<PAGE> 1
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
January 31, 1995
<TABLE>
<S> <C>
Commission file number: 1-6828 Commission file number: 1-7959
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
(Exact name of registrant as specified in its (Exact name of registrant as specified in its
charter) charter)
Maryland Maryland
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or
organization) organization)
52-0901263 (I.R.S. employer identification number) 52-1193298 (I.R.S. employer identification number)
11845 W. Olympic Blvd.
11845 W. Olympic Blvd. Suite 560
Suite 550 Los Angeles, CA 90064
Los Angeles, CA 90064 (Address of principal executive offices, including
(Address of principal executive offices, including zip code)
zip code)
310-575-3900
310-575-3900 (Registrant's telephone number, including area
(Registrant's telephone number, including area code)
code)
Hotel Investors Corporation
Hotel Investors Trust (Former name or former address, if changed since
(Former name or former address, if changed since last report)
last report)
</TABLE>
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On January 31, 1995 (the "Closing Date"), Starwood Lodging
Trust (the "Trust") (formerly Hotel Investors Trust) and Starwood Lodging
Corporation (the "Corporation") (formerly Hotel Investors Corporation),
consummated the previously announced reorganization (the "Reorganization") with
Starwood Capital Group, L.P. ("Starwood") and certain affiliates of Starwood
(the "Starwood Partners"). The Reorganization was approved by the shareholders
of the Trust and the stockholders of the Corporation at meetings held on
December 15, 1994.
The Reorganization was effected pursuant to a Formation
Agreement among the Trust, the Corporation, Starwood and the Starwood Partners
(the "Formation Agreement") and other agreements entered into pursuant to the
Formation Agreement. A copy of the Formation Agreement is incorporated by
reference as an exhibit to this Report and certain of those agreements are
filed as exhibits to this Report. The following description is qualified in
its entirety by reference to the provisions of the Formation Agreement and such
other agreements.
The Reorganization involved a number of related transactions
that occurred simultaneously on the Closing Date pursuant to the terms of the
Formation Agreement. Such transactions included (i) the contribution by the
Trust to SLT Realty Limited Partnership (the "Realty Partnership") of all of
the properties and assets of the Trust, subject to substantially all of the
liabilities of the Trust (including the senior debt (the "Senior Debt") of the
Trust), in exchange for an approximate 28.3% interest as a general partner in
the Realty Partnership, (ii) the contribution by the Starwood Partners to the
Realty Partnership of approximately $12,568,000 in cash and certain hotel
properties and first mortgage notes, in exchange for limited partnership units
representing the remaining approximate 71.7% interest in the Realty
Partnership, (iii) the contribution by the Corporation and its subsidiaries to
SLC Operating Limited Partnership (the "Operating Partnership") of all of their
properties and operating assets (except for their gaming assets, which are to
be contributed upon approval by Nevada gaming authorities), subject to
substantially all of their liabilities, in exchange for an approximate 28.3%
interest as a general partner in the Operating Partnership, and (iv) the
contribution by the Starwood Partners to the Operating Partnership of
approximately $1,432,000 in cash, furnishings and equipment of the hotel
properties, in exchange for limited partnership units representing the
remaining approximate 71.7% interest in the Operating Partnership.
The limited partnership units of the Realty Partnership and
the Operating Partnership held by the Starwood Partners are (subject to the
Ownership Limit Provisions of the Trust and the Corporation described below
which are designed to preserve the
-2-
<PAGE> 3
status of the Trust as a REIT for tax purposes) exchangeable by the Starwood
Partners, for, at the option of the Trust and the Corporation, either cash,
Paired Shares of the Trust and the Corporation representing up to approximately
71.7% of the Paired Shares after such exchange, or a combination of cash and
such Paired Shares.
In addition if, prior to June 15, 1995, an affiliate of
Starwood acquires Senior Debt, such affiliate will exchange up to $12,000,000
of such Senior Debt for up to an additional approximate 3.0% of the outstanding
limited partnership units of the Realty Partnership and the Operating
Partnership. Such affiliate of Starwood is the general partner of a
partnership which has the right to acquire approximately $74.0 million of
Senior Debt. Any such units issued pursuant to such exchange would be
exchangeable for Paired Shares on the same basis as other units issued to the
Starwood Partners in connection with the Reorganization.
In connection with the consummation of the Reorganization, the
Trust amended (the "Trust Amendment") the Amended and Restated Declaration of
Trust of the Trust (the "Trust Declaration") to (i) change the name of the
Trust to "Starwood Lodging Trust", (ii) create a classified Board of Trustees
of the Trust, (iii) eliminate the cumulative voting provisions of the
Declaration of Trust, (iv) increase the number of authorized Trust shares to
100 million and change the par value of the Trust shares from $1.00 per share
to $.01 per share, (v) eliminate the provision limiting the principal amount of
Trust borrowing to no more than 300% of the net assets of the Trust and (vi)
eliminate the provisions prohibiting the Trust from (A) making any investment
in real property in an amount that exceeds 40% of the sum of the Trust's net
worth and subordinated indebtedness, (B) making any investment in unimproved
non-income producing real property that exceeds 10% of the Trust's assets and
(C) investing in certain types of assets or engaging in certain other
activities.
The Corporation also amended and restated its Articles of
Incorporation (the "Restated Articles") to (i) change the name of the
Corporation to "Starwood Lodging Corporation", (ii) create a classified Board
of Directors of the Corporation and provide for removal of directors only for
cause, (iii) eliminate the cumulative voting provisions of the Articles of
Incorporation, (iv) increase the number of authorized shares of common stock of
the Corporation to 100 million and change the par value of the Corporation
shares from $.10 per share to $.01 per share.
In addition, Trust Amendment and the Restated Articles added
new provisions (the "Ownership Limit Provisions") which updated and replaced
provisions which are designed to allow the Trust to qualify as a real estate
investment trust for federal income tax purposes. The Ownership Limit
Provisions provide
-3-
<PAGE> 4
that, subject to certain exceptions specified in the Trust Declaration and the
Restated Articles, no shareholder may own, or be deemed to own by virtue of the
attribution provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), more than 8.0%, whether measured by vote, value or number (the
"Ownership Limit"), of Paired Shares, shares of Preferred Stock of the
Corporation or preferred shares of the Trust (collectively, "Preferred Stock")
which may be issued, or any combination thereof; provided that, for
shareholders who owned as of the date of the Trust Amendment and the Restated
Articles, 8.0% or more of the Paired Shares ("Existing Holders"), the Ownership
Limit is equal to the lesser of 9.9% and the number of Paired Shares owned or
deemed to be owned on such date (unless the percentage ownership of an Existing
Holder shall subsequently be decreased, in which case the Ownership Limit for
such Existing Holder will be equal to the greater of 8.0% and the percentage
owned after giving effect to such decrease).
In the event of a purported transfer or other event that
would, if effective, result in the ownership of Paired Shares or shares of
Preferred Stock in violation of the Ownership Limit Provisions, such transfer
with respect to that number of shares that would be owned by the transferee in
excess of the Ownership Limit Provisions would be deemed void ab initio and
such Paired Shares or shares of Preferred Stock would automatically be
exchanged for Excess Trust Shares of the Trust and Excess Common Stock of the
Corporation or Excess Preferred Shares of the Trust and Excess Preferred Stock
of the Corporation, respectively (collectively, "Excess Stock"), pursuant to
the provisions set forth in the Trust Declaration and the Restated Articles, to
the extent necessary to ensure that the purported transfer or other event does
not result in ownership of Paired Shares or shares of Preferred Stock or Excess
Stock in violation of the Ownership Limit Provisions. Any purported transferee
or other purported holder of Excess Stock is required to give written notice to
the Trust and the Corporation of a purported transfer or other event that would
result in the issuance of Excess Stock.
The foregoing description is a summary of the amendments
effected by the Trust Amendment and the Restated Articles (including, without
limitation, the Ownership Limit Provisions). Such summary is qualified in its
entirety by reference to the provisions of the Trust Declaration and the
Restated Articles, each of which is filed as an exhibit to this Report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired. The historical
financial statements required to be provided in this
Form 8-K will be filed under cover of Form 8-K/A not later
than 60 days after this Form 8-K must be filed.
(b) Pro Forma Financial Information. The pro forma financial
information required to be provided in this
-4-
<PAGE> 5
Form 8-K will be filed under cover of Form 8-K/A not later than
60 days after this Form 8-K must be filed.
(c) Exhibits.
2.1 Formation Agreement dated as of November 11, 1994
among the Trust, the Corporation, the Starwood
Partners and Starwood (incorporated herein by
reference to Exhibit 2 to the Registrants' Current
Report on Form 8-K dated November 16, 1994).
2.2 Exchange Rights Agreement dated as of January 1, 1995
among the Trust, the Corporation, the Realty
Partnership, the Operating Partnership and the
Starwood Partners.
2.3 Registration Rights Agreement dated as of January 1,
1995 among the Trust, the Corporation and Starwood.
2.4 Limited Partnership Agreement for the Realty
Partnership dated as of December 15, 1994 among the
Trust and the Starwood Partners.
2.5 Limited Partnership Agreement for the Operating
Partnership dated as of December 15, 1994 among the
Corporation and the Starwood Partners.
3.1 Amended and Restated Declaration of Trust, as
amended, of the Trust.
3.2 Articles of Amendment and Restatement of Articles of
Incorporation of the Corporation.
-5-
<PAGE> 6
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
2.1 Formation Agreement dated as of November 11, 1994 among the
Trust, the Corporation, the Starwood Partners and Starwood
(incorporated herein by reference to Exhibit 2 to the
Registrants' Current Report on Form 8-K dated November 16,
1994).
2.2 Exchange Rights Agreement dated as of January 1, 1995
among the Trust, the Corporation, the Realty
Partnership, the Operating Partnership and the
Starwood Partners.
2.3 Registration Rights Agreement dated as of January 1,
1995 among the Trust, the Corporation and Starwood.
2.4 Limited Partnership Agreement for the Realty
Partnership dated as of December 15, 1994 among the
Trust and the Starwood Partners.
2.5 Limited Partnership Agreement for the Operating
Partnership dated as of December 15, 1994 among the
Corporation and the Starwood Partners.
3.1 Amended and Restated Declaration of Trust, as
amended, of the Trust.
3.2 Articles of Amendment and Restatement of Articles of
Incorporation of the Corporation.
-6-
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, each registrant has duly caused this report to be signed on its behalf by
the undersigned, thereto duly authorized.
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION
By: /s/ JEFFREY C. LAPIN By: /s/ KEVIN E. MALLORY
----------------------------- ---------------------------------
Jeffrey C. Lapin Kevin E. Mallory
President Executive Vice President
Date: February 10, 1995
-7-
<PAGE> 1
EXHIBIT 2.2
EXCHANGE RIGHTS AGREEMENT
This Exchange Rights Agreement (this "Agreement") is made as
of January 1, 1995 among Hotel Investors Trust, a real estate investment trust
organized under the laws of the State of Maryland (the "Trust"), Hotel
Investors Corporation, a Maryland corporation (the "Corporation"), SLT Realty
Limited Partnership, a Delaware limited partnership (the "Realty Partnership"),
SLC Operating Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"), each of the limited partners of the Realty
Partnership and the Operating Partnership listed on the signature pages hereto
(the "Starwood Partners") and Firebird Consolidated Partners, L.P., a Delaware
limited partnership ("Firebird"). Unless otherwise indicated, capitalized
terms used herein are used herein as defined in Section 11.
WHEREAS, pursuant to a Formation Agreement dated as of
November 11, 1994 (the "Formation Agreement") among the Trust, the Corporation,
Starwood Capital Group, L.P., a limited partnership organized under the laws of
the State of Delaware ("Starwood"), and the Starwood Partners (i) on the date
hereof the Trust and the Starwood Partners are making capital contributions to
the Realty Partnership in return for the issuance by the Realty Partnership to
the Trust and to the Starwood Partners of Units (as defined in the Limited
Partnership Agreement of the Realty Partnership (the "Realty Partnership
Agreement")) of the Realty Partnership (such Units issued by the Realty
Partnership to the Starwood Partners on the date hereof, together with any
Units of the Realty Partnership issued to the Starwood Partners or Firebird
after the date hereof (including, without limitation, Units issued to Firebird
in exchange for senior debt pursuant to Section 6.4 of the Formation
Agreement), being hereinafter called the "Realty Units") and (ii) on the date
hereof the Corporation and the Starwood Partners are making capital
contributions to the Operating Partnership in return for the issuance by the
Operating Partnership to the Corporation and to the Starwood Partners of Units
(as defined in the Limited Partnership Agreement of the Operating Partnership
(the "Operating Partnership Agreement")) of the Operating Partnership (such
Units issued by the Operating Partnership to the Starwood Partners on the date
hereof, together with any Units of the Operating Partnership issued to the
Starwood Partners or Firebird after the date hereof (including, without
limitation, Units issued to Firebird in exchange for senior debt pursuant to
Section 6.4 of the Formation Agreement), being hereinafter called the
"Operating Units");
WHEREAS, in the event that Firebird shall acquire Realty Units
and Operating Units on or after the date hereof,
-1-
<PAGE> 2
then from and after such acquisition Firebird shall be deemed to be a "Starwood
Partner" for all purposes of this Agreement; and
WHEREAS, pursuant to the Formation Agreement the parties
hereto are entering into this Agreement to provide for the rights of the
Starwood Partners to tender Realty Units and Operating Units in exchange for
either Paired Shares (as defined herein), cash or a combination of Paired
Shares and cash, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants set forth herein, the parties hereto agree as follows:
SECTION 1. RIGHT TO TENDER STARWOOD UNITS. (a) Upon the
terms and subject to the conditions of this Agreement, each holder of Starwood
Units (as defined below) shall have the right to tender to the Trust
outstanding Realty Units and the right to tender to the Corporation outstanding
Operating Units. Notwithstanding anything to the contrary contained in this
Agreement (i) no Realty Unit may be tendered to the Trust unless simultaneously
therewith the tendering holder also tenders to the Corporation an Operating
Unit and no Operating Unit may be tendered to the Corporation unless
simultaneously therewith the tendering holder also tenders to the Trust a
Realty Unit (a Realty Unit tendered for exchange and the Operating Unit
simultaneously tendered for exchange being hereinafter collectively referred to
as a "Starwood Unit") and (ii) any attempted tender of a Realty Unit or an
Operating Unit which is not accompanied by a simultaneous tender of an
Operating Unit or Realty Unit, respectively, shall be void and of no effect; it
being understood that a simultaneous tender of unequal numbers of Realty Units
and Operating Units shall be valid under this sentence to the extent of the
lesser of the number of Realty Units or Operating Units, as the case may be,
included in such tender.
(b) Notwithstanding any other provision of this Agreement, no
Paired Shares or cash shall be issued or paid in respect of any tender of
Starwood Units (i) if, notwithstanding the provisions of Section 6 of this
Agreement, the right to tender Starwood Units and receive Paired Shares or cash
would result in the Trust not satisfying the REIT Requirements in any respect
or would result in any person or entity Beneficially Owning Trust Shares
exceeding the Ownership Limit, (ii) prior to the expiration or termination of
the waiting period applicable to such exchange and issuance, if any, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as it may be amended from
time to time, or (iii) prior to the receipt of all governmental and regulatory
approvals which are required to be obtained prior to such tender and issuance
or payment, including, without limitation, any required approvals of the gaming
authorities of the State of Nevada and of Clark County, Nevada (the "Gaming
-2-
<PAGE> 3
Approvals"). Prior to the receipt of Gaming Approvals, such holder shall, as a
condition to any tender of Starwood Units which would (if the Paired Share
Option (as defined below) were to be elected in respect of such tender) cause
the Starwood Partners to beneficially own, in the aggregate, Paired Shares
representing more than 4.9% of the then issued and outstanding Paired Shares,
give not less than 90 days' written notice to the Trust and the Corporation (at
the offices provided pursuant to Section 10) of its intent to tender Starwood
Units. In the event that the ability to receive Paired Shares or cash would
result in the Trust not satisfying the REIT Requirements in any respect or
would result in any person or entity Beneficially Owning Trust Shares exceeding
the Ownership Limit, and as a result thereof no Paired Shares or cash may be
issued or paid in respect of any tender of Starwood Units pursuant to Section
1(b)(i) above, the parties hereto shall use their respective best efforts to
restructure the terms and provisions of this Agreement (and, if necessary, the
Partnership Agreements and the Registration Rights Agreement (as defined in
Section 6)), or to agree to terms and provisions in addition to such terms and
provisions, so as to provide to each such party the same substantive rights (or
substantive rights as close thereto as is reasonably practicable) as those
provided by this Agreement, the Partnership Agreements and the Registration
Rights Agreement.
(c) The rights to exchange Starwood Units pursuant to this
Agreement constitute a continuous offer and may not be withdrawn, amended or
modified by the Trust or the Corporation without the prior written consent of
each holder of outstanding Starwood Units adversely affected by such
withdrawal, amendment or modification; provided that any withdrawal, amendment
or modification that does not adversely affect any holder of outstanding
Starwood Units may be effected without the consent of such holder.
SECTION 2. ACCEPTANCE OF TENDER; ELECTION OF METHOD OF
PAYMENT FOR TENDERED STARWOOD UNITS. (a) Upon the terms and subject to the
conditions of this Agreement, the Trust and the Corporation shall accept
Starwood Units validly tendered in proper form and meeting all of the
requirements of this Agreement. In order for Starwood Units to be validly
tendered pursuant to this Agreement, the registered holder thereof shall
deliver to the Trust and the Corporation, at the address provided pursuant to
Section 10, (i) a completed and duly executed Letter of Transmittal in the form
attached hereto as Exhibit A (the "Letter of Transmittal") and any other
documents required by the Letter of Transmittal and (ii) a calculation, to the
best knowledge of such registered holder after due inquiry (together with such
supporting documentation as the Trust may reasonably request), of the maximum
number of Paired Shares that may be issued to such registered holder without
causing either (x) the Trust to not satisfy the REIT Requirements in any
respect or (y) any person or entity to Beneficially Own Trust Shares exceeding
-3-
<PAGE> 4
the Ownership Limit. The Trust and the Corporation shall make all
determinations as to the validity and form of any tender of Starwood Units in
accordance with the provisions of this Agreement and upon rejection of a tender
shall give the tendering holder written notice of such rejection, which shall
include the reasons therefor.
(b) Unless otherwise determined by agreement of the Trust and
the Corporation, tenders of Starwood Units pursuant to this Agreement shall be
irrevocable and shall not be subject to withdrawal or modification; provided
that if the Trust and the Corporation make the Paired Share Election with
respect to a tender, then within 3 days after such Election the tendering
holder may elect to revoke such tender so long as (i) no public disclosure of
such tender has been made prior to such revocation and (ii) such tendering
holder reimburses the Trust and the Corporation for all reasonable costs and
expenses incurred in connection with such tender.
(c) Within 15 days after the valid tender pursuant to this
Agreement of Starwood Units, the Trust and the Corporation shall make an
election to pay for such Starwood Units by delivering either (i) Paired Shares
(the "Paired Share Election"), (ii) cash (the "Cash Election") or (iii) a
combination of Paired Shares and cash (the "Combined Election"). Such election
shall be made pursuant to an agreement as to such election between the Trust
and the Corporation. If the Trust and the Corporation do not so agree within
such 15-day period, they shall be deemed to have made the Cash Election.
SECTION 3. PAIRED SHARE ELECTION. (a) If with respect to
any tender of Starwood Units pursuant to this Agreement, the Trust and the
Corporation make the Paired Share Election, then within 20 days after such
tender the Trust and the Corporation shall deliver to the tendering holder one
Paired Share for each Starwood Unit validly tendered pursuant to the provisions
of this Agreement.
(b) No fractional Paired Shares or scrip representing
fractional Paired Shares shall be issued upon exchange of Starwood Units
pursuant to this Agreement. If more than one Letter of Transmittal shall be
delivered at one time by the same holder, the number of full Paired Shares
which shall be issuable upon exchange of the Starwood Units tendered thereby
shall be computed on the basis of the aggregate number of Starwood Units so
tendered. Instead of any fractional Paired Shares which would otherwise be
issuable upon exchange of any Starwood Units, the Trust and the Corporation
shall pay a cash adjustment in respect of such fraction in an amount equal to
the same fraction of the Paired Share Closing Price on the last business day
preceding the date of exchange.
-4-
<PAGE> 5
(c) If a holder exchanges Starwood Units pursuant to this
Agreement, the Trust and the Corporation shall pay any documentary, stamp or
similar issue or transfer tax due on any issue of Paired Shares upon such
exchange. Such holder, however, shall (i) pay to the Trust and the Corporation
the amount of any additional documentary, stamp or similar issue or transfer
tax which is due (or shall establish to the satisfaction of the Trust and the
Corporation the payment thereof) as a result of Paired Shares being issued in a
name other than the name of such holder and (ii) be responsible for all income
or other taxes as a result of such exchange.
SECTION 4. CASH ELECTION. (a) If with respect to any tender
of Starwood Units pursuant to this Agreement, the Trust and the Corporation
make or are deemed to have made the Cash Election, then within 20 days after
such tender the Trust and the Corporation shall pay to the tendering holder an
aggregate amount of cash (the "Aggregate Cash Payment") equal to the product of
(i) the number of Paired Shares which would have been delivered to such holder
if the Trust and the Corporation had made the Paired Share Election with
respect to such tender and (ii) the average Paired Share Closing Price for the
ten trading day period ending one day prior to the date of such tender.
(b) In connection with any Aggregate Cash Payment pursuant
to Section 4(a) or any cash payment pursuant to Section 5(a)(ii), the Trust
shall pay 95% of such Aggregate Cash Payment or such cash payment and the
Corporation shall pay 5% of such Aggregate Cash Payment or such cash payment
(such percentages being herein called the "Issuance Percentages"); provided
that the Trust and the Corporation may from time to time change the Issuance
Percentages based on their determination of the relative fair values of the
Trust Shares and the Corporation Shares.
SECTION 5. COMBINED ELECTION. (a) If with respect to any
tender of Units pursuant to this Agreement, the Trust and the Corporation shall
make the Combined Election, then within 20 days after such tender the Trust and
the Corporation shall (i) notify the tendering holder of the number of such
tendered Units which will be exchanged for cash (the "Cash Units") and the
number of such tendered Units which will be exchanged for Paired Shares (the
"Paired Share Units"), (ii) pay to the tendering holder, in respect of each
Cash Unit validly tendered pursuant to the provisions of this Agreement, an
amount of cash (with each of the Trust and the Corporation paying its then
respective Issuance Percentage of such amount of cash) equal to the average
Paired Share Closing Price for the ten trading day period ending one day prior
to the date of such tender and (iii) deliver to the tendering holder one Paired
Share for each Paired Share Unit validly tendered pursuant to the provisions of
this Agreement.
-5-
<PAGE> 6
(b) The provisions of Sections 3(b) and 3(c) of this
Agreement shall apply to the issuance of Paired Shares pursuant to Section
5(a).
SECTION 6. REGISTRATION RIGHTS. If at any time after one
year from the date of this Agreement, (a) a Starwood Partner validly tenders
Starwood Units pursuant to the provisions of this Agreement, (b) the Trust and
the Corporation make the Paired Share Election or the Combined Election with
respect to such tender, (c) as a result of the Ownership Limit such Starwood
Partner cannot receive the full number of Paired Shares otherwise issuable to
such Starwood Partner pursuant to such tender and such Election (without giving
effect to the Ownership Limit) (the event described in clauses (a), (b) and (c)
being referred to as a "Paired Share Tender Reduction"; the number of such
Paired Shares which such Starwood Partner cannot receive pursuant to such
tender as a result of the Ownership Limit being referred to as the "Unissued
Paired Shares"; and the Starwood Units tendered in respect of such Unissued
Paired Shares being referred to as the "Delayed Payment Units"), then (i)
subject to the other terms and conditions of this Agreement, such Starwood
Partner shall be entitled to receive the number of Paired Shares which it can
receive pursuant to such tender, such Election and the Ownership Limit and (ii)
if Starwood shall make a written request for registration of Paired Shares
pursuant to Section 2.3 of the Registration Rights Agreement of even date
herewith among the Trust, the Corporation and Starwood (the "Registration
Rights Agreement"), then, pursuant to the terms of the Registration Rights
Agreement, the Trust and the Corporation shall cause there to be filed with the
Securities and Exchange Commission a registration statement and the Trust and
the Corporation shall register and sell pursuant thereto a number of Paired
Shares equal to the number of such Unissued Paired Shares requested by Starwood
to be registered pursuant to Section 2.3 of the Registration Rights Agreement.
Within two business days after the receipt by the Trust and the Corporation of
the proceeds of any sale (after underwriting discounts and commissions) of such
Paired Shares pursuant to such registration, the Trust and the Corporation
shall pay such proceeds to the tendering holder of the Delayed Payment Units,
in full payment for the tender of such Delayed Payment Units.
SECTION 7. REPRESENTATIONS OF TENDERING HOLDER. Each tender
of Starwood Units shall constitute a representation and warranty by the
tendering holder of each of the representations and warranties set forth in the
form of Letter of Transmittal. Without limiting the generality of the
foregoing, unless, at the time of a tender for exchange of Starwood Units
pursuant to this Agreement, a registration statement relating to any Paired
Shares to be delivered upon such tender is effective under the Securities Act
of 1933, as amended (the "Securities Act"), such tender shall constitute a
representation and warranty by the tendering holder to the Trust and the
Corporation that such
-6-
<PAGE> 7
tendering holder (i) is an "accredited investor" within the meaning of Rule 501
under the Securities Act, (ii) has sufficient knowledge and experience in
financial and business matters and in investing in entities similar to the
Partnerships, the Trust and the Corporation so as to be able to evaluate the
risks and merits of its investment in the Partnerships, the Trust and the
Corporation and it is able financially to bear the risks thereof, (iii) has had
an opportunity to discuss the business, management and financial affairs of the
Trust, the Corporation and the Partnerships with the management of the Trust,
the Corporation and the Partnerships, and (iv) understands that the Paired
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act and such Paired Shares must be held indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
and applicable state securities laws or is exempt from such registration.
SECTION 8. STATUS OF TENDERING HOLDER. Until the holder of
Starwood Units tendered pursuant to this Agreement becomes a holder of record
of the Paired Shares issued in exchange therefor (in the case of a Paired Share
Election or a Combined Election) or until such holder has received cash in
exchange therefor (in the case of a Cash Election or a Combined Election), such
holder shall continue to hold and own such Starwood Units for all purposes of
the Realty Partnership Agreement and the Operating Partnership Agreement. In
the case of a Paired Share Election or a Combined Election, no such holder
shall have any rights as a shareholder of the Trust or a stockholder of the
Corporation in respect of such Paired Shares until such holder becomes a holder
of record of such Paired Shares.
SECTION 9. RESERVATION OF SHARES; CLOSING OF TRANSFER BOOKS.
(a) The Trust shall reserve and shall at all times have reserved out of its
authorized but unissued Trust Shares, solely for the purpose of effecting the
exchange of Realty Units pursuant to this Agreement, enough Trust Shares to
permit the exchange of the then outstanding Realty Units. The Corporation
shall reserve and shall at all times have reserved out of its authorized but
unissued Corporation Shares, solely for the purpose of effecting the exchange
of Operating Units pursuant to this Agreement, enough Corporation Shares to
permit the exchange of the then outstanding Operating Units. All Paired Shares
which may be issued upon exchange of Starwood Units shall be validly issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof other than income taxes resulting from such
exchange.
(b) The Trust shall not close its transfer books so as to
prevent the timely issuance of Trust Shares pursuant to this
-7-
<PAGE> 8
Agreement. The Corporation shall not close its transfer books so as to prevent
the timely issuance of Corporation Shares pursuant to this Agreement.
SECTION 10. NOTICES. All notices, documents and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally or by overnight mail or when sent by facsimile
transmission, or four days after being mailed (by registered mail, return
receipt requested) to a party at the following address (or to such other
address as such party may have specified by notice given to the other parties
pursuant to this provision):
If to the Trust or the Realty Partnership, to:
Starwood Lodging Trust
11845 West Olympic Boulevard
Suite 550
Los Angeles, California 90064
Attention: Jeffrey C. Lapin
Telecopy No.: (310) 575-9512
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
If to the Corporation or the Operating Partnership, to:
Starwood Lodging Corporation
11845 West Olympic Boulevard
Suite 560
Los Angeles, California 90064
Attention: Kevin E. Mallory
Telecopy No.: (310) 575-5912
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
-8-
<PAGE> 9
If to Starwood, to:
Starwood Capital Group, L.P.
c/o Sternlicht Holdings II, Inc.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Barry S. Sternlicht
Telecopy No.: (203) 861-2101
with a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Robert E. King, Jr.
Telecopy No.: (212) 878-8375
SECTION 11. DEFINITIONS. For purposes of this Agreement:
"Beneficially Owning" means owning Trust Shares directly,
indirectly or constructively by a person or entity through the
application of Section 318(a) of the Code, as modified by Section
856(d)(5) of the Code, or Section 544 of the Code, as modified by
Section 856(h) of the Code. The term "Beneficially Own" shall have a
correlative meaning.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Corporation Shares" means the shares of Common Stock, par
value $.01 per share, of the Corporation.
"Declaration of Trust" means the Declaration of Trust of the
Trust dated August 25, 1969, as amended and restated as of June 6,
1988, and as further amended on February 1, 1995 and as amended from
time to time after the date of this Agreement.
"Disinterested Members" when used with respect to the Trust has
the meaning set forth in the Code of Regulations of the Trust and, when
used with respect to the Corporation, has the meaning set forth in the
By-Laws of the Corporation, in each case as amended from time to time.
"Ownership Limit" when used with respect to Trust Shares, has
the meaning set forth in the Declaration of Trust and, when used with
respect to the Corporation Shares, has the meaning set forth in the
Restated Articles, in each case as amended from time to time.
-9-
<PAGE> 10
"Paired Share" means a Corporation Share and a Trust Share
which are paired pursuant to the Pairing Agreement.
"Paired Share Closing Price" shall mean, with respect to a
particular date, the last reported sales price regular way on such
date or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices regular way on
such date, in either case on the New York Stock Exchange, or if the
Paired Shares are not then listed or admitted to trading on such
Exchange, on the principal national securities exchange on which the
Paired Shares are then listed or admitted to trading or, if not then
listed or admitted to trading on any national securities exchange, the
closing sale price on such date of the Paired Shares or, in case no
reported sale takes place on such date then, the average of the
closing bid and asked prices on such date, on NASDAQ or any comparable
system. If the Paired Shares are not then quoted on NASDAQ or any
comparable system, the Board of Trustees of the Trust and the Board of
Directors of the Corporation shall in good faith determine the Paired
Share Closing Price.
"Pairing Agreement" means the Pairing Agreement dated June 25,
1980 between the Trust and the Corporation, as it may be amended from
time to time.
"REIT Requirements" shall mean the requirements for the Trust
to (i) qualify as a REIT under the Code and the rules and regulations
promulgated thereunder, (ii) avoid any federal income or excise tax
liability, (iii) retain its status as grandfathered pursuant to
Section 132(c)(3) of the Deficit Reduction Act of 1984 and (iv) retain
the benefits of that certain private letter ruling issued by the
Internal Revenue Service to the Trust dated as of January 4, 1980.
"Restated Articles" means the Restated Articles of
Incorporation of the Corporation, as amended from time to time after
the date of this Agreement.
"Trust Shares" means the shares of Beneficial Interest, $.01
par value, of the Trust.
SECTION 12. DETERMINATIONS AND INTERPRETATION. All
agreements between the Trust and the Corporation provided for in this Agreement
shall be made on behalf of the Trust and the Corporation by their respective
Disinterested Members, including, without limitation, any agreement between the
Trust and the Corporation as to the election of the Paired Share Election, the
Cash Election or the Combined Election with respect to a tender of Starwood
Units pursuant to Section 2(c), any agreement to permit the revocation,
withdrawal or modification of a tender of Starwood Units pursuant to Section
1(c) and any adjustment of the Issuance Percentages pursuant to Section 4(b).
All
-10-
<PAGE> 11
interpretations of the terms of this Agreement shall be resolved on behalf of
the Trust and the Corporation by their respective Disinterested Members.
SECTION 13. PARTIAL INVALIDITY. In case any one or more of
the provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
SECTION 14. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective permitted successors or assigns. Notwithstanding prohibitions on
assignment contained herein, in the event that a Starwood Partner transfers
record ownership of Starwood Units to any of its direct or indirect partners,
this Agreement shall be assigned to such partners; provided that each such
partner agrees to be bound by all of the terms and conditions of this
Agreement.
SECTION 15. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original counterpart, and shall become a binding agreement when the Trust, the
Corporation, the Realty Partnership, the Operating Partnership, each of the
Starwood Partners and Firebird shall have each executed a counterpart of this
Agreement.
SECTION 16. TITLES AND HEADINGS. Titles and headings to
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
SECTION 17. EXHIBITS. The Exhibits referred to in this
Agreement shall be construed with, and as an integral part of, this Agreement
to the same extent as if the same had been set forth verbatim herein.
SECTION 18. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
Agreement, including the Exhibits, contains the entire understanding of the
parties hereto with regard to the subject matter contained herein. In addition
to amendments and modifications permitted by Section 1(e), the parties hereto,
by mutual agreement in writing, may amend, modify and supplement this
Agreement; provided that any such amendment, modification or supplement shall
be approved by a majority of the Disinterested Members of each of the Trust and
the Corporation. The failure of any party hereto to enforce at any time any
provision of this
-11-
<PAGE> 12
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
such party thereafter to enforce each and every such provision. No waiver of
any breach of this Agreement shall be held to constitute a waiver of any other
or subsequent breach.
SECTION 19. GOVERNING LAW. Except to the extent that
Maryland law is mandatorily applicable to the rights and obligations of the
shareholders of the Trust and the stockholders of the Corporation, this
Agreement, and the application or interpretation thereof, shall be governed
exclusively by its terms and by the internal laws of the State of New York,
without regard to principles of conflicts of laws as applied in the State of
New York or any other jurisdiction which, if applied, would result in the
application of any laws other than the internal laws of the State of New York.
SECTION 20. HOTEL INVESTORS TRUST. The parties hereto
understand and agree that the name "Hotel Investors Trust" is a designation of
the Trust and its Trustees (as Trustees but not personally) under the
Declaration of Trust, and all persons dealing with the Trust shall look solely
to the Trust's assets for the enforcement of any claims against the Trust, and
that the Trustees, officers, agents and security holders of the Trust assume no
personal liability for obligations entered into on behalf of the Trust, and
their respective individual assets shall not be subject to the claims of any
person relating to such obligations.
SECTION 21. SUBMISSION TO JURISDICTION. Each of the parties
hereto irrevocably submits and consents to the jurisdiction of the United
States District Court for the Southern District of New York and the United
States District Court for the Central District of California in connection with
any action or proceeding arising out of or relating to this Agreement, and
irrevocably waives any immunity from jurisdiction thereof and any claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled in any such action or proceeding.
-12-
<PAGE> 13
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto or by their duly authorized officers, all as of
the date first above written.
HOTEL INVESTORS TRUST
a Maryland real estate investment
trust
By:
-------------------------------------------
Name:
Title:
HOTEL INVESTORS CORPORATION
a Maryland corporation
By:
-------------------------------------------
Name:
Title:
SLT REALTY LIMITED PARTNERSHIP
By: HOTEL INVESTORS TRUST,
general partner
By:
--------------------------------------
Name:
Title:
SLC OPERATING LIMITED PARTNERSHIP
By: HOTEL INVESTORS CORPORATION,
general partner
By:
--------------------------------------
Name:
Title:
-13-
<PAGE> 14
STARWOOD PARTNERS:
BERL HOLDINGS, L.P.
By: BERL HOLDINGS I, INC.,
general partner
By:
--------------------------------------
Name:
Title:
STARWOOD-APOLLO HOTEL PARTNERS
VIII, L.P.
By: SAHI, INC.,
general partner
By:
--------------------------------------
Name:
Title:
STARWOOD APOLLO HOTEL PARTNERS IX, L.P.
By: SAHI, INC.,
general partner
By:
--------------------------------------
Name:
Title:
STARWOOD NOMURA HOTEL INVESTORS, L.P.
By: SNHI, INC.,
general partner
By:
--------------------------------------
Name:
Title:
-14-
<PAGE> 15
STARWOOD/WICHITA INVESTORS, L.P.
By: STARWOOD OPPORTUNITY FUND,
II, L.P., general partner
By: STARWOOD CAPITAL GROUP, L.P.,
general partner
By: BSS CAPITAL PARTNERS,
L.P., general partner
By: STERNLICHT HOLDINGS
II, INC., general
partner
By:
---------------------------
Name:
Title:
STARWOOD-HUNTINGTON PARTNERS, L.P.
By: SRL HOLDINGS, INC.,
general partner
By:
--------------------------------------
Name:
Title:
WOODSTAR PARTNERS I, L.P.
By: STARWOOD CAPITAL GROUP, L.P.,
general partner
By: BSS CAPITAL PARTNERS, L.P.,
general partner
By: STERNLICHT HOLDINGS II,
INC., general partner
By:
------------------------------
Name:
Title:
-15-
<PAGE> 16
FIREBIRD:
FIREBIRD CONSOLIDATED PARTNERS, L.P.
By: STARWOOD OPPORTUNITY FUND II, L.P.,
general partner
By: STARWOOD CAPITAL GROUP, L.P.,
general partner
By: BSS CAPITAL PARTNERS, L.P.,
general partner
By: STERNLICHT HOLDINGS II,
INC., general partner
By:
-------------------------
Name:
Title:
-16-
<PAGE> 17
EXHIBIT A TO
EXCHANGE RIGHTS AGREEMENT
LETTER OF TRANSMITTAL
To Tender Units
Pursuant to the Exchange Rights Agreement
Dated as of January 1, 1995
TO: Starwood Lodging Trust
11845 West Olympic Boulevard
Suite 550
Los Angeles, California 90064
Starwood Lodging Corporation
11845 West Olympic Boulevard
Suite 560
Los Angeles, California 90064
DESCRIPTION OF UNITS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NAMES(S) AND ADDRESS(ES) UNITS TENDERED (ATTACH
OF REGISTERED OWNERS ADDITIONAL LIST IF
NECESSARY)
</TABLE>
Realty
Units:
Operating
Units:
------------------------------------------------------
Total
<PAGE> 18
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Starwood Lodging Trust (the
"Trust") the above-described Realty Units (as defined in the Exchange Rights
Agreement dated as of January 1, 1995 (the "Exchange Rights Agreement")) and
hereby tenders to Starwood Lodging Corporation (the "Corporation") the
above-described Operating Units (as defined in the Exchange Rights Agreement)
in accordance with the terms and conditions of the Exchange Rights Agreement
and this Letter of Transmittal (which together constitute the "Offer"), receipt
of which is hereby acknowledged. All terms used herein but not defined herein
are used as defined in the Exchange Rights Agreement.
Subject to, and effective upon the issuance of Paired Shares
and/or the payment of cash, as the case may be, for the Starwood Units tendered
hereby, the undersigned hereby assigns and transfers (i) to the Trust all
right, title and interest in and to all the Realty Units that are being
tendered hereby and irrevocably constitutes and appoints the Trust (the "Realty
Unit Agent"), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) transfer
such Realty Units on the books of the Realty Partnership and (b) receive all
rights, privileges and benefits, and any and all obligations and liabilities
appertaining thereto and otherwise exercise all rights of beneficial ownership
of such Realty Units, all in accordance with the terms of the Offer and (ii) to
the Corporation all right, title and interest in and to all the Operating Units
that are being tendered hereby and irrevocably constitutes and appoints the
Corporation (the "Operating Unit Agent" and, together with the Realty Unit
Agent, the "Agents"), with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (a)
transfer such Operating Units on the books of the Operating Partnership and (b)
receive all rights, privileges and benefits, and any and all obligations and
liabilities appertaining thereto and otherwise exercise all rights of
beneficial ownership of such Operating Units, all in accordance with the terms
of the Offer.
The undersigned hereby represents and warrants (i) to the
Trust that the undersigned has full power and authority to tender, sell, assign
and transfer the tendered Realty Units and that upon payment therefor, the
Trust will acquire unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim, (ii) to the Corporation that the undersigned has full power and
authority to tender, sell, assign and transfer the tendered Operating Units and
that upon payment therefor, the
-2-
<PAGE> 19
Corporation will acquire unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances and the same will not be subject
to any adverse claim, (iii) to the Trust and the Corporation that the tender
complies with each and every provision of Section 1 of the Exchange Rights
Agreement, and (iv) attached hereto is a calculation, to the best knowledge of
the undersigned after due inquiry (together with such supporting documentation
as the Trust may reasonably request) of the maximum number of Paired Shares
that may be issued to the undersigned without causing either (x) the Trust to
not satisfy the REIT Requirements in any respect or (y) any person or entity to
Beneficially Own Trust Shares exceeding the Ownership Limit. The undersigned
will, upon request, execute any additional documents deemed by the Trust or the
Corporation to be reasonably necessary or desirable to complete the sale,
assignment and transfer of the tendered Starwood Units.
Unless a registration statement relating to any Paired Shares
to be delivered to the undersigned is effective under the Securities Act of
1933, as amended (the "Securities Act"), the undersigned hereby represents and
warrants to the Trust and the Corporation that the undersigned (i) is an
"accredited investor" within the meaning of Rule 501 under the Securities Act,
(ii) has sufficient knowledge and experience in financial and business matters
and in investing in entities similar to the Partnerships, the Trust and the
Corporation so as to be able to evaluate the risks and merits of its investment
in the Partnerships, the Trust and the Corporation and it is able financially
to bear the risks thereof, (iii) has had an opportunity to discuss the
business, management and financial affairs of the Trust, the Corporation and
the Partnerships with the management of the Trust, the Corporation and the
Partnerships, and (iv) understands that any such Paired Shares have not been
registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the
Securities Act and any such Paired Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from such registration. If not
sold pursuant to an effective registration statement, any such Paired Shares
will bear an appropriate legend indicating that such Paired Shares have not
been registered under the Securities Act and resale of such Paired Shares is
restricted under applicable securities laws.
All authority conferred or agreed to be conferred in this
Letter of Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors, administrators
and legal representatives of the undersigned.
-3-
<PAGE> 20
The undersigned understands that, except as provided in
Section 2(b) of the Exchange Rights Agreement, a tender of Starwood Units
pursuant to the Exchange Rights Agreement is irrevocable and constitutes a
binding agreement between the undersigned and the Trust and the Corporation
upon the terms and subject to the conditions of the Exchange Rights Agreement.
Unless otherwise indicated under "Special Delivery
Instructions", please mail any Paired Shares issuable upon exchange of the
Starwood Units tendered hereby (or, if the Cash Election or the Combined
Election is made, the cash payment payable pursuant thereto) to the address(es)
of the registered holder(s) appearing under "Description of Units." In the
event that the Special Delivery Instructions are completed, please issue the
Paired Shares (or, if the Cash Election or the Combined Election is made, the
cash payment payable pursuant thereto) in the name of the registered holder(s)
and transmit the same to the person or persons so indicated.
The Trust, the Corporation and the undersigned agree that they
will cooperate with each other and will make, execute, acknowledge, deliver,
record and file, or cause to be made, executed, acknowledged, delivered,
recorded and filed, at such times and places as the other may reasonably deem
necessary, all other and further documents and instruments, and will take all
other and further actions, as the other may reasonably request from time to
time in order to effectuate the purposes and provisions of the tender made
pursuant to this Letter of Transmittal.
-4-
<PAGE> 21
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if Paired Shares or the cash payment are
to be sent to someone other than the undersigned or to the undersigned at an
address other than that above.
Mail certificate(s) for Paired Shares or cash payment to:
Name
----------------------------------------------------------------------------
(please print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(include Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
SIGN HERE
Complete Substitute Form W-9 included
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature(s) of holder of Units)
(Must be signed by registered holder(s) as name(s) appear(s) on books and
records of the Partnership. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, please set forth full
title and see instruction 4.)
Dated
----------------------------------------------------------------------------
Name(s)
-------------------------------------------------------------------------
(please print)
Capacity
(Full Title)
--------------------------------------------------------------------
Address
-------------------------------------------------------------------------
(include Zip Code)
-5-
<PAGE> 22
Area Code and Tel. No.
----------------------------------------------------------
Tax Identification or
Social Security No.
-------------------------------------------------------------
(Complete Substitute Form W-9)
Guarantee of Signature(s)
(See Instruction 1)
Authorized
Signature
-----------------------------------------------------------------------
Name of
Firm
----------------------------------------------------------------------------
Dated
---------------------------------------------------------------------------
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Exchange Rights Agreement
1. GUARANTEE OF SIGNATURE. No signature guarantee on
this Letter of Transmittal is required unless the registered holder of the
Starwood Units has completed the box entitled "Special Delivery Instructions".
In such case all signatures on this Letter of Transmittal must be guaranteed by
a member firm of any registered national securities exchange in the United
States or of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company (not a savings bank or a savings and loan
association) having an office, branch or agency in the United States.
2. DELIVERY OF LETTER OF TRANSMITTAL. This Letter of
Transmittal is to be completed by the holder of Starwood Units. A properly
completed and duly executed Letter of Transmittal and any other documents
required by this Letter of Transmittal must be received by the Agents.
No alternative, conditional or contingent tenders will be
accepted.
3. INADEQUATE SPACE. If the space provided herein is
inadequate, the Units tendered and/or other information required should be
listed on a separate schedule attached hereto.
4. SIGNATURES ON LETTER OF TRANSMITTAL. The signature
must correspond with the name as shown on the books and records of the
Partnerships without any change whatsoever.
-6-
<PAGE> 23
If any of the Starwood Units tendered hereby are owned of
record by two or more joint owners, all such owners must sign the Letter of
Transmittal.
If any tendered Starwood Units are registered in different
names, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations.
If this Letter of Transmittal is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, each
person should so indicate when signing, and proper evidence satisfactory to the
Agents of their authority so to act must be submitted.
5. SPECIAL DELIVERY INSTRUCTIONS. If a certificate for
Paired Shares or the cash payment is to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
6. WAIVER OF CONDITIONS. Each of the Trust and the
Corporation reserves the right to waive in its sole discretion any of the
specified conditions of the Offer in the case of the Starwood Units tendered;
provided that any such waiver shall not adversely affect any holder of
outstanding Starwood Units without the consent of such holder.
7. BACK-UP WITHHOLDING. Under the Federal income tax
law, a person surrendering Starwood Units must provide the Agents with his
correct taxpayer identification number ("TIN") on Substitute Form W-9 below
unless an exemption applies. If the correct TIN is not provided, a $50 penalty
may be imposed by the Internal Revenue Service and payments made in exchange
for the surrendered Starwood Units may be subject to back-up withholding of
that rate provided by the Federal income tax law (such rate being at the date
of the Exchange Rights Agreement, 31%).
The TIN that must be provided is that of the registered holder
of the Starwood Units. The TIN for an individual is his social security
number.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions and requests for assistance or additional copies of the Exchange
Rights Agreement and the Letter of Transmittal may be directed to the Agents at
the address set forth above.
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a holder whose tendered
Starwood Units are accepted for payment is required by law to
-7-
<PAGE> 24
provide the Agents (as payers) with his correct taxpayer identification number
on Substitute Form W-9 below. If such holder is an individual, the taxpayer
identification number is his social security number. If the Agents are not
provided with the correct taxpayer identification number, the holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such holder with respect to Starwood Units purchased
pursuant to the Offer may be subject to back-up withholding.
If back-up withholding applies, the Agents are required to
withhold, at that rate provided by the Federal income tax law (such rate being
at the date of the Exchange Rights Agreement 31%), of any such payments made to
the holder of Starwood Units. Paired Shares otherwise deliverable hereunder
may, at the expense (and with all risk of loss for the account) of the
undersigned, be sold to pay such amounts. Back-up withholding is not an
additional tax. Rather, the tax liability of persons subject to back-up
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent back-up withholding on payments that are made to a
holder of Starwood Units purchased pursuant to the Offer, the holder is
required to notify the Agents of his correct taxpayer identification number by
completing the form below certifying that the taxpayer identification number
provided on Substitute Form W-9 is correct.
WHAT NUMBER TO GIVE THE AGENT
The holder is required to give the Agents the social security
number or employer identification number of the record owner of the Starwood
Units.
-8-
<PAGE> 25
PAYER'S NAME: Starwood Lodging Trust
Starwood Lodging Corporation
<TABLE>
=======================================================================================================
<CAPTION>
Substitute Part 1 - Please provide your TIN in the box at right Social Security
Form W-9 and certify by signing and dating below Number/Employer
Identification
Number
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Department of the Certification - Under the penalties of perjury,
Treasury/Internal (i) I certify that the information provided on this
Revenue Service form is true, correct and complete and (ii) I am not
subject to backup withholding because: (a) I am
exempt from backup Service withholding, or (b) I
have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup
withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup
withholding.
- -------------------------------------------------------------------------------------------------------
Signature Date
---------------------------------------- --------------
=======================================================================================================
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING OF THAT RATE PROVIDED BY THE FEDERAL INCOME TAX LAW (SUCH
RATE BEING AT THE DATE OF THE EXCHANGE RIGHTS AGREEMENT 31%) OF ANY
PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
-9-
<PAGE> 1
EXHIBIT 2.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
as of January 1, 1995 among Hotel Investors Trust, a real estate investment
trust organized under the laws of the State of Maryland (the "Trust"), Hotel
Investors Corporation, a Maryland corporation (the "Corporation"), and Starwood
Capital Group, L.P., a limited partnership organized under the laws of the
State of Delaware ("Starwood"). Unless otherwise indicated, capitalized terms
used herein are used herein as defined in Section 1.1.
RECITALS
WHEREAS, pursuant to a Formation Agreement dated as of
November 11, 1994 (the "Formation Agreement") among the Trust, the Corporation,
Starwood and certain affiliates of Starwood listed on Schedule A hereto (the
"Holders") (i) on the date hereof the Trust and the Holders are making capital
contributions to SLT Realty Limited Partnership, a Delaware limited partnership
(the "Realty Partnership"), in return for the issuance by the Realty
Partnership to the Trust and to the Holders of Units (as defined in the Limited
Partnership Agreement of the Realty Partnership) of the Realty Partnership
(such Units issued by the Realty Partnership to the Holders on the date hereof
being hereinafter called the "Realty Units") and (ii) on the date hereof the
Corporation and the Holders are making capital contributions to SLC Operating
Limited Partnership, a Delaware limited partnership (the "Operating
Partnership"), in return for the issuance by the Operating Partnership to the
Corporation and to the Holders of Units (as defined in the Limited Partnership
Agreement of the Operating Partnership) of the Operating Partnership (such
Units issued by the Operating Partnership to the Holders on the date hereof
being hereinafter called the "Operating Units");
WHEREAS, in the event that Firebird Consolidated Partners,
L.P., a Delaware limited partnership ("Firebird"), shall acquire Units of the
Partnerships on or after the date hereof pursuant to Section 6.4 of the
Formation Agreement, then from and after such acquisition Firebird shall be
deemed to be a "Holder" for all purposes of this Agreement and such Units shall
be deemed to be "Units" for all purposes of this Agreement; and
WHEREAS, pursuant to the Formation Agreement the parties
hereto desire to set forth the rights of Starwood and the obligations of the
Trust and the Corporation to cause the registration of the Registrable
Securities pursuant to the Securities Act;
-1-
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND USAGE.
1.1. DEFINITIONS. As used in this Agreement:
Beneficially Owning. "Beneficially Owning" means owning Trust
Shares directly, indirectly or constructively by a Person through the
application of Section 318(a) of the Code, as modified by Section 856(d)(5) of
the Code, or Section 544 of the Code, as modified by Section 856(h) of the
Code.
Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Commission. "Commission" shall mean the Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
Continuously Effective. "Continuously Effective", with
respect to a specified registration statement, shall mean that such
registration statement shall not cease to be effective and available for
Transfers of Registrable Securities thereunder for longer than either (i) any
ten (10) consecutive business days, or (ii) an aggregate of fifteen (15)
business days during the period specified in the relevant provision of this
Agreement.
Corporation Shares. "Corporation Shares" shall mean the
shares of Common Stock, par value $.01 per share, of the Corporation.
Demand Registration. "Demand Registration" shall have the
meaning set forth in Section 2.1.
Disinterested Members. "Disinterested Members", when used
with respect to the Trust, has the meaning set forth in the Code of Regulations
of the Trust and, when used with respect to the Corporation, has the meaning
set forth in the By-Laws of the Corporation, in each case as amended from time
to time.
Formation Agreement. "Formation Agreement" shall have the
meaning set forth in the recitals.
Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934 and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
-2-
<PAGE> 3
Exchange Rights Agreement. "Exchange Rights Agreement" shall
mean the Exchange Rights Agreement dated the date hereof among the Trust, the
Corporation, the Realty Partnership, the Operating Partnership, Starwood and
the Holders.
Issuance Percentages. "Issuance Percentage", when used with
respect to the Trust, shall mean 95% and, when used with respect to the
Corporation, shall mean 5%; provided that the Trust and the Corporation may
from time to time change the Issuance Percentages based on their joint
determination of the relative values of the Trust Shares and Corporation
Shares.
Majority Selling Holders. "Majority Selling Holders" means
those Selling Holders whose Registrable Securities included in such
registration represent a majority of the Registrable Securities of all Selling
Holders included therein.
Operating Partnership. "Operating Partnership" shall have the
meaning set forth in the recitals.
Operating Units. "Operating Units" shall have the meaning set
forth in the recitals.
Ownership Limit. "Ownership Limit" when used with respect to
Trust Shares, has the meaning set forth in the Declaration of Trust of the
Trust and, when used with respect to the Corporation Shares, has the meaning
set forth in the Restated Articles of Incorporation of the Corporation, in each
case as amended from time to time.
Paired Shares. "Paired Shares" shall mean the shares of Trust
Shares and shares of Corporation Stock which are "paired" pursuant to the
Pairing Agreement dated June 25, 1980 between the Trust and the Corporation, as
it may be amended from time to time.
Person. "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government or other agency or
political subdivision thereof.
Piggyback Registration. "Piggyback Registration" shall have
the meaning set forth in Section 3.
Realty Partnership. "Realty Partnership" shall have the
meaning set forth in the recitals.
Realty Units. "Realty Units" shall have the meaning set forth
in the recitals.
-3-
<PAGE> 4
Register, Registered and Registration. "Register",
"registered", and "registration" shall refer to a registration effected by
preparing and filing a registration statement or similar document in compliance
with the Securities Act, and the declaration or ordering by the Commission of
effectiveness of such registration statement or document.
Registrable Securities. "Registrable Securities" shall mean:
(i) the Paired Shares issued upon exchange of Realty Units and Operating Units
pursuant to the Exchange Rights Agreement, (ii) the Paired Shares issued upon
exchange of Units of the Partnerships issued in exchange for senior debt
pursuant to Section 6.4 of the Formation Agreement; (iii) any Paired Shares or
other securities issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange by the Trust and the Corporation
generally for, or in replacement by the Trust and the Corporation generally of,
such Paired Shares; and (iv) any securities issued in exchange for Paired
Shares in any merger or reorganization of the Trust and the Corporation;
provided, however, that Registrable Securities shall not include any securities
which have theretofore been registered and sold pursuant to the Securities Act
or which have been sold to the public pursuant to Rule 144 or any similar rule
promulgated by the Commission pursuant to the Securities Act, and, provided
further, the Trust and the Corporation shall have no obligation under Sections
2 and 3 to register any Registrable Securities if the Trust and the Corporation
shall deliver to the Holders of such Registrable Securities an opinion of
counsel to the effect that the proposed sale or disposition of all of the
Registrable Securities for which registration was requested does not require
registration under the Securities Act for a sale or disposition in a single
public sale, and offers to remove any and all legends restricting transfer from
the certificates evidencing such Registrable Securities. Notwithstanding
anything to the contrary set forth herein, Registrable Securities shall not
include (x) any Realty Units or Operating Units or (y) any Paired Shares issued
upon exchange of Units issued after the date hereof to any Person (including,
without limitation, any Holder), other than Units described in clause (ii) of
this definition.
Registrable Securities then outstanding. "Registrable
Securities then outstanding" shall mean, with respect to a specified
determination date, the Registrable Securities owned by all Holders on such
date and the Registrable Securities which are issuable upon exchange of Realty
Units and Operating Units owned by all Holders on such date.
Registration Expenses. "Registration Expenses" shall have the
meaning set forth in Section 6.1.
-4-
<PAGE> 5
REIT Requirements. "REIT Requirements shall mean the
requirements for the Trust to (i) qualify as a REIT under the Internal Revenue
Code of 1986, as amended from time to time, and the rules and regulations
promulgated thereunder, (ii) avoid any federal income or excise tax liability,
(iii) retain its status as grandfathered pursuant to Section 132(c)(3) of the
Deficit Reduction Act of 1984 and (iv) retain the benefits of that certain
private letter ruling issued by the Internal Revenue Service to the Trust dated
as of January 4, 1980.
Securities Act. "Securities Act" shall mean the Securities
Act of 1933 and the rules and regulations of the Commission thereunder, all as
the same may be in effect at the time.
Selling Holders. "Selling Holders" shall mean, with respect
to a specified registration pursuant to this Agreement, Holders whose
Registrable Securities are included in such registration.
Shelf Registration. "Shelf Registration" shall have the
meaning set forth in Section 2.2.
Tender Registration. "Tender Registration" shall have the
meaning set forth in Section 2.3.
