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EXHIBIT 10(e)
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INTERSTONE THREE PARTNERS III L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
Dated as of June 25, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.5 Purpose; Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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 . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.2 Joint Control by the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.3 Blackstone Partners Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.4 Certain Duties and Obligations of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.5 Restrictions on Authority of the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.6 Right of First Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.7 Right of First Opportunity; Exclusive Rights; Investment Parameters . . . . . . . . . . . . . . . . . . . 29
SECTION 3.8 Termination of Right of First Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.9 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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 . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V
Capital Contributions;
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.1 Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.2 Partner Loans for Failure to Fund Committed Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.3 Dilution for Failure to Fund Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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SECTION 5.4 Distributions Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.5 Distributions of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.6 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.7 Partnership Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI
Books and Reports; Tax Matters;
Capital Accounts; Allocations . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.1 General Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.2 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.4 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VII
Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.2 Winding-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.3 Final Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VIII
Transfer of Partners' Interests . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.1 Restrictions on Transfer of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.2 Other Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE IX
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.1 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.2 Ownership and Use of Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.5 Access; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.9 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.10 Section Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.11 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
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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 25,
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 PARTNER" means, 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, or 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 Corporation, (ii)
each of the senior executives of Interstate Hotels Company and Interstate
Hotels Corporation and his immediate family members, for so long as he is
employed by Interstate Hotels Company and/or Interstate Hotels Corporation,
(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.
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"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 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).
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"ORGANIZATIONAL EXPENSES" means all reasonable third-party costs and
expenses pertaining to the organization of the Partnership and the
registration, qualification or 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. Section Section 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
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thereof and hereof, formed pursuant to this Agreement to own Projects
purchased hereunder.
"PROJECT PARTNERSHIP AGREEMENT" shall mean a partnership agreement in the
form attached hereto as Exhibit B, (with such changes as required to provide
the Blackstone General Partner therein and the Interstate General Partner
therein with the same management rights as the Blackstone General Partner
herein and the Interstate General Partner herein, respectively, have pursuant
to this Agreement), 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.
Notwithstanding the foregoing, at the election of the Blackstone General
Partner or the Interstate General Partner made prior to the purchase of any
Target Investment by the Partnership, the Sharing Percentages of the
Interstate Limited Partner shall be reduced to 49.5% with respect to each
Projecct and the Sharing Percentage of the Blackstone Limited Partner shall
be increased to 49.5% in the aggregate with respect to each Projecct. In
such event, appropriate changes shall be made in Section 6.4(a) and 6.4(d)(i)
below.
"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
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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 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, address and
Sharing Percentage 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.
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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.
(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;
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(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;
(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
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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 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.
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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 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)
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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.
(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 in
its capacity as such, 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
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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;
(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;
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(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 manager of any Target Investment if such manager is not the Interstate
General Partner or an Affiliate thereof), or the execution, modification or
termination of any agreement which is material to the Partnership (except as
set forth in Section 3.3(a);
(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
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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:
(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 (provided that the Blackstone General Partner shall consult with
the Interstate General Partner with respect to any replacement manager and
shall act reasonably with respect to its selection of a replacement manager,
but the Interstate General Partner shall not have any consent rights with
respect to such replacement manager), 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 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.
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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 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
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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
(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
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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 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
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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% (or 49.5% if the election set forth in the
definition of "Sharing Percentage" below is exercised) of the due diligence
expenses allocated to the Partnership. The remaining 48.5% (or 49.5% if the
election set forth in the definition of "Sharing Percentage" below is
exercised) 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, at its own cost, its own due
diligence in addition to that being performed by the Partnership.
(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 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
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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 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.
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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% (or
49.5% if the election set forth in the definition of "Sharing Percentage" below
is exercised) 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% (or 49.5% if the election set forth in the definition of
"Sharing Percentage" below is exercised) 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 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
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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.
(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 General Partners unanimously agree otherwise, each Project in
which the Partnership invests shall secure mortgage debt financing in
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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 Corporation (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
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;
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(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 judgment, involvement with the Blackstone Group or the
Interstate Group, as applicable, in such Target Investment would 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.
