EXHIBIT 10.3
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
August 3, 1998
TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINED TERMS................................................................... 2
ARTICLE 2 ORGANIZATIONAL MATTERS.......................................................... 14
Section 2.1 Continuation...................................................... 14
Section 2.2 Name.............................................................. 14
Section 2.3 Registered Office and Agent; Principal Office..................... 14
Section 2.4 Power of Attorney................................................. 15
Section 2.5 Term.............................................................. 16
ARTICLE 3 PURPOSE......................................................................... 16
Section 3.1 Purpose and Business.............................................. 16
Section 3.2 Powers............................................................ 17
ARTICLE 4 CAPITAL CONTRIBUTIONS........................................................... 17
Section 4.1 Capital Contributions of the Partners............................. 17
Section 4.2 Additional Funds; Restrictions on the Company..................... 18
Section 4.3 Issuance of Additional Partnership Interests;
Admission of Additional Limited Partners..................... 19
Section 4.4 Contribution of Proceeds of Issuance of REIT Stock................ 19
Section 4.5 Repurchase of REIT Stock.......................................... 20
Section 4.6 No Third Party Beneficiary........................................ 20
Section 4.7 No Interest; No Return............................................ 21
Section 4.8 No Preemptive Rights.............................................. 21
Section 4.9 Class B Certificate of Designation................................ 21
Section 4.10 Class C Certificate of Designation................................ 21
Section 4.11 Class D Certificate of Designation................................ 21
ARTICLE 5 DISTRIBUTIONS................................................................... 22
ARTICLE 6 ALLOCATIONS..................................................................... 25
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS........................................... 25
Section 7.1 Management........................................................ 25
Section 7.2 Certificate of Limited Partnership................................ 29
Section 7.3 Reimbursement of the General Partner and
the Company.................................................. 30
Section 7.4 Outside Activities of the General Partner......................... 30
Section 7.5 Contracts with Affiliates......................................... 31
Section 7.6 Indemnification................................................... 31
Section 7.7 Liability of the General Partner................................. 33
Section 7.8 Other Matters Concerning the General Partner..................... 34
Section 7.9 Title to Partnership Assets...................................... 34
Section 7.10 Reliance by Third Parties........................................ 35
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS..................................... 35
Section 8.1 Limitation of Liability.......................................... 35
Section 8.2 Management of Business........................................... 36
Section 8.3 Outside Activities of Limited Partners........................... 36
Section 8.4 Return of Capital................................................ 36
Section 8.5 Rights of Limited Partners Relating to the
Partnership...................................................... 37
Section 8.6 Exchange Rights Agreement........................................ 38
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS......................................... 38
Section 9.1 Records and Accounting........................................... 38
Section 9.2 Fiscal Year...................................................... 38
Section 9.3 Reports.......................................................... 38
ARTICLE 10 TAX MATTERS.................................................................... 39
Section 10.1 Preparation of Tax Returns....................................... 39
Section 10.2 Tax Elections.................................................... 39
Section 10.3 Tax Matters Partner.............................................. 39
Section 10.4 Organizational Expenses.......................................... 41
Section 10.5 Withholding...................................................... 41
ARTICLE 11 TRANSFERS AND WITHDRAWALS...................................................... 42
Section 11.1 Transfer......................................................... 42
Section 11.2 Transfer of the General Partner's General Partner
Interest......................................................... 42
Section 11.3 Limited Partners' Rights to Transfer............................. 44
Section 11.4 Substituted Limited Partners..................................... 45
Section 11.5 Assignees........................................................ 46
Section 11.6 General Provisions............................................... 46
ARTICLE 12 ADMISSION OF PARTNERS.......................................................... 47
Section 12.1 Admission of Successor General Partner........................... 47
Section 12.2 Admission of Additional Limited Partners......................... 48
Section 12.3 Amendment of Agreement and Certificate of
Limited Partnership.............................................. 49
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION....................................... 49
Section 13.1 Dissolution...................................................... 49
Section 13.2 Winding Up....................................................... 50
Section 13.3 No Obligation to Contribute Deficit.............................. 52
Section 13.4 Rights of Limited Partners....................................... 52
Section 13.5 Notice of Dissolution........................................ 52
Section 13.6 Termination of Partnership and Cancellation of
Certificate of Limited Partnership........................... 52
Section 13.7 Reasonable Time for Winding-Up............................... 53
Section 13.8 Waiver of Partition.......................................... 53
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS................................... 53
Section 14.1 Amendments................................................... 53
Section 14.2 Meetings of the Partners..................................... 54
ARTICLE 15 GENERAL PROVISIONS............................................................. 55
Section 15.1 Addresses and Notice......................................... 55
Section 15.2 Titles and Captions.......................................... 56
Section 15.3 Pronouns and Plurals......................................... 56
Section 15.4 Further Action............................................... 56
Section 15.5 Binding Effect............................................... 56
Section 15.6 Creditors.................................................... 56
Section 15.7 Waiver....................................................... 56
Section 15.8 Counterparts................................................. 56
Section 15.9 Applicable Law............................................... 57
Section 15.10 Invalidity of Provisions..................................... 57
Section 15.11 Entire Agreement............................................. 57
Section 15.12 Guaranty by the Company...................................... 57
Section 15.13 Merger....................................................... 57
Section 15.14 Limitation of Partnership Interest........................... 57
Page
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EXHIBITS
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Exhibit A - Partners' Contributions and Partnership Interests
Exhibit B - Allocations
Exhibit C - Class B Certificate of Designation
Exhibit D - Class C Certificate of Designation
Exhibit E - Class D Certificate of Designation
v
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P.
(F/K/A AMERICAN GENERAL HOSPITALITY OPERATING PARTNERSHIP, L.P.)
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P. (this "AGREEMENT"), dated as of
August 3, 1998, is entered into by and among MERISTAR HOSPITALITY CORPORATION, a
Maryland corporation, as general partner ("MERISTAR" or the "GENERAL PARTNER")
and the Limited Partners set forth on the limited partner signature pages
attached hereto;
WHEREAS, MeriStar Hospitality Operating Partnership, L.P. (the
"PARTNERSHIP"), was initially formed pursuant to the Revised Uniform Limited
Partnership Act of the State of Delaware by filing a certificate of limited
partnership on April 9, 1996 with the Secretary of State of the State of
Delaware and entering into a limited partnership agreement dated as of April 9,
1996 (the "ORIGINAL PARTNERSHIP AGREEMENT");
WHEREAS, the Original Partnership Agreement was amended and restated
on July 31, 1996 (the "AMENDED AND RESTATED PARTNERSHIP AGREEMENT") to, inter
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alia, admit Additional Limited Partners (as defined below);
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WHEREAS, AGH GP, Inc., a Nevada corporation ("AGH GP"), on August 3,
1998, merged with and into the General Partner (the "GP MERGER"), and prior to
that time had been the general partner of the Partnership (as defined below);
WHEREAS, after the consummation of the GP Merger, the General Partner,
as general partner of the Partnership, continued the business of the Partnership
without dissolution in accordance with the terms of the Amended and Restated
Partnership Agreement;
WHEREAS, subsequent to the GP Merger, but still on August 3, 1998, the
General Partner merged with CapStar Hotel Company, with the General Partner
being the surviving entity operating under the name MeriStar Hospitality
Corporation, and the business of the Partnership was continued without
dissolution in accordance with the terms of the Amended and Restated Partnership
Agreement;
WHEREAS, CapStar Hotel Company LLC, a Delaware limited liability
company ("CAPSTAR HOTEL LLC") and CapStar Hotel Company II, LLC, a Delaware
limited liability company ("CAPSTAR HOTEL II LLC"), on August 3, 1998 merged
with and into the Partnership;
WHEREAS, the General Partner desires, pursuant to Section 14.1A and
Section 14.1B of this Agreement, to amend and restate the Amended and Restated
Partnership Agreement to reflect (i) the admission of MeriStar as the general
partner of the Partnership, (ii) the merger of CapStar Hotel LLC and CapStar
Hotel II LLC with and into the Partnership and the admission of CapStar
Management Company, LLC as an Additional Limited Partner, (iii) the change of
the Partnership's name to "MeriStar Hospitality Operating Partnership, L.P." and
address to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and (iv) other
clarifications to this Agreement, not inconsistent with this Agreement, in
accordance with Section 14.1B hereto.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties do hereby agree as follows:
ARTICLE 1
DEFINED TERMS
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, as
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it may be amended from time to time, and any successor to such statute.
"ADDITIONAL LIMITED PARTNER" means a Person that has executed and
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delivered an additional limited partner signature page, has been admitted to the
Partnership as a Limited Partner pursuant to Section 4.3 hereof and who is shown
as such on the books and records of the Partnership.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Partner,
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the negative balance, if any, in such Partner's Capital Account as of the end of
any relevant fiscal year, determined after giving effect to the following
adjustments:
(a) credit to such Capital Account any portion of such negative
balance which such Partner (i) is treated as obligated to restore to the
Partnership pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c) of
the Regulations, or (ii) is deemed to be obligated to restore to the
Partnership pursuant to the penultimate sentences of Sections 1.704-2(g)(1)
and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
"ADJUSTED CONTRIBUTION" means the Capital Contributions of any Partner
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reduced by the total distributions to such Partner from Capital Events. With
respect to the
General Partner or the Initial Limited Partner (as the case may be), the
Adjusted Contribution shall include the difference, if any, between gross
proceeds from the future issuance of REIT Stock, if any, and the proceeds
actually received by the Company.
"AFFILIATE" means, (a) with respect to any individual Person, any
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member of the Immediate Family of such Person or a trust established for the
benefit of such member, or (b) with respect to any Entity, any Person which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, any such Entity.
"AGREEMENT" means this Second Amended and Restated Agreement of
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Limited Partnership, as originally executed and as amended, modified,
supplemented or restated from time to time, as the context requires.
"ARTICLES OF INCORPORATION" means the Company's Amended and Restated
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Articles of Incorporation, filed with the Maryland State Department of
Assessments and Taxation, as amended, modified, supplemented or restated from
time to time, as the context requires.
"ASSIGNEE" means a Person to whom one or more OP Units have been
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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 the applicable period of
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measurement (i.e., any period beginning on the first day of the fiscal year,
quarter or other period commencing immediately after the last day of the fiscal
year, quarter or other applicable period for purposes of the prior calculation
of Available Cash for or with respect to which a distribution has been made, and
ending on the last day of the fiscal year, quarter or other applicable period
immediately preceding the date of the calculation), the excess, if any, as of
such date, of (a) the gross cash receipts of the Partnership for such period
from all sources whatsoever, including, without limitation, the following:
(i) all Participating Lease and other rents, revenues, income and
proceeds derived by the Partnership from its operations, including, without
limitation, distributions received by the Partnership from any Entity in
which the Partnership has an interest; (ii) all proceeds and revenues
received by the Partnership on account of any sales of hotels or other
property of the Partnership or as a refinancing of or payments of
principal, interest, costs, fees, penalties or otherwise on account of any
borrowings or loans made by the Partnership or financings or refinancings
of any hotel or other property of the Partnership; (iii) the amount of any
insurance proceeds and condemnation awards received by the Partnership;
(iv) all capital contributions or loans received by the Partnership from
its Partners; (v) all cash amounts previously reserved by the Partnership,
to the extent such amounts are no longer needed for the specific
3
purposes for which such amounts were reserved; (vi) all principal and
interest received under the FF&E Note; and (vii) the proceeds of
liquidation of the Partnership's property in accordance with this
Agreement,
over (b) the sum of:
(i) all operating costs and expenses, including, to the extent of the
Partnership's obligations under the Participating Leases, costs relating to
the replacement or refurbishment of FF&E, taxes and other expenses of the
Hotels, of the Partnership and capital expenditures made during such period
(without deduction, however, for any capital expenditures, charges for
Depreciation or other expenses not paid in cash or expenditures from
reserves described in (viii) below); (ii) all costs and expenses expended
or paid during such period in connection with the sale or other
disposition, or financing or refinancing, of the hotels or other property
of the Partnership or the recovery of insurance or condemnation proceeds;
(iii) all fees provided for under this Agreement; (iv) all debt service,
including principal and interest, paid during such period on all
indebtedness (including under any line of credit) of the Partnership; (v)
all capital contributions, advances, reimbursements or similar payments
made to any Person in which the Partnership has an interest; (vi) all loans
made by the Partnership in accordance with the terms of this Agreement;
(vii) all reimbursements to the General Partner or its Affiliates during
such period; and (viii) any new reserves or increases in reserves required
to be established under the Participating Leases or reasonably determined
by the General Partner to be necessary for working capital, capital
improvements, payments of periodic expenditures, debt service or other
purposes for the Partnership or any Person in which the Partnership has an
interest.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"CAPITAL ACCOUNT" means with respect to any Partner, the Capital
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Account maintained for such Partner in accordance with the following provisions:
a. to each Partner's Capital Account there shall be credited (i)
such Partner's Capital Contributions, (ii) such Partner's distributive
share of Net Income and any items in the nature of income or gain which are
specially allocated to such Partner pursuant to Paragraphs 1 and 2 of
Exhibit B and (iii) the amount of any Partnership liabilities assumed by
such Partner or which are secured by any asset distributed to such Partner;
4
b. to each Partner's Capital Account there shall be debited (i) the
amount of cash and the Gross Asset Value of any Hotel distributed to such
Partner pursuant to any provision of this Agreement, (ii) such Partner's
distributive share of Net Losses and any items in the nature of expenses or
losses which are specially allocated to such Partner pursuant to Paragraphs
1 and 2 of Exhibit B and (iii) the amount of any liabilities of such
Partner assumed by the Partnership or which are secured by any asset
contributed by such Partner to the Partnership; and
c. in the event all or a portion of a Partnership Interest 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 Partnership Interest.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Sections 1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the General
Partner shall reasonably 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 assets or which are assumed by the Partnership, the
General Partner or any Limited Partner) are computed in order to comply with
such Regulations, the General Partner may make such modification; provided that
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it does not have an adverse effect on the amounts distributable to any Partner
pursuant to Article 13 hereof upon the dissolution of the Partnership.
"CAPITAL CONTRIBUTION" means, with respect to any Partner, any cash,
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cash equivalents or the Gross Asset Value of property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Article 4
hereof.
"CAPITAL EVENT" means any Partnership transaction not in the ordinary
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course of its business including, without limitation, principal payments,
prepayments, prepayment penalties, Participating Lease termination penalties,
sales, exchanges, foreclosures or other dispositions of Hotels owned by the
Partnership, recoveries of damage awards and insurance proceeds not used to
rebuild (other than the receipt of contributions to the capital of the
Partnership and business or rental interruption insurance proceeds not used to
rebuild).
"CERTIFICATE" means the Certificate of Limited Partnership relating to
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the Partnership filed on April 9, 1996 in the office of the Delaware Secretary
of State, as amended and/or restated from time to time in accordance with the
terms hereof and the Act.
"CLASS B OP UNIT" means a fractional, undivided share of the
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Partnership Interests of all Partners, designated as Class B OP Units, issued
pursuant to Sections 4.1, 4.2 and 4.3. The number of Class B OP Units
outstanding and the Percentage Interests in the
5
Partnership represented by such Class B OP Units are set forth in Exhibit A, as
such Exhibit may be amended from time to time. The ownership of Class B OP Units
shall be evidenced by such form of certificate for units as the General Partner
adopts from time to time unless the General Partner determines that the OP Units
shall be uncertificated securities. The rights and preferences of the Class B OP
Units are as set forth in the Class B Certificate of Designation (as defined in
Section 4.9) of the Class B OP Units and shall entitle the holder thereof to the
same rights and preferences of a holder of an OP Unit under this Agreement
except with respect to the initial dividend such holder is entitled to receive
following issuance of such Class B OP Unit.
