AMENDED AND RESTATED LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT OF CNL INCOME GW PARTNERSHIP, LLLP

Exhibit 10.1

 

AMENDED AND RESTATED

LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT

 

OF

 

CNL INCOME GW PARTNERSHIP, LLLP

 

Dated: As of October 11, 2005

TABLE OF CONTENTS

 

 

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CNL INCOME GW PARTNERSHIP, LLLP

AMENDED AND RESTATED

LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT

 

THIS AMENDED AND RESTATED LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT (this “ Agreement ”) is made and entered into as of October 11, 2005 (the “ Effective Date ”), by and among (i) CNL INCOME GW GP, LLC , a Delaware limited liability company (“ CNL GP ” or “ General Partner ”), (ii) CNL INCOME PARTNERS, LP , a Delaware limited partnership (“ CNL LP ”), and (iii) GREAT BEAR LODGE OF WISCONSIN DELLS, LLC , a Delaware limited liability company (“ GW LP ”).

 

RECITALS

 

A. CNL LP, GW LP, Great Bear Lodge of Sandusky, LLC, a Delaware limited liability company that is an Affiliate of GW LP (“ Wolf Sandusky ”), and Great Wolf Resorts, Inc., a Delaware corporation that is an Affiliate of GW LP (“ Great Wolf Resorts ”), entered into that certain Venture Formation and Contribution Agreement dated as of October 3, 2005 (the “ Formation Agreement ”), which provides for, among other things, the formation of a limited liability limited partnership in Delaware to be known as CNL Income GW Partnership, LLLP (the “ Partnership ”) and the execution of this Agreement.

 

B. Pursuant to the Formation Agreement, the Partnership was formed by its original general partner, Wolf Sandusky, and its original limited partners, GW LP and Wolf Sandusky.

 

C. Pursuant to the Formation Agreement and as of the Effective Date, (i) CNL GP has acquired the entire general partner partnership interest in the Partnership of Wolf Sandusky, and (ii) CNL LP has acquired the entire limited partner partnership interest in the Partnership of Wolf Sandusky and a portion of the limited partner partnership interest in the Partnership of GW LP.

 

D. In connection with the transactions contemplated in the Formation Agreement, the parties hereto desire to enter into this Agreement for the purpose of setting forth in writing the terms and provisions of their agreements as to the Partnership.

 

NOW, THEREFORE , in consideration of the mutual promises, covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, CNL GP, CNL LP and GW LP agree as follows:

 

ARTICLE 1

FORMATION AND AMENDMENT

 

Section 1.1 Organization . The Partnership was organized as a Delaware limited liability limited partnership pursuant to the Act.

Section 1.2 Agreement; Effect of Inconsistencies with Act . The Partners agree to the terms and conditions of this Agreement, as it may from time to time be amended, supplemented or restated according to its terms. The Partners intend that this Agreement, the Formation Agreement, the Development Agreement, and any other agreements to be entered into pursuant to the Formation Agreement, shall be the sole source of the agreement among the parties, and, except to the extent a provision of this Agreement expressly incorporates federal income tax rules by reference to sections of the Code or Regulations or is expressly prohibited or ineffective under the Act, this Agreement shall govern, even when inconsistent with, or different than, the provisions of the Act or any other law. To the extent any provision of this Agreement is prohibited or ineffective under the Act, this Agreement shall be considered amended to the smallest degree possible in order to make such provision effective under the Act. If the Act is subsequently amended or interpreted in such a way as to validate a provision of this Agreement that was formerly invalid, such provision shall be considered to be valid from the effective date of such interpretation or amendment. Each Partner shall be entitled to rely on the provisions of this Agreement, and no Partner shall be liable to the Partnership or to any other Partner for any action or refusal to act taken in good faith reliance on this Agreement. The Partners and the Partnership agree that the duties and obligations imposed on the Partners as such shall be those set forth in this Agreement, which is intended to govern the relationship among the Partnership and the Partners, notwithstanding any provision of the Act or common law to the contrary.

 

Section 1.3 Name . The name of the Partnership shall be “CNL Income GW Partnership, LLLP” and such name shall be used at all times in connection with the conduct of the Partnership’s business.

 

Section 1.4 Effective Date . This Agreement shall become effective as of the date set forth in the first paragraph on page 1 of this Agreement.

 

Section 1.5 Term . The Partnership shall have perpetual existence and shall continue until the Partnership is dissolved and its affairs wound up in accordance with this Agreement and the Act.

 

Section 1.6 Certificate of Limited Partnership; Statement of Qualification . On October 7, 2005, a Certificate of Limited Partnership for the Partnership was filed with the Secretary of State pursuant to the Act. On that date, a Statement of Qualification for the Partnership was also filed with the Secretary of State pursuant to the Act qualifying the Partnership as a limited liability limited partnership under the Act. On the Effective Date, a Certificate of Amendment to the Certificate of Limited Partnership was filed with the Secretary of State pursuant to the Act to reflect the change in the general partner of the Partnership described in the Recitals above. The General Partner shall take all other actions deemed by it to be necessary or appropriate from time to time to comply with all applicable requirements for the operation and, when appropriate, termination of the Partnership as a limited liability limited partnership under the Act.

 

Section 1.7 Registered Agent and Office . The Partnership’s registered agent for service of process and registered office in the State of Delaware shall be that Person and location reflected in the Certificate. The General Partner may, from time to time, change the registered

 

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agent or office through appropriate filings with the Secretary of State. If the registered agent ceases to act as such for any reason or the registered office shall change, the General Partner shall promptly designate a replacement registered agent or file a notice of change of address, as the case may be.

 

Section 1.8 Principal Place of Business . The Partnership’s principal place of business shall be located at c/o CNL Income Properties, Inc., CNL Center at City Commons, 450 South Orange Avenue, Orlando, Florida 32801-3336. The General Partner may change the location of the Partnership’s principal place of business from time to time; provided that the General Partner shall provide notice of such change to each of the Limited Partners. The General Partner shall make any filing and take any other action required by applicable law in connection with the change and shall give notice to all Partners of the new location of the Partnership’s principal place of business promptly after the change becomes effective. The General Partner may establish and maintain additional places of business for the Partnership.

 

Section 1.9 Foreign Qualifications . The Partnership shall qualify to do business as a foreign limited partnership in each jurisdiction in which the nature of its business requires such qualification. The General Partner may select any Person permitted by applicable law to act as registered agent for the Partnership in each jurisdiction in which it is qualified to do business, and may replace any such Person from time to time.

 

Section 1.10 Partner’s Qualifications . Each Partner shall maintain its respective existence and good standing under the laws of its state of formation, and its qualification to do business in such jurisdictions where such qualifications are required.

