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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CONSENT SOLICITATION STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [_]
Filed by a party other than the registrant [X]
Check the appropriate box:
[_] Preliminary consent solicitation [_] CONFIDENTIAL,FOR USE OF THE
statement COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive consent solicitation statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
HOTEL PROPERTIES MANAGEMENT, INC.
(NAME OF PERSON(S) FILING CONSENT SOLICITATION STATEMENT, IF OTHER THAN THE
REGISTRANT)
Payment of filing fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
____________________________________________________
(2) Aggregate number of securities to which transaction applies:
____________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
____________________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________________
(5) Total fee paid:
____________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
____________________________________________________
(2) Form, schedule or registration statement no.:
____________________________________________________
(3) Filing party:
____________________________________________________
(4) Date filed:
____________________________________________________
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* Set forth the amount on which the filing fee is calculated and state how it
was determined.
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MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP
10400 FERNWOOD ROAD
BETHESDA, MARYLAND 20817
301/380-2070
NOTICE TO UNITHOLDERS
On November 19, 1996, MHP Acquisition Corp., a Delaware corporation (the
"Purchaser") that is a wholly owned direct subsidiary of Host Marriott
Corporation ("Parent"), commenced a tender offer (the "Tender Offer") to
purchase 450 of the issued and outstanding units of limited partnership
interest (the "Units") of Marriott Hotel Properties Limited Partnership, a
Delaware limited partnership (the "Partnership"), at a price of $80,000 per
Unit, net to the seller in cash without interest thereon. The Tender Offer is
subject to and conditioned upon, among other things, (i) the holders of Units
(the "Unitholders") tendering to the Purchaser at least 450 Units, and (ii)
the approval of certain proposed amendments to the Partnership's Amended and
Restated Agreement of Limited Partnership (the "Partnership Agreement") set
forth below. The Tender Offer will expire on Friday, December 20, 1996, unless
extended.
In connection with the Tender Offer, Hotel Properties Management, Inc., the
general partner of the Partnership (the "General Partner"), at the request of
Parent and the Purchaser, is soliciting the consents of the limited partners
of the Partnership (the "Limited Partners") to the following proposed
amendments to the Partnership Agreement (the "Required Amendments"), upon the
approval of which the Tender Offer is conditioned:
1. An amendment that would (a) revise the provisions limiting the voting
rights of the General Partner and its affiliates to permit the General
Partner and its affiliates (including the Purchaser) to have full voting
rights with respect to all Units currently held by the General Partner or
acquired by its affiliates except on matters where the General Partner or
its affiliates have an actual economic interest other than as a Unitholder
or general partner (an "Interested Transaction"), and
1(b) establish special voting standards with respect to Interested
Transactions to permit action to be taken only if (i) a majority of Units
held by Limited Partners other than the General Partner and its affiliates
are present in person or by proxy or consent for the vote on an Interested
Transaction and (ii) the Interested Transaction is approved by Limited
Partners holding a majority of the outstanding Units, with all Units held
by the General Partner and its affiliates being voted in the same manner as
a majority of the Units actually voted by Limited Partners other than the
General Partner and its affiliates.
2. An amendment that would amend the definition of "Affiliate" to make
clear that a publicly-traded entity (such as Marriott International, Inc.)
will not be deemed an affiliate of the General Partner or any of its
affiliates unless a person or group of persons directly or indirectly owns
twenty percent (20%) or more of the outstanding common stock of both the
General Partner (or its affiliates) and such other entity.
3. An amendment that would revise the provisions relating to the
authority of the General Partner to permit the General Partner, without
obtaining the consent of the Limited Partners, to (i) sell or otherwise
transfer to an independent third party the assets of the Partnership,
including the Orlando World Center Hotel and the Partnership's 50.5%
general partnership interest in the Lauderdale Beach Association, a general
partnership owning the Marriott Harbor Beach Hotel, and (ii) vote its
interest in the Lauderdale Beach Association in favor of the sale or other
disposition of the Marriott Harbor Beach Hotel to an independent third
party.
4. An amendment that would (i) revise the provision that permits Unit
transfers only on the first day of a fiscal quarter, so that (a) the Units
tendered pursuant to the Tender Offer and accepted for payment (the
"Accepted Units") could be transferred to the Purchaser on the date on
which payment for the accepted Units pursuant to the Tender Offer occurs
(the "Closing Date") and (b) any subsequent transfer of Units by the
Purchaser could occur on the designated closing date, rather than on the
first day of a fiscal quarter; and (ii) revise the provision that prohibits
Unit transfers that would result in the assignor or assignee owning a
fraction of a Unit other than a half-Unit to permit fractions of Units to
be purchased by the Purchaser
pursuant to the Tender Offer, and the subsequent assignment of such
fractional interests, provided that such fractional interests are assigned
in their entirety.
5. An amendment that would revise the provisions relating to the
allocation of profits and losses and cash distributions, so that tendering
Unitholders will receive allocations of profit and loss with respect to the
Accepted Units for periods up to and including, but not beyond, the
accounting period ending prior to the Closing Date and will not receive
cash distributions with respect to the Accepted Units made after the
Closing Date.
6. Amendments to certain terms and sections of the Partnership Agreement
in order to reflect various U.S. Treasury Department Regulations that have
been issued subsequent to the formation of the Partnership.
In addition, the General Partner, at the request of Parent and the
Purchaser, is soliciting the consents of the Unitholders to the following
additional proposed amendments to the Partnership Agreement (the
"Additional Amendments" and, together with the Required Amendments, the
"Amendments"), the approval of which is not a condition to the Tender
Offer:
7. Amendments to certain terms and sections of the Partnership Agreement
in order to (i) reflect the fact that after the division of Marriott
Corporation's operations into two separate public companies, Parent, as the
successor to Marriott Corporation, no longer owns the management business
conducted by Marriott International, Inc., (ii) delete certain obsolete
references to entities and agreements that are no longer in existence and
(iii) update the Partnership Agreement to reflect the passage of time since
the formation of the Partnership.
8. An amendment that would permit the General Partner, without the
consent of the Limited Partners, to make any amendment to the Partnership
Agreement as is necessary to clarify the provisions thereof so long as such
amendment does not affect the rights of the Limited Partners under the
Partnership Agreement in any material respect.
The close of business on November 14, 1996, has been set by the General
Partner as the record date for determining Units entitled to vote upon the
Amendments. A Consent Solicitation Statement and Consent Form are enclosed
with this notice. The Consent Solicitation Statement contains a detailed
description of the Amendments. A copy of the Partnership Agreement, as
proposed to be amended, is attached as Appendix A to the Consent Solicitation
Statement.
THE GENERAL PARTNER IS A WHOLLY OWNED DIRECT SUBSIDIARY OF HOST MARRIOTT
CORPORATION AND AN AFFILIATE OF THE PURCHASER AND, THEREFORE, HAS SUBSTANTIAL
CONFLICTS OF INTEREST WITH RESPECT TO THE AMENDMENTS. ACCORDINGLY, THE GENERAL
PARTNER MAKES NO RECOMMENDATION TO ANY LIMITED PARTNER AS TO WHETHER TO VOTE
FOR OR AGAINST THE AMENDMENTS. EACH LIMITED PARTNER MUST MAKE HIS OR HER OWN
DECISION WHETHER OR NOT TO VOTE FOR OR AGAINST THE AMENDMENTS. THE GENERAL
PARTNER HAS BEEN INFORMED BY HOST MARRIOTT AND THE PURCHASER THAT THEY BELIEVE
THE AMENDMENTS ARE FAIR TO NON-TENDERING UNITHOLDERS.
Approval of the Amendments will require the affirmative consent of Limited
Partners (excluding the General Partner and certain of its affiliates) holding
a majority of the issued and outstanding Units. Your vote on this matter is
very important. Abstentions or failure to return the enclosed Consent Form
will have the same effect as voting AGAINST the Amendments. Therefore, you are
requested to complete, sign and return the Consent Form in the enclosed pre-
paid envelope at your earliest convenience and, in any event, by 6:00 p.m.,
New York City time, on Friday, December 20, 1996 to GEMISYS, Inc., Attention:
Proxy Department, 7103 South Revere Parkway, Englewood, Colorado 80112.
CONSENT FORMS THAT ARE EXECUTED BUT CONTAIN NO VOTING INSTRUCTIONS WILL BE
DEEMED TO HAVE CONSENTED TO ALL OF THE AMENDMENTS.
Hotel Properties Management, Inc.
General Partner
Date: November 19, 1996
Bethesda, Maryland /s/ Christopher G. Townsend
Christopher G. Townsend
Secretary
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MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP
CONSENT SOLICITATION STATEMENT
This Consent Solicitation Statement is being furnished to you as a holder of
units of limited partnership interest ("Units") of Marriott Hotel Properties
Limited Partnership, a Delaware limited partnership (the "Partnership"), in
connection with the solicitation of consents by Hotel Properties Management,
Inc., the general partner of the Partnership (the "General Partner"), to
certain amendments (described below) to the Partnership's Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement"). At the request
of Host Marriott Corporation, a Delaware corporation ("Parent" or "Host
Marriott") and MHP Acquisition Corp., a Delaware corporation (the
"Purchaser"), the General Partner is soliciting your consent to the amendments
in connection with a tender offer (the "Tender Offer") that has been commenced
by the Purchaser, which is a wholly owned direct subsidiary of Parent and an
affiliate of the General Partner, to purchase 450 of the outstanding Units of
the Partnership. An Offer to Purchase detailing the terms and conditions of
the Tender Offer has been separately furnished to you and should be read in
conjunction with this Consent Solicitation Statement. The Tender Offer is
conditioned upon, among other things, the approval of the amendments to the
Partnership Agreement set forth in Proposal Nos. 1 through 6 below. Only
holders of Units ("Unitholders") of record at the close of business on
November 14, 1996 (the "Record Date") who have been admitted to the
Partnership as limited partners (the "Limited Partners") are entitled to
notice of and to vote upon the amendments to the Partnership Agreement. On the
Record Date, there were 1,000 Units issued and outstanding, held of record by
1,165 Unitholders. No meeting of Limited Partners will be held in connection
with this solicitation of consents.
SUMMARY
THE TENDER OFFER
The General Partner is a wholly owned direct subsidiary of Parent. The
Purchaser has been organized as a wholly owned direct subsidiary of Parent for
the purpose of acquiring Units pursuant to the Tender Offer. The Purchaser
commenced the Tender Offer on November 19, 1996 at a price of $80,000 per Unit
(the "Offer Price"), net to the seller in cash without interest thereon. The
Tender Offer is scheduled to expire on Friday, December 20, 1996, unless
extended. In the event more than 450 Units are validly tendered and not
properly withdrawn on or prior to the Tender Offer's expiration date, the
Purchaser will accept for payment, upon the terms and subject to the
conditions of the Tender Offer, 450 Units (the "Accepted Units") on a pro rata
basis based upon the number of Units properly tendered by the expiration date
and not withdrawn. The General Partner is required, pursuant to the terms of
the Partnership Agreement, to impose a suspension of any sales or exchanges of
Units that would result in tax termination of the Partnership pursuant to
Section 708(b)(1)(B) of the Internal Revenue Code of 1986, as amended (the
"Code"). In the event the Tender Offer is consummated and 450 Units are
purchased by the Purchaser, the General Partner may be required to impose such
suspension (the "Transfer Restriction"). Following consummation of the Tender
Offer, it is the Purchaser's current intention to acquire additional Units
beginning after the end of a twelve month period. Any such acquisition may be
made through private purchases, a future tender offer, or by any other means
deemed advisable by the Purchaser. The Purchaser currently anticipates that in
acquiring additional Units (other than pursuant to a future tender offer), it
will give priority to the acquisition of fractional interests of Units
resulting from proration of Units tendered in the Tender Offer and that such
acquisitions may be at a price equivalent to the Offer Price on a per Unit
basis. However, the Purchaser is not obligated to make any such acquisitions
and any acquisitions of additional Units, if made, may be at a price higher or
lower than the Offer Price. The Purchaser currently intends to wait until at
least twelve months after consummation of the Tender Offer to acquire any
additional Units so as to not cause a tax termination of the Partnership.
Business conditions existing after the end of the twelve month period
following consummation of the Tender Offer may make it impractical or
inadvisable for the Purchaser to acquire any additional Units at that time.
The Tender Offer is conditioned upon, among other things, (i) Unitholders'
tendering to the Purchaser at least 450 Units, and (ii) the approval by
Limited Partners (excluding the General Partner and certain of its
affiliates) holding a majority of the issued and outstanding Units ("Limited
Partner Approval") of the proposed Required Amendments (as defined below) to
the Partnership Agreement that are described below. Unitholders that have not
been admitted as Limited Partners are not entitled to vote. Some or all of the
conditions to the Tender Offer may be waived by the Purchaser, in its sole
discretion. See "Background--The Tender Offer."
SUMMARY OF THE PROPOSALS
Pursuant to this Consent Solicitation Statement, the General Partner, at the
request of Parent and the Purchaser, is asking Limited Partners to consider
and vote upon proposed amendments to the Partnership Agreement (the
"Amendments") that would:
(1)(a) revise the provisions limiting the voting rights of the General
Partner and its affiliates (referred to herein as "Affiliates" as defined
in the Partnership Agreement) to permit the General Partner and its
Affiliates (including the Purchaser) to have full voting rights with
respect to all Units currently held by the General Partner or acquired by
its Affiliates except on matters where the General Partner or its
Affiliates have an actual economic interest other than as a Unitholder or
general partner or other than as a result of a person or persons directly
or indirectly owning less than twenty percent (20%) of the outstanding
common stock of (i) the General Partner or any of its Affiliates and (ii) a
publicly traded company (an "Interested Transaction"), and
(1)(b) establish special voting standards with respect to Interested
Transactions to permit action to be taken only if (i) a majority of Units
held by Limited Partners other than the General Partner and its Affiliates
are present in person or by proxy or consent for the vote on an Interested
Transaction and (ii) the Interested Transaction is approved by Limited
Partners holding a majority of the outstanding Units, with all Units held
by the General Partner and its affiliates being voted in the same manner as
a majority of the Units actually voted by Limited Partners other than the
General Partner and its affiliates;
(2) amend the definition of "Affiliate" to make clear that a publicly-
traded entity (such as Marriott International, Inc. ("Marriott
International")) will not be deemed an Affiliate of the General Partner or
any of its Affiliates unless a person or group of persons directly or
indirectly owns twenty percent (20%) or more of the outstanding common
stock of (i) the General Partner or any of its Affiliates and (ii) such
other entity;
(3) revise the provisions relating to the authority of the General
Partner to permit the General Partner, without obtaining the consent of the
Limited Partners, to (i) sell or otherwise transfer to an independent third
party the assets of the Partnership, including the Orlando World Center
Hotel (the "Orlando Hotel") and the Partnership's 50.5% general partnership
interest in the Lauderdale Beach Association (the "Harbor Beach
Partnership" and, collectively with the Partnership, the "Partnerships"), a
general partnership owning the Marriott Harbor Beach Hotel (the "Harbor
Beach Hotel"), and (ii) vote its interest in the Harbor Beach Partnership
in favor of the sale or other disposition of the Harbor Beach Hotel to an
independent third party;
(4)(a) revise the provision that permits Unit transfers only on the first
day of a fiscal quarter, so that (i) the transfer of Accepted Units
pursuant to the Tender Offer could occur on the date on which payment for
the Accepted Units pursuant to the Tender Offer occurs (the "Closing Date")
and (ii) any subsequent transfer of Units by the Purchaser could occur on
the designated closing date for such transaction, rather than on the first
day of a fiscal quarter; and (b) revise the provision that prohibits Unit
transfers that would result in the assignor or assignee owning a fraction
of a Unit other than a half-Unit to permit fractions of Units to be
purchased by the Purchaser pursuant to the Tender Offer, and the subsequent
assignment of such fractional interests, provided that such fractional
interests are assigned in their entirety;
(5) revise the provisions relating to the allocation of profits and
losses and cash distributions so that tendering Unitholders whose tenders
are accepted will receive allocations of profit and loss with respect to
their Accepted Units for periods up to and including, but not beyond, the
last day of the Accounting Period (as defined in Section 1.01 of the
Partnership Agreement attached hereto as Appendix A) ending prior to the
Closing Date (for example, the Accounting Period ending November 29, 1996,
if the Tender Offer is consummated on December 26, 1996) and will not
receive cash distributions with respect to such Units;
2
(6) amend certain terms and sections of the Partnership Agreement in
order to reflect various U.S. Treasury Department Regulations that have
been issued subsequent to the formation of the Partnership;
(7) amend certain terms and sections of the Partnership Agreement in
order to (a) reflect the fact that after the division of Marriott
Corporation's operations into two separate public companies, Parent
(formerly Marriott Corporation) no longer owns the management business
conducted by Marriott International, (b) delete certain obsolete references
to entities and agreements that are no longer in existence and (c) update
the Partnership Agreement to reflect the passage of time since the
formation of the Partnership; and
(8) permit the General Partner, without the consent of the Limited
Partners, to make any amendment to the Partnership Agreement as is
necessary to clarify the provisions thereof so long as such amendment does
not affect the rights of Unitholders under the Partnership Agreement in any
material respect.
The Amendments described in paragraphs 1 through 6 above are sometimes
hereinafter referred to as the "Required Amendments" and the Amendments
described in paragraphs 7 and 8 above are sometimes hereinafter referred to as
the "Additional Amendments." See Proposal Nos. 1 through 8 for a description,
and discussion of the effects, of the proposed Amendments. For the actual text
of all the Amendments, see the copy of the Partnership Agreement, as proposed
to be amended, attached hereto as Appendix A.
VOTING MATTERS
Limited Partner Approval of the Amendments requires the affirmative consent
of Limited Partners (excluding the General Partner and certain of its
Affiliates) holding a majority of the issued and outstanding Units.
Accordingly, an abstention or failure to return the enclosed Consent Form will
have the same effect as a vote AGAINST the Amendments. For purposes of
determining the existence of a quorum, Limited Partners who check the
"abstain" box on the Consent Form will be deemed to have voted. The close of
business on November 14, 1996 has been fixed by the General Partner as the
Record Date for determination of Limited Partners entitled to notice of and to
vote upon the Amendments. With the exception of the General Partner and
certain of its Affiliates, each Unitholder who has been admitted to the
Partnership as a Limited Partner as of the Record Date is entitled to cast one
vote for each Unit held of record on each of the proposed Amendments. Holders
of half-Units are entitled to cast half a vote for each half-Unit held of
record as a Limited Partner. Under the terms of the Partnership Agreement,
Units held by the General Partner and its Affiliates (currently a total of
10.5 Units) or by a Unitholder not admitted as a Limited Partner cannot be
voted on the Amendments. As of the date hereof, all Unitholders of record have
been admitted as Limited Partners. Currently, a total of 3.5 Units are held by
Affiliates of the General Partner or their officers and directors. Three of
these Units are owned by persons who are not officers or directors of the
General Partner or its parent, Host Marriott, and the General Partner has no
basis for forming an expectation as to whether or how these Unitholders will
vote. The holder of a half-Unit is an officer of Host Marriott and the General
Partner believes he will vote his half-Unit in favor of the Amendments.
SOLICITATION PERIOD
The Solicitation Period is the time during which Limited Partners may vote
for or against the Amendments. The Solicitation Period will commence upon
delivery of this Consent Solicitation Statement and the Consent Form and will
continue until the later of (1) 6:00 p.m., New York City time, on Friday,
December 20, 1996 (the expiration date of the Tender Offer), or (2) in the
event that the Tender Offer is extended, such later date that coincides with
the expiration date of the Tender Offer, and as to which notice is given to
Unitholders. The General Partner, in its sole discretion, may elect to extend
the Solicitation Period. Notice to Unitholders of such an extension will be by
press release and written notice mailed to Unitholders.
EXECUTION AND REVOCATION OF CONSENTS
All Consent Forms that are properly executed and returned to GEMISYS prior
to the expiration of the Solicitation Period will be voted in accordance with
the instructions contained therein. ALL PROPERLY EXECUTED CONSENT FORMS THAT
CONTAIN NO VOTING INSTRUCTIONS WILL BE DEEMED TO HAVE CONSENTED TO ALL THE
AMENDMENTS. Consent Forms will be effective only when actually received by
GEMISYS at the address or
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facsimile number set forth below. Consent Forms may be withdrawn at any time
prior to the expiration of the Solicitation Period or any extension thereof.
In addition, subsequent to the submission of a Consent Form, but prior to the
expiration of the Solicitation Period or any extension thereof, Limited
Partners may change their vote. For a withdrawal or change of vote to be
effective, Limited Partners must execute and deliver, prior to the expiration
of the Solicitation Period or any extension thereof, a subsequently dated
Consent Form or a written notice stating that the consent is revoked to
GEMISYS, Attention: Proxy Department, 7103 South Revere Parkway, Englewood,
Colorado 80112, facsimile number (800) 387-7365.
EFFECTIVE TIME OF AMENDMENTS
If approved by the Limited Partners, the Amendments will become effective
when the General Partner executes and delivers a Second Amended and Restated
Agreement of Limited Partnership incorporating the Amendments in accordance
with the Partnership Agreement, which will occur as soon as practicable
following the expiration date of the Solicitation Period. If for any reason
the Tender Offer is not consummated, however, some or all of the Amendments to
the Partnership Agreement may not be implemented, even if they receive Limited
Partner Approval. The General Partner currently anticipates implementing the
Amendments set forth in Proposal Nos. 1, 2, 3, 6, 7 and 8 if they receive
Limited Partner Approval, even if the Tender Offer is not consummated.
For a more detailed discussion of the procedures and requirements for
voting, see "Voting Rights and Information."
THE GENERAL PARTNER IS A WHOLLY OWNED DIRECT SUBSIDIARY OF HOST MARRIOTT AND
AN AFFILIATE OF THE PURCHASER AND, THEREFORE, HAS SUBSTANTIAL CONFLICTS OF
INTEREST WITH RESPECT TO THE AMENDMENTS. ACCORDINGLY, THE GENERAL PARTNER
MAKES NO RECOMMENDATION TO ANY LIMITED PARTNER AS TO WHETHER TO VOTE FOR OR
AGAINST THE AMENDMENTS. EACH LIMITED PARTNER MUST MAKE HIS OR HER OWN DECISION
WHETHER TO VOTE FOR OR AGAINST THE AMENDMENTS. THE GENERAL PARTNER HAS BEEN
INFORMED BY HOST MARRIOTT AND THE PURCHASER THAT THEY BELIEVE THE AMENDMENTS
ARE FAIR TO NON-TENDERING UNITHOLDERS.
YOUR VOTE IN FAVOR OF THE AMENDMENTS DOES NOT REQUIRE THAT YOU TENDER YOUR
UNITS PURSUANT TO THE TENDER OFFER. IF YOU DESIRE TO RECEIVE THE CASH PRICE
PER UNIT OFFERED PURSUANT TO THE TENDER OFFER, YOU MUST TENDER YOUR UNITS, BUT
ARE NOT REQUIRED TO VOTE IN FAVOR OF THE AMENDMENTS.
THE DATE OF THIS CONSENT SOLICITATION STATEMENT IS NOVEMBER 19, 1996.
VOTING RIGHTS AND INFORMATION
At the request of Parent and the Purchaser, the General Partner is
soliciting the consent of the Limited Partners to the proposed Amendments in
connection with the Tender Offer. As discussed more fully below under
"Background--The Tender Offer," the proposed Required Amendments must receive
Limited Partner Approval in order for Unitholders to have the opportunity to
receive the cash price per Unit offered pursuant to the Tender Offer. For a
discussion of the interests that Parent, the General Partner and their
Affiliates have in the Amendments and the Tender Offer, see "Background--
Interests of Certain Persons" below.
RECORD DATE
The General Partner has set the close of business on November 14, 1996, as
the Record Date for the determination of Unitholders entitled to notice of and
to vote upon the proposed Amendments. Only Unitholders of record as of the
Record Date who have been admitted to the Partnership as Limited Partners will
be entitled to vote upon the proposed Amendments. On the Record Date, there
were 1,000 Units issued and outstanding, held of record by 1,165 Unitholders.
The Partnership has no other class of securities.
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REQUIRED VOTE
Under the Partnership Agreement, Limited Partner Approval of the Amendments
requires the affirmative consent of Limited Partners (excluding the General
Partner and certain of its Affiliates) holding a majority of the issued and
outstanding Units. Accordingly, an abstention or failure to return the
enclosed Consent Form will have the same effect as a vote AGAINST the
Amendments. For purposes of determining the existence of a quorum, Limited
Partners who check the "abstain" box on the Consent Form will be deemed to
have voted. With the exception of the General Partner and its Affiliates, each
Unitholder who has been admitted to the Partnership as a Limited Partner is
entitled to cast one vote for each Unit held of record on each of the proposed
Amendments. Holders of half-Units are entitled to cast half a vote for each
half-Unit held of record as a Limited Partner. Units held by the General
Partner and its Affiliates or by a Unitholder who has not been admitted as a
Limited Partner cannot be voted on the Amendments. As of the date hereof, all
Unitholders of record have been admitted as Limited Partners. Currently, a
total of 3.5 Units are held by Affiliates of the General Partner or their
officers and directors. Three of these Units are owned by persons who are not
officers or directors of the General Partner or its parent, Host Marriott, and
the General Partner has no basis for forming an expectation as to whether or
how these Unitholders will vote. The holder of a half-Unit is an officer of
Host Marriott and the General Partner believes he will vote his half-Unit in
favor of the Amendments.
SOLICITATION PERIOD
The Solicitation Period is the time during which Limited Partners may vote
for or against the Amendments. The Solicitation Period will commence upon
delivery of this Consent Solicitation Statement and the Consent Form and will
continue until the later of (1) 6:00 p.m., New York City time, on Friday,
December 20, 1996 (the expiration date of the Tender Offer), or (2) in the
event that the Tender Offer is extended, such later date that coincides with
the expiration date of the Tender Offer, and as to which notice is given to
Unitholders. The General Partner, in its sole discretion, may elect to extend
the Solicitation Period. Notice to Unitholders of such an extension will be by
press release and written notice mailed to Unitholders.
EXECUTION AND REVOCATION OF CONSENTS
A Consent Form is included with this Consent Solicitation Statement. All
Consent Forms that are properly executed and returned to GEMISYS prior to the
expiration of the Solicitation Period will be voted in accordance with the
instructions contained therein. ALL PROPERLY EXECUTED CONSENT FORMS THAT
CONTAIN NO VOTING INSTRUCTIONS WILL BE DEEMED TO HAVE CONSENTED TO ALL OF THE
AMENDMENTS. Consent Forms will be effective only when actually received by
GEMISYS at the address or facsimile number set forth below. Consent Forms may
be withdrawn at any time prior to the expiration of the Solicitation Period.
In addition, subsequent to the submission of a Consent Form, but prior to the
expiration of the Solicitation Period, Limited Partners may change their vote.
For a withdrawal or change of vote to be effective, Limited Partners must
execute and deliver, prior to the expiration of the Solicitation Period, a
subsequently dated Consent Form or a written notice stating that the consent
is revoked to GEMISYS, Attention: Proxy Department, 7103 South Revere Parkway,
Englewood, Colorado 80112, facsimile number (800) 387-7365. Consent Forms and
notices of withdrawal or change of vote dated after the expiration of the
Solicitation Period will not be valid. Questions concerning (i) how to
complete the Consent Form, (ii) where to remit the Consent Form and (iii)
obtaining additional Consent Forms should be directed to Trust Company of
America (the "Information Agent"), 7103 South Revere Parkway, Englewood,
Colorado 80112-9523, (800) 955-9033. Substantive questions concerning the
Consent Form should be directed to Investor Relations at Host Marriott
Corporation, at (301) 380-2070.
EFFECTIVE TIME OF AMENDMENTS
If approved by the Limited Partners, the Amendments will become effective
when the General Partner executes and delivers a Second Amended and Restated
Agreement of Limited Partnership incorporating the Amendments in accordance
with the Partnership Agreement. Assuming the Tender Offer is approved, the
General Partner will execute and deliver the Second Amended and Restated
Agreement of Limited Partnership as soon as practicable following the
expiration date of the Solicitation Period. If for any reason the Tender Offer
is not consummated, however, some or all of the Amendments to the Partnership
Agreement may not be
5
implemented, even if they receive Limited Partner Approval. The General
Partner currently anticipates implementing the Amendments set forth in
Proposal Nos. 1, 2, 3, 6, 7 and 8 if they receive Limited Partner Approval,
even if the Tender Offer is not consummated.
NO SPECIAL MEETING
The Partnership Agreement does not require a special meeting of Limited
Partners to consider the Amendments or the Tender Offer. Accordingly, no such
meeting will be held.
COST OF SOLICITATION
Parent has retained the Information Agent at an estimated cost of $4,800
plus reimbursement of expenses to assist in the solicitation of consents. The
total cost of the solicitation will be approximately $20,000. All expenses of
this solicitation, including the cost of preparing and mailing this Consent
Solicitation Statement, will be borne by Parent. In addition, consents may be
solicited by directors and officers of the General Partner and employees of
Parent in person or by mail, telephone, telegram or other means of
communication. In conducting these solicitation efforts, however, the
directors and officers of the General Partner and employees of Parent will be
acting solely in a ministerial capacity and will be making no recommendation
to any Limited Partner as to whether to vote for or against the Amendments.
These directors and officers will not be additionally compensated, but may be
reimbursed for out-of-pocket expenses incurred in connection with the
solicitation. Arrangements also will be made to furnish copies of solicitation
materials to custodians, nominees, fiduciaries and brokerage houses for
forwarding to beneficial owners of Units. Such persons will be paid for
reasonable expenses incurred in connection therewith.
BACKGROUND
THE TENDER OFFER
The Purchaser, a wholly owned direct subsidiary of Host Marriott and an
Affiliate of the General Partner, is offering to purchase 450 of the issued
and outstanding Units at an Offer Price of $80,000 per Unit, net to the seller
in cash without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated November 19, 1996 (the "Offer to
Purchase"), which has been separately furnished to you and which should be
read in conjunction with this Consent Solicitation Statement. The Tender Offer
is scheduled to expire on Friday, December 20, 1996 unless extended. In the
event more than 450 Units are validly tendered and not properly withdrawn on
or prior to the Tender Offer's expiration date, the Purchaser will accept for
payment 450 Units on a pro rata basis based upon the number of Units properly
tendered by the expiration date and not withdrawn. The General Partner is
required, pursuant to the terms of the Partnership Agreement, to impose a
suspension of any sales or exchanges of Units that would result in a tax
termination of the Partnership pursuant to Section 708(b)(1)(B) of the Code.
In the event the Tender Offer is consummated and 450 Units are purchased by
the Purchaser, the General Partner may be required to impose a Transfer
Restriction. Following consummation of the Tender Offer, it is the Purchaser's
current intention to acquire additional Units beginning after the end of a
twelve month period. Any such acquisition may be made through private
purchases, a future tender offer, or by any other means deemed advisable by
the Purchaser. The Purchaser currently anticipates that in acquiring
additional Units (other than pursuant to a future tender offer), it will give
priority to the acquisition of fractional interests of Units resulting from
proration of Units tendered in the Tender Offer and that such acquisitions may
be at a price equivalent to the Offer Price on a per Unit basis. However, the
Purchaser is not obligated to make any such acquisitions and any acquisitions
of additional Units, if made, may be at a price higher or lower than the Offer
Price. The Purchaser currently intends to wait until at least twelve months
after consummation of the Tender Offer to acquire any additional Units so as
to not cause a tax termination of the Partnership. Business conditions
existing after the end of the twelve month period following consummation of
the Offer may make it impractical or inadvisable for the Purchaser to acquire
any additional Units at that time.
The Tender Offer is conditioned upon, among other things, (i) there being
validly tendered, prior to the expiration of the Tender Offer and not
withdrawn, at least 450 Units (the "Minimum Tender Condition"), and
6
(ii) Limited Partner Approval of the proposed Required Amendments. All
conditions to the Tender Offer must be satisfied or waived by the Purchaser
before the Tender Offer can be consummated.
