<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
______________________________
INTERSTATE HOTELS COMPANY
FOSTER PLAZA 10
680 ANDERSEN DRIVE
PITTSBURGH, PENNSYLVANIA 15220
(412) 937-0600
PENNSYLVANIA 1-11731 25-1788101
(State of incorporation) (SEC File No.) (IRS Employer
Identification No.)
The Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the period
that the Registrant was required to file such reports, but (2) has not been
subject to such filing requirements for the past 90 days.
The number of shares of Common Stock, par value $0.01 per share,
outstanding at August 13, 1996 was 28,668,350.
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<PAGE> 2
INDEX
INTERSTATE HOTELS COMPANY
Part I Financial Information Page No.
- ------ --------------------- --------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995
Consolidated Statements of Operations - Pro Forma
Three Months and Six Months Ended
June 30, 1995 and June 30, 1996
Consolidated Statements of Operations - Historical
Three Months and Six Months Ended
June 30, 1995 and June 30, 1996
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1995 and June 30, 1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II Other Information
- ------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. (A) Exhibits
(B) Reports of Form 8-K
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).
INTERSTATE HOTELS COMPANY
CONSOLIDATED BALANCE SHEETS
-------
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1996 1995
--------------- ---------------
(unaudited) (A)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 38,078 $ 14,035
Accounts receivable 24,091 10,654
Net investment in direct financing leases 400 399
Deferred income taxes 4,048 --
Prepaid expenses and other current assets 4,005 313
--------- ---------
Total current assets 70,622 25,401
Restricted cash 10,864 2,096
Property and equipment, net 376,076 1,894
Investments in management contracts, net of accumulated amortization of
$18,464 at June 30, 1996 and $16,933 at December 31, 1995 4,007 5,861
Investments in hotel real estate 4,931 12,884
Officers and employees notes receivable 4,681 1,219
Affiliates notes receivable -- 8,718
Net investment in direct financing leases 930 836
Other assets 12,815 2,492
--------- ---------
Total assets $ 484,926 $ 61,401
========= =========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable 7,545 926
Accounts payable - health trust 1,192 5,505
Accrued payroll and related benefits 7,156 3,026
Other accrued liabilities 23,027 5,546
Current portion of long-term debt 5,171 363
--------- ---------
Total current liabilities 44,091 15,366
Long-term debt 219,620 35,907
Deferred income taxes 2,101 --
Other liabilities 1,213 --
--------- ---------
Total liabilities 267,025 51,273
--------- ---------
Minority interests 6,185 872
Equity:
Common stock, $.01 par value; authorized 75,000 shares;
issued and outstanding 27,220 shares as of June 30, 1996 272 3
Paid-in capital 220,525 26,883
Unearned compensation -- (3,263)
Accumulated deficit (9,081) (12,737)
Receivable from stockholders -- (1,630)
--------- ---------
Total equity 211,716 9,256
--------- ---------
Total liabilities and equity $ 484,926 $ 61,401
========= =========
</TABLE>
(A) The year-end balance sheet data was derived from audited financial
statements, but does not include all disclosures required by
generally accepted accounting principles.
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 4
INTERSTATE HOTELS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
-------
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Pro Forma (Note 3)
-----------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1995 1996 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Lodging revenues:
Rooms $ 27,731 $ 31,400 $ 52,721 $ 58,482
Food and beverage 16,407 18,074 31,212 33,863
Other departmental 3,039 3,268 5,993 6,387
Management and related fees 10,319 11,082 19,726 21,889
--------- --------- --------- ---------
57,496 63,824 109,652 120,621
--------- --------- --------- ---------
Lodging expenses:
Rooms 6,427 6,973 12,497 13,249
Food and beverage 11,775 12,794 22,962 24,236
Other departmental 1,646 1,458 3,199 2,737
Property costs 14,048 15,737 28,063 30,216
General and administrative 2,456 2,478 4,940 5,066
Payroll and related benefits 3,597 4,148 7,435 8,397
Depreciation and amortization 4,443 4,504 8,958 9,003
--------- --------- --------- ---------
44,392 48,092 88,054 92,904
--------- --------- --------- ---------
Operating income 13,104 15,732 21,598 27,717
Other expense:
Interest, net 4,572 4,570 9,144 9,196
Other, net 537 631 828 1,127
--------- --------- --------- ---------
Income before income taxes 7,995 10,531 11,626 17,394
Income tax expense 3,038 4,002 4,418 6,610
---------- --------- --------- ---------
Net income $ 4,957 $ 6,529 $ 7,208 $ 10,784
========== ========= ========= =========
Pro forma earnings per common
share and common share equivalent $ .17 $ .23 $ .25 $ .38
========== ========= ========= =========
Weighted average number of common
shares and common share
equivalents outstanding 28,703 28,703 28,703 28,703
========== ========= ========= =========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 5
INTERSTATE HOTELS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
-------
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Historical
-----------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1995 1996 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Lodging revenues:
Rooms -- $ 2,033 -- $ 2,033
Food and beverage -- 1,021 -- 1,021
Other departmental -- 221 -- 221
Net management fees $ 6,724 7,796 $ 12,570 14,978
Other management-related fees 4,679 4,875 9,082 9,988
--------- --------- --------- ---------
11,403 15,946 21,652 28,241
--------- --------- --------- ---------
Lodging expenses:
Rooms -- 384 -- 384
Food and beverage -- 743 -- 743
Other departmental -- 92 -- 92
Property costs -- 880 -- 880
General and administrative 2,237 2,238 4,317 4,576
Payroll and related benefits 3,569 4,148 7,404 8,397
Non-cash compensation -- 11,896 - 11,896
Depreciation and amortization 961 1,340 2,002 2,441
--------- --------- --------- ---------
6,767 21,721 13,723 29,409
--------- --------- --------- ---------
Operating income (loss) 4,636 (5,775) 7,929 (1,168)
Other income (expense):
Interest, net 76 (528) 128 (1,015)
Other, net -- 635 -- 751
--------- --------- --------- ---------
Income (loss) before income taxes 4,712 (5,668) 8,057 (1,432)
Income tax expense -- 6,631 -- 6,631
--------- --------- --------- ---------
Income (loss) before extraordinary items 4,712 (12,299) 8,057 (8,063)
Extraordinary loss from early extinguishment
of debt, net of deferred tax
benefit of $3,937 -- 7,643 -- 7,643
--------- --------- --------- ---------
Net income (loss) $ 4,712 $ (19,942) $ 8,057 $ (15,706)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 6
INTERSTATE HOTELS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
1995 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 8,057 $ (15,706)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,002 2,441
Minority interests' share of equity loss from
investment in hotel real estate -- (540)
Write-off of deferred financing fees -- 6,231
Non-cash stock compensation -- 11,896
Deferred income taxes -- 2,694
Other (39) (175)
Cash provided (used) by assets and liabilities:
Accounts receivable (1,913) (1,489)
Prepaid expenses and other assets (174) (657)
Accounts payable 2,700 (3,857)
Accrued liabilities 2,623 5,285
------- --------
Net cash provided by operating activities 13,256 6,123
------- --------
Cash flows from investing activities:
Investments in contracts (90) (77)
Equity investment in hotel real estate -- (4,931)
Change in notes receivable, net (1,857) (3,462)
Acquisition of hotels, net of cash received -- (115,490)
Purchase of property and equipment (310) (283)
Purchase of assets to be leased (374) (320)
Other (207) (2,695)
------- --------
Net cash used in investing activities (2,838) (127,258)
------- --------
Cash flows from financing activities:
Proceeds from long-term debt -- 195,000
Repayment of long-term debt (300) (240,439)
Financing costs paid -- (9,349)
Proceeds from issuance of common stock, net -- 235,151
Capital contributions 600 --
Change in funds restricted for debt service -- (83)
Funds advanced to stockholders (6,985) (6,423)
Repayment of funds advanced to stockholders 2,493 8,053
Repayment of notes payable to stockholders -- (30,000)
Distributions and capital distributions paid (4,228) (6,732)
------- --------
Net cash (used in) provided by financing activities (8,420) 145,178
------- --------
Net increase in cash and cash equivalents 1,998 24,043
Cash and cash equivalents at beginning of period 6,702 14,035
------- --------
Cash and cash equivalents at end of period $ 8,700 $ 38,078
======= ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 153 $ 2,534
======= ========
Supplemental disclosure of non-cash investing and financing activities:
Notes payable issued to stockholders -- $ 30,000
======= ========
Assets contributed for stock -- $ 9,916
======= ========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 7
INTERSTATE HOTELS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, dollars in thousands except per share amounts)
-------
1. ORGANIZATION AND BASIS OF PRESENTATION:
Interstate Hotels Company (the Company) provides management and other
related services principally to hotels through its wholly-owned
subsidiaries. As of June 30, 1996, the Company also owned eight hotels
and had a majority interest in six other hotels (collectively, the
Owned Hotels). The Company was formed on April 19, 1996. As a result
of the transactions discussed in Note 2, the consolidated interim
financial statements of the Company as of June 30, 1996 consist of the
historical results of Interstate Hotels Corporation and Affiliates
(IHC), the Company's predecessor, and the operations of the Owned
Hotels from the date of their acquisition. Prior thereto, the
consolidated interim financial statements reflect only the historical
activity of IHC. All significant intercompany transactions and
balances have been eliminated in consolidation.
The accompanying consolidated interim financial statements have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the SEC).
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and
regulations. The consolidated interim financial statements should be
read in conjunction with the financial statements, notes thereto and
other information included in the Company's Registration Statement on
Form S-1 (No. 333-03958), filed with the SEC on April 26, 1996,
as amended (the Registration Statement).
The accompanying unaudited consolidated interim financial statements
reflect, in the opinion of management, all adjustments, which are of a
normal and recurring nature, necessary for a fair presentation of the
financial position and results of operations for the periods
presented. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions. Such estimates and assumptions affect the
reported amounts of assets and liabilities, as well as the disclosure
of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates. The results of operations for the interim periods are not
necessarily indicative of the results for the entire year.
2. INITIAL PUBLIC OFFERING:
In June 1996, the Company completed an initial public offering of
11,000,000 shares of its common stock at a price of $21 per share (the
Initial Offering). In July 1996, the underwriters of the Company's
Initial Offering exercised their over-allotment options and purchased
an additional 1,448,350 shares of common stock at $21 per share from
the Company. After underwriting discounts, commissions and other
Initial Offering expenses, net proceeds to the Company were $211,851
from the Initial Offering and $28,601 from the exercise of the
over-allotment options. The Company used a significant portion of the
proceeds of the Initial Offering to repay certain debt obligations and
to fund hotel acquisitions.
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited, dollars in thousands except per share amounts)
-------
2. INITIAL PUBLIC OFFERING, continued:
The following transactions were consummated prior to or
concurrently with the consummation of the Initial Offering:
EXERCISE OF THE BLACKSTONE OPTION: In October 1995, IHC granted
Blackstone Real Estate Advisors L.P. and certain of its affiliates
(collectively, Blackstone) an option (the Blackstone Option) to
purchase an equity interest in a new company to be formed to succeed
IHC for an exercise price of $23,300. In connection with the
Initial Offering, Blackstone exercised the Blackstone Option and
received 2,133,333 shares of common stock of the Company.
ACQUISITION OF THE BLACKSTONE HOTEL INTERESTS: In March 1996, a
subsidiary of the Company entered into a purchase and sale agreement to
acquire all of Blackstone's interests in thirteen of the Owned Hotels
(the Blackstone Acquisition). In connection with the Initial Offering,
the Blackstone Acquisition was consummated for a cash purchase price of
$124,400. In addition to the Blackstone Acquisition, Blackstone also
contributed their interest in one hotel in consideration for $8,300 of
common stock of the Company. Additionally, the principal shareholders
of IHC contributed their equity interests in the Owned Hotels to the
Company in exchange for common stock of the Company concurrent with the
Initial Offering. The Blackstone Acquisition has been accounted for
using the purchase method of accounting except that carryover basis was
used for 9.3% of the acquired interests. The contributions of interests
in the Owned Hotels in exchange for common stock of the Company have
been accounted for using carryover basis.
3. PRO FORMA INFORMATION:
The unaudited pro forma consolidated statements of operations for the
three-month and six-month periods ended June 30, 1995 and 1996 are
presented as if the acquisitions of Blackstone's interests in all
of the Owned Hotels, the acquisition of the Boston Marriott Westborough
Hotel and the consummation of the transactions described in Note 2 had
occurred on January 1, 1995. Such pro forma information is based in
part upon information contained in the Company's Registration Statement
and should be read in conjunction with the Registration Statement. In
management's opinion, all pro forma adjustments necessary to reflect
the effects of these transactions have been made. The pro forma
information does not include earnings on the Company's pro forma cash
and short-term investments or certain one-time charges to income, and
does not purport to present what the actual results of operations of
the Company would have been if the previously mentioned transactions
had occurred on such dates or to project the results of operations of
the Company for any future period.
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited, dollars in thousands except per share amounts)
-------
4. EARNINGS PER SHARE:
Prior to the consummation of the Company's Initial Offering, the
predecessors of the Company were organized as S corporations,
partnerships and limited liability companies. Accordingly, the Company
believes that the historical earnings per share calculations required
in accordance with Accounting Principles Board Opinion No. 15 are not
meaningful for periods prior to the Initial Offering and, therefore,
have not been provided. Rather, pro forma earnings per share is a
more meaningful measure of the Company's results of operations for the
periods presented.
The weighted average number of common shares and common share
equivalents used in the computation of pro forma earnings per share
for the three-month and six-month periods ended June 30, 1995 and 1996
are as follows:
<TABLE>
<S> <C>
Weighted average common shares
and common share equivalents issued 28,667,000
Dilutive effect of stock options 36,000
----------
28,703,000
==========
</TABLE>
The pro forma earnings per share for the three-month and six-month
periods ended June 30, 1995 and 1996 have been calculated by dividing
pro forma net income by the weighted average number of shares of common
stock deemed to be outstanding. Net income has been adjusted to pro
forma net income by reflecting the transactions discussed in Note 2 and
other required adjustments as discussed in Note 3 as if the
transactions had occurred on January 1, 1995.
5. INVESTMENTS IN HOTEL REAL ESTATE:
The Company accounts for its investments in hotel real estate
as follows:
o Majority-owned hotels: The Company consolidates all
majority-owned interests in hotels.
o Less than majority owned: The Company accounts for investments
in less than 50% but greater than 20% owned entities in which
it can exert significant influence on the equity method of
accounting. The Company accounts for all other investments on
the cost method.
As of June 30, 1996, investments under the balance sheet caption
investments in hotel real estate consisted primarily of minority
interests in two hotel partnerships in which the Company does not
exert significant influence. As of December 31, 1995, this caption
consisted of an investment in which the Company had a less than 50%
controlling interest. As part of the transaction discussed in Note 2,
the Company acquired a majority interest in this investment and has
accounted for the acquisition using the purchase method of accounting.
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited, dollars in thousands except per share amounts)
-------
6. LONG-TERM DEBT:
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Term Loan and Revolving Credit Facility $ 195,000 --
CGL Loan 29,250 --
IHC revolving credit and term loan facility -- $ 35,000
Other 541 1,270
-------- ---------
224,791 36,270
Less current portion 5,171 363
--------- ---------
$ 219,620 $ 35,907
========= =========
</TABLE>
Effective June 25, 1996, the Company entered into a $195,000 Term
Loan and a $100,000 Revolving Credit Facility (collectively, the
Credit Facilities). The Term Loan is payable over seven years in
accelerating quarterly installments beginning September 26, 1996 and
includes certain mandatory prepayment provisions. All remaining unpaid
accrued interest and principal on the Term Loan will be due June 26,
2003. The Revolving Credit Facility provides for borrowings under
letters of credit, revolving loans for working capital and acquisition
loans to be used to finance additional hotel acquisitions.
The proceeds from the Term Loan were used to refinance certain
indebtedness of the Company and to pay fees and expenses incurred in
connection with the Credit Facilities. Proceeds from the Term Loan in
the amount of $90,000 were used to purchase a subordinated
participation interest in the $119,250 mortgage indebtedness of
Interestone/CGL, a subsidiary of the Company (CGL Loan). As of June 30,
1996, on a consolidated basis, the Company had outstanding, in addition
to the Term Loan, $29,250 of the CGL Loan. The CGL Loan requires
no principal payments until the indebtedness matures on June 25, 2003.
All other terms of the CGL Loan, including interest and covenants, are
identical to the Credit Facilities.
Interest on the Credit Facilities and the CGL Loan is payable subject
to the Company's election of the Base Rate Option or the Eurodollar
Option. The Base Rate Option is the lender's prime rate plus 1%. The
Eurodollar Option can be applied for periods of one, two, three or six
months, and is LIBOR plus 2%. The Company elected the Eurodollar Option
to be in effect as of June 30, 1996, and was 7.5%. Additionally, the
Company has purchased two interest rate protection agreements: an
interest rate cap that limits LIBOR to 5.5% on $105,000 of the
indebtedness through June 28, 1999 and an interest rate swap that
provides for a fixed LIBOR rate of 5.8% on $72,105 of the
indebtedness through December 15, 2000.
A nonrefundable commitment fee equal to 3/8 of 1% of the unused
portion of the Revolving Credit Facility is payable quarterly.
Additionally, letter of credit fees equal to 2.25% of the outstanding
letters of credit are payable quarterly.
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited, dollars in thousands except per share amounts)
-------
6. LONG-TERM DEBT, continued:
The Credit Facilities and the CGL Loan contain certain restrictive
covenants, including the maintenance of several financial ratios,
restrictions on the payment of dividends, limitations on additional
indebtedness, limitations on changes in members of the Board of
Directors and certain other reporting requirements. The Company has
pledged substantially all of the assets of the Company and an interest
in the rights to the cash flows of certain of the Owned Hotels as
collateral for the Credit Facilities and the CGL Loan.
Aggregate scheduled maturities of long-term debt outstanding as of
June 30, 1996 for each of the five years ending December 31 and
thereafter are as follows:
<TABLE>
<S> <C>
1996 $ 2,500
1997 7,671
1998 12,681
1999 20,189
2000 30,000
Thereafter 151,750
---------
$ 224,791
=========
</TABLE>
7. SHAREHOLDERS' EQUITY:
The Company's Articles of Incorporation grant the Board of Directors
the authority to issue up to 25,000,000 shares of preferred stock
having such rights, preferences and privileges as designated by the
Board without shareholder approval. The rights of the holders of common
stock will be subject to, and may be adversely affected by, the rights
of the holders of any shares of such preferred stock that may be issued
in the future.
8. NON-CASH COMPENSATION:
Prior to the Initial Offering, the Company issued 785,533 shares of
restricted stock to certain executives and employees to replace certain
prior options issued by IHC in 1995. The restricted shares were valued
based on the estimated value of the common stock of the Company at the
time the restricted stock was issued. The issuance of the restricted
stock resulted in a one-time charge of $11,896, which is classified as
non-cash compensation expense in the accompanying consolidated
statements of operations.
9. INCOME TAXES:
IHC was organized as S corporations, partnerships and limited liability
companies for federal and state income tax purposes until the Initial
Offering. Accordingly, IHC was not subject to income tax, as all
taxable income or loss of IHC was reported on the tax return of its
shareholders or owners. As a result of the change in IHC's tax status
to a C corporation effective with the consummation of the Initial
Offering, the Company recorded income tax expense amounting to $6,261
to establish deferred taxes existing as of the date of the change in
tax status. The difference between the Company's effective income tax
rate and statutory federal income tax rate for the six-month period
ended June 30, 1996 results mainly from the change in tax entity and
from state income taxes.
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited, dollars in thousands except per share amounts)
-------
10. EXTRAORDINARY ITEMS:
In June 1996, the Company recorded an extraordinary loss amounting to
$7,643, net of a deferred tax benefit of $3,937, as a result of the
early extinguishment of certain debt. The extraordinary loss related
principally to the write-off of deferred financing fees, prepayment
penalties and loan commitment fees.
11. SUBSEQUENT EVENTS:
As discussed in Note 3, the Company acquired the Boston Marriott
Westborough Hotel on July 1, 1996 for $18,900. This acquisition is
included in the pro forma consolidated statements of operations.
The Company also purchased three additional hotels in July 1996. These
three separate acquisitions include: the Brentwood Holiday Inn located
in Nashville, Tennessee, the Blacksburg Marriott Hotel located in
Blacksburg, Virginia and the Roanoke Marriott Hotel located in Roanoke,
Virginia. The total aggregate purchase price of these three hotels was
$50,400. These acquisitions have not been included in the pro forma
financial results of the Company because consummation of the
acquisitions was not probable as of June 30, 1996.
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
PRO FORMA THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA THREE MONTHS
ENDED JUNE 30, 1995
Pro forma total revenues increased by $6.3 million, or 11.0%, from $57.5 million
in the three months ended June 30, 1995 to $63.8 million in the three months
ended June 30, 1996. The most significant portion of this increase related to
lodging revenues, which consists of rooms, food and beverage and other revenues.
Pro forma lodging revenues increased by $5.5 million, or 11.8%, from $47.2
million in the three months ended June 30, 1995 to $52.7 million in the three
months ended June 30, 1996. The increase was due to the overall improvement in
the operating performance of the Owned Hotels, which was attributed to a change
in franchise affiliations for certain of the Owned Hotels, fewer hotel
renovations in 1996 than in 1995 and an overall improvement in economic
conditions in certain geographic regions. This increase in lodging revenues was
consistent with the increase in the Owned Hotels' room revenues of $3.7 million,
or 13.2%, to $31.4 million in the three months ended June 30, 1996. For the
Owned Hotels, the average room rate increased by 9.7%, from $87.74 during the
three months ended June 30, 1995 to $96.28 during the three months ended June
30, 1996, and occupancy increased from 75.8% to 76.9%, respectively. This
resulted in an 11.3% increase in revenue per available room (REVPAR) to $74.05
during the three months ended June 30, 1996. The Philadelphia, Atlanta,
Chicago, Denver, Houston and Colorado Springs markets had the most significant
impact on average rate and occupancy growth. Pro forma management and related
fees increased by $0.8 million, or 7.4%, from $10.3 million in the three months
ended June 30, 1995 to $11.1 million in the three months ended June 30, 1996 due
primarily to the performance improvement of existing managed hotels and
incremental revenues associated with the net addition of new hotels, many of
which utilize the Company's other contractual services. Such contractual
services include insurance services, purchasing and renovation services, MIS
support, centralized accounting, leasing and training and relocation programs.
Pro forma lodging expenses, which consists of rooms, food and beverage,
property costs and other expenses, increased by $3.1 million, or 9.0%, from
$33.9 million in the three months ended June 30, 1995 to $37.0 million in the
three months ended June 30, 1996. The pro forma operating margin of the Owned
Hotels increased from 28.2% during the three months ended June 30, 1995 to
29.9% during the three months ended June 30, 1996. The increase was attributed
to the increase in revenues and the overall improvement in operating
efficiencies of the Owned Hotels.
<PAGE> 14
General and administrative expenses are associated with the management of hotels
and consist primarily of centralized management expenses such as operations
management, sales and marketing, finance and other hotel support services, as
well as general corporate expenses. Pro forma general and administrative
expenses in the three months ended June 30, 1996 remained relatively consistent
with pro forma general and administrative expenses in the three months ended
June 30, 1995 due to the relatively fixed nature of these expenses. Pro forma
general and administrative expenses as a percentage of pro forma revenues
decreased to 3.9% during the three months ended June 30, 1996 compared to 4.3%
during the three months ended June 30, 1995 as a result of operating leverage.
Pro forma payroll and related benefits expenses increased by $0.5 million, or
15.3%, from $3.6 million in the three months ended June 30, 1995 to $4.1
million in the three months ended June 30, 1996. The increase was due
primarily to the addition of new employees related to the growth of the
Company's hotel management business. Pro forma payroll and related benefits
expenses as a percentage of pro forma revenues remained relatively consistent
during the three months ended June 30, 1996 and 1995.
Pro forma depreciation and amortization of $4.5 million in the three months
ended June 30, 1996 remained relatively consistent with pro forma depreciation
and amortization of $4.4 million in the three months ended June 30, 1995.
Pro forma operating income increased by $2.6 million, or 20.1%, from $13.1
million in the three months ended June 30, 1995 to $15.7 million in the three
months ended June 30, 1996. Accordingly, pro forma operating margin increased
from 22.8% during the three months ended June 30, 1995 to 24.6% during the
three months ended June 30, 1996. As discussed above, the improvement in the
pro forma operating margin was attributed to the increase in pro forma revenues
and the overall decrease in pro forma operating expenses as a percentage of pro
forma revenues.
The pro forma income tax expense of $4.0 million in the three months ended June
30, 1996 and $3.0 million in the three months ended June 30, 1995 was computed
as if the Company were subject to federal and state income taxes for the entire
period, based on an effective tax rate of 38%.
As a result of the changes noted above, pro forma net income increased by $1.5
million, or 31.7%, from $5.0 million in the three months ended June 30, 1995 to
$6.5 million in the three months ended June 30, 1996. Accordingly, pro forma
net income margin increased from 8.6% during the three months ended June 30,
1995 to 10.2% during the three months ended June 30, 1996.
<PAGE> 15
PRO FORMA SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA SIX MONTHS ENDED
JUNE 30, 1995
Pro forma total revenues increased by $10.9 million, or 10.0%, from $109.7
million in the six months ended June 30, 1995 to $120.6 million in the six
months ended June 30, 1996. The most significant portion of this increase
related to pro forma lodging revenues, which increased by $8.8 million, or
9.8%, from $89.9 million in the six months ended June 30, 1995 to $98.7 million
in the six months ended June 30, 1996. The increase was due to the overall
improvement in the operating performance of the Owned Hotels, which was
attributed to a change in franchise affiliations for certain of the Owned
Hotels, fewer hotel renovations in 1996 than in 1995 and an overall improvement
in economic conditions in certain geographic regions. This increase in lodging
revenues was consistent with the increase in the Owned Hotels' room revenues of
$5.8 million, or 10.9%, to $58.5 million in the six months ended June 30, 1996.
For the Owned Hotels, the average room rate increased by 8.1%, from $87.25
during the six months ended June 30, 1995 to $94.35 during the six months ended
June 30, 1996, and occupancy increased from 72.8% to 73.6%, respectively. This
resulted in a 9.4% increase in REVPAR to $69.49 during the six months ended June
30, 1996. Pro forma management and related fees increased by $2.2 million, or
11.0%, from $19.7 million in the six months ended June 30, 1995 to $21.9 million
in the six months ended June 30, 1996 due primarily to the performance
improvement of existing managed hotels and incremental revenues associated with
the net addition of new hotels, many of which provide for incentive management
fees and utilize the Company's other contractual services.
Pro forma lodging expenses increased by $3.7 million, or 5.6%, from $66.7
million in the six months ended June 30, 1995 to $70.4 million in the six
months ended June 30, 1996. The pro forma operating margin for the Owned
Hotels increased from 25.8% during the six months ended June 30, 1995 to 28.7%
during the six months ended June 30, 1996. The increase was attributed to the
increase in revenues and the overall improvement in operating performance and
operating efficiencies of the Owned Hotels.
Pro forma general and administrative expenses increased slightly from $4.9
million in the six months ended June 30, 1995 to $5.1 million in the six months
ended June 30, 1996. Pro forma general and administrative expenses as a
percentage of pro forma revenues decreased to 4.2% during the six months ended
June 30, 1996 compared to 4.5% during the six months ended June 30, 1995 as a
result of operating leverage.
Pro forma payroll and related benefits expenses increased by $1.0 million, or
12.9%, from $7.4 million in the six months ended June 30, 1995 to $8.4 million
in the six months ended June 30, 1996. The increase was due primarily to the
addition of new employees related to the growth of the Company's hotel
management business. Pro forma payroll and related benefits expenses as a
percentage of pro forma revenues remained relatively consistent during the six
months ended June 30, 1996 and 1995.
<PAGE> 16
Pro forma depreciation and amortization in the six months ended June 30, 1996
remained relatively consistent with pro forma depreciation and amortization in
the six months ended June 30, 1995.
Pro forma operating income increased by $6.1 million, or 28.3%, from $21.6
million in the six months ended June 30, 1995 to $27.7 million in the six
months ended June 30, 1996. Accordingly, pro forma operating margin increased
from 19.7% during the six months ended June 30, 1995 to 23.0% during the six
months ended June 30, 1996. As discussed above, the improvement in the pro
forma operating margin was attributed to the increase in pro forma revenues and
the overall decrease in pro forma operating expenses as a percentage of pro
forma revenues.
The pro forma income tax expense of $6.6 million in the six months ended June
30, 1996 and $4.4 million in the three months ended June 30, 1995 was computed
as if the Company were subject to federal and state income taxes for the entire
period, based on an effective tax rate of 38%.
As a result of the changes noted above, pro forma net income increased by $3.6
million, or 49.6%, from $7.2 million in the six months ended June 30, 1995 to
$10.8 million in the six months ended June 30, 1996. Accordingly, pro forma
net income margin increased from 6.6% during the six months ended June 30, 1995
to 8.9% during the six months ended June 30, 1996.
HISTORICAL THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO HISTORICAL THREE MONTHS
ENDED JUNE 30, 1995
Total revenues increased by $4.5 million, or 39.8%, from $11.4 million in the
three months ended June 30, 1995 to $15.9 million in the three months ended
June 30, 1996. The most significant portion of this increase related to
lodging revenues, which increased by $3.3 million in the three months ended
June 30, 1996 due to the acquisition of the Owned Hotels on June 25, 1996. Net
management fees increased by $1.1 million, or 15.9%, from $6.7 million in the
three months ended June 30, 1995 to $7.8 million in the three months ended June
30, 1996 due to the addition of 39 new management contracts and increased
revenues associated with the performance improvement of existing managed
hotels. The increase in net management fees was partially offset by the loss
of 28 management contracts primarily due to the divestiture of hotels by
third-party hotel owners. Other management-related fees increased by $0.2
million, or 4.2%, from $4.7 million in the three months ended June 30, 1995 to
$4.9 million in the three months ended June 30, 1996 due to incremental
revenues associated with the net addition of new hotels, many of which utilize
the Company's other contractual services.
Lodging expenses increased by $2.1 million in the three months ended June 30,
1996 due to the acquisition of the Owned Hotels.
<PAGE> 17
General and administrative expenses in the three months ended June 30, 1996
remained relatively consistent with general and administrative expenses in the
three months ended June 30, 1995 due to the relatively fixed nature of these
expenses. General and administrative expenses as a percentage of revenues
decreased to 14.0% during the three months ended June 30, 1996 compared to
19.6% during the three months ended June 30, 1995 as a result of the
acquisition of the Owned Hotels.
Payroll and related benefits expenses increased by $0.5 million, or 16.2%, from
$3.6 million in the three months ended June 30, 1995 to $4.1 million in the
three months ended June 30, 1996. The increase was due primarily to the
addition of new employees related to the growth of the Company's hotel
management business. Payroll and related benefits expenses as a percentage of
revenues decreased to 26.0% during the three months ended June 30, 1996
compared to 31.3% during the three months ended June 30, 1995 as a result of
the acquisition of the Owned Hotels.
Non-cash compensation of $11.9 million in the three months ended June 30, 1996
was incurred as a result of the issuance of 785,533 shares of restricted stock
to certain executives and key employees of the Company to replace certain
options issued by IHC in 1995.
Depreciation and amortization increased by $0.3 million from $1.0 million in
the three months ended June 30, 1995 to $1.3 million in the three months ended
June 30, 1996 due to the acquisition of the Owned Hotels.
Operating income (exclusive of non-cash compensation) increased by $1.5
million, or 32.0%, from $4.6 million in the three months ended June 30, 1995 to
$6.1 million in the three months ended June 30, 1996. Accordingly, operating
margin decreased from 40.7% during the three months ended June 30, 1995 to
38.4% during the three months ended June 30, 1996 due primarily to the
acquisition of the Owned Hotels.
Interest, net was $0.5 million of expense in the three months ended June 30,
1996 compared to $0.1 million of income in the three months ended June 30,
1995. The change was due to the increase in interest expense of $0.8 million
from $0.1 million in the three months ended June 30, 1995 to $0.9 million in
the three months ended June 30, 1996 due to the acquisition of the Owned
Hotels. The increase was offset by the increase in interest income of $0.2
million from $0.2 million in the three months ended June 30, 1995 to $0.4
million in the three months ended June 30, 1996 due to higher available cash
generated from operations.
Other, net of $0.6 million in the three months ended June 30, 1996 consisted
primarily of minority interests.
Income tax expense of $6.6 million in the three months ended June 30, 1996 was
attributed primarily to deferred taxes recorded on the date IHC changed its tax
status from a pass-through entity for tax purposes to a C corporation.
<PAGE> 18
An extraordinary loss of $7.6 million, net of a deferred tax benefit of $3.9
million, in the three months ended June 30, 1996 was incurred as a result of
the early extinguishment of certain debt. The extraordinary loss related to
the write-off of deferred financing fees, prepayment penalties and loan
commitment fees.
As a result of the changes noted above, a net loss of $19.9 million was
recorded in the three months ended June 30, 1996 compared to net income of $4.7
million in the three months ended June 30, 1995.
HISTORICAL SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO HISTORICAL SIX MONTHS
ENDED JUNE 30, 1995
Total revenues increased by $6.5 million, or 30.4%, from $21.7 million in the
six months ended June 30, 1995 to $28.2 million in the six months ended June
30, 1996. The most significant portion of this increase related to lodging
revenues, which increased by $3.3 million in the six months ended June 30, 1996
due to the acquisition of the Owned Hotels. Net management fees increased by
$2.4 million, or 19.2%, from $12.6 million in the six months ended June 30,
1995 to $15.0 million in the six months ended June 30, 1996 due to the addition
of 39 new management contracts and increased revenues associated with the
performance improvement of existing managed hotels. Approximately $0.6 million
of this increase resulted from increases in incentive management fees due to
performance improvement of existing managed hotels and the increase in the
number of new management contracts that provide for incentive management fees.
The increase in net management fees was partially offset by the loss of 28
management contracts primarily due to the divestiture of hotels by third-party
hotel owners. Other management-related fees increased by $0.9 million, or
10.0%, from $9.1 million in the six months ended June 30, 1995 to $10.0 million
in the six months ended June 30, 1996 due to incremental revenues associated
with the net addition of new hotels, many of which utilize the Company's other
contractual services.
Lodging expenses increased by $2.1 million in the six months ended June 30,
1996 due to the acquisition of the Owned Hotels.
General and administrative expenses increased slightly from $4.3 million in the
six months ended June 30, 1995 to $4.6 million in the six months ended June 30,
1996. General and administrative expenses as a percentage of revenues
decreased to 16.2% during the six months ended June 30, 1996 compared to 19.9%
during the six months ended June 30, 1995 as a result of the acquisition of the
Owned Hotels.
Payroll and related benefits expenses increased by $1.0 million, or 13.4%, from
$7.4 million in the six months ended June 30, 1995 to $8.4 million in the six
months ended June 30, 1996. The increase was due primarily to the addition of
new employees related to the growth of the Company's hotel management business.
Payroll and related benefits expenses as a percentage of revenues decreased to
29.7% during the six months ended June 30, 1996 compared to 34.2% during the
six months ended June 30, 1995 as a result of the acquisition of the Owned
Hotels.
<PAGE> 19
Non-cash compensation of $11.9 million in the six months ended June 30, 1996
was incurred as a result of the issuance of 785,533 shares of restricted stock
to certain executives and key employees of the Company to replace certain
options issued by IHC in 1995.
Depreciation and amortization increased by $0.4 million from $2.0 million in
the six months ended June 30, 1995 to $2.4 million in the six months ended June
30, 1996 due to the acquisition of the Owned Hotels.
Operating income (exclusive of non-cash compensation) increased by $2.8
million, or 35.3%, from $7.9 million in the six months ended June 30, 1995 to
$10.7 million in the six months ended June 30, 1996. Accordingly, operating
margin decreased from 36.6% during the six months ended June 30, 1995 to 38.0%
during the six months ended June 30, 1996 due primarily to the acquisition of
the Owned Hotels.
Interest, net was $1.0 million of expense in the six months ended June 30, 1996
compared to $0.1 million of income in the six months ended June 30, 1995. The
change was due to the increase in interest expense of $1.6 million from $0.2
million in the six months ended June 30, 1995 to $1.8 million in the six months
ended June 30, 1996 due to the acquisition of the Owned Hotels. The increase
was offset by the increase in interest income of $0.5 million from $0.3 million
in the six months ended June 30, 1995 to $0.8 million in the six months ended
June 30, 1996 due to higher available cash generated from operations.
Other, net of $0.8 million in the six months ended June 30, 1996 consisted
primarily of minority interests.
Income tax expense of $6.6 million in the six months ended June 30, 1996 was
attributed primarily to deferred taxes recorded on the date IHC changed its tax
status from a pass-through entity for tax purposes to a C corporation.
An extraordinary loss of $7.6 million, net of a deferred tax benefit of $3.9
million, in the six months ended June 30, 1996 was incurred as a result of the
early extinguishment of certain debt. The extraordinary loss related to the
write-off of deferred financing fees, prepayment penalties and loan commitment
fees.
As a result of the changes noted above, a net loss of $15.7 million was
recorded in the six months ended June 30, 1996 compared to net income of $8.1
million in the six months ended June 30, 1995.
<PAGE> 20
LIQUIDITY AND CAPITAL RESOURCES
The Company completed the Initial Offering of 11,000,000 shares of its common
stock in June 1996 at a price of $21 per share. The Company received net
proceeds of $235.2 million from the Initial Offering and the exercise of the
Blackstone Option after deducting underwriting discounts and commissions and
expenses payable by the Company. In July 1996, the Company received an
additional $28.6 million of net proceeds from the sale to the underwriters of an
additional 1,448,350 shares of common stock upon exercise of the over-allotment
options granted to the underwriters in connection with the Initial Offering. As
of June 30, 1996, the Company had used $115.5 million, net of cash acquired, of
the Initial Offering proceeds to purchase controlling equity interests in 14
hotels.
A portion of the proceeds of the Initial Offering were used, together with the
proceeds of a new $195 million term loan (the "Term Loan"), to repay $240.4
million of indebtedness. The Company also obtained a new $100 million revolving
credit facility (the "Acquisition Facility" and, together with the Term Loan,
the "Credit Facilities") which may be used to finance the expansion of existing
facilities, to obtain management contracts for hotel properties and to finance
the acquisition of hotel properties. The Credit Facilities carry variable
interest rates based on LIBOR plus 2%, and the Company has entered into interest
rate protection agreements covering $177.0 million of indebtedness. The Credit
Facilities have a seven-year term and require accelerating quarterly principal
payments, beginning on September 26, 1996. In addition to certain mandatory
prepayment provisions, the Credit Facilities contain certain restrictive
covenants, including the maintenance of financial ratios, restrictions on the
payment of dividends, and limitations on additional indebtedness. The Company
is in compliance with all of the restrictive covenants. As a result of the
above transactions, net of repayment of the notes payable to stockholders of $30
million and a capital distribution of $6.7 million, total funds provided by
financing activities was $145.2 million in the six months ended June 30, 1996.
Principally as the result of the purchase of the equity interests in 14 hotels
discussed above, cash of $127.3 million was used in investing activites during
the six-month period ended June 30, 1996.
The Company's capital expenditure budgets for existing properties (before
acquisitions) for the remainder of 1996 and 1997 are $9.2 million and $8.7
million, respectively. The Company intends to pursue a growth-oriented
strategy involving, among other things, the acquisition of additional
management contracts (which may from time to time require capital expenditures
by the Company), as well as acquisitions of interests in additional hotel
properties and hotel management companies. Management believes that the
Acquisition Facility, plus cash provided by operations, will be sufficient to
pursue the Company's strategy for the immediate future. However, depending
upon conditions in the capital and other financial markets and other factors,
the Company may from time to time consider the issuance of debt or other
securities, the proceeds of which could be used to finance acquisitions, to
refinance debt or for other general corporate purposes.
<PAGE> 21
In the six months ended June 30, 1996, the Company had a net loss from
operations of $15.7 million. This amount included non-cash items, which
consisted of non-cash stock compensation of $11.9 million as a result of the
issuance of restricted stock to certain executives and key employees, the
write-off of $6.2 million in deferred financing fees as a result of the
repayment of certain indebtedness, the recognition of $2.7 million of deferred
income tax expense and $2.4 million in depreciation and amortization. As a
result, net cash provided from operations amounted to $6.1 million in the six
months ended June 30, 1996. Management of the Company believes that, with
respect to its current operations, the Company's cash on hand and funds
generated from operations will be sufficient to cover its reasonably foreseeable
working capital, capital expenditures and debt service requirements.
<PAGE> 22
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In connection with the Company's initial public offering, by unanimous
written consent dated June 12, 1996, the Company's shareholders approved (i)
amendments to the Company's articles of incorporation, (ii) the Company's 1996
Equity Incentive Plan, Stock Purchase Plan, Director Option Plan and Management
Bonus Plan and (iii) grants of options to employees to purchase an aggregate of
900,000 shares of common stock of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<S> <C>
2 Formation Agreement, dated June 25, 1996, among the Company and the parties identified on the signature
page thereof
3(a) Amended and Restated Articles of Incorporation of the Company
3(b) Amended and Restated By-Laws of the Company
4 Credit Agreement, dated June 25, 1996, among Interstate Hotels Corporation, Credit Lyonnais and the other
parties signatory thereto
10(a) Stockholders Agreement, dated June 25, 1996, among the Company, Blackstone Real Estate Advisors L.P. and the
shareholders named therein
10(b) Registration Rights and Shareholders Agreement, dated June 25, 1996, among the Company and the shareholders
named therein
10(c) First Amendment to Interstone Three Partners I L.P. Limited Partnership Agreement, dated June 25, 1996, among
BJS Interstone Management Associates, IHC/Interstone Corporation, Blackstone Real Estate Partners I L.P. and
IHC/Interstone Partnership II, L.P.
10(d) First Amendment to Interstone Three Partners II L.P. Limited Partnership Agreement among BJS Interstone
Management Associates, IHC/Interstone Corporation, Blackstone Real Estate Partners II L.P. and IHC/Interstone
Partnership II, L.P.
10(e) First Amendment to Interstone Three Partners III L.P. Limited Partnership Agreement, dated June 25, 1996, among
BJS Interstone Management Associates, IHC/Interstone Corporation, Blackstone Real Estate Partners III L.P.,
Blackstone RE Offshore Capital Partners L.P. and IHC/Interstone Partnership II, L.P.
10(f) First Amendment to Interstone Three Partners IV L.P. Limited Partnership Agreement, dated June 25, 1996, among
BJS Interstone Management Associates, IHC/Interstone Corporation, Blackstone Real Estate Partners IV L.P.,
Blackstone RE Capital Partners II L.P. and IHC/Interstone Partnership II, L.P.
10(g)* Interstate Hotels Company Equity Incentive Plan
10(h)* Interstate Hotels Company Stock Purchase Plan
10(i)* Interstate Hotels Company Management Bonus Plan
</TABLE>
<PAGE> 23
<TABLE>
<S> <C>
10(j)* Interstate Hotels Company Stock Option Plan for Non-Employee Directors
10(k)* Employment Agreement between the Company and Milton Fine
10(l)* Employment Agreement between the Company and W. Thomas Parrington, Jr.
10(m)* Employment Agreement between the Company and J. William Richardson
10(n)* Employment Agreement between the Company and Robert L. Froman
10(o)* Employment Agreement between the Company and Marvin I. Droz
10(p)* Form of Severance Agreement between the Company and each of Milton Fine,
W. Thomas Parrington, Jr., J. William Richardson, Robert L. Froman and Marvin I. Droz
10(q)* Form of Indemnification Agreement between the Company and each of its Directors
10(r)* Interstate Hotels Company Supplemental Deferred Compensation Plan
10(s)* Deferred Compensation Agreement between the Company and W. Thomas Parrington, Jr.
10(t)* Deferred Compensation Agreement between the Company and J. William Richardson
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
</TABLE>
- -------------
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 333-3958) and incorporated herein by reference.
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERSTATE HOTELS COMPANY
Date: August 13, 1996 By: /s/ J.William Richardson
------------------------------
J. William Richardson
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C>
2 Formation Agreement, dated June 25, 1996, among the Company and the parties
identified on the signature page thereof
3(a) Amended and Restated Articles of Incorporation of the Company
3(b) Amended and Restated By-Laws of the Company
4 Credit Agreement, dated June 25, 1996, among Interstate Hotels Corporation, Credit
Lyonnais and the other parties signatory thereto
10(a) Stockholders Agreement, dated June 25, 1996, among the Company, Blackstone Real
Estate Advisors L.P. and the shareholders named therein
10(b) Registration Rights and Shareholders Agreement, dated June 25, 1996, among the
Company and the shareholders named therein
10(c) First Amendment to Interstone Three Partners I L.P. Limited Partnership Agreement,
dated June 25, 1996, among BJS Interstone Management Associates, IHC/Interstone
Corporation, Blackstone Real Estate Partners I L.P. and IHC/Interstone
Partnership II, L.P.
10(d) First Amendment to Interstone Three Partners II L.P. Limited Partnership Agreement
among BJS Interstone Management Associates, IHC/Interstone Corporation, Blackstone
Real Estate Partners II L.P. and IHC/Interstone Partnership II, L.P.
10(e) First Amendment to Interstone Three Partners III L.P. Limited Partnership Agreement,
dated June 25, 1996, among BJS Interstone Management Associates, IHC/Interstone
Corporation, Blackstone Real Estate Partners III L.P., Blackstone RE Offshore Capital
Partners L.P. and IHC/Interstone Partnership II, L.P.
10(f) First Amendment to Interstone Three Partners IV L.P. Limited Partnership Agreement,
dated June 25, 1996, among BJS Interstone Management Associates, IHC/Interstone
Corporation, Blackstone Real Estate Partners IV L.P., Blackstone RE Capital
Partners II L.P. and IHC/Interstone Partnership II, L.P.
10(g)* Interstate Hotels Company Equity Incentive Plan
10(h)* Interstate Hotels Company Stock Purchase Plan
10(i)* Interstate Hotels Company Management Bonus Plan
10(j)* Interstate Hotels Company Stock Option Plan for Non-Employee Directors
10(k)* Employment Agreement between the Company and Milton Fine
10(l)* Employment Agreement between the Company and W. Thomas Parrington, Jr.
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<S> <C>
10(m)* Employment Agreement between the Company and J. William Richardson
10(n)* Employment Agreement between the Company and Robert L. Froman
10(o)* Employment Agreement between the Company and Marvin I. Droz
10(p)* Form of Severance Agreement between the Company and each of Milton Fine,
W. Thomas Parrington, Jr., J. William Richardson, Robert L. Froman and
Marvin I. Droz
10(q)* Form of Indemnification Agreement between the Company and each of its Directors
10(r)* Interstate Hotels Company Supplemental Deferred Compensation Plan
10(s)* Deferred Compensation Agreement between the Company and W. Thomas Parrington, Jr.
10(t)* Deferred Compensation Agreement between the Company and J. William Richardson
27 Financial Data Schedule
</TABLE>
- --------------
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 333-3958) and incorporated herein by reference.
<PAGE> 1
EXHIBIT 2
================================================================================
FORMATION AGREEMENT
among
INTERSTATE HOTELS COMPANY,
INTERSTATE HOTELS CORPORATION
and
THE CONTRIBUTORS NAMED HEREIN
As of June 25, 1996
================================================================================
<PAGE> 2
FORMATION AGREEMENT
FORMATION AGREEMENT (this "Agreement"), made as of the 25th
day of June, 1996 by and among each of the Contributors (as defined below),
INTERSTATE HOTELS COMPANY, a Pennsylvania corporation ("Interstate"), and
INTERSTATE HOTELS CORPORATION, a Pennsylvania corporation ("IHC").
BACKGROUND
A. Interstate contemplates the consummation of an
initial public offering of its common stock.
B. The persons listed on SCHEDULE A attached hereto and
made a part hereof (collectively, "Contributors") own interests in the
corporations and partnerships listed opposite their respective names on
Schedule A attached hereto (collectively, the "Assets").
C. The Contributors desire to contribute the Assets to
Interstate in exchange for shares of Interstate's common stock, on the terms
and conditions hereinafter set forth.
D. The Contributors and Interstate intend that the
contribution of the Assets and the issuance of the common stock hereunder, will
be treated as a tax-free transfer within the meaning of Section 351(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
E. Interstate desires to contribute certain of the
Assets to IHC.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements set forth herein, and other good and
valuable consideration, the receipt of which is hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
1. CONTRIBUTIONS OF ASSETS. On the Closing Date (as
hereinafter defined) and pursuant to the terms and subject to the conditions
set forth in this Agreement, the Contributors shall contribute to Interstate
and Interstate shall accept from the Contributors all of the Contributors'
right, title and interest in and to the Assets, free and clear of any and all
Encumbrances (as hereinafter defined) other than Permitted Exceptions (as
hereinafter defined). Immediately following the foregoing contribution,
Interstate shall contribute the Assets described on SCHEDULE B attached hereto
and made a part hereof to IHC. In addition, on the Closing Date IHC shall
assign its 1% general partner interest (the "GP Interest") in IHC/Pittsburgh
Partnership, L.P., a Delaware limited partnership ("IHC/Pittsburgh") to IHC
Member Corporation, a Delaware
<PAGE> 3
corporation ("IHC Member"), who shall be admitted as an additional general
partner of IHC/Pittsburgh.
2. CONSIDERATION. In consideration of the contribution
of the Assets by the Contributors, on the Closing Date, Interstate shall
deliver to the Contributors certificates representing shares of the common
stock, par value $.01 per share, of Interstate (the "Stock") with each
Contributor receiving the number of shares of Stock set forth opposite the name
of such Contributor on SCHEDULE A, attached hereto and made a part hereof. The
contribution by Interstate of the Assets described on Schedule B to IHC shall
be treated as a contribution of capital and no additional shares of capital
stock of IHC shall be issued to Interstate. The contribution by IHC of the GP
Interest in IHC/Pittsburgh to IHC Member shall be treated as a contribution of
capital and no additional shares of capital stock of IHC Member shall be issued
to IHC. Interstate, IHC and IHC Member intend that the contribution by
Interstate of the Assets described on Schedule B to IHC and the contribution by
IHC of the GP Interest in IHC/Pittsburgh to IHC Member will be treated as
tax-free transfers within the meaning of Section 351 of the Code.
3. THE CLOSING. (a) The closing of the contribution of
the Assets (the "Closing") shall take place on the date of closing of
Interstate's initial public offering (the "Closing Date"), or such other date
as the parties may mutually determine.
(b) The Closing shall be held on the Closing Date at 9:00
A.M. at the offices of Jones, Day, Reavis & Pogue, 500 Grant Street, One Mellon
Bank Center, Pittsburgh, Pennsylvania 15219, or at such other location agreed
upon by the parties hereto.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
CONTRIBUTORS. Each Contributor hereby represents, warrants and covenants to
Interstate as of the date hereof and as of the Closing Date, as to itself and
its own actions, severally but not jointly, as follows:
4.1 FORMATION; EXISTENCE. Each Contributor that
is a limited liability company, general or limited partnership
or corporation, as applicable, is duly formed, validly
existing and in good standing under the laws of the
jurisdiction of its organization.
4.2 POWER AND AUTHORITY. It has all requisite
power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance
of this Agreement and the consummation of the transactions
provided for in this Agreement have been duly authorized by
all necessary action on its part. This Agreement has been
duly executed and delivered by it and constitutes its legal,
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<PAGE> 4
valid and binding obligation, enforceable against it in
accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights and by
general principles of equity (whether applied in a proceeding
at law or in equity).
4.3 NO CONSENTS. No consent, license, approval,
order, permit or authorization of, or registration, filing or
declaration with, any court, administrative agency or
commission or other governmental authority or instrumentality,
domestic or foreign, or any other persons is required to be
obtained or made in connection with the execution, delivery
and performance of this Agreement or any of the transactions
required or contemplated hereby other than such as have been
made or obtained prior to the date hereof or will be made or
obtained prior to the Closing Date.
4.4 NO CONFLICTS. The execution, delivery and
performance of this Agreement, and the contribution of the
Assets, will not (a) conflict with or result in any violation
of its organization documents, (b) conflict with or result in
any violation of any provision of any bond, note or other
instrument of indebtedness, indenture, mortgage, deed of
trust, loan agreement, lease or other material agreement or
instrument to which it is a party in its individual capacity
or by which its assets are bound, or (c) violate any existing
term or provision of any order, writ, judgment, injunction,
decree, statute, law, rule or regulation applicable to it or
its assets or properties.
4.5 ASSETS. It is the owner and holder of good
and marketable title of a portion of the Assets and such
Assets are held by it free and clear of any lien, pledge,
option, charge, security interest, encumbrance, title
retention agreement, right of first refusal, adverse claim or
restriction (collectively, "Encumbrances") other than the
liens, encumbrances and exceptions set forth on EXHIBIT A
attached hereto and made a part hereof ("Permitted
Exceptions"). Upon contribution of such Assets by it to
Interstate and upon the issuance of the Stock to the
Contributors, Interstate will receive good and marketable
title to such Assets free and clear of any Encumbrances other
than Permitted Exceptions.
4.6 ACTION BY CONTRIBUTORS. (a) It has not
caused any of the entities whose ownership interests comprise
the Assets (i) to sell or otherwise dispose (or enter into a
contract to sell or dispose) of any of their material assets,
(ii) to place a voluntary lien
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<PAGE> 5
on any of their material assets, or (iii) to enter into,
modify or terminate any of their material contracts, material
leases or other material commitments.
(b) From the date hereof through the Closing
Date, it shall not, without the prior approval of Interstate,
cause any such entities (i) to sell or otherwise dispose of
any of their material assets, (ii) to place a voluntary lien
on any of their material assets, or (iii) to enter into,
modify or terminate any material contracts, material leases or
other material commitments, except, in the case of clause
(iii), in the ordinary course of business.
4.7 GOOD FAITH EFFORTS. It shall use its good
faith efforts to consummate the Closing and fulfill each of
its obligations hereunder.
4.8 INVESTMENT REPRESENTATIONS. It (a) has
received no general solicitation or general advertisement
concerning the Stock, (b) is a sophisticated investor that has
prior experience with investments of a similar nature, and has
sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks
of an investment in the Stock, (c) is accepting the Stock for
investment purposes only, for its own account and not with a
view to or in connection with any resale or distribution
thereof, (d) has no reason to anticipate any change in its
circumstances, financial or otherwise, which may cause or
require resale or distribution by it of all or any part of the
Stock, and (e) confirms that all requested information
pertaining to Interstate and the Stock and Interstate's
business operations has been made available to it, and it also
confirms that it has been given an opportunity to make any
further inquiries of Interstate that it desires to make. It
understands and agrees that (i) the Stock will be "restricted
securities" within the meaning of the Securities Act of 1933,
as amended ("Securities Act"), (ii) in the absence of a
registration statement filed in accordance with the Securities
Act and applicable state securities laws, or an exemption from
the registration requirements of such securities laws, such
Stock may not be offered or sold to any person and (iii) each
certificate representing the Stock will bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER THE APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF
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<PAGE> 6
EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND THE
APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION."
5. REPRESENTATIONS WARRANTIES AND COVENANTS OF
INTERSTATE. Interstate hereby represents, warrants and covenants to the
Contributors as of the date hereof and as of the Closing Date as follows:
5.1 FORMATION; EXISTENCE. Interstate is a
corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania.
5.2 POWER; AUTHORITY. Interstate has all
requisite power and authority to enter into this Agreement, to
perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement, the acquisition of the Assets
and the consummation of the transactions provided for herein
have been duly authorized by all necessary action on the part
of Interstate. This Agreement has been duly executed and
delivered by Interstate and constitutes the legal, valid and
binding obligation of Interstate enforceable against
Interstate in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors'
rights and by general principles of equity (whether applied in
a proceeding at law or in equity).