 

ARTICLE 2

DEFINITIONS

 

Section 2.1 General Interpretive Principles . For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (i) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other genders; (ii) accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (iii) references in this Agreement to “Articles,” “Sections,” “subsections,” “paragraphs” and other subdivisions without reference to a document are to designated Articles, Sections, subsections, paragraphs and other subdivisions of this Agreement; (iv) a reference to a subsection without further reference to a Section is a reference to such subsection as contained in the same Section in which the reference appears, and this rule shall also apply to paragraphs and other subdivisions; (v) the words “hereto,” “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision; (vi) the word “including” means “including, but not limited to”; (vii) the words “not including” mean “excluding only”; (viii) the headings in this Agreement are for convenience only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of any of the provisions of this Agreement; and (ix) all Schedules and Exhibits to this Agreement are incorporated herein by this reference thereto as if fully set forth herein, and all references herein to this Agreement shall be deemed to include all such incorporated Schedules and Exhibits.

 

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Section 2.2 Defined Terms . As used in this Agreement, the following terms shall have the following respective meanings (unless otherwise expressly provided herein):

 

Act : The Delaware Revised Uniform Limited Partnership Act in its present form or as amended from time to time.

 

Additional Capital Contributions : The additional Capital Contributions required to be made by the Partners pursuant to Section 4.3 .

 

Adjusted Basis : The basis for determining gain or loss for federal income tax purposes from the sale or other disposition of property, as defined in Section 1011 of the Code.

 

Adjusted Capital Account Balance : With respect to any Partner, at any given time, the Capital Account balance of such Partner after taking into account all adjustments to such Capital Account required to be made pursuant to Section 4.4 and after crediting to such Capital Account any amount which such Partner is obligated to restore or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5).

 

Adjusted Capital Account Deficit . With respect to any Partner, the deficit balance, if any, in such Partner’s Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments:

 

(a) credit to such Capital Account any amount which such Partner is obligated to restore or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

 

(b) debit to such Capital Account the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

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.

 

Affiliate : As to any Person, any other Person controlling, controlled by or under common control with such Person. For the purposes of this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of a Person, whether through ownership of voting securities or a partnership or membership interest, by contract or otherwise.

 

Agreement : This Limited Liability Limited Partnership Agreement in its present form or as amended, supplemented or restated from time to time.

 

Appraisal Date : As defined in Section 8.8.

 

Assignee : A Person to whom a Partnership Interest is Transferred and who is not admitted to the Partnership as a Partner.

 

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Bank Accounts : As defined in Section 7.2 .

 

Bankruptcy Law : As defined in Section 10.1(e) .

 

Bona Fide Third Party Offer : As defined in Section 12.5 .

 

Business Day : Any day other than a Saturday, a Sunday or a day on which national banks in the State of Florida or the State of Wisconsin are not open for business or are authorized by law to close.

 

Buy-Out Notice : As defined in Section 8.6 .

 

Capital Account : The capital account of a Partner maintained in accordance with Section 4.4 .

 

Capital Contribution : Any property (including money) from time to time contributed by a Partner to the Partnership or deemed contributed by a Partner to the Partnership, including, but not limited to, pursuant to Section 4.2 , Section 4.3 , Section 4.7 , Section 10.2 or Section 10.4 .

 

Capital Proceeds : The cash proceeds received by the Partnership or the Subsidiaries from a Capital Transaction (excluding the proceeds of rental or business interruption insurance) which are not used by the Partnership or the Subsidiaries to pay for the costs and expenses incurred in connection with the Capital Transaction, including, in the case of casualty or condemnation, the costs and expenses of collecting the insurance proceeds or the condemnation award, as the case may be, and are not placed in any reserve established for working capital, maintenance, repairs, replacements, capital improvements, contingent or unforeseen liabilities or obligations or to meet anticipated expenses during such period; all as are reasonably necessary in the efficient conduct of the Partnership’s business or as are required by the Hotel Management Agreements. Capital Proceeds shall include all payments of principal of, and interest on, any promissory note or other obligation received by the Partnership or the Subsidiaries in connection with a Capital Transaction and shall be increased by any reduction of reserves previously established out of Capital Proceeds.

 

Capital Transaction : A transaction in which the Partnership or any of the Subsidiaries, (i) borrows money (ii) sells, exchanges or otherwise disposes of all or any part of its property, including a sale or other disposition pursuant to a condemnation but excluding sales of miscellaneous items of property such as used equipment and retail sales in the ordinary course of business, or (iii) receives the proceeds of property damage insurance, or any other transaction that, in accordance with GAAP, is considered capital in nature.

 

Carrying Value : Carrying Value means, with respect to any asset, the Adjusted Basis of the asset, except as follows:

 

(i) the initial Carrying Value of an asset contributed by a Partner to the Partnership after the Effective Date shall be the gross fair market value of the asset, as agreed to (A) in Section 4.2(a) as to the Initial Contributed Property and (B) by the General Partner and GW LP at the time the asset is contributed with respect to any other assets;

 

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(ii) the Carrying Values of the Partnership’s and the Subsidiaries’ assets shall be adjusted to equal their respective gross fair market values, as reasonably determined by the General Partner, as of the following times: (a) the acquisition of an additional interest in the Partnership by any new or existing Assignee or Partner in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Partnership to a Partner or an Assignee of more than a de minimis amount of property as consideration for all or part of a Partnership Interest or an Assignee’s Economic Rights; and (c) the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); but adjustments pursuant to clauses (a) and (b) above shall be made only if the General Partner reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership;

 

(iii) the Carrying Value of an asset of the Partnership distributed to a Partner shall be adjusted to equal the gross fair market value of the asset on the date of distribution as reasonably determined by the General Partner; and

 

(iv) the Carrying Values of the Partnership’s and the Subsidiaries’ assets shall be increased (or decreased) to reflect any adjustments to the Adjusted Basis of those assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the extent that those adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-l(b)(2)(iv)(m) and Section 5.2(h) ; but the Carrying Values shall not be adjusted pursuant to this clause (iv) to the extent the General Partner reasonably determines that an adjustment pursuant to clause (ii) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this clause (iv).

 

If the Carrying Value of an asset is determined or adjusted pursuant to clauses (i), (ii) or (iv), such Carrying Value shall thereafter be adjusted by the Depreciation taken into account with respect to the asset for purposes of computing profit or loss hereunder.

 

Certificate : The Certificate of Limited Partnership of the Partnership filed with the Secretary of State, as amended from time to time in accordance with the Act.

 

CNL GP : As defined in the Preamble.

