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Exhibit 3.142
FIFTH AMENDMENT TO PARTNERSHIP AGREEMENT
THIS FIFTH AMENDMENT TO PARTNERSHIP AGREEMENT, made and entered into this
17th day of January, 1984, by and between PARTICIPATION CORPORATION, a Maryland
corporation ("Participation") and SHELTER CORPORATION OF CANADA, LTD., a
Canadian corporation ("Shelter").
BACKGROUND
1. Participation and Shelter entered into a Partnership Agreement dated
January 22, 1980, relating to the expansion of The Columbia Inn, Columbia,
Maryland, which was subsequently amended pursuant to an Amendment to
Partnership Agreement, a Second Amendment to Partnership Agreement, a Third
Amendment to Partnership Agreement and a Fourth Amendment to Partnership
Agreement, dated March 19, 1980, March 19, 1980, June 24, 1980 and June 27,
1980, respectively, such Partnership Agreement, as amended, being hereinafter
referred to as the "Partnership Agreement."
2. Shelter has heretofore made Capital and Operating Loans to the
Partnership in the amount of One Million Eight Hundred Fifty-Four Thousand
Forty-One Dollars ($1,854,041.00) and is currently obligated to make additional
Operating Loans to the Partnership of Two Hundred Twenty Thousand Dollars
($220,000.00) to cover real estate taxes for the 1983-1984 tax year and Three
Hundred Seventy-Two Thousand Dollars ($372,000.00) to cover cash requirements
of the Partnership for the 1983 fiscal year. Participation has already advanced
One Hundred Eighty-Three Thousand One Hundred Fifty Dollars ($183,150.00) of
this latter amount to the Partnership.
3. In order to provide for the funding of certain renovations of the old
section of The Columbia Inn by Participation, Participation and Shelter have
agreed to recapitalize the Partnership and to amend the Partnership Agreement
in accordance with the terms and conditions set forth below.
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NOW, THEREFORE, in consideration of the Premises, the sum of Five Dollars
($5.00) paid by each party to the other, and other good and valuable
consideration, the receipt and sufficiency whereof are hereby acknowledged by
both parties hereto, the parties mutually agree as follows:
1. Article 7.00 of the Partnership Agreement shall be amended as follows:
a. Section 7.08 is modified by adding the following clause at the
end of the sentence: "... which shall be deemed a capital contribution by
Participation to the Partnership and added to its capital account."
b. Section 7.09 is deleted in its entirety and the following
substituted therefor:
"7.09(i). Shelter hereby forgives all accrued interest on the Capital and
Operating Loans made by it to the Partnership on or before December 31,
1983, and the Partners agree that the principal of all such Capital and
Operating Loans are hereby converted to capital and added to Shelter's
capital account.
(ii) The Partners acknowledge and agree that as of December 31, 1983,
Participation has advanced to the Partnership the amount of One Hundred
Eighty-Three Thousand One Hundred Fifty Dollars ($183,150.00) to meet
certain cash requirements of the Project for the fiscal year ended December
31, 1983. The Partners agree that this amount shall be deemed a capital
contribution and added to Participation's capital account."
c. "7.10" is renumbered to "7.12" and a new Section 7.10 is added
as follows:
"7.10. Participation agrees to fund, up to a maximum of One Million
Three Hundred Fifty-Four Thousand Three Hundred Dollars ($1,354,300.00),
those capital improvements set forth in Section G, pages 52 through 62, of
that certain report entitled "The Columbia Inn - Special Project Report,"
delivered to Shelter in October, 1983, which shall be completed by December
31, 1984. Any amounts funded by Participation for such capital improvements
shall be deemed a capital contribution to the Partnership and added to
Participation's capital account."
d. A new Section 7.11 is added as follows:
"7.11. Shelter agrees to pay to the Partnership on March 1, 1984, the
amount of Two Hundred Twenty
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Thousand Dollars ($220,000.00) to be used to pay the real estate taxes for
the 1983-84 tax year. Such amount shall be deemed a capital contribution
and added to Shelter's capital account."
2. By way of illustration of the effect of the amendments to Article
7.00 of the Partnership Agreement set forth in paragraph 1 above, as of
December 31, 1984, each Partner shall have made the following capital
contributions to the Partnership:
Item Participation Shelter
- ------ ------------- -------
Land $ 950,000 --
Cash $2,000,000 $1,250,000
Equity/Cross Keys Property -- $2,000,000
Rusty Scupper Proceeds $ 428,000 --
Shelter Operating Loan -- $1,854,041
1983-84 Real Estate Taxes -- $ 220,000
Participation Advance $ 183,150 --
Capital Improvements $1,354,300 --
------------ ----------
Total $4,915,450 $5,324,041
3. The Partnership Agreement is hereby amended by deleting Section
8.02A. in its entirety and substituting the following therefor:
"8.02A. Participation agrees, prior to the closing of the Permanent
Loan, to use its best efforts to obtain an increase in the amount of the
Permanent Loan. Such additional proceeds shall be retained by the Partnership
to fund the excess, if any, of the actual cost of development of the Project
over the Development Budget, with any excess, if any, to be used to fund any
case expenditures incurred by the Partnership in the course of its operations."
4. Article 17.00 of the Partnership Agreement shall be amended by
modifying Section 17.02 thereof by adding the following clause at the end:
"...except that all Operating Loans from Shelter to the Partnership under this
Article 17.00 shall bear interest at the annual rate of ten percent (10%) per
annum." Also, a new Section 17.04 is added as follows:
"17.04.(i) Notwithstanding Section 17.01 above, Participation agrees to
loan to the Partnership the amount of One Hundred Eighty-Eight Thousand Eight
Hundred Fifty Dollars ($188,850.00) to meet the cash requirements of the
Project for the fiscal year ended December 31, 1983, such loan to bear interest
at the rate of ten percent (10%) per annum. Shelter shall have no obligation to
reimburse Participation for such loan which shall be repaid in accordance with
Section 19.03 of this Agreement.
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(ii) Notwithstanding Section 17.01 above, Participation agrees to fund on
behalf of Shelter any Operating Loans which would otherwise be required by
Shelter to meet the cash requirements of the Partnership for the period
commencing January 1, 1984 and ending October 1, 1984. Shelter agrees to
repay Participation on October 15, 1984, any amounts so funded by
Participation on its behalf, together with interest thereon at ten percent
(10%) per annum and upon such repayment, Shelter shall be deemed to have
made an Operating Loan to the Partnership in that amount. Any failure of
Shelter to repay such amounts on October 15, 1984, shall be deemed a
failure by Shelter to make a required Operating Loan to the Partnership and
Participation shall be entitled to all the rights and remedies available
under Article 24.00 of this Agreement on account thereof and shall be
deemed an Advancing Partner as defined therein."
5. The Partnership Agreement shall be amended by deleting Section 19.03
thereof in its entirety, substituting therefor the following:
"19.03. Commencing with the day following the Construction Period, and
for the balance of the term of the Partnership, Net Cash Flow shall be
distributed to the partners in the following manner:
(a) firstly, repayment to the Manager of any deferred and unpaid
management fees required pursuant to any management agreement
negotiated in accordance with Article 22.00 hereof;
(b) secondly, repayment to Participation of the loan and accrued interest
referred to in Section 17.04(i) of this Agreement;
(c) thirdly, any available Net Cash Flow shall be paid to Shelter in
repayment of any principal and interest due and owing under any unpaid
notes delivered by the Partnership to Shelter in respect of any
Operating Loans made on account of cash requirements of the Project
arising on or after January 1, 1984;
(d) fourthly, only to the extent that Net Cash Flow includes net proceeds
from any sale or refinancing of the Project, a payment to Shelter
equal to the amount by which the total capital contributions of
Shelter to the Partnership exceeds the total capital contributions of
Participation; and
(e) fifthly, any remaining available Net Cash Flow shall be distributed
equally to Participation and Shelter, subject to the provisions of
Article 20.00 hereof."
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Section 19.06 of the Partnership Agreement is hereby deleted in its
entirety and existing Section 19.07 is renumbered to Section 19.06.
Unless otherwise expressly provided herein or the context otherwise
requires, capitalized terms used herein shall have the same meaning as set
forth in the Partnership Agreement.
The amendments set forth herein shall be deemed effective as of January 1,
1984. Except as amended herein, the Partnership Agreement shall continue in
full force and effect.
IN WITNESS WHEREOF, the parties have caused this Fifth Amendment to
Partnership Agreement to be executed as of the day and year first above written.
ATTEST: PARTICIPATION CORPORATION
James D. Law By [illegible signature]
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Its Senior Vice-President
ATTEST: SHELTER CORPORATION OF CANADA, LTD.
Virginia B. Beat By [illegible signature]
- -------------------------------- --------------------------------
Its Executive Vice-President
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TdeR/rav (3) 5/29/80
FOURTH AMENDMENT TO PARTNERSHIP AGREEMENT
THIS FOURTH AMENDMENT TO PARTNERSHIP AGREEMENT, made and entered into this
27 day of June, 1980, by and between PARTICIPATION CORPORATION, a Maryland
corporation ("Participation"), and SHELTER CORPORATION OF CANADA LIMITED, a
Canadian corporation ("Shelter");
WHEREAS, Participation and Shelter entered into that certain Partnership
Agreement dated January 22, 1980, relating to the expansion of the Cross Keys
Inn, Columbia, Maryland, as amended pursuant to an Amendment to Partnership
Agreement and a Second Amendment to Partnership Agreement, both dated March 19,
1980 and a Third Amendment to Partnership Agreement dated 6/24, 1980
(collectively, the "Agreement"); and
WHEREAS, Section 11.01 of the Agreement provides that title to all assets
of the Partnership shall be registered and recorded in the name of
Participation; and
WHEREAS, the parties have determined that the best interests of the
Partnership would be served by having title to all partnership assets
registered and recorded in the name of the Partnership and, in connection
therewith, the parties desire to further amend the Agreement accordingly.
NOW, THEREFORE, in consideration of the premises, the sum of five dollars
($5.00) paid by each party to the other, and other good and valuable
consideration, the receipt and sufficiency whereof are hereby acknowledged by
both parties hereto, the parties mutually agree to amend the Agreement as
follows:
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1. Section 11.01 of the Agreement is amended to read as follows:
The Partners hereby agree that title to all assets of the Partnership,
together with all real property and improvements, fixtures, buildings,
personal or other assets acquired by the Partnership from time to time,
shall be registered and recorded in the name of the Partnership.
Except as amended herein, the Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties have caused this Fourth Amendment to
Partnership Agreement to be executed as of the day and year first above written.
ATTEST: PARTICIPATION CORPORATION
[illegible signature] By [illegible signature]
- -------------------------------- --------------------------------
Treasurer
ATTEST: SHELTER CORPORATION OF CANADA
LIMITED
[illegible signature] By [illegible signature]
- -------------------------------- --------------------------------
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TdeR/rav (4) 5/29/80
THIRD AMENDMENT TO PARTNERSHIP AGREEMENT
THIS THIRD AMENDMENT TO PARTNERSHIP AGREEMENT, made and entered into this
24th day of June, 1980, by and between PARTICIPATION CORPORATION, a Maryland
corporation ("Participation"), and SHELTER CORPORATION OF CANADA LIMITED, a
Canadian corporation ("Shelter");
WHEREAS, Participation and Shelter entered into that certain Partnership
Agreement dated January 22, 1980, relating to the expansion of the Cross Keys
Inn, Columbia, Maryland, as amended pursuant to an Amendment to Partnership
Agreement and a Second Amendment to Partnership Agreement, both dated March 19,
1980 (collectively, the "Agreement"); and
WHEREAS, Section 11.01 of the Agreement provides that title to all assets
of the Partnership shall be registered and recorded in the name of the
Partnership; and
WHEREAS, the parties have determined that the best interests of the
Partnership would be served by having title to all partnership assets
registered and recorded in the name of Participation and, in connection
therewith, the parties desire to further amend the Agreement accordingly.
