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Exhibit 10.9(c)(2)
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INTERSTONE THREE PARTNERS III L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
Dated as of June __, 1996
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TABLE OF CONTENTS
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ARTICLE I
Definitions.......................... 2
SECTION 1.1 Definitions............................................ 2
SECTION 1.2 Terms Generally........................................ 12
ARTICLE II
General Provisions....................... 13
SECTION 2.1 Continuation of Partnership............................ 13
SECTION 2.2 Partners............................................... 13
SECTION 2.3 Name................................................... 13
SECTION 2.4 Term................................................... 13
SECTION 2.5 Purpose; Powers........................................ 13
SECTION 2.6 Place of Business...................................... 15
SECTION 2.7 Alternative Investment Structure....................... 15
SECTION 2.8 Parallel Partnerships.................................. 16
ARTICLE III
Management and Operation of the
Partnership; Identification and Approval of
Investments; Partner Services................. 16
SECTION 3.1 Management............................................. 16
SECTION 3.2 Joint Control by the General Partners.................. 18
SECTION 3.3 Blackstone Partners Rights............................. 20
SECTION 3.4 Certain Duties and Obligations of the
Partners............................................... 21
SECTION 3.5 Restrictions on Authority of the General
Partners............................................... 22
SECTION 3.6 Right of First Opportunity............................. 23
SECTION 3.7 Right of First Opportunity; Exclusive
Rights; Investment Parameters.......................... 28
SECTION 3.8 Termination of Right of First
Opportunity............................................ 30
SECTION 3.9 Financing.............................................. 31
SECTION 3.10 Financial Advisory Services............................ 32
SECTION 3.11 Other Partner Services................................. 33
SECTION 3.12 Marketing Rights....................................... 34
ARTICLE IV
Other Activities Permitted................... 36
ARTICLE V
Capital Contributions;
Distributions......................... 37
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SECTION 5.1 Capital Contributions.................................. 37
SECTION 5.2 Partner Loans for Failure to Fund
Committed Capital...................................... 38
SECTION 5.3 Dilution for Failure to Fund Capital................... 38
SECTION 5.4 Distributions Generally................................ 39
SECTION 5.5 Distributions of Proceeds.............................. 39
SECTION 5.6 Restricted Payments.................................... 40
SECTION 5.7 Partnership Expenses................................... 41
ARTICLE VI
Books and Reports; Tax Matters;
Capital Accounts; Allocations................. 41
SECTION 6.1 General Accounting Matters............................. 41
SECTION 6.2 Certain Tax Matters.................................... 42
SECTION 6.3 Capital Accounts....................................... 45
SECTION 6.4 Allocations............................................ 45
ARTICLE VII
Dissolution.......................... 48
SECTION 7.1 Dissolution............................................ 48
SECTION 7.2 Winding-up............................................. 49
SECTION 7.3 Final Distribution..................................... 49
ARTICLE VIII
Transfer of Partners' Interests................ 49
SECTION 8.1 Restrictions on Transfer of Partnership
Interests.............................................. 49
SECTION 8.2 Other Transfer Provisions.............................. 51
ARTICLE IX
Miscellaneous......................... 52
SECTION 9.1 Equitable Relief....................................... 52
SECTION 9.2 Ownership and Use of Names............................. 52
SECTION 9.3 Governing Law.......................................... 53
SECTION 9.4 Successors and Assigns................................. 53
SECTION 9.5 Access; Confidentiality................................ 53
SECTION 9.6 Notices................................................ 53
SECTION 9.7 Counterparts........................................... 53
SECTION 9.8 Entire Agreement....................................... 54
SECTION 9.9 Amendments............................................. 54
SECTION 9.10 Section Titles......................................... 54
SECTION 9.11 Representations and Warranties......................... 54
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Schedules
SCHEDULE A Name and Address
Exhibits
Exhibit A Form of Management Agreement
Exhibit B Form of Project Partnership Agreement
Exhibit C Form of Confirmation and Acknowledgment
of Right of First Opportunity
Exhibit D Pre-Existing Projects
Exhibit E Excluded Projects
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INTERSTONE THREE PARTNERS III L.P.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT,
dated as of June __, 1996 by and among BJS INTERSTONE
MANAGEMENT ASSOCIATES, a Delaware general partnership, as a
general partner, IHC/INTERSTONE CORPORATION, a Delaware
corporation, as a general partner, and BLACKSTONE REAL ESTATE
PARTNERS III L.P., BLACKSTONE REAL ESTATE HOLDINGS L.P.,
BLACKSTONE RE CAPITAL PARTNERS L.P., BLACKSTONE RE OFFSHORE
CAPITAL PARTNERS L.P., and IHC/INTERSTONE PARTNERSHIP II,
L.P., each a Delaware limited partnership, as limited
partners.
Preliminary Statement
A. The Blackstone Group and the Interstate Group each have the
capability for identifying, acquiring, improving, operating and disposing of
individual hotel, motel and other lodging properties and groups of hotel, motel
and other lodging properties, hotel and motel management companies (for which
the ownership of hotels and motels is a significant part of their business) and
public and private companies whose primary holdings are comprised of such assets
or operations ("Target Investment" or "Target Investments").
B. The Blackstone Partners and the Interstate Partners,
individually and acting through the Partnership, in each case in accordance with
the terms of this Agreement, wish to continue an exclusive arrangement with each
other under which, for the duration thereof and subject to the terms set forth
below, the Partnership, the Blackstone Partners and the Interstate Partners
through the Partnership and the Parallel Partnerships, will have the first
opportunity to acquire, operate and dispose of certain Target Investments which
are hereafter identified by the Blackstone Group and/or the Interstate Group, as
the case may be, and approved for investment in accordance with this Agreement
(each Target Investment proposed or approved, as the context indicates, for
acquisition pursuant to this Agreement is referred to as a "Project").
C. In order to effect the foregoing, the parties hereto
entered into a limited partnership agreement dated as of December 15, 1995 (the
"Existing Agreement") and formed a partnership under the laws of the State of
Delaware with the name Interstone Three Partners III L.P. (the "Partnership").
D. Each of the Partners of the Partnership have
agreed to amend and restate the Existing Agreement in its
entirety as set forth herein.
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Agreement
Accordingly, in consideration of the mutual promises and
agreements herein made and intending to be legally bound hereby, the parties
hereto agree to amend and restate the Existing Agreement to read as follows:
ARTICLE I
Definitions
SECTION 1.1 Definitions. Unless the context otherwise
requires, the following terms shall have the following meanings for purposes of
this Agreement:
"Acknowledgement" has the meaning set forth in Section
3.6(a).
"Adjusted Capital Account Balance" shall mean, with respect to
any Partner, the balance in such Partner's Capital Account adjusted (i)
by taking into account the adjustments, allocations and distributions
described in Regulations section 1.704-1(b)(2)(ii)(d)(4), (5), and (6);
and (ii) by adding to such balance such Partner's share of partnership
Minimum Gain and Partner Nonrecourse Debt Minimum Gain, determined
pursuant to Regulations section 1.704-2(g)(1) and 1.704-2(i)(5).
"Affiliate" with respect to any person means (i) any other
person who controls, is controlled by or is under common control with
such person, (ii) any director, officer, partner or employee of such
person or any person specified in clause (i) above or (iii) any
immediate family member of any person specified in clause (i) or (ii)
above. Notwithstanding the foregoing, for the purposes of this
Agreement, none of the Blackstone Partners nor their Affiliates shall
be deemed to be Affiliates of any of the Interstone Partners or the
Interstone Related Parties, none of the Interstate Partners nor their
Affiliates shall be deemed to be Affiliates of any of the Blackstone
Partners or the Blackstone Related Parties, and no officer or director
of any member of the Blackstone Group which is also an officer or
director of any member of the Interstone Group shall be deemed to be an
Affiliate of any of the Interstate Partners or Interstate Related
Parties,
and no member of the Interstone Group shall be deemed an
Affiliate of any member of the Blackstone Group.
"Agreement" means this Amended and Restated Limited
Partnership Agreement, as it may be amended, supplemented, modified or
restated from time to time.
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"Asset Management Agreement" has the meaning set forth
in Section 3.6(f).
"Authorized Representatives" of a General Partner shall be
those representatives designated by notice to all Partners by each
General Partner from time to time to represent such General Partner in
connection with the Partnership. The term "Authorized Representative"
shall refer to any one of the Authorized Representatives of a Partner.
The initial Authorized Representatives of the General Partners are set
forth in Section 3.1(e) below.
"Blackstone General Partner" means BJS Interstone Management
Associates, a Delaware general partnership, or any Affiliate of any
member of the Blackstone Group who replaces BJS Interstone Management
Associates as a general partner hereunder, or is admitted as an
additional general partner hereunder.
"Blackstone Group" means the Blackstone Partners, Affiliates
of the Blackstone Partners and the Blackstone Related Parties;
provided, that the Blackstone Group shall not include investors in the
Blackstone Partners who are not Affiliates of Blackstone Group Holdings
L.P., to the extent such investors are not investing through any
Affiliate of Blackstone Group Holdings L.P.
"Blackstone Limited Partners" mean collectively Blackstone
Real Estate Partners III L.P., Blackstone Real Estate Holdings L.P.,
Blackstone RE Capital Partners L.P., Blackstone RE Offshore Capital
Partners L.P., each a Delaware limited partnership, and any Affiliate
of any member of the Blackstone Group who replaces any of the foregoing
as a limited partner hereunder, or is admitted as an additional limited
partner hereunder.
"Blackstone Partners" means collectively, the Blackstone
General Partner and the Blackstone Limited Partners and any other
Partner admitted to the Partnership which is an Affiliate of any of the
foregoing and any
permitted assigns of such Partners.
"Blackstone Related Parties" means (i) Blackstone Group
Holdings L.P., (ii) each of the general partners of Blackstone Group
Holdings L.P. and his immediate family members, for so long as he is
such a partner and (iii) any corporation, partnership, limited
liability company, joint venture or other like entity in which the
Blackstone Partners or the parties referred to in (i) and (ii) above
individually or collectively, hold a fifty percent (50%) or greater,
direct or indirect (through one or more business entities), ownership
interest, but shall not include any such entity in which the collective
ownership interest of
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these parties is less than fifty percent (50%) or which is a publicly
traded company.
"Broken Deal" shall mean a proposed Project that is not
ultimately acquired by the Partnership.
"Business Day" shall mean any day on which commercial banks
are authorized to do business and are not required by law or executive
order to close in New York, New York.
"Capital Account" has the meaning set forth in
Section 6.3.
"Capital Contributions" means the net fair market value of any
capital contributions made by the Partners to the Partnership and shall
include (i) the contributions of such Partner made pursuant to Sections
3.6, 3.9, 3.10, 5.1 and 5.7 and (ii) such Partner's payments made to
third party creditors of the Partnership with respect to Partnership
obligations to the extent such Partner is authorized by this Agreement
to make any such payment, unless and until reimbursed by the
Partnership.
"Capital Proceeds" means (A) the cash or other consideration
received by the Partnership (including interest on installment sales
when received) as a result of (i) any sale, exchange, abandonment,
foreclosure, insurance award, condemnation, easement sale or other
similar transaction relating to any property of the Partnership, (ii)
any financing or refinancing (to the extent such refinancing is deemed
a Disposition hereunder) relating to any property of the Partnership,
(iii) capital contributions to the Partnership upon admission of new
partners, (iv) any other transaction which, in accordance with
generally accepted accounting principles, would be treated as a capital
event, in each case less (B) any such cash which is applied to (i) the
payment of transaction costs and expenses, (ii) the repayment of debt
of the Partnership which is required under the terms of any
indebtedness of the Partnership or has been authorized by the General
Partners, (iii) the repair, restoration or other improvement of
Partnership Assets which is required under any contractual obligation
of the Partnership or has been authorized by the General Partners and
(iv) the establishment of reserves by the General Partners. "Capital
Proceeds" shall also mean any of the foregoing which are received by a
partnership or other vehicle in which the Partnership is a partner or
investor or in which the Partnership otherwise has an interest, to the
extent received by the Partnership as dividends or distributions.
"Carrying Value" shall mean, with respect to any
Partnership Asset, the asset's adjusted basis for U.S.
federal income tax purposes, except that the Carrying Values
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of all Partnership Assets shall be adjusted to equal their respective
fair market values, in accordance with the rules set forth in
Regulations Section 1.704-1(b)(2)(iv)(f), except as otherwise provided
herein, as of: (a) the date of the acquisition of any additional
Partnership interest by any new or existing Partner in exchange for
more than a de minimis Capital Contribution, other than pursuant to the
initial formation of the Partnership; (b) the date of the distribution
of more than a de minimis amount of Partnership property to a Partner;
(c) the date a Partnership interest is relinquished to the Partnership
or (d) the date of the termination of the Partnership under Section
708(b)(i)(B) of the Code; provided, however, that adjustments pursuant
to clauses (a), (b) and (c) above shall be made only if the General
Partners determine that such adjustments are necessary or appropriate
to reflect the relative economic interests of the Partners. The
Carrying Value of any Partnership Asset distributed to any Partner
shall be adjusted immediately prior to such distribution to equal its
fair market value. Depreciation shall be calculated by reference to
Carrying Value, instead of tax basis once Carrying Value differs from
tax basis.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute. Any reference herein to a
particular provision of the Code shall mean, where appropriate, the
corresponding provision in any successor statute.
"Committed Capital" shall mean, the aggregate amount of
$29,400,000 for the Blackstone Partners and the Blackstone Partners of
the Parallel Partnerships, and the aggregate amount of $30,600,000 for
the Interstate Partners and the Interstate Partners of the Parallel
Partnership.
"Competitive Rate" shall mean, with respect to a particular
service at a Target Investment, the lower of (i) the rate charged on an
arm's length basis for the same or similar service for comparable
properties in the geographic area in which the relevant Target
Investment is located by unaffiliated persons providing or performing
such service on an ongoing basis and (ii) the lowest rate charged by
any Affiliates of the Interstate General Partner for the same or
similar service for comparable properties in the geographic area in
which the relevant Target Investment is located.
"Consent" shall mean the approval, direction or determination,
as the case may be, of a Partner, given as provided in Section 3.1, to
do the act or thing for which the approval is solicited or with respect
to which the direction or determination is given or made, or the act of
granting such approval or giving such direction or making such
determination, as the context may require. Any Consent required to be
given by the Blackstone General Partner shall
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be given by any one Authorized Representative of the
Blackstone General Partner. Any Consent to be given by the
Interstate General Partner shall be given by any two
Authorized Representatives of the Interstate General
Partner.
"Consideration" means the gross value of all cash, securities
and other properties paid or payable, directly or indirectly, in one
transaction or in a series or combination of transactions, in
connection with an acquisition or disposition of a Target Investment or
a transaction related thereto (including, without limitation, amounts
paid (A) pursuant to covenants not to compete, employment contracts,
employee benefit plans or other similar arrangements and (B) to holders
of any warrants, stock purchase rights, convertible securities or
similar rights and to holders of any options or stock appreciation
rights, whether or not vested). Consideration shall also include the
value of any long-term liabilities (including the principal amount of
any mortgage indebtedness or other indebtedness for borrowed money,
preferred stock obligations, any pension liabilities and guarantees)
indirectly or directly assumed or acquired, or otherwise repaid or
retired, in connection with or anticipation of such acquisition. If an
acquisition takes the form of a purchase of assets, to the extent
applicable Consideration shall also include (i) the value of any
current assets not purchased, minus (ii) the value of any current
liabilities not assumed. If the Consideration to be paid is computed in
any foreign currency, the value of such foreign currency shall, for
purposes hereof, be converted into U.S. dollars at the prevailing
exchange rate on the date or dates on which such Consideration is paid.
In this Agreement, the value of any securities (whether debt or equity)
or other property paid or payable as part of the Consideration shall be
determined as follows: (1) the value of securities that are freely
tradable in an established public market will be determined on the
basis of the last market closing price prior to the public announcement
of the acquisition; and (2) the value of the securities that are not
freely tradable or have no established public market or, if the
Consideration utilized consists of property other than securities, the
value of such other property shall be the fair market value thereof as
reasonably determined by the General Partners.