Transfer. "Transfer" shall mean and include the act of
selling, giving, transferring, creating a trust (voting or otherwise),
assigning or otherwise disposing of (other than pledging, hypothecating or
otherwise transferring as security) (and correlative words shall have
correlative meanings); provided however, that any transfer or other disposition
upon foreclosure or other exercise of remedies of a secured creditor after an
event of default under or with respect to a pledge, hypothecation or other
transfer as security shall constitute a "Transfer".
Trust Shares. "Trust Shares" shall mean the shares of
Beneficial Interest, $.01 par value, of the Trust.
Underwriters' Representative. "Underwriters' Representative"
shall mean the managing underwriter, or, in the case of a co-managed
underwriting, the managing underwriter designated as the Underwriters'
Representative by the co-managers.
Units. "Units" shall mean Realty Units and Operating Units.
Violation. "Violation" shall have the meaning set forth in
Section 7.1.
-5-
<PAGE> 6
1.2. USAGE.
(i) References to a Person are also references to its
assigns and successors in interest (by means of merger, consolidation or sale of
all or substantially all the assets of such Person or otherwise, as the case may
be).
(ii) References to Registrable Securities "owned" by a Holder
shall include Registrable Securities beneficially owned by such Person but
which are held of record in the name of a nominee, trustee, custodian, or other
agent, but shall exclude Paired Shares held by a Holder in a fiduciary capacity
for customers of such Person.
(iii) References to a document are to it as amended, waived
and otherwise modified from time to time and references to a statute or other
governmental rule are to it as amended and otherwise modified from time to time
(and references to any provision thereof shall include references to any
successor provision).
(iv) References to Sections or to Schedules or Exhibits are
to sections hereof or schedules or exhibits hereto, unless the context otherwise
requires.
(v) The definitions set forth herein are equally applicable
both to the singular and plural forms and the feminine, masculine and neuter
forms of the terms defined.
(vi) The term "including" and correlative terms shall be
deemed to be followed by "without limitation" whether or not followed by such
words or words of like import.
(vii) The term "hereof" and similar terms refer to this
Agreement as a whole.
(viii) The "date of" any notice or request given pursuant to
this Agreement shall be determined in accordance with Section 12.
SECTION 2. DEMAND, SHELF AND TENDER REGISTRATIONS.
2.1. If Starwood shall make a written request to the Trust
and the Corporation, then the Trust and the Corporation shall cause there to be
filed with the Commission a registration statement under the Securities Act (a
"Demand Registration") and (subject to Section 2.9) the Trust and the
Corporation shall include therein all or any portion of the Registrable
Securities as Starwood shall request in such written request; provided,
however, that no request may be made pursuant to this Section 2.1 if within 90
days prior to the date of such request a Demand Registration statement pursuant
to this Section 2.1 shall have
-6-
<PAGE> 7
been declared effective by the Commission. Any request made pursuant to this
Section 2.1 shall be addressed to the attention of the Secretary of each of the
Trust and the Corporation, and shall specify the number of Registrable
Securities to be registered, the intended methods of disposition thereof and
that the request is for a Demand Registration pursuant to this Section 2.1.
2.2. If Starwood shall make a written request to the Trust
and the Corporation, then the Trust and the Corporation shall cause there to be
filed with the Commission a registration statement in accordance with the
Securities Act for an offering on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act (a "Shelf Registration"), and the Trust and
the Corporation shall include therein the Registrable Securities requested by
Starwood. Any request made pursuant to this Section 2.2 shall be addressed to
the attention of the Secretary of each of the Trust and the Corporation, and
shall specify the number of Registrable Securities to be registered, the
possible intended methods of disposition thereof and that the request is for a
Shelf Registration pursuant to this Section 2.2.
2.3. If (i) there is a Paired Share Tender Reduction (as
defined in Section 6 of the Exchange Rights Agreement) and (ii) Starwood shall
make a written request to the Trust and the Corporation, then the Trust and the
Corporation shall cause there to be filed with the Commission a registration
statement under the Securities Act (a "Tender Registration"), and the Trust and
the Corporation shall register and sell pursuant thereto a number of Paired
Shares (such Paired Shares being considered to be "Registrable Securities" for
purposes of this Agreement) equal to the number of Unissued Paired Shares (as
defined in Section 6 of the Exchange Rights Agreement) that Starwood shall
request in such written request. The Trust and the Corporation shall pay the
net proceeds of such sale (after underwriting discounts and commissions) to the
tendering holder of the Delayed Payment Units (as defined in Section 6 of the
Exchange Rights Agreement) pursuant to the Exchange Rights Agreement. Any
request made pursuant to this Section 2.3 shall be addressed to the attention
of the Secretary of each of the Trust and the Corporation, and shall specify
the number of Reduced Paired Shares to be registered, the intended methods of
disposition thereof and that the request is for a Tender Registration pursuant
to this Section 2.3.
2.4. (i) The Trust and the Corporation shall be entitled to
postpone for up to 90 days the filing, effectiveness, supplementing or amending
of any registration statement otherwise required to be prepared and filed
pursuant to this Section 2, if the Board of Trustees of the Trust or the Board
of Directors of the Corporation determines that such registration and the
Transfer of Registrable Securities contemplated thereby would
-7-
<PAGE> 8
interfere with, or require premature disclosure of, any material financing,
acquisition, disposition, reorganization or other transaction involving the
Realty Partnership, the Operating Partnership, the Trust or the Corporation or
any of their respective subsidiaries and the Trust or the Corporation, as the
case may be, promptly gives Starwood notice of such determination. Starwood
and each Holder hereby acknowledges that any notice given by the Trust or the
Corporation pursuant to this Section 2.4(i) shall constitute material
non-public information and that the United States securities laws prohibit any
Person who has material non- public information about a company from purchasing
or selling securities of such company or from communicating such information to
any other Person under circumstances in which it is reasonably foreseeable that
such Person is likely to purchase or sell such securities.
(ii) The Trust and the Corporation shall not be obligated to
file any Demand Registration statement or any Tender Registration statement
pursuant to this Section 2 if, within 30 days after their receipt of the
written request of Starwood the Trust and the Corporation notify Starwood that,
prior to their receipt of such request, they had a plan or intention promptly
to register equity securities under the Securities Act. Holders of Registrable
Securities shall have rights to participate in any such registration on the
terms provided in Section 3 hereof.
(iii) Notwithstanding anything to the contrary contained in
this Agreement, without the consent of the Trust and the Corporation, no
Registrable Securities may be offered or sold pursuant to a registration
statement pursuant to Sections 2 or 3 prior to the earlier of (A) one year from
the date of this Agreement and (B) the consummation of the first underwritten
public offering of Paired Shares by the Trust and the Corporation after the
date of this Agreement. No Holder shall be entitled to participate in any
Piggyback Registration pursuant to which securities registered thereunder are
to be offered or sold prior to the earlier of the events described in clauses
(A) and (B).
2.5. Following receipt of a request for a Demand
Registration, a Shelf Registration or a Tender Registration, the Trust and the
Corporation shall:
(i) File the registration statement with the Commission as
promptly as practicable, and shall use their respective reasonable efforts to
have the registration declared effective under the Securities Act as soon as
reasonably practicable, in each instance giving due regard to the need to
prepare current financial statements, conduct due diligence and complete other
actions that are reasonably necessary to effect a registered public offering.
-8-
<PAGE> 9
(ii) Use their respective reasonable efforts to keep the
relevant registration statement Continuously Effective (x) if a Demand
Registration or a Tender Registration, for up to 30 days or until such earlier
date as of which all the Registrable Securities under the Demand Registration
statement or Tender Registration statement shall have been disposed of in the
manner described in the registration statement and (y) if a Shelf Registration,
until such date as of which all the Registrable Securities under the Shelf
Registration statement have been disposed of in a manner described in the
registration statement. Notwithstanding the foregoing, if for any reason the
effectiveness of a registration pursuant to this Section 2 is suspended or, in
the case of a Demand Registration or a Tender Registration, postponed as
permitted by Section 2.4(i), the relevant foregoing period shall be extended by
the aggregate number of days of such suspension or postponement.
2.6. Notwithstanding anything in this Agreement to the
contrary, (a) in no event will the Trust or the Corporation be obligated to
effect more than a total of four Demand Registrations and Shelf Registrations,
(b) in no event will the Trust or the Corporation be obligated to effect any
Demand Registration for less than 100,000 Paired Shares, (c) in no event will
the Trust or the Corporation be obligated to effect a Demand Registration or a
Tender Registration if the Registrable Securities proposed to be registered
therein shall be covered by a Shelf Registration statement, and (d) no
registration shall be effected under this Agreement and no Transfer of
Registrable Securities may be effected if as a result thereof the Trust would
not satisfy the REIT Requirements in any respect or if such registration or
Transfer would result in any Person Beneficially Owning Paired Shares in excess
of the Ownership Limit. For purposes of the preceding sentence, registration
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective, or (ii) if after such registration
statement has become effective, the related offer, sale or distribution of
Registrable Securities thereunder is prohibited by any stop order, injunction
or other order or requirement of the Commission or other governmental agency or
court for any reason not attributable to Starwood or the Selling Holders and
such prohibition is not thereafter eliminated. If the Trust and the
Corporation shall have complied with their respective obligations under this
Agreement, a right to demand a registration pursuant to this Section 2 shall be
deemed to have been satisfied (A) if a Demand Registration or a Tender
Registration, upon the earlier of (x) the date as of which all of the
Registrable Securities included therein shall have been disposed of pursuant to
the Registration Statement, and (y) the date as of which such Demand
Registration shall have been Continuously Effective for a period of 30 days,
and (B) if a Shelf Registration, upon the effective date of such Shelf
Registration, provided no stop order or similar order, or
-9-
<PAGE> 10
proceedings for such an order, is thereafter entered or initiated.
2.7. A registration pursuant to this Section 2 shall be on
such appropriate registration form of the Commission as shall be selected by
the Trust and the Corporation and shall permit the disposition of the
Registrable Securities in accordance with the intended method or methods of
disposition specified in the request pursuant to Sections 2.1, 2.2 or 2.3,
respectively.
2.8. If any Demand Registration or Shelf Registration
pursuant to Section 2 involves an underwritten offering (whether on a "firm
commitment", "best efforts" or "all reasonable efforts" basis or otherwise),
Starwood shall select the underwriter or underwriters and manager or managers
to administer such underwritten offering; provided, however, that each Person
so selected shall be acceptable to the Trust and the Corporation.
2.9. Whenever the Trust and the Corporation shall effect a
registration pursuant to this Section 2 in connection with an underwritten
offering by one or more Selling Holders of Registrable Securities: (i) if such
Selling Holders have requested the inclusion therein of more than one class of
Registrable Securities and the Underwriters' Representative advises Starwood
that, in its opinion, the inclusion of more than one class of Registrable
Securities would adversely affect such offering, Starwood shall decide which
class of Registrable Securities shall be included therein in such offering and
the related registration and the other class shall be excluded and (ii) if the
Underwriters' Representative advises Starwood that, in its opinion, the amount
of securities requested to be included in such offering (whether by Selling
Holders or others, including the Trust and the Corporation) exceeds the amount
which can be sold in such offering within a price range acceptable to the
Majority Selling Holders, securities shall be included in such offering and the
related registration, to the extent of the amount which can be sold within such
price range in the following order of priority: first, the Registrable
Securities requested to be included in such registration pursuant to this
Section 2, pro rata based on the estimated gross proceeds from the sale
thereof; and second all other securities requested to be included in such
registration.
SECTION 3. PIGGYBACK REGISTRATION.
3.1. If at any time the Trust and the Corporation propose to
register securities under the Securities Act in connection with the public
offering solely for cash on Form S-1, S-2, S-3, or S-11 (or any replacement or
successor forms), the Trust and the Corporation shall promptly give Starwood
written notice of such registration. Upon the written request of each
-10-
<PAGE> 11
Holder given as promptly as practicable but in any event within 20 days
following the date of such notice, the Trust and the Corporation shall cause to
be included in such registration statement and use their respective reasonable
efforts to be registered under the Securities Act all the Registrable
Securities that each such Holder shall have requested to be registered;
provided, however, that such right of inclusion shall not apply to any
registration statement covering an offering of debt securities or convertible
debt securities (any such registration in which Holders participate pursuant to
this Section 3.1 being referred to as a "Piggyback Registration"). The Trust
and the Corporation shall have the absolute right to delay, withdraw or cease
to prepare or file any registration statement for any offering referred to in
this Section 3 without any obligation or liability to Starwood or any Holder,
it being understood that any Registrable Securities previously included in any
such withdrawn Registration Statement shall not cease to be Registrable
Securities by reason of such inclusion or withdrawal.
3.2. If the Underwriters' Representative shall advise the
Trust and the Corporation that, in its opinion, the amount or type of
Registrable Securities requested to be included in such registration would
adversely affect such offering, or the timing thereof, then the Trust and the
Corporation will include in such registration, to the extent of the amount and
class which the Trust and the Corporation are so advised can be sold without
such adverse effect in such offering: first, all securities proposed to be
sold by the Trust and the Corporation for their own accounts; second, the
Registrable Securities requested to be included in such registration by Holders
pursuant to this Section 3, pro rata based on the estimated gross proceeds from
the sale thereof; and third all other securities requested to be included in
such registration.
SECTION 4. REGISTRATION PROCEDURES. Whenever required under
Section 2 or Section 3 to effect the registration of any Registrable
Securities, the Trust and the Corporation shall, as expeditiously as
practicable:
4.1. Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use their respective
reasonable efforts to cause such registration statement to become effective;
provided, however, that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Trust and the Corporation shall
furnish to one firm of counsel for the Selling Holders, copies of all such
documents in the form substantially as proposed to be filed with the
Commission.
4.2. Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as
-11-
<PAGE> 12
may be necessary to comply with the provisions of the Securities Act and rules
thereunder with respect to the disposition of all securities covered by such
registration statement. If the registration is for an underwritten offering,
the Trust and the Corporation shall amend the registration statement or
supplement the prospectus whenever required by the terms of the underwriting
agreement entered into pursuant to Section 5.2. If the registration statement
is for a Shelf Registration, the Trust and the Corporation shall amend the
registration statement or supplement the prospectus so that it will remain
current and in compliance with the requirements of the Securities Act for the
period specified in Section 2.5(ii), and if during such period any event or
development occurs as a result of which the registration statement or
prospectus contains a misstatement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, the Trust or the Corporation shall promptly notify each
Selling Holder, amend the registration statement or supplement the prospectus
so that each will thereafter comply with the Securities Act and furnish to each
Selling Holder of Registrable Securities such amended or supplemented
prospectus, which each such Holder shall thereafter use in the Transfer of
Registrable Securities covered by such registration statement. Pending any
such amendment or supplement described in this Section 4.2, each such Holder
shall cease making offers or Transfers of Registrable Shares pursuant to the
prior prospectus. In the event that any Registrable Securities included in a
registration statement subject to, or required by, this Agreement remain unsold
at the end of the period during which the Trust and the Corporation are
obligated to use their respective reasonable efforts to maintain the
effectiveness of such registration statement, the Trust and the Corporation may
file a post-effective amendment to the registration statement for the purpose
of removing such Registrable Securities from registered status.
4.3. Furnish to each Selling Holder of Registrable
Securities, without charge, such numbers of copies of the registration
statement, any pre-effective or post-effective amendment thereto, the
prospectus, including each preliminary prospectus and any amendments or
supplements thereto, in each case in conformity with the requirements of the
Securities Act and the rules thereunder, and such other related documents as
any such Selling Holder may reasonably request in order to facilitate the
disposition of Registrable Securities owned by such Selling Holder.
4.4. Use their respective reasonable efforts (i) to register
and qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such states where an exemption from
registration is not available and as shall be reasonably requested by the
Underwriters' Representative and (ii) to obtain the withdrawal of any order
-12-
<PAGE> 13
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of the offer
and transfer of any of the Registrable Securities in any state, at the earliest
possible moment; provided, however, that neither the Trust nor the Corporation
shall be required in connection therewith or as a condition thereto to qualify
to do business or to consent to general service of process in any state.
4.5. In the event of any underwritten offering, use their
respective reasonable efforts to enter into and perform their respective
obligations under an underwriting agreement (including indemnification and
contribution obligations of underwriters), in usual and customary form, with
the managing underwriter or underwriters of such offering. The Trust and the
Corporation shall also cooperate with the Majority Selling Holders, and the
Underwriters' Representative for such offering in the marketing of the
Registerable Securities, including making available the officers, accountants,
counsel, premises, books and records of the Trust and the Corporation for such
purpose, but neither the Trust nor the Corporation shall be required to incur
any material out-of-pocket expense pursuant to this sentence.
4.6. Promptly notify each Selling Holder of any stop order
issued or threatened to be issued by the Commission in connection therewith and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
4.7. Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and Underwriter (but not more than one firm of counsel to such
Selling Holders), all financial and other information as shall be reasonably
requested by them, and provide any Selling Holder, any underwriter
participating in such offering and the representatives of such Selling Holder
and Underwriter the reasonable opportunity to discuss the business affairs of
the Trust and the Corporation with their principal executives and independent
public accountants who have certified the audited financial statements included
in such registration statement, in each case all as necessary to enable them to
exercise their due diligence responsibility under the Securities Act; provided,
however, that information that the Trust or the Corporation determine to be
confidential and which the Trust or the Corporation advise such Person in
writing, is confidential shall not be disclosed unless such Person signs a
confidentiality agreement reasonably satisfactory to the Trust and the
Corporation or the related Selling Holder of Registrable Securities agrees to
be responsible for such Person's breach of confidentiality on terms reasonably
satisfactory to the Trust and the Corporation.
-13-
<PAGE> 14
4.8. Use their respective reasonable efforts to obtain a
so-called "comfort letter" from the independent public accountants of the Trust
and the Corporation, and legal opinions of counsel to the Trust and the
Corporation addressed to the Selling Holders, in customary form and covering
such matters of the type customarily covered by such letters, and in a form
that shall be reasonably satisfactory to Starwood. Delivery of any such opinion
or comfort letter shall be subject to the recipient furnishing such written
representations or acknowledgements as are customarily provided by selling
shareholders who receive such comfort letters or opinions.
4.9. Use their respective reasonable efforts to cause the
Registrable Securities covered by such registration statement (i) if the Paired
Shares are then listed on a securities exchange or included for quotation in a
recognized trading market, to continue to be so listed or included for a
reasonable period of time after the offering, and (ii) to be registered with or
approved by such other United States or state governmental agencies or
authorities as may be necessary by virtue of the business and operations of the
Trust and the Corporation to enable the Selling Holders of Registrable
Securities to consummate the disposition of such Registrable Securities.
4.10. Take such other actions as are reasonably required in
order to expedite or facilitate the disposition of Registrable Securities
included in each such registration.
SECTION 5. HOLDERS' OBLIGATIONS. It shall be a condition
precedent to the obligations of the Trust and the Corporation to take any
action pursuant to this Agreement with respect to the Registrable Securities of
any Selling Holder of Registrable Securities that such Selling Holder shall:
5.1. Furnish to the Trust and the Corporation such
information regarding such Selling Holder, the number of the Registrable
Securities owned by it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Selling
Holder's Registrable Securities, and to cooperate fully with the Trust and the
Corporation in preparing such registration.
5.2. Agree to sell their Registrable Securities to the
underwriters at the same price and on substantially the same terms and
conditions as the Trust and the Corporation or the other Persons on whose
behalf the registration statement was being filed have agreed to sell their
securities, and to execute the underwriting agreement agreed to by the Majority
Selling Holders (in the case of a registration under Section 2) or the Trust
and the Corporation and the Majority Selling Holders (in the case of a
registration under Section 3).
-14-
<PAGE> 15
SECTION 6. EXPENSES OF REGISTRATION. Expenses in connection
with registrations pursuant to this Agreement shall be allocated and paid as
follows:
6.1. With respect to each Demand Registration, Shelf
Registration and Tender Registration each of the Trust and the Corporation
shall bear and pay all expenses incurred in connection with any registration,
filing, or qualification of Registrable Securities with respect to such
Registration for each Selling Holder, including all registration, filing and
National Association of Securities Dealers, Inc. fees, all fees and expenses of
complying with securities or blue sky laws, all printing expenses, messenger
and delivery expenses, the reasonable fees and disbursements of counsel for the
Trust and the Corporation, and of the independent public accountants for the
Trust and the Corporation, including the expenses of "cold comfort" letters
required by or incident to such performance and compliance (the "Registration
Expenses"), but excluding underwriting discounts and commissions relating to
Registrable Securities (which shall be paid on a pro rata basis by the Selling
Holders) and all fees and expenses of counsel for the Selling Holders;
provided, however, that the Trust and the Corporation shall not be required to
pay for any expenses of any registration proceeding begun pursuant to Section 2
if the registration is subsequently withdrawn (in which case all Selling
Holders shall bear such expenses), unless, in the case of a Demand Registration
or a Shelf Registration, Holders whose Registrable Securities constitute a
majority of the Registrable Securities then outstanding agree that such
withdrawn registration shall have constituted one of the four Demand and Shelf
Registrations available to them under Section 2 hereof. The Trust and the
Corporation each agree between themselves that they shall bear and pay
Registration Expenses in an amount equal to its respective Issuance Percentage
of such Registration Expenses and that they shall reimburse each other to the
extent necessary to cause each of them to so bear and pay such respective
amounts.
6.2. The Trust and the Corporation shall bear and pay all
Registration Expenses incurred in connection with any Piggyback Registrations
pursuant to Section 3 but excluding underwriting discounts and commissions
relating to Registrable Securities (which shall be paid on a pro rata basis by
the Selling Holders) and all fees and expenses of counsel for the Selling
Holders.
SECTION 7. INDEMNIFICATION; CONTRIBUTION. If any Registrable
Securities are included in a registration statement under this Agreement:
-15-
<PAGE> 16
7.1. To the extent permitted by applicable law, each of the
Trust and the Corporation, severally and not jointly, shall indemnify and hold
harmless each Selling Holder, each Person, if any, who controls such Selling
Holder within the meaning of the Securities Act, and each officer, director,
partner and employee of such Selling Holder and such controlling Person,
against any and all losses, claims, damages, liabilities and expenses (joint or
several), including reasonable attorneys' fees and disbursements and reasonable
expenses of investigation, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may otherwise become subject under the Securities Act, the
Exchange Act or other federal or state laws, insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"):
(i) Any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any amendments
or supplements thereto; or
(ii) The omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading; provided, however, that the indemnification
required by this Section 7.1 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or expense if such settlement is
effected without the consent of the Trust or the Corporation (which consent
shall not be unreasonably withheld), nor shall the Trust or the Corporation be
liable in any such case for any such loss, claim, damage, liability or expense
to the extent that it arises out of or is based upon a Violation which occurs
in reliance upon and in conformity with information furnished to the Trust or
the Corporation by the indemnified party expressly for use in connection with
such registration; and provided, further, that the indemnity agreement
contained in this Section 7 shall not apply to the extent that any such loss is
based on or arises out of an untrue statement or alleged untrue statement of a
material fact, or an omission or alleged omission to state a material fact,
contained in or omitted from any preliminary prospectus if the final prospectus
shall correct such untrue statement or alleged untrue statement, or such
omission or alleged omission, and a copy of the final prospectus has not been
sent or given to such person at or prior to the confirmation of sale to such
person if an underwriter was under an obligation to deliver such final
prospectus and failed to do so.
7.2. To the extent permitted by applicable law, each Selling
Holder shall indemnify and hold harmless the Trust, the Corporation, each of
the Trustees of the Trust, each of the directors of the Corporation, each of
the officers of the Trust
-16-
<PAGE> 17
or the Corporation who shall have signed the registration statement, each
Person, if any, who controls the Trust or the Corporation within the meaning of
the Securities Act, any other Selling Holder, any controlling Person of any
such other Selling Holder and each officer, director, partner, and employee of
such other Selling Holder and such controlling Person, against any and all
losses, claims, damages, liabilities and expenses (joint and several),
including reasonable attorneys' fees and disbursements and reasonable expenses
of investigation, incurred by such party pursuant to any actual or threatened
action, suit, proceeding or investigation, or to which any of the foregoing
Persons may otherwise become subject under the Securities Act, the Exchange Act
or other federal or state laws, but only insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any Violation,
in each case to the extent that such Violation arises out of or is based upon
information furnished by such Selling Holder expressly for use in connection
with such registration; provided, however, that (x) the indemnification
required by this Section 7.2 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or expense if such settlement is
effected without the consent of the relevant Selling Holder (which consent
shall not be unreasonably withheld) and (y) in no event shall the amount of any
indemnity under this Section 7.2 exceed the gross proceeds from the applicable
offering received by such Selling Holder.
7.3. Promptly after receipt by an indemnified party under
this Section 7 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified
party may make a claim under this Section 7, such indemnified party shall
deliver to the indemnifying party a written notice thereof and the indemnifying
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and disbursements and
expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time following the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
7 to the extent of such prejudice but shall not relieve the indemnifying party
of any liability that it may have to any indemnified party otherwise than
pursuant to this Section 7. Any fees and expenses incurred by the indemnified
party (including any fees and expenses
-17-
<PAGE> 18
incurred in connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within thirty
(30) days of written notice thereof to the indemnifying party (regardless of
whether it is ultimately determined that an indemnified party is not entitled
to indemnification hereunder). Any such indemnified party shall have the right
to employ separate counsel in any such action, claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be the expenses of such indemnified party unless (i) the indemnifying
party has agreed to pay such fees and expenses or (ii) the indemnifying party
shall have failed to promptly assume the defense of such action, claim or
proceeding or (iii) the named parties to any such action, claim or proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or in addition to those available to the indemnifying party and
that the assertion of such defenses would create a conflict of interest such
that counsel employed by the indemnifying party could not faithfully represent
the indemnified party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action, claim or proceeding on behalf of
such indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action, claim or proceeding or
separate but substantially similar or related actions, claims or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at any
time for all such indemnified parties, unless in the reasonable judgment of
such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to
such action, claim or proceeding, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel or
counsels).
7.4. If the indemnification required by this Section 7 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to in
this Section 7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
-18-
<PAGE> 19
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any Violation has been committed by,
or relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such Violation. The amount paid or payable
by a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 7.1 and Section 7.2, any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in Section 7.4(i). No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
7.5. If indemnification is available under this Section 7,
the indemnifying parties shall indemnify each indemnified party to the full
extent provided in this Section 7 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 7.4.
7.6. The obligations of the Trust, the Corporation and the
Selling Holders of Registrable Securities under this Section 7 shall survive
the completion of any offering of Registrable Securities pursuant to a
registration statement under this Agreement, and otherwise.
SECTION 8. DETERMINATIONS AND INTERPRETATION. All
determinations of the Trust (or the Board of Trustees of the Trust) and the
Corporation (or the Board of Directors of the Corporation) provided for in or
pursuant to this Agreement shall be made by their respective Disinterested
Members, including, without limitation, any determination pursuant to Sections
2.4(i) and 2.7. All interpretations of the terms of this Agreement shall be
resolved on behalf of the Trust and the Corporation by their respective
Disinterested Members.
SECTION 9. HOLDBACK. (a) Each Holder, if so requested by the
Underwriters' Representative in connection with an offering of any securities
covered by a registration statement filed by Trust and the Corporation, whether
or not Holder's
-19-
<PAGE> 20
securities are included therein, shall not effect any public sale or
distribution of Paired Shares or any securities convertible into or
exchangeable or exercisable for Paired Shares, including a sale pursuant to
Rule 144 under the Securities Act (except as part of such underwritten
registration), during the 15-day period prior to, and during the 180-day period
beginning on, the date such registration statement is declared effective under
the Securities Act by the Commission. In order to enforce the foregoing
covenant, the Trust and the Corporation shall be entitled to impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder until the end of such period. Holders of Registrable Securities shall
have the right to participate in any such registration on the terms provided in
Section 3 hereof.
(b) Each of the Trust and the Corporation agrees not to
effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such securities,
during the 15-day period prior to and during the 90-day period beginning on the
effective date of any underwritten Demand Registration (except pursuant to (i)
registrations on Form S-8 or any successor form, (ii) registrations on Form S-4
or any successor form and (iii) registrations of securities in connection with
a dividend reinvestment plan on form(s) applicable to such securities) unless
the underwriters managing the registered public offering otherwise agree.
SECTION 10. AMENDMENT, MODIFICATION AND WAIVERS; FURTHER
ASSURANCES.
(i) This Agreement may be amended with the consent of the
Trust and the Corporation and the Trust and the Corporation may take any action
herein prohibited, or omit to perform any act herein required to be performed
by it, only if the Trust and the Corporation shall have obtained the written
consent of Starwood to such amendment, action or omission to act and no consent
or agreement of any Holder shall be required for such amendment, action or
omission to act.
(ii) No waiver of any terms or conditions of this Agreement
shall operate as a waiver of any other breach of such terms and conditions or
any other term or condition, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
No written waiver hereunder, unless it by its own terms explicitly provides to
the contrary, shall be construed to effect a continuing waiver of the
provisions being waived and no such waiver in any instance shall constitute a
waiver in any other instance or for any other purpose or impair the right of
the party against whom such waiver
-20-
<PAGE> 21
is claimed in all other instances or for all other purposes to require full
compliance with such provision.
(iii) Each of the parties hereto shall execute all such
further instruments and documents and take all such further action as any other
party hereto may reasonably require in order to effectuate the terms and
purposes of this Agreement.
SECTION 11. ASSIGNMENT; BENEFIT. This Agreement and all of
the provisions hereof shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, assigns, executors,
administrators or successors; provided, however, that neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned or
delegated (i) by the Trust and the Corporation without the consent of Starwood
(which consent shall not be unreasonably withheld) or (ii) by a Holder unless
the transferee of the Registrable Securities is a direct or indirect partner of
such Holder.
SECTION 12. MISCELLANEOUS.
12.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
regard to the conflict of laws principles thereof.
12.2. NOTICES. All notices and requests given pursuant to
this Agreement shall be in writing and shall be made by hand-delivery,
first-class mail (registered or certified, return receipt requested), confirmed
facsimile or overnight air courier guaranteeing next business day delivery to
the relevant address specified in the Formation Agreement. Except as otherwise
provided in this Agreement, the date of each such notice and request shall be
deemed to be, and the date on which each such notice and request shall be
deemed given shall be: at the time delivered, if personally delivered or
mailed; when receipt is acknowledged, if sent by facsimile; and the next
business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next business day delivery.
12.3. ENTIRE AGREEMENT; INTEGRATION. This Agreement
supersedes all prior agreements between or among any of the parties hereto with
respect to the subject matter contained herein and therein, and such agreements
embody the entire understanding among the parties relating to such subject
matter.
12.4. SECTION HEADINGS. Section headings are for convenience
of reference only and shall not affect the meaning of any provision of this
Agreement.
-21-
<PAGE> 22
12.5. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, and all of which
shall together constitute one and the same instrument. All signatures need not
be on the same counterpart.
12.6. SEVERABILITY. If any provision of this Agreement shall
be invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity and enforceability of the remaining provisions of this
Agreement, unless the result thereof would be unreasonable, in which case the
parties hereto shall negotiate in good faith as to appropriate amendments
hereto.
12.7. TERMINATION. This Agreement may be terminated at any
time by a written instrument signed by the Trust, the Corporation and Starwood.
Unless sooner terminated in accordance with the preceding sentence, this
Agreement (other than Section 7 hereof) shall terminate in its entirety on such
date as there shall be (a) no Registrable Securities outstanding, and (b) no
securities outstanding which are convertible or exchangeable into Registrable
Securities; provided that any Paired Shares previously subject to this
Agreement shall not be Registrable Securities following the sale of any such
shares in an offering registered pursuant to this Agreement.
12.8. HOTEL INVESTORS TRUST. The parties hereto understand
and agree that the name "Hotel Investors Trust" is a designation of the Trust
and its Trustees (as Trustees but not personally) under the Declaration of
Trust, and all persons dealing with the Trust shall look solely to the Trust's
assets for the enforcement of any claims against the Trust, and that the
Trustees, officers, agents and security holders of the Trust assume no personal
liability for obligations entered into on behalf of the Trust, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.
12.9. OTHER REGISTRATION RIGHTS. The Trust and the
Corporation will not grant directly or indirectly to any Persons the right to
request the Trust and the Corporation to register any equity securities of the
Trust and the Corporation, or any securities convertible or exchangeable into
or exercisable for such securities, without the prior written consent of
Starwood (which consent shall not be unreasonably withheld). Each of the Trust
and the Corporation hereby severally represents and warrants that it has not
previously entered into any agreement with respect to the Paired Shares
granting any registration rights to any Person.
12.10. SUBMISSION TO JURISDICTION. Each of the parties
hereto and each of the Holders irrevocably submits and consents to the
jurisdiction of the United States District Court
-22-
<PAGE> 23
for the Southern District of New York and United States District Court for the
Central District of California in connection with any action or proceeding
arising out of or relating to this Agreement, and irrevocably waives any
immunity from jurisdiction thereof and any claim of improper venue, forum non
conveniens or any similar basis to which it might otherwise be entitled in any
such action or proceeding.
-23-
<PAGE> 24
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first written above.
HOTEL INVESTORS TRUST
a Maryland real estate investment
trust
By:
-------------------------------------------
Name:
Title:
HOTEL INVESTORS CORPORATION
a Maryland corporation
By:
-------------------------------------------
Name:
Title:
STARWOOD CAPITAL GROUP, L.P.
By: BSS CAPITAL PARTNERS, L.P.
a Delaware limited partnership
General Partner
By: STERNLICHT HOLDINGS II, INC.
a Delaware corporation
General Partner
By:
-----------------------------------
Name:
Title:
-24-
<PAGE> 25
SCHEDULE A
TO
REGISTRATION RIGHTS AGREEMENT
Holders
Berl Holdings, L.P.
Starwood-Apollo Hotel Partners VIII, L.P.
Starwood-Apollo Hotel Partners IX, L.P.
Starwood-Nomura Hotel Investors, L.P.
Starwood\Wichita Investors, L.P.
Starwood-Huntington Partners, L.P.
Woodstar Partners I, L.P.
<PAGE> 1
EXHIBIT 2.4
================================================================================
LIMITED PARTNERSHIP AGREEMENT
OF
SLT REALTY LIMITED PARTNERSHIP
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 Formation and Business of the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3 Character of the Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.4 Location of Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Registered Agent and Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Commencement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 4 Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Capital Contributions; Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Percentage Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.3 Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.5 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 No Interest on or Return of Capital Contribution . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Indemnification of General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Indemnification of Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Indemnification Pursuant to Formation Agreement . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6 Allocations, Distributions and Other Tax and Accounting Matters . . . . . . . . . . . . . . . . 20
6.1 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.3 Books of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.5 Tax Elections and Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.6 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.7 Withholding Payments Required By Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 7 Rights, Duties and Restrictions of the General Partner . . . . . . . . . . . . . . . . . . . . . 26
7.1 Powers and Duties of General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.2 Major Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.3 Reimbursement of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.4 Outside Activities of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.5 Contracts with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.6 Title to Partnership Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.7 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.8 Liability of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.9 Other Matters Concerning the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.10 Operation in Accordance with REIT Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 8 Dissolution, Liquidation and Winding-Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.1 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.2 Distribution on Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.3 Documentation of Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 9 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.1 General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.2 Transfers by Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3 Certain Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.4 Effective Dates of Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.5 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 10 Rights and Obligations of the Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1 No Participation in Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2 Bankruptcy of a Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.3 No Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.4 Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.5 Provision of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.6 Limited Partner Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.7 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.8 Ownership of Paired Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.9 Waiver of Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 11 Amendment of Partnership Agreement, Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Meetings of the Partners; Notices to Partners . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 12 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.1 No Liability of Directors and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.3 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.4 Execution of Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.7 Paragraph Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.8 Gender, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.9 Number of Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.10 Partners Not Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.11 Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.12 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
12.13 Hotel Investors Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
-iii-
<PAGE> 5
LIST OF EXHIBITS
Exhibit
A List of Partners, Percentage Interests and Units
B Contributed Property and Capital Contributions
C Notice Address of Partners
-iv-
<PAGE> 6
THE LIMITED PARTNERSHIP INTERESTS REFERRED TO IN THIS AGREEMENT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. REFERENCE IS MADE TO ARTICLE 9 OF THIS AGREEMENT FOR
PROVISIONS RELATING TO VARIOUS RESTRICTIONS ON THE SALE OR OTHER TRANSFER OF
THESE INTERESTS.
LIMITED PARTNERSHIP AGREEMENT
OF
SLT REALTY LIMITED PARTNERSHIP
THIS LIMITED PARTNERSHIP AGREEMENT (this "Agreement") is made
and entered into this 15th day of December, 1994 by and among Hotel Investors
Trust, a Maryland real estate investment trust, as general partner and the
persons whose names are set forth on Exhibit A hereto, as such exhibit may be
amended from time to time, as limited partners, pursuant to the provisions of
the Delaware Revised Uniform Limited Partnership Act.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
Definitions
1.1 Definitions. Except as otherwise herein expressly
provided, the following terms and phrases shall have the meanings as set forth
below:
"Accountants" shall mean the national firm or firms of
independent certified public accountants selected by the General Partner on
behalf of the Partnership to audit the books and records of the Partnership and
to prepare statements and reports in connection therewith.
"Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, as the same may hereafter be amended from time to time.
"Adjusted Capital Account Deficit" shall mean, with
respect to any Partner or holder of Units other than the General Partner, the
deficit balance, if any, in such
<PAGE> 7
holder's Capital Account as of the end of any relevant fiscal year and after
giving effect to the following adjustments:
(a) credit to such Capital Account any amounts which such
holder is obligated or treated as obligated to restore with respect to any
deficit balance in such Capital Account pursuant to Section
1.704-1(b)(2)(ii)(c) of the Regulations, or is deemed to be obligated to
restore with respect to any deficit balance pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the requirements of the alternate test for economic effect
contained in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
"Administrative Expenses" shall mean: (a) all administrative
and operating costs and expenses of the Partnership; (b) those administrative
costs and expenses of the General Partner, including, but not limited to,
salaries and other renumerations paid to trustees, officers and employees of
the General Partner and accounting and legal expenses undertaken by the General
Partner on behalf or for the benefit of the Partnership; and (c) to the extent
not included in clause (b) above, REIT Expenses.
"Affected Gain" shall have the meaning set forth in Section
6.1(c)(ii) hereof.
"Affiliate" shall mean, with respect to any Partner (or as to
any other Person the Affiliates of whom are relevant for purposes of any of the
provisions of this Agreement): (a) any member of the Immediate Family of such
Partner or Person; (b) any trustee or beneficiary of a Partner which is a
trust; (c) any trust for the benefit of any Person referred to in the preceding
clauses (a) and (b); or (d) any Entity which directly or indirectly through one
or more intermediaries, Controls, is Controlled by, or is under common Control
with, any Partner or Person referred to in the preceding clauses (a) through
(c).
"Agreement" shall mean this Limited Partnership Agreement, as
amended, modified, supplemented or restated from time to time, as the context
requires.
"Audited Financial Statements" shall mean financial statements
(balance sheet, statement of income, statement of partners equity and statement
of cash flows) prepared in accordance with GAAP and accompanied by an
independent auditor's report containing an opinion thereon.
"Bankruptcy" shall mean, with respect to any Person: (a) the
commencement by such Person of any petition, case or proceeding seeking relief
under any provision or chapter of the federal Bankruptcy Code or any other
federal or state law relating
-2-
<PAGE> 8
to insolvency, bankruptcy or reorganization; (b) an adjudication that such
Person is insolvent or bankrupt; (c) the entry of an order for relief under the
federal Bankruptcy Code with respect to such Person; (d) the filing of any such
petition or the commencement of any such case or proceeding against such
Person, unless such petition and the case or proceeding initiated thereby are
dismissed within ninety (90) days from the date of such filing; or (e) the
filing of an answer by such Person admitting the allegations of any such
petition.
"Business Day" shall mean any day that is not a Saturday,
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Capital Account" shall mean, as to any Partner or holder of
Units, a book account maintained in accordance with the following provisions:
(a) to each Partner's or holder of Unit's Capital Account
there shall be credited the amount of cash contributed by the Partner or
holder, the initial Gross Asset value of any other asset contributed by such
Partner or holder to the capital of the Partnership (net of liabilities secured
by contributed property that the Partnership assumes or takes subject to), such
Partner's or holder's distributive share of Net Income and any other items of
income or gain allocated to such Partner or holder, the amount of any
Partnership liabilities assumed by the Partner or holder or secured by
distributed assets that such Partner or holder takes subject to and any other
items in the nature of income or gain that are allocated to such Partner or
holder pursuant to Section 6.1 hereof; and
(b) to each Partner's or holder of Unit's Capital Account
there shall be debited the amount of cash distributed to the Partner or holder,
the Gross Asset Value of any Partnership asset distributed to such Partner or
holder pursuant to any provision of this Agreement, such Partner's or holder's
distributive share of Net Losses and any other items in the nature of expenses
or losses that are allocated to such Partner pursuant to Section 6.1 hereof.
In the event that a Partner's Partnership Interest or a holder of Unit's Units
or portion thereof is transferred within the meaning of Section
1.704-1(b)(2)(iv)(f) of the Regulations, the transferee shall succeed to the
Capital Account of the transferor to the extent that it relates to the
Partnership Interest, Units or portion thereof so transferred. In the event
that the Gross Asset Values of Partnership assets are adjusted, as contemplated
in paragraph (b) or (c) of the definition of "Gross Asset Value," the Capital
Accounts of the Partners and holders of Units shall be adjusted to reflect the
aggregate net adjustments as if the Partnership sold all of its properties for
their fair market values and recognized gain or loss for federal income tax
purposes equal to the amount of such aggregate net adjustment. This definition
of Capital Accounts is intended to comply with the maintenance of capital
account provisions of Section 1.704-1(b) of the Regulations and shall be
interpreted and applied in a manner consistent therewith.
-3-
<PAGE> 9
"Capital Contribution" shall mean, with respect to any
Partner, the amount of cash and the initial Gross Asset Value of any
Contributed Property (net of liabilities to which such property is subject).
"Certificate" shall mean the Certificate of Limited
Partnership establishing the Partnership, as filed with the office of the
Delaware Secretary of State, as amended from time to time in accordance with
the terms of this Agreement and the Act.
"Code" shall mean the Internal Revenue Code of 1986, as
amended and in effect from time to time, as interpreted by the applicable
regulations thereunder. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of future law.
"Consent of the Limited Partners" shall mean the written
consent of a Majority-In-Interest of the Limited Partners given in accordance
with Section 11.2 hereof, which consent shall be obtained prior to the taking
of any action for which it is required by this Agreement and may be given or
withheld by a Majority-In-Interest of the Limited Partners, unless otherwise
expressly provided herein, in their sole and absolute discretion.
"Consent of the Starwood Partners" shall mean the written
consent of Starwood Partners who hold in the aggregate more than fifty (50)
percent of the Percentage Interests then allocable to and held by the Starwood
Partners given in accordance with Section 11.2 hereof, which consent shall be
obtained prior to the taking of any action for which it is required by this
Agreement and may be given or withheld by each Starwood Partners in its sole
and absolute discretion.
"Contributed Property" shall mean any property or other asset
listed on Exhibit B (as such exhibit may be amended from time to time), in such
form as may be permitted by the Act, but excluding cash, contributed or deemed
contributed to the Partnership with respect to the Partnership Interest held by
each Partner.
"Control" shall mean the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to select the
managing partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons exercising governing
authority over an Entity. In the case of a limited partnership, the sole
general partner, all of the general partners to the extent each has equal
management control and authority, or the managing general partner or managing
general partners thereof shall be deemed to have control of such partnership
and, in the case of a trust, any trustee thereof or any Person having the right
to select any such trustee shall be deemed to have control of such trust.
"Declaration of Trust" shall mean the Declaration of Trust of
the General Partner dated August 25, 1969, as amended and restated as of June
6, 1988, as the same may be amended, modified, supplemented, restated or
superseded from time to time.
-4-
<PAGE> 10
"Depreciation" shall mean, with respect to any asset of the
Partnership for any fiscal year or other period, the depreciation or
amortization, as the case may be, allowed or allowable for federal income tax
purposes in respect of such asset for such fiscal year or other period, except
that if the Gross Asset Value of an asset differs from its adjusted tax basis
for federal income tax purposes at the beginning of such fiscal year or other
period, Depreciation shall be an amount that bears the same ratio to such
beginning book value as the federal income tax depreciation, amortization or
other cost recovery deduction for such fiscal year or other period bears to
such beginning adjusted tax basis and if such adjusted tax basis is zero, the
Depreciation shall be based on the method of depreciation, amortization or
other cost recovery deduction utilized in preparing the financial statements of
the Partnership.
"Entity" shall mean any general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, real estate investment trust or association.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time and as interpreted by the applicable
regulations thereunder (or any corresponding provisions of succeeding laws and
regulations).
"Exchange Rights Agreement" shall mean that certain Exchange
Rights Agreement by and among Hotel Investors Trust, Hotel Investors
Corporation and Starwood Capital Group, L.P., and dated as of the date hereof.
"Formation Agreement" shall mean that certain Formation
Agreement by and among Hotel Investors Trust, Hotel Investors Corporation,
Starwood Capital Group, L.P., Berl Holdings, L.P., Woodstar Partners I, L.P.,
Starwood-Apollo Hotel Partners VIII, L.P., Starwood-Apollo Hotel Partners IX,
L.P., Starwood-Nomura Hotel Investors, L.P., Starwood/Wichita Investors, L.P.,
and Starwood-Huntington Partners, L.P., and dated as of November 11, 1994, and
any amendments or modifications thereof or side letters thereto.
"GAAP" shall mean generally accepted accounting principles in
effect from time to time.
"General Partner" shall mean Hotel Investors Trust, a Maryland
real estate investment trust, its duly admitted successors and assigns and any
other Person who is a general partner of the Partnership at the time of
reference thereto.
"Gross Asset Value" shall mean, with respect to any asset of
the Partnership, such asset's adjusted basis for federal income tax purposes,
except as follows:
(a) the initial Gross Asset Value of any asset contributed
by a Partner to the Partnership shall be the gross fair market value of such
asset at the time of its contribution as reasonably determined by the General
Partner and the contributing Partner;
-5-
<PAGE> 11
(b) the Gross Asset values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as reasonably
determined by the General Partner, immediately prior to the following events:
(i) a Capital Contribution (other than a de minimis Capital
Contribution) to the Partnership by a new or existing Partner as consideration
for a Partnership Interest;
(ii) the distribution by the Partnership to a Partner of more
than a de minimis amount of Partnership property as consideration for the
redemption of a Partnership Interest;
(iii) the liquidation of the Partnership within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations; and
(iv) any other event as to which the General Partner
reasonably determines that an adjustment is necessary or appropriate to reflect
the relative economic interests of the Partners;
(c) the Gross Asset Values of Partnership assets distributed to
any Partner shall be the gross fair market values of such assets as reasonably
determined by the General Partner as of the date of distribution; and
(d) the Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided,
however, that Gross Asset Values shall not be adjusted pursuant to this
paragraph to the extent that the General Partner reasonably determines that an
adjustment pursuant to paragraph (b) above is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of computing
Net Income and Net Loss. Any adjustment to the Gross Asset Values of
Partnership property shall require an adjustment to the Partner's Capital
Accounts.
"HIC" shall mean Hotel Investors Corporation, a Maryland
corporation.
"Immediate Family" shall mean, with respect to any Person, such
Person's spouse (then current or former), parents, parents-in-law, descendants,
brothers and sisters (whether by whole or half-blood), first cousins,
brothers-in-law and sisters-in-law (whether by whole or half-blood), ancestors
and lineal descendants.
-6-
<PAGE> 12
"Indemnitee" shall mean any Person who is, or at any time on
or after December 15, 1994 was, a (i) General Partner or (ii) employee,
trustee, director, officer, stockholder or Liquidating Trustee of the
Partnership or the General Partner.
"Lien" shall mean any liens, security interests, mortgages,
deeds of trust, pledges, options, rights of first offer or first refusal and
any other similar encumbrances of any nature whatsoever.
"Limited Partner Representative" shall have the meaning set
forth in Section 10.6 hereof.
"Limited Partners" shall mean those Persons listed under the
heading "Limited Partners" on the signature page hereto in their respective
capacities as limited partners of the Partnership, their permitted successors
or assigns as limited partners hereof, and any Person who, at the time of
reference thereto, is a limited partner of the Partnership.
"Liquidating Trustee" shall mean such individual or Entity
which is selected as the Liquidating Trustee hereunder by the General Partner,
which individual or Entity may include the General Partner or an Affiliate of
the General Partner, provided that such Liquidating Trustee agrees in writing
to be bound by the terms of this Agreement. The Liquidating Trustee shall be
empowered to give and receive notices, reports and payments in connection with
the dissolution, liquidation and/or winding up of the Partnership and shall
hold and exercise such other rights and powers granted to the General Partner
herein or under the Act as are necessary or required to conduct the winding-up
and liquidation of the Partnership's affairs and to authorize all parties to
deal with the Liquidating Trustee in connection with the dissolution,
liquidation and/or winding-up of the Partnership.
"Major Decisions" shall have the meaning set forth in Section
7.2 hereof.
"Majority-In-Interest of the Limited Partners" shall mean
Limited Partner(s) who hold in the aggregate more than fifty (50) percent of
the Percentage Interests then allocable to and held by the Limited Partners, as
a class (but excluding any Partnership Interests acquired by the General
Partner or any Person controlled by the General Partner, or any Person holding
as a nominee of the General Partner or any Person controlled by the General
Partner).
"Material Asset" shall mean an asset or assets comprising
twenty-five (25) percent or more of the book value of the assets of the
Partnership.
"Minimum Gain Attributable to Partner Nonrecourse Debt" shall
mean "partner nonrecourse debt minimum gain" as determined in accordance with
Section 1.704-2(i)(2) of the Regulations.
-7-
<PAGE> 13
"Net Cash Flow" shall mean, with respect to any fiscal period
of the Partnership, the excess, if any, of "Receipts" over "Expenditures." For
purposes hereof, the term "Receipts" means the sum of all cash receipts of the
Partnership from all sources for such period and any amounts held as reserves
as of the last day of such period which the General Partner reasonably deems to
be in excess of reserves as determined below. The term "Expenditures" means
the sum of (a) all cash expenditures of the Partnership for any purpose,
including operating expenses and capital expenditures, for such period, (b) the
amount of all payments of principal, premium, if any, and interest on account
of any indebtedness of the Partnership, and (c) such additions to cash reserves
as of the last day of such period as the General Partner deems necessary or
appropriate for any capital, operating or other expenditure, including, without
limitation, contingent liabilities; but the term "Expenditures" shall not
include amounts paid from cash reserves previously established by the
Partnership.
"Net Income" or "Net Loss" shall mean, for each fiscal year or
other applicable period, an amount equal to the Partnerships's net income or
loss for such year or period as determined for federal income tax purposes by
the Accountants, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Section 703(a) of the Code shall be included in
taxable income or loss), with the following adjustments: (a) by including as
an item of gross income any tax-exempt income received by the Partnership; (b)
by treating as a deductible expense any expenditure of the Partnership
described in Section 705(a)(2)(B) of the Code (including amounts paid or
incurred to organize the Partnership (unless an election is made pursuant to
Section 709(b) of the Code) or to promote the sale of interests in the
Partnership and by treating deductions for any losses incurred in connection
with the sale or exchange of Partnership property disallowed pursuant to
Section 267(a)(1) or Section 707(b) of the Code as expenditures described in
Section 705(a)(2)(B) of the Code); (c) in lieu of depreciation, depletion,
amortization and other cost recovery deductions taken into account in computing
total income or loss, there shall be taken into account Depreciation; (d) gain
or loss resulting from any disposition of Partnership property with respect to
which gain or loss is recognized for federal income tax purposes shall be
computed by reference to the Gross Asset Value of such property rather than its
adjusted tax basis; (e) in the event of an adjustment of the Gross Asset Value
of any Partnership asset which requires that the Capital Accounts of the
Partnership be adjusted pursuant to Sections 1.704-1(b)(2)(iv)(e), (f) and (m)
of the Regulations, the amount of such adjustment is to be taken into account
as additional Net Income or Net Loss pursuant to Section 6.1 hereof; and (f)
excluding any items specially allocated pursuant to Section 6.1(b) hereof.
"Nonrecourse Deductions" shall have the meaning set forth in
Sections 1.704-2(b)(1) and (c) of the Regulations and shall be determined in
accordance with Section 1.704-2(c) of the Regulations.
"Nonrecourse Liabilities" shall have the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
-8-
<PAGE> 14
"Operating Partnership" shall mean SLC Operating Limited
Partnership, a Delaware limited partnership.
"Paired Shares" shall mean one Share and one share common
stock of HIC that are subject to a pairing agreement between the General
Partner and HIC.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Deductions" shall have the meaning set
forth in Section 1.704-2(i)(2) of the Regulations and the amount of Partner
Nonrecourse Deductions with respect to a Partner Nonrecourse Debt shall be
determined in accordance with the rules of Section 1.704-2(i) of the
Regulations.
"Partners" shall mean the General Partner and the Limited
Partners, their duly admitted successors or assigns or any Person who is a
partner of the Partnership at the time of reference thereto.
"Partnership" shall mean the limited partnership formed under
the Act pursuant to the Old Agreement and as continued pursuant to this
Agreement and any successor thereto.
"Partnership Interest" shall mean the ownership interest of a
Partner in the Partnership from time to time, including each Partner's
Percentage Interest and such Partner's Units.
"Partnership Minimum Gain" shall have the meaning set forth in
Section 1.704-2(b)(2) of the Regulations and the amount of Partnership Minimum
Gain (and any net increase or decrease thereof) for a fiscal year or other
period shall be determined in accordance with the rules of Section 1.704-2(d)
of the Regulations.
"Partnership Record Date" means the record date established by
the General Partner for distribution of Net Cash Flow pursuant to Section 6.2
hereof, which record date shall be the same as the record date established by
the General Partner for distribution to its shareholders of some or all of its
portion of such distribution.
"Percentage Interest" shall mean, with respect to any Partner,
the percentage ownership interest of such Partner in such items of the
Partnership as to which the term "Percentage Interests" is applied in this
Agreement, as provided in Section 4.2 hereof.
"Person" shall mean any natural person or Entity.
-9-
<PAGE> 15
"Property" shall mean any property acquired by or contributed
to the Partnership or any property owned by an Entity in which the Partnership
has an ownership interest.
"Purchase Rights" shall have the meaning set forth in Section
4.5 hereof.
"Registration Rights Agreement" shall mean that certain
Registration Rights Agreement by and among Hotel Investors Trust, Hotel
Investors Corporation and Starwood Capital Group, L.P., and dated as of the
date hereof. No provision of this Agreement shall be interpreted as granting
any Partner or holder of Units registration rights or any rights or interest in
or to the Registration Rights Agreement.
"Regulations" shall mean the income tax regulations
promulgated under the Code, as such regulations may be amended from time to
time (including corresponding provisions of succeeding regulations).
"Regulatory Allocations" shall have the meaning set forth in
Section 6.1(b)(viii) hereof.
"REIT" shall mean a real estate investment trust as defined in
Section 856 of the Code.
"REIT Expenses" shall mean all expenses which the Partnership
hereby assumes and agrees to pay as incurred for the benefit of the
Partnership, including (a) costs and expenses relating to the formation and
continuation of the Partnership and continuity of existence of the General
Partner, including taxes (other than the General Partner's federal and state
income and franchise taxes, if any), fees and assessments associated therewith,
any and all costs, expenses or fees payable to any director or trustee of the
General Partner, (b) to the extent funded by the General Partner for payment by
the Partnership, costs and expenses relating to any offer or registration of
securities by the General Partner the net proceeds of which are to be
contributed or loaned to the Partnership and all statements, reports, fees and
expenses incidental thereto, including underwriting discounts and selling
commissions applicable to any such offer of securities, (c) costs and expenses
associated with the preparation and filing of any periodic reports by the
General Partner under federal, state or local laws or regulations, including
filings with the SEC, (d) costs and expenses associated with compliance by the
General Partner with laws, rules and regulations promulgated by any regulatory
body, including the SEC, (e) costs and expenses incurred, directly or
indirectly, by the General Partner pursuant to a settlement or other agreement
between Leonard M. Ross and SCG and (f) all other costs of the General Partner
incurred in the course of its business on behalf of the Partnership including,
but not limited to, any indemnification obligations of the General Partner
(other than indemnification obligations pursuant to Sections 9.1 and 9.2 of
the Formation Agreement).
-10-
<PAGE> 16
"REIT Requirements" shall mean the requirements for the
General Partner to: (a) qualify as a REIT under the Code and Regulations; (b)
avoid any federal income or excise tax liability; (c) retain its status as
grandfathered pursuant to Section 132(c)(3) of the Deficit Reduction Act of
1984; and (d) retain the benefits of that certain private letter ruling issued
by the Internal Revenue Service to the General Partner dated as of January 4,
1980. "REIT Requirements" shall also include the ownership limitation
provisions set forth in Article VI of the Declaration of Trust. Clauses (a)
and (b) of this definition shall not apply prior to January 1, 1995.
"Restricted Entity" shall mean any "employee benefit plan" as
defined in and subject to ERISA, any "plan" as defined in and subject to
Section 4975 of the Code, or any entity any portion or all of the assets of
which are deemed pursuant to United States Department of Labor Regulation
Section 2510.3-101 or otherwise pursuant to ERISA or the Code to be, for any
purpose of ERISA or Section 4975 of the Code, assets of any such "employee
benefit plan" or "plan" which invests in such entity.