 

CNL Partner(s) : CNL GP and CNL LP, individually or collectively as the context requires. Unless otherwise provided herein, any distributions or allocations that are made to “the CNL Partners” shall be made between the CNL Partners in the same ratio that the Percentage Interest of each CNL Partner bears to the Percentage Interests of all CNL Partners.

 

CNL Preferred Distribution : A non-cumulative and non-compounded return commencing as of the Effective Date equal to eleven percent (11.00%) for each twelve (12) month period following the Effective Date through the term of this Agreement on the Unreturned Capital of the CNL Partners outstanding from time to time.

 

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Code : The Internal Revenue Code of 1986, as in effect and hereafter amended.

 

Competitor : A Person (other than Great Wolf Resorts or an Affiliate of Great Wolf Resorts) that operates, or owns and operates, at least three (3) themed resorts or lodges or ten (10) non-themed resorts or lodges which each include an indoor water park that is at least thirty thousand (30,000) square feet in size consisting of at least six (6) separately identifiable Water Amenities, but excluding any Person that, at the time in question, already owns or operates a Great Wolf Lodge, a Blue Harbor Resort or any other resort or lodge under a brand which is owned by Great Wolf Resorts or any of its Affiliates.

 

Competing Facility : A resort or lodge that is not owned or operated by Great Wolf Resorts or any of its Affiliates and that includes an indoor water park that is at least thirty thousand (30,000) square feet in size.

 

Contributed Property : All property (other than cash) contributed to the Partnership as a Capital Contribution.

 

Contributing Partner : Any Partner who contributes property (other than cash) to the Partnership as a Capital Contribution.

 

Defaulting Partner : A Partner or Partners with respect to which an Event of Default has occurred and is continuing.

 

Dells Attraction Addition : As defined in the Formation Agreement.

 

Dells Owner : CNL Income GW WI-DEL, LP, a Delaware limited partnership that will own the Dells Hotel Property and is a wholly-owned subsidiary of the Partnership.

 

Dells Hotel Property : The Dells Hotel, as such term is defined in the Formation Agreement.

 

Dells Hotel Tenant Entity : CNL Income GW WI-DEL Tenant, LP, a Delaware limited partnership.

 

Depreciation : For each Fiscal Year, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such Fiscal Year, except that if the Carrying Value of an asset differs from its Adjusted Basis on the Effective Date or at the beginning of a subsequent Fiscal Year, Depreciation shall be determined in a manner permitted by the Regulations promulgated under Section 704(c). To the extent consistent with such Regulations, Depreciation shall be an amount which bears the same ratio to the beginning Carrying Value as the federal income tax depreciation, amortization or other cost recovery deduction for the Fiscal Year (or part thereof) bears to such beginning Adjusted Basis.

 

Development Agreement : As defined in the Formation Agreement.

 

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Distribution : A transfer of property (including cash) by the Partnership to a Partner or an Assignee on account of a Partnership Interest or Economic Rights, respectively, pursuant to Section 5.1 or Section 13.3 .

 

Documents : As defined in Section 6.6 .

 

Earn Out Amount : The 2007 Dells Earn Out Amount, the 2007 Sandusky Earn Out Amount, the 2008 Dells Earn Out Amount or the 2008 Sandusky Earn Out Amount, as the case may be.

 

Economic Rights : With respect to an Assignee, the Assignee’s rights to receive allocations of items of income, gain, deduction and loss and Distributions.

 

Effective Date : As defined in the first paragraph of this Agreement above.

 

Emergency Costs : Costs and expenses required to (a) correct a condition that if not corrected would endanger imminently the preservation or safety of a Hotel Property or the safety of tenants, guests or other persons at or using a Hotel Property, (b) avoid the imminent suspension of any necessary service in or to a Hotel Property, or (c) prevent any of the Partners or any Subsidiary from being subjected imminently to criminal or substantial civil penalties or damage.

 

Event of Default : As defined in Section 10.1 .

 

Fair Market Value : As defined in Section 8.8 .

 

First Mortgage Loan : The loan or loans to the Partnership and/or the Hotel Entities that the parties intend for the Partnership to obtain as soon as possible after the Effective Date, which loan or loans will be secured in whole or in part by a first priority mortgage of the Dells Hotel Property and the Sandusky Hotel Property.

 

First Offer : As defined in Section 8.3(e) .

 

Fiscal Quarter : Each calendar quarter in each Fiscal Year.

 

Fiscal Year : The calendar year.

 

Formation Agreement : As defined in the Recitals above.

 

GAAP : Generally accepted accounting principles as applied in the United States of America.

 

General Partner : CNL Income GW GP, LLC, a Delaware limited liability company, or any successor general partner.

 

Great Wolf Resorts : As defined in the Recitals above.

 

GW LP : As defined in the Recitals above.

 

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GW LP Buy-Out Price : The amount GW LP would be entitled to receive under this Agreement if, on the date of the calculation thereof, the Hotel Properties and other non-cash assets of the Partnership and its Subsidiaries were all sold for their fair market value, determined in accordance with Section 8.8 , the Partnership was dissolved, and the proceeds from such sale (after giving effect to the payment of all of the debts and liabilities of the Partnership and Subsidiaries and all contributions, distributions and allocations that would be made hereunder for all fiscal periods through such date) were distributed to the Partners in accordance with Section 13.3 .

 

GW Manager : Great Lakes Services, LLC, a Delaware limited liability company.

 

GW Management Agreement : Each of the hotel management agreements in effect as of the Effective Date (or thereafter entered into in accordance with the Formation Agreement) between each of the Tenants and the GW Manager, in its present form or as amended, supplemented or restated from time to time.

 

GW Preferred Distribution : A non-cumulative and non-compounded return commencing as of the Effective Date equal to eleven percent (11.00%) for each twelve (12) month period following the Effective Date through the term of this Agreement on the Unreturned Capital of GW LP outstanding from time to time.

 

Hotel Entities : Collectively, the Dells Owner and the Sandusky Owner and any other Subsidiary that is formed by the Partnership to acquire any additional hotel property.

 

Hotel Entity General Partners : With respect to the Dells Owner, CNL Income GW WI-DEL GP, LLC, a Delaware limited liability company, and with respect to the Sandusky Owner, CNL Income GW Sandusky GP, LLC, a Delaware limited liability company, and with respect to any other Hotel Entity, the entity that is the general partner thereof.

 

Hotel Manager : GW Manager, or, in the case of the termination of either of the GW Management Agreements, any other Hotel Manager selected by the General Partner to manage the Hotel Property as to which the applicable GW Management Agreement was terminated.

 

Hotel Management Agreement(s) : Each GW Management Agreement, dated as of the date of this Agreement, between the Dells Hotel Tenant Entity and the Hotel Manager or between the Sandusky Hotel Tenant Entity and the Hotel Manager, as the case may be, or any similar management agreement between either of the Tenants and a Hotel Manager arising after a Management Agreements Termination Date.