"Contributing Partner" has the meaning set forth in
Section 5.2.
"Disabling Event" means any event which would cause a General
Partner to cease to be a general partner of the Partnership pursuant to
Section 17-402 of the Partnership Act.
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"Disposition" of a Project shall mean the sale, exchange or
other disposition by the Partnership of all or any portion of such
Project for cash, and shall include the receipt by the Partnership of a
liquidating dividend or other like distribution in cash. A refinancing
of a Project shall be deemed a Disposition of such Project unless the
General Partners agree otherwise. Whenever a portion of a Project (but
not the entire Project) is the subject of a Disposition, that portion
shall be treated as having been a separate project from that portion of
the Project that is retained by the Partnership, and the Capital
Contributions for such Project and the Proceeds (other than the
Proceeds of such Disposition of a portion of a Project) distributed to
the Partners with respect to such Project shall be treated as having
been divided between the portion subject to the Disposition and the
retained portion on a pro rata basis. For purposes of calculating the
Internal Rate of Return, a Broken Deal shall be considered a Project
subject to a Disposition that did not yield any Proceeds.
"Fair Market Value" of a Project as of a specific date shall
mean the fair market value of such project on such date as reasonably
determined by the General Partners (taking into consideration all
factors which may reasonably affect the sales price of the Project),
less the principal amount of any debt and other similar liabilities
secured by or otherwise related to such Project, and less a reasonable
estimate of transaction costs and expenses which would be incurred upon
a Disposition of such Project on such date. If the General Partners can
not reach agreement on the Fair Market Value of a Project, the matter
shall be settled by arbitration in New York, New York in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association then in effect, except that the number and method of
selection of the arbitrators shall be as follows: each General Partner
shall select one qualified real estate investment banker or MAI
appraiser who is experienced in valuing assets and liabilities of the
type in question; the average of the Fair Market Values of such Project
determined by such arbitrators shall be the Fair Market Value of such
Project, and shall be final, conclusive and binding on the Partners.
"Fiscal Period" means each fiscal quarter or such other period
as may be established by the General Partners.
"Fiscal Year" means the calendar year ending on December 31 of
each year.
"General Partners" mean the Blackstone General Partner, the
Interstate General Partner and any other person admitted to the
Partnership as an additional or substitute general partner of the
Partnership in accordance with the provisions
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of this Agreement, until such time as such person ceases to be a
general partner of the Partnership as provided herein.
"Internal Rate of Return" shall mean with respect to any
Partner as of the date of a cash distribution of Proceeds to such
Partner, the rate of return (calculated as provided below, taking into
account the time value of money) which (x) the Proceeds for which the
return is being calculated represent on (y) all Capital Contributions
made by such Partner as of such date with respect to the Project or
Projects for which the return is being calculated.
In determining the Internal Rate of Return, the following
shall apply:
(i) subject to the provisions of clause (ii) of
this definition, all present value calculations are to be made
as of the date such Capital Contributions were contributed to
the Partnership;
(ii) all Capital Contributions shall be treated as
having been contributed to the Partnership on the first day of
the month during which a Partner's funds were actually
delivered to the Partnership;
(iii) all distributions shall be treated as if
received on the last day of the month in which the
distribution was made;
(iv) all distribution amounts shall be based on
the amount of the distribution prior to the application of any
federal, state or local taxation to Partners (including any
withholding or deduction requirements); and
(v) the rates of return shall be per annum rates
and all amounts shall be calculated on a compounded annual
basis, and on the basis of a 365-day year.
When calculating the Internal Rate of Return (and for such
purpose only), a Partner's Capital Contribution to a Project shall not
be deemed to include 60% of such Partner's share of any amounts paid to
the Blackstone General Partner or its Affiliates pursuant to Sections
3.9 and 3.10 below for such Project. When calculating the Internal Rate
of Return, a Partner's initial Capital Contributions shall be deemed
given on the date of admission of such Partner to the Partnership, not
on the date that the transferor of such Partner's interest in the
Partnership made its Capital Contributions; such Capital Contributions
shall be deemed Capital Contributions of the transferor for the period
from when made until the transfer to the new Partner.
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"Interstate General Partner" means IHC/Interstone Corporation,
a Delaware corporation, or any Affiliate of any member of the
Interstate Group who replaces IHC/Interstone Corporation as a general
partner hereunder or is admitted as an additional general partner
hereunder.
"Interstate Group" means the Interstate Partners,
Affiliates of the Interstate Partners and the Interstate
Related Parties.
"Interstate Limited Partner" means IHC/Interstone Partnership
II, L.P., a Delaware limited partnership, or any Affiliate of any
member of the Interstate Group who replaces IHC/Interstone Partnership
II, L.P. as a limited partner hereunder or is admitted as an additional
limited partner hereunder.
"Interstate Partners" means collectively, the Interstate
General Partner, the Interstate Limited Partner and any other Partner
admitted to the Partnership which is an Affiliate of any of the
foregoing and any permitted
assigns of such Partners.
"Interstate Related Parties" means (i) Interstate Hotels
Company, (ii) each of the senior executives of Interstate Hotels
Company and his immediate family members, for so long as he is employed
by Interstate Hotels Company, (iii) Milton Fine and his immediate
family members and (iv) any corporation, partnership, limited liability
company, joint venture or other like entity in which the Interstate
Partners or the parties referred to in (i), (ii) and (iii) above
individually or collectively, hold a fifty percent (50%) or greater,
direct or indirect (through one or more business entities), ownership
interest but shall not include any such entity in which the collective
ownership interest of these parties is less than fifty percent (50%) or
which is a publicly traded company.
"Limited Partners" means the Blackstone Limited Partners, the
Interstate Limited Partner and any person admitted to the Partnership
as an additional or substitute limited partner of the Partnership in
accordance with the provisions of this Agreement.
"Liquidator" has the meaning set forth in Section 7.2.
"Management Agreement" shall mean a Management Agreement in
the form attached hereto as Exhibit A, as such agreement may be amended
from time to time in accordance with the terms thereof and hereof.
"Minimum Gain" shall have the meaning set forth in Regulations
section 1.704-2(d)(1) and shall mean the amount determined by (i)
computing for each nonrecourse liability
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of the Partnership any gain the Partnership would realize if it
disposed of the property subject to that liability for no consideration
other than full satisfaction of the liability and (ii) aggregating the
separately computed gains. If the Carrying Value of any Partnership
Asset differs from the adjusted tax basis of such property, the
calculation of Minimum Gain pursuant to the preceding sentence shall be
made by reference to the Carrying Value. For purposes hereof, a
liability of the Partnership is a nonrecourse liability to the extent
that no Partner or related person bears the economic risk of loss for
that liability within the meaning of Regulations section 1.752-1.
"Net Income (Loss)" shall mean for each Fiscal Year or other
period, the taxable income or loss of the Partnership, or particular
items thereof, determined in accordance with the accounting method used
by the Partnership for U.S. federal income tax purposes with the
following adjustments: (i) all items of income, gain, loss or deduction
allocated pursuant to Section 6.4(c) through (e) shall not be taken
into account in computing such taxable income or loss; (ii) any income
of the Partnership that is exempt from U.S. federal income taxation and
not otherwise taken into account in computing Net Income and Net Loss
shall be added to such taxable income or loss; (iii) if the Carrying
Value of any asset differs from its adjusted tax basis for U.S. federal
income tax purposes, any depreciation, amortization or gain resulting
from a disposition of such asset shall be calculated with reference to
such Carrying Value; (iv) upon an adjustment to the Carrying Value of
any asset, pursuant to the definition of Carrying Value, the amount of
the adjustment shall be included as gain or loss in computing such
taxable income or loss; and (v) except for items in (i) above, any
expenditures of the Partnership not deductible in computing taxable
income or loss, not properly capitalizable and not otherwise taken into
account in computing Net Income and Net Loss pursuant to this
definition shall be treated as deductible items.
"Non-Capital Proceeds" means (x) any cash or other
consideration received by the Partnership other than Capital Proceeds
less (y) any such cash that is applied to the establishment of reserves
which have been established by the General Partners and to expenses of
the Partnership.
"Non-Contributing Partner" has the meaning set forth in
Section 5.2.
"Nonrecourse Deductions" shall have the meaning ascribed to
such term in Regulations section 1.704-2(b)(1).
"Organizational Expenses" means all reasonable third-
party costs and expenses pertaining to the organization of
the Partnership and the registration, qualification or
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exemption of the Partnership under any applicable federal, state or
foreign laws, including fees of counsel to the Partnership and the
Partners.
"Parallel Partnerships" has the meaning set forth in
Section 2.8.
"Partner" means any person who is a partner of the
Partnership, whether a General Partner, a Limited Partner or both.
"Partner Nonrecourse Debt" shall have the meaning ascribed to
such term in Regulations section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning
ascribed to such term in Regulations section 1.704- 2(i)(2).
"Partner Nonrecourse Deductions" shall mean any item of
partnership loss, deduction, or expenditure under section 705(a)(2)(B)
of the Code that is attributable to a Partner Nonrecourse Debt, as
determined pursuant to Regulations section 1.704-2(i)(2).
"Partnership" means Interstone Three Partners III L.P.
"Partnership Act" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C. Sections 17-101, et seq., as it may be amended
from time to time, and any successor to such statute.
"Partnership Assets" means all right, title and interest of
the Partnership in and to all or any portion of the assets of the
Partnership and any property (real or personal) or estate acquired in
exchange therefor or in connection therewith.
"Pre-Existing Projects" has the meaning set forth in
Section 3.6(a).
"Proceeds" means the collective reference to Capital
Proceeds and Non-Capital Proceeds.
"Project" has the meaning set forth in the Preliminary
Statement.
"Project Limited Liability Company Agreement" shall mean a
limited liability company agreement in a form to be agreed upon by the
General Partners, as such agreement may be amended from time to time in
accordance with the terms thereof and hereof, formed pursuant to this
Agreement to own Projects purchased hereunder.
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"Project Partnership Agreement" shall mean a partnership
agreement in the form attached hereto as Exhibit B, as such agreement
may be amended from time to time in accordance with the terms thereof
and hereof, formed pursuant to this Agreement to own Projects purchased
hereunder.
"Regulations" means the regulations promulgated under
the Code.
"Related Parties" means the Blackstone Related Parties
and the Interstate Related Parties.
"Request for Preliminary Approval" has the meaning set
forth in Section 3.6(b).
"Request for Final Approval" has the meaning set forth
in Section 3.6(f).
"Sharing Percentage" means the percentage interest of a
Partner with respect to each Project, determined in accordance with
Section 3.6(f) of this Agreement, as amended from time to time in
accordance herewith.
"Target Investment" has the meaning set forth in the
Preliminary Statement.
"Tax Matters Partner" has the meaning set forth in
Section 6.2.
"Transfer" has the meaning set forth in Section 8.1(a).
"Transferee" has the meaning set forth in Section
8.1(b).
"Unrealized Loss" with respect to a Project on a date of a
distribution of Capital Proceeds shall mean the excess of the total
Capital Contributions with respect to such Project as of such date over
the Fair Market Value of such Project as of such date. A Project shall
not have any Unrealized Loss on a date of a distribution if the
calculation pursuant to this definition for such Project on such date
equals zero or less.
SECTION 1.2 Terms Generally. The definitions in Section 1.1
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The term "person" includes individuals,
partnerships, joint ventures, corporations, trusts, governments (or agencies or
political subdivisions thereof) and other associations and entities. Unless the
context requires otherwise, the words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The
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term "hereunder" shall mean this entire Agreement as a whole unless reference to
a specific section of this Agreement is made.
ARTICLE II
General Provisions
SECTION 2.1 Continuation of Partnership. The Blackstone
General Partner and the Interstate General Partner, as the General Partners, and
the Blackstone Limited Partners and the Interstate Limited Partner, as limited
partners, hereby agree to continue the Partnership and the Partners agree that
the Partnership shall continue for the limited purposes set forth and on the
other terms and conditions set forth in this Agreement. The Blackstone General
Partner hereby represents that each of the Blackstone Limited Partners is an
Affiliate of the Blackstone General Partner or its Affiliates.
SECTION 2.2 Partners. Schedule A hereto contains the name and
address of each Partner as of the date of this Agreement. Schedule A shall be
revised by the General Partners from time to time to reflect the admission or
withdrawal of a Partner or the transfer or assignment of interests in the
Partnership in accordance with the terms of this Agreement and other
modifications to or changes in the information set forth therein.
SECTION 2.3 Name. The Partnership shall conduct its activities
under the name of Interstone Three Partners III L.P. The General Partners shall
have the power at any time to change the name of the Partnership; provided, that
the name shall always contain the words "Limited Partnership" or the letters
"L.P." The General Partners shall give prompt notice of any such change to each
Partner.
SECTION 2.4 Term. The term of the Partnership shall commence
on the date of this Agreement and shall continue until December 31, 2045, unless
sooner dissolved, wound up and terminated in accordance with Article VII of this
Agreement.
SECTION 2.5 Purpose; Powers. (a) The purpose of the
Partnership shall be (i) to implement the right of first opportunity with the
Blackstone Group and the Interstate Group, including review and approval or
disapproval by the General Partners of due diligence investigation of proposed
Target Investments, and, upon final approval by the General Partners, causing
the acquisition by the Partnership of such Target Investments either by itself
or directly or indirectly through entities in which the Partnership shall have a
direct or indirect ownership interest; (ii) operating, managing and disposing of
any Target Investments approved for acquisition pursuant to this Agreement; and
(iii) to do all things necessary or incidental to any of the foregoing.
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(b) In furtherance of its purposes, the Partnership shall have
all powers necessary, suitable or convenient for the accomplishment of its
purposes, alone or with others, including the following:
(i) to invest and reinvest the cash assets of the
Partnership in money-market or other short-term investments;
(ii) to have and maintain one or more offices within or
without the State of Delaware, and, in connection therewith, to rent or
acquire office space, engage personnel and compensate them and do such
other acts and things as may be advisable or necessary in connection
with the maintenance of such office or offices;
(iii) to open, maintain and close bank accounts and draw
checks and other orders for the payment of moneys;
(iv) to engage employees (with such titles and delegated
responsibilities as may be determined), accountants, consultants,
auditors, custodians, investment advisers, attorneys and any and all
other agents and assistants, both professional and nonprofessional, and
to compensate them as may be necessary or advisable;
(v) to form or cause to be formed and to own the stock of
one or more corporations, whether foreign or domestic, and to form or
cause to be formed and to participate in partnerships, joint ventures
and limited liability companies, whether foreign or domestic;
(vi) to enter into, make and perform all contracts,
agreements and other undertakings as may be necessary or advisable or
incident to carrying out its purposes;
(vii) to sue, prosecute, settle or compromise all claims
against third parties, to compromise, settle or accept judgment of
claims against the Partnership, and to execute all documents and make
all representations, admissions and waivers in connection therewith;
(viii) to distribute, subject to the terms of this
Agreement, at any time and from time to time to Partners cash or
investments or other property of the Partnership, or any combination
thereof;
(ix) to borrow money, whether secured or unsecured, and to
make, issue, accept, endorse and execute promissory notes, drafts,
bills of exchange and other instruments and evidences of indebtedness,
all without limit as to amount, and to secure the payment thereof by
mortgage, pledge, or assignment of, or security interest in, the assets
then owned or thereafter acquired by the Partnership;
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(x) to buy, sell, operate and otherwise deal with Target
Investments;
(xi) to hold, receive, mortgage, pledge, lease, transfer,
exchange or otherwise dispose of, grant options with respect to, and
otherwise deal in and exercise all rights, powers, privileges and other
incidents of ownership or possession with respect to, all property held
or owned by the Partnership; and
(xii) to take such other actions necessary or incidental
thereto as may be permitted under applicable law.
