EXHIBIT 10.1(1)
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SECOND AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP
OF
PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, L.P.
APRIL 11, 1997
TABLE OF CONTENTS
ARTICLE I
DEFINED TERMS.................................................................. 1
ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION.................................... 9
2.01 Continuation.............................................................. 9
2.02 Name, Office and Registered Agent......................................... 9
2.03 Partners.................................................................. 9
2.04 Term and Dissolution...................................................... 9
2.05 Filing of Certificate and Perfection of Limited Partnership.............. 10
ARTICLE III
BUSINESS OF THE PARTNERSHIP.................................................... 10
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS............................................. 11
4.01 Capital Contributions..................................................... 11
4.02 Additional Capital Contributions and Issuances of Additional Partnership
Interests................................................................. 11
4.03 Additional Funding........................................................ 14
4.04 Capital Accounts.......................................................... 14
4.05 Percentage Interests...................................................... 14
4.06 No Interest on Contributions.............................................. 15
4.07 Return of Capital Contributions........................................... 15
4.08 No Third Party Beneficiary................................................ 15
4.09 Stock Incentive Plans..................................................... 15
ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS.............................................. 17
5.01 Allocation of Profit and Loss............................................. 17
5.02 Operating Distributions................................................... 18
5.03 REIT Distribution Requirements............................................ 19
5.04 No Right to Distributions in Kind......................................... 19
5.05 Limitations on Return of Capital Contributions............................ 19
5.06 Distributions Upon Liquidation............................................ 19
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5.07 Substantial Economic Effect............................................... 20
5.08 Additional Distributions Provisions and Definitions
Relating to Preferred Units............................................... 20
ARTICLE VI
RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER.......................... 22
6.01 Management of the Partnership............................................. 22
6.02 Delegation of Authority................................................... 24
6.03 Indemnification and Exculpation of Indemnitees............................ 24
6.04 Liability of the General Partner.......................................... 26
6.05 Expenditures by Partnership............................................... 27
6.06 Outside Activities........................................................ 27
6.07 Employment or Retention of Affiliates..................................... 27
6.08 General Partner Participation............................................. 28
6.09 Title to Partnership Assets............................................... 28
6.10 Miscellaneous............................................................. 28
ARTICLE VII
CHANGES IN GENERAL PARTNER..................................................... 29
7.01 Transfer of the General Partner's Partnership Interest.................... 29
7.02 Admission of a Substitute or Successor General............................ 30
7.03 Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner 31
7.04 Removal of a General Partner.............................................. 31
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS................................. 33
8.01 Management of the Partnership............................................. 33
8.02 Power of Attorney......................................................... 33
8.03 Limitation on Liability of Limited Partners............................... 33
8.04 Ownership by Limited Partner of Corporate General Partner or Affiliate.... 33
8.05 Redemption Right.......................................................... 33
ARTICLE IX
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS..................................... 37
9.01 Purchase for Investment................................................... 37
9.02 Restrictions on Transfer of Limited Partnership Interests................. 37
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9.03 Admission of Substitute Limited Partner................................... 38
9.04 Rights of Assignees of Partnership Interests.............................. 39
9.05 Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner 39
9.06 Joint Ownership of Interests.............................................. 40
ARTICLE X
BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS...................................... 40
10.01 Books and Records......................................................... 40
10.02 Custody of Partnership Funds; Bank Accounts............................... 41
10.03 Fiscal and Taxable Year................................................... 41
10.04 Annual Tax Information and Report......................................... 41
10.05 Tax Matters Partner; Tax Elections;
Special Basis Adjustments................................................. 41
10.06 Reports to Limited Partners............................................... 42
ARTICLE XI
AMENDMENT OF AGREEMENT.......................................................... 42
ARTICLE XII
GENERAL PROVISIONS.............................................................. 43
12.01 Notices................................................................... 43
12.02 Survival of Rights........................................................ 43
12.03 Additional Documents...................................................... 44
12.04 Severability.............................................................. 44
12.05 Entire Agreement.......................................................... 44
12.06 Pronouns and Plurals...................................................... 44
12.07 Headings.................................................................. 44
12.08 Counterparts.............................................................. 44
12.09 Governing Law............................................................. 44
12.10 Guaranty by Company....................................................... 44
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
PATRIOT AMERICAN HOSPITALITY PARTNERSHIP, L.P.
RECITALS
Patriot American Hospitality Partnership, L.P. (the "Partnership") was
formed as a limited partnership under the laws of the Commonwealth of Virginia
by a Certificate of Limited Partnership filed with the Clerk of the State
Corporation Commission of Virginia on April 17, 1995. The Partnership is
governed by a First Amended and Restated Agreement of Limited Partnership dated
as of October 2, 1995, maintained at the offices of the Partnership (the
"Current Agreement").
The General Partner desires to restate the Current Agreement in its
entirety.
AGREEMENT
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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 Current Agreement to read in its entirety as follows:
ARTICLE I
DEFINED TERMS
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The following defined terms used in this Agreement shall have the meanings
specified below:
"ACT" means the Virginia Revised Uniform Limited Partnership Act, as it may
be amended from time to time.
"ADDITIONAL FUNDS" has the meaning set forth in Section 4.03 hereof.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to this Partnership as
a Limited Partner pursuant to Section 4.02 hereof.
"ADDITIONAL SECURITIES" means any additional REIT Shares (other than REIT
Shares issued in connection with a redemption pursuant to Section 8.05 hereof)
or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares, as set forth in
Section 4.02(a)(ii).
"ADMINISTRATIVE EXPENSES" means (i) all administrative and operating costs
and expenses incurred by the Partnership, (ii) those administrative costs and
expenses of the General Partner, including any salaries or other payments to
directors, officers or employees of the General Partner, and any accounting and
legal expenses of the General Partner, which expenses, the Partners have agreed,
are expenses of the Partnership and not the General Partner, and (iii) to the
extent not included in clause (ii) above, REIT Expenses; provided, however, that
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Administrative Expenses shall not include any administrative costs and expenses
incurred by the Company that are attributable to Properties or partnership
interests in a Subsidiary Partnership that are owned by the Company directly.
"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, 10% 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 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.
"AGREED VALUE" means the fair market value of a Partner's non-cash Capital
Contribution as agreed to by the Partners. The names and addresses of the
Partners, number of Partnership Units issued to each Partner, and the Agreed
Value of non-cash Capital Contributions as of the date hereof is set forth on
Exhibit A.
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"AGREEMENT" means this Second Amended and Restated Agreement of Limited
Partnership.
"ARTICLES OF INCORPORATION" means the Amended and Restated Articles of
Incorporation of the Company filed with the State Corporation Commission of the
Commonwealth of Virginia, as amended or restated from time to time.
"CAPITAL ACCOUNT" has the meaning provided in Section 4.04 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.
