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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
July 11, 1997
Date of Report (Date of Earliest Event Reported)
WINSTON HOTELS, INC.
(Exact Name of Registrant as Specified in Its Charter)
North Carolina O-23732 56-1872141
- ---------------------------- --------------------- ----------------
(State or Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
2209 Century Drive
Suite 300
Raleigh, North Carolina 27612
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(Address of Principal Executive Offices) (Zip Code)
(919) 510-6010
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(Registrant's Telephone Number, Including Area Code)
N/A
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
Second Amended and Restated Agreement of Limited Partnership
On July 11, 1997, the Second Amended and Restated Agreement of Limited
Partnership (the "Second Amended Agreement") of WINN Limited Partnership (the
"Partnership"), of which Winston Hotels, Inc. is the sole general partner and in
which it currently owns an approximate 87.9% interest, became effective. A copy
of the Second Amended Agreement is attached hereto as Exhibit 4.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(c) Exhibits. The following exhibit required by Item 601 of
Regulation S-K is listed below:
4.1- Second Amended and Restated Agreement of Limited Partnership
of WINN Limited Partnership
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SIGNATURE
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.
WINSTON HOTELS, INC.
(REGISTRANT)
Date: July 24, 1997 By: /s/ Robert W. Winston, III
----------------------------
Robert W. Winston, III
Chief Executive Officer
and President
Date: July 24, 1997 By: /s/ Philip R. Alfano
----------------------
Philip R. Alfano
Senior Vice President and
Chief Financial Officer
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EXHIBITS
<TABLE>
<CAPTION>
ITEM NUMBER DESCRIPTION
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<S> <C> <S>
4.1 - Second Amended and Restated Agreement of Limited Partnership
of WINN Limited Partnership
</TABLE>
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EXHIBIT 4.1
SECOND AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
WINN LIMITED PARTNERSHIP
JULY 11, 1997
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TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINED TERMS................................................................................................... 1
ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION................................................................. 7
2.01 Continuation.................................................................................. 7
2.02 Name, Office and Registered Agent............................................................. 7
2.03 Partners...................................................................................... 7
2.04 Term and Dissolution.......................................................................... 7
2.05 Filing of Certificate and Perfection of Limited Partnership................................... 8
ARTICLE III
BUSINESS OF THE PARTNERSHIP................................................................................. 8
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS.......................................................................... 9
4.01 Capital Contributions......................................................................... 9
4.02 Issuance of Additional Partnership Interests; Purchase of Shares by
General Partner............................................................................... 9
4.03 Capital Accounts.............................................................................. 11
4.04 Percentage Interests.......................................................................... 11
4.05 No Interest on Contributions.................................................................. 12
4.06 Return of Capital Contributions............................................................... 12
4.07 No Third Party Beneficiary.................................................................... 12
ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS........................................................................... 13
5.01 Allocation of Profit and Loss................................................................. 13
5.02 Distribution of Cash.......................................................................... 14
5.03 REIT Distribution Requirements................................................................ 15
5.04 No Right to Distributions in Kind............................................................. 15
5.05 Limitations on Return of Capital Contributions................................................ 15
5.06 Distributions Upon Liquidation................................................................ 16
5.07 Substantial Economic Effect................................................................... 16
ARTICLE VI
RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNER............................................................................... 17
6.01 Management of the Partnership................................................................. 17
6.02 Delegation of Authority....................................................................... 19
6.03 Indemnification and Exculpation of Indemnitees................................................ 20
</TABLE>
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<TABLE>
<S> <C> <C> <C>
6.04 Liability of the General Partner.............................................................. 21
6.05 Reimbursement of General Partner.............................................................. 22
6.06 Outside Activities............................................................................ 23
6.07 Employment or Retention of and Contracts With Affiliates...................................... 23
6.08 Loans to the Partnership...................................................................... 24
6.09 Authority on Behalf of Limited Partners....................................................... 24
ARTICLE VII
CHANGES IN GENERAL PARTNER.................................................................................. 24
7.01 Transfer of the General Partner's Partnership Interest........................................ 24
7.02 Admission of a Substitute or Successor General................................................ 26
7.03 Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General
Partner....................................................................................... 26
7.04 Removal of a General Partner.................................................................. 27
ARTICLE VIII
RIGHTS AND OBLIGATIONS
OF THE LIMITED PARTNERS..................................................................................... 28
8.01 Management of the Partnership................................................................. 28
8.02 Power of Attorney............................................................................. 28
8.03 Limitation on Liability of Limited Partners................................................... 29
8.04 Ownership by Limited Partner of Corporate General Partner or Affiliate........................ 29
8.05 Redemption Right.............................................................................. 29
8.06 Registration.................................................................................. 31
ARTICLE IX
TRANSFERS OF PARTNERSHIP INTERESTS.......................................................................... 35
9.01 Purchase for Investment....................................................................... 35
9.02 Restrictions on Transfer of Limited Partnership Interests..................................... 35
9.03 Admission of Substitute Limited Partner....................................................... 36
9.04 Rights of Assignees of Partnership Interests.................................................. 37
9.05 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited
Partner....................................................................................... 38
9.06 Joint Ownership of Interests.................................................................. 38
ARTICLE X
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS.................................................................. 39
10.01 Books and Records............................................................................... 39
10.02 Custody of Partnership Funds; Bank Accounts..................................................... 39
10.03 Fiscal and Taxable Year......................................................................... 39
10.04 Annual Tax Information and Report............................................................... 39
10.05 Tax Matters Partner; Tax Elections; Special Basis Adjustments................................... 39
10.06 Reports to Limited Partners..................................................................... 40
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XI
AMENDMENT OF AGREEMENT...................................................................................... 41
ARTICLE XII
GENERAL PROVISIONS.......................................................................................... 41
12.01 Notices......................................................................................... 41
12.02 Survival of Rights.............................................................................. 41
12.03 Additional Documents............................................................................ 42
12.04 Severability.................................................................................... 42
12.05 Entire Agreement................................................................................ 42
12.06 Pronouns and Plurals............................................................................ 42
12.07 Headings........................................................................................ 42
12.08 Counterparts.................................................................................... 42
12.09 Governing Law................................................................................... 42
</TABLE>
EXHIBITS
EXHIBIT A - Partners, Capital Contributions and Percentage Interests
EXHIBIT B - Notice of Exercise of Redemption Right
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SECOND AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
WINN LIMITED PARTNERSHIP
RECITALS
WINN Limited Partnership (the "Partnership") was formed as a limited
partnership under the laws of the State of North Carolina by a Certificate of
Limited Partnership filed with the Secretary of State of the State of North
Carolina on March 18, 1994. This Second Amended and Restated Agreement of
Limited Partnership of WINN Limited Partnership is entered into as of July 11
(the "Corporation" and in its capacity as the General Partner, the "General
Partner"), and the Limited Partners set forth on Exhibit A hereto, for the
purpose of amending and restating the First Amended and Restated Agreement of
Limited Partnership of WINN Limited Partnership, dated as of June 2, 1994 (the
"First Amended and Restated Agreement").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, of mutual covenants
between the parties hereto, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to amend the First Amended and Restated Agreement to read in its entirety
as follows:
ARTICLE I
DEFINED TERMS
The following defined terms used in this Agreement shall have the
meanings specified below:
"ACT" means the North Carolina Revised Uniform Limited Partnership Act,
as it may be amended from time to time.
"AFFILIATE" means, (i) any Person that, directly or indirectly,
controls or is controlled by or is under common control with such Person, (ii)
any other Person that owns, beneficially, directly or indirectly, 5 percent or
more of the outstanding capital stock, shares or equity interests of such
Person, or (iii) any officer, director, employee, partner or trustee of such
Person or any Person controlling, controlled by or under common control with
such Person (excluding trustees and persons serving in similar capacities who
are not otherwise an Affiliate of such Person). For the purposes of this
definition, "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the
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power to direct or cause the direction of the management and policies of such
Person, through the ownership of voting securities, partnership interests or
other equity interests.
"AGREEMENT" means this Second Amended and Restated Agreement of Limited
Partnership.
"ARTICLES" means the Articles of Incorporation of the General Partner
filed with the Secretary of State of the State of North Carolina, as amended or
restated from time to time.
"CAPITAL ACCOUNT" has the meaning provided in Section 4.03 hereof.
"CAPITAL CONTRIBUTION" means the total amount of capital initially
contributed or agreed to be contributed, as the context requires, to the
Partnership by each Partner pursuant to the terms of the Agreement. Any
reference to the Capital Contribution of a Partner shall include the Capital
Contribution made by a predecessor holder of the Partnership Interest of such
Partner. The paid-in Capital Contribution shall mean the cash amount or the
Agreed Value of other assets actually contributed by each Partner to the capital
of the Partnership.
"CASH AMOUNT" means an amount of cash per Partnership Unit equal to the
Value of the REIT Shares Amount on the date of receipt by the General Partner of
a Notice of Redemption.
"CERTIFICATE" means any instrument or document that is required under
the laws of the State of North Carolina, or any other jurisdiction in which the
Partnership conducts business, to be signed and sworn to by the Partners of the
Partnership (either by themselves or pursuant to the power-of-attorney granted
to the General Partner in Section 8.02 hereof) and filed for recording in the
appropriate public offices within the State of North Carolina or such other
jurisdiction to perfect or maintain the Partnership as a limited partnership, to
effect the admission, withdrawal, or substitution of any Partner of the
Partnership, or to protect the limited liability of the Limited Partners as
limited partners under the laws of the State of North Carolina or such other
jurisdiction.
"CODE" means the Internal Revenue Code of 1986, as amended, and as
hereafter amended from time to time. Reference to any particular provision of
the Code shall mean that provision in the Code at the date hereof and any
succeeding provision of the Code.
"COMMISSION" means the U.S. Securities and Exchange Commission.
"CONVERSION FACTOR" means one (1), provided that, in the event that the
General Partner (i) declares or pays a dividend on its outstanding REIT Shares
in REIT Shares or makes a distribution to all holders of its outstanding REIT
Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii)
combines its outstanding REIT Shares into a smaller number of REIT Shares, the
Conversion Factor shall be adjusted by multiplying the Conversion Factor by a
fraction, the numerator of which shall be the number of REIT Shares
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issued and outstanding on the record date (assuming for such purposes that such
dividend, distribution, subdivision or combination has occurred as of such
time), and the denominator of which shall be the actual number of REIT Shares
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination, and provided
further that, in the event that an entity shall cease to be the General Partner
(the "Predecessor Entity") and another entity shall become the General Partner
(the "Successor Entity") (including, without limitation, pursuant to any merger,
consolidation or combination of the Predecessor Entity with or into the
Successor Entity), the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by the number (expressed in decimal form) of shares of the
Successor Entity into which one REIT Share of the Predecessor Entity is
converted pursuant to such merger, consolidation or combination, determined as
of the date on which the Successor Entity becomes the General Partner. Any
adjustment to the Conversion Factor shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
"CORPORATION" means Winston Hotels, Inc., a North Carolina corporation.
"EVENT OF BANKRUPTCY" as to any Person means the filing of a petition
for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of
1978 or similar provision of law of any jurisdiction (except if such petition is
contested by such Person and has been dismissed within 90 days); insolvency of
such Person as finally determined by a court proceeding; filing by such Person
of a petition or application to accomplish the same or for the appointment of a
receiver or a trustee for such Person or a substantial part of his assets;
commencement of any proceedings relating to such Person as a debtor under any
other reorganization, arrangement, insolvency, adjustment of debt or liquidation
law of any jurisdiction, whether now in existence or hereinafter in effect,
either by such Person or by another, provided, that if such proceeding is
commenced by another, such Person indicates his approval of such proceeding,
consents thereto or acquiesces therein, or such proceeding is contested by such
Person and has not been finally dismissed within 90 days.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GENERAL PARTNER" means Winston Hotels, Inc., and any Person who
becomes a substitute or additional General Partner as provided herein, and any
of their successors as General Partner.
"GENERAL PARTNER INTEREST" means a Partnership Interest held by the
General Partner that is a general partnership interest.
"INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of his status as (A) the General Partner or (B) a director or officer of
the Partnership or the General Partner, and (ii) such other Persons (including
Affiliates of the General Partner or the Partnership) as the General Partner may
designate from time to time, in its sole and absolute discretion.
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"LIMITED PARTNER" means any Person named as a Limited Partner on
Exhibit A attached hereto, and any Person who becomes a Substitute or Additional
Limited Partner, in such Person's capacity as a Limited Partner in the
Partnership.