5.3 NO CONSENTS. No consent, license, approval,
order, permit or authorization of, or registration, filing or
declaration with, any court, administrative agency or
commission or other governmental authority or instrumentality,
domestic or foreign, or any other persons is required to be
obtained or made in connection with the execution, delivery
and performance of this Agreement or any of the transactions
required or contemplated hereby other than such as have been
made or obtained or will be made or obtained prior to the
Closing Date.
5.4 NO CONFLICTS. The execution, delivery and
performance of the terms and provisions of this Agreement, and
the acquisition of the Assets, will not (a) conflict with or
result in any violation of its organizational documents, (b)
conflict with or result in any violation of any provision of
any bond, note or other instrument of indebtedness, indenture,
mortgage, deed of trust, loan agreement, lease or other
material agreement or instrument to which it is a party in its
individual capacity, or (c) violate any existing term
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<PAGE> 7
or provision of any order, writ, judgment, injunction, decree,
statute, law, rule or regulation applicable to it or its
assets or properties.
5.5 EXAMINATION. Before entering into this
Agreement, Interstate has made such examination of the Assets
and all other matters affecting or relating to the
transactions contemplated hereunder as Interstate has deemed
necessary. In entering into this Agreement, Interstate has
not been induced by and has not relied upon any written or
oral representations, warranties or statements, whether
express or implied, made by any Contributor, any partner or
affiliate of any Contributor, or any agent, employee, or other
representative of any of the foregoing or by any broker or any
other person representing or purporting to represent any
Contributor, with respect to the Assets or any other matter
affecting or relating to the transactions contemplated hereby,
other than those expressly set forth in this Agreement.
5.6 GOOD FAITH EFFORTS. Interstate shall use its
good faith efforts to consummate the Closing and fulfill each
of its obligations hereunder.
5.7 CONTRIBUTORS. Although the Contributors have
jointly executed this Agreement for administrative efficiency,
Interstate hereby acknowledges and agrees that each
Contributor shall be liable hereunder only for the
representations, warranties and covenants made by such
Contributor with respect to such Contributor and the Assets
owned by such Contributor, and no Contributor shall be liable
for any representations, warranties or covenants made by any
of the other Contributors hereunder.
5.8 INVESTMENT REPRESENTATIONS. Interstate (a)
has received no general solicitation or general advertisement
concerning the Assets, (b) is a sophisticated investor that
has prior experience with investments of a similar nature, and
has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits
and risks of investment in the Assets, (c) is accepting the
Assets for investment purposes only, for its own account and
not with a view to or in connection with any resale or
distribution thereof, (d) has no reason to anticipate any
change in its circumstances, financial or otherwise, which may
cause or require resale or distribution by it of all or any
part of the Assets, and (e) confirms that all requested
information pertaining to the Assets and their business
operations has been made available to Interstate, and
Interstate also confirms that it has been given an opportunity
to
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<PAGE> 8
make any further inquiries of the Assets and the Contributors
that it desires to make. Interstate understands and agrees
that (i) the Assets will be "restricted securities" within the
meaning of the Securities Act, (ii) in the absence of a
registration statement filed in accordance with the Securities
Act and applicable state securities laws, or an exemption from
the registration requirements of such securities laws, such
Assets may not be offered or sold to any person and (iii) each
certificate representing such Assets will bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER THE APPLICABLE SECURITIES LAWS
OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE
SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
REQUIREMENTS OF SUCH ACT AND THE APPLICABLE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION."
6. CONDITIONS PRECEDENT TO CLOSING.
6.1 CONTRIBUTORS' OBLIGATION. The obligation of
the Contributors to consummate the transfer of the Assets to
Interstate on the Closing Date is subject to the satisfaction
(or waiver by the Contributors) as of the Closing of the
following conditions:
(a) Each of the representations and warranties
made by Interstate in this Agreement shall be true and correct
in all material respects when made and on and as of the
Closing Date as though such representations and warranties
were made on and as of the Closing Date, and Interstate shall
have performed or complied in all material respects with each
obligation and covenant required by this Agreement to be
performed or complied with by Interstate on or before the
Closing.
(b) The Contributors shall have received duly
executed counterparts of each of the following documents,
dated as of the Closing Date:
(i) Assignment and Assumption Agreement
for each of the Assets representing interests in
partnerships;
(ii) amendments to the partnership agreement
(and the execution thereof by Interstate) and any
certificate of limited partnership for each of the
Assets representing partnership interests which
amendments shall reflect the assignment of
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<PAGE> 9
partnership interests and admission of Interstate as
an additional or substitute partner;
(iii) any forms or affidavits required to be
filed with respect to any applicable transfer, stamp,
transfer gains or other similar taxes applicable to
the transfers;
(iv) the Registration Rights Agreement
attached hereto as EXHIBIT B and made a part hereof;
and
(v) such other documents reasonably
required by the Contributors to transfer the Assets
hereunder.
(c) No order or injunction of any court or
administrative agency of competent jurisdiction nor any
statute, rule, regulation or executive order promulgated by
any governmental authority of competent jurisdiction shall be
in effect as of the Closing which restrains or prohibits the
transfer of the applicable Assets or the consummation of any
other transaction contemplated hereby.
(d) No action, suit or other proceeding shall be
pending which shall have been brought by any person or entity
(other than the parties hereto and their affiliates) (i) to
restrain, prohibit or change in any material respect the
contribution and acceptance of the Assets or the consummation
of any other transaction contemplated hereby or (ii) seeking
material damages with respect to such contribution and
acceptance or any other transaction contemplated hereby.
(e) The Contributors shall have received the
Stock of Interstate, in accordance with Section 2 above.
(f) The Contributors shall have obtained all
necessary consents to the transfer of the Assets from any
ground lessors, lenders, franchisors, partners and all other
third parties with approval rights. The Contributors shall
cooperate with Interstate in obtaining any necessary consents
(including reasonably timely execution of any applications or
similar documents).
(g) Interstate shall have paid (or reimbursed the
Contributors, as the case may be) all of the reasonable costs
and expenses incurred by the Contributors and Interstate in
connection with the consummation of the transactions
contemplated hereby, including without limitation any sales,
real estate transfer, stamp,
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<PAGE> 10
recordation, or other similar taxes applicable to or arising
out of the contribution of the Assets.
6.2 INTERSTATE'S OBLIGATION. The obligation of
Interstate to issue the Stock is subject to the satisfaction
(or waiver by Interstate) as of the Closing of the following
conditions:
(a) Each of the representations and warranties
made by the Contributors in this Agreement shall be true and
correct in all material respects when made and on and as of
the Closing Date as though such representations and warranties
were made on and as of Closing Date, and the Contributors
shall have performed or complied in all material respects with
each obligation and covenant required by this Agreement to be
performed or complied with by the Contributors on or before
the Closing.
(b) Interstate shall have received duly executed
counterparts of each of the following documents, dated the
Closing Date:
(i) Assignment and Assumption Agreement
for each of the Assets representing interests in
partnerships;
(ii) amendments to the partnership agreement
and certificate of limited partnership for each of
the Assets representing partnership interests which
amendments shall reflect the assignment of
partnership interests and admission of Interstate as
an additional or substitute partner;
(iii) stock powers reflecting the assignment
of the Assets representing interests in corporations;
(iv) The Stockholders Agreement attached
hereto as EXHIBIT C;
(v) The Registration Rights and
Shareholders Agreement attached hereto as EXHIBIT B
and made a part hereof;
(vi) any forms or affidavits required to
be filed with respect to any applicable transfer,
stamp, transfer gains or other similar taxes
applicable to the transfers; and
(vii) such other documents reasonably
required by Interstate to transfer the Assets
hereunder.
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<PAGE> 11
(c) No order or injunction of any court or
administrative agency of competent jurisdiction nor any
statute, rule, regulation or executive order promulgated by
any governmental authority of competent jurisdiction shall be
in effect as of the Closing which restrains or prohibits the
transfer of the applicable Assets or the consummation of any
other transaction contemplated hereby.
(d) No action, suit or other proceeding shall be
pending which shall have been brought by any person or entity
(other than the parties hereto and their affiliates) (i) to
restrain, prohibit or change in any material respect the
contribution and acceptance of the applicable Assets or the
consummation of any other transaction contemplated hereby or
(ii) seeking material damages with respect to such
contribution and acceptance or any other transaction
contemplated hereby.
7. FURTHER ASSURANCES. From time to time, as
and when requested by any party hereto, the other party shall
execute and deliver, or cause to be executed and delivered,
all such documents and instruments and shall take, or cause to
be taken, all such further or other actions as such other
party may reasonably deem necessary or desirable to consummate
the transactions contemplated by this Agreement.
8. SURVIVAL OF REPRESENTATIONS. The
representations and warranties contained in Section 4.5 of
this Agreement shall survive the Closing without limitation as
to time subject to applicable statutes of limitation. The
remainder of the representations and warranties contained in
this Agreement shall survive the Closing and shall terminate
on the first anniversary of the Closing Date.
9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY THE CONTRIBUTORS. Each
Contributor shall indemnify and hold Interstate, its
shareholders, officers, directors, employees, agents and
affiliates harmless from and against any and all costs, fees,
expenses, damages, deficiencies, interest and penalties
(including, without limitation, reasonable attorneys' fees and
disbursements) suffered or incurred by any such indemnified
party in connection with any and all losses, liabilities,
claims, damages and expenses ("Losses") arising out of, or in
any way relating to, (i) any breach of any representation or
warranty of such Contributor contained in this Agreement or in
any Schedule, certificate, instrument
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<PAGE> 12
or other document delivered pursuant hereto, and (ii) any
breach of any covenant of such Contributor contained in this
Agreement and (iii) any act or omission by such Contributor
arising out of or related to the Assets occurring on or prior
to the Closing, such obligation to survive the Closing subject
to Section 9.3.
9.2 INDEMNIFICATION BY INTERSTATE. Interstate
shall indemnify and hold the Contributors, their partners,
members, shareholders, officers, directors, employees, agents
and affiliates harmless from any and all Losses arising out
of, or in any way relating to, (i) any breach of any
representation or warranty by Interstate contained in this
Agreement or in any Schedule, certificate, instrument or other
document delivered pursuant hereto or in connection herewith,
(ii) any breach of any covenant of Interstate contained in
this Agreement, and (iii) any act or omission arising out of
or related to the Assets occurring after the Closing, such
obligation to survive the Closing or termination of this
Agreement subject to Section 9.3.
9.3 TERMINATION OF INDEMNIFICATION. (a) The
obligations of the Contributors under Section 9.1 shall
terminate on the first anniversary of the Closing Date (or the
first anniversary of the termination of this Agreement) except
with respect to any claims expressly asserted prior to such
termination.
(b) The obligations of Interstate under Section
9.2 shall terminate on the first anniversary of the Closing
Date (or the first anniversary of the termination of this
Agreement) except with respect to any claims expressly
asserted prior to such termination.
10. TAXES; PRORATIONS. (a) All sales and use, stamp,
transfer, documentary or other ad valorem taxes imposed by any governmental
taxing authority or any other taxing authority (excluding, however, taxes on
capital gains or income) as a result of the contribution of the Assets
hereunder shall be paid by Interstate.
(b) Any and all distributions and allocations made with
respect to the Assets for the year in which the contribution contemplated
hereunder occurs shall be prorated between Interstate and the Contributor based
upon the number of days in such year during which the respective Assets were
held by each party.
11. INDEMNIFICATION OF FINE. In consideration of Fine
(as hereinafter defined) granting to IHC the rights described in Sections 12.1
and 12.2 and other good and valuable consideration,
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<PAGE> 13
IHC shall indemnify and hold Milton Fine and his heirs, personal and legal
representatives and affiliates (collectively, "Fine Indemnities") harmless from
and against all Losses, including without limitation, any Losses as incurred to
the extent of the aggregate amount paid in investigation, preparation, defense
or settlement of any litigation or proceeding, suffered or incurred by any of
the Fine Indemnities, directly or indirectly, arising out of, or in any way
related to the action styled as STANLEY H. TREZEVANT, JR., V. INTERSTATE HOTELS
CORPORATION, ET AL., United States District Court for the Western District of
Tennessee, Docket Number 94-2709 GBRE, or any related action or the facts or
circumstances giving rise to any such action. The provisions of this section
shall survive Closing.
12. RIGHTS OF FIRST REFUSAL/RIGHTS OF FIRST OPPORTUNITY.
Milton Fine, individually and as trustee under that certain Second Amended and
Restated Trust Agreement for the Milton Fine Revocable Trust dated November 11,
1994 for the benefit of Milton Fine (collectively, "Fine") owns direct and
indirect interests (collectively, "Interests") in the entities set forth on
SCHEDULE C attached hereto (collectively, "Fine Partnerships"). In
consideration of the agreement by IHC to provide the services to Fine described
in Section 12.3 below, Fine shall grant to IHC the rights described in Sections
12.1 and 12.2 below.
12.1 RIGHTS OF FIRST REFUSAL. If Fine shall
receive a bona fide cash offer from a third party to purchase
any one or more of the Interests ("Offered Interests") in the
Fine Partnerships and Fine desires to sell the Offered
Interests pursuant to such offer, Fine shall offer to sell all
of the Offered Interests to IHC, or its designee, for the
price set forth in, and in accordance with the other terms and
conditions of, the bona fide offer by the third party. Fine
shall give to IHC written notice ("Offer Notice") of such
offer stating the Offered Interests, the name and address of
the proposed purchaser (including the names and addresses of
the owners of the equity interests in such prospective
purchaser), the price offered for the Offered Interests and
the other terms and conditions of the offer and shall attach a
photocopy of the bona fide offer by such third party to the
Offer Notice. Fine shall also provide to IHC such other
information regarding the proposed sale as is reasonably
requested by IHC and reasonably available to Fine. Within
fifteen (15) days after receipt of the Offer Notice, IHC or
its designee may accept the offer of Fine to purchase all (but
not less than all) of the Offered Interests and shall provide
Fine with written notice stating whether IHC or its designee
accepts or rejects such offer. If the offer is accepted, IHC
shall deposit in escrow with a bank or other financial
institution selected by Fine as escrowee an earnest
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<PAGE> 14
money deposit in cash in an amount equal to 10% of the
purchase price and the parties shall promptly enter into an
agreement of sale consistent with the terms and conditions in
the Offer Notice. A failure by IHC or its designee to notify
Fine of its acceptance of the offer within such fifteen (15)
day period shall constitute a waiver of its rights hereunder.
If IHC fails to close such purchase, then Fine may retain the
escrow deposit and, in addition, may exercise any other rights
or remedies available to him at law or in equity. All
closings of the purchase by IHC under this Section shall be
held at IHC's principal office and shall take place on the
date mutually agreed by IHC and Fine but not later than thirty
(30) days after the date of the notice to Fine exercising the
purchase option. All transfer, stamp and recording taxes
imposed on the transfer and all other closing costs shall be
paid by IHC. If IHC or its designee does not accept the offer
to purchase all of the Offered Interests subject to the Offer
Notice, then at any time within one hundred eighty (180) days
after IHC or its designee notifies Fine of its rejection of
the offer (or is deemed to have rejected the offer pursuant to
the terms of this Section), Fine may sell the Offered
Interests to the third party offeror at a price not less than
90% of the price set forth in the Offer Notice and on other
terms and conditions no less favorable to Fine than those
stated in the Offer Notice. In determining the application of
the 90% as stated herein, only the stated purchase price shall
be relevant and no adjustments thereto shall be made in
respect of the other terms or conditions of a proposed sale.
If such transfer to such third party is not made within such
one hundred eighty (180) day period, Fine shall not transfer
the Offered Interests except by again complying with this
Section.
12.2 RIGHT OF FIRST OFFER. In the event Fine
desires to market or actively solicit the sale of any of the
Interests ("Sale Interests") to a third party, prior to
offering such Sale Interests for sale, Fine shall give IHC
written notice ("Sale Notice") of his intent to sell or market
such Sale Interests, stating Fine's intended cash purchase
price and all other terms and conditions of such proposed sale
together with all other information with respect thereto which
is reasonably required by IHC and reasonably available to
Fine. Within fifteen (15) days of its receipt of such Sale
Notice, IHC, or its designee, may elect, by providing written
notice to Fine, to purchase all (but not less than all) of the
Sale Interests at the same price and upon the same terms and
conditions as those set forth in the Sale Notice. A failure
by IHC or its designee to notify Fine of its acceptance of the
offer
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<PAGE> 15
within such fifteen (15) day period shall constitute a waiver
of its rights hereunder. In the event that IHC or its
designee shall have elected to purchase all of the Sale
Interests in accordance with the provisions of the preceding
sentence, IHC shall deposit in escrow with a bank or other
financial institution selected by Fine as escrowee an earnest
money deposit in cash in an amount equal to 10% of the
purchase price and Fine and IHC (or its designee as the case
may be) shall promptly thereafter enter into an agreement for
sale at the price and on the same terms and conditions as set
forth in the Sale Notice. If IHC fails to close such
purchase, then Fine may retain the escrow deposit and, in
addition, may exercise any other rights or remedies available
to him at law or in equity. All closings of the purchase by
IHC under this Section shall be held at IHC's principal office
and shall take place on the date mutually agreed by IHC and
Fine but not later than thirty (30) days after the date of the
notice to Fine exercising the purchase option. All transfer,
stamp and recording taxes imposed on the transfer and all
other closing costs shall be paid by IHC. If IHC elects not to
purchase all of the Sale Interests, then at any time within
one hundred eight (180) days from the date of Fine's Sale
Notice to IHC, Fine may sell the Sale Interests for a purchase
price which is at least 90% of the offer price contained in
the Sale Notice or a greater price and upon other terms and
conditions no less favorable to Fine than those set forth in
the Sale Notice. In determining the application of the 90% as
stated herein, only the stated purchase price shall be
relevant and no adjustments thereto shall be made in respect
of the other terms or conditions of a proposed sale. Should
Fine desire to sell such Sale Interests at a price which is
less than 90% of the original offer price or upon terms which
materially differ from those set forth in the Sale Notice to
IHC, or should the one hundred eight (180) day time period
expire, Fine shall again comply with the requirements set
forth in this Section 12.2 prior to marketing or soliciting
for sale of any such Interests.
12.3 SERVICES. In consideration for Fine granting
to IHC the above described rights, IHC shall continue, at no
cost or expense to Fine, to provide to Fine various
administrative, legal, support and/or accounting services
related to his Interests in the Fine Partnerships so long as
he owns such Interests; provided, that IHC's provision of such
services is limited by the following: (a) these services
shall be consistent with past practices as to the type, scope
and extent of such services; (b) IHC shall not be obligated to
provide any services which it does not otherwise provide nor
will IHC be required to hire
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<PAGE> 16
personnel, acquire equipment or other assets or otherwise make
any capital expenditures solely for the purpose of providing
such services; and (c) the provision of such services shall
not unreasonably detract from the normal performance of duties
of the persons providing such services.
13. DEFAULT. In the event any of the parties hereto
shall default in the performance of its obligations hereunder, the
nondefaulting parties shall be entitled to terminate this Agreement with
respect to such party and/or pursue any and all remedies available to it at law
or in equity, including, without limitation, an action for specific
performance.
14. BROKERS. (a) Each Contributor represents and
warrants to Interstate that it has dealt with no broker, salesman, finder or
consultant with respect to this Agreement or the transactions contemplated
hereby. Each Contributor agrees to indemnify, protect, defend and hold
Interstate harmless from and against all claims, losses, damages, liabilities,
costs, expenses (including reasonable attorneys' fees and disbursements) and
charges resulting from such Contributor's breach of the foregoing
representation in this subsection (a). The provisions of this subsection (a)
shall survive the Closing and any termination of this Agreement.
(b) Interstate represents and warrants to the Contributors
that it has dealt with no broker, salesman, finder or consultant with respect
to this Agreement or the transactions contemplated hereby. Interstate agrees
to indemnify, protect, defend and hold the Contributors harmless from and
against all claims, losses, damages, liabilities, costs, expenses (including
reasonable attorneys' fees and disbursements) and charges resulting from
Interstate's breach of the foregoing representations in this subsection (b).
The provisions of this subsection (b) shall survive the Closing and any
termination of this Agreement.
15. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES.
The stipulations, terms, covenants and agreements contained in this Agreement
shall inure to the benefit of, and shall be binding upon, the parties hereto
and their respective permitted successors and assigns (including any successor
entity after a public offering of stock, merger, consolidation, purchase or
other similar transaction involving a party here to) and nothing herein
expressed or implied shall give or be construed to give to any person or
entity, other than the parties hereto and such assigns, any legal or equitable
rights hereunder.
16. ASSIGNMENT. This Agreement may not be assigned by
either party hereto without the consent of the other party hereto, except to an
entity under the control of, controlling or under common control with the
assigning party, provided that in
- 15 -
<PAGE> 17
each case, the assigning party will continue to remain primarily liable under
this Agreement notwithstanding any such assignment. Interstate may designate
parties to which the Assets will be assigned at the Closing, provided that
Interstate will continue to remain primarily liable under this Agreement
notwithstanding any such designation.
17. Notices. All notices, demands or requests made
pursuant to, under or by virtue of this Agreement must be in writing and shall
be (i) personally delivered, (ii) delivered by express mail, Federal Express or
other comparable overnight courier service, (iii) telecopied or (iv) mailed to
the party to which the notice, demand or request is being made by certified or
registered mail, postage prepaid, return receipt requested, as follows:
(a) To any Contributor:
to the address set forth opposite such
Contributor's name on the signature
pages hereto.
(b) To Interstate:
c/o Interstate Hotels Corporation
Foster Plaza X
680 Andersen Drive
Pittsburgh, Pennsylvania 15220
Attention: Mr. W. Thomas Parrington, Jr.
Facsimile: 412-937-8053
with copies thereof to:
Interstate Hotels Corporation
Foster Plaza X
680 Andersen Drive
Pittsburgh, Pennsylvania 15220
Attention: Marvin I. Droz, Esq.
Facsimile: 412-937-3116
and
Jones, Day, Reavis & Pogue
2300 Trammel Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: David Lowery, Esq.
Facsimile: 214-969-5100
All notices (i) shall be deemed to have been given on the date that the same
shall have been delivered in accordance with the provisions of this Section and
(ii) may be given either by a party or by such party's attorneys. Any party
may, from time to
- 16 -
<PAGE> 18
time, specify as its address for purposes of this Agreement any other address
upon the giving of 10 days' notice thereof to the other parties.
18. ENTIRE AGREEMENT. This Agreement, along with the
Schedules here to (but specifically excluding any other correspondence between
any of the parties hereto or any of their affiliates), contains all of the
terms agreed upon between the parties hereto with respect to the subject matter
hereof, and all understandings and agreements heretofore had or made among the
parties hereto are merged in this Agreement which alone fully and completely
expresses the agreement of the parties hereto.
19. AMENDMENTS. This Agreement may not be amended,
modified, supplemented or terminated, nor may any of the obligations of the
Contributors or Interstate hereunder be waived, except by written agreement
executed by the party or parties to be charged.
20. NO WAIVER. No waiver by either party of any failure
or refusal by another party to comply with its obligations hereunder shall be
deemed a waiver of any other or subsequent failure or refusal to so comply.
21. GOVERNING LAW. This Agreement shall be governed by,
interpreted under, and construed and enforced in accordance with, the internal
laws of the Commonwealth of Pennsylvania.
22. SUBMISSION TO JURISDICTION. Each of Interstate and
each Contributor irrevocably submits to the jurisdiction of the United States
District Court for the Western District of Pennsylvania for the purposes of any
suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby. Each of Interstate and each Contributor
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party's respective address set forth above shall be
effective service of process for any action, suit or proceeding in Pennsylvania
with respect to any matters to which it had submitted to jurisdiction as set
forth above in the immediately preceding sentence. Each of Interstate and each
Contributor irrevocably and unconditionally waives trial by jury and
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in the United States District Court for the
Western District of Pennsylvania, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
- 17 -
<PAGE> 19
23. SEVERABILITY. If any term or provision of this
Agreement or the application thereof to any person or circumstances shall, to
any extent, be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
24. SECTION HEADINGS. The headings of the various
Sections of this Agreement have been inserted only for purposes of convenience,
are not part of this Agreement and shall not be deemed in any manner to modify,
explain, expand or restrict any of the provisions of this Agreement.
25. COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
26. TERMINATION. Effective as of the Closing, that
certain Shareholder Agreement dated May, 1996 among IHC, the Family
Shareholders named therein and the Employee Shareholders named therein shall
terminate and be of no further force or effect.
[Remainder of page intentionally left blank.]
- 18 -
<PAGE> 20
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the day and year first above written.
INTERSTATE HOTELS COMPANY
By: /s/ W. Thomas Parrington
-------------------------------
Its: President
INTERSTATE HOTELS CORPORATION
By: /s/ W. Thomas Parrington
-------------------------------
Its: President
CONTRIBUTORS:
/s/ Milton Fine
- ----------------------------------
Milton Fine, Trustee, U/A dated 11/17/89,
as amended, FBO Milton Fine
/s/ David J. Fine
- ----------------------------------
David J. Fine, Trustee for the Milton Fine
Grantor Annuity Trust U/A dated
March 31, 1996
/s/ David J. Fine
- ----------------------------------
David J. Fine, Trustee, U/A dated
12/15/89 FBO Sibyl A. Fine King
/s/ David J. Fine
- ----------------------------------
David J. Fine, Trustee, U/A dated
12/15/89 FBO Carolyn Fine Friedman
- 19 -
<PAGE> 21
/s/ David J. Fine
- ----------------------------------
David J. Fine, Trustee, U/A dated
12/15/89 FBO David J. Fine
/s/ W. Thomas Parrington
- ----------------------------------
W. Thomas Parrington
/s/ J. William Richardson
- ----------------------------------
J. William Richardson
/s/ Robert L. Froman
- ----------------------------------
Robert L. Froman
/s/ Marvin I. Droz
- ----------------------------------
Marvin I. Droz
/s/ Marvin I. Droz, POA
- ----------------------------------
Henry L. Ciaffone
/s/ Marvin I. Droz, POA
- ----------------------------------
Kevin P. Kilkeary
/s/ Marvin I. Droz, POA
- ----------------------------------
Jay A. Litt
/s/ Marvin I. Droz, POA
- ----------------------------------
Gregory W. Ade
/s/ Marvin I. Droz, POA
- ----------------------------------
Robert D. Cowan
/s/ Marvin I. Droz, POA
- ----------------------------------
Robert C. Holland
- 20 -
<PAGE> 22
/s/ Marvin I. Droz, POA
- ----------------------------------
Jay Wold
/s/ Milton Fine
- ----------------------------------
Milton Fine
IHC ASSOCIATES LIMITED PARTNERSHIP
By: IHC Associates Corporation,
General Partner
By: /s/ Milton Fine
-------------------------------
Title: President
----------------------------
HILLTOP INVESTMENTS PARTNERSHIP, L.P.
By: /s/ Milton Fine
-------------------------------
Milton Fine, Trustee, U/A dated 11/17/89,
as amended, FBO Milton Fine,
General Partner
INTERPRO, LTD.
By: Interstate Hotels Corporation
#1018, General Partner
By: /s/ Milton Fine
-------------------------------
Title: Chairman
----------------------------
- 21 -
<PAGE> 23
SCHEDULE A
ASSETS TO BE CONTRIBUTED TO INTERSTATE HOTELS COMPANY
AND NUMBER OF SHARES OF INTERSTATE HOTELS COMPANY STOCK
TO BE ISSUED TO CONTRIBUTORS IN RETURN THEREFORE
<TABLE>
<CAPTION>
CONTRIBUTOR COMPANY/INTERESTS TO BE CLASS NO. OF SHARES CERT. SHARES OF INTERSTATE
CONTRIBUTED NO. TO BE ISSUED TO
CONTRIBUTORS FOR
CONTRIBUTION
<S> <C> <C> <C> <C> <C>
1. Milton Fine, Trustee Interstate Hotels Corporation A 538.145 22 4,927,919.99459
FBO Milton Fine A 197.438 26
-------
735.583
B 64,344.56352 43
2. David Fine, Trustee Interstate Hotels Corporation A 179-229/600 23 1,642,520.27054
FBO Sibyl F. King A 65-4876/6000 27
--------------
245-1,166/6000
B 9,824.292 23
B 11,622.015 27
----------
21,446.307
3. David Fine, Trustee Interstate Hotels Corporation A 179-229/600 24 1,642,520.27054
FBO Carolyn F. A 65-4876/6000 28
Friedman --------------
245-1,166/6000
B 9,824.292 24
B 11,622.015 28
----------
21,446.307
4. David Fine, Trustee Interstate Hotels Corporation A 179-229/600 25 1,642,520.27054
FBO David Fine A 65-4876/6000 29
--------------
245-1,166/6000
B 9,824.292 25
B 11,622.015 29
----------
21,446.307
5. David Fine, Trustee Interstate Hotels Corporation B 17,383.000 30 1,315,483.42347
Milton Fine Grantor
Annuity Trust
6. Milton, Fine, Trustee Colony Hotels and Resorts B 0.4 1 0
FBO Milton Fine Company ("Colony")
7. David Fine, Trustee Colony B 1.2 2 0
FBO Sibyl F. King
8. David Fine, Trustee Colony B 1.2 3 0
FBO Carolyn F.
Friedman
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
CONTRIBUTOR COMPANY/INTERESTS TO BE CLASS NO. OF SHARES CERT. SHARES OF INTERSTATE
CONTRIBUTED NO. TO BE ISSUED TO
CONTRIBUTORS FOR
CONTRIBUTION
<S> <C> <C> <C> <C> <C>
9. David Fine, Trustee Colony B 1.2 4 0
FBO David Fine
10. Milton Fine, Trustee IHC Member Corporation A 50.00 1 5,591.8726
FBO Milton Fine ("IHC Member")
B 4,950.00 1
B 2,175.00 5
--------
7,125.00
11. David Fine, Trustee IHC Member A 16-2/3 2 1,299.0452
FBO Sibyl F. King
B 1,650.00 2
12. David Fine, Trustee IHC Member A 16-2/3 3 1,299.0452
FBO Carolyn F. B 1,650.00 3
Friedman
13. David Fine, Trustee IHC Member A 16-2/3 4 1,299.0452
FBO David Fine
B 1,650.00 4
14. Milton Fine, Trustee Northridge Insurance Company B 22.73 10B 3,116.66667
FBO Milton Fine ("Northridge")
15. David Fine, Trustee Northridge B 59.09 11B 8,405.55556
FBO Sibyl F. King
16. David Fine, Trustee Northridge B 59.09 12B 8,405.55556
FBO Carolyn F.
Friedman
17. David Fine, Trustee Northridge B 59.09 13B 8,405.55556
FBO David Fine
18. Milton Fine IHC/Colorado Springs -- 600 1 2,786.0
Corporation
19. Milton Fine IHC/Lisle Corporation -- 600 1 3,517.0
20. Milton Fine IHC/Huntington Corporation -- 600 1 711.0
21. Milton Fine IHC/Houston Corporation -- 600 1 1,970.0
22. Milton Fine IHC/Denver Corporation -- 600 1 1,569.0
23. Milton Fine, Trustee IHC/Conshohocken Corporation -- 600 1 2,151.0
FBO Milton Fine
24. Milton Fine, Trustee IHC/Atlanta Corporation -- 600 1 2,192.0
FBO Milton Fine
25. Milton Fine, Trustee IHC/CG Portfolio Corporation -- 600 1 11,733.0
FBO Milton Fine
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
CONTRIBUTOR COMPANY/INTERESTS TO BE CLASS NO. OF SHARES CERT. SHARES OF INTERSTATE
CONTRIBUTED NO. TO BE ISSUED TO
CONTRIBUTORS FOR
CONTRIBUTION
<S> <C> <C> <C> <C> <C>
26. Milton Fine IHC/Interstone Corporation -- 600 1 59,332.0
27. Milton Fine IHC/Williamsburg Corporation -- 600 1 764.0
28. IHC Associates 6.7673% limited partner -- -- -- 146,599.0
Limited Partnership interest in IHC/Pittsburgh
Partnership, L.P.
6.7673% limited partner
interest in IHC/Interstone
Partnership, L.P.
6.7673% limited partner
interest in IHC/Interstone
Partnership II, L.P.
29. Hilltop Investments 92.2327% limited partner -- -- -- 1,212,574.0
Partnership, L.P. interest in IHC/Interstone
Partnership, L.P.
30. Interpro, Ltd. Special Interest in -- -- -- 251,208.0
IHC/Interstone Partnership, L.P.
31. W. Thomas Parrington, Interstate Hotels Corporation B 2,935.71714 32 264,034.0
Jr. B 584.75372 44
32. J. William Richardson Interstate Hotels Corporation B 1,547.58986 33 143,286.0
B 362.38538 45
33. Robert L. Froman Interstate Hotels Corporation B 1,650.78567 34 155,579.0
B 422.71910 46
34. Marvin I. Droz Interstate Hotels Corporation B 719.13788 35 75,037.0
B 280.06048 47
35. Henry L. Ciaffone Interstate Hotels Corporation B 287.65248 36 26,520.0
B 65.86784 48
36. Kevin P. Kilkeary Interstate Hotels Corporation B 287.65248 42 26,520.0
B 65.86784 49
37. Jay A. Litt Interstate Hotels Corporation B 287.65248 37 26,520.0
B 65.86784 50
38. Robert C. Holland Interstate Hotels Corporation B 143.83292 38 13,260.0
B 32.92732 51
39. Robert D. Cowan Interstate Hotels Corporation B 143.83292 39 13,260.0
B 32.92732 52
40. Jay Wold Interstate Hotels Corporation B 143.83292 40 13,260.0
B 32.92732 53
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
CONTRIBUTOR COMPANY/INTERESTS TO BE CLASS NO. OF SHARES CERT. SHARES OF INTERSTATE
CONTRIBUTED NO. TO BE ISSUED TO
CONTRIBUTORS FOR
CONTRIBUTION
<S> <C> <C> <C> <C> <C>
41. Gregory W. Ade Interstate Hotels Corporation B 143.83292 41 13,260.0
B 32.92732 54
42. Milton Fine HMG Beverage, Inc. Common 100 2 0
Common 300 3
43. Milton Fine, Trustee IHC Capital Corporation Common 100 1 0
FBO Milton Fine
</TABLE>
<PAGE> 27
SCHEDULE B
Assets to be Contributed
to IHC by Interstate
1. Four (4) shares of Class B stock of Colony Hotels and Resorts Company
2. 100 shares of Class A stock and 12,075 shares of Class B stock of IHC
Member Corporation
3. 200 shares of Class B stock of Northridge Insurance Company
4. 600 shares of common stock of IHC/Colorado Springs Corporation
5. 600 shares of common stock of IHC/Lisle Corporation
6. 600 shares of common stock of IHC/Huntington Corporation
7. 600 shares of common stock of IHC/Houston Corporation
8. 600 shares of common stock in IHC/Williamsburg Corporation
9. 600 shares of common stock of IHC/Denver Corporation
10. 600 shares of common stock of IHC/Conshohocken Corporation
11. 600 shares of common stock of IHC/Atlanta Corporation
12. 600 shares of common stock of IHC/CG Portfolio Corporation
13. 6.7673% limited partner interest in IHC/Interstone Partnership II, L.P.
14. 6.7673% limited partner interest in IHC/Pittsburgh Partnership, L.P.
15. 600 shares of common stock in IHC/Interstone Corporation
16. 92.2327% limited partner interest in IHC/Interstone Partnership, L.P.
17. Special Interest in IHC/Interstone Partnership, L.P.
18. 400 shares of common stock in HMG Beverage, Inc.
19. 6.7673% limited partner interest in IHC/Interstone L.P.
<PAGE> 28
EXHIBIT A
Permitted Exceptions
1. All liens, encumbrances and exceptions set forth in the
articles or certificate of incorporation, bylaws, certificate
of limited partnership, partnership agreement or similar
organizational document of the corporations and partnerships
comprising the Assets.
2. All encumbrances and exceptions set forth in the Stockholder
Agreements attached hereto as EXHIBIT C and D, respectively.
3. Liens for taxes not yet due and payable.
4. Any financing liens that the Assets will be subject to after
Closing including, without limitation, liens that will be
imposed at Closing by Credit Lyonnais.
<PAGE> 29
SCHEDULE C
FINE PARTNERSHIPS
<TABLE>
<CAPTION>
OWNER PROPERTY
----- --------
<S> <C>
(1) Interstate Hotels Partners, L.P. (1) Albany Marriott
(2) Cincinnati Hotel Limited Partnership (2) Cincinnati Marriott
(3) Interstate/Fort Lauderdale Associates Ltd. (3) Ft. Lauderdale Marriott North
(4) Swatara Associates (4) Harrisburg Marriott
(5) Interstate Hotels Partners, L.P. (5) Minneapolis Marriott Southwest
(6) Park West Hotels Associates (6) Pittsburgh Airport Marriott
(7) Green Tree Associates (7) Pittsburgh Greentree Marriott
(8) Host/Interstate Partnership, L.P. (8) Pittsburgh Marriott City Center
(9) Providence Realty Associates, L.P. (9) Providence Marriott
(10) The Key West Reach Limited Partnership (10) Marriott's Reach Resort
(11) Maryville Centre Hotel Joint Venture (11) St. Louis Marriott
(12) Interstate Hotels Partners, L.P. (12) San Diego Marriott
(13) Trumbull Hotel Associates Limited Partnership (13) Trumbull Marriott
</TABLE>
<PAGE> 1
EXHIBIT 3(a)
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
INTERSTATE HOTELS COMPANY
Under Section 1915 of the
Pennsylvania Business Corporation Law
The undersigned corporation (the "Corporation"), organized and existing
under the laws of the Commonwealth of Pennsylvania, for the purpose of amending
and restating its Articles of Incorporation, hereby certifies as follows:
1. The name of the Corporation is Interstate Hotels Company, and the address
of its registered office is Foster Plaza 10, 680 Andersen Drive,
Pittsburgh, Pennsylvania 15220, Allegheny County.
2. The Corporation was originally incorporated under the Pennsylvania Business
Corporation Law (the "BCL") on April 19, 1996.
3. These Amended and Restated Articles of Incorporation will be effective upon
filing with the Pennsylvania Department of State.
4. These Amended and Restated Articles of Incorporation were duly adopted in
accordance with the provisions of Section 1914 of the BCL by the unanimous
consent of the Board of Directors of the Corporation and the unanimous
consent of the shareholders of the Corporation.
5. These Amended and Restated Articles of Incorporation supersede the
Corporation's original Articles of Incorporation and all prior amendments
thereto.
6. The Corporation's Articles of Incorporation are hereby amended and restated
to read in their entirety as follows:
<PAGE> 2
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
INTERSTATE HOTELS COMPANY
* * *
FIRST. The name of the Corporation is Interstate Hotels Company.
SECOND. The address of the registered office of the Corporation in the
Commonwealth of Pennsylvania is Foster Plaza 10, 680 Andersen Drive, Pittsburgh,
Pennsylvania 15220.
THIRD. The Corporation is incorporated under the provisions of the
Pennsylvania Business Corporation Law (the "BCL"), and the purpose of the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the BCL.
FOURTH. Section 1. AUTHORIZED CAPITAL STOCK. The total number of shares
of capital stock that the Corporation is authorized to issue is 100,000,000
shares, consisting of 75,000,000 shares of Common Stock, par value $0.01 per
share ("Common Stock"), and 25,000,000 shares of Preferred Stock, par value
$0.01 per share ("Preferred Stock").
Section 2. PREFERRED STOCK. The Preferred Stock may be issued in one or
more series. The Board of Directors of the Corporation (the "Board") has the
authority to authorize the issuance of shares of Preferred Stock in any series
and to fix from time to time before issuance the number of shares to be included
in any such series and the designation, relative powers, preferences, and rights
and qualifications, limitations, or restrictions of all shares of any series.
The authority of the Board with respect to each such series will include,
without limiting the generality or effect of the foregoing, the determination of
any or all of the following:
(a) the number of shares of any series and the designation to
distinguish the shares of such series from the shares of all other series;
(b) the voting powers, if any, and whether such voting powers are full
or limited;
(c) the redemption provisions, if any, applicable to such series,
including the redemption price or prices to be paid;
<PAGE> 3
(d) whether dividends, if any, will be cumulative or noncumulative, the
dividend rate for such series, and the dates and preferences of dividends on
such series;
(e) the rights of such series upon the voluntary or involuntary
dissolution of, or upon any distribution of the assets of, the Corporation;
(f) the provisions, if any, pursuant to which the shares of such series
are convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or classes of
stock, or any other security, of the Corporation or any other corporation or
other entity, and the price or prices or the rates of exchange applicable
thereto;
(g) the right, if any, to subscribe for or to purchase any securities of
the Corporation or any other corporation or other entity;
(h) the provisions, if any, of a sinking fund applicable to such series;
and
(i) any other relative, participating, optional, or other special
powers, preferences, rights, qualifications, limitations, or restrictions
thereof;
all as may be determined from time to time by the Board and set forth in the
resolution or resolutions providing for the issuance of such Preferred Stock
(each, a "Preferred Stock Designation").
Section 3. COMMON STOCK. Except as may otherwise be provided in a
Preferred Stock Designation, the holders of Common Stock will be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders for each
share of Common Stock held of record by such holder as of the record date for
such meeting.
FIFTH. The Corporation will have perpetual existence.
SIXTH. These Amended and Restated Articles of Incorporation will be
effective upon filing with the Pennsylvania Department of State.
SEVENTH. The Board may make, amend, and repeal the Bylaws of the
Corporation ("Bylaws"). Any Bylaw made by the Board under the powers conferred
hereby may be amended or repealed by the Board (except as specified in any such
Bylaw so made or amended) or by the shareholders in the manner provided in the
Bylaws. Notwithstanding the foregoing and anything contained in these Articles
of Incorporation to the contrary, Sections 1.1, 1.3, 1.9, 2.2, 2.3, 2.4, 2.5 and
9.1 and Article VI of the Bylaws may not be amended or repealed by the
shareholders, and no provision inconsistent therewith may be adopted by the
shareholders, without the affirmative vote of the holders of at least 80% of the
Voting Stock, voting together as a single class; provided, however, that if any
such action (other than any direct or indirect amendment
-2-
<PAGE> 4
to Section 1.6 of the Bylaws) is approved by the affirmative vote of the
holders of a majority, but less than 80%, of the Voting Stock (in addition to
any other approvals required by law), such action will become effective one
year after the date of such approval. Notwithstanding anything contained in
these Articles of Incorporation to the contrary, the affirmative vote of the
holders of at least 80% of the Voting Stock, voting together as a single class,
is required to amend or repeal, or to adopt any provision inconsistent with,
this Article Seventh. For the purposes of these Articles of Incorporation,
"Voting Stock" means stock of the Corporation of any class or series entitled
to vote generally in the election of Directors.
EIGHTH. Subject to the rights of the holders of any series of Preferred
Stock:
(a) any action required or permitted to be taken by the shareholders of
the Corporation must be effected at a duly called annual or special meeting
of shareholders of the Corporation and may not be effected by any consent in
writing of such shareholders or other action not taken at a meeting of
shareholders; and
(b) special meetings of shareholders of the Corporation may be called
only by (i) the Chairman of the Board (the "Chairman"), (ii) the Secretary of
the Corporation within 10 calendar days after receipt of the written request
of 80% of the total number, assuming no vacancies, of the Directors of the
Corporation (the "Whole Board"), and (iii) as provided in Section 1.3(c) of
the Bylaws.
At any annual meeting or special meeting of shareholders of the Corporation,
only such business will be conducted or considered as has been brought before
such meeting in the manner provided in the Bylaws; provided, however, that
action taken at a special meeting of shareholders may not include the removal
of Directors other than for cause, the increase or decrease in the number of
Directors or any other action affecting the composition of the Board or any
committee thereof (other than the removal of Directors, but only for cause as
contemplated above). Notwithstanding anything contained in these Articles of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the Voting Stock, voting together as a single class, is required to
amend or repeal, or to adopt any provision inconsistent with, this Article
Eighth; provided, however, that if any proposed amendment or repeal of, or
adoption of a provision inconsistent with, clause (b) of the first sentence of
this Article Eighth is approved by the affirmative vote of the holders of a
majority, but less than 80%, of the Voting Stock, voting together as a single
class, such proposed amendment, repeal, or adoption of an inconsistent
provision will become effective one year after such approval.
NINTH. Section 1. NUMBER, ELECTION, AND TERMS OF DIRECTORS. Subject to
the rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in a Preferred Stock
Designation, (i) the number of the Directors of the Corporation will be fixed
from time to time in the manner provided in
-3-
<PAGE> 5
the Bylaws and (ii) Directors may be elected by the shareholders only at an
annual meeting of shareholders and only in the manner provided in the Bylaws.
Section 2. NOMINATION OF DIRECTOR CANDIDATES. Advance notice of
shareholder nominations for the election of Directors must be given in the
manner provided in the Bylaws.
Section 3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
additional Directors under circumstances specified in a Preferred Stock
Designation, newly created directorships resulting from any increase in the
number of Directors and any vacancies on the Board resulting from death,
resignation, disqualification, removal, or other cause will be filled solely by
the affirmative vote of a majority of the remaining Directors then in office,
even though less than a quorum of the Board, by a sole remaining Director, or,
if there is no remaining Director, by the shareholders. Any Director elected in
accordance with the preceding sentence will hold office for the remainder of the
term of the directorship for which such Director was so elected and until such
Director's successor has been elected and qualified. No decrease in the number
of Directors constituting the Board may shorten the term of any incumbent
Director.
Section 4. REMOVAL. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect additional Directors under circumstances
specified in a Preferred Stock Designation, any Director may be removed from
office (i) by the Board as provided in the Bylaws and (ii) by the shareholders
only for cause and only in the manner provided in this Section 4. At any annual
meeting of the shareholders, the affirmative vote of the holders of at least a
majority of the Voting Stock, voting together as a single class, may remove such
Director or Directors; provided, however, that the Chairman may be removed only
by the affirmative vote of the holders of at least 80% of the Voting Stock,
voting together as a single class.
Section 5. AMENDMENT, REPEAL, ETC. Notwithstanding anything contained in
these Articles of Incorporation to the contrary, the affirmative vote of the
holders of at least 80% of the Voting Stock, voting together as a single class,
is required to amend or repeal, or to adopt any provision inconsistent with,
this Article Ninth; provided, however, that if any such proposed amendment or
repeal or adoption of an inconsistent provision is approved by the affirmative
vote of the holders of a majority, but less than 80%, of the Voting Stock,
voting together as a single class, such proposed amendment, repeal, or adoption
of an inconsistent provision will become effective one year after such approval.
TENTH. To the full extent permitted by the BCL or any other applicable law
currently or hereafter in effect, no Director of the Corporation will be
personally liable to the Corporation or its shareholders for or with respect to
any acts or omissions in the performance of his or her duties as a Director of
the Corporation. Any repeal or modification of this Article Tenth will not
adversely affect any right or protection of a
-4-
<PAGE> 6
Director of the Corporation in respect of any act or omission occurring in
whole or in part prior to such repeal or modification.
ELEVENTH. Each person who is or was or had agreed to become a Director or
officer of the Corporation, and each such person who is or was serving or who
had agreed to serve at the request of the Board or an officer of the Corporation
as an employee or agent of the Corporation or as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
entity, whether for profit or not for profit (including the heirs, executors,
administrators, or estate of such person), will be indemnified by the
Corporation to the full extent permitted by the BCL or any other applicable law
as currently or hereafter in effect. The right of indemnification provided in
this Article Eleventh (a) will not be exclusive of any other rights to which any
person seeking indemnification may otherwise be entitled, including without
limitation pursuant to any contract approved by a majority of the Whole Board
(whether or not the Directors approving such contract are or are to be parties
to such contract or similar contracts) and (b) will be applicable to matters
otherwise within its scope whether or not such matters arose or arise before or
after the adoption of this Article Eleventh. Without limiting the generality or
the effect of the foregoing, the Corporation may adopt Bylaws, or enter into one
or more agreements with any person, which provide for indemnification greater or
otherwise different than that provided in this Article Eleventh or the BCL, and
any such agreement approved by the Whole Board will be a valid and binding
obligation of the Corporation regardless of whether one or more members of the
Board, or all members of the Board, are parties thereto or to similar
agreements. Notwithstanding anything to the contrary in this Article Eleventh,
in the event that the Corporation enters into a contract with any person
expressly providing for indemnification of such person, the provisions of such
contract will exclusively govern the Corporation's obligations in respect of
indemnification for or advancement of fees or disbursements of such person's
counsel or any other professional engaged by such person. Any amendment or
repeal of, or adoption of any provision inconsistent with, this Article Eleventh
will not adversely affect any right or protection existing hereunder, or arising
out of events occurring or circumstances existing, in whole or in part, prior to
such amendment, repeal, or adoption and no such amendment, repeal, or adoption,
will affect the legality, validity, or enforceability of any contract entered
into or right granted prior to the effective date of such amendment, repeal, or
adoption.
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<PAGE> 7
IN WITNESS WHEREOF, Interstate Hotels Company has caused its corporate seal
to be hereunto affixed and these Articles of Amendment to be signed by its
Executive Vice President and attested by its Secretary, this 21st day of June,
1996.
INTERSTATE HOTELS COMPANY
By: /s/ J. William Richardson
----------------------------
Executive Vice President
ATTEST:
/s/ Marvin I. Droz
- ------------------------------
Secretary
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<PAGE> 1
EXHIBIT 3(b)
================================================================================
INTERSTATE HOTELS COMPANY
AMENDED AND RESTATED
BYLAWS
As Adopted and in Effect
as of June 25, 1996
================================================================================
<PAGE> 2
INTERSTATE HOTELS COMPANY
AMENDED AND RESTATED
BYLAWS
<TABLE>
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ARTICLE I - SHAREHOLDERS' MEETINGS
1.1. Time and Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5. Record Date for Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6. Judges of Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7. Quorum; Adjournments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8. Action by Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9. Order of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II - DIRECTORS
2.1. Powers of Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. Number, Election and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3. Vacancies and New Directorships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5. Nominations of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.8. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.10. Action by Written Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.11. Telephone Participation in Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.12. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.13. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.14. Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III - NOTICES
3.1. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV - OFFICERS
4.1. Enumeration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3. Succession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4. Authority and Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
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ARTICLE V - DIRECTORS' LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1. Directors' Personal Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2. Preservation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI - INDEMNIFICATION
6.1. Mandatory Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2. Mandatory Advancement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3. Permissive Indemnification and Advancement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4. Scope of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.6. Contracts and Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.8. Definition of Corporation for this Article VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII - SHARES OF CAPITAL STOCK
7.1. Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.2. Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3. Classes of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.5. Lost, Stolen, Destroyed, or Mutilated Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.6. Record Date for Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.7. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII - GENERAL PROVISIONS
8.1. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.2. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.5. Reliance upon Books, Reports, and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.6. Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.7. Effect of Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.8. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX - AMENDMENTS
9.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.2. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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<PAGE> 4
AMENDED AND RESTATED BYLAWS
OF
INTERSTATE HOTELS COMPANY
___________________________________
ARTICLE I
SHAREHOLDERS' MEETINGS
1.1. TIME AND PLACE OF MEETINGS. All meetings of the shareholders
for the election of Directors or for any other purpose will be held at such
time and place, within or without the Commonwealth of Pennsylvania, as may be
designated by the Board or, in the absence of a designation by the Board, the
Chairman, and stated in the notice of meeting. The Board or the Chairman may
postpone and reschedule any previously scheduled annual or special meeting of
the shareholders.
1.2. ANNUAL MEETING. The annual meeting of the shareholders for
the election of Directors and the transaction of such other business as may
properly be brought before the meeting in accordance with Section 1.9 of these
Bylaws will be held at such time and on such date as may be designated by the
Board or, in the absence of a designation by the Board, the Chairman.
1.3. SPECIAL MEETINGS. (a) Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by law, the Articles
of Incorporation or these Bylaws, may be called only by (i) the Chairman and
(ii) the Secretary within 10 calendar days after receipt of the written request
of 80% of the Whole Board. Any such request by 80% of the Whole Board must be
sent to the Chairman and the Secretary and must state the purpose or purposes
of the proposed meeting. Special meetings of holders of the outstanding
Preferred Stock, if any, may be called in the manner and for the purposes
provided in the applicable Preferred Stock Designation.
(b) Upon the receipt by the Corporation of a written request
executed by the holders of not less than 25% of the outstanding Voting Stock (a
"Meeting Request"), the Board will (i) call a special meeting of the
shareholders for the purpose specified in such Meeting Request (which may not,
however, include the removal of Directors other than for cause, the increase or
decrease in the number of Directors, or any other action affecting the
composition of the Board or any committee thereof) and (ii) fix a record date
for the determination of shareholders entitled to notice of and to vote at such
meeting (which record date will not be later than 60 calendar days after the
date of receipt by the Corporation of the Meeting Request); provided, however,
that no separate special meeting of shareholders requested pursuant to a
Meeting Request will be required to be convened if (A) the Board calls an
annual or special meeting of shareholders to be held not later than 90 calendar
days
<PAGE> 5
after receipt of such Meeting Request and (B) the purposes of such annual or
special meeting include (among any other matters properly brought before the
meeting) the purposes specified in such Meeting Request.
1.4. NOTICE OF MEETINGS. Written notice of every meeting of the
shareholders, stating the place, date, and hour of such meeting and, in the
case of a special meeting, the general nature of the business to be transacted,
will be given by, or at the direction of, the Secretary or any other person
authorized to call such meeting to each shareholder of record entitled to vote
at such meeting, not less than five calendar days prior to the date named for
the meeting, except as otherwise provided herein or by law. When a meeting is
adjourned to another place, date, or time, written notice need not be given of
the adjourned meeting if the place, date, and time thereof are announced at the
meeting at which the adjournment is taken; provided, however, that if the
adjournment is for more than 30 calendar days, or if after the adjournment a
new record date is fixed for the adjourned meeting, written notice of the
place, date, and time of the adjourned meeting must be given in conformity
herewith. At any adjourned meeting, any business may be transacted which might
have been transacted at the original meeting.
1.5. RECORD DATE FOR MEETINGS. The Board may fix a time prior to
the date of any meeting of the shareholders as a record date for the
determination of the shareholders entitled to notice of, or to vote at, the
meeting. Except in the case of an adjourned meeting, the record date will be
not more than 90 calendar days prior to the date of the meeting of
shareholders. Only shareholders of record on the record date will be entitled
to notice of, and to vote at, such meeting notwithstanding any transfer of
shares on the books of the Corporation after the record date. When a
determination of shareholders of record has been made as provided herein for
purposes of a meeting, the determination will apply to any adjournment thereof
unless the Board fixes a new record date of the adjourned meeting. If a record
date is not fixed by the Board, the record date for determining shareholders
entitled to notice of, or to vote at, a meeting of the shareholders will be at
the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day immediately
preceding the day on which the meeting is held.
1.6. JUDGES OF ELECTION. The Board may appoint one or more judges
of election to act as judges of the voting and to determine those entitled to
vote at any meeting of the shareholders, or any adjournment thereof, in advance
of such meeting. The Board may designate one or more persons as alternate
judges of election to replace any judge of election who fails to act. If no
judge of election or alternate is able to act at a meeting of shareholders, the
presiding officer of the meeting may appoint one or more substitute judges of
election.
1.7. QUORUM; ADJOURNMENTS. Except as otherwise provided by law or
in a Preferred Stock Designation, the presence, whether in person or
represented by proxy, of the holders of a majority of the Voting Stock issued
and outstanding and entitled to vote on a particular matter to be acted upon at
a meeting of the shareholders will constitute a quorum for the purposes of
consideration and action on the matter. If, however, such quorum is not
present or represented at any meeting of the shareholders, the shareholders
entitled to vote
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<PAGE> 6
thereat, present in person or represented by proxy, will have the power to
adjourn the meeting; provided, however, that (i) any such meeting at which
Directors are to be elected may be adjourned only from day to day, or for such
longer periods (not to exceed 15 calendar days each) as the shareholders
present in person or by proxy and entitled to vote direct, until the Directors
have been elected, and (ii) those shareholders entitled to vote who attend a
meeting called for the election of Directors that has been previously adjourned
for lack of a quorum, although constituting less than a quorum as fixed in this
Section 1.7, will nevertheless constitute a quorum for the purpose of electing
Directors.