NOW, THEREFORE, in consideration of the premises, the sum of five dollars
($5.00) paid by each party to the other, and other good and valuable
consideration, the receipt and sufficiency whereof are hereby acknowledged by
both parties hereto, the parties mutually agree to amend the Agreement as
follows:
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1. Section 11.01 of the Agreement is amended to read as follows:
The Partners hereby agree that title to all assets of the Partnership,
together with all real property and improvements, fixtures, buildings,
personalty or other assets acquired by the Partnership from time to time,
shall be registered and recorded in the name of Participation Corporation.
Except as amended herein, the Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to
Partnership Agreement to be executed as of the day and year first above written.
ATTEST: PARTICIPATION CORPORATION
[illegible signature] By [illegible signature]
- -------------------------------- --------------------------------
Treasurer
ATTEST: SHELTER CORPORATION OF CANADA
LIMITED
[illegible signature] By [illegible signature]
- -------------------------------- --------------------------------
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JDL:cs (6) 3/14/80
SECOND AMENDMENT TO PARTNERSHIP AGREEMENT
THIS SECOND AMENDMENT TO PARTNERSHIP AGREEMENT, made and entered into
this 19th day of March, 1980, by and between PARTICIPATION CORPORATION, a
Maryland corporation ("Participation"), and SHELTER CORPORATION OF CANADA LTD.,
a Canadian corporation ("Shelter");
WHEREAS, Participation and Shelter entered into that certain Partnership
Agreement of even date, relating to the expansion of the Cross Keys in
Columbia, Maryland (the "Agreement"); and
WHEREAS, the Agreement has been amended pursuant to a Amendment to
Partnership Agreement of even date; and
WHEREAS, the parties desire to further amend the Agreement in accordance
with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the sum of five dollars
($5.00) paid by each party to the other, and other good and valuable
consideration, the receipt and sufficiency whereof is hereby acknowledged by
both parties hereto, the parties mutually agree to amend the Agreement as
follows:
1. Section 16.01 of the Agreement is amended by adding the following
sentence:
"Shelter shall not be obligated to make Capital Loans to the
Partnership until Shelter and Participation have first contributed to the
Partnership pursuant to Section 7.07 hereof any Net Cash Flow generated by
the Cross Keys Property which was previously distributed to them."
2. Section 19.03 is amended by the following paragraph as subsection
19.03(b) between existing subsections 19.03(a) and (c) and renumbering the
following subsections:
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(b) secondly, to the extent not distributed to Shelter pursuant to either
Section 7.09 or Section 8.02A hereof, an amount out of available Net
Cash Flow up to THREE HUNDRED THOUSAND DOLLARS ($300,000.00),
representing the difference between the respective maximum equity
contributions of Participation and Shelter required under Article 7.00
hereof, such payments to be made on a monthly basis and to continue
only until Shelter has been paid the above amount in full.
Except as amended herein, the Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties have caused this Second Amendment to
Partnership Agreement to be executed as of the day and year first above written.
ATTEST: PARTICIPATION CORPORATION
[illegible signature] By [illegible signature]
- ---------------------------------- ----------------------------------
Vice-President
SHELTER CORPORATION OF CANADA, LTD.
By [illegible signature]
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JDL/rav (2) 2/1/80 #7351-J 118(a)(23)
AMENDMENT TO PARTNERSHIP AGREEMENT
This Amendment to Partnership Agreement made and entered into this 1st day
of February, 1980, by and between PARTICIPATION CORPORATION, a Maryland
corporation ("Participation"), and SHELTER CORPORATION OF CANADA LTD., a
Canadian corporation ("Shelter"):
WHEREAS, Participation and Shelter entered into that certain Partnership
Agreement dated January 22, 1980, relating to the expansion of the Cross Keys
Inn in Columbia, Maryland (the "Agreement"); and
WHEREAS, the Agreement contemplated obtaining a Gap Loan, as defined
therein, for the purpose of funding on an interim basis the equity contribution
required per the terms of Article 7.00 thereof; and
WHEREAS, Participation and Shelter now deem it inadvisable to fund such
equity contribution by the Gap Loan and have agreed upon an alternative method
of funding such contribution.
NOW, THEREFORE, in consideration of the premises, the sum of FIVE DOLLARS
($5.00) paid by each party to the other, and other food and valuable
consideration (the receipt and sufficiency whereof is hereby acknowledged by
both parties hereto), the parties mutually agree to amend the Agreement as
follows:
1. The phrase "... but shall not include the Gap Loan" is deleted from
Section 5.01(d).
2. Section 5.01(j) is deleted in its entirety.
3. Section 7.05 is deleted in its entirety and the following substituted
therefor:
"7.05. Participation further covenants and agrees with Shelter that it
will contribute to the Partnership by way of additional capital
contributions the sum of TWO MILLION DOLLARS ($2,000,000.00) during the
construction of the Project as and when
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required under the terms of the Construction Loan. The Partnership shall
so record each additional capital contribution.
4. Section 7.06 is deleted in its entirety and the following substituted
therefor:
"7.06. Shelter further covenants with Participation that it will
contribute to the Partnership by way of additional capital contributions
the sum of ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($1,250,000.00)
after the construction of the Project as required under the terms of the
Construction Loan. The Partnership shall so record each additional capital
contribution."
5. Section 8.01(c) is hereby deleted in its entirety.
6. Section 8.01A is hereby deleted in its entirety and the following
substituted therefor:
"8.01A. If required by the Construction Lender, Shelter agrees to procure
and deliver to the Construction Lender prior to July 15, an irrevocable,
unconditional letter of credit in the amount of ONE MILLION THREE HUNDRED
THOUSAND DOLLARS ($1,300,000.00) in favor of the Construction Lender to
secure Shelter's obligation to make the additional capital contributions
required under Section 7.06. The letter of credit shall be in such form
and be drawn upon such lender as may be acceptable to the Construction
Lender, and shall remain in full force and effect until the earlier of the
closing of the Permanent Loan or the payment of Shelter's total additional
capital contribution required under Section 7.06. All fees on account of
such letter of credit shall be paid by Shelter."
Except as amended herein, the Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to Partnership
Agreement to be executed as of the day and year first above written.
ATTEST: PARTICIPATION CORPORATION
/s/ James D. Laur By /s/ [Illegible]
- ----------------- -----------------------------
Its Vice President
SHELTER CORPORATION OF CANADA LTD.
By /s/ [Illegible]
------------------------------
Its Exec. Vice President
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PARTNERSHIP AGREEMENT
THIS PARTNERSHIP AGREEMENT made and entered into this 22nd day of January,
1980, by and between PARTICIPATION CORPORATION, a Maryland corporation
("Participation"), and SHELTER CORPORATION OF CANADA LTD., a Canadian
corporation ("Shelter");
WHEREAS, Shelter, pursuant to an Agreement of Purchase and Sale between
Shelter and COLUMBIA MALL, INC. under date December 28, 1978 (hereinafter
referred to as the "Agreement of Purchase"), did purchase good and marketable
title in and to a certain parcel of real property located in Town Center,
Columbia, Howard County, State of Maryland, together with the buildings,
structures, facilities, improvements, rights-of-way, or use, easements,
riparian rights, water rights, privileges, appurtenances and advantages
belonging in or any way pertaining to the hotel complex situate thereon ("the
Cross Keys property");
AND, WHEREAS, pursuant to the Lease Agreement between Shelter and
Participation dated December 28, 1978, as subsequently amended from time to
time, Shelter agreed to lease to Participation the Cross Keys Inn property for
a term commencing December 30, 1978 (hereinafter referred to as the "Lease");
AND, WHEREAS, the Lease contemplated the entering into of this Partnership
Agreement by Shelter and Participation for the purpose of setting out the terms
and conditions upon which Shelter and Participation will attempt to form a
joint venture for the purpose of expanding the Cross Keys Inn property onto
adjacent property owned by Participation and to be contributed by Participation
to the Partnership (the "adjacent property"), and to construct thereon an
expanded hotel/commercial complex with accompanying parking facilities (the
"Project");
AND, WHEREAS, Participation and Shelter acknowledge that notwithstanding
the execution of this Agreement, the commitment of each party to proceed with
the joint venture under this Partnership Agreement is conditional upon all of
the "Preliminary Conditions" (as hereinafter defined) being satisfied on or
before March 1, 1980, failing which, this Agreement shall be deemed to be
terminated and of no further force and effect;
NOW, THEREFORE, in consideration of the premises, the sum of FIVE DOLLARS
($5.00) paid by each party to the other, and other good and valuable
consideration (the receipt and sufficiency whereof is hereby acknowledged by
both parties hereto), the parties mutually agree as follows:
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ARTICLE 1.00
FORMATION OF PARTNERSHIP
1.01 Shelter and Participation hereby agree to form and establish a general
partnership to be conducted under the name "Hotel Columbia Company" (the
"Partnership") or such other name as the partners may from time to time
determine, such Partnership to be constituted and operated in accordance with
the terms and provisions thereof.
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ARTICLE 2.00
REGISTRATION OF PARTNERSHIP
2.01 The parties hereto agree to cause the Partnership to be registered in
accordance with the laws of the State of Maryland and to effect such other
registration and licensing as may be required to permit each of the partners
and the Partnership to conduct business in the State of Maryland.
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ARTICLE 3.00
NAME AND PRINCIPAL PLACE OF BUSINESS
3.01 The parties hereto agree that the Partnership shall initially be
operated under the name "Hotel Columbia Company" or such other name as the
partners may from time to time determine by Partnership decision.
3.02 The parties hereto agree to establish the principal head office of the
Partnership as The Rouse Company Building (c/o Frederick W. Glassberg,
Vice-President of Participation, or such other Vice-President of Participation
as may be designated in writing by Participation to Shelter), Columbia,
Maryland 21044, or such other place as the partners may, from time to time, by
Partnership decision determine.
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ARTICLE 4.00
TERM OF PARTNERSHIP
4.01 The Partnership will commence as of January 1, 1980 assuming that the
Preliminary Conditions are fulfilled in accordance with the provisions of
Article 8.00 hereof, and shall continue for a period ending the earlier of:
(a) December 31, 2035
(b) The date on which the Partnership is dissolved in accordance
with the terms of this Agreement;
(c) the date on which the Partnership is dissolved by operation of
law or by judicial decree.
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ARTICLE 5.00
GLOSSARY OF TERMS
5.01 Where used in this Agreement, the following terms shall have the
following meanings:
(a) "Adjacent Property" means all of those lands presently owned by
Participation and located adjacent to the "Cross Keys Property"
as more particularly set out and described in Schedule "A"
attached hereto and forming a part hereof.