"Rights" shall mean the rights of Limited Partners set forth
in the Exchange Rights Agreement or the Registration Rights Agreement. No
provision of this Agreement shall be interpreted as granting any Partner or
holder of Units any Rights or any rights or interest in or to the Exchange
Rights Agreement or the Registration Rights Agreement.
"SCG" shall mean Starwood Capital Group, L.P., a Delaware
limited partnership.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Section 704(c) Tax Items" shall have the meaning set forth in
Section 6.1(c)(iii) hereof.
"Senior Debt" shall mean the indebtedness issued pursuant to
that certain Credit Agreement among Starwood Lodging Trust and certain
institutional lenders, dated as of January 28, 1993, which indebtedness has
been assumed by the Partnership.
"Shares" shall mean the common shares of beneficial interest,
par value $0.01 per share, of the General Partner.
"Starwood Partners" shall mean Berl Holdings, L.P.,
Starwood-Apollo Hotel Partners VIII, L.P, Starwood-Apollo Hotel Partners IX,
L.P, Starwood-Nomura Hotel Investors, L.P., Starwood/Wichita Investors, L.P.,
Starwood-Huntington Partners, L.P., Woodstar Partners I, L.P., and, if it
becomes a Limited Partner, Firebird Consolidated Partners, L.P.
-11-
<PAGE> 17
"Tax Items" shall have the meaning set forth in Section
6.1(c)(i) hereof.
"Tax Payment Loan" shall have the meaning set forth in Section
6.7(a) hereof.
"Units" shall have the meaning set forth in Section 4.1(c)
hereof.
"Withholding Tax Act" shall have the meaning set forth in
Section 6.7(a) hereof.
ARTICLE 2
Formation and Business of the Partnership
2.1 Formation. The parties hereto do hereby form a limited
partnership pursuant to the provisions of the Act and upon the terms and
conditions set forth herein. The parties hereto agree that the rights and
liabilities of the Partners shall be as provided herein. The parties hereto
shall immediately execute and deliver all certificates and other documents and
do all filings, recording and publishing and other acts as in the judgment of
the General Partner may be appropriate to comply with all of the requirements
for the continuation of the Partnership as a limited partnership under the Act
and the qualification of the Partnership in any jurisdiction in which the
Partnership owns property or conducts business.
2.2 Name. The name of the Partnership shall be SLT Realty
Limited Partnership, or such other name as shall be chosen from time to time by
the General Partner in its sole and absolute discretion; provided, however,
that the General Partner may not choose the name (or any derivative thereof) of
any Limited Partner without the prior written consent of such Limited Partner.
2.3 Character of the Business. The purpose of the Partnership
shall be to acquire, hold, own, develop, redevelop, construct, improve,
maintain, operate, manage, sell, lease, rent, transfer, encumber, mortgage,
convey, exchange and otherwise dispose of or deal with the Properties and any
other real and personal property of all kinds; to undertake such other
activities as may be necessary, desirable or appropriate to the business of the
Partnership; to engage in such other activities as shall be necessary,
desirable or appropriate to effectuate the foregoing purposes; and to otherwise
engage in any enterprise or business in which a limited partnership may engage
or conduct under the Act. The Partnership shall have all powers necessary,
desirable or appropriate to accomplish the purposes enumerated. In connection
with the foregoing, but subject to the terms and conditions of this Agreement,
the Partnership shall have full power and authority to enter into, perform and
carry out contracts of any kind, to borrow money and to issue evidences of
indebtedness, whether or
-12-
<PAGE> 18
not secured by Liens, and, directly or indirectly, to acquire and construct
additional Properties necessary or useful in connection with its business.
2.4 Location of Principal Place of Business. The location of
the principal place of business of the Partnership shall be at 11845 West
Olympic Boulevard, Suite 550, Los Angeles, California 90064, or such other
location as shall be selected from time to time by the General Partner in its
sole and absolute discretion; provided, however, that the General Partner shall
notify the Limited Partners of any change in the location of the principal
place of business of the Partnership within thirty (30) days thereafter.
2.5 Registered Agent and Registered Office. The registered
agent of the Partnership shall be The Corporation Trust Company or such other
Person as the General Partner may select in its sole and absolute discretion.
The registered office of the Partnership in the State of Delaware shall be c/o
The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801
or such other location as the General Partner may from time to time select in
its sole discretion; provided, however, that the General Partner shall notify
the Limited Partners of any change in the registered office or registered agent
of the Partnership within thirty (30) days thereafter.
ARTICLE 3
Term
3.1 Commencement. The Partnership's term commenced upon the
filing of the Certificate with the Secretary of State of Delaware on December
15, 1994.
3.2 Dissolution. The Partnership shall continue until
dissolved and terminated upon the occurrence of the earliest of the following
events:
(a) the death, dissolution, termination, withdrawal,
retirement, expulsion or Bankruptcy of a General Partner, unless the
Partnership's business is continued as provided in Section 9.1 hereof;
(b) the election to dissolve the Partnership made in writing by
the General Partner with the Consent of the Starwood Partners;
(c) the sale or other disposition of all or substantially all
of the assets of the Partnership unless the General Partner elects to continue
the Partnership business for the purpose of the receipt and the collection of
indebtedness or the collection of any other consideration to be received in
exchange for the assets of the Partnership (which activities shall be deemed to
be part of the winding up of the affairs of the Partnership);
(d) the entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act, which decree is final and
not subject to appeal; or
-13-
<PAGE> 19
(e) December 31, 2094.
ARTICLE 4
Capital Contributions
4.1 Capital Contributions; Units.
(a) The General Partner and the Limited Partners shall make
or cause to be made the Capital Contributions described in Exhibit B hereto.
The Partners shall have the initial Percentage Interests in the Partnership as
set forth in Exhibit A which Percentage Interests shall be adjusted to the
extent necessary to reflect properly exchanges, redemptions or conversions of
Partnership Interests, Capital Contributions, the issuance of additional
Partnership Interests or any other event having an effect on a Partner's
Percentage Interest, in each case to the extent permitted by and in accordance
with this Agreement. Except to the extent specifically set forth in this
Agreement with respect to the General Partner, the Partners shall have no
obligation to make any additional Capital Contributions or loans to the
Partnership, even if the failure to do so could result in the Bankruptcy or
insolvency of the Partnership or any other adverse consequence to the
Partnership.
(b) The General Partner shall, from time to time, contribute
cash or Property to the Partnership such that the General Partner's Percentage
Interest shall at all times be at least one (1) percent and the General
Partner's Capital Account balance shall be at least the lesser of $500,000 or
one (1) percent of the total positive Capital Account balances for the
Partnership.
(c) The interest of a Partner (or an assignee of a Partner)
in capital, allocations of Net Income, Net Losses and distributions shall be
evidenced by the issuance to such Partner (or assignee) of one or more "Units."
The aggregate total of all Units outstanding and the ownership of Units by each
Partner, as of the date of this Agreement, are as set forth on Exhibit A hereto.
(d) From time to time, the General Partner may cause the
Partnership to issue additional Partnership Interests to existing or
newly-admitted Partners in exchange for additional Capital Contributions
(including Capital Contributions pursuant to Section 4.1(b)). If the General
Partner contributes to the Partnership the net proceeds to the General Partner
from any offering or sale of Paired Shares (including, without limitation, any
issuance of Paired Shares pursuant to the exercise of options, warrants,
convertible securities, or similar rights to acquire Paired Shares), the
Partnership shall issue to the General Partner Units equal in number to the
number of Paired Shares issued in such offering.
(e) The General Partner is hereby authorized to cause the
Partnership to issue to the General Partner Partnership Interests in one or
more classes or
-14-
<PAGE> 20
one or more series of any of such classes, with such designations, preferences
and relative, participating, optional or other special rights, powers and
duties, including rights, powers and duties senior to the then-existing
Partnership Interests and Units, as shall be determined by the General Partner
in its sole and absolute discretion, including (i) the allocation of items of
Partnership income, gain, loss, deduction and credit to each such class or
series of Partnership Interests and (ii) the rights of each such class or
series of Partnership Interests to share in Partnership distributions
(including liquidating distributions); provided, however, that no such
additional Partnership Interests shall be issued to the General Partner unless
(x) the additional Partnership Interests are issued in connection with an
issuance of shares of the General Partner, which shares have designations,
preferences and other rights, all such that the economic interests of such
shares are substantially similar to the designations, preferences and other
rights of the additional Partnership Interests issued to the General Partner in
accordance with this Section 4.1(e) and (y) the General Partner contributes to
the Partnership an amount equal to the net proceeds received by the General
Partners in connection with the issuance of such shares.
(f) In the event of any change in the outstanding number of
Paired Shares by reason of any share dividend, split, reverse split,
recapitalization, merger, consolidation or combination, the number of Units
held by each Partner (or assignee) shall be proportionately adjusted such that,
to the extent possible, one Unit remains the equivalent of one Share without
dilution. It is the intent of the Partners that, to the extent possible, the
number of Units held by the General Partner shall at all times equal the number
of issued and outstanding Shares.
(g) No fractional Units shall remain outstanding. Any
fractional Units that, but for this Section 4.1(g), would otherwise be
outstanding shall be redeemed by the Partnership or, at the General Partner's
election, acquired by the General Partner, for cash equal to the fair market
value of such fractional Unit.
4.2 Percentage Interests. The Percentage Interest of a Partner
shall be equal to the percentage obtained by dividing (a) the number of Units
held by such Partner (including Units held by assignees of such Partner who
have not been admitted as Partners) by (b) the total number of issued and
outstanding Units.
4.3 Purchase Rights. If the General Partner grants, issues or
sells any options, convertible securities or rights to purchase shares,
warrants, or other property pro rata to the record holders of Shares
(collectively, "Purchase Rights"), then the Partners shall, to the extent
practicable and consistent with the other provisions of this Agreement, be
entitled to acquire from the Partnership interests in the Partnership that are
substantially similar in amount, tone and tenor to the Purchase Rights to which
such Partners would be entitled if such Partners had converted their
Partnership Interests into Paired Shares immediately prior to the grant, issue
or sale of the Purchase Rights.
4.4 Redemption. If the General Partner shall redeem any of its
outstanding Shares, the Partnership shall concurrently therewith redeem an
equal number of Units held
-15-
<PAGE> 21
by the General Partner for the same price as paid by the General Partner for
the redemption of such Shares. Similar redemptions of interests of the General
Partner in the Partnership shall occur if any other outstanding securities of
the General Partner are redeemed or otherwise retired.
4.5 No Third Party Beneficiaries. No creditor or other third party
shall have the right to enforce any right or obligation of any Partner to make
Capital Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being understood and agreed that the provisions of
this Agreement shall be solely for the benefit of, and may be enforced solely
by, the parties hereto and their respective successors and assigns. None of
the rights or obligations of the Partners herein set forth to make Capital
Contributions or loans to the Partnership shall be deemed an asset of the
Partnership for any purpose by any creditor or other third party, nor may such
rights or obligations be sold, transferred or assigned by the Partnership or
pledged or encumbered by the Partnership to secure any debt or other obligation
of the Partnership or of any of the Partners.
4.6 No Interest on or Return of Capital Contribution. No Partner
shall be entitled to interest on its Capital Contribution or Capital Account.
Except as provided herein or by law, no Partner shall have any right to demand
or receive the return of its Capital Contribution.
ARTICLE 5
Indemnification
5.1 Indemnification of General Partner.
(a) To the fullest extent permitted by law, the Partnership
shall and does hereby indemnify an Indemnitee from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
reasonable legal fees and expenses), judgments, fines, settlements, and other
amounts arising from any and all claims, demands, actions, suits or proceedings
(including arbitration and mediation proceedings), civil, criminal,
administrative or investigative, that relate, directly or indirectly, to the
formation, business or operations of the Partnership in which any Indemnitee
may be involved, or is threatened to be involved, as a party, witness or
otherwise, by reason of the fact that such Person was an Indemnitee, whether or
not the same shall proceed to judgment or be settled or otherwise be brought to
a conclusion, except only if and to the extent that it is finally adjudicated
that the act or omission of the Indemnitee was material to the matter giving
rise to the proceeding and was committed with fraud, gross negligence or
willful misconduct. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the Indemnitee did not meet the
requisite standard of conduct set forth in this Section 5.1(a). Any
indemnification pursuant to this Section 5.1 shall be made only out of the
assets of the Partnership and no Partner shall have any personal liability
therefor. The provisions of this Section 5.1 are for the benefit of the
Indemnitees, their heirs, successors,
-16-
<PAGE> 22
assigns, personal representatives and administrators, and shall not be deemed
to create any rights for the benefit of any other Persons. The foregoing
notwithstanding, the General Partner shall not be entitled to indemnification
from the Partnership with respect to matters provided for in Sections 9.1 and
9.2 of the Formation Agreement.
(b) Reasonable expenses incurred by an Indemnitee who is a party or
witness in a proceeding shall be paid or reimbursed by the Partnership in
advance of the final disposition of the proceeding upon receipt by the
Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee's
good faith belief that the standard of conduct necessary for indemnification by
the Partnership, as authorized in this Section 5.1, has been met, and (ii) a
written undertaking by or on behalf of the Indemnitee to repay the amount paid
or reimbursed if it shall ultimately be determined that such Indemnitee is not
entitled to be indemnified hereunder.
(c) The indemnification provided by this Section 5.1 shall be
in addition to any other rights to which an Indemnitee may be entitled under
any agreement, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity. The Partnership shall
purchase and maintain insurance, on behalf of the Indemnitees, against any
liability that may be asserted against or expenses that may be incurred by such
Person in connection with the Partnership's activities, regardless of whether
the Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement. An Indemnitee shall not be
denied indemnification in whole or in part under this Section 5.1 solely
because the Indemnitee had an interest in the transaction with respect to which
the indemnification applies.
(d) For purposes of this Section 5.1, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of this Section 5.1; and actions
taken or omitted by the Indemnitee with respect to an employee benefit plan in
the performance of its duties for a purpose reasonably believed by it to be in
the interest of the participants and beneficiaries of the plan shall be deemed
to be for a purpose which is not opposed to the best interests of the
Partnership.
5.2 Indemnification of Limited Partners. From and after the date
hereof, the Partnership shall indemnify and hold harmless each Limited Partner,
its Affiliates, employees, officers, directors and agents against and from all
liability, demands, claims, actions or causes of action, assessments, losses,
fines, penalties, costs, damages and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) sustained or incurred
by such Limited Partner or Affiliate or any assignee or successor thereof
(including, without limitation, any permitted assignee of a Limited Partner
under Article 9 hereof) as a result of or arising out of any action, suit or
proceeding (including mediation and arbitration proceedings) (a) arising out of
or relating to the operation of the
-17-
<PAGE> 23
Partnership's business or the Limited Partner being a Partner in the Partnership
(excluding, specifically, actions, suits or proceedings arising out of actual
or alleged breaches of a Partner's representations, warranties or covenants
hereunder or pursuant to the Formation Agreement or arising out of acts by a
Limited Partner other than in its capacity as such) and (b) naming a Limited
Partner or any of its Affiliates as a party to such proceeding. Any
indemnification pursuant to this Section 5.2 shall be made only out of the
assets of the Partnership and no Partner shall have any personal liability
therefor. The provisions of this Section 5.2 are for the benefit of the Limited
Partners, their Affiliates, employees, officers, directors and agents, and shall
not be deemed to create any rights for the benefit of any other Persons.
5.3 Notice of Claims. If any Person believes that it is
entitled to indemnification under this Article 5, such Person shall so notify
the Partnership promptly in writing describing such claim for indemnification,
the amount thereof, if known, and the method of computation, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such claim shall have occurred; provided,
however, that the omission by such indemnified party to give notice as provided
herein shall not relieve the Partnership of its indemnification obligation
under this Article 5 except to the extent that the Partnership is materially
damaged as a result of such failure to give notice. If any action at law or
suit in equity is instituted by or against a third party with respect to which
any of the Persons entitled to indemnification under this Article 5 intends to
make a claim for indemnification under this Article 5, any such Person shall
promptly notify the Partnership of such action or suit. Any Person entitled to
indemnification hereunder shall use reasonable efforts to minimize the amount
of any claim for indemnification hereunder.
5.4 Third Party Claims. In the event of any claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceeding by a third party, the indemnified Person shall give such
notice thereof to the Partnership not later than twenty (20) business days
prior to the time any response to the asserted claim is required, if possible,
and in any event within fifteen (15) days following the date such indemnified
Person has actual knowledge thereof; provided, however, that the omission by
such indemnified Person to give notice as provided herein shall not relieve the
Partnership of its indemnification obligation under this Article 5 except to
the extent that the Partnership is materially damaged as a result of such
failure to give notice. In the event of any such claim for indemnification
resulting from or in connection with a claim or legal proceeding by a third
party, the Partnership may, at its sole cost and expense, assume the defense
thereof; provided, however, that counsel for the Partnership, who shall conduct
the defense of such claim or legal proceeding, shall be reasonably satisfactory
to the indemnified Person; and provided, further, that if the defendants in any
such actions include both the indemnified Persons and the Partnership and the
indemnified Persons shall have reasonably concluded that there may be legal
defenses or rights available to them which have not been waived and are in
actual or potential conflict with those available to the Partnership, the
indemnified Persons shall have the right to select one law firm reasonably
acceptable to the Partnership to act as separate counsel, on behalf of such
indemnified Persons, at the expense of the Partnership. Unless the indemnified
Persons are represented by separate counsel pursuant to the second proviso of
the immediately preceding sentence, if the Partnership assumes the defense of
any such claim or legal proceeding, it shall not consent to entry of any
judgment, or enter into any settlement, that (a) is not subject to
indemnification in accordance with the provisions in this Article 5, (b)
provides for injunctive or other non-monetary relief affecting the indemnified
Persons or (c) does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such indemnified Persons of a release from all
liability with respect to such claim or legal proceeding, without the prior
written consent of the indemnified Persons (which consent, in the case of
clauses (b) and (c), shall not be unreasonably withheld or delayed); and
provided, further, that, unless the indemnified Persons are represented by
separate counsel pursuant to the second
-18-
<PAGE> 24
proviso of the immediately preceding sentence, the indemnified Persons may, at
their own expense, participate in any such proceeding with the counsel of their
choice without any right of control thereof. So long as the Partnership is in
good faith defending such claim or proceeding, the indemnified Persons shall not
compromise or settle such claim or proceeding without the prior written consent
of the Partnership, which consent shall not be unreasonably withheld or
delayed. If the Partnership does not assume the defense of any such claim or
litigation in accordance with the terms hereof, the indemnified Persons may
defend against such claim or litigation in such manner as they may deem
appropriate, including, without limitation, settling such claim or litigation
(after giving prior written notice of the same to the Partnership and obtaining
the prior written consent of the Partnership, which consent shall not be
unreasonably withheld or delayed) on such terms as the indemnified Persons
may deem appropriate, and the Partnership will promptly indemnify the
indemnified Persons in accordance with the provisions of this Article 5.
5.5 Indemnification Pursuant to Formation Agreement. If any
obligation pursuant to the indemnification provisions of Article IX of the
Formation Agreement would otherwise require the indemnifying Person to make a
cash payment to the indemnified Person then, subject to Article 9 hereof, in
lieu of making all or any portion of such cash payment, the indemnifying Person
may transfer Units of equivalent value to the indemnified Person. For purposes
of the preceding sentence, the value of a Unit shall be treated as equal to
ninety-five (95) percent of the average closing price of a Paired Share for the
ten (10) trading day period commencing fifteen (15) trading days prior to the
date the indemnifying Person would otherwise be required to pay cash to the
indemnified Person. Indemnification through the transfer of Units pursuant to
this Section 5.5 may only be made if (a) indemnification through the transfer
of an equal number of units of the Operating Partnership is being made pursuant
to Section 5.5 of the Limited Partnership Agreement of SLC Operating Limiting
Partnership or (b) the indemnifying Person otherwise makes arrangements for the
transfer to the indemnified Person (or its designee) of an equal number of
units of the Operating Partnership.
-19-
<PAGE> 25
ARTICLE 6
Allocations, Distributions and Other Tax and Accounting Matters
6.1 Allocations. The Net Income, Net Loss and other
Partnership items shall be allocated pursuant to the provisions of this Section
6.1 hereto.
(a) Allocation of Net Income and Net Loss.
(i) Net Income. Except as otherwise provided
herein, Net Income for any fiscal year or other applicable period shall be
allocated in the following order and priority:
(A) first, to the General Partner, until the
cumulative Net Income allocated pursuant to this clause (i)(A) for the current
and all prior periods equals the cumulative Net Loss allocated pursuant to the
second sentence of clause (ii) hereof for all prior periods; and
(B) thereafter, the balance of the Net Income,
if any, shall be allocated to the holders of Units in accordance with their
respective holdings of Units.
(ii) Net Loss. Except as otherwise provided herein, Net Loss
of the Partnership for each fiscal year or other applicable period shall be
allocated to the holders of Units in accordance with their respective holdings
of Units. The preceding sentence notwithstanding, to the extent any Net Loss
allocated to a holder would cause such a holder to have an Adjusted Capital
Account Deficit as of the end of the fiscal year to which such Net Loss
relates, such Net Loss shall not be allocated to such holder and instead shall
be allocated to the General Partner.
(b) Special Allocations. Notwithstanding any provisions of
Section 6.1(a) hereof, the following special allocations shall be made in the
following order:
(i) Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 6, if there is a net decrease in Partnership Minimum
Gain for any Partnership fiscal year (except as a result of conversion or
refinancing of Partnership indebtedness, certain capital contributions or
revaluation of the Partnership property as further outlined in Section
1.704-2(f) of the Regulations), each holder of Units shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to that holder's share of the
net decrease in Partnership Minimum Gain as determined under Section 1.704-2(g)
of the Regulations. The items to be so allocated shall be determined in
accordance with Section 1.704-2(f) of the Regulations. This clause (i) is
intended to comply with the minimum gain chargeback requirement in said section
of the Regulations and shall be interpreted consistently therewith.
Allocations
-20-
<PAGE> 26
pursuant to this clause (i) shall be made in proportion to the respective
amounts required to be allocated to each holder of Units pursuant hereto.
(ii) Minimum Gain Chargeback Attributable to Partner
Nonrecourse Debt. Notwithstanding any other provision of this Article 6, if
there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse
Debt during any fiscal year (other than due to the conversion, refinancing or
other change in the debt instrument causing it to become partially or wholly
nonrecourse, certain capital contributions, or certain revaluations of
Partnership property (as further outlined in Section 1.704-2(i)(4) of the
Regulations), each holder of Units shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount equal to the holder's share of the net decrease in the Minimum
Gain Attributable to Partner Nonrecourse Debt as determined under Section
1.704-2(i) of the Regulations. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and (j)(2) of the
Regulations. This clause (ii) is intended to comply with the minimum gain
chargeback requirement with respect to Partner Nonrecourse Debt contained in
said section of the Regulations and shall be interpreted consistently therewith.
Allocations pursuant to this clause (ii) shall be made in proportion to the
respective amounts required to be allocated to each holder of Units.
(iii) Qualified Income Offset. In the event a holder of Units
unexpectedly receives any adjustments, allocations or distributions described
in Section 1.704-1(b)(2)(ii) (d)(4), (5), or (6) of the Regulations, and such
holder has an Adjusted Capital Account Deficit, items of Partnership income and
gain shall be specially allocated to such holder in an amount and manner
sufficient to eliminate the Adjusted Capital Account Deficit as quickly as
possible, provided that an allocation pursuant to this Section 6.1(b)(iii)
shall be made only if and to the extent that such holder would have Adjusted
Capital Account Deficit after all other allocations provided for in this
Article VI have been tentatively made as if this Section 6.1(b)(iii) were not
in the Agreement. This clause (iii) is intended to constitute a "qualified
income offset" under Section 1.704-1(b)(2)(ii) (d) of the Regulations and shall
be interpreted consistently therewith.
(iv) Gross Income Allocation. In the event any holder of Units
a deficit Capital Account at the end of any fiscal year which is in excess of
the sum of (x) the amount such holder is obligated to restore pursuant to any
provision of this Agreement, and (y) the amount such holder is deemed to be
obligated to restore pursuant to the penultimate sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such holder shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
Section 6.1(b)(iv) shall be made only if and to the extent that such holder
would have a Capital Account Deficit in excess of such sum after all other
allocations provided for in this Article 6 have been made as if Section
6.1(b)(iii) hereof and this Section 6.1(b)(iv) were not in the Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any
fiscal year or other applicable period shall be allocated to the holders of
Units in
-21-
<PAGE> 27
accordance with their respective holdings of Units. For purposes of Section
1.752-3(a) (3) of the Regulations, "excess nonrecourse liabilities" shall be
allocated among the holders of Units in proportion to their respective holdings
of Units.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any fiscal year or other applicable period shall be specially
allocated to the holder of Units that bears the economic risk of loss with
respect to the Partner Nonrecourse Debt in respect of which such Partner
Nonrecourse Deductions are attributable (as determined under Sections
1.704-2(b) (4) and (i) (1) of the Regulations).
(vii) Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
Section 743(b) of the Code is required, pursuant to Section
1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations,
to be taken into account in determining Capital Accounts, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to
holders of Units in accordance with their interests in a manner consistent with
the manner in which their Capital Accounts are required to be adjusted pursuant
to such sections of the Regulations.
(viii) Curative Allocations. The Regulatory Allocations shall
be taken into account in allocating other items of income, gain, loss, and
deduction among the holders of Units so that, to the extent possible, the
cumulative net amount of allocations of Partnership items under Sections 6.1(a)
and (b) hereof shall be equal to the net amount that would have been allocated
to each holder of Units if the Regulatory Allocations had not occurred. This
subparagraph (viii) is intended to minimize to the extent possible and to the
extent necessary any economic distortions which may result from application of
the Regulatory Allocations and shall be interpreted in a manner consistent
therewith. For purposes hereof, "Regulatory Allocations" shall mean the
allocations provided under this Section 6.1(b) (other than this subparagraph)
and allocations pursuant to the last sentence of Section 6.1(a)(ii) hereof.
(ix) Varying Interests. In the event the number of Units
outstanding during a fiscal year changes, the allocations pursuant to this
Article 6 shall be made by the General Partner to take such varying interests
into account in any reasonable manner permitted under the Code and the
Regulations.
(c) Tax Allocations.
(i) Generally. Subject to clauses (ii) and (iii) hereof,
items of income, gain, loss, deduction and credit to be allocated for income tax
purposes (collectively, "Tax Items") shall be allocated among the holders of
Units on the same basis as their respective book items.
-22-
<PAGE> 28
(ii) Sections 1245/1250 Recapture. If any portion of gain
from the sale of property is treated as gain which is ordinary income by virtue
of the application of Sections 1245 or 1250 of the Code ("Affected Gain"), then
(A) such Affected Gain shall be allocated among the holders of Units in the
same proportion that the depreciation and amortization deductions giving rise to
the Affected Gain were allocated and (B) other Tax Items of gain of the same
character that would have been recognized, but for the application of Sections
1245 and/or 1250 of the Code, shall be allocated away from those holders of
Units who are allocated Affected Gain pursuant to clause (A) so that, to the
extent possible, the other holders of Units are allocated the same amount,
and type, of capital gain that would have been allocated to them had Sections
1245 and/or 1250 of the Code not applied. For purposes hereof, in order to
determine the proportionate allocations of depreciation and amortization
deductions for each fiscal year or other applicable period, such deductions
shall be deemed allocated on the same basis as Net Income or Net Loss for such
respective period.
(iii) Allocations Respecting Section 704(c) of the Code and
Revaluations. Property contributed to the Partnership shall be subject to
Section 704(c) of the Code and the Regulations thereunder so that,
notwithstanding paragraph (b) hereof, taxable gain from disposition, taxable
loss from disposition and tax depreciation with respect to Partnership property
that is subject to Section 704(c) of the Code and/or Section 1.704-1(b) (2)
(iv) (f) of the Regulations (collectively "Section 704(c) Tax Items") shall be
allocated on a property by property basis in accordance with said Code Section
and/or the Regulations thereunder, as the case may be. The allocation of
Section 704(c) Tax Items shall be made pursuant to the "traditional method" of
Section 1.704-3(b) of the Regulations. The General Partner will not specially
allocate Tax Items (other than the Section 704(c) Tax Items) to cure for the
effect of the ceiling rule. Allocations pursuant to this Section 6.1(c)(iii)
are solely for purposes of federal, state, and local taxes and shall not
affect, or in any way be taken into account in computing, the Capital Account
or share of Net Income, Net Loss, other items, or distributions of any holder
of Units pursuant to any provision of this Agreement.
(iv) Tax Credits and Other Items. Tax credits and other
items shall be allocated in accordance with the holdings of Units to the extent
permitted under Section 1.704-1(b)(4)(ii) of the Regulations or other
applicable provision of the Code and Regulations and otherwise in accordance
with such provisions.
(v) Senior Debt. Any income (including income from
discharge of indebtedness), gain, correlative adjustments, loss, deduction or
retirement or other premium relating to the assumption of the Senior Debt by the
Partnership, the repayment of or refinancing of the Senior Debt, the
contribution of any portion of the Senior Debt to the Partnership or the
defeasance of any portion of the Senior Debt as a result of the application
of Section 108(e)(4) of the Code and the Regulations thereunder shall be
specially allocated to the General Partner.
-23-
<PAGE> 29
6.2 Distributions. The General Partner shall cause the
Partnership to distribute all, or such portion as the General Partner may in
its reasonable discretion determine, of Net Cash Flow to the holders of Units
who are holders on the Partnership Record Date with respect to such
distribution. All such distributions shall be made pro rata in accordance with
the holders' ownership of Units. Notwithstanding the foregoing, the General
Partner is authorized to cause the Partnership to distribute sufficient
amounts, pro rata by ownership of Units, to enable the General Partner to pay
shareholder dividends that will satisfy the REIT Requirements.
6.3 Books of Account. At all times during the continuance of
the Partnership, the General Partner shall maintain or cause to be maintained
full, true, complete and correct books of account in accordance with GAAP,
using the calendar year as the fiscal and taxable year of the Partnership. In
addition, the Partnership shall keep all records required to be kept pursuant
to the Act.
6.4 Reports. The General Partner shall cause to be sent to
the Limited Partners promptly after receipt of the same from the Accountants
and in no event later than 105 days after the close of each fiscal year of the
Partnership, copies of Audited Financial Statements for the Partnership, or of
the General Partner if such statements are prepared solely on a consolidated
basis with the General Partner, for the immediately preceding fiscal year of
the Partnership. The Partnership shall also cause to be prepared such reports
and/or information as are necessary for the General Partner to determine its
qualification as a REIT and its compliance with REIT Requirements.
6.5 Tax Elections and Returns. All elections required or
permitted to be made by the Partnership under any applicable tax law shall be
made by the General Partner in its sole and absolute discretion, except that
the General Partner shall, if requested by a Limited Partner, file an election
on behalf of the Partnership pursuant to Section 754 of the Code to adjust the
basis of the Partnership property in the case of a transfer of a Partnership
Interest or distribution from the Partnership, including transfers made in
connection with the exercise of the Rights, made in accordance with the
provisions of the Agreement. The General Partner shall cause the Accountants
to prepare and submit to the Limited Partner Representative on or before July
15th of each year for review drafts of all federal and state income tax returns
of the Partnership. If the Limited Partner Representative determines that any
modifications to the tax returns of the Partnership should be considered, the
Limited Partner Representative shall, within fifteen (15) days following receipt
of such tax returns from the Accountants or the General Partner, indicate to the
Accountants or to the General Partner the suggested revisions to the tax
returns, which returns shall be resubmitted to the Limited Partner
Representative for its review (but not approval). The Limited Partner
Representative shall complete their review of the resubmitted returns within
ten (10) days after receipt thereof from the Accountants or the General
Partner. The General Partner shall consult in good faith with the Limited
Partner Representative regarding any proposed modifications to the tax returns
of the Partnership. The General Partner shall be responsible for preparing and
filing all federal and state tax returns for the Partnership and furnishing
copies thereof to the Partners, together with required Partnership schedules
showing
-24-
<PAGE> 30
allocations of tax items, copies of all within the period of time prescribed by
law. The General Partner shall use reasonable efforts to make available to the
holders of Units final K-1's not later than September 15 of each year.
6.6 Tax Matters Partner. The General Partner is hereby
designated as the Tax Matters Partner within the meaning of Section 6231(a)(7)
of the Code (and any corresponding provisions of state and local law) for the
Partnership; provided, however, that (a) in exercising its authority as Tax
Matters Partner, the General Partner shall be limited by the provisions of this
Agreement affecting tax aspects of the Partnership; (b) the General Partner
shall consult in good faith with the Limited Partner Representative regarding
the filing of an administrative adjustment request with respect to the
Partnership before filing such request, it being understood, however, that the
provisions hereof shall not be construed to limit the ability of any Partner,
including the General Partner, to file an administrative adjustment request on
its own behalf pursuant to Section 6227(a) of the Code; (c) the General Partner
shall consult in good faith with the Limited Partner Representative regarding
the filing of a petition for judicial review of an administrative adjustment
request under Section 6228 of the Code, or a petition for judicial review of a
final partnership administrative judgment under Section 6226 of the Code
relating to the Partnership before filing such petition; (d) the General
Partner shall give prompt notice to the Limited Partner Representative and any
notice partners under Section 6231 of the Code of the receipt of any written
notice that the Internal Revenue Service intends to examine or audit
Partnership income tax returns for any year, receipt of written notice of the
beginning of an administrative proceeding at the Partnership level relating to
the Partnership under Section 6223 of the Code, receipt of written notice of
the final Partnership administrative adjustment relating to the Partnership
pursuant to Section 6223 of the Code, and receipt of any request from the
Internal Revenue Service for waiver of any applicable statute of limitations
with respect to the filing of any tax return by the Partnership; and (e) the
General Partner shall promptly notify the Limited Partner Representative if the
General Partner does not intend to file for judicial review with respect to the
Partnership. Similar provisions shall apply in the case of any audit or
examination by a state or local taxing authority.
6.7 Withholding Payments Required By Law.
(a) Unless treated as a Tax Payment Loan (as hereinafter
defined), any amount paid by the Partnership for or with respect to any holder
of Units on account of any withholding tax or other tax payable with respect to
the income, profits or distributions of the Partnership pursuant to the Code,
the Regulations, or any state or local statute, regulation, notice, ruling or
ordinance requiring such payment (a "Withholding Tax Act") shall be treated as
a distribution to such holder for all purposes of this Agreement, consistent
with the character or source of the income, profits or cash which gave rise to
the payment or withholding obligation. To the extent that the amount required
to be remitted by the Partnership under the Withholding Tax Act exceeds the
amount then otherwise distributable to such holder, unless and to the extent
that funds shall have been provided by such holder pursuant to the last
sentence of this Section 6.7(a), the excess shall constitute a loan from the
Partnership to such holder (a "Tax Payment Loan") which shall be payable upon
demand and
-25-
<PAGE> 31
shall bear interest, from the date that the Partnership makes the payment to
the relevant taxing authority, at the rate announced from time to time by
Citibank, N.A. (or any successor thereto) as its "prime rate", plus four (4)
percent per annum, compounded monthly (but in no event higher than the highest
interest rate permitted by applicable law). So long as any Tax Payment Loan to
any holder of Units or the interest thereon remains unpaid, the Partnership
shall make future distributions due to such holder under this Agreement by
applying the amount of any such distributions first to the payment of any
unpaid interest on such Tax Payment Loan and then to the repayment of the
principal thereof, and no such future distributions shall be paid to such
holder until all of such principal and interest has been paid in full. If the
amount required to be remitted by the Partnership under the Withholding Tax Act
exceeds the amount then otherwise distributable to a holder of Units, the
Partnership shall notify such holder at least five (5) Business Days in advance
of the date upon which the Partnership would be required to make a Tax Payment
Loan under this Section 6.7(a) (the "Tax Payment Loan Date") and provide such
holder the opportunity to pay to the Partnership, on or before the Tax Payment
Loan Date, all or a portion of such deficit.
(b) The General Partner shall have the authority to take all
actions necessaryto enable the Partnership to comply with the provisions of any
Withholding Tax Act applicable to the Partnership and to carry out the
provisions of this Section 6.7. Nothing in this Section 6.7 shall create any
obligation on the General Partner to advance funds to the Partnership or to
borrow funds from third parties in order to make any payments on account of
any liability of the Partnership under a Withholding Tax Act.
(c) In the event that a Tax Payment Loan is not paid by a
holder of Units within thirty (30) days after written demand therefor is made
by the General Partner, the General Partner may cause all distributions that
would otherwise be made to such holder to be retained by the Partnership, or
sell such holder's Units for sale proceeds, in each case up to the amount
necessary to repay such Tax Payment Loan, including all accrued and unpaid
interest therein, and such retained distributions or sale proceeds shall be
applied against, first, the accrued interest on and, second, the principal of,
such Tax Payment Loan.
ARTICLE 7
Rights, Duties and Restrictions of the General Partner
7.1 Powers and Duties of General Partner.
(a) The General Partner shall be responsible for the
management of the Partnership's business and affairs. Except as otherwise
herein expressly provided, and subject to the limitations contained in
Section 7.2 hereof with respect to Major Decisions, the General Partner
shall have, and is hereby granted, full and complete power, authority and
discretion to take such action for and on behalf of the Partnership and in
its name as the General Partner shall, in its sole and absolute discretion,
deem necessary or appropriate to
-26-
<PAGE> 32
carry out the Partnership's business and the purposes for which the Partnership
was organized. Except as otherwise expressly provided herein, and subject to
Section 7.2 hereof, the General Partner shall, on behalf of, and at the expense
of, the Partnership, have the right, power and authority:
(1) to manage, control, invest, reinvest, acquire by purchase,
lease or otherwise, sell, contract to purchase or sell, grant, obtain, or
exercise options to purchase, options to sell or conversion rights, assign,
transfer, convey, deliver, endorse, exchange, pledge, mortgage, abandon,
improve, repair, maintain, insure, lease for any term and otherwise deal with
any and all property of whatsoever kind and nature, and wheresoever situated,
in furtherance of the business or purposes of the Partnership;
(2) to acquire, directly or indirectly, interests in real
estate of any kind and of any type, and any and all kinds of interests therein
(including, withoutlimitation, Entities investing therein), and to determine
the manner in which title thereto is to be held; to manage (directly or through
property managers), insure against loss, protect and subdivide any of the real
estate, interests therein or parts thereof; to improve, develop or redevelop
any such real estate; to participate in the ownership and development of any
property; to dedicate for public use, to vacate any subdivisions or parts
thereof, to resubdivide, to contract to sell, to grant options to purchase or
lease, to sell on any terms; to convey, mortgage, pledge or otherwise encumber
said property, or any part thereof; to lease said property or any part thereof
from time to time, upon any terms and for any period of time, and to renew or
extend leases, to amend, change or modify the terms and provisions of any leases
and to grant options to lease and options to renew leases and options to
purchase; to partition or to exchange said real property, or any part thereof,
for other real or personal property; to grant easements or charges of any kind;
to release, convey or assign any right, title or interest in or about or
easement appurtenant to said property or any part thereof; to construct and
reconstruct, remodel, alter, repair, add to or take from buildings on any
property in which the Partnership owns an interest; to insure any Person having
an interest in or responsibility for the care, management or repair of such
property; to direct the trustee of any land trust to mortgage, lease, convey or
contract to convey the real estate held in such land trust or to execute and
deliver deeds, mortgages, notes and any and all documents pertaining to the
property subject to such land trust or in any matter regarding such trust; and
to execute assignments of all or any part of the beneficial interest in such
land trust;
(3) to employ, engage, indemnify or contract with or dismiss
from employment or engagement Persons to the extent deemed necessary or
appropriate by the General Partner for the operation and management of the
Partnership business, including but not limited to contractors, subcontractors,
engineers, architects, surveyors, mechanics, consultants, accountants,
attorneys, insurance brokers, real estate brokers and others;
(4) to enter into contracts on behalf of the Partnership, and
to cause all Administrative Expenses to be paid;
-27-
<PAGE> 33
(5) to borrow or loan money, obtain or make loans and advances
from and to any Person for Partnership purposes and to apply for and secure
from or accept and grant to any Person credit or accommodations; to contract
liabilities and obligations (including interest rate swaps, caps and hedges) of
every kind and nature with or without security; and to repay, collect,
discharge, settle, adjust, compromise or liquidate any such loan, advance,
obligation or liability;
(6) to grant security interests, mortgage, assign, deposit,
deliver, enter into sale and leaseback arrangements or otherwise give as
security or as additional or substitute security or for sale or other
disposition any and all Partnership property, tangible or intangible,
including, but not limited to, personal property and real estate and interests
in land trusts, and to make substitutions thereof, and to receive any proceeds
thereof upon the release or surrender thereof; to sign, execute and deliver any
and all assignments, deeds, bills of sale and contracts and instruments in
writing; to authorize, give, make, procure, accept and receive moneys,
payments, property notices, demands, protests and authorize and execute waivers
of every kind and nature; to enter into, make, execute, deliver and receive
agreements, undertakings and instruments of every kind and nature; and
generally to do any and all other acts and things incidental to any of the
foregoing or with reference to any dealings or transactions which the General
Partner may deem necessary, proper or advisable to effect or accomplish any of
the foregoing or to carry out the business and purposes of the Partnership;
(7) to acquire and enter into any contract of insurance
(including, without limitation, general partner liability and partnership
reimbursement insurance policies) which the General Partner may deem necessary
or appropriate;
(8) to conduct any and all banking transactions on behalf of
the Partnership; to adjust and settle checking, savings and other accounts with
such institutions as the General Partner shall deem appropriate; to draw, sign,
execute, accept, endorse, guarantee, deliver, receive and pay any checks,
drafts, bills of exchange, acceptances, notes, obligations, undertakings and
other instruments for or relating to the payment of money in, into or from any
account in the Partnership's name; to make deposits into and withdrawals from
the Partnership's bank accounts and to negotiate or discount commercial paper,
acceptances, negotiable instruments, bills of exchange and dollar drafts;
(9) to demand, sue for, receive and otherwise take steps to
collect or recover all debts, rents, proceeds, interests, dividends, goods,
chattels, income from property, damages and all other property, to which the
Partnership may be entitled or which are or may become due the Partnership from
any Person; to commence, prosecute or enforce, or to defend, answer or oppose,
contest and abandon all legal proceedings in which the Partnership is or may
hereafter be interested; and to settle, compromise or submit to arbitration any
accounts, debts, claims, disputes and matters which may arise between the
Partnership and any other Person and to grant an extension of time for the
payment or satisfaction thereof on any terms, with or without security;
-28-
<PAGE> 34
(10) to acquire interests in and contribute money or property
to any limited or general partnerships, joint ventures, subsidiaries or other
entities as the General Partner deems desirable;
(11) to maintain or cause to be maintained the Partnership's
books and records;
(12) to prepare and deliver, or cause to be prepared and
delivered, all financial and other reports with respect to the operations of
the Partnership, and preparation and filing of all tax returns and reports;
(13) to do all things which are necessary or advisable for the
protection and preservation of the Partnership's business and assets, and to
execute and deliver such further instruments and undertake such further acts as
may be necessary or desirable to carry out the intent and purposes of this
Agreement and as are not inconsistent with the terms hereof;
(14) subject to Section 7.5 hereof, to lease any or all of the
Properties to HIC, the Operating Partnership or the Affiliates of either on
such terms and conditions as the General Partner may from time to time agree;
and
(15) in general, to exercise all of the general rights,
privileges and powers permitted to be had and exercised under the Act.
To the extent the duties of the General Partner require expenditures of funds
to be paid to third parties, the General Partner shall not have any obligations
hereunder except to the extent that Partnership funds are reasonably available
to it for the performance of such duties, and nothing herein contained shall be
deemed to require the General Partner, in its capacity as such, to expend its
individual funds for payment to third parties or to undertake any specific
liability or litigation on behalf of the Partnership.
(b) Notwithstanding the provisions of Section 7.1(a) hereof,
the Partnership shall not take any action which (or fail to take any action,
the omission of which), in the reasonable judgement of the General Partner, in
its sole and absolute discretion, (i) could adversely affect the ability of the
General Partner to qualify or continue to qualify as a REIT, (ii) could subject
the General Partner to any additional taxes under Section 857 or Section 4981
of the Code or other potentially adverse consequences under the Code, (iii)
could otherwise violate the REIT Requirements or (iv) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
General Partner or its securities, unless such action (or inaction) shall have
been specifically consented to by the General Partner in writing.
(c) Notwithstanding the provisions of Section 7.1(a) hereof,
the Partnership shall not commingle its funds with those of any Affiliate or
other entity; funds and other assets of the Partnership shall be separately
identified and segregated; all of the
-29-
<PAGE> 35
Partnership's assets shall at all times be held by or on behalf of the
Partnership, and, if held on behalf of the Partnership by another entity,
shall at all times be kept identifiable (in accordance with customary usages)
as assets owned by the Partnership; and the Partnership shall maintain its own
separate bank accounts, payroll and books of account.
(d) Without the consent of all the Limited Partners, the
General Partner shall have no power to do any act in contravention of this
Agreement or possess any Partnership property for other than a partnership
purpose.
7.2 Major Decisions. The General Partner shall not, without
the prior Consent of the Starwood Partners undertake, on behalf of the
Partnership, any of the following actions at any time that the Limited Partners
(not including the General Partner) own or control in the aggregate fifteen
(15) percent or more of the issued and outstanding Partnership Interests (the
"Major Decisions"):
(i) make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a custodian, receiver or trustee for
all or any part of the assets of the Partnership;
(ii) institute any proceedings for Bankruptcy on behalf of
the Partnership;
(iii) except in connection with the dissolution and winding up
of the Partnership by the Liquidating Trustee, agree to or consummate the
merger or consolidation of the Partnership or the voluntary sale or other
transfer of all or substantially all of the Partnership's assets in a single
transaction or related series of transactions (without limiting the
transactions which will not be deemed to be a voluntary sale or transfer, the
foreclosure of a mortgage lien on any Property or the grant by the Partnership
of a deed in lieu of foreclosure for such Property shall not be deemed to be
such a voluntary sale or other transfer);
(iv) sell, in one transaction or a series of related
transactions, a Material Asset of the Partnership; or
(v) dissolve the Partnership.
7.3 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.3 and elsewhere in
this Agreement (including the provisions of Articles 5, 6 and 8 hereof
regarding distributions, payments and allocations to which it may be entitled),
the General Partner shall not receive payments from or be compensated for its
services as general partner of the Partnership.
(b) The General Partner shall be reimbursed on a monthly
basis, or such other basis as the General Partner may determine in its sole and
absolute discretion, for
-30-
<PAGE> 36
all expenses it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership, including, without limitation, the Administrative
Expenses. Such reimbursements shall be in addition to any reimbursement to the
General Partner as a result of indemnification pursuant to Section 5.1 hereof.
(c) The General Partner shall also be reimbursed for all
expenses it incurs relating to the organization and formation of the
Partnership, the General Partner's share of public offerings of Paired Shares
by the General Partner and HIC to the extent included in REIT Expenses, and any
other issuance of additional Partnership Interests.
7.4 Outside Activities of the General Partner. The General
Partner shall not directly or indirectly enter into or conduct any business
other than the ownership, acquisition and disposition of Partnership Interests
as a General Partner or Limited Partner and the management of the business of
the Partnership, and such activities as are incidental thereto. All future
acquisitions of real estate by the General Partner shall be made through and
for the benefit of the Partnership. The General Partner agrees that the net
proceeds of all offerings of securities by the General Partner shall be
contributed to the Partnership (in the case of equity offerings) or loaned to
the Partnership (in the case of debt offerings).
7.5 Contracts with Affiliates. The Partnership may engage in
transactions, enter into contracts with Affiliates, and lend money to or borrow
money from Affiliates which are on terms fair and reasonable to the Partnership
and no less favorable to the Partnership than would be obtained from
unaffiliated third parties. The Partners hereby agree that the Partnership's
leases and loans with the Operating Partnership, HIC and its Affiliates, as in
effect on the date first above written, are on terms fair and reasonable to the
Partnership and such terms are no less favorable to the Partnership than would
be obtained from unaffiliated third parties.
7.6 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby
acknowledges and confirms that any Partnership assets for which legal title is
held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partner shall use its best efforts to cause
beneficial and record title to such assets to be vested in the Partnership as
soon as reasonably practicable. All Partnership assets shall be recorded as
the property of the Partnership in its books and records, irrespective of the
name in which legal title to such Partnership assets is held.
7.7 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the
-31-
<PAGE> 37
General Partner has full power and authority to encumber, sell or otherwise use
in any manner any and all assets of the Partnership and to enter into any
contracts on behalf of the Partnership, and such Person shall be entitled to
deal with the General Partner as if it were the Partnership's sole party in
interest, both legally and beneficially. In no event shall any Person dealing
with the General Partner or its representatives be obligated to ascertain that
the terms of this Agreement have been complied with or to inquire into the
necessity or expedience of any act or action of the General Partner or its
representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the General Partner shall be
conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (i) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (ii) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Partnership and (iii) such certificate, document or instrument was duly
executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
7.8 Liability of the General Partner.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary or other damages
to the Partnership, any of the Partners or any assignee of any interest of any
Partner for losses sustained or liabilities incurred as a result of errors in
judgment or of any act or omission if the General Partner acted without fraud,
gross negligence or willful misconduct.
(b) The Limited Partners expressly acknowledge (i) that the
General Partner is acting on behalf of the Partnership and the General
Partner's shareholders collectively, (ii) that, subject to the terms and
conditions of this Agreement, the General Partner may, but is under no
obligation to, consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or any
assignees thereof except as provided in this Agreement) in deciding whether to
cause the Partnership to take (or decline to take) any actions, and (iii) that
the General Partner shall not be liable for monetary damages for losses
sustained, liabilities incurred, or benefits not derived by Limited Partners in
connection with such decisions, provided that the General Partner acted without
fraud, gross negligence or willful misconduct.
(c) Subject to its obligations and duties as General Partner
set forth in Section 7.1 hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents. The General
Partner shall not be responsible for any fraud, willful misconduct or gross
negligence on the part of any such agent appointed by it without fraud, gross
negligence or willful misconduct.
(d) Any amendment, modification or repeal of this Section 7.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability to the Partnership
and the Limited Partners under this
-32-
<PAGE> 38
Section 7.8 as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless
of when such claims may be asserted.
7.9 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, or other document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the advice or opinion of such Persons as to matters
which the General Partner reasonably believes to be within such Person's
professional or expert competence and in accordance with such advice or opinion
shall be prima facie evidence that such actions have been done or omitted in
good faith.
(c) The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers and any attorney or attorneys-in-fact duly appointed by the
General Partner. Each such attorney shall, to the extent provided by the
General Partner in the power of attorney, have full power and authority to do
and perform all and every act and duty which is permitted or required to be
done by the General Partner hereunder.
7.10 Operation in Accordance with REIT Requirements.
(a) The Partners acknowledge and agree the General Partner has
the authority to cause the Partnership to be operated in a manner that will
enable the General Partner to (i) satisfy the REIT Requirements and (ii) avoid
the imposition of any federal income or excise tax liability on the General
Partner from and after January 1, 1995. The General Partner has the authority
to cause the Partnership to avoid taking any action which would result in the
General Partner ceasing to satisfy the REIT Requirements or would result in the
imposition of any federal income or excise tax liability on the General Partner
from and after January 1, 1995.
(b) Without the prior consent of the General Partner, no
Limited Partner or holder of Units or any Affiliate shall take any action,
including acquiring, directly or indirectly, an interest in any tenant of a
Property (including, but not limited to, the Operating Partnership, HIC or the
Affiliates of either), which would have, through the actual or constructive
ownership of any tenant of any Property, the effect of causing the percentage
of the gross income of the General Partner that fails to be treated as "rents
from real property" within the meaning of Section 856(d)(2) of the Code to
exceed such percentage on the date hereof. Each Limited Partner and holder of
Units shall use its best efforts to notify
-33-
<PAGE> 39
the General Partner on a timely basis of any direct or indirect acquisition or
potential direct or indirect acquisition of Paired Shares by such Limited
Partner or holder or any Affiliate or direct or indirect owner of an interest
in such Limited Partner or holder that could reasonably be expected to have
such effect.
ARTICLE 8
Dissolution, Liquidation and Winding-Up
8.1 Accounting. In the event of the dissolution, liquidation
and winding-up of the Partnership, a proper accounting shall be made of the
Capital Account of each holder of Units and of the Net Income or Net Loss of
the Partnership from the date of the last previous accounting to the date of
dissolution.
8.2 Distribution on Dissolution.
(a) In the event of the dissolution and liquidation of
the Partnership for any reason, the assets of the Partnership shall be
liquidated for distribution in the following rank and order:
(i) payment of creditors of the Partnership, including
creditors who are Partners or former Partners;
(ii) establishment of reserves as provided by the
Liquidating Trustee to provide for contingent liabilities, if any; and
(iii) to the holders of Units in accordance with the
positive balances in their Capital Accounts after giving effect to all
contributions, distributions and allocations for all periods.
Whenever the Liquidating Trustee reasonably determines that any reserves
established pursuant to paragraph (ii) above are in excess of the reasonable
requirements of the Partnership, the amount determined to be excess shall be
distributed to the Partners in accordance with the provisions of this Section
8.2(a). The foregoing notwithstanding, in the event of the dissolution,
liquidation and winding up of the Partnership prior to the occurrence of (A)
the consummation of the first public offering of securities (after the date
first above written) by the Partnership, the General Partner or HIC or (B) the
consummation of a private placement of securities that substantially reduces
the outstanding balance of the Senior Debt, the distributions described in
paragraph (iii) above shall be made in the following order: (x) to the
Starwood Partners until the Starwood Partners have received an amount equal to
fifty-five (55) percent of their Capital Contributions; (y) then, to the
holders of Units pro rata in proportion to their unreturned Capital
Contributions following the distribution described in clause (x); and (z)
thereafter, in accordance with the remaining positive balances in the holders'
Capital Accounts after giving effect to all contributions, distributions and
allocations
-34-
<PAGE> 40
for all periods. If the distributions described in the preceding sentence would
otherwise not be in accordance with the positive balances in the holders of
Units Capital Accounts after giving effect to all contributions, distributions
and allocations for all periods, then the General Partner shall allocate items
of gross income or deduction to the holders such that said distributions are in
accordance with positive Capital Account balances. No Partner or holder of
Units shall be liable to any other Partner or holder of Units for a deficit
balance in its Capital Account.
(b) Notwithstanding the provisions of Section 8.2(a) hereof
which require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidating Trustee determines that an immediate sale of part
or all of the Partnership's assets would be impractical or would cause undue
loss to the Partners, the Liquidating Trustee may, in its sole and absolute
discretion, defer for a reasonable time liquidation of any assets except those
necessary to satisfy liabilities of the Partnership (including to those
Partners which are creditors of the Partnership) and/or, with the Consent of
the Limited Partners, distribute to the Partners, in lieu of cash, as tenants
in common and in accordance with the provisions of Section 8.2(a) hereof,
undivided interests in such Partnership assets as the Liquidating Trustee deems
not suitable for liquidation. Any such distributions in kind shall be made
only if, in the good faith judgment of the Liquidating Trustee, such
distributions in kind are in the best interest of the Partners, and shall be
subject to such conditions relating to the disposition and management of such
properties as the Liquidating Trustee deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidating Trustee shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
8.3 Documentation of Liquidation. Upon the completion of the
dissolution and liquidation of the Partnership, the Partnership shall terminate
and the Liquidating Trustee shall have the authority to execute and record any
and all documents or instruments required to effect the dissolution,
liquidation and termination of the Partnership.
ARTICLE 9
Transfer
9.1 General Partner. The General Partner shall not withdraw
from the Partnership and shall not sell, assign, pledge, encumber or otherwise
dispose of all or any portion of its Partnership Interest or Units without the
Consent of the Limited Partners which consent may be given or withheld in each
Limited Partner's sole and absolute discretion. Upon any transfer of a
Partnership Interest in accordance with the provisions of this Section 9.1,
the transferee General Partner shall become vested with the powers and rights
of the transferor General Partner, and shall be liable for all obligations and
responsible for all duties of the General Partner, once such transferee has
executed such instruments as may be necessary to effectuate such admission and
to confirm the agreement of such transferee to be
-35-
<PAGE> 41
bound by all the terms and provisions of this Agreement with respect to the
Partnership interest so acquired. It shall be a condition to any transfer
otherwise permitted hereunder that the transferee assumes by express agreement
(or pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the General Partner are assumed by a successor trust or
corporation by operation of law) all of the obligations of the transferor
General Partner under this Agreement with respect to such transferred
Partnership Interest and no such transfer (other than pursuant to a statutory
merger or consolidation wherein all obligations and liabilities of the
transferor General Partner are assumed by a successor trust or corporation by
operation of law) shall relieve the transferor General Partner of its
obligations under this Agreement without the Consent of the Limited Partners.
In connection with any such permitted transfer, the successor General Partner
shall be deemed admitted as such immediately prior to the effective time of the
transfer from the transferor General Partner and shall continue the business of
the Partnership without dissolution. If the General Partner withdraws or
retires from the Partnership, in violation of this Agreement or otherwise, or
dissolves, terminates or upon the Bankruptcy of the General Partner, (a) the
remaining General Partners may elect to continue the Partnership business or
(b) within 90 days thereafter, all of the remaining Partners (or, to the extent
permitted under the Act, such lesser number or percentage of the Partners, but
in no event less than a Majority-in-Interest of the Limited Partners) may elect
to continue the Partnership business by selecting a substitute General Partner,
which substitute General Partner accepts such election and agrees to serve as
General Partner. Such successor General Partner shall thereupon succeed to the
rights and obligations of the General Partner as provided in this Section 9.1.