SECTION 2.6 Place of Business. The Partnership shall maintain
a registered office at The Corporation Trust Company, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801, or such other office within the
State of Delaware as is chosen by the General Partners. The Partnership shall
maintain an office and principal place of business at 345 Park Avenue, New York,
New York 10154, or at such other place as may from time to time be determined as
its principal place of business by the General Partners; the General Partners
shall give notice to the other Partners of any change in the Partnership's
principal place of business. The name and address of the Partnership's
registered agent as of the date of this Agreement is The Corporation Trust
Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
SECTION 2.7 Alternative Investment Structure. If the
Blackstone General Partner determines that for legal, tax, regulatory or other
reasons it is in the best interests of the Partners that a Target Investment be
made through an alternative investment structure, and all of the other General
Partners unanimously Consent to such alternative structure (which Consent shall
not be unreasonably withheld), the Blackstone General Partner shall structure
the making of all or any portion of such Target Investment outside of the
Partnership by requiring any Partner or Partners to make such Target Investment
either directly or indirectly through a partnership or other vehicle (such as
the purchase of stock, the purchase of partnership interests, or the formation
of another partnership or as tenants in common) that will invest on a parallel
basis with or in lieu of the Partnership, as the case may be. The Partners shall
be required to make capital contributions directly to each such vehicle to the
same extent, for the same purposes and on the same terms and conditions as
Partners are required to make Capital Contributions to the Partnership, and such
capital contributions shall reduce the unused Committed Capital of the Partners
to the same extent as if Capital Contributions were made to the Partnership with
respect thereto. Each Partner shall have the same economic interest in all
material respects in Target Investments made pursuant to this Section 2.7 as
such Partner would have if such Target Investment had been made solely by the
Partnership, and the other terms of such vehicle shall be
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substantially identical in all material respects to those of the Partnership, to
the maximum extent applicable; provided, that such vehicle (or the entity in
which such vehicle invests) shall provide for the limited liability of the
Limited Partners as a matter of the organizational documents of such vehicle (or
the entity in which such vehicle invests) and as a matter of local law; and
provided, further, that the General Partners or Affiliates thereof will serve as
the general partners or in some other similar fiduciary capacity with respect to
such vehicle.
SECTION 2.8 Parallel Partnerships. The General Partners have
established one or more additional collective partnerships (the "Parallel
Partnerships") organized pursuant to partnership agreements in substantially the
same form as this Agreement for certain types of investors to invest in Target
Investments together with the Partnership. The Blackstone General Partner, or an
Affiliate thereof, shall be a general partner of any such Parallel Partnerships,
and the Blackstone Limited Partners, or Affiliates thereof, shall be limited
partners of any such Parallel Partnerships. The Interstate General Partner, or
an Affiliate thereof, shall be a general partner of any such Parallel
Partnerships and the Interstate Limited Partner, or an Affiliate thereof, shall
be a limited partner of any such Parallel Partnerships. The economic terms of
each Parallel Partnership shall be the same as those of the Partnership.
ARTICLE III
Management and Operation of the
Partnership; Identification and Approval of
Investments; Partner Services
SECTION 3.1 Management. (a) The General Partners shall have
the full and complete responsibility for managing the business of the
Partnership and shall make all of the decisions affecting the business of the
Partnership. Except as otherwise set forth in this Agreement, the Limited
Partners shall have no right of Consent with respect to such decisions. The
General Partners shall have all of the rights, powers and authorities permitted
to be exercised by a general partner of a limited partnership formed under the
Partnership Act. The General Partners shall exercise all powers necessary and
convenient for the purposes of the Partnership, including those enumerated in
Section 2.5, on behalf and in the name of the Partnership.
(b) Except as otherwise provided herein, the Limited Partners
as such shall not have the right to, and shall not, take part in the management
or affairs of the Partnership, nor in any event shall any Limited Partner have
the power to act for or bind the Partnership unless delegated such power by the
General Partners. The exercise by any Limited Partner of any right or power
conferred herein shall not be construed to constitute
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participation by such Limited Partner in the control of the business of the
Partnership so as to make such Limited Partner liable as a general partner for
the debts and obligations of the Partnership for purposes of the Partnership
Act.
(c) Any Consent required by this Agreement may be
given as follows:
(1) by a written Consent given by the approving Partner at
or prior to the doing of the act or thing of which the Consent is
solicited, provided that such Consent shall not have been nullified by
notice to all of the General Partners by the approving Partner at or
prior to the time, or by the negative vote by such approving Partner at
any meeting held to consider the doing, of such act or thing; or
(2) by the Consent given by the approving Partner to the
doing of the act or thing for which the Consent is solicited at any
meeting called or held to consider the doing of such act or thing.
(d) Unless the General Partners agree on a different
procedure, any matter requiring the Consent of all or any of the Partners
pursuant to this Agreement may be considered at a meeting of the Partners held
not less than three (3) nor more than fifteen (15) Business Days after notice
thereof shall have been given by a General Partner to all Partners. Such notice
(i) may be given by any General Partner, in its discretion, at any time. Any
such notice shall state briefly the purpose, time and place of the meeting. All
such meetings shall be held within or outside the State of Delaware at such
reasonable place as the General Partners shall designate and during normal
business hours. Unless otherwise provided by the General Partners, meetings may
be held telephonically.
(e) The written statements and representations of an
Authorized Representative for a General Partner shall be the only authorized
statements and representations of such General Partner with respect to the
matter covered by this Agreement. The initial Authorized Representatives are (i)
Kenneth C. Whitney, Thomas Saylak and John Schreiber for the Blackstone General
Partner and (ii) W. Thomas Parrington, J. William Richardson and Marvin I. Droz
for the Interstate General Partner. The written statement or representation of
any one Authorized Representative of the Blackstone General Partner shall be
sufficient to bind the Blackstone General Partner with respect to all matters
pertaining to the Partnership and addressed in such statement or representation.
The written statement or representation of any two Authorized Representatives of
the Interstate General Partner shall be sufficient to bind the Interstate
General Partner with respect to all matters pertaining to the Partnership and
addressed in such statement or representation.
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(f) The failure to vote by any Partner on any matter requiring
such Partner's Consent within five business days after such vote is requested
shall be deemed to be a negative vote with respect to such matter.
(g) A Partner shall not be obligated to abstain from voting on
any matter (or vote in any particular manner) because of any interest (or
conflict of interest) of such Partner (or any Affiliate thereof) in such matter.
(h) Each Partner agrees that, except as otherwise expressly
provided herein and to the fullest extent permitted by applicable law, the
approval of any proposed action of or relating to the Partnership by all of the
General Partners as provided herein (or if this Agreement grants one General
Partner sole approval rights over a certain action, the approval of such action
by such General Partner) shall bind each Partner and shall have the same legal
effect as the approval of each Partner of such action.
SECTION 3.2 Joint Control by the General Partners. Except as
specifically provided in this Agreement, the business, affairs and operations of
the Partnership shall be managed, and all Partnership decisions shall be jointly
made, by both General Partners, and no single General Partner, acting alone,
shall have the authority to bind or make any decision for the Partnership or to
conduct or manage the Partnership's business or affairs. Without limiting the
foregoing in any way, the following are examples of decisions of the Partnership
which shall be made jointly by the General Partners:
(a) the reorganization of the Partnership as a corporation or
other entity, or the creation of a holding corporation, partnership or
limited liability company to own all or any substantial portion of the
assets of or all the equity interests in the Partnership, provided that
the surviving entity remains a pass-through entity for taxation
purposes;
(b) the termination or settlement of any litigation by
the Partnership;
(c) the making of any change in the Fiscal Period, any
determination of reserves under this Agreement, any distribution of
cash or investments or other property of the Partnership to the
Partners, or any withdrawals of capital from the Partnership;
(d) the making of any change in the name of the
Partnership or the use of another name by the Partnership to
carry on any business of the Partnership;
(e) the making of the determination and approval of
such tax matters as are specified in Section 6.2;
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(f) the making of the allocation of amounts in respect
of an interest in the Partnership Transferred pursuant to
Section 8.2(e);
(g) the authorization of a Partner to disclose
information agreed to be held confidential under
Sections 9.5;
(h) the admission of an additional Partner to the Partnership
pursuant to the terms of this Agreement if such additional Partner is
not an Affiliate of either any member of the Blackstone Group or any
member of the Interstate Group;
(i) (A) the sale, exchange or other transfer of any
Partnership Asset, (B) the merger or consolidation of the Partnership
with or into any other business entity provided that the surviving
entity remains a pass-through entity for taxation purposes, and (C) the
right to require each of the Partners to exchange, transfer or
otherwise convey some or all of its partnership interest in the
Partnership as part of an exit or disposition strategy for the
Partnership;
(j) the making of any expenditure incurred in connection with
the administration of the Partnership;
(k) the entering into of any lease by the Partnership as
lessor;
(l) the engagement of any independent accountant, counsel,
actuary or consultant to the Partnership, or any change in or
termination of any engaged independent accountant, counsel, actuary or
consultant to the Partnership;
(m) the maintenance of a registered office in Delaware other
than that specified in Section 2.6;
(n) the determination of any titles and responsibilities of
employees of the Partner pursuant to Section 2.5(b)(iv);
(o) the approval of budgets;
(p) the expenditure by the Partnership of any funds in
connection with the disposition of a Target Investment or the
expenditure by the Partnership of any funds required in connection with
the operation of any Target Investments which are not included within
the approved budget for such Target Investment;
(q) any termination, replacement or other change in the
franchisor of any Target Investment in accordance with the terms of the
franchise agreement, or the execution,
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modification or termination of any agreement which is
material to the Partnership;
(r) the dissolution, termination and winding up of the
Partnership as provided in Section 7.1(a);
(s) any amendment to this Agreement which would have a
material adverse effect on any Partner's economic interest in the
Partnership;
(t) extending the term of the Partnership beyond December 31,
2045;
(u) in accordance with Section 3.6 below, the decision for the
Partnership to investigate a Target Investment and the decision for the
Partnership to acquire a Target Investment, or the decision for the
Partnership to acquire any other asset;
(v) the borrowing of money;
(w) the filing of a petition under any bankruptcy or other
insolvency law by the Partnership, or the admission in writing by the
Partnership of its bankruptcy, insolvency or general inability to pay
its debts;
(x) the commencement of any litigation by the Partnership;
(y) a transaction or other matter involving any actual or
potential conflict of interest affecting any Partner or Affiliate
thereof other than the entering into of any agreements or the payment
of any amounts provided for in this Agreement; and
(z) a change in the business of the Partnership to include any
business other than that specified in Section 2.5 which takes the focus
of the Partnership's business away from the lodging industry.
Notwithstanding the foregoing and without limiting the foregoing in any way, any
General Partner may delegate in writing to (i) the other General Partner, its
right to make any decisions concerning the Partnership or take any actions on
behalf of the Partnership and/or (ii) to any manager of any Target Investment,
the day to day administrative duties in connection with the operation of such
property.
SECTION 3.3 Blackstone Partners Rights. Notwithstanding any
other provision of this Agreement, the Blackstone General Partner may take any
of the following actions with out the Consent of any of the Interstate Partners:
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(a) with respect to any Target Investment in which an
Affiliate of the Interstate General Partner is the manager, any
termination, replacement or other change in such manager in accordance
with the terms of the management agreement, the declaration of a
default or event of default under any management agreement for such
manager, and the exercise of any remedies under such management
agreement;
(b) the approval of a transfer of any partner's interest in
the Partnership and the approval of the admission of any additional
partner to the Partnership if such additional partner is an Affiliate
of any member of the Blackstone Group or any member of the Interstate
Group; and
(c) such other actions and decisions which are expressly given
solely to the Blackstone General Partner pursuant to the terms of this
Agreement.
SECTION 3.4 Certain Duties and Obligations of the Partners.
(a) Subject to the terms of this Agreement, the General Partners shall take all
action which may be reasonably necessary or appropriate (i) for the formation
and continuation of the Partnership as a limited partnership under the laws of
the State of Delaware and (ii) for the development, maintenance, preservation
and operation of the business of the Partnership in accordance with the
provisions of this Agreement and applicable laws and regulations.
(b) No Partner shall take any action so as to cause the
Partnership to be classified for Federal income tax purposes as an association
taxable as a corporation and not as a partnership.
(c) The General Partners shall take (and each Partner agrees
to cooperate with the General Partners and approves of the General Partners
taking on its behalf) all action which is necessary to form or qualify the
Partnership to conduct the business in which the Partnership is engaged under
the laws of any jurisdiction in which the Partnership is doing business and to
continue in effect such formation or qualification.
(d) The General Partners shall not take, or cause to be taken,
any action that would result in any Limited Partner having any personal
liability for the obligations of the Partnership. The General Partners shall be
under a duty as described herein to conduct the affairs of the Partnership in
the best interests of the Partnership and of the Partners including the
safekeeping and use of all Partnership funds and assets and the use thereof for
the exclusive benefit of the Partnership. Neither any Partner nor any Affiliate
of any Partner shall enter into any transaction with the Partnership unless the
transaction (i) is expressly permitted hereunder, (ii) is entered into on
arm's-length terms in the ordinary course of Partnership business or (iii) is
approved by all of the General Partners upon
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disclosure of any direct or indirect interest such Partner or any Affiliate
thereof may have in the transaction.
(e) No General Partner shall be liable, responsible or
accountable in damages or otherwise to the Partnership or to any Partner for (a)
any act performed within the scope of the authority conferred on such General
Partner by this Agreement except for the gross negligence or willful misconduct
of such General Partner in carrying out its obligations hereunder, (b) such
General Partner's failure or refusal to perform any act, except those expressly
required by or pursuant to the terms of this Agreement, (c) such General
Partner's performance of, or failure to perform, any act on the reasonable
reliance on advice of legal counsel to the Partnership or (d) the negligence,
dishonesty or bad faith of any agent, consultant or broker of the Partnership
selected, engaged or retained and monitored with reasonable care. In any
threatened, pending or completed action, suit or proceeding, each General
Partner shall be fully protected and indemnified and held harmless by the
Partnership against all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, proceedings, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
reasonable attorneys' fees, costs of investigation, fines, judgments and amounts
paid in settlement, actually incurred by such General Partner in connection with
such action, suit or proceeding) by virtue of its status as a General Partner or
with respect to any action or omission taken or suffered in good faith, other
than liabilities and losses resulting from the gross negligence or willful
misconduct of such General Partner; provided, however, that a General Partner
shall not be so indemnified for any acts determined to be in contravention of
this Agreement or in breach of its fiduciary duties. The indemnification
provided by this paragraph shall be recoverable only out of the assets of the
Partnership, and no Partner shall have any personal liability on account
thereof.
SECTION 3.5 Restrictions on Authority of the General Partners.
The General Partners shall not have the authority to:
(a) do any act in contravention of this Agreement (including
under Section 3.2 or Section 3.3);
(b) do any act which would make it impossible to carry on the
ordinary business of the Partnership, except in connection with the
dissolution, winding up and termination of the Partnership as provided
by Article VII;
(c) possess Partnership property, or assign their respective
rights in specific Partnership property, for other than a Partnership
purpose;
(d) admit a person as a Partner except as provided in this
Agreement; or
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(e) knowingly perform any act that would subject any
Limited Partner to liability as a general partner in any
jurisdiction.
SECTION 3.6 Right of First Opportunity. (a) Subject to Section
3.7(b) below, and until expiration or termination of the right of first
opportunity in favor of the Partnership set forth below (which right has been
confirmed and acknowledged in the Confirmation and Acknowledgment of Right of
First Opportunity ("Acknowledgment"), in the form attached hereto as Exhibit C,
which has been executed simultaneously herewith), each member of the Blackstone
Group and the Interstate Group shall offer to the Partnership (along with the
Parallel Partnerships) a right of first opportunity to invest in each Target
Investment which (x) is identified by such member after the date of this
Agreement or (y) which is identified on the list of Projects attached hereto as
Exhibit D (the "Pre-Existing Projects"), in each case, upon and subject to the
terms set forth in the remainder of this Section 3.6.
(b) Except as provided in Section 3.7(b) below, promptly upon
its identification of a Target Investment as a potential investment, each member
of the Blackstone Group and the Interstate Group shall notify each of the
General Partners about such Target Investment (such notification, a "Request for
Preliminary Approval") and shall provide each of the General Partners with such
information reasonably necessary to evaluate such investment.