(b) "Capital Loans" shall mean loans advanced to the Partnership from
time to time by Shelter for the purpose of funding any capital
costs of the Partnership (as determined by the auditors of the
Partnership in accordance with generally accepted accounting
principles) which have not been financed by capital contributions
(in accordance with this Agreement) or third party financing.
(c) "CDC Note" means the recourse promissory note executed by Shelter
in favour of Columbia Mall, Inc. in the initial amount of ONE
MILLION EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000.00) payable
with interest at ten percent (10%) per annum, over a six (6) year
term, as provided for under the Agreement to Purchase between
Shelter and Columbia mall, Inc. dated December 28, 1978.
(d) "Construction Loan" shall mean any loan obtained by the
Partnership for the purpose of funding the cost of construction
of the Project, but shall not include the Gap Loan.
(e) "Construction Period" means the period commencing the "Effective
Date" of this Agreement and expiring the date on which the
architect for the Project shall certify substantial completion of
the Project.
(f) "Cross Keys Property" means all of those land, buildings,
structures, facilities and improvements purchased by Shelter from
Columbia Mall, Inc. pursuant to the Agreement of Purchase dated
December 28, 1978.
(g) "Development Budget" means the Budget, attached hereto as
Schedule B, established and agreed to by the parties with respect
to the construction and completion of the Project, in the
aggregate amount of SIXTEEN MILLION EIGHT HUNDRED TWENTY-EIGHT
THOUSAND DOLLARS ($16,828,000.00), which Budget includes the
acquisition of the Cross Keys Property and the adjacent property
by the Partnership.
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(h) "Effective Date" shall be January 1, 1980 assuming all of the Preliminary
Conditions as set out in Article 8.00 hereof have been fulfilled in
accordance with the terms thereof;
(i) "Equitable Note" means the existing note in the original principal sum of
TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000.00) dated June 29,
1978 in favour of the Equitable Life Assurance Society of the United
States, which note is secured by Deed of Trust recorded in the Land Records
of Howard County, Maryland, in Liber 890, Folio 199, against the Cross Keys
Property.
(j) "Gap Loan" shall mean a loan in the amount of TWO MILLION SIX HUNDRED
THOUSAND DOLLARS ($2,600,000.00) obtained by the Partnership for the
purpose of funding all or any portion of the difference between the
Development Budget and the Construction Loan.
(k) "Gross Cash Flow" means the aggregate of:
(i) the aggregate cash flow from the operations of the Partnership as and
when collected;
(ii) The amount of any proceeds generated by virtue of the principal
balance of the Equitable Note being less than $2,500,000;
(iii) the amount of proceeds from any financing which is secured by the
Project in excess of the capital requirements of the Partnership
excluding, however, any proceeds resulting from any increase in the
amount of the Permanent Loan obtained pursuant to Section 8.02A
hereof; and
(iv) the proceeds of all operations or business interruption insurance
including refunds of premiums on cancellation.
(1) "Manager" shall mean Hospitality Management Corporation, a Texas
corporation, or such other person, firm or corporation as shall be
appointed by the partners in substitution therefor to manage the Project;
(m) "Net Cash Flow" means the amount, if any, by which the Gross Cash Flow
exceeds, in any fiscal period ending December 31st, the aggregate of all
cash expenditures incurred by the Partnership in the course of its
operations and the operation of the Project including, but not limited to,
the following:
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(i) All taxes and impositions levied against the Project;
(ii) Fees paid to Manager, wages paid for janitorial, maintenance and
managerial personnel for services rendered with respect to the Project
including Social Security taxes, unemployment insurance taxes and the
cost of such other additional benefits as are required by law;
(iii) Maintenance or repairs to the Project as determined in accordance
with generally accepted accounting principles;
(iv) Heat, water, gas and electric charges and the cost of trash removal;
(v) Premiums for all policies of insurance;
(vi) Supplies and miscellaneous expenses;
(vii) Advertising and promotional expenses in connection with the operation
of the Project;
(viii) Fees paid to Participation and Manager pursuant to the terms of
Articles 21.00 and 22.00 hereof;
(ix) Fees paid for audits of the operations of the Partnership as required
under the terms hereof;
(x) All cash expenditures in respect of principal and interest payments
under the first mortgage or any other mortgage secured against the
Project; and
(xi) All amounts expended as capital expenditures or replacements.
Any distribution of cash to either Shelter or Participation shall not be
considered a cash expenditure in determining "Net Cash Flow."
All invoices received with respect to expenditures incurred in the
Partnership operations and the operation of the Project shall be considered
paid within forty-five (45) days from the date of invoice.
(n) "Operating Loans" shall mean any loans advanced by either Shelter or
Participation to the Partnership to meet working capital requirements for
the purpose of making cash expenditures as and when due. The funds
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contributed to the Partnership to provide initial working capital as set
forth in the Development Budget shall not be considered an Operating Loan.
(o) "Partnership Interest" shall mean the interest of Participation and
Shelter, respectively, from time to time, in accordance with the terms of
this Agreement.
(p) "Permanent Loan" shall mean the loan in the principal amount of
$10,200,000 referred to in that certain letter of commitment dated October
2, 1979, as amended, issued by New England Mutual Life Insurance Company
to Participation for the financing of the Project.
(q) "Project" means the Cross Keys Property and the adjacent property and the
expansion of the existing Cross Keys Inn to include additional rooms,
restaurant, cocktail lounge, banquet facilities and a parking facility as
will be more particularly detailed and specified in the Development Budget
and construction contract to be completed on or before the effective date
in accordance with the Preliminary Conditions set out in Article 8.00
hereof.
(r) "Preliminary Conditions" means all of those conditions precedent as more
particularly set out in Article 8.00 hereof which must be fulfilled on or
before March 1, 1980.
(s) "Substantial Completion" means the date on which the architect for the
Project shall certify that all rooms, dining areas, lounges, parking
facility and other common amenities available within the Project are ready
for occupancy and use and that all applicable municipal, state or other
government licenses or permits have been obtained with respect to the full
use and operation of the Project.
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ARTICLE 6.00
OBJECTIVES OF PARTNERSHIP
6.01 The principal purpose of the formation of the Partnership is to joint
venture the development of the Cross Keys Property, presently owned by
Shelter, and the Adjacent Property, presently owned by Participation, for
the purposes of developing thereon an expanded hotel/commercial complex
with adequate parking facilities, all as more particularly set out in this
Agreement, and for that purpose, to construct, maintain, renovate, lease,
manage and operate, mortgage, subdivide, sell or transfer or acquire (by
ground leases, structural leases or otherwise) and to enter into agreements
and contracts to manage and operate the property contributed to the
Partnership from time to time.
6.02 Unless otherwise agreed to by the partners, the Partnership shall not
engage in any other business or activity provided that nothing herein
shall restrict the freedom of either partner individually to conduct any
other business or activity whatsoever without any accountability to the
Partnership to the other partner, even if such business competes with the
business of the Partnership.
6.03 For the purpose of maintaining the status quo of the Lease,
Participation and Shelter hereby mutually agree to extend the term of the
Lease to March 1, 1980 unless terminated earlier pursuant to the terms of
Article 8.00 hereof.
24
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ARTICLE 7.00
------------
CAPITAL
-------
7.01 The initial capital contribution of each of Participation and Shelter
shall be the sum of FIFTEEN DOLLARS ($15.00) and as a result of such
contributions, the Partnership shall be owned by Shelter and Participation in
the following proportions regardless of the relative amount of any additional
capital contributions made by the Partners pursuant to Sections 7.03, 7.04,
7.05 and 7.06 hereof:
Shelter - 50%
Participation - 50%
7.02 The initial capital contribution of each venturer shall be contributed on
the date that the Preliminary Conditions have been fulfilled.
7.03 In addition to the "initial capital contributions" as referred to in
Clause 7.01, on the date that the Preliminary Conditions have been fulfilled,
Shelter agrees to contribute the Cross Keys Property to the Partnership at an
agreed value of FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS ($4,500,000.00). The
Partnership, in payment therefor, shall record on the Partnership records the
following entries:
(a) Assumption of Equitable Note - $2,500,000
(b) Equity Contribution by Shelter - $2,000,000
==========
TOTAL $4,500,000
7.04 Participation, on the Effective Date, agrees to contribute to the
Partnership the Adjacent Property at and for an agreed value of NINE HUNDRED
AND FIFTY THOUSAND DOLLARS ($950,000.00). The Partnership shall record the
following entry with respect to the contribution of the Adjacent Property by
Participation:
(a) Equity Contribution by Participation - $ 950,000
==========
7.05 Participation further covenants and agrees with Shelter that it will
contribute to the Partnership by way of additional capital contributions the
following sums:
(a) TWO MILLION DOLLARS (2,000,000.00) during the construction of the
Project as and when required to enable the Partnership to meet
its obligations under the Development Budget;
The Partnership shall so record each additional capital contribution.
25
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7.06 Shelter further covenants and agrees with Participation that it will
contribute, at the date of closing of the Permanent Loan, by way of additional
capital contribution, the sum of ONE MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS
($1,250,000.00). The Partnership shall so record such additional capital
contribution.
7.07 In addition to the commitment by each of Shelter and Participation to
make additional capital contributions as otherwise set out in this Article,
each of Shelter and Participation agree to contribute any Net Cash Flow
generated by the Cross Keys Property during the Construction Period and
distributed to either Shelter or Participation, excluding Shelter's guaranteed
return under Clause 19.01(a) hereof, as may be necessary to fund any
construction costs for the Project in excess of the Development Budget. Such
additional capital contributions shall be made by the Partners on an equal
basis as and when required by the Partnership to meet such costs.
7.08 Participation agrees to contribute to the Partnership cash in the amount
of FOUR HUNDRED TWENTY-EIGHT THOUSAND DOLLARS ($428,000.00) representing net
proceeds realized on the sale of adjacent property to Borel Restaurant
Corporation.
7.09. Shelter shall be entitled to receive in cash from the Partnership the
difference between the Development Budget and the actual cost of development of
the Project, if less than the Development Budget (the "development cost
savings"), up to $300,000.00, to the extent that such amount has not been
distributed to Shelter pursuant to Section 8.02A hereof. Participation shall be
entitled to receive in cash from the Partnership any additional development
cost savings, up to $428,000.00. Any balance of development cost savings shall
be distributed to Shelter and Participation on an equal basis. Any portion of
the foregoing $428,000.00 contributed by Participation which is not returned to
Participation by way of development cost savings shall be deemed an equal
additional capital contribution by Shelter and Participation to the Partnership.
7.10. No interest shall be paid on any capital contributions to the Partnership.
26
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ARTICLE 8.00
PRELIMINARY CONDITIONS PRECEDENT
8.01 Notwithstanding the execution of this Agreement by Shelter and
Participation, the parties hereto acknowledge and agree that the obligations of
Shelter and Participation hereunder are conditional upon the following
conditions precedent first being fulfilled in full, or waived in writing by
both Shelter and Participation, on or before March 1, 1980:
(a) Receipt of a fixed lending commitment to finance the construction
and development of the Project in an amount (including the
payment of the Equitable Note) of not less than TEN MILLION TWO
HUNDRED THOUSAND DOLLARS ($10,200,000.00) on such terms and
conditions as are mutually satisfactory to Shelter and
Participation;
(b) Awarding of a fixed price bonded construction contract for the
items listed as "Building" and "Parking" on Schedule B for a
total fixed cost not to exceed SEVEN MILLION NINE HUNDRED ELEVEN
THOUSAND DOLLARS ($7,911,000.00);
(c) Receipt of a fixed lending commitment for the Gap Loan on such
terms and conditions as are mutually satisfactory to Shelter and
Participation; and
(d) Receipt of confirmation of all necessary government approvals,
zoning agreements, building permits and other requisite consents
or licenses to construct and operate the Project as contemplated
in accordance with the plans and specifications attached to the
construction contract referred to above.
