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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 13, 1996 0-28222
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Date of Report (Date of earliest event reported) Commission File No.
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 52-1604506
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(State of Organization) (I.R.S. Employer
Identification Number)
10400 Fernwood Road, Bethesda, MD 20817-1109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 380-2070
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ITEM 5 - OTHER EVENTS
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On June 13, 1996 MHP II Acquisition Corp. (the "Company"), a wholly-owned
subsidiary of Host Marriott Corporation ("Host"), successfully completed its
tender offer for a majority of the limited partnership units in Marriott Hotel
Properties II Limited Partnership (the "Partnership"). The Company purchased
375.5 units for an aggregate consideration of $56,325,000 or $150,000 per unit.
As a result of this transaction, the Company became the majority limited partner
in the Partnership. Additionally, in a Partnership vote held in conjunction with
the tender offer, the limited partners approved certain amendments to the
partnership agreement that were conditions to the tender offer. A copy of the
Second Amended and Restated Agreement of Limited Partnership of Marriott Hotel
Properties II Limited Partnership is attached to this Form 8-K as Exhibit 4.1.
The Partnership owns the 1,290-room New Orleans Marriott Hotel, the 999-room San
Antonio Marriott Rivercenter Hotel and the 368-room San Ramon Marriott Hotel.
In addition, the Partnership owns a 50% limited partnership interest in the
Santa Clara Marriott Hotel Limited Partnership which owns the 754-room Santa
Clara Marriott Hotel.
The Partnership is in the process of refinancing the Partnership debt as well as
the debt of the Santa Clara Partnership which totals approximately $256.8
million.
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ITEM 7 - FINANCIAL STATEMENT, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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(c) Exhibits.
Exhibit No.
(per Exhibit Tables in
Item 601 of Regulation S-K) Description
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4.1 Second Amended and Restated Agreement
of Limited
Partnership of Marriott Hotel
Properties II Limited Partnership
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
By: MARRIOTT MHP TWO CORPORATION
General Partner
Date: June 24,1996 By: /s/ Bruce F. Stemerman
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Bruce F. Stemerman
President and Chief Accounting Officer
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EXHIBIT INDEX
EXHIBIT DOCUMENT PAGE
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4.1 Second Amended and Restated Agreement of Limited 1
Partnership of Marriott Hotel Properties II Limited
Partnership
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EXHIBIT 4.1
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MARRIOTT HOTEL PROPERTIES II
LIMITED PARTNERSHIP
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TABLE OF CONTENTS
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ARTICLE ONE--DEFINED TERMS................................................................................................... 1
ARTICLE TWO--FORMATION, NAME, PLACE OF BUSINESS, PURPOSE AND TERM............................................................ 9
Section 2.01 Formation....................................................................................................... 9
Section 2.02 Name and Offices................................................................................................ 9
Section 2.03 Purposes........................................................................................................ 9
Section 2.04 Term............................................................................................................ 9
Section 2.05 Registered Agent for Service of Process......................................................................... 9
Section 2.06 Certificate of Limited Partnership.............................................................................. 10
ARTICLE THREE--PARTNERS AND CAPITAL.......................................................................................... 10
Section 3.01 General Partner................................................................................................. 10
Section 3.03 Limited Partners................................................................................................ 10
Section 3.04 Capital Contributions by General Partner........................................................................ 10
Section 3.05 Capital Contributions by Limited Partners....................................................................... 10
Section 3.06 Partnership Capital............................................................................................. 14
Section 3.07 Additional Issuances of Units and Capital Contributions......................................................... 14
Section 3.08 Liability of the Limited Partners............................................................................... 14
Section 3.09 Liability of the General Partner................................................................................ 15
Section 3.10 Initial Working Capital Reserve................................................................................. 15
ARTICLE FOUR--ALLOCATIONS OF PROFITS AND LOSSES; DISTRIBUTIONS OF CASH AND CERTAIN PROCEEDS.................................. 16
Section 4.01 Allocation of Net Profits....................................................................................... 16
Section 4.02 Allocation of Net Losses........................................................................................ 16
Section 4.03 Allocations of Gain and Loss.................................................................................... 16
Section 4.04 Allocation Among Limited Partners of Net Profits, Gains, Net Losses and Losses.................................. 17
Section 4.05 Allocation of Recapture Income................................................................................. 17
Section 4.06 Distribution of Cash Available for Distribution................................................................ 17
Section 4.07 Distribution of Refinancing Proceeds........................................................................... 18
Section 4.08 Distribution of Sale Proceeds................................................................................... 18
Section 4.09 Distribution Among Limited Partners of Cash Available for Distribution, Refinancing Proceeds and Sale Proceeds.. 19
Section 4.10 Section 754 Adjustments......................................................................................... 19
Section 4.11 Special Allocations............................................................................................. 19
Section 4.12 Operating Rules................................................................................................. 21
Section 4.13 Minimum Interest of the General Partner......................................................................... 22
ARTICLE FIVE--RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER.............................................................. 22
Section 5.01 Authority of the General Partner to Manage the Partnership...................................................... 22
Section 5.02 Restrictions on Authority of the General Partner............................................................... 25
Section 5.03 Duties and Obligations of the General Partner.................................................................. 28
Section 5.04 Compensation of General Partner................................................................................ 30
Section 5.05 Other Business of Partners..................................................................................... 30
Section 5.06 Limitation on Liability of General Partner; Indemnification.................................................... 30
Section 5.07 Designation of Tax Matters Partner and Designated Person for Purposes of Investor List......................... 32
ARTICLE SIX--WITHDRAWAL AND REMOVAL OF GENERAL PARTNER....................................................................... 33
Section 6.01 Limitation on Voluntary Withdrawal............................................................................. 33
Section 6.02 Bankruptcy or Dissolution of the General Partner............................................................... 34
Section 6.03 Liability of Withdrawn General Partner......................................................................... 34
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Section 6.04 Removal of General Partner..................................................................................... 34
Section 6.05 Continuation and Reconstitution................................................................................ 35
ARTICLE SEVEN--ASSIGNABILITY OF UNITS........................................................................................ 36
Section 7.01 Restrictions on Assignments.................................................................................... 36
Section 7.02 Assignees and Substituted Limited Partners..................................................................... 37
ARTICLE EIGHT--DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP................................................................ 39
Section 8.01 Events Causing Dissolution..................................................................................... 39
Section 8.02 Liquidation.................................................................................................... 40
ARTICLE NINE--BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS, ETC..................................................... 41
Section 9.01 Books and Records.............................................................................................. 41
Section 9.02 Accounting and Fiscal Year..................................................................................... 41
Section 9.03 Bank Accounts and Investments.................................................................................. 41
Section 9.04 Reports........................................................................................................ 42
Section 9.05 Tax Depreciation and Elections................................................................................. 43
Section 9.06 Interim Closing of the Books................................................................................... 43
Section 9.07 Information from Limited Partners.............................................................................. 43
ARTICLE TEN--MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS.................................................................. 43
Section 10.01 Meetings...................................................................................................... 43
Section 10.02 Special Voting Rights of Limited Partners..................................................................... 44
ARTICLE ELEVEN--MISCELLANEOUS PROVISIONS..................................................................................... 46
Section 11.01 Appointment of General Partner as Attorney-in-Fact............................................................ 46
Section 11.02 Amendments.................................................................................................... 47
Section 11.03 General Partner Representations and Warranties................................................................ 48
Section 11.04 Binding Provisions............................................................................................ 48
Section 11.05 Applicable Law................................................................................................ 48
Section 11.06 Counterparts.................................................................................................. 48
Section 11.07 Separability of Provisions.................................................................................... 48
Section 11.08 Article and Section Titles.................................................................................... 48
Section 11.09 Short Form Filings............................................................................................ 48
EXHIBIT A LIMITED PARTNER NOTE
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SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
This Second Amended and Restated Agreement of Limited Partnership, dated as of
June 14, 1996, is made and entered into by and among Marriott MHP Two
Corporation, a Delaware corporation, as general partner (the "General Partner"),
and those Persons who have been admitted as limited partners of this limited
partnership in accordance with the provisions of the Amended and Restated
Agreement of Limited Partnership of the Partnership dated as of March 20, 1989
(the "Original Agreement") and are identified as such in the books and records
of the Partnership (the "Limited Partners").
Marriott Hotel Properties II Limited Partnership (the "Partnership") was
formed pursuant to a Certificate of Limited Partnership dated as of September
13, 1988 and filed with the Office of the Secretary of State of the State of
Delaware on September 20, 1988. On March 20, 1989, the General Partner,
Christopher G. Townsend, as initial limited partner, and the Limited Partners
who purchased units of limited partnership interest (the "Units") in the
Partnership in the private placement effected pursuant to the Private Placement
Memorandum entered into the Original Agreement. On April 18, 1996, MHP II
Acquisition Corp., an affiliate of the General Partner, made an offer to the
Limited Partners to purchase their Units on the terms and condition set forth in
MHP II Acquisition Corp.'s Offer to Purchase for Cash All Outstanding Units of
Limited Partnership Interest, dated April 18, 1996 (the "Offer"). In connection
with, and as a condition to consummation of, the Offer, the Partners are
adopting this Second Amended and Restated Agreement of Limited Partnership. In
consideration of the mutual agreements made herein, the parties hereby agree to
continue the Partnership as a limited partnership under the Delaware Revised
Uniform Limited Partnership Act (6 Del. C. (S) 17-101, et seq.), as amended from
time to time, (the "Act") as follows:
ARTICLE ONE
Defined Terms
Section 1.01. The defined terms used in this Agreement shall, unless the
context otherwise requires, have the respective meanings specified in this
Section 1.01.
"Accounting Period" means the four-week accounting periods having the same
beginning and ending dates as the General Partner's four-week accounting
periods, except that an Accounting Period may occasionally contain up to five
weeks when necessary to conform the accounting system to the calendar year.
"Act" means the Delaware Revised Uniform Limited Partnership Act (6 Del. C.
(S) 17-101, et seq.), as amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
the end of the relevant Fiscal Year, after giving effect to the following
adjustments:
(i) Credit to such Capital Account any amounts that such Partner is
obligated to restore pursuant to any provision of this Agreement, is
otherwise treated as being obligated to restore under section 1.704-
1(b)(2)(ii)(c) of the Treasury Regulations, or 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 Treasury regulations (determined after taking into
account any changes during such year in Minimum Gain); and
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(ii) Debit to such Capital Account the items described in sections
1.704-1(b)(2)(ii)(d)(4), (5), and (6) of the Treasury regulations.
"Affiliate," "Affiliates" or "Affiliated Person" means, when used with
reference to a specified Person, (i) any Person that directly or indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with the specified Person, (ii) any Person that is an officer or
director of, general partner in or trustee of, or serves in a similar capacity
with respect to, the specified Person or of which the specified Person is an
officer, director, general partner or trustee, or with respect to which the
specified Person serves in a similar capacity, (iii) any Person for which an
officer or director of, general partner in or trustee of, or individual serving
in a similar capacity with respect to, the specified Person serves in any such
capacity, (iv) any Person that, directly or indirectly, is the beneficial owner
of 10% or more of any class of equity securities of the specified Person or of
which the specified Person is directly or indirectly the owner of 10% or more of
any class of equity securities, and (v) any relative or spouse of the specified
Person who makes his or her home with that of the specified Person.
Notwithstanding the foregoing, no corporation whose common stock is listed on a
national securities exchange or authorized for inclusion on the NASDAQ National
Market, or any subsidiary thereof, shall be an "Affiliate" of the General
Partner or any Affiliate thereof unless a Person (or Persons if such Persons
would be treated as part of the same group for purposes of Section 13(d) or
13(g) of the Securities Exchange Act of 1934) directly or indirectly owns twenty
percent (20%) or more of the outstanding common stock of the General Partner and
such other corporation.
"Agreement" means this Second Amended and Restated Agreement of Limited
Partnership, as originally executed and as hereafter amended or modified from
time to time.
"Capital Account" or "Capital Accounts" means, with respect to a Partner, the
account maintained for such Partner which is determined and maintained in the
manner provided for in Section 3.06.
"Capital Contribution" or "Capital Contributions" means, with respect to any
Partner, the total amount of money contributed or agreed to be contributed to
the Partnership (prior to the deduction of any selling commissions or expenses)
by such Partner, as the context may require; provided, however, that in
connection with the private placement (i) as and to the extent the Placement
Agents retained by the General Partner to assist in the private placement of the
Units agreed to forego any portion of their fees or selling commissions, with a
consequent reduction in the offering price of any Units so placed, or (ii) as
and to the extent any Limited Partner elected to make a payment of $89,247 per
Unit in cash ($79,247 per Unit in cash if purchased by the General Partner, its
Affiliates, or officers, directors or employees of the General Partner or its
Affiliates, or the Placement Agents) upon execution of the subscription
documents as full payment of his Capital Contribution, the Limited Partners who
purchased any such Units in the private placement nevertheless shall be deemed
to have contributed to the Partnership the full amount of the offering price
(i.e., $100,000 per Unit) without reduction on account of such reduced purchase
price.
"Capital Priority Amount" means an amount equal to the sum of (i) the Net
Invested Capital of the Limited Partners at the time of determination plus (ii)
the Limited Partners' 15% Preferred Distribution at the time of determination.
"Capital Receipts" means Sale Proceeds and/or Refinancing Proceeds. Capital
Receipts shall not be considered to include the San Ramon Cost Refund, if any,
or the San Ramon Cash Adjustment, if any.
"Cash Available for Distribution" means, with respect to any fiscal period,
the cash revenues of the Partnership from all sources (other than Capital
Receipts, the San Ramon Cost Refund, if any, and the San Ramon Cash Adjustment,
if any) during such fiscal period (including amounts received
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pursuant to the Purchase Price Adjustments) PLUS such reserves as may be
determined by the General Partner in its reasonable discretion, as no longer
necessary to provide for the foreseeable needs of the Partnership, less (i) all
cash expenditures of the Partnership during such fiscal period, including,
without limitation, debt service, repayment of advances made by the General
Partner as and when such repayments are required, any fees for management
services, and administrative expenses but excluding expenditures incurred by the
Partnership in connection with a capital transaction, and (ii) such reserves as
may be determined by the General Partner, in its reasonable discretion, to be
necessary to provide for the foreseeable needs of the Partnership, including,
without limitation, for the maintenance, repair or restoration of the Hotels.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership, and any and all amendments thereto, filed on behalf of the
Partnership with the Secretary of State of the State of Delaware as required
under the Act.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision or provisions of succeeding law).
"Consent" means either (i) the approval given by vote at a meeting called and
held in accordance with the provisions of Section 10.01 prior to the taking of
any action with respect to which such Consent is given, or (ii) a prior written
approval required or permitted to be given pursuant to this Agreement or the Act
granting such approval, as the context may require. Unless otherwise specified,
"Consent of the Limited Partners" shall mean consent of the Limited Partners
holding, in their capacity as Limited Partners and not as assignees, a majority
of the outstanding Units considered present and entitled to vote on the matter
(as determined under Sections 10.01A and 10.01B); provided, however, if the
General Partner or any Affiliate of the General Partner (other than an
individual who acquires Units for his own account or a trust or other similar
entity that acquires Units for the direct benefit of an individual) own any
Units, then in the case of each matter in which the General Partner or an
Affiliate thereof has an actual economic interest (other than an interest solely
as a result of its or an Affiliate's ownership of Units or as a result of its or
an Affiliate's (and any group of which it is a part for purposes of Section
13(d) or 13(g) of the Securities Exchange Act of 1934) direct or indirect
ownership of less than twenty percent (20%) of the outstanding common stock of
both the General Partner and a corporation whose common stock is listed on a
national securities exchange or authorized for inclusion in the NASDAQ National
Market, or any subsidiary thereof), such Units shall be voted in the same manner
as the vote of Limited Partners holding, in their capacity as Limited Partners
and not as assignees, a majority of the outstanding Units actually voting on the
matter presented (other than those Units held by the General Partner or any of
its Affiliates, except for an individual who acquired Units for his own account
or a trust or similar entity that acquires Units for the direct benefit of an
individual).
"Debt Service Guarantee" means the guarantee by Marriott of payment of up to
$22,784,000 of interest and principal payments due under the Hotel Mortgage Debt
if the Partnership was unable to make such payments. The Debt Service Guarantee
is no longer outstanding.
"Defaulting Limited Partner" means a Limited Partner who fails to pay all or
any portion of any installment of his Investor Note for a period of 20 days
after the date such installment was due.
"Defaulting Limited Partner Allocations" means allocations of Net Losses, Net
Profits, Gains, Losses, and tax credits to a Defaulting Limited Partner.
"Default Notice" means the notice given by the General Partner to the
Partnership and a Defaulting Limited Partner of the General Partner's desire to
purchase all or a portion of such Defaulting Limited Partner's Interest in the
Partnership.
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"Deferred Purchase Debt" means the indebtedness of the Partnership to Marriott
and its Affiliates of up to $51.6 million to permit the Partnership to pay a
portion of the purchase price of the deferred portion of the Hotel Interests,
with interest accruing at the lesser of 10% per annum or the maximum rate
permitted by applicable law and with principal and accrued interest due on July
1, 1991, but required to be prepaid out of the proceeds of the installments of
the Capital Contributions paid by the Limited Partners. The Deferred Purchase
Debt has been paid in full and is no longer outstanding.
"Designated Person" means the General Partner.
"FF&E" means (i) furniture, fixtures and furnishings and equipment and (ii)
routine repairs and maintenance undertaken subsequent to the opening date of a
Hotel, the cost of which would not be expensed under generally accepted
accounting principles.
"Fiscal Quarter" means, for the respective fiscal periods in any year, (i) the
period beginning on January 1, and having the same ending date as the General
Partner's 12-week fiscal first quarter, (ii) the same period of time as the
General Partner's second fiscal quarter, (iii) the same period of time as the
General Partner's third fiscal quarter, and (iv) the period from the end of the
General Partner's third fiscal quarter through December 31 in such Fiscal Year.
"Fiscal Year" means the fiscal year of the Partnership, which shall end on
December 31 of each year.
"Gain" or "Gains" means the gain or gains recognized by the Partnership (or
allocated to the Partnership from the Santa Clara Partnership) for Federal
income tax purposes upon the sale or disposition of Partnership (or Santa Clara
Partnership) property (plus any Section 267(d) Gain) (other than the routine
sale or disposition of used FF&E being replaced at the Hotels), as reduced by
costs of such sale or disposition.
"General Partner" means Marriott MHP Two Corporation, a Delaware corporation
and wholly owned subsidiary of Marriott Properties, Inc., in its capacity as
general partner of the Partnership and its permitted successors or assigns and
any Person admitted as a substitute general partner pursuant to Sections 6.01 or
10.02B.
"Ground Leases" means the respective leases between the Partnership or the
Santa Clara Partnership, as tenant, and third parties, as landlords, by which
the Partnership or the Santa Clara Partnership will lease the land on which the
San Antonio, San Ramon and Santa Clara Hotels are located. Reference to a
"Ground Lease" means one of the Ground Leases.
"Ground Lessors" means the landlords under the Ground Leases.
"Hotel Interests" means the New Orleans, San Antonio and San Ramon Hotels and
the Partnership's 50% limited partnership interest in the Santa Clara
Partnership. Reference to a "Hotel Interest" means one of the three Hotels
included in the definition of "Hotel Interests" or the Partnership's interest in
the Santa Clara Partnership.
"Hotel Mortgage Debt" means the loan made to the Partnership pursuant to the
loan agreement entered into at the initial closing of the offering made pursuant
to the Private Placement Memorandum between the Partnership, as borrower, and
The First National Bank of Chicago, NCNB National Bank of North Carolina and
First Interstate Bank, Ltd., as lenders, pursuant to which the lenders lent
$222.5 million to finance a portion of the purchase price of the New Orleans,
San Antonio and San Ramon Hotels.