"LIMITED PARTNERSHIP INTEREST" means the ownership interest of a
Limited Partner in the Partnership at any particular time, including the right
of such Limited Partner to any and all benefits to which such Limited Partner
may be entitled as provided in this Agreement and in the Act, together with the
obligations of such Limited Partner to comply with all the provisions of this
Agreement and of such Act.
"LOSS" has the meaning provided in Section 5.01(f) hereof.
"MINIMUM LIMITED PARTNERSHIP INTEREST" means the lesser of (i) 1
percent or (ii) if the total Capital Contributions to the Partnership exceed $50
million, 1 percent divided by the ratio of the total Capital Contributions to
the Partnership to $50 million; provided, however, that the Minimum Limited
Partnership Interest shall not be less than 0.2 percent at any time.
"NOTICE OF REDEMPTION" means the Notice of Exercise of Redemption Right
substantially in the form of Exhibit B hereto.
"PARTNER" means any General Partner or Limited Partner.
"PARTNERSHIP" means WINN Limited Partnership.
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Regulations Section 1.704-2(i). A Partner's share of Partner Nonrecourse Debt
Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(i)(5).
"PARTNERSHIP INTEREST" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(d). In accordance with Regulations Section 1.704-2(d), the
amount of Partnership Minimum Gain is determined by first computing, for each
Partnership nonrecourse liability, any gain the Partnership would realize if it
disposed of the property subject to that liability for no consideration other
than full satisfaction of the liability, and then aggregating the separately
computed gains. A Partner's share of Partnership Minimum Gain shall be
determined in accordance with Regulations Section 1.704-2(g)(1).
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"PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of cash pursuant to Section 5.02 hereof,
which record date shall be the same as the record date established by the
General Partner for a distribution to its shareholders of some or all of its
portion of such distribution.
"PARTNERSHIP UNIT" means a fractional, undivided share of the
Partnership Interests of all Partners issued hereunder.
"PERCENTAGE INTEREST" means the percentage ownership interest in the
Partnership of each Partner, as determined by dividing the Partnership Units
owned by a Partner by the total number of Partnership Units then outstanding.
"PERSON" means any individual, partnership, corporation, joint venture,
trust or other entity.
"PREDECESSOR ENTITY" has the meaning provided in the definition of
"Conversion Factor" contained herein.
"PROFIT" has the meaning provided in Section 5.01(f) hereof.
"PROPERTY" means any hotel property or other investment in which the
Partnership holds an ownership interest.
"REDEEMING PARTNER" has the meaning provided in Section 8.05(a) hereof.
"REDEMPTION AMOUNT" means either the Cash Amount or the REIT Shares
Amount.
"REDEMPTION RIGHT" has the meaning provided in Section 8.05(a) hereof.
"REDEMPTION SHARES" shall mean REIT Shares that may be issued in
redemption of Partnership Units under Section 8.05.
"REGULATIONS" means the Federal Income Tax Regulations issued under the
Code, as amended and as hereafter amended from time to time. Reference to any
particular provision of the Regulations shall mean that provision of the
Regulations on the date hereof and any succeeding provision of the Regulations.
"REIT" means a real estate investment trust under Sections 856 through
860 of the Code.
"REIT SHARE" means a share of the common stock of the General Partner
(or Successor Entity, as the case may be) or any option, warrant or right to
purchase or subscribe for such shares.
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"REIT SHARES AMOUNT" means a number of REIT Shares equal to the product
of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor; provided, that in the event the
General Partner issues to all holders of REIT Shares rights, options, warrants
or convertible or exchangeable securities entitling the shareholders to
subscribe for or purchase REIT Shares, or any other securities or property
(collectively, the "rights"), then the REIT Shares Amount shall also include
such rights that a holder of that number of REIT Shares would be entitled to
receive.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SPECIFIED REDEMPTION DATE" means the first business day of the month
that is at least ten (10) business days after the receipt by the General Partner
of the Notice of Redemption.
"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.
"SUBSTITUTE LIMITED PARTNER" means any Person admitted to the
Partnership as a Limited Partner pursuant to Section 9.03 hereof.
"SUCCESSOR ENTITY" has the meaning provided in the definition of
"Conversion Factor" contained herein.
"TRANSACTION" has the meaning provided in Section 7.01(c).
"TRANSFER" shall have the meaning assigned to it in Section 9.02.
"VALUE" means, with respect to any security, the average of the daily
market price of such security for the ten consecutive trading days immediately
preceding the date of such valuation. The market price for each such trading day
shall be: (i) if such security is listed or admitted to trading on any
securities exchange or The Nasdaq National Market, the closing price, regular
way, on such day, or if no such sale takes place on such day, the average of the
closing bid and asked prices on such day, (ii) if such security is not listed or
admitted to trading on any securities exchange or The Nasdaq National Market,
the last reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as reported by a
recognized quotation source designated by the General Partner, or (iii) if such
security is not listed or admitted to trading on any securities exchange or The
Nasdaq National Market and no such last reported sale price or closing bid and
asked prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a recognized quotation source designated by
the General Partner, or if there shall be no bid and asked prices on such day,
the average of the
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high bid and low asked prices, as so reported, on the most recent day (not more
than 10 days prior to the date in question) for which prices have been so
reported; provided, that if there are no bid and asked prices reported during
the ten days prior to the date in question, the value of such security shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate. In the event that any security includes any additional rights, then
the value of such rights shall be determined by the General Partner acting in
good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate.
ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION
2.01 CONTINUATION. The Partners hereby agree to continue the
Partnership pursuant to the Act and upon the terms and conditions set forth in
this Agreement.
2.02 NAME, OFFICE AND REGISTERED AGENT. The name of the Partnership
shall be WINN Limited Partnership. The specified office and place of business of
the Partnership shall be 2209 Century Drive, Raleigh, North Carolina 27612. The
General Partner may at any time change the location of such office, provided the
General Partner gives notice to the Partners of any such change. The name and
address of the Partnership's registered agent is Robert W. Winston, III, 2209
Century Drive, Raleigh, North Carolina 27612. The sole duty of the registered
agent as such is to forward to the Partnership any notice that is served on him
as registered agent.
2.03 PARTNERS.
(a) The General Partner of the Partnership is Winston Hotels,
Inc. Its principal place of business shall be the same as that of the
Partnership.
(b) The Limited Partners shall be those Persons identified as
Limited Partners in Exhibit A hereto, as amended from time to time.
2.04 TERM AND DISSOLUTION.
(a) The term of the Partnership shall continue in full
force and effect until December 31, 2050, except that the Partnership shall be
dissolved upon the happening of any of the following events:
(i) The occurrence of an Event of Bankruptcy as
to the General Partner or the dissolution, death or withdrawal
of the General Partner unless the business of the Partnership
is continued pursuant to Section 7.03(b) hereof;
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provided, that if a General Partner is on the date of such
occurrence a partnership, the dissolution of such General
Partner as a result of the dissolution, death, withdrawal,
removal or Event of Bankruptcy of a partner in
such partnership shall not be an event of dissolution of the
Partnership if the business of such General Partner is
continued by the remaining partner or partners, either alone
or with additional partners, and such General Partner and such
partners comply with any other applicable requirements of this
Agreement;
(ii) The passage of 90 days after the sale or
other disposition of all or substantially all the assets of
the Partnership; (provided, that if the Partnership receives
an installment obligation as consideration for such sale or
other disposition, the Partnership shall continue, unless
sooner dissolved under the provisions of this Agreement, until
such time as such note or notes are paid in full);
(iii) The redemption of all Limited Partnership
Interests (other than any of such interests held by the
General Partner); or
(iv) The election by the General Partner that the
Partnership should be dissolved.
(b) Upon dissolution of the Partnership (unless the business
of the Partnership is continued pursuant to Section 7.03(b) hereof), the General
Partner (or its trustee, receiver, successor or legal representative) shall
amend or cancel the Certificate and liquidate the Partnership's assets and apply
and distribute the proceeds thereof in accordance with Section 5.06 hereof.
Notwithstanding the foregoing, the liquidating General Partner may either (i)
defer liquidation of, or hold from distribution for a reasonable time, any
assets of the Partnership except those necessary to satisfy the Partnership's
debts and obligations, or (ii) distribute the assets to the Partners in kind.
2.05 FILING OF CERTIFICATE AND PERFECTION OF LIMITED PARTNERSHIP.
The General Partner shall execute, acknowledge, record and file at the expense
of the Partnership, the Certificate and any and all amendments thereto and all
requisite fictitious name statements and notices in such places and
jurisdictions as may be necessary to cause the Partnership to be treated as a
limited partnership under, and otherwise to comply with, the laws of each state
or other jurisdiction in which the Partnership conducts business.
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ARTICLE III
BUSINESS OF THE PARTNERSHIP
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act, provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner at all times to qualify as a REIT, unless the General Partner
ceases to qualify as a REIT, (ii) to enter into any partnership, joint venture
or other similar arrangement to engage in any of the foregoing or the ownership
of interests in any entity engaged in any of the foregoing and (iii) to do
anything necessary or incidental to the foregoing. The Limited Partners
acknowledge that the status of the General Partner as a REIT and the avoidance
of federal income and excise taxes on the General Partner inures to the benefit
of all the Partners and not solely the General Partner or its Affiliates.
Notwithstanding the foregoing, the Limited Partners acknowledge and agree that
the General Partner may terminate its status as a REIT under the Code at any
time to the full extent permitted under the Articles. The General Partner shall
also be empowered to do any and all acts and things necessary or prudent to
ensure that the Partnership will not be classified as a "publicly traded
partnership" for purposes of Section 7704 of the Code.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.01 CAPITAL CONTRIBUTIONS. The General Partner and the Limited
Partners previously made capital contributions to the Partnership in exchange
for the Partnership Interests set forth opposite their names on Exhibit A.
4.02 ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS; PURCHASE OF
SHARES BY GENERAL PARTNER.
(a) The General Partner is hereby authorized to cause the
Partnership to issue such additional Limited Partnership Interests in the form
of Partnership Units for any Partnership purpose at any time or from time to
time, to the Partners or to other Persons for such consideration and on such
terms and conditions as shall be established by the General Partner in its sole
and absolute discretion, all without the approval of any Limited Partners. In
causing the Partnership to issue additional Limited Partnership Interests, the
General Partner shall make a good faith determination that the Partnership will
receive adequate consideration therefor. The General Partner's determination
that consideration is adequate shall be conclusive insofar as the adequacy of
consideration relates to whether the Limited Partnership Interests are validly
issued.
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(b) In the event that either a redemption pursuant to Section
8.05 hereof or an additional Capital Contribution by the General Partner would
result in the Limited Partners, in the aggregate, owning less than the Minimum
Limited Partnership Interest, the General Partner shall form another
partnership, which shall acquire sufficient Limited Partnership Interests so
that the Limited Partners, in the aggregate, own at least the Minimum Limited
Partnership Interest.
(c) The Partnership also may from time to time issue to the
General Partner additional Partnership Units or other Partnership Interests in
one or more classes, or one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, including rights, powers and duties senior to Limited
Partnership Interests, all as shall be determined by the General Partner,
subject to North Carolina law, including, without limitation, (i) the
allocations of items of Partnership income, gain, loss, deduction and credit to
each such class or series of Partnership Interests; (ii) the right of each such
class or series of Partnership Interests to share in Partnership distributions;
and (iii) the rights of each such class or series of Partnership Interests upon
dissolution and liquidation of the Partnership, provided, that (x) the
additional Partnership Interests are issued in connection with an issuance of
shares of the General Partner, which shares have designations, preferences and
other rights, all such that the economic interests are substantially similar to
the designations, preferences and other rights of the additional Partnership
Interests issued to the General Partner in accordance with this Section 4.02(c),
(y) if the General Partner receives cash or other property as consideration for
the issuance of shares of the General Partner, the General Partner shall make a
Capital Contribution to the Partnership in an amount equal to the net proceeds
raised in connection with the issuance of such shares of the General Partner,
and (z) notwithstanding the foregoing, if the General Partner contributes the
Hampton Inn hotel, 201 Asheville Avenue, Cary, North Carolina to the capital of
the Partnership, the General Partner shall receive 670,616 Partnership Units in
exchange for such contribution.
