MERISTAR H & R OPERATING COMPANY, L.P.
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF MERISTAR
H & R OPERATING COMPANY, L.P. (the "Partnership"), dated as of August 3, 1998,
is entered into by and among MeriStar Hotels & Resorts, Inc., a Delaware
corporation, as the General Partner, and MeriStar Hotels & Resorts and CapStar
Management Company, L.L.C., a Delaware limited liability company, as the Limited
Partners, together with any other Persons who become Partners in the Partnership
as provided herein.
WHEREAS, the Partnership was formed pursuant to an Agreement of Limited
Partnership, dated as of March 13, 1998 (the "Initial Agreement");
WHEREAS, prior to the execution of this Agreement, CapStar Management
Company L.L.C. and CapStar Management Company II L.L.C., each a Delaware limited
liability company, entered into contribution agreements (the "Contribution
Agreements"), whereby the assets of each such limited liability company were
contributed to the Partnership and MeriStar H & R Operating Company II, L.P., a
Delaware limited partnership, in exchange for certain interests in such limited
partnerships;
WHEREAS, prior to the execution of this Agreement, (i) CapStar Management
Company II L.L.C. merged with and into CapStar Management Company L.L.C. and
(ii) MeriStar H & R Operating Company II, L.P. merged with and into the
Partnership; and
WHEREAS, in connection with the foregoing, the parties hereto desire to
amend and restate the Initial Agreement in its entirety;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree to amend and
restate the Initial Agreement in its entirety as follows:
ARTICLE I.
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 it may
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be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership as
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a Limited Partner pursuant to Section 4.2 hereof and who is shown as such on the
books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for each
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Partner as of the end of each Partnership Year (i) increased by any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement, or is treated as being obligated to restore pursuant to Regulations
Section 1.704-1(b)(2)(ii)(c), or is deemed to be obligated to restore pursuant
to the penultimate sentences of Regulations Sections 1.704-2(g)(1),
1.704-1(i)(5), and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The
foregoing definition of Adjusted Capital Account is intended to comply with the
provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
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deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of which has been
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adjusted pursuant to Exhibit B hereof.
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"Affiliate" means, with respect to any Person, (i) any Person directly or
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indirectly controlling, controlled by or under common control with such Person,
(ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person, (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests, or
(iv) any officer, director, general partner, member, or trustee of such Person
or of any Person referred to in clauses (i), (ii), and (iii) above. For the
purposes of this definition, "control" when used with respect to any Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreed Value" means (i) in the case of any Contributed Property set forth
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in Exhibit D and as of the time of its contribution to the Partnership, the
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Agreed Value of such property as set forth in Exhibit D; (ii) in the case of any
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Contributed Property not set forth in Exhibit D and as of the time of its
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contribution to the Partnership, the 704(c) Value of such property, reduced by
any liabilities either assumed by the Partnership upon such contribution or to
which such property is subject when contributed, and (iii) in the case of any
property distributed to a Partner by the Partnership, the Partnership's Carrying
Value of such property at the time such property is distributed, reduced by any
indebtedness either assumed by such Partner upon such distribution or to which
such property is subject at the time of distribution as determined under Section
752 of the Code and the Regulations thereunder.
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"Agreement" means this Agreement of Limited Partnership, as it may be
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amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership 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.
"Book-Tax Disparities" means, with respect to any item of Contributed
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Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
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computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
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which commercial banks in New York, New York are authorized or required by law
to close.
"Capital Account" means the Capital Account maintained for a Partner
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pursuant to Exhibit B hereof.
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"Capital Contribution" means, with respect to any partner, any cash, cash
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equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.2 or 4.3 hereof. The principal amount of a promissory note which is not
readily traded on an established securities market and which is contributed by a
Partner as the maker of the note shall not be considered a capital contribution
until the Partnership makes a taxable disposition of the note or until (and to
the extent) principal payments are made on the note, all in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv)(d)(2).
"Carrying Value" means (i) with respect to a Contributed Property or
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Adjusted Property, the 704(c) Value of such property, or the Carrying Value of
such property as determined pursuant to Exhibit B hereof, as the case may be;
reduced (but not below zero) by all Depreciation with respect to such Property
charged to the Partners' Capital Accounts following the contribution of or
adjustment with respect to such Property, and (ii) with respect to any other
Partnership property, the adjusted basis of such property for federal income tax
purposes, all as of the time of determination. The Carrying Value of any
property shall be adjusted from time to time in accordance with Exhibit B
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hereof, and to reflect changes, additions or other adjustments to the Carrying
Value for dispositions and acquisitions of Partnership properties, as deemed
appropriate by the General Partner.
"Cash Amount" means an amount of cash per Partnership Unit equal to the
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Value on the Valuation Date of the OPCO Shares Amount.
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"Certificate" means the Certificate of Limited Partnership relating to the
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Partnership filed in the office of the Delaware Secretary of State, as amended
from time to time in accordance with the terms hereof and the Act.
"Certificate of Incorporation" means the Amended and Restated Certificate
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of Incorporation of the General Partner filed in the State of Delaware on July
22, 1998, as amended or restated from time to time.
"Class A MHR Unit" means a Partnership Unit having the rights, preferences
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and privileges assigned to Class A MHR Units pursuant to the further provisions
of this Agreement. The ownership of Class A MHR Units is as set forth in Exhibit
A annexed hereto, as such Exhibit may be amended from time to time.
"Class B MHR Unit" means a Partnership Unit having the rights, preferences
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and privileges assigned to Class B MHR Units pursuant to the further provisions
of this Agreement. The ownership of Class B MHR Units is as set forth in Exhibit
A annexed hereto, as such Exhibit may be amended from time to time.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
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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.
"Consent" means the consent or approval of a proposed action by a Partner
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given in accordance with Section 14.2 hereof.
"Contributed Property" means each property or other asset contributed to
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the Partnership, in such form as may be permitted by the Act, but excluding cash
contributed or deemed contributed to the Partnership. Once the Carrying Value of
a Contributed Property is adjusted pursuant to Section 1.D of Exhibit B hereof,
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such property shall no longer constitute a Contributed Property for purposes of
Exhibit B hereof, but shall be deemed an Adjusted Property for such purposes.
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"Contribution Agreements" means the agreements whereby certain assets of
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CapStar Management LLC and CapStar Management II LLC were contributed to the
Partnership and MeriStar H & R Operating Company II, L.P., respectively, in
exchange for interests in such limited partnerships.
"Conversion Factor" means 1.0; provided that in the event that the General
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Partner (i) declares or pays a dividend on its outstanding OPCO Shares in the
form of OPCO Shares or makes a distribution to all holders of its outstanding
OPCO Shares in OPCO Shares; (ii) subdivides its outstanding OPCO Shares; or
(iii) combines its outstanding OPCO Shares into a smaller number of OPCO Shares,
the Conversion Factor shall be adjusted by multiplying the Conversion Factor by
a fraction, the numerator of which shall be the number of OPCO Shares issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination (assuming for such purposes that such dividend, distribution,
subdivision or combination has occurred as of such time), and
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the denominator of which shall be the actual number of OPCO Shares (determined
without the above assumption) issued and outstanding on the record date for such
dividend, distribution, subdivision or combination. Any adjustment to the
Conversion Factor shall become effective immediately after the effective date of
such event retroactive to the record date, if any, for such event.
"Debt" means, as to any Person, as of any date of determination, (i) all
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indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
which, in accordance with generally accepted accounting principles, should be
capitalized.
"Depreciation" means, for each Partnership year, an amount equal to the
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federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
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that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Distribution Amount" means, with respect to any period for which there is
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a Distribution Event, an amount equal to the aggregate amount that the
Partnership would have paid in income taxes had it been a C corporation during
the period to which the Distribution Event relates.
"Distribution Event" means any quarter in which the General Partner incurs
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an income tax liability as a result of its status as the General Partner of the
partnership.
"Effective Tax Rate" means, for any year, the percentage determined by the
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General Partner to be a reasonable estimate of the combined effective rate of
Federal, state and local income tax (giving effect to the deduction of state and
local income taxes, as applicable, for Federal and state income tax purposes)
that would be applicable to the Partnership if it were a C corporation.
"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).
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"Final Determination" means (i) a decision, judgment, decree or other order
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by a court of original jurisdiction which has become final (i.e., the time for
filing an appeal shall have expired without any appeal having been filed), (ii)
a closing agreement made under Section 7121 of the Code or any other settlement
agreement entered into in connection with an administrative or judicial
proceeding, (iii) the expiration of the time for instituting a claim for refund,
or if a claim was filed, the expiration of the time for instituting suit with
respect thereto, or (iv) in any case where judicial review shall be unavailable,
a decision, judgment, decree or other order of an administrative official or
agency which has become final.
"General Partner" means MeriStar Hotels & Resorts, Inc., a Delaware
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corporation, or its successors as general partner of the Partnership.
"General Partner Distribution Amount" means an amount necessary to satisfy
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any income tax obligations of the General Partner incurred due to its status as
the General Partner of the Partnership.
"General Partner Interest" means a Partnership Interest held by the General
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Partner that is a general partnership interest. A General Partner Interest may
be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the internal
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revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such natural
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Person's spouse and such natural Person's natural or adoptive parents,
descendants, nephews, nieces, brothers, and sisters.
"Incapacity" or "Incapacitated" means, (i) as to any individual Partner,
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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 the Partner in any proceeding of the
nature described in clause (b) above, (e) the Partner
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seeks, consents to or acquiesces in the appointment of a trustee, receive 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 reason of
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his status as (A) the General Partner or a Limited Partner, or (B) a director or
officer of the Partnership or the General Partner or a Limited Partner, or (C)
his or its liability, 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 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.
"Institutional Lender" has the meaning as defined in Section 11.7 hereof.
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"Limited Partner" means CapStar Management Company, L.L.C., a Delaware
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limited liability company and MeriStar Hotels & Resorts, Inc., in its capacity
as a Limited Partner, or any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Limited Partner in the Partnership.
"Limited Partner Distribution Amount" means the Distribution Amount less
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the General Partner Distribution Amount.
"Limited Partner Interest" means a Partnership Interest of a Limited
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Partner in the Partnership 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 Partnership Units.
"Liquidator" has the meaning set forth in Section 13.2.
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"Net Income" means, for any taxable period, the excess, if any, of the
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Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B. Once an item of income, gain, loss or deduction that
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has been included in the initial computation of Net Income is subjected to the
special allocation rules in Exhibit C, Net Income or the resulting Net Loss,
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whichever the case may be, shall be recomputed without regard to such item.