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"CAPITAL TRANSACTION" means the refinancing, sale, exchange, condemnation,
recovery of a damage award or insurance proceeds (other than business or rental
interruption insurance proceeds not reinvested in the repair or reconstruction
of Properties), or other disposition of any Property (or the Partnership's
interest therein).
"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 Company of a
Notice of Redemption. The value of the REIT Shares Amount shall be based on the
average of the daily market price of REIT Shares 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 the REIT Shares are listed or admitted to
trading on any securities exchange or the NYSE, the sale 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, regular way, on such day, (ii) if the REIT Shares are not
listed or admitted to trading on any securities exchange or the NYSE, 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
reliable quotation source designated by the Company, or (iii) if the REIT Shares
are not listed or admitted to trading on any securities exchange or the NYSE 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 reliable quotation source designated by the Company, or if there
shall be no bid and asked prices on such day, the average of the high bid and
low asked prices, as so reported, on the most recent day (not more than ten days
prior to the date in question) for which prices have been so reported; provided
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that if there are no bid and asked prices reported during the ten days prior to
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the date in question, the value of the REIT Shares shall be determined by the
Company acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. In the
event the REIT Shares Amount includes rights that a holder of REIT Shares would
be entitled to receive, then the value of such rights shall be determined by the
Company acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate.
"CERTIFICATE" means any instrument or document that is required under the
laws of the Commonwealth of Virginia, 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 Commonwealth of Virginia 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 Commonwealth of Virginia 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
successor provision of the Code.
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"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMPANY" means Patriot American Hospitality, Inc., a Virginia corporation,
and its successors.
"CONVERSION FACTOR" means 2.0, provided that in the event that the Company
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(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 issued and outstanding on
the record date for such dividend, distribution, subdivision or combination
(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 such date. 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; provided, however, that
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if the Company receives a Notice of Redemption after the record date, but prior
to the effective date of such dividend, distribution, subdivision or
combination, the Conversion Factor shall be determined as if the Company had
received the Notice of Redemption immediately prior to the record date for such
dividend, distribution, subdivision or combination.
"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 or
bankruptcy 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.
"GENERAL PARTNER" means PAH GP and any Person who becomes a substitute or
additional General Partner as provided herein, and any of their successors as
General Partner.
"GENERAL PARTNERSHIP INTEREST" means a Partnership Interest held by the
General Partner that is a general partnership interest.
"INCENTIVE RIGHTS" has the meaning set forth in Section 4.09 hereof.
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"INDEMNITEE" means (i) any Person made a party to a proceeding by reason of
its status as the Company, the REIT Limited Partner or the General Partner or a
director or officer of the Company, the REIT Limited Partner, the Partnership or
the General Partner, and (ii) such other Persons (including Affiliates of the
Company, General Partner or the Partnership) as the General Partner may
designate from time to time, in its sole and absolute discretion.
"INDEPENDENT DIRECTORS" means a director of the Company who is not an
officer or employee of the Company, any Affiliate of an officer or employee or
any Affiliate of (i) any lessee of any property of the Company or any Subsidiary
of the Company, (ii) any Subsidiary of the Company, or (iii) any partnership
that is an Affiliate of the Company.
"LIMITED PARTNER" means any Person named as a Limited Partner on Exhibit A
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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% or (ii)
if the total Capital Contributions to the Partnership exceeds $50 million, 1%
divided by the ratio of the total Capital Contributions to the Partnership to
$50 million; provided, however, that the Minimum Limited Partnership Interest
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shall not be less than 0.2% at any time.
"NOTICE OF REDEMPTION" means the Notice of Exercise of Redemption Right
substantially in the form attached as Exhibit C hereto.
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"NYSE" means the New York Stock Exchange.
"OFFER" has the meaning set forth in Section 7.01(c) hereof.
"PAH GP" means PAH GP, Inc., a Virginia corporation and wholly-owned
subsidiary of the Company.
"PAH LP" means PAH LP, Inc., a Virginia corporation and wholly-owned
subsidiary of the Company.
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"PARTNER" means any General Partner or Limited Partner.
"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 held
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).
"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 Company 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 (and includes any Preferred Units).
The allocation of Partnership Units among the Partners shall be as set forth on
Exhibit A, as may be amended from time to time.
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"PERCENTAGE INTEREST" means the percentage ownership interest in the
Partnership of each Partner, as determined by dividing the Partnership Units
owned by a Partner (including any outstanding Preferred Units) by the total
number of Partnership Units outstanding (including any outstanding Preferred
Units). The Percentage Interest of each Partner shall be as set forth on
Exhibit A, as may be amended from time to time. For purposes of applying
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Section 5.02(a), a Partner's Percentage Interest shall be calculated with the
modifications provided in section 5.02(a)(2).
"PERSON" means any individual, partnership, corporation, joint venture,
trust or other entity.
"PREFERRED UNIT" means a limited partnership interest represented by
fractional, undivided share of the Partnership Interests of all Partners issued
hereunder which has the
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rights, preferences and other privileges designated herein. The allocation of
Preferred Units among the Partners shall be set forth on Exhibit A, as may be
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amended from time to time.
"PREFERRED UNITHOLDER" means a limited partner that holds Preferred Units.
"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,
as selected by the General Partner or the Company in its sole discretion
pursuant to Section 8.05(b) hereof.
"REDEMPTION RIGHT" has the meaning provided in Section 8.05(a) hereof.
"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 successor provision of the Regulations.
"REIT" means a real estate investment trust under Sections 856 through 860
of the Code.
"REIT EXPENSES" means (i) costs and expenses relating to the formation and
continuity of existence of the Company and any Subsidiaries thereof (which
Subsidiaries shall, for purposes hereof, be included within the definition of
Company), including taxes, fees and assessments associated therewith, any and
all costs, expenses or fees payable to any director, officer, or employee of the
Company, (ii) costs and expenses relating to the public offering and
registration of securities by the Company and all statements, reports, fees and
expenses incidental thereto, including underwriting discounts and selling
commissions applicable to any such offering of securities, (iii) costs and
expenses associated with the preparation and filing of any periodic reports by
the Company under federal, state or local laws or regulations, including filings
with the Commission, (iv) costs and expenses associated with compliance by the
Company with laws, rules and regulations promulgated by any regulatory body,
including the Commission, and (v) all other operating or administrative costs of
the Company incurred in the ordinary course of its business on behalf of or in
connection with the Partnership.
"REIT LIMITED PARTNER" means PAH LP and any person who becomes a Substitute
or Additional Limited Partner to PAH LP's limited partner interest, and any of
their successors as the REIT Limited Partner.
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"REIT SHARE" means a share of common stock of the Company, no par value.
"REIT SHARES AMOUNT" shall mean 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
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Company 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.
"SERVICE" means the Internal Revenue Service.
"SPECIFIED REDEMPTION DATE" means the first business day that is at least
60 business days after the receipt by the Company of the Notice of Redemption.