Subject to applicable rules and regulations of the Securities and Exchange
Commission, the Purchaser reserves the right, in its sole discretion, at any
time to waive any condition to its obligation to acquire Units pursuant to the
Tender Offer. If the Purchaser waives either the Minimum Tender Condition or
Limited Partner Approval of any of the proposed Required Amendments, it will
disseminate additional tender offer materials to Unitholders and allow the
Tender Offer to remain open for a sufficient period of time to satisfy the
requirements of applicable law, including Rules 14d-4(c) and 14d-6(d) under
the Securities Exchange Act of 1934.
The purpose of the Tender Offer is for the Purchaser and, indirectly, Host
Marriott to increase the number of Units owned and their economic interest in
the Partnership. Consummation of the Tender Offer will allow the Purchaser
and, indirectly, Parent, to have a greater economic interest in, and greater
control of, the quality full service lodging properties owned by the
Partnership. The increase of the economic interest in the Partnership which
would result from the acquisition of 450 Units, together with the approval of
certain of the Amendments to the Partnership Agreement, is expected to allow
Parent to consolidate for accounting purposes the Partnerships' hotels in
Parent's financial statements. Parent and the Purchaser currently intend that,
upon consummation of the Tender Offer, the Partnership will continue its
businesses and operations substantially as, and in such places as, they are
currently being conducted. The Purchaser has no present plans or proposals,
regardless of the outcome of the Tender Offer, that would result in an
extraordinary transaction, such as a merger, reorganization, liquidation, or
sale or transfer of a material amount of assets, involving the Partnership or
its subsidiaries, or any material changes in the Partnership capitalization,
distribution policy, structure or business. As a result of the consummation of
the Tender Offer, tendering Unitholders will not have the opportunity to
participate in the future earnings, profits and growth of the Partnership.
TENDERS OF UNITS MAY BE MADE ONLY BY COMPLYING WITH THE PROCEDURES FOR
ACCEPTING THE TENDER OFFER AND TENDERING UNITS CONTAINED IN THE OFFER TO
PURCHASE. The Offer to Purchase contains important information and should be
read by Unitholders before any decision is made with respect to the tender of
Units. If you have not received a copy of the Offer to Purchase, one may be
obtained by contacting the Information Agent at (800) 955-9033.
INTERESTS OF CERTAIN PERSONS
In considering whether to vote for or against the Amendments, Limited
Partners should be aware that the General Partner is a wholly owned direct
subsidiary of Parent and an Affiliate of the Purchaser. Accordingly, the
General Partner has substantial conflicts of interest with respect to this
consent solicitation and makes no recommendation to any Limited Partner as to
whether to vote for or against the Amendments. Assuming the approval of the
Amendments and the consummation of the Tender Offer, Parent is expected to be
in a position to influence substantially all decisions with respect to the
Partnership (other than Interested Transactions) that require the consent of
Limited Partners, such as the timing of the liquidation of the Partnership, a
sale of all of the Partnership's properties, a merger or other extraordinary
transaction.
PURPOSE OF THE AMENDMENTS
The General Partner is soliciting the consents of the Limited Partners, at
the request of Parent and the Purchaser, in connection with the Tender Offer.
The purpose of the Tender Offer, as discussed more fully above, is to permit
the Parent, through the Purchaser, to increase its economic and limited
partnership voting interest in the Partnership to as much as 46.05% of the
limited partnership interests in the Partnership and, consequently, to
participate in the future income stream and governance of the Partnership. The
Required Amendments have been proposed in order to satisfy a condition to the
Tender Offer and the Additional Amendments have been proposed to clarify
certain provisions of the Partnership Agreement in connection with its
amendment and restatement following Limited Partner Approval of the Required
Amendments.
7
PROPOSAL NO. 1
AMENDMENTS TO VOTING PROVISIONS
The Partnership Agreement contains various provisions that inhibit the
ability of the General Partner and its Affiliates to vote Units beneficially
owned by them. In the event the Tender Offer is completed and such parties
become the owners of additional outstanding Units, such parties believe it
would be appropriate to amend the voting provisions of the Partnership
Agreement to provide such parties with the voting rights described below.
SUMMARY OF THE AMENDMENTS
Section 10.01.G of the Partnership Agreement currently provides that the
General Partner or its Affiliates (including the Purchaser), are not entitled
to any voting, determinative or consensual rights with respect to any Units
owned or controlled by them and such Units held by the General Partner or
certain of its Affiliates (including the Purchaser) are not taken into account
in determining the presence or absence of a quorum. The proposed Amendments to
this provision and to Section 10.01.B of the Partnership Agreement would (i)
revise the provisions limiting the voting rights of the General Partner and
its Affiliates to permit the General Partner and its Affiliates (including the
Purchaser) to have full voting rights with respect to all Units currently held
by the General Partner and its Affiliates on all matters affecting the
Partnership (other than Interested Transactions) in the same manner as other
Limited Partners are entitled and (ii) establish special voting standards with
respect to Interested Transactions to permit action to be taken only if (i) a
majority of Units held by Limited Partners other than the General Partner and
its Affiliates are present in person or by proxy or consent for the vote on an
Interested Transaction and (ii) the Interested Transaction is approved by
Limited Partners holding a majority of the outstanding Units, with all Units
held by the General Partner and its Affiliates being voted in the same manner
as a majority of the Units actually voted by Limited Partners other than the
General Partner and its Affiliates.
PURPOSE OF THE AMENDMENTS
The Tender Offer is conditioned, among other things, upon the ability of the
General Partner and its Affiliates (including the Purchaser) to have
independent voting control over the Units currently held by the General
Partner or acquired by the Purchaser through the Tender Offer (except in the
case of Interested Transactions). This condition has been imposed in order to
permit Parent, through the Purchaser, to have a voice in the limited number of
decisions affecting the Partnership (other than Interested Transactions) upon
which Limited Partners are entitled to vote. Accordingly, the General Partner,
at the request of Parent and the Purchaser, has proposed the amendment of
Sections 10.01.G and 10.01.B, to allow the General Partner and its Affiliates
to have full voting rights to vote their Units on all matters affecting the
Partnership (other than Interested Transactions) in the same manner as other
Limited Partners are entitled.
The Tender Offer also is conditioned, among other things, upon allowing
approval of Interested Transactions by Limited Partners holding a majority of
the outstanding Units, with all Units held by the General Partner and its
Affiliates being voted in the same manner as a majority of the Units actually
voted by Limited Partners other than the General Partner and its Affiliates,
provided that a majority of the Units held by Limited Partners other than the
General Partner and its Affiliates are present in person or by proxy or
consent for the vote on the Interested Transaction. This change has been
proposed because, if the Tender Offer is successful, the General Partner and
its Affiliates (including the Purchaser) would hold a substantial portion of
the outstanding Units, but absent the proposed Amendments would not be
permitted to vote such Units on an Interested Transaction. Therefore, it might
not be possible to obtain the approval of a majority of the outstanding Units
of an Interested Transaction, even if a significant majority of the remaining
Limited Partners were strongly in favor of such a transaction. Under the
proposed Amendments, the outcome of the Interested Transaction vote would
still be determined by the disinterested Limited Partners who vote, because
the Units held by the General Partner and its Affiliates (including the
Purchaser) would be voted in accordance with the desires of the majority of
such disinterested Limited Partners. These quorum requirements would ensure
that in order for such Interested Transaction to be acted upon by Limited
Partners, a majority of the disinterested Limited Partners must be present or
represented at the meeting or in the written consent pursuant to which the
action is to be taken.
8
EFFECTS OF THE AMENDMENTS
The proposed voting Amendments would affect the voting of the General
Partner and its Affiliates with respect to transactions not involving such
parties and transactions in which any such party would have a direct or
indirect actual economic interest.
Transactions Not Involving the General Partner or its Affiliates. Under the
Partnership Agreement in its current form, the General Partner has
substantially all the management discretion over the business of the
Partnership. These Amendments would not restrict the authority currently
granted to the General Partner under the Partnership Agreement. The
Partnership Agreement, however, prevents the General Partner from undertaking
certain activities without the consent of Limited Partners holding a majority
of the outstanding Units, and prevents the General Partner and certain of its
Affiliates (including the Purchaser) from voting the Units they own. The
proposed Amendments would permit the General Partner and its Affiliates to
vote the Units they own in the same manner as all other Limited Partners are
entitled (except in the case of Interested Transactions). Assuming the
proposed Amendments are approved and the Tender Offer is completed, the
General Partner and the Purchaser together could own as much as 46.05% of the
outstanding Units. The effect of the Amendments to the voting requirements,
therefore, would be to permit Parent, through the General Partner and the
Purchaser, to influence substantially all matters affecting the Partnership
(other than Interested Transactions) that require the consent of Limited
Partners holding a majority of the Units. (For a discussion of the effects
caused by the changes in the authority of the General Partner, see "Proposal
No. 5--Amendments to Authority of the General Partner" below.) These matters
currently include the following:
(i) having any of the Partnerships acquire interests in other
partnerships or hotel properties in addition to the Partnership's
partnership interests in the Harbor Beach Partnership and the interest in
the Orlando Hotel (except for additional interests in the Harbor Beach
Partnership or partnership interests in the other Harbor Beach General
Partner or partners of the other Harbor Beach General Partner);
(ii) selling or otherwise disposing of or consenting to the sale or
disposition of any assets of any of the Partnerships which had an original
cost in excess of 25% of the original cost basis of all assets of such
Partnership or voting the Partnership's general partnership interest in the
Harbor Beach Partnership in favor of the sale or other disposition of any
assets of the Harbor Beach Partnership which had an original cost in excess
of 25% of the original cost of all assets of the Harbor Beach Partnership
to a party other than the General Partner or an Affiliate thereof;
(iii) voting the Partnership's interest in the Harbor Beach Partnership
in favor of any amendment to any agreement, contract or arrangement with
any general partner of the Harbor Beach Partnership or any of its
Affiliates which reduces the responsibilities or duties of such general
partner or which increases the compensation payable to such general partner
or any of its Affiliates, or which adversely affects the rights of the
Partnership as general partner of the Harbor Beach Partnership;
(iv) incurring material debt of the Partnership in excess of the
limitations set forth in the Partnership Agreement, or voting the
Partnership's interests in the Harbor Beach Partnership in favor of the
incurrence by the Harbor Beach Partnership of such debt;
(v) agreeing to the addition of transient guest rooms at any hotel unless
(a) the hotel has had an average occupancy rate of at least 70% for a
consecutive period of at least 12 months and (b) the Partnership has
obtained debt financing to finance the costs of the addition on a
nonrecourse basis as to all the partners of such partnership and the
Partnership (including the General Partner);
(vi) incurring any debt of a Partnership which does not provide by its
terms that it shall be nonrecourse as to all of the partners of the
Partnerships;
(vii) taking any action or failing to take any action which would result
in the Partnership withdrawing as a partner of the Harbor Beach
Partnership;
(viii) transferring, selling, assigning, pledging, or otherwise disposing
of all or any portion of the Partnership's interest in the Harbor Beach
Partnership;
9
(ix) making any election to continue beyond its term, discontinue or
dissolve any of the Partnerships; or
(x) admitting any other Person as a general partner of the Partnership.
Although the General Partner currently has no plans to undertake such
activities, it may do so in the future if a majority of Units are voted by the
Purchaser or any successor thereof (which together with the General Partner
could own as much as 46.05% of the outstanding Units if the Tender Offer is
successful) and other Limited Partners in favor of such actions.
Interested Transactions. The Partnership Agreement prohibits the General
Partner and its Affiliates from voting and provides that Units owned or
controlled by the General Partner and its Affiliates are not taken into
account in determining the presence or absence of a quorum. Thus, the General
Partner cannot cause the Partnership to engage in an Interested Transaction
unless it is approved by Limited Partners (other than the General Partner and
its Affiliates) holding a majority of the Units entitled to vote on such
matter. The proposed Amendments to the voting requirements would not reduce
the percentage of Partners that is required to consent to any Interested
Transaction under the Partnership Agreement, but would require the General
Partner and its Affiliates (including the Purchaser) to vote all of their
Units on Interested Transactions in the same manner as a majority of the Units
actually voted by Limited Partners other than the General Partner and its
Affiliates, provided that a majority of the Units held by Limited Partners
other than the General Partner and its Affiliates are present in person or by
proxy or consent for the vote on the Interested Transaction. Accordingly, if
Limited Partners (other than the General Partner and its Affiliates) holding a
majority of the outstanding Units are present in person or by proxy or consent
for the vote on an Interested Transaction and a majority of such Units
actually are voted in favor of the Interested Transaction, then the General
Partner and its Affiliates would vote all of their Units in favor of the
Interested Transaction. Conversely, if Limited Partners holding a majority of
the outstanding Units (other than the General Partner and its Affiliates) are
present in person or by proxy or consent for the vote on an Interested
Transaction and a majority of such Units actually are voted against the
Interested Transaction, then the General Partner and its Affiliates would vote
all of their Units against the Interested Transaction as well. In the absence
of the proposed Amendments, fewer than a majority of the outstanding Units
could be entitled to vote on Interested Transaction following the Tender Offer
because the Purchaser would hold a substantial portion of the outstanding
Units. The proposed Amendments require decisions regarding Interested
Transactions to be determined by a majority of the disinterested Limited
Partners who vote, because the Units held by the General Partner and its
Affiliates would be voted on such transactions in accordance with the desires
of the majority of such disinterested Limited Partners. The amendments to the
quorum requirements ensure that in order for an Interested Transaction to be
acted upon by Limited Partners, a majority of the disinterested Limited
Partners must be present or represented at the meeting or in the written
consent pursuant to which the action is to be taken. In the event that
"Proposal No. 2--Amendment to Definition of Affiliate" is approved by the
Limited Partners, transactions between the Partnership and Marriott
International would not be Interested Transactions under the Partnership
Agreement. (For a more detailed discussion of the effects caused by the change
in the definition of Affiliate, see "Proposal No. 2--Amendment to Definition
of Affiliate" below.) Examples of Interested Transactions would include:
(i) selling or otherwise disposing of or consenting to the sale or
disposition of any of the Partnerships' hotels to the General Partner or an
Affiliate, or selling the Partnership's interest in the Harbor Beach
Partnership or consenting to a sale of the Harbor Beach Hotel to the
General Partner or an Affiliate;
(ii) effecting any amendment to any agreement, contract or arrangement
with the General Partner or any Affiliate thereof that would reduce the
responsibility or duties or would increase the compensation payable to the
General Partner or any of its Affiliates or that would otherwise adversely
affect the rights of the disinterested Limited Partners;
(iii) voluntarily withdrawing as a General Partner;
(iv) causing the Partnership to borrow any funds from the General Partner
or an Affiliate except as set forth in the Partnership Agreement; or
10
(v) causing the Partnership to acquire any property from the General
Partner and any Affiliate of the General Partner in exchange for interests
in the Partnership.
This list of Interested Transactions, however, is not exclusive. Any matter
that is required to be presented to the Limited Partners for a vote, depending
upon the particular circumstances involved, could constitute an Interested
Transaction. The General Partner has no current intention to undertake any of
the transactions in examples (i) through (v) above; however, the Partnership
currently is evaluating the costs and benefits of a possible expansion of the
facilities of the Orlando Hotel. This process is in the preliminary stages and
no decision has been made to proceed with any such expansion; however, in the
event that the Partnership decides to expand the Orlando Hotel, one potential
source of financing would be a loan from the General Partner or one of its
Affiliates.
TEXT OF THE AMENDMENTS
1. Section 10.01.G of the Partnership Agreement would be amended to delete
the bracketed language and add the underlined language set forth below:
If any consents, determinations or votes of Limited Partners, with or
without a meeting, are to be requested, made or taken [,] WITH RESPECT TO
AN INTERESTED TRANSACTION, UNITS HELD BY the General Partner or any
Affiliate shall [not be entitled to any voting, determinative or consensual
rights with respect to any Interests owned or controlled by any of them nor
shall any such Interests be taken into account in determining the presence
or absence of a quorum.] BE VOTED IN THE SAME MANNER AS THE VOTE OF LIMITED
PARTNERS HOLDING, IN THEIR CAPACITY AS LIMITED PARTNERS AND NOT AS
ASSIGNEES, A MAJORITY OF THE OUTSTANDING UNITS ACTUALLY VOTING ON THE
INTERESTED TRANSACTION (OTHER THAN THOSE UNITS HELD BY THE GENERAL PARTNER
OR ANY OF ITS AFFILIATES); PROVIDED, HOWEVER, THAT NO INTERESTED
TRANSACTION SHALL BE DEEMED TO BE APPROVED UNLESS A MAJORITY OF THE UNITS
HELD BY LIMITED PARTNERS OTHER THAN THE GENERAL PARTNER AND ITS AFFILIATES
ARE PRESENT IN PERSON OR BY PROXY AT THE MEETING AT WHICH SUCH INTERESTED
TRANSACTION IS CONSIDERED, OR, IF WRITTEN CONSENTS ARE SOUGHT WITH RESPECT
TO SUCH INTERESTED TRANSACTION, CONSENTS REPRESENTING A MAJORITY OF THE
UNITS HELD BY LIMITED PARTNERS OTHER THAN THE GENERAL PARTNER AND ITS
AFFILIATES ARE RETURNED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE
CONSENT SOLICITATION PERIOD. WITH RESPECT TO ALL MATTERS OTHER THAN AN
INTERESTED TRANSACTION, THE GENERAL PARTNER AND ITS AFFILIATES MAY VOTE
UNITS HELD BY THEM AS LIMITED PARTNERS IN THEIR SOLE AND ABSOLUTE
DISCRETION.
2. Section 10.01.B of the Partnership Agreement would be amended to delete
the bracketed language and add the underlined language set forth below:
Notification of any such meeting shall be given not less than 10 days nor
more than 60 days before the date of the meeting, to the Limited Partners
at their record addresses, or at such other address which they may have
furnished in writing to the General Partner. Such Notification shall be in
writing, and shall state the place, date, hour and purpose of the meeting,
and shall indicate that it is being issued at or by the direction of the
Partner or Partners calling the meeting. If a meeting is adjourned to
another time or place, and if any announcement of the adjournment of time
or place is made at the meeting, it shall not be necessary to give
Notification of the adjourned meeting. The presence in person or by proxy
of [holders of] LIMITED PARTNERS HOLDING A MAJORITY OF THE UNITS (WHICH, IN
THE CASE OF AN INTERESTED TRANSACTION, MUST INCLUDE A MAJORITY OF THE UNITS
HELD BY LIMITED PARTNERS OTHER THAN THE GENERAL PARTNER AND ITS AFFILIATES)
shall constitute a quorum at all meetings of the Limited Partners;
provided, however, that if there be no such quorum, [holders of] LIMITED
PARTNERS HOLDING a majority of the Units so present or so represented may
adjourn the meeting from time to time without further notice, until a
quorum shall have been obtained. No Notification of the time, place or
purpose of any meeting of Limited Partners need be given to any Limited
Partner who attends in person or is represented by proxy (except when a
Limited Partner attends a meeting for the express purpose of objecting at
the beginning of the meeting to the transaction of any business on the
ground that the meeting is not lawfully called or convened), or to any
Limited Partner entitled to such notice who, in a writing executed and
filed with the records of the meeting, either before or after the time
thereof, waives such Notification.
11
PROPOSAL NO. 2
AMENDMENT TO DEFINITION OF AFFILIATE
SUMMARY OF THE AMENDMENTS
Under the current definition of "Affiliate" in Section 1.01 of the
Partnership Agreement, Marriott International, the manager of the Orlando
Hotel and the parent of the operating tenant of the Harbor Beach Hotel, would
be deemed an Affiliate of the General Partner because Messrs. J.W. Marriott,
Jr. and Richard E. Marriott, together with their families (the "Marriott
Family"), beneficially own more than 10% of the common stock of both the
General Partner (through their ownership in Host Marriott, which owns all of
the common stock of the General Partner) and Marriott International. The
proposed Amendment would revise this definition to provide that a publicly
traded entity such as Marriott International, although an "affiliate" under
the Federal securities laws, will not be deemed to be an Affiliate of the
General Partner or any of its Affiliates for purposes of the Partnership
Agreement unless a person or group of persons directly or indirectly owns
twenty percent (20%) or more of the outstanding common stock of the General
Partner or its Affiliates and such other entity without regard to the presence
or absence of other indices of "control" commonly evaluated in an affiliation
analysis.
PURPOSE OF THE AMENDMENTS
The proposed Amendment to the definition of "Affiliate" in the Partnership
Agreement is designed to exclude Marriott International from the definition of
an Affiliate of the General Partner unless or until such time as the Marriott
Family or some other person or group of persons directly or indirectly owns
20% or more of the outstanding common stock of both the General Partner
(through Host Marriott) and Marriott International. The Amendment has been
proposed because of the division on October 8, 1993 of Marriott Corporation's
operations into two separate companies. Prior to October 8, 1993, Host
Marriott was named "Marriott Corporation." In addition to conducting the
business now operated by Host Marriott of owning lodging properties and senior
living facilities, and operating restaurants, cafeterias, gift shops and
related facilities at airports, stadiums, arenas, and tourist attractions and
on highway systems, Marriott Corporation engaged in lodging and senior living
services management, timeshare resort development and operation, food service
and facilities management and other contract service businesses (the
"Management Business"). On October 8, 1993, however, Marriott Corporation
issued a special dividend consisting of the distribution to holders of its
outstanding common stock, on a share-for-share basis, of all of the
outstanding shares of its wholly owned subsidiary, Marriott International,
which had succeeded to Marriott Corporation's Management Business. Marriott
International now conducts that Management Business as a separate publicly
traded company.
Host Marriott and Marriott International share an ongoing relationship. J.W.
Marriott, Jr. serves as Chairman of the Board of Directors and President of
Marriott International and also serves as a director of Host Marriott. Richard
E. Marriott serves as Chairman of the Board of Directors of Host Marriott and
also serves as a director of Marriott International. In addition, the Marriott
Family beneficially owned approximately 16.21% of the outstanding common stock
of Host Marriott, as of January 31, 1996, and approximately 20.90% of the
common stock of Marriott International, as of January 31, 1996. In addition to
the lodging management agreements between Host Marriott and Marriott
International, the companies also have entered into, among other things, a
distribution agreement, a noncompetition agreement, a credit agreement, a
mortgage debt agreement, a debt allocation agreement, a consulting agreement
and senior living services lease agreements.
Notwithstanding the foregoing relationship between and mutual ownership of
Host Marriott and Marriott International, the two companies operate as
separate and distinct organizations with substantially distinct board members,
executive officers and stockholders. Because of this independence, each public
company has its own business goals and objectives, which are separate and
distinct from those of the other. The potential exists for disagreements as to
the quality of services provided by Marriott International to the Partnership
(the General Partner of which is a direct wholly owned subsidiary of Host
Marriott). In addition, the possible desire of the General Partner, from time
to time, to finance, refinance or effect a sale of a hotel property managed by
Marriott International may result, depending upon the structure of such
transactions, in a need to modify the management
12
agreement with respect to such property. Any such modification proposed may
not be acceptable to Marriott International, and the lack of consent from
Marriott International could adversely affect the ability of the Partnership
to consummate such financing or sale. Moreover, subject to certain
restrictions imposed by the noncompetition agreement, certain situations could
arise in which actions taken by Marriott International in its capacity as
manager of competing lodging properties would not necessarily be in the best
interests of the Partnership. Because of the independent nature of the
operations of the General Partner and Host Marriott, on the one hand, and
Marriott International, on the other hand, Host Marriott believes that it
would be inappropriate to include Marriott International within the definition
of an "Affiliate" of the General Partner until such time that the Marriott
Family or some other person or group of persons own at least 20% of the
outstanding common stock of the General Partner and Marriott International.
EFFECTS OF THE AMENDMENTS
The proposed Amendment to the definition of Affiliate would exclude Marriott
International from such definition for so long as the Marriott Family or some
other person or group of persons does not own 20% or more of the outstanding
common stock of the General Partner (through Host Marriott) and Marriott
International. Section 10.02.A of the Partnership Agreement currently permits
Limited Partners to terminate any agreement (including the Orlando management
agreement with Marriott International and the Harbor Beach operating lease
with a subsidiary of Marriott International), pursuant to which operating
management of any of the Partnership's hotels is vested in the General Partner
or an Affiliate, that the Partnership has the right to terminate as a result
of the failure of the operation of such hotel to achieve specifically defined
objectives. Termination by the Limited Partners under such circumstances can
occur without the consent of the General Partner upon the affirmative vote of
Limited Partners holding a majority of the outstanding Units. Because the
revised definition of Affiliate would exclude Marriott International unless or
until the Marriott Family or some other person or persons owns 20% or more of
the outstanding common stock of both the General Partner (through Host
Marriott) and Marriott International, the Orlando management agreement and the
Harbor Beach operating lease would be deemed to be vested in a third party,
rather than an Affiliate. However, Section 10.02.A is proposed to be amended
to maintain the Limited Partners' right under the Partnership Agreement to
terminate a management agreement or operating lease with Marriott
International or its Affiliates for cause.
Section 5.02.B(iii) of the Partnership Agreement currently prohibits the
General Partner, without the consent of Limited Partners holding a majority of
the outstanding Units, from causing the Partnership to amend any agreement,
contract or arrangement with the General Partner or any Affiliate in a manner
that reduces the responsibilities or duties of the General Partner as a
general partner of the Partnership, or any of its Affiliates, increases the
compensation payable to the General Partner or its Affiliates, or adversely
affects the rights of the Limited Partners, or voting the Partnership's
interest in the Harbor Beach Partnership in favor of any amendment to any
agreement, contract or arrangement with any General Partner of the Harbor
Beach Partnership or any of its Affiliates which reduces the responsibilities
or duties of such General Partner or which increases the compensation payable
to such General Partner or any of its Affiliates, or which adversely affects
the rights of the Partnership as General Partner of the Harbor Beach
Partnership. As discussed above, the proposed Amendment to the definition of
Affiliate would exclude Marriott International unless or until the Marriott
Family or some other person or group of persons owns 20% or more of the
outstanding common stock of both the General Partner (through Host Marriott)
and Marriott International. Therefore, the Orlando management agreement and
the Harbor Beach operating lease would be deemed to be vested in a third
party, rather than an Affiliate, until such time in the future (if ever) that
Marriott International becomes an Affiliate under the new definition.
Consequently, until such time, the General Partner could cause the Partnership
to amend the management agreement or operating lease so as to increase the
compensation payable thereunder to Marriott International or otherwise change
the terms of such agreements. The General Partner currently has no plans to
amend the management agreement or operating lease.
As discussed below under "Conflicts of Interest--Policies with Respect to
Conflicts of Interest," Section 5.01.E of the Partnership Agreement sets forth
certain conflict of interest policies which require that agreements, contracts
or arrangements between the Partnership and the General Partner or its
Affiliates be on commercially
13
reasonable terms and subject to certain other specific criteria. Because the
proposed Amendment to the definition of Affiliate would exclude Marriott
International, it would not be subject to the conflict of interest policies
until such time in the future (if ever) that Marriott International becomes an
Affiliate under the new definition. Nevertheless, the General Partner will not
enter into any new, or amend any existing, agreement, contract or arrangement
with Marriott International on terms that are unfair to the Partnership or
commercially unreasonable.
The General Partner currently intends to enter into an approximately $3
million furniture, fixtures and equipment (collectively, "FF&E") loan with
Marriott International or one of its Affiliates in order to cover anticipated
shortfalls in the Orlando Hotel's FF&E escrow account as a result of Phase II
of the rooms renovation at the Orlando Hotel. This FF&E loan, which the
General Partner anticipates will be made during late 1996 or early 1997, will
be unsecured and will be repaid from the FF&E escrow account. Other than the
FF&E loan described above, the General Partner has no current intention to
engage in any transaction with Marriott International or its Affiliates.
TEXT OF THE AMENDMENTS
1. Section 1.01 of the Partnership Agreement would be amended to add the
underlined language set forth below:
"Affiliate," "AFFILIATES" or "Affiliated Person" means, when used with
reference to a specified Person, (i) any Person that directly or indirectly
through one or more intermediaries controls or is controlled by or is under
common control with the specified Person, (ii) any Person that is an
officer of, partner in or trustee of, or serves in a similar capacity with
respect to, the specified Person or of which the specified Person is an
officer, partner or trustee, or with respect to which the specified Person
serves in a similar capacity, (iii) any Person that, directly or
indirectly, is the beneficial owner of 10% or more of any class of equity
securities of the specified Person or of which the specified Person is
directly or indirectly the owner of 10% or more of any class of equity
securities, and (iv) any relative or spouse of the specified Person who
makes his or her home with that of the specified Person. Affiliate or
Affiliated Person of the Partnership or the General Partner does not
include a Person who is a partner of, or in a partnership or joint venture
with the Partnership or any other Affiliated Person if such Person is not
otherwise an Affiliate or Affiliated Person of the Partnership or the
General Partner. NOTWITHSTANDING THE FOREGOING, NO CORPORATION WHOSE COMMON
STOCK IS LISTED ON A NATIONAL SECURITIES EXCHANGE OR AUTHORIZED FOR
INCLUSION ON THE NASDAQ NATIONAL MARKET, OR ANY SUBSIDIARY THEREOF, SHALL
BE AN "AFFILIATE" OF THE GENERAL PARTNER OR ANY AFFILIATE THEREOF UNLESS A
PERSON (OR PERSONS IF SUCH PERSONS WOULD BE TREATED AS PART OF THE SAME
GROUP FOR PURPOSES OF SECTION 13(D) OR 13(G) OF THE SECURITIES EXCHANGE ACT
OF 1934) DIRECTLY OR INDIRECTLY OWNS TWENTY PERCENT (20%) OR MORE OF THE
OUTSTANDING COMMON STOCK OF THE GENERAL PARTNER AND SUCH OTHER CORPORATION.
2. Section 10.02.A of the Partnership Agreement would be amended to delete
the bracketed language and add the underlined language set forth below:
A. If at any time any agreement [(including the Management Agreements and
Operating Lease)] pursuant to which operating management of any property of
the Partnership[,] or the Harbor Beach [Partnership or the Warner Center]
Partnership is vested in the General Partner or any general partner of the
other [two Partnerships] PARTNERSHIP which is an Affiliate of the General
Partner OR IN MARRIOTT INTERNATIONAL, INC. OR ANY OF ITS AFFILIATES and if
pursuant to the terms of such agreement the Partnership[,] or the Harbor
Beach [Partnership or the Warner Center] Partnership has a right to
terminate such agreement as a result of the failure of the operation of
such property to attain any economic objective, the Limited Partners,
without the Consent of the General Partner, may, upon the affirmative vote
of [the holders of] LIMITED PARTNERS HOLDING a majority of the Units, take
action to exercise the right of the Partnership, acting for itself or as a
general partner of the Harbor Beach Partnership [or a limited partner of
the Warner Center Partnership], to terminate such agreement.
14
PROPOSAL NO. 3
AMENDMENTS TO AUTHORITY OF THE GENERAL PARTNER
SUMMARY OF THE AMENDMENTS
Section 5.02B of the Partnership Agreement provides that the General Partner
shall not, without the consent of Limited Partners holding a majority of the
Units, (i) sell or otherwise dispose of (collectively, to "Sell") or consent
to the sale or disposition of (collectively, a "Sale") any assets which had an
original cost in excess of 25% of the original cost basis of all assets ("25%
Assets") of the Partnership, (ii) vote the Partnership's general partnership
interest in the Harbor Beach Partnership (the "Harbor Beach Interest") in
favor of the Sale of any 25% Assets of the Harbor Beach Partnership, or (iii)
transfer, sell, assign, pledge or otherwise dispose of (collectively, to
"Transfer") all or any portion of the Harbor Beach Interest (collectively, the
transactions referred to in clauses (i) through (iii) above are sometimes
referred to as the "25% Asset Sale Transactions"). The Amendments to Section
5.01C and 5.02B would grant the General Partner the authority, without
obtaining the consent of the Limited Partners, to engage in 25% Asset Sale
Transactions with persons ("Third Parties") other than the General Partner or
any general partner of the Harbor Beach Partnership or any Affiliate of any of
the foregoing ("Affiliated Parties"). The Sale of 25% Assets of the
Partnership, the vote of the Partnership in favor of the Sale of 25% Assets of
the Harbor Beach Partnership, or the Transfer of the Harbor Beach Interest to
any Affiliated Party would continue to require the consent of Limited Partners
holding a majority of the Units.