In the event that the foregoing conditions precedent are satisfied on or prior
to March 1, 1980, the obligations of Shelter and Participation shall become
unconditional and the Partnership shall be deemed effective as of January 1,
1980, the Lease shall be deemed terminated as of the Effective Date, and all
items of income, expense and working capital with respect to the Cross Keys
Property shall be adjusted as of the Effective Date.
8.02 If the foregoing conditions precedent are not fulfilled, or waived in
writing by both Shelter and Participation on or before March 1, 1980, then this
Agreement shall automatically be terminated and at an end and no further rights
or obligations shall exist as between Participation and Shelter pursuant to the
terms hereof. Upon such termination the Cross Keys Property shall be reconveyed
to Participation as of March 1, 1980 free and clear of all liens, encumbrances
and restrictions except those existing as of conveyance of the Cross Keys
Property to Shelter or those subsequently created by Participation, and
Participation shall pay to Shelter FIVE HUNDRED THOUSAND DOLLARS ($500,000.00)
in cash and shall return the C.D.C. Note to Shelter. Upon such termination the
Agreement of Purchase shall be deemed terminated, the assumption agreement
relating to the Equitable Note shall be returned to Shelter, and there shall be
no further liability of Shelter and Participation to each other.
27
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ARTICLE 8.00A
PROJECT FINANCING
8.01A. Shelter agrees to use its best efforts to negotiate the Gap Loan on
behalf of the Partnership which, when combined with the Construction Loan, will
be used to fund the cost of construction of the Project. The Gap Loan may be
combined with the Construction Loan and treated as a participation therein.
The Gap Loan may be secured by a second deed of trust against the Project and
each Partner agrees to guarantee the payment of one-half thereof. Participation
further agrees to cause the CDC Note to be pledged to the Gap Loan lender as
additional security.
8.02A. Participation agrees, prior to the closing of the Permanent Loan, to use
its best efforts to obtain an increase in the amount of the Permanent Loan. The
first $2,000,000 of such additional proceeds shall be distributed as follows:
the first $300,000, representing the difference between the respective maximum
equity contributions of Participation and Shelter, shall be paid to Shelter,
and the balance shall be shared equally between the Partners. Any additional
proceeds over $2,000,000 shall be distributed as follows: the first $428,000,
representing the net proceeds from the land sale to Borel contributed by
Participation, to the extent not already paid to Participation pursuant to
Section 7.09 hereof, shall be paid to Participation, and the balance shall be
shared equally between the Partners.
28
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ARTICLE 9.00
REPRESENTATIONS OF PARTICIPATION
9.01 Participation hereby represents and warrants to Shelter that the Adjacent
Property is presently zoned so as to permit the construction and operation of
the Project as contemplated herein and that Participation presently has good
and marketable title in and to the Adjacent Property and is capable of
transferring clear title to the Adjacent Property to the Partnership as
contemplated hereunder.
9.02 Participation further represents to Shelter that based upon its studies of
the proposed Project as at the date of execution, Participation believes that
the Project can be constructed and completed within a total Development Budget
of SIXTEEN MILLION EIGHT HUNDRED TWENTY-EIGHT THOUSAND DOLLARS ($16,828,000.00)
based upon reasonable estimates to date; provided, however, that Participation
does not guarantee that the Development Budget will not be exceeded.
9.03 Participation further represents and warrants that the Cross Keys Property
is properly zoned for the intended use of it by the Partnership as part of the
Project.
29
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ARTICLE 10.00
PARTNERSHIP DECISIONS
10.01 The partners hereto agree that all Major Decisions, as defined in clause
21.03 hereof, with respect to the Partnership and the construction and
development of the Project shall be made by mutual agreement in the manner set
forth in this Article 10.00.
10.02 Where any partner wishes to request the other partner to consider a
formal Partnership Decision, such request shall be put in writing and shall be
delivered to the other partner. Such Partnership Decision shall be deemed
approved unless the other partner shall, within fifteen (15) days from the date
of receipt of such request, advise the other partner in writing as to its
objections.
10.03 For the purposes of dealing with each other, and advising the other as to
each partner's position or decision, each partner shall designate in writing
from time to time one or more persons who have the authority to speak for and
on behalf of each partner and to commit such partner so designating him to all
matters in respect of which a decision is required pursuant to the provisions
of this Agreement.
30
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ARTICLE 11.00
TITLE TO PARTNERSHIP ASSETS
11.01 The partners hereby agree that title to all assets of the Partnership,
together with all improvements, fixtures, buildings, personalty or other assets
acquired by the Partnership from time to time, shall be registered and recorded
in the name of the Partnership.
31
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ARTICLE 12.00
ACCOUNTING, BANKS AND RECORDS
12.01 The Manager of the Partnership shall maintain the books and records of the
Partnership in accordance with sound and generally accepted accounting
principles, showing all costs, expenditures, sales, receipts, assets,
liabilities, capital accounts, profits, losses and distributions to partners and
any other matter normally required to be accounted for, including all other
records convenient or incidental to recording the Partnership's business
affairs. The books and records of the Partnership shall be open to inspection by
each of the partners or their accredited representatives at any reasonable time
during business hours.
12.02 An individual capital account shall be maintained for each partner. Such
capital account shall be credited with each partner's respective capital
contributions, both initial and additional, and their respective share of
Partnership profits and charged with their respective distributions and share of
Partnership losses as may be determined in accordance with this Agreement and
generally accepted accounting principles.
12.03 The fiscal year of the Partnership shall be from the Effective Date of
this Agreement through to December 31, 1980, and thereafter, without any
mandatory interim reporting, January 1 through the last day of December in each
calendar year for the term of the Partnership unless changed by Partnership
decision.
12.04 Within one hundred twenty (120) days after the end of each fiscal year,
there shall be prepared and delivered to each partner a statement of income and
expenses showing the results of the Partnership operations during such year. The
records of account shall be examined and reviewed as of the close of each fiscal
year by an independent certified public accountant of nationally recognized
standing chosen by Partnership decision.
12.05 Concurrently with the provision of the profit and loss statement as
provided for in Clause 12.04 hereof, each partner shall be furnished with a copy
of such annual audit, including a balance sheet, a statement of the capital
accounts of the partners, and a statement of income and/or loss, together with a
certificate of said accountants covering the results of such audit, as soon as
reasonably practicable after the end of each fiscal year, but in no event later
than the earliest date required by the Partnership's lenders or mortgagees.
12.06 All decisions as to accounting principles and elections, whether for book
or tax purposes (and such decisions may be different for each purpose) shall,
subject to any other term or provision of this Agreement, be made by Partnership
Decision.
32
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ARTICLE 13.00
TAX STATUS AND REPORTS
13.01 Unless otherwise herein provided, the Partnership shall calculate
depreciation on its depreciable assets for income tax purposes under the
declining balances method of depreciation and shall annually claim the maximum
amount of depreciation pursuant to that method.
13.02 Participation shall prepare or cause to be prepared all information
returns and statements, if any, which must be filed on behalf of the
Partnership with any taxing authority in the United States of America, and
shall submit such returns and statements to both partners for their approval
prior to filing. Within one hundred twenty (120) days after the end of each
fiscal year of the Partnership, the manager shall prepare or cause to be
prepared and mailed to each partner a report setting forth in sufficient detail
all such information and data with respect to the business transactions and
operations of the Partnership for the prior fiscal year as shall enable each
partner to properly understand the annual audit and financial information
provided in accordance with Article 12.00 so as to enable each partner to
prepare its state and federal income tax returns in accordance with the laws,
rules and regulations then prevailing.
33
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ARTICLE 14.00
BANK ACCOUNTS
14.01 During the Construction Period, the partners agree to cause the
Partnership to establish a "construction bank account" into which bank account
shall be deposited all capital contributions, capital loans, or proceeds from
any financing arranged by the partners to finance the construction and
development of the Project.
14.02 Out of such construction bank account, all expenditures incurred with
respect to the construction and development of the Project shall be paid by
cheque drawn on such bank account.
14.03 Commencing with the Effective Date, a general operating bank account
shall be established by the Partnership into which all Gross Cash Flow received
by the Partnership from time to time shall be deposited. All cash expenditures,
loan repayments or capital distributions to the partners shall be made by
cheque drawn on such bank account.
14.04 For the purposes of the construction bank account and the general
operating bank account, signing authority on behalf of the Partnership shall be
one or more of the President, Vice-President, Treasurer, Assistant Treasurer,
or Controller, or other designee of Participation, unless otherwise decided by
Partnership Decision. The Partners may designate an official or employee of
Manager signing authority with respect to the general operating bank account
under such limitations as they may prescribe.
14.05 The Partnership may, by Partnership Decision, agree to and authorize
the establishment and operation of additional bank accounts from time to time
and may designate the signing authorities thereon.
34
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ARTICLE 15.00
RESPONSIBILITIES OF PARTNERSHIP
DURING THE CONSTRUCTION PERIOD
15.01 Participation shall have the responsibility and authority, except where
the matter requires a Partnership Decision as herein elsewhere provided, to do
and perform the following functions in connection with the construction and
development of the Project during the Construction Period:
(a) preparation of a timetable for fulfillment of all functions
necessary to construct and complete the Project;
(b) application for and obtaining of such zoning, subdivision and
building permits and other government consents, approvals,
permits and licenses as are required from time to time to
complete the construction and development of the Project and to
acquire the necessary occupancy permits and architect's
certificate as are required as contemplated within the definition
of "Substantial Completion" under Clause 5.01 of this Agreement;
(c) review and supervision of the progress of construction and
approval of all payments for construction and other expenditure
during the construction period;
(d) employ such engineers, architects, land planners, attorneys,
accountants and others as are required to fulfill its
responsibilities during the Construction Period;
(e) enter into contracts for architectural and engineering services
and construction and development of the Project;
(f) execute any documents on behalf of the Partnership and authorize
the manager to make any payments on behalf of the Partnership
which are necessary or appropriate with respect to the
construction and development of the Project:
(g) file or cause to be filed and process applications for land
acquisition, construction and permanent financing of the Project,
and execute any documents related there to, including but not
limited to a note and deed of trust against the Project;
(h) obtain and/or cause to be provided accounting and administrative
services for the processing of all construction costs and
payments until the Project shall be completed, such services to
be provided to the Partnership at no cost.
35
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(i) plan or cause to be planned or developed a marketing and
promotional program for the Project.
(j) with the consent of Shelter (which consent shall be deemed given
unless stated to the contrary in writing or by telex or telegram
within ten (10) days after receipt by Shelter of request for
such consent):
(1) settle, abandon, compromise or arbitrate any claims
held by or asserted against the Partnership during the
Construction Period and through the completion and opening of the
Project for intended occupancy;
(2) negotiate a contract for the management of the Cross
Keys Inn and the Project, as and when completed with Hospitality
Management Corporation (the "Manager") or such other management
company as Participation shall determine, in substantially the
same form as the existing management contract for the Cross Keys
Property, a copy of which is attached as Schedule C, with the
exception of the management fees provided for therein which shall
be adjusted as reasonable and appropriate, it being understood
that the fees payable to such manager shall be in addition to and
exclusive of all actual costs and expenses of services, supplies,
materials and equipment required for the operation and
maintenance of Cross Keys Inn and the Project, such services as
more particularly outlined in Article 22.00 hereof.
