Exhibit 99.6
AGREEMENT OF LIMITED PARTNERSHIP
of
MIP LESSEE, LP
March 31, 1999
TABLE OF CONTENTS
Page
1. Definitions................................................................1
2. Formation.................................................................14
3. Name; Principal and Registered Offices; Agent for Service of Process......14
4. Term......................................................................14
5. Purposes..................................................................14
6. Competition...............................................................15
7. Representations and Covenants.............................................17
8. OHTE Subsidiaries; Capital Contributions..................................18
9. Capital Accounts; Allocations.............................................24
10. Distributions; Use of Partnership Funds...................................27
11. Books and Records; Tax Matters............................................31
12. Bank Accounts.............................................................33
14. Transfer of Partnership Interests.........................................46
15. Dissolution and Liquidation; Bankruptcy or Insolvency of a Partner........53
16. Further Assurances........................................................57
17. Notices...................................................................57
18. Captions..................................................................58
19. Counterparts..............................................................58
20. Governing Law.............................................................58
21. Successors and Assigns....................................................58
22. Invalidity................................................................58
23. Fair Market Value.........................................................58
24. Special Purpose Entity Provisions.........................................60
Exhibits
A Initial Commitments; Initial Percentage Interests
B Form of Management Agreement
C Form of Operating Lease
D Hotels Not Subject to Exclusivity Agreement
E. Distribution Example
i
AGREEMENT OF LIMITED PARTNERSHIP
of
MIP LESSEE, LP
This AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") dated
as of March 31, 1999, by and among MIP GP, LLC, a Delaware limited liability
company, having an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇, as a general partner ("Opco GP"), MIP Gen Par, LLC, a Delaware limited
liability company, having an office at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, as a general partner ("Oak ▇▇▇▇ ▇▇"; together with Opco GP, the "General
Partners"), MeriStar H & R Operating Company, L.P., a Delaware limited
partnership, having an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇, as a limited partner ("Opco LP"), Oak Hill Capital Management Partners,
L.P., a Delaware limited partnership, as a limited partner ("OHCMP"), Oak Hill
Capital Partners, L.P., a Delaware limited partnership, having an office at ▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as a limited partner ("Oak Hill
Parent" and, together with OHCMP, Opco LP and any Person hereafter admitted to
the Partnership (as hereinafter defined) as a limited partner in accordance with
the provisions of the Agreement (including Section 8.1), the "Limited
Partners"). For purposes of this Agreement, the limited partnership interest in
the Partnership held by Oak Hill Parent shall be deemed to consist of two
separate limited partnership interests, and Oak Hill Parent shall sometimes be
hereinafter referred to as "Oak ▇▇▇▇ ▇▇," in its capacity as the holder of one
such interest, and "OHTE", in its capacity as the holder of the other such
interest.
W I T N E S S E T H :
WHEREAS, the General Partners and the Limited Partners
(collectively, the "Partners" and individually, a "Partner") desire to form a
limited partnership for the purposes hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below.
1.1 "Act" shall have the meaning set forth in Article
2.
1.2 "Act of Insolvency" shall have the meaning set
forth in Section 15.4.
1.3 "Adjusted Capital Account" shall mean, with
respect to any Partner, such Partner's Capital Account balance, increased by
such Partner's share of Partnership Minimum Gain and Partner Minimum Gain.
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1.4 "Affiliate," when used with respect to a Person,
shall mean a Person which, directly or indirectly, controls, is controlled by or
is under common control with such Person. For the purposes of this definition,
"control" shall mean the power to direct the management and policies of a
Person. In addition to the foregoing, the term "Affiliate" shall mean at any
time with respect to each of Oak ▇▇▇▇ ▇▇, Oak ▇▇▇▇ ▇▇, OHCMP, OHTE and the OHTE
Subsidiaries (as hereinafter defined), if any, the then-current investment
advisor or asset manager of Oak Hill Parent and any officer, shareholder (unless
such shareholder is not at the time actively involved in the operation and
management of such advisor's business), director or executive employee thereof
or any Person which is, directly or indirectly, controlled by such investment
advisor and/or one or more of such individuals.
1.5 "Allocated Required Purchase Price" shall have
the meaning set forth in Section 14.3.
1.6 "Affiliated Partner" shall have the meaning set
forth in Section 13.10.
1.7 "Appraiser" shall have the meaning set forth in
Section 23.1.
1.8 "Available Cash" for any period shall mean the
Partnership's share of cash distributions made by the Underlying Partnership, as
well as the operating cash flow, Capital Proceeds and other income generated by
the Partnership's business, during such period (including for this purpose
reserves set aside during a previous period, to the extent the same are
determined by the Management Committee to be available for distribution in the
current period), in each case after payment of operating expenses, debt service
(including the payment of interest and principal) and any other amounts due and
payable in respect of any borrowings of the Partnership (other than Voluntary
Loans and Priority Loans), if any, and after setting aside any reserves the
Management Committee reasonably determines are necessary to meet the projected
expenses of the Partnership (excluding the cost of funding the acquisition of
Hotel Interests by the Underlying Partnership). The term "Available Cash" shall
not include the proceeds of any loans made to the Partnership or the amount of
any capital contributions made to the Partnership, except to the extent the
Management Committee determines the same are available for distribution to the
Partners.
1.9 "Capital Account" shall mean the capital account
of a Partner, maintained as set forth in Section 9.2.
1.10 "Capital Improvement," when used with reference
to a Hotel (as defined in this Article 1), shall mean any alteration,
replacement, addition or improvement of or to such Hotel (including, without
limitation, to the appliances, machinery, devices, fixtures, equipment,
furniture, furnishings and other similar articles of tangible personal property
located at such Hotel or used or useful in connection therewith (collectively,
the "FF&E" of such Hotel)) the cost of which for Federal income
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tax purposes may not be deducted as an expense but must be capitalized and
amortized over the life of such alteration, replacement, addition or
improvement.
1.11 "Capital Proceeds" shall mean, with respect to
the Partnership or the Underlying Partnership, any net excess insurance
proceeds, the net proceeds of the sales of Hotel Interests (or, in the case of
the Partnership, the sale of all or any portion of its interest in the
Underlying Partnership), the net proceeds received in connection with partial
condemnations, financings and refinancings and any other similar items which, in
accordance with generally accepted accounting principles, are attributable to
capital (in each case, after payment of all amounts due in respect of any
borrowings of the Partnership or the Underlying Partnership, other than
Voluntary Loans or Priority Loans). The term "Capital Proceeds" shall also mean,
with respect to the Partnership, distributions received by the Partnership from
the Underlying Partnership on account of Capital Proceeds received by the
Underlying Partnership.
1.12 "Change in Control" shall mean, with respect to
MHR, the occurrence of any of the following: (i) the sale, lease or transfer, in
one or a series of related transactions, of all or substantially all of MHR's
assets to any person or group (as such term is used in Section 13(d)(3) of the
Exchange Act), (ii) the adoption of a plan relating to the liquidation or
dissolution of MHR, (iii) the acquisition by any person or group (as such term
is used in Section 13(d)(3) of the Exchange Act), excluding the "Oak Hill Group"
(as defined below), of a direct or indirect interest in more than 35% of the
ownership of MHR or the voting power of the voting stock of MHR by way of
purchase, merger or consolidation or otherwise (other than a creation of a
holding company that does not involve a change in the beneficial ownership of
MHR as a result of such transaction), provided, that any "Current Voting Stock"
(as defined below) shall not be counted in determining whether such 35%
ownership has been achieved, (iv) the merger or consolidation of MHR with or
into another corporation or the merger of another corporation into MHR with the
effect that immediately after such transaction the stockholders of MHR
immediately prior to such transaction hold less than 50% of the total voting
power of all securities generally entitled to vote in the election of directors,
managers, or trustees of the Person surviving such merger or consolidation or
(v) the first day on which a majority of the members of the Board of Directors
of MHR are not Continuing Directors. As used herein: the term "Oak Hill Group"
shall mean (i) those persons who filed a Schedule 13D with the Securities and
Exchange Commission on or about September 18, 1998 with respect to MHR, (ii) all
persons who are members of a group with the persons referred to under subclause
(i), and (iii) any Affiliate of Oak ▇▇▇▇ ▇▇, Oak ▇▇▇▇ ▇▇, OHCMP, OHTE or the
OHTE Subsidiaries; and the term "Current Voting Stock" shall mean the 3,221,409
shares of voting stock owned by the Oak Hill Group on the date hereof plus all
shares acquired by the Oak Hill Group after the date hereof pursuant to the
Stock Purchase Agreement.
1.13 "Code" shall mean the Internal Revenue Code of
1986, as heretofore amended and as the same may be amended from time to time.
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1.14 "Commitment" shall mean, with respect to a
Partner, the amount of such Partner's capital commitment to the Partnership, as
set forth opposite such Partner's name on Exhibit A.
1.15 "Commitment Expiration Date" shall mean the
first anniversary of the date of this Agreement.
1.16 "Continuing Directors" means, as of any date of
determination, any member of the Board of Directors of MHR who (i) was a member
of such Board of Directors on the date hereof or (ii) was nominated for election
or elected to such Board of Directors with the affirmative vote of at least a
majority of the Continuing Directors who were members of such Board at the time
of such nomination or election.
1.17 "Contribution Notice" shall have the meaning set
forth in Section 8.2(a).
1.18 "Defaulting Partner shall have the meaning set
forth in Section 8.3.
1.19 "Default Loan" shall have the meaning set forth
in Section 8.3.
1.20 "Deficit Partner" shall have the meaning set
forth in Section 9.11.
1.21 "Depreciation" shall mean, with respect to any
Fiscal Year, an amount equal to the depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for Federal income tax
purposes, except that if the Gross Asset Value of the asset differs from its
adjusted tax basis, Depreciation shall be determined in accordance with the
methods used for Federal income tax purposes and shall equal the amount that
bears the same ratio to the Gross Asset Value of such asset as the depreciation,
amortization or other cost recovery deduction computed for Federal income tax
purposes with respect to such asset bears to the adjusted Federal income tax
basis of such asset; provided, however, that if any such asset that is
depreciable or amortizable has an adjusted Federal income tax basis of zero, the
rate of Depreciation shall be as determined by the "tax matters partner."
1.22 "Effective Tax Rate" shall mean, for any year,
the percentage determined by the General Partners to be a reasonable estimate of
the highest marginal combined Federal, state and local income tax rate (giving
effect to the deduction of state and local income taxes, as applicable, for
Federal and state income tax purposes), applicable to corporations all of the
income of which is allocable to New York City or individuals residing in New
York City (whichever is higher), with respect to the taxable income allocated to
the Partners by the Partnership for Federal income tax purposes.
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1.23 "Electing Partner" shall have the meaning set
forth in Section 14.4.4.
1.24 "equity interests" in an entity shall mean
interests which give the holders thereof a share in the distributions, income
and losses of such entity.
1.25 "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
1.26 "Exclusivity Period" shall mean the period
commencing on the date hereof and expiring on the earliest to occur of (a) the
termination of the Partnership, (b) the date upon which the Underlying
Partnership has invested at least $375,000,000 in Hotel Interests and (c) the
Commitment Expiration Date.
1.27 "Exempt Person" shall have the meaning set forth
in Section 14.5.
1.28 "FF&E" shall have the meaning set forth in the
definition of "Capital Improvements" set forth in this Article 1.
1.29 "Fiscal Year" or "fiscal year" shall mean the
calendar year. "Fiscal Year" or "fiscal year" shall also be deemed to mean and
include that fraction of a Fiscal Year commencing on the date hereof and ending
on December 31, 1999, and that fraction, if any, of a Fiscal Year ending on the
last day of the term of this Agreement.
1.30 "FMV Date" shall have the meaning set forth in
Section 23.1.
1.31 "GAAP" shall mean generally accepted accounting
principles consistently applied.
1.32 "General Partners" shall have the meaning set
forth in the preamble to this Agreement.
1.33 "Go-Along Notice" shall have the meaning set
forth in Section 14.4.1.
1.34 "Go-Along Option" shall have the meaning set
forth in Section 14.4.2.
1.35 "Go-Along Percentage" shall have the meaning set
forth in Section 14.4.1.
1.36 "Go-Along Purchaser" shall have the meaning set
forth in Section 14.4.1.
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1.37 "Go-Along Terms" shall have the meaning set
forth in Section 14.4.1.
1.38 "Gross Asset Value" shall mean, with respect to
any asset, the asset's adjusted basis for Federal income tax purposes, except
that (i) the Gross Asset Value of any asset contributed to the Partnership shall
be its gross fair market value (as determined by the General Partners) at the
time of contribution, (ii) upon a change in the Partners' Percentage Interests,
the Gross Asset Value of all of the assets of the Partnership shall be adjusted
to equal their respective gross fair market values, as determined by the General
Partners, (iii) the Gross Asset Value of any asset distributed in kind to any
Partner (including upon a liquidation of the Partnership) shall be the gross
fair market value of such asset, as reasonably determined by the General
Partners on the date of such distribution, and (iv) the Gross Asset Value of any
asset determined pursuant to clauses (i) or (ii) above shall thereafter be
adjusted from time to time by the Depreciation taken into account with respect
to such asset for purposes of determining Net Profit or Net Loss.
1.39 "Gross Profit" shall mean, with respect to any
fiscal year, the items of income and gain of the Partnership, computed on the
same basis that Net Profit and Net Loss are computed (other than the adjustment
described in clause (vi) of the definition of Net Profit and Net Loss).
1.40 "Hotel" shall mean any hotel and/or resort
property, or any mixed-use property a substantial component of which is a hotel
and/or resort, and shall include the land (or a leasehold interest therein),
buildings, FF&E and other personal property (including, without limitation,
contract rights and other intangible assets) constituting a portion of, or
associated with or used or useful in connection with, such property.
Supplementing the foregoing, (i) the term "Hotel" shall include any building or
complex of buildings which is undergoing renovation or alteration or is under
construction and which, after such renovation, alteration or construction is
completed as intended, would qualify as a "Hotel" pursuant to the immediately
preceding sentence and (ii) the term "Hotel" shall include any vacant land
adjacent to property of the nature hereinabove set forth, to the extent such
land is acquired or to be acquired together with such property.
1.41 "Hotel Debt" shall mean secured debt for which
one or more Hotel Interests are a substantial part of the security.
1.42 "Hotel Equity Interests" shall have the meaning
set forth in the definition of "Hotel Interests" set forth in this Article 1.
1.43 "Hotel Interests" shall mean, collectively, (i)
Hotels, (ii) direct or indirect equity interests in Persons that own Hotels or
that lease Hotels, (iii) undivided interests in Hotels and leasehold interests
in Hotels, and (iv) Hotel Debt (and undivided interests therein) and direct or
indirect equity interests in Persons that hold Hotel Debt. The interests
described in the foregoing clauses (ii) and (iii) are
7
collectively referred to herein as "Hotel Equity Interests". Notwithstanding the
foregoing, the term "Hotel Interests" shall not include (i) the manager's
interest under any hotel management agreement or similar arrangement, (ii) the
lessee's interest under any lease that creates a relationship between the
parties thereto substantially similar to the relationship between an owner and
operator in a customary hotel management agreement or (iii) the lessee's
interest under any "operating lease" of the type customarily entered into by
real estate investment trusts which directly or indirectly own hotel properties.
1.44 "IRR" shall mean, with respect to the Oak Hill
Partners (including, for this purpose, Oak Hill Parent or OHCMP as the purchaser
of shares in MHR pursuant to the Stock Purchase Agreement), the annual internal
rate of return (compounded by discounting on a quarterly basis) realized by such
Partners in the aggregate, taking into account (i) the aggregate capital
contributions made to the Partnership by such Partners, (ii) the aggregate
purchase price paid by Oak Hill Parent or OHCMP for shares in MHR pursuant to
the Stock Purchase Agreement, (iii) the aggregate distributions of cash and
marketable securities by the Partnership to such Partners pursuant to Section
10.1, amounts received by any Oak Hill Partner in respect of any sale of an
interest in an Operating Subsidiary, and amounts received by OHTE in respect of
the sale of stock in an OHTE Subsidiary, (iv) any proceeds received by Oak Hill
Parent or OHCMP from the sale of the stock referred to in clause (ii), and (v)
the timing of the capital contributions, the purchase of shares in MHR and the
distributions, payments and receipt of sale proceeds referred to in the
preceding clauses (it being understood that fees payable by the Underlying
Partnership to any Affiliate of Oak Hill Parent shall not be deemed a
distribution to an Oak Hill Partner for purposes of calculating the IRR of the
Oak Hill Partners). For purposes of the foregoing calculation, if at the time
the Partnership disposes of all or substantially all of its assets, the stock of
MHR held by Oak Hill Parent or OHCMP has not yet been sold, such stock shall be
deemed to have been sold at such time for an amount determined as set forth in
Section 10.5.
1.45 "Initial OHTE Subsidiary" shall have the meaning
set forth in Section 8.1.
1.46 "Intercompany Agreement" shall have the meaning
set forth in Article 6.
1.47 "Internal Representations" shall have the
meanings et forth in Section 13.5(d).
1.48 "investment company" shall have the meaning set
forth in Section 13.5(b).
1.49 "Joint Venture Opportunity" shall mean an
acquisition opportunity which is offered to an Oak Hill Person or Opco Person by
another Person
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which proposes to acquire the Hotel Interest in question jointly (whether
through a partnership, limited liability company or other entity, or otherwise)
with such Oak Hill Person or Opco Person, but only if such Oak Hill Person or
Opco Person is a minority owner in the entity in question.
1.50 "Limited Partners" shall have the meaning set
forth in the preamble to this Agreement.
1.51 "Management Agreement" shall have the meaning
set forth in Section 13.8.
1.52 "Management Committee" shall have the meaning
set forth in Section 13.1.
1.53 "Managing Agent" shall have the meaning set
forth in Section 13.8.
1.54 "Maximum Amount" shall have the meaning set
forth in Section 14.4.1.
1.55 "MHOP" shall mean MeriStar Hospitality Operating
Partnership, L.P., a Delaware limited partnership.
1.56 "MHR" shall mean MeriStar Hotels & Resorts,
Inc., a Delaware corporation.
1.57 "Minor Capital Improvements" shall have the
meaning set forth in Section 13.5(e).
1.58 "Net Profit" or "Net Loss" shall mean, with
respect to any fiscal year, the taxable income or loss of the Partnership as
determined for Federal income tax purposes, with the following adjustments:
(i) Such taxable income or loss shall be
adjusted by the amount, if any, of tax-exempt income received or accrued by the
Partnership;
(ii) Such taxable income or loss shall be
adjusted by the amount, if any, of all expenditures of the Partnership described
in Section 705(a)(2)(B) of the Code, including expenditures treated as described
therein under ss. 1.704-1(b)(2)(iv)(i) of the Treasury Regulations;
(iii) If the Gross Asset Value of any asset
is adjusted pursuant to clause (ii) or (iii) of the definition of Gross Asset
Value, the amount of such adjustment shall be taken into account, immediately
prior to the event giving rise to such
9
adjustment, as gain or loss from the disposition of such asset for purposes of
computing Net Profit or Net Loss;
(iv) Gain or loss resulting from any
disposition of any asset with respect to which gain or loss is recognized for
Federal income tax purposes shall be computed by reference to the Gross Asset
Value of the asset disposed of, notwithstanding that such Gross Asset Value
differs from the adjusted tax basis of such asset;
(v) In lieu of the depreciation,
amortization, or other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account Depreciation for
such fiscal year; and
(vi) Any items of Gross Profit specially
allocated pursuant to Article 9 for such fiscal year shall be eliminated in
computing Net Profit or Net Loss.
1.59 "Non-Defaulting Partner" shall have the meaning
set forth in Section 8.3.
1.60 "Non-Qualified Partner" shall have the meaning
set forth in Section 15.3.