PURPOSE OF THE AMENDMENTS
Although the General Partner, as a result of being the general partner of
the Partnership, already effectively controls the Sale of 25% Assets of the
Partnership and the Harbor Beach Interest, and the Partnership's voting of the
Harbor Beach Interest in favor of the Sale of 25% Assets of the Harbor Beach
Partnership the purpose of these Amendments is to permit Parent to consolidate
for accounting purposes the Partnerships' hotels in Parent's financial
statements.
EFFECTS OF THE AMENDMENTS
These proposed Amendments would eliminate Limited Partner consent
requirements relating to 25% Asset Sale Transactions with Third Parties and
vest the sole authority with respect to such transactions in the General
Partner. In the event the Tender Offer is consummated and the General Partner
and its Affiliates are granted the right to vote their Units pursuant to the
proposed Amendments set forth in "Proposal No. 1--Amendment to Voting
Provisions," the General Partner and its Affiliates could own as much as
46.05% of the Units, thereby exerting substantial influence on votes by the
Limited Partners to approve 25% Asset Sale Transactions with Third Parties. In
votes on these transactions with Third Parties, the General Partner's and its
Affiliates' interests would be aligned with those of the other Limited
Partners, since the General Partner and its Affiliates would benefit or be
harmed by these transactions in much the same way as all Limited Partners
would be (except as to tax consequences). Moreover, these Amendments would not
alter the Limited Partner consent requirements relating to the 25% Asset Sale
Transactions with Affiliated Parties. These transactions would be Interested
Transactions under the Partnership Agreement and could only be approved with
the consent of a majority of the disinterested Limited Partners. (For a
discussion of the effects caused by the changes in the voting provisions, see
"Proposal No. 1--Amendment to Voting Provisions.") In addition, the General
Partner has no current intention of selling any asset of the Partnership,
including the Orlando Hotel and the Harbor Beach Interest, or voting the
Harbor Beach Interest in favor of the Sale of any asset of the Harbor Beach
Partnership, including the Harbor Beach Hotel.
These Amendments to Sections 5.01C and 5.02B are being sought solely to
permit the consolidation of the Partnership's hotels in Parent's financial
statements. The General Partner has no current intention to engage in any 25%
Asset Sale Transaction.
15
TEXT OF THE AMENDMENTS
1. Section 5.01C of the Partnership Agreement would be amended to add new
subsections (vi) and (vii) set forth below:
(vi) sell or otherwise dispose of or consent to the sale or disposition
of any assets of the Partnership to any Person provided that, if the assets
to be sold or disposed of had an original cost in excess of 25% of the
original cost of all assets of the applicable Partnership, such Person is
not a general partner of either Partnership or an Affiliate of any such
general partner; and
(vii) transfer, sell, assign, pledge or otherwise dispose of all or any
portion of the Partnership's interest in the Harbor Beach Partnership to a
Person other than the General Partner or a general partner of the Harbor
Beach Partnership or an Affiliate of any of the foregoing.
2. Section 5.02B(ii) of the Partnership Agreement, would be amended to
delete the bracketed language and add the underlined language set forth below:
sell or otherwise dispose of or consent to the sale or disposition of any
assets of [any of] the [Partnerships] Partnership which had an original
cost in excess of 25% of the original cost basis of all assets of [such]
THE Partnership TO ANY OF THE GENERAL PARTNERS OF THE PARTNERSHIPS OR AN
AFFILIATE OF ANY SUCH GENERAL PARTNER or vote the Partnership's general
partnership interest in the Harbor Beach Partnership [and the Partnership's
limited partnership interest in the Warner Center Partnership] in favor of
the sale or other disposition of any assets of the Harbor Beach Partnership
[or the Warner Center Partnership] which had an original cost in excess of
25% of the original cost of all assets of the Harbor Beach Partnership [or
the Warner Center Partnership] TO ANY OF THE GENERAL PARTNERS OF THE
PARTNERSHIPS OR AN AFFILIATE OF ANY SUCH GENERAL PARTNER; provided,
however, that if it is proposed that one of the Partnerships sell one of
the Hotels to any of the general partners of the Partnerships or an
Affiliate of any such general partner the following procedures shall be
followed: (a) the General Partner shall first give notice of the proposed
sale to the Limited Partners who shall thereafter have 30 days within which
to select a nationally recognized appraiser having the approval of [the
holders of] LIMITED PARTNERS holding a majority of the Units, (b) the
appraiser selected under clause (a) of this proviso shall have 30 days from
the date of selection to prepare and submit to the General Partner an
appraisal of the fair market value of the Hotel in question, (c) the
purchaser shall submit to the General Partner an appraisal of the fair
market value of the Hotel, such appraisal to be submitted within the time
limit provided by clause (b) of this proviso in the case of the appraisal
to be submitted by the appraiser selected by the Limited Partners, and (d)
the General Partner shall thereafter make formal request for the required
Consent and in connection therewith shall submit to the Limited Partners
the two appraisals contemplated by clauses (b) and (c) of this proviso;
provided further, however, that if the Limited Partners do not select an
appraiser as contemplated by clause (a) of this proviso or if such
appraiser does not supply an appraisal within the time period required by
clause (b) of this proviso, the General Partner will not request Consent to
the sale of the Hotel to any of the general partners or any Affiliate of
the general partners unless such request is accompanied by three appraisals
as to market value of the Hotel, one such appraisal to be prepared by an
appraiser selected by the purchaser and the other two appraisals to be
prepared by appraisers selected by the first such appraiser, the cost of
all such appraisals to be borne by the purchaser;
3. Section 5.02B(viii) of the Partnership Agreement, would be amended to
delete the bracketed language and add the underlined language set forth below:
transfer, sell, assign, pledge or otherwise dispose of all or any portion
of the Partnership's interest in the Harbor Beach Partnership [or the
Warner Center Partnership; provided, however, that if the General Partner
proposes to sell such Harbor Beach Partnership or Warner Center Partnership
interest] to the General Partner or a general partner of the Harbor Beach
Partnership or [the Warner Center Partnership or] an Affiliate of any of
the foregoing, [then], provided that the appraisal procedure in Section
5.02B(ii) shall be followed;
16
PROPOSAL NO. 4
REVISION OF TRANSFER RESTRICTIONS
SUMMARY OF THE AMENDMENTS
Section 7.01.A of the Partnership Agreement permits the assignment of Units
only on the first day of each fiscal quarter. The Amendment to Section 7.01.A
would waive this restriction for the transfer of Units to the Purchaser
pursuant to the Tender Offer and would exempt the Purchaser from this
restriction for any subsequent transfer of Units to another entity. Section
7.01D prohibits transfers of Units that would result in the assignor or
assignee owning a fraction of a Unit other than a half-Unit. The Amendment to
Section 7.01D would permit fractions of Units to be purchased by the Purchaser
pursuant to the Tender Offer and would permit the subsequent assignment of
such fractional interests, provided that such fractional interests are
assigned in their entirety.
PURPOSE OF THE AMENDMENTS
Section 7.01.A of the Partnership Agreement permits the assignment of Units
only on the first day of each fiscal quarter (as defined in the Partnership
Agreement). January 1, 1997 is the first day of the next fiscal quarter.
Without amending the Partnership Agreement to permit the waiver of this
requirement, the Closing Date for the Tender Offer would have to fall on
January 1, 1997, rather than an earlier or later date that otherwise would be
chosen as the Closing Date. Accordingly, the General Partner has proposed, at
the request of Parent and the Purchaser, the inclusion in Section 7.01.A of a
provision that would waive the Section 7.01.A transfer restrictions for Units
transferred pursuant to the Tender Offer. This change would permit the
transfer of such Units and the closing of the Tender Offer to occur on the
earliest date practicable following the expiration of the Tender Offer, and in
any event, on such date as is necessary to facilitate the orderly consummation
of the Tender Offer. The General Partner also has proposed, at the request of
Parent and the Purchaser, that the Limited Partners exempt the Purchaser from
this restriction for all subsequent assignments of its Units to any other
entity in order to provide the Purchaser with the flexibility to transfer its
Units on such date that may be necessary to facilitate the transfer.
Section 7.01D prohibits certain transfers of Units that would result in the
assignor or assignee owning a fraction of a Unit other than a half-Unit. Since
the Tender Offer is for less than all of the outstanding Units of the
Partnership, in the event that the Tender Offer is oversubscribed, the
Purchaser will need to prorate its purchases of Units. Without the Amendment
to Section 7.01D, the Purchaser would be forced to prorate to half-Units,
which could result in the Purchaser purchasing slightly different percentages
of Units from holders of full Units and holders of half-Units. The Amendment
to Section 7.01D would permit the Purchaser to prorate its purchases of Units
exactly (i.e., if 100% of the Units are tendered, the Purchaser would purchase
45% of each Unitholder's Units). In addition, this Amendment would permit the
subsequent assignment of fractional interests received in the Tender Offer,
provided that such fractional interests are assigned in their entirety.
EFFECT OF THE AMENDMENTS
The effect of the proposed Amendment to the Section 7.01.A transfer
restriction would be to permit the closing of the Tender Offer and any
subsequent transfer by the Purchaser to another entity to occur on a date that
is convenient for the parties concerned, rather than on the first day of a
fiscal quarter. Because such transfers would occur in isolated transactions,
the General Partner does not believe that as a result of such transfers, the
Partnership would be treated as an association taxable as a corporation under
Section 7704 of the Code.
The effect of the proposed Amendment to Section 7.01D would be to permit the
Purchaser to prorate its purchases of Units pursuant to the Tender Offer in
exactly the same manner for each Unitholder in the event that the Tender Offer
is oversubscribed and would permit Unitholders whose tenders of Units were
prorated in the Tender Offer to transfer such prorated Units in subsequent
transactions. Therefore, the Purchaser would be able to purchase an identical
percentage of Units tendered from each Unitholder who tenders in the Tender
Offer.
17
TEXT OF THE AMENDMENTS
1. Section 7.01.A of the Partnership Agreement would be revised to add the
underlined language set forth below:
No assignment of any Interest may be made other than on the first day of
a Fiscal Quarter; PROVIDED, HOWEVER, THAT THIS RESTRICTION ON THE TIMING OF
ASSIGNMENT SHALL NOT APPLY TO (I) ANY TRANSFER OF UNITS (OR FRACTIONS OF
UNITS) TO MHP ACQUISITION CORP. PURSUANT TO MHP ACQUISITION CORP.'S OFFER
TO PURCHASE FOR CASH 450 OUTSTANDING UNITS OF LIMITED PARTNERSHIP INTEREST,
DATED NOVEMBER 19, 1996 OR (II) ANY SUBSEQUENT ASSIGNMENT OF ANY UNITS BY
MHP ACQUISITION CORP.
2. Section 7.01.D of the Partnership Agreement would be revised to delete
the bracketed language and add the underlined language set forth below:
No purported assignment [by a Limited Partner] (i) BY THE HOLDER of any
Unit after which the assignor or the assignee would hold a fraction of a
Unit (other than a one-half Unit)[,] OR (II) BY THE HOLDER OF A FRACTION OF
A UNIT OF LESS THAN ALL OF SUCH HOLDER'S ENTIRE FRACTIONAL INTEREST will be
permitted or recognized (except for assignments by gift, inheritance or
family dissolution or assignments to Affiliates of the assignor). THE
PRECEDING SENTENCE SHALL NOT APPLY TO ANY TRANSFER OF UNITS (OR FRACTIONS
OF UNITS) TO MHP ACQUISITION CORP. PURSUANT TO MHP ACQUISITION CORP.'S
OFFER TO PURCHASE FOR CASH 450 OUTSTANDING UNITS OF LIMITED PARTNERSHIP
INTEREST, DATED NOVEMBER 19, 1996, WHICH TRANSFERS SHALL BE CONSIDERED TO
BE IN ACCORDANCE WITH THIS AGREEMENT.
PROPOSAL NO. 5
AMENDMENTS TO PROVISIONS ALLOCATING PROFITS AND LOSSES AND
CASH DISTRIBUTIONS
SUMMARY OF THE AMENDMENTS
Section 4.03 of the Partnership Agreement provides that net profits, gains,
net losses or losses attributable to Units transferred during a fiscal year
will be allocated between the assignor and assignee according to the number of
fiscal quarters during such fiscal year that each owned such Units. This
section also provides that transfers of Units other than on the first day of a
fiscal quarter in contravention of the Partnership Agreement will be
recognized for allocation purposes only if, and to the extent, the Partnership
is required to do so in the opinion of legal counsel. The Amendment to this
provision would clarify that transfers of Units pursuant to the Tender Offer
would be recognized for allocation purposes even if made other than on the
first day of a fiscal quarter. In addition, the Amendment to this provision
would provide that net profits, gains, net losses or losses attributable to
Units transferred during a fiscal year would be allocated between the assignor
and the assignee according to the number of Accounting Periods (rather than
fiscal quarters) during such fiscal year that each owned such Units. The
Amendment to this provision also would provide that Unitholders who transfer
Units pursuant to the Tender Offer would be treated as holding such Units up
to and including, but not beyond, the last day of the Accounting Period ending
immediately prior to the Closing Date and, therefore, would receive
allocations of profit (or loss) on such Units for periods through, but not
beyond, such date.
Section 4.09 of the Partnership Agreement provides that distributions by the
Partnership are made in accordance with the number of Units owned as of the
end of the fiscal quarter with respect to which the distribution is being
made. This section also provides that transfers of Units other than on the
first day of a fiscal quarter in contravention of the Partnership Agreement
will be recognized for distribution purposes only if, and to the extent, the
Partnership is required to do so in the opinion of legal counsel. The
Amendment to this provision would provide that transfers of Units pursuant to
the Tender Offer would be recognized for distribution purposes even if made
other than on the first day of a fiscal quarter. The Amendment to this
provision also would provide that Unitholders who transfer Units pursuant to
the Tender Offer would not receive distributions with respect to such Units
made after the Closing Date (other than distributions of any sale or
refinancing proceeds
18
made with respect to fiscal quarters ending before such Units are
transferred). As a result of amending Section 4.09, each Unitholder of record
as of September 6, 1996 whose Units are tendered and accepted for payment in
the Tender Offer received his or her final cash distribution as to such
Accepted Units on November 1, 1996 and will not receive any additional cash
distributions with respect to such Accepted Units. In this regard, note that
the Partnership anticipates that there will be no cash available for
distribution during the period from the November 1, 1996 distribution date
through the Closing Date due to this period being the cyclical slow period for
the Hotels.
PURPOSE OF THE AMENDMENTS
Pursuant to Sections 4.03 and 4.09 of the Partnership Agreement, if a
transfer of Units occurs other than on the first day of a fiscal quarter, the
Partnership cannot recognize such transfer for allocation and distribution
purposes unless it obtains an opinion of counsel providing that the
Partnership is required to do so. Since this is an unsettled issue of state
law, the General Partner has not received, and does not plan to request, such
an opinion. In addition, these sections are unclear regarding (i) the
allocation of net profits, gains, net losses or losses and (ii) the
distribution of cash available for distribution and refinancing and sale
proceeds, respectively, with respect to Units transferred other than on the
first day of a fiscal quarter. It is unlikely that Units transferred pursuant
to the Tender Offer will be transferred on the first day of a fiscal quarter.
Accordingly, the General Partner, at the request of Parent and the Purchaser,
has proposed that Sections 4.03 and 4.09 of the Partnership Agreement be
amended to clarify that the Partnership shall recognize such transfers without
receiving an opinion of counsel that it is required to do so. In addition, the
General Partner, at the request of Parent and the Purchaser, has proposed that
Sections 4.03 and 4.09 of the Partnership Agreement be amended to clarify the
manner in which allocations of net profits, gains, net losses or losses and
distributions with respect to Units transferred pursuant to the Tender Offer
shall be made.
EFFECTS OF THE AMENDMENTS
The Amendment to Section 4.03 would provide that transfers of Units pursuant
to the Tender Offer would be recognized for allocation purposes and treated
for such purposes as if they took place on the first day of the Accounting
Period in which they occur. Accordingly, with respect to Accepted Units, the
Partnership would be required to allocate profits (and losses) for the entire
Accounting Period containing the Closing Date to the Purchaser. This would
prevent Unitholders from receiving an allocation of profits (or losses) for
any portion of this Accounting Period, which could be as long as 35 days--even
though they could have beneficially owned the transferred Units for a majority
of such period. Because the Partnership currently is generating net income for
holders of Units, the Amendment would result in less taxable income being
allocated to tendering Unitholders than would be the case currently under the
Partnership Agreement.
The Amendment to Section 4.09 would provide that transfers of Units pursuant
to the Tender Offer would be recognized for distribution purposes and treated
for such purposes as if such transfers took place on the date of transfer. As
a result of the Amendment, with respect to Accepted Units, the Partnership
would be required to make all distributions (other than distributions of sale
or refinancing proceeds made with respect to fiscal quarters ending before the
Closing Date) to the Purchaser if such distributions were made after the
Closing Date. All distributions with respect to Accepted Units made before the
Closing Date would be made to the tendering Unitholder.
As a result of amending Section 4.09, each Unitholder of record as of
September 6, 1996 whose Units are tendered and accepted for payment in the
Tender Offer received his or her final cash distribution as to such Accepted
Units on November 1, 1996 and will not receive any additional cash
distributions as to such Accepted Units. This distribution was with respect to
the period of June 1995 through October 1996 from operations of the Orlando
Hotel and for the period of April 1996 through October 1996 from operations of
the Harbor Beach Hotel.
19
TEXT OF THE AMENDMENTS
1. Section 4.03 of the Partnership Agreement would be amended to delete the
bracketed language and add the underlined language set forth below:
[Any] SUBJECT TO THE PROVISIONS OF SECTION 4.13, any Net Profits or Net
Losses for any Fiscal Year allocable to the Limited Partners under Section
4.01 or 4.02 shall be allocated among the Limited Partners pro rata in
accordance with the number of Units owned by each as of the end of such
Fiscal Year; provided that if any Unit is assigned during the Fiscal Year
in accordance with this Agreement, the Net Profits or Net Losses that are
so allocable to such Unit shall be allocated between the assignor and
assignee of such Unit according to the number of [Fiscal Quarters]
ACCOUNTING PERIODS in such Fiscal Year each owned such Unit. Any Gains or
Losses allocable to the Limited Partners shall be allocated among the
Limited Partners who held Units on the last day of the Fiscal Quarter in
which the sale or disposition giving rise to such Gains or Losses occurred,
pro rata in accordance with the number of Units owned by each such Limited
Partner. If any Unit is assigned by a Limited Partner other than on the
first day of a Fiscal Quarter (in contravention of the Agreement), then the
Partnership shall recognize such assignment for the purposes of allocating
Net Profits, Gains, Net Losses or Losses if, and to the extent, it is
legally required to do so in the opinion of legal counsel. THE PRECEDING
SENTENCE SHALL NOT APPLY TO THE UNITS (OR FRACTIONS OF UNITS) TRANSFERRED
TO MHP ACQUISITION CORP. PURSUANT TO MHP ACQUISITION CORP.'S OFFER TO
PURCHASE FOR CASH 450 OUTSTANDING UNITS OF LIMITED PARTNERSHIP INTEREST,
DATED NOVEMBER 19, 1996, WHICH TRANSFERS SHALL BE CONSIDERED TO BE IN
ACCORDANCE WITH THIS AGREEMENT, SHALL BE DEEMED TO OCCUR FOR PURPOSES OF
THIS SECTION 4.03 ON THE FIRST DAY OF THE ACCOUNTING PERIOD IN WHICH THE
TRANSFER OF SUCH UNITS OCCURS AND SHALL BE GOVERNED BY THE FIRST TWO
SENTENCES OF THIS SECTION 4.03.
2. Section 4.09 of the Partnership Agreement would be amended to add the
underlined language set forth below:
Cash Available for Distribution distributable with respect to any Fiscal
Quarter to the Limited Partners pursuant to Section 4.06, shall be
distributed to the Limited Partners pro rata in accordance with the number
of Units owned by each as of the end of such Fiscal Quarter; provided that
if a Unit is assigned during the Fiscal Year in accordance with this
Agreement, then the amount so distributable with respect to such Unit shall
be divided between the assignor and the assignee of such Unit according to
the number of Fiscal Quarters in such Fiscal Year each owned such Unit.
Proceeds distributable to the Limited Partners pursuant to Section 4.07 or
4.08A shall be distributed to the Limited Partners pro rata in accordance
with the number of Units owned by each such Limited Partner on the last day
of the Fiscal Quarter in which the transaction giving rise to such proceeds
was completed. If a Unit is assigned by a Limited Partner other than on the
first day of a Fiscal Quarter (in contravention of this Agreement), then
the Partnership shall recognize such assignment for the purpose of
distributing amounts pursuant to Sections 4.06, 4.07 and 4.08 if, and to
the extent, it is legally required to do so in the opinion of legal
counsel. THE PRECEDING SENTENCE SHALL NOT APPLY TO THE UNITS (OR FRACTIONS
OF UNITS) TRANSFERRED TO MHP ACQUISITION CORP. PURSUANT TO MHP ACQUISITION
CORP.'S OFFER TO PURCHASE FOR CASH 450 OUTSTANDING UNITS OF LIMITED
PARTNERSHIP INTEREST, DATED NOVEMBER 19, 1996, WHICH TRANSFERS SHALL BE
CONSIDERED TO BE IN ACCORDANCE WITH THIS AGREEMENT, AND, FOR PURPOSES OF
THIS SECTION 4.09, SHALL BE DEEMED TO OCCUR ON THE DATE OF TRANSFER OF SUCH
UNITS FOR THE PURPOSE OF DISTRIBUTING AMOUNTS PURSUANT TO SECTIONS 4.06,
4.07 AND 4.08 (WHICH SHALL RESULT IN MHP ACQUISITION CORP. BECOMING THE
LIMITED PARTNER OF RECORD ON SUCH DATE OF TRANSFER). NOTWITHSTANDING THE
FIRST SENTENCE OF THIS SECTION 4.09, ANY DISTRIBUTIONS PURSUANT TO SECTION
4.06 WITH RESPECT TO SUCH TRANSFERRED UNITS MADE BEFORE THE DATE OF
TRANSFER OF SUCH UNITS BUT AFTER THE LAST DAY OF THE FISCAL QUARTER ENDING
BEFORE SUCH DATE OF TRANSFER SHALL BE MADE TO THE TRANSFERRING LIMITED
PARTNER, AND ANY DISTRIBUTION PURSUANT TO SECTION 4.06 WITH RESPECT TO SUCH
TRANSFERRED UNITS AFTER SUCH DATE OF TRANSFER BUT BEFORE THE FIRST DAY OF
THE FIRST FISCAL QUARTER COMMENCING AFTER SUCH DATE OF TRANSFER SHALL BE
MADE TO MHP ACQUISITION CORP.
20
PROPOSAL NO. 6
TAX AMENDMENTS
SUMMARY OF THE AMENDMENTS
Amendments to certain terms and sections of the Partnership Agreement would
be made in order to reflect various U.S. Treasury Department Regulations that
have been issued subsequent to the formation of the Partnership. The General
Partner does not believe that these amendments will affect the rights of the
Unitholders in any material respect. These changes are included, along with
the other proposed Amendments, in the copy of the Partnership Agreement, as
proposed to be amended, which is attached as APPENDIX A to this Consent
Solicitation Statement. These changes are located predominantly in Articles I
and IV of the Partnership Agreement. The amended Partnership Agreement is
marked to indicate the revisions made to the existing Partnership Agreement
and should be read in its entirety. Deleted provisions are contained in
brackets and struck through, and added provisions are in bold type and
underlined.
PROPOSAL NO. 7
CLARIFYING AMENDMENTS
SUMMARY OF THE AMENDMENTS
Amendments to certain terms and sections of the Partnership Agreement would
be made in order to (i) reflect the fact that after the division of Marriott
Corporation's operations into two separate public companies, Parent, as the
successor to Marriott Corporation, no longer owns the management business
conducted by Marriott International, (ii) delete certain obsolete references
to entities and agreements that are no longer in existence and (iii) update
the Partnership Agreement to reflect the passage of time since the formation
of the Partnership. The General Partner does not believe that these amendments
would affect the rights of the Unitholders in any material respect. These
changes are included, along with the other proposed Amendments, in the copy of
the Partnership Agreement, as proposed to be amended, which is attached as
APPENDIX A to this Consent Solicitation Statement. The amended Partnership
Agreement is marked to indicate the revisions made to the existing Partnership
Agreement and should be read in its entirety. Deleted provisions are contained
in brackets and struck through, and added provisions are in bold type and
underlined.
PROPOSAL NO. 8
AMENDMENT TO AMENDMENT PROVISIONS
SUMMARY OF THE AMENDMENT
In addition to certain amendments specifically authorized in the Partnership
Agreement, the Partnership Agreement may be amended from time to time by the
General Partner with the consent of Limited Partners holding a majority of
Units. Thus, Limited Partner approval is required to amend that Partnership
Agreement in any manner, even if the amendment would not have a material
effect on the rights of the Unitholders. The General Partner believes that it
would be beneficial to have the ability to amend the Partnership Agreement
from time to time, without the consent of the Limited Partners, to reflect the
occurrence of events that render provisions of the Partnership Agreement
unclear or obsolete, provided that any such amendment would not affect the
rights of the Unitholders in any material respect. The General Partner would
determine whether any such amendment satisfies this test. In making this
determination there may be conflicts of interest between the General Partner
and the Limited Partners, however, the General Partner would be bound by, and
intends to fulfill, its fiduciary duties to the Partnership and the Limited
Partners, including its duties of good faith and loyalty.
PURPOSE OF THE AMENDMENT
This proposed Amendment would give the General Partner the ability to amend
the Partnership Agreement from time to time, without the consent of the
Limited Partners, to reflect the occurrence of events that render provisions
of the Partnership Agreement unclear or obsolete, provided that any such
amendment would not affect
21
the rights of the Unitholders under the Partnership Agreement in any material
respect. The General Partner believes that this type of provision is contained
in the partnership agreements of many widely-held limited partnerships,
including certain other Host Marriott sponsored limited partnerships, and
would enhance the ability of the General Partner in keeping the Partnership
Agreement updated.
EFFECTS OF THE AMENDMENT
This proposed Amendment would give the General Partner the ability to amend
the Partnership Agreement from time to time, without the consent of the
Limited Partners, in order to clarify provisions of the Partnership Agreement,
provided that any such amendment would not affect the rights of Unitholders
under the Partnership Agreement in any material respect. For example, if the
Partnership Agreement, as currently in effect, contained this proposed
Amendment, the Amendments set forth in Proposal Nos. 6 and 7 would not require
the consent of the Limited Partners. The General Partner would still be
required to seek the consent of Limited Partners in order to amend the
Partnership Agreement (i) as specifically set forth in the Partnership
Agreement and (ii) in any way which would affect the rights of the Unitholders
under the Partnership Agreement in any material respect.
TEXT OF THE AMENDMENTS
Section 11.02 of the Partnership Agreement would be amended to add a new
subsection 11.02F, the text of which is set forth below:
F. The General Partner may, without the Consent of the Limited Partners,
make any amendment to this Agreement as is necessary to clarify the
provisions hereof so long as such amendment does not affect the rights of
the Limited Partners or assignees of their Interests under this Agreement
in any material respect.
CONFLICTS OF INTEREST
Because Parent and its affiliates own hotels other than those owned by the
Partnership and the Harbor Beach Partnership, potential conflicts of interest
exist. With respect to these potential conflicts of interest, Parent and its
affiliates retain a free right to compete with the Partnership's and the
Harbor Beach Partnership's hotels, including the right to develop competing
hotels now and in the future, in addition to those existing hotels that may
compete directly or indirectly. As the owner of 46.05% of the outstanding
Units, Parent, through the Purchaser, could substantially influence the action
taken by the Partnership with respect to all matters requiring the consent of
Limited Partners that do not fully reflect the interests of all Limited
Partners of the Partnership.
Under Delaware law, the General Partner has unlimited liability for
obligations of the Partnership, unless those obligations are, by contract,
without recourse to the partners thereof. Since the General Partner is
entitled to manage and control the business and operations of the Partnership,
this control could lead to a conflict of interest.
POLICIES WITH RESPECT TO CONFLICTS OF INTEREST
The Partnership Agreement permits the General Partner, without the consent
of the Limited Partners, to engage in various transactions with its Affiliates
in conducting the business and affairs of the Partnership. Such transactions
include, subject to certain restrictions, borrowing money from itself or any
Affiliate, engaging in business with, or providing services to and receiving
compensation from, persons or entities that have provided or may in the future
provide various services to the General Partner or its Affiliates, and
entering into agreements to employ agents, attorneys, accountants, engineers,
appraisers or other consultants or contractors who may be Affiliates of the
General Partner to provide services to the General Partner. Section 5.01.E of
the Partnership Agreement provides that agreements, contracts or arrangements
between the Partnership and the General Partner or its Affiliates, other than
arrangements for rendering legal, tax, accounting, financial, engineering, and
22
procurement services to the Partnership by the General Partner or its
Affiliates, shall be on commercially reasonable terms, and shall be subject to
the following conditions:
(i) the General Partner or any such Affiliate must be actively engaged in
the business of rendering such services or selling or leasing such goods
independently of its dealings with the Partnerships and as an ordinary
ongoing business or must enter into and engage in such business with
Marriott system hotels or hotel owners generally and not exclusively with
the Partnerships;
(ii) any such agreements, contracts or arrangements must be fair to the
Partnerships and reflect commercially reasonable terms and shall be
embodied in a written contract that precisely describes the subject matter
thereof and all compensation to be paid therefor;
(iii) no rebates or give-ups may be received by the General Partner or
any such Affiliate, nor may the General Partner or any such Affiliate
participate in any reciprocal business arrangements which would have the
effect of circumventing any of the provisions of the Partnership Agreement
or the Harbor Beach Partnership Agreement;
(iv) no such agreement, contract or arrangement as to which the Limited
Partners had previously given approval may be amended in such manner as to
increase the fees or other compensation payable to the General Partner or
any such Affiliate or to decrease the responsibilities or duties of the
General Partner or any Affiliate in the absence of the consent of Limited
Partners holding a majority of the Units; and
(v) any such agreement, contract or arrangement that relates to or
secures any funds advanced or loaned to the Partnerships by the General
Partner or any such Affiliate must reflect commercially reasonable terms.
The foregoing policies with respect to conflicts of interest would not be
changed by any of the Amendments except that such policies would not apply to
Marriott International under the proposed Amendment to the definition of
Affiliate until such time in the future (if ever) that Marriott International
becomes an Affiliate under the new definition. Nevertheless, the General
Partner will not enter into any new, or amend any existing, agreement,
contract or arrangement with Marriott International on terms that are unfair
to the Partnership or commercially unreasonable. Furthermore, the General
Partner currently has no plans to amend the Orlando management agreement or
the Harbor Beach operating lease.
OTHER MATTERS
OPINION OF COUNSEL
The General Partner will obtain an opinion of counsel from Hogan & Hartson
L.L.P., counsel to Parent and the Purchaser, that the assignment of the Units
in connection with the Tender Offer will not result in the Partnership being
treated as an association taxable as a corporation.
ADMISSION OF THE PURCHASER AS SUBSTITUTED LIMITED PARTNER
In the event transfer of the Units to the Purchaser occurs pursuant to the
Tender Offer and the Required Amendments receive Limited Partner Approval, the
Purchaser will be admitted to the Partnership as a substituted limited partner
in accordance with Section 7.02.D of the Partnership Agreement effective as of
the Closing Date. In order for the Purchaser to be admitted as a substituted
limited partner, the General Partner, in its sole and absolute discretion,
must consent to the admission in writing, the Purchaser and the tendering
Limited Partners must execute certain documents satisfactory to the General
Partner to effectuate such admission, the Purchaser must execute the
Partnership Agreement and a power of attorney, and the Purchaser must bear the
reasonable expenses of being admitted as a substituted limited partner. The
General Partner will consent in writing to the Purchaser's admission as a
substituted limited partner, and the Purchaser will execute all required
documents and pay all required fees.
23
OPERATIONS AFTER THE AMENDMENTS
Parent and the Purchaser currently intend that upon the effectiveness of the
Amendments and the consummation of the Tender Offer, the Partnership will
continue its businesses and operations substantially as, and in such places
as, they are currently being conducted. The Purchaser has no present plans or
proposals regardless of the outcome of the Amendments or the Tender Offer that
would result in an extraordinary transaction, such as a merger,
reorganization, liquidation, or sale or transfer of a material amount of
assets, involving the Partnership or its subsidiaries, or any material changes
in the Partnership capitalization, distribution policy, structure or business.
