EXHIBIT 10.2(3)
Patriot American Hospitality Operating Partnership, L.P.
Second Amendment to
Agreement of Limited Partnership
This Second Amendment is made as of September 30, 1997 by Patriot American
Hospitality Operating Company, a Delaware corporation, as general partner (the
"General Partner") of Patriot American Hospitality Operating Partnership, L.P.,
a Delaware limited partnership (the "Partnership"), and as attorney-in-fact for
each of the limited partners of the Partnership (collectively, the "Limited
Partners") for the purpose of amending the Agreement of Limited Partnership of
the Partnership dated as of June 27, 1997, as amended to date (the "Partnership
Agreement"). All capitalized terms used herein and not defined shall have the
respective meanings ascribed to them in the Partnership Agreement.
WHEREAS, it is necessary and desirable to impose certain restrictions on
the exercise of the redemption rights granted under the Partnership Agreement so
that the Partnership may avoid treatment as a publicly traded partnership, and
the General Partner is authorized pursuant to Article III and Section 8.05(f) of
the Partnership Agreement to make such amendments; and
WHEREAS, the General Partner desires to make certain other conforming
amendments in connection with the foregoing, which amendments may be made in the
General Partner's discretion pursuant to Section 11.01 of the Partnership
Agreement.
NOW, THEREFORE, the General Partner undertakes to implement the following
amendments to the Partnership Agreement:
Section 1. Amendments to Text of Partnership Agreement.
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A. Article I, Defined Terms, is amended to add the following definitions of
"LP Unit Percentage" and "Private Transfer."
"LP Unit Percentage" means a percentage of the total interests in
Partnership capital or Partnership profits determined without regard to
Partnership Units held by the General Partner and any other person related
to the General Partner within the meaning of Section 267(b) or 707(b)(1) of
the Code (and after applying the rules of Section 856(i) of the Code), all
as determined under Regulations Section 1.7704-1(k) using any reasonable
method selected by the General Partner. Notwithstanding the foregoing, in
the event that the General Partner and the persons related to the General
Partner described above own 10% or less of the interests in the
Partnership's capital and profits, then the interests of the General
Partner and such persons shall not be disregarded in computing the LP Unit
Percentage.
"Private Transfer" means a Transfer described in one of the following
clauses:
(i) A Transfer in which the basis of the Partnership Unit
in the hands of the transferee is determined, in whole or in part, by
reference to its basis in the hands of the transferor Partner or is
determined under Section 732 of the Code;
(ii) A Transfer at death;
(iii) A Transfer between members of a family as defined
under Section 267(c)(4) of the Code, (i.e., to the Partner's brother,
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sister (by whole or half blood), spouse, ancestor or lineal
descendant);
(iv) A Transfer involving a distribution from a retirement
plan qualified under Section 401(a) of the Code; or
(v) A Transfer that, when aggregated with other Transfers
by the Partner and any related persons (within the meaning of Section
267(b) or 707(b)(1) of the Code) during any 30 calendar day period,
represents a Transfer of Partnership Units representing an LP Unit
Percentage of more than two percent (2%).
The foregoing definition of "Private Transfer" is intended to include
only such Transfers as would be disregarded in determining whether
Partnership Units are readily tradable on a secondary market or the
substantial equivalent thereof pursuant to Treasury Regulations
Section 1.7704-1(e) (i), (ii), (iii), (v) and (vi), and shall be
construed and administered in accordance therewith. The General
Partner may modify this definition of Private Transfer from time to
time in its discretion to ensure that the terms of the definition
comply and continue to comply with such requirements.
B. Article I, Defined Terms, is amended to replace the definitions of
"Deferred Redemption Right" and "Redeeming Partner" with the following
definitions. All other terms defined in Article I shall remain in full force
and effect.
"Deferred Redemption Right" has the meaning provided in Section
8.05(i) hereof.
"Redeeming Partner" has the meanings provided in Sections 8.05(a) and
8.05(i) hereof, as the context so requires.
C. Article VIII, Rights and Obligations of the Limited Partners, shall be
amended to replace the first phrase of the first sentence of Section 8.05(a)
with the following phrase:
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"Subject to Sections 8.05(b) through 8.05(j),"
D. Article VIII, Rights and Obligations of the Limited Partners, shall be
amended to replace the final proviso of Section 8.05(e) with the following
proviso:
"provided, that any such redemption shall be effected by the
Partnership in the form of the Cash Amount or the Deferred Cash Amount
(as applicable) and shall be subject to any other restrictions imposed
on the exercise by a Limited Partner of the Redemption Right and
Deferred Redemption Right as set forth in this Section 8.05."