"CLASS C OP UNIT" means a fractional, undivided share of the
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Partnership Interests of all Partners, designated as Class C OP Units, issued
pursuant to Sections 4.1, 4.2 and 4.3. The number of Class C OP Units
outstanding and the Percentage Interests in the Partnership represented by such
Class C OP Units are set forth in Exhibit A, as such Exhibit may be amended from
time to time. The ownership of the Class C OP Units shall be evidenced by such
form of certificate for units as the General Partner adopts from time to time
unless the General Partner determines that the OP Units shall be uncertificated
securities. The rights and preferences of the Class C OP Units are as set forth
in the Class C Certificate of Designation (as defined in Section 4.10) of the
Class C OP Units and shall entitle the holder thereof to the same rights and
preferences of a holder of an OP Unit under this Agreement except as set forth
in the Class C Certificate of Designation of the Class C OP Units.
"CLASS D OP UNIT" means a fractional, undivided share of the
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Partnership Interests of all Partners, designated as Class D OP Units, issued
pursuant to Section 4.3. The number of Class D OP Units outstanding and the
Percentage Interests in the Partnership represented by such Class D OP Units are
set forth in Exhibit A, as such Exhibit may be amended from time to time. The
ownership of the Class D OP Units shall be evidenced by such form of certificate
for units as the General Partner adopts from time to time unless the General
Partner determines that the OP Units shall be uncertificated securities. The
rights and preferences of the Class D OP Units are as set forth in the Class D
Certificate of Designation (as defined in Section 4.11) of the Class D OP Units
and shall entitle the holder thereof to the same rights and preferences of a
holder of an OP Unit under this Agreement except as set forth in the Class D
Certificate of Designation of the Class D OP Units.
"CODE" means the Internal Revenue Code of 1986, as amended and in
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effect from time to time, as interpreted by the applicable regulations
thereunder. 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.
"COMPANY" means MeriStar Hospitality Corporation, a Maryland
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corporation, the General Partner and the parent of the Initial Limited Partner.
6
"CONSENT" means the consent or approval of a proposed action by a
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Partner given in accordance with Section 14.2 hereof.
"CONTRIBUTED PROPERTY" means each property, partnership interest,
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contract right or other asset, in such form as may be permitted by the Act,
contributed or deemed contributed to the Partnership by any Partner (including
any interest in a successor partnership as a result of a termination pursuant to
Section 708 of the Code).
"DEPRECIATION" means, with respect to any asset of the Partnership for
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any fiscal year or other period, the depreciation, depletion, amortization or
other cost recovery deduction, as the case may be, allowed or allowable for
federal income tax purposes in respect of such asset for such fiscal year or
other period; provided, however, that except as otherwise provided in Section
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1.704-2 of the Regulations, if there is a difference between the Gross Asset
Value (including the Gross Asset Value, as determined pursuant to paragraph 1 of
the definition of Gross Asset Value) and the adjusted tax basis of such asset at
the beginning of such fiscal year or other period, Depreciation for such asset
shall be an amount that bears the same ratio to the beginning Gross Asset Value
of such asset as the federal income tax depreciation, depletion, amortization or
other cost recovery deduction for such fiscal year or other period bears to the
beginning adjusted tax basis of such asset; provided, further, that if the
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federal income tax depreciation, depletion, amortization or other cost recovery
deduction for such asset for such fiscal year or other period is zero,
Depreciation of such asset shall be determined with reference to the beginning
Gross Asset Value of such asset using any reasonable method selected by the
General Partner.
"DISTRIBUTION PERIOD" has the meaning set forth in Section 5.1(b).
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"ENTITY" means any general partnership, limited partnership,
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corporation, joint venture, trust, business trust, real estate investment trust,
limited liability company, cooperative or association.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended from time to time (or any corresponding provisions of succeeding laws).
"EXCHANGE FACTOR" has the meaning set forth in the Exchange Rights
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Agreement.
"EXCHANGE RIGHT" has the meaning set forth in the Exchange Rights
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Agreement.
"EXCHANGE RIGHTS AGREEMENT" has the meaning set forth in Section 8.6.
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"FF&E" means furniture, fixtures and equipment.
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7
"FF&E NOTE" means those certain promissory notes in the original
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principal amount of $400,000 between AGH Leasing, L.P., a Delaware limited
partnership, as maker, and the Partnership's subsidiaries, as payee, issued in
connection with such subsidiaries' sale of certain FF&E to AGH Leasing L.P.
"GAAP" means United States generally accepted accounting principles,
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as in effect from time to time.
"GENERAL PARTNER" means MeriStar Hospitality Corporation, a Maryland
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corporation, in its capacity as the general partner of the Partnership, or its
successors as general partner of the Partnership.
"GENERAL PARTNER INTEREST" means a Partnership Interest held by the
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General Partner, in its capacity as general partner. A General Partner Interest
may be expressed as a number of OP Units.
"GROSS ASSET VALUE" means, with respect to any asset of the
-----------------
Partnership, such asset's adjusted basis for federal income tax purposes, except
as follows:
1. 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, without reduction for liabilities, as determined by the contributing
Partner and the Partnership on the date of contribution thereof;
2. if the General Partner reasonably determines that an adjustment
is necessary or appropriate to reflect the relative economic interests of
the Partners, the Gross Asset Values of all Partnership assets shall be
adjusted in accordance with Sections 1.704-1(b)(2)(iv)(f) and (g) of the
Regulations to equal their respective gross fair market values, without
reduction for liabilities, as reasonably determined by the General Partner,
as of the following times:
a. a Capital Contribution (other than a de minimis Capital
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Contribution) to the Partnership by a new or existing Partner as
consideration for a Partnership Interest; or
b. the distribution by the Partnership to a Partner of more than
a de minimis amount of Partnership assets as consideration for the
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repurchase of a Partnership Interest; or
c. the liquidation of the Partnership within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations;
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3. the Gross Asset Values of Partnership assets distributed to any
Partner shall be the gross fair market values of such assets (taking
Section 7701(g) of the Code into account) without reduction for
liabilities, as reasonably determined by the General Partner as of the date
of distribution; and
4. 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 Sections 734(b) or 743(b) of the Code, but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations (as
set forth in Exhibit B); provided, however, that Gross Asset Values shall
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not be adjusted pursuant to this paragraph (4) to the extent that the
General Partner reasonably determines that an adjustment pursuant to
paragraph (2) above is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
paragraph (4).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of computing
Net Income and Net Loss.
"HOTEL" means any hotel in which the Partnership, directly or
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indirectly, acquires ownership of a fee or leasehold interest.
"IMMEDIATE FAMILY" means, with respect to any individual, such
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individual's spouse, parents, parents-in-law, children, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren, sons-in-law
and daughters-in-law or any trust solely for the benefit of any of the foregoing
family members whose sole beneficiaries include the foregoing family members.
"INCAPACITY" or "INCAPACITATED" means, (i) as to any individual
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Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his person or his 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 or limited liability company which is a
Partner, the dissolution and commencement of winding up of the partnership or
limited liability company; (iv) as to any estate which is a Partner, the
distribution by the fiduciary of the estate's 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 Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against
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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
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner 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 Partner's 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) which has been
stayed is not vacated within ninety (90) days after the expiration of any such
stay.
"INDEMNITEE" means (i) any Person made a party to a proceeding by
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reason of (A) such Person's status as (1) the General Partner, (2) a director,
trustee or officer of the Partnership or the General Partner, or (3) a director,
trustee or officer of any other Entity, each Person serving in such capacity at
the request of the Partnership or the General Partner, or (B) his or its
liabilities, pursuant to a loan guarantee 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 assets subject to); and (ii) such other Persons
(including Affiliates of the General Partner, the Company 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.
"INITIAL LIMITED PARTNER" means MeriStar LP, Inc. (f/k/a/ AGH LP,
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Inc.), a Nevada corporation.
"IRS" shall mean the Internal Revenue Service of the United States.
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"LIEN" means any lien, security interest, mortgage, deed of trust,
----
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means the Initial Limited Partner and any other
---------------
Person named as a Limited Partner in Exhibit A, as such Exhibit may be amended
from time to time, or any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Limited Partner of the Partnership.
"LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited
------------------------
Partner in the Partnership representing a fractional part of the Partnership
Interests of all 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" has the meaning set forth in Section 13.1 hereof.
-----------------
10
"LIQUIDATOR" has the meaning set forth in Section 13.2 hereof.
----------
"NET INCOME" or "NET LOSS" means, for each fiscal year or other
------------------------
applicable period, an amount equal to the Partnership's taxable income or loss
for such year or period as determined for federal income tax purposes by the
General Partner, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a) of the Code shall be included in taxable
income or loss), adjusted as follows: (a) by including as an item of gross
income any tax-exempt income received by the Partnership and not otherwise taken
into account in computing Net Income or Net Loss; (b) by treating as a
deductible expense any expenditure of the Partnership described in Section
705(a)(2)(B) of the Code (or which is treated as a Section 705(a)(2)(B)
expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not
otherwise taken into account in computing Net Income or Net Loss, including
amounts paid or incurred to organize the Partnership (unless an election is made
pursuant to Section 709(b) of the Code) or to promote the sale of interests in
the Partnership and by treating deductions for any losses incurred in connection
with the sale or exchange of Partnership property disallowed pursuant to Section
267(a)(1) or 707(b) of the Code as expenditures described in Section
705(a)(2)(B) of the Code; (c) by taking into account Depreciation in lieu of
depreciation, depletion, amortization and other cost recovery deductions taken
into account in computing taxable income or loss; (d) by computing gain or loss
resulting from any disposition of Partnership property with respect to which
gain or loss is recognized for federal income tax purposes by reference to the
Gross Asset Value of such property rather than its adjusted tax basis; (e) in
the event of an adjustment of the Gross Asset Value of any Partnership asset
which requires that the Capital Accounts of the Partnership be adjusted pursuant
to Sections 1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking into
account the amount of such adjustment as if such adjustment represented
additional Net Income or Net Loss pursuant to Exhibit B; and (f) by not taking
into account in computing Net Income or Net Loss items separately allocated to
the Partners pursuant to Paragraphs 1 and 2 of Exhibit B.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Sections 1.704-
----------------------
2(b)(1) and 1.704-2(c) of the Regulations.
"NONRECOURSE LIABILITIES" has the meaning set forth in Section 1.704-
-----------------------
2(b)(3) of the Regulations.
"OP UNIT" means a fractional, undivided share of the Partnership
-------
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of OP Units outstanding and the Percentage Interests in the Partnership
represented by such OP Units are set forth in Exhibit A, as such Exhibit may be
amended from time to time. The ownership of OP Units shall be evidenced by such
form of certificate for units as the General Partner adopts from time to time
unless the General Partner determines that the OP Units shall be uncertificated
securities.
11
"PARTICIPATING LEASES" shall mean those certain lease agreements
--------------------
relating to the lease of the Partnership's Hotels, as such leases may be amended
from time to time.
"PARTNER" means a General Partner or a Limited Partner, and "Partners"
-------
means the General Partner and the Limited Partners collectively.
"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 were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
------------------------
Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEDUCTIONS" has 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 taxable
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
--------------------
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of OP
Units.
"PARTNERSHIP MINIMUM GAIN" has 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 a Partnership Minimum Gain, for a Partnership
taxable 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
hereof, which record date shall be the same as the record date established by
the Company 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, as set
----------------
forth in Section 9.2 hereof.
"PERCENTAGE INTEREST" means, as to a Partner, the fractional part of
-------------------
the Partnership Interests owned by such Partner and expressed as a percentage as
specified in Exhibit A, as such Exhibit may be amended from time to time.
12
"PERMITTED PARTNERS" has the meaning set forth in subparagraph 1(b) of
------------------
Exhibit B.
"PERMITTED TRANSFEREE" means any person to whom OP Units are
--------------------
Transferred in accordance with Section 11.3 of this Agreement.
"PERSON" means an individual or Entity.
------
"PRECONTRIBUTION GAIN" has the meaning set forth in subparagraph 3(c)
--------------------
of Exhibit B.
"QUARTER" means each of the three month periods ending on March 31,
-------
June 30, September 30 and December 31.
"REGULATIONS" means the final, temporary or proposed Income Tax
-----------
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust as defined in Section 856
----
of the Code.
"REIT REQUIREMENTS" has the meaning set forth in Section 5.2.
-----------------
"REIT STOCK" means a share of stock of the Company.
----------
"REIT STOCK AMOUNT" has the meaning set forth in the Exchange Rights
-----------------
Agreement.
"RESTRICTED PARTNER" has the meaning set forth in Section 1(b) of
------------------
Exhibit B.
"STOCK OPTION PLANS" means collectively, the MeriStar Hospitality
------------------
Corporation 1996 Incentive Plan, the MeriStar Hospitality Corporation Non-
Employee Directors' Incentive Plan, each as amended and/or restated from time to
time, and any other plan adopted from time to time by the Company pursuant to
which REIT Stock is issued, or options to acquire REIT Stock are granted, to
employees or directors of the Company, employees of the Partnership or employees
of their respective Affiliates in consideration for services or future services.
"SUBSIDIARY" means, with respect to any Person, any corporation,
----------
partnership 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.
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
---------------------------
Limited Partner to the Partnership pursuant to Section 11.4 hereof.
13
"TAX ITEMS" has the meaning set forth in Exhibit B.
---------
"TERMINATING CAPITAL TRANSACTION" means 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.
"TRANSFER" as a noun, means any sale, assignment, conveyance, pledge,
--------
hypothecation, gift, encumbrance or other transfer, and as a verb, means to
sell, assign, convey, pledge, hypothecate, give, encumber or otherwise transfer.
Certain additional terms and phrases have the meanings set forth in
Exhibit B.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Continuation
------------
The Partners hereby agree to continue the Partnership under and
pursuant to the Act. Except as expressly provided herein to the contrary, 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. Without the need for any
further consent of any Person and notwithstanding any other provision of this
Agreement to the contrary, each Person listed on Exhibit A as a Limited Partner
(i) who was not a limited partner of the Partnership prior to the effective date
and time of this Agreement is hereby admitted to Partnership as a limited
partner of the Partnership, and (ii) who was a limited partner of the
Partnership prior to the effective date and time of the Agreement shall continue
to be a limited partner of the Partnership.
Section 2.2 Name
----
The name of the Partnership shall continue to be MeriStar Hospitality
Operating Partnership, L.P. The Partnership's business may be conducted under
any other name or names deemed advisable by the General Partner, including the
name of the Company or any Affiliate thereof. The words "Limited
Partnership,""L.P.,""Ltd." or similar words or letters shall be included in the
Partnership's 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, upon 5 days prior written notice to the Limited
Partners, change the name of the Partnership.
Section 2.3 Registered Office and Agent; Principal Office
---------------------------------------------
The address of the registered office of the Partnership in the State
of Delaware and the name and address of the registered agent for service of
process on the Partnership in
14
the State of Delaware is The Corporation Trust Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ (▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇), ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The principal office of the
Partnership shall be ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, or
such other place as the General Partner may from time to time designate by
notice to the Limited 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
-----------------
A0 Each Limited Partner and each Assignee hereby 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 or plans to conduct business or own
property, including, without limitation, any documents
necessary or advisable to convey any Contributed Property to
the Partnership; (b) all instruments that the General
Partner 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 the 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, Article 11, 12 or 13 hereof or the Capital
Contribution of any Partner; (e) all certificates, documents
and other instruments relating to the determination of the
rights, preferences and privileges of Partnership Interest;
and (f) amendments to this Agreement as provided in Article
14 hereof; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and
absolute discretion of
15
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
hereof or as may be otherwise expressly provided for in this Agreement.