9.2 Transfers by Limited Partners.
(a) No Limited Partner shall have the right, directly or
indirectly, to transfer all or any part of his Partnership Interest or Units to
any Person without the prior written consent of the General Partner, which
consent may be given or withheld by the General Partner in its sole and
absolute discretion. The foregoing notwithstanding, the General Partner hereby
grants the consents described in this Section 9.2 to the following categories
of transfers, provided that any such transfer otherwise complies with all of
the other provisions of this Article 9 (including, but not limited to, any
additional consents required hereunder): (i) transfers of Units; (ii)
transfers of Partnership Interests (whether outright or in trust) to members of
a Partner's Immediate Family; (iii) transfers of Partnership Interests to a
Person holding a direct or indirect interest in a Partner; (iv) transfers of
Partnership Interests pursuant to an exercise of Rights; or (v) pledges to
secure bona fide indebtedness.
(b) It shall be a condition to any transfer (other
than a pledge, encumbrance, hypothecation or mortgage) otherwise permitted
hereunder that the transferee assume by operation of law or express agreement
all of the obligations of the transferor under this Agreement (including,
without limitation, under Article 9 hereof) with respect to such transferred
Partnership Interest or Units and no such transfer (other than pursuant to a
statutory merger or consolidation wherein all obligations and liabilities of
the transferor are assumed by a successor corporation by operation of law)
shall relieve the transferor of its
-36-
<PAGE> 42
obligations under this Agreement without the approval of the General Partner,
in its reasonable discretion (it being understood that a transferor shall be
deemed relieved from such obligations, without the necessity of any such
approval, in respect of Partnership Interests transferred to the General
Partner or the Partnership pursuant to the Exchange Rights Agreement). Upon
such transfer, the transferee of a Partnership Interest shall be admitted as a
Limited Partner and shall succeed to all of the rights of the transferor
Limited Partner under this Agreement in the place and stead of such transferor
Limited Partner (which succession, in the event of a pledge, may be entered
into and become effective at the time of foreclosure or other realization of
such pledge). The foregoing notwithstanding, a transferee of a Unit shall not
be admitted as a substituted Limited Partner unless the General Partner
consents, which consent may be given or withheld by the General Partner in its
sole and absolute discretion. Any transferee, whether or not admitted as a
substituted Limited Partner, shall succeed to the obligations of the transferor
hereunder (unless such transfer is a pledge, encumbrance, hypothecation or
mortgage or except as otherwise provided herein).
(c) In addition to any other restrictions on transfer provided
herein, no Partnership Interest or Units shall be transferable unless the
transferor gives written notice of the proposed transfer which notice shall
state, to the best of its knowledge, that such transfer will not violate any
of the restrictions set forth in Section 9.3 hereof.
(d) Any permitted transferee under Section 9.2 who is not
admitted as a Limited Partner in accordance with this Article 9 or a transferee
who only holds Units shall be considered an assignee for purposes of this
Agreement. An assignee shall be deemed to have had assigned to it, and shall
be entitled to receive, distributions from the Partnership and the share of Net
Income, Net Losses, and any other items of income, gain, loss, deduction and
credit of the Partnership and rights attributable to the Partnership Interests
assigned to such transferee, but shall not be deemed to be a holder of
Partnership Interests for any other purpose under this Agreement, and shall not
be entitled to vote such Partnership Interests in any matter presented to the
Limited Partners for a vote. In the event any such transferee desires to make
a further assignment of any such Partnership Interests, such transferee shall
be subject to all the provisions of this Article 9 to the same extent and in
the same manner as any Limited Partner desiring to make an assignment of
Partnership Interests.
(e) The Limited Partners acknowledge that neither the
Partnership Interests nor the Units have been registered under any federal or
state securities laws and, as a result thereof, they may not be sold or
otherwise transferred, except in compliance with such laws. Notwithstanding
anything to the contrary contained in this Agreement, no Partnership Interest
or Units may be sold or otherwise transferred unless such transfer is exempt
from registration under any applicable securities laws or such transfer is
registered under such laws, it being acknowledged that the Partnership has no
obligation to take any action which would cause any such Partnership Interests
or Units to be registered.
9.3 Certain Restrictions on Transfer. In addition to any
other restrictions on transfer herein contained, except with the consent of the
General Partner and the Consent
-37-
<PAGE> 43
of the Starwood Partners, in no event may any transfer of a Partnership Interest
or Units by any Person be made (a) to any person or Entity that lacks the legal
right, power or capacity to own a Partnership Interest or Units; (b) in the
event such transfer would cause the General Partner to cease to comply with the
REIT Requirements; (c) if such transfer would cause a termination of the
Partnership for federal income tax purposes; (d) if such transfer would, in the
opinion of counsel to the Partnership, cause the Partnership to cease to be
classified as a Partnership for federal income tax purposes; (e) if such
transfer would result in the Partnership being treated as a "publicly traded
partnership" or is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the meaning of
Section 7704 of the Code; (f) in violation of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976; (g) if the General Partner reasonably believes that
such transfer may (i) cause any portion or all of the assets of the Partnership
to be deemed pursuant to United States Department of Labor Regulation Section
2510.3-101 or otherwise pursuant to ERISA or the Code to be for any purpose of
ERISA or Section 4975 of the Code assets of any Restricted Entity, or (ii) cause
a "prohibited transaction" (as defined in Section 4975(c) of the Code or within
the meaning of Section 406 of ERISA) to occur, or (iii) cause the Partnership to
become with respect to any Restricted Entity a "party in interest" (as defined
in Section 3(14) of ERISA) or a "disqualified person" (as defined in Section
4975(e) of the Code) or (iv) cause the Partnership to be jointly and severally
liable for any obligation arising under ERISA or the Code with respect to any
"employee benefit plan" as defined in and subject to ERISA or any "plan" as
defined in Section 4975 of the Code; or (h) if the intended transferee is a
Restricted Entity. Any purported transfer described in this Section 9.3 shall
be void ab initio.
9.4 Effective Dates of Transfers.
(a) Transfers pursuant to this Article 9 may be made on any
day, but for purposes of this Agreement, the effective date of any such
transfer shall be (i) the first day of the month in which such transfer
occurred if such transfer occurred on or prior to the fifteenth calendar day of
a month, or (ii) the first day of the month immediately following the month in
which such transfer occurred, if such transfer occurred after the fifteenth
calendar day of a month, or such other date determined by the General Partner
pursuant to such convention as may be administratively feasible and consistent
with applicable law.
(b) If any Partnership Interest or Unit is transferred or
assigned in compliance with the provisions of this Article 9, on any day other
than the first day of a calendar year, then Net Income, Net Loss, each item
thereof and all other items attributable to such Partnership Interest or Unit
for such year shall be allocated to the transferor, and, in the case of a
transfer or assignment other than a redemption, to the transferee, by taking
into account their varying interests during such year in accordance with
Section 706(d) of the Code, using any method permitted thereunder. All
distributions pursuant to Section 6.2 hereof attributable to such transferred
Partnership Interests or Units (A) with respect to which the Partnership Record
Date is before the effective date of such transfer (other than a pledge,
encumbrance, hypothecation or mortgage) shall be made to the transferor, (B)
with
-38-
<PAGE> 44
respect to the first Partnership Record Date after the effective date of
such transfer (other than a pledge, encumbrance, hypothecation or mortgage)
shall be paid to the transferor and to the transferee, ratably in accordance
with their respective periods of ownership of the Partnership Interest or
Units transferred during the period with respect to which such distribution
is made, and (C) all distributions after those described in (A) and (B) shall
be made to the transferee.
9.5 Transfer.
(a) The term "transfer," when used in this Article 9 with
respect to a Partnership Interest, shall be deemed to refer to a transaction by
which a Person purports to assign its Partnership Interest or any portion
thereof (including Units) to another Person, and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise.
(b) The General Partner is hereby authorized on behalf of each
of the Partners to amend this Agreement (including the schedules hereto) to
reflect the admission of any transferee of a Partnership Interest as a
substituted Limited Partner in accordance with the provisions of this
Article 9.
(c) No Partnership Interest or Unit shall be transferred, in
whole or in part, except in accordance with the terms and conditions set forth
in this Article 9. Any transfer or purported transfer of a Partnership
Interest not made in accordance with this Article 9 shall be null and void.
ARTICLE 10
Rights and Obligations of the Limited Partners
10.1 No Participation in Management. No Limited Partner, in its
capacity as such, shall take part in the management of the Partnership's
business, transact any business in the Partnership's name or have the power to
sign documents for or otherwise bind the Partnership. Any rights expressly
granted to the Limited Partners in this Agreement shall not be deemed to be
rights relating to the management of the Partnership's business.
10.2 Bankruptcy of a Limited Partner. The Bankruptcy of any
Limited Partner shall not cause a dissolution of the Partnership, but the
rights of such Limited Partner to share in the Net Profits or Net Losses of the
Partnership and to receive distributions of Partnership funds shall, on the
happening of such event, devolve on its successors or assigns, subject to the
terms and conditions of this Agreement, and the Partnership shall continue as a
limited partnership. In no event, however, shall such assignee(s) become a
substituted Limited Partner except in accordance with Article 9 hereof.
-39-
<PAGE> 45
10.3 No Withdrawal. No Limited Partner may withdraw from the
Partnership without the prior written consent of the General Partner, other
than as provided in Article 9 hereof.
10.4 Conflicts. The Partners recognize that the Limited
Partners and their Affiliates have or may have other business interests,
activities and investments, some of which may be in conflict or competition
with the business of the Partnership, and that such Persons are entitled to
carry on such other business interests, activities and investments. In
deciding whether to take any actions in such capacity, such Limited Partners
and their Affiliates may, but shall be under no obligation to, consider the
separate interests of the Partnership and shall have no fiduciary obligations
to the Partnership and shall not be liable for monetary damages for losses
sustained, liabilities incurred or benefits not derived by the other Partners
in connection with such actions except for damages for losses sustained or
liabilities incurred which result from a Limited Partner breaching a
representation, warranty or covenant hereunder or to the extent provided in the
Formation Agreement; nor shall the Partnership or the General Partner be under
any obligation to consider the separate interests of the Limited Partners and
their Affiliates in such capacity or have any fiduciary obligations to the
Limited Partners and their Affiliates in such capacity or be liable for
monetary damages for losses sustained, liabilities incurred or benefits not
derived by the Limited Partners and their Affiliates in such capacity arising
from actions or omissions taken by the Partnership. The Limited Partners and
their Affiliates may engage in or possess an interest in any other business or
venture of any kind, independently or with others, on their own behalf or on
behalf of other entities with which they are affiliated or associated, and such
persons may engage in any activities, whether or not competitive with the
Partnership, without any obligation to offer any interest in such activities to
the Partnership or to any Partner. Neither the Partnership nor any Partner
shall have any right, by virtue of this Agreement, in or to such activities, or
the income or profits derived therefrom, and the pursuit of such activities,
even if competitive with the business of the Partnership, shall not be deemed
wrongful or improper. Notwithstanding the foregoing, the provisions of this
Section 10.4 shall not negate or impair any other written agreement between one
or more of the Limited Partners and the General Partner or the Partnership
(including Section 6.6 of the Formation Agreement) or any duties which a
Limited Partner may have in such Limited Partner's capacity as an officer or
director of the General Partner.
10.5 Provision of Information.
(a) With respect to any information required to be
provided to the Limited Partners pursuant to Section 17-305 (or any successor
thereto) of the Act: (i) the cost of preparing or providing any such
information (including, without limitation, fees paid to any person or entity
in connection therewith) shall be paid by the requesting Partner and in no
event shall such information be required to be given to the requesting Partner
until such payment has been made to the Partnership; (ii) in no event shall any
financial statements of the Partnership be required to be provided except for
such statements as have already been prepared or are otherwise required to be
provided to the Limited Partners under this Agreement and in no event shall any
statements which have been prepared be required to be audited, reviewed or
otherwise examined by a certified public accountant, if the statements are not
otherwise required to be
-40-
<PAGE> 46
audited, reviewed or examined pursuant to the provisions of this Agreement;
and (iii) in no event shall such information be required to be furnished until
forty-five (45) days after such request and unless the information is already
in the possession of the Partnership.
(b) In addition to other rights provided by this Agreement or
by the Act, each Limited Partner shall have the right, for a purpose reasonably
related to such Limited Partner's interest as a limited partner in the
Partnership, upon written demand with a statement of the purpose of such demand
and at such Limited Partner's own expense (excluding copying and administrative
expenses of the General Partner):
(1) to obtain a copy of the most recent annual and
quarterly reports and current reports on Form 8-K filed with the SEC by the
General Partner pursuant to the Securities Exchange Act of 1934;
(2) to obtain a copy of the Partnership's federal, state
and local income tax returns for each fiscal year of the Partnership;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner; and
(4) to obtain a copy of this Agreement and the Certificate,
together with executed copies of all powers of attorney pursuant to which this
Agreement and the Certificate have been executed.
(c) Notwithstanding any other provision of this Section 10.5,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that is not material to the
Limited Partners and that (i) the General Partner reasonably believes to be in
the nature of trade secrets or other information the disclosure of which the
General Partner in good faith believes is not in the best interests of the
Partnership or could damage the Partnership or its business or (ii) the
Partnership is required by law or by agreements with an unaffiliated third
party to keep confidential.
10.6 Limited Partner Representative. SCG is hereby appointed
as the Limited Partner Representative. A Majority-in- Interest of the Limited
Partners shall have the right, at any time, within their sole discretion, to
replace the Limited Partner Representative, or to appoint a temporary
substitute to act for a Limited Partner Representative unable to act. Any
appointment of a Limited Partner Representative made hereunder shall remain
effective until rescinded in a writing delivered to the General Partner via
certified mail, registered overnight express mail or telecopy, and the General
Partner shall have the right and authority to rely (and shall be fully
protected in so doing) on the actions taken and directions given by such
Limited Partner Representative, without any further evidence of their authority
or
-41-
<PAGE> 47
further action by the Limited Partners. The General Partner shall send
copies of all notices received by it pursuant to Section 6.6 to each Limited
Partner requesting the same.
10.7 Power of Attorney.
(a) Each Limited Partner constitutes and appoints the General
Partner, any Liquidating Trustee and authorized officers and attorneys-in-fact
of each, and each of those acting singly, in each case with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full
power and authority in its name, place and stead to: execute, swear to,
acknowledge, deliver, file and record in the appropriate public offices (i) all
certificates, documents and other instruments (including, without limitation,
this Agreement and the Certificate and all amendments or restatements thereof)
that the General Partner or the Liquidating Trustee deems appropriate or
necessary to form, qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and in all other
jurisdictions in which the Partnership may conduct business or own property;
(ii) all instruments that the General Partner deems appropriate or necessary to
reflect any amendment, change, modification or restatement of this Agreement in
accordance with its terms; (iii) all conveyances and other instruments or
documents that the General Partner deems appropriate or necessary to reflect
the dissolution and liquidation of the Partnership pursuant to the terms of
this Agreement, including, without limitation, a certificate of cancellation;
and (iv) all instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to the provisions of this Agreement or the
Capital Contribution of any Partner.
(b) The foregoing power of attorney is irrevocable and a
power coupled with an interest, in recognition of the fact that each of the
Partners will be relying upon the power of the General Partner to act as
contemplated by this Agreement in any filing or other action by it on behalf of
the Partnership, and it shall survive the death or incompetency of a Limited
Partner to the effect and extent permitted by law, subsequent incapacity of any
Limited Partner and the transfer of all or any portion of such Limited
Partner's Partnership Interests and shall extend to such Limited Partner's
heirs, successors, assigns and personal representatives.
(c) Nothing contained in this Section 10.7 shall be construed
as authorizing the General Partner to amend this Agreement except in accordance
with Article 11 hereof.
10.8 Ownership of Paired Shares.
(a) Each Limited Partner and holder of Units hereby agrees to
provide the General Partner within fifteen (15) days of any written request
therefor, a statement, to the best of its knowledge, describing the number of
Paired Shares actually or constructively owned by such Limited Partner or
holder of Units and all direct and indirect owners of such Limited Partner or
holder for purposes of the REIT Requirements as
-42-
<PAGE> 48
determined under Section 318(a) of the Code, as modified by Section 856(d)(5)
of the Code, or Section 544 of the Code, as modified by Section 856(h) of
the Code.
(b) Each Limited Partner and holder of Units (i) hereby
covenants that, without the prior written consent of the General Partner and
the Limited Partner Representative (which consent shall not be unreasonably
withheld or delayed) it will not and will use all reasonable efforts to cause
its direct or indirect owners not to acquire any Paired Shares or any rights to
acquire Paired Shares and (ii) except to the extent that the General Partner
and the Limited Partner Representative provides prior written consent, hereby
represents, warrants and covenants that (I) it is not and will not become a
Restricted Entity, (II) no "prohibited transaction" (as defined in Section
4975(c) of the Code or within the meaning of Section 406 of ERISA) has occurred
or will occur that would not have occurred or occur if the Limited Partner or
holder of Units and its Affiliates were not Limited Partners and were not
holders of Units, (III) the Partnership has not become and will not become with
respect to any Restricted Entity a "party in interest" (as defined in
Section 3(14) of ERISA) or a "disqualified person" (as defined in Section
4975(e) of the Code) which the Partnership would not have become or be if the
Limited Partner or holder of Units and its Affiliates were not Limited Partners
and were not holders of Units, and (IV) the Partnership has not and will not
become jointly and severally liable for any obligations arising under ERISA or
the Code with respect to any "employee benefit plan" as defined in and subject
to ERISA or any "plan" as defined in the Code for which the Partnership has not
become or would not be liable if the Limited Partner or holder of Units and its
Affiliate were not Limited Partners and were not holders of Units.
10.9 Waiver of Fiduciary Duty. Each Limited Partner and holder of
Units hereby waives, to the maximum extent permitted under law, any and all
fiduciary duties of the General Partner to each, all or any combination of them
and hereby agrees that the General Partner may, but is under no obligation to,
take their interests into account in performing or refraining from performing
any act permitted under this Agreement.
ARTICLE 11
Amendment of Partnership Agreement, Meetings
11.1 Amendments.
(a) This Agreement may not be amended unless such amendment
is approved by the General Partner and by a Majority-in-Interest of the Limited
Partners, except as provided below in this Section 11.1.
(b) Notwithstanding Section 11.1(a), the General Partner
shall have the power, without the Consent of the Limited Partners but after
five (5) Business Days notice to the Limited Partners, to amend this Agreement
as may be required to facilitate or implement any of the following purposes:
-43-
<PAGE> 49
(1) to add to the obligations of the General Partner for the
benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners after the date hereof in accordance with Section 4.1(d)
or Article 9 of this Agreement, provided that the General Partner shall not be
required to give the notice referred to in the first paragraph of this
subsection (b) in respect of a transfer of Partnership Interests or Units upon
the exercise of Rights;
(3) to set forth the rights, powers, duties, and preferences
of the holders of any additional Partnership Interests issued pursuant to
Section 4.2 hereof;
(4) to reflect a change that is of an inconsequential nature
and does not adversely affect the Limited Partners, or to cure any ambiguity,
correct or supplement any provision in this Agreement not inconsistent with law
or with other provisions, or make other changes with respect to matters arising
under this Agreement that will not be inconsistent with law or with the
provisions of this Agreement;
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or regulation of a federal
or state agency or contained in federal or state law; and
(6) to prevent all or any portion of the assets of the
Partnership from being deemed pursuant to United States Department of Labor
Regulation Section 2510.3-101 or otherwise pursuant to ERISA or the Code to be,
for any purpose of ERISA or Section 4975 of the Code, assets of any Restricted
Entity.
(c) Notwithstanding Sections 11.1(a) and (b) hereof, this
Agreement shall not be amended without the prior written consent of each
Partner adversely affected if such amendment would (i) convert a Limited
Partner's interest in the Partnership into a general partner's interest, (ii)
modify the limited liability of a Limited Partner, (iii) alter rights of the
Partners to receive allocations and distributions pursuant to Article 6 or
Section 8.2 hereof (except as permitted pursuant to Section 11.1(b)(3) hereof),
(iv) alter or modify the Rights set forth in the Exchange Rights Agreement or
the Registration Rights Agreement except in compliance therewith, (v) amend
this Section 11.1(c), (vi) alter such Partner's rights to transfer its
Partnership Interests or (vii) amend Section 7.8, 7.9, 10.8 or 11.2(e) hereof.
Further, no amendment may alter the restrictions on the General Partner's
authority set forth in Section 7.2 hereof without the consent specified in that
section.
11.2 Meetings of the Partners; Notices to Partners.
(a) Meetings of Partners may be called by the General Partner
or by any Limited Partner to act on any matter specified herein or in the Act
to be voted on or consented to by the Partners. The call shall state the
nature of the business to be transacted. Notice of any such meeting shall be
given to all Partners not less than seven (7) Business
-44-
<PAGE> 50
Days prior to the date of such meeting. Partners may vote in person or by
proxy at such meeting. Whenever the vote or Consent of the Limited Partners is
permitted or required under this Agreement, such vote or consent may be given
at a meeting of Partners or may be given in accordance with the procedure
prescribed in Section 11.2(b) hereof.
(b) Any action required or permitted to be taken at a meeting
of the Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by the General Partner and such percentage
or number of the Limited Partners as is expressly required by this Agreement.
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of the Partners. Such consent shall be
filed with the General Partner and copies thereof delivered to all Partners.
An action so taken shall be deemed to have been taken at a meeting held on the
effective date so certified.
(c) Each Limited Partner may authorize any Person or Persons
to act for him by proxy on all matters in which a Limited Partner is entitled
to participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited Partner
or his attorney-in-fact. No proxy shall be valid after the expiration of
eleven (11) months from the date thereof unless otherwise provided in the
proxy. Every proxy shall be revocable at the pleasure of the Limited Partner
executing it. No such proxy and no such revocation shall be effective unless a
copy thereof has been delivered to the General Partner.
(d) Whenever the Consent of the Limited Partners is required
hereunder, the General Partner shall provide a notice to each Partner who is a
Limited Partner on the date the notice is given setting forth the matter(s) as
to which it proposes to seek such consent at least five (5) Business Days in
advance of the date upon which such consent is sought.
(e) In addition to the requirements of Section 7.2 hereof, the
General Partner shall provide advance written notice to the Limited Partners of
any proposed sale or refinancing, and will consult during normal business hours
with any Limited Partner who requests in writing the right to consult with the
General Partner with respect thereto. The General Partner also shall provide
the Limited Partners with quarterly tax projections for the Partnership.
Subject in all respects to Section 7.2 hereof, in no event, however, will the
General Partner be obligated to agree to any modifications to a proposed sale
or refinancing which are suggested by a Limited Partner, nor will any Limited
Partner have a veto right over any such proposed sale or refinancing.
-45-
<PAGE> 51
ARTICLE 12
General Provisions
12.1 No Liability of Directors and Others. Notwithstanding
anything to the contrary contained herein, no recourse shall be had by the
Partnership or any Partner against any trustee, director, shareholder, officer,
employee, agent or attorney of the General Partner for any act or omission of
the General Partner or any obligation or liability of the General Partner under
this Agreement, and none of the foregoing shall have any personal liability for
or with respect to any of the foregoing; provided that the foregoing shall not
relieve any trustee, officer or director of the General Partner of any
liability in his capacity as such.
12.2 Notices. All notices, offers or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and may be personally served or sent by United States mail and shall be
deemed to have been given when delivered in person or three business days after
deposit in United States mail, registered or certified, postage prepaid, and
properly addressed, by or to the appropriate party. For purposes of this
Section 12.2, the addresses of the parties hereto shall be as set forth on
Exhibit C hereto. The address of any party hereto may be changed by a notice
in writing given in accordance with the provisions hereof.
12.3 Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement
(including, without limitation, provisions concerning limitations of actions),
shall be governed by and construed in accordance with the laws of the State of
Delaware, notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary. Each of the parties hereto irrevocably submits
and consents to the jurisdiction of the United States District Court for the
Southern District of New York and the United States District Court for the
Central District of California in connection with any action or proceeding
arising out of or relating to this Agreement and irrevocably waives any
immunity from jurisdiction thereof and any claim of proper venue, forum non
conveniens or any similar basis to which it might otherwise be entitled in any
such action or proceeding.
12.4 Execution of Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
12.5 Severability. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for
any reason any other or others of them may be invalid or unenforceable in whole
or in part.
-46-
<PAGE> 52
12.6 Entire Agreement. This Agreement (together with the
Exhibits hereto) and the Formation Agreement contain the entire understanding
among the parties hereto with respect to the subject matter hereof, and
supersede all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as
herein contained. The parties hereto intend that this Agreement be treated as
a separate and distinct agreement and as not being part of any other agreement
(other than the Formation Agreement), arrangement, partnership or joint
venture. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms
hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
12.7 Paragraph Headings. The paragraph headings in this
Agreement are for convenience and they form no part of this Agreement and shall
not affect its interpretation.
12.8 Gender, Etc. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context indicates is appropriate. The term "including" shall
mean "including, but not limited to."
12.9 Number of Days. In computing the number of days (other
than Business Days and Trading Days) for purposes of this Agreement, all days
shall be counted, including Saturdays, Sundays and holidays; provided, however,
that if the final day of any time period falls on a Saturday, Sunday or holiday
on which national banks are or may elect to be closed, then the final day shall
be deemed to be the next day which is not a Saturday, Sunday or such holiday.
12.10 Partners Not Agents. Nothing contained herein shall be
construed to constitute any Partner the agent of another Partner, except as
specifically provided herein, or in any manner to limit the Limited Partners in
the carrying on of their own respective businesses or activities.
12.11 Assurances. Each of the Partners shall hereafter
execute and deliver such further instruments and do such further acts and
things as may be reasonably required or useful to carry out the intent and
purpose of this Agreement and as are not inconsistent with the terms hereof.
12.12 Waiver of Partition. Each Partner hereby waives any
right such Partner may have to partition its interest in the Partnership or any
property of the Partnership.
12.13 Hotel Investors Trust. The name "Hotel Investors Trust"
is a designation of Hotel Investors Trust and its Trustees (as Trustees but not
personally) under a Declaration of Trust dated August 25, 1969, as amended and
restated as of June 6, 1988, and all persons dealing with Hotel Investors Trust
shall look solely to Hotel Investors Trust's
-47-
<PAGE> 53
assets for the enforcement of any claims against Hotel Investors Trust, as the
Trustees, officers, agents and security holders of Hotel Investors Trust assume
no personal liability for obligations entered into on behalf of Hotel Investors
Trust, and their respective individual assets shall not be subject to the
claims of any person relating to such obligations.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed on their behalf as of the
date first above written.
GENERAL PARTNER:
HOTEL INVESTORS TRUST, a Maryland real estate
investment trust
By:
--------------------------------------
Jeffrey C. Lapin
President and Chief Operating Officer
LIMITED PARTNERS:
BERL HOLDINGS, L.P.
By BERL HOLDINGS I, INC.
General Partner
By:
------------------------------
Name:
Title:
STARWOOD-APOLLO HOTEL PARTNERS VIII, L.P.
By SAHI, INC.
General Partner
By:
---------------------------------
Name:
Title:
-48-
<PAGE> 54
STARWOOD-APOLLO HOTEL PARTNERS IX, L.P.
By SAHI, INC.
General Partner
By:
-------------------------------
Name:
Title:
STARWOOD-NOMURA HOTEL INVESTORS, L.P.
By SNHI, INC.
General Partner
By:
-------------------------------
Name:
Title:
STARWOOD/WICHITA INVESTORS, L.P.
By STARWOOD OPPORTUNITY FUND II, L.P.
General Partner
By STARWOOD CAPITAL GROUP, L.P.
General Partner
By BSS CAPITAL PARTNERS, L.P.
General Partner
By STERNLICHT HOLDINGS II, INC.
General Partner
By:
------------------------
Name:
Title:
-49-
<PAGE> 55
STARWOOD-HUNTINGTON PARTNERS, L.P.
By SRL HOLDINGS, INC.
General Partner
By:
--------------------------------------
Name:
Title:
WOODSTAR PARTNERS I, L.P.
By STARWOOD CAPITAL GROUP, L.P.
General Partner
By BSS CAPITAL PARTNERS, L.P.
General Partner
By STERNLICHT HOLDINGS II, INC.
General Partner
By:
------------------------
Name:
Title:
-50-
<PAGE> 56
EXHIBIT A
List of Partners, Percentage Interests and Units
Date: December 15, 1994
<TABLE>
<CAPTION>
Name of Partner Percentage Interest Units
- --------------- ------------------- -----
<S> <C> <C>
Hotel Investors Trust 28.2746% 12,132,948
Berl Holdings, L.P. 32.5337% 13,960,604
Starwood-Apollo Hotel 2.2722% 975,019
Partners VIII, L.P.
Starwood-Apollo Hotel 3.3050% 1,418,210
Partners IX, L.P.
Starwood-Nomura Hotel 11.5361% 4,950,260
Investors, L.P.
Starwood/Wichita 5.0375% 2,161,657
Investors, L.P.
Starwood-Huntington 1.4129% 606,279
Partners, L.P.
Woodstar Partners I, 15.6280% 6,706,145
L.P.
- ---------------------- ------- ----------
Totals 100.000% 42,911,121
</TABLE>
<PAGE> 57
EXHIBIT B
CONTRIBUTED PROPERTY AND
CAPITAL CONTRIBUTIONS
Hotel Investors Trust
The properties and assets, subject to the assumption of liabilities,
as described in that certain Contribution Agreement to be entered into
by and between Hotel Investors Trust and the Partnership in connection
with the Closing (as defined in the Formation Agreement).
Limited Partners
The properties and assets, subject to the assumption of liabilities,
as described in that certain Contribution Agreement to be entered into
by and among the Limited Partners and the Partnership in connection
with the Closing (as defined in the Formation Agreement).
<PAGE> 58
EXHIBIT C
Notice Address of Partners
<TABLE>
<CAPTION>
Name of Partner Notice Address
- --------------- --------------
<S> <C>
Hotel Investors Trust 11845 West Olympic Boulevard
Suite 550
Los Angeles, California 90064
Attention: Jeffrey C. Lapin, President
Fax No.: (310) 575-9512
Berl Holdings, L.P. c/o Starwood Capital Group, L.P.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Fax No.: (203) 861-2101
Starwood-Apollo Hotel Partners VIII, L.P. c/o Starwood Capital Group, L.P.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Fax No.: (203) 861-2101
Starwood-Apollo Hotel Partners IX, L.P. c/o Starwood Capital Group, L.P.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Fax No.: (203) 861-2101
Starwood-Nomura Hotel Investors, L.P. c/o Starwood Capital Group, L.P.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Fax No.: (203) 861-2101
Starwood/Wichita Investors, L.P. c/o Starwood Capital Group, L.P.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Fax No.: (203) 861-2101
</TABLE>
<PAGE> 59
Starwood-Huntington Partners, L.P. c/o Starwood Capital Group,L.P.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Fax No.: (203) 861-2101
Woodstar Partners I, L.P. c/o Starwood Capital Group, L.P.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Fax No.: (203) 861-2101
<PAGE> 1
EXHIBIT 2.5
================================================================================
LIMITED PARTNERSHIP AGREEMENT
OF
SLC OPERATING LIMITED PARTNERSHIP
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 Formation and Business of the Partnership . . . . . . . . . . . . . . . . . 12
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Character of the Business . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Location of Principal Place of Business . . . . . . . . . . . . . . . . . . 13
2.5 Registered Agent and Registered Office . . . . . . . . . . . . . . . . . . 13
ARTICLE 3 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Commencement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 4 Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 Capital Contributions; Units . . . . . . . . . . . . . . . . . . . . . . . 14
4.2 Percentage Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.4 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 No Interest on or Return of Capital Contribution. . . . . . . . . . . . . . 17
ARTICLE 5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.1 Indemnification of General Partners . . . . . . . . . . . . . . . . . . . . 17
5.2 Indemnification of Limited Partners . . . . . . . . . . . . . . . . . . . . 18
5.3 Notice of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.5 Indemnification Pursuant to Formation Agreement . . . . . . . . . . . . . . 20
ARTICLE 6 Allocations, Distributions and Other Tax and Accounting Matters . . . . . . 20
6.1 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.3 Books of Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.5 Tax Elections and Returns . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.6 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.7 Withholding Payments Required By Law . . . . . . . . . . . . . . . . . . . 26
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 7 Rights, Duties and Restrictions of the General Partners . . . . . . . . . . . 27
7.1 Powers and Duties of the Managing General Partner . . . . . . . . . . . . . . 27
7.2 Major Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.3 Reimbursement of the General Partners . . . . . . . . . . . . . . . . . . . . 31
7.4 Outside Activities of the General Partners . . . . . . . . . . . . . . . . . 31
7.5 Contracts with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Title to Partnership Assets . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.8 Liability of the General Partners . . . . . . . . . . . . . . . . . . . . . . 33
7.9 Other Matters Concerning the General Partners . . . . . . . . . . . . . . . . 33
7.10 Operation of HIT in Accordance with REIT Requirements . . . . . . . . . . . . 34
7.11 Replacement of Managing General Partner . . . . . . . . . . . . . . . . . . . 35
7.12 Management Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 8 Dissolution, Liquidation and Winding-Up . . . . . . . . . . . . . . . . . . . 35
8.1 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Distribution on Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.3 Documentation of Liquidation . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 9 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.1 General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.2 Transfers by Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . 38
9.3 Certain Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . 39
9.4 Effective Dates of Transfers . . . . . . . . . . . . . . . . . . . . . . . . 40
9.5 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.6 Nevada Gaming Control Act . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 10 Rights and Obligations of the Limited Partners. . . . . . . . . . . . . . . . 41
10.1 No Participation in Management . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Bankruptcy of a Limited Partner . . . . . . . . . . . . . . . . . . . . . . . 42
10.3 No Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4 Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.5 Provision of Information . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.6 Limited Partner Representative . . . . . . . . . . . . . . . . . . . . . . . 44
10.7 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.8 Ownership of Paired Shares . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.9 Waiver of Fiduciary Duty . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 11 Amendment of Partnership Agreement, Meetings . . . . . . . . . . . . . . 46
11.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.2 Meetings of the Partners; Notices to Partners . . . . . . . . . . . . . . 47
ARTICLE 12 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.1 No Liability of Directors and Others . . . . . . . . . . . . . . . . . . 48
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.3 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.4 Execution of Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 49
12.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.7 Paragraph Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.8 Gender, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.9 Number of Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.10 Partners Not Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.11 Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.12 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
-iii-
<PAGE> 5
LIST OF EXHIBITS
Exhibit
- -------
A List of Partners, Percentage Interests and Units
B Contributed Property and Capital Contributions
C Notice Address of Partners
-iv-
<PAGE> 6
THE LIMITED PARTNERSHIP INTERESTS REFERRED TO IN THIS AGREEMENT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. REFERENCE IS MADE TO ARTICLE 9 OF THIS AGREEMENT FOR
PROVISIONS RELATING TO VARIOUS RESTRICTIONS ON THE SALE OR OTHER TRANSFER
OF THESE INTERESTS.
LIMITED PARTNERSHIP AGREEMENT
OF
SLC OPERATING LIMITED PARTNERSHIP
THIS LIMITED PARTNERSHIP AGREEMENT (this "Agreement") is made
and entered into this 15th day of December, 1994 by and among Hotel Investors
Corporation, a Maryland corporation, as managing general partner and the
persons whose names are set forth Exhibit A hereto, as such exhibit may be
amended from time to time, as general and limited partners, pursuant to the
provisions of the Delaware Revised Uniform Limited Partnership Act.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
Definitions
1.1 Definitions. Except as otherwise herein expressly
provided, the following terms and phrases shall have the meanings as set forth
below:
"Accountants" shall mean the national firm or firms
of independent certified public accountants selected by the Managing General
Partner on behalf of the Partnership to audit the books and records of the
Partnership and to prepare statements and reports in connection therewith.
"Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, as the same may hereafter be amended from time to time.
"Adjusted Capital Account Deficit" shall mean, with
respect to any Partner or holder of Units other than a General Partner, the
deficit balance, if any, in such
<PAGE> 7
holder's Capital Account as of the end of any relevant fiscal year and after
giving effect to the following adjustments:
(a) credit to such Capital Account any
amounts which such holder is obligated or treated as obligated to restore with
respect to any deficit balance in such Capital Account pursuant to Section
1.704-1(b)(2)(ii)(c) of the Regulations, or is deemed to be obligated to
restore with respect to any deficit balance pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the
items described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the requirements of the alternate test for economic effect
contained in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
"Administrative Expenses" shall mean: (a) all
administrative and operating costs and expenses of the Partnership; (b) those
administrative costs and expenses of a General Partner, including, but not
limited to, salaries and other renumerations paid to trustees, officers and
employees of a General Partner and accounting and legal expenses undertaken by
a General Partner on behalf or for the benefit of the Partnership; and (c) all
expenses which the Partnership hereby assumes and agrees to pay as incurred for
the benefit of the Partnership, including (i) costs and expenses relating to
the formation and continuation of the Partnership and continuity of existence
of the General Partners, including taxes (other than the General Partners'
federal and state income and franchise taxes, if any), fees and assessments
associated therewith, any and all costs, expenses or fees payable to any
director or trustee of the General Partners, (ii) to the extent funded by a
General Partner for payment by the Partnership, costs and expenses relating to
any offer or registration of securities by a General Partner the net proceeds
of which are to be contributed or loaned to the Partnership and all statements,
reports, fees and expenses incidental thereto, including underwriting discounts
and selling commissions applicable to any such offer of securities, (iii) costs
and expenses associated with the preparation and filing of any periodic reports
by the General Partners under federal, state or local laws or regulations,
including filings with the SEC, (iv) costs and expenses associated with
compliance by the General Partners with laws, rules and regulations promulgated
by any regulatory body, including the SEC, (v) costs and expenses incurred,
directly or indirectly, by any General Partner pursuant to a settlement or
other agreement by and between Leonard M. Ross and SCG and (vi) all other costs
of the General Partners incurred in the course of their business on behalf of
the Partnership including, but not limited to, any indemnification obligations
of a General Partner (other than indemnification pursuant to Section 9.1 and
9.2 of the Formation Agreement).
"Affected Gain" shall have the meaning set forth in
Section 6.1(c)(ii) hereof.
-2-
<PAGE> 8
"Affiliate" shall mean, with respect to any Partner
(or as to any other Person the Affiliates of whom are relevant for purposes of
any of the provisions of this Agreement): (a) any member of the Immediate
Family of such Partner or Person; (b) any trustee or beneficiary of a Partner
which is a trust; (c) any trust for the benefit of any Person referred to in
the preceding clauses (a) and (b); or (d) any Entity which directly or
indirectly through one or more intermediaries, Controls, is Controlled by, or
is under common Control with, any Partner or Person referred to in the
preceding clauses (a) through (c).
"Agreement" shall mean this Limited Partnership
Agreement, as amended, modified, supplemented or restated from time to time, as
the context requires.
"Articles of Incorporation" shall mean the Amended
and Restated Article of Incorporation of the Managing General Partner, as the
same may be amended, modified, supplemented, restated or superseded from time
to time.
"Audited Financial Statements" shall mean financial
statements (balance sheet, statement of income, statement of partners equity
and statement of cash flows) prepared in accordance with GAAP and accompanied
by an independent auditor's report containing an opinion thereon.
"Bankruptcy" shall mean, with respect to any Person:
(a) the commencement by such Person of any petition, case or proceeding seeking
relief under any provision or chapter of the federal Bankruptcy Code or any
other federal or state law relating to insolvency, bankruptcy or
reorganization; (b) an adjudication that such Person is insolvent or bankrupt;
(c) the entry of an order for relief under the federal Bankruptcy Code with
respect to such Person; (d) the filing of any such petition or the commencement
of any such case or proceeding against such Person, unless such petition and
the case or proceeding initiated thereby are dismissed within ninety (90) days
from the date of such filing; or (e) the filing of an answer by such Person
admitting the allegations of any such petition.
"Business Day" shall mean any day that is not a
Saturday, Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
"Capital Account" shall mean, as to any Partner or
holder of Units, a book account maintained in accordance with the following
provisions:
(a) to each Partner's or holder of Unit's Capital
Account there shall be credited the amount of cash contributed by the Partner
or holder, the initial Gross Asset value of any other asset contributed by such
Partner or holder to the capital of the Partnership (net of liabilities secured
by contributed property that the Partnership assumes or takes subject to), such
Partner's or holder's distributive share of Net Income and any other items of
income or gain allocated to such Partner or holder, the amount of any
Partnership liabilities assumed by the Partner or holder or secured by
distributed assets that such Partner
-3-
<PAGE> 9
or holder takes subject to and any other items in the nature of income or gain
that are allocated to such Partner or holder pursuant to Section 6.1 hereof; and
(b) to each Partner's or holder of Unit's Capital
Account there shall be debited the amount of cash distributed to the Partner or
holder, the Gross Asset Value of any Partnership asset distributed to such
Partner or holder pursuant to any provision of this Agreement, such Partner's
or holder's distributive share of Net Losses and any other items in the nature
of expenses or losses that are allocated to such Partner pursuant to Section
6.1 hereof.
In the event that a Partner's Partnership Interest or a holder of Unit's Units
or portion thereof is transferred within the meaning of Section
1.704-1(b)(2)(iv)(f) of the Regulations, the transferee shall succeed to the
Capital Account of the transferor to the extent that it relates to the
Partnership Interest, Units or portion thereof so transferred. In the event
that the Gross Asset Values of Partnership assets are adjusted, as contemplated
in paragraph (b) or (c) of the definition of "Gross Asset Value," the Capital
Accounts of the Partners and holders of Units shall be adjusted to reflect the
aggregate net adjustments as if the Partnership sold all of its properties for
their fair market values and recognized gain or loss for federal income tax
purposes equal to the amount of such aggregate net adjustment. This definition
of Capital Accounts is intended to comply with the maintenance of capital
account provisions of Section 1.704-1(b) of the Regulations and shall be
interpreted and applied in a manner consistent therewith.
"Capital Contribution" shall mean, with respect to
any Partner, the amount of cash and the initial Gross Asset Value of any
Contributed Property (net of liabilities to which such property is subject).
"Certificate" shall mean the Certificate of Limited
Partnership establishing the Partnership, as filed with the office of the
Delaware Secretary of State, as amended from time to time in accordance with
the terms of this Agreement and the Act.
"Code" shall mean the Internal Revenue Code of 1986,
as amended and in effect from time to time, as interpreted by the applicable
regulations thereunder. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of future law.
"Commission" shall mean the Nevada Gaming Commission.
"Consent of the Limited Partners" shall mean the
written consent of a Majority-In-Interest of the Limited Partners given in
accordance with Section 11.2 hereof, which Consent shall be obtained prior to
the taking of any action for which it is required by this Agreement and may be
given or withheld by a Majority-In-Interest of the Limited Partners, unless
otherwise expressly provided herein, in their sole and absolute discretion.
-4-
<PAGE> 10
"Consent of the Starwood Partners" shall mean the
written consent of Starwood Partners who hold in the aggregate more than fifty
(50) percent of the Percentage Interest then allocable to and held by the
Starwood Partners given in accordance with Section 11.2 hereof, which consent
shall be obtained prior to the taking of any action for which it is required by
this Agreement and may be given or withheld by each Starwood Partner in its
sole and absolute discretion.
"Contributed Property" shall mean any property or
other asset listed on Exhibit B (as such exhibit may be amended from time to
time), in such form as may be permitted by the Act, but excluding cash,
contributed or deemed contributed to the Partnership with respect to the
Partnership Interest held by each Partner.
"Control" shall mean the ability, whether by the
direct or indirect ownership of shares or other equity interests, by contract
or otherwise, to elect a majority of the directors of a corporation, to select
the managing partner of a partnership, or otherwise to select, or have the
power to remove and then select, a majority of those persons exercising
governing authority over an Entity. In the case of a limited partnership, the
sole general partner, all of the general partners to the extent each has equal
management control and authority, or the managing general partner or managing
general partners thereof shall be deemed to have control of such partnership
and, in the case of a trust, any trustee thereof or any Person having the right
to select any such trustee shall be deemed to have control of such trust.
"Depreciation" shall mean, with respect to any asset
of the Partnership for any fiscal year or other period, the depreciation or
amortization, as the case may be, allowed or allowable for federal income tax
purposes in respect of such asset for such fiscal year or other period, except
that if the Gross Asset Value of an asset differs from its adjusted tax basis
for federal income tax purposes at the beginning of such fiscal year or other
period, Depreciation shall be an amount that bears the same ratio to such
beginning book value as the federal income tax depreciation, amortization or
other cost recovery deduction for such fiscal year or other period bears to
such beginning adjusted tax basis and if such adjusted tax basis is zero, the
Depreciation shall be based on the method of depreciation, amortization or
other cost recovery deduction utilized in preparing the financial statements of
the Partnership.
"Entity" shall mean any general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, real estate investment trust or association.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time and as interpreted by the
applicable regulations thereunder (or any corresponding provisions of
succeeding laws and regulations).
"Exchange Rights Agreement" shall mean that certain
Exchange Rights Agreement by and among Hotel Investors Trust, Hotel Investors
Corporation and Starwood Capital Group, L.P., dated as of the date hereof.
-5-
<PAGE> 11
"Formation Agreement" shall mean that certain
Formation Agreement by and among Hotel Investors Trust, Hotel Investors
Corporation, Starwood Capital Group, L.P., Berl Holdings, L.P., Woodstar
Partners I, L.P., Starwood-Apollo Hotel Partners VIII, L.P., Starwood-Apollo
Hotel Partners IX, L.P., Starwood-Nomura Hotel Investors, L.P., Starwood/Wichita
Investors, L.P., and Starwood-Huntington Partners, L.P., and dated as of
November 11, 1994, and any amendments or modifications thereof or side letters
thereto.
"GAAP" shall mean generally accepted accounting
principles in effect from time to time.
"General Partners" shall mean those Persons listed
under the heading "General Partners" on the signature pages hereto in their
respective capacities as general partners of the Partnership, their permitted
successors or assigns as general partners hereof, and any Person who, at the
time of reference thereto, is a general partner of the Partnership. Unless the
context clearly indicates to the contrary, the term "General Partner" shall
include the Managing General Partner.
"Gross Asset Value" shall mean, with respect to any
asset of the Partnership, such asset's adjusted basis for federal income tax
purposes, except as follows:
(a) the initial Gross Asset Value of any
asset contributed by a Partner to the Partnership shall be the gross fair
market value of such asset at the time of its contribution as reasonably
determined by the Managing General Partner and the contributing Partner;
(b) the Gross Asset values of all
Partnership assets shall be adjusted to equal their respective gross fair
market values, as reasonably determined by the Managing General Partner,
immediately prior to the following events:
(i) a Capital Contribution (other
than a de minimis Capital Contribution) to the Partnership by a new or existing
Partner as consideration for a Partnership Interest;
(ii) the distribution by the
Partnership to a Partner of more than a de minimis amount of Partnership
property as consideration for the redemption of a Partnership Interest;
(iii) the liquidation of the
Partnership within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations; and
(iv) any other event as to which the
Managing General Partner reasonably determines that an adjustment is necessary
or appropriate to reflect the relative economic interests of the Partners;
-6-
<PAGE> 12
(c) the Gross Asset Values of
Partnership assets distributed to any Partner shall be the gross fair market
values of such assets as reasonably determined by the Managing General Partner
as of the date of distribution; and
(d) the Gross Asset Values of
Partnership assets shall be increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Sections 734(b) or 743(b) of
the Code, but only to the extent that such adjustments are taken into account
in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations; provided, however, that Gross Asset Values shall not be adjusted
pursuant to this paragraph to the extent that the Managing General Partner
reasonably determines that an adjustment pursuant to paragraph (b) above is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of computing
Net Income and Net Loss. Any adjustment to the Gross Asset Values of
Partnership property shall require an adjustment to the Partner's Capital
Accounts.
"HICN" shall mean Hotel Investors Corporation of
Nevada, a Nevada corporation.
"HICN Partnership" shall have the meaning providing in
Section 4.1(f) hereof.
"HIT" shall mean Hotel Investors Trust, a Maryland
real estate investment trust.
"Immediate Family" shall mean, with respect to any
Person, such Person's spouse (then current or former), parents, parents-in-law,
descendants, brothers and sisters (whether by whole or half-blood), first
cousins, brothers-in-law and sisters-in-law (whether by whole or half-blood),
ancestors and lineal descendants.
"Indemnitee" shall mean any Person who is, or at any
time on or after December 15, 1994 was, a (i) General Partner, (ii) employee,
trustee, director, officer, stockholder or Liquidating Trustee of the
Partnership or a General Partner or (iii) member of the Management Committee.
"Lien" shall mean any liens, security interests,
mortgages, deeds of trust, pledges, options, rights of first offer or first
refusal and any other similar encumbrances of any nature whatsoever.
"Limited Partner Representative" shall have the
meaning set forth in Section 10.6 hereof.
-7-
<PAGE> 13
"Limited Partners" shall mean those Persons listed
under the heading "Limited Partners" on the signature page hereto in their
respective capacities as limited partners of the Partnership, their permitted
successors or assigns as limited partners hereof, and any Person who, at the
time of reference thereto, is a limited partner of the Partnership.
"Liquidating Trustee" shall mean such individual or
Entity which is selected as the Liquidating Trustee hereunder by the Managing
General Partner, which individual or Entity may include the Managing General
Partner or an Affiliate of the Managing General Partner, provided that such
Liquidating Trustee agrees in writing to be bound by the terms of this
Agreement. The Liquidating Trustee shall be empowered to give and receive
notices, reports and payments in connection with the dissolution, liquidation
and/or winding up of the Partnership and shall hold and exercise such other
rights and powers granted to the Managing General Partner herein or under the
Act as are necessary or required to conduct the winding-up and liquidation of
the Partnership's affairs and to authorize all parties to deal with the
Liquidating Trustee in connection with the dissolution, liquidation and/or
winding-up of the Partnership.
"Major Decisions" shall have the meaning set forth in
Section 7.2 hereof.
"Majority-In-Interest of the General Partners" shall
mean General Partner(s) who hold in the aggregate more than fifty (50) percent
of the Percentage Interests then allocable to and held by the General Partners,
as a class, including any Partnership Interests acquired by any Person
controlled by a General Partner, or any person holding as a nominee of a
General Partner or any Person controlled by a General Partner.
"Majority-In-Interest of the Limited Partners" shall
mean Limited Partner(s) who hold in the aggregate more than fifty (50) percent
of the Percentage Interests then allocable to and held by the Limited Partners,
as a class (but excluding any Partnership Interests acquired by the General
Partner, or any Person holding as a nominee of a General Partner or any Person
controlled by a General Partner).
"Management Committee" shall mean Barry S.
Sternlicht, Steven Robert Goldman, Bruce M. Ford and such other persons as they
may appoint.
"Managing General Partner" shall mean Hotel Investors
Corporation, a Maryland corporation, its duly admitted successors and assigns
as managing general partner of the Partnership at the time of reference
thereto.
"Material Asset" shall mean an asset or assets
comprising twenty-five (25) percent or more of the book value of the assets of
the Partnership.
"Minimum Gain Attributable to Partner Nonrecourse
Debt" shall mean "partner nonrecourse debt minimum gain" as determined in
accordance with Section 1.704-2(i)(2) of the Regulations.
-8-
<PAGE> 14
"Net Cash Flow" shall mean, with respect to any
fiscal period of the Partnership, the excess, if any, of "Receipts" over
"Expenditures." For purposes hereof, the term "Receipts" means the sum of all
cash receipts of the Partnership from all sources for such period and any
amounts held as reserves as of the last day of such period which the Managing
General Partner reasonably deems to be in excess of reserves as determined
below. The term "Expenditures" means the sum of (a) all cash expenditures of
the Partnership for any purpose, including operating expenses and capital
expenditures for such period, (b) the amount of all payments of principal,
premium, if any, and interest on account of any indebtedness of the
Partnership, and (c) such additions to cash reserves as of the last day of such
period as the Managing General Partner deems necessary or appropriate for any
capital, operating or other expenditure, including, without limitation,
contingent liabilities; but the term "Expenditures" shall not include amounts
paid from cash reserves previously established by the Partnership.
"Net Income" or "Net Loss" shall mean, for each
fiscal year or other applicable period, an amount equal to the Partnerships's
net income or loss for such year or period as determined for federal income tax
purposes by the Accountants, determined in accordance with Section 703(a) of
the Code (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a) of the Code shall
be included in taxable income or loss), with the following adjustments: (a) by
including as an item of gross income any tax-exempt income received by the
Partnership; (b) by treating as a deductible expense any expenditure of the
Partnership described in Section 705(a)(2)(B) of the Code (including amounts
paid or incurred to organize the Partnership (unless an election is made
pursuant to Section 709(b) of the Code) or to promote the sale of interests in
the Partnership and by treating deductions for any losses incurred in
connection with the sale or exchange of Partnership property disallowed
pursuant to Section 267(a)(1) or Section 707(b) of the Code as expenditures
described in Section 705(a)(2)(B) of the Code); (c) in lieu of depreciation,
depletion, amortization and other cost recovery deductions taken into account
in computing total income or loss, there shall be taken into account
Depreciation; (d) gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Gross Asset Value of such
property rather than its adjusted tax basis; (e) in the event of an adjustment
of the Gross Asset Value of any Partnership asset which requires that the
Capital Accounts of the Partnership be adjusted pursuant to Sections
1.704-1(b)(2)(iv)(e), (f) and (m) of the Regulations, the amount of such
adjustment is to be taken into account as additional Net Income or Net Loss
pursuant to Section 6.1 hereof; and (f) excluding any items specially allocated
pursuant to Section 6.1(b) hereof.
"Nonrecourse Deductions" shall have the meaning set
forth in Sections 1.704-2(b)(1) and (c) of the Regulations and shall be
determined in accordance with Section 1.704-2(c) of the Regulations.
"Nonrecourse Liabilities" shall have the meaning set
forth in Section 1.704-2(b)(3) of the Regulations.
-9-
<PAGE> 15
"Paired Shares" shall mean one Share and one common
share of beneficial interest of HIT that are subject to a pairing agreement
between the Managing General Partner and HIT.
"Partner Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Deductions" shall have the
meaning set forth in Section 1.704-2(i)(2) of the Regulations and the amount of
Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt shall
be determined in accordance with the rules of Section 1.704-2(i) of the
Regulations.
"Partners" shall mean the General Partners and the
Limited Partners, their duly admitted successors or assigns or any Person who
is a partner of the Partnership at the time of reference thereto.
"Partnership" shall mean the limited partnership
formed under the Act pursuant to this Agreement and any successor thereto.
"Partnership Interest" shall mean the ownership
interest of a Partner in the Partnership from time to time, including each
Partner's Percentage Interest and such Partner's Units.
"Partnership Minimum Gain" shall have the meaning set
forth in Section 1.704-2(b)(2) of the Regulations and the amount of Partnership
Minimum Gain (and any net increase or decrease thereof) for a fiscal year or
other period shall be determined in accordance with the rules of Section
1.704-2(d) of the Regulations.
"Partnership Record Date" means the record date
established by the Managing General Partner for distribution of Net Cash Flow
pursuant to Section 6.2 hereof, which record date shall be the same as the
record date established by the Managing General Partner for distribution to its
shareholders of some or all of its portion of such distribution.
"Percentage Interest" shall mean, with respect to any
Partner, the percentage ownership interest of such Partner in such items of the
Partnership as to which the term "Percentage Interests" is applied in this
Agreement, as provided in Section 4.2 hereof.
"Person" shall mean any natural person or Entity.
"Property" shall mean any property acquired by or
contributed to the Partnership.
"Purchase Rights" shall have the meaning set forth in
Section 4.5 hereof.
-10-
<PAGE> 16
"Realty Partnership" shall mean SLT Realty Limited
Partnership, a Delaware limited partnership.
"Registration Rights Agreement" shall mean that
certain Registration Rights Agreement by and among Hotel Investors Trust, Hotel
Investors Corporation and Starwood Capital Group, L.P., and dated as of the
date hereof. No provision of this Agreement shall be interpreted as granting
any Partner or holder of Units registration rights or any rights or interest in
or to the Registration Rights Agreement.
"Regulations" shall mean the income tax regulations
promulgated under the Code, as such regulations may be amended from time to
time (including corresponding provisions of succeeding regulations).
"Regulatory Allocations" shall have the meaning set
forth in Section 6.1(b)(viii) hereof.
"REIT" shall mean a real estate investment trust as
defined in Section 856 of the Code.
"REIT Requirements" shall mean the requirements for
SLT to: (a) qualify as a REIT under the Code and Regulations; (b) avoid any
federal income or excise tax liability; (c) retain its status as grandfathered
pursuant to Section 132(c)(3) of the Deficit Reduction Act of 1984; and (d)
retain the benefits of that certain private letter ruling issued by the
Internal Revenue Service to SLT dated as of January 4, 1980. "REIT
Requirements" shall also include the ownership limitation provisions set forth
in Article VI of the Declaration of Trust of HIT, dated August 25, 1969, as
amended and restated as of June 6, 1988, and in TENTH Article of the Articles
of Incorporation. Clauses (a) and (b) of this definition shall not apply prior
to January 1, 1995.