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"Hotel Purchase Agreements" means the purchase agreements entered into at the
initial closing of the offering made pursuant to the Private Placement
Memorandum between the Partnership and Marriott and its Affiliates providing for
the purchase by the Partnership of the New Orleans, San Antonio and San Ramon
Hotels, the land on which the New Orleans Hotel is located, the assignment of
the Ground Leases relating to the San Antonio and San Ramon Hotels and the sale
of, or assignment of a leasehold interest in, certain related materials and
personal property, including FF&E.
"Hotels" means the New Orleans Hotel, the San Antonio Hotel, the San Ramon
Hotel and the Santa Clara Hotel. Reference to a "Hotel" means any one of the
Hotels.
"Interest" means the entire interest of a Partner in the Partnership at any
particular time, including the right of such Partner to any and all rights and
benefits to which a Partner may be entitled as provided in this Agreement,
together with the obligations of such Partner to comply with the terms and
provisions of this Agreement.
"Interested Transaction" means any matter in which the General Partner or its
Affiliates have an actual economic interest, other than an interest solely as a
result of its or an Affiliate's ownership of Units or a general partner interest
or as a result of its or an Affiliate's (and any group of which it is a part for
purposes of Section 13(d) or 13(g) of the Securities Act of 1934) direct or
indirect ownership of less than twenty percent (20%) of the outstanding common
stock of both the General Partner and a corporation whose common stock is listed
on a national securities exchange or authorized for inclusion in the NASDAQ
National Market, or any subsidiary thereof.
"Invested Capital" means the following specified amounts: for 1989,
$27,937,500; for 1990, $52,150,000; and for 1991 and thereafter, $74,500,000.
"Investor List" means that list, required by section 6112 of the Code,
identifying Persons to whom Interests in the Partnership were sold, such
Persons' addresses and taxpayer identification numbers, the dates on which the
Interests were acquired, the name and tax shelter registration number of the
Partnership, and such other information as may be required by Treasury
regulations to be included therein.
"Investor Note" or "Investor Notes" means the fully recourse, non-interest
bearing promissory notes given by the Limited Partners to evidence their
obligation to pay the deferred portion of the Capital Contributions due with
respect to their Units.
"IRS" means the Internal Revenue Service.
"Limited Partner" means the Initial Limited Partner, the Original Limited
Partners, and any Substituted Limited Partners.
"Limited Partners' 10% Preferred Distribution" means, with respect to each
Fiscal Year, an annual, non-cumulative 10% preferred return to the Limited
Partners on the weighted average outstanding Net Invested Capital during such
Fiscal Year.
"Limited Partners' 15% Preferred Distribution" means the excess of (a) the
product of (x) 15% per annum (applied using the simple interest method for the
period from the date of the admission of the Original Limited Partners through
the date for which the determination is being made on the basis of a 365/366-day
year and the actual number of days elapsed) multiplied by (y) the total daily
average outstanding Net Invested Capital over (b) the sum of all previous
distributions made to the Limited Partners pursuant to Sections 4.06, 4.07(i),
and 4.08A(i).
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"Loss" or "Losses" means the loss or losses recognized by the Partnership (or
allocated to the Partnership from the Santa Clara Partnership) for Federal
income tax purposes upon the sale or disposition of Partnership (or Santa Clara
Partnership) property (other than the routine sale of used FF&E being replaced
at a Hotel), taking into account costs of such sale or disposition.
"Management Agreements" means the management agreements to be entered into at
the initial closing of the offering made pursuant to the Private Placement
Memorandum between the Partnership (or, in the case of the Santa Clara Hotel,
the Santa Clara Partnership) and the Manager pursuant to which the Manager will
manage the Hotels, as the same may be amended or supplemented from time to time.
Reference to a "Management Agreement" means any one of the Management
Agreements.
"Manager" means Marriott International, Inc., a Delaware corporation, as
manager of the Hotels and any successor manager that is an Affiliate of Marriott
International, Inc.
"Marriott" means Host Marriott Corporation, a Delaware corporation.
"MHP II Acquisition Corp." means MHP II Acquisition Corp., a Delaware
corporation and a wholly owned direct subsidiary of Marriott.
"Minimum Gain" means the amount determined by computing, with respect to each
Partner Nonrecourse Debt, the amount of Gain, if any, that would be realized by
the Partnership if it disposed of (in a taxable transaction) the Partnership
property subject to such liability in full satisfaction thereof (and for no
other consideration), and by then aggregating the amounts so computed. It is
the intent that Minimum Gain be determined in accordance with the provisions of
sections 1.704-2(d) of the Treasury regulations. Minimum Gain with respect to
any Partner Nonrecourse Debt shall be determined in a manner consistent with the
foregoing.
"Mortgage Debt" means the Hotel Mortgage Debt and the Santa Clara Mortgage
Debt.
"MPI" means Marriott Properties, Inc., a Delaware corporation, the parent of
the General Partner and wholly owned subsidiary of Marriott.
"Net Invested Capital" means Invested Capital reduced by cumulative
distributions of Capital Receipts to the Limited Partners pursuant to Sections
4.07 (ii) and 4.08A(ii). Except as specifically provided in the definition of
"Invested Capital," no adjustment shall be made in Invested Capital as a result
of any distribution pursuant to Section 3.05G as a result of the San Ramon
Termination.
"Net Profits" or "Net Losses" means, for any period, the net profits or net
losses of the Partnership (including net profits or net losses of the Santa
Clara Partnership allocated to the Partnership) for Federal income tax purposes
during such period as determined under section 702 of the Code, including gain
or loss on the routine sale or disposition of used FF&E not in connection with
the sale of a Hotel and excluding Gains and Losses and items specially allocated
under Section 4.11.
"New Orleans Hotel" means the 1,329-room New Orleans Marriott located in New
Orleans, Louisiana and the underlying land.
"Nonrecourse Liability" means any Partnership liability (or portion thereof)
for which no Partner bears (or is deemed to bear) the economic risk of loss
within the meaning of section 1.752-2 of the Treasury regulations.
"Notification" means a written notice, containing the information required by
this Agreement to be communicated to any Person, sent by registered, express,
certified or regular mail to such
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Person; provided, however, that any communication containing such information
sent to such Person and actually received by such Person shall constitute
Notification for all purposes of this Agreement.
"Original Limited Partners" means each Person purchasing Units in connection
with the initial offering of the Units made pursuant to the Private Placement
Memorandum.
"Partner Nonrecourse Debt" means any Partnership liability that is considered
nonrecourse for purposes of section 1.1001-2 of the Treasury regulations but for
which a Partner bears (or is deemed to bear) the economic risk of loss within
the meaning of section 1.752-2 of the Treasury regulations.
"Partners" means, collectively, the Limited Partners, as constituted from time
to time, and the General Partner. Reference to a "Partner" means any of the
Partners.
"Partnership" means the limited partnership formed under the Act and continued
by this Agreement by the parties hereto, as said Partnership may from time to
time be constituted.
"Partnership Debt" means any indebtedness for borrowed money incurred by the
Partnership.
"Person" means any individual, partnership, corporation, trust or other legal
entity.
"Placement Agents" means Smith Barney, Harris Upham & Co. Incorporated and
Bear, Stearns & Co. Inc.
"Private Placement Memorandum" means the Partnership's confidential private
placement memorandum dated January 9, 1989, prepared for use in connection with
the offering to investors of 745 Units of limited partnership interests in the
Partnership.
"Purchase Agreements" means the Hotel Purchase Agreements and the Santa Clara
Purchase Agreement.
"Purchase Price Adjustments" means any reductions of the aggregate purchase
price of certain Hotel Interests that occurred pursuant to the Purchase
Agreements.
"Refinancing Proceeds" means (a) the cumulative net proceeds from any
refinancing or borrowing by the Partnership, the proceeds of which are applied
to the repayment of previously incurred debt of the Partnership, or borrowed for
distributions to the Partners, including the proceeds of a sale and leaseback on
which no taxable gain is recognized for Federal income tax purposes, after
deducting (i) any expenses incurred in connection therewith, (ii) any amounts
applied by the General Partner toward the payment of any indebtedness, other
obligation, or expense of the Partnership or the creation of any reserves deemed
necessary by the General Partner, and (iii) all amounts then payable therefrom
pursuant to the Management Agreements, and (b) any comparable amount distributed
to the Partnership from the Santa Clara Partnership.
"Sale Proceeds" means (a) any net proceeds received by the Partnership from
(i) the exchange, condemnation, eminent domain taking, casualty, sale or other
disposition of all or a portion of the Partnership's assets, or (ii) the
liquidation of the Partnership's property in connection with a dissolution of
the Partnership, after deducting (A) any expenses incurred in connection
therewith, (B) any amounts applied by the General Partner toward the payment of
any indebtedness, other obligation, or expense of the Partnership or the
creation of any reserves deemed necessary by the General Partner, and (C) all
amounts payable therefrom pursuant to the Management Agreements, and (b) any
distribution to the Partnership from the Santa Clara Partnership from a
comparable transaction. Sale Proceeds shall not include the proceeds from the
routine sale of used FF&E not in connection with the disposition of a Hotel.
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"San Antonio Hotel" means the 999-room Marriott Rivercenter Hotel located in
San Antonio, Texas and a leasehold interest in the underlying land.
"San Ramon Cash Adjustment" means the amount of cash, if any, paid to the
Partnership pursuant to section 2.08(c) of the applicable Hotel Purchase
Agreement in the event that the San Ramon Termination occurs. The San Ramon
Termination did not occur, and there was no San Ramon Cash Adjustment.
"San Ramon Cost Refund" means the amount of cash, if any, paid to the
Partnership pursuant to section 2.08(b) of the applicable Hotel Purchase
Agreement in the event that the San Ramon Termination occurs. The San Ramon
Termination did not occur, and there was no San Ramon Cost Refund.
"San Ramon Hotel" means the 372-room Bishop Ranch Marriott Hotel located at
Bishop Ranch in San Ramon, California and a leasehold interest in the underlying
land.
"San Ramon Termination" means the termination of the applicable Hotel Purchase
Agreement with respect to the San Ramon Hotel in the event that the
Partnership's acquisition of the San Ramon Hotel shall not have occurred on or
before January 31, 1990 (as such date may be extended by the General Partner
pursuant to Section 5.02B (iii)). The San Ramon Termination did not occur.
"Santa Clara Debt Service Advances" means advances deemed to be made by the
partners in the Santa Clara Partnership (other than the Partnership) to the
Partnership from cash available for distribution from the Santa Clara
Partnership to such other partners to permit the Partnership to reimburse the
Santa Clara Partnership for debt service payments required on the Santa Clara
Mortgage Debt or certain specified replacement debt with respect to the Santa
Clara Hotel.
"Santa Clara Hotel" means the 754-room Santa Clara Marriott Hotel located in
Santa Clara, California and a subleasehold interest in the underlying land.
"Santa Clara Mortgage Debt" means the loan provided to the Santa Clara
Partnership pursuant to the loan agreement entered into at the initial closing
of the offering made pursuant to the Private Placement Memorandum between the
Santa Clara Partnership, as borrower, and The First National Bank of Chicago,
NCNB National Bank of North Carolina and First Interstate Bank, Ltd., as
lenders, pursuant to which the lenders lent to the Santa Clara Partnership $43.5
million, which was distributed to MPI in payment of a portion of the purchase
price for the Santa Clara Partnership Interest.
"Santa Clara Partnership" means the Santa Clara Marriott Hotel Limited
Partnership, a limited partnership, the owner of the Santa Clara Hotel.
"Santa Clara Partnership Agreement" means the partnership agreement of the
Santa Clara Partnership.
"Santa Clara Partnership Interest" means the 50% limited partnership interest
in the Santa Clara Partnership that the Partnership will purchase pursuant to
the Santa Clara Purchase Agreement.
"Santa Clara Purchase Agreement" means the purchase agreement entered into at
the initial closing of the offering made pursuant to the Private Placement
Memorandum between the Partnership and Marriott and its Affiliates providing for
the purchase by the Partnership of the Santa Clara Partnership Interest from
MPI.
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"Section 267(d) Gain" means gain realized by the Partnership but not
recognized solely by reason of section 267(d) of the Code.
"Substituted Limited Partner" means any Person admitted to the Partnership as
a Limited Partner pursuant to the provisions of Section 7.02 and who is listed
as such in the books and records of the Partnership.
"Tax Matters Partner" means the General Partner.
"Total Partnership Distributions" means the total amount of cash and the fair
market value of any property (net of any associated liabilities) distributed to
the Partners pursuant to Sections 4.06 through 4.09.
"Unit" means the units of limited partnership interest represented by a
Capital Contribution of $100,000 (determined without reductions for purchases of
Units in circumstances where the Placement Agents elected to forego all or a
portion of the fees and commissions payable to them and/or purchases where the
full purchase price was paid in cash at the time of subscription), sold in the
private placement pursuant to the Private Placement Memorandum.
ARTICLE TWO
Formation, Name, Place Of Business, Purpose And Term
Section 2.01. Formation. The parties do hereby continue the Partnership
formed as of September 20, 1988 pursuant to the provisions of the Act.
Section 2.02. Name and Offices. The name of the Partnership is and shall be
Marriott Hotel Properties II Limited Partnership. The principal offices of the
Partnership shall be located at 10400 Fernwood Road, Bethesda, Maryland 20817 or
at such other place or places as the General Partner may from time to time
determine, provided that the General Partner shall give the Limited Partners
written notice thereof not later than 60 days after the effective date of such
change of address and shall, if required, amend the Certificate of Limited
Partnership in accordance with the requirements of the Act. The address of the
registered office of the Partnership in the State of Delaware is at 229 South
State Street, Dover, County of Kent, Delaware 19901.
Section 2.03. Purposes. The purposes of the Partnership are to (i) invest
in, acquire, own, use, operate or manage the Hotel Interests, either as full-
service Marriott hotels or otherwise, and sell, lease, sublease, exchange or
otherwise dispose of the Hotel Interests (or any portion thereof) and (ii)
engage in any other activities related or incidental thereto as more fully set
forth in Section 5.01 hereof.
Section 2.04. Term. The term of the Partnership shall continue in full force
and effect from the date of the filing of the original Certificate of Limited
Partnership until December 31, 2088, or until dissolution and termination prior
thereto pursuant to the provisions of Article Eight.
Section 2.05. Registered Agent for Service of Process. The name and address
of the registered agent for service of process on the Partnership in the State
of Delaware is The Prentice Hall Corporation System, Inc., 229 South State
Street, Dover, County of Kent, Delaware 19901.
Section 2.06. Certificate of Limited Partnership. On September 20, 1988, the
General Partner, in accordance with the Act, filed with the Secretary of State
of the State of Delaware a Certificate of Limited Partnership for the
Partnership. If the laws of any jurisdiction in which the Partnership transacts
business so require, the General Partner also shall file with the appropriate
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office in that jurisdiction a copy of the Certificate of Limited Partnership and
any other documents necessary for the Partnership to qualify to transact
business in such jurisdiction and shall use its best efforts to file with the
appropriate office in that jurisdiction a copy of other documents necessary to
establish and maintain the Limited Partners' limited liability in such
jurisdiction. The Partners further agree and obligate themselves to execute,
acknowledge, and cause to be filed for record, in the place or places and in the
manner prescribed by law, any amendments to the Certificate of Limited
Partnership as may be required, either by the Act, by the laws of a jurisdiction
in which the Partnership transacts business, or by this Agreement, to reflect
changes in the information contained therein or otherwise to comply with the
requirements of law for the continuation, preservation, and operation of the
Partnership as a limited partnership under the Act.
ARTICLE THREE
Partners And Capital
Section 3.01. General Partner. The General Partner of the Partnership is
Marriott MHP Two Corporation, a Delaware corporation and wholly owned subsidiary
of MPI, having its principal executive offices at 10400 Fernwood Road, Bethesda,
Maryland 20817, and any Person admitted as a substitute general partner in
accordance with Sections 6.01 or 10.02B.
Section 3.02. [Intentionally Omitted]
Section 3.03. Limited Partners. The names and addresses of the Limited
Partners, the amount of their Capital Contributions and the number of Units held
by them are set forth in the books and records of the Partnership. A Person
shall be deemed to be admitted as a Limited Partner when the General Partner has
accepted such Person as a Limited Partner of the Partnership, and the books and
records reflect such Person as admitted to the Partnership as a Limited Partner.
Section 3.04. Capital Contributions by General Partner. The General Partner
has made a Capital Contribution in the amount of $752,525. The General Partner
shall not be permitted to make any additional Capital Contributions without the
Consent of the Limited Partners except as required pursuant to Section 8.02D.
Section 3.05. Capital Contributions by Limited Partners.
A. [Intentionally Omitted]
B. The Partnership offerred 745 Units for sale in a private placement
pursuant to the Private Placement Memorandum and admitted as Original Limited
Partners those Persons (i) who executed and filed with the Partnership the
subscription documents specified in the Private Placement Memorandum, together
with such other documents as the General Partner deemed necessary or desirable
to effect such admission, (ii) whose subscriptions for such Units were accepted
by the General Partner (who may refuse to accept the subscription of any Person
or Persons for any reason whatsoever), and (iii) who paid the required Capital
Contributions with respect to Units for which a subscription is accepted in the
manner set forth in Section 3.05C. The number of Units subscribed for by each
Original Limited Partner is set forth in the subscription documents executed and
delivered by such Original Limited Partner. Each Original Limited Partner's
contribution in respect to the Units subscribed for was (i) in cash $20,000 per
Unit and an Investor Note of such Limited Partner payable as set forth in
Section 3.05C or (ii) in cash in the amount of $89,247 per Unit as full payment
of the subscription price ($79,247 per Unit in cash if purchased by the General
Partner, its Affiliates, or officers, directors or employees of the General
Partner or its Affiliates, or the Placement Agents). No Partner shall be paid
interest on any Capital Contribution.
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C. The Original Limited Partners made Capital Contributions totaling up to
$74.5 million, for which each such Original Limited Partner subscribed in Units
of $100,000 each unless the General Partner and the Placement Agents, in their
sole discretion, accepted subscriptions for one-half of a Unit. For each Unit
purchased, an Original Limited Partner made a Capital Contribution by paying
either (i) $89,247 per Unit in cash ($79,247 per Unit in cash if purchased by
the General Partner, its Affiliates, or officers, directors or employees of the
General Partner or its Affiliates, or the Placement Agents) upon execution of
the subscription documents as full payment of the subscription price; or (ii)
$100,000 in the following installments: (a) a first installment in the amount of
$20,000 payable upon execution of the subscription documents; (b) a second
installment in the amount of $17,500 payable on June 1, 1989; (c) a third
installment in the amount of $32,500 payable on June 1, 1990; (d) and a fourth
installment in the amount of $30,000 payable on June 1, 1991. Original Limited
Partners purchasing more or less than a full Unit were required to make
proportionate installments on the dates aforesaid. Original Limited Partners
could prepay, without any reduction in the amount thereof, the foregoing
installments, in whole or in part, at any time prior to their respective due
date.