B0 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 Partner's or Assignee's OP Units
and shall extend to such Limited Partner's or Assignee's 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 the Liquidator, within fifteen (15) days after receipt of the General
Partner's or Liquidator's 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 shall continue until December 31, 2046,
unless the Partnership is dissolved sooner 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 conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act including, without limitation,
to engage in the following activities: to acquire, hold, own, develop,
construct, improve, maintain, operate, sell, lease, transfer,
16
encumber, convey, exchange, and otherwise dispose of or deal with the Hotels; to
acquire, hold, own, develop, construct, improve, maintain, operate, sell, lease,
transfer, encumber, convey, exchange, and otherwise dispose of or deal with real
and personal property of all kinds; to undertake such other activities as may be
necessary, advisable, desirable or convenient to the business of the
Partnership; and to engage in such other ancillary activities as shall be
necessary or desirable to effectuate the foregoing purposes. The Partnership
shall have all powers necessary or desirable to accomplish the purposes
enumerated. In connection with the foregoing, but subject to all of the terms,
covenants, conditions and limitations contained in this Agreement and any other
agreement entered into by the Partnership, the Partnership shall have full power
and authority to enter into, perform, and carry out contracts of any kind, to
borrow money and to issue evidences of indebtedness, whether or not secured by
mortgage, trust deed, pledge or other Lien, and, directly or indirectly, to
acquire and construct additional Hotels necessary or useful in connection with
its business.
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; provided, that 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 Company to continue to qualify as a REIT,
unless the Company otherwise ceases to qualify as a REIT; (ii) could subject the
Company to any additional 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 Company or its securities, unless such action (or
inaction) shall have been specifically consented to by the General Partner in
writing. The Partnership also is empowered to do any and all acts and things
necessary, appropriate or advisable to ensure that the Partnership will not be
classified as a "publicly traded partnership" for the purposes of Section 7704
of the Code.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
-------------------------------------
The Partners have made the Capital Contributions set forth in the
agreements pursuant to which the OP Units were originally issued as reflected in
the books and records of the Partnership. To the extent the Partnership
acquires any property by the merger of any other Person into the Partnership,
Persons who receive Partnership Interests in exchange for their interests in the
Person merging into the Partnership shall become Partners and shall be deemed to
have made Capital Contributions as provided in the applicable merger agreement.
Each Partner shall own OP Units in the amounts set forth for such Partner 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
17
necessary to reflect accurately exchanges, additional Capital Contributions, the
issuance of additional OP Units or similar events having an effect on any
Partner's Percentage Interest. The number of OP Units held by the General
Partner, in its capacity as general partner, shall be deemed to be the General
Partner Interest. Except as provided in Sections 4.2 and 10.5, the Partners
shall have no obligation to make any additional Capital Contributions or loans
to the Partnership.
Section 4.2 Additional Funds; Restrictions on the Company
---------------------------------------------
A0 The sums of money required to finance the business and affairs of
the Partnership shall be derived from the initial Capital Contributions made to
the Partnership by the Partners as set forth in Section 4.1 and from funds
generated from the operation and business of the Partnership including, without
limitation, rents received under the Participating Leases and distributions
directly or indirectly received by the Partnership from any Subsidiary. In the
event additional financing is needed from sources other than as set forth in the
preceding sentence for any reason, the General Partner may, in its sole and
absolute discretion, in such amounts and at such times as it solely shall
determine to be necessary or appropriate, (i) cause the Partnership to issue
additional Partnership Interests and admit additional Limited Partners to the
Partnership in accordance with Section 4.3; (ii) make additional Capital
Contributions to the Partnership (subject to the provisions of Section 4.2B);
(iii) cause the Partnership to borrow money, enter into loan arrangements, issue
debt securities, obtain letters of credit or otherwise borrow money on a secured
or unsecured basis; (iv) make a loan or loans to the Partnership (subject to
Section 4.2B); or (v) sell any Hotels or other assets or properties of the
Partnership. In no event shall the Limited Partners be required to make any
additional Capital Contributions or any loan to, or otherwise provide any
financial accommodation for the benefit of, the Partnership.
B0 The Company shall not issue any debt securities, any preferred
stock or any common stock (including additional REIT Stock (other than (i) as
payment of the REIT Stock Amount or (ii) in connection with the conversion or
exchange of securities of the Company solely in conversion or exchange for other
securities of the Company)) or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase any of
the foregoing (collectively, "SECURITIES"), other than to all holders of REIT
Stock, unless the Company (through the General Partner and the Initial Limited
Partner) shall (i) in the case of debt securities, lend to the Partnership the
proceeds of or consideration received for such Securities on the same terms and
conditions, including interest rate and repayment schedule, as shall be
applicable with respect to or incurred in connection with the issuance of such
Securities and the proceeds of, or consideration received from, any subsequent
exercise, exchange or conversion thereof (if applicable); (ii) in the case of
equity Securities senior or junior to the REIT Stock as to dividends and
distributions on liquidation, contribute to the Partnership the proceeds of or
consideration (including any property or other non-cash assets) received for
such Securities and the proceeds of, or consideration received from, any
subsequent exercise, exchange or conversion thereof (if applicable), and receive
from the Partnership, interests in the Partnership in consideration therefor
with the same terms and conditions, including dividend, dividend priority and
liquidation preference, as are
18
applicable to such Securities; and (iii) in the case of REIT Stock or other
equity Securities on a parity with the REIT Stock as to dividends and
distributions on liquidation (including, without limitation, REIT Stock or other
Securities issued as a stock award or upon exercise of options issued under the
Stock Option Plans), contribute to the Partnership the proceeds of or
consideration (including any property or other non-cash assets, including
services) received for such Securities and the proceeds of, or consideration
received from, any subsequent exercise, exchange or conversion thereof (if
applicable), and receive from the Partnership a number of additional OP Units in
consideration therefor equal to the product of (x) the number of shares of REIT
Stock or other equity Securities issued by the Company, multiplied by (y) a
fraction the numerator of which is one and the denominator of which is the
Exchange Factor in effect on the date of such contribution.
Section 4.3 Issuance of Additional Partnership Interests; Admission
-------------------------------------------------------
of Additional Limited Partners
------------------------------
In addition to any Partnership Interests issuable by the Partnership
pursuant to Section 4.2, the General Partner is authorized to cause the
Partnership to issue additional Partnership Interests (or options therefor) in
the form of OP Units or other Partnership Interests senior or junior to the OP
Units to any Persons at any time or from time to time, for consideration not
less than the fair market value thereof (or the fair market value as of the date
an option is granted) (as such fair market value is determined in the discretion
of the General Partner's Board of Directors), and on such terms and conditions,
as the General Partner shall establish in each case in its sole and absolute
discretion, without any approval being required from any Limited Partner or any
other Person; provided, however, that (i) such issuance does not effect a
-------- -------
material adverse impact (as such material adverse impact is determined in the
discretion of the General Partner's Board of Directors) on (A) the existing
Limited Partners' right to exercise the Exchange Rights pursuant to the Exchange
Rights Agreement or (B) the economic interest of the Limited Partners in the
allocations set forth in Exhibit B (other than due to the issuance of OP Units
or other interests in the Partnership as set forth in this Section 4.3 or
Section 4.2B); (ii) such issuance does not cause the Partnership to become, with
respect to any employee benefit plan subject to Title I of ERISA or Section 4975
of the Code, a "party in interest" (as defined in Section 3(14) of ERISA) or a
"disqualified person" (as defined in Section 4975(e) of the Code); and (iii)
such issuance would not cause any portion of the assets of the Partnership to
constitute assets of any employee benefit plan pursuant to Section 2510.3-101 of
the regulations of the United States Department of Labor. Subject to the
limitations set forth in the preceding sentence, the General Partner may take
such steps as it, in its reasonable discretion, deems necessary or appropriate
to admit any Person as a Limited Partner of the Partnership, including, without
limitation, amending the Certificate, Exhibit A or any other provision of this
Agreement.
Section 4.4 Contribution of Proceeds of Issuance of REIT Stock
--------------------------------------------------
In connection with any offering, grant, award, or issuance of REIT
Stock or securities, rights, options, warrants or convertible or exchangeable
securities pursuant to Section 4.2, the Company shall cause the General Partner
and the Initial Limited Partner to
19
make aggregate Capital Contributions to the Partnership of the proceeds raised
in connection with such offering, grant, award, or issuance, provided that if
the proceeds actually received by the Company are less than the gross proceeds
of such offering, grant, award, or issuance as a result of any underwriter's
discount, commission, or fee or other expenses paid or incurred in connection
with such offering, grant, award, or issuance, then the General Partner and the
Initial Limited Partner shall be deemed to have made a Capital Contribution to
the Partnership in the amount of the gross proceeds of such issuance and the
Partnership shall be deemed simultaneously to have paid pursuant to Section 7.3C
for the amount of such underwriter's discount or other expenses.
Section 4.5 Repurchase of REIT Stock; Excess Shares
---------------------------------------
A. In the event that the Company shall elect to purchase from its
stockholders REIT Stock for the purpose of delivering such REIT Stock to satisfy
an obligation under any dividend reinvestment program adopted by the Company,
any employee stock purchase plan adopted by the Company, or any other obligation
or arrangement undertaken by the Company in the future, the purchase price paid
by the Company for such REIT Stock and any other expenses incurred by the
Company in connection with such purchase shall be considered expenses of the
Partnership and shall be reimbursed to the General Partner on behalf of the
Company, subject to the condition that: (i) if such REIT Stock subsequently is
to be sold by the Company, the Company shall pay to the Partnership, through the
General Partner and the Initial Limited Partner, any proceeds received by the
Company from the sale of such REIT Stock (provided that an exchange of REIT
Stock for OP Units pursuant to the Exchange Rights Agreement would not be
considered a sale for such purposes); and (ii) if such REIT Stock is not re-
transferred by the Company within 30 days after the purchase thereof, the
General Partner shall cause the Partnership to cancel a number of OP Units held
by the Initial Limited Partner and/or the General Partner (as applicable) equal
to the product of (x) the number of shares of such REIT Stock and (y) a
fraction, the numerator of which is one and the denominator of which is the
Exchange Factor in effect on the date of such cancellation.
B. In the event the Company purchases Shares-in-Trust (as defined in
the Articles of Incorporation), the Partnership will purchase from the General
Partner and/or the Initial Limited Partner (as applicable) a number of OP Units
equal to the product of (x) the number of Shares-in-Trust purchased by the
Company multiplied by (y) a fraction, the numerator of which is one and the
denominator of which is the Exchange Factor in effect on the date of such
purchase.
Section 4.6 No Third Party Beneficiary
--------------------------
No creditor or other third party having dealings with the Partnership
shall have the right to enforce the right or obligation of any Partner to make
Capital Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being
20
understood and agreed that the provisions of this Agreement shall be solely for
the benefit of, and may be enforced solely by, the parties hereto and their
respective successors and assigns.
Section 4.7 No Interest; No Return
----------------------
No Partner shall be entitled to interest on its Capital Contribution
or on such Partner's 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 4.8 No Preemptive Rights
--------------------
Subject to any preemptive rights that may be granted pursuant to
Section 4.3 hereof, no Person shall have any preemptive or other similar right
with respect to (i) additional Capital Contributions or loans to the
Partnership; or (ii) issuance or sale of any OP Units or other Partnership
Interests.
Section 4.9 Class B Certificate of Designation
----------------------------------
The Partnership may issue from time to time Class B OP Units, which
Limited Partner Interest shall have the rights and preferences set forth in the
Certificate of Designation attached hereto as Exhibit C (the "Class B
Certificate of Designation").
Section 4.10 Class C Certificate of Designation
----------------------------------
The Partnership may issue from time to time Class C OP Units, which
Limited Partner Interest shall have the rights and preferences set forth in the
Certificate of Designation attached hereto as Exhibit D (the "Class C
Certificate of Designation").
Section 4.11 Class D Certificate of Designation
----------------------------------
The Partnership may issue from time to time Class D OP Units, which
Limited Partner Interest shall have the rights and preferences set forth in the
Certificate of Designation attached hereto as Exhibit E (the "Class D
Certificate of Designation").
21
ARTICLE 5
DISTRIBUTIONS
5.1 Regular Distributions
---------------------
(a) Except for distributions pursuant to Section 13.2 in connection
with the dissolution and liquidation of the Partnership, and subject to the
provisions of Sections 5.3, 5.4, 5.5 and 12.2C, the General Partner shall cause
the Partnership to distribute, on a quarterly basis (or, at the election of the
General Partner, more frequently), an amount of Available Cash, determined by
the General Partner in its sole discretion to the Partners, as of the applicable
Partnership Record Date, in accordance with each Partner's respective Percentage
Interest, provided, however, that in no event may a Partner receive a
distribution of Available Cash with respect to an OP Unit if such Partner is
entitled to receive a distribution out of such Available Cash with respect to
REIT Stock for which such OP Unit has been exchanged.
(b) If for any quarter or shorter period with respect to which a
distribution is to be made (a "Distribution Period") Class B OP Units are
outstanding on the Partnership Record Date for such Distribution Period, the
General Partner shall allocate the Available Cash with respect to such
Distribution Period available for distribution with respect to the OP Units and
Class B OP Units collectively between the Partners who are holders of OP Units
and the Partners who are holders of Class B OP Units ("Class B") as follows:
(1) Holders of OP Units shall receive that portion of the
Available Cash (the "OP Unit REIT Portion") determined by multiplying
the amount of Available Cash by the following fraction:
A x Y
---------------
(A x Y)+(B x X)
(2) Class B shall receive that portion of the Available Cash
(the "Class B REIT Portion") determined by multiplying the amount of
Available Cash by the following fraction:
B x X
---------------
(A x Y)+(B x X)
(3) For purposes of the foregoing formulas, (i) "A" equals the
number of OP Units outstanding on the Partnership Record Date for
such Distribution Period; (ii) "B" equals the number of Class B OP
Units outstanding on the Partnership Record Date for such Distribution
Period; (iii) "Y" equals the number of days in the Distribution
Period; and (iv) "X" equals the number of
22
days in the Distribution Period for which the Class B OP Units were
issued and outstanding.
The OP Unit REIT Portion shall be distributed among Partners holding
OP Units on the Partnership Record Date for the Distribution Period in
accordance with the number of OP Units held by each Partner on such Partnership
Record Date; provided that, in no event may a Partner receive a distribution of
Available Cash with respect to an OP Unit if a Partner is entitled to receive a
distribution out of such Available Cash with respect to REIT Stock for which
such OP Unit has been redeemed or exchanged. The Class B REIT Portion shall be
distributed among the Partners holding Class B OP Units on the Partnership
Record Date for the Distribution Period in accordance with the number of Class B
OP Units held by each Partner on such Partnership Record Date. In no event shall
any Class B OP Units be entitled to receive any distribution of Available Cash
for any Distribution Period ending prior to the date on which such Class B OP
Units are issued.
(c) Distributions When Class B OP Units Have Been Issued on Different
-----------------------------------------------------------------
Dates. If Class B OP Units which have been issued on different dates are
-----
outstanding on the Partnership Record Date for any Distribution Period, then the
Class B OP Units issued on each particular date shall be treated as a separate
series of Partnership Interests for purposes of making the allocation of
Available Cash for such Distribution Period among the holders of Partnership
Interests (and the formula for making such allocation, and the definitions of
variables used therein, shall be modified accordingly). Thus, for example, if
two series of Class B OP Units are outstanding on the Partnership Record Date
for any Distribution Period, the allocation formula for each series, "Series B1"
and "Series B2" would be as follows:
(4) Series B1 shall receive that portion of the Available Cash
determined by multiplying the amount of Available Cash by the
following fraction:
B1 x X1
---------------------------
(A x Y)+(B1 x X1)+(B2 x X2)
(5) Series B2 shall receive that portion of the Available Cash
determined by multiplying the amount of Available Cash by the
following fraction:
B2 x X2
---------------------------
(A x Y)+(B1 x X1)+(B2 x X2)
(6) For purposes of the foregoing formulas the definitions set
forth in Section 5.1(b)(3) remain the same except that (i) "B1" equals
the number of Partnership Interests in Series B1 outstanding on the
Partnership Record Date
23
for such Distribution Period; (ii) "B2" equals the number of
Partnership Interests in Series B2 outstanding on the Partnership
Record Date for such Distribution Period; (iii) "X1" equals the number
of days in the Distribution Period for which the Partnership Interests
in Series B1 were issued and outstanding; and (iv) "X2" equals the
number of days in the Distribution Period for which the Partnership
Interests in Series B2 were issued and outstanding.