 

Hotel(s) : The (i) 309-room hotel and recreational facilities known as the “Great Wolf Lodge-Wisconsin Dells” located in Lake Delton, Wisconsin, and (ii) the 271-room hotel and recreational facilities known as the “Great Wolf Lodge-Sandusky” located in Sandusky, Ohio, and (iii) any other hotel property acquired by the Partnership or any of its Subsidiaries.

 

Hotel Property : Any one of the Hotel Properties.

 

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Hotel Properties : At any given time, the hotel properties acquired and owned by the Partnership and its Subsidiaries, including, but not limited to, the Dells Hotel Property and the Sandusky Hotel Property.

 

Independent Manager : A duly appointed member of the board of managers of the SPE General Partner, who may not have been at the time of such individual’s appointment, and may not have been at any time, and shall not be at any time during such individual’s appointment (i) a member, manager, officer, director, employee, attorney or counsel of the SPE General Partner or any of its respective members, subsidiaries or Affiliates (with the exceptions of serving as an Independent Manager or independent director of the SPE General Partner or another so-called Special Purpose Entity other than an Excluded Entity, as defined below), (ii) a customer of, or supplier to, or service provider (including a provider of professional services) to, the SPE General Partner or any of its respective members, subsidiaries or Affiliates (other than consumer transactions, such as hotel guest or senior living facility stays, in the ordinary course of business), (iii) a Person controlling or under common control with any such member, supplier or customer, or (iv) a member of the immediate family of any such member, director, officer, employee, supplier or customer or a member of the immediate family of any Person in (i), (ii) and (iii). As used herein, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of a Person, whether through ownership of voting securities or a partnership or membership interest, by contract or otherwise. The term “Excluded Entity” means each of CNL Income GW WI-DEL GP, LLC, a Delaware limited liability company, CNL Income GW WI-DEL, LP, a Delaware limited partnership, CNL Income GW Sandusky GP, LLC, a Delaware limited liability company, CNL Income GW Sandusky, LP, a Delaware limited partnership, CNL Income GW Corp., a Delaware corporation, CNL Income GW WI-DEL Tenant, LP, a Delaware limited partnership, and CNL Income GW Sandusky Tenant, LP, a Delaware limited partnership.

 

Initial Contributed Property : The Dells Hotel Property and related personal property contributed to the Partnership and the Sandusky Hotel Property and related personal property contributed to the Partnership.

 

Initial Contributed Property Value : The sum of the agreed upon fair market values of the Dells Hotel Property and related personal property contributed to the Partnership and the Sandusky Hotel Property and related personal property contributed to the Partnership as set forth in Section 4.2(a).

 

Lender : A commercial or savings bank, savings and loan association, public or privately-held fund engaged in real estate and/or corporate lending, pension fund, insurance company, endowment fund or trust, real estate investment trust, government agency, or quasi-governmental agency, such as a board, bureau, authority or department of any federal, state or local government, any corporation established by or for the benefit of any federal, state or local governmental agency or authority, any asset manager or investment advisor acting on behalf of any such entity, or any entity composed of one or more of the foregoing.

 

License Agreements : Those certain license agreements to be entered into as of the Effective Date pursuant to the Formation Agreement by and between Great Lakes Services,

 

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LLC, a Delaware limited liability company that is an Affiliate of GW LP, and the applicable Tenant for each of the Hotels for the purpose of licensing to such Tenant the right to use the name “Great Wolf Lodge” and any other intangible property licensed by Wolf in connection with the operation of the Hotels.

 

Limited Partners : Each of CNL LP and GW LP and any other Person who becomes a limited partner of the Partnership.

 

Loan : Any loan made by a Lender to the Partnership or any of the Subsidiaries.

 

Loan Document : Any one of the Loan Documents.

 

Loan Documents : All loan documents evidencing a Loan including, without limitation, a loan agreement and any other document, certificate, agreement or instrument necessary or incidental to the execution, delivery or performance thereof, including all amendments, supplements, restatements, modifications and refinancings thereof and thereto.

 

Major Decisions : As defined in Section 6.4 .

 

Management Agreements Termination Date : The date upon which all Hotel Management Agreements between GW Manager and any Tenant have terminated by their terms or otherwise.

 

Management Rights : The rights, if any, of a Partner to participate in the management of the Partnership, including the rights to receive information, to inspect and audit the books and records and to vote on, consent to, or approve actions of the Partnership.

 

Mortgage : Any mortgage, deed of trust, or similar security document encumbering any or all of the Hotel Properties.

 

Necessary Expenditures : (a) all Emergency Costs, and (b) all other expenditures whether or not of a recurring nature that are necessary for the Partnership, or any Subsidiary to preserve, operate, maintain, improve or protect any of the Hotel Properties, including payment of any amounts due under the Hotel Management Agreements, debt service or other payments required to be made by the Partnership as part of a Loan, if any, insurance payments, real estate tax payments, utility costs, repair and maintenance costs, costs of compliance with federal, state and local laws, codes, rules or regulations, and any other operating expenses or capital expenses.

 

Net Cash Flow : For any specified period, an amount equal to the sum of (a) all cash revenues received by the Partnership during such period from any source (including proceeds of rental or business interruption insurance, but excluding funds received as Capital Contributions or Capital Proceeds), and (b) amounts set aside as reserves during earlier periods where, and to the extent, such reserves are no longer reasonably necessary in the efficient conduct of the Partnership’s business or are required by the Hotel Management Agreements, reduced by the sum of (i) any amounts contributed by the Partnership to a Subsidiary to satisfy any shortfall in Net Cash Flow, as determined on a Subsidiary by Subsidiary basis, (ii) cash expenditures by the Partnership during such period for real estate taxes, management fees and other costs and expenses in connection with the normal conduct of the Partnership’s businesses, (iii) all

 

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payments by the Partnership during such period of principal of and interest on any Loan, and other obligations of the Partnership for borrowed money, including loans made by a Partner, (iv) all cash expenditures by the Partnership during such period for the acquisition of property, for construction period interest and taxes and for loan fees, whether or not capitalized, and for capital improvements and/or replacements, and (v) such reserves as are established for working capital, maintenance, repairs, replacements, capital improvements, contingent or unforeseen liabilities or obligations and to meet anticipated expenses during such period as are reasonably necessary in the efficient conduct of the Partnership’s business or as are required by the Hotel Management Agreements, but only to the extent the payments and expenditures described in clauses (iii) and (iv) are not made from funds received as advances under any Loan or from any Capital Contributions or Capital Proceeds or from cash reserves of the Partnership which were established during, and deducted in determining Net Cash Flow for, any earlier period and the reserves described in clause (v) are not established from funds received as Capital Contributions or Capital Proceeds. Net Cash Flow shall include distributions and receipts from Subsidiaries.