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"Net Loss" means, for any taxable period, the excess, if any, of the
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Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B. Once an item of income, gain, loss or deduction that
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has been included in the initial computation of Net Loss is subjected to the
special allocation rules in Exhibit C, Net Loss or the resulting Net Income,
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whichever the case may be, shall be recomputed without regard to such item.
"Nonrecourse Built-in Gain" means, with respect to any Contributed
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Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
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properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
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1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership Year
shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
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1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in the
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form of Exhibit E to this Agreement.
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"OPCO" means MeriStar Hotels & Resorts, Inc., a Delaware corporation.
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"OPCO Share" means a share of common stock, par value $0.01 per share, of
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the General Partner.
"OPCO Shares Amount" means a whole number of OPCO Shares equal to the
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product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor (rounded down to the nearest whole
number in the event such product is not a whole number); provided that in the
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event the General Partner at any time issues to all holders of OPCO Shares
rights, options, warrants or convertible or exchangeable securities entitling
the shareholders to subscribe for or purchase OPCO Shares or any other
securities or property (collectively, the "rights"), which rights have not
expired pursuant to their terms, then the OPCO Shares Amount thereafter shall
also include such rights that a holder of that number of OPCO Shares would be
entitled to receive.
"Ownership Excess" means direct or indirect ownership of an interest of 10
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percent or more in the assets or net profits of the Partnership, within the
meaning of Section 856(d)(2)(B)(ii) of the Code.
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"Partner" means a General Partner or a Limited Partner, and "Partners"
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means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
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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
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1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
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Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Partnership Year shall be determined
in accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
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pursuant to the Initial Agreement and any successor thereto.
"Partnership Interest" means an ownership interest in the Partnership and
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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 Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations Section
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1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net
increase or decrease in Partnership Minimum Gain, for a Partnership Year shall
be determined in accordance with the rules of Regulations Section 1.704-2(d).
"Partnership Record Date" means the record date established by the General
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Partner for any distribution pursuant to Section 5.1 hereof.
"Partnership Unit" means (i) a fractional undivided share of the
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Partnership Interests of all Partners (other than the Preferred Units); and (ii)
each Preferred Unit. The total number of Partnership Units outstanding,
including the number of Class A MHR Units and Class B MHR Units, and the
Percentage Interests in the Partnership represented by such Partnership Units
are set forth in Exhibit A hereto, as such exhibit may be amended from time to
time. The ownership of Partnership Units may be evidenced by such form of
certificate for units as the General Partner adopts from time to time.
"Partnership Year" means the fiscal year of the Partnership, which shall
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end on the Friday nearest December 31.
"Percentage Interest" means, as to a Partner, its interest in the
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Partnership as determined by dividing the Partnership Units (other than
Preferred Units) owned by
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such Partner by the total number of Partnership Units (other than Preferred
Units) then outstanding.
"Person" means an individual or a corporation, partnership, trust, limited
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liability company, unincorporated organization, association or other entity.
"Preferred Capital," with respect to each Preferred Unit, means an amount
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equal to $3.34.
"Preferred Return," with respect to each Preferred Unit, means a preferred
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distribution right at the rate of 6.5% per annum, compounded quarterly to the
extent not distributed pursuant to Section 5.1.A(1), on the Preferred Capital
with respect to such Preferred Unit and includes any Preferred Return accrued
prior to the date of this Agreement.
"Preferred Sub-Account," with respect to a Preferred Unitholder, means an
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account maintained on the same basis as the Partners' Capital Accounts, but
taking into account only the aggregate Preferred Capital, allocations of Net
Income and Net Loss and distributions with respect to its Preferred Units
(including distributions of Preferred Return).
"Preferred Unit" means a Partnership Unit having the rights, preferences
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and privileges assigned to Preferred Units pursuant to the further provisions of
this Agreement. Class A MHR Units and Class B MHR Units shall not constitute
Preferred Units. The ownership of Preferred Units by the Partners is as set
forth in Exhibit A annexed hereto, as such Exhibit may be amended from time to
time.
"Preferred Unitholder" means a Limited Partner that holds one or more
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Preferred Units.
"Recapture Income" means any gain recognized by the Partnership upon the
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disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6 hereof.
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"Redemption Right" shall have the meaning set forth in Section 8.6 hereof.
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"Regulations" means the Income Tax Regulations promulgated under the Code,
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as such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
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case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the
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extent such item of gain or loss is not allocated pursuant to Section 2.B.1(a)
or 2.B.2(a) of Exhibit C to eliminate Book-Tax Disparities.
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"Rights Offering" means that certain rights offering by the General Partner
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described in the General Partner's Registration Statement on Form S-1
(Registration No. 333-49881) filed with the Securities and Exchange Commission
on April 10, 1998, as amended and supplemented through the date hereof.
"704(c) Value" of any Contributed Property means the value of such property
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as set forth in Exhibit D or if no value is set forth in Exhibit D, the fair
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market value of such property or other consideration at the time of contribution
as determined by the General Partner using such reasonable method of valuation
as it may adopt. Subject to Exhibit B hereof, the General Partner shall, in its
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sole and absolute discretion, use such method as it deems reasonable and
appropriate to allocate the aggregate of the 704(c) Values of contributed
Properties in a single or integrated transactions among the separate properties
on a basis proportional to their respective fair market values.
"Specified Redemption Date" means the tenth (10th) Business Day after
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receipt by the General Partner of a Notice of Redemption; provided that if the
General Partner combines its outstanding OPCO Shares, no Specified Redemption
Date shall occur after the record date and prior to the effective date of such
combination.
"Subsidiary" means, with respect to any Person, any corporation,
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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
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Partner to the Partnership pursuant to Section 11.4.
"Terminating Capital Transaction" means any sale or other disposition of
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all or substantially all of the assets of the Partnership or its Subsidiaries 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
or its Subsidiaries.
"Unpaid Preferred Return," with respect to each Preferred Unit, means an
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amount equal to the excess, if any, of (x) the aggregate Preferred Return on the
Preferred Capital with respect to such Preferred Unit over (y) the aggregate of
all amounts previously distributed with respect to such Preferred Unit pursuant
to Section 5.1.A(1).
"Unrealized Gain" attributable to any item of Partnership property means,
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as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under Exhibit B hereof) as of such date,
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over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to Exhibit B hereof) as of such date.
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"Unrealized Loss" attributable to any item of Partnership property means,
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as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to Exhibit B
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hereof) as of such date, over (ii) the fair market value of such property (as
determined under Exhibit B hereof) as of such date.
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"Valuation Date" means the date of receipt by the General
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Partner of a Notice of Redemption or, if such date is not a Business Day, the
first Business Day thereafter.
"Value" means, with respect to an OPCO Share, the average of the daily
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market price for the ten (10) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be: (i) if the
OPCO Shares are listed or admitted to trading on any securities exchange or the
NASDAQ National Market, the closing price, regular way, on such day, or if no
such sale takes place on such day, the average of the closing bid and asked
prices on such day; (ii) if the OPCO Shares are not listed or admitted to
trading on any securities exchange or the Nasdaq National Market, the last
reported sale price on such day or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reliable quotation source designated by the General Partner; or (iii) if the
OPCO Shares are not listed or admitted to trading on any securities exchange or
the NASDAQ National Market System and no such last reported sale price or
closing bid and asked prices are available, the average of the reported high bid
and low asked prices on such day, as reported by a reliable quotation source
designated by the General Partner, or if there shall be no bid and asked prices
on such day, the average of the high bid and low asked prices, as so reported,
on the most recent day (not more than ten (10) days prior to the date in
question) for which prices have been so reported; provided that if there are no
--------
bid and asked prices reported during the ten (10) days prior to the date in
question, the Value of the OPCO Shares shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. In the
event the OPCO Shares Amount includes rights that a holder of OPCO Shares would
be entitled to receive, and the General Partner acting in good faith determines
that the value of such rights is not reflected in the Value of the OPCO Shares
determined as aforesaid, then the Value of such rights shall be determined by
the General Partner acting in good faith on the basis of such quotations and
other information as it considers, in its reasonable judgment, appropriate.
ARTICLE II.
ORGANIZATIONAL MATTERS
Section 2.1. Organization
------------
The Partnership is a limited partnership organized pursuant to the
provisions of the Act and upon the terms and conditions set forth herein. Except
as expressly provided herein to the contrary, the rights and obligations of the
Partners and
12
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.
Section 2.2 Name
----
The name of the Partnership shall be MeriStar H & R Operating Company,
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 General
Partner 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
change the name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular communication to
the Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
---------------------------------------------
The address of the registered office of the Partnership in the State of
Delaware is CT Corporation, 1209 Orange Street, Wilmington, Delaware 19801, and
the registered agent for service of process on the Partnership in the State of
Delaware at such registered office shall be CT Corporation, 1209 Orange Street,
Wilmington, Delaware 19801. The principal office of the Partnership shall be
1010 Wisconsin Avenue, N.W., Suite 650, Washington, DC 20007, 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
-----------------
A. Each Limited Partner and each Assignee who accepts Partnership
Units (or any rights, benefits or privileges associated therewith) is deemed to
irrevocably constitute and appoint 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 jurisdictions in which the
Partnership may or plans to conduct business or own property; (b) all
instruments that the General Partner or the Liquidator deems appropriate or
necessary to reflect any amendment, change, modification or restatement of
this Agreement in accordance with its terms; (c) all conveyances
13
and other instruments or documents that the General Partner 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; and (e) all certificates, documents
and other instruments relating to the determination of the rights,
preferences and privileges of Partnership Interests; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the
General Partner or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is made
or given by the Partners hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion of the
General Partner or any Liquidator, to effectuate the terms or intent of
this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
and any Liquidator to act as contemplated by this Agreement in any filing or
other action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership 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 commenced on March 13, 1998, the date the
Certificate was filed in the office of the Secretary of State of Delaware in
accordance with the Act and shall continue until December 31, 2095, unless the
Partnership is dissolved sooner pursuant to the provisions of Article 13 or as
otherwise provided by law.
14
ARTICLE III.
PURPOSE
Section 3.1 Purpose and Business
--------------------
(a) The purpose and nature of the business to be conducted by the
Partnership, directly or indirectly through subsidiaries (including, without
limitation, partnerships for which the Partnership is a general partner), 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:
(i) to acquire, invest in, hold, own, develop, construct,
improve, maintain, operate, manage, purchase, sell, lease, transfer,
encumber, convey, exchange, and otherwise dispose of or deal with real and
person property of all kinds;
(ii) to engage in all phases of the hotel and hotel
management business;
(iii) to enter into any partnership, joint venture or other
similar arrangement to engage in any of the foregoing;
(iv) to undertake such other activities as may be necessary,
advisable, desirable or convenient to the business of the Partnership; and
(v) to engage in such other ancillary activities as shall be
necessary or desirable to effectuate the foregoing purposes.