(c) Within five (5) Business Days after delivery to the
General Partners of the Request for Preliminary Approval and the accompanying
information pursuant to paragraph (b) above with respect to a proposed Target
Investment, and provided that notice shall have first been given from the party
requesting such action that approval is being sought under this Section, the
General Partners shall either approve or disapprove pursuit of such proposed
Target Investment (including the incurring of due diligence costs and
expenditures, the negotiation and documentation of the terms of purchase and
financing, and the posting of deposits). If the General Partners, having first
been notified that approval under this Section is being sought, fail to
unanimously approve the investigation of a proposed Target Investment within
such five (5) Business Day period, the proposed Target Investment shall be
deemed disapproved. Any General Partner shall have the right to reasonably
request additional information regarding the proposed Project within three (3)
Business Days after receipt of the Request for Preliminary Approval and the
accompanying information. If any General Partner requests such additional
information, the five (5) Business Day period referred to above shall commence
on the day such General Partner receives all such additional information. The
General Partners shall each have the right to approve or disapprove
investigation of any proposed Project in their sole and absolute discretion.
Once investigation of a Target
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Investment is approved, the due diligence costs and expenditures reasonably
incurred by the Partnership and within the scope approved by the General
Partners with respect to such Project shall become the obligation of the
Partnership.
(1) All due diligence costs and expenditures reasonably
incurred by the Partnership pursuant to this Section and within the
scope of the approved due diligence shall be funded if and when
required for payment, and shall be funded solely from, and shall
constitute, Capital Contributions to the Partnership by the Partners.
In no event shall due diligence expenses be funded from operating
revenues of the Partnership. The due diligence expenses incurred by the
Partnership shall be allocated for book and tax accounting purposes
between and among each Project in such manner as the General Partners
may reasonably approve. Due diligence expenses from a Project shall be
allocated among the Parallel Partnerships in such a manner as the
Blackstone General Partner shall determine, in its sole discretion. The
Interstate General Partner and the Blackstone General Partner shall
each make a Capital Contribution equal to 0.5% of the due diligence
expenses allocated to the Partnership. The Interstate Limited Partner
shall make a Capital Contribution equal to 50.5% of the due diligence
expenses allocated to the Partnership. The remaining 48.5% of the due
diligence expenses allocated to the Partnership shall be funded from
Capital Contributions of the Blackstone Limited Partners, with each
Blackstone Limited Partner contributing a percentage of the total due
diligence expenses to be determined by the Blackstone General Partner,
in its sole discretion.
(2) The Partners intend that all due diligence will be
conducted through the Partnership in accordance with any Consent given
by the General Partners; however, a General Partner may elect to
perform its own due diligence in addition to that being performed by
the Partnership. In the event a General Partner so elects to perform
its own due diligence, such General Partner shall use its best efforts
to minimize duplication of efforts and costs with that of the
Partnership. The expenses (including legal fees) reasonably incurred by
such General Partner shall be payable by the Partnership as Partnership
expenses.
(d) If the General Partners approve investigation of a
Project, the Partnership shall promptly undertake due diligence investigation
and at appropriate times during and, in any event, prior to the conclusion of
that due diligence investigation, the Partnership shall make available to each
Partner copies of the material due diligence information obtained by the
Partnership with respect to the applicable Target Investment.
(e) If any General Partner has elected to participate in the
due diligence investigation of a proposed Project pursuant
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to Section 3.6(c)(2) above, then all due diligence activities shall be
coordinated with such General Partner as reasonably necessary to facilitate such
participation.
(f) At such time, if any, as any member of the Blackstone
Group or the Interstate Group determines that a request for final authority to
proceed with acquisition of a Project is required because such party reasonably
believes that a binding commitment (i.e. a letter of intent which is, or could
become binding or a contract for purchase and sale) to proceed with the
acquisition must be executed by the Partnership or the opportunity to acquire
such interest would be lost, such party shall request the General Partners to
give their final approval to proceed with such acquisition (such notification, a
"Request for Final Approval"). Upon the request of any General Partner, a
Request for Final Approval shall be made in writing. In connection with any
Request for Final Approval, such party shall, to the extent applicable, (i)
submit to the General Partners the form of any purchase agreement and/or other
relevant documents pursuant to which the Partnership may acquire an interest in
a Project, and (ii) notify the General Partners of whether an Affiliate of the
Interstate General Partner is being proposed as the property manager for the
Project. Within five (5) Business Days after delivery of the Request for Final
Approval, the General Partners shall meet and either approve or disapprove, in
writing, the proposed Project, including a timetable for closing of the
acquisition, the posting of any non-refundable deposits, if applicable, and the
terms of engagement of any Affiliate of the Interstate General Partner for
property or asset management of the Project, as applicable. Each General Partner
shall have the right to grant final approval or disapproval of the Project in
its sole and absolute discretion. However, unless all of the General Partners
agree to extend the five (5) Business Day decision period set forth above, the
General Partners shall either approve or disapprove the Project within that
period without exception, and any failure to act within that period, as it may
be extended by the General Partners in their sole discretion, shall constitute a
disapproval of the Project. The Blackstone Partners specifically acknowledge
that, unless transfer of management is not feasible or practical, the Interstate
General Partner contemplates the engagement by the Partnership of an Affiliate
of the Interstate General Partner on an arm's length basis in connection with
the property management of one or more of the Projects and contemplates that one
or more of the Project proposals may propose such engagement. If transfer of
management is not feasible or practical, then, unless such engagement is not
feasible or practical, the Partnership shall engage an Affiliate of the
Interstate General Partner as an asset manager for such Project pursuant to an
Asset Management Agreement in form and substance satisfactory to the parties
thereto (the "Asset Management Agreement"), and the fees payable by the
Partnership under such Asset Management Agreement shall be at Competitive Rates.
Unless the General Partners unanimously agree otherwise, no nonrefundable
deposit shall be posted with
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respect to a Project until that Project has received final Project approval
pursuant to this subsection 3.6(f) and the General Partners have had the
opportunity to review the purchase agreement and/or the other documents pursuant
to which the Partnership may acquire an interest in such Project. The final
Project approval shall specify the amount of each remaining funding obligation
with respect to the applicable Project and the date(s) by which each such amount
is to be funded, it being the intent of the Partners that they not fund to the
Partnership those amounts due to the seller of (or if applicable, escrow agent
for the transfer of) the Project more than three (3) Business Days prior to the
date such amounts are due to the Seller or escrow agent, as applicable. The
funding obligations with respect to a Project shall be allocated among the
Parallel Partnerships in such a manner as the Blackstone General Partner shall
determine, in its sole discretion. By each funding date, the Partners shall fund
to the Partnership a portion of the funding obligation then due, including any
purchase deposits contemplated in connection with the Consent to such Project.
The Interstate General Partner and the Blackstone General Partner shall each
make a Capital Contribution equal to 0.5% of the funding obligations allocated
to the Partnership (which percentage shall be such Partner's Sharing Percentage
in such Project). The Interstate Limited Partner shall make a Capital
Contribution equal to 50.5% of the funding obligations allocated to the
Partnership (which percentage shall be such Partner's Sharing Percentage in such
Project). The Blackstone Limited Partners shall, in the aggregate, make Capital
Contributions equal to 48.5% of the funding obligations allocated to the
Partnership, and each Blackstone Limited Partner's share thereof shall be
determined by the Blackstone General Partner, in its sole discretion, and
recorded in the books and records of the Partnership (each Blackstone Limited
Partner's share thereof, as determined by the Blackstone General Partner, shall
be such Partner's Sharing Percentage in such Project). In no event shall final
Project approval funding requirements be funded from operating revenues of the
Partnership. All such contributions to the Partnership shall constitute Capital
Contributions. Each of the General Partners will consult with the other General
Partners in connection with the negotiation of any documents necessary for the
acquisition of a Target Investment.
(g) If the General Partners approve a proposed Project
pursuant to subsection 3.6(f) above, unless the Project shall be purchased
through another form, the Partnership shall promptly finalize the form of the
Project Partnership Agreement or Project Limited Liability Company Agreement, as
applicable, for the ownership of the proposed Project (with such Project
specific modifications as are necessary to address any Project specific
characteristics not addressed by the form of Project Partnership Agreement or
Project Limited Liability Company Agreement, as applicable), and promptly
finalize the form of a Management Agreement or an Asset Management Agreement, as
applicable, to be entered into (with such Project specific modifications as are
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necessary to address any Project specific characteristics not addressed by the
form of Management Agreement or Asset Management Agreement, as applicable, and
which the Manager and the Blackstone General Partner may approve), which
Management Agreement (if applicable) shall provide for aggregate fees not
greater than 2.8% of Gross Operating Revenues (as defined in the Management
Agreement). In no event shall any party hereunder have any liability to the
other party for failure to finalize or enter into any Management Agreement or
Asset Management Agreement, as applicable, so long as the parties have proceeded
in good faith to attempt to consummate such documentation following approval of
the General Partners of any proposed Project pursuant to Section 3.6.
(h) The General Partners agree that in the event that (A)
material facts or circumstances or a material change in any facts or
circumstances regarding a Target Investment which was approved for acquisition
by the General Partners become known to any General Partner which were not
previously known by such General Partner and (B) with the knowledge of such new
or changed facts or circumstances, such General Partner no longer desires to
proceed with such acquisition and (C) at the time of the occurrence of the event
or events referred to in clause (A) above, (x) the Partnership is not
irrevocably committed to consummate the acquisition of such Target Investment
pursuant to a binding legal agreement and (y) the Partnership's obligations
under such agreement would not be breached by the failure to consummate such
acquisition, then such General Partner may, by written notice to the other
General Partners, revoke its Consent to consummate such acquisition at which
time such Target Investment shall no longer be deemed approved.
(i) Notwithstanding anything in this Section to the contrary,
if, with respect to a Project, a member of the Blackstone Group or the
Interstate Group reasonably believes it must take some action to retain the
opportunity to purchase such Project before it has sufficient time to follow the
procedures for approval set forth in this Section, such party may take such
action (including the making of a deposit or the entering into a binding
agreement if assignable to the Partnership) in its own name only and at its own
risk without violating the terms of this Agreement, provided such party promptly
submits such Project to the Partnership for its consideration. If the General
Partners subsequently approve such Project, such party shall assign all of its
rights in the Project to the Partnership and the Parallel Partnerships, as
appropriate. If the General Partners subsequently disapprove such Project, the
Partnership shall not be bound in any way to such Project, and the party who
proposed the Project may proceed with such Project only if the conditions of
Section 3.7(b) and Section 3.7(c) have been met.
(j) Any General Partner may request that any of the time
periods set forth herein be reduced or extended, if reasonably necessary.
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(k) Notwithstanding anything in this Section to the contrary,
none of the Interstate Partners shall be deemed in default hereunder for failure
to notify the Blackstone Group as required herein if notice has been given to
the Blackstone General Partner of any of the Parallel Partnerships.
(l) Notwithstanding anything contained in this Agreement to
the contrary, unless all of the Partners unanimously agree otherwise, each
Project in which the Partnership invests shall secure mortgage debt financing in
principal amounts and with terms that are consistent with the then currently
prevailing market conditions, but in any event in principal amounts between 60%
and 75% of the total acquisition cost of such Project.
SECTION 3.7 Right of First Opportunity; Exclusive Rights;
Investment Parameters. (a) Subject to the terms of this Agreement as set forth
above, the Blackstone Partners and the Interstate Partners each covenant to
provide to the Partnership, and each other, during the term of this Agreement,
the right of first opportunity as provided in Section 3.6 above to invest in (x)
those Target Investments which are hereafter identified by them and (y) the
Pre-Existing Projects. By their previous execution of the Acknowledgement,
Interstate Hotels Company (in the case of (A) below) and Blackstone Group
Holdings L.P. (in the case of (B) below) have agreed and hereby ratify and
confirm that they agree, and agree to cause (A) the Interstate Group and (B) the
Blackstone Group, respectively, to submit any Target Investments in which they
or the Interstate Group and the Blackstone Group would otherwise wish to invest
independent of the Partnership to the right of first opportunity set forth
herein, and, in connection therewith, they shall, and shall cause the Interstate
Group and the Blackstone Group to, subject to Section 3.7(b) below, refer all
such investment opportunities to the Interstate General Partner or the
Blackstone General Partner, as applicable, for submission to the Partnership
pursuant to the terms set forth above.
(b) Notwithstanding anything herein to the contrary, the
Interstate Group and the Blackstone Group expressly retain the right to
undertake acquisition or development of any Target Investment or any other
investment whatsoever, without the consent of the others, and free of any right
of first opportunity hereunder, at such time, in such form and upon such terms
as they, acting in their sole discretion, may determine appropriate, where any
one of the following conditions is satisfied:
(i) such Project is a Project that was disapproved or
deemed disapproved solely by action or inaction of the General Partners
after proper notice; provided, that if a Project is disapproved or
deemed disapproved by a General Partner who is a member of the same
group (i.e., the Blackstone Group or the Interstate Group) as the party
who submitted the Request for Preliminary Approval or Request for Final
Approval, as applicable, then the condition
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contained in this clause (i) shall not be deemed satisfied
for any member of such group;
(ii) such Project fails to meet the definition of a Target
Investment;
(iii) except as expressly provided below, such Project is
listed on Exhibit E hereto, subject to the qualifications and
agreements described in such Exhibit;
(iv) such Project is identified or undertaken after the
termination of the right of first opportunity pursuant to the terms of
this Agreement;
(v) such party is acquiring, directly or indirectly, the
stock or assets of an entity which owns one or more Target Investments
but whose assets and/or operations are not primarily composed of Target
Investments;
(vi) such party is acquiring, directly or indirectly, the
stock or assets of an entity which primarily owns and/or operates hotel
or motel franchise systems or hotel or motel reservations systems;
(vii) the Consideration being paid for such Target
Investment in the aggregate is less than $10,000,000 or the equity
portion of the Consideration being paid for such Target Investment in
the aggregate is less than $5,000,000; or
(viii) with respect to a Target Investment, the Interstate
Group or the Blackstone Group , as applicable, certifies, at any time
(whether or not such Project has been submitted to the Partners and the
Partnership under Section 3.6 above), that in its good faith judgment,
involvement with the Blackstone Group or the Interstate Group, as
applicable, in such Target Investment would be prohibited by, or
otherwise interfere with, its other business arrangements or would
otherwise not be appropriate, feasible or practical.
(c) Notwithstanding anything in Section 3.7(b) above to the
contrary, the right of first opportunity set forth herein will apply to any
acquisition undertaken by any member of the Blackstone Group or the Interstate
Group during the term of this right of first opportunity with respect to the
Pre-Existing Projects. In the event that a party is undertaking the acquisition
of a Target Investment free of the right of first opportunity pursuant to
Section 3.7(b)(i), such party shall acquire such Target Investment upon terms
that are no more favorable than the terms presented to the General Partners with
respect to such Target Investment.
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(d) The Partners acknowledge that, without limiting the
definition of Target Investment, it is their intent that the Target Investments
ultimately acquired by the Partnership will be Target Investments which (i) are
mid to high quality (3-4 stars), (ii) are located in growing markets, (iii) are
well positioned vis-a-vis the competition and, (iv) provide significant
opportunity for enhanced performance through intensive management repositioning
and/or redevelopment. Additionally, there is a preference for multi-asset
acquisitions over single properties in order to provide for the most efficient
and cost effective underwriting and investment process. Further, such
acquisitions should provide minimum going-in free and clear returns of 11%
(after management and FF&E reserve), unless immediate opportunity for enhanced
performance can be demonstrated. Nevertheless, certain Target Investments may be
approved hereunder even if they do not fall within the above-referenced
investment parameters. Accordingly, except as otherwise provided herein
(including without limitation Section 3.7(b) below), all Target Investments,
including, those that do not fall within the above-referenced investment
parameters, shall be subject to the right of first opportunity set forth in
Section 3.6 above.
SECTION 3.8 Termination of Right of First Opportunity.
(a) The Blackstone General Partner shall have the right to
terminate the right of first opportunity set forth in Section 3.6 if any member
of the Interstate Group defaults in the performance of any of its obligations
hereunder or under the Acknowledgement after the Blackstone General Partner has
given such Partner or any other such party notice of such default and such
Partner or other party has failed to cure such default within 30 days after
receipt of such notice.