1.61 "Nonrecourse Deductions" shall have the meaning
set forth in ss. 1.704-2(b)(1) of the Treasury Regulations. The amount of
Nonrecourse Deductions for any year equals the excess, if any, of the net
increase in the amount of Partnership Minimum Gain during such year over the
aggregate amount of any distributions during such year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Partnership Minimum
Gain, determined in accordance with ss. 1.704-2(c) of the Treasury Regulations.
1.62 "Nonrecourse Liability" shall have the meaning
set forth in ss. 1.704-2(b)(3) of the Treasury Regulations.
1.63 "Non-Transfer Option" shall have the meaning set
forth in subsection 14.4.2.
1.64 "notices" shall have the meaning set forth in
Section 17.1.
1.65 "Oak ▇▇▇▇ ▇▇" shall have the meaning set forth
in the preamble to this Agreement.
1.66 "Oak ▇▇▇▇ ▇▇" shall have the meaning set forth
in the preamble to this Agreement.
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1.67 "Oak Hill Parent" shall have the meaning set
forth in the preamble to this Agreement.
1.68 "Oak Hill Partners" shall mean, collectively,
Oak ▇▇▇▇ ▇▇, Oak ▇▇▇▇ ▇▇, OHCMP, OHTE (if it is then a Partner) and any OHTE
Subsidiaries which hereafter become Partners.
1.69 "Oak Hill Person" shall mean and include (i) any
Oak Hill Partner, (ii) Oak Hill Parent or (iii) any Affiliate of any Oak Hill
Partner if Oak Hill Capital Management, Inc. or any successor or Affiliate
thereof is primarily responsible for the acquisition, investment or other
transaction in question (as investment advisor or otherwise) for such Affiliate
or its direct or indirect controlling Person; provided that the term "Oak Hill
Person" shall not include Keystone, Inc., RMB Realty Inc. or any Person
controlled by or under common control with Keystone, Inc. or RMB Realty, Inc.
1.70 "OHCMP" shall have the meaning set forth in the
preamble to this Agreement.
1.71 "OHTE" shall have the meaning set forth in the
preamble to this Agreement.
1.72 "OHTE Capital Contributions" shall have the
meaning set forth in Section 8.2(a).
1.73 "OHTE Initial Contribution Date" shall mean
April 15, 1999.
1.74 "OHTE Subsidiary" shall have the meaning set
forth in Section 8.1.
1.75 "Opco GP" shall have the meaning set forth in
the preamble to this Agreement.
1.76 "Opco LP" shall have the meaning set forth in
the preamble to this Agreement.
1.77 "Opco Partners" shall mean, collectively, Opco
GP and Opco LP.
1.78 "Opco Person" shall mean and include any Opco
Partner and any Affiliate of any Opco Partner (including without limitation
MHR); provided that in no event shall "Opco Person" include MHOP, MeriStar
Hospitality Corporation, a Maryland corporation, or any of their respective
subsidiaries.
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1.79 "Operating Leases" shall have the meaning set
forth in Article 5.
1.80 "Operating Subsidiary" shall have the meaning
set forth in Section 13.7.
1.81 "Originating Party" shall have the meaning set
forth in Section 6.2.
1.82 "Overall Percentage Interest," with respect to
each Partner, shall mean a percentage equal to the fraction obtained by dividing
such Partner's aggregate capital contributions by the total capital
contributions of all Partners.
1.83 "Partner" shall mean each of the parties to this
Agreement and any other Person to which an interest in the Partnership is
hereafter transferred and who is admitted to the Partnership in accordance with
the terms of this Agreement.
1.84 "Partner Minimum Gain" shall mean "partner
nonrecourse debt minimum gain" as defined in ss. 1.704-2(i)(2) of the Treasury
Regulations and determined in accordance with ss. 1.704-2(i)(3) of the Treasury
Regulations.
1.85 "Partner Nonrecourse Debt" shall have the
meaning set forth in ss. 1.704-2(b)(4) of the Treasury Regulations.
1.86 "Partner Nonrecourse Deductions" shall have the
meaning set forth in ss. 1.704-2(i)(1) of the Treasury Regulations and shall be
determined in accordance with ss. 1.704-2(i)(2) of the Treasury Regulations.
1.87 "Partnership" shall have the meaning set forth
in Article 2.
1.88 "Partnership Interest," when used with reference
to a Partner, shall mean the interest of such Partner in the Partnership.
1.89 "Partnership Minimum Gain" shall have the
meaning set forth in ss. 1.704-2(b)(2) of the Treasury Regulations and shall be
determined in accordance with ss. 1.704-2(d) of the Treasury Regulations.
1.90 "Permitted MHR Transferee" shall mean a Person
which (i) is a successor to MHR by merger, consolidation or other similar
transaction or (ii) acquires all or a substantial portion of the assets of MHR.
1.91 "Permitted Opco Transferee" shall mean a Person
which (i) is a successor to Opco LP by merger, consolidation or other similar
transaction or (ii) acquires all or a substantial portion of the management
business of Opco LP.
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1.92 "Person" shall mean an individual, partnership,
limited liability company, corporation, trust, unincorporated association or any
other legal entity.
1.93 "Preliminary Proposal" shall mean, with respect
to a Hotel Interest, a reasonably detailed description of the Hotel in question,
a general business plan and projections with respect thereto, a description of
the market in which such Hotel is located and a description of competing hotels
in such market, and such other information as is reasonably necessary to enable
the Partnership to determine, on a reasonably informed basis, whether to acquire
such Hotel Interest.
1.94 "Priority Loan" shall have the meanings et forth
in Section 8.5.
1.95 "Prime Rate" shall mean the "base rate" (or its
equivalent) announced from time to time by Citibank, N.A. at its principal
office in New York City.
1.96 "Proportionate Share" shall have the meaning set
forth in Section 8.2.
1.97 "Purchase Price" shall have the meaning set
forth in Section 15.3.
1.98 "Purchasing Partner" shall have the meaning set
forth in Section 15.3.
1.99 "Qualified Opco Entity" shall have the meaning
set forth in Section 14.2.
1.100 "Recourse Indemnity" shall have the meaning set
forth in Section 8.5.
1.101 "Regulatory Allocations" shall have the meaning
set forth in Section 9.12.
1.102 "Representative" or "Representatives" shall
have the meaning set forth in Section 13.1.
1.103 "Requested Amount" shall have the meaning set
forth in Section 8.3.
1.104 "Required Purchase" shall have the meaning set
forth in Section 14.3(a).
1.105 "Required Purchase Offer" shall have the
meaning set forth in Section 14.3(a).
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1.106 "Required Purchase Price" shall have the
meaning set forth in Section 14.3(a).
1.107 "Required Purchaser" shall have the meaning set
forth in Section 14.3(a).
1.108 "Selling Partner" shall have the meaning set
forth in Section 14.4.1.
1.109 "Stock Purchase Agreement" shall mean that
certain Stock Purchase Agreement of even date herewith between MHR, Oak Hill
Parent and OHCMP pursuant to which Oak Hill Parent has agreed to purchase
certain shares in MHR and has been given an option to purchase additional such
shares.
1.110 "Tax Advance" shall have the meaning set forth
in Section 10.2.
1.111 "tax matters partner" shall have the meaning
set forth in Section 11.7.
1.112 "Transaction Documents" shall have the meaning
set forth in Article 7.
1.113 "Transfer" shall mean, with respect to any
Partnership Interest (or, if applicable, a direct or indirect interest in a
Partner), the sale, transfer, assignment or other disposition of, or the
mortgaging, hypothecation, pledging or other encumbrancing, or the permitting or
sufferance of any encumbrance of, all or any portion of such Partnership
Interest (or such interest).
1.114 "Treasury Regulations" shall mean the Income
Tax Regulations promulgated under the Code, as amended from time to time.
1.115 "Underlying Partnership" shall mean MeriStar
Investment Partners, L.P., a Delaware limited partnership.
1.116 "Underlying Partnership Agreement" shall mean
that certain Agreement of Limited Partnership of the Underlying Partnership,
dated of even date herewith, between the Partnership, as general partner, and
MHOP, as limited partner.
1.117 "Voluntary Loan" shall have the meaning set
forth in Section 8.5(A).
14
2. Formation. The Partners hereby form a limited partnership
(the "Partnership") under the Revised Uniform Limited Partnership Act of the
State of Delaware (the "Act") for the purposes set forth herein.
3. Name; Principal and Registered Offices; Agent for Service
of Process.
3.1 The name of the Partnership is MIP LESSEE, LP,
and its business shall be conducted under that name or any variation thereof
that the General Partners deem appropriate. The Partnership's principal office
shall be at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇, or
such other place in Washington, D.C. or New York City, or in the vicinity of
either such city, as the Management Committee shall from time to time determine.
3.2 The Partnership's registered office within the
State of Delaware shall be c/o CT Corporation, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
3.3 The registered agent of the Partnership for
service of process within the State of Delaware shall be CT Corporation, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. In the event that the Person at any
time acting as such agent shall cease to act as such agent for any reason, Opco
GP, with the approval of Oak ▇▇▇▇ ▇▇, shall appoint a substitute agent. Such
agent shall be the agent of the Partnership on which any process, notice or
demand required or permitted by law to be served on the Partnership may be
served.
4. Term. The term of the Partnership shall commence upon the
filing of a certificate of limited partnership with respect to the Partnership
with the Secretary of State of Delaware and shall continue until March 31, 2049,
unless earlier terminated by agreement of the Partners or as otherwise provided
in this Agreement.
5. Purposes. The purposes of the Partnership shall be (i) to
act as the general partner of the Underlying Partnership, (ii) to enter into
leases (the "Operating Leases"), as lessee, with the Underlying Partnership or
one of its subsidiaries, as lessor, for the operation of the Hotels, and (iii)
to enter into any and all contracts or agreements to implement each of the
foregoing and do all things incidental to the foregoing, in all cases upon and
subject to the terms and conditions of this Agreement. All of the foregoing
activities may be conducted by the Partnership directly or indirectly through
one or more subsidiaries. The purpose of the Underlying Partnership is to
acquire and own Hotel Interests and, directly or indirectly through one or more
other entities, to hold, own, manage, operate, lease, mortgage, alter, improve
and sell, and in all other respects to act as owner of, Hotels or, with respect
to Hotel Debt, to exercise, directly or indirectly through one or more entities,
all rights to which the holder of such debt is entitled. The Partnership is and
shall be a limited partnership formed only for the purposes described
15
in the first sentence of this Paragraph 5 and nothing contained in this
Agreement shall be deemed to create a partnership among the Partners with
respect to any other activities.
6. Competition.
6.1 Except as hereinafter provided in this Article 6,
and subject in any event to the rights and obligations of MeriStar Hospitality
Corporation, MHOP, MHR and Opco LP under that certain Intercompany Agreement,
dated as of August 3, 1998 (the "Intercompany Agreement"), each Partner and its
Affiliates, as well as its officers, directors, employees and direct and
indirect owners, may engage in or possess an interest in any other business
venture or ventures, including the construction, development, acquisition,
ownership, investment, operation and/or management of or in real estate
(including Hotels), whether or not in competition with any Hotel owned by the
Underlying Partnership, and neither the Underlying Partnership, the Partnership
nor the other Partners shall have any rights in or to such venture or ventures
or the income or profits derived therefrom.
6.2 If, during the Exclusivity Period, any Oak Hill
Person or any Opco Person (any such Person, the "Originating Party") shall be
presented with the opportunity to acquire any Hotel Interest (other than a Joint
Venture Opportunity), the Originating Party shall, before pursuing such
opportunity on its own behalf or on behalf of any other Person, present such
proposed acquisition to the Partnership for consideration as an investment by
the Underlying Partnership. The General Partners shall evaluate such proposed
acquisition in good faith and shall make their decision as to such acquisition
within 15 days after delivery of a Preliminary Proposal (if requested by either
General Partner) with respect thereto (it being agreed that (i) notwithstanding
anything to the contrary contained in this Agreement, the decision to cause the
Underlying Partnership to acquire a Hotel Interest shall require the approval of
both General Partners and (ii) the rejection of a Preliminary Proposal with
respect to an acquisition shall constitute a determination not to proceed with
such acquisition on behalf of the Underlying Partnership). If the General
Partners elect to proceed with such acquisition on behalf of the Underlying
Partnership, the Partnership shall use good faith efforts to cause such
acquisition to be concluded (provided, however, that nothing herein shall
require that such acquisition actually be concluded if the Underlying
Partnership is unable to reach agreement with the seller of such Hotel Interest
(and any other relevant third parties) as to the terms of or otherwise with
respect to the acquisition or if the Underlying Partnership otherwise determines
in good faith to abandon such acquisition). If the General Partners elect not to
proceed with such acquisition, then the Originating Party shall have the right
to pursue such acquisition opportunity; provided that if the General Partner
which is, or which is affiliated with, the Originating Party voted against
acquiring such Hotel Interest on behalf of the Underlying Partnership and the
other General Partner voted in favor of such acquisition, then the Originating
Party shall not have the right to pursue such acquisition opportunity other than
through the Underlying Partnership.
16
6.3 If the acquisition of a Hotel Interest is part of
an acquisition of assets and/or interests of which Hotel Interests are not,
collectively, a significant component, such acquisition shall not be subject to
the provisions of Section 6.2, provided that any Opco Person or Oak Hill Person
which makes such an acquisition shall, promptly after the consummation thereof,
notify the General Partners of the same.
6.4 Opco LP acknowledges and confirms that, with
respect to this Article 6, it is executing this Agreement in order to bind not
only itself but also all Opco Persons (whether now or hereafter in existence).
Oak Hill Parent acknowledges and confirms that it is executing this Agreement
for the purpose (and the sole purpose) of binding itself and also all other Oak
Hill Persons (whether now or hereafter in existence) to comply with this Article
6. Notwithstanding the foregoing, no Opco Person or Oak Hill Person shall be
deemed to be in violation of this Agreement if it, and its direct or indirect
officers, directors or principals, exercise, with respect to any other Opco
Person or Oak Hill Person, as applicable, its and their voting or discretionary
powers in a manner consistent with the provisions of this Article 6.
6.5 Nothing contained herein shall be construed (a)
as limiting the ability of any Person to acquire any equity or debt interest (or
increase its existing equity or debt interest) in or with respect to any Hotel
listed on Exhibit D annexed hereto, (b) as limiting the ability of any Person to
acquire assets (including, without limitation, Hotel Interests) pursuant to a
foreclosure, a deed in lieu of foreclosure, a workout or restructuring of debt
interests held by such Person or a reorganization or liquidation pursuant to the
United States Bankruptcy Code, or the bankruptcy or insolvency laws of any other
jurisdiction, of a Person that is a debtor of such Person, (c) as limiting the
ability of any Person to acquire direct or indirect debt or equity interests in
insurance companies, other financial institutions and other entities whose
primary business is not the ownership, operation and/or management of real
estate (including, without limitation, Hotels) or (d) as requiring any Person to
violate any fiduciary duty or obligation it may have to any other Person or
Persons (it being agreed that, for purposes of this clause (d), the term
"fiduciary duty" shall not include the duty to offer to any Person, as a
"partnership opportunity," "limited liability company opportunity" or "corporate
opportunity," the opportunity to acquire Hotel Interests).
6.6 Notwithstanding anything to the contrary
contained in the foregoing, the provisions of Section 6.2 shall not apply with
respect to: (i) golf courses; (ii) properties which are, and are intended after
acquisition to be, operated as time shares; (iii) conference centers; (iv) other
Hotels, or interests in other Hotels, which are not upscale or luxury
full-service hotels; or (v) Hotels, or interests in Hotels, located outside the
United States, Canada or the Caribbean. The provisions of this Article 6 are
subject to the provisions of the Intercompany Agreement, it being agreed that,
to the extent any Opco Person is required thereunder to present an acquisition
opportunity to MHOP or its general partner, it shall be permitted to do so
without regard to this Article 6 and shall be obligated to present such
opportunity to the Partnership only to the extent such opportunity is rejected
by MHOP or its general partner.
17
7. Representations and Covenants.
(a) Each Partner warrants and represents to the
others that (i) it is a partnership, corporation or limited liability company,
as applicable, duly organized, validly existing and in good standing under the
laws of the state in which it was formed, (ii) it has the power, right,
authority and legal capacity to execute and deliver this Agreement and the
documents referred to herein (the "Transaction Documents") and to enter into and
fully perform and observe the transactions contemplated hereby and thereby,
(iii) the execution, delivery and performance by it of this Agreement and the
consummation by it of the transactions contemplated hereby and by the
Transaction Documents have been duly authorized by all necessary action on
behalf of such Partner, (iv) all of the Persons who execute and deliver this
Agreement and the Transaction Documents on behalf of such Partner have been (or,
at the time of such execution, will be) duly authorized and empowered on behalf
of such Partner so to do and to enter into all transactions contemplated hereby
and thereby, (v) this Agreement and each Transaction Document to which it is a
party is the valid and binding obligation of such Partner enforceable against it
in accordance with its terms, except as the enforceability of such terms may be
limited by bankruptcy, insolvency, reorganization and other laws relating to or
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law), (vi) the execution, delivery and performance
by it of this Agreement and each Transaction Document to which it is a party,
and the consummation by it of the transactions contemplated hereby and thereby,
will not (A) violate any provision of any of its organizational documents, (B)
except as described in any other Transaction Document, require it to obtain any
consent, approval or action of, or make any filing with or give any notice to,
any Person, (C) assuming all required consents are obtained, violate, conflict
with or result in the breach of any of the terms of, result in a material
modification of the effect of, otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time or both
constitute) a default (by way of substitution, novation or otherwise) under, any
agreement to which it or any of its Affiliates (whether now or formerly
existing) is or was a party or by or to which any of them or any of their
properties may be (or may have been) bound or subject, (D) violate any order,
judgment, injunction, award, decree or writ of any governmental body, entity or
authority against, or binding upon, it or any of its Affiliates or upon any of
its or their properties or the business of the Partnership or the Underlying
Partnership or (E) assuming all required consents of governmental bodies,
entities and authorities are obtained, violate any law, statute, code,
ordinance, regulation or other requirement of any governmental body, entity or
authority and (vii) there is no provision in the organizational documents of
such Partner that would prevent or limit, or is otherwise inconsistent with, the
conduct of the Partnership's business in accordance with this Agreement or the
business of the Underlying Partnership under the Underlying Partnership
Agreement.
(b) Each of Opco GP and Oak ▇▇▇▇ ▇▇ (i) warrants and
represents to the other Partners that it is a special purpose entity formed for
the sole
18
purposes of becoming a general partner in the Partnership and engaging in the
activities contemplated by this Agreement and (ii) covenants that it shall not
engage in any other business.
(c) Each of the Partners represents that it is
acquiring its interest in the Partnership for investment and not with a view to
the resale or distribution thereof.