"Restricted Entity" shall mean any "employee benefit
plan" as defined in and subject to ERISA, any "plan" as defined in and subject
to Section 4975 of the Code, or any entity any portion or all of the assets of
which are deemed pursuant to United States Department of Labor Regulation
Section 2510.3-101 or otherwise pursuant to ERISA or the Code to be, for any
purpose of ERISA or Section 4975 of the Code, assets of any such "employee
benefit plan" or "plan" which invests in such entity.
"Rights" shall mean the rights of Limited Partners
set forth in the Exchange Rights Agreement and the Registration Rights
Agreement. No provision of this Agreement shall be interpreted as granting any
Partner or holder of Units any Rights or any rights or interest in or to the
Exchange Rights Agreement or the Registration Rights Agreement.
"SCG" shall mean Starwood Capital Group, L.P., a
Delaware limited partnership.
-11-
<PAGE> 17
"SEC" shall mean the United States Securities and
Exchange Commission.
"Section 704(c) Tax Items" shall have the meaning set
forth in Section 6.1(c)(iii) hereof.
"Senior Debt" shall mean the indebtedness pursuant to
that certain Credit Agreement among Starwood Lodging Trust and certain
institutional lenders, dated as of January 28, 1993, which indebtedness has
been assumed by the Realty Partnership.
"Shares" shall mean the common stock, par value $0.01
per share, of the Managing General Partner.
"Starwood Partners" shall mean Berl Holdings, L.P.,
Starwood-Apollo Hotel Partners VIII, L.P., Starwood- Apollo Hotel Partners IX,
L.P., Starwood-Nomura Hotel Investors, L.P., Starwood/Wichita Investors, L.P.,
Starwood-Huntington Partners, L.P., Woodstar Partners I, L.P., and, if it
becomes a Limited Partner, Firebird Consolidated Partners, L.P.
"Tax Items" shall have the meaning set forth in
Section 6.1(c)(i) hereof.
"Tax Payment Loan" shall have the meaning set forth in
Section 6.7(a) hereof.
"Units" shall have the meaning set forth in Section
4.1(c) hereof.
"Withholding Tax Act" shall have the meaning set forth
in Section 6.7(a) hereof.
ARTICLE 2
Formation and Business of the Partnership
2.1 Formation. The parties hereto do hereby form a
limited partnership pursuant to the provisions of the Act and upon the terms
and conditions set forth herein. The parties hereto agree that the rights and
liabilities of the Partners shall be as provided herein. The parties hereto
shall immediately execute and deliver all certificates and other documents and
do all filings, recording and publishing and other acts as in the judgment of
the Managing General Partner may be appropriate to comply with all of the
requirements for the formation of a limited partnership under the Act and the
qualification of the Partnership in any jurisdiction in which the Partnership
owns property or conducts business.
-12-
<PAGE> 18
2.2 Name. The name of the Partnership shall be SLC
Operating Limited Partnership, or such other name as shall be chosen from time
to time by the Managing General Partner in its sole and absolute discretion;
provided, however, that the Managing General Partner may not choose the name
(or any derivative thereof) of any Limited Partner without the prior written
consent of such Limited Partner.
2.3 Character of the Business. The purpose of the
Partnership shall be to acquire, hold, own, develop, redevelop, construct,
improve, maintain, operate, manage, sell, lease, rent, transfer, encumber,
mortgage, convey, exchange and otherwise dispose of or deal with hotels and any
other real and personal property of all kinds; to undertake such other
activities as may be necessary, desirable or appropriate to the business of the
Partnership; to engage in such other activities as shall be necessary,
desirable or appropriate to effectuate the foregoing purposes; and to otherwise
engage in any enterprise or business in which a limited partnership may engage
or conduct under the Act. The Partnership shall have all powers necessary,
desirable or appropriate to accomplish the purposes enumerated. In connection
with the foregoing, but subject to the terms and conditions of this Agreement,
the Partnership shall have full power and authority to enter into, perform and
carry out contracts of any kind, to borrow money and to issue evidences of
indebtedness, whether or not secured by Liens, and, directly or indirectly, to
acquire and construct additional Properties necessary or useful in connection
with its business. The character and general nature of the business to be
conducted by the Partnership shall include, but not be limited to, the
operation, management and the conduct of gaming in gaming establishments
located on or within the premises known as the Bourbon Street Hotel and Casino
and the King 8 Gambling Hall and Hotel, located at 120 East Flamingo Road, Las
Vegas, Nevada, and 3330 West Tropicana Avenue, Las Vegas, Nevada, respectively.
2.4 Location of Principal Place of Business. The
location of the principal place of business of the Partnership shall be at
11845 West Olympic Boulevard, Suite 560, Los Angeles, California 90064, or such
other location as shall be selected from time to time by the Managing General
Partner in its sole and absolute discretion; provided, however, that the
Managing General Partner shall notify the Partners of any change in the
location of the principal place of business of the Partnership within thirty
(30) days thereafter.
2.5 Registered Agent and Registered Office. The
registered agent of the Partnership shall be The Corporation Trust Company or
such other Person as the Managing General Partner may select in its sole and
absolute discretion. The registered office of the Partnership in the State of
Delaware shall be c/o The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801 or such other location as the Managing General
Partner may from time to time select in its sole discretion; provided, however,
that the Managing General Partner shall notify the Partners of any change in
the registered office or registered agent of the Partnership within thirty (30)
days thereafter.
-13-
<PAGE> 19
ARTICLE 3
Term
3.1 Commencement. The Partnership's term commenced upon
the filing of the Certificate with the Secretary of State of Delaware on
December 15, 1994.
3.2 Dissolution. The Partnership shall continue until
dissolved and terminated upon the occurrence of the earliest of the following
events:
(a) the death, dissolution, termination,
withdrawal, retirement, expulsion or Bankruptcy of a General Partner, unless
the Partnership's business is continued as provided in Section 9.1 hereof;
(b) the election to dissolve the Partnership made
in writing by the Managing General Partner with the Consent of the Starwood
Partners;
(c) the sale or other disposition of all or
substantially all of the assets of the Partnership unless the Managing General
Partner elects to continue the Partnership business for the purpose of the
receipt and the collection of indebtedness or the collection of any other
consideration to be received in exchange for the assets of the Partnership
(which activities shall be deemed to be part of the winding up of the affairs
of the Partnership);
(d) the entry of a decree of judicial dissolution
of the Partnership pursuant to the provisions of the Act, which decree is final
and not subject to appeal; or
(e) December 31, 2094.
ARTICLE 4
Capital Contributions
4.1 Capital Contributions; Units.
(a) The Partners shall make or cause to be made
the Capital Contributions described in Exhibit B hereto. The Partners shall
have the initial Percentage Interests in the Partnership as set forth in
Exhibit A which Percentage Interests shall be adjusted to the extent necessary
to reflect properly exchanges, redemptions or conversions of Partnership
Interests, Capital Contributions, the issuance of additional Partnership
Interests or any other event having an effect on a Partner's Percentage
Interest, in each case to the extent permitted by and in accordance with this
Agreement. Except to the extent specifically set forth in this Agreement with
respect to the General Partners, the Partners shall have no obligation to make
any additional Capital Contributions or loans to the Partnership, even if
-14-
<PAGE> 20
the failure to do so could result in the Bankruptcy or insolvency of the
Partnership or any other adverse consequence to the Partnership.
(b) The General Partners shall, from time to
time, contribute cash or Property to the Partnership such that the aggregate
Percentage Interests of all General Partners shall at all times be at least one
(1) percent and the aggregate Capital Account balances of all General Partners
shall be at least the lesser of $500,000 or one (1) percent of the total
positive Capital Account balances for the Partnership.
(c) The interest of a Partner (or an assignee of
a Partner) in capital, allocations of Net Income, Net Losses and distributions
shall be evidenced by the issuance to such Partner (or assignee) of one or more
"Units." The aggregate total of all Units outstanding and the ownership of
Units by each Partner as of the date of this Agreement, are as set forth on
Exhibit A hereto.
(d) From time to time, the Managing General
Partner may cause the Partnership to issue additional Partnership Interests to
existing or newly-admitted Partners in exchange for additional Capital
Contributions (including Capital Contributions pursuant to Section 4.1(b)). If
the Managing General Partner contributes to the Partnership the net proceeds to
the Managing General Partner from any offering or sale of Paired Shares
(including, without limitation, any issuance of Paired Shares pursuant to the
exercise of options, warrants, convertible securities, or similar rights to
acquire Paired Shares), the Partnership shall issue to the Managing General
Partner Units equal in number to the number of Paired Shares issued in such
offering.
(e) The Managing General Partner is hereby
authorized to cause the Partnership to issue to the Managing General Partner
Partnership Interests in one or more classes or one or more series of any of
such classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties, including rights, powers
and duties senior to the then-existing Partnership Interests and Units, as
shall be determined by the Managing General Partner in its sole and absolute
discretion, including (i) the allocation of items of Partnership income, gain,
loss, deduction and credit to each such class or series of Partnership
Interests and (ii) the rights of each such class or series of Partnership
Interests to share in Partnership distributions (including liquidating
distributions); provided, however, that no such additional Partnership
Interests shall be issued to the Managing General Partner unless (x) the
additional Partnership Interests are issued in connection with an issuance of
shares of the Managing General Partner, which shares have designations,
preferences and other rights, all such that the economic interests of such
shares are substantially similar to the designations, preferences and other
rights of the additional Partnership Interests issued to the Managing General
Partner in accordance with this Section 4.1(e) and (y) the Managing General
Partner contributes to the Partnership an amount equal to the net proceeds
received by the Managing General Partner in connection with the issuance of
such shares.
-15-
<PAGE> 21
(f) As of the date first above written, HICN
shall be issued the number of Units set forth on Exhibit C hereto. On or
before December 31, 1995, HICN or the Managing General Partner, as appropriate,
shall make contributions to the Partnership described in Section 6.3 of the
Formation Agreement. At the election of the Managing General Partner, the
assets and liabilities of HICN may be contributed to a limited partnership with
HICN as the general partner holding a one (1) percent interest and the
Partnership as the limited partner holding a ninety-nine (99) percent interest
(the "HICN Partnership").
(g) In the event of any change in the outstanding
number of Paired Shares by reason of any share dividend, split, reverse split,
recapitalization, merger, consolidation or combination, the number of Units
held by each Partner (or assignee) shall be proportionately adjusted such that,
to the extent possible, one Unit remains the equivalent of one Share without
dilution. It is the intent of the Partners that, to the extent possible, the
number of Units held by the General Partner shall at all times equal the number
of issued and outstanding Paired Shares.
(h) No fractional Units shall remain outstanding.
Any fractional Units that, but for this Section 4.1(h), would otherwise be
outstanding shall be redeemed by the Partnership or, at the Managing General
Partner's election, acquired by the Managing General Partner, for cash equal to
the fair market value of such fractional Unit.
4.2 Percentage Interests. The Percentage Interest of a
Partner shall be equal to the percentage obtained by dividing (a) the number of
Units held by such Partner (including Units held by assignees of such Partner
who have not been admitted as Partners) by (b) the total number of issued and
outstanding Units.
4.3 Purchase Rights. If the Managing General Partner
grants, issues or sells any options, convertible securities or rights to
purchase shares, warrants, or other property pro rata to the record holders of
Shares (collectively, "Purchase Rights"), then the Partners shall, to the
extent practicable and consistent with the other provisions of this Agreement,
be entitled to acquire from the Partnership interests in the Partnership that
are substantially similar in amount, tone and tenor to the Purchase Rights to
which such Partners would be entitled if such Partners had converted their
Partnership Interests into Paired Shares immediately prior to the grant, issue
or sale of the Purchase Rights.
4.4 Redemption. If the Managing General Partner shall
redeem any of its outstanding Shares, the Partnership shall concurrently
therewith redeem an equal number of Units held by the Managing General Partner
for the same price as paid by the Managing General Partner for the redemption
of such Shares. Similar redemptions of interests of a General Partner in the
Partnership in the Partnership shall occur if any other outstanding securities
of a General Partner are redeemed or otherwise retired.
4.5 No Third Party Beneficiaries. No creditor or other
third party shall have the right to enforce any right or obligation of any
Partner to make Capital Contributions
-16-
<PAGE> 22
or loans or to pursue any other right or remedy hereunder or at law or in
equity, it being understood and agreed that the provisions of this Agreement
shall be solely for the benefit of, and may be enforced solely by, the parties
hereto and their respective successors and assigns. None of the rights or
obligations of the Partners herein set forth to make Capital Contributions or
loans to the Partnership shall be deemed an asset of the Partnership for any
purpose by any creditor or other third party, nor may such rights or obligations
be sold, transferred or assigned by the Partnership or pledged or encumbered by
the Partnership to secure any debt or other obligation of the Partnership or of
any of the Partners.
4.6 No Interest on or Return of Capital Contribution. No
Partner shall be entitled to interest on its Capital Contribution or Capital
Account. Except as provided herein or by law, no Partner shall have any right
to demand or receive the return of its Capital Contribution.
ARTICLE 5
Indemnification
5.1 Indemnification of General Partners.
(a) To the fullest extent permitted by law, the
Partnership shall and does hereby indemnify an Indemnitee from and against any
and all losses, claims, damages, liabilities, joint or several, expenses
(including reasonable legal fees and expenses), judgments, fines, settlements,
and other amounts arising from any and all claims, demands, actions, suits or
proceedings (including arbitration and mediation proceedings), civil, criminal,
administrative or investigative, that relate, directly or indirectly, to the
formation, business or operations of the Partnership in which any Indemnitee
may be involved, or is threatened to be involved, as a party, witness or
otherwise, by reason of the fact that such Person was an Indemnitee, whether or
not the same shall proceed to judgment or be settled or otherwise be brought to
a conclusion, except only if and to the extent that it is finally adjudicated
that the act or omission of the Indemnitee was material to the matter giving
rise to the proceeding and was committed with fraud, gross negligence or
willful misconduct. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the Indemnitee did not meet the
requisite standard of conduct set forth in this Section 5.1(a). Any
indemnification pursuant to this Section 5.1 shall be made only out of the
assets of the Partnership and no Partner shall have any personal liability
therefor. The provisions of this Section 5.1 are for the benefit of the
Indemnitees, their heirs, successors, assigns, personal representatives and
administrators, and shall not be deemed to create any rights for the benefit of
any other Persons. The foregoing notwithstanding, the General Partners shall
not be entitled to indemnification from the Partnership with respect to matters
provided for in Sections 9.1 and 9.2 of the Formation Agreement.
(b) Reasonable expenses incurred by an Indemnitee
who is a party or witness in a proceeding shall be paid or reimbursed by the
Partnership in advance of the
-17-
<PAGE> 23
final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership, as
authorized in this Section 5.1, has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount paid or reimbursed if it
shall ultimately be determined that such Indemnitee is not entitled to be
indemnified hereunder.
(c) The indemnification provided by this Section
5.1 shall be in addition to any other rights to which an Indemnitee may be
entitled under any agreement, as a matter of law or otherwise, and shall
continue as to an Indemnitee who has ceased to serve in such capacity. The
Partnership shall purchase and maintain insurance, on behalf of the
Indemnitees, against any liability that may be asserted against or expenses
that may be incurred by such Person in connection with the Partnership's
activities, regardless of whether the Partnership would have the power to
indemnify such Person against such liability under the provisions of this
Agreement. An Indemnitee shall not be denied indemnification in whole or in
part under this Section 5.1 solely because the Indemnitee had an interest in
the transaction with respect to which the indemnification applies.
(d) For purposes of this Section 5.1, the
Partnership shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by it of its
duties to the Partnership also imposes duties on, or otherwise involves
services by, it to the plan or participants or beneficiaries of the plan;
excise taxes assessed on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines within the meaning of this
Section 5.1; and actions taken or omitted by the Indemnitee with respect to an
employee benefit plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participants and beneficiaries of
the plan shall be deemed to be for a purpose which is not opposed to the best
interests of the Partnership.
5.2 Indemnification of Limited Partners. From and after
the date hereof, the Partnership shall indemnify and hold harmless each Limited
Partner, its Affiliates, employees, officers, directors and agents against and
from all liability, demands, claims, actions or causes of action, assessments,
losses, fines, penalties, costs, damages and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and expenses) sustained
or incurred by such Limited Partner or Affiliate or any assignee or successor
thereof (including, without limitation, any permitted assignee of a Limited
Partner under Article 9 hereof) as a result of or arising out of any action,
suit or proceeding (including mediation and arbitration proceedings) (a)
arising out of or relating to the operation of the Partnership's business or
the Limited Partner being a Partner in the Partnership (excluding,
specifically, actions, suits or proceedings arising out of actual or alleged
breaches of a Partner's representations, warranties or covenants hereunder or
pursuant to the Formation Agreement or arising out of acts by a Limited Partner
other than in its capacity as such) and (b) naming a Limited Partner or any of
its Affiliates as a party to such proceeding. Any indemnification pursuant to
this Section 5.2 shall be made only out of the assets of the Partnership and no
Partner shall have any personal liability therefor. The provisions of this
-18-
<PAGE> 24
Section 5.2 are for the benefit of the Limited Partners, their Affiliates,
employees, officers, directors and agents, and shall not be deemed to create
any rights for the benefit of any other Persons.
5.3 Notice of Claims. If any Person believes that it is
entitled to indemnification under this Article 5, such Person shall so notify
the Partnership promptly in writing describing such claim for indemnification,
the amount thereof, if known, and the method of computation, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such claim shall have occurred; provided,
however, that the omission by such indemnified party to give notice as provided
herein shall not relieve the Partnership of its indemnification obligation
under this Article 5 except to the extent that the Partnership is materially
damaged as a result of such failure to give notice. If any action at law or
suit in equity is instituted by or against a third party with respect to which
any of the Persons entitled to indemnification under this Article 5 intends to
make a claim for indemnification under this Article 5, any such Person shall
promptly notify the Partnership of such action or suit. Any Person entitled to
indemnification hereunder shall use reasonable efforts to minimize the amount
of any claim for indemnification hereunder.
5.4 Third Party Claims. In the event of any claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceeding by a third party, the indemnified Person shall give such
notice thereof to the Partnership not later than twenty (20) business days
prior to the time any response to the asserted claim is required, if possible,
and in any event within fifteen (15) days following the date such indemnified
Person has actual knowledge thereof; provided, however, that the omission by
such indemnified Person to give notice as provided herein shall not relieve the
Partnership of its indemnification obligation under this Article 5 except to
the extent that the Partnership is materially damaged as a result of such
failure to give notice. In the event of any such claim for indemnification
resulting from or in connection with a claim or legal proceeding by a third
party, the Partnership may, at its sole cost and expense, assume the defense
thereof; provided, however, that counsel for the Partnership, who shall conduct
the defense of such claim or legal proceeding, shall be reasonably satisfactory
to the indemnified Person; and provided, further, that if the defendants in any
such actions include both the indemnified Persons and the Partnership and the
indemnified Persons shall have reasonably concluded that there may be legal
defenses or rights available to them which have not been waived and are in
actual or potential conflict with those available to the Partnership, the
indemnified Persons shall have the right to select one law firm reasonably
acceptable to the Partnership to act as separate counsel, on behalf of such
indemnified Persons, at the expense of the Partnership. Unless the indemnified
Persons are represented by separate counsel pursuant to the second proviso of
the immediately preceding sentence, if the Partnership assumes the defense of
any such claim or legal proceeding, it shall not consent to entry of any
judgment, or enter into any settlement, that (a) is not subject to
indemnification in accordance with the provisions in this Article 5, (b)
provides for injunctive or other non-monetary relief affecting the indemnified
Persons or (c) does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such indemnified Persons of a release from all
liability with respect to such claim or legal proceeding, without the prior
written consent of the
-19-
<PAGE> 25
indemnified Persons (which consent, in the case of clauses (b) and (c), shall
not be unreasonably withheld or delayed); and provided, further, that, unless
the indemnified Persons are represented by separate counsel pursuant to the
second proviso of the immediately preceding sentence, the indemnified Persons
may, at their own expense, participate in any such proceeding with the counsel
of their choice without any right of control thereof. So long as the
Partnership is in good faith defending such claim or proceeding, the indemnified
Persons shall not compromise or settle such claim or proceeding without the
prior written consent of the Partnership, which consent shall not be
unreasonably withheld or delayed. If the Partnership does not assume the
defense of any such claim or litigation in accordance with the terms hereof, the
indemnified Persons may defend against such claim or litigation in such manner
as they may deem appropriate, including, without limitation, settling such claim
or litigation (after giving prior written notice of the same to the Partnership
and obtaining the prior written consent of the Partnership, which consent shall
not be unreasonably withheld or delayed) on such terms as the indemnified
Persons may deem appropriate, and the Partnership will promptly indemnify the
indemnified Persons in accordance with the provisions of this Article 5.
5.5 Indemnification Pursuant to Formation Agreement. If
any obligation pursuant to the indemnification provisions of Article IX of the
Formation Agreement would otherwise require the indemnifying Person to make a
cash payment to the indemnified Person then, subject to Article 9 hereof, in
lieu of making all or any portion of such cash payment, the indemnifying Person
may transfer Units of equivalent value to the indemnified Person. For purposes
of the preceding sentence, the value of a Unit shall be treated as equal to
five (5) percent of the average closing price of a Paired Share for the ten
(10) trading day period commencing fifteen (15) trading days prior to the date
the indemnifying Person would otherwise be required to pay cash to the
indemnified Person. Indemnification through the transfer of Units pursuant to
this Section 5.5 may only made if (a) indemnification through the transfer of
an equal number of units of the Realty Partnership is being made pursuant to
Section 5.5 of the Limited Partnership Agreement of SLT Realty Limited
Partnership or (b) the indemnifying Person otherwise makes arrangements for the
transfer to the indemnified Person (or its designee) of an equal number of
units of the Realty Partnership.
ARTICLE 6
Allocations, Distributions and Other Tax and Accounting Matters
6.1 Allocations. The Net Income, Net Loss and other
Partnership items shall be allocated pursuant to the provisions of this Section
6.1 hereto.
(a) Allocation of Net Income and Net Loss.
(i) Net Income. Except as otherwise
provided herein, Net Income for any fiscal year or other applicable period
shall be allocated in the following order and priority:
-20-
<PAGE> 26
(A) first, to the General Partners
in accordance with their respective holdings of Units, until the cumulative Net
Income allocated pursuant to this clause (i)(A) for the current and all prior
periods equals the cumulative Net Loss allocated pursuant to the second
sentence of clause (ii) hereof for all prior periods; and
(B) thereafter, the balance of the
Net Income, if any, shall be allocated to the holders of Units in accordance
with their respective holdings of Units.
(ii) Net Loss. Except as otherwise
provided herein, Net Loss of the Partnership for each fiscal year or other
applicable period shall be allocated to the holders of Units in accordance with
their respective holdings of Units. The preceding sentence notwithstanding, to
the extent any Net Loss allocated to a holder would cause such a holder to have
an Adjusted Capital Account Deficit as of the end of the fiscal year to which
such Net Loss relates, such Net Loss shall not be allocated to such holder and
instead shall be allocated to the General Partners in accordance with their
respective holdings of Units.
(b) Special Allocations. Notwithstanding any
provisions of Section 6.1(a) hereof, the following special allocations shall be
made in the following order:
(i) Minimum Gain Chargeback.
Notwithstanding any other provision of this Article 6, if there is a net
decrease in Partnership Minimum Gain for any Partnership fiscal year (except as
a result of conversion or refinancing of Partnership indebtedness, certain
capital contributions or revaluation of the Partnership property as further
outlined in Section 1.704-2(f) of the Regulations), each holder of Units shall
be specially allocated items of Partnership income and gain for such year (and,
if necessary, subsequent years) in an amount equal to that holder's share of
the net decrease in Partnership Minimum Gain as determined under Section
1.704-2(g) of the Regulations. The items to be so allocated shall be
determined in accordance with Section 1.704-2(f) of the Regulations. This
clause (i) is intended to comply with the minimum gain chargeback requirement
in said section of the Regulations and shall be interpreted consistently
therewith. Allocations pursuant to this clause (i) shall be made in proportion
to the respective amounts required to be allocated to each holder of Units
pursuant hereto.
(ii) Minimum Gain Chargeback Attributable
to Partner Nonrecourse Debt. Notwithstanding any other provision of this
Article 6, if there is a net decrease in Minimum Gain Attributable to Partner
Nonrecourse Debt during any fiscal year (other than due to the conversion,
refinancing or other change in the debt instrument causing it to become
partially or wholly nonrecourse, certain capital contributions, or certain
revaluations of Partnership property (as further outlined in Section
1.704-2(i)(4) of the Regulations), each holder of Units shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to the holder's share of the
net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt as
determined under Section 1.704-2(i) of the Regulations. The items to be so
allocated shall be determined in accordance with Sections 1.704-2(i)(4) and
(j)(2) of the Regulations.
-21-
<PAGE> 27
This clause (ii) is intended to comply with the minimum gain chargeback
requirement with respect to Partner Nonrecourse Debt contained in said section
of the Regulations and shall be interpreted consistently therewith. Allocations
pursuant to this clause (ii) shall be made in proportion to the respective
amounts required to be allocated to each holder of Units.
(iii) Qualified Income Offset. In the
event a holder of Units unexpectedly receives any adjustments, allocations or
distributions described in Section 1.704-1(b)(2)(ii) (d)(4), (5), or (6) of the
Regulations, and such holder has an Adjusted Capital Account Deficit, items of
Partnership income and gain shall be specially allocated to such holder in an
amount and manner sufficient to eliminate the Adjusted Capital Account Deficit
as quickly as possible, provided that an allocation pursuant to this Section
6.1(b)(iii) shall be made only if and to the extent that such holder would have
Adjusted Capital Account Deficit after all other allocations provided for in
this Article VI have been tentatively made as if this Section 6.1(b)(iii) were
not in the Agreement. This clause (iii) is intended to constitute a "qualified
income offset" under Section 1.704-1(b)(2)(ii) (d) of the Regulations and shall
be interpreted consistently therewith.
(iv) Gross Income Allocation. In the
event any holder of Units has a deficit Capital Account at the end of any
fiscal year which is in excess of the sum of (x) the amount such holder is
obligated to restore pursuant to any provision of this Agreement, and (y) the
amount such holder is deemed to be obligated to restore pursuant to the
penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations, each such holder shall be specially allocated items of Partnership
income and gain in the amount of such excess as quickly as possible, provided
that an allocation pursuant to this Section 6.1(b)(iv) shall be made only if
and to the extent that such holder would have a Capital Account Deficit in
excess of such sum after all other allocations provided for in this Article 6
have been made as if Section 6.1(b)(iii) hereof and this Section 6.1(b)(iv)
were not in the Agreement.
(v) Nonrecourse Deductions. Nonrecourse
Deductions for any fiscal year or other applicable period shall be allocated to
the holders of Units in accordance with their respective holdings of Units.
For purposes of Section 1.752-3(a) (3) of the Regulations, "excess nonrecourse
liabilities" shall be allocated among the holders of Units in proportion to
their respective holdings of Units.
(vi) Partner Nonrecourse Deductions.
Partner Nonrecourse Deductions for any fiscal year or other applicable period
shall be specially allocated to the holder of Units that bears the economic
risk of loss with respect to the Partner Nonrecourse Debt in respect of which
such Partner Nonrecourse Deductions are attributable (as determined under
Sections 1.704-2(b) (4) and (i) (1) of the Regulations).
(vii) Section 754 Adjustments. To the
extent an adjustment to the adjusted tax basis of any Partnership asset
pursuant to Section 734(b) or Section 743(b) of the Code is required, pursuant
to Section 1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the
Regulations, to be taken into account in determining Capital
-22-
<PAGE> 28
Accounts, the amount of such adjustment to Capital Accounts shall be treated as
an item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to holders of Units in accordance with their interests in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to such sections of the Regulations.
(viii) Curative Allocations. The
Regulatory Allocations shall be taken into account in allocating other items of
income, gain, loss, and deduction among the holders of Units so that, to the
extent possible, the cumulative net amount of allocations of Partnership items
under Sections 6.1(a) and (b) hereof shall be equal to the net amount that
would have been allocated to each holder of Units if the Regulatory Allocations
had not occurred. This subparagraph (viii) is intended to minimize to the
extent possible and to the extent necessary any economic distortions which may
result from application of the Regulatory Allocations and shall be interpreted
in a manner consistent therewith. For purposes hereof, "Regulatory
Allocations" shall mean the allocations provided under this Section 6.1(b)
(other than this subparagraph) and allocations pursuant to the last sentence of
Section 6.1(a)(ii) hereof.
(ix) Varying Interests. In the event the
number of Units outstanding during a fiscal year changes, the allocations
pursuant to this Article 6 shall be made by the General Partner to take such
varying interests into account in any reasonable manner permitted under the
Code and the Regulations.
(c) Tax Allocations.
(i) Generally. Subject to clauses (ii)
and (iii) hereof, items of income, gain, loss, deduction and credit to be
allocated for income tax purposes (collectively, "Tax Items") shall be
allocated among the holders of Units on the same basis as their respective book
items.
(ii) Sections 1245/1250 Recapture. If
any portion of gain from the sale of property is treated as gain which is
ordinary income by virtue of the application of Sections 1245 or 1250 of the
Code ("Affected Gain"), then (A) such Affected Gain shall be allocated among
the holders of Units in the same proportion that the depreciation and
amortization deductions giving rise to the Affected Gain were allocated and (B)
other Tax Items of gain of the same character that would have been recognized,
but for the application of Sections 1245 and/or 1250 of the Code, shall be
allocated away from those holders of Units who are allocated Affected Gain
pursuant to clause (A) so that, to the extent possible, the other holders of
Units are allocated the same amount, and type, of capital gain that would have
been allocated to them had Sections 1245 and/or 1250 of the Code not applied.
For purposes hereof, in order to determine the proportionate allocations of
depreciation and amortization deductions for each fiscal year or other
applicable period, such deductions shall be deemed allocated on the same basis
as Net Income or Net Loss for such respective period.
-23-
<PAGE> 29
(iii) Allocations Respecting Section
704(c) of the Code and Revaluations. Property contributed to the Partnership
shall be subject to Section 704(c) of the Code and the Regulations thereunder
so that, notwithstanding paragraph (b) hereof, taxable gain from disposition,
taxable loss from disposition and tax depreciation with respect to Partnership
property that is subject to Section 704(c) of the Code and/or Section
1.704-1(b) (2) (iv) (f) of the Regulations (collectively "Section 704(c) Tax
Items") shall be allocated on a property by property basis in accordance with
said Code Section and/or the Regulations thereunder, as the case may be. The
allocation of Section 704(c) Tax Items shall be made pursuant to the
"traditional method" of Section 1.704-3(b) of the Regulations. The Managing
General Partner will not specially allocate Tax Items (other than the Section
704(c) Tax Items) to cure for the effect of the ceiling rule. Allocations
pursuant to this Section 6.1(c)(iii) are solely for purposes of federal, state,
and local taxes and shall not affect, or in any way be taken into account in
computing, the Capital Account or share of Net Income, Net Loss, other items,
or distributions of any holder of Units pursuant to any provision of this
Agreement.
(iv) Tax Credits and Other Items. Tax
credits and other items shall be allocated in accordance with the holdings of
Units to the extent permitted under Section 1.704-1(b)(4)(ii) of the
Regulations or other applicable provision of the Code and Regulations and
otherwise in accordance with such provisions.
(v) HICN Partnership. Gross income
equal to the distributions pursuant to the last sentence of Section 6.2 hereof
shall be made to the holders of Units other than the General Partners.
6.2 Distributions. The Managing General Partner shall
cause the Partnership to distribute all, or such portion as the Managing
General Partner may in its reasonable discretion determine, of Net Cash Flow to
the holders of Units who are holders on the Partnership Record Date with
respect to such distribution. All such distributions shall be made pro rata in
accordance with the holders' ownership of Units. The foregoing
notwithstanding, the Partnership shall distribute to the holders of Units other
than the General Partners an amount equal to the distributions by the HICN
Partnership to HICN.
6.3 Books of Account. At all times during the
continuance of the Partnership, the Managing General Partner shall maintain or
cause to be maintained full, true, complete and correct books of account in
accordance with GAAP, using the calendar year as the fiscal and taxable year of
the Partnership. In addition, the Partnership shall keep all records required
to be kept pursuant to the Act.
6.4 Reports. The Managing General Partner shall cause to
be sent to the Partners promptly after receipt of the same from the Accountants
and in no event later than 105 days after the close of each fiscal year of the
Partnership, copies of Audited Financial Statements for the Partnership, or of
the Managing General Partner if such statements are prepared solely on a
consolidated basis with the Managing General Partner, for the immediately
preceding fiscal year of the Partnership. The Partnership shall also cause to
be
-24-
<PAGE> 30
prepared such reports and/or information as are necessary for SLT to determine
its qualification as a REIT and its compliance with REIT Requirements.
6.5 Tax Elections and Returns. All elections required or
permitted to be made by the Partnership under any applicable tax law shall be
made by the Managing General Partner in its sole and absolute discretion,
except that the Managing General Partner shall, if requested by a Partner, file
an election on behalf of the Partnership pursuant to Section 754 of the Code to
adjust the basis of the Partnership property in the case of a transfer of a
Partnership Interest or distribution from the Partnership, including transfers
made in connection with the exercise of the Rights, made in accordance with the
provisions of the Agreement. The Managing General Partner shall cause the
Accountants to prepare and submit to the Limited Partner Representative on or
before July 15th of each year for review drafts of all federal and state income
tax returns of the Partnership. If the Limited Partner Representative
determines that any modifications to the tax returns of the Partnership should
be considered, the Limited Partner Representative shall, within fifteen (15)
days following receipt of such tax returns from the Accountants or the Managing
General Partner, indicate to the Accountants or to the Managing General Partner
the suggested revisions to the tax returns, which returns shall be resubmitted
to the Limited Partner Representative for its review (but not approval). The
Limited Partner Representative shall complete their review of the resubmitted
returns within ten (10) days after receipt thereof from the Accountants or the
Managing General Partner. The Managing General Partner shall consult in good
faith with the Limited Partner Representative regarding any proposed
modifications to the tax returns of the Partnership. The Managing General
Partner shall be responsible for preparing and filing all federal and state tax
returns for the Partnership and furnishing copies thereof to the Partners,
together with required Partnership schedules showing allocations of tax items,
copies of all within the period of time prescribed by law. The Managing
General Partner shall use reasonable efforts to make available to the holders
of Units final K-1's not later than September 15 of each year.
6.6 Tax Matters Partner. The Managing General Partner is
hereby designated as the Tax Matters Partner within the meaning of Section
6231(a)(7) of the Code (and any corresponding provisions of state and local
law) for the Partnership; provided, however, that (a) in exercising its
authority as Tax Matters Partner, the Managing General Partner shall be limited
by the provisions of this Agreement affecting tax aspects of the Partnership;
(b) the Managing General Partner shall consult in good faith with the Limited
Partner Representative regarding the filing of an administrative adjustment
request with respect to the Partnership before filing such request, it being
understood, however, that the provisions hereof shall not be construed to limit
the ability of any Partner, including the Managing General Partner, to file an
administrative adjustment request on its own behalf pursuant to Section 6227(a)
of the Code; (c) the Managing General Partner shall consult in good faith with
the Limited Partner Representative regarding the filing of a petition for
judicial review of an administrative adjustment request under Section 6228 of
the Code, or a petition for judicial review of a final partnership
administrative judgment under Section 6226 of the Code relating to the
Partnership before filing such petition; (d) the Managing General Partner shall
give prompt notice to the Limited Partner Representative and any notice
-25-
<PAGE> 31
partners under Section 6231 of the Code of the receipt of any written notice
that the Internal Revenue Service intends to examine or audit Partnership
income tax returns for any year, receipt of written notice of the beginning of
an administrative proceeding at the Partnership level relating to the
Partnership under Section 6223 of the Code, receipt of written notice of the
final Partnership administrative adjustment relating to the Partnership
pursuant to Section 6223 of the Code, and receipt of any request from the
Internal Revenue Service for waiver of any applicable statute of limitations
with respect to the filing of any tax return by the Partnership; and (e) the
Managing General Partner shall promptly notify the Limited Partner
Representative if the Managing General Partner does not intend to file for
judicial review with respect to the Partnership. Similar provisions shall
apply in the case of any audit or examination by a state or local taxing
authority.
6.7 Withholding Payments Required By Law.
(a) Unless treated as a Tax Payment Loan (as
hereinafter defined), any amount paid by the Partnership for or with respect to
any holder of Units on account of any withholding tax or other tax payable with
respect to the income, profits or distributions of the Partnership pursuant to
the Code, the Regulations, or any state or local statute, regulation, notice,
ruling or ordinance requiring such payment (a "Withholding Tax Act") shall be
treated as a distribution to such holder for all purposes of this Agreement,
consistent with the character or source of the income, profits or cash which
gave rise to the payment or withholding obligation. To the extent that the
amount required to be remitted by the Partnership under the Withholding Tax Act
exceeds the amount then otherwise distributable to such holder, unless and to
the extent that funds shall have been provided by such holder pursuant to the
last sentence of this Section 6.7(a), the excess shall constitute a loan from
the Partnership to such holder (a "Tax Payment Loan") which shall be payable
upon demand and shall bear interest, from the date that the Partnership makes
the payment to the relevant taxing authority, at the rate announced from time
to time by Citibank, N.A. (or any successor thereto) as its "prime rate", plus
four (4) percent per annum, compounded monthly (but in no event higher than the
highest interest rate permitted by applicable law). So long as any Tax Payment
Loan to any holder of Units or the interest thereon remains unpaid, the
Partnership shall make future distributions due to such holder under this
Agreement by applying the amount of any such distributions first to the payment
of any unpaid interest on such Tax Payment Loan and then to the repayment of
the principal thereof, and no such future distributions shall be paid to such
holder until all of such principal and interest has been paid in full. If the
amount required to be remitted by the Partnership under the Withholding Tax Act
exceeds the amount then otherwise distributable to a holder of Units, the
Partnership shall notify such holder at least five (5) Business Days in advance
of the date upon which the Partnership would be required to make a Tax Payment
Loan under this Section 6.7(a) (the "Tax Payment Loan Date") and provide such
holder the opportunity to pay to the Partnership, on or before the Tax Payment
Loan Date, all or a portion of such deficit.
(b) The Managing General Partner shall have the
authority to take all actions necessary to enable the Partnership to comply
with the provisions of any
-26-
<PAGE> 32
Withholding Tax Act applicable to the Partnership and to carry out the
provisions of this Section 6.7. Nothing in this Section 6.7 shall create any
obligation on the Managing General Partner to advance funds to the Partnership
or to borrow funds from third parties in order to make any payments on account
of any liability of the Partnership under a Withholding Tax Act.
(c) In the event that a Tax Payment Loan is not
paid by a holder of Units within thirty (30) days after written demand therefor
is made by the Managing General Partner, the Managing General Partner may cause
all distributions that would otherwise be made to such holder to be retained by
the Partnership, or sell such holder's Units for sale proceeds, in each case up
to the amount necessary to repay such Tax Payment Loan, including all accrued
and unpaid interest therein, and such retained distributions or sale proceeds
shall be applied against, first, the accrued interest on and, second, the
principal of, such Tax Payment Loan.
ARTICLE 7
Rights, Duties and Restrictions of the General Partners
7.1 Powers and Duties of the Managing General Partner.
(a) Subject to Section 7.12 hereof, the Managing
General Partner shall be responsible for the management of the Partnership's
business and affairs. Except as otherwise herein expressly provided, and
subject to the limitations contained in Section 7.2 hereof with respect to
Major Decisions, the Managing General Partner shall have, and is hereby
granted, full and complete power, authority and discretion to take such action
for and on behalf of the Partnership and in its name as the Managing General
Partner shall, in its sole and absolute discretion, deem necessary or
appropriate to carry out the Partnership's business and the purposes for which
the Partnership was organized. Except as otherwise expressly provided herein,
and subject to Section 7.2 hereof, the Managing General Partner shall, on
behalf of, and at the expense of, the Partnership, have the right, power and
authority:
(1) to manage, control, invest,
reinvest, acquire by purchase, lease or otherwise, sell, contract to purchase
or sell, grant, obtain, or exercise options to purchase, options to sell or
conversion rights, assign, transfer, convey, deliver, endorse, exchange,
pledge, mortgage, abandon, improve, repair, maintain, insure, lease for any
term and otherwise deal with any and all property of whatsoever kind and
nature, and wheresoever situated, in furtherance of the business or purposes of
the Partnership;
(2) to acquire, directly or indirectly,
interests in real estate of any kind and of any type, and any and all kinds of
interests therein (including, without limitation, Entities investing therein),
and to determine the manner in which title thereto is to be held; to manage
(directly or through property managers), insure against loss, protect and
-27-
<PAGE> 33
subdivide any of the real estate, interests therein or parts thereof; to
improve, develop or redevelop any such real estate; to participate in the
ownership and development of any property; to dedicate for public use, to
vacate any subdivisions or parts thereof, to resubdivide, to contract to sell,
to grant options to purchase or lease, to sell on any terms; to convey,
mortgage, pledge or otherwise encumber said property, or any part thereof; to
lease said property or any part thereof from time to time, upon any terms and
for any period of time, and to renew or extend leases, to amend, change or
modify the terms and provisions of any leases and to grant options to lease and
options to renew leases and options to purchase; to partition or to exchange
said real property, or any part thereof, for other real or personal property;
to grant easements or charges of any kind; to release, convey or assign any
right, title or interest in or about or easement appurtenant to said property
or any part thereof; to construct and reconstruct, remodel, alter, repair, add
to or take from buildings on any property in which the Partnership owns an
interest; to insure any Person having an interest in or responsibility for the
care, management or repair of such property; to direct the trustee of any
land trust to mortgage, lease, convey or contract to convey the real estate
held in such land trust or to execute and deliver deeds, mortgages, notes and
any and all documents pertaining to the property subject to such land trust or
in any matter regarding such trust; and to execute assignments of all or any
part of the beneficial interest in such land trust;
(3) to employ, engage, indemnify or
contract with or dismiss from employment or engagement Persons to the extent
deemed necessary or appropriate by the Managing General Partner for the
operation and management of the Partnership business, including but not limited
to contractors, subcontractors, engineers, architects, surveyors, mechanics,
consultants, accountants, attorneys, insurance brokers, real estate brokers and
others;
(4) to enter into contracts on behalf of
the Partnership, and to cause all Administrative Expenses to be paid;
(5) to borrow or loan money, obtain or
make loans and advances from and to any Person for Partnership purposes and to
apply for and secure from or accept and grant to any Person credit or
accommodations; to contract liabilities and obligations (including interest
rate swaps, caps and hedges) of every kind and nature with or without security;
and to repay, collect, discharge, settle, adjust, compromise or liquidate any
such loan, advance, obligation or liability;
(6) to grant security interests,
mortgage, assign, deposit, deliver, enter into sale and leaseback arrangements
or otherwise give as security or as additional or substitute security or for
sale or other disposition any and all Partnership property, tangible or
intangible, including, but not limited to, personal property and real estate
and interests in land trusts, and to make substitutions thereof, and to receive
any proceeds thereof upon the release or surrender thereof; to sign, execute
and deliver any and all assignments, deeds, bills of sale and contracts and
instruments in writing; to authorize, give, make, procure, accept and receive
moneys, payments, property notices, demands, protests and authorize and execute
waivers of every kind and nature; to enter into, make,
-28-
<PAGE> 34
execute, deliver and receive agreements, undertakings and instruments of every
kind and nature; and generally to do any and all other acts and things
incidental to any of the foregoing or with reference to any dealings or
transactions which the Managing General Partner may deem necessary, proper or
advisable to effect or accomplish any of the foregoing or to carry out the
business and purposes of the Partnership;
(7) to acquire and enter into any
contract of insurance (including, without limitation, general partner liability
and partnership reimbursement insurance policies) which the Managing General
Partner may deem necessary or appropriate;
(8) to conduct any and all banking
transactions on behalf of the Partnership; to adjust and settle checking,
savings and other accounts with such institutions as the Managing General
Partner shall deem appropriate; to draw, sign, execute, accept, endorse,
guarantee, deliver, receive and pay any checks, drafts, bills of exchange,
acceptances, notes, obligations, undertakings and other instruments for or
relating to the payment of money in, into or from any account in the
Partnership's name; to make deposits into and withdrawals from the
Partnership's bank accounts and to negotiate or discount commercial paper,
acceptances, negotiable instruments, bills of exchange and dollar drafts;
(9) to demand, sue for, receive and
otherwise take steps to collect or recover all debts, rents, proceeds,
interests, dividends, goods, chattels, income from property, damages and all
other property, to which the Partnership may be entitled or which are or may
become due the Partnership from any Person; to commence, prosecute or enforce,
or to defend, answer or oppose, contest and abandon all legal proceedings in
which the Partnership is or may hereafter be interested; and to settle,
compromise or submit to arbitration any accounts, debts, claims, disputes and
matters which may arise between the Partnership and any other Person and to
grant an extension of time for the payment or satisfaction thereof on any
terms, with or without security;
(10) to acquire interests in and
contribute money or property to any limited or general partnerships, joint
ventures, subsidiaries or other entities as the Managing General Partner deems
desirable;
(11) to maintain or cause to be maintained
the Partnership's books and records;
(12) to prepare and deliver, or cause to
be prepared and delivered, all financial and other reports with respect to the
operations of the Partnership, and preparation and filing of all tax returns
and reports;
(13) to do all things which are necessary
or advisable for the protection and preservation of the Partnership's business
and assets, and to execute and deliver such further instruments and undertake
such further acts as may be necessary or desirable to carry out the intent and
purposes of this Agreement and as are not inconsistent with the terms hereof;
-29-
<PAGE> 35
(14) subject to Section 7.5 hereof, to
lease real or personal property from the Realty Partnership or its Affiliates
on such terms and conditions as the Managing General Partner may from time to
time agree; and
(15) in general, to exercise all of the
general rights, privileges and powers permitted to be had and exercised under
the Act.
To the extent the duties of the Managing General Partner require expenditures
of funds to be paid to third parties, the Managing General Partner shall not
have any obligations hereunder except to the extent that Partnership funds are
reasonably available to it for the performance of such duties, and nothing
herein contained shall be deemed to require the Managing General Partner, in
its capacity as such, to expend its individual funds for payment to third
parties or to undertake any specific liability or litigation on behalf of the
Partnership.
(b) Notwithstanding the provisions of Section
7.1(a) hereof, the Partnership shall not take any action which (or fail to take
any action, the omission of which), in the reasonable judgement of the Managing
General Partner, in its sole and absolute discretion, (i) could adversely
affect the ability of HIT to qualify or continue to qualify as a REIT, (ii)
could subject HIT to any additional taxes under Section 857 or Section 4981 of
the Code or other potentially adverse consequences under the Code, (iii) could
otherwise cause HIT to violate the REIT Requirements or (iv) could violate any
law or regulation of any governmental body or agency having jurisdiction over
the General Partners or their securities, unless such action (or inaction)
shall have been specifically consented to by the Managing General Partner in
writing.
(c) Notwithstanding the provisions of Section
7.1(a) hereof, the Partnership shall not commingle its funds with those of any
Affiliate or other entity; funds and other assets of the Partnership shall be
separately identified and segregated; all of the Partnership's assets shall at
all times be held by or on behalf of the Partnership, and, if held on behalf of
the Partnership by another entity, shall at all times be kept identifiable (in
accordance with customary usages) as assets owned by the Partnership; and the
Partnership shall maintain its own separate bank accounts, payroll and books of
account.
(d) Without the consent of all the Partners, the
Managing General Partner shall have no power to do any act in contravention of
this Agreement or possess any Partnership property for other than a partnership
purpose.
7.2 Major Decisions. The Managing General Partner shall
not, without the prior Consent of the Starwood Partners undertake, on behalf of
the Partnership, any of the following actions at any time that the Limited
Partners (not including the General Partners) own control in the aggregate
fifteen (15) percent or more of the issued and outstanding Partnership
Interests (the "Major Decisions"):
-30-
<PAGE> 36
(i) make a general assignment for the benefit of
creditors or appoint or acquiesce in the appointment of a custodian, receiver
or trustee for all or any part of the assets of the Partnership;
(ii) institute any proceedings for Bankruptcy on
behalf of the Partnership;
(iii) except in connection with the dissolution and
winding up of the Partnership by the Liquidating Trustee, agree to or
consummate the merger or consolidation of the Partnership or the voluntary sale
or other transfer of all or substantially all of the Partnership's assets in a
single transaction or related series of transactions (without limiting the
transactions which will not be deemed to be a voluntary sale or transfer, the
foreclosure of a mortgage lien on any Property or the grant by the Partnership
of a deed in lieu of foreclosure for such Property shall not be deemed to be
such a voluntary sale or other transfer);
(iv) sell, in one transaction or a series of
related transactions, a Material Asset of the Partnership; or
(v) dissolve the Partnership.
7.3 Reimbursement of the General Partners.
(a) Except as provided in this Section 7.3 and
elsewhere in this Agreement (including the provisions of Articles 5, 6 and 8
hereof regarding distributions, payments and allocations to which it may be
entitled), no General Partner shall receive payments from or be compensated for
its services as general partner of the Partnership.
(b) The General Partners shall be reimbursed on a
monthly basis, or such other basis as the Managing General Partner may
determine in its sole and absolute discretion, for all expenses incurred
relating to the ownership and operation of, or for the benefit of, the
Partnership, including, without limitation, the Administrative Expenses. Such
reimbursements shall be in addition to any reimbursement to the General
Partners as a result of indemnification pursuant to Section 5.1 hereof.
(c) The General Partners shall also be reimbursed
for all expenses incurred relating to the organization and formation of the
Partnership, the General Partners' share of public offerings of Paired Shares
by the General Partners and HIT to the extent included in Administrative
Expenses, and any other issuance of additional Partnership Interests.
7.4 Outside Activities of the General Partners. The
General Partners shall not directly or indirectly enter into or conduct any
business other than the ownership, acquisition and disposition of Partnership
Interests as a General Partner or Limited Partner and the management of the
business of the Partnership, and such activities as are incidental
-31-
<PAGE> 37
thereto. All future acquisitions of real estate or of leasehold interests in
hotels or management of hotels by any of the General Partners shall be made
through and for the benefit of the Partnership. The Managing General Partner
agrees that the net proceeds of all offerings of securities by the Managing
General Partner shall be contributed to the Partnership (in the case of equity
offerings) or loaned to the Partnership (in the case of debt offerings). This
Section 7.4 shall not apply to HICN or the Managing General Partner's activities
with respect to HICN prior to the earlier of the date it contributes its assets
to the Partnership or January 1, 1996.
7.5 Contracts with Affiliates. The Partnership may
engage in transactions, enter into contracts with Affiliates, and lend money to
or borrow money from Affiliates which are on terms fair and reasonable to the
Partnership and no less favorable to the Partnership than would be obtained
from unaffiliated third parties. The Partners hereby agree that the
Partnership's leases and loans with the Realty Partnership, as in effect on the
date first above written, are on terms fair and reasonable to the Partnership
and such terms are no less favorable to the Partnership than would be obtained
from unaffiliated third parties.
7.6 Title to Partnership Assets. Title to Partnership
assets, whether real, personal or mixed and whether tangible or intangible,
shall be deemed to be owned by the Partnership as an entity, and no Partner,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, a General
Partner or one or more nominees, as the Managing General Partner may determine,
including Affiliates of a General Partner. The General Partners hereby
acknowledge and confirm that any Partnership assets for which legal title is
held in the name of a General Partner or any nominee or Affiliate of a General
Partner shall be held by such General Partner for the use and benefit of the
Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partners shall use their best efforts to cause
beneficial and record title to such assets to be vested in the Partnership as
soon as reasonably practicable. All Partnership assets shall be recorded as
the property of the Partnership in its books and records, irrespective of the
name in which legal title to such Partnership assets is held.
7.7 Reliance by Third Parties. Notwithstanding anything
to the contrary in this Agreement, any Person dealing with the Partnership
shall be entitled to assume that the Managing General Partner has full power
and authority to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any contracts on behalf of the
Partnership, and such Person shall be entitled to deal with the Managing
General Partner as if it were the Partnership's sole party in interest, both
legally and beneficially. In no event shall any Person dealing with the
Managing General Partner or its representatives be obligated to ascertain that
the terms of this Agreement have been complied with or to inquire into the
necessity or expedience of any act or action of the Managing General Partner or
its representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the Managing General Partner shall be
conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (i) at the time of the
-32-
<PAGE> 38
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (ii) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (iii) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
7.8 Liability of the General Partners.
(a) Notwithstanding anything to the contrary set
forth in this Agreement, no General Partner shall be liable for monetary or
other damages to the Partnership, any of the Partners or any assignee of any
interest of any Partner for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if such General Partner
acted without fraud, gross negligence or willful misconduct.
(b) The Limited Partners expressly acknowledge
(i) that the General Partners are acting on behalf of the Partnership and the
General Partners' shareholders collectively, (ii) that, subject to the terms
and conditions of this Agreement, a General Partner may, but is under no
obligation to, consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or any
assignees thereof except as provided in this Agreement) in deciding whether to
cause the Partnership to take (or decline to take) any actions, and (iii) that
no General Partner shall be liable for monetary damages for losses sustained,
liabilities incurred, or benefits not derived by Limited Partners in connection
with such decisions, provided that such General Partner acted without fraud,
gross negligence or willful misconduct.
(c) Subject to its obligations and duties as
General Partners set forth in Section 7.1 hereof, the General Partners may
exercise any of the powers granted to them by this Agreement and perform any of
the duties imposed upon them hereunder either directly or by or through agents.
No General Partner shall be responsible for any fraud, willful misconduct or
gross negligence on the part of any such agent appointed by it without fraud,
gross negligence or willful misconduct.
(d) Any amendment, modification or repeal of this
Section 7.8 or any provision hereof shall be prospective only and shall not in
any way affect the limitations on a General Partner's liability to the
Partnership and the Partners under this Section 7.8 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may be
asserted.
7.9 Other Matters Concerning the General Partners.
(a) A General Partner may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion,
-33-
<PAGE> 39
report, or other document reasonably believed by it to be genuine and to have
been signed or presented by the proper party or parties.
(b) A General Partner may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers
and other consultants and advisers selected by it, and any act taken or omitted
to be taken in reliance upon the advice or opinion of such Persons as to
matters which such General Partner reasonably believes to be within such
Person's professional or expert competence and in accordance with such advice
or opinion shall be prima facie evidence that such actions have been done or
omitted in good faith.
(c) A General Partner shall have the right, in
respect of any of its powers or obligations hereunder, to act through any of
its duly authorized officers and any attorney or attorneys-in-fact duly
appointed by the General Partner. Each such attorney shall, to the extent
provided by the General Partner in the power of attorney, have full power and
authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.
7.10 Operation of HIT in Accordance with REIT Requirements.
(a) The Partners acknowledge and agree that the
ability of HIT to satisfy the REIT Requirements is a material inducement for
the Realty Partnership to lease its real and personal property to the Operating
Partnership and that the failure of HIT to satisfy the REIT Requirements is
likely to have a material adverse effect on the Partnership. The Partners
therefore acknowledge and agree that, in addition to the other provisions of
this Agreement, so long as HIT desires to elect to be taxed as a REIT, the
Partnership shall be operated in a manner that will enable HIT to (i) satisfy
the REIT Requirements and (ii) avoid the imposition of any federal income or
excise tax liability on HIT from and after January 1, 1995. So long as HIT
desires to elect to be taxed as a REIT, the Partnership shall avoid taking any
action which would result in HIT ceasing to satisfy the REIT Requirements or
would result in the imposition of any federal income or excise tax liability on
HIT from and after January 1, 1995.
(b) Without the prior consent of the Managing
General Partner, no Limited Partner or holder of Units or any Affiliate shall
take any action, including acquiring, directly or indirectly, an interest in
any tenant of a property owned by the Realty Partnership or by an Entity owned
by the Realty Partnership (including, but not limited to, the Operating
Partnership, HIC or the Affiliates of either), which would have, through the
actual or constructive ownership of any tenant of any property, the effect of
causing the percentage of the gross income of HIT that fails to be treated as
"rents from real property" within the meaning of Section 856(d)(2) of the Code
to exceed such percentage on the date hereof. Each Limited Partner and holder
of Units shall use its best efforts to notify the Managing General Partner on a
timely basis of any direct or indirect acquisition or potential direct or
indirect acquisition of Paired Shares by such Limited Partner or holder or any
Affiliate or
-34-
<PAGE> 40
direct or indirect owner of an interest in such Limited Partner or holder that
could reasonably be expected to have such effect.
7.11 Replacement of Managing General Partner. In the
event the Managing General Partner is no longer a Partner (whether in
accordance with the provisions of this Agreement or otherwise), a successor
Managing General Partner, who shall be a General Partner, shall be appointed by
a vote of the remaining General Partners.
7.12 Management Committee. The Managing General Partner
hereby delegates all of its rights, duties and obligations under this Agreement
with respect to the management of the Partnership to the Management Committee.
The Management Committee shall establish its rules and regulations for the
management of the Partnership which rules and regulations shall be
substantially similar to the Articles of Incorporation and By-Laws of the
Managing General Partner. So long as the Management Committee has not been
disbanded, the Managing General Partner shall take actions pursuant to this
Agreement only as directed by the Management Committee. The Management
Committee shall be disbanded upon the earlier of the receipt of the regulatory
approvals described in Section 4.1(f) hereof or the disposition of the
operating assets of HICN. Once the Management Committee has been disbanded it
may not be reformed and this Section 7.12 shall be of no further force or
effect.