(b) The Interstate General Partner shall have the right to
terminate the right of first opportunity set forth in Section 3.6 if any member
of the Blackstone Group defaults in the performance of any of its obligations
hereunder or under the Acknowledgement after the Interstate General Partner has
given such Partner or any other such party notice of such default and such
Partner or other party has failed to cure such default within 30 days after
receipt of such notice.
(c) The right of first opportunity set forth in Section 3.6
shall automatically terminate upon the earlier to occur of (i) December 15, 1997
or (ii) the date upon which the members of the Blackstone Group in the
Partnership and in the Parallel Partnerships shall have contributed an aggregate
of $29,400,000 to the Partnership and the Parallel Partnerships and the members
of the Interstate Group in the Partnership and the Parallel Partnerships shall
have contributed an aggregate of $30,600,000 to the Partnership and the Parallel
Partnerships.
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(d) At any time after $54,000,000 has been invested (either
through acquisitions that are closed or through binding commitments to close
acquisitions) in the aggregate by the Partnership and the Parallel Partnerships,
then any Partner may elect to terminate the right of first opportunity set forth
in Section 3.6 upon three (3) Business Days notice to all the other Partners.
(e) The General Partners may, in their discretion, extend the
right of first opportunity set forth in Section 3.6 for such period of time as
they may mutually agree.
SECTION 3.9 Financing. The Blackstone General Partner, acting
directly or through one or more of its Affiliates, shall endeavor to secure an
acquisition financing facility for the Partnership and the Parallel Partnerships
in an initial amount between $60,000,000 and $80,000,000, such facility to be
subject to borrowings by the Partnership and the Parallel Partnerships to
acquire Target Investments in the event that sufficient seller financing is not
available in connection with the acquisition of any such Target Investment and
for other related purposes. If needed, the Blackstone General Partner may secure
additional debt facilities for the Partnership and the Parallel Partnerships up
to an aggregate amount (including the initial $60,000,000 to $80,000,000)
between $140,000,000 and $180,000,000. The General Partners must unanimously
approve the terms and conditions of such financing. In the event such financing
is obtained, in addition to any other fees, expenses or other compensation
payable to the Blackstone General Partner and/or its Affiliates hereunder or any
fees payable to third parties in connection with such financing, the Partnership
and the Parallel Partnerships shall pay to the Blackstone General Partner and/or
its Affiliates, as the case may be, a fee for placing such debt facilities in an
amount equal to one percent (1%) of the maximum principal amount of each such
debt facility. The portion of such fee allocated to the Partnership shall be
determined by the Blackstone General Partner, in its sole discretion. At the
time such fee is payable, each Partner shall fund to the Partnership, as a
Capital Contribution, a portion of such fee, to the extent not financed as part
of the overall transaction. The Interstate General Partner and the Blackstone
General Partner shall each make a Capital Contribution equal to 0.5% of such fee
allocated to the Partnership. The Interstate Limited Partner shall make a
Capital Contribution equal to 50.5% of such fee allocated to the Partnership.
The Blackstone Limited Partners shall, in the aggregate, make Capital
Contributions equal to 48.5% of such fee allocated to the Partnership, and each
Blackstone Limited Partner's share thereof shall be determined by the Blackstone
General Partner, in its sole discretion, and recorded in the books and records
of the Partnership. No fee shall be payable under this Section in connection
with the refinancing of any such debt facilities.
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SECTION 3.10 Financial Advisory Services. (a) Each time that
the Partnership acquires a Target Investment, the Partnership and any Parallel
Partnerships invested in such Target Investment shall pay to whichever of the
Blackstone General Partner (and/or its Affiliates) or the Interstate General
Partners (and/or its Affiliates) proposed such Target Investment to the
Partnership, an aggregate advisory fee equal to one percent (1%) of the amount
of the Consideration for the acquisition of such Target Investment; provided
that the Blackstone General Partner or its Affiliates shall not be entitled to
such a fee after the occurrence and during the continuance of a default
hereunder by any of the Blackstone Partners (after any notice and opportunity to
cure); and provided further that the Interstate General Partner or its
Affiliates shall not be entitled to such a fee after the occurrence and during
the continuance of a default hereunder by any of the Interstate Partners (after
any notice and opportunity to cure). The portion of such fee allocated to the
Partnership shall be determined by the Blackstone General Partner. At the time
such fee is payable, each Partner shall fund to the Partnership, as a Capital
Contribution, a portion of such fee, to the extent not financed as part of the
overall transaction. The Interstate General Partner and the Blackstone General
Partner shall each make a Capital Contribution equal to 0.5% of such fee
allocated to the Partnership. The Interstate Limited Partner shall make a
Capital Contribution equal to 50.5% of such fee allocated to the Partnership.
The Blackstone Limited Partners shall, in the aggregate, make Capital
Contributions equal to 48.5% of such fee allocated to the Partnership, and each
Blackstone Limited Partner's share thereof shall be determined by the Blackstone
General Partner, in its sole discretion, and recorded in the books and records
of the Partnership.
(b) Each time that the Partnership disposes (including,
without limitation, in exchange for stock of a corporation, partnership
interests in a partnership or interests in a limited liability company) of a
Target Investment, the Partnership and any Parallel Partnerships invested in
such Target Investment shall pay to the Blackstone General Partner (and/or its
Affiliates) an aggregate advisory fee equal to one percent (1%) of the amount of
the Consideration for the disposition of such Target Investment; provided that
the Blackstone General Partner or its Affiliates shall not be entitled to such a
fee after the occurrence and during the continuance of a default hereunder by
any of the Blackstone Partners (after any notice and opportunity to cure). The
portion of such fee allocated to the Partnership shall be determined by the
Blackstone General Partner. At the time such fee is payable, each Partner shall
fund to the Partnership, as a Capital Contribution, its pro rata portion of such
fee, based upon such Partner's Sharing Percentage, to the extent not financed as
part of the overall transaction.
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SECTION 3.11 Other Partner Services.
(a) Until such time as the General Partners hire, as an
employee or employees of the Partnership, a portfolio manager, a controller
and/or an administrative staff to conduct and oversee the overall administration
of the Partnership, the Interstate General Partner shall conduct all the
administrative affairs of the Partnership at the then Competitive Rate;
provided, however, that the General Partners agree to hire an employee or
employees of the Partnership to perform such tasks promptly after the needs of
the Partnership so require. Any such employee may be employed jointly by the
Parallel Partnerships. The Interstate General Partner shall also, at no cost to
the Partnership (except where otherwise provided in this Agreement), conduct,
oversee and/or manage all (i) pre-acquisition due diligence, (ii) property-level
management, (iii) performance tracking, (iv) the making of capital improvements
to any Project, (v) overall portfolio management of the Partnership Assets and
(vi) negotiation of franchise fee arrangements. The Interstate General Partner
shall also be responsible for preparing administrative, operating and capital
budgets for the Partnership. The Interstate General Partner shall submit to the
General Partners all relevant information regarding all proposed budgets,
proposed franchise fee arrangements and related financial matters, and the
General Partners shall have the right to Consent to all such materials before
they are implemented by the Partnership.
(b) The Blackstone General Partner shall, at no cost to the
Partnership (except where otherwise provided in this Agreement), conduct,
oversee and/or manage all the acquisition and disposition activities of the
Partnership, including overseeing acquisitions and dispositions of Target
Investments, arranging debt financings on individual Target Investments and
conducting and/or overseeing all mergers and public securities offerings.
(c) The Partners acknowledge that Affiliates of the Interstate
General Partner have the capability of providing to the Partnership various
insurance and purchasing services. At the direction of the Blackstone General
Partner acting in its sole discretion (including, as to insurance, approval by
the Blackstone General Partner of the financial soundness of any proposed
insurance company and its reinsurers), the Partnership may engage such
Affiliates of the Interstate General Partner to perform such services (in which
case such services shall be performed at Competitive Rates) or the Partnership
may engage independent third parties to perform such services, provided, that if
the Partnership has received an offer from any such independent third party to
perform such services, Affiliates of the Interstate General Partner shall have
the right to match such offer and, if such offer is matched, the Partnership
will engage such Affiliates on the terms of such offer.
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(d) In performance of the services pursuant to this Section
3.11 and otherwise, the Partners agree that they shall cooperate and consult
with each other in an effort to minimize duplication of efforts and costs.
SECTION 3.12 Marketing Rights. At any time after December __,
1997 [18 MONTHS FROM THE EXECUTION HEREOF], the Blackstone Partners, acting
jointly, or the Interstate Partners, acting jointly, may propose the sale of a
Project or Projects (but not a portion of any Project) in accordance with the
following terms:
(a) All of the Blackstone Partners may jointly serve upon all
of the Interstate Partners, or all of the Interstate Partners may
jointly serve upon the all of the Blackstone Partners, a notice (an
"Offering Notice") as described below. The partners serving an Offering
Notice shall be referred to in this Section as the "Offering Group".
The partners receiving an Offering Notice shall be referred to in this
Section as the "Offeree Group". Each Offering Notice shall specify one
or more Projects (the "Offered Projects") that the Offeror Group
proposes to be sold (either by causing the Property Partnerships which
own such Offered Projects to sell such Offered Projects or by selling
all of the partnership interests in such Property Partnerships) and
designate a price for the sale of each Offered Project (the "Offer
Price"). The Offeree Group with respect to a Project may not deliver an
Offering Notice with respect to such Project until the expiration of
the Sale Option Period (as defined below) for such Project with respect
to the Offering Notice of the Offeror Group with respect to such
Project. The Offering Notice may not propose to sell a portion of any
Project. An Offering Notice delivered under this Agreement must be
simultaneously delivered under the partnership agreement of each of the
Parallel Partnerships, and for the purposes of this Section 3.12, the
Offeror Group shall consist of all of the members of the Offeror Groups
in each of the Parallel Partnerships, the Offeree Group shall consist
of all of the members of the Offeree Groups in each of the Parallel
Partnerships, the Offered Projects shall consist of the interest of all
of the Parallel Partnerships in such Offered Projects, and the Offeree
Deposit (as defined below) shall be delivered in the aggregate by all
of the Parallel Partnerships,
(b) Within 30 days after the receipt by the Offeree Group of
an Offering Notice (an "Offeree Option Period"), the Offeree Group may
in a writing to the Offeror Group (an "Offeree Reply Notice") (i) elect
to purchase all of the Offered Projects listed in such Offering Notice
(an "Offeror Group Interest") at a price equal to the aggregate Offer
Price for the Offered Projects, or (ii) decline to purchase such
Offered Projects. With respect to each Offering Notice, if the Offeree
Group fails to deliver an Offeree
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Reply Notice to the Offeror Group prior to the expiration of the
Offeree Option Period, the Offeree Group shall for all purposes be
conclusively deemed to have declined to purchase the Offered Projects
listed in such Offering Notice. If the Offeree Group elects to purchase
all of the Offered Projects, the Offeree Group shall deliver to a
mutually acceptable escrow agent, a nonrefundable deposit in an amount
equal to 5% of the aggregate Offer Price for the Offered Projects (the
"Offeree Deposit"); in such case, the Offeree Reply Notice shall not be
deemed delivered until such time as the escrow agent has received the
Offeree Deposit. The Offeror Group and the Offeree Group shall endeavor
to structure any sale of the Offered Projects to the Offeree Group in a
tax efficient manner.
(c) If, with respect to an Offering Notice, the Offeree Group
elects to purchase the Offered Projects, the closing of the purchase of
such Offered Projects (the "Closing") will be held on a date selected
by the Offeree Group upon five Business Days' notice to the Offeror
Group but no later than 90 days after the Offeror Group's receipt of
the Offeree Reply Notice (the "Outside Purchase Date"). Each Closing
shall be held in New York City at a location designated by the General
Partner in the Offeror Group. At the Closing, the Partnership (or the
Property Partnership, as applicable) shall execute such transfer
documents as the Offeree Group shall reasonably require to transfer the
Offered Projects to the Offeree Group, as is, where is, and the Offeree
Group shall pay to the Offeror Group, in immediately available funds,
the aggregate Offeror Price for all of the Offered Projects listed in
such Offering Notice. To the extent the execution by a member or
Affiliate of a member of the Offeree Group is required on behalf of the
Partnership or Property Partnership, each member or Affiliate of a
member of the Offeree Group shall promptly execute and deliver any such
document or instrument, and each Partner of the Offeree Group hereby
constitutes and appoints each Partner in the Offeror Group its attorney
in fact to execute, acknowledge and deliver any such documents or
instruments in its stead.
(d) An Offeree Reply Notice shall be an irrevocable binding
obligation of the Offeree Group. If the Offeree Group elects in an
Offeree Reply Notice to purchase the Offered Projects, and the Offeree
Group fails to purchase such Offered Projects by the applicable Offeree
Outside Purchase Date, (i) the Offeree Group shall immediately forfeit
all of its rights under this Section 3.12 with respect to any Projects,
including without limitation the right to send out Offering Notices
with respect to any Projects, (ii) the Offeror Group shall be entitled
to retain the Offeree Deposit as liquidated damages, and (iii) the
Offeror Group shall be entitled to exercise any and all other remedies
available at law and equity, including
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specific performance since the parties hereto recognize that damages
alone would be inadequate.
(e) With respect to an Offering Notice, if the Offeree Group
declines (or is deemed to have declined) to purchase the Offered
Projects listed therein, the Offeror Group shall have the right,
without the consent of any Partner of the Offeree Group, within 90 days
after the earlier of (i) the Offeror Group's receipt of an Offeree
Reply Notice in which the Offeree Group declines to purchase the
Offered Projects, and (ii) the expiration of the Offeree Option Period
(such 90 day period, the "Sale Option Period"), to cause the sale of
any or all of the Offered Projects listed in such Offering Notice
(including the sale to any member of the Offeror Group). Each Partner
of the Offeree Group shall promptly execute and deliver any document or
instrument the Offeror Group reasonably requires in order to consummate
the sale of such Offered Projects during the Sale Option Period, and
each Partner of the Offeree Group hereby constitutes and appoints each
Partner in the Offeror Group its attorney in fact to execute,
acknowledge and deliver any such documents or instruments in its stead.
Notwithstanding the foregoing, the Offeror Group shall not be entitled
to cause the sale of an Offered Project during the Sale Option Period
for a sales price of less than 90% of the Offer Price for such Offered
Project listed in such Offering Notice (or 100% of the Offer Price for
such Offered Project if the purchaser is any member of the Offeror
Group or any affiliate of any member of the Offeror Group). If an
Offered Project is not sold prior to the expiration of the Sale Option
Period, the Offeror Group may not cause the sale of such Offered
Project without again complying with all of the provisions of this
Section (unless all of the other Partners consent). No Partner may
exercise its rights under this Section with respect to any particular
Project more than once in any twelve month period (but such Partner may
exercise its rights under this Section with respect to other Projects).
The Offeror Group and the Offeree Group shall endeavor to structure any
sale of the Offered Projects to the Offeror Group (or any member
thereof) in a tax efficient manner.
ARTICLE IV
Other Activities Permitted
Except as expressly provided hereunder, this Agreement shall
not be construed in any manner to preclude any Partner or any of its Affiliates
from engaging in any activity whatsoever permitted by applicable law (whether or
not such activity might compete, or constitute a conflict of interest, with the
Partnership), including, without limitation, the provision of financial or
investment advisory services to any person, managing
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investments or receiving compensation or profit from any of the
foregoing.
ARTICLE V
Capital Contributions;
Distributions
SECTION 5.1 Capital Contributions. (a) No Partner shall be
required to make a Capital Contribution except as provided in this Section. Each
Partner agrees to make Capital Contributions (i) as required by this Agreement,
including, without limitation, Sections 3.6, 3.9, 3.10 and 5.7 of this
Agreement, (ii) to pay for costs and expenses under approved budgets and for
fees, costs and expenses specifically payable by the Partnership pursuant to
this Agreement or (iii) in the event that the General Partners determine that
the Partnership requires additional funds to meet its then existing obligations,
including to cover operating shortfalls, and funds are not otherwise available
from Partnership revenues or from loans to the Partnership for such purposes.