Hotel Properties Management, Inc.
General Partner
Date: November 19, 1996 /s/ Bruce F. Stemerman
Bruce F. Stemerman
President, Director, Treasurer and
Chief Accounting Officer
24
APPENDIX A
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP
TABLE OF CONTENTS
PAGE
----
ARTICLE ONE DEFINED TERMS................................................. D-1
ARTICLE TWO FORMATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM.......... D-8
SECTION 2.01. Formation................................................ D-8
SECTION 2.02. Name and Offices......................................... D-8
SECTION 2.03. Purpose.................................................. D-8
SECTION 2.04. Term..................................................... D-8
SECTION 2.05. Agent for Service of Process............................. D-8
ARTICLE THREE PARTNERS AND CAPITAL........................................ D-9
SECTION 3.01. General Partner.......................................... D-9
SECTION 3.02. [Initial Limited Partner.] [INTENTIONALLY OMITTED]....... D-9
SECTION 3.03. Limited Partners......................................... D-9
SECTION 3.04. Capital Contributions by General Partner................. D-9
SECTION 3.05. Capital Contributions by Limited Partners................ D-9
SECTION 3.06. [Partnership] Capital ACCOUNTS........................... D-11
SECTION 3.07. Liability of the Limited Partners........................ D-12
SECTION 3.08. Liability of the General Partner......................... D-12
ARTICLE FOUR ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS OF CASH AND
CERTAIN PROCEEDS......................................................... D-12
SECTIOn 4.01. Allocation of Net Profits................................ D-12
SECTION 4.02. Allocation of Net Losses and Losses...................... D-12
SECTION 4.03. Allocation Among Limited Partners of Net Profits, Gains,
Net Losses and Losses.................................. D-13
SECTION 4.04. Allocation of Gain....................................... D-13
SECTION 4.05. Allocation of Recapture Income........................... D-14
SECTION 4.06. Distribution of Cash Available for Distribution.......... D-14
SECTION 4.07. Distribution of Refinancing Proceeds..................... D-14
SECTION 4.08. Distribution of Sale Proceeds............................ D-14
SECTION 4.09. Allocation among Limited Partners of Cash Available for
Distribution, Refinancing Proceeds and Sale Proceeds... D-14
SECTION 4.10. Section 754 Adjustments.................................. D-15
SECTION 4.11. [Special Allocation of] Selling Commissions.............. D-15
SECTION 4.12. Contingent Adjustments................................... D-15
SECTION 4.13. Special Allocations [in Event of Advances by]............ D-16
SECTION 4.14. ADVANCES BY THE General Partner.......................... D-17
SECTION 4.15. OPERATING RULES.......................................... D-17
ARTICLE FIVE RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER............. D-17
SECTION 5.01. Authority of the General Partner to Manage the
Partnership............................................ D-17
SECTION 5.02. Restrictions on Authority of the General Partner......... D-20
SECTION 5.03. Duties and Obligations of the General Partner............ D-22
SECTION 5.04. Compensation of General Partner.......................... D-23
SECTION 5.05. Other Business of Partners............................... D-23
SECTION 5.06. Limitation on Liability of General Partner;
Indemnification........................................ D-24
SECTION 5.07. Designation of Tax Matters Partner and Designated Person
for Purposes of Investor List.......................... D-25
ARTICLE SIX WITHDRAWAL AND REMOVAL OF GENERAL PARTNER..................... D-26
SECTION 6.01. Limitation on Voluntary Withdrawal....................... D-26
SECTION 6.02. Bankruptcy or Dissolution of the General Partner......... D-26
D-i
PAGE
----
SECTION 6.03. Liability of Withdrawn General Partner.................... D-26
SECTION 6.04. Removal of General Partner................................ D-26
SECTION 6.05. Substitute General Partner................................ D-26
ARTICLE SEVEN ASSIGNABILITY OF UNITS....................................... D-26
SECTION 7.01. Restrictions on Assignments............................... D-26
SECTION 7.02. Assignees and Substituted Limited Partners................ D-28
ARTICLE EIGHT DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP............... D-29
SECTION 8.01. Events Causing Dissolution................................ D-29
SECTION 8.02. Liquidation............................................... D-29
ARTICLE NINE BOOKS AND RECORDS, ACCOUNTING, REPORTS,
TAX ELECTIONS, ETC........................................................ D-30
SECTION 9.01. Books and Records......................................... D-30
SECTION 9.02. Accounting and Fiscal Year................................ D-30
SECTION 9.03. Bank Accounts and Investments............................. D-30
SECTION 9.04. Reports................................................... D-30
SECTION 9.05. Tax Depreciation and Elections............................ D-31
SECTION 9.06. Interim Closing of the Books.............................. D-31
ARTICLE TEN MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS................. D-31
SECTION 10.01. Meetings.................................................. D-31
SECTION 10.02. Special Voting Rights of Limited Partners................. D-33
ARTICLE ELEVEN MISCELLANEOUS PROVISIONS.................................... D-33
SECTION 11.01. Appointment of General Partner as Attorney-in-Fact........ D-33
SECTION 11.02. Amendments................................................ D-34
SECTION 11.03. General Partner Representation and Warranties............. D-35
SECTION 11.04. Binding Provision......................................... D-35
SECTION 11.05. Applicable Law............................................ D-35
SECTION 11.06. Counterparts.............................................. D-35
SECTION 11.07. Separability of Provisions................................ D-35
SECTION 11.08. Article and Section Titles................................ D-35
SECTION 11.09. Short Form Filings........................................ D-35
Exhibit A Limited Partner Note
D-ii
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP
This SECOND Amended and Restated Agreement of Limited Partnership, dated as
of [November 27, 1985] , 1996, is made and entered into by and among
[Marriott] Hotel Properties MANAGEMENT, Inc., a Delaware corporation, as
general partner (the "General Partner"), and those persons who have BEEN
ADMITTED AS LIMITED PARTNERS OF THE PARTNERSHIP IN ACCORDANCE WITH THE
PROVISIONS OF THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
[executed this Agreement and are identified in the books and records of the
Partnership as the Limited Partners.] Marriott Hotel Properties Limited
Partnership (the "Partnership") DATED AS OF NOVEMBER 27, 1985 (THE "ORIGINAL
AGREEMENT") OR THIS AGREEMENT AND ARE IDENTIFIED IN THE BOOKS AND RECORDS OF
THE PARTNERSHIP AS THE LIMITED PARTNERS.
THE PARTNERSHIP was formed pursuant to a Certificate and Agreement of
Limited Partnership filed with the Secretary of State of Delaware on August
22, 1984. An Amended and Restated Certificate of Limited Partnership was duly
executed and filed in accordance with Section 17-210 of the Delaware Revised
Uniform Limited Partnership Act on November 1, 1985. ON NOVEMBER 27, 1985, THE
GENERAL PARTNER, AIRLINE FOODS, INC., AS INITIAL LIMITED PARTNER, AND THE
LIMITED PARTNERS WHO PURCHASED UNITS OF LIMITED PARTNERSHIP INTEREST (THE
"UNITS") IN THE PARTNERSHIP IN THE PRIVATE PLACEMENT EFFECTED PURSUANT TO THE
PRIVATE PLACEMENT MEMORANDUM ENTERED INTO THE ORIGINAL AGREEMENT. ON NOVEMBER
19, 1996, MHP ACQUISITION CORP., AN AFFILIATE OF THE GENERAL PARTNER, MADE AN
OFFER TO THE LIMITED PARTNERS TO PURCHASE THEIR UNITS ON THE TERMS AND
CONDITIONS SET FORTH IN MHP ACQUISITION CORP.'S OFFER TO PURCHASE FOR CASH 450
OUTSTANDING UNITS OF LIMITED PARTNERSHIP INTEREST, DATED NOVEMBER 19, 1996
(THE "OFFER"). IN CONNECTION WITH, AND AS A CONDITION TO CONSUMMATION OF, THE
OFFER, THE PARTNERS ARE ADOPTING THIS SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP.
In consideration of the mutual agreements made herein, the parties hereby
agree to [constitute] CONTINUE THE PARTNERSHIP AS a limited partnership UNDER
THE DELAWARE REVISED UNIFORM LIMITED PARTNERSHIP ACT (6 DEL. C. (S) 17-101, ET
SEQ.), AS AMENDED FROM TIME TO TIME (THE "ACT"), as follows:
ARTICLE ONE
DEFINED TERMS
SECTION 1.01.
The defined terms used in this Agreement shall, unless the context otherwise
requires, have the respective meanings specified in this Section 1.01.
["Adjustments" means the after-tax present values to the General Partner and
the Limited Partners of the Affected Losses and Net Losses, as determined by
the Expert.]
"ACCOUNTING PERIODS" MEANS THE FOUR-WEEK ACCOUNTING PERIODS (EACH, AN
"ACCOUNTING PERIOD") HAVING THE SAME BEGINNING AND ENDING DATES AS THE GENERAL
PARTNER'S FOUR-WEEK ACCOUNTING PERIODS, EXCEPT THAT AN ACCOUNTING PERIOD MAY
OCCASIONALLY CONTAIN FIVE WEEKS WHEN NECESSARY TO CONFORM THE ACCOUNTING
SYSTEM TO THE CALENDAR.
["Affected Losses or Net Losses" means those Losses or Net Losses otherwise
allocable to the Limited Partners that, because of the Proposed Regulations,
are allocable instead to the General Partner pursuant to Section 4.12.]
"ACT" MEANS THE DELAWARE REVISED LIMITED UNIFORM PARTNERSHIP ACT (6 DEL. C.
(S) 17-101, ET SEQ.), AS AMENDED FROM TIME TO TIME.
["Affected Year" means any Fiscal Year of the Partnership in which there are
Affected Losses or Net Losses.]
D-1
"ADJUSTED BASIS" MEANS THE BASIS FOR DETERMINING GAIN OR LOSS FOR FEDERAL
INCOME TAX PURPOSES FROM THE SALE OR OTHER DISPOSITION OF PROPERTY, AS DEFINED
IN SECTION 1011 OF THE CODE.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" MEANS WITH RESPECT TO ANY PARTNER, THE
DEFICIT BALANCE, IF ANY, IN THE PARTNER'S CAPITAL ACCOUNT AS OF THE END OF THE
RELEVANT FISCAL YEAR, AFTER GIVING EFFECT TO THE FOLLOWING ADJUSTMENTS:
(I) CREDIT TO SUCH CAPITAL ACCOUNT ANY AMOUNTS THAT THE PARTNER IS
OBLIGATED TO RESTORE PURSUANT TO ANY PROVISION OF THIS AGREEMENT OR
PURSUANT TO SECTION 1.704-1(B)(II)(C) OF THE TREASURY REGULATIONS, OR IS
DEEMED OBLIGATED TO RESTORE PURSUANT TO THE PENULTIMATE SENTENCES OF
SECTIONS 1.704-2(G)(1) AND 1.704-2(I)(5) OF THE TREASURY REGULATIONS
(DETERMINED AFTER TAKING INTO ACCOUNT ANY CHANGES DURING SUCH YEAR IN
MINIMUM GAIN); AND
(II) DEBIT TO SUCH CAPITAL ACCOUNT THE ITEMS DESCRIBED IN SECTIONS 1.704-
1(B)(2)(II)(D)(4), (5), AND (6) OF THE TREASURY REGULATIONS.
THE FOREGOING DEFINITION OF ADJUSTED CAPITAL ACCOUNT DEFICIT IS INTENDED TO
COMPLY WITH THE PROVISIONS OF SECTION 1.704-1(B)(2)(II)(D) OF THE TREASURY
REGULATIONS AND SHALL BE INTERPRETED CONSISTENTLY THEREWITH.
"Affiliate," "AFFILIATES" or "Affiliated Person" means, when used with
reference to a specified Person, (i) any Person that directly or indirectly
through one or more intermediaries controls or is controlled by or is under
common control with the specified Person, (ii) any Person that is an officer
of, partner in or trustee of, or serves in a similar capacity with respect to,
the specified Person or of which the specified Person is an officer, partner
or trustee, or with respect to which the specified Person serves in a similar
capacity, (iii) any Person that, directly or indirectly, is the beneficial
owner of 10% or more of any class of equity securities of the specified Person
or of which the specified Person is directly or indirectly the owner of 10% or
more of any class of equity securities, and (iv) any relative or spouse of the
specified Person who makes his or her home with that of the specified Person.
Affiliate or Affiliated Person of the Partnership or the General Partner does
not include a Person who is a partner of, or in a partnership or joint venture
with the Partnership or any other Affiliated Person if such Person is not
otherwise an Affiliate or Affiliated Person of the Partnership or the General
Partner. NOTWITHSTANDING THE FOREGOING, NO CORPORATION WHOSE COMMON STOCK IS
LISTED ON A NATIONAL SECURITIES EXCHANGE OR AUTHORIZED FOR INCLUSION ON THE
NASDAQ NATIONAL MARKET, OR ANY SUBSIDIARY THEREOF, SHALL BE AN "AFFILIATE" OF
THE GENERAL PARTNER OR ANY AFFILIATE THEREOF UNLESS A PERSON (OR PERSONS IF
SUCH PERSONS WOULD BE TREATED AS PART OF THE SAME GROUP FOR PURPOSES OF
SECTION 13(D) OR 13(G) OF THE SECURITIES EXCHANGE ACT OF 1934) DIRECTLY OR
INDIRECTLY OWNS TWENTY PERCENT (20%) OR MORE OF THE OUTSTANDING COMMON STOCK
OF THE GENERAL PARTNER AND SUCH OTHER CORPORATION.
"Agreement" means this SECOND Amended and Restated Agreement of Limited
Partnership, as originally executed and as hereafter amended or modified from
time to time.
["Airline Foods" means Airline Foods, Inc., a Delaware corporation and
wholly owned subsidiary of Marriott, in its capacity as the seller of the
limited partnership interest in the Warner Center Partnership. Airline Foods
is also the Initial Limited Partner of the Partnership.]
"Capital Account" or "Capital Accounts" means, with respect to a Partner,
such Partner's total Capital Contribution, increased or decreased as provided
for in this Agreement, as provided for in Section 3.06 and elsewhere.
"Capital Contribution" or "Capital Contributions" means, with respect to any
Partner, the total amount of money contributed or agreed to be contributed to
the Partnership (prior to the deduction of any selling commissions or
expenses) by such Partner; provided, however, that as and to the extent any
placement agent retained by the General Partner to assist in the private
placement of the Units [foregoes] AGREED TO FOREGO any portion of its fees or
selling commission with a consequent reduction in the offering price of any
Units so placed, the Limited Partners [purchasing] WHO PURCHASED any such
Units shall nevertheless be deemed to have contributed to the Partnership the
full amount of the offering price without deduction on account of such reduced
purchase price.
D-2
"Capital Receipts" means Sale Proceeds and/or Refinancing Proceeds.
"Cash Available for Distribution" means, with respect to any fiscal period,
the revenues of the Partnership from all sources during such fiscal period
less (i) all cash expenditures of the Partnership during such fiscal period,
including, without limitation, debt service, any fees for management services
and administrative expenses and (ii) such reserves as may be determined by the
General Partner, in its sole discretion, to be necessary to provide for the
foreseeable needs of the Partnership, but shall not include Capital Receipts.
"Code" means the Internal Revenue Code of [1954] 1986, as amended (or any
corresponding provision or provisions of succeeding law).
"Consent" means either (a) the consent given by vote at a meeting called and
held in accordance with the provisions of Section 10.01, or (b) a prior
written consent required or permitted to be given pursuant to this Agreement
or the act granting such consent, as the context may require.
"Defaulting Limited Partner" means a Limited Partner who fails to pay all or
any portion of any installment of his Capital Contribution for a period of ten
days after the date such installment was due.
"Defaulting Limited Partner Allocation" means allocations of Net Losses, Net
[Profits,] Profits, Gains, Losses, and Tax Credits to a Defaulting Limited
Partner.
"Default Notice" means the notice given by the General Partner to the
Partnership of its desire to purchase all or a portion of a Defaulting Limited
Partner's Interest in the Partnership.
"Deferred Purchase Debt" means the Orlando Deferred Purchase Debt, the
Harbor Beach Deferred Purchase Debt and [the Warner Center] CERTAIN OTHER
DEFERRED PURCHASED DEBT. THE Deferred Purchase Debt HAS BEEN PAID IN FULL AND
IS NO LONGER OUTSTANDING.
"Designated Person" means the General Partner.
["Development Agreements" means the Orlando Development Agreement and the
Warner Center Development Agreement.]
["Expert" means that independent expert retained by the General Partner who
will determine the respective after-tax present values to the General Partner
and the Limited Partners of the Affected Losses and Net Losses.]
"FF&E" means (i) furniture, fixtures and furnishings and equipment and (ii)
routine repairs and maintenance undertaken subsequent to the opening date of a
Hotel, the cost of which would not be expensed under generally accepted
accounting principles.
"Fiscal Quarter" means, for the respective fiscal periods in any year, (i)
the period beginning on January 1, and having the same ending date as the
General Partner's 12 week fiscal first quarter, (ii) the same period of time
as the General Partner's second fiscal quarter, (iii) the same period of time
as the General Partner's third fiscal quarter, and (iv) the period from the
end of the General Partner's third fiscal quarter through December 31 in such
Fiscal Year.
"Fiscal Year" means the fiscal year of the Partnership as established in
Section 9.02.
"Gain" or "Gains" means the gain or gains recognized by the Partnership (or
allocated to the Partnership) for Federal income tax purposes upon the sale or
disposition of Partnership[,] OR Harbor Beach [Partnership or Warner Center]
Partnership property other than the routine sale of used FF&E being replaced
at the Hotels.
"General Partner" means [Marriott] Hotel Properties MANAGEMENT, Inc., a
Delaware corporation and wholly owned subsidiary of Host, PREVIOUSLY KNOWN AS
MARRIOTT HOTEL PROPERTIES, INC., and its successors or permitted assigns.
D-3
"Harbor Beach Deferred Purchase Debt" means Partnership Debt incurred by the
Partnership pursuant to [the Harbor Beach Purchase Agreement] THAT PURCHASE
AGREEMENT entered into between the Partnership and Host [as of the date of
this Agreement.] INTERNATIONAL, INC. AS OF NOVEMBER 27, 1985 FOR THE PURCHASE
OF HOST INTERNATIONAL, INC.'S 49% GENERAL PARTNERSHIP INTEREST IN THE HARBOR
BEACH PARTNERSHIP AND A RECEIVABLE OF APPROXIMATELY $3.5 MILLION FROM THE
HARBOR BEACH PARTNERSHIP. THE HARBOR BEACH DEFERRED PURCHASE DEBT HAS BEEN
PAID IN FULL AND IS NO LONGER OUTSTANDING.
"Harbor Beach Hotel" means Marriott's Harbor Beach Resort located in Fort
Lauderdale, Florida.
"Harbor Beach Mortgage Debt" means the loan provided to the Harbor Beach
Partnership by Great Western Savings and Loan Association for the construction
and operation of the Harbor Beach Hotel, WHICH LOAN WAS ASSIGNED TO THE AETNA
LIFE INSURANCE CO. IN JUNE 1986.
"Harbor Beach Partnership" means Lauderdale Beach Association, a Florida
general partnership, the owner of the Harbor Beach Hotel.
"Harbor Beach Partnership Agreement" means the Lauderdale Beach Association
Partnership Agreement, as amended.
["Harbor Beach Purchase Agreement" means that purchase agreement to be
entered into between the Partnership and Host for the purchase of Host's 49%
general partnership interest in the Harbor Beach Partnership and a receivable
of approximately $3.5 million from the Harbor Beach Partnership.]
"Host" means Host [International, Inc.] MARRIOTT CORPORATION, a Delaware
corporation [and wholly owned subsidiary of Marriott].
"Hotels" means the Orlando Hotel[,] AND the Harbor Beach Hotel [and the
Warner Center Hotel]. Reference to "a Hotel" means any one of the Hotels.
["Initial Limited Partner" means Airline Foods in its capacity as the
initial limited partner of the Partnership.]
"Interest" means the entire interest of a Partner in the Partnership at any
particular time, including the right of such Partner to any and all benefits
to which a Partner may be entitled as provided in this Agreement, together
with the obligations of such Partner to comply with all the terms and
provisions of this Agreement.
"INTERESTED TRANSACTION" MEANS ANY MATTER IN WHICH THE GENERAL PARTNER OR
ITS AFFILIATES HAS AN ACTUAL ECONOMIC INTEREST, OTHER THAN AN INTEREST SOLELY
AS A RESULT OF ITS OR AN AFFILIATE'S OWNERSHIP OF UNITS OR A GENERAL PARTNER
INTEREST OR AS A RESULT OF ITS OR AN AFFILIATE'S (AND ANY GROUP OF WHICH IT IS
A PART FOR PURPOSES OF SECTION 13(D) OR 13(G) OF THE SECURITIES EXCHANGE ACT
OF 1934) DIRECT OR INDIRECT OWNERSHIP OF LESS THAN TWENTY PERCENT (20%) OF THE
OUTSTANDING COMMON STOCK OF BOTH THE GENERAL PARTNER AND A CORPORATION WHOSE
COMMON STOCK IS LISTED ON A NATIONAL SECURITIES EXCHANGE OR AUTHORIZED FOR
INCLUSION IN THE NASDAQ NATIONAL MARKET, OR ANY SUBSIDIARY THEREOF.
"Invested Capital" means the excess, if any, of paid in Capital
Contributions of a Partner over cumulative distributions to him of Capital
Receipts.
"Investor List" means that list, required by [the Tax Reform Act of 1984]
SECTION 6112 OF THE CODE, identifying Persons to whom Interests in the
Partnership were sold, such Persons' addresses and taxpayer identification
numbers, the dates on which the Interests were acquired [and], the name and
tax shelter registration number of the Partnership, AND SUCH OTHER INFORMATION
AS MAY BE REQUIRED BY TREASURY REGULATIONS TO BE INCLUDED THEREIN.
"IRS" means the Internal Revenue Service.
D-4
"Limited Partner" means any Person admitted to the Partnership pursuant to
Section 3.03, or any Person who, at the time of reference thereto, has been
admitted as a limited partner of the Partnership pursuant to this Agreement OR
THE ORIGINAL AGREEMENT.
"Loss" or "Losses" means the loss or losses recognized by the Partnership
(or allocated to the Partnership) for Federal income tax purposes upon the
sale or disposition of Partnership[,] OR Harbor Beach [Partnership or Warner
Center] Partnership property other than the routine sale of used FF&E being
replaced at the Hotels.
"Manager" means Marriott [Hotels] INTERNATIONAL, Inc., a Delaware
corporation or any Person who may from time to time act as manager of the
Orlando Hotel [or the Warner Center Hotel.].
["Marriott" means Marriott Corporation, a Delaware corporation.]
"MANAGEMENT AGREEMENT" MEANS THE HOTEL MANAGEMENT AGREEMENT BETWEEN THE
PARTNERSHIP AND THE MANAGER PROVIDING FOR THE MANAGEMENT OF THE ORLANDO HOTEL,
AS SUCH AGREEMENT MAY BE MODIFIED OR AMENDED IN ACCORDANCE WITH ITS TERMS.
["Management Agreements" means the Orlando Management Agreement and the
Warner Center Management Agreement pursuant to which the Manager operates the
Orlando Hotel and the Warner Center Hotel.]
"MHP ACQUISITION CORP." MEANS MHP ACQUISITION CORP., A DELAWARE CORPORATION
AND A WHOLLY OWNED SUBSIDIARY OF HOST.
"MINIMUM GAIN" MEANS THE AMOUNT DETERMINED BY COMPUTING, WITH RESPECT TO
EACH PARTNERSHIP NONRECOURSE LIABILITY, THE AMOUNT OF GAIN, IF ANY, THAT WOULD
BE REALIZED BY THE PARTNERSHIP IF IT DISPOSED OF (IN A TAXABLE TRANSACTION)
THE PARTNERSHIP PROPERTY SUBJECT TO SUCH LIABILITY IN FULL SATISFACTION
THEREOF (AND FOR NO OTHER CONSIDERATION), AND BY THEN AGGREGATING THE AMOUNTS
SO COMPUTED. IT IS THE INTENT THAT MINIMUM GAIN BE DETERMINED IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 1.704-2(D) OF THE TREASURY REGULATIONS. MINIMUM
GAIN WITH RESPECT TO ANY PARTNER NONRECOURSE DEBT SHALL BE DETERMINED IN A
MANNER CONSISTENT WITH THE FOREGOING.
"Mortgage Debt" means the Orlando Mortgage Debt[,] AND the Harbor Beach
Mortgage Debt [and the Warner Center Mortgage Debt].
"Net Profits" or "Net Losses" means, for any period, the net profits or net
losses of the Partnership for Federal income tax purposes during such period
as determined under section 702 of the Code, excluding recapture income
realized pursuant to section 1245 or section 1250 of the Code and ITEMS
SPECIALLY ALLOCATED UNDER SECTION 4.11 OR SECTION 4.13, AND including gain or
loss on the routine sale of used FF&E not in connection with the sale of a
Hotel.
"NONRECOURSE LIABILITY" MEANS ANY PARTNERSHIP DEBT (OR PORTION THEREOF) FOR
WHICH NO PARTNER BEARS (OR IS DEEMED TO BEAR) THE ECONOMIC RISK OF LOSS WITHIN
THE MEANING OF SECTION 1.752-2 OF THE TREASURY REGULATIONS.
"Note" or "Notes" means the promissory note or notes given to the
Partnership by the Limited Partners pursuant to Section 3.05.
"Notification" means a written notice, containing the information required
by this Agreement to be communicated to any Person, sent by registered,
certified or regular mail to such Person at the last known address of such
Person; provided, however, that any communication containing such information
sent to such Person and actually received by such Person shall constitute
Notification for all purposes of this Agreement.
D-5
"Operating Lease" means that lease by which MARRIOTT Hotel Services, Inc., a
Delaware corporation and wholly owned subsidiary of [Marriott] THE MANAGER,
leases the Harbor Beach Hotel from the Harbor Beach Partnership.
"ORIGINAL LIMITED PARTNER" MEANS ANY LIMITED PARTNER WHO ACQUIRED UNITS IN
THE INITIAL OFFERING OF UNITS PURSUANT TO THE PRIVATE PLACEMENT MEMORANDUM.
"Orlando Deferred Purchase Debt" means Partnership Debt incurred by the
Partnership pursuant to [the Orlando Purchase Agreement] THAT PURCHASE
AGREEMENT entered into between the Partnership and AIRLINE FOODS, INC. AS OF
NOVEMBER 27, 1985 FOR THE REDEMPTION BY PURCHASE OF AIRLINE FOODS INC.'S 99%
LIMITED PARTNERSHIP INTEREST IN [the Initial Limited Partner as of the date of
this Agreement. "Orlando Development Agreement" means that agreement between]
the Partnership and [Willmar Distributors, Inc., a wholly owned subsidiary of
Marriott, by which Willmar has agreed to complete construction of and the
furnishing and equipping of the Orlando hotel.] CERTAIN RELATED MATERIALS AND
PERSONAL PROPERTY INCLUDING FF&E. THE ORLANDO DEFERRED PURCHASE DEBT HAS BEEN
PAID IN FULL AND IS NO LONGER OUTSTANDING.
"Orlando Hotel" means Marriott's Orlando World Center Hotel located in
Orlando, Florida.
["Orlando Management Agreement" means the hotel management agreement between
the Partnership and the Manager providing for the managing of the Orlando
Hotel, as such agreement may be modified or amended in accordance with its
terms.]
"Orlando Marriott World Center Limited Partnership" means the previous name
of the Partnership.
"Orlando Mortgage Debt" means the loans provided to the Partnership pursuant
to that loan agreement between California Federal Savings and Loan Association
and Home Federal Savings and Loan Association as lenders and the Partnership
as borrower, to provide financing for the construction and operation of the
Orlando Hotel, WHICH DEBT WAS REFINANCED ON JUNE 16, 1987 WITH THE SANWA BANK
LIMITED.[.]
["Orlando Purchase Agreement" means that purchase agreement to be entered
into between the Partnership and the Initial Limited Partner for the
redemption by purchase of the Initial Limited Partner's 99% limited
partnership interest in the Partnership and certain related materials and
personal property including FF&E.]
"PARTNER NONRECOURSE DEBT" MEANS ANY PARTNERSHIP DEBT THAT IS CONSIDERED
NONRECOURSE FOR PURPOSES OF SECTION 1.1001-2 OF THE TREASURY REGULATIONS BUT
FOR WHICH A PARTNER BEARS (OR IS DEEMED TO BEAR) THE ECONOMIC RISK OF LOSS
WITHIN THE MEANING OF SECTION 1.752-2 OF THE TREASURY REGULATIONS.
"Partners" means, collectively, the Limited Partners as constituted from
time to time and the General Partner.
"Partnership" means the limited partnership formed UNDER THE ACT AND
CONTINUED pursuant to this Agreement by the parties hereto, as said
Partnership may from time to time be constituted. The Partnership was formed
as Orlando Marriott World Center Limited Partnership, but has since changed
its name to Marriott Hotel Properties Limited Partnership.
"Partnership Agreements" means the Agreement[,] AND the Harbor Beach
Partnership Agreement [and the Warner Center Partnership Agreement].
"Partnerships" means the Partnership[,] AND the Harbor Beach Partnership
[and the Warner Center Partnership].
"Partnership Debt" means any indebtedness for borrowed money incurred by the
Partnership.
"Person" means any individual, partnership, LIMITED LIABILITY COMPANY,
corporation, trust or other legal entity.
D-6
"Prime Rate" means the prime rate of interest announced from time-to-time by
The Bankers Trust Company, New York, New York, charged to its best commercial
customers.
"Private Placement Memorandum" means the Partnership's confidential private
placement memorandum dated November 1, 1985 concerning the offering of the
Units.
["Proposed Regulations" means regulations proposed by the Department of the
Treasury as directed by section 79 of the Tax Reform Act of 1984.]
["Purchase Agreements" means the Orlando Purchase Agreement, the Harbor
Beach Purchase Agreement and the Warner Center Purchase Agreement.]
"Refinancing Proceeds" means the net proceeds from any refinancing or
borrowing by any of the Partnerships, the proceeds of which are applied to the
repayment of previously incurred debt of any of the Partnerships, or borrowed
for distributions to the partners of any of the Partnerships including sale
and leasebacks on which no taxable gain is recognized for Federal income tax
purposes.
"SAFE HARBORS" HAS THE MEANING SET FORTH IN SECTION 5.03I.
"Sale Proceeds" means (a) any proceeds received by the Partnership from (i)
the exchange, condemnation, eminent domain taking, casualty, sale or other
disposition of all or a portion of the Partnership's assets, (ii) the sale or
other disposition of all or a portion of the partnership interests of the
Partnership in the Harbor Beach Partnership or [the Warner Center Partnership
or] (iii) the liquidation of the Partnership's property in connection with a
dissolution of the Partnership (in excess of the outstanding indebtedness and
other liabilities of the Partnership) and (b) any proceeds (i) received by the
Harbor Beach [Partnership or the Warner Center] Partnership from (A) the
exchange, condemnation, eminent domain taking, casualty, sale or other
disposition of the Harbor Beach Hotel or [the Warner Center Hotel or] all or a
portion of all of the Harbor Beach Partnership's [or the Warner Center
Partnership's] assets or (B) the liquidation of the Harbor Beach Partnership's
[or the Warner Center Partnership's] property following a dissolution of the
Harbor Beach [Partnership or the Warner Center] Partnership and (ii)
distributed to the Partnership. Sale Proceeds shall not include the proceeds
from the routine sale of used FF&E not in connection with the disposition of a
Hotel.
"Substituted Limited Partner" means any Person admitted to the Partnership
as a Limited Partner pursuant to the provisions of Section 7.02.
"Tax Matters Partner" means the General Partner.
"Total Partnership Distributions" means the total amount of cash and the
fair market value of any property (net of any associated liabilities)
distributed to the Partners pursuant to Sections 4.06 through 4.09.
"TREASURY REGULATIONS" MEANS THE INCOME TAX REGULATIONS PROMULGATED BY THE
DEPARTMENT OF THE TREASURY.
"Unit" means the Interest of a Limited Partner represented by a Capital
Contribution of $100,000.