(b) In connection with the foregoing, but subject to all of the
terms, covenants, conditions and limitations contained in this Agreement, 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 properties
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, including, without
limitation, full power and authority, directly or through its ownership interest
in other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness, whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire and develop real
property, and manage, lease, sell, transfer and dispose of real property.
15
ARTICLE IV.
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
-------------------------------------
The Partners have made: (i) certain Capital Contributions to the
Partnership; and (ii) certain capital contributions to MeriStar H & R Operating
Company II, L.P. (which capital contributions shall be deemed to be Capital
Contributions for purposes of this Agreement). To the extent the Partnership
acquires any property by the merger of any 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 and as
set forth in Exhibit A, as amended to reflect such deemed Capital Contributions.
The Partners shall own Partnership Units as set forth in Exhibit A and shall
have Percentage Interests in the Partnership as set forth in Exhibit A, which
Percentage Interests shall be adjusted from time to time by the General Partner
to the extent necessary to accurately reflect redemptions, Capital
Contributions, the issuance of additional Partnership Units, or similar events
having an effect on a Partner's Percentage Interest. A number of Partnership
Units held by the General Partner equal to one percent (1%) of all outstanding
Partnership Units (other than Preferred Units) shall be the General Partner
Interest. Except as provided in Sections 4.2 and 10.5, the Partners shall have
no obligation to make Capital Contributions or loans to the Partnership.
Section 4.2 Issuances of Additional Interests
---------------------------------
A. The General Partner is hereby authorized to cause the
Partnership from time to time to issue to the Partners (including the General
Partner) or other persons (including, without limitation, in connection with the
contribution of property to the Partnership) additional Partnership Units or
other Partnership Interests in one or more classes, or one or more series of any
of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to Limited Partnership Interests, all as shall
be determined by the General Partner in its sole and absolute discretion subject
to Delaware law, including, without limitation, (i) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such class or
series of Partnership Interests; (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions; and (iii) the
rights of each such class or series of Partnership Interests upon dissolution
and liquidation of the Partnership; provided that no such additional Partnership
-------------
Units or other Partnership Interests shall be issued to the General Partner
unless either (a)(1) the additional Partnership Interests are issued in
connection with the grant, award, or issuance of shares of the General Partner,
which shares have designations, preferences and other rights (except for voting
rights) such that the economic interests attributable to such shares are
substantially similar to the designations, preferences and other rights of the
additional Partnership Interests issued to the General Partner in accordance
with this Section 4.2.A, and (2) the General Partner shall make a Capital
Contribution to the Partnership in an amount equal to the proceeds, if any,
raised
16
in connection with the issuance of such shares of the General Partner, or (b)
the additional Partnership Interests are issued to all Partners in proportion to
their respective Percentage Interests.
B. After the date hereof, the General Partner shall not grant,
award, or issue any additional OPCO Shares (other than OPCO Shares issued
pursuant to Sections 8.6 or 8.7), or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase OPCO
Shares (collectively "New Securities"), other than to all holders of OPCO Shares
unless (i) the General Partner shall cause the Partnership to issue to the
General Partner Partnership Interests or rights, options, warrants or
convertible or exchangeable securities of the Partnership having designations,
preferences and other rights, all such that the economic interests are
substantially the same as those of the New Securities, and (ii) the General
Partner contributes the net proceeds from the grant, award or issuance of such
New Securities and from the exercise of rights contained in such New Securities
to the Partnership. Without limiting the foregoing, the General Partner is
expressly authorized to issue New Securities for less than fair market value,
and to cause the Partnership to issue to the General Partner corresponding
Partnership Interests, so long as (x) the General Partner concludes in good
faith that such issuance is in the interests of the General Partner and the
Partnership (for example, and not by way of limitation, the issuance of OPCO
Shares and corresponding Partnership Units pursuant to an employee stock
purchase plan providing for employee purchases of OPCO Shares at a discount from
fair market value or employee stock options that have an exercise price that is
less than the fair market value of the OPCO Shares, either at the time of
issuance or at the time of exercise), and (y) the General Partner contributes
all proceeds from such issuance and exercise to the Partnership.
Section 4.3 Contribution of Proceeds of Issuance of OPCO Shares
---------------------------------------------------
In connection with any grant, award, or issuance of OPCO Shares or
rights, options, warrants, or convertible or exchangeable securities pursuant to
Section 4.2, and to the extent the proceeds in each case are required to be
contributed to the Partnership as provided in Section 4.2.B hereof, the General
Partner shall make a Capital Contribution to the Partnership of the proceeds
raised in connection with such grant, award, or issuance; provided that if the
proceeds actually received by the General Partner are less than the gross
proceeds of such 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 grant, award, or issuance, then the General 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 reimbursed the General Partner pursuant to Section 7.4.C for the amount of
such underwriter's discount or other expenses.
Section 4.4 No Preemptive Rights
--------------------
17
No existing Limited Partner shall have any preemptive, preferential or
other similar right with respect to (i) additional Capital Contributions or
loans to the Partnership; or (ii) issuance or sale of any Partnership Units or
other Partnership Interests.
Section 4.5 No Interest on Capital
----------------------
No Partner shall be entitled to interest on its Capital Contribution
or its Capital Account.
ARTICLE V.
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
-------------------------------------------------
A. Distributions shall be made to the Partners as follows and in the
following order of priority:
(1) First, 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, to the Preferred Unitholders with
respect to their Preferred Units, in proportion to and to the extent of
their respective amounts of Unpaid Preferred Return on such Preferred Units
at such time; and
(2) Thereafter, to the extent that the General Partner
determines that the Partnership has cash available for distribution, to the
Partners in accordance with their respective Percentage Interests.
Distributions made pursuant to clause (1) shall be made on a quarterly basis.
B. (1) Notwithstanding the provisions of Section 5.1.A, if it is
anticipated that the Partners will recognize taxable income with respect to
the Partnership for any year, the General Partner shall make a good faith
estimate of the amount of such taxable income to be recognized by each of
the Partners (other than any taxable income recognized as a result of the
allocations of Net Income Pursuant to Sections 6.l.A(1), (2) and (3)), and
distributions of Partnership cash shall be made to the Partners, in
proportion to their respective Percentage Interests, in an aggregate amount
sufficient to permit each of the Partners to pay taxes (calculated at a
rate equal to the Effective Tax Rate) on their distributive shares of such
taxable income; provided, however, that if, as a result of the remedial
allocations of taxable income to the holders of Class B MHR Units as
required by Section 2.C of Exhibit C, the amounts otherwise distributable
to the holders of Class B MHR Units pursuant to this sentence with respect
to any year ending on or prior to December 31, 2000 would be insufficient
to permit the holders of Class B MHR Units to pay taxes, calculated using a
rate determined in the same manner as the Effective Tax Rate but using the
highest marginal tax rates applicable to individuals rather than the tax
applicable to C corporations, on
18
their respective distributive shares of the Partnership's taxable income
for such year, the amounts otherwise distributable to the holders of Class
B MHR Units pursuant to this sentence shall be increased as necessary to
permit the holders of Class B MHR Units to pay such taxes. Distributions
required to be made pursuant to this Section 5.1.B(1) shall be made at such
times as may be appropriate to permit the Partners to make estimated tax
payments; provided that if any Partner has its Partnership Units redeemed
pursuant to Section 8.6 or 8.7, the fact that such Partner may no longer
hold any Partnership Units after such redemption shall not affect such
Partner's right to receive any distributions required pursuant to this
Section 5.1.B(1) with respect to the applicable taxable income allocated to
such Partnership Unit up to and including the date of such redemption.
(2) The computation of the amounts required to be distributed
pursuant to Section 5.1.B(1) for any year shall be adjusted (i) prior to
each distribution of such year, (ii) upon the filing of the Partnership's
Federal income tax return for such year, (iii) upon any Final Determination
of the Partnership's taxable income for such year and (iv) at any other
time when in the good faith judgment of the General Partner it appears that
a prior estimate has been incorrect, in each case so as to take into
account actual determinations and/or revised estimates of the Partners'
shares of taxable income for such year for Federal income tax purposes.
Following any such adjustment, the amounts to be distributed pursuant to
Section 5.1.B(1) shall be adjusted appropriately, or additional
distributions shall be made, so as to give effect to such actual
determinations and/or revised estimates.
Section 5.2. Amounts Withheld
----------------
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 hereof with respect to any allocation,
payment or distribution to the General Partner, the Limited Partners or
Assignees shall be treated as amounts distributed to the General Partner,
Limited Partners, or Assignees pursuant to Section 5.1 for all purposes under
this Agreement.
Section 5.3 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.
ARTICLE VI.
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
----------------------------------------
19
For purposes of maintaining the Capital Accounts and in determining
the rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Net Income. After giving effect to the special allocations set
----------
forth in Section 1 of Exhibit C, Net Income shall be allocated as follows and in
the following order of priority:
(1) First, to the General Partner until the aggregate amount of
Net Income allocated to it pursuant to this clause (1) for the current and
all prior years equals the aggregate amount of Net Loss previously
allocated to it pursuant to the proviso of Section 6.1.B(3);
(2) Second, to the Partners, in proportion to and to the extent
of any deficit balances in their respective Capital Accounts;
(3) Third, to the Preferred Unitholders with respect to their
Preferred Units, in proportion to and to the extent of the excess, if any,
of (x) each such Preferred Unitholder's aggregate Preferred Capital with
respect to such Preferred Units over (y) the balance of such Preferred
Unitholder's Preferred Sub-Account; and
(4) Thereafter, to the Partners in accordance with their
respective Percentage Interests.
B. Net Loss. After giving effect to the special allocations set
--------
forth in Section 1 of Exhibit C, Net Loss shall be allocated as follows and in
the following order of priority:
(1) First, to the Partners in proportion to and to the extent of
the excess, if any, of (x) each such Partner's Capital Account balance over
(y) such Partner's aggregate Preferred Capital with respect to such
Partner's Preferred Units (if any);
(2) Second, to the Preferred Unitholders, in proportion to and
to the extent of their remaining Capital Account balances; and
(3) Thereafter, to the Partners in accordance with their
respective Percentage Interests; provided that, to the extent any such
allocation to a Limited Partner would (after giving effect to the
allocations required under Sections 1.A and 1.B of Exhibit C) give such
Limited Partner an Adjusted Capital Account Deficit, such amount of Net
Loss shall instead be allocated to the General Partner.