15.02. With respect to the undertakings of Participation as to the
supervision and completion of the Project, such undertakings shall be deemed to
have been completed in accordance with the terms hereof upon the Project being
substantially completed (as said term is defined in Clause 5.01 hereof).
15.03. Participation through its Controller, will complete and certify an
audit of the total costs of the Project and deliver same to Shelter within one
hundred twenty (120) days of Substantial Completion. If Participation and
Shelter agree, such certification shall be verified by an independent audit,
the cost of such audit to be considered a project expense and included in the
Development Budget.
36
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ARTICLE 16.00
LOAN COMMITMENTS OF SHELTER AND PARTICIPATION
DURING CONSTRUCTION PERIOD
16.01 Participation covenants and agrees during the Construction Period to
provide, by way of Operating Loans to the Partnership, on a non-recourse basis,
the financial requirements of the Partnership to meet the operating commitments
of the existing Cross Keys Inn as and when due during the Construction Period.
Shelter covenants and agrees during the Construction Period to provide by way of
demand loans to the Partnership all financial requirements necessary to complete
the construction and development of the Project which cannot be financed out of
monies required to be contributed by way of additional capital contributions by
the partners or out of net proceeds of any mortgage or other financing arranged
with respect to the construction and development of the Project (the "Capital
Loans").
16.02 All Operating Loans from Participation to the Partnership shall be
evidenced by a non-recourse note of the Partnership in favour of Participation
and shall provide for repayment on demand with interest thereon at a rate equal
to fourteen percent (14%) per annum from date of advance to date of payment.
16.03 All Capital Loans by Shelter to the Partnership shall be evidenced by a
non-recourse note from the Partnership to Shelter and shall provide for
repayment on demand with interest at an annual rate of sixteen percent (16%)
per annum from date of advance to date of payment.
16.04 The Partnership shall make interest payments under the notes delivered to
Participation in respect of Operating Loans and Shelter in respect of Capital
Loans on June 30 and December 30.
16.05 Shelter and Participation each covenant and agree with the Partnership
and each other that it will not demand payment of such notes so as to
financially embarrass the Partnership except in this following circumstances:
(a) dissolution or termination of the Partnership for any reason
whatsoever;
(b) sale of the other partner's Partnership interest;
(c) the petitioning of the Partnership into bankruptcy or the
obtaining by any person, firm or corporation of a judgment of a
court of competent jurisdiction for unpaid monies owing by the
Partnership to such third party person, firm or corporation,
which judgment remains undischarged for a period in excess of
thirty (30) days.
37
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ARTICLE 17.00
LOAN COMMITMENTS OF
SHELTER AFTER CONSTRUCTION PERIOD
17.01 After the Construction Period, Shelter undertakes and agrees to lend to
the Partnership all funds required by the Partnership not available through
non-recourse bank or other third party financing for the purpose of enabling the
Partnership to pay all cash expenditures incurred in the course of operation of
the Project by the Partnership from time to time.
17.02 For the purposes of the Operating Loans made by Shelter to the Partnership
in accordance with the terms of this Article 17.00, the provisions of Clause
16.02, 16.04 and 16.05 shall apply, mutatis mutandis as though Shelter were the
lender thereunder.
17.03 For the purpose of Section 17.01 hereof, cash expenditures for the
purposes of capital additions to the Partnership assets that constitute
modifications, renovations, improvements and/or betterments thereto shall be
considered to be cash expenditures incurred in the course of the operation of
the Project by the Partnership.
38
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ARTICLE 18.00
ALLOCATION OF PARTNERSHIP PROFITS AND CREDITS
18.01 During the operation of the Partnership, all losses and profits of the
Partnership shall be allocated on the following basis:
(a) If the Partnership has a profit for any fiscal year, such profit shall
be allocated to each partner in the same proportion as the aggregate
Net Cash Flow distributed to each partner during the fiscal year bears
to the aggregate Net Cash Flow distributed to both partners during
such fiscal year.
(b) All losses of the Partnership shall be allocated to Shelter.
For purposes of this Agreement, the terms "profit" and "loss" shall mean the
profit and loss of the Partnership as finally computed for Federal income tax
purposes in accordance with the United States Internal Revenue Code (the
"Internal Revenue Code") and the rules and regulations issued thereunder.
18.02 All tax preference items, as that term is defined in the Internal Revenue
Code and the rules and regulations issued thereunder, with respect to any fiscal
year for which there are losses allocated to Shelter pursuant to Section
18.01(b) shall be allocated solely to Shelter. All tax preference items with
respect to any fiscal year for which the Partnership has a profit shall be
allocated to each Partner in the same proportion as the aggregate Net Cash Flow
distributed to each Partner during the fiscal year bears to the aggregate Net
Cash Flow distributed to both Partners during such fiscal year.
18.03 Any investment credits to which the Partnership is entitled with respect
to purchases during the Construction Period and any subsequent recapture thereof
shall be allocated solely to Shelter. Any investment credits with respect to
purchases after the Construction Period to which the Partnership is entitled and
any subsequent recapture thereof shall be allocated to each Partner in the same
proportion as the aggregate Net Cash Flow distributed to each Partner during the
fiscal year in which the purchases occur bears to the aggregate Net Cash Flow
distributed to both Partners during such fiscal year.
18.04 To the extent permitted under the Internal Revenue Code, all interest,
real estate taxes, sales taxes and similar items incurred during the
Construction Period shall not be capitalized but shall be deducted as expenses.
39
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ARTICLE 19.00
CASH DISTRIBUTIONS
19.01 During the Construction Period:
(a) firstly, an annual amount equal to TWO HUNDRED THOUSAND DOLLARS
($200,000.00) of Net Cash Flow from the operations of the Project
shall be distributed monthly to Shelter during each fiscal year
during the Construction Period, subject to adjustment pursuant to
Section 19.02 hereof;
(b) secondly, an amount up to TWO HUNDRED THOUSAND DOLLARS
($200,000.00) annually out of any available Net Cash Flow shall be
paid to Participation monthly, subject to adjustment pursuant to
Section 19.02 hereof;
(c) thirdly, any available Net Cash Flow shall be paid to Shelter in
payment of all interest and/or principal owing under notes
delivered by the Partnership to Shelter in respect of Capital
Loans then unpaid;
(d) fourthly, any available Net Cash Flow shall be paid to Shelter in
repayment of any interest or principal owing under any "guaranteed
return notes," as defined in Section 19.06 hereof, remaining due
and unpaid;
(e) fifthly, any available Net Cash Flow shall be paid to
Participation in repayment of any principal and/or interest due
and owing under any notes delivered by the Partnership to
Participation in respect of any Operating Loans remaining due and
unpaid;
(f) sixthly, any remaining available Net Cash Flow shall be
distributed equally to Participation and Shelter, subject to the
provisions of Article 20.00 hereof.
19.02 In the event that any fiscal year during the Construction Period is less
than twelve (12) months, the amounts to be distributed to Shelter and
Participation under Sections 19.01(a) and (b), respectively, shall be in the
same ratio to $200,000.00 as the number of months in the given fiscal year is to
twelve. In the event that the Construction Period ends during a fiscal year, the
amounts to be distributed to Shelter and Participation under Sections 19.01(a)
and (b), respectively, shall be in the same ratio to $200,000.00 as the number
of elapsed months in the fiscal year up to the end of the Construction Period is
to twelve.
19.03 Commencing with the day following the Construction Period, and for the
balance of the term of the Partnership, Net Cash Flow shall be distributed to
the partners in the following manner:
40
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(a) firstly, payment to the Manager of any deferred and unpaid
management fees required pursuant to any management agreement
negotiated in accordance with Article 22.00 hereof;
(b) secondly, any available Net Cash Flow shall be paid to Shelter in
payment of all interest and/or principal owing and notes
delivered by the Partnership to Shelter in respect of Capital
Loans then unpaid;
(c) thirdly, any available Net Cash Flow shall be paid to Shelter in
repayment of any interest or principal owing under any
"guaranteed return notes," as defined in Section 19.06 hereof,
remaining due and unpaid;
(d) fourthly, any available Net Cash Flow shall be paid to Shelter in
repayment of any principal and interest due and owing under any
notes delivered by the Partnership to Shelter in respect of any
Operating Loans remaining due and unpaid;
(e) fifthly, any available Net Cash Flow shall be paid to
Participation in repayment of any principal and interest due and
owing under any notes delivered by the Partnership to
Participation in respect of any Operating Loans remaining due and
unpaid;
(f) sixthly, an amount up to TWO HUNDRED THOUSAND DOLLARS
($200,000.00) shall be paid to Shelter out of available Net Cash
Flow, such amount to be paid monthly, subject to adjustment
pursuant to Section 19.04 hereof;
(g) seventhly, an amount up to TWO HUNDRED THOUSAND DOLLARS
($200,000.00) shall be paid to Participation out of available Net
Cash Flow, such amount to be paid monthly, subject to adjustment
pursuant to Section 19.04 hereof;
(h) eighthly, any remaining available Net Cash Flow shall be
distributed equally to Participation and Shelter, subject to the
provisions of Article 20.00 hereof.
19.04 In the event that the Construction Period ends during a fiscal year, the
amounts to be distributed to Shelter and Participation under Sections 19.03(f)
and (g), respectively, for the given fiscal year shall be in the same ratio to
$200,000 as the number of remaining months in the fiscal year is to twelve.
19.05 All cash flow distributions other than the payments under subclauses
19.01(a), 19.01(b), 19.03(f) and 19.03(g) shall be distributed not later than
ninety (90) days after the end of each fiscal year unless the Manager makes a
good faith determination that such funds, or some portion thereof, are
necessary for the operation of the joint venture in accordance with the
provisions of Article 20.00 hereof.
41
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19.06 Notwithstanding the provisions of Clause 19.01, the parties agree that
Shelter's entitlement to an annual distribution under subclause 19.01(a) is
guaranteed by the Partnership. Accordingly, if in any year during the
Construction Period, there is not sufficient Net Cash Flow to make the required
payment to Shelter under 19.01(a), the Partnership shall execute and deliver to
Shelter, within ninety (90) days of the end of each fiscal year, a non-recourse
promissory note (the "Guaranteed Return Note") evidencing a demand debt due in
an amount equal to the difference between the amount actually distributed to
Shelter under subclause 19.01(a) and the guarantee amount. The principal amount
of the note shall bear interest at an annual rate equal to fourteen percent
(14%) per annum, calculated from date of execution to date of payment. Shelter
agrees that the provisions of Clause 16.05 shall apply to these Guaranteed
Return Notes.