E. Article VIII, Rights and Obligations of the Limited Partners, shall be
amended to add paragraphs (i) and (j) to section 8.05, as follows:
(i) Deferred Redemption Rights. Subject to certain other
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provisions of this Article VIII as provided below, each Limited Partner
(other than the Company) shall have the right (the "Deferred Redemption
Right"), on or after the first anniversary of the date on which he acquires
Partnership Units (or such later or earlier date as shall be determined in
the sole and absolute discretion of the General Partner at the time of the
issuance of the Partnership Units), to require the Partnership to redeem on
a Specified Redemption Date all or a portion of the Partnership Units held
by such Limited Partner at a redemption price equal to and in a form of the
Deferred Cash Amount to be paid by the Partnership. The Deferred
Redemption Right shall be exercised pursuant to a Notice of Redemption
delivered to the Partnership (with a copy to the Company) by the Limited
Partner who is exercising the Deferred Redemption Right (the "Redeeming
Partner"); provided, however, that the Partnership shall not be obligated
to satisfy such Deferred Redemption Right if the Company elects to purchase
the Partnership Units subject to the Notice of Redemption pursuant to
Section 8.05(b) (as modified by the next succeeding paragraph of this
Section 8.05(i)); and provided, further, that no Limited Partner may
deliver more than two Notices of Redemption during each calendar year. A
Limited Partner may not exercise the Deferred Redemption Right for less
than 1,000 Partnership Units or, if such Limited Partner holds less than
1,000 Partnership Units, all of the Partnership Units held by such Partner,
unless the General Partner consents, in its sole discretion. The Redeeming
Partner shall have no right, with respect to any Partnership Units so
redeemed, to receive any distribution paid with respect to Partnership
Units if the record date for such distribution is on or after the Specified
Redemption Date.
The foregoing Deferred Redemption Right shall be subject to the provisions
of Section 8.05(b), reading "Deferred Redemption Right" for "Redemption
Right" and "Deferred Cash Amount" for "Cash Amount"; provided that if the
Company shall elect to exercise its right to purchase Partnership Units
under Section 8.05(b) with respect to a Notice of Redemption under this
Section 8.05(i), the Company shall not be required to so notify the
Redeeming Partner until five Business Days prior to the Specified
Redemption Date. The foregoing Deferred Redemption Right shall also be
subject to
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the provisions of Sections 8.05(c), 8.05(d), 8.05(e), 8.05(f),
8.05(g) and 8.05(h), also reading "Deferred Redemption Right" for
"Redemption Right" and "Deferred Cash Amount" for "Cash Amount" where the
context requires. The foregoing Deferred Redemption Right also shall be
subject to Section 8.05(j).
The foregoing Deferred Redemption Right is intended to comply with the
requirements of Regulations Section 1.7704-1(f) and shall be construed and
administered in accordance therewith. The General Partner may modify the
Deferred Redemption Right from time to time in its discretion to ensure
that the terms of the Deferred Redemption Right comply and continue to
comply with such requirements.
(j) Restrictions on Exercise of Redemption Right and Deferred
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Redemption Right.
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(i) Notwithstanding the provisions of Sections 8.05(a) and
8.05(b), a Limited Partner shall be entitled to exercise the
Redemption Right only if the redemption or purchase of the Limited
Partner's Partnership Units would constitute a Private Transfer
(within the meaning of clause (v) of the definition of Private
Transfer).
(ii) Notwithstanding the provisions of Sections 8.05(i)
and 8.05(b), a Limited Partner shall be entitled to exercise the
Deferred Redemption Right only if (x) the redemption or purchase of
the Limited Partner's Partnership Units would constitute a Private
Transfer (within the meaning of clause (v) of the definition of
Private Transfer) or (y) the number of Partnership Units to be
purchased or redeemed, when aggregated with other Transfers of
Partnership Units within the same taxable year of the Partnership (but
not including Private Transfers), would constitute an LP Unit
Percentage of ten percent (10%) or less.
(iii) The General Partner may establish such policies and
procedures as it may deem necessary or desirable in its sole
discretion to administer the 10% LP Unit Percentage limit set forth in
subparagraph (ii) above, including without limitation by imposing
further limitations on the number of Partnership Units with respect to
which the Deferred Redemption Right may be exercised to coordinate the
exercise of the Deferred Redemption Right with the limitations on
Transfers set forth in Section 9.02(e) and by establishing procedures
to allocate the ability to exercise the Deferred Redemption Right
among the Limited Partners and over the course of any taxable year.