20
C. Allocation of Nonrecourse Debt. For purposes of Regulations
------------------------------
Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain
and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among
the Partners in accordance with their respective Percentage Interests.
D. Recapture Income. Any gain allocated to the Partners upon the
----------------
sale or other taxable disposition of any Partnership asset shall to the extent
possible, after taking into account other required allocations of gain pursuant
to Exhibit C, be characterized as Recapture Income in the same proportions and
---------
to the same extent as such Partners have been allocated any deductions directly
or indirectly giving rise to the treatment of such gains as Recapture Income
(including deductions taken by any Partner with respect to Contributed Property
prior to the time such Property was contributed to the Partnership).
E. Allocations to Reflect Issuance of Additional Partnership
---------------------------------------------------------
Interests. In the event that the Partnership issues additional Partnership
- ---------
Interests to the General Partner or any Additional Limited Partner under Section
4.2 hereof, the General Partner shall make such revisions to Sections 6.1.A and
B above as it determines are necessary to reflect the issuance of such
additional Partnership Interests.
ARTICLE VII.
MANAGEMENT AND OPERATIONS OF BUSINESS
Section . Management
----------
7.1 Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are and shall
be exclusively vested in the General Partner, and no Limited Partner shall have
any right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 7.3 hereof, 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) the making of any expenditures, the lending or borrowing of money
(including, without limitation, making prepayments on loans), the
assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness (including the securing of same by deed to secure
debt, mortgage, deed of trust or other lien or encumbrance on the
21
Partnership's assets) and the incurring of any obligations it
deems necessary for the conduct of the activities of the
Partnership;
(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;
(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 General Partner, the Partnership or any of the
Partnership's Subsidiaries, the lending of funds to other Persons
(including, without limitation, the Partnership's Subsidiaries)
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 management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property or
improvements owned by the General Partner, the Partnership or any
of the Partnership's Subsidiaries;
(6) the negotiation, execution, and performance of any contracts,
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;
(8) holding, managing, investing and reinvesting cash and other
assets of the Partnership;
22
(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, any
division of the Partnership, or the General Partner (including,
without limitation, employees having titles such as "president,"
"vice president," "secretary" and "treasurer" of the Partnership,
any division of the Partnership, or the General Partner), and
agents, outside attorneys, accountants, consultants and
contractors of the General Partner, the Partnership or any
division of the Partnership, and the determination of their
compensation and other terms of employment or hiring;
(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 in which it has an equity
investment 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, arbitrations or other
forms of dispute resolution, and the representation of the
Partnership in all suits or legal proceedings, administrative
proceedings, arbitrations or other forms of dispute resolution,
the incurring of legal expense, and the indemnification of any
Person against liabilities and contingencies to the extent
permitted by law;
(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);
(15) the determination of the fair market value of any Partnership
property distributed in kind using such reasonable method of
valuation as it may adopt;
23
(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, deeds to secure debt, mortgages, deeds of trust, security
agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or legal instruments or agreements
in writing necessary or appropriate in the judgment of the
General Partner for the accomplishment of any of the powers of
the General Partner; and
(20) the distribution of cash to acquire Partnership Units held by a
Limited Partner in connection with a Limited Partner's exercise
of its Redemption Right under Section 8.6 or the exercise by the
General Partner of its rights under Section 8.7.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the Partners, notwithstanding any other provision of this Agreement, the
Act or any applicable law, rule or regulation, to the fullest extent permitted
under the Act or other applicable law. The execution, delivery or performance by
the General Partner or the Partnership of any agreement authorized or permitted
under this Agreement shall not constitute a breach by the General Partner of any
duty that the General Partner may owe the Partnership or the Limited Partners or
any other Persons under this Agreement or of any duty stated or implied by law
or equity.
C. At all times from and after the date hereof, the General Partner
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.
D. 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
24
accounts and other cash or similar balances in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
E. Notwithstanding anything to the contrary contained in this Agreement,
any agreement of merger or consolidation of the Partnership entered into in
accordance with the provisions of this Agreement may, as provided in Section
17-211(g) of the Delaware Revised Uniform Limited Partnership Act, (1) effect
any amendment to this Agreement or (2) effect the adoption of a new partnership
agreement for the Partnership if it is the surviving or resulting limited
partnership in the merger or consolidation (provided that no such amendment
shall be so effected if it would, under Section 14.1.C hereof, require the
consent of the Limited Partners (unless the requisite consent or consents shall
be obtained), and no provision shall be included in any such new partnership
agreement if such provision would, under Section 14.1.C hereof, require the
consent of the Limited Partners if it were being incorporated in this Agreement
by amendment (unless the requisite consent shall be obtained)).
Section 7.2 Certificate of Limited Partnership
----------------------------------
The Partnership has previously filed the Certificate 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
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 8.5.A(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 Restrictions on General Partner's Authority
-------------------------------------------
Subject to Section 14.1, the General Partner may not take any action in
contravention of an express prohibition or limitation of this Agreement without
the written Consent of a majority in interest of the Limited Partners (including
Limited Partnership Interests held by the General Partner) (or such lower
percentage of the Limited Partners as may be specifically provided for under a
provision of this Agreement or the Act).
Section 7.4 Reimbursement of the General Partner
------------------------------------
A. Except as provided in this Section 7.4 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions,
25
payments, and allocations to which it may be entitled), the General Partner
shall not be compensated for its services as general partner of the Partnership.
B. The General Partner shall be reimbursed on a monthly basis, or such
other basis as the General Partner may determine in its sole and absolute
discretion, for all expenses it incurs relating to the ownership and operation
of, or for the benefit of, the Partnership; provided that the amount of any such
-------------
reimbursement shall be reduced by any interest earned by the General Partner
with respect to bank accounts or other instruments or accounts held by it on
behalf of the Partnership as permitted in Section 7.5.A. The Limited Partners
acknowledge that, for purposes of this Section 7.4.B, all of the General
Partner's expenses (including without limitation, costs and expenses associated
with compliance with the periodic reporting requirements and all other rules and
regulations of the Securities and Exchange Commission or any other federal,
state or local regulatory body, salaries payable to officers and employees of
the General Partner, fees and expenses payable to directors of the General
Partner, and all other operating or administrative costs of the General Partner)
are deemed incurred for the benefit of the Partnership and shall be paid by or
reimbursed by the Partnership as provided in this Section 7.4.B. Such
reimbursements shall be in addition to any reimbursement to the General Partner
as a result of indemnification pursuant to Section 7.7 hereof. All payments and
reimbursements hereunder will be characterized for federal income tax purposes
as expenses of the Partnership incurred on its behalf, and not expenses of the
General Partner.
C. The General Partner shall also be reimbursed for all expenses it incurs
relating to the organization and/or reorganization of the Partnership and the
General Partner, the Rights Offering and any issuance of additional Partnership
Interests, OPCO Shares, New Securities, or rights, options, warrants, or
convertible or exchangeable securities pursuant to Section 4.2 hereof
(including, without limitation, all costs, expenses, damages, and other payments
resulting from or arising in connection with litigation related to any of the
foregoing).
D. In the event that the General Partner shall elect to purchase from its
shareholders OPCO Shares for the purpose of delivering such shares to satisfy an
obligation under any dividend reinvestment program adopted by the General
Partner, any employee stock purchase plan adopted by the General Partner, or any
similar obligation or arrangement undertaken by the General Partner in the
future, the purchase price paid by the General Partner for such OPCO Shares and
any other expenses incurred by the General Partner in connection with such
purchase shall be considered expenses of the Partnership and shall be reimbursed
to the General Partner by the Partnership, subject to the condition that: (i) if
such OPCO Shares subsequently are to be sold by the General Partner, the General
Partner shall pay to the Partnership any proceeds received by the General
Partner for such OPCO Shares (provided that a transfer of OPCO Shares for
Partnership Units pursuant to Section 8.6 or Section 8.7 shall not be considered
a sale for such purposes); and (ii) if such OPCO Shares are not retransferred by
the General Partner within 30 days after the purchase thereof, the General
Partner shall cause the Partnership to cancel a number of Partnership Units
(rounded to the nearest whole Partnership Unit) held by the General Partner
equal to the product obtained by multiplying the number of
26
such OPCO Shares by a fraction, the numerator of which is one and the
denominator of which is the Conversion Factor.
Section 7.5 Outside Activities of the General Partner
-----------------------------------------
A. The General Partner shall not directly or indirectly enter into or
conduct any business, other than in connection with the ownership, acquisition
and disposition, directly or indirectly, of interests in the Partnership, the
management of the businesses of the Partnership and such activities as are
incidental thereto. The General Partner shall not incur any debts other than (i)
debt of the Partnership for which it may be liable in its capacity as General
Partner of the Partnership or as guarantor or co-borrower, and (ii) indebtedness
for borrowed money the proceeds from which borrowing are loaned to the
Partnership on the same terms and conditions as the borrowing by the General
Partner. The General Partner shall not hold any assets other than the
partnership interests herein above referred to or such bank accounts or similar
instruments or accounts as it deems necessary to carry out its responsibilities
contemplated under this Agreement and the General Partner's organizational
documents and other activities consistent with the foregoing provisions of this
Section 7.5.A. The General Partner and any Affiliates of the General Partner may
acquire Limited Partner Interests and shall be entitled to exercise all rights
of a Limited Partner relating to such Limited Partner Interests.
B. The General Partner may, from time to time, purchase and/or redeem OPCO
Shares (including, without limitation, in connection with a stock repurchase or
similar program), if the General Partner determines that it is in the interest
of the Partnership for the General Partner to purchase and/or redeem OPCO
Shares. In the event that the General Partner purchases and/or redeems OPCO
Shares, then the General Partner shall cause the Partnership to purchase from
the General Partner, concurrently with the OPCO Share purchase or redemption,
Partnership Units for the same consideration (including any fees, concessions
and expenses payable by the General Partner in connection therewith) and on the
same terms as those applicable to the purchase or redemption by the General
Partner of the related OPCO Shares.
Section 7.6. 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. The Partnership may transfer assets to joint ventures, other
partnerships, corporations or other business entities in which it is or thereby
becomes a participant upon such terms and subject to such conditions consistent
with this Agreement and applicable law as the General Partner, in its sole and
absolute discretion, believes are advisable.
27
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 and no less favorable to the Partnership
than would be obtained from an unaffiliated third party.