1.8. ACTION BY SHAREHOLDERS. (a) Except as otherwise provided by
law or in the Articles of Incorporation, these Bylaws or a Preferred Stock
Designation, each shareholder will be entitled at every meeting of the
shareholders to one vote for each share of Voting Stock standing in the name of
such shareholder on the books of the Corporation on the record date for the
meeting, and such votes may be cast either in person or by written proxy.
Every proxy must be duly executed and filed with the Secretary. A shareholder
may revoke any proxy that is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the proxy or
another duly executed proxy bearing a later date with the Secretary. The vote
upon any matter brought before a meeting of the shareholders may be by voice
vote, unless otherwise required by the Articles of Incorporation or these
Bylaws or unless the Chairman or the holders of a majority of the outstanding
shares of all classes of capital stock entitled to vote thereon, present in
person or by proxy, at such meeting otherwise determine. Every vote taken by
written ballot will be counted by the inspectors of election.
(b) With respect to any corporate action to be taken at a meeting by
a vote of the shareholders entitled to vote thereon, when a quorum is present
at such meeting, such action will be authorized by a majority of the votes cast
by the holders of the Voting Stock entitled to vote thereon, unless the action
is one with respect to which by express provision of law, the Articles of
Incorporation, a Preferred Stock Designation, these Bylaws, or action by the
Board, a different vote is required, in which case such express provision will
govern and control the authorization of such action. For purposes of these
Bylaws, the term "cast" does not include recording the fact of abstention or
failing to vote for a candidate or for approval or disapproval of a matter,
whether or not the person entitled to vote characterized the conduct as voting
or casting a vote. In an election of Directors, the candidates receiving the
highest number of votes, up to the number of Directors to be elected, will be
elected.
1.9. ORDER OF BUSINESS. (a) The Chairman, or if the Chairman is
not present thereat such other officer of the Corporation designated by a
majority of the Whole Board, will call meetings of the shareholders to order
and will act as presiding officer thereof. The presiding officer of the
meeting of the shareholders will also determine the order of business and have
the authority in his or her sole discretion to regulate the conduct of any such
meeting, including without limitation by imposing restrictions on the persons
(other than shareholders of the Corporation or their duly appointed proxies)
who may attend any such shareholders' meeting, by ascertaining whether any
shareholder or his or her proxy may be excluded from any meeting of the
shareholders based upon any determination by the presiding officer, in his or
her sole discretion, that any such person has unduly disrupted or
-3-
<PAGE> 7
is likely to disrupt the proceedings thereat, and by determining the
circumstances in which any person may make a statement or ask questions at any
meeting of the shareholders.
(b) At an annual meeting of the shareholders, only such business will
be conducted or considered as is properly brought before the meeting. To be
properly brought before an annual meeting, business must be (i) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board in accordance with Section 1.4, (ii) otherwise properly brought
before the meeting by the presiding officer or by or at the direction of a
majority of the Whole Board, or (iii) otherwise properly requested to be
brought before the meeting by a shareholder of the Corporation in accordance
with the Articles of Incorporation or these Bylaws.
(c) For business to be properly requested by a shareholder to be
brought before an annual meeting, the shareholder must (i) be a shareholder of
the Corporation of record at the time of the giving of the notice for such
annual meeting provided for in these Bylaws, (ii) be entitled to vote at such
meeting, and (iii) have given timely notice thereof in writing to the
Secretary. To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less
than 60 calendar days prior to the annual meeting; provided, however, that in
the event public announcement of the date of the annual meeting is not made at
least 75 calendar days prior to the date of the annual meeting, notice by the
shareholder to be timely must be so received by not later than the close of
business on the 10th calendar day following the day on which public
announcement is first made of the date of the annual meeting. A shareholder's
notice to the Secretary must set forth as to each matter the shareholder
proposes to bring before the annual meeting (A) a description in reasonable
detail of the business desired to be brought before the annual meeting and the
reasons for conducting such business at the annual meeting, (B) the name and
address, as they appear on the Corporation's books, of the shareholder
proposing such business and the beneficial owner, if any, on whose behalf the
proposal is made, (C) the class and number of shares of the Corporation that
are owned beneficially and of record by the shareholder proposing such business
and by the beneficial owner, if any, on whose behalf the proposal is made, and
(D) any material interest of such shareholder proposing such business and the
beneficial owner, if any, on whose behalf the proposal is made in such
business. Notwithstanding the foregoing provisions of this Section 1.10(c), a
shareholder must also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder with respect to the matters set forth in this Section
1.9(c). For purposes of this Section 1.9(c) and Section 2.5(c), "public
announcement" means disclosure in a press release reported by the Dow Jones
News Service, Associated Press, or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission (the "Commission") pursuant to Section 13, 14, or 15(d) of the
Exchange Act or in a document furnished to shareholders. Nothing in this
Section 1.9(c) will be deemed to affect any rights of shareholders to request
inclusion of proposals in the Corporation's proxy statement in accordance with
Rule 14a-8 under the Exchange Act.
(d) At a special meeting of shareholders, only such business may
be conducted or considered as is properly brought before the meeting. To be
properly brought before a
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<PAGE> 8
special meeting, business must be (i) specified in the notice of the meeting
(or any supplement thereto) given by or at the direction of the Chairman
(including without limitation pursuant to a Meeting Request) or a majority of
the Whole Board in accordance with Section 1.4 or (ii) otherwise properly
brought before the meeting by the presiding officer or by or at the direction
of a majority of the Whole Board.
(e) The determination of whether any business sought to be brought
before any annual or special meeting of the shareholders is properly brought
before such meeting in accordance with this Section 1.9 will be made by the
presiding officer of such meeting. If the presiding officer determines that
any business is not properly brought before such meeting, he or she will so
declare to the meeting and any such business will not be conducted or
considered.
ARTICLE II
DIRECTORS
2.1. POWERS OF BOARD OF DIRECTORS. Except as otherwise provided by
law, the Articles of Incorporation, or these Bylaws, all powers vested by law
in the Corporation will be exercised by or under the authority of, and the
business and affairs of the Corporation will be managed under the direction of,
the Board.
2.2. NUMBER, ELECTION AND TERM OF OFFICE. (a) Subject to the
rights, if any, of any series of Preferred Stock to elect additional Directors
under circumstances specified in a Preferred Stock Designation, the authorized
number of Directors initially will be seven, and thereafter will not be less
than six nor more than ten as may be determined from time to time by (i) a vote
of a majority of the Whole Board or (ii) the affirmative vote of the holders of
at least 80% of the Voting Stock, voting together as a single class.
(b) Directors will be elected by the shareholders at an annual
meeting of shareholders. Each Director will hold office until the next annual
meeting of the shareholders and until his or her successor has been duly
elected and qualified.
(c) Notwithstanding anything contained in the Articles of
Incorporation or these Bylaws to the contrary, the term of any Director who is
also an officer of the Corporation will terminate automatically, without any
further action on the part of the Board or such Director, upon the termination
for any reason of such Director in his or her capacity as an officer of the
Corporation unless the Board determines otherwise.
2.3. VACANCIES AND NEW DIRECTORSHIPS. Subject to the rights, if
any, of the holders of any series of Preferred Stock to elect additional
Directors under circumstances specified in a Preferred Stock Designation, newly
created directorships resulting from any increase in the authorized number of
Directors and any vacancies or the Board resulting from death, resignation,
removal, or other cause will be filled solely by the affirmative vote of a
majority of the remaining Directors then in office, even though less than a
quorum of the Board, by a
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sole remaining Director, or, if there is no remaining Director, by the
shareholders. Any Director elected in accordance with the preceding sentence
will hold office for the remainder of the term of the directorship for which
such Director was so elected and until such Director's successor has been
elected and qualified. No decrease in the number of Directors constituting the
Board may shorten the term of any incumbent Director.
2.4. REMOVAL. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect additional Directors under circumstances
specified in a Preferred Stock Designation, any Director may be removed from
office (i) by the Board for cause and upon the vote of a majority of the Whole
Board and (ii) by the shareholders with or without cause and only in the manner
provided in the Articles of Incorporation; provided, however, that the Chairman
may be removed only by the affirmative vote of the holders of at least 80% of
the Voting Stock, voting together as a single class.
2.5. NOMINATIONS OF DIRECTORS. (a) Subject to the rights, if any,
of the holders of any series of Preferred Stock to elect additional Directors
under circumstances specified in a Preferred Stock Designation, only persons
who are nominated in accordance with the following procedures will be eligible
for election at a meeting of shareholders as Directors of the Corporation.
(b) Nominations of persons for election as Directors of the
Corporation may be made only at an annual meeting of shareholders (i) by or at
the direction of the Board or (ii) by any shareholder who is a shareholder of
record at the time of giving of notice provided for in this Section 2.5, who is
entitled to vote for the election of Directors at such meeting, and who
complies with the procedures set forth in this Section 2.5. All nominations by
shareholders must be made pursuant to timely notice in proper written form to
the Secretary.
(c) To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than 60 calendar days prior to the annual meeting of shareholders;
provided, however, that in the event that public announcement of the date of
the annual meeting is not made by the Corporation by inclusion in a report
filed with the Commission or furnished to shareholders, or by mail, press
release, or otherwise more than 75 calendar days prior to the date of the
annual meeting, notice by the shareholder to be timely must be so received not
later than the close of business on the 10th calendar day following the day on
which public announcement is first made of the date of the annual meeting. To
be in proper written form, such shareholder's notice must set forth or include
(i) the name and address, as they appear on the Corporation's books, of the
shareholder giving the notice and of the beneficial owner, if any, on whose
behalf the nomination is made; (ii) a representation that the shareholder
giving the notice is a holder of record of stock of the Corporation entitled to
vote at such annual meeting and intends to appear in person or by proxy at the
annual meeting to nominate the person or persons specified in the notice; (iii)
the class and number of shares of stock of the Corporation owned beneficially
and of record by the shareholder giving the notice and by the beneficial owner,
if any, on whose behalf the nomination is made; (iv) a description of all
arrangements or understandings between or among any of (A) the shareholder
giving the notice, (B) the beneficial owner on whose behalf the notice is
given, (C) each nominee, and (D) any other
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<PAGE> 10
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder giving the notice;
(v) such other information regarding each nominee proposed by the shareholder
giving the notice as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the Commission under the Exchange Act had
the nominee been nominated, or intended to be nominated, by the Board; and (vi)
the signed consent of each nominee to serve as a Director of the Corporation if
so elected. At the request of the Board, any person nominated by the Board for
election as a Director must furnish to the Secretary that information required
to be set forth in a shareholder's notice of nomination which pertains to the
nominee. The presiding officer of any meeting will, if the facts warrant,
determine that a nomination was not made in accordance with the procedures
prescribed by this Section 2.5 and any other applicable provisions of these
Bylaws or law, and if he or she should so determine, he or she will so declare
to the meeting and the defective nomination will be disregarded.
Notwithstanding the foregoing provisions of this Section 2.5, a shareholder
must also comply with all applicable requirements of applicable law, including
without limitation the Exchange Act and the rules and regulations thereunder,
with respect to the matters set forth in this Section 2.5.
2.6. RESIGNATION. Any Director may resign at any time by giving
written notice of his resignation to the Chairman or the Secretary. Any
resignation will be effective upon actual receipt by any such person or, if
later, as of the date and time specified in such written notice.
2.7. REGULAR MEETINGS. Regular meetings of the Board may be held
immediately after the annual meeting of the shareholders and at such other time
and place as may from time to time be determined by the Board. No notice will
be required to be given of any such regular meeting.
2.8. SPECIAL MEETINGS. Special meetings of the Board may be called
by the Chairman on two days' written or oral notice to each Director by whom
such notice is not waived, given either personally or by mail, telephone,
telegram, telex, facsimile, or similar medium of communication, and will be
called by the Chairman in like manner and on like notice on the written request
of a majority of the Directors. Special meetings of the Board may be held at
such time and place either within or without the Commonwealth of Pennsylvania
as is determined by the Board or specified in the notice of any such meeting.
2.9. QUORUM. At all meetings of the Board, a majority of the total
number of Directors then in office will constitute a quorum for the transaction
of business. Except for the designation of committees as hereinafter provided
and except for actions required by these Bylaws or the Articles of
Incorporation to be taken by a majority of the Whole Board, the act of a
majority of the Directors present at any meeting at which there is a quorum
present will be the act of the Board. If a quorum is not present at any
meeting of the Board, the Directors present thereat may adjourn the meeting
from time to time to another place, time, or date, without notice other than
announcement at the meeting, until a quorum is present.
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2.10. ACTION BY WRITTEN CONSENT. Any action required or permitted
to be taken at any meeting of the Board, or at a meeting of the members of any
committee thereof, may be taken without a meeting if, prior or subsequent
thereto, all members of the Board or committee, as the case may be, consent
thereto in writing, and such consent or consents are filed with the minutes or
proceedings of the Board or committee.
2.11. TELEPHONE PARTICIPATION IN MEETINGS. One or more members of
the Board, or any committee thereof, may participate in a meeting of the Board,
or any such committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting will
constitute presence in person at the meeting.
2.12. COMMITTEES. (a) The Board, by resolution passed by a
majority of the Board, may designate one or more committees, each such
committee to consist of one or more Directors and each to have such lawfully
delegable powers and duties as the Board may confer.
(b) Each committee of the Board will serve at the pleasure of the
Board or as may be specified in any resolution from time to time adopted by the
Board. The Board may designate one or more Directors as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of such committee. In lieu of such action by the Board, in the absence
or disqualification of any member of a committee of the Board, the members
thereof present at any such meeting of such committee and not disqualified from
voting, whether or not they constitute a quorum, may, by unanimous action,
appoint another member of the Board to act at the meeting in the place of any
such absent or disqualified member.
(c) Except as otherwise provided in these Bylaws or by law, any
committee of the Board, to the extent provided in the resolution of the Board
designating such committee, will have and may exercise all the powers and
authority of the Board in the direction of the management of the business and
affairs of the Corporation. Any such committee designated by the Board will
have such name as may be determined from time to time by resolution adopted by
the Board. Except as prescribed by the Board, a majority of the members of any
committee of the Board will constitute a quorum for the transaction of
business, and the act of a majority of the members will be the act of such
committee. Each committee of the Board may prescribe its own rules for calling
and holding meetings and its method of procedure, subject to any rules
prescribed by the Board, and will keep a written record of all actions taken by
it.
(d) A majority of the members of any committee the primary
responsibilities of which include (i) reviewing the professional services to be
provided by the Corporation's independent auditors and the independence of such
firm from the Corporation's management, reviewing financial statements with
management or independent auditors, and/or reviewing internal accounting
controls, (ii) recommending candidates to the Board for nomination for election
to the Board, and (iii) reviewing and approving salaries and other
compensation,
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whether cash or non-cash, and benefits of the Corporation's executive officers,
will be Directors who are not employees of the Corporation or any affiliate
thereof.
2.13. COMPENSATION. The Board may establish such compensation for,
and reimbursement of the expenses of, Directors for membership on the Board and
on committees of the Board, attendance at meetings of the Board or committees
of the Board, or for other services by Directors to the Corporation or any of
its majority-owned subsidiaries, as the Board may determine.
2.14. RULES. The Board may adopt rules and regulations for the
conduct of its meetings and the management of the affairs of the Corporation.
ARTICLE III
NOTICES
3.1. GENERALLY. Whenever notice is required to be given to any
person by law or under the provisions of the Articles of Incorporation or these
Bylaws, it may be given to such person either personally or by sending a copy
thereof by first class or express mail, postage prepaid, or by telegram (with
messenger service specified), telex or TWX (with answerback received) or
courier service, charges prepaid, or by facsimile transmission, to the
recipient's address (or to his or her telex, TWX or facsimile number) appearing
on the books of the Corporation or, in the case of directors, supplied by him
or her to the Corporation for the purpose of notice. If the notice is sent by
mail, telegraph or courier service, it will be deemed to have been given to the
person entitled thereto when deposited in the United States mail or with a
telegraph office or courier service for delivery to that person or, in the case
of telex or TWX, when dispatched.
3.2. WAIVERS. Whenever notice is required to be given to any
person by law or under the provisions of the Articles of Incorporation or these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, will be deemed
equivalent to such notice. Attendance of a person at any meeting will
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened.
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ARTICLE IV
OFFICERS
4.1. ENUMERATION. The officers of the Corporation will be elected
by the Board and will consist of a President, such Vice Presidents (if any) as
the Board may elect from time to time, a Secretary, a Treasurer, and such other
officers and assistant officers (if any) as the Board may elect from time to
time. The Board may at any time elect one of its members as Chairman, to
preside at meetings of the Board and of the shareholders and to have such
powers and perform such duties as may be prescribed from time to time by the
Board. Notwithstanding the foregoing, by specific action the Board may
authorize the Chairman to appoint any person to any office other than Chairman,
President, Secretary, or Treasurer. Any two or more offices may be held by the
same person. Any of the offices may be left vacant from time to time as the
Board may determine. In the case of the absence or disability of any officer
of the Corporation or for any other reason deemed sufficient by a majority of
the Board, the Board may delegate the absent or disabled officer's powers or
duties to any other officer or to any Director.
4.2. COMPENSATION. The compensation of all officers, assistant
officers, and agents of the Corporation will be fixed by, or pursuant to
authority delegated by, the Board or a committee thereof from time to time.
4.3. SUCCESSION. The officers of the Corporation will hold office
until their successors are elected and qualified. Any officer may be removed
at any time by the affirmative vote of a majority of the Whole Board. Any
vacancy occurring in any office of the Corporation may be filled by the Board
as provided in Section 4.1.
4.4. AUTHORITY AND DUTIES. Each of the officers of the Corporation
will have such authority and will perform such duties as are customarily
incident to their respective offices or as may be specified from time to time
by the Board or by the Chairman as provided in Section 4.1.
ARTICLE V
DIRECTORS' LIABILITY
5.1. DIRECTORS' PERSONAL LIABILITY. A Director of the Corporation
will not be personally liable, as such, for monetary damages for any action
taken, or the failure to take any action, by such Director; provided, however,
that this provision will not eliminate or limit the liability of a Director to
the extent that such elimination or limitation of liability is expressly
prohibited by Section 1713 of the BCL or any successor statute as in effect at
the time the alleged action taken, or alleged failure to take action, by such
Director.
5.2. PRESERVATION OF RIGHTS. Any repeal or modification of this
Article V will not adversely affect any right or protection existing at the
time of such repeal or modification to
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which any Director or former Director may be entitled under this Article V.
The rights conferred by this Article V will continue as to any person who has
ceased to be a Director of the Corporation and will inure to the benefit of the
heirs and personal representatives of such person.
ARTICLE VI
INDEMNIFICATION
6.1. MANDATORY INDEMNIFICATION. Without limiting the generality or
effect of any provision of the Articles of Incorporation or applicable law, the
Corporation will indemnify, to the fullest extent now or hereafter permitted by
law (including without limitation the indemnification provided by Chapter 17,
Subchapter D, of the BCL or any successor statute), each Director or officer
(including each former Director or officer) of the Corporation who was or is
made a party to or a witness in or is threatened to be made a party to or a
witness in any threatened, pending or completed action or proceeding, whether
civil, criminal, administrative, or investigative, by reason of the fact that
such person is or was an authorized representative of the Corporation, against
all expenses (including without limitation attorneys' fees and disbursements),
judgments, fines (including excise taxes and penalties), and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action or proceeding.
6.2. MANDATORY ADVANCEMENT OF EXPENSES. Without limiting the
generality or effect of any provision of the Articles of Incorporation or
applicable law, the Corporation will pay all expenses (including without
limitation attorneys' fees and disbursements) incurred by a Director or officer
(including without limitation a former Director or officer) referred to in
Section 6.1 in defending or appearing as a witness in any action or proceeding
described in Section 6.1 in advance of the final disposition of such action or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay all amounts advanced if it is ultimately determined that such person is
not entitled to be indemnified by the Corporation as provided in Section 6.4.
6.3. PERMISSIVE INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
Without limiting the generality or effect of any provision of the Articles of
Incorporation or applicable law, the Corporation may, as determined by the
Board from time to time, indemnify to the fullest extent now or hereafter
permitted by law, any person who was or is made a party to or a witness in or
is threatened to be made a party to or a witness in, or was or is otherwise
involved in, any threatened, pending, or completed action or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the
fact that such person is or was an authorized representative of the
Corporation, both as to action in such person's official capacity and as to
action in another capacity while holding such office or position, against all
expenses (including without limitation attorneys' fees and disbursements),
judgments, fines (including excise taxes and disbursements) and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action or proceeding. Without limiting the generality or effect of any
provision of the Articles of Incorporation or
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<PAGE> 15
applicable law, the Corporation may, as determined by the Board from time to
time, pay expenses incurred by any such person by reason of such person's
participation in an action or proceeding referred to in this Section 6.3 in
advance of the final disposition of such action or proceeding upon receipt of
an undertaking by or on behalf of such person to repay such amount if it will
ultimately be determined that such person is not entitled to be indemnified by
the Corporation as provided in Section 6.4 hereof.
6.4. SCOPE OF INDEMNIFICATION. Indemnification under this Article
VI will not be made by the Corporation in any case where a court determines
that the alleged act or failure to act giving rise to the claim for
indemnification is expressly prohibited by Chapter 17, Subchapter D, of the BCL
or any successor statute as in effect at the time of such alleged action or
failure to take action.
6.5. INSURANCE. Without limiting the generality or effect of any
provision of the Articles of Incorporation or applicable law, the Corporation
may purchase and maintain insurance on behalf of any person who is or was a
Director or officer of other Corporation, or is or was an authorized
representative of the Corporation, against any liability asserted against or
incurred by such person in any such capacity, or arising out of the status of
such person as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of this
Article VI.
6.6. CONTRACTS AND FUNDING. Without limiting the generality or
effect of any provision of the Articles of Incorporation or applicable law, the
Board, without approval of the shareholders, will have the power to authorize
the Corporation to borrow money, including the power to authorize the pledge of
the assets of the Corporation, from time to time to discharge the Corporation's
obligations with respect to indemnification, the advancement and reimbursement
of expenses, and the purchase and maintenance of insurance referred to in this
Article VI. Without limiting the generality or effect of any provision of the
Articles of Incorporation or applicable law, the Corporation may enter into
contracts with any person entitled to indemnification under this Article VI or
otherwise, and may, in lieu of or in addition to the purchase and maintenance
of insurance referred to in Section 6.5 hereof, establish and maintain a fund
of any nature or otherwise secure or insure in any manner its indemnification
obligations, whether arising under or pursuant to this Article VI or otherwise.
6.7. MISCELLANEOUS. Each Director and officer of the Corporation
will be deemed to act in such capacity in reliance upon such rights of
indemnification and advancement of expenses as are provided in this Article VI.
The rights of indemnification and advancement of expenses provided by this
Article VI will not be deemed exclusive of any other rights to which any person
seeking indemnification or advancement of expenses may be entitled under the
Articles of Incorporation, any agreement, any vote of shareholders or
disinterested directors of the Corporation, any statute or otherwise, both as
to action in such person's official capacity and as to action in another
capacity while holding such office or position, and will continue as to a
person who has ceased to be an authorized representative of the Corporation and
will inure to the benefit of the heirs and personal representatives of such
person. Indemnification and advancement of expenses under this Article VI will
be provided
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<PAGE> 16
whether or not the indemnified liability arises or arose from any threatened,
pending, or completed action by or in the right of the Corporation. Any repeal
or modification of this Article VI will not adversely affect any right or
protection existing at the time of such repeal or modification to which any
person may be entitled under this Article VI.
6.8. DEFINITION OF CORPORATION FOR THIS ARTICLE VI. Solely for
purposes of this Article VI, references to "the Corporation" will include all
constituent corporations absorbed in a consolidation or merger, as well as the
surviving or resulting corporation or corporations therefrom, so that (i) any
person who is or was an authorized representative of a constituent, surviving,
or new corporation will stand in the same position under the provisions of this
Article VI with respect to the surviving or new corporation as such person
would if he or she had served the surviving or new corporation in the same
capacity and (ii) any person who is or was an authorized representative of the
Corporation will stand in the same position under the provisions of this
Article VI with respect to the surviving or new corporation as such person
would with respect to the Corporation if its separate existence had continued.
ARTICLE VII
SHARES OF CAPITAL STOCK
7.1. ISSUANCE OF SHARES. Shares of capital stock of any class now
or hereafter authorized, securities convertible into or exchangeable for such
shares, or options or other rights to purchase such shares or securities, may
be issued or granted in accordance with authority granted by resolution of the
Board from time to time.
7.2. SHARE CERTIFICATES. Certificates representing shares of the
capital stock of the Corporation will be in the form adopted from time to time
by the Board or an authorized committee thereof, subject to applicable legal
requirements. Each such certificate will be numbered and its issuance recorded
in the books of the Corporation, and such certificate will exhibit the holder's
name and the number of shares and will be signed by, or in the name of, the
Corporation by the Chairman, President or a Vice President and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and will
also be signed by, or bear the facsimile signature of, any properly designated
transfer agent of the Corporation. Any or all of the signatures and the seal
of the Corporation, if any, upon such certificates may be facsimiles, engraved,
or printed. Such certificates may be issued and delivered notwithstanding that
the person whose facsimile signature appears thereon may have ceased to be such
officer at the time certificates are issued and delivered.
7.3. CLASSES OF STOCK. The designations, preferences, and relative
participating, optional, or other special rights of the various classes of
capital stock or any series thereof, and the qualifications, limitations, or
restrictions thereof, will be set forth in full or summarized on the face or
back of the certificates which the Corporation issues to represent such capital
stock or, in lieu thereof or in addition thereto, such certificates will set
forth the office of the Corporation from which the holders of certificates may
obtain a copy of such information.
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7.4. TRANSFERS. Shares of capital stock of the Corporation will be
transferred only on the books of the Corporation by the holder of record in
person or by such holder's duly authorized representative. Upon surrender to
the Corporation or the transfer agent (if any) of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment, or authority to transfer, it will be the duty of the
Corporation to issue, or cause its transfer agent (if any) to issue, a new
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction upon its books.
7.5. LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES. The
Secretary may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged
to have been lost, stolen, destroyed, or mutilated upon the making of an
affidavit of that fact, satisfactory to the Secretary, by the person claiming
the certificate of stock to be lost, stolen, destroyed, or mutilated. As a
condition precedent to the issuance of a new certificate or certificates, the
Secretary may require the owners of such lost, stolen, destroyed, or mutilated
certificate or certificates to give the Corporation a bond in such sum and with
such surety or sureties as the Board may direct as indemnity against any claims
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen, destroyed, or mutilated or the issuance of
the new certificate.
7.6. RECORD DATE FOR DISTRIBUTIONS. (a) In order that the
Corporation may determine the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the shareholders
entitled to exercise any rights in respect of any change, conversion, or
exchange of stock, or for the purpose of any other lawful action, the Board may
fix a record date, which record date will not be more than 60 calendar days
prior to such action. If no record date is fixed, the record date for
determining shareholders for any such purpose will be at the close of business
on the calendar day on which the Board adopts the resolution relating thereto.
(b) The Corporation will be entitled to treat the person in whose
name any share of its stock is registered as the holder or owner in fact
thereof for all purposes, and will not be bound to recognize any equitable or
other claim to, or right, title, or interest in, such share or shares on the
part of any other person, whether or not the Corporation will have express or
other notice thereof, except as may be otherwise expressly provided by law.
7.7. REGULATIONS. The Board will have the power and authority to
make all such rules and regulations not inconsistent with these Bylaws as it
may deem expedient concerning the issue, transfer, and registration of shares
of capital stock of the Corporation.
ARTICLE VIII
GENERAL PROVISIONS
8.1. CORPORATE SEAL. The Corporation may adopt a corporate seal in
such form as the Board may determine from time to time and use the same by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
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8.2. FISCAL YEAR. The fiscal year of the Corporation will be as
designated by the Board from time to time.
8.3. AUTHORIZATION. All checks, notes, mortgages, evidences of
indebtedness, vouchers, warrants, drafts, acceptances, and other orders for the
payment of moneys of the Corporation, contracts, and other documents, and
assignments or endorsements thereof, will be signed by the President or such
officer or officers or such other person as the Board may designate from time
to time.
8.4. FINANCIAL STATEMENTS. The Corporation will furnish annual
financial statements to its shareholders in accordance with applicable law.
8.5. RELIANCE UPON BOOKS, REPORTS, AND RECORDS. Each Director,
each member of a committee designated by the Board, and each officer of the
Corporation will, in the performance of his or her duties, be fully protected
in relying in good faith upon the records of the Corporation and upon such
information, opinions, reports, or statements presented to the Corporation by
any of the Corporation's officers or employees, or committees of the Board, or
by any other person or entity to the extent provided by law.
8.6. TIME PERIODS. In applying any provision of these Bylaws that
requires that an act be done or not be done a specified number of days prior to
an event or that an act be done during a period of a specified number of days
prior to an event, calendar days will be used unless otherwise specified, the
day of the doing of the act will be excluded, and the day of the event will be
included.
8.7. EFFECT OF BYLAWS. No provision of these Bylaws will vest any
property right in any shareholder.
8.8. CERTAIN DEFINED TERMS. Terms used herein with initial capital
letters that are defined in the Articles of Incorporation are used herein as so
defined.
ARTICLE IX
AMENDMENTS
9.1. AMENDMENT. Except as otherwise provided by law or by the
Articles of Incorporation or these Bylaws, these Bylaws or any of them may be
amended in any respect or repealed at any time, either (a) at any meeting of
shareholders, provided that any amendment or supplement proposed to be acted
upon at any such meeting has been described or referred to in the notice of
such meeting, or (b) at any meeting of the Board, provided that no amendment or
repeal adopted by the Board may vary or conflict with any amendment or repeal
adopted by the shareholders.
9.2. EFFECTIVE DATE. Any change in the Bylaws will take effect
when adopted unless otherwise provided in the resolution effecting the change.
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<PAGE> 1
EXHIBIT 4
================================================================================
CREDIT AGREEMENT
among
INTERSTATE HOTELS COMPANY
INTERSTATE HOTELS CORPORATION
VARIOUS LENDING INSTITUTIONS
and
CREDIT LYONNAIS NEW YORK BRANCH
as
ADMINISTRATIVE AGENT
____________________________________
Dated as of June 25, 1996
____________________________________
$295,000,000
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Amount and Terms of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Borrowing Amounts, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.09 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.11 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.12 Change of Lending Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.02 Letter of Credit Requests; Notices of Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.03 Agreement to Repay Letter of Credit Drawings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.04 Letter of Credit Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.05 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.01 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.02 Voluntary Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.03 Mandatory Adjustments of Commitments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 4. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.02 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.04 Net Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.01 Conditions Precedent to Initial Borrowing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.02 Conditions Precedent to All Credit Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
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SECTION 6. Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.02 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.04 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.05 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.06 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.07 True and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.08 Financial Condition; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.09 Security Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.10 Representations and Warranties in Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.11 Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.12 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.14 Intellectual Property, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.16 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.17 Labor Relations; Collective Bargaining Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.18 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.19 Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.20 Certain Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.21 Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.01 Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.02 Books, Records and Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.04 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.05 Corporate Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.06 Compliance with Statutes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.07 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.08 Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.09 End of Fiscal Years; Fiscal Quarters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.10 Interest Rate Hedging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.11 Additional Security; Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.12 Corporate Separateness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.01 Changes in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.02 Consolidation, Merger or Sale of Assets, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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8.03 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.04 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.05 Advances, Investments and Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.06 Capital Expenditures; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8.07 Prepayments of Indebtedness, Modifications of Agreements, etc. . . . . . . . . . . . . . . . . . . . . . . . 58
8.08 Dividends, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
8.09 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.10 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
8.11 Minimum EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.12 Interest Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.13 Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.14 Debt Service Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.15 Creation of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.16 Limitation on Certain Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.17 Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.02 Representations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.04 Default Under Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.07 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.08 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.09 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.10 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 10 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 11. The Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.02 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.03 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
11.04 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.05 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.06 Non-Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
11.07 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.08 The Administrative Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
11.09 Successor Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
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SECTION 12. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.01 Payment of Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
12.02 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
12.03 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
12.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
12.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
12.06 Payments Pro Rata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
12.07 Calculations; Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
12.08 Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . 97
12.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
12.10 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
12.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
12.12 Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
12.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.14 Domicile of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.15 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.16 Bank Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
12.17 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
12.18 Post-Closing Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
SECTION 13. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
13.01 The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
13.02 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
13.03 Nature of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
13.04 Independent Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
13.05 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
13.06 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
13.07 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
13.08 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
13.09 Limitation on Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
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ANNEX I -- Commitments
ANNEX II -- Bank Addresses
ANNEX III -- Schedule of Subsidiaries
ANNEX IV -- Real Properties
ANNEX V -- Existing Indebtedness
ANNEX VI -- Existing Liens
ANNEX VII -- Existing Advances, Loans and Investments
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ANNEX VIII -- Existing Letters of Credit
ANNEX IX -- Underground Storage Tanks
ANNEX X -- Third-Party Rights
EXHIBIT A-1 -- Form of Notice of Borrowing
EXHIBIT A-2 -- Form of Letter of Credit Request
EXHIBIT B-1 -- Form of Term Note
EXHIBIT B-2 -- Form of Revolving Note
EXHIBIT C-1 -- Form of Opinion of Jones, Day, Reavis & Pogue Special
Counsel to Holdings and its Subsidiaries
EXHIBIT C-2 -- Form of Opinion of General Counsel to Borrower
EXHIBIT C-3 -- Form of Opinion of White & Case, Special Counsel to the
Banks
EXHIBIT D -- Form of Officers' Certificate
EXHIBIT E -- Form of Subsidiary Guaranty
EXHIBIT F -- Form of Pledge Agreement
EXHIBIT G -- Form of Security Agreement
EXHIBIT H -- Form of Solvency Certificate
EXHIBIT I -- Form of Consent Letter
EXHIBIT J -- Form of Assignment Agreement
EXHIBIT K -- Form of Section 4.04(b)(ii) Certificate
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CREDIT AGREEMENT, dated as of June 25, 1996, among INTERSTATE
HOTELS COMPANY ("Holdings"), a Pennsylvania corporation, INTERSTATE HOTELS
CORPORATION (the "Borrower"), a Pennsylvania corporation, the lending
institutions listed from time to time on Annex I hereto (each a "Bank" and,
collectively, the "Banks") and CREDIT LYONNAIS NEW YORK BRANCH, as
administrative agent (the "Administrative Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 10 are used
herein as so defined.
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, subject to and upon the terms and conditions set
forth herein, the Banks are willing to make available to the Borrower the
credit facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 COMMITMENTS. Subject to and upon the terms and
conditions herein set forth, each Bank severally agrees to make a loan or loans
(each a "Loan" and, collectively, the "Loans") to the Borrower, which Loans
shall be drawn, to the extent such Bank has a commitment under such Facility,
under the Term Facility or the Revolving Facility, as set forth below:
(a) Loans under the Term Facility (each a "Term Loan" and,
collectively, the "Term Loans"): (i) shall be made pursuant to a
single Borrowing on the Initial Borrowing Date; (ii) except as
hereinafter provided, may, at the option of the Borrower, be incurred
and maintained as, and/or converted into, Base Rate Loans or
Eurodollar Loans, provided that all Term Loans made by all Banks
pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Term Loans of the same Type; and
(iii) shall not exceed in initial aggregate principal amount for any
Bank the Term Commitment, if any, of such Bank as in effect on the
Initial Borrowing Date. Once repaid, Term Loans borrowed hereunder
may not be reborrowed.
(b) Loans under the Revolving Facility (each a "Revolving
Loan" and, collectively, the "Revolving Loans"): (i) may be made at
any time and from time to time on and after the Initial Borrowing Date
and prior to the RF Maturity Date; (ii)
<PAGE> 8
except as hereinafter provided, may, at the option of the Borrower, be
incurred and maintained as, and/or converted into, Base Rate Loans or
Eurodollar Loans, provided that (x) prior to the Syndication Date,
Revolving Loans may only be incurred as Eurodollar Loans on the first
day of a PSD Interest Period and (y) all Revolving Loans made as part
of the same Borrowing shall, unless otherwise specifically provided
herein, consist of Revolving Loans of the same Type; (iii) may be
repaid and reborrowed in accordance with the provisions hereof; and
(iv) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which, when added to the product at such
time of (x) such Bank's RF Percentage and (y) the sum of the Letter of
Credit Outstandings, equals the Revolving Commitment of such Bank at
such time. In addition the aggregate outstanding principal amount of
all Acquisition Loans for all Banks at any time shall not exceed the
Acquisition Sublimit at such time.
1.02 MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal
amount of each Borrowing shall not be less than the Minimum Borrowing Amount
for such Borrowing. More than one Borrowing may be incurred on any day,
provided that at no time shall there be outstanding more than eight Borrowings
of Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires
to incur Term Loans or Revolving Loans, it shall give the Administrative Agent
at its Notice Office, (x) prior to 1:00 P.M. (New York time), at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) of each Borrowing of Eurodollar Loans and (y) prior to 10:00 A.M. (New
York time) on the proposed date thereof written notice (or telephonic notice
promptly confirmed in writing) of each Borrowing of Base Rate Loans to be made
hereunder. Each such notice (each such notice, a "Notice of Borrowing") (or
the written confirmation) shall be in the form of Exhibit A-1 and (y) shall be
irrevocable and shall specify: (i) the Facility pursuant to which such
Borrowing is being made; (ii) the aggregate principal amount of the Loans to be
made pursuant to such Borrowing; (iii) the date of Borrowing (which shall be a
Business Day); and (iv) whether the respective Borrowing shall consist of Base
Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest Period to
be initially applicable thereto. The Administrative Agent shall promptly give
each Bank written notice (or telephonic notice promptly confirmed in writing)
of each proposed Borrowing, of such Bank's proportionate share thereof and of
the other matters covered by the Notice of Borrowing.
(b) Without in any way limiting the obligation of the
Borrower to confirm in writing any telephonic notice permitted to be given
hereunder, the Administrative Agent may act prior to receipt of written
confirmation without liability upon the basis of such telephonic notice
believed by the Administrative Agent in good faith to be from an Authorized
Officer of the Borrower entitled to give telephonic notices under this
Agreement on behalf
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<PAGE> 9
of the Borrower. In each such case, the Administrative Agent's record of the
terms of such telephonic notice shall be conclusive absent manifest error.
1.04 DISBURSEMENT OF FUNDS. (a) No later than 1:00 P.M.
(New York time) on the date specified in each Notice of Borrowing, each Bank
will make available its pro rata share, if any, of each Borrowing requested to
be made on such date in the manner provided below. All amounts shall be made
available to the Administrative Agent in U.S. dollars and immediately available
funds at the Payment Office and the Administrative Agent promptly will make
available to the Borrower by depositing to its account at the Payment Office
the aggregate of the amounts so made available in the type of funds received.
Unless the Administrative Agent shall have been notified by any Bank prior to
the date of Borrowing that such Bank does not intend to make available to the
Administrative Agent its portion of the Borrowing or Borrowings to be made on
such date, the Administrative Agent may assume that such Bank has made such
amount available to the Administrative Agent on such date of Borrowing, and the
Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrower
a corresponding amount. If such corresponding amount is not in fact made
available to the Administrative Agent by such Bank and the Administrative Agent
has made available same to the Borrower, the Administrative Agent shall be
entitled to recover such corresponding amount from such Bank. If such Bank
does not pay such corresponding amount forthwith upon the Administrative
Agent's demand therefor, the Administrative Agent shall promptly notify the
Borrower, and the Borrower shall immediately pay such corresponding amount to
the Administrative Agent. The Administrative Agent shall also be entitled to
recover from such Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to the Borrower to the
date such corresponding amount is recovered by the Administrative Agent, at a
rate per annum equal to (x) if paid by such Bank, the overnight Federal Funds
Effective Rate or (y) if paid by the Borrower, the then applicable rate of
interest, calculated in accordance with Section 1.08, for the respective Loans.
(b) Nothing herein and no subsequent termination of the
Commitments pursuant to Section 3.02 or 3.03 shall be deemed to relieve any
Bank from its obligation to fulfill its commitments hereunder and in existence
from time to time or to prejudice any rights which the Borrower may have
against any Bank as a result of any default by such Bank hereunder.
1.05 NOTES. (a) The Borrower's obligation to pay the
principal of, and interest on, the Loans made to it by each Bank shall be
evidenced: (i) if Term Loans, by a promissory note substantially in the form of
Exhibit B-1 with blanks appropriately completed in conformity herewith (each a
"Term Note" and, collectively, the "Term Notes"); and (ii) if Revolving Loans,
by a promissory note substantially in the form of Exhibit B-2
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<PAGE> 10
with blanks appropriately completed in conformity herewith (each a "Revolving
Note" and, collectively, the "Revolving Notes").
(b) The Term Note issued to a Bank shall: (i) be executed by
the Borrower; (ii) be payable to the order of such Bank and be dated the
Initial Borrowing Date; (iii) be in a stated principal amount equal to the Term
Commitment of such Bank (or in the case of a new Note issued pursuant to
Section 12.04, the Term Loans evidenced thereby at the time of issuance) and be
payable in the principal amount of Term Loans evidenced thereby; (iv) mature on
the TF Maturity Date; (v) bear interest as provided in the appropriate clause
of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the
case may be, evidenced thereby; (vi) be subject to mandatory repayment as
provided in Section 4.02; and (vii) be entitled to the benefits of this
Agreement and the other Credit Documents.
(c) The Revolving Note issued to a Bank shall: (i) be
executed by the Borrower; (ii) be payable to the order of such Bank and be
dated the Initial Borrowing Date; (iii) be in a stated principal amount equal
to the Revolving Commitment of such Bank and be payable in the principal amount
of Revolving Loans evidenced thereby; (iv) mature on the RF Maturity Date; (v)
bear interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby; (vi) be subject to mandatory repayment as provided in Section 4.02;
and (vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(d) Each Bank will note on its internal records the amount of
each Loan made by it and each payment in respect thereof and will, prior to any
transfer of its Note, endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in any such notation shall not affect the Borrower's obligations
in respect of such Loans.
1.06 CONVERSIONS. The Borrower shall have the option to
convert on any Business Day all or a portion at least equal to the applicable
Minimum Borrowing Amount of the outstanding principal amount of the Loans owing
pursuant to a single Facility into a Borrowing or Borrowings pursuant to such
Facility of the other Type of Loan, provided that: (i) no conversion of Base
Rate Loans into Eurodollar Loans may be made prior to the Syndication Date
except for a conversion made on the first day of a PSD Interest Period; (ii) no
partial conversion of a Borrowing of Eurodollar Loans shall reduce the
outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto; (iii)
Base Rate Loans may only be converted into Eurodollar Loans if no Default under
Section 9.01 or Event of Default is in existence on the date of the conversion
unless the Required Banks otherwise agree; and (iv) Borrowings of Eurodollar
Loans resulting from this Section 1.06 shall be limited in numbers as provided
in Section 1.02. Each such conversion shall be effected by the Borrower giving
the Administrative Agent at its Notice Office, prior to 1:00 P.M. (New
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<PAGE> 11
York time), at least three Business Days' (or one Business Day's, in the case
of a conversion into Base Rate Loans) prior written notice (or telephonic
notice promptly confirmed in writing) (each a "Notice of Conversion")
specifying the Loans to be so converted, the Type of Loans to be converted into
and, if to be converted into a Borrowing of Eurodollar Loans, the Interest
Period to be initially applicable thereto. The Administrative Agent shall give
each Bank prompt notice of any such proposed conversion affecting any of its
Loans.
1.07 PRO RATA BORROWINGS. All Borrowings of Term Loans or
Revolving Loans shall be made by the Banks pro rata on the basis of their Term
Commitments or Revolving Commitments, as the case may be. It is understood
that no Bank shall be responsible for any default by any other Bank in its
obligation to make Loans hereunder and that each Bank shall be obligated to
make the Loans provided to be made by it hereunder, regardless of the failure
of any other Bank to fulfill its commitments hereunder.
1.08 INTEREST. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the Borrowing thereof until
maturity (whether by acceleration or otherwise) at a rate per annum which shall
at all times be the Applicable Percentage plus the Base Rate in effect from
time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at a rate per annum which shall at all times be the
Applicable Percentage plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by
law, overdue interest in respect of each Loan shall bear interest at a rate per
annum equal to the Base Rate in effect from time to time plus the sum of (i) 2%
and (ii) the Applicable Percentage then in effect for Base Rate Loans, provided
that each Eurodollar Loan shall bear interest after maturity (whether by
acceleration or otherwise) until the end of the Interest Period then applicable
thereto at a rate per annum equal to 2% in excess of the rate of interest
applicable thereto at maturity.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, monthly in arrears on the last
Business Day of each calendar month, (ii) in respect of each Eurodollar Loan,
on the last day of each Interest Period applicable thereto and, in the case of
an Interest Period in excess of three months, on the dates which are
successively three months after the commencement of such Interest Period and
(iii) in respect of each Loan, on any prepayment or conversion (on the amount
prepaid or converted), at maturity (whether by acceleration or otherwise) and,
after such maturity, on demand.
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<PAGE> 12
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) The Administrative Agent, upon determining the interest
rate for any Borrowing of Eurodollar Loans for any Interest Period, shall
promptly notify the Borrower and the Banks thereof.
1.09 INTEREST PERIODS. (a) At the time the Borrower gives a
Notice of Borrowing or Notice of Conversion in respect of the making of, or
conversion into, a Borrowing of Eurodollar Loans (in the case of the initial
Interest Period applicable thereto) or prior to 1:00 P.M. (New York time) on
the third Business Day prior to the expiration of an Interest Period applicable
to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving
the Administrative Agent written notice (or telephonic notice promptly
confirmed in writing) of the Interest Period applicable to such Borrowing,
which Interest Period shall, at the option of the Borrower, be a one, two,
three or six month period. Notwithstanding anything to the contrary contained
above:
(i) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of Base Rate
Loans) and each Interest Period occurring thereafter in respect of
such Borrowing shall commence on the day on which the next preceding
Interest Period expires;
(ii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, provided that if any Interest Period
would otherwise expire on a day which is not a Business Day but is a
day of the month after which no further Business Day occurs in such
month, such Interest Period shall expire on the next preceding
Business Day;
(iv) subject to the foregoing clauses (i) through (iii), only
a one month Interest Period shall be available to be selected prior to
the Syndication Date, with all Term Loans constituting Eurodollar
Loans during said period to be outstanding pursuant to a single
Borrowing and all Revolving Loans constituting Eurodollar Loans during
such period to be outstanding pursuant to a single Borrowing, with
both such Borrowings to commence and end on the same day;
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<PAGE> 13
(v) no Interest Period with respect to any Borrowing of
Revolving Loans may (x) extend beyond any date upon which a Scheduled
RF Reduction is required to be made if after giving affect to the
selection of such Interest Period, the sum of (I) the aggregate
principal amount of Revolving Loans maintained as Eurodollar Loans
with Interest Periods ending after such date plus (II) Letter of
Credit Outstandings under Letters of Credit with expiry dates beyond
such date would exceed the Total Revolving Commitment after giving
effect to such reduction or (y) extend beyond the RF Maturity Date;
(vi) no Interest Period with respect to any Borrowing of Term
Loans may (x) extend beyond any date upon which a Scheduled Repayment
is required to be made if, after giving effect to the selection of
such Interest Period, the aggregate principal amount of Term Loans
maintained as Eurodollar Loans with Interest Periods ending after such
date would exceed the aggregate principal amount of Term Loans
permitted to be outstanding after such Scheduled Repayment or (y)
extend beyond the TF Maturity Date; and
(vii) no Interest Period may be elected at any time when a
Default under Section 9.01 or an Event of Default is then in existence
unless the Required Banks otherwise agree.
(b) If upon the expiration of any Interest Period the
Borrower has failed to (or may not) elect a new Interest Period to be
applicable to the respective Borrowing of Eurodollar Loans as provided above,
the Borrower shall be deemed to have elected to convert such Borrowing into a
Borrowing of Base Rate Loans effective as of the expiration date of such
current Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event
that (x) in the case of clause (i) below, the Administrative Agent or (y) in
the case of clauses (ii) and (iii) below, any Bank shall have determined on a
reasonable basis (which determination shall, absent manifest error, be final
and conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising after the
Effective Date affecting the interbank Eurodollar market, adequate and
fair means do not exist for ascertaining the applicable interest rate
on the basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs
or reductions in the amounts received or receivable hereunder in an
amount which such Bank deems material with respect to any Eurodollar
Loans (other than any increased cost or reduction in the amount
received or receivable resulting from the imposition of or
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<PAGE> 14
a change in the rate of taxes or similar charges) because of (x) any
change since the Effective Date in any applicable law, governmental
rule, regulation, guideline, order or request (whether or not having
the force of law), or in the interpretation or administration thereof
and including the introduction of any new law or governmental rule,
regulation, guideline, order or request (such as, for example, but not
limited to, a change in official reserve requirements, but, in all
events, excluding reserves includable in the Eurodollar Rate pursuant
to the definition thereof) and/or (y) other circumstances adversely
affecting the interbank Eurodollar market or the position of such Bank
in such market; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Bank in good
faith with any change since the Effective Date in any law,
governmental rule, regulation, guideline or order, or the
interpretation or application thereof, or would conflict with any
thereof not having the force of law but with which such Bank
customarily complies;
then, and in any such event, such Bank (or the Administrative Agent in the case
of clause (i) above) shall (x) on such date and (y) within 10 Business Days of
the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Banks). Thereafter (x) in the case of clause (i) above,
Eurodollar Loans shall no longer be available until such time as the
Administrative Agent notifies the Borrower and the Banks that the circumstances
giving rise to such notice by the Administrative Agent no longer exist, and any
Notice of Borrowing or Notice of Conversion given by the Borrower with respect
to Eurodollar Loans which have not yet been incurred shall be deemed rescinded
by the Borrower or, in the case of a Notice of Borrowing, shall, at the option
of the Borrower, be deemed converted into a Notice of Borrowing for Base Rate
Loans to be made on the date of Borrowing contained in such Notice of
Borrowing, (y) in the case of clause (ii) above, the Borrower shall pay to such
Bank, upon written demand therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as such Bank shall determine) as shall be required to compensate such Bank for
such increased costs or reductions in amounts receivable hereunder (a written
notice as to the additional amounts owed to such Bank, showing the basis for
the calculation thereof, which basis must be reasonable, submitted to the
Borrower by such Bank shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in Section 1.10(b) as promptly
as possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the
Borrower shall) either (i) if the affected
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<PAGE> 15
Eurodollar Loan is then being made pursuant to a Borrowing, by giving the
Administrative Agent telephonic notice (confirmed promptly in writing) thereof
on the same date that the Borrower was notified by a Bank pursuant to Section
1.10(a)(ii) or (iii), cancel said Borrowing, convert the related Notice of
Borrowing into one requesting a Borrowing of Base Rate Loans or require the
affected Bank to make its requested Loan as a Base Rate Loan, or (ii) if the
affected Eurodollar Loan is then outstanding, upon at least one Business Day's
notice to the Administrative Agent, require the affected Bank to convert each
such Eurodollar Loan into a Base Rate Loan, provided that if more than one Bank
is affected at any time, then all affected Banks must be treated the same
pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the
Effective Date, the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged by law with the interpretation or
administration thereof, or compliance by such Bank or its parent corporation
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, in
each case made subsequent to the Effective Date, has or would have the effect
of reducing by an amount reasonably deemed by such Bank to be material the rate
of return on such Bank's or its parent corporation's capital or assets as a
consequence of such Bank's commitments or obligations hereunder to a level
below that which such Bank or its parent corporation could have achieved but
for such adoption, effectiveness, change or compliance (taking into
consideration such Bank's or its parent corporation's policies with respect to
capital adequacy), then from time to time, within 15 days after demand by such
Bank (with a copy to the Administrative Agent), the Borrower shall pay to such
Bank such additional amount or amounts as will compensate such Bank or its
parent corporation for such reduction. Each Bank, upon determining in good
faith that any additional amounts will be payable pursuant to this Section
1.10(c), will give prompt written notice thereof to the Borrower, which notice
shall set forth the basis of the calculation of such additional amounts, which
basis must be reasonable, although the failure to give any such notice shall
not release or diminish any of the Borrower's obligations to pay additional
amounts pursuant to this Section 1.10(c) upon the subsequent receipt of such
notice. No Bank shall demand compensation for any reduction referred to in
this Section 1.10(c) if it shall not at the time be the general policy or
practice of such Bank to demand such compensation in similar circumstances
under comparable provisions of other credit agreements.
(d) Notwithstanding anything in this Agreement to the
contrary, no Bank shall be entitled to compensation under Section 1.10, 2.05 or
4.04 for any amounts incurred or accruing more than 180 days prior to the
giving of notice to the Borrower of additional costs of the type described in
such Sections.
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1.11 COMPENSATION. The Borrower shall compensate each Bank,
upon its written request (which request shall set forth the detailed basis for
requesting and the method of calculating such compensation), for all reasonable
losses, expenses and liabilities (including, without limitation, any loss,
expense or liability incurred by reason of the liquidation or reemployment of
deposits or other funds required by such Bank to fund its Eurodollar Loans)
which such Bank may sustain: (i) if for any reason (other than a default by
such Bank or the Administrative Agent) a Borrowing of Eurodollar Loans does not
occur on a date specified therefor in a Notice of Borrowing or Notice of
Conversion (whether or not withdrawn by the Borrower or deemed withdrawn
pursuant to Section 1.10(a)); (ii) if any repayment or conversion of any of its
Eurodollar Loans occurs on a date which is not the last day of an Interest
Period applicable thereto; (iii) if any prepayment of any of its Eurodollar
Loans is not made on any date specified in a notice of prepayment given by the
Borrower; or (iv) as a consequence of (x) any other default by the Borrower to
repay its Eurodollar Loans when required by the terms of this Agreement or (y)
an election made pursuant to Section 1.10(b).
1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that, upon
the occurrence of any event giving rise to the operation of Section 1.10(a)(ii)
or (iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Bank) to designate another lending office for any Loans
or Commitments affected by such event, provided that such designation is made
on such terms that such Bank and its lending office suffer no economic, legal
or regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such Section. Nothing in this
Section 1.12 shall affect or postpone any of the obligations of the Borrower or
the right of any Bank provided in Section 1.10, 2.05 or 4.04.
SECTION 2. LETTERS OF CREDIT.
2.01 LETTERS OF CREDIT. (a) Subject to and upon the terms
and conditions herein set forth, the Borrower may request a Letter of Credit
Issuer at any time and from time to time on or after the Initial Borrowing Date
and prior to the RF Maturity Date to issue, for the account of the Borrower and
in support of (x) trade obligations, workmen's compensation and other
obligations of the Borrower or any Subsidiary (other than a Specified
Subsidiary) incurred in the ordinary course of its business and/or (y) such
other obligations of the Borrower or any Subsidiary (other than a Specified
Subsidiary) to any other Person that are acceptable to the Administrative Agent
and such Letter of Credit Issuer, and subject to and upon the terms and
conditions herein set forth such Letter of Credit Issuer agrees to issue from
time to time, irrevocable letters of credit in such form as may be approved by
such Letter of Credit Issuer and the Administrative Agent (each such letter of
credit, and each Existing Letter of Credit described in Section 2.01(d), a
"Letter of Credit" and collectively, the "Letters of Credit").
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(b) Notwithstanding the foregoing, (i) no Letter of Credit
shall be issued the Stated Amount of which, when added to the Letter of Credit
Outstandings at such time, would exceed either (x) $5,000,000 or (y) when added
to the aggregate principal amount of all Revolving Loans then outstanding, an
amount equal to the Total Revolving Commitment at such time and (ii) each
Letter of Credit shall have an expiry date occurring not later than one year
after such Letter of Credit's date of issuance, although any Letter of Credit
may be renewable for successive periods of up to 12 months, but not beyond the
Business Day next preceding the RF Maturity Date, on terms acceptable to the
Administrative Agent and the relevant Letter of Credit Issuer.