"STOCK INCENTIVE PLANS" means the Patriot American Hospitality, Inc. 1995
Incentive Plan and this Patriot American Hospitality, Inc. Non-Employee
Directors' Incentive Plan, as either such plan may be amended from time to time,
or any stock incentive plan adopted in the future by the Company.
"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.
"SUBSIDIARY PARTNERSHIP" means any partnership of which the majority of the
limited or general partnership interests therein are owned, directly or
indirectly, by the Partnership.
"SUBSTITUTE LIMITED PARTNER" means any Person admitted to the Partnership
as a Limited Partner pursuant to Section 9.03 hereof.
"SURVIVING GENERAL PARTNER" has the meaning set forth in Section 7.01(d)
hereof.
"TRANSACTION" has the meaning set forth in Section 7.01(c) hereof.
"TRANSFER" has the meaning set forth in Section 9.02(a) hereof.
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ARTICLE II
PARTNERSHIP CONTINUATION AND IDENTIFICATION
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2.01 CONTINUATION. The Partners hereby agree to continue the
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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 Patriot American Hospitality Partnership, L.P. The specified office
and place of business of the Partnership shall be ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇. 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
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. 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.
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(a) As of the date hereof, the General Partner of the Partnership
shall be PAH GP. 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 on Exhibit A hereto, as amended from time to time.
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2.04 TERM AND DISSOLUTION.
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(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 first to occur of any of the following events:
(i) The occurrence of an Event of Bankruptcy as to a General
Partner or the dissolution, death, removal or withdrawal of a General
Partner unless the business of the Partnership is continued pursuant to
Section 7.03(b) hereof; provided that if a General Partner is on the date
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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 of the assets of the Partnership (provided that
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if the Partnership
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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 REIT Limited 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 withhold from distribution for a reasonable time, any
assets of the Partnership (including 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.
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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.
ARTICLE III
BUSINESS OF THE PARTNERSHIP
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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 Company at
all times to qualify as a REIT, unless the Company otherwise 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. In connection with the foregoing, and without
limiting the Company's right in its sole discretion to cease qualifying as a
REIT, the Partners acknowledge that the Company's current status as a REIT
inures to the benefit of all the Partners and not solely to the Company. The
General Partner shall also be empowered to do any and all acts and things
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necessary or prudent to ensure that the Partnership will not be classified as a
"publicly traded partnership" for the purposes of Section 7704 of the Code.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ACCOUNTS
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4.01 CAPITAL CONTRIBUTIONS. The General Partner and the Limited
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Partners have contributed to the capital of the Partnership cash and other
interests as set forth opposite their names on Exhibit A.
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4.02 ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES OF ADDITIONAL
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PARTNERSHIP INTERESTS. Except as provided in this Section 4.02 or in Section
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4.03, the Partners shall have no right or obligation to make any additional
Capital Contributions or loans to the Partnership. The General Partner may
contribute additional capital to the Partnership, from time to time, and receive
additional Partnership Interests in respect thereof, in the manner contemplated
in this Section 4.02.
(a) Issuances of Additional Partnership Interests.
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(i) General. The General Partner is hereby authorized to cause
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the Partnership to issue such additional Partnership Interests in the form
of Partnership Units for any Partnership purpose at any time or from time
to time, to the Partners (including the General Partner and the REIT
Limited Partner) 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. Any additional Partnership Interests issued thereby may be
issued 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 in its sole and absolute discretion and
without the approval of any Limited Partner, subject to Virginia 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, however, that no
-------- -------
additional Partnership Interests shall be issued to the General Partner or
the REIT Limited Partner unless either:
(1)(A) the additional Partnership Interests are issued in
connection with an issuance of REIT Shares of or other interests in the
Company,
-11-
which shares or interests 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 or the REIT Limited Partner by the
Partnership in accordance with this Section 4.02 and (B) the General
Partner or the REIT Limited Partner shall make a Capital Contribution to
the Partnership in an amount equal to the proceeds raised in connection
with the issuance of such shares of stock of or other interests in the
Company,
(2) the additional Partnership Interests are issued
pursuant to Section 7.01(d), or
(3) the additional Partnership Interests are issued to
all Partners in proportion to their respective Percentage Interests.
Without limiting the foregoing, the General Partner is expressly authorized to
cause the Partnership to issue Partnership Units for less than fair market
value, so long as the General Partner concludes in good faith that such issuance
is in the best interests of the General Partner and the Partnership.
(ii) Upon Issuance of Additional Securities. The Company
--------------------------------------
shall not issue any additional REIT Shares (other than REIT Shares issued
in connection with a redemption pursuant to Section 8.05 hereof) or rights,
options, warrants or convertible or exchangeable securities containing the
right to subscribe for or purchase REIT Shares (collectively, "Additional
Securities") other than to all holders of REIT Shares, unless (A) the
General Partner shall cause the Partnership to issue to the General Partner
and the REIT Limited Partner, as the Company may designate, Partnership
Interests 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 Additional Securities, and (B) the Company contributes the
proceeds from the issuance of such Additional Securities and from any
exercise of rights contained in such Additional Securities, through the
General Partner and the REIT Limited Partner to the Partnership; provided,
however, that the Company is allowed to issue Additional Securities in
connection with an acquisition of a property to be held directly by the
Company, but if and only if, such direct acquisition and issuance of
Additional Securities have been approved and determined to be in the best
interests of the Company and the Partnership by a majority of the
Independent Directors. Without limiting the foregoing, the Company is
expressly authorized to issue Additional Securities for less than fair
market value, and to cause the Partnership to issue to the General Partner
corresponding Partnership Interests, so long as (x) the General Partner
concludes in good faith that such issuance is in the best interests of the
General Partner and the Partnership, including without limitation, the
issuance of REIT Shares and corresponding Partnership Units pursuant to an
employee stock purchase plan providing for employee
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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 (y) the Company contributes all proceeds from such issuance,
through the General Partner and the REIT Limited Partner, to the
Partnership. For example, in the event the Company issues REIT Shares for a
cash purchase price and contributes all of the proceeds of such issuance,
through the General Partner and the REIT Limited Partner, to the
Partnership as required hereunder, the General Partner and the REIT Limited
Partner, as the Company may so designate, shall be issued a number of
additional Partnership Units equal to the product of (A) the number of such
REIT Shares issued by the Company, the proceeds of which were so
contributed, multiplied by (B) a fraction, the numerator of which is 100%,
and the denominator of which is the Conversion Factor in effect on the date
of such contribution.
(b) Certain Deemed Contributions of Proceeds of Issuance of REIT
------------------------------------------------------------
Shares. In connection with any and all issuances of REIT Shares, the Company
------
shall contribute all of the proceeds raised in connection with such issuance to
the General Partner and the REIT Limited Partner as the Company determines, and
in turn, the General Partner and the REIT Limited Partner shall make Capital
Contributions to the Partnership of such proceeds, provided that if the proceeds
-------- ----
actually received and contributed by the Company to the General Partner and the
REIT Limited 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 and the REIT Limited
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 connection
with the required issuance of additional Partnership Units to the General
Partner and the REIT Limited Partner for such Capital Contributions pursuant to
Section 4.02(a) hereof.