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 General Partner, the
Partnership, Subsidiaries of the Partnership or any Affiliate of any of them in
respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, or any of the Partnership's Subsidiaries.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a right of first opportunity arrangement and
other conflict avoidance agreements with various Affiliates of the Partnership
and the General Partner, on such terms as the General Partner, in its sole and
absolute discretion, believes are advisable.
Section 7.7 Indemnification
---------------
A. The Partnership shall indemnify each Indemnitee from and against any and
all losses, claims, damages, liabilities, joint or several, expenses (including,
without limitation, attorneys fees and other legal fees and expenses),
judgments, fines, settlements, and other amounts arising from any and all
claims, demands, actions, suits or proceedings, civil, criminal, administrative
or investigative, that relate to the Partnership in which such Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise, for any indebtedness of the Partnership or any Subsidiary
of the Partnership (including, without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. The termination of any
proceeding, by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct set forth in this
Section 7.7.A . The termination of any proceeding by conviction of an Indemnitee
or upon a plea of nolo contendere or its equivalent by an Indemnitee, or an
entry of an order of probation against an Indemnitee prior to judgment, creates
a rebuttable presumption that such Indemnitee acted in a
28
manner contrary to that specified in this Section 7.7.A with respect to the
subject matter of such proceeding. Any indemnification pursuant to this Section
7.7 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 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding may be paid or reimbursed by the Partnership in advance of the final
disposition of the proceeding upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7.A has been met, and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in addition to
any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity unless otherwise provided in a written agreement pursuant to which
such Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnitees and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
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 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of Section 7.7; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject 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 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
29
H. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
Section 7.8 Liability of the General Partner
--------------------------------
A. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner shall not be liable for monetary damages to the Partnership,
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 General Partner's shareholders
collectively, that the General Partner is under no obligation to consider the
separate interests of the Limited Partners (including, without limitation, the
tax consequences to Limited Partners or Assignees) in deciding whether to cause
the Partnership to take (or decline to take) any actions, and that the General
Partner shall not be liable to the Partnership or to any Partner for monetary
damages for losses sustained, liabilities incurred, or benefits not derived by
Limited Partners in connection with such decisions, provided that the General
Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth in
Section 7.1.A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's liability to the Partnership and the
Limited Partners under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner
--------------------------------------------
A. The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion,
30
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 a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder.
Section 7.10 Title to Partnership Assets
---------------------------
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby declares
and warrants that any Partnership assets for which legal title is held in the
name of the General Partner or any nominee or Affiliate of the General Partner
shall be held by the General Partner for the use and benefit of the Partnership
in accordance with the provisions of this Agreement; provided, however, that the
-------- -------
General Partner shall use its best efforts to cause beneficial and record title
to such assets to be vested in the Partnership as soon as reasonably
practicable. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which legal
title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties
-------------------------
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, 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
31
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 VIII.
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
-----------------------
The Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement, including Section 10.5 hereof, or under
the Act.
Section 8.2 Management of Business
----------------------
No Limited Partner or Assignee (other than the General Partner, any of its
Affiliates or any officer, director, employee, partner, agent or trustee of the
General Partner, the Partnership or any of their Affiliates, in their capacity
as such) shall take part in the 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 Section 7.5 hereof and any other agreements entered into by a
Limited Partner or its Affiliates with the Partnership or a Subsidiary, any
Limited Partner and any officer, director, employee, agent, trustee, member,
Affiliate or shareholder of any Limited Partner shall be entitled to and may
have business interests and engage in business activities in addition to those
relating to the Partnership, including business interests and activities 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 nor any other Person
shall have any
32
rights by virtue of this Agreement or the Partnership relationship established
hereby in any business ventures of any other Person (other than the General
Partner to the extent expressly provided herein) 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
-----------------
Except pursuant to the right of redemption set forth in Section 8.6
(including any such right exercised after the giving of a Mandatory Redemption
Notice as provided in Section 8.7), 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. Nothing in this Section 8.4 shall be interpreted
as limiting the Partnership's right to redeem all or a portion of the
Partnership Units held by a Limited Partner, with the consent of such Limited
Partner, on such terms and for such consideration as determined by the General
Partner to be in the interests of the Partnership. Except to the extent provided
by Exhibit C hereof or as permitted by Section 4.2 (relating to preferred
---------
interests issued subsequent to the date hereof), or 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 other rights provided by this Agreement or by the Act,
and except as limited by Section 8.5.C 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 copying and administrative charges as the General Partner may establish
from time to time):
(1) to obtain a copy of the most recent annual and quarterly reports filed
with the Securities and Exchange Commission by the General Partner
pursuant to the Securities Exchange Act of 1934;
(2) to obtain a copy of the Partnership's federal, state and local income
tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and all
amendments thereto, together with executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed; and
33
(5) to obtain true and full information regarding the amount of cash and a
description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner.
B. The Partnership shall notify each Limited Partner, upon request, of
the then current Conversion Factor and any change therein.
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner 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 Redemption Right
----------------
A. Subject to Section 8.6.B, each Limited Partner, other than the General
Partner, shall have the right (the "Redemption Right"), on or after the date
specified in Exhibit A, as amended from time to time, to require the Partnership
to redeem on a Specified Redemption Date all or a portion of the Partnership
Units that are allocable to such Limited Partner at a redemption price equal to
and in the form of the Cash Amount to be paid by the Partnership. The Redemption
Right shall be exercised pursuant to a Notice of Redemption delivered to the
Partnership (with a copy to the General Partner) by the Limited Partner who is
exercising the redemption right (the "Redeeming Partner"). A Limited Partner may
not exercise the Redemption Right for less than one thousand (1,000) Partnership
Units or, if such Limited Partner holds less than one thousand (1,000)
Partnership Units, all of the Partnership Units that are allocable to such
Partner. The Assignee of any Limited Partner may exercise the rights of such
Limited Partner pursuant to this Section 8.6, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Limited Partner's Assignee. In connection with
any exercise of such rights by such Assignee on behalf of such Limited Partner,
the Cash Amount shall be paid by the Partnership directly to such Assignee and
not to such Limited Partner. Except as otherwise provided herein, neither the
Redeeming Partner nor any Assignee of any Limited Partner shall have any right
with respect to any Partnership Units so redeemed to receive any distributions
if the record date for such distribution is after the Specified Redemption Date.
Notwithstanding anything to the contrary set forth above, if any Preferred
Unitholder shall exercise the Redemption Right with respect to any Preferred
Units, the Partnership shall be obligated to pay to such Preferred Unitholder,
together with the Cash Amount, the Unpaid Preferred Return attributable to the
Preferred Units being redeemed as of the date such payment is made.
34
B. Notwithstanding the provisions of Section 8.6.A, in the event a Limited
Partner elects to exercise the Redemption Right, the General Partner may, in its
sole and absolute discretion, elect to assume directly and satisfy a Redemption
Right by paying to the Redeeming Partner either the Cash Amount or the OPCO
Shares Amount, as elected by the General Partner (in its sole and absolute
discretion) on the Specified Redemption Date, whereupon the General Partner
shall acquire the Partnership Units offered for redemption by the Redeeming
Partner and shall be treated for all purposes of this Agreement as the owner of
such Partnership Units. Unless the General Partner (in its sole and absolute
discretion) shall exercise its right to assume directly and satisfy the
Redemption Right, the General Partner itself shall have no obligation to the
Redeeming Partner or to the Partnership with respect to the Redeeming Partner's
exercise of the Redemption Right. In the event the General Partner shall
exercise its right to satisfy the Redemption Right in the manner described in
the first sentence of this Section 8.6.B, the Partnership shall have no
obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of the Redemption Right, and each of the Redeeming
Partner, the Partnership, and the General Partner shall treat the transaction
between the General Partner and the Redeeming Partner for federal income tax
purposes as a sale of the Redeeming Partner's Partnership Units to the General
Partner. Each Redeeming Partner agrees to execute such documents as the General
Partner may reasonably require in connection with the issuance of OPCO Shares
upon exercise of the Redemption Right. If the Redemption Right is satisfied by
the delivery of OPCO Shares, the Redeeming Partner shall be deemed to become a
holder of OPCO Shares as of the close of business on the Specified Redemption
Date.
Notwithstanding anything to the contrary contained in the foregoing or in
Section 8.6.A, if the Cash Amount with respect to a redemption of Partnership
Units is, pursuant to Section 8.6.D hereof, paid after the Specified Redemption
Date, then (i) such redemption shall not occur until the Cash Amount is paid and
(ii) the Limited Partner in question (or its Assignee) shall have the right to
continue receiving distributions hereunder until the date of such redemption or
as otherwise provided in Section 5.1.B(1).
In addition, notwithstanding anything to the contrary contained in Section
8.6.A, if the General Partner exercises its right to satisfy the Redemption
Right pursuant to this Section 8.6.B, then, if the Redeeming Partner is a
Preferred Unitholder: (i) the General Partner shall be obligated to pay to such
Preferred Unitholder, together with the payment of the Cash Amount or the
delivery of OPCO Shares, an amount equal to the Unpaid Preferred Return
attributable to such Preferred Units as of the date such payment is made; and
(ii) if the General Partner has elected to deliver OPCO Shares to such Preferred
Unitholder, the General Partner shall have the right to satisfy its obligation
under clause (i) of this sentence by delivering to such Preferred Unitholder a
number of OPCO Shares equal to the amount of such Unpaid Preferred Return
divided by the Value on the Valuation Date of one OPCO Share (rounded down to
the nearest whole number of OPCO Shares if such quotient is not a whole number).
C. Each Limited Partner covenants and agrees with the General Partner that
all Partnership Units delivered for redemption shall be delivered to the
Partnership or the General Partner, as the case may be, free and clear of all
liens and, notwithstanding anything herein contained to the contrary, neither
the General Partner nor
35
the Partnership shall be under any obligation to acquire Partnership Units which
are or may be subject to any liens. Each Limited Partner further agrees that, in
the event any state or local property transfer tax is payable as a result of the
transfer of its Partnership Units to the Partnership or the General Partner,
such Limited Partner shall assume and pay such transfer tax.
D. Any Cash Amount to be paid to a Redeeming Partner pursuant to this
Section 8.6 shall be paid within 60 days after the initial date of receipt by
the Partnership of the Notice of Redemption relating to the Partnership Units to
be redeemed; provided, however, that such 60-day period may be extended for up
-------- -------
to an additional 30-day period to the extent required for the Partnership to
cause additional OPCO Shares to be issued to provide financing to be used to
make such payment of the Cash Amount. Notwithstanding the foregoing, the
Partnership and the General Partner agree to use their best efforts to cause the
closing of the acquisition of redeemed Partnership Units hereunder to occur as
quickly as reasonably possible.