D. The obligation of each Original Limited Partner to pay the installments
required by Section 3.05C, other than the first installment, was evidenced by
the delivery to the Partnership, concurrently with payment of the first
installment, of the Investor Note in the form of Exhibit A attached hereto
payable to the Partnership in the amount of $80,000 for each Unit purchased
($40,000 if one-half of a Unit is purchased) representing the amount of the
remaining unpaid Capital Contribution of such Limited Partner. Such Limited
Partners (i) could prepay in whole, or in part, all of the installments and (ii)
were required to prepay the outstanding balance of their Investor Notes to the
extent of any Sale Proceeds otherwise distributable to such Limited Partners
pursuant to Section 4.08 (which amounts would be withheld by the Partnership and
applied in satisfaction of such obligation); provided that in the event such
Sale Proceeds are received by the Partnership in a taxable transaction or the
distribution thereof would result in Federal taxable income to the Limited
Partners, the amount of Sale Proceeds per Unit withheld to prepay the
outstanding balance of the Limited Partners' Investor Notes would be reduced by
an amount equal to the product of (i) the maximum marginal Federal income tax
rate applicable to individuals multiplied by (ii) the Federal taxable income per
Unit realized as a result of such taxable transaction and/or distribution, as
determined by the General Partner in good faith. If an Original Limited Partner
paid $89,247 per Unit in cash ($79,247 per Unit in cash if purchased by the
General Partner, its Affiliates, or officers, directors or employees of the
General Partner or its Affiliates, or the Placement Agents) at the time he
delivered an executed subscription agreement, then there was no obligation to
deliver an Investor Note to the Partnership. That portion of such $89,247
payment, or $79,247 payment if applicable, in excess of the amount that would
have been paid upon subscription had the Original Limited Partner selected the
installment method of paying the subscription price was applied by the
Partnership at the closing of the offering made pursuant to the Private
Placement Memorandum to reduce the Deferred Purchase Debt.
E. Each Original Limited Partner electing to pay the Capital Contributions
with respect to one or more Units in installments pledged to the Partnership his
Interest (including any Units with respect to which he has elected to pay the
full Capital Contribution in cash at the time of subscription) as security for
payment of the installments payable under such Original Limited Partner's
Investor Note. Notwithstanding the pledge, each Original Limited Partner shall
continue to be a Partner. The Partnership, acting through the General Partner,
shall have all rights and remedies granted to a secured party under the Uniform
Commercial Code as adopted in Delaware with respect to such interest, including,
but not limited to, the right to sell such Interest, and such Original Limited
Partner agrees to execute such instruments, including, without limitation, a
financing statement on Form UCC-1, as the General Partner may from time to time
require to perfect such security interest. For purposes of the Uniform
Commercial Code, this Agreement shall also be deemed to be a security agreement.
In addition, the General Partner shall have the right, at any time prior to the
date of payment of the last installment of Capital Contributions specified in
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Section 3.05C above, to have a credit check performed with respect to any
Limited Partner making payment of Capital Contributions in installments.
F. The following provisions applied in the event a Limited Partner failed to
make installment payments when due:
(i) A Limited Partner who fails to pay when due all or any portion of
any installment for a period of 20 days shall be in default hereunder and
the Defaulting Limited Partner shall be required to pay the Partnership a
late payment charge equal to five percent (5%) of such unpaid installment
or portion thereof. If a default shall continue for more than 30 days
after notice to the Defaulting Limited Partner of such default, in addition
to the aforesaid late charge, the unpaid portion of such installment or
portion thereof shall bear interest from the date due until paid in full at
a rate equal to the lesser of (a) sixteen percent (16%) per annum or (b)
the maximum rate permitted by law. If the late charge is deemed to be
interest under applicable law, it may only be imposed to the extent it does
not cause total interest to exceed the maximum rate permitted by law. A
Defaulting Limited Partner shall have no voting rights and no right to
receive any distributions of cash (including, without limitation, Capital
Receipts, if any) or allocations of Net Profits, Gains, Losses, or Net
Losses with respect to his Interest for so long as any unpaid installments
plus any late charge or interest attributable to such unpaid installment or
portion thereof remains unpaid. The General Partner will deduct the amount
of any delinquent installments, late penalty or interest from any cash
distributions available to Defaulting Limited Partners.
(ii) If a default shall continue for more than 30 days after notice to
the Defaulting Limited Partner, the General Partner shall have the option
of accelerating the payment of the entire unpaid balance of the Investor
Note of the Defaulting Limited Partner and the additional option of
purchasing (for the price set forth below) all or a portion of the
Defaulting Limited Partner's Interest (including the portion of such
Defaulting Limited Partner's Interest, if any, with respect to which the
Limited Partner elected to pay the full Capital Contribution in cash at the
time of subscription). Such option may be exercised by the General Partner
by giving the Partnership and the Defaulting Limited Partner a Default
Notice. The purchase price to be paid to the Defaulting Limited Partner
shall be an amount equal to the greater of (x) 10% of the amount of Capital
Contributions of the Defaulting Limited Partner actually paid (excluding
for this purpose the unpaid portion of any Investor Note secured thereby)
in respect of the Interest being purchased less the sum of (i) the total
amount of cash distributions, if any, theretofore made to the Defaulting
Limited Partner in respect of the Interest being purchased, (ii) any
reasonable expenses incurred by the Partnership and by the General Partner
in connection with such purchase, (iii) all tax credits previously reported
by the Partnership for all Fiscal Years then ended allocable to the
Interest being purchased, and (iv) 50% of the Net Losses previously
reported by the Partnership for all Fiscal Years then ended allocable to
the Interest being purchased, or (y) three percent (3%) of the amount of
the Capital Contributions of the Defaulting Limited Partner actually paid
(excluding for this purpose the principal portion of any Investor Note
secured thereby) in respect of the Interest being purchased. Such purchase
price shall be paid in cash within 30 days after the date of the
consummation of the purchase. The General Partner shall also pay to the
Partnership an amount equal to all Capital Contribution installments in
respect of the Interest being purchased then due and not theretofore paid
by the Defaulting Limited Partner (including the unpaid installment giving
rise to the default) and shall assume all other obligations (other than
late payment charges and interest due as a result of the default) of the
Defaulting Limited Partner in respect of the Interest being purchased, if
any, to the Partnership. At any time prior to any sale of all or any
portion of the Defaulting Limited Partner's Interest as provided in this
Section 3.05F, the General Partner may but shall not be obligated to accept
full payment from the Defaulting Limited Partner of any unpaid installment
then overdue and any late payment charge plus interest.
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The acceptance of such payment by the General Partner shall extinguish the
further right (as hereafter defined) of the General Partner to purchase the
Defaulting Limited Partner's Interest.
(iii) In the event that the General Partner does not acquire all of
the Interest of a Defaulting Limited Partner and, after the exercise of due
diligence, the General Partner is unable to find a purchaser for all or the
balance of the Defaulting Limited Partner's Interest for the price set
forth in clause (ii) above, then the Defaulting Limited Partner shall sell
such Interest or the balance of such Interest, as the case may be, on such
terms and conditions as the General Partner deems reasonable under the
circumstances to any Person, including the General Partner; provided,
however, if such purchaser is the General Partner or an Affiliate of the
General Partner, it shall be required to agree to assume the obligation of
the Defaulting Limited Partner to make payments of at least 75% of the
unpaid balance of the installments to the extent of the Interest so
acquired. At the closing of any purchase and sale pursuant to this clause
(iii), the purchaser shall pay to the Partnership the unpaid balance of the
installments then due and owing by the Defaulting Limited Partner and shall
agree to thereafter make payment of any future installments as and when the
same shall become due and payable. The Defaulting Limited Partner shall
pay all of the Partnership's and General Partner's costs and expenses
incurred in connection with any purchase and sale of a Defaulting Limited
Partner's Interest pursuant to this clause (iii).
(iv) A purchaser of all or any part of the Interest of a Defaulting
Limited Partner will receive all of the cash not yet distributed to the
Defaulting Limited Partner, including cash earned prior to the default.
All Net Profits, Net Losses, and deductions that would otherwise be
allocated in accordance with Sections 4.01, 4.02 and 4.12 to a Defaulting
Limited Partner shall be allocated, from and after the date of default to,
but not including, the date, if any, on which the Interest of such
Defaulting Limited Partner shall be purchased, among the non-Defaulting
Limited Partners in proportion to the number of Units owned by each. All
Defaulting Limited Partner Allocations from and after the date of purchase
of the Defaulting Limited Partner's Interest until the expiration of the
Fiscal Year in which such purchase date falls shall be allocated to the
purchaser. In the following Fiscal Year or Fiscal Years, all Net Profits,
Net Losses, and deductions of the Partnership allocable to the Limited
Partners under Article Four shall first be allocated until the purchaser's
Capital Account balance shall be equal in amount to the Capital Account
balance of a non-Defaulting Partner owning the same number of Units as the
purchaser.
(v) Notwithstanding the foregoing provisions of this Section 3.05F,
the obligations of the Defaulting Limited Partner hereunder shall not be
extinguished by the existence of any option of the General Partner to
purchase the Interest of the Defaulting Limited Partner, or by its
exercise, or by any agreement by any person to purchase such Interest, but
only to the extent of payment of the unpaid installments together with
interest thereon made in the Defaulting Limited Partner's stead by any
purchaser of such Interest.
(vi) In addition to the other rights of the Partnership against the
Defaulting Limited Partner, the Partnership may avail itself of appropriate
legal remedies, at law or in equity, to compel payment of any portion of
the installments remaining unpaid together with any interest thereon
remaining unpaid, together with reasonable court costs and legal fees in
the event of litigation against the Defaulting Limited Partner.
G. [Intentionally Omitted]
Section 3.06. Partnership Capital.
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A. The Capital Contribution of each Limited Partner and the General Partner
shall be credited to each such Partner's Capital Account; provided, however,
that the deemed increase in the Capital Contribution of any Limited Partner due
to (i) any relinquished selling commissions or other fees with respect to such
Limited Partner or (ii) any reduction of $10,753 per Unit for any Limited
Partner making full payment of such Limited Partner's Capital Contribution
($20,753 for the General Partner or any of its Affiliates, or for officers,
directors or employees of the General Partner or any of its Affiliates, or the
Placement Agents) upon execution of the subscription agreement shall not be
credited to such Limited Partner's Capital Account and a Limited Partner's
obligation to make additional contributions in installments shall not be
credited to his Capital Account until the installments are actually contributed.
A Partner's Capital Account shall also be credited with the amount of Net
Profits or Gain allocable to the Partner, and shall be debited with (x) such
Partner's share of Total Partnership Distributions and (y) the amount of Net
Losses, Losses, deductions or other items allocated to such Partner. Capital
Accounts shall be maintained and adjusted in accordance with the provisions of
section 1.704-1(b)(2) (iv) of the Treasury regulations.
B. For purposes of this Section 3.06, upon a distribution in kind of
Partnership property, the Capital Accounts of the Partners will be debited or
credited as though the property had been sold for an amount equal to its fair
market value, and gain or loss which would have been recognized for Federal
income tax purposes had the property actually been sold will be allocated to the
Partners under Article Four.
C. No Partner shall be entitled to receive any interest on his outstanding
Capital Account balance. Except upon the dissolution and termination of the
Partnership or as otherwise specifically provided in this Agreement, no Partner
shall have the right to demand or to receive the return of all or any part of
the Capital Account of such Partner.
Section 3.07. Additional Issuances of Units and Capital Contributions.
A. No Units except those Units issued by the Partnership in connection with
the offering pursuant to the Private Placement Memorandum shall be offered for
sale or issued by the Partnership without the written consent of the General
Partner and the Consent of the Limited Partners.
B. No Partner shall be required or allowed to make any Capital Contribution,
except as specifically set forth in Sections 3.04, 3.05 and 8.02D or in
connection with an issuance of additional Units permitted under Section 3.07A.
Section 3.08. Liability of the Limited Partners. Except as otherwise
described in the Act, no Limited Partner shall be liable for any debts,
liabilities, contracts or any other obligations of the Partnership. Except as
otherwise described in the Act, a Limited Partner has no liability in excess of
his Capital Contribution and his share of the Partnership's assets and
undistributed profits, and shall not be required to lend any funds to the
Partnership or, after his Capital Contribution has been paid, to make any
further Capital Contributions to the Partnership or to pay to the Partnership,
any Partner or to any creditor of the Partnership any portion or all of any
negative balance of his Capital Account.
Section 3.09. Liability of the General Partner. Except as provided in the
Act, the General Partner has the liabilities of a partner in a partnership
without limited partners to Persons other than the Partnership and the other
Partners. Except as provided in the Act or herein, the General Partner has the
liabilities of a general partner in a partnership without limited partners to
the Partnership and to the other Partners. This Agreement shall not be amended
to limit such liability of the General Partner.
Section 3.10. Initial Working Capital Reserve.
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A. The General Partner, as a third party and not as a Partner, guaranteed to
the Partnership that the initial working capital reserves of the Partnership
following the admission of the Original Limited Partners, determined after the
payment of all Organization, Offering and Acquisition Expenses (the "Initial
Working Capital Reserve"), would be equal to $1,971,000. In the event that the
Initial Working Capital Reserve was less than $1,971,000, the General Partner,
as a third party and not as a Partner, would pay such difference to the
Partnership in cash. In consideration of the foregoing, the General Partner, as
a third party and not as a Partner, would be entitled to receive as a payment
from the Partnership any amount by which the Initial Working Capital Reserve
exceeds $1,971,000. As used herein, "Organization, Offering and Acquisition
Expenses" means expenses incurred by the Partnership in connection with the
offering of the Units as set forth in the Private Placement Memorandum
(including, without limitation, all amounts payable to the Placement Agents),
the admission of the Original Limited Partners, the purchase of the Hotel
Interests (including all expenses to be incurred in connection with the purchase
of the San Ramon Hotel) (excluding interest payable on the Deferred Purchase
Debt) and the funding of the Mortgage Debt (including expenses to be incurred in
connection with funding the portion of the Mortgage Debt to be incurred to
finance the acquisition of the San Ramon Hotel). No payments pursuant to this
Section 3.10A shall be reflected in Capital Accounts or otherwise treated as
payments to or from a Partner in the Partnership.
B. No more than $971,000 of the Initial Working Capital Reserve was permitted
to be applied to pay or provide for Partnership administrative expenses with
respect to any Fiscal Year through December 31, 1991. To the extent not
required to pay or provide for Partnership administrative expenses or other
liabilities of the Partnership, amounts in the Initial Working Capital Reserve
could be made available for distribution to the Partners. Any amount from the
Initial Working Capital Reserve determined, for purposes of the Purchase
Agreements, to be available for distribution and thus resulting in a reduction
of any required Purchase Price Adjustment would be included in Cash Available
for Distribution for the Fiscal Year with respect to which such determination is
made.
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ARTICLE FOUR
Allocations Of Profits And Losses;
Distributions Of Cash And Certain Proceeds
Section 4.01. Allocation of Net Profits. Subject to the provisions of
Sections 3.05F(iv) and 4.11, Net Profits with respect to each Fiscal Year will
be allocated as follows: (i) first, through and including the end of the
Accounting Period during which the Partners have received cumulative
distributions of Capital Receipts pursuant to Sections 4.07 (ii) and 4.08A(ii)
equal to $37,626,263, 1% to the General Partner and 99% to the Limited Partners;
and (ii) thereafter, 20% to the General Partner and 80% to the Limited Partners.
Section 4.02. Allocation of Net Losses. Subject to the provisions of
Sections 3.05F(iv) and 4.11, Net Losses for each Fiscal Year shall be allocated
75% to the General Partner and 25% to the Limited Partners.
Section 4.03. Allocations of Gain and Loss.
A. Subject to the provisions of Section 4.11, Gain recognized by the
Partnership shall be allocated (after giving effect to the allocations referred
to in Sections 4.01 and 4.02 and all distributions other than distributions
pursuant to Section 4.08) with respect to any Fiscal Year in the following order
of priority:
(i) first, to all Partners whose Capital Accounts have negative
balances, in the ratio of such negative balances until such negative
balances are brought to zero;
(ii) second, to the Limited Partners in the amount necessary to bring
their respective Capital Account balances to an amount equal to the Capital
Priority Amount and to the General Partner in the amount necessary to bring
its Capital Account balance to an amount equal to 1/99 multiplied by the
Limited Partners' Capital Priority Amount; provided, however, that if there
is insufficient Gain to bring such balances to such levels, then (a) Gain
first shall be allocated so as to cause the ratio of the Limited Partners'
Capital Account balances to the General Partner's Capital Account balance
to be 99 to 1 and (b) any remaining Gain allocable pursuant to this
subsection (ii) shall be allocated 99% to the Limited Partners and 1% to
the General Partner; and
(iii) thereafter, any remaining Gain shall be allocated among the
Partners so that, to the extent possible, the ratio of (A) the aggregate
balance in the Capital Account of the Limited Partners in excess of the
Capital Priority Amount to (B) the balance in the General Partner's Capital
Account in excess of 1/99 of the Limited Partners' Capital Priority Amount,
is 80 to 20.
B. Subject to the provisions of Section 4.11, Losses recognized by the
Partnership shall be allocated (after giving effect to the allocations referred
to in Sections 4.01 and 4.02 and all distributions other than distributions
pursuant to Section 4.08) with respect to any Fiscal Year in the following order
of priority:
(i) first, Losses shall be allocated to the Partners with positive
Capital Account balances until all positive balances in the Partners'
Capital Account balances shall have been eliminated with such allocation
being made in proportion to the outstanding positive Capital Account
balances; and
(ii) second, all remaining Losses shall be allocated 25% to the
Limited Partners and 75% to the General Partner.
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Section 4.04. Allocation Among Limited Partners of Net Profits, Gains, Net
Losses and Losses. Any Net Profits or Net Losses for any Fiscal Year allocable
to the Limited Partners shall be allocated among the Limited Partners pro rata
in accordance with the number of Units owned by each as of the end of such
Fiscal Year; provided that if any Unit is assigned during the Fiscal Year in
accordance with this Agreement, (a) the Net Profits or Net Losses that are so
allocable to such Unit shall be allocated between the assignor and assignee of
such Unit according to the number of Accounting Periods in such Fiscal Year each
owned such Unit, and (b) any Gains or Losses allocable to the Limited Partners
shall be allocated among the Limited Partners who held Units on the last day of
the Accounting Period in which the sale or disposition giving rise to such Gains
or Losses occurred, pro rata in accordance with the number of Units owned by
each such Limited Partner. If any Unit is purported to be assigned by a Limited
Partner other than on the first day of a Fiscal Quarter (in contravention of
this Agreement), then the Partnership shall not recognize such assignment for
the purposes of allocating Net Profits, Gains, Net Losses, or Losses or for any
other purpose unless the assignment is permitted by Section 7.01 hereof and then
only as of the first day of the next Fiscal Quarter commencing after the
expiration of 15 days from the receipt by the Partnership of an application for
such assignment. The preceding sentence shall not apply to the Units
transferred by Limited Partners to MHP II Acquisition Corp. pursuant to MHP II
Acquisition Corp.'s Offer to Purchase for Cash All Outstanding Units of Limited
Partnership Interest, dated April 18, 1996, which transfers shall be considered
to be in accordance with this Agreement, shall be deemed to occur on the first
day of the Accounting Period in which the transfer of such Units occurs and
shall be governed by the first sentence of this Section 4.04.
Section 4.05. Allocation of Recapture Income. "Recapture income," if any,
realized by the Partnership pursuant to section 1245 or section 1250 of the Code
directly, or allocated to the Partnership from the Santa Clara Partnership, and
allocated to the Partners under Sections 4.01, 4.02 or 4.03 shall be allocated,
to the extent possible, to the Partners to whom (or to whose predecessors in
interest) the prior corresponding depreciation deductions were allocated, such
allocations to be made pro rata to the Partners in accordance with the manner in
which such depreciation deductions were allocated.
Section 4.06. Distribution of Cash Available for Distribution.