19.07 In order to secure to Columbia Mall, Inc. repayment of the principal
and interest owing under the C.D.C. Note, from time to time, Shelter does hereby
pledge all of its rights and entitlement to receive distributions from the
Partnership in favour of Columbia Mall, Inc., including, but not limited to,
cash distributions required under Sections 19.01(a), (c), (d) and (f) and
Sections 19.03(b), (c), (d), (f), and (h). If Shelter, at any time, shall be in
default under any payments due under the C.D.C. Note, then Columbia Mall, Inc.
shall be entitled to give written notice to Participation and Shelter that it is
exercising its rights under the pledge hereby created to receive all cash
distributions otherwise payable to Shelter and to apply them against all amounts
in respect of which Shelter is in default.
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ARTICLE 20.00
WORKING CAPITAL RESERVES
20.01 When and if the Manager with the concurrence of Participation and
Shelter, shall determine that a working capital reserve is required for the
future anticipated obligations of the Partnership, a working capital account
reserve, not to exceed the sum of:
(a) one month's debt service on any financing obtained by the joint
venture, excluding Operating Loans or Capital Loans from
Shelter; and
(b) two months' operating expenses ad determined in accordance with
the "operating budget" (as hereinafter defined);
then any other amounts of Net Cash Flow otherwise available for distribution in
accordance with Article 19.00 shall be withheld and maintained in the
Partnership's operating bank account.
20.02 If the Manager shall make a determination under this Article for
a specific amount for a working capital reserve, and there is not sufficient
Net Cash Flow from the operations of the Partnership to provide such reserve,
then Shelter shall, within fourteen (14) days from receipt of a notice from the
Manager, advance the difference between the working capital reserve required
and the Net Cash Flow available and such advance shall be deemed to be an
Operating Loan under the provisions of Article 17.00 hereof.
20.03 As one of its obligations hereunder, the Manager, in concert with
Participation, shall prepare an operating budget for the next fiscal year of
the Partnership no later than sixty (60) days prior to the expiration of each
fiscal year and shall provide a copy of such budget to Shelter for its approval.
Once approved by Shelter and Participation, the Manager shall
implement and manage the budget and shall conduct the Partnership operations as
closely as possible in accordance with the budget.
20.04 The budget shall be up-dated quarterly by the Manager and shall be
amended from time to time as required only with the approval of the partners by
Partnership Decision.
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ARTICLE 21.00
OVERALL MANAGEMENT OF THE PARTNERSHIP
21.01 The overall management and supervision of the Partnership affairs and
its operations shall be the responsibility of Participation, for which
Participation shall receive the sum of TEN THOUSAND DOLLARS ($10,000.00) per
annum to be paid as an operating expense of the Partnership commencing after
Substantial Completion of the Project.
21.02 Notwithstanding the undertaking of Participation to provide the
overall supervision and management of the Partnership affairs, except where
herein expressly provided to the contrary, all decisions with respect to the
management and control of the Partnership made and agreed to by the partners by
Partnership Decision shall be binding on the Partnership and on the partners.
21.03 After the date on which the Preliminary Conditions have been
fulfilled; no action will be taken, Partnership obligation incurred, or Cash
Expenditure made by the Partnership, Participation, any partner, or the
Manager, with respect to any matter affecting any "Major Decision" unless
approved by Partnership Decision. For the purposes hereof, a "Major Decision"
shall include:
(a) acquisition of any additional lands;
(b) amendment or alteration of any of the plans or specifications
with respect to the Project changing the cost thereof by $5,000
or more;
(c) amendments or alterations to any financing document approved
under Article 8.00 in satisfaction of one of the Preliminary
Conditions;
(d) the sale, lease, transfer, remortgaging or placing of any other
encumbrance or charge on any part of the Project or other
Partnership assets;
(e) provide the depreciation and accounting methods for federal
income tax purposes consistent with the other provisions of this
Agreement and approving the budget;
(f) determining whether or not any available Net Cash Flow after all
specific distributions provided for in this Agreement should be
made to the partners;
(g) making any expenditure or incurring any obligation by or on
behalf of the Partnership for any transaction except for
expenditures properly made and obligations properly incurred
pursuant to the Development Budget or the plans and specifications
approved in the construction contract entered into in satisfaction
of the Pre-
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liminary Conditions, and except any expenditures or obligations
incurred in the ordinary and normal operation of the Project;
(h) the negotiation of any contract with a manager other than H.M.C.;
(i) any other decision or action which by the provision of this Agreement
is required to be approved by the partners.
21.04 In addition to any other duties or responsibilities of Participation as
set forth in this Agreement, Participation shall perform the following duties
with respect to its overall management and supervision of the Partnership:
(a) implement all Major Decisions as approved by the partners in
accordance with the provisions of Clause 21.03;
(b) review and approve all budgets and financial statements and reports
required to be prepared and submitted by the Manager prior to
submission to Shelter of same for Shelter's approval;
(c) negotiate and contract for additional improvements to the Project from
time to time as authorized by Partnership Decisions;
(d) protect the titles and interests of the Partnership in respect to the
Project and any other asset owned by the Partnership from time to
time.
21.05 It is understood and agreed that Participation shall act as the
Partnership's representative in connection with any State or Federal tax audit
of the operations of the Partnership and the Project. The Management Fee set
forth in Article 21.01 hereof shall not cover any services rendered in
connection with such audits and the Partnership shall reimburse Participation
for such services as an operating expense at the average rate of $60.00 per
hour or in such amount as The Rouse Company Tax Department may actually charge,
whichever is lower, for time expended by any representatives in connection with
any such audit. Participation shall not retain counsel or accountants other
than those employed by The Rouse Company Tax Department in connection with any
such audit without the consent of Shelter, but in the event that the Partners
agree to hire counsel or accountants, the cost thereof shall be paid by the
Partnership as an operating expense.
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ARTICLE 22.00
RESPONSIBILITIES OF MANAGER
22.01 Participation shall attempt to negotiate and complete a management
agreement with H.M.C. in accordance with clause 15.01(j)(2) of this Agreement.
22.02 Notwithstanding the provisions of Schedule "C" attached hereto, the
management contract to be entered into between the Partnership and H.M.C. shall
include the following responsibilities and undertakings on the part of Manager:
(a) implementation of major Partnership Decisions as delegated to the
Manager by Participation;
(b) make and enforce credit policies (including entering agreements with
credit card organizations);
(c) make and determine terms of admittances and charges for rooms and
services in connection therewith;
(d) enter into, execute and consummate contracts, agreements, leases,
licenses, grants and concessions for space in or on the Project,
including contracts for the furnishing for the Project of utilities and
services which are normally provided in connection with the maintenance
and operation of similar properties;
(e) provide entertainment, food and beverages and other services generally
found in comparable facilities;
(f) maintain the Project,.purchase operating equipment and make repairs and
replacement of furnishings and equipment, as reflected in the operating
budget in each year;
(g) engage in all phases of advertising, promotion and publicity relating
to the Project in accordance with the operating budget in each year;
(h) provide qualified, bonded, trustworthy, competent and sufficient
personnel, including supervisory personnel, to undertake the proper
performance of the management obligations contemplated herein;
(i) purchase all operating supplies and other material supplies necessary
for the operation of the Project as allowed by the operating budget in
each fiscal year;
(j) make or install or cause to be made or installed, all budgeted,
necessary or desirable repairs, decorations, renewals, revisions,
alterations, rebuildings, replace-
46
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ments, additions and improvements in and to the Project, and all
buildings, furnishings and equipment situate thereon;
(k) take all reasonable precautions to protect and safeguard the assets of
the Partnership and to take all reasonable precautions to preserve the
assets of the Partnership and all licenses and permits required in
connection with the operation of the Project;
(l) to cause within the framework of this Agreement, the management
agreement and the annual operating budget, to do all such actions and
things as may be done in and about the Project as shall be necessary;
(m) deposit all monies received by it for and on behalf of the Partnership
or the Project into the operating bank account as required by the
provisions of this Partnership Agreement;
(n) prepare and deliver to Participation financial statements and reports
as provided for in this Agreement;
(o) pay all ad valorem taxes, assessments, and other impositions applicable
to the Project;
(p) keep all books of account and other records of the Project;
(q) to the extent that funds of the Project are available therefor, pay any
and all debts and other obligations and commitments of the Project
including amounts due under permanent financing secured by the Project
and other loans by the Partnership in respect of the Project;
(r) superintend the management and operation of the Project;
(s) comply with all present and future laws, ordinances, orders, rules,
regulations and requirements of all federal, state and municipal
governments, courts, departments, commissions, boards and officers,
the Constitution of the United States of America, any national or local
board of fire underwriters, or any other body exercising functions
similar to those of any of the foregoing, foreseen or unforeseen,
ordinary as well as extraordinary, which may be applicable to the
Project;
(t) carry and maintain all such insurance in such amounts as may be
required by the partners, or by any mortgage secured against the
Project, including, but not limited to, fire and extended coverage
insurance, public liability insurance, business interruption insurance,
and workmen's compensation insurance.
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ARTICLE 23.00
DEALING IN PARTNERSHIP INTERESTS
23.01 Except as provided in this Article, no partner shall sell, transfer,
assign, mortgage, hypothecate or otherwise encumber or permit or suffer any
encumbrance of all or any part of its interest in the Partnership unless
approved by the other partner, such approval not to be unreasonably withheld.
Except as provided for in Clause 23.02, no partner shall sell, transfer, assign
or otherwise transfer its interest in the Partnership prior to the completion of
the Construction Period. Any attempt to so transfer or encumber any such
interest shall be void and of no binding force or effect on the other partner
hereto, and shall not vest any title or interest in any such third party
transferee, assignee or purchaser.
23.02 Any partner may, without obtaining the consent of the other partner,
assign or transfer any or all of its right, title and interest in the
Partnership to either:
(a) a parent corporation which owns all or substantially all of the
outstanding shares of the partner (the "Partner's Parent"), or
(b) any corporation, all or substantially all of the outstanding
shares of which are owned ether by such partner or by such
Partner's Parent ("Parent's Affiliate");
but any such interest so assigned or transferred shall not be further assignable
or transferable without the prior written consent of the other partner, such
approval not to be unreasonably withheld. It is also agreed that no partner
shall assign its interest in the Partnership by way of a sale of stock of any
Partner's Affiliate into which the Partnership interest of the partner may be
transferred.
23.03 Any permitted assignment to a Partner's Parent or Partner's Affiliate
shall only be effective if the Partner's Parent or Partner's Affiliate has a
financial and business reputation and net assets comparable, as confirmed in
writing by the other partner wishing to make the assignment, and only if prior
to or concurrently with such assignment, the assignee agrees in writing to be
bound by all of the terms and conditions of this Agreement to the same extent as
the original partner, as if such assignee were an original party hereto.
23.04 At any time after the Construction Period, a partner may sell or transfer
its interest in the Partnership, provided such partner (hereinafter referred to
as "the selling partner") first offers the other partner an opportunity to
purchase his interest in accordance with the following terms and provisions:
(a) The partner wishing to sell or otherwise transfer his Partnership
interest shall first notify the other partner of such intention.
If the basis of such notice is the receipt of a bona fide offer
to purchase from a third party, the selling partner shall advise
the other
48
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partner of all terms and conditions of such offer. If the selling
partner is not in receipt of a bona fide offer from a third party, a
valuation of the selling partner's interest shall then be made in the
manner provided in Clause 25.01, and copies of the completed valuation
report shall be furnished to the other partner.
(b) Within thirty (30) days after receipt of the terms and conditions of a
bona fide offer by a third party or the valuation report, the other
partner may elect to purchase the selling partner's interest at the
price set forth in such a bona fide offer or said valuation report.