(d) Nothing contained herein shall restrict the General
Partner's rights to issue REIT Shares for less than fair market value, and the
General Partner is expressly authorized to cause the Partnership to issue to the
General Partner corresponding Partnership Units, so long as (i) the General
Partner concludes in good faith that such issuance is in the interests of the
General Partner and the Partnership (for example, and not by way of limitation,
the issuance of REIT Shares and corresponding Partnership Units pursuant to an
employee stock purchase plan providing for employee purchases of REIT Shares at
a discount from fair market value or employee stock options that have an
exercise price that is less than the fair market value of the REIT Shares,
either at the time of issuance or at the time of exercise), and (ii) the General
Partner contributes all proceeds from such issuance and/or exercise to the
Partnership. In the case of employee purchases of REIT Shares at a discount from
fair market value, the amount of the discount representing compensation to the
employee shall be treated as an expense paid by the General Partner on behalf of
the Partnership.
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(e) Nothing contained herein shall restrict the General
Partner's right to issue additional REIT Shares or to transfer REIT Shares to
the Partnership in connection with a redemption pursuant to Section 8.05 hereof;
provided, however, that in the event that REIT Shares are issued by the General
Partner to finance an investment in a hotel or other property by the
Partnership, (i) the General Partner shall cause the Partnership to issue to the
General Partner an equivalent number of Partnership Units or rights, options,
warrants or convertible or exchangeable securities of the Partnership having
designations, preferences and other rights, all such that the economic interests
are substantially similar to those of the REIT Shares and (ii) the General
Partner shall contribute to the Partnership the net proceeds from the offering
of such REIT Shares and from the exercise of rights contained in such REIT
Shares.
(f) If the General Partner shall repurchase shares of any
class of the General Partner's capital stock, the purchase price thereof and all
costs incurred in connection with such repurchase shall be reimbursed to the
General Partner by the Partnership pursuant to Section 6.05 hereof and the
General Partner shall cause the Partnership to cancel a number of Partnership
Units of the appropriate class held by the General Partner equal to the quotient
of the number of such shares of the General Partner's capital stock divided by
the Conversion Factor.
(g) If the General Partner issues REIT Shares, makes a Capital
Contribution to the Partnership of the proceeds therefrom, and the proceeds
actually received and contributed by the General Partner are less than the gross
proceeds of such issuance as a result of any underwriter's discount or other
expenses paid or incurred in connection with such issuance, then the General
Partner shall be deemed to have made Capital Contributions to the Partnership in
the aggregate amount of the gross proceeds of such issuance and the Partnership
shall be deemed simultaneously to have paid such offering expenses in accordance
with Section 6.05 hereof and in connection with the issuance of additional
Partnership Units to the General Partner for such Capital Contributions.
4.03 CAPITAL ACCOUNTS. A separate capital account (a "Capital Account")
shall be established and maintained for each Partner in accordance with
Regulations Section 1.704- 1(b)(2)(iv). If (i) a new or existing Partner
acquires an additional Partnership Interest in exchange for more than a de
minimis Capital Contribution, (ii) the Partnership distributes to a Partner more
than a de minimis amount of Partnership property as consideration for a
Partnership Interest, or (iii) the Partnership is liquidated within the meaning
of Regulation Section 1.704-1(b)(2)(ii)(g), the General Partner shall revalue
the property of the Partnership to its fair market value (as determined by the
General Partner in its sole discretion and taking into account Section 7701(g)
of the Code) in accordance with Regulations Section 1.704- 1(b)(2)(iv)(f). When
the Partnership's property is revalued by the General Partner, the Capital
Accounts of the Partners shall be adjusted in accordance with Regulations
Sections 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital
Accounts to be adjusted to reflect the manner in which the unrealized gain or
loss inherent in such property (that has not been reflected in the Capital
Accounts previously) would be allocated among the Partners
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pursuant to Section 5.01 if there were a taxable disposition of such property
for its fair market value (as determined by the General Partner in its sole
discretion taking into account Section 7701(g) of the Code) on the date of the
revaluation.
4.04 PERCENTAGE INTERESTS. If the number of outstanding Partnership
Units increases or decreases during a taxable year, each Partner's Percentage
Interest shall be adjusted to a percentage equal to the number of Partnership
Units held by such Partner divided by the aggregate number of outstanding
Partnership Units. If the Partners' Percentage Interests are adjusted pursuant
to this Section 4.04, the Profits and Losses for the taxable year in which the
adjustment occurs shall be allocated between the part of the year ending on the
day when the Partnership's property is revalued by the General Partner and the
part of the year beginning on the following day either (i) as if the taxable
year had ended on the date of the adjustment or (ii) based on the number of days
in each part. The General Partner, in its sole discretion, shall determine which
method shall be used to allocate Profits and Losses for the taxable year in
which the adjustment occurs. The allocation of Profits and Losses for the
earlier part of the year shall be based on the Percentage Interests before
adjustment, and the allocation of Profits and Losses for the later part shall be
based on the adjusted Percentage Interests.
4.05 NO INTEREST ON CONTRIBUTIONS. No Partner shall be entitled to
interest on its Capital Contribution.
4.06 RETURN OF CAPITAL CONTRIBUTIONS. No Partner shall be entitled to
withdraw any part of its Capital Contribution or its Capital Account or to
receive any distribution from the Partnership, except as specifically provided
in this Agreement. Except as otherwise provided herein, there shall be no
obligation to return to any Partner or withdrawn Partner any part of such
Partner's Capital Contribution for so long as the Partnership continues in
existence.
4.07 NO THIRD PARTY BENEFICIARY. No creditor or other third party
having dealings with the Partnership shall have the right to enforce the right
or obligation of any Partner to make Capital Contributions or loans or to pursue
any other right or remedy hereunder or at law or in equity, it being understood
and agreed that the provisions of this Agreement shall be solely for the benefit
of, and may be enforced solely by, the parties hereto and their respective
successors and assigns. None of the rights or obligations of the Partners herein
set forth to make Capital Contributions or loans to the Partnership shall be
deemed an asset of the Partnership for any purpose by any creditor or other
third party, nor may such rights or obligations be sold, transferred or assigned
by the Partnership or pledged or encumbered by the Partnership to secure any
debt or other obligation of the Partnership or of any of the Partners. In
addition, it is the intent of the parties hereto that no distribution to any
Limited Partner shall be deemed a return of money or other property in violation
of the Act. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Limited Partner is
obligated to return such money or property, such obligation shall be the
obligation of such Limited Partner and not of the General Partner.
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Without limiting the generality of the foregoing, a deficit Capital Account of a
Partner shall not be deemed to be a liability of such Partner nor an asset or
property of the Partnership.
ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS
5.01 ALLOCATION OF PROFIT AND LOSS.
(a) General. Except as otherwise provided in this Section
5.01, Profit and Loss of the Partnership for each fiscal year of the Partnership
shall be allocated among the Partners in accordance with their respective
Percentage Interests.
(b) Minimum Gain Chargeback. Notwithstanding any provision to
the contrary, (i) any expense of the Partnership that is a "nonrecourse
deduction" within the meaning of Regulations Section 1.704-2(b)(1) shall be
allocated in accordance with the Partners' respective Percentage Interests, (ii)
any expense of the Partnership that is a "partner nonrecourse deduction" within
the meaning of Regulations Section 1.704-2(i)(2) shall be allocated in
accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net
decrease in Partnership Minimum Gain within the meaning of Regulations Section
1.704-2(f)(1) for any Partnership taxable year, items of gain and income shall
be allocated among the Partners in accordance with Regulations Section
1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j),
and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain
within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership
taxable year, items of gain and income shall be allocated among the Partners in
accordance with Regulations Section 1.704-2(i)(4) and the ordering rules
contained in Regulations Section 1.704-2(j). A Partner's "interest in
partnership profits" for purposes of determining its share of the nonrecourse
liabilities of the Partnership within the meaning of Regulations Section
1.752-3(a)(3) shall be such Partner's Percentage Interest.
(c) Qualified Income Offset. If a Limited Partner receives in
any taxable year an adjustment, allocation, or distribution described in
subparagraphs (4), (5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that
causes or increases a negative balance in such Partner's Capital Account that
exceeds the sum of such Partner's shares of Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations
Sections 1.704-2(g) and 1.704-2(i), such Partner shall be allocated specially
for such taxable year (and, if necessary, later taxable years) items of income
and gain in an amount and manner sufficient to eliminate such negative Capital
Account balance as quickly as possible as provided in Regulations Section
1.704-1(b)(2)(ii)(d). After the occurrence of an allocation of income or gain to
a Limited Partner in accordance with this Section 5.01(c), to the extent
permitted by Regulations Section 1.704-1(b) and Section 5.01(d), items of
expense or loss shall be allocated to such Partner in an amount necessary to
offset the income or gain previously allocated to such Partner under this
Section 5.01(c).
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(d) Capital Account Deficits. Loss shall not be allocated to a
Limited Partner to the extent that such allocation would cause a deficit in such
Partner's Capital Account (after reduction to reflect the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of
such Partner's shares of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain. Any Loss in excess of that limitation shall be allocated to the
General Partner. After the occurrence of an allocation of Loss to the General
Partner in accordance with this Section 5.01(d), to the extent permitted by
Regulations Section 1.704-1(b), Profit shall be allocated to such Partner in an
amount necessary to offset the Loss previously allocated to such Partner under
this Section 5.01(d).
(e) Allocations Between Transferor and Transferee. If a
Partner transfers any part or all of its Partnership Interest, the distributive
shares of the various items of Profit and Loss allocable among the Partners
during such fiscal year of the Partnership shall be allocated between the
transferor and the transferee either (i) as if the Partnership's fiscal year had
ended on the date of the transfer, or (ii) based on the number of days of such
fiscal year that each was a Partner without regard to the results of Partnership
activities in the respective portions of such fiscal year in which the
transferor and the transferee were Partners. The General Partner, in its sole
discretion, shall determine which method shall be used to allocate the
distributive shares of the various items of Profit and Loss between the
transferor and the transferee.
(f) Definition of Profit and Loss. "Profit" and "Loss" and any
items of income, gain, expense, or loss referred to in this Agreement shall be
determined in accordance with federal income tax accounting principles, as
modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss
shall not include items of income, gain and expense that are specially allocated
pursuant to Section 5.01(b), 5.01(c) or 5.01(d). All allocations of income,
Profit, gain, Loss, and expense (and all items contained therein) for federal
income tax purposes shall be identical to all allocations of such items set
forth in this Section 5.01, except as otherwise required by Section 704(c) of
the Code and Regulations Section 1.704-1(b)(4). The General Partner shall have
the authority to elect the method to be used by the Partnership for allocating
items of income, gain and expense required by Section 704(c) of the Code and
such election shall be binding on all Partners.
5.02 DISTRIBUTION OF CASH.
(a) The General Partner shall distribute cash on a quarterly
(or, at the election of the General Partner, more frequent) basis, in an amount
determined by the General Partner in its sole discretion, to the Partners who
are Partners on the Partnership Record Date with respect to such quarter or
other distributive period in accordance with their respective Percentage
Interests on the Partnership Record Date; provided, however, that if a new or
existing Partner acquires an additional Partnership Interest in exchange for a
Capital Contribution on any date other than a Partnership Record Date, the cash
distribution attributable to such additional Partnership Interest for the
Partnership Record Date following the issuance of such additional Partnership
Interest shall be reduced in the proportion that the
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number of days that such additional Partnership Interest is held by such Partner
bears to the number of days between such Partnership Record Date and the
immediately preceding Partnership Record Date.
(b) In no event may a Partner receive a distribution of cash
with respect to a Partnership Unit if such Partner is entitled to receive a
distribution with respect to a REIT Share for which all or part of such
Partnership Unit has been exchanged.
(c) Notwithstanding any other provision of this Agreement, the
General Partner is authorized to take any action that it determines to be
necessary or appropriate to cause the Partnership to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445, and 1446
of the Code. If the Partnership is required to withhold and pay over to any
taxing authority any amount resulting from the allocation or distribution of
income to a Partner or its assignee (including by reason of Section 1446 of the
Code) and if the amount to be distributed to the Partner (the "Distributable
Amount") equals or exceeds the amount required to be withheld by the Partnership
(the "Withheld Amount"), the Withheld Amount shall be treated as a distribution
of cash to such Partner. If, however, the Distributable Amount is less than the
Withheld Amount, no amount shall be distributed to the Partner, the
Distributable Amount shall be treated as a distribution of cash to such Partner,
and the excess of the Withheld Amount over the Distributable Amount shall be
treated as a loan (a "Partnership Loan") from the Partnership to the Partner on
the day the Partnership pays over such excess to a taxing authority. A
Partnership Loan may be repaid, at the election of the General Partner in its
sole discretion, either (i) through withholding by the Partnership with respect
to subsequent distributions to the applicable Partner or assignee, or (ii) at
any time more than 12 months after a Partnership Loan arises, by cancellation of
Partnership Units with a value equal to the unpaid balance of the Partnership
Loan (including accrued interest). Any amounts treated as a Partnership Loan
pursuant to this Section 5.02(c) shall bear interest at the lesser of (i) the
base rate on corporate loans at large United States money center commercial
banks, as published from time to time in The Wall Street Journal (or an
equivalent successor publication), or (ii) the maximum lawful rate of interest
on such obligation, such interest to accrue from the date the Partnership is
deemed to extend the loan until such loan is repaid in full.