8. OHTE Subsidiaries; Capital Contributions.
8.1 Without limiting the Oak Hill Partners' rights
under Article 14 hereof and under the other provisions of this Agreement, and
notwithstanding anything to the contrary contained in the Agreement (other than
Section 14.7), Oak Hill Parent shall have the right to assign that portion of
its Partnership Interest owned by it in its capacity as "OHTE" to an Affiliate
of Oak Hill Parent which is wholly-owned by one or more investors in Oak Hill
Parent. In addition, OHTE shall have the right, with respect to each Hotel
Interest acquired by the Underlying Partnership prior to the OHTE Initial
Contribution Date, to require that on or after the OHTE Initial Contribution
Date a wholly owned subsidiary of OHTE (an "OHTE Subsidiary") be admitted to the
Partnership as a Limited Partner with respect to such Hotel Interest (any such
OHTE Subsidiary, an "Initial OHTE Subsidiary"). If OHTE shall exercise such
right, then upon the admission of the Initial OHTE Subsidiaries to the
Partnership, OHTE shall withdraw as a Partner and shall no longer share in
distributions of Available Cash or in allocations of Partnership income, gain
and loss (provided that no such withdrawal shall affect OHTE's obligations under
Section 8.2). OHTE shall also have the right, prior to the acquisition of any
Hotel Interest by the Underlying Partnership after the OHTE Initial Contribution
Date, to require that a separate OHTE Subsidiary be admitted to the Partnership
as an additional Limited Partner with respect to such Hotel Interest. The OHTE
Subsidiary admitted to the Partnership with respect to a Hotel Interest shall be
responsible, in accordance with the provisions of Section 8.2, for making all
OHTE Capital Contributions (as defined in Section 8.2) to the Partnership in
respect of such Hotel Interest (including without limitation, capital
contributions required to fund the acquisition of such Hotel Interest) and shall
share in distributions of Available Cash, and in allocations of Partnership
income, gain and loss, only with respect to such Hotel Interest. If OHTE shall
designate Initial OHTE Subsidiaries but shall fail to designate an OHTE
Subsidiary in respect of any Hotel Interest acquired after the Initial OHTE
Contribution Date, OHTE shall be deemed to have designated, as such OHTE
Subsidiary, the OHTE Subsidiary most recently admitted to the Partnership. Upon
the admission of an OHTE Subsidiary to the Partnership, such OHTE Subsidiary
shall be deemed to have made, as to itself, the warranties and representations
contained in Section 7.1(a) and (b). The admission of any Initial OHTE
Subsidiary to the Partnership shall be deemed a partial assignment of OHTE's
interest in the Partnership and shall be subject to the requirements of Section
14.7 (it being understood that the admission of any other OHTE Subsidiary shall
not be deemed such an assignment, provided that any such OHTE Subsidiary shall
execute and deliver to the Partnership documentation of the nature
19
referred to in clauses (i) and (iii) of Section 14.7). Notwithstanding anything
to the contrary contained in the foregoing, OHTE may elect to form OHTE
Subsidiaries with respect to some Hotel Interests and not others and, in such
event, the term "OHTE Subsidiary," as used herein with respect to any Hotel
Interest as to which an OHTE Subsidiary was not formed, shall be deemed to mean
OHTE itself (except for purposes of Section 13.7 and any other provisions hereof
relating to the sale of stock in OHTE Subsidiaries).
8.2 (a) Each Partner is, on the date hereof,
contributing to the capital of the Partnership the amount shown under "Initial
Capital Contributions" on Exhibit A annexed hereto. If the Management Committee
shall determine that additional funds in excess of those available through
borrowings, withdrawals from reserves or other sources are required by the
Partnership or the Underlying Partnership in order to fund activities authorized
under this Agreement or the Underlying Partnership Agreement, as applicable, the
Management Committee may give notice (a "Contribution Notice") to such effect to
each Partner (or, in the case of the OHTE Subsidiaries, if any, to OHTE). The
Contribution Notice shall require that each Partner (other than the OHTE
Subsidiaries) make, and that OHTE cause the applicable OHTE Subsidiary or each
of the OHTE Subsidiaries to make, a contribution to the capital of the
Partnership in an amount equal to such Partner's Proportionate Share of the
total amount so required by the Partnership or of the Partnership's share of the
total amount so required by the Underlying Partnership (the capital
contributions for which OHTE is so responsible, the "OHTE Capital
Contributions"). As used herein with respect to a Partner, the term
"Proportionate Share" shall mean: (i) in the case of each Partner other than an
OHTE Subsidiary, a fraction, the numerator of which is such Partner's Commitment
and the denominator of which is the aggregate Commitments; and (ii) in the case
of an OHTE Subsidiary, the numerator of which is OHTE's Commitment and the
denominator of which is the aggregate Commitments. Notwithstanding the
foregoing: (A) in the case of capital contributions to be used to pay costs and
expenses which are not allocable to a particular Hotel Interest, each such
capital contribution shall be deemed allocated among the Hotel Interests then
owned by the Underlying Partnership in proportion to the other capital
contributions associated with each such Hotel Interest; (B) in no event shall
the aggregate amount of funds required to be contributed by any Partner (other
than OHTE and the OHTE Subsidiaries, if any) pursuant to this Section 8.2 exceed
such Partner's Commitment; (C) in no event shall the aggregate amount of funds
required to be contributed by OHTE and any OHTE Subsidiaries pursuant to this
Section 8.2 exceed in the aggregate OHTE's Commitment; and (D) in no event shall
any Partner be required to contribute funds to the Partnership after the
Commitment Expiration Date for the purpose of funding the acquisition of Hotel
Interests by the Partnership. If a Contribution Notice shall be given, then,
unless such Contribution Notice relates solely to cash needs of the Partnership
(and not to the Partnership's share of the cash needs of the Underlying
Partnership), a corresponding capital call shall be made to MHOP in its capacity
as limited partner of the Underlying Partnership.
20
(b) The Partners shall be required to make
contributions to the capital of the Partnership pursuant to this Section 8.2
within fifteen (15) days after the giving of a Contribution Notice. Each
Contribution Notice shall set forth the amount of funds the Management Committee
has determined are to be contributed to the Partnership and the purpose(s) for
which such funds will be used. No Contribution Notice shall require the Oak Hill
Partners to contribute (in the aggregate) less than $5,000,000 in capital to the
Partnership. The amount of capital required to be contributed to the Partnership
pursuant to a Contribution Notice may, to the extent necessary to comply with
the preceding sentence or as otherwise reasonably determined by the Management
Committee in light of the projected future cash needs of the Partnership and the
timing of such needs, exceed the amount needed by the Partnership to meet its
then-current cash needs and, to the extent of such excess, shall be invested in
temporary investments acceptable to the Management Committee and permitted under
the terms of the Credit Facility or any other third party agreement.
8.3 For purposes of this Section 8.3: (A) the term
"Defaulting Partner" shall mean, collectively, (i) the Oak Hill Partners, if any
of the Oak Hill Partners (including Oak Hill Partners admitted to the
Partnership after the date hereof) shall fail to contribute all or any part of
the funds which they are called upon to contribute pursuant to Section 8.2, or
(ii) the Opco Partners, if any of the Opco Partners shall fail to contribute all
or any part of the funds which they are called upon to contribute pursuant to
Section 8.2; (B) the term "Non-Defaulting Partner" shall mean, collectively, the
Oak Hill Partners or the Opco Partners, whichever shall not be the Defaulting
Partner; and (C) the term "Requested Amount" shall mean the amount of the funds
which the Defaulting Partner was called upon or required to contribute or pay
and as to which it is, in whole or in part, in default. If any Partner shall
fail to contribute all or any part of the Requested Amount, the Non-Defaulting
Partner may, but shall not be obligated to, advance to the Partnership all or
any part of such Requested Amount. Any amount so advanced shall be deemed to be
a demand loan (a "Default Loan") to the Partner which failed to contribute the
Requested Amount, which loan shall bear interest at an annual rate equal to the
lesser of (a) seven (7) percentage points in excess of the Prime Rate and (b)
the highest rate permitted by law, the proceeds of which loan shall be deemed to
have been used by such Partner to make Capital Contribution to the Partnership.
All of the Persons constituting the Defaulting Partner shall be jointly and
severally liable with respect to each Default Loan made to such Partner. Until
any Default Loans and the interest thereon shall be paid in full, all
distributions to which the Persons constituting the Defaulting Partner would
otherwise be entitled under this Agreement shall instead be paid to the Persons
constituting the Non-Defaulting Partner, and applied first to interest on, and
then to the principal balance of, the outstanding Default Loans (such payments
to be allocated between the Persons constituting the Non-Defaulting Partner in
proportion to the respective amounts of interest or principal, as applicable,
owing to each such Person); provided that for purposes of Articles 9 and 10 such
distributions shall be deemed to have been made to the Persons constituting the
Defaulting Partner. All Default Loans shall be prepayable in whole or in part
without penalty or premium; provided that any payments on account of Default
Loans shall be
21
applied first against interest and then against principal. The right of the
Non-Defaulting Partner to make Default Loans pursuant to this Section 8.3 shall
be non-exclusive and the Non-Defaulting Partner and the Partnership may, in
respect of the Defaulting Partner's failure to advance all or any portion of the
Requested Amount, exercise all other remedies available to them at law or in
equity (it being agreed that the General Partner which is not included in the
Defaulting Partner shall have the sole right, without the consent of any other
Partner, to act on behalf of the Partnership in exercising any such remedy).
8.4 The Partners shall not be liable for any of the
debts, liabilities or obligations of the Partnership or any of the losses
thereof beyond the amount of each of their respective capital contributions to
the Partnership, except to the extent otherwise required by law. No Partner
shall be responsible for any debts or losses of any other Partner.
8.5 (A) If, after all contributions then required or
permitted to have been made under Sections 8.2 and 8.3 have been made,
additional funds are needed by the Partnership to pay cash needs of the
Partnership (or to fund loans made by the Partnership to pay cash needs of the
Underlying Partnership pursuant to Section 8.4 of the Underlying Partnership
Agreement), then, subject to the obtaining of any required consents from the
lenders to the Underlying Partnership or other third parties, the Partners may,
but shall not be obligated to, loan such funds to the Partnership in proportion
to their respective Proportionate Share or in such other proportion as they
shall agree on. Such loans ("Voluntary Loans") shall bear interest at an
appropriate risk-adjusted market rate, shall be repayable only out of available
cash of the Partnership (prior to any distributions provided for in this
Agreement but after the payment of Priority Loans) and shall be repaid to the
Partners which made such loans, together with accrued and unpaid interest
thereon, in proportion to the respective outstanding principal balance of such
loans owed to each such Partner. No dispute as to whether any interest rate is
an appropriate risk-adjusted market rate of interest shall affect the right of
the Partnership to accept any loan provided for in this Section 8.5 or to pay
interest thereon at the rate agreed to by the Partnership. In the event of a
dispute as to the appropriate risk-adjusted market rate of interest to be
charged then, pending the resolution of such dispute, interest at a per annum
rate of the Prime Rate plus 1% shall accrue (and, to the extent payments thereof
are to be made pursuant to this Section 8.5, shall be paid) on such loans from
the date such loans are made until the date any such dispute shall have been
resolved. Upon the determination as to the actual rate of interest to be
charged, interest shall be recalculated retroactively to the date such loans
were made and the applicable Partner or the Partnership, as the case may be,
shall, within 15 days after the determination of such actual rate of interest,
pay to the other party any excess interest paid to or by such party. If the
parties are unable to agree as to the rate of interest to be charged on any
loans pursuant to this Section 8.5, such dispute may, at the election of either
Partner, be submitted to arbitration under the Expedited Procedures provisions
of the Commercial Arbitration Rules of the American Arbitration Association or
any
22
successor. For purposes of this Section 8.5, the term "cash needs" shall not
include the cost of acquiring Hotel Interests.
(B) If any Partner or any holder of direct
or indirect equity interests in any Partner shall make any payment under any
Recourse Indemnity (as hereinafter defined), then, unless the act or occurrence
giving rise to such payment is one as to which such Partner would not be
entitled to indemnification hereunder, the amount so paid shall, at such
Partner's election, be deemed a loan ("Priority Loan") to the Partnership, which
Priority Loan shall bear interest at an annual rate equal to the Prime Rate plus
1% and shall be repayable, together with such interest, only out of Available
Cash and prior to the repayment of any Voluntary Loans, the payment of interest
on Voluntary Loans and distributions to the Partners. All payments by the
Partnership on account of Priority Loans shall be applied first to interest and
then to principal. As used herein, the term "Recourse Indemnity" shall mean any
agreement to indemnify a lender to the Underlying Partnership with respect to
any so-called "non-recourse" carveouts in such lender's loan documents, or any
separate recourse indemnity or guaranty given to any such lender. The rights of
the Partners and their direct and indirect equity owners under this Section
8.5(B) shall be in addition to, and not in substitution for, those under Section
13.11 hereof.
(C) All Priority Loans and Voluntary Loans
shall be subordinate in all respects to the indebtedness evidenced by that
certain Senior Secured Credit Facility being entered into between the Underlying
Partnership, certain of its Operating Subsidiaries and ▇▇▇▇▇▇ Brothers Holdings
Inc. (the "Credit Facility") and to all renewals, extensions, modifications,
assignments, replacements or consolidations thereof and the rights, privileges
and powers of the lender thereunder.
8.6 Notwithstanding anything to the contrary
contained in the foregoing, if the General Partners elect to cause the
Partnership to acquire MHOP's interest in the Underlying Partnership with
respect to a Hotel Interest pursuant to Section 13.12 of the Underlying
Partnership Agreement, then the cost of such acquisition and any expenses
incidental thereto shall be funded not out of capital contributions to the
Partnership but out of third-party borrowings, Voluntary Loans or such other
financing sources as the General Partners shall agree on. The election to make
such acquisition shall, notwithstanding anything to the contrary contained in
this Agreement, require the approval of both General Partners.
8.7 Except as expressly provided in this Article 8,
no Partner shall be required or permitted to make any capital contributions or
loans to the Partnership.
8.8 (A) Notwithstanding anything to the contrary
contained in this Agreement, the Partners agree that, until the OHTE Initial
Contribution Date, the Partnership's share of all cash needs of the Underlying
Partnership (to the extent such cash needs are not funded out of borrowings of
the Underlying Partnership), as well as all
23
other cash needs of the Partnership, shall be funded through capital
contributions by the Opco Partners. All such capital contributions shall be made
by the Opco Partners in proportion to their respective Proportionate Shares. The
Partners further agree that, subject to the Limited Partner's rights under
clause (B) of this Section 8.8 and notwithstanding anything to the contrary set
forth in Section 8.2, the Oak Hill Partners (including any OHTE Subsidiary which
is then a Partner) shall, from and after the OHTE Initial Contribution Date,
make 100% of all required capital contributions to the Partnership (in
proportion to their respective Proportionate Shares) until their aggregate
capital contributions and the capital contributions theretofore made by the Opco
Partners are in the same proportion, one to the other, as the respective
Commitments of the Oak Hill Partners and the Opco Partners. Each such capital
contribution shall, for purposes of this Agreement, be deemed made with respect
to the Hotel Interests then owned by the Partnership in proportion to the
respective total capital contributions (whether made by the Opco Partners or the
Oak Hill Partners) made with respect to such Hotel Interests (including capital
contributions made pursuant to this Section 8.8(A)). Upon each such capital
contribution, the aggregate capital contributions theretofore made by the Opco
Partners shall be deemed reallocated among such Hotel Interests such that they
equal, as to each such Hotel Interest, the total capital contributed with
respect to such Hotel Interest (whether by the Opco Partners or the Oak Hill
Partners) less the amount of capital deemed contributed by the Oak Hill Partners
with respect to such Hotel Interest pursuant to the immediately preceding
sentence.
(B) Notwithstanding the foregoing provisions
of this Section 8.8, Opco GP shall have the right, at any time on or after April
1, 1999, to give a Contribution Notice requiring the Oak Hill Partners to make
capital contributions to the Partnership on or after April 15, 1999 (in
proportion to their respective Proportionate Shares) in an amount such that
their aggregate capital contributions to the Partnership equal their aggregate
Proportionate Share of all capital contributions theretofore made to the
Partnership; provided that Opco GP shall use its reasonable efforts not to
require that such capital contributions be made prior to the earlier of (i) May
12, 1999 and (ii) the third closing of the acquisition of partnership interests
in Oak Hill Parent. The amount so contributed shall be distributed to the Opco
Partners (in proportion to their respective Proportionate Shares), shall be
treated as a reduction of their capital contributions (including for purposes of
calculating Overall Percentage Interest), and shall be treated, for purposes of
determining the extent to which the Opco Partners shall have funded their
respective Commitments, not to have been contributed to the Partnership. Upon
any such capital contribution, the respective capital contributions deemed made
by the Partners with respect to each Hotel Interest then owned by the
Partnership shall be reallocated so they stand in the same proportion, one to
the other, as the Partners' respective Proportionate Shares.
8.9 Notwithstanding anything to the contrary
contained in this Agreement, Oak ▇▇▇▇ ▇▇, OHTE and OHCMP shall have the right,
at any time on or prior to the OHTE Initial Contribution Date (or thereafter, at
the time of any closing of the acquisition of partnership interests in Oak Hill
Parent) to increase or reduce their
24
respective Commitments (provided that such Commitments shall in all events equal
$89,500,000 in the aggregate and OHCMP's Commitment shall in no event exceed its
Commitment on the date hereof). Oak ▇▇▇▇ ▇▇ shall notify Opco GP of the exercise
of such right prior to the OHTE Initial Contribution Date (or prior to any
subsequent exercise of such right) and the Partners shall promptly thereafter
enter into an amendment to this Agreement, reasonably satisfactory to the
Partners, reflecting such reallocation of Commitments and the resulting
adjustment in Proportionate Shares. In the event Capital Contributions have
theretofore been made by the Oak Hill Partners, then additional Capital
Contributions shall be made by, and corresponding distributions made to, Oak
▇▇▇▇ ▇▇, OHCMP and OHTE (or, if OHTE Subsidiaries have been admitted to the
Partnership, such OHTE Subsidiaries) in a manner consistent with that described
in Section 8.8(B) in order to give effect to such reallocation. Notwithstanding
the foregoing, no such reallocation shall be effected unless all necessary
consents thereto, if any, shall have been obtained from lenders to the
Partnership or the Underlying Partnership or other third parties.
8.10 The Partners agree that, notwithstanding
anything to the contrary contained in this Agreement, a Contribution Notice
shall in all events be given in the event the Partnership requires additional
cash in order to pay base rent under the Operating Leases. Nothing in the
foregoing shall require that any Partner make aggregate contributions in excess
of its Commitment.
9. Capital Accounts; Allocations.
9.1 A separate Capital Account shall be maintained
for each Partner. Each Partner's Capital Account shall be credited with the
amount of such Partner's capital contributions made in cash and the fair market
value (net of liabilities assumed or taken subject to) of all property
contributed by such Partner and such Partner's allocated share of Gross Profit
and Net Profit of the Partnership. Each Partner's Capital Account shall be
debited with the amount of any cash distributions to such Partner and the fair
market value (net of liabilities assumed or taken subject to) of all property
distributed in kind to such Partner and such Partner's allocated share of Net
Loss of the Partnership. In the event that any Partnership Interest or portion
thereof is transferred in accordance with the terms of this Agreement, the
transferee of such Partnership Interest or portion thereof shall succeed to the
transferor's Capital Account (or that percentage of the transferor's Capital
Account as is equal to the percentage of the transferor's Partnership Interest
so transferred).
9.2 Except as otherwise provided in the further
provisions of this Article 9, Net Profit and Net Loss of the Partnership for any
Fiscal Year shall be allocated as follows and in the following order of
priority:
9.2.1 Any Net Profit of the Partnership for
any Fiscal Year shall be allocated as follows and in the following order of
priority:
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(i) First, to the Partners in
proportion to and to the extent of the excess, if any, of (A) the
aggregate amount of Net Loss previously allocated to each such Partner
pursuant to Section 9.2.2(ii) for all prior years over (B) the
aggregate amount of Net Profit previously allocated to such Partner
pursuant to this clause (i) for all prior years; and
(ii) Thereafter, to the Partners in
such amounts so that their respective Adjusted Capital Account balances
are proportionate to the respective aggregate distribution to which
each Partner is entitled pursuant to Section 10.1.
9.2.2 Any Net Loss of the Partnership for
any Fiscal Year shall be allocated as follows and in the following order of
priority:
(i) First, to the Partners in such
amounts so that their respective Adjusted Capital Account balances are
proportionate to the respective aggregate distribution to which each
Partner is entitled pursuant to Section 10.1, until such Adjusted
Capital Account balances are reduced to zero; and
(ii) Second, to the Partners in
proportion to their Overall Percentage Interests.