ARTICLE 8
Dissolution, Liquidation and Winding-Up
8.1 Accounting. In the event of the dissolution,
liquidation and winding-up of the Partnership, a proper accounting shall be
made of the Capital Account of each holder of Units and of the Net Income or
Net Loss of the Partnership from the date of the last previous accounting to
the date of dissolution.
8.2 Distribution on Dissolution.
(a) In the event of the dissolution and
liquidation of the Partnership for any reason, the assets of the Partnership
shall be liquidated for distribution in the following rank and order:
(i) payment of creditors of the
Partnership, including creditors who are Partners or former Partners;
(ii) establishment of reserves as
provided by the Liquidating Trustee to provide for contingent liabilities, if
any; and
-35-
<PAGE> 41
(iii) to the holders of Units in
accordance with the positive balances in their Capital Accounts after giving
effect to all contributions, distributions and allocations for all periods.
Whenever the Liquidating Trustee reasonably determines that any reserves
established pursuant to paragraph (ii) above are in excess of the reasonable
requirements of the Partnership, the amount determined to be excess shall be
distributed to the Partners in accordance with the provisions of this Section
8.2(a). The foregoing notwithstanding, in the event of the dissolution,
liquidation and winding up of the Partnership prior to the occurrence of (A)
the consummation of the first public offering of securities (after the date
first above written) by the Partnership, the Managing General Partner or HIT or
(B) the consummation of a private placement of securities that substantially
reduces the outstanding balance of the Senior Debt, the distributions described
in paragraph (iii) above shall be made in the following order: (x) to the
Starwood Partners until the Starwood Partners have received an amount equal to
fifty-five (55) percent of their Capital Contributions; (y) then, to the
holders of Units pro rata in proportion to their unreturned Capital
Contributions following the distribution described in clause (x); and (z)
thereafter, in accordance with the remaining positive balances in the holders'
Capital Accounts after giving effect to all contributions, distributions and
allocations for all periods. If the distributions described in the preceding
sentence would otherwise not be in accordance with the positive balances in the
holders of Units Capital Accounts after giving effect to all contributions,
distributions and allocations for all periods, then the Managing General
Partner shall allocate items of gross income or deduction to the holders such
that said distributions are in accordance with positive Capital Account
balances. No Partner or holder of Units shall be liable to any other Partner
or holder of Units for a deficit balance in its Capital Account.
(b) Notwithstanding the provisions of Section
8.2(a) hereof which require liquidation of the assets of the Partnership, but
subject to the order of priorities set forth therein, if prior to or upon
dissolution of the Partnership the Liquidating Trustee determines that an
immediate sale of part or all of the Partnership's assets would be impractical
or would cause undue loss to the Partners, the Liquidating Trustee may, in its
sole and absolute discretion, defer for a reasonable time liquidation of any
assets except those necessary to satisfy liabilities of the Partnership
(including to those Partners which are creditors of the Partnership) and/or,
with the Consent of the Limited Partners, distribute to the Partners, in lieu
of cash, as tenants in common and in accordance with the provisions of Section
8.2(a) hereof, undivided interests in such Partnership assets as the
Liquidating Trustee deems not suitable for liquidation. Any such distributions
in kind shall be made only if, in the good faith judgment of the Liquidating
Trustee, such distributions in kind are in the best interest of the Partners,
and shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidating Trustee deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidating Trustee shall determine the fair market value of
any property distributed in kind using such reasonable method of valuation as
it may adopt.
-36-
<PAGE> 42
8.3 Documentation of Liquidation. Upon the completion of
the dissolution and liquidation of the Partnership, the Partnership shall
terminate and the Liquidating Trustee shall have the authority to execute and
record any and all documents or instruments required to effect the dissolution,
liquidation and termination of the Partnership.
ARTICLE 9
Transfer
9.1 General Partners. No General Partner shall withdraw
from the Partnership or sell, assign, pledge, encumber or otherwise dispose of
all or any portion of its Partnership Interest or Units without the Consent of
the Limited Partners which consent may be given or withheld in each Partner's
sole and absolute discretion. Upon any transfer of a Partnership Interest in
accordance with the provisions of this Section 9.1, the transferee General
Partner shall become vested with the powers and rights of the transferor
General Partner, and shall be liable for all obligations and responsible for
all duties of such General Partner, once such transferee has executed such
instruments as may be necessary to effectuate such admission and to confirm the
agreement of such transferee to be bound by all the terms and provisions of
this Agreement with respect to the Partnership interest so acquired. It shall
be a condition to any transfer otherwise permitted hereunder that the
transferee assumes by express agreement (or pursuant to a statutory merger or
consolidation wherein all obligations and liabilities of the General Partner
are assumed by a successor trust or corporation by operation of law) all of the
obligations of the transferor General Partner under this Agreement with respect
to such transferred Partnership Interest and no such transfer (other than
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor General Partner are assumed by a successor trust
or corporation by operation of law) shall relieve the transferor General
Partner of its obligations under this Agreement without the Consent of the
Limited Partners. In connection with any such permitted transfer, the
successor General Partner shall be deemed admitted as such immediately prior to
the effective time of the transfer from the transferor General Partner and
shall continue the business of the Partnership without dissolution. If a
General Partner withdraws or retires from the Partnership, in violation of this
Agreement or otherwise, or dissolves, terminates or upon the Bankruptcy of such
General Partner, (a) the remaining General Partners may elect to continue the
Partnership business or (b) within 90 days thereafter, all of the remaining
Partners (or, to the extent permitted under the Act, such lesser number or
percentage of the Partners, but in no event less than a Majority-in-Interest of
the Limited Partners) may elect to continue the Partnership business by
selecting a substitute General Partner, which substitute General Partner
accepts such election and agrees to serve as General Partner. Such successor
General Partner shall thereupon succeed to the rights and obligations of the
General Partner as provided in this Section 9.1.
-37-
<PAGE> 43
9.2 Transfers by Limited Partners.
(a) No Limited Partner shall have the right,
directly or indirectly, to transfer all or any part of his Partnership Interest
or Units to any Person without the prior written consent of the Managing
General Partner, which consent may be given or withheld by the Managing General
Partner in its sole and absolute discretion. The foregoing notwithstanding,
the Managing General Partner hereby grants consents described in this Section
9.2 to the following categories of transfers by Limited Partners, provided that
any such transfer otherwise complies with all of the other provisions of this
Article 9 (including, but not limited to, any additional consents required
hereunder): (i) transfers of Units; (ii) transfers of Partnership Interests
(whether outright or in trust) to members of a Partner's Immediate Family;
(iii) transfers Partnership Interests to a Person holding a direct or indirect
interest in a Partner; (iv) transfers of Partnership Interests pursuant to an
exercise of Rights; or (v) pledges to secure bona fide indebtedness.
(b) It shall be a condition to any transfer by a
Limited Partner (other than a pledge, encumbrance, hypothecation or mortgage)
otherwise permitted hereunder that the transferee assume by operation of law or
express agreement all of the obligations of the transferor under this Agreement
(including, without limitation, under Article 9 hereof) with respect to such
transferred Partnership Interest or Units and no such transfer (other than
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor are assumed by a successor corporation by
operation of law) shall relieve the transferor of its obligations under this
Agreement without the approval of the Managing General Partner, in its
reasonable discretion (it being understood that a transferor shall be deemed
relieved from such obligations, without the necessity of any such approval, in
respect of Partnership Interests transferred to the Managing General Partner or
the Partnership pursuant to the Exchange Rights Agreement). Upon such
transfer, the transferee of a Partnership Interest shall be admitted as a
Limited Partner and shall succeed to all of the rights of the transferor
Limited Partner under this Agreement in the place and stead of such transferor
Limited Partner (which succession, in the event of a pledge, may be entered
into and become effective at the time of foreclosure or other realization of
such pledge). The foregoing notwithstanding, a transferee of a Unit shall not
be admitted as a Limited Partner unless the Managing General Partner consents,
which consent may be given or withheld by the Managing General Partner in its
sole and absolute discretion. Any transferee, whether or not admitted as a
substituted Limited Partner, shall succeed to the obligations of the transferor
hereunder (unless such transfer is a pledge, encumbrance, hypothecation or
mortgage or except as otherwise provided herein).
(c) In addition to any other restrictions on
transfer provided herein, no Partnership Interest or Units shall be
transferable by a Limited Partner unless the transferor gives written notice of
the proposed transfer which notice shall state to the best of its knowledge
that such transfer will not violate any of the restrictions set forth in
Section 9.3 hereof.
-38-
<PAGE> 44
(d) Any permitted transferee under Section 9.2
who is not admitted as a Limited Partner in accordance with this Article 9 or a
transferee who only holds Units shall be considered an assignee for purposes of
this Agreement. An assignee shall be deemed to have had assigned to it, and
shall be entitled to receive, distributions from the Partnership and the share
of Net Income, Net Losses, and any other items of income, gain, loss, deduction
and credit of the Partnership and rights attributable to the Partnership
Interests assigned to such transferee, but shall not be deemed to be a holder
of Partnership Interests for any other purpose under this Agreement, and shall
not be entitled to vote such Partnership Interests in any matter presented to
the Limited Partners for a vote. In the event any such transferee desires to
make a further assignment of any such Partnership Interests, such transferee
shall be subject to all the provisions of this Article 9 to the same extent and
in the same manner as any Limited Partner desiring to make an assignment of
Partnership Interests.
(e) The Limited Partners acknowledge that neither
the Partnership Interests nor the Units have been registered under any federal
or state securities laws and, as a result thereof, they may not be sold or
otherwise transferred, except in compliance with such laws. Notwithstanding
anything to the contrary contained in this Agreement, no Partnership Interest
or Units may be sold or otherwise transferred unless such transfer is exempt
from registration under any applicable securities laws or such transfer is
registered under such laws, it being acknowledged that the Partnership has no
obligation to take any action which would cause any such Partnership Interests
or Units to be registered.
9.3 Certain Restrictions on Transfer. In addition to any
other restrictions on transfer herein contained, except with the consent of the
Managing General Partner and the Consent of the Starwood Partners, in no event
may any transfer of a Partnership Interest or Units by any Person be made (a)
to any person or Entity that lacks the legal right, power or capacity to own a
Partnership Interest or Units; (b) in the event such transfer would cause HIT
to cease to comply with the REIT Requirements; (c) if such transfer would cause
a termination of the Partnership for federal income tax purposes; (d) if such
transfer would, in the opinion of counsel to the Partnership, cause the
Partnership to cease to be classified as a Partnership for federal income tax
purposes; (e) if such transfer would result in the Partnership being treated as
a "publicly traded partnership" or is effectuated through an "established
securities market" or a "secondary market (or the substantial equivalent
thereof)" within the meaning of Section 7704 of the Code; (f) in violation of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976; (g) if the Managing
General Partner reasonably believes that such transfer may (i) cause any
portion or all of the assets of the Partnership to be deemed pursuant to United
States Department of Labor Regulation Section 2510.3-101 or otherwise pursuant
to ERISA to be for any purpose of ERISA or Section 4975 of the Code assets of
any Restricted Entity, or (ii) cause a "prohibited transaction" (as defined in
Section 4975(c) of the Code or within the meaning of Section 406 of ERISA) to
occur, or (iii) cause the Partnership to become with respect to any Restricted
Entity a "party in interest" (as defined in Section 3(14) of ERISA) or a
"disqualified person" (as defined in Section 4975(e) of the Code) or (iv) cause
the Partnership to be jointly and severally liable for any obligation arising
under ERISA or the Code with respect to any "employee benefit
-39-
<PAGE> 45
plan" as defined in and subject to ERISA or any "plan" as defined in Section
4975 of the Code; or (h) if the intended transferee is a Restricted Entity. Any
purported transfer described in this Section 9.3 shall be void ab initio.
9.4 Effective Dates of Transfers.
(a) Transfers pursuant to this Article 9 may be
made on any day, but for purposes of this Agreement, the effective date of any
such transfer shall be (i) the first day of the month in which such transfer
occurred if such transfer occurred on or prior to the fifteenth calendar day of
a month, or (ii) the first day of the month immediately following the month in
which such transfer occurred, if such transfer occurred after the fifteenth
calendar day of a month, or such other date determined by the Managing General
Partner pursuant to such convention as may be administratively feasible and
consistent with applicable law.
(b) If any Partnership Interest or Unit is
transferred or assigned in compliance with the provisions of this Article 9, on
any day other than the first day of a calendar year, then Net Income, Net Loss,
each item thereof and all other items attributable to such Partnership Interest
or Unit for such year shall be allocated to the transferor, and, in the case of
a transfer or assignment other than a redemption, to the transferee, by taking
into account their varying interests during such year in accordance with
Section 706(d) of the Code, using method permitted thereunder. All
distributions pursuant to Section 6.2 hereof attributable to such transferred
Partnership Interests or Units (A) with respect to which the Partnership Record
Date is before the effective date of such transfer (other than a pledge,
encumbrance, hypothecation or mortgage) shall be made to the transferor, (B)
with respect to the first Partnership Record Date after the effective date of
such transfer (other than a pledge, encumbrance, hypothecation or mortgage)
shall be paid to the transferor and to the transferee, ratably in accordance
with their respective periods of ownership of the Partnership Interest or Units
transferred during the period with respect to which such distribution is made,
and (C) all distributions after those described in (A) and (B) shall be made to
the transferee.
9.5 Transfer.
(a) The term "transfer," when used in this
Article 9 with respect to a Partnership Interest, shall be deemed to refer to a
transaction by which a Person purports to assign its Partnership Interest or
any portion thereof (including Units) to another Person, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise.
(b) The Managing General Partner is hereby
authorized on behalf of each of the Partners to amend this Agreement (including
the schedules hereto) to reflect the admission of any transferee of a
Partnership Interest as a substituted Limited or General Partner in accordance
with the provisions of this Article 9.
-40-
<PAGE> 46
(c) No Partnership Interest or Unit shall be
transferred, in whole or in part, except in accordance with the terms and
conditions set forth in this Article 9. Any transfer or purported transfer of
a Partnership Interest not made in accordance with this Article 9 shall be null
and void.
9.6 Nevada Gaming Control Act.
(a) Notwithstanding anything to the contrary
expressed or implied in this Agreement, the sale, assignment, transfer, pledge
or other disposition of any interest in the Partnership is void unless approved
in advance by the Commission. If at any time the commission finds that an
individual owner of any interest in the Partnership is unsuitable to hold that
interest, the Commission shall immediately notify the Partnership of that fact.
The Partnership shall, within ten (10) days from the date that it receives the
notice from the Commission, return to the unsuitable owner the amount of his
capital account as reflected on the books of the Partnership. Beginning on the
date when the Commission serves notice of a determination of unsuitability,
pursuant to the preceding sentence, on the Partnership, it is unlawful for the
unsuitable owner: (i) to receive any share of the profits or distributions of
any cash or other property other than a return of capital as described above;
(ii) to exercise, directly or through any trust or nominee, any voting right
conferred by such interest; or (iii) to receive any remuneration in any form
from the Partnership for services rendered or otherwise.
(b) Any Limited Partner granted a delayed
licensing by the Commission which Limited Partner is later found unsuitable by
the Commission shall return all evidence of any ownership in the Partnership to
the Partnership, at which time the Partnership shall refund to the unsuitable
Limited Partner no more than the amount that such Limited Partner paid for his
ownership interest in the Partnership, and the unsuitable Limited Partner shall
no longer have any direct or indirect interest in the Partnership.
(c) This Section 9.6 and the last sentence of
Section 2.3 hereof shall apply only if the Partnership applies for and obtains
a Nevada state gaming license and only while such license is in effect. No
such license shall be applied for or obtained by the Partnership without the
Consent of the Starwood Partners.
ARTICLE
Rights and Obligations of the Limited Partners
10.1 No Participation in Management. No Limited Partner,
in its capacity as such, shall take part in the management of the Partnership's
business, transact any business in the Partnership's name or have the power to
sign documents for or otherwise bind the Partnership. Any rights expressly
granted to the Limited Partners in this Agreement shall not be deemed to be
rights relating to the management of the Partnership's business.
-41-
<PAGE> 47
10.2 Bankruptcy of a Limited Partner. The Bankruptcy of
any Limited Partner shall not cause a dissolution of the Partnership, but the
rights of such Limited Partner to share in the Net Profits or Net Losses of the
Partnership and to receive distributions of Partnership funds shall, on the
happening of such event, devolve on its successors or assigns, subject to the
terms and conditions of this Agreement, and the Partnership shall continue as a
limited partnership. In no event, however, shall such assignee(s) become a
substituted Limited Partner except in accordance with Article 9 hereof.
10.3 No Withdrawal. No Limited Partner may withdraw from
the Partnership without the prior written consent of the Managing General
Partner, other than as provided in Article 9 hereof.
10.4 Conflicts. The Partners recognize that the Limited
Partners and their Affiliates have or may have other business interests,
activities and investments, some of which may be in conflict or competition
with the business of the Partnership, and that such Persons are entitled to
carry on such other business interests, activities and investments. In
deciding whether to take any actions in such capacity, such Limited Partners
and their Affiliates may, but shall be under no obligation to, consider the
separate interests of the Partnership and shall have no fiduciary obligations
to the Partnership and shall not be liable for monetary damages for losses
sustained, liabilities incurred or benefits not derived by the other Partners
in connection with such actions except for damages for losses sustained or
liabilities incurred which result from a Limited Partner breaching a
representation, warranty or covenant hereunder or to the extent provided in the
Formation Agreement; nor shall the Partnership or the General Partners be under
any obligation to consider the separate interests of the Limited Partners and
their Affiliates in such capacity or have any fiduciary obligations to the
Limited Partners and their Affiliates in such capacity or be liable for
monetary damages for losses sustained, liabilities incurred or benefits not
derived by the Limited Partners and their Affiliates in such capacity arising
from actions or omissions taken by the Partnership. The Limited Partners and
their Affiliates may engage in or possess an interest in any other business or
venture of any kind, independently or with others, on their own behalf or on
behalf of other entities with which they are affiliated or associated, and such
persons may engage in any activities, whether or not competitive with the
Partnership, without any obligation to offer any interest in such activities to
the Partnership or to any Partner. Neither the Partnership nor any Partner
shall have any right, by virtue of this Agreement, in or to such activities, or
the income or profits derived therefrom, and the pursuit of such activities,
even if competitive with the business of the Partnership, shall not be deemed
wrongful or improper. Notwithstanding the foregoing, the provisions of this
Section 10.4 shall not negate or impair any other written agreement between one
or more of the Limited Partners and one or more of the General Partners or the
Partnership (including Section 6.6 of the Formation Agreement) or any duties
which a Limited Partner may have in such Limited Partner's capacity as an
officer or director of a General Partner.
-42-
<PAGE> 48
10.5 Provision of Information.
(a) With respect to any information required to
be provided to the Partners pursuant to Section 17-305 (or any successor
thereto) of the Act: (i) the cost of preparing or providing any such
information (including, without limitation, fees paid to any person or entity
in connection therewith) shall be paid by the requesting Partner and in no
event shall such information be required to be given to the requesting Partner
until such payment has been made to the Partnership; (ii) in no event shall any
financial statements of the Partnership be required to be provided except for
such statements as have already been prepared or are otherwise required to be
provided to the Partners under this Agreement and in no event shall any
statements which have been prepared be required to be audited, reviewed or
otherwise examined by a certified public accountant, if the statements are not
otherwise required to be so audited, reviewed or examined pursuant to the
provisions of this Agreement; and (iii) in no event shall such information be
required to be furnished until forty-five (45) days after such request and
unless the information is already in the possession of the Partnership.
(b) In addition to other rights provided by this
Agreement or by the Act, each Partner shall have the right, for a purpose
reasonably related to such Limited Partner's interest as a limited partner in
the Partnership, upon written demand with a statement of the purpose of such
demand and at such Partner's own expense (excluding copying and administrative
expenses of the Managing General Partner):
(1) to obtain a copy of the most recent
annual and quarterly reports and current reports on Form 8-K filed with the SEC
by the Managing General Partner pursuant to the Securities Exchange Act of
1934;
(2) to obtain a copy of the
Partnership's federal, state and local income tax returns for each fiscal year
of the Partnership;
(3) to obtain a current list of the name
and last known business, residence or mailing address of each Partner; and
(4) to obtain a copy of this Agreement
and the Certificate, together with executed copies of all powers of attorney
pursuant to which this Agreement and the Certificate have been executed.
(c) Notwithstanding any other provision of this
Section 10.5, the Managing General Partner may keep confidential from the
Limited Partners, for such period of time as the Managing General Partner
determines in its sole and absolute discretion to be reasonable, any
information is not material to the Limited Partners and that (i) the Managing
General Partner reasonably believes to be in the nature of trade secrets or
other information the disclosure of which the Managing General Partner in good
faith believes is not in the best interests of the Partnership or could damage
the Partnership or its business or (ii) the
-43-
<PAGE> 49
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.
10.6 Limited Partner Representative. SCG is hereby
appointed as the Limited Partner Representative. A Majority-in-Interest of the
Limited Partners shall have the right, at any time, within their sole
discretion, to replace the Limited Partner Representative, or to appoint a
temporary substitute to act for a Limited Partner Representative unable to act.
Any appointment of a Limited Partner Representative made hereunder shall remain
effective until rescinded in a writing delivered to the Managing General
Partner via certified mail, registered overnight express mail or telecopy, and
the Managing General Partner shall have the right and authority to rely (and
shall be fully protected in so doing) on the actions taken and directions given
by such Limited Partner Representative, without any further evidence of their
authority or further action by the Limited Partners. The Managing General
Partner shall send copies of all notices received by it pursuant to Section 6.6
to each Limited Partner requesting the same.
10.7 Power of Attorney.
(a) Each Limited Partner and General Partner
constitutes and appoints the Managing General Partner, any Liquidating Trustee
and authorized officers and attorneys-in-fact of each, and each of those acting
singly, in each case with full power of substitution, as its true and lawful
agent and attorney-in-fact, with full power and authority in its name, place
and stead to: execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (i) all certificates, documents and other
instruments (including, without limitation, this Agreement and the Certificate
and all amendments or restatements thereof) that the Managing General Partner
or the Liquidating Trustee deems appropriate or necessary to form, qualify or
continue the existence or qualification of the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (ii) all instruments that the
Managing General Partner deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this Agreement in accordance
with its terms; (iii) all conveyances and other instruments or documents that
the Managing General Partner deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of cancellation; and
(iv) all instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to the provisions of this Agreement or the
Capital Contribution of any Partner.
(b) The foregoing power of attorney is
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the Managing
General Partner to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive the death or
incompetency of a Partner to the effect and extent permitted by law, subsequent
incapacity of any Partner and the transfer of all or any portion of such
Partner's Partnership Interests and shall extend to such Partner's heirs,
successors, assigns and personal representatives.
-44-
<PAGE> 50
(c) Nothing contained in this Section 10.7 shall
be construed as authorizing the Managing General Partner to amend this
Agreement except in accordance with Article 11 hereof.
10.8 Ownership of Paired Shares.
(a) Each Limited Partner and holder of Units
hereby agrees to provide the Managing General Partner within fifteen (15) days
of any written request therefor, a statement, to the best of its knowledge,
describing the number of Paired Shares actually or constructively owned by such
Limited Partner or holder of Units and all direct and indirect owners of such
Limited Partner or holder for purposes of the REIT Requirements as determined
under Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code,
or Section 544 of the Code, as modified by Section 856(h) of the Code.
(b) Each Limited Partner and holder of Units (i)
hereby covenants that, without the prior written consent of the Managing
General Partner and the Limited Partner Representative (which consent shall not
be unreasonably withheld or delayed) it will not and will use all reasonable
efforts to cause its direct or indirect owners not to acquire any Paired Shares
or any rights to acquire Paired Shares and (ii) except to the extent that the
Managing General Partner and the Limited Partner Representative provides prior
written consent, hereby represents, warrants and covenants that (I) it is not
and will not become a Restricted Entity, (II) no "prohibited transaction" (as
defined in Section 4975(c) of the Code or within the meaning of Section 406 of
ERISA) has occurred or will occur that would not have occurred or occur if the
Limited Partner or holder of Units and its Affiliates were not Limited Partners
and were not holders of Units, (III) the Partnership has not become and will
not become with respect to any Restricted Entity a "party in interest" (as
defined in Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(e) of the Code) which the Partnership would not have become or be
if the Limited Partner or holder of Units and its Affiliates were not Limited
Partners and were not holders of Units, and (IV) the Partnership has not and
will not become jointly and severally liable for any obligations arising under
ERISA or the Code with respect to any "employee benefit plan" as defined in and
subject to ERISA or any "plan" as defined in the Code for which the Partnership
has not become or would not be liable if the Limited Partner or holder of Units
and its Affiliate were not Limited Partners and were not holders of Units.
10.9 Waiver of Fiduciary Duty. Each Limited Partner and
holder of Units hereby waives, to the maximum extent permitted under law, any
and all fiduciary duties of the Managing Partner and any other General Partner
to each, all or any combination of them and hereby agrees that the Managing
General Partners and the other General Partners may, but are under no
obligation to, take their interests into account in performing or refraining
from performing any act permitted under this Agreement.
-45-
<PAGE> 51
ARTICLE 11
Amendment of Partnership Agreement, Meetings
11.1 Amendments.
(a) This Agreement may not be amended unless such
amendment is approved by the Managing General Partner and by a
Majority-In-Interest of the Limited Partners, except as provided below in this
Section 11.1.
(b) Notwithstanding Section 11.1(a), the Managing
General Partner shall have the power, without the Consent of the Limited
Partners but after five (5) Business Days notice to the Partners, to amend this
Agreement as may be required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the
Managing General Partner for the benefit of the Limited Partners;
(2) to reflect the admission,
substitution, termination, or withdrawal of Partners after the date hereof in
accordance with Section 4.1(d) or Article 9 of this Agreement, provided that
the Managing General Partner shall not be required to give the notice referred
to in the first paragraph of this subsection (b) in respect of a transfer of
Partnership Interests or Units upon the exercise of Rights or in respect of the
transactions described in Section 4.1(f);
(3) to set forth the rights, powers,
duties, and preferences of the holders of any additional Partnership Interests
issued pursuant to Section 4.2 hereof;
(4) to reflect a change that is of an
inconsequential nature and does not adversely affect the Partners, or to cure
any ambiguity, correct or supplement any provision in this Agreement not
inconsistent with law or with other provisions, or make other changes with
respect to matters arising under this Agreement that will not be inconsistent
with law or with the provisions of this Agreement;
(5) to satisfy any requirements,
conditions, or guidelines contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in federal or state law;
and
(6) to prevent all or any portion of the
assets of the Partnership from being deemed pursuant to United States
Department of Labor Regulation Section 2510.3-101 or otherwise pursuant to
ERISA or the Code to be, for any purpose of ERISA or Section 4975 of the Code,
assets of any Restricted Entity.
(c) Notwithstanding Sections 11.1(a) and (b)
hereof, this Agreement shall not be amended without the prior written consent
of each Partner adversely affected if
-46-
<PAGE> 52
such amendment would (i) convert a Limited Partner's interest in the Partnership
into a General Partner's interest, (ii) modify the limited liability of a
Limited Partner, (iii) alter rights of the Partners to receive allocations and
distributions pursuant to Article 6 or Section 8.2 hereof (except as permitted
pursuant to Section 11.1(b)(3) hereof), (iv) alter or modify the Rights set
forth in the Exchange Rights Agreement or the Registration Rights Agreement
except in compliance therewith, (v) amend this Section 11.1(c), (vi) alter such
Partner's rights to transfer its Partnership Interests or (vii) amend Section
7.8, 7.9, 10.8 or 11.2(e) hereof. Further, no amendment may alter the
restrictions on the Managing General Partner's authority set forth in Section
7.2 hereof without the consent specified in that section.
11.2 Meetings of the Partners; Notices to Partners.
(a) Meetings of Partners may be called by any
Partner to act on any matter specified herein or in the Act to be voted on or
consented to by the Partners. The call shall state the nature of the business
to be transacted. Notice of any such meeting shall be given to all Partners
not less than seven (7) Business Days prior to the date of such meeting.
Partners may vote in person or by proxy at such meeting. Whenever the vote or
Consent of the Limited Partners or Consent of the General Partners is permitted
or required under this Agreement, such vote or consent may be given at a
meeting of Partners or may be given in accordance with the procedure prescribed
in Section 11.2(b) hereof.
(b) Any action required or permitted to be taken
at a meeting of the Partners may be taken without a meeting if a written
consent setting forth the action so taken is signed by the Managing General
Partner and such percentage or number of the Partners as is expressly required
by this Agreement. Such consent may be in one instrument or in several
instruments, and shall have the same force and effect as a vote of the
Partners. Such consent shall be filed with the Managing General Partner and
copies thereof delivered to all Partners. An action so taken shall be deemed
to have been taken at a meeting held on the effective date so certified.
(c) Each Partner may authorize any Person or
Persons to act for him by proxy on all matters in which a Partner is entitled
to participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Partner executing it. No such
proxy and no such revocation shall be effective unless a copy thereof has been
delivered to the Managing General Partner.
(d) Whenever the Consent of the Limited Partners
is required hereunder, the Managing General Partner shall provide a notice to
each Partner who is a Limited Partner on the date the notice is given setting
forth the matter(s) as to which it proposes to seek such consent at least five
(5) Business Days in advance of the date upon which such consent is sought.
-47-
<PAGE> 53
(e) In addition to the requirements of Section
7.2 hereof, the Managing General Partner shall provide advance written notice
to the Limited Partners of any proposed sale or refinancing, and will consult
during normal business hours with any Limited Partner who requests in writing
the right to consult with the General Partner with respect thereto. The
Managing General Partner also shall provide the Limited Partners with quarterly
tax projections for the Partnership. Subject in all respects to Section 7.2
hereof, in no event, however, will the Managing General Partner be obligated to
agree to any modifications to a proposed sale or refinancing which are
suggested by a Limited Partner, nor will any Limited Partner have a veto right
over any such proposed sale or refinancing.
ARTICLE 12
General Provisions
12.1 No Liability of Directors and Others.
Notwithstanding anything to the contrary contained herein, no recourse shall be
had by the Partnership or any Partner against any trustee, director,
shareholder, officer, employee, agent or attorney of any General Partner for
any act or omission of such General Partner or any obligation or liability of
such General Partner under this Agreement, and none of the foregoing shall have
any personal liability for or with respect to any of the foregoing; provided
that the foregoing shall not relieve any trustee, officer or director of a
General Partner of any liability in his capacity as such.
12.2 Notices. All notices, offers or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and may be personally served or sent by United States mail and shall be
deemed to have been given when delivered in person or three business days after
deposit in United States mail, registered or certified, postage prepaid, and
properly addressed, by or to the appropriate party. For purposes of this
Section 12.2, the addresses of the parties hereto shall be as set forth on
Exhibit C hereto. The address of any party hereto may be changed by a notice
in writing given in accordance with the provisions hereof.
12.3 Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement
(including, without limitation, provisions concerning limitations of actions),
shall be governed by and construed in accordance with the laws of the State of
Delaware, notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary. Each of the parties hereto irrevocably submits
and consents to the jurisdiction of the United States District Court for the
Southern District of New York and the United States District Court for the
Central District of California in connection with any action or proceeding
arising out of or relating to this Agreement and irrevocably waives any
immunity from jurisdiction thereof and any claim of proper venue, forum non
conveniens or any similar basis to which it might otherwise be entitled in any
such action or proceeding.
-48-
<PAGE> 54
12.4 Execution of Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
12.5 Severability. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for
any reason any other or others of them may be invalid or unenforceable in whole
or in part.
12.6 Entire Agreement. This Agreement (together with the
Exhibits hereto) and the Formation Agreement contain the entire understanding
among the parties hereto with respect to the subject matter hereof, and
supersede all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as
herein contained. The parties hereto intend that this Agreement be treated as
a separate and distinct agreement and as not being part of any other agreement
(other than the Formation Agreement), arrangement, partnership or joint
venture. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms
hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
12.7 Paragraph Headings. The paragraph headings in this
Agreement are for convenience and they form no part of this Agreement and shall
not affect its interpretation.
12.8 Gender, Etc. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context indicates is appropriate. The term "including" shall
mean "including, but not limited to."
12.9 Number of Days. In computing the number of days
(other than Business Days and Trading Days) for purposes of this Agreement, all
days shall be counted, including Saturdays, Sundays and holidays; provided,
however, that if the final day of any time period falls on a Saturday, Sunday
or holiday on which national banks are or may elect to be closed, then the
final day shall be deemed to be the next day which is not a Saturday, Sunday or
such holiday.
12.10 Partners Not Agents. Nothing contained herein shall
be construed to constitute any Partner the agent of another Partner, except as
specifically provided herein, or in any manner to limit the Limited Partners in
the carrying on of their own respective businesses or activities.
-49-
<PAGE> 55
12.11 Assurances. Each of the Partners shall hereafter
execute and deliver such further instruments and do such further acts and
things as may be reasonably required or useful to carry out the intent and
purpose of this Agreement and as are not inconsistent with the terms hereof.
12.12 Waiver of Partition. Each Partner hereby waives any
right such Partner may have to partition its interest in the Partnership or any
property of the Partnership.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed on their behalf as of the
date first above written.
GENERAL PARTNERS:
HOTEL INVESTORS CORPORATION, a Maryland corporation
By:
---------------------------------------
Kevin E. Malloy
Executive Vice President
COLUMBUS OPERATORS, INC.
By:
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
HOTEL INVESTORS OF ARIZONA, INC.
By:
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
HOTEL INVESTORS OF MICHIGAN, INC.
By:
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
-50-
<PAGE> 56
HOTEL INVESTORS OF VIRGINIA, INC.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
WESTERN HOST, INC.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
HOTEL INVESTORS CORPORATION OF NEVADA
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
HOTEL INVESTORS OF NEBRASKA, INC.
By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
LIMITED PARTNERS:
BERL HOLDINGS, L.P.
By BERL HOLDINGS I, INC.
General Partner
By:
---------------------------------------
Name:
Title:
-51-
<PAGE> 57
WOODSTAR PARTNERS I, L.P.
By STARWOOD CAPITAL GROUP, L.P
General Partner
By BSS CAPITAL PARTNERS, L.P.
General Partner
By STERNLICHT HOLDINGS II, INC.
General Partner
By:
-------------------------------
Name:
Title:
STARWOOD-APOLLO HOTEL PARTNERS VIII, L.P.
By SAHI, INC.
General Partner
By:
----------------------------------
Name:
Title:
STARWOOD-APOLLO HOTEL PARTNERS IX, L.P.
By SAHI, INC.
General Partner
By:
----------------------------------
Name:
Title:
STARWOOD-NOMURA HOTEL INVESTORS, L.P.
By SNHI, INC.
General Partner
By:
----------------------------------
Name:
Title:
-52-
<PAGE> 58
STARWOOD/WICHITA INVESTORS, L.P.
By STARWOOD OPPORTUNITY FUND II, L.P.
General Partner
By STARWOOD CAPITAL GROUP, L.P.
General Partner
By BSS CAPITAL PARTNERS, L.P.
General Partner
By STERNLICHT HOLDINGS II, INC.
General Partner
By:
-----------------------
Name:
Title:
STARWOOD-HUNTINGTON PARTNERS, L.P.
By SRL HOLDINGS, INC.
General Partner
By:
----------------------------------
Name:
Title:
-53-
<PAGE> 59
EXHIBIT A
LIST OF PARTNERS, PERCENTAGE INTERESTS AND UNITS
Date: December 15, 1994
<TABLE>
<CAPTION>
NAME OF PARTNER PERCENTAGE INTEREST UNITS
- --------------- ------------------- ----------
<S> <C> <C>
Hotel Investors Corporation 24.5953% 10,554,205
Columbus Operators, Inc. 0.5678% 243,633
Hotel Investors of Arizona, Inc. 0.5678% 243,633
Hotel Investors of Michigan, Inc. 0.5678% 243,633
Hotel Investors of Virginia, Inc. 0.5678% 243,633
Western Host, Inc. 0.5678% 243,633
Hotel Investors Corporation 0.5678% 243,633
of Nevada
Hotel Investors of Nebraska, Inc. 0.2725% 116,945
Berl Holdings, L.P. 32.5337% 13,960,604
Woodstar Partners I, L.P. 15.6280% 6,706,145
Starwood-Apollo Hotel 2.2722% 975,019
Partners VIII, L.P.
Starwood-Apollo Hotel 3.3050% 1,418,210
Partners IX, L.P.
Starwood-Nomura Hotel 11.5361% 4,950,260
Investors, L.P.
Starwood/Wichita 5.0375% 2,161,657
Investors, L.P.
Starwood-Huntington 1.4129% 606,279
Partners, L.P.
- -------------------------------- -------- ----------
Totals 100.0000% 42,911,122
</TABLE>
<PAGE> 60
EXHIBIT B
CONTRIBUTED PROPERTY AND
CAPITAL CONTRIBUTIONS
General Partners
The properties and assets, subject to the assumption of
liabilities, as described in that certain Contribution Agreement to be entered
into by and among the General Partners and the Partnership in connection with
the Closing (as defined in the Formation Agreement).
Limited Partners
The properties and assets, subject to the assumption of
liabilities, as described in that certain Contribution Agreement to be entered
into by and among the Limited Partners and the Partnership in connection with
the Closing (as defined in the Formation Agreement).
<PAGE> 61
EXHIBIT C
NOTICE ADDRESS OF PARTNERS
<TABLE>
<CAPTION>
NAME OF PARTNER NOTICE ADDRESS
- --------------- --------------
<S> <C>
Hotel Investors Corporation 11845 West Olympic Boulevard
Suite 560
Los Angeles, California 90064
Attention: Kevin E. Mallory,
Executive Vice-
President
Fax No.: (310) 575-9512
Columbus Operators, Inc. Same as above.
Hotel Investors of Arizona, Inc. Same as above.
Hotel Investors of Michigan, Inc. Same as above.
Hotel Investors of Virginia, Inc. Same as above.
Western Host, Inc. Same as above.
Hotel Investors Corporation of
Nevada, Inc. Same as above.
Hotel Investors of Nebraska, Inc. Same as above.
Berl Holdings I, L.P. c/o Starwood Capital Group, L.P.
Three Pickwick Plaza
Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Fax No.: (203) 861-2101
Woodstar Partners I, L.P. Same as above.
Starwood-Apollo Hotels Partners
VIII, L.P. Same as above.
Starwood-Apollo Hotel Partners
IX, L.P. Same as above.
Starwood-Nomura Hotel Investors,
L.P. Same as above.
</TABLE>
<PAGE> 62
Starwood/Wichita Investors, L.P. Same as above.
Starwood-Huntington Partners, L.P. Same as above.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED DECLARATION OF TRUST
OF
STARWOOD LODGING TRUST
DATED AS OF AUGUST 15, 1969 AS
AMENDED AND RESTATED AS OF JUNE 6, 1988
AMENDED AS OF FEBRUARY 1, 1995
-1-
<PAGE> 2
AMENDED AND RESTATED DECLARATION OF TRUST
OF
STARWOOD LODGING TRUST
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - The Trust; Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Nature of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II - Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Number, Term of Office, Qualifications of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Compensation and Other Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Resignation, Removal and Death of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Successor and Additional Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Actions by Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Names and Addresses of Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 Non-Affiliated Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III - Trustees' Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Power and Authority of Trustees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Specific Powers and Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Trustees' Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Additional Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV - Advisor; Limitation on Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1 Employment of Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3 Restrictions on Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4 Limitation on Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5 Initial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6 Sale of Shares of the Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V - Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.1 General Statement of Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.2 Changes in Investments Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3 Other Permissible Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Obligor's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.5 Changes in Investment Policies and Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI - The Shares and Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Legal Ownership of Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Shares Deemed Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.4 Share Record: Issuance and Transferability of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
-i-
<PAGE> 3
<TABLE>
PAGE
----
<S> <C>
6.5 Dividends or Distributions to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.6 Transfer Agent, Dividend Disbursing Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . 25
6.7 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.8 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.9 Reports to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.10 Fixing Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.11 Notice to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.12 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.13 Excess Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.14 Pairing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII - Liability of Trustees, Shareholders and Officers, and Other Matters . . . . . . . . . . . . . . . . 37
7.1 Exculpation of Trustees and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2 Limitation of Liability of Shareholders, Trustees and Officers . . . . . . . . . . . . . . . . . . . . . 38
7.3 Express Exculpatory Clauses and Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.4 Indemnification of Trustees, Officers, Employees and Other Agents . . . . . . . . . . . . . . . . . . . 38
7.5 Right of Trustees and officers to Own Shares or Other Property and to Engage in Other Business . . . . 39
7.6 Transactions Between the Trustees and the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.7 Restriction of Duties and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.8 Persons Dealing with Trustees or Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.9 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.10 Income Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VIII - Duration, Amendment, Termination and Qualification of Trust . . . . . . . . . . . . . . . . . . . . 43
8.1 Duration of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2 Termination of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.3 Amendment Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.4 Qualification Under the REIT Provisions of the Internal Revenue Code . . . . . . . . . . . . . . . . . 44
ARTICLE IX - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.1 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.2 Index and Headings for Reference Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.3 Successors in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.4 Inspection of Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.6 Provisions of the Trust in Conflict with Law or Regulations . . . . . . . . . . . . . . . . . . . . . . 45
9.7 Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.8 Recording and Filing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.9 Resident Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
-ii-
<PAGE> 4
AMENDED AND RESTATED DECLARATION OF TRUST
As of August 15, 1969, the initial Trustees agreed, pursuant
to a Declaration of Trust dated as of said date (the "Declaration of Trust"),
to hold in trust as trustees any and all property, real, personal or otherwise,
tangible or intangible, which is transferred, conveyed or paid to them as such
Trustees and all rents, income, profits and gains therefrom for the benefit of
the Shareholders thereunder, subject to the terms and conditions and for the
uses and purposes set forth therein. As of August 5, 1970, the Trustees who
were a majority of the Trustees on said date agreed, pursuant to an Amended
Declaration of Trust dated as of said date to restate in its entirety the
Declaration of Trust, as theretofore amended. The effect of this Amended and
Restated Declaration of Trust shall be to restate in its entirety said Amended
Declaration of Trust as heretofore amended (the "Amended Declaration of
Trust"), and it shall not have the effect of dissolving or terminating or in
any way affecting the continuity of, but shall continue without interruption,
the trust created by the Declaration of Trust (the "Trust").
The undersigned, being a majority of the Trustees as of June
6, 1988, under the Amended Declaration of Trust, do hereby set forth this
Amended and Restated Declaration of Trust, do hereby agree to be bound by this
Amended and Restated Declaration of Trust and do hereby certify that the
amendments to the Amended Declaration of Trust included in this Amended and
Restated Declaration of Trust were duly adopted by the Shareholders of the
Trust in accordance with the Amended Declaration of Trust.
ARTICLE I
THE TRUST; DEFINITIONS
1.1 Name. The name of the Trust shall be "Starwood
Lodging Trust." As far as practicable and except as otherwise provided in this
Declaration, the Trustees shall conduct the Trust's activities, execute all
documents, and sue or be sued in the name of Starwood Lodging Trust, or in
their names as Trustees of Starwood Lodging Trust.
1.2 Place of Business. The principal office of the Trust
shall be in the State of Maryland. However, the Trustees may, from time to
time, change such location and maintain other offices or places of business.
1.3 Nature of Trust. The Trust is a real estate
investment trust organized under Article 78C of the Annotated
-1-
<PAGE> 5
Code of the State of Maryland. It is intended that the Trust shall carry on
business as a "real estate investment trust" (hereinafter called "REIT" or
"Real Estate Investment Trust") as described in the REIT Provisions of the
Internal Revenue Code. The Trust is not a general partnership, limited
partnership, joint venture, corporation or joint stock company or association
(but nothing herein shall preclude the Trust from being taxed as an association
under the REIT Provisions of the Internal Revenue Code) nor shall the Trustees
or Shareholders or any of them for any purpose be, or be deemed to be treated
in any way whatsoever to be, liable or responsible hereunder as partners or
joint ventures. The relationship of the Shareholders to the Trustees shall be
solely that of beneficiaries of the Trust and their rights shall be limited to
those conferred upon them by this Declaration.
1.4 Definitions. The terms defined in this Section 1.4
whenever used in this Declaration shall, unless the context otherwise requires,
have the respective meanings hereinafter specified in this Section 1.4. In this
Declaration, words in the singular number include the plural and in the plural
number include the singular.
(a) Accommodations Field. "Accommodations Field" shall
mean the hotel, motel, motor inn, restaurant, and lodgings field generally, and
shall also be deemed to include activities undertakings and businesses directly
allied or connected with, or directly related to, hotels, motels, motor inns,
restaurants or lodgings.
(b) Advisor. "Advisor" shall mean the Person employed by
the Trustees under the provisions of Article IV.
(c) Affiliate. "Affiliate" shall mean (i) with respect
to any Person, any other Person (A) which such Person directly or indirectly
controls, is controlled by, or is under common control with or (B) of which
such Person is a director, officer, employee, partner or trustee or (C) of
which such Person directly or indirectly owns, controls or holds with power to
vote five percent (5%) or more of the outstanding voting securities or (D)
which directly or indirectly owns, controls or holds with power to vote five
percent (5%) or more of the outstanding voting securities of such Person and
(ii) with respect to the Trust, the Advisor and any other investment adviser,
manager or independent contractor (as that term is defined in Section 856(d)(3)
of the Internal Revenue Code) of the Trust.
(d) Annual Meeting of Shareholders. "Annual Meeting of
Shareholders" shall have the meaning set forth in the first sentence of Section
6.7.
-2-
<PAGE> 6
(e) Annual Report. "Annual Report" shall have the
meaning set forth in Section 6.9.
(f) Appraisal. "Appraisal" shall mean the fair market
value, as of the date of the appraisal, of Real Property in its existing state
or in a state as to be created or improved, as determined by the Trustees or as
determined by any bank, insurance company or other Person which makes
appraisals in connection with its lending or services activities or as
determined by a disinterested Person having no interest in the Real Property,
provided, however, that, any such Person, is, in the sole judgment of the
Trustees properly qualified to make a determination; provided further that an
appraisal shall be included within the meaning of the term Appraisal as used
herein upon which the Trustees may in good faith rely if it is made on behalf
of a Person or Persons other than the Trust at or prior to the time of the
investment by the Trust if the Trust is acquiring an interest (either in whole
or in part) in the investment with respect to which such appraisal is or has
been made.
(g) Construction Loans. "Construction Loans" shall mean
Mortgage Loans incurred to finance all or part of the cost of acquiring and
improving land (including leaseholds therein) and the construction or
improvement of buildings and other improvements thereon.
(h) Declaration. "Declaration" shall mean this
Declaration of Trust and all amendments or modifications thereof. References
in this Declaration to "herein" and "hereunder" shall be deemed to refer to
this Declaration and shall not be limited to the particular text, article or
section in which such words appear.
(i) Development Loans. "Development Loans" shall mean
Mortgage Loans incurred to finance all or part of the cost of acquiring and
improving vacant land and developing it into a site or sites suitable for the
construction of buildings thereon or suitable for other residential,
commercial, industrial or public uses.
(j) Equity Investments. "Equity Investments" shall mean
investments in Real Property (other than Mortgage Loans), or in borrowing or
leasing entities or other organizations owning, operating or managing Real
Property.
(k) Equity Participations. "Equity Participations" shall
mean participations acquired in connection with making any Real Property
Investment including, but not limited to, participations in contingent interest
based upon operating revenues, participations in the ownership of Real
Property, participations in rental based upon operating revenues or based upon
a percentage of sales or room rents, or participations in
-3-
<PAGE> 7
the ownership of borrowing or leasing entities or other organizations owning,
operating or managing Real Property.
(l) First Mortgage. "First Mortgage" shall mean a
Mortgage which takes priority or precedence over all other charges or liens
upon the Real Property and which must be satisfied before such other charges
are entitled to participate in the proceeds of any sale. Such priority shall
not be deemed as abrogated by liens for taxes, or assessments which are not
delinquent or remain payable without penalty, contracts (other than contracts
for repayment of borrowed moneys), or leases, mechanic's and materialman's
liens for work performed and materials furnished which are not in default or
are in good faith being contested and other claims normally deemed in the same
local jurisdiction not to abrogate the priority of a first mortgage.
(m) First Mortgage Loans. "First Mortgage Loans" shall
mean Mortgage Loans secured or collateralized at the time of acquisition
thereof by the Trust by First Mortgages.
(n) Interim Loans. "Interim Loans" shall mean Mortgage
Loans secured or collateralized by Mortgages made on improved properties and
having a maturity of three years or less.
(o) Junior Mortgage. "Junior Mortgage" shall mean any
Mortgage (other than a Mortgage securing a Wrap-Around Mortgage Loan or a
Mortgage securing the junior portion of a Mortgage Loan with respect to which a
Senior Participation has been issued) which has the same priority or precedence
over all charges or encumbrances on Real Property as is required for a First
Mortgage, except that it is subject to the priority of one or more Mortgages
which must be satisfied before such Junior Mortgage is entitled to participate
in the proceeds of any sale or other disposition of such Real Property.
(p) Junior Mortgage Loans. "Junior Mortgage Loans" shall
mean Mortgage Loans (other than Wrap-Around Mortgage Loans and the junior
portion of Mortgage Loans with respect to which a Senior Participation has been
sold) secured or collateralized by Junior Mortgages.
(q) Long Term. "Long Term" shall mean, when used with
respect to a Mortgage Loan, a Mortgage Loan other than an Interim Loan or a
Construction Loan and, when used with respect to any other Real Property
Investment, shall mean such an investment which is not expected to be amortized
in full within a period of three years from the date on which such investment
is made.
(r) Mortgage Loans. "Mortgage Loans" shall mean notes,
debentures, bonds and other evidence of indebtedness or
-4-
<PAGE> 8
obligation which are negotiable or non-negotiable and which are secured or
collateralized by Mortgages.
(s) Mortgages. "Mortgages" shall mean mortgages, deeds
of trust or other security deeds on Real Property or rights or interests in
Real Property.
(t) National Hotel Companies. "National Hotel Companies"
shall mean Hilton Hotels Corporation, Marriott Corporation, Holiday Inns, Inc.,
TraveLodge International, Inc. and any other nationally known hotel companies
which are engaged in operations in the Accommodations Field or the granting of
franchises to other Persons with respect to such operations and the Affiliates
of any of them.
(u) Net Assets. "Net Assets" shall mean the "Total
Assets of the Trust", after deducting therefrom all liabilities of the Trust;
provided, however, that depreciable assets shall be included in such Assets at
the lesser of either:
(i) the cost of such Assets on the books of the Trust less
depreciation thereof on a straight-line basis over the useful life of
such Assets in accordance with generally accepted accounting
principles, and in making such calculation the useful life of such
Assets shall correspond to the useful life used as the basis of
depreciation on the Trust's federal income tax returns; or
(ii) fair market value of such Assets, in the judgment of
the Trustees.
(v) Person. "Person" shall mean and include individuals,
corporations, limited partnerships, general partnerships, joint stock companies
or associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities and governments and
agencies and political subdivisions thereof.
(w) Real Property. "Real Property" shall mean and
include land, rights in land, leasehold interests (including but not limited to
interests of a lessor or lessee therein), and any building, structures,
improvements, fixtures and equipment located on or used in connection with
land, leasehold interests and rights in land or interest therein, but does not
include Mortgages, Mortgage Loans or interests therein.
(x) Real Property Investments. "Real Property
Investments" shall mean and include investments in Real Property or in
obligations secured, directly or indirectly, by liens on Real Property,
including, but not limited to, Long-Term Mortgage Loans (with or without Equity
Participations), Interim Loans, Development Loans, Construction Loans, First
Mortgage Loans,
-5-
<PAGE> 9
Junior Mortgage Loans, Wrap-Around Mortgage Loans and Equity Investments in
Real Property (including, but not limited to, land leasebacks and leasehold
mortgage loans, net lease financings and sale and leaseback transactions).
(y) REIT Provisions of the Internal Revenue Code. "REIT
Provisions of the Internal Revenue Code" shall mean Part II, Subchapter M of
Chapter 1, of the Internal Revenue Code of 1954, as now enacted or hereafter
amended, or successor statutes and regulations promulgated thereunder.
(z) Securities. "Securities" shall mean any stock,
shares, voting trust certificates, bonds, debentures, notes, or other evidences
of indebtedness, or in general any instruments commonly known as "securities"
or any certificates of interest shares or participations in temporary or
interim certificates for, receipts for, guarantees of, or warrants, options or
rights to subscribe to, purchase or acquire any of the foregoing.
(aa) Senior Participation. "Senior Participation" shall
mean a participation or interest which shall have been sold by the Trust in a
Mortgage Loan, on terms and conditions satisfactory to the Trustees, pursuant to
which the participation sold takes priority or precedence as to charges and
liens upon the mortgaged property and satisfaction out of the proceeds of any
sale over the junior portion of the Mortgage Loan retained by the Trust;
provided, however, that a participation sold in a Mortgage Loan shall not be
deemed to be a Senior Participation as such term is used in this Declaration
unless such Mortgage Loan, considered as a single Mortgage Loan including the
junior portion retained by the Trust, would satisfy all of the requirements
relating to the investment by the Trust in a First Mortgage Loan.
(bb) Shares. "Shares" shall mean the shares of beneficial
interest of the Trust as described in Section 6.1.
(cc) Shareholders. "Shareholders" shall mean, as of any
particular time, all holders of record of outstanding Shares at such time.
(dd) Total Assets of the Trust. "Total Assets of the
Trust" shall mean the value of all the assets of the Trust Estate as such value
appears on the most recent quarterly balance sheet of the Trust available to the
Trustees.
(ee) Trust. "Trust" shall mean the Trust created by this
Declaration.
(ff) Trustees. "Trustees" shall mean, as of any particular
time Trustees holding office under this Declaration at such time, whether they
be the Trustees named herein or additional or successor Trustees, and shall not
include the
-6-
<PAGE> 10
officers, representatives or agents of the Trust, or the Shareholders, but
nothing herein shall be deemed to preclude the Trustees from also serving as
officers, representatives, or agents of the Trust, or owning Shares.
(gg) Trust Estate. "Trust Estate" shall mean, as of any
particular time, any and all property, real, personal, or otherwise, tangible
or intangible, which is owned or held by the Trust or the Trustees, including,
but not limited to, property which is transferred, conveyed or paid to the
Trust or Trustees, and all rents, income, profits and gains therefrom.
(hh) Trustees' Regulations. "Trustees' Regulations" shall
have the meaning set forth in Section 3.3.
(ii) Wrap-Around Mortgage Loans. "Wrap-Around Mortgage
Loans" shall mean Mortgage Loans which are subject to prior First Mortgages
(which have been created prior to or simultaneously with the creation of the
Wrap-Around Mortgage Loan) and are made on the basis of the current values of
the mortgaged properties without regard to and without discharging the prior
First Mortgages; provided, however, that a Mortgage Loan shall not be included
in the term Wrap-Around Mortgage Loan for purposes of this Declaration unless
the indebtedness evidenced by the Wrap-Around Mortgage Loan when added to the
indebtedness evidenced by the prior First Mortgage and considered as a single
First Mortgage Loan would comply in all respects with the requirements relating
to an investment by the Trust in such a First Mortgage Loan.
ARTICLE II
TRUSTEES
2.1 Number, Term of Office, Qualifications of Trustees.
There shall be no less than three (3) nor more than fifteen (15) Trustees. The
initial Trustees shall be the signatories to this Declaration as originally
executed. Within the limits set forth in this Section 2.1, the number of
Trustees may be fixed, increased or decreased from time to time by the Trustees
or by the Shareholders at any particular time provided however that, subject to
the provisions of section 2.3, each Trustee shall hold office until the
expiration of his term and until the election and qualification of his
successor. Trustees may be re-elected. The Trustee shall be an individual at
least twenty-one (21) years of age who is not under legal disability Such
individual shall qualify as a Trustee when he has either signed the Declaration
or agreed in writing to be bound by it. Unless otherwise required by law, no
Trustee shall be required to give bond, surety or security in any jurisdiction
for the performance of any duties or obligations hereunder. The
-7-
<PAGE> 11
Trustees, in their capacity as trustees, shall not be required to devote their
entire time to the business and affairs of the Trust.
The Trustees shall be divided, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as reasonably possible, with the term of office of the first class to expire at
the 1995 Annual Meeting of Shareholders, the term of office of the second class
to expire at the 1996 Annual Meeting of Shareholders and the term of office of
the third class to expire at the 1997 Annual Meeting of Shareholders, with each
Trustee to hold office until his or her successor shall have been duly elected
and qualified. At each Annual Meeting of Shareholders, commencing with the
1995 Annual Meeting, (i) Trustees elected to succeed those Trustees whose terms
then expire shall be elected for a term of office to expire at the third
succeeding Annual Meeting of Shareholders after their election, with each
Trustee to hold office until his or her successor shall have been duly elected
and qualified, and (ii) if authorized by a resolution of the Board of Trustees,
Trustees may be elected to fill any vacancy on the Board of Trustees,
regardless of how such vacancy shall have been created.
2.2 Compensation and Other Remuneration. The Trustees
shall be entitled to receive such reasonable compensation for their services as
Trustees as they may determine from time to time. The Trustees, either
directly or indirectly, shall also be entitled to receive remuneration for
services rendered to the Trust in any other capacity. Such services may
include, without limitation, services as an officer of the Trust, legal,
accounting or other professional services, or services as a broker, transfer
agent or underwriter, whether performed by a Trustee or any person affiliated
with a Trustee. Notwithstanding the foregoing, except as provided in Section
7.6, no Trustee shall receive any fee or other remuneration, directly or
indirectly, as a result of any sale of property to or purchase of property from
the Trust.
