UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2010
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission File Number: 333-149899
CAREY WATERMARK INVESTORS INCORPORATED
(Exact name of registrant as specified in its charter)
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Maryland
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26-2145060
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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50 Rockefeller Plaza
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New York, New York
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10020
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(Address of principal executive office)
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(Zip Code)
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Investor Relations (212) 492-8920
(212) 492-1100
(Registrants telephone numbers, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
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No
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Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes
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No
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Registrant has 23,222 shares of common stock, $.001 par value, outstanding at November 1, 2010.
INDEX
Forward Looking Statements
This Quarterly Report on Form 10-Q, including Managements Discussion and Analysis of Financial
Condition and Results of Operations in Item 2 of Part I of this Report, contains forward-looking
statements within the meaning of the federal securities laws. These forward-looking statements
generally are identified by the words believe, project, expect, anticipate, estimate,
intend, strategy, plan, may, should, will, would, will be, will continue, will
likely result, and similar expressions. It is important to note that our actual results could be
materially different from those projected in such forward-looking statements. You should exercise
caution in relying on forward-looking statements as they involve known and unknown risks,
uncertainties and other factors that may materially affect our future results, performance,
achievements or transactions. Information on factors which could impact actual results and cause
them to differ from what is anticipated in the forward-looking statements contained herein is
included in this report as well as in our other filings with the Securities and Exchange Commission
(the SEC), including but not limited to the risk factors described in our Registration Statement
on Form S-11 (File No. 333-149899). We do not undertake to revise or update any forward-looking
statements. Accordingly, such information should not be regarded as representations that the
results or conditions described in such statements or that our objectives and plans will be
achieved.
CWI 9/30/2010 10-Q
1
PART I
Item 1. Financial Statements
CAREY WATERMARK INVESTORS INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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September 30, 2010
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December 31, 2009
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Assets
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Cash and cash equivalents
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$
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208,663
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$
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8,663
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Total assets
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$
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208,663
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$
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8,663
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Liabilities
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Due to affiliates
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$
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45,500
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$
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Commitments and contingencies (Note 4)
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Stockholders Equity
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Common stock, $0.001 par value; authorized 300,000,000 shares;
issued and outstanding, 23,222 and 1,000 shares, respectively
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23
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1
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Additional paid-in capital
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208,977
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8,999
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Accumulated deficit
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(45,837
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(337
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Total stockholders equity
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163,163
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8,663
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Total liabilities and stockholders equity
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$
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208,663
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$
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8,663
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Note:
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The balance sheet at December 31, 2009 has been derived from the audited financial statement
at that date.
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See Notes to Consolidated Financial Statements.
CWI 9/30/2010 10-Q
2
CAREY WATERMARK INVESTORS INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three months ended
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Nine months ended
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September 30, 2010
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September 30, 2010
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Expenses
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General and administrative
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$
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(45,500
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$
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(45,500
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Net Loss
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$
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(45,500
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$
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(45,500
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Loss Per Share
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$
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(3.76
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$
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(9.59
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Weighted Average Shares Outstanding
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12,111
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4,744
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See Notes to Consolidated Financial Statements.
CWI 9/30/2010 10-Q
3
CAREY WATERMARK INVESTORS INCORPORATED
CONSOLIDATED STATEMENT OF EQUITY
(UNAUDITED)
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Additional
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Accumulated
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Shares
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Common Stock
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Paid-In Capital
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Deficit
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Total
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Balance at
January 1, 2010
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1,000
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$
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1
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$
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8,999
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$
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(337
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$
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8,663
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Shares, $0.001 par value,
issued to the advisor
at $9.00 per share
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22,222
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22
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199,978
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200,000
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Net loss
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(45,500
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(45,500
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Balance at September 30, 2010
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23,222
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$
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23
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$
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208,977
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$
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(45,837
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$
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163,163
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See Notes to Consolidated Financial Statements.
CWI 9/30/2010 10-Q
4
CAREY WATERMARK INVESTORS INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
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Nine months ended
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September 30, 2010
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Cash Flows Operating Activities
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Net loss
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$
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(45,500
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Adjustments to reconcile net loss to net cash provided by operating activities:
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Increase in amount due to affiliates
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45,500
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Net cash provided by operating activities
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Cash Flows Financing Activities
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Proceeds from stock issuance
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200,000
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Net cash provided by financing activities
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200,000
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Net increase in cash and cash equivalents:
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200,000
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Cash and cash equivalents, beginning of period
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8,663
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Cash and cash equivalents, end of period
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$
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208,663
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Noncash investing and financing activities:
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(a)
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Amounts due to affiliate for general and administrative costs total $45,500 to date.
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See Notes to Consolidated Financial Statements.
CWI 9/30/2010 10-Q
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Organization and Offering
Organization
Carey Watermark Investors Incorporated (together with its consolidated subsidiaries, we, us or
our) is a Maryland corporation formed in March 2008 for the purpose of acquiring, owning,
disposing of and, through our advisor, managing and seeking to enhance the value of, interests in
lodging and lodging related properties, primarily in the United States. We intend to conduct
substantially all of our investment activities and own all of our assets through CWI OP, LP, our
Operating Partnership. We are a general partner and a limited partner and will own approximately
a 99.985% capital interest in the Operating Partnership. Carey Watermark Holdings, LLC, an entity
substantially all of which is owned by CLA Holdings, LLC, an indirect subsidiary of W. P. Carey &
Co. LLC (W. P. Carey), Carey REIT II, Inc.(Carey REIT II) and CWA, LLC, a subsidiary of
Watermark Capital Partners, LLC (a related party), will hold a special general partner interest in
the Operating Partnership. We had not begun operations as of September 30, 2010.
Carey Lodging Advisors, LLC, an indirect subsidiary of W. P. Carey, is our advisor and will
manage our business. CWA, LLC, the subadvisor, has entered into a subadvisory agreement with our
advisor effective upon the commencement of this offering. Our advisor and the subadvisor will
manage our overall portfolio, including providing oversight and strategic guidance to the
independent property operators that manage our properties.
Public Offering
On September 15, 2010, our Registration Statement on Form S-11 (File No. 333-149899), covering an
initial public offering of up to 100,000,000 shares of common stock at $10.00 per share was
declared effective under the Securities Act of 1933, as amended. The Registration Statement also
covers the offering of up to 25,000,000 shares of common stock at $9.50 pursuant to our
distribution reinvestment plan. Our initial public offering is being offered on a best efforts
basis by Carey Financial, LLC, an affiliate of the advisor (Carey Financial), and other selected
dealers. We intend to use the net proceeds of the offering to acquire, own and manage a portfolio
of interests in lodging and lodging related properties. While our core strategy is focused on the
lodging industry, we may also invest in other real estate property sectors.
On March 19, 2008, Carey REIT II, a wholly-owned subsidiary of W. P. Carey and an affiliate of our
advisor, purchased 1,000 shares of our common stock for $9,000 and was admitted as our initial
stockholder. Additionally, on August 16, 2010, we received a capital contribution of $200,000 in
cash from Carey REIT II in exchange for 22,222 shares of our common stock. Carey REIT II purchased
its shares at $9.00 per share, net of commissions and fees, which would have otherwise been payable
to Carey Financial.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
Our interim consolidated financial statements have been prepared, without audit, in accordance with
the instructions to Form 10-Q and therefore do not necessarily include all information and
footnotes necessary for a fair statement of our consolidated financial position, results of
operations and cash flows in accordance with accounting principles generally accepted in the United
States (GAAP).
In the opinion of management, the unaudited financial information for the interim periods presented
in this Report reflects all normal and recurring adjustments necessary for a fair statement of
results of operations, financial position and cash flows. Operating results for interim periods are
not necessarily indicative of operating results for an entire fiscal year.
We had no significant operations as of September 30, 2010. Our operating expenses for the nine
months ended September 30, 2010 consist solely of administrative expenses related to fees paid to
our board of directors. Activity for the nine months ended September 30, 2009 was nominal and,
therefore, is not presented. The consolidated financial statements reflect all of our accounts,
including those of our majority-owned and/or controlled subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts
in our consolidated financial statements and the accompanying notes. Actual results could differ
from those estimates.
Basis of Consolidation
The consolidated financial statements reflect all of our accounts, including those of our
majority-owned and/or controlled subsidiaries. The portion of equity in a subsidiary that is not
attributable, directly or indirectly, to us is presented as noncontrolling interests. All
significant intercompany accounts and transactions have been eliminated.
CWI 9/30/2010 10-Q
6
Notes to Consolidated Financial Statements
The Financial Accounting Standard Board (FASB) has issued amended guidance related to the
consolidation of variable interest entities (VIEs). The amended guidance affects the overall
consolidation analysis, changing the approach taken by companies in identifying which entities are
VIEs and in determining which party is the primary beneficiary, and requires an enterprise to
qualitatively assess the determination of the primary beneficiary of a VIE based on whether the
entity (i) has the power to direct the activities that most significantly impact the economic
performance of the VIE, and (ii) has the obligation to absorb losses or the right to receive
benefits of the VIE that could potentially be significant to the VIE. The amended guidance changes
the consideration of kick-out rights in determining if an entity is a VIE. Additionally, the
guidance requires an ongoing reconsideration of the primary beneficiary and provides a framework
for the events that trigger a reassessment of whether an entity is a VIE.
We performed an analysis of all of our subsidiary entities to determine whether they qualify as
VIEs and whether they should be consolidated or accounted for as equity investments in an
unconsolidated venture. As a result of our assessment, we have concluded that none of our
subsidiaries is a VIE and all are consolidated under the voting model.
Cash and Cash Equivalents and Short-Term Investments
We consider all short-term, highly liquid investments that are both readily convertible to cash and
have a maturity of generally three months or less at the time of purchase to be cash equivalents.
Items to be classified as cash equivalents include commercial paper and money-market funds. Our
cash and cash equivalents at September 30, 2010 and December 31, 2009 were held in the custody of
one financial institution and, these balances, at times, exceeded federally insurable limits. We
mitigate this risk by depositing funds with major financial institutions. Instruments that have a
maturity of three months or more at the time of purchase will be classified as short-term
investments in the consolidated financial statements.
Federal Income Taxes
We intend to qualify as a real estate investment trust (REIT) under the Internal Revenue Code of
1986 (the Code) beginning with our taxable year ending December 31, 2010. In order to maintain
our qualification as a REIT, we will be required to, among other things, distribute at least 90% of
our REIT taxable income to our stockholders and meet certain tests regarding the nature of our
income and assets. Under the Code, REITs are subject to numerous organizational and operational
requirements including limitations on certain types of gross income. As a REIT, we generally will
not be subject to U.S. federal income tax on income that we distribute to stockholders as long as
we meet such requirements and distribute at least 90% of our net taxable income (excluding net
capital gains) on an annual basis. If we fail to qualify for taxation as a REIT for any taxable
year, our income will be taxed at regular corporate rates, and we may not be able to qualify for
treatment as a REIT for that year and the next four years. Even if we qualify as a REIT for U.S.
federal income tax purposes, we may be subject to state, local and foreign taxes on our income and
property and to income and excise taxes on our U.S. undistributed income.
We may elect to treat one or more of our corporate subsidiaries as a taxable REIT subsidiary
(TRS). In general, a TRS may perform additional services for our tenants and generally may engage
in any real estate or non-real estate related business (except for the operation or management of
health care facilities or lodging facilities or providing to any person, under a franchise, license
or otherwise, rights to any brand name under which any lodging facility or health care facility is
operated). A TRS is subject to corporate federal income tax.
Organization and Offering Costs
The advisor has paid various organization and offering costs on our behalf, all or a portion of
which we may be liable for under the advisory agreement (see Note 3). When it becomes probable
that we will be liable for these costs and we can estimate our liability, we will accrue costs
incurred in connection with the raising of capital as deferred offering costs. Upon receipt of
offering proceeds and reimbursement to the advisor for costs incurred, we will charge the deferred
offering costs to stockholders equity as appropriate. Such reimbursements will not exceed
regulatory cost limitations. Organization costs will be expensed as incurred and will be included
in General and administrative expenses in the financial statements.
CWI 9/30/2010 10-Q
7
Notes to Consolidated Financial Statements
Note 3. Agreements and Transactions with Related Parties
Effective September 15, 2010, we entered into a dealer manager agreement with Carey Financial,
whereby Carey Financial will receive a selling commission of up to $0.70 per share sold and a
dealer manager fee of up to $0.30 per share sold, a portion of which may be re-allowed to the
selected broker dealers.
Effective September 15, 2010, we entered into an advisory agreement with the advisor to perform
certain services for us, including managing the offering and our overall business, identification,
evaluation, negotiation, purchase and disposition of lodging related properties and the performance
of certain administrative duties. Pursuant to the advisory agreement, after we have reached the
minimum offering amount of $10 million, the advisor shall be reimbursed for all organization and
offering costs incurred in connection with our offering, up to a maximum amount (excluding selling
commissions and the dealer manager fee) of 2.0% of the gross proceeds of our offering and
distribution reinvestment plan. Through September 30, 2010, the advisor has incurred organization
and offering costs on our behalf of approximately $73,598 and $2,497,434, respectively; however at
September 30, 2010, we were not obligated to pay any of these costs because we had not reached the
minimum offering amount at that date. The advisor will also receive acquisition fees of 2.5% of
the total investment cost of the properties acquired and loans originated by us not to exceed 6% of
the aggregate contract purchase price of all investments and loans. We will also pay the advisor an
annual asset management fee equal to 0.50% of the aggregate average market value of our
investments. Carey Watermark Holdings, LLC, an affiliate of the advisor, will receive a 10%
interest in distributions of available cash by the Operating Partnership and a subordinated
interest of 15% of the net proceeds from the sale, exchange or other disposition of operating
partnership assets. The advisor will also receive disposition fees of up to 1.5% of the contract
sales price of a property. We will also pay the advisor a loan refinancing fee of up to 1% of a
refinanced loan, if certain conditions described in our prospectus are met.
Additionally, effective September 15, 2010, the advisor entered into a subadvisory agreement with
the subadvisor, whereby the advisor will pay 20% of the aforementioned fees earned under the
advisory agreement to the subadvisor. In addition, the subadvisor owns a 20% interest in Cary
Watermark Holdings, LLC.
Note 4. Commitments and Contingencies
As of September 30, 2010, we were not involved in any material litigation.
We will be liable for certain expenses of the offering described in our prospectus, which include
filing, legal, accounting, printing and escrow fees, which are to be deducted from the gross
proceeds of the offering. We will reimburse Carey Financial or one of its affiliates for expenses
(including fees and expenses of its counsel) and for the costs of any sales and information
meetings of Carey Financials registered representatives or employees of one of its affiliates
relating to the offering. The total underwriting compensation to Carey Financial and other dealers
in connection with the offering shall not exceed limitations prescribed by the Financial Industry
Regulatory Authority, Inc. The advisor has agreed to be responsible for the repayment of (i)
organization and offering expenses (excluding selling commissions to Carey Financial with respect
to shares held by clients of it and selected dealers and fees paid and expenses reimbursed to
selected dealers) which exceed 2% of the gross proceeds of the offering and (ii) organization and
offering expenses (including selling commissions, fees and fees paid and expenses reimbursed to
selected dealers) which exceed 15% of the gross proceeds of the offering.
Note 5. Subsequent Events
On October 11, 2010, we announced that our board of directors had determined to pay distributions
at a daily rate initially representing an annualized yield of 4% on the offering price of $10.00.
Distributions will not accrue or be payable until subscriptions for sales of at least $10 million
have been received.
On October 13, 2010, Carey Watermark Holdings, LLC purchased a capital interest in the
Operating Partnership, CWI, OP, LP, representing its special general partnership interest of 0.015%
for $185,625. Subsequent to this transaction, our general partnership interest is 99.985%.
CWI 9/30/2010 10-Q
8
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Managements discussion and analysis of financial condition and results of operations (MD&A) is
intended to provide the reader with information that will assist in understanding our financial
statements and the reasons for changes in certain key components of our financial statements from
period to period. MD&A also provides the reader with our perspective on our financial position and
liquidity, as well as certain other factors that may affect our future results. Our MD&A should be
read in conjunction with the financial statements and accompanying notes thereto as of September
30, 2010.
Business Overview
We were formed in March 2008 for the purpose of acquiring, owning, disposing of and, through our
advisor, managing and seeking to enhance the value of, interests in lodging and lodging related
properties, primarily in the United States. We intend to qualify as a REIT and intend to conduct
substantially all of our investment activities and own all of our assets through CWI OP, LP, our
Operating Partnership. We are a general partner and a limited partner and will own approximately a
99.985% capital interest in the Operating partnership. Carey Watermark Holdings, LLC, an entity
substantially all of which is owned by CLA Holdings, LLC, Carey REIT II, Inc. and CWA, LLC will
hold a special general partner interest in the Operating Partnership.
Carey Lodging Advisors, LLC is our advisor and will manage our business. CWA, LLC, a subsidiary of
Watermark Capital Partners LLC, entered into a subadvisory agreement with our advisor effective
upon the commencement of this offering. Our advisor and the subadvisor will manage our overall
portfolio, including providing oversight and strategic guidance to the independent property
operators that manage our properties.
Significant Developments
Public Offering
On September 15, 2010, our Registration Statement on Form S-11 (File No.
333-149899), covering an initial public offering of up to 100,000,000 shares of our common stock at
$10.00 per share, was declared effective under the Securities Act of 1933. The Registration
Statement also covers the offering of up to 25,000,000 shares of common stock at $9.50 per share
pursuant to our distribution reinvestment plan. Our initial public offering is being offered on a
best efforts basis by Carey Financial, LLC and other selected dealers.
We intend to use the net proceeds of the offering to acquire, own and manage a portfolio of
interests in lodging and lodging related properties. While our core strategy will be focused on the
lodging industry, we may also invest in other real estate property sectors.
Subsequent Events
On October 11, 2010, we announced that our board of directors had determined to
pay distributions at a daily rate initially representing an annualized yield of 4% on the offering
price of $10.00. Distributions will not accrue or be payable until subscriptions for sales of at
least $10 million have been received.
On October 13, 2010, Carey Watermark Holdings, LLC purchased a capital interest in the Operating
Partnership, CWI, OP, LP, representing its special general partnership interest of 0.015% for
$185,625. Subsequent to this transaction, our general partnership interest is 99.985%.
Results of Operations
We are a newly formed company and have no operating history. We are dependent upon proceeds
received from the offering to conduct our proposed activities. In addition, we currently own no
properties. The capital required to purchase any property will be obtained from the offering
proceeds and from any mortgage indebtedness that we may incur in connection with the acquisition of
any property or thereafter. We have initially been capitalized with $209,000 from the sale of
23,222 shares to an affiliate of the advisor.
We have an accumulated deficit of $45,837 representing general and administrative costs which
consist primarily of directors fees incurred prior to the commencement of our operations. To
date, these costs have been funded primarily by advances from an affiliate of the advisor.
Additionally, pursuant to our advisory agreement as described in Note 3, we may be liable for all
or a portion of the organization and offering costs paid by the advisor on our behalf. Such
organization and offering costs were $73,598 and $2,497,434, respectively, through September 30,
2010. As of the date of this report, we have no commitments to acquire any property or to make
any other material capital expenditures. We will not commence our operations until we have sold at
least the minimum offering of 1,000,000 shares.
Financial Condition
Liquidity would be affected adversely by unanticipated costs and greater-than-anticipated operating
expenses. To the extent that the working capital reserve is insufficient to satisfy our cash
requirements, additional funds may be provided from cash generated from operations or through
short-term borrowings. In addition, subject to limitations described in our prospectus, we may
incur
indebtedness in connection with the acquisition of any property, refinance the debt thereon,
arrange for the leveraging of any previously unfinanced property or reinvest the proceeds of
financings or refinancings in additional properties.
CWI 9/30/2010 10-Q
9
If we qualify as a REIT, we will not be subject to U.S. federal income taxes on amounts distributed
to stockholders provided we meet certain conditions, including distributing at least 90% of our
taxable income to stockholders. Our objectives are to pay quarterly distributions at an increasing
rate, to increase equity in our real estate through regular mortgage principal payments and to own
a geographically diversified portfolio of lodging properties that will increase in value. Our
distributions may exceed our earnings and our cash flow from operating activities and may be paid
from borrowings, offering proceeds and other sources, without limitation, particularly during the
period before we have substantially invested the net proceeds from this offering.
As a REIT, we are allowed to own lodging properties but are prohibited from operating these
properties. In order to comply with applicable REIT qualification rules, we will enter into leases
for each of our lodging properties with the TRS lessees. The TRS lessees will in turn contract with
independent property operators that will manage day-to-day operations of our properties under the
oversight of the subadvisor.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We currently have limited exposure to financial market risks, including changes in interest rates.
We currently have no foreign operations and are not exposed to foreign currency fluctuations.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
Our disclosure controls and procedures include our controls and other procedures designed to
provide reasonable assurance that information required to be disclosed in this and other reports
filed under the Securities Exchange Act of 1934, as amended (the Exchange Act) is recorded,
processed, summarized and reported within the required time periods specified in the SECs rules
and forms and that such information is accumulated and communicated to management, including our
chief executive officer and chief financial officer, to allow timely decisions regarding required
disclosures. It should be noted that no system of controls can provide complete assurance of
achieving a companys objectives and that future events may impact the effectiveness of a system of
controls.
Our chief executive officer and chief financial officer, after conducting an evaluation, together
with members of our management, of the effectiveness of the design and operation of our disclosure
controls and procedures at September 30, 2010, have concluded that our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of September 30,
2010 at a reasonable level of assurance.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our most
recently completed fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
CWI 9/30/2010 10-Q
10
PART II
Item 1A. Risk Factors
We are not aware of any significant trends or uncertainties, favorable or unfavorable, that may be
reasonably anticipated to have a significant impact on either the ability to raise capital or the
revenue to be derived from the acquisition and operation of any investments we will make, other
than those referred to in the risks described in the Risk Factors section of our Registration
Statement on Form S-11 as filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
As of the date of this Report, Carey REIT II owns 23,222 shares of our common stock. Since this
transaction was not considered to have involved a public offering within the meaning of Section
4(2) of the Securities Act of 1933, as amended, the shares issued were deemed to be exempt from
registration. In acquiring our shares, Carey REIT II represented that such interests were being
acquired by it for the purposes of investment and not with a view to the distribution thereof.
We intend to use the net proceeds of the offering to acquire, own and manage a portfolio of
interests in lodging and lodging related properties.
CWI
9/30/2010 10-Q
11
Item 6. Exhibits
|
|
|
|
|
|
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Exhibit No.
|
|
Description
|
|
Method of Filing
|
|
3.1
|
|
|
Articles of Amendment and Restatement of Carey Watermark Investors Incorporated
|
|
Filed herewith
|
|
3.2
|
|
|
Bylaws of Carey Watermark Investors Incorporated (Incorporated by reference to
Exhibit 3.3 to the registrants Registration Statement on Form S-11 (File
No. 333-149899) filed on March 26, 2008)
|
|
|
|
4.1
|
|
|
Distribution Reinvestment and Stock Purchase Plan
|
|
Filed herewith
|
|
10.1
|
|
|
Advisory Agreement dated September 15, 2010, between Carey Watermark Investors
Incorporated, CWI OP, LP, and Carey Lodging Advisors, LLC
|
|
Filed herewith
|
|
10.2
|
|
|
Agreement of Limited Partnership of CWI OP, LP
|
|
Filed herewith
|
|
10.3
|
|
|
Dealer Manager Agreement dated September 15, 2010, between Carey Watermark
Investors Incorporated and Carey Financial, LLC
|
|
Filed herewith
|
|
10.4
|
|
|
Subscription Escrow Agreement dated September 15, 2010, between Carey
Financial, LLC, Carey Watermark Investors Incorporated and UMB Bank, N.A.
|
|
Filed herewith
|
|
10.5
|
|
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2010 Equity Incentive Plan
|
|
Filed herewith
|
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10.6
|
|
|
Indemnification Agreement dated September 15, 2010, between Carey Watermark
Investors Incorporated and CWA, LLC
|
|
Filed herewith
|
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10.7
|
|
|
Form of Indemnification Agreement between Carey Watermark Investors
Incorporated and its directors and executive officers
|
|
Filed herewith
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31.1
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|
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Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
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Filed herewith
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31.2
|
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
Filed herewith
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32
|
|
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
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Filed herewith
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CWI 9/30/2010 10-Q
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Carey Watermark Investors Incorporated
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Date 11/12/2010
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By:
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/s/ Mark J. DeCesaris
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Mark J. DeCesaris
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Chief Financial Officer
(Principal Financial Officer)
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Date 11/12/2010
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By:
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/s/ Thomas J. Ridings, Jr.
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Thomas J. Ridings, Jr.
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Executive Director and Chief Accounting Officer
(Principal Accounting Officer)
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CWI 9/30/2010 10-Q
13
EXHIBIT INDEX
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Exhibit No.
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Description
|
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Method of Filing
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3.1
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Articles of Amendment and Restatement of Carey Watermark Investors Incorporated
|
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Filed herewith
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3.2
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Bylaws of Carey Watermark Investors Incorporated (Incorporated by reference to
Exhibit 3.3 to the registrants Registration Statement on Form S-11 (File
No. 333-149899) filed on March 26, 2008)
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|
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4.1
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|
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Distribution Reinvestment and Stock Purchase Plan
|
|
Filed herewith
|
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10.1
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|
|
Advisory Agreement dated September 15, 2010, between Carey Watermark Investors
Incorporated, CWI OP, LP, and Carey Lodging Advisors, LLC
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Filed herewith
|
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10.2
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|
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Agreement of Limited Partnership of CWI OP, LP
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Filed herewith
|
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10.3
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|
|
Dealer Manager Agreement dated September 15, 2010, between Carey Watermark
Investors Incorporated and Carey Financial, LLC
|
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Filed herewith
|
|
10.4
|
|
|
Subscription Escrow Agreement dated September 15, 2010, between Carey
Financial, LLC, Carey Watermark Investors Incorporated and UMB Bank, N.A.
|
|
Filed herewith
|
|
10.5
|
|
|
2010 Equity Incentive Plan
|
|
Filed herewith
|
|
10.6
|
|
|
Indemnification Agreement dated September 15, 2010, between Carey Watermark
Investors Incorporated and CWA, LLC
|
|
Filed herewith
|
|
10.7
|
|
|
Form of Indemnification Agreement between Carey Watermark Investors
Incorporated and its directors and executive officers
|
|
Filed herewith
|
|
31.1
|
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
|
31.2
|
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
|
32
|
|
|
Certifications of Chief Executive Officer and Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
Filed herewith
|
Exhibit 3.1
CAREY WATERMARK INVESTORS INCORPORATED
ARTICLES OF AMENDMENT
AND RESTATEMENT
TABLE OF CONTENTS
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|
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Page
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ARTICLE I NAME
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1
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ARTICLE II PURPOSES AND POWERS
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1
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ARTICLE III PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
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1
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ARTICLE IV DEFINITIONS
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1
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ARTICLE V STOCK
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11
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Section 5.1. Authorized Shares
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11
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Section 5.2. Common Shares
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11
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Section 5.3. Preferred Shares
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11
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Section 5.4. Classified or Reclassified Shares
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12
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Section 5.5. Dividends and Distributions
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12
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Section 5.6. Charter and Bylaws
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12
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Section 5.7. No Issuance of Share Certificates
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12
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Section 5.8. Suitability of Stockholders
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13
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Section 5.9. Repurchase of Shares
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13
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Section 5.10. Distribution Reinvestment Plans
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13
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ARTICLE VI RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
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14
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Section 6.1. Shares
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14
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Section 6.2. Transfer of Shares in Trust
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18
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Section 6.3. NYSE Transactions
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19
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Section 6.4. Enforcement
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19
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Section 6.5. Non-Waiver
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19
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ARTICLE VII PROVISIONS FOR DEFINING, LIMITING AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
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20
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Section 7.1. Number of Directors
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20
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Section 7.2. Experience
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20
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Section 7.3. Committees
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20
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Section 7.4. Term
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20
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Section 7.5. Fiduciary Obligations
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20
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Section 7.6. Extraordinary Actions
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21
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Section 7.7. Authorization by Board of Stock Issuance
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21
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Section 7.8. Preemptive Rights and Appraisal Rights
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21
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Section 7.9. Determinations by Board
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21
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Section 7.10. REIT Qualification
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22
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Section 7.11. Removal of Directors
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22
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Section 7.12. Board Action with Respect to Certain Matters
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22
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- i -
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Page
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ARTICLE VIII ADVISOR
|
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22
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Section 8.1. Appointment and Initial Investment of Advisor
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22
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Section 8.2. Supervision of Advisor
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22
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Section 8.3. Fiduciary Obligations
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|
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23
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Section 8.4. Affiliation and Functions
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23
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Section 8.5. Termination
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|
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23
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Section 8.6. Disposition Fee on Sale of Property
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23
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Section 8.7. Incentive Fees
|
|
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24
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|
Section 8.8. Limitation on Organization and Offering Expenses
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|
|
24
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Section 8.9. Limitation on Acquisition Fees and Expenses
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|
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24
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Section 8.10. Reimbursement for Total Operating Expenses
|
|
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24
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|
Section 8.11. Reimbursement Limitation
|
|
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25
|
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Section 8.12. Other Activities of the Advisor
|
|
|
25
|
|
ARTICLE IX INVESTMENT OBJECTIVES AND LIMITATIONS
|
|
|
25
|
|
Section 9.1. Review of Objectives
|
|
|
25
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Section 9.2. Certain Permitted Investments
|
|
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25
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Section 9.3. Investment Limitations
|
|
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26
|
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ARTICLE X CONFLICTS OF INTEREST
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27
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Section 10.1. Sales and Leases to the Corporation
|
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27
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Section 10.2. Sales and Leases to the Sponsor, Advisor, Directors or Affiliates
|
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|
28
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|
Section 10.3. Other Transactions
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28
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ARTICLE XI STOCKHOLDERS
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28
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Section 11.1. Meetings
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28
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Section 11.2. Voting Rights of Stockholders
|
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|
29
|
|
Section 11.3. Voting Limitations on Shares Held by the Advisor, Directors and Affiliates
|
|
|
29
|
|
Section 11.4. Right of Inspection
|
|
|
29
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Section 11.5. Access to Stockholder List
|
|
|
29
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Section 11.6. Reports
|
|
|
30
|
|
Section 11.7. Tender Offers
|
|
|
30
|
|
ARTICLE XII LIABILITY LIMITATION AND INDEMNIFICATION
|
|
|
31
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|
Section 12.1. Limitation of Stockholder Liability
|
|
|
31
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|
Section 12.2. Limitation of Director and Officer Liability; Indemnification
|
|
|
31
|
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Section 12.3. Payment of Expenses
|
|
|
33
|
|
Section 12.4. Express Exculpatory Clauses in Instruments
|
|
|
33
|
|
ARTICLE XIII AMENDMENTS
|
|
|
33
|
|
ARTICLE XIV ROLL-UP TRANSACTIONS
|
|
|
34
|
|
Section 14.1. Roll-Up Transactions
|
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|
34
|
|
Section 14.2. Limitations on Roll-Up Transactions
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|
|
34
|
|
- ii -
FIRST
: CAREY WATERMARK INVESTORS INCORPORATED, a Maryland corporation (the
Corporation
),
desires to amend and restate its charter as currently in effect and as hereinafter amended.
SECOND
: The following provisions are all the provisions of the charter currently in effect
and as hereinafter amended:
ARTICLE I
NAME
The name of the corporation (which is hereinafter called the
Corporation
) is:
CAREY WATERMARK INVESTORS INCORPORATED
ARTICLE II
PURPOSES AND POWERS
The purposes for which the Corporation is formed are to engage in any lawful act or activity
(including, without limitation or obligation, engaging in business as a real estate investment
trust under the Internal Revenue Code of 1986, as amended, or any successor statute (the
Code
))
for which corporations may be organized under the general laws of the State of Maryland as now or
hereafter in force. For purposes of the Charter,
REIT
means a real estate investment trust under
Sections 856 through 860 of the Code.
ARTICLE III
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The
address of the principal office of the Corporation in the State of Maryland is c/o CSC
Lawyers Incorporating Service Company, 7 Saint Paul Street, Baltimore, Maryland 21202. The name
and address of the resident agent of the Corporation are CSC Lawyers Incorporating Service
Company, 7 Saint Paul Street, Baltimore, Maryland 21202. The resident agent is a Maryland
corporation.
ARTICLE IV
DEFINITIONS
As used in the Charter, the following terms shall have the following meanings unless the
context otherwise requires:
Acquisition Expenses
. The term
Acquisition Expenses
shall mean, to the extent not
paid or to be paid by the seller, lessee, borrower or any other party involved in the
transaction, those expenses, including, but not limited to, legal fees and expenses, travel
and communications expenses, costs of appraisals, nonrefundable option payments on
Investments not acquired, accounting fees and expenses, title insurance, and miscellaneous
expenses related to selection, acquisition and origination of Investments, whether or not a
particular Investment ultimately is made. Acquisition Expenses shall not include
Acquisition Fees.
- 1 -
Acquisition Fees
. The term
Acquisition Fees
shall mean the total of all fees and
commissions paid by the Corporation or its subsidiaries to any party in connection with the
making of Investments, including, without limitation, the purchase, development or
construction of Properties. A Development Fee or Construction Fee paid to a Person not
affiliated with the Sponsor in connection with the actual development or construction of a
project after acquisition of the Property by the Corporation shall not be deemed an
Acquisition Fee. Included in the computation of such fees or commissions shall be any real
estate commission, selection fee, Development Fee or Construction Fee (other than as
described above), non-recurring management fees, loan fees, points or any fee of a similar
nature, however designated. Acquisition Fees shall not include Acquisition Expenses.
Adjusted Net Income
. The term
Adjusted Net Income
shall mean for any period, the
total consolidated revenues recognized in such period by the Corporation, less the total
consolidated expenses of the Corporation recognized in such period, excluding additions to
reserves for depreciation and amortization, bad debts or other similar non-cash reserves;
provided
,
however
,
that
Adjusted Net Income for purposes of calculating total allowable
Operating Expenses under the 2%/25% Guidelines shall exclude any gains, losses or writedowns
from the sale of the Corporations assets.
Advisor or Advisors
. The term
Advisor
or
Advisors
shall mean the Person or
Persons, if any, appointed, employed or contracted with by the Corporation pursuant to
Section 8.1 hereof and responsible for directing or performing the day-to-day business
affairs of the Corporation, including any Person to whom the Advisor subcontracts all or
substantially all of such functions.
Advisory Agreement
. The term
Advisory Agreement
shall mean the agreement between the
Corporation and the Advisor pursuant to which the Advisor will direct or perform the
day-to-day business affairs of the Corporation.
Affiliate or Affiliated
. The term
Affiliate
or
Affiliated
shall mean, with respect
to any Person, (i) any Person directly or indirectly owning, controlling or holding, with
the power to vote, 10% or more of the outstanding voting securities of such other Person;
(ii) any Person 10% or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held, with the power to vote, by such other Person;
(iii) any Person directly or indirectly controlling, controlled by or under common control
with such other Person; (iv) any executive officer, director, trustee or general partner of
such other Person; or (v) any legal entity for which such Person acts as an executive
officer, director, trustee or general partner.
Aggregate Share Ownership Limit
. The term
Aggregate Share Ownership Limit
shall mean
not more than 9.8% in value of the aggregate of the outstanding Shares.
Appraised Value
. The term
Appraised Value
shall mean value according to an appraisal
made by an Independent Appraiser, which may take into consideration any factor deemed
appropriate by such Independent Appraiser, including, but not limited to, current market and
property conditions, any unique attributes of the property or its operations, current and
anticipated income and expense trends, forecasts of stabilized operations, repositioning
opportunities and conditions in the credit and investment markets. The Appraised Value of a
Property may be greater than the construction cost or the replacement cost of the Property.
Average Invested Assets
. The term
Average Invested Assets
shall mean the average
during any period of the aggregate book value of the Corporations Investments, before
deducting
reserves for depreciation, bad debts, impairments, amortization and all other non-cash
reserves, computed by taking the average of such values at the end of each month during such
period.
- 2 -
Beneficial Ownership
. The term
Beneficial Ownership
shall mean ownership of Shares
by a Person, whether the interest in Shares is held directly or indirectly (including by a
nominee), and shall include interests that would be treated as owned through the application
of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms
Beneficial Owner
,
Beneficially Owns
and
Beneficially Owned
shall have the correlative
meanings.
Board or Board of Directors
. The term
Board
or
Board of Directors
shall mean the
Board of Directors of the Corporation.
Business Day
. The term
Business Day
shall mean any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions in New York
City are authorized or required by law, regulation or executive order to close.
Bylaws
. The term
Bylaws
shall mean the Bylaws of the Corporation, as amended from
time to time.
Charitable Beneficiary
. The term
Charitable Beneficiary
shall mean one or more
beneficiaries of the Charitable Trust as determined pursuant to Section 6.2.6,
provided that
each such organization must be described in Section 501(c)(3) of the Code and contributions
to each such organization must be eligible for deduction under each of
Sections 170(b)(1)(A), 2055 and 2522 of the Code.
Charitable Trust
. The term
Charitable Trust
shall mean any trust provided for in
Section 6.2.1.
Charitable Trustee
. The term
Charitable Trustee
shall mean the Person unaffiliated
with the Corporation and a Prohibited Owner, that is appointed by the Corporation to serve
as trustee of the Charitable Trust.
Charter
. The term
Charter
shall mean the charter of the Corporation.
Code
. The term
Code
shall have the meaning as provided in Article II herein.
Commencement of the Initial Public Offering
. The term
Commencement of the Initial
Public Offering
shall mean the date that the Securities and Exchange Commission declares
effective the registration statement filed under the Securities Act for the Initial Public
Offering.
Common Share Ownership Limit
. The term
Common Share Ownership Limit
shall mean not
more than 9.8% (in value or in number of Shares, whichever is more restrictive) of the
aggregate of the outstanding Common Shares.
Common Shares
. The term
Common Shares
shall have the meaning as provided in
Section 5.1 herein.
Competitive Real Estate Commission
. The term
Competitive Real Estate Commission
shall mean a real estate or brokerage commission paid for the purchase or sale of an
Investment that is reasonable, customary and competitive in light of the size, type and
location or other relevant characteristics of the Investment.
- 3 -
Construction Fee
. The term
Construction Fee
shall mean a fee or other remuneration
for acting as general contractor and/or construction manager to construct improvements,
supervise and coordinate projects or to provide major repairs or rehabilitations on a
Property.
Constructive Ownership
. The term
Constructive Ownership
shall mean ownership of
Shares by a Person, whether the interest in Shares is held directly or indirectly (including
by a nominee), and shall include interests that would be treated as owned through the
application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code.
The terms
Constructive Owner
,
Constructively Owns
and
Constructively Owned
shall have
the correlative meanings.
Contract Purchase Price
. The term
Contract Purchase Price
shall mean the amount
actually paid or allocated (as of the date of purchase) to the purchase, development,
construction or improvement of an Investment or, in the case of an originated Loan, the
principal amount of such Loan, in each case exclusive of Acquisition Fees and Acquisition
Expenses.
Contract Sales Price
. The term
Contract Sales Price
shall mean the total
consideration received by the Corporation for the sale of an Investment.
Corporation
. The term
Corporation
shall have the meaning as provided in Article I
herein.
Development Fee
. The term
Development Fee
shall mean a fee for the packaging of a
Property, including the negotiation and approval of plans, and any assistance in obtaining
zoning and necessary variances and financing for a specific Property, either initially or at
a later date.
Director
. The term
Director
shall have the meaning as provided in Section 7.1
herein.
Disposition Fee
. The term
Disposition Fee
shall mean the fee paid to the Advisor or
an Affiliate under the Advisory Agreement for property disposition services.
Distributions
. The term
Distributions
shall mean any distributions of money or other
property, pursuant to Section 5.5 hereof, by the Corporation to owners of Shares, including
distributions that may constitute a return of capital for federal income tax purposes.
Excepted Holder
. The term
Excepted Holder
shall mean a Stockholder for whom an
Excepted Holder Limit is created by Article VI or by the Board of Directors pursuant to
Section 6.1.7.
Excepted Holder Limit
. The term
Excepted Holder Limit
shall mean,
provided that
the
affected Excepted Holder agrees to comply with the requirements established by the Board of
Directors pursuant to Section 6.1.7 and subject to adjustment pursuant to Section 6.1.8, the
percentage limit established by the Board of Directors pursuant to Section 6.1.7.
Excess Amount
. The term
Excess Amount
shall have the meaning as provided in
Section 8.10 herein.
FINRA
. The term
FINRA
shall mean the Financial Industry Regulatory Authority.
Gross Proceeds
. The term
Gross Proceeds
shall mean the aggregate purchase price of
all Shares sold for the account of the Corporation through an Offering, without deduction
for selling
commissions, volume discounts, any marketing support and due diligence expense reimbursement
or Organization and Offering Expenses in any Offering.
- 4 -
Indemnitee
. The term
Indemnitee
shall have the meaning as provided in
Section 12.2.1(b) herein.
Independent Appraiser
. The term
Independent Appraiser
shall mean a qualified
appraiser of real estate of the type held by the Corporation as determined by the Board, who
has no material current or prior business or personal relationship with the Advisor or the
Directors and who is engaged to a substantial extent in the business of rendering opinions
regarding the value of assets of the type held by the Corporation. Membership in a
nationally recognized appraisal society such as the American Institute of Real Estate
Appraisers or the Society of Real Estate Appraisers shall be conclusive evidence of such
qualification (but not of independence).
Independent Director
. The term
Independent Director
shall mean a Director who is not
on the date of determination, and within the last two years from the date of determination
has not been, directly or indirectly associated with the Sponsor or the Advisor by virtue of
(i) ownership of an interest in the Sponsor, the Advisor or any of their Affiliates, other
than the Corporation, (ii) employment by the Sponsor, the Advisor or any of their
Affiliates, (iii) service as an officer or director of the Sponsor, the Advisor or any of
their Affiliates, other than as a Director of the Corporation, (iv) performance of services,
other than as a Director, for the Corporation, (v) service as a director or trustee of more
than three REITs organized by the Sponsor or advised by the Advisor, or (vi) maintenance of
a material business or professional relationship with the Sponsor, the Advisor or any of
their Affiliates. A business or professional relationship is considered material per se
if the aggregate gross revenue derived by the Director from the Sponsor, the Advisor and
their Affiliates exceeds 5% of either the Directors annual gross revenue, derived from all
sources during either of the last two years or the Directors net worth on a fair market
value basis. In addition, (x) a Directors ownership of Shares or of shares of stock of
another REIT organized by the Sponsor or advised by the Advisor for which the Director has
served or is serving as a member of the board of directors and (y) indirect ownership of an
immaterial amount of stock of the Sponsor (for example, through ownership of a widely
diversified mutual fund) shall be deemed not to be an interest prohibited by clause (i) of
this definition. An indirect association with the Sponsor or the Advisor shall include
circumstances in which a Directors spouse, parent, child, sibling, mother- or
father-in-law, son- or daughter-in-law or brother- or sister-in-law is or has been
associated with the Sponsor, the Advisor, any of their Affiliates or the Corporation.
Initial Date
. The term
Initial Date
shall mean the date on which Shares are first
issued in the Corporations first Offering.
Initial Investment
. The term
Initial Investment
shall mean that portion of the
initial capitalization of the Corporation contributed by the Sponsor or its Affiliates
pursuant to Section II.A. of the NASAA REIT Guidelines.
Initial Public Offering
. The term
Initial Public Offering
shall mean the
Corporations first Offering pursuant to an effective registration statement filed under the
Securities Act.
Investment
. The term
Investment
shall mean an investment made by the Corporation,
directly or indirectly, in a Property, Loan or other asset that is consistent with the
investment objectives and policies of the Corporation.
- 5 -
Joint Ventures
. The term
Joint Ventures
shall mean those joint venture or
partnership arrangements in which the Corporation or any of its subsidiaries is a
co-venturer or general partner established to acquire or hold Investments.
Leverage
. The term
Leverage
shall mean the aggregate amount of indebtedness of the
Corporation for money borrowed (including purchase money mortgage loans) outstanding at any
time, both secured and unsecured.
Listing
. The term
Listing
shall mean the listing of the Common Shares on a national
securities exchange, the quotation of the Common Shares by The NASDAQ Stock Market or the
trading of the Common Shares in the over-the-counter market. Upon such Listing, the Common
Shares shall be deemed Listed.
Loans
. The term
Loans
shall mean the notes and other evidences of indebtedness or
obligations acquired, originated or entered into, directly or indirectly, by the Corporation
as lender, noteholder, participant, note purchaser or other capacity, including but not
limited to first or subordinate mortgage loans, construction loans, development loans, loan
participation, B notes, loans secured by capital stock or any other assets or form of equity
interest and any other type of loan or financial arrangement, such as providing or arranging
for letters of credit, providing guarantees of obligations to third parties, or providing
commitments for loans. The term
Loans
shall not include leases which are not recognized
as leases for federal income tax reporting purposes.
Market Price
. The term
Market Price
on any date shall mean, with respect to any
class or series of outstanding Shares, the Closing Price for such Shares on such date. The
Closing Price
on any date shall mean the last sale price for such Shares, regular way, or,
in case no such sale takes place on such day, the average of the closing bid and asked
prices, regular way, for such Shares, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or admitted to
trading on the NYSE or, if such Shares are not listed or admitted to trading on the NYSE, as
reported on the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which such Shares are
listed or admitted to trading or, if such Shares are not listed or admitted to trading on
any national securities exchange, the last quoted price, or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter market, as reported by FINRAs
OTC Bulletin Board quotation system or, if such system is no longer in use, the principal
other automated quotation system that may then be in use or, if such Shares are not quoted
by any such organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in such Shares selected by the Board of Directors
or, in the event that no trading price is available for such Shares, the fair market value
of Shares, as determined in good faith by the Board of Directors.
MGCL
. The term
MGCL
shall mean the Maryland General Corporation Law, as amended from
time to time.
NASAA REIT Guidelines
. The term
NASAA REIT Guidelines
shall mean the Statement of
Policy Regarding Real Estate Investment Trusts published by the North American Securities
Administrators Association on May 7, 2007 and in effect on the Initial Date.
Net Assets
. The term
Net Assets
shall mean the total assets of the Corporation
(other than intangibles) valued at cost, before deducting depreciation, reserves for bad
debts or other non-cash reserves, less total liabilities, calculated quarterly by the Corporation on a basis
consistently applied.
- 6 -
Non-Compliant Tender Offer
. The term
Non-Compliant Tender Offer
shall have the meaning as
provided in Section 11.7 herein.
NYSE
. The term
NYSE
shall mean the New York Stock Exchange.
Offering
. The term
Offering
shall mean the offering of Shares pursuant to a
Prospectus.
Operating Expenses
. The term
Operating Expenses
shall mean all consolidated
operating, general and administrative expenses paid or incurred by the Corporation, as
determined under generally accepted accounting principles, except the following (insofar as
they would otherwise be considered operating, general and administrative expenses under
generally accepted accounting principles): (i) interest and discounts and other cost of
borrowed money; (ii) taxes (including state, Federal and foreign income tax, property taxes
and assessments, franchise taxes and taxes of any other nature); (iii) expenses of raising
capital, including Organization and Offering Expenses, printing, engraving, and other
expenses, and taxes incurred in connection with the issuance and distribution of the
Corporations Shares and Securities; (iv) Acquisition Expenses, real estate commissions on
resale of property and other expenses connected with the acquisition, disposition,
origination, ownership and operation of Investments, including the costs of foreclosure,
insurance premiums, legal services, brokerage and sales commissions, and the maintenance,
repair and improvement of Property; (v) Acquisition Fees or Disposition Fees payable to the
Advisor or any other party; (vi) distributions paid by the Operating Partnership to the
special general partner under the agreement of limited partnership of the Operating
Partnership in respect of gains realized on dispositions of Investments and other capital
transactions; (vii) amounts paid to effect a redemption or repurchase of the special general
partner interest held by the special general partner pursuant to the agreement of limited
partnership of the Operating Partnership; and (viii) non-cash items, such as depreciation,
amortization, depletion, and additions to reserves for depreciation, amortization,
depletion, losses and bad debts. Notwithstanding anything herein to the contrary, Operating
Expenses shall include asset management fees and any loan refinancing fee and, solely for
the purposes of determining compliance with the 2%/25% Guideline, (1) distributions of
available cash generated by operations and investments made by the Operating Partnership to
the special general partner pursuant to the agreement of limited partnership of the
Operating Partnership, which, for the avoidance of doubt, does not include distributions
described in clauses (vi) and (vii) of this definition and (2) Disposition Fees paid in
respect of non-real property Investments.
Operating Partnership
. The term
Operating Partnership
or
OP
shall mean CWI OP, LP,
a Delaware limited partnership, through which the Corporation may own Investments.
Organization and Offering Expenses
. The term
Organization and Offering Expenses
shall mean those expenses payable by the Corporation and the OP in connection with the
formation, qualification and registration of the Corporation and in marketing and
distributing Shares including, but not limited to such expenses as: (i) the preparation,
printing, filing and delivery of any registration statement or Prospectus (including any
amendments thereof or supplements thereto) and the preparing and printing of contractual
agreements among the Corporation, the OP, dealer managers and selected dealers (including
copies thereof); (ii) the preparing and printing of the Charter and Bylaws, other
solicitation material and related documents and the filing and/or recording of such
documents necessary to comply with the laws of the State of Maryland for the formation of a
- 7 -
corporation
and thereafter for the continued good standing of a corporation;
(iii) the qualification or registration of the Shares under state securities or
Blue Sky
laws; (iv) any escrow arrangements, including any compensation to an escrow agent; (v) the
filing fees payable to the Securities and Exchange Commission and to FINRA;
(vi) reimbursement for the reasonable and identifiable out-of-pocket expenses of the dealer
managers and the selected dealers, including the cost of their counsel; (vii) the fees of
the Corporations counsel and accountants; (viii) all advertising expenses incurred in
connection with an Offering, including the cost of all sales literature and the costs
related to investor and broker/dealer sales and information meetings and marketing incentive
programs; and (ix) selling commissions, dealer manager fees, selected dealer fees, marketing
fees, incentive fees and due diligence fees incurred in connection with the sale of the
Shares.