A. Cash Available for Distribution with respect to each Fiscal Year shall be
distributed at least semi-annually, not later than October 31st of each Fiscal
Year and April 15th of each succeeding Fiscal Year, as follows:
(i) first, 100% to the Limited Partners until the Limited Partners
shall have received with respect to such Fiscal Year an amount equal to the
Limited Partners' 10% Preferred Distribution;
(ii) second 100% to the General Partner until the General Partner
shall have received with respect to such Fiscal Year an amount equal to
1/99 multiplied by the amount distributed to the Limited Partners pursuant
to Section 4.06A(i) with respect to such Fiscal Year; and
(iii) third, through and including the end of the Accounting Period
during which the General Partner and the Limited Partners have received
cumulative distributions of Capital Receipts pursuant to Sections 4.07 (ii)
and 4.08A(ii) equal to $37,626,263 (of which the Limited Partners' portion
would equal $50,000 per Unit), 1% to the General Partner and 99% to the
Limited Partners, and thereafter, 20% to the General Partner and 80% to the
Limited Partners.
B. In determining the amount of the distribution to be made on or before
October 31st of each Fiscal Year, the General Partner shall estimate the Cash
Available for Distribution with respect
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to such Fiscal Year as a result of the first nine Accounting Periods of such
Fiscal Year (for 1989, the actual number of Accounting Periods ending prior to
September 15) and shall reduce such amount by such reserves as the General
Partner reasonably determines are necessary to provide for the doing operation
of the Partnership. The amount of the distribution to be made on or before April
15th of the succeeding Fiscal Year shall be the Cash Available for Distribution
for the prior Fiscal Year, reduced by the amount of the distribution made with
respect to such Fiscal Year pursuant to the preceding sentence.
C. The Limited Partners' 10% Preferred Distribution for 1989 was pro-rated,
based upon the number of days in the Fiscal Year from the date of the closing of
the offering pursuant to the Private Placement Memorandum. For purposes of
Sections 4.06A(i) and (ii), distributions made within 105 days after the end of
a Fiscal Year shall be deemed made with respect to such Fiscal Year.
Section 4.07. Distribution of Refinancing Proceeds. Refinancing Proceeds
shall, unless the General Partner, in its reasonable discretion, shall determine
to retain any such amounts in the Partnership, be distributed as follows:
(i) first, until the Limited Partners shall have received cumulative
distributions of Capital Receipts pursuant to this Section 4.07(i) equal to
the then outstanding Limited Partners' 15% Preferred Distribution, 1% to
the General Partner and 99% to the Limited Partners;
(ii) second, until the Limited Partners shall have received cumulative
distributions of Capital Receipts pursuant to this Section 4.07(ii) and
Section 4.08A(ii) below equal to the Limited Partners' Invested Capital, 1%
to the General Partner and 99% to the Limited Partners; and
(iii) thereafter, 20% to the General Partner and 80% to the Limited
Partners.
Section 4.08. Distribution of Sale Proceeds.
A. Sale Proceeds from the sale or other disposition of less than
substantially all of the assets of the Partnership shall, unless the General
Partner, in its reasonable discretion, shall determine to retain any such
amounts in the Partnership, be distributed as follows:
(i) first, until the Limited Partners shall have received cumulative
distributions pursuant to this Section 4.08A(i) equal to the then
outstanding Limited Partners' 15% Preferred Distribution, 1% to the General
Partner and 99% to the Limited Partners;
(ii) second, until the Limited Partners shall have received cumulative
distributions of Capital Receipts pursuant to this Section 4.08A(ii) and
Section 4.07(ii) above equal to the Limited Partners' Invested Capital, 1%
to the General Partner and 99% to the Limited Partners; and
(iii) thereafter, 20% to the General Partner and 80% to the Limited
Partners.
B. As provided in Section 8.02, Sale Proceeds from the sale or other
disposition (or from a related series of sales or dispositions) of all or
substantially all of the remaining assets of the Partnership will be distributed
to the Partners in accordance with their Capital Account balances, as adjusted
to take into account Gain or Loss resulting from such sale or sales.
Section 4.09. Distribution Among Limited Partners of Cash Available for
Distribution, Refinancing Proceeds and Sale Proceeds. The distribution of Cash
Available for Distribution distributable with respect to any Fiscal Quarter to
the Limited Partners pursuant to Section 4.06,
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shall be distributed to the Limited Partners of record as of the end of the
Fiscal Quarter prior to the date of distribution, pro rata in accordance with
the number of Units owned by each as of the end of such Fiscal Quarter, after
any deduction pursuant to Section 3.05F(i). Capital Receipts distributable to
the Limited Partners pursuant to Section 4.07 or Section 4.08A shall be
distributed to the Limited Partners pro rata in accordance with the number of
Units owned by each such Limited Partner on the day of the Fiscal Quarter in
which the transaction giving rise to such proceeds was completed. If a Unit is
purported to be assigned by a Limited Partner other than on the first day of a
Fiscal Quarter (in contravention of this Agreement), then the Partnership shall
not recognize such assignment for the purpose of distributing amounts pursuant
to Sections 4.06, 4.07 and 4.08 or for any other purpose unless the assignment
is permitted by Section 7.01 hereof, and then only as of the first day of the
next Fiscal Quarter commencing after the expiration of 15 days from the receipt
by the Partnership of an application for such assignment. The preceding sentence
shall not apply to the Units transferred by Limited Partners to MHP II
Acquisition Corp. pursuant to MHP II Acquisition Corp.'s Offer to Purchase for
Cash All Outstanding Units of Limited Partnership Interest, dated April 18,
1996, which transfers shall be considered to be in accordance with this
Agreement, shall be deemed to occur on the date of transfer of such Units for
purposes of Sections 4.06, 4.07 and 4.08 (which shall result in MHP II
Acquisition Corp. becoming the Limited Partner of record on such date of
transfer), and, notwithstanding the first sentence of this Section 4.09, any
distributions pursuant to Section 4.06 with respect to such transferred Units
made after such date of transfer but before the first day of the first Fiscal
Quarter commencing after such date of transfer shall be made to MHP II
Acquisition Corp.
Section 4.10. Section 754 Adjustments. For income tax purposes (but not for
purposes of adjusting the Capital Accounts of the Partnership, except as
otherwise provided in section 1.704-1(b)(2)(iv) of the Treasury regulations),
appropriate adjustments shall be made in the information furnished to affected
Limited Partners with respect to allocations under this Article Four in order to
reflect adjustments in the basis of Partnership property permitted pursuant to
any election under Section 754 of the Code if the General Partner, in its sole
discretion, makes such election. If such an election is made, the Partnership
shall make the basis adjustments and calculate depreciation deductions in
accordance with such adjustments for those transferee Limited Partners who
advise the Partnership of this obligation and provide sufficient information to
enable the Partnership to determine when, and at what price, such transferee
Limited Partners acquired Units. In the case of a transferee Limited Partner
who does not advise the Partnership of such information, the Partnership will
attempt to supply such Limited Partner with reasonably available information
that will permit such Limited Partner to make the required basis adjustment
calculation.
Section 4.11. Special Allocations. The following provisions shall apply
notwithstanding the provisions of Sections 4.01, 4.02, 4.03 and 4.04. In the
event that there is a conflict between any of the following provisions, the
earlier listed provision shall govern.
A. If there is a net decrease in the Minimum Gain attributable to Nonrecourse
Liabilities during any Fiscal Year, each Partner shall be specially allocated
items of Partnership income and gain for such year (and, if necessary, for
subsequent years) in proportion to, and to the extent of, an amount equal to
such Partner's share of the net decrease in such Minimum Gain during such year
(as such share is determined pursuant to section 1.704-2(g)(2) of the Treasury
regulations). It is intended that items to be so allocated shall be determined
and the allocations made only to the extent of the minimum gain chargeback
requirement of section 1.704-2(f) of the Treasury regulations, and this Section
4.11A shall be interpreted consistently therewith.
B. If there is a net decrease in the Minimum Gain attributable to Partner
Nonrecourse Debts during any Fiscal Year, each Partner who has a share of the
Minimum Gain (determined in accordance with section 1.704-2(i)(5) of the
Treasury regulations) attributable to such Partner Nonrecourse Debts as of the
beginning of such year shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, for subsequent years) in proportion
to, and to the
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extent of, an amount equal to such Partner's share of the net decrease in such
Minimum Gain. It is intended that items to be so allocated shall be determined
and the allocations made in accordance with the minimum gain chargeback
requirement of section 1.704-2(i)(4) of the Treasury regulations, and this
Section 4.11B shall be interpreted consistently therewith.
C. In the event a Partner unexpectedly receives in any taxable year any
adjustments, allocations or distributions described in Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury regulations that cause or increase
an Adjusted Capital Account Deficit of such Partner, items of Partnership income
and gain shall be specially allocated to such Partner in such taxable year (and,
if necessary, in subsequent taxable years) in an amount and manner sufficient to
eliminate, to the extent required by the Treasury regulations, the Adjusted
Capital Account Deficit of such Partner as quickly as possible. It is intended
that items to be so allocated shall be determined and the allocations made in
accordance with the "qualified income offset" requirement of Section 1.704-
1(b)(2)(ii)(d), and this Section 4.11C shall be interpreted consistently
therewith.
D. No Net Losses, Losses, or Partnership deductions for any Fiscal Year
shall be allocated to any Limited Partner to the extent such allocation would
cause or increase an Adjusted Capital Account Deficit with respect to such
Partner, and such Net Losses, Losses, or Partnership deductions instead shall be
allocated to the General Partner.
E. If in any Fiscal Year there is a net increase during such year in the
amount of Minimum Gain attributable to a Partner Nonrecourse Debt, any Partner
bearing the economic risk of loss with respect to such debt (within the meaning
of section 1.752-2 of the Treasury regulations) shall be specially allocated
items of Partnership loss or deduction in an amount equal to the excess of (i)
such Partner's share of the amount of such net increase, over (ii) the aggregate
amount of any distributions during such year to such Partner of the proceeds of
such debt that are allocable to such increase in Minimum Gain. It is intended
that items to be so allocated shall be determined and the allocations made in
accordance with the required allocation of "partner nonrecourse deductions"
pursuant to section 1.704-2(i)(1) and (2) of the Treasury regulations and this
Section 4.11E shall be interpreted consistently therewith.
F. If in any Fiscal Year items of Partnership loss or deduction are specially
allocated to the General Partner pursuant to Section 4.11E, the General Partner
shall be specially allocated in such year (and, if necessary, subsequent years)
items of Partnership gross income in an amount equal to the amount of such
specially allocated loss or deduction.
G. Selling commissions and similar fees that are "syndication expenses," as
described in the Treasury regulations under section 709 of the Code, paid or
incurred by the Partnership in any Fiscal Quarter in respect of any Unit shall
be specially allocated to and charged to the Capital Account of the Limited
Partner owning such Unit during such Fiscal Quarter. In this regard, there
shall be charged to the Capital Account of each Unit sold by the Placement
Agents (other than Units sold to the General Partner, its Affiliates, or
officers, directors or employees of the General Partner or its Affiliates or to
the Placement Agents) an amount of up to $10,000 per Unit. Any other such
syndication expenses shall be allocated to and charged to the Capital Accounts
of the Partners in the following manner: 99% to the Limited Partners and 1% to
the General Partner.
H. Deductions for interest expense on the Deferred Purchase Debt incurred in
each Fiscal Year shall be allocated solely to the Limited Partners owning the
Units during such Fiscal Year with respect to which Capital Contributions are
being paid in installments; provided, however, that the total allocation under
this Section 4.11H with respect to any Unit since the formation of the
Partnership shall not exceed $10,753.
I. In the event that any fees, interest, or other amounts paid to a Partner
or an Affiliate of a Partner pursuant to this Agreement, the Management
Agreements, or any other agreement between
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the Partnership and such Partner or Affiliate providing for the payment of such
amounts, and deducted by the Partnership, whether in reliance upon section 162,
163, 707(a) or 707(c) of the Code or otherwise, are disallowed as deductions to
the Partnership on its federal income tax return for the Fiscal Year in or with
respect to which such amounts are paid and are treated instead as Partnership
distributions, then:
(i) the Net Profits or Net Losses, as the case may be, for the Fiscal
Year in or with respect to which such fees, interest, or other amounts were
paid shall be increased or decreased, as the case may be, by the amount of
such fees, interest, or other amounts that are disallowed and treated as
Partnership distributions; and
(ii) there shall be allocated to the Partner who received (or whose
Affiliate received) such payments an amount of gross income for the Fiscal
Year in or with respect to which such fees, interest or other amounts were
paid equal to the amount of such fees, interest or other amounts that are
so disallowed and treated as Partnership distributions.
J. If the Partnership acquires property by purchase or exchange from a
transferor who, on the transaction, sustained a loss not allowable in whole or
in part as a deduction by reason of section 267(a)(1) of the Code, and the
Partnership subsequently realizes an amount of gain on the sale or other
disposition of the property which is not recognized by reason of section 267(d),
then
(i) the amount of Gain allocated under Section 4.03A to the Partner or
Partners related to such transferor shall be deemed to consist of the
Section 267(d) Gain to the extent of the lesser of the amount of the
Section 267(d) Gain or the amount of Gain allocated to such Partner(s)
pursuant to Section 4.03A; and
(ii) if the amount of the Section 267(d) Gain exceeds the amount of
Gain allocated to the Partner or Partners related to such transferor
pursuant to Section 4.03A, the amounts of Gain allocated to the other
Partners under Section 4.03A shall be deemed to consist pro rata of such
excess Section 267(d) Gain.
Section 4.12. Operating Rules.
A. Solely for purposes of determining a Partner's proportionate share of
"excess nonrecourse liabilities" of the Partnership within the meaning of
section 1.752-3(a)(3) of the Treasury regulations, the General Partner's
interest in Partnership profits shall equal 20% and the Limited Partners'
aggregate interest in Partnership profits shall equal 80%. Each Limited
Partner's share of Partnership profits shall be the product of 80% times a
fraction, the numerator of which is the total number of Units owned by such
Limited Partner as of the time as of which the determination of such Limited
Partner's share is being made and the denominator of which is the total number
of Units as of such time.
B. Except as otherwise specifically provided in this Agreement, the
distributive share of a Partner of each specific deduction and item of income,
loss, and credit of the Partnership for Federal income tax purposes shall be the
same as such Partner's share of Net Profits, Gains, Net Losses, or Losses, as
the case may be, for such Fiscal Year.
C. For purposes of this Agreement, any amount of taxes required to be
withheld by the Partnership to any Partner or required to be paid by the
Partnership in respect of any Partner's tax obligation shall be deemed to be a
distribution or payment to such Partner and shall reduce the amount otherwise
distributable to such Partner pursuant to this Agreement.
D. In the event of a sale or other disposition of less than substantially all
of the assets of the Partnership, (i) for purposes of determining the balances
in the Capital Accounts of the Partners in
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order to allocate Gain or Loss recognized from such sale or disposition pursuant
to Sections 4.03 and 4.04, each Partner's Capital Account balance shall be
deemed to include any amount that such Partner is deemed to be obligated to
restore pursuant to the penultimate sentence of sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Treasury regulations (determined after taking into account
any changes during such year in Minimum Gain, including changes in Minimum Gain
resulting from such sale or other disposition); and (ii) for purposes of
determining the Capital Accounts in order to allocate Loss recognized from such
sale or disposition pursuant to Sections 4.03 and 4.04, each Partner's Capital
Account shall be reduced by the items described in sections 1.704-
1(b)(2)(ii)(d)(4), (5), and (6).
Section 4.13. Minimum Interest of the General Partner. The interest of the
General Partner in each item of the Partnership's income, gain, loss, deduction
and credit shall at all times during the existence of the Partnership be equal
to at least 1% of each such item.
ARTICLE FIVE
Rights, Powers And Duties Of
The General Partner
Section 5.01. Authority of the General Partner to Manage the Partnership.
A. The General Partner shall have the exclusive right and power to conduct
the business and affairs of the Partnership and to do all things necessary to
carry on the business of the Partnership in accordance with the provisions of
this Agreement and applicable law, and is hereby authorized to take any action
of any kind and to do anything and everything it deems necessary or appropriate
in accordance with the provisions of this Agreement and applicable law. Except
as expressly provided herein, the authority to conduct the business of the
Partnership shall be exercised only by the General Partner. Subject to Section
5.01E, the General Partner may appoint, contract, or otherwise deal with any
Person, including employees of its Affiliates, to perform any acts or services
for the Partnership necessary or appropriate for the conduct of the business and
affairs of the Partnership.
B. No Limited Partner shall participate in or have any control whatsoever
over the Partnership's business or have any authority or right to act for or
bind the Partnership. The Limited Partners hereby unanimously Consent to the
exercise by the General Partner of the powers conferred on it by this Agreement,
subject to the restrictions and limitations set forth in this Agreement or the
Act.
C. Except to the extent otherwise provided herein, the General Partner is
hereby authorized, without Consent of the Limited Partners, to:
(i) execute any and all agreements (including the Purchase Agreements
and the Management Agreements, which agreements shall be deemed to satisfy
all requirements of this Agreement), contracts, documents, certifications
and instruments necessary or convenient in connection with the acquisition,
development, financing, management, maintenance, operation, sale or other
disposition of the Partnership's properties and assets except as otherwise
limited by this Agreement;
(ii) borrow money from itself or others (including Affiliates of any
general partner of the Partnership) and issue evidences of indebtedness
necessary, convenient or incidental to the accomplishment of the purposes
of the Partnership and to secure the same by mortgage, pledge or other lien
on the assets of the Partnership, such borrowing and security to be only
with respect to the following: (a) the Deferred Purchase Debt, (b) any
amounts advanced by the General Partner or an Affiliate of the General
Partner (which
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amounts may or may not be secured) or any other lender to enable the
Partnership to satisfy its obligations arising in the normal course of its
business, to make payments of principal, interest, premium or penalty on
any debt of the Partnership or to make capital repairs, improvements and
expansions, provided any required Consent of the Limited Partners is
obtained, (c) the Mortgage Debt, (d) amounts incurred exclusively for the
purpose of a distribution to the Partners, (e) any indebtedness the
incurrence of which has been specifically consented to by the Limited
Partners under Section 5.02B, (f) any indebtedness incurred to refinance
(and thereafter further refinance as often as shall be necessary) the
unamortized portion of any of the foregoing from time to time and any
expenses of such refinancing, or (g) any indebtedness that the General
Partner otherwise has determined, in accordance with its fiduciary duties
as a general partner, is in the best interests of the Partnership and the
Limited Partners; provided, however, that in connection with the borrowing
of money on a nonrecourse basis, no lender shall, unless permitted pursuant
to Section 5.02B, be granted or acquire, at any time as a result of making
such a loan, any direct or indirect interest in the profits, capital or
property of the Partnership other than as a secured creditor;
(iii) prepay in whole or in part, refinance (to the extent permitted
by clause (ii) above), fix the interest rate on, recast, modify or extend
any debt affecting or encumbering any of the Partnership's property and in
connection therewith to execute any extensions, consolidations,
modifications or renewals of mortgages on any assets of the Partnership;
(iv) deal with, or otherwise engage in business with, or provide
services to and receive compensation therefor from, any Person who has
provided or may in the future provide any services, lend money or sell
property to or purchase property from the General Partner or any Affiliate
of the General Partner. No such dealing, engaging in business or providing
of services may involve any direct or indirect payment by the Partnership
of any rebate or any reciprocal arrangement for the purpose of
circumventing any restriction set forth herein upon dealings with the
General Partner or any Affiliate of the General Partner. The General
Partner may on behalf of the Partnership enter into agreements to employ
agents, attorneys, accountants, engineers, appraisers, or other consultants
or contractors who may be Affiliates of the General Partner and may enter
into agreements to employ Affiliates of the General Partner to provide
further or additional services to the Partnership; provided that any
employment of such Persons will be subject to Section 5.01E and will be on
terms not less favorable to the Partnership than those offered by persons
who are not Affiliates of the General Partner for comparable services;
(v) engage in any kind of activity and perform and carry out contracts
of any kind necessary to, or in connection with, or incidental to the
accomplishment of, the purposes of the Partnership, as may be lawfully
carried on or performed by a limited partnership under the laws of the
State of Delaware, the states where the Hotels are located, and in each
state where the Partnership has been qualified to do business;
(vi) if such sale would be permitted under Section 5.02C, either sell
the Partnership's interest in the Santa Clara Partnership or vote the
Partnership's interest in the Santa Clara Partnership to permit a sale of
the Santa Clara Hotel;
(vii) take such actions (including, but not limited to, amending this
Agreement) as the General Partner determines are advisable or necessary,
based upon advice of counsel to the Partnership, and will not result in any
material adverse effect on the economic position of holders of a majority
of the Units, to (a) preserve the tax status of the Partnership as a
partnership for Federal income tax purposes, (b) to conform this Agreement
to (i) the Act for the purpose of preserving the tax status of the
Partnership as a partnership for Federal income tax purposes, or (ii)
provisions of the Code or the Treasury regulations relating to
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taxation of partners and partnerships, including, without limitation, any
changes thereto, or (c) in the event that any provision of the Code or the
Treasury regulations causes the terms of this Agreement to differ to the
detriment of the Limited Partners from the terms as contemplated by the
Partners (as reflected in the Private Placement Memorandum), to modify this
Agreement in a manner designed to ameliorate such difference; or
(viii) take any action on behalf of the Partnership authorized,
required, or permitted to be taken by the Partnership under the Santa Clara
Partnership Agreement.