5.2 Qualification as a REIT
-----------------------
The General Partner shall use its best efforts to cause the
Partnership to distribute sufficient amounts under this Article 5 to enable the
Company to pay stockholder dividends that will enable the Company to (i) satisfy
the requirements for qualification as a REIT under the Code and Regulations
("REIT Requirements"), and (ii) avoid any federal income or excise tax
liability; provided, however, the General Partner shall not be bound to comply
with this covenant to the extent such distributions would (i) violate applicable
Delaware law or (ii) contravene the terms of any notes, mortgages or other types
of debt obligations which the Partnership may be subject to in conjunction with
borrowed funds.
5.3 Withholding
-----------
With respect to any withholding tax or other similar tax liability or
obligation to which the Partnership may be subject as a result of any act or
status of any Partner or to which the Partnership becomes subject with respect
to any OP Unit, the Partnership shall have the right to withhold amounts of
Available Cash distributable to such Partner or with respect to such OP Units,
to the extent of the amount of such withholding tax or other similar tax
liability or obligation pursuant to the provisions contained in Section 10.5.
5.4 Additional Partnership Interests
--------------------------------
If the Partnership issues Partnership Interests in accordance with
Section 4.2 or 4.3, the distribution priorities set forth in Section 5.1 shall
be amended, as necessary, to reflect the distribution priority of such
Partnership Interests and corresponding amendments shall be made to the
provisions of Exhibit B.
5.5 Distributions Upon Liquidation
------------------------------
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership shall be distributed to the Partners in accordance with Section
13.2.
24
ARTICLE 6
ALLOCATIONS
The Net Income, Net Loss and other Partnership items shall be
allocated pursuant to the provisions of Exhibit B.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
----------
A0 Except as otherwise expressly provided in this Agreement, full,
complete and exclusive discretion to manage and control the business and affairs
of the Partnership are and shall be 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. 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 shall have full
power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth in
Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including, without limitation:
(1) (a) 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 Company (so long as the Company
qualifies 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 in amounts sufficient to
permit the Company to maintain REIT status, (b) the
assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, (c) the issuance of
evidence of indebtedness (including the securing of the same
by deed, mortgage, deed of trust or other lien or
encumbrance on the Partnership's assets) and (d) the
incurring of any obligations it deems necessary for the
conduct of the activities of the Partnership, including the
payment of all expenses associated with the Company;
25
(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 or the Company;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership
(including the exercise or grant of any conversion, option,
privilege, or subscription right or other right available in
connection with any assets at any time held by the
Partnership) or the merger or other combination of the
Partnership with or into another entity;
(4) 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
of the operations of the Company, the Partnership or any of
the Partnership's Subsidiaries, the lending of funds to
other Persons (including, without limitation, the
Subsidiaries of the Partnership and/or the Company) and the
repayment of obligations of the Partnership and its
Subsidiaries and any other Person in which it has an equity
investment, and the making of capital contributions to its
Subsidiaries;
(5) the expansion, development, construction, leasing, repair,
alteration, demolition or improvement of any Hotel owned by
the Partnership or any Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any contracts
(including, without limitation, the Participating Leases),
conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of the
Partnership's operations or the implementation of the
General Partner's 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 Partnership's assets;
(7) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
26
(8) holding, managing, investing and reinvesting cash and other
assets of the Partnership;
(9) the collection and receipt of revenues and income of the
Partnership;
(10) 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" of the Partnership), and agents, outside
attorneys, accountants, consultants and contractors of the
Partnership, and the determination of their compensation and
other terms of employment or engagement;
(11) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or
appropriate;
(12) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it
deems desirable (including, without limitation, the
acquisition of interests in, and the contributions of
property to, its Subsidiaries and any other Person from time
to time);
(13) 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 expenses, and the
indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, the contribution or loan of funds by the
Partnership to such Persons);
27
(15) the determination of the fair market value of any
Partnership property distributed in kind using such
reasonable method of valuation as the General Partner may
adopt;
(16) 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;
(17) 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;
(18) 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;
(19) the making, execution and delivery of any and all deeds,
leases, notes, 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 foregoing;
(20) the issuance of additional OP Units in connection with
Capital Contributions by Additional Limited Partners and
additional Capital Contributions by Partners pursuant to
Article 4 hereof; and
(21) The opening of bank accounts on behalf of, and in the name
of, the Partnership and its Subsidiaries.
B0 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 provision of this Agreement 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
28
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.
C0 At all times from and after the date hereof, the General Partner
at the expense of the Partnership, may or may not, cause the Partnership to
obtain and maintain (i) casualty, liability and other insurance on the
properties of the Partnership and (ii) liability insurance for the Indemnitees
hereunder.
D0 At all times from and after the date hereof, the General Partner
may cause the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amount as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
E0 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 of any action taken by it; provided, that if the
General Partner decides to refinance (directly or indirectly) any outstanding
indebtedness of the Partnership, the General Partner shall use reasonable
efforts to structure such refinancing in a manner that minimizes any adverse tax
consequences resulting therefrom to the Limited Partners. The General Partner
and the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under and in accordance with this Agreement.
Section 7.2 Certificate of Limited Partnership
----------------------------------
The Certificate has been filed with the Secretary of State of Delaware
as required by the Act. 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 and any other state,
or the District of Columbia, in which the Partnership may elect to do business
or own property. 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 of 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 each other state, or the District of Columbia, in which the
Partnership may elect to do business or own property. Subject to the terms of
Section 8.5A(4) hereof, 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.
Section 7.3 Reimbursement of the General Partner and the Company
----------------------------------------------------
29
A0 Except as provided in this Section 7.3 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.
B0 The General Partner shall be reimbursed on a monthly basis, or
such other basis as it may determine in its sole and absolute discretion, for
all expenses that it incurs on behalf of the Partnership relating to the
ownership and operation of the Partnership's assets, or for the benefit of the
Partnership, including all expenses associated with compliance by the Company,
the General Partner and the Initial Limited Partner with laws, rules and
regulations promulgated by any regulatory body and any and all salaries,
compensation and expenses of officers and employees of the Company; provided,
that the amount of any such reimbursement shall be reduced by any interest
earned by the Company (including the General Partner and the Initial Limited
Partner) with respect to bank accounts or other instruments or accounts held by
it in its name. Such reimbursement shall be in addition to any reimbursement
made as a result of indemnification pursuant to Section 7.6 hereof.
Notwithstanding any provisions to the contrary set forth herein, the General
Partner shall not be entitled to reimbursement for any administrative costs and
expenses incurred by the Company or that are attributable to Hotels or
partnership interests in a Subsidiary of the Partnership that are owned by the
Company directly.
C. Expenses incurred by the Company relating to the organization
and/or reorganization of the Partnership and the Company, the initial public
offering of REIT Stock by the Company, and any other issuance of additional
Partnership Interests, REIT Stock or rights, options, warrants, or convertible
or exchangeable securities pursuant to Section 4.2 hereof and all costs and
expenses associated with the preparation and filing of any periodic reports by
the Company under federal, state or local laws or regulations (including,
without limitation, all costs, expenses, damages, and other payments resulting
from or arising in connection with litigation related to any of the foregoing)
are primarily obligations of the Partnership. To the extent the General
Partner, on behalf of the Company, pays or incurs such expenses, the General
Partner, on behalf of the Company, shall be reimbursed for such expenses.
Section 7.4 Outside Activities of the General Partner
-----------------------------------------
The Company shall not, and it shall cause the General Partner and the
Initial Limited Partner not to, directly or indirectly enter into or conduct any
business other than in connection with the ownership, acquisition, development
and disposition of Partnership Interests and the management of the business of
the Partnership, and such activities as are incidental thereto. The General
Partner and any Affiliates of the General Partner may acquire
30
Limited Partner Interests and shall be entitled to exercise all rights of a
Limited Partner relating to such Limited Partner Interests.
Section 7.5 Contracts with Affiliates
-------------------------
A. The Partnership may lend or contribute funds or other assets to
its Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.4, the Partnership may Transfer
assets to joint ventures, limited liability companies, 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 and absolute
discretion may determine.
C. 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.
D. 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, stock option plans, and similar
plans funded by the Partnership for the benefit of employees of the Company, the
Partnership, the General Partner, any 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 Company, any Subsidiaries of
the Partnership or any Affiliate of any of them.
E. The General Partner is expressly authorized to enter into, in the
name and on behalf of the Partnership, a "right of first opportunity" or "right
of first offer" arrangement, non-competition agreements 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 7.6 Indemnification
---------------
A. To the fullest extent permitted by Delaware law, the Partnership
shall indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without limitation,
reasonable attorneys' fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any
31
and all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the
Partnership, the General Partner or the Company as set forth in this Agreement,
in which such Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, except to the extent it is finally determined by a court of
competent jurisdiction, from which no further appeal may be taken, that such
Indemnitee's action constituted intentional acts or omissions constituting
willful misconduct or fraud. 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 7.6 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. Any indemnification
pursuant to this Section 7.6 shall be made only out of the assets of the
Partnership, 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 7.6.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding.
C. The indemnification provided by this Section 7.6 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 Indemnitees are 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
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.6, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by such Indemnitee of its duties to the
Partnership also imposes duties on, or otherwise involves services by, such
Indemnitee to the plan or participants or beneficiaries of the plan; excise
taxes assessed on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines within the meaning of this
Section 7.6; and actions taken or omitted by the Indemnitee with respect to an
employee benefit plan in the
32
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participant 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 any of the 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 7.6 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 7.6 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 7.6 or any provision hereof
shall be prospective only and shall not in any way affect the Partnership's
liability to any Indemnitee under this Section 7.6, 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.
Section 7.7 Liability of the General Partner
--------------------------------
A. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner and its officers and directors shall not be
liable for monetary damages to the Partnership, any Partners or any Assignees
for losses sustained or liabilities incurred as a result of errors in judgment
or of any act or omission if the General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the General
Partner is acting on behalf of the Partnership and the shareholders of the
Company collectively, that the General Partner, subject to the provisions of
Section 7.1E hereof, is under no obligation to consider the separate interest of
the Limited Partners in deciding whether to cause the Partnership to take (or
decline to take) any actions, and that the General Partner shall not be liable
for monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Limited Partners in connection with such decisions, provided that the
General Partner has acted in good faith. With respect to any indebtedness of
the Partnership which any Limited Partner may have guaranteed, the General
Partner shall have no duty to keep such indebtedness outstanding.
C. Subject to its obligations and duties as General Partner set
forth in Section 7.1A hereof, the General Partner may exercise any of the powers
granted to it by this
33
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 the General Partner in good faith.
D. 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 General Partner's and its officers' and directors' liability
to the Partnership and the Limited Partners 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.
Section 7.8 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 in good faith 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, architects, engineers,
environmental consultants 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 Person's 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 duly appointed 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 the
Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the Company to
continue to qualify as a REIT; or (ii) to avoid the Company 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 7.9 Title to Partnership Assets
---------------------------
34
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner or one or more nominees, as the General Partner may
determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership asset 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,
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 7.10 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, without consent or approval of any other
Partner or Person, 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 take any and all actions on behalf of the Partnership, and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's 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.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
35
Section 8.1 Limitation of Liability
-----------------------
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5 hereof,
or under the Act. Notwithstanding the preceding sentence, each Limited Partner
shall have the right, but not the obligation, to guarantee a portion of
indebtedness of the Partnership.
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, agent or trustee of the
General Partner, the Partnership or any of their Affiliates, in their capacity
as such) shall take part in the operation, management or control (within the
meaning of the Act) of the Partnership's business, transact any business in the
Partnership's 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 pursuant to Section 7.5 hereof
and any other agreements entered into by a Limited Partner or its Affiliates
with the Partnership or any of its Subsidiaries, any Limited Partner (other than
the Initial Limited Partner) and any officer, director, employee, agent,
trustee, Affiliate or shareholder of any Limited Partner (other than the Initial
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 that are 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. None of
the Limited Partners (other than the Initial Limited Partner) 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 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.
Section 8.4 Return of Capital
-----------------
36
Except pursuant to the Exchange Rights Agreement, no Limited Partner
shall be entitled to the withdrawal or return of its Capital Contribution,
except to the extent of distributions made pursuant to this Agreement or upon
termination of the Partnership as provided herein. Except to the extent
provided by Exhibit B, or as otherwise expressly provided in this Agreement, 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 to profits,
losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership
------------------------------------------------------
A. In addition to the other rights provided by this Agreement or by
the Act, and except as limited by Section 8.5B hereof, each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner' s own
expense (including such reasonable copying and administrative charges as the
General Partner may establish from time to time):
(10 to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by
the Company pursuant to the Securities Exchange Act of 1934;
(20 to obtain a copy of the Partnership's federal, state and
local income tax returns for each Partnership Year;
(30 to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(40 to obtain a copy of this Agreement and the Certificate and
all amendments and/or restatements thereto, together with
executed copies of all powers of attorney pursuant to which
this Agreement, the Certificate and all amendments and/or
restatements thereto have been executed; and
(50 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. 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
37
that (i) the General Partner reasonably 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 could
damage the Partnership or its business; or (ii) the Partnership is required by
law or by agreements with an unaffiliated third party to keep confidential.
Section 8.6 Exchange Rights Agreement
-------------------------
The Limited Partners have been granted the right, but not the
obligation, to exchange all or a portion of their OP Units for cash or at the
option of the Company, for shares of REIT Stock on the terms and subject to the
conditions and restrictions contained in those certain Exchange Rights
Agreements among the Company and the particular Limited Partners (as amended
from time to time, the "Exchange Rights Agreements").
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 those records and documents required to be maintained
by the Act and other books and records deemed by the General Partner to be
appropriate with respect to the Partnership's business, including, without
limitation, all books and records necessary to comply with applicable REIT
Requirements and to provide to the Limited Partners any information, lists and
copies of documents required to be provided pursuant to Sections 8.5A and 9.3
hereof. 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, punch
cards, magnetic tape, photographs, micrographics or any other 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,
or such other basis as the General Partner determines to be necessary or
appropriate.
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
five (105) days after the close of each Partnership Year, the General Partner
shall cause to be mailed to
38
each Limited Partner as of the close of the Partnership Year, an annual report
containing financial statements of the Partnership, or of the Company, if such
statements are prepared on a consolidated basis with the Company, for such
Partnership Year, presented in accordance with GAAP, such statements to be
audited by a nationally recognized firm of independent public accountants
selected by the General Partner in its sole discretion.
B. As soon as practicable, but in no event later than one hundred
five (105) days after the close of each calendar quarter (except the last
calendar quarter of each calendar year), the General Partner shall cause to be
mailed to each Limited Partner a report containing unaudited financial
statements as of the last day of the calendar quarter of the Partnership, or of
the Company, if such statements are prepared on a consolidated basis with the
Company, and such other information as may be required by applicable law or
regulation, or as the General Partner determines to be appropriate.
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 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 Limited
Partners for federal and state income tax reporting purposes.
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; provided, however, that the General Partner shall make the
election under Section 754 of the Code in accordance with applicable regulations
thereunder effective for the Partnership's first calendar year. The General
Partner shall elect a permissible method of eliminating the disparity between
the book value and the tax basis of property contributed to the Partnership or
to a Subsidiary of the Partnership pursuant to the regulations promulgated under
the provisions of Section 704(c) of the Code. The General Partner shall have
the right to seek to revoke any tax election it makes including, without
limitation, the election under Section 754 of the Code, upon the General
Partner's determination, in its sole and absolute discretion, that such
revocation is in the best interests of the Partners.