(c) Notwithstanding the foregoing, in the event a Bank
Default exists, no Letter of Credit Issuer shall be required to issue any
Letter of Credit unless such Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Borrower to eliminate such Letter of
Credit Issuer's risk with respect to the participation in Letters of Credit of
the Defaulting Bank or Banks, including by cash collateralizing such Defaulting
Bank's or Banks' RF Percentage of the Letter of Credit Outstandings.
(d) Annex VIII hereto contains a description of all letters
of credit outstanding on, and to continue in effect after, the Initial
Borrowing Date. Each such letter of credit issued by a bank that becomes a
Bank under this Agreement prior to the Syndication Date (each, an "Existing
Letter of Credit") shall constitute a "Letter of Credit" for all purposes of
this Agreement, issued, for purposes of Section 2.04(a), on the date such bank
so becomes a Bank (or, if later, the Initial Borrowing Date), and the Borrower,
the Administrative Agent and the Banks hereby agree that, from and after such
date, the terms of this Agreement shall apply to such Letters of Credit,
superseding any other agreement theretofore applicable to them.
2.02 LETTER OF CREDIT REQUESTS; NOTICES OF ISSUANCE. (a)
Whenever it desires that a Letter of Credit be issued, the Borrower shall give
the Administrative Agent and the Letter of Credit Issuer written notice
(including by way of telecopier) in the form of Exhibit A-2 thereof prior to
1:00 P.M. (New York time) at least five Business Days (or such shorter period
as may be acceptable to the relevant Letter of Credit Issuer) prior to the
proposed date of issuance (which shall be a Business Day) (each a "Letter of
Credit Request"), which Letter of Credit Request shall include an application
for such Letter of Credit and any other documents that such Letter of Credit
Issuer customarily requires in connection therewith. The Administrative Agent
shall promptly notify each Bank of each Letter of Credit Request.
(b) Each Letter of Credit Issuer shall, on the date of each
issuance of a Letter of Credit by it, give the Administrative Agent, each Bank
and the Borrower written notice of the issuance of such Letter of Credit,
accompanied by a copy to the Administrative Agent of the Letter of Credit or
Letters of Credit issued by it. Each Letter of Credit
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Issuer shall provide to the Administrative Agent a monthly summary describing
each Letter of Credit issued by such Letter of Credit Issuer and then
outstanding.
2.03 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The
Borrower hereby agrees to reimburse each Letter of Credit Issuer, by making
payment to the Administrative Agent in immediately available funds at the
Payment Office, for any payment or disbursement made by such Letter of Credit
Issuer under any Letter of Credit (each such amount so paid or disbursed until
reimbursed, an "Unpaid Drawing") immediately after, and in any event on the
date on which, such Letter of Credit Issuer notifies the Administrative Agent
and the Borrower of such payment or disbursement (which notice to the Borrower
shall be delivered reasonably promptly after any such payment or disbursement),
with interest on the amount so paid or disbursed by such Letter of Credit
Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York time) on the
date of such payment or disbursement, from and including the date paid or
disbursed to but not including the date such Letter of Credit Issuer is
reimbursed therefor at a rate per annum which shall be the rate then applicable
to Base Rate Loans (plus an additional 2% per annum if not reimbursed by the
third Business Day after the date of such payment or disbursement), such
interest also to be payable on demand.
(b) The Borrower's obligation under this Section 2.03 to
reimburse each Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower may have or have had against such Letter
of Credit Issuer, the Administrative Agent, any other Letter of Credit Issuer
or any Bank, including, without limitation, any defense based upon the failure
of any drawing under a Letter of Credit to conform to the terms of the Letter
of Credit or any non-application or misapplication by the beneficiary of the
proceeds of such drawing, provided however that the Borrower shall not be
obligated to reimburse a Letter of Credit Issuer for any wrongful payment made
by such Letter of Credit Issuer under a Letter of Credit as a result of acts or
omissions constituting willful misconduct or gross negligence on the part of
such Letter of Credit Issuer.
2.04 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon
the issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter
of Credit Issuer shall be deemed to have sold and transferred to each Bank with
a Revolving Commitment, and each Bank (each a "Participant") shall be deemed
irrevocably and unconditionally to have purchased and received from such Letter
of Credit Issuer, without recourse or warranty, an undivided interest and
participation, to the extent of such Bank's RF Percentage, in such Letter of
Credit, each substitute letter of credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement with respect thereto (although
Letter of Credit Fees shall be payable directly to the Administrative Agent for
the account of the Banks as provided in Section 3.01(b) and the Participants
shall have no right to receive any
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<PAGE> 19
portion of any Facing Fees) and any security therefor or guaranty pertaining
thereto. Upon any change in the Revolving Commitments of the Banks pursuant to
Section 12.04(b), it is hereby agreed that, with respect to all outstanding
Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment
to the participations pursuant to this Section 2.04 to reflect the new RF
Percentages of the assigning and assignee Bank.
(b) In determining whether to pay under any Letter of Credit,
a Letter of Credit Issuer shall not have any obligation relative to the
Participants other than to determine that any documents required to be
delivered under such Letter of Credit have been delivered and that they appear
to comply on their face with the requirements of such Letter of Credit. Any
action taken or omitted to be taken by a Letter of Credit Issuer under or in
connection with any Letter of Credit if taken or omitted in the absence of
gross negligence or willful misconduct, shall not create for such Letter of
Credit Issuer any resulting liability.
(c) In the event that a Letter of Credit Issuer makes any
payment under any Letter of Credit and the Borrower shall not have reimbursed
such amount in full to such Letter of Credit Issuer pursuant to Section
2.03(a), such Letter of Credit Issuer shall promptly notify the Administrative
Agent, and the Administrative Agent shall promptly notify each Participant of
such failure, and each Participant shall promptly and unconditionally pay to
the Administrative Agent for the account of such Letter of Credit Issuer, the
amount of such Participant's RF Percentage of such payment in U.S. dollars and
in same day funds, provided, however, that no Participant shall be obligated to
pay to the Administrative Agent its RF Percentage of such unreimbursed amount
for any wrongful payment made by such Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or
gross negligence on the part of such Letter of Credit Issuer. If the
Administrative Agent so notifies any Participant required to fund a payment
under a Letter of Credit prior to 11:00 A.M. (New York time) on any Business
Day, such Participant shall make available to the Administrative Agent for the
account of the relevant Letter of Credit Issuer such RF's Revolving Percentage
of the amount of such payment on such Business Day in same day funds. If and
to the extent such Participant shall not have so made its RF Percentage of the
amount of such payment available to the Administrative Agent for the account of
the relevant Letter of Credit Issuer, such Participant agrees to pay to the
Administrative Agent for the account of such Letter of Credit Issuer, forthwith
on demand such amount, together with interest thereon, for each day from such
date until the date such amount is paid to the Administrative Agent for the
account of such Letter of Credit Issuer at the Federal Funds Effective Rate.
The failure of any Participant to make available to the Administrative Agent
for the account of the relevant Letter of Credit Issuer its RF Percentage of
any payment under any Letter of Credit shall not relieve any other Participant
of its obligation hereunder to make available to the Administrative Agent for
the account of such Letter of Credit Issuer its RF Percentage of any payment
under any Letter of Credit on the date required, as specified
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<PAGE> 20
above, but no Participant shall be responsible for the failure of any other
Participant to make available to the Administrative Agent for the account of
such Letter of Credit Issuer such other Participant's RF Percentage of any such
payment.
(d) Whenever a Letter of Credit Issuer receives a payment of
a reimbursement obligation as to which the Administrative Agent has received
for the account of such Letter of Credit Issuer any payments from the
Participants pursuant to clause (c) above, such Letter of Credit Issuer shall
pay to the Administrative Agent and the Administrative Agent shall promptly pay
to each Participant which has paid its RF Percentage thereof, in U.S. dollars
and in same day funds, an amount equal to such Participant's RF Percentage of
the principal amount thereof and interest thereon accruing after the purchase
of the respective participations.
(e) The obligations of the Participants to make payments to
the Administrative Agent for the account of each Letter of Credit Issuer with
respect to Letters of Credit shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of
this Agreement under all circumstances, including, without limitation, any of
the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit
(or any Person for whom any such transferee may be acting), the
Administrative Agent, any Letter of Credit Issuer, any Bank, or other
Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the
Borrower and the beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
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<PAGE> 21
2.05 INCREASED COSTS. If after the Effective Date, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Letter of Credit Issuer or any
Bank with any request or directive (whether or not having the force of law) by
any such authority, central bank or comparable agency (in each case made
subsequent to the Effective Date) shall either (i) impose, modify or make
applicable any reserve, deposit, capital adequacy or similar requirement
against Letters of Credit issued by such Letter of Credit Issuer or such Bank's
participation therein, or (ii) shall impose on such Letter of Credit Issuer or
any Bank any other conditions affecting this Agreement, any Letter of Credit or
such Bank's participation therein; and the result of any of the foregoing is to
increase the cost to such Letter of Credit Issuer or such Bank of issuing,
maintaining or participating in any Letter of Credit, or to reduce the amount
of any sum received or receivable by such Letter of Credit Issuer or such Bank
hereunder (other than any increased cost or reduction in the amount received or
receivable resulting from the imposition of or a change in the rate of taxes or
similar charges), then, upon demand to the Borrower by such Letter of Credit
Issuer or such Bank (a copy of which notice shall be sent by such Letter of
Credit Issuer or such Bank to the Administrative Agent), the Borrower shall pay
to such Letter of Credit Issuer or such Bank such additional amount or amounts
as will compensate any such Letter of Credit Issuer or such Bank for such
increased cost or reduction. A certificate submitted to the Borrower by any
Letter of Credit Issuer or any Bank, as the case may be (a copy of which
certificate shall be sent by such Letter of Credit Issuer or such Bank to the
Administrative Agent), setting forth the basis for the determination of such
additional amount or amounts necessary to compensate any Letter of Credit
Issuer or such Bank as aforesaid shall be conclusive and binding on the
Borrower absent manifest error, although the failure to deliver any such
certificate shall not release or diminish any of the Borrower's obligations to
pay additional amounts pursuant to this Section 2.05.
SECTION 3. FEES; COMMITMENTS.
3.01 FEES. (a) The Borrower agrees to pay to the
Administrative Agent a Commitment Commission ("Commitment Commission") for the
account of each Non-Defaulting Bank for the period from and including the
Effective Date to but not including the date the Total Revolving Commitment has
been terminated, computed at a rate equal to 3/8 of 1% per annum on the average
daily Unutilized Revolving Commitment of such Bank. Such Commitment Commission
shall be due and payable quarterly in arrears on the last Business Day of each
March, June, September and December of each year, commencing September, 1996,
and on the date upon which the Total Revolving Commitment is terminated.
(b) The Borrower agrees to pay to the Administrative Agent,
for the account of each Non-Defaulting Bank, pro rata on the basis of its RF
Percentage, a fee in
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<PAGE> 22
respect of each Letter of Credit (the "Letter of Credit Fee") computed at the
rate of 2% per annum on the average daily Stated Amount of such Letter of
Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in
arrears on the last Business Day of each March, June, September and December of
each year, commencing September, 1996, and on the date upon which the Total
Revolving Commitment is terminated.
(c) The Borrower agrees to pay to the Administrative Agent
for the account of each Letter of Credit Issuer a fee in respect of each Letter
of Credit issued by it (the "Facing Fee") computed at the rate of 1/4 of 1% per
annum on the average daily Stated Amount of such Letter of Credit. Accrued
Facing Fees shall be due and payable quarterly in arrears on the last Business
Day of each March, June, September and December of each year, commencing
September, 1996, and on the date upon which the Total Revolving Commitment is
terminated.
(d) The Borrower agrees to pay directly to each Letter of
Credit Issuer upon each issuance of, drawing under, and/or amendment of, a
Letter of Credit issued by it such amount as shall at the time of such
issuance, drawing or amendment be the administrative charge which such Letter
of Credit Issuer is customarily charging for issuances of, drawings under or
amendments of, letters of credit issued by it.
(e) The Borrower shall pay to the Administrative Agent on the
Initial Borrowing Date and thereafter for its own account and/or for
distribution to the Banks such fees as heretofore agreed by the Borrower and
the Administrative Agent.
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 VOLUNTARY REDUCTION OF COMMITMENTS. Upon at least three
Business Days' prior written notice (or telephonic notice confirmed in writing)
to the Administrative Agent at its Notice Office (which notice the
Administrative Agent shall promptly transmit to each of the Banks), the
Borrower shall have the right, without premium or penalty, to terminate or
partially reduce the Unutilized Total Revolving Commitment, provided that (i)
any such termination shall apply to proportionately and permanently reduce the
Revolving Commitment, if any, of each of the Banks, (ii) any partial reduction
pursuant to this Section 3.02 shall be in the amount of at least $5,000,000
(or, if greater, in integral multiples of $1,000,000) and (iii) each such
reduction shall reduce the then remaining Scheduled RF Reductions on a pro rata
basis (based on the then remaining amount of each such Scheduled RF Reduction).
3.03 MANDATORY ADJUSTMENTS OF COMMITMENTS, ETC. (a) The
Total Commitment (and the Term Commitment and Revolving Commitment of each
Bank) shall
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<PAGE> 23
terminate on the Expiration Date unless the Initial Borrowing Date has occurred
on or before such date.
(b) The Total Term Commitment shall terminate in its entirety
on the Initial Borrowing Date (after giving effect to the making of Term Loans
on such date).
(c) The Total Revolving Commitment shall be reduced in an
amount of $5,000,000 on each of the last Business Day of each March, June,
September and December commencing September 2001 (each such reduction, a
"Scheduled RF Reduction").
(d) On each date upon which a mandatory repayment of Loans
pursuant to Section 4.02(A)(d), (e), (f), (g), (h) or (i) is required, or would
be required if any Acquisition Loans or Term Loans were then outstanding, the
Total Revolving Commitment shall be permanently reduced by the amount, if any,
by which the amount that would be required to be repaid pursuant to said
Sections if an unlimited amount of Acquisition Loans and Term Loans were
actually then outstanding exceeds the aggregate principal amount of Acquisition
Loans and Term Loans then outstanding.
(e) The Total Revolving Commitment (and the Revolving
Commitment of each Bank) shall terminate on the earlier of (x) the RF Maturity
Date and (y) the date on which a Change of Control occurs.
(f) Each partial reduction of the Total Revolving Commitment
provided for in this Section 3.03 shall apply pro rata to the Revolving
Commitment (if any) of each Bank.
SECTION 4. PAYMENTS.
4.01 VOLUNTARY PREPAYMENTS. The Borrower shall have the
right to prepay Loans, in whole or in part, without premium or penalty, from
time to time on the following terms and conditions: (i) the Borrower shall
give the Administrative Agent at the Payment Office written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay the
Loans, whether such Loans are Term Loans or Revolving Loans, the amount of such
prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s)
pursuant to which made, which notice shall be received by the Administrative
Agent by 1:00 P.M. (New York time) one Business Day prior to the date of such
prepayment (and which notice shall promptly be transmitted by the
Administrative Agent to each of the Banks); (ii) each partial prepayment of any
Borrowing shall be in an aggregate principal amount of at least $5,000,000,
provided that no partial prepayment of Eurodollar Loans made pursuant to a
Borrowing shall reduce the aggregate principal amount of the Loans outstanding
pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount
applicable
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<PAGE> 24
thereto; (iii) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied pro rata among such Loans; and (iv) each prepayment
of Term Loans pursuant to this Section 4.01 shall reduce the then remaining
Scheduled Repayments on a pro rata basis (based upon the then remaining
principal amount of each such Scheduled Repayment).
4.02 MANDATORY PREPAYMENTS.
(A) REQUIREMENTS:
(a) If on any date (after giving effect to any other payments
on such date) the sum of (i) the aggregate outstanding principal amount of
Revolving Loans plus (ii) the aggregate amount of Letter of Credit Outstandings
exceeds the Total Revolving Commitment as then in effect, the Borrower shall
repay on such date that principal amount of Revolving Loans and, after
Revolving Loans have been paid in full, Unpaid Drawings, in an aggregate amount
equal to such excess. If, after giving effect to the prepayment of Revolving
Loans and Unpaid Drawings, the aggregate amount of Letter of Credit
Outstandings exceeds the Total Revolving Commitment as then in effect, the
Borrower shall pay to the Administrative Agent an amount in cash and/or Cash
Equivalents equal to such excess and the Administrative Agent shall hold such
payment as security for the obligations of the Borrower hereunder pursuant to a
cash collateral agreement to be entered into in form and substance reasonably
satisfactory to the Administrative Agent and the Borrower (which shall permit
certain investments in Cash Equivalents reasonably satisfactory to the
Administrative Agent and the Borrower until the proceeds are applied to the
secured obligations). In addition, if on any date (after giving effect to any
other payments on such date) the aggregate outstanding principal amount of
Acquisition Loans exceeds the Acquisition Sublimit then in effect, the Borrower
shall repay on such date that principal amount of Acquisition Loans in an
aggregate amount equal to such excess.
(b) On June 1 of each year commencing June 1, 1997, if a
Clean-Down Period shall not have occurred since the preceding July 1, the
Borrower shall prepay the principal amount of Working Capital Loans in an
amount (if any) necessary to reduce the sum of the aggregate outstanding
principal amount of Working Capital Loans plus the Letter of Credit
Outstandings to not more than $10,000,000, with the outstanding principal
amount of Working Capital Loans plus the Letter of Credit Outstandings not to
exceed such $10,000,000 sum until the Clean-Down Period has ended.
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<PAGE> 25
(c) On each date set forth below the Borrower shall be
required to repay the principal amount of Term Loans as is set forth opposite
such date (each such repayment, a "Scheduled Repayment"):
<TABLE>
<CAPTION>
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
September 26, 1996 $1,250,000
December 26, 1996 1,250,000
March 26, 1997 1,250,000
June 26, 1997 1,250,000
September 26, 1997 2,500,000
December 26, 1997 2,500,000
March 26, 1998 2,500,000
June 26, 1998 2,500,000
September 26, 1998 3,750,000
December 26, 1998 3,750,000
March 26, 1999 3,750,000
June 26, 1999 3,750,000
September 26, 1999 6,250,000
December 26, 1999 6,250,000
March 26, 2000 6,250,000
June 26, 2000 6,250,000
September 26, 2000 8,750,000
December 26, 2000 8,750,000
March 26, 2001 8,750,000
June 26, 2001 8,750,000
September 26, 2001 10,000,000
December 26, 2001 10,000,000
March 26, 2002 10,000,000
June 26, 2002 10,000,000
September 26, 2002 11,250,000
December 26, 2002 11,250,000
March 26, 2003 11,250,000
TF Maturity Date 31,250,000
</TABLE>
(d) On or prior to the third Business Day following the date
of receipt thereof by Holdings and/or any of its Subsidiaries of the Cash
Proceeds from any Asset Sale, an amount equal to 100% of the Net Cash Proceeds
then received from such Asset Sale shall be applied as a mandatory repayment of
principal of (x) first, the then outstanding Acquisition Loans and (y) second,
once no Acquisition Loans remain outstanding, the then outstanding Term Loans
provided that to the extent any such Asset Sale constitutes a
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<PAGE> 26
Specified Asset Sale then the mandatory repayments required to be made with the
Net Cash Proceeds thereof pursuant to this clause (d) shall be applied first to
Term Loans and second to Acquisition Loans.
(e) On the date of the receipt thereof by Holdings and/or any
of its Subsidiaries an amount equal to 100% of the cash proceeds (net of
underwriting discounts and commissions and other customary fees and costs
associated therewith) from the incurrence of Indebtedness for borrowed money by
Holdings or any of its Subsidiaries (other than Indebtedness permitted by
Section 8.04 as in effect on the Effective Date but excluding from such
exception Non-Recourse Debt that refinances properties financed by Acquisition
Loans) shall be applied as a mandatory repayment of principal of (x) first, the
then outstanding Acquisition Loans and (y) second, once no Acquisition Loans
remain outstanding, the then outstanding Term Loans.
(f) On the date of the receipt thereof by Holdings, an amount
equal to 100% of the cash proceeds (net of underwriting discounts and
commissions and other customary fees and costs associated therewith) from any
sale or issuance of equity by Holdings after the Initial Borrowing Date (other
than (i) any over allotment option related to the IPO and (ii) any sale or
issuance to management or employees) shall be applied as a mandatory repayment
of principal of (x) first, the then outstanding Acquisition Loans and (y)
second, once no Acquisition Loans remain outstanding, the then outstanding Term
Loans.
(g) On each date which is 90 days after the last day of each
fiscal year of Holdings (commencing with the fiscal year ending on December 31,
1996), an amount equal to 50% of Excess Cash Flow for such fiscal year (which
in the case of the first fiscal year shall be for the period from the Initial
Borrowing Date to the end of such first fiscal year) shall be applied as a
mandatory repayment of principal of (x) first, the then outstanding Acquisition
Loans and (y) second, once no Acquisition Loans remain outstanding, the then
outstanding Term Loans.
(h) On the date of the receipt thereof by Holdings or any of
its Subsidiaries, an amount equal to 100% of the net cash proceeds constituting
termination fees under any Management Contract shall be applied as a mandatory
repayment of principal of (x) first, the then outstanding Acquisition Loans and
(y) second, once no Acquisition Loans remain outstanding, the then outstanding
Term Loans, provided that to the extent the affected Management Contract was in
effect on the Effective Date (and notwithstanding any subsequent modification
or extension thereof), then the mandatory repayments required to be made with
the termination fees paid thereunder pursuant to this clause (h) shall be
applied first to Term Loans and second to Acquisition Loans, provided further
that any such net cash proceeds aggregating less than $500,000 for a Management
Contract that are received in any fiscal year of Holdings shall not be required
to be used to repay Loans
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<PAGE> 27
pursuant to this clause (h) until such time as all such exempted net cash
proceeds aggregate $500,000 in such fiscal year and, in such event, only to the
extent of such excess.
(i) On the date of the receipt thereof by the Borrower, an
amount equal to 100% of a payment received by the Borrower under the CGL
Participation relating to principal indebtedness (and not to interest thereon)
shall be applied as a mandatory repayment of principal of (x) first, the then
outstanding Term Loans and (y) second, once no Term Loans remain outstanding,
the Acquisition Loans.
(j) On the date of which a Change of Control occurs, the then
outstanding principal amount of Term Loans, if any, shall become due and
payable in full.
(B) APPLICATION:
(a) Each mandatory repayment of Term Loans required pursuant
to Section 4.02(A)(d), (e), (f), (g), (h) or (i) shall be applied to the
repayment of the then remaining Scheduled Repayments on a pro rata basis (based
upon the then remaining principal amount of each such Scheduled Repayment).
(b) With respect to each repayment of Loans required by this
Section 4.02, the Borrower shall designate the Types of Loans which are to be
repaid and the specific Borrowing(s) under the affected Facility pursuant to
which made, provided that (i) the Borrower shall first so designate all Loans
of the respective Facility that are Base Rate Loans and Eurodollar Loans with
Interest Periods ending on the date of repayment prior to designating any other
Eurodollar Loans of such Facility for repayment, (ii) if the outstanding
principal amount of Eurodollar Loans made pursuant to a Borrowing is reduced
below the applicable Minimum Borrowing Amount as a result of any such
prepayment, then all the Loans outstanding pursuant to such Borrowing shall be
converted into Base Rate Loans, and (iii) each prepayment of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans. In the
absence of a designation by the Borrower as described in the preceding
sentence, the Administrative Agent shall, subject to the above, make such
designation in its sole discretion with a view, but no obligation, to minimize
breakage costs owing under Section 1.11.
4.03 METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made
to the Administrative Agent for the ratable (based on its pro rata share)
account of the Banks entitled thereto, not later than 1:00 P.M. (New York time)
on the date when due and shall be made in immediately available funds and in
lawful money of the United States of America at the Payment Office, it being
understood that written notice by the Borrower to the Administrative Agent to
make a payment from the funds in the Borrower's account at the Payment Office
shall constitute the making of such payment to the extent of such funds held in
such account. Any pay-
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<PAGE> 28
ments under this Agreement which are made later than 1:00 P.M. (New York
time) shall be deemed to have been made on the next succeeding Business
Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and, with respect to
payments of principal, interest shall be payable during such extension
at the applicable rate in effect immediately prior to such extension.
4.04 NET PAYMENTS. (a) All payments made by the Borrower
hereunder, under any Note or any other Credit Document, will be made without
setoff, counterclaim or other defense. Except as provided for in Section
4.04(b), all such payments will be made free and clear of, and without
deduction or withholding for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature now or hereafter
imposed by any jurisdiction or by any political subdivision or taxing authority
thereof or therein with respect to such payments (but excluding, except as
provided in the second succeeding sentence, any tax, imposed on or measured by
the net income or net profits of a Bank pursuant to the laws of the
jurisdiction under which such Bank is organized or the jurisdiction in which
the principal office or applicable lending office of such Bank is located or
any subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect to such nonexcluded taxes, levies, imposts, duties,
fees, assessments or other charges (all such nonexcluded taxes, levies,
imposts, duties, fees assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower
agrees to pay the full amount of such Taxes and such additional amounts as may
be necessary so that every payment of all amounts due hereunder, under any Note
or under any other Credit Document, after withholding or deduction for or on
account of any Taxes, will not be less than the amount provided for herein or
in such Note or in such other Credit Document. If any amounts are payable in
respect of Taxes pursuant to the preceding sentence, the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for taxes imposed
on or measured by the net income or profits of such Bank pursuant to the laws
of the jurisdiction in which such bank is organized or in which the principal
office or applicable lending office of such Bank is located or under the laws
of any political subdivision or taxing authority of any such jurisdiction in
which such bank is organized or in which the principal office or applicable
lending office of such Bank is located and for any withholding of income or
similar taxes imposed by the United States of America as such Bank shall
determine are payable by, or withheld from, such Bank in respect of such
amounts so paid to or on behalf of such Bank pursuant to the preceding sentence
and in respect of any amounts paid to or on behalf of such Bank pursuant to
this sentence. The Borrower will furnish to the Administrative Agent within 45
days after the date the payment of any Taxes, or any withholding or deduction
on account thereof, is due pursuant to applicable law certified copies of tax
receipts, or other evidence satisfactory to the Bank, evidencing such payment
by the Borrower. The Borrower will indemnify and hold harmless the
Administrative Agent and
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<PAGE> 29
each Bank, and reimburse the Administrative Agent or such Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid or withheld
by such Bank.
(b) Each Bank that is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes agrees to provide to the Borrower and the Administrative Agent on or
prior to the Effective Date, or in the case of a Bank that is an assignee or
transferee of an interest under this Agreement pursuant to Section 12.04
(unless the respective Bank was already a Bank hereunder immediately prior to
such assignment or transfer and such Bank is in compliance with the provisions
of this Section 4.04(b)), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement, any Note or any other
Credit Document, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit K (any such certificate, a Section
4.04(b)(ii) Certificate) and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement to a complete exemption from United States withholding
tax with respect to payments of interest to be made under this Agreement, any
Note or any other Credit Document. In addition, each Bank agrees that from
time to time after the Effective Date, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate in any
material respect, it will deliver to the Borrower and the Administrative Agent
two new accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001, or Form W-8 and a Section 4.04(b)(ii) Certificate,
as the case may be, and such other forms as may be required in order to confirm
or establish the entitlement of such Bank to a continued exemption from or
reduction in United States withholding tax with respect to payments under this
Agreement, any Note or any other Credit Document, or it shall immediately
notify the Borrower and the Administrative Agent of its inability to deliver
any such Form or Certificate, in which case such Bank shall not be required to
deliver any such Form or Certificate pursuant to this Section 4.04(b).
Notwithstanding anything to the contrary contained in Section 4.04(a), but
subject to Section 12.04(b) and the immediately succeeding sentence, (x) the
Borrower shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or other similar taxes imposed by the United States
(or any political subdivision or taxing authority thereof or therein) from
interest, fees or other amounts payable hereunder for the account of any Bank
which is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for United States federal income tax purposes and
which has not provided to the Borrower such forms that establish a complete
exemption from such deduction or withholding and (y) the Borrower shall not be
obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to
a Bank in respect of income or similar taxes imposed by the United States or
any additional amounts with respect thereto (I) if
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such Bank has not provided to the Borrower the Internal Revenue Service forms
required to be provided to the Borrower pursuant to this Section 4.04(b) or
(II) in the case of a payment other than interest, to a Bank described in
clause (ii) above, to the extent that such forms do not establish a complete
exemption from withholding of such taxes. Notwithstanding anything to the
contrary contained in the preceding sentence or elsewhere in this Section 4.04
and except as specifically provided for in Section 12.04(b), the Borrower
agrees to pay additional amounts and indemnify each Bank in the manner set
forth in Section 4.04(a) (without regard to the identity of the jurisdiction
requiring the deduction or withholding) in respect of any Taxes deducted or
withheld by it as described in the previous sentence as a result of any changes
after the Effective Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of income or similar Taxes.
SECTION 5. CONDITIONS PRECEDENT.
5.01 CONDITIONS PRECEDENT TO INITIAL BORROWING DATE. The
obligation of the Banks to make Loans, and of the Letter of Credit Issuer to
issue Letters of Credit, on the Initial Borrowing Date is subject to the
satisfaction of each of the following conditions at such time:
(a) EFFECTIVENESS; NOTES. On or prior to the Initial
Borrowing Date, (i) the Effective Date shall have occurred and (ii)
there shall have been delivered to the Administrative Agent for the
account of each Bank the appropriate Term Note and Revolving Note
executed by the Borrower, in each case, in the amount, maturity and as
otherwise provided herein.
(b) OPINIONS OF COUNSEL. On the Initial Borrowing Date, the
Administrative Agent shall have received opinions, addressed to the
Administrative Agent and each of the Banks and dated the Initial
Borrowing Date, from (i) Jones, Day, Reavis & Pogue, special counsel to
Holdings and its Subsidiaries, which opinion shall cover the matters
covered in Exhibit C-1 hereto, (ii) Marvin I. Droz, Esq., General
Counsel of Holdings, which opinion shall cover the matters contained in
Exhibit C-2 hereto, (iii) White & Case, special counsel to the Banks,
which opinion shall cover the matters contained in Exhibit C-3 hereto
and (iv) local counsel satisfactory to the Administrative Agent
covering the perfection of the Liens granted pursuant to the Security
Documents and such other matters incident to the transactions
contemplated by this Agreement as the Administrative Agent may
reasonably request, in such jurisdictions as the Administrative Agent
may reasonably specify, all such opinions to be in form and substance
reasonably satisfactory to the Administrative Agent.
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(c) CORPORATE PROCEEDINGS. (i) On the Initial Borrowing
Date, the Administrative Agent shall have received from (x) each Credit
Party a certificate, dated the Initial Borrowing Date, signed by the
President or any Vice-President of such Credit Party in the form of
Exhibit D hereto with appropriate insertions and deletions, together
with copies of the articles of incorporation, partnership agreement,
limited liability company agreement, certificate of formation and the
by-laws or other organizational documents of such Credit Party and the
resolutions, or such other administrative approval, of such Credit
Party referred to in such certificate and all of the foregoing shall be
reasonably satisfactory to the Administrative Agent, (y) the Borrower a
certificate of its chief financial officer, dated the Initial Borrowing
Date, to the effect that all of the applicable conditions set forth in
Sections 5.01(g), (h), (i), (j), (k), and (o) and 5.02 have been
satisfied as of such date and (z) CGL a true and correct copy of the
amendment, if any, to the CGL Partnership Agreement executed in
connection with the CGL Participation (the "CGL Partnership
Amendment"), which amendment shall be in form and substance
satisfactory to the Administrative Agent and shall be in full force and
effect.
(ii) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Transaction
Documents shall be reasonably satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received
all information and copies of all certificates, documents and papers,
including good standing certificates and any other records of corporate
proceedings and governmental approvals, if any, which the
Administrative Agent may have reasonably requested in connection
therewith, such documents and papers, where appropriate, to be
certified by proper corporate or governmental authorities.
(d) PLANS; ETC. On or prior to the Initial Borrowing Date,
there shall have been made available for review by the Administrative
Agent true and correct copies of:
(i) any Plans, and for each Plan (x) that is a
Single-Employer plan the most recently completed actuarial
valuation prepared therefor by such Plan's regular enrolled
actuary and the Schedule B (Actuarial Information) to the
most recent annual report (Form 5500 Series) for each Plan
filed with the Internal Revenue Service and (y) that is a
Multiemployer Plan, each of the documents referred to in
clause (x) either in the possession of Holdings or any of its
Subsidiaries or any ERISA Affiliate or reasonably available
thereto from the sponsor or trustees of such Plan;
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(ii) any collective bargaining agreements or any
other similar agreement or arrangements covering the
employees of Holdings or any of its Subsidiaries
(collectively, the "Collective Bargaining Agreements");
(iii) all agreements evidencing or relating to the
Existing Indebtedness (the "Existing Indebtedness
Agreements");
(iv) all agreements entered into by Holdings
governing the terms and relative rights of its capital stock,
and any agreements entered into by members or shareholders of
Holdings with respect to its capital stock (collectively, the
"Shareholders' Agreements");
(v) any agreement with respect to, the management
of Holdings or any of its Subsidiaries (collectively, the
"Management Agreements");
(vi) any material employment agreements entered into
by Holdings or any of its Subsidiaries (collectively, the
"Employment Agreements");
(vii) management contracts relating to hotels managed
by Holdings or any of its Subsidiaries (collectively the
"Management Contracts") to the extent in existence on the
Initial Borrowing Date; and
(viii) any tax sharing, tax allocation and other
similar agreements entered into by Holdings and/or any of its
Subsidiaries (collectively, the "Tax Sharing Agreements");
all of which Plans, Collective Bargaining Agreements, Existing
Indebtedness Agreements, Shareholders' Agreements, Management
Agreements, Employment Agreements, Management Contracts and Tax
Sharing Agreements shall be in form and substance reasonably
satisfactory to the Administrative Agent.
(e) ADVERSE CHANGE, ETC. From May 15, 1996 to the Initial
Borrowing Date, nothing shall have occurred which the Administrative
Agent or the Required Banks shall reasonably determine (i) has, or
could reasonably be expected to have, a material adverse effect on the
Assets or the rights or remedies of the Banks or the Administrative
Agent under this Agreement or any other Credit Document, or on the
ability of the Borrower to perform its obligations to them, or (ii)
has, or could reasonably be expected to have, a Material Adverse
Effect.
(f) LITIGATION. No actions, suits or proceedings shall be
pending or, to the knowledge of the Borrower, threatened against
Holdings or any of its Subsidiaries or any of their assets on the
Initial Borrowing Date (i) with respect to this Agree-
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ment or any other Credit Document or (ii) which the
Administrative Agent or the Required Banks shall determine has,
or could reasonably be expected to have, (x) a Material Adverse
Effect or (y) a material adverse effect on the Assets or the
rights or remedies of the Banks or the Administrative Agent
hereunder or under any other Credit Document or on the ability
of any Credit Party to perform its respective obligations to
the Banks hereunder or under any other Credit Document.
(g) APPROVALS. On the Initial Borrowing Date, all material
governmental and third party approvals in connection with the
transactions contemplated by the Credit Documents and the other
Transaction Documents and otherwise referred to herein or therein
shall have been obtained and remain in effect, and all applicable
waiting periods shall have expired without any action being taken by
any competent authority (including any court having jurisdiction)
which restrains or prevents such transactions or imposes, in the
reasonable judgment of the Required Banks or the Administrative Agent,
materially adverse conditions upon the consummation of such
transactions.
(h) REORGANIZATION. On or prior to the Initial Borrowing
Date, (x) the shareholders of (i) IHC shall have contributed 100% of
the outstanding capital stock of IHC to Holdings in exchange for
common stock of Holdings and (ii) each of Member and the Subsidiaries
of IHC shall have contributed 100% of the outstanding capital stock,
equity and/or partnership interests of such Persons not already owned
by the Borrower to Holdings in exchange for common stock of Holdings
and (y) Holdings shall have contributed such stock and interests
received by it pursuant to the proceeding clause (x) to the Borrower
(collectively, the "Reorganization"), such Reorganization to be
effected pursuant to the Formation Agreement, a copy of which
certified as true and correct by an Authorized Officer of the Borrower
to have been delivered to the Administrative Agent prior to the
Initial Borrowing Date, which Formation Agreement shall be in form and
substance reasonably satisfactory to the Administrative Agent. The
Reorganization shall have been consummated in accordance with the
terms and conditions of the Formation Agreement (without any material
waiver thereto not consented to by the Administrative Agent) and all
applicable laws.
(i) IPO. On or prior to the Initial Borrowing Date, Holdings
shall have received in available funds at least $203,000,000 in net
cash proceeds from the initial public issuance of its common stock
(the "IPO") effected as contemplated by the Registration Statement.
(j) ACQUISITIONS. (i) On or prior to the Initial Borrowing
Date, the Borrower shall have delivered to the Administrative Agent
all Acquisition Documents, certified as true and correct by an
Authorized Officer, all of which
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Acquisition Documents shall be in the same form as they were in on May
15, 1996 or shall otherwise be reasonably satisfactory to the
Administrative Agent and each of the conditions precedent to the
obligations of the Borrower to consummate the Acquisition shall have
been satisfied (without any material waiver thereto not consented to
by the Administrative Agent) to the reasonable satisfaction of the
Administrative Agent. The Acquisition shall have been consummated in
compliance with the terms of the Acquisition Documents and all
applicable laws.
(ii) In the event that the Westborough Acquisition is
effected on the Initial Borrowing Date the Borrower shall have
delivered to the Administrative Agent on or prior to the Initial
Borrowing Date all Westborough Acquisition Documents, certified as
true and correct by an Authorized Officer, all of which Westborough
Acquisition Documents shall be in form and substance reasonably
satisfactory to the Administrative Agent and each of the conditions
precedent to the obligations of the Borrower to consummate the
Westborough Acquisition shall have been satisfied (without any
material waiver thereto not consented to by the Administrative Agent)
to the reasonable satisfaction of the Administrative Agent. The
Westborough Acquisition shall have been consummated in compliance with
the terms of the Westborough Acquisition Documents and all applicable
laws.
(k) REFINANCING. (i) On the Initial Borrowing Date and
concurrently with the Credit Events to occur on such date, the
commitments under the Existing PNC Credit Agreement shall have been
terminated, all loans thereunder shall have been repaid in full,
together with interest thereon, all letters of credit issued
thereunder shall have been terminated or incorporated hereunder as, or
supported hereunder by, Letters of Credit, all other amounts owing
pursuant to the Existing PNC Credit Agreement shall have been repaid
in full and the creditors under the Existing PNC Credit Agreement
shall have terminated and released all Liens incurred in connection
therewith and the Administrative Agent shall have received evidence in
form, scope and substance reasonably satisfactory to it that the
matters set forth in this Section 5.01(k)(i) have been satisfied at
such time.
(ii) On the Initial Borrowing Date and concurrently with the
Credit Events to occur on such date, all loans under the Existing
Wells Fargo Credit Agreements shall have been repaid in full, together
with interest thereon, all letters of credit issued in connection
therewith shall have been terminated, all other amounts owing pursuant
to the Existing Wells Fargo Credit Agreements shall have been repaid
in full and the creditors under the Existing Wells Fargo Credit
Agreements shall have terminated and released all Liens incurred in
connection therewith and the Administrative Agent shall have received
evidence in form, scope and substance reasonably satisfactory to it
that the matter set forth in this Section 5.01(k)(ii) have been
satisfied at such time.
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(iii) On the Initial Borrowing Date and concurrently with the
Credit Events to occur on such date, all loans under the Existing
Hilltop Credit Agreement shall have been repaid in full, together with
interest thereon, all other amounts owing pursuant to the Existing
Hilltop Credit Agreement shall have been repaid in full and the
creditors under the Existing Hilltop Credit Agreement shall have
terminated and released all Liens incurred in connection therewith and
the Administrative Agent shall have received evidence in form, scope
and substance reasonably satisfactory to it that the matters set forth
in this Section 5.01(k)(iii) have been satisfied at such time.
(iv) On the Initial Borrowing Date and concurrently with the
Credit Events to occur on such date, all loans under the Existing
CIGNA Note shall have been repaid in full, together with interest
thereon, all other amounts owing pursuant to the Existing CIGNA Note
shall have been repaid in full and the creditors under the Existing
CIGNA Note shall have terminated and released all Liens incurred in
connection therewith and the Administrative Agent shall have received
evidence in form, scope and substance reasonably satisfactory to it
that the matters set forth in this Section 5.01(k)(iv) have been
satisfied at such time.
(v) On the Initial Borrowing Date and concurrently with the
Credit Events to occur on such date, the Borrower shall have
purchased, out of the proceeds of the Term Loans, subordinated
participations (the "CGL Participations") in $90,000,000 aggregate
principal amount of the loans outstanding under the Existing CGL
Credit Agreements and the Administrative Agent shall have received,
and be reasonably satisfied with, all documents relating to the CGL
Participations.
(vi) On the Initial Borrowing Date and after giving effect
to the refinancings referred to in Section 5.01(k)(i), (ii), (iii) and
(iv) (collectively the "Refinancing"), neither Holdings nor any of its
Subsidiaries shall have any outstanding Indebtedness other than the
Existing Indebtedness described in Section 6.18, and no default or
event of default under and as defined in the documentation governing
any such Existing Indebtedness shall have occurred or be continuing
both before and after giving effect to the Transaction.
(l) SUBSIDIARY GUARANTY. On the Initial Borrowing Date,
Capital Corp and each Wholly-Owned Subsidiary shall have duly
authorized, executed and delivered a Guaranty in the form of Exhibit E
hereto (as modified, amended or supplemented from time to time in
accordance with the terms hereof and thereof, the "Subsidiary
Guaranty"), and the Subsidiary Guaranty shall be in full force and
effect.
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(m) SECURITY DOCUMENTS. (i) On the Initial Borrowing Date,
each Credit Party shall have duly authorized, executed and delivered a
Pledge Agreement substantially in the form of Exhibit F hereto (as
modified, amended or supplemented from time to time in accordance with
the terms thereof and hereof, the "Pledge Agreement"), and shall have
delivered to the Collateral Agent, as pledgee thereunder, all of the
certificates representing the Pledged Securities referred to therein,
endorsed in blank or accompanied by executed and undated stock powers,
and the Pledge Agreement shall be in full force and effect.
(ii) On the Initial Borrowing Date, each Credit Party
shall have duly authorized, executed and delivered a Security
Agreement substantially in the form of Exhibit G (as modified,
supplemented or amended from time to time in accordance with the terms
thereof and hereof, the "Security Agreement") covering all of such
Credit Party's present and future Security Agreement Collateral, in
each case together with:
(A) executed copies of Financing Statements (Form
UCC-1) in appropriate form for filing under the UCC of each
jurisdiction as may be necessary to perfect the security
interests purported to be created by the Security Agreement;
(B) certified copies of Requests for Information or
Copies (Form UCC-11), or equivalent reports, each of recent
date listing all effective financing statements that name each
Credit Party as debtor and that are filed in the jurisdictions
referred to in clause (A), together with copies of such
financing statements (none of which shall cover the Collateral
except (x) those with respect to which appropriate termination
statements executed by the secured lender thereunder have been
delivered to the Agent and (y) to the extent evidencing Liens
permitted pursuant to Section 8.03(d));
(C) evidence of the completion of all other
recordings and filings of, or with respect to, the Security
Agreement as may be necessary or, in the opinion of the
Collateral Agent, desirable to perfect the security interests
intended to be created by the Security Agreement;
(D) executed copies of notices delivered to each
entity which is the issuer of partnership interests and/or
membership interests pledged under the Security Agreement and
executed copies of acknowledgements executed by each such
entity, together with evidence that such other actions have
been taken as may be necessary or, in the opinion of the
Collateral Agent, desirable to perfect the security interest
purported to be created by the Security Agreement (including,
without limitation, evidence that each such
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entity has duly recorded the security interest created by the
Security Agreement on the books and records of such entity);
and
(E) evidence that all other actions necessary or, in
the reasonable opinion of the Collateral Agent, desirable to
perfect and protect the security interest purported to be
created by the Security Agreement have been taken.
(iii) On the Initial Borrowing Date, the Collateral Agent
shall have received:
(A) fully executed counterparts of mortgages, deeds
of trust or deeds to secure debt, in each case in form and
substance reasonably satisfactory to the Collateral Agent
(each as modified, amended or supplemented from time to time
in accordance under the terms hereof and thereof, a "Mortgage"
and, collectively, the "Mortgages"), which Mortgages shall
cover such of the Real Property owned or leased by any Credit
Party as is designated on Part A of Annex IV as a mortgaged
property (each a "Mortgaged Property" and, collectively, the
"Mortgaged Properties"), together with evidence that
counterparts of the Mortgages have been delivered to the title
insurance company insuring the Lien of the Mortgages for
recording in all places to the extent necessary or, in the
reasonable opinion of the Collateral Agent, desirable to
effectively create a valid and enforceable first priority
mortgage lien on such Credit Party's interest in each
Mortgaged Property (subject only to Permitted Encumbrances) in
favor of the Collateral Agent (or such other trustee as may be
required or desired under local law) for the benefit of the
Banks;
(B) executed copies of financing statements (Form
UCC-1 or other applicable form) in appropriate form for filing
under the UCC of each jurisdiction as may be reasonably
necessary to perfect the security interests in fixtures,
equipment and personal property purported to be created by the
Mortgages;
(C) mortgagee title insurance policies (or marked
commitments to issue the same) for the Mortgaged Properties
issued by title insurers reasonably satisfactory to the
Collateral Agent (each a "Mortgage Policy" and, collectively,
the "Mortgage Policies") in amounts reasonably satisfactory to
the Collateral Agent assuring the Collateral Agent that the
Mortgages on such Mortgaged Properties are valid and
enforceable first priority mortgage liens on such Mortgaged
Properties, free and clear of all defects and encumbrances
except Permitted Encumbrances, and the
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Mortgage Policies shall otherwise be in form and substance
reasonably satisfactory to the Collateral Agent; and
(D) surveys and, to the extent requested by the
Collateral Agent, survey updates, in form and substance
reasonably satisfactory to the Collateral Agent, of the
Mortgaged Properties specified by the Administrative Agent,
certified in a manner satisfactory to the Collateral Agent by
a licensed professional surveyor reasonably satisfactory to
the Administrative Agent.
(iv) On the Initial Borrowing Date, the Collateral Agent
shall have received:
(A) from Interstone/Huntington Partnership L.P., a
duly authorized and executed assignment of judgment, in form
and substance satisfactory to the Collateral Agent, assigning
to the Collateral Agent as collateral security all of
Interstone/Huntington Partnership L.P.'s rights and interests
in the Huntington Judgment with respect to the Real Property
located in Melville, New York (the "Assignment of Judgment"),
and Interstate/Huntington Partnership, L.P. shall take all
actions necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect and protect the
security interests purported to be created by the Assignment
of Judgment; and
(B) from the Borrower, a form of Mortgage, a form of
UCC-1 financing statement relating to such Mortgage, a form of
Mortgage Policy relating to such Mortgage and form of legal
opinion relating to such Mortgage, each with respect to the
Real Property located in Melville, New York (collectively, the
"Melville Documents"), such Melville Documents to be in form
and substance reasonably satisfactory to the Collateral Agent
and shall be filed and/or delivered pursuant to Section
12.18(c).
(n) SOLVENCY. On the Initial Borrowing Date, the
Administrative Agent shall have received from the chief financial
officer of Holdings a certificate in the form of Exhibit H hereto,
expressing opinions of value and other appropriate facts or
information regarding the solvency of Holdings and its Subsidiaries
taken as a whole.
(o) FEES. On or prior to the Initial Borrowing Date, the
Borrower shall have paid to the Administrative Agent and the Banks all
Fees and expenses agreed upon by such parties to be paid on or prior
to such date.
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(p) CONSENT LETTER. On the Initial Borrowing Date, the
Administrative Agent shall have received a letter from Corporation
Service Company, presently located at 375 Hudson Street, New York, New
York 10014, in the form of Exhibit I hereto indicating its consent to
its appointment by each Credit Party as their agent to receive service
of process.
(q) INSURANCE POLICIES. On the Initial Borrowing Date, the
Collateral Agent shall have received evidence of insurance complying
with the requirements of Section 7.03 for the business and properties
of Holdings and its Subsidiaries, in form and substance satisfactory
to the Agent and, with respect to all casualty insurance, naming the
Collateral Agent as an additional insured and loss payee.
5.02 CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The
obligation of the Banks to make each Loan and/or of a Letter of Credit Issuer
to issue each Letter of Credit is subject, at the time thereof, to the
satisfaction of the following conditions:
(a) NOTICE OF BORROWING, ETC. The Administrative Agent shall
have received a Notice of Borrowing meeting the requirements of
Section 1.03 with respect to the incurrence of Loans or a Letter of
Credit Request meeting the requirement of Section 2.03 with respect to
the issuance of a Letter of Credit.
(b) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time
of each Credit Event and also after giving effect thereto, (i) there
shall exist no Default or Event of Default and (ii) all
representations and warranties contained herein or in the other Credit
Documents shall be true and correct in all material respects with the
same effect as though such representations and warranties had been
made on and as of the date of such Credit Event, except to the extent
that such representations and warranties expressly relate to an
earlier date.
The acceptance of the benefits of each Credit Event shall
constitute a representation and warranty by the Borrower to each of the Banks
that all of the applicable conditions specified in Section 5.01 and/or 5.02, as
the case may be, exist as of that time. All of the certificates, legal
opinions and other documents and papers referred to in this Section 5, unless
otherwise specified, shall be delivered to the Administrative Agent for the
account of each of the Banks and, except for the Notes, in sufficient
counterparts for each of the Banks.
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SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In
order to induce the Banks to enter into this Agreement and to make the Loans,
and/or to issue and/or to participate in the Letters of Credit provided for
herein, each of Holdings and the Borrower makes the following representations
and warranties to, and agreements with, the Banks, all of which shall survive
the execution and delivery of this Agreement and each Credit Event:
6.01 CORPORATE STATUS. Each of Holdings and its Subsidiaries
(i) is a duly organized or formed and validly existing corporation, limited
liability company or partnership, as the case may be, in good standing under
the laws of the jurisdiction of its formation and has the organizational power
and authority to own its property and assets and to transact the business in
which it is engaged and presently proposes to engage and (ii) has duly
qualified and is authorized to do business in all jurisdictions where it is
required to be so qualified except where the failure to be so qualified would
not have a Material Adverse Effect.
6.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has
the corporate or other organizational power and authority to execute, deliver
and carry out the terms and provisions of the Credit Documents to which it is
party and has taken all necessary corporate or other organizational action to
authorize the execution, delivery and performance of the Credit Documents to
which it is party. Each Credit Party has duly executed and delivered each
Credit Document to which it is party and each Credit Document to which it is
party constitutes the legal, valid and binding obligation of each Credit Party
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting creditors'
rights (including laws and principles applicable to fraudulent transfers) and
by equitable principles (regardless of whether enforcement is sought in equity
or at law).
6.03 NO VIOLATION. Neither the execution, delivery and
performance by any Credit Party of the Credit Documents to which it is party
nor compliance with the terms and provisions thereof, nor the consummation of
the loan transactions contemplated therein (i) will contravene any provision of
any law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality applicable to such Credit Party or its
properties and assets, (ii) will conflict or result in any breach of, any of
the terms, covenants, conditions or provisions of, or constitute a default
under, or (other than pursuant to the Security Documents) result in the
creation or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of Holdings or any of its Subsidiaries pursuant
to the terms of any indenture, mortgage, deed of trust, agreement or other
instrument to which Holdings or any of its Subsidiaries is a party or by which
it or any of its property or assets are bound or to which it may be subject or
(iii) will violate any
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provision of the partnership agreement, certificate of formation, certificate
of incorporation or by-laws, as the case may be, of such Credit Party.
6.04 LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of Holdings, threatened with respect to Holdings
or any of its Subsidiaries (i) that have, or could reasonably be expected
likely to have, a Material Adverse Effect or (ii) that have, or could
reasonably be expected to have, a material adverse effect on the rights or
remedies of the Banks or on the ability of any Credit Party to perform its
obligations to them hereunder and under the other Credit Documents.
6.05 USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds
of all Term Loans shall be utilized (i) to finance, in part, the Transaction
and (ii) to pay certain fees and expenses arising in connection with the
Transaction Documents. The proceeds of Revolving Loans may be utilized (x) on
the Initial Borrowing Date to finance, in part, the Westborough Acquisition in
the event that the Westborough Acquisition is consummated on the Initial
Borrowing Date, provided that the aggregate amount so utilized shall not exceed
$15,000,000, and (y) as provided in the following sentence. The proceeds of
Acquisition Loans may only be utilized to finance Permitted Acquisitions, while
the proceeds of Working Capital Loans may be utilized for general corporate
purposes, other than to finance Permitted Acquisitions and/or any other
acquisition.
(b) No part of the proceeds of any Credit Event will be used
to purchase or carry Margin Stock. Neither any Credit Event, nor the use of
the proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System.
6.06 GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization, or validation of, or filing (other than filings related
to the perfection of the security interests granted to the Collateral Agent
pursuant to the Security Documents), recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required in
connection with (i) the execution, delivery and performance of any Credit
Document or (ii) the legality, validity, binding effect or enforceability of
any Credit Document.
6.07 TRUE AND COMPLETE DISCLOSURE. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
Holdings, the Borrower or any of its Subsidiaries in writing to the
Administrative Agent or any Bank for purposes of or in connection with this
Agreement or any transaction contemplated herein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of such
Person in writing to any Bank in connection with this Agreement will be, true
and accurate in all material respects on the date as of which such information
is dated or certified and not incomplete by omitting to state any material fact
necessary to make such
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information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was or is provided. The projections
and pro forma financial information prepared by Holdings and the Borrower which
are contained in such materials are based on good faith estimates and
assumptions believed by such Persons to be reasonable at the time made, it
being recognized by the Banks that such projections as to future events are not
to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ materially from the projected
results. As of the Effective Date, there is no fact known to Holdings, the
Borrower or any of its Subsidiaries which has, or could likely have, a Material
Adverse Effect which has not theretofore been disclosed to the Administrative
Agent.
6.08 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and
as of the Initial Borrowing Date on a pro forma basis after giving effect to
the Transaction and to all Indebtedness incurred and to be incurred, and Liens
created, and to be created, by the Credit Parties in connection therewith, (i)
the sum of the assets, at a fair valuation, of Holdings and its Subsidiaries
taken as a whole will exceed their debts, (ii) Holdings and its Subsidiaries
taken as a whole will not have incurred or intended to (and Holdings and the
Borrower do not believe that they will) incur debts beyond their ability to pay
such debts as such debts mature and (iii) Holdings and its Subsidiaries taken
as a whole will have sufficient capital with which to conduct their business.
For purposes of this Section 6.08, "debt" means any liability on a claim, and
"claim" means (x) right to payment whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured; or (y) right to
an equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(b) (i) The combined balance sheets of the Borrower and its
affiliates at December 31, 1994 and December 31, 1995, and the related combined
statements of income, changes in equity and cash flows for the fiscal periods
ended as of said dates, which have been examined by Coopers & Lybrand L.L.P.,
independent certified public accountants, and (ii) the pro forma (after giving
effect to the Transaction and the related financings thereof) consolidated
balance sheet of Holdings and its Subsidiaries as of December 31, 1995, copies
of each of which have heretofore been furnished to each Bank, present fairly
the financial position of the respective entities as of the dates of said
statements and the results for the periods covered thereby (or, in the case of
the pro forma balance sheet, presents a good faith estimate of the consolidated
pro forma financial condition of Holdings and its Subsidiaries after giving
effect to the Transaction and the related financings thereof at the date
thereof). All such financial statements (other than the aforesaid pro forma
balance sheets) have been prepared in accordance with generally accepted
accounting principles and practices consistently applied except to the extent
provided in the
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notes to said financial statements. Nothing has occurred since December 31,
1995 that has had a Material Adverse Effect.