(c) Minimum Limited Partnership Interest. In the event that either a
------------------------------------
redemption pursuant to Section 8.05 hereof or additional Capital Contributions
by the General Partner and the REIT Limited Partner would result in the Limited
Partners (other than the REIT Limited Partner), in the aggregate, owning less
than the Minimum Limited Partnership Interest, the General Partner and the
Limited Partners shall form another partnership and contribute sufficient
Limited Partnership Interests together with such other Limited Partners so that
the limited partners (other than the REIT Limited Partner) of such partnership
own at least the Minimum Limited Partnership Interest.
(d) Exchange of Preferred Units.
---------------------------
(i) In the event the General Partner or the Company acquires
Preferred Units from the Preferred Unitholders (in exchange for cash or
REIT Shares), the Partnership shall, as soon as practicable thereafter,
exchange each Preferred Unit
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held by the General Partner or the Company for such number of Partnership
Units which are not designated as Preferred Units, as determined by the
Conversion Factor then in effect.
(ii) In the event the Company qualifies under the Department
of Labor regulations as a "real estate operating company" or a "venture
capital operating company" and has the authority to issue preferred capital
stock having the same designations, preferences and other rights as the
Preferred Units, all such that the economic interests of the preferred
stock are substantially similar to those of the Preferred Units, in the
sole and absolute discretion of the Company, each Preferred Unit will be
immediately converted into one share of preferred stock having the same
designating preferences and other rights as the Preferred Units.
Notwithstanding the foregoing, as a condition to such conversion the
Company shall deliver to each Preferred Unitholder who so requests a legal
opinion, in form and substance reasonably satisfactory to the Preferred
Unitholder, as to the Company's qualification as a "real estate operating
company" or a "venture capital operating company."
4.03 ADDITIONAL FUNDING. If the General Partner determines that it is
------------------
in the best interests of the Partnership to provide for additional Partnership
funds ("Additional Funds") for any Partnership purpose, the General Partner may
(i) cause the Partnership to obtain such funds from outside borrowings, or (ii)
elect to have the General Partner or the REIT Limited Partner provide such
Additional Funds to the Partnership through loans or otherwise.
4.04 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 (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
pursuant to Section 5.01 if there were a taxable disposition of such property
for its fair market value (taking into account Section 7701(g) of the Code) on
the date of the revaluation.
4.05 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
-14-
aggregate number of outstanding Partnership Units. If the Partners' Percentage
Interests are adjusted pursuant to this Section 4.05, 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.
4.06 NO INTEREST ON CONTRIBUTIONS. No Partner shall be entitled to
----------------------------
interest on its Capital Contribution.
4.07 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.
4.08 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. 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.
4.09 STOCK INCENTIVE PLANS. (a) If grants of REIT Shares are made in
---------------------
connection with a Stock Incentive Plan:
-15-
(i) The Company, through the General Partner and the REIT
Limited Partner, shall contribute, as soon as practicable after such grant,
to the Partnership (to be thereafter taken into account for the purposes of
calculating any cash distributable to the Partners), an amount equal to the
price, if any, paid to the Company by the party receiving such REIT Shares;
(ii) The Partnership shall issue to the General Partner and the
REIT Limited Partner an aggregate number of additional Partnership Units
equal to the product of (1) the number of such REIT Shares issued by the
Company, multiplied by (2) a fraction, the numerator of which is 100%, and
-------------
the denominator of which is the Conversion Factor in effect on the date of
such contribution; and
(iii) The General Partner's and the REIT Limited Partner's
Percentage Interest and the Percentage Interests of the other Limited
Partners shall be adjusted as set forth in Section 4.02.
(b) If stock options granted in connection with a Stock Incentive
Plan are exercised:
(i) The Company, through the General Partner and the REIT
Limited Partner, shall contribute, as soon as practicable after such
exercise, to the Partnership (to be thereafter taken into account for
purposes of calculating any cash distributable to the Partners), an amount
equal to the exercise price, if any, paid to the Company by the exercising
party in connection with the exercise of the option or warrant;
(ii) The Partnership shall issue to the General Partner and the
REIT Limited Partner an aggregate number of additional Partnership Units
equal to the product of (1) the number of REIT Shares issued by the Company
in satisfaction of such exercised option or warrant, multiplied by (2) a
-------------
fraction, the numerator of which is 100%, and the denominator of which is
the Conversion Factor in effect on the date of such contribution; and
(iii) The General Partner's and the REIT Limited Partner's
Percentage Interest and the Percentage Interests of the other Limited
Partners shall be adjusted as set forth in Section 4.02.
(c) If the Company grants any director, officer or employee share
appreciation rights, performance share awards or other similar rights
("Incentive Rights"), then simultaneously, the Partnership shall grant the
General Partner and the REIT Limited Partner corresponding and economically
equivalent rights. Consequently, upon the cash payment by the Company to its
directors, officers or employees pursuant to such Incentive
-16-
Rights, the Partnership shall make an equal cash payment to the General Partner
and the REIT Limited Partner.
ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS
---------------------------------
5.01 ALLOCATION OF PROFIT AND LOSS.
-----------------------------
(a) General. 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), items of expense or loss shall be
-17-
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).
(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 Partner 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 Partner.
(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 as required by Section 704(c) of the Code and
such election shall be binding on all Partners.
5.02 OPERATING DISTRIBUTIONS.
-----------------------
(a) Except as otherwise provided in Section 5.06, cash available
for distribution by the Partnership shall be distributed as follows:
(1) First, if there are any Preferred Units outstanding on
any record date for payment of a dividend on the REIT Shares, the General
Partner shall distribute
-18-
to the Preferred Unitholder(s) of record on such date (concurrently with
the payment of such REIT Share dividend) an amount with respect to each
such Preferred Unit equal to the Preferred Distribution Amount.
(2) Second, the General Partner shall distribute any
remaining cash available for distribution 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 for such quarter (or other
distribution period) in accordance with their respective Percentage
Interests on the Partnership Record Date. For purposes of this Section
5.02(a)(2), Percentage Interests shall not include any Preferred Units.
(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 dividend
with respect to a REIT Share for which all or part of such Partnership Unit has
been or will be exchanged.
5.03 REIT DISTRIBUTION REQUIREMENTS. The General Partner shall use
------------------------------
its reasonable efforts to cause the Partnership to distribute amounts sufficient
to enable the Company to pay shareholder dividends that will allow the Company
to (i) meet its distribution requirement for qualification as a REIT as set
forth in Section 857(a)(1) of the Code and (ii) avoid any federal income or
excise tax liability imposed by the Code.