2.3 Resignation, Removal and Death of Trustees. A
Trustee may resign at any time by giving written notice in recordable form to
the remaining Trustees at the principal office of the Trust. Such resignation
shall take effect on the date such notice is given, or at any later time
specified in the notice, without need for prior accounting. A Trustee may be
removed at any time, with or without cause, by vote or written consent of
holders of two-thirds (2/3rds) of the outstanding Shares entitled to vote
thereon, or with cause by all remaining Trustees. A Trustee judged
incompetent, or for whom a guardian or conservator has been appointed, shall be
deemed to have resigned as of the date of such adjudication or appointment.
Upon the resignation or removal of any Trustee, or his otherwise ceasing to be
a Trustee, he shall execute and deliver such
-8-
<PAGE> 12
documents as the remaining Trustee shall require for the conveyance of any
Trust property held in his name, and shall account to the remaining Trustee or
Trustees, as they require, for all property which he holds as Trustee, and
shall thereupon be discharged as Trustee. Upon the incapacity or death of any
Trustee, his legal representative shall perform the acts set forth in the
preceding sentence and the discharge mentioned therein shall run to such legal
representative and to the incapacitated Trustee or the estate of the deceased
Trustee, as the case may be.
2.4 Vacancies. If any or all of the Trustees cease to be
Trustees hereunder, whether by reason of resignation, removal, incapacity,
death or otherwise, such event shall not terminate the Trust or affect its
continuity. Until vacancies are filled, the remaining Trustee or Trustees, if
any (even though less than three (3)), may exercise the powers of the Trustees
hereunder. Vacancies occurring among the Trustees (including vacancies created
by increases in number) may be filled by a majority of the remaining Trustees,
though less than a quorum, or by a sole remaining Trustee, and the person so
appointed shall hold office for a term expiring at the Annual Meeting of
Shareholders at which the term of office of the class to which they have been
appointed expires and until his successor is elected and qualified. If at any
time there shall be no Trustees in office, successor Trustees shall be elected
by the Shareholders as provided in Section 6.7.
2.5 Successor and Additional Trustees. The right, title
and interest of the Trustees in and to the Trust Estate shall also vest in
successor and additional Trustees upon their qualification, and they shall
thereupon have all the rights and obligations of Trustees hereunder. Such
right, title and interest shall vest in the Trustees, whether or not conveyance
documents have been executed and delivered pursuant to Section 2.3, or
otherwise.
2.6 Actions by Trustees. A quorum for all meetings of
the Trustees shall be a majority of the Trustees. Common or interested
Trustees may be counted in determining the presence of a quorum at a meeting of
the Trustees. Unless specifically provided otherwise in this Declaration, the
Trustees may act by a vote or resolution at a meeting at which a quorum is
present, or without a meeting by a written vote, resolution, or other writing
consenting to said action, signed by a majority of the Trustees. Any
agreement, deed, mortgage, lease or other instrument or writing executed by one
or more of the Trustees, or by any authorized person, shall be valid and
binding upon the Trustees and upon the Trust when ratified by action of the
Trustees.
2.7 Executive Committee. The Trustees may appoint from
among their own number an executive committee of two or more
-9-
<PAGE> 13
persons to whom they may delegate from time to time such of the powers herein
given to the Trustees as they may deem advisable.
2.8 Names and Addresses of Trustees and Officers. The
names and addresses of the Trustees and officers of the Trust on the date
hereof* are as follows:
Name Address
---- -------
John P. Traynor. . . . . . . .6308 Midnight Pass Road Villa 4
Trustee and Chairman Sarasota, Florida 33581
Harold W. Milner. . . . . . . 1503 Walden Drive
Trustee and President McLean, Virginia
Raymond C. Brophy. . . . . . .1725 DeSales N.W.
Trustee Washington, D.C.
Richard S. Ellwood. . . . . . 10 Heron Road
Trustee Middletown, New Jersey 07748
Charles J. Kelley, Jr. . . . .400 East 57th Street
Trustee New York, New York
Frederick X. Wilson. . . . . .7009 Chansory Lane
Trustee Hyattsville, Maryland 20782
C. Lawrence Wiser. . . . . . .12702 Littleton Street
Trustee and Secretary Silver Spring, Maryland 20906
-Treasurer
2.9 Non-Affiliated Trustees. Affiliates of the Advisor
and of any National Hotel Company may be Trustees; however, there shall at all
times be at least a majority of the Trustees who are not Affiliates of the
Advisor or of any National Hotel Company or Affiliates of such Affiliates. If
at any time, by reason of one or more vacancies, there shall not be at least a
majority of such Trustees who are not such Affiliates, then within sixty (60)
days after such vacancy occurs, the continuing Trustee or Trustees then in
office shall appoint, pursuant to Section 2.4, a sufficient number of other
Persons who are not such Affiliates so that there shall be at least a majority
of such Trustees in office.
ARTICLE III
- ----------------------------------
* Refers to date of the Amended Declaration of Trust (August 5, 1970).
-10-
<PAGE> 14
TRUSTEES' POWERS
3.1 Power and Authority of Trustees. The Trustees,
subject only to the specific limitations contained in this Declaration, shall
have without further or other authorization, and free from any power or control
on the part of the Shareholders, full, absolute and exclusive power, control and
authority over the Trust Estate and over the business and affairs of the Trust
to the same extent as if the Trustees were the sole owners thereof in their own
right, and to do all such acts and things as in their sole judgment and
discretion are necessary or incidental to, or desirable, for the carrying out of
any of the purposes of the Trust or conducting the business of the Trust. Any
determination made in good faith by the Trustees of the purposes of the Trust or
the existence of any power or authority hereunder shall be conclusive. In
construing the provisions of this Declaration, presumption shall be in favor of
the grant of powers and authority to the Trustees. The enumeration of any
specific power or authority herein shall not be construed as limiting the
general powers or authority or any other specified power or authority conferred
herein upon the Trustees.
3.2 Specific Powers and Authorities. Subject only to the
express limitations contained in this Declaration and in addition to any powers
and authorities conferred by this Declaration or which the Trustees may have by
virtue of any present or future statute or rule or law, the Trustees without
any action or consent by the Shareholders shall have and may exercise at any
time and from time to time the following powers and authorities which may or
may not be exercised by them in their sole judgment and discretion and in such
manner and upon such terms and conditions as they may from time to time deem
proper:
(a) To retain, invest and reinvest the capital or other
funds of the Trust in real or personal property of any kind, all without regard
to whether any such property is authorized by law for the investment of trust
funds and to possess and exercise all the rights, powers and privileges
appertaining to the ownership of the Trust Estate and to increase the capital
of the Trust at any time by the issuance of additional Shares for such
consideration as they deem appropriate.
(b) For such consideration as they deem proper, to invest
in, purchase or otherwise acquire for cash or other property or through the
issuance of Shares or through the issuance of notes, debentures, bonds or other
obligations of the Trust and hold for investment the entire of any
participating interest in notes, bonds, or other obligations which are secured
by Mortgages. In connection with any such investment, purchase or acquisition,
the Trustees shall have the power to acquire a
-11-
<PAGE> 15
share of rents, lease payments or other gross income from or a share of the
profits from or a share in the equity or ownership of Real Property, either
directly or through joint venture, general or limited partnership, or other
lawful combinations or associations; to invest in loans secured by the pledge
or transfer of mortgage obligations; to develop, operate, pool, utilize, grant
production payments out of or lease or otherwise dispose of mineral, oil and
gas properties and rights.
(c) To sell, rent, lease, hire, exchange, release,
partition, assign, mortgage, pledge, hypothecate, grant security interests in,
encumber, negotiate, convey, transfer or otherwise dispose of any and all of
the Trust Estate by deeds, trust deeds, assignments, bills of sale, transfers,
leases, mortgages, financing statements, security agreements and other
instruments for any of such purposes executed and delivered for and on behalf
of the Trust or the Trustees by one or more of the Trustees or by a duly
authorized officer, employee, agent or any nominee of the Trust.
(d) To issue Shares, bonds, debentures, notes or other
evidences of indebtedness which may be secured or unsecured and may be
subordinated to any indebtedness of the Trust and may be convertible into
Shares and which may include options, warrants and rights to subscribe to,
purchase or acquire any of the foregoing, all without vote of or other action
by the Shareholders to such Persons for such cash, property or other
consideration (including Securities issued or created by, or interest in any
Person) at such time or times and on such terms as the Trustees may deem
advisable and to list any of the foregoing Securities issued by the Trust on
any securities exchange and to purchase or otherwise acquire, hold, cancel,
reissue, sell and transfer any of such Securities.
(e) To enter into leases, contracts, obligations, and
other agreements for a term extending beyond the term of office of the Trustees
and beyond the possible termination of the Trust or for a lesser term.
(f) To-borrow money and give negotiable or nonnegotiable
instruments therefor; to guarantee, indemnify or act as surety with respect to
payment or performance of obligations of third parties; to enter into other
obligations on behalf of the Trust; and to assign, convey, transfer, mortgage,
subordinate, pledge, grant security interests in, encumber or hypothecate the
Trust Estate to secure any of the foregoing.
(g) To lend money, whether secured or unsecured.
(h) To create reserve funds for any purpose.
-12-
<PAGE> 16
(i) To incur and pay out of the Trust Estate any charges
or expenses, and disburse any funds of the Trust, which charges, expenses or
disbursements are, in the opinion of the Trustees, necessary or incidental to or
desirable for the. carrying out of any of the purposes of the Trust or
conducting the business of the Trust, including without limitation taxes and
other governmental levies, charges and assessments, of whatever kind or nature,
imposed upon or against the Trustees in connection with the Trust or the Trust
Estate or upon or against the Trust Estate or any part thereof, and for any of
the purposes herein.
(j) To deposit funds of the Trust in banks, trust
companies, savings and loan associations and other depositories, whether or not
such deposits will draw interest, the same to be subject to withdrawal on such
terms and in such manner and by such Person or Persons (including any one or
more Trustees, officers, agents or representatives) as the Trustees may
determine.
(k) To possess and exercise all the rights, powers and
privileges appertaining to the ownership of all or any Mortgages or Securities,
issued or created by, or interests in, any Person, forming part of the Trust
Estate, to the same extent that an individual might, and, without limiting the
generality of the foregoing, to vote or give any consent, request or notice, or
waive any notice, either in person or by proxy or power of attorney, with or
without power of substitution, to one or more Persons, which proxies and powers
of attorney may be for meetings or action generally or for any particular
meeting or action, and may include the exercise of discretionary powers.
(l) To cause to be organized or assist in organizing any
Person under the laws of any jurisdiction to acquire the Trust Estate or any
part or parts thereof or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, rent, lease, hire,
convey, negotiate, assign, exchange or transfer the Trust Estate or any part or
parts thereof to or with any such Person in exchange for the Securities thereof
or otherwise, and to lend money to, subscribe for the Securities of, and enter
into any contracts with, any such Person in which the Trust holds or is about
to acquire Securities or any other interest.
(m) To enter into joint ventures, general or limited
partnerships and any other lawful combinations or associations.
(n) To elect, appoint, engage or employ officers for the
Trust (including a President, Secretary, Treasurer and such Vice Presidents and
other officers as the Trustees may determine), who may be removed or discharged
at the discretion of the Trustees, such officers to have such powers and
duties, and
-13-
<PAGE> 17
to serve such terms, as may be prescribed by the Trustees or by the Trustees'
Regulations; to engage or employ any Persons (including, subject to the
provisions of Sections 7.5 and 7.6, any Trustee or officer and any Person in
which any Trustee or officer is directly or indirectly interested or with which
he is directly or indirectly connected) as agents, representatives, employees,
or independent contractors (including without limitation, real estate advisors,
investment advisors, transfer agents, registrars, underwriters, accountants,
attorneys at law, real estate agents, managers, appraisers, brokers,
architects, engineers, construction managers, general contractors or otherwise)
in one or more capacities, and to pay compensation from the Trust for services
in as many capacities as such Person may be so engaged or employed; and, except
as prohibited by law, to delegate any of the powers and duties of the Trustees
to any one or more Trustees, agents, representatives, officers, employees
independent contractors or other Persons. The Trustees may elect one of the
Trustees as Chairman, to preside at meetings of the Trustees and exercise such
other powers and duties as the Trustees may from time to time assign to him;
provided that the Chairman shall not be or act as an officer of the Trust.
(o) To determine whether moneys, Securities or other
assets received by the Trust shall be charged or credited to income or capital
or allocated between income and capital, including the power to amortize or
fail to amortize any part or all of any premium or discount, to treat any part
of all of the profit resulting from the maturity or sale of any asset whether
purchased at a premium or at a discount, as income or capital, or apportion the
same between income and capital, to apportion the sales price of any asset
between income and capital, and to determine in what manner any expenses or
disbursements are to be borne as between income and capital, whether or not in
the absence of the power and authority conferred by this subsection such
moneys, Securities or other assets would be regarded as income or as capital or
such expense or disbursement would be charged to income or to capital; to treat
any dividend or other distribution on any investment as income or capital or
apportion the same between income and capital; to provide or fail to provide
reserves for depreciation, amortization or obsolescence in respect of all or
any part of the Trust Estate subject to depreciation, amortization or
obsolescence in such amounts and by such methods as they shall determine; and
to determine the method or form in which the accounts and records of the Trust
shall be kept and to change from time to time such method or form.
(p) To determine from time to time, the value of all or
any part of the Trust Estate and of any services, Securities, property or other
consideration to be furnished to or acquired by the Trust, and from time to
time to revalue all or any part of the Trust Estate in accordance with such
appraisals or other
-14-
<PAGE> 18
information as are, in the Trustees' sole judgment, necessary and/or
satisfactory.
(q) To collect, sue for, and receive all sums of money
coming due to the Trust, and to engage in, intervene in, prosecute, join,
defend, compound, compromise, abandon or adjust, by arbitration or otherwise,
any actions, suits, proceeding, disputes, claims, controversies demands or
other litigation relating to the Trust, the Trust Estate or the Trust's
affairs, to enter into agreements therefor, whether or not any suit is
commenced or claim accrued or asserted and, in advance of any controversy, to
enter into agreements regarding arbitration, adjudication or settlement
thereof.
(r) To renew, modify, release, compromise, extend,
consolidate, or cancel, in whole or in part, any obligation to or of the Trust.
(s) To purchase and pay for out of the Trust Estate
insurance contracts and policies insuring the Trust Estate against any and all
risks and insuring the Trust and/or any or all of the Trustees, the
Shareholders or officers against any and all claims and liabilities of every
nature asserted by any Person arising by reason of any action alleged to have
been taken or omitted by the Trust or by the Trustees, Shareholders, or
officers.
(t) To cause legal title to any of the Trust Estate to be
held by and/or in the name of the Trustees, or except as prohibited by law, by
and/or in the name of the Trust or one or more of the Trustees or any other
Person, on such terms, in such manner, with such powers in such Person as the
Trustees may determine, and with or without disclosure that the Trust or
Trustees are interested therein.
(u) To adopt a fiscal year for the Trust, and from time
to time to change such fiscal year.
(v) To adopt and use a seal (but the use of a seal shall
not be required for the execution of instruments or obligations of the Trust).
(w) To make, perform, and carry out, or cancel and
rescind, contracts of every kind for any lawful purpose without limit as to
amount, with any person, firm, trust, association, corporation, municipality,
county, parish, state, territory, government or other municipal or governmental
subdivision. These contracts shall be for such duration and upon such terms as
the Trustees in their sole discretion shall determine.
(x) To do all other such acts and things as are incident
to the foregoing, and to exercise all powers which are
-15-
<PAGE> 19
necessary or useful to carry on the business of the Trust, to promote any of
the purposes for which the Trust is formed, and to carry out the provisions of
this Declaration.
3.3 Trustees' Regulations. The Trustees may make, adopt,
amend or repeal regulations (the "Trustees' Regulations") containing provisions
relating to the business of the Trust, the conduct of its affairs, its rights
or powers and the rights or powers of its Shareholders, Trustees or officers
not inconsistent with law or with this Declaration.
3.4 Additional Powers. The Trustees shall additionally
have and exercise all the powers conferred by the laws of the State of Maryland
upon real estate investment trusts formed under such laws, insofar as such laws
are not in conflict with the provisions of this Declaration.
3.5 Incorporation. With the approval of the holders of a
majority of the shares, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association, or other organization to take over
the Trust property or any part or parts thereof or to carry on any business in
which the Trust shall directly or indirectly have any interest, and to sell,
convey and transfer the Trust property or any part or parts thereof to any such
corporation, trust, association, or organization in exchange for the shares or
securities thereof or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such corporation,
trust, association, or organization, or any corporation, trust, partnership,
association, or organization in which the Trust holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation if and to the extent permitted by law, provided that under the law
then in effect, the federal income tax benefits available to Real Estate
Investment Trusts, or substantially similar benefits, are also available to
such corporation, trust, association or organization.
ARTICLE IV
ADVISOR; LIMITATION ON OPERATING EXPENSES
4.1 Employment of Advisor. The Trustees are responsible
for the general policies of the Trust and for such general supervision of the
business of the Trust conducted by all officers, agents, employees, advisors,
managers or independent contractors of the Trust as may be necessary to insure
that such business conforms to the provisions of this Declaration. However,
the Trustees shall not be required personally to conduct
-16-
<PAGE> 20
the business of the Trust, and consistent with their ultimate responsibility as
stated above, the Trustees shall have the power to appoint, employ or contract
with such Person or Persons (including one or more of themselves or any
corporation, partnership, or trust in which one or more of them may be
directors, officers, stockholders, partners or trustees) as the Trustees may
deem necessary or proper for the transaction of the business of the Trust. The
Trustees may therefor employ or contract with such Person (herein referred to
as the "Advisor") as an investment adviser and administrator of the affairs of
the Trust and may grant or delegate such authority to the Advisor as the
Trustees may in their sole discretion deem necessary or desirable without
regard to whether such authority is normally granted or delegated by Trustees.
The Trustees shall have the power to determine the terms and
compensation of the Advisor or any other Person whom they may employ or with
whom they may contract; provided, however, that any determination to employ or
contract with any Trustee or any Person in which a Trustee may be a director,
officer, stockholder, partner, employee or trustee, shall be valid only if
made, approved or ratified by a majority of the other Trustees. The Trustees
may exercise broad discretion in allowing the Advisor to administer and
regulate the operations of the Trust, to act as agent for the Trust, to execute
documents on behalf of the Trustees, and to make executive decisions which
conform to general policies and general principles previously established by
the Trustees.
4.2 Term. The Trustees shall not enter into any contract
with the Advisor unless such contract has an initial term expiring at the end
of the Trust's fiscal year commencing in 1971 and provides for annual renewal
or extension thereafter. The Trustees shall not enter into such a contract
with any Person unless such contract provides for renewal or extension thereof
only by the affirmative vote of a majority of the other Trustees. Any such
contract shall provide that it may be terminated (a) by the Trust upon sixty
(60) days' written notice by unanimous vote of the Trustees who are not
affiliated with the Advisor, (b) by the Advisor upon one hundred twenty (120)
days' written notice by unanimous vote of the directors of the Advisor who are
not Trustees or (c) by the holders of more than a majority of the shares of the
Trust.
4.3 Restrictions on Advisor. The Advisor may administer
the Trust as its sole and exclusive function or engage in other activities
including the rendering of advice to other investors and the management of
other investments. The Advisor shall not, however, without prior written
consent of a majority of the Trustees, render advice or service to any other
Real Estate Investment Trust, except that the Advisor may with respect to any
loan or other investment in which the Trust may
-17-
<PAGE> 21
participate or allot a participation, render advice and service, with or
without remuneration, to each and every participant in such loan or other
investment.
4.4 Limitation on Operating Expenses. Each contract made
with the Advisor shall provide that, within 120 days after the end of any
Fiscal Year which begins on a date following the effective date of the Trust's
first Registration Statement filed under the Securities Act of 1933, the
Advisor will refund to the Trust (or, at the election of the Trustees, reduce
its compensation payable by) (A) the amount, if any, by which the Operating
Expenses of the Trust during such Fiscal Year exceed the lesser of (a) 1.2% of
the Average Value of Invested Assets for such Fiscal Year or (b) the greater of
(i) 1.2% of the MonthEnd Average Net Assets of the Trust for such Fiscal Year
or (ii) 25% of the Net Income of the Trust for such Fiscal Year and (B) the
amount, if any, by which the aggregate of fees and expenses (including travel
expenses and other out-of-pocket expenses) paid to Trustees who are not
affiliates of the Advisor and expenses of the type referred to in clause (m) of
the definition of operating Expenses contained in this Section 4.4 during such
Fiscal Year exceeded 0.3% of the Average Value of Invested Assets for such
Fiscal Year.
For purposes of this Section 4.4 the following terms shall
have the meanings set forth below:
(a) "Average Value" for any period shall mean the
arithmetic average of the aggregate Value of the assets reflected in the
computation at the close of the last business day of each month during the
period to which such computation relates.
(b) "Average Value of Invested Assets" shall mean the
Average Value of the Trust's total assets (without deduction of any
liabilities) plus the undisbursed commitments of the Trust in respect of closed
loans or other closed investments, but excluding good will and other intangible
assets, cash, cash items and obligations of municipal, state and the federal
governments and governmental agencies (other than obligations secured by a lien
on real property owned, or to be acquired, by such governments or governmental
agencies and securities of the Federal Housing Administration, the Federal
National Mortgage Administration, and other governmental agencies issuing
securities backed by a pool of mortgages).
(c) "Value" of an asset or assets shall mean the value of
such asset or assets on the books of the Trust, reduced by provision for
amortization, depreciation or depletion but before deducting any indebtedness
or other liability in respect thereof. Depreciable assets shall be valued at
the lesser or fair market value (in the judgment of the Trustees) or cost less
straightline depreciation.
-18-
<PAGE> 22
(d) "Fiscal Year" shall mean any period for which an
income tax return is submitted to the Internal Revenue Service and which is
treated by the Internal Revenue Service as a reporting period.
(e) "Net Income" for any period shall mean the net income
of the Trust for such period computed on the basis of its results of operations
for such period, after deduction of all expenses other than the regular,
incentive and additional compensation payable to the Advisor or fees payable to
any mortgage service, and excluding extraordinary items and gains and losses
from the disposition of assets of the Trust.
(f) "Month-End Average Net Assets" shall mean the Average
Value of all the assets of the Trust minus all the liabilities of the Trust
reflected in the computation at the close of each month during the period to
which such computation relates.
(g) "Operating Expenses" during any Fiscal Year shall
mean the aggregate annual expenses of every character regarded as operating
expenses in accordance with generally accepted accounting principles, as
determined by the independent public or certified accountants who shall have
reported on the financial statements of the Trust at the end of and for such
Fiscal Year but excluding:
(a) interest, discount and other costs of borrowed money;
(b) taxes on income and taxes and assessments on real
property and all other taxes (including license fees) applicable to
the Trust;
(c) legal, audit, accounting, underwriting, brokerage,
listing, registration and other fees, printing, engraving and other
expenses and taxes incurred in connection with the issuance,
distribution, transfer, registration and stock exchange listing of the
Trust's securities;
(d) fees and expenses (including travel expenses and
other out-of-pocket expenses) paid to Trustees (other than fees paid
to Trustees who are affiliates of the Advisor), independent
contractors, consultants, managers, closing and disbursement agents,
and other agents employed by or on behalf of the Trust (other than the
Advisor);
(e) expenses connected with the acquisition, disposition
and ownership of real estate interests or mortgage loans or other
property (including the costs of closing, foreclosure, insurance
premiums, legal services,
-19-
<PAGE> 23
brokerage and sales commissions, maintenance, repair and improvement
of property);
(f) expenses of maintenance, up-keep and management of
real estate equity interests and processing and servicing mortgage,
construction and other loans;
(g) insurance as required by the Trustees (including
Trustees' liability insurance);
(h) the expenses of organizing, revising, amending,
converting, modifying or terminating the Trust;
(i) expenses connected with payments of dividends or
interest or distributions in cash or any other form made or caused to
be made by the Trustees to holders of securities of the Trust;
(j) all expenses connected with communications to holders
of securities of the Trust and the other bookkeeping and clerical work
necessary in maintaining relations with holders of securities,
including the cost of printing and mailing certificates for securities
and proxy solicitation materials and reports to holders of the Trust's
securities;
(k) the cost of any accounting, statistical, or
bookkeeping equipment necessary for the maintenance of the books and
records of the Trust;
(l) transfer agent's, registrar's and indenture trustee's
fees and charges;
(m) legal, accounting and auditing fees and expenses
incurred in connection with the administration and operation of the
business of the Trust in the ordinary course of its business and not
included in clauses (a) through (1) of this definition; and
(n) depletion, depreciation, amortization and losses on
disposition of investments and reserves therefor.
All calculations made in accordance with this Section 4.4
shall be based upon statements (which may be unaudited, except as provided
herein) prepared on an accrual basis consistent with generally accepted
accounting principles, regardless of whether the Trust may also prepare
statements on a different basis.
4.5 Initial Advisor. Hotel Advisors, Inc. shall serve as
the initial Advisor.
-20-
<PAGE> 24
4.6 Sale of Shares of the Advisor. Any advisory
agreement entered into by the Trustees with an Advisor shall contain, among
other provisions, a provision permitting any transfer, directly or indirectly,
of securities of the Advisor without the consent of the Trust or its
shareholders and a waiver to the fullest extent permitted by law of any rights
which the Trust or its shareholders might have to any income or profits
realized on any such direct or indirect transfer by the transferor of such
securities. By purchasing Shares of the Trust, each shareholder shall be
deemed to have consented to any such transfer and to have expressly and
irrevocably waived any interest in or rights to any such income or profits.
Such waiver shall not be effective as to any transfer of a majority of the
voting stock of the Advisor unless such transfer shall have been consented to
by the holders of a majority of the Shares of the Trust.
ARTICLE V
INVESTMENT POLICY
5.1 General Statement of Policy. The Trust has been
established to provide investors with the opportunity to invest in a portfolio
of Real Property Investments consisting primarily of Long-Term Mortgage Loans
with Equity Participations and Equity Investments in Real Property made in
transactions not relating to the Trust's lending activities. The Trust may
also make Construction Loans primarily in connection with Long-Term Real
Property Investments. It is the policy of the Trust to concentrate its Real
Property Investments in the Accommodations Field; however, other types of
income producing Real Property Investments may be made by the Trust if, in the
opinion of the Trustees, such investments are more advantageous to the Trust
than available Real Property Investments in the Accommodations Field. In
addition to the foregoing the Trust is empowered to make any other investment
or engage in any other activity which does not adversely affect the Trust's
status as a real estate investment trust under the REIT Provisions of the
Internal Revenue Code. In each case the Trustees may make the Trust's
investments or engage in an activity alone or in participation with others,
including the granting of Senior Participations to other lenders.
5.2 [Deleted.]
5.3 [Deleted.]
(a) Cash;
(b) Obligations of the United States Government or
agencies thereof;
-21-
<PAGE> 25
(c) Obligations of any state or territory of the United
States of America or any agency thereof;
(d) Obligations of any foreign government or agency
thereof;
(e) Evidences of deposits in,, obligations of, and
bankers' acceptances issued by, banking institutions and savings institutions
which are members of the Federal Deposit Insurance Corporation or of the Federal
Home Loan Bank System; and
(f) Evidences of corporate indebtedness.
5.4 Obligor's Default. Notwithstanding any provision of
this Declaration, when an obligor to the Trust is in default under the terms of
any obligation to the Trust, the Trustees shall have the power to pursue any
remedies permitted by law which in their sole judgment are in the interest of
the Trust, and the Trustees shall have the power to enter into any necessary
investment, commitment or obligation of the Trust which results from the pursuit
of such remedies or which is necessary or desirable to dispose of property
acquired in the pursuit of such remedies.
5.5 Changes in Investment Policies and Restrictions.
Notwithstanding the foregoing provisions of this Article 5, the investment
policies and the restrictions thereon set forth in Sections 5.1 through 5.6 of
this Declaration may be altered or modified by the Trustees, or additional or
substitute policies or restrictions may be adopted by the Trustees if they
shall determine, and so specify in a duly adopted resolution, that the
alteration or modification of such policies or restrictions or the adoption of
additional or substitute policies or restrictions are in the best interests of
the Trust and its Shareholders and are not prohibited by the Real Estate
Investment Trust provisions of the Internal Revenue Code and no consent or
approval of, or other action by, Shareholders shall be required for any such
alteration, modification or adoption. Any policy or restriction altered,
modified, or adopted pursuant to this Section 5.8 shall be subject to
subsequent alteration or modification only with the consent of Shareholders
holding a majority of the outstanding Shares entitled to vote on such
alteration or modification if the Trustees shall so specify in the resolution
adopted with respect to such policy or restriction. Any resolution adopted by
the Trustees pursuant to this Section 5.8 shall be recorded within the State of
Maryland in such public offices as this Declaration and any amendments hereto
shall have been recorded in accordance with Section 9.8 of this Declaration.
5.6 [Deleted.]
-22-
<PAGE> 26
ARTICLE VI
THE SHARES AND SHAREHOLDERS
6.1. Shares. The units into which the beneficial interests
in the Trust will be divided shall be designated as Shares consisting of (a)
100,000,000 Trust Shares with a par value of $0.01 per share and having equal
dividend, distribution, liquidation and other rights but without preference,
pre-emptive, appraisal, conversion or exchange rights of any kind, (b)
20,000,000 Excess Trust Shares with a par value of $0.01 per share and having
the rights provided in Article VI hereof and (c) 5,000,000 Excess Preferred
Shares with a par value of $0.01 per share and having the rights provided in
Article VI hereof; provided, however, that the Trustees may, in their
discretion create and authorize the issuance of Shares of Beneficial Interest
evidencing units of beneficial interest in the Trust of one or more additional
classes, or one or more series within any such class, with or without par
value, having such voting rights, such rights to dividends, distributions and
in liquidation, such conversion, exchange and redemption rights, and such
designations, preferences, participation, and other limitations or
restrictions, as shall not be prohibited by this Declaration or the Real Estate
Investment Trust provisions of the Internal Revenue Code or the laws of the
State of Maryland and as shall be specified by the Trustees in their discretion
in a resolution or resolutions duly adopted by the Trustees and recorded within
the State of Maryland in such public offices as this Declaration and any
amendments shall have been recorded in accordance with Section 9.8 of this
Declaration. As used herein, the term "Shares" shall mean and include (i) the
Trust Shares, Excess Trust Shares and Excess Preferred Shares, and (ii) from
and after the issuance of Shares of any other and additional classes of Shares
of Beneficial Interest, so created and authorized by the Trustees, such Shares
of Beneficial Interest. The certificates evidencing the Shares shall be in
such form and signed (manually or by facsimile) on behalf of the Trust in such
manner as the Trustees may from time to time prescribe or as may be prescribed
in the Trustees' Regulations. The certificates shall be negotiable and title
thereto and to the Shares represented thereby shall be transferred by
assignment and delivery thereof to the same extent and in all respects as a
share certificate of a Maryland corporation. There shall be no more than
135,000,000 Shares issued. The Shares may be issued for such consideration as
the Trustees shall determine or by way of share dividend or share split in the
discretion of the Trustees. Shares reacquired by the Trust shall no longer be
deemed outstanding and shall have no voting or other rights unless and until
reissued. Shares reacquired by the Trust may be cancelled and restored to the
status of authorized and unissued Shares by action of the Trustees. All Shares
shall be fully paid and non-assessable by or on behalf of the Trust upon
receipt of full consideration for
-23-
<PAGE> 27
which then have been issued or without additional consideration if issued by
way of share dividend or share split.
6.2 Legal Ownership of Trust Estate. The legal ownership
of the Trust Estate and the right to conduct the business of the Trust are
vested exclusively in the Trustees and the Shareholders shall have no interest
therein other than beneficial interest in the Trust conferred by their Shares
issued hereunder and they shall have no right to compel any partition,
division, dividend or distribution of the Trust or any of the Trust Estate.
6.3 Shares Deemed Personal Property. The Shares shall be
personal property and shall confer upon the holders thereof only the interest
and rights specifically set forth in this Declaration. The death, insolvency
or incapacity of a Shareholder shall not dissolve or terminate the Trust or
affect its continuity nor give his legal representative any rights whatsoever,
whether against or in respect of other Shareholders, the Trustees or the Trust
Estate or otherwise except the sole right to demand and, subject to the
provisions of this Declaration, the Trustees' Regulations and any requirements
of law, to receive a new certificate for Shares registered in the name of such
legal representative, in exchange for the certificate held by such Shareholder.
6.4 Share Record: Issuance and Transferability of Shares.
Records shall be kept by or on behalf of and under the direction of the
Trustees, which shall contain the names and addresses of the Shareholders, the
number of Shares held by them respectively, and the numbers of the certificates
representing the Shares, and in which there shall be recorded all transfers of
Shares. Certificates shall be issued, listed and transferred in accordance
with the Trustees' Regulations. The Persons in whose names certificates are
registered on the records of the Trust shall be deemed the absolute owners of
the shares represented thereby for all purposes of this Trust; but nothing
herein shall be deemed to preclude the Trustees or officers, or their agents or
representatives, from inquiring as to the actual ownership of Shares. Prior to
due presentment for registration of transfer, the Trustees shall not be
affected by any notice of such transfer, either actual or constructive. The
receipt by the Person in whose name any Shares are registered on the records of
the Trust or of the duly authorized agent of such Person, or if such Shares are
so registered in the names of more than one Person, the receipt of any one of
such Persons, or of the duly authorized agent of such Person, shall be a
sufficient discharge for all dividends or distributions payable or deliverable
in respect of such Shares and from all liability to see to the application
thereof.
-24-
<PAGE> 28
Shares shall be transferable on the records of the Trust only
by the record holder thereof or by his agent thereunto duly authorized in
writing upon delivery to the Trustees or a transfer agent of the certificate or
certificates therefor, properly endorsed or accompanied by duly executed
instruments of transfer and accompanied by all necessary documentary stamps
together with such evidence of the genuineness of each such endorsement,
execution or authorization and of other matters as may reasonably be required
by the Trustees or such transfer agent. Upon such delivery, the transfer shall
be recorded in the records of the Trust and a new certificate for the Shares so
transferred shall be issued to the transferee and in case of a transfer of only
a part of the Shares represented by any certificate, a new certificate for the
balance shall be issued to the transferor. Any Person becoming entitled to any
Shares in consequence of the death of a Shareholder or otherwise by operation
of law shall be recorded as the holder of such Shares and shall receive a new
certificate therefor but only upon delivery to the Trustees or a transfer agent
of instruments and other evidence required by the Trustees or the transfer
agent to demonstrate such entitlement, the existing certificate for such Shares
and such necessary releases from applicable governmental authorities. In case
of the loss, mutilation or destruction of any certificate for Shares, the
Trustees may issue or cause to be issued a replacement certificate on such
terms and subject to such rules and regulations as the Trustees may from time
to time prescribe. Nothing in this Declaration shall impose upon the Trustees
or a transfer agent a duty or limit their rights to inquire into adverse
claims.
6.5 Dividends or Distributions to Shareholders. The
Trustees may from time to time declare and pay to Shareholders such dividends
or distributions in cash or other form, out of current or accumulated income,
capital, capital gains, principal, surplus, proceeds from the increase or
refinancing of Trust obligations, or from the sale of portions of the Trust
Estate or from any other source as the Trustees in their discretion shall
determine. Shareholders shall have no right to any dividend or distribution
unless and until declared by the Trustees. The Trustees shall furnish the
Shareholders at the time of each such distribution with a statement in writing
advising as to the source of the funds so distributed or, if the source thereof
has not then been determined, the communication shall so state and in such
event the statement as to such source shall be sent to the Shareholders not
later than sixty (60) days after the close of the fiscal year in which the
distribution was made.
6.6 Transfer Agent, Dividend Disbursing Agent and
Registrar. The Trustees shall have power to employ one or more transfer
agents, dividend disbursing agents and registrars and to authorize them on
behalf of the Trust to keep records, to hold and disburse any dividends and
distributions, and to have and
-25-
<PAGE> 29
perform in respect of all original issues and transfers of Shares, dividends
and distributions and reports and communications to Shareholders, the powers
and duties usually had and performed by transfer agents, dividend disbursing
agents and registrars of a Maryland corporation.
6.7 Shareholders' Meeting. There shall be an Annual
Meeting of the Shareholders which shall be held at the principal office of the
Trust, or at such other convenient location as may be determined by the
Trustees or by the written consent of all Shareholders entitled to vote
thereat, at such time as the Trustees shall determine, at which the Trustees
shall be elected and any other proper business may be conducted. The Annual
Meeting shall be held after delivery to the Shareholders of the Annual Report.
At least ten (10) days and not more than forty (40) days notice shall be given
of the time and place of the Annual Meeting of the Shareholders. Special
meetings of Shareholders may be called by the Trustees and shall be called upon
the written request of Shareholders holding not less than twenty-five percent
(25%) of the outstanding Shares of the Trust entitled to vote in the manner
provided in the Trustees' Regulations. If there shall be no Trustees, the
officers of the Trust shall promptly call a special meeting of the Shareholders
for the election of successor Trustees. Notice of any special meeting shall
state the purposes of the meeting. A majority of the outstanding Shares
entitled to vote at any meeting represented in person or by proxy shall
constitute a quorum at any such meeting. Whenever any action is to be taken by
the Shareholders, such action shall, except as otherwise required by this
Declaration or by law, be authorized by a majority of the votes cast at a
meeting of Shareholders by holders of Shares entitled to vote thereon.
Notwithstanding anything in this Declaration to the contrary,
the Trust shall not consummate a merger, the shareholder approval of which is
required by the applicable law, unless such transaction is approved by the
shareholders by the affirmative vote of a majority of all the votes entitled to
be cast on the matter.
The affirmative vote at a meeting of Shareholders of the
holders of a majority of all outstanding Shares shall be required to approve
the principal terms of the transaction and the nature and amount of the
consideration involving any sale, lease, exchange or other disposition of more
than 50% of the Trust Estate. Whenever Shareholders are required or permitted
to take any action, such action may be taken without a meeting on written
consent setting forth the action so taken, signed by the holders of a majority
of all outstanding Shares entitled to vote thereon, or such larger proportion
thereof as would be required for a vote of Shareholders at a meeting. The vote
or consent of Shareholders shall not be required for the pledging,
-26-
<PAGE> 30
hypothecating, granting security interest in, mortgaging, or encumbering of all
or any of the Trust Estate, or for the sale, lease, exchange or other
disposition of less than 50% of the Trust Estate.
6.8 Proxies. Whenever the vote or consent of
Shareholders is required or permitted under this Declaration, such vote or
consent may be given either directly by the Shareholder or to a proxy in the
form prescribed in the Trustee's Regulations. The Trustees may solicit such
proxies from the Shareholders or any of them in any manner requiring or
permitting the Shareholders' vote or consent.
6.9 Reports to Shareholders. Not later than ninety (90)
days after the close of each fiscal year of the Trust, the Trustees shall mail
a report of the business and operation of the Trust during such fiscal year to
the Shareholders, which report shall constitute the accounting of the Trustees
for such fiscal year. The report (herein "Annual Report") shall be in such
form and have such content as the Trustees deem proper. The Annual Report
shall include a balance sheet and a statement of income and surplus of the
Trust. Such financial statement shall be accompanied by a certificate of an
independent certified public accountant thereon, based on a full examination of
the books and records of the Trust and made in accordance with generally
accepted auditing procedure. A manually signed copy of the accountant's
certificate shall be filed with the Trustees. A signed copy of the Annual
Report and accountant's certificate shall be filed with the Department of
Assessments and Taxation of the State of Maryland within ninety (90) days after
the close of each fiscal year.
6.10 Fixing Record Date. The Trustees' Regulations may
provide for fixing or in the absence of such provision, the Trustees may fix,
in advance, a date as the record date for determining the Shareholders entitled
to notice of or to vote at any meeting of Shareholders or to express consent to
any proposal without a meeting, or for the purpose of determining Shareholders
entitled to receive payment of any dividend or distribution (whether before or
after termination of the Trust) or any Annual Report or other communication
from the Trustees, or for any other purpose. The record date so fixed shall be
not less than five (5) days nor more than fifty (50) days prior to the date of
the meeting or event for the purposes of which it is fixed.
6.11 Notice to Shareholders. Any notice of meeting or
other notice, communication or report to any Shareholder shall be deemed duly
delivered to such Shareholder when such notice, communication or report is
deposited, with postage thereon prepaid, in the United States mail, addressed to
such Shareholder at his address as it appears on the records of the Trust or is
delivered in person to such Shareholder.
-27-
<PAGE> 31
6.12 Restrictions on Transfer.
(a) Definitions. The following terms shall have the
following meanings:
"Beneficial Ownership" shall mean ownership of Shares by a
Person who would be treated as an owner of such Shares directly,
indirectly or constructively through the application of Section 318(a)
of the Code, as modified by Section 856(d)(5) of the Code, or Section
544 of the Code, as modified by Section 856(h) of the Code. The terms
"Beneficial Owner", "Beneficially Owns" and "Beneficially Owned" shall
have correlative meanings.
"Charitable Beneficiary" shall mean the organization or
organizations described in Section 170(c)(2) and 501(c)(3) of the Code
selected by the Excess Share Trustee.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Excess Shares" shall mean the Excess Trust Shares and the
Excess Preferred Shares.
"Excess Share Trust" shall mean the trust created pursuant to
Section 6.13 hereof.
"Excess Share Trust Beneficiary" shall mean a beneficiary of
the Excess Share Trust as determined pursuant to Section 6.13 hereof.
"Excess Share Trustee" shall mean Nina Matis or any successor
appointed pursuant to Section 6.13 hereof.
"Market Price" of any class of Shares on any date shall mean
the average of the Closing Price for the five (5) consecutive trading
days ending on such date, or if such date is not a trading date, the
five consecutive trading days preceding such date. The "Closing
Price" on any date shall mean (i) the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported
in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York
Stock Exchange, or (ii) if such class of Shares is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on
which such class of Shares is listed or admitted to trading, or (iii)
if such class of Shares is not listed or admitted to trading on any
national securities exchange,
-28-
<PAGE> 32
the last quoted price, or if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated
Quotation System or, if such system is no longer in use, the principal
other automated quotations system that may then be in use, or (iv) if
such class of Shares is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a
professional market maker making a market in such class of Shares
selected by the Trustees.
"Ownership Limit" shall mean (i) in the case of a Person other
than an Existing Holder (as defined below) Beneficial Ownership of
more than eight percent (8.0%), by value, vote or number, of the
Shares and (ii) in the case of a Person who or which was the
Beneficial Owner, as of February 1, 1995 (the "Amendment Date"), of
more than 8.0% (by vote, value or number) of the Shares (any such
Person being referred to as an "Existing Holder"), a percentage (by
vote, value or number) equal to the lesser of (a) 9.9% and (b) the
percentage of Shares Beneficially Owned by such Existing Holder as of
the Amendment Date; provided that if, at any time and from time to
time after the Amendment Date, the percentage of Shares Beneficially
Owned by an Existing Holder shall decrease (whether by reason of a
disposition by such Existing Holder, an increase in the number of
outstanding Shares or otherwise), then from and after the time of such
decrease the Ownership Limit in the case of such Existing Holder shall
be a percentage (by vote, value or number) equal to the greater of (x)
8.0% and (y) the percentage of Shares Beneficially Owned by such
Existing Holder after giving effect to such decrease.
"Purported Beneficial Holder" shall mean, with respect to any
event (other than a purported Transfer) which results in Excess
Shares, the Person for whom the Purported Record Holder held Shares
that were, pursuant to Section 6.12(c) hereof, automatically converted
into Excess Shares upon the occurrence of such event.
"Purported Beneficial Transferee" shall mean, with respect to
any purported Transfer which results in Excess Shares, the purported
beneficial transferee for whom the Purported Record Transferee would
have acquired Shares if such Transfer had been valid under Section
6.12(b) hereof.
"Purported Record Holder" shall mean, with respect to any
event (other than a purported Transfer) which results in Excess
Shares, the record holder of the Shares that were, pursuant to Section
6.12(c) hereof, automatically converted into Excess Shares upon the
occurrence of such event.
-29-
<PAGE> 33
"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Shares, the record holder
of the Shares if such Transfer had been valid under Section 6.12(b)
hereof.
"Restriction Termination Date" shall mean the first day of the
taxable year for which the Trustees have determined to terminate the
Trust's status as a REIT.
"Transfer" shall mean any sale, transfer, gift, hypothecation,
pledge, assignment, devise or other disposition of Shares (including
(i) the granting of any option or interest similar to an option
(including an option to acquire an option or any series of such
options) or entering into any agreement for the sale, transfer or
other disposition of Shares or (ii) the sale, transfer, assignment or
other disposition of any securities or rights convertible into or
exchangeable for Shares), whether voluntary or involuntary, whether of
record, constructively or beneficially and whether by operation of law
or otherwise. For purposes of this definition, whether securities or
rights are convertible or exchangeable for Shares shall be determined
in accordance with Sections 318 and 544 of the Code.
(b) Restrictions on Transfers and Other Events. On or after
the Restriction Termination Date, the provisions of Sections 6.12 and 6.13
hereof shall be of no further force and effect. Prior to the Restriction
Termination Date and except as provided in Section 6.12(i) hereof:
(1) No Person shall Beneficially Own Shares in excess of the
Ownership Limit;
(2) Any Transfer that, if effective, would result in any
Person Beneficially Owning Shares in excess of the Ownership Limit
shall be void ab initio as to the Transfer of that number of Shares
which would be otherwise Beneficially Owned by such Person in excess
of the Ownership Limit and the intended transferee shall acquire no
rights in such Shares in excess of the Ownership Limit;
(3) Any Transfer that, if effective, would result in the
Shares being Beneficially Owned by fewer than one hundred (100)
Persons (determined without reference to any rules of attribution)
shall be void ab initio and the intended transferee shall acquire no
rights in such Shares; and
(4) Any Transfer of Shares that, if effective, would result
in the Trust being "closely held" within the meaning of Section 856(h)
of the Code shall be void ab initio as to
-30-
<PAGE> 34
the Transfer of that number of Shares which would cause the Trust to
be "closely held" within the meaning of Section 856(h) of the Code and
the intended transferee shall acquire no rights in such Shares.
(c) Conversion into Excess Shares.
(1) If, notwithstanding the other provisions contained in
this Article VI, at any time prior to the Restriction Termination
Date, there is a purported Transfer or other event such that any
Person would Beneficially Own Shares in excess of the Ownership Limit,
then, except as otherwise provided in Section 6.12(i) hereof, such
Shares which would be in excess of the Ownership Limit (rounded up to
the nearest whole share), shall automatically be converted into that
number of shares of Excess Trust Shares or Excess Preferred Shares, as
appropriate, equal to the number of Shares being converted, as further
described in Section 6.12(c)(3) hereof. Such conversion shall be
effective as of the close of business on the business day prior to the
date of the Transfer or other event.
(2) If, notwithstanding the other provisions contained in
this Article VI, at any time prior to the Restriction Termination
Date, there is a purported Transfer or other event which, if
effective, would cause the Trust to become "closely held" within the
meaning of Section 856(h) of the Code, then the Shares being
Transferred or which are otherwise affected by such event and which,
in either case, would cause, when taken together with all other
Shares, the Trust to be "closely held" within the meaning of Section
856(h) of the Code (rounded up to the nearest whole share) shall
automatically be converted into that number of Excess Trust Shares or
Excess Preferred Shares, as appropriate, equal to the number of Shares
being converted, as further described in Section 6.12(c)(3) hereof.
Such conversion shall be effective as of the close of business on the
business day prior to the date of the Transfer or change in capital
structure.
(3) Upon conversion of Trust Shares or Preferred Shares
into Excess Shares pursuant to this Section 6.12(c), Trust Shares shall
be converted into Excess Trust Shares and Preferred Shares shall be
converted in Excess Preferred Shares.
(d) Remedies for Breach. If the Trustees or their
designees shall at any time determine in good faith that a purported Transfer or
other event has taken place in violation of Section 6.12(b) hereof or that a
Person intends to acquire or has attempted to acquire Beneficial Ownership of
any Shares in violation of Section 6.12(b) hereof, the Trustees or their
-31-
<PAGE> 35
designees may take such action as they deem advisable to refuse to give effect
to or to prevent such Transfer or other event, including, but not limited to,
refusing to give effect to such Transfer or other event on the books of the
Trust or instituting proceedings to enjoin such Transfer or other event or
transaction; provided, however, that any Transfers or attempted Transfers (or,
in the case of events other than a Transfer, Beneficial Ownership) in violation
of Section 6.12(b) hereof shall be void ab initio and automatically result in
the conversion described in Section 6.12(c)(3) hereof, irrespective of any
action (or non-action) by the Trustees or their designees.
(e) Notice of Restricted Transfer. Any Person who
acquires or attempts to acquire Shares in violation of Section 6.12(b) hereof,
or any Person who is a purported transferee such that Excess Shares result under
Section 6.12(c) hereof, shall immediately give written notice to the Trust of
such Transfer, attempted Transfer or other event and shall provide to the Trust
such other information as the Trust may request in order to determine the
effect, if any, of such Transfer or attempted Transfer or other event on the
Trust's status as a REIT.
(f) Owners Required to Provide Information. Prior to the
Restriction Termination Date:
(1) Every Beneficial Owner of five percent (5%) or more,
by vote, value or number, or such lower percentages as required
pursuant to regulations under the Code, of the outstanding Shares
shall, before January 30 of each year, give written notice to the Trust
stating the name and address of such Beneficial Owner, the general
ownership structure of such Beneficial Owner, the number of shares of
each class of Shares Beneficially Owned, and a description of how such
Shares are held.
(2) Each Person who is a Beneficial Owner of Shares and
each Person (including the shareholder of record) who is holding Shares
for a Beneficial Owner shall provide on demand to the Trust such
information as the Trust may request from time to time in order to
determine the Trust's status as a REIT and to ensure compliance with
the Ownership Limit and the REIT requirements of the Code and the
regulations published thereunder.
(g) Remedies Not Limited. Subject to Section 6.12(l)
hereof, nothing contained in this Article VI shall limit the authority of the
Trustees to take such other action as they deem necessary or advisable to
protect the Trust and the interests of its Shareholders by preservation of the
Trust's status as a REIT and to ensure compliance with the Ownership Limit.
-32-
<PAGE> 36
(h) Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 6.12 or Section 6.13,
including any definition contained in Section 6.12(a) hereof, the Trustees
shall have the power to determine the application of the provisions of this
Section 6.12 and Section 6.13 with respect to any situation based on the facts
known to them.
(i) Exception. The Trustees upon receipt of a ruling from
the Internal Revenue Service or an opinion of tax counsel, satisfactory to them
in their sole and absolute discretion, in each case to the effect that the
Trust's status as a REIT will not be jeopardized, may exempt a Person from the
Ownership Limit if the Trustees obtain such representations and undertakings
from such Person as are reasonably necessary to ascertain that such Person's
Beneficial Ownership of Shares will not jeopardize the Trust's status as a
REIT.
(j) Legend. Until the Restriction Termination Date, each
certificate for the respective class of Shares shall bear the following legend:
The Shares represented by this certificate are subject to
restrictions on transfer. Unless excepted by the Trustees, no Person
may (1) Beneficially Own Shares in excess of 8.0% of the outstanding
Shares, by value, vote or number, determined as provided in the
Trust's Declaration of Trust, as the same may be amended from time to
time (the "Declaration"), and computed with regard to all outstanding
Shares and, to the extent provided by the Code, all Shares issuable
under existing options and exchange rights that have not been
exercised; or (2) Beneficially Own Shares which would result in the
Trust being "closely held". Unless so excepted, any acquisition of
Shares and continued holding of ownership constitutes a continuous
representation of compliance with the above limitations, and any
Person who attempts to Beneficially Own Shares in excess of the above
limitations has an affirmative obligation to notify the Trust
immediately upon such attempt. If the restrictions on transfer are
violated, the transfer will be void ab initio and the Shares
represented hereby will be automatically converted into Excess Shares
that will be held in trust. Excess Shares may not be transferred at a
profit and may be purchased by the Trust. In addition, certain
Beneficial Owners must give written notice as to certain information
on demand and on an annual basis. All terms not defined in this
legend have the meanings provided in the Declaration. The Trust will
mail without charge to any requesting shareholder a copy of the
Declaration, including the
-33-
<PAGE> 37
express terms of each class and series of the authorized Shares of the
Trust, within five (5) days after receipt of a written request
therefor.
(k) Severability. If any provision of this Article VI or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected, and other applications of such provision
shall be affected only to the extent necessary to comply with the determination
of such court.
(l) New York Stock Exchange Transactions. Nothing in this
Article VI shall preclude the settlement of any transaction entered into
through the facilities of the New York Stock Exchange.
(m) Amendment of Sections 6.12 or 6.13. Notwithstanding any
other provisions of this Declaration or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any affirmative
vote of the holders of any particular class or series of Shares required by law
or this Declaration, the affirmative vote of the holders of at least two-thirds
(2/3) of the voting power of all the then-outstanding Shares, voting together
as a single class, shall be required to alter, amend or repeal this Section
6.12 or Section 6.13.
6.13 Excess Shares.
(a) Ownership In Trust. Upon any purported Transfer or other
event that results in Excess Shares pursuant to Section 6.12(c) hereof, such
Excess Shares shall be deemed to have been transferred to Nina Matis (or any
successor Excess Share Trustee), as Excess Share Trustee of the Excess Share
Trust for the benefit of such Excess Share Trust Beneficiary or Beneficiaries
and the Charitable Beneficiary effective as of the close of business on the
business day prior to the date of the Transfer or other event. Excess Shares
so held in trust shall be issued and outstanding shares of the Trust. The
Purported Record Transferee or Purported Record Holder shall have no rights in
such Excess Shares. The Purported Beneficial Transferee or Purported
Beneficial Holder shall have no rights in such Excess Shares except as provided
in Section 6.13(e). Nina Matis, or any successor Excess Share Trustee, may
resign by appointing a person independent of the Trust, the Corporation (as
defined in Section 6.14) or any Excess Share Trust Beneficiary as the Excess
Share Trustee. The Excess Share Trustee shall, from time to time, designate
one or more charitable organization or organizations as the Charitable
Beneficiary.
(b) Dividend Rights. Excess Shares shall be entitled to the
same dividends determined as if no conversion into Excess
-34-
<PAGE> 38
Shares had occurred. Any dividend or distribution paid prior to the discovery
by the Trust that the Shares have been converted into Excess Shares shall be
repaid to the Excess Share Trust upon demand. Any dividend or distribution
declared but unpaid shall be paid to the Excess Share Trust. All dividends
received or other income earned by the Excess Share Trust shall be paid over to
the Charitable Beneficiary.
(c) Rights Upon Liquidation. Excess Shares shall not be
entitled to receive any portion of the assets of the Trust on the liquidation
or dissolution of the Trust. Upon conversion of Excess Shares into Shares
pursuant to Section 6.13(e) hereof, such shares shall be entitled to receive
their pro rata share of the assets of the Trust as a result of the liquidation
or dissolution of the Trust.
(d) Voting Rights. The Excess Share Trustee shall vote the
Excess Shares which shall have the same voting rights as the Shares into which
they are to be converted pursuant to Section 6.13(e) hereof. Any vote cast by
the Purported Beneficial Transferee or Purported Record Transferee will, at the
election of the Excess Share Trustee, be void ab initio.
(e) Restrictions On Transfer; Designation of Excess Share
Trust Beneficiary.
(1) Excess Shares shall not be transferrable. The Excess
Share Trustee may freely designate an Excess Share Trust Beneficiary
of all or any portion of the beneficial interest in the Excess Share
Trust (representing the number of Excess Shares held by the Excess
Share Trust attributable to a purported Transfer or other event that
results in Excess Shares and designated as to number and class of
shares pursuant to the notice provision of this Section 6.13(e)(1)),
if the Excess Shares held in the Excess Share Trust would not be
Excess Shares in the hands of such Excess Share Trust Beneficiary. If
the Excess Shares resulted from a purported Transfer, the Purported
Beneficial Transferee shall receive a payment from the Excess Share
Trustee that reflects a price per share for such Excess Shares equal
to the lesser of (A) the price per share received by the Excess Share
Trustee and (B) (x) the price per share such Purported Beneficial
Transferee paid for the Share of Beneficial Interest in the purported
Transfer that resulted in the Excess Shares, or (y) if the Purported
Beneficial Transferee did not give value for such shares of Excess
Shares (through a gift, devise or other transaction), a price per
share of Excess Shares equal to the Market Price of the Shares on the
date of the purported Transfer that resulted in the Excess Shares. If
the Excess Shares resulted from an event other than a purported
Transfer, the Purported Beneficial Holder shall receive a payment from
the Excess Share Trustee that
-35-
<PAGE> 39
reflects a price per share of Excess Shares equal to the lesser of (A)
the price per share received by the Excess Share Trustee and (B) the
Market Price of the Shares on the date of the event that resulted in
Excess Shares. Upon such transfer of an interest in the Excess Share
Trust, the corresponding shares of Excess Shares in the Excess Share
Trust shall be automatically converted into such number of Shares (of
the same class as the shares that were converted into such Excess
Shares) as is equal to the number of shares of Excess Shares, and such
Shares shall be transferred of record to the Excess Share Trust
Beneficiary of the interest in the Excess Share Trust designated by
the Excess Share Trustee as described above if such Shares would not
be Excess Shares in the hands of such Excess Share Trust Beneficiary.