(iv) The restrictions set forth in this Section 8.05(j)
shall continue in effect until such time as the Partnership is no
longer potentially subject to classification as a publicly traded
partnership, as defined in Section
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7704 of the Code, in the absence of such restrictions, as determined
by the General Partner in its discretion. The restrictions set forth
in this Section 8.05(j), together with the restrictions on the
Transfer of Partnership Units set forth in Section 9.02, are intended
to limit transfers of interests in the Partnership in such a manner as
to permit the Partnership to qualify for the safe harbors from
treatment as a publicly traded partnership set forth in both Treasury
Regulations Sections 1.7704-1(d), (e), (f) and (j) and shall be
construed and administered in accordance therewith. The General
Partner may modify the restrictions set forth in this Section 8.05(j),
and the provisions of Section 9.02, from time to time in its
discretion to ensure that the Partnership complies and continues to
comply with such requirements.
F. Article IX, Transfers of Limited Partnership Interests, shall be amended to
replace the first phrase of Section 9.02(a) with the following phrase:
"Subject to Sections 9.02(b) through 9.02(e),"
G. Article IX, Transfers of Limited Partnership Interests, shall be amended to
redesignate Section 9.02(e) as Section 9.02(f) and to insert the following new
Section 9.02(e):
(e) No Limited Partner may effect a Transfer of its Limited
Partnership Interest, in whole or in part, unless (i) the Transfer is a
Private Transfer, (ii) the Transfer is a redemption or sale permitted by
the provisions of Section 8.05, or (iii) the Transfer satisfies both of the
following tests, (x) when aggregated with other Transfers of Partnership
Units within the same taxable year of the Partnership (but not including
Private Transfers or Transfers pursuant to exercises of the Deferred
Redemption Right), the Transfer would constitute an LP Unit Percentage of
two percent (2%) or less, and (y) when aggregated with other Transfers of
Partnership Units within the same taxable year of the Partnership (but not
including Private Transfers), the Transfer would constitute an LP Unit
Percentage of ten percent (10%) or less. The General Partner may establish
such policies and procedures as it may deem necessary or desirable in its
sole discretion to administer the 2% and 10% LP Unit Percentage limits set
forth in the foregoing subclause (iii) in the manner described in Section
8.05(j)(iii). Solely for purposes of this Section 9.02(e), the term
"Transfer" shall not include (except as provided in the following clause)
the mere pledge, hypothecation or grant of a security interest in a
Partnership Unit, but shall include any transfer of a Partnership Unit
within the meaning of Treasury Regulations Section 1.7704-1(a)(3) (other
than transfers that have not been recognized by the Partnership). The
restrictions set forth in this Section 9.02(e) shall continue in effect
until such time as the Partnership is no longer potentially subject to
classification as a publicly traded partnership, as defined in Section 7704
of the Code, as determined by the General Partner in its discretion.
H. Article XI, Amendment of Agreement, shall be amended to correct an
incorrect cross-reference by replacing Section 11.01(a) with the following:
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(a) any amendment affecting the operation of the Conversion
Factor or the Redemption Right (except as provided in Section 8.05(f) or
7.01(e) hereof) in a manner adverse to the Limited Partners;
Section 2. Effective Date. The amendments to the text of the Partnership
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Agreement provided in Section 1 of this Second Amendment shall take effect as of
the date first set forth above. Except as amended by Section 1 of this Second
Amendment, the terms of the Agreement shall remain in full force and effect.
Section 3. Defined Terms. Capitalized terms used without definition in this
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Second Amendment shall have the meanings set forth in the Partnership Agreement.
Section 4. Partnership Agreement. The Partnership Agreement and this Second
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Amendment shall be read together and shall have the same effect as if the
provisions of the Partnership Agreement and this Second Amendment were contained
in one document. Any provisions of the Partnership Agreement not amended by
this Second Amendment shall remain in full force and effect as provided in the
Partnership Agreement immediately prior to the date hereof.
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IN WITNESS WHEREOF, the General Partner has executed this Second Amendment as
of the date first written above.
GENERAL PARTNER
PATRIOT AMERICAN HOSPITALITY
OPERATING COMPANY
/s/ Xxxxxx Xx
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By: Xxxxxx Xx
Its: Senior Vice President
LIMITED PARTNERS
By: Patriot American Hospitality
Operating Company, as
attorney-in-fact for each of the
Limited Partners
/s/ Xxxxxx Xx
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By: Xxxxxx Xx
Its: Senior Vice President
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