D. Any Person dealing with the Partnership or the General Partner may rely
upon a certificate signed by the Secretary or Assistant Secretary of the General
Partner, thereunto duly authorized, as to:
(i) the identity of the General Partner or any Limited Partner;
(ii) the existence or non-existence of any fact or facts which
constitute a condition precedent to the acts by the General Partner or in
any other manner germane to the affairs of the Partnership;
(iii) the Persons who are authorized to execute and deliver any
instrument or document of the Partnership; and
(iv) any act or failure to act by the Partnership or as to any other
matter whatsoever involving the Partnership or any Partner.
E. Any agreements, contracts and arrangements between either the Partnership
or the Santa Clara Partnership and the General Partner or any of its Affiliates,
except for rendering legal, tax, financial, accounting, procurement and
engineering services by employees of the General Partner and Affiliates of the
General Partner, which agreements shall be on commercially reasonable terms,
shall be subject to the following additional conditions:
(i) such services, goods, or materials must be reasonably necessary to
the prudent operation of the business of the Partnership;
(ii) the General Partner or any such Affiliate must have the ability
to render such services;
(iii) such agreements, contracts or arrangements must be fair to the
Partnership and reflect commercially reasonable terms and shall be embodied
in a written contract which precisely describes the subject matter thereof
and all compensation to be paid therefor;
(iv) no rebates or give-ups may be received by the General Partner or
any such Affiliate, nor may the General Partner or any such Affiliate
participate in any reciprocal business arrangements which would have the
effect of circumventing any of the provisions of this Agreement; and
(v) no such agreement, contract or arrangement as to which the Limited
Partners had previously given Consent may be amended in such manner as to
increase the fees or other compensation payable to the General Partner or
any such Affiliate or to decrease the responsibilities or duties of the
General Partner or any such Affiliate in the absence of the Consent
contemplated by Section 5.02B(iii).
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Section 5.02. Restrictions on Authority of the General Partner.
A. Without an amendment to this Agreement, which amendment shall require
the unanimous Consent of all the Limited Partners, the General Partner shall not
have authority on behalf of the Partnership to:
(i) do any act in contravention of this Agreement;
(ii) except as otherwise provided in this Agreement, do any act which
would make it impossible to carry on the ordinary business of the
Partnership;
(iii) confess a judgment in excess of $250,000 against the
Partnership;
(iv) convert property of the Partnership to its own use, or possess or
assign any rights in specific property of the Partnership for other than a
purpose of the Partnership;
(v) admit a Person as a Limited Partner or as a General Partner,
except as provided in this Agreement;
(vi) perform any act that would subject any Limited Partner to
liability as a general partner in any jurisdiction or any other liability
except as provided for herein or under the Act;
(vii) list, recognize, or facilitate the trading of the Interests (or
any interests therein) on any "established securities market" within the
meaning of section 7704 of the Code, or permit any of its Affiliates (or to
the extent the General Partner has rights with respect thereto, the selling
agents or any of their Affiliates) to take such actions, if as a result
thereof the Partnership would be taxed for Federal income tax purposes as
an association taxable as a corporation; or
(viii) create for the Interests (or any interest therein) a
"secondary market" (or the substantial equivalent thereof) within the
meaning of section 7704 of the Code or otherwise permit, recognize or
facilitate the trading of the Interests (or any interest therein) on any
such market, or permit any of its Affiliates (or to the extent the General
Partner has rights with respect thereto, selling agents or any of their
Affiliates) to take such actions, if as a result thereof the Partnership
would be taxed for Federal income tax purposes as an association taxable as
a corporation.
B. Without an amendment to this Agreement, which amendment shall require
the Consent of the Limited Partners, the General Partner shall not have the
authority on behalf of the Partnership to:
(i) have the Partnership acquire interests in other hotel properties,
or in other entities owning hotels, in addition to the Hotel Interests or
in other assets not reasonably related to the conduct of the Partnership's
business as set forth in Section 2.03;
(ii) sell or otherwise dispose of or consent to the sale or
disposition of any Hotel or the Partnership's interest in the Santa Clara
Partnership (except as permitted in Section 5.02C below), or any interest
in any of the foregoing, provided, however, that if it is proposed that the
Partnership sell any Hotels or interests therein to the General Partner or
an Affiliate of the General Partner, the Consent of the Limited Partners
must be obtained after the following procedures are followed: (a) the
General Partner shall give not less than 30 days' notice of the proposed
sale to the Limited Partners, which notice shall set forth the price and
other material terms and conditions on which the proposed transaction is to
be
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effected; (b) the Partnership shall obtain three appraisals of the fair
market sales value of the Hotel or Hotels to be sold, such appraisals to be
prepared by independent, nationally recognized appraisers experienced in
the valuation of hotel properties selected by the General Partner (the cost
of all such appraisals to be borne by the General Partner or its
Affiliate); (c) such appraiser shall not have, directly or indirectly, any
material interest in or material business or professional relationship with
the General Partner or any of its Affiliates and the compensation of each
such appraiser shall be determined and embodied in a written contract
before such appraisal is prepared; (d) the price at which the sale is
effected shall not be less than the average of the three amounts determined
by the three appraisers, disregarding entirely any appraisal that differs
by more than 20% from the amount determined by the appraiser whose
determination is between the highest and lowest of the amounts determined
by the three appraisers (in the case of a purchase pursuant to the right of
first refusal granted to the Manager, the price shall not be less than the
higher of such average or the price offered to the Partnership by a third
party); (e) the purchase price must be payable in cash; (f) no real estate
commission may be paid by the Partnership in connection with such sale; and
(g) the General Partner shall include copies of such appraisals with the
aforesaid notice to the Limited Partners;
(iii) effect any amendment to any agreement, contract or arrangement
with the General Partner or any of its Affiliates (including, without
Limitation, the Purchase Agreements and, if the Manager is an Affiliate of
the General Partner, the Management Agreements) which reduces the
responsibilities or duties of the General Partner as a general partner of
the Partnership or any of its Affiliates under this Agreement or any other
agreement, contract or arrangement, or which increases the compensation
payable to the General Partner or any of its Affiliates, or which adversely
affects the rights of the Limited Partners;
(iv) incur debt of the Partnership except as set forth in Section
5.01C(ii);
(v) agree to the addition of transient guest rooms at any Hotel unless
(a) the Hotel has had an average occupancy rate of at least 70% for a
consecutive period of at least 12 months immediately prior to commencement
of construction of the addition; and (b) the Partnership has obtained debt
financing to finance the costs of the addition on a nonrecourse basis as to
all the Partners and the Partnership (including the General Partner),
except as provided in Section 5.02B(viii);
(vi) make any election to continue beyond its term, discontinue or
dissolve the Partnership;
(vii) voluntarily withdraw as a General Partner;
(viii) permit or cause the Partnership to incur any debt in excess of
$250,000 (other than the Mortgage Debt, the Deferred Purchase Debt, and
liabilities to Marriott and its Affiliates with respect to the Debt Service
Guarantee or the Santa Clara Debt Service Advances) otherwise permitted to
be incurred pursuant to the terms of this Agreement if such debt would not
constitute in its entirety both "qualified nonrecourse financing" within
the meaning of section 465(b)(6)(B) of the Code and the applicable Treasury
regulations and a Nonrecourse Liability, unless (a) the General Partner, in
accordance with its fiduciary duties as a general partner and taking into
consideration the tax consequences to the Limited Partners, determines that
such action is not detrimental to the best interests of the Limited
Partners, or (b) the General Partner shall have obtained the Consent of the
Limited Partners to such action;
(ix) cause the Partnership to merge or consolidate with any other
entity;
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(x) cause the Partnership to borrow any funds from the General Partner
or any Affiliate of the General Partner unless such borrowing is in
accordance with Section 5.01E and Section 5.06C;
(xi) cause the Partnership to acquire any property from the General
Partner and any Affiliate of the General Partner in exchange for Interests
in the Partnership; or
(xii) cause the Partnership to incur any debt that would result in
Refinancing Proceeds, unless such Refinancing Proceeds are distributed to
the Partners in the same taxable year in which the Partnership incurred
such liability.
C. Except as specifically set forth in this Section 5.02C, the General
Partner shall have the power (i) to consent to any action by the Santa Clara
Partnership requiring the consent of the Partnership under the Santa Clara
Partnership Agreement and (ii) to take any action permitted to be taken by the
Partnership under the Santa Clara Partnership Agreement. The General Partner
shall not consent to any action by the Santa Clara Partnership requiring the
consent of the Partnership under the Santa Clara Partnership Agreement (or vote
the Partnership's interest in the Santa Clara Partnership to permit any such
action) if such action, were it to be taken directly by the Partnership, would
require an amendment to this Agreement with a specified Consent of the Limited
Partners (or otherwise would have been prohibited) pursuant to Section 5.02A or
Section 5.02B unless and until such an amendment, with the specified Consent,
shall have been obtained. Conversely, the Limited Partners shall be permitted
to amend this Agreement to cause the Partnership to take any action permitted by
the Partnership under the Santa Clara Partnership Agreement if such action, were
it to be taken with respect to the Partnership, could be taken through an
amendment to this Agreement by a specified Consent of the Limited Partners
pursuant to Section 6.05B or Section 10.02 without the approval of the General
Partner. Notwithstanding the foregoing or any provision of Section 5.02B, the
General Partner shall be permitted to consent to a sale of the Santa Clara
Hotel, or cause the Partnership to dispose of its entire interest in the Santa
Clara Partnership, without the Consent of the Limited Partners, so long as the
following conditions are satisfied:
(i) such sale or disposition is to a Person other than the General
Partner or an Affiliate thereof (other than an Affiliate solely by reason
of the fact that the General Partner and/or its Affiliates have an interest
equal to one percentage point or less in the acquiring Person);
(ii) such sale is part of a transaction involving a sale of the Santa
Clara Partnership's entire interest in the Santa Clara Hotel or a sale of
either all or all but up to one percentage point of the aggregate interest
of the other partners (other than the Partnership) in the Santa Clara
Partnership (the "Other Santa Clara Partners");
(iii) if the Manager is an Affiliate of the General Partner, the
changes, if any, in the terms and conditions (including the compensation
payable) under the Management Agreement with respect to the Santa Clara
Hotel that will occur as a result of or in connection with such sale
cannot, in the aggregate, be materially more beneficial to the Manager and
its Affiliates than those in effect prior to the sale; and
(iv) the total amount payable to the Other Santa Clara Partners and
any Affiliates thereof in connection with or as a result of such sale,
irrespective of how denominated (including, without limitation,
compensation for services to be rendered other than pursuant to the
Management Agreement, if the Manager is an Affiliate of the General
Partner), and the terms on which such payments are to be made, shall be
identical in all material respects to the total amount payable to the
Partnership (and the terms on which such payments are to be made), subject
to (a) repayment of the Santa Clara Mortgage Debt
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(or certain specified replacement debt with respect to the Santa Clara
Hotel), Santa Clara Debt Service Advances, advances under the Debt Service
Guarantee, and any other obligations of the Partnership required to be paid
in connection with or as a result of such sale, (b) any adjustments
necessary to reflect the retention by the Other Santa Clara Partners of up
to a one percentage point interest in the event of a sale of their interest
in the Santa Clara Partnership, and (c) payment of any amounts payable
under the Management Agreement in connection with or as a result of such
sale.
For purposes of this Section 5.02C, an interest of the General Partner or any
Affiliate of any entity shall be considered to satisfy the "one percentage
point" limitation set forth above only if the interest of the General Partner
and/or its Affiliates in any cash, property, and tax attributes (or any items or
portion thereof) of such entity in question can never exceed one percentage
point under any circumstances.
Section 5.03. Duties and Obligations of the General Partner.
A. The General Partner shall take all action which may be necessary or
appropriate for the acquisition, development, maintenance, preservation and
operation of the properties and assets of the Partnership in accordance with the
provisions of this Agreement and applicable laws and regulations (it being
understood and agreed, however, that the General Partner shall be permitted to
cause the Partnership to contract with other Persons for the direct performance
of day-to-day management or operational services for the Hotels and other
properties of the Partnership) and that the General Partner shall have no
obligation to perform such services itself, the General Partner's obligation
with respect thereto being limited to using its best efforts to cause the
Partnership to locate and employ a manager or operator to perform such services.
B. The General Partner shall not (i) directly or through a subsidiary
engage in any business other than that of acting as a partner of the Partnership
and the Santa Clara Partnership, (ii) pay dividends or make other distributions
or payments on its stock or incur any obligations if, as a result, its net worth
would be reduced below the requirement of Section 5.03D, (iii) merge or
consolidate with another corporation except Marriott or a wholly owned direct or
indirect subsidiary of Marriott, (iv) voluntarily dissolve, or (v) borrow any
funds or become liable for any obligations of third parties except to the extent
that any such borrowings or liabilities are directly related to meeting the
financial needs of the Partnership and the Santa Clara Partnership. MPI and the
General Partner agree that so long as the General Partner is the general partner
of the Partnership, its parent company, MPI, will not transfer its stock of the
General Partner except to a wholly owned, direct or indirect, subsidiary of
Marriott, and Marriott and the General Partner agree that so long as the General
Partner is the general partner of the Partnership, Marriott will not sell the
stock of MPI unless the stock of the General Partner is thereafter owned by
Marriott or a wholly owned, direct or indirect, subsidiary of Marriott.
C. The General Partner shall devote to the Partnership and the Santa Clara
Partnership such time as may be necessary for the proper performance of its
duties hereunder, but the officers and directors of the General Partner shall
not be required to devote their full time to the performance of duties of the
General Partner.
D. The General Partner shall use its reasonable best efforts to maintain
at all times a net worth of $7.6 million in excess of its investment in the
Partnership and the Santa Clara Partnership.
E. The General Partner shall take such action as may be necessary or
appropriate in order to form or qualify the Partnership under the laws of any
jurisdiction in which the Partnership is doing business or owns property or in
which such formation or qualification is necessary in order to protect the
limited liability of the Limited Partners or in order to continue in effect such
formation or qualification. If required by law, the General Partner shall file
or cause to be filed for recordation in
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the office of the appropriate authorities of the State of Delaware, and in the
proper office or offices in each other jurisdiction in which the Partnership is
formed or qualified, such certificates (including limited partnership and
fictitious name certificates) and other documents as are required by the
applicable statutes, rules or regulations of any such jurisdiction or as are
necessary to reflect the identity of the Partners and the amounts of their
respective Capital Contributions.
F. The General Partner shall be obligated to use its best efforts to
remove any General Partner or Affiliate guarantee or personal liability with
respect to any Partnership debt that was permitted under Section 5.02B(viii)
hereof when such action was incurred, but that subsequently results or will
result in material adverse tax consequences to the Limited Partners if (i) such
guarantee or personal liability would no longer be permitted if such debt were
first being incurred at the time of such adverse consequences and (ii) the
removal of such guarantee or personal liability would substantially mitigate the
material adverse tax consequences to the Limited Partners.
G. Except as otherwise permitted in Section 5.02B(viii), the General
Partner shall at all times conduct its affairs and the affairs of the
Partnership and all of its Affiliates in such a manner that neither the
Partnership nor any Partner nor any Affiliate of any Partner will have any
personal liability on any Partnership Debt.
H. The General Partner shall prepare or cause to be prepared and shall
file on or before the due date (or any extension thereof) any Federal, state or
local tax returns required to be filed by the Partnership. The General Partner
shall cause the Partnership to pay any taxes payable by the Partnership, whether
by way of withholding from distributions to the Partners or otherwise.
I. The General Partner shall be under a duty to conduct the affairs of the
Partnership in good faith and in accordance with the terms of this Agreement and
in a manner consistent with the purposes set forth in Section 2.03. Nothing
contained in this Agreement is intended or shall be construed to contract away
the fiduciary duty of the General Partner to the Limited Partners.
J. The General Partner shall use its best efforts to assure that the
Partnership shall not be deemed an investment company as such term is defined in
the Investment Company Act of 1940.
K. The General Partner shall monitor the transfers of Interests to
determine (i) if such Interests are being traded on an "established securities
market" or a "secondary market" (or the substantial equivalent thereof) within
the meaning of section 7704 of the Code, and (ii) whether additional transfers
of Interests would result in the Partnership being unable to qualify for at
least one of the "safe harbors" set forth in IRS Notice 88.75 (or such other
guidance subsequently published by the IRS setting forth safe harbors under
which Interests will not be treated as "readily tradable on a secondary market"
(or the substantial equivalent thereof) within the meaning of section 7704 of
the Code) (the "Safe Harbors"). The General Partner shall take (and cause its
Affiliates to take) all steps reasonably necessary or appropriate to prevent any
trading of Interests or any recognition by the Partnership of transfers made on
such markets and, except as otherwise provided herein, to ensure that at least
one of the Safe Harbors is met.
L. The General Partner shall maintain or cause to be maintained the
subscription documents obtained from the Original Limited Partners to
demonstrate that they meet the suitability standards employed in connection with
the offering of Units pursuant to the Private Placement Memorandum and shall
obtain a commitment from the Placement Agents to maintain the same record of
information required of the General Partner.
M. The General Partner shall make an advance to the Partnership in an
amount equal to the amount, if any, that the Partnership is required to pay to
the Santa Clara Partnership pursuant to its obligation to restore any deficit in
its capital account balance under the Santa Clara Partnership Agreement. Any
such advance shall bear interest at a rate equal to the Prime Rate plus
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one percentage point (or the highest lawful rate under the laws of the State of
Delaware, whichever is less). Any such advance and all interest accrued thereon
will be repaid as follows: (i) out of Cash Available for Distribution for any
Fiscal Year to the extent the amount thereof exceeds the amount distributable to
the Limited Partners with respect to such Fiscal Year pursuant to Section
4.06A(i); (ii) out of any Capital Receipts prior to a distribution thereof to
the Partners; and (iii) in any event, ten (10) years from the date of such
advance.
Section 5.04. Compensation of General Partner. The General Partner as
general partner of the Partnership shall not in such capacity receive any
salary, fees, profits or distributions except for such allocations,
distributions or payments to which it may be entitled under Article Three,
Article Four, Article Five or Article Eight. Notwithstanding the foregoing,
however, the Partnership shall reimburse the General Partner or its Affiliates
for the cost of providing any administrative or other services required or
contemplated by this Agreement.