5.04 NO RIGHT TO DISTRIBUTIONS IN KIND. The General Partner may
---------------------------------
distribute property, other than cash to the Partners in any manner determined by
the General Partner. No Partner shall be entitled to demand property other than
cash in connection with any distributions by the Partnership.
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
that includes a return of all or part of a Partner's Capital Contributions,
unless after giving effect to the return of a Capital Contribution, the sum of
all Partnership liabilities, other than the liabilities to a Partner for the
return of his Capital Contribution, does 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
-19-
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.
5.08 ADDITIONAL DISTRIBUTIONS PROVISIONS AND DEFINITIONS RELATING TO
---------------------------------------------------------------
PREFERRED UNITS.
---------------
Notwithstanding any other provision to the contrary in this Agreement, as
long as there remain any Preferred Units outstanding, the following additional
distribution provisions and definitions shall apply.
(a) "Preferred Distribution Amount" shall mean, for any quarter
or other period with respect to which a REIT Share dividend is paid and a
distribution is required to be made pursuant to Section 5.02(a)(1), an amount
equal to the sum of the following: (i) such amount that if it were the sole
amount distributed on a Preferred Unit pursuant to Section 5.02(a)(1) for such
quarter or other period would provide the Preferred Unitholder with a
distribution on such Preferred Unit equal to 103% of the corresponding REIT
Share dividend to be paid for such quarter or other period plus (ii) the UBTI
Adjuster, if any, required to be paid during such quarter or other period
pursuant to Section 5.08(b). Notwithstanding the foregoing, the aggregate
Preferred Distribution Amount with respect to any Preferred Unitholder shall not
exceed the Preferred Unitholder's Capital Account balance (after reducing such
balance to reflect the items described in Regulations section 1.704-
1(b)(ii)(2)(d)(4), (5) and (6) and after increasing such Capital Account balance
to reflect such Preferred
-20-
Unitholder's shares of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain), determined as of the date of the relevant distribution.
(b) "UBTI Adjuster." If, for any fiscal year of the Partnership,
the amount of a Preferred Unitholder's distributive share of UBTI exceeds 20% of
the aggregate amount of income and gain allocated to such Preferred Unitholder
for the fiscal year, (any such excess referred to as the "Excess UBTI" for such
fiscal year) the Preferred Unitholder shall be entitled to an additional
distribution from the Partnership (each such distribution a "UBTI Adjuster") on
account of such Excess UBTI equal to the product of (i) the Excess UBTI
multiplied by (ii) the Applicable Rate; provided, however, that in the case of
any fiscal year beginning on or after January 1, 1999, a Preferred Unitholder
shall be entitled to receive a UBTI Adjuster only for the Excess UBTI that
arises in the first fiscal year beginning after January 1, 1999 for which the
Preferred Unitholder has Excess UBTI, and such Preferred Unitholder shall not be
entitled to a UBTI Adjuster for Excess UBTI in any other fiscal year beginning
on or after January 1, 1999. The "Applicable Rate" means the marginal federal
income tax rate applicable to UBTI of the Preferred Unitholder for the fiscal
year during which the corresponding Excess UBTI arises with respect to such
Excess UBTI, assuming for this purpose that the Preferred Unitholder has no UBTI
from any source other than the Partnership and taking into account the character
of such income. "UBTI" for a fiscal year means "unrelated business taxable
income" within the meaning of section 512(a)(1) of the Code, as determined in
accordance with the "Schedule K-1" of the Preferred Unitholder for such fiscal
year; provided, however, that for purposes of determining Excess UBTI and the
amount of any UBTI Adjuster, it shall be assumed (notwithstanding any
determination to the contrary or the fact that a greater amount of UBTI may
appear on the Schedule K-1) that the Partnership and its subsidiary partnerships
as of the date hereof meet the requirements of section 514(c)(9)(B)(vi)(III) of
the Code, unless the failure to satisfy such requirements results from
amendments made to the partnership agreement of the Partnership or any such
subsidiary partnership without the consent of the Preferred Unitholders
subsequent to the issuance of the Preferred Units. Any UBTI Adjuster required to
be paid as a result of Excess UBTI for a fiscal year shall be distributed
concurrently with the Partnership distribution immediately following the
Preferred Unitholder's receipt of the Schedule K-1 for the fiscal year in which
the Excess UBTI arises and shall be included in the computation of the Preferred
Distribution Amount for the quarter or other distribution period for which such
distribution is made.
-21-
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
real property and any 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 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;
(iv) to pay, either directly or by reimbursement, for all
operating costs and general administrative expenses of the Company, the
General Partner, the REIT Limited Partner or the Partnership, to third
parties or to the General Partner as set forth in this Agreement;
(v) 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 part to others, for such consideration and
on such terms as the General Partner may determine;
(vi) 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
-22-
assets; provided, however, that the General Partner may not, without the
consent of all of the Partners, confess a judgment against the Partnership;
(vii) 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;
(viii) to make or revoke any election permitted or required
of the Partnership by any taxing authority;
(ix) 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;
(x) to determine whether or not to apply any insurance
proceeds for any property to the restoration of such property or to
distribute the same;
(xi) 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;
(xii) 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;
(xiii) 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;
(xiv) to maintain accurate accounting records and to file
promptly all federal, state and local income tax returns on behalf of the
Partnership;
(xv) to distribute Partnership cash or other Partnership
assets in accordance with this Agreement;
(xvi) 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);
-23-
(xvii) to establish Partnership reserves for working
capital, capital expenditures, contingent liabilities, or any other valid
Partnership purpose; and
(xviii) to take such other action, execute, acknowledge,
swear to or deliver such other documents and instruments, and perform any
and all other acts that the General Partner deems necessary or appropriate
for the formation, continuation and conduct of the business and affairs of
the Partnership (including, without limitation, all actions consistent with
allowing the Company at all times to qualify as a REIT unless the Company
voluntarily terminates its REIT status) and to possess and enjoy all of the
rights and powers of a general partner as provided by the Act.
(b) Except as otherwise provided herein, to the extent the duties of
the General Partner require expenditures of funds to be paid to third parties,
the General Partner shall not have any obligations hereunder except to the
extent that partnership funds are reasonably available to it for the performance
of such duties, and nothing herein contained shall be deemed to authorize or
require the General Partner, in its capacity as such, to expend its individual
funds for payment to third parties or to undertake any individual liability or
obligation on behalf of the Partnership.
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.
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
-24-
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 shall 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 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.
-25-
(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, the Company and the Company'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. In the event of
a conflict between the interests of the shareholders of the Company on one hand
and the Limited Partners on the other, the General Partner shall endeavor in
good faith to resolve the conflict in a manner not adverse to either the
shareholders of the Company or the Limited Partners; provided, however, that for
so long as the Company, through PAH GP and PAH LP, owns a controlling interest
in the Partnership, any such conflict that cannot be resolved in a manner not
adverse to either the shareholders of the Company or the Limited Partners shall
be resolved in favor of the shareholders. 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.