Section 10.3 Tax Matters Partner
-------------------
39
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 Internal Revenue Service of the beginning
of an administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the Internal Revenue Service with the name, address,
taxpayer identification number, and profit interest of each of the Limited
Partners and the Assignees; provided, that such information is provided to the
Partnership by the Limited Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(10 to enter into any settlement with the Internal Revenue
Service 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 Internal Revenue
Service 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(a)(8) of the Code) or a member
of a "notice group" (as defined in Section 6223(b)(2) of the
Code);
(20 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 filing of a complaint for refund with the United States
Claims Court or the District Court of the United States for
the district in which the Partnership's principal place of
business is located;
(30 to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(40 to file a request for an administrative adjustment with the
Internal Revenue Service and, if any part of such request is
not allowed by the Internal Revenue Service, to file an
appropriate pleading
40
(petition or complaint) for judicial review with respect to
such request;
(50 to enter into an agreement with the Internal Revenue Service
to extend the period for assessing any tax which is
attributable to any item required to be taken account of by
a Partner for tax purposes, or an item affected by such
item; and
(60 to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial
review proceeding to the extent permitted by applicable law
or regulations.
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 7.6 of this Agreement 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
and expenses) 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 ratably over a sixty (60) month period as provided
in Section 709 of the Code.
Section 10.5 Withholding
-----------
Each Limited Partner hereby authorizes the Partnership to withhold
from, or pay on behalf of or with respect to, such Limited 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 Limited 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 a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days
41
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 Limited 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 Limited Partner. Any amounts withheld pursuant to the
foregoing clauses (i) or (ii) shall be treated as having been distributed to
such Limited Partner. Each Limited Partner hereby unconditionally and
irrevocably grants to the Partnership a security interest in such Limited
Partner's Partnership Interest to secure such Limited Partner's obligation to
pay to the Partnership any amounts required to be paid pursuant to this Section
10.5. In the event that a Limited Partner fails to pay when due any amounts owed
to the Partnership pursuant to this Section 10.5, the General Partner may, in
its sole and absolute discretion, elect to make the payment to the Partnership
on behalf of such defaulting Limited Partner, and in such event shall be deemed
to have loaned such amount to such defaulting Limited Partner and shall succeed
to all rights and remedies of the Partnership as against such defaulting Limited
Partner. Without limitation, in such event, the General Partner shall have the
right to receive distributions that would otherwise be distributable to such
defaulting Limited Partner until such time as such loan, together with all
interest thereon, has been paid in full, and any such distributions so received
by the General Partner shall be treated as having been distributed to the
defaulting Limited Partner and immediately paid by the defaulting Limited
Partner to the General Partner in repayment of such loan. Any amount payable by
a Limited Partner hereunder shall bear interest at the highest base or prime
rate of interest published from time to time by any of Citibank, N.A., Chemical
Bank, ▇▇▇▇▇▇ Guaranty Trust Company of New York and Chase Manhattan Bank, N.A.,
plus four (4) percentage points, but in no event higher than the maximum lawful
rate of interest on such obligation, such interest to accrue from the date such
amount is due (i.e., fifteen (15) days after demand) until such amount is paid
in full. 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
an OP Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner Interest to
another Person or by which a Limited Partner purports to assign all or any part
of its Limited Partner Interest to another Person. The term "Transfer" when
used in this Article 11 does not include any exchange of OP Units for cash or
REIT Stock pursuant to the Exchange Rights Agreement.
42
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.
Section 11.2 Transfer of the General Partner's General Partner
-------------------------------------------------
Interest
--------
A. The General Partner may not Transfer any of its General Partner
Interest or withdraw as General Partner, or Transfer any of its Limited Partner
Interest, except (i) if Limited Partners holding at least a majority of the
Percentage Interests of the Limited Partners (other than Limited Partner
Interests held by the Company or any Affiliate thereof) consent to such Transfer
or withdrawal, (ii) if such Transfer is to the Company or an entity which is
wholly-owned by the Company and is a Qualified REIT Subsidiary as defined in
Section 856(i) of the Code or (iii) in connection with a transaction described
in Section 11.2D or 11.2E (as applicable).
B. The Initial Limited Partner may not Transfer any of its Limited
Partner Interest or withdraw as a Limited Partner, except (i) if Limited
Partners holding a majority of the Percentage Interest of the Limited Partners
(other than Limited Partner Interests held by the Company or any Affiliate
thereof) consent to such Transfer or withdrawal, (ii) if such Transfer is to the
Company or an entity which is wholly owned by the Company and is a Qualified
REIT Subsidiary as defined in Section 856(i) of the Code or (iii) in connection
with a transaction described as Section 11.2D.
C. In the event the General Partner withdraws as general partner of
the Partnership in accordance with clause (A) above, the General Partner's
General Partner Interest shall immediately be converted into a Limited Partner
Interest.
D. Except as otherwise provided in Section 11.2E, the Company shall
not engage in any merger, consolidation or other combination with or into
another Person or sale of all or substantially all of its assets, or any
reclassification, or any recapitalization or change of outstanding REIT Stock
(other than a change in par value, or from par value to no par value, or as a
result of a subdivision or combination of REIT Stock) (a "Transaction"), unless
(i) the Transaction also includes a merger of the Partnership or sale of
substantially all of the assets of the Partnership as a result of which all
Limited Partners will receive for each OP Unit an amount of cash, securities, or
other property equal to the product of the Exchange Factor and the greatest
amount of cash, securities or other property or value paid in the Transaction to
or received by a holder of one share of REIT Stock in consideration of one share
of REIT Stock, provided that if, in connection with the Transaction, a purchase,
-------- ----
tender or exchange offer ("Offer") shall have been made to and accepted by the
holders of more than 50% of the outstanding REIT Stock, each holder of OP Units
shall be given the option to exchange its OP Units for the greatest amount of
cash, securities, or other property which a Limited Partner
43
would have received had it (A) exercised its Exchange Right and (B) sold,
tendered or exchanged pursuant to the Offer the REIT Stock received upon
exercise of the Exchange Right immediately prior to the expiration of the Offer;
and (ii) no more than 75% of the equity securities of the acquiring Person in
such Transaction shall be owned, after consummation of such Transaction, by the
General Partner or Persons who were Affiliates of the Partnership or the General
Partner immediately prior to the date on which the Transaction is consummated.
E. Notwithstanding Section 11.2D, the General Partner may merge into
or consolidate with another entity if immediately after such merger or
consolidation (i) substantially all of the assets of the successor or surviving
entity (the "Surviving General Partner"), other than OP Units held by the
General Partner, are contributed to the Partnership as a Capital Contribution in
exchange for OP Units with a fair market value equal to the value of the assets
so contributed as determined by the Surviving General Partner in good faith and
(ii) the Surviving General Partner expressly agrees to assume all obligations of
the General Partner hereunder. Upon such contribution and assumption, the
Surviving General Partner shall have the right and duty to amend this Exchange
Rights Agreement as set forth in this Section 11.2.E. The Surviving General
Partner shall in good faith arrive at a new method for the calculation of the
Exchange Factor for an OP Unit after any such merger or consolidation so as to
approximate the existing method for such calculation as closely as reasonably
possible. Such calculation shall take into account, among other things, the
kind and amount of securities, cash and other property that was receivable upon
such merger or consolidation by a holder of REIT Stock or options, warrants or
other rights relating thereto, and which a holder of OP Units could have
acquired had such OP Units been redeemed for REIT Stock immediately prior to
such merger or consolidation. Such amendment to this Agreement shall provide
for adjustment to such method of calculation, which shall be as nearly
equivalent as may be practicable to the adjustments provided for with respect to
the Exchange Factor. The above provisions of this Section 11.2E shall similarly
apply to successive mergers or consolidations permitted hereunder.
Section 11.3 Limited Partners' Rights to Transfer
------------------------------------
A. Subject to the provisions of Sections 11.3C, 11.3D, 11.3E and
11.4, a Limited Partner (other than the Initial Limited Partner) may, without
the consent of the General Partner, Transfer all or any portion of its Limited
Partnership Interest.
B. If a Limited Partner is Incapacitated, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all of 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.
44
C. The General Partner may prohibit any Transfer by a Limited
Partner of its OP Units if, in the opinion of legal counsel to the Partnership,
such Transfer would require filing of a registration statement under the
Securities Act of 1933, as amended, or would otherwise violate any federal or
state securities laws or regulations applicable to the Partnership or the OP
Units.
D. No Transfer by a Limited Partner of its OP Units may be made to
any Person if (i) in the opinion of legal counsel for the Partnership, it would
result in the Partnership being treated as an association taxable as a
corporation for federal income tax purposes; (ii) such Transfer would 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); (iii)
such Transfer would, in the opinion of legal counsel for 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; (iv) such Transfer would subject the Partnership to regulation 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; (v) without
the consent of the General Partner, which consent may be withheld in its sole
and absolute discretion, if such Transfer is a sale or exchange, and such sale
or exchange would, when aggregated with all other sales and exchanges during the
12-month period ending on the date of the proposed Transfer, result in 50% or
more of the interests in Partnership capital and profits being sold or exchanged
during such 12-month period; or (vi) such Transfer is effectuated through an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code.
E. No transfer of any OP Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Regulations
Section 1.752-4(b)) to any lender to the Partnership whose loan constitutes a
nonrecourse liability (within the meaning of Regulations Section 1.752.1(a)(2)),
without the consent of the General Partner, which may be withheld in its sole
and absolute discretion, provided that as a condition to such consent the lender
-------- ----
will be required to enter into an arrangement with the Partnership and the
General Partner to exchange for the Cash Amount (as such term is defined in the
Exchange Rights Agreement) 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.
F. Any Transfer in contravention of any of the provisions of this
Section 11.3 shall be void and ineffectual and shall not be binding upon, or
recognized by, the Partnership.
Section 11.4 Substituted Limited Partners
----------------------------
45
A. No Limited Partner shall have the right to substitute a Permitted
Transferee for a Limited Partner in his place. The General Partner shall,
however, have the right to consent to the admission of a Permitted Transferee of
the Partnership Interest of a Limited Partner pursuant to this Section 11.4 as a
Substitute Limited Partner, which consent may be given or withheld by the
General Partner in its sole and absolute discretion. The General Partner's
failure or refusal to permit such transferee to become a Substituted Limited
Partner shall not give rise to any cause of action against the Partnership or
any Partner.
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.
C. No Permitted Transferee will be admitted as a Substituted Limited
Partner unless such transferee has furnished to the General Partner (a) evidence
of acceptance in form satisfactory to the General Partner of all of the terms
and conditions of this Agreement and the Exchange Rights Agreement, including,
without limitation, the power of attorney granted in Section 2.4 hereof and (b)
such other documents or instruments as may be required in the reasonable
discretion of the General Partner in order to effect such Person's admission as
a Substituted Limited Partner. 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 transferee as a Substituted Limited Partner, as
described in Section 11.4A, such transferee shall be considered an Assignee for
purposes of this Agreement. An Assignee shall be deemed to have had assigned to
it, and shall be entitled to receive distributions from the Partnership and the
share of Net Income, Net Losses and any other items, gain, loss deduction and
credit of the Partnership attributable to the OP Units assigned to such
transferee, 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 vote such OP Units in
any matter presented to the Limited Partners for a vote (such OP Units being
deemed to have been voted on such matter in the same proportion as all other OP
Units held by Limited Partners are voted). In the event any such transferee
desires to make a further assignment of any such OP Units, such transferee shall
be subject to all of 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.
Section 11.6 General Provisions
------------------
46
A. No Limited Partner may withdraw from the Partnership other than
as a result of a permitted Transfer of all of such Limited Partner's OP Units in
accordance with this Article 11 or pursuant to exchange of all of its OP Units
pursuant to the Exchange Rights Agreement.
B. Any Limited Partner which shall Transfer all of its OP Units in a
Transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such OP Units as Substituted
Limited Partners. Similarly, any Limited Partner which shall Transfer all of
its OP Units pursuant to an exchange of all of its OP Units pursuant to the
Exchange Rights Agreement shall cease to be a Limited Partner.
C. Other than pursuant to the Exchange Rights Agreement or without
the consent of the General Partner, transfers pursuant to this Article 11 may
only be made as of the first day of a fiscal quarter of the Partnership.
D. If any Partnership Interest is transferred or assigned during the
Partnership's fiscal year in compliance with the provisions of this Article 11
or exchanged pursuant to the Exchange Rights Agreement on any day other than the
first day of a Partnership Year, then Net Income, Net Losses, each item thereof
and all other items attributable to such 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 in accordance with Section 706(d) of the Code, using the interim closing of
the books method. Solely for purposes of making such allocations, each of such
items for the calendar month in which the Transfer or assignment occurs shall be
allocated to the transferee Partner, and none of such items for the calendar
month in which an exchange occurs shall be allocated to the exchanging Partner,
provided, however, that the General Partner may adopt such other conventions
relating to allocations in connection with transfers, assignments, or exchanges
as it determines are necessary or appropriate. All distributions of Available
Cash attributable to such OP Units with respect to which the Partnership Record
Date is before the date of such transfer, assignment, or exchange shall be made
to the transferor Partner or the exchanging Partner, as the case may be, and in
the case of a Transfer or assignment other than an exchange, all distributions
of Available Cash thereafter attributable to such OP Units shall be made to the
transferee Partner.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
--------------------------------------
47
A. A successor to all of the General Partner Interest pursuant to
Section 11 hereof who is proposed to be admitted as a successor General Partner
shall be admitted to the Partnership as the General Partner, effective
immediately prior to such transfer. Any such transferee shall carry on the
business of the Partnership without dissolution.
B. A Person shall be admitted as a substitute or successor General
Partner of the Partnership only if the following terms and conditions are
satisfied:
(a) the Person to be admitted as a substitute or additional
General Partner shall have accepted and agreed to be bound by all the terms
and provisions of this Agreement by executing a counterpart thereof and
such other documents or instruments as may be required or appropriate in
order to effect the admission of such Person as a General Partner;
(b) if the Person to be admitted as a substitute or additional
General Partner is a corporation or a partnership it shall have provided
the Partnership with evidence satisfactory to counsel for the Partnership
of such Person's authority to become a General Partner and to be bound by
the terms and provisions of this Agreement; and
(c) counsel for the Partnership shall have rendered an opinion
(relying on such opinions from other counsel as may be necessary) that the
admission of the person to be admitted as a substitute or additional
General Partner is in conformity with the Act, that none of the actions
taken in connection with the admission of such Person as a substitute or
additional General Partner will cause (i) the Partnership to be classified
other than as a partnership for federal income tax purposes, or (ii) the
loss of any Limited Partner's limited liability.
C. 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 Section 11.6D hereof.
Section 12.2 Admission of Additional Limited Partners
----------------------------------------
A. After the admission to the Partnership of the additional 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 and the Exchange Rights
Agreement, including, without limitation, the power of attorney granted in
Section 2.4 hereof and (ii) such other documents or instruments as may be
required in the
48
discretion of the General Partner in order to effect such Person's 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
Partner's 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 consent of the General Partner to such admission.