Person
. The term
Person
shall mean an individual, corporation, partnership, estate,
trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, limited liability company, private
foundation within the meaning of Section 509(a) of the Code, joint stock company or other
entity and also includes a group as that term is used for purposes of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, and a group to which an Excepted Holder
Limit applies.
Preferred Shares
. The term
Preferred Shares
shall have the meaning as provided in
Section 5.1 herein.
Prohibited Owner
. The term
Prohibited Owner
shall mean, with respect to any
purported Transfer, any Person who, but for the provisions of Section 6.1.1, would
Beneficially Own or Constructively Own Shares, and if appropriate in the context, shall also
mean any Person who would have been the record owner of Shares that the Prohibited Owner
would have so owned.
Property or Properties
. The term
Property
or
Properties
shall mean, as the context
requires, the Corporations partial or entire interest in lodging or other lodging related
real property (including leasehold interests) and personal or mixed property connected
therewith. An investment which obligates the Corporation to acquire a Property shall be
treated as a Property.
Prospectus
. The term
Prospectus
shall mean any prospectus or offering document
pursuant to which the Corporation offers Shares in a public or private offering, as the same
may at any time and from time to time be amended or supplemented, after the effective date
of the registration statement in which it is included.
Reinvestment Plan
. The term
Reinvestment Plan
shall have the meaning as provided in
Section 5.10 herein.
REIT
. The term
REIT
shall mean a corporation, trust, association or other legal
entity (other than a real estate syndication) that is engaged primarily in investing in
equity interests in real estate (including fee ownership and leasehold interests) or in
loans secured by real estate or both as defined pursuant to the REIT Provisions of the Code.
REIT Provisions of the Code
. The term
REIT Provisions of the Code
shall mean
Sections 856 through 860 of the Code and any successor or other provisions of the Code
relating to real estate investment trusts (including provisions as to the attribution of
ownership of beneficial interests therein) and the regulations promulgated thereunder.
- 8 -
Restriction Termination Date
. The term
Restriction Termination Date
shall mean the
first day after the Initial Date on which the Board of Directors determines that it is no
longer in the best interests of the Corporation to attempt to, or continue to, qualify as a
REIT or that compliance with the restrictions and limitations on Beneficial Ownership,
Constructive Ownership and Transfers of Shares set forth herein is no longer required in
order for the Corporation to qualify as a REIT.
Roll-Up Entity
. The term
Roll-Up Entity
shall mean a partnership, REIT, corporation,
trust or similar entity that would be created or would survive after the successful
completion of a proposed Roll-Up Transaction.
Roll-Up Transaction
. The term
Roll-Up Transaction
shall mean a transaction involving
the acquisition, merger, conversion or consolidation either directly or indirectly of the
Corporation and the issuance of securities of a Roll-Up Entity to the Stockholders. Such
term does not include:
|
(a)
|
|
a transaction involving securities of the Corporation that have been for at
least 12 months Listed on a national securities exchange; or
|
|
|
(b)
|
|
a transaction involving the conversion to corporate, trust or association form
of only the Corporation, if, as a consequence of the transaction, there will be no
significant adverse change in any of the following:
|
|
(i)
|
|
Stockholders voting rights;
|
|
|
(ii)
|
|
the term of existence of the Corporation;
|
|
|
(iii)
|
|
Sponsor or Advisor compensation; or
|
|
|
(iv)
|
|
the Corporations investment objectives.
|
SDAT
. The term
SDAT
shall have the meaning as provided in Section 5.4 herein.
Securities
. The term
Securities
shall mean any of the following issued by the
Corporation, as the text requires: Shares, any other stock, shares or other evidences of
equity or beneficial or other interests, voting trust certificates, bonds, debentures, notes
or other evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as securities or any certificates
of interest, shares or participations in, temporary or interim certificates for, receipts
for, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire, any
of the foregoing.
Securities Act
. The term
Securities Act
shall mean the Securities Act of 1933, as
amended from time to time, or any successor statute thereto. Reference to any provision of
the Securities Act shall mean such provision as in effect from time to time, as the same may
be amended, and any successor provision thereto, as interpreted by any applicable
regulations as in effect from time to time.
Shares
. The term
Shares
shall mean shares of stock of the Corporation of any class
or series, including Common Shares or Preferred Shares.
- 9 -
Sponsor
. The term
Sponsor
shall mean any Person which (i) is directly or indirectly
instrumental in organizing, wholly or in part, the Corporation, (ii) will control, manage or
participate in the management of the Corporation, and any Affiliate of any such Person,
(iii) takes the initiative, directly or indirectly, in founding or organizing the
Corporation, either alone or in conjunction with one or more other Persons, (iv) receives a
material participation in the Corporation in connection with the founding or organizing of
the business of the Corporation, in consideration of services or property, or both services
and property, (v) has a substantial number of relationships and contacts with the
Corporation, (vi) possesses significant rights to control Properties, (vii) receives fees
for providing services to the Corporation which are paid on a basis that is not customary in
the industry, or (viii) provides goods or services to the Corporation on a basis which was
not negotiated at arms-length with the Corporation. The term
Sponsor
does not include
any Person whose only relationship with the Corporation is that of an independent property
manager and whose only compensation is as such, or wholly independent third parties such as
attorneys, accountants and underwriters whose only compensation is for professional
services.
Stockholder List
. The term
Stockholder List
shall have the meaning as provided in
Section 11.5 herein.
Stockholders
. The term
Stockholders
shall mean the holders of record of the Shares
as maintained in the books and records of the Corporation or its transfer agent.
Tendered Shares
. The term
Tendered Shares
shall have the meaning as provided in
Section 11.7 herein.
Transfer
. The term
Transfer
shall mean any issuance, sale, transfer, gift,
assignment, devise or other disposition, as well as any other event that causes any Person
to acquire Beneficial Ownership or Constructive Ownership, or any agreement to take any such
actions or cause any such events, of Shares or the right to vote or receive dividends on
Shares, including (a) the granting or exercise of any option (or any disposition of any
option), (b) any disposition of any securities or rights convertible into or exchangeable
for Shares or any interest in Shares or any exercise of any such conversion or exchange
right and (c) Transfers of interests in other entities that result in changes in Beneficial
or Constructive Ownership of Shares; in each case, whether voluntary or involuntary, whether
owned of record, Constructively Owned or Beneficially Owned and whether by operation of law
or otherwise. The terms
Transferring
and
Transferred
shall have the correlative
meanings.
2%/25% Guideline
. The term
2%/25% Guideline
shall have the meaning as provided in
Section 8.10 herein.
Unimproved Real Property
. The term
Unimproved Real Property
shall mean Property in
which the Corporation has an equity interest that was not acquired for the purpose of
producing rental or other operating income, that has no development or construction in
process and for which no development or construction is planned, in good faith, to commence
within one year.
- 10 -
ARTICLE V
STOCK
Section 5.1.
Authorized Shares
. The Corporation has authority to issue 350,000,000 Shares,
consisting of 300,000,000 shares of Common Stock, $.001 par value per share (
Common Shares
),
and 50,000,000 shares of Preferred Stock, $.001 par value per share (
Preferred Shares
).
The aggregate par value of all authorized Shares having par value is $350,000.00. All
Shares shall be fully paid and nonassessable when issued. If Shares of one class are classified
or reclassified into Shares of another class pursuant to this Article V, the number of
authorized Shares of the former class shall be automatically decreased and the number of Shares
of the latter class shall be automatically increased, in each case by the number of Shares so
classified or reclassified, so that the aggregate number of Shares of all classes that the
Corporation has authority to issue shall not be more than the total number of Shares set forth
in the first sentence of this Section 5.1. The Board of Directors, with the approval of a
majority of the entire Board and without any action by the Stockholders, may amend the Charter
from time to time to increase or decrease the aggregate number of Shares or the number of Shares
of any class or series that the Corporation has authority to issue.
Section 5.2.
Common Shares
.
Section 5.2.1
Common Shares Subject to Terms of Preferred Shares
. The Common Shares shall be
subject to the express terms of any series of Preferred Shares.
Section 5.2.2
Description
. Subject to the provisions of Article VI and except as may
otherwise be specified in the terms of any class or series of Common Shares, each Common Share
shall entitle the holder thereof to one vote per share on all matters upon which Stockholders are
entitled to vote pursuant to Section 11.2 hereof. The Board may classify or reclassify any
unissued Common Shares from time to time in one or more classes or series of Shares;
provided
,
however
,
that
the voting rights per Share (other than any publicly held Share) sold in a private
offering shall not exceed the voting rights which bear the same relationship to the voting rights
of a publicly held Share as the consideration paid to the Corporation for each privately offered
Share bears to the book value of each outstanding publicly held Share.
Section 5.2.3
Rights Upon Liquidation
. In the event of any voluntary or involuntary
liquidation, dissolution or winding up, or any distribution of the assets of the Corporation, the
aggregate assets available for distribution to holders of the Common Shares shall be determined in
accordance with applicable law. Each holder of Common Shares of a particular class shall be
entitled to receive, ratably with each other holder of Common Shares of such class, that portion of
such aggregate assets available for distribution as the number of outstanding Common Shares of such
class held by such holder bears to the total number of outstanding Common Shares of such class then
outstanding.
Section 5.2.3
Voting Rights
. Except as may be provided otherwise in the Charter, and subject
to the express terms of any series of Preferred Shares, the holders of the Common Shares shall have
the exclusive right to vote on all matters (as to which a common stockholder shall be entitled to
vote pursuant to applicable law) at all meetings of the Stockholders.
Section 5.3.
Preferred Shares
. The Board may classify any unissued Preferred Shares and
reclassify any previously classified but unissued Preferred Shares of any series from time to
time, in one or more classes or series of Shares;
provided
,
however
,
that
the voting rights per
Share (other than any publicly held Share) sold in a private offering shall not exceed the
voting rights which bear the same relationship to the voting rights of a publicly held Share as
the consideration paid to the Corporation for each privately offered Share bears to the book
value of each outstanding publicly held Share.
- 11 -
Section 5.4.
Classified or Reclassified Shares
. Prior to issuance of classified or
reclassified Shares of any class or series, the Board by resolution shall: (a) designate
that class or series to distinguish it from all other classes and series of Shares; (b) specify
the number of Shares to be included in the class or series; (c) set or change, subject to the
provisions of Article VI and subject to the express terms of any class or series of Shares
outstanding at the time, the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions, qualifications and terms and
conditions of redemption for each class or series; and (d) cause the Corporation to file
articles supplementary with the State Department of Assessments and Taxation of Maryland
(
SDAT
). Any of the terms of any class or series of Shares set or changed pursuant to
clause (c) of this Section 5.4 may be made dependent upon facts or events ascertainable outside
the Charter (including determinations by the Board or other facts or events within the control
of the Corporation) and may vary among holders thereof,
provided that
the manner in which such
facts, events or variations shall operate upon the terms of such class or series of Shares is
clearly and expressly set forth in the articles supplementary or other charter document.
Section 5.5.
Dividends and Distributions
. The Board of Directors may from time to time
authorize the Corporation to declare and pay to Stockholders such dividends or Distributions, in
cash or other assets of the Corporation or in securities of the Corporation or from any other
source as the Board of Directors in its discretion shall determine. The Board of Directors
shall endeavor to authorize the Corporation to declare and pay such dividends and Distributions
as shall be necessary for the Corporation to qualify as a REIT under the Code so long as such
qualification, in the opinion of the Board of Directors, is in the best interest of the
Corporation; however, Stockholders shall have no right to any dividend or Distribution unless
and until authorized by the Board and declared by the Corporation. The exercise of the powers
and rights of the Board of Directors pursuant to this Section 5.5 shall be subject to the
provisions of any class or series of Shares at the time outstanding. The receipt by any Person
in whose name any Shares are registered on the records of the Corporation or by his or her duly
authorized agent shall be a sufficient discharge for all dividends or Distributions payable or
deliverable in respect of such Shares and from all liability to see to the application thereof.
Distributions in kind shall not be permitted, except for distributions of readily marketable
securities, distributions of beneficial interests in a liquidating trust established for the
dissolution of the Corporation and the liquidation of its assets in accordance with the terms of
the Charter or distributions in which (i) the Board advises each Stockholder of the risks
associated with direct ownership of the property, (ii) the Board offers each Stockholder the
election of receiving such in-kind distributions, and (iii) in-kind distributions are made only
to those Stockholders that accept such offer.
Section 5.6.
Charter and Bylaws
. The rights of all Stockholders and the terms of all
Shares are subject to the provisions of the Charter and the Bylaws.
Section 5.7.
No Issuance of Share Certificates
. Unless otherwise provided by the Board of
Directors, the Corporation shall not issue stock certificates. A Stockholders investment shall
be recorded on the books of the Corporation. To transfer his or her Shares, a Stockholder shall
submit an executed form to the Corporation, which form shall be provided by the Corporation upon
request. Such transfer will also be recorded on the books of the Corporation. With respect to
any Shares that are issued without certificates, and upon request by a Stockholder, the
Corporation will provide the Stockholder with information concerning his or her rights with
regard to such Shares, as required by the Bylaws and the MGCL or other applicable law.
- 12 -
Section 5.8.
Suitability of Stockholders
. Until Listing, the following provisions shall
apply:
Section 5.8.1
Investor Suitability Standards
. Subject to suitability standards established by
individual states, to become a Stockholder in the Corporation, if such prospective Stockholder is
an individual (including an individual beneficiary of a purchasing Individual Retirement Account),
or if the prospective Stockholder is a fiduciary (such as a trustee of a trust or corporate pension
or profit sharing plan, or other tax-exempt organization, or a custodian under a Uniform Gifts to
Minors Act), such individual or fiduciary, as the case may be, must represent to the Corporation,
among other requirements as the Corporation may require from time to time:
(a) that such individual (or, in the case of a fiduciary, that the fiduciary account or the
donor who directly or indirectly supplies the funds to purchase the Shares) has a minimum annual
gross income of $70,000 and a net worth (excluding home, furnishings and automobiles) of not less
than $70,000; or
(b) that such individual (or, in the case of a fiduciary, that the fiduciary account or the
donor who directly or indirectly supplies the funds to purchase the Shares) has a net worth
(excluding home, furnishings and automobiles) of not less than $250,000.
Section 5.8.2
Determination of Suitability of Sale
. The Sponsor and each Person selling
Shares on behalf of the Corporation shall make every reasonable effort to determine that the
purchase of Shares by Stockholders is a suitable and appropriate investment for such Stockholder.
In making this determination, the Sponsor and each Person selling Shares on behalf of the
Corporation shall ascertain that the prospective Stockholder: (a) meets the minimum income and net
worth standards established for the Corporation; (b) can reasonably benefit from the Corporation
based on the prospective Stockholders overall investment objectives and portfolio structure;
(c) is able to bear the economic risk of the investment based on the prospective Stockholders
overall financial situation; and (d) has apparent understanding of (1) the fundamental risks of the
investment; (2) the risk that the Stockholder may lose the entire investment; (3) the lack of
liquidity of the Shares; (4) the restrictions on transferability of the Shares; and (5) the tax
consequences of the investment.
The Sponsor and each Person selling Shares on behalf of the Corporation shall make this
determination on the basis of information it has obtained from a prospective Stockholder. Relevant
information for this purpose will include at least the age, investment objectives, investment
experience, income, net worth, financial situation, and other investments of the prospective
Stockholder, as well as any other pertinent factors.
The Sponsor and each Person selling Shares on behalf of the Corporation shall maintain records
of the information used to determine that an investment in Shares is suitable and appropriate for a
Stockholder. The Sponsor and each Person selling Shares on behalf of the Corporation shall
maintain these records for at least six years.
Section 5.8.3
Minimum Investment and Transfer
. Subject to certain individual state
requirements and the issuance of Shares under the Reinvestment Plan, no initial sale or transfer of
Shares will be permitted of less than $2,000.
Section 5.9.
Repurchase of Shares
. The Board may establish, from time to time, a program
or programs by which the Corporation voluntarily repurchases Shares from its Stockholders;
provided
,
however
,
that
such repurchase does not impair the capital or operations of the Corporation.
The Sponsor, Advisor, members of the Board or any Affiliates thereof may not receive any fees
arising out of the repurchase of Shares by the Corporation.
Section 5.10.
Distribution Reinvestment Plans
. The Board may establish, from time to time,
a Distribution reinvestment plan or plans (each, a
Reinvestment Plan
). Under any such
Reinvestment Plan, (i) all material information regarding Distributions to the Stockholders and
the effect of reinvesting such Distributions, including the tax consequences thereof, shall be
provided to the Stockholders at least annually, and (ii) each Stockholder participating in such
Reinvestment Plan shall have a reasonable opportunity to withdraw from the Reinvestment Plan at
least annually after receipt of the information required in clause (i) above.
- 13 -
ARTICLE VI
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 6.1.
Shares
.
Section 6.1.1
Ownership Limitations
. During the period commencing on the Initial Date and
prior to the Restriction Termination Date, but subject to Section 6.3:
(a)
Basic Restrictions
.
(i) (1) No Person, other than an Excepted Holder, shall Beneficially Own or Constructively Own
Shares in excess of the Aggregate Share Ownership Limit, (2) no Person, other than an Excepted
Holder, shall Beneficially Own or Constructively Own Common Shares in excess of the Common Share
Ownership Limit and (3) no Excepted Holder shall Beneficially Own or Constructively Own Shares in
excess of the Excepted Holder Limit for such Excepted Holder.
(ii) No Person shall Beneficially Own or Constructively Own Shares to the extent that such
Beneficial Ownership or Constructive Ownership of Shares would result in the Corporation being
closely held
within the meaning of Section 856(h) of the Code (without regard to whether the
ownership interest is held during the last half of a taxable year), or otherwise failing to qualify
as a REIT (including, but not limited to, Beneficial Ownership or Constructive Ownership that would
result in the Corporation owning (actually or Constructively) an interest in a tenant that is
described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation from such
tenant would cause the Corporation to fail to satisfy any of the gross income requirements of
Section 856(c) of the Code).
(iii) Any Transfer of Shares that, if effective, would result in Shares being Beneficially
Owned by less than 100 Persons (determined under the principles of Section 856(a)(5) of the Code)
shall be void
ab initio
, and the intended transferee shall acquire no rights in such Shares.
(b)
Transfer in Trust
. If any Transfer of Shares occurs which, if effective, would result in
any Person Beneficially Owning or Constructively Owning Shares in violation of Section 6.1.1(a)(i)
or (ii),
(i) then that number of Shares the Beneficial Ownership or Constructive Ownership of which
otherwise would cause such Person to violate Section 6.1.1(a)(i) or
(ii) (rounded up to the nearest whole share) shall be automatically transferred to a
Charitable Trust for the benefit of a Charitable Beneficiary, as described in Section 6.2,
effective as of the close of business on the Business Day prior to the date of such Transfer, and
such Person shall acquire no rights in such Shares; or
(ii) if the transfer to the Charitable Trust described in clause (i) of this sentence would
not be effective for any reason to prevent the violation of Section 6.1.1(a)(i) or (ii), then the
Transfer of that number of Shares that otherwise would cause any Person to violate
Section 6.1.1(a)(i) or (ii) shall be void
ab initio
, and the intended transferee shall acquire no
rights in such Shares.
- 14 -
Section 6.1.2
Remedies for Breach
. If the Board of Directors or its designee (including any
duly authorized committee of the Board) shall at any time determine in good faith that a Transfer
or other event has taken place that results in a violation of Section 6.1.1(a) or that a Person
intends to acquire or has attempted to acquire Beneficial Ownership or Constructive Ownership of
any Shares in violation of Section 6.1.1(a) (whether or not such violation is intended), the Board
of Directors or its designee shall take such action as it deems advisable to refuse to give effect
to or to prevent such Transfer or other event, including, without limitation, causing the
Corporation to redeem Shares, refusing to give effect to such Transfer on the books of the
Corporation or instituting proceedings to enjoin such Transfer or other event;
provided
,
however
,
that
any Transfers or attempted Transfers or other events in violation of Section 6.1.1(a) shall
automatically result in the transfer to the Charitable Trust described above, and, where
applicable, such Transfer (or other event) shall be void
ab initio
as provided above irrespective
of any action (or non-action) by the Board of Directors or its designee.
Section 6.1.3
Notice of Restricted Transfer
. Any Person who acquires or attempts or intends
to acquire Beneficial Ownership or Constructive Ownership of Shares that will or may violate
Section 6.1.1(a), or any Person who would have owned Shares that resulted in a transfer to the
Charitable Trust pursuant to the provisions of Section 6.1.1(b), shall immediately give written
notice to the Corporation of such event, or in the case of such a proposed or attempted
transaction, give at least 15 days prior written notice, and shall provide to the Corporation such
other information as the Corporation may request in order to determine the effect, if any, of such
Transfer on the Corporations status as a REIT.
Section 6.1.4
Owners Required To Provide Information
. From the Initial Date and prior to the
Restriction Termination Date:
(a) every owner of more than 5% (or such lower percentage as required by the Code or the
Treasury Regulations promulgated thereunder) of the outstanding Shares, within 30 days after the
end of each taxable year, shall give written notice to the Corporation stating the name and address
of such owner, the number of Shares and other Shares Beneficially Owned and a description of the
manner in which such Shares are held. Each such owner shall provide to the Corporation such
additional information as the Corporation may request in order to determine the effect, if any, of
such Beneficial Ownership on the Corporations status as a REIT and to ensure compliance with the
Aggregate Share Ownership Limit, the Common Share Ownership Limit and the other restrictions set
forth herein.
(b) each Person who is a Beneficial Owner or Constructive Owner of Shares and each Person
(including the stockholder of record) who is holding Shares for a Beneficial Owner or Constructive
Owner shall provide to the Corporation such information as the Corporation may request, in good
faith, in order to determine the Corporations status as a REIT and to comply with requirements of
any taxing authority or governmental authority or to determine such compliance.
Section 6.1.5
Remedies Not Limited
. Subject to Section 7.10, nothing contained in this
Section 6.1 shall limit the authority of the Board of Directors to take such other action as it
deems
necessary or advisable to protect the Corporation and the interests of its stockholders in
preserving the Corporations status as a REIT.
Section 6.1.6
Ambiguity
. In the case of an ambiguity in the application of any of the
provisions of this Section 6.1, Section 6.2 or any definition contained in Article IV, the Board of
Directors shall have the power to determine the application of the provisions of this Section 6.1
or Section 6.2 with respect to any situation based on the facts known to it. In the event
Section 6.1 or 6.2 requires an action by the Board of Directors and the Charter fails to provide
specific guidance with respect to such action, the Board of Directors shall have the power to
determine the action to be taken so long as such action is not contrary to the provisions of
Article IV or Sections 6.1 or 6.2. Absent a decision to the contrary by the Board of Directors
(which the Board may make in its sole and absolute discretion), if a Person would have (but for the
remedies set forth in Section 6.1.2) acquired Beneficial Ownership or Constructive Ownership of
Shares in violation of Section 6.1.1, such remedies (as applicable) shall apply first to the Shares
which, but for such remedies, would have been Beneficially Owned or Constructively Owned (but not
actually owned) by such Person, pro rata among the Persons who actually own such Shares based upon
the relative number of the Shares held by each such Person.
- 15 -
Section 6.1.7
Exceptions
.
(a) Subject to Section 6.1.1(a)(ii), the Board of Directors, in its sole discretion, may
exempt (prospectively or retroactively) a Person from the Aggregate Share Ownership Limit and the
Common Share Ownership Limit, as the case may be, and may establish or increase an Excepted Holder
Limit for such Person if:
(i) the Board of Directors obtains such representations and undertakings from such Person as
are reasonably necessary to ascertain that no individuals Beneficial Ownership or Constructive
Ownership of such Shares will violate
Section 6.1.1(a)(ii);
(ii) such Person does not and represents that it will not own, actually or Constructively, an
interest in a tenant of the Corporation (or a tenant of any entity owned or controlled by the
Corporation) that would cause the Corporation to own, actually or Constructively, more than a 9.9%
interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the Board of
Directors obtains such representations and undertakings from such Person as are reasonably
necessary to ascertain this fact (for this purpose, a tenant from whom the Corporation (or an
entity owned or controlled by the Corporation) derives (and is expected to continue to derive) a
sufficiently small amount of revenue such that, in the opinion of the Board of Directors, rent from
such tenant would not adversely affect the Corporations ability to qualify as a REIT, shall not be
treated as a tenant of the Corporation); and
(iii) such Person agrees that any violation or attempted violation of such representations or
undertakings (or other action which is contrary to the restrictions contained in Sections 6.1.1
through 6.1.6) will result in such Shares being automatically transferred to a Charitable Trust in
accordance with Sections 6.1.1(b) and 6.2.
(b) Prior to granting any exception pursuant to Section 6.1.7(a), the Board of Directors may
require a ruling from the Internal Revenue Service, or an opinion of counsel, in either case in
form and substance satisfactory to the Board of Directors in its sole discretion, as it may deem
necessary or advisable in order to determine or ensure the Corporations status as a REIT.
Notwithstanding the receipt of any ruling or opinion, the Board of Directors may impose such
conditions or restrictions as it deems appropriate in connection with granting such exception.
(c) Subject to Section 6.1.1(a)(ii), an underwriter which participates in a public offering or
a private placement of Shares (or securities convertible into or exchangeable for Shares) may
Beneficially Own or Constructively Own Shares (or securities convertible into or exchangeable for
Shares) in excess of the Aggregate Share Ownership Limit, the Common Share Ownership Limit or both
such limits, but only to the extent necessary to facilitate such public offering or private
placement.
(d) The Board of Directors may only reduce the Excepted Holder Limit for an Excepted Holder:
(1) with the written consent of such Excepted Holder at any time, or (2) pursuant to the terms and
conditions of the agreements and undertakings entered into with such Excepted Holder in connection
with the establishment of the Excepted Holder Limit for that Excepted Holder. No Excepted Holder
Limit shall be reduced to a percentage that is less than the Common Share Ownership Limit.
- 16 -
Section 6.1.8
Increase in Aggregate Share Ownership and Common Share Ownership Limits
.
Subject to Section 6.1.1(a)(ii), the Board of Directors may from time to time increase the Common
Share Ownership Limit and the Aggregate Share Ownership Limit for one or more Persons and decrease
the Common Share Ownership Limit and the Aggregate Share Ownership Limit for all other Persons;
provided
,
however
,
that
the decreased Common Share Ownership Limit and/or Aggregate Share Ownership
Limit will not be effective for any Person whose percentage ownership in Shares is in excess of
such decreased Common Share Ownership Limit and/or Aggregate Share Ownership Limit until such time
as such Persons percentage of Shares equals or falls below the decreased Common Share Ownership
Limit and/or Aggregate Share Ownership Limit, but any further acquisition of Shares in excess of
such percentage ownership of Shares will be in violation of the Common Share Ownership Limit and/or
Aggregate Share Ownership Limit and,
provided further
,
that
the new Common Share Ownership Limit
and/or Aggregate Share Ownership Limit would not allow five or fewer Persons to Beneficially Own
more than 49.9% in value of the outstanding Shares.
Section 6.1.9
Legend
. Any certificate representing Shares shall bear substantially the
following legend:
The Shares represented by this certificate are subject to restrictions on Beneficial Ownership
and Constructive Ownership and Transfer for the purpose, among others, of the Corporations
maintenance of its status as a real estate investment trust (a
REIT
) under the Internal Revenue
Code of 1986, as amended (the
Code
). Subject to certain further restrictions and except as
expressly provided in the Corporations Charter, (i) no Person may Beneficially Own or
Constructively Own Common Shares of the Corporation in excess of 9.8% (in value or number of
Shares) of the outstanding Common Shares of the Corporation unless such Person is an Excepted
Holder (in which case the Excepted Holder Limit shall be applicable); (ii) no Person may
Beneficially Own or Constructively Own Shares of the Corporation in excess of 9.8% of the value of
the total outstanding Shares of the Corporation, unless such Person is an Excepted Holder (in which
case the Excepted Holder Limit shall be applicable); (iii) no Person may Beneficially Own or
Constructively Own Shares that would result in the Corporation being closely held under
Section 856(h) of the Code or otherwise cause the Corporation to fail to qualify as a REIT; and
(iv) no Person may Transfer Shares if such Transfer would result in Shares of the Corporation being
owned by fewer than 100 Persons. Any Person who Beneficially Owns or Constructively Owns or
attempts to Beneficially Own or Constructively Own Shares which cause or will cause a Person to
Beneficially Own or Constructively Own Shares in excess or in violation of the above limitations
must immediately notify the Corporation. If any of the restrictions on transfer or ownership are
violated, the Shares represented hereby will be automatically transferred to a Charitable Trust for
the benefit of one or more Charitable Beneficiaries. In addition, the Corporation may redeem
Shares upon the terms and conditions specified by the Board of Directors in its sole discretion if
the Board of Directors determines that ownership or a Transfer or other event may violate the
restrictions described above. Furthermore, upon the occurrence of certain events, attempted
Transfers in violation of the restrictions described above
may be void
ab initio
. All capitalized terms in this legend have the meanings defined in the
Corporations Charter, as the same may be amended from time to time, a copy of which, including the
restrictions on transfer and ownership, will be furnished to each holder of Shares of the
Corporation on request and without charge. Requests for such a copy may be directed to the
Secretary of the Corporation at its principal office.
Instead of the foregoing legend, the certificate may state that the Corporation will furnish a
full statement about certain restrictions on transferability to a stockholder on request and
without charge. In the case of uncertificated Shares, the Corporation will send the holder of such
Shares, on request and without charge, a written statement of the information otherwise required on
certificates.
- 17 -
Section 6.2.
Transfer of Shares in Trust
.
Section 6.2.1
Ownership in Trust
. Upon any purported Transfer or other event described in
Section 6.1.1(b) that would result in a transfer of Shares to a Charitable Trust, such Shares shall
be deemed to have been transferred to the Charitable Trustee as trustee of a Charitable Trust for
the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Charitable
Trustee shall be deemed to be effective as of the close of business on the Business Day prior to
the purported Transfer or other event that results in the transfer to the Charitable Trust pursuant
to Section 6.1.1(b). The Charitable Trustee shall be appointed by the Corporation and shall be a
Person unaffiliated with the Corporation and any Prohibited Owner. Each Charitable Beneficiary
shall be designated by the Corporation as provided in Section 6.2.6.
Section 6.2.2
Status of Shares Held by the Charitable Trustee
. Shares held by the Charitable
Trustee shall continue to be issued and outstanding Shares of the Corporation. The Prohibited
Owner shall have no rights in the Shares held by the Charitable Trustee. The Prohibited Owner
shall not benefit economically from ownership of any Shares held in trust by the Charitable
Trustee, shall have no rights to dividends or other Distributions and shall not possess any rights
to vote or other rights attributable to the Shares held in the Charitable Trust.
Section 6.2.3
Dividend and Voting Rights
. The Charitable Trustee shall have all voting rights
and rights to dividends or other Distributions with respect to Shares held in the Charitable Trust,
which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary. Any
dividend or other Distribution paid prior to the discovery by the Corporation that Shares have been
transferred to the Charitable Trustee shall be paid with respect to such Shares to the Charitable
Trustee upon demand and any dividend or other Distribution authorized but unpaid shall be paid when
due to the Charitable Trustee. Any dividends or Distributions so paid over to the Charitable
Trustee shall be held in trust for the Charitable Beneficiary. The Prohibited Owner shall have no
voting rights with respect to Shares held in the Charitable Trust and, subject to Maryland law,
effective as of the date that the Shares have been transferred to the Charitable Trustee, the
Charitable Trustee shall have the authority (at the Charitable Trustees sole discretion) (i) to
rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Corporation that
Shares have been transferred to the Charitable Trustee and (ii) to recast such vote in accordance
with the desires of the Charitable Trustee acting for the benefit of the Charitable Beneficiary;
provided
,
however
,
that
if the Corporation has already taken irreversible corporate action, then
the Charitable Trustee shall not have the authority to rescind and recast such vote.
Notwithstanding the provisions of this Article VI, until the Corporation has received notification
that Shares have been transferred into a Charitable Trust, the Corporation shall be entitled to
rely on its share transfer and other stockholder records for purposes of preparing lists of
stockholders entitled to vote at meetings, determining the validity and authority of proxies and
otherwise conducting votes of stockholders.
Section 6.2.4
Sale of Shares by Charitable Trustee
. Within 20 days of receiving notice from
the Corporation that Shares have been transferred to the Charitable Trust, the Charitable Trustee
shall sell the Shares held in the Charitable Trust to a person, designated by the Charitable
Trustee, whose ownership of the Shares will not violate the ownership limitations set forth in
Section 6.1.1(a). Upon such sale, the interest of the Charitable Beneficiary in the Shares sold
shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the
Prohibited Owner and to the Charitable Beneficiary as provided in this Section 6.2.4. The
Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the
Shares or, if the Prohibited Owner did not give value for the Shares in connection with the event causing the Shares to be held in the Charitable Trust (
e.g.
, in the case of a gift, devise or other
such transaction), the Market Price of the Shares on the day of the event causing the Shares
- 18 -
to be
held in the Charitable Trust and (2) the price per share received by the Charitable Trustee (net of
any commissions and other expenses of sale) from the sale or other disposition of the Shares held
in the Charitable Trust. The Charitable Trustee may reduce the amount payable to the Prohibited
Owner by the amount of dividends and Distributions which have been paid to the Prohibited Owner and
are owed by the Prohibited Owner to the Charitable Trustee pursuant to Section 6.2.3 of this
Article VI. Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall
be immediately paid to the Charitable Beneficiary. If, prior to the discovery by the Corporation
that Shares have been transferred to the Charitable Trustee, such Shares are sold by a Prohibited
Owner, then (i) such Shares shall be deemed to have been sold on behalf of the Charitable Trust and
(ii) to the extent that the Prohibited Owner received an amount for such Shares that exceeds the
amount that such Prohibited Owner was entitled to receive pursuant to this Section 6.2.4, such
excess shall be paid to the Charitable Trustee upon demand.
Section 6.2.5
Purchase Right in Shares Transferred to the Charitable Trustee
. Shares
transferred to the Charitable Trustee shall be deemed to have been offered for sale to the
Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share
in the transaction that resulted in such transfer to the Charitable Trust (or, in the case of a
devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on
the date the Corporation, or its designee, accepts such offer. The Corporation may reduce the
amount payable to the Prohibited Owner by the amount of dividends and Distributions which has been
paid to the Prohibited Owner and are owed by the Prohibited Owner to the Charitable Trustee
pursuant to Section 6.2.3 of this Article VI. The Corporation may pay the amount of such reduction
to the Charitable Trustee for the benefit of the Charitable Beneficiary. The Corporation shall
have the right to accept such offer until the Charitable Trustee has sold the Shares held in the
Charitable Trust pursuant to Section 6.2.4. Upon such a sale to the Corporation, the interest of
the Charitable Beneficiary in the Shares sold shall terminate and the Charitable Trustee shall
distribute the net proceeds of the sale to the Prohibited Owner.
Section 6.2.6
Designation of Charitable Beneficiaries
. By written notice to the Charitable
Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable
Beneficiary of the interest in the Charitable Trust such that (i) Shares held in the Charitable
Trust would not violate the restrictions set forth in Section 6.1.1(a) in the hands of such
Charitable Beneficiary and (ii) each such organization must be described in Section 501(c)(3) of
the Code and contributions to each such organization must be eligible for deduction under each of
Sections 170(b)(1)(A), 2055 and 2522 of the Code.
Section 6.3.
NYSE Transactions
. Nothing in this Article VI shall preclude the settlement
of any transaction entered into through the facilities of the NYSE or any other national
securities exchange or automated inter-dealer quotation system. The fact that the settlement of
any transaction occurs shall not negate the effect of any other provision of this Article VI and
any
transferee in such a transaction shall be subject to all of the provisions and limitations
set forth in this Article VI.
Section 6.4.
Enforcement
. The Corporation is authorized specifically to seek equitable
relief, including injunctive relief, to enforce the provisions of this Article VI.
Section 6.5.
Non-Waiver
. No delay or failure on the part of the Corporation or the Board
of Directors in exercising any right hereunder shall operate as a waiver of any right of the
Corporation or the Board of Directors, as the case may be, except to the extent specifically
waived in writing.
- 19 -
ARTICLE VII
PROVISIONS FOR DEFINING
,
LIMITING AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE
STOCKHOLDERS AND DIRECTORS
Section 7.1.
Number of Directors
. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. The number of Directors of the
Corporation (the
Directors
) shall be six, which number may be increased or decreased from time
to time pursuant to the Bylaws;
provided
,
however
,
that
the total number of Directors shall not
be fewer than three. A majority of the Board will be Independent Directors except for a period
of up to 90 days after the death, removal or resignation of an Independent Director pending the
election of such Independent Directors successor. The names of the Directors who shall serve
until the first annual meeting of stockholders and until their successors are duly elected and
qualify are:
Trevor P. Bond
Michael G. Medzigian
Charles S. Henry
Michael D. Johnson
Robert E. Parsons
William H. Reynolds, Jr.
These Directors may increase the number of Directors and fill any vacancy, whether resulting
from an increase in the number of Directors or otherwise, on the Board of Directors prior to the
first annual meeting of Stockholders in the manner provided in the Bylaws.
The Corporation elects, at such time as it becomes eligible to make the election provided for
under Section 3-804(c) of the MGCL, that, except as may be provided by the Board of Directors in
setting the terms of any class or series of Shares, any and all vacancies on the Board of Directors
may be filled only by the affirmative vote of a majority of the remaining Directors in office, even
if the remaining Directors do not constitute a quorum, and any Director elected to fill a vacancy
shall serve for the remainder of the full term of the directorship in which such vacancy occurred.
Notwithstanding the foregoing sentence, Independent Directors shall nominate replacements for
vacancies among the Independent Directors positions,
provided, however
, that if there are no
Independent Directors, the Directors shall nominate replacements for vacancies among the
Independent Directors.
Section 7.2.
Experience
. Each Director shall have at least three years of relevant
experience demonstrating the knowledge and experience required to successfully acquire and manage the
type of assets being acquired by the Corporation. At least one of the Independent Directors
shall have three years of relevant real estate experience.
Section 7.3.
Committees
. The Board may establish such committees as it deems appropriate,
in its discretion,
provided
that the majority of the members of each committee are Independent
Directors.
Section 7.4.
Term
. Except as may otherwise be provided in the terms of any Preferred
Shares issued by the Corporation, each Director shall hold office for one year, until the next
annual meeting of Stockholders and until his or her successor is duly elected and qualifies.
Directors may be elected to an unlimited number of successive terms.
Section 7.5.
Fiduciary Obligations
. The Directors and the Advisor serve in a fiduciary
capacity to the Corporation and have a fiduciary duty to the Stockholders of the Corporation,
including, with respect to the Directors, a specific fiduciary duty to supervise the
relationship of the Corporation with the Advisor.
- 20 -
Section 7.6.
Extraordinary Actions
. Notwithstanding any provision of law permitting or
requiring any action to be taken or approved by the affirmative vote of the holders of Shares
entitled to cast a greater number of votes, any such action shall be effective and valid if
declared advisable by the Board of Directors and taken or approved by the affirmative vote of
holders of Shares entitled to cast a majority of all the votes entitled to be cast on the
matter.
Section 7.7.
Authorization by Board of Stock Issuance
. The Board of Directors may
authorize the issuance from time to time of Shares of any class or series, whether now or
hereafter authorized, or securities or rights convertible into Shares of any class or series,
whether now or hereafter authorized, for such consideration as the Board of Directors may deem
advisable (or without consideration in the case of a stock split or stock dividend), subject to
such restrictions or limitations, if any, as may be set forth in the Charter or the Bylaws. The
issuance of Preferred Shares shall also be approved by a majority of Independent Directors not
otherwise interested in the transaction, who shall have access at the Corporations expense to
the Corporations legal counsel or to independent legal counsel.
Section 7.8.
Preemptive Rights and Appraisal Rights
. Except as may be provided by the
Board of Directors in setting the terms of classified or reclassified Shares pursuant to
Section 5.4 or as may otherwise be provided by contract approved by the Board of Directors, no
holder of Shares shall, as such holder, have any preemptive right to purchase or subscribe for
any additional Shares or any other security of the Corporation which it may issue or sell.
Holders of Shares shall not be entitled to exercise any rights of an objecting stockholder
provided for under Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board of
Directors, upon the affirmative vote of a majority of the Board of Directors, shall determine
that such rights apply, with respect to all or any classes or series of Shares, to one or more
transactions occurring after the date of such determination in connection with which holders of
such Shares would otherwise be entitled to exercise such rights.
Section 7.9.
Determinations by Board
. The determination as to any of the following
matters, made in good faith by or pursuant to the direction of the Board of Directors consistent
with the Charter, shall be final and conclusive and shall be binding upon the Corporation and
every holder of Shares: the amount of the net income of the Corporation for any period and the
amount of assets at any time legally available for the payment of dividends, redemption of
Shares or the payment of other Distributions on Shares; the amount of paid-in surplus, net
assets, other surplus, annual or other cash flow, funds from operations, net profit, net assets
in excess of capital, undivided profits or excess of profits over losses on sales of assets; the
amount, purpose, time of creation, increase or decrease, alteration or cancellation of any
reserves or charges and the propriety thereof (whether or not any obligation or liability for
which such reserves or charges shall have been created shall have been paid or discharged); any
interpretation of the terms, preferences, conversion or other rights, voting powers or rights,
restrictions, limitations as to dividends or Distributions, qualifications or terms or
conditions of redemption of any class or series of Shares; the fair value, or any sale, bid or
asked price to be applied in determining the fair value, of any asset owned or held by the
Corporation or any Shares; the number of Shares of any class of the Corporation; any matter
relating to the acquisition, holding and disposition of any assets by the Corporation; any
conflict between the MGCL and the provisions set forth in the NASAA REIT Guidelines; or any
other matter relating to the business and affairs of the Corporation or required or permitted by
applicable law, the Charter or Bylaws or otherwise to be determined by the Board of Directors;
provided, however,
that any determination by the Board of Directors as to any of the preceding
matters shall not render invalid or improper any action taken or omitted prior to such
determination and no Director shall be liable for making or failing to make such a
determination; and provided, further, that to the extent the Board determines that the MGCL
conflicts with the provisions set forth in the NASAA REIT Guidelines, the NASAA REIT Guidelines
control to the extent any provisions of the MGCL are not mandatory.
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Section 7.10.
REIT Qualification
. If the Corporation elects to qualify for federal income
tax treatment as a REIT, the Board of Directors shall use its reasonable best efforts to take
such actions as are necessary or appropriate to preserve the status of the Corporation as a
REIT; however, the Board of Directors may revoke or otherwise terminate the Corporations REIT
election pursuant to Section 856(g) of the Code if a majority of the directors not otherwise
interested in the transaction conclude that a failure to effect such a revocation or termination
could result in material adverse tax consequences to the Corporation or its stockholders. The
Board of Directors also may determine that compliance with any restriction or limitation on
stock ownership and transfers set forth in Article VI is no longer required for REIT
qualification.
Section 7.11.
Removal of Directors
. Subject to the rights of holders of one or more
classes or series of Preferred Shares to elect or remove one or more Directors, any Director, or
the entire Board of Directors, may be removed from office at any time, but only by the
affirmative vote of at least a majority of the votes entitled to be cast generally in the
election of Directors at a meeting called for the purpose of removing the Director, and the
notice of that meeting must state that the purpose, or one of the purposes of the meeting, is
the proposed removal of the Director.
Section 7.12.
Board Action with Respect to Certain Matters
. A majority of the Independent
Directors must approve any Board action to which the following sections of the NASAA REIT
Guidelines apply: II.A., II.C., II.F., II.G., IV.A., IV.B., IV.C., IV.D., IV.E., IV.F., IV.G.,
V.E., V.H., V.J., VI.A., VI.B.4, and VI.G.
ARTICLE VIII
ADVISOR
Section 8.1.
Appointment and Initial Investment of Advisor
. The Board is responsible for
setting the general policies of the Corporation and for the general supervision of its business
conducted by officers, agents, employees, advisors or independent contractors of the
Corporation. However, the Board is not required personally to conduct the business of the
Corporation, and it may (but need not) appoint, employ or contract with any Person (including a
Person Affiliated with any Director) as an Advisor and may grant or delegate such authority to
the Advisor as the Board may, in its sole discretion, deem necessary or desirable. The term of
retention of any Advisor shall not exceed one year, although there is no limit to the number of
times that a particular Advisor may be retained. The Advisor or its Affiliates have made an
Initial Investment of $200,000 in the Corporation. The Advisor or any such Affiliate may not
sell this Initial Investment while the Advisor remains a Sponsor but may transfer the Initial
Investment to other Affiliates.
Section 8.2.
Supervision of Advisor
. The Board shall evaluate the performance of the
Advisor before entering into or renewing an Advisory Agreement, and the criteria used in such
evaluation shall be reflected in the minutes of the meetings of the Board. The Board may
exercise broad discretion in allowing the Advisor to administer and regulate the operations of
the Corporation, to act as agent for the Corporation, to execute documents on behalf of the
Corporation and to make executive decisions that conform to general policies and principles
established by the Board. The Board shall monitor the Advisor to assure that the administrative
procedures, operations and programs of the Corporation are in the best interests of the
Stockholders and are fulfilled. The Independent Directors are responsible for reviewing the
fees and expenses of the Corporation at least annually or with sufficient frequency to determine
that the expenses incurred are reasonable in light of the investment performance of the
Corporation, its Net Assets, its Adjusted Net Income and the fees and expenses of other
comparable unaffiliated REITs. Each such determination shall be reflected in the minutes of the
meetings of the Board. The Independent Directors also will be responsible for reviewing, from
time to time and at least
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annually, the performance of the Advisor and determining that compensation to be paid to the Advisor is reasonable in relation to the nature and quality of
services performed and the investment performance of the Corporation and that the provisions of
the Advisory Agreement are being carried out. Specifically, the Independent Directors will
consider factors such as (i) the amount of the fee paid to the Advisor in relation to the size,
composition and performance of the Net Assets, (ii) the success of the Advisor in generating
opportunities that meet the investment objectives of the Corporation, (iii) rates charged to
other REITs and to investors other than REITs by advisors performing the same or similar
services, (iv) additional revenues realized by the Advisor and its Affiliates through their
relationship with the Corporation, including loan administration, underwriting or broker
commissions, servicing, engineering, inspection and other fees, whether paid by the Corporation
or by others with whom the Corporation does business, (v) the quality and extent of service and
advice furnished by the Advisor, (vi) the performance of the Corporations investment portfolio,
including income, conservation or appreciation of capital, frequency of problem investments and
competence in dealing with distress situations, and (vii) the quality of the Corporations
portfolio relative to the investments generated by the Advisor for its own account. The
Independent Directors may also consider all other factors that it deems relevant, and the
findings of the Independent Directors on each of the factors considered shall be recorded in the
minutes of the Board. The Board shall determine whether any successor Advisor possesses
sufficient qualifications to perform the advisory function for the Corporation and whether the
compensation provided for in its contract with the Corporation is justified.
Section 8.3.
Fiduciary Obligations
. The Advisor shall have a fiduciary responsibility and
duty to the Corporation and to the Stockholders.
Section 8.4.
Affiliation and Functions
. The Board, by resolution or in the Bylaws, may
provide guidelines, provisions or requirements concerning the affiliation and functions of the
Advisor.
Section 8.5.
Termination
. Either a majority of the Independent Directors or the Advisor
may terminate the Advisory Agreement on 60 days written notice without cause or penalty, and,
in such event, the Advisor will cooperate with the Corporation and the Board in making an
orderly transition of the advisory function.
Section 8.6.
Disposition Fee on Sale of Property
. Unless otherwise provided in any
resolution adopted by a majority of the Independent Directors, if the Advisor, any Director,
Sponsor or any Affiliate thereof provides a substantial amount of services in the effort to sell
an Investment, then such Person may receive a fee in the amount equal to the lesser of (i) 50%
of the Competitive Real Estate Commission (if applicable) or (ii) 3% of the Contract Sales
Price. Total brokerage commissions (including real estate brokerage commissions) payable to all
Persons shall not exceed the lesser of (a) the Competitive Real Estate Commission or (b) an
amount equal to 6% of the Contract Sales Price.
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Section 8.7.
Incentive Fees
. Unless otherwise provided in any resolution adopted by a
majority of the Independent Directors, the Corporation may pay the Advisor or an Affiliate of
the Advisor an interest in the gain from the sale of Investments, provided the amount or
percentage of such interest is reasonable. Such an interest in gain from the sale of
Investments shall be considered presumptively reasonable if it does not exceed 15% of the
balance of such net proceeds remaining after payment to Stockholders, in the aggregate, of an
amount equal to 100% of the invested capital (through liquidity or Distributions), plus a 6%
cumulative annual return. In the case of multiple Advisors, such Advisor and any of their
Affiliates shall be allowed such fees provided such fees are distributed by a proportional
method reasonably designed to reflect the value added to the Corporation assets by each
respective Advisor or any Affiliate. For these purposes, Stockholders will be deemed to have
been provided with liquidity if the Shares are Listed, if Shares can be redeemed through the
Corporations redemption plan on a quarterly basis without delay or some other liquidity device
has been provided which enables Stockholders to receive cash or marketable securities for their
Shares no less frequently than quarterly. The return requirement will be deemed satisfied if
the total distributions paid by the Corporation equals or exceeds 100% of the capital raised by
the Corporation (less any amounts distributed from the sale or refinancing of any Investment).
The market value will be calculated on the basis of the average market value of the Shares over
the 30 trading days beginning 180 days after the Shares are first listed on a stock exchange or
listed or included for quotation.
Section 8.8.
Limitation on Organization and Offering Expenses
. The Organization and
Offering Expenses shall be reasonable. To the extent that all Organizational and Offering
Expenses (excluding selling commissions and fees paid and expenses reimbursed to selected
dealers) paid directly by the Corporation and its subsidiaries exceed 2% of the Gross Proceeds,
the excess will be paid by the Advisor.
Section 8.9.
Limitation on Acquisition Fees and Expenses
. The total of all Acquisition
Fees and Acquisition Expenses shall be reasonable and shall not exceed an amount equal to 6% of
the aggregate Contract Purchase Price of all Investments, measured for the period beginning with
the initial acquisition of an Investment and ending (i) on December 31 of the year in which the
Corporation has invested 90% of the net proceeds of its initial Offering (excluding the net
proceeds from the sale of Shares pursuant to the Reinvestment Plan), and (ii) on each
December 31 thereafter, unless a majority of the Directors (including a majority of the
Independent Directors) not otherwise interested in any transaction approves the excess as being
commercially competitive, fair and reasonable to the Corporation. In the event that the Sponsor
holds an Investment on an interim basis on behalf of the Corporation, all profits and losses
generated from that Investment during the interim period will be paid to the Corporation.