 

NOI: With respect to each of the Dells Hotel Property and the Sandusky Hotel Property, has the meaning given to such term in the Hotel Management Agreement for such Hotel Property.

 

Nondefaulting Partner : A Partner or Partners other than a Defaulting Partner.

 

Nonrecourse Deductions : As defined in Regulations Section 1.704-2(b)(1).

 

Notices : As defined in Section 14.1 .

 

Offeree : As defined in Section 8.3(a) .

 

Offeror : As defined in Section 8.3(a) .

 

Offered Interest : As defined in Section 8.3(a) .

 

Offering Notice : As defined in Section 8.3(a)

 

Operating Lease : A lease between a Hotel Entity that owns a Hotel Property and the Tenant that leases such Hotel Property from such Hotel Entity, including, but not limited to, that certain (i) Lease Agreement, dated as of the date of this Agreement, between the Dells Owner, as landlord, and the Dells Hotel Tenant Entity, as tenant, and (ii) Lease Agreement, dated as of the date of this Agreement, between the Sandusky Owner, as landlord, and the Sandusky Hotel Tenant Entity, as tenant, each as amended or replaced from time to time.

 

Partner Minimum Gain : “Partner nonrecourse debt minimum gain” as defined in Regulations Section 1.704-2(i)(2).

 

Partner Nonrecourse Debt : As defined in Regulations Section 1.704-2(b)(4).

 

Partner Nonrecourse Deductions . As defined in Regulations Section 1.704-2(i)(l).

 

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Partners : The Limited Partners and the General Partner.

 

Partnership : The limited liability limited partnership formed pursuant to this Agreement, and any successor limited liability limited partnership which continues the business of CNL Income GW Partnership, LLLP, and is a reformation or reconstitution of CNL Income GW Partnership, LLLP.

 

Partnership Interest : With respect to a Partner, the Partner’s entire ownership interest in the Partnership, including the Partner’s rights to receive allocations of items of income, gain, deduction and credit and Distributions.

 

Percentage Interest : The percentage interest from time to time of each Partner in the Partnership, as such percentage interest may be adjusted from time to time pursuant to any provision of this Agreement that provides for such adjustment.

 

Partnership Minimum Gain . As defined in Regulations Section 1.704-2(d).

 

Permitted Transferee : An Affiliate of a Partner.

 

Person : An individual, corporation, trust, association, unincorporated association, estate, partnership, joint venture, limited partnership, limited liability company or other legal entity, including a governmental entity.

 

Prime Rate : The prime rate of interest (or its equivalent) as published from time to time in the Money Rates column of The Wall Street Journal or any successor newspaper (or, if The Wall Street Journal and all successor newspapers cease publication, another nationally recognized newspaper mutually selected by the General Partner and GW LP), said prime rate to change from time to time as and when the change is published.

 

Proposing Partner : As defined in Section 12.1 .

 

Rating Agency : As defined in Section 3.4(f) .

 

Rating Agency Condition : As defined in Section 3.4(f) .

 

Regulations : The permanent and temporary regulations, and all amendments, modifications and supplements thereof, from time to time promulgated by the Secretary of the Treasury under the Code.

 

Sandusky Hotel Property : The Sandusky Hotel, as such term is defined in the Formation Agreement.

 

Sandusky Hotel Tenant Entity : CNL Income GW Sandusky Tenant, LP, a Delaware limited partnership.

 

Sandusky Owner : CNL Income GW Sandusky, LP, a Delaware limited partnership that will own the Sandusky Hotel Property and is a wholly-owned subsidiary of the Partnership.

 

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Secretary of State : The Secretary of State of the State of Delaware.

 

SPE General Partner : The sole general partner of the Partnership, which shall at all times (i) be a Delaware limited liability company or a Delaware corporation, (ii) maintain the separateness covenants of Section 3.4 , below and (iii) have at least two (2) Independent Managers, who will be elected by a majority of such SPE General Partner’s members holding a majority of the equity interests of the SPE General Partner. To the fullest extent permitted by law, including Section 18-1101(c) of the Delaware Limited Liability Company Act and the Act, the Independent Managers will consider only the interest of the Partnership, including its respective creditors, in acting or otherwise voting on matters referred to in Section 3.4 or when acting on behalf of the Partnership. No resignation or removal of an Independent Manager, and no appointment of a successor Independent Manager, will be effective until such successor will have accepted his or her appointment as an Independent Manager by written instrument. In the event of a vacancy in the position of an Independent Manager, the member of the SPE General Partner will, as soon as practicable, elect or designate a successor Independent Manager. All right, power and authority of the Independent Managers will be limited to the extent necessary to exercise those rights and perform those duties specifically set forth in the SPE General Partner’s limited liability company agreement. Except as provided in the second sentence of this definition above, in exercising the rights and performing the duties under the SPE General Partner’s limited liability company agreement, any Independent Manager will have a fiduciary duty of loyalty and care similar to that of a director of a business corporation organized under the General Corporation Law of the State of Delaware. No Independent Manager will at any time serve as trustee in bankruptcy for an affiliate of the SPE General Partner or the Partnership.

 

Subsidiaries : The Hotel Entities, the Hotel Entity General Partners and any other entity wholly owned, directly or indirectly, by the Partnership.

 

Tenant(s) : The Dells Hotel Tenant Entity and the Sandusky Hotel Tenant Entity, individually or collectively as the context requires, and any other Affiliate of the Partnership that is formed to be a tenant of any additional hotel property acquired by a Hotel Entity.

 

Third Party Offer : As defined in Section 8.3(e) .