(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 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 Company to
continue to qualify as a REIT or (ii) to prevent the Company from incurring any
taxes under Section 857, Section 4981, or any other provision 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
-26-
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 EXPENDITURES BY PARTNERSHIP. The General Partner is hereby
---------------------------
authorized to pay compensation for accounting, administrative, legal, technical,
management and other services rendered to the Partnership. All of the aforesaid
expenditures (including Administrative Expenses) shall be made on behalf of the
Partnership, and the General Partner shall be entitled to reimbursement by the
Partnership for any expenditure (including Administrative Expenses) incurred by
it on behalf of the Partnership which shall be made other than out of the funds
of the Partnership. The Partnership shall also assume, and pay when due, all
Administrative Expenses.
6.06 OUTSIDE ACTIVITIES. Subject to Section 6.08 hereof, the Articles
------------------
of Incorporation and any agreements entered into by the General Partner or its
Affiliates with the Partnership or a Subsidiary, 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 such business ventures, interest or activities.
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 ventures, interests or activities, and the General Partner
shall have no obligation pursuant to this Agreement to offer any interest in any
such business ventures, 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.
6.07 EMPLOYMENT OR RETENTION OF 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 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.
-27-
(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 GENERAL PARTNER PARTICIPATION. The General Partner agrees that
-----------------------------
all business activities of the General Partner, including activities pertaining
to the acquisition, development or ownership of hotels or other property, shall
be conducted through the Partnership or one or more Subsidiary Partnerships;
provided, however, that the Company is allowed to make a direct acquisition, but
-------- -------
if and only if, such acquisition is made in connection with the issuance of
Additional Securities, which direct acquisition and issuance have been approved
and determined to be in the best interests of the Company and the Partnership by
a majority of the Independent Directors.
6.09 TITLE TO PARTNERSHIP ASSETS. Title to Partnership assets,
---------------------------
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby declares and warrants that any Partnership assets for
which legal title is held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
-------- -------
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
6.10 MISCELLANEOUS. In the event the Company redeems any REIT Shares
-------------
or securities convertible into or redeemable or exchangeable for REIT Shares,
then the General Partner shall cause the Partnership to purchase from the
General Partner and the REIT Limited Partner a number of Partnership Units as
determined based on the application of the Conversion Factor on the same terms
that the Company redeemed such securities. Moreover, if the Company makes a
cash tender offer or other offer to acquire REIT Shares or securities
convertible into or redeemable or exchangeable for REIT Shares, then the General
Partner shall cause the Partnership to make a corresponding offer to the General
Partner and the REIT Limited Partner to acquire an equal number of Partnership
Units held by the General Partner
-28-
and the REIT Limited Partner. In the event any REIT Shares or securities
convertible into or redeemable or exchangeable for REIT Shares are redeemed by
the Company pursuant to such offer, the Partnership shall redeem an equivalent
number of the General Partner's and the REIT Limited Partner's Partnership Units
for an equivalent purchase price based on the application of the Conversion
Factor.
ARTICLE VII
CHANGES IN GENERAL PARTNER
--------------------------
7.01 TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP INTEREST.
------------------------------------------------------
(a) The General Partner shall not transfer all or any portion of
its General Partnership Interest or withdraw as General Partner except as
provided in Section 7.01(c) or in connection with a transaction described in
Section 7.01(d).
(b) The General Partner agrees that it and PAH LP will at all
times own in the aggregate at least a 20% Percentage Interest.
(c) Except as otherwise provided in Section 6.06(b) or Section
7.01(d) hereof, the Company shall not engage in any merger, consolidation or
other combination with or into another Person or sale of all or substantially
all of its assets, or any reclassification, or any recapitalization or change of
outstanding REIT Shares (other than a change in par value, or from par value to
no par value, or as a result of a subdivision or combination of REIT Shares) (a
"Transaction"), unless (i) the Transaction also includes a merger of the
Partnership or sale of substantially all of the assets of the Partnership as a
result of which all Limited Partners will receive for each Partnership Unit an
amount of cash, securities, or other property equal to the product of the
Conversion Factor and the greatest amount of cash, securities or other property
paid in the Transaction to a holder of one REIT Share in consideration of one
REIT Share, 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% of the outstanding REIT Shares, each holder of
Partnership Units shall be given the option to exchange its Partnership Units
for the greatest amount of cash, securities, or other property which a Limited
Partner would have received had it (A) exercised its 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; and (ii) no more than 75% of the equity securities of the acquiring
Person in such Transaction shall be owned, after consummation of such
Transaction, by the General Partner or Persons who were Affiliates of the
Partnership or the General Partner immediately prior to the date on which the
Transaction is consummated.
(d) Notwithstanding Section 7.01(c), the Company or the General
Partner may merge with or into or consolidate with another entity if immediately
after such merger or
-29-
consolidation (i) substantially all of the assets of the successor or surviving
entity (the "Surviving General Partner"), other than Partnership Units held by
the General Partner, are contributed, directly or indirectly, to the Partnership
as a Capital Contribution in exchange for Partnership Units with a fair market
value equal to the value of the assets so contributed as determined by the
Surviving General Partner in good faith and (ii) the Surviving General Partner
expressly agrees to assume all obligations of the General Partner or the
Company, as appropriate, hereunder. Upon such contribution and assumption, the
Surviving General Partner shall have the right and duty to amend this Agreement
as set forth in this Section 7.01(d). The Surviving General Partner shall in
good faith arrive at a new method for the calculation of the Cash Amount, the
REIT Shares Amount and Conversion Factor for a Partnership Unit after any such
merger or consolidation so as to approximate the existing method for such
calculation as closely as reasonably possible. Such calculation shall take into
account, among other things, the kind and amount of securities, cash and other
property that was receivable upon such merger or consolidation by a holder of
REIT Shares or options, warrants or other rights relating thereto, and to which
a holder of Partnership Units could have acquired had such Partnership Units
been redeemed immediately prior to such merger or consolidation. Such amendment
to this Agreement shall provide for adjustment to such method of calculation,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for with respect to the Conversion Factor. The Surviving General
Partner also shall in good faith modify the definition of REIT Shares and make
such amendments to Section 8.05 hereof so as to approximate the existing rights
and obligations set forth in Section 8.05 as closely as reasonably possible. The
above provisions of this Section 7.01(d) shall similarly apply to successive
mergers or consolidations permitted hereunder.
7.02 ADMISSION OF A SUBSTITUTE OR SUCCESSOR GENERAL PARTNER. Except
------------------------------------------------------
as otherwise provided in Section 7.01(d), a Person shall be admitted as a
substitute or successor General Partner of the Partnership only if the following
terms and conditions are satisfied:
(a) a majority in interest of the Limited Partners (other than
the REIT Limited Partner) shall have consented in writing to the admission of
the substitute or successor General Partner, which consent may be withheld in
the sole discretion of such Limited Partners;
(b) 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;
(c) 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
-30-
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
(d) 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 (i) the
Partnership to be classified other than as a partnership for federal income tax
purposes, or (ii) 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 death,
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.