["Warner Center Deferred Purchase Debt" means Partnership Debt incurred by
the Partnership pursuant to the Warner Center Purchase Agreement entered into
between the Partnership and Airline Foods as of the date of this agreement.]
["Warner Center Development Agreement" means that agreement between the
Warner Center Partnership and Willmar Distributors, Inc., a wholly owned
subsidiary of Marriott, by which Willmar has agreed to complete construction
of and the furnishing and equipping of the Warner Center Hotel.]
["Warner Center Hotel" means the Warner Center Marriott Hotel located in Los
Angeles, California.]
D-7
["Warner Center Management Agreement" means the hotel management agreement
between the Warner Center Partnership and the Manager providing for the
managing of the Warner Center Hotel, as such agreement may be modified or
amended in accordance with its terms.]
["Warner Center Mortgage Debt" means the Loans provided to the Warner Center
Partnership by Connecticut General Life Insurance Company for the construction
and operation of the Warner Center hotel.]
["Warner Center Partnership" means the Warner Center Marriott Hotel Limited
Partnership, a Delaware limited partnership, the owner of the Warner Center
hotel.]
["Warner Center Partnership Agreement" means the Warner Center Partnership
Agreement, as amended.]
["Warner Center Purchase Agreement" means that purchase agreement to be
entered into between the Partnership and Airline Foods, for the purchase of
Airline Foods' 99% limited partnership interest in the Warner Center
Partnership and certain related materials and personal property including
FF&E.]
["Willmar" means Willmar Distributors, Inc., a Delaware corporation and
wholly owned subsidiary of Marriott.]
ARTICLE TWO
FORMATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM
SECTION 2.01. FORMATION.
The parties do hereby [form and] continue the Partnership FORMED AS OF
AUGUST 22, 1984 pursuant to the provisions of the [Delaware Revised Uniform
Limited Partnership] Act.
SECTION 2.02. NAME AND OFFICES.
The name of the Partnership is and shall be Marriott Hotel Properties
Limited Partnership. The principal offices of the Partnership shall be located
at 10400 Fernwood Road, Bethesda, Maryland [20058] 20817 or at such other
place or places as the General Partner may from time to time determine. The
address of the registered office of the Partnership in the State of Delaware
is at 1013 Centre Road, Wilmington, County of NEW CASTLE, DELAWARE 19805.
SECTION 2.03. PURPOSE.
The purpose of the Partnership is, without limitation, to (i) acquire,
develop, own, and operate the Orlando Hotel as part of the Marriott hotel
system and sell or otherwise dispose of the Orlando Hotel, (ii) acquire, own
and sell or otherwise dispose of a general partnership interest in the Harbor
Beach Partnership; [(iii) acquire, own and sell or otherwise dispose of a
limited partnership interest in the Warner Center Partnership and (iv) to] AND
(III) engage in any other activities related or incidental thereto as more
fully set forth in Section 5.01 hereof.
SECTION 2.04. TERM.
The term of the Partnership shall continue in full force and effect from the
date of the filing of the original Certificate and Agreement of Limited
Partnership until January 1, 2106 or until dissolution prior thereto pursuant
to the provisions of Article Eight.
SECTION 2.05. AGENT FOR SERVICE OF PROCESS.
The name and address of the agent for service of process of the Partnership
is The Prentice Hall Corporation System, Inc., 1013 Centre Road, Wilmington,
County of New Castle, Delaware 19805.
D-8
ARTICLE THREE
PARTNERS AND CAPITAL
SECTION 3.01. GENERAL PARTNER.
The General Partner of the Partnership is and shall be [Marriott] Hotel
Properties MANAGEMENT, Inc., a Delaware corporation and wholly owned
subsidiary of Host, having its principal executive offices at 10400 Fernwood
Road, Bethesda, Maryland [20058.] 20817.
SECTION 3.02. [Initial Limited Partner.] [INTENTIONALLY OMITTED]
[The Initial Limited Partner who is hereby admitted as the initial limited
partner of the Partnership is Airline Foods, Inc., a Delaware corporation and
wholly owned subsidiary of Marriott. Upon admission to the Partnership of the
Limited Partners, the Initial Limited Partner will sell its limited
partnership interest to the Partnership pursuant to the terms of the Orlando
Purchase Agreement and shall be deemed to have been withdrawn and shall
withdraw from the Partnership.]
SECTION 3.03. LIMITED PARTNERS.
The names and addresses of the Limited Partners, the amount of their agreed
upon Capital Contributions and the number of Units held by them are set forth
in the books and records of the Partnership and a Person shall be deemed to be
admitted as a Limited Partner when the General Partner has accepted such
Person as a Limited Partner of the Partnership, the books and records reflect
such Person as admitted to the Partnership as a Limited Partner and such
Person has executed this Agreement.
SECTION 3.04. CAPITAL CONTRIBUTIONS BY GENERAL PARTNER.
The General Partner has made Capital Contributions in the amount of
$1,010,000.
SECTION 3.05. CAPITAL CONTRIBUTIONS BY LIMITED PARTNERS.
A. The number of Units subscribed for by each Limited Partner is set forth
in the subscription documents executed and delivered by such Limited Partner.
Each ORIGINAL Limited Partner's contribution in respect of the Units
subscribed for [shall be] WAS MADE in cash and a fully recourse promissory[,]
note (the "Note") of such Limited Partner payable as set forth in Section
3.05B. No Partner shall be paid interest on any Capital Contribution.
[The Partnership may pledge the aforesaid Notes and its interests in the
Units to Marriott, Airline Foods and Host as security for payment of the
Deferred Purchase Debt and may not further pledge or assign such Note.]
B. The ORIGINAL Limited Partners [shall make] MADE Capital Contributions
totaling $100 million for which each such Limited Partner [shall subscribe]
SUBSCRIBED in Units of $100,000 [each] unless the General Partner in its sole
discretion [shall accept] ACCEPTED subscriptions for less than a full Unit.
For each Unit purchased, [a] AN ORIGINAL Limited Partner [shall make] MADE a
Capital Contribution in the following installments: (i) a first installment in
the amount of $10,000 payable on execution of the subscription documents; (ii)
a second installment in the amount of $12,000 payable on May 15, 1986; (iii) a
third installment in the amount of $20,500 payable on May 15, 1987; (iv) a
fourth installment in the amount of $19,500 payable on May 15, 1988; (v) a
fifth installment of $19,000 payable on May 15, 1989; and (vi) a sixth
installment of $19,000 payable on May 15, 1990. ORIGINAL Limited Partners
[purchasing] WHO PURCHASED more or less than a full Unit [shall be] WERE
required to make proportionate installments on the dates aforesaid. ORIGINAL
Limited Partners [may] COULD prepay, without any reduction in the amount
thereof, the foregoing installments, in whole or in part, at any time prior to
their respective due date.
C. The obligation of each ORIGINAL Limited Partner to pay the installments
required by Section 3.05B, other than the first installment, [shall be] WAS
evidenced by the delivery to the Partnership concurrently with payment
D-9
of the first installment of the Note in the form of Exhibit A attached hereto
payable to the Partnership in the amount of $90,000 for each Unit purchased
(adjusted if less than a full Unit is purchased) representing the amount of
the remaining unpaid Capital Contribution of such ORIGINAL Limited Partner.
ORIGINAL Limited Partners [may] COULD prepay in whole, or in part, all of the
installments. If [a] AN ORIGINAL Limited Partner [prepays] PREPAID all
installments due at the time he [delivers] DELIVERED an executed Subscription
Agreement, then there [shall be] WAS no obligation to deliver a Note to the
Partnership.
D. Each ORIGINAL Limited Partner [pledges] PLEDGED to the Partnership his
Interest as security for payment of the installments payable under such
ORIGINAL Limited Partner's Note. The Partnership, acting through the General
Partner, shall have all rights and remedies granted to a secured party under
the Uniform Commercial Code as adopted in Delaware, including, but not limited
to, the right to sell such Interest, and each Limited Partner agrees to
execute such instruments, including, without limitation, a financing statement
on Form UCC-1, as the General Partner may from time to time require to perfect
such security interest. For purposes of the said Uniform Commercial Code, this
Agreement shall also be deemed to be a security agreement.
E. The following provisions [shall apply] APPLIED in the event a Limited
Partner [fails] FAILED to make installment payments when due:
(i) A Limited Partner who [fails] FAILED to pay when due all or any
portion of any installment for a period of ten days (a "Defaulting Limited
Partner") shall be in default hereunder and the Defaulting Limited Partner
shall be required to pay the Partnership a late payment charge equal to
five percent (5%) of such unpaid installment or portion thereof. At any
time prior to any sale of all or any portion of the Defaulting Limited
Partner's Interest as provided in this subsection E, the General Partner
may but shall not be obligated to accept full payment from the Defaulting
Limited Partner of any unpaid installment then overdue. The acceptance of
such payment by the General Partner shall extinguish the further right (as
hereafter defined) of the General Partner to purchase the Defaulting
Limited Partner's Interest. If a default shall continue for more than 30
days after notice to the Defaulting Limited Partner, in addition to the
aforesaid late charge, the unpaid portion of such installment or portion
thereof shall bear interest from the date due until paid in full at a rate
equal to the lesser of (a) four percentage points in excess of the Prime
Rate or (b) the maximum rate permitted by law. If the late charge is deemed
to be interest under law, it may only be imposed to the extent it does not
cause total interest to exceed the rate permitted by law. A Defaulting
Limited Partner shall have no voting rights with respect to his Interest
for so long as any unpaid installments plus any late charge or interest
attributable to such unpaid installment or portion thereof remains unpaid.
(ii) If a default shall continue for more than 30 days after notice to
the Defaulting Limited Partner, the General Partner shall have the option
of accelerating the payment of the entire unpaid balance of the Note of the
Defaulting Limited Partner and the additional option of purchasing (for the
price set forth below) all or a portion of the Defaulting Limited Partner's
Interest. Such option may be exercised by the General Partner by giving the
Partnership notice of its desire to purchase all or a portion of the
Defaulting Limited Partner's Interest specifying the percentage of the
Defaulting Limited Partner's Interest which it desires to purchase
("Default Notice"). The purchase price to be paid to the Defaulting Limited
Partner shall be an amount equal to the greater of (x) 80% of the amount of
the paid in Capital Contribution of the Defaulting Limited Partner in
respect of the Interest being purchased less the sum of (i) the total
amount of cash distributions, if any, theretofore made to the Defaulting
Limited Partner in respect of the Interest being purchased, (ii) any
reasonable expenses incurred by the Partnership and by the General Partner
in connection with such purchase, (iii) all tax credits previously reported
by the Partnership for all Fiscal Years then ended allocable to the
Interest being purchased, and (iv) 50% of the Net Losses previously
reported by the Partnership for all Fiscal Years then ended allocable to
the Interest being purchased, or (y) three percent (3%) of the amount of
the paid-in Capital Contribution of the Defaulting Limited Partner in
respect of the Interest being purchased. Such purchase price shall be paid
in cash within thirty days after the date of the consummation of the
purchase. The General Partner shall also pay to the Partnership an amount
equal to all Capital Contribution installments in respect of the Interest
being purchased then due and not theretofore
D-10
paid by the Defaulting Limited Partner (including the unpaid installment
giving rise to the default) and shall assume all other obligations of the
Defaulting Limited Partner in respect of the Interest being purchased, if
any, to the Partnership.
(iii) In the event that the General Partner does not acquire all of the
Interest of a Defaulting Limited Partner and after the exercise of due
diligence, the General Partner is unable to find a purchaser for all or the
balance of the Defaulting Limited Partner's Interest for the price set
forth in clause (ii) above, then the Defaulting Limited Partner shall sell
such Interest or the balance of such Interest, as the case may be, on such
terms and conditions as the General Partner deems reasonable under the
circumstances; provided that any purchaser shall be required to agree to
assume the obligation of the Defaulting Limited Partner to make payment of
the unpaid balance of the installments to the extent of the Interest so
acquired. At the closing of any purchase and sale pursuant to this clause
(iii), the purchaser shall pay to the Partnership the unpaid balance of the
installments then due and owing by the Defaulting Limited Partner and shall
agree to thereafter make payment of any future installments as and when the
same shall become due and payable. The Defaulting Limited Partner shall pay
all of the Partnership's and General Partner's costs and expenses incurred
in connection with any purchase and sale of a Defaulting Limited Partner's
Interest pursuant to this clause (iii).
(iv) A purchaser of all or any part of the Interest of a Defaulting
Limited Partner will receive all of the cash allocable to such Interest
from and after the date of default and not actually distributed to the
Defaulting Limited Partner prior to default. All Net Profits and Net Losses
that would otherwise be allocated in accordance with Section 4.03 to a
Defaulting Limited Partner ("Defaulting Limited Partner Allocation") shall
be allocated, from and after the date of default to, but not including, the
date, if any, on which the Interest of such Defaulting Limited Partner
shall be purchased, among the non-Defaulting Partners in proportion to the
number of Units owned by each. All Defaulting Limited Partner Allocations
from and after the date of purchase of the Defaulting Limited Partner's
Interest until the expiration of the Fiscal Year in which such purchase
date falls shall be allocated to the purchaser. In the following Fiscal
Year, all Profits and Losses of the Partnership allocable to the Partners
under Section 4.03 shall first be allocated to the purchaser until the
purchaser's capital account balance shall be equal in amount to the capital
account balance of a non-Defaulting Partner owning the same number of Units
as the purchaser.
(v) Notwithstanding the foregoing provisions of this Section 3.05E, the
obligations of the Defaulting Limited Partner hereunder shall not be
extinguished by the existence of any option of the General Partner to
purchase the Interest of the Defaulting Limited Partner, or by its
exercise, or by any agreement by any person to purchase such Interest, but
only to the extent of payment of the unpaid installments together with
interest thereon made in the Defaulting Limited Partner's stead by any
purchaser of such Interest.
(vi) In addition to the other rights of the Partnership against the
Defaulting Limited Partner, the Partnership may avail itself of appropriate
legal remedies at law or equity to compel payment of any portion of the
installments remaining unpaid together with any interest thereon remaining
unpaid, together with reasonable court costs and legal fees in the event of
litigation against the Defaulting Limited Partner.
SECTION 3.06. [Partnership] CAPITAL ACCOUNTS.
A. The Capital Contribution of each Limited Partner and from the General
Partner shall be credited to each such Partner's Capital Account; provided,
however, that the deemed increase in the Capital Contribution of any Partner
due to any relinquished selling commission with respect to such Partner shall
not be credited to such Partner's Capital Account. A Partner's Capital Account
shall also be credited with the amount of Net Profits or Gain allocable to the
Partner, and shall be debited with (x) such Partner's share of Total
Partnership Distributions and (y) the amount of Net Losses or Losses allocated
to such Partner. Capital Accounts shall be maintained in accordance with
[Federal income tax accounting principles.] SECTION 1.704-1(B)(2)(IV) OF THE
TREASURY REGULATIONS.
B. For purposes of this Section 3.06, upon a distribution in kind of
Partnership property, the Capital Accounts of the Partners will be debited or
credited as though the property had been sold for an amount equal to
D-11
its fair market value, and gain or loss which would have been recognized for
Federal income tax purposes had the property actually been sold will be
allocated to the Partners under Article Four.
SECTION 3.07. LIABILITY OF THE LIMITED PARTNERS.
Except as otherwise required by Delaware law, no Limited Partner shall be
liable for the debts, liabilities, contracts or any other obligations of the
Partnership. Limited Partners shall be liable only to make their Capital
Contributions and shall not be required to lend any funds to the Partnership
or, after their Capital Contributions have been paid, to make any further
Capital Contributions to the Partnership or to repay to the Partnership, any
Partner or to any creditor of the Partnership any portion or all of any
negative balance of a Limited Partner's Capital Account.
SECTION 3.08. LIABILITY OF THE GENERAL PARTNER.
The General Partner shall be subject to the liabilities of a partner in a
partnership without limited partners except as may otherwise be provided
herein. This Agreement shall not be amended to limit such liability of the
General Partner.
ARTICLE FOUR
ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS OF CASH AND CERTAIN PROCEEDS
SECTION 4.01. ALLOCATION OF NET PROFITS.
SUBJECT TO THE PROVISIONS OF SECTION 4.13, Net Profits for each Fiscal Year
shall be allocated to the Partners in the following order of priority:
(i) Net Profits up to the amount of Cash Available for Distribution in
such Fiscal Year, whether or not actually distributed, shall be allocated
in the same ratio as Cash Available for Distribution would be distributed
for such Fiscal Year pursuant to Section 4.06; and
(ii) any remaining Net Profits shall be allocated (a) to eliminate the
negative Capital Account balances of the Partners, if any, in proportion to
the respective negative Capital Account balances, and (b) then in the same
ratio as an equivalent amount of Cash Available for Distribution would have
been distributable for such Fiscal Year.
SECTION 4.02. ALLOCATION OF NET LOSSES AND LOSSES.
SUBJECT TO THE PROVISIONS OF SECTION 4.13, Net Losses and Losses for each
Fiscal Year shall be allocated as follows:
(i) first, through and including the end of the Fiscal Quarter during
which the General Partner and the Limited Partners shall have received
cumulative distributions of Capital Receipts equal to 50% of their Capital
Contributions, 1% to the General Partner and 99% to the Limited Partners;
(ii) next, through and including the end of the Fiscal Quarter during
which the General Partner and the Limited Partners have received cumulative
distributions of Capital Receipts equal to their Capital Contributions, 15%
to the General Partner and 85% to the Limited Partners; and
(iii) thereafter, 30% to the General Partner and 70% to the Limited
Partners.
Provided, however, that Net Losses and Losses [shall not be allocated to any
Limited Partner to the extent that all or any portion of such allocation would
cause such Limited Partner's negative Capital Account balance, if any, to
exceed his share of "minimum gain," as defined in Proposed Treasury Regulation
section 1.704-1(b)(4), at the end of such Fiscal Year and, in such event, any
amount of such] ALLOCATED PURSUANT TO THIS SECTION 4.02 SHALL NOT EXCEED THE
MAXIMUM AMOUNT OF LOSSES THAT CAN BE SO ALLOCATED WITHOUT CAUSING ANY
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PARTNER TO HAVE AN ADJUSTED CAPITAL ACCOUNT DEFICIT AT THE END OF THE FISCAL
YEAR. IN THE EVENT SOME BUT NOT ALL OF THE PARTNERS WOULD HAVE ADJUSTED
CAPITAL ACCOUNT DEFICITS AS A CONSEQUENCE OF AN ALLOCATION OF Net Losses or
Losses [not allocated to a Limited Partner on account of the preceding clause]
PURSUANT TO THIS SECTION 4.02, THE LIMITATION SET FORTH IN THIS PARAGRAPH
SHALL BE APPLIED ON A PARTNER BY PARTNER BASIS SO AS TO ALLOCATE THE MAXIMUM
PERMISSIBLE NET LOSSES AND LOSSES TO EACH PARTNER UNDER SECTION
1.704-1(B)(2)(II)(D) OF THE TREASURY REGULATIONS. ALL NET LOSSES AND LOSSES IN
EXCESS OF THE LIMITATIONS SET FORTH IN THIS PARAGRAPH shall be allocated to
the General Partner.
SECTION 4.03. ALLOCATION AMONG LIMITED PARTNERS OF NET PROFITS, GAINS, NET
LOSSES AND LOSSES.
[Any] SUBJECT TO THE PROVISIONS OF SECTION 4.13, ANY Net Profits or Net
Losses for any Fiscal Year allocable to the Limited Partners under Section
4.01 or 4.02 shall be allocated among the Limited Partners pro rata in
accordance with the number of Units owned by each as of the end of such Fiscal
Year; provided that if any Unit is assigned during the Fiscal Year in
accordance with this Agreement, the Net Profits or Net Losses that are so
allocable to such Unit shall be allocated between the assignor and assignee of
such Unit according to the number of [Fiscal Quarters] ACCOUNTING PERIODS in
such Fiscal Year each owned such Unit. Any Gains or Losses allocable to the
Limited Partners shall be allocated among the Limited Partners who held Units
on the last day of the Fiscal Quarter in which the sale or disposition giving
rise to such Gains or Losses occurred, pro rata in accordance with the number
of Units owned by each such Limited Partner. If any Unit is assigned by a
Limited Partner other than on the first day of a Fiscal Quarter (in
contravention of the Agreement), then the Partnership shall recognize such
assignment for the purposes of allocating Net Profits, Gains, Net Losses or
Losses if, and to the extent, it is legally required to do so in the opinion
of legal counsel. THE PRECEDING SENTENCE SHALL NOT APPLY TO THE UNITS (OR
FRACTIONS OF UNITS) TRANSFERRED TO MHP ACQUISITION CORP. PURSUANT TO MHP
ACQUISITION CORP.'S OFFER TO PURCHASE FOR CASH 450 OUTSTANDING UNITS OF
LIMITED PARTNERSHIP INTEREST, DATED NOVEMBER 19, 1996, WHICH TRANSFERS SHALL
BE CONSIDERED TO BE IN ACCORDANCE WITH THIS AGREEMENT, SHALL BE DEEMED TO
OCCUR FOR PURPOSES OF THIS SECTION 4.03 ON THE FIRST DAY OF THE ACCOUNTING
PERIOD IN WHICH THE TRANSFER OF SUCH UNITS OCCURS AND SHALL BE GOVERNED BY THE
FIRST TWO SENTENCES OF THIS SECTION 4.03.
SECTION 4.04. ALLOCATION OF GAIN.
SUBJECT TO THE PROVISIONS OF SECTION 4.13, Gain (other than gain from the
routine sale of used FF&E not in connection with the sale of a Hotel or
Hotels) recognized by the Partnership, or recognized by the Harbor Beach
[Partnership or the Warner Center] Partnership and allocated to the
Partnership, shall be allocated (after giving effect to the allocations
referred to in Sections 4.01 and 4.02 and all distributions other than
distributions pursuant to Section 4.08 with respect to any Fiscal Year) in the
following order of priority:
(i) first, to all Partners whose Capital Accounts have a negative
balance, in the ratio of such negative balance until such negative balances
are brought to zero;
(ii) second, to all Partners up to the amount necessary to bring their
respective Capital Account balances to an amount equal to their respective
Invested Capital;
(iii) third, in the case of Gain arising from the sale or other
disposition (or from a related series of sales or dispositions) of
substantially all the assets of the Partnership (including for this purpose
the Partnership's allocable share of Gain from the last Hotel sold when
sold by the Harbor Beach Partnership or [the Warner Center Partnership or]
from a related series of sales or dispositions by such partnership leading
to the sale of the last Hotel), (a) to the Limited Partners in an amount
equal to the excess, if any, of (1) the sum of 15% times the weighted
average of the Limited Partners' Invested Capital each year, over (2) the
sum of distributions to the Limited Partners of Cash Available for
Distribution each year; (b) next, to the General Partner until it has been
allocated an amount equal to 30/70 times the amount allocated to the
Limited Partners under clause (a); and
(iv) thereafter, 30% to the General Partner and 70% to the Limited
Partners.
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SECTION 4.05. ALLOCATION OF RECAPTURE INCOME.
"Recapture income," if any, realized by the Partnership pursuant to section
1245 or section 1250 of the Code directly or allocated to the Partnership from
the [Warner Center Partnership or the] Harbor Beach Partnership shall be
allocated to the Partners to whom the Net Profits or Net Losses which included
the prior corresponding depreciation deductions were allocated, such
allocations to be made pro rata to the Partners in accordance with the manner
in which such Net Profits or Net Losses were allocated.
SECTION 4.06. DISTRIBUTION OF CASH AVAILABLE FOR DISTRIBUTION.
Cash Available for Distribution with respect to each Fiscal Year shall be
distributed at least annually as follows:
(i) first, through and including the end of the Fiscal Quarter during
which the General Partner and the Limited Partners shall have received
cumulative distributions of Capital Receipts equal to 50% of their Capital
Contributions, 1% to the General Partner and 99% to the Limited Partners;
(ii) next, through and including the end of the Fiscal Quarter during
which the General Partner and the Limited Partners shall have received
cumulative distributions of Capital Receipts equal to their Capital
Contributions, 15% to the General Partner and 85% to the Limited Partners;
and
(iii) thereafter, 30% to the General Partner and 70% to the Limited
Partners.
SECTION 4.07. DISTRIBUTION OF REFINANCING PROCEEDS.
Refinancing Proceeds shall, unless the General Partner, in its sole
discretion, shall determine to retain any such amounts in the Partnership, be
distributed as follows:
(i) first, 1% to the General Partner and 99% to the Limited Partners,
until the General Partner and the Limited Partners shall have received
cumulative distributions of Capital Receipts equal to their Capital
Contributions; and
(ii) thereafter, 30% to the General Partner and 70% to the Limited
Partners.
SECTION 4.08. DISTRIBUTION OF SALE PROCEEDS.
A. Sale Proceeds from the sale or other disposition of less than
substantially all of the assets of the Partnership shall be distributed:
(i) first, until the Limited Partners have received cumulative
distributions of Capital Receipts equal to their Capital Contributions, 1%
to the General Partner and 99% to the Limited Partners; and
(ii) thereafter, 30% to the General Partner and 70% to the Limited
Partners.
B. Sale Proceeds from the sale or other disposition (or from a related
series of sales or dispositions) of substantially all of the assets of the
Partnership (including for this purpose the Partnership's allocable share of
Sale Proceeds from the last Hotel sold when sold by the Harbor Beach
Partnership or [the Warner Center Partnership or] from a related series of
sales or dispositions by such [partnerships] PARTNERSHIP leading to the sale
of the last Hotel) shall be distributed in accordance with Article 8.
SECTION 4.09. ALLOCATION AMONG LIMITED PARTNERS OF CASH AVAILABLE FOR
DISTRIBUTION, REFINANCING PROCEEDS AND SALE PROCEEDS.
Cash Available for Distribution distributable with respect to any Fiscal
Quarter to the Limited Partners pursuant to Section 4.06, shall be distributed
to the Limited Partners pro rata in accordance with the number of Units owned
by each as of the end of such Fiscal Quarter; provided that if a Unit is
assigned during the Fiscal Year in accordance with this Agreement, then the
amount so distributable with respect to such Unit shall be divided between the
assignor and the assignee of such Unit according to the number of Fiscal
Quarters in such Fiscal Year each owned such Unit. Proceeds distributable to
the Limited Partners pursuant to Section 4.07 or
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4.08A shall be distributed to the Limited Partners pro rata in accordance with
the number of Units owned by each such Limited Partner on the last day of the
Fiscal Quarter in which the transaction giving rise to such proceeds was
completed. If a Unit is assigned by a Limited Partner other than on the first
day of a Fiscal Quarter (in contravention of this Agreement), then the
Partnership shall recognize such assignment for the purpose of distributing
amounts pursuant to Sections 4.06, 4.07 and 4.08 if, and to the extent, it is
legally required to do so in the opinion of legal counsel. THE PRECEDING
SENTENCE SHALL NOT APPLY TO THE UNITS (OR FRACTIONS OF UNITS) TRANSFERRED TO
MHP ACQUISITION CORP. PURSUANT TO MHP ACQUISITION CORP.'S OFFER TO PURCHASE
FOR CASH 450 OUTSTANDING UNITS OF LIMITED PARTNERSHIP INTEREST, DATED NOVEMBER
19, 1996, WHICH TRANSFERS SHALL BE CONSIDERED TO BE IN ACCORDANCE WITH THIS
AGREEMENT, AND, FOR PURPOSES OF THIS SECTION 4.09, SHALL BE DEEMED TO OCCUR ON
THE DATE OF TRANSFER OF SUCH UNITS FOR THE PURPOSE OF DISTRIBUTING AMOUNTS
PURSUANT TO SECTIONS 4.06, 4.07 AND 4.08 (WHICH SHALL RESULT IN MHP
ACQUISITION CORP. BECOMING THE LIMITED PARTNER OF RECORD ON SUCH DATE OF
TRANSFER). NOTWITHSTANDING THE FIRST SENTENCE OF THIS SECTION 4.09, ANY
DISTRIBUTIONS PURSUANT TO SECTION 4.06 WITH RESPECT TO SUCH TRANSFERRED UNITS
MADE BEFORE THE DATE OF TRANSFER OF SUCH UNITS BUT AFTER THE LAST DAY OF THE
FISCAL QUARTER ENDING BEFORE SUCH DATE OF TRANSFER SHALL BE MADE TO THE
TRANSFERRING LIMITED PARTNER, AND ANY DISTRIBUTION PURSUANT TO SECTION 4.06
WITH RESPECT TO SUCH TRANSFERRED UNITS AFTER SUCH DATE OF TRANSFER BUT BEFORE
THE FIRST DAY OF THE FIRST FISCAL QUARTER COMMENCING AFTER SUCH DATE OF
TRANSFER SHALL BE MADE TO MHP ACQUISITION CORP.
SECTION 4.10. SECTION 754 ADJUSTMENTS.
Appropriate adjustments shall be made in the allocations to Limited Partners
under this Article Four in order to reflect adjustments in the basis of
Partnership property permitted pursuant to any election under section 754 of
the Code. The Partnership will make the basis adjustments and, upon request by
the transferee Limited Partner, calculate depreciation deductions in
accordance with such adjustments for those transferee Limited Partners who
supply information to the Partnership that enables the Partnership to
determine when, and at what price, such transferee Limited Partners acquired
Units. In the case of a transferee Limited Partner who does not supply such
information to the Partnership, the Partnership will attempt to supply such
Limited Partner with reasonably available information that will permit such
Limited Partner to make the required basis adjustment calculation.
SECTION 4.11. [Special Allocation of] SELLING COMMISSIONS.
Any selling commissions or other fees paid by the Partnership in any Fiscal
Year in respect of any Unit shall be specially allocated to the Limited
Partner owning such Unit during such Fiscal Year.
SECTION 4.12. CONTINGENT ADJUSTMENTS.
A. If prior to 1990, regulations shall have been proposed by the Department
of the Treasury, as directed by section 79 of the Deficit Reduction Act of
1984 (the "Proposed Regulations"), and the General Partner [(l)](I) is of the
opinion (based upon advice of counsel) that the Proposed Regulations require
for any Fiscal Year of the Partnership (an "Affected Year") that all or a
portion of the Losses or Net Losses that would otherwise be allocable to the
Limited Partners pursuant to Section 4.02 be allocated instead to the General
Partner (the "Affected Losses or Net Losses") and (ii) shall have taken such
steps to ameliorate the potential adverse effect of the Proposed Regulations
on the tax consequences of an investment in the Partnership by Limited
Partners, that the General Partner (upon advice of counsel) shall consider to
be reasonable under the circumstances (taking into account economic,
financial, accounting, regulatory and any other facts or circumstances
existing at the time), then to the extent that a change in the allocations is
still required, the adjustments required by the Proposed Regulations shall be
made and the General Partner shall retain a qualified expert (the "Expert"),
the fees and expenses of which shall be paid by the Partnership, who will be
requested to determine at the beginning of each Affected Year the respective
after-tax present values to the General Partner and the Limited Partners of
the Affected Losses or Net Losses for such Affected Year (the "Adjustments").
B. In determining such Adjustments the Expert shall (i) assume that the
Hotels will be sold in 2000 for an amount equal to their original cost, and
that the Limited Partners and the General Partner are subject to Federal
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income tax at the highest marginal tax rates (for individual taxpayers in the
case of the Limited Partners and for corporate taxpayers in the case of the
General Partner) in effect at the times relevant to such determination and
(ii) use such cash flow forecasts and other economic data that the General
Partner shall provide to assist the Expert in making such determination. For
each Affected Year, the General Partner will make a Capital Contribution to
the Partnership at the end of the Affected Year equal to the Adjustment to the
General Partner or to the Limited Partners, whichever is less. Each such
Capital Contribution made by the General Partner shall be promptly distributed
to the Limited Partners in accordance with the ratios in which Net Loses would
be allocated pursuant to Section 4.02 for such Affected Year; and provided
further that, notwithstanding the foregoing proviso, if the Proposed
Regulations shall be promulgated in a form other than the form in which they
shall have been proposed then the General Partner shall make such reasonable
adjustments to the amount of any such Capital Contribution as it shall
consider appropriate under the circumstances. Any contribution or distribution
of cash required by this Section 4.12 shall be appropriately reflected in the
Capital Accounts of the Partners but shall not affect the amount or
computation of Capital Contributions or Invested Capital for purposes of
Article Four of this Agreement.