E. Notwithstanding anything to the contrary hereinabove contained, except
as provided in Section 8.7.A, no Limited Partner shall be entitled to exercise
the Redemption Right with respect to any Preferred Unit as to which the
Mandatory Redemption Notice (as hereinafter defined) has been given.
F. In addition to the right of redemption provided for in this Section 8.6,
the Preferred Unitholders shall have the right, on one occasion only on or after
April 1, 2004, to require the Partnership to redeem all of their Preferred Units
then outstanding at a redemption price equal to $3.34 per Preferred Unit. If
such right is exercised, then, for purposes of this Agreement but subject to the
further provisions of this Section 8.6.F, (i) such exercise shall be deemed to
constitute, as to each Preferred Unitholder, the exercise of the Redemption
Right, (ii) each such Preferred Unitholder shall be deemed a Redeeming 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 8.6.A hereof; provided that (A) the Notice of Redemption shall be signed
by all such Preferred Unitholders, (B) each Notice of Redemption shall state
specifically that it is being given under this Section 8.6.F and (C) such
Preferred Unitholders shall be entitled to elect (which election shall be
indicated in the Notice of Redemption) whether to be paid the Cash Amount (which
term, for purposes of this Section 8.6.F, shall mean the redemption price
provided for above) or to receive OPCO Shares in exchange for their Preferred
Units (the number of OPCO Shares so to be delivered to such Preferred
Unitholders to be computed in accordance with Section 8.7.B hereof). In the
event such Preferred Unitholders elect to receive OPCO Shares in exchange for
their Preferred Units, the provisions of Section 8.6.B shall apply (except that
references therein to the General Partner's election to deliver OPCO Shares to
the Redeeming Partners shall instead be deemed references to the election of the
Preferred Unitholders to receive OPCO Shares).
Section 8.7 Mandatory Redemption
--------------------
A. Except as otherwise provided in the last sentence of this Section 8.7.A,
the Partnership shall have the right ("Mandatory Redemption Right"), at
36
any time on or after April 1, 2000, to redeem all or any portion of the
Preferred Units at a redemption price equal to $3.34 per Preferred Unit;
provided, however, that any such redemption shall be effected on a pro rata
--- ----
basis among all of the Preferred Unitholders. The Mandatory Redemption Right
shall be exercised pursuant to a notice (the "Mandatory Redemption Notice")
delivered by the Partnership to the Preferred Unitholders whose Preferred Units
are being redeemed. If the Mandatory Redemption Notice is given to a Preferred
Unitholder, then the redemption of such Preferred Unitholder's Preferred Units
shall take place on the tenth Business Date after the giving of such Notice. On
such tenth Business Day, the Partnership shall pay to such Preferred Unitholder
the redemption price hereinabove provided for, and such Preferred Unitholder
shall deliver to the Partnership such instruments of transfer as the Partnership
shall reasonably require assigning to the Partnership the Preferred Units being
redeemed, free and clear of all liens and encumbrances. Such Preferred
Unitholder 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 Preferred Unitholder gives the Redemption Notice with
respect to the Preferred Units specified in such Mandatory Redemption Notice,
then such Mandatory Redemption Notice shall be deemed null and void and the
provisions of Section 8.6 shall apply with respect to such Preferred Units.
B. (i) Notwithstanding anything to the contrary contained in Section 8.7.A,
the General Partner shall have the right (the "Share Exchange Right") to
purchase all or any portion of the Preferred Units in lieu of the Partnership's
exercise of its Mandatory Redemption Right. Any such purchase by the General
Partner of the Preferred Units shall be on the terms and conditions set forth in
Section 8.7.A, with the General Partner performing the obligations of the
Partnership under such section; provided, however, that the General Partner
shall have the right, in lieu of paying to the Preferred Unitholder in question
the redemption price provided for in Section 8.7.A, to deliver to such Preferred
Unitholder a number of OPCO Shares equal to (i) the number of Preferred Units
being purchased, multiplied by (ii) $3.34, divided by (iii) the Value per OPCO
Share on the Valuation Date (which amount shall be rounded down to the nearest
whole number if it is not a whole number). For purposes of this Section 8.7, the
term "Valuation Date" shall mean the date on which the Mandatory Redemption
Notice is delivered to the Preferred Unitholder in question or, if such date is
not a Business Day, the First Business Day thereafter. If the General Partner
purchases Preferred Units pursuant to this Section 8.7.B, the General Partner
shall thereafter be treated for all purposes as the owner of such Preferred
Units.
(ii) Notwithstanding anything to the contrary contained in clause (i)
this Section 8.7.B, if the General Partner shall exercise the Share Exchange
Right with respect to a Preferred Unitholder on or after April 1, 2000, such
Preferred Unitholder 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 Preferred Units in lieu of accepting delivery of
OPCO Shares therefor. If any Preferred Unitholder shall exercise such right,
then the Partnership or the General Partner shall pay to such Preferred
Unitholder the redemption price for the Preferred Units being redeemed as
provided in Section 8.7.A or clause (i) of this Section 8.7.B, as applicable.
37
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 Preferred Unitholder, such Preferred Unitholder
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 deliver OPCO Shares to such Preferred Unitholder in
exchange for such Preferred Unitholder's Preferred Units. If any Preferred
Unitholder shall exercise such right, then the General Partner shall so deliver
such OPCO Shares on the terms and conditions set forth in clause (i) of this
Section 8.7.B.
C. If the Mandatory Redemption Right is exercised or the General Partner
purchases Preferred Units pursuant to Section 8.7.B, then the Partnership or the
General Partner, as the case may be, shall be required to pay to the Preferred
Unitholder in question, in addition to the payment or the delivery of OPCO
Shares hereinabove provided for, an amount equal to the Unpaid Preferred Return
(as of the date such payment is made) attributable to the Preferred Units being
so redeemed or purchased; provided, however, that if the General Partner has
elected to purchase Preferred Units by delivery of OPCO Shares and a Preferred
Unitholder has not elected pursuant to Section 8.7.B, to receive cash in lieu of
such OPCO Shares, or if a Preferred Unitholder has elected to Section 8.7.B to
receive OPCO Shares in exchange for its Preferred Units, the General Partner
shall have the right, in lieu of paying an amount equal to such Unpaid Preferred
Return, to deliver to such Preferred Unitholder a whole number of OPCO Shares
equal to the amount of such Unpaid Preferred Return (as of the date such payment
is made) divided by the Value on the Valuation Date of one OPCO Share (rounded
----------
down to the nearest whole number of OPCO 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 Preferred Unit as to which a
Redemption Notice has been given as provided in Section 8.6.
Section 8.8. Special Rights of Class B MHR Units
-----------------------------------
Notwithstanding anything to the contrary contained in this Agreement:
A. In the event a holder of Class B MHR Units exercises the Redemption
Right with respect to all or a portion of its Partnership Units and the
Partnership fails to redeem such Partnership Units as required under Section
8.6, the General Partner shall assume and satisfy said Redemption Right as
provided in Section 8.6(B) (except that such assumption and satisfaction shall
be mandatory rather than elective as provided in said Section).
B. In the event a holder of Class B MHR Units exercises the Redemption
Right and the General Partner elects to satisfy the Redemption Right as provided
in Section 8.6(B), it shall so advise such holder within 5 Business Days after
receipt by the Partnership of the Notice of Redemption and, in addition, shall
advise such holder within such 5 Business-Day period as to whether it will pay
such holder the Cash Amount or the OPCO Shares Amount in satisfaction of the
Redemption Right.
38
C. At the request of any holder of Class B MHR Units, the General Partner
shall notify such holder of the then current Conversion Factor. In addition, the
General Partner shall, promptly after any adjustment of the Conversion Factor
pursuant to the provisions of this Agreement, notify the holders of Class B MHR
Units of such adjustment and of the Conversion Factor as so adjusted.
D. In the event the General Partner wishes to effect a Transaction (as
defined in Section 11.2.B), the General Partner shall give notice of such
Transaction to the holders of Class B MHR Units simultaneously with the giving
of any such notice to the shareholders of the General Partner. Such notice to
the holders of Class B MHR Units shall contain substantially the same
information with respect to such Transaction as the notice to the General
Partner's shareholders.
E. The holders of Class B MHR Units shall have the right to transfer or
pledge all or any portion of their Partnership Units without the consent of the
General Partner; provided, however, that (i) no such transfer or pledge shall be
made unless such holders deliver to the General Partner a certificate, the form
of which is attached hereto as Exhibit F, (ii) the General Partner shall have
the right to prohibit any such transfer pursuant to Section 11.3.E and (iii) the
provisions of Section 11.3.D shall apply with respect to any such transfer. Any
transferee of Partnership Units pursuant to a transfer permitted hereunder shall
have the right to be admitted as a Substituted Limited Partner, provided that
such transferee complies with the provisions of Section 11.4.B.
F. If the General Partner intends either (i) to liquidate the Partnership
or (ii) to declare or pay a dividend or other distribution on its OPCO Shares
(other than (a) ordinary cash dividends or (b) dividends payable in OPCO Shares
that give rise to an adjustment in the Conversion Factor pursuant to the
provisions of this Agreement), then the General Partner shall notify the holders
of Class B MHR Units of such action, dividend or distributions at least 10 days
in advance of the record date for determining the holders of OPCO Shares
entitled to participate in the same and the holders of Class B MHR Units shall
thereupon have the right to exercise the Redemption Right notwithstanding that
the applicable period referred to in Section 8.9 hereof may not have elapsed.
Notwithstanding anything to the contrary contained in this Agreement, in the
event a holder of Class B MHR Units so exercises the Redemption Right within 5
Business Days after such notification, the Partnership and the General Partner
shall take such actions as are necessary in order that the Partnership Units in
question may be redeemed on or prior to such record date.
39
G. If a Bankruptcy Event shall occur with respect to the Partnership,
the holders of Class B MHR Units shall have the right to exercise the Redemption
Right notwithstanding that the applicable period referred to in Section 8.9
hereof may not have elapsed. As used herein, the term "Bankruptcy Event" shall
mean any of the following events:
(i) A court having proper jurisdiction shall enter a decree or
order for relief in respect of the Partnership in an involuntary case under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law nor or hereafter in effect, which decree or order is not stayed; or any
other similar relief shall be granted under any applicable federal or state law;
or (ii) an involuntary case shall be commenced against the Partnership under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law nor or hereafter in effect; or a decree or order of a court having proper
jurisdiction for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Partnership,
or over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim receiver,
trustee or other custodian of the Partnership for all or a substantial part of
its property; or a warrant of attachment, execution or similar process shall
have been issued against any substantial part of the property of the
Partnership, and any such event described in this clause (ii) shall continue for
60 days unless dismissed, bonded or discharged; or (iii) the Partnership shall
have an order for relief entered with respect to it or commence a voluntary case
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or (iv) the Partnership shall
make any assignment for the benefit of creditors; or (v) the Partnership shall
be unable, or shall fail generally, or shall admit in writing its inability, to
pay its debts as such debts become due. The General Partner shall promptly
notify the holders of Class B MHR Units of the occurrence of any Bankruptcy
Event with respect to the Partnership.