(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
death, 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 reconstitute the Partnership and 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 unanimous consent of the Limited
Partners. If the Limited Partners elect to reconstitute 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
-31-
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.
(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 Partnership
Interest in the Partnership to the substitute General Partner approved by a
majority in interest of the Limited Partners (excluding PAH LP) 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 Partnership 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 a majority in interest of the
Limited Partners (excluding the REIT Limited Partner) within 10 days following
the removal of the General Partner. In the event that the parties are unable to
agree upon an appraiser, the removed General Partner and a majority in interest
of the Limited Partners (excluding the REIT Limited Partner) each shall select
an appraiser. Each such appraiser shall complete an appraisal of the fair market
value of the removed General Partner's General Partnership Interest within 30
days of the General Partner's removal, and the fair market value of the removed
General Partner's General Partnership Interest shall be the average of the two
appraisals; provided, however, that if the higher appraisal exceeds the lower
-------- -------
appraisal by more than 20% 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 removed General Partner's General Partnership Interest no
later than 60 days after the removal of the General Partner. In such case, the
fair market value of the removed General Partner's General Partnership Interest
shall be the average of the two appraisals closest in value.
(c) The General Partnership 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, expense, profit, gain or loss allocations or cash
distributions allocable or payable, as the case may be, to the Limited Partners.
Instead, such removed General Partner shall receive and be entitled only to
retain distributions or allocations of such items that 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.
-32-
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 its true and lawful attorney-in-fact, who may act
for each Limited Partner and in its name, place and stead, and for its use and
benefit, to sign, acknowledge, swear to, deliver, file and 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 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 of the Limited Partner, or the transfer
by the Limited Partner of any part or all of its Partnership Interest.
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 its Capital Contribution, if any, as and when due hereunder. After
its 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 Sections 8.05(b), 8.05(c), 8.05(d), 8.05(e) and
8.05(f), each Limited Partner, other than PAH LP, shall have the right (the
"Redemption Right"), on or after the first anniversary of the date on which he
acquires Partnership Units (or such later or earlier date as shall be determined
in the sole and absolute discretion of the General Partner at the time of the
issuance of the Partnership Units), to require the Partnership to redeem on a
-33-
Specified Redemption Date all or a portion of the Partnership Units held by such
Limited Partner at a redemption price equal to and in a form of the Cash Amount
to be paid by the Partnership. The Redemption Right shall be exercised pursuant
to a Notice of Redemption delivered to the Partnership (with a copy to the
General Partner) by the Limited Partner who is exercising the Redemption Right
(the "Redeeming Partner"); provided, however, that the Partnership shall not be
obligated to satisfy such Redemption Right if the Company and/or the General
Partner elects to purchase the Partnership Units subject to the Notice of
Redemption pursuant to Section 8.05(b); and provided, further, that no Limited
Partner may deliver more than two Notices of Redemption during each calendar
year. A Limited Partner may not exercise the Redemption Right for less than
1,000 Partnership Units or, if such Limited Partner holds less than 1,000
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 distribution paid with respect to Partnership Units if
the record date for such distribution is on or after the Specified Redemption
Date.
(b) Notwithstanding the provisions of Section 8.05(a), a Limited
Partner that exercises the Redemption Right shall be deemed to have offered to
sell the Partnership Units described in the Notice of Redemption to the General
Partner and the Company, and either of the General Partner or the Company (or
both) may, in its sole and absolute discretion, elect to purchase directly and
acquire such Partnership Units by paying to the Redeeming Partner either the
Cash Amount or the REIT Shares Amount, as elected by the General Partner or the
Company (in its sole and absolute discretion), on the Specified Redemption Date,
whereupon the General Partner or the Company 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. If the
General Partner and/or the Company shall elect to exercise its right to purchase
Partnership Units under this Section 8.05(b) with respect to a Notice of
Redemption, they shall so notify the Redeeming Partner within five Business Days
after the receipt by the General Partner of such Notice of Redemption. Unless
the General Partner and/or the Company (in its sole and absolute discretion)
shall exercise its right to purchase Partnership Units from the Redeeming
Partner pursuant to this Section 8.05(b), neither the General Partner nor the
Company shall have any obligation to the Redeeming Partner or the Partnership
with respect to the Redeeming Partner's exercise of the Redemption Right. In
the event the General Partner or the Company shall exercise its right to
purchase Partnership Units with respect to the exercise of a Redemption Right in
the manner described in the first sentence of this Section 8.05(b), the
Partnership shall have no obligation to pay any amount to the Redeeming Partner
with respect to such Redeeming Partner's exercise of such Redemption Right, and
each of the Redeeming Partner, the Partnership, and the General Partner or the
Company, as the case may be, shall treat the transaction between the General
Partner or the Company, as the case may be, and the Redeeming Partner for
federal income tax purposes as a sale of the Redeeming Partner's Partnership
Units to the General Partner or the Company, as the case may be. 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.
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(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 or the Company pursuant to Section 8.05(b)
(regardless of whether or not the General Partner or the Company 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 or the Look-Through Ownership Limitation, if applicable,
(as defined in the Articles of Incorporation) and calculated in accordance
therewith, except as provided in the Articles of Incorporation, (ii) result in
REIT Shares being owned by fewer than 100 persons (determined without reference
to any rules of attribution), except as provided in the Articles of
Incorporation, (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% or more of the ownership interests in a tenant of the
General Partner's, the Partnership's, or a Subsidiary Partnership'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 or the Company, in their 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 Company or 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 Company 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 Company and the General Partner agree to use
their best efforts to cause the closing of the acquisition of redeemed
Partnership Units hereunder to occur as quickly as reasonably possible.
(e) In the event that the General Partner permits the pledge of a
Limited Partner's Partnership Units to a lender, the General Partner may agree
to allow such lender, upon foreclosure of such Partnership Units, to redeem such
Partnership Units prior to the expiration of the one-year period described in
section 8.05(a); provided, that any such redemption shall be effected by the
Partnership in the form of the Cash Amount.
(f) 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
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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. Any such restriction shall become
effective on the later of (i) the fifth business day after the Restriction
Notice is received by the Limited Partner or (ii) the date on which the
regulations under section 7704 of the Code that would cause the Partnership to
be classified as a "publicly traded partnership" become effective.
(g) Notwithstanding any other provision of this Agreement, the
holders of Preferred Units shall not have the Redemption Right specified in
section 8.05.
8.06 REGISTRATION.
------------
(a) Payment of REIT Shares Amount. In the event that the General
-----------------------------
Partner or the Company elects to acquire from a Redeeming Partner Partnership
Units issued to such Redeeming Partner prior to March 27, 1996 (the "Registrable
Units") by paying to such Partner the REIT Shares Amount, such shares will be
issued pursuant to an effective registration statement under the Securities Act.