C. 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
Losses, each item thereof and all other items allocable among Partners and
Assignees for such Partnership Year shall be allocated among such Additional
Limited Partner and all other Partners and Assignees by taking into account
their varying interests during the Partnership Year in accordance with Section
706(d) of the Code, using the interim closing of the books method. Solely for
purposes of making such allocations, each of such item for the calendar month in
which an admission of any Additional Limited Partner occurs shall be allocated
among all of the Partners and Assignees, including such Additional Limited
Partner. 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, and
all distributions of Available Cash thereafter shall be made to all of the
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 hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
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
49
accordance with the terms of this Agreement. The Partnership shall dissolve, and
its affairs shall be wound up, only upon the first to occur of any of the
following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal of the General Partner, as defined in the
Act (other than an event of bankruptcy), unless, within ninety (90) days after
such event of withdrawal, majority in interest of the remaining Partners agree
in writing to continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal, of a successor General Partner;
C. from and after the date of this Agreement through December 31,
2046, an election to dissolve the Partnership made by the General Partner, with
the Consent of Limited Partners holding at least a majority of the Percentage
Interest of the Limited Partners (other than Limited Partnership Interests held
by the Initial Limited Partner);
D. on or after January 1, 2047, an election to dissolve the
Partnership made by the General Partner, in its sole and absolute discretion;
E. entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
F. the sale of all or substantially all of the assets and properties
of the Partnership;
G. 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.
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 Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner, any
Person elected by Limited Partners holding at least a majority of the
50
Limited Partnership Interests (the General Partner or such other Person being
referred to herein as the "Liquidator"), shall be responsible for overseeing the
winding up and dissolution of the Partnership and shall take full account of the
Partnership's 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 common stock or other securities of the Company)
shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners; and
(4) The balance, if any, to the General Partner and Limited Partners
to the extent of and in accordance with the positive balances in
their Capital Accounts, after giving effect to all contributions,
distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13. Any distributions pursuant to
this Section 13.2A shall be made by the end of the Partnership's taxable year in
which the liquidation occurs (or, if later, within 90 days after the date of the
liquidation).
B. Notwithstanding the provisions of Section 13.2A hereof 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 Partnership's 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 asset 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 13.2A hereof, 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 interests 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.
51
C. In the discretion of the Liquidator, 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 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, in the same proportions as 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
(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 order
of priority set forth in Section 13.2A as soon as
practicable.
Section 13.3 No Obligation to Contribute Deficit
-----------------------------------
If any Partner has a deficit balance in his Capital Account (after
giving effect to all contributions, distributions and allocations for all
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 shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever.
Section 13.4 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 its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or allocations.
52
Section 13.5 Notice of Dissolution
---------------------
In the event a Liquidating Event occurs or an event occurs that would,
but for the provisions of an election or objection by one or more Partners
pursuant to 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.
Section 13.6 Termination of Partnership and Cancellation of
----------------------------------------------
Certificate of Limited Partnership
----------------------------------
Upon the completion of the liquidation of the Partnership's assets, as
provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
state of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
Section 13.7 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 hereof in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect among the Partners during the period of liquidation.
Section 13.8 Waiver of Partition
-------------------
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
----------
A. Amendments to this Agreement may be proposed by the General
Partner or by any Limited Partners (other than the Initial Limited Partner)
holding in the aggregate 25 percent or more of the Partnership Interests.
Following such proposal, the General Partner shall submit any proposed amendment
to the Limited Partners. The General Partner shall seek the written vote of the
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 vote, 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 vote which is consistent with the
General Partner's recommendation with
53
respect to the proposal. Except as provided in Section 14.1B, 14.1C or 14.1D, a
proposed amendment shall be adopted and be effective as an amendment hereto if
it is approved by the General Partner and it receives the Consent of Limited
Partners holding at least a majority of the Percentage Interests of the Limited
Partners (including Limited Partnership Interests held by the Initial Limited
Partner).
B. Notwithstanding Section 14.1A, the General Partner shall have the
power, without the consent of the Limited Partners, 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 admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership
Interests issued pursuant to Section 4.3 hereof;
(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; and
(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.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1B is taken.
C. Notwithstanding Section 14.1A and 14.1B hereof, this Agreement
shall not be amended without the Consent of each Partner adversely affected if
such amendment would (i) convert a Limited Partner's interest in the Partnership
into a General Partner Interest; (ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner; (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or Article 13, or the
allocations specified in Article 6 (except as permitted pursuant to Article IV
54
and Section 14.1B(3) hereof); (iv) cause the termination of the Partnership
prior to the time set forth in Section 2.5 or 13.1; or (v) amend this Section
14.1C.
D. Notwithstanding Section 14.1A or Section 14.1B hereof, the
General Partner shall not amend Section 4.3, 7.4, 7.5, 11.2, 13.1 or 14.2
without the Consent of Limited Partners holding a majority of the Percentage
Interests of the Limited Partners, excluding Limited Partner Interests held by
the Initial Limited Partner.
Section 14.2 Meetings of 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 (other than the Initial Limited Partner) holding 25 percent or
more of the Partnership Interests. The request 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 is permitted or
required under this Agreement, such vote or Consent may be given at a meeting of
the Partners or may be given in accordance with the procedure prescribed in
Section 14.1A hereof. Except as otherwise expressly provided in this Agreement,
the Consent of holders of a majority of the Percentage Interests held by
Partners (including Limited Partnership Interests held by the Initial Limited
Partner) shall control.
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 a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
the Partners (or such other percentage as is 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
of the consent as certified by the General Partner.
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 and a copy thereof delivered to the Partnership. No proxy
shall be valid after the expiration of eleven (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, such revocation to be effective
upon the General Partner's receipt of written notice of such revocation from the
Limited Partner executing such proxy.
55
D. Each meeting of the 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. Meetings of Partners may be conducted in the same manner as
meetings of the stockholders of the Company and may be held at the same time,
and as part of, meetings of the shareholders of the Company.
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 overnight delivery or via facsimile to the
Partner or Assignee at the address set forth in Exhibit A or such other address
of which the Partner 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
--------------
56
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 the
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 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 a 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 of 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.
Section 15.9 Applicable Law
--------------
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of laws thereof.
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 Guaranty by the Company
-----------------------
57
For so long as the General Partner is a wholly-owned subsidiary of the
Company and the General Partner is the general partner of the Partnership, the
Company unconditionally and irrevocably guarantees to the Limited Partners the
performance by the General Partner of the General Partner's obligations under
this Agreement. This guarantee is exclusively for the benefit of the Limited
Partners and shall not extend to the benefit any creditor of the Partnership.
Section 15.13 Merger
------
Subject to Section 4.2 herein, the Partnership may merge with, or
consolidate into, any Person or Entity in accordance with Section 17-211 of the
Act.
Section 15.14 Limitation of Partnership Interest
----------------------------------
No Limited Partner (other than the Initial Limited Partner) shall own,
directly or indirectly, as determined under the rules provided for in Section
7704(d)(3)(B) of the Code, more than 4.9 percent of the Partnership Interests.
If a direct or indirect acquisition of Partnership Interests or REIT Stock would
result in a Limited Partner (other than the Initial Limited Partner) owning,
directly or indirectly, Partnership Interests in excess of 4.9 percent as
determined under the rules provided for in Section 7704(d)(3)(B) of the Code
(such excess interest referred to as an "Excess Interest"), then the Excess
Interest shall be automatically exchanged in accordance with the terms of the
Exchange Rights Agreement to which such Partner is a party and the terms of such
Exchange Rights Agreement shall govern the disposition of such Excess Interest.
This Agreement shall be effective at 9:01 a.m., New York time, on
August 3, 1998.
58
Signature Page to the Second Amended and Restated Agreement of Limited
Partnership of MeriStar Hospitality Operating Partnership, L.P., by and among
the undersigned and the other parties thereto.
GENERAL PARTNER:
MERISTAR HOSPITALITY CORPORATION
By: __________________________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Investment Officer
59
Signature Page to the Second Amended and Restated Agreement of Limited
Partnership of MeriStar Hospitality Operating Partnership, L.P., by and among
the undersigned and the other parties thereto.
CAPSTAR MANAGEMENT COMPANY, L.L.C.
By: MeriStar Hotels & Resorts, Inc., its Manager
By: ____________________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
60
Signature Page to the Second Amended and Restated Agreement of Limited
Partnership of MeriStar Hospitality Operating Partnership, L.P., by and among
the undersigned and the other parties thereto.
MeriStar LP, Inc.
3005 Hotel Associates, Ltd.
▇▇▇▇▇▇▇-▇▇▇▇ Partners No. 51, Ltd.
3100 Hotel Associates, L.P.
Virtual Hospitality, Inc.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
3860 Investors Joint Venture
▇▇▇ ▇▇▇▇▇▇ Construction Co., Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. Capt
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
Pin ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
DFW South Acquisition Corporation
Corporate Property Associates 4
Corporate Property Associates 8, L.P.
Devlo, Inc.
The Cocoa Beach Company, Inc.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
C. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
S. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
CW Associates Co.
1815 Hotel Associates Limited Partnership
Prime Hospitality Corp.
O/K Associates Limited Partnership
By: MeriStar Hospitality Corporation, Attorney-
In-Fact Pursuant to Section 2.4 of the Second
Amended and Restated Agreement of Limited
Partnership of the Partnership
By:_______________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Investment
61
Post Merger:
Total Shares of MeriStar Hospitality Corporation Outstanding: 45,753,550
Total OP Units Outstanding: 50,455,367
EXHIBIT A
---------
Partnership Interests
Class B Class C Class D Percentage
Name and Address of Partner OP Units OP Units OP Units OP Units Interest
--------------------------- -------- -------- -------- -------- --------
General Partner
------------------------------------
MeriStar Hospitality Corporation 504,554 1.00%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Limited Partners
------------------------------------
MeriStar LP, Inc. 45,248,996 89.68%
EquiStar Acquisition Corporation
CapStar Westchase Acquisition Corp.
CapStar Lexington, Inc.
CapStar Austin, Inc.
CapStar PA, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
3005 Hotel Associates, Ltd. 26,636 .05%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇ Partners No. 51, Ltd. 4,455 .009%
A-1
Class B Class C Class D Percentage
Name and Address of Partner OP Units OP Units OP Units OP Units Interest
--------------------------- -------- -------- -------- -------- --------
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
3100 Hotel Associates, L.P. 20,612 .04%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Virtual Hospitality, Inc. 5,279 .01%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 95,223 .18%
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇ 60,850 .12%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 59,907 .12%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ 16,190 .03%
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 44,659 .09%
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
A-2
Class B Class C Class D Percentage
Name and Address of Partner OP Units OP Units OP Units OP Units Interest
--------------------------- -------- -------- -------- -------- --------
▇▇▇▇▇ ▇. ▇▇▇▇▇ 18,039 .04%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇ 8,475 .02%
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3860 Investors Joint Venture 18,268 .04%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ Construction Co., Inc. 12,731 .03%
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 5,704 .01%
Madison Realty Investors
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. Capt 24,357 .05%
L.E.C. Investments
▇▇▇ ▇. ▇▇▇▇ (▇▇▇ ▇▇▇)
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 36,537 .07%
c/▇ ▇▇▇▇▇▇▇▇ Warehouses
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
A-3
Class B Class C Class D Percentage
Name and Address of Partner OP Units OP Units OP Units OP Units Interest
--------------------------- -------- -------- -------- -------- --------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. 36,537 .07%
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 18,268 .04%
▇▇▇▇ ▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ 8,525 .02%
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Pin ▇▇▇▇ ▇▇▇▇▇ 7,185 .01%
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇. #▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 3,045 .006%
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇ 3,045 .006%
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ 6,955 .01%
▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
DFW South Acquisition Corporation 98,041 .19%
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
A-4
Class B Class C Class D Percentage
Name and Address of Partner OP Units OP Units OP Units OP Units Interest
--------------------------- -------- -------- -------- -------- --------
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Corporate Property Associates 4, 361,889 .72%
a California Limited Partnership
c/o W.P. ▇▇▇▇▇ & Company, Inc.
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Corporate Property Associates 8, L.P. 418,380 .83%
c/o W.P. ▇▇▇▇▇ & Company, Inc.
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Devlo, Inc. 20,608 .04%
c/o ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇. ▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Cocoa Beach Company, Inc. 2,278 .005%
c/o Spieth, Bell, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ Co., L.P.A.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 22,340 .04%
▇▇▇▇-Summit Management Group
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Lauderdale by the ▇▇▇, ▇▇ ▇▇▇▇▇
A-5
Class B Class C Class D Percentage
Name and Address of Partner OP Units OP Units OP Units OP Units Interest
--------------------------- -------- -------- -------- -------- --------
C. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 44,682 .09%
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
S. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 44,682 .09%
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇ 55,852 .11%
c/o ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ Company
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. 18,601 .04%
c/o Spieth, Bell, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ Co., L.P.A.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
CW Associates Co. 37,250 .07%
c/o Spieth, Bell, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ Co., L.P.A.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
1815 Hotel Associates Limited Partnership, 11,568 .02%
c/o MeriStar Hospitality Corporation,
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
A-6
Class B Class C Class D Percentage
Name and Address of Partner OP Units OP Units OP Units OP Units Interest
--------------------------- -------- -------- -------- -------- --------
Prime Hospitality Corp. 439,375 .87%
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
O/K Associates Limited Partnership
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ 1,108,873 2.20%
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
CapStar Management Company, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. 1,083,759 392,157 2.86%
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
A-7
Exhibit B
---------
Allocations
1. Allocation of Net Income and Net Loss.
-------------------------------------
(a) Net Income. Subject to subparagraph 1(c) hereof and except as
----------
otherwise provided in this Exhibit B, Net Income (or items thereof) (other than
Net Income, or items thereof, arising in connection with a Terminating Capital
Transaction) for any fiscal year or other applicable period shall be allocated
to the Partners in accordance with their respective Percentage Interests.
(b) Net Loss. Except as otherwise provided in this Exhibit B, Net Loss
--------
(or items thereof) of the Partnership for each fiscal year or other applicable
period shall be allocated to the Partners in accordance with the Partners'
respective Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) allocated to a Partner under this
subparagraph (b) would cause such Partner (hereinafter, a "Restricted Partner")
to have an Adjusted Capital Account Deficit, or increase the amount of an
existing Adjusted Capital Account Deficit, as of the end of the fiscal year or
other applicable period to which such Net Loss relates, such Net Loss shall not
be allocated to such Restricted Partner and instead shall be allocated to the
other Partner(s) (hereinafter, the "Permitted Partners") pro rata in accordance
--- ----
with each Permitted Partner's Percentage Interest.
(c) Net Income (or items thereof) for each year shall first be allocated
(i) to the holders of Class C OP Units up to an amount equal to the excess of
the Preferential Distribution distributed for such year and all prior years to
the holders of such Units in accordance with the Certificate of Designation of
the Class C OP Units over the aggregate amount of Net Income previously
allocated to such holders under this subparagraph 1(c)(i), and (ii) to the
holders of Class D OP Units up to an amount equal to the excess of the Preferred
Return accrued with respect to such Units in accordance with the Certificate of
Designation of the Class D OP Units for the current year and all prior years
over the aggregate amount of Net Income previously allocated to such Holders
under this subparagraph 1(c)(ii), to the extent of and in proportion to the
respective amounts of such excesses.
(d) Terminating Capital Transaction; Liquidation. Allocations of Net
--------------------------------------------
Income or Net Loss (or items thereof) in connection with a Terminating Capital
Transaction or liquidation of the Partnership shall first be made so that, to
the extent possible, each Partner's Capital Account balance is equal to such
Partner's Adjusted Contribution, and the remainder of such Net Income or Net
Loss (or items thereof) shall be allocated to the Partners in accordance with
their Percentage Interests. Notwithstanding the preceding sentence, to the
extent any Net Loss (or items thereof) would be allocated to a Restricted
Partner under this subparagraph (c), such Net Loss shall not be allocated to
such Restricted Partner and instead shall be allocated to the Permitted Partners
pro rata in accordance with each Permitted Partner's Percentage Interest.
--- ----
(e) Rules of Construction.
---------------------
(1) Capital Account Increases. For purposes of making allocations
-------------------------
pursuant to subparagraph 1(d) of this Exhibit B, a Partner's Capital Account
balance shall be deemed to be increased by such Partner's share of any
Partnership Minimum Gain and Partner Minimum Gain remaining at the close of the
fiscal period in respect of which such allocations are being made.