(c) Except as fully reflected in the financial statements and
the notes thereto described in Section 6.08(b), there were as of the Initial
Borrowing Date (after giving effect to the Loans made on such date), no
material Contingent Obligations, contingent liability or liability for taxes,
or any long-term lease or unusual forward or long-term commitment, including,
without limitation, interest rate or foreign currency swap or exchange
transaction with respect to Holdings or any of its Subsidiaries which, either
individually or in aggregate, would be material to Holdings and its
Subsidiaries taken as a whole, except as incurred in the ordinary course of
business consistent with past practices subsequent to December 31, 1995.
6.09 SECURITY INTERESTS. Once executed and delivered, and
until terminated in accordance with the terms thereof, each of the Security
Documents creates, as security for the obligations purported to be secured
thereby, a valid and enforceable perfected security interest in and Lien on all
of the Collateral subject thereto from time to time, superior to and prior to
the rights of all third Persons (subject in the case of the Mortgages to
Permitted Encumbrances and subject to no other Liens (except that the Security
Agreement Collateral and/or Mortgage Properties may be subject to Permitted
Liens and (in the case of the Mortgaged Properties) Permitted Encumbrances
relating thereto)) in favor of the Collateral Agent for the benefit of the
Banks. No filings or recordings are required in order to perfect the security
interests created under any Security Document except for filings or recordings
required in connection with any such Security Document which shall have been
made, or for which satisfactory arrangements have been made, upon or prior to
the execution and delivery thereof. All mortgage, mortgage recording, stamp,
intangible or other similar taxes required to be paid by any Person under
applicable Legal Requirements or other laws applicable to the Real Property
encumbered by the Mortgages in connection with the execution, delivery,
recordation, filing, registration, perfection or enforcement of the Mortgages
have been paid.
6.10 REPRESENTATIONS AND WARRANTIES IN TRANSACTION DOCUMENTS.
All representations and warranties of Holdings and/or any of its Subsidiaries
set forth in any of the Transaction Documents were true and correct in all
material respects as of the time such representations and warranties were made
and shall be true and correct in all material respects as of the Initial
Borrowing Date as if such representations and warranties were made on and as of
such date, unless stated to relate to a specific earlier date, in which case
such representations and warranties shall be true and correct in all material
respects as of such earlier date.
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6.11 TAX RETURNS AND PAYMENTS. Each of Holdings and each of
its Subsidiaries has filed all federal income tax returns and all other
material tax returns, domestic and foreign, required to be filed by it and has
paid all material taxes and assessments payable by it which have become due,
other than those not yet delinquent and except for those contested in good
faith. Holdings and each of its Subsidiaries have paid, or have provided
adequate reserves for the payment of, all federal, state and foreign income
taxes applicable for all prior fiscal years and for the current fiscal year to
the date hereof (giving effect to the Reorganization).
6.12 COMPLIANCE WITH ERISA. Each Plan (and each related
trust, insurance contract or fund) is in substantial compliance with its terms
and with all applicable laws, including without limitation ERISA and the Code;
each Plan (and each related trust, if any) which is intended to be qualified
under Section 401(a) of the Code has received a determination letter from the
Internal Revenue Service to the effect that it meets the requirements of
Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; no
Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA)
is insolvent or in reorganization; no Plan has an Unfunded Current Liability;
no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has
an accumulated funding deficiency, within the meaning of such sections of the
Code or ERISA, or has applied for or received a waiver of an accumulated
funding deficiency or an extension of any amortization period, within the
meaning of Section 412 of the Code or Section 303 or 304 of ERISA; all
contributions required to be made with respect to a Plan have been timely made;
neither Holdings nor any Subsidiary of Holdings nor any ERISA Affiliate has
incurred any material liability (including any indirect, contingent or
secondary liability) to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or
Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such
liability under any of the foregoing sections with respect to any Plan; no
condition exists which presents a material risk to Holdings or any Subsidiary
of Holdings or any ERISA Affiliate of incurring a liability to or on account of
a Plan pursuant to the foregoing provisions of ERISA and the Code; no
proceedings have been instituted to terminate or appoint a trustee to
administer any Plan which is subject to Title IV of ERISA; no action, suit,
proceeding, hearing, audit or investigation with respect to the administration,
operation or the investment of assets of any Plan (other than routine claims
for benefits) is pending, expected or threatened; using actuarial assumptions
and computation methods consistent with Part 1 of subtitle E of Title IV of
ERISA, the aggregate liabilities of Holdings and its Subsidiaries and its ERISA
Affiliates to all Plans which are multiemployer plans (as defined in Section
4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each such Plan, would not exceed
$500,000. Each group health plan (as defined in Section 607(1) of ERISA or
Section 4980B(g)(2) of the Code) which covers or has covered employees or
former employees of Holdings, any Subsidiary of Holdings, or any ERISA
Affiliate has at all times been operated in compliance with the provisions of
Part 6 of subtitle B of Title I of ERISA and
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Section 4980B of the Code; no lien imposed under the Code or ERISA on the
assets of Holdings or any Subsidiary of Holdings or any ERISA Affiliate exists
or is likely to arise on account of any Plan; and Holdings and its Subsidiaries
do not maintain or contribute to any employee welfare benefit plan (as defined
in Section 3(1) of ERISA) which provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any Plan
the obligations with respect to which could reasonably be expected to have a
material adverse effect on the ability of any Credit Party to perform its
obligations under this Agreement or the other Credit Documents.
6.13 SUBSIDIARIES. On the Initial Borrowing Date and after
giving effect to the Transaction, the only direct Subsidiary of Holdings is the
Borrower. Annex III hereto lists each Subsidiary of the Borrower (and the
direct and indirect ownership interest of Holdings therein), in each case
existing on the Initial Borrowing Date but after giving effect to the
Transaction.
6.14 INTELLECTUAL PROPERTY, ETC. Holdings, the Borrower and
each of its Subsidiaries has obtained or has the right to use all material
patents, trademarks, servicemarks, trade names, copyrights, licenses and other
rights, free from burdensome restrictions, that are necessary for the operation
of its business as presently conducted and as proposed to be conducted.
6.15 ENVIRONMENTAL MATTERS. (a) Holdings, the Borrower and
each of its Subsidiaries is in compliance with all Environmental Laws governing
its business except to the extent that any such failure to comply (together
with any resulting penalties, fines or forfeitures) would not reasonably be
expected to have a Material Adverse Effect. All licenses, permits,
registrations or approvals required for the business of Holdings, the Borrower
and each of its Subsidiaries, as conducted as of the Initial Borrowing Date,
under any Environmental Law have been secured and Holdings, the Borrower and
each of its Subsidiaries is in substantial compliance therewith, except for
such licenses, permits, registrations or approvals the failure to secure or to
comply therewith is not reasonably likely to have a Material Adverse Effect.
Neither Holdings, the Borrower nor any of its Subsidiaries is in any respect in
noncompliance with, breach of or default under any applicable writ, order,
judgment, injunction, or decree to which Holdings, the Borrower or such
Subsidiary is a party or which would affect the ability of Holdings, the
Borrower or such Subsidiary to operate any real property and no event has
occurred and is continuing which, with the passage of time or the giving of
notice or both, would constitute noncompliance, breach of or default
thereunder, except in each such case, such noncompliance, breaches or defaults
as would not reasonably be expected to, in the aggregate, have a Material
Adverse Effect. There are as of the Initial Borrowing Date no Environmental
Claims pending or, to the best knowledge of Holdings and the Borrower,
threatened wherein an unfavorable decision, ruling or finding would reasonably
be expected to have a Material Adverse Effect. There are no facts,
circumstances, conditions or occurrences on any Real Property now or at any
time
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owned, leased or operated by Holdings, the Borrower or any of its Subsidiaries
or, to the knowledge of Holdings and the Borrower, on any property adjacent to
any such Real Property that could reasonably be expected (i) to form the basis
of an Environmental Claim against Holdings, the Borrower or any of its
Subsidiaries or any Real Property of Holdings, the Borrower or any of its
Subsidiaries, or (ii) to cause such Real Property to be subject to any
restrictions on the ownership, occupancy, use or transferability of such Real
Property under any Environmental Law, except in each such case, such
Environmental Claims or restrictions that individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed on Annex IX, as of the Initial
Borrowing Date (after giving effect to the Transaction) there are no
underground storage tanks located on any Real Property owned, leased or
operated by Holdings, the Borrower or any of its Subsidiaries.
6.16 PROPERTIES. Annex IV contains a true and complete list
of each Real Property owned or leased by Holdings, the Borrower or any of its
Subsidiaries on the Initial Borrowing Date (after giving effect to the
Transaction) and the type of interest therein held by Holdings, the Borrower or
the respective Subsidiary. Holdings, the Borrower and each of its Subsidiaries
has good and indefeasible title in fee to each Real Property owned by it and a
valid Leasehold in each Real Property leased by it, in each case, after giving
effect to the Transaction, free and clear of all Liens and security interests
other than the Liens created pursuant to the Mortgages, Permitted Liens and
Permitted Encumbrances. Holdings, the Borrower and each of its Subsidiaries
has received all material assignments, waivers, consents and other documents,
and duly effected all material recordings, filings and other material actions
necessary to establish, protect and perfect its right, title and interest in
and to each Real Property owned or leased by it. All material transfer taxes,
deed stamps, intangible taxes or other amounts in the nature of transfer taxes
required to be paid by any Person under applicable Legal Requirements or other
laws applicable to the Real Property in connection with the Transaction have
been paid.
6.17 LABOR RELATIONS; COLLECTIVE BARGAINING AGREEMENTS.
There is (i) no significant unfair labor practice complaint pending against
Holdings, the Borrower or any of its Subsidiaries or, to the knowledge of
Holdings and the Borrower, threatened against any of them, before the National
Labor Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is now
pending against Holdings, the Borrower or any of its Subsidiaries or, to the
knowledge of Holdings and the Borrower, threatened against any of them, (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Holdings, the Borrower or any of its Subsidiaries or, to the best knowledge of
Holdings and the Borrower, threatened against Holdings, the Borrower or any of
its Subsidiaries and (iii) to the knowledge of Holdings and the Borrower, no
union representation question exists with respect to the employees of Holdings,
the Borrower or any of its Subsidiaries, except (with respect to any
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matter specified in clause (i), (ii) or (iii) above, either individually or in
the aggregate) such as would not reasonably be expected to have a Material
Adverse Effect.
6.18 INDEBTEDNESS. Annex V sets forth a true and complete
list of all Indebtedness of the Borrower and each of its Subsidiaries (after
giving effect to the Transaction) incurred prior to, but which is to remain
outstanding after, the Initial Borrowing Date (collectively, the "Existing
Indebtedness"), in each case showing the aggregate principal amount,
amortization and interest rate thereof (and available commitments, if any,
thereunder) and the name of the respective borrower and any other entity which
directly or indirectly guaranteed such debt.
6.19 TRANSACTION. On and as of the Initial Borrowing Date,
(i) all material consents and approvals of, and filings and registrations with,
and all other actions in respect of, all governmental agencies, authorities or
instrumentalities required to be obtained, given, filed or taken by the
Holdings, the Borrower or any other Credit Party in order to make or consummate
each component of the Transaction will have been obtained, given, filed or
taken and are or will be in full force and effect (or effective judicial relief
with respect thereto will have been obtained) except for filings, consents or
notices not required by federal or state securities laws to be made at such
time, which filings, consents or notices have been or will be made during the
period in which they are required to be made and (ii) each component of the
Transaction shall have been consummated in accordance, in all material
respects, with the applicable Transaction Documents and in compliance, in all
material respects, with all applicable laws.
6.20 CERTAIN MATERIAL AGREEMENTS. After giving effect to the
Transaction, each Management Contract and each Existing Indebtedness Agreement
is in full force and effect in accordance with its respective terms, without
any material default existing thereunder.
6.21 THIRD-PARTY RIGHTS. Except as disclosed on Annex X, as
of the Initial Borrowing Date, no Person holds any right of first refusal,
option to purchase or lease, buy-out right, right of first offer or other
similar right or option with respect to any portion of the Collateral or any
partnership interest, joint venture interest, membership interest or
shareholder interest owned by Holdings in any of its Subsidiaries.
SECTION 7. AFFIRMATIVE COVENANTS. Each of Holdings and the
Borrower hereby covenants and agrees that so long as this Agreement is in
effect and until such time as the Total Commitment has been terminated, no
Notes are outstanding and the Loans, together with interest, Fees and all other
Obligations hereunder, have been paid in full:
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7.01 REPORTING REQUIREMENTS. Holdings will furnish to each
of the Banks:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in
any event within 90 days after the close of each fiscal year of
Holdings, the consolidated balance sheet of Holdings and its
consolidated Subsidiaries as at the end of such fiscal year and the
related consolidated statements of income, of stockholder's equity and
of cash flows for such fiscal year, in each case setting forth
comparative figures for the preceding fiscal year and examined by
independent certified public accountants of recognized national
standing whose opinion shall not be qualified as to the scope of audit
or as to the status of Holdings and its Subsidiaries as a going
concern, together with a certificate of such accounting firm stating
that in the course of its regular audit of the business of Holdings
and its Subsidiaries, which audit was conducted in accordance with
generally accepted auditing standards, nothing came to the attention
of such accounting firm which would lead it to believe that any
Default or Event of Default as they relate to accounting matters has
occurred and is continuing or if in the opinion of such accounting
firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof, it being understood
that the delivery of Holdings Form 10-K for any fiscal year or Form
10-Q for any fiscal quarter, as the case may be, within the time frame
specified in Section 7.01(a) or (b), respectively, shall satisfy the
requirements of Section 7.01(a) or (b), as the case may be, to the
extent covering the financial information specified herein or therein.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and
in any event within 45 days after the close of each of the first three
quarterly accounting periods in each fiscal year of Holdings, the
consolidated balance sheet of Holdings and its consolidated
Subsidiaries as at the end of such quarterly period and the related
consolidated statements of income, of stockholder's equity and of cash
flows for such quarterly period and for the elapsed portion of the
fiscal year ended with the last day of such quarterly period, in each
case setting forth comparative figures for the related periods in the
prior fiscal year and which shall be certified by the Chief Financial
Officer or other Authorized Officer of Holdings, subject to changes
resulting from normal year-end audit adjustments.
(c) BUDGET. Not less than 10 days prior to the commencement
of each fiscal year of Holdings, a preliminary consolidated budget (to
be followed no later than 30 days after the commencement of such
fiscal year by a final consolidated budget) of Holdings and its
Subsidiaries in reasonable detail for each of the four fiscal quarters
of such fiscal year, as customarily prepared by management for its
internal use, setting forth, with appropriate discussion, the
principal assumptions upon which such plans are based.
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(d) OFFICER'S CERTIFICATES. At the time of (i) the delivery
of the financial statements provided for in Sections 7.01(a) and (b),
a certificate of the Chief Financial Officer or other Authorized
Officer of Holdings to the effect that no Default or Event of Default
exists or, if any Default or Event of Default does exist, specifying
the nature and extent thereof, which certificate shall set forth the
calculations required to establish compliance with the provisions of
Sections 8.10, 8.11, 8.12, 8.13 and 8.14 as at the end of such fiscal
year or quarter, as the case may be and (ii) if delivered with the
financial statements required by Section 7.01(a), set forth the
calculations required to establish the amount of Excess Cash Flow for
the fiscal year of Holdings then last ended.
(e) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any
event within three Business Days after Holdings or any of its
Subsidiaries obtains knowledge thereof, notice of (x) the occurrence
of any event which constitutes a Default or Event of Default, which
notice shall specify the nature thereof, the period of existence
thereof and what action Holdings proposes to take with respect thereto
and (y) any litigation or governmental or regulatory proceeding
pending against Holdings or any of its Subsidiaries which is likely to
have a Material Adverse Effect or a material adverse effect on the
Collateral or the ability of any Credit Party to perform its
obligations hereunder or under any other Credit Document.
(f) AUDITORS' REPORTS. Promptly upon receipt thereof, a copy
of each other report or "management letter" submitted to Holdings or
any of its Subsidiaries by their independent accountants or
independent actuaries in connection with any annual, interim or
special audit made by them of the books of Holdings or any of its
Subsidiaries.
(g) ERISA. Promptly upon completion thereof, deliver to each
of the Banks a complete copy of the annual report (Form 5500) of each
Plan (including, to the extent required, the related financial and
actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with
the Internal Revenue Service. In addition to any certificates or
notices delivered to the Banks pursuant to the first sentence hereof,
copies of reports and any material notices received by Holdings, any
Subsidiary of Holdings or any ERISA Affiliate with respect to any Plan
shall be delivered to the Banks no later than 10 days after the date
such report has been filed with the Internal Revenue Service or such
notice has been received by Holdings, such Subsidiary or such ERISA
Affiliate, as applicable.
(h) ENVIRONMENTAL MATTERS. Promptly upon, and in any event
within 10 Business Days after, an officer of Holdings, the Borrower or
any of its Subsidiaries obtains knowledge thereof, notice of one or
more of the following environmental
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matters: (i) any pending or threatened (in writing) material
Environmental Claim against Holdings, the Borrower or any of its
Subsidiaries or any Real Property owned or operated by Holdings, the
Borrower or any of its Subsidiaries; (ii) any condition or occurrence
on or arising from any Real Property owned or operated by Holdings,
the Borrower or any of its Subsidiaries that (a) results in material
noncompliance by Holdings, the Borrower or any of its Subsidiaries
with any applicable Environmental Law or (b) would reasonably be
expected to form the basis of a material Environmental Claim against
Holdings, the Borrower or any of its Subsidiaries or any such Real
Property; (iii) any condition or occurrence on any Real Property
owned, leased or operated by Holdings, the Borrower or any of its
Subsidiaries that could reasonably be expected to cause such Real
Property to be subject to any material restrictions on the ownership,
occupancy, use or transferability by Holdings, the Borrower or any of
its Subsidiaries of such Real Property under any Environmental Law;
and (iv) the taking of any material removal or remedial action in
response to the actual or alleged presence of any Hazardous Material
on any Real Property owned, leased or operated by Holdings, the
Borrower or any of its Subsidiaries as required by any Environmental
Law or any governmental or other administrative agency. All such
notices shall describe in reasonable detail the nature of the
Environmental Claim and Holdings', the Borrower's or such Subsidiary's
response thereto.
(i) OTHER INFORMATION. Promptly upon transmission thereof,
copies of any filings and registrations with, and reports to, the SEC
by Holdings or any of its Subsidiaries (other than any registration
statement on Form S-8) and copies of all financial statements, proxy
statements, notices and reports as Holdings or any of its Subsidiaries
shall send to analysts generally or to the holders (other than
Holdings and its Subsidiaries) of their capital stock or of the
Indebtedness in their capacity as such holders (in each case to the
extent not theretofore delivered to the Banks pursuant to this
Agreement) and, with reasonable promptness, such other information or
documents (financial or otherwise) as the Administrative Agent on its
own behalf or on behalf of the Required Banks may reasonably request
from time to time.
7.02 BOOKS, RECORDS AND INSPECTIONS. Holdings will, and will
cause each of its Subsidiaries to, permit, upon at least five Business Days'
notice to the Chief Financial Officer or any other Authorized Officer of
Holdings, officers and designated representatives of the Administrative Agent
or the Required Banks to visit and inspect any of the properties or assets of
Holdings and any of its Subsidiaries in whomsoever's possession (but only to
the extent Holdings or such Subsidiary has the right to do so to the extent in
the possession of another Person), and to examine the books of account of
Holdings and any of its Subsidiaries and discuss the affairs, finances and
accounts of Holdings and of any of its Subsidiaries with, and be advised as to
the same by, its and their officers and independent
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accountants and independent actuaries, if any, all at such reasonable times and
intervals and to such reasonable extent as the Administrative Agent or the
Required Banks may request.
7.03 INSURANCE. (a) Holdings will, and will cause each of
its Subsidiaries to, at all times maintain in full force and effect insurance
with reputable and solvent insurers (which may include Subsidiaries which are
licensed insurance carriers) in such amounts and covering such risks and
liabilities as are in accordance with normal industry practice, provided that
this covenant shall be satisfied in respect of any Mortgaged Property to the
extent the insurance covenants in the related Mortgage are satisfied. Holdings
will, and will cause each of its Subsidiaries to, furnish annually to the
Administrative Agent a summary of the insurance carried.
(b) Holdings will, and will cause each of its Subsidiaries
to, at all times keep their respective property insured in favor of the
Collateral Agent, and all policies (including the Mortgage Policies) or
certificates (or certified copies thereof) with respect to, or other evidence
acceptable to the Administrative Agent of, such insurance (and any other
insurance maintained by Holdings or any such Subsidiary) (i) shall be endorsed
to the Collateral Agent's satisfaction for the benefit of the Collateral Agent
(including, without limitation, by naming the Collateral Agent as loss payee
(with respect to Collateral) or, to the extent permitted by applicable law, as
an additional insured), (ii) shall state that such insurance policies shall not
be cancelled without 30 days' prior written notice thereof (or 10 days' prior
written notice in the case of cancellation for the non-payment of premiums) by
the respective insurer to the Collateral Agent, (iii) shall provide that the
respective insurers irrevocably waive any and all rights of subrogation with
respect to the Collateral Agent and the Banks and (iv) shall be deposited with
the Collateral Agent. In no event shall Holdings be required to deposit the
actual insurance policies with the Collateral Agent. The Administrative Agent
shall deliver copies of any certificates of insurance to a Bank upon such
Bank's request.
(c) If Holdings or any of its Subsidiaries shall fail to
maintain all insurance in accordance with this Section 7.03, or if Holdings or
any of its Subsidiaries shall fail to so endorse and deposit all policies or
certificates with respect thereto, the Administrative Agent and/or the
Collateral Agent shall have the right (but shall be under no obligation), upon
prior notice to Holdings, to procure such insurance, and Holdings agrees to
reimburse the Administrative Agent or the Collateral Agent, as the case may be,
for all costs and expenses of procuring such insurance.
7.04 PAYMENT OF TAXES. Holdings will pay and discharge, and
will cause each of its Subsidiaries to pay and discharge, all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims (other than claims
relating to the adjustment or settling, in the ordinary course of business,
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of claims in respect of insurance policies or reinsurance contracts) which, if
unpaid, might become a Lien or charge upon any properties of Holdings or any of
its Subsidiaries, provided that neither Holdings nor any of its Subsidiaries
shall be required to pay any such tax, assessment, charge, levy or claim which
is being contested in good faith and by proper proceedings if it has maintained
adequate reserves with respect thereto in accordance with GAAP.
7.05 CORPORATE FRANCHISES. Holdings will do, and will cause
each of its Subsidiaries to do, or cause to be done, all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
authority, provided that any transaction permitted by Section 8.02 will not
constitute a breach of this Section 7.05.
7.06 COMPLIANCE WITH STATUTES, ETC. Holdings will, and will
cause each of its Subsidiaries to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property other than those the non-compliance
with which would not have, and which would not be reasonably expected to have,
a Material Adverse Effect or a material adverse effect on the Collateral or the
ability of any Credit Party to perform its obligations under any Credit
Document.
7.07 GOOD REPAIR. Holdings will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used or
useful in its business in whomsoever's possession they may be, are kept in good
repair, working order and condition, normal wear and tear excepted, and that
from time to time there are made in such properties and equipment all needful
and proper repairs, renewals, replacements, extensions, additions, betterments
and improvements thereto, to the extent and in the manner customary for
companies in similar businesses.
7.08 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) (i) Holdings
will comply, and will cause each of its Subsidiaries to comply, in all material
respects, with all Environmental Laws applicable to the ownership, lease or use
of all Real Property now or hereafter owned, leased or operated by the Borrower
or any of its Subsidiaries, will promptly pay or cause to be paid all costs and
expenses incurred in connection with such compliance, and will keep or cause to
be kept all such Real Property free and clear of any Liens imposed pursuant to
such Environmental Laws and (ii) neither Holdings, the Borrower nor any of its
Subsidiaries will generate, use, treat, store, release or dispose of, or permit
the generation, use, treatment, storage, release or disposal of, Hazardous
Materials on any Real Property now or hereafter owned, leased or operated by
Holdings, the Borrower or any of its Subsidiaries or transport or permit the
transportation of Hazardous Materials to or from any such Real Property other
than in substantial compliance with applicable Environmental Laws and in the
ordinary course of business. If required to do so under any applicable
directive or order of any governmental agency, Holdings and
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the Borrower each agrees to undertake, and cause each of its Subsidiaries to
undertake, any clean up, removal, remedial or other action necessary to remove
and clean up any Hazardous Materials from any Real Property owned, leased or
operated by Holdings, the Borrower or any of its Subsidiaries in accordance
with, in all material respects, the requirements of all applicable
Environmental Laws and in accordance with, in all material respects, such
orders and directives of all governmental authorities, except to the extent
that Holdings, the Borrower or such Subsidiary is contesting such order or
directive in good faith and by appropriate proceedings and for which adequate
reserves have been established to the extent required by GAAP.
(b) At the written request of the Administrative Agent or the
Required Banks, which request shall specify in reasonable detail the basis
therefor, at any time and from time to time after the Banks receive notice
under Section 7.01(h) for any event for which notice is required to be
delivered for any Real Property which discloses an Environmental Claim or any
potential requirement for remedial or similar work aggregating in excess of
$1,000,000, the Borrower will provide, at its sole cost and expense, an
environmental site assessment report concerning any such Real Property now or
hereafter owned, leased or operated by Holdings, the Borrower or any of its
Subsidiaries, prepared by an environmental consulting firm reasonably
satisfactory to the Administrative Agent, indicating the presence or absence of
Hazardous Materials and the potential cost of any removal or remedial action in
connection with any Hazardous Materials on such Real Property. If the Borrower
fails to provide the same within 90 days after such request was made, the
Administrative Agent may order the same, and the Borrower shall grant and
hereby grants, to the Administrative Agent and the Banks and their agents,
access to such Real Property and specifically grants the Administrative Agent
and the Banks an irrevocable non-exclusive license, subject to the rights of
tenants, to undertake such an assessment, all at the Borrower's expense.
7.09 END OF FISCAL YEARS; FISCAL QUARTERS. Holdings will,
for financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries' fiscal years to end on December 31 of each year and (ii) each of
its, and each of its Subsidiaries', fiscal quarters to end on March 31, June
30, September 30 and December 31 of each year.
7.10 INTEREST RATE HEDGING. The Borrower will, no later than
the date occurring 30 days after the Initial Borrowing Date, enter into an
Interest Rate Agreement, reasonably satisfactory to the Administrative Agent,
establishing a fixed or maximum rate in respect of an amount equal to at least
(x) 60% of Total Indebtedness outstanding on the Initial Borrowing Date (after
giving effect to the Transaction) less (y) the aggregate principal amount of
the CGL Participations, for a period of years reasonably acceptable to the
Administrative Agent.
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7.11 ADDITIONAL SECURITY; FURTHER ASSURANCES. (a) The
Borrower will give the Collateral Agent not less than 15 days prior written
notice of the scheduled closing date for any Permitted Acquisition by the
Borrower or any of its Subsidiaries occurring after the Initial Borrowing Date.
Subject to obtaining any consents from third parties (including third party
lessors and co-venturers) necessary to be obtained for the granting of a Lien
on the interests or assets acquired pursuant to any such Permitted Acquisition
(with the Borrower hereby agreeing to use its reasonable efforts to obtain such
consents), the Borrower will, and will cause its Subsidiaries to, grant the
Collateral Agent for the benefit of the Banks security interests and mortgages
(each an "Additional Security Document") in the interests or properties (other
than (I) any Real Property and related personal property assets acquired by a
joint venture with the proceeds of equity investments made by the Borrower or a
Subsidiary to the extent such equity investments are pledged to the Collateral
Agent, (II) any Real Property and related personal property assets acquired
with the proceeds of, and securing, or subject to assumed, Non-Recourse Debt
and those constituting expansions of existing facilities subject to mortgages
in favor of other Persons) as are acquired after the Initial Borrowing Date by
the Borrower or such Subsidiary with the proceeds of Acquisition Loans and as
may be requested from time to time by the Administrative Agent or the Required
Banks, as additional security for the Obligations. Each Additional Security
Document shall be granted pursuant to documentation reasonably satisfactory in
form and substance to the Administrative Agent and shall constitute a valid and
enforceable perfected Lien upon the interests or properties so acquired,
superior to and prior to the rights of all third Persons and subject to no
other Liens except those permitted by Section 8.03 or otherwise agreed by the
Administrative Agent at the time of perfection thereof and such other
encumbrances as may be set forth in the mortgage policy, if any, relating to
such Additional Security Document which shall be delivered to the Collateral
Agent together with such Additional Security Document and which shall be
reasonably satisfactory in form and substance to the Collateral Agent. The
Additional Security Document or instruments related thereto shall have been
duly recorded or filed in such manner and in such places as are required by law
to establish, perfect, preserve and protect the Liens created thereby required
to be granted pursuant to the Additional Security Document and all taxes, fees
and other charges payable in connection therewith shall have been paid in full.
(b) Holdings and the Borrower will, and will cause each of
its Subsidiaries to, at the expense of the Borrower, make, execute, endorse,
acknowledge, file and/or deliver to the Collateral Agent from time to time such
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, and other assurances or instruments and take such further steps
relating to the Collateral covered by any of the Security Documents as the
Collateral Agent may reasonably require. If at any time the Collateral Agent
determines, based on applicable law, that all applicable taxes (including,
without limitation, mortgage recording taxes or similar charges) were not paid
in connection with the recordation of any Mortgage, the Borrower shall promptly
pay the same upon demand.
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Furthermore, the Borrower shall cause to be delivered to the Collateral Agent
such opinions of counsel, title insurance, surveys and other related documents
as may be reasonably requested by the Collateral Agent to assure itself that
this Section 7.11 has been complied with, all of which documents shall be in
form and substance reasonably satisfactory to the Collateral Agent.
(c) Holdings and the Borrower each agrees that each action
required above by this Section 7.11 shall be completed as soon as practicable,
but in no event later than 60 days after such action is requested to be taken
by the Administrative Agent or the Required Banks.
7.12 CORPORATE SEPARATENESS. Holdings and the Borrower will
take, and will cause each of its Subsidiaries to take, all such action as is
necessary to keep the operations of Holdings, the Borrower and its Subsidiaries
separate and apart from those of each Specified Subsidiary, including, without
limitation, ensuring that all customary formalities regarding corporate
existence, including holding regular board of directors' meetings and
maintenance of corporate records, are followed. All financial statements of
Holdings and its Subsidiaries provided to creditors will clearly evidence the
corporate separateness of Holdings and its other Subsidiaries from each
Specified Subsidiary. Finally, neither Holdings nor any of its other
Subsidiaries will take any action, or conduct its affairs in a manner which is
likely to result in the corporate existence of a Specified Subsidiary on the
one hand, and Holdings and its other Subsidiaries on the other, being ignored,
or in the assets and liabilities of Holdings or any of its other Subsidiaries
being substantively consolidated with those of a Specified Subsidiary in a
bankruptcy, reorganization or other insolvency proceeding. No action or
indemnity expressly permitted by this Agreement will breach this covenant.
7.13 ERISA. As soon as possible and, in any event, within
ten (10) days after Holdings, any Subsidiary of Holdings or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following, Holdings
will deliver to each of the Banks a certificate of the chief financial officer
of Holdings setting forth the full details as to such occurrence and the
action, if any, that Holdings, such Subsidiary or such ERISA Affiliate is
required or proposes to take, together with any notices required or proposed to
be given to or filed with or by Holdings, the Subsidiary, the ERISA Affiliate,
the PBGC, a Plan participant or the Plan administrator with respect thereto:
that a Reportable Event has occurred; that an accumulated funding deficiency,
within the meaning of Section 412 of the Code or Section 302 of ERISA, has been
incurred or an application may be or has been made for a waiver or modification
of the minimum funding standard (including any required installment payments)
or an extension of any amortization period under Section 412 of the Code or
Section 303 or 304 of ERISA with respect to a Plan; that any contribution
required to be made with respect to a Plan has not been timely made; that a
Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that
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a Plan has an Unfunded Current Liability; that proceedings may be or have been
instituted to terminate or appoint a trustee to administer a Plan which is
subject to Title IV of ERISA; that a proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Plan; that
Holdings, any Subsidiary of Holdings or any ERISA Affiliate will or may incur
any liability (including any indirect, contingent, or secondary liability) to
or on account of the termination of or withdrawal from a Plan under Section
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan
under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or
502(i) or 502(l) of ERISA or with respect to a group health plan (as defined in
Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B
of the Code; or that Holdings or any Subsidiary of Holdings may incur any
material liability pursuant to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) that provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any Plan.
SECTION 8. NEGATIVE COVENANTS. Each of Holdings and the
Borrower hereby covenants and agrees that on the Effective Date and thereafter
for so long as this Agreement is in effect and until such time as the Total
Commitment has been terminated, no Notes remain outstanding and the Loans,
together with interest, Fees and all other Obligations incurred hereunder are
paid in full:
8.01 CHANGES IN BUSINESS. Holdings will not, and will not
permit the Borrower or any of its Subsidiaries to, engage in any significant
business or activities in any industries or business segments, other than the
business and activities conducted by Holdings and its Subsidiaries (taken as a
whole) on the Initial Borrowing Date (after giving effect to the Transaction)
in the business segments and industries described in the Registration
Statement, and other businesses and activities related or incidental thereto.
8.02 CONSOLIDATION, MERGER OR SALE OF ASSETS, ETC. Holdings
will not, and will not permit any Subsidiary to, wind up, liquidate or dissolve
its affairs, or enter into any transaction of merger or consolidation or sell
or otherwise dispose of any of its property or assets (but excluding any sale
or disposition of obsolete or excess FF&E or excess land in the ordinary course
of business), or purchase, lease or otherwise acquire (in one transaction or a
series of related transactions) all or any part of the property or assets of
any Person (excluding any purchases, leases or other acquisitions of property
or assets in, and for use in, the ordinary course of business) or agree to do
any of the foregoing at any future time, except that the following shall be
permitted:
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(a) capital expenditures by the Borrower and its
Subsidiaries;
(b) the investments permitted pursuant to Section 8.05;
(c) (i) the merger or consolidation of any Subsidiary
Guarantor (other than Capital Corp) with or into the Borrower or
another Subsidiary Guarantor (other than Capital Corp) or the
liquidation or dissolution of any Subsidiary that is not a Material
Subsidiary or a Specified Subsidiary or (ii) the transfer or other
disposition of any property (other than the Capital Note) by the
Borrower to any Subsidiary Guarantor or by any Subsidiary Guarantor to
the Borrower or any other Subsidiary Guarantor, provided that all
Liens granted pursuant to the Security Documents on any property or
assets involved in any of the foregoing transactions shall remain in
full force and effect (with the same priority as they would have if
such transfer pursuant to this clause (ii) had not occurred), either
as a result of any such transfer being made subject to such Liens or
as a result of the surviving or transferee entity executing and
delivering new Security Documents, in each case to the satisfaction of
the Administrative Agent;
(d) the Borrower or any Subsidiary Guarantor (other than
Capital Corp) (or to the extent limited to one Permitted Acquisition,
any NRD Borrower) may make Permitted Acquisitions provided that at
least 15 days prior to the date of such acquisition, the Borrower
shall have delivered to the Administrative Agent an officer's
certificate executed by an authorized officer of the Borrower, which
certificate shall (i) contain the date such Permitted Acquisition is
scheduled to be consummated, (ii) contained the estimated purchase
price of such Permitted Acquisition, (iii) contain a description of
the property and/or assets acquired in connection with such Permitted
Acquisition, (iv) demonstrate that at the time of making any such
Permitted Acquisition the covenants contained in Sections 8.10, 8.11,
8.12, 8.13 and 8.14 shall be complied with on a pro forma basis as if
the properties and/or assets so acquired had been owned by the
Borrower, and the Indebtedness assumed and/or incurred to acquire
and/or finance same has been outstanding, for the 12 month period
immediately preceding such acquisition (without giving effect to any
credit for unobtained or unrealized gains in connection with such
Permitted Acquisition), (v) to the extent applicable, confirms that
the Borrower has performed physical inspections, including, without
limitation, Phase I environmental assessments (a copy of which shall
be delivered to the Administrative Agent with such certificate), which
demonstrate that the representations and warranties of the Borrower
contained in this Agreement (including those set forth in Section
6.15) shall be true and correct after giving effect to such Permitted
Acquisition, (vi) except in the case of a Permitted Acquisition of a
Non-Managed Hotel, confirms that the hotel property acquired pursuant
to such Permitted Acquisition (or owned by the partnership in which
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interests have been acquired or to which loans and/or advances have
been made pursuant to such Permitted Acquisition) is to be managed by
the Borrower and (vii) attach thereto a true and correct copy of the
then proposed purchase agreement or similar agreement, partnership
agreement, lease and/or management contract entered into in connection
with such Permitted Acquisition;
(e) the Borrower or any of its Subsidiaries may sell any
hotel property, land or building and/or any capital stock and/or
equity interests of any Person that owns such hotel property, land or
building, provided that after giving effect to such sale the covenants
contained in Sections 8.10, 8.11, 8.12, 8.13 and 8.14 shall be
complied with on a pro forma basis as if such hotel property, land or
building so sold had not been owned by the Borrower and/or any of its
Subsidiaries for the 12-month period immediately preceding such sale;
(f) the Reorganization;
(g) the Borrower or any of its Subsidiaries (other than an
NRL Subsidiary) may enter into leases of property or assets not
constituting Permitted Acquisitions in the ordinary course of business
not otherwise in violation of this Agreement and to the extent not
prohibited by Section 8.06(b);
(h) the Borrower and its Subsidiaries (other than any
Specified Subsidiary) may purchase or otherwise acquire any property
or assets of any Person (other than pursuant to Permitted
Acquisitions), provided that (x) such purchases or acquisitions are
made with funds other than the proceeds of Loans and Non-Recourse
Debt, (y) no Default or Event of Default exists at the time thereof or
after giving effect thereto and (z) after giving effect thereto,
Section 8.01 is complied with;
(i) the Borrower and its Subsidiaries may sell or discount
accounts receivable in the ordinary course of business consistent with
past practices, but only in connection with the collection or
compromise thereof, so long as the aggregate outstanding face amount
of accounts receivable sold or discounted at any time does not exceed
$5,000,000; and
(j) any NRL Subsidiary may enter into leases of hotel
properties in connection with obtaining, or as a method of effectively
obtaining, the benefits of (and entered in lieu of) a Management
Contract relating to the hotel properties which are the subject of
such leases, provided that any such lease shall not be guaranteed (or
otherwise supported) directly or indirectly by Holdings, the Borrower,
any Subsidiary Guarantor or any other Subsidiary (other than the NRL
Subsidiary entering into same) except that (x) the documentation
governing any such lease may contain provisions relating to customary
indemnities from the Borrower
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or a Subsidiary Guarantor for fraud, use of proceeds and environmental
matters or as are otherwise reasonably acceptable to the
Administrative Agent and (y) the Borrower may incur guaranties and
other Contingent Obligations in respect of such leases to the extent
permitted by Section 8.04(f)(A)(z).
To the extent the Required Banks (or all of the Banks as shall be required by
Section 12.12) waive the provisions of this Section 8.02 with respect to the
sale, transfer or other disposition of any Collateral, or any Collateral is
sold, transferred or disposed of as permitted by this Section 8.02, (i) such
Collateral shall be sold, transferred or disposed of free and clear of the
Liens created by the respective Security Document; (ii) if such Collateral
includes all of the capital stock of a Subsidiary Guarantor, such capital stock
shall be released from the Pledge Agreement and such Subsidiary shall be
released from the Subsidiary Guaranty; and (iii) the Administrative Agent and
the Collateral Agent shall be authorized to take actions deemed appropriate by
them in order to effectuate the foregoing.
8.03 LIENS. Holdings will not, and will not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or
with respect to any property or assets of any kind (real or personal, tangible
or intangible) of Holdings or any such Subsidiary whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such
property or assets (including sales of accounts receivable or notes with
recourse to Holdings or any of its Subsidiaries) or assign any right to receive
income, or file or permit the filing of any financing statement under the UCC
or any other similar notice of Lien under any similar recording or notice
statute, except:
(a) Liens for taxes not yet delinquent or Liens for taxes
being contested in good faith and by appropriate proceedings for which
adequate reserves (in the good faith judgment of the management of
Holdings) have been established;
(b) Liens in respect of property or assets imposed by law
which were incurred in the ordinary course of business, such as
carriers', warehousemen's, materialmen's and mechanics' Liens and
other similar Liens arising in the ordinary course of business, which
do not in the aggregate materially detract from the value of such
property or assets or materially impair the use thereof in the
operation of the business of Holdings or any Subsidiary;
(c) Liens created by this Agreement or the other Credit
Documents;
(d) Liens in existence on the Initial Borrowing Date which
(x) are listed, and the property subject thereto on the Initial
Borrowing Date described, in Annex VI, without giving effect to any
extensions or renewals thereof or (y) are otherwise permitted under
this Section 8.03;
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(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.08;
(f) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money);
(g) Leases or subleases granted to others not interfering in
any material respect with the business of Holdings or any of its
Subsidiaries and any interest or title of a lessor under any lease not
in violation of this Agreement;
(h) Easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of Holdings or any of its Subsidiaries;
(i) Liens arising from financing statements regarding leases
not in violation of this Agreement;
(j) Liens securing Non-Recourse Debt to the extent such Liens
do not attach to any property or assets other than the property or
asset financed or refinanced by any such Debt;
(k) Liens created by virtue of Capitalized Lease Obligations,
provided that such Liens are only in respect of the property or assets
subject to, and secure only, the respective Capital Lease;
(l) Liens (x) placed upon equipment or machinery used in the
ordinary course of business of the Borrower, any Subsidiary Guarantor
(other than Capital Corp) or any NRD Borrower at the time of (or
within 180 days after) the acquisition thereof by the Borrower, any
such Subsidiary Guarantor (other than Capital Corp) or any such NRD
Borrower to secure Indebtedness incurred to pay all or a portion of
the purchase price thereof, provided that the Lien encumbering the
equipment or machinery so acquired does not encumber any other asset
of the Borrower or any Subsidiary; or (y) existing on specific
tangible assets at the time acquired by the Borrower, any Subsidiary
Guarantor (other than Capital Corp) or any NRD Borrower or on assets
of a Person at the time such Person first becomes a Subsidiary of the
Borrower, provided that (i) any such Liens were not created at
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the time of or in contemplation of the acquisition of such assets or
Person by the Borrower or any of its Subsidiaries, (ii) in the case of
any such acquisition of a Person, any such Lien attaches only to
specific tangible assets of such Person and not assets of such Person
generally, (iii) the Indebtedness secured by any such Lien does not
exceed 100% of the fair market value of the asset to which such lien
attaches, determined at the time of the acquisition of such asset or
the time at which such Person becomes a Subsidiary of the Borrower
(except in the circumstances described in clause (y) above to the
extent such Liens constituted customary purchase money Liens at the
time of incurrence entered into in the ordinary course of business)
and (iv) the Indebtedness secured thereby is permitted by Section
8.04(b);
(m) Permitted Encumbrances;
(n) Liens arising from the transactions permitted by Section
8.02(i) and attached only to the receivable so sold or discounted; and
(o) Liens securing lease obligations of an NRL Subsidiary
permitted pursuant to Section 8.02(j) to the extent such Liens do not
attach to any property or assets other than the property or assets
subject to such leases.
8.04 INDEBTEDNESS. Holdings will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(b) Indebtedness of the Borrower, any Subsidiary Guarantor
(other than Capital Corp) or any NRD Borrower subject to Liens
permitted by Section 8.03(l) or constituting Capitalized Lease
Obligations, provided that the aggregate principal amount of such
Indebtedness and Capitalized Lease Obligations under all Capital
Leases shall not exceed $6,000,000 at any time outstanding;
(c) Existing Indebtedness without giving effect to any
subsequent extension, renewal or refinancing thereof;
(d) Indebtedness of the Borrower under the Interest Rate
Agreements entered into pursuant to Section 7.10;
(e) Indebtedness of (x) Holdings to the Borrower to the
extent the proceeds thereof are promptly utilized to pay
administrative and reporting costs, (y) the Borrower to Holdings or
any Subsidiary Guarantor or (z) any Subsidiary Guarantor
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to the Borrower or any other Subsidiary Guarantor, provided that (x)
such Indebtedness shall be evidenced by a promissory note which shall
be pledged to the Collateral Agent pursuant to the Pledge Agreement
and (y) no Indebtedness owing to or by Capital Corp shall be permitted
by this clause (e);
(f) Contingent Obligations of (A) the Borrower in respect of
(x) leases of real property entered into by the Borrower, (y)
obligations of any Subsidiary Guarantor permitted under this Agreement
and (z) leases entered into by any NRL Subsidiary permitted by Section
8.02(j), provided that the aggregate amount of such Contingent
Obligations shall not exceed $3,000,000, and (B) the Borrower or any
Subsidiary in respect of any other Person (other than in respect of
indebtedness for borrowed money) arising as a matter of applicable law
because the Borrower or such Subsidiary is or is deemed to be a
general partner of such other Person;
(g) any NRD Borrower may incur indebtedness ("Non-Recourse
Debt") to finance or refinance a hotel property acquired pursuant to a
Permitted Acquisition, provided that (i) Non-Recourse Debt may only be
incurred on and after the date on which pro forma annual Consolidated
EBITDA of Holdings (after giving effect to all Permitted Acquisitions
then consummated or being consummated) first equals or exceeds
$70,000,000, (ii) Non-Recourse Debt shall not be guaranteed (or
otherwise supported) directly or indirectly by Holdings, the Borrower,
any Subsidiary Guarantor or any other Subsidiary (other than the NRD
Borrower incurring same) (except that the documentation governing any
Non-Recourse Debt may contain provisions relating to customary
indemnities from the Borrower or a Subsidiary Guarantor for fraud, use
of proceeds and environmental matters or as are otherwise reasonably
acceptable to the Administrative Agent), (iii) the principal amount of
any issue of Non-Recourse Debt shall not exceed 65% of the fair market
value of the property securing such Debt, determined at the time of
the acquisition of such property by a valuation firm of national
standing utilizing appraisal standards satisfying the Real Estate
Appraisal Reform Amendments of The Financial Institution Reform,
Recovery and Enforcement Act of 1989, as amended, and (iv) the
aggregate principal amount of Non-Recourse Debt incurred by all NRD
Borrowers shall not exceed $50,000,000 at any time outstanding;
(h) the Borrower or any Subsidiary Guarantor (other than
Capital Corp) may incur additional Indebtedness other than any
guaranty or other Contingent Obligation created in respect of
Non-Recourse Debt (except for the indemnities specifically referred to
in clause (g)) in an aggregate principal amount not to exceed
$10,000,000 at any time outstanding; and
(i) the Borrower may incur Indebtedness evidenced by the
Capital Note as provided therein.
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8.05 ADVANCES, INVESTMENTS AND LOANS. Holdings will not, and
will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, except:
(a) Holdings or any of its Subsidiaries may invest in cash
and Cash Equivalents;
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to them in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms;
(c) loans and advances (x) to employees for business-related
travel expenses, moving expenses and other similar expenses, in each
case incurred in the ordinary course of business and (y) other than
loans described on Annex VII, to employees in an aggregate principal
amount not to exceed $8,000,000 at any time outstanding, shall be
permitted;
(d) to the extent allowed by Section 8.02(c), (d) or (h), and
the creation of Subsidiaries in compliance with Section 8.15 shall be
permitted;
(e) investments acquired by the Borrower or any of its
Subsidiaries (x) in exchange for any other investment held by the
Borrower or any such Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer
of such other investment or (y) as a result of a foreclosure by the
Borrower or any of its Subsidiaries with respect to any secured
investment or other transfer of title with respect to any secured
investment in default;
(f) investments of the Borrower in Interest Rate Agreements
entered into pursuant to Section 7.10;
(g) Loans and advances permitted by Section 8.04(e) and/or (i); and
(h) The investments (other than in Subsidiaries) outstanding
on the Initial Borrowing Date which are listed on Annex VII hereto
(without any increase thereto).
8.06 CAPITAL EXPENDITURES; LEASES. (a) The Borrower will
not permit the amount expended during any fiscal year for Consolidated Capital
Expenditures to be less than 3% (it being understood and agreed that up to 50%
of such amount may be in the form of a Reserve created during such fiscal year)
but not more than 6% of the aggregate
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revenues for such fiscal year of all hotels owned or leased by the Borrower and
its Subsidiaries.
(b) Holdings will not permit the aggregate payments
(including, without limitation, any property taxes paid by the Borrower and its
Subsidiaries (other than a Specified Subsidiary) as additional rent or lease
payments) by the Borrower and its Subsidiaries (other than a Specified
Subsidiary) on a consolidated basis under agreements in effect as of the
Initial Borrowing Date and/or entered into after the Initial Borrowing Date
(including any such agreement that is an extension, replacement, substitution,
or renewal of any agreement entered into prior to such date) to rent or lease
any real or personal property (exclusive of Capitalized Lease Obligations) to
exceed $2,500,000 in any fiscal year of Holdings.
8.07 PREPAYMENTS OF INDEBTEDNESS, MODIFICATIONS OF
AGREEMENTS, ETC. Holdings will not, and will not permit any of its
Subsidiaries to:
(a) make (or give any notice in respect thereof) any
voluntary or optional payment or prepayment or redemption or
acquisition for value of (including, without limitation, by way of
depositing with the trustee with respect thereto money or securities
before due for the purpose of paying when due) or exchange of any
Existing Indebtedness or the Capital Note;
(b) amend or modify (or permit the amendment or modification
of) any of the terms or provisions of or terminate (other than any
scheduled termination in accordance with the terms thereof) (A) the
Capital Note and/or any document or agreement governing same, (B) in
any manner adverse to the interests of the Banks any documents or
agreement governing any Existing Indebtedness or the CGL Participation
or (C) in any manner that has, or which would reasonably be expected
to have, a Material Adverse Effect, any Acquisition Document or any
Westborough Acquisition Document; and/or
(c) amend, modify or change in any manner materially adverse
to the interests of the Banks the certificate of incorporation
(including, without limitation, and in any event, by the filing of any
certificate of designation), partnership agreement, certificate of
formation or by-laws of any Credit Party, or enter into any new
agreement with respect to the capital stock or equity interests, as
the case may be, of any Credit Party (to the extent adverse to the
interests of the Banks).
8.08 DIVIDENDS, ETC. Holdings will not, and will not permit
any Subsidiary to declare or pay any dividends (other than, in the case of
Holdings, dividends payable solely in common stock of Holdings) or return any
capital to, its stockholders, equity holders, members or partners or authorize
or make any other distribution, payment or
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delivery of property or cash to its stockholders, equity holders, members or
partners, as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for a consideration, any shares of any class of its capital
stock or equity or partnership interests or membership interests now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights in respect of any of such shares), or set aside any funds for any of the
foregoing purposes, or permit any Subsidiary to purchase or otherwise acquire
for consideration any shares of any class of the capital stock or equity or
partnership interests or membership interests of Holdings or any such
Subsidiary, as the case may be, now or hereafter outstanding (or any options or
warrants or stock appreciation rights issued with respect to such capital stock
or membership interests or partnership interests) (all of the foregoing
"Dividends"), except that (i) any Subsidiary of the Borrower may pay Dividends
to the Borrower or to any Subsidiary Guarantor, (ii) Capital Corp may pay cash
Dividends to Holdings so long as Holdings shall immediately utilize 100% of the
proceeds thereof to (x) promptly pay when due administrative and other
customary operating costs and/or (y) make a capital contribution to the
Borrower and (iii) the Borrower may pay cash Dividends to Holdings so long as
Holdings shall immediately utilize 100% of the proceeds thereof to pay when due
administrative and other customary operating costs.
8.09 TRANSACTIONS WITH AFFILIATES. Holdings will not, and
will not permit any Subsidiary to, enter into any transaction or series of
transactions with any Affiliate (other than, in the case of a Subsidiary,
Holdings, the Borrower or a Subsidiary Guarantor) other than in the ordinary
course of business and on terms and conditions substantially as favorable to
Holdings or such Subsidiary as would be obtainable, in Holdings' reasonable
judgment, by Holdings or such Subsidiary at the time in a comparable
arm's-length transaction with a Person other than an Affiliate except (i)
Management Contracts, (ii) investments permitted by Section 8.06 and (iii)
payments made pursuant to Section 8.09.
8.10 LEVERAGE RATIO. The Borrower will not permit the ratio
of (i) Modified Total Indebtedness as of a date set forth below to (ii) EBITDA
for the Test Period ended on such date to be greater than the ratio set forth
opposite such date below:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
September 30 and December 31, 1996,
March 31, June 30, September 30
and December 31, 1997 4.5:1
March 31, June 30, September 30
and December 31, 1998, March 31,
June 30, September 30 and
December 31, 1999 4.25:1
</TABLE>
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<PAGE> 66
<TABLE>
<S> <C>
March 31, June 30, September 30
and December 31, 2000, March 31,
June 30, September 30 and
December 31, 2001 4.00:1
March 31, June 30, September 30
and December 31, 2002 3.75:1
March 31, 2003 and each
fiscal quarter thereafter 3.50:1
</TABLE>
8.11 MINIMUM EBITDA. Holdings will not permit EBITDA for any
Test Period ending on a date set forth below to be less than the amount set
forth opposite such date:
<TABLE>
<CAPTION>
Date Amount
---- ------
<S> <C>
September 30
and December 31, 1996 $65,000,000
March 31, June 30,
September 30 and
December 31, 1997,
March 31, June 30,
September 30 and
December 31, 1998 $70,000,000
March 31, 1999 and each
fiscal quarter thereafter $75,000,000
</TABLE>
8.12 INTEREST COVERAGE. Holdings will not permit the
Interest Coverage Ratio for any Test Period ending on a date set forth below to
be less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
September 30 and December 31, 1996,
March 31, June 30, September 30
and December 31, 1997 2.50:1
</TABLE>
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<TABLE>
<S> <C>
March 31, 1998 and each
fiscal quarter thereafter 2.75:1
</TABLE>
8.13 CONSOLIDATED NET WORTH. Holdings will not permit
Consolidated Net Worth as of the end of any fiscal quarter of Holdings to be
less than an amount equal to the sum of (x) $190,000,000 plus (y) the aggregate
of 80% (70% for each fiscal quarter ending after December 31, 1998) of the
Consolidated Net Income, if positive, for each fiscal quarter ending after the
Initial Borrowing Date and on or prior to the end of the fiscal quarter as of
which Consolidated Net Worth is being determined.
8.14 DEBT SERVICE COVERAGE. Holdings will not permit the
Debt Service Coverage Ratio for any Test Period ending on a date set forth
below to be less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
September 30 and December 31, 1996,
March 31, June 30, September 30
and December 31, 1997 2.00:1
March 31, 1998 and each
fiscal quarter thereafter 2.25:1
</TABLE>
8.15 CREATION OF SUBSIDIARIES. Holdings will not, and will
not permit any Subsidiary to, create or acquire any Subsidiary other than (x) a
Wholly-Owned Subsidiary that executes a counterpart of the Subsidiary Guaranty,
Pledge Agreement and Security Agreement or (y) a Specified Subsidiary, to the
extent, in each case, that 100% of the capital stock of such entity is pledged
to the Collateral Agent pursuant to the Pledge Agreement. Upon an entity
ceasing to be a Specified Subsidiary, such entity, unless liquidated, shall
become a Subsidiary Guarantor and execute all documents required by the
preceding and following sentences. In addition, each new Subsidiary Guarantor
created as permitted by this Section 8.15 shall execute and deliver, or cause
to be executed, all other relevant documentation of the type described in
Section 5 as such new Subsidiary Guarantor would have had to deliver if such
new Subsidiary were a Credit Party on the Initial Borrowing Date.