(b) Shelf Registration of the Common Stock. Prior to or on the
--------------------------------------
first date upon which the Registrable Units owned by any Limited Partner may be
redeemed (or such other date as may be required under applicable provisions of
the Securities Act), the Company agrees to file with the Securities and Exchange
Commission (the "Commission"), a shelf registration statement on Form S-3 under
Rule 415 of the Securities Act (a "Registration Statement"), or any similar rule
that may be adopted by the Commission, with respect to all of the shares of
Common Stock that may be issued upon redemption of such Registrable Units
pursuant to Section 8.05 hereof ("Redemption Shares"). The Company will use its
best efforts to have the Registration Statement declared effective under the
Securities Act. The Company need not file a separate Registration Statement,
but may file one Registration Statement covering Redemption Shares issuable to
more than one Limited Partner. The Company further agrees to supplement or make
amendments to each Registration Statement, 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 such Registration
Statement.
(c) Listing on Securities Exchange. If the Company 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."
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ARTICLE IX
TRANSFERS OF LIMITED PARTNERSHIP INTERESTS
------------------------------------------
9.01 PURCHASE FOR INVESTMENT.
-----------------------
(a) Each Limited Partner hereby represents and warrants to the
General Partner, to the Company and to the Partnership that the acquisition of
his Partnership Interests 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) Subject to the provisions of 9.02(b), (c) and (d), a Limited
Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer all
or any portion of his Limited Partnership Interest or any of such Limited
Partner's economic rights as a Limited Partner, whether voluntarily or by
operation of law or at judicial sale or otherwise (collectively, a "Transfer")
with or without the consent of the General Partner; provided however that upon
-------- -------
Transfer of any Preferred Units, the holder thereof shall not be entitled to the
additional UBTI Adjuster distribution as set forth in Section 5.08(b). Any
assignee or transferee of a Limited Partnership Interest pursuant to this
Section 9.02(a) may only become a substitute Limited Partner pursuant to Section
9.03 hereof. 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 its 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 of 1933, as amended,
or would otherwise violate any applicable federal or state securities or blue
sky law (including investment suitability standards).
(c) No transfer by a Limited Partner of its 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 legal counsel for the Partnership, it would adversely affect the
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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) No transfer of any Partnership Units may be made to a lender
to the Partnership or any Person who is related (within the meaning of
Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan
constitutes a nonrecourse liability (within the meaning of Regulations Section
1.752-1(a)(2)), without the consent of the General Partner, which may be
withheld in its sole and absolute discretion, provided that as a condition to
-------- ----
such consent the lender will be required to enter into an arrangement with the
Partnership and the General Partner to exchange or redeem for the Cash Amount
any Partnership Units in which a security interest is held simultaneously with
the time at which such lender would be deemed to be a partner in the Partnership
for purposes of allocating liabilities to such lender under Section 752 of the
Code.
(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 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
-38-
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 reasonable legal fees
of the Partnership and the General Partner and filing and publication costs
in connection with its substitution as a Limited Partner.
(vii) The assignee has obtained the prior written consent of
the General Partner to its admission as a Substitute Limited Partner, which
consent may be given or denied in the exercise of the General Partner's
sole and absolute discretion.
(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 its Partnership Interest until the Partnership has received notice thereof.
(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 its 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
-39-
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 generally
accepted accounting principles, 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 its 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.
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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 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.
-41-
(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) As soon as practicable after the close of each fiscal quarter
(other than the last quarter of the fiscal year), the General Partner shall
cause to be mailed to each Limited Partner a quarterly report containing
financial statements of the Partnership, or of the Company if such statements
are prepared solely on a consolidated basis with the Company, for such fiscal
quarter, presented in accordance with generally accepted accounting principles.
As soon as practicable after the close of each fiscal year, the General Partner
shall cause to be mailed to each Limited Partner an annual report containing
financial statements of the Partnership, or of the Company if such statements
are prepared solely on a consolidated basis with the Company, for such fiscal
year, presented in accordance with generally accepted accounting principles.
The annual financial statements shall be audited by accountants selected by the
General Partner.
(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
----------------------
11.01 VOTING RIGHTS OF COMMON UNITHHOLDERS. 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 the
-------- -------
consent of Limited Partners (other than the REIT Limited Partner) holding more
than 50% of the Percentage Interests of the Limited Partners (other than the
REIT Limited Partner):
(a) any amendment affecting the operation of the Conversion
Factor or the Redemption Right (except as provided in Section 8.05(d) or 7.01(d)
hereof) in a manner adverse to the Limited Partners;
-42-
(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 alter the Partnership's allocations
of Profit and Loss to the Limited Partners; or
(d) any amendment that would impose on the Limited Partners any
obligation to make additional Capital Contributions to the Partnership.
11.02 VOTING RIGHTS OF PREFERRED UNITHOLDERS. The holders of record of
--------------------------------------
Preferred Units shall not be entitled to vote on any matter on which Limited
Partners are entitled to vote, or on any other matters, provided that the
holders of Preferred Units shall have the right to vote as a separate class of
Partnership Units on the following, each of which shall require the consent of
holders of record of Preferred Units representing more than 50% of Preferred
Units:
(a) Any amendment that would adversely affect the rights of the
Preferred Unitholders to receive the distributions payable to them hereunder;
(b) Any amendment that would alter the Partnership's allocations
or Profit and Loss to the Preferred Unitholders; or
(c) Any amendment that would impose on the Preferred Unitholders
any obligation to make additional Capital Contributions to the Partnership.
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 A 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.
-43-
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 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 Commonwealth of Virginia.
12.10 GUARANTY BY COMPANY. The Company unconditionally and irrevocably
-------------------
guarantees to the Limited Partners the performance by the General Partner and
the REIT Limited Partner of the respective obligations of the General Partner
and the REIT Limited Partner under this Agreement. This guaranty is exclusively
for the benefit of the Limited Partners and shall not extend to the benefit of
any creditor of the Partnership.
-44-
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 April, 1997.
GENERAL PARTNER:
---------------
PAH GP, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman of the Board and Chief
Executive Officer
LIMITED PARTNERS:
-----------------
By: PAH GP, INC., as attorney-in-fact for each of
the Limited Partners
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman of the Board and Chief
Executive Officer
-45-
EXHIBIT B
---------
NOTICE OF EXERCISE OF REDEMPTION RIGHT
In accordance with Section 8.05 of the First Amended and Restated
Agreement of Limited Partnership (the "Agreement") of Patriot American
Hospitality Partnership, L.P., the undersigned hereby irrevocably (i) presents
for redemption ________ Partnership Units in Patriot American Hospitality
Partnership, L.P. in accordance with the terms of the Agreement and the
Redemption Right referred to in Section 8.05 thereof, (ii) surrenders such
Partnership Units and all right, title and interest therein, and (iii) directs
that the Cash Amount or REIT Shares (as defined in 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:
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