5.03 REIT DISTRIBUTION REQUIREMENTS. Unless the General Partner
determines that such a distribution would not be in the best interests of the
Partnership, it is the intent, but not the obligation, of the Partnership that a
cash distribution shall be made for each fiscal year of the Partnership to
enable the General Partner (i) to meet its distribution requirement for
qualification as a REIT as set forth in Section 857(a)(1) of the Code and (ii)
to avoid the excise tax imposed by Section 4981 of the Code.
5.04 NO RIGHT TO DISTRIBUTIONS IN KIND. No Partner shall be entitled to
demand property other than cash in connection with any distributions by the
Partnership.
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5.05 LIMITATIONS ON RETURN OF CAPITAL CONTRIBUTIONS.
Notwithstanding any of the provisions of this Article V, no Partner shall have
the right to receive and the General Partner shall not have the right to make, a
distribution which includes a return of all or part of a Partner's Capital
Contributions, unless after giving effect to the return of a Capital
Contribution, all Partnership liabilities, other than the liabilities to a
Partner for the return of his Capital Contribution, do not exceed the fair
market value of the Partnership's assets.
5.06 DISTRIBUTIONS UPON LIQUIDATION.
(a) Upon liquidation of the Partnership, after payment of, or
adequate provision for, debts and obligations of the Partnership, including any
Partner loans, any remaining assets of the Partnership shall be distributed to
all Partners with positive Capital Accounts in accordance with their respective
positive Capital Account balances. For purposes of the preceding sentence, the
Capital Account of each Partner shall be determined after all adjustments made
in accordance with Sections 5.01 and 5.02 resulting from Partnership operations
and from all sales and dispositions of all or any part of the Partnership's
assets. Any distributions pursuant to this Section 5.06 shall be made by the end
of the Partnership's taxable year in which the liquidation occurs (or, if later,
within 90 days after the date of the liquidation). To the extent deemed
advisable by the General Partner, appropriate arrangements (including the use of
a liquidating trust) may be made to assure that adequate funds are available to
pay any contingent debts or obligations.
(b) If the General Partner has a negative balance in its
Capital Account following a liquidation of the Partnership, as determined after
taking into account all Capital Account adjustments in accordance with Sections
5.01 and 5.02 resulting from Partnership operations and from all sales and
dispositions of all or any part of the Partnership's assets, the General Partner
shall contribute to the Partnership an amount of cash equal to the negative
balance in its Capital Account and such cash shall be paid or distributed by the
Partnership to creditors, if any, and then to the Limited Partners in accordance
with Section 5.06(a). Such contribution by the General Partner shall be made by
the end of the Partnership's taxable year in which the liquidation occurs (or,
if later, within 90 days after the date of the liquidation).
5.07 SUBSTANTIAL ECONOMIC EFFECT. It is the intent of the Partners
that the allocations of Profit and Loss under the Agreement have substantial
economic effect (or be consistent with the Partners' interests in the
Partnership in the case of the allocation of losses attributable to nonrecourse
debt) within the meaning of Section 704(b) of the Code as interpreted by the
Regulations promulgated pursuant thereto. Article V and other relevant
provisions of this Agreement shall be interpreted in a manner consistent with
such intent.
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ARTICLE VI
RIGHTS, OBLIGATIONS AND
POWERS OF THE GENERAL PARTNER
6.01 MANAGEMENT OF THE PARTNERSHIP.
(a) Except as otherwise expressly provided in this Agreement,
the General Partner shall have full, complete and exclusive discretion to manage
and control the business of the Partnership for the purposes herein stated, and
shall make all decisions affecting the business and assets of the Partnership.
Subject to the restrictions specifically contained in this Agreement, the powers
of the General Partner shall include, without limitation, the authority to take
the following actions on behalf of the Partnership:
(i) to acquire, purchase, own, lease and dispose
of any or all real property and any or all other property or
assets that the General Partner determines are necessary or
appropriate or in the best interests of the business of the
Partnership;
(ii) to construct buildings and make other
improvements on the properties owned or leased by the
Partnership;
(iii) to authorize, issue, sell, redeem or
otherwise purchase any Partnership Interests or any securities
(including secured and unsecured debt obligations of the
Partnership, debt obligations of the Partnership convertible
into any class or series of Partnership Interests, or options,
rights, warrants or appreciation rights relating to any
Partnership Interests) of the Partnership;
(iv) to borrow money for the Partnership, issue
evidences of indebtedness in connection therewith, refinance,
guarantee, increase the amount of, modify, amend or change the
terms of, or extend the time for the payment of, any
indebtedness or obligation to the Partnership, and secure such
indebtedness by mortgage, deed of trust, pledge or other lien
on the Partnership's assets;
(v) to pay, either directly or by reimbursement,
for all operating costs and general administrative expenses of
the Partnership, to third parties or, to the General Partner
as set forth in this Agreement;
(vi) to lease all or any portion of any of the
Partnership's assets, whether or not the terms of such leases
extend beyond the termination date of the Partnership and
whether or not any portion of the Partnership's assets so
leased are to be occupied by the lessee, or, in turn,
subleased in whole or in
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part to others, for such consideration and on such terms as
the General Partner may determine;
(vii) to prosecute, defend, arbitrate, or
compromise any and all claims or liabilities in favor of or
against the Partnership, on such terms and in such manner as
the General Partner may reasonably determine, and similarly to
prosecute, settle or defend litigation with respect to the
Partners, the Partnership, or the Partnership's assets;
(viii) to file applications, communicate, and
otherwise deal with any and all governmental agencies having
jurisdiction over, or in any way affecting, the Partnership's
assets or any other aspect of the Partnership business;
(ix) to make or revoke any election permitted or
required of the Partnership by any taxing authority;
(x) to maintain such insurance coverage for
public liability, fire and casualty, and any and all other
insurance for the protection of the Partnership, for the
conservation of Partnership assets, or for any other purpose
convenient or beneficial to the Partnership, in such amounts
and such types, as it shall determine from time to time;
(xi) to determine whether or not to apply any
insurance proceeds for any property, to the restoration of
such property or to distribute the same;
(xii) to retain legal counsel, accountants,
consultants, real estate brokers, and such other persons, as
the General Partner may deem necessary or appropriate in
connection with the Partnership business and to pay therefor
such reasonable remuneration as the General Partner may deem
reasonable and proper;
(xiii) to retain other services of any kind or
nature in connection with the Partnership business, and to pay
therefor such remuneration as the General Partner may deem
reasonable and proper;
(xiv) to negotiate and conclude agreements on
behalf of the Partnership with respect to any of the rights,
powers and authority conferred upon the General Partner;
(xv) to maintain accurate accounting records and
to file promptly all federal, state and local income tax
returns on behalf of the Partnership;
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(xvi) to distribute Partnership cash or other
Partnership assets in accordance with this Agreement;
(xvii) to form or acquire an interest in, and
contribute property to, any further limited or general
partnerships, joint ventures or other relationships that it
deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of property
to, its Subsidiaries and any other Person in which it has an
equity interest from time to time);
(xviii) to establish Partnership working capital
reserves;
(xix) to merge, consolidate or combine the
Partnership with or into another Person (to the extent
permitted by applicable law);
(xx) to do any and all acts and things necessary
or prudent to ensure that the Partnership will not be
classified as a "publicly traded partnership" for purposes of
Section 7704 of the Code; and
(xxi) to take such other action, execute,
acknowledge, swear to or deliver such other documents and
instruments, and perform any and all other acts the General
Partner deems necessary or appropriate for the formation,
continuation and conduct of the business and affairs of the
Partnership and to possess and enjoy all of the rights and
powers of a general partner as provided by the Act.
(b) In no event shall the General Partner incur or allow to
exist as of the end of any month Indebtedness (as defined below) in an amount in
excess of 45 percent (or such greater or lesser percentage as may be established
from time to time with respect to the General Partner pursuant to its Articles)
of the General Partner's investment in hotel properties, at cost, after giving
effect to the General Partner's use of proceeds from any Indebtedness. For
purposes of the foregoing restrictions, "Indebtedness" of the General Partner
shall mean all obligations of the General Partner, the Partnership or any other
Subsidiaries or partnerships in which the General Partner serves as general
partner, for borrowed money (including all notes payable and drafts accepted
representing extensions of credit) and all obligations evidenced by bonds,
debentures, notes or other similar instruments on which interest charges are
customarily paid, including obligations under capital leases.
6.02 DELEGATION OF AUTHORITY. The General Partner may delegate any or
all of its powers, rights and obligations hereunder, and may appoint, employ,
contract or otherwise deal with any Person for the transaction of the business
of the Partnership, which Person may, under supervision of the General Partner,
perform any acts or services for the Partnership as the General Partner may
approve.
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6.03 INDEMNIFICATION AND EXCULPATION OF INDEMNITEES.
(a) The Partnership shall indemnify an Indemnitee from and
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including reasonable legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership as set forth in this Agreement
in which any Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, unless it is established that: (i) the act or omission of
the Indemnitee was material to the matter giving rise to the proceeding and
either was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal benefit
in money, property or services; or (iii) in the case of any criminal proceeding,
the Indemnitee had reasonable cause to believe that the act or omission was
unlawful. The termination of any proceeding by judgment, order or settlement
does not create a presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 6.03(a). The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent, or
an entry of an order of probation prior to judgment, creates a rebuttable
presumption that the Indemnitee acted in a manner contrary to that specified in
this Section 6.03(a). Any indemnification pursuant to this Section 6.03 shall be
made only out of the assets of the Partnership.
(b) The Partnership may reimburse an Indemnitee for reasonable
expenses incurred by an Indemnitee who is a party to a proceeding in advance of
the final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 6.03 has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
(c) The indemnification provided by this Section 6.03 shall be
in addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity.
(d) The Partnership may purchase and maintain insurance, on
behalf of the Indemnitees and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expenses that
may be incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 6.03, the Partnership shall
be deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise
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involves services by, it to the plan or participants or beneficiaries of the
plan; excise taxes assessed on an Indemnitee with respect to an employee benefit
plan pursuant to applicable law shall constitute fines within the meaning of
this Section 6.03; and actions taken or omitted by the Indemnitee with respect
to an employee benefit plan in the performance of its duties for a purpose
reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole
or in part under this Section 6.03 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.03 are for the benefit of
the Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
6.04 LIABILITY OF THE GENERAL PARTNER.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary damages to the
Partnership or any Partners for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if the General Partner
acted in good faith.
(b) The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership and the General Partner's
shareholders collectively, that the General Partner is under no obligation to
consider the separate interests of the Limited Partners (including, without
limitation, the tax consequences to Limited Partners) in deciding whether to
cause the Partnership to take (or decline to take) any actions, and that the
General Partner shall not be liable for monetary damages for losses sustained,
liabilities incurred, or benefits not derived by Limited Partners in connection
with such decisions, provided, that the General Partner has acted in good faith.
In any case in which the General Partner determines in good faith that the
interests of the Limited Partners and the General Partner's shareholders may
conflict, the Limited Partners further acknowledge and agree that the General
Partner shall be deemed to have discharged its fiduciary duties to the Limited
Partners by discharging such duties to its shareholders.
(c) Subject to its obligations and duties as General Partner
set forth in Section 6.01 hereof, the General Partner may exercise any of the
powers granted to it under this Agreement and perform any of the duties imposed
upon it hereunder either directly or by
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or through its agents. The General Partner shall not be responsible for any
misconduct or negligence on the part of any such agent appointed by it in good
faith.
(d) Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the General
Partner to continue to qualify as a REIT or (ii) to prevent the General Partner
from incurring any taxes under Section 857 or Section 4981 of the Code, is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners.
(e) Any amendment, modification or repeal of this Section 6.04
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability to the Partnership and
the Limited Partners under this Section 6.04 as in effect immediately prior to
such amendment, modification or repeal with respect to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless of
when claims relating to such matters may arise or be asserted.