9.3 Notwithstanding the foregoing, to the extent any
allocation of Net Loss pursuant to Section 9.2.2 would reduce any Limited
Partner's Adjusted Capital Account below zero and any other Partner has a
positive Adjusted Capital Account balance, such Net Loss shall instead be
allocated among the General Partners and the other Limited Partners whose
Adjusted Capital Accounts would not thereby be reduced below zero, and
subsequent allocations of Net Profit shall thereafter be made, prior to any
other allocations of Net Profit, to the General Partners and such other Limited
Partners in proportion to and to the extent of such excess Net Loss allocation.
If all of the Partners' Adjusted Capital Account balances are equal to or below
zero, then allocations of Net Loss shall be determined pursuant to subsection
9.2.2.
9.4 In the event of a transfer of an interest in the
Partnership, or a change in the Overall Percentage Interests, the Partnership's
Net Profit or Net Loss shall be allocated among the Partners for the periods
before and after the transfer or change based on an interim closing of the books
or as the Partners may otherwise agree.
9.5 Except as otherwise provided in Section 9.6, all
items of Partnership income, gain, deduction and loss for tax purposes shall be
allocated among the Partners in the same proportion as they share in the Gross
Profit, Net Profit and Net Loss to which such items relate.
26
9.6 Income, gain, loss or deductions of the
Partnership shall, solely for income tax purposes, be allocated among the
Partners in accordance with Section 704(c) of the Code and the Treasury
Regulations promulgated thereunder, so as to take account of any difference
between the adjusted tax basis of the assets of the Partnership and their
respective Gross Asset Values in accordance with the traditional method set
forth in ss. 1.704-3(b) of the Treasury Regulations or such other methods as the
Partners may agree on.
9.7 Notwithstanding any other provision of this
Article 9, if there is a net decrease in Partnership Minimum Gain during any
year, each Partner shall be specially allocated items of Gross Profit for such
year (and, if necessary, subsequent years) in an amount equal to the portion of
such Partner's share of the net decrease in Partnership Minimum Gain, determined
in accordance with ss. 1.704-2(g) of the Treasury Regulations. Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Partner pursuant thereto. The items to
be so allocated shall be determined in accordance with ss. 1.704-2(f)(6) of the
Treasury Regulations. This Section 9.7 is intended to comply with the minimum
gain chargeback requirement in ss. 1.704-2(f) of the Treasury Regulations and
shall be interpreted consistently therewith.
9.8 Notwithstanding any other provisions of this
Article 9 except Section 9.7, if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any year, each Partner who has
a share of the Partner Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in accordance with ss. 1.704-2(i)(5) of the Treasury
Regulations, shall be specially allocated items of Gross Profit for such year
(and, if necessary, subsequent years) in an amount equal to the portion of such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with ss. 1.704-2(i)(4) of the
Treasury Regulations. Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined in
accordance with ss. 1.704- 2(i)(4) of the Treasury Regulations. This Section 9.8
is intended to comply with the minimum gain chargeback requirement in ss.
1.704-2(i) of the Treasury Regulations and shall be interpreted consistently
therewith.
9.9 Nonrecourse Deductions for any year shall be
allocated as Net Loss pursuant to Section 9.2.
9.10 Any Partner Nonrecourse Deductions for any year
shall be specially allocated to the Partner who bears the economic risk of loss
with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with ss. 1.704-2(i)(1) of the Treasury
Regulations.
9.11 If a Limited Partner unexpectedly receives an
adjustment, allocation or distribution described in ss. 1.704-1(b)(2)(ii)(d) of
the Treasury Regulations
27
which, after taking into account all other allocations to be made for such year
pursuant to this Article 9, creates or increases a deficit balance in such
Partner's Adjusted Capital Account (computed after all other allocations to be
made for such year pursuant to this Article 9 have been tentatively made as if
this Section 9.11 were not in this Agreement), such Deficit Partner shall be
allocated items of Gross Profit in an amount equal to such deficit balance. This
Section 9.11 is intended to comply with the qualified income offset requirement
of ss. 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted
consistently therewith.
9.12 The allocations set forth in Sections 9.7
through 9.11 (the "Regulatory Allocations") shall be taken into account in
allocating items of income, gain, loss and deduction among the Partners so that,
to the extent possible, the net amount of such allocations of other items and
the Regulatory Allocations to each Partner shall be equal to the net amount that
would have been allocated to each such Partner if the Regulatory Allocations had
not occurred.
10. Distributions; Use of Partnership Funds.
10.1 Subject to the further provisions of this
Article 10, distributions of Partnership cash or other property shall be made to
the Partners, in such amounts and at such times as the Management Committee
shall determine, as follows:
10.1.1 Available Cash other than Capital
Proceeds shall be distributed to the Partners, in proportion to their respective
Overall Percentage Interests.
10.1.2 Prior to the fourth anniversary of
the date hereof, Available Cash consisting of Capital Proceeds shall be
distributed as follows:
(i) First, for computational purposes, the
aggregate amount to be distributed shall be divided among Opco GP, Opco LP and
the Oak Hill Partners, in the aggregate, in proportion to their respective
Overall Percentage Interests, and the amounts so apportioned to Opco GP and Opco
LP shall be distributed to them; and
(ii) Second, the aggregate amount so
apportioned to the Oak Hill Partners shall be distributed as follows and in the
following order of priority:
(a) First, 100% to the Oak Hill
Partners, until they have achieved an IRR of 20%;
(b) Second, 100% to Opco LP, until
it has received aggregate distributions pursuant to this Section
10.1.2(ii) equal to 1%
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of the aggregate distributions to all Oak Hill Partners pursuant to
Section 10.1.1 and to all Partners pursuant to this Section 10.1.2(ii);
(c) Third, 1% to Opco LP and 99% to
the Oak Hill Partners, until the Oak Hill Partners have achieved an IRR
of 25%;
(d) Fourth, 100% to Opco LP, until
it has received aggregate distributions pursuant to this Section
10.1.2(ii) equal to 2% of the aggregate distributions to all Oak Hill
Partners pursuant to Section 10.1.1 and to all Partners pursuant to
this Section 10.1.2(ii);
(e) Fifth, 2% to Opco LP and 98% to
the Oak Hill Partners, until the Oak Hill Partners have achieved an IRR
of 30%;
(f) Sixth, 100% to Opco LP, until
it has received aggregate distributions pursuant to this Section
10.1.2(ii) equal to 3% of the aggregate distributions to all Oak Hill
Partners pursuant to Section 10.1.1 and to all Partners pursuant to
this Section 10.1.2(ii);
(g) Seventh, 3% to Opco LP and 97%
to the Oak Hill Partners, until the Oak Hill Partners have achieved an
IRR of 35%;
(h) Eighth, 100% to Opco LP, until
it has received aggregate distributions pursuant to this Section
10.1.2(ii) equal to 4% of the aggregate distributions to all Oak Hill
Partners pursuant to Section 10.1.1 and to all Partners pursuant to
this Section 10.1.2(ii);
(i) Ninth, 4% to Opco LP and 96% to
the Oak Hill Partners, until the Oak Hill Partners have achieved an IRR
of 40%;
(j) Tenth, 100% to Opco LP, until
it has received aggregate distributions pursuant to this Section
10.1.2(ii) equal to 5% of the aggregate distributions to all Oak Hill
Partners pursuant to Section 10.1.1 and to all Partners pursuant to
this Section 10.2.1(ii); and
(k) Thereafter, 5% to Opco LP and
95% to the Oak Hill Partners.
Exhibit E annexed hereto sets forth an example of how the foregoing distribution
formula shall be applied.
10.1.3 On and after the fourth anniversary
of the date hereof, Available Cash consisting of Capital Proceeds shall be
distributed as follows:
29
(i) First, for computational purposes, the
aggregate amount to be distributed shall be divided among the Opco GP, the Opco
LP and the Oak Hill Partners, in the aggregate, in proportion to their
respective Overall Percentage Interests, and the amounts so apportioned to the
Opco GP and the Opco LP shall be distributed to them; and
(ii) Second, the aggregate amount so
apportioned to the Oak Hill Partners shall be distributed as follows and in the
following order of priority:
(a) First, 100% to the Oak Hill
Partners, until they have achieved an IRR of 20%;
(b) Second, 100% to Opco LP, until
it has received aggregate distributions pursuant to Section 10.1.2(ii)
and this Section 10.1.3(ii) equal to 2% of the aggregate distributions
to all Oak Hill Partners pursuant to Section 10.1.1 and to all Partners
pursuant to Section 10.1.2(ii) and this Section 10.1.3(ii);
(c) Third, 2% to Opco LP and 98% to
the Oak Hill Partners, until the Oak Hill Partners have achieved an IRR
of 25%;
(d) Fourth, 100% to Opco LP, until
it has received aggregate distributions pursuant to Section 10.1.2(ii)
and this Section 10.1.3(ii) equal to 4% of the aggregate distributions
to all Oak Hill Partners pursuant to Section 10.1.1 and to all Partners
pursuant to Section 10.1.2(ii) and this Section 10.1.3(ii);
(e) Fifth, 4% to Opco LP and 96% to
the Oak Hill Partners, until the Oak Hill Partners have achieved an IRR
of 27.5%;
(f) Sixth, 100% to Opco LP, until
it has received aggregate distributions pursuant to Section 10.1.2(ii)
and this Section 10.1.3(ii) equal to 5% of the aggregate distributions
to all Oak Hill Partners pursuant to Section 10.1.1 and to all Partners
pursuant to Section 10.1.2(ii) and this Section 10.1.3(ii);
(g) Seventh, 5% to Opco LP and 95%
to the Oak Hill Partners, until the Oak Hill Partners have achieved an
IRR of 30%;
(h) Eighth, 100% to Opco LP, until
it has received aggregate distributions pursuant to Section 10.1.2(ii)
and this Section 10.1.3(ii) equal to 7% of the aggregate distributions
to all Oak Hill Partners pursuant to Section 10.1.1 and to all Partners
pursuant to Section 10.1.2(ii) and this Section 10.1.3(ii); and
30
(i) Thereafter, 7% to Opco LP and
93% to the Oak Hill Partners.
10.1.4 For purposes of Sections 10.1.2 and
10.1.3, amounts to be distributed to the Oak Hill Partners shall be apportioned
among them as the Oak ▇▇▇▇ ▇▇ shall determine, and the Oak ▇▇▇▇ ▇▇ shall inform
the Partnership of the amount of each distribution to be made to each Oak Hill
Partner; provided, however, that any such apportionment among the Oak Hill
Partners must satisfy the "substantial economic effect" requirement of the
Treasury Regulations.
10.2 (i) Notwithstanding the foregoing distribution
provisions of this Article 10, if, with respect to any Partner(s) as of any
quarterly period, (A) the product of (I) the cumulative amount of net taxable
income allocated to such Partner(s) pursuant to this Agreement for the current
Fiscal Year (or portion thereof) that includes such quarter and all prior Fiscal
Years multiplied by (II) the Effective Tax Rate, exceeds (B) the aggregate
amount distributed or to be distributed to such Partner(s) during such Fiscal
Year (or portion thereof) ending on with such quarter and all prior Fiscal Years
pursuant to the other provisions of this Article 10, the Partnership may, at the
election of the Management Committee, elect to make an advance ("Tax Advance")
to all such Partner(s) in an amount up to the aggregate excess tax liability of
the Partner(s) in proportion to their respective shares of such excess tax
liability. It is expected that any such Tax Advances would be made at such times
as may be appropriate to permit the Partners to make their required estimated
tax payments.
(ii) All Tax Advances made on behalf of a
Partner shall be repaid to the Partnership by reducing the amount of the next
succeeding distribution or distributions that would otherwise have been made to
such Partner, or, if such distributions are not sufficient for that purpose, by
so reducing the proceeds of liquidation otherwise payable to such Partner.
10.3 In no event shall the Partnership be required to
distribute Partnership cash pursuant to Sections 10.1 and 10.2 to the extent
that, in the reasonable judgment of the Management Committee, such cash is
needed to meet cash needs of the Partnership or the Underlying Partnership (the
Partners hereby agreeing that the cost of acquiring any Hotel Interest shall not
be deemed a cash need for this purpose) or to meet (or to reserve for) any
liabilities or obligations of the Partnership (including, without limitation,
contingent liabilities or obligations to the extent then known by the Management
Committee and as reasonably estimated by the Management Committee).
10.4 Notwithstanding anything to the contrary
contained in Section 10.1, (i) distributions of Partnership cash, to the extent
paid out of distributions by the Underlying Partnership, shall be made to the
Partners within one business day after the corresponding distributions are
received by the Partnership from the Underlying Partnership and (ii) other
distributions shall be made at least quarterly (in the case of distributions of
operating cash flow) or within 30 days after the event generating the cash
31
to be distributed (in the case of distributions of Capital Proceeds). The
parties agree that the Partnership, as the general partner of the Underlying
Partnership, shall cause cash of the Underlying Partnership to be distributed in
accordance with Sections 9.12, 9.13 and 9.14, and the other relevant provisions,
of the Underlying Partnership Agreement.
10.5 For purposes of determining the amount of any
distributions or payments made in kind, marketable securities shall be valued
based on the average trading price of the securities over the 30-day period
preceding the later of the date of such distribution or payment and the
termination of any underwriter lock-up applicable to such securities, and
non-marketable securities shall be valued as determined by the General Partners
in their reasonable discretion. In the event that any security to be distributed
in kind is to be valued based on the trading value of such security after the
distribution date of such security under this Agreement, then the General
Partners shall determine whether or not an interim distribution of such
securities shall be made to the Partners on such distribution date based on the
value of such security prior to such distribution date, and if so, whether a
portion of such interim distribution shall be held in escrow pending any
adjustment in the relative distributions to the Partners based on trading values
after such distribution date or whether any such adjustment shall be settled
among the parties by applying such adjustment against future distributions or
otherwise.
11. Books and Records; Tax Matters.
11.1 At all times during the continuance of the
Partnership, Opco GP shall keep or cause to be kept full and complete books of
account in which shall be entered fully and accurately each transaction of the
Partnership and the Underlying Partnership. All such books of account shall at
all times be maintained at the principal office of the Partnership and shall be
open to the inspection and examination of the Partners and their representatives
on reasonable advance notice during normal business hours. Such books shall be
kept on the accrual basis and on the basis of an accounting period consisting of
a Fiscal Year.
11.2 The books of the Partnership and the Underlying
Partnership shall be closed and balanced at the end of each Fiscal Year, and not
later than April 1 of the following year, Opco GP shall furnish and distribute
financial statements to OPCO LP, Oak ▇▇▇▇ ▇▇, Oak ▇▇▇▇ ▇▇, OHCMP and OHTE which
shall reflect or include the results of the operations of the Partnership and
the Underlying Partnership for such year, the unpaid balance due on all
obligations of the Partnership and the Underlying Partnership, each Partner's
share of the net profits or net losses of the Partnership, and the Partnership's
share of the net profits or net losses of the Underlying Partnership, for
financial accounting purposes, each Partner's distributive share of all tax
items of the Partnership, an income and expense statement with respect to each
Hotel Interest owned by the Underlying Partnership, a statement of Capital
Improvements made with respect to each such Hotel Interest, all other relevant
information for federal income tax purposes and for the purposes of any state
and local taxes applicable to any Partner, and any other information customarily
reflected in financial statements prepared in accordance with
32
GAAP. Such statements shall be audited in accordance with generally accepted
auditing standards by the independent certified public accountants then
regularly retained by the Partnership or the Underlying Partnership, as
applicable, and adjusted, to the extent necessary, to make them conform to GAAP.
Opco GP shall also be responsible for causing the Partnership to deliver to the
partners of the Underlying Partnership, in a timely manner, all financial
statements required to be delivered to such Persons under the Underlying
Partnership Agreement.
11.3 Opco GP shall cause to be prepared from the
books of the Partnership, and shall send OPCO LP, Oak ▇▇▇▇ ▇▇, Oak ▇▇▇▇ ▇▇,
OHCMP and OHTE within 20 days after the close of each calendar month, (a)
Monthly Reports (as defined in the Form of Management Agreement annexed hereto
as Exhibit B) for each Hotel owned by the Underlying Partnership and (b) an
income and expense statement with respect to each other Hotel Interest owned by
the Underlying Partnership.
11.4 The Partners and their representatives shall
have the right to inspect, examine and copy all books, records, files and other
documents of the Partnership and the Underlying Partnership (including, without
limitation, those maintained for the Underlying Partnership by its managing
agent or agents) at all reasonable times during normal business hours at the
offices of the Partnership or at such other place(s) as any of the same may then
be regularly maintained (it being agreed that at least one set of books of
accounts of the Partnership and the Underlying Partnership shall be maintained
at the principal office of the Partnership as provided in Section 11.1).
11.5 It is agreed that the Partnership will retain as
the independent certified public accountants for the Partnership and the
Underlying Partnership a "Big Five" accounting firm until and unless the General
Partners otherwise determine.
11.6 Federal, state and local income tax returns of
the Partnership and the Underlying Partnership shall be prepared or caused to be
prepared by Opco GP and reviewed by the independent certified public accountants
then regularly retained by the Partnership or the Underlying Partnership. Copies
of all such tax returns shall be furnished to OPCO LP, Oak ▇▇▇▇ ▇▇, Oak ▇▇▇▇ ▇▇,
OHCMP and OHTE within 90 days after the close of each Fiscal Year and shall be
subject to the approval of Oak ▇▇▇▇ ▇▇ and OHTE. Oak ▇▇▇▇ ▇▇ and OHTE shall
endeavor to approve or disapprove any such return within 30 days after the same
is so furnished to it. Opco GP shall be responsible for requesting any requisite
extensions of the statutory dates for filing of the tax returns of the
Partnership or the Underlying Partnership. Notwithstanding the foregoing, in no
event shall Opco GP be responsible for the failure to timely prepare or cause to
be prepared and filed such returns if such failure is attributable to the
failure of the Partnership's (or the Underlying Partnership's) independent
certified public accountants to perform in a timely manner the services in
connection with such tax returns which they were engaged to perform or if such
failure is due to Oak Hill GP's or OHTE's failure timely to approve such return.
The income and deductions of the
33
Partnership shall be reported for tax purposes under the accrual method of
accounting. Material tax decisions and elections for the Partnership not
expressly provided for in this Agreement shall be determined by the Management
Committee.
11.7 Opco GP shall, subject to clause (a) of Section
15.5, be the "tax matters partner" pursuant to Section 6231(a)(7) of the Code
and the Treasury Regulations promulgated thereunder. Except as otherwise
required by law, the "tax matters partner" shall not take any action whatsoever
as "tax matters partner" unless such action shall have been approved by Oak ▇▇▇▇
▇▇ and OHTE. This Section 11.7 shall survive any termination of this Agreement.
12. Bank Accounts. All funds of the Partnership and the
Underlying Partnership shall be deposited in the name of the Partnership in one
or more bank accounts at one or more banking institutions designated by Opco GP
and reasonably acceptable to the Management Committee. All such funds shall be
and remain the property of the Partnership or the Underlying Partnership, as
applicable. Withdrawals from any such bank account or accounts shall be made
only for the purposes specified in or authorized by this Agreement. All such
withdrawals shall, subject to the provisions of the Management Agreements, be
made upon such signature or signatures as the Management Committee may
designate. No funds of the Partnership or the Underlying Partnership shall be
commingled with funds of any other Person.
13. Management and Powers; Rights, Duties and Obligations of
Partners.