SECTION 4.13. SPECIAL ALLOCATIONS [IN EVENT OF ADVANCES BY].
THE FOLLOWING PROVISIONS SHALL APPLY NOTWITHSTANDING THE PROVISIONS OF
SECTIONS 4.01, 4.02, 4.03, AND 4.04. IN THE EVENT THAT THERE IS A CONFLICT
BETWEEN ANY OF THE FOLLOWING PROVISIONS, THE EARLIER LISTED PROVISIONS SHALL
GOVERN.
A. IF THERE IS A NET DECREASE IN THE MINIMUM GAIN ATTRIBUTABLE TO
NONRECOURSE LIABILITIES DURING ANY FISCAL YEAR, EACH PARTNER SHALL BE
SPECIALLY ALLOCATED ITEMS OF PARTNERSHIP INCOME AND GAIN FOR SUCH YEAR (AND,
IF NECESSARY, FOR SUBSEQUENT YEARS) IN PROPORTION TO, AND TO THE EXTENT OF, AN
AMOUNT EQUAL TO SUCH PARTNER'S SHARE OF THE NET DECREASE IN SUCH MINIMUM GAIN
DURING SUCH YEAR (AS SUCH SHARE IS DETERMINED PURSUANT TO SECTION 1.704-
2(G)(2) OF THE TREASURY REGULATIONS. IT IS INTENDED THAT ITEMS TO BE SO
ALLOCATED SHALL BE DETERMINED IN ACCORDANCE WITH, AND THE ALLOCATIONS MADE
ONLY TO THE EXTENT OF, THE MINIMUM GAIN CHARGEBACK REQUIREMENT OF SECTION
1.704-2(F) OF THE TREASURY REGULATIONS (TAKING INTO ACCOUNT THE EXCEPTIONS SET
FORTH IN PARAGRAPHS (2), (3), (4) AND (5) THEREOF) AND THIS SECTION 4.10A
SHALL BE INTERPRETED CONSISTENTLY THEREWITH.
B. IF THERE IS A NET DECREASE IN THE MINIMUM GAIN ATTRIBUTABLE TO PARTNER
NONRECOURSE DEBTS DURING ANY FISCAL YEAR, EACH PARTNER WHO HAS A SHARE OF THE
MINIMUM GAIN (DETERMINED IN ACCORDANCE WITH SECTION 1.704-2(I)(5) OF THE
TREASURY REGULATIONS) ATTRIBUTABLE TO SUCH PARTNER NONRECOURSE DEBTS AS OF THE
BEGINNING OF SUCH YEAR SHALL BE SPECIALLY ALLOCATED ITEMS OF PARTNERSHIP
INCOME AND GAIN FOR SUCH YEAR (AND, IF NECESSARY, FOR SUBSEQUENT YEARS) IN
PROPORTION TO, AND TO THE EXTENT OF, AN AMOUNT EQUAL TO SUCH PARTNER'S SHARE
OF THE NET DECREASE IN MINIMUM GAIN. IT IS INTENDED THAT ITEMS TO BE SO
ALLOCATED SHALL BE DETERMINED IN ACCORDANCE WITH, AND THE ALLOCATIONS MADE
ONLY TO THE EXTENT OF THE MINIMUM GAIN CHARGEBACK REQUIREMENT OF SECTION
1.704-2(I)(4) OF THE TREASURY REGULATIONS (INCLUDING, WITHOUT LIMITATION, THE
EXCEPTIONS SET FORTH THEREIN AND IN PARAGRAPHS (2), (3), (4) AND (5) OF
SECTION 1.704-2(F) OF THE TREASURY REGULATIONS) AND THIS SECTION 4.10B SHALL
BE INTERPRETED CONSISTENTLY THEREWITH.
C. IN THE EVENT A PARTNER UNEXPECTEDLY RECEIVES IN ANY TAXABLE YEAR ANY
ADJUSTMENTS, ALLOCATIONS, OR DISTRIBUTIONS DESCRIBED IN SECTION 1.704-
1(B)(2)(II)(D)(4), (5), OR (6) OF THE TREASURY REGULATIONS THAT CAUSE OR
INCREASE AN ADJUSTED CAPITAL ACCOUNT DEFICIT OF SUCH PARTNER, ITEMS OF
PARTNERSHIP INCOME AND GAIN SHALL BE SPECIALLY ALLOCATED TO SUCH PARTNER IN
SUCH TAXABLE YEAR (AND, IF NECESSARY, IN SUBSEQUENT TAXABLE YEARS) IN AN
AMOUNT AND MANNER SUFFICIENT TO ELIMINATE, TO THE EXTENT REQUIRED BY THE
TREASURY REGULATIONS, THE ADJUSTED CAPITAL ACCOUNT DEFICIT OF SUCH PARTNER AS
QUICKLY AS POSSIBLE. IT IS INTENDED THAT THE ALLOCATIONS MADE PURSUANT TO THIS
SECTION 4.10C CONSTITUTE A "QUALIFIED INCOME OFFSET" UNDER SECTION 1.704-
1(B)(2)(II)(D) OF THE TREASURY REGULATIONS AND SHALL BE INTERPRETED
CONSISTENTLY THEREWITH.
D. IF IN ANY FISCAL YEAR THERE IS A NET INCREASE DURING SUCH YEAR IN THE
AMOUNT OF MINIMUM GAIN ATTRIBUTABLE TO A PARTNER NONRECOURSE DEBT, ANY PARTNER
BEARING THE ECONOMIC RISK OF LOSS WITH RESPECT TO
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SUCH DEBT (WITHIN THE MEANING OF SECTION 1.752-2 OF THE TREASURY REGULATIONS)
SHALL BE SPECIALLY ALLOCATED ITEMS OF PARTNERSHIP LOSS OR DEDUCTION IN AN
AMOUNT EQUAL TO THE EXCESS OF (I) SUCH PARTNER'S SHARE OF THE AMOUNT OF SUCH
NET INCREASE, OVER (II) THE AGGREGATE AMOUNT OF ANY DISTRIBUTIONS DURING SUCH
YEAR TO SUCH PARTNER OF THE PROCEEDS OF SUCH DEBT THAT ARE ALLOCATED TO SUCH
INCREASE IN MINIMUM GAIN. IT IS INTENDED THAT ITEMS TO BE SO ALLOCATED SHALL
BE DETERMINED AND THE ALLOCATIONS MADE IN ACCORDANCE WITH THE REQUIRED
ALLOCATION OF "PARTNER NONRECOURSE DEDUCTIONS" PURSUANT TO SECTION 1.704-
2(I)(1) AND (2) OF THE TREASURY REGULATIONS AND THIS SECTION 4.10D AND SHALL
BE INTERPRETED CONSISTENTLY THEREWITH.
SECTION 4.14. ADVANCES BY THE GENERAL PARTNER.
Notwithstanding any other provision of this Article, in the event the
General Partner makes an advance which is deemed to be a loan under Section
5.06C then before any Net Losses or Losses attributable to the Fiscal Quarter
in which such an advance is made, or any subsequent Fiscal Quarter, are
allocated pursuant to Section 4.02, there shall first be allocated to the
General Partner an amount of Net Losses or Losses equal to the amount of any
such advance; provided, however, that this Section [4.13] 4.14 shall not apply
to allocate Losses or Net Losses away from any Limited Partner to the extent
that such Limited Partner has a positive Capital Account balance.
SECTION 4.15. OPERATING RULES.
A. SOLELY FOR PURPOSES OF DETERMINING A PARTNER'S PROPORTIONATE SHARE OF THE
"EXCESS NONRECOURSE LIABILITIES" OF THE PARTNERSHIP WITHIN THE MEANING OF
SECTION 1.752-1(A)(3) OF THE TREASURY REGULATIONS, A PARTNER'S INTEREST IN
PARTNERSHIP PROFITS SHALL BE ITS PERCENTAGE INTEREST AS OF SUCH TIME.
B. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, THE
DISTRIBUTIVE SHARE OF A PARTNER OF EACH SPECIFIC DEDUCTION AND ITEM OF INCOME,
LOSS, AND CREDIT OF THE PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES SHALL BE
THE SAME AS SUCH PARTNER'S SHARE OF NET PROFITS, GAINS, NET LOSSES, OR LOSSES,
AS THE CASE MAY BE, FOR SUCH FISCAL YEAR.
C. FOR PURPOSES OF THIS AGREEMENT, ANY AMOUNT OF TAXES REQUIRED TO BE
WITHHELD BY THE PARTNERSHIP WITH RESPECT TO ANY PARTNER OR REQUIRED TO BE PAID
BY THE PARTNERSHIP IN RESPECT OF ANY PARTNER'S TAX OBLIGATION SHALL BE DEEMED
TO BE A DISTRIBUTION OR PAYMENT TO SUCH PARTNER AND SHALL REDUCE THE AMOUNT
OTHERWISE DISTRIBUTABLE TO SUCH PARTNER PURSUANT TO THIS AGREEMENT.
D. FOR PURPOSES OF DETERMINING THE BALANCES IN THE CAPITAL ACCOUNTS OF THE
PARTNERS IN ORDER TO ALLOCATE NET PROFITS PURSUANT TO SECTION 4.01, NET LOSSES
OR LOSSES (FROM A SALE OR DISPOSITION OF LESS THAN SUBSTANTIALLY ALL OF THE
ASSETS OF THE PARTNERSHIP) PURSUANT TO SECTION 4.02, AND/OR GAIN (FROM A SALE
OR DISPOSITION OF LESS THAN SUBSTANTIALLY ALL OF THE ASSETS OF THE
PARTNERSHIP) PURSUANT TO SECTION 4.04, EACH PARTNER'S CAPITAL ACCOUNT BALANCE
SHALL BE DEEMED TO INCLUDE ANY AMOUNT THAT SUCH PARTNER IS DEEMED OBLIGATED TO
RESTORE PURSUANT TO THE PENULTIMATE SENTENCE OF SECTION 1.704-2(G)(1) AND
1.704-2(I)(5) OF THE TREASURY REGULATIONS (DETERMINED AFTER TAKING INTO
ACCOUNT ANY CHANGES DURING SUCH YEAR IN MINIMUM GAIN, INCLUDING CHANGES IN
MINIMUM GAIN RESULTING FROM SUCH SALE OR OTHER DISPOSITION). FOR PURPOSES OF
DETERMINING THE CAPITAL ACCOUNTS IN ORDER TO ALLOCATE NET LOSSES OR SUCH
LOSSES PURSUANT TO SECTION 4.02, EACH PARTNER'S CAPITAL ACCOUNT SHALL BE
REDUCED BY THE ITEMS DESCRIBED IN SECTIONS 1.704-1(B)(2)(II)(D)(4), (5), AND
(6).
ARTICLE FIVE
RIGHTS, POWERS AND DUTIES OF
THE GENERAL PARTNER
SECTION 5.01. AUTHORITY OF THE GENERAL PARTNER TO MANAGE THE PARTNERSHIP.
A. Subject to the Consent of the Limited Partners where required by this
Agreement, the General Partner shall have the exclusive right and power to
conduct the business and affairs of the Partnership and to do all things
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necessary to carry on the business of the Partnership, and is hereby
authorized to take any action of any kind and to do anything and everything it
deems necessary or appropriate in accordance with the provisions of this
Agreement and applicable law. Except as expressly provided herein, the
authority of the General Partner to conduct the business of the Partnership
shall be exercised only by the General Partner.
B. No Limited Partner shall participate in or have any control whatsoever
over the Partnership's business or have any authority or right to act for or
bind the Partnership. The Limited Partners hereby Consent to the exercise by
the General Partner of the powers conferred on it by this Agreement.
C. Except to the extent otherwise provided herein, the General Partner, for
and in the name and on behalf of the Partnership acting for itself, OR as a
general partner of the Harbor Beach [partnership or as a limited partner of
the Warner Center Partnership to the extent permitted by the Warner Center
partnership Agreement] PARTNERSHIP, is hereby authorized to:
(i) execute any and all agreements [(including the Purchase Agreements)],
contracts, documents, certifications and instruments necessary or
convenient in connection with the development, financing management,
maintenance, operation, sale or other disposition of the Partnerships'
properties and assets except as otherwise limited by this Agreement;
(ii) borrow money from itself or others (including Affiliates of any
general partner of any of the Partnerships) and issue evidences of
indebtedness necessary, convenient or incidental to the accomplishment of
the purposes of the Partnerships and to secure the same by mortgage, pledge
or other lien on the assets of the Partnerships only with respect to the
following: (a) any of the Deferred Purchase Debt, (b) any amounts advanced
by the general partner of any of the Partnerships or an Affiliate of such
general partner (which amounts may or may not be secured) or any other
lender to enable the Partnerships to satisfy any of their obligations
arising in the normal course of their business or to make payments of
principal, interest, premium or penalty on any debt of the Partnerships,
(c) any indebtedness of the Partnerships to each other, (d) the Mortgage
Debt, (e) amounts incurred exclusively for the purpose of a distribution to
the partners of the Partnerships, (f) any indebtedness the [incurrence]
INCURRING of which has been specifically Consented to by the Limited
Partners under Section 5.02B, and (g) any indebtedness incurred to
refinance (and thereafter further refinance as often as shall be necessary)
the unamortized portion of any of the foregoing from time to time
outstanding. In connection with the borrowing of money on a nonrecourse
basis, [with the exception of the repayment fee to the lender of the Warner
Center Mortgage Debt] no lender shall be granted or acquire, at any time as
a result of making such a loan, any direct or indirect interest in the
profits, capital or property of the Partnerships, other than as a secured
creditor;
(iii) prepay in whole or in part, refinance (to the extent permitted by
clause (ii) above), recast, modify or extend any mortgage debt affecting or
encumbering any of the Partnerships' property and in connection therewith
to execute any extensions, consolidations, modifications or renewals of
mortgages on any assets of the Partnerships;
(iv) deal with, or otherwise engage in business with, or provide services
to and receive compensation therefor from, any Person who has provided or
may in the future provide any services, lend money or sell property to or
purchase property from the General Partner or any Affiliate of the General
Partner. No such dealing, engaging in business or providing of services may
involve any direct or indirect payment by the Partnerships of any rebate or
any reciprocal arrangement for the purpose of circumventing any restriction
set forth herein upon dealings with the General Partner or any Affiliate of
the General Partner. The General Partner may on behalf of any of the
Partnerships enter into agreements to employ agents, attorneys,
accountants, engineers, appraisers, or other consultants or contractors who
may be Affiliates of the General Partner and may enter into agreements to
employ Affiliates of the General Partner to provide further or additional
services to the Partnerships; provided that any employment of such Persons
is on terms not less favorable to the Partnerships than those offered by
persons who are not Affiliates of the General Partner for comparable
services;
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(v) engage in any kind of activity and perform and carry out contracts of
any kind necessary to, or in connection with, or incidental to the
accomplishment of the purposes of the respective Partnerships, as may be
lawfully carried on or performed by a partnership under the laws of the
States of Delaware[,] AND Florida [and California], as the case may be, and
in each state where the Partnerships have been formed or have been
qualified to do business;
(VI) SELL OR OTHERWISE DISPOSE OF OR CONSENT TO THE SALE OR DISPOSITION
OF ANY ASSETS OF THE PARTNERSHIP TO ANY PERSON PROVIDED THAT, IF THE ASSETS
TO BE SOLD OR DISPOSED OF HAD AN ORIGINAL COST IN EXCESS OF 25% OF THE
ORIGINAL COST OF ALL ASSETS OF THE PARTNERSHIP, SUCH PERSON IS NOT A
GENERAL PARTNER OF EITHER PARTNERSHIP OR AN AFFILIATE OF ANY SUCH GENERAL
PARTNER; AND
(VII) TRANSFER, SELL, ASSIGN, PLEDGE OR OTHERWISE DISPOSE OF ALL OR ANY
PORTION OF THE PARTNERSHIP'S INTEREST IN THE HARBOR BEACH PARTNERSHIP TO A
PERSON OTHER THAN THE GENERAL PARTNER OR A GENERAL PARTNER OF THE HARBOR
BEACH PARTNERSHIP OR AN AFFILIATE OF ANY OF THE FOREGOING.
D. Any Person dealing with the Partnership or the General Partner may rely
upon a certificate signed by the Secretary or Assistant Secretary of the
General Partner, thereunto duly authorized, as to:
(i) the identity of the General Partner or any Limited Partner;
(ii) the existence or non-existence of any fact or facts which constitute
a condition precedent to the acts by the General Partner or in any other
manner germane to the affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver any
instrument or document of the Partnership; AND
(iv) any act or failure to act by the Partnership or as to any other
matter whatsoever involving the Partnership or any Partner.
E. Any agreements, contracts and arrangements between any of the
Partnerships and any general partner of the Partnership or any of their
Affiliates, except for rendering legal, tax, accounting and engineering
services by employees of the General Partner and Affiliates of the General
Partner and [except for arrangements between the Partnership and Marriott's
time share subsidiary which owns a time share project near the Orlando Hotel,]
which agreements will be on commercially reasonable terms, shall be subject to
the following additional conditions:
(i) the general partner or any such Affiliate must be actively engaged in
the business of rendering such services or selling or leasing such goods,
independently of its dealings with the Partnerships and as an ordinary
ongoing business or must enter into and engage in such business with
Marriott system hotels or hotel owners generally and not exclusively with
the Partnerships;
(ii) such agreements, contracts or arrangements must be fair to the
Partnerships and reflect commercially reasonable terms and shall be
embodied in a written contract which precisely describes the subject matter
thereof and all compensation to be paid therefor;
(iii) no rebates or give-ups may be received by the general partner or
any such Affiliate, nor may the general partner or any such Affiliate
participate in any reciprocal business arrangements which would have the
effect of circumventing any of the provisions of this Agreement[,] OR the
Harbor Beach Partnership Agreement [or the Warner Center Partnership
Agreement];
(iv) no such agreement, contract or arrangement as to which the Limited
Partners had previously given approval may be amended in such manner as to
increase the fees or other compensation payable to the general partner or
any such Affiliate or to decrease the responsibilities or duties of the
general partner or any such Affiliate in the absence of the Consent
contemplated by Section 5.02B(iii); and
(v) any such agreement, contract or arrangement which relates to or
secures any funds advanced or loaned to any of the Partnerships by the
general partner or any such Affiliate must reflect commercially reasonable
terms.
D-19
SECTION 5.02. RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNER.
A. Without the Consent of all the Limited Partners, the General Partner
shall not have authority on behalf of the Partnership acting for itself, OR as
a general partner of the Harbor Beach Partnership [or as a limited partner of
the Warner Center Partnership to the extent permitted by the Warner Center
Partnership Agreement], to:
(i) do any willful act in contravention of this Agreement[,] OR the
Harbor Beach Partnership Agreement [or the Warner Center Partnership
Agreement];
(ii) do any willful act which would make it impossible to carry on the
ordinary business of any of the Partnerships;
(iii) confess a judgment in a material amount against any of the
Partnerships;
(iv) convert property of any of the Partnerships to its own use, or
assign any rights in specific property of any of the Partnerships for other
than a purpose of the respective Partnership;
(v) admit any other Person as a General Partner or withdraw as a General
Partner except as necessary to alleviate the negative effect of any
Affected Losses pursuant to Section 4.12 in which case the vote of the
majority of the Units shall be required;
(vi) admit a Person as a Limited Partner, except as provided in this
Agreement;[ or]
(vii) knowingly perform any act that would subject any Limited Partner to
liability as a general partner in any jurisdiction or any other liability
except as provided for herein or under the [Delaware Revised Uniform
Limited Partnership] ACT;
(VIII) LIST, RECOGNIZE, OR FACILITATE THE TRADING OF THE INTERESTS (OR
ANY INTEREST THEREIN) ON ANY "ESTABLISHED SECURITIES MARKET" WITHIN THE
MEANING OF SECTION 7704 OF THE CODE, OR PERMIT ANY OF ITS AFFILIATES TO
TAKE SUCH ACTIONS, IF AS A RESULT THEREOF THE PARTNERSHIP WOULD BE TAXED
FOR FEDERAL INCOME TAX PURPOSES AS AN ASSOCIATION TAXABLE AS A CORPORATION;
OR
(IX) CREATE FOR THE INTERESTS (OR ANY INTEREST THEREIN) A "SECONDARY
MARKET (OR THE SUBSTANTIAL EQUIVALENT THEREOF)" WITHIN THE MEANING OF
SECTION 7704 OF THE CODE OR OTHERWISE PERMIT, RECOGNIZE OR FACILITATE THE
TRADING OF THE INTERESTS (OR ANY INTEREST THEREIN) ON ANY SUCH MARKET, OR
PERMIT ANY OF ITS AFFILIATES TO TAKE SUCH ACTIONS, IF AS A RESULT THEREOF
THE PARTNERSHIP WOULD BE TAXED FOR FEDERAL INCOME TAX PURPOSES AS AN
ASSOCIATION TAXABLE AS A CORPORATION.
B. Without the Consent of [the holders of] LIMITED PARTNERS HOLDING a
majority of the Units, the General Partner shall not have the authority on
behalf of the Partnership acting for itself, OR as a general partner of the
Harbor Beach Partnership [or as a limited partner of the Warner Center
Partnership to the extent permitted by the Warner Center Partnership
Agreement], to:
(i) have any of the Partnerships acquire interests in other partnerships
or hotel properties in addition to the Partnership's partnership
[interests] INTEREST in the Harbor Beach Partnership and the [Warner Center
Partnership and the] interest in the Orlando Hotel except for additional
interests in the Harbor Beach [Partnership, the Warner Center] Partnership
or partnership interests in the other Harbor Beach General Partner or
partners of the other Harbor Beach General Partner;
(ii) sell or otherwise dispose of or consent to the sale or disposition
of any assets of [any of] the [Partnerships] PARTNERSHIP which had an
original cost in excess of 25% of the original cost basis of all assets of
[such Partnership ] THE PARTNERSHIP TO ANY OF THE GENERAL PARTNERS OF THE
PARTNERSHIPS OR AN AFFILIATE OF ANY SUCH GENERAL PARTNER or vote the
Partnership's general partnership interest in the Harbor Beach Partnership
[and the Partnership's limited partnership interest in the Warner Center
Partnership] in favor of the sale or other disposition of any assets of the
Harbor Beach Partnership [or the Warner Center Partnership] which had an
original cost in excess of 25% of the original cost of all assets of the
Harbor Beach Partnership [or the Warner Center Partnership] TO ANY OF THE
GENERAL PARTNERS OF THE PARTNERSHIPS OR AN AFFILIATE OF ANY SUCH GENERAL
PARTNER; provided, however, that if it is proposed that one of the
Partnerships sell one of the Hotels to any of the general partners of the
Partnerships or an Affiliate of any such general partner the following
procedures shall be followed: (a) the General Partner shall first give
D-20
notice of the proposed sale to the Limited Partners who shall thereafter
have 30 days within which to select a nationally recognized appraiser
having the approval of [the holders of] LIMITED PARTNERS HOLDING a majority
of the Units, (b) the appraiser selected under clause (a) of this proviso
shall have 30 days from the date of selection to prepare and submit to the
General Partner an appraisal of the fair market value of the Hotel in
question, (c) the purchaser shall submit to the General Partner an
appraisal of the fair market value of the Hotel, such appraisal to be
submitted within the time limit provided by clause (b) of this proviso in
the case of the appraisal to be submitted by the appraiser selected by the
Limited Partners, and (d) the General Partner shall thereafter make formal
request for the required Consent and in connection therewith shall submit
to the Limited Partners the two appraisals contemplated by clauses (b) and
(c) of this proviso; provided further, however, that if the Limited
Partners do not select an appraiser as contemplated by clause (a) of this
proviso or if such appraiser does not supply an appraisal within the time
period required by clause (b) of this proviso, the General Partner will not
request Consent to the sale of the Hotel to any of the general partners or
any Affiliate of the general partners unless such request is accompanied by
three appraisals as to market value of the Hotel, one such appraisal to be
prepared by an appraiser selected by the purchaser and the other two
appraisals to be prepared by appraisers selected by the first such
appraiser, the cost of all such appraisals to be borne by the purchaser;
(iii) effect any amendment to any agreement, contract or arrangement with
the General Partner or any Affiliate which reduces the responsibilities or
duties of the General Partner as a general partner of the Partnership, or
any of its Affiliates or which increases the compensation payable to the
General Partner, or any of its Affiliates, or which adversely affects the
rights of the Limited Partners, or vote the Partnership's interest in
[either] the Harbor Beach [Partnership or the Warner Center] Partnership in
favor of any amendment to any agreement, contract or arrangement with any
general partner of [either] the Harbor Beach Partnership or [the Warner
Center Partnership or] any of its Affiliates which reduces the
responsibilities or duties of such general partner or which increases the
compensation payable to such general partner or any of its Affiliates, or
which adversely affects the rights of the Partnership as general partner of
the Harbor Beach Partnership [or limited partner of the Warner Center
Partnership];
(iv) incur material debt of the Partnership in excess of the limitations
set forth in Section 5.01C(ii), or vote the Partnership's [interests]
INTEREST in the Harbor Beach Partnership [or Warner Center Partnership] in
favor of the incurrence by the Harbor Beach [Partnership or Warner Center]
Partnership of such debt;
(v) agree to the addition of transient guest rooms at any Hotel unless
(a) the Hotel has had an average occupancy rate of at least 70% for a
consecutive period of at least 12 months and (b) the partnership has
obtained debt financing to finance the costs of the addition on a
nonrecourse basis as to all the partners of such partnership and the
Partnership (including the General Partner);
(vi) incur any debt of a partnership which does not provide by its terms
that it shall be nonrecourse as to all of the partners of the Partnerships;
(vii) take any action or fail to take any action which would result in
the Partnership withdrawing as a partner of the Harbor Beach Partnership
[or Warner Center Partnership];
(viii) transfer, sell, assign, pledge or otherwise dispose of all or any
portion of the Partnership's interest in the Harbor Beach Partnership [or
the Warner Center Partnership; provided, however, that if the General
Partner proposes to sell such Harbor Beach Partnership or Warner Center
Partnership interest] to the General Partner or a general partner of the
Harbor Beach Partnership or [the Warner Center Partnership or] an Affiliate
of any of the foregoing, [then] PROVIDED THAT the appraisal procedure in
Section 5.02B(ii) shall be followed;
(ix) make any election to continue beyond its term, discontinue or
dissolve any of the Partnerships; or
(x) admit any other Person as a general partner of the Partnership [or
the Warner Center Partnership].
C. Without the Consent of [the holders of] LIMITED PARTNERS HOLDING a
majority of the Units, the General Partner shall not have the authority to use
the cash flow of any one of the Partnerships on behalf of any other one of the
Partnerships unless necessary to pay any partnership obligation (except to pay
management fees)
D-21
which is not required to be funded by a guarantee of [Marriott] HOST or an
Affiliate of [Marriott] HOST, or if required to be funded by [Marriott] HOST
or an Affiliate of [Marriott] HOST, such guarantee has expired or [Marriott]
HOST or its Affiliate has not funded its guarantee with respect to such
obligation.
SECTION 5.03. DUTIES AND OBLIGATIONS OF THE GENERAL PARTNER.
A. The General Partner shall take all action which may be necessary or
appropriate for the development, maintenance, preservation and operation of
the properties and assets of any of the Partnerships in accordance with the
provisions of this Agreement and applicable laws and regulations (it being
understood and agreed, however, that the direct performance of day-to-day
management services for the Hotels and other properties of the Partnerships is
not an obligation of the General Partner as general partner of the
Partnership).
B. Except as provided in Section 4.12, the General Partner shall not (i)
directly or through a subsidiary engage in any business other than that of
acting as general partner of the Partnership [or general partner of the Warner
Center Partnership], (ii) pay dividends or make other distributions or
payments on its stock or incur any obligations if, as a result, its net worth
would be reduced below the requirement of Section 5.03C, (iii) merge or
consolidate with another corporation except [Marriott] HOST or a wholly owned
direct or indirect subsidiary of [Marriott] HOST, (iv) dissolve, or (v) borrow
any funds or become liable for any obligations of third parties except to the
extent that any such borrowings or liabilities are directly related to meeting
the financial needs of the Partnerships. Except as may be necessary to
alleviate the negative effect of any Affected Losses pursuant to Section 4.12,
the General Partner further agrees that so long as the General Partner is the
general partner of the Partnership, its parent company, Host, will not
transfer its stock of the General Partner except to a wholly owned, direct or
indirect, subsidiary of [Marriott and that Marriott will not sell the stock of
Host unless the stock of the General Partner is thereafter owned by Marriott
or a wholly owned, direct or indirect, subsidiary of Marriott.] HOST.
The General Partner shall devote to the Partnership such time as may be
necessary for the proper performance of its duties hereunder, but the officers
and directors of the General Partner shall not be required to devote their
full time to the performance of duties of the General Partner.
C. The General Partner shall use its reasonable best efforts to maintain at
all times a net worth at a level sufficient to meet all requirements of the
Code and applicable regulations, rulings and revenue procedures of the IRS and
to meet any future requirements set by Congress, the IRS, any agency of the
Federal government or the courts the decisions of which are binding on the
Partnership, to assure that the Partnership will be classified for Federal
income tax purposes as a partnership and not as an association taxable as a
corporation. These provisions are designed to ensure that the equity
capitalization of the General Partner will be available to meet any legal
obligations which the General Partner may have in its role as the general
partner of the Partnership.
D. The General Partner shall take such action as may be necessary or
appropriate in order to form or qualify the Partnership under the laws of any
jurisdiction in which the Partnership is doing business or owns property or in
which such formation or qualification is necessary in order to protect the
limited liability of the Limited Partners or in order to continue in effect
such formation or qualification. If required by law, the General Partner shall
file or cause to be filed for recordation in the office of the appropriate
authorities of the State of Delaware, and in the proper office or offices in
each other jurisdiction in which the Partnership is formed or qualified, such
certificates (including limited partnership and fictitious name certificates)
and other documents as are required by the applicable statutes, rules or
regulations of any such jurisdiction or as are necessary to reflect, if
required to reflect the identity of the Partners and the amounts of their
respective Capital Contributions.
E. The General Partner shall at all times conduct its affairs and the
affairs of the Partnership and all of its Affiliates in such a manner that
neither the Partnership nor any Partner nor any Affiliate of any Partner will
have any personal liability on any Partnership Debt, unless in the opinion of
the General Partner it would be in the best interests of the Limited Partners
for the General Partner to incur such personal liability for itself except
where Consent of a majority of the Limited Partners is required hereby. The
General Partner shall use its best
D-22
efforts, in the conduct of the Partnership's business, to put all suppliers
and other Persons with whom the Partnership does business on notice that the
Limited Partners are not liable for Partnership obligations, and all
agreements to which the Partnership is a party shall include a statement to
the effect that the Partnership is a limited partnership organized under the
[Delaware Revised Uniform Limited Partnership] Act; but the General Partner
shall not be liable to any Limited Partner for any failure to give such notice
to such suppliers or other Persons or to have any such agreement fail to
contain such statement.
F. The General Partner shall prepare or cause to be prepared and shall file
on or before the due date (or any extension thereof) any Federal, state or
local tax returns required to be filed by the Partnership. The General Partner
shall cause the Partnership to pay any taxes payable by the Partnership.
G. The General Partner shall be under a fiduciary duty to conduct the
affairs of the Partnership in accordance with the terms of this Agreement and
in a manner consistent with the purposes set forth in Section 2.03. The
General Partner shall be under a fiduciary duty to conduct the affairs of the
Partnership[,] OR the Harbor Beach Partnership [or the Warner Center
Partnership, to the extent permitted by the Warner Center Partnership
Agreement,] in the best interests of the Partnerships.
H. The General Partner shall use its best efforts to assure that the
Partnership shall not be deemed an investment company as such term is defined
in the Investment Company Act of 1940.