Section 8.10.
Reimbursement for Total Operating Expenses
. If Operating Expenses during the
12-month period ending on the last day of any fiscal quarter of the Corporation exceed the
greater of (i) 2% of the Average Invested Assets during the same 12-month period or (ii) 25% of
the Adjusted Net Income of the Corporation during the same 12-month period (the
2%/25%
Guideline
), then subject to the following sentence, such excess amount shall be the sole
responsibility of the Advisor and neither the Operating Partnership nor the Corporation shall be
liable for payment therefor. Notwithstanding the foregoing, to the extent that the Advisor
becomes responsible for any excess amount as provided in the foregoing sentence, if a majority
of the Independent Directors finds such excess amount or a portion thereof justified based on
such unusual and non-recurring factors as they deem sufficient, the Operating Partnership shall
reimburse the Advisor in future quarters for the full amount of such excess amount, or any
portion thereof, but only to the extent such reimbursement would not cause the Operating
Expenses to exceed the 2%/25% Guideline in the 12-month period ending on the last day of such
quarter. In no event shall the Operating Expenses payable by the Operating Partnership in any
12-month period ending at the end of a fiscal quarter exceed the 2%/25% Guideline. Within 60
days after the end of any 12-month period referred to in the foregoing for which Operating
Expenses (for the 12 months then ended) do exceed the 2%/25% Guideline and the Independent
Directors determine that such excess Operating Expenses are justified, there shall be sent to
the Stockholders a written disclosure of such fact, together with an explanation of the factors
the Independent Directors considered in ascertaining that such excess Operating Expenses were
justified. Additionally, such information shall be reflected in the minutes of the meetings of
the Board. All figures used in the foregoing computation shall be determined in accordance with
generally accepted accounting principles applied in a consistent basis.
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Section 8.11.
Reimbursement Limitation
. The Corporation shall not reimburse the Advisor or
its Affiliates for services for which the Advisor or its Affiliates are entitled to compensation
in the form of a separate fee.
Section 8.12.
Other Activities of the Advisor
. The Advisor shall not be restricted to
administering the investment activities of the Corporation as its sole and exclusive function
and may have other business interests and may engage in other activities similar or in addition
to those relating to the Corporation, including the performance of services and advice to other
Persons (including other REITs) and the management of other investments (including investments
of the Advisor and its Affiliates). The Directors may request the Advisor to engage in other
activities which complement the Investments, and the Advisor may receive compensation or
commissions for those activities from the Corporation or other Persons. Nothing herein shall
limit or restrict the right of any
director, officer, employee or shareholder of the Advisor, whether or not also a Director,
officer or employee of the Company, to engage in any other business or to render services of any
kind to any other partnership, corporation, firm, individual, trust or association. The Advisor
with or without remuneration may render advice and service to Persons involved with Investments.
Except as provided in the Advisory Agreement, neither the Advisor nor any Affiliate of the
Advisor shall be obligated generally to present any particular investment opportunity to the
Corporation even if the opportunity is of character which, if presented to the Corporation,
could be taken by the Corporation. In the event that the Advisor or its Affiliates is presented
with a potential investment which might be made by the Corporation or any wholly-owned
subsidiary corporation and by another investment entity which the Advisor or its Affiliates
advises or manages, the Advisor shall determine the allocation of such potential investment in a
fair and reasonable manner and pursuant to procedures approved by a majority of the Independent
Directors.
ARTICLE IX
INVESTMENT OBJECTIVES AND LIMITATIONS
Section 9.1.
Review of Objectives
. The Independent Directors shall review the investment
policies of the Corporation with sufficient frequency (not less often than annually) to
determine that the policies being followed by the Corporation are in the best interests of its
Stockholders. Each such determination and the basis therefor shall be set forth in the minutes
of the meetings of the Board.
Section 9.2.
Certain Permitted Investments
. Until such time as the Common Shares are
Listed, the following investment limitations shall apply:
(a) The Corporation may invest in Investments.
(b) The Corporation may invest in Joint Ventures with the Sponsor, Advisor, one or more
Directors or any Affiliate thereof, only if a majority of Directors (including a majority of
Independent Directors) not otherwise interested in the transaction, approve such investment as
being fair and reasonable to the Corporation and on substantially the same terms and conditions as
those received by the other joint venturers.
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(c) The Corporation may invest in equity securities only if a majority of Directors (including
a majority of Independent Directors) not otherwise interested in the transaction, approve such
investment as being fair, competitive, and commercially reasonable to the Corporation.
Section 9.3.
Investment Limitations
. Until such time as the Common Shares are Listed, the
following investment limitations shall apply. In addition to other investment restrictions
imposed by the Board from time to time, consistent with the Corporations objective of
qualifying as a REIT, the following shall apply to the Corporations investments:
(a) Not more than 10% of the Corporations total assets shall be invested in Unimproved Real
Property or mortgage loans on Unimproved Real Property.
(b) The Corporation shall not invest in commodities or commodity futures contracts. This
limitation is not intended to apply to futures contracts, when used solely for hedging
purposes in connection with the Corporations ordinary business of investing in real estate
assets and mortgages.
(c) The Corporation shall not invest in or make any mortgage loan unless an appraisal is
obtained concerning the underlying property except for those loans insured or guaranteed by a
government or government agency. In cases in which a majority of Independent Directors so
determine, and in all cases in which the transaction is with the Advisor, Sponsor, Directors, or
any Affiliates thereof, such appraisal of the underlying property must be obtained from an
Independent Appraiser. Such appraisal shall be maintained in the Corporations records for at
least five years and shall be available for inspection and duplication by any Stockholder for a
reasonable charge. In addition to the appraisal, a mortgagees or owners title insurance policy
or commitment as to the priority of the mortgage or condition of the title must be obtained.
(d) The Corporation shall not make or invest in any mortgage loan, including a construction
loan, on any one property if the aggregate amount of all mortgage loans outstanding on the
property, including the loans of the Corporation, would exceed an amount equal to 85% of the
appraised value of the property as determined by appraisal unless substantial justification exists
because of the presence of other underwriting criteria. For purposes of this subsection,
(i) investments in commercial mortgage backed securities shall be deemed not to be an investment in
mortgage loans and (ii) the aggregate amount of all mortgage loans outstanding on the property,
including the loans of the Corporation shall include all interest (excluding contingent
participation in income and/or appreciation in value of the mortgaged property), the current
payment of which may be deferred pursuant to the terms of such loans, to the extent that deferred
interest on each loan exceeds 5% per annum of the principal balance of the loan.
(e) The Corporation shall not invest in indebtedness secured by a mortgage on real property
which is subordinate to the lien or other indebtedness of the Advisor, any Director, the Sponsor or
any Affiliate of the Corporation.
(f) The Corporation shall not issue (A) equity Securities redeemable solely at the option of
the holder (except that Stockholders may offer their Common Shares to the Corporation pursuant to
any repurchase plan adopted by the Board on terms outlined in the Prospectus relating to any
Offering, as such plan is thereafter amended in accordance with its terms); (B) debt Securities
unless the historical debt service coverage (in the most recently completed fiscal year) as
adjusted for known changes is sufficient to properly service that higher level of debt; (C) equity
Securities on a deferred payment basis or under similar arrangements; or (D) options or warrants to
the Advisor, Directors, Sponsor or any Affiliate thereof except on the same terms as such options
or warrants are sold to the general public. Options or warrants may be issued to persons other
than the Advisor, Directors, Sponsor or any Affiliate thereof, but not at exercise prices less than
the fair market value of the underlying Securities on the date of grant and not for consideration
(which may include services) that in the judgment of the Independent Directors has a market value
less than the value of such option or warrant on the date of grant. Options or warrants issuable
to the Advisor, Directors, Sponsor or any Affiliate thereof shall not exceed 10% of the outstanding
Shares on the date of grant. The voting rights per Share (other than any publicly held Share) sold
in a private offering shall not exceed the voting rights which bear the same relationship to the
voting rights of a publicly held Share as the consideration paid to the Corporation for each
privately offered Share bears to the book value of each outstanding publicly held Share.
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(g) The consideration paid for an Investment by the Corporation shall ordinarily be based on
the fair market value thereof, as determined by a majority of the Directors (or of the members of a
duly authorized committee thereof) or a committee of the Board of Directors. If a majority of the
Independent Directors on the Board of Directors or such duly authorized committee
determine, or if the Investment is acquired from the Advisor, a Director, the Sponsor or their
Affiliates, such fair market value shall be determined by a qualified Independent Appraiser
selected by such Independent Directors.
(h) The aggregate Leverage shall be reasonable and shall be reviewed by the Board at least
quarterly. The maximum amount of such Leverage shall not exceed the lesser of 75% of the total
costs of the Corporations investment or 300% of its Net Assets. Notwithstanding the foregoing,
Leverage may exceed such limit if any excess in borrowing over such level is approved by a majority
of the Independent Directors. Any such excess borrowing shall be disclosed to Stockholders in the
next quarterly report of the Corporation following such borrowing, along with justification for
such excess.
(i) The Corporation will continually review its investment activity to attempt to ensure that
it is not classified as an investment company under the Investment Company Act of 1940, as
amended.
(j) The Corporation will not make any investment that the Corporation believes will be
inconsistent with its objectives of qualifying and remaining qualified as a REIT unless and until
the Board determines, in its sole discretion, that REIT qualification is not in the best interests
of the Corporation.
(k) The Corporation shall not invest in real estate contracts of sale unless such contracts of
sale are in recordable form and appropriately recorded in the chain of title.
ARTICLE X
CONFLICTS OF INTEREST
Section 10.1.
Sales and Leases to the Corporation
. The Corporation may purchase or lease
an asset or assets from the Sponsor, the Advisor, a Director or any Affiliate thereof upon a
finding by a majority of Directors (including a majority of Independent Directors) not otherwise
interested in the transaction that such transaction is fair and reasonable to the Corporation
and at a price to the Corporation no greater than the cost of the asset to such Sponsor,
Advisor, Director or Affiliate, or, if the price to the Corporation is in excess of such cost,
that substantial justification for such excess exists and such excess is reasonable. In no
event shall the purchase price paid by the Corporation for any such asset exceed the assets
current Appraised Value.
- 27 -
Section 10.2.
Sales and Leases to the Sponsor, Advisor, Directors or Affiliates
. An
Advisor, Sponsor, Director or Affiliate thereof may purchase or lease assets from the
Corporation if a majority of Directors (including a majority of Independent Directors) not
otherwise interested in the transaction determine that the transaction is fair and reasonable to
the Corporation.
Section 10.3.
Other Transactions
.
(a) The Corporation shall not engage in any other transaction with the Sponsor, the Advisor, a
Director or any Affiliates thereof unless a majority of the Directors (including a majority of the
Independent Directors) not otherwise interested in such transaction approve such
transaction as fair and reasonable to the Corporation and on terms and conditions not less
favorable to the Corporation than those available from unaffiliated third parties.
(b) The Corporation shall not make Loans to the Sponsor, the Advisor, a Director or any
Affiliates thereof except Loans pursuant to Section 9.3(c) hereof or Loans to wholly owned
subsidiaries of the Corporation. The Sponsor, Advisor, Directors and any Affiliates thereof shall
not make Loans to the Corporation, or to joint ventures in which the Corporation is a co-venturer,
unless approved by a majority of the Directors (including a majority of the Independent Directors)
not otherwise interested in such transaction as fair, competitive, and commercially reasonable, and
no less favorable to the Corporation than comparable loans between unaffiliated parties.
ARTICLE XI
STOCKHOLDERS
Section 11.1.
Meetings
. There shall be an annual meeting of the Stockholders, to be held
on such date and at such time and place as shall be determined by or in the manner prescribed in
the Bylaws, at which the Directors shall be elected and any other proper business may be
conducted;
provided
that such annual meeting will be held upon reasonable notice and within a
reasonable period (not less than 30 days) following delivery of the annual report. The Board of
Directors (including the Independent Directors) shall take reasonable steps to ensure that this
requirement is met. The holders of a majority of Shares entitled to vote who are present in
person or by proxy at an annual meeting at which a quorum is present, may, without the necessity
for concurrence by the Board, vote to elect the Directors. A quorum shall be the presence in
person or by proxy of Stockholders entitled to cast a majority of all the votes entitled to be
cast at such meeting on any matter. Special meetings of Stockholders may be called in the
manner provided in the Bylaws, including by the chairman of the board, the president, the chief
executive officer, the secretary, a majority of the Board of Directors or a majority of the
Independent Directors, and shall be called by an officer of the Corporation upon written request
of Stockholders entitled to cast not less than 10% of all the votes entitled to be cast at such
meeting on any matter. Notice of any special meeting of Stockholders shall be given as provided
in the Bylaws, and the special meeting shall be held not less than 15 days nor more than 60 days
after the delivery of such notice. If the meeting is called by written request of Stockholders
as described in this Section 11.1, the special meeting shall be held at the time and place
specified in the Stockholder request;
provided, however
, that if none is so specified, at such
time and place convenient to the Stockholders. If there are no Directors, the officers of the
Corporation shall promptly call a special meeting of the Stockholders entitled to vote for the
election of successor Directors. Any meeting may be adjourned and reconvened as the Board may
determine or as otherwise provided in the Bylaws.
- 28 -
Section 11.2.
Voting Rights of Stockholders
. Subject to the provisions of any class or
series of Shares then outstanding and the mandatory provisions of any applicable laws or
regulations, the Stockholders shall be entitled to vote only on the following matters:
(a) election or removal of Directors, without the necessity for concurrence by the Board, as
provided in Sections 11.1, 7.4 and 7.11 hereof; (b) amendment of the Charter, without the
necessity for concurrence by the Board, as provided in Article XIII hereof; (c) dissolution of
the Corporation, without the necessity for concurrence by the Board; (d) merger or consolidation
of the Corporation, or the sale or other disposition of all or substantially all of the
Corporations assets; and (e) such other matters with respect to which the Board of Directors
has adopted a resolution declaring that a proposed action is advisable and directing that the
matter be submitted to the Stockholders for
approval or ratification. Except with respect to the foregoing matters, no action taken by
the Stockholders at any meeting shall in any way bind the Board. Without the approval of a
majority of the Shares entitled to vote on the matter, the Board may not (i) amend the Charter
to materially and adversely affect the rights, preferences and privileges of the Stockholders;
(ii) amend provisions of the Charter relating to director qualifications, fiduciary duties,
liability and indemnification, conflicts of interest, investment policies or investment
restrictions; (iii) liquidate or dissolve the Corporation other than before the initial
investment in property; (iv) sell all or substantially all of the Corporations assets other
than in the ordinary course of business or as otherwise permitted by law; or (v) cause the
merger or reorganization of the Corporation except as permitted by law.
Section 11.3.
Voting Limitations on Shares Held by the Advisor, Directors and Affiliates
.
With respect to Shares owned by the Advisor, any Director, or any of their Affiliates, neither
the Advisor, nor such Director(s), nor any of their Affiliates may vote or consent on matters
submitted to the Stockholders regarding the removal of the Advisor, such Director(s) or any of
their Affiliates or any transaction between the Corporation and any of them. In determining the
requisite percentage in interest of Shares necessary to approve a matter on which the Advisor,
such Director(s) and any of their Affiliates may not vote or consent, any Shares owned by any of
them shall be deemed not entitled to cast votes on the matter and shall not be included in
making such determination.
Section 11.4.
Right of Inspection
. Any Stockholder and any designated representative
thereof shall be permitted access to the records of the Corporation to which it is entitled
under applicable law at all reasonable times, and may inspect and copy any of them for a
reasonable charge. Inspection of the Corporations books and records by the office or agency
administering the securities laws of a jurisdiction shall be provided upon reasonable notice and
during normal business hours.
Section 11.5.
Access to Stockholder List
. An alphabetical list of the names, addresses and
telephone numbers of the Stockholders, along with the number of Shares held by each of them (the
Stockholder List
), shall be maintained as part of the books and records of the Corporation and
shall be available for inspection by any Stockholder or the Stockholders designated agent at
the home office of the Corporation upon the request of the Stockholder only if the Stockholder
represents to the Corporation that the list will not be used to pursue commercial interests of
the Stockholder unrelated to the Stockholders interest in the Corporation. If the
representation is not included with the request, the Corporation will mail a copy of the
representation within five days. The Corporation will mail a list of the names and addresses of
all Stockholders within 10 days (or five days if the Stockholder first requests a copy of the
representation and returns it within 30 days) of the receipt of the request and the payment for
cost of postage and duplication. The Stockholder List shall be updated at least quarterly to
reflect changes in the information contained therein. A copy of such list shall be mailed to
any Stockholder so requesting within ten days of receipt by the Corporation of the request. The
copy of the Stockholder List shall be printed in alphabetical order, on white paper, and in a
readily readable type size (in no event smaller than ten-point type). The Corporation may
impose a reasonable charge for expenses incurred in reproduction pursuant to the Stockholder
request. A Stockholder may request a copy of the Stockholder List in connection with matters
relating to Stockholders voting rights, and the exercise of Stockholder rights under federal
proxy laws.
- 29 -
If the Advisor or the Board neglects or refuses to exhibit, produce or mail a copy of the
Stockholder List as requested, the Advisor and/or the Board, as the case may be, shall be liable to
any Stockholder requesting the list for the costs, including reasonable attorneys fees, incurred
by that
Stockholder for compelling the production of the Stockholder List, and for actual damages
suffered by any Stockholder by reason of such refusal or neglect. It shall be a defense that the
actual purpose and reason for the requests for inspection or for a copy of the Stockholder List is
to secure such list of Stockholders or other information for the purpose of selling such list or
copies thereof, or of using the same for a commercial purpose other than in the interest of the
applicant as a Stockholder relative to the affairs of the Corporation. The remedies provided
hereunder to Stockholders requesting copies of the Stockholder List are in addition, to and shall
not in any way limit, other remedies available to Stockholders under federal law, or the laws of
any state.
Section 11.6.
Reports
. The Directors, including the Independent Directors, shall take
reasonable steps to insure that the Corporation shall cause to be prepared and mailed or
delivered to each Stockholder as of a record date after the end of the fiscal year and each
holder of other publicly held Securities within 120 days after the end of the fiscal year to
which it relates an annual report for each fiscal year ending after the Commencement of the
Initial Public Offering that shall include: (i) financial statements prepared in accordance
with generally accepted accounting principles which are audited and reported on by independent
certified public accountants; (ii) the ratio of the costs of raising capital during the period
to the capital raised; (iii) the aggregate amount of advisory fees and the aggregate amount of
other fees paid to the Advisor and any Affiliate of the Advisor by the Corporation and including
fees or charges paid to the Advisor and any Affiliate of the Advisor by third parties doing
business with the Corporation; (iv) the Operating Expenses of the Corporation, stated as a
percentage of Average Invested Assets and as a percentage of its Net Income; (v) a report from
the Independent Directors that the policies being followed by the Corporation are in the best
interests of its Stockholders and the basis for such determination; and (vi) separately stated,
full disclosure of all material terms, factors and circumstances surrounding any and all
transactions involving the Corporation, Directors, Advisors, Sponsors and any Affiliate thereof
occurring in the year for which the annual report is made, and the Independent Directors shall
be specifically charged with a duty to examine and comment in the report on the fairness of such
transactions.
Section 11.7.
Tender Offers
. If any Person makes a tender offer, including, without
limitation, a mini-tender offer, such Person must comply with all of the provisions set forth
in Regulation 14D of the Securities Exchange Act of 1934, as amended, including, without
limitation, disclosure and notice requirements, which would be applicable if the tender offer
was for more than 5% of the outstanding Securities of the Corporation;
provided, however
, that
such documents are not required to be filed with the Securities and Exchange Commission.
Notwithstanding the foregoing, the Corporation and the Directors shall be under no obligation to
comply with Rule 14d-9 promulgated under the Securities Exchange Act of 1934, as amended. In
addition, any such Person must provide notice to the Corporation at least 10 Business Days prior
to initiating any such tender offer. If any Person initiates a tender offer without complying
with the provisions set forth above (a
Non-Compliant Tender Offer
), the Corporation, in its
sole discretion, shall have the right to redeem such non-compliant Persons Shares and any
Shares acquired in such tender offer (collectively, the
Tendered Shares
) at the lesser of
(i) with respect to Common Shares, the price then being paid per share of Common Shares
purchased in the Corporations latest offering of Common Shares at full purchase price (not
discounted for commission reductions nor for reductions in sale price permitted pursuant to the
distribution reinvestment plan), (ii) the fair market value of the Shares as determined by an
independent valuation obtained by the Corporation or (iii) the lowest tender offer price paid in
such Non-Compliant Tender Offer. The Corporation may purchase such Tendered Shares upon
delivery of the purchase price to the Person initiating such Non-Compliant Tender Offer, and,
upon such delivery, the Corporation may instruct any transfer agent to transfer such purchased
shares to the Corporation. In addition, any Person who makes a Non-Compliant Tender Offer shall
be responsible
for all expenses incurred by the Corporation in connection with the enforcement of the
provisions of this Section 11.7, including, without limitation, expenses incurred in connection
with the review of all documents related to such tender offer and expenses incurred in
connection with any purchase of Tendered Shares by the Corporation. The Corporation maintains
the right to offset any such expenses against the dollar amount to be paid by the Corporation
for the purchase of Tendered Shares pursuant to this Section 11.7. In addition to the remedies
provided herein, the Corporation may seek injunctive relief, including, without limitation, a
temporary or permanent restraining order, in connection with any Non-Compliant Tender Offer.
- 30 -
ARTICLE XII
LIABILITY LIMITATION AND INDEMNIFICATION
Section 12.1.
Limitation of Stockholder Liability
. No Stockholder shall be liable for any
debt, claim, demand, judgment or obligation of any kind of, against or with respect to the
Corporation by reason of his or her being a Stockholder, nor shall any Stockholder be subject to
any personal liability whatsoever, in tort, contract or otherwise, to any Person in connection
with the Corporations assets or the affairs of the Corporation by reason of his or her being a
Stockholder.
Section 12.2.
Limitation of Director and Officer Liability; Indemnification
.
Section 12.2.1
Limitation of Director and Officer Liability
.
(a) Subject to the limitations set forth under Maryland law and in paragraph (b) below, no
Director or officer of the Corporation shall be liable to the Corporation or its Stockholders for
money damages. Neither the amendment nor repeal of this Section 12.2.1(a), nor the adoption or
amendment of any other provision of the Charter or Bylaws inconsistent with this Section 12.2.1(a),
shall apply to or affect in any respect the applicability of the preceding sentence with respect to
any act or failure to act which occurred prior to such amendment, repeal or adoption.
(b) Notwithstanding anything to the contrary contained in paragraph (a) above, the Corporation
shall not provide that a Director, the Advisor or any Affiliate of the Advisor (the
Indemnitee
)
be held harmless for any loss or liability suffered by the Corporation, unless all of the following
conditions are met:
(c) The Indemnitee has determined, in good faith, that the course of conduct that caused the
loss or liability was in the best interests of the Corporation.
(d) The Indemnitee was acting on behalf of or performing services for the Corporation.
(e) Such liability or loss was not the result of (A) negligence or misconduct, in the case
that the Indemnitee is a Director (other than an Independent Director), the Advisor or an Affiliate
of the Advisor or (B) gross negligence or willful misconduct, in the case that the Indemnitee is an
Independent Director.
(f) Such agreement to hold harmless is recoverable only out of Net Assets and not from the
Stockholders.
- 31 -
Section 12.2.2
Indemnification
.
(a) Subject to the limitations set forth under Maryland law and in paragraph (b) or (c) below,
the Corporation shall indemnify and, without requiring a preliminary determination of the ultimate
entitlement to indemnification, pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (i) any individual who is a present or former Director or officer of
the Corporation or a non-Director member of the investment committee and who is made or threatened
to be made a party to the proceeding by reason of his or her service in that capacity, (ii) any
individual who, while a Director or officer of the Corporation and at the request of the
Corporation, serves or has served as a director, officer, partner or trustee of such corporation,
real estate investment trust, partnership, joint venture, trust, employee benefit plan or other
enterprise and who is made or threatened to be made a party to the proceeding by reason of his or
her service in that capacity or (iii) the Advisor of any of its Affiliates acting as an agent of
the Corporation. The Corporation may, with the approval of the Board of Directors or any duly
authorized committee thereof, provide such indemnification and advance for expenses to a person who
served a predecessor of the Corporation in any of the capacities described in (i) or (ii) above and
to any employee or agent of the Corporation or a predecessor of the Corporation. The Board may
take such action as is necessary to carry out this Section 12.2.2(a). No amendment of the Charter
or repeal of any of its provisions shall limit or eliminate the right of indemnification provided
hereunder with respect to acts or omissions occurring prior to such amendment or repeal.
(b) Notwithstanding anything to the contrary contained in paragraph (a) above, the Corporation
shall not provide for indemnification of an Indemnitee for any liability or loss suffered by such
Indemnitee unless all of the following conditions are met:
(i) The Indemnitee has determined, in good faith, that the course of conduct that caused the
loss or liability was in the best interests of the Corporation.
(ii) The Indemnitee was acting on behalf of or performing services for the Corporation.
(iii) Such liability or loss was not the result of (A) negligence or misconduct, in the case
that the Indemnitee is a Director (other than an Independent Director), the Advisor or an Affiliate
of the Advisor or (B) gross negligence or willful misconduct, in the case that the Indemnitee is an
Independent Director.
(iv) Such indemnification is recoverable only out of Net Assets and not from the Stockholders.
(c) Notwithstanding anything to the contrary contained in paragraph (a) of this Section
12.2.2, the Corporation shall not provide indemnification for any loss, liability or expense
arising from or out of an alleged violation of federal or state securities laws by an Indemnitee
unless one or more of the following conditions are met: (i) there has been a successful
adjudication on the merits of each count involving alleged material securities law violations as to
the Indemnitee, (ii) such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the Indemnitee; or (iii) a court of competent jurisdiction approves a
settlement of the claims against the Indemnitee and finds that indemnification of the settlement
and the related costs should be made, and the court considering the request for indemnification has
been advised of the position of the Securities and Exchange Commission and of the published
position of any state securities regulatory authority in which Securities were offered or sold as
to indemnification for violations of securities laws.
- 32 -
Section 12.3.
Payment of Expenses
. The Corporation may pay or reimburse reasonable legal
expenses and other costs incurred by an Indemnitee in advance of final disposition of a
proceeding only if all of the following are satisfied: (i) the proceeding relates to acts or
omissions with respect to the performance of duties or services on behalf of the Corporation,
(ii) the Indemnitee provides the Corporation with written affirmation of the Indemnitees good
faith belief that the Indemnitee has met the standard of conduct necessary for indemnification
by the Corporation as authorized by Section 12.2.2 hereof, (iii) the legal proceeding was
initiated by a third party who is not a Stockholder or, if by a Stockholder of the Corporation
acting in his or her capacity as such, a court of competent jurisdiction approves such
advancement, and (iv) the Indemnitee provides the Corporation with a written agreement to repay
the amount paid or reimbursed by the Corporation, together with the applicable legal rate of
interest thereon, if it is ultimately determined that the Indemnitee did not comply with the
requisite standard of conduct and is not entitled to indemnification.
Section 12.4.
Express Exculpatory Clauses in Instruments
. Neither the Stockholders nor the
Directors, officers, employees or agents of the Corporation shall be liable under any written
instrument creating an obligation of the Corporation by reason of their being Stockholders,
Directors, officers, employees or agents of the Corporation, and all Persons shall look solely
to the Corporations assets for the payment of any claim under or for the performance of that
instrument. The omission of the foregoing exculpatory language from any instrument shall not
affect the validity or enforceability of such instrument and shall not render any Stockholder,
Director, officer, employee or agent liable thereunder to any third party, nor shall the
Directors or any officer, employee or agent of the Corporation be liable to anyone as a result
of such omission.
ARTICLE XIII
AMENDMENTS
The Corporation reserves the right from time to time to make any amendment to the Charter, now
or hereafter authorized by law, including any amendment altering the terms or contract rights, as
expressly set forth in the Charter, of any Shares. All rights and powers conferred by the Charter
on Stockholders, Directors and officers are granted subject to this reservation. Except for those
amendments permitted to be made without Stockholder approval under Maryland law or by specific
provision in the Charter, any amendment to the Charter shall be valid only if approved by the
affirmative vote of a majority of all votes entitled to be cast on the matter, including without
limitation, (1) any amendment which would adversely affect the rights, preferences and privileges
of the Stockholders and (2) any amendment to Sections 7.2, 7.5 and 7.11 of Article VII, Article IX,
Article X, Article XII and Article XIV hereof and this Article XIII (or any other amendment of the
Charter that would have the effect of amending such sections).
- 33 -
ARTICLE XIV
ROLL-UP TRANSACTIONS
Section 14.1.
Roll-Up Transactions
. In connection with any proposed Roll-Up Transaction,
an appraisal of all of the Corporations assets shall be obtained from a competent Independent
Appraiser. The Corporations assets shall be appraised on a consistent basis, and the appraisal
shall be based on the evaluation of all relevant information and shall indicate the value of the
Corporations assets as of a date immediately prior to the announcement of the proposed Roll-Up
Transaction. The
appraisal shall assume an orderly liquidation of the Corporations assets over a
twelve-month period. The terms of the engagement of the Independent Appraiser shall clearly
state that the engagement is for the benefit of the Corporation and the Stockholders. A summary
of the appraisal, indicating all material assumptions underlying the appraisal, shall be
included in a report to Stockholders in connection with a proposed Roll-Up Transaction. In
connection with a proposed Roll-Up Transaction, the person sponsoring the Roll-Up Transaction
shall offer to Stockholders who vote against the proposed Roll-Up Transaction the choice of:
(a) accepting the securities of a Roll-Up Entity offered in the proposed Roll-Up Transaction;
or
(b) one of the following:
(i) remaining as Stockholders and preserving their interests therein on the same terms and
conditions as existed previously; or
(ii) receiving cash in an amount equal to the Stockholders pro rata share of the appraised
value of the net assets of the Corporation.
Section 14.2.
Limitations on Roll-Up Transactions
. The Corporation is prohibited from
participating in any proposed Roll-Up Transaction:
(a) that would result in the Stockholders having voting rights in a Roll-Up Entity that are
less than the rights provided for in Sections 11.1 and 11.2 hereof;
(b) that includes provisions that would operate as a material impediment to, or frustration
of, the accumulation of Shares by any purchaser of the securities of the Roll-Up Entity (except to
the minimum extent necessary to preserve the tax status of the Roll-Up Entity), or which would
limit the ability of an investor to exercise the voting rights of its securities of the Roll-Up
Entity on the basis of the number of Shares held by that investor;
(c) in which investors rights to access of records of the Roll-Up Entity will be less than
those described in Sections 11.4 and 11.5 hereof; or
(d) in which any of the costs of the Roll-Up Transaction would be borne by the Corporation if
the Roll-Up Transaction is rejected by the Stockholders.
THIRD
: The amendment to and restatement of the charter of the Corporation as hereinabove set
forth has been duly advised by the Board of Directors and approved by the stockholders of the
Corporation as required by law.
FOURTH
: The current address of the principal office of the Corporation is as set forth in
Article III of the foregoing amendment and restatement of the charter.
- 34 -
FIFTH
: The name and address of the Corporations current resident agent is as set forth in
Article III of the foregoing amendment and restatement of the charter.
SIXTH
: The number of directors of the Corporation and the names of those currently in office
are as set forth in Article VII of the foregoing amendment and restatement of the charter.
SEVENTH
: The total number of shares of stock which the Corporation had authority to issue
immediately prior to this amendment was 350,000,000, consisting of 300,000,000 shares of Common
Stock, $0.001 par value per share and 50,000,000 shares of Preferred Stock, $0.001 par value per
share. The aggregate par value of all shares of stock having par value was $350,000.00.
EIGHTH
: The total number of shares of stock which the Corporation has authority to issue
pursuant to the foregoing amendment and restatement of the charter of the Corporation is
350,000,000, consisting of 300,000,000 shares of Common Stock, $0.001 par value per share, and
50,000,000 shares of Preferred Stock, $0.001 par value per share. The aggregate par value of all
authorized shares of stock having par value is $350,000.00.
NINTH
: The undersigned Chief Executive Officer acknowledges these Articles of Amendment and
Restatement to be the corporate act of the Corporation and as to all matters or facts required to
be verified under oath, the undersigned Chief Executive Officer acknowledges that to the best of
his knowledge, information and belief, these matters and facts are true in all material respects
and that this statement is made under the penalties for perjury.
- 35 -
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to
be signed in its name and on its behalf by its Chief Executive Officer and attested to by its
Secretary on this 15th day of September, 2010.
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ATTEST:
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CAREY WATERMARK INVESTORS INCORPORATED
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/s/ Susan C. Hyde
Name: Susan C. Hyde
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/s/ Michael G. Medzigian
Name: Michael G. Medzigian
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(SEAL)
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Title: Secretary
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Title: Chief Executive Officer
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[
Signature Page to Charter
]
Exhibit 10.1
EXECUTION VERSION
ADVISORY AGREEMENT
CONTENTS
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Page
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1. Definitions
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1
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2. Appointment
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8
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3. Duties of the Advisor
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8
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4. Authority of Advisor
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10
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5. Bank Accounts
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11
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6. Records; Access
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11
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7. Limitations on Activities
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12
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8. Relationship with Directors
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13
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9. Fees
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13
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10. Expenses
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16
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11. Other Services
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17
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12. Fidelity Bond
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17
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13. Limitation on Expenses
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18
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14. Other Activities of the Advisor
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18
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15. Relationship of Advisor and CWI
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19
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16. Term; Termination of Agreement
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19
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17. Termination by CWI
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20
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18. Termination by Either Party
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20
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19. Assignment Prohibition
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20
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20. Payments to and Duties of Advisor Upon Termination
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20
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21. Non-Solicitation and Non-Hire Following Termination
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22
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22. Indemnification by CWI and the Operating Partnership
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22
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23. Indemnification by Advisor
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22
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- i -
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Page
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24. Joint and Several Obligations
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22
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25. Notices
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22
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26. Modification
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23
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27. Severability
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23
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28. Construction
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23
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29. Entire Agreement
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23
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30. Indulgences, Not Waivers
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23
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31. Gender
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23
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32. Titles Not to Affect Interpretation
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24
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33. Execution in Counterparts
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24
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34. Initial Investment
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24
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- ii -
ADVISORY AGREEMENT
THIS ADVISORY AGREEMENT, dated as of September 15, 2010, is among CAREY WATERMARK INVESTORS
INCORPORATED, a Maryland corporation (
CWI
), CWI OP, LP, a Delaware limited partnership of
which CWI is a general partner (the
Operating Partnership
), and CAREY LODGING ADVISORS,
LLC, a Delaware limited liability company (the
Advisor
).
W I T N E S S E T H
:
WHEREAS, CWI through its interest in the Operating Partnership intends to acquire, own,
dispose of, and, through its Advisor, manage a portfolio consisting primarily of lodging and other
lodging related properties; and
WHEREAS, CWI intends to qualify as a REIT (as defined below), and the Operating Partnership
intends to qualify as a partnership, in each case for U.S. federal income tax purposes; and
WHEREAS, CWI and its subsidiaries, including the Operating Partnership, desire to avail
themselves of the experience, sources of information, advice and assistance of, and certain
facilities available to, the Advisor and to have the Advisor undertake the duties and
responsibilities hereinafter set forth, on behalf of, and subject to the supervision of the Board
of Directors of CWI, all as provided herein; and
WHEREAS, the Advisor is willing to render such services, subject to the supervision of the
Board of Directors of CWI, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1.
Definitions
. As used in this Agreement, the following terms have the definitions
hereinafter indicated:
2%/25% Guidelines
. The requirement, as provided for in Section 13 hereof, that, in
the 12-month period ending on the last day of any fiscal quarter, Operating Expenses not exceed the
greater of two percent of Average Invested Assets during such 12-month period or 25% of CWIs
Adjusted Net Income over the same 12-month period.
Acquisition Expenses
. To the extent not paid or to be paid by the seller, lessee,
borrower or any other party involved in the transaction, those expenses, including, but not limited
to, travel and communications expenses, the cost of appraisals, title insurance, nonrefundable
option payments on Investments not acquired, legal fees and expenses, accounting fees and expenses,
and miscellaneous expenses related to selection, acquisition and origination of Investments,
whether or not a particular Investment ultimately is made. Acquisition Expenses shall not include
Acquisition Fees.
Acquisition Fees
. Any fee or commission paid by CWI or its subsidiaries to the
Advisor, or, with respect to Section 9(b)(ii), by CWI or its subsidiaries to any party, in
connection with the making of Investments, including, without limitation, the purchase, development
or construction of Properties. A Development Fee or Construction Fee paid to a Person not
affiliated with the Sponsor in connection with the actual development or construction of a project
after acquisition of the Property by CWI shall not be deemed an Acquisition Fee. Included in the
computation of such fees or commissions shall be any real estate commission, selection fee,
Development Fee or Construction Fee (other than as described above),
non-recurring management fees, loan fees, points or any fee of a similar nature, however
designated. Acquisition Fees shall not include Acquisition Expenses.
- 1 -
Adjusted Net Income
. For any period, the total consolidated revenues recognized in
such period by CWI, less the total consolidated expenses of CWI recognized in such period,
excluding additions to reserves for depreciation and amortization, bad debts or other similar
non-cash reserves;
provided, however
, that Adjusted Net Income for purposes of calculating total
allowable Operating Expenses under the 2%/25% Guidelines shall exclude any gains, losses or
writedowns from the sale of CWIs assets.
Affiliate
. An Affiliate of another Person shall include any of the following:
(i) any Person directly or indirectly owning, controlling, or holding, with power to vote ten
percent or more of the outstanding voting securities of such other Person; (ii) any Person ten
percent or more of whose outstanding voting securities are directly or indirectly owned,
controlled, or held, with power to vote, by such other Person; (iii) any Person directly or
indirectly controlling, controlled by, or under common control with such other Person; (iv) any
executive officer, director, trustee or general partner of such other Person; or (v) any legal
entity for which such Person acts as an executive officer, director, trustee or general partner.
Agreement
. This Advisory Agreement.
Appraised Value
. Value according to an appraisal made by an Independent Appraiser,
which may take into consideration any factor deemed appropriate by such Independent Appraiser,
including, but not limited to, current market and property conditions, any unique attributes of the
property or its operations, current and anticipated income and expense trends, forecasts of
stabilized operations, repositioning opportunities and conditions in the credit and investment
markets. The Appraised Value of a Property may be greater than the construction cost or the
replacement cost of the Property.
Articles of Incorporation
. Articles of Incorporation of CWI under the Maryland
General Corporation Law, as amended from time to time, pursuant to which CWI is organized.
Asset Management Fee
. The Asset Management Fee as defined in Section 9(a) hereof.
Average Invested Assets
. The average during any period of the aggregate book value
of CWIs Investments, before deducting reserves for depreciation, bad debts, impairments,
amortization and all other non-cash reserves, computed by taking the average of such values at the
end of each month during such period.
Average Market Value
. The Total Investment Cost paid by CWI for an Investment, less
Acquisition Fees,
provided
that, if a later Appraised Value is obtained for the Investment, that
later Appraised Value, adjusted for other net assets and liabilities that have economic value and
are associated with that Investment, shall become the Average Market Value for the Investment.
Board or Board of Directors
. The Board of Directors of CWI.
Bylaws
. The bylaws of CWI, as amended from time to time.
Cause
. With respect to the termination of this Agreement means the occurrence of
any of the following: (a) the transfer of W. P. Carey & Co. LLCs interests in the Advisor to one
or more entities other than to one or more controlled subsidiaries of W. P. Carey & Co. LLC, (b)
fraud, criminal conduct, willful misconduct or willful or negligent breach of fiduciary duty by the
Advisor that, in each case, is
determined by a majority of the Independent Directors to be materially adverse to CWI, or (c)
a breach of a material term or condition of this Agreement by the Advisor and the Advisor has not
cured such breach within 30 days of written notice thereof or, in the case of any breach that
cannot be cured within 30 days by reasonable effort, has not taken all necessary action within a
reasonable time period to cure such breach.
- 2 -
Code
. Internal Revenue Code of 1986, as amended.
Competitive Real Estate Commission
. The real estate or brokerage commission paid
for the purchase or sale of an Investment that is reasonable, customary and competitive in light of
the size, type and location or other relevant characteristics of the Investment.
Construction Fee
. A fee or other remuneration for acting as general contractor
and/or construction manager to construct improvements, supervise and coordinate projects or to
provide major repairs or rehabilitations on a Property.
Contract Purchase Price
. The amount actually paid for, or allocated (as of the date
of purchase) to, the purchase, development, construction or improvement of an Investment or, in the
case of an originated Loan, the principal amount of such Loan, in each case exclusive of
Acquisition Fees and Acquisition Expenses.
Contract Sales Price
. The total consideration received by CWI for the sale of an
Investment.
Control
. The possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability to exercise voting
power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto.
CWI.
Carey Watermark Investors Incorporated together with its consolidated
subsidiaries, including the Operating Partnership, unless in the context of a particular reference,
it is clear that such reference refers to Carey Watermark Investors Incorporated excluding its
consolidated subsidiaries. Unless the context otherwise requires, any reference to financial
measures of CWI shall be calculated by reference to the consolidated financial statements of CWI
and its subsidiaries, including, without limitation, the Operating Partnership, prepared in
accordance with GAAP.
Dealer Manager
. Carey Financial, LLC.
Development Fee
. A fee for the packaging of a Property including negotiating and
approving plans, and undertaking to assist in obtaining zoning and necessary variances and
necessary financing for the specific Property, either initially or at a later date.
Directors
. The persons holding such office, as of any particular time, under the
Articles of Incorporation, whether they be the directors named therein or additional or successor
directors.
Disposition Fee
. The Disposition Fee as defined in Section 9(d) hereof.
Distributions
. Distributions declared by the Board.
First Offer Period
. The period commencing on the date of this Agreement and ending
on the earliest of:
(i) the dissolution of CWI,
(ii) the termination of the Subadvisory Agreement;
- 3 -
(iii) the third anniversary of the date of this Agreement, if CWI has not then accepted
aggregate net offering proceeds from investors of at least Five Hundred Million Dollars
($500,000,000);
(iv) the date on which CWI has Fully Invested the net proceeds of its initial public
offering, unless on or before such date there has been an initial filing by CWI with the
Securities and Exchange Commission of a Registration Statement on Form S-11, or any other
form which CWI is eligible to use to register securities, with respect to a Follow-On
Offering;
(v) the third anniversary of the date of effectiveness of the Registration Statement
for the Follow-On Offering as described in (iv) above, if CWI has not then accepted net
offering proceeds from investors of at least 75% of the maximum aggregate offering proceeds
named in such registration statement at the time of its effectiveness; or
(vi) the date on which CWI has Fully Invested the net proceeds of the Follow-On
Offering.
Follow-On Offering
. means a public offering of common stock of CWI with maximum
aggregate offering proceeds named in the registration statement related thereto of not less than
$500,000,000 and for which CWI begins receiving proceeds within six months after the termination of
CWIs initial public offering.
Fully Invested
. With respect to the First Offer Period as defined in this Agreement,
at least ninety percent (90%) of the net offering proceeds of CWIs initial public offering or a
Follow-On Offering, as applicable, are invested or committed for investment.
GAAP
. Generally accepted accounting principles, as applied in the United States.
Good Reason
. With respect to the termination of this Agreement, (i) any failure to
obtain a satisfactory agreement from any successor to CWI or the Operating Partnership to assume
and agree to perform CWIs or the Operating Partnerships, as applicable, obligations under this
Agreement; or (ii) any material breach of this Agreement of any nature whatsoever by CWI or the
Operating Partnership;
provided
that (a) such breach is of a material term or condition of this
Agreement and (b) CWI or the Operating Partnership, as applicable, has not cured such breach within
30 days of written notice thereof or, in the case of any breach that cannot be cured within 30 days
by reasonable effort, has not taken all necessary action within a reasonable time period to cure
such breach.
Gross Offering Proceeds
. The aggregate purchase price of Shares sold in any
Offering.
Incentive Plans
. CWIs 2010 Equity Incentive Plan and CWIs Directors Incentive
Plan.
Independent Appraiser
. A qualified appraiser of real estate as determined by the
Board, who has no material current or prior business or personal relationship with the Advisor or
the Directors and who is engaged to a substantial extent in the business of rendering opinions
regarding the value of assets of the type held by CWI. Membership in a nationally recognized
appraisal society such as the American Institute of Real Estate Appraisers or the Society of Real
Estate Appraisers shall be conclusive evidence of such qualification (but not of independence).
- 4 -
Independent Director
. A Director of CWI who meets the criteria for an Independent
Director specified in the Articles of Incorporation.
Individual
. Any natural person and those organizations treated as individuals in
Section 542(a) of the Code.
Investment
. An investment made by CWI, directly or indirectly, in a Property, Loan
or Other Permitted Investment Asset.
Investment Committee
. The committee of individuals responsible for reviewing
Investments on behalf of CWI.
Investment Opportunity
. With respect to the limitations set forth in Section 14
hereof, the opportunity to lease, sublease, purchase or to offer to purchase any asset or
investment originated by, presented to or otherwise identified by the Subadvisor, the Advisor, or
any of their respective Affiliates, as applicable, relating to (i) Lodging Facilities or
(ii) Lodging Loans. Investment Opportunity shall not include any opportunity to purchase or to
offer to purchase any asset or investment if the purchase price of such asset or investment does
not exceed $4,000,000.00.
Loans
. The notes and other evidences of indebtedness or obligations acquired,
originated or entered into, directly or indirectly, by CWI as lender, noteholder, participant, note
purchaser or other capacity, including but not limited to first or subordinate mortgage loans,
construction loans, development loans, loan participations, B notes, loans secured by capital stock
or any other assets or form of equity interest and any other type of loan or financial arrangement,
such as providing or arranging for letters of credit, providing guarantees of obligations to third
parties, or providing commitments for loans. The term Loans shall not include leases which are
not recognized as leases for federal income tax reporting purposes.
Loan Refinancing Fee
. A fee payable to the Advisor in respect of the refinancing of
a loan secured by an Investment.
Lodging Facility or Lodging Facilities
. With respect to an Investment Opportunity
(1) a hotel, motel or other mixed-use establishment of which more than one-half (1/2) of its
dwelling units are used on a transient basis or (2) equity interests in an entity that derives at
least 30% of its earnings before interest, taxes, depreciation and amortization, or EBITDA, from
owning, operating or managing facilities of the type described in clause (1) of this definition.
Lodging Loans
. With respect to an Investment Opportunity (1) Loans fully or
partially secured by Lodging Facilities or equity interests in entities that own, directly or
indirectly, Lodging Facilities; (2) unsecured Loans to entities that derive at least 30% of their
EBITDA from interests in Lodging Facilities, or (3) participations in any of the Loans described in
clauses (1) or (2) of this definition.
NASDAQ
. The NASDAQ Stock Market.
- 5 -
Offering
. The offering of Shares pursuant to a Prospectus.
Operating Expenses
. All consolidated operating, general and administrative expenses
paid or incurred by CWI, as determined under GAAP, except the following (insofar as they would
otherwise be considered operating, general and administrative expenses under GAAP): (i) interest
and discounts and other cost of borrowed money; (ii) taxes (including state, Federal and foreign
income tax, property taxes and assessments, franchise taxes and taxes of any other nature);
(iii) expenses of raising capital, including
Organization and Offering Expenses, printing, engraving, and other expenses, and taxes
incurred in connection with the issuance and distribution of CWIs Shares and Securities;
(iv) Acquisition Expenses, real estate commissions on resale of property and other expenses
connected with the acquisition, disposition, origination, ownership and operation of Investments,
including the costs of foreclosure, insurance premiums, legal services, brokerage and sales
commissions, and the maintenance, repair and improvement of property; (v) Acquisition Fees or
Disposition Fees payable to the Advisor or any other party; (vi) distributions paid by the
Operating Partnership to the Special General Partner under the agreement of limited partnership of
the Operating Partnership in respect of gains realized on dispositions of Investments and other
capital transactions; (vii) amounts paid to effect a redemption or repurchase of the special
general partner interest held by the Special General Partner pursuant to the agreement of limited
partnership of the Operating Partnership; and (viii) non-cash items, such as depreciation,
amortization, depletion, and additions to reserves for depreciation, amortization, depletion,
losses and bad debts. Notwithstanding anything herein to the contrary, Operating Expenses shall
include the Asset Management Fee and any Loan Refinancing Fee and, solely for the purposes of
determining compliance with the 2%/25% Guidelines, (1) distributions of available cash generated by
operations and investments made by the Operating Partnership to the Special General Partner
pursuant to the agreement of limited partnership of the Operating Partnership, which, for the
avoidance of doubt, does not include distributions described in clauses (vi) and (vii) of this
definition and (2) Disposition Fees paid in respect of non-real property Investments.
Operating Partnership
. CWI OP, LP, a Delaware limited partnership, through which
CWI owns Investments.
Organization and Offering Expenses
. Those expenses payable by CWI and the Operating
Partnership in connection with the formation, qualification and registration of CWI and in
marketing and distributing Shares, including, but not limited to: (i) the preparation, printing,
filing and delivery of any registration statement or Prospectus (including any amendments thereof
or supplements thereto) and the preparing and printing of contractual agreements among CWI, the
Operating Partnership, the Dealer Manager and the Selected Dealers (including copies thereof);
(ii) the preparing and printing of the Articles of Incorporation and Bylaws, other solicitation
material and related documents and the filing and/or recording of such documents necessary to
comply with the laws of the State of Maryland for the formation of a corporation and thereafter for
the continued good standing of a corporation; (iii) the qualification or registration of the Shares
under state securities or Blue Sky laws; (iv) any escrow arrangements, including any compensation
to an escrow agent; (v) the filing fees payable to the SEC and to the Financial Industry Regulatory
Authority; (vi) reimbursement for the reasonable and identifiable out-of-pocket expenses of the
Dealer Manager and the Selected Dealers, including the cost of their counsel; (vii) the fees of
CWIs counsel and accountants; (viii) all advertising expenses incurred in connection with an
Offering, including the cost of all sales literature and the costs related to investor and
broker-dealer sales and information meetings and marketing incentive programs; and (ix) selling
commissions, dealer manager fees, selected dealer fees, marketing fees, incentive fees and due
diligence fees incurred in connection with the sale of the Shares.