13.1 Subject to the further provisions of this
Article 13, the management and control of the Partnership's business shall be
vested in a management committee (the "Management Committee") which shall
consist of seven (7) representatives (each, a "Representative" and,
collectively, the "Representatives"). Three (3) Representatives shall be
appointed by Oak ▇▇▇▇ ▇▇ (the "Oak Hill Representative") one (1) Representative
shall be appointed by OHTE (the "OHTE Representative") and three (3)
Representatives shall be appointed by Opco GP. Each of Oak ▇▇▇▇ ▇▇, Opco GP and
OHTE shall have the right to remove and replace its Representatives from time to
time. If any Representative shall resign, the party who initially appointed such
Representative may appoint a substitute Representative. Any action to be taken
by or with the consent or approval of the Management Committee pursuant to the
terms of this Agreement and any determination to be made by the Management
Committee pursuant to the terms of this Agreement, shall require the consent of
a majority in number of the Representatives present at the meeting at which such
action is considered and at which a quorum is present as provided in the last
sentence of Section 13.4(a). So long as MHOP, a successor to MHOP by merger,
consolidation, sale of all or substantially all of its assets (the "OHTE
Representative") or similar transaction (a "MHOP Successor") or an Affiliate of
MHOP or an MHOP Subsidiary is the limited partner of the Underlying Partnership,
such limited partner shall be given the right to have an observer present at all
meetings of the Management Committee and to receive all materials presented to
34
members of the Management Committee. If the Management Committee approves any
action, a written consent to such action executed by either General Partner
shall, with respect to Persons dealing with the Partnership, be conclusive
evidence of such approval.
13.2 Opco GP shall be responsible for conducting, and
shall (subject to the other provisions of this Agreement) have the authority to
conduct, the ordinary and usual business and affairs of the Partnership
(including its activities as the general partner of the Underlying Partnership),
and shall devote such time and render such services to the Partnership as is
necessary in order to conduct such business and affairs in an efficient manner.
Without limiting the generality of the foregoing (i) Opco GP shall have the
authority to, and shall, perform, or caused to be performed by the managing
agent of each Hotel in which the Underlying Partnership has an interest, all
services it is the obligation of such managing agent to perform under the
applicable management agreement (Opco GP's authority to perform (or cause to be
performed) such services to be subject, however, to the Management Committee's
consent or approval to the extent (and only to the extent) such consent or
approval is required by the provisions of this Agreement, including, without
limitation, Sections 13.6 and 13.8 hereof) and (ii) in exercising the foregoing
duties and performing the foregoing services, Opco GP shall at all times conform
to any policies or programs approved by the Management Committee, and
(notwithstanding any other provision hereof) shall at all times comply with all
directions, instructions and requests of the Management Committee that are
within the scope of the Management Committee's authority under clause (i) of
this Section 13.2 and the other provisions of this Agreement. Subject to the
further provisions of this Article 13 (including, without limitation, Section
13.10), Opco GP may employ, on behalf of the Partnership and the Underlying
Partnership, such Persons as it, in its judgment, shall deem advisable in the
operation and management of the business of the Partnership, including, without
limitation, architects, engineers, appraisers and experts, on such terms and for
such compensation as Opco GP, in its discretion, shall determine.
13.3 Each of the General Partners shall have the
authority to take any action, or execute any document or instrument of any type,
on behalf or in the name of the Partnership; provided, however, that each
General Partner's authority to take any such action or execute any such document
or instrument is only effective to the extent such action or execution is within
the scope of such General Partner's authority pursuant to the provisions of this
Agreement. Any Person dealing with the Partnership shall be entitled, without
having to undertake any investigation of the applicable facts, circumstances or
provisions of this Agreement, to rely on any instrument or document signed by
either General Partner, and the signature of no other Partner shall be required
to make any such instrument or document binding on the Partnership. Opco GP
shall have the authority, with the approval of the Management Committee, to
appoint officers of the Partnership and the Underlying Partnership to act in
such capacities as the Opco GP may from time to time determine.
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13.4 (a) The Management Committee shall meet on a
regular basis, not less frequently than quarterly, to review the operations of
the Partnership and to consider other matters which, pursuant to the provisions
of this Agreement, are to be submitted to the Management Committee or the
General Partners for their approval or consideration. One of such regular
meetings each year shall be held on or before December 1 of such year for the
purpose of reviewing the proposed budgets (both operating and Capital
Improvement) for each Hotel owned by the Underlying Partnership submitted by the
managing agent of such Hotel pursuant to the management agreement between the
Underlying Partnership or its subsidiary (as owner of such Hotel) or the
Partnership (as operating lessee of such Hotel), as the case may be, and such
managing agent covering such Hotel. Unless otherwise agreed, the foregoing
meetings shall be held at the principal office of the Partnership. All meetings
of the Management Committee shall require the attendance of (i) at least one
Representative appointed by Opco GP and at least one Representative appointed by
each of Oak ▇▇▇▇ ▇▇ and OHTE and (ii) Representatives the majority of which are
Oak Hill Representatives and/or the OHTE Representative.
(b) Any Partner shall have the right from
time to time to call a special meeting of the Partners on not less than 10 days'
prior written notice to the other such Partners. Any General Partner or OHTE
shall have the right from time to time to call a special meeting of the
Management Committee on not less than 10 days' prior written notice to the
Representatives. Any such notice shall set forth the purpose of such meeting and
an agenda in respect of the same. Unless otherwise agreed upon, each special
meeting shall be held at a location in Washington, D.C. or New York City, or in
the vicinity of either such city, designated by Oak ▇▇▇▇ ▇▇.
(c) The Representatives or the Partners, as
applicable, may participate in any above-described meeting by conference
telephone or similar communications equipment.
(d) The Management Committee shall cause to
be kept a book of minutes of all above-described meetings in which there shall
be recorded the time and place of such meeting, whether regular or special (and
if special, how called), the notice thereof given, the names of those present,
and the proceedings thereof. Such minutes shall be kept at the principal place
of business of the Partnership and a copy shall be delivered to each Partner
promptly following each meeting.
13.5 (a) Supplementing Section 13.2, but without
limiting the generality of said Section, Opco GP shall cause to be prepared and
submitted to the Partners with respect to each Hotel Interest owned by the
Underlying Partnership the budgets (both operating and Capital Improvement),
cash flow forecasts, marketing plans and other reports and projections required
to be prepared and submitted to the Partnership by the managing agent of such
Hotel pursuant to its management agreement with the Partnership. Each such
submission shall be made within the time period provided for in the applicable
Management Agreement or within 5 business days after the expiration of
36
the time period provided for in the applicable management agreement, if such
agreement is not a Management Agreement. The rights and powers of Opco GP and
Oak ▇▇▇▇ ▇▇ with respect to each Management Agreement and each other management
agreement covering a Hotel are set forth in Section 13.8.
(b) Opco GP shall be responsible for
locating and proposing to the Partners Hotels for possible purchase by the
Underlying Partnership (and shall actively seek out and pursue such acquisition
opportunities), negotiating the terms of purchase therefor and furnishing to the
Partners such information as any Partner shall request in respect of the
operation and physical condition of each Hotel so proposed. Opco GP shall
prepare or cause to be prepared with respect to any Hotel the purchase of which
is then being considered by the Underlying Partnership, and shall submit to the
Partners, budgets, schedules and plans of the nature referred to in the form of
Management Agreement attached hereto as Exhibit B for the remainder of the then
current Fiscal Year (and, if such consideration takes place during the last
quarter of such Fiscal Year, for the next ensuing Fiscal Year), and, if any
Partner so requests, a plan for making renovations and other Capital
Improvements to such Hotel. All of such items shall be subject to the Management
Committee's approval. Opco GP shall, in the performance of the foregoing acts,
in all events comply with any directions or instructions of the Management
Committee. Nothing in this Section 13.5(b) shall prevent any other Partner from
proposing to the Partnership the acquisition of one or more Hotels, Opco GP
hereby agreeing that it shall, if so directed by Oak ▇▇▇▇ ▇▇, prepare and submit
to the Partners the items referred to above with respect to any such Hotel(s).
The provisions of this Section 13.5(b) shall apply with equal force to Hotel
Equity Interests (and the underlying Hotels in connection therewith) and to
Hotel Debt (and the Hotels that serve as security therefor). Notwithstanding
anything to the contrary contained herein, (i) all decisions regarding the
acquisition of any Hotel Interest by the Underlying Partnership shall require
the approval of both General Partners and (ii) in no event shall the Partnership
acquire any Hotel Interest if, in the judgment of either General Partner, such
acquisition would cause the Partnership to be an "investment company," as such
term is defined in the Investment Company Act of 1940.
(c) The General Partners shall cooperate in
locating sources of, and negotiating the terms of, the financing (including the
refinancing) of Hotel acquisitions and operations. Notwithstanding anything to
the contrary contained herein, all decisions regarding the financing and
refinancing of Hotel Interests and other borrowings of the Partnership or the
Underlying Partnership shall be made by the Management Committee; provided,
however, that in no event shall any Opco Partner or any Affiliate of an Opco
Partner be required to give any guaranty or indemnification, or otherwise incur
any recourse liability, with respect to any such financing or refinancing
(except, in the case of the Opco Partners and MHR, to the extent of liability
comparable to that incurred by such Persons under the Credit Facility, but only
so long as an Affiliate of MHR is the managing agent of the Hotels owned by the
Underlying Partnership).
37
(d) Without limiting the generality of any
other provision hereof, including, without limitation, Section 13.1, but subject
to the provisions of Section 13.7, (i) the Oak Hill General Partner shall have
the right, without the consent of any Opco Partner but subject to the provisions
of the Underlying Partnership Agreement, to require that any Hotel Interest be
sold by the Underlying Partnership, (ii) each Partner shall cooperate with all
efforts of the Underlying Partnership to purchase, sell, finance or refinance a
Hotel Interest, such cooperation to include, without limitation, making the
applicable Hotel, and the books and records pertaining thereto, available to
prospective purchasers or lenders, furnishing such purchasers or lenders with
all information they may request in respect of such Hotel and furnishing such
information as is necessary in order that the Partnership (on behalf of itself
or in its capacity as general partner of the Underlying Partnership) may give
such representations and warranties as are customary in comparable transactions
and (iii) each General Partner shall (but only in its capacity as a general
partner of the Partnership) execute the contract of sale or other agreement(s)
required to be executed in connection with a sale of a Hotel Interest approved
or required by the Oak Hill General Partner. Notwithstanding the foregoing, no
Opco Partner, nor any Affiliate thereof, shall be required to give any
warranties or representations in connection with the sale of a Hotel Interest,
or with respect to any matter relating thereto, unless the same is customary and
reasonable and (except in the case of warranties or representations
(collectively, "Internal Representations" relating solely to its own internal
organization, its due authorization of documents and other matters relating to
itself (as opposed for the Partnership, the Underlying Partnership, the Hotel
Interests and the Operating Subsidiaries)) unless the same is also given by an
Oak Hill Partner (or an Affiliate thereof), of comparable or greater
creditworthiness. The provisions of the immediately preceding sentence shall
also be applicable to any joint sale of Partnership Interests, or of interests
in an Operating Subsidiary (and/or stock in an OHTE Subsidiary), effected
pursuant to any provision of this Agreement.
(e) Opco GP shall, at the request of the
Management Committee and in connection with any proposed renovation of, or other
Capital Improvement to, any Hotel in which the Underlying Partnership has an
interest, prepare (or cause to be prepared), for approval by the Management
Committee, Capital Improvement budgets, plans and specifications (such plans and
specifications to be prepared by an architect and/or an engineer approved by the
Management Committee), provided that no such approval shall be required with
respect to the plans, specifications, architect and/or engineer with respect to
renovations or Other Capital Improvements having, in each case, a cost less than
$100,000 ("Minor Capital Improvements").
13.6 Supplementing Section 13.1, but without limiting
the generality of said Section, neither the Partnership, whether acting on
behalf of itself or in its capacity as general partner of the Underlying
Partnership, nor the Underlying Partnership (which term shall, for purposes of
this Section 13.6, include any managing agent acting on behalf of the Underlying
Partnership) shall, without the approval of the Management Committee, do any of
the following (and the Management Committee shall,
38
subject to the further provisions of this Section 13.6 and the other provisions
of this Agreement, have the right to determine that the Partnership do any of
the following):
13.6.1 sell, exchange or otherwise dispose
of any Hotel Interest or, in the case of the Partnership, all or any portion of
the Partnership's interest in the Underlying Partnership;
13.6.2 incur any indebtedness other than
Voluntary Leases and Priority Loans (it being agreed that for purposes of this
subsection 13.6.2 indebtedness shall not include, and Opco GP shall have the
right without the Management Committee's approval to cause the Partnership or
the Underlying Partnership to incur, (A) trade payables for items provided for
in a budget approved by the Partnership pursuant to the applicable Management
Agreement or other management agreement, and (B) equipment leases and similar
arrangements so long as, in the case of the items described in this clause (B),
(i) the aggregate imputed purchase price of the property covered by such leases
and other arrangements in connection with a particular Hotel does not exceed
$100,000, (ii) such leases and other arrangements cover property of the type
customarily financed by owners and operators of Hotels and (iii) payments under
such leases and other arrangements are consistent with the aforesaid approved
budgets);
13.6.3 enter into, cancel, surrender, modify
or amend any Operating Lease (it being agreed that any action described in this
subsection 13.6.3 shall be subject to the approval of both General Partners);
13.6.4 (i) initiate any litigation, or (ii)
undertake any course of defense in connection with any litigation brought
against the Partnership or the Underlying Partnership, or settle any claim,
litigation or insurance claim concerning the Partnership or the Underlying
Partnership or any Hotel Interest owned by the Partnership or the Underlying
Partnership, unless, in either case, (A) the amount involved is $100,000 or less
(unless, in the case of the settlement or defense of claims against the
Partnership or the Underlying Partnership, such claim is completely covered by
insurance with a deductible of $100,000 or less) or (B) such litigation is in
the ordinary course of business. (Opco GP hereby agreeing to deliver or cause to
be delivered to the Partners, no less often then every 90 days, written reports
detailing the status of all claims, litigations and insurance claims concerning
the Partnership, the Underlying Partnership or any Hotel Interest owned by the
Partnership or the Underlying Partnership). Opco GP shall have the right,
without the approval of the Management Committee, to conduct or effect any
defense or settlement as to which, pursuant to the immediately preceding
sentence, the approval of the General Partners is not required.
13.6.5 place any mortgage on any Hotel owned
by the Underlying Partnership or any portion thereof, or encumber the
Partnership's interest in the Underlying Partnership; or prepay, recast,
refinance, modify or amend any such
39
mortgage or any other instrument evidencing or otherwise relating to
indebtedness incurred by the Partnership or the Underlying Partnership;
13.6.6 engage or dismiss any certified
public accountants or legal counsel on behalf of the Partnership or the
Underlying Partnership (provided that Opco GP shall have the right, without the
approval of the Management Committee, to engage or dismiss legal counsel with
respect to immaterial Hotel-specific legal matters);
13.6.7 enter into (i) any lease of space at
a Hotel for premises which exceed 7,500 square feet in area; or (ii) any
agreement for the provision of services to a Hotel which has a term in excess of
12 months (unless such agreement is terminable by the Underlying Partnership
without cause and without penalty upon not more than 30 days' notice and the
payments due thereunder conform to the applicable budget approved by the
Underlying Partnership pursuant to the applicable Management Agreement or other
management agreement) or which calls for aggregate payments by the Underlying
Partnership of more than $100,000, or modify or amend any such lease or
agreement in any material respect (it being agreed that Opco GP shall have
right, without the approval of the Management Committee, to take any action with
respect to a lease or service contract affecting a Hotel if such action does not
require General Partner approval pursuant to the foregoing);
13.6.8 without limiting the generality of
subsection 13.6.4, agree to the settlement of any proceeding brought for the
taking of all or any portion of any Hotel in condemnation or by eminent domain,
or to the sale of all or any portion of any Hotel in lieu of such taking;
13.6.9 implement any insurance program with
respect to the Partnership or the Underlying Partnership or any Hotel in which
the Underlying Partnership has a direct or indirect debt or equity interest, or
modify any such insurance program in any material respect;
13.6.10 enter into any written employment
agreement or severance arrangement with any individual, or amend or terminate
any such agreement;
13.6.11 issue any guaranty on behalf of the
Partnership or the Underlying Partnership of the obligations of any Person;
13.6.12 make any material decisions as to
tax planning on behalf of the Partnership or the Underlying Partnership;
13.6.13 enter into, cancel, surrender, or
modify or amend in any material respect, any franchise agreement with respect to
a Hotel (it being agreed that any action described in this subsection 13.6.13
shall be subject to the approval of both General Partners);
40
13.6.14 enter into, cancel, modify or amend
any union or collective bargaining agreement or enroll Hotel employees in any
pension, medical and health, life insurance or any other employee benefit plan,
or amend or cancel any such plan;
13.6.15 take any of the actions described in
the second sentence of Section 13.8 or elect to renew any management agreement
after the expiration of its then current term;
13.6.16 take any actions that result in a
material change in the character of any Hotel in which the Underlying
Partnership has a direct or indirect interest (e.g., from a full-service to a
limited-service hotel) (it being agreed that any action described in this
subsection 13.6.16 shall be subject to the approval of both General Partners);
13.6.17 enter into, cancel, surrender,
modify, amend or assign any ground or underlying lease of land on which a Hotel
is situated or which is acquired in connection with a Hotel (it being agreed
that any action described in this subsection 13.6.17 shall be subject to the
approval of both General Partners);
13.6.18 take any material action on behalf
of the Underlying Partnership in its capacity as the holder of Hotel Debt (in
connection with the Underlying Partnership's relationship with the borrower
under such Hotel Debt, including, without limitation, the exercise of the
Underlying Partnership's rights and remedies against such borrower, and the
Underlying Partnership's entering into amendments to the documents creating and
governing, and giving releases of, such Hotel Debt) or of a Hotel Equity
Interest (in connection with the Underlying Partnership's relationship with
other owners of Hotel Equity Interests relating to the same Hotel(s), including,
without limitation, the exercise of rights and remedies against such other
owner(s) and the entering into amendments to the documents governing such
relationship), which the Underlying Partnership, as such holder, has the right
to take;
13.6.19 merge or consolidate the Partnership
or the Underlying Partnership with or into any other entity;
13.6.20 terminate, modify, waive or amend
the Underlying Partnership Agreement (it being agreed that any action described
in this subsection 13.6.20 shall be subject to the approval of both General
Partners);
13.6.21 perform Capital Improvements other
than in substantial conformance with the budgets, plans and specifications
theretofore approved by the Management Committee under Section 13.5(e) (to the
extent such approval is required) or engage any general contractor or
construction manager for the performance of any Capital Improvement other than a
Minor Capital Improvement; or
41
13.6.22 take any other action which,
pursuant to the express provisions of this Agreement, is subject to the approval
of the Management Committee.
13.7 Notwithstanding anything to the contrary
contained in this Agreement, if any OHTE Subsidiary is admitted to the
Partnership in connection with the acquisition of a Hotel Interest by the
Underlying Partnership, then, unless OHTE agrees otherwise, such Hotel Interest
shall be acquired and owned by a separate partnership or limited liability
company wholly owned, directly or indirectly, by the Underlying Partnership (an
"Operating Subsidiary"). If it is determined in accordance with the provisions
of this Agreement that such Hotel Interest shall be sold, then such sale shall,
unless OHTE agrees otherwise, be effected in the following manner: (i) the
Partnership shall cause the Underlying Partnership to distribute to the
Partnership and the limited partner (s) of the Underlying Partnership all of its
interests in the Operating Subsidiary which owns such Hotel Interest, in
proportion to the respective amounts of cash the Partnership and such limited
partners would receive if such Hotel Interest were being sold by the Underlying
Partnership for cash; (ii) the Partnership shall distribute to the Opco
Partners, Oak ▇▇▇▇ ▇▇, Oak ▇▇▇▇ ▇▇, OHCMP and the applicable OHTE Subsidiary the
interests in the Operating Subsidiary so distributed to the Partnership, in
proportion to the respective amounts of cash such Partners would receive in
connection with a sale of such Hotel Interest under Section 10.1.3; (iii) OHTE
shall sell to the purchaser all of its stock in the applicable OHTE Subsidiary;
and (iv) the Opco Partners, Oak ▇▇▇▇ ▇▇, Oak ▇▇▇▇ ▇▇, OHCMP and the limited
partner(s) of the Underlying Partnership shall sell to the purchaser their
interests in the Operating Subsidiary. The aggregate purchase price paid to such
Persons, net of the costs and expenses associated with the sale, shall be
allocated between the limited partner (s) of the Underlying Partnership, on the
one hand, and the other such Persons, on the other hand, in the same proportion
as that described in clause (i) above. The amount so allocated to such other
Persons shall be allocated among such Persons in the same proportion as that
defined in clause (ii) above. Nothing herein shall limit the ability of the
Underlying Partnership to acquire Hotel Interests through Operating Subsidiaries
notwithstanding that the use of Operating Subsidiaries may not be required under
this Section 13.7. If a Hotel Interest shall be acquired through an Operating
Subsidiary, all of the provisions of this Agreement applicable to Hotel
Interests owned by the Underlying Partnership shall apply to the Hotel Interests
owned by such Operating Subsidiary.