Section 5.05. Other Business of Partners. Any Limited Partner may engage
independently or with others in other business ventures of every nature and
description. Nothing in this Agreement shall be deemed to prohibit any
Affiliate of the General Partner from dealing, or otherwise engaging in business
with Persons transacting business with the Partnership or from providing
services relating to the purchase, sale, financing, management, development or
operation of hotels, motels, restaurants or other food and lodging facilities
and receiving compensation therefor. Neither the Partnership nor any Partner
shall have any right by virtue of this Agreement or the partnership relationship
created hereby in or to such other ventures or activities or to the income or
proceeds derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper. Neither the General Partner nor any Affiliate of the General
Partner shall be obligated to present any particular opportunity to the
Partnership even if such opportunity is of a character which, if presented to
the Partnership could be taken by the Partnership, and any Affiliate of the
General Partner shall have the right to take for its own account (individually
or as a trustee, partner or fiduciary) or to recommend to others any such
particular opportunity.
Section 5.06. Limitation on Liability of General Partner; Indemnification.
A. Other than pursuant to Section 5.07, the General Partner shall not be
liable to the Partnership or any Limited Partner because any taxing authority
disallows or adjusts any deductions or credits in the Partnership income tax
returns unless such action by the taxing authority is due to the negligence of
the General Partner. The indemnification under this subsection is not broader
than any other indemnification contained in this Section 5.06. Subject to this
Section 5.06, the General Partner shall not be liable for the return of the
Capital Contributions of the Limited Partners or for any portion thereof, it
being expressly understood that any return of capital shall be made solely from
the assets of the Partnership; nor shall the General Partner be required to pay
to the Partnership or to any Limited Partner any deficit in the Capital Account
of any Partner upon dissolution or otherwise, except as otherwise provided in
Section 8.02D.
B. The General Partner shall have no liability, responsibility or
accountability in damages or otherwise to any other Partner or to the
Partnership for, and the Partnership agrees to indemnify, pay, protect and hold
harmless the General Partner (on the demand of and to the reasonable
satisfaction of the General Partner and to the extent permitted by law) from and
against any and all liabilities, losses, judgments and expenses of any kind or
nature whatsoever (including, without limitation, all costs and expenses of
defense, appeal and settlement of any and all claims and any and all suits,
actions or proceedings instituted against the General Partner or the Partnership
and all costs of investigations in connection therewith) which may be imposed
on, incurred by, or assessed against the General Partner or the Partnership in
any way relating to or arising out of, or alleged to relate to or arise out of,
any action or
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inaction on the part of the Partnership, or on the part of the General Partner
as the general partner of the Partnership including any action or inaction in
connection with the General Partner acting as Tax Matters Partner or Designated
Person under Section 5.07, if, but only if, (i) the action or inaction of the
General Partner giving rise thereto was determined by the General Partner, in
good faith, to be in the best interests of the Partnership and such action or
inaction shall have been within the scope of the authority granted to it by this
Agreement or by law or by the Limited Partners in accordance with this
Agreement; and (ii) the General Partner and its Affiliates were not guilty of
negligence, fraud, misconduct, or breach of fiduciary duty to the Partnership or
any Partner. The satisfaction of the obligations of the Partnership under this
Section 5.06 shall be from and limited to the assets of the Partnership and no
Limited Partner shall have any personal liability on account thereof. The
provisions of this indemnification shall also extend to any Person performing
services for the Partnership on behalf of the General Partner, within the scope
of its authority as the General Partner of the Partnership, who is an Affiliate
of the General Partner, so long as such Person satisfied the requirements of
clauses (i) and (ii) above. Notwithstanding any other provision of this
Agreement, the Partnership shall not incur any cost in excess of the cost of
insuring the Partnership itself in respect of any liability insurance that
insures the General Partner or any other Person for any liability with respect
to which indemnity would be prohibited under this Section 5.06B.
C. The General Partner shall have no liability or responsibility hereunder
to make loans, advances or additional Capital Contributions to the Partnership
except as specified in Sections 3.04, 5.03M and 8.02D and except as may
otherwise be provided as a matter of law or under the Mortgage Debt. However,
except for advances made pursuant to the Debt Service Guarantee, the Santa Clara
Debt Service Advances, or Section 5.03M which advances will be repaid in
accordance with the terms of such Guarantee, the terms of the Santa Clara
Partnership Agreement, or the terms of Section 5.03M, as the case may be, to the
extent the General Partner or any of its Affiliates advances any funds, to meet
any liabilities or obligations of the Partnership, any such advances shall be
deemed loans to the Partnership by the General Partner and shall accrue interest
per annum at one percentage point in excess of the Prime Rate (or the highest
lawful rate under the laws of the State of Delaware, whichever is less) payable
in arrears on the first day of each Fiscal Quarter and such amounts shall be due
and payable upon that date which is the tenth anniversary of the date on which
any such advances were made; provided, however, that any and all such advances
shall be paid prior to distributions to Partners out of any Cash Available for
Distribution to the Partners, upon the liquidation or dissolution of the
Partnership, or the sale of a Hotel and the receipt by the Partnership of the
proceeds of such sale. No advance may be made by the General Partner or any of
its Affiliates under this Section 5.06C that is directly or indirectly used (i)
to permit the Partnership to make a required debt service payment with respect
to the Hotel Mortgage Debt (and any replacement financing therefor) unless and
to the extent such payment is in excess of the amount then available to the
Partnership under the Debt Service Guarantee, or (ii) to permit the payment of a
required debt service payment with respect to the Santa Clara Mortgage Debt (and
any replacement financing therefor) unless and to the extent that such payment
is in excess of the Cash Flow Available for Santa Clara Mortgage Debt Service
(as defined in the Santa Clara Partnership Agreement), or (iii) to permit the
Partnership to restore any deficit in its capital account balance under the
Santa Clara Partnership Agreement. Any advance made pursuant to the preceding
sentence shall be repaid with the proceeds of an advance pursuant to the Debt
Service Guarantee or the Santa Clara Debt Service Advances, as the case may be,
as soon as such an advance would be permitted.
D. Notwithstanding the foregoing, neither the General Partner nor any
other Person specified in Section 5.06B nor any Person acting as an underwriter
or broker-dealer on behalf of the Partnership shall be indemnified by the
Partnership for liabilities arising under Federal and state securities laws
unless (i) there has been a successful adjudication in favor of the indemnitee
on the merits of each count involving alleged securities law violations, or such
claims against the indemnitee have been dismissed with prejudice on the merits
by a court of competent jurisdiction, and, in either case, indemnification of
litigation costs is approved by a court of competent jurisdiction, or (ii) a
court of competent jurisdiction approves a settlement of the claims against a
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particular indemnitee and finds that indemnification of the settlement and
related costs should be made. In any claim for indemnification for Federal or
state securities law violations, the party seeking indemnification shall place
before the court the position, if available, of the Securities and Exchange
Commission, the Massachusetts Securities Division, the Pennsylvania Securities
Commission and any of the state securities commissions that require such actions
with respect to the issue of indemnification for securities law violations.
Notwithstanding any other provision of this Agreement, the Partnership shall not
incur the cost of any liability insurance that insures the General Partner or
any other Person for any liability with respect to which indemnity would be
prohibited under this Section 5.06D.
E. The Partnership may not advance funds for expenses or other costs
incurred by the General Partner (or any other Person described in Section 5.06B)
in defending any threatened or pending action, suit or proceeding subject to
this Section 5.06.
Section 5.07. Designation of Tax Matters Partner and Designated Person for
Purposes of Investor List.
A. The General Partner shall act as the Tax Matters Partner of the
Partnership, as provided in Treasury regulations pursuant to section 6231 of the
Code and as the Designated Person for purposes of maintaining the Investor List.
Each Partner hereby approves of such designation and agrees to execute, certify,
acknowledge, deliver, swear to, file and record at the appropriate public
offices such documents as may be deemed necessary or appropriate to evidence
such approval.
B. To the extent and in the manner provided by applicable Code sections
and regulations thereunder, the Tax Matters Partner shall furnish the name,
address, profits interest and taxpayer identification number of each Partner (or
assignee) to the IRS.
C. To the extent and in the manner provided by applicable Code sections
and Treasury regulations thereunder, the Tax Matters Partner shall inform each
Partner of administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner for income tax
purposes (such administrative proceedings being referred to as a "tax audit" and
such judicial proceedings being referred to as "judicial review").
D. The Tax Matters Partner is authorized, but not required:
(a) to enter into any settlement with the IRS with respect to any tax
audit or judicial review, and in the settlement agreement the Tax Matters
Partner may expressly state that such agreement shall bind all Partners
except that such settlement agreement shall not bind any Partner who
(within the time prescribed pursuant to the Code and Treasury regulations
thereunder) files a statement with the IRS providing that the Tax Matters
Partner shall not have the authority to enter into a settlement agreement
on behalf of such Partner or (ii) who is a "notice partner" (as defined in
section 6231 of the Code) or a member of a "notice group" (as defined in
section 6223(b) (2));
(b) in the event that a notice of a final administrative adjustment at
the Partnership level of any item required to be taken into account by a
Partner for tax purposes (a "final adjustment") is mailed to the Tax
Matters Partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court or
the United States Claims Court, or the filing of a complaint for refund
with the District Court of the United States for the district in which the
Partnership's principal place of business is located;
(c) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
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(d) to file a request for an administrative adjustment with the IRS at
any time and, if any part of such request is not allowed by the IRS, to
file an appropriate pleading (petition or complaint) for judicial review
with respect to such request;
(e) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be taken
into account by a Partner for tax purposes, or an item affected by such
item; and
(f) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review proceeding
to the extent permitted by applicable law or regulations.
E. Notwithstanding any other provision of this Agreement, but subject to
Sections 5.06B and 5.06D of this Agreement, the Partnership shall indemnify and
reimburse, to the full extent provided by law, the Tax Matters Partner for all
expenses, including legal and accounting fees (as such fees are incurred),
claims, liabilities, losses and damages incurred in connection with any tax
audit or judicial review proceeding with respect to the tax liability of the
Partners, the payment of all such expenses to be made before the distribution of
Cash Available for Distribution to the Partners. Neither the General Partner
nor any of its Affiliates nor any other Person shall be obligated to provide
funds for such purpose.
F. The taking of any action and the incurring of any expense by the Tax
Matters Partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole discretion of the Tax Matters Partner
and the provisions on limitations of liability of the General Partner and
indemnification set forth in Section 5.06 of this Agreement shall be fully
applicable to the Tax Matters Partner in its capacity as such.
ARTICLE SIX
WITHDRAWAL AND REMOVAL
OF GENERAL PARTNER
Section 6.01. Limitation on Voluntary Withdrawal. Except as permitted in
Section 5.02B, the General Partner shall not have the right (but shall have the
power) to retire or withdraw voluntarily from the Partnership. Prior to any
voluntary withdrawal, the General Partner shall give the Limited Partners notice
of its intention to withdraw at least 90 days in advance of such withdrawal and
the Limited Partners may, by Consent of the Limited Partners, elect a substitute
General Partner. If a substitute General Partner is elected, it shall be
admitted immediately prior to the withdrawal of the General Partner and shall
continue the business of the Partnership without dissolution. The General
Partner shall not sell, transfer or assign its entire general partnership
Interest or any portion thereof other than as provided below. The General
Partner shall be permitted to assign its rights to up to 80% of its interest in
the Net Profits, Net Losses, Losses, Gains, Cash Available for Distribution,
Capital Receipts and other allocations and distributions only to a wholly owned
Affiliate, subject to the following conditions: (i) the General Partner shall
not be permitted to assign such rights unless the General Partner receives an
opinion of counsel that such assignment shall not cause any adverse tax
consequences to the Partnership or the Limited Partners or cause a default on
any Partnership debt obligation; and (ii) notwithstanding anything to the
contrary set forth in this Agreement and notwithstanding such assignment by the
General Partner of its Interest in the Net Profits, Net Losses, Gains, Losses,
Cash Available for Distribution, or Capital Receipts as provided above, upon any
such assignment (A) the General Partner shall not cease to be a general partner
of the Partnership, and shall continue to be a general partner of the
Partnership,
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and (B) the General Partner shall not cease to have any and all rights and
powers of a general partner under this Agreement and the Act and the power to
exercise any and all rights and powers of a general partner under this Agreement
and the Act and shall continue to have any and all such rights and powers and
the assignee shall not acquire any such rights and powers of a general partner.
Section 6.02. Bankruptcy or Dissolution of the General Partner. In the
event of the bankruptcy of the General Partner or other event that causes the
General Partner to cease to be a General Partner under sections 17-402(6), (7),
(8), (9) or (10) of the Act, the General Partner shall immediately cease to be
the General Partner and its Interest shall terminate; provided, however, that
such termination shall not affect any rights or liabilities of the General
Partner which matured prior to such event, or the value, if any, at the time of
such event of the Interest of the General Partner.
Section 6.03. Liability of Withdrawn General Partner. If the General
Partner shall cease to be General Partner of the Partnership, it shall be and
remain liable for all obligations and liabilities incurred by it as General
Partner prior to the time such withdrawal shall have become effective, but it
shall be free of any obligation or liability incurred on account of the
activities of the Partnership from and after the time such withdrawal shall have
become effective. If the General Partner withdraws in violation of this
Agreement, (i) the General Partner's Interest as General Partner in the
Partnership shall be treated as the Interest of a removed General Partner under
Section 6.04, shall be reduced by 50%, and shall be subject to purchase in the
same manner as the interest of a removed General Partner; and (ii) the
Partnership shall be entitled to recover from the withdrawn General Partner
damages for breach of this Agreement and offset such damages against the amount,
if any, otherwise distributable to it in addition to any remedies otherwise
available under applicable law. Such reduction of the General Partner's
interest is not a penalty.
Section 6.04. Removal of General Partner. In the event of the removal of
the General Partner pursuant to Section 10.02B, the removed General Partner's
Interest as General Partner in the Partnership shall be reduced by fifty percent
(50%) and shall become a limited partner interest but without any voting or
consensual rights which other Limited Partners may have, except the right to
continue the business of the Partnership and to appoint one or more general
partners as provided in Section 6.05A. Such reduction of the General Partner's
interest is not a penalty. In the event of the removal of the General Partner
pursuant to Section 10.02B, then the Partnership shall have the right (but not
the obligation) to purchase the removed General Partner's interest in the
Partnership (determined after giving effect to the preceding sentence) within 60
days of such removal (or if later, upon the determination of the "fair market
value" of such interest as set forth below) at the "fair market value" of such
interest. For purposes of the preceding sentence, the "fair market value" of
the removed General Partner's Interest in the Partnership shall be the amount
agreed to between the Partnership and the removed General Partner or, in the
absence of such an agreement, the amount determined by an independent appraiser
selected by the Partnership and the removed General Partner (provided that, if
the parties cannot agree upon such an appraiser, then each party shall select an
appraiser and the two appraisers selected by the parties shall select a third
appraiser, with the "fair market value" of the removed General Partner's
Interest to be determined by the average of the amounts determined by the three
appraisers, disregarding entirely any appraisal that differs by more than twenty
percent (20%) from the amount determined by the appraiser whose determination is
between the highest and lowest of the amounts determined by the three
appraisers). Payment of the purchase price for the removed General Partner's
Interest may be made, at the election of the Partnership, in cash or by a
promissory note bearing interest at the Prime Rate (but not higher than the
maximum lawful rate) and providing for payment of principal in five equal annual
installments. The expense of all appraisals pursuant to this Section 6.04 shall
be borne equally by the Partnership and the removed General Partner.
Section 6.05. Continuation and Reconstitution.
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A. Upon the occurrence of an event described in Section 8.01A(ii), (iii),
or (iv), any remaining General Partner and any substitute General Partner shall
be obligated to continue the business of the Partnership without dissolution.
In the event that, upon the occurrence of such an event, there is no remaining
General Partner or substitute General Partner or the sole remaining or
substitute General Partner fails to continue the business of the Partnership in
breach of this Agreement, then the Partnership shall be dissolved and its
affairs shall be wound up unless, within 90 days after the occurrence of such
event, all Partners agree in writing to continue the business of the Partnership
and to the appointment, effective as of the date of such event, of one or more
additional general partners.
B. If, upon the occurrence of an event described in Section 8.01A(ii),
(iii), or (iv) at a time when there is no remaining or substitute General
Partner or the sole remaining or substitute General Partner fails to continue
the business of the Partnership in breach of this Agreement, the Partnership is
not continued in accordance with Section 6.05A, then, within an additional 90
days after the period referred to above, the Limited Partners, by Consent of the
Limited Partners, may elect to reconstitute the Partnership and continue its
business on the same terms and conditions set forth in this Agreement by forming
a new limited partnership on terms identical to those set forth in this
Agreement (except to the extent that such terms are amended by Consent of the
Limited Partners in order to reflect the interests, allocations, fees, benefits,
rights, duties, and obligations of the successor general partner) and having as
a general partner a Person approved by a Consent of the Limited Partners.
Except as amended by Consent of the Limited Partners as aforesaid, the successor
general partner shall have all of the rights, duties, and obligations of the
former General Partner and shall have a 1% interest in the Net Profits, Net
Losses, Gains, Losses, Cash Available for Distribution, Capital Receipts, and
other allocations and distributions. Upon any such Consent of the Limited
Partners, all Partners shall be bound thereby and shall be deemed to have
approved thereof. Unless such an election is made within 180 days after the
occurrence of an event described in such Section, the Partnership shall continue
only activities necessary to wind up its affairs. If such an election is so
made within 180 days after the occurrence of such an event, then:
(i) the reconstituted Partnership shall continue until the end of the
term set forth in Section 2.04 unless earlier dissolved in accordance with
the terms of this Agreement;
(ii) if the successor general partner is not the former General
Partner, then, subject to Section 6.04, the interest of the former General
Partner shall be treated thenceforth as a limited partner interest; and
(iii) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into a new partnership
agreement and certificate of limited partnership, and the successor general
partner may for this purpose exercise the powers of attorney granted the
General Partner pursuant to this Agreement;
provided that the right of the Limited Partners, by Consent of the Limited
Partners, to approve a successor general partner and to reconstitute and to
continue the business of the Partnership, as provided in this Section 6.05B,
shall be void ab initio if prior to or within 15 days after such vote either:
(A) the Partnership shall have received an opinion of counsel, satisfactory to
the Limited Partners as provided in Section 10.02C, that such action may not be
effected without adversely affecting the liability of the Limited Partners under
the Act or a court having jurisdiction over the
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matter shall have entered a judgment subject to no further appeal to such
effect; or (B) the Partnership shall have received an opinion of counsel,
satisfactory to the Limited Partners as provided in Section 10.02C, that such
action may not be effected without changing the Partnership's status as a
partnership for Federal income tax purposes, or a court having jurisdiction over
the matter shall have entered a judgment subject to no further appeal to such
effect or the IRS shall have issued a ruling to such effect.
ARTICLE SEVEN
ASSIGNABILITY OF UNITS
Section 7.01. Restrictions on Assignments. After the admission to the
Partnership of the Limited Partners, a Limited Partner shall have the right to
assign any Interest, subject to the following limitations:
A. No assignment of any Interest may be made other than on the first day
of a Fiscal Quarter; provided, however, that this restriction on the timing of
assignment shall not apply to (i) any transfer of Units by Limited Partners to
MHP II Acquisition Corp. pursuant to MHP II Acquisition Corp.'s Offer to
Purchase for Cash All Outstanding Units of Limited Partnership Interest, dated
April 18, 1996 or (ii) any subsequent assignment of any Units by MHP II
Acquisition Corp.
B. The General Partner may prohibit any assignment of an Interest in the
Partnership if, in the opinion of legal counsel to the Partnership, such
assignment would require filing of a registration statement under the Securities
Act of 1933, as amended, or would otherwise violate any Federal or state
securities or Blue Sky laws (including any investment suitability standards) or
regulations applicable to the Partnership or the Units. With respect to any
proposed assignment within one year of the admission of any Limited Partner
whose Unit is to be transferred, the General Partner will require an opinion
from counsel of the assignee of the Interest to the effect that no such filing
would be required and that no such violation would occur as a result of such
assignment.