(2) Change in Percentage Interests. In the event any Partner's
------------------------------
Percentage Interest changes during a fiscal year for any reason, including
without limitation, the Transfer of any interest in the Partnership, the tax
allocations contained in this Exhibit B shall be applied as necessary to reflect
the varying interests of the Partners during such year.
2. Special Allocations. Notwithstanding any provisions of paragraph 1 of this
-------------------
Exhibit B, the following special allocations shall be made.
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as
-------------------------------------------------
otherwise provided in Section 1.704-2(f) of the Regulations, if there is a net
decrease in Partnership Minimum Gain for any Partnership fiscal 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
Partner's share of the net decrease in Partnership Minimum Gain to the extent
required by Regulations Section 1.704-2(f). The items to be so allocated shall
be determined in accordance with Sections 1.704-2(f) and (i) of the Regulations.
This subparagraph 2(a) is intended to comply with the minimum gain chargeback
requirement in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(a) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
-------------------------------
Section 1.704-2(i)(4) of the Regulations, if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of
the Regulations, shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal to
that Partner's share of the net decrease in the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt to the extent and in the manner
required by Section 1.704-2(i) of the Regulations. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(i)(4) and (j)(2) of the
Regulations. This subparagraph 2(b) is intended to comply with the minimum gain
chargeback requirement with respect to Partner Nonrecourse Debt contained in
said section of the Regulations and shall be interpreted consistently therewith.
Allocations pursuant to this subparagraph 2(b) shall be made in proportion to
the respective amounts required to be allocated to each Partner pursuant hereto.
(c) Qualified Income Offset. In the event a Partner unexpectedly receives
-----------------------
any adjustments, allocations or distributions described in Sections 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such Partner has an
Adjusted Capital Account Deficit, items of Partnership income (including gross
income) and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly
as possible as required by the Regulations. This subparagraph 2(c) is intended
to constitute a "qualified income offset" under Section 1.704-1(b)(2)(ii)(d) of
the Regulations and shall be interpreted consistently therewith.
(d) Other Chargeback of Impermissible Negative Capital Account. To the
----------------------------------------------------------
extent any Partner has an Adjusted Capital Account Deficit at the end of any
Partnership fiscal year, each such Partner shall be specially allocated items of
Partnership income (including gross income) and gain in the amount of such
excess as quickly as possible, provided that an allocation pursuant to this
--------
paragraph 2(d) shall be made if and only to the extent that such Partner would
have an Adjusted Capital Account Deficit after all other allocations provided
for in this Exhibit B have been tentatively made as if this paragraph 2(d) were
not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or
----------------------
other applicable period shall be allocated to the Partners in accordance with
their respective Percentage Interests.
(f) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
------------------------------
any fiscal year or other applicable period with respect to a Partner Nonrecourse
Debt shall be specially allocated to the Partner that bears the economic risk of
loss for such Partner Nonrecourse Debt (as determined under Sections 1.704-
2(b)(4) and 1.704-2(i)(1) of the Regulations).
(g) Intent of Allocations. The parties intend that the allocation
---------------------
provisions of this Exhibit B shall result in final Capital Account balances of
the Partners that initially are equal to each Partner's Adjusted Contribution
and are then in proportion to the Partners' respective Percentage Interests, so
that when liquidating distributions are made in accordance with such final
Capital Account balances under Section 13.2A(4) hereof, such distributions will
be able to return to each Partner its Adjusted Contribution and then will be
made in proportion to the Partners' respective Percentage Interests. To the
extent that such final Capital Account balances do not so reflect the provisions
of this Exhibit B, income and loss of the Partnership for the current year and
future years, as computed for book purposes, shall be allocated among the
Partners so as to result in final Capital Account balances reflecting the
provisions of this Exhibit B and to the extent such allocations of items of
income (including gross income) and deduction do not result in such final
Capital Account balances, then, income and loss of the Partnership for prior
open years, as computed for book purposes (or items of gross income and
deduction of the Partnership for such years, as computed for book purposes)
shall be reallocated among the Partners consistent with the foregoing. This
subparagraph shall control
B-3
notwithstanding any reallocation of income, loss, or items thereof, as computed
for book purposes, by the Internal Revenue Service or any other taxing
authority.
(h) Section 754 Adjustment. To the extent an adjustment to the adjusted
----------------------
tax basis of any asset of the Partnership pursuant to Section 734(b) of the Code
or Section 743(b) of the Code is required, pursuant to Section 1.704-
1(b)(2)(iv)(m) of the Regulations, to be taken into account in determining
Capital Accounts, 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 among the Partners in a manner consistent with the manner in
which each of their respective Capital Accounts are required to be adjusted
pursuant to such section of the Regulations.
(i) Gross Income Allocation. There shall be specially allocated to the
-----------------------
General Partner an amount of Partnership income and gain during each Partnership
Year or portion thereof, before any other allocations are made hereunder, which
is equal to the excess, if any, of the cumulative distributions of cash made to
the General Partner under Section 7.3B hereof over the cumulative allocations of
Partnership income and gain to the General Partner pursuant to this Section 2(i)
of this Exhibit B.
3. Tax Allocations.
---------------
(a) Items of Income or Loss. Except as is otherwise provided in this
-----------------------
Exhibit B, an allocation of Partnership Net Income or Net Loss to a Partner
shall be treated as an allocation to such Partner of the same share of each item
of income, gain, loss, deduction and item of tax-exempt income or Section
705(a)(2)(B) expenditure (or item treated as such expenditure pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i)) ("Tax Items") that is taken into
account in computing Net Income or Net Loss.
(b) Section 1245/1250 Recapture. If any portion of gain from the sale of
---------------------------
Partnership assets is treated as gain which is ordinary income by virtue of the
application of Code Sections 1245 or 1250 ("Affected Gain"), then such Affected
Gain shall be allocated among the Partners in the same proportion that the
depreciation and amortization deductions giving rise to the Affected Gain were
allocated. This subparagraph 3(b) shall not alter the amount of Net Income (or
items thereof) allocated among the Partners, but merely the character of such
Net Income (or items thereof). For purposes hereof, in order to determine the
proportionate allocations of depreciation and amortization deductions for each
fiscal year or other applicable period, such deductions shall be deemed
allocated on the same basis as Net Income and Net Loss for such respective
period.
(c) Precontribution Gain, Revaluations. With respect to any Contributed
----------------------------------
Property, the Partnership shall use any permissible method contained in the
Regulations promulgated under Section 704(c) of the Code selected by the General
Partner, in its sole discretion, to take into account any variation between the
adjusted basis of such asset and the fair market value of
B-4
such asset as of the time of the contribution ("Precontribution Gain"). Each
Partner hereby agrees to report income, gain, loss and deduction on such
Partner's federal income tax return in a manner consistent with the method used
by the Partnership. If any asset has a Gross Asset Value which is different from
the Partnership's adjusted basis for such asset for federal income tax purposes
because the Partnership has revalued such asset pursuant to Regulations Section
1.704-1(b)(2)(iv)(f), the allocations of Tax Items shall be made in accordance
with the principles of Section 704(c) of the Code and the Regulations and the
methods of allocation promulgated thereunder. The intent of this subparagraph
3(c) is that each Partner who contributed to the capital of the Partnership a
Contributed Property will bear, through reduced allocations of depreciation,
increased allocations of gain or other items, the tax detriments associated with
any Precontribution Gain. This subparagraph 3(c) is to be interpreted
consistently with such intent.
(d) Excess Nonrecourse Liability Safe Harbor. Pursuant to Regulations
----------------------------------------
Section 1.752-3(a)(3), solely for purposes of determining each Partner's
proportionate share of the "excess nonrecourse liabilities" of the Partnership
(as defined in Regulations Section 1.752-3(a)(3)), the Partners' respective
interests in Partnership profits shall be determined in accordance with each
Partner's Percentage Interest; provided, however, that each Partner who has
-------- -------
contributed an asset to the Partnership shall be allocated, to the extent
possible, a share of "excess nonrecourse liabilities" of the Partnership which
results in such Partner being allocated nonrecourse liabilities in an amount
which is at least equal to the amount of income pursuant to Section 704(c) of
the Code and the Regulations promulgated thereunder (the "Liability Shortfall").
In the event there is an insufficient amount of nonrecourse liabilities to
allocate to each Partner an amount of nonrecourse liabilities equal to the
Liability Shortfall, then an amount of nonrecourse liabilities in proportion to,
and to the extent of, the Liability Shortfall shall be allocated to each
Partner.
(e) References to Regulations. Any reference in this Exhibit B or the
-------------------------
Agreement to a provision of proposed and/or temporary Regulations shall, in the
event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision.
(f) Successor Partners. For purposes of this Exhibit B, a transferee of a
------------------
Partnership Interest shall be deemed to have been allocated the Net Income, Net
Loss and other items of Partnership income, gain, loss, deduction and credit
allocable to the transferred Partnership Interest that previously have been
allocated to the transferor Partner pursuant to this Agreement.
B-5
Exhibit C
---------
CERTIFICATE OF DESIGNATION
OF THE
CLASS B OP UNITS
OF
MERISTAR HOSPITALITY
OPERATING PARTNERSHIP, L.P.
MeriStar Hospitality Operating Partnership, L.P., a Delaware limited
partnership (the "Partnership"), does hereby certify that, pursuant to the
authority conferred on its general partner, MeriStar Hospitality Corporation, a
Maryland corporation (the "General Partner") by the Second Amended and Restated
Agreement of Limited Partnership of the Partnership, as amended from time to
time (the "Agreement"), the General Partner hereby adopts the following for the
Partnership:
"RESOLVED, that pursuant to the authority vested in this General
Partner in accordance with Article 4 of the Agreement:
1. A series of Class B limited partnership interests of the Partnership, to be
known as Class B OP Units be, and it hereby is, created, classified, authorized
and the issuance thereof provided for, and that the designation and number of
units, and relative rights, preferences and limitations thereof, shall be as set
forth herein;
2. DESIGNATION, AMOUNT AND RIGHTS.
(a) CLASS B OP UNITS. The units of this series of limited partnership
interests shall be designated as "Class B OP Units," and the number of units of
limited partnership interests constituting such series shall be that number of
Class B OP Units issued pursuant to Section 4.1, 4.2 and 4.3. The number of
Class B OP Units outstanding and the Percentage Interests in the Partnership
represented by such Class B OP Units are set forth in Exhibit A of the
---------
Agreement, as such Exhibit may be amended from time to time. Except with
-------
respect to the payment of dividends as provided in Section 2.1 below, all
holders of Class B OP Units shall have the identical rights, preferences and
obligations as a holder of OP Units. The ownership of Class B Units shall be
evidenced by such form of certificate as the General Partner adopts from time to
time unless the General Partner determines that the Class B OP Units shall be
uncertificated securities.
3. DIVIDENDS.
(a) DIVIDEND. A dividend period (a "Dividend Period") with respect to any
Class B OP Unit shall commence on and include the first day of issuance of such
series of Class B OP Units and shall end on and include the last day of the
calendar quarter to which such Dividend Period corresponds. The holder of each
Class B OP Unit shall be entitled to receive, when and as declared by the board
of directors of the General Partner, and on the terms and subject to the
conditions specified by the board of directors of the General Partner at the
time any such dividend is declared, out of funds legally available therefor,
such dividend relating only to the Dividend Period for which such dividend is
declared. Accordingly, that holder of a Class B OP Unit shall be entitled to
receive a dividend equal to the product of (i) the number of Class B OP Units
owned by the Partner multiplied by the dividend declared per unit of limited
partnership interest of the Partnership by the board of directors of the General
Partner, multiplied by (ii) a fraction the numerator of which is the Dividend
Period and the denominator of which is the number of days in the calendar
quarter to which such Dividend Period relates.
4. CONVERSION.
(a) AUTOMATIC CONVERSION. On the first day following the record date for
the payment of dividends relating to the calendar quarter in which such Class B
OP Unit was issued, each such issued and outstanding Class B OP Unit shall
automatically be converted into an equal amount of OP Units, without any action
required on the part of the Class B OP Unit holder.
5. MISCELLANEOUS.
(a) Unless otherwise defined herein, all defined terms used herein shall
be such meaning ascribed such term in the Agreement."
Exhibit D
---------
CERTIFICATE OF DESIGNATION
OF THE
CLASS C OP UNITS
OF
MERISTAR HOSPITALITY
OPERATING PARTNERSHIP, L.P.
MeriStar Hospitality Operating Partnership, L.P., a Delaware limited
partnership (the "Partnership"), does hereby certify that, pursuant to the
authority conferred on its general partner, MeriStar Hospitality Corporation, a
Maryland corporation (the "General Partner"), by the Second Amended and Restated
Agreement of Limited Partnership of the Partnership, as amended from time to
time (the "Agreement"), the General Partner hereby adopts the following for the
Partnership:
"RESOLVED, that pursuant to the authority vested in this General
Partner in accordance with Article 4 of the Agreement:
1. A series of Class C limited partnership interests of the Partnership, to be
known as "Class C OP Units" be, and it hereby is, created, classified,
authorized and the issuance thereof provided for, and that the designation and
number of units, and relative rights, preferences and limitations thereof, shall
be as set forth herein;
2. DESIGNATION, AMOUNT AND RIGHTS.
(a) CLASS C OP UNITS. The units of this series of limited partnership
interests shall be designated as "Class C OP Units," and the number of units of
limited partnership interest constituting such series shall be that number of
Class C OP Units issued pursuant to Sections 4.1, 4.2 and 4.3 of the Agreement.
The number of Class C OP Units outstanding and the Percentage Interests in the
Partnership represented by such Class C OP Units shall be as set forth in
Exhibit A to the Agreement, as such Exhibit may be amended from time to time.
--------- -------
Except as otherwise provided herein, all holders of Class C OP Units shall have
the identical rights, preferences and obligations as a holder of OP Units. The
ownership of Class C Units shall be evidenced by such form of certificate as the
General Partner adopts from time to time
unless the General Partner determines that the Class C OP Units shall be
uncertificated securities.
3. DISTRIBUTIONS.
(a) PREFERENTIAL DISTRIBUTIONS. Except for the First Distribution Payment
as provided in Section 3.2 below, the holders of the Class C OP Units are
entitled to receive, when as determined by the General Partner, quarterly
distributions of $0.5575 per Class C OP Unit (the "Preferential Distribution").
The distribution on the Class C OP Units shall be non-cumulative. The Class C
OP Unit distribution is subject to adjustment as determined by the General
Partner as equitably required in the event that there is any change in the units
of limited partnership of the Partnership or exchange of such units of limited
partnership for a different number or kind of units or other partnership
interests of the Partnership by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, spin-off, split-up, subdivision or
consolidation of such units, change in partnership structure or other event
which results in a similar change in the equity position of a holder of Class C
OP Units (such an event a "Reclassification"). The right of a holder of a Class
C OP Unit to receive the Preferential Distribution shall terminate upon the
earlier to occur of (i) the exchange of the Class C OP Unit into share(s) of
common stock of the Company (an "Exchange Termination Event") and (ii) the
payment of a quarterly distribution per OP Unit of at least $0.5575 per unit, as
adjusted to reflect a Reclassification (a "Preferential Distribution Termination
Event," and together with an Exchange Termination Event, a "Termination Event").
Upon a Preferential Distribution Termination Event, the affected Class C OP
Units shall automatically convert to OP Units as described in Section 5.1,
provided however, a Preferential Distribution Termination Event shall not by
itself terminate such unit's associated Contingent Value Right (as defined in
Section 4). While any Class C OP Units are issued and outstanding, the General
Partner shall not pay any quarterly distribution in accordance with Section 5.1
of the Agreement with respect to any class of OP Unit that is junior in rank
with regard to the payment of distributions pursuant to Section 5.1 of the
Agreement prior to the declaration and payment of the Preferential Distribution
with regard to any issued and outstanding Class C OP Unit. The Class C OP Units
shall rank pari passu with respect to distributions with the Class D OP Units.