6.05 REIMBURSEMENT OF GENERAL PARTNER.
(a) Except as provided in this Section 6.05 and elsewhere in
this Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments, and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner of
the Partnership.
(b) The General Partner shall be reimbursed on a monthly
basis, or such other basis as the General Partner may determine in its sole and
absolute discretion, for all (i) costs and expenses relating to the continuity
of existence of the General Partner and its wholly-owned Subsidiaries, if any
(all such entities shall, for purposes of this section, be included within the
definition of General Partner), including, without limitation, taxes, fees and
assessments associated therewith and the portion of any costs, expenses or fees
payable to any director, officer or trustee of the General Partner (including,
without limitation, any costs of indemnification), (ii) costs and expenses
relating to any offer or registration of REIT Shares or other securities by the
General Partner and all statements, reports, fees and expenses incidental
thereto, including, without limitation, underwriting discounts and selling
commissions applicable to any such offer of securities and any costs and
expenses associated with any claims made by any holders of such securities or
any underwriters or placement agents thereof, (iii) costs and expenses incurred
in connection with the repurchase of any securities by the General Partner, (iv)
costs and expenses associated with the preparation and filing of any periodic or
other reports and communications by the General Partner under federal, state or
local laws or regulations, including filings with the SEC, (v) costs and
expenses associated with compliance by the General Partner with laws, rules and
regulations promulgated by any regulatory body, including the SEC and any
securities exchange, (vi) costs and expenses associated with any 401(k) plan,
incentive plan, bonus plan or other plan
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providing for compensation for the employees of the General Partner, the
Partnership, or any Subsidiary thereof, (vii) costs and expenses incurred by the
General Partner relating to any issuance or redemption of Partnership Interests,
and (viii) all other operating or administrative costs incurred by the General
Partner in connection with the ordinary course of the General Partner's or the
Partnership's business (including the business of any Subsidiary thereof). Such
reimbursements all shall be obligations of the Partnership and shall be in
addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 6.03 hereof. Notwithstanding the foregoing,
an appropriate portion of the General Partner's expenditures will not be
reimbursable by the Partnership to the extent that the General Partner owns an
interest in one or more Properties directly or indirectly (other than through
the Partnership).
6.06 OUTSIDE ACTIVITIES.
(a) Subject to the Articles and any agreements entered into by
the General Partner or its Affiliates with the Partnership or a Subsidiary, the
General Partner and any officer, director, employee, agent, trustee, Affiliate
or shareholder of the General Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities substantially similar
or identical to those of the Partnership. Neither the Partnership nor any of the
Limited Partners shall have any rights by virtue of this Agreement in any
business ventures of the General Partner. None of the Limited Partners nor any
other Person shall have any rights by virtue of this Agreement or the
partnership relationship established hereby in any such business interests or
activities of the General Partner, and the General Partner shall have no
obligation pursuant to this Agreement to offer any interest in any such business
interests and activities to the Partnership or any Limited Partner, even if such
opportunity is of a character which, if presented to the Partnership or any
Limited Partner, could be taken by such Person.
(b) In the event the General Partner exercises its rights
under Article 15 of the Articles to redeem REIT Shares, then the General Partner
shall cause the Partnership to purchase from it a number of Partnership Units as
determined based on the application of the Conversion Factor on the same terms
that the General Partner redeemed such REIT Shares.
6.07 EMPLOYMENT OR RETENTION OF AND CONTRACTS WITH AFFILIATES.
(a) Any Affiliate of the General Partner may be employed or
retained by the Partnership and may otherwise deal with the Partnership (whether
as a buyer, lessor, lessee, manager, furnisher of goods or services, broker,
agent, lender or otherwise) and may receive from the Partnership any
compensation, price, or other payment therefor which the General Partner
determines to be fair and reasonable.
(b) The Partnership may lend or contribute to its Subsidiaries
or other Persons in which it has an equity investment, and such Persons may
borrow funds from the
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Partnership, on terms and conditions established in the sole and absolute
discretion of the General Partner. The foregoing authority shall not create any
right or benefit in favor of any Subsidiary or any other Person.
(c) The Partnership may transfer assets to joint ventures,
other partnerships, corporations or other business entities in which it is or
thereby becomes a participant upon such terms and subject to such conditions as
the General Partner deems are consistent with this Agreement and applicable law.
(d) Except as expressly permitted by this Agreement, neither
the General Partner nor any of its Affiliates shall sell, transfer or convey any
property to, or purchase any property from, the Partnership, directly or
indirectly, except pursuant to transactions that are on terms that are fair and
reasonable to the Partnership.
6.08 LOANS TO THE PARTNERSHIP. If additional funds are required by
the Partnership for any purpose relating to the business of the Partnership or
for any of its obligations, expenses, costs, or expenditures, including
operating deficits, the Partnership may borrow such funds as are needed from the
General Partner or any Affiliate of the General Partner for such period of time
and on such terms as the General Partner or its Affiliate may agree, provided
that the terms shall be substantially equivalent to the terms that could be
obtained from a third party on an arm's-length basis.
6.09 AUTHORITY ON BEHALF OF LIMITED PARTNERS. The General Partner
shall have the right, power and authority to negotiate and conclude agreements
with any Person (including, without limitation, an Affiliate of the General
Partner) on behalf of the Limited Partners in any transaction involving the sale
or exchange of all of the Partnership Interests and to sell to or exchange with
any Person all of the Partnership Interests for such consideration and on such
terms as the General Partner may determine.
ARTICLE VII
CHANGES IN GENERAL PARTNER
7.01 TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP INTEREST.
(a) Other than to an Affiliate of the Corporation, the General
Partner may not transfer any of its General Partner Interest or Limited
Partnership Interests or withdraw as General Partner except as provided in
Section 7.01(c).
(b) The General Partner agrees that it will at all times own
at least one percent of the Partnership Interests in the form of a General
Partner Interest.
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(c) The General Partner shall not engage in any merger,
consolidation or other combination with or into another Person or any sale of
all or substantially all of its assets (other than in connection with a change
in the General Partner's state of incorporation or organizational form) (a
"Transaction"), unless one of the following conditions is met:
(i) the consent of Limited Partners (other than
the General Partner or any wholly-owned Subsidiary) holding
more than 50 percent of the Percentage Interests of the
Limited Partners (other than the General Partner or any
wholly-owned Subsidiary) is obtained;
(ii) the Transaction also includes a merger of
the Partnership or sale of substantially all of the assets of
the Partnership or other transaction (including, without
limitation, a sale or exchange of Partnership Interests
pursuant to Section 6.09 hereof) as a result of which all
Limited Partners (other than the General Partner or any
wholly-owned Subsidiary) will receive for each Partnership
Unit an amount of cash, securities, or other property (or a
partnership interest or other security readily convertible
into such cash, securities, or other property) no less than
the product of the Conversion Factor and the greatest amount
of cash, securities or other property (expressed as an amount
per REIT Share) paid in the Transaction in consideration for
REIT Shares; provided that, if, in connection with the
Transaction, a purchase, tender or exchange offer ("Offer")
shall have been made to and accepted by the holders of more
than 50 percent of the outstanding REIT Shares, all Limited
Partners (other than the General Partner or any wholly-owned
Subsidiary) will receive no less than the amount of cash and
the fair market value of securities or other consideration
that they would have received had they (A) exercised their
Redemption Right and (B) sold, tendered or exchanged pursuant
to the Offer the REIT Shares received upon exercise of the
Redemption Right immediately prior to the expiration of the
Offer;
(iii) the General Partner is the surviving entity
in the Transaction and either (A) the holders of REIT Shares
do not receive cash, securities, or other property in the
Transaction or (B) all Limited Partners (other than the
General Partner or any wholly-owned Subsidiary) receive an
amount of cash, securities, or other property (expressed as an
amount per Partnership Unit) that is no less than the product
of the Conversion Factor and the greatest amount of cash,
securities, or other property (expressed as an amount per REIT
Share) received in the Transaction by any holder of REIT
Shares; or
(iv) the General Partner merges, consolidates, or
combines with or into another entity and, immediately after
such merger, (A) substantially all of the assets of the
surviving entity (other than the Partnership Units and the
ownership interests in any wholly-owned Subsidiaries held by
the General Partner) are contributed to the Partnership as a
Capital Contribution in
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exchange for Partnership Units with a fair market value equal
to the value of the assets so contributed as determined
pursuant to Section 704(c) of the Code, (B) any successor or
surviving corporation expressly agrees to assume all
obligations of the General Partner hereunder, and (C) the
Conversion Factor is adjusted appropriately to reflect the
ratio at which REIT Shares are converted into shares of the
surviving entity.
7.02 ADMISSION OF A SUBSTITUTE OR SUCCESSOR GENERAL PARTNER. A
Person shall be admitted as a substitute or successor General Partner of the
Partnership if the following exclusive terms and conditions are satisfied:
(a) the Person to be admitted as a substitute or additional
General Partner shall have accepted and agreed to be bound by all the terms and
provisions of this Agreement by executing a counterpart thereof and such other
documents or instruments as may be required or appropriate in order to effect
the admission of such Person as a General Partner, and a certificate evidencing
the admission of such Person as a General Partner shall have been filed for
recordation and all other actions required by Section 2.05 hereof in connection
with such admission shall have been performed;
(b) if the Person to be admitted as a substitute or additional
General Partner is a corporation or a partnership it shall have provided the
Partnership with evidence satisfactory to counsel for the Partnership of such
Person's authority to become a General Partner and to be bound by the terms and
provisions of this Agreement; and
(c) counsel for the Partnership shall have rendered an opinion
(relying on such opinions from other counsel and the state or any other
jurisdiction as may be necessary) that the admission of the person to be
admitted as a substitute or additional General Partner is in conformity with the
Act, that none of the actions taken in connection with the admission of such
Person as a substitute or additional General Partner will cause the termination
of the Partnership under Section 708 of the Code or will cause it to be
classified other than as a partnership for federal income tax purposes or will
result in the loss of any Limited Partner's limited liability.
7.03 EFFECT OF BANKRUPTCY, WITHDRAWAL, DEATH OR DISSOLUTION OF A
GENERAL PARTNER.
(a) Upon the occurrence of an Event of Bankruptcy as to a
General Partner (and its removal pursuant to Section 7.04(a) hereof) or the
withdrawal, removal or dissolution of a General Partner (except that, if a
General Partner is on the date of such occurrence a partnership, the withdrawal,
death, dissolution, Event of Bankruptcy as to or removal of a partner in such
partnership shall be deemed not to be a dissolution of such General Partner if
the business of such General Partner is continued by the remaining partner or
partners), the Partnership shall be dissolved and terminated unless the
Partnership is continued pursuant to Section 7.03(b) hereof. The merger of the
General Partner with or
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into any entity that is admitted as a substitute or successor General Partner
pursuant to Section 7.02 hereof shall not be deemed to be the withdrawal,
dissolution or removal of the General Partner.
(b) Following the occurrence of an Event of Bankruptcy as to a
General Partner (and its removal pursuant to Section 7.04(a) hereof) or the
withdrawal, removal or dissolution of a General Partner (except that, if a
General Partner is on the date of such occurrence a partnership, the withdrawal,
death, dissolution, Event of Bankruptcy as to or removal of a partner in such
partnership shall be deemed not to be a dissolution of such General Partner if
the business of such General Partner is continued by the remaining partner or
partners), the Limited Partners, within 90 days after such occurrence, may elect
to continue the business of the Partnership for the balance of the term
specified in Section 2.04 hereof by selecting, subject to Section 7.02 hereof
and any other provisions of this Agreement, a substitute General Partner by
consent of the Limited Partners holding more than 50 percent of the Percentage
Interests of the Limited Partners. If the Limited Partners elect to continue the
business of the Partnership and admit a substitute General Partner, the
relationship with the Partners and of any Person who has acquired an interest of
a Partner in the Partnership shall be governed by this Agreement.
7.04 REMOVAL OF A GENERAL PARTNER.
(a) Upon the occurrence of an Event of Bankruptcy as to, or
the dissolution of, a General Partner, such General Partner shall be deemed to
be removed automatically; provided, however, that if a General Partner is on the
date of such occurrence a partnership, the withdrawal, death, dissolution, Event
of Bankruptcy as to or removal of a partner in such partnership shall be deemed
not to be a dissolution of the General Partner if the business of such General
Partner is continued by the remaining partner or partners. The Limited Partners
may not remove the General Partner, with or without cause.