C. No purported assignment by a Limited Partner of any Unit, after which
the assignor or the assignee would hold a fraction of a Unit (other than one-
half of a Unit), will be permitted or recognized.
D. No transfer or assignment on any date of any Interest may be made to
any Person if (i) in the opinion of legal counsel to the Partnership, it would
result in the Partnership being treated as an association taxable as a
corporation, or (ii) such transfer 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.
E. No assignment of any Interest may be made to any Person unless such
Person agrees in writing that such Person will not, directly or indirectly,
create for the Units, or facilitate the trading of Units on, a "secondary
market" (or the substantial equivalent thereof), within the meaning of section
7704 of the Code.
F. No assignment of any Interest may be made if, in the opinion of legal
counsel to the Partnership, it would result in the Partnership or the Santa
Clara Partnership not being able to obtain or continue in effect any license
permitting the service or sale of alcoholic beverages in a Hotel.
G. No assignment of any Interest may be made to any Person who is not a
"United States person" within the meaning of section 7701(a)(30) of the Code.
H. No assignment of any Interest may be made to any Person generally
exempt from Federal income tax under section 501 of the Code or otherwise.
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No purported transfer or assignment shall be of any effect unless all of
the foregoing conditions have been satisfied. The General Partner is authorized
to impose any other limitations or restrictions on the assignment of Interests
to the extent that it, in the exercise of its reasonable discretion and based
upon the advice of counsel to the Partnership, determines such further
limitations or restrictions are necessary or advisable to protect the
Partnership from being considered a "publicly traded partnership" within the
meaning of section 7704 of the Code. The General Partner shall, from time to
time, review the limitations and restrictions on the assignment of Interests set
forth in Section 7.01D and Section 7.01E or imposed pursuant to the preceding
sentence and the Federal income tax law, regulations, and rulings applicable
thereto, and shall eliminate or modify any such limitation or restriction to
make it less restrictive on assignment of Interests if the Partnership shall
have received an opinion of counsel that such elimination or modification may be
made without causing the Partnership to be considered either a "publicly traded
partnership," within the meaning of section 7704 of the Code, or an association
taxable as a corporation under the applicable federal income tax laws.
Section 7.02. Assignees and Substituted Limited Partners.
A. If a Limited Partner dies, the executor, administrator or trustee, or
if a Limited Partner is adjudicated incompetent or insane, the committee,
guardian or conservator, or, if a Limited Partner becomes bankrupt, the trustee
or receiver of the estate, shall have all the rights of a Limited Partner for
the purpose of settling or managing the estate and such power as the decedent or
incompetent possessed to assign all or any part of the Units and to join with
the assignee thereof in satisfying conditions precedent to such assignee
becoming a Substituted Limited Partner. The death, dissolution, adjudication of
incompetence or bankruptcy of a Limited Partner in and of itself shall not
dissolve the Partnership.
B. Except for an assignment permitted by the proviso to Section 7.01A, the
Partnership will not recognize for any purpose any assignment of any Interest
unless there shall have been filed with the Partnership not less than 15 days
prior to the first day of the next Accounting Period commencing following such
filing, a duly executed and acknowledged counterpart of the instrument making
such assignment signed by both the assignor and the assignee and such instrument
evidences the written acceptance by the assignee of all of the terms and
provisions of this Agreement and represents that such assignment was made in
accordance with all applicable laws and regulations (including investment
suitability requirements). Irrespective of whether or not any successor to a
Limited Partner or an assignee of a Limited Partner's Interest hereunder
provides the aforesaid instruments, any such Person shall be bound by the terms
and provisions of this Agreement. As a condition to any voluntary assignment of
an Interest, the General Partner may require that the assignor or the assignee
of the Interest or their representatives provide to the Partnership information
sufficient to permit counsel to the Partnership to determine that the assignment
is not prohibited by this Article Seven.
C. Subject to the provisions of this Section 7.02C, no assignee of a
Limited Partner's Interest shall be entitled to become a Substituted Limited
Partner unless: (i) the General Partner shall have given its written consent
thereto, which consent may be withheld in its absolute discretion; (ii) the
transferring Limited Partner and the assignee shall have executed and
acknowledged such other instrument or instruments as the General Partner may
deem necessary or desirable to effect such admission; (iii) the assignee shall
have accepted, adopted and approved in writing all of the terms and provisions
of this Agreement, as the same may have been amended, and executed a power of
attorney similar to the power of attorney granted in this Agreement; and (iv)
the assignee shall pay or obligate itself to pay, as the General Partner may
require, all reasonable expenses incurred in connection with his admission as a
Substituted Limited Partner. An assignee of a Limited Partner's Interest shall
become a Substituted Limited Partner only when the General Partner has reflected
the admission of such Person as a Limited Partner in the books and records of
the Partnership. The General Partner shall take action once each Fiscal Quarter
to reflect in the books and records all
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Persons, if any, admitted to the Partnership as Substituted Limited Partners
since the last such action.
D. Limited Partners who shall have assigned all of their Interests in
accordance with the provisions of this Article Seven shall cease to be Limited
Partners of the Partnership with respect to such Interests as of the date that
such assignment is given effect by the Partnership in accordance with the terms
of this Article Seven. A purported assignment of an Interest not in accordance
with the provisions of this Article Seven shall not be given effect for any
purpose.
E. Any Person who is the assignee of the Interest of a Limited Partner in
accordance with the terms of this Article Seven, and who has satisfied the
requirements of Sections 7.01, 7.02B, and 7.02C shall become a Substituted
Limited Partner when the General Partner has accepted such Person as a Limited
Partner and the books and records of the Partnership reflect such Person as
admitted to the Partnership as a Limited Partner and when such Person shall have
satisfied the conditions of Section 11.02A and shall have paid all reasonable
legal fees and filing costs in connection with the substitution as a Limited
Partner; provided, however, that the General Partner's Consent to the
substitution of any assignee of an Interest as a Substituted Limited Partner may
be granted or withheld in its sole discretion.
F. Any Person who is the assignee of any of the Interest of a Limited
Partner in accordance with the terms of this Article Seven, but who does not
become a Substituted Limited Partner shall be entitled to all the rights of an
assignee of a limited partner interest under the Act, including the right to
receive distributions from the Partnership and the share of Net Profits, Gain,
Net Losses, Loss, and any specially allocated items attributable to the
Partnership Interests assigned to such Person, but shall not be deemed to be a
holder of Units for any other purpose under this Agreement. In the event any
such Person desires to make a further assignment of any such Interests, such
Person shall be subject to all the provisions of this Article Seven to the same
extent and in the same manner as any Limited Partner desiring to make an
assignment of the Interests.
G. Any Limited Partner who assigns or exchanges all or any portion of a
Unit must notify the Partnership of such assignment or exchange. Such
notification must be in writing and must be within fifteen days of the exchange.
Such notification must include the names and addresses of the transferor and
transferee, the taxpayer identification numbers of the transferor and the
transferee, the date of the assignment or exchange, and any other information
required by the General Partner.
H. There shall be no restrictions on the assignments of Interests except
as provided in Article Six or this Article Seven.
ARTICLE EIGHT
DISSOLUTION AND LIQUIDATION
OF THE PARTNERSHIP
Section 8.01. Events Causing Dissolution.
A. The Partnership shall be dissolved and its affairs wound up on the
first to occur of the following events:
(i) the bankruptcy of the Partnership; or
(ii) the withdrawal (whether or not in accordance with this
Agreement) or removal of the General Partner, unless there is, at the time
of the occurrence of such event, a remaining or substitute General Partner
that continues the business of the
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Partnership pursuant to its obligation under Section 6.05A or the
Partnership is continued pursuant to Section 6.05A; or
(iii) the bankruptcy of the General Partner, unless there is, at
the time of the occurrence of such event, a remaining or substitute General
Partner that continues the business of the Partnership pursuant to its
obligation under Section 6.05A or the Partnership is continued pursuant to
Section 6.05A; or
(iv) the occurrence of any event listed in sections 17-402 (6),
(7), (8), (9), or (10) of the Act where the General Partner shall cease to
be a general partner unless there is, at the time of the occurrence of such
event, a remaining or substitute General Partner that continues the
business of the Partnership pursuant to its obligation under Section 6.05A
or the Partnership is continued pursuant to Section 6.05A; or
(v) the sale or other disposition of all or substantially all of
the property of the Partnership; or
(vi) action of the Limited Partners pursuant to Section
10.02B(ii); or
(vii) the expiration of the term of the Partnership; or
(viii) any event that makes it unlawful for the business of the
Partnership to be carried on or for the Partners to carry it on in a
limited partnership.
Dissolution of the Partnership shall be effective on the day on which the event
occurs giving rise to dissolution. The Partnership shall not terminate until
the assets of the Partnership shall have been liquidated as provided in Section
8.02 and all proceeds therefrom have been collected and distributed.
Notwithstanding the dissolution of the Partnership, prior to the termination of
the Partnership, as aforesaid, the business of the Partnership and the affairs
of the Partners as such, shall continue to be governed by this Agreement.
B. Except as otherwise provided in Section 8.02D, the Partners shall look
solely to the assets of the Partnership for all distributions with respect to
the Partnership and their Capital Contribution thereto, and shall have no
recourse therefor (upon dissolution or otherwise) against the General Partner or
any other Limited Partner.
Section 8.02. Liquidation.
A. Upon dissolution of the Partnership and the failure to reconstitute the
Partnership as provided in Section 6.05B, the General Partner (or if the
dissolution is caused by the withdrawal, retirement, bankruptcy, dissolution, or
removal of the General Partner, then the Person designated as "liquidating
trustee" by the Consent of the Limited Partners, which "liquidating trustee"
shall have all of the powers of the General Partner under this Agreement for
purposes of liquidating and winding up the affairs of the Partnership) (the term
"General Partner" as used in this Section 8.02 shall be deemed to mean the
"liquidating trustee" where appropriate) shall liquidate the assets of the
Partnership and the proceeds of such liquidation shall be applied and
distributed in the following order of priority:
(i) to the payment of the expenses of the liquidation;
(ii) in satisfaction of Partnership Debt and all other liabilities of
the Partnership (whether by payment or making reasonable provision for
payment thereof) owing to creditors of the Partnership other than Partners
who are creditors;
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(iii) in satisfaction of any liabilities of the Partnership (whether
by payment or making reasonable provision for payment thereof) owing to
Partners who are creditors of the Partnership; and
(iv) to the General Partner and to the Limited Partners, in proportion
to the net balances in their respective Capital Accounts (after the
adjustments required pursuant to Article Four of this Agreement in respect
of Net Profits, Net Losses, Gains, and Losses have been reflected therein),
to reduce any net balances then existing in the Capital Accounts of the
Partners.
B. Notwithstanding the foregoing, in the event the General Partner shall
determine that an immediate sale of all or part of the Partnership's assets
would cause undue loss to the Partners, the General Partner, in order to avoid
such loss, after having given Notification to all the Limited Partners, to the
extent not then prohibited by the limited partnership act of any jurisdiction in
which the Partnership is then formed or qualified and applicable in the
circumstances, may defer liquidation of and withhold from distribution for a
reasonable time (not to exceed three years) any assets of the Partnership except
those necessary to satisfy the Partnership's debts and obligations.
C. The General Partner shall cause the liquidation and distribution of all
the Partnership's assets and shall cause the cancellation of the Partnership's
certificate of limited partnership upon completion of winding up the business of
the Partnership.
D. Upon the dissolution and termination of the Partnership or a
liquidation of the Interest of the General Partner, if, after giving effect to
Sections 8.02A through 8.02C hereof for the Fiscal Year in which such
dissolution or liquidation occurs, there shall be a deficit in the Capital
Account of the General Partner, while there is a positive balance in the Capital
Account of any other Partner, the General Partner shall contribute to the
Partnership (in cash) the amount of such deficit, which thereupon shall be
distributed by the Partnership pro rata to any Partners possessing positive
balances in their respective Capital Accounts. Such contribution by the General
Partner is to be made to the Partnership not later than the close of the taxable
year in which the dissolution or liquidation (as defined in section
1.704.1(b)(2)(ii)(g) of the Treasury regulations) occurs.
ARTICLE NINE
BOOKS AND RECORDS, ACCOUNTING,
REPORTS, TAX ELECTIONS, ETC.
Section 9.01. Books and Records.
A. The books and records of the Partnership shall be maintained by the
General Partner in accordance with applicable law at the principal office of the
Partnership and shall be available for examination at such location by any
Partner or such Partner's duly authorized representatives at any and all
reasonable times for any purpose reasonably related to the Partner's Interest in
the Partnership.
B. Each Limited Partner, and each such Limited Partner's duly authorized
representative, shall have the right, at reasonable times and at such Limited
Partner's own expense, upon prior written notice to the General Partner (which
notice shall be given a reasonable length of time in advance in light of the
scope of such request, but which need not be given more than five business days
in advance), and only for any purpose reasonably related to the Partner's
Interest in the Partnership, (i) to have true and full information regarding the
status of the business and financial condition of the Partnership as is
possessed by the General Partner; (ii) to inspect and copy the books
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of the Partnership and other reasonably available records and information as is
possessed by the General Partner concerning the operation of the Partnership,
including copies of the Federal, state, and local income tax returns of the
Partnership; (iii) to have a current list of the name and last known business,
residence, or mailing address of each Partner mailed to such Limited Partner or
representatives; (iv) to have true and full information regarding the amount of
cash and a description and statement of the value of any property or services
contributed to the Partnership as of the date upon which each Partner became a
Partner; and (v) to have a copy of this Agreement, the Certificate of Limited
Partnership and all amendments or certificates of amendment, as the case may be,
thereto, together with copies of any powers of attorney pursuant to which any
such amendment or certificate of amendment has been executed.
Section 9.02. Accounting and Fiscal Year. The books of the Partnership
will be kept in accordance with generally accepted accounting principles. The
Partnership will report its operations for tax purposes on the accrual method.
The Fiscal Year of the Partnership shall end December 31 in each year.
Section 9.03. Bank Accounts and Investments. The bank accounts of the
Partnership shall be maintained in such banking institutions as the General
Partner shall determine, and withdrawals shall be made only in the regular
course of Partnership business on such signature or signatures as the General
Partner may determine. All deposits and other funds not needed in the operation
of the business or not yet invested may be invested in U.S. government
securities, securities issued or guaranteed by U.S. government agencies,
securities issued or guaranteed by states or municipalities, certificates of
deposit and time or demand deposits in commercial banks, bankers' acceptances,
savings and loan association deposits or deposits in members of the Federal Home
Loan Bank System. Except as expressly permitted pursuant to the Management
Agreement, the funds of the Partnership shall not be commingled with the funds
of any other Person.
Section 9.04. Reports. The General Partner shall deliver to each Partner
the following:
A. As soon as practicable but in no event later than 75 days after the end
of each Fiscal Year of the Partnership such information as shall be necessary
for the preparation by such Partner of a Federal income tax return, and state
income or other tax returns with regard to the jurisdictions in which the Hotels
are located. Such information shall include computation of the distributions to
such Partner and the allocation to such Partner of the Net Profits or Net
Losses, as the case may be, and any Gain or Loss, as the case may be, recognized
by or allocated to the Partnership on the sale of a Hotel or other Partnership
properties during such Fiscal Year; and
B. Within 120 days after the end of each Fiscal Year of the Partnership, a
report prepared by the General Partner which report shall set forth the
following:
(i) a statement of assets, liabilities and Partners' capital, a
statement of income and expenses on an accrual basis and a statement of
cash flow and a statement of changes in Partners' capital, prepared by the
General Partner on the accrual basis of accounting, in accordance with
generally accepted accounting principles, which statements are to be
audited and reported on by a firm of independent public accountants
selected by the General Partner, setting forth its opinion as to the items
in this clause (i);
(ii) the balances in the Capital Accounts of the Limited Partners in
the aggregate and of the General Partner and the identity and amount of all
sources of cash distributed or to be distributed to the Partners in respect
of such Fiscal Year;
(iii) a report (which need not be audited) summarizing the fees,
commissions, compensation and other remuneration and reimbursed expenses
paid by the Partnership for
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such Fiscal Year to the General Partner or any Affiliate of the General
Partner and the services performed for the Partnership in connection
therewith;
(iv) a report of the activities of the Partnership for such Fiscal
Year; and
(v) a budget (which need not be audited) setting forth the expected
Net Profits or Net Losses per Unit, for the current Fiscal Year.
C. Within 75 days after the end of each of the first three Fiscal Quarters
of each Fiscal Year of the Partnership, the General Partner shall send to each
Person who was a Limited Partner at any time during the Fiscal Quarter then
ended (i) a balance sheet (which need not be audited); (ii) a profit and loss
statement (which need not be audited) (all of the foregoing statements to be
prepared in accordance with generally accepted accounting principles); and (iii)
any other pertinent information regarding the Partnership and its activities
during the period covered by the report.
D. Concurrent with the report sent pursuant to Section 9.04C for the third
Fiscal Quarter of each Fiscal Year, the Partners will be furnished an estimate
of Net Profits or Net Losses per Unit for such Fiscal Year.
E. The General Partner may prepare and deliver to the Limited Partners
from time to time in its sole discretion during each Fiscal Year, in connection
with cash distributions or otherwise, unaudited statements showing the results
of operations of the Partnership to the date of such statement.
F. The General Partner shall prepare and file such registration
statements, annual reports, quarterly reports, current reports, proxy statements
and other documents, if any, as may be required under the Securities Exchange
Act of 1934 and the rules and regulations of the Securities and Exchange
Commission thereunder.
Section 9.05. Tax Depreciation and Elections.
A. With respect to all depreciable assets of the Partnership, the General
Partner may, in its sole discretion, elect to use such depreciation method for
Federal tax purposes as it deems appropriate and in the best interest of the
Partners generally.
B. The General Partner shall be permitted in any Fiscal Year to make an
election under section 754 of the Code and such other tax elections under
Federal, state or local law as it may from time to time deem necessary or
appropriate.
Section 9.06. Interim Closing of the Books. There shall be an interim
closing of the books of account of the Partnership (i) at the date of the
admission to the Partnership of Original Limited Partners, (ii) at any time a
taxable year of the Partnership ends pursuant to the Code and (iii) at such
other times as the General Partner shall determine are required by good
accounting practice or may be appropriate under the circumstances.
Section 9.07. Information from Limited Partners. The Limited Partners
shall, within 30 days of a written request by the General Partner, furnish to
the General Partner such information or execute such forms or certificates as
the General Partner shall reasonably require for the purpose of complying with
Federal, state or other tax requirements.
ARTICLE TEN
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MEETINGS AND VOTING RIGHTS
OF LIMITED PARTNERS
Section 10.01. Meetings.
A. Meetings of the Limited Partners for any purpose may be called by the
General Partner and shall be called by the General Partner upon receipt of a
request in writing signed by holders of 10% or more of the Units held by Limited
Partners. Such request and any notification from the General Partner shall
state the purpose of the proposed meeting and the matters proposed to be acted
upon thereat. If the meeting is called pursuant to such request, notification
of any such meeting shall be sent to the Limited Partners by certified mail
within ten business days after receipt of such a request and any such meeting
shall be held on a date not less than 15 nor more than 60 days after receipt of
such request. Any meeting may be held at the principal office of the
Partnership or at such other location within the United States as the General
Partner may deem appropriate or desirable. In addition, the General Partner
may, and, upon receipt of a request in writing signed by holders of 25% or more
of the Units held by Limited Partners, the General Partner shall submit any
matter (upon which the Limited Partners are entitled to act by Consent of the
Limited Partners) to the Limited Partners for a vote by written Consent without
a meeting. For purposes of determining whether the requisite approval has been
obtained on any matter upon which the Limited Partners are entitled to act by
written Consent without a meeting, a majority of the Units held by Limited
Partners (which, in the case of an Interested Transaction, must include a
majority of the Units held by Limited Partners other than the General Partner
and its Affiliates) shall be considered to constitute the Limited Partners
"present and entitled to vote on the matter" for purposes of the definition of
"Consent of the Limited Partners."