With respect to each Project, each of the Partners shall be required to make
Capital Contributions to the Partnership in accordance with such Partner's
Sharing Percentage in such Project (as determined in accordance with Section
3.6(f) above); provided that, except for amounts to be contributed under clause
(iii) above (for which no limit shall apply), the aggregate amount of Capital
Contributions made by the Blackstone Partners hereof and by the Blackstone
Partners in the Parallel Partnerships shall not exceed $29,400,000, and the
aggregate amount of Capital Contributions made by the Interstate Partners hereof
and by the Interstate Partners in the Parallel Partnerships shall not exceed
$30,600,000. It is understood and agreed that the commitment by the Blackstone
Partners and the Interstate Partners to fund their respective Committed Capital
is not revolving in nature and at such time as the date such Partner's Committed
Capital shall have been funded in full, such commitment will expire and be of no
further force or effect.
(b) No Partner shall have any obligation to restore any
negative balance in the Partner's Capital Account upon liquidation of the
Partnership. No Partner shall be entitled to withdraw all or any part of its
Capital Contributions except as expressly provided in this Partnership
Agreement. No interest shall be payable by the Partnership on the Capital
Contributions of any Partner except as otherwise provided herein. In no event
shall any Partner be entitled to demand any property from the Partnership other
than cash.
(c) When Capital Contributions are required under paragraph
(a) above from the Partners, the General Partners shall give notice to all of
the Partners of the amount of funds required and the date such funds shall be
due, which due date
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shall be, unless otherwise provided in this Agreement, no less than 10 Business
Days from the date such notice is given.
SECTION 5.2 Partner Loans for Failure to Fund Committed
Capital. If any Partner shall fail to timely make a Capital Contribution
required in Section 5.1 (such Partner is hereinafter referred to as a
"Non-Contributing Partner") and such default is not cured within 10 days of the
date such Capital Contribution was due, then any other Partner (a "Contributing
Partner") may fund all or part of such Capital Contribution and, unless the
Contributing Partner otherwise elects the remedy of the dilution of such
Non-Contributing Partner's Interest in the Partnership as set forth in Section
5.3 below, any amounts funded by a Contributing Partner on behalf of a
Non-Contributing Partner shall be made directly to the Partnership but shall be
treated as (i) a recourse demand loan made by the Contributing Partner to the
Non-Contributing Partner (bearing interest at a fluctuating rate of interest
equal to 10% per annum in excess of the prime rate of interest publicly
announced by Citibank, N.A. from time to time, but not less than 15% per annum,
but in no event in excess of the maximum rate permitted by applicable law),
followed by (ii) a Capital Contribution by such Non-Contributing Partner to the
Partnership. Any such recourse loan (to the extent of unpaid principal and
interest) shall be payable on demand by the Contributing Partner and shall be
repaid directly by the Partnership on behalf of the Non-Contributing Partner to
the Contributing Partner from Non-Capital Proceeds and Capital Proceeds
otherwise distributable to the Non-Contributing Partner. Amounts paid directly
by the Partnership to the Contributing Partner on account of the loan shall be
deemed distributions to the Non-Contributing Partner. Any Non-Capital Proceeds
and Capital Proceeds used to repay such loan shall be applied first to interest
and then to principal thereof.
SECTION 5.3 Dilution for Failure to Fund Capital. (a) With
respect to a Project, if a Non-Contributing Partner fails to contribute any
amounts required to be contributed pursuant to Section 5.1 above as and when
required to be contributed and such funds are contributed to the Partnership by
a Contributing Partner, the Non-Contributing Partner's Sharing Percentage in
such Project shall be, if the Contributing Partner elects to apply the
provisions of this Section 5.3 in lieu of the loan mechanism provided in Section
5.2, adjusted pursuant to Section 5.3(b) below as of the day on which the
Contributing Partner contributes such funds. In such an event the contribution
of such funds shall be treated as a Capital Contribution to the Partnership by
the Contributing Partner.
(b) With respect to a Project, the Sharing Percentage in such
Project of a Non-Contributing Partner may be reduced (but not below zero), upon
the election described in Section 5.3(a) above, by an amount equal to the
product of (i) 1.6 times (ii) a fraction expressed as a percentage, (A) the
numerator of which is the amount of the Capital Contribution which such Non-
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Contributing Partner fails to contribute with respect to such Project and (B)
the denominator of which is the aggregate of the Capital Contributions made by
the Partners with respect to such Project up to and including such time,
including the Capital Contribution which such Non-Contributing Partner fails to
make. The Sharing Percentage of the Contributing Partner in such Project shall
be increased by the amount of the reduction in the Sharing Percentage of the
Non-Contributing Partner in such Project. Notwithstanding the foregoing, if
within 90 days after the reduction of the Non-Contributing Partner's Sharing
Percentage described herein, the Non-Contributing Partner pays to the
Contributing Partner the amount which the Non-Contributing Partner failed to
contribute and such Contributing Partner contributed, together with interest
thereon (at a rate equal to 10% per annum in excess of the prime rate of
interest publicly announced by Citibank, N.A. from time to time, but not less
than 15% per annum, and in no event in excess of the maximum rate permitted by
applicable law), the Non-Contributing Partner's Sharing Percentage in such
Project and the Contributing Partner's Sharing Percentage in such Project shall
be reinstated as if the Non-Contributing Partner had timely made such Capital
Contribution.
SECTION 5.4 Distributions Generally. Capital Proceeds shall be
distributed as soon as practicable but in any event within 45 days after the
date that such Proceeds are received by the Partnership. Non-Capital Proceeds
shall be distributed at such times and intervals as the General Partners shall
determine, but in no event later than 30 days after the end of each calendar
quarter. The Partnership shall make such distributions in cash among the
Partners in accordance with this Article V.
SECTION 5.5 Distributions of Proceeds.
(a) Each distribution of Non-Capital Proceeds from a Project
shall be made to the Partners to the extent of, and pro rata in accordance with,
each of their Sharing Percentages in such Project (as the same may be adjusted
hereunder). Notwithstanding the foregoing, Non-Capital Proceeds from a Project
otherwise distributable to a Blackstone Partner shall be distributed as follows:
(i) First, 100% to such Blackstone Partner until such
Blackstone Partner has received cumulative Proceeds from such Project
in an amount equal to the Capital Contributions made by such Partner
with respect to such Project; and
(ii) Second, 100% to such Blackstone Partner until such
Blackstone Partner has received cumulative Proceeds from such Project,
in excess of any amounts distributed under Section 5.5(a)(i) above, in
an amount which generates a 20% Internal Rate of Return on the Capital
Contributions made by such Partner with respect to such Project; and
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(iii) Thereafter, 86.532% to such Blackstone Partner and
13.468% to the Interstate Partners (pro rata in accordance with their
Sharing Percentages in such Project).
(b) Each distribution of Capital Proceeds from a Project shall
be made to the Partners to the extent of, and pro rata in accordance with, each
of their Sharing Percentages (as the same may be adjusted hereunder).
Notwithstanding the foregoing, Capital Proceeds from a Project otherwise
distributable to a Blackstone Partner shall be distributed as follows:
(i) First, 100% to such Blackstone Partner until such
Blackstone Partner has received cumulative Proceeds from (x) all
Projects which have been subject to a Disposition on or prior to the
date of such distribution and (y) all Projects for which an Unrealized
Loss exists on such date, in an amount equal to the sum of the Capital
Contributions made by such Partner as of such date with respect to all
Projects which have been subject to a Disposition on or prior to such
date; and
(ii) Second, 100% to such Blackstone Partner until such
Blackstone Partner has received cumulative Proceeds from (x) all
Projects which have been subject to a Disposition on or prior to the
date of such distribution and (y) all Projects for which an Unrealized
Loss exists on such date, in excess of any amounts distributed under
Section 5.5(b)(i) above, in an amount which generates a 20% Internal
Rate of Return on the Capital Contributions made by such Partner as of
such date with respect to all Projects which have been subject to a
Disposition on or prior to such date and all Projects for which an
Unrealized Loss exists on such date; and
(iii) Third, 100% to such Blackstone Partner until such
Blackstone Partner has received cumulative Proceeds from (x) all
Projects which have been subject to a Disposition on or prior to the
date of such distribution and (y) all Projects for which an Unrealized
Loss exists on such date, in excess of any amounts distributed under
Sections 5.5(b)(i) and (ii) above, in an amount equal to the total of
such Partner's pro rata shares of Unrealized Loss from all Projects for
which an Unrealized Loss exists on such date (based on such Partner's
Sharing Percentage in each such Project); and
(iv) Thereafter, 86.532% to such Blackstone Partner and
13.468% to the Interstate Partners (pro rata in accordance with their
Sharing Percentages in each such Project).
SECTION 5.6 Restricted Payments. Notwithstanding any
provisions to the contrary in this Agreement, neither the Partnership nor the
General Partners on behalf of the Partnership shall make a distribution if such
distribution would violate the Partnership Act.
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SECTION 5.7 Partnership Expenses. (a) Promptly after the date
of this Agreement, the Partnership, to the extent it does not pay such costs and
expenses directly, will reimburse each Partner for Organizational Expenses
incurred by such Partner.
(b) The following expenses shall be borne by the
Partnership:
(i) To the extent not reimbursed, all expenses (other than
any Partner's overhead) reasonably incurred in the operation of the
Partnership (and approved by the General Partners if required
hereunder), including without limitation, any taxes imposed on the
Partnership, fees and expenses for attorneys and accountants, the costs
and expenses of any insurance purchased by the Partnership, and the
costs and expenses of any litigation involving the Partnership and the
amount of any judgments or settlements paid in connection therewith;
and
(ii) All third party professional services which have been
approved by the General Partners and incurred in connection with a
proposed Target Investment that is not ultimately made or a proposed
disposition of a Project which is not actually consummated, including,
without limitation, (i) commitment fees that become payable in
connection with a proposed Target Investment that is not ultimately
made, (ii) legal fees, accounting fees and other third party
professional due diligence costs and expenses and (iii) all travel and
similar out of pocket costs and expenses of employees of the Partners
in connection with approved due diligence.
Partnership expenses shall be paid directly by the Partnership
or the Partnership shall reimburse the Partner who incurred such expenses for
the payment thereof, as the case may be.
ARTICLE VI
Books and Reports; Tax Matters;
Capital Accounts; Allocations
SECTION 6.1 General Accounting Matters. (a) Allocations of Net
Income (Loss) pursuant to Section 6.4 shall be made by or under the direction of
the General Partners at the end of each Fiscal Period.
(b) Each Partner shall be supplied with the Partnership
information necessary to enable such Partner to prepare in a timely manner its
Federal, state and local income tax returns and such other financial or other
statements and reports that are approved by the General Partners.
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(c) The Blackstone General Partner shall keep or cause to be
kept books and records pertaining to the Partnership's business showing all of
its assets and liabilities, receipts and disbursements, realized profits and
losses, Partners' Capital Accounts and all transactions entered into by the
Partnership. Such books and records of the Partnership shall be kept at the
office of the Blackstone General Partner and the Partners and their
representatives shall at all reasonable times have free access thereto for the
purpose of inspecting or copying the same. The Partnership's books of account
shall be kept on an accrual basis or as otherwise provided by the General
Partners, and otherwise in accordance with generally accepted accounting
principles, except that for income tax purposes such books shall be kept in
accordance with applicable tax accounting principles.
(d) Except as otherwise provided herein, all determinations,
valuations and other matters of judgment required to be made for accounting and
tax purposes under this Agreement shall be made by or under the direction of the
General Partners and shall be conclusive and binding on all Partners, former
Partners, their successors or legal representatives and any other person except
for computational errors or fraud, and to the fullest extent permitted by law no
such person shall have the right to an accounting or an appraisal of the assets
of the Partnership or any successor thereto except for computational errors or
fraud.
(e) The books of the Partnership shall be examined, certified
and audited annually as of the end of each Fiscal Year, by such recognized firm
of independent certified public accountants that is designated by the General
Partners. For each Fiscal Year of the Partnership, such accountants shall
determine and prepare full financial statements, including, without limitation,
a balance sheet, an income statement, a statement of changes in financial
position and a statement of the Non-Capital Proceeds and Capital Proceeds of the
Partnership. The General Partners shall promptly upon receipt of such financial
statements, and in any event within 90 days after the end of each such Fiscal
Year, transmit copies thereof to each Partner, together with the report and
management letter of such accountants covering the results of such audit. The
cost of all audits and reports provided to the Partners pursuant to this Section
shall be an expense of the Partnership.
SECTION 6.2 Certain Tax Matters.
The taxable year of the Partnership shall be the same as its
Fiscal Year. The Tax Matters Partner (as defined below) shall cause to be
prepared all Federal, state and local tax returns of the Partnership for each
year for which such returns are required to be filed and, after approval of such
returns by the General Partners, shall cause such returns to be timely filed.
The General Partners shall determine the appropriate treatment of each item of
income, gain, loss, deduction and
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credit of the Partnership and the accounting methods and conventions under the
tax laws of the United States, the several states and other relevant
jurisdictions as to the treatment of any such item or any other method or
procedure related to the preparation of such tax returns. The Tax Matters
Partner shall make the election provided for in Section 754 of the Code, if, and
only if the Partner who or which has acquired an interest in the Partnership or
a distribution of Partnership property with respect to which the election is
made will have provided to the Tax Matters Partner concurrently, or within 30
days after the Transfer of such interest, its undertaking to the effect that it,
and its successors in interest hereunder, will reimburse the Partnership
annually for its additional administrative costs incurred by reason of such
election as determined by the auditor of the Partnership. The Tax Matters
Partner shall also make the election to amortize Organizational Expenses
pursuant to Code Section 709 and the regulation promulgated thereunder. In
addition, the General Partners may cause the Partnership to make or refrain from
making any and all other elections permitted by the tax laws of the United
States, the several states and other relevant jurisdictions. The Tax Matters
Partner for purposes of Section 6231(a)(7) of the Code (the "Tax Matters
Partner") shall be the Blackstone General Partner. The Tax Matters Partner shall
have all of the rights, duties, powers and obligations provided for in Sections
6221 through 6232 of the Code with respect to the Partnership provided, however,
that the following provisions shall apply with respect to the Tax Matters
Partner:
(a) The Tax Matters Partner shall be responsible for the
filing of the Partnership information returns required under Section
6031 of the Code. Within thirty (30) days after the end of each Fiscal
Year, the Tax Matters Partner shall furnish to the Partnership's
accountants sufficient information for the preparation of all required
Partnership tax returns.
(b) A Partner shall provide notice to the Tax Matters Partner
of its intent to file an original or an amended income tax return of
which such Partner will take a position with respect to a partnership
item that is inconsistent with the position taken by the Tax Matters
Partner on the Partnership return. Such notice must be given at least
thirty (30) days prior to the filing of such return. At such time, such
Partner shall provide the Tax Matters Partner with a statement
detailing the inconsistent item or items contained in such return.
Within ten (10) days of receipt of such statement, the Tax Matters
Partner shall provide a copy of such statement to each Partner.
(c) The Tax Matters Partner shall include in each Partnership
return sufficient information to entitle each eligible Partner and any
indirect partner (at its request) to notice from the Internal Revenue
Service pursuant to Section 6223(a) of the Code.
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(d) Each Partner reserves the right to participate in
an audit proceeding.
(e) Each Partner reserves the right to enter into a separate
settlement agreement with the Internal Revenue Service. A Partner who
enters into a settlement agreement with the Internal Revenue Service
concerning a partnership item shall notify the Tax Matters Partner of
its terms within ten (10) days of such agreement, and the Tax Matters
Partner shall notify the other Partners of the terms of such agreement
within ten (10) days after receiving such notice. The Tax Matters
Partner shall notify each other Partner of the terms of any settlement
offer received by it within ten (10) days of receiving such offer.
(f) The Tax Matters Partner shall not file an administrative
adjustment request without the Consent of all of the General Partners.
Each Partner, other than the Tax Matter partner, reserves the right to
file an administrative adjustment request under Section 6227 of the
Code. Any Partner filing an administrative adjustment request shall
notify the Tax Matters Partner of its contents within ten (10) days
after filing such request. The Tax Matters Partner shall notify each
Partner of the contents of such request within ten (10) days of the
receipt of such notice.
(g) All Partners shall report to the Tax Matters Partner the
conversion of a partnership item to a nonpartnership item under Section
6231(b) or any other provision of the Code within ten (10) days of
learning of the conversion.