8.16 LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES.
Holdings will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction in the ability of any such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by Holdings or any Subsidiary of
Holdings, or pay any Indebtedness owed to Holdings or a Subsidiary of
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Holdings, (b) make loans or advances to Holdings or any of Holdings'
subsidiaries, or (c) transfer any of its property or assets to Holdings or any
of Holdings' Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) this Agreement and the
other Credit Documents, (iii) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of Holdings or a
Subsidiary of Holdings, (iv) customary provisions restricting assignment of any
licensing agreement entered into by Holdings or any Subsidiary of Holdings in
the ordinary course of business, (v) customary provisions restricting the
transfer of assets subject to Liens permitted under Section 8.03(j) and (l),
(vi) customary provisions restricting assignment of any Management Contract (as
defined in the Security Agreement) or Franchise Agreement (as defined in the
Security Agreement) and (vii) restrictions governing any of the Non-Recourse
Debt of an NRD Borrower or any lease of an NRL Subsidiary.
8.17 HOLDINGS. Holdings will not engage in any business or
activities other than the ownership of all of the capital stock of Capital Corp
and the Borrower and administrative and reporting activities entitled thereto.
Capital Corp will not engage in any business or activities other than holding
the Capital Note.
SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of any of
the following specified events (each an "Event of Default"):
9.01 PAYMENTS. The Borrower shall (i) default in the payment
when due of any principal of the Loans or (ii) default, and such default shall
continue for three or more Business Days, in the payment when due of any
interest on the Loans or any Fees or any other amounts owing hereunder or under
any other Credit Document; or
9.02 REPRESENTATIONS, ETC. Any representation, warranty or
statement made by any Credit Party herein or in any other Credit Document or in
any statement or certificate delivered or required to be delivered pursuant
hereto or thereto shall prove to be untrue in any material respect on the date
as of which made or deemed made; or
9.03 COVENANTS. Holdings or the Borrower shall (i) default
in the due performance or observance by it of any term, covenant or agreement
contained in Section 7.10, 7.11, 8 or 12.18, or (ii) default in the due
performance or observance by it of any term, covenant or agreement (other than
those referred to in Section 9.01, 9.02 or clause (i) of this Section 9.03)
contained in this Agreement and such default shall continue unremedied for a
period of at least 30 days after notice by the Administrative Agent or the
Required Banks; or
9.04 DEFAULT UNDER OTHER AGREEMENTS. (a) Holdings, the
Borrower or any of its Subsidiaries shall (i) default in any payment with
respect to any Indebtedness (other than the Obligations and/or any non-recourse
Indebtedness), and such default shall continue
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<PAGE> 69
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness, or (ii) default in the observance or
performance of any agreement or condition relating to any such Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto (and all grace periods applicable to such observance, performance or
condition shall have expired), or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause any such Indebtedness to become due
prior to its stated maturity; or (b) any such Indebtedness of Holdings, the
Borrower or any of its Subsidiaries shall be declared to be due and payable, or
shall be required to be prepaid (other than by a regularly scheduled required
prepayment or redemption or as a mandatory prepayment or redemption (unless
such required or mandatory prepayment or redemption results from a default
thereunder or an event of type that constitutes an Event of Default hereunder),
provided that it shall not constitute an Event of Default pursuant to this
Section 9.04 unless the aggregate amount of all Indebtedness referred to in
clauses (a) and (b) above exceeds $5,000,000 at any one time; or
9.05 BANKRUPTCY, ETC. Holdings, the Borrower or any of its
Material Subsidiaries shall commence a voluntary case concerning itself under
Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter
in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary
case is commenced against Holdings, the Borrower or any of its Material
Subsidiaries and the petition is not controverted within 10 days, or is not
dismissed within 60 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of Holdings, the Borrower or any of its
Material Subsidiaries; or Holdings, the Borrower or any of its Material
Subsidiaries commences (including by way of applying for or consenting to the
appointment of, or the taking of possession by, a rehabilitator, receiver,
custodian, trustee, conservator or liquidator (collectively, a "conservator")
of itself or all or any substantial portion of its property) any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency, liquidation, rehabilitation, conservatorship
or similar law of any jurisdiction whether now or hereafter in effect relating
to Holdings, the Borrower or any of its Material Subsidiaries; or any such
proceeding is commenced against Holdings, the Borrower or any of its Material
Subsidiaries to the extent such proceeding is consented to by such Person or
remains undismissed for a period of 60 days; or Holdings, the Borrower or any
of its Material Subsidiaries is adjudicated insolvent or bankrupt; or any order
of relief or other order approving any such case or proceeding is entered; or
Holdings, the Borrower or any of its Material Subsidiaries suffers any
appointment of any conservator or the like for it or any substantial part of
its property which continues undischarged or unstayed for a period of 60 days;
or Holdings, the Borrower or any of its Material Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action
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is taken by Holdings, the Borrower or any of its Material Subsidiaries for the
purpose of effecting any of the foregoing; or
9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under Section 412
of the Code or Section 302 of ERISA or a waiver of such standard or extension
of any amortization period is sought or granted under Section 412 of the Code
or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, any
Plan which is subject to Title IV of ERISA shall have had or is likely to have
a trustee appointed to administer such Plan, any Plan which is subject to Title
IV of ERISA is, shall have been or is likely to be terminated or to be the
subject of termination proceedings under ERISA, any Plan shall have an Unfunded
Current Liability, a contribution required to be made with respect to a Plan
has not been timely made, Holdings, or any Subsidiary of Holdings or any ERISA
Affiliate has incurred or is likely to incur any liability to or on account of
a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201,
4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on
account of a group health plan (as defined in Section 607(1) of ERISA or
Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or Holdings,
or any Subsidiary of Holdings has incurred or is likely to incur liabilities
pursuant to one or more employee welfare benefit plans (as defined in Section
3(1) of ERISA) that provide benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or Plans; (b) there
shall result from any such event or events the imposition of a lien, the
granting of a security interest, or a liability or a material risk of incurring
a liability; and (c) such lien, security interest or liability, individually,
and/or in the aggregate, in the opinion of the Required Banks, has had, or
could reasonably be expected to have, a Material Adverse Effect; or
9.07 SECURITY DOCUMENTS. (a) Any Security Document shall
cease to be in full force and effect (other than upon termination thereof in
accordance with its terms), or shall cease to give the Collateral Agent the
Liens purported to be created thereby in favor of the Collateral Agent or (b)
any Credit Party shall default in the due performance or observance of any
material term, covenant or agreement on its part to be performed or observed
pursuant to any Security Document and such default shall continue beyond any
cure or grace period specifically provided for in such Security Document; or
9.08 JUDGMENTS. One or more judgments or decrees shall be
entered against Holdings, the Borrower and/or any of its Subsidiaries involving
a liability (not paid or fully covered by insurance) of $5,000,000 or more in
the aggregate for all such judgments and decrees for Holdings, the Borrower and
its Subsidiaries) and any such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 60 days from the
entry thereof; or
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9.09 ENVIRONMENTAL MATTERS. Any Hazardous Materials shall
have been at any time (i) generated, used, treated or stored on, or transferred
to or from, any Real Property of Holdings or any of its Subsidiaries or (ii)
released on any such Real Property in violation of Environmental Laws, in each
case where such occurrence or event has had, or is reasonably likely to have, a
Material Adverse Effect; or
9.10 GUARANTY. Any Guaranty or any provision thereof shall
cease to be in full force or effect, or any Guarantor or any Person acting by
or on behalf of such Guarantor shall deny or disaffirm such Guarantor's
obligations under such Guaranty or any Guarantor shall default in the due
performance or observance of any material term, covenant, or agreement on its
part to be performed or observed pursuant to the relevant Guaranty;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Administrative Agent shall, upon the
written request of the Required Banks, by written notice to the Borrower, take
any or all of the following actions, without prejudice to the rights of the
Administrative Agent or any Bank to enforce its claims against the Borrower,
except as otherwise specifically provided for in this Agreement (provided that,
if an Event of Default specified in Section 9.05 shall occur with respect to
the Borrower, the result which would occur upon the giving of written notice by
the Administrative Agent as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the Total
Commitment terminated, whereupon the Commitment of each Bank shall forthwith
terminate immediately and any Commitment Commission shall forthwith become due
and payable without any other notice of any kind; (ii) declare the principal of
and any accrued interest in respect of all Loans, all Unpaid Drawings and all
obligations owing hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; (iii)
enforce, as Administrative Agent (or direct the Collateral Agent to enforce),
any or all of the Liens and security interests created pursuant to the Security
Documents; (iv) terminate any Letter of Credit which may be terminated in
accordance with its terms; and (v) direct the Borrower to pay (and the Borrower
hereby agrees that on receipt of such notice or upon the occurrence of an Event
of Default with respect to the Borrower under Section 9.05, it will pay) to the
Collateral Agent an amount of cash equal to the aggregate Stated Amount of all
Letters of Credit then outstanding (such amount to be held as security after
the Borrower's reimbursement obligations in respect thereof).
SECTION 10 DEFINITIONS. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
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"Acquisition" shall mean the acquisition by the Borrower of
the Assets as provided in the Acquisition Documents.
"Acquisition Documents" shall mean (i) the Agreement of
Purchase and Sale and (ii) the Contribution Agreement, in each case in the form
delivered to the Administrative Agent pursuant to Section 5.01(j) and without
giving effect to any amendment or modification thereof not consented to by the
Required Banks.
"Acquisition Loans" shall mean Revolving Loans the proceeds of
which are utilized to make Permitted Acquisitions or to refinance loans or
advances the proceeds of which were utilized to make Permitted Acquisitions.
"Acquisition Sublimit" shall mean at any time the Total
Revolving Commitment at such time less $5,000,000.
"Additional Security Documents" shall have the meaning provided
in Section 7.11.
"Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 11.09.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control
a second Person if such first Person possesses, directly or indirectly, the
power (i) to vote 10% or more of the securities having ordinary voting power
for the election of directors or managers of such second Person or (ii) to
direct or cause the direction of the management and policies of such second
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Credit Agreement, as the same may
be from time to time further modified, amended and/or supplemented.
"Agreement of Purchase and Sale" shall mean the Agreement of
Purchase and Sale, dated as of March 29, 1996, among the sellers named therein
and Member, in the form delivered to the Administrative Agent pursuant to
Section 5.01(j)(i) amended through the Effective Date.
"Applicable Percentage" shall mean (i) in the case of Loans
maintained as Base Rate Loans, 1% and (ii) in the case of Loans maintained as
Eurodollar Loans, 2%.
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"Assets" shall mean the partnership interests and hotel assets
acquired by the Borrower pursuant to, and as more fully described in, the
Acquisition Documents.
"Asset Sale" shall mean the sale, transfer or other
disposition (including by liquidations of a partnership of the interests
therein of the Borrower or any Subsidiary) by the Borrower or any Subsidiary to
any Person other than the Borrower or any Subsidiary Guarantor of any of their
respective assets (other than (i) sales, transfers or other dispositions of
obsolete or excess FF&E in the ordinary course of business and (ii) sales,
transfers or other dispositions with Net Cash Proceeds aggregating no more than
$500,000 in any fiscal year).
"Assignment Agreement" shall mean an Assignment Agreement
substantially in the form of Exhibit J hereto.
"Assignment of Judgment" shall have the meaning provided in
Section 5.01(m)(iv).
"Authorized Officer" shall mean any executive officer of
Holdings or the Borrower, as the case may be, designated as such in writing to
the Administrative Agent by Holdings or the Borrower, respectively, to the
extent acceptable to the Administrative Agent.
"Bank" shall have the meaning provided in the first
paragraph of this Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any incurrence of Loans
or to fund its portion of any unreimbursed payment under Section 2.04(c) or
(ii) a Bank having notified the Administrative Agent and/or the Borrower that
it does not intend to comply with the obligations under Section 1.01 and/or
Section 2.04(c), in the case of either (i) or (ii) as a result of the
appointment of a receiver or conservator with respect to such Bank at the
direction or request of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section
9.05.
"Base Rate" shall mean the higher of (x) the rate established
by the Administrative Agent from time to time as the reference rate for short
term commercial loans in U.S. dollars and (y) 1/2 of 1% in excess of the
overnight cost of funds of the Administrative Agent (as determined by the
Administrative Agent in its sole discretion).
"Base Rate Loan" shall mean each Loan bearing interest
at the rates provided in Section 1.08(a).
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"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrowing" shall mean the incurrence of one Type of Loan
pursuant to a single Facility by the Borrower from all of the Banks having
Commitments with respect to such Facility on a pro rata basis on a given date
(or resulting from conversions on a given date), having in the case of
Eurodollar Loans the same Interest Period, provided that Base Rate Loans
incurred pursuant to Section 1.10(b) shall be considered part of any related
Borrowing of Eurodollar Loans.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which
banking institutions are authorized by law or other governmental actions to
close and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) and which is also a day for
trading by and between banks in U.S. dollar deposits in the interbank
Eurodollar market.
"Capital Corp" shall mean IHC Capital Corporation, a Delaware
corporation.
"Capital Lease" as applied to any Person shall mean any lease
of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Capital Note" shall mean the subordinated promissory note
issued by the Borrower and payable to Capital Corp in an aggregate principal
amount equal to the net proceeds of the IPO, which Capital Note shall be in
form and substance reasonably satisfactory to the Administrative Agent and
shall be pledged to the Collateral Agent pursuant to the Pledge Agreement to
which Capital Corp is party. Not less than $182,972,500 of the amounts
received by the Borrower pursuant to the Capital Note shall be utilized to
effect the Transaction prior to or contemporaneously with the utilization of
proceeds of initial Loans hereunder.
"Capitalized Lease Obligations" shall mean all obligations
under Capital Leases of the Borrower or any of its Subsidiaries in each case
taken at the amount thereof accounted for as liabilities in accordance with
GAAP.
"Cash Equivalents" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities
of not more than one year from the date of acquisition,
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(ii) U.S. dollar denominated time deposits, certificates of deposit and
bankers' acceptances of (x) any Bank or (y) any bank whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent thereof or
from Moody's is at least P-1 or the equivalent thereof (any such bank, an
"Approved Bank"), in each case with maturities of not more than one year from
the date of acquisition, (iii) commercial paper issued by any Bank or Approved
Bank or by the parent company of any Bank or Approved Bank and commercial paper
issued by, or guaranteed by, any industrial or financial company with a short-
term commercial paper rating of at least A-1 or the equivalent thereof by S&P
or at least P-1 or the equivalent thereof by Moody's, or guaranteed by any
industrial company with a long term unsecured debt rating of at least A or A2,
or the equivalent of each thereof, from S&P or Moody's, as the case may be, and
in each case maturing within one year after the date of acquisition and (iv)
investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) through (iii)
above.
"Cash Proceeds" shall mean, with respect to any Asset Sale,
the aggregate cash payments (including any cash received by way of deferred
payment pursuant to a note receivable issued in connection with such Asset
Sale, other than the portion of such deferred payment constituting interest,
but only as and when so received) received by Holdings, the Borrower and/or any
Subsidiary from such Asset Sale.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as the same may be amended from time
to time, 42 U.S.C. Section 9601 et seq.
"CGL" shall mean Interstone/CGL Partners, L.P., a
Delaware Limited Partnership.
"CGL Partnership Agreement" shall mean the Amended and
Restated Limited Partnership Agreement, dated as of November 20, 1995, among
Interstone/CGL Management Associates, Interstone Two Partners I L.P.,
Interstone Two Partners II L.P., Interstone Two Partners III L.P., Interstone
Two Partners IV L.P., Connecticut General Life Insurance Company, CGI Partners,
L.P. and Quebec Street Investments, Inc.
"CGL Participation" shall have the meaning provided in Section
5.01(k)(v).
"Change of Control" shall mean and include (i) during any
period of two consecutive calendar years, individuals who at the beginning of
such period constituted Holdings' Board of Directors (together with any new
directors whose election by Holdings' Board of Directors or whose nomination
for election by Holding's shareholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors then
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in office (ii) any Person or group (as such term is defined in Section
13(da)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), other than the Fine Family, shall acquire, directly or indirectly,
beneficial ownership (within the meaning of Rule 13d-3 and 13d-5 of the
Exchange Act) of 30% or more, on a fully diluted basis, of the economic or
voting interest in Holdings' capital stock and/or (iii) any "change in control"
or any similar term as defined in any of the indentures, agreements or
instruments governing any Indebtedness of Holdings or any of its Subsidiaries.
"Clean-Down Period" shall mean a 30 consecutive day period
which shall commence on or after July 1 of each year and terminate on or before
June 30 of the following year during which the sum of the aggregate outstanding
principal amount of Working Capital Loans plus the Letter of Credit
Outstandings do not exceed $10,000,000 at any time during such period.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and the rulings
issued thereunder. Section references to the Code are to the Code, as in
effect at the Effective Date and any subsequent provisions of the Code,
amendatory thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in
each of the Security Documents.
"Collateral Agent" shall mean the Administrative Agent acting
as collateral agent for the Banks pursuant to the Security Documents.
"Collective Bargaining Agreement" shall have the
meaning provided in Section 5.01(d).
"Commitment" shall mean, with respect to each Bank, such
Bank's Term Commitment plus its Revolving Commitment.
"Commitment Commission" shall have the meaning provided in
Section 3.01(a).
"Consolidated Capital Expenditures" shall mean all
expenditures made by the Borrower and its Subsidiaries for the maintenance of
properties in the ordinary course (and not in connection with acquisitions or
major expansion/renovation programs).
"Consolidated Net Income" shall mean for any period, the net
income (or loss), without deduction for minority interests, of Holdings and its
Subsidiaries on a consolidated basis for such period taken as a single
accounting period determined in
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conformity with GAAP, provided that there shall be excluded (i) the income (or
loss) of any entity (other than a Subsidiary) in which any other Person (other
than the Borrower or any of its Subsidiaries) has a joint interest, except to
the extent of the amount of dividends or other distributions actually paid to
the Borrower or any of its Subsidiaries by any such entity during such period,
(ii) the income (or loss) of any entity accrued prior to the date it becomes a
Subsidiary or is merged into or consolidated with the Borrower or any of its
Subsidiaries or on which its assets are acquired by the Borrower or any of its
Subsidiaries and (iii) the income of any Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary.
"Consolidated Net Worth" shall mean at any time for the
determination thereof all amounts which, in conformity with GAAP, would be
included under the caption "total stockholders' equity" (or any like caption)
on a consolidated balance sheet of Holdings as at such date.
"Contingent Obligations" shall mean as to any Person any
obligation of such Person guaranteeing any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net worth
or solvency of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation, or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof, provided, however,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by such Person in good
faith.
"Contribution Agreement" shall mean the Contribution
Agreement, dated as of March 29, 1996, among the contributors named therein and
the Borrower, as amended through the Initial Borrowing Date.
"Credit Documents" shall mean this Agreement, the Notes, the
Security Documents and the Subsidiary Guaranty.
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"Credit Event" shall mean the making of any Loans and/or the
issuance of any Letter of Credit.
"Credit Lyonnais" shall mean Credit Lyonnais New York Branch.
"Credit Party" shall mean Holdings, the Borrower and each
Subsidiary Guarantor.
"Debt Service Coverage Ratio" shall mean, for any Test Period,
the ratio of (x) EBITDA to (y) the Total Debt Service, in each case for such
Test Period.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a
Bank Default is in effect.
"Dividends" shall have the meaning provided in Section 8.08.
"EBIT" shall mean, for any period, (A) the sum of the amounts
for such period of (i) Consolidated Net Income, (ii) provisions for taxes based
on income, (iii) Total Interest Expense, (iv) amortization or write-off of
deferred financing costs to the extent deducted in determining Consolidated Net
Income and (v) losses on sales of assets (excluding sales in the ordinary
course of business) and other extraordinary losses and other one-time non-cash
charges less (B) gains on sales of assets (excluding sales in the ordinary
course of business) and other extraordinary gains and other one-time non-cash
gains, all as determined for Holdings and its Subsidiaries on a consolidated
basis in accordance with GAAP.
"EBITDA" shall mean, for any period, the sum of the amounts
for such period of (i) EBIT, (ii) depreciation expense, (iii) amortization
expense and (iv) any other non-cash charges, all as determined for Holdings and
its Subsidiaries on a consolidated basis in accordance with GAAP.
"Effective Date" shall have the meaning provided in Section
12.10.
"Eligible Transferee" shall mean and include a commercial
bank, financial institution or other "accredited investor" (as defined in SEC
Regulation D), in each case which is not a direct competitor of the Borrower or
engaged in the same or similar business as the Borrower, or any of its
respective Subsidiaries or is not an Affiliate of any such competitors of the
Borrower or any of its respective Subsidiaries.
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"Employment Agreements" shall have the meaning provided in
Section 5.01(d).
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any Environmental Law or any permit issued under any such law
(hereafter "Claims"), including, without limitation, (a) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any applicable Federal, state,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding and enforceable written policy or any rule of
common law, and any binding and enforceable judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment issued to or rendered against the Borrower or any
of its Subsidiaries (in each of the foregoing cases, now or hereafter in effect
and as amended) relating to the environment, employee health and safety or
Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal
Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air
Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701
et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42
U.S.C. Section 11001 et seq., the Toxic Substances Control Act, 15 U.S.C.
Section 7401 et seq.; and the Occupational Safety and Health Act, 29 U.S.C.
Section 651 et seq. (to the extent it regulates occupational exposure to
Hazardous Materials); and any state and local or foreign counterparts or
equivalents, in each case as now or hereafter in effect and as amended from
time to time.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the Effective Date and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with Holdings or a Subsidiary of Holdings
would be deemed to be a "single employer" (i) within the meaning of Section
414(b),(c), (m) or (o) of the Code or (ii) as a result of Holdings or a
Subsidiary of Holdings being or having been a general partner of such person.
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"Eurodollar Loans" shall mean each Loan bearing interest at
the rates provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest
Period for a Eurodollar Loan, (A) (i) the rate for deposits in U.S. Dollars
for a period equal to such Interest Period which appears on the Telerate Page
3750 as of 11:00 A.M. London time, on the day that is two Business Days prior
to the commencement of such Interest Period or (ii) in the event that the
Eurodollar Rate can not be determined pursuant to the preceding clause (i), the
offered quotation to first-class banks in the interbank Eurodollar market by
the Administrative Agent for dollar deposits of amounts in same day funds
comparable to the outstanding principal amount of the Eurodollar Loan of the
Administrative Agent for which an interest rate is then being determined with
maturities comparable to the Interest Period to be applicable to such
Eurodollar Loan, determined as of 11:00 A.M. (London time) on the date which is
two Business Days prior to the commencement of such Interest Period, in each
case divided (and rounded upward to the next whole multiple of 1/16 of 1%) by
(B) a percentage equal to 100% minus the then stated maximum rate of all
reserve requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section
9.
"Excess Cash Flow" shall mean, for any period, (x) EBITDA for
such period less (y) the sum, without duplication, of the amount for such
period of (i) Total Interest Expense, (ii) provisions for taxes based on
income, (iii) Consolidated Capital Expenditures other than any thereof made
from a Reserve established prior to such period, (iv) all scheduled principal
payments on Total Indebtedness (including all Scheduled Repayments), (v) all
partnership distributions made by any Subsidiary of the Borrower to any entity
that is not a wholly-owned direct or indirect Subsidiary of the Borrower and
(vi) any Reserve created (including any increase to an existing Reserve) during
such period.
"Existing CGL Credit Agreements" shall mean the Loan
Agreements, each dated as of December 15, 1995, between CGL and Credit Lyonnais
as in effect on the Initial Borrowing Date and as the same may be subsequently
amended, modified or supplemented in accordance with the provisions thereof and
hereof.
"Existing CIGNA Note" shall mean the Deed of Trust Note, dated
March 7, 1994, issued by Interstone/Houston Partnership, L.P. and payable to
Connecticut General Life Insurance Company.
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"Existing Hilltop Credit Agreement" shall mean the Credit
Agreement, dated as of February 19, 1993, between Hilltop Equipment Leasing
Company, L.P. and PNC Bank, National Association.
"Existing Indebtedness" shall have the meaning provided in
Section 6.18.
"Existing Indebtedness Agreements" shall have the meaning
provided in Section 5.01(d).
"Existing Letter of Credit" shall have the meaning
provided in Section 2.01(d).
"Existing PNC Credit Agreement" shall mean the Credit
Agreement, dated as of December 13, 1995, among the Borrower, the financial
institution from time to time party thereto and PNC Bank, National Association,
as agent.
"Existing Wells Fargo Credit Agreements" shall mean,
collectively, (i) the Loan and Security Agreement, dated as of June 26, 1995,
between Interstone/Huntington Partnership L.P. and Wells Fargo Bank, N.A., (ii)
the Loan Agreement, dated as of August 31, 1995, among Interstone/Atlanta
Partnership, L.P., Interstone/Colorado Springs, L.P., Interstone/Denver
Partnership, L.P., Interstone/Lisle Partnership, L.P., Interstone/Conshohocken
Partnership, L.P. and Wells Fargo Bank, National Association, and (iii) the
Loan Agreement, dated as of October 10, 1995, between Interstone/Williamsburg
Partnership, L.P. and Wells Fargo Bank, National Association.
"Expiration Date" shall mean July 31, 1996.
"Facing Fee" shall have the meaning provided in Section
3.01(c).
"Facility" shall mean either of the credit facilities
established under this Agreement, i.e., the Term Facility or the Revolving
Facility.
"Federal Funds Effective Rate" shall mean, for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members of
the Federal Reserve System arranged by Federal Funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the quotations
for such day on such transactions received by the Administrative Agent from
three Federal Funds brokers of recognized standing selected by the
Administrative Agent.
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"Fees" shall mean all amounts payable pursuant to, or
referred to in, Section 3.01.
"FF&E" shall mean furniture, fixtures and equipment.
"Fine" shall mean Milton Fine, individually and in his
capacity as trustee of the Fine Revocable Trust.
"Fine Children Trust" shall mean the three irrevocable trusts
established pursuant to that certain single Irrevocable Trust Agreement, dated
December 15, 1989, for the benefit respectively of the grantors thereof made
among Carolyn Fine Freidman, Sibyl A. Fine King and David J. Fine, as grantors,
and David J. Fine, as trustee.
"Fine Family" shall mean, collectively, Fine and the Fine
Children Trust.
"Fine Revocable Trust" shall mean the revocable trust
established pursuant to that certain Second Amended and Restated Trust
Agreement, dated November 11, 1994, for the benefit of Milton Fine.
"Formation Agreement" shall mean the Formation Agreement,
dated as of June 25, 1996, among Holdings and the contributors named therein,
in the form delivered pursuant to Section 5.01(h) and as the same may be
subsequently amended with the consent of the Administrative Agent.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 8, including defined terms as used therein, are subject (to the
extent provided therein) to Section 12.07(a).
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranties" shall mean the guaranty provided by Holdings
pursuant to Section 13 of this Agreement and the Subsidiary Guaranty.
"Guarantor" shall mean Holdings and each Subsidiary Guarantor.
"Hazardous Materials" shall mean (a) any petrochemical or
petroleum products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, and radon gas; and (b) any chemicals,
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materials or substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "restricted hazardous
materials," "extremely hazardous wastes," "restrictive hazardous wastes,"
"toxic substances," "toxic pollutants," "contaminants" or "pollutants," or
words of similar meaning and regulatory effect under any applicable
Environmental Law.
"Highest Lawful Rate" shall mean, with respect to any
indebtedness owed to any Bank hereunder or under any other Credit Document, the
maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received by such Bank
with respect to such indebtedness under the law applicable to any such
indebtedness that is extended by such Bank provided that if there is no such
maximum rate for any Bank then the provisions of Section 12.17 shall be
inapplicable to such Bank and its Loans and the obligations owed it hereunder
and under the other Credit Documents.
"Huntington Judgment" shall mean the Judgment of Foreclosure
and Sale, entered on May 29, 1996, granted to Interstone/Huntington
Partnership, L.P. by the Supreme Court of the State of New York, County of
Suffolk, IAS Part 30, in conneciton with Interstone/Huntington Partnership,
L.P. v. 110 Huntington Associates, Index No. 18445/95.
"Holdings" shall have the meaning provided in the first
paragraph of this Agreement.
"IHC" shall mean Interstate Hotels Corporation, a Pennsylvania
corporation.
"Indebtedness" of any Person shall mean without duplication
(i) all indebtedness of such Person for borrowed money, (ii) the deferred
purchase price of assets or services which in accordance with GAAP would be
shown on the liability side of the balance sheet of such Person, (iii) the face
amount of all letters of credit issued for the account of such Person and,
without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a
second Person secured by any Lien on any property owned by such first Person,
whether or not such indebtedness has been assumed, (v) all Capitalized Lease
Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vii) all net obligations
of such Person under Interest Rate Agreements and (viii) all Contingent
Obligations of such Person, provided that Indebtedness shall not include trade
payables and accrued expenses, in each case arising in the ordinary course of
business.
"Initial Borrowing Date" shall mean the date, on or after the
Effective Date, upon which the initial Borrowing of Loans occurs.
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"Interest Coverage Ratio" shall mean, for any Test Period, the
ratio of (x) EBITDA to (y) Total Interest Expense, in each case for such Test
Period.
"Interest Period" with respect to any Loan shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, any interest rate cap agreement, any interest rate collar agreement
or other similar agreement or arrangement designed to protect against
fluctuations in interest rates.
"Interstone II" shall mean IHC/Interstone Partnership II,
L.P., a Delaware Limited Partnership.
"IPO" shall have the meaning provided in Section 5.01(i).
"Leaseholds" of any Person means all the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Legal Requirements" shall mean all applicable laws, rules,
orders and regulations made by any legislature or government or any
governmental body or regulatory authority having jurisdiction over Holdings or
a Subsidiary.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(b).
"Letter of Credit Issuer" shall mean (i) Credit Lyonnais, (ii)
in respect of each Existing Letter of Credit, the Bank that has issued same as
of the Effective Date and/or (iii) such other Bank that is requested, and
agrees, to so act by the Borrower and reasonably acceptable to the
Administrative Agent.
"Letter of Credit Outstandings" shall mean, at any time, the
sum, without duplication, of (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings.
"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
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"Loan" shall have the meaning provided in Section 1.01.
"Management Agreements" shall have the meaning provided in
Section 5.01(d).
"Management Contracts" shall have the meaning provided in
Section 5.01(d).
"Margin Stock" shall have the meaning provided in Regulation
U.
"Material Adverse Effect" shall mean a material adverse effect
on the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of Holdings and its Subsidiaries taken as
a whole (after giving effect to the Transaction).
"Material Subsidiary" shall mean, at any time, any Subsidiary
of the Borrower that (x) has assets at such time comprising 5% or more of the
consolidated assets of the Borrower and its Subsidiaries or (y) had net income
in the most recently ended fiscal year of the Borrower comprising 5% or more of
the consolidated net income of the Borrower and its Subsidiaries for such
fiscal year.
"Melville Documents" shall have the meaning provided in
Section 5.01(m)(iv).
"Member" shall mean IHC Member Corporation, a Delaware
corporation.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans,
$1,000,000, (ii) for Eurodollar Loans, $5,000,000.
"Modified Total Indebtedness" shall mean at any time (i) Total
Indebtedness less (ii) the outstanding principal amount up to $30,000,000 in
the aggregate of Non-Recourse Debt included in determining Total Indebtedness.
"Moody's" shall mean Moody's Investors Service, Inc. and its
successors.
"Mortgage" shall have the meaning provided in Section
5.01(m)(iii) and, after the execution and delivery thereof, shall include each
mortgage constituting an Additional Security Document.
"Mortgage Policies" shall have the meaning provided in Section
5.01(m)(iii).
"Mortgaged Property" shall have the meaning provided in
Section 5.01(m)(iii) and, after the execution and delivery of any mortgage or
deed of trust
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constituting an Additional Security Document, shall include the respective
property subject thereto but shall not include after the date of such release
any real property theretofore a Mortgaged Property that has been released from
the Liens of the Security Documents in accordance with the terms thereof or of
this Agreement.
"Net Cash Proceeds" shall mean, with respect to any Asset
Sale, the Cash Proceeds resulting therefrom net of (i) reasonable and customary
expenses of sale incurred in connection with such Asset Sale, and other
reasonable and customary fees (other than any commission paid or payable to
Holdings or any of its Subsidiaries) and expenses incurred, and all state, and
local taxes paid or reasonably estimated to be payable by such Person, as a
consequence of such Asset Sale and the payment of principal, premium and
interest of Indebtedness secured by the asset which is the subject of the Asset
Sale and required to be, and which is, repaid under the terms thereof as a
result of such Asset Sale, (ii) amounts of any distributions payable to holders
of minority interests in the relevant Person or in the relevant property or
assets and (iii) incremental income taxes paid or payable as a result thereof.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Non-Defaulting Bank" shall mean each Bank other than a
Defaulting Bank.
"Non-Managed Hotel" shall mean the Marriott property located
at Tysons Corner, Virginia and one other hotel property acquired by the
Borrower or a Subsidiary Guarantor after the Initial Borrowing Date and
identified at the time of acquisition as a Non-Managed Hotel by the Borrower to
the Administrative Agent, provided that such identified Non-Managed Hotel shall
be managed by the Borrower or any of its Subsidiaries from and after the first
anniversary of the consummation of the acquisition of such hotel property.
"Non-Recourse Debt" shall have the meaning provided in Section
8.04(g).
"Note" shall mean and include each Term Note and each
Revolving Note.
"Notice of Borrowing" shall have the meaning provided in
Section 1.03(a).
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Administrative
Agent at 1301 Avenue of the Americas, New York, New York 10019, Attention:
Mischa Zabotin, or such other office as the Administrative Agent may designate
to the Borrower from time to time.
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"NRD Borrower" shall mean each corporation (i) all of the
capital stock of which is directly owned by the Borrower, (ii) that owns one
(but not more than one) hotel property acquired pursuant to a Permitted
Acquisition and (iii) that incurs Non-Recourse Debt to finance or refinance the
acquisition of the property discussed in clause (ii) above, provided that upon
the repayment in full of such Non-Recourse Debt (other than from the proceeds
of refinancing Non-Recourse Debt), such corporation shall cease to be an NRD
Borrower.
"NRL Subsidiary" shall mean each corporation (i) all of the
capital stock of which is directly owned by the Borrower, (ii) that enters into
a lease or leases permitted by Section 8.02(j) and (iii) that incurs no
Indebtedness (except any such leases to the extent constituting Indebtedness),
provided that upon the termination of all such leases entered into by an NRL
Subsidiary, such corporation shall cease to be an NRL Subsidiary.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Administrative Agent or any Bank pursuant to the terms of this
Agreement or any other Credit Document.
"Participant" shall have the meaning provided in Section
2.04(a).
"Payment Office" shall mean the office of the Administrative
Agent at 1301 Avenue of the Americas, New York, New York, Attention: Mischa
Zabotin, or such other office as the Administrative Agent may designate to the
Borrower from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisitions" shall mean and include (i)
expenditures (including the purchase of adjacent land) to expand then existing
hotel facilities located in the United States or Canada to the extent owned by
the Borrower or any Subsidiary Guarantor on the Initial Borrowing Date or
acquired pursuant to a Permitted Acquisition, in an aggregate amount not to
exceed $10,000,000 for all expenditures pursuant to this clause (i); (ii)
advances or credit extensions to, or other investments in, any Person owing a
hotel property located in the United States or Canada made in connection with
the Borrower or any Subsidiary Guarantor obtaining a management contact for
such hotel property, in an aggregate amount not to exceed $30,000,000 for all
advances, credit extensions and investments pursuant to this clause (ii), with
advances, extensions and investments in NRL Subsidiaries in an aggregate amount
of up to $5,000,000 to be included as a Permitted Acquisition pursuant to this
clause (ii); and (iii) acquisitions (whether by purchase, lease or otherwise,
and including expenditures for start-up activities and operations and
renovations) of hotel properties (or interests in such properties) located in
the United States or Canada and/or interests in (or the making of advances or
credit extensions to or
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investments in) partnerships or limited liability companies owning hotel
properties located in the United States or Canada, provided that (x) the only
Indebtedness that may be incurred by Holdings, the Borrower and its
Subsidiaries to effect a Permitted Acquisition shall be Acquisition Loans and
Non-Recourse Debt, and (y) the aggregate amount that may be expended for all
Permitted Acquisitions in respect of hotel properties and facilities located in
Canada will not exceed $25,000,000.
"Permitted Encumbrances" shall mean, with respect to a Real
Property constituting part of the Collateral, (i) the liens, encumbrances and
other matters disclosed in the Mortgage Policy relating to the Mortgage on such
Real Property or "insured over" or "insured around" to the satisfaction of the
Collateral Agent in such Mortgage Policy, (ii) such other title and survey
exceptions as the Collateral Agent may approve in writing in its reasonable
discretion, and (iii) the Permitted Liens, if any, described in Section 8.03(h)
affecting such Real Property.
"Permitted Liens" shall mean Liens described in Section 8.03.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of) Holdings or a Subsidiary of
Holdings or an ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which Holdings, or a Subsidiary of
Holdings or an ERISA Affiliate maintained, contributed to or had an obligation
to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section
5.01(m)(i).
"Pledged Securities" shall mean all the Pledged
Securities as defined in the Pledge Agreement.
"Prohibited Transaction" shall mean a transaction with respect
to a Plan that is prohibited under Section 4975 of the Code or Section 406 of
ERISA and not exempt under Section 4975 of the Code or Section 408 of ERISA.
"PSD Interest Period" shall mean an Interest Period commenced
prior to the Syndication Date, each of which Interest Periods must satisfy the
requirements of Section 1.09(iv).
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"RCRA" shall mean the Resource Conservation and Recovery Act,
as the same may be amended from time to time, 42 U.S.C. Section 6901 et seq.
"Real Property" of any Person shall mean all of the right,
title and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.
"Reference Rate" shall mean the rate which the Administrative
Agent establishes from time to time as its reference rate for short term
commercial loans in U.S. dollars, the Reference Rate to change when and as such
reference rate changes. The Reference Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
The Administrative Agent may make commercial loans or other loans at rates of
interest at, above or below the Reference Rate.
"Refinancing" shall have the meaning provided in Section
5.01(k)(vi).
"Registration Statement" shall mean the Registration Statement
on Form S-1, Registration Number 333-3958 filed by Holdings with the SEC on
April 24, 1996, together with the amendments thereto filed on or prior to the
Effective Date (copies of which have been delivered to the Banks) and any
subsequent amendment thereto reasonably satisfactory to the Administrative
Agent.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"Reorganization" shall have the meaning provided in Section
5.01(h).
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan other than those events as to which the
30-day notice period is waived under subsection .13, .14, .16, .18, .19 or .20
of PBGC Regulation Section 2615.
"Required Banks" shall mean Non-Defaulting Banks whose
outstanding Term Loans and Term Commitments, and Revolving Commitments (or, if
after the Total Revolving Commitment has been terminated, outstanding Revolving
Loans) aggregate more than 50% of the sum of (i) the total outstanding Term
Loans and Term Commitments of Non-Defaulting Banks and (ii) the total Revolving
Commitments of Non-Defaulting Banks
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(or, if after the Total Revolving Commitment has been terminated, the total
outstanding Revolving Loans of Non-Defaulting Banks).
"Reserve" shall mean for any period any cash reserve
reasonably taken by the Borrower in good faith and in accordance with GAAP (to
the extent applicable thereto) or pursuant to the requirements of any credit
agreement binding on the Borrower and/or any Subsidiary in respect of cash
payments to be made in future periods relating to Consolidated Capital
Expenditures (other than any such Reserve relating to Consolidated Capital
Expenditures not permitted to be made in such period as a result of Section
8.06(a)).
"Revolving Commitment" shall mean, with respect to each Bank,
the amount set forth opposite such Bank's name in Annex I hereto directly below
the column entitled "Revolving Commitment," as the same may be reduced from
time to time pursuant to Section 3.02, 3.03 and/or 9 or (y) adjusted from time
to time as a result of assignments to or from such Bank pursuant to Section
12.04.
"Revolving Facility" shall mean the Facility evidenced by the
Total Revolving Commitment.
"Revolving Loan" shall have the meaning provided in Section
1.01(b).
"Revolving Note" shall have the meaning provided in Section
1.05(a).
"RF Maturity Date" shall mean June 25, 2003.
"RF Percentage" shall mean, at any time for each Bank with a
Revolving Commitment, the percentage obtained by dividing such Bank's Revolving
Commitment by the Total Revolving Commitment, provided that if the Total
Revolving Commitment has been terminated, the RF Percentage of each Bank shall
be determined by dividing such Bank's Revolving Commitment immediately prior to
such termination by the Total Revolving Commitment immediately prior to such
termination.
"S&P" shall mean Standard & Poor's Corporation and its
successors.
"Scheduled Repayment" shall have the meaning provided in
Section 4.02(A)(c).
"Scheduled RF Reduction" shall have the meaning provided in
Section 3.03(c).
"SEC" shall mean the United States Securities and Exchange
Commission.
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"SEC Regulation D" shall mean Regulation D as promulgated
under the Securities Act of 1933, as amended, as the same may be in effect from
time to time.
"Section 4.04(b)(ii) Certificate" shall have the meaning
provided in Section 4.04(b)(ii).
"Security Agreement" shall have the meaning provided in
Section 5.01(m)(ii).
"Security Agreement Collateral" shall mean all
"Collateral" as defined in the Security Agreement.
"Security Documents" shall mean the Pledge Agreement, the
Security Agreement, each Mortgage, each other Additional Security Document and
each security document entered into pursuant to Section 8.02(c).
"Shareholders' Agreements" shall have the meaning provided in
Section 5.01(d).
"Specified Asset Sale" shall mean and include a sale by the
Borrower or any of its Subsidiaries of any assets owned by such Person on the
Initial Borrowing Date but shall not include the sale of the Boston Marriott
Westborough Hotel.
"Specified Subsidiary" shall mean and include at any time each
NRD Borrower and each NRL Subsidiary existing at such time.
"Stated Amount" of each Letter of Credit shall mean the
maximum available to be drawn thereunder (regardless of whether any conditions
for drawing could then be met).
"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries, has more than a 50% equity interest at the
time. Unless otherwise expressly provided, all references herein to
"Subsidiary" shall mean a Subsidiary of the Borrower.
"Subsidiary Guarantor" shall mean Capital Corp and each
Wholly-Owned Subsidiary that is party to the Subsidiary Guaranty.
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"Subsidiary Guaranty" shall have the meaning provided in
Section 5.01(l).
"Syndication Date" shall mean the earlier of (x) the date
which is 60 days after the Initial Borrowing Date and (y) the date upon which
the Administrative Agent determines in its sole discretion (and notifies the
Borrower) that the primary syndication has been completed.
"Tax Sharing Agreement" shall have the meaning provided in
Section 5.01(d).
"Taxes" shall have the meaning provided in Section 4.04.
"Term Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I hereto directly below the
column entitled "Term Commitment," as the same may be reduced or terminated
pursuant to Section 3.03.
"Term Facility" shall mean the Facility evidenced by
the Total Term Commitment.
"Term Loan" shall have the meaning provided in Section
1.01(a).
"Term Note" shall have the meaning provided in Section
1.05(a).
"Test Period" shall mean at any time the period (taken as one
accounting period) of four consecutive fiscal quarters then last ended,
provided that the computation of any amount (e.g. EBITDA) for a Test Period
that includes less than four full fiscal quarters commencing on or after the
Initial Borrowing Date shall include such amount for the Borrower, Member and
their respective Subsidiaries on a combined basis for the portion of such Test
Period occurring prior to the Initial Borrowing Date (determined on a basis
consistent with the Borrower's and Member's financial statements and the
definitions contained herein).
"TF Maturity Date" shall mean June 25, 2003.
"Total Commitment" shall mean the sum of the Total Term
Commitment and the Total Revolving Commitment.
"Total Debt Service" shall mean, for any period, the sum,
without duplication, of the amounts for such period of (i) Total Interest
Expense and (ii) all scheduled principal payments on Total Indebtedness
(including all Scheduled Repayments).
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"Total Indebtedness" shall mean all Indebtedness for borrowed
money of or guaranteed by the Borrower and/or any of its Subsidiaries all as
determined on a consolidated basis.
"Total Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases in accordance
with GAAP) of Holdings and its Subsidiaries on a consolidated basis with
respect to all outstanding Indebtedness of Holdings and its Subsidiaries
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and net costs under Interest
Rate Agreements, but excluding, however, any amortization of deferred financing
costs, all as determined in accordance with GAAP.
"Total Revolving Commitment" shall mean the sum of the
Revolving Commitments of each of the Banks.
"Total Term Commitment" shall mean the sum of the Term
Commitments of each of the Banks.
"Transaction" shall include (i) the Reorganization, (ii) the
IPO, (iii) the Refinancing, (iv) the Acquisition and (v) if consummated on the
Initial Borrowing Date, the Westborough Acquisition.
"Transaction Documents" shall mean and include the Acquisition
Documents, the Westborough Acquisition Documents (in the event that the
Westborough Acquisition is consummated on the Initial Borrowing Date), the
Registration Statement and all agreements and documents governing the IPO, all
agreements and documents governing the Refinancing (including the CGL
Participations) and the Credit Documents.
"Two Thirds Banks" shall mean Non-Defaulting Banks whose
outstanding Term Loans and Term Commitments, and Revolving Commitments (or, if
after the Total Revolving Commitment has been terminated, outstanding Revolving
Loans) constitute at least 66-2/3% of the sum of (i) the total outstanding Term
Loans and Term Commitments of Non-Defaulting Banks and (ii) the Total Revolving
Commitment (or, if after the Total Revolving Commitment has been terminated,
the total outstanding Revolving Loans of Non-Defaulting Banks).
"Type" shall mean any type of Loan determined with respect to
the interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar
Loan.
"UCC" shall mean the Uniform Commercial Code.
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"Unfunded Current Liability" of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year exceeds
the fair market value of the assets allocable thereto, each determined in
accordance with Statement of Financial Accounting Standards No. 87, based upon
the actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan.
"Unpaid Drawing" shall have the meaning provided in Section
2.03(a).
"Unutilized Revolving Commitment" for any Bank at any time
shall mean the excess of (i) such Bank's Revolving Commitment at such time over
(ii) the sum of the principal amount of Revolving Loans made by such Bank and
outstanding at such time and (y) such Bank's RF Percentage of Letter of Credit
Outstandings at such time.
"Unutilized Total Revolving Commitment" shall mean, at any
time, the excess of (i) the Total Revolving Commitment at such time over (ii)
the sum of (x) the aggregate principal amount of all Revolving Loans then
outstanding plus (y) the aggregate Letter of Credit Outstandings at such time.
"Westborough Acquisition" shall mean the acquisition by the
Borrower of the Boston Marriott Westborough Hotel as provided in the
Westborough Acquisition Documents.
"Westborough Acquisition Documents" shall mean Agreement to
Sell and Purchase, effective as of March 1, 1996, by and between First
Allmerica Financial Life Insurance and the Borrower.
"Wholly-Owned Subsidiary" shall mean each Subsidiary of the
Borrower all of whose capital stock, equity interests and partnership interests
are owned directly or indirectly by the Borrower, its officers, stockholders
and affiliates but excluding any Subsidiary primarily engaged in the business
of issuing insurance and/or insurance policies.
"Working Capital Loans" shall mean all Revolving Loans that
are not Acquisition Loans.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile transmission,
telegraph or cable.
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SECTION 11. THE ADMINISTRATIVE AGENT.
11.01 APPOINTMENT. Each Bank hereby irrevocably designates
and appoints Credit Lyonnais as Administrative Agent (such term to include for
the purposes of this Section 11 Credit Lyonnais acting as Collateral Agent) to
act as specified herein and in the other Credit Documents, and each such Bank
hereby irrevocably authorizes Credit Lyonnais as the Administrative Agent for
such Bank, to take such action on its behalf under the provisions of this
Agreement and the other Credit Documents and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent by
the terms of this Agreement and the other Credit Documents, together with such
other powers as are reasonably incidental thereto. The Administrative Agent
agrees to act as such upon the express conditions contained in this Section 11.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except
those expressly set forth herein or in the other Credit Documents, nor any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Administrative Agent. The provisions
of this Section 11 are solely for the benefit of the Administrative Agent, and
the Banks, and no Credit Party shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, the Administrative Agent shall act solely as agent
of the Banks and does not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for any Credit Party.
11.02 DELEGATION OF DUTIES. The Administrative Agent may
execute any of its duties under this Agreement or any other Credit Document by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by Section 11.03.
11.03 EXCULPATORY PROVISIONS. Neither the Administrative
Agent nor any of its respective officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by Holdings or any
Subsidiary or any of their respective officers contained in this Agreement, any
other Credit Document or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative
Agent under or in connection with, this Agreement or any other Credit Document
or for any failure of Holdings or any Subsidiary or any of their respective
officers to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be under any obligation to any Bank to ascertain
or to inquire as to the
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observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of Holdings
or any Subsidiary. The Administrative Agent shall not be responsible to any
Bank for the effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Credit Document or for
any representations, warranties, recitals or statements made herein or therein
or made in any written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by the Administrative Agent
to the Banks or by or on behalf of Holdings to the Administrative Agent or any
Bank or be required to ascertain or inquire as to the performance or observance
of any of the terms, conditions, provisions, covenants or agreements contained
herein or therein or as to the use of the proceeds of the Loans or of the
existence or possible existence of any Default or Event of Default.
11.04 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, facsimile transmission, telex or teletype message,
statement, order or other document or conversation believed by it, in good
faith, to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to Holdings), independent accountants
and other experts selected by the Administrative Agent. The Administrative
Agent shall be fully justified in failing or refusing to take any action under
this Agreement or any other Credit Document unless it shall first receive such
advice or concurrence of the Required Banks as it deems appropriate or it shall
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Credit Documents in accordance with a request of the
Required Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Banks.
11.05 NOTICE OF DEFAULT. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless the Administrative Agent has received notice from a
Bank or the Borrower or any other Credit Party referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Administrative Agent receives such
a notice, the Administrative Agent shall give prompt notice thereof to the
Banks. The Administrative Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Banks, provided that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Banks.
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11.06 NON-RELIANCE. Each Bank expressly acknowledges that
neither the Administrative Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates have made any representations or
warranties to it and that no act by the Administrative Agent hereinafter taken,
including any review of the affairs of the Borrower or any Subsidiary, shall be
deemed to constitute any representation or warranty by the Administrative Agent
to any Bank. Each Bank represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent, or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, assets,
operations, property, financial and other conditions, prospects and
creditworthiness of Holdings and its Subsidiaries and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Bank also
represents that it will, independently and without reliance upon the
Administrative Agent, or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
conditions, prospects and creditworthiness of Holdings and its Subsidiaries.
The Administrative Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other conditions, prospects or
creditworthiness of Holdings or any Subsidiary which may come into the
possession of the Administrative Agent or any of their officers, directors,
employees, agents, attorneys-in-fact or affiliates.
11.07 INDEMNIFICATION. The Banks agree to indemnify the
Administrative Agent in its capacity as such ratably according to their
respective Loans and unutilized Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, reasonable expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Obligations) be imposed on, incurred by or asserted against the
Administrative Agent in its capacity as such in any way relating to or arising
out of this Agreement or any other Credit Document, or any documents
contemplated by or referred to herein or the transactions contemplated hereby
or any action taken or omitted to be taken by the Administrative Agent under or
in connection with any of the foregoing, but only to the extent that any of the
foregoing is not paid by Holdings or any of its Subsidiaries, provided that no
Bank shall be liable to the Administrative Agent for the payment of any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements to the extent resulting
solely from the Administrative Agent's gross negligence or willful misconduct.
If any indemnity furnished to the Administrative Agent for any purpose shall,
in the opinion of the Administrative Agent, be insufficient or become impaired,
the Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional
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indemnity is furnished. The agreements in this Section 11.07 shall survive the
payment of all Obligations.
11.08 THE ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY. The
Administrative Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with Holdings and its Subsidiaries
as though not acting as Administrative Agent hereunder. With respect to the
Loans made by it and all Obligations owing to it, the Administrative Agent
shall have the same rights and powers under this Agreement as any Bank and may
exercise the same as though it were not the Administrative Agent, and the terms
"Bank" and "Banks" shall include the Administrative Agent in its individual
capacity.
11.09 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative
Agent may resign as the Administrative Agent upon 20 days' notice to the Banks
and Holdings. The Required Banks shall appoint from among the Banks a
successor Administrative Agent for the Banks subject to prior approval by
Holdings so long as an Event of Default has not occurred and is continuing
(such approval not to be unreasonably withheld), whereupon such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent, and
the term "Administrative Agent" shall include such successor agent effective
upon its appointment, and the resigning Administrative Agent's rights, powers
and duties as the Administrative Agent shall be terminated, without any other
or further act or deed on the part of such former Administrative Agent or any
of the parties to this Agreement. After the retiring Administrative Agent's
resignation hereunder as the Administrative Agent, the provisions of this
Section 11 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
SECTION 12. MISCELLANEOUS.
12.01 PAYMENT OF EXPENSES, ETC. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent in
connection with the negotiation, preparation, execution and delivery of the
Credit Documents and the documents and instruments referred to therein and any
amendment, waiver or consent relating thereto (including, without limitation,
the reasonable fees and disbursements of White & Case) and of the
Administrative Agent and each of the Banks in connection with the enforcement
of the Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and disbursements of
counsel for the Administrative Agent and for each of the Banks); (ii) in the
event (x) that any of the Mortgages are foreclosed in whole or in part or that
any of the Mortgages are put into the hands of an attorney for collection,
suit, action or foreclosure, (y) of the foreclosure of any mortgage prior to or
subsequent to any of the Mortgages in which proceeding the Collateral Agent is
made a party, or (z) of the bankruptcy, insolvency, rehabilitation or other
similar proceeding in
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respect of the Borrower or any of its Subsidiaries, pay all costs of collection
and defense, including reasonable attorneys' fees in connection therewith and
in connection with any appellate proceeding or post-judgment action involved
therein, which shall be due and payable together with all required service or
use taxes; (iii) pay and hold each of the Banks harmless from and against any
and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iv)
indemnify each Bank, its officers, directors, employees, representatives and
agents (collectively, the "Indemnitees") from and hold each of them harmless
against any and all losses, liabilities, obligations (including removal or
remedial actions), claims, damages or expenses (including reasonable attorneys'
and consultants' fees and disbursements) incurred by any of them as a result
of, or arising out of, or in any way related to, or by reason of (a) any
interest in any Real Property (other than as permitted hereunder and/or under
the other Credit Documents) is claimed by any other Person, (b) any
investigation, litigation or other proceeding (whether or not any Bank is a
party thereto) related to the entering into and/or performance of any Credit
Document or the use of the proceeds of any Loans hereunder or the Transaction
or the consummation of any transactions contemplated in any Credit Document, or
(c) the actual or alleged presence of Hazardous Materials in the air, surface
water or groundwater or on the surface or subsurface of any Real Property
owned, leased or at any time operated by the Borrower or any of its
Subsidiaries, the release, generation, storage, transportation, handling or
disposal of Hazardous Materials at any location, whether or not owned or
operated by the Borrower or any of its Subsidiaries, the non-compliance by the
Borrower or any of its Subsidiaries of any Real Property with foreign, federal,
state and local laws, regulations, ordinances or Environmental Laws (including
applicable permits thereunder) applicable to any Real Property, or any
Environmental Claim relating to the Borrower or any of its Subsidiaries or any
Real Property owned, leased or at any time operated by the Borrower or any of
its Subsidiaries, including, in each case, without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of
the gross negligence or willful misconduct of the Person to be indemnified or
of any other Indemnitee who is such Person or an affiliate of such Person). To
the extent that the undertaking to indemnify, pay or hold harmless any Person
set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, the Borrower shall make the maximum
contribution to the payment and satisfaction of each of the indemnified
liabilities which is permissible under applicable law.
12.02 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence of an Event of Default, each
Bank is hereby authorized at any time or from time to time, without
presentment, demand, protest or other notice of any kind to the
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Borrower or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and apply any and all deposits (general or
special) and any other Indebtedness at any time held or owing by such Bank
(including, without limitation, by branches and agencies of such Bank wherever
located) to or for the credit or the account of the Borrower against and on
account of the Obligations and liabilities of the Borrower to such Bank under
this Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations the Borrower purchased by such Bank
pursuant to Section 12.06(b), and all other claims of any nature or description
arising out of or connected with this Agreement or any other Credit Document,
irrespective of whether or not such Bank shall have made any demand hereunder
and although said Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured.