B. Notification of any such meeting shall be given not less than 10 days
nor more than 60 days before the date of the meeting, to the Limited Partners at
their record addresses, or at such other address which they may have furnished
in writing to the General Partner. Such Notification shall be in writing, and
shall state the place, date, hour and purpose of the meeting, and shall indicate
that it is being issued at or by the direction of the Partner or Partners
calling the meeting. If a meeting is adjourned to another time or place, and if
any announcement of the adjournment of time or place is made at the meeting, it
shall not be necessary to give Notification of the adjourned meeting. The
presence in person or by proxy of holders of a majority of the Units held by
Limited Partners (which, in the case of an Interested Transaction, must include
a majority of the Units held by Limited Partners other than the General Partner
and its Affiliates) shall constitute a quorum at all meetings of the Limited
Partners (which shall, for purposes of the definition of "Consent of the Limited
Partners," be considered to constitute the Limited Partners "present and
entitled to vote on the matter"); provided, however, that if there be no such
quorum, holders of a majority of the Units held by Limited Partners so present
or so represented may adjourn the meeting from time to time without further
notice, until a quorum shall have been obtained. No Notification of the time,
place or purpose of any meeting of Limited Partners need be given to any Limited
Partner who attends in person or is represented by proxy (except when a Limited
Partner attends a meeting for the express purpose of disapproving at the
beginning of the meeting the transaction of any business on the ground that the
meeting is not lawfully called or convened), or to any Limited Partner entitled
to such notice who, in a writing executed and filed with the records of the
meeting, either before or after the time thereof, waives such Notification.
C. For the purpose of determining the Limited Partners entitled to vote at
any meeting of the Partnership or any adjournment thereof, or entitled to
Consent to any matter upon which the Limited Partners are entitled to act by
written Consent without a meeting, the General Partner may fix, in advance, a
date as the record date for any such determination of Limited Partners. Such
date
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shall be not more than 60 days nor less than 10 days before any such meeting or
any such solicitation of written Consents without a meeting.
D. The Limited Partners may authorize any Person to act for them by proxy
in all matters in which a Limited Partner is entitled to participate, whether by
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Limited Partner or the Partner's attorney-in-fact.
No proxy shall be valid beyond the period permitted by law. Every proxy shall
be revocable at the pleasure of the Limited Partner executing it.
E. At each meeting of Limited Partners, the General Partner shall appoint
such officers and adopt such rules for the conduct of such meeting as the
General Partner shall deem appropriate.
F. As and to the extent that the Securities Exchange Act of 1934 is
applicable to the procedural rules governing any meeting of Limited Partners
(including any proxies or proxy statement related thereto), the provisions of
such act shall take precedence over any provision of this Section 10.01 which
may be inconsistent therewith.
Section 10.02. Special Voting Rights of Limited Partners.
A. If at any time any agreement (including the Management Agreements, if
the Manager is an Affiliate of the General Partner), pursuant to which operating
management of any property of the Partnership (or the Santa Clara Partnership)
is vested in the General Partner or an Affiliate of the General Partner,
provides that the Partnership (or the Santa Clara Partnership) has a right to
terminate such agreement as a result of the failure of the operation of such
property to attain any economic objective or as a result of a default of the
General Partner or such Affiliate thereunder, the Limited Partners, without the
Consent of the General Partner, may by an amendment to this Agreement, which
amendment shall require the Consent of the Limited Partners, require the
Partnership (or the Santa Clara Partnership) to terminate such agreement. If
the Partnership (or the Santa Clara Partnership) terminates any such agreement,
the duties previously performed by the General Partner or its Affiliate under
the agreement may only thereafter be performed by the General Partner or any of
its Affiliates if the Partnership Agreement is thereafter amended with the
Consent of the Limited Partners, to permit such performance.
B. To the extent not inconsistent with the Act or other applicable law, in
the event that the General Partner (i) has committed a material breach of its
obligations under Section 5.03 and not, within 30 days thereafter, remedied such
breach, (ii) has breached the restrictions under Section 5.02 (provided that in
case of Section 5.02B(x), such breach must be material and not have been
remedied within 30 days thereafter), (iii) has committed any act of fraud, (iv)
has committed and not, within 30 days, remedied any act of bad faith, gross
negligence or breach of fiduciary duty of loyalty, or (v) has committed a breach
of any other provision of this Agreement and not remedied the same within 30
days after receipt of notice thereof, in carrying out its duties as the general
partner, the Limited Partners may, by Consent of the Limited Partners without
the Consent of the General Partner, vote to:
(i) amend this Agreement; provided, however, that (a) the allocable
percentage interests of the Partners in the allocations set forth in
Article Four may not be altered, and no new material obligation may be
imposed on any Partner without such Partner's approval, and (b) the
provisions of Section 2.03 may not be altered without the consent of the
General Partner;
(ii) dissolve the Partnership;
(iii) remove the General Partner, such removal to be effective upon
the date set forth in the resolution adopted by such Consent of the Limited
Partners, provided that any
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such action for removal must also provide for the appointment of a
substitute General Partner (such substitute General Partner to be admitted
as a general partner immediately prior to the effective date of removal of
the General Partner to be removed and such substitute, together with any
then remaining general partners, to continue the business of the
Partnership without dissolution); provided further, however, that if prior
to or within 15 days after such vote either: (A) the Partnership shall have
received an opinion of counsel, satisfactory to the Limited Partners as
provided in Section 10.02C, that such action may not be effected without
adversely affecting the liability of the Limited Partners under the Act or
a court having jurisdiction over the matter shall have entered a judgment
subject to no further appeal to such effect; or (B) the Partnership shall
have received an opinion of counsel, satisfactory to the Limited Partners
as provided in Section 10.02C, that such action may not be effected without
changing the Partnership's status as a partnership for Federal income tax
purposes, or a court having jurisdiction over the matter shall have entered
a judgment subject to no further appeal to such effect, or the IRS shall
have issued a ruling to such effect, then such vote shall be void ab
initio; or
(iv) elect a substitute General Partner as provided in Section 6.01
or reconstitute and continue the Partnership as provided in Section 6.05.
C. For the purposes of Sections 6.05B and 10.02B(iii), counsel shall be
deemed to be satisfactory to the Limited Partners if (i) such counsel is not
counsel for the General Partner or any Affiliate of the General Partner and (ii)
either (a) such counsel shall have been proposed by the General Partner and
affirmatively approved within 45 days by Consent of the Limited Partners, (b)
such counsel shall have been proposed for such purposes by the holders of 10% or
more of the Units held by Limited Partners, or (c) Consent of the Limited
Partners to any action pursuant to Sections 6.05B or 10.02B shall have been
obtained without the proposal or selection of any counsel. The existence of an
opinion of counsel, court judgment, or IRS ruling to the effect described in
Section 6.05B or 10.02B with respect to a particular contemplated action shall
not affect the rights of Limited Partners to vote on other future actions or the
existence of such rights.
ARTICLE ELEVEN
MISCELLANEOUS PROVISIONS
Section 11.01. Appointment of General Partner as Attorney-in-Fact.
A. Each Limited Partner, including each Substituted Limited Partner,
irrevocably constitutes and appoints the General Partner and the President, any
Vice President, Secretary, Treasurer, Assistant Secretary and Assistant
Treasurer of any corporate General Partner as his true and lawful attorney-in-
fact with full power and authority in such Limited Partner's name, place and
stead to execute, acknowledge, deliver, swear to, file and record at the
appropriate public offices such documents as may be necessary or appropriate to
carry out the provisions of this Agreement, including but not limited to:
(i) all counterparts of this Agreement, and any amendment or
restatement thereof, including all certificates and instruments, which the
General Partner deems appropriate to form, qualify or continue the
Partnership as a limited partnership (or a partnership in which the Limited
Partners will have limited liability comparable to that provided by the
Act) in the jurisdictions in which the Partnership may conduct business or
in which such formation, qualification or continuation is, in the opinion
of the General Partner, necessary or desirable to protect the limited
liability of the Limited Partners;
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(ii) all amendments to this Agreement adopted in accordance with the
terms hereof and all instruments which the General Partner deems
appropriate to reflect a change or modification of the Agreement in
accordance with the terms hereof;
(iii) all documents or instruments which the General Partner deems
appropriate to reflect the admission of a Limited Partner (including any
Substituted Limited Partner), in accordance with this Agreement, the
dissolution of the Partnership (including a certificate of cancellation),
sales or transfers of Partnership property, sales or transfers of
Partnership Interests, or the initial amount or increase or reduction in
amount of any Partner's Capital Contribution or reduction in any Partner's
Capital Account in accordance with the terms of this Agreement;
(iv) any instrument or document requested by the Partnership or any
purchaser of the Interest of a Defaulting Limited Partner under the
provisions of Section 3.05 of this Agreement;
(v) all documents, including but not limited to financing statements,
necessary or appropriate to perfect and continue the Partnership's security
interest in such Limited Partner's Interest; and
(vi) any instrument, certificate or document to implement the
provisions of Section 5.01C(vii).
B. The appointment by all Limited Partners of the General Partner and the
aforesaid officers of any corporate General Partner as attorney-in-fact shall be
deemed to be a power coupled with an interest, in recognition of the fact that
each of the Partners under this Agreement will be relying upon the power of the
General Partner to act as contemplated by this Agreement in any filing and other
action by it on behalf of the Partnership, and shall survive, and not be
affected by the subsequent bankruptcy, death, incapacity, disability,
adjudication of incompetence or insanity, or dissolution of any Person hereby
giving such power and the transfer or assignment of all or any part of the Units
or Interest of such Person; provided, however, that in the event of the transfer
by a Limited Partner of all of such Limited Partner's Interest, the forgoing
power of attorney of a transferor Partner shall survive such transfer only until
such time as the transferee shall have been admitted to the Partnership as a
Substituted Limited Partner and all required documents and instruments shall
have been duly executed, filed and recorded to effect such substitution.
Section 11.02. Amendments.
A. Subject to the provisions of Section 7.02, each Limited Partner, each
Substituted Limited Partner and any successor General Partner, whether or not
such Person becomes a signatory hereof shall be deemed, solely by reason of
having become a Partner, to have adopted, and to have agreed to be bound by all
the provisions of this Agreement. Without limiting the forgoing, each Limited
Partner, Substituted Limited Partner and any successor General Partner shall
take any action requested by the General Partner (including, without Limitation,
executing this Agreement or such other instrument or instruments as the General
Partner shall determine) to reflect such Person's adoption of, and agreement to
be bound by all the provisions of, this Agreement.
B. In addition to the amendments otherwise authorized herein, amendments
may be made to this Agreement from time to time by the General Partner with the
Consent of the Limited Partners; provided, however, that without the Consent of
all Partners, this Agreement may not be amended so as to (i) convert the
Interest of a Limited Partner into a general partner's Interest; (ii) adversely
affect the liability of a Limited Partner; (iii) except for the General
Partner's right to assign up to 80% of its interest in allocations and
distributions, alter the Interest of a Partner in Net
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Profits, Net Losses, or Gain or Loss or distributions of Cash Available for
Distribution, Sale Proceeds, or Refinancing Proceeds or reduce the percentage of
Partners which is required to consent to any action hereunder; (iv) limit in any
manner the liability of the General Partner as provided in Section 3.09; (v)
permit the General Partner to take any action prohibited by Section 5.02A; (vi)
cause the Partnership to be taxed for Federal income tax purposes as an
association taxable as a corporation; or (vii) effect any amendment or
modification to this Section 11.02B.
C. If this Agreement shall be amended to reflect the withdrawal, removal,
or bankruptcy of the General Partner or any event described in section 17-
402(6), (7), (8), (9) or (10) of the Act where the General Partner shall cease
to be a general partner when the business of the Partnership is being continued,
such amendment shall be signed by the withdrawing General Partner (and the
General Partner hereby agrees to do so) and by the successor General Partner.
D. In making any amendments, there shall be prepared and filed for
recordation by the General Partner such documents and certificates as shall be
required to be prepared and filed, no such filing being required solely by
reason of this Agreement, under the Act and under the laws of the other
jurisdictions under the laws of which the Partnership is then formed or
qualified, not less frequently, in the case of a substitution of a Limited
Partner, than once each calendar quarter.
E. The General Partner may, without the Consent of the Limited Partners,
make any amendment to this Agreement (i) as is necessary to clarify the
provisions thereof so long as such amendment does not adversely affect the
rights of the Limited Partners under this Agreement; or (ii) is expressly
permitted by Section 5.01C(vii).
Section 11.03. General Partner Representations and Warranties. The
General Partner represents that, except to the extent expressly permitted by
Section 5.06B, the Partnership shall not incur the cost of any insurance which
insures any party against any liability as to which such party is prohibited
from being indemnified under this Agreement.
Section 11.04. Binding Provisions. The covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, the heirs, executors,
administrators, personal representatives, successors and assigns of the
respective parties hereto.
Section 11.05. Applicable Law. Notwithstanding the place where this
Agreement may be executed by any of the parties hereto, this Agreement, the
rights and obligations of the parties hereto, and any claims and disputes
relating thereto shall be subject to and governed by the Act and the other laws
of the State of Delaware as applied to agreements among Delaware residents to be
entered into and performed entirely within the State of Delaware, and such laws
shall govern all aspects of this Agreement, including, without limitation, the
limited partnership aspects of this Agreement.
Section 11.06. Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
Section 11.07. Separability of Provisions. Each provision of this
Agreement shall be considered separable and if, for any reason, any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid.
Section 11.08. Article and Section Titles. Article and section titles are
for descriptive purposes only and shall not control or alter the meaning of this
Agreement as set forth in the text.
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Section 11.09. Short Form Filings. The General Partner shall have
authority to sign any short-form Certificate of Limited Partnership or restated
or amended Certificate of Limited Partnership meeting the requirement of
applicable law which reflects this Agreement, as same may be amended.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
General Partner:
MARRIOTT MHP TWO CORPORATION
By:/s/ Bruce F. Stemerman
------------------------------
Bruce F. Stemerman
President
Limited Partners:
All Limited Partners now and hereafter admitted to the
Partnership as limited partners of the Partnership, pursuant
to powers of attorney now and hereafter executed in favor of
and delivered to the General Partner.
MARRIOTT MHP TWO CORPORATION, as
Attorney-in-Fact for all the Limited Partners
By:/s/ Bruce F. Stemerman
------------------------------
Bruce F. Stemerman
President
Solely for the purposes of the obligations contained in Section 5.03B and,
in the case of Host Marriott Corporation only, Section 3.05G(iv), the
undersigned have executed this Agreement as of the date first above written.
HOST MARRIOTT CORPORATION
By:/s Christoper G. Townsend
------------------------------
Name: Christoper G. Townsend
Title: Senior Vice President
MARRIOTT PROPERTIES, INC.
By:/s/ Christopher G. Townsend
------------------------------
Name: Christopher G. Townsend
Title: Vice President
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EXHIBIT A
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
$80,000 PER UNIT ,1989
_______ UNITS
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP
LIMITED PARTNER NOTE
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
MARRIOTT HOTEL PROPERTIES II LIMITED PARTNERSHIP, a Delaware limited partnership
(the "Partnership"), at its offices at 10400 Fernwood Road, Bethesda, Maryland
20817, or at such other place as the holder hereof from time to time shall
designate in writing to the undersigned, the principal sum of Eighty Thousand
Dollars ($80,000) per unit of limited partnership interest in the Partnership
("Unit") for the number of Units set forth above, without interest, in the
following installments per Unit at the following times:
Due Date Amount
-------- ------
June 1, 1989....... $17,500 per Unit for the number of Units set forth above
June 1, 1990....... $32,500 per Unit for the number of Units set forth above
June 1, 1991....... $30,000 per Unit for the number of Units set forth above
In the event the undersigned fails to pay in lawful money of the United
States of America any amount which he is required to pay to the Partnership on
or before the 20th day following the date when such amount is due and payable, a
late payment fee of five percent (5%) of the amount of the overdue payment shall
be added to the amount due. If default shall continue beyond 30 days after
notice thereof to the undersigned, in addition to the aforesaid late charge, the
unpaid portion of such installment shall bear interest from the due date of such
installment until paid in full at a rate equal to the lesser of sixteen percent
(16%) per annum or the maximum rate permitted by law. In no event may the late
charge, if deemed to be interest under law, when added to any interest exceed
the rate permitted by law. If the default continues beyond 30 days after notice
thereof to the undersigned, the general partner of the Partnership (the "General
Partner") shall have the option of accelerating the payment of the entire unpaid
balance of this note.
The undersigned shall have the right to prepay, in whole or in part, at any
time, the unpaid principal balance of this note.
This note may not be modified orally, and shall be governed by, enforced,
determined and construed in accordance with the laws of the State of Delaware.
The undersigned hereby consents to the non-exclusive jurisdiction and venue of
the courts of the State of Delaware and of the United States for the District of
Delaware in connection with the collection of this note or any matter relating
thereto and hereby irrevocably appoints the General Partner as its agent to
receive service of process in the State of Delaware in connection with any such
matter.
In the event of default, the undersigned agrees to pay the costs of
collection, including, without limitation, reasonable attorneys' fees and
disbursements and court costs.
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The undersigned waives presentment, demand for payment, notice of dishonor,
notice of protest, protest and all other notices or demands in connection with
the delivery, acceptance, performance, default, endorsement or guaranty of this
instrument, except as set forth in the Partnership Agreement. No failure or
delay by the holder of this note in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof or course of dealing preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
To secure repayments of the outstanding amounts hereunder, the undersigned
has, pursuant to Section 3.05E of the Amended and Restated Agreement of Limited
Partnership of the Partnership (the /"/Partnership Agreement"), granted to the
Partnership a security interest in all of the undersigned's right, title and
interest in the undersigned's limited partnership interest in the Partnership.
Reference is made to Sections 3.05E and 3.05F of the Partnership Agreement for
the rights of the Partnership (and any other holder of this note) with respect
to such security interest and the remedies available with respect thereto in the
event of a default under this note. In the event that this note is negotiated,
endorsed, assigned, transferred and/or pledged, all references to the
Partnership in this note and in the provisions of the Partnership Agreement
regarding the rights of the Partnership in connection with the security interest
granted thereunder shall apply to the one which receives the Partnership's
interest as if that one instead of the Partnership was named as the original
payee under this note.
If any part of this note is determined by any court to be invalid or
unenforceable, the remaining portions of this note will remain in effect. Any
ambiguity or uncertainty in the note will be construed in favor of the
Partnership.
The terms of this note shall be binding upon and inure to the benefit of
the respective successors and assigns of the Partnership and the undersigned.
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If Subscriber is an individual:
___________________________ ____________________________________
Print Name of Subscriber Signature of Subscriber
___________________________ ____________________________________
Print Name of Co-Subscriber Signature of Co-Subscriber (if any)
(if any)
If Subscriber is a corporation, partnership or trust:
____________________________________________________________________
Print Name of Subscribing Entity
By:________________________ __________________________________
Print Name of Authorized Signature of Authorized Officer,
Officer,
Partner or Trustee Partner or Trustee
_______________________________________
Print Title of Authorized Officer
___________________________ ____________________________________
Print Name of Co-Trustee Signature of Co-Trustee
(if required by trust instrument) (if required by trust instrument)
52