I. THE GENERAL PARTNER SHALL MONITOR THE TRANSFERS OF INTERESTS TO DETERMINE
(I) IF SUCH INTERESTS ARE BEING TRADED ON AN "ESTABLISHED SECURITIES MARKET"
OR A "SECONDARY MARKET (OR THE SUBSTANTIAL EQUIVALENT THEREOF)" WITHIN THE
MEANING OF SECTION 7704 OF THE CODE, AND (II) WHETHER ADDITIONAL TRANSFERS OF
INTERESTS WOULD RESULT IN THE PARTNERSHIP BEING UNABLE TO QUALIFY FOR AT LEAST
ONE OF THE "SAFE HARBORS" SET FORTH IN IRS NOTICE 88-75 (OR SUCH OTHER
GUIDANCE SUBSEQUENTLY PUBLISHED BY THE IRS SETTING FORTH SAFE HARBORS UNDER
WHICH INTERESTS WILL NOT BE TREATED AS "READILY TRADABLE ON A SECONDARY MARKET
(OR THE SUBSTANTIAL EQUIVALENT THEREOF)" WITHIN THE MEANING OF SECTION 7704 OF
THE CODE) (THE "SAFE HARBORS"). THE GENERAL PARTNER SHALL TAKE (AND CAUSE ITS
AFFILIATES TO TAKE) ALL STEPS REASONABLY NECESSARY OR APPROPRIATE TO PREVENT
ANY TRADING OF INTERESTS OR ANY RECOGNITION BY THE PARTNERSHIP OF TRANSFERS
MADE ON SUCH MARKETS AND, EXCEPT AS OTHERWISE PROVIDED HEREIN, TO ENSURE THAT
AT LEAST ONE OF THE SAFE HARBORS IS MET.
SECTION 5.04. COMPENSATION OF GENERAL PARTNER.
The General Partner shall not in such capacity receive any salary, fees,
profits or distributions except for such allocations to which it may be
entitled under Article Four, Section 5.06 or Article Eight [or pursuant to the
Warner Center Partnership Agreement]. Notwithstanding the foregoing, however,
the Partnership shall reimburse the General Partner for the cost of providing
any administrative or other services required or contemplated by this
Agreement.
SECTION 5.05. OTHER BUSINESS OF PARTNERS.
Any Limited Partner may engage independently or with others in other
business ventures of every nature and description. Nothing in this Agreement
shall be deemed to prohibit any Affiliate of the General Partner from dealing,
or otherwise engaging in business with Persons transacting business with the
Partnership[,] OR the Harbor Beach [Partnership or the Warner Center]
Partnership or from providing services relating to the purchase, sale,
financing, management, development or operation of hotels, motels, restaurants
or other food and lodging facilities and receiving compensation therefor.
Neither the Partnership[,] NOR the Harbor Beach [Partnership or the Warner
Center] Partnership nor any Partner shall have any right by virtue of this
Agreement or the partnership relationship created hereby in or to such other
ventures or activities or to the income or proceeds derived therefrom, and the
pursuit of such venture, even if competitive with the business of the
Partnership, shall not be deemed wrongful or improper. Neither the General
Partner nor any Affiliate of the General Partner shall be obligated to present
any particular opportunity to the Partnership even if such opportunity is of a
character which, if presented to the Partnership[,] OR the Harbor Beach
[Partnership or the Warner Center] Partnership,
D-23
could be taken by the Partnership[,] OR the Harbor Beach Partnership [or the
Warner Center Partnership], and any Affiliate of the General Partner shall
have the right to take for its own account (individually or as a trustee,
partner or fiduciary) or to recommend to others any such particular
opportunity.
SECTION 5.06. LIMITATION ON LIABILITY OF GENERAL PARTNER; INDEMNIFICATION.
A. The General Partner shall not be liable to the Partnership or any Limited
Partner because any taxing authority disallows or adjusts any deductions or
credits in the Partnership income tax return. The General Partner shall not be
liable for the return of the Capital Contributions of the Limited Partners or
for any portion thereof, it being expressly understood that any return of
capital shall be made solely from the assets of the Partnership; nor shall the
General Partner be required to pay to the Partnership or to any Limited
Partner any deficit in the Capital Account of any Partner upon dissolution or
otherwise.
B. The General Partner shall have no liability, responsibility or
accountability in damages or otherwise to any other Partner or to the
Partnership for, and the Partnership agrees to indemnify, pay, protect and
hold harmless the General Partner (on the demand of and to the satisfaction of
the General Partner and to the extent permitted by law) from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, proceedings, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, all costs and expenses of
defense, appeal and settlement of any and all suits, actions or proceedings
threatened or instituted against the General Partner or the Partnership and
all costs of investigations in connection therewith) which may be imposed on,
incurred by, or asserted against the General Partner or the Partnership in any
way relating to or arising out of, or alleged to relate to or arise out of,
any action or inaction on the part of the Partnership, or on the part of the
General Partner as the General Partner of the Partnership including any action
or inaction in connection with the General Partner acting as Tax Matters
Partner or Designated Person under Section 5.07; provided, that the General
Partner shall be liable, responsible and accountable, and the Partnership
shall not be liable to the General Partner for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, proceedings, costs, expenses or disbursements (including, without
limitation, all costs and expenses of defense, appeal and settlement of any
and all suits, actions or proceedings threatened or instituted against the
General Partner or the Partnership and all costs of investigation in
connection therewith) which a court of competent jurisdiction shall have
determined resulted primarily from the General Partner's own fraud,
negligence, or other breach of fiduciary duty to any of the Partnerships or
any partner of any of the Partnerships. The satisfaction of the obligations of
the Partnership under this Section 5.06 shall be from and limited to the
assets of the Partnership and no Limited Partner shall have any personal
liability on account thereof. The provisions of this indemnification shall
also extend to the officers, directors, employees or shareholders of the
General Partner for any action taken by them on behalf of the General Partner
pursuant to this Agreement.
C. The General Partner shall have no liability or responsibility hereunder
to make loans, advances or additional Capital Contributions to the Partnership
except as specified in Section 3.04 or Section 4.12 and except as may
otherwise be provided as a matter of law. However, to the extent the General
Partner advances any funds to meet any liabilities or obligations of the
Partnership, any such advances shall be deemed loans to the Partnership by the
General Partner and shall accrue interest per annum at one percentage point in
excess of the Prime Rate payable in arrears on the first day of each Fiscal
Quarter and such amounts shall be due and payable upon that date which is the
fifth anniversary of the date on which any such advances were made; provided,
however, that any and all such advances shall be prepaid out of any Cash
Available for Distribution to the Partners, upon the liquidation or
dissolution of the Partnership, or the sale of a Hotel and the receipt by the
Partnership of the proceeds of such sale.
D. Notwithstanding the foregoing, the General Partner shall not be
indemnified by the Partnership or any Limited Partner for liabilities arising
under Federal and state securities laws unless (i) there has been a successful
adjudication in favor of the General Partner on the merits of each count
involving securities law violations; or (ii) such claims against the General
Partner have been dismissed with prejudice on the merits by a court of
competent jurisdiction.
D-24
SECTION 5.07. DESIGNATION OF TAX MATTERS PARTNER AND DESIGNATED PERSON FOR
PURPOSES OF INVESTOR LIST.
A. The General Partner shall act as the Tax Matters Partner of the
Partnership, as provided in regulations pursuant to Section 6231 of the Code
and as the Designated Person for purposes of maintaining the Investor List.
Each Partner hereby consents to such designation and agrees to execute,
certify, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents as may be deemed necessary or appropriate to
evidence such consent.
B. To the extent and in the manner provided by applicable Code sections and
regulations thereunder, the Tax Matters Partner shall furnish the name,
address, profits interest and taxpayer identification number of each Partner
to the IRS.
C. To the extent and in the manner provided by applicable Code sections and
regulations thereunder, the Tax Matters Partner shall inform each Partner of
administrative or judicial proceedings for the adjustment of Partnership items
required to be taken into account by a Partner for income tax purposes (such
administrative proceedings being referred to as a "tax audit" and such
judicial proceedings being referred to as "judicial review").
D. The Tax Matters Partner is authorized, but not required:
(a) to enter into any settlement with the IRS with respect to any tax
audit or judicial review, and in the settlement agreement the Tax Matters
Partner may expressly state that such agreement shall bind all Partners
except that such settlement agreement shall not bind any Partner who
(within the time prescribed pursuant to the Code and regulations
thereunder) files a statement with the IRS providing that the Tax Matters
Partner shall not have the authority to enter into a settlement agreement
on behalf of such Partner;
(b) in the event that a notice of a final administrative adjustment at
the Partnership level of any item required to be taken into account by a
Partner for tax purposes (a "final adjustment") is mailed to the Tax
Matters Partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court or
the United States Claims Court, or the filing of a complaint for refund
with the District Court of the United States for the district in which the
Partnership's principal place of business is located;
(c) to intervene in any action brought by any other Partner for judicial
review of a final adjustment;
(d) to file a request for an administrative adjustment with the IRS at
any time and, if any part of such request is not allowed by the IRS to file
an appropriate pleading (petition or complaint) for judicial review with
respect to such request;
(e) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be taken
into account by a Partner for tax purposes, or an item affected by such
item; and
(f) to take any other action on behalf of the Partners or the Partnership
in connection with any tax audit or judicial review proceeding to the
extent permitted by applicable law or regulations.
E. The Partnership shall indemnify and reimburse the Tax Matters Partner for
all expenses, including legal and accounting fees (as such fees are incurred),
claims, liabilities, losses and damages incurred in connection with any tax
audit or judicial review proceeding with respect to the tax liability of the
Partners, the payment of all such expense shall be made before the
distribution of Cash Available for Distribution to the Partners. Neither the
General Partner nor any of its Affiliates nor other person shall be obligated
to provide funds for such purpose.
The taking of any action and the incurring of any expense by the Tax Matters
Partner in connection with any such proceeding, except to the extent required
by law, is a matter in the sole discretion of the Tax Matters Partner and the
provisions on limitations of liability of the General Partner and
indemnification set forth in Section 5.06 of this Agreement shall be fully
applicable to the Tax Matters Partner in its capacity as such.
D-25
ARTICLE SIX
WITHDRAWAL AND REMOVAL
OF GENERAL PARTNER
SECTION 6.01. LIMITATION ON VOLUNTARY WITHDRAWAL.
Except as permitted in Section 5.02A, the General Partner shall not retire
or withdraw voluntarily from the Partnership or sell, transfer or assign its
entire general partnership Interest or any portion thereof.
SECTION 6.02. BANKRUPTCY OR DISSOLUTION OF THE GENERAL PARTNER.
A. In the event of the bankruptcy or dissolution of the General Partner, the
General Partner shall immediately cease to be the General Partner and its
Interest shall terminate; provided, however, that such termination shall not
affect any rights or liabilities of the General Partner which matured prior to
such event, or the value, if any, at the time of such event of the Interest of
the General Partner.
B. Except as provided in Section 6.05, in the event of such bankruptcy or
dissolution of the General Partner, the Partnership shall be dissolved.
SECTION 6.03. LIABILITY OF WITHDRAWN GENERAL PARTNER.
If the General Partner shall cease to be General Partner of the Partnership,
it shall be and remain liable for all obligations and liabilities incurred by
it as General Partner prior to the time such withdrawal shall have become
effective, but it shall be free of any obligation or liability incurred on
account of the activities of the Partnership from and after the time such
withdrawal shall have become effective.
SECTION 6.04. REMOVAL OF GENERAL PARTNER.
In the event of the removal of the General Partner pursuant to Section
10.02B, the removed General Partner's Interest as General Partner in the
Partnership shall become a limited partnership interest but without any voting
or consensual rights which other Limited Partners may have.
SECTION 6.05. SUBSTITUTE GENERAL PARTNER.
If the General Partner shall withdraw, be removed, dissolves or becomes
bankrupt, it shall promptly notify the Limited Partners and thereafter the
Limited Partners may elect by written vote of [holders of] LIMITED PARTNERS
HOLDING all of the Units within 90 days of such withdrawal, removal,
dissolution or bankruptcy to continue the Partnership and appoint a substitute
general partner effective as of the withdrawal, removal, dissolution or
bankruptcy of the retiring General Partner; provided, however, that if the
Partnership is advised by legal counsel that an election by vote of LIMITED
PARTNERS HOLDING less than [the holders of] all of the Units would not, for
Federal tax purposes, cause the Partnership to be treated as an association
taxable as a corporation, then, in such event, the vote required for such
election shall be such lesser vote but in no event may such election be made
by vote of LIMITED PARTNERS HOLDING less than [the holders of] a majority of
the Units. [For purposes of the proviso to the preceding sentence only, if
less than the holders of all of the Units are entitled to vote to continue the
Partnership and appoint a substitute general partner, those Limited Partners
who do not vote or who vote against continuation and against appointment of a
substitute general partner will be deemed to have voted in favor of
continuation.]
ARTICLE SEVEN
ASSIGNABILITY OF UNITS
SECTION 7.01. RESTRICTIONS ON ASSIGNMENTS.
After the admission to the Partnership of the Limited Partners, no Limited
Partner shall have the right to assign any Interest except with the Consent of
the General Partner, the giving or withholding of which is exclusively within
the discretion of the General Partner, and provided further that:
D-26
A. No assignment of any Interest may be made other than on the first day of
a Fiscal Quarter; PROVIDED, HOWEVER, THAT THIS RESTRICTION ON THE TIMING OF
ASSIGNMENT SHALL NOT APPLY TO (I) ANY TRANSFER OF UNITS (OR FRACTIONS OF
UNITS) TO MHP ACQUISITION CORP. PURSUANT TO MHP ACQUISITION CORP.'S OFFER TO
PURCHASE FOR CASH 450 OUTSTANDING UNITS OF LIMITED PARTNERSHIP INTEREST, DATED
NOVEMBER 19, 1996 OR (II) ANY SUBSEQUENT ASSIGNMENT OF ANY UNITS BY MHP
ACQUISITION CORP.
B. No assignment of any Interest may be made if the assignment is pursuant
to a sale or exchange of the Interest and if the Interest sought to be
assigned, when added to the total of all other Interests assigned within a
period of 12 consecutive months prior thereto, would, in the opinion of legal
counsel for the Partnership, result in the Partnership being deemed to have
been terminated within the meaning of Section 708 of the Code. The General
Partner shall give Notification to all Limited Partners in the event that
sales or exchanges should be suspended for such reason. Any deferred sales or
exchanges shall be made (in chronological order to the extent practicable) as
of the first day of a Fiscal Quarter after the end of any such 12-month
period, subject to the provisions of this Article Seven.
C. The General Partner may require that any assignment of an Interest in the
Partnership be made only if the assignor or assignee provides an opinion of
counsel that such assignment would not require filing of a registration
statement under the Securities Act of 1933 or would otherwise not be in
violation of any Federal or state securities or Blue Sky laws (including any
investment suitability standards) applicable to the Partnership.
D. No purported assignment [by a Limited Partner](I) BY THE HOLDER of any
Unit after which the assignor or the assignee would hold a fraction of a Unit
(other than a one-half Unit)[,] OR (II) BY THE HOLDER OF A FRACTION OF A UNIT
OF LESS THAN ALL OF SUCH HOLDER'S ENTIRE FRACTIONAL INTEREST will be permitted
or recognized (except for assignments by gift, inheritance or family
dissolution or assignments to Affiliates of the assignor). THE PRECEDING
SENTENCE SHALL NOT APPLY TO ANY TRANSFER OF UNITS (OR FRACTIONS OF UNITS) TO
MHP ACQUISITION CORP. PURSUANT TO MHP ACQUISITION CORP.'S OFFER TO PURCHASE
FOR CASH 450 OUTSTANDING UNITS OF LIMITED PARTNERSHIP INTEREST, DATED NOVEMBER
19, 1996, WHICH TRANSFERS SHALL BE CONSIDERED TO BE IN ACCORDANCE WITH THIS
AGREEMENT.
E. NO TRANSFER, ASSIGNMENT OR NEGOTIATION ON ANY DATE OF AN [E. No
assignment of any] Interest may be made TO ANY PERSON if[,] in the opinion of
legal counsel [to] FOR the Partnership, it would result in the Partnership
being treated as an association taxable as a corporation BASED ON A FAILURE TO
QUALIFY FOR AT LEAST ONE OF THE SAFE HARBORS WITHIN THE MEANING OF SECTION
7704 OF THE CODE.
F. NO PURPORTED TRANSFER OR ASSIGNMENT OF ANY INTEREST, OR ANY BENEFICIAL
INTEREST THEREIN, MAY BE MADE, AND ANY SUCH PURPORTED TRANSFER WILL BE VOID AB
INITIO IF, AS A RESULT OF SUCH TRANSFER, THE PARTNERSHIP WOULD BE UNABLE TO
SATISFY AT LEAST ONE OF THE SAFE HARBORS. NOTWITHSTANDING THE FOREGOING, IF
THE PARTNERSHIP SHALL HAVE RECEIVED A FAVORABLE IRS RULING OR OPINION OF
COUNSEL SATISFACTORY TO THE GENERAL PARTNER TO THE EFFECT THAT SUCH TRANSFER
WILL NOT RESULT IN THE PARTNERSHIP BEING CLASSIFIED AS A "PUBLICLY TRADED
PARTNERSHIP" WITHIN THE MEANING OF SECTION 7704 OF THE CODE, THIS SECTION
7.01F SHALL NOT APPLY TO SUCH TRANSFER.
G. NO ASSIGNMENT OF ANY INTEREST MAY BE MADE TO ANY PERSON UNLESS SUCH
PERSON AGREES IN WRITING THAT SUCH PERSON WILL NOT, DIRECTLY OR INDIRECTLY,
CREATE FOR THE UNITS, OR FACILITATE THE TRADING OF UNITS ON, A "SECONDARY
MARKET (OR THE SUBSTANTIAL EQUIVALENT THEREOF)," WITHIN THE MEANING OF SECTION
7704 OF THE CODE.
H. THE GENERAL PARTNER MAY PROHIBIT TRANSFERS OF UNITS FOR THE REMAINDER OF
A TAXABLE YEAR, NOTWITHSTANDING THAT ANY SUCH TRANSFER WOULD NOT IN ITSELF
VIOLATE ANY RESTRICTIONS ON TRANSFERS CONTAINED IN THIS SECTION 7.01, IF THE
GENERAL PARTNER, IN GOOD FAITH AND BASED UPON THE ADVICE OF COUNSEL TO THE
PARTNERSHIP, DETERMINES THAT SUCH ACTION IS NECESSARY OR ADVISABLE IN ORDER TO
PROTECT THE PARTNERSHIP FROM POSSIBLE FAILURE TO MEET AT LEAST ONE OF THE SAFE
HARBORS. NO PURPORTED TRANSFER OR ASSIGNMENT SHALL BE OF ANY EFFECT UNLESS ALL
OF THE FOREGOING CONDITIONS HAVE BEEN SATISFIED. THE GENERAL PARTNER IS
AUTHORIZED TO
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IMPOSE ANY OTHER LIMITATIONS OR RESTRICTIONS ON THE ASSIGNMENT OF INTEREST TO
THE EXTENT THAT IT, IN THE EXERCISE OF ITS REASONABLE DISCRETION AND BASED
UPON THE ADVICE OF COUNSEL TO THE PARTNERSHIP, DETERMINES SUCH FURTHER
LIMITATIONS OR RESTRICTIONS ARE NECESSARY OR ADVISABLE TO PROTECT THE
PARTNERSHIP FROM BEING CONSIDERED A "PUBLICLY TRADED PARTNERSHIP," WITHIN THE
MEANING OF SECTION 7704 OF THE CODE. THE GENERAL PARTNER SHALL, FROM TIME TO
TIME, REVIEW THE LIMITATIONS AND RESTRICTIONS ON THE ASSIGNMENT OF INTERESTS
THEN IN EFFECT AND THE FEDERAL INCOME TAX LAW, REGULATIONS, AND RULINGS
APPLICABLE THERETO, AND SHALL ELIMINATE OR MODIFY ANY SUCH LIMITATION OR
RESTRICTION TO MAKE IT LESS RESTRICTIVE ON ASSIGNMENT OF INTERESTS IF THE
PARTNERSHIP SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT SUCH ELIMINATION OR
MODIFICATION MAY BE MADE WITHOUT CAUSING THE PARTNERSHIP TO FAIL TO MEET AT
LEAST ONE OF THE SAFE HARBORS OR BE CONSIDERED AN ASSOCIATION TAXABLE AS A
CORPORATION UNDER THE APPLICABLE FEDERAL INCOME TAX LAWS.
I[.F]. No assignment of any Interest may be made if, in the opinion of legal
counsel to the Partnership, it would result in the Partnership[,] OR THE
Harbor Beach [Partnership or Warner Center] Partnership not being able to
obtain or continue in effect any license permitting the service or sale of
alcoholic beverages in a Hotel.
SECTION 7.02. ASSIGNEES AND SUBSTITUTED LIMITED PARTNERS.
A. If a Limited Partner dies, the executor, administrator or trustee, or, if
[such] A LIMITED Partner is adjudicated incompetent or insane, the committee,
guardian or conservator, or, if [such] A LIMITED Partner becomes bankrupt, the
trustee or receiver of the estate, shall have all the rights of a Limited
Partner for the purpose of settling or managing the estate and such power as
the decedent or incompetent possessed to assign all or any part of the Units
and to join with the assignee thereof in satisfying conditions precedent to
such assignee becoming a Substituted Limited Partner. The death, dissolution,
adjudication of incompetence or bankruptcy of a Limited Partner shall not
dissolve the Partnership.
B. [The] EXCEPT FOR AN ASSIGNMENT PERMITTED BY THE PROVISO TO SECTION 7.01A,
THE Partnership need not recognize for any purpose any assignment of any
Interest unless there shall have been filed with the Partnership a duly
executed and acknowledged counterpart of the instrument making such assignment
signed by both the assignor and the assignee and such instrument evidences the
written acceptance by the assignee of all of the terms and provisions of this
Agreement and represents that such assignment was made in accordance with all
applicable laws and regulations (including investment suitability
requirements).
C. Limited Partners who shall assign all their Interests shall cease to be
Limited Partners of the Partnership except that unless and until a Substituted
Limited Partner is admitted in his stead, the assigning Limited Partner shall
retain the statutory rights of an assignor of limited partnership interest
under the [Delaware Revised Uniform Limited Partnership] Act.
D. Any Person who is an assignee of any of the Interests of a Limited
Partner and who has satisfied the requirements of Section 7.01 and Section
7.02B shall become a Substituted Limited Partner when the General Partner has
accepted such Person as a Limited Partner of the Partnership and the books and
records of the Partnership reflect such Person as admitted to the Partnership
as a Limited Partner; and when such Person shall have satisfied the conditions
of Section 11.02A and shall have paid all reasonable legal fees and filing
costs in connection with the substitution as a Limited Partner; provided,
however, that the General Partner's consent to the substitution of any
assignee of an Interest as a Substituted Limited Partner may be granted or
withheld in its sole discretion.
E. Any Person who is the assignee of any of the Interest of a Limited
Partner, but who does not become a Substituted Limited Partner and desires to
make a further assignment of any such Interests, shall be subject to all the
provisions of this Article Seven to the same extent and in the same manner as
any Limited Partner desiring to make an assignment of the Interests.
F. There shall be no restrictions on the assignments of Interests except as
provided in Article Six or this Article Seven.
D-28
ARTICLE EIGHT
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
SECTION 8.01. EVENTS CAUSING DISSOLUTION.
A. The Partnership shall be dissolved upon the happening of any of the
following events:
(i) the bankruptcy of the Partnership;
(ii) the withdrawal or removal of the General Partner, except upon the
election of a substitute general partner by the Limited Partners pursuant
to Section 6.05;
(iii) the dissolution or bankruptcy of the General Partner, except upon
the election of a substitute General Partner by the Limited Partners
pursuant to Section 6.05;
(iv) the sale or other disposition of all of the property of the
Partnership;
(v) the happening of any other event [cawing] CAUSING the dissolution of
the Partnership under the laws of the State of Delaware; or
(vi) the expiration of the term of the Partnership.
Dissolution of the Partnership shall be effective on the day on which the
event occurs giving rise to the dissolution. The Partnership shall not
terminate until the assets of the Partnership shall have been liquidated as
provided in Section 8.02. Notwithstanding the dissolution of the Partnership,
prior to the termination of the Partnership, as aforesaid, the business of the
Partnership and the affairs of the Partners as such, shall continue to be
governed by this Agreement.
B. Partners shall look solely to the assets of the Partnership for all
distributions with respect to the Partnership and their Capital Contribution
thereto, and shall have no recourse therefor (upon dissolution or otherwise)
against the General Partner or any other Limited Partner.
SECTION 8.02. LIQUIDATION.
A. Upon dissolution of the Partnership, the General Partner shall liquidate
the assets of the Partnership and the proceeds of such liquidation shall be
applied and distributed in the following order of priority:
(i) to the payments of Partnership Debt and all other liabilities of the
Partnership owing to third parties;
(ii) to the payment of any loans or advances that may have been made by
any of the Partners to the partnership;
(iii) to the payment of the expenses of the liquidation; and
(iv) pro rata to the General Partner and to the Limited Partners to
reduce any net balances then existing in the Capital Accounts of the
Partners.
B. Notwithstanding the foregoing, in the event the General Partner shall
determine that an immediate sale of all or part of the Partnership assets
would cause undue loss to the Partners, the General Partner, in order to avoid
such loss, may, after having given Notification to all the Limited Partners,
to the extent not then prohibited by the limited partnership act of any
jurisdiction in which the Partnership is then formed or qualified and
applicable in the circumstances, either defer liquidation of and withhold from
distribution for a reasonable time any assets of the Partnership except those
necessary to satisfy the Partnership's debts and obligations, or distribute
the assets of the Partnership in kind.
C. If any assets of the Partnership are to be distributed in kind, such
assets shall be distributed on the basis of the fair market value thereof, and
any Partner entitled to any interest in such assets shall receive such
interest therein as a tenant-in-common with all other Partners so entitled.
The fair market value of such assets shall be determined by an independent
appraiser to be selected by random number from a list of three qualified
appraisers obtained by the General Partner from the American Institute of Real
Estate Appraisers.
D-29
D. The General Partner shall cause the cancellation of the Partnership's
certificate of limited partnership upon completion of winding up the business
of the Partnership and shall cause the liquidation and distribution of all the
Partnership's assets.
ARTICLE NINE
BOOKS AND RECORDS, ACCOUNTING,
REPORTS, TAX ELECTIONS, ETC.
SECTION 9.01. BOOKS AND RECORDS.
The books and records of the Partnership shall be maintained by the General
Partner in accordance with applicable law at the principal office of the
Partnership and shall be available for examination at such location by any
Partner or such Partner's duly authorized representatives at any and all
reasonable times. Any Partner, upon paying the costs of collating, duplication
and mailing, shall be entitled, upon written application to the General
Partner, to a copy of the list of the names and addresses of the Limited
Partners and the number of Units owned by each of them.
SECTION 9.02. ACCOUNTING AND FISCAL YEAR.
The books of the Partnership will be kept on the accrual basis. The
Partnership will report its operations for tax purposes on the accrual method.
The Fiscal Year of the Partnership shall end December 31 in each year.
SECTION 9.03. BANK ACCOUNTS AND INVESTMENTS.
The bank accounts of the Partnership shall be maintained in such banking
institutions as the General Partner shall determine, and withdrawals shall be
made only in the regular course of Partnership business on such signature or
signatures as the General Partner may determine. All deposits and other funds
not needed in the operation of the business or not yet invested may be
invested as provided in Section 5.01C(v) or in U.S. government securities,
securities issued or guaranteed by U.S. government agencies, securities issued
or guaranteed by states or municipalities, certificates of deposit and time or
demand deposits in commercial banks, bankers' acceptances, savings and loan
association deposits or deposits in members of the Federal Home Loan Bank
System. The funds of the Partners shall not be commingled with the funds of
any other Person.
SECTION 9.04. REPORTS.
The General Partner shall deliver to each Partner the following:
A. As soon as practicable but in no event later than 75 days after the end
of each Fiscal Year of the Partnership, such information as shall be necessary
for the preparation by such Partner of a Federal income tax return, and state
income or other tax returns with regard to the jurisdictions in which the
Hotels are located. Such information shall include computation of the
distributions to such Partner and the allocation to such Partner of the Net
Profits or Net Losses, as the case may be, the Gain or Loss recognized by or
allocated to the Partnership on the sale of a Hotel or other Partnership
properties during such Fiscal Year; and
B. Within 120 days after the end of each Fiscal Year of the Partnership, a
statement prepared by the General Partner on an accrual basis of accounting
which statement is to be audited and certified by a firm of independent public
accountants selected by the General Partner, setting forth its opinion as to
the items in clauses (i) and (ii) below, which statement shall set forth the
following:
(i) a statement of assets, liabilities and Partners' capital, a statement
of income and expenses on an accrual basis and a statement of [sources and
uses of funds] CASH FLOWS, and a statement of changes in Partners' capital
all such statements to be on an aggregate basis with the Harbor Beach
Partnership [and the Warner Canter Partnership];
(ii) the balances in the Capital Accounts of the Limited Partners in the
aggregate and of the General Partner;
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(iii) a report (which need not be audited) summarizing the fees,
commissions, compensation and other remuneration and reimbursed expenses
paid by the Partnerships for such Fiscal Year to the General Partner or any
Affiliate of the General Partner or the general partners of the Harbor
Beach Partnership or [the Warner Canter Partnership or] any Affiliate of
such general partners and the services performed; and
(iv) a budget (which need not be audited) setting forth the expected Net
Profits and Net Losses per Unit, for the current Fiscal Year.
C. Within 75 days after the end of each of the first three Fiscal Quarters
of each Fiscal Year of the Partnership, the General Partner shall send to each
Person who was a Limited Partner at any time during the Fiscal Quarter then
ended (i) a balance sheet (which need not be audited) and (ii) a profit and
loss statement (which need not be audited) and any other pertinent information
regarding the Partnership and its activities during the period covered by the
report as required by Form 10-Q under the Securities Exchange Act of 1934.
D. Concurrent with the report sent pursuant to Section 9.04C for the third
Fiscal Quarter of each Fiscal Year, the Partners will be furnished an estimate
of Net Profits or Net Losses per Unit for such Fiscal Year.
E. The General Partner may prepare and deliver to the Limited Partners from
time to time in its sole discretion during each Fiscal Year, in connection
with cash distributions, unaudited statements showing the results of
operations of the Partnerships to the date of such statement.
F. The General Partner shall prepare and file such registration statements,
annual reports, quarterly reports, current reports, proxy statements and other
documents, if any, as may be required under the Securities Exchange Act of
1934 and the rules and regulations of the Securities and Exchange Commission
thereunder.
SECTION 9.05. TAX DEPRECIATION AND ELECTIONS.
A. With respect to all depreciable assets of the Partnership, the General
Partner may, in its sole discretion, elect to use such depreciation method for
Federal tax purposes as it deems appropriate and in the best interest of the
Partners generally.
B. The General Partner shall be permitted in any Fiscal Year to make an
election under section 754 of the Code and such other tax elections as it may
from time to time deem necessary or appropriate.
SECTION 9.06. INTERIM CLOSING OF THE BOOKS.
There shall be an interim closing of the books of account of the Partnership
(i) at the date of the admission to the Partnership of THE ORIGINAL Limited
Partners [as of the date of this Agreement], (ii) at any time a taxable year
of the Partnership ends pursuant to the Code and (iii) at such other times as
the General Partner shall determine are required by good accounting practice
or may be appropriate under the circumstances.
ARTICLE TEN
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS
SECTION 10.01. MEETINGS.
A. Meetings of the Limited Partners for any purpose may be called by the
General Partner and shall be called by the General Partner upon receipt of a
request in writing signed by [holders of] LIMITED PARTNERS HOLDING 10% or more
of the Units. Notification of any such meeting shall be sent to the Limited
Partners within ten business days after receipt of such a request. Such
request or any notification from the General Partner shall state the purpose
of the proposed meeting and the matters proposed to be acted upon thereat.
Such meeting may be held at the principal office of the Partnership or at such
other location within the United States as the General Partner may deem
appropriate or desirable. In addition, the General Partner may, and, upon
receipt of a request in writing signed by [holders of] LIMITED PARTNERS
HOLDING 25% or more of the Units, the General Partner shall
D-31
submit any matter (upon which the Limited Partners are entitled to act) to the
Limited Partners for a vote by written Consent without a meeting.