(h) Each Partner reserves the right to file a petition for
judicial review and to participate in a judicial proceeding under
Section 6226 and 6228 of the Code. If the Tax Matters Partner files a
petition for judicial review or an appeal under Section 6226 of the
Code, it shall notify each Partner of such petition or appeal within
ten (10) days of such filing. Any other Partner filing a petition for
judicial review or any appeal under Sections 6226 or 6228 of the Code
shall notify the Tax Matters Partner of such petition or appeal on or
before the date of filing. The Tax Matters Partner shall notify each
Partner of such filing within ten (10) days of receipt of such notice
from the filing partner.
(i) The Tax Matters Partner shall not agree to extend the
statute of limitations for assessment without the Consent of all of the
General Partners.
(j) The Tax Matters Partner shall be authorized to incur
expenses in the performance of its duties pursuant to this Agreement.
Notwithstanding any other provision of this Agreement, such expenses
shall be borne by the persons who
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were Partners of the Partnership at any time during the applicable
taxable year without regard to whether such persons are Partners at the
time the expense is incurred. Such expenses shall be allocated to the
Partners and former Partners having an interest in the proceeding at
the time the cost is incurred in proportion to their relative Sharing
Percentages for the applicable taxable year.
(k) The provisions of this Section shall govern the conduct of
all parties who are currently Partners and all parties who were
Partners during the applicable Partnership taxable year. A Partner
shall not be relieved of any duties or responsibilities imposed under
this Section by the termination or transfer of its interest in the
Partnership.
(l) All terms used in this Section that are defined in Section
6231(a) of the Code shall have the meanings set forth therein.
SECTION 6.3 Capital Accounts. There shall be established for
each Partner on the books of the Partnership as of the date hereof, or such
later date on which such Partner is admitted to the Partnership, a capital
account (each being a "Capital Account"). Each Capital Contribution shall be
credited to the Capital Account of such Partner on the date such contribution of
capital is paid to the Partnership. In addition, each Partner's Capital Account
shall be (a) credited with such Partner's allocable share of any Net Income of
the Partnership, (b) debited with (i) distributions to such Partner of cash or
the fair market value of other property and (ii) such Partner's allocable share
of Net Loss of the Partnership and expenditures of the Partnership described or
treated under Section 704(b) as described in Section 705(a)(2)(B) of the Code,
and (c) otherwise maintained in accordance with the provisions of the Code. Any
other item which is required to be reflected in a Partner's Capital Account
under Section 704(b) of the Code or otherwise under this Agreement shall be so
reflected. Capital Accounts shall be appropriately adjusted to reflect transfers
of part (but not all) of a Partner's interest in the Partnership. Interest shall
not be payable on Capital Account balances. Notwithstanding anything to the
contrary contained in this Agreement, the Partnership shall maintain the Capital
Accounts of the Partners in accordance with the principles and requirements set
forth in section 704(b) of the Code and Regulations section 1.704-1(b)(2)(iv).
SECTION 6.4 Allocations. (a) Net Income of the Partnership
shall be allocated to the Partners having deficit balances in their Capital
Accounts (computed after taking into account distributions pursuant to Section
5.5 with respect to such fiscal year, and after adding back each Partner's share
of partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain,
determined pursuant to Regulations sections 1.704-2(g)(1) and 1.704-2(i)(5)) in
proportion to, and to the extent of, such
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deficits. Any remaining Net Income and all Net Loss shall be allocated among the
Partners either 49% to the Blackstone Partners (pro rata in proportion to their
Sharing Percentages) and 51% to the Interstate Partners (pro rata in accordance
with their Sharing Percentages) or [______]% to the Blackstone Partners (pro
rata in proportion to their Sharing Percentages) and [______]% to the Interstate
Partners pro rata in accordance with their Sharing Percentages) so as to produce
to the extent possible Capital Accounts for the Partners (computed in the manner
set forth in the preceding sentence) such that if an amount of cash equal to
such positive Capital Account balances were distributed in accordance with such
positive Capital Account balances, such distribution would be in the amounts,
sequence and priority set forth in Section 5.5 and to the extent Net Loss
exceeds the positive Adjusted Capital Account Balances of the Partners, the
excess shall be allocated first, to those Partners with positive Adjusted
Capital Account Balances, in proportion to, and to the extent of, such Adjusted
Capital Account Balances, and thereafter, to the General Partners, in the ratio
that the Sharing Percentage of each General Partner bears to the Sharing
Percentage of all General Partners. Notwithstanding the foregoing, if an
allocation of Net Loss in the ratio of [______]% to the Blackstone Partners and
[______]% to the Interstate Partners is in excess of amounts of Net Income
previously allocated in the ratio of [______]% to the Blackstone Partners and
[______]% to the Interstate Partners, then such allocation of Net Loss shall
instead be made 49% to the Blackstone Partners (pro rata in proportion to their
Sharing Percentages) and 51% to the Interstate Partners (pro rata in accordance
with their Sharing Percentages). Notwithstanding the foregoing, if an allocation
of Net Income or Net Loss would not result in Capital Accounts for the Partners
(computed in the manner set forth in the first sentence of this paragraph (a))
being equal to cash distributions in the amounts, sequence and priority set
forth in Section 5.5, Net Income may be allocated 100% to the Interstate
Partners (pro rata in accordance with their Sharing Percentages) or Net Loss may
be allocated 100% to the Blackstone Partners (pro rata in accordance with their
Sharing Percentages) if (and to the extent necessary) to produce Capital
Accounts equal (or in proportion) to the cash distributions set forth in Section
5.5.
(b) Notwithstanding anything herein to the contrary, in the
event any Partner unexpectedly receives any adjustments, allocations or
distributions described in paragraphs (b)(2)(ii)(d)(4), (5) or (6) of Section
1.704-1 of the regulations under the Code, there shall be specially allocated to
such Partner such items of Partnership income and gain, at such times and in
such amounts as will eliminate as quickly as possible that portion of any
deficit in its Capital Account caused or increased by such adjustments,
allocations or distributions. To the extent permitted by the Code and the
regulations thereunder, any special allocations of items of income or gain
pursuant to this Section 6.4(c) shall be taken into account in computing
subsequent allocations of Net Income
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(Loss) pursuant to this Section 6.4 so that the net amount of any items so
allocated and the subsequent allocations of Net Income (Loss) to the Partners
pursuant to this Section 6.4 shall, to the extent possible, be equal to the net
amounts that would have been allocated to each such Partner pursuant to the
provisions of this Section 6.4 if such unexpected adjustments, allocations or
distributions had not occurred.
(c) All items of income, gain, loss, deduction and credit of
the Partnership shall be allocated among the Partners for Federal, state and
local income tax purposes consistent with the manner that the corresponding
constituent items of Net Income (Loss) shall be allocated among the Partners
pursuant to this Agreement, except as may otherwise be provided herein or by the
Code. To the extent Treasury Regulations promulgated pursuant to Subchapter K of
the Code (including under Sections 704(b) and (c) of the Code) require
allocations for tax purposes that differ from the foregoing allocations, the
General Partners may determine the manner in which such tax allocations shall be
made so as to comply more fully with such Treasury Regulations or other
applicable law and, at the same time to the extent reasonably possible, preserve
the economic relationships among the Partners as set forth in this Agreement.
(d) Notwithstanding the provisions of this Section 6.4, net
income, net gain, and net loss of the Partnership (or items of income, gain,
loss, deduction, or credit, as the case may be) shall be allocated in accordance
with the following provisions of this Section 6.4 to the extent such provisions
shall be applicable.
(i) Nonrecourse Deductions of the Partnership for any
Fiscal Year shall be specially allocated to the Partners in the same
proportion as Net Income or Net Loss is allocated for such Fiscal Year;
provided that if an allocation of Nonrecourse Deductions in the ratio
of [______]% to the Blackstone Partners and [______]% to the Interstate
Partners is in excess of amounts of Net Income previously allocated in
the ratio of [______]% to the Blackstone Partners and [______]% to the
Interstate Partners, then such allocation of Nonrecourse Deductions
shall instead be made 49% to the Blackstone Partners (pro rata in
proportion to their Sharing Percentages) and 51% to the Interstate
Partners (pro rata in accordance with their Sharing Percentages).
Partner Nonrecourse Deductions of the Partnership for any Fiscal Year
shall be specially allocated to the Partner who bears the economic risk
of loss for the liability in question. The provisions of this Section
6.4(e)(i) are intended to satisfy the requirements of Regulations
sections 1.704-2(e)(2) and 1.704-2(i)(1) and shall be interpreted in
accordance therewith for all purposes under this Agreement.
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(ii) If there is a net decrease in the Minimum Gain of the
Partnership during any Partnership Fiscal Year, each Partner shall be
specially allocated items of Partnership income and gain for such year
equal to that Partner's share of the net decrease in Minimum Gain,
within the meaning of Regulations section 1.704- 2(g)(2). The
provisions of this Section 6.4(e)(ii) are intended to comply with the
Minimum Gain chargeback requirements of Regulations section 1.704-2(f)
and shall be interpreted in accordance therewith for all purposes under
this Agreement.
(iii) If there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Fiscal Year, each Partner that has a share of
such partner Nonrecourse Debt Minimum Gain, determined in accordance
with Regulations section 1.704-2(i)(5), as of the beginning of such
year shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, for succeeding years) equal to such
Partner's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain. The provisions of this Section 6.4(e)(iii) are intended to comply
with the Partner Nonrecourse Debt Minimum Gain chargeback requirement
of Regulations section 1.704-2(i)(4) and shall be interpreted in
accordance therewith for all purposes under this Agreement.
ARTICLE VII
Dissolution
SECTION 7.1 Dissolution. The Partnership shall be dissolved
and subsequently terminated upon the occurrence of the first of the following
events:
(a) decision of all of the General Partners to dissolve and
subsequently terminate the Partnership;
(b) December 31, 2045;
(c) the occurrence of a Disabling Event with respect to the
sole remaining General Partner, provided that the Partnership shall not
be dissolved if, within 90 days after such Disabling Event, all of the
Partners agree in writing to continue the business of the Partnership
and to the appointment, effective as of the date of the Disabling
Event, of another General Partner; or
(d) if, after the right of first opportunity under Article 3
shall no longer be in effect, all of the Partnership Assets are sold or
otherwise disposed of.
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SECTION 7.2 Winding-up. When the Partnership is dissolved, the
business and property of the Partnership shall be wound up and liquidated by the
General Partners or, in the event of a Disabling Event with respect to any
General Partner, by the remaining General Partners or, in the event of a
Disabling Event with respect to each of the General Partners, such liquidating
trustee as may be named by Limited Partners holding a majority of the Sharing
Percentages (with respect to all of the Projects) held by all Limited Partners
(the party conducting the liquidation being hereinafter referred to as the
"Liquidator"). The Liquidator shall use its best efforts to reduce to cash and
cash equivalent items such assets of the Partnership as the Liquidator shall
deem it advisable to sell, subject to obtaining fair value for such assets and
any tax or other legal considerations.
SECTION 7.3 Final Distribution. Within 90 calendar days after
the effective date of dissolution of the Partnership, the assets of the
Partnership shall be distributed in the following manner and order:
(a) to the payment of the expenses of the winding-up,
liquidation and dissolution of the Partnership;
(b) to pay all creditors of the Partnership, other
than Partners, either by the payment thereof or the making
of reasonable provision therefor;
(c) to establish reserves, in amounts established by
the Liquidator, to meet other liabilities of the
Partnership; and
(d) to pay, in accordance with the provisions of this
Agreement applicable to such loans or in accordance with the terms
agreed among them and otherwise on a pro rata basis, all creditors of
the Partnership that are Partners, either by the payment thereof or the
making of reasonable provision therefor.
The remaining assets of the Partnership shall be applied and distributed in
accordance with the positive balances of the Partners' Capital Accounts, as
determined after taking into account all adjustments to Capital Accounts for the
Partnership taxable year during which the liquidation occurs.
ARTICLE VIII
Transfer of Partners' Interests
SECTION 8.1 Restrictions on Transfer of Partnership Interests.
(a) No Partner may, directly or indirectly, assign, sell, exchange, transfer,
pledge, hypothecate or otherwise dispose of all or any part of its interest in
the Partnership (a
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"Transfer") to any person, other than in accordance with paragraphs (b), (c),
(d), (e) and (f) below. A change in the ultimate beneficial ownership of a
Partner shall be deemed a Transfer for purposes of this Agreement.
(b) Any Partner may Transfer all or part of its interest in
the Partnership to any person upon obtaining the prior written Consent of the
Blackstone General Partner, which Consent may be withheld in its sole and
absolute discretion; provided, however, that upon any Transfer of a Partner's
interest in accordance with this paragraph, the person (the "Transferee") to
whom the Partner's interest was Transferred shall not be admitted as a
substitute Partner without receiving the prior written Consent of the Blackstone
General Partner (which Consent may be withheld in its sole and absolute
discretion) and the Transferee has given written acceptance and adoption of all
of the terms and provisions of this Agreement; and provided, further, that the
prior written Consent of each of the General Partners shall be required to admit
the Transferee as a substitute Partner (which Consent may be withheld in their
sole and absolute discretion) (i) if the Transferee is not an Affiliate of any
member of the Blackstone Group or the Interstate Group, or (ii) if the aggregate
Sharing Percentages of the Interstate Partners (with respect to all of the
Projects) is 20% or less at the time of the Transfer.
(c) A Partner may mortgage, pledge, hypothecate or otherwise
encumber all or any portion of such Partner's rights to receive a portion of the
Non-Capital Proceeds, Capital Proceeds, Net Income and Net Losses to any person;
provided, however, that the holder of such mortgage, pledge, hypothecation or
encumbrance shall not be admitted as a substitute Partner without the prior
Consent of the Blackstone General Partner (which Consent may be withheld in its
sole and absolute discretion), provided that (i) if the Transferee is not an
Affiliate of any member of the Blackstone Group or the Interstate Group or (ii)
if the aggregate Sharing Percentages of the Interstate Partners (with respect to
all of the Projects) is 20% or less at the time of the Transfer, the prior
written Consent of each of the General Partners shall be required, which Consent
may be withheld in their sole and absolute discretion.
(d) At any time, any Blackstone Partner may transfer its
interest in Non-Capital Proceeds, Capital Proceeds, Net Income and Net Losses to
any other Blackstone Partner or its Affiliates but the Transferee shall not be
admitted as a substitute Partner and the transferor shall not be permitted to
withdraw from the Partnership without, in each case, the Consent of the
Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion), or, if the aggregate Sharing Percentages of the Interstate
Partners (with respect to all of the Projects) is 20% or less at the time of the
Transfer, the Consent of each of the General Partners (which Consent may be
withheld in their sole and absolute discretion).
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(e) At any time, any Interstate Partner may transfer its
interest in Non-Capital Proceeds, Capital Proceeds, Net Income and Net Losses to
any other Interstate Partner or their Affiliates, but the Transferee shall not
be admitted as a substitute Partner and the transferor shall not be permitted to
withdraw from the Partnership without, in each case, the Consent of the
Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion).
(f) At any time, the ultimate beneficial ownership of a
Partner may be changed without any requirement for Consent hereunder, provided
that day to day management of such Partner is, at all times thereafter, directly
or indirectly controlled by the Blackstone General Partner or an Affiliate
thereof or by the Interstate General Partner or an Affiliate thereof.
SECTION 8.2 Other Transfer Provisions. (a) Any purported
Transfer by a Partner of all or any part of its interest in the Partnership in
violation of this Article VIII shall be null and void and of no force or effect.
(b) Except as provided in this Article VIII, no Partner shall
have the right to withdraw from the Partnership prior to its termination and no
additional Partner may be admitted to the Partnership without the prior written
consent of the General Partners. In the event of any withdrawal of a General
Partner in violation of this Agreement, including as a result of a Disabling
Event, such General Partner shall be liable to the Partnership as provided in
Section 17-602 of the Partnership Act.