Section 8.9 Redemption Date
---------------
Notwithstanding anything to the contrary contained in Section 8.6.A, the
respective dates before which the Redemption Right may not be exercised by those
Partners who are Limited Partners are as set forth in Exhibit A annexed hereto.
ARTICLE IX.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
----------------------
40
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 provide to the Limited Partners
any information, lists and copies of documents required to be provided pursuant
to Section 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, micro graphics 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 other such basis as the General Partner determines to be necessary or
appropriate.
Section 9.2 Fiscal Year
-----------
The fiscal year of the Partnership shall end on the Friday nearest
December 31 of each 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 each Limited Partner as of the close of the
Partnership Year, an annual report containing financial statements of the
Partnership, or of the General Partner if such statements are prepared solely on
a consolidated basis with the General Partner, for such Partnership Year,
presented in accordance with generally accepted accounting principles, such
statements to be audited by a nationally recognized firm of independent public
accountants selected by the General Partner.
B. As soon as practicable, but in no event later than one hundred
five (105) days after the close of each calendar quarter (except the last
calendar quarter of each year), the General Partner shall cause to be mailed to
each Limited Partner as of the last day of the calendar quarter, a report
containing unaudited financial statements of the Partnership, or of the General
Partner, if such statements are prepared solely on a consolidated basis with the
General Partner, and such other information as may be required by applicable law
or regulation, or as the General Partner determines to be appropriate.
ARTICLE X.
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
41
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 first calendar year following the date hereof. The
General Partner shall have the right to seek to revoke any such election
(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
-------------------
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address, taxpayer identification number, and
profit interest of each of the Limited Partners and the Assignees; provided,
--------
however, 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:
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner
for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being
referred to as "judicial review"), and in the settlement
agreement the tax matters partner may expressly state that such
agreement shall bind all Partners, except that such settlement
agreement shall not bind any Partner (i) who (within the time
prescribed pursuant to the Code and Regulations) files a
statement with the IRS providing that the tax matters partner
shall not have the authority to enter into a settlement agreement
on behalf of such Partner or (ii) who is a "notice partner" (as
defined in Section 6231(a)(8) of the Code) or a member of a
"notice group" (as defined in Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative adjustment
at the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is
mailed to the tax matters partner, to seek judicial review of
such final adjustment,
42
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;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS
and, if any part of such request is not allowed by the IRS, to
file an appropriate pleading (petition or complaint) for judicial
review with respect to such request;
(5) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to
be taken into account by a Partner for tax purposes, or an item
affected by such item; and
(6) to take any other action on behalf of the Partners of the
Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or
regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 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 or legal 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,
43
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 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 any amounts
owed to the Partnership pursuant to this Section 10.5 when due, 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
amounts payable by a Limited Partner hereunder shall bear interest at the lesser
of (A) the base rate on corporate loans at large United States money center
commercial banks, as published from time to time in the Wall Street Journal,
-------------------
plus four (4) percentage points, or (B) 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 XI.
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
--------
A. The term "transfer," when used in this Article 11 with respect to
a Partnership Interest or Partnership 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, and includes a sale, assignment, gift, pledge,
44
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise. The term "transfer" when used in this Article 11 does not include
any redemption of Partnership Units by a Limited Partner or acquisition of
Partnership Units from a Limited Partner by the General Partner pursuant to
Section 8.6 or Section 8.7.
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 General Partner's Partnership Interest
--------------------------------------------------
A. The General Partner may not transfer any of its General Partner
Interest or withdraw as General Partner except in connection with a transaction
described in Section 11.2.B, 11.2.C or 11.2.D.
B. Except as otherwise provided in Section 11.2.C or 11.2.D, the
General Partner 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 recapitalization or change of
outstanding OPCO Shares (other than a change in par value, or from par value to
no par value, or as a result of a subdivision or combination as described in the
definition of "Conversion Factor") ("Transaction"), unless the Transaction also
includes a merger of the Partnership or sale of substantially all of the assets
of the Partnership and as a result of which all Limited Partners will receive
for each Partnership Unit an amount of cash, securities, or other property equal
to the product of the Conversion Factor and the greatest amount of cash,
securities or other property paid to a holder of one OPCO Share in consideration
of one OPCO Share at any time during the period from and after the date on which
the Transaction is consummated.
C. Notwithstanding anything to the contrary contained in Section
11.2.B, the General Partner may merge with another entity if immediately after
such merger substantially all of the assets of the surviving entity other than
Partnership Units held by the General Partner (whether such Partnership Units
constitute the General Partner Interest or a Limited Partner Interest), are
contributed to the Partnership as a Capital Contribution in exchange for Class A
MHR Units having a fair market value, as reasonably determined by the General
Partner, equal to the 704(c) Value of the assets so contributed to the
Partnership.
D. Notwithstanding Sections 11.2.A and 11.2.B, the General Partner
may pledge its General Partner Interest, in connection with any borrowing of the
Partnership which is guaranteed by or otherwise recourse to the General Partner,
and any transfer of the General Partner Interest (or of such rights) pursuant or
subsequent to the exercise of rights or remedies in connection with such pledge
shall be permitted hereunder.
Section 11.3 Limited Partners' Rights to Transfer
------------------------------------
45
A. Subject to the provisions of Section 11.3.F and Section 11.7 and
except as otherwise provided in Section 8.8.E, no Limited Partner shall have the
right to transfer all or any portion of his Partnership Interest, or any of such
Limited Partner's rights as a Limited Partner, without the prior written consent
of the General Partner, which consent may be given or withheld by the General
Partner in its sole and absolute discretion. Any purported transfer of a
Partnership Interest by a Limited Partner in violation of this Section 11.3.A
shall be void ab initio and shall not be given effect for any purpose by the
Partnership.
B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all the rights of a Limited Partner, but not
more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited
Partner of his Partnership Units otherwise permitted under Section 11.3.F or
Section 11.7 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 or would otherwise violate any federal, state or foreign securities
laws or regulations applicable to the Partnership or the Partnership Unit.
D. Subject to the provisions of Section 11.3.F, no transfer by a
Limited Partner of his Partnership 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, or would result in a termination of the Partnership for federal income
tax purposes or (ii) 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. Subject to the provisions of Section 11.3.F, no transfer of any
Partnership Units may be made to a lender to the Partnership or any Person who
is related (within the meaning of Section 1.752-4(b) of the Regulations) to any
lender to the Partnership if, in either case, such loan constitutes a
Nonrecourse Liability, without the consent of the General Partner, which consent
may be given or withheld by the General Partner in its sole and absolute
discretion, provided that as a condition to such consent being granted the
lender will be required to enter into an arrangement with the Partnership and
the General Partner to exchange or redeem for the OPCO Shares Amount any
Partnership Units in which a security interest is held simultaneously with the
time at which such lender would be deemed to be a partner in the Partnership for
purposes of allocating liabilities to such lender under Section 752 of the Code.
F. Notwithstanding the foregoing provisions of this Section 11.3, a
Limited Partner may pledge its Partnership Interest, or any of such Limited
Partner's rights as a Limited Partner, in connection with any borrowing of the
Partnership which is
46
guaranteed by or otherwise recourse to such Limited Partner, and any transfer of
such Partnership Interest (or of such rights) pursuant or subsequent to the
exercise of rights or remedies in connection with such pledge shall be permitted
hereunder.
G. No transfer by a Limited Partner of its Partnership 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 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, 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.
H. Notwithstanding the other provisions of this Article 11, no
transfer by a Limited Partner of its Partnership Units may be made to any Person
if such transfer would result in an Ownership Excess by such transferee. If an
Ownership Excess results from the acquisition of OPCO Shares by any Person, the
Partnership shall have the right to redeem a number of Partnership Units
sufficient to cause such Ownership Excess not to exist, for an amount of cash
per Partnership Unit equal to the Value of an OPCO Share on the date of
acquisition by such Person divided by the Conversion Factor.
Section 11.4 Substituted Partners
--------------------
A. Except as provided in Section 11.4.C hereof, no Limited Partner
shall have the right to substitute a transferee as a Limited Partner in his
place. The General Partner shall, however, have the right to consent to the
admission of a transferee of the interest of a Limited Partner pursuant to this
Section 11.4 as a Substituted Limited Partner, which consent may be given or
withheld by the General Partner in its sole and absolute discretion. The General
Partner's failure or refusal to permit a transferee of any such interests to
become a Substituted Limited Partner shall not give rise to any cause of action
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. The admission of any transferee as a Substituted Limited
Partner shall be subject to the
47
transferee executing and delivering to the Partnership an acceptance of all of
the terms and conditions of this Agreement (including, without limitation, the
provisions of Section 2.4) and such other documents or instruments as may be
required to effect the admission.
C. Any transferee by way of an exercise of the rights and remedies
in connection with the pledge of a General Partner Interest pursuant to Section
11.2.D shall have the right, at the election of such transferee, to be admitted
as a substituted General Partner, and (ii) any transferee of a Limited Partner
Interest pursuant to Section 11.3.F or Section 11.7 shall have the right, at the
election of such transferee, to be admitted as a Substituted Limited Partner.
Section 11.5 Assignees
---------
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 as a
Substituted Limited Partner, as described in Section 11.4, such transferee shall
be considered an Assignee for purposes of this Agreement. An Assignee shall be
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,
Recapture Income, and any other items of gain, loss, deduction and credit of the
Partnership attributable to the Partnership Units assigned to such transferee,
but shall not be deemed to be a holder of Partnership Units for any other
purpose under this Agreement, and shall not be entitled to vote such Partnership
Units in any matter presented to the Limited Partners for a vote (such
Partnership Units being deemed to have been voted on such matter in the same
proportion as all other Partnership Units held by Limited Partners are voted).
In the event any such transferee desires to make a further assignment of any
such Partnership Units, such transferee shall be subject to all the provisions
of this Article 11 to the same extent and in the same manner as any Limited
Partner desiring to make an assignment of Partnership Units.