B. Notification of any such meeting shall be given not less than 10 days nor
more than 60 days before the date of the meeting, to the Limited Partners at
their record addresses, or at such other address which they may have furnished
in writing to the General Partner. Such Notification shall be in writing, and
shall state the place, date, hour and purpose of the meeting, and shall
indicate that it is being issued at or by the direction of the Partner or
Partners calling the meeting. If a meeting is adjourned to another time or
place, and if any announcement of the adjournment of time or place is made at
the meeting, it shall not be necessary to give Notification of the adjourned
meeting. The presence in person or by proxy of [holders of] LIMITED PARTNERS
HOLDING a majority of the Units (WHICH, IN THE CASE OF AN INTERESTED
TRANSACTION, MUST INCLUDE A MAJORITY OF THE UNITS HELD BY LIMITED PARTNERS
OTHER THAN THE GENERAL PARTNER AND ITS AFFILIATES) shall constitute a quorum
at all meetings of the Limited Partners; provided, however, that if there be
no such quorum, [holders of] LIMITED PARTNERS HOLDING a majority of the Units
so present or so represented may adjourn the meeting from time to time without
further notice, until a quorum shall have been obtained. No Notification of
the time, place or purpose of any meeting of Limited Partners need be given to
any Limited Partner who attends in person or is represented by proxy (except
when a Limited Partner attends a meeting for the express purpose of objecting
at the beginning of the meeting to the transaction of any business on the
ground that the meeting is not lawfully called or convened), or to any Limited
Partner entitled to such notice who, in a writing executed and filed with the
records of the meeting, either before or after the time thereof, waives such
Notification.
C. For the purpose of determining the Limited Partners entitled to vote at
any meeting of the Partnership or any adjournment thereof, OR ENTITLED TO
CONSENT TO ANY MATTER UPON WHICH THE LIMITED PARTNERS ARE ENTITLED TO ACT BY
WRITTEN CONSENT WITHOUT A MEETING, the General Partner or the Limited Partners
requesting such meeting may fix, in advance, a date as the record date for any
such determination of Limited Partners. Such date shall be not more than 60
days nor less than 10 days before any such meeting.
D. The Limited Partners may authorize any Person to act for them by proxy in
all matters in which a Limited Partner is entitled to participate, whether by
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Limited Partner or the Partner's attorney-in-fact.
No proxy shall be valid beyond the period permitted by law. Every proxy shall
be revocable at the pleasure of the Limited Partner executing it.
E. At each meeting of Limited Partners, the General Partner shall appoint
such officers and adopt such rules for the conduct of such meeting as the
General Partner shall deem appropriate.
F. As and to the extent that the Securities Exchange Act of 1934 is
applicable to the procedural rules governing any meeting of Limited Partners
(including any proxies or proxy statement related thereto), the provisions of
such Act shall take precedence over any provision of this Section 10.01 which
may be inconsistent therewith.
G. If any consents, determinations or votes of Limited Partners, with or
without a meeting, are to be requested, made or taken[,] WITH RESPECT TO AN
INTERESTED TRANSACTION, UNITS HELD BY the General Partner or any Affiliate
shall [not be entitled to any voting, determinative or consensual rights with
respect to any Interests owned or controlled by any of them nor shall any such
Interests be taken into account in determining the presence or absence of a
quorum.] BE VOTED IN THE SAME MANNER AS THE VOTE OF LIMITED PARTNERS HOLDING,
IN THEIR CAPACITY AS LIMITED PARTNERS AND NOT AS ASSIGNEES, A MAJORITY OF THE
OUTSTANDING UNITS ACTUALLY VOTING ON THE INTERESTED TRANSACTION (OTHER THAN
THOSE UNITS HELD BY THE GENERAL PARTNER OR ANY OF ITS AFFILIATES); PROVIDED,
HOWEVER, THAT NO INTERESTED TRANSACTION SHALL BE DEEMED TO BE APPROVED UNLESS
A MAJORITY OF THE UNITS HELD BY LIMITED PARTNERS OTHER THAN THE GENERAL
PARTNER AND ITS AFFILIATES ARE PRESENT IN PERSON OR BY PROXY AT THE MEETING AT
WHICH SUCH INTERESTED TRANSACTION IS CONSIDERED, OR, IF WRITTEN CONSENTS ARE
SOUGHT WITH RESPECT TO SUCH INTERESTED TRANSACTION, CONSENTS REPRESENTING A
MAJORITY OF THE UNITS HELD BY LIMITED PARTNERS OTHER THAN THE GENERAL PARTNER
AND ITS AFFILIATES ARE RETURNED AND NOT WITHDRAWN PRIOR
D-32
TO THE EXPIRATION OF THE CONSENT SOLICITATION PERIOD. WITH RESPECT TO ALL
MATTERS OTHER THAN AN INTERESTED TRANSACTION, THE GENERAL PARTNER AND ITS
AFFILIATES MAY VOTE UNITS HELD BY THEM AS LIMITED PARTNERS IN THEIR SOLE AND
ABSOLUTE DISCRETION.
SECTION 10.02. SPECIAL VOTING RIGHTS OF LIMITED PARTNERS.
A. If at any time any agreement (including the Management [Agreements and
Operating Lease)] AGREEMENT, IF THE MANAGER IS AN AFFILIATE OF THE GENERAL
PARTNER, AND THE OPERATING LEASE, IF MARRIOTT HOTEL SERVICES, INC. IS AN
AFFILIATE OF THE GENERAL PARTNER) pursuant to which operating management of
any property of the Partnership[,] OR the Harbor Beach [Partnership or the
Warner Center] Partnership is vested in the General Partner or any general
partner of the other [two Partnerships] PARTNERSHIP which is an Affiliate of
the General Partner and if pursuant to the terms of such agreement the
Partnership[,] OR the Harbor Beach [Partnership or the Warner Center]
Partnership has a right to terminate such agreement as a result of the failure
of the operation of such property to attain any economic objective, the
Limited Partners, without the Consent of the General Partner, may, upon the
affirmative vote of [the holders of] LIMITED PARTNERS HOLDING a majority of
the Units, take action to exercise the right of the Partnership, acting for
itself or as a general partner of the Harbor Beach Partnership [or a limited
partner of the Warner Center Partnership], to terminate such agreement.
B. To the extent not inconsistent with applicable law, in the event that the
General Partner has breached its obligations under Section 5.03B or has
committed and not, within a reasonable period of time, remedied any act of
fraud, bad faith, gross negligence or breach of fiduciary duty in carrying out
its duties as the general partner, [holders of] LIMITED PARTNERS HOLDING a
majority of the Units may, without the Consent of the General Partner, vote
to:
(i) amend this Agreement; provided, however, that the allocable
percentage interests of the Partners in the allocations set forth in
Article [IV] FOUR may not be altered, and no new material obligation may be
imposed on any Partner without such Partner's approval;
(ii) dissolve the Partnership; or
(iii) remove the General Partner, provided that the Partnership is
continued in the manner set forth in Section 6.05.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
SECTION 11.01. APPOINTMENT OF GENERAL PARTNER AS ATTORNEY-IN-FACT.
A. Each Limited Partner, including each Substituted Limited Partner, by the
execution and delivery of the Subscription Agreement or the Partnership
Agreement, irrevocably constitutes and appoints the General Partner and the
President, any Vice President, Secretary, Treasurer, Assistant Secretary and
Assistant Treasurer of any corporate General Partner as his true and lawful
attorney-in-fact with full power and authority in such Limited Partner's name,
place and stead to execute, acknowledge, deliver, swear to, file and record at
the appropriate public offices such documents as may be necessary or
appropriate to carry out the provisions of this Agreement, including but not
limited to:
(i) all certificates and other instruments, including counterparts of
this Agreement, and any amendment or restatement thereof, which the General
Partner deems appropriate to form, qualify or continue the Partnership as a
limited partnership (or a partnership in which the Limited Partners will
have limited liability comparable to that provided by the [Delaware Revised
Uniform Limited Partnership] Act) in the jurisdictions in which the
Partnership may conduct business or in which such formation, qualification
or continuation is, in the opinion of the General Partner, necessary or
desirable to protect the limited liability of the Limited Partners;
(ii) all amendments to this Agreement adopted in accordance with the
terms hereof and all instruments which the General Partner deems
appropriate to reflect a change or modification of the Agreement in
accordance with the terms hereof;[and]
D-33
(iii) all documents or instruments which the General Partner [deem] DEEMS
appropriate to reflect the admission of a Limited Partner (including any
Substituted Limited Partner), the dissolution of the Partnership, sales or
transfers of Partnership property, sales or transfers of Partnership
Interests, or the initial amount or increase or reduction in amount of any
Partner's Capital Contribution or reduction in any Partner's Capital
Account;
(iv) any instrument or document requested by the Partnership or any
purchaser of the Interest of a Defaulting Limited Partner under the
provisions of Section 3.05 of this Agreement; and
(v) all documents, including but not limited to financing statements,
necessary or appropriate to perfect and continue the Partnership's security
interest in such Limited Partner's Interest.
B. The appointment by all Limited Partners of the General Partner and the
aforesaid officers of any corporate General Partner as attorney-in-fact shall
be deemed to be a power coupled with an interest, in recognition of the fact
that each of the Partners under this Agreement will be relying upon the power
of the General Partner to act as contemplated by this Agreement in any filing
and other action by it on behalf of the Partnership, and shall survive, and
not be affected by the bankruptcy, death, incapacity, disability, adjudication
of incompetence or insanity, or dissolution of any Person hereby giving such
power and the transfer or assignment of all or any part of the Units or
Interest of such Person; provided, however, that in the event of the transfer
by a Limited Partner of all of such Limited Partner's Interests, the foregoing
power of attorney of a transferor Partner shall survive such transfer only
until such time as the transferee shall have been admitted to the Partnership
as a Substituted Limited Partner and all required documents and instruments
shall have been duly executed, filed and recorded to effect such substitution.
SECTION 11.02. AMENDMENTS.
A. Each Limited Partner, Substituted Limited Partner and any successor
General Partner shall become a signatory hereof by signing such number of
counterpart signature pages to this Agreement and such other instrument or
instruments, and in such manner, as the General Partner shall determine. By so
signing, each Limited Partner, Substituted Limited Partner or successor
General Partner, as the case may be, shall be deemed to have adopted, and to
have agreed to be bound by all the provisions of, this Agreement subject to
the provisions of Section 7.02D.
B. In addition to the amendments otherwise authorized herein, amendments may
be made to this Agreement from time to time by the General Partner with the
Consent of the holders of a majority of the Units; provided, however, that
without the Consent of all the Partners, this Agreement may not be amended so
as to (i) convert the Interest of a Limited Partner into a general partner's
interest; (ii) modify the limited liability of a Limited Partner; (iii) alter
the Interest of a Partner in Net Profits, Net Losses, or Gain or Loss (other
than as required by the Code or Federal income tax regulations) or
distributions of Cash Available for Distribution, Sale Proceeds, Refinancing
Proceeds or reduce the percentage of Partners which is required to Consent to
any action hereunder: (iv) modify the liability of the General Partner as
provided in Section 3.08; (v) permit the General Partner to take any action
prohibited by Section 5.02; (vi) cause the Partnership to be taxed for Federal
income tax purposes as an association taxable as a corporation; or (vii)
effect any amendment or modification to this Section 11.02B.
C. In addition to the amendments otherwise authorized herein, the
Partnership may agree to amendments to the Harbor Beach Partnership Agreement
[or the Warner Center Partnership Agreement] from time to time with the
consent of [the holders of] LIMITED PARTNERS HOLDING a majority of the Units;
provided, however, without the consent of all of the Limited Partners, the
Partnership will not consent to an amendment of the Harbor Beach Partnership
Agreement [or Warner Center Partnership Agreement] so as to (i) alter the
interest of a partner in the Harbor Beach [Partnership or Warner Center]
Partnership in taxable profits, taxable losses, gains or loss (other than as
required by the Code or Federal income tax regulations), cash distributions,
sale, condemnation, casualty or refinancing proceeds; (ii) cause the Harbor
Beach Partnership [or Warner Center Partnership] to be taxed for Federal
income tax purposes as an association taxable as a corporation; (iii) effect
any amendment or modification to this Section 11.02C; or (iv) reduce the
percentage of [limited partners or other] partners which is required to
consent to any action under the Harbor Beach Partnership Agreement [or the
Warner Center Partnership Agreement].
D-34
D. If this Agreement shall be amended as a result of adding or substituting
a Limited Partner, the amendment to this Agreement shall be signed by the
General Partner and by the Person to be substituted or added and, if a Limited
Partner is to be substituted, by the assigning Limited Partner. If this
Agreement shall be amended to reflect the withdrawal or removal of the General
Partner when the business of the Partnership is being continued, such
amendment shall be signed by the withdrawing General Partner (and the General
Partner hereby so agrees) and by the successor General Partner.
E. In making any amendments, there shall be prepared and filed for
recordation by the General Partner such documents and certificates as shall be
required to be prepared and filed, no such filing being required solely by
reason of this Agreement, under the [Delaware Revised Uniform Limited
Partnership] Act and under the laws of the other jurisdictions under the laws
of which the Partnership is then formed or qualified, not less frequently, in
the case of a substitution of a Limited Partner, than once each calendar
quarter.
F. THE GENERAL PARTNER MAY, WITHOUT THE CONSENT OF THE LIMITED PARTNERS,
MAKE ANY AMENDMENT TO THIS AGREEMENT AS IS NECESSARY TO CLARIFY THE PROVISIONS
HEREOF SO LONG AS SUCH AMENDMENT DOES NOT AFFECT THE RIGHTS OF THE LIMITED
PARTNERS OR ASSIGNEES OF THEIR INTERESTS UNDER THIS AGREEMENT IN ANY MATERIAL
RESPECT.
SECTION 11.03. GENERAL PARTNER REPRESENTATION AND WARRANTIES.
[The General Partner, individually and not as the general partner of the
Partnership, hereby makes, in favor of the Limited Partners, the
representations and warranties regarding the Orlando Hotel and other matters
set forth in a certificate to be executed by the General Partner
simultaneously with the admission of the Limited Partners to the Partnership.]
The General Partner represents that the Partnership shall not incur the cost
of any insurance which insures any party against any liability as to which
such party is prohibited from being indemnified under this Agreement.
SECTION 11.04. BINDING PROVISION.
The covenants and agreements contained herein shall be binding upon, and
inure to the benefit of, the heirs, executors, administrators, personal
representatives, successors and assigns of the respective parties hereto.
SECTION 11.05. APPLICABLE LAW.
This Agreement shall be construed and enforced in accordance with laws of
the State of Delaware.
SECTION 11.06. COUNTERPARTS.
This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the same counterpart.
SECTION 11.07. SEPARABILITY OF PROVISIONS.
Each provision of this Agreement shall be considered separable and if for
any reason any provision or provisions hereof are determined to be invalid and
contrary to any existing or future law, such invalidity shall not impair the
operation of or affect those portions of this Agreement which are valid.
SECTION 11.08. ARTICLE AND SECTION TITLES.
Article and section titles are for descriptive purposes only and shall not
control or alter the meaning of this Agreement as set forth in the text.
SECTION 11.09. SHORT FORM FILINGS.
The General Partner shall have authority to sign any short-form Certificate
of Limited Partnership or restated or amended Certificate of Limited
Partnership meeting the requirement of applicable law which reflects this
Agreement, as same may be amended.
D-35
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
GENERAL PARTNER:
[MARRIOTT HOTEL PROPERTIES, INC.
By
Withdrawing INITIAL LIMITED PARTNER:
AIRLINE FOODS, INC.
By ] HOTEL PROPERTIES
MANAGEMENT, INC.
BY:__________________________________
BRUCE F. STEMERMAN
PRESIDENT, DIRECTOR, TREASURER
AND CHIEF ACCOUNTING OFFICER
LIMITED PARTNERS
BY: HOTEL PROPERTIES MANAGEMENT,
INC., AS ATTORNEY-IN-FACT FOR
THE LIMITED PARTNERS
BY:______________________________
BRUCE F. STEMERMAN
PRESIDENT, DIRECTOR, TREASURER
AND CHIEF ACCOUNTING OFFICER
D-36
ACKNOWLEDGMENT
STATE OF ss.:
COUNTY OF
On this day of , [1985] 1996, before me personally
appeared , to me known, who, first by me duly sworn, did depose and
say that he is the [Vice President of Marriott] OF Hotel Properties
MANAGEMENT, Inc., that he knows the seal of such corporation and that such
seal hereto affixed is such seal and that it was so affixed by order of the
Board of Directors of [Marriott] Hotel Properties MANAGEMENT, Inc.
[Corporation], and that he signed his name thereto on behalf of the General
Partner by order of the Board of Directors of [Marriott] Hotel Properties
MANAGEMENT, Inc.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official Seal
the day and year in this certificate first above written.
[SEAL] _____________________________________
Notary Public for:
My Commission Expires:
[ACKNOWLEDGMENT
STATE OF ss.:
COUNTY OF
On this day of , 1985, before me personally appeared
, to me known, who, first by me duly sworn, did depose and say that he is
the vice President of Airline Foods, Inc., the Initial Limited Partner of
Marriott Hotel Properties Limited Partnership, that he knows the seal of such
corporation and that such seal hereto affixed is such seal and that it was so
affixed by order of the Board of Directors of Airline Foods, Inc., and that he
signed his name to the foregoing instrument on behalf of Airline Foods, Inc.
by order of the Board of Directors of Airline Foods, Inc.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
the day and year in this certificate first above written.
[SEAL] _____________________________________
Notary Public for:
My Commission Expires:[ ]
D-37
ACKNOWLEDGMENT
STATE OF ss.:
COUNTY OF
On this day of , [1985] 1996, before me personally
appeared , to me known, who, first by me duly sworn, did depose and
say that he is the of [Marriott] Hotel Properties MANAGEMENT, Inc.,
that he knows the corporate seal of said corporation and that such seal hereto
affixed is such seal and that it was so affixed by order of the Board of
Directors of said corporation, and that he signed his name thereto on behalf
of said corporation as attorney-in-fact for all the Limited Partners of
Marriott Hotel Properties Limited Partnership.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
the day and year in this certificate first above written.
[SEAL] _____________________________________
Notary Public for:
My Commission Expires:
D-38
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
LIMITED PARTNER SIGNATURE PAGE
The undersigned, desiring to enter into the SECOND Amended and Restated
Agreement of Limited Partnership of Marriott Hotel Properties Limited
Partnership, a Delaware limited partnership[,] (the "Agreement"), hereby
agrees to and agrees to be bound by all of the terms and provisions of the
Agreement. The undersigned hereby joins in and executes the Agreement, hereby
authorizing this Signature Page to be attached to the Agreement.
WITNESS the execution hereof by the undersigned this day of , .
If an individual:
_________________________________ _________________________________
Print Name Signature
_________________________________ _________________________________
Print Name Signature
If a corporation, partnership or trust:
_________________________________
Print Name of Entity
By:__________________________________ _________________________________
Print Name of Authorized Officer, Signature of Authorized Officer,
Partner or Trustee Partner or Trustee
_________________________________
Print Title of Authorized Officer _________________________________
_________________________________ Signature of Co-Trustee (if
required by trust instrument)
Print Name of Co-Trustee
(if required by trust instrument)
- --------
* Complete if Unit is to be owned by two persons.
D-39
INDIVIDUAL ACKNOWLEDGMENT
STATE OF ss.:
COUNTY OF
On this day of , [1985] 19 , before me personally
appeared , to me known to be the person(s) described in and who executed
the foregoing instrument, and acknowledged that (he) executed the same as
(his) free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
the day and year in this certificate first above written.
[SEAL] _____________________________________
Notary Public for:
My Commission Expires:
CORPORATE ACKNOWLEDGMENT
STATE OF ss.:
COUNTY OF
On this day of , [1985] 19 , before me personally
appeared to me known, who, being first by me duly sworn, did depose
and say that he resides at ; that he is the of the
corporation described in and which executed the above instrument; that [the
corporation has no seal]*[he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation]*, and that he signed his
name thereto by order of said corporation's Board of Directors.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
the day and year in this certificate first above written.
[SEAL] _____________________________________
Notary Public for:
My Commission Expires:
- --------
* Strike out whichever bracketed clause does not apply.
D-40
PARTNERSHIP OR TRUST ACKNOWLEDGMENT
STATE OF ss.:
COUNTY OF
On this day of , [1985] 19 , before me personally
appeared who being first by me duly
sworn, did depose and say that he is a [General Partner] [trustee]* of
, a [partnership] [trust]*, and acknowledged that his execution
of the foregoing instrument was the free act and deed of said partnership
[trust]*.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
the day and year in this certificate first above written.
[SEAL] _____________________________________
Notary Public for:
My Commission Expires:
- --------
* Strike out whichever bracketed clause does not apply.
D-41
$90,000 per Unit , 1985
Units
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP
EXHIBIT A LIMITED PARTNER NOTE
FOR VALUE RECEIVED, the undersigned promises to pay to the order of MARRIOTT
HOTEL PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership (the
"Partnership"), at its offices at 10400 Fernwood Road, Bethesda, Maryland
20058, or at such other place as the holder hereof from time to time shall
designate in writing to the undersigned, the principal sum of Ninety Thousand
Dollars ($90,000) per Unit for the number of Units set forth above, without
interest, in the following installments per Unit at the following times:
DUE DATE AMOUNT
-------- ------
May 15, 1986... $12,000 per Unit for the number of Units set forth above
May 15, 1987... $20,500 per Unit for the number of Units set forth above
May 15, 1988... $19,500 per Unit for the number of Units set forth above--
May 15, 1989... $19,000 per Unit for the number of Units set forth above
May 15, 1990... $19,000 per Unit for the number of Units set forth above
In the event the undersigned fails to pay in lawful money of the United
States of America any amount which he is required to pay to the Partnership on
or before the tenth day following the date when such amount is due and
payable, a late payment fee of five percent of the amount of the overdue
payment shall be added to the amount due. If default shall continue beyond 30
days, in addition to the aforesaid late charge, the unpaid portion of such
installment shall bear interest from the due date of such installment until
paid in full at a rate equal to the lesser of four percentage points in excess
of the prime rate announced from time-to-time by The Bankers Trust Company,
New York, New York, charged to its best commercial customer, or the maximum
rate permitted by law. In no event may the late charge, if deemed to be
interest under law, when added to any interest exceed the rate permitted by
law. If the default continues beyond 30 days after notice, the General Partner
of the Partnership shall have the option of accelerating the payment of the
entire unpaid balance of the note, and exercising all of the Partnership's
rights and remedies under the Partnership Agreement, as hereinafter defined.
The undersigned shall have the right to prepay, in whole or in part, at any
time, the unpaid principal balance to this note.
All of the provisions of the Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") regarding this note are incorporated
herein by reference.
The undersigned agrees that in the event his subscription for a limited
partnership interest in the Partnership is reduced, this note may be modified
by the general partner of the Partnership (the "General Partner"), in its sole
discretion, to reflect a corresponding reduction of the principal amount
hereof, and the General Partner shall allocate such reduction equally among
the installment payments due under this note.
This note may not be modified orally, and shall be governed by, enforced,
determined and construed in accordance with the laws of the State of Delaware.
The undersigned hereby consents to the non-exclusive jurisdiction and venue of
the courts of the State of Delaware and of the United States for the District
of Delaware in connection with the collection of this note or any matter
relating thereto and hereby irrevocably appoints the General Partner of the
Partnership as its agent to receive service of process in the State of
Delaware in connection with any such matter.
In the event of default, the undersigned agrees to pay the costs of
collection, including, without limitation, reasonable attorneys' fees and
disbursements and court costs.
D-42
The undersigned waives presentment, demand for payment, notice of dishonor,
notice of protest, protest and all other notices or demands in connection with
the delivery, acceptance, performance, default, endorsement or guaranty of
this instrument, except as set forth in the Partnership Agreement. No failure
or delay by the holder of this note in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof or course of dealing preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
To secure repayments of the outstanding amounts hereunder, the undersigned
has, pursuant to the Partnership Agreement, hereby granted to the Partnership
a security interest in all of the undersigned's right, title and interest in
the undersigned's limited partnership interest in the Partnership. In the
event that this note is negotiated, endorsed, assigned, transferred and/or
pledged, all references to the Partnership shall apply to the one which
receives the Partnership's interest as if that one instead of the Partnership
was named as the original payee under this note.
If any part of this note is determined by any court to be invalid or
unenforceable the remaining portions of this note will remain in effect. Any
ambiguity or uncertainty in the note will be construed in favor of the
Partnership.
The terms of this note shall be binding upon and inure to the benefit of the
respective successors and assigns of the Partnership and the undersigned.
All definitions as used herein shall have the same meaning as such terms are
used in the Partnership Agreement.
If Subscriber is an individual:
_________________________________ _________________________________
Print Name of Subscriber Signature of Subscriber
_________________________________ _________________________________
Print Name of Co-Subscriber (if Signature of Co-Subscriber (if
any) any)
If Subscriber is a corporation, partnership or trust:
___________________________________________________________________________
Print Name of Subscribing Entity
By:______________________________ _________________________________
Print Name of Authorized Officer, Signature of Authorized Officer,
Partner or Trustee Partner or Trustee
_________________________________
Print Title of Authorized Officer _________________________________
_________________________________ Signature of Co-Trustee (if
required by trust instrument)
Print Name of Co-Trustee (if required by trust instrument)
D-43
CONSENT FORM
This Consent Form (the "Consent Form") must be completed and returned by
every limited partner who wishes to vote for or against the proposals (the
"Proposals") to amend the Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") of Marriott Hotel Properties Limited
Partnership (the "Partnership") that are described in the Consent Solicitation
Statement. The Proposals are being made in connection with the tender offer
(the "Tender Offer") by MHP Acquisition Corp. to purchase 450 of the issued
and outstanding units of limited partnership interest (the "Units") of the
Partnership.
THIS CONSENT FORM MUST BE RETURNED TO AND RECEIVED BY:
GEMISYS
PROXY DEPARTMENT
7103 SOUTH REVERE PARKWAY
ENGLEWOOD, CO 80112
BY FACSIMILE: 1-800-387-7365
PRIOR TO 6:00 P.M., NEW YORK CITY TIME, ON FRIDAY, DECEMBER 20, 1996, OR SUCH
LATER DATE AS MAY BE DESIGNATED IN A MAILING TO ALL LIMITED PARTNERS (THE
"EXPIRATION DATE"). The Consent Form will be effective only when it is
actually received by GEMISYS. A self-addressed return envelope has been
provided for your convenience, if you desire to mail this Consent Form.
All Consent Forms that are properly executed and returned to GEMISYS prior
to the Expiration Date will be voted in accordance with the elections set
forth therein. ANY LIMITED PARTNER WHO ABSTAINS OR FAILS TO RETURN A SIGNED
CONSENT FORM WILL BE DEEMED TO HAVE VOTED AGAINST THE PROPOSALS. PROPERLY
EXECUTED CONSENT FORMS THAT ARE NOT MARKED AS TO A PARTICULAR PROPOSAL WILL BE
DEEMED TO BE VOTED FOR THE PROPOSAL.
Before completing this Consent Form, you and your advisor, if any, should
carefully review the Consent Solicitation Statement, including the attached
copy of the Partnership Agreement, as proposed to be amended. Each of the
proposed amendments to the Partnership Agreement, including the text of such
amendments, is set forth in detail in Proposal Nos. 1 through 8 of the Consent
Solicitation Statement.
THE GENERAL PARTNER OF THE PARTNERSHIP IS AN AFFILIATE OF HOST MARRIOTT
CORPORATION AND MHP ACQUISITION CORP. AND, THEREFORE, HAS SUBSTANTIAL
CONFLICTS OF INTEREST WITH RESPECT TO THE AMENDMENTS. ACCORDINGLY, THE GENERAL
PARTNER MAKES NO RECOMMENDATION TO ANY UNITHOLDER AS TO WHETHER TO VOTE FOR OR
AGAINST THE AMENDMENTS. EACH UNITHOLDER MUST MAKE HIS OR HER OWN DECISION
WHETHER OR NOT TO VOTE FOR OR AGAINST THE AMENDMENTS.
IF YOU HAVE ANY QUESTIONS REGARDING THE PROPOSALS, PLEASE CONTACT HOST
MARRIOTT INVESTOR RELATIONS AT (301) 380-2070. IF YOU WOULD LIKE ASSISTANCE IN
COMPLETING THIS CONSENT FORM, PLEASE CONTACT TRUST COMPANY OF AMERICA (THE
"INFORMATION AGENT") AT (800) 955-9033.
Consent Forms may be withdrawn at any time prior to the Expiration Date. In
addition, you may change your vote subsequent to the submission of a Consent
Form, but prior to the Expiration Date. For a withdrawal or change of vote to
be effective, you must execute and deliver, prior to the Expiration Date, a
subsequently dated Consent Form or a written notice stating that the consent
is revoked to GEMISYS at the address set forth above. Consent Forms and
notices of withdrawal or change of vote dated or received after the Expiration
Date will not be valid.
FORM OF CONSENT
You may vote uniformly on all of the Proposals by marking the appropriate
box set forth in the first item below. Alternatively, you may vote
individually on any Proposal by marking the appropriate boxes relating to
Proposal Nos. 1 through 8 below. IN ORDER FOR LIMITED PARTNERS TO HAVE THE
OPPORTUNITY TO RECEIVE THE CASH PRICE PER UNIT OFFERED PURSUANT TO THE TENDER
OFFER, PROPOSAL NOS. 1 THROUGH 6 MUST BE APPROVED BY LIMITED PARTNERS HOLDING
A MAJORITY OF THE OUTSTANDING UNITS. Abstentions on any or all of the
Proposals will have the same effect as votes AGAINST such Proposal(s).
UNIFORM VOTING
- --------------
APPROVAL, REJECTION OR ABSTENTION OF ALL OF THE AMENDMENTS
[_] FOR [_] AGAINST [_] ABSTAIN
NOTE: IF YOU CHOOSE TO VOTE UNIFORMLY ABOVE, YOU MAY NOT VOTE INDIVIDUALLY ON
ANY OF THE PROPOSALS BELOW.
PROPOSAL NO. 1 PROPOSAL NO. 5
- -------------- --------------
(PAGE 8 OF CONSENT SOLICITATION (PAGE 18 OF CONSENT SOLICITATION
STATEMENT) STATEMENT)
AMENDMENTS TO VOTING PROVISIONS AMENDMENTS TO PROVISIONS ALLOCATING
[_] FOR [_] AGAINST [_] ABSTAIN PROFITS AND LOSSES AND CASH
DISTRIBUTIONS
PROPOSAL NO. 2 [_] FOR [_] AGAINST [_] ABSTAIN
- --------------
(PAGE 12 OF CONSENT SOLICITATION
STATEMENT)
AMENDMENT TO DEFINITION OF AFFILIATE PROPOSAL NO. 6
[_] FOR [_] AGAINST [_] ABSTAIN --------------
(PAGE 21 OF CONSENT SOLICITATION
STATEMENT)
TAX AMENDMENTS
PROPOSAL NO. 3 [_] FOR [_] AGAINST [_] ABSTAIN
- --------------
(PAGE 15 OF CONSENT SOLICITATION
STATEMENT)
AMENDMENTS TO AUTHORITY OF THE PROPOSAL NO. 7
GENERAL PARTNER --------------
(PAGE 21 OF CONSENT SOLICITATION
STATEMENT)
[_] FOR [_] AGAINST [_] ABSTAIN CLARIFYING AMENDMENTS
[_] FOR [_] AGAINST [_] ABSTAIN
PROPOSAL NO. 4
- --------------
(PAGE 17 OF CONSENT SOLICITATION
STATEMENT) PROPOSAL NO. 8
--------------
REVISION OF TRANSFER RESTRICTIONS (PAGE 21 OF CONSENT SOLICITATION
STATEMENT)
[_] FOR [_] AGAINST [_] ABSTAIN AMENDMENT TO AMENDMENT PROVISIONS
[_] FOR [_] AGAINST [_] ABSTAIN
The undersigned hereby acknowledges receipt of the Consent Solicitation
Statement, dated November 19, 1996. If Units are owned jointly, all joint
owners must sign below. ALL OWNERS MUST SIGN THEIR NAMES EXACTLY AS SET FORTH
ON THE STICKER BELOW. All Units represented by properly executed consent forms
will be voted in accordance with the choices specified in the forms. IF NO
CHOICE IS SPECIFIED, THE UNITS WILL BE VOTED FOR THE PROPOSAL(S).
DATE: ___________________ SIGNATURE(S) OF PARTNER(S): _________
SIGNATURE(S) OF PARTNER(S): _________
- ------------------------------------
ATTACH IDENTIFICATION STICKER HERE
- ------------------------------------