Prior to any transfer of any interest in the Excess Share Trust, the
Trust must have waived in writing its purchase rights, if any, under
Section 6.13(f) hereof. Any funds received by the Excess Share
Trustee in excess of the funds payable to the Purported Beneficial
Holder or the Purported Beneficial Transferor shall be paid to the
Charitable Beneficiary. The Trust shall pay the costs and expenses of
the Excess Share Trustee.
(2) Notwithstanding the foregoing, if a Purported Beneficial
Transferee, Purported Beneficial Holder or Excess Share Trustee
receives a price for designating an Excess Share Trust Beneficiary of
an interest in the Excess Share Trust that exceeds the amounts
allowable under Section 6.13(e)(1) hereof, such Purported Beneficial
Transferee or Purported Beneficial Holder shall be personally liable
to, and shall pay, or cause the Excess Share Trust Beneficiary of the
interest in the Excess Share Trust to pay, such excess to the Excess
Share Trustee who shall pay over such excess to the Charitable
Beneficiary.
(3) Notwithstanding the foregoing, if the provisions of this
Section 6.13(e) are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the Purported
Beneficial Transferee or Purported Beneficial Holder of any shares of
Excess Shares may be deemed, at the option of the Trust, to have acted
as an agent on behalf of the Trust, in acquiring or holding such
Excess Shares and to hold such Excess Shares on behalf of the Trust.
(f) Purchase Right in Excess Shares. Excess Shares shall be
deemed to have been offered for sale by the Excess Share Trustee to the Trust,
or its designee, at a price per Excess Share equal to (i) in the case of Excess
Shares resulting from a purported Transfer, the lesser of (A) the price per
share of the Shares in the transaction that created such Excess Shares (or, in
the case of devise or gift, the Market Price of the Shares at the
-36-
<PAGE> 40
time of such devise or gift), or (B) the lowest Market Price of the class of
Shares which resulted in the Excess Shares at any time after the date such
shares were converted into Excess Shares and prior to the date the Trust, or
its designee, accepts such offer or (ii) in the case of Excess Shares resulting
from an event other than a purported Transfer, the lesser of (A) the Market
Price of the Shares on the date of such event or (B) the lowest Market Price
for Shares which resulted in the Excess Shares at any time from the date of the
event resulting in such Excess Shares and prior to the date the Trust, or its
designee, accepts such offer. The Trust shall have the right to accept such
offer for a period of ninety (90) days after the later of (i) the date of the
Transfer which resulted in such Excess Shares and (ii) the date the Trustees
determine in good faith that a Transfer or other event resulting in Excess
Shares has occurred, if the Trust does not receive a notice of such Transfer or
other event pursuant to Section 6.12(e) hereof.
6.14 Pairing. Beginning at the time that the payment of a
distribution in kind to the Shareholders of the Trust of the shares of common
stock of Starwood Lodging Corporation, a Maryland corporation ("Corporation"),
shall have occurred ("effective time of the restriction"), and continuing
thereafter until such time as the limitation on transfer provided for in the
Pairing Agreement to be entered into by the Trust and the Corporation shall be
terminated:
(a) The Trust Shares having a par value of $0.01 per share
shall not be transferable, and shall not be transferred on the books of the
Trust, unless (1) a simultaneous transfer is made by the same transferor to the
same transferee, or (2) such transfer has previously arranged with the
Corporation for the acquisition by the transferee, of a like number of shares
of the Corporation and such shares and Trust Shares are paired with one
another.
(b) Each certificate evidencing ownership of Trust Shares
issued and not canceled prior to the effective time of the restriction shall be
deemed to evidence a like number of shares of common stock of the Corporation.
(c) Any registered holder of a certificate evidencing
ownership of Trust Shares issued prior to the effective time of the restriction
may, upon request and presentation of said certificate to the Corporation's
transfer agent, obtain in substitution therefor a certificate or certificates
registered in such holder's name evidencing the same number of shares of common
stock of the Corporation and a like number of Trust Shares.
(d) A legend shall be placed on the face of each certificate
evidencing ownership of Trust Shares issued after the
-37-
<PAGE> 41
effective time of the restriction, referring to the restrictions on transfer
set forth herein.
ARTICLE VII
LIABILITY OF TRUSTEES, SHAREHOLDERS
AND OFFICERS, AND OTHER MATTERS
7.1 Exculpation of Trustees and Officers. No Trustee,
officer or agent of the Trust shall be liable or held to any personal liability
whatsoever for an obligation or contract of the Trust. The provisions of
section 2-405.1 of the Corporations and Associations Article of the Annotated
Code of Maryland (as amended and interpreted from time to time, and any
successor statute thereto), which sets forth the standard of care required of
directors of corporations organized under the laws of the State of Maryland,
and all other statutory or decisional law (as amended or interpreted from time
to time) which sets forth the standard of care required of officers, employees
and agents for corporations organized under the laws of the State of Maryland,
shall be fully applicable to the Trust, and to the Trustees, officers,
employees and agents of the Trust, as if the Trust were a corporation organized
under the laws of the State of Maryland and its Trustees, officers, employees
and agents were, respectively, directors, officers, employees and agents of
such corporation.
Notwithstanding the foregoing, to the fullest extent permitted
by Maryland statutory or decisional law, as amended or interpreted from time to
time, no Trustee or officer of the Trust shall be liable to the Trust or its
shareholders for money damages arising out of acts or omissions occurring on or
after the date of this provision is approved by the shareholders of the Trust
(which date was June 6, 1988) provided, however, that this provision shall not
restrict or limit the liability of the Trust's Trustees or officers to the
Trust or its shareholders (i) to the extent that it is proved that such Person
actually received an improper benefit or profit in money, property or services,
for the amount of the benefit or profit in money, property or services actually
received, or (ii) to the extent that a judgment or final adjudication adverse
to such Person is entered in a proceeding based on a finding in the proceeding
that such Person's action, or failure to act, was the result of active and
deliberate dishonesty which was material to the cause of action adjudicated in
the proceeding. No amendment to this Section 7.1 or repeal of any of its
provisions shall limit or eliminate the effect of this Section 7.1 with respect
to any act or omission which occurs prior to such amendment or repeal.
7.2 Limitation of Liability of Shareholders, Trustees and
Officers. The Trustees and officers in incurring any debts,
-38-
<PAGE> 42
liabilities or obligations, or in taking or omitting any other actions for or
in connection with the Trust are, and shall be deemed to be, acting as Trustees
or officers of the Trust and not in their own individual capacities. Except to
the extent provided by applicable law, no Trustee, Shareholder, officer,
employee or other agent shall be liable for any debt, claim, demand, judgment,
decree, liability or obligation of any kind of, against or with respect to the
Trust, arising out of any action taken or omitted for or on behalf of the Trust
and the Trust shall be solely liable therefor and resort shall be had solely to
the Trust Estate for the payment or performance thereof. Each Shareholder
shall be entitled to pro rata indemnity from the Trust Estate if, contrary to
the provisions hereof, such Shareholder shall be held to any personal
liability.
7.3 Express Exculpatory Clauses and Instruments. In all
agreements, obligations, instruments, and actions in regard to the affairs of
this Trust, this Trust and not the Shareholders, officers, or agents shall be
the principal and entitled as such to enforce the same, collect damages, and
take all other action. All such agreements, obligations, instruments, and
actions shall be made, executed, incurred, or taken by or in the name and on
behalf of this Trust or by the Trustees as Trustees hereunder, but not
personally. All such agreements, obligations, and instruments shall
acknowledge notice of this paragraph or shall refer to this Declaration and
contain a statement to the effect that the name of this Trust refers to the
Trustees as Trustees but not personally, and that no Trustee, Shareholder,
officer, or agent shall be held to any personal liability thereunder; and
neither the Trustees nor any officer or agent shall have any power or authority
to make, execute, incur, or take any agreement, obligation, instrument or
action unless the requirements of this paragraph are met; however, the omission
of such provision from any such instrument shall not render the Shareholders or
any Trustee or officer liable nor shall the Trustees or any officer of the
Trust be liable to anyone for such omission.
7.4 Indemnification of Trustees, Officers, Employees and
Other Agents. The provisions of Section 218 of the Corporations and
Associations Article of the Annotated Code of Maryland (as amended and
interpreted from time to time, and any successor statute thereto), which
empowers a corporation organized under the laws of the State of Maryland to
indemnify its directors, officers, employees and other agents against certain
liabilities and obligations, and for the right of directors, officers,
employees and other agents of such corporation to be so indemnified (as
amended, interpreted and superseded, "Section 2- 418"), shall be fully
applicable to the Trust and to the Trustees, officers, employees and other
agents of the Trust as if the Trust were a corporation organized under the laws
of the State of Maryland and its Trustees, officers,
-39-
<PAGE> 43
employees and other agents were, respectively, directors, officers, employees
and agents of such corporation. In each and every situation where the Trust
may do so under said Section 2-418 or other applicable law, the Trust hereby
obligates itself to so indemnify its Trustees, officers, employees and other
agents, and in each case where the Trust must make certain investigations on a
case-by-case basis prior to indemnification, the Trust hereby obligates itself
to pursue such investigations diligently, it being the specific intention of
this Section 7.4 to obligate the Trust to indemnify each Person whom the Trust
may indemnify to the fullest extent permitted by Section 2-148 or by other
applicable law at any time and from time to time. The rights accruing to any
Person under these provisions shall not exclude any other right to which he may
be lawfully entitled, nor shall anything contained herein restrict the right of
the Trust to indemnify or reimburse such Person in any proper case even though
not specifically provided for herein, nor shall anything contained herein
restrict such right of a Trustee to contribution as may be available under
applicable law. In addition, and without limiting the generality of the
foregoing, the Trust shall have the power to purchase and maintain insurance on
behalf of any Person entitled to indemnify hereunder against any liability
asserted against him and incurred by him in a capacity mentioned above, or
arising out of his status as such, whether or not the Trust would have the
power to indemnify him against such liability under the provisions hereof.
7.5 Right of Trustees and officers to Own Shares or Other
Property and to Engage in Other Business. Any Trustee or officer may acquire,
own, hold and dispose of Shares in the Trust, for his individual account, and
may exercise all rights of a Shareholder to the same extent and in the same
manner as if he were not a Trustee or officer. Any Trustee or officer may have
personal business interests and may engage in personal business activities,
which interest and activities may include the acquisition, syndication,
holding, management, operation or disposition, for his own account or for the
account of others, or interests in Mortgages, interests in Real Property, or
interests in Persons engaged in the real estate business, including serving as
a trustee or officer of any other Real Estate Investment Trust. Subject to the
provisions of Article IV any Trustee or officer may be interested as trustee,
officer, director, stockholder, partner, member, advisor or employee, or
otherwise have a direct or indirect interest in any Person who may be engaged
to render advice or services to the Trust, and may receive compensation from
such Person as well as compensation as Trustee, officer, or otherwise
hereunder. None of these activities shall be deemed to conflict with his
duties and powers as Trustee or officer.
-40-
<PAGE> 44
7.6 Transactions Between the Trustees and the Trust.
(a) If subsection (b) of this Section 7.6 is complied
with, a contract or other transaction between the Trust and any corporation,
firm or other entity in which any of the Trustees is a director or has a
material financial interest is not void or voidable solely because any one or
more of the following: (i) the common directorship or interest; (ii) the
presence of the Trustee at the meeting of the Board of Trustees or a committee
of the Board of Trustees which authorizes, approves or ratifies the contract or
transaction; or (iii) the counting of the vote of the Trustee for the
authorization, approval or ratification of the contract or transaction.
(b) Subsection (a) of this Section 7.6 applies if:
(i) The fact of the common directorship or interest is
disclosed or known to (a) the Board of Trustees or the committee, and
the Board of Trustees or committee authorizes, approves or ratifies
the contract or transaction by the affirmative vote of a majority of
disinterested Trustees, even if the disinterested Trustees constitute
less than a quorum; or (b) the shareholders entitled to vote, and the
contract or transaction is authorized, approved or ratified by a
majority of the votes cast by the shareholders entitled to vote other
than the votes of shares owned of record or beneficially by the
interested Trustee or corporation, firm or other entity; or
(ii) The contract or transaction is fair and reasonable to
the Trust.
(c) Common or interested Trustees, or the Shares of
Beneficial Interest owned by them or by an interested corporation, firm or
other entity, may be counted in determining the presence of a quorum at a
meeting of the Board of Trustees or a committee of the Board of Trustees or at
a meeting of the shareholders, as the case may be, at which the contract or
transaction is authorized, approved or ratified.
(d) If a contract or transaction is not authorized,
approved or ratified in one of the ways provided for in subsection (b)(i) of
this Section 7.6, the person asserting the validity of the contract or
transactions bears the burden of proving that the contract or transaction was
fair and reasonable to the Trust at the time it was authorized, approved or
ratified. This subsection (d) does not apply to the fixing by the Board of
Trustees of reasonable compensation for a Trustee, whether as a Trustee or in
any other capacity.
(e) Any procedures authorized by Section 7.4 of this
Declaration shall be deemed to satisfy subsection (b)(i) of this
-41-
<PAGE> 45
Section 7.6. Any provision of this Declaration, the Trustees' Regulations or
any contract, or any transaction, requiring or permitting indemnification of
Trustees, including advances of expenses, is fair and reasonable to the Trust.
(f) Any Trustee or officer, employee or agent of the
Trust may acquire, own, hold and dispose of Securities of the Trust, for his
individual account, and may exercise all rights of a holder of such Securities
to the same extent and in the same manner as if he were not such a Trustee or
officer, employee or agent. The Trustees shall use their best efforts to
obtain through an Advisor or other Persons a continuing and suitable investment
program, consistent with the investment policies and objectives of the Trust,
and the Trustees shall be responsible for reviewing and approving or rejecting
investment opportunities presented by the Advisor or such other Persons. So
long as there is such Advisor or other Person, the Trustees shall have no
responsibility for the origination of investment opportunities for the Trust.
Any Trustee or officer, employee, or agent of the Trust may, in his personal
capacity, or in a capacity of trustee, officer, director, stockholder, partner,
member, advisor or employee of any Person, have business interests and engage
in business activities in addition to those relating to the Trust, which
interests and activities may include the acquisition, syndication, holding,
management, operation or disposition, for his own account or for the account of
such Person, of interests in Mortgages, interests in Real Property, or
interests in Persons engaged in the real estate business, and each Trustee,
officer, employee and agent of the Trust shall be free of any obligation to
present to the Trust any investment opportunity which comes to him in any
capacity other than solely as Trustee, officer, employee or agent of the Trust,
even if such opportunity is of a character which, if presented to the Trust,
could be taken by the Trust; provided, however, that the provisions of this
sentence shall not extend to any of such Trustees or agents of the Trust who
are affiliates of the Advisor, or to any officer or employee of the Trust or
(at a time when there is no such Advisor or other Person providing an
investment program for the Trust as aforesaid) to any Trustee of the Trust, in
each case who is not acting as a trustee, officer, director, stockholder,
partner, member, advisor or employee of any Person but is acting for his own
personal account. Subject to the provisions of this Section 7.6, any Trustee
or officer, employee or agent of the Trust may be interested as trustee,
officer, director, stockholder, partner, member, advisor or employee of, or
otherwise have a direct or indirect interest in, any Person who may be engaged
to render advice or services to the Trust, and may receive compensation from
such Person as well as compensation as Trustee, officer, employee or agent of
the Trust or otherwise hereunder. None of the activities in this paragraph
shall be deemed to conflict with his duties and powers as Trustee, officer,
employee or agent of the Trust.
-42-
<PAGE> 46
(g) Nothing contained in this Declaration shall prohibit
or in any way limit any person described in Section 3.2(n) of this Declaration
from contracting with others for the performing of services similar or
identical to those undertaken by such Person pursuant to this Declaration or
from conducting the usual and normal business operations of such Person. The
Trustees are not restricted by this Section 7.6 from forming a corporation,
partnership, trust or other business association owned by the Trustees or by
their nominees for the purpose of holding title to property of the Trust or
managing property of the Trust providing the Trustees' motive for the formation
of such business association is not their own enrichment.
7.7 Restriction of Duties and Liabilities. To the extent
that the nature of this Trust (that is, a Maryland real estate investment
trust) will permit, the duties and liabilities of Shareholders, Trustees and
officers shall in no event be greater than the duties and liabilities of
shareholders, directors and officers of a Maryland corporation. The
Shareholders, Trustees and officers shall in no event have any greater duties
or liabilities than those imposed by applicable law as shall be in effect from
time to time.
7.8 Persons Dealing with Trustees or Officers. Any act of
the Trustees or officers purporting to be done in their capacity as such,
shall, as to any persons dealing with such Trustees or officers, be
conclusively deemed to be within the purposes of this Trust and within the
powers of the Trustees and officers. No Person dealing with the Trustees or
any of them, or with the authorized officers, agents or representatives of the
Trust, shall be bound to see to the application, of any funds or property
passing into their hands of control. The receipt of the Trustees, or any of
them, or of authorized officers, agents, or representatives of the Trust, for
moneys or other consideration, shall be binding upon the Trust.
7.9 Reliance. The Trustees and officers may consult with
counsel and the advice or opinion of such counsel shall be full and complete
personal protection to all of the Trustees and officers in respect to any
action taken or suffered by them in good faith and in reliance on and in
accordance with such advice or opinion. In discharging their duties, Trustees
and officers, when acting in good faith, may rely upon financial statements of
the Trust represented to them to be correct by the President or the officer of
the Trust having charge of its books of account, or stated in a written report
by an independent certified public accountant fairly to present the financial
position of the Trust. The Trustees may rely, and shall be personally
protected in acting, upon any instrument or other document believed by them to
be genuine.
-43-
<PAGE> 47
7.10 Income Tax Status. Anything to the contrary herein
notwithstanding and without limitation of any rights of indemnification or
non-liability of the Trustees herein, said Trustees by this Declaration make no
commitment or representation that the Trust will qualify for the dividends paid
deduction permitted by the Internal Revenue Code, by Article 81, Section 313A
of the Annotated Code of Maryland, or by any Rules and Regulations thereunder
pertaining to Real Estate Investment Trusts, in any given year. The failure of
the Trust to qualify as a Real Estate Investment Trust under the Internal
Revenue Code or under the Maryland Code shall not render the Trustees liable to
the Shareholders or to any other person or in any manner operate to annul the
Trust.
ARTICLE VIII
DURATION, AMENDMENT, TERMINATION AND
QUALIFICATION OF TRUST
8.1 Duration of Trust. The Trust shall continue without
limitation of time, unless terminated as provided in Section 8.2.
8.2 Termination of Trust.
(a) The Trust may be terminated by the affirmative vote of
the holders of two-thirds (2/3) in interest of all outstanding Shares entitled
to vote thereon, at any meeting of Shareholders. Upon termination of the
Trust:
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of
the Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the contracts of the Trust,
collect its assets, sell, convey, assign, exchange, transfer, or
otherwise dispose of all or any part of the remaining Trust Estate to
one or more persons at public or private sale for consideration which
may consist in whole or in part of cash, securities or other property
of any kind, discharge or pay its liabilities and do all other acts
appropriate to liquidate its business; provided, that any sale,
conveyance, assignment, exchange, transfer or other disposition of more
than fifty percent (50%) of the Trust Estate shall require approval of
the principal terms of the transaction and the nature and amount of the
consideration by vote or consent of the holders of a majority of all
the outstanding Shares entitled to vote thereon.
-44-
<PAGE> 48
(iii) After paying or adequately providing for the payment
of all liabilities, and upon the receipt of such releases, indemnities,
and refunding agreements as they deem necessary for their protection
the Trustees may distribute the remaining Trust Estate, in case or in
kind, or partly each, among the Shareholders, according to their
respective rights.
(b) After termination of the Trust and distribution to
the Shareholders as herein provided, the Trustees shall execute and lodge among
the records of the Trust an instrument in writing, setting forth the fact of
such termination, and the Trustees shall thereupon be discharged from all
further liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease.
8.3 Amendment Procedure.
(a) This Declaration may be amended by the vote or
written consent of Shareholders holding a majority of the outstanding Shares
entitled to vote thereon. The Trustees may also amend this Declaration without
the vote or consent of Shareholders as provided in Section 9.6.
(b) A certification, in recordable form, signed by a
majority of the Trustees, setting forth an amendment and reciting that it was
duly adopted by the Shareholders or by the Trustees as aforesaid, or a copy of
the Declaration, as amended, in recordable form, and executed by a majority of
the Trustees, shall be conclusive evidence of such amendment when lodged among
the records of the Trust.
(c) Nothing contained in this Declaration shall permit
the amendment of this Declaration to impair the exception from personal
liability of the Shareholders, Trustees, officers, and agents of this Trust.
8.4 Qualification Under the REIT Provisions of the
Internal Revenue Code. It is intended that the Trust shall qualify as a "real
estate investment trust" under the REIT Provisions of the Internal Revenue Code
during such period as the Trustees shall deem it advisable so to qualify the
Trust.
ARTICLE IX
MISCELLANEOUS
9.1 Applicable Law. This Declaration has been executed
and acknowledged by the Trustees with reference to the statutes and laws of the
State of Maryland and the rights of all parties and the construction and effect
of every provision hereof
-45-
<PAGE> 49
shall be subject to and construed according to statutes and laws of said State.
9.2 Index and Headings for Reference Only. The index and
headings preceding the text, articles and sections hereof have been inserted
for convenience and reference only and shall not be construed to affect the
meaning, construction or effect of this Declaration.
9.3 Successors in Interest. This Declaration and the
Trustees' Regulations shall be binding upon and inure to the benefit of the
undersigned Trustees and their successors assigns, heirs, distributees and
legal representatives, and every Shareholder and his successors, assigns,
heirs, distributees and legal representatives.
9.4 Inspection of Records. Trust records shall be
available for inspection by Shareholders at the same time and in the same
manner and to the extent that comparable records of a Maryland corporation
would be available for inspection by corporate shareholders under the laws of
the State of Maryland. Except as specifically provided for in this
Declaration, Shareholders shall have no greater right than shareholders of a
Maryland corporation to require financial or other information from the Trust,
Trustees or officers. Any Federal or state securities administration, the
Department of Assessments and Taxation of the State of Maryland, or other
similar authority shall have the right, at reasonable times during business
hours and for proper purposes, to inspect the books and records of the Trust.
9.5 Counterparts. This instrument may be simultaneously
executed in several counterparts, each of which when so executed shall be
deemed to be an original and such counterparts together shall constitute one
and the same instrument, which shall be sufficiently evidenced by any such
original counterpart.
9.6 Provisions of the Trust in Conflict with Law or
Regulations.
(a) The provisions of this Declaration are severable, and
if the Trustees shall determine with the advice of counsel, that any one or
more of such provisions (the "Conflicting Provisions") are in conflict with the
REIT Provisions of the Internal Revenue Code, with other applicable federal
laws and regulations, or with the REIT provisions of the Annotated Code of
Maryland, the Conflicting Provisions shall be deemed never to have constituted
a part of the Declaration; provided, however, that such determination by the
Trustees shall not affect or impair any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted
(including
-46-
<PAGE> 50
but not limited to the election of Trustees) prior to such determination. A
certification in recordable form signed by a majority of the Trustees setting
forth any such determination and reciting that it was duly adopted by the
Trustees, or a copy of this Declaration, with the Conflicting Provisions
removed pursuant to such determination, in recordable form, signed by a
majority of the Trustees, shall be conclusive evidence of such determination
when lodged in the records of the Trust. The Trustees shall not be liable for
failure to make any determination under this Section 9.6(a). Nothing in this
Section 9.6(a) shall in any way limit or affect the right of the Shareholders
to amend this Declaration as provided in Section 8.3(a).
(b) If any provisions of this Declaration shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other provision of this Declaration, and this Declaration
shall be carried out as if any such invalid or unenforceable provision were not
contained herein.
9.7 Certifications. The following certifications shall
be final and conclusive as to any persons dealing with the Trust:
(a) A certification of a vacancy among the Trustees by
reason of resignation, removal, increase in the number of Trustees, incapacity,
death or otherwise, when made in writing by majority of the remaining Trustees;
(b) A certification as to the persons holding office as
Trustees or officers at any particular time, when made in writing by the
Secretary of the Trust or by any Trustee;
(c) A certification that a copy of this Declaration or of
the Trustees' Regulations is a true and correct copy thereof as then in force,
when made in writing by the Secretary of the Trust or by any Trustee;
(d) The certification referred to in Section 8.3(b) and
9.6(a) hereof;
(e) A certification as to any action by Trustees, other
than the above, when made in writing by the Secretary of the Trust, or by any
Trustee.
9.8 Recording and Filing. A copy of this instrument and
any other amendments to the Declaration shall be filed with the Department of
Assessments and Taxation of Maryland, and in the office of the County Recorder
or its equivalent in every county of Maryland where the Trust is or the
Trustees are the
-47-
<PAGE> 51
record owner or owners of Real Property; provided, however, that provision is
made in such county for such recording, and further provided that this
Declaration is accepted for recording. This Declaration and any amendments may
also be filed or recorded in such other places as the Trustees deem
appropriate.
9.9 Resident Agent. The name and post office address of
the resident agent of the Trust in the State of Maryland is C. Lawrence Wiser,
12702 Littleton Street, Silver Spring, Maryland 20906.* Said resident is a
citizen of the State of Maryland actually residing therein. The resident agent
may be removed and vacancy existing in such office for any reason may be filled
by majority of the Trustees.
- ----------------------------------
* The resident agent of the Trust was changed to The Corporation Trust, 33
South Street, Baltimore, Maryland 21202, pursuant to documents recorded on
January 16, 1976 on Film No. 2246, Frame No. 684 and on May 3, 1984, on Film
No. 2644, Frame No. 2123.
-48-
<PAGE> 1
EXHIBIT 3.2
HOTEL INVESTORS CORPORATION
ARTICLES OF AMENDMENT AND
RESTATEMENT OF ARTICLES OF INCORPORATION
Hotel Investors Corporation, a Maryland corporation having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation"), hereby certifies to the Maryland State Department of
Assessments and Taxation that:
FIRST: The Corporation desires to amend the Charter of the Corporation
as currently in effect.
SECOND: The Charter of the Corporation is hereby amended and restated
as follows:
HOTEL INVESTORS CORPORATION
ARTICLES OF INCORPORATION
FIRST: The name of the corporation ("Corporation") is:
Starwood Lodging Corporation
SECOND: The purposes for which the Corporation is formed are
as follows:
(a) To lease hotels, to acquire hotels, to manage hotels and
other real property, either directly or by entering into management
contracts, to perform services relating to real estate and to engage
in other activities involving hotels and other real estate.
(b) To engage in any lawful act or activity for which
corporations may be organized under, and to have and exercise any and
all powers or privileges now or hereafter conferred by, the Maryland
General Corporation Law or any Act amendatory thereof or supplemental
thereto or in substitution therefor.
THIRD: The post office address of the principal office of the
Corporation in Maryland is:
The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
-1-
<PAGE> 2
FOURTH: The name and post office address of the resident
agent of the Corporation in Maryland is:
The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
FIFTH: The total number of shares of capital stock which the
Corporation has authority to issue is one hundred thirty five million
(135,000,000) shares, consisting of (a) one hundred million (100,000,000)
shares of common stock with a par value of $0.01 per share, (b) ten million
(10,000,000) shares of preferred stock with a par value of $0.01 per share, (c)
twenty million (20,000,000) shares of excess common stock with a par value of
$0.01 per share and (d) five million (5,000,000) shares of excess preferred
stock with a par value of $0.01 per share. The preferred stock may be issued
in such series and with such preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
redemption provisions, if any, as may be fixed by the Board of Directors. The
excess common stock and the excess preferred stock shall have the rights
provided in the NINTH Article hereof. The aggregate par value of all shares of
stock which the Corporation has authority to issue is One Million Three Hundred
Fifty Thousand Dollars ($1,350,000).
SIXTH: (a) The Corporation shall have three Directors, which
number may be changed from time to time in such manner as the By-Laws of the
Corporation shall provide. The Directors shall be divided, with respect to the
time for which they severally hold office, into three classes, as nearly equal
in number as reasonably possible, with the term of office of the first class to
expire at the 1995 annual meeting of stockholders, the term of office of the
second class to expire at the 1996 annual meeting of stockholders and the term
of office of the third class to expire at the 1997 annual meeting of
stockholders, with each director to hold office until his or her successor
shall have been duly elected and qualified. At each annual meeting of
stockholders, commencing with the 1995 annual meeting, (i) Directors elected to
succeed the class of Directors whose terms then expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election, with each director of the class to hold office until his
or her successor shall have been duly elected and qualified, and (ii) except as
otherwise required by law, if authorized by a resolution of the Board of
Directors, Directors may be elected to fill any vacancy on the Board of
Directors, regardless of how such vacancy shall have been created.
(b) Except as otherwise required by law, unless the Board of
Directors otherwise determines, newly created Directorships resulting from any
increase in the authorized
-2-
<PAGE> 3
number of Directors or any vacancies on the Board of Directors resulting from
any cause shall be filled only by a majority vote of the Directors then in
office, though less than a quorum, and Directors so chosen shall hold office
for a term expiring at the annual meeting of stockholders at which the term of
office of the class to which they have been elected expires and until such
Director's successor shall have been duly elected and qualified. No decrease
in the numbers of authorized Directors constituting the entire Board of
Directors shall shorten the term of any incumbent Director.
(c) The names of the Directors of the Corporation as of the
amendment and restatement of the Charter herein set forth are as follows:
Bruce M. Ford
Graeme W. Henderson
Earle F. Jones
SEVENTH: Notwithstanding the provisions of the SIXTH Article
or any limitations on removal of Directors, the stockholders of the Corporation
may remove any director, but only for cause, and only by the affirmative vote
of two-thirds (2/3) of all the votes entitled to be cast for the election of
Directors.
EIGHTH: No holder of capital stock of the Corporation shall
be entitled as a matter of right to subscribe for, purchase or receive any part
of any new or additional issue of capital stock of any class or any options or
warrants for such stock or any rights to subscribe to or purchase such stock or
securities convertible into or exchangeable for such stock whether now or
hereafter authorized or whether issued for money, for a consideration other
than money, or for no consideration.
NINTH: Restrictions on the transferability of stock of the
Corporation are as follows:
(a) Subject to paragraphs (b), (c) and (d) of this NINTH
Article, upon surrender to the Corporation or to any transfer agent of
the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority
to transfer, the Corporation, or its transfer agent, shall issue a new
certificate to the person entitled thereto, cancel the old certificate
and record the transaction upon the Corporation's books.
(b) Beginning at the time that the payment of a distribution
in kind of the shares of common stock of the Corporation shall have
occurred ("effective time of the restriction"), and continuing
thereafter until such time as
-3-
<PAGE> 4
the limitation on transfer provided for in the Pairing Agreement to be
entered into by Starwood Lodging Trust, a Maryland real estate
investment trust ("SLT"), and the Corporation shall be terminated:
(i) The shares of common stock of the Corporation
shall not be transferable, and shall not be transferred on the
books of the Corporation unless (1) a simultaneous transfer of
a like number of shares of SLT is made by the same transferor
to the same transferee, or (2) such transferor has previously
arranged with SLT for the acquisition by the transferee of a
like number of shares of SLT, and in each case such shares are
paired with one another.
(ii) Each certificate evidencing ownership of shares
of SLT issued and not cancelled prior to the effective time of
the restriction shall be deemed to evidence a like number of
shares of common stock of the Corporation.
(iii) Any registered holder of a certificate
evidencing ownership of shares of SLT issued prior to the
effective time of the restriction may, upon request and
presentation of such certificate to the Corporation's transfer
agent, obtain in substitution therefor a certificate or
certificates registered in such holder's name evidencing the
same number of shares of common stock of the Corporation and a
like number of shares of SLT.
(iv) A legend shall be placed on the face of each
certificate evidencing ownership of shares of common stock of
the Corporation issued after the effective time of the
restriction, referring to the restrictions on transfer set
forth herein.
(c) Restrictions on Transfer.
(i) Definitions. The following terms shall have
the following meanings:
"Beneficial Ownership" shall mean ownership of shares
of capital stock by a Person who would be treated as an owner
of such shares of capital stock directly, indirectly or
constructively through the application of Section 318(a) of
the Code, as modified by Section 856(d)(5) of the Code, or
Section 544 of the Code, as modified by Section 856(h) of the
Code. The terms "Beneficial Owner", "Beneficially Owns" and
"Beneficially Owned" shall have correlative meanings.
-4-
<PAGE> 5
"Charitable Beneficiary" shall mean the organization
or organizations described in Sections 170(c)(2) and 501(c)(3)
of the Code selected by the Excess Share Trustee.
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
"Excess Shares" shall mean the excess common stock
and the excess preferred stock.
"Excess Share Trust" shall mean the trust created
pursuant to paragraph (d) of this NINTH Article.
"Excess Share Trust Beneficiary" shall mean a
beneficiary of the Excess Share Trust as determined pursuant
to paragraph (d) of this NINTH Article.
"Excess Share Trustee" shall mean Nina Matis or any
successor appointed pursuant to paragraph (d) of this NINTH
Article.
"Market Price" of any class of shares of capital
stock on any date shall mean the average of the Closing Price
for the five (5) consecutive trading days ending on such date,
or if such date is not a trading date, the five consecutive
trading days preceding such date. The "Closing Price" on any
date shall mean (1) the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange, or (2) if such class
of shares of capital stock is not listed or admitted to
trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with
respect to securities listed on the principal national
securities exchange on which such class of shares of capital
stock is listed or admitted to trading, or (3) if such class
of shares of capital stock is not listed or admitted to
trading on any national securities exchange, the last quoted
price, or if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc.
Automated Quotation System or, if such system is no longer in
use, the principal other automated quotations system that may
then be in use, or (4) if such class of shares of capital
stock is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a
-5-
<PAGE> 6
professional market maker making a market in such class of
shares of capital stock selected by the Board of Directors.
"Ownership Limit" shall mean (i) in the case of a
Person other than an Existing Holder (as defined below),
Beneficial Ownership of more than eight percent (8.0%), by
value, vote or number, of the shares of capital stock and (ii)
in the case of a Person who or which was the Beneficial Owner,
as of February 1, 1995 (the "Amendment Date"), of more than
8.0% (by vote, value or number) of the shares of capital stock
(any such Person being referred to as an "Existing Holder"), a
percentage (by vote, value or number) equal to the lesser of
(a) 9.9% and (b) the percentage of shares of capital stock
Beneficially Owned by such Existing Holder as of the Amendment
Date; provided that if, at any time and from time to time
after the Amendment Date, the percentage of shares of capital
stock Beneficially Owned by an Existing Holder shall decrease
(whether by reason of a disposition by such Existing Holder,
an increase in the number of outstanding shares of capital
stock or otherwise), then from and after the time of such
decrease the Ownership Limit in the case of such Existing
Holder shall be a percentage (by vote, value or number) equal
to the greater of (x) 8.0% and (y) the percentage of shares of
capital stock Beneficially Owned by such Existing Holder after
giving effect to such decrease.
"Person" shall mean any individual, corporation,
partnership, joint stock company or association, joint
venture, association, company, trust, bank, limited liability
company, estate, foundation or other entity and any
government, agency or political subdivision thereof.
"Purported Beneficial Holder" shall mean, with
respect to any event (other than a purported Transfer) which
results in Excess Shares, the Person for whom the Purported
Record Holder held shares of capital stock that were, pursuant
to paragraph (c)(iii) of this NINTH Article, automatically
converted into Excess Shares upon the occurrence of such
event.
"Purported Beneficial Transferee" shall mean, with
respect to any purported Transfer which results in Excess
Shares, the purported beneficial transferee for whom the
Purported Record Transferee would have acquired shares of
capital stock if such Transfer had been valid under paragraph
(c)(ii) of this NINTH Article.
-6-
<PAGE> 7
"Purported Record Holder" shall mean, with respect to
any event (other than a purported Transfer) which results in
Excess Shares, the record holder of the shares of capital
stock that were, pursuant to paragraph (c)(iii) of this NINTH
Article, automatically converted into Excess Shares upon the
occurrence of such event.
"Purported Record Transferee" shall mean, with
respect to any purported Transfer which results in Excess
Shares, the record holder of the shares of capital stock if
such Transfer had been valid under paragraph (c)(ii) of this
NINTH Article.
"REIT" shall mean a real estate investment trust for
federal income tax purposes.
"Restriction Termination Date" shall mean the first
day of the taxable year for which the Trustees of SLT have
determined to terminate SLT's status as a REIT.
"Transfer" shall mean any sale, transfer, gift,
hypothecation, pledge, assignment, devise or other disposition
of shares of capital stock (including (1) the granting of any
option or interest similar to an option (including an option
to acquire an option or any series of such options) or
entering into any agreement for the sale, transfer or other
disposition of shares of capital stock or (2) the sale,
transfer, assignment or other disposition of any securities or
rights convertible into or exchangeable for shares of capital
stock), whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law
or otherwise. For purposes of this definition, whether
securities or rights are convertible or exchangeable for
capital stock shall be determined in accordance with Sections
318 and 544 of the Code.
(ii) Restrictions on Transfers and Other Events. On
or after the Restriction Termination Date, the provisions of
paragraphs (c) and (d) of this NINTH Article shall be of no further
force and effect. Prior to the Restriction Termination Date and
except as provided in subparagraph (ix) below:
(1) No Person shall Beneficially Own shares of
capital stock in excess of the Ownership Limit;
(2) Any Transfer that, if effective, would result
in any Person Beneficially Owning shares of capital
-7-
<PAGE> 8
stock in excess of the Ownership Limit shall be void ab initio
as to the Transfer of that number of shares of capital stock
which would be otherwise Beneficially Owned by such Person in
excess of the Ownership Limit and the intended transferee shall
acquire no rights in such shares of capital stock in excess of
the Ownership Limit;
(3) Any Transfer that, if effective, would result
in the shares of capital stock being Beneficially Owned by
fewer than one hundred (100) Persons (determined without
reference to any rules of attribution) shall be void ab initio
and the intended transferee shall acquire no rights in such
shares of capital stock; and
(4) Any Transfer of shares of capital stock that,
if effective, would result in the Corporation being "closely
held" within the meaning of Section 856(h) of the Code
(applied as if the Corporation was a REIT) shall be void ab
initio as to the Transfer of that number of shares of capital
stock which would cause SLT to be "closely held" within the
meaning of Section 856(h) of the Code and the intended
transferee shall acquire no rights in such shares of capital
stock.
(iii) Conversion into Excess Shares.
(1) If, notwithstanding the other provisions
contained in this NINTH Article, at any time prior to the
Restriction Termination Date, there is a purported Transfer or
other event such that any Person would Beneficially Own shares
of capital stock in excess of the Ownership Limit, then,
except as otherwise provided in subparagraph (ix) below, such
shares of capital stock which would be in excess of the
Ownership Limit (rounded up to the nearest whole share), shall
automatically be converted into that number of shares of
excess common stock or excess preferred stock, as appropriate,
equal to the number of shares of capital stock being
converted, as further described in clause (3) below. Such
conversion shall be effective as of the close of business on
the business day prior to the date of the Transfer or other
event.
(2) If, notwithstanding the other provisions
contained in this NINTH Article, at any time prior to the
Restriction Termination Date, there is a purported Transfer or
other event which, if effective, would cause the Corporation
to become "closely held" within the meaning of Section 856(h)
of the Code (applied as if the Corporation was a REIT), then
the shares of capital stock being Transferred or which are
otherwise
-8-
<PAGE> 9
affected by such event and which, in either case, would cause,
when taken together with all other shares of capital stock, the
Corporation to be "closely held" within the meaning of Section
856(h) of the Code (rounded up to the nearest whole share)
shall automatically be converted into that number of shares of
excess common stock or excess preferred stock, as appropriate,
equal to the number of shares of capital stock being converted,
as further described in clause (3) below. Such conversion
shall be effective as of the close of business on the business
day prior to the date of the Transfer or change in capital
structure.
(3) Upon conversion of common stock or preferred
stock into Excess Shares pursuant to subparagraph (iii),
common stock shall be converted into excess common stock and
preferred stock shall be converted in excess preferred stock.
(iv) Remedies for Breach. If the Board of Directors or its
designees shall at any time determine in good faith that a purported
Transfer or other event has taken place in violation of paragraph
(c)(ii) of this NINTH Article or that a Person intends to acquire or
has attempted to acquire Beneficial Ownership of any shares of capital
stock in violation of paragraph (c)(ii) of this NINTH Article, the
Board of Directors or its designees may take such action as it deems
advisable to refuse to give effect to or to prevent such Transfer or
other event, including, but not limited to, refusing to give effect to
such Transfer or other event on the books of the Corporation or
instituting proceedings to enjoin such Transfer or other event or
transaction; provided, however, that any Transfers or attempted
Transfers (or, in the case of events other than a Transfer, Beneficial
Ownership) in violation of paragraph (c)(ii) of this NINTH Article,
shall be void ab initio and automatically result in the conversion
described in paragraph (c)(iii), irrespective of any action (or non-
action) by the Board of Directors or its designees.
(v) Notice of Restricted Transfer. Any Person who acquires
or attempts to acquire shares of capital stock in violation of
paragraph (c)(ii) of this NINTH Article, or any Person who is a
purported transferee such that Excess Shares result under paragraph
(c)(iii), shall immediately give written notice to the Corporation of
such Transfer, attempted Transfer or other event and shall provide to
the Corporation such other information as the Corporation may request
in order to determine the effect, if any, of such Transfer or
attempted Transfer or other event on SLT's status as a REIT.
-9-
<PAGE> 10
(vi) Owners Required to Provide Information. Prior to the
Restriction Termination Date:
(1) Every Beneficial Owner of five percent (5%) or
more, by value, vote or number, or such lower percentages as
required pursuant to regulations under the Code (applied as if
the Corporation was a REIT), of the outstanding shares of
capital stock shall, before January 30 of each year, give
written notice to the Corporation stating the name and address
of such Beneficial Owner, the general ownership structure of
such Beneficial Owner, the number of shares of each class of
capital stock Beneficially Owned, and a description of how
such shares are held.
(2) Each Person who is a Beneficial Owner of shares
of capital stock and each Person (including the shareholder of
record) who is holding shares of capital stock for a
Beneficial Owner shall provide on demand to the Corporation
such information as the Corporation may request from time to
time in order to ensure compliance with the Ownership Limit
and SLT's compliance with the REIT requirements of the Code
and the regulations published thereunder.
(vii) Remedies Not Limited. Subject to paragraph (c)(xii) of
this NINTH Article, nothing contained in this NINTH Article shall
limit the authority of the Board of Directors to take such other
action as it deems necessary or advisable to protect SLT and the
interests of the Corporation's stockholders by preservation of SLT's
status as a REIT and to ensure compliance with the Ownership Limit.
(viii) Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this paragraph (c) or
paragraph (d), including any definition contained in subparagraph
(c)(i), the Board of Directors shall have the power to determine the
application of the provisions of this paragraph (c) or paragraph (d)
with respect to any situation based on the facts known to them.
(ix) Exception. The Board of Directors upon receipt of a
ruling from the Internal Revenue Service or an opinion of tax counsel,
satisfactory to them in their sole and absolute discretion, in each
case to the effect that SLT's status as a REIT will not be
jeopardized, may exempt a Person from the Ownership Limit if the Board
of Directors obtains such representations and undertakings from such
Person as are reasonably necessary to ascertain that such Person's
Beneficial Ownership of shares of capital stock will not jeopardize
SLT's status as a REIT.
-10-
<PAGE> 11
(x) Legend. Until the Restriction Termination Date, each
certificate for the respective class of shares of capital stock shall
bear the following legend:
The shares of capital stock represented by this
certificate are subject to restrictions on transfer. Unless
excepted by the Board of Directors, no Person may (1)
Beneficially Own shares of capital stock in excess of 8.0% of
the outstanding shares of capital stock, by value, vote or
number, determined as provided in the Corporation's Articles
of Incorporation, as the same may be amended from time to time
(the "Articles"), and computed with regard to all outstanding
shares of capital stock and, to the extent provided by the
Code, all shares of capital stock issuable under existing
options and exchange rights that have not been exercised; or
(2) Beneficially Own shares of capital stock which would
result in SLT being "closely held". Unless so excepted, any
acquisition of shares of capital stock and continued holding
of ownership constitutes a continuous representation of
compliance with the above limitations, and any Person who
attempts to Beneficially Own shares of capital stock in excess
of the above limitations has an affirmative obligation to
notify the Corporation immediately upon such attempt. If the
restrictions on transfer are violated, the transfer will be
void ab initio and the shares of capital stock represented
hereby will be automatically converted into Excess Shares that
will be held in trust. Excess Shares may not be transferred
at a profit and may be purchased by the Corporation. In
addition, certain Beneficial Owners must give written notice
as to certain information on demand and on an annual basis.
All terms not defined in this legend have the meanings
provided in the Articles. The Corporation will mail without
charge to any requesting stockholder a copy of the Articles,
including the express terms of each class and series of the
authorized shares of capital stock of the Corporation, within
five (5) days after receipt of a written request therefor.
(xi) Severability. If any provision of this NINTH Article
or any application of any such provision is determined to be invalid by
any Federal or state court having jurisdiction over the issues, the
validity of the remaining provisions shall not be affected, and other
applications of such provision shall be affected only to the
-11-
<PAGE> 12
extent necessary to comply with the determination of such court.
(xii) New York Stock Exchange Transactions. Nothing in this
NINTH Article shall preclude the settlement of any transaction entered
into through the facilities of the New York Stock Exchange.
(d) Excess Shares.
(i) Ownership In Trust. Upon any purported Transfer
or other event that results in Excess Shares pursuant to
paragraph (c)(iii) of this NINTH Article, such Excess Shares
shall be deemed to have been transferred to Nina Matis (or any
successor Excess Share Trustee), as Excess Share Trustee of
the Excess Share Trust for the benefit of such Excess Share
Trust Beneficiary or Beneficiaries and the Charitable
Beneficiary effective as of the close of business on the
business day prior to the date of the Transfer or other event.
Excess Shares so held in trust shall be issued and outstanding
shares of the Corporation. The Purported Record Transferee or
Purported Record Holder shall have no rights in such Excess
Shares. The Purported Beneficial Transferee or Purported
Beneficial Holder shall have no rights in such Excess Shares
except as provided in paragraph (d)(v). Nina Matis, or any
successor Excess Share Trustee, may resign by appointing a
person independent of SLT, the Corporation or any Excess Share
Trust Beneficiary as the Excess Share Trustee. The Excess
Share Trustee shall, from time to time, designate one or more
charitable organization or organizations as the Charitable
Beneficiary.
(ii) Dividend Rights. Excess Shares shall be entitled
to the same dividends determined as if no conversion into
Excess Shares had occurred. Any dividend or distribution paid
prior to the discovery by the Corporation that the shares of
capital stock have been converted into Excess Shares shall be
repaid to the Excess Share Trust upon demand. Any dividend or
distribution declared but unpaid shall be paid to the Excess
Share Trust. All dividends received or other income earned by
the Excess Share Trust shall be paid over to the Charitable
Beneficiary.
(iii) Rights Upon Liquidation. Excess Shares shall not
be entitled to receive any portion of the assets of the
Corporation on the liquidation or dissolution of the
Corporation. Upon conversion of Excess Shares into shares of
capital stock pursuant to paragraph (d)(v),
-12-
<PAGE> 13
such shares shall be entitled to receive their pro rata share
of the assets of the Corporation as a result of the liquidation
or dissolution of the Corporation.
(iv) Voting Rights. The Excess Share Trustee shall
vote the Excess Shares which shall have the same voting rights
as the shares of capital stock into which they are to be
converted pursuant to paragraph (d)(v). Any vote cast by the
Purported Beneficial Transferee or Purported Record Transferee
will, at the option of the Excess Share Trustee, be void ab
initio.
(v) Restrictions On Transfer; Designation of Excess
Share Trust Beneficiary. (1) Excess Shares shall not be
transferrable. The Excess Share Trustee may freely designate
an Excess Share Trust Beneficiary of all or any portion of the
beneficial interest in the Excess Share Trust (representing
the number of Excess Shares held by the Excess Share Trust
attributable to a purported Transfer or other event that
results in Excess Shares and designated as to number and class
of shares pursuant to the notice provision of this clause), if
the Excess Shares held in the Excess Share Trust would not be
Excess Shares in the hands of such Excess Share Trust
Beneficiary. If the Excess Shares resulted from a purported
Transfer, the Purported Beneficial Transferee shall receive a
payment from the Excess Share Trustee that reflects a price
per share for such Excess Shares equal to the lesser of (A)
the price per share received by the Excess Share Trustee and
(B) (x) the price per share such Purported Beneficial
Transferee paid for the Share of Beneficial Interest in the
purported Transfer that resulted in the Excess Shares, or (y)
if the Purported Beneficial Transferee did not give value for
such shares of Excess Shares (through a gift, devise or other
transaction), a price per share of Excess Shares equal to the
Market Price of the shares of capital stock on the date of the
purported Transfer that resulted in the Excess Shares. If
Excess Shares resulted from an event other than a purported
Transfer, the Purported Beneficial Holder shall receive a
payment from the Excess Share Trustee that reflects a price
per share of Excess Shares equal to the lesser of (A) the
price per share received by the Excess Share Trustee or (B)
the Market Price of the shares of capital stock on the date of
the event that resulted in Excess Shares. Upon such transfer
of an interest in the Excess Share Trust, the corresponding
shares of Excess Shares in the Excess Share Trust shall be
automatically converted into such number of shares of common
or preferred stock (of the same class as the shares that were
converted into such Excess Shares) as
-13-
<PAGE> 14
is equal to the number of shares of Excess Shares, and such
shares of common or preferred stock shall be transferred of
record to the Excess Share Trust Beneficiary of the interest in
the Excess Share Trust designated by the Excess Share Trustee
as described above if such shares of capital stock would not be
Excess Shares in the hands of such Excess Share Trust
Beneficiary. Prior to any transfer of any interest in the
Excess Share Trust, the Corporation must have waived in writing
its purchase rights, if any, under paragraph (d)(vi). Any
funds received by the Excess Share Trustee in excess of the
funds payable to the Purported Beneficial Holder or the
Purported Beneficial Transferor shall be paid to the Charitable
Beneficiary. The Corporation shall pay the costs and expenses
of the Excess Share Trustee.
(2) Notwithstanding the foregoing, if a Purported
Beneficial Transferee, Purported Beneficial Holder or the
Excess Share Trustee receives a price for an interest in the
Excess Share Trust that exceeds the amounts allowable under
paragraph (d)(v)(1) of this NINTH Article, such Purported
Beneficial Transferee or Purported Beneficial Holder shall be
personally liable to, and shall pay, or cause the Excess Share
Trust Beneficiary of the interest in the Excess Share Trust to
pay, such excess to the Excess Share Trustee who shall pay
over such excess to the Charitable Beneficiary.
(3) Notwithstanding the foregoing, if the provisions
of this paragraph (d)(v) are determined to be void or invalid
by virtue of any legal decision, statute, rule or regulation,
then the Purported Beneficial Transferee or Purported
Beneficial Holder of any shares of Excess Shares may be
deemed, at the option of the Corporation, to have acted as an
agent on behalf of the Corporation, in acquiring or holding
such Excess Shares and to hold such Excess Shares on behalf of
the Corporation.
(vi) Purchase Right in Excess Shares. Excess Shares shall
be deemed to have been offered for sale by the Excess Share Trustee to
the Corporation, or its designee, at a price per Excess Share equal to
(I) in the case of Excess Shares resulting from a purported Transfer,
the lesser of (A) the price per share of the shares of capital stock in
the transaction that created such Excess Shares (or, in the case of
devise or gift, the Market Price of the shares of capital stock at the
time of such devise or gift), or (B) the lowest Market Price of the
class of shares of capital stock which resulted in the Excess Shares at
any time after
-14-
<PAGE> 15
the date such shares were converted into Excess Shares and prior to
the date the Corporation, or its designee, accepts such offer or (II)
in the case of Excess Shares resulting from an event other than a
purported Transfer, the lesser of (A) the Market Price of the shares
of capital stock on the date of such event or (B) the lowest Market
Price for shares of capital stock which resulted in the Excess Shares
at any time from the date of the event resulting in such Excess Shares
and prior to the date the Corporation, or its designee, accepts such
offer. The Corporation shall have the right to accept such offer for
a period of ninety (90) days after the later of (i) the date of the
Transfer which resulted in such Excess Shares and (ii) the date the
Board of Directors determines in good faith that a Transfer or other
event resulting in Excess Shares has occurred, if the Corporation does
not receive a notice of such Transfer or other event pursuant to
paragraph (c)(v) of this NINTH Article.
(e) Notwithstanding any other provision of these Articles of
Incorporation or any provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of capital stock required by
law or these Articles of Incorporation, the affirmative vote of the
holders of at least two-thirds (2/3) of the voting power of all the
then-outstanding shares of capital stock of the Corporation, voting
together as a single class, shall be required to alter, amend or
repeal this NINTH Article.
TENTH: The Corporation shall indemnify (A) its directors and
officers, whether serving the Corporation or at its request any other entity,
to the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law and (B) other employees and
agents to such extent as shall be authorized by the Board of Directors or the
Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such by-laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of the
charter of the Corporation or repeal of any of its provisions shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal.
-15-
<PAGE> 16
ELEVENTH: The provisions for the regulation of the internal
affairs of the Corporation are to be stated in the Bylaws of the Corporation,
as the same may be amended from time to time.
TWELFTH: Any amendments to these Articles of Incorporation
shall be approved by the stockholders of the Corporation by the affirmative
vote of a majority of all the votes entitled to be cast on the matter.
THIRTEENTH: The Corporation shall not consummate a
consolidation, merger, share exchange or sale, lease, exchange or other
transfer of all or substantially all of its assets, the stockholder approval of
which is required by applicable law, unless such transaction is approved by the
stockholders of the Corporation by the affirmative vote of a majority of all
the votes entitled to be cast on the matter.
FOURTEENTH: To the fullest extent permitted by Maryland
statutory or decisional law, as amended or interpreted from time to time, no
director or officer of the Corporation shall be liable to the Corporation or
its stockholders for money damages. No amendment to these Articles of
Incorporation or repeal of any of its provisions shall limit or eliminate the
effect of this FOURTEENTH Article with respect to any act or omission which
occurs prior to such amendment or repeal.
FIFTEENTH: The directors of the Corporation, at a meeting
duly called and held on November 10, 1994, adopted a resolution in which was
set forth the foregoing amendment and restatement of the Charter, declaring
that said amendment and restatement was advisable and directing that said
amendment and restatement be submitted for approval by the stockholders.
SIXTEENTH: The stockholders of the Corporation, voting at a
meeting duly called and held on December 15, 1994, adopted a resolution in
which was set forth the foregoing amendment and restatement of the Charter, and
approved said amendment and restatement by a vote of the holders of a majority
of the issued and outstanding shares of Common Stock.
SEVENTEENTH: The amendment and restatement of the Charter as
hereinabove set forth has been duly approved by the directors and stockholders
of the Corporation.
EIGHTEENTH: Immediately before the amendment and restatement
of the Charter, the Corporation had authority to issue forty million
(40,000,000) shares of capital stock, consisting of thirty million (30,000,000)
shares of common stock with a par value of $0.10 per share and ten million
(10,000,000) shares of preferred stock with a par value of $1.00 per share,
-16-
<PAGE> 17
and the aggregate par value of all shares of stock was Thirteen Million Dollars
($13,000,000).
As amended, the total number of shares of stock which the
Corporation has authority to issue is one hundred thirty five million
(135,000,000) shares, consisting of (a) one hundred million (100,000,000)
shares of common stock with a par value of $0.01 per share, (b) ten million
(10,000,000) shares of preferred stock with a par value of $0.01 per share, (c)
twenty million (20,000,000) shares of excess common stock with a par value of
$0.01 per share and (d) five million (5,000,000) shares of excess preferred
stock, with a par value of $0.01 per share. The aggregate par value of all
shares of stock which the Corporation has authority to issue is One Million
Three Hundred Fifty Thousand Dollars ($1,350,000).
The information required by Section 2-607(b)(2)(i) of the
Maryland General Corporation Law with respect to the common stock and preferred
stock was not changed by the amendment. The terms of the excess common stock
and excess preferred stock are set forth in Article NINTH of these Articles of
Amendment and Restatement.
-17-
<PAGE> 18
IN WITNESS WHEREOF, Hotel Investors Corporation has caused
these presents to be signed in its name and on its behalf by the Executive Vice
President of the Corporation this 1st day of February, 1995.
ATTEST: HOTEL INVESTORS CORPORATION
[Corporate Seal]
By:
- ----------------------------- ------------------------------
Helen Azevedo Kevin E. Mallory
Secretary Executive Vice President
-18-
<PAGE> 19
THE UNDERSIGNED, Executive Vice President of Hotel Investors
Corporation, who executed on behalf of the Corporation the foregoing Articles
of Amendment and Restatement of which this certificate is made a part, hereby
acknowledges in the name and on behalf of said Corporation the foregoing
Articles of Amendment and Restatement to be the corporate act of said
Corporation and hereby certifies that to the best of his knowledge, information
and belief, the matters and facts set forth therein with respect to the
authorization and approval thereof are true in all material respects under the
penalties of perjury.
----------------------------------------
Kevin E. Mallory
Executive Vice President
-19-