12.03 NOTICES. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, facsimile transmission or cable
communication) and mailed, telegraphed, telexed, transmitted, cabled or
delivered, if to the Borrower, at the address specified opposite its signature
below; if to any Bank, at its address specified for such Bank on Annex II
hereto; or, at such other address as shall be designated by any party in a
written notice to the other parties hereto. All such notices and
communications shall be mailed, telegraphed, telexed, telecopied, or cabled or
sent by overnight courier, and shall be effective when received.
12.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that no Credit Party may
assign or transfer any of its rights or obligations hereunder without the prior
written consent of all the Banks. Each Bank may at any time grant
participations in any of its rights hereunder or under any of the Notes to
another financial institution, provided that in the case of any such
participation, (i) the participant shall not have any rights under this
Agreement or any of the other Credit Documents, including rights of consent,
approval or waiver (the participant's rights against such Bank in respect of
such participation to be those set forth in the agreement executed by such Bank
in favor of the participant relating thereto), (ii) such Bank's obligations
under this Agreement (including, without limitation, its Commitment hereunder)
shall remain unchanged, (iii) such Bank shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iv) such Bank
shall remain the holder of any Note for all purposes of this Agreement and (v)
the Borrower, the Administrative Agent, and the other Banks shall continue to
deal solely and directly with the selling Bank in connection with such Bank's
rights and obligations under this Agreement, and all amounts payable by the
Borrower hereunder shall be determined as if such Bank had not sold such
participation, except that the participant shall be entitled to the benefits of
Sections 1.10, 1.11 and 4.04 of this Agreement to the extent that such Bank
would be entitled to such benefits if the participation had not been entered
into or sold, and, provided further, that no Bank shall transfer, grant or sell
any participation under which the participant shall have rights to
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approve any amendment to or waiver of this Agreement or any other Credit
Document except to the extent such amendment or waiver would (x) extend the
final scheduled matu-rity of the Term Loans or Revolving Loans in which such
participant is participating (it being understood that any waiver of the making
of, or the application of any amortization payment or other prepayment or the
method of any application of any prepayment to the amortization of the Loans
shall not constitute an extension of the final maturity date thereof), or
reduce the rate or extend the time of payment of interest or Fees thereon
(except in connection with a waiver of the applicability of any post-default
increase in interest rates), or reduce the principal amount thereof, or
increase such participant's participating interest in any Commitment over the
amount thereof then in effect (it being understood that a waiver of any Default
or Event of Default or of any mandatory prepayment or a mandatory reduction in
the Total Commitment, or a mandatory prepayment, shall not constitute a change
in the terms of any Commitment), (y) release all or substantially all of the
Collateral (in each case except as expressly provided in the Credit Documents)
or (z) consent to the assignment or transfer by Holdings and/or the Borrower of
any of its rights and obligations under this Agreement.
(b) Notwithstanding the foregoing, (x) any Bank may assign
all or a portion of its Loans and/or Commitments, which does not have to be pro
rata among the Facilities, and its rights and obligations hereunder to another
Bank that is not a Defaulting Bank or to an Affiliate of such assignor Bank,
and (y) any Bank may assign all, or if less than all, a portion equal to at
least $5,000,000 in the aggregate for the assigning Bank or assigning Banks, of
its Loans and/ or Commitments and its rights and obligations hereunder, which
assignment does not have to be pro rata between the Facilities, to one or more
Eligible Transferees, each of which assignees shall become a party to this
Agreement as a Bank by execution of an Assignment Agreement, provided that, (i)
at such time Annex I shall be deemed modified to reflect the Commitments
(and/or outstanding Term Loans, as the case may be) of such new Bank and of the
existing Banks, (ii) upon surrender of the old Notes, new Notes will be issued,
at the Borrower's expense, to such new Bank and to the assigning Bank, such new
Notes to be in conformity with the requirements of Section 1.05 (with
appropriate modifications) to the extent needed to reflect the revised
Commitments (and/or outstanding Term Loans, as the case may be), (iii) in the
case of clause (y) only, the consent of the Administrative Agent shall be
required in connection with any such assignment (such consent not to be
unreasonably withheld) and (iv) the Administrative Agent shall receive at the
time of each such assignment, from the assigning or assignee Bank, the payment
of a non-refundable assignment fee of $3,000 and, provided further, that such
transfer or assignment will not be effective until recorded by the
Administrative Agent on the Bank Register pursuant to Section 12.16. To the
extent of any assignment pursuant to this Section 12.04(b) the assigning Bank
shall be relieved of its obligations hereunder with respect to its assigned
Commitments. At the time of each assignment pursuant to this Section 12.04(b)
to a Person which is not already a Bank hereunder and which is not a United
States Person (as such term is defined in Section 7701(a)(30) of the Code) for
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Federal income tax purposes, the respective assignee Bank shall provide to the
Borrower and the Administrative Agent the appropriate Internal Revenue Service
Forms (and, if applicable a Section 4.04(b)(ii) Certificate) described in
Section 4.04(b). To the extent that an assignment of all or any portion of a
Bank's Commitments and related outstanding Obligations pursuant to this Section
12.04(b) would, at the time of such assignment, result in increased costs under
Section 1.10 from those being charged by the respective assigning Bank prior to
such assignment, then the Borrower shall not be obligated to pay such increased
costs (although the Borrower shall be obligated to any other increased costs of
the type described above resulting from changes after the date of the
respective assignment). Nothing in this clause (b) shall prevent or prohibit
any Bank from pledging its Notes or Loans to a Federal Reserve Bank in support
of borrowings made by such Bank from such Federal Reserve Bank.
(c) Notwithstanding any other provisions of this Section
12.04, no transfer or assignment of the interests or obligations of any Bank
hereunder or any grant of participation therein shall be permitted if such
transfer, assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
State.
(d) Each Bank initially party to this Agreement hereby
represents, and each Person that became a Bank pursuant to an assignment
permitted by this Section 12.04 will, upon its becoming party to this
Agreement, represent that it is a commercial lender, other financial
institution or other "accredited" investor (as defined in SEC Regulation D)
which makes or acquires loans in the ordinary course of its business and that
it will make or acquire Loans for its own account in the ordinary course of
such business, provided that subject to the preceding clauses (a) and (b), the
disposition of any promissory notes or other evidences of or interests in
Indebtedness held by such Bank shall at all times be within its exclusive
control.
(e) The Administrative Agent shall maintain at its Notice
Office a copy of each Assignment Agreement delivered to and accepted by it.
12.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of the Administrative Agent or any Bank in exercising any right, power
or privilege hereunder or under any other Credit Document and no course of
dealing between the Borrower and the Administrative Agent or any Bank shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder or thereunder. The rights and remedies herein expressly
provided are cumulative and not exclusive of any rights or remedies which the
Administrative Agent or any Bank would otherwise have. No notice to or demand
on the Borrower in any case shall entitle the Borrower to any other or further
notice or demand
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in similar or other circumstances or constitute a waiver of the rights of the
Administrative Agent or the Banks to any other or further action in any
circumstances without notice or demand.
12.06 PAYMENTS PRO RATA. (a) The Administrative Agent
agrees that promptly after its receipt of each payment from or on behalf of the
Borrower in respect of any Obligations, it shall distribute such payment to the
Banks (other than any Bank that has expressly waived its right to receive its
pro rata share thereof) pro rata based upon their respective shares, if any, of
the Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans or Fees, of a sum which with respect to the related sum or sums
received by other Banks is in a greater proportion than the total of such
Obligation then owed and due to such Bank bears to the total of such Obligation
then owed and due to all of the Banks immediately prior to such receipt, then
such Bank receiving such excess payment shall purchase for cash without
recourse or warranty from the other Banks an interest in the Obligations to
such Banks in such amount as shall result in a proportional participation by
all of the Banks in such amount, provided that if all or any portion of such
excess amount is thereafter recovered from such Bank, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
12.07 CALCULATIONS; COMPUTATIONS. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be made and
prepared in accordance with GAAP consistently applied throughout the periods
involved (except as set forth in the notes thereto or as otherwise disclosed in
writing by Holdings to the Banks); provided, that except as otherwise
specifically provided herein, all computations determining compliance with
Sections 4.02 and 8, including definitions used therein, shall utilize
accounting principles and policies in effect at the time of the preparation of,
and in conformity with those used to prepare, the December 31, 1995 financial
statements delivered to the Banks pursuant to Section 6.10(b), but shall be
prepared on a consolidated basis instead of a combined basis and shall not give
effect to purchase accounting adjustments required or permitted by APB 16
(including non-cash write-ups and non-cash charges relating to inventory and
fixed assets, in each case arising in connection with the Transaction) and APB
17 (including non-cash charges relating to intangibles and goodwill arising in
connection with the Transactions).
(b) All computations of interest on Loans and Fees hereunder
shall be made on the actual number of days elapsed over a year of 360 days.
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12.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE;
WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW
YORK, EXCEPT THAT THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT
OF THE LIENS CREATED PURSUANT TO THE MORTGAGES SHALL BE GOVERNED BY AND
CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE REAL
PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED
BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE
VALIDITY AND ENFORCEABILITY OF ALL CREDIT DOCUMENTS, INCLUDING ALL MORTGAGES,
AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST
EXTENT PERMITTED BY LAW, THE BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK GOVERNS THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS,
EXCEPT TO THE EXTENT AFORESAID WITH RESPECT TO THE LIENS CREATED BY THE
MORTGAGES. Any legal action or proceeding with respect to this Agreement or
any other Credit Document may be brought in the courts of the State of New York
or of the United States for the Southern District of New York, and, by
execution and delivery of this Agreement, the Borrower hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Holdings and the
Borrower hereby irrevocably designate, appoint and empower Corporation Service
Company, with offices on the date hereof at 375 Hudson Street, New York, New
York 10014, as its designee, appointee and agent to receive, accept and
acknowledge for and on its behalf, and in respect of its property, service of
any and all legal process, summons, notices and documents which may be served
in any such action or proceeding. If for any reason such designee, appointee
and agent shall cease to be available to act as such, Holdings and the Borrower
agrees to designate a new designee, appointee and agent in New York City on the
terms and for the purposes of this provision satisfactory to the agent under
this Agreement. Holdings and the Borrower hereby further irrevocably consents
to the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to Holdings or the Borrower, as the case may
be, at its address for notices pursuant to Section 12.03, such service to
become effective 30 days after such mailing. Nothing herein shall affect the
right of the Administrative Agent, any Bank to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against Holdings and the Borrower in any other jurisdiction.
(b) Holdings and the Borrower hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Credit Document brought in the courts referred to in
clause (a) above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
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(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
12.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall be
lodged with the Borrower and the Administrative Agent.
12.10 EFFECTIVENESS. This Agreement shall become effective
on the date (the "Effective Date") on which each of Holdings, the Borrower and
each of the Banks shall have signed a copy hereof (whether the same or
different copies) and shall have delivered the same to the Administrative Agent
at the Notice Office of the Administrative Agent or, in the case of the Banks,
shall have given to the Administrative Agent telephonic (confirmed in writing),
written telex or facsimile transmission notice (actually received) at such
office that the same has been signed and mailed to it.
12.11 HEADINGS DESCRIPTIVE. The headings of the several
sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision of
this Agreement.
12.12 AMENDMENT OR WAIVER. Neither this Agreement nor any
terms hereof or thereof may be changed, waived, discharged or terminated unless
such change, waiver, discharge or termination is in writing signed by the
Borrower and the Required Banks (or the Two Thirds Banks if such change or
waiver is to Section 4.02(A)(c), provided that no such change, waiver,
discharge or termination shall, without the consent of each Bank (other than a
Defaulting Bank) affected thereby, (i) extend the final maturity date
applicable to a Facility (it being understood that any waiver of the making of,
or application of any prepayment of or the method of application of any
amortization payment or other prepayment to, the amortization of, the Loans
shall not constitute an extension of such final maturity thereof), reduce the
rate or extend the time of payment of interest (other than as a result of
waiving the applicability of any post-default increase in interest rates) or
Fees thereon, or reduce the principal amount thereof, or increase the
Commitment of any Bank over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default or of any mandatory
prepayment or a mandatory reduction in the Total Commitment shall not
constitute a change in the terms of any Commitment of any Bank), (ii) release
all or substantially all of the Collateral (in each case except as expressly
provided in the Credit Documents), (iii) amend, modify or waive any provision
of this Section 12.12, or Section 11.07, 12.01, 12.04, 12.06 or 12.07(b), (iv)
reduce the percentage speci-
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fied in, or otherwise modify, the definition of Required Banks or (v)
consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement. No provision of Section 2
or 11 may be amended without the consent of (x) any Letter of Credit
Issuer adversely affected thereby or (y) the Administrative Agent,
respectively.
12.13 SURVIVAL. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01 shall
survive the execution and delivery of this Agreement and the making and
repayment of the Loans.
12.14 DOMICILE OF LOANS. Each Bank may transfer and carry
its Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Bank, provided that the Borrower shall not be responsible for
costs arising under Section 1.10 or 4.04 resulting from any such transfer
(other than a transfer pursuant to Section 1.12) to the extent not otherwise
applicable to such Bank prior to such transfer.
12.15 CONFIDENTIALITY. Subject to Section 12.04, the Banks
shall hold all non-public information obtained pursuant to the requirements of
this Agreement which has been identified as such by the Borrower in accordance
with its customary procedure for handling confidential information of this
nature and in accordance with safe and sound banking practices and in any event
may make disclosure reasonably required by any bona fide transferee or
participant in connection with the contemplated transfer of any Loans or
Commitments or participation therein (provided that each such prospective
transferee and/or participant shall execute an agreement for the benefit of the
Borrower with such prospective transferor Bank containing provisions
substantially identical to those contained in this Section 12.15), to its
auditors, attorneys or as required or requested by any governmental agency or
representative thereof or pursuant to legal process, provided that, unless
specifically prohibited by applicable law or court order, each Bank shall
notify the Borrower of any request by any governmental agency or
self-regulatory organization or representative of either thereof (other than
any such request in connection with an examination of the financial condition
of such Bank by such governmental agency or, to the extent such organization
agrees to be bound by the terms of this Section 12.15, self-regulatory agency)
for disclosure of any such non-public information prior to disclosure of such
information, and provided further that in no event shall any Bank be obligated
or required to return any materials furnished by Holdings or any Subsidiary.
Holdings and the Borrower hereby agrees that the failure of a Bank to comply
with the provisions of this Section 12.15 shall not relieve Holdings or the
Borrower of any of the obligations to such Bank under this Agreement and the
other Credit Documents.
12.16 BANK REGISTER. The Borrower hereby designates the
Administrative Agent to serve as its agent, solely for purposes of this Section
12.16, to maintain a register (the "Bank Register") on which it will record the
names and addresses of the Banks and the
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Commitments of, and principal amount of the Loans owing to each, Bank from time
to time. The entries in the Bank Register shall be conclusive and binding for
all purposes, absent manifest error, and the Borrower, the Administrative Agent
and the Banks shall treat each Person whose name is recorded in the Bank
Register as a Bank hereunder for all purposes of this Agreement. Failure to
make any such recordation, or any error in such recordation, shall not affect
the Borrower's obligations in respect of such Loans. With respect to any Bank,
the transfer of the Commitments of such Bank and the rights to the principal
of, and interest on, any Loan made pursuant to such Commitments shall not be
effective until such transfer is recorded on the Bank Register maintained by
the Administrative Agent with respect to ownership of such Commitments and
Loans and prior to such recordation all amounts owing to the transferor with
respect to such Commitments and Loans shall remain owing to the transferor.
The registration of assignment or transfer of all or part of any Commitments
and Loans shall be recorded by the Administrative Agent on the Bank Register
only upon the acceptance by the Administrative Agent of a properly executed and
delivered Assignment and Assumption Agreement pursuant to Section 12.04(b).
The Bank Register shall be available for inspection by the Borrower or any Bank
at any reasonable time and from time to time upon reasonable prior notice. The
Borrower agrees to indemnify the Administrative Agent from and against any and
all losses, claims, damages and liabilities of whatsoever nature which may be
imposed on, asserted against or incurred by the Administrative Agent in
performing its duties under this Section 12.16.
12.17 INTEREST. (a) It is the intention of the parties
hereto that each Bank shall conform strictly to usury laws applicable to it.
Accordingly, the parties hereto stipulate and agree that none of the terms and
provisions contained in the Notes, this Agreement, or any of the other Credit
Documents shall ever be construed to create a contract to pay to any Bank for
the use, forbearance, or retention of money at a rate in excess of the Highest
Lawful Rate applicable to such Bank, and that for purposes hereof, "interest"
shall include Banks only to the extent same is included for purposes of
determining the Highest Lawful Rate for such Bank, the aggregate of all charges
or other consideration which constitute interest under applicable law and are
contracted for, taken, reserved, charged, or received under any of this
Agreement, the Notes, or the other Credit Documents or otherwise in connection
with the transactions contemplated by this Agreement. Further, if the
transactions contemplated hereby would be usurious as to any Bank under laws
applicable to it, then, in that event, notwithstanding anything to the contrary
in the Notes, this Agreement or in any other Credit Document or agreement
entered into in connection with or as security for the Notes, it is agreed as
follows: the aggregate of all consideration which constitutes interest for
determining the Highest Lawful Rate for each such Bank that is contracted for,
taken, reserved, charged, or received by such Bank under the Notes, this
Agreement, or under any of the other aforesaid Credit Documents or agreements
or otherwise in connection with the Notes shall under no circumstances exceed
the maximum amount allowed by the law applicable to such Bank, and any excess
shall be credited by such Bank on the principal amount of the Indebtedness of
the Borrower owed to such Bank
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and thereafter all other obligations owing such Bank not included in
determining "interest" for purposes of the Highest Lawful Rate applicable to
such Bank (or, if the principal amount of such Indebtedness and all other such
amounts shall have been paid in full, to the extent such interest has been
received by a Bank it shall be refunded by such Bank to the Borrower). The
provisions of this Section 12.17(a) shall control over all other provisions of
this Agreement, the Notes, and the other Credit Documents which may be in
apparent conflict herewith. The parties further stipulate and agree that,
without limitation on the foregoing, all calculations of the rate or amount of
interest contracted for, taken, reserved, charged or received under any of this
Agreement, the Notes, and the other Credit Documents which are made for the
purpose of determining whether such rate or amount exceed the Highest Lawful
Rate shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocating, and spreading during the period of the full stated term
of the Indebtedness, and if longer and if permitted by applicable law, until
payment in full, all interest at any time so contracted for, taken, reserved,
charged, or received.
(b) If at any time the effective rate of interest which would
otherwise apply to any Indebtedness hereunder or evidenced by any Bank's Notes
would exceed the Highest Lawful Rate applicable to such Bank (taking into
account the interest rate applicable to such Indebtedness pursuant to the other
provisions of this Agreement, plus all additional charges and consideration
which have been contracted for, taken, reserved, charged, or received under
this Agreement, such Bank's Notes and the other Credit Documents, or any of
them (the "Additional Charges") to, but only to, the extent any of the same
constitute interest with respect to such Indebtedness for purposes of
determining the Highest Lawful Rate), the effective interest rate to apply to
such Indebtedness made by such Bank shall be limited to the Highest Lawful
Rate, but any subsequent reductions in the interest rate applicable to such
Indebtedness owed to such Bank shall not reduce the effective interest rate to
apply to such Indebtedness owed to such Bank below the Highest Lawful Rate
applicable to such Bank until the total amount of interest accrued on such
Indebtedness equals the amount of interest which would have accrued if the
interest rate from time to time applicable to such Indebtedness owed to such
Bank had at all times been in effect with respect to such Indebtedness pursuant
to the other provisions of this Agreement and the other Credit Documents and if
the Banks had collected all Additional Charges called for under this Agreement,
the Notes, and the other Credit Documents. If at maturity or final payment of
such Bank's Obligations the total amount of interest paid to any Bank hereunder
and under the other Credit Documents (including amounts designated as
"interest" plus any Additional Charges, and taking into account the limitations
of the first sentence of this Section 12.17(b)) is less than the total amount
of such "interest" which would have been paid if all amounts were paid as
required by this Agreement (without giving effect to this Section 12.17) and
the other Credit Documents (the amount of the difference described above, the
"Deficiency"), then the Borrower agrees, to the fullest extent permitted by the
laws applicable to such Bank, to pay to such Bank an amount equal to the lesser
of (i) the difference between (1) the amount of such "interest" which would
have accrued on such
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Bank's Notes if the Highest Lawful Rate had at all times been in effect, and
(2) the amount of interest actually paid on such Bank's Notes (including
amounts designated as "interest" plus any Additional Charges) and (ii) the
amount of the Deficiency.
12.18 POST-CLOSING ACTIONS. Notwithstanding anything to the
contrary contained in this Agreement or the other Credit Documents, the parties
hereto acknowledge and agree that:
(a) SURVEY UPDATES. The Borrower or its counsel, on the
Initial Borrowing Date, will deliver to the Collateral Agent a list
of the survey updates that were not delivered on the Initial
Borrowing Date pursuant to Section 5.01(m)(iii)(D), and the Borrower
will as promptly as practicable (and in any event no later than 30
days after the Initial Borrowing Date) deliver or cause to be
delivered to the Collateral Agent the survey updates referred to in
such letter.
(b) HUNTINGTON JUDGMENT. The Borrower will, and will cause
Interstone/Huntington Partnership, L.P. to, take all actions
necessary and appropriate to fully execute and foreclose on the
Huntington Judgment within 90 days after the Initial Borrowing Date,
or within such longer period as shall be necessary to complete such
process, provided that the Borrower demonstrates to the satisfaction
of the Collateral Agent that the execution of and foreclosure on the
Huntington Judgment is being pursued with all diligence.
(c) DELIVERY OF MELVILLE DOCUMENTS. Promptly upon the
execution and foreclosure on the Huntington Judgment, the Borrower
will deliver or cause to be delivered to the Collateral Agent
executed originals of the Melville Documents.
(d) ZONING CONFIRMATIONS. The Borrower agrees to use its
reasonable efforts to obtain confirmation from the relevant municipal
authority that each Mortgage Property is in compliance with local
zoning requirements.
All conditions precedent and representations contained in this
Agreement and the other Credit Documents shall be deemed modified to the extent
but only to the extent necessary to effect the foregoing.
SECTION 13. GUARANTY.
13.01 THE GUARANTY. In order to induce the Banks to enter into this
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Holdings from the proceeds of the Loans, Holdings
hereby agrees with the Banks as follows: Holdings hereby, unconditionally and
irrevocably, guarantees as primary obligor and not merely as surety the full
and prompt payment when due, whether upon maturity,
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by acceleration or otherwise, of any and all indebtedness of the Borrower to
the Banks. If any or all of the indebtedness of the Borrower to the Banks
becomes due and payable hereunder, Holdings unconditionally promises to pay
such indebtedness to the Banks, or order, on demand, together with any and all
expenses which may be incurred by the Agent or the Banks in collecting any of
the indebtedness. The word "indebtedness" is used in this Section 13 in its
most comprehensive sense and includes any and all advances, debts, obligations
(including obligations which, but for any automatic stay under Section 362(a)
of the Bankruptcy Code, would become due) and liabilities of the Borrower
arising in connection with this Agreement or any other Credit Document or under
any Interest Rate Agreement with an Interest Rate Creditor (as such term is
defined in the Security Documents), in each case, heretofore, now, or hereafter
made, incurred or created, whether voluntarily or involuntarily, absolute or
contingent, liquidated or unliquidated, determined or undetermined, whether or
not such indebtedness is from time to time reduced, or extinguished and
thereafter increased or incurred, whether the Borrower may be liable
individually or jointly with others, whether or not recovery upon such
indebtedness may be or hereafter become barred by any statute of limitations,
and whether or not such indebtedness may be or hereafter become otherwise
unenforceable.
13.02 BANKRUPTCY. Additionally, Holdings unconditionally and
irrevocably guarantees the payment of any and all indebtedness of the Borrower
to the Banks whether or not due or payable by the Borrower upon the occurrence
in respect of the Borrower of any of the events specified in Section 9.05, and
unconditionally promises to pay such indebtedness to the Banks, or order, on
demand, in lawful money of the United States.
13.03 NATURE OF LIABILITY. The liability of Holdings hereunder is
exclusive and independent of any security for or other guaranty of the
indebtedness of the Borrower whether executed by Holdings, any other guarantor
or by any other party, and the liability of Holdings hereunder shall not be
affected or impaired by (a) any direction as to application of payment by the
Borrower or by any other party, or (b) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
indebtedness of the Borrower, or (c) any payment on or in reduction of any such
other guaranty or undertaking, or (d) any dissolution, termination or increase,
decrease or change in personnel by the Borrower, or (e) any payment made to the
Administrative Agent or the Banks on the indebtedness which the Administrative
Agent or such Banks repay the Borrower pursuant to court order in any
bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding, and each Parent Guarantor waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding.
This Guaranty is a guaranty of payment and not a guaranty of collectibility.
13.04 INDEPENDENT OBLIGATION. The obligations of Holdings hereunder
are independent of the obligations of any other guarantor or the Borrower, and
a separate action or actions may be brought and prosecuted against Holdings
whether or not action is brought
-104-
<PAGE> 111
against any other guarantor or the Borrower and whether or not any other
guarantor or the Borrower be joined in any such action or actions. Holdings
waives, to the fullest extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the Borrower or other circumstance which operates to toll any
statute of limitations as to the Borrower shall operate to toll the statute of
limitations as to Holdings.
13.05 AUTHORIZATION. Holdings authorizes the Administrative Agent
and the Banks without notice or demand (except as shall be required by
applicable statute and cannot be waived), and without affecting or impairing
its liability hereunder, from time to time to (a) renew, compromise, extend,
increase, accelerate or otherwise change the time for payment of, or otherwise
change the terms of the indebtedness or any part thereof in accordance with
this Agreement, including any increase or decrease of the rate of interest
thereon, (b) take and hold security from any guarantor or any other party for
the payment of this guaranty or the indebtedness and exchange, enforce, waive
and release any such security, (c) apply such security and direct the order or
manner of sale thereof as the Administrative Agent and the Banks in their
discretion may determine and (d) release or substitute any one or more
endorsers, guarantors, the Borrower or other obligors.
13.06 RELIANCE. It is not necessary for the Administrative Agent or
the Banks to inquire into the capacity or powers of the Borrower or its
Subsidiaries or the officers, directors, partners or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
13.07 SUBORDINATION. Any indebtedness of the Borrower now or
hereafter held by Holdings is hereby subordinated to the indebtedness of the
Borrower to the Administrative Agent and the Banks; and such indebtedness of
the Borrower to Holdings, if the Administrative Agent, after an Event of
Default has occurred, so requests, shall be collected, enforced and received by
Holdings as trustee for the Banks and be paid over to the Banks on account of
the indebtedness of the Borrower to the Banks, but without affecting or
impairing in any manner the liability of Holdings under the other provisions of
this Guaranty. Prior to the transfer by Holdings of any note or negotiable
instrument evidencing any indebtedness of the Borrower to Holdings, Holdings
shall mark such note or negotiable instrument with a legend that the same is
subject to this subordination.
13.08 WAIVER. (a) Holdings waives any right (except as shall be
required by applicable statute and cannot be waived) to require the
Administrative Agent or the Banks to (a) proceed against the Borrower, any
other guarantor or any other party, (b) proceed against or exhaust any security
held from the Borrower, any other guarantor or any other party or (c) pursue
any other remedy in the Administrative Agent's or the Banks' power whatsoever.
Holdings waives any defense based on or arising out of any defense of the
-105-
<PAGE> 112
Borrower, any other guarantor or any other party other than payment in full of
the indebtedness, including without limitation any defense based on or arising
out of the disability of the Borrower, any other guarantor or any other party,
or the unenforceability of the indebtedness or any part thereof from any cause,
or the cessation from any cause of the liability of the Borrower other than
payment in full of the indebtedness. The Administrative Agent and the Banks
may, at their election, foreclose on any security held by the Administrative
Agent or the Banks by one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable (to the extent such
sale is permitted by applicable law), or exercise any other right or remedy the
Administrative Agent and the Banks may have against the Borrower or any other
party, or any security, without affecting or impairing in any way the liability
of Holdings hereunder except to the extent the indebtedness has been paid.
Holdings waives any defense arising out of any such election by the
Administrative Agent and the Banks, even though such election operates to
impair or extinguish any right of reimbursement or subrogation or other right
or remedy of Holdings against the Borrower or any other party or any security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notice of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
indebtedness. Holdings assumes all responsibility for being and keeping itself
informed of the Borrower's financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the indebtedness and the
nature, scope and extent of the risks which Holdings assumes and incurs
hereunder, and agrees that the Administrative Agent and the Banks shall have no
duty to advise Holdings of information known to them regarding such
circumstances or risks.
13.09 LIMITATION ON ENFORCEMENT. The Banks agree that this Guaranty
may be enforced only by the action of the Administrative Agent or the
Collateral Agent, in each case acting upon the instructions of the Required
Banks and that no Bank shall have any right individually to seek to enforce or
to enforce this Guaranty or to realize upon the security to be granted by any
Security Document, it being understood and agreed that such rights and remedies
may be exercised by the Administrative Agent or the Collateral Agent for the
benefit of the Banks upon the terms of this Agreement and any Security
Document. The Banks further agree that the Guaranty may not be enforced
against any director, officer, employee or stockholder of Holdings.
* * *
-106-
<PAGE> 113
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
ADDRESS: INTERSTATE HOTELS COMPANY
Foster Plaza 10
680 Andersen Drive
Pittsburgh, Pennsylvania 15220 By /s/ J. William Richardson
Attn: Marvin I. Droz -------------------------------
Tel: (412) 937-3304 Title: Executive Vice President
Fax: (412) 937-3265
Foster Plaza 10 INTERSTATE HOTELS CORPORATION
680 Andersen Drive
Pittsburgh, Pennsylvania 15220
Attn: Marvin I. Droz
Tel: (412) 937-3304 By /s/ J. William Richardson
Fax: (412) 937-3265 -------------------------------
Title: Executive Vice President
CREDIT LYONNAIS NEW YORK BRANCH,
Individually and as Administrative Agent
By /s/ Joseph A. Asciolla
------------------------------
Title: Vice President
-107-
<PAGE> 114
ANNEX I
COMMITMENTS
<TABLE>
<CAPTION>
TERM REVOLVING
NAME OF BANK COMMITMENT COMMITMENT
--------------------------------- ------------ ------------
<S> <C> <C>
Credit Lyonnais New York Branch $195,000,000 $100,000,000
--------------------------------- ------------ ------------
TOTALS $195,000,000 $100,000,000
</TABLE>
<PAGE> 115
ANNEX II
BANK ADDRESSES
<TABLE>
<CAPTION>
BANK ADDRESS
<S> <C>
CREDIT LYONNAIS 1301 Avenue of the Americas
NEW YORK BRANCH New York, NY 10019
Telephone No: 212-261-7872
Facsimile No: 212-261-7890
Attention: Mischa Zabotin
</TABLE>
<PAGE> 116
ANNEX III
---------
LIST OF SUBSIDIARIES*/
--------------------
1. INTERSTATE HOTELS COMPANY
Interstate Hotels Corporation
IHC Capital Corporation
2. IHC CAPITAL CORPORATION
None
3. INTERSTATE HOTELS CORPORATION
IHC Member Corporation
Colony Hotels and Resorts Company
Northridge Insurance Company
IHC/Interstone Corporation
IHC/Colorado Springs Corporation
IHC/Lisle Corporation
IHC/Huntington Corporation
IHC/Houston Corporation
IHC/Williamsburg Corporation
IHC/Denver Corporation
IHC/Conshohocken Corporation
IHC/Atlanta Corporation
IHC/CG Portfolio Corporation
IHC/Interstone Partnership, L.P. (99% LP interest)
IHC/Interstone Partnership II, L.P. (99% LP interest)
Crossroads Hospitality Company, L.L.C.
(75% voting/99% distribution)
Continental Design & Supplies Company, L.L.C.
(75% voting/99% distribution)
__________________________________
*/ 100% direct ownership unless otherwise indicated. Minority interests are
owned by Subsidiaries of Holdings as indicated on Annex D to the Pledge
Agreement, unless otherwise indicated on said Annex.
<PAGE> 117
ANNEX III
Page 2
IHC Services Company L.L.C. (75% voting/99% distribution)
IHC/Pittsburgh Partnership L.P. (92.2327% GP interest,
6.7673% LP)
HMG Beverage, Inc.
Hilltop Equipment Leasing Company, L.P. (99% GP interest)
4. IHC MEMBER CORPORATION
Interstone Partners I L.P. (.5% GP interest/74.5% LP interest)
5. COLONY HOTELS AND RESORTS COMPANY
CHR Services Company L.L.C. (75% voting/99% distribution)
Colony International Management Company L.L.C.
(75% voting/99% distribution)
6. COLONY INTERNATIONAL MANAGEMENT COMPANY L.L.C.
CHR Consulting Company L.L.C. (75% voting/99% distribution)
7. CROSSROADS HOSPITALITY COMPANY, L.L.C.
Crossroads Hospitality Tenant Company L.L.C.
(75% voting/99% distribution)
8. IHC/INTERSTONE CORPORATION
None
9. NORTHRIDGE INSURANCE COMPANY
None
<PAGE> 118
ANNEX III
Page 3
10. IHC/COLORADO SPRINGS CORPORATION
None
11. IHC/LISLE CORPORATION
None
12. IHC/HUNTINGTON CORPORATION
None
13. IHC/HOUSTON CORPORATION
None
14. IHC/WILLIAMSBURG CORPORATION
None
15. IHC/DENVER CORPORATION
None
16. IHC/CONSHOHOCKEN CORPORATION
None
17. IHC/ATLANTA CORPORATION
None
<PAGE> 119
ANNEX III
Page 4
18. IHC/CG PORTFOLIO CORPORATION
None
19. CONTINENTAL DESIGN & SUPPLIES COMPANY, L.L.C.
None
20. IHC SERVICES COMPANY L.L.C.
None
21. CHR SERVICES COMPANY L.L.C.
None
22. CHR CONSULTING COMPANY L.L.C.
None
23. CROSSROADS HOSPITALITY TENANT COMPANY L.L.C.
None
24. IHC/INTERSTONE PARTNERSHIP, L.P.
None
<PAGE> 120
ANNEX III
Page 5
25. INTERSTONE PARTNERS I L.P.
None
26. INTERSTONE PARTNERS II L.P.
None
27. INTERSTONE PARTNERS III L.P.
Interstone/Lisle Partnership, L.P. (63.697% LP interest)
Huntington Hotel Partners, L.P. (53.787% LP interest)
Interstone/Houston Partnership, L.P. (67.353% LP interest)
Interstone/Williamsburg Partnership, L.P. (53.787% LP interest)
Interstone/Conshohocken Partnership, L.P. (53.787% LP interest)
Interstone/Atlanta Partnership, L.P. (53.787% LP interest)
28. INTERSTONE PARTNERS IV L.P.
None
29. COLORADO SPRINGS MASTER INTERSTONE L.P.
Interstone/Colorado Springs Partnership, L.P.
(99% LP interest)
30. IHC/INTERSTONE PARTNERSHIP II, L.P.
Interstone Three Partners I L.P. (51% LP interest)
Interstone Three Partners III L.P. (51% LP interest)
Interstone Three Partners III L.P. (51% LP interest)
Interstone Three Partners IV L.P. (51% LP interest)
<PAGE> 121
ANNEX III
Page 6
31. INTERSTONE TWO PARTNERS I L.P.
None
32. INTERSTONE TWO PARTNERS II L.P.
None
33. INTERSTONE TWO PARTNERS III L.P.
None
34. INTERSTONE TWO PARTNERS IV L.P.
None
35. INTERSTONE THREE PARTNERS I L.P.
None
36. INTERSTONE THREE PARTNERS II L.P.
None
37. INTERSTONE THREE PARTNERS III L.P.
None
38. INTERSTONE THREE PARTNERS IV L.P.
None
<PAGE> 122
ANNEX III
Page 7
40. HILLTOP EQUIPMENT LEASING COMPANY, L.P.
None
41. INTERSTONE/CGL PARTNERS, L.P.
None
<PAGE> 123
ANNEX IV
--------
REAL PROPERTIES
---------------
A. OWNED PROPERTIES
----------------
<TABLE>
<CAPTION>
Hotel Location
- ----- --------
<S> <C>
Warner Center Marriott Woodland Hills, CA
Colorado Springs Marriott Colorado Springs, CO
Denver Hilton South Greenwood Village, CO
Ft. Lauderdale Airport Hilton Dania, FL
Atlanta Marriott North Central Atlanta, GA
Lisle Radisson Lisle, IL
Schaumberg Embassy Suites Schaumburg, IL
Boston Marriott Andover Andover, MA
Huntington Hilton Melville, NY
Philadelphia Marriott West West Conshohocken, PA
Marriott Suites at Valley Forge Valley Forge, PA
Houston Marriott North at Greenspoint Houston, TX
Tysons Corner Marriott Tysons Corner, VA
Fort Magruder Inn and Conference Center Williamsburg, VA
</TABLE>
[* For all of the above owned properties, see attached chart depicting
the ownership interest for each Subsidiary.]
B. LEASED PROPERTIES
-----------------
<TABLE>
<CAPTION>
Hotel Location
- ----- --------
<S> <C>
Harrisburg Marriott Harrisburg, PA
Arcata Super 8 Motel Arcata, CA
Flagstaff Super 8 Motel Flagstaff, AZ
Indio Super 8 Motel Indio, CA
Poplar Bluff Super 8 Poplar Bluff, MO
Red Bluff Super 8 Motel Red Bluff, CA
Rock Falls Super 8 Rock Falls, IL
Super 8 Mission Bay San Diego, CA
Selma Super 8 Motel Selma, CA
Miner/Sikeston Super 8 Sikeston, MO
Somerset Super 8 Somerset, KY
Willows Super 8 Motel Willows, CA
Yucca Valley Super 8 Motel Yucca Valley, CA
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
ATTACHMENT
to
Annex IV
----------
<S> <C> <C>
OWNED PROPERTIES - OWNERSHIP INTEREST
-------------------------------------
1. Warner Center Marriott
----------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 74% LP Interest
2. Colorado Springs Marriott
-------------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 99% LP Interest
3. Denver Hilton South
-------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 89% LP Interest
4. Ft. Lauderdale Airport Hilton
-----------------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 74% LP Interest
5. Atlanta Marriott North Central
------------------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 99% LP Interest
6. Lisle Radisson
--------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 99% LP Interest
7. Schaumberg Embassy Suites
-------------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 74% LP Interest
8. Boston Marriott Andover
-----------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 74% LP Interest
</TABLE>
<PAGE> 125
<TABLE>
<CAPTION>
ATTACHMENT
Page 2
<S> <C> <C>
9. Huntington Hilton
-----------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 99% LP Interest
10. Philadelphia Marriott West
--------------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 99% LP Interest
11. Marriott Suites at Valley Forge
-------------------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 74% LP Interest
12. Houston Marriott North at Greenspoint
-------------------------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 99% LP Interest
13. Tysons Corner Marriott
----------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 74% LP Interest
14. Fort Magruder Inn and Conference Center
---------------------------------------
IHC/CG Portfolio Corp 1% GP Interest
Interstone Partners I, L.P. 99% LP Interest
</TABLE>
<PAGE> 126
ANNEX V
-------
EXISTING INDEBTEDNESS
---------------------
1. Payment obligations of Interstate Hotels Corporation and Colony
Acquisition Corporation in the original principal sum of $1,000,000
pursuant to that certain Asset Purchase Agreement, dated May 31, 1994,
by and among Colony Hotels & Resorts, Inc., Radisson Hotels
International, Inc., Colony Acquisition Corporation and Interstate
Hotels Corporation. Balance as of 6/30/96 is $600,000.00; $200,000
per year due January 1; last payment 1/1/99. No interest.
2. $100,000,000 Loan Agreement, dated as of December 19, 1995, between
Interstone/CGL Partners L.P. and Credit Lyonnais, New York Branch,
under which an aggregate principal amount of $99,375,000 is
outstanding on the Effective Date.
3. $20,000,000 Loan Agreement, dated as of December 15, 1995, between
Interstone/CGL Partners L.P. and Credit Lyonnais, New York Branch,
under which an aggregate principal amount of $19,875,000 is
outstanding on the Effective Date.
4. Guaranty of Crossroads Hospitality Company, L.L.C. of the obligations
of Crossroads Hospitality Tenant Company, L.L.C. to Host Funding, Inc.
as described in that certain Master Agreement dated as of April 1,
1996, as more fully described on page 51 of the Registration
Statement.
<PAGE> 127
ANNEX VI
--------
Existing Liens
--------------
A. UCC-1s
------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Jurisdiction File Number Filing Date Secured Party Lien(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
110 Huntington Associates New York: SOS 220816 10/31/94 Colonial Pacific Equipment lease
d/b/a Huntington Hilton Leasing
110 Huntington Associates New York: SOS 161762 08/09/95 Greyrock Capital Equipment lease
d/b/a Huntington Hilton Group
110 Huntington Associates New York: SOS 194646 09/22/94 Advanta Leasing Equipment lease
d/b/a Huntington Hilton Corp.
110 Huntington Associates New York: Suffolk Co. 15650 09/26/94 SFR Funding Equipment lease
d/b/a Huntington Hilton
110 Huntington Associates New York: Suffolk Co. 02136 02/06/92 Vendor Funding Camera
d/b/a Huntington Hotel Co., Inc. equipment
110 Huntington Associates New York: Suffolk Co. 18077 10/30/95 MCS Business Copier lease
d/b/a Huntington Hotel Machines
Andover Marriott Massachusetts: SOS 223758 3/25/94 Ecolab Inc. Glasswasher
lease
Andover Marriott Massachusetts: SOS 378142 3/28/96 Pitney Bowes Pitney Bowes
Credit equipment lease
Corporation
Boston Marriott Andover Massachusetts: SOS 038194 07/19/91 GE Capital Equipment
Carlin Atlas Holding Co. New York: SOS 149126 07/24/95 The Manifest Equipment lease
Inc. d/b/a Huntington Group
Hilton
Carlin Atlas Holding Co. New York: SOS 259684 12/16/91 Colonial Pacific Equipment lease
Inc. d/b/a Huntington Leasing
Hilton
Cigna Investments, Inc. Florida: Broward Co. 95-25-071 06/14/95 Federal Sign, Equipment lease
d/b/a Ft. Lauderdale Division of
Airport Hilton Federal Signal
Corporation
Cigna Investments, Inc. Florida: SOS 950000116318 06/09/95 Federal Sign, Equipment lease
d/b/a Ft. Lauderdale Division of
Airport Hilton Federal Signal
Corp.
Cigna Investments, Inc. Florida: SOS 930000139042 07/02/93 Federal Sign, Equipment lease
d/b/a Ft. Lauderdale Div. Federal
Airport Hilton Signal Corp.
</TABLE>
<PAGE> 128
ANNEX VI
Page 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Jurisdiction File Number Filing Date Secured Party Lien(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Colony Hotels & Resorts Hawaii: SOS 95-080695 06/20/95 Hawkins Audio Equipment
Inc. Engineers
Colony Hotels & Resorts Hawaii: SOS 95-080694 06/20/95 Kanaloa at Kona Telecommun-
Inc. Rental Program ications
equipment
Fort Magruder Inn and Virginia: James City 15096, 03/14/88 General Electric Equipment
Conference Center Co. continuation filed Credit Corp.
12/10/92, #17487
Huntington Hilton New York: SOS 269595 12/30/92 Copelco Credit Copier & fax
Corp. lease
Huntington Hilton New York: Suffolk Co. 16449 10/07/94 American Classic 2 freezers on
Specialties loan
Huntington Hilton New York: Suffolk Co. 05794 04/08/93 Westrock Ice One pushcart
Cream Corp. with umbrella
Interstate Hotel Corp. California: SOS 9520060541 07/14/95 Adohr Farms, Ice cream
Inc. freezer
Interstate Hotels Pennsylvania: 04706 07/13/94 Xerox Copier &
Allegheny Co. Corporation accessories
Prothonotary lease
Interstate Hotels Pennsylvania: 03013 04/27/92 Xerox Copier &
Allegheny Co. Corporation accessories
Prothonotary lease
Interstate Hotels Pennsylvania: SOS 20860509 06/02/92 Xerox Copier &
Corporation accessories
lease
Interstate Hotels Corp. Florida: SOS 940000006438 01/10/94 Xerox Copier &
Corporation accessories
lease
Interstate Hotels Corp. Pennsylvania: 08295 10/03/91 Xerox Copier &
Allegheny Co. Corporation accessories
Prothonotary lease
Interstate Hotels Corp. Pennsylvania: 08889 10/25/91 Xerox Copier &
Allegheny Co. Corporation accessories
Prothonotary lease
Interstate Hotels Corp. Pennsylvania: 04613 06/22/92 Xerox Copier &
Allegheny Co. Corporation accessories
Prothonotary lease
Interstate Hotels Corp. Pennsylvania: SOS 20191577 10/25/91 Xerox Copier &
Corporation accessories
lease
</TABLE>
<PAGE> 129
ANNEX VI
Page 3
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Jurisdiction File Number Filing Date Secured Party Lien(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interstate Hotels Corp. Pennsylvania: SOS 21050278 07/30/92 Xerox Copier &
Corporation accessories
lease
Interstate Hotels Corp. Pennsylvania: SOS 20191575 10/25/91 Xerox Copier &
Corporation accessories
lease
Interstate Hotels California: SOS 94185438 09/08/94 National Equipment lease
Corporation Westminster Bank
USA, as Agent
Interstate Hotels Florida: SOS 91000019876 09/16/91 First Interstate Equipment lease
Corporation Bank
Interstate Hotels Pennsylvania: 15480, 11/30/87 Equitable Life Music equipment
Corporation Allegheny Co. continuation filed Leasing
Prothonotary 11/12/92 Corporation
Interstate Hotels Pennsylvania: 15481, 11/30/87 Equitable Life Television
Corporation Allegheny Co. continuation filed Leasing equipment
Prothonotary 11/12/92 Corporation
Interstate Hotels Pennsylvania: 15191-87, 11/23/87 Equitable Life Television
Corporation Allegheny Co. continuation filed Leasing system
Prothonotary 11/5/92 Corporation
Interstate Hotels Pennsylvania: 15193-87, 11/23/87 Equitable Life Television
Corporation Allegheny Co. continuation filed Leasing system
Prothonotary 11/5/92 Corporation
Interstate Hotels Pennsylvania: 15194-87, 11/23/87 Equitable Life Music equipment
Corporation Allegheny Co. continuation filed Leasing
Prothonotary 11/5/92 Corporation
Interstate Hotels Pennsylvania: 15192-87, 11/28/92 Equitable Life Television
Corporation Allegheny Co. continuation filed Leasing equipment
Prothonotary 11/5/92 Corporation
Interstate Hotels Pennsylvania: 95-007891 11/29/95 Mellon Bank, Licenses and
Corporation Allegheny Co. N.A. permits with
Prothonotary respect to land
parcel and
Marriott in
Providence, RI
Interstate Hotels Pennsylvania: 15918, 12/10/87 Equitable Life Property lease
Corporation Allegheny Co. continuation filed Leasing
Prothonotary 11/12/92 Corporation
</TABLE>
<PAGE> 130
ANNEX VI
Page 4
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Jurisdiction File Number Filing Date Secured Party Lien(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interstate Hotels Pennsylvania: 05916 07/11/91 OCM Lease Equipment
Corporation Allegheny Co. Corporation
Prothonotary Assignee: Mid
American Bank &
Trust Co.
Interstate Hotels Pennsylvania: 16167, 12/17/87 Equitable Life Property/
Corporation Allegheny Co. continuation filed Leasing equipment lease
Prothonotary 11/12/92 Corporation
Interstate Hotels Pennsylvania: SOS 24930467 11/29/95 Mellon Bank, Licenses &
Corporation N.A. permits with
respect to land
parcel and
Marriott in
Providence, RI
Interstate Hotels Pennsylvania: SOS 14322152, 06/06/86 Equitable Life Telephone
Corporation continuation filed Leasing System
3/4/91, $19460394
Interstate Hotels Pennsylvania: SOS 19801222 06/20/91 OCM Lease Equipment
Corporation Corporation
Assignee:
MidAmerican Bank
& Trust
Interstate Hotels Pennsylvania: SOS 15780479, 11/23/87 Equitable Life Equipment lease
Corporation continuation filed Leasing
11/5/95, #21341178 Corporation
Interstate Hotels Pennsylvania: SOS 18390391, 04/06/90 ELLCO Leasing Equipment lease
Corporation continuation filed Corporation
11/23/95,
#23920804
Interstate Hotels Pennsylvania: SOS 18021652, 12/20/89 ELLCO Leasing Equipment lease
Corporation continuation filed Corporation
11/22/95,
#23731727
Interstate Hotels Florida: SOS 910000198976 09/16/91 First Interstate Equipment lease
Corporation #10 Bank
Interstate Hotels Florida: SOS 910000198974 09/16/91 First Interstate Equipment lease
Corporation #10 Bank
Interstate Hotels Florida: SOS 910000198970 09/16/91 First Interstate Equipment lease
Corporation #10 Bank
</TABLE>
<PAGE> 131
ANNEX VI
Page 5
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Jurisdiction File Number Filing Date Secured Party Lien(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interstate Hotels Pennsylvania: SOS 15071502 03/18/87 Dollar Bank Contract and
Corporation #11 Federal Savings possessory
Bank rights under
6/6/80 Lease
Agreement
Interstate Hotes Pennsylvania: SOS 24290481 05/16/95 BRE/Trumbull Partnership
Corporation #103 L.L.C. distributions
Interstone/CGL Partners California: Los 96-544403 04/04/96 Credit Lyonnais Blanket; 4
L.P. Angeles Co. New York Branch parcels in Los
Angeles, CA
Interstone/CGL Partners California: SOS 9605260183 02/20/96 Credit Lyonnais Blanket; land
L.P. New York Branch parcels in Los
Angeles
Interstone/CGL Partners California: SOS 96095C02O5 04/03/96 Credit Lyonnais Blanket; land
L.P. Amendment to New York Branch parcels in Los
9605260183 Angeles
Interstone/CGL Partners Florida: Broward Co. 24696940 Amendment 04/03/96 Credit Lyonnais Blanket; 4 land
L.P. to 24379729 New York Branch parcels in
Broward County,
FL, 6 land
parcels in Cook
County, IL; one
parcel in
Andover, Essex
County, MA; one
parcel in
Tredyffrin,
Chester County,
PA; one parcel
in Fairfax
County, VA
</TABLE>
<PAGE> 132
ANNEX VI
Page 6
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Jurisdiction File Number Filing Date Secured Party Lien(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interstone/CGL Partners Florida: Broward Co. 24379729 01/16/96 Credit Lyonnais Blanket; 4 land
L.P. New York Branch parcels in
Broward County,
FL, 6 land
parcels in Cook
County, IL; one
parcel in
Andover, Essex
County, MA; one
parcel in
Tredyffrin,
Chester County,
PA; one parcel
in Fairfax
County, VA
Interstone/CGL Partners Florida: SOS 950000256107 12/22/95 Credit Lyonnais Blanket; 4 land
L.P. New York Branch parcels in
Broward County,
FL, 6 land
parcels in Cook
County, IL; one
parcel in
Andover, Essex
County, MA; one
parcel in
Tredyffrin,
Chester County,
PA; one parcel
in Fairfax
County, VA
Interstone/CGL Partners Florida: SOS 960000068002 04/03/96 Credit Lyonnais Blanket; 4 land
L.P. Amendment to New York Branch parcels in
950000256107 Broward County,
FL, 6 land
parcels in Cook
County, IL; one
parcel in
Andover, Essex
County, MA; one
parcel in
Tredyffrin,
Chester County,
PA; one parcel
in Fairfax
County, VA
</TABLE>
<PAGE> 133
ANNEX VI
Page 7
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Jurisdiction File Number Filing Date Secured Party Lien(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interstone/CGL Partners Illinois: Cook Co. 96U01530 02/05/96 Credit Lyonnais Blanket; 6 land
L.P. New York Branch parcels in Cook
County, IL
Interstone/CGL Partners Illinois: Cook Co. 96U04260 Amendment 04/03/96 Credit Lyonnais Blanket; 6 land
L.P. to 96U01530 New York Branch, parcels in Cook
for itself and County, IL
as agent
Interstone/CGL Partners Illinois: SOS 3525255 Amendment 04/03/96 Credit Lyonnais Blanket; 6 land
L.P. to 3485270 New York Branch, parcels in Cook
for itself and County, IL
as agent
Interstone/CGL Partners Illinois: SOS 3485270 12/22/95 Credit Lyonnais Blanket; 6 land
L.P. New York Branch parcels in Cook
County, IL
Interstone/CGL Partners Massachusetts: North 7868 04/02/96 Credit Lyonnais Blanket; 2 land
L.P. Essex Co. New York Branch, parcels in
for itself and Andover, Essex
as agent County, MA
Interstone/CGL Partners Massachusetts: SOS 379988 Amendment 04/04/96 Credit Lyonnais Blanket; 2 land
L.P. to 363692 New York Branch, parcels in Cook
for itself and Co., IL
as agent
Interstone/CGL Partners Massachusetts: SOS 363692 01/17/96 Credit Lyonnais Blanket; 2 land
L.P. New York Branch parcels in Cook
Co., IL
Interstone/CGL Partners New York: SOS 066298 04/02/96 Credit Lyonnais Blanket; 4 land
L.P. New York Branch, parcels in
for itself and Broward County,
as agent FL, 6 land
parcels in Cook
County, IL; 2
parcels in
Andover, Essex
County, MA; one
parcel in
Tredyffrin,
Chester County,
PA; one parcel
in Fairfax
County, VA
</TABLE>
<PAGE> 134
ANNEX VI
Page 8
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Jurisdiction File Number Filing Date Secured Party Lien(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interstone/CGL Partners Pennsylvania: Chester Amendment to ST96- 04/03/96 Credit Lyonnais Blanket; one
L.P. Co. Prothonotary 118 New York Branch land parcel in
Tredyffrin,
Chester County,
PA
Interstone/CGL Partners Pennsylvania: Chester 4016-41 Amendment 04/09/96 Credit Lyonnais Blanket; one
L.P. Co. Recorder of Deeds to 3983-2171 New York Branch, parcel in
for itself and Chester County,
as agent PA
Interstone/CGL Partners Pennsylvania: Chester ST96-118 01/17/96 Credit Lyonnais Blanket; one
L.P. Co. Prothonotary New York Branch land parcel in
Tredyffrin,
Chester County,
PA
Interstone/CGL Partners Pennsylvania: Chester 3983-2171 01/16/96 Credit Lyonnais Blanket; one
L.P. Co. Recorder of Deeds New York Branch parcel in
Chester County,
PA
Interstone/CGL Partners Pennsylvania: SOS 25001627 12/22/95 Credit Lyonnais Blanket; one
L.P. New York Branch land parcel in
Tredyffrin,
Chester County,
PA
Interstone/CGL Partners Pennsylvania: SOS 25320915 Amendment 04/03/96 Credit Lyonnais Blanket; one
L.P. to 25001627 New York Branch, land parcel in
for itself and Tredyffrin,
as agent Chester County,
PA
Interstone/CGL Partners Virginia: Fairfax Co. 96-000305 1/16/96 Credit Lyonnais Blanket; one
L.P. New York Branch parcel in
Fairfax, VA
Interstone/CGL Partners Virginia: Fairfax Co. 96-003740 4/3/96 Credit Lyonnais Blanket; one
L.P. Amendment to 96- New York Branch parcel in
305 Fairfax, VA
Interstone/CGL Partners Virginia: SOS 9512277707 12/27/95 Credit Lyonnais Blanket; one
L.P. New York Branch parcel in
Fairfax, VA
Interstone/CGL Partners Virginia: SOS 9604037801 04/03/96 Credit Lyonnais Blanket; one
L.P. Amendment to New York Branch, parcel in
951227707 for itself and Fairfax, VA
as agent
</TABLE>
<PAGE> 135
ANNEX VI
Page 9
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Jurisdiction File Number Filing Date Secured Party Lien(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interstone/Denver Colorado: SOS 952047509 06/22/95 General Electric Equipment,
Partnership, L.P. Capital machinery
Corporation
Preferred Property Fund 82 Colorado: Arapahoe C0349709 06/30/95 General Electric Equipment
(1st debtor) d/b/a Denver Co. Capital
Hilton South (2nd debtor) Corporation
Preferred Property Fund 82 Colorado: Arapahoe C296320 Filed New England Equipment
(1st debtor) d/b/a Denver Co. 02/09/87 Capital lease
Hilton South (2nd debtor) Amended Corporation
02/26/87
Continued
01/31/92
Preferred Property Fund 82 Colorado: SOS 922025541 04/13/92 Phoenix Income Equipment lease
(1st debtor) d/b/a Denver Fund, L.P.