(b) If a General Partner has been removed pursuant to this
Section 7.04 and the Partnership is continued pursuant to Section 7.03 hereof,
such General Partner shall promptly transfer and assign its General Partner
Interest in the Partnership (i) to the substitute General Partner approved by
the Limited Partners in accordance with Section 7.03(b) hereof and otherwise
admitted to the Partnership in accordance with Section 7.02 hereof. At the time
of assignment, the removed General Partner shall be entitled to receive from the
substitute General Partner the fair market value of the General Partner Interest
of such removed General Partner as reduced by any damages caused to the
Partnership by such General Partner. Such fair market value shall be determined
by an appraiser mutually agreed upon by the General Partner and the Limited
Partners within 10 days following the removal of the General Partner. In the
event that the parties are unable to agree upon an appraiser, the General
Partner and the Limited Partners each shall select an appraiser, each of which
appraisers shall complete an appraisal of the fair market value of the General
Partner's General Partner Interest within 30 days of the General Partner's
removal, and the fair market value of the General Partner's General Partner
Interest shall be the average of the two
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appraisals; provided, however, that if the higher appraisal exceeds the lower
appraisal by more than 20 percent of the amount of the lower appraisal, the two
appraisers, no later than 40 days after the removal of the General Partner,
shall select a third appraiser who shall complete an appraisal of the fair
market value of the General Partner's General Partner Interest no later than 60
days after the removal of the General Partner. In such case, the fair market
value of the General Partner's General Partner Interest shall be the average of
the two appraisals closest in value.
(c) The General Partner Interest of a removed General Partner,
during the time after default until transfer under Section 7.04(b), shall be
converted to that of a special Limited Partner; provided, however, such removed
General Partner shall not have any rights to participate in the management and
affairs of the Partnership, and shall not be entitled to any portion of the
income, expenses, Profit, gain or Loss, distributions or allocations, as the
case may be, payable or allocable to the Limited Partners as such. Instead, such
removed General Partner shall receive and be entitled to retain only
distributions or allocations of such items which it would have been entitled to
receive in its capacity as General Partner, until the transfer is effective
pursuant to Section 7.04(b).
(d) All Partners shall have given and hereby do give such
consents, shall take such actions and shall execute such documents as shall be
legally necessary and sufficient to effect all the foregoing provisions of this
Section 7.04.
ARTICLE VIII
RIGHTS AND OBLIGATIONS
OF THE LIMITED PARTNERS
8.01 MANAGEMENT OF THE PARTNERSHIP. The Limited Partners shall not
participate in the management or control of Partnership business nor shall they
transact any business for the Partnership, nor shall they have the power to sign
for or bind the Partnership, such powers being vested solely and exclusively in
the General Partner.
8.02 POWER OF ATTORNEY. Each Limited Partner hereby irrevocably
appoints the General Partner his true and lawful attorney-in-fact, who may act
for each Limited Partner and in his name, place and stead, and for his use and
benefit, to sign, acknowledge, swear to, deliver, file or record, at the
appropriate public offices, any and all documents, certificates, and instruments
as may be deemed necessary or desirable by the General Partner to carry out
fully the provisions of this Agreement (including specifically, but without
limitation, the provisions of Article XI with respect to the making of any
amendments hereto and the provisions of Section 6.09 hereof and any related sale
or exchange of such Limited Partner's Partnership Interests) and the Act in
accordance with their terms, which power of attorney is coupled with an interest
and shall survive the death, dissolution or legal incapacity
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of the Limited Partner, or the transfer by the Limited Partner of any part or
all of his Interest in the Partnership.
8.03 LIMITATION ON LIABILITY OF LIMITED PARTNERS. No Limited
Partner shall be liable for any debts, liabilities, contracts or obligations of
the Partnership. A Limited Partner shall be liable to the Partnership only to
make payments of his Capital Contribution, if any, as and when due hereunder.
After his Capital Contribution is fully paid, no Limited Partner shall, except
as otherwise required by the Act, be required to make any further Capital
Contributions or other payments or lend any funds to the Partnership.
8.04 OWNERSHIP BY LIMITED PARTNER OF CORPORATE GENERAL PARTNER OR
AFFILIATE. No Limited Partner shall at any time, either directly or indirectly,
own any stock or other interest in the General Partner or in any Affiliate
thereof, if such ownership by itself or in conjunction with other stock or other
interests owned by other Limited Partners would, in the opinion of counsel for
the Partnership, jeopardize the classification of the Partnership as a
partnership for federal income tax purposes. The General Partner shall be
entitled to make such reasonable inquiry of the Limited Partners as is required
to establish compliance by the Limited Partners with the provisions of this
Section.
8.05 REDEMPTION RIGHT.
(a) Subject to Section 8.05(c) and the provisions of any
agreements between the Partnership and one or more Limited Partners, each
Limited Partner, other than the General Partner, shall have the right (the
"Redemption Right") to require the Partnership to redeem on a Specified
Redemption Date all or a portion of such Limited Partner's Partnership Units at
a redemption price equal to and in the form of the Redemption Amount. The
Redemption Right shall be exercised pursuant to a Notice of Redemption delivered
to the General Partner by the Limited Partner who is exercising the Redemption
Right (the "Redeeming Partner"). A Limited Partner may not exercise the
Redemption Right for less than one hundred (100) Partnership Units or, if such
Limited Partner holds less than one hundred (100) Partnership Units, all of the
Partnership Units held by such Partner. The Redeeming Partner shall have no
right, with respect to any Partnership Units so redeemed, to receive any
distributions paid with respect to Partnership Units after the Specified
Redemption Date.
(b) Notwithstanding the provisions of Section 8.05(a), the
General Partner may, in its sole and absolute discretion, assume directly and
satisfy a Redemption Right by paying to the Redeeming Partner the Redemption
Amount on the Specified Redemption Date, whereupon the General Partner shall
acquire the Partnership Units offered for redemption by the Redeeming Partner
and shall be treated for all purposes of this Agreement as the owner of such
Partnership Units. In the event the General Partner shall exercise its right to
satisfy the Redemption Right in the manner described in the preceding sentence,
the Partnership shall have no obligation to pay any amount to the Redeeming
Partner with respect to such Redeeming Partner's exercise of the Redemption
Right, and each of the Redeeming Partner,
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the Partnership, and the General Partner shall treat the transaction between the
General Partner and the Redeeming Partner as a sale of the Redeeming Partner's
Partnership Units to the General Partner for federal income tax purposes. Each
Redeeming Partner agrees to execute such documents as the General Partner may
reasonably require in connection with the issuance of REIT Shares upon exercise
of the Redemption Right.
(c) Notwithstanding the provisions of Section 8.05(a) and
8.05(b), a Limited Partner shall not be entitled to exercise the Redemption
Right if the delivery of REIT Shares to such Partner on the Specified Redemption
Date by the General Partner pursuant to Section 8.05(b) (regardless of whether
or not the General Partner would in fact exercise its rights under Section
8.05(b)) would (i) result in such Partner or any other person owning, directly
or indirectly, REIT Shares in excess of the Ownership Limitation (as defined in
the Articles and calculated in accordance therewith), except as otherwise
expressly permitted in the Articles, (ii) result in REIT Shares being owned by
fewer than 100 persons (determined without reference to any rules of
attribution), (iii) result in the Company being "closely held" within the
meaning of Section 856(h) of the Code, (iv) cause the Company to own, directly
or constructively, 10 percent or more of the ownership interests in a tenant of
the General Partner's, the Partnership's, or a Subsidiary's real property,
within the meaning of Section 856(d)(2)(B) of the Code, or (v) cause the
acquisition of REIT Shares by such Partner to be "integrated" with any other
distribution of REIT Shares for purposes of complying with the registration
provisions of the Securities Act of 1933, as amended (the "Securities Act"). The
General Partner, in its sole discretion, may waive the restriction on redemption
set forth in this Section 8.05(c); provided, however, that in the event such
restriction is waived, the Redeeming Partner shall be paid the Cash Amount.
(d) Any Cash Amount to be paid to a Redeeming Partner pursuant
to this Section 8.05 shall be paid on the Specified Redemption Date; provided,
however, that the General Partner may elect to cause the Specified Redemption
Date to be delayed for up to an additional 180 days to the extent required for
the General Partner to cause additional REIT Shares to be issued to provide
financing to be used to make such payment of the Cash Amount. Notwithstanding
the foregoing, the General Partner agrees to use its best efforts to cause the
closing of the acquisition of redeemed Partnership Units hereunder to occur as
quickly as reasonably possible.
(e) Notwithstanding any other provision of this Agreement, the
General Partner shall place appropriate restrictions on the ability of the
Limited Partners to exercise their Redemption Rights as and if deemed necessary
to ensure that the Partnership does not constitute a "publicly traded
partnership" under section 7704 of the Code. If and when the General Partner
determines that imposing such restrictions is necessary, the General Partner
shall give prompt written notice thereof (a "Restriction Notice") to each of the
Limited Partners, which notice shall be accompanied by a copy of an opinion of
counsel to the Partnership which states that, in the opinion of such counsel,
restrictions are necessary in order to avoid the Partnership being treated as a
"publicly traded partnership" under section 7704 of the Code.
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8.06 REGISTRATION.
(a) Legend. Each certificate, if any, evidencing Partnership
Units or Redemption Shares shall bear a restrictive legend in substantially the
following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities law. No transfer of the
securities represented by this certificate shall be valid or effective
unless (a) such transfer is made pursuant to an effective registration
statement under the Securities Act, or (b) the holder of the securities
proposed to be transferred shall have delivered to the issuer either a
no-action letter from the Securities and Exchange Commission or an
opinion of counsel (who may be an employee of such holder) experienced
in securities matters to the effect that such proposed transfer is
exempt from the registration requirements of the act which opinion
shall be reasonably satisfactory to the issuer."
(b) Shelf Registration. The General Partner may agree to file
one or more registration statements under Rule 415 of the Securities Act, or any
similar rule that may be adopted by the Commission (a "Shelf Registration"),
with respect to Redemption Shares. The General Partner further agrees to
supplement or make amendments to the Shelf Registration, if required by the
rules, regulations or instructions applicable to the registration form utilized
by the Company or by the Securities Act or rules and regulations thereunder for
the Shelf Registration. Additional terms and provisions with respect to the
registration of Redemption Shares under a Shelf Registration or otherwise,
including the period during which the General Partner will maintain the
effectiveness of any registration statement (the "Shelf Registration Period"),
may be set forth in one or more agreements between the Partnership and any
Limited Partners affected thereby.
(c) Registration and Qualification Procedures. Unless
otherwise agreed with any affected Limited Partner or holder of Redemption
Shares, the General Partner will:
(i) prepare and file with the Commission a
registration statement, including amendments thereof and supplements relating
thereto, with respect to the Redemption Shares, in connection with which the
General Partner will give each holder of Redemption Shares, their underwriters,
if any, and their counsel and accountants a reasonable opportunity to
participate in the preparation thereof and will give such persons reasonable
access to its books, records, officers and independent public accountants;
(ii) use its best efforts to cause the
registration statement to be declared effective by the Commission;
(iii) keep the registration statement effective
and the related prospectus current throughout the Shelf Registration Period;
provided, however, that the
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General Partner shall have no obligation to file any amendment or supplement at
its own expense more than ninety (90) days after the effective date of the
registration statement;
(iv) furnish to each holder of Redemption Shares
such numbers of copies of prospectuses, and supplements or amendments thereto,
and such other documents as such holder reasonably requests;
(v) register or qualify the securities covered
by the registration statement under the securities or blue sky laws of such
jurisdictions within the United States as any holder of Redemption Shares shall
reasonably request, and do such other reasonable acts and things as may be
required of it to enable such holders to consummate the sale or other
disposition in such jurisdictions of the Redemption Shares; provided, however,
that the General Partner shall not be required to (i) qualify as a foreign
corporation or consent to a general and unlimited service or process in any
jurisdictions in which it would not otherwise be required to be qualified or so
consent or (ii) qualify as a dealer in securities;
(vi) furnish, at the request of the holders of
Redemption Shares, on the date Redemption Shares are delivered to the
underwriters for sale pursuant to such registration, or, if such Shares are not
being sold through underwriters, on the date the Shelf Registration with respect
to such Redemption Shares becomes effective, (A) a securities opinion of counsel
representing the General Partner for the purposes of such registration covering
such legal matters as are customarily included in such opinions and (B) letters
of the firm of independent public accountants that certified the financial
statements included in the registration statement, addressed to the
underwriters, covering substantially the same matters as are customarily covered
in accountant's letters delivered to underwriters in underwritten public
offerings of securities and such other financial matters as such holders (or the
underwriters, if any) may reasonably request;
(vii) otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and file on a
timely basis all reports required to be filed by the General Partner with the
SEC under the Securities Act and the Exchange Act;
(viii) enter into and perform an underwriting
agreement with the managing underwriter, if any, selected as provided herein,
containing customary (A) terms of offer and sale of the securities, payment
provisions, underwriting discounts and commissions and (B) representations,
warranties, covenants, indemnities, terms and conditions;
(ix) keep the holders of Redemption Shares
advised as to the initiation and progress of the registration.