Other Permitted Investment Asset
. An asset, other than cash, cash equivalents,
short term bonds, auction rate securities and similar short term investments, acquired by CWI for
investment purposes that is not a Loan or a Property and is consistent with the investment
objectives and policies of CWI.
Person
. An Individual, corporation, partnership, joint venture, association,
company, trust, bank, or other entity, or government or any agency or political subdivision of a
government.
- 6 -
Pre-Existing Holdings
. The (i) the interests in the Lodging Facilities and Loans
listed on Schedule 14.1; and (ii) interests in Lodging Facilities and Loans acquired between the
date hereof and the expiration of the period commencing on the date of the initial filing of
Pre-Effective Amendment No. 2 to CWIs Registration Statement on Form S-11 (No. 333-149899) with
respect to CWI and ending on the date on which CWI has first accepted net offering proceeds from
investors.
Property or Properties
. CWIs partial or entire interest in real property
(including leasehold interests) and personal or mixed property connected therewith. An Investment
which obligates CWI to acquire a Property will be treated as a Property for purposes of this
Agreement.
Property Management Fee
. Subject to CWIs intention to qualify as a REIT for U.S.
federal income tax purposes, a fee for property management services rendered by the Advisor or its
Affiliates in connection with Properties acquired directly or through foreclosure.
Prospectus
. Any prospectus or offering document pursuant to which CWI offers Shares
in a public or private offering, as the same may at any time and from time to time be amended or
supplemented, after the effective date of the registration statement in which it is included.
REIT
. A real estate investment trust, as defined in Sections 856-860 of the Code.
Securities
. Any stock, shares (other than currently outstanding Shares and
subsequently issued Shares), or other evidences of equity or beneficial or other interests, voting
trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise or in general any instruments commonly known as
securities or any certificate of interest, shares or participation in temporary or interim
certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe to,
purchase or acquire any of the foregoing.
Selected Dealers
. Broker-dealers who are members of the Financial Industry
Regulatory Authority and who have executed an agreement with the Dealer Manager in which the
Selected Dealers agree to participate with the Dealer Manager in the Offering.
Shareholders
. Those Persons who, at the time any calculation hereunder is to be
made, are shown as holders of record of Shares on the books and records of CWI or its transfer
agent.
Shares
. All of the shares of common stock of CWI, $0.001 par value, and any other
shares of common stock of CWI.
Special General Partner
. Carey Watermark Holdings, LLC and any permitted transferee
of the special general partnership interest under the agreement of limited partnership of the
Operating Partnership.
Sponsor
. W. P. Carey & Co. LLC and any other Person directly or indirectly
instrumental in organizing, wholly or in part, CWI or any person who will control, manage or
participate in the management of CWI, and any Affiliate of any such person. Sponsor does not
include a person whose only relationship to CWI is that of an independent property manager and
whose only compensation is as such. Sponsor also does not include wholly independent third parties
such as attorneys, accountants and underwriters whose only compensation is for professional
services.
Subadvisor
. CWA, LLC, an Illinois limited liability company.
- 7 -
Subadvisory Agreement
. The Subadvisory Agreement, dated as of the date hereof (as
amended from time to time), between the Advisor and the Subadvisor.
Termination Date
. The effective date of any termination of this Agreement.
Total Investment Cost
. With regard to any Investment, an amount equal to the sum of
the Contract Purchase Price of such Investment plus the Acquisition Fees and Acquisition Expenses
paid in connection with such Investment and other fees and costs approved by the Independent
Directors relating to the initial capitalization of the Investment.
2.
Appointment
. CWI hereby appoints the Advisor to serve as its advisor on the terms
and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.
3.
Duties of the Advisor
. Subject to Section 14, the Advisor undertakes to use its
best efforts to present to CWI potential investment opportunities and to provide a continuing and
suitable investment program consistent with the investment objectives and policies of CWI as
determined and adopted from time to time by the Board. In performance of this undertaking, subject
to the supervision of the Board and consistent with the provisions of the Articles of Incorporation
and Bylaws of CWI and any Prospectus pursuant to which Shares are offered, the Advisor shall,
either directly or by engaging an Affiliate or the Subadvisor:
(a) serve as CWIs investment and financial advisor and provide research and economic
and statistical data in connection with CWIs assets and investment policies;
(b) provide the daily management of CWI and perform and supervise the various
administrative functions reasonably necessary for the management of CWI, the Operating
Partnership and the Investments;
(c) investigate, select, and, on behalf of CWI, engage, oversee and conduct business
with such Persons as the Advisor deems necessary to the proper performance of its
obligations hereunder, including but not limited to consultants, accountants,
correspondents, lenders, technical advisors, attorneys, brokers, underwriters, corporate
fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers,
insurance agents, banks, builders, developers, property owners, mortgagors, franchisors,
independent property operators and any and all agents for any of the foregoing, including
Affiliates of the Advisor, and Persons acting in any other capacity deemed by the Advisor
necessary or desirable for the performance of any of the foregoing services, including but
not limited to entering into contracts in the name of CWI with any of the foregoing;
(d) consult with Directors of CWI and assist the Board in the formulation and
implementation of CWIs policies, and furnish the Board with such information, advice and
recommendations as they may request or as otherwise may be necessary to enable them to
discharge their fiduciary duties with respect to matters coming before the Board;
(e) subject to the provisions of Sections 3(g) and 4 hereof: (i) locate, analyze and
select potential Investments and deliver to the Investment Committee, as applicable, such
information as it may request or as otherwise may be necessary to enable the Investment
Committee to evaluate potential Investments; (ii) structure and negotiate the terms and
conditions of transactions pursuant to which Investments will be made, purchased or acquired
by CWI;
(iii) make Investments on behalf of CWI; (iv) arrange for financing and refinancing of,
make other changes in the asset or capital structure of, dispose of, reinvest the proceeds
from the sale of, or otherwise deal with the Investments; (v) enter into service contracts
for Properties and, to the extent necessary, perform all other operational functions for the
maintenance and administration of such; (vi) oversee such non-affiliated property managers
and other non-affiliated Persons who perform services for CWI; and (vii) undertake
accounting and other record-keeping functions at the Investment level;
- 8 -
(f) provide the Board with periodic reports regarding prospective Investments and with
periodic reports, no less than quarterly, of new Investments made during the prior fiscal
quarter;
(g) obtain the prior approval of the Board (including a majority of the Independent
Directors) for any and all investments in Properties which do not meet all of the
requirements set forth in Section 4(b) hereof;
(h) negotiate on behalf of CWI with banks or lenders for loans to be made to CWI, and
negotiate on behalf of CWI with investment banking firms and broker-dealers or negotiate
private sales of Shares and Securities or obtain loans for CWI, but in no event in such a
way so that the Advisor shall be acting as broker-dealer or underwriter; and
provided
,
further
, that any fees and costs payable to third parties incurred by the Advisor in
connection with the foregoing shall be the responsibility of CWI;
(i) obtain reports (which may be prepared by the Advisor or its Affiliates), where
appropriate, concerning the value of Investments or contemplated Investments;
(j) obtain for, or provide to, CWI such services as may be required in acquiring,
managing and disposing of Investments, including, but not limited to: (i) the negotiation,
making and servicing of Investments; (ii) the disbursement and collection of Company monies;
(iii) the payment of debts of and fulfillment of the obligations of CWI; and (iv) the
handling, prosecuting and settling of any claims of or against CWI, including, but not
limited to, foreclosing and otherwise enforcing mortgages and other liens securing Loans;
(k) from time to time, or at any time reasonably requested by the Board, make reports
to the Board of its performance of services to CWI under this Agreement;
(l) communicate on behalf of CWI with Shareholders as required to satisfy the reporting
and other requirements of any governmental bodies or agencies to Shareholders and third
parties and otherwise as requested by CWI;
(m) provide or arrange for administrative services and items, legal and other services,
office space, office furnishings, personnel and other overhead items necessary and
incidental to CWIs business and operations;
(n) provide CWI with such accounting data and any other information requested by CWI
concerning the investment activities of CWI as shall be required to prepare and to file all
periodic financial reports and returns required to be filed with the Securities and Exchange
Commission and any other regulatory agency, including annual financial statements;
(o) maintain the books and records of CWI;
(p) supervise the performance of such ministerial and administrative functions as may
be necessary in connection with the daily operations of the Investments;
- 9 -
(q) provide CWI with all necessary cash management services;
(r) provide asset management services including, without limitation, oversight and
strategic guidance to independent property operators that handle day-to-day operations of
CWIs Properties;
(s) do all things necessary to assure its ability to render the services described in
this Agreement;
(t) perform such other services as may be required from time to time for management and
other activities relating to the assets of CWI as the Advisor shall deem advisable under the
particular circumstances;
(u) arrange to obtain on behalf of CWI as requested by the Board, and deliver to or
maintain on behalf of CWI copies of, all appraisals obtained in connection with Investments;
(v) if a transaction, proposed transaction or other matter requires approval by the
Board or by the Independent Directors, deliver to the Board or the Independent Directors, as
the case may be, all documentation reasonably requested by them to properly evaluate such
transaction, proposed transaction or other matter; and
(w) on an annual basis, no later than 90 days prior to the end of each term of this
Agreement, provide the Independent Directors with a report on (1) the Advisors performance
during the past year, (2) the compensation paid to the Advisor during such year and (3) any
proposed changes to the compensation to be paid to the Advisor during the upcoming year if
the Agreement is renewed. The Advisors report shall address, among other things, (a) those
matters identified in CWIs organizational documents as matters which the Independent
Directors must review each year with respect to the Advisors performance and compensation;
(b) whether any Triggering Event occurred with respect to an Investment made during the past
year; and (c) the dead deal costs incurred by CWI during the past year. In addition, the
Independent Directors may request that the Advisor refund certain of the dead deal costs
incurred by CWI if, in light of the circumstances under which such costs were incurred, the
Independent Directors determine that CWI should not bear such costs.
4.
Authority of Advisor
.
(a) Pursuant to the terms of this Agreement (and subject to the restrictions included
in Paragraphs (b), (c) and (d) of this Section 4 and in Section 7 hereof), and subject to
the continuing and exclusive authority of the Board over the management of CWI, the Board
hereby delegates to the Advisor the authority to: (1) locate, analyze and select Investment
opportunities; (2) structure and negotiate the terms and conditions of transactions pursuant
to which Investments will be made, purchased or acquired for CWI; (3) make Investments on
behalf of CWI in compliance with the investment objectives and policies of CWI; (4) arrange
for financing or refinancing, or make changes in the asset or capital structure of, and
dispose of, reinvest the proceeds from the sale of, or otherwise deal with, Investments;
(5) enter into the Subadvisory Agreement; (6) enter into service contracts, contracts with
independent property operators and franchisors and perform other property level operations;
(7) oversee such non-affiliated property managers and other non-affiliated Persons who perform services for CWI; and (8) undertake accounting and other
record-keeping functions at the Investment level.
- 10 -
(b) The consideration paid for an Investment acquired by CWI shall ordinarily be based
on the fair market value thereof. Consistent with the foregoing provision, the Advisor may,
without further approval by the Board (except with respect to transactions subject to
paragraphs (c) and (d) of this Section 4) invest on behalf of CWI in an Investment so long
as, in the Advisors good faith judgment, (i) the Total Investment Cost of such Investment
does not exceed the fair market value thereof, and in the case of an Investment that is a
Property, shall in no event exceed the Appraised Value of such Property and (ii) the
Investment, in conjunction with CWIs other Investments and proposed Investments, at the
time CWI is committed to purchase or originate the Investment, is reasonably expected to
fulfill CWIs investment objectives and policies as established by the Board and then in
effect. For purposes of the foregoing, the Total Investment Cost shall be measured at the
date the Investment is made and shall exclude future commitments to fund improvements.
Investments not meeting the foregoing criteria must be approved in advance by the Board.
(c) Notwithstanding anything to the contrary contained in this Agreement, the Advisor
shall not cause CWI to make Investments that do not comply with Article IX (Investment
Objectives and Limitations) of the Articles of Incorporation and related sections of the
Bylaws.
(d) The prior approval of the Board, including a majority of the Independent Directors
and a majority of the Directors not interested in the transaction, will be required for:
(i) Investments made through co-investment or joint venture arrangements with the Sponsor,
the Advisor, one or more Directors or any of their Affiliates; (ii) Investments which are
not contemplated by the terms of a Prospectus; (iii) transactions that present issues which
involve conflicts of interest for the Advisor, its members or Affiliates (other than
conflicts involving the payment of fees or the reimbursement of expenses); (iv) the purchase
or lease of assets from or to any Director, any Sponsor, the Advisor, the member of the
Advisor or any of their Affiliates; (v) any purchase or sale of an Investment from or to the
Advisor, its members, one or more Directors or their Affiliates; and (vi) the retention of
any Affiliate of the Advisor to provide services to CWI not expressly contemplated by this
Agreement and the terms of such services by such Affiliate. In addition, the Advisor shall
comply with any further approval requirements set forth in the Bylaws.
(e) The Board may, at any time upon the giving of notice to the Advisor, modify or
revoke the authority set forth in this Section 4. If and to the extent the Board so
modifies or revokes the authority contained herein, the Advisor shall henceforth comply with
such modification or revocation,
provided however
, that such modification or revocation
shall be effective upon receipt by the Advisor and shall not be applicable to investment
transactions to which the Advisor has committed CWI prior to the date of receipt by the
Advisor of such notification.
5.
Bank Accounts
. The Advisor may establish and maintain one or more bank accounts in
its own name for the account of CWI or in the name of CWI and may collect and deposit into any such
account or accounts, and disburse from any such account or accounts, any money on behalf of CWI,
provided
that no funds shall be commingled with the funds of the Advisor; and the Advisor shall
from time to time render appropriate accountings of such collections and payments to the Board and
to the auditors of CWI.
6.
Records; Access
. The Advisor shall maintain appropriate records of all its
activities hereunder and make such records available for inspection by the Board and by counsel,
auditors and authorized agents of CWI, at any time or from time to time during normal business
hours. The Advisor shall at all reasonable times have access to the books and records of CWI.
- 11 -
7.
Limitations on Activities
. Anything else in this Agreement to the contrary
notwithstanding, the Advisor shall refrain from taking any action which, in its sole judgment made
in good faith, would (i) adversely affect the status of CWI as a REIT or of the Operating
Partnership as a partnership for Federal income tax purposes, (ii) subject CWI or the Operating
Partnership to regulation under the Investment Company Act of 1940, as amended, or (iii) would
violate any law, rule, regulation or statement of policy of any governmental body or agency having
jurisdiction over CWI, its Shares or its Securities, or otherwise not be permitted by the Articles
of Incorporation or Bylaws or agreement of limited partnership of the Operating Partnership, except
if such action shall be ordered by the Board, in which case the Advisor shall notify promptly the
Board of the Advisors judgment of the potential impact of such action and shall refrain from
taking such action until it receives further clarification or instructions from the Board. In such
event the Advisor shall have no liability for acting in accordance with the specific instructions
of the Board so given.
(a) Notwithstanding the foregoing, the Company shall indemnify and hold harmless the
the Advisor, its shareholders, members, directors, officers and employees, and partners,
shareholders, directors and officers of the Advisors shareholders and Affiliates of any of
them for any loss or liability suffered by them, and the Advisor, its shareholders, members,
directors, officers and employees, and partners, shareholders, directors and officers of the
Advisors shareholders and Affiliates of any of them, shall not be liable to CWI, the
Operating Partnership or to the Directors or Shareholders for any act or omission by the
Advisor, its shareholders, members, directors, officers and employees, or partners,
shareholders, directors or officers of the Advisors shareholders and Affiliates of any of
them, if in each case the following conditions are met:
(i) The Advisor, its shareholders, members, directors, officers and employees,
and partners, shareholders, directors and officers of the Advisors shareholders and
Affiliates of any of them have determined, in good faith, that the course of conduct
which caused the loss or liability was in the best interests of CWI;
(ii) The Advisor, its shareholders, members, directors, officers and employees,
and partners, shareholders, directors and officers of the Advisors shareholders and
Affiliates of any of them were acting on behalf of or performing services for CWI;
and
(iii) Such liability or loss was not the result of negligence or misconduct by
the Advisor, its shareholders, members, directors, officers and employees, and
partners, shareholders, directors and officers of the Advisors shareholders or
Affiliates of any of them.
(b) Notwithstanding the foregoing, the Advisor and its Affiliates shall not be
indemnified by CWI or the Operating Partnership for any losses, liabilities or expenses
arising from or out of the alleged violation of federal or state securities laws unless one
or more of the following conditions are met:
(i) There has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee;
(ii) Such claims have been dismissed with prejudice on the merits by a court of
competent jurisdiction as to the particular indemnitee; or
- 12 -
(iii) A court of competent jurisdiction approves a settlement of the claims
against a particular indemnitee and finds that indemnification of the settlement and
the related costs should be made, and the court considering the request for
indemnification has been advised of the position of the Securities and Exchange
Commission and of the published position of any state securities regulatory
authority in which securities of CWI were offered or sold as to indemnification for
violation of securities laws.
(c) CWI and the Operating Partnership shall advance funds to the Advisor or its
Affiliates for legal expenses and other costs incurred as a result of any legal action for
which indemnification is being sought only if all of the following conditions are satisfied:
(i) The legal action relates to acts or omissions with respect to the
performance of duties or services on behalf of CWI;
(ii) The Advisor or the Affiliate has provided CWI or the Operating Partnership
with a written affirmation of his, her or its good faith belief that the standard of
conduct necessary for indemnification has been met;
(iii) The legal action is initiated by a third party who is not a Shareholder
or the legal action is initiated by a Shareholder acting in his or her capacity as
such and a court of competent jurisdiction specifically approves such advancement;
and
(iv) The Advisor or the Affiliate undertakes to repay the advanced funds to
CWI, together with the applicable legal rate of interest thereon, in cases in which
such Advisor or Affiliate is found not to be entitled to indemnification.
(d) Notwithstanding the foregoing, the Advisor shall not be entitled to indemnification
or be held harmless pursuant to this Section 7 for any activity which the Advisor shall be
required to indemnify or hold harmless CWI pursuant to Section 23 hereof.
(e) Any amounts paid pursuant to this Section 7 shall be recoverable or paid only out
the net assets of CWI and not from Shareholders.
8.
Relationship with Directors
. There shall be no limitation on any shareholder,
member, director, officer, or employee of the Advisor or its Affiliates serving as a Director or an
officer of CWI, except that no employee of the Advisor or its Affiliates who is also a Director or
officer of CWI shall receive any compensation from CWI for serving as a Director or officer other
than for (a) reasonable reimbursement for travel and related expenses incurred in attending
meetings of the Board and (b) awards made pursuant to the Incentive Plans; for the avoidance of
doubt, the limitations of this Section 8 shall not apply to any compensation paid by the Advisor or
any Affiliate for which CWI reimbursed the Advisor or Affiliate in accordance with Section 10
hereof. However, an employee of the Advisor who is also an officer of CWI is eligible to receive
restricted stock units as provided under the Incentive Plans.
9.
Fees
.
(a)
Asset Management Fee
.
(i) The Operating Partnership shall pay to the Advisor as compensation for the
advisory services rendered hereunder an asset management fee (the
Asset
Management Fee
) in an amount equal to 0.50% of the aggregate Average Market
Value of Investments. The Asset Management Fee with respect to an Investment will
be calculated monthly, beginning with the month in which CWI first makes the
Investment, and shall be pro rated for the number of days during a month that CWI
owns the Investment. The aggregate Asset Management Fees calculated with respect to
each month shall be payable on the first business day following such month.
- 13 -
(b)
Acquisition Fee
.
(i) The Advisor may receive as compensation for services rendered in connection
with the investigation, selection, acquisition or origination (by purchase,
investment or exchange) of any Investment, an acquisition fee (an
Acquisition
Fee
) payable by the Operating Partnership. The Acquisition Fee payable to the
Advisor in respect of an Investment shall be payable at the time such Investment is
acquired in an amount equal to 2.50% of the Total Investment Cost.
(ii) The total amount of all Acquisition Fees, whether payable to the Advisor
or a third party, and Acquisition Expenses payable by the Operating Partnership may
not exceed 6% of the aggregate Contract Purchase Price of all Investments, measured
for the period beginning with the initial acquisition of an Investment and ending
(A) on December 31 of the year in which CWI has invested 90% of the net proceeds of
its initial Offering (excluding the net proceeds from the sale of Shares pursuant to
CWIs dividend reinvestment program), and (B) on each December 31 thereafter, unless
a majority of the Directors (including a majority of the Independent Directors) not
otherwise interested in any transaction approves the excess as being commercially
competitive, fair and reasonable to CWI.
(c)
Property Management Fee; Loan Refinancing Fee
.
(i) No Property Management Fee shall be paid unless approved by a majority of
the Independent Directors.
(ii) The Advisor shall receive as compensation for services rendered in
connection with a qualifying refinancing of a Loan secured by a Property (the
Refinanced Loan
), a loan refinancing fee (a
Loan Refinancing
Fee
) payable by the Operating Partnership. A refinancing will qualify for a
Loan Refinancing Fee only if (A) the maturity date of the Refinanced Loan is less
than one year from the date of the refinancing and the new loan has a term of at
least five years, (B) in the judgment of the Independent Directors, the terms of the
new loan represent an improvement over the Refinanced Loan, or (C) the new loan is
approved by the Independent Directors as being in the best interest of CWI. The
Loan Refinancing Fee payable to the Advisor in respect of a Refinanced Loan shall be
payable at upon the funding of the related mortgage loan or as soon thereafter as is
reasonably practicable in an amount up to 1.00% of the principal amount of the
Refinanced Loan.
(d)
Disposition Fee
.
(i) If the Advisor or an Affiliate provides a substantial amount of services in
the sale of an Investment, the Advisor or such Affiliate shall be entitled to
receive a disposition fee (the
Disposition Fee
) at the time of such
disposition, in an amount equal to the lesser of (1) 50% of the Competitive Real
Estate Commission (if applicable) and (2) 1.5% of the Contract Sales Price of the
Investment.
- 14 -
(ii) The total real estate commissions and Disposition Fees CWI pays to all
Persons shall not exceed an amount equal to the lesser of: (1) 6% of the Contract
Sales Price of the Investment and (2) the Competitive Real Estate Commission. The
Advisor shall present to the Independent Directors such information as they may
reasonably request to review the level of services provided by the Advisor in
connection with a disposition and the basis for the calculation of the amount of the
Disposition Fees on a quarterly basis. No payment of Disposition Fees shall be made
prior to review and approval of such information by the Independent Directors.
(e)
Loans From Affiliates
. CWI shall not borrow funds from the Advisor or its
Affiliates unless (A) the transaction is approved by a majority of the Independent Directors
and a majority of the Directors who are not interested in the transaction as being fair,
competitive and commercially reasonable, (B) the interest and other financing charges or
fees received by the Advisor or its Affiliates do not exceed the amount which would be
charged by non-affiliated lending institutions and (C) the terms are not less favorable than
those prevailing for comparable arms-length loans for the same purpose. CWI will not
borrow on a long-term basis from the Advisor or its Affiliates unless it is to provide the
debt portion of a particular investment and CWI is unable to obtain a permanent loan at that
time or in the judgment of the Board, it is not in CWIs best interest to obtain a permanent
loan at the interest rates then prevailing and the Board has reason to believe that CWI will
be able to obtain a permanent loan on or prior to the end of the loan term provided by the
Advisor or its Affiliates.
(f)
Changes To Fee Structure
. In the event the Shares are listed on a national
securities exchange or are included for quotation on the NASDAQ, CWI and the Advisor shall
negotiate in good faith to establish a fee structure appropriate for an entity with a
perpetual life. A majority of the Independent Directors must approve the new fee structure
negotiated with the Advisor. In negotiating a new fee structure, the Independent Directors
may consider any of the factors they deem relevant, including but not limited to: (a) the
size of the advisory fee in relation to the size, composition and profitability of CWIs
portfolio; (b) the success of the Advisor in generating opportunities that meet the
investment objectives of CWI; (c) the rates charged to other REITs and to investors other
than REITs by advisors performing similar services; (d) additional revenues realized by the
Advisor and its Affiliates through their relationship with CWI, including loan
administration, underwriting or broker commissions, servicing, engineering, inspection and
other fees, whether paid by CWI or by others with whom CWI does business; (e) the quality
and extent of service and advice furnished by the Advisor; (f) the performance of the
investment portfolio of CWI, including income, conservation or appreciation of capital,
frequency of problem investments and competence in dealing with distress situations; and
(g) the quality of the portfolio of CWI in relationship to the investments generated by the
Advisor for the account of other clients. The Independent Directors shall not approve any
new fee structure that is in their judgment more favorable (taken as a whole) to the Advisor
than the current fee structure.
(g)
Payment
. Compensation payable to the Advisor pursuant to this Section 9
shall be paid in cash;
provided
,
however
, that any fee payable pursuant to this Section 9
may be paid, at the option of the Advisor, in the form of: (i) cash, (ii) restricted stock
of CWI, or (iii) a combination of cash and restricted stock. The Advisor shall notify CWI
in writing annually of
the form in which the fee shall be paid. Such notice shall be provided no later than
January 15 of each year. If no such notice is provided, the fee shall be paid in cash. For
purposes of the payment of compensation to the Advisor in the form of stock, the value of
each share of restricted stock shall be: (i) the Net Asset Value per Share as determined
based on the most recent appraisal of CWIs assets performed by an Independent Appraiser, or
(ii) if an appraisal has not yet been performed, $10.00 per share. If shares are being
offered to the public at the time a fee is paid with stock, the value shall be the price of
the stock without commissions. The Net Asset Value determined on the basis of such
appraisal may be adjusted on a quarterly or other basis by the Board to account for
significant capital transactions. Stock issued by CWI to the Advisor in payment of fees
hereunder shall be governed by the terms set forth in Schedule A hereto, or such other terms
as the Advisor and CWI may from time to time agree.
- 15 -
10.
Expenses
.
(a) Subject to the limitations set forth in Section 9(b), to the extent applicable, in
addition to the compensation paid to the Advisor pursuant to Section 9 hereof, the Operating
Partnership shall pay directly or reimburse the Advisor for the following expenses:
(i) Organization and Offering Expenses;
provided however
, that within 60 days
after the end of the quarter in which any Offering terminates, the Advisor shall
reimburse the Operating Partnership for any Organization and Offering Expense
reimbursements received by the Advisor pursuant to this Section 10 to the extent
that such reimbursements, when added to the balance of the Organization and Offering
Expenses (excluding selling commissions and dealer manager fees) paid directly by
the Operating Partnership, exceed two percent of the Gross Offering Proceeds;
provided further
, that the Advisor shall be responsible for the payment of all
Organization and Offering Expenses (excluding such commissions and such fees and
expense reimbursements) in excess of two percent of the Gross Offering Proceeds;
(ii) all Acquisition Expenses;
(iii) to the extent not included in Acquisition Expenses, all expenses of
whatever nature reasonably incurred and directly connected with the proposed
acquisition of any Investment that does not result in the actual acquisition of the
Investment, including, without limitation, personnel costs;
(iv) expenses other than Acquisition Expenses incurred in connection with the
investment of the funds of CWI, including, without limitation, business development
expenses, costs of retaining industry or economic consultants and finders fees and
similar payments, to the extent not paid by the seller of the Investment or another
third party, regardless of whether such expenses were incurred in transactions where
a fee is not payable to the Advisor;
(v) interest and other costs for borrowed money, including discounts, points
and other similar fees;
(vi) taxes and assessments on income of CWI, to the extent paid or advanced by
the Advisor, or on Investments and taxes as an expense of doing business;
(vii) costs associated with insurance required in connection with the business
of CWI or by the Directors;
(viii) expenses of managing and operating Investments owned by CWI, whether
payable to an Affiliate of the Advisor or a non-affiliated Person;
(ix) fees and expenses of legal counsel for CWI;
- 16 -
(x) fees and expenses of auditors and accountants for CWI;
(xi) all expenses in connection with payments to the Directors and meetings of
the Directors and Shareholders;
(xii) all expenses in connection with payments to the non-director members of
the Investment Committee for CWIs Investments and meetings of the Investment
Committee;
(xiii) expenses associated with listing the Shares and Securities on a
securities exchange or the NASDAQ if requested by the Board;
(xiv) expenses connected with payments of Distributions in cash or otherwise
made or caused to be made by the Board to the Shareholders;
(xv) expenses of organizing, revising, amending, converting, modifying, or
terminating CWI, the Operating Partnership or their respective governing
instruments;
(xvi) expenses of maintaining communications with Shareholders, including the
cost of preparation, printing and mailing annual reports and other Shareholder
reports, proxy statements and other reports required by governmental entities; and
(xvii) all other Operating Expenses and other expenses the Advisor incurs in
connection with providing services to CWI, including reimbursement to the Advisor or
its Affiliates for the costs of rent, goods, materials and personnel incurred by
them based upon the compensation of the Persons involved and an appropriate share of
overhead allocable to those Persons as reasonably determined by the Advisor on a
basis approved annually by the Board (including a majority of the Independent
Directors). No reimbursement shall be made for the cost of time spent by personnel
on activities for which the Advisor receives a separate fee.
(b) Expenses incurred by the Advisor on behalf of CWI and payable pursuant to this
Section 10 shall be reimbursed quarterly to the Advisor within 60 days after the end of each
quarter, subject to the provisions of Section 13 hereof. The Advisor shall prepare a
statement documenting the Operating Expenses of CWI within 45 days after the end of each
quarter.
11.
Other Services
. Should the Board request that the Advisor or any Affiliate,
shareholder or employee thereof render services for CWI other than as set forth in Section 3
hereof, such services shall be separately compensated and shall not be deemed to be services
pursuant to the terms of this Agreement.
12.
Fidelity Bond
. The Advisor shall maintain a fidelity bond for the benefit of CWI
which bond shall insure CWI from losses of up to $5,000,000 and shall be of the type customarily
purchased by entities performing services similar to those provided to CWI by the Advisor.
- 17 -
13.
Limitation on Expenses
.
(a) If Operating Expenses during the 12-month period ending on the last day of any
fiscal quarter of CWI exceed the greater of (i) two percent of the Average Invested Assets
during the same 12-month period or (ii) 25% of the Adjusted Net Income of CWI over the same
12-month period (the
2%/25% Guidelines
), then subject to paragraph (b) of this
Section 13, such excess amount shall be the sole responsibility of the Advisor and neither
the Operating Partnership nor CWI shall be liable for payment therefor. CWI may defer the
payment or distribution to the Advisor and the Special General Partner of fees, expenses and
distributions that would, if paid or distributed, cause Operating Expenses during such
12-month period to exceed the foregoing limitations;
provided, however
, that in determining
which items shall be paid and which may be deferred, priority will be given to the payment
of distributions to the Special General Partner over the payment to the Advisor of amounts
due under this Agreement.
(b) Notwithstanding the foregoing, to the extent that the Advisor becomes responsible
for any excess amount as provided in paragraph (a), if a majority of the Independent
Directors finds such excess amount or a portion thereof justified based on such unusual and
non-recurring factors as they deem sufficient, the Operating Partnership shall reimburse the
Advisor in future quarters for the full amount of such excess, or any portion thereof, but
only to the extent such reimbursement would not cause the Operating Expenses to exceed the
2%/25% Guidelines in the 12-month period ending on the last day of such quarter. In no
event shall the Operating Expenses payable by the Operating Partnership in any 12-month
period ending at the end of a fiscal quarter exceed the 2%/25% Guidelines.
(c) Within 60 days after the end of any 12-month period referred to in paragraph (a),
the Advisor shall reimburse CWI for any amounts expended by CWI in such 12-month period that
exceeds the limitations provided in paragraph (a) unless the Independent Directors determine
that such excess expenses are justified, as provided in paragraph (b), and provided the
Operating Expenses for such later quarter would not thereby exceed the 2%/25% Guidelines.
(d) All computations made under paragraphs (a) and (b) of this Section 13 shall be
determined in accordance with generally accepted accounting principles applied on a
consistent basis.
(e) If the Special General Partner receives distributions pursuant to the agreement of
limited partnership of the Operating Partnership in respect of realized gains on the
disposition of an Investment, Adjusted Net Income, for purposes of calculating the Operating
Expenses, shall exclude the gain from the disposition of such Investment.
14.
Other Activities of the Advisor
.
(a) During the First Offer Period, the Advisor and its Affiliates shall not, directly
or indirectly, acquire, lease, own or manage any Lodging Facility or Lodging Loan other than
(i) non-Controlling interests in Persons that own one or more Properties or Other Permitted
Investment Assets; (ii) Pre-Existing Holdings; and (iii) Investment Opportunities presented
by the Advisor or its Affiliates which are rejected by the Investment Committee.
(b) The Advisor shall not consent to any material amendment of Section 4(a) of the
Subadvisory Agreement without the prior approval of a majority of the Independent Directors.
- 18 -
(c) Subject to the limitations set forth in paragraph (a) of this Section 14, nothing
herein contained shall prevent the Advisor from engaging in other activities, including the
rendering of advice to other investors (including other REITs) and the management of other
programs advised, sponsored or organized by the Advisor or its Affiliates; nor shall this
Agreement limit or restrict the right of the Advisor or any of its Affiliates or of any
director, member, officer, employee or shareholder of the Advisor or its Affiliates to
engage in any other business or to render services of any kind to any other partnership,
corporation, firm, individual, trust or association. The Advisor may, with respect to any
investment in which CWI is a participant, also render advice and service to each other
participant therein. Without limiting the generality of the foregoing, CWI acknowledges
that (i) affiliates of W. P. Carey & Co. LLC provide or will provide services to the
CPA
®
REIT funds, (ii) W. P. Carey & Co. LLC owns investments in lodging
properties which are not being contributed to CWI which it will continue to own and manage
and (iii) the Advisor and its Affiliates may provide services to other programs sponsored or
managed by W. P. Carey & Co. LLC whether now in existence or formed hereafter, and (iv) the
Advisor and its Affiliates may make future investments for their own account. The Advisor
shall be responsible for promptly reporting to the Board the existence of any actual or
potential conflict of interest that arises that may affect its performance of its duties
under this Agreement. If the Sponsor, Advisor, Director or Affiliates thereof has or have
sponsored other investment programs with similar investment objectives which have investment
funds available at the same time as CWI, it shall be the duty of the Advisor to adopt a
reasonable method by which properties are to be allocated to the competing investment
entities and to use its best efforts to apply such method fairly to CWI.
(d) The Advisor shall be required to use its best efforts to present a continuing and
suitable investment program to CWI that is consistent with the investment procedures,
objectives and policies of CWI, but subject to the last sentence of the preceding paragraph,
neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present
any particular investment opportunity to CWI even if the opportunity is of character which,
if presented to CWI, could be taken by CWI.
(e) If the Advisor or its Affiliates is presented with a potential investment which
might be made by CWI and by another investment entity which the Advisor or its Affiliates
advises or manages, the Advisor shall consider, among other things, the investment portfolio
of each entity, cash flow of each entity and from the asset, the effect of the acquisition
on the diversification of each entitys portfolio, the estimated income tax effects of the
purchase on each entity, the policies of each entity relating to leverage, the funds of each
entity available for investment, the amount of equity required to make the investment, the
length of time such funds have been available for investment and the manner in which the
potential investment can be structured by each entity, and whether a particular entity has
been formed specifically for the purpose of making particular types of investments (in which
case it will generally receive preference in the allocation of those types of investments).
15.
Relationship of Advisor and CWI
. CWI and the Advisor agree that they have not
created and do not intend to create by this Agreement a joint venture or partnership relationship
between them and nothing in this Agreement shall be construed to make them partners or joint
venturers or impose any liability as partners or joint venturers on either of them.
16.
Term; Termination of Agreement
. This Agreement, as amended and restated, shall
continue in force until September 30, 2011 or until 60 days after the date on which the Independent
Directors shall have notified the Advisor of their determination either to renew this
Agreement for an additional one-year period or terminate this Agreement, as required by the
Articles of Incorporation.
- 19 -
17.
Termination by CWI
. At the sole option of the Board (including a majority of the
Independent Directors), this Agreement may be terminated immediately by written notice of
termination from CWI to the Advisor upon the occurrence of events which would constitute Cause or
if any of the following events occur:
(a) If the Advisor shall be adjudged bankrupt or insolvent by a court of competent
jurisdiction, or an order shall be made by a court of competent jurisdiction for the
appointment of a receiver, liquidator, or trustee of the Advisor, for all or substantially
all of its property by reason of the foregoing, or if a court of competent jurisdiction
approves any petition filed against the Advisor for reorganization, and such adjudication or
order shall remain in force or unstayed for a period of 30 days; or
(b) If the Advisor shall institute proceedings for voluntary bankruptcy or shall file a
petition seeking reorganization under the federal bankruptcy laws, or for relief under any
law for relief of debtors, or shall consent to the appointment of a receiver for itself or
for all or substantially all of its property, or shall make a general assignment for the
benefit of its creditors, or shall admit in writing its inability to pay its debts,
generally, as they become due.
Any notice of termination under Section 16 or 17 hereof shall be effective on the date
specified in such notice, which may be the day on which such notice is given or any date
thereafter. The Advisor agrees that if any of the events specified in this Section 17(a) or (b)
shall occur, it shall give written notice thereof to the Board within 15 days after the occurrence
of such event.
18.
Termination by Either Party
. This Agreement may be terminated immediately without
penalty (but subject to the requirements of Section 20 hereof) by the Advisor by written notice of
termination to CWI upon the occurrence of events which would constitute Good Reason or by CWI
without cause or penalty (but subject to the requirements of Section 20 hereof) by action of the
Directors, a majority of the Independent Directors or by action of a majority of the Shareholders,
in each case upon 60 days written notice.
19.
Assignment Prohibition
. This Agreement may not be assigned by the Advisor
without the prior written consent of CWI except in case of an assignment to a corporation,
partnership, association, trust or organization which takes over the assets and carries on the
affairs of the Advisor,
provided
: (i) that at the time of such assignment, such successor
organization shall be owned substantially by an entity directly or indirectly controlled by the
Advisor and only if such entity has a net worth of at least $5,000,000, and (ii) that the board of
directors of the Advisor shall deliver to the Board a statement in writing indicating the ownership
structure and net worth of the successor organization and a certification from the new Advisor as
to its net worth. Such an assignment shall bind the assignees hereunder in the same manner as the
Advisor is bound by this Agreement. The Advisor may assign any rights to receive fees or other
payments under this Agreement without obtaining the approval of the Board. This Agreement may not
be assigned by CWI or the Operating Partnership without the prior written consent of the Advisor
except in case of an assignment to a corporation or other organization which is a successor to CWI
or the Operating Partnership, in which case such successor organization shall be bound hereunder
and by the terms of said assignment in the same manner as CWI or the Operating Partnership is bound
by this Agreement.
20.
Payments to and Duties of Advisor Upon Termination
.
(a) After the Termination Date, the Advisor shall not be entitled to compensation for
further services hereunder but shall be entitled to receive from CWI the following:
(i) all unpaid reimbursements of Organization and Offering Expenses and of
Operating Expenses payable to the Advisor;
(ii) all earned but unpaid Asset Management Fees payable to the Advisor prior
to the Termination Date;
- 20 -
(iii) all earned but unpaid Acquisition Fees payable to the Advisor relating to
the acquisition of any Property prior to the Termination Date;
(iv) all earned but unpaid Disposition Fees payable to the Advisor relating to
the sale of any Investment prior to the Termination Date; and
(v) all earned but unpaid Property Management Fees and Loan Refinancing Fees,
if any, payable to the Advisor or its Affiliates relating to the management of any
property prior to the termination of this Agreement.
(b) Notwithstanding the foregoing, if this Agreement is terminated by CWI for Cause, or
by the Advisor for other than Good Reason, the Advisor will not be entitled to receive the
sums in this Section 20(a) (ii) through (v).
(c) Any and all amounts payable to the Advisor pursuant to Section 20(a) hereof that,
irrespective of the termination, were payable on a current basis prior to the Termination
Date either because they were not subordinated or all conditions to their payment had been
satisfied, shall be paid within 90 days after the Termination Date. All other amounts shall
be paid in a manner determined by the Board, but in no event on terms less favorable to the
Advisor than those represented by a note (i) maturing upon the liquidation of CWI or the
Operating Partnership or three years from the Termination Date, whichever is earlier,
(ii) with no less than twelve equal quarterly installments and (iii) bearing a fair,
competitive and commercially reasonable interest rate (the
Note
). The Note, if
any, may be prepaid by the Operating Partnership at any time prior to maturity with accrued
interest to the date of payment but without premium or penalty. Notwithstanding the
foregoing, any amounts that relate to Investments (A) shall be an amount which provides
compensation to the Advisor only for that portion of the holding period for the respective
Investments during which the Advisor provided services to CWI, (B) shall not be due and
payable until the Property, Loan or Other Permitted Investment Asset to which such amount
relates is sold or refinanced, and (C) shall not bear interest until the Property, Loan or
Other Permitted Investment Asset to which such amount relates is sold or refinanced. A
portion of the amount shall be paid as each Investment owned by CWI on the Termination Date
is sold. The portion of such amount payable upon each such sale shall be equal to (X) such
amount multiplied by (Y) the percentage calculated by dividing the fair value (at the
Termination Date) of the Investment sold by CWI divided by the total fair value (at the
Termination Date) of all Investments owned by CWI on the Termination Date.
(d) The Advisor shall promptly upon termination:
(i) pay over to the Operating Partnership all money collected and held for the
account of CWI pursuant to this Agreement, after deducting any accrued compensation
and reimbursement for its expenses to which it is then entitled;
(ii) deliver to the Board a full accounting, including a statement showing all
payments collected by it and a statement of all money held by it, covering the
period following the date of the last accounting furnished to the Board;
(iii) deliver to the Board all assets, including the Properties, Loans, and
Other Permitted Investment Assets, and documents of CWI then in the custody of the
Advisor; and
(iv) cooperate with CWI to provide an orderly management transition.
- 21 -
21.
Non-Solicitation and Non-Hire Following Termination
. None of CWI or any of its
Affiliates will, for a period of 24 months after the termination of this Agreement for any reason,
solicit for employment or employ, solicit for engagement or engage, including as an advisor,
subadvisor, consultant or independent contractor, (i) any officer, director or management employee,
or any other employee with whom CWI or its Affiliates came into contact in connection with the
services to be provided under this Agreement and the Subadvisory Agreement, in each case of the
Advisor or the Subadvisor or any of their respective Affiliates (each a
Restricted
Person
) or (ii) any Affiliate of a Restricted Person.
22.
Indemnification by CWI and the Operating Partnership
. Neither CWI nor the
Operating Partnership shall indemnify the Advisor or any of its Affiliates for any loss or
liability suffered by the Advisor or the Affiliate, or hold the Advisor or the Affiliate harmless
for any loss or liability suffered by CWI, except as permitted under Section 7 hereof.
23.
Indemnification by Advisor
. The Advisor shall indemnify and hold harmless CWI and
the Operating Partnership from liability, claims, damages, taxes or losses and related expenses
including attorneys fees, to the extent that such liability, claims, damages, taxes or losses and
related expenses are not fully reimbursed by insurance and are incurred by reason of the Advisors
bad faith, fraud, willful misfeasance, misconduct, negligence or reckless disregard of its duties.
24.
Joint and Several Obligations
. Any obligations of CWI shall be construed as the
joint and several obligations of CWI and the Operating Partnership, unless otherwise specifically
provided in this Agreement.
25.
Notices
. Any notice, report or other communication required or permitted to be
given hereunder shall be in writing unless some other method of giving such notice, report or other
communication is accepted by the party to whom it is given, and shall be given by being delivered
by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:
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To the Board
and to CWI:
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Carey Watermark Investors Incorporated
50 Rockefeller Plaza
New York, NY 10020
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To the Operating Partnership:
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c/o Carey Watermark Investors Incorporated
50 Rockefeller Plaza
New York, NY 10020
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- 22 -
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To the Advisor:
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Carey Lodging Advisors, LLC
50 Rockefeller Plaza
New York, NY 10020
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With a copy to:
Carey Asset Management Corp.
50 Rockefeller Plaza
New York, NY 10020 and
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During the term of the Subadvisory
Agreement, with a copy to:
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CWA, LLC
c/o Watermark Capital Partners, LLC
207 East Westminster, Ste. 200
Lake Forest, IL 60045
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Either party may at any time give notice in writing to the other party of a change in its
address for the purposes of this Section 25.
26.
Modification
. This Agreement shall not be changed, modified, terminated, or
discharged, in whole or in part, except by an instrument in writing signed by both parties hereto,
or their respective successors or assignees.
27.
Severability
. The provisions of this Agreement are independent of and severable
from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue
of the fact that for any reason any other or others of them may be invalid or unenforceable in
whole or in part.
28.
Construction
. This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of New York.
29.
Entire Agreement
. This Agreement contains the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or
written, of any nature whatsoever with respect to the subject matter hereof. The express terms
hereof control and supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof. This Agreement may not be modified or amended other than by an agreement
in writing.
30.
Indulgences, Not Waivers
. Neither the failure nor any delay on the part of a
party to exercise any right, remedy, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege
preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver
of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of
such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and is signed by the party asserted to have granted such waiver.
31.
Gender
. Words used herein regardless of the number and gender specifically used,
shall be deemed and construed to include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context requires.
- 23 -
32.
Titles Not to Affect Interpretation
. The titles of Sections and subsections
contained in this Agreement are for convenience only, and they neither form a part of this
Agreement nor are they to be used in the construction or interpretation hereof.
33.
Execution in Counterparts
. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same instrument. This
Agreement shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as the signatories.
34.
Initial Investment
. The Advisor has contributed to CWI $200,000 in exchange for
22,222 Shares (the
Initial Investment
). The Advisor or its Affiliates may not sell any
of the Shares purchased with the Initial Investment during the term of this Agreement. The
restrictions included above shall not continue to apply to any Shares other than the Shares
acquired through the Initial Investment acquired by the Advisor or its Affiliates. The Advisor
shall not vote any Shares it now owns or hereafter acquires in any vote for the election of
Directors or any vote regarding the approval or termination of any contract with the Advisor or any
of its Affiliates.
- 24 -
IN WITNESS WHEREOF, the parties hereto have executed this Advisory Agreement as of the day and
year first above written.
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CAREY WATERMARK INVESTORS INCORPORATED
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By:
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/s/ Thomas E. Zacharias
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Name:
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Thomas E. Zacharias
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Title:
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Authorized Officer
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CWI OP, LP
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By:
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/s/ Thomas E. Zacharias
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Name:
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Thomas E. Zacharias
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Title:
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Authorized Officer
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CAREY LODGING ADVISORS, LLC
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By:
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CAREY ASSET MANAGEMENT CORP., as sole member
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By:
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/s/ Thomas E. Zacharias
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Name:
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Thomas E. Zacharias
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Title:
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Managing Director and Chief Operating Officer
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- 25 -
SCHEDULE 14.1
Pre-Existing Holdings
The Lodging Facilities and Lodging Loans described in the Registration Statement on Form S-11
(File No. 333-149899) as being owned by the Advisor and its Affiliates.
- 26 -
SCHEDULE A
This Schedule A sets forth the terms governing any Shares issued by CWI to the Advisor in
payment of advisory fees set forth in the Agreement. Capitalized terms used herein and not defined
herein shall have the meanings ascribed to them in the Agreement.
1.
Restrictions
. The Shares are subject to vesting over a five-year period. The
Shares shall vest ratably over a five-year period with 20% of the Shares paid in each payment
vesting on each of the first through fifth anniversary of the date hereof. Prior to the vesting of
the ownership of the Shares in the Advisor, the Shares may not be transferred by the Advisor.
2.
Immediate Vesting
. Upon the expiration or termination of the Agreement for any
reason other than a termination for Cause under Section 17 of the Agreement or upon a Change of
Control of CWI (as defined below), all Shares granted to the Advisor pursuant to Section 9(g) of
the Agreement shall vest immediately and all restrictions shall lapse. For purposes of this
Schedule A, a Change of Control of CWI shall be deemed to have occurred if there has been a
change in the ownership of CWI of a nature that would be required to be reported in response to the
disclosure requirements of Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the
Exchange Act
), as enacted and in force on the date hereof,
whether or not CWI is then subject to such reporting requirements;
provided
,
however
, that, without
limitation, a
Change of Control
shall be deemed to have occurred if:
(i) any person, as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than CWI, any of its subsidiaries, any trustee, fiduciary or
other person or entity holding securities under any employee benefit plan of CWI or
any of its subsidiaries), together with all affiliates and associates (as such
terms are defined in Rule 14b-2 under the Exchange Act) of such person, shall become
the beneficial owner (as such term is defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of CWI representing 25 % or more of
either (A) the combined voting power of CWIs then outstanding securities having the
right to vote in an election of the Board (
Voting Securities
) or (B) the
Shares then outstanding (in either such case other than as a result of acquisition
of securities directly from CWI);
(ii) persons who, as of the date hereof, constitute the Board (the
Incumbent Directors
) cease for any reason, including without limitation,
as a result of a tender offer, proxy contest, merger or similar transaction, to
constitute at least a majority of the Board,
provided
that any person becoming a
director of CWI subsequent to the date hereof whose election or nomination for
election was approved by a vote of at least a majority of the Incumbent Directors
shall be considered an Incumbent Director; or
(iii) the stockholders of CWI shall approve (A) any consolidation or merger of
CWI or any subsidiary where the stockholders of CWI, immediately prior to the
consolidation or merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, shares representing in the aggregate 50 % or more of the
voting equity of the entity issuing cash or securities in the consolidation or
merger (or of its ultimate parent entity, if any), (B) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the assets of
CWI or (C) any plan or proposal for the liquidation or dissolution of CWI.