Section 11.6 General Provisions
------------------
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 Partnership
Units in accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units under Section 8.6 or Section 8.7.
B. Any Limited Partner who shall transfer all of his Partnership
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 Partnership Units as
Substitute Limited Partners. Similarly, any Limited Partner who shall transfer
all of his Partnership Units pursuant to a redemption of all of his Partnership
Units under Section 8.6 or Section 8.7 shall cease to be a Limited Partner.
C. Transfers (other than transfers pursuant to a redemption of
Partnership Units under Section 8.6 or 8.7) pursuant to this Article 11 may only
be made
48
on the first day of a fiscal quarter of the Partnership, unless the General
Partner otherwise agrees.
D. If any Partnership Interest is transferred or assigned in
compliance with the provisions of this Article 11 or redeemed or transferred
pursuant to Section 8.6 or Section 8.7, 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 fiscal year in accordance
with Section 706(d) of the Code, using the interim closing of the books method
(unless the General Partner, in its sole and absolute discretion, elects to
adopt a daily, weekly or monthly proration method, in which event Net Income,
Net Losses and each item thereof for such Partnership Year shall be prorated
based upon the applicable period selected by the General Partner). 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 a redemption
occurs shall be allocated to the Redeeming Partner. Without derogating from the
provisions of Section 5.1.B, all distributions attributable to such Partnership
Unit with respect to which the Partnership Record Date is before the date of
such transfer, assignment or redemption shall be made to the transferor Partner
or the Redeeming Partner or the Partner whose Preferred Units are being redeemed
pursuant to Section 8.7, as the case may be.
Section 11.7 Pledges of Partnership Interests. Except as provided in
--------------------------------
Section 11.3.F, no Limited Partner shall pledge, hypothecate or grant a security
interest in all or any portion of its Partnership Interest; provided, however,
that any Limited Partner shall have the right, as security for a borrowing from
a bank, insurance company or other commercial lending institution (an
"Institutional Lender"), to pledge or hypothecate to such Institutional Lender,
--------------------
or to grant and/or sell to and/or purchase from such Institutional Lender or an
Affiliate thereof an option with respect to, or grant to such Institutional
Lender a security interest in, all or a portion of its Partnership Units, and
any transfer of such pledged Partnership Units to such Institutional Lender (or
to its transferee in any public or private sale by such Institutional Lender)
pursuant to the exercise of rights or remedies in connection with such pledge or
option shall be permitted hereunder.
ARTICLE XII.
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
--------------------------------------
A successor to all of the General Partner Interest (i) pursuant to
Section 11.2.D hereof shall be admitted to the Partnership as a successor
General Partner in accordance with the provisions of Section 11.4.C, and (ii)
pursuant to Section 11.2.C hereof who is proposed to be admitted as a successor
General Partner shall be admitted to the Partnership as the General Partner,
effective upon such transfer. Any such transferee shall carry on the business of
the Partnership without dissolution. In each case, the admission shall be
subject to the successor General Partner executing and delivering to
49
the Partnership an acceptance of all of the terms and conditions of this
Agreement and such other documents or instruments as may be required to effect
the admission. In the case of such admission on any day other than the first day
of a Partnership Year, all items attributable to the General Partner Interest
for such Partnership Year shall be allocated between the transferring General
Partner and such successor as provided in Section 11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners
----------------------------------------
A. A Person who makes a Capital Contribution to the Partnership in
accordance with this Agreement or who exercises an option to receive Partnership
Units shall be admitted to the Partnership as an Additional Limited Partner only
upon furnishing to the General Partner (i) evidence of acceptance in form
satisfactory to the General Partner of all of the terms and conditions of this
Agreement, including, without limitation, the power of attorney granted in
Section 2.4 hereof and (ii) such other documents or instruments as may be
required in the 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 items for the calendar month in which an
admission of any Additional Limited Partner occurs shall be allocated among all
the Partners and Assignees including such Additional Limited Partner. All
distributions pursuant to Section 5.1.B before the date of such admission shall
be made solely to Partners and Assignees other than the Additional Limited
Partner, and all distributions pursuant to Section 5.1.B thereafter shall be
made to all 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 and, if required by law, shall prepare and file an
amendment to the Certificate
50
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4 hereof.
ARTICLE XIII.
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
-----------
Except as set forth in this Article 13, no Partner shall have the right to
dissolve the Partnership. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs shall be wound up, upon the first to occur of
any of the following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. (i) 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, or (ii) any other 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 all 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. on or after December 31, 2015, an election to dissolve the Partnership
made by the General Partner, in its sole and absolute discretion;
D. entry of a decree of judicial dissolution of the Partnership pursuant to
the provisions of the Act; or
E. the sale of all or substantially all of the assets and properties of the
Partnership.
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
51
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 a
majority in interest of the Limited Partners (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 stock in the General
Partner) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the 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 in
accordance with 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.
B. Notwithstanding the provisions of Section 13.2.A 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 assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A 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 interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
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:
52
1. distributed to a trust established for the benefit of the
General Partner and Limited Partners for the purposes of liquidating
Partnership assets, collecting amounts owed to the Partnership, and paying
any contingent or unforeseen liabilities or obligations of the Partnership
or of the General Partner arising out of or in connection with the
Partnership. The assets of any such trust shall be distributed to the
General Partner and Limited Partners from time to time, in the reasonable
discretion of 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 13.2.A as soon as practicable.
Section 13.3. Compliance with Timing Requirements of Regulations
--------------------------------------------------
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
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.
Section 13.5 Notice of Dissolution
---------------------
In the event a Liquidating Event occurs or an event occurs that would, but
for 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.
53
Section 13.6 Termination of Partnership and Cancellation of Certificate of
-------------------------------------------------------------
Limited Partnership
-------------------
Upon the completion of the liquidation of the Partnership cash and property
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 between 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.
Section 13.9 Liability of the Liquidator
---------------------------
The Liquidator shall be indemnified and held harmless by the Partnership
from and against any and all claims, demands, liabilities, costs, damages and
cause of action of any nature whatsoever arising out of or incidental to the
Liquidator's taking of any action authorized under or within the scope of this
Agreement; provided, however, that the Liquidator shall not be entitled to
-------- -------
indemnification, and shall not be held harmless, where the claim, demand,
liability, cost, damage or cause of action at issue arises out of:
(i) a matter entirely unrelated to the Liquidator's action or conduct
pursuant to the provisions of this Agreement; or
(ii) the proven willful misconduct or gross negligence of the Liquidator.
ARTICLE XIV.
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 holding twenty-five percent (25%) or more of the
Percentage Interests. Following such proposal, the General Partner shall submit
any
54
proposed amendment to the Limited Partners. Subject to Section 14.2.B, 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 respect to the proposal. Except as provided in Section
14.1.B, 14.1.C or 14.1.D, 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 Partners holding a majority of the Percentage Interests of the
Limited Partners (including Limited Partner Interests held by the General
Partner).
B. Notwithstanding Section 14.1.A but subject to Section 14.1.C, the
General Partner shall have the power, without the consent of the Limited
Partners, to amend this Agreement (i) as permitted under Section 7.1(F) or (ii)
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 4.2.A hereof;
(4) to reflect a change that does not adversely affect any of 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 14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B 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, including an amendment that
would impose on such Limited Partner any obligation to make capital
contributions in the Partnership; (iii) alter rights of
55
the Partner to receive distributions pursuant to Article 5, or the allocations
specified in Article 6 (except as permitted pursuant to Section 4.2 and Section
14.1.B(3) hereof) in a manner adverse to such Partner; (iv) alter or modify the
Redemption Right or Mandatory Redemption Right and OPCO Shares Amount as set
forth in Section 8.6 or 8.7, and related definitions hereof; (v) cause the
termination of the Partnership prior to the time set forth in Sections 2.5 or
13.1; (vi) amend Section 11.7 (as to any then existing Limited Partner) or this
Section 14.1.C; (vii) amend Section 2 of Exhibit C in a manner adverse to such
Partner; or (viii) alter or modify in any material respect the definition of
"Conversion Factor." Further, no amendment may alter the restrictions on the
General Partner's authority set forth in Section 7.3 without the Consent
specified in that section.
D. Notwithstanding Section 14.1.A or Section 14.1.B hereof, the General
Partner shall not amend Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2 without the
Consent of a majority of the Percentage Interests of the Limited Partners
excluding Limited Partnership Interests held directly or indirectly by the
General 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 request by Limited
Partners holding twenty-five percent (25%) or more of the Percentage Interests.
The call 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
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 14.1.A hereof. Except as otherwise expressly
provided in this Agreement, the Consent of holders of a majority of the
Percentage Interests held by Limited Partners (including Limited Partnership
Interests held by the General 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
so certified.
C. Each Limited Partner may authorize any Person or Persons to act for him
by proxy on all matters in which a Limited Partner is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited
56
Partner executing it, such revocation to be effective upon the Partnership's
receipt of written notice of such revocation from the Limited Partner executing
such proxy.
D. Each meeting of Partners shall be conducted by the General Partner or
such other Person as the General Partner may appoint pursuant to such rules for
the conduct of the meeting as the General Partner or such other Person deems
appropriate in its sole discretion. Without limitation, meetings of Partners may
be conducted in the same manner as meetings of the shareholders of the General
Partner and may be held at the same time as, and as part of, meetings of the
shareholders of the General Partner.
ARTICLE XV.
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
--------------------
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by first class
United States mail or by other means of written communication to the Partner or
Assignee. Such communications shall be deemed sufficiently given, served, sent
or received for all purposes at such time as delivered to the addressee (with
the return receipt or delivery receipt being deemed conclusive evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
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
--------------
57
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 an 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 law.
Section 15.10 Invalidity of Provisions
------------------------
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.11 Entire Agreement
----------------
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.
Section 15.12 No Rights as Shareholders
-------------------------
Nothing contained in this Agreement shall be construed as conferring upon
the holders of the Partnership Units any rights whatsoever as shareholders of
the General Partner, including without limitation any right to receive dividends
or other
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distributions made to shareholders of the General Partner or to vote or
to consent or to receive notice as shareholders in respect of any meeting of
shareholders for the election of directors of the General Partner or any other
matter.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first written above.
AS GENERAL PARTNER:
MERISTAR HOTELS & RESORTS, INC.
By:
----------------------------
Name:
Title:
AS LIMITED PARTNERS:
MERISTAR HOTELS & RESORTS, INC.
By:
----------------------------
Name:
Title:
CAPSTAR MANAGEMENT COMPANY, L.L.C
By: MeriStar Hotels & Resorts, Inc.,
Its Manager
By:
----------------------------
Name:
Title:
60