13.7.1 In the event of a sale of the type
hereinabove described in this Section 13.7, each of the Opco Partners, Oak ▇▇▇▇
▇▇, Oak ▇▇▇▇ ▇▇, OHCMP and OHTE shall be required to take all action that the
General Partners reasonably deem necessary or desirable to effectuate such sale,
including without limitation the execution of a contract of sale with respect to
the sale of its interest in the Operating Subsidiary or the stock of the
applicable OHTE Subsidiary, as the case may be (which contract may include
customary and reasonable representations by OHTE with respect to the applicable
OHTE Subsidiary). If the contract(s) of sale entered into by the parties shall
provide for any "post-closing" liability (other than with respect to Internal
42
Representations) which is joint and several between one or more Partners and/or
their Affiliates, or which is undertaken solely by one or more Partners and/or
their Affiliates (but not other Partners and/or their Affiliates), the party or
parties incurring such liability shall have the right to determine that a
reasonable portion of the aggregate purchase price allocated to the Partners
and, if applicable, OHTE pursuant to the foregoing portions of this Section 13.7
be deposited into an interest-bearing reserve account. Such reserve account
shall be maintained by an escrow agent selected by the such parties for the
purpose of disbursing such reserves in payment of any such post-closing
liability suffered or incurred by such parties and all reasonable costs and
expenses, including, without limitation, reasonable attorneys' fees and
expenses, incurred by such parties in connection therewith. At the expiration of
such period as such parties reasonably deem advisable (which period shall not be
longer than the so-called "survival period" of such post-closing liability), all
remaining funds in such reserve account (except for such funds as such parties
reasonably deem necessary for the purpose of satisfying any then-pending claims)
shall be distributed to the Partners and, if applicable, OHTE pro rata in
proportion to the amounts to which they are entitled under the introductory
paragraph of this Section 13.7. Such parties shall cooperate in defending and
settling all claims which, if successful, would result in liability that would
be satisfied, in whole or in part, out of such reserve account. The provisions
of this Section 13.7 regarding the establishment of a reserve account shall,
notwithstanding anything to the contrary contained in this Agreement, also be
applicable in the case of a sale of any Hotel Interest by the Underlying
Partnership, or of Partnership Interests by the Partners, effected pursuant to
any other provision of this Agreement.
13.7.2 Notwithstanding anything to the
contrary contained in the foregoing if, at the time of a sale pursuant to this
Section 13.7, there are any outstanding Default Loans owing by a transferring
party (or, in the event OHTE is the transferring party, by any OHTE Subsidiary),
any sale proceeds to which such transferring party would otherwise be entitled
hereunder shall instead, to the extent of the outstanding principal balance, and
accrued unpaid interest on, such Default Loans, be paid to the Persons
constituting the Non-Defaulting Partner and applied first to the interest, and
then to the principal, owed to such Persons (in proportion to the respective
amounts of interest or principal, as applicable, owed to each such Person).
13.8 Simultaneously with the purchase of any Hotel by
the Underlying Partnership, the Partnership (i) shall enter into an Operating
Lease with the Underlying Partnership in the form annexed hereto as Exhibit C
(with the fixed and percentage rent payable thereunder being determined, by
agreement of the General Partners), and (ii) shall, in its capacity as operating
lessee under such Operating Lease, enter into a management agreement
("Management Agreement") with MeriStar Management Company, LLC, an Affiliate of
Opco GP (sometimes referred to herein as the "Managing Agent"), as manager, with
respect to such Hotel in the form annexed hereto as Exhibit B, having a term of
five (5) years, with all fees not specified in Exhibit B to be determined by the
General Partners and the Managing Agent. The Management Committee shall have the
right, on behalf of the Partnership, to elect
43
whether to renew any Management Agreement after the expiration of its then
current term, to elect whether to execute any amendment to any Management
Agreement, to elect whether notices of default and termination under any
Management Agreement should be given (or whether defaults under any Management
Agreement should be waived) and otherwise to elect to have the Partnership cause
the obligations of the Managing Agent or managing agent thereunder to be
enforced, to exercise on behalf of the Partnership all approval and other rights
under any Management Agreement and to make all decisions and elections which the
Partnership, as owner, is entitled to make under any Management Agreement. If
the Management Committee elects to have the Partnership exercise any termination
right under any Management Agreement or decline to renew any Management
Agreement or other management agreement, the Partnership shall terminate, or
shall not renew, such Management Agreement and shall retain, with respect to the
Hotel in question, the services of another managing agent selected by the
Management Committee.
13.9 The Partnership shall reimburse each Partner for
all reasonable out-of-pocket costs (including, without limitation, reasonable
travel expenses) incurred by such Partner in connection with the performance of
its duties and responsibilities under this Agreement, provided that no such
reimbursement shall be made for (i) any such costs as to which such Partner or
an Affiliate thereof was reimbursed pursuant to any Management Agreement or the
Underlying Partnership Agreement or (ii) any costs associated with the proposed
acquisition of Hotel Interests which are not in fact acquired. For purposes of
the immediately preceding sentence, the term "out-of-pocket costs" shall not
include compensation of regular personnel of any Partner (or Affiliate thereof)
or other overhead expenses. Except as provided in this Section 13.9 or under any
separate agreement between a Partner and the Partnership or the Underlying
Partnership, no Partner shall receive any compensation or reimbursement for
services rendered by it, him or her to the Partnership or the Underlying
Partnership or for costs incurred or time expended by it, him or her on behalf
of the Partnership or the Underlying Partnership.
13.10 The fact that a Partner or an Affiliate of a
Partner (the "Affiliated Partner") is directly or indirectly interested in or
connected with any Person employed by the Partnership or the Underlying
Partnership to render or perform a service or from which or to whom the
Partnership or the Underlying Partnership may buy or sell merchandise or other
property or with whom the Partnership or the Underlying Partnership shall
otherwise have dealings shall not prohibit the Partnership or the Underlying
Partnership from employing such Person or from dealing with it on competitive
terms and at competitive rates of compensation, and neither the Partnership, the
Underlying Partnership, nor the other Partners shall have any right in or to any
income or profits derived therefrom; provided, however, that no such arrangement
shall be entered into unless the General Partner which is not an Affiliated
Partner has been given prior notice thereof and such General Partner shall have
approved such arrangement (such approval not to be unreasonably withheld if such
arrangement is on
44
arms'-length terms). No such arrangement shall be modified or extended without
the prior approval of such General Partner.
13.11 No Partner shall be liable, responsible or
accountable in damages or otherwise to the other Partners or to the Partnership
or the Underlying Partnership for any acts performed within the scope of the
authority conferred on it by this Agreement, or for its failure or refusal to
perform any acts except those expressly required by or pursuant to the terms of
this Agreement, or for any loss in connection with the affairs of the
Partnership or the Underlying Partnership, unless such Partner is guilty of
fraud, willful misconduct or gross negligence or violates any of the provisions
of this Agreement in any material respect. To the extent permitted by law, the
Partnership shall (to the extent of assets of the Partnership) indemnify, defend
and hold harmless each Partner and each owner of interests (direct or indirect)
in, and each officer and director of, each Partner (and each officer and
director of each such direct or indirect owner) from and against all losses,
expenses, damages, claims or liabilities, including, without limitation,
reasonable attorneys' fees and expenses (each Partner and each such other Person
to be reimbursed for such attorneys' fees and expenses by the Partnership
promptly after periodic (but not more than monthly) written requests therefor to
the Partnership, but only so long as Opco GP (if the Person seeking
reimbursement is, or is employed by or otherwise associated with, an Oak Hill
Partner) or Oak ▇▇▇▇ ▇▇ (if the Person seeking reimbursement is, or is employed
by or otherwise associated with, an Opco Partner) in good faith believes that
the applicable action or omission which is the subject of the claim in question
does not constitute fraud, willful misconduct or gross negligence), arising out
of or in connection with any action taken or omitted to be taken by such Partner
in respect of the affairs of the Partnership or the Underlying Partnership,
other than an action or omission by such Partner which constitutes a material
violation of this Agreement or which constitutes fraud, willful misconduct or
gross negligence. Each Partner, and each owner of interests (direct or indirect)
in, and each officer, employee and director of, each Partner, shall, in acting
on behalf of or in connection with the Partnership or the Underlying
Partnership, be entitled to rely on the advice of the independent attorneys and
the independent certified public accountants then engaged by the Partnership or
the Underlying Partnership, and any act or omission in reliance on such advice
shall not subject such Partner, or such owner, officer, employee or director, to
liability to the Partnership, the Underlying Partnership or to the other
Partners. All references in this Section 13.11 to a Partner shall be deemed to
include their respective investment advisors and the officers, employees and
directors thereof and owners of interests (direct and indirect) therein.
13.12 Notwithstanding any other provision hereof, the
Partnership shall not, without the unanimous written consent of the Partners, do
any of the following:
13.12.1 amend, or do any acts in
contravention of, this Agreement;
45
13.12.2 engage in any activity not within
the purposes enumerated in Article 5;
13.12.3 do any act that would make it
impossible to carry on the business of the Partnership;
13.12.4 dissolve or voluntarily terminate
the Partnership (except where the dissolution of the Partnership is required
under Section 15.1 hereof);
13.12.5 admit a new Partner other than in
accordance with the provisions of Article 14 or Section 8.1; or
13.12.6 request or accept any capital
contribution or loan from a Partner other than in accordance with the provisions
of Article 8.
13.13 Except as otherwise specifically provided in
this Agreement, no Limited Partner shall have any right to participate in the
management, affairs or operation of the business of the Partnership.
13.14 The Partners acknowledge and confirm that
without limiting any provision hereof, the Partnership or the Underlying
Partnership may, in the Management Committee's sole discretion, purchase and
maintain a so-called "general partners liability and limited partnership
reimbursement" insurance policy covering the General Partners (and their
members, officers and directors) in their capacity as general partners of the
Partnership which policy may (i) include so-called "errors and omissions"
coverage for Opco GP (and its members, officers and directors) and (ii) also
cover the Partnership (and its officers and directors) in its capacity as
general partner of the Underlying Partnership. The entire cost of any such
policy shall be borne by the Partnership or the Underlying Partnership, as
applicable.
13.15 If Oak Hill so requests, the Partners shall
negotiate in good faith to restructure the Partnership and the Underlying
Partnership such that interests in the Underlying Partnership are distributed or
otherwise transferred to the OHTE Subsidiaries in redemption of their interests
in the Partnership. In such event, or if one or more OHTE Subsidiaries are
otherwise admitted as partners of the Underlying Partnership, the General
Partners shall cause the Partnership, as general partner of the Underlying
Partnership, to amend the provisions of the Underlying Partnership Agreement so
as to cause the terms of the interests in the Underlying Partnership held by
such OHTE Subsidiaries to be essentially equivalent to the terms of their
redeemed interests in the Partnership (or, in the case of OHTE Subsidiaries not
previously admitted as Partners of the Partnership, the interests in the
Partnership they would have acquired under Section 8.1). In such event the
General Partners shall also (i) amend the provisions of Article 14 to provide
that the Go-Along Option shall not apply with respect to the ownership and
transfer of such interests in the OHTE Subsidiaries as are necessary in order
that the OHTE Subsidiaries qualify as
46
real estate investment trusts within the meaning of ss. 856 of the Code and (ii)
enter into such other amendments to this Agreement, and cause the Partnership to
enter into such other amendments to the Underlying Partnership Agreement, as are
reasonably necessary or desirable to give effect to such restructuring and, at
the same time, preserve the rights and obligations of the Partnership, and those
of the partners in the Underlying Partnership, in light of such restructuring.
13.16 If the Partnership shall incur any liability
under Section 12.4 of the Underlying Partnership Agreement as a result of any
action which has not been approved by, or is not included in a budget, business
plan or proposal approved by, the Management Committee, then the Opco Partners
shall, notwithstanding anything to the contrary contained in this Agreement, be
solely responsible for providing all such funds as are necessary to satisfy such
liability.
13.17 The Partners agree that they shall take such
actions as are reasonably necessary in order that the Partnership meet any net
worth or similar requirements contained in the Operating Leases; provided that
in no event shall any Oak Hill Partner be required to give any guaranty of the
rents or any other amounts payable under the Operating Leases, nor shall any
Partner be required to increase its Commitment or make capital contributions in
excess of its Commitment.
14. Transfer of Partnership Interests.
14.1 Except as provided in the further provisions of
this Article 14, no Partner shall Transfer all or any portion of its Partnership
Interest, or any interest therein, or resign from the Partnership, without the
prior written consent of both General Partners, and any attempt so to do shall
be void and of no force or effect. Any conveyance, sale, assignment or transfer
of a Partnership Interest deemed to be such by operation of law shall be deemed
to be a transfer of such Partnership Interest for purposes of this Article 14.
Except as hereinafter provided in this Article 14, nothing in this Agreement
shall prohibit the assignment, transfer or other disposition, or the
encumbrance, of direct or indirect equity interests in any Partner.
14.2 (a) If, at any time during the term of this
Agreement, the Partnership Interest of Opco GP or Opco LP shall, without the
prior written consent of Oak ▇▇▇▇ ▇▇, cease to be held by a Qualified Opco
Entity (as hereinafter defined), then Opco GP or Opco LP, as applicable, shall
be deemed to have transferred its interest in the Partnership in violation of
Section 14.1. Notwithstanding anything to the contrary contained in Section
14.1, each of Opco GP and Opco LP shall have the right, without the consent of
Oak ▇▇▇▇ ▇▇, to assign or transfer (but not to pledge, hypothecate or otherwise
encumber) its Partnership Interest to a Qualified Opco Entity. As used herein,
the term "Qualified Opco Entity" shall mean and include each of the following:
(i) MHR, any Permitted MHR Transferee or any Affiliate of MHR or a Permitted MHR
Transferee and (ii) any Permitted Opco Transferee or any Affiliate of a
Permitted Opco Transferee. Each of Opco GP and Opco LP represents and warrants
that as of the date hereof, (A) all
47
of the equity interests in Opco GP are owned, on an unencumbered basis, by Opco
LP and (B) the sole general partner of Opco LP is MHR. Opco GP and Opco LP
shall, promptly upon request by Oak ▇▇▇▇ ▇▇ (which request shall be made not
more than twice in any twelve-month period), furnish Oak ▇▇▇▇ ▇▇ with a
certificate certifying that as of the date of such certificate no event
prohibited under this Section 14.2 or Section 14.1 has occurred (or, if such
event has occurred, describing the particulars thereof).
(b) The Oak Hill Partners each represent and
warrant that as of the date hereof (i) 100% of the equity interests in Oak ▇▇▇▇
▇▇ are owned, on an unencumbered basis, by Oak Hill Parent.
14.3 (a) Subject to paragraph (e) of this Section
14.3, the Oak Hill Partners may, at any time, deliver to Opco GP a written bona
fide offer (the "Required Purchase Offer") from a Person or Persons none of whom
is an Affiliate of the Oak Hill Partners (collectively, the "Required
Purchaser") to purchase the Partnership Interests of all of the Partners, which
Required Purchase Offer shall set forth all of the material terms and conditions
of the proposed purchase (the "Required Purchase") of the Partnership Interests,
including the aggregate consideration (the "Required Purchase Price") that the
Required Purchaser would pay if it were acquiring all of the assets (subject to
all of the liabilities) of the Underlying Partnership, and shall include the
identity of the Required Purchaser. If the Required Purchase Offer is given, the
Opco Partners shall be obligated to join with the Oak Hill Partners in selling
all of the Partnership Interests on the terms and conditions set forth in the
Required Purchase Offer and hereinafter set forth in this Section 14.3.
(b) In the event that the Partners shall,
pursuant to subsection (a) of this Section 14.3, be obligated to sell the
Partnership Interests to the Required Purchaser, then each Partner shall be
required to take all actions that the Oak ▇▇▇▇ ▇▇ reasonably deems necessary or
desirable to effectuate the closing of such sale, including, without limitation,
the execution of a contract of sale with respect to the sale of its Partnership
Interest or the Partnership Interests of all of the Partners. At the closing of
the Required Purchase, each Partner shall receive its proper share of the
Required Purchase Price pursuant to the further provisions of this Section 14.3.
(c) Each Partner shall receive, as its
portion of the aggregate purchase price in respect of any Required Purchase, an
amount equal to its Allocated Required Purchase Price; provided, however, that
the reasonable and customary expenses of each Partner in connection with the
transfer of the Partnership Interests to the Required Purchaser (including,
without limitation, any reasonable attorneys' fees and expenses and any
brokerage fees) shall, prior to the allocation of the Required Purchase Price
among the Partners, be paid (or reimbursed) out of the Required Purchase Price.
As used herein, the term "Allocated Required Purchase Price" shall mean, with
respect to any Partner, that amount which such Partner would receive under this
Agreement if, on the same date as the Required Purchase closing, all of the
assets (subject to all of the liabilities) of the Underlying Partnership were
sold at an all-cash
48
price equal to the Required Purchase Price, the proceeds of such sale were then
distributed to the partners of the Underlying Partnership and the amount so
distributed to the Partnership (after satisfying any liabilities of the
Partnership) were then distributed to the Partners as required pursuant to
Section 15.2.4 (without regard to limitations imposed by Adjusted Capital
Account deficits). Notwithstanding the foregoing or anything to the contrary
contained in Article 8, if at the time the Partnership Interests are sold there
are any outstanding Default Loans owing by a Defaulting Partner, then any sale
proceeds to which such Defaulting Partner would otherwise be entitled hereunder
shall instead, to the extent of the outstanding principal balance of, and
accrued and unpaid interest on, such Default Loans, be paid to the Persons
constituting the Non-Defaulting Partner and applied first against such interest
and then against such principal in proportion to the respective amounts of such
interest and principal owed to each such Person).
(d) The foregoing provisions of this Section
14.3 shall apply not only with respect to the share of Partnership Interests but
also, in the case of the OHTE Subsidiaries, with respect to the stock thereof,
and all of such provisions relating to the Oak Hill Partners' Partnership
Interests shall apply with respect to such stock.
(e) Subject to Section 14.5, no Oak Hill
Partner shall enter into any contract or binding letter of intent in connection
with the sale of its Partnership Interest or any portion thereof to third
parties, and Oak ▇▇▇▇ ▇▇ shall not deliver to the Opco Partners a Required
Purchase Offer or a Go-Along Notice, unless (x) Oak ▇▇▇▇ ▇▇ shall have first
notified Opco GP in writing of the desire of such Oak Hill Partner to sell its
Partnership Interest or such portion and (y) either (A) Opco LP, on the one
hand, and such Oak Hill Partner, on the other hand, shall have failed,
notwithstanding good faith negotiations, to execute a binding agreement for the
purchase of the Partnership Interests of such Oak Hill Partner or such portion
within 20 days after the giving of the foregoing notification or (B) Opco LP
shall have waived its rights under this sentence. If the conditions set forth in
the foregoing clauses (x) and (y) are satisfied, but Oak ▇▇▇▇ ▇▇ does not
deliver to Opco GP a Required Purchase Offer or a Go-Along Notice within 180
days after the expiration of the above described 20-day period or Opco LP's
waiver of its rights under the preceding sentence, whichever is applicable, the
Oak Hill Partners shall no longer be permitted to undertake any of the actions
described in said sentence without once again complying with the provisions of
said sentence, provided that said 180-day period shall be extended, up to a
maximum of 270 days, so long as the Oak Hill Partner in question is actively
negotiating the sale of its Partnership Interest or such portion with a third
party. The foregoing provisions of this Section 14.3(e) shall also apply with
respect to the sale of direct and indirect interests (or portions thereof) in
any Oak Hill Partner, except for sales as to which a Go-Along Notice would not
be required to be given under Section 14.4.