- 27 -
Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred for
purposes of the foregoing clause (i) solely as the result of an acquisition of securities by CWI
which, by reducing the number of Shares outstanding, increases (A) the proportionate number of
Shares beneficially owned by any person to 25% or more of the Shares then outstanding, or (B) the
proportionate voting power represented by the Shares beneficially owned by any person to 25% or
more of the combined voting power of all then outstanding Voting Securities;
provided
,
however
,
that if any person referred to in clause (A) or (B) of this sentence shall thereafter become the
beneficial owner of any additional Shares or other Voting Securities (other than pursuant to a
Share split, Share dividend, or similar transaction), then a Change of Control shall be deemed to
have occurred for purposes of the foregoing clause (i).
3.
Exception
. Notwithstanding anything else in the Agreement to the contrary, the
Shares shall continue to vest according to the vesting schedule in this Section A regardless of:
(a) the expiration of the Agreement for any reason other than a termination by CWI for Cause or a
resignation by the Advisor for other than Good Reason, (b) the merger of CWI and an Affiliate of
CWI, or (c) any Change of Control of CWI in connection with a merger of CWI with an Affiliate of
CWI.
- 28 -
Exhibit 10.2
AGREEMENT OF LIMITED PARTNERSHIP
OF
CWI OP, LP
THIS AGREEMENT OF LIMITED PARTNERSHIP OF CWI OP, LP, a Delaware limited partnership (the
Partnership
), dated as of September 15, 2010 (the Effective Date), is entered into by
and among Carey Watermark Investors Incorporated, a Maryland corporation holding both general
partner and limited partner interests in the Partnership (the
General Partner
), and Carey
Watermark Holdings, LLC, a Delaware limited liability company holding a special general partner
interest in the Partnership (the
Special General Partner
), together with any other
Persons who become Partners in the Partnership as provided herein.
WHEREAS, the Partnership was formed when a Certificate of Limited Partnership was filed and
accepted by the Secretary of State of the State of Delaware; and
WHEREAS, the General Partner proposes to effect an initial offering of its common stock and to
contribute the net proceeds of the offering to the Partnership to cause the Partnership to fund (i)
certain acquisitions and investments, (ii) working capital requirements, (iii) redemptions of
interests in the Partnership, and (iv) repayment of indebtedness incurred under various financing
instruments.
NOW, THEREFORE, BE IT RESOLVED, that for good and adequate consideration, the receipt of which
is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1.
DEFINED TERMS
Section 1.1
Definitions
.
The following definitions shall be for all purposes, unless otherwise clearly indicated to the
contrary, applied to the terms used in this Agreement.
Act
means the Delaware Revised Uniform Limited Partnership Act (6 Del. C. § 17-101
et seq
.), as it may be amended from time to time, and any successor to such statute.
Additional Funds
shall have the meaning set forth in
Section 4.3.A
.
Additional Limited Partner
means a Person admitted to the Partnership as a Limited
Partner pursuant to
Section 12.2
and who is shown as such on the books and records of the
Partnership.
Adjusted Capital Account Deficit
means, with respect to any Partner, the deficit
balance, if any, in such Partners Capital Account as of the end of the relevant fiscal year, after
giving effect to the following adjustments:
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(i)
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such deficit shall be decreased by any amounts which such Partner is
obligated to restore pursuant to this Agreement or is deemed to be
obligated to restore pursuant to Regulations Section
1.704-1(b)(2)(ii)(c) or the penultimate sentence of each of
Regulations Sections 1.704-2(i)(5) and 1.704-2(g)(1); and
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(ii)
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such deficit shall be increased by the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
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The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the
provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith. A positive balance in a Partners Capital Account, after giving effect to the
adjustments described above in clauses (i) and (ii), is referred to in this Agreement as an
Adjusted Capital Account Balance
.
Adjustment Date
means, with respect to any Capital Contribution, the close of
business on the Business Day last preceding the date of the Capital Contribution,
provided
,
that
if such Capital Contribution is being made by the General Partner in respect of the
proceeds from the issuance of REIT Shares (or the issuance of the General Partners securities
exercisable for, convertible into or exchangeable for REIT Shares), then the Adjustment Date shall
be as of the close of business on the Business Day last preceding the date of the issuance of such
securities.
Advisor
means Carey Lodging Advisors, LLC, a Delaware limited liability company.
Advisory Agreement
means that certain Advisory Agreement between the Advisor and the
General Partner entered into contemporaneously with this Agreement, as the same may be amended from
time to time.
Affiliate
means, with respect to any Person, any Person directly or indirectly
controlling, controlled by or under common control with such Person. Control of any Person means
the power to direct the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise, and the terms controlling
and controlled have meanings correlative to the foregoing.
Agreed Value
means (i) in the case of any Contributed Property set forth in
Exhibit
A
and as of the Adjustment Date, the Agreed Value of such property as set forth in
Exhibit A
; (ii)
in the case of any Contributed Property not set forth in
Exhibit A
and as of the Adjustment Date,
the fair market value of such property or other consideration as determined by the General Partner,
reduced by any liabilities either assumed by the Partnership upon such contribution or to which
such property is subject when contributed; and (iii) in the case of any property distributed to a
Partner by the Partnership, the fair market value of such property as determined by the General
Partner at the time such property is distributed, reduced by any liabilities either assumed by such
Partner upon such distribution or to which such property is subject at the time of the distribution
as determined under Section 752 of the Code and the Regulations thereunder.
Agreement
means this Agreement of Limited Partnership, as it may be amended,
modified, supplemented or restated from time to time.
Appraisal
means with respect to any assets, the opinion of an independent third
party experienced in the valuation of similar assets, selected by the General Partner and the
Special General Partner in good faith; such opinion may be in the form of an opinion by such
independent third party that the value for such property or asset as set by the General Partner is
fair, from a financial point of view, to the Partnership.
Assignee
means a Person to whom one or more OP Units have been transferred in a
manner permitted under this Agreement, but who has not become a Substituted Limited Partner, and
who has the rights set forth in
Section 11.5
.
Available Cash
means, with respect to any period for which such calculation is being
made, the cash flow generated by Partnership operations and investments as determined in the
reasonable discretion of the General Partner taking into account all cash available for
distribution from all sources excluding Capital Proceeds, after the payment of regular debt
payments (including, without limitation, regularly scheduled payments of interest and amortization,
but excluding balloon payments and early prepayment of debt principal) and Operating Expenses of
the Partnership (as defined in the Advisory Agreement) but before the payment of distributions to
Partners. Notwithstanding the foregoing, the operating cash flow of any entity in which the
Partnership owns, directly or indirectly, less than a 100% interest shall be multiplied by the
percentage ownership of such entity held, directly or indirectly, by the Partnership.
Business Day
means any day except a Saturday, Sunday or other day on which
commercial banks in New York, New York are authorized or required by law to be closed.
-2-
Capital Account
means, with respect to any Partner, the Capital Account maintained
for such Partner in accordance with the following provisions:
(a) To each Partners Capital Account there shall be added such Partners Capital
Contributions, such Partners share of Net Income and any items in the nature of income or gain
which are specially allocated pursuant to
Section 6.3
, and the amount of any Partnership
liabilities assumed by such Partner or which are secured by any property distributed to such
Partner.
(b) From each Partners Capital Account there shall be subtracted the amount of cash and the
Gross Asset Value of any property distributed to such Partner pursuant to any provision of this
Agreement, such Partners distributive share of Net Loss and any items in the nature of expenses or
losses which are specially allocated pursuant to
Section 6.3
, and the amount of any
liabilities of such Partner assumed by the Partnership or which are secured by any property
contributed by such Partner to the Partnership (except to the extent already reflected in the
amount of such Partners Capital Contribution).
(c) In the event any interest in the Partnership is transferred in accordance with the terms
of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred interest.
(d) In determining the amount of any liability for purposes of subsections (a) and (b) hereof,
there shall be taken into account Code Section 752(c) and any other applicable provisions of the
Code and Regulations.
(e) The foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b) and
1.704-2, and shall be interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed property or which
are assumed by the Partnership, the General Partner, or the Limited Partners) are computed in order
to comply with such Regulations, the General Partner may make such modification,
provided
that
it is not likely to have a material effect on the amounts distributable to any Person
pursuant to
Article 13
of this Agreement upon the dissolution of the Partnership. The
General Partner also shall (i) make any adjustments that are necessary or appropriate to maintain
equality between the Capital Accounts of the Partners and the amount of Partnership capital
reflected on the Partnerships balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b) or
Section 1.704-2.
Capital Contribution
means, with respect to any Partner, the amount of money and the
initial Gross Asset Value of any property (other than money) contributed to the Partnership by such
Partner (net of any liabilities assumed by the Partnership relating to such property and any
liability to which such property is subject).
Capital Proceeds
means the gross receipts received by the Partnership from a Capital
Transaction, Change of Control Event or a Listing Event (including any borrowing or other
transaction entered into in connection with, or as a part of, a Capital Transaction, Change of
Control Event or Listing Event), less any expenses related to the Capital Transaction, Change of
Control Event or Listing Event.
Capital Transaction
means any transaction outside the ordinary course of the
Partnerships business involving the sale, exchange, other disposition, or refinancing of any
Partnership asset.
Cash Amount
means, with respect to any OP Units subject to a Redemption, an amount
of cash equal to the Deemed Partnership Interest Value attributable to such OP Units.
-3-
Certificate
means the Certificate of Limited Partnership relating to the Partnership
filed in the office of the Secretary of the State of the State of Delaware, as amended from time to
time in accordance with the terms hereof and the Act.
Change of Control
shall be deemed to have occurred at such time as (i) the date a
person or group (within the meaning of Sections 13(d) and 14(d) of the Exchange Act) becomes
the ultimate beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a person or group shall be deemed to have beneficial ownership of all shares of voting stock
that such person or group has the right to acquire regardless of when such right is first
exercisable), directly or indirectly, of voting stock representing more than fifty percent (50%) of
the total voting power of the total voting stock of the General Partner; (ii) the date the General
Partner sells, transfers or otherwise disposes of all or substantially all of its assets; or (iii)
the date of the consummation of a merger or share exchange of the General Partner with another
entity where the General Partners stockholders immediately prior to the merger or share exchange
would not beneficially own, immediately after the merger or share exchange, shares representing
fifty percent (50%) or more of all votes (without consideration of the rights of any class of stock
to elect directors by a separate group vote) to which all stockholders of the corporation issuing
cash or securities in the merger or share exchange would be entitled in the election of directors,
or where members of the board of directors of the General Partner immediately prior to the merger
or share exchange would not immediately after the merger or share exchange constitute a majority of
the board of directors of the corporation issuing cash or securities in the merger or share
exchange.
Change of Control Event
means (i) the date on which another Person acquires more
than fifty percent (50%) of the aggregate ordinary voting power represented by the equity
securities of the General Partner by purchase or by merger provided that the indirect ownership of
the General Partner immediately after the acquisition differs from the direct ownership of the
General Partner immediately before the acquisition by more than a de minimis amount; or (ii) the
date on which the General Partner merges with another Person provided that the ownership of the
entity surviving the merger immediately after the merger differs from the ownership of the General
Partner immediately before the merger by more than a de minimis amount.
Charter
means the Articles of Incorporation of the General Partner filed with the
State Department of Assessments and Taxation of Maryland on March 10, 2008, as amended or restated
from time to time.
Code
means the Internal Revenue Code of 1986, as amended from time to time or any
successor statute thereto. Any reference herein to a specific section or sections of the Code shall
be deemed to include a reference to any corresponding provision of future law.
Consent
means the consent to, approval of, or vote on a proposed action by a Partner
given in accordance with
Article 14
.
Consent of the Limited Partners
means the Consent of a Majority in Interest of the
Limited Partners, which Consent shall be obtained prior to the taking of any action for which it is
required by this Agreement and may be given or withheld by a Majority in Interest of the Limited
Partners, unless otherwise expressly provided herein, in their sole and absolute discretion.
Consent of the Partners
means the Consent of Partners holding Percentage Interests
that in the aggregate are equal to or greater than fifty percent (50%) of the aggregate Percentage
Interests of all Partners, which Consent shall be obtained prior to the taking of any action for
which it is required by this Agreement and may be given or withheld by such Partners, in their sole
and absolute discretion.
Constructively Own
means ownership under the constructive ownership rules described
in the Charter.
-4-
Contributed Property
means each property or other asset, in such form as may be
permitted by the Act, but excluding cash, contributed or deemed contributed to the Partnership.
Debt
means, as to any Person, as of any date of determination, (i) all indebtedness
of such Person for borrowed money or for the deferred purchase price of property or services; (ii)
all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations
under letters of credit, surety bonds, guarantees and other similar instruments guaranteeing
payment or other performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any lien on any
property owned by such Person, to the extent attributable to such Persons interest in such
property, even though such Person has not assumed or become liable for the payment thereof; and
(iv) lease obligations of such Person which, in accordance with generally accepted accounting
principles, should be capitalized.
Deemed Partnership Interest Value
means, as of any date with respect to any class of
Partnership Interests, the Deemed Value of the Partnership Interests attributable to such class
multiplied by the Partners relative Percentage Interest of such class.
Deemed Value of the Partnership Interests
means, as of any date with respect to any
class or series of Partnership Interests, (i) the total number of OP Units of the General Partner
issued and outstanding as of the close of business on such date multiplied by the Fair Market Value
determined as of such date of a share of common stock of the General Partner which corresponds to
such Partnership Interest, as adjusted (x) pursuant to
Section 7.5
(in the event the
General Partner acquires material assets, other than on behalf of the Partnership) and (y) for
stock dividends and distributions, stock splits and subdivisions, reverse stock splits and
combinations, distribution of warrants or options and distributions of evidences of indebtedness or
assets not received by the General Partner pursuant to a pro rata distribution by the Partnership;
(ii)
divided
by
the Percentage Interest of the General Partner on such date;
provided
,
that
if no outstanding shares of capital stock of the General Partner
correspond to a class or series of Partnership Interests, the Deemed Value of the Partnership
Interests with respect to such class or series shall be equal to an amount reasonably determined by
the General Partner.
Depreciation
means, for each fiscal year or other period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with respect to an asset for
such year or other period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as
the federal income tax depreciation, amortization or other cost recovery deduction for such year or
other period bears to such beginning adjusted tax basis;
provided
,
however
, that if
the federal income tax depreciation, amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the General Partner.
ERISA
means the Employee Retirement Income Security Act of 1974, as amended.
Exchange Act
means the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Securities and Exchange Commission promulgated thereunder and any successor
statute thereto.
-5-
Fair Market Value
means, with respect to any share of capital stock of the General
Partner, (i) if such shares are listed or admitted to trading on any securities exchange or
automated quotation system, the average of the daily market price for the ten (10) consecutive
trading days immediately preceding the date with respect to which Fair Market Value must be
determined hereunder or, if such date is not a Business Day, the immediately preceding Business
Day, using as the market price for each such trading day the closing price, regular way, on such
day, or if no such sale takes place on such day, the average of the closing bid and asked prices on
such day, or (ii) if such shares are not listed or admitted to trading on any securities exchange
or automated quotation system, the price at which such shares are then being offered to
the public pursuant to any public offering of the General Partner or pursuant to its distribution
reinvestment plan (before giving effect to any discounts in effect and made available to
participants in such plan);
provided
that
, if there is no ongoing public offering
or if the General Partner is not then offering its shares pursuant to a distribution reinvestment
plan, the Fair Market Value of such shares shall be determined by the General Partner acting in
good faith on the basis of the most recent, publicly reported net asset value of the General
Partner and other information as it considers, in its reasonable judgment, appropriate. In the
event the REIT Shares Amount for such shares includes rights that a holder of such shares would be
entitled to receive, then the Fair Market Value of such rights shall be determined by the General
Partner acting in good faith on the basis of such quotations and other information as it considers,
in its reasonable judgment, appropriate; and
provided
,
further
that
, in
connection with determining the Deemed Value of the Partnership Interests for purposes of
determining the number of additional OP Units issuable upon a Capital Contribution funded by an
underwritten public offering of shares of capital stock of the General Partner, the Fair Market
Value of such shares shall be the public offering price per share of such class of capital stock
sold. Notwithstanding the foregoing, the General Partner in its reasonable discretion may use a
different Fair Market Value for purposes of making the determinations under subparagraph (b) of
the definition of Gross Asset Value and
Section 4.3.D
in connection with the contribution
of Property or cash to the Partnership by a third party,
provided
such value shall be based
upon the value per REIT Share (or per OP Unit) agreed upon by the General Partner and such third
party for purposes of such contribution.
General Partner Interest
means a Partnership Interest held by the General Partner. A
General Partner Interest may be expressed as a number of OP Units.
General Partner Net Current Investment
means the General Partners total Capital
Contributions then paid to the Partnership, plus the amount of any Partnership liabilities assumed
by the General Partner (or which are secured by Partnership property distributed to the General
Partner), less (i) the amount of any liabilities of the General Partner assumed by the Partnership
(or which are secured by property contributed by the General Partner to the Partnership), (ii) all
amounts actually distributed to the General Partner pursuant to
Section 5.1.B(2)
, and (iii)
all amounts representing a return of capital to the General Partner, including, but not limited to,
the portion of any redemption proceeds distributed to the General Partner pursuant to
Section
11.8
which represents a return of capital to the General Partner.
General Partner Priority Return
means an amount equal to six percent (6%) per annum
of the Weighted Average General Partner Net Current Investment, payable to the General Partner
annually on a cumulative basis.
General Partner Unpaid Priority Return
means the excess, if any, of the General
Partner Priority Return over all amounts previously paid to the General Partner under
Section
5.1.A
, or paid in respect of the General Partner Priority Return under
Section 5.1.B(1)
as of the time in question.
Gross Asset Value
means, with respect to any asset, the assets adjusted basis for
federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner to the Partnership
shall be the gross fair market value of such asset, as determined by the contributing Partner and
the General Partner (as set forth on
Exhibit A
attached hereto, as such Exhibit may be amended from
time to time);
provided
,
that
if the contributing Partner is the General Partner,
then, except with respect to the General Partners initial Capital Contribution which shall be
determined as set forth on
Exhibit A
, the determination of the fair market value of the contributed
asset shall be determined (i) by the price paid by the General Partner if the asset is acquired by
the General Partner contemporaneously with its contribution to the Partnership, (ii) by Appraisal,
if otherwise acquired by the General Partner, (iii) by the amount of cash if the asset is cash, and
(iv) as reasonably determined by the General Partner if the asset is REIT Shares or other shares of
capital stock of the General Partner.
-6-
(b) The Gross Asset Values of all Partnership assets shall be adjusted to equal their
respective gross fair market values, as determined by the General Partner using such reasonable
method of valuation as it may adopt,
provided
,
however
, that for such purpose, the
net value of all of the Partnership assets, in the aggregate, shall be equal to the Deemed Value of
the Partnership Interests of all classes of Partnership Interests then outstanding, regardless of
the method of valuation adopted by the General Partner, immediately prior to the times listed
below:
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(i)
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the acquisition of an additional interest in the Partnership
by a new or existing Partner in exchange for more than a de
minimis Capital Contribution, if the General Partner
reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of
the Partners in the Partnership;
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(ii)
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the distribution by the Partnership to a Partner of more
than a de minimis amount of Partnership property as
consideration for an interest in the Partnership if the
General Partner reasonably determines that such adjustment
is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership;
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(iii)
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the liquidation of the Partnership within
the meaning of Regulations Section
1.704-1(b)(2)(ii)(g);
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(iv)
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at such other times as the General Partner
shall reasonably determine necessary or
advisable in order to comply with
Regulations Sections 1.704-1(b) and 1.704-2;
and
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(v)
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in connection with the grant of an interest
in the Partnership (other than a de minimis
interest) as consideration for the provision
of services to or for the benefit of the
Partnership by an existing Partner acting in
a partner capacity or by a new Partner
acting in a partner capacity or in
anticipation of becoming a Partner.
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(c) The Gross Asset Value of any Partnership asset distributed to a Partner shall be the gross
fair
market value of such asset on the date of distribution as determined by the distributee and the
General Partner, or if the distributee and the General Partner cannot agree on such a
determination, by Appraisal.
(d) The Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect
any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code
Section 743(b), but only to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m);
provided
,
however
, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to
the extent that the General Partner reasonably determines that an adjustment pursuant to
subparagraph (b) is necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this subparagraph (d).
(e) If the Gross Asset Value of a Partnership asset has been determined or adjusted pursuant
to subparagraph (a), (b) or (d), such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of computing Net Income and
Net Loss.
Immediate Family
means, with respect to any natural Person, such natural Persons
estate or heirs or current spouse or former spouse, parents, parents-in-law, children (whether
natural, adopted or by marriage), siblings and grandchildren and any trust or estate, all of the
beneficiaries of which consist of such Person or such Persons spouse or former spouse, parents,
parents-in-law, children, siblings or grandchildren.
-7-
Incapacity
or
Incapacitated
means, (i) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction adjudicating him or
her incompetent to manage his or her Person or his or her estate; (ii) as to any corporation which
is a Partner, the filing of a certificate of dissolution, or its equivalent, for the corporation or
the revocation of its charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any
estate which is a Partner, the distribution by the fiduciary of the estates entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the termination of the trust (but
not the substitution of a new trustee); or (vi) as to any Partner, the bankruptcy of such Partner.
For purposes of this definition, bankruptcy of a Partner shall be deemed to have occurred when (a)
the Partner commences a voluntary proceeding seeking liquidation, reorganization or other relief
under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Partner
is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the
Partner, (c) the Partner executes and delivers a general assignment for the benefit of the
Partners creditors, (d) the Partner files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the Partner in any proceeding of the
nature described in clause (b) above, (e) the Partner seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator for the Partner or for all or any substantial part
of the Partners properties, (f) any proceeding seeking liquidation, reorganization or other relief
under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been
dismissed within one hundred twenty (120)days after the commencement thereof, (g) the appointment
without the Partners consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within ninety (90) days of such appointment, or (h) an appointment referred to in
clause (g) is not vacated within ninety (90) days after the expiration of any such stay.
Indemnitee
means (i) any Person subject to a claim or demand or made or threatened
to be made a party to, or involved or threatened to be involved in, an action, suit or proceeding
by reason of his or her status as (A) the General Partner or (B) a director, officer or employee of
the Partnership or the General Partner, and (ii) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from time to time (whether
before or after the event giving rise to potential liability), in its sole and absolute discretion.
Investments
means investments made by the Partnership, directly or indirectly, in a
Property, Loan or Other Permitted Investment Asset.
IRS
means the United States Internal Revenue Service.
Limited Partner
means any Person named as a Limited Partner in
Exhibit A
attached
hereto, as such Exhibit may be amended from time to time, or any Substituted Limited Partner or
Additional Limited Partner, in such Persons capacity as a Limited Partner in the Partnership.
Limited Partner Interest
means a Partnership Interest of a Limited Partner
representing a fractional part of the Partnership Interests of all Limited Partners 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. A Limited Partner Interest may be expressed as a number of OP Units.
Liquidating Event
shall have the meaning set forth in
Section 13.1
.
Liquidator
shall have the meaning set forth in
Section 13.2.A
.
Listing Event
means the date on which the General Partners common equity securities
are first listed on a securities exchange or admitted for trading in an automated quotation system.
Listed Market Value
means the average closing price of the common equity securities
of the General Partner as reported by the primary securities exchange or automated quotations
system in which such securities are then listed or admitted to trading for the thirty (30) trading
days beginning with the first trading day after the one hundred and eightieth (180
th
)
day after such securities are first listed or admitted to trading; provided, however, that if no
sales take place on any of such thirty (30) days, the average of the closing bid and asked prices
on such day shall be used.
-8-
Loan
means any note and other evidence of indebtedness or obligation acquired,
originated or entered into, directly or indirectly, by the Partnership as lender, noteholder,
participant, note purchaser or other capacity, including but not limited to a first or subordinate
mortgage loan, construction loan, development loan, loan participation, B note, loan secured by
capital stock or any other assets or form of equity interest and any other type of loan or
financial arrangement, such as providing or arranging for a letter of credit, providing a guarantee
of obligations to third parties, or providing a commitment for loans. Loan shall not include any
leases which are not recognized as leases for federal income tax reporting purposes.
Majority in Interest of the Limited Partners
means Limited Partners holding in the
aggregate Percentage Interests that are greater than fifty percent (50%) of the aggregate
Percentage Interests of all Limited Partners.
Net Income
or
Net Loss
means for each fiscal year of the Partnership, an
amount equal to the Partnerships taxable income or loss for such fiscal year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or
deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal income tax and not otherwise
taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income or
Net Loss shall be added to such taxable income or loss;
(b) Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as
Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and
not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of
Net Income or Net Loss shall be subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to
subparagraph (b) or subparagraph (c) of the definition of Gross Asset Value, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of such asset for
purposes of computing Net Income or Net Loss;
(d) Gain or loss resulting from any disposition of property with respect to which gain or loss
is recognized for federal income tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost recovery deductions taken into
account in computing such taxable income or loss, there shall be taken into account Depreciation
for such fiscal year;
(f) To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to
Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Partners interest in the Partnership, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing Net Income or Net Loss; and
(g) Notwithstanding any other provision of this definition of Net Income or Net Loss, any
items which are specially allocated pursuant to
Section 6.3
shall not be taken into account
in computing Net Income or Net Loss. The amounts of the items of Partnership income, gain, loss, or
deduction available to
be specially allocated pursuant to
Section 6.3
shall be determined by applying rules
analogous to those set forth in this definition of Net Income or Net Loss.
-9-
Net Income from a Capital Transaction
means that portion of Net Income attributable
to a Capital Transaction.
Net Loss from a Capital Transaction
means that portion of Net Loss attributable to a
Capital Transaction.
New Securities
means (i) any rights, options, warrants or convertible or
exchangeable securities having the right to subscribe for or purchase REIT Shares or other shares
of common stock of the General Partner, or (ii) any Debt issued by the General Partner that
provides any of the rights described in clause (i).
Nonrecourse Deductions
shall have the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership Year shall be determined
in accordance with the rules of Regulations Section 1.704-2(c).
Nonrecourse Liability
shall have the meaning set forth in Regulations Section
1.752-1(a)(2).
Notice of Redemption
means the Notice of Redemption substantially in the form of
Exhibit B
to this Agreement.
OP Unit
means a fractional share of the Partnership Interests of all Partners issued
pursuant to
Article 4
.
Other Permitted Investment Asset
means assets, other than cash, cash equivalents,
short term bonds, auction rate securities and similar short term investments, acquired by the
Partnership for investment purposes that is not a Loan or a Property and is consistent with the
investment objectives and policies of the Partnership.
Partner
means a General Partner, a Special General Partner, or a Limited Partner,
and
Partners
means the General Partner, the Special General Partner and the Limited
Partners.
Partner Minimum Gain
means an amount, with respect to each Partner Nonrecourse Debt,
equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt was
treated as a Nonrecourse Liability, determined in accordance with Regulations Section
1.704-2(i)(3).
Partner Nonrecourse Debt
shall have the meaning set forth in Regulations Section
1.704-2(b)(4).
Partner Nonrecourse Deductions
shall have the meaning set forth in Regulations
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with respect to a Partner
Nonrecourse Debt for a Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(i)(2).
Partnership
means the limited partnership formed under the Act and pursuant to this
Agreement, and any successor thereto.
Partnership Interest
means, an ownership interest in the Partnership of either a
Limited Partner, the Special General 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. There may be one or more classes or series of Partnership Interests as provided in
Section 4.3
. Except as otherwise provided for in this Agreement, a Partnership Interest may
be expressed as a number of OP Units. Unless otherwise expressly provided for in this Agreement or
by the General Partner at the time of the original issuance of any
Partnership Interests, all Partnership Interests (whether of a Limited Partner, a Special General
Partner or a General Partner) shall be of the same class or series.
-10-
Partnership Minimum Gain
shall have the meaning set forth in Regulations Section
1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net increase or decrease
in Partnership Minimum Gain, for a Partnership Year shall be determined in accordance with the
rules of Regulations Section 1.704-2(d).
Partnership Record Date
means the record date established by the General Partner for
the distribution of Available Cash pursuant to
Section 5.1
which record date shall be the
same as the record date established by the General Partner for a distribution to its stockholders
of some or all of its portion of such distribution.
Partnership Year
means the fiscal year of the Partnership, which shall be the
calendar year.
Percentage Interest
means, as to a Partner holding a class or series of Partnership
Interests, its interest as determined, as of the first day of each Partnership Year, by dividing
such Partners Adjusted Capital Account Balance by aggregate Adjusted Capital Account Balances of
all Partners. For purposes of the preceding sentence, the Adjusted Capital Account Balances of the
Partners shall be determined after giving effect to all allocations of Net Income and Net Loss for
all preceding Partnership Years, including allocations of Net Income and Net Loss resulting from
adjustments to the Gross Asset Value of the Partnerships assets pursuant to the definition of
Gross Asset Value.
Permitted Transfer
means a transfer of a Limited Partner Interest in accordance with
Section 11.3
.
Person
means an individual, corporation, partnership, limited liability company,
trust, unincorporated organization, association or other entity.
Plan Asset Regulation
means the regulations promulgated by the United States
Department of Labor in Title 29, Code of Federal Regulations, Part 2510, Section 101.3, and any
successor regulations thereto.
Pledge
shall have the meaning set forth in
Section 11.3.A
.
Property or Properties
means a partial or entire interest in real property
(including leasehold interests) and personal or mixed property connected therewith. An Investment
which obligates the Partnership to acquire a Property will be treated as a Property for purposes of
this Agreement.
Qualifying Party
means (a) an Additional Limited Partner; (b) a member of the
Immediate Family of a Member (a Family Member), or a lending institution as the pledgee of a
Pledge, who is the transferee in a Permitted Transfer; or (c) a Substituted Limited Partner
succeeding to all or part of the Limited Partner Interest of (i) an Additional Limited Partner or
(ii) a Family Member, or a lending institution who is the pledgee of a Pledge, who is the
transferee in a Permitted Transfer.
Qualified REIT Subsidiary
means any Subsidiary of the General Partner that is a
qualified REIT subsidiary within the meaning of Section 856(i) of the Code.
Qualified Transferee
means an Accredited Investor as such term is defined in Rule
501 promulgated under the Securities Act.
Redemption
shall have the meaning set forth in
Section 8.6.A
.
Regulations
means the Treasury Regulations promulgated under the Code, as such
regulations may be amended from time to time (including corresponding provisions of succeeding
regulations).
-11-
Regulatory Allocations
shall have the meaning set forth in
Section 6.3
.
REIT
means a real estate investment trust, as defined under Sections 856 through 860
of the Code.
REIT Requirements
shall have the meaning set forth in
Section 5.1
.
REIT Share
means a share of common stock, par value $0.001 per share, of the General
Partner.
REIT Shares Amount
means, as of any date, an aggregate number of REIT Shares equal
to the number of Tendered Units, as adjusted (x) pursuant to
Section 7.5
(in the event the
General Partner acquires material assets, other than on behalf of the Partnership) and (y) for
stock dividends and distributions, stock splits and subdivisions, reverse stock splits and
combinations, distributions of rights, warrants or options, and distributions of evidences of
indebtedness or assets relating to assets not received by the General Partner pursuant to a
pro
rata
distribution by the Partnership.
Securities Act
means the Securities Act of 1933, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder and any successor
statute thereto.
Special General Partner Interest
means a Partnership Interest held by the Special
General Partner. A Special General Partner Interest may be expressed as a number of OP Units, but
only to the extent that the Special General Partner makes Capital Contributions to the Partnership.
Specified Redemption Date
means the day of receipt by the General Partner of a
Notice of Redemption.
Subsidiary
means, with respect to any Person, any corporation, partnership, limited
liability company, joint venture 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 or limited liability company that is a
Subsidiary of the Partnership.
Substituted Limited Partner
means a Person who is admitted as a Limited Partner to
the Partnership pursuant to
Section 11.4
.
Tax Items
shall have the meaning set forth in
Section 6.4.A
.
Tenant
means any tenant from which the General Partner derives rent either directly
or indirectly through partnerships, including the Partnership, or Qualified REIT Subsidiaries.
Tendered Units
shall have the meaning set forth in
Section 8.6.A
.
Tendering Partner
shall have the meaning set forth in
Section 8.6.A
.
Weighted Average General Partner Net Current Investment
means the annual average
balance of the General Partner Net Current Investment computed on a daily basis.
ARTICLE 2.
ORGANIZATIONAL MATTERS
Section 2.1
Organization
The Partnership is a limited partnership formed pursuant to the provisions of the Act and upon
the terms and conditions set forth in this Agreement. Except as expressly provided herein, the
rights and
obligations of the Partners and the administration and termination of the Partnership shall be
governed by the Act. The Partnership Interest of each Partner shall be personal property for all
purposes.
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Section 2.2
Name
The name of the Partnership is CWI OP, LP. The Partnerships business may be conducted under
any other name or names deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words Limited Partnership, L.P., Ltd. or similar words
or letters shall be included in the Partnerships name where necessary for the purposes of
complying with the laws of any jurisdiction that so requires. The General Partner in its sole and
absolute discretion may change the name of the Partnership at any time and from time to time and
shall notify the Limited Partners of such change in the next regular communication to the Limited
Partners.
Section 2.3
Registered Office and Agent; Principal Office
The name and address of the registered office and registered agent of the Partnership is
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808. The principal
office of the Partnership is located at 50 Rockefeller Plaza, New York, New York 10020, or such
other place as the General Partner may from time to time designate by notice to the other Partners.
The Partnership may maintain offices at such other place or places within or outside the State of
Delaware as the General Partner deems advisable.
Section 2.4
Power of Attorney
A
. Each Limited Partner and each Assignee constitutes and appoints the General Partner, any
Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly,
in each case with full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices
(a) all certificates, documents and other instruments (including, without limitation, this
Agreement and the Certificate and all amendments or restatements thereof) that the General Partner
or the Liquidator deems appropriate or necessary to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a partnership in which the Limited
Partners have limited liability) in the State of Delaware and in all other jurisdictions in which
the Partnership may conduct business or own property; (b) all instruments that the General Partner
or any Liquidator deems appropriate or necessary to reflect any amendment, change, modification or
restatement of this Agreement in accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner or any Liquidator deems appropriate or necessary
to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of cancellation; (d) all instruments
relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other
events described in,
Articles 11
,
12
or
13
or the Capital Contribution of
any Partner; and (e) all certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of Partnership Interests; and
(2) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers,
certificates and other instruments appropriate or necessary, in the sole and absolute discretion of
the General Partner or any Liquidator, to make, evidence, give, confirm or ratify any vote,
consent, approval, agreement or other action which is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or appropriate or necessary, in the sole discretion of
the General Partner or any Liquidator, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner or any Liquidator to
amend this Agreement except in accordance with
Article 14
or as may be otherwise expressly
provided for in this Agreement.
-13-
B.
The foregoing power of attorney is hereby declared to be irrevocable and a power coupled
with an interest, in recognition of the fact that each of the Partners will be relying upon the
power of the General Partner and any Liquidator to act as contemplated by this Agreement in any
filing or other action by it on behalf of the Partnership, and it shall survive and not be affected
by the subsequent Incapacity of any Limited Partner or Assignee and the transfer of all or any
portion of such Limited Partners or Assignees OP Units and shall extend to such Limited Partners
or Assignees heirs, successors, assigns and personal representatives. Each such Limited Partner or
Assignee hereby agrees to be bound by any representation made by the General Partner or any
Liquidator, acting in good faith pursuant to such power of attorney; and each such Limited Partner
or Assignee hereby waives any and all defenses which may be available to contest, negate or
disaffirm the action of the General Partner or any Liquidator, taken in good faith under such power
of attorney. Each Limited Partner or Assignee shall execute and deliver to the General Partner or
any Liquidator, within fifteen (15) days after receipt of the General Partners or Liquidators
request therefor, such further designation, powers of attorney and other instruments as the General
Partner or the Liquidator, as the case may be, deems necessary to effectuate this Agreement and the
purposes of the Partnership.
Section 2.5
Term
The term of the Partnership commenced on the date of its formation and the Partnership shall
have a perpetual existence unless it is dissolved pursuant to the provisions of
Article 13
or as otherwise provided by law.
ARTICLE 3.
PURPOSE
Section 3.1
Purpose and Business
The purpose and nature of the business to be conducted by the Partnership is to (i) conduct
any business that may be lawfully conducted by a limited partnership organized pursuant to the Act,
(ii) enter into any partnership, joint venture or other similar arrangement to engage in any
business described in the foregoing clause (i) or to own interests in any entity engaged, directly
or indirectly, in any such business and (iii) do anything necessary or incidental to the foregoing,
provided
,
however
, that such business shall be limited to and conducted in such a
manner as to permit the General Partner at all times to be classified as a REIT for federal income
tax purposes, unless the General Partner ceases to qualify as a REIT for reasons other than the
conduct of the business of the Partnership. In connection with the foregoing, and without limiting
the General Partners right in its sole discretion to cease qualifying as a REIT, the Limited
Partners acknowledge that the General Partners current status as a REIT inures to the benefit of
all the Limited Partners and not solely the General Partner. Without limiting the generality of
the foregoing, it is understood that the Partnership will hold lodging and lodging-related
properties and will generally lease such properties to one or more taxable REIT subsidiaries (or
to subsidiary entities of such taxable REIT subsidiaries) within the meaning of Code Section
856(l).
Section 3.2
Powers
The Partnership is empowered to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and
business described herein and for the protection and benefit of the Partnership, including, without
limitation, full power and authority, directly or through its ownership interest in other entities,
to enter into, perform and carry out contracts of any kind, borrow money and issue evidences of
indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien, acquire,
own, manage, improve and develop real property, and lease, sell, transfer and dispose of real
property;
provided
,
however
, notwithstanding anything to the contrary in this
Agreement, the Partnership shall not take, or refrain from taking, any action which, in the
judgment of the General Partner, in its sole and absolute discretion, (i) could adversely affect
the ability of the General Partner to continue to qualify as a REIT, (ii) absent the consent of the
General Partner, which may be given or withheld in its sole and absolute discretion, could subject
the General Partner to any taxes
under Section 857 or Section 4981 of the Code, or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner or its securities, unless
any such action (or inaction) under the foregoing clauses (i), (ii) or (iii) shall have been
specifically consented to by the General Partner in writing.
-14-
Section 3.3
Partnership Only for Purposes Specified
The Partnership shall be a partnership only for the purposes specified in
Section 3.1
,
and this Agreement shall not be deemed to create a partnership among the Partners with respect to
any activities whatsoever other than the activities within the purposes of the Partnership as
specified in
Section 3.1
. Except as otherwise provided in this Agreement, no Partner shall
have any authority to act for, bind, commit or assume any obligation or responsibility on behalf of
the Partnership, its properties or any other Partner. No Partner, in its capacity as a Partner
under this Agreement, shall be responsible or liable for any indebtedness or obligation of another
Partner, nor shall the Partnership be responsible or liable for any indebtedness or obligation of
any Partner, incurred either before or after the execution and delivery of this Agreement by such
Partner, except as to those responsibilities, liabilities, indebtedness or obligations incurred
pursuant to and as limited by the terms of this Agreement and the Act.
Section 3.4
Representations and Warranties by the Parties
A
. Each Partner that is an individual represents and warrants to each other Partner that (i)
such Partner has the legal capacity to enter into this Agreement and perform such Partners
obligations hereunder, (ii) the consummation of the transactions contemplated by this Agreement to
be performed by such Partner will not result in a breach or violation of, or a default under, any
agreement by which such Partner or any of such Partners property is or are bound, or any statute,
regulation, order or other law to which such Partner is subject, (iii) such Partner is a United
States person within the meaning of Section 7701(a)(30) of the Code, and (iv) this Agreement is
binding upon, and enforceable against, such Partner in accordance with its terms.
B
. Each Partner that is not an individual represents and warrants to each other Partner that
(i) its execution and delivery of this Agreement and all transactions contemplated by this
Agreement to be performed by it have been duly authorized by all necessary action, including
without limitation, that of its general partner(s), committee(s), trustee(s), beneficiaries,
directors and/or stockholder(s), as the case may be, as required, (ii) the consummation of such
transactions shall not result in a breach or violation of, or a default under, its certificate of
limited partnership, partnership agreement, trust agreement, limited liability company operating
agreement, charter or bylaws, as the case may be, any agreement by which such Partner or any of
such Partners properties or any of its partners, beneficiaries, trustees or stockholders, as the
case may be, is or are bound, or any statute, regulation, order or other law to which such Partner
or any of such Partners properties or any of its partners, trustees, beneficiaries or
stockholders, as the case may be, is or are subject, (iii) such Partner is a United States person
within the meaning of Section 7701(a)(30) of the Code and (iv) this Agreement is binding upon, and
enforceable against, such Partner in accordance with its terms.
C
. Each Partner represents, warrants, and agrees that it has acquired and continues to hold
its interest in the Partnership for its own account for investment only and not for the purpose of,
or with a view toward, the resale or distribution of all or any part thereof, nor with a view
toward selling or otherwise distributing such interest or any part thereof at any particular time
or under any predetermined circumstances. Each Partner further represents and warrants that it is a
sophisticated investor, able and accustomed to handling sophisticated financial matters for itself,
particularly real estate investments, and that it has a sufficiently high net worth that it does
not anticipate a need for the funds it has invested in the Partnership in what it understands to be
a highly speculative and illiquid investment. Each Partner represents, warrants and agrees that
such Partner is an accredited investor (as such term is defined in Rule 501(a) of Regulation D
under the Securities Act).
-15-
D
. Each Partner acknowledges that (i) the OP Units (and any REIT Shares that might be
exchanged therefor) have not been registered under the Securities Act and may not be transferred
unless they are subsequently registered under the Securities Act or an exemption from such
registration is available (it being understood that the Partnership has no intention of so
registering the OP Units), (ii) a restrictive legend in the form set forth in Exhibit D shall be
placed on the certificates representing the OP Units, and (iii) a notation shall be made in the
appropriate records of the Partnership indicating that the OP Units are subject to restrictions on
transfer.
E
. Each Limited Partner further represents, warrants, covenants and agrees as follows:
(1) Except as provided in
Exhibit E
, at any time such Partner actually or Constructively Owns
a twenty-five percent (25%) or greater capital interest or profits interest in the Partnership, it
does not and will not, without the prior written consent of the General Partner, actually own or
Constructively Own (a) with respect to any Tenant that is a corporation, any stock of such Tenant,
and (b) with respect to any Tenant that is not a corporation, any interests in either the assets or
net profits of such Tenant.
(2) Except as provided in
Exhibit F
, at any time such Partner actually or Constructively Owns
a twenty-five percent (25%) or greater capital interest or profits interest in the Partnership, it
does not, and agrees that it will not without the prior written consent of the General Partner,
actually own or Constructively Own, any stock in the General Partner, other than any REIT Shares or
other shares of capital stock of the General Partner such Partner may acquire as a result of an
exchange of Tendered Units pursuant to
Section 8.6
, subject to the ownership limitations
set forth in the General Partners Charter.
(3) Upon request of the General Partner, it will disclose to the General Partner the amount of
REIT Shares or other shares of capital stock of the General Partner that it actually owns or
Constructively Owns.
(4) It understands that if, for any reason, (a) the representations, warranties or agreements
set forth in
E(1)
or
(2)
above are violated, or (b) the Partnerships actual or
Constructive Ownership of REIT Shares or other shares of capital stock of the General Partner
violates the limitations set forth in the Charter, then (x) some or all of the Redemption rights of
the Partners may become non-exercisable, and (y) some or all of the REIT Shares owned by the
Partners may be automatically transferred to a trust for the benefit of a charitable beneficiary,
as provided in the Charter.
(5) Without the consent of the General Partner, which may be given or withheld in its sole
discretion, no Partner shall take any action that would cause the Partnership at any time to have
more than one hundred (100) partners (including as partners those persons indirectly owning an
interest in the Partnership through a partnership, limited liability company, S corporation or
grantor trust (such entity, a
flow through entity
), but only if substantially all of the
value of such persons interest in the flow through entity is attributable to the flow through
entitys interest (direct or indirect) in the Partnership).
F.
The representations and warranties contained in this
Section 3.4
shall survive the
execution and delivery of this Agreement by each Partner and the dissolution and winding-up of the
Partnership.
G.
Each Partner hereby acknowledges that no representations as to potential profit, cash
flows, funds from operations or yield, if any, in respect of the Partnership or the General Partner
have been made by any Partner or any employee or representative or Affiliate of any Partner, and
that projections and any other information, including, without limitation, financial and
descriptive information and documentation, which may have been in any manner submitted to such
Partner shall not constitute any representation or warranty of any kind or nature, express or
implied.
Section 3.5
Certain ERISA Matters
Each Partner acknowledges that the Partnership is intended to qualify as a real estate
operating company (as such term is defined in the Plan Asset Regulation). The General Partner may
structure
investments in, relationships with and conduct with respect to Investments and any other assets of
the Partnership so that the Partnership will be a real estate operating company (as such term is
defined in the Plan Asset Regulation).
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ARTICLE 4.
CAPITAL CONTRIBUTIONS
Section 4.1
Capital Contributions of the Partners
At the time of their respective execution of this Agreement, the Partners shall make or shall
have made Capital Contributions as set forth in
Exhibit A
to this Agreement. The Partners shall own
OP Units of the class or series and in the amounts set forth in
Exhibit A
and shall have a
Percentage Interest in the Partnership as set forth in
Exhibit A
, which Percentage Interest shall
be adjusted in
Exhibit A
from time to time by the General Partner to the extent necessary to
reflect accurately exchanges, redemptions, Capital Contributions, the issuance of additional OP
Units or similar events having an effect on a Partners Percentage Interest. Except as required by
law, as otherwise provided in
Sections 4.3
,
4.4
and
10.5
, or as otherwise
agreed to by a Partner and the Partnership, no Partner shall be required or permitted to make any
additional Capital Contributions or loans to the Partnership.
Section 4.2
Loans by Third Parties
Subject to
Section 4.3
, the Partnership may incur Debt, or enter into other similar
credit, guarantee, financing or refinancing arrangements for any purpose (including, without
limitation, in connection with any further acquisition of Investments) with any Person that is not
the General Partner upon such terms as the General Partner determines appropriate;
provided
that
, the Partnership shall not incur any Debt that is recourse to the General Partner,
except to the extent otherwise agreed to by the General Partner in its sole discretion.
Section 4.3
Additional Funding and Capital Contributions
A
.
General
. The General Partner may, at any time and from time to time determine that
the Partnership requires additional funds (
Additional Funds
) for the acquisition of
additional Investments or for such other Partnership purposes as the General Partner may determine.
Additional Funds may be raised by the Partnership, at the election of the General Partner, in any
manner provided in, and in accordance with, the terms of this
Section 4.3
. No Person shall
have any preemptive, preferential or similar right or rights to subscribe for or acquire any
Partnership Interest, except as set forth in this
Section 4.3
.
B
.
Issuance of Additional Partnership Interests
. The General Partner, in its sole and
absolute discretion, may raise all or any portion of the Additional Funds by accepting additional
Capital Contributions of cash. The General Partner may also accept additional Capital Contributions
of real property or any other non-cash assets. In connection with any such additional Capital
Contributions (of cash or property), the General Partner is hereby authorized to cause the
Partnership from time to time to issue to Partners (including the General Partner) or other Persons
additional OP Units or other Partnership Interests in one or more classes, or one or more series of
any of such classes, with such designations, preferences and relative, participating, optional or
other special rights, powers, and duties, including rights, powers, and duties senior to then
existing Limited Partner Interests, all as shall be determined by the General Partner in its sole
and absolute discretion subject to Delaware law, and as set forth by amendment to this Agreement,
including without limitation, (i) the allocations of items of Partnership income, gain, loss,
deduction, and credit to such class or series of Partnership Interests; (ii) the right of each such
class or series of Partnership Interests to share in Partnership distributions; (iii) the rights of
each such class or series of Partnership Interests upon dissolution and liquidation of the
Partnership; and (iv) the right to vote, including, without limitation, the Limited Partner
approval rights set forth in
Section 11.2.A
;
provided
,
that
no such
additional OP Units or other Partnership Interests shall be issued to the General Partner unless
either (a) (1) the additional Partnership Interests are issued in connection with the grant, award,
or issuance of shares of the General
Partner pursuant to
Section 4.3.C
below, which shares have designations, preferences, and
other rights (except voting rights) such that the economic interests attributable to such shares
are substantially similar to the designations, preferences and other rights of the additional
Partnership Interests issued to the General Partner in accordance with this
Section 4.3.B
,
and (2) the General Partner shall make a Capital Contribution to the Partnership in an amount equal
to the net proceeds raised in connection with such issuance, or (b) the additional Partnership
Interests are issued to all Partners holding Partnership Interests in the same class in proportion
to their respective Percentage Interests in such class. The General Partners determination that
consideration is adequate shall be conclusive insofar as the adequacy of consideration relates to
whether the Partnership Interests are validly issued and paid. In the event that the Partnership
issues additional Partnership Interests pursuant to this
Section 4.3.B
, the General Partner
shall make such revisions to this Agreement (including but not limited to the revisions described
in
Section 5.4
and
Section 8.6
) as it determines are necessary to reflect the
issuance of such additional Partnership Interests. Without limiting the foregoing, the General
Partner is expressly authorized to cause the Partnership to issue OP Units for less than fair
market value, so long as the General Partner concludes in good faith that such issuance of
Partnership Interests is in the best interests of the Partnership.
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C
.
Issuance of REIT Shares or Other Securities by the General Partner
. The General
Partner shall not issue any additional REIT Shares, other shares of capital stock of the General
Partner or New Securities (other than REIT Shares issued pursuant to
Section 8.6
or such
shares, stock or securities pursuant to a dividend or distribution (including any stock split) to
all of its stockholders or all of its stockholders who hold a particular class of stock of the
General Partner) unless (i) the General Partner shall cause the Partnership to issue to the General
Partner, 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 thereof are substantially similar to those of the REIT Shares, other shares of
capital stock of the General Partner or New Securities issued by the General Partner and (ii) the
General Partner shall make a Capital Contribution of the net proceeds from the issuance of such
additional REIT Shares, other shares of capital stock or New Securities, as the case may be, and
from the exercise of the rights contained in such additional New Securities, as the case may be.