 

Transfer and Transferred : (a) an assignment, pledge, encumbrance or other transfer in any manner of a Partner’s Partnership Interest or an Assignee’s Economic Interest, (b) any transfer of direct or indirect legal and/or beneficial interests (whether partnership interests, stock, limited liability company membership interests or otherwise) in a Partner or an Assignee or in any owner or owners of a Partner or an Assignee, whether occurring in one or a series of transactions, that results in the transfer of fifty percent (50%) or more of the direct or indirect ownership interests or voting power in a Partner or Assignee, or (c) any change in the actual or effective voting control of a Partner or Assignee or an owner of such Partner or Assignee, but excluding in all cases any transfer of publicly traded stock and any public offering of equity ownership interests in a Partner or an Assignee by its parent company or other owner of such Partner or Assignee, or entity that itself or through its ownership of legal or beneficial interests in one or more other entities holds legal or beneficial interests or voting power in such an owner. As used in this definition, the term “owner” means (i) the holder of legal or beneficial interests or

 

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voting power in a Partner or Assignee and (ii) the holder of direct or indirect legal or beneficial interests or voting power in an owner (as defined in clause (i) above); and the term “direct or indirect” shall mean the holder of a legal or beneficial interest or voting power in a Partner or an Assignee or an owner directly by a Person or indirectly through such Person’s ownership of legal or beneficial interests or voting power in an owner (as defined above) or in an entity that itself, or through its ownership of interests or voting power in one or more other entities, holds legal or beneficial interests or voting power in an owner. Notwithstanding the foregoing, the merger or consolidation of any owner with any other Person shall not constitute the transfer of a Partner’s Partnership Interest or the transfer of an Assignee’s Economic Interest under this definition or for any other purpose under this Agreement unless the principal purpose of such merger or consolidation is to avoid the restrictions on transfers of Partnership Interests or Economic Interests set forth in this Agreement.

 

Unreturned Capital : With respect to each Partner, as of any date, an amount (but not less than zero) equal to the excess of (i) the aggregate amount of such Partner’s Capital Contributions before such date, over (ii) the aggregate amount of Capital Proceeds distributed to such Partner before such date pursuant to Section 5.1(b)(i) , the amount of the proceeds of the First Mortgage Loan distributed to such Partner pursuant to Section 4.8 , and, in the case of GW LP, the amounts distributed to GW LP pursuant to Section 4.2 .

 

Water Amenities : Large, water-based attractions commonly located in commercial water amusement parks, indoor or outdoor, including water slides, “lazy river” inner tube rides, and wave pools, but specifically excluding indoor and outdoor pools and related amenities (e.g. diving boards, water basketball equipment, water volleyball equipment, and personal flotation devices) commonly developed and operated by major hotel or motel chains, or the franchisees of same.

 

Wolf Sandusky : As defined in the Recitals above.

 

ARTICLE 3

BUSINESS, PURPOSES AND POWERS

 

Section 3.1 Business and Purposes . The sole business of the Partnership shall be and the purposes of the Partnership shall be limited to (i) owning, holding and disposing of ownership interests (as a partner, member or shareholder, as applicable) in the Subsidiaries and (ii) carrying on all activities reasonably related thereto (but not including the acquisition of additional property or other material assets not related to the ownership and management of ownership interests in the Subsidiaries). The business and purpose of each of the Subsidiaries is (i) to own, hold, develop, construct, lease, operate, manage, maintain, improve, repair, sell, finance and refinance the Hotels, directly or through one or more agents, for the production of income; and (ii) to carry on any and all activities, directly or indirectly, incidental or related thereto. The Partnership may acquire additional hotel properties (other than the Dells Hotel Property and the Sandusky Hotel Property) as may be approved by CNL LP and GW LP.

 

Section 3.2 Powers . Except as otherwise provided in this Section 3.2 , the Partnership shall have all powers of a limited liability limited partnership under the Act and the power to do

 

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all things necessary or convenient to operate its business and accomplish its purposes as described in Section 3.1 , including the following:

 

(a) to hold, operate, manage and exercise rights with respect to all property owned by the Partnership, including the ownership interest in the Subsidiaries;

 

(b) to sell, transfer, assign, convey, lease, encumber or otherwise dispose of or deal with all or any part of the property of the Partnership;

 

(c) to incur expenses and to enter into and carry out contracts, agreements and guaranties necessary to accomplish the business and purposes of the Partnership;

 

(d) to raise and provide such funds as may be necessary to further the business and purposes of the Partnership and to borrow money, incur liabilities and issue promissory notes and other evidences of indebtedness, and to secure the same by security interest or other lien on all or any part of the property of the Partnership;

 

(e) to employ or retain, on behalf of the Partnership, such Persons as the Partners deem advisable in the operation and management of the business of the Partnership, including such accountants, attorneys and consultants as the General Partner deems appropriate, on such reasonable terms and at such reasonable compensation as the General Partner shall determine;

 

(f) to collect, receive and deposit all sums due or to become due to the Partnership;

 

(g) to hire and appoint agents and employees of the Partnership, to define their duties and to establish their compensation;

 

(h) to pay any and all taxes, charges and assessments that may be levied, assessed or imposed upon any property of the Partnership;

 

(i) to demand, sue for, collect, recover and receive all goods, claims, debts, moneys, interest and demands whatsoever now due or that may hereafter become due or belong to the Partnership, including the right to institute any action, suit, or other legal proceedings for the recovery of any property, or any part or parts thereof, to the possession of which the Partnership may be entitled, and to make, execute and deliver receipts, releases and other discharges therefore under seal or otherwise;

 

(j) to make, execute, endorse, accept, collect and deliver any and all bills of exchange, checks, drafts and notes of the Partnership;

 

(k) to defend, settle, adjust, compound, submit to arbitration and compromise all actions suits, accounts, reckonings, claims and demands whatsoever that now are or hereafter shall be pending between the Partnership and any Person (other than disputes between or among Partners), at law or in equity, in such manner and in all respects as the General Partner shall

 

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deem fit, subject to the approval of CNL LP and GW LP to the extent specifically provided in Section 6.4 ;

 

(l) to secure and maintain insurance against liability and property damage with respect to the activities of the Partnership;

 

(m) to cause the Subsidiaries to take any of the actions described in Section 3.2(a) through Section 3.2(l) , inclusive; and

 

(n) to do and perform all acts and things necessary, appropriate, proper, advisable, incidental to, or convenient for, the furtherance and accomplishment of the business and purposes of the Partnership and the Subsidiaries set forth in Section 3.1 .

 

Section 3.3 Limitations on Scope of Business . Except for the authority expressly granted to the General Partner in this Agreement, no Partner, attorney-in-fact, employee or other agent of the Partnership shall have any authority to bind or act for the Partnership or any other Partner in the carrying on of their respective businesses or activities.

 

Section 3.4 Separate Existence

 

(a) Notwithstanding anything to the contrary contained herein or in any other document governing the formation, management or operation of the Partnership, for so long as any Loan remains outstanding, in the event of any conflict or inconsistency between the provisions contained in this Section 3.4 and the other provisions of this Agreement, the provisions contained in this Section 3.4 shall control and govern.