Hilton South (2nd debtor)
Preferred Property Fund 82 Colorado: SOS 952035463 05/10/95 General Electric Equipment
(1st debtor) d/b/a Denver Capital
Hilton South (2nd debtor) Corporation
Preferred Property Fund 82 Colorado: SOS 952035462 05/10/95 General Electric Equipment
(1st debtor) d/b/a Denver Capital
Hilton South (2nd debtor) Corporation
Preferred Property Fund 82 Colorado: SOS 922028616 04/23/92 Phoenix Income Equipment lease
(1st debtor) d/b/a Denver Fund, L.P.
Hilton South (2nd debtor)
Preferred Property Fund 82 Colorado: SOS 932010848 02/09/93 Phoenix Leasing Equipment lease
(1st debtor) d/b/a Denver Cash Distri-
Hilton South (2nd debtor) bution Fund IV,
a California
Limited
Partnership
Tower Bridge Land Holdings Pennsylvania: SOS 20220711 11/04/91 Hawthorne Direct Equipment lease
III, Interstate/ Leasing, Inc.
Conshohocken Assoc. Ltd.,
Managing General Partners
of Tower Bridge Land
Holdings Interstate Hotels
Corporation #117
</TABLE>
<PAGE> 136
ANNEX VI
Page 10
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Debtor Jurisdiction File Number Filing Date Secured Party Lien(s)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tysons Corner Marriott Virginia: SOS 900720625, 07/12/90 NTFC Capital Machinery and
continuation filed Corporation equipment
11/14/94, (formerly
#941147521 Northern Telecom
Finance Corp)
Warner Center Marriott California: SOS 89121784, 05/15/89 MarCap Equipment
continuation filed Corporation
2/18/94
Warner Center Marriott California: Los 86-742276, 06/13/86 BancBoston Telephone
Hotel Limmited Partnership Angeles Co. continuation filed Leasing Inc. equipment lease
4/29/91
</TABLE>
B. MORTGAGES
1. Deed of Trust, dated December 15, 1995, between Interstone/CGL Partners,
L.P. (mortgagor) and Credit Lyonnais New York Branch (mortgagee), relating
to the Warner Center Marriott located in Woodland Hills, California.
2. Mortgage, dated December 15, 1995, between Interstone/CGL Partners, L.P.
(mortgagor) and Credit Lyonnais New York Branch (mortgagee), relating to the
Ft. Lauderdale Airport Hilton located in Ft. Lauderdale, Florida.
3. Mortgage, dated December 15, 1995, between Interstone/CGL Partners, L.P.
(mortgagor) and Credit Lyonnais New York (mortgagee), relating to the
Schaumburg Embassy Suites located in Schaumburg, Illinois.
4. Mortgage, dated December 19, 1995, between Interstone/CGL Partners, L.P.
(mortgagor) and Credit Lyonnais New York Branch (mortgagee), relating to the
Boston Marriott Andover, located in Andover, Massachusetts.
5. Amended and Restated Deed of Trust, dated December 15, 1995, from
Interstone/CGL Partners L.P. (mortgagor) to William E. Sudow and Felicia
Silber as Trustees on behalf of Credit Lyonnais (mortgagee), relating to the
Tysons Corner Marriott located in Tysons Corner, Virginia.
6. Deed of Trust, dated October 4, 1995, from Hollingswood Associates
(mortgagor) to Connecticut General Life Insurance Company, assigned to
Credit Lyonnais New York Branch (mortgagee), relating to the Tysons Corner
Marriott located in Tysons Corner, Virginia.
7. Deed of Trust, dated July 2, 1979, from Hollingswood Associates (mortgagor)
to Louis H. Mann and William F. Patten and assigned to Credit Lyonnais New
York Branch (mortgagee), relating to the Tysons Corner Marriott located in
Tysons Corner, Virginia.
<PAGE> 137
ANNEX VI
Page 11
C. HOST FUNDING TRANSACTION
1. Pledge of 60,000 shares of common stock of Host Funding,Inc. held by
Crossroads Hospitality Company, L.L.C. securing certain lease payments as
more fully described on page 51 of the Registration Statement.
<PAGE> 138
ANNEX VII
---------
EXISTING ADVANCES, LOANS AND INVESTMENTS
----------------------------------------
A. INVESTMENTS
1. 60,000 shares of common stock of Host Funding, Inc. purchased
by Crossroads Hospitality Company, L.L.C.
2. 13% limited partnership interest in Don Cesar Resorts Hotel
Ltd. by the Borrower.
B. ADVANCES AND LOANS FROM INTERSTATE HOTELS CORPORATION
1. Loan in the amount of $165,850.00 to W. Thomas Parrington.
2. Loan in the amount of $50,000.00 to Samuel E. Knighton.
3. Loan in the amount of $45,000.00 to David Jenner.
4. Loan in the amount of $42,000.00 to Marvin Droz.
5. Loan in the amount of $87,500.00 to Fred Kleisner.
6. Balance of 1996 Bridge Loan in the amount of $5,000.00 to Rick
Whelpley.
7. Bonus Advances in the amount of $67,997.00 to Rob Hazard.
8. Loan in the amount of $92,666.00 to Robert Froman.
9. Bonus Advance for 1996 in the amount of $63,000.00 to Robert
Froman.
10. Bridge Loan for 1996 in the amount of $29,200.00 to Jan
Carpiento.
11. Loan in the amount of $12,500.00 to Kathy Bannan.
12. Loan in the amount of $165,000.00 to Jim Risoleo.
13. Balance of 1995 Bridge Loan in the amount of $60,000.00 to Bob
Cowan.
<PAGE> 139
ANNEX VII
Page 2
14. Bonus Advances in the amount of $177,628.00 to Charles Tomb.
15. Loan in the amount of $45,000.00 to Donald Stanczak.
16. Bonus Advances for 1996 in the amount of $10,000.00 to Lisa
O'Connor.
17. Loan in the amount of $725.00 to Tom Neely.
18. Loan in the amount of $135,000.00 to Jay Litt.
19. Bonus Advances for 1996 in the amount of $9,000.00 to Ken
Zern.
20. Bonus Advances in the amount of $58,439.00 to James Erlacher.
21. Bonus Advances for 1996 in the amount of $1,000.00 to David
Brdar.
22. Bridge Loan for 1996 in the amount of $2,000.00 to Jean
Schmier.
23. Bridge Loan for 1996 in the amount of $20,000.00 to Robert
Walter.
24. Bridge Loan for 1996 in the amount of $15,000.00 to Michael
Fatta.
25. Loan in the amount of $30,000.00 to Bob Holland.
26. Loan in the amount of $120,000.00 to Bill Richardson.
27. Bonus Advance for 1996 in the amount of $4,000.00 to John
Doeherty.
28. Loan in the amount of $15,000.00 to David Rowe.
29. Loan in the amount of $170,000.00 to Hank Ciaffone.
30. Bonus Advance for 1996 in the amount of $21,000.00 to Hank
Ciaffone.
31. Loan in the amount of $5,000.00 to Tom Bardenett.
32. Balance of 1995 Bridge Loan in the amount of $10,000.00 to Jay
Wold.
33. Balance of 1995 Bridge Loan in the amount of $7,000.00 to Bill
Kelly.
<PAGE> 140
ANNEX VII
Page 3
34. Balance of 1996 Bridge Loan in the amount of $25,000.00 to
Greg Ade.
35. Balance of 1995 Bridge Loan in the amount of $6,000.00 to
Suzanne Roser.
36. Loan in the amount of $20,000.00 to Kevin P. Kilkeary.
<PAGE> 141
ANNEX VIII
----------
EXISTING LETTERS OF CREDIT
--------------------------
1. Letter of Credit by PNC Bank, National Association, for the account of
Interstate Hotels Corporation naming Florida Power & Light Company as
beneficiary in the amount of $77,000.
2. Letter of Credit by PNC Bank, National Association, for the account of
Continental Design & Suppliers, Inc. naming Amwest Surety Insurance
Company as beneficiary in the amount of $10,000.
<PAGE> 142
ANNEX IX
--------
LOCATION OF UNDERGROUND STORAGE TANKS
-------------------------------------
Lisle Radisson
3000 Warrenville Road
Lisle, IL 60532
Fort Magruder Inn
6945 Pocahontas Trail
Williamsburg, VA 23185
Warner Center Marriott
21850 Oxnard Street
Woodland Hills, CA 91367
Marriott Tysons Corner
8028 Leesburg Pike
Vienna, VA
<PAGE> 143
ANNEX X
-------
THIRD-PARTY RIGHTS
------------------
1. Pursuant to reciprocal buy-sell provisions of the Interstone/CGL
Partners, L.P. (the "Partnership") Amended and Restated Limited
Partnership Agreement, dated as of November 20, 1995, Connecticut
General Life Insurance Company has the right under specified
circumstances to purchase the partnership interests of the
Subsidiaries in the Partnership.
2. Pursuant to the terms and conditions of the Hilton Inns, Inc.
("Hilton") License Agreement, dated as of November 30, 1994 and
executed on December 14, 1994, between Hilton Inns, Inc. and
Interstone/Denver Partnership, L.P. relating to the Denver Hilton,
Hilton has rights of first refusal and first offer in the event of a
sale of the hotel to an affiliated third party.
<PAGE> 1
EXHIBIT 10(a)
================================================================================
STOCKHOLDERS AGREEMENT
among
THE STOCKHOLDERS NAMED HEREIN
and
INTERSTATE HOTELS COMPANY
Dated as of June 25, 1996
================================================================================
<PAGE> 2
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of June 25, 1996, among
BLACKSTONE REAL ESTATE PARTNERS II L.P. ("BREPII"), BLACKSTONE REAL ESTATE
PARTNERS IV L.P. ("BREPIV"), BLACKSTONE RE CAPITAL PARTNERS II L.P.
("BRECPII"), each a Delaware limited partnership, BRE/INTERSTONE L.L.C., a
Delaware limited liability company ("BRE"; BRE, BREPII, BREPIV and BRECPII,
collectively, the "Blackstone Entities"), INTERSTATE HOTELS COMPANY, a
Pennsylvania corporation (the "Company"), and the stockholders of the Company
(other than the Blackstone Entities) identified on the signature pages hereof
(the "Fine Family Stockholders").
Background
WHEREAS, Blackstone Real Estate Advisors L.P. ("BREA"), Interstate Hotels
Corporation ("IHC"), and certain other persons are parties to the Option
Agreement, dated as of October 12, 1995 (as amended by Amendment No. 1, dated
December 15, 1995, and Amendment No. 2, dated as of March 29, 1996, the "Option
Agreement");
WHEREAS, IHC is a party to a Contribution Agreement, dated as of March 29,
1996 (the "Contribution Agreement"), with the contributors referred to therein,
including certain affiliates of BREA;
WHEREAS, in accordance with the Contribution Agreement and/or the Option
Agreement, the Company has delivered to the Blackstone Entities, shares of the
Common Stock (as defined below); and
WHEREAS, the parties hereto wish to set forth certain rights and obligations
with respect to the Common Stock owned by such parties (other than the Company)
and the governance and operations of the Company.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings, whether used in the singular or the plural:
"Affiliate" means, with respect to any person, any other person that
directly or indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, such first person.
"Blackstone" means The Blackstone Group L.P., a Delaware limited
partnership.
<PAGE> 3
2
"Charter Documents" means the articles of incorporation and bylaws (or other
constituent documents) of the Company.
"Common Stock" means the common stock, par value $.01 per share, of the
Company and any other shares, units or other equity interests into which such
common stock may be converted or exchanged in any acquisition, merger,
consolidation, reorganization, reclassification or similar transaction.
"Control" means, with respect to any person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such person, whether through the ownership of voting
securities, by contract or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Fine Family Stockholders Representative" means Milton Fine or other
Individual Fine Family Member designated by the Fine Family Stockholders.
"Individual Fine Family Member" means: (i) each of Milton Fine, David J.
Fine, Sybil Fine King and Carolyn Fine Friedman and (ii) each spouse, child
(natural or adopted), grandchild or parent of the individuals referred to in
clause (i); provided, however, no individual who is less than 21 years of age
shall be an Individual Fine Family Member.
"Permitted Transferee" means: (i) with respect to any Fine Family
Stockholder, (1) any Individual Fine Family Member, (2) any trust, the
beneficiaries of which include only Individual Fine Family Members and/or any
individual who would, but for the proviso to clause (ii) of the definition of
Individual Fine Family Member, be an Individual Fine Family Member, (3) any
corporation or partnership controlled by any Fine Family Stockholder or any
Individual Fine Family Member, so long as a majority of the economic and
voting interests of such corporation or partnership are owned by Fine Family
Stockholders, Individual Fine Family Members and/or trusts referred to in
clause (2) above and (4) any director, officer or employee of the Company or
its subsidiaries; and (ii) with respect to any Blackstone Entity, (1) any
corporation, partnership or other entity which is an Affiliate of Blackstone
("Blackstone Affiliate"), (2) any managing director, general partner, or
limited partner, director, officer or employee of Blackstone or any
Blackstone Affiliate ("Blackstone Associate"), (3) the heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of any
Blackstone Associate, or (4) any trust, the beneficiaries of which, or
corporation or partnership, the stockholders or
<PAGE> 4
3
general or limited partners of which, include only Blackstone, Blackstone
Affiliates, Blackstone Associates, their spouses or their lineal descendants.
"person" means any individual, partnership, joint venture, limited liability
company, corporation or other entity, trust, unincorporated organization or
government or department or agency thereof.
"Public Sale" means any underwritten public distribution pursuant to a
registered public offering under the Securities Act or any sale pursuant to
Rule 144 (if available) or Rule 144A under the Securities Act (or any similar
rule then in force).
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securities and Exchange Commission" means the Securities and Exchange
Commission and includes any federal governmental body or agency succeeding to
the functions thereof.
"Subsidiary" means, with respect to any person, any corporation, limited
liability company, partnership, joint venture, trust or estate of which (or
in which) more than 50% of: (a) the outstanding capital stock having ordinary
voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether or not at the time capital stock of any
other class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency); (b) the interest in the capital or
profits of such partnership, limited liability company or joint venture; or
(c) the beneficial interest of such trust or estate, is at the time directly
or indirectly (through one or more other Subsidiaries of such person) owned
by such person.
"Transfer" of any shares of Common Stock, means any sale, transfer,
assignment, or other disposition of such shares or any interest therein for
value (but excluding bona-fide pledges and any transfer upon foreclosure
thereof and any transfer by gift or devise), directly or indirectly
(including a transfer by any person of the capital stock or other interest in
a Subsidiary of such person which is the direct or indirect holder of shares
of Common Stock).
2. TAG ALONG RIGHT.
(a) No Fine Family Stockholder shall Transfer any shares of Common Stock
other than in compliance with this Section 2. Any such attempted Transfer not
in compliance herewith shall be null and void, ab initio, and the Company shall
not give
<PAGE> 5
4
effect to any such attempted Transfer in the stock transfer ledgers of the
Company.
(b) At least 20 days prior to any Transfer by any Fine Family Stockholder
of any shares of Common Stock, such Fine Family Stockholder proposing to make
such Transfer (the "Transferring Fine Family Stockholder") shall deliver a
notice (a "Tag Along Notice") to BREA specifying the identity of the
prospective Transferee(s) and disclosing in reasonable detail the price and
other terms and conditions of the proposed Transfer, and offering to permit
each of the Blackstone Entities to Transfer their shares of Common Stock as
part of such proposed Transfer as provided herein. BREA may on behalf of each
of such Blackstone Entities elect to participate in the proposed Transfer by
delivering written notice of such election to the Transferring Fine Family
Stockholder prior to the expiration of the 20-day period commencing on the date
of receipt by BREA of the Tag Along Notice.
(c) If BREA elects on behalf of the Blackstone Entities to participate in a
Transfer in accordance with this Section 2, each Blackstone Entity on whose
behalf such election has been made will be entitled to sell in such proposed
Transfer, at the same price and on the same terms as the Transferring Fine
Family Stockholder, that number of shares of Common Stock which is equal to the
product of (1) the quotient determined by dividing the number of the
outstanding shares of Common Stock then held by such Blackstone Entity by the
total number of shares of outstanding Common Stock then held by the
Transferring Fine Family Stockholder and such Blackstone Entity and (2) the
total number of shares of Common Stock to be sold in such proposed Transfer.
(d) The provisions of this Section 2 shall not apply to Transfers by any
Fine Family Stockholder: (i) of Common Stock pursuant to a Public Sale
involving a public offering registered under the Securities Act; (ii) to a
Permitted Transferee of such Fine Family Stockholder (provided that, in the
case of this clause (ii), such Permitted Transferee has agreed in writing to be
bound by the terms and conditions of this Agreement, in form and substance
reasonably satisfactory to BREA, to the same extent and in the same manner
applicable to the Fine Family Stockholder Transferring such shares; and (iii)
to any person (other than persons who or which fall within the definition of
"Permitted Transferee" with respect to such Fine Family Stockholder); provided
that the aggregate number of shares of Common Stock transferred by all Fine
Family Stockholders and their Permitted Transferees in reliance on the
foregoing clause (iii) shall not exceed 238,095 shares (as adjusted from time
to time following the date hereof to give effect to any stock splits,
combinations and other similar events following the date hereof).
3. BOARD REPRESENTATION. (a) The Fine Family Stockholders shall vote all
their shares of Common Stock, at any
<PAGE> 6
5
regular or special meeting of the stockholders of the Company called for the
purpose of filling positions on the Board of Directors of the Company, or, to
the extent permitted by the Charter Documents, in any written consent executed
in lieu of such a meeting of stockholders, and shall take all actions
necessary, to ensure that the Board of Directors of the Company (the "Board of
Directors") shall include at least one individual selected by BREA, for and on
behalf of the Blackstone Entities and their Permitted Transferees (the "BREA
Nominee"), such individual to be reasonably acceptable to the Company (it being
agreed that any individual employed by Blackstone at the level of senior
managing director or higher is acceptable to the Company.)
(b) If, prior to his or her election to the Board of Directors pursuant to
Section 3(a), the BREA Nominee shall be unable or unwilling to serve as a
director of the Company, BREA shall be entitled to nominate a replacement who
shall then be the BREA Nominee for purposes of this Section 3. If, following
election to the Board of Directors pursuant to Section 3(a), the BREA Nominee
shall resign, or be removed, or be unable to serve for any reason prior to the
expiration of his or her term as a director of the Company, BREA, for and on
behalf of the Blackstone Entities and their Permitted Transferees, shall within
30 days of such event, notify the Board of Directors in writing of a
replacement BREA Nominee, and the Fine Family Stockholders shall vote all their
shares of Common Stock, at any regular or special meeting called for the
purpose of filling positions on the Board of Directors, or, to the extent
permitted by the Charter Documents, in any written consent executed in lieu of
such a meeting of stockholders, and shall take all actions necessary, to ensure
the prompt election to the Board of Directors of such replacement BREA Nominee
to fill the unexpired term of the BREA Nominee whom such new BREA Nominee is
replacing.
(c) Each of the Company and each Fine Family Stockholder agrees that it
shall not take any direct or indirect action to remove any BREA Nominee without
cause.
(d) If and for so long as an executive committee (or other comparable
committee) of the Board of Directors exists, the BREA Nominee shall, at BREA's
option, be a member of such committee.
(e) Each Blackstone Entity shall vote all its shares of Common Stock, at
any regular or special meeting of the stockholders of the Company called for
the purpose of filling positions on the Board of Directors, or, to the extent
permitted by the Charter Documents, in any written consent executed in lieu of
such a meeting of stockholders, for the election of the director-candidates
nominated by the Board of Directors.
(f) BREA, for and on behalf of the Blackstone Entities and their Permitted
Transferees, shall have the option, upon
<PAGE> 7
6
written notice to the Company, to terminate the provisions of this Section 3.
(g) The Charter Documents shall contain provisions: (i) specifying that
directors may not be removed without cause; and (ii) (1) limiting the liability
of the directors of the Company and (2) requiring indemnification by the
Company for such directors, all to the fullest extent permitted by law.
(h) In order to effectuate the provisions of this Agreement, each of the
Blackstone Entities and the Fine Family Stockholders hereby agrees that when
any action or vote is required to be taken by such person pursuant to this
Agreement, such person shall use such person's best efforts to call, or cause
the appropriate officers and directors of the Company to call, a special or
annual meeting of stockholders of the Company, as the case may be, or, to the
extent permitted by the Charter Documents, execute or cause to be executed a
consent in writing in lieu of any such meetings.
(i) The Company shall take appropriate action so that the policies of the
Board of Directors shall require that any transaction between the Company (or
its Subsidiaries) with any Affiliate of the Company (other than wholly owned
Subsidiaries of the Company) be approved in advance by affirmative action of a
majority of the disinterested directors of the Company.
4. CONFORMITY OF CHARTER DOCUMENTS TO AGREEMENT. Each Blackstone Entity
and each of the Fine Family Stockholders shall vote all shares of Common Stock
owned or Controlled by such person, at any regular or special meeting of
stockholders of the Company or, to the extent permitted by the Charter
Documents, in any written consent executed in lieu of such a meeting of
stockholders, and shall take all actions necessary, to ensure that the Charter
Documents do not, at any time, conflict with the provisions of this Agreement.
5. ROFO.
(a) Each Blackstone Entity agrees that it shall not Transfer any shares of
Common Stock other than in compliance with this Section 5. Any such attempted
Transfer not in compliance herewith shall be null and void, ab initio, and the
Company shall not give effect to any such attempted Transfer in the stock
transfer ledgers of the Company.
(b) If any Blackstone Entity proposes to Transfer any shares of Common
Stock, BREA shall given written notice (the "First Offer Notice") of such
proposal to the Fine Family Stockholders Representative at least 5 days in
advance thereof, setting forth the number of shares which such Blackstone
Entity desires to Transfer (the "First Offer Shares"). The Fine Family
Stockholders Representative, on behalf of the Fine Family Stockholders, may at
any time within 5 days after delivery by
<PAGE> 8
7
BREA of the First Offer Notice (the "First Offer Period") submit to BREA a
written offer to purchase (a "Purchase Offer") all (but not less than all) of
the First Offer Shares covered by such First Offer Notice at a per share cash
price specified by the Fine Family Stockholders Representative in the Purchase
Offer. The Purchase Offer shall specify which of the Fine Family Stockholders
shall, if such Purchase Offer is accepted by BREA, purchase the First Offer
Shares (including the number of First Offer Shares to be purchased by each of
such Fine Family Stockholders). The Fine Family Stockholders shall be under no
obligation to submit a Purchase Offer, and BREA shall not be obligated to
accept any Purchase Offer. Upon BREA's acceptance of any Purchase Offer in
writing, such Purchase Offer shall be irrevocable, and the parties shall
thereafter promptly (and in any event within 10 days of the date of such
written acceptance) close the purchase and sale of the First Offer Shares
covered by the Purchase Offer. At such closing, BREA shall (or shall cause the
transferring Blackstone Entity to) deliver the First Offer Shares to the Fine
Family Stockholders on whose behalf the Fine Family Stockholders Representative
delivered the Purchase Offer against a cash payment therefor in full by wire
transfer of immediately available funds to such account or accounts as may be
designated by BREA. Such closing shall take place at such place as the Fine
Family Stockholders Representative and BREA shall mutually agree.
(c) If no Purchase Offer is received by BREA within the First Offer
Period, or if BREA rejects or otherwise declines to accept a Purchase Offer
received by BREA within the First Offer Period, the Blackstone Entity shall be
entitled, for a period of 120 days following the date of delivery of the First
Offer Notice (the "Free Transfer Period"), to Transfer all (but not less than
all, excluding shares covered by a First Offer Notice which are Transferred
during the Free Transfer Period in reliance on the provisions of Section 5(d)
below) of the First Offer Shares on such terms as it may be willing to accept;
provided that, if a Purchase Offer has been submitted to BREA within the First
Offer Period, no Transfer may be made during the Free Transfer Period at a per
share cash price less than the per share price specified in the Purchase Offer.
(d) The provisions of this Section 5 shall not apply to Transfers by any of
the Blackstone Entities (including Transfers of First Offer Shares during the
Free Transfer Period) (i) of Common Stock pursuant to a Public Sale (1)
involving a public offering registered under the Securities Act or (2)
consistent with the "manner of sale" requirements specified in Rule 144(f)
under the Securities Act; or (ii) to a Permitted Transferee of such Blackstone
Entity; provided that, in the case of clause (ii), such Permitted Transferee
has agreed in writing to be bound by the terms and conditions of this
Agreement, in form and substance reasonably satisfactory to the Company, to the
same extent and in the same manner applicable to such Blackstone Entity.
<PAGE> 9
8
6. INITIAL LOCK-UP PERIOD. [Intentionally left blank]
7. REGISTRATION RIGHTS. (a) If at any time after the date hereof the
Company intends to file with the Securities and Exchange Commission a
registration statement on any registration form of the Securities and Exchange
Commission (other than Form S-8 or S-4) covering the sale of shares of Common
Stock for cash in a public offering by the Company or any of its stockholders,
the Company shall notify BREA of its intention to file that registration
statement at least 30 days prior to the filing thereof. The notice shall state
the total number of shares of Common Stock proposed to be registered thereby.
If BREA notifies the Company within 10 days after receipt of such notice from
the Company of the desire of any or all of the Blackstone Entities to have
included in that registration statement any of their shares of Common Stock,
then, subject to Section 7(e), the Company shall include those shares in that
registration statement ("Company Registration"). Neither the delivery of a
notice under this Section 7(a) nor a request by BREA under this Section 7(a)
shall in any way, obligate the Company to file any registration statement and
notwithstanding the filing of such a registration statement, the Company may,
at any time before the effective date thereof, elect to terminate the entire
registration process without any further obligation to BREA or the Blackstone
Entities with respect thereto. A registration request pursuant to this Section
7(a) shall not be deemed to have been effected (i) unless a registration
statement with respect thereto has become effective for such period as is
described in Section 7(c), (ii) if after it has become effective such
registration is interfered with by any stop order, injunction or other order or
requirement of the Securities and Exchange Commission or other governmental
authority and (iii) unless the amount of shares offered and sold by the Company
as part of such underwritten public offering shall have created an active
trading market for such shares immediately following such offering in the
reasonable judgment of the managing underwriter or underwriters in respect of
such offering. If the registration demanded pursuant to this Section 7(a)
shall not have been deemed to be so effected, BREA shall be entitled to
exercise registration rights as provided herein until the registration demanded
pursuant to this Section 7(a) shall be deemed to be so effected.
(b) BREA may on behalf of any or all of the Blackstone Entities, subject to
the terms and conditions contained in this Section 7, exercise the demand
registration rights contained in this Section 7(b) at any time and from time to
time, subject to the 180-day "lock-up" agreement entered into by the Blackstone
Entities in connection with this Agreement. BREA may exercise the demand
registration rights contained in this Section 7(b) for up to three Demand
Registrations (as defined below). BREA shall have the right to make a demand
on the Company to effect the registration (a "Demand Registration") for an
underwritten public offering involving a secondary offering of all or a portion
of
<PAGE> 10
9
the shares of Common Stock held by the Blackstone Entities on Form S-1 (or
other form available for registration of sales of securities for cash). BREA
shall notify the Company of its desire to exercise each Demand Registration by
delivering to the Company written notice (a "Demand Notice") specifying the
number of shares of Common Stock which BREA desires to be included in the
Demand Registration. Upon receipt of the Demand Notice, the Company shall
promptly give written notice of the Demand Registration to all holders of
shares of Common Stock, if any, that are entitled to have such shares included
in such registration (the "Other Holders") and otherwise comply with the
registration procedures contained herein. Each of the Other Holders may elect
to participate in the Demand Registration by giving the Company written notice
of such Other Holder's election to include its shares of Common Stock in the
Demand Registration within 15 days from the date on which the notice to Other
Holders is given by the Company, which notice shall specify the number of
shares of Common Stock which such Other Holder desires to be included in the
Demand Registration. A registration demanded pursuant to this Section 7(b)
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective for such period as is described in
Section 7(c) and (ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the Securities and Exchange Commission or other governmental authority. If the
registration demanded pursuant to this Section 7(b) shall not have been deemed
to be so effected, such registration shall not be counted against the number of
Demand Registrations permitted by this Section 7(b).
(c) Upon the Company's receipt of a Demand Notice and the responses from
Other Holders (or the expiration of the 15-day period referred to above), the
Company shall prepare and file with the Securities and Exchange Commission, as
soon as practicable but no longer than 60 days from the date of the Company's
receipt of the Demand Notice, a registration statement covering the shares of
Common Stock requested to be included in the Demand Registration by BREA and
the Other Holders, and shall use its best efforts to cause such registration
statement to become effective as expeditiously as possible. The Company shall
in no event be required to maintain the effectiveness under the Securities Act
of any registration statement relating to a Demand Registration for more than
15 months following the date such registration statement became effective. In
connection with the Demand Notice and the filing of such registration
statement, the Company will:
(i) Prepare and file with the Securities and Exchange Commission such
amendments to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the sale
of such securities.
<PAGE> 11
10
(ii) Cause all securities covered by such registration statement to be
listed on each securities exchange, if any, on which securities of such
class, if any, are then listed if requested by BREA.
(iii) Cooperate and assist in any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD") and the
performance of any due diligence investigation by the underwriters (including
any "qualified independent underwriter" that is required to be retained in
accordance with the rules and regulations of the NASD).
(iv) Use its best efforts to register or qualify the securities covered by
such registration statement for sale under such other securities or blue sky
laws of such jurisdictions as the holders of the securities covered thereby
(hereinafter in this Section referred to as "such holders") participating in
such registration may reasonably request and do any and all other acts and
things which may be reasonably necessary or desirable to enable such holders
to consummate the disposition in such jurisdictions of the securities covered
thereby owned by such holders.
(v) Furnish to such holders participating in such registration and to the
underwriters of the securities being registered a reasonable number of copies
of the registration statement, preliminary prospectus, final prospectus, and
such other documents as such holders or underwriters may reasonably request
in order to facilitate the public offering of such securities.
(vi) Notify such holders participating in such registration, promptly
after it shall receive notice thereof, of the time when such registration
statement has become effective or a supplement to any prospectus forming a
part of such registration statement has been filed.
(vii) Notify such holders promptly of any request by the Securities and
Exchange Commission for the amending or supplementing of such registration
statement or prospectus or for additional information.
(viii) Prepare and file with the Securities and Exchange Commission,
promptly upon the request of any such holders, any amendments or supplements
to such registration statement or prospectus which, in the opinion of special
counsel for such holders (and concurred in by counsel for the Company), is
required under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the securities by such holder.
(ix) Prepare and promptly file with the Securities and Exchange Commission
and promptly notify such holders of the filing of such amendment or
supplement to such registration
<PAGE> 12
11
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact or
omit to state any material fact necessary to make the statement therein, in
the light of the circumstances in which they were made, not misleading.
(x) Advise such holders, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Securities and
Exchange Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for the purpose
and promptly use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such stop order should be issued.
(xi) As soon as practicable and in no event less than one day prior to the
filing of any amendment or supplement to such registration statement or
prospectus, furnish copies thereof to such holders and refrain from filing
any such amendment or supplement to which a majority in interest of such
holders shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements of
the Securities Act or the rules and regulations thereunder, unless in the
opinion of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities under any
applicable federal or state law and such filing will not violate applicable
law.
(xii) Allow the managing underwriter (and its counsel) to conduct "due
diligence" investigations of the Company and participate in the preparation
of the registration statement, and at the request of any such holder, enter
into an underwriting agreement containing customary terms, conditions and
furnish on the date or dates provided for in the underwriting agreement: (i)
an opinion of counsel satisfactory to such holder, addressed to the
underwriters and to such holder or holders making such request, opining as to
such matters as such underwriters and holder or holders may reasonably
request; and (ii) a letter or letters from the independent certified public
accountants of the Company, addressed to the underwriter and to such holder
or holders making such request, covering such matters as such underwriters
and holder or holders may reasonably request, in which letters such
accountants shall state (without limiting the generality of the foregoing)
that they are independent certified public accountants within the meaning of
the Securities Act and that in the opinion of such
<PAGE> 13
12
accountants the financial statements and other financial data of the Company
included in the registration statement or any amendment or supplement thereto
comply in all material respects with the applicable accounting requirements
of the Securities Act.
(d) The obligations of the Company under Section 7(b) to comply with
requests for Demand Registrations are subject to the following limitations:
(i) The Company shall be entitled to postpone up to 60 days in any twelve
month period the filing of any registration statement otherwise required to
be prepared and filed by it pursuant to Section 7(b) if, at the time it
receives a Demand Notice, the Company determines, in its reasonable and good
faith judgment, that such registration and sale would materially interfere
with any financing, acquisition, corporate reorganization or other material
transaction involving the Company or any of its Subsidiaries and promptly
gives BREA written notice of such determination. If the Company shall so
postpone the filing of a registration statement, the Demand Notice received
by the Company shall not be counted for purposes of determining the number of
Demand Registrations to which BREA is entitled pursuant to this Section 7.
(ii) Any Demand Notice shall be for the registration of shares of Common
Stock representing at least 25% of the total number of shares of Common Stock
issued to the Blackstone Entities on the date of this Agreement or, if less,
all shares of Common Stock owned by the Blackstone Entities and their
Permitted Transferees.
(iii) In the event of a Demand Registration, sales shall be made through
a managing underwriter or underwriters mutually selected by BREA and the
Company.
(e) Notwithstanding the provisions of Section 7(a) and 7(b): (i) in the
event of any Company Registration in which the managing underwriter(s) notify
the Company that the aggregate amount of securities of the Company proposed to
be offered by the Company, the Blackstone Entities and Other Holders would
adversely affect the ability to effect such offering, then the number of shares
of Common Stock proposed to be offered by the Blackstone Entities and any Other
Holders shall be reduced (if need be to zero) to the aggregate amount
determined by the managing-underwriter(s) that can be offered without adversely
affecting the ability to effect such offering, such reductions to be made pro
rata among BREA and such Other Holders in accordance with the number of shares
of Common Stock proposed to be offered by each such offeror; and (ii) in the
event of any Demand Registration in which the managing underwriter(s) notify
the Company that the aggregate amount of securities of the Company proposed to
be offered by the Company, the Blackstone Entities
<PAGE> 14
13
and any Other Holders would adversely affect the ability to effect such
offering, then the number of shares of Common Stock proposed to be offered by
the Blackstone Entities shall first be included in such registration; then the
shares of Common Stock, if any, proposed to be included in such registration by
the Company and any Other Holders shall be reduced (if need be to zero) to the
aggregate amount determined by the managing-underwriter(s) that can be offered
without adversely affecting the ability to effect such offering, such
reductions to be made pro rata in accordance with the number of shares of
Common Stock proposed to be offered by each such offeror.
8. REGISTRATION EXPENSES. To the extent permitted by applicable law, the
Company shall pay all expenses in connection with any Company Registration or
Demand Registration, including, without limitation, (a) all expenses incident
to filing with the NASD, (b) registration fees, (c) printing expenses, (d)
accounting and legal fees and expenses of one accounting firm and one law firm
to represent all selling stockholders (selected by BREA, in the case of any
Demand Registration, and reasonably acceptable to BREA, in the case of any
Company Registration), (e) expenses of any special audits incident to or
required by any such registration or qualification, (f) premiums for insurance
in such amount, if any, deemed appropriate by the managing underwriter, and (g)
expenses of complying with the securities or blue sky laws of any jurisdictions
in connection with such registration or qualification; provided, however, the
Company shall not be liable for (1) any discounts or commissions to any
underwriter attributable to shares of Common Stock being sold by any selling
stockholder, (2) any stock transfer taxes incurred in respect of the shares of
Common Stock being sold by any selling stockholder, or (3) the legal fees of
any selling stockholder (other than as set forth in clause 8(d) above).
9. BLUE SKY LAWS. In any registration under Sections 7(a) and 7(b), the
Company shall use its best efforts to register, qualify, or effect an exemption
with respect to the shares of Common Stock of the Blackstone Entities under the
"blue sky" laws of such states as may be reasonably requested by BREA or the
managing underwriter(s); provided, however, that the Company shall not be
required to qualify to do business or to file a general consent to service of
process in any such jurisdictions.
10. INDEMNIFICATION. In connection with any registration pursuant to
Section 7:
(a) The Company hereby agrees to indemnify and hold harmless, to the
fullest extent permitted by law, BREA, and each of its partners, officers,
employees and agents, and any Affiliates (as defined in the Securities Act)
of BREA and each person who controls BREA (within the meaning of the
Securities Act or the Exchange Act), against any losses, costs, expenses,
claims, damages, liabilities, actions or
<PAGE> 15
14
judgments, including reasonable attorneys' fees and disbursements
(collectively, "Damages"), joint or several, to which any of them may become
subject under the Securities Act or otherwise, insofar as such Damages arise
out of or are based upon any untrue or alleged untrue statement of a material
fact contained in a registration statement filed with the Securities and
Exchange Commission by the Company, or preliminary or final prospectus
contained therein, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the
statements made therein not misleading; and will reimburse BREA, and its
respective partners, officers, employees and agents, and any Affiliates or
control persons, for any legal or other expenses incurred by it or any of
them in connection with investigating or defending against any such Damages;
except that the Company will not be liable in any such case to BREA or any
other person or entity to the extent that any Damages arise out of or are
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in a registration statement, or preliminary or final
prospectus contained therein, or any amendment or supplement thereto, in
reliance upon and in conformity with written information furnished by or on
behalf of BREA specifically for use therein.
(b) BREA agrees to indemnify and hold harmless, to the fullest extent
permitted by law, the Company, each of its directors, officers, employees,
agents, and any Affiliates (as defined in the Securities Act) of the Company
and each person who controls the Company (within the meaning of the
Securities Act or the Exchange Act), against any Damages, joint or several,
to which any of them may become subject under the Securities Act or
otherwise, insofar as such Damages arise out of or are based upon any untrue
or alleged untrue statement of a material fact contained in a registration
statement filed with the Securities and Exchange Commission by the Company,
or preliminary or final prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such untrue or
alleged untrue statement or omission or alleged omission is made in reliance
upon and in conformity with written information furnished to the Company by
or on behalf of BREA, specifically for use therein, and will reimburse the
Company, its directors, officers, agents, and Affiliates or control persons,
for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Damages.
<PAGE> 16
15
(c) Any person entitled to indemnification hereunder shall give prompt
notice to the indemnifying person of any claim with respect to which it shall
seek indemnification and shall permit such indemnifying person to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
person; provided, that any person entitled to indemnification hereunder shall
have the right to employ separate counsel and to participate in the defense
of such claim, but the fees and expenses of such counsel shall be at the
expense of such person unless (i) the indemnifying person shall have agreed
to pay such fees or expenses, or (ii) the indemnifying person shall have
failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person, or (iii) in the opinion of outside counsel to
such person there may be one or more legal defenses available to such person
which are different from or in addition to those available to the
indemnifying person with respect to such claims (in which case, if the person
notifies the indemnifying person in writing that such person elects to employ
separate counsel at the expense of the indemnifying person, the indemnifying
person shall not have the right to assume the defense of such claim on behalf
of such person). If such defense is not assumed by the indemnifying person,
the indemnifying person shall not be subject to any liability for any
settlement made without its consent (but such consent shall not be
unreasonably withheld). No indemnified person shall be required to consent
to entry of any judgment or enter into any settlement that does not include
as an unconditional term thereof the giving by the claimant or plaintiff to
such indemnified person of a written release in form and substance reasonably
satisfactory to such indemnified person from all liability in respect of such
claim or litigation. An indemnifying person who is not entitled to, or
elects not to, assume the defense of a claim shall not be obligated to pay
the fees and expenses of more than one firm of counsel (and, if necessary,
local counsel) for all persons indemnified by such indemnifying person with
respect to such claim, unless in the written opinion of outside counsel to an
indemnified person a conflict of interest as to the subject matter exists
between such indemnified person and another indemnified person with respect
to such claim, in which event the indemnifying person shall be obligated to
pay the fees and expenses of additional counsel for such indemnified person.
(d) If for any reason the indemnification provided for herein is
unavailable to an indemnified person or is insufficient to hold it harmless
as contemplated hereby, then the indemnifying person shall contribute to the
amount paid or payable by the indemnified person as a result of such loss,
cost, expense, claim damage, liability, action or judgment in such proportion
as is appropriate to reflect not only the relative benefits received by the
indemnified
<PAGE> 17
16
person and the indemnifying person, but also the relative fault of the
indemnified person and the indemnifying person, as well as any other relevant
equitable considerations.
11. LOCK-UP PROVISION. Each Blackstone Entity agrees in connection with
any public offering of the Company's securities following the date hereof that,
upon the request of the managing underwriter(s) in the case of any underwritten
public offering, or the Company in the case of a non-underwritten public
offering, it shall not sell or offer to sell any shares of Common Stock or any
other securities of the Company, other than shares of Common Stock included in
the public offering, during the period commencing on the distribution of a "red
herring" prospectus for such offering and ending 90 days following the date of
the final prospectus used in such offering, provided that all Fine Family
Stockholders and all officers and managers of the Company have agreed to the
same lockup terms.
12. PARTICIPATION IN REGISTRATIONS. Each Blackstone Entity may not
participate in any registration of securities of the Company unless such
Blackstone Entity.
(a) agrees to sell its securities on the basis provided in any underwriting
arrangements approved by the Company and reasonably acceptable to BREA (in
the case of any Demand Registration) which are customary and which are not in
direct contradiction of any rights granted to BREA or the Blackstone Entities
under this Agreement; and
(b) completes and executes all questionnaires, powers of attorney,
custodial agreements, indemnities, underwriting agreements and other
documents required under the terms of such underwriting arrangements which
are customary and which are not in direct contradiction of any rights granted
to BREA or the Blackstone Entities under this Agreement.
13. REQUEST TO DEREGISTER. The Company will promptly deregister any of the
shares of the Blackstone Entities initially included in a registration
statement pursuant to Section 7 if BREA should thereafter desire to withdraw
such shares from the proposed offering, provided that (a) the registration
statement has not been declared effective, or (b) if the registration statement
has been declared effective, it is not current under the requirement of the
Securities Act due to the lapse of time or material changes in the affairs of
the Company. Such deregistration by the Company shall in no way indicate that
the Company or its counsel deem that any such shares meet the requirements for
sale under such rule.
14. LEGEND ON STOCK CERTIFICATES. Each certificate evidencing shares of
Common Stock will be stamped or otherwise imprinted with a legend in
substantially the following form:
<PAGE> 18
17
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
STOCKHOLDERS AGREEMENT, DATED AS OF JUNE 25, 1996, AMONG INTERSTATE HOTELS
COMPANY (THE "COMPANY") AND CERTAIN STOCKHOLDERS OF THE COMPANY. A COPY OF
SUCH AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER
HEREOF UPON WRITTEN REQUEST.
The Company will imprint such legends on certificates evidencing shares of
Common Stock outstanding prior to the date hereof. The legend set forth in the
paragraph above shall be removed at such time as BREA and its Permitted
Transferees no longer own any Common Stock.
15. BREA AS REPRESENTATIVE. For the sake of convenience, notices and
other communications required hereunder to be made to the Blackstone Entities
and their Permitted Transferees, and all notices and other communications
required hereunder to be made by the Blackstone Entities and their Permitted
Transferees to the Company and the Fine Family Stockholders, shall be made
through BREA or such other Blackstone Affiliate as may be designated by BREA.
16. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. The
stipulations, terms, covenants and agreements contained in this Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto and
their respective successors and Permitted Transferees and nothing herein
expressed or implied shall give or be construed to give to any person or
entity, other than the parties hereto and such successors and Permitted
Transferees, any legal or equitable rights hereunder.
17. ASSIGNMENT. This Agreement may not be assigned by any party hereto
(other than to Permitted Transferees of such party) without the consent of the
other party hereto. Notwithstanding any such assignment, the assigning party
will continue to remain primarily liable under this Agreement.
18. NOTICES. All notices, demands or requests made pursuant to, under or
by virtue of this Agreement must be in writing and shall be (i) personally
delivered, (ii) delivered by express mail, Federal Express or other comparable
overnight courier service, (iii) telecopied or (iv) mailed to the party to
which the notice, demand or request is being made by certified or registered
mail, postage prepaid, return receipt requested, as follows:
To BREA or any Blackstone Entity:
c/o Blackstone Real Estate Advisors L.P.
345 Park Avenue
New York, New York 10154
Attention: Mr. Thomas J. Saylak
<PAGE> 19
18
Facsimile: 212-754-8726
with copies thereof to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Glenn D. Kesselhaut, Esq.
Facsimile: 212-455-2502
To the Company:
Interstate Hotels Corporation
Foster Plaza X
680 Andersen Drive
Pittsburgh, Pennsylvania 15220
Attention: Mr. Milton Fine
Facsimile: 412-937-8053
with copies thereof to:
Interstate Hotels Corporation
Foster Plaza X
680 Andersen Drive
Pittsburgh, Pennsylvania 15220
Attention: Marvin I. Droz, Esq.
Facsimile: 412-937-3265
and
Jones, Day, Reavis & Pogue
2300 Trammel Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: David Lowery, Esq.
Facsimile: 214-969-5100
To the Fine Family Stockholders:
c/o Interstate Hotels Corporation
Foster Plaza X
680 Andersen Drive
Pittsburgh, Pennsylvania 15220
Attention: Marvin I. Droz, Esq.
Facsimile: 412-937-3265
All notices (i) shall be deemed to have been given on the date that the same
shall have been delivered in accordance with the provisions of this Section and
(ii) may be given either by a party or by such party's attorneys. Any party
may, from time to time, specify as its address for purposes of this Agreement
any
<PAGE> 20
19
other address upon the giving of 10 days' notice thereof to the other parties.
19. ENTIRE AGREEMENT. This Agreement contains all of the terms agreed
upon between the parties hereto with respect to the subject matter hereof, and
all understandings and agreements heretofore had or made among the parties
hereto are merged in this Agreement which alone fully and completely expresses
the agreement of the parties hereto.
20. TERM OF AGREEMENT; TERMINATION OF CERTAIN SECTIONS. This Agreement
shall become effective upon the execution hereof, and Sections 3 and 4 shall
terminate at such time as the Blackstone Entities and their Permitted
Transferees own in the aggregate less than 25% of the shares of Common Stock
issued to the Blackstone Entities on the date of this Agreement. Sections 2, 5
and 7 shall terminate at such time as the Blackstone Entities and their
Permitted Transferees own in the aggregate less than 10% of the shares of
Common Stock issued to the Blackstone Entities on the date of this Agreement.
21. AMENDMENTS. This Agreement may not be amended, modified, supplemented
or terminated, nor may any of the obligations of the Parties hereto be waived,
except by written agreement executed by the party or parties to be charged.
22. NO WAIVER. No waiver by any party of any failure or refusal by the
other party to comply with its obligations hereunder shall be deemed a waiver
of any other or subsequent failure or refusal to so comply.
23. REMEDIES. The Parties hereto will be entitled to enforce their rights
under this Agreement specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights existing in their favor. The parties hereto
agree and acknowledge that money damages will not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity or competent jurisdiction for
specific performance and/or injunctive relief in order to enforce or prevent
any violation of the provisions of this Agreement.
24. GOVERNING LAW. This Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with, the laws of the State of
Pennsylvania.
25. SUBMISSION TO JURISDICTION. Each Fine Family Stockholder, the
Company, BREA and each Blackstone Entity irrevocably submits to the
jurisdiction of (a) the Supreme Court of the State of New York, New York
County, (b) the United States District Court for the Southern District of New
York, and (c) the United States District Court for the Western District of
Pennsylvania for the purposes of any suit, action or other
<PAGE> 21
20
proceeding arising out of this Agreement or any transaction contemplated
hereby. Each Fine Family Stockholder, the Company, BREA and each Blackstone
Entity further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth above
shall be effective service of process for any action, suit or proceeding in
Delaware or Pennsylvania with respect to any matters to which it has submitted
to jurisdiction as set forth above in the immediately preceding sentence. Each
Fine Family Stockholder, the Company, BREA and each Blackstone Entity
irrevocably and unconditionally waives trial by jury and irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (a) the Supreme Court of the State of New York, New York County, (b)
the United States District Court for the Southern District of New York, and (c)
the United States District Court for the Western District of Pennsylvania, and
hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
26. SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
27. SECTION HEADINGS. The headings of the various Sections of this
Agreement have been inserted only for purposes of convenience, are not part of
this Agreement and shall not be deemed in any manner to modify, explain, expand
or restrict any of the provisions of this Agreement.
28. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, all as of the day and year first above written.
INTERSTATE HOTELS COMPANY
By: /s/ Milton Fine
----------------------------
Milton Fine
Chairman
<PAGE> 22
21
FINE FAMILY STOCKHOLDERS:
/s/ Milton Fine
-------------------------------
Milton Fine
/s/ Milton Fine
- --------------------------------
Milton Fine, Trustee Under the
Second Amended and Restated
Revocable Trust
dated November 11, 1994
for the benefit of Milton Fine
/s/ David J. Fine
- --------------------------------
David J. Fine, Trustee Under
the Irrevocable Trust dated
December 15, 1989 for the
benefit of Sibyl Fine King
/s/ David J. Fine
- --------------------------------
David J. Fine, Trustee Under
the Irrevocable Trust dated
December 15, 1989 for the benefit
of Carolyn Fine Friedman
/s/ David J. Fine
- --------------------------------
David J. Fine, Trustee Under the
Irrevocable Trust dated
December 15, 1989 for the
benefit of David J. Fine.
/s/ David J. Fine
- --------------------------------
David J. Fine, Trustee for the
Milton Fine Grantor Annuity Trust
dated March 31, 1996.
<PAGE> 23
22
BLACKSTONE ENTITIES:
BLACKSTONE REAL ESTATE PARTNERS II L.P.
By: Blackstone Real Estate
Associates L.P., general partner
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
-----------------------------
Name:
Title:
BLACKSTONE REAL ESTATE PARTNERS IV L.P.
By: Blackstone Real Estate
Associates L.P., general partner
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
-----------------------------
Name:
Title:
BLACKSTONE RE CAPITAL PARTNERS II L.P.
By: Blackstone Real Estate
Associates L.P., general partner
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
-----------------------------
Name:
Title:
BRE/INTERSTONE L.L.C.
By: /s/ Gary M. Sumers
---------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10(b)
================================================================================
REGISTRATION RIGHTS and SHAREHOLDERS AGREEMENT
among
INTERSTATE HOTELS COMPANY
and
THE SHAREHOLDERS NAMED HEREIN
Dated as of June 25, 1996
================================================================================
<PAGE> 2
REGISTRATION RIGHTS AND SHAREHOLDERS AGREEMENT
THIS REGISTRATION RIGHTS AND SHAREHOLDERS AGREEMENT (the "Agreement"), dated
as of the 25th day of June, 1996 among INTERSTATE HOTELS COMPANY, a
Pennsylvania corporation (the "Company") and the shareholders of the Company
identified on the signature pages hereof (individually, a "Shareholder";
collectively, the "Shareholders").
WITNESSETH:
WHEREAS, the Shareholders have contributed to the Company certain assets in
exchange for restricted shares of Common Stock of the Company;
WHEREAS, the parties hereto desire to execute a shareholder agreement
relating to the Transfers of shares of Common Stock; and
WHEREAS, the Company has agreed to grant to the Shareholders certain
registration rights, as more specifically described herein, with respect to
their shares of Common Stock of the Company,
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the adequacy of which are hereby acknowledged and intending to be
legally bound, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings, whether used in the singular or the plural:
"Affiliate" means, with respect to any person, any other person that
directly or indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, such first person.
"BREA" means the affiliates of Blackstone Real Estate Advisors L.P. who
become parties to that certain Shareholders Agreement among the Company and
the parties hereto.
"Common Stock" means the common stock, par value $0.01 per share, of the
Company and any other shares, units or other equity interests into which such
common stock may be converted or exchanged in any acquisition, merger,
consolidation, reorganization, reclassification or similar transaction.
"Control" means, with respect to any person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of
<PAGE> 3
such person, whether through the ownership of voting securities, by contract
or otherwise.
"Employee Shareholder" shall mean any Shareholder other than Milton Fine;
Milton Fine, Trustee, U/A dated 11/17/89 as amended, FBO Milton Fine; David
J. Fine, Trustee for the Milton Fine Grantor Annuity Trust U/A dated March
31, 1996; David J. Fine, Trustee, U/A dated 12/15/89 FBO Sibyl A. Fine King;
David J. Fine, Trustee, U/A dated 12/15/89 FBO Carolyn Fine Friedman; and
David J. Fine, Trustee, U/A dated 12/15/89 FBO David J. Fine; or any of their
Permitted Transferees.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Permitted Transferee" means (1) each spouse, child (natural or adopted),
grandchild or parent of any Shareholder (provided no individual who is less
than 21 years of age shall be a Permitted Transferee), (2) any trust for the
benefit of a Shareholder or a person described in clause (1), (3) any
corporation or partnership controlled by one or more Shareholders or any
persons described in clause (1) so long as a majority of the economic and
voting interests of such corporation or partnership are owned by such
Shareholders, the persons described in clause (1) or the trusts referred to
in clause (2), (4) any director, officer or employee of the Company or its
subsidiaries, or (5) any shareholders, partners or members of a Shareholder
in connection with the dissolution of such Shareholder.
"Person" means any individual, partnership, joint venture, limited liability
company, corporation or other entity, trust, unincorporated organization or
government or department or agency thereof.
"Public Sale" means any underwritten public distribution pursuant to a
registered public offering under the Securities Act or any sale pursuant to
Rule 144 (if available) or Rule 144A under the Securities Act (or any similar
rule then in force)
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securities and Exchange Commission" means the Securities and Exchange
Commission and includes any federal governmental body or agency succeeding to
the functions thereof.
"Subsidiary" means, with respect to any person, any corporation, limited
liability company, partnership, joint venture, trust or estate of which (or
in which) more than 50% of: (a) the outstanding capital stock having ordinary
- 2 -
<PAGE> 4
voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether or not at the time capital stock of any
other class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency); (b) the interest in the capital or
profits of such partnership, limited liability company or joint venture; or
(c) the beneficial interest of such trust or estate, is at the time directly
or indirectly (through one or more other Subsidiaries of such person) owned
by such person.
"Transfer" of any shares of Common Stock, means any sale, transfer,
assignment, or other disposition of such shares or any interest therein for
value (but excluding bona-fide pledges and any transfer upon foreclosure
thereof and any transfer by gift or devise), directly or indirectly
(including a transfer by any person of the capital stock or other interest in
a Subsidiary of such person which is the direct or indirect holder of shares
of Common Stock).
2. REGISTRATION RIGHTS. (a) If at any time after the date hereof the
Company intends to file with the Securities and Exchange Commission a
registration statement on any registration form of the Securities and Exchange
Commission (other than Form S-8 or S-4) covering the sale of shares of Common