(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
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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) above), 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.
(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.
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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%
(or 49.5% if the election set forth in the definition of "Sharing Percentage"
below is exercised) of such fee allocated to the Partnership. The Blackstone
Limited Partners shall, in the aggregate, make Capital Contributions equal to
48.5% (or 49.5% if the election set forth in the definition of "Sharing
Percentage" below is exercised) 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.
SECTION 3.10 FINANCIAL ADVISORY SERVICES. 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
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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% (or 49.5% if the election set forth in the
definition of "Sharing Percentage" below is exercised) of such fee allocated to
the Partnership. The Blackstone Limited Partners shall, in the aggregate, make
Capital Contributions equal to 48.5% (or 49.5% if the election set forth in the
definition of "Sharing Percentage" below is exercised) 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.
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.
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(b) 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.
(c) 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 25, 1997 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
Project Partnerships which own such Offered Projects to sell such Offered
Projects or by selling all of the partnership interests in such Project
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,
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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, (ii) offer to purchase all of the Offered Projects listed in such
Offering Notice for a price (the "Counteroffer Price") listed by the Offeree
Group in the Offeree Reply Notice (the "Counteroffer"), or (iii) decline to
purchase such Offered Projects. With respect to each Offering Notice, if the
Offeree Group fails to deliver an Offeree 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. If the Offeree Group makes a Counteroffer, the Offeror Group may
accept such Counteroffer or decline such Counteroffer. If the Offeror Group
accepts such Counteroffer, the Offeree Group shall deliver to a mutually
acceptable escrow agent, the Offeree Deposit equal to 5% of the Counteroffer
Price. 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 or the Offeror Group accepts a Counteroffer of
the Offeree Group, 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 Project Partnership, as applicable) shall execute such
transfer documents as the Offeree Group shall reasonably require to transfer
the Offered Projects to the Offeree Group (which shall include a
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special warranty deed if reasonably required by the title company for the
Offeree Group), as is, where is; the Offeree Group shall pay to the
Partnership (or Project Partnership, as applicable), in immediately available
funds, the aggregate Offer Price for all of the Offered Projects listed in
such Offering Notice; the Project Partnership and the Partnership shall each
immediately distribute such Offer Price to its Partners, pro rata in
accordance with this Agreement, and the Offeree Deposit shall be returned to
the Offeree Group. 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
Project 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. Transfer taxes and
closing costs with respect to an Offered Project shall be paid by whichever
of the seller (the Partnership or Project Partnership) or the purchaser (the
Offeree Group) customarily pays such costs in the state in which such Offered
Project is located.
(d) An Offeree Reply Notice in which the Offeree Group elects to purchase
the Offered Projects, or in which the Offeree Group makes a Counteroffer
which is accepted by the Offeror Group, shall create an irrevocable binding
obligation of the Offeree Group and the Offeror Group. If the Offeree Group
elects in an Offeree Reply Notice to purchase the Offered Projects or makes a
Counteroffer which is accepted by the Offeror Group, 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
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, or
if the Offeror Group rejects a Counteroffer made by the Offeree Group, 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
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Period"), to cause the sale for all cash of 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 less than 95% of the Offer Price for such Offered Project listed
in such Offering Notice (or the Counteroffer Price in the case of a rejected
Counteroffer, 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 investments or receiving
compensation or profit from any of the foregoing.
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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 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. Notwithstanding the foregoing, if additional
Capital Contributions are necessary to fund operating expenses of any Target
Investment (other than for payments to Affiliates of the Interstate General
Partner or the Blackstone General Partner) after the deferring of payables to
the extent reasonable, income has not been used in the immediately preceding
three months to pay amounts to Affiliates of the Blackstone General Partner of
the Interstate General Partner beyond amounts set forth in the relevant budget
(any such expenses meeting the foregoing conditions, "Necessary Expenses"), and
the General Partners do not agree on the need for such Capital Contribution
after a reasonable amount of time (but in no event after the time failure to
pay would have a material adverse effect on the Partnership), either General
Partner may nonetheless, to the extent of Necessary Expenses, require a Capital
Contribution, not to exceed $1,000,000 in the aggregate to cover Necessary
Expenses for such Target Investment. If any Partner fails to make such Capital
Contribution, the provisions of Section 5.2 below shall apply (except that the
provision allowing the election of the remedy set forth in Section 5.3 shall
not be applicable). 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.