 

(b) The Partnership does not and shall not:

 

(1) engage in any business or activity other than as set forth in Section 3.1 hereof;

 

(2) acquire or own any assets other than (A) its interests in the Hotel Entities, the Hotel Entity General Partners and the Hotel Properties, and (B) as expressly permitted by the Loan Documents;

 

(3) except as otherwise permitted under the Loan Documents, merge into or consolidate with any Person, or, to the fullest extent permitted by law, dissolve, terminate, liquidate in whole or in part, transfer or otherwise dispose of all or substantially all of its assets or change its legal structure, without the prior written consent of Lender and, after a securitization, if any, written confirmation from each of the applicable Rating Agencies that the same shall not result in the qualification, withdrawal or downgrade of the initial, or if higher then current, ratings issued in connection with a securitization;

 

(4) fail to observe all organizational and partnership governance formalities, or fail to preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the applicable legal requirements of the jurisdiction of its organization or formation, or amend, modify, terminate or fail to comply with the provisions of its organizational documents;

 

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(5) except as otherwise permitted under the Loan Documents, own any subsidiary, or make any investment in, any Person, without the prior written consent of Lender and, after a securitization, if any, written confirmation from each of the applicable Rating Agencies that the same shall not result in the qualification, withdrawal or downgrade of the initial, or if higher then current, ratings issued in connection with a securitization;

 

(6) except as otherwise permitted under the Loan Documents, commingle its funds or assets with the funds or assets of any other Person;

 

(7) without the prior written consent of the Lender, incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (A) pursuant to the Loan or as permitted or contemplated by the Loan Documents, (B) trade and operational indebtedness incurred in the ordinary course of business with trade creditors (including obligations in respect of alterations, replacements and capital improvements permitted under the Loan Documents), to the extent permitted in the Loan Documents, and/or (C) financing leases and purchase money indebtedness incurred in the ordinary course of business relating to personal property on commercially reasonable terms and conditions, to the extent permitted in the Loan Documents;

 

(8) fail to maintain its records, books of account, bank accounts, financial statements, accounting records and other entity documents as official records and separate and apart from those of any other Person; except that the Partnership’s financial position, assets, liabilities, net worth and operating results may be included in the consolidated financial statements of an Affiliate; provided that the Partnership is properly reflected and treated as a separate legal entity in such consolidated financial statements;

 

(9) enter into any contract or agreement with any general partner, member, shareholder, principal, guarantor of the obligations of the Partnership, or any Affiliate of the foregoing, except upon terms and conditions that are intrinsically fair and commercially reasonable;

 

(10) maintain its assets in such a manner that it will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person;

 

(11) except as otherwise expressly permitted by the Loan Documents, assume, guaranty or become obligated for the debts of any other Person (other than any commercially reasonable guaranty of any Affiliate-lessee’s obligations under any management agreement, license agreement or related agreement consented to by Lender), hold itself out to be responsible for the debts of any other Person, or otherwise pledge its assets for the benefit of any other Person or hold out its credit as being available to satisfy the obligations of any other Person;

 

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(12) except as otherwise permitted under the Loan Documents, make any loans or advances to any Person or hold evidence of indebtedness issued by any other Person without the prior written consent of Lender and, after a securitization, if any, written confirmation from each of the applicable Rating Agencies that the same shall not result in the qualification, withdrawal or downgrade of the initial, or if higher then current, ratings issued in connection with a securitization;

 

(13) fail to file either its own tax returns or, if applicable, a consolidated federal income tax return, as required by applicable Legal Requirements;

 

(14) fail either to hold itself out to the public as a legal entity separate and distinct from any other Person (and not as a division or part of any other Person) or to conduct its business solely in its own name or fail to correct any known misunderstanding regarding its separate identity;

 

(15) fail to maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations;

 

(16) notwithstanding any provision of this Agreement or provision of law that otherwise empowers the Partnership or any Person on behalf of the Partnership, without the unanimous written consent of all of its partners, and the written consent of 100% of the directors or managers, as applicable, of the SPE General Partner, including, without limitation, each Independent Manager, (A) file or consent to the filing of any petition, either voluntary or involuntary, to take advantage of any Creditors Rights Laws, (B) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or other similar official, (C) take any action that might cause such entity to become insolvent or otherwise seek any relief under any laws relating to the relief of debts or the protection of creditors generally, or (D) make an assignment for the benefit of creditors;

 

(17) fail to establish and maintain an office through which its business shall be conducted separate and apart from that of any of its Affiliates, or fail to fairly and reasonably allocate shared expenses (including, without limitation, shared office space and services performed by an employee of an Affiliate) among the Persons sharing such expenses, or fail to use separate stationery, invoices and checks. The stationery, invoices and checks utilized to collect its funds or pay its expenses shall bear its own name and shall not bear the name of any other entity unless such entity is clearly designated as being the other entity agent;

 

(18) fail to remain solvent or pay its own liabilities (including, without limitation, salaries of its own employees, if any) only from its own funds;

 

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(19) acquire obligations or securities of its partners, members, shareholders or other Affiliates, as applicable, or have its obligations guaranteed by any Affiliate, except as contemplated by the Loan Documents;

 

(20) violate or cause to be violated the assumptions made with respect to the Partnership and its principals in any opinion letter pertaining to substantive consolidation delivered to Lender in connection with the Loan;

 

(21) fail to hold its assets in its own name;

 

(22) fail to cause the Limited Partner, the General Partner and all other representatives of the Partnership to act at all times, with respect to the Partnership, consistently and in the best interest of the Partnership; or

 

(23) fail to maintain a sufficient number of employees in light of its contemplated business operations.

 

(c) The SPE General Partner (i) will not engage in any business or activity other than as set forth in its limited liability company agreement, (ii) will not acquire or own any assets other than its equity interest in Partnership and as permitted in the Loan Documents; (iii) will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), except as permitted by the Loan Documents; and (iv) will at all times have two (2) Independent Managers. Prior to the withdrawal of any SPE General Partner from the Partnership, the Partnership shall immediately appoint a new general partner whose articles of formation (or other applicable formation and entity documentation) are substantially similar to those of such SPE General Partner and, if an opinion letter pertaining to substantive consolidation was required at closing, deliver a new opinion letter acceptable to Lender and the Rating Agencies with respect to the new SPE General Partner and its equity owners.

 

(d) The Partnership shall not allow direct or indirect transfers of ownership interests in or control rights over the Partnership or the Property that would violate the provisions of any Loan Document.

 

(e) The Partnership’s obligation hereunder, if any, to indemnify its directors and officers, partners, or members or managers, as applicable, is hereby fully subordinated to each of the Loan and the Loan Documents, and no indemnity payment from funds of the Partnership (as distinct from funds from other sources, such as insurance) of any indemnity hereunder, if any, shall be payable from amounts allocable to any other Person pursuant to the Loan Documents.

 

(f) The Partnership shall not, without the prior written consent of the Lender, issue any additional partnership interests of the Partnership other than its initial issuance of partnership interests issued on or prior to the date hereof.