(b) FIRST DISTRIBUTION. Subject to Section 3.1, the first distribution to
be paid for each Class C OP Unit after its issuance (the "First Distribution
Payment") shall equal the product of (i) the Preferential Distribution (subject
to adjustment in the event of a Reclassification) multiplied by (ii) a fraction,
the numerator of which is the First Distribution Period (as defined below) and
the denominator of which is the number of days in the calendar quarter to which
such First Distribution Period corresponds. After the declaration and payment
of the First Distribution Payment, Class C OP Units shall pay a dividend equal
to the Preferential Distribution, to the extent provided herein. "First
Distribution Period" shall mean that period of time that commences on and
includes the day of issuance of such Class C OP Unit and shall end on and
include the last day of the calendar quarter in which such issuance occurred.
4. CONTINGENT VALUE RIGHT. Upon issuance of a Class C OP Unit, the holder
thereof shall also receive one Contingent Value Right which right shall attach
to and remain inseparable, other than in connection with a Preferential
Distribution Termination Event, from the Class C OP Unit upon which it was
issued. A "Contingent Value Right" shall automatically entitle the holder
thereof to receive on the first year anniversary of the issuance of the Class C
OP Unit that number of OP Units equal to 1 multiplied by a fraction (a) the
numerator of which is the difference between (i) $35.40 (subject to adjustment
as provided below under Current Market Price) and (ii) the Current Market Price
(as defined below) of a share of common stock of the Company and (b) the
denominator of which is the Current Market Price of a share of common stock of
the Company. For example, if the Current Market Price per share of common stock
of the Company were either $25, $35 or $40, then the number of OP Units to be
issued upon exercise of the Contingent Value Right would be calculated as
follows, respectively:
(i) 35.40-$25 = .416 OP Unit
---------
$25
(ii) 35.40-$35 = .011 OP Unit
---------
$35
or
(iii) 35.40-$40 = OP Unit
---------
$40
"Current Market Price" shall mean the average final closing price per
share of common stock of the Company as calculated during the twenty
(20) trading days immediately preceding the first year anniversary
date of the issuance of the Class C OP Unit. Notwithstanding anything
herein to the contrary, the Contingent Value Right shall terminate and
be null and void (i) if the Current Market Price of a share of common
stock of the Company equals at least $35.40, provided, however, that
in any event, if prior to exercise of the Contingent Value Right the
outstanding shares of common stock of the Company shall have been
changed into a different number of shares or a different class, by
reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the $35.40
amount shall be correspondingly adjusted, as determined by the General
Partner, to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares, or (ii) if an Exchange Termination Event has occurred prior to
the first year anniversary date of the issuance of the Class C OP Unit
or (iii) if the Contingent Value Right is not exercised on or before
the first year anniversary date of the issuance of the Class C OP Unit
or (iv)
D-3
upon exercise of a Contingent Value Right. Upon a Preferential
Distribution Termination Event, the corresponding Contingent Value
Right shall detach from the Class C OP Unit and shall automatically
attach to the OP Unit issued in exchange for the terminated Class C OP
Unit.
5. CONVERSION. Immediately upon a Preferential Distribution Termination Event,
each such issued and outstanding Class C OP Unit shall automatically be
converted into an equal amount of OP Units, without any action required on the
part of the Class C OP Unit holder. Upon a Preferential Distribution Termination
Event, the corresponding Contingent Value Right shall detach from the Class C OP
Unit and shall automatically attach to the OP Unit issued in exchange for the
terminated Class C OP Unit.
6. VOTING RIGHTS. The holders of the Class C OP Units shall be entitled to one
vote per Class C OP Unit and, except as required by law, shall vote together
with the holders of the OP Units and not as a separate class or group.
7. MISCELLANEOUS.
(a) Unless otherwise defined herein, all defined terms used herein shall
have such meaning ascribed such term in the Agreement."
D-4
Exhibit E
---------
CERTIFICATE OF DESIGNATION
OF THE
CLASS D OP UNITS
OF
MERISTAR HOSPITALITY
OPERATING PARTNERSHIP, L.P.
MeriStar Hospitality Operating Partnership, L.P., a Delaware limited
partnership (the "Partnership"), does hereby certify that, pursuant to the
authority conferred on its general partner, MeriStar Hospitality Corporation, a
Maryland corporation (the "General Partner") by the Second Amended and Restated
Agreement of Limited Partnership of the Partnership, as amended from time to
time (the "Agreement"), the General Partner hereby adopts the following for the
Partnership:
"RESOLVED, that pursuant to the authority vested in this General Partner in
accordance with Article 4 of the Agreement:
1. A series of Class D limited partnership interests of the Partnership, to be
known as "Class D OP Units" be, and it hereby is, created, classified,
authorized and the issuance thereof provided for, and that the designation and
number of units, and relative rights, preferences and limitations thereof, shall
be as set forth herein;
2. DESIGNATION, AMOUNT AND RIGHTS.
(a) CLASS D OP UNITS. The units of this series of limited partnership
interests shall be designated as "Class D OP Units," and the number of units of
limited partnership interest constituting such series shall be that number of
Class D OP Units issued pursuant to Section 4.3 of the Agreement. The number of
Class D OP Units outstanding and the Percentage Interests in the Partnership
represented by such Class D OP Units shall be as set forth in Exhibit A to the
---------
Agreement, as such Exhibit may be amended from time to time. Except as
-------
otherwise provided herein, all holders of Class D OP Units shall have the
identical rights, preferences and obligations as a holder of OP Units. The
ownership of Class D Units shall be evidenced by such form of certificate as the
General Partner adopts from time to time unless the General Partner determines
that the Class D OP Units shall be uncertificated securities.
3. DISTRIBUTIONS. The holders of the Class D OP Units are entitled to
receive, except to the extent the General Partner, by resolution of its Board of
Directors, determines that the Partnership does not have cash available for
distribution, with respect to each Class D OP Unit, a preferential distribution
(a "Preferential Distribution") equal to the excess, if any, of (x) a preferred
distribution right at the rate of 6.5% per annum, compounded quarterly to the
extent not distributed (the "Preferred Return"), with respect to an amount equal
to $22.16 (the "Preferred Capital") per class D OP Unit over (y) the aggregate
of all amounts previously distributed to such Class D OP Unit pursuant to
Section 5.1 of the Agreement. While any Class D OP Units are issued and
outstanding, the General Partner shall not pay any quarterly distribution in
accordance with Section 5.1 of the Agreement with respect to any class of OP
Unit that is junior in rank with regard to the payment of distributions pursuant
to Section 5.1 of the Agreement prior to the declaration and payment of the
Preferential Distribution with regard to any issued and outstanding Class D OP
Unit. The Class D OP Units shall rank pari passu with respect to distributions
with the Class OP Units. In addition, the holders of the Class D OP Units shall
be entitled to receive any accrued but unpaid distributions attributable to the
392,157 Preferred Units issued pursuant to the Third Amendment to the Agreement
of Limited Partnership of CapStar Management Company, L.P.
4. MANDATORY REDEMPTION.
(a) Except as otherwise provided in the last sentence of this Section 4(a),
the Partnership shall have the right ("Mandatory Redemption Right") at any time
on or after April 1, 2000, to redeem all or any portion of the Class D OP Units
at a redemption price equal to $22.16 per Class D OP Unit; provided, however,
that any such redemption shall be effected on a pro rata basis among all of the
holders of Class D OP Units. The Mandatory Redemption Right shall be exercised
pursuant to a notice (the "Mandatory Redemption Notice") delivered by the
Partnership to the holders of Class D OP Units whose Class D OP Units are being
redeemed. If the Mandatory Redemption Notice is given to a holder of Class D OP
Units, then the redemption of such holder's Class D OP Units shall take place on
the tenth Business Day (as defined in the Exchange Rights Agreement, dated
August 3, 1998, among MeriStar Hospitality Corporation ("MHC"), the Partnership
and the Persons set forth therein (the "Exchange Agreement")) after the giving
of such notice. On such tenth Business Day, the Partnership shall pay to such
holder of Class D OP Units the redemption price herein above provided for, and
such holder of Class D OP Units shall deliver to the Partnership such
instruments of transfer as the Partnership shall reasonably require, assigning
to the Partnership the Class D OP Units being redeemed, free and clear of all
liens and encumbrances. Such holder of Class D OP Units shall pay any state or
local property tax payable in connection with such transfer. Notwithstanding
anything to the contrary contained in the foregoing, if, within 5 Business Days
after the giving of the Mandatory Redemption Notice, any holder of Class D OP
Units gives the Notice of Exchange (as defined in the Exchange Agreement) with
respect to the Class D OP Units specified in such Mandatory Redemption Notice,
then such Mandatory Redemption Notice shall be deemed null and void and the
provisions of Article 2 of the Exchange Rights
E-2
Agreement shall apply with respect to such Class D OP Unit Special Allocation.
------------------
To the extent that distributions are made to holders of a class of OP Units
prior to distributions to holders of any other class of OP Units, whether
pursuant to the provision of Article 5 or a Certificate of Designation with
respect to a certain class or classes of OP Units, Net Income (or items
thereof), shall first be allocated to such holders in an amount equal to such
distributions.
(b)(i) Notwithstanding anything to the contrary contained in Section 4(a), the
General Partner shall have the right to cause MHC to purchase all or any portion
of the Class D OP Units in lieu of the Partnership's exercise of its Mandatory
Redemption Right. Any such purchase by MHC of the Class D OP Units shall be on
the terms and conditions set forth in Section 4(a), with MHC performing the
obligations of the Partnership under such section; provided, however, that the
General Partner shall have the right (the "Share Exchange Right"), in lieu of
causing MHC to pay to the holder of Class D OP Units in question the redemption
price provided for in Section 4(a), to cause MHC to deliver to such holder of
Class D OP Units a number of shares of common stock, par value $.01 per share of
MHC (the "MHC Shares") equal to (i) the number of Class D OP Units being
purchased, multiplied by (ii) $22.16, divided by (iii) the Value (as defined in
the Exchange Rights Agreement) per MHC Share on the Valuation Date (as defined
in the Exchange Rights Agreement) (which amount shall be rounded down to the
nearest whole number if it is not a whole number). The Share Exchange Right
shall be exercised by notice included in the Mandatory Redemption Notice. For
purposes of this Section 4, the term "Valuation Date" shall mean the date on
which the Mandatory Redemption Notice is delivered to the holder in question or,
if such date is not a Business Day, the first Business Day thereafter. If MHC
purchases Class D OP Units pursuant to this Section 4(b), MHC shall contribute
such Class D OP Units to the General Partner, and the General Partner shall
thereafter be treated for all purposes as the owner of such Class D OP Units.
(ii) Notwithstanding anything to the contrary contained in clause (i) of this
Section 4(b), if the General Partner shall exercise the Share Exchange Right
with respect to a holder of Class D OP Units on or after April 1, 2000, such
holder of Class D OP Units shall have the right, by notice given to the General
Partner within five Business Days after the giving of the Mandatory Redemption
Notice, to receive cash for its Class D OP Units in lieu of accepting delivery
of MHC Shares therefor. If any holder of Class D OP Units shall exercise such
right, then the Partnership or MHC shall pay to such holder of Class D OP Units
the redemption price for the Class D OP Units being redeemed as provided in
Section 4(a) or clause (i) of this Section 4(b), as applicable. In addition to
the foregoing, if the General Partner shall exercise the Mandatory Redemption
Right on or after April 1, 2000 and shall not exercise the Share Exchange Right
as to a holder of Class D OP Units, such holder shall have the right, by notice
given to the General Partner within five Business Days after the giving of the
Mandatory Redemption Notice, to require the General Partner to cause MHC to
deliver MHC Shares to such holder in exchange for such holder's Class D OP
Units. If any holder of Class D OP Units shall exercise such right, then the
General Partner shall cause MHC so to deliver such MHC Shares on the terms and
conditions set forth in clause (i) of this Section 4(b).
E-3
(c) If the Mandatory Redemption Right is exercised or MHC purchases Class D OP
Units pursuant to Section 4(b), then the Partnership or MHC, as the case may be,
shall be required to pay (or cause to be paid) to the holder of Class D OP Units
in question, in addition to the payment or the delivery of MHC Shares herein
above provided for, an amount equal to the Preferential Distribution (as of the
date such payment is made) attributable to the Class D OP Units being so
redeemed or purchased; provided, however, that if the General Partner has
elected to cause MHC to purchase Class D OP Units by delivery of MHC Shares and
a holder of Class D OP Units has not elected, pursuant to Section 4(b), to
receive cash in lieu of such MHC Shares, or if a holder of Class D OP Units has
elected pursuant to Section 4(b) to receive MHC Shares in exchange for its Class
D OP Units, the General Partner shall have the right, in lieu of paying an
amount equal to such Preferential Distribution, to cause MHC to deliver to such
holder a whole number of MHC Shares equal to the amount of such Preferential
Distribution (as of the date such payment is made) DIVIDED BY the Value on the
Valuation Date of one MHC Share (rounded down to the nearest whole number of MHC
Shares if such quotient is not a whole number).
(d) Notwithstanding the foregoing, in no event shall the Mandatory Redemption
Right be exercisable with respect to any Class D OP Unit as to which a Notice of
Exchange has been given as provided in Article 2 of the Exchange Rights
Agreement.
5. REDEMPTION. In addition to the right of redemption provided for in Article
2 of the Exchange Rights Agreement, the holders of Class D OP Units shall have
the right, on one occasion only on or after April 1, 2004, to require the
Partnership to redeem all of their Class D OP Units then outstanding at a
redemption price equal to $22.16 per Class D OP Unit. If such right is
exercised, then, for purposes of this Agreement but subject to the further
provisions of this Section 5, (i) such exercise shall be deemed to constitute,
as to each holder of Class D OP Units the exercise of the Exchange Right, (ii)
each such holder of Class D OP Units shall be deemed an Exchanging Partner, and
(iii) such redemption shall, except as provided above and except as hereinafter
provided, be treated in the same manner as a redemption pursuant to Section 2.1
of the Exchange Rights Agreement; provided that (A) the Notice of Exchange shall
be signed by all such holders of Class D OP Units, (B) each Notice of Exchange
shall state specifically that it is being give under this Section 5 and (C) such
holders of Class D OP Units shall be entitled to elect (which election shall be
indicated in the Notice of Exchange) whether to be paid the Cash Amount (which
term, for purposes of this Section 5, shall mean the redemption price provided
for above) or to receive MHC Shares in exchange for their Class D OP Units (the
number of MHC Shares so to be delivered to such holders of Class D OP Units to
be computed in accordance with Section 5(b) hereof). In the event such holders
of Class D OP Units elect to receive MHC Shares in exchange for their Class D OP
Units, the provisions of Section 2.1.B of the Exchange Rights Agreement shall
apply (except that references therein to the General Partner's election to
deliver MHC Shares to the Exchanging Partners shall
E-4
instead be deemed references to the election of the holders of Class D OP Units
to receive MHC Shares).
6. VOTING RIGHTS. The holders of the Class D OP Units shall be entitled to one
vote per Class D OP Unit and, except as required by law, shall vote together
with the holders of the OP Units and not as a separate class or group.
7. MISCELLANEOUS.
(a) Unless otherwise defined herein, all defined terms used herein shall have
such meaning ascribed such term in the Agreement.
E-5
IN WITNESS WHEREOF, the General Partner has caused this Certificate of
Designation to be duly signed by the undersigned, this __th day of _________,
1998.
MERISTAR HOSPITALITY CORPORATION
By: ______________________________________
Name:
Title:
E-6