14.4 Subject to Section 14.5, no Oak Hill Partner
shall be permitted, without the prior written consent of Opco GP, to Transfer
its Partnership Interest or any portion thereof except in accordance with
Section 14.3 or this Section 14.4 (and any attempt to effectuate such a
transaction without the consent of Opco GP shall be
49
void and of no force and effect). In addition, notwithstanding anything to the
contrary hereinafter set forth in this Section 14.4, but subject to the
provisions of Section 14.5, (i) all of the equity interests in Oak ▇▇▇▇ ▇▇ shall
at all times continue to be owned, directly or indirectly, by Oak ▇▇▇▇ ▇▇, and
(ii) Oak ▇▇▇▇ ▇▇ shall not have the right to Transfer its Partnership Interest,
and OHTE shall not have the right to Transfer or delegate its right to appoint a
member of the Management Committee (other than to another Oak Hill Partner which
is an Exempt Person), except in its entirety and except in connection with the
Transfer of all of the Partnership Interests of Oak ▇▇▇▇ ▇▇, OHCMP, OHTE and any
OHTE Subsidiaries, and/or all of the direct or indirect equity interests in such
entities, to a Person or Persons which are not Affiliate(s) of the Oak Hill
Partners. The Oak Hill Partners shall, promptly upon request by Opco GP (which
request shall be made not more than twice in any twelve-month period), furnish
Opco GP with a certificate certifying that as of the date of such certificate no
event prohibited under this Section 14.4 has occurred (or, if such event has
occurred, describing the particulars thereof).
14.4.1 Prior to the transfer (which term,
for purposes of this Section 14.4, shall not include a pledge, hypothecation or
other encumbrance) of all or any portion of the Partnership Interest of any Oak
Hill Partner (for purposes of this Section 14.4, the "Selling Partner"), Oak
▇▇▇▇ ▇▇ shall give the Opco Partners written notice (the "Go-Along Notice")
advising the Opco Partners of the proposed transfer, which notice shall set
forth (a) all of the material terms and conditions, including consideration (the
"Go-Along Terms") of the proposed transfer, (b) the identity of and financial
information concerning the proposed transferee (the "Go-Along Purchaser"), (c)
the maximum amount (the "Maximum Amount") the Go-Along Purchaser is willing to
pay in the aggregate for one or more Partnership Interests (or portions
thereof), (d) if the Selling Partner proposes to sell less than all of its
Partnership Interest, the percentage (the "Go-Along Percentage") proposed to be
sold, and (e) the purchase price that would be paid to each Partner by the
Go-Along Purchaser for its Partnership Interest (or the Go-Along Percentage)
pursuant to subsection 14.4.4 if each Partner exercised the Go-Along Option.
14.4.2 Within twenty (20) days after
delivery of an effective Go-Along Notice, each Opco Partner shall give written
notice to the Selling Partner (i) that such Partner elects to transfer its
Partnership Interest (or if the Selling Partner Proposes to sell less than all
of its Partnership Interest, the Go-Along Percentage of such Partner's
Partnership Interest) to the Go-Along Purchaser on the Go-Along Terms (the
"Go-Along Option") or (ii) that such Partner elects not to transfer any portion
of its Partnership Interest to the Go-Along Purchaser (the "Non-Transfer
Option"). A Partner shall be conclusively deemed to have elected the
Non-Transfer Option if it fails to elect either of the above-described options
within such twenty (20) day period.
14.4.3 If the Opco Partners elect or are
deemed to have elected the Non-Transfer Option, the Selling Partner shall be
permitted to transfer its Partnership Interest to the Go-Along Purchaser on the
Go-Along Terms (or on terms less
50
favorable to the seller than the Go-Along terms), so long as such transfer takes
place within 180 days of the Go-Along Notice.
14.4.4 If one or more of the Opco Partners
(the "Electing Partner(s)") shall elect the Go-Along Option, then the Selling
Partner shall not transfer its Partnership Interest (or any portion thereof) to
the Go-Along Purchaser unless such Go-Along Purchaser acquires, simultaneously
with its acquisition of the Selling Partner's Partnership Interest (or the
Go-Along Percentage thereof), the Partnership Interests (or the Go-Along
Percentages thereof) of the Electing Partners at a purchase price, with respect
to each such Partner, equal to the amount such Partner would receive if all of
the assets (subject to all of the liabilities) of the Underlying Partnership
were sold at a price which would result in the Selling Partner receiving the
purchase price for the Selling Partner's Partnership Interest (or Go-Along
Percentage thereof) set forth in the Go-Along Notice, assuming that the proceeds
of such sale were distributed to the partners of the Underlying Partnership, and
the amount so distributed to the Partnership was then distributed to the
Partners (after satisfying any liabilities of the Partnership) as required
pursuant to Section 15.2.4 (without regard to limitations imposed by Adjusted
Capital Account deficits); provided, however, that (i) if the sum of the
purchase prices to be paid to each such Partner pursuant to the foregoing
exceeds the Maximum Amount, the purchase price to be paid to each such Partner,
and the percentage of the Partnership Interest of each such Partner to be
transferred to the Go-Along Purchaser, shall be reduced pro rata, in accordance
with the respective purchase prices that would have been paid to each such
Partner pursuant to the foregoing, so that the sum of the purchase prices equals
the Maximum Amount, (ii) the aggregate reasonable and customary expenses of the
transferring Partners incurred in connection with the transfer of their
Partnership Interests (including, without limitation, any reasonable attorneys'
fees and expenses and any brokerage fees) shall be paid (or reimbursed) out of
the aggregate purchase price paid to such Partners and (iii) if, at the time of
the transfer there are any outstanding Default Loans owing by a transferring
Partner, any sale proceeds to which such transferring Partner would otherwise be
entitled hereunder shall instead, to the extent of the outstanding principal
balance, and accrued unpaid interest on, such Default Loans, be paid to the
Persons to whom such principal and interest are owed and applied first to such
interest (in proportion to the respective amounts of such interest owed to each
such Person) and then to such principal (in proportion to the respective amounts
of such principal owed to each such Person).
14.4.5 Each Partner who exercises the
Go-Along Option shall take all actions necessary to cause the applicable
Partnership Interest (or the Go-Along Percentage thereof) to be transferred to
the Go-Along Purchaser as set forth in subsection 14.4.4, such actions to
include, without limitation, executing a contract of sale if requested to do so
by the Go-Along Purchaser and complying with the terms thereof. If the Opco
Partners do not elect the Go-Along Option and the sale of the Selling Partner's
Partnership Interest (or the Go-Along Percentage thereof) on the Go-Along Terms
(or on terms less favorable to the seller than the Go-Along Terms) does not
occur within 180 days after the delivery of the Go-Along Notice, the Opco
Partners shall have
51
the right to require that the Selling Partner not be permitted to transfer its
Partnership Interest (or any portion thereof) without once again complying with
this Section 14.4, provided that said 180-day period shall be extended, up to a
maximum of 270 days, so long as the Selling Partner (and/or any Partner that
elected the Go-Along Option) is actively negotiating the sale of its Partnership
Interest with the Go-Along Purchaser. If a Partner does not comply with the
provisions of this subsection 14.4.5 and, as a result, the applicable
Partnership Interest (or the Go-Along Percentage thereof) is not transferred to
the Go-Along Purchaser as provided for in subsection 14.4.4, the Selling Partner
shall be permitted to transfer its Partnership Interest to the Go-Along
Purchaser (subject, however, to the provisions of subsection 14.4.4 and this
subsection 14.4.5 with respect to all Partners who exercise the Go-Along Option
and who comply with the provisions of this subsection 14.4.5).
14.5 (A) Each Oak Hill Partner shall be permitted,
without having to comply with the provisions of Section 14.4 or 14.3(e), to
transfer or assign (but not pledge, hypothecate or otherwise encumber) all or
(in the case of each Oak Hill Partner other than Oak ▇▇▇▇ ▇▇) any portion of its
Partnership Interest to (i) the other of them or (ii) any Affiliate of Oak Hill
Parent which is wholly owned, directly or indirectly, by Oak Hill Parent or one
or more investors in Oak Hill Parent.
(B) For purposes of Sections 14.4 and
14.3(e), the transfer of a direct or indirect equity interest in an Oak Hill
Partner (other than an interest in (i) Oak Hill Parent, (ii) OHCMP or (iii) any
Affiliate of Oak Hill Parent all of the equity interests in which are held
directly by one or more investors in Oak Hill Parent (any Person described in
clause (i), (ii) or (iii), an "Exempt Person")) shall be deemed a transfer of
such portion of such Partner's Partnership Interest as would occur if such
Partnership Interest were owned directly by the transferor and the other direct
and/or indirect (as applicable) owners of such Partnership Interest, the same
economic rights and benefits vis-a-vis each other as such Persons have partners,
members or shareholders of the applicable entities, and the transferor were
transferring its direct interest (or applicable portion thereof) in the
Partnership; provided, however, that the transferor shall have the right,
without having to comply with the provisions of Section 14.4 or 14.3(e), to
transfer or assign all or any portion of its equity interest to an Exempt
Person.
(C) Oak ▇▇▇▇ ▇▇ shall, at least 10 days
prior to the occurrence of any Transfer to an Exempt Person, or any Transfer
(other than a Transfer described in clause (i) of Section 14.5) which does not
trigger the provisions of Section 14.4, notify Opco GP of the same.
14.6 Notwithstanding anything to the contrary
contained in this Article 14, prior to the earlier to occur of (i) the date that
the Capital Commitments have been fully funded and (ii) the Commitment
Expiration Date, no Transfer of any Partnership Interest, and no Transfer of any
direct or indirect interest in any Partner, otherwise permitted hereunder shall
be effected unless the ability of Transferee, or the
52
Partner the interest in which is Transferred, to fund the remaining portion of
its Capital Commitment is unimpaired by such Transfer.
14.7 No assignment or transfer of all or any part of
a Partnership Interest otherwise permitted to be made under this Article 14
shall be permitted or binding on the non-assigning Partners or on the
Partnership unless (i) the assignee or transferee shall execute and acknowledge
an instrument, in form reasonably satisfactory to the non-assigning Partners,
whereby it agrees to assume and be bound by all of the obligations, covenants,
terms and conditions of this Agreement, as the same may have been amended, and
grants any power of attorney granted herein by the assignor or transferor, (ii)
a duplicate original of such assignment (or other instrument of transfer) and
assumption, duly executed and acknowledged in each case, shall be delivered to
each non-assigning Partner, (iii) the assignee or transferee shall (if required)
execute and acknowledge a certificate amending this Agreement and/or the
Certificate of Limited Partnership of the Partnership in order to reflect such
assignment or transfer or take any other action that may be required in
connection therewith, (iv) unless the assignment is to an OHTE Subsidiary, the
assignee or transferee shall pay all reasonable expenses in connection with its
admission as a Partner, including, but not limited to, the cost (including
reasonable attorneys' fees) of preparing and filing the certificate referred to
in subdivision (iii) above, (v) all required consents of mortgagees or other
Persons to such assignment or transfer shall have been obtained in writing and
delivered to the non-assigning Partners, (vi) unless the assignment is to an
OHTE Subsidiary and occurs on or before June 1, 1999, the assignor or transferor
shall provide the non-assigning Partners with an indemnity, in form and
substance reasonably acceptable to the non-assigning Partners, indemnifying the
non-assigning Partners against all losses, costs, damages, claims, liabilities
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) suffered or incurred by such Partners by reason of such assignment or
transfer resulting in a termination of the Partnership under Section 708 of the
Code (including without limitation losses resulting from the deferral of
deductions or the acceleration of income) and (vii) unless the assignment or
transfer is pursuant to Section 15.3 or 8.1, the assignor or transferor shall
provide the non-assigning Partners with an opinion of counsel reasonably
acceptable (both with respect to the identity of such counsel and the form and
substance of such opinion) to the non-assigning Partners to the effect that the
assignment or transfer to the assignee or transferee was not made in violation
of any applicable federal or state securities laws. Upon satisfaction of the
requirements set forth in the immediately preceding sentence, (a) the assignee
or transferee shall be admitted to the Partnership as a Partner and shall
succeed to all of the rights of the assigning or transferring Partner
(including, without limitation, all of the rights of the assigning or
transferring Partner set forth in Article 13 and all of the rights described in
clauses (b) and (c) of Section 15.5) and (b) the assigning Partner shall be
relieved of all of its obligations under this Agreement thereafter accruing.
14.8 Notwithstanding anything to the contrary
contained in this Agreement, no Transfer of direct or indirect interests in a
Partner shall be effected if such Transfer would violate the provision of any
loan agreement, mortgage, deed of trust or
53
other agreement or instrument to which the Partnership or the Underlying
Partnership is a party.
14.9 Notwithstanding anything to the contrary
contained in this Agreement, and without limiting the rights of Opco GP and Opco
LP under Section 14.2(a) of this Agreement, if there shall be a Change in
Control with respect to MHR or if MHR no longer controls Opco GP (as the term
"control" is defined in the definition of "Affiliate" contained herein), then
(i) the Management Committee shall have the right to cause the Underlying
Partnership to terminate the Management Agreements (whether or not the Managing
Agent is then in default thereunder) and (ii) Opco LP shall, at the election of
Oak ▇▇▇▇ ▇▇, no longer be entitled to distributions under Sections 10.1.2(ii)
and 10.1.3(ii) hereof. The parties acknowledge that the Credit Facility contains
certain restrictions on the right of the Underlying Partnership to replace the
Managing Agent.
14.10 Without the prior written consent of Oak ▇▇▇▇
▇▇, or the Management Committee, the Partnership shall not enter into any debt
instrument or other agreement which would limit or restrict the ability of OHTE
to transfer its interest pursuant to Section 8.1 (or which would limit or
restrict the admission of OHTE Subsidiaries as additional Limited Partners) or
which contain covenants, representations and warranties which would be violated
by any such transfer (or such admission).
15. Dissolution and Liquidation; Bankruptcy or Insolvency of a
Partner.
15.1 The occurrence of any of the following events
shall cause the dissolution of the Partnership:
(i) an Act of Insolvency committed by either
General Partner, the dissolution of either General Partner without
reconstitution within 90 days, or the withdrawal of either General
Partner from the Partnership, unless in each case the other General
Partner elects to continue the Partnership within ninety (90) days
after such Act of Insolvency, dissolution or withdrawal; or
(ii) the sale or other disposition of all of
the Hotel Interests then owned by the Underlying Partnership, if the
General Partners determine that no further acquisitions of Hotel
Interests are to be made by the Underlying Partnership, or the sale or
other disposition of the Partnership's interest in the Underlying
Partnership; or
(iii) the expiration of the term provided
for in Article 4 hereof.
All Partners at the time of dissolution shall execute such documents as are
necessary or desirable to cause the complete dissolution of the Partnership.
Upon any dissolution of
54
the Partnership, the Partnership shall wind up its affairs and shall then be
liquidated in accordance with the further provisions of this Article 15.
15.2 Upon any dissolution of the Partnership, each of
the following shall be accomplished:
15.2.1 Opco GP shall cause to be prepared a
statement setting forth the assets and liabilities of the Partnership as of the
date of dissolution and such statement shall be furnished to the other Partners.
15.2.2 All property and assets of the
Partnership not previously sold shall be liquidated as promptly as possible
under the direction of Opco GP, but in an orderly and businesslike manner so as
not to involve undue sacrifice.
15.2.3 The Capital Accounts of the Partners
shall be adjusted to take into account allocations pursuant to Article 9.
15.2.4 The net proceeds of sale or other
disposition of the Partnership's assets, and all other assets of the
Partnership, shall be paid and distributed as follows and in the following order
of priority:
15.2.4.1 To the payment of the
debts and liabilities of the Partnership and the expenses of
liquidation, if applicable.
15.2.4.2 To the setting up of any
reserves which the Management Committee determines are reasonably
necessary for any contingent or unforeseen liabilities or obligations
of the Partnership. Such reserves may, in the discretion of the
Management Committee, be paid over to an escrow agent selected by the
Management Committee to be held by it for the purpose of disbursing
such reserves in payment of any of the aforementioned contingencies,
and at the expiration of such period as the Management Committee may
deem advisable, to distribute the balance thereafter remaining as
provided in the further provisions of this subsection 15.2.4.
15.2.4.3 Any remaining proceeds
shall be distributed to the Partners as set forth in Article 10,
provided that no Partner shall be distributed any amount in excess of
its Capital Account balance, and any such excess amount shall instead
be distributed among the Partners with positive Capital Account
balances in proportion to such balances.
15.2.5 Upon liquidation, distribution of
assets may be in kind, or in cash, or both, as the General Partners shall
decide, and in the order of priority listed in subsection 15.2.4; provided,
however, that all in-kind distributions shall be pro rata to the extent
practicable and to the extent each Partner is entitled to share in such
55
distribution. The value of assets distributed in kind shall be determined in
accordance with the provisions of Section 10.5.
15.2.6 If the dissolution of the Partnership
is pursuant to clause (i) of Section 15.1, then all tasks, duties and
obligations of the General Partners set forth in this Article 15 in connection
with such dissolution shall be performed and carried out solely by whichever of
them did not dissolve, withdraw or commit an Act of Insolvency.
15.3 In the event (i) a Partner at any time commits
an Act of Insolvency or (ii) such Partner dissolves without reconstitution
within 90 days after such dissolution (the Partner in question being herein
called the "Non-Qualified Partner"), Oak ▇▇▇▇ ▇▇ (or, if an Oak Hill Partner is
the Non-Qualified Partner, Opco GP) shall have the option, exercisable by notice
in writing to the Non-Qualified Partner or to the legal representative(s) or
successor(s) of the Non-Qualified Partner given within 60 days after the date on
which Oak ▇▇▇▇ ▇▇ (or Opco GP, as the case may be) first learned that the Act of
Insolvency was committed or that such dissolution occurred, as the case may be,
to acquire the Partnership Interest of the Non-Qualified Partner for a price
(for purposes of this Section 15.3, the "Purchase Price") equal to the amount
which would be distributed to the Non-Qualified Partner pursuant to Article 10
if all of the assets (subject to all of the liquidated liabilities) of the
Underlying Partnership (or, if the Non-Qualified Partner is an OHTE Subsidiary,
the Hotel Interest(s) with respect to such OHTE Subsidiary was admitted to the
Partnership) were sold for cash at a price equal to their fair market value
determined as of the date that the Act of Insolvency was committed or the
dissolution occurred, as the case may be, the proceeds of such sale were
distributed to the partners of the Underlying Partnership in accordance with the
provisions of the Underlying Partnership Agreement, the Net Profit or Net Loss
associated with such sale were allocated pursuant to Article 9 and the amounts
distributed to the Partnership by the Underlying Partnership were then
distributed as provided in Article 10 (except that such proceeds shall be deemed
reduced by the reasonably estimated amount of any contingent or other
unliquidated liability then known to the Partnership (to the extent associated
with the Hotel Interest in question, if the Non-Qualified Partner is an OHTE
Subsidiary), it being agreed that if such amount subsequently proves to be
excessive the excess shall be deemed a retroactive increase in such proceeds and
an appropriate payment shall be made to the Non-Qualified Partner)). The "fair
market value" of the property and assets of the Underlying Partnership for
purposes of this Section 15.4 shall be determined pursuant to the procedure set
forth in Article 23. The purchasing Partner (the "Purchasing Partner") shall
have the right to commence such procedure at any time after the event giving
rise to its rights under this Section 15.3, and the costs and expenses of such
procedure shall be paid by the Non-Qualified Partner (unless such Partner is a
Non-Qualified Partner by reason of committing an Act of Insolvency, in which
case the provisions of the third sentence of Section 23.1 and Section 23.7 shall
apply with respect to the payment of such costs and expenses). The closing of
the sale of the Non-Qualified Partner's Partnership Interest shall take place at
the office of the Purchasing Partner, on a date specified in the Purchasing
Partner's notice, which date shall be not less than 30 days nor more than 90
56
days after the date of the determination of the Purchase Price. At the closing,
the NonQualified Partner or its legal representative(s) or successor shall
assign and transfer its entire Partnership Interest, free and clear of all
liens, encumbrances and adverse claims, to the Purchasing Partner or its
designee or designees against receipt of the Purchase Price. The Purchase Price
shall be paid by the Purchasing Partner to the Non-Qualified Partner or its
legal representative(s) or successor, or to any other Person to whom the
Purchasing Partner shall be directed to pay the same by a court of competent
jurisdiction, by good or certified official bank check or by wire transfer of
immediately available federal funds. Opco GP and Opco LP hereby irrevocably
constitute and appoint Oak ▇▇▇▇ ▇▇, and each Oak Hill Partner hereby irrevocably
constitutes and appoints Opco GP, as the appointing parties' attorney-in-fact,
coupled with an interest, to execute, acknowledge and deliver all instruments
and documents necessary to effectuate the foregoing transfer and assignment in
the event the appointing Partner becomes a Non-Qualified Partner and the
Purchasing Partner exercises its rights set forth under this Section 15.3.