The partner electing to purchase the selling partner's interest shall
send written notice of such election to the selling partner within
such thirty (30) day period, and failure to send written notice of
such election within such thirty (30) day period shall be conclusively
deemed to be a decision not to purchase the selling partner's
interest.
(c) If the other partner does not wish to purchase the selling partner's
interest, the selling partner may then sell or otherwise transfer its
interest to any third person, subject to the limitations set forth in
Clause 23.05, 23.06, and 23.07 of this Article. However, if the
selling partner cannot sell his interest for the amount of the bona
fide offer or for the amount fixed in the valuation report, or an
amount in excess thereof, his right to sell his interest for a less
amount shall be subject to the right of first refusal of the other
partner as hereinabove provided, except that said thirty (30) day
period within which a partner may elect to purchase shall be decreased
to a period of fifteen (15) days from the receipt of written notice
from the selling partner of the price contained in a further bona fide
offer for the interest sought to be sold.
(d) If, in any event, the selling partner shall not consummate the sale or
other transfer of its interest within six (6) months after the
expiration of the original thirty (30) day period established under
subclause (b), the procedure set forth in this Section 23.04 must be
reinstated with respect to the same or any other sale.
(e) The cost of the valuation report shall be borne by the selling partner
unless its interest is purchased by the other partner, in which case,
one-half (1/2) of such cost shall be borne by the selling partner and
one-half by such other partner.
23.05 Not sale or transfer of a fractional part of a partner's interest in the
Partnership to a person not already a partner shall be permitted, but a partner
may permit one or more other persons to participate in his share of the profits
and losses. Any such parti-
49
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cipation by a third party shall not make such third party a partner or result
in any privity whatsoever between such third person and the Partnership, such
third person's rights and obligations being restricted solely to those between
himself and the partner who has permitted such participation pursuant to the
participation agreement between them.
23.06 Neither partner shall have the right to transfer its interest in the
Partnership to any third person, nor shall any termination of this Partnership
be effected during any period of restoration of the Project after partial
condemnation or a fire or other casualty or at any time during the Construction
Period except with the consent of the other partner.
23.07 Any purchaser or permitted assignee of an interest in the Partnership
must first execute a written acknowledgement that he will be bound by all the
terms of this agreement prior to acquiring any entitlements in and to the
Partnership and this agreement.
23.08 Nothing herein shall be deemed to prohibit the pledge of the issued
and outstanding stock of Participation by the holder thereof as additional
security pursuant to those certain Note and Exchange Agreements dated August 8,
1975 entered into by and between The Howard Research And Development
Corporation and various lenders relating to the financing of the new town of
Columbia, Maryland.
50
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ARTICLE 24.00
DEFAULT
24.01 For the purposes of this Article, the term "Events of Default" shall
include the following:
(a) the failure of any partner to make an additional capital
contribution or Operating Loan or Capital Loan in accordance with
the provisions of this Agreement and a continuance of such
failure after the giving to such partner by the other partner or
the Manager of the Project of a written request for such
additional capital contribution or Loan and such default
continues for a period in excess of twenty (20) days following
the date of notice of default;
(b) the failure by any partner to comply with, or the violation by a
partner of any material provisions in this Agreement (other than
that specified in subclause (a) above) and the continuance of
such failure or violation for a period of twenty (20) days after
written notice of such failure or violation is given to such
partner by the other partner specifying the details and nature of
such failure or violation;
(c) any default by Shelter in making payments of principal and
interest as required by the terms of the C.D.C. Note;
(d) the institution by a partner of proceedings to be adjudicated a
voluntary bankrupt, its consent to the filing of a bankruptcy
proceeding against it, its filing of a petition or answer or
consent seeking reorganization under the Federal Bankruptcy Act
or any other similar federal or state law, or its consent to the
filing of any such petition;
(e) the entry against a partner of a decree or order of a court
having jurisdiction adjudging it a bankrupt or insolvent or
approving a petition seeking reorganization under the Federal
Bankruptcy Act or any other similar applicable federal or state
law if such decree shall have continued undischarged or unstayed
for a period in excess of thirty (30) days;
(f) the entry against a partner of a decree or order of a court
having jurisdiction for the appointment of a receiver or
liquidator or trustee or assignee, in bankruptcy or insolvency,
of all or substantially all of its property, or for the winding
up or liquidation of its affairs, and such decree or order shall
have continued undischarged or unstayed for a period in excess of
thirty (30) days;
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(g) the assignment by a partner for the benefit of its creditors, the
admission in writing of its inability to pay its debts generally as
they become due, or its consent to the appointment of a receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of it or
of all or substantially all of its property.
24.02 In the event a partner commits an Event of Default, then the following
provisions shall govern and apply:
(a) A non-defaulting partner ("the Advancing Partner") may advance to the
Partnership funds to be contributed by the Defaulting Partner and such
amount shall become immediately due and payable from the Defaulting
Partner with interest from the date of advance at a rate equal to four
percent (4%) above the prime rate of interest charged from time to
time by The Chase Manhattan Bank; provided, however, that to the
extent that the default consists of the refusal to make any loan to
the Partnership required under the terms hereof, the interest rate to
be paid the Advancing Partner shall not be less than the interest rate
required to be paid by the Partnership on such loan as set forth
herein. Such advance shall not be deemed to cure such benefit.
(b) Until repayment of such advance plus interest by the Defaulting
Partner;
(i) the Advancing Partner shall have a first right of lien on all
interest of the Defaulting Partner in the Partnership; and
(ii) all distributions, payments or other entitlements accruing to or
payable to the Defaulting Partner arising out of his interest in
the Partnership interest, including but not limited to all
distributions required under Article 19.00 hereof shall be paid
over to the Advancing Partner and shall be applied towards
repayment of the of the outstanding advance together with
interest owing thereon.
(c) For a period of ninety (90) days after notice of default by the
Advancing Partner to the Defaulting Partner, the Defaulting Partner
shall be entitled to either negotiate with the Advancing Partner for
the purchase of the Defaulting Partner's interest in the Partnership
by the Advancing Partner on mutually agreeable terms and conditions,
or shall be entitled to solicit third parties in respect of obtaining
an offer in respect of such Defaulting Partner's interest in the
Partnership.
If, within the said ninety (90) day period, the Defaulting Partner is
able to obtain a bona fide third party
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offer in respect of such Defaulting Partner's interest in the
Partnership, then the rights of first refusal provided for under
Article 23.00 of this Agreement shall apply.
If, at the end of said ninety (90) day period, the Defaulting Partner
has not been able to obtain any bona fide third party offers with
respect to the purchase of his Partnership interest, then the
Advancing Partner, by written notice to the Defaulting Partner may
either:
(i) terminate this Partnership, in which event the provisions of
Article 26.00 shall apply, or
(ii) purchase the Defaulting Partner's interest in the Partnership at
"book value." For the purposes hereof, the auditors of the
Partnership will determine book value in accordance with
generally accepted accounting principles.
(d) In the event that the Advancing Partner shall elect to purchase the
Defaulting Partner's interest in the Partnership at book value subject
to subclause (c) above, then the purchase price shall be determined by
the auditors for the Partnership within ninety (90) days from the date
of notice by Advancing Partner to the Defaulting Partner of its
election to so purchase and payment of the purchase price shall be
made in the following manner:
(i) partial payment shall be made by crediting the Defaulting
Partner with the amount of money advanced by the Advancing
Partner on behalf of the Defaulting Partner plus interest owing
thereon;
(ii) the balance, if any, shall be paid only out of the Advancing
Partner's distribution of profits from the Project, if any, and
the Defaulting Partner shall have a first charge thereon for
this purpose;
(iii) if book value shall be a negative amount, then the Defaulting
Partner shall have no obligation to pay the Advancing Partner
the amount of such negative balance;
(iv) notwithstanding Section 16.05(b) hereof, the Defaulting Partner
agrees not to call any Capital or Operating Loan or Guaranteed
Return Notes held by it; provided, however, that such
obligations may either be paid out of available Net Cash Flow in
the same priority set forth in Article 19.00, or paid in full at
any time, in the sole discretion of the Advancing Partner.
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(v) the Defaulting Partner agrees to execute any and all conveyances
and other documents reasonable and necessary to transfer its
interest in the Partnership to the Advancing Partner.
No interest shall be paid on the purchase price to the Defaulting Partner.
54
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ARTICLE 25.00
VALUATION OF PARTNERSHIP INTERESTS
25.01 If, for any purposes under this Agreement, a valuation of the fair market
value of the assets of the Partnership or the partners' Partnership interest is
required or desired to be determined, such value shall be determined in the
following manner:
(a) An appraisal of the Project and all other assets shall be made by a
board of two qualified appraisers, each in good standing as an M.A.I.
under, as and so designated by, the American Institute of Real Estate
Appraisers; provided, however, that any officer of Harris, Kerr,
Forester & Company or Laventhol and Horvath, having at least ten (10)
years experience in valuing hotel properties, shall also be considered
qualified appraisers for all purposes under this Article 25.00 even
though such officer may not have the M.A.I. designation. One appraiser
shall be selected by the Selling Partner and the other by the
remaining partner. If any party shall not appoint an appraiser within
fourteen (14) days after notice giving rise to the need for such
appraisal has been received, the other partner may appoint the second
appraiser also.
(b) If the two appraisers so appointed disagree as to the fair market
value of the assets being appraised, they shall appoint a third
appraiser having the same qualifications as themselves. If the two
appraisers shall not have appointed a third appraiser within fourteen
(14) days after the date it is determined that they disagree, the
third appraiser shall be appointed by the President of the American
Institute of Real Estate Appraisers.
(c) The determination of value of any two of the three appraisers shall
control, and if all three shall disagree, their determinations shall
be averaged; provided, however, that any appraisal which is ten
percent (10%) or more above or below the median appraisal shall be
disregarded in computing such average.
(d) The value of a partner's interest in the Partnership is defined as
such Partner's proportionate share of the fair market value of all
Partnership assets less all outstanding debts of the Partnership
including, without limiting the generality thereof, any mortgage loans
secured by an asset of the Partnership, adjusted to reflect the
balance of such Partner's capital account.
55
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ARTICLE 26.00
DISSOLUTION AND TERMINATION OF PARTNERSHIP;
TREATMENT OF GAIN FOR TAX PURPOSES
26.01 The Partnership shall be dissolved on the happening of any one of the
following events:
(a) the election of an Advancing Partner to terminate the Partnership in
accordance with the provisions of Clause 24.02 hereof;
(b) by the mutual agreement of both partners;
(c) upon the expiration of the term of the Partnership;
(d) upon the sale of a Partnership interest by one partner to the other;
(e) upon the taking of all or substantially all of the assets of the
Partnership by any governmental authority under right of eminent
domain.
(f) upon the sale of substantially all the assets of the Partnership.
26.02 In the event of termination of the Partnership, a final audit shall be
made by the Partnership's auditors and all of the property and assets of the
Partnership shall be distributed as follows:
(a) All property and assets, if any, other than cash, shall be sold or
collected and, to the extent feasible, turned into cash within a period
of one (1) year from the date of termination. The partners shall have a
right to bid on and purchase any and all of the property and assets
being sold.
(b) All of the Partnership's debts, liabilities and obligations, other than
Operating Loans, Capital Loans, or guaranteed return notes or
additional capital contributions shall then be repaid in full or
reserves therefor shall be set aside.