(c) Notwithstanding any provision of this Agreement to the
contrary, a Partner may not Transfer all or any part of its interest in the
Partnership if such Transfer would jeopardize the status of the Partnership as a
partnership for federal income tax purposes, cause a dissolution of the
Partnership under the Partnership Act or would violate, or would cause the
Partnership to violate, any applicable law or regulation (including any
applicable federal or state securities laws) or contract to which the
Partnership is a party.
(d) Concurrently with the admission of any substitute or
additional Partner, the General Partners shall forthwith cause any necessary
papers to be filed and recorded and notice to be given wherever and to the
extent required showing the substitution of a Transferee as a substitute Partner
in place of the Partner Transferring its interest, or the admission of an
additional Partner, all at the expense, including payment of any professional
and filing fees incurred, of such substituted or additional Partner. The
admission of any person as a substitute or additional Partner shall be
conditioned upon such person's written acceptance and adoption of all the terms
and provisions of this Agreement.
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52
(e) If any interest in the Partnership is Transferred during
any accounting period in compliance with the provisions of this Article VIII,
each item of income, gain, loss, expense, deduction and credit and all other
items attributable to such interest for such period shall be divided and
allocated between the transferor and the transferee by taking into account their
varying interests during such period in accordance with Section 706(d) of the
Code, using any conventions permitted by law and selected by the General
Partners. All distributions on or before the date of such Transfer shall be made
to the transferor, and all distributions thereafter shall be made to the
transferee. Solely for purposes of making such allocations and distributions,
the Partnership shall recognize a Transfer on the date that the General Partners
receive notice of the Transfer which complies with this Article VIII from the
Partner Transferring its interest.
ARTICLE IX
Miscellaneous
SECTION 9.1 Equitable Relief. The Partners hereby confirm that
damages at law may be an inadequate remedy for a breach or threatened breach of
this Agreement and agree that, in the event of a breach or threatened breach of
any provision hereof, the respective rights and obligations hereunder shall be
enforceable by specific performance, injunction or other equitable remedy, but,
nothing herein contained is intended to, nor shall it, limit or affect any right
or rights at law or by statute or otherwise of a Partner aggrieved as against
the other for a breach or threatened breach of any provision hereof, it being
the intention by this Section 9.1 to make clear the agreement of the Partners
that the respective rights and obligations of the Partners hereunder shall be
enforceable in equity as well as at law or otherwise and that the mention herein
of any particular remedy shall not preclude a Partner from any other remedy it
or he might have, either in law or in equity.
SECTION 9.2 Ownership and Use of Names. Rights to the name
"Blackstone" shall belong solely to the designated Blackstone Partners. Rights
to the name "Interstate" and "Interstate Hotels" shall belong solely to the
designated Interstate Partners. The ownership of, and the right to use, sell or
otherwise dispose of, the name, Interstone Three Partners III L.P. or any
abbreviation or modification thereof, shall belong to the Partnership. The
Interstate General Partner agrees to take all actions and to approve, execute
and file any document or instrument proposed by any Blackstone Partner to
protect the rights of the Blackstone Partners to the name "Blackstone". The
Blackstone General Partner agrees to take all actions and to approve, execute
and file any document or instrument proposed by any Interstate Partner to
protect the rights of the Interstate Partners to the name "Interstate" and
"Interstate Hotels". The Partners each agree to take all actions
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53
and to approve, execute and file any document or instrument proposed by the
General Partners to protect the rights of the Partnership to the name
"Interstone Three Partners III L.P.".
SECTION 9.3 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware. In
particular, the Partnership is formed pursuant to the Partnership Act, and the
rights and liabilities of the General Partners and Limited Partners shall be as
provided therein, except as herein otherwise expressly provided.
SECTION 9.4 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their
respective successors and assigns.
SECTION 9.5 Access; Confidentiality. By executing this
Agreement, each Partner expressly agrees, at all times during the term of the
Partnership and thereafter and whether or not at the time a Partner of the
Partnership (i) not to issue any press release or advertisement or take any
similar action concerning the Partnership's business or affairs without first
obtaining the Consent of all of the General Partners, (ii) not to publicize
detailed financial information concerning the Partnership without the Consent of
all of the General Partners and (iii) not to disclose the Partnership's affairs
generally without using reasonable efforts to consult with the other Partners
prior to such disclosure; provided, however, the foregoing shall not restrict
any Partner from disclosing information concerning such Partner's investment in
the Partnership to its officers, directors, employees, agents, legal counsel,
accountants, other professional advisors, limited partners and Affiliates, or to
prospective or existing investors in such Partner or its Affiliates or to
prospective or existing lenders to such Partner or its Affiliates, or to
prospective purchasers of any property owned by the Partnership. The provisions
of this Section 9.5 shall survive the termination of the Partnership.
SECTION 9.6 Notices. Whenever notice is required or permitted
by this Agreement to be given, such notice need not be in writing unless
otherwise required herein or requested by the receiving Partner. If in writing,
such notice shall be given to any Partner at its address or facsimile number
shown in the Partnership's books and records (including Schedule A hereto). Each
such notice shall be effective (i) if given by facsimile, upon oral confirmation
of receipt, (ii) if given by mail, on the fourth day after deposit in the mails
(certified or registered return receipt requested) addressed as aforesaid and
(iii) if given by any other means, when delivered to and receipted for at the
address of such Partner specified as aforesaid.
SECTION 9.7 Counterparts. This Agreement may be executed in
any number of counterparts, all of which together shall constitute a single
instrument.
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SECTION 9.8 Entire Agreement. This Agreement embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter hereof.
SECTION 9.9 Amendments. Any amendment to this Agreement shall
be effective only if such amendment is evidenced by a written instrument duly
executed by and delivered to the General Partners; provided, however, no such
amendment shall be effective or binding against a Partner unless executed by
such Partner if such amendment materially and adversely affects such Partner in
a specific manner separate and distinct from the amendment's treatment of other
Partners; and provided, further that any amendment which would have a material
adverse effect on any Partner's economic interest in the Partnership shall
require the Consent of all of the General Partners.
SECTION 9.10 Section Titles. Section titles are for
descriptive purposes only and shall not control or alter the meaning of this
Agreement as set forth in the text hereof.
SECTION 9.11 Representations and Warranties. (a) Each Partner
represents, warrants and covenants to each other Partner and to the Partnership
that:
(i) such Partner, if not a natural person, is duly formed and
validly existing under the laws of the jurisdiction of its organization
with full power and authority to conduct its business to the extent
contemplated in this Agreement;
(ii) this Agreement has been duly authorized, executed and
delivered by such Partner and constitutes the valid and legally binding
agreement of such Partner enforceable in accordance with its terms
against such Partner except as enforceability hereof may be limited by
bankruptcy, insolvency, moratorium and other similar laws relating to
creditors' rights generally and by general equitable principles;
(iii) the execution and delivery of this Agreement by such
Partner and the performance of its duties and obligations hereunder do
not result in a breach of any of the terms, conditions or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, credit agreement, note or other evidence of indebtedness, or any
lease or other agreement, or any license, permit, franchise or
certificate, to which such Partner is a party or by which it is bound
or to which its properties are subject, or require any authorization or
approval under or
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pursuant to any of the foregoing, or violate any statute, regulation,
law, order, writ, injunction, judgment or decree to which such Partner
is subject;
(iv) such Partner is not in default (nor has any event
occurred which with notice, lapse of time, or both, would constitute a
default) in the performance of any obligation, agreement or condition
contained in any indenture, mortgage, deed of trust, credit agreement,
note or other evidence of indebtedness or any lease or other agreement,
or any license, permit, franchise or certificate, to which it is a
party or by which it is bound or to which the properties of it are
subject, nor is it in violation of any statute, regulation, law, order,
writ, injunction, judgment or decree to which it is subject, which
default or violation would materially adversely affect such Partner's
ability to carry out its obligations under this Agreement;
(v) except as disclosed to the Partners prior to the date
hereof, there is no litigation, investigation or other proceeding
pending or, to the knowledge of such Partner, threatened against such
Partner or any of its Affiliates which, if adversely determined, would
materially adversely affect such Partner's ability to carry out its
obligations under this Agreement; and
(vi) no consent, approval or authorization of, or filing,
registration or qualification with, any court or governmental authority
on the part of such Partner is required for the execution and delivery
of this Agreement by such Partner and the performance of its
obligations and duties hereunder.
(b) IHC/Interstone Partnership II, L.P. represents that not
less than 90% of its interests are owned by Interstate Hotels Company.
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IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Limited Partnership Agreement of Interstone Three Partners III L.P. as
of the day and year first above
written.
GENERAL PARTNERS:
BJS INTERSTONE MANAGEMENT
ASSOCIATES
By: Blackstone Real Estate Inc.,
general partner
By:
-----------------------
Name:
Title:
IHC/INTERSTONE CORPORATION
By:
-------------------------------
Name:
Title:
LIMITED PARTNERS:
BLACKSTONE REAL ESTATE
PARTNERS III L.P.
By: Blackstone Real Estate
Associates L.P., general
partner
By: BREA L.L.C., general
partner
By:
--------------
Name:
Title:
BLACKSTONE REAL ESTATE
HOLDINGS L.P.
By: BREA L.L.C., general partner
By:
-----------------------
Name:
Title:
61
57
BLACKSTONE RE CAPITAL PARTNERS L.P.
By: Blackstone Real Estate
Associates L.P., general
partner
By: BREA L.L.C., general
partner
By:
--------------------
Name:
Title:
BLACKSTONE RE OFFSHORE CAPITAL
PARTNERS L.P.
By: Blackstone Real Estate
Associates L.P., general
partner
By: BREA L.L.C., general
partner
By:
---------------------
Name:
Title:
IHC/INTERSTONE PARTNERSHIP II, L.P.
By: IHC Member Corporation,
general partner
By:
--------------------------------
Name:
Title:
62
SCHEDULE A
PARTNERS OF THE PARTNERSHIP
General
Partners Address
- - -------- -------
BJS Interstone Management 345 Park Avenue
Associates New York, NY 10154
c/o Interstate Hotels Corporation
IHC/Interstone Corporation Foster Plaza X
680 Anderson Drive
Pittsburgh, PA 15220-8126
Limited Partners
- - -----------------
Blackstone Real Estate 345 Park Avenue
Partners III L.P. New York, NY 10154
Blackstone Real Estate 345 Park Avenue
Holdings L.P. New York, NY 10154
Blackstone RE Capital Partners 345 Park Avenue
L.P. New York, NY 10154
Blackstone RE Offshore Capital 345 Park Avenue
Partners L.P. New York, NY 10154
IHC/Interstone Partnership II, c/o Interstate Hotels Corporation
L.P. Foster Plaza X
680 Anderson Drive
Pittsburgh, PA 15220-8126
63
EXHIBIT A
Form of Management Agreement
64
EXHIBIT B
Form of Project Partnership Agreement
65
EXHIBIT C
FORM OF CONFIRMATION AND ACKNOWLEDGMENT
OF RIGHT OF FIRST OPPORTUNITY
This Confirmation and Acknowledgment of Right of First
Opportunity ("Confirmation") is made and entered into as of the ____ day of
________, 19__ by and among THE BLACKSTONE GROUP HOLDINGS L.P. ("Blackstone")
and INTERSTATE HOTELS COMPANY ("Interstate").
RECITALS
A. Sections 3.6 through 3.8 of that certain Amended and
Restated Limited Partnership Agreement of Interstone Three Partners III L.P.,
dated as of the date hereof (as amended, supplemented or otherwise modified from
time to time, the "Partnership Agreement") sets forth the scope, operation,
duration, termination and other terms relating to a right of first opportunity
provided by the Blackstone Group and the Interstate Group in favor of the
Partnership with respect to certain Target Investments identified for investment
by the Blackstone Group and the Interstate Group. Except as otherwise expressly
provided herein, any defined term used in this Confirmation shall have the
meaning prescribed for that term in the Partnership Agreement.
B. The parties wish to enter into this Confirmation in order
to confirm and acknowledge their obligations to each other with respect to the
foregoing matters and any other obligations each may have to the other pursuant
to the express terms of Sections 3.6 through 3.8 of the Partnership Agreement.
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto, intending to be legally bound,
do hereby agree as follow:
1. The provisions of Sections 3.6 through 3.8 of the
Partnership Agreement are hereby incorporated by reference as though set forth
in full herein. Each party hereto hereby confirms its obligation to comply with
all terms, provisions, covenants, conditions and restrictions and perform all
obligations applicable to such party under said Sections 3.6 through 3.8 of the
Partnership Agreement. Without limiting the generality of the foregoing,
Blackstone and Interstate hereby agree to comply, and to cause the Blackstone
Related Parties and the Interstate Related Parties, respectively, to comply,
with their obligations pertaining to the right of first opportunity set forth in
said Sections of the Partnership Agreement in accordance with the terms
applicable thereto.
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2
2. This Confirmation confirms and acknowledges the terms,
provisions, covenants, conditions, obligations and restrictions set forth in
Sections 3.6 through 3.8 of the Partnership Agreement. It shall not be construed
or understood to modify, in any way, such terms, provisions, covenants,
conditions, obligations and restrictions, and, in the event of any conflict
between this Confirmation and the Partnership Agreement, the provisions of
Sections 3.6 through 3.8 of the Partnership Agreement shall control. In no event
shall this Confirmation be construed or understood to extend the duration of the
restrictions on Blackstone, Interstate and the Related Parties arising from the
right of first opportunity, which shall terminate as set forth in the
Partnership Agreement. The provisions of Sections 9.1, 9.3, and 9.5 through 9.10
of the Partnership Agreement are incorporated herein, except that all references
therein to the "Agreement" shall be deemed to be references to this
Confirmation, all references therein to the "Partners" shall be deemed to be
references to the parties hereto and delivery of notices to Blackstone hereunder
or under the Partnership Agreement shall be delivered to the same address as the
Blackstone General Partner, and delivery of notices to Interstate hereunder
shall be delivered to the same address as the Interstate General Partner, unless
any such parties shall change the address for delivery of notice in accordance
with the procedures established under Section 9.6 of the Partnership Agreement.
Nothing in this Confirmation shall be understood or construed to render the
parties hereto joint venturers or partners for any purposes. Nothing in this
Confirmation shall be understood or construed to modify or expand the extent of
any recourse between the Partners beyond that expressly provided by the
Partnership Agreement.
THE BLACKSTONE GROUP HOLDINGS, L.P.
By:
---------------------------
INTERSTATE HOTELS COMPANY
By:
---------------------------
67
EXHIBIT D
Pre-Existing Projects
NONE
68
EXHIBIT E
Excluded Projects
Blackstone Excluded Projects
1. Any business activities with the Davidson Hotel Company
("Davidson"), including a merger or a combination of Davidson
or its assets with any other entity or with the assets of any
other entity, a REIT involving Davidson or some or all of its
assets, an initial public offering or other capital event
involving Davidson; provided, that this exclusion shall not
include the acquisition of other hotels by Davidson (other
than through a combination with another entity or a
combination with the assets of another entity) which were
first identified by the affiliates of the Blackstone Group
which are investors in Davidson (as opposed to acquisitions
first identified by the non- affiliated Davidson investors).
Interstate Excluded Projects
1. Four to six hotel acquisitions from an institutional owner
only in conjunction with the Carlyle Group or The Apollo Group
2. Acquisition of Checkers Hotel in Los Angeles, California only
in conjunction with The Apollo Group
3. Any investment in a hotel which is incidental to Interstate
taking over management of such hotel such as those currently
under consideration by Interstate in Farmington, Connecticut,
Irvine, California, Warner Center, California and Burlington,
Massachusetts.
With respect to Interstate's investment opportunities
described in clauses 1 and 2 above, if The Apollo Group or The
Carlyle Group decides not to participate in such investment or
is willing to admit additional partners or participants other
than Interstate, Interstate will present such opportunity to
the Partnership in the manner prescribed in Section 3.6 of the
Partnership Agreement.
With respect to Interstate's investment opportunities
described in clauses 1 and 2 above, Interstate (i) shall
exercise best efforts to increase its equity stake in such
investments (up to the maximum
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2
of 50% of the total equity invested), and (ii) shall offer the
Blackstone Group (outside of the Partnership) an opportunity
to acquire 50% of whatever interest is available to Interstate
on terms and conditions acceptable to Interstate and the
Blackstone Group.