Without limiting the foregoing, the General Partner is expressly authorized to issue REIT Shares,
other shares of capital stock of the General Partner or New Securities for no tangible value or for
less than fair market value, and the General Partner is expressly authorized to cause the
Partnership to issue to the General Partner corresponding Partnership Interests, so long as (x) the
General Partner concludes in good faith that such issuance of Partnership Interests is in the
interests of the Partnership; and (y) the General Partner contributes all proceeds, if any, from
such issuance and exercise to the Partnership. In connection with the General Partners initial
offering of REIT Shares, any other issuance of REIT Shares, other capital stock of the General
Partner or New Securities, the General Partner shall contribute to the Partnership, any net
proceeds raised in connection with such issuance;
provided
,
that
the General
Partner may use a portion of the net proceeds from any offering to acquire OP Units or other assets
(provided such other assets are contributed to the Partnership pursuant to the terms of this
Agreement; and
provided
further
that if the net proceeds actually received by the
General Partner are less than the gross proceeds of such issuance as a result of any underwriters
discount or other expenses paid or incurred in connection with such issuance then, except to the
extent such net proceeds are used to acquire OP Units, the General Partner shall be deemed to have
made a Capital Contribution to the Partnership in the amount equal to the sum of the net proceeds
of such issuance plus the amount of such underwriters discount and other expenses paid by the
General Partner (which discount and expense shall be treated as an expense for the benefit of the
Partnership for purposes of
Section 7.4
)).
D
.
Percentage Interest Adjustments in the Case of Capital Contributions for OP Units
.
Upon the acceptance of additional Capital Contributions in exchange for OP Units, the Percentage
Interest in such OP Units shall be equal to a fraction, the numerator of which is equal to the
amount of cash and the Agreed Value of the Property contributed as of the Adjustment Date and the
denominator of which is equal to the sum of (i) the Deemed Value of the Partnership Interests of
such class or series (computed as of the Business Day immediately preceding the Adjustment Date)
and (ii) the aggregate Agreed Value of additional Capital Contributions contributed by all Partners
and/or third parties to the Partnership on such Adjustment Date in such class or series of
Partnership Interests. The Percentage Interest of each other
Partner holding Partnership Interests of such class or series not making a full
pro
rata
Capital Contribution shall be adjusted to equal a fraction, the numerator of which is
equal to the sum of (i) the Deemed Partnership Interest Value of such Limited Partner in respect of
such class or series (computed as of the Business Day immediately preceding the Adjustment Date)
and (ii) the Agreed Value of additional Capital Contributions, if any, made by such Partner to the
Partnership in such class or series of Partnership Interests as of such Adjustment Date, and the
denominator of which is equal to the sum of (i) the Deemed Value of the Partnership Interests of
such class or series (computed as of the Business Day immediately preceding the Adjustment Date),
plus
(ii) the aggregate Agreed Value of additional Capital Contributions contributed by all
Partners and/or third parties to the Partnership on such Adjustment Date in such class or series.
Provided, however, solely for purposes of calculating a Partners Percentage Interest pursuant to
this
Section 4.3.D
, (i) in the case of cash Capital Contributions by the General Partner
funded by an offering of REIT Shares or other shares of capital stock of the General Partner and
(ii) in the case of the contribution of properties by the General Partner which were acquired by
the General Partner in exchange for REIT Shares or other shares of capital stock of the General
Partner immediately prior to such contribution, the General Partner shall be issued a number of OP
Units equal and corresponding to the number of such shares issued by the General Partner in
exchange for such cash or Investments, the OP Units held by the other Partners shall not be
adjusted, and the Partners Percentage Interests shall be adjusted accordingly. The General Partner
shall promptly give each Partner written notice of its Percentage Interest, as adjusted.
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E
.
Reinvestment of Special General Partner Distributions
. The Special General
Partner, in its sole and absolute discretion, may elect, on an annual basis, to reinvest all, or
any portion, of the distributions of Available Cash and Capital Proceeds it receives under
Section 5.1
in the Partnership in exchange for the issuance of OP Units. If the Special
General Partner elects to reinvest any portion of Available Cash and Capital Proceeds distributed
to the Special General Partner under this Agreement, the Special General Partner shall be treated
no differently than any Limited Partner making a Capital Contribution to the Partnership under
Section 4.3
.
Section 4.4
Other Contribution Provisions
With the consent of the General Partner, in its sole discretion, one or more Limited Partners
may enter into agreements with the Partnership, in the form of a guarantee or contribution
agreement, which have the effect of providing a guarantee of certain obligations of the
Partnership.
Section 4.5
No Preemptive Rights
Except to the extent expressly granted by the Partnership pursuant to another agreement, no
Person shall have any preemptive, preferential or other similar right with respect to (i) providing
funds to the Partnership or (ii) issuance or sale of any OP Units or other Partnership Interests.
Section 4.6
No Interest; No Return
.
No Partner shall be entitled to interest on its Capital Contribution or on such Partners
Capital Account. Except as provided herein or by law, no Partner shall have any right to demand or
receive the return of its Capital Contribution from the Partnership.
Section 4.7
Profits Interest of Special General Partner
To the extent that the Special General Partner receives a Partnership Interest with a
disproportionate interest in Partnership Net Income or Net Loss, such Partnership Interest shall be
treated as a profits interest received for services rendered, or to be rendered, within the
meaning of IRS Rev. Proc. 93-27, 1993-2 C.B. 343.
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ARTICLE 5.
DISTRIBUTIONS
Section 5.1
Requirement and Characterization of Distributions
The General Partner shall cause the Partnership to distribute at least quarterly all, or such
portion as the General Partner may in its discretion determine, Available Cash and Capital Proceeds
generated by the Partnership to the Partners who are Partners on the applicable Partnership Record
Date with respect to such distribution, in the following order and priority:
A
.
Available Cash
. Available Cash shall be distributed ten percent (10%) to the
Special General Partner and ninety percent (90%) to the Partners in proportion to their respective
Percentage Interests.
B
.
Distribution of Capital Proceeds
. Subject to
Section 5.1.C
,
Section
5.1.D
and
Section 13.2
, distributions of Capital Proceeds shall be made as follows:
(1) First, Capital Proceeds shall be distributed one hundred percent (100%) to the General
Partner until the General Partner has received distributions under this
Section 5.1.B(1)
equal to the General Partner Unpaid Priority Return;
(2) Second, Capital Proceeds shall be distributed one hundred percent (100%) to the General
Partner until the General Partner Net Current Investment has been reduced to zero (0); and
(3) Third, any remaining Capital Proceeds shall be distributed fifteen percent (15%) to the
Special General Partner and eighty-five percent (85%) to the Partners in proportion to their
respective Percentage Interests.
C
.
Distribution of Capital Proceeds Listing Event
. As soon as possible following
the determination of the Listed Market Value following a Listing Event, the General Partner shall
cause the Partnership to make a special distribution of Capital Proceeds to the Special General
Partner in an amount equal to the Capital Proceeds distributable solely to the Special General
Partner under
Section 5.1.B
if the Partnership sold all of its assets on the date of the
Listing Event for its Listed Market Value and distributed the net proceeds from such sale to the
Partners pursuant to
Section 5.1.B
. To avoid duplicating distributions to the Special
General Partner, the General Partner shall take into account distributions made to the Special
General Partner pursuant to this
Section 5.1.C
in determining the appropriate amount of any
subsequent distributions of Capital Proceeds to the Special General Partner under
Section
5.1.B(3)
and
Section 5.1.D
.
D
.
Distribution of Capital Proceeds Change of Control Event
. As soon as possible
following the occurrence of a Change of Control Event, the General Partner, or its successor in
interest, shall cause the Partnership, or its successor in interest, to make a special distribution
of Capital Proceeds to the Special General Partner in an amount equal to the Capital Proceeds
distributable solely to the Special General Partner under
Section 5.1.B
if the Partnership
sold all of its assets for their fair value (less the amount of all indebtedness secured by such
assets and less any fees payable to the Advisor under the Advisory Agreement) immediately prior to
the Change of Control Event and distributed the net proceeds from such sale to the Partners
pursuant to
Section 5.1.B
. The fair value of any Property shall be its value as determined
by an Appraisal. To avoid duplicating distributions to the Special General Partner, the General
Partner shall take into account distributions made to the Special General Partner pursuant to this
Section 5.1.D
in determining the appropriate amount of any subsequent distributions of
Capital Proceeds to the Special General partner under
Section 5.1.B(3)
and
Section
5.1.C
.
Notwithstanding any other provision of this
Article 5
to the contrary, the General Partner
shall take such reasonable efforts, as determined by it in its sole and absolute discretion and
consistent with its
qualification as a REIT, to cause the Partnership to distribute sufficient amounts to enable the
General Partner, for so long as the General Partner has determined to qualify as a REIT, to pay
stockholder dividends that will (a) satisfy the requirements for qualifying as a REIT under the
Code and Regulations (REIT Requirements), and (b) except to the extent otherwise determined by
the General Partner, avoid the imposition of any federal income or excise tax liability on the
General Partner.
-20-
Section 5.2
Distributions in Kind
Except as expressly provided herein, no right is given to any Partner to demand and receive
property other than cash. The General Partner may determine, in its sole and absolute discretion,
to make a distribution in-kind to the Partners of Partnership assets, and such assets shall be
distributed in such a fashion as to ensure that the fair market value is distributed and allocated
in accordance with
Articles 5
,
6
and
10
.
Section 5.3
Distributions Upon Liquidation
Notwithstanding
Section 5.1
, proceeds from a Liquidating Event shall be distributed to
the Partners in accordance with
Section 13.2
.
Section 5.4
Distributions to Reflect Issuance of Additional Partnership Interests
In the event that the Partnership issues additional Partnership Interests to the General
Partner, the Special General Partner, or any Additional Limited Partner pursuant to
Section
4.3.B
,
4.3.C
, or
4.3E
, the General Partner shall make such revisions to this
Article 5
as it determines are necessary to reflect the issuance of such additional
Partnership Interests. In the absence of any agreement to the contrary, an Additional Limited
Partner shall be entitled to the distributions set forth in
Section 5.1
(without regard to
this
Section 5.4
) with respect to the period during which the closing of its contribution
to the Partnership occurs, multiplied by a fraction the numerator of which is the number of days
from and after the date of such closing through the end of the applicable period, and the
denominator of which is the total number of days in such period.
Section 5.5
Distribution Limitation
Notwithstanding any other provision in this
Article 5
, the General Partner shall have
the power, in its reasonable discretion, to adjust the distributions to the Special General Partner
to the extent necessary to avoid violations of the 2%/25% Guidelines as described in the Advisory
Agreement.
ARTICLE 6.
ALLOCATIONS
Section 6.1
Timing and Amount of Allocations of Net Income and Net Loss
Net Income and Net Loss of the Partnership shall be determined and allocated with respect to
each Partnership Year of the Partnership as of the end of each such year. Subject to the other
provisions of this
Article 6
, an allocation to a Partner of a share of Net Income or Net
Loss shall be treated as an allocation of the same share of each item of income, gain, loss or
deduction that is taken into account in computing Net Income or Net Loss.
Section 6.2
General Allocations
A.
Allocation of Net Income and Net Loss Other Than From a Capital Transaction
.
(1)
Net Income other than from a Capital Transaction
. Except as otherwise provided in
Section 6.3
, Net Income other than from a Capital Transaction for any Partnership Year
shall be allocated ten percent
(10%) to the Special General Partner and ninety percent (90%) to the Partners in proportion to
their respective Percentage Interests.
-21-
(2)
Net Loss other than from a Capital Transaction
. Except as otherwise provided in
Section 6.3
, Net Loss other than from a Capital Transaction for any Partnership Year shall
be allocated to the Partners in the following manner and order of priority:
(a) First, to the Partners, in proportion to their relative allocations of Net Income other
than from a Capital Transaction pursuant to
Section 6.2.A(1)
until the aggregate
allocations of Net Loss other than from a Capital Transaction pursuant to this
Section
6.2.A(2)
for all Partnership Years equal the aggregate allocations of Net Income other than
from a Capital Transaction pursuant to
Section 6.2.A(1)
for all prior Partnership Years;
(b) Second, to the Partners in proportion to their respective Adjusted Capital Account
Balances until the Adjusted Capital Account Balance of each such Partner is zero (0); and
(c) Third, to each of the Partners in proportion to their respective Percentage Interests.
B.
Allocation of Net Income and Net Loss From a Capital Transaction
(1)
Net Income from a Capital Transaction
. Except as otherwise provided in
Section
6.2.D
and
Section 6.3
, Net Income from a Capital Transaction for any Partnership Year
shall be allocated to the Partners in the following manner and order of priority:
(a) First, to the Partners, in proportion to their relative allocations of Net Loss from a
Capital Transaction pursuant to
Section 6.2.B(2)(b) and (c)
until the aggregate allocations
of Net Income from a Capital Transaction pursuant to this
Section 6.2.B(1)(a)
for all
Partnership Years equal the aggregate allocations of Net Loss from a Capital Transaction pursuant
to
Section 6.2.B(2)(b) and (c)
for all prior Partnership Years;
(b) Second, one hundred percent (100%) to the General Partner until the Adjusted Capital
Account Balance of the General Partner equals the sum of the General Partner Net Current Investment
and the General Partner Unpaid Priority Return; and
(c) Third, fifteen percent (15%) to the Special General Partner and eighty-five percent (85%)
to the Partners in proportion to their respective Percentage Interests.
(2)
Net Loss from a Capital Transaction
. Except as otherwise provided in
Section
6.3
, Net Loss from a Capital Transaction for any Partnership Year shall be allocated to the
Partners in the following manner and order of priority:
(a) First, to the Partners, in proportion to their relative allocations of Net Income from a
Capital Transaction pursuant to
Section 6.2.B(1)(c)
until the aggregate allocations of Net
Loss from a Capital Transaction pursuant to this
Section 6.2.B(2)(a)
for all Partnership
Years equal the aggregate allocations of Net Income from a Capital Transaction pursuant to
Section 6.2.B(1)(c)
for all prior Partnership Years;
(b) Second, to the Partners in proportion to their respective Adjusted Capital Account
Balances until the Adjusted Capital Account Balance of each such Partner is zero (0); and
(c) Third, to the Partners in proportion to their respective Percentage Interests.
C
.
Allocations to Reflect Issuance of Additional Partnership Interests
. In the event
that the Partnership issues additional Partnership Interests to the General Partner, the Special
General Partner, a Limited Partner
or any Additional Limited Partner pursuant to
Section 4.3
, the General Partner shall make
such revisions to this
Section 6.2
as it determines are necessary to reflect the terms of
the issuance of such additional Partnership Interests, including making preferential allocations to
certain classes of Partnership Interests, in accordance with any method selected by the General
Partner.
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D
.
Allocations Related to a Listing Event
. If a Listing Event occurs, the Partnership
shall allocate Net Income from a Capital Transaction first to the Special General Partner in an
amount equal to the Net Income from a Capital Transaction allocable to the Special General Partner
under
Section 6.2.B(1)
if the Partnership sold all of its assets on the date of the Listing
Event for its Listed Market Value and allocated the gain from such sale to the Partners pursuant to
Section 6.2.B(1)
. To avoid duplicating allocations to the Special General Partner, the
General Partner shall take into account allocations made to the Special General Partner pursuant to
this
Section 6.2.D
in determining the appropriate amount of any subsequent allocations of
Net Income from a Capital Transaction to the Special General Partner under
Section 6.2.B(1)
and
Section 6.2.E
.
E
.
Allocations Related to a Change of Control Event
. If a Change of Control Event
occurs, the Partnership shall allocate Net Income from a Capital Transaction first to the Special
General Partner in an amount equal to the Net Income from a Capital Transaction allocable to the
Special General Partner under
Section 6.2.B(1)
if the Partnership sold all of its assets on
the date of the Change of Control Event for their fair value (less the amount of all indebtedness
secured by such assets and less any fees payable to the Advisor under the Advisory Agreement)
immediately prior to the Change of Control Event and allocated the gain from such sale to the
Partners pursuant to
Section 6.2.B(1)
. To avoid duplicating allocations to the Special
General Partner, the General Partner shall take into account allocations made to the Special
General Partner pursuant to this
Section 6.2.E
in determining the appropriate amount of any
subsequent allocations of Net Income from a Capital Transaction to the Special General Partner
under
Section 6.2.B(1)
and
Section 6.2.D
.
Section 6.3
Regulatory Allocations
Notwithstanding the foregoing provisions of this
Article 6
:
(i)
Minimum Gain Chargeback
. Except as otherwise provided in Regulations Section
1.704-2(f), notwithstanding the provisions of
Section 6.2
, or any other provision of this
Article 6
, if there is a net decrease in Partnership Minimum Gain during any Partnership
Year, each Partner shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such Partners share of the net
decrease in Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be allocated shall be
determined in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 6.3(i)
is intended to qualify as a minimum gain chargeback within the meaning of
Regulation Section 1.704-2(f) which shall be controlling in the event of a conflict between such
Regulation and this
Section 6.3(i)
.
(ii)
Partner Minimum Gain Chargeback
. Except as otherwise provided in Regulations
Section 1.704-2(i)(4), and notwithstanding the provisions of
Section 6.2
, or any other
provision of this
Article 6
(except
Section 6.3(i)
), if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership Year, each
Partner who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items
of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount
equal to such Partners share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This
Section 6.3(ii)
is intended to
qualify as a chargeback of partner nonrecourse debt minimum gain within the meaning of Regulation
Section 1.704-2(i) which shall be controlling in the event of a conflict between such Regulation
and this
Section 6.3(ii)
.
-23-
(iii)
Nonrecourse Deductions and Partner Nonrecourse Deductions
. Any Nonrecourse
Deductions for any Partnership Year shall be specially allocated to the Partners in accordance with
their respective Percentage Interests. Any Partner Nonrecourse Deductions for any Partnership Year
shall be specially allocated to the Partner(s) who bears the economic risk of loss with respect to
the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable, in
accordance with Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
(iv)
Qualified Income Offset
. If any Partner unexpectedly receives an adjustment,
allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
items of Partnership income and gain shall be allocated, in accordance with Regulations Section
1.704-1(b)(2)(ii)(d), to the Partner in an amount and manner sufficient to eliminate, to the extent
required by such Regulations, the Adjusted Capital Account Deficit of the Partner as quickly as
possible provided that an allocation pursuant to this
Section 6.3(iv)
shall be made if and
only to the extent that such Partner would have an Adjusted Capital Account Deficit after all other
allocations provided in this
Article 6
have been tentatively made as if this
Section
6.3(iv)
were not in this Agreement. It is intended that this
Section 6.3(iv)
qualify
and be construed as a qualified income offset within the meaning of Regulations
1.704-1(b)(2)(ii)(d), which shall be controlling in the event of a conflict between such
Regulations and this
Section 6.3(iv)
.
(v)
Gross Income Allocation
. In the event any Partner has a deficit Capital Account at
the end of any Partnership Year which is in excess of the sum of (1) the amount (if any) such
Partner is obligated to restore to the Partnership, and (2) the amount such Partner is deemed to be
obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be
specially allocated items of Partnership income and gain in the amount of such excess as quickly as
possible,
provided
,
that
an allocation pursuant to this
Section 6.3(v)
shall be made if and only to the extent that such Partner would have a deficit Capital Account in
excess of such sum after all other allocations provided in this
Article 6
have been
tentatively made as if this
Section 6.3(v)
and
Section 6.3(iv)
were not in this
Agreement.
(vi)
Limitation on Allocation of Net Loss
. To the extent any allocation of Net Loss
would cause or increase an Adjusted Capital Account Deficit as to any Partner, such allocation of
Net Loss shall be reallocated among the other Partners in accordance with their respective
Percentage Interests, subject to the limitations of this
Section 6.3(vi)
.
(vii)
Section 754 Adjustment
. To the extent an adjustment to the adjusted tax basis of
any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant
to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to
be taken into account in determining Capital Accounts as the result of a distribution to a Partner
in complete liquidation of his interest in the Partnership, the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Partners in accordance with their interests in the Partnership in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Partners to whom such distribution
was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(viii)
Curative Allocation
. The allocations set forth in
Sections 6.3(i)
,
(ii)
,
(iii)
,
(iv)
,
(v)
,
(vi)
, and
(vii)
(the
Regulatory Allocations
) are intended to comply with certain regulatory requirements,
including the requirements of Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding the
provisions of
Sections 6.1
and
6.2
, the Regulatory Allocations shall be taken into
account in allocating other items of income, gain, loss and deduction among the Partners so that,
to the extent possible, the net amount of such allocations of other items and the Regulatory
Allocations to each Partner shall be equal to the net amount
that would have been allocated to each such Partner if the Regulatory Allocations had not occurred.
For purposes of determining a Partners proportional share of the excess nonrecourse liabilities
of the Partnership within the meaning of Regulations Section 1.752-3(a)(3), each Partners interest
in Partnership profits shall be such Partners Percentage Interest.
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Section 6.4
Tax Allocations
A
.
In General
. Except as otherwise provided in this
Section 6.4
, for income
tax purposes each item of income, gain, loss and deduction (collectively,
Tax Items
)
shall be allocated among the Partners in the same manner as its correlative item of book income,
gain, loss or deduction is allocated pursuant to
Sections 6.2
and
6.3
.
B
.
Allocations Respecting Section 704(c) Revaluations
. Notwithstanding
Section
6.4.A
, Tax Items with respect to Partnership property that is contributed to the Partnership by
a Partner with a Gross Asset Value that differs from its adjusted tax basis in the hands of the
Contributing Partner immediately preceding the date of contribution shall be allocated among the
Partners for income tax purposes pursuant to Regulations promulgated under Section 704(c) of the
Code, so as to take into account the variation between book Capital Accounts and tax capital
accounts. The Partnership shall account for such variation under the traditional method under
Regulations Section 1.704-3(b) with respect to Partnership property that is contributed to the
Partnership in connection with the General Partners initial offering. With respect to other
properties contributed to the Partnership, the Partnership shall account for such variation under
any reasonable method consistent with Section 704(c) of the Code and the applicable regulations as
chosen by the General Partner. In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (b) of the definition of Gross Asset Value (provided in Article
1), subsequent allocations of Tax Items with respect to such asset shall take account of the
variation, if any, between the adjusted basis of such asset and its Gross Asset Value in the same
manner as under Section 704(c) of the Code and the applicable regulations consistent with the
requirements of Regulations Section 1.704-1(b)(2)(iv)(g) using any method approved under Section
704(c) of the Code and the applicable regulations as chosen by the General Partner.
ARTICLE 7.
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1
Management
A
. Except as otherwise expressly provided in this Agreement, all management powers over the
business and affairs of the Partnership are and shall be exclusively vested in the General Partner,
and no Limited Partner shall have any right to participate in or exercise control or management
power over the business and affairs of the Partnership. The General Partner may not be removed by
the Limited Partners with or without cause, except with the consent of the General Partner. In
addition to the powers now or hereafter granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner under any other provision of this
Agreement, the General Partner, subject to the other provisions hereof including
Sections
7.3
and
11.2
, shall have full power and authority to do all things deemed necessary or
desirable by it to conduct the business of the Partnership (including, without limitation, all
actions consistent with allowing the General Partner at all times to qualify as a REIT unless the
General Partner voluntarily terminates its REIT status), to exercise all powers set forth in
Section 3.2
and to effectuate the purposes set forth in
Section 3.1
, including,
without limitation:
(1) the making of any expenditures, the lending or borrowing of money (including, without
limitation, making prepayments on loans and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as will permit the General Partner (so long as the
General Partner has determined to qualify as a REIT) to avoid the payment of any federal income tax
(including, for this purpose, any excise tax pursuant to Section 4981 of the Code) and to make
distributions to its stockholders sufficient to permit the General Partner to maintain REIT
status), the assumption or guarantee
of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of
indebtedness (including the securing of same by mortgage, deed of trust or other lien or
encumbrance on all or any of the Partnerships assets) and the incurring of any obligations it
deems necessary for the conduct of the activities of the Partnership;
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(2) the making of tax, regulatory and other filings, or rendering of periodic or other reports
to governmental or other agencies having jurisdiction over the business or assets of the
Partnership, the registration of any class of securities of the Partnership under the Exchange Act,
and the listing of any debt securities of the Partnership on any exchange;
(3) subject to the provisions of
Section 11.2
, the acquisition, disposition, mortgage,
pledge, encumbrance, hypothecation or exchange of any assets of the Partnership or the merger or
other combination of the Partnership with or into another entity;
(4) the acquisition, disposition, mortgage, pledge, encumbrance or hypothecation of all or any
assets of the Partnership, and the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of this Agreement and on any
terms it sees fit, including, without limitation, the financing of the conduct or the operations of
the General Partner or the Partnership, the lending of funds to other Persons (including, without
limitation, the General Partner or any Subsidiaries of the Partnership) and the repayment of
obligations of the Partnership, any of its Subsidiaries and any other Person in which it has an
equity investment, and the making of capital contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair, alteration, demolition or
improvement of any real property or improvements owned by the Partnership or any Subsidiary of the
Partnership;
(6) the negotiation, execution, and performance of any contracts, leases, conveyances or other
instruments that the General Partner considers useful or necessary to the conduct of the
Partnerships operations or the implementation of the General Partners powers under this
Agreement, including contracting with contractors, developers, consultants, accountants, legal
counsel, other professional advisors and other agents and the payment of their expenses and
compensation out of the Partnerships assets;
(7) the distribution of Partnership cash or other Partnership assets in accordance with this
Agreement;
(8) the establishment of one or more divisions of the Partnership, the selection and dismissal
of employees of the Partnership (including, without limitation, employees having titles such as
president, vice president, secretary and treasurer), and agents, outside attorneys,
accountants, consultants and contractors of the Partnership, the determination of their
compensation and other terms of employment or hiring, including waivers of conflicts of interest
and the payment of their expenses and compensation out of the Partnerships assets;
(9) the maintenance of such insurance for the benefit of the Partnership and the Partners and
directors and officers of the Partnership or the General Partner as it deems necessary or
appropriate;
(10) the formation of, or acquisition of an interest in, and the contribution of property to,
any further limited or general partnerships, limited liability companies, joint ventures,
corporations or other relationships that it deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of property to any Subsidiary and any other
Person in which it has an equity investment from time to time);
provided
,
that
, as
long as the General Partner has determined to continue to qualify as a REIT, the Partnership may
not engage in any such formation, acquisition or contribution that could cause the General Partner
to fail to qualify as a REIT;
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(11) the control of any matters affecting the rights and obligations of the Partnership,
including the settlement, compromise, submission to arbitration or any other form of dispute
resolution, or abandonment
of, any claim, cause of action, liability, debt or damages, due or owing to or from the
Partnership, the commencement or defense of suits, legal proceedings, administrative proceedings,
arbitration or other forms of dispute resolution, and the representation of the Partnership in all
suits or legal proceedings, administrative proceedings, arbitrations or other forms of dispute
resolution, the incurring of legal expense, and the indemnification of any Person against
liabilities and contingencies to the extent permitted by law;
(12) the undertaking of any action in connection with the Partnerships direct or indirect
investment in any Person (including, without limitation, contributing or loaning Partnership funds
to, incurring indebtedness on behalf of, or guarantying the obligations of any such Persons);
(13) subject to the other provisions in this Agreement, the determination of the fair market
value of any Partnership property distributed in kind using such reasonable method of valuation as
it may adopt,
provided
,
that
such methods are otherwise consistent with
requirements of this Agreement;
(14) the management, operation, leasing, landscaping, repair, alteration, demolition or
improvement of any real property or improvements owned by the Partnership or any Subsidiary of the
Partnership or any Person in which the Partnership has made a direct or indirect equity investment;
(15) holding, managing, investing and reinvesting cash and other assets of the Partnership;
(16) the collection and receipt of revenues and income of the Partnership;
(17) the exercise, directly or indirectly through any attorney-in-fact acting under a general
or limited power of attorney, of any right, including the right to vote, appurtenant to any asset
or investment held by the Partnership;
(18) the exercise of any of the powers of the General Partner enumerated in this Agreement on
behalf of or in connection with any Subsidiary of the Partnership or any other Person in which the
Partnership has a direct or indirect interest, or jointly with any such Subsidiary or other Person;
(19) the exercise of any of the powers of the General Partner enumerated in this Agreement on
behalf of any Person in which the Partnership does not have an interest pursuant to contractual or
other arrangements with such Person;
(20) the making, execution and delivery of any and all deeds, leases, notes, deeds to secure
debt, mortgages, deeds of trust, security agreements, conveyances, contracts, guarantees,
warranties, indemnities, waivers, releases or legal instruments or agreements in writing necessary
or appropriate in the judgment of the General Partner for the accomplishment of any of the powers
of the General Partner enumerated in this Agreement;
(21) the issuance of additional Partnership Interests, as appropriate, in connection with the
contribution of Additional Funds pursuant to
Section 4.3
;
(22) the distribution of cash to acquire OP Units held by a Limited Partner in connection with
a Limited Partners exercise of its Redemption Right under
Section 8.6
hereof;
(23) the amendment and restatement of
Exhibit A
hereto to reflect accurately at all times the
Capital Contributions and Percentage Interests of the Partners as the same are adjusted from time
to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of OP
Units, the admission of any Additional Limited Partner or any Substituted Limited Partner or
otherwise, which amendment and restatement, notwithstanding anything in this Agreement to the
contrary, shall not be deemed an amendment to this Agreement, as long as the matter or event being
reflected in
Exhibit A
hereto otherwise is authorized by this Agreement;
-27-
(24) the taking of any and all acts and things necessary or prudent to ensure that the
Partnership will not be classified as a publicly traded partnership under Section 7704 of the
Code; and
(25) the delegation to another Person of any powers now or hereafter granted to the General
Partner.
B
. Each of the Limited Partners agrees that the General Partner is authorized to execute,
deliver and perform the above-mentioned agreements and transactions on behalf of the Partnership
without any further act, approval or vote of the Partners, notwithstanding any other provisions of
this Agreement (except as provided in
Section 7.3
or
11.2
), the Act or any
applicable law, rule or regulation to the fullest extent permitted under the Act or other
applicable law, rule or regulation. The execution, delivery or performance by the General Partner
or the Partnership of any agreement authorized or permitted under this Agreement shall not
constitute a breach by the General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this Agreement or of any duty stated
or implied by law or equity.
C
. At all times from and after the date hereof, the General Partner may cause the Partnership
to obtain and maintain (i) casualty, liability and other insurance on the Investments and (ii)
liability insurance for the Indemnities hereunder.
D
. At all times from and after the date hereof, the General Partner may cause the Partnership
to establish and maintain working capital and other reserves in such amounts as the General
Partner, in its sole and absolute discretion, deems appropriate and reasonable from time to time.
E
. Each of the Limited Partners acknowledges that, in exercising its authority under this
Agreement, the General Partner may, but shall be under no obligation to, take into account the tax
consequences to any Partner (including the General Partner) of any action taken (or not taken) by
the General Partner. The General Partner and the Partnership shall not have liability to a Partner
under this Agreement as a result of any income tax liability incurred by a Limited Partner as a
result of an action (or inaction) by the General Partner pursuant to its authority under this
Agreement. There may be circumstances in which the fiduciary duties that the General Partner owes
to the Limited Partners conflicts with any duties that the officers and directors of the General
Partner owe to its stockholders. For so long as the General Partner owns a controlling interest in
the Partnership, any such conflict that cannot be resolved in a manner not adverse to either the
stockholders or the Limited Partners shall be resolved in favor of the General Partners
stockholders.
F
. 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.
Section 7.2
Certificate of Limited Partnership
To the extent that such action is determined by the General Partner to be reasonable and
necessary or appropriate, the General Partner shall file amendments to and restatements of the
Certificate and do all the things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the laws of the State of
Delaware and to maintain the Partnerships qualification to do business as a foreign limited
partnership in each other state, the District of Columbia or other jurisdiction, in which the
Partnership may elect to do business or own property. Subject to the terms of
Section
8.5.A(4)
, the General Partner shall not be required, before or after filing, to deliver or mail
a copy of the Certificate or any amendment thereto to any Limited Partner. The General Partner
shall use all reasonable efforts to cause to be filed such other certificates or documents as may
be reasonable and necessary or appropriate for the formation, continuation, qualification and
operation of a limited
partnership (or a partnership in which the limited partners have limited liability) in the State of
Delaware, any other state, or the District of Columbia or other jurisdiction, in which the
Partnership may elect to do business or own property.
-28-
Section 7.3
Restrictions on General Partners Authority
A
. The General Partner may not take any action in contravention of an express prohibition or
limitation of this Agreement without the written Consent of the Limited Partners and the Special
General Partner, and may not (i) perform any act that would subject a Limited Partner to liability
as a general partner in any jurisdiction or any other liability except as provided herein or under
the Act; or (ii) enter into any contract, mortgage, loan or other agreement that prohibits or
restricts, or has the effect of prohibiting or restricting, the ability of a Limited Partner to
exercise its rights to a Redemption in full, except in each case with the written consent of such
Limited Partner.
B
. The General Partner shall not, without the prior Consent of the Partners (in addition to
any Consent of the Limited Partners required by any other provision hereof), or except as provided
in
Section 7.3.D
, amend, modify or terminate this Agreement.
C
. The General Partner may not cause the Partnership to take any action which the General
Partner would be prohibited from taking directly under the General Partners bylaws as in effect
from time to time.
D
. Notwithstanding
Section 7.3.B
, the General Partner shall have the exclusive power
to amend this Agreement as may be required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the General Partner or surrender any right or power granted
to the General Partner or any Affiliate of the General Partner for the benefit of the Limited
Partners;
(2) to reflect the issuance of additional Partnership Interests pursuant to
Sections
4.3.B, 5.4
and
6.2.C.
or the admission, substitution, termination, or withdrawal of
Partners in accordance with this Agreement (which may be effected through the replacement of
Exhibit A
with an amended
Exhibit A
);
(3) to set forth or amend the designations, rights, powers, duties and preferences of the
holders of any additional Partnership Interests issued pursuant to
Article 4
;
(4) to reflect a change that is of an inconsequential nature and does not adversely affect the
Limited Partners in any material respect, or to cure any ambiguity, correct or supplement any
provision in this Agreement not inconsistent with law or with other provisions, or make other
changes with respect to matters arising under this Agreement that will not be inconsistent with law
or with the provisions of this Agreement;
(5) to satisfy any requirements, conditions, or guidelines contained in any order, directive,
opinion, ruling or regulation of a federal or state agency or contained in federal or state law;
(6) to reflect such changes as are reasonably necessary for the General Partner to maintain
its status as a REIT, including changes which may be necessitated due to a change in applicable law
(or an authoritative interpretation thereof) or a ruling of the IRS;
(7) to modify, as set forth in the definition of
Capital Account
, the manner in
which Capital Accounts are computed; and
(8) to amend or modify any provision of this Agreement to reflect a statutory or regulatory
change regarding the federal income tax treatment of the profits interest of the Special General
Partner or to ensure that the receipt of the Special General Partners profits interest will not
result in taxation to the Special General Partner.
-29-
The General Partner will provide notice to the Limited Partners when any action under this
Section 7.3.D
is taken.
E
. Notwithstanding
Sections 7.3.B
and
7.3.D
, this Agreement shall not be
amended with respect to any Partner adversely affected, and no action may be taken by the General
Partner, without the Consent of such Partner adversely affected if such amendment or action would
(i) convert a Limited Partners interest in the Partnership into a general partners interest
(except as the result of the General Partner acquiring such interest), (ii) modify the limited
liability of a Limited Partner, (iii) alter rights of the Partner to receive distributions pursuant
to
Article 5
or
Section 13.2.A(4)
, or the allocations specified in
Article
6
(except as permitted pursuant to
Sections 4.3
,
5.4
,
6.2.C
and
Section 7.3.D(2)
), (iv) materially alter or modify the rights to a Redemption or the REIT
Shares Amount as set forth in
Section 8.6
, and related definitions hereof, or (v) amend
this
Section 7.3.E
. Further, no amendment may alter the restrictions on the General
Partners authority set forth elsewhere in this
Section 7.3
or in
Section 11.2.A
without the Consent specified in such section. This
Section 7.3.E
does not require
unanimous consent of all Partners adversely affected unless the amendment is to be effective
against all partners adversely affected.
Section 7.4
Reimbursement of the General Partner
A
. Except as provided in this
Section 7.4
and elsewhere in this Agreement (including
the provisions of
Articles 5
and
6
regarding distributions, payments and
allocations to which it may be entitled), the General Partner shall not be compensated for its
services as general partner of the Partnership.
B
. The Partnership shall be responsible for and shall pay all expenses relating to the
Partnerships and the General Partners organization, the ownership of its assets and its
operations. The General Partner is hereby authorized to pay compensation for accounting,
administrative, legal, technical, management and other services rendered to the Partnership. Except
to the extent provided in this Agreement, the General Partner and its Affiliates shall be
reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole
and absolute discretion, for all expenses that the General Partner and its Affiliates incur
relating to the ownership and operation of, or for the benefit of, the Partnership (including,
without limitation, administrative expenses);
provided
,
that
the amount of any such
reimbursement shall be reduced by any interest earned by the General Partner with respect to bank
accounts or other instruments or accounts held by it on behalf of the Partnership. The Partners
acknowledge that all such expenses of the General Partner are deemed to be for the benefit of the
Partnership. Such reimbursement shall be in addition to any reimbursement made as a result of
indemnification pursuant to
Section 7.7
hereof. In the event that certain expenses are
incurred for the benefit of the Partnership and other entities (including the General Partner),
such expenses will be allocated to the Partnership and such other entities in such a manner as the
General Partner in its sole and absolute discretion deems fair and reasonable. All payments and
reimbursements hereunder shall be characterized for federal income tax purposes as expenses of the
Partnership incurred on its behalf, and not as expenses of the General Partner.
C
. If the General Partner shall elect to purchase from its stockholders REIT Shares for the
purpose of delivering such REIT Shares to satisfy an obligation under any dividend reinvestment
program adopted by the General Partner, any employee stock purchase plan adopted by the General
Partner, or any similar obligation or arrangement undertaken by the General Partner in the future
or for the purpose of retiring such REIT Shares, the purchase price paid by the General Partner for
such REIT Shares and any other expenses incurred by the General Partner in connection with such
purchase shall be considered expenses of the Partnership and shall be advanced to the General
Partner or reimbursed to the General Partner, subject to the condition that: (i) if such REIT
Shares subsequently are sold by the General Partner, the General Partner shall pay to the
Partnership any proceeds received by the General Partner for such REIT Shares (which sales proceeds
shall include the amount of dividends reinvested under any dividend reinvestment or similar
program;
provided
,
that
a transfer of REIT Shares for OP Units pursuant to
Section 8.6
would not be considered a sale for such purposes); and (ii) if such REIT Shares
are not retransferred by the General Partner within thirty (30) days after the purchase thereof, or
the General Partner otherwise determines not
to retransfer such REIT Shares, the General Partner, shall cause the Partnership to redeem a number
of OP Units held by the General Partner equal to the number of such REIT Shares, as adjusted (x)
pursuant to
Section 7.5
(in the event the General Partner acquires material assets, other
than on behalf of the Partnership) and (y) for stock dividends and distributions, stock splits and
subdivisions, reverse stock splits and combinations, distributions of rights, warrants or options,
and distributions of evidences of indebtedness or assets relating to assets not received by the
General Partner pursuant to a
pro
rata
distribution by the Partnership (in which
case such advancement or reimbursement of expenses shall be treated as having been made as a
distribution in redemption of such number of OP Units held by the General Partner).
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D
. As set forth in
Section 4.3
, the General Partner shall be treated as having made a
Capital Contribution in the amount of all expenses that it incurs relating to the General Partners
offering of REIT Shares, other shares of capital stock of the General Partner or New Securities.
E
. If and to the extent any reimbursements to the General Partner pursuant to this
Section
7.4
constitute gross income of the General Partner (as opposed to the repayment of advances
made by the General Partner on behalf of the Partnership), such amounts shall constitute guaranteed
payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith
by the Partnership and all Partners, and shall not be treated as distributions for purposes of
computing the Partners Capital Accounts.
Section 7.5
Outside Activities of the General Partner
A
. Except in connection with a transaction authorized in
Section 11.2
, without the
Consent of the Limited Partners, the General Partner shall not, directly or indirectly, enter into
or conduct any business, other than in connection with the ownership, acquisition and disposition
of Partnership Interests as a General Partner and the management of the business of the
Partnership, its operation as a public reporting company with a class (or classes) of securities
registered under the Exchange Act, its operation as a REIT and such activities as are incidental to
the same. Without the Consent of the Limited Partners, the General Partner shall not, directly or
indirectly, participate in or otherwise acquire any interest in any real or personal property,
except its General Partner Interest, its minority interest in any Subsidiary Partnership(s) that
the General Partner holds in order to maintain such Subsidiary Partnerships status as a
partnership, and such bank accounts, similar instruments or other short term investments as it
deems necessary to carry out its responsibilities contemplated under this Agreement and the
Charter. In the event the General Partner desires to contribute cash to any Subsidiary Partnership
to acquire or maintain an interest of 1% or less in the capital of such partnership, the General
Partner may acquire or maintain an interest of 1% or less in the capital of such partnership, and
the General Partner may acquire such cash from the Partnership as a loan or in exchange for a
reduction in the General Partners OP Units, in an amount equal to the amount of such cash divided
by the Fair Market Value of a REIT Share on the day such cash is received by the General Partner.
Notwithstanding the foregoing, the General Partner may acquire Investments or other assets in
exchange for REIT Shares or cash, to the extent such Investments or other assets are immediately
contributed by the General Partner to the Partnership, pursuant to the terms described in
Section 4.3.D
. Any Limited Partner Interests acquired by the General Partner, whether
pursuant to exercise by a Limited Partner of its right of Redemption, or otherwise, shall be
automatically converted into a General Partner Interest comprised of an identical number of OP
Units with the same rights, priorities and preferences as the class or series so acquired. The
General Partner may also own one hundred percent (100%) of the stock or interests of one or more
Qualified REIT Subsidiaries or limited liability companies, respectively, provided that any such
entity shall be subject to the limitations of this Section 7.5.A. If, at any time, the General
Partner acquires material assets (other than Partnership Interests or other assets on behalf of the
Partnership) the definition of
REIT Shares Amount
and the definition of Deemed Value of
Partnership Interests shall be adjusted, as reasonably determined by the General Partner, to
reflect the relative Fair Market Value of a share of capital stock of the General Partner relative
to the Deemed Partnership Interest Value of the related Partnership Unit. The General Partners
General Partner Interest in the Partnership, its minority interest in any Subsidiary Partnership(s)
(held directly or indirectly through a Qualified REIT Subsidiary) that the General Partner holds in
order to maintain such Subsidiary Partnerships status as a
partnership, and interests in such short-term liquid investments, bank accounts or similar
instruments as the General Partner deems necessary to carry out its responsibilities contemplated
under this Agreement and the Charter are interests which the General Partner is permitted to
acquire and hold for purposes of this
Section 7.5.A
.
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B
. In the event the General Partner exercises its rights under the Charter to purchase REIT
Shares, other common stock of the General Partner or New Securities, as the case may be, then the
General Partner shall cause the Partnership to purchase from it a number of OP Units equal to the
number of REIT Shares, other capital stock of the General Partner or New Securities, as the case
may be, so purchased on the same terms that the General Partner purchased such REIT Shares, other
capital stock of the General Partner or New Securities, as the case may be.
Section 7.6
Contracts with Affiliates
A
. The Partnership may lend or contribute to 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 Person.
B
. Except as provided in
Section 7.5.A
, 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 consistent with this Agreement
and applicable law as the General Partner in its sole discretion deems advisable.
C
. The General Partner, in its sole and absolute discretion and without the approval of the
Limited Partners, may propose and adopt on behalf of the Partnership employee benefit plans funded
by the Partnership for the benefit of employees of the General Partner, the Partnership,
Subsidiaries of the Partnership or any Affiliate of any of them in respect of services performed,
directly or indirectly, for the benefit of the Partnership, the General Partner, or any of the
Partnerships Subsidiaries.
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 determined by the
General Partner in good faith to be fair and reasonable.
E
. The General Partner is expressly authorized to enter into, in the name and on behalf of the
Partnership, a right of first opportunity arrangement and other conflict avoidance agreements with
various Affiliates of the Partnership and the General Partner, on such terms as the General
Partner, in its sole and absolute discretion, believes are advisable.
Section 7.7
Indemnification
A
. To the fullest extent permitted by law, the Partnership shall indemnify an Indemnitee from
and against any and all losses, claims, damages, liabilities, joint or several, expenses (including
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 (1)
Section 12.2.2 of the Charter of the General Partner prohibits the corporation from indemnifying
the Indemnitee for a matter, in which case the Partnership shall likewise be prohibited from
indemnifying the Indemnitee for the matter, or (2) 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, fraud 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
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Indemnitee had reasonable cause to believe that the act or omission
was unlawful. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee,
pursuant to a loan guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary
of the Partnership (including, without limitation, any indebtedness which the Partnership or any
Subsidiary of the Partnership has assumed or taken subject to), and the General Partner is hereby
authorized and empowered, on behalf of the Partnership, to enter into one or more indemnity
agreements consistent with the provisions of this
Section 7.7
in favor of any Indemnitee
having or potentially having liability for any such indebtedness. The termination of any proceeding
by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, or
any entry of an order of probation prior to judgment, does not create a presumption that the
Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.7.A
.
Any indemnification pursuant to this
Section 7.7
shall be made only out of the assets of
the Partnership, and any insurance proceeds from the liability policy covering the General Partner
and any Indemnitee, and neither the General Partner nor any Limited Partner shall have any
obligation to contribute to the capital of the Partnership or otherwise provide funds to enable the
Partnership to fund its obligations under this
Section 7.7
, except to the extent otherwise
expressly agreed to by such Partner and the Partnership.
B
. Reasonable expenses incurred by an Indemnitee who is a party to a proceeding may be paid or
reimbursed by the Partnership in advance of the final disposition of the proceeding upon receipt by
the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitees good faith
belief that the standard of conduct necessary for indemnification by the Partnership as authorized
in this
Section 7.7
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 7.7
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 unless otherwise provided in a written agreement pursuant
to which such Indemnitee is indemnified.
D
. The Partnership may, but shall not be obligated to, 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 Partnerships 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 7.7
, 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
Section 7.7
; 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 7.7
because the Indemnitee had an interest in the transaction with respect to which
the indemnification applies if the transaction was otherwise permitted by the terms of this
Agreement.
H
. The provisions of this
Section 7.7
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. Any amendment, modification or repeal of this
Section 7.7
or
any provision hereof shall be prospective only and shall not in any way affect the limitations on
the Partnerships liability to any Indemnitee under
this
Section 7.7
as in effect immediately prior to such amendment, modification or repeal
with respect to claims arising from or relating to matters occurring, in whole or in part, prior to
such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
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I
. If and to the extent any reimbursements to the General Partner pursuant to this
Section
7.7
constitute gross income of the General Partner (as opposed to the repayment of advances
made by the General Partner on behalf of the Partnership) such amounts shall constitute guaranteed
payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith
by the Partnership and all Partners, and shall not be treated as distributions for purposes of
computing the Partners Capital Accounts.
J
. Any indemnification hereunder is subject to, and limited by, the provisions of Section
17-108 of the Act and Section 12.2.2 of the Charter.
K
. In the event the Partnership is made a party to any litigation or otherwise incurs any loss
or expense as a result of or in connection with any Partners personal obligations or liabilities
unrelated to Partnership business, such Partner shall indemnify and reimburse the Partnership for
all such loss and expense incurred, including legal fees, and the Partnership interest of such
Partner may be charged therefor. The liability of a Partner under this
Section 7.7.K
shall
not be limited to such Partners Partnership Interest, but shall be enforceable against such
Partner personally.
Section 7.8
Liability of the General Partner
A
. Notwithstanding anything to the contrary set forth in this Agreement, none of the General
Partner nor any of its officers, directors, agents or employees shall be liable or accountable in
damages or otherwise to the Partnership, any Partners or any Assignees, or their successors or
assigns, for losses sustained, liabilities incurred or benefits not derived as a result of errors
in judgment or mistakes of fact or law or any act or omission if the General Partner acted in good
faith.
B
. The Limited Partners expressly acknowledge that the General Partner is acting for the
benefit of the Partnership, the Limited Partners and the General Partners stockholders
collectively. The General Partner is under no obligation to give priority to the separate interests
of the Limited Partners or the General Partners stockholders (including, without limitation, the
tax consequences to Limited Partners or Assignees or to stockholders) in deciding whether to cause
the Partnership to take (or decline to take) any actions. If there is a conflict between the
interests of the stockholders of the General Partner 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 stockholders of the General Partner or the Limited Partners;
provided
,
however
, that for so long as the General Partner, owns a controlling
interest in the Partnership, any such conflict that cannot be resolved in a manner not adverse to
either the stockholders of the General Partner or the Limited Partners shall be resolved in favor
of the stockholders. The General Partner shall not be liable under this Agreement to the
Partnership or to any Partner 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
7.1.A
, the General Partner may exercise any of the powers granted to it by this Agreement and
perform any of the duties imposed upon it hereunder either directly or by or through its agents.
The General Partner shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by it in good faith.
D
. Any amendment, modification or repeal of this
Section 7.8
or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the liability of the
General Partner and any of its officers, directors, agents and employees liability to the
Partnership and the Limited Partners under this
Section 7.8
as in effect immediately prior
to such amendment, modification or repeal with respect to claims arising from or relating to
matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless
of when such claims may arise or be asserted.
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Section 7.9
Other Matters Concerning the General Partner
A
. The General Partner may rely and shall be protected in acting or refraining from acting
upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond, debenture, or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties.
B
. The General Partner may consult with legal counsel, accountants, appraisers, management
consultants, investment bankers and other consultants and advisers selected by it, and any act
taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which such
General Partner reasonably believes to be within such Persons professional or expert competence
shall be conclusively presumed to have been done or omitted in good faith and in accordance with
such opinion.
C
. The General Partner shall have the right, in respect of any of its powers or obligations
hereunder, to act through any of its duly authorized officers and a duly appointed attorney or
attorneys-in-fact. Each such attorney shall, to the extent provided by the General Partner in the
power of attorney, have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder.
D
. Notwithstanding any other provisions of this Agreement or any non-mandatory provision of
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 to protect the ability of
the General Partner, for so long as the General Partner has determined to qualify as a REIT, to (i)
continue to qualify as a REIT or (ii) avoid the General Partner incurring any taxes under Section
857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed
approved by all of the Limited Partners.
Section 7.10
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 Partners,
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.