(d) Allocation of Expenses. Unless otherwise agreed by any
affected Limited Partner or holder of Redemption Shares, the General Partner
shall pay all expenses in connection with the Shelf Registration, including
without limitation (i) all expenses incident to filing with the National
Association of Securities Dealers, Inc., (ii) registration fees, (iii)
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printing expenses, (iv) accounting and legal fees and expenses, except to the
extent any Limited Partner or holder of Redemption Shares elects to engage
accountants or attorneys in addition to the accountants and attorneys engaged by
the General Partner, (v) accounting expenses incident to or required by any such
registration or qualification and (vi) expenses of complying with the securities
or blue sky laws of any jurisdictions in connection with such registration or
qualification; provided, however, the General Partner shall not be liable for
(A) any discounts or commissions to any underwriter or broker attributable to
the sale of Redemption Shares, or (B) any fees or expenses incurred by holders
of Redemption Shares in connection with such registration which, according to
the written instructions of any regulatory authority, the General Partner is not
permitted to pay.
(e) Indemnification.
(i) In connection with the Shelf Registration,
the General Partner agrees to indemnify holders of Redemption Shares within the
meaning of Section 15 of the Securities Act, against all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation)
caused by any untrue, or alleged untrue, statement of a material fact contained
in the Shelf Registration, preliminary prospectus or prospectus (as amended or
supplemented if the General Partner shall have furnished any amendments or
supplements thereto) or caused by any omission, or alleged omission, to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any untrue statement, alleged
untrue statement, omission, or alleged omission based upon information furnished
to the General Partner expressly for use therein. The General Partner and each
officer, director and controlling person of the General Partner shall be
indemnified by each holder of Redemption Shares covered by the Shelf
Registration for all such losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) caused by any such untrue, or
alleged untrue, statement or any such omission, or alleged omission, based upon
information furnished to the General Partner expressly for use therein in a
writing signed by the holder.
(ii) Promptly upon receipt by a party indemnified
under this Section 8.06(e) of notice of the commencement of any action against
such indemnified party in respect of which indemnity or reimbursement may be
sought against any indemnifying party under this Section 8.06(e), such
indemnified party shall notify the indemnifying party in writing of the
commencement of such action, but the failure to so notify the indemnifying party
shall not relieve it of any liability which it may have to any indemnified party
otherwise than under this Section 8.06(e) unless such failure shall materially
adversely affect the defense of such action. In case notice of commencement of
any such action shall be given to the indemnifying party as above provided, the
indemnifying party shall be entitled to participate in and, to the extent it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense of such action at its own expense, with counsel chosen by it and
reasonably satisfactory to such indemnified party. The indemnified party shall
have the right to employ separate counsel in any such action and participate in
the
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<PAGE> 38
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the indemnified party unless
(i) the indemnifying party agrees to pay the same, (ii) the indemnifying party
fails to assume the defense of such action with counsel reasonably satisfactory
to the indemnified party or (iii) the named parties to any such action
(including any impleaded parties) have been advised by such counsel that
representation of such indemnified party and the indemnifying party by the same
counsel would be inappropriate under applicable standards of professional
conduct (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party). No indemnifying
party shall be liable for any settlement entered into without its consent.
(f) Contribution.
(i) If for any reason the indemnification
provisions contemplated by Section 8.06(e) are either unavailable or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities referred to therein, then the party that would
otherwise be required to provide indemnification or the indemnifying party (in
either case, for purposes of this Section 8.06(f), the "Indemnifying Party") in
respect of such losses, claims, damages or liabilities, shall contribute to the
amount paid or payable by the party that would otherwise be entitled to
indemnification or the indemnified party (in either case, for purposes of this
Section 8.06(f), the "Indemnified Party") as a result of such losses, claims,
damages, liabilities or expense, in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party and the Indemnified Party, as well
as any other relevant equitable considerations. The relative fault of the
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact related to
information supplied by the Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party. In no event shall any holder of Redemption
Shares covered by the Shelf Registration be required to contribute an amount
greater than the dollar amount of the proceeds received by such holder from the
sale of Redemption Shares pursuant to the registration giving rise to the
liability.
(ii) The parties hereto agree that it would not
be just and equitable if contribution pursuant to this Section 8.06(f) were
determined by pro rata allocation (even if the holders or any underwriters or
all of them were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. No person or entity
determined to have committed a fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
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<PAGE> 39
(iii) The contribution provided for in this
Section 8.06(f) shall survive the termination of this Agreement and shall remain
in full force and effect regardless of any investigation mae by or on behalf of
any Indemnified Party.
(g) Listing on Securities Exchange. If the General Partner
shall list or maintain the listing of any shares of Common Stock on any
securities exchange or national market system, it will at its expense and as
necessary to permit the registration and sale of the Redemption Shares
hereunder, list thereon, maintain and, when necessary, increase such listing to
include such Redemption Shares.
ARTICLE IX
TRANSFERS OF PARTNERSHIP INTERESTS
9.01 PURCHASE FOR INVESTMENT.
(a) Each Limited Partner hereby represents and warrants to the
General Partner and to the Partnership that the acquisition of his Partnership
Interest is made as a principal for his account for investment purposes only and
not with a view to the resale or distribution of such Partnership Interest.
(b) Each Limited Partner agrees that he will not sell, assign
or otherwise transfer his Partnership Interest or any fraction thereof, whether
voluntarily or by operation of law or at judicial sale or otherwise, to any
Person who does not make the representations and warranties to the General
Partner set forth in Section 9.01(a) above and similarly agree not to sell,
assign or transfer such Partnership Interest or fraction thereof to any Person
who does not similarly represent, warrant and agree.
9.02 RESTRICTIONS ON TRANSFER OF LIMITED PARTNERSHIP INTERESTS.
(a) Except as otherwise provided in this Article IX, no
Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise
transfer his Limited Partnership Interest, in whole or in part, whether
voluntarily or by operation of law or at judicial sale or otherwise
(collectively, a "Transfer") without the written consent of the General Partner,
which consent may be withheld in the sole discretion of the General Partner. The
General Partner may require, as a condition of any Transfer, that the transferor
assume all costs incurred by the Partnership in connection therewith.
(b) No Limited Partner may effect a Transfer of his Limited
Partnership Interest, in whole or in part, if, in the opinion of legal counsel
for the Partnership, such proposed Transfer would require the registration of
the Limited Partnership Interest under the Securities Act, or would otherwise
violate any applicable federal or state securities or "Blue Sky" law (including
investment suitability standards).
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<PAGE> 40
(c) No Transfer by a Limited Partner of his Partnership Units,
in whole or in part, may be made to any Person if (i) in the opinion of legal
counsel for the Partnership, the Transfer would result in the Partnership's
being treated as an association taxable as a corporation (other than a qualified
REIT subsidiary within the meaning of Section 856(i) of the Code), (ii) in the
opinion of counsel for the Partnership, it would adversely affect the ability of
the Company to continue to qualify as a REIT or subject the Company to any
additional taxes under Section 857 or Section 4981 of the Code, or (iii) 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.
(d) Section 9.02(a) shall not apply to the following
transactions, except that the General Partner may require that the transferor
assume all costs incurred by the Partnership in connection therewith:
(i) any Transfer by a Limited Partner pursuant
to the exercise of its Redemption Right under Section 8.05
hereof;
(ii) any Transfer by a Limited Partner that is a
corporation or other business entity to any of its Affiliates
or subsidiaries or to any successor in interest of such
Limited Partner; or
(iii) any donative Transfer by an individual
Limited Partner to his immediate family members or any trust
in which the individual or his immediate family members own,
collectively, 100 percent of the beneficial interests. For
purposes of this Section 9.02(d)(iii), the term "immediate
family member" shall be deemed to include only an individual
Limited Partner's spouse, children and grandchildren.
(e) Any Transfer in contravention of any of the provisions of
this Article IX shall be void and ineffectual and shall not be binding upon, or
recognized by, the Partnership.
9.03 ADMISSION OF SUBSTITUTE LIMITED PARTNER.
(a) Subject to the other provisions of this Article IX, an
assignee of the Limited Partnership Interest of a Limited Partner (which shall
be understood to include any purchaser, transferee, donee, or other recipient of
any disposition of such Limited Partnership Interest) shall be deemed admitted
as a Limited Partner of the Partnership only upon the satisfactory completion of
the following:
(i) The assignee shall have accepted and agreed
to be bound by the terms and provisions of this Agreement by
executing a counterpart or an amendment thereof, including a
revised Exhibit A, and such other documents
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<PAGE> 41
or instruments as the General Partner may require in order to
effect the admission of such Person as a Limited Partner.
(ii) To the extent required, an amended
Certificate evidencing the admission of such Person as a
Limited Partner shall have been signed, acknowledged and filed
for record in accordance with the Act.
(iii) The assignee shall have delivered a letter
containing the representation set forth in Section 9.01(a)
hereof and the agreement set forth in Section 9.01(b) hereof.
(iv) If the assignee is a corporation,
partnership or trust, the assignee shall have provided the
General Partner with evidence satisfactory to counsel for the
Partnership of the assignee's authority to become a Limited
Partner under the terms and provisions of this Agreement.
(v) The assignee shall have executed a power of
attorney containing the terms and provisions set forth in
Section 8.02 hereof.
(vi) The assignee shall have paid all legal fees
and other expenses of the Partnership and the General Partner
and filing and publication costs in connection with his
substitution as a Limited Partner.
(b) For the purpose of allocating profits and losses and
distributing cash received by the Partnership, a Substitute Limited Partner
shall be treated as having become, and appearing in the records of the
Partnership as, a Partner upon the filing of the Certificate described in
Section 9.03(a)(ii) hereof or, if no such filing is required, the later of the
date specified in the transfer documents or the date on which the General
Partner has received all necessary instruments of transfer and substitution.
(c) The General Partner shall cooperate with the Person
seeking to become a Substitute Limited Partner by preparing the documentation
required by this Section and making all official filings and publications. The
Partnership shall take all such action as promptly as practicable after the
satisfaction of the conditions in this Article IX to the admission of such
Person as a Limited Partner of the Partnership.
9.04 RIGHTS OF ASSIGNEES OF PARTNERSHIP INTERESTS.
(a) Subject to the provisions of Sections 9.01 and 9.02
hereof, except as required by operation of law, the Partnership shall not be
obligated for any purposes whatsoever to recognize the assignment by any Limited
Partner of his Partnership Interest until the Partnership has received notice
thereof.
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<PAGE> 42
(b) Any Person who is the assignee of all or any portion of a
Limited Partner's Limited Partnership Interest, but does not become a Substitute
Limited Partner and desires to make a further assignment of such Limited
Partnership Interest, shall be subject to all the provisions of this Article IX
to the same extent and in the same manner as any Limited Partner desiring to
make an assignment of his Limited Partnership Interest.
9.05 EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR TERMINATION OF A
LIMITED PARTNER. The occurrence of an Event of Bankruptcy as to a Limited
Partner, the death of a Limited Partner or a final adjudication that a Limited
Partner is incompetent (which term shall include, but not be limited to,
insanity) shall not cause the termination or dissolution of the Partnership, and
the business of the Partnership shall continue if an order for relief in a
bankruptcy proceeding is entered against a Limited Partner, the trustee or
receiver of his estate or, if he dies, his executor, administrator or trustee,
or, if he is finally adjudicated incompetent, his committee, guardian or
conservator, shall have the rights of such Limited Partner for the purpose of
settling or managing his estate property and such power as the bankrupt,
deceased or incompetent Limited Partner possessed to assign all or any part of
his Partnership Interest and to join with the assignee in satisfying conditions
precedent to the admission of the assignee as a Substitute Limited Partner.