(c) The balance of the Partnership assets shall be distributed in
accordance with subclauses 19.01 or 19.03 of Article 19.00, subject to
the application, in the appropriate case, of subclause 19.06. No
partner shall have any claim or recourse against the other partner in
the event that any partner shall have a negative capital account, or
the assets of the Partnership are insufficient to repay, as required or
permitted by this Agreement, all sums advanced or any capital
contribution or other interest except for the failure by such other
56
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partner to perform its obligations under this Agreement.
26.03 A reasonable time shall be allowed for the orderly liquidation and
discharge of the liabilities of the Partnership. Each partner shall be
furnished with a statement, prepared by the Partnership's auditors, setting
forth the total amount of the assets available for distribution after
satisfaction of all liabilities.
26.04 In the event that the Partnership shall terminate by virtue of the
election of an Advancing Partner to terminate this Partnership, then, within
ninety (90) days from the date of such notice of election, the Defaulting
Partner shall assign to the Advancing Partner its complete interest in the
Partnership free and clear of any and all liens, claims, encumbrances and, at
the request of the Advancing Partner, in order to properly set forth the record
title to the assets of the Partnership, shall convey and transfer title to the
Advancing Partner, at the expense of the Defaulting Partner, with covenants of
special warranty, an undivided percentage interest in the assets of the
Partnership equal to the Defaulting Partner's; provided, however, that such
transfer shall not affect any right of the Defaulting Partner to receive any
payments from the Partnership on account of its interest therein as may be
provided for herein.
26.05 Upon the sale, condemnation or other disposition of the assets of the
Partnership, gain for Federal income tax purposes, shall be determined in
accordance with the applicable provisions of Internal Revenue Code and the
rules and regulations issued thereunder; provided, however, that any recapture
of excess depreciation as that term is defined in the Internal Revenue Code
shall be allocated first to Shelter to the extent that excess depreciation is
included in the losses charged to Shelter pursuant to Section 18.01(b) hereof
and the balance to be allocated to each Partner in the same proportion as the
aggregate Net Cash Flow distributed to each Partner during the term of the
Partnership bears to the aggregate Net Cash Flow distributed to both Partners
during such term.
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ARTICLE 27.00
BANK FINANCING PERMITTED
27.01 Notwithstanding any other term or provision of this Agreement,
nothing in this Agreement shall prevent either partner from securing its
normal operating lines of credit from time to time by means of granting; a
pledge or other security interest with respect to its interest in the
Partnership; provided, however, that no such security device shall create
at the time of giving thereof a fixed specific charge against the
Partnership, and that upon foreclosure thereof the pledgee shall be bound
by all of the terms and conditions hereof.
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ARTICLE 28.00
PARTIAL CONDEMNATION
28.01 In the event of a taking of a portion of the Partnership assets,
including the Project, by condemnation proceedings, by exercise of right
of eminent domain or by reason of agreement between the Partnership and
any authority possessing such right, the Partnership shall use the award
thereby realized, or such portion thereof as may be necessary, to restore
the remainder of the Partnership property to a complete, independent and
self-contained architectural unit, subject to the right of mortgagees or
other creditors secured against the Project to retain such award for the
purpose of reducing any indebtedness of the Partnership.
28.02 In the event that the amount of the award is insufficient to restore
the Partnership property as aforesaid, or in the event that such mortgagee
or mortgagees, or other creditor, shall not make the award available for
such restoration, then either partner shall be entitled within thirty (30)
days to give notice of termination of the Partnership.
28.03 Any portion of the award remaining after restoration of the
Partnership property as aforesaid shall, if required by the mortgagee, be
applied by the Partnership to reduce any then existing indebtedness
secured against the Project. If the mortgagee shall not require any such
reduction of the indebtedness, the Partnership shall apply such sum
to reduce the then-existing indebtedness of Shelter under the C.D.C. Note.
Otherwise, such amount shall be treated as a receipt to the Partnership.
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ARTICLE 29.00
DESTRUCTION BY FIRE OR OTHER CASUALTY
29.01 In the event the Project or other Partnership property shall be
damaged or destroyed by fire or other casualty, Participation shall
immediately institute a claim to the Partnership's insurers for insurance
proceeds in an amount sufficient to restore the Project or the Partnership
asset to at least the condition existing prior to the casualty and for
necessary business interruption proceeds. Subject to the rights of
mortgagees or other creditors to retain any such proceeds, the Partnership
shall use the proceeds of such insurance to restore the Project or other
Partnership asset as aforesaid.
29.02 In the event of the amount of such insurance proceeds is
insufficient to restore the Partnership property as aforesaid, or if any
mortgagee or other creditor shall not make the proceeds available for
restoration, then either partner shall be entitled to terminate this
Partnership for a period of thirty (30) days following the date the
insufficiency or unavailability of such proceeds is determined.
20.03 Any such insurance proceeds remaining after complete restoration as
aforesaid, shall be treated by the Partnership as a receipt and shall be
treated accordingly.
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ARTICLE 30.00
GENERAL
30.01 Wherever in this Agreement reference is made to amounts of monies,
same shall be deemed to refer to U.S. funds.
30.02 It is specifically understood and agreed between the partners that
this Partnership extends only to and is limited to the rights and obligations
under this Agreement and nothing herein shall be construed to constitute any
partner the agent or general partner of the other nor in any manner to limit the
partners in the carrying out of their respective business activities other than
those contemplated within the scope of this Agreement. Nothing herein shall
deprive or otherwise affect the right of any partner to own, invest in, manage
or operate property or to conduct business activities which are competitive with
the business of the Partnership from time to time.
30.03 Each partner shall be indemnified by the other partner and held
harmless against and from all claims, demands, actions, and rights of action
which shall or may arise by virtue of anything done or omitted to be done by
such other partner (directly or through or by agents, employees, or other
representatives) outside the scope of or in breach of the terms of this
Agreement; provided that such other partner shall promptly be notified of the
existence of the claim, demand, action or right of action and shall be given a
reasonable opportunity to participate in the defense thereof; and further
provided that failure to give such notice shall not affect such other's
obligations hereunder except to the extent of any actual prejudice to it
resulting therefrom.
30.04 Any controversy or dispute arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration. Such
arbitration shall be effected by arbitrators selected as hereinafter provided
and shall be conducted in accordance with the Rules existing at the date thereof
of the American Arbitration Association. The dispute shall be submitted to three
(3) arbitrators each of whom shall have at least ten (10) years experience in
the real estate business, one (1) arbitrator being selected by each partner and
the third being selected by the American Arbitration Association. In the event
that any party, within one (1) month after notification of any demand for
arbitration hereunder, shall not have selected its arbitrator being given notice
thereof by registered or certified mail to the other, such arbitrator shall be
selected by the American Arbitration Association. The meetings of the
arbitrators shall be held at such place or places as may be agreed upon by the
arbitrators. Judgment may be entered or an award rendered by the arbitrators in
any federal or state court having jurisdiction over the sites in which the
Project and other Partnership assets are located. Each partner shall bear the
cost of the fees and expenses of the arbitrator selected by or for it, and the
fees and expenses of the third
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arbitrator shall be borne by the partner demanding arbitration unless the
findings or awards of the arbitrator shall be in favour of such partner.
30.05 Subject to the provisions of this Agreement requiring arbitration, each
partner acknowledges and agrees that the remedy at law for any breach of any
term of this Agreement would be inadequate, and agrees and consents that
temporary and permanent injunctive and other equitable relief may be granted in
any proceedings which may be brought to enforce any provision hereof, including
within such other equitable relief, specific performance, without the necessity
of proof of actual damage or inadequacy of any legal remedy.
30.06 All notices required or permitted by this Agreement shall be in writing
and shall be sent by registered mail or certified mail or telegram or telex to
the following addresses:
in the case of Shelter
Corporation of Canada Limited - 3800 - 55 Nassau Street North
Winnipeg, Manitoba, Canada
R3L 2G8
in the case of Participation - c/o The General Manager's Office
The Rouse Company Building
Columbia, Maryland 21044
U.S.A.
or to such other address as shall from time to time be supplied in writing by
any party hereto.
In the case of notice sent by registered or certified mail, same
shall be deemed to be delivered seven (7) days after date of mailing unless
there shall be a postal strike interrupting postal service, in which case,
notice shall be given by telex or telegram.
30.07 This Agreement shall inure to the benefit of and shall be binding upon
the parties hereto and their respective successors and permitted assigns.
30.08 Nothing in this Agreement, express or modified, is intended or shall be
construed to confer upon or to give to any person, firm or corporation other
than the parties hereto, their successors and permitted assigns, any right,
remedy or claim under this Agreement or by reason hereof. All covenants,
stipulations, promises and agreements herein contained shall be for the sole
and exclusive benefit of the parties hereto and their respective successors and
assigns.
30.09 If any provision of this Agreement or application to any party or
circumstance shall be deemed by any court of competent jurisdiction to be
invalid or unenforceable to any extent, the remainder of this Agreement or the
application of such provision to such person or circumstance, other than those
to which it is so determined invalid or unenforceable, shall not be effected
thereby, and each provision
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thereof shall be valid and shall be enforced to the fullest extent permitted by
law.
30.10 This Agreement shall be construed and enforced in accordance with the
laws of the State of Maryland and is generally performable in Howard County,
Maryland.
30.11 The headings and the various Articles and Paragraphs in this Agreement
are solely for convenience and shall not be relied upon in construing any
provision hereof.
30.12 All covenants, agreements, representations and warranties made in this
Agreement shall be deemed to be material and to have been relied upon by the
parties hereto, notwithstanding any investigation heretofore or hereafter made
by or on behalf of such parties.
30.13 This instrument contains the entire agreement between the parties hereto
with respect to the transactions covered hereby and, to the extent applicable,
supersedes all other agreements between the parties, oral or written, relating
to the subject matter hereof.
30.14 This Agreement shall not be altered, changed, amended, cancelled or
terminated except by an instrument in writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Partnership
Agreement to be executed as of the day and year first above written.
ATTEST: PARTICIPATION CORPORATION
/S/ [ILLEGIBLE SIG] By: /s/ [ILLEGIBLE SIG]
- ---------------------------- ----------------------------
Its Vice President
SHELTER CORPORATION OF CANADA, LTD.
By: /s/ [ILLEGIBLE SIG]
----------------------------
Its Exec. Vice-President
63
SCHEDULE A
Adjacent Property
That parcel of land containing 2.07476 acres of land, more or less,
and being a portion of Lot B-8, as shown on the Plat entitled, "Columbia, Town
Center, Lot 1-A, Section 1, Parcel F-1, Section 7, Area 1, Lot B-8, Section 7,
Area 1, A Resubdivision of Lot 1, Section 1, Parcel F, Section 7, Area 6, Lot
B-7, Section 7, Area 1, and Lot B-2 and Lot B-6, Section 7, Area 1", recorded
among the Land Records of Howard County, Maryland as Plat No. 4293, said
2.07476-acre parcel being formerly shown and designated as Lot B-6 on the Plat
entitled, "Columbia, Town Center, Section 7, Area 1, Lot B-5, B-6 and B-7, A
Resubdivision of Lot B-3 and B-4, Sheet 1 of 1," recorded among the Land
Records aforesaid as Plat No. 4111.