Section 7.11
Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person dealing with the
Partnership shall be entitled to assume that the General Partner has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter
into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the
General Partner as if it were the Partnerships sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other remedies which may
be available against such Person to contest, negate or disaffirm any action of the General Partner
in connection with any such dealing. In no event shall any Person dealing with the General Partner
or its representatives be obligated to ascertain that the terms of this Agreement have been
complied with or to inquire into the necessity or expedience of any act or action of
the General Partner or its representatives. Each and every certificate, document or other
instrument executed on behalf of the Partnership by the General Partner or its representatives
shall be conclusive evidence in favor of any and every Person relying thereon or claiming
thereunder that (i) at the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership and (iii) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and is binding upon the
Partnership.
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Section 7.12
Management Assistance Provided by Special General Partner
In addition to the requirement to obtain the Consent of the Special General Partner with
respect to certain matters as provided for in this Agreement, the Special General Partner shall
provide consulting services and assistance to the Partnership at various times, in conjunction with
the Advisor, for no additional consideration, on matters relating to the following:
|
(1)
|
|
the strategic planning of the Partnership;
|
|
|
(2)
|
|
the creation of business plans of the Partnership;
|
|
|
(3)
|
|
the sale, merger, or the sale of substantially all of the assets, of the Partnership; and
|
|
|
(4)
|
|
any other matters concerning the Partnership as determined appropriate by the General
Partner and the Special General Partner.
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ARTICLE 8.
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1
Limitation of Liability
The Limited Partners shall have no liability under this Agreement except as expressly provided
in this Agreement or under the Act.
Section 8.2
Management of Business
No Limited Partner or Assignee (other than the General Partner, any of its Affiliates or any
officer, director, employee, partner, agent or trustee of the General Partner, the Partnership or
any of their Affiliates, in their capacity as such) shall take part in the operations, management
or control (within the meaning of the Act) of the Partnerships business, transact any business in
the Partnerships name or have the power to sign documents for or otherwise bind the Partnership.
The transaction of any such business by the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner, the Partnership or any of
their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations
on the liability of the Limited Partners or Assignees under this Agreement.
Section 8.3
Outside Activities of Limited Partners
Subject to any agreements entered into by a Limited Partner or its Affiliates with the General
Partner, Partnership or a Subsidiary, any Limited Partner and any officer, director, employee,
agent, trustee, Affiliate or stockholder of any Limited 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 in direct competition with the Partnership
or that are enhanced by the activities of the Partnership. Neither the Partnership nor any Partners
shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner
or Assignee. Subject to such agreements, 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 business ventures of any other Person, other than the Limited Partners
benefiting from the business conducted by the General Partner, and such Person shall have no
obligation pursuant to this Agreement to offer any interest in any such business ventures to the
Partnership, any Limited Partner or any such other Person, even if such opportunity is of a
character which, if presented to the Partnership, any Limited Partner or such other Person, could
be taken by such Person.
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Section 8.4
Return of Capital
Except pursuant to the rights of Redemption set forth in
Section 8.6
, no Limited
Partner shall be entitled to the withdrawal or return of his or her Capital Contribution, except to
the extent of distributions made pursuant to this Agreement or upon termination of the Partnership
as provided herein. No Limited Partner or Assignee shall have priority over any other Limited
Partner or Assignee either as to the return of Capital Contributions, or as otherwise expressly
provided in this Agreement, or as to profits, losses, distributions or credits.
Section 8.5
Rights of Limited Partners Relating to the Partnership
A
. In addition to other rights provided by this Agreement or by the Act, and except as limited
by
Section 8.5.C
, each Limited Partner shall have the right, for a purpose reasonably
related to such Limited Partners interest as a limited partner in the Partnership, upon written
demand with a statement of the purpose of such demand and at such Limited Partners expense:
(1) to obtain a copy of the most recent annual and quarterly reports filed with the Securities
and Exchange Commission by the General Partner pursuant to the Exchange Act, and each communication
sent to the stockholders of the General Partner;
(2) to obtain a copy of the Partnerships federal, state and local income tax returns for each
Partnership Year;
(3) to obtain a current list of the name and last known business, residence or mailing address
of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and all amendments thereto,
together with executed copies of all powers of attorney pursuant to which this Agreement, the
Certificate and all amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount of cash and a description and
statement of any other property or services contributed by each Partner and which each Partner has
agreed to contribute in the future, and the date on which each became a Partner.
B
. The Partnership shall notify each Limited Partner in writing of any adjustment made in the
calculation of the REIT Shares Amount within a reasonable time after the date such change becomes
effective.
C
. Notwithstanding any other provision of this
Section 8.5
, the General Partner may
keep confidential from the Limited Partners, for such period of time as the General Partner
determines in its sole and absolute discretion to be reasonable, any information that (i) the
General Partner believes to be in the nature of trade secrets or other information the disclosure
of which the General Partner in good faith believes is not in the best interests of the Partnership
or (ii) the Partnership or the General Partner is required by law or by agreements with
unaffiliated third parties to keep confidential.
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Section 8.6
Redemption Rights
A
. At any time after one year following the date of issuance of any OP Units to a Limited
Partner or a Special General Partner, such Partner shall have the right (subject to the terms and
conditions set forth herein and in any other such agreement, as applicable) to require the
Partnership to redeem all or a portion of the OP Units held by such Partner (such OP Units being
hereafter referred to as
Tendered Units
) in exchange for the Cash Amount (a
Redemption
); provided that the terms of such OP Units do not provide that such OP Units
are not entitled to a right of Redemption. Unless otherwise expressly provided in this Agreement or
in a separate agreement entered into between the Partnership and the holders of such OP Units, all
OP Units shall be entitled to a right of Redemption hereunder. The Tendering Partner shall have no
right, with respect to any OP Units so redeemed, to receive any distributions paid on or after the
Specified Redemption Date. Any Redemption shall be exercised pursuant to a Notice of Redemption
delivered to the General Partner by the Special General Partner or Limited Partner who is
exercising the right (the
Tendering Partner
). The Cash Amount shall be payable to the
Tendering Partner within ten (10) days of the Specified Redemption Date in accordance with the
instructions set forth in the Notice of Redemption.
B
. Notwithstanding
Section 8.6.A
above, if the Special General Partner or a Limited
Partner has delivered to the General Partner a Notice of Redemption then the General Partner may,
in its sole and absolute discretion (subject to the limitations on ownership and transfer of REIT
Shares set forth in the Charter), elect to acquire some or all of the Tendered Units from the
Tendering Partner in exchange for the REIT Shares Amount (as of the Specified Redemption Date) and,
if the General Partner so elects, the Tendering Partner shall sell the Tendered Units to the
General Partner in exchange for the REIT Shares Amount. In such event, the Tendering Partner shall
have no right to cause the Partnership to redeem such Tendered Units. The General Partner shall
promptly give such Tendering Partner written notice of its election, and the Tendering Partner may
elect to withdraw its redemption request at any time prior to the acceptance of the cash or REIT
Shares Amount by such Tendering Partner.
C
. The REIT Shares Amount, if applicable, shall be delivered as duly authorized, validly
issued, fully paid and nonassessable REIT Shares and, if applicable, free of any pledge, lien,
encumbrance or restriction, other than those provided in the Charter, the Bylaws of the General
Partner, the Securities Act, relevant state securities or blue sky laws and any applicable
registration rights agreement with respect to such REIT Shares entered into by the Tendering
Partner. Notwithstanding any delay in such delivery (but subject to
Section 8.6.E
), the
Tendering Partner shall be deemed the owner of such REIT Shares for all purposes, including without
limitation, rights to vote or consent, and receive dividends, as of the Specified Redemption Date.
D
. The Special General Partner and each Limited Partner covenants and agrees with the General
Partner that all Tendered Units shall be delivered to the General Partner free and clear of all
liens, claims and encumbrances whatsoever and should any such liens, claims and/or encumbrances
exist or arise with respect to such Tendered Units, the General Partner shall be under no
obligation to acquire the same. The Special General Partner and each Limited Partner further
agrees that, in the event any state or local property transfer tax is payable as a result of the
transfer of its Tendered Units to the General Partner (or its designee), such Partner shall assume
and pay such transfer tax.
E
. Notwithstanding the provisions of
Section 8.6.A
,
8.6.B
,
8.6.C
or
any other provision of this Agreement, the Special General Partner or a Limited Partner (i) shall
not be entitled to effect a Redemption for cash or an exchange for REIT Shares to the extent the
ownership or right to acquire REIT Shares pursuant to such exchange by such Partner on the
Specified Redemption Date could cause such Partner or any other Person, or, in the opinion of
counsel selected by the General Partner, may cause such Partner or any other Person, to violate the
restrictions on ownership and transfer of REIT Shares set forth in the Charter and (ii) shall have
no rights under this Agreement to acquire REIT Shares which would otherwise be prohibited under the
Charter. To the extent any attempted Redemption or exchange for REIT Shares would be in violation
of this
Section 8.6.E
, it shall be null and void
ab initio
and such Partner shall not
acquire any rights or economic interest in the cash otherwise payable upon such Redemption or the
REIT Shares otherwise issuable upon such exchange.
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F
. Notwithstanding anything herein to the contrary (but subject to
Section 8.6.E
),
with respect to any Redemption or exchange for REIT Shares pursuant to this
Section 8.6
:
(1) All OP Units acquired by the General Partner pursuant thereto shall automatically, and
without further action required, be converted into and deemed to be Limited Partner Interests
comprised of the same number and class of OP Units.
(2) The Special General Partner and each Limited Partner may not effect a Redemption for less
than one thousand (1,000) OP Units or, if such Partner holds less than one thousand (1,000) OP
Units, such Partner may effect a Redemption only with respect to all OP Units held by such Partner.
(3) A Tendering Partner may not effect more than two (2) Redemptions in a single calendar
year.
(4) Without the consent of the General Partner, the Special General Partner and each Limited
Partner may not effect a Redemption during the period after the Partnership Record Date with
respect to a distribution and before the record date established by the General Partner for a
distribution to its stockholders of some or all of its portion of such distribution.
(5) The consummation of any Redemption or exchange for REIT Shares shall be subject to the
expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
(6) Each Tendering Partner shall continue to own all OP Units subject to any Redemption or
exchange for REIT Shares, and be treated as a Partner with respect to such OP Units for all
purposes of this Agreement, until such OP Units are transferred to the General Partner and paid for
or exchanged on the Specified Redemption Date. Until a Specified Redemption Date, the Tendering
Partner shall have no rights as a stockholder of the General Partner with respect to such Tendering
Partners OP Units.
G
. In the event that the Partnership issues additional Partnership Interests to any Additional
Limited Partner pursuant to
Section 4.3.B
, the General Partner shall make such revisions to
this
Section 8.6
as it determines are necessary to reflect the issuance of such additional
Partnership Interests.
H
. Notwithstanding any other provision of this Agreement, the General Partner is authorized to
take any action that it determines to be necessary or appropriate to cause the partnership to
comply with any withholding requirements established under the Code or any other federal, state or
local law that apply upon a Redemption or exchange of Tendered Units. If a Tendering Partner
believes that it is exempt from withholding upon a Redemption or exchange of Tendered Units, such
Partner must furnish the General Partner a FIRPTA certificate or other documentation requested by
the General Partner is a form acceptable to the General Partner. If the Partnership or the General
Partner is required to withhold and pay over to any taxing authority any amount upon a Redemption
or exchange of Tendered Units and the Cash Amount or the REIT Shares Amount, as the case may be,
equals or exceeds the amount of tax required to be withheld, the amount withheld shall be treated
as an amount received by such Partner in redemption of its Tendered Units. If the Cash Amount or
the REIT Shares Amount, as the case may be, is less than the amount of tax required to be withheld,
the Tendering Partner shall not receive any Cash Amount or REIT Shares Amount, and the Tendering
Partner shall contribute the excess of the amount of tax required to be withheld over the Cash
Amount or REIT Shares Amount before such excess taxes are required to be paid to the taxing
authority.
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ARTICLE 9.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1
Records and Accounting
The General Partner shall keep, or cause to be kept, at the principal office of the
Partnership appropriate books and records with respect to the Partnerships business, including
without limitation, all books and records necessary to provide to the Special General Partner and
the Limited Partners any information, lists and copies of documents required to be provided
pursuant to
Section 9.3
. Any records maintained by or on behalf of the Partnership in the
regular course of its business may be kept on, or be in the form of any information storage device,
provided
,
that
the records so maintained are convertible into clearly legible
written form within a reasonable period of time. The books of the Partnership shall be maintained,
for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted
accounting principles.
Section 9.2
Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3
Reports
A
. As soon as practicable, but in no event later than one hundred and five (105) days after
the close of each Partnership Year, or such earlier date as they are filed with the Securities and
Exchange Commission, the General Partner shall cause to be delivered to the Special General Partner
and each Limited Partner as of the close of the Partnership Year, an annual report containing
financial statements of the Partnership, or of the General Partner if such statements are prepared
solely on a consolidated basis with the General Partner, for such Partnership Year, presented in
accordance with generally accepted accounting principles, such statements to be audited by a
nationally recognized firm of independent public accountants selected by the General Partner.
B
. As soon as practicable, but in no event later than forty five (45) days after the close of
each calendar quarter (except the last calendar quarter of each year), or such earlier date as they
are filed with the Securities and Exchange Commission, the General Partner shall cause to be
delivered to the Special General Partner and each Limited Partner as of the last day of the
calendar quarter, a report containing unaudited financial statements of the Partnership, or of the
General Partner, if such statements are prepared solely on a consolidated basis with the applicable
law or regulation, or as the General Partner determines to be appropriate.
Section 9.4
Nondisclosure of Certain Information
Notwithstanding the provisions of
Sections 9.1
and
9.3
, the General Partner
may keep confidential from the Special General Partner and the Limited Partners any information
that the General Partner believes to be in the nature of trade secrets or other information the
disclosure of which the General Partner in good faith believes is not in the best interest of the
Partnership or which the Partnership is required by law or by agreements with unaffiliated third
parties to keep confidential.
ARTICLE 10.
TAX MATTERS
Section 10.1
Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely filing of all returns of
Partnership income, gains, deductions, losses and other items required of the Partnership for
federal and applicable state income tax purposes and shall use all reasonable efforts to furnish,
within ninety (90) days of the close of each taxable year, the tax information reasonably required
by the Special General Partner and the
Limited Partners for federal and applicable state income tax reporting purposes. The Special
General Partner and each Limited Partner shall promptly provide the General Partner with any
information reasonably requested by the General Partner relating to any Contributed Property
contributed (directly or indirectly) by such Partner to the Partnership.
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Section 10.2
Tax Elections
Except as otherwise provided herein, the General Partner shall, in its sole and absolute
discretion, determine whether to make any available election pursuant to the Code, including the
election under Section 754 of the Code. The General Partner shall have the right to seek to revoke
any such election (including without limitation, any election under Section 754 of the Code) upon
the General Partners determination in its sole and absolute discretion that such revocation is the
best interests of the Partners.
Section 10.3
Tax Matters Partner
A.
The General Partner shall be the
tax matters partner
of the Partnership for
federal income tax purposes. Pursuant to Section 6230(e) of the Code, upon receipt of notice from
the IRS of the beginning of an administrative proceeding with respect to the Partnership, the tax
matters partner shall furnish the IRS with the name, address and profit interest of the Special
General Partner and each of the Limited Partners and Assignees;
provided
,
however
,
that such information is provided to the Partnership by the Partners and Assignees.
B
. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any administrative or judicial
proceedings for the adjustment of Partnership items required to be taken into account by a Partner
for income tax purposes (such administrative proceedings being referred to as a
tax audit
and such judicial proceedings being referred to as
judicial review
), and in the
settlement agreement the tax matters partner may expressly state that such agreement shall bind all
Partners, except that such settlement agreement shall not bind any Partner (i) who (within the time
prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the
tax matters partner shall not have the authority to enter into a settlement agreement on behalf of
such Partner or (ii) who is a
notice partner
(as defined in Section 6231 of the Code) or
a member of a
notice group
(as defined in Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative adjustment at the Partnership level
of any item required to be taken into account by a Partner for tax purposes (a
final
adjustment
) is mailed to the tax matters partner, to seek judicial review of such final
adjustment, including the filing of a petition for readjustment with the Tax Court or the United
States Claims Court, or the filing of a complaint for refund with the District Court of the United
States for the district in which the Partnerships principal place of business is located;
(3) to intervene in any action brought by any other Partner for judicial review of a final
adjustment;
(4) to file a request for an administrative adjustment with the IRS at any time and, if any
part of such request is not allowed by the IRS, to file an appropriate pleading (petition or
complaint) for judicial review with respect to such request;
(5) to enter into an agreement with the IRS to extend the period for assessing any tax which
is attributable to any item required to be taken into account by a Partner for tax purposes, or an
item affected by such item; and
(6) to take any other action on behalf of the Partners of the Partnership in connection with
any tax audit or judicial review proceeding to the extent permitted by applicable law or
regulations.
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The taking of any action and the incurring of any expense by the tax matters partner in
connection with any such proceeding, except to the extent required by law, is a matter in the sole
and absolute discretion of the tax matters partner and the provisions relating to indemnification
of the General Partner set forth in
Section 7.7
shall be fully applicable to the tax
matters partner in its capacity as such.
C
. The tax matters partner shall receive no compensation for its services. All third party
costs and expenses incurred by the tax matters partner in performing its duties as such (including
legal and accounting fees) shall be borne by the Partnership. Nothing herein shall be construed to
restrict the Partnership from engaging an accounting firm to assist the tax matters partner in
discharging its duties hereunder, so long as the compensation paid by the Partnership for such
services is reasonable.
Section 10.4
Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it in organizing the
Partnership as provided in Section 709 of the Code.
Section 10.5
Withholding
The Special General Partner and each Limited Partner hereby authorize the Partnership to
withhold from or pay on behalf of or with respect to such Partner any amount of federal, state,
local, or foreign taxes that the General Partner determines that the Partnership is required to
withhold or pay with respect to any amount distributable or allocable to such Partner pursuant to
this Agreement, including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445 or 1446 of the Code. Any amount paid on behalf of
or with respect to the Special General Partner or a Limited Partner shall constitute a receivable
of the Partnership from such Partner, which receivable shall be paid by such Partner within fifteen
(15) days after notice from the General Partner that such payment must be made unless (i) the
Partnership withholds such payment from a distribution which would otherwise be made to the Partner
or (ii) the General Partner determines, in its sole and absolute discretion, that such payment may
be satisfied out of the available funds of the Partnership which would, but for such payment, be
distributed to the Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Partner. The Special General Partner and each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership a security
interest in such Partners Partnership Interest to secure such Partners obligation to pay to the
Partnership any amounts required to be paid pursuant to this
Section 10.5
. Any amounts
payable by the Special General Partner or a Limited Partner hereunder shall bear interest at the
base rate on corporate loans at large United States money center commercial banks, as published
from time to time in the
Wall Street Journal
, plus two percentage points (but not higher
than the maximum lawful rate) from the date such amount is due (
i.e.
, fifteen (15) days
after demand) until such amount is paid in full. The Special General Partner and each Limited
Partner shall take such actions as the Partnership or the General Partner shall request in order to
perfect or enforce the security interest created hereunder.
ARTICLE 11.
TRANSFERS AND WITHDRAWALS
Section 11.1
Transfer
A.
The term
transfer
, when used in this
Article 11
with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which a Partner purports to
assign its Partnership Interest to another Person and includes a sale, assignment, gift (outright
or in trust), pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by
law or otherwise. The term transfer when used in this
Article 11
does not include any
Redemption or exchange for REIT Shares pursuant to
Section 8.6
, except as otherwise
provided herein. No part of the interest of a Limited Partner shall be subject to the claims of any
creditor, any spouse for alimony or support, or to legal process, and may not be voluntarily or
involuntarily alienated or encumbered except as may be specifically provided for in this Agreement
or consented to by the General Partner and the Special General Partner.
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B
. No Partnership Interest shall be transferred, in whole or in part, except in accordance
with the terms and conditions set forth in this
Article 11
. Any transfer or purported
transfer of a Partnership Interest not made in accordance with this
Article 11
shall be
null and void
ab initio
unless otherwise consented to by the General Partner and the Special
General Partner in their sole and absolute discretion.
Section 11.2
Transfer of the Partnership Interest of the General Partner and the Special
General Partner
A
. The General Partner shall not (i) voluntarily withdraw from the Partnership, (ii) directly
or indirectly transfer all or any portion of its interest in the Partnership (except to an entity
wholly owned by the General Partner), or (iii) engage in any merger, consolidation, or other
combination with or into another Person, sale of all or substantially all of its assets or any
reclassification or recapitalization of its outstanding equity interests or undertake any Listing
Event (an Extraordinary Transaction), without the Consent of the Partners, which may be given or
withheld by each Partner in his, her or its sole and absolute discretion. In addition, if an
Extraordinary Transaction would result in the termination of the Advisory Agreement, the
Partnership must either (i) exercise its right to redeem the Special General Partner Interest as
provided under
Section 11.7
, or (ii) obtain the Consent of the Special General Partner.
Upon any transfer of a Partnership Interest in accordance with the provisions of this
Section
11.2
, the transferee shall become a Substitute General Partner for all purposes herein, and
shall be vested with the powers and rights of the transferor General Partner, and shall be liable
for all obligations and responsible for all duties of the General Partner, once such transferee has
executed such instruments as may be necessary to effectuate such admission and to confirm the
agreement of such transferee to be bound by all the terms and provisions of this Agreement with
respect to the Partnership Interest so acquired. It is a condition to any transfer otherwise
permitted hereunder that the transferee assumes, by operation of law or express agreement, all of
the obligations of the transferor General Partner under this Agreement with respect to such
transferred Partnership Interest, and no such transfer (other than pursuant to a statutory merger
or consolidation wherein all obligations and liabilities of the transferor General Partner are
assumed by a successor corporation by operation of law) shall relieve the transferor General
Partner of its obligations under this Agreement without the Consent of the Limited Partners, in
their reasonable discretion. In the event the General Partner withdraws from the Partnership in
violation of this Agreement or otherwise, or otherwise dissolves or terminates, or upon the
Incapacity of the General Partner, all of the remaining Partners may elect to continue the
Partnership business by selecting a Substitute General Partner in
accordance with the Act.
B
. Notwithstanding any other provision of this Agreement, the Special General Partner shall
not transfer all or any portion of its Partnership Interest to any transferee without the consent
of the General Partner, which consent may be withheld in the sole and absolute discretion of the
General Partner. Notwithstanding the preceding sentence, however, the Special General Partner
shall have the right, at any time, to transfer its Partnership Interest to the General Partner, an
Affiliate of the General Partner, W. P. Carey & Co. LLC (W. P. Carey), Watermark Capital
Partners, LLC (Watermark Capital Partners), or an Affiliate of W. P. Carey or Watermark Capital
Partners.
Section 11.3
Limited Partners Rights to Transfer
A
. Prior to the first anniversary of the Effective Date, no Limited Partner shall transfer all
or any portion of its Partnership Interest to any transferee without the consent of the General
Partner and the Special General Partner, which consent may be withheld in their sole and absolute
discretion;
provided
,
however
, that any Limited Partner may, at any time, without
the consent of the General Partner and the Special General Partner, (i) transfer all or any portion
of its Partnership Interest to the General Partner, (ii) transfer all or any portion of its
Partnership Interest to an Affiliate, another original Limited Partner or to a Family Member,
subject to the provisions of
Section 11.6
, (iii) transfer all or any portion of its
Partnership Interest to a trust for the benefit of a charitable beneficiary or to a charitable
foundation, subject to the provisions of
Section 11.6
, and (iv) subject to the provisions
of
Section 11.6
, pledge
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(a
Pledge
) all or any portion of its Partnership Interest to a lending institution, which is not an Affiliate of such Limited Partner,
as collateral or security for a bona fide loan or other extension of credit, and transfer such
pledged Partnership Interest to such lending institution in connection with the exercise of
remedies under such loan or extension or credit, and the transfer of such pledged Partnership
Interest by the lender to any transferee. After such anniversary, each Limited Partner or Assignee
(resulting from a transfer made pursuant to clauses (i)-(iv) of the proviso of the preceding
sentence) shall have the right to transfer all or any portion of its Partnership Interest, subject
to the provisions of
Section 11.6
and the satisfaction of each of the following conditions
(in addition to the right of each such Limited Partner or Assignee to continue to make any such
transfer permitted by clauses (i)-(iv) of such proviso without satisfying either of the following
conditions):
(1)
General Partner Right of First Refusal
. The transferring Partner shall give
written notice of the proposed transfer to the General Partner, which notice shall state (i) the
identity of the proposed transferee, and (ii) the amount and type of consideration proposed to be
received for the transferred OP Units. The General Partner shall have ten (10) business days upon
which to give the transferring Partner notice of its election to acquire the OP Units on the
proposed terms. If it so elects, it shall purchase the OP Units on such terms within ten (10)
business days after giving notice of such election. If it does not so elect, the transferring
Partner may transfer such OP Units to a third party, on economic terms no more favorable to the
transferee than the proposed terms, subject to the other conditions of this
Section 11.3
.
(2)
Qualified Transferee
. Any transfer of a Partnership Interest shall be made only to
Qualified Transferees. It is a condition to any transfer otherwise permitted hereunder that the
transferee assumes by operation of law or express agreement all of the obligations of the
transferor Limited Partner under this Agreement with respect to such transferred Partnership
Interest and no such transfer (other than pursuant to a statutory merger or consolidation wherein
all obligations and liabilities of the transferor Partner are assumed by a successor corporation by
operation of law) shall relieve the transferor Partner of its obligations under this Agreement
without the approval of the General Partner, in its reasonable discretion. Notwithstanding the
foregoing, any transferee of any transferred Partnership Interest shall be subject to any and all
ownership limitations contained in the Charter, which may limit or restrict such transferees
ability to exercise its Redemption rights, and to the representations in
Section 3.4.D
. Any
transferee, whether or not admitted as a Substituted Limited Partner, shall take subject to the
obligations of the transferor hereunder. Unless admitted as a Substituted Limited Partner, no
transferee, whether by a voluntary transfer, by operation of law or otherwise, shall have any
rights hereunder, other than the rights of an Assignee as provided in
Section 11.5
.
B.
If a Limited Partner is subject to Incapacity, the executor, administrator, trustee,
committee, guardian, conservator, or receiver of such Limited Partners estate shall have all the
rights of a Limited Partner, but not more rights than those enjoyed by other Limited Partners, for
the purpose of settling or managing the estate, and such power as the Incapacitated Limited Partner
possessed to transfer all or any part of his or its interest in the Partnership. The Incapacity of
a Limited Partner, in and of itself, shall not dissolve or terminate the Partnership.
C
. The General Partner may prohibit any transfer otherwise permitted under
Section
11.3
by a Limited Partner of his or her OP Units if, in the opinion of legal counsel to the
Partnership, such transfer would require the filing of a registration statement under the
Securities Act by the Partnership or would otherwise violate any federal or state securities laws
or regulations applicable to the Partnership or the Partnership Unit.
Section 11.4
Substituted Limited Partners
A
. No Limited Partner shall have the right to substitute a transferee as a Limited Partner in
his or her place (including any transferee permitted by
Section 11.3
). The General Partner
shall, however, have the right to consent to the admission of a transferee of the interest of a
Limited Partner pursuant to this
Section 11.4
as a Substituted Limited Partner, which
consent may be given or withheld by the General Partner in its sole and absolute discretion. The
General Partners failure or refusal to permit a transferee of any such
interests to become a Substituted Limited Partner shall not give rise to any cause of action,
whether at law or in equity, against the Partnership or any Partner.
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B
. A transferee who has been admitted as a Substituted Limited Partner in accordance with this
Article 11
shall have all the rights and powers and be subject to all the restrictions and
liabilities of a Limited Partner under this Agreement. The admission of any transferee as a
Substituted Limited Partner shall be subject to the transferee executing and delivering to the
General Partner an acceptance of all of the terms and conditions of this Agreement (including
without limitation, the provisions of
Section 2.4
and such other documents or instruments
as may be required to effect the admission), each in form and substance satisfactory to the General
Partner) and the acknowledgment by such transferee that each of the representations and warranties
set forth in
Section 3.4
are true and correct with respect to such transferee as of the
date of the transfer of the Partnership Interest to such transferee and will continue to be true to
the extent required by such representations and warranties.
C
. Upon the admission of a Substituted Limited Partner, the General Partner shall amend
Exhibit A
to reflect the name, address, number of OP Units, and Percentage Interest of such
Substituted Limited Partner and to eliminate or adjust, if necessary, the name, address and
interest of the predecessor of such Substituted Limited Partner.
Section 11.5
Assignees
If the General Partner, in its sole and absolute discretion, does not consent to the admission
of any permitted transferee under
Section 11.3
as a Substituted Limited Partner, as
described in
Section 11.4
, such transferee shall be considered an Assignee for purposes of
this Agreement. An Assignee shall be entitled to all the rights of an assignee of a limited
partnership interest under the Act, including the right to receive distributions from the
Partnership and the share of Net Income, Net Loss, gain and loss attributable to the OP Units
assigned to such transferee, the rights to transfer the OP Units provided in this
Article
11
, the right of Redemption provided in
Section 8.6
, but shall not be deemed to be a
holder of OP Units for any other purpose under this Agreement, and shall not be entitled to effect
a Consent with respect to such OP Units on any matter presented to the Limited Partners for
approval (such Consent remaining with the transferor Limited Partner). In the event any such
transferee desires to make a further assignment of any such Partnership Units, such transferee
shall be subject to all the provisions of this
Article 11
to the same extent and in the
same manner as any Limited Partner desiring to make an assignment of OP Units. Notwithstanding
anything contained in this Agreement to the contrary, as a condition to becoming an Assignee, any
prospective Assignee must first execute and deliver to the Partnership an acknowledgment that each
of the representations and warranties set forth in
Section 3.4
are true and correct with
respect to such prospective Assignee as of the date of the prospective assignment of the
Partnership Interest to such prospective Assignee and will continue to be true to the extent
required by such representations or warranties.
Section 11.6
General Provisions
A.
No Limited Partner may withdraw from the Partnership other than as a result of (i) a
permitted transfer of all of such Limited Partners OP Units in accordance with this
Article
11
and the transferee(s) of such Partnership Units being admitted to the Partnership as a
Substituted Limited Partner or (ii) pursuant to the exercise of its right of Redemption of all of
such Limited Partners OP Units under
Section 8.6
; provided that after such transfer,
exchange or redemption such Limited Partner owns no Partnership Interest.
B
. Any Limited Partner who shall transfer all of such Limited Partners OP Units in a transfer
permitted pursuant to this
Article 11
where such transferee was admitted as a Substituted
Limited Partner or pursuant to the exercise of its rights of Redemption of all of such Limited
Partners OP Units under
Section 8.6
shall cease to be a Limited Partner; provided that
after such transfer, exchange or redemption such Limited Partner owns no Partnership Interest.
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C
. Transfers pursuant to this
Article 11
may only be made on the first day of a fiscal
quarter of the Partnership, unless the General Partner otherwise agrees.
D
. If any Partnership Interest is transferred, assigned or redeemed during any quarterly
segment of the Partnerships Partnership Year in compliance with the provisions of this
Article
11
or transferred or redeemed pursuant to
Section 8.6
, on any day other than the first
day of a Partnership Year, then Net Income, Net Loss, each item thereof and all other items
attributable to such Partnership Interest for such Partnership Year shall be divided and allocated
between the transferor Partner and the transferee Partner by taking into account their varying
interests during the Partnership Year using a method selected by the General Partner that is in
accordance with Section 706(d) of the Code. Except as otherwise agreed by the General Partner, all
distributions of Available Cash with respect to which the Partnership Record Date is before the
date of such transfer, assignment, exchange or redemption shall be made to the transferor Partner,
and all distributions of Available Cash thereafter, in the case of a transfer or assignment other
than a redemption, shall be made to the transferee Partner.
E
. In addition to any other restrictions on transfer herein contained, including without
limitation the provisions of this
Article 11
, in no event may any transfer or assignment of
a Partnership Interest by any Partner (including pursuant to a Redemption or exchange for REIT
Shares by the Partnership or the General Partner) be made (i) to any person or entity who lacks the
legal right, power or capacity to own a Partnership Interest; (ii) in violation of applicable law;
(iii) except with the consent of the General Partner, which may be given or withheld in its sole
and absolute discretion, of any component portion of a Partnership Interest, such as the Capital
Account, or rights to distributions, separate and apart from all other components of a Partnership
Interest; (iv) except with the consent of the General Partner, which may be given or withheld in
its sole and absolute discretion, if in the opinion of legal counsel to the Partnership such
transfer could cause a termination of the Partnership for federal or state income tax purposes
(except as a result of the Redemption or exchange for REIT Shares of all Partnership Interests held
by all Limited Partners or pursuant to a transaction expressly permitted under
Section
11.2
); (v) if in the opinion of counsel to the Partnership such transfer could cause the
Partnership to cease to be classified as a partnership for federal income tax purposes (except as a
result of the Redemption or exchange for REIT Shares of all Partnership Interests held by all
Limited Partners); (vi) if such transfer could, in the opinion of counsel to the Partnership, cause
the Partnership to become, with respect to any employee benefit plan subject to Title I of ERISA, a
party-in-interest (as defined in Section 3(14) of ERISA) or a disqualified person (as defined
in Section 4975(c) of the Code); (vii) if such transfer could, in the opinion of counsel to the
Partnership, cause any portion of the assets of the Partnership to constitute assets of any
employee benefit plan pursuant to Department of Labor Regulations Section 2510.2-101; (viii) if
such transfer requires the registration of such Partnership Interest pursuant to any applicable
federal or state securities laws; (ix) except with the consent of the General Partner, which may be
given or withheld in its sole and absolute discretion, if such transfer (1) could be treated as
effectuated through an established securities market or a secondary market (or the substantial
equivalent thereof) within the meaning of Section 7704 of the Code, (2) could cause the Partnership
to become a publicly traded partnership, as such term is defined in Sections 469(k)(2) or 7704(b)
of the Code, (3) could be in violation of
Section 3.4.E(5)
, or (4) could cause the
Partnership to fail one or more of the Safe Harbors (as defined below); (x) if such transfer
subjects the Partnership to be regulated under the Investment Company Act of 1940, the Investment
Advisors Act of 1940 or the Employee Retirement Income Security Act of 1974, each as amended; (xi)
except with the consent of the General Partner, which may be given or withheld in its sole
discretion, if the transferee or assignee of such Partnership Interest is unable to make the
representations set forth in
Section 3.4.C
; (xii) if such transfer is made to a lender to
the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Partnership whose loan constitutes a Nonrecourse Liability,
except with the consent of the General Partner, which may be given or withheld in its sole and
absolute discretion; and provided, that, as a condition to granting such consent the lender may be
required to enter into an arrangement with the Partnership and the General Partner to redeem or
exchange for the REIT Shares Amount any OP 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; or (xiii) if in the opinion of
legal counsel for the Partnership such transfer could adversely affect the ability of the General
Partner to continue to qualify as a REIT or, except with the consent of the General Partner, which
may be given or withheld in its sole and absolute discretion, subject the General Partner to any
additional taxes under Section 857 or Section 4981 of the Code.
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F
. The General Partner shall monitor the transfers of interests in the Partnership (including
any acquisition of OP Units by the Partnership or the General Partner) to determine (i) if such
interests could be treated as being traded on an established securities market or a secondary
market (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code and
(ii) whether such transfers of interests could result in the Partnership being unable to qualify
for the safe harbors set forth in Regulations Section 1.7704-1 (or such other guidance
subsequently published by the IRS setting forth safe harbors under which interests will not be
treated as readily tradable on a secondary market (or the substantial equivalent thereof) within
the meaning of Section 7704 of the Code) (the
Safe Harbors
). The General Partner shall
have the authority (but shall not be required) to take any steps it determines are necessary or
appropriate in its sole and absolute discretion to prevent any trading of interests which could
cause the Partnership to become a publicly traded partnership within the meaning of Code Section
7704, or any recognition by the Partnership of such transfers, or to ensure that one or more of the
Safe Harbors is met.
Section 11.7
Call Right Attributable to the Special General Partner Interest
A.
In the event of a
Trigger Event
(as defined in
Section 11.7.B
hereof),
the Partnership shall have the right (the Call Right) to redeem all, or any portion, of the
Special General Partner Interest. The Partnership shall exercise the Call Right by providing the
Special General Partner with written notice of its desire to exercise the Call Right within sixty
(60) days of the occurrence of a Trigger Event. The purchase price to be paid by the Partnership
for the portion of the Special General Partner Interest that is subject to the Call Right shall
equal the fair market value of such Interest as determined by Appraisal, and, subject to
Section 11.7.C
below, shall be paid in cash or in REIT Shares (at the option of the Special
General Partner) within one hundred twenty (120) days after the Partnership provides the written
notice required under this
Section 11.7.A
.
B
. For purposes of this
Section 11.7
, a Trigger Event means, at any time after the
second anniversary of the Effective Date, the:
|
(1)
|
|
non-renewal of the Advisory Agreement upon the expiration of
its then-current term;
|
|
|
(2)
|
|
termination of the Advisory Agreement for any reason under
circumstances where an Affiliate of the Advisor does not serve as the advisor
under any replacement advisory agreement; or
|
|
|
(3)
|
|
resignation of the Advisor under the Advisory Agreement.
|
C.
In the event that the Partnership exercises the Call Right as a result of a termination of
the Advisory Agreement for Cause (as defined in the Advisory Agreement), the Partnership shall
have the option to redeem all or a portion of the Special General Partner Interest by issuing its
promissory note with (i) a term of five (5) years; (ii) annual installments of principal payable
ratably over the term of the note; and (iii) a market rate of interest.
Section 11.8
Put Right of General Partner
The General Partner shall have the right at any time (the GP Put Right) to require the
Partnership to redeem any portion of the General Partner Interest for the purpose of providing the
General Partner with
sufficient funds to enable it to make redemptions of its stock. The General Partner shall exercise
the GP Put Right at any time by providing the Partnership with written notice of its desire to
exercise the GP Put Right. The purchase price to be paid by the Partnership for the portion of the
General Partner Interest that the General Partner desires to be redeemed shall equal the fair
market value of such portion as determined by Appraisal, and shall be paid in cash within one
hundred twenty (120) days after the General Partner provides the written notice required under this
Section 11.8
. In the event that the General Partner exercises the GP Put Right, the OP
Units held by the General Partner shall be reduced as appropriate.
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ARTICLE 12.
ADMISSION OF PARTNERS
Section 12.1
Admission of Successor General Partner
A successor to all of the General Partners General Partner Interest pursuant to
Section
11.2
who is proposed to be admitted as a successor General Partner shall be admitted to the
Partnership as the General Partner, effective upon such transfer. Any such transferee shall carry
on the business of the Partnership without dissolution. In each case, the admission shall be
subject to the successor General Partner executing and delivering to the Partnership an acceptance
of all of the terms and conditions of this Agreement and such other documents or instruments as may
be required to effect the admission. In the case of such admission on any day other than the first
day of a Partnership Year, all items attributable to the General Partner Interest for such
Partnership Year shall be allocated between the transferring General Partner and such successor as
provided in
Article 11
.
Section 12.2
Admission of Additional Limited Partners
A
. After the admission to the Partnership of the initial Limited Partners on the date hereof,
a Person who makes a Capital Contribution to the Partnership in accordance with this Agreement
shall be admitted to the Partnership as an Additional Limited Partner only upon furnishing to the
General Partner (i) evidence of acceptance in form satisfactory to the General Partner of all of
the terms and conditions of this Agreement, including, without limitation, the power of attorney
granted in
Section 2.4
and (ii) such other documents or instruments as may be required in
the discretion of the General Partner in order to effect such Persons admission as an Additional
Limited Partner.
B
. Notwithstanding anything to the contrary in this
Section 12.2
, no Person shall be
admitted as an Additional Limited Partner without the consent of the General Partner, which consent
may be given or withheld in the General Partners sole and absolute discretion. The admission of
any Person as an Additional Limited Partner shall become effective on the date upon which the name
of such Person is recorded on the books and records of the Partnership, following the receipt of
the Capital Contribution in respect of such Limited Partner and the consent of the General Partner
to such admission. If any Additional Limited Partner is admitted to the Partnership on any day
other than the first day of a Partnership Year, then Net Income, Net Loss, each item thereof and
all other items allocable among Partners and Assignees for such Partnership Year shall be allocated
among such Limited Partner and all other Partners and Assignees by taking into account their
varying interests during the Partnership Year using a method selected by the General Partner that
is in accordance with Section 706(d) of the Code. All distributions of Available Cash with respect
to which the Partnership Record Date is before the date of such admission shall be made solely to
Partners and Assignees other than the Additional Limited Partner (other than in its capacity as an
Assignee) and, except as otherwise agreed to by the Additional Limited Partners and the General
Partner, all distributions of Available Cash thereafter shall be made to all Partners and Assignees
including such Additional Limited Partner.
Section 12.3
Amendment of Agreement and Certificate of Limited Partnership
For the admission to the Partnership of any Partner, the General Partner shall take all steps
necessary and appropriate under the Act to amend the records of the Partnership and, if necessary,
to prepare as soon
as practical an amendment of this Agreement (including an amendment of
Exhibit A
) and, if required
by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise
the power of attorney granted pursuant to
Section 2.4
.
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ARTICLE 13.
DISSOLUTION AND LIQUIDATION
Section 13.1
Dissolution
The Partnership shall not be dissolved by the admission of Substituted Limited Partners or
Additional Limited Partners or by the admission of a successor General Partner in accordance with
the terms of this Agreement. Upon the withdrawal of the General Partner, any successor General
Partner (selected as described in
Section 13.1.B
below) shall continue the business of the
Partnership. The Partnership shall dissolve, and its affairs shall be wound up, upon the first to
occur of any of the following (each a
Liquidating Event
):
A
. the expiration of its term as provided in
Section 2.5
;
B.
an event of withdrawal of the General Partner, as defined in the Act, unless, within ninety
(90) days after the withdrawal, all of the remaining Partners agree in writing, in their sole and
absolute discretion, to continue the business of the Partnership and to the appointment, effective
as of the date of withdrawal, of a substitute General Partner;
C
. subject to compliance with
Section 11.2
an election to dissolve the Partnership
made by the General Partner, in its sole and absolute discretion;
D
. entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of
the Act;
E
. any sale or other disposition of all or substantially all of the assets of the Partnership
or a related series of transactions that, taken together, result in the sale or other disposition
of all or substantially all of the assets of the Partnership;
F
. the Incapacity of the General Partner, unless all of the remaining Partners in their sole
and absolute discretion agree in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such Incapacity, of a substitute General
Partner;
G
. the redemption or exchange for REIT Shares of all Partnership Interests (other than those
of the General Partner) pursuant to this Agreement; or
H
. a final and non-appealable judgment is entered by a court of competent jurisdiction ruling
that the General Partner is bankrupt or insolvent, or a final and non-appealable order for relief
is entered by a court with appropriate jurisdiction against the General Partner, in each case under
any federal or state bankruptcy or insolvency laws as now or hereafter in effect, unless prior to
the entry of such order or judgment all of the remaining Partners agree in writing to continue the
business of the Partnership and to the appointment, effective as of a date prior to the date of
such order or judgment, of a substitute General Partner.
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Section 13.2
Winding Up
A
. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the
purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the
claims of its creditors and Partners. No Partner shall take any action that is inconsistent with,
or not necessary to or appropriate for, the winding up of the Partnerships business and affairs.
The General Partner (or, in the event there is no remaining General Partner, any Person elected by
a Majority in Interest of the Limited Partners (the
Liquidator
)) shall be responsible for
overseeing the winding up and dissolution of the Partnership and
shall take full account of the Partnerships liabilities and property and the Partnership property
shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom (which may, to the extent determined by the General Partner, include shares of
stock in the General Partner) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the Partnerships debts and liabilities to
creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnerships debts and liabilities to
the General Partner;
(3) Third, to the payment and discharge of all of the Partnerships debts and liabilities to
the other Partners; and
(4) The balance, if any, to the General Partner, the Special General Partner and the Limited
Partners in proportion to their positive Capital Account balances, determined after taking into
account all Capital Account adjustments for all prior periods and the Partnership taxable year
during which the liquidation occurs (other than those made as a result of the liquidating
distribution set forth in this
Section 13.2.A(4)
).
B.
Notwithstanding the provisions of
Section 13.2.A
which require liquidation of the
assets of the Partnership, but subject to the order of priorities set forth therein, if prior to or
upon dissolution of the Partnership the Liquidator determines that an immediate sale of part or all
of the Partnerships assets would be impractical or would cause undue loss to the Partners, the
Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of
any assets except those necessary to satisfy liabilities of the Partnership (including to those
Partners as creditors) and/or distribute to the Partners, in lieu of cash, as tenants in common and
in accordance with the provisions of
Section 13.2.A
, undivided interests in such
Partnership assets as the Liquidator deems not suitable for liquidation. Any such distributions
in-kind shall be made only if, in the good faith judgment of the Liquidator, such distributions
in-kind are in the best interest of the Partners, and shall be subject to such conditions relating
to the disposition and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property distributed in kind using such
reasonable method of valuation as it may adopt.
Section 13.3
Capital Contribution Obligation
If any Partner has a deficit balance in his, her, or its Capital Account (after giving effect
to all contributions, distributions and allocations for the taxable years, including the year
during which such liquidation occurs), such Partner shall have no obligation to make any
contribution to the capital of the Partnership with respect to such deficit, and such deficit at
any time shall not be considered a debt owed to the Partnership or to any other Person for any
purpose whatsoever, except to the extent otherwise expressly agreed to by such Partner and the
Partnership.
Section 13.4
Compliance with Timing Requirements of Regulations
In the discretion of the Liquidator or the General Partner, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited Partners pursuant to
this
Article 13
may be:
(1) distributed to a trust established for the benefit of the General Partner and Limited
Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the
Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership
or of the General Partner arising out of or in connection with the Partnership. The assets of any
such trust shall be distributed to the General Partner and Limited Partners from time to time, in
the reasonable discretion of the Liquidator or the
General Partner, in the same proportions and the amount distributed to such trust by the
Partnership would otherwise have been distributed to the General Partner and Limited Partners
pursuant to this Agreement; or
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(2) withheld or escrowed to provide a reasonable reserve for Partnership liabilities
(contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed
to the Partnership,
provided
,
that
such withheld or escrowed amounts shall be
distributed to the General Partner and Limited Partners in the manner and priority set forth in
Section 13.2.A
as soon as practicable.
Section 13.5
Deemed Contribution and Distribution
Notwithstanding any other provision of this
Article 13
, in the event the Partnership
is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Liquidating
Event has occurred, the Partnerships property shall not be liquidated, the Partnerships
liabilities shall not be paid or discharged, and the Partnerships affairs shall not be wound up.
Instead, the Partnership shall be deemed to have contributed all of its assets and liabilities to a
new partnership in exchange for an interest in the new partnership. Immediately thereafter, the
Partnership shall be deemed to distribute interests in the new partnership to the General Partner
and Limited Partners in proportion to their respective interests in the Partnership in liquidation
of the Partnership.
Section 13.6
Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited Partner shall look solely to the
assets of the Partnership for the return of his Capital Contribution and shall have no right or
power to demand or receive property from the General Partner. No Limited Partner shall have
priority over any other Limited Partner as to the return of his Capital Contributions,
distributions or allocations.
Section 13.7
Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs that would, but for provisions of
Section 13.1
, result in a dissolution of the Partnership, the General Partner shall, within
thirty (30) days thereafter, provide written notice thereof to each of the Partners and to all
other parties with whom the Partnership regularly conducts business (as determined in the
discretion of the General Partner) and shall publish notice thereof in a newspaper of general
circulation in each place in which the Partnership regularly conducts business (as determined in
the discretion of the General Partner).
Section 13.8
Cancellation of Certificate of Limited Partnership
Upon the completion of the liquidation of the Partnership cash and property as provided in
Section 13.2
, the Partnership shall be terminated and the Certificate and all
qualifications of the Partnership as a foreign limited partnership in jurisdictions shall be
cancelled and such other actions as may be necessary to terminate the Partnership shall be taken.
Section 13.9
Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the business and affairs of
the Partnership and the liquidation of its assets pursuant to
Section 13.2
, in order to
minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement
shall remain in effect between the Partners during the period of liquidation.
Section 13.10
Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership property.
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ARTICLE 14.
AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS
Section 14.1
Amendments
A
. The actions requiring consent or approval of the Partners or of the Limited Partners
pursuant to this Agreement, including
Section 7.3
, or otherwise pursuant to applicable law,
are subject to the procedures in this
Article 14
.
B
. Amendments to this Agreement requiring the consent or approval of Limited Partners may be
proposed by the General Partner or by Limited Partners holding twenty-five percent (25%) or more of
the Partnership Interests held by Limited Partners. Following such proposal, the General Partner
shall submit any proposed amendment to the Partners or to the Limited Partners, as applicable. The
General Partner shall seek the written consent of the Limited Partners on the proposed amendment or
shall call a meeting to vote thereon and to transact any other business that it may deem
appropriate. For purposes of obtaining a written consent, the General Partner may require a
response within a reasonable specified time, but not less than fifteen (15) days, and failure to
respond in such time period shall constitute a consent which is consistent with the General
Partners recommendation (if so recommended) with respect to the proposal;
provided
,
that
, an action shall become effective at such time as requisite consents are received even
if prior to such specified time.
C
. No amendment to this Agreement that would adversely affect the rights and interests of the
Special General Partner may be made without the prior written consent of the Special General
Partner.
Section 14.2
Action by the Partners
A
. Meetings of the Partners may be called by the General Partner and shall be called upon the
receipt by the General Partner of a written request by Limited Partners holding twenty-five percent
(25%) or more of the Partnership Interests held by Limited Partners. The notice shall state the
nature of the business to be transacted. Notice of any such meeting shall be given to all Partners
not less than seven (7) days nor more than thirty (30) days prior to the date of such meeting.
Partners may vote in person or by proxy at such meeting. Whenever the vote or Consent of the
Limited Partners or of the Partners is permitted or required under this Agreement, such vote or
Consent may be given at a meeting of Partners or may be given in accordance with the procedure
prescribed in
Section 14.1
.