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(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 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
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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-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 shall be increased by the amount of the
reduction in the Sharing Percentage of the Non-Contributing Partner.
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
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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
(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
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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 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
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.
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.
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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.
(c) The Interstate 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 Interstate 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
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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 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
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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.
(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
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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 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
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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 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 42.401% to the Blackstone Partners (pro rata in proportion to
their Sharing Percentages) and 57.599% 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 42.401% to the Blackstone Partners and 57.599% to the
Interstate Partners is in excess of amounts of Net Income previously allocated
in the ratio of 42.401% to the Blackstone Partners and 57.599% 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
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48
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 (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 42.401% to the Blackstone Partners and
57.599% to
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49
the Interstate Partners is in excess of amounts of Net Income previously
allocated in the ratio of 42.401% to the Blackstone Partners and 57.599% 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.
(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:
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50
(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.
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
55
51
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 "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 (other than changes in the ownership of the common stock of
Interstate Hotels Company sold to the public).
(b) Any Partner may Transfer all or part of its interest in the
Partnership to any person; 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 (with respect to all of the Projects)
of the Interstate Partners 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
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52
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).
(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
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53
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.
(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
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54
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 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 required to be disclosed by applicable
law or 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
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55
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.
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
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56
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 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.
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(b) IHC/Interstone Partnership II, L.P. represents that not less than 90%
of its interests are owned by Interstate Hotels Corporation.
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58
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: /s/ Gary M. Sumers
------------------------------
Gary M. Sumers
Vice President
IHC/INTERSTONE CORPORATION
By: /s/ Marvin I. Droz
------------------------------
Marvin I. Droz
Vice President
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: /s/ Gary M. Sumers
------------------------------
Gary M. Sumers
Vice President
BLACKSTONE REAL ESTATE
HOLDINGS L.P.
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
------------------------------
Gary M. Sumers
Vice President
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59
BLACKSTONE RE CAPITAL PARTNERS L.P.
By: Blackstone Real Estate Associates L.P.,
general partner
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
------------------------------
Gary M. Sumers
Vice President
BLACKSTONE RE OFFSHORE CAPITAL PARTNERS L.P.
By: Blackstone Real Estate Associates L.P.,
general partner
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
------------------------------
Gary M. Sumers
Vice President
IHC/INTERSTONE PARTNERSHIP II, L.P.
By: IHC Member Corporation,
general partner
By: /s/ Marvin I. Droz
------------------------------
Marvin I. Droz
Vice President
64
SCHEDULE A
PARTNERS OF THE PARTNERSHIP
Sharing
Percentage as of
June __, 1996
---------------
General
Partners Address
-------- -------
BJS Interstone Management 345 Park Avenue
Associates New York, NY 10154 0.5%
IHC/Interstone c/o Interstate Hotels Corporation
Corporation Foster Plaza X
680 Anderson Drive
Pittsburgh, PA 15220-8126 0.5%
Limited Partners
----------------
Blackstone Real Estate 345 Park Avenue
Partners III L.P. New York, NY 10154 48.5%
IHC/Interstone c/o Interstate Hotels Corporation
Partnership II, L.P. Foster Plaza X
680 Anderson Drive 50.5%
Pittsburgh, PA 15220-8126
65
EXHIBIT A
FORM OF MANAGEMENT AGREEMENT
66
EXHIBIT B
FORM OF PROJECT PARTNERSHIP AGREEMENT
67
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 CORPORATION ("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 CORPORATION
By: _____________________________
69
EXHIBIT D
PRE-EXISTING PROJECTS
NONE
70
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
71
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.