9.06 JOINT OWNERSHIP OF INTERESTS. A Partnership Interest may be
acquired by two individuals as joint tenants with right of survivorship,
provided, that such individuals either are married or are related and share the
same home as tenants in common. The written consent or vote of both owners of
any such jointly held Partnership Interest shall be required to constitute the
action of the owners of such Partnership Interest; provided, however, that the
written consent of only one joint owner will be required if the Partnership has
been provided with evidence satisfactory to the counsel for the Partnership that
the actions of a single joint owner can bind both owners under the applicable
laws of the state of residence of such joint owners. Upon the death of one owner
of a Partnership Interest held in a joint tenancy with a right of survivorship,
the Partnership Interest shall become owned solely by the survivor as a Limited
Partner and not as an assignee. The Partnership need not recognize the death of
one of the owners of a jointly-held Partnership Interest until it shall have
received notice of such death. Upon notice to the General Partner from either
owner, the General Partner shall cause the Partnership Interest to be divided
into two equal Partnership Interests, which shall thereafter be owned separately
by each of the former owners.
ARTICLE X
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
10.01 BOOKS AND RECORDS. At all times during the continuance of the
Partnership, the Partners shall keep or cause to be kept at the Partnership's
specified office true and complete books of account in accordance with the
accounting method followed by the
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<PAGE> 43
Partnership for federal income tax purposes, including: (a) a current list of
the full name and last known business address of each Partner, (b) a copy of the
Certificate of Limited Partnership and all certificates of amendment thereto,
(c) copies of the Partnership's federal, state and local income tax returns and
reports, (d) copies of the Agreement and any financial statements of the
Partnership for the three most recent years and (e) all documents and
information required under the Act. Any Partner or his duly authorized
representative, upon paying the costs of collection, duplication and mailing,
shall be entitled to inspect or copy such records during ordinary business
hours.
10.02 CUSTODY OF PARTNERSHIP FUNDS; BANK ACCOUNTS.
(a) All funds of the Partnership not otherwise invested shall
be deposited in one or more accounts maintained in such banking or brokerage
institutions as the General Partner shall determine, and withdrawals shall be
made only on such signature or signatures as the General Partner may, from time
to time, determine.
(b) All deposits and other funds not needed in the operation
of the business of the Partnership may be invested by the General Partner in
investment grade instruments (or investment companies whose portfolio consists
primarily thereof), government obligations, certificates of deposit, bankers'
acceptances and municipal notes and bonds. The funds of the Partnership shall
not be commingled with the funds of any other Person except for such commingling
as may necessarily result from an investment in those investment companies
permitted by this Section 10.02(b).
10.03 FISCAL AND TAXABLE YEAR. The fiscal and taxable year of the
Partnership shall be the calendar year.
10.04 ANNUAL TAX INFORMATION AND REPORT. Within 75 days after the
end of each fiscal year of the Partnership, the General Partner shall furnish to
each person who was a Limited Partner at any time during such year the tax
information necessary to file such Limited Partner's individual tax returns as
shall be reasonably required by law.
10.05 TAX MATTERS PARTNER; TAX ELECTIONS; SPECIAL BASIS ADJUSTMENTS.
(a) The General Partner shall be the Tax Matters Partner of
the Partnership within the meaning of Section 6231(a)(7) of the Code. As Tax
Matters Partner, the General Partner shall have the right and obligation to take
all actions authorized and required, respectively, by the Code for the Tax
Matters Partner. The General Partner shall have the right to retain professional
assistance in respect of any audit of the Partnership by the Service and all
out-of-pocket expenses and fees incurred by the General Partner on behalf of the
Partnership as Tax Matters Partner shall constitute Partnership expenses. In the
event the General Partner receives notice of a final Partnership adjustment
under Section 6223(a)(2) of the Code, the General Partner shall either (i) file
a court petition for judicial review of such final adjustment within the period
provided under Section 6226(a) of the Code, a copy of
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<PAGE> 44
which petition shall be mailed to all Limited Partners on the date such petition
is filed, or (ii) mail a written notice to all Limited Partners, within such
period, that describes the General Partner's reasons for determining not to file
such a petition.
(b) All elections required or permitted to be made by the
Partnership under the Code or any applicable state or local tax law shall be
made by the General Partner in its sole discretion.
(c) In the event of a transfer of all or any part of the
Partnership Interest of any Partner, the Partnership, at the option of the
General Partner, may elect pursuant to Section 754 of the Code to adjust the
basis of the Properties. Notwithstanding anything contained in Article V of this
Agreement, any adjustments made pursuant to Section 754 shall affect only the
successor in interest to the transferring Partner and in no event shall be taken
into account in establishing, maintaining or computing Capital Accounts for the
other Partners for any purpose under this Agreement. Each Partner will furnish
the Partnership with all information necessary to give effect to such election.
10.06 REPORTS TO LIMITED PARTNERS.
(a) The books of the Partnership shall be examined annually as
of the end of each fiscal year of the Partnership by accountants selected by the
General Partner, who shall be the same accountants responsible for the
examination of the General Partner's books. The General Partner shall determine
and prepare a statement of assets and liabilities and Partners' capital as of
the end of such year, as well as statements of revenue and expenses
(collectively, the "Financial Statements"). As a note to such Financial
Statements, the General Partner shall prepare a schedule of all loans to the
Partnership. Such schedule shall demonstrate that loans have been made, used,
carried on the books of the Partnership (and repaid, if applicable) in
accordance with the provisions of this Agreement. Within 90 days after the end
of each fiscal year, the General Partner shall transmit the Financial Statements
to the Limited Partners. The General Partner also shall prepare quarterly
unreviewed Financial Statements and shall transmit such statements to the
Limited Partners within 45 days of the end of each fiscal quarter of the
Partnership.
(b) Any Partner shall further have the right to a private
audit of the books and records of the Partnership, provided such audit is made
for Partnership purposes, at the expense of the Partner desiring it and is made
during normal business hours.
ARTICLE XI
AMENDMENT OF AGREEMENT
The General Partner, without the consent of the Limited Partners, may
amend this Agreement in any respect; provided, however, that the following
amendments shall require
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the consent of Limited Partners (other than the General Partner or any
wholly-owned Subsidiary) holding more than 50 percent of the Percentage
Interests of the Limited Partners (other than the General Partner or any
wholly-owned Subsidiary):
(a) any amendment adversely affecting the operation of the
Conversion Factor or the Redemption Right;
(b) any amendment that would adversely affect the rights of
the Limited Partners to receive the distributions payable to them hereunder;
(c) any amendment that would materially alter the
Partnership's allocations of Profit and Loss; or
(d) any amendment that would impose on the Limited Partners
any obligation to make additional Capital Contributions to the Partnership.
Notwithstanding the foregoing, the General Partner, without the consent
of the Limited Partners, may amend this agreement in any respect in connection
with a Transaction complying with the provisions of Section 7.01(c) hereof.
ARTICLE XII
GENERAL PROVISIONS
12.01 NOTICES. All communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been given when
delivered personally or upon deposit in the United States mail, registered,
postage prepaid return receipt requested, to the Partners at the addresses set
forth in Exhibit B attached hereto; provided, however, that any Partner may
specify a different address by notifying the General Partner in writing of such
different address. Notices to the Partnership shall be delivered at or mailed to
its specified office.
12.02 SURVIVAL OF RIGHTS. Subject to the provisions hereof limiting
transfers, this Agreement shall be binding upon and inure to the benefit of the
Partners and the Partnership and their respective legal representatives,
successors, transferees and assigns.
12.03 ADDITIONAL DOCUMENTS. Each Partner agrees to perform all
further acts and execute, swear to, acknowledge and deliver all further
documents which may be reasonable, necessary, appropriate or desirable to carry
out the provisions of this Agreement or the Act.
12.04 SEVERABILITY. If any provision of this Agreement shall be
declared illegal, invalid, or unenforceable in any jurisdiction, then such
provision shall be deemed to be
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severable from this Agreement (to the extent permitted by law) and in any event
such illegality, invalidity or unenforceability shall not affect the remainder
hereof.
12.05 ENTIRE AGREEMENT. This Agreement and exhibits attached hereto
constitute the entire Agreement of the Partners and supersede all prior written
agreements and prior and contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof.
12.06 PRONOUNS AND PLURALS. When the context in which words are used
in the Agreement indicates that such is the intent, words in the singular number
shall include the plural and the masculine gender shall include the neuter or
female gender as the context may require.
12.07 HEADINGS. The Article headings or sections in this Agreement
are for convenience only and shall not be used in construing the scope of this
Agreement or any particular Article.
12.08 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original copy and all of
which together shall constitute one and the same instrument binding on all
parties hereto, notwithstanding that all parties shall not have signed the same
counterpart.
12.09 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina.
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IN WITNESS WHEREOF, the parties hereto have hereunder affixed their
signatures to this Second Amended and Restated Agreement of Limited Partnership,
all as of the 11th day of July, 1997.
GENERAL PARTNER:
WINSTON HOTELS, INC., a
North Carolina corporation
By: /s/ Robert W. Winston, III
--------------------------------
President
LIMITED PARTNERS:
HOTEL I, INC.
By: /s/ Robert W. Winston, III
--------------------------------
Name: Robert W. Winston, III
Title: President
CARY SUITES, INC.
By: /s/ Robert W. Winston, III
--------------------------------
Name: Robert W. Winston, III
Title: President
RWW, INC.
By: /s/ Robert W. Winston, III
--------------------------------
Name: Robert W. Winston, III
Title: President
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<PAGE> 48
WJS ASSOCIATES-PERIMETER II, INC.
By: /s/ Charles M. Winston
--------------------------------
Name: Charles M. Winston
Title: President
HOTEL II, INC.
By: /s/ Charles M. Winston
--------------------------------
Name: Charles M. Winston
Title: President
/s/ Charles M. Winston
-----------------------------------
CHARLES M. WINSTON
/s/ John B. Harris, Jr.
-----------------------------------
JOHN B. HARRIS, JR.
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<PAGE> 49
EXHIBIT A
January 22, 1997
(after exercise of options by Leslie Ligon, III)
<TABLE>
<CAPTION>
AGREED VALUE OF
CAPITAL
PARTNER AND ADDRESS CASH CONTRIBUTION CONTRIBUTION PARTNERSHIP UNITS PERCENTAGE INTEREST
- ------------------- ----------------- -------------- ----------------- -------------------
<S> <C> <C> <C> <C>
GENERAL PARTNER:
Winston Hotels, Inc. $103,524,120 $2,693,610 15,148,964 92.29
2209 Century Drive
Raleigh, NC 27612
LIMITED PARTNERS:
Hotel I, Inc. _____ $2,975,000 297,500 1.81%
2209 Century Drive
Raleigh, NC 27612
Charles M. Winston _____ $1,056,430 105,643 .64%
Winston Hotels, Inc.
2209 Century Drive
Raleigh, NC 27612
John B. Harris, Jr. _____ $308,130 30,813 .19%
Winston Hotels, Inc.
2209 Century Drive
Raleigh, NC 27612
Cary Suites, Inc. _____ $6,947,215 606,413 3.69%
2209 Century Drive
Raleigh, NC 27612
RWW, Inc. _____ $788,365 69,960 .43%
2209 Century Drive
Raleigh, NC 27612
WJS Associates- _____ $1,230,000 109,516 .67%
Perimeter II, Inc.
2209 Century Drive
Raleigh, NC 27612
Hotel II, Inc. _____ $590,042 45,651 .28%
2209 Century Drive -------- ---
Raleigh, NC 27612
16,414,460 100.00%
</TABLE>
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<PAGE> 50
EXHIBIT B
NOTICE OF EXERCISE OF REDEMPTION RIGHT
In accordance with Section ____ of the Second Amended and Restated
Agreement of Limited Partnership of WINN Limited Partnership (the "Agreement"),
the undersigned hereby irrevocably (i) presents for redemption ________
Partnership Units in Winston Hotels Partnership, L.P. in accordance with the
terms of the Agreement and the Redemption Right referred to in Section ____
thereof, (ii) surrenders such Limited Partnership Units and all right, title and
interest therein, and (iii) directs that the Cash Amount or REIT Shares (as
defined in Sections ____ and ____ of the Agreement) as determined by the General
Partner deliverable upon exercise of the Redemption Right be delivered to the
address specified below, and if REIT Shares are to be delivered, such REIT
Shares be registered or placed in the name(s) and at the address(es) specified
below.
Dated:________ __, _____
Name of Limited Partner:
------------------------------
(Signature of Limited Partner)
------------------------------
(Mailing Address)
------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
------------------------------
If REIT Shares are to be issued, issue to:
Please insert social security or identifying number:
Name:
46