B
. Any action required or permitted to be taken at a meeting of the Partners may be taken
without a meeting if a written consent setting forth the action so taken is signed by the
percentage as is expressly required by this Agreement for the action in question. Such consent may
be in one instrument or in several instruments, and shall have the same force and effect as a vote
of the Percentage Interests of the Partners (expressly required by this Agreement). Such consent
shall be filed with the General Partner. An action so taken shall be deemed to have been taken at a
meeting held on the effective date so certified.
C
. Each Limited Partner may authorize any Person or Persons to act for him by proxy on all
matters in which a Limited Partner is entitled to participate, including waiving notice of any
meeting, or voting or participating at a meeting. Every proxy must be signed by the Limited Partner
or his attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of
the Limited Partner executing it.
D
. Each meeting of Partners shall be conducted by the General Partner or such other Person as
the General Partner may appoint pursuant to such rules for the conduct of the meeting as the
General Partner or such other Person deems appropriate.
E
. On matters on which Limited Partners are entitled to vote, each Limited Partner shall have
a vote equal to the number of OP Units held.
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ARTICLE 15.
GENERAL PROVISIONS
Section 15.1
Addresses and Notice
Any notice, demand, request or report required or permitted to be given or made to a Partner
or Assignee under this Agreement shall be in writing and shall be deemed given or made when
delivered in person or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address set forth in
Exhibit A
or such other
address as the Partners shall notify the General Partner in writing.
Section 15.2
Titles and Captions
All article or section titles or captions in this Agreement are for convenience only. They
shall not be deemed part of this Agreement and in no way define, limit, extend or describe the
scope or intent of any provisions hereof. Except as specifically provided otherwise, references to
Articles and Sections are to Articles and Sections of this Agreement.
Section 15.3
Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and
verbs shall include the plural and vice versa.
Section 15.4
Further Action
The parties shall execute and deliver all documents, provide all information and take or
refrain from taking action as may be necessary or appropriate to achieve the purposes of this
Agreement.
Section 15.5
Binding Effect
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their
heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 15.6
Creditors
Other than as expressly set forth herein with respect to Indemnitees, none of the provisions
of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the
Partnership.
Section 15.7
Waiver
No failure or delay by any party to insist upon the strict performance of any covenant, duty,
agreement or condition of this Agreement or to exercise any right or remedy consequent upon any
breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
Section 15.8
Counterparts
This Agreement may be executed in counterparts, all of which together shall constitute one
agreement binding on all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
-53-
Section 15.9
Applicable Law
This Agreement shall be construed in accordance with and governed by the laws of the State of
Delaware, without regard to the principles of conflicts of law.
Section 15.10
Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions contained herein
shall not be affected thereby.
Section 15.11
Entire Agreement
This Agreement contains the entire understanding and agreement among the Partners with respect
to the subject matter hereof and supersedes any other prior written or oral understandings or
agreements among them with respect thereto.
Section 15.12
No Rights as Stockholders
Nothing contained in this Agreement shall be construed as conferring upon the holders of OP
Units any rights whatsoever as stockholders of the General Partner, including without limitation
any right to receive dividends or other distributions made to stockholders of the General Partner
or to vote or to consent or to receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the General Partner or any other matter.
[the remainder of this page is intentionally left blank]
-54-
IN WITNESS WHEREOF
, the parties hereto have executed this Agreement of Limited Partnership as
of the date first written above.
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General Partner:
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CAREY WATERMARK INVESTORS
INCORPORATED,
a Maryland corporation
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By:
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/s/ Thomas E. Zacharias
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Name:
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Thomas E. Zacharias
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Title:
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Chief Operating Officer
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Special General Partner:
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CAREY WATERMARK HOLDINGS, LLC,
a Delaware limited liability company
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By:
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CLA HOLDINGS, LLC, its Managing Member
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/s/ Mark J. DeCesaris
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Name:
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Mark J. DeCesaris
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Title:
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Chief Financial Officer
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Signature Page to OP Agreement
Exhibit 10.5
CAREY WATERMARK INVESTORS INCORPORATED
2010 EQUITY INCENTIVE PLAN
TABLE
OF CONTENTS
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Page
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1. DEFINITIONS
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1
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2. EFFECTIVE DATE AND TERMINATION OF PLAN
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4
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3. ADMINISTRATION OF PLAN
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5
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4. SHARES AND UNITS SUBJECT TO THE PLAN
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5
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5. RESTRICTED STOCK UNITS
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6
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6. DIVIDEND EQUIVALENT RIGHTS
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9
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7. PERFORMANCE GOALS
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10
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8. TAX WITHHOLDING
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11
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9. REGULATIONS AND APPROVALS
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11
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10. INTERPRETATION AND AMENDMENTS; OTHER RULES
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12
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11. CHANGES IN CAPITAL STRUCTURE
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13
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12. MISCELLANEOUS
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14
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EXHIBIT A
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16
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CAREY WATERMARK INVESTORS INCORPORATED
2010 EQUITY INCENTIVE PLAN
Carey Watermark Investors Incorporated, a Maryland corporation, wishes to provide incentives
to certain employees (if any) and officers of the Company and others expected to provide
significant services to the Company, whether directly or through Subsidiaries, including the
personnel, employees and officers of the Advisor, Subadvisor and their respective Affiliates, to
encourage a proprietary interest in the Company, to encourage certain key personnel to remain in
the service of the Company and the Advisor, Subadvisor and their respective Affiliates, to attract
new personnel with outstanding qualifications, and to afford additional incentive to others to
increase their efforts in providing significant services to the Company and the Advisor, Subadvisor
and their respective Affiliates. In furtherance thereof, the Carey Watermark Investors
Incorporated 2010 Equity Incentive Plan is designed to provide equity-based incentives to certain
Eligible Persons. Awards under the Plan may be made to selected Eligible Persons in the form of
Restricted Stock Units or Dividend Equivalent Rights.
1.
DEFINITIONS.
Whenever used herein, the following terms shall have the meanings set forth below:
Advisor means Carey Lodging Advisors, LLC.
Affiliate means any entity other than a Subsidiary that is controlled by or under common
control with the Company that is designated as an Affiliate by the Plan Administrator in its
discretion.
Award, shall include Restricted Stock Units and Dividend Equivalent Rights.
Award Agreement means a written agreement in a form approved by the Plan Administrator to be
entered into between the Company and the Grantee as provided in Section 3.
Board means the Board of Directors of the Company.
Cause means, unless otherwise provided in the Grantees Award Agreement: (i) engaging in (A)
willful or gross misconduct or (B) willful or gross neglect; (ii) repeatedly failing to adhere to
the directions of superiors or the Board or the written policies and practices of the Advisor, the
Subadvisor, the Company, any Subsidiaries or their Affiliates; (iii) the commission of a felony or
a crime of moral turpitude, dishonesty, breach of trust or unethical business conduct, or any crime
involving the Advisor, the Subadvisor, the Company or any Subsidiaries, or any Affiliate thereof;
(iv) fraud, misappropriation or embezzlement; (v) a material breach of the Grantees employment
agreement (if any) with the Advisor, the Subadvisor, the Company or any Subsidiaries or their
Affiliates; (vi) acts or omissions constituting a material failure to perform substantially and
adequately the duties assigned to the Grantee; (vii) any illegal act detrimental to the Advisor,
the Subadvisor, the Company or any Subsidiaries or their Affiliates; or (viii) repeated failure to
devote the appropriate amount of Grantees business time and efforts to the Advisor, the
Subadvisor, the Company, any Subsidiaries or their Affiliates if required by Grantees employment
agreement; provided, however, that, if at any particular time the Grantee is subject to an
effective employment agreement with the Advisor, the Subadvisor or the Company, then, in lieu of
the foregoing definition, Cause shall at that time have such meaning as may be specified in such
employment agreement.
1
Change in Control means, unless otherwise provided in the Grantees Award Agreement, the
happening of any of the following:
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(i)
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any person, including a group (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act, but excluding the Company or the Advisor, any entity
controlling, controlled by or under common control with the Company or the Advisor, any
trustee, fiduciary or other person or entity holding securities under any employee
benefit plan or trust of the Company or the Advisor or any such entity, and, with
respect to any particular Grantee, the Grantee and any group (as such term is used in
Section 13(d)(3) of the Exchange Act) of which the Grantee is a member), is or becomes
the beneficial owner (as defined in Rule 13(d)(3) under the Exchange Act), directly
or indirectly, of securities of the Company representing 50% or more of either (A) the
combined voting power of the Companys then outstanding securities or (B) the then
outstanding Shares (in either such case other than as a result of an acquisition of
securities directly from the Company); provided, however, that, in no event shall a
Change in Control be deemed to have occurred upon an initial public offering of the
Common Stock under the Securities Act; or
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(ii)
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any consolidation or merger of the Company where the stockholders of the
Company, immediately prior to the consolidation or merger, would not, immediately after
the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, shares representing in the aggregate
50% or more of the combined voting power of the securities of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate parent
corporation, if any); or
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(iii)
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there shall occur (A) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets of the Company, other than a
sale or disposition by the Company of all or substantially all of the Companys assets
to an entity, at least 50% of the combined voting power of the voting securities of
which are owned by persons (as defined above) in substantially the same proportion as
their ownership of the Company immediately prior to such sale or (B) the approval by
stockholders of the Company of any plan or proposal for the liquidation or dissolution
of the Company; or
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(iv)
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the members of the Board at the beginning of any consecutive 24-calendar-month
period (the Incumbent Directors) cease for any reason other than due to death to
constitute at least a majority of the members of the Board; provided that any director
whose election, or nomination for election by the Companys stockholders, was approved
or ratified by a vote of at least a majority of the Incumbent Directors shall be deemed
to be an Incumbent Director.
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Notwithstanding the foregoing, no event or condition described in clauses (i) through (iv) above
shall constitute a Change in Control if it results from (A) a transaction between the Company and
Advisor, or an Affiliate of Advisor, or (B) a termination of the advisory agreement by and between
the Company and Advisor for Cause.
Notwithstanding the foregoing, no event or condition shall constitute a Change in Control to the
extent that, if it were, a 20% tax would be imposed upon or with respect to any Award under Section
409A of the Code; provided that, in such a case, the event or condition shall continue to
constitute a Change in Control to the maximum extent possible (e.g., if applicable, in respect of
vesting without an acceleration of distribution) without causing the imposition of such 20% tax.
Code means the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder.
2
Common Stock means the Companys common stock, par value $.01 per share, either currently
existing or authorized hereafter.
Company means Carey Watermark Investors Incorporated, a Maryland corporation.
Disability means that a Grantee is (i) unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment that can be expected to
result in death or last for a continuous period of at least twelve (12) months; or (ii) by reason
of any medically determinable physical or mental impairment that can be expected to result in death
or last for a continuous period of at least twelve (12) months, receiving income replacement
benefits for at least three (3) months under an accident and health plan covering the Companys, a
Subsidiarys, the Advisors or the Subadvisors employees. Notwithstanding the foregoing, no
circumstances or condition shall constitute a Disability to the extent that, if it were, a 20% tax
would be imposed upon or with respect to any Award under Section 409A of the Code; provided that,
in such a case, the event or condition shall continue to constitute a Disability to the maximum
extent possible (e.g., if applicable, in respect of vesting without an acceleration of
distribution) without causing the imposition of such 20% tax.
Dividend Equivalent Right means a right awarded under Section 6 of the Plan to receive (or
have credited) the equivalent value of dividends paid on Common Stock.
Eligible Person means (i) an officer or employee (if any) of the Company or its
Subsidiaries, (ii) an officer or employee of the Advisor, Subadvisor or their respective
Affiliates, which includes W. P. Carey & Co. and Watermark Capital Partners, LLC or (iii) a Member,
or other person expected to provide significant services (of a type expressly approved by the Plan
Administrator as covered services for these purposes) to the Company or its Subsidiaries. In the
case of the grant of Awards directly or indirectly to officers or employees of entities described
in clause (ii) of the foregoing sentence, the Plan Administrator may make arrangements with such
entities in its discretion, in light of tax and other considerations.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Fair Market Value per Share as of a particular date means (i) if Shares are then listed on a
national securities exchange or quoted or reported on a national quotation system, the closing
sales price per Share on the exchange or system for the applicable date or, if there are no sales
on such date, for the last preceding date on which there was a sale of Shares on such exchange or
system; (ii) if Shares are not then listed on a national securities exchange or quoted on a
national quotation system but are then traded on an over-the-counter market, the average of the
closing bid and asked prices for the Shares in such over-the-counter market for the date in
question, or, if there are no bid and asked prices on such date, for the last preceding date on
which there was a sale of such Shares in such market; or (iii) if Shares are not then listed on a
national securities exchange, quoted on a national quotation system or traded on an
over-the-counter market, such value as may be determined by the Plan Administrator in its
discretion or as may be determined in accordance with such methodologies, procedures or other rules
(which may provide, without limitation, that determinations of Fair Market Value shall be made by
an independent third party) as may be established by the Plan Administrator in its discretion;
provided that, where the Shares are so listed or traded, the Plan Administrator may make such
discretionary determinations, or implement such methodologies, procedures or other rules, where the
Shares have not been traded for 10 trading days.
Grantee means an Eligible Person to whom an Award is granted.
Member means a non-director member of the investment committee of the Board, who is not an
officer of the Company.
3
Performance Goals has the meaning set forth in Section 7 of the Plan.
Plan means the Companys 2010 Equity Incentive Plan, as set forth herein and as the same may
from time to time be amended.
Plan Administrator means the independent directors of the Board.
Restricted Stock Unit means a right, pursuant to the Plan, of the Grantee to payment of the
Restricted Stock Unit Value in accordance with Section 5.
Restricted Stock Unit Value, per Restricted Stock Unit, means the Fair Market Value of a
Share or, if so provided by the Plan Administrator, such Fair Market Value to the extent in excess
of a base value established by the Plan Administrator at the time of grant.
Retirement means, unless otherwise provided in the applicable Award Agreement, the
Termination of Service of a Grantee under circumstances which would entitle the Grantee to an
immediate pension under an approved retirement plan of the Company, the Advisor or the Subadvisor,
or, in the absence of such a plan, the Termination of Service (other than for Cause) of a Grantee
on or after the Grantees attainment of age 65 or on or after the Grantees attainment of age 55
with five consecutive years of service with the Company, the Advisor, the Subadvisor, any
Subsidiaries or their Affiliates.
Securities Act means the Securities Act of 1933, as amended.
Settlement Date means the date determined under Section 5.4(c).
Shares means shares of Common Stock of the Company.
Subadvisor means CWA, LLC, an Illinois limited liability company.
Subsidiary means any corporation, partnership or other entity of which at least 50% of the
economic interest in the equity or voting power is owned (directly or indirectly) by the Company,
the Advisor or another subsidiary. In the event the Company or the Advisor becomes such a
subsidiary of another company (directly or indirectly), the provisions hereof applicable to
subsidiaries shall, unless otherwise determined by the Plan Administrator, also be applicable to
such parent company.
Termination of Service means a Grantees termination of employment or other service, as
applicable, including Disability or Retirement, with the Company, Subsidiaries, the Advisor, the
Subadvisor or their Affiliates. Notwithstanding the foregoing, a Grantees Termination of Service
shall be a separation from service as interpreted within the meaning of Section 409A of the Code
and Treasury Regulation 1.409A-1(h). Unless otherwise provided in the Award Agreement, cessation
of service as an officer, employee or Member shall not be treated as a Termination of Service if
the Grantee continues without interruption to serve thereafter in another one (or more) of such
other capacities, and Termination of Service shall be deemed to have occurred when service in the
final covered capacity ceases.
2.
EFFECTIVE DATE AND TERMINATION OF PLAN
.
The effective date of the Plan is
September 15, 2010; provided, however, that the Plan shall not
become effective unless and until it is approved by the requisite percentage of the holders of the
Common Stock of the Company. The Plan shall terminate on, and no Award shall be granted hereunder
on or after, the 10-year anniversary of the earlier of the approval of the Plan by (i) the Board or
(ii) the stockholders of the Company; provided, however, that the Board may at any time prior to
that date terminate the Plan.
4
3.
ADMINISTRATION OF PLAN
.
(a) The Plan shall be administered by the Plan Administrator. The Plan Administrator, upon
and after such time as it is subject to Section 16 of the Exchange Act, shall consist of at least
two individuals each of whom shall be a nonemployee director as defined in Rule 16b-3 as
promulgated by the Securities and Exchange Commission (Rule 16b-3) under the Exchange Act, and
shall, at such times as the Company is subject to Section 162(m) of the Code (to the extent relief
from the limitation of Section 162(m) of the Code is sought with respect to Awards), qualify as
outside directors for purposes of Section 162(m) of the Code; provided that no action taken by
the Plan Administrator (including, without limitation, grants) shall be invalidated because any or
all of the members of the Plan Administrator fails to satisfy the foregoing requirements of this
sentence. The acts of a majority of the members present at any meeting of the Plan Administrator
at which a quorum is present, or acts approved in writing by a majority of the Plan Administrator,
shall be the acts of the Plan Administrator for purposes of the Plan. If and to the extent
applicable, no member of the Plan Administrator may act as to matters under the Plan specifically
relating to such member. Notwithstanding the other foregoing provisions of this Section 3(a), any
Award under the Plan to a person who is a member of the Plan Administrator shall be made and
administered by the Board. If no Plan Administrator is designated by the Board to act for these
purposes, the Board shall have the rights and responsibilities of the Plan Administrator hereunder
and under the Award Agreements.
(b) Subject to the provisions of the Plan, the Plan Administrator shall in its discretion as
reflected by the terms of the Award Agreements (i) authorize the granting of Awards to Eligible
Persons (or to an entity for the benefit of Eligible Persons) and (ii) determine the eligibility of
an Eligible Person to receive an Award, as well as determine the number of Shares to be covered
under any Award Agreement, considering the position and responsibilities of the Eligible Person,
the nature and value to the Company of the Eligible Persons present and potential contribution to
the success of the Company, whether directly or through Subsidiaries, the other compensation and
distributions received by the Advisor and the Subadvisor and their affiliates from the Company and
its Subsidiaries and such other factors as the Plan Administrator may deem relevant. In granting
Awards under the Plan, the Plan Administrator may impose conditions on the transfer of Awards
received under the Plan, and may impose other restrictions and requirements as it may deem
appropriate.
(c) The Award Agreement shall contain such other terms, provisions and conditions not
inconsistent herewith as shall be determined by the Plan Administrator. In the event that any
Award Agreement or other agreement hereunder provides (without regard to this sentence) for the
obligation of the Company or any Affiliate thereof to purchase or repurchase Shares from a Grantee
or any other person, then, notwithstanding the provisions of the Award Agreement or such other
agreement, such obligation shall not apply to the extent that the purchase or repurchase would not
be permitted under Maryland law. The Grantee shall take whatever additional actions and execute
whatever additional documents the Plan Administrator may in its reasonable judgment deem necessary
or advisable in order to carry out or effect one or more of the obligations or restrictions imposed
on the Grantee pursuant to the express provisions of the Plan and the Award Agreement.
4.
SHARES AND UNITS SUBJECT TO THE PLAN
.
(a) Subject to adjustments as provided in Section 11 of the Plan, the total number of Shares
subject to Awards granted under the Plan, in the aggregate may not exceed
4,000,000. Subject to adjustments pursuant to Section 11 of the Plan, the maximum number of Shares subject to Awards
granted under the Plan in any one year to any Eligible Person, shall not exceed
4,000,000. Shares distributed under the Plan may be treasury Shares or authorized but unissued Shares. Any Shares
that have been
reserved for distribution in payment for Restricted Stock Units but are later forfeited or for
any other reason are not payable under the Plan may again be made the subject of Awards under the
Plan.
5
(b) Shares subject to Dividend Equivalent Rights, other than Dividend Equivalent Rights based
directly on the dividends payable on a number of Shares corresponding to the number of Restricted
Stock Units awarded, shall be subject to the limitation of Section 4(a). Notwithstanding Section
4(a), except in the case of Awards intended to qualify for relief from the limitations of Section
162(m) of the Code, there shall be no limit on the number of Restricted Stock Units or Dividend
Equivalent Rights, to the extent they are paid out in cash, that may be granted under the Plan. If
any Restricted Stock Units or Dividend Equivalent Rights are paid out in cash, then,
notwithstanding the first sentence of Section 4(a) above (but subject to the second sentence
thereof), the underlying Shares may again be made the subject of Awards under the Plan.
(c) The certificates for Shares issued hereunder may include any legend which the Plan
Administrator deems appropriate to reflect any restrictions on transfer hereunder or under the
Award Agreement, or as the Plan Administrator may otherwise deem appropriate.
5.
RESTRICTED STOCK UNITS
.
5.1
Grant of Restricted Stock Units
.
Subject to the other terms of the Plan, the Plan Administrator shall, in its discretion as
reflected by the terms of the applicable Award Agreement: (i) authorize the granting of Restricted
Stock Units to Eligible Persons (ii) provide a specified purchase price for the Restricted Stock
Units (whether or not the payment of a purchase price is required by any state law applicable to
the Company); (iii) determine the period of forfeiture and related restrictions, if any, applicable
to Restricted Stock Units; and (iv) determine or impose other conditions, including any applicable
Performance Goals, to the grant of Restricted Stock Units under the Plan as it may deem
appropriate.
5.2
Term
.
The Plan Administrator may provide in an Award Agreement that any particular Restricted Stock
Unit shall expire at the end of a specified term.
5.3
Vesting
.
(a) In connection with the grant of Restricted Stock Units, whether or not Performance Goals
(as provided for under Section 7 of the Plan) apply thereto, the Plan Administrator shall establish
one or more vesting periods with respect to the Restricted Stock Units granted, the length of which
shall be determined in the discretion of the Plan Administrator. Subject to the provisions of this
Section 5, the applicable Award Agreement and the other provisions of the Plan, restrictions on
Restricted Stock Units shall lapse if the Grantee satisfies all applicable employment or other
service requirements through the end of the applicable vesting period.
(b) Restricted Stock Units shall vest as provided in the applicable Award Agreement. Unless
otherwise stated in the Award Agreement, upon the Grantees Termination of Service, all unvested
Restricted Stock Units shall be forfeited.
6
5.4
Settlement of Restricted Stock Units
.
(a) Each vested and outstanding Restricted Stock Unit shall be settled by the transfer to the
Grantee of one Share; provided that the Plan Administrator at the time of grant (or, in the
appropriate case, as determined by the Plan Administrator, thereafter) may provide that, after
consideration of possible accounting issues, a Restricted Stock Unit may be settled (i) in cash at
the applicable Restricted Stock Unit Value, (ii) in cash or by transfer of Shares as elected by the
Grantee in accordance with procedures established by the Plan Administrator or (iii) in cash or by
transfer of Shares as elected by the Company.
(b) Payment (whether of cash or Shares) in respect of Restricted Stock Units shall be made in
a single sum by the Company; provided that, with respect to Restricted Stock Units of a Grantee
which have a common Settlement Date, the Plan Administrator may permit the Grantee to elect in
accordance with procedures established by the Plan Administrator (taking into account, without
limitation, Section 409A of the Code, as the Plan Administrator may deem appropriate) to receive
installment payments over a period not to exceed 10 years, rather than a single-sum payment.
(c) Regarding the time at which payment in respect of Restricted Stock Units will be made or
commence:
(i) Unless otherwise provided in the applicable Award Agreement, the
Settlement Date with respect to a Restricted Stock Unit is the first day of the
month to follow the date on which the Restricted Stock Unit vests; provided,
however, that a Grantee may elect at or prior to grant, if permitted by and in
accordance with procedures to be established by the Plan Administrator, that such
Settlement Date will be deferred as elected by the Grantee to the first day of the
month to follow the Grantees Termination of Service, or such other time as may be
permitted by the Plan Administrator. Notwithstanding the prior sentence, all
initial elections to defer the Settlement Date shall be made in accordance with the
requirements of Section 409A of the Code. In addition, unless otherwise determined
by the Plan Administrator, elections under this Section 5.4(c)(i) must, except as
may otherwise be permitted under the rules applicable under Section 409A of the
Code, (A) be effective at least one year after they are made, or, in the case of
payments to commence at a specific time, be made at least one year before the first
scheduled payment and (B) defer the commencement of distributions (and each affected
distribution) for at least five years.
(ii) Notwithstanding the foregoing, the Settlement Date, if not earlier pursuant
to this Section 5.4(c), is the date of the Grantees death.
(d) Notwithstanding the other provisions of this Section 5, taking into account, without
limitation, the application of Section 409A of the Code, as the Plan Administrator may deem
appropriate, in the event of a Change in Control, the Settlement Date shall be the date of such
Change in Control and all amounts due with respect to Restricted Stock Units to a Grantee hereunder
shall be paid as soon as practicable (but in no event more than 30 days) after such Change in
Control, unless such Grantee elects otherwise in accordance with procedures established by the Plan
Administrator.
7
(e) Notwithstanding any other provision of the Plan, a Grantee may receive any amounts to be
paid in installments as provided in Section 5.4(b) or deferred by the Grantee as provided in
Section 5.4(c) in the event of an Unforeseeable Emergency. For these purposes, an Unforeseeable
Emergency, as determined by the Plan Administrator in its sole discretion, is a severe financial
hardship to the Grantee resulting from (1) a sudden and unexpected illness or accident of the
Grantee or dependent, as defined in Section 152(a) of the Code, of the Grantee, (2) loss of the
Grantees property due to casualty, or (3) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Grantee. The circumstances
that will constitute an Unforeseeable Emergency will depend upon the facts of each case, but, in
any case, payment may not be made to the extent that such hardship is or may be relieved:
(i) through reimbursement or compensation by insurance or otherwise,
(ii) by liquidation of the Grantees assets, to the extent the liquidation of
such assets would not itself cause severe financial hardship, or
(iii) by future cessation of the making of additional deferrals under Section
5.4 (b) and (c).
Without limitation, the need to send a Grantees child to college or the desire to purchase a home
shall not constitute an Unforeseeable Emergency. Distributions of amounts because of an
Unforeseeable Emergency shall be permitted to the extent reasonably needed to satisfy the emergency
need.
5.5
Other Restricted Stock Unit Provisions
.
(a) Except as permitted by the Plan Administrator, rights to payments with respect to
Restricted Stock Units granted under the Plan shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, garnishment, levy,
execution, or other legal or equitable process, either voluntary or involuntary; and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, attach or garnish, or levy or
execute on any right to payments or other benefits payable hereunder, shall be void.
(b) A Grantee may designate in writing, on forms to be prescribed by the Plan Administrator, a
beneficiary or beneficiaries to receive any payments payable after his or her death and may amend
or revoke such designation at any time. If no beneficiary designation is in effect at the time of
a Grantees death, payments hereunder shall be made to the Grantees estate. If a Grantee with a
vested Restricted Stock Unit dies, such Restricted Stock Unit shall be settled and the Restricted
Stock Unit Value in respect of such Restricted Stock Units paid, and any payments deferred pursuant
to an election under Section 5.4(c) shall be accelerated and paid, as soon as practicable (but no
later than 60 days) after the date of death to such Grantees beneficiary or estate, as applicable.
(c) The Plan Administrator may, taking into account, without limitation, the application of
Section 409A of the Code, as the Plan Administrator may deem appropriate, establish a program under
which distributions with respect to Restricted Stock Units may be deferred for periods in addition
to those otherwise contemplated by foregoing provisions of this Section 5. Such program may
include, without limitation, provisions for the crediting of earnings and losses on unpaid amounts,
and, if permitted by the Plan Administrator, provisions under which Grantees may select from among
hypothetical investment alternatives for such deferred amounts in accordance with procedures
established by the Plan Administrator.
(d) Notwithstanding any other provision of this Section 5, any fractional Restricted Stock
Unit will be paid out in cash at the Restricted Stock Unit Value as of the Settlement Date.
(e) No Restricted Stock Unit shall be construed to give any Grantee any rights with respect to
Shares or any ownership interest in the Company. Except as may be provided in accordance with
Section 6, no provision of the Plan shall be interpreted to confer upon any Grantee of Restricted
Stock Units any voting, dividend or derivative or other similar rights with respect to any
Restricted Stock Unit.
8
5.6
Claims Procedures
.
(a) To the extent that the Plan is determined by the Plan Administrator to be subject to the
Employee Retirement Income Security Act of 1974, as amended, the Grantee, or his beneficiary
hereunder or authorized representative, may file a claim for payments with respect to Restricted
Stock Units under the Plan by written communication to the Plan Administrator or its designee. A
claim is not considered filed until such communication is actually received. Within 90 days (or,
if special circumstances require an extension of time for processing, 180 days, in which case
notice of such special circumstances should be provided within the initial 90-day period) after the
filing of the claim, the Plan Administrator will either:
(i) approve the claim and take appropriate steps for satisfaction of the claim;
or
(ii) if the claim is wholly or partially denied, advise the claimant of such
denial by furnishing to him a written notice of such denial setting forth (A) the
specific reason or reasons for the denial; (B) specific reference to pertinent
provisions of the Plan on which the denial is based and, if the denial is based in
whole or in part on any rule of construction or interpretation adopted by the Plan
Administrator, a reference to such rule, a copy of which shall be provided to the
claimant; (C) a description of any additional material or information necessary for
the claimant to perfect the claim and an explanation of the reasons why such
material or information is necessary; and (D) a reference to this Section 5.6 as the
provision setting forth the claims procedure under the Plan.
(b) The claimant may request a review of any denial of his claim by written application to the
Plan Administrator within 60 days after receipt of the notice of denial of such claim. Within 60
days (or, if special circumstances require an extension of time for processing, 120 days, in which
case notice of such special circumstances should be provided within the initial 60-day period)
after receipt of written application for review, the Plan Administrator will provide the claimant
with its decision in writing, including, if the claimants claim is not approved, specific reasons
for the decision and specific references to the Plan provisions on which the decision is based.
6.
DIVIDEND EQUIVALENT RIGHTS.
6.1
Grant of Dividend Equivalent Rights
.
Subject to the other terms of the Plan, the Plan Administrator shall, in its discretion as
reflected by the terms of the Award Agreements, authorize the granting of Dividend Equivalent
Rights to Eligible Persons based on the regular cash dividends declared on Common Stock, to be
credited as of the dividend payment dates, during the period between the date an Award is granted,
and the date such Award is exercised, vests or expires, as determined by the Plan Administrator.
Such Dividend Equivalent Rights shall be converted to cash or additional Shares by such formula and
at such time and subject to such limitation as may be determined by the Plan Administrator. If a
Dividend Equivalent Right is granted in respect of an Award hereunder, then, unless otherwise
stated in the Award Agreement, or, in the appropriate case, as determined by the Plan
Administrator, in no event shall the Dividend Equivalent Right be in effect for a period beyond the
time during which the applicable portion of the underlying Award is in effect.
9
6.2
Certain Terms
.
(a) The term of a Dividend Equivalent Right shall be set by the Plan Administrator in its
discretion.
(b) Unless otherwise determined by the Plan Administrator, except as contemplated by Section
6.4, a Dividend Equivalent Right is exercisable or payable only while the Grantee is an Eligible
Person.
(c) Payment of the amount determined in accordance with Section 6.1 shall be in cash, in
Common Stock or a combination of the two, as determined by the Plan Administrator.
(d) The Plan Administrator may impose such employment-related conditions on the grant of a
Dividend Equivalent Right as it deems appropriate in its discretion.
6.3
Other Types of Dividend Equivalent Rights
.
The Plan Administrator may establish a program under which Dividend Equivalent Rights of a
type whether or not described in the foregoing provisions of this Section 6 may be granted to
Grantees. For example, and without limitation, the Plan Administrator may grant a Dividend
Equivalent Right with respect to a Restricted Stock Unit, which right would consist of the right
(subject to Section 6.4) to receive a cash payment in an amount equal to the dividend distributions
paid on a Share from time to time.
6.4
Deferral
.
The Plan Administrator may establish a program or programs (taking into account, without
limitation, the possible application of Section 409A of the Code, as the Plan Administrator may
deem appropriate) under which Grantees (i) will have Restricted Stock Units credited, subject to
the terms of Sections 5.4 and 5.5 as though directly applicable with respect thereto, upon the
granting of Dividend Equivalent Rights, or (ii) will have payments with respect to Dividend
Equivalent Rights deferred. In the case of the foregoing clause (ii), such program may include,
without limitation, provisions for the crediting of earnings and losses on unpaid amounts, and, if
permitted by the Plan Administrator, provisions under which Grantees may select from among
hypothetical investment alternatives for such deferred amounts in accordance with procedures
established by the Plan Administrator.
7.
PERFORMANCE GOALS
.
The Plan Administrator, in its discretion, may, in the case of any Awards intended to qualify
for an exception from the limitation imposed by Section 162(m) of the Code at any time that Section
162(m) applies to the Company, or otherwise (Performance-Based Awards), (i) establish one or more
performance goals (Performance Goals) as a precondition to the issuance or vesting of Awards, and
(ii) provide, in connection with the establishment of the Performance Goals, for predetermined
Awards to those Grantees (who continue to meet all applicable eligibility requirements) with
respect to whom the applicable Performance Goals are satisfied. The Performance Goals shall be
based upon the criteria set forth in Exhibit A hereto which is hereby incorporated herein by
reference as though set forth in full. The Performance Goals shall be established in a timely
fashion such that they are considered pre-established for purposes of the rules governing
performance-based compensation under Section 162(m) of the Code at any time that Section 162(m)
applies to the Company, and compliance with such rules is sought. Prior to the award or vesting,
as applicable, of affected Awards hereunder, the Plan Administrator shall have certified that any
applicable Performance Goals, and other material terms of the Award, have been
satisfied. Performance Goals which do not satisfy the foregoing provisions of this Section 7
may be established by the Plan Administrator with respect to Awards not intended to qualify for an
exception from the limitations imposed by Section 162(m) of the Code.
10
8.
TAX WITHHOLDING
.
8.1
In General
.
The Company, or, a properly designated paying agent, shall be entitled to withhold from any
payments or deemed payments any amount of tax withholding determined by the Plan Administrator to
be required by law. Without limiting the generality of the foregoing, the Plan Administrator may,
in its discretion, require the Grantee to pay to the Company at such time as the Plan Administrator
determines the amount that the Plan Administrator deems necessary to satisfy the Companys
obligation to withhold federal, state or local income or other taxes incurred by reason of (i) the
receipt of a distribution in respect of Restricted Stock Units or Dividend Equivalent Rights or
(ii) any other applicable income-recognition event under the Plan or (iii) the lapsing of any
restrictions applicable to any Restricted Stock Units.
8.2
Share Withholding
.
Upon the making of a distribution in respect of Restricted Stock Units or Dividend Equivalent
Rights, the Grantee may, if approved (or pre-approved) by the Plan Administrator in its discretion,
make a written election to have amounts (which may include Shares) withheld by the Company from the
distribution otherwise to be made, or to deliver previously owned Shares (not subject to
restrictions hereunder), in order to satisfy the liability for such withholding taxes. In the
event that the Grantee makes, and the Plan Administrator permits, such an election, any Shares so
withheld or delivered shall have an aggregate Fair Market Value on the date of exercise sufficient
to satisfy the applicable withholding taxes.
8.3
Withholding Required
.
Notwithstanding anything contained in the Plan or the Award Agreement to the contrary, the
Grantees satisfaction of any tax-withholding requirements imposed by the Plan Administrator shall
be a condition precedent to the Companys obligation as may otherwise be provided hereunder to
provide Shares to the Grantee and to the release of any restrictions as may otherwise be provided
hereunder; and the Restricted Stock Units or Dividend Equivalent Rights shall be forfeited upon the
failure of the Grantee to satisfy such requirements with respect to the distributions in respect of
any Restricted Stock Unit or Dividend Equivalent Right or the lapsing of any restrictions
applicable to any Restricted Stock Units (or other income-recognition event).
9.
REGULATIONS AND APPROVALS
.
(a) The obligation of the Company to sell Shares with respect to an Award granted under the
Plan shall be subject to all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals by governmental agencies
as may be deemed necessary or appropriate by the Plan Administrator.
(b) The Plan Administrator may make such changes to the Plan as may be necessary or
appropriate to comply with the rules and regulations of any government authority or to obtain tax
benefits applicable to an Award.
11
(c) Each grant of Restricted Stock Units (or issuance of Shares in respect thereof) or
Dividend Equivalent Rights is subject to the requirement that, if at any time the Plan
Administrator determines, in its discretion, that the listing, registration or qualification of
Shares issuable pursuant to the Plan is required by any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the issuance of Restricted Stock Units,
Dividend Equivalent Rights or other Shares, no payment shall be made, or Restricted Stock Units or
Shares issued, in whole or in part, unless listing, registration, qualification, consent or
approval has been effected or obtained free of any conditions in a manner acceptable to the Plan
Administrator.
(d) In the event that the disposition of stock acquired pursuant to the Plan is not covered by
a then current registration statement under the Securities Act, and is not otherwise exempt from
such registration, such Shares shall be restricted against transfer to the extent required under
the Securities Act, and the Plan Administrator may require any individual receiving Shares pursuant
to the Plan, as a condition precedent to receipt of such Shares, to represent to the Company in
writing that such Shares are acquired for investment only and not with a view to distribution and
that such Shares will be disposed of only if registered for sale under the Securities Act or if
there is an available exemption for such disposition.
(e) Notwithstanding any other provision of the Plan, the Company shall not be required to take
or permit any action under the Plan or any Award Agreement which, in the good-faith determination
of the Company, would result in a material risk of a violation by the Company of Section 13(k) of
the Exchange Act.
10.
INTERPRETATION AND AMENDMENTS; OTHER RULES
.
The Plan Administrator may make such rules and regulations and establish such procedures for
the administration of the Plan as it deems appropriate. Without limiting the generality of the
foregoing, the Plan Administrator may (i) determine the extent, if any, to which Restricted Stock
Units or Dividend Equivalent Rights shall be forfeited (whether or not such forfeiture is expressly
contemplated hereunder); (ii) interpret the Plan and the Award Agreements hereunder, with such
interpretations to be conclusive and binding on all persons and otherwise accorded the maximum
deference permitted by law, provided that the Plan Administrators interpretation shall not be
entitled to deference on and after a Change in Control except to the extent that such
interpretations are made exclusively by members of the Plan Administrator who are individuals who
served as Plan Administrator members before the Change in Control; and (iii) take any other actions
and make any other determinations or decisions that it deems necessary or appropriate in connection
with the Plan or the administration or interpretation thereof. In the event of any dispute or
disagreement as to the interpretation of the Plan or of any rule, regulation or procedure, or as to
any question, right or obligation arising from or related to the Plan, the decision of the Plan
Administrator, except as provided in clause (ii) of the foregoing sentence, shall be final and
binding upon all persons. Unless otherwise expressly provided hereunder, the Plan Administrator,
with respect to any grant, may exercise its discretion hereunder at the time of the Award or
thereafter. The Board may amend the Plan as it shall deem advisable, except that no amendment may
adversely affect a Grantee with respect to an Award previously granted without such Grantees
written consent unless such amendments are required in order to comply with applicable laws;
provided, however, that the Plan may not be amended without stockholder approval (a) to materially
increase the total number of Shares that may be subject to Awards set forth in Section 4(a), (b) to
materially modify the requirements of eligibility for participation in the Plan, (c) to materially
increase the benefits accruing to Grantees under the Plan, or (d) in any other manner that in the
absence of stockholder approval would cause the Plan to fail to comply with any applicable legal
requirement or applicable exchange or similar rule.
12
11.
CHANGES IN CAPITAL STRUCTURE
.
(a) If (i) the Company or Subsidiaries shall at any time be involved in a merger,
consolidation, dissolution, liquidation, reorganization, exchange of shares, sale of all or
substantially all of the assets or stock of the Company or Subsidiaries or a transaction similar
thereto, (ii) any stock dividend, stock split, reverse stock split, stock combination,
reclassification, recapitalization or other similar change in the capital structure of the Company
or Subsidiaries, or any distribution to holders of Common Stock other than cash dividends, shall
occur or (iii) any other event shall occur which in the judgment of the Plan Administrator
necessitates action by way of adjusting the terms of the outstanding Awards, then:
(x) the maximum aggregate number and kind of Shares which may be subject to Dividend
Equivalent Rights under the Plan, and the maximum aggregate number of Restricted
Stock Units which may be granted under the Plan shall be appropriately adjusted by
the Plan Administrator in its discretion; and
(y) the Plan Administrator shall take any such action as in its discretion shall be
necessary to maintain each Grantees rights hereunder (including under their Award
Agreements) so that their respective Restricted Stock Units and Dividend Equivalent
Rights are substantially proportionate to the rights existing in such Restricted
Stock Units and Dividend Equivalent Rights prior to such event, including, without
limitation, adjustments in (A) the number of Restricted Stock Units and Dividend
Equivalent Rights granted, (B) the number and kind of shares or other property to be
distributed in respect of Restricted Stock Units and Dividend Equivalent Rights, (C)
the Restricted Stock Unit Value, and (D) performance-based criteria established in
connection with Awards (to the extent consistent with Section 162(m) of the Code, as
applicable); provided that, in the discretion of the Plan Administrator, the
foregoing clause (D) may also be applied in the case of any event relating to a
Subsidiary if the event would have been covered under this Section 11(a) had the
event related to the Company.
To the extent that such action shall include an increase or decrease in the number of Shares (or
units of other property then available) subject to all outstanding Awards, the number of Shares (or
units) available under Section 4 shall be increased or decreased, as the case may be,
proportionately, as shall be determined by the Plan Administrator in its discretion.
(b) If a Change in Control shall occur, then the Plan Administrator, as constituted
immediately before the Change in Control, may make such adjustments as it, in its discretion,
determines are necessary or appropriate in light of the Change in Control, provided that the Plan
Administrator determines that such adjustments do not have an adverse economic impact on the
Grantee as determined at the time of the adjustments. The Plan Administrator shall have the
discretion to provide that upon a Change in Control, (i) all or a portion of any outstanding Awards
shall become vested and transferable, and all or a portion of any outstanding Performance-Based
Awards will be earned, or (iii) all or a portion of any outstanding Awards may be cancelled in
exchange for a payment of cash, or all or a portion of any outstanding Awards may be substituted
for Awards that will substantially preserve the otherwise applicable terms of any affected Awards
previously granted under the Plan.
(c) The judgment of the Plan Administrator with respect to any matter referred to in this
Section 11 shall be conclusive and binding upon each Grantee without the need for any amendment to
the Plan.
13
12.
MISCELLANEOUS
.
12.1
No Rights to Employment or Other Service
.
Nothing in the Plan or in any grant made pursuant to the Plan shall confer on any individual
any right to continue in the employ or other service of the Company, the Subsidiaries, the Advisor,
the Subadvisor or their Affiliates, or interfere in any way with the right of the Company, the
Subsidiaries or the Advisor, the Subadvisor and their stockholders to terminate the individuals
employment or other service at any time.
12.2
No Fiduciary Relationship
.
Nothing contained in the Plan (including without limitation Section 5.5(c) and 6.4), and no
action taken pursuant to the provisions of the Plan, shall create or shall be construed to create a
trust of any kind, or a fiduciary relationship between the Company or Subsidiaries or their
officers or the Plan Administrator, on the one hand, and the Grantee, the Company, Subsidiaries or
any other person or entity, on the other.
12.3
Compliance with Section 409A of the Code
.
(a) Any Award Agreement issued under the Plan that is subject to Section 409A of the Code may
include such additional terms and conditions as the Plan Administrator determines are required to
satisfy the requirements of Section 409A of the Code.
(b) With respect to any Award issued under the Plan that is subject to Section 409A of the
Code, and with respect to which a payment or distribution is to be made upon a Termination of
Service, if the Grantee is determined by the Company to be a specified employee within the
meaning of Section 409A(a)(2)(B)(i) of the Code and any of the Companys stock is publicly traded
on an established securities market or otherwise, such payment or distribution, to the extent it
would constitute a payment of nonqualified deferred compensation within the meaning of Section 409A
of the Code that is ineligible for an exemption from treatment as such, may not be made before the
date which is six months after the date of Termination of Service (to the extent required under
Section 409A of the Code). Any payments or distributions delayed in accordance with the prior
sentence shall be paid to the Grantee on the first day of the seventh month following the Grantees
Termination of Service.
(c) To the extent compliance with Section 409A of the Code is intended, the Board and the Plan
Administrator shall administer the Plan, and exercise authority and discretion under the Plan,
consistent with the requirements of Section 409A of the Code or any exemption thereto.
(d) The Company makes no representation or warranty and shall have no liability to any Grantee
or any other person if any provisions of this Plan or any Award Agreement issued pursuant hereto
are determined to constitute deferred compensation subject to Section 409A of the Code but do not
satisfy an exemption from, or the conditions of, such Section.
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12.4
No Fund Created
.
Any and all payments hereunder to any Grantee shall be made from the general funds of the
Company (or, if applicable, a participating subsidiary), no special or separate fund shall be
established or other segregation of assets made to assure such payments, and the Restricted Stock
Units (including for purposes of this Section 12.4 any accounts established to facilitate the
implementation of Section 5.4(c)) and any other similar devices issued hereunder to account for
Plan obligations do not constitute Common
Stock and shall not be treated as (or as giving rise to) property or as a trust fund of any
kind; provided, however, that the Company may establish a mere bookkeeping reserve to meet its
obligations hereunder or a trust or other funding vehicle that would not cause the Plan to be
deemed to be funded for tax purposes or for purposes of Title I of the Employee Retirement Income
Security Act of 1974, as amended. The obligations of the Company under the Plan are unsecured and
constitute a mere promise by the Company to make benefit payments in the future and, to the extent
that any person acquires a right to receive payments under the Plan from the Company, such right
shall be no greater than the right of a general unsecured creditor of the Company. (If any
Affiliate of the Company is or is made responsible with respect to any Awards, the foregoing
sentence shall apply with respect to such Affiliate.) Without limiting the foregoing, Restricted
Stock Units and any other similar devices issued hereunder to account for Plan obligations are
solely a device for the measurement and determination of the amounts to be paid to a Grantee under
the Plan, and each Grantees right in the Restricted Stock Units and any such other devices is
limited to the right to receive payment, if any, as may herein be provided.
12.5
Notices
.
All notices under the Plan shall be in writing, and if to the Company, shall be delivered to
the Board or mailed to its principal office, addressed to the attention of the Board; and if to the
Grantee, shall be delivered personally, sent by facsimile transmission or mailed to the Grantee at
the address appearing in the records of the Company. Such addresses may be changed at any time by
written notice to the other party given in accordance with this Section 12.5.
12.6
Exculpation and Indemnification
.
The Company shall indemnify and hold harmless the members of the Board and the members of the
Plan Administrator from and against any and all liabilities, costs and expenses incurred by such
persons as a result of any act or omission to act in connection with the performance of such
persons duties, responsibilities and obligations under the Plan, to the maximum extent permitted
by law, other than such liabilities, costs and expenses as may result from the gross negligence,
bad faith, willful misconduct or criminal acts of such persons.
12.7
Captions
.
The use of captions in the Plan is for convenience. The captions are not intended to provide
substantive rights.
12.8
Governing Law
.
THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MARYLAND WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF MARYLAND.
12.9
Gender Neutral
.
Wherever used herein, a pronoun in the masculine gender shall be considered as including the
feminine gender unless the context clearly indicates otherwise.
15
EXHIBIT A
PERFORMANCE CRITERIA
Performance-Based Awards intended to qualify as performance based compensation under Section
162(m) of the Code, may be payable upon the attainment of objective Performance Goals that are
established by the Plan Administrator and relate to one or more Performance Criteria, in each case
on specified date or over any period, up to 10 years, as determined by the Plan Administrator.
Performance Criteria may (but need not) be based on the achievement of the specified levels of
performance under one or more of the measures set out below relative to the performance of one or
more other corporations or indices.
Performance Criteria means the following business criteria (or any combination thereof) with
respect to one or more of the Company, any participating company or any division or operating unit
thereof:
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(i)
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pre-tax income;
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(ii)
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after-tax income;
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(iii)
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net income (meaning net income as reflected in the Companys financial reports
for the applicable period, on an aggregate, diluted and/or per share basis);
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(iv)
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operating income;
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(v)
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cash flow;
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(vi)
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earnings per share;
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(vii)
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return on equity;
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(viii)
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return on invested capital or assets;
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(ix)
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cash and/or funds available for distribution;
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(x)
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appreciation in the fair market value of the Common Stock;
|
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(xi)
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return on investment;
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(xii)
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total return to stockholders (meaning the aggregate Common Stock price
appreciation and dividends paid (assuming full reinvestment of dividends) during the
applicable period);
|
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(xiii)
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net earnings growth;
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(xiv)
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stock appreciation (meaning an increase in the price or value of the Common
Stock after the date of grant of an award and during the applicable period);
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(xv)
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related return ratios;
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(xvi)
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increase in revenues;
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16
|
(xvii)
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net earnings;
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(xviii)
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changes (or the absence of changes) in the per share or aggregate market price of
the Companys Common Stock;
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(xix)
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number of securities sold;
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(xx)
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earnings before any one or more of the following items: interest, taxes,
depreciation or amortization for the applicable period, as reflected in the Companys
financial reports for the applicable period;
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(xxi)
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total revenue growth (meaning the increase in total revenues after the date of
grant of an award and during the applicable period, as reflected in the Companys
financial reports for the applicable period);
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(xxii)
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the Companys published ranking against its peer group of real estate investment
trusts based on total stockholder return;
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(xxiii)
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funds from operations;
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(xxiv)
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adjusted funds from operations and operating activities; and
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(xxv)
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adjusted cash flow from operations.
|
Performance Goals may be absolute amounts or percentages of amounts, may be relative to the
performance of other companies or of indexes or may be based upon absolute values or values
determined on a per-share basis.
Except as otherwise expressly provided, all financial terms are used as defined under
Generally Accepted Accounting Principles (GAAP) and all determinations shall be made in
accordance with GAAP, as applied by the Company in the preparation of its periodic reports to
stockholders.
To the extent permitted by Section 162(m) of the Code, unless the Plan Administrator provides
otherwise at the time of establishing the Performance Goals, for each fiscal year of the Company,
there shall be objectively determinable adjustments, as determined in accordance with GAAP, to any
of the Performance Criteria described above for one or more of the items of gain, loss, profit or
expense: (A) determined to be extraordinary or unusual in nature or infrequent in occurrence, (B)
related to the disposal of a segment of a business, (C) related to a change in accounting principle
under GAAP, (D) related to discontinued operations that do not qualify as a segment of a business
under GAAP, and (E) attributable to the business operations of any entity acquired by the Company
during the fiscal year.
17