 

This Section 3.4 may not be modified, altered, supplemented or amended unless the Rating Agency Condition is satisfied and all Partners have consented thereto, upon unanimous approval of all directors or managers of SPE General Partner, including all

 

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Independent Managers. As used herein, the term “ Rating Agency Condition ” shall mean (i) with respect to any action taken at any time before the Loan has been sold or assigned to a securitization trust, that the Lender has consented in writing to such action, and (ii) with respect to any action taken at any time after such Loan has been sold or assigned to a securitization trust, that (A) the Lender has consented in writing to such action, and (B) each Rating Agency (defined below) shall have been given ten (10) days prior notice thereof and that each of the Rating Agencies shall have notified the Lender in writing that such action will not result in a downgrade, reduction or withdrawal of the then current rating by such Rating Agency of any of securities issued by such securitization trust. As used herein, the term “Rating Agency” shall mean each of Standard & Poor’s Rating Services, a division of the McGraw-Hill Companies, Inc., Moody’s Investors Service, Inc. and Fitch, Inc., or any other nationally-recognized statistical rating agency which has been approved by the Lender.

 

ARTICLE 4

PARTNERS, CAPITAL CONTRIBUTIONS AND FINANCING

 

Section 4.1 Identity of Partners and Percentage Interests .

 

(a) Partners . As of the date hereof, the Partners of the Partnership shall be CNL GP, CNL LP, and GW LP.

 

(b) Percentage Interests . Subject to adjustment as provided in this Agreement, the Percentage Interests of the Partners shall be as follows:

 

 

Section 4.2 Initial Capital Contributions and Related Distributions .

 

(a) GW LP has, in accordance with the terms of the Formation Agreement, contributed the Dells Hotel Property and certain related personal property to the Partnership by transferring title thereto to the Dells Owner (and in connection therewith the Partnership was deemed to contribute all of such property to the Dells Owner). GW LP has also, in accordance with the terms of the Formation Agreement, caused Sandusky Dells to contribute the Sandusky Hotel Property and certain related personal property to the Partnership by transferring title thereto to the Sandusky Owner (and in connection therewith the Partnership was deemed to contribute all such property to the Sandusky Owner). The Partners agree that the Dells Hotel Property and the related personal property contributed therewith to the Partnership and the Dells Owner has a fair market value of $55,333,454, and that the Sandusky Hotel Property and the related personal property contributed therewith to the

 

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Partnership and the Sandusky Owner has a fair market value of $50,098,690. The Partners further agree that because the Partnership was a “disregarded entity” for federal income tax purposes prior to the Effective Date, for federal income tax purposes (i) the CNL Partners will be deemed to have purchased a portion of the Initial Contributed Property from Great Wolf Resorts (which indirectly owns 100% of GW LP and Wolf Sandusky), and (ii) Great Wolf Resorts and the CNL Partners will be deemed to have jointly contributed the Initial Contributed Property to the Partnership.

 

(b) The Partners agree that as a result of the deemed purchase of a portion of the Initial Contributed Property by the CNL Partners and the deemed contribution of the Initial Contributed Property to the Partnership by Great Wolf Resorts and the CNL Partners as described in Section 4.2(a) above, (i) GW LP (in its capacity as a Partner and because Great Wolf Resorts indirectly owns 100% of GW LP) will have an initial Capital Account balance equal to the Initial Contributed Property Value less the amount paid by the CNL Partners to GW LP and Wolf Sandusky for the Initial Contributed Property pursuant to the terms of the Formation Agreement, and (ii) the CNL Partners will have an aggregate initial Capital Account balance equal to the amount paid by them to GW LP and Wolf Sandusky for the Initial Contributed Property pursuant to the terms of the Formation Agreement.

 

(c) GW LP and the CNL Partners each have paid for a portion of the closing costs in connection with the contribution of the Dells Hotel Property and the Sandusky Hotel Property to the Partnership in accordance with the terms of the Formation Agreement as described in Section 4.2(a) above. The amount of such closing costs paid for by GW LP as of the Closing was $512,581 and will be deemed to be a Capital Contribution by GW LP to the Partnership. The amount of such closing costs paid for by the CNL Partners as of the Closing was $806,464 and will be deemed to be a Capital Contribution by the CNL Partners to the Partnership. Any further such closing costs paid for by a Partner after the Closing will also be deemed to be a Capital Contribution to the Partnership.

 

(d) If the Partnership does not borrow the First Mortgage Loan on or before the date that is four (4) months after the Effective Date and distribute the proceeds thereof in accordance with Section 4.8 such that GW LP’s Adjusted Capital Account Balance immediately after such distribution, determined, solely for this purpose, by excluding the deemed Capital Contributions described in Section 4.2(c) above and any other adjustments that have been made pursuant to the provisions of Section 4.4 or Section 5.3 , is not more than thirty percent (30%) of the sum of the Initial Contributed Property Value and the closing costs funded by GW LP as set forth in Section 4.2(c) , then CNL LP shall, in one or more transactions, on or before the date that is four (4) months after the Effective Date, make Capital Contributions in cash in an aggregate amount such that, after the last of such Capital Contributions is made, Wolf Sandusky and GW LP shall have received from the CNL Partners pursuant to the terms of the Formation Agreement (as described in Section 4.2(b) above), pursuant to Section 4.8 and pursuant to this Section 4.2(d) an aggregate amount equal to seventy percent (70%) of the sum of the Initial Contributed Property Value and the closing costs funded by GW LP as set forth in Section 4.2(c) . Any

 

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Capital Contributions made by CNL LP pursuant to this Section 4.2(d) shall be paid directly to GW LP (provided all such amounts shall be treated as if contributed to the Partnership, and immediately distributed by the Partnership to GW LP for purposes of determining each of the Partner’s respective Unreturned Capital). Upon the occurrence of each such Capital Contribution and payment thereof to GW LP, (i) the Percentage Interest of CNL LP will be increased so that it is equal to a fraction, the numerator of which will be the sum of the amount paid by the CNL Partners to the original partners of the Partnership pursuant to the Formation Agreement as described in Section 4.2(b) above and the aggregate amount of the Capital Contributions made by CNL LP pursuant to this Section 4.2(d) as of the date of such increase, and the denominator of which shall be the Initial Contributed Property Value plus the closing costs funded by GW LP as set forth in Section 4.2(c) (the “ Resulting CNL Percentage ”), and (ii) the Percentage Interest of GW LP will be decreased so that it will be equal to the result obtained by subtracting the Resulting CNL Percentage from one hundred percent (100%).

 

(e) Notwithstanding the respective Capital Contributions made or to be made by each of the CNL Partners, CNL GP will at all times own a .01% Percentage Interest and CNL LP will own t