Notwithstanding anything to the contrary contained herein, if, at the time of
the closing of the sale of the Non-Qualified Partner's Partnership Interest,
there are any outstanding Default Loans owing by the Non-Qualified Partner, then
the sale proceeds to which the Non-Qualified Partner would otherwise be entitled
shall instead, to the extent of the outstanding principal balance of, and
accrued interest on, such Default Loans, be paid to the Person constituting the
Non-Defaulting Partner in proportion to the respective amounts of principal and
interest owed to each such Person.
15.4 As used in this Agreement, an "Act of
Insolvency" shall be deemed to have occurred in the event a Partner commences
voluntary proceedings under any Chapter of the Federal Bankruptcy Code, or for
similar relief under any state insolvency law, or if there is commenced against
such Partner any involuntary proceeding under any Chapter of the Federal
Bankruptcy Code or for similar relief under any state insolvency law and such
proceeding is not dismissed or stayed within 60 days thereafter or, if stayed,
is not dismissed prior to the expiration of the stay.
15.5 In the event that a Partner becomes a
Non-Qualified Partner, then from and after the date of the applicable Act of
Insolvency, dissolution or failure to satisfy a condition, as the case may be,
(a) if such Partner is a General Partner or OHTE, such Partner shall no longer
have any of the responsibilities, duties, powers or rights granted to it in this
Agreement (and the other of them shall have such responsibilities, duties,
powers and responsibilities) and shall no longer have the right to appoint a
Representative, and (b) such Partner shall not, unless required by another
Partner which is not its Affiliate, participate in the meetings and activities
described in Sections 13.4 and 13.5.
15.6 Upon the closing of a sale by a Partner of its
Partnership Interest pursuant to the foregoing provisions of this Article 15,
the selling Partner shall be relieved of all of its obligations under this
Agreement thereafter accruing. If the selling Partner shall default in its
obligation to sell its Partnership Interest under this Article and such default
shall continue for 30 days, such Partner's only remaining right under this
57
Agreement shall be to receive the purchase price for its Partnership Interest,
based, not on the fair market value of the Underlying Partnership's assets, but
on the lower of (x) 80% of such fair market value and (y) the amount invested by
the Underlying Partnership in such assets.
15.7 For purposes of this Article 15: (i) if Opco GP
or Opco LP shall become a Non-Qualified Partner, the other of them shall also be
deemed to be a Non-Qualified Partner; and (ii) if any Oak Hill Partner shall
become a Non-Qualified Partner, the other Oak Hill Partners shall also be deemed
to be Non-Qualified Partners.
16. Further Assurances. Each party to this Agreement agrees to
execute, acknowledge, deliver, file and record such further certificates,
amendments, instruments and documents, and to do all such other acts and things,
as may be required by law, or as may be necessary or advisable, to carry out the
intent and purposes of this Agreement.
17. Notices.
17.1 Unless otherwise specified in this Agreement,
all notices, consents, demands, elections, requests or other communications
(collectively "notices") which any Partner may desire or be required to give
hereunder shall be in writing and shall be given by mailing the same by
registered or certified mail, return receipt requested, or by Federal Express or
other reputable air courier service, postage prepaid, return receipt requested,
or by delivering the same by hand, or by facsimile, addressed as follows:
17.1.1 To any Oak Hill Partner (or OHTE, if
it is not then a Partner) at its address first set forth above, Attention:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, with a copy given simultaneously in the manner aforesaid to
each of (i) Oak Hill Capital Management, Inc., Park Avenue Tower, ▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, and (ii) ▇'▇▇▇▇▇▇▇▇, Graev & Karabell LLP, ▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇, facsimile
number (▇▇▇) ▇▇▇-▇▇▇▇, or at such other address or addresses or facsimile number
or to the attention of such other Person or Persons as may be designated by the
applicable Partner by notice given to the other Partners as provided in this
Article.
17.1.2 To Opco GP or Opco LP at their
address first set forth above, Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, facsimile
number (▇▇▇) ▇▇▇-▇▇▇▇, with a copy given simultaneously in the manner aforesaid
to ▇▇▇▇▇▇▇, Diamond & Ash, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., facsimile number (▇▇▇) ▇▇▇-▇▇▇▇, or at such
other address or addresses or facsimile number or to the attention of such other
Person or Persons as may be designated by the applicable Partner by notice given
to the other Partners as provided in this Article.
58
17.1.3 To any Person who hereafter becomes a
Partner (other than an OHTE Subsidiary) at such address or addresses or
facsimile number as may be designated by it by notice given to the other
Partners as provided in this Article.
17.2 All notices given as in this Article provided
shall be deemed to have been given or served on the third business day after the
date so mailed (in the case of notices mailed by registered or certified mail)
or on the day sent (in the case of notices by facsimile; provided if such notice
is sent by facsimile on a day which is not a business day in the place of
receipt or after business hours on such a business day, the same shall be deemed
to have been given on the next such business day) or upon delivery thereof (in
all other cases), with failure to accept delivery to constitute delivery for
this purpose.
17.3 Notwithstanding the provisions of Section 17.1,
routine communications such as distribution checks or annual statements of the
Partnership may be sent by first-class mail, postage prepaid.
18. Captions. All Section and article titles or captions
contained in this Agreement and the table of contents, if any, are for
convenience only and shall not be deemed a part of this Agreement.
19. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
20. Governing Law. This Agreement is made pursuant to the
provisions of the Act and shall be construed accordingly.
21. Successors and Assigns. This Agreement shall be binding
upon the parties hereto and their respective successors and permitted assigns
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but shall not inure to the benefit of, or be
enforceable by, any other Person.
22. Invalidity. If any provision or any portion of any
provision of this Agreement, or the application of any such provision or any
portion thereof to any Person or circumstance, shall be held invalid or
unenforceable, the remaining portion of such provision and the remaining
provisions of this Agreement, and the application of such provision or such
portion to Persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby.
23. Fair Market Value. The following procedure shall govern
the determination of the fair market value of the Hotel Interests then owned by
the Underlying Partnership (which term shall mean, for purposes of this Article
23, the Hotel Interest or Interests with respect to which any OHTE Subsidiary
which is a
59
Non-Qualified Partner was admitted to the Partnership) for purposes of Article
15. Such determination shall be made as of the date a Partner commits an Act of
Insolvency:
23.1 The General Partners shall each make good faith
efforts to agree on the fair market value of the Hotel Interests. If, despite
such efforts, they are unable to agree on such fair market value within 10 days
after the date (the "FMV Date") the Purchasing Partner learns of the Act of
Insolvency and so notifies the Non-Qualified Partner or its legal
representative, the General Partners shall make good faith efforts to agree on
the appointment of a disinterested Person who is an MAI appraiser with at least
10 years' experience in appraising Hotels comparable in size and quality to the
applicable Hotel(s) (such a Person, an "Appraiser") as an appraiser for purposes
of this Article 23. If the General Partners agree on the appointment of an
Appraiser, the fair market value of the Hotels and Hotel Equity Interests in
question shall be determined pursuant to Sections 23.4, 23.5 and 23.6, and each
of the General Partners shall, subject to the parenthetical clause of the first
sentence of this Article 23, be responsible for 50% of the costs of the
appraisal procedure. If the General Partners are unable so to agree within 20
days after the FMV Date, the fair market value of the Hotel Interest(s) in
question shall, at either party's election, be determined pursuant to Sections
23.2, 23.3, 23.4, 23.5, 23.6 and 23.7.
23.2 If the General Partners are unable to agree on
the appointment of an Appraiser pursuant to Section 23.1 within the 20-day
period provided for therein, each of the General Partners shall have the right
thereafter to appoint an Appraiser and, having made such appointment, shall
notify the other as to the name of the Person so appointed. Each such Appraiser
shall then make its own determination of such fair market value and if, with 45
days after both Appraisers have been appointed, such two Appraisers cannot reach
agreement on what such fair market value should be, they shall appoint a third
Appraiser who shall make his, her or its own determination of such fair market
value, provided that:
(i) if either General Partner shall fail to
designate an Appraiser within 15 days after being notified of the other
party's designation of an Appraiser, the Appraiser chosen by the
notifying General Partner shall alone proceed to determine fair market
value, and
(ii) if the two Appraisers shall be unable
to agree, within 45 days after both have been appointed, on the
appointment of a third Appraiser, they shall give written notice of
such failure to agree to the General Partners and, if such Partners
fail to agree on the selection of a third Appraiser within fifteen (15)
days after the Appraisers appointed by them give notice as aforesaid,
then either of such Partners, upon written notice to the other, may
apply for appointment of a third Appraiser to the American Arbitration
Association.
23.3 If a third Appraiser shall have been appointed
as above provided, then (i) if the fair market value determined by such third
Appraiser shall exceed the higher of the fair market value determinations of the
first and second
60
Appraisers or shall be less than the lower of such fair market value
determinations, then the determination of such third Appraiser shall be
disregarded and the closer in amount of the other two appraisals to such third
appraisal shall instead constitute said fair market value and (ii) if the fair
market value determined by such third Appraiser shall neither exceed the higher
nor be less than the lower of the fair market value determinations of the first
and second appraisers, the fair market value determination of such third
Appraiser shall constitute said fair market value.
23.4 Each of the General Partners shall be entitled
to present evidence and arguments to the Appraiser(s). Each such Partner shall
use reasonable efforts to expedite the completion of the appraisal procedure.
23.5 The determination of the Appraisers or the
Appraiser acting alone as above provided shall be conclusive and binding upon
the Partnership. The Appraisers or Appraiser, as the case may be, shall be
required to give written notice to the Partners stating their or his or her
determination, and shall furnish to each Partner a signed copy of such
determination.
23.6 Notwithstanding anything to the contrary
contained in this Agreement, if the fair market value of any Hotel Debt is to be
determined pursuant to this Article 23, the Appraiser(s) shall determine the
fair market value of the Hotel Interest(s) that serve as security therefor
pursuant to the procedure set forth above, and the fair market value of such
Hotel Debt shall be deemed to be the lesser of (a) the fair market value of such
Hotel Interest(s), as determined by the procedure set forth above and after
taking into account all secured debt or other liens covering such Hotel
Interest(s) (or the underlying Hotels) superior to such Hotel Debt and (b) the
sum of (i) the outstanding principal amount of, and accrued interest on, such
Hotel Debt and (ii) if the terms of such Hotel Debt include provisions for any
so-called "equity kickers" or "equity participations," the amount that would be
paid to the Partnership pursuant to said provisions if such Hotel Interest(s)
were sold for their fair market value, as determined as set forth above.
23.7 If the appraisal procedure described in Sections
23.2, 23.3, 23.4, 23.5 and 23.6 is used, each of the General Partners shall pay
the costs and expenses of the Appraiser appointed by it and one-half of the
other expenses of the appraisal procedure incurred hereunder.
24. Special Purpose Entity Provisions. Notwithstanding any
other provisions of this Agreement, for so long as (i) the Partnership is a
party to the documents (the "Loan Documents") evidencing and securing the Credit
Facility or is otherwise obligated to take any action under the terms of the
Loan Documents, or (ii) any obligations are outstanding under the Credit
Facility, the Partnership shall not:
61
24.1 Except as permitted under the Loan Documents,
own any assets or property other than its interest in the Underlying
Partnership, its interest as lessee under the Operating Leases and other
property that is encumbered by the security interests securing the Credit
Facility;
24.2 Engage in any business other than as described
in Article 5 hereof;
24.3 Except as permitted under the Loan Documents,
enter into any contract or agreement with any Affiliate of the Partnership,
except upon terms and conditions that are intrinsically fair and no less
favorable to the Partnership than those that would be available in a comparable
arms'-length transaction with unrelated third parties;
24.4 Except as permitted under the Loan Documents,
(i) fail to pay solely from its assets all obligations of any kind incurred by
it or (ii) pay from its assets the obligations of any other person;
24.5 Incur any debt, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other than (i) the debt
evidenced by the Loan Documents, (ii) Voluntary Loans, (iii) Priority Loans and
(iv) other debt permitted pursuant to the Loan Documents;
24.6 Except as permitted under the Loan Documents,
make any loans or advances to any third party (including any affiliate) or hold
evidence of indebtedness issued by any third party, or acquire obligations or
securities of its affiliates; provided, however, that the Partnership may hold
government-backed, other investment grade securities and repurchase obligations
with a term of not more than one year with respect to such securities;
24.7 Become insolvent or fail to pay its debts and
liabilities (including, as applicable, shared personnel and overhead expenses)
from its assets as the same shall become due;
24.8 Fail to observe limited partnership formalities
and preserve its existence, including by paying the salaries of its own
employees, if any (or paying a proportionate share of the salary of any employee
of any Affiliate who performs work for both the Partnership and such Affiliate),
or, except as otherwise permitted under the Loan Documents, amend, modify or
otherwise change the other organizational documents of the Partnership;
24.9 Except as required under the Loan Documents,
fail to (i) maintain all of its books, records, financial statements and bank
accounts separate from those of its Affiliates (except that the Partnership may
be included in a consolidated financial statement for the Partnership, its
subsidiaries and the
62
Partnership's controlling parties (the "Controlling Parties") filed with the
Securities Exchange Commission, which consolidated financial statement shall
indicate that Partnership, such subsidiaries and the Controlling Parties are
separate legal entities and that the assets and liabilities of the Partnership
are intended to be available only to creditors of the Partnership), (ii) file
its own tax returns and pay the taxes shown thereon (except that the
Partnership, its subsidiaries and the Controlling Parties may file consolidated
or combined federal, state and city tax returns, which shall provide that the
Partnership, the such subsidiaries and the Controlling Parties are separate
legal entities and pay their respective proportionate shares of the taxes shown
on such returns), or (iii) maintain its books, records, resolutions and
agreements as official records;
24.10 Fail to (i) hold itself out to the public as a
legal entity separate and distinct from any other entity (including any
Affiliate of the Partnership), (ii) correct any known misunderstanding regarding
its status as a separate entity, (iii) conduct business solely in its own name,
(iv) not identify itself or any of its affiliates as a division or part of the
other or (v) maintain and utilize separate stationery, invoices and checks;
24.11 Fail to maintain adequate capital for the
normal obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations;
24.12 Seek or effect the liquidation, dissolution,
winding up, consolidation or merger, in whole or in part, of the Partnership;
24.13 Commingle its funds or other assets with the
assets of any affiliate of the Partnership or any other person or entity;
24.14 Guarantee or become obligated for the debts of
any other entity or person or hold itself out to be responsible for the debts of
another person or entity, other than (i) with respect to the loan provided for
in the Credit Facility, and (ii) as otherwise permitted under the Loan
Documents;
24.15 Share any common logo with or hold itself out
as or be considered as a department or division of (i) any, principal, member or
affiliate of the Partnership, (ii) any Affiliate of a principal or member of the
Partnership, or (iii) any other person or entity;
24.16 Fail to allocate fairly and reasonably any
overhead expenses that are shared with an Affiliate, including paying for office
space and services performed by any employee of an Affiliate, and maintain a
principal executive and administrative office through which its business is
conducted separate from that of any Affiliate; provided, however, that the
Partnership and any of its Affiliates may have offices in the same location
provided there is a fair and
63
appropriate allocation of overhead costs, if any, among the Partnership and/or
any such affiliates and each of the Partnership and any such Affiliates bear its
fair share of such costs;
24.17 Pledge its assets for the benefit of any other
person or entity, other than with respect to (i) the loan provided for in the
Credit Facility, and (ii) except as otherwise permitted under the Loan
Documents;
24.18 Fail to maintain a sufficient number of
employees in light of its contemplated business operations (taking in account
any management or similar agreement or operating lease entered into by the
Partnership);
24.19 Fail to take title to any personal or real
property of the Partnership other than in the name of the Partnership;
24.20 Without the consent of both General Partners,
file or consent to the filing of any petition, either voluntary or involuntary,
to take advantage of any applicable insolvency, bankruptcy, liquidation or
reorganization statute, or make an assignment for the benefit of creditors; or
24.21 Without the consent of both General Partners,
take any of the following actions:
24.21.1 file or consent to the filing of any
bankruptcy, insolvency or reorganization case or proceeding; institute any
proceedings under any applicable insolvency law or otherwise seek any relief
under any laws relating to the relief from debts or the protection of debtors
generally;
24.21.2 seek or consent to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any
similar official for the Partnership or a substantial portion of its properties;
24.21.3 make any assignment for the benefit
of the Partnership's creditors;
24.21.4 amend the organizational
documentation of the Partnership in any manner that does not comply with each of
the covenants contained in this Article 29; or
24.21.5 take any action in furtherance of
any of the foregoing.
64
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MIP GP, LLC
By: MeriStar H & R Operating Company, L.P.,
its Manager
By: MeriStar Hotels & Resorts, Inc., its
general partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Treasurer
MIP GEN PAR, LLC
By: Oak Hill Capital Partners, L.P., its
Manager
By: OHCP GenPar, L.P., its general
partner
By: OHCP MGP, LLC, its general
partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------,
a member
OAK HILL CAPITAL MANAGEMENT PARTNERS, L.P.
By: OHCP Gen Par, L.P., its general partner
By: OHCP MGP, LLC, its general partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------,
a member
OAK HILL CAPITAL PARTNERS, L.P., in its
capacities as "OHTE" and "Oak ▇▇▇▇ ▇▇"
hereunder
By: OHCP Gen Par, L.P., its general partner
By: OHCP MGP, LLC, its general partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------,
a member
MERISTAR H & R OPERATING COMPANY, L.P.
By: MeriStar Hotels & Resorts, Inc., its
general partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Treasurer
EXHIBIT A
---------
Initial Initial Capital
Partner Commitment Proportionate Share Contribution
------- ---------- ------------------- ---------------
Opco GP $500,000.00 0.50%
Oak ▇▇▇▇ ▇▇ 500,000.00 0.50%
Opco LP 9,500,000.00 9.50%
Oak ▇▇▇▇ ▇▇ [Aggregate Commitment [Aggregate Commitment
of Oak ▇▇▇▇ ▇▇, OHTE of Oak ▇▇▇▇ ▇▇, OHTE
OHTE and OHCMP to be and OHCMP to be
$89,500,000] 89.5%]
OHCMP
Total: $100,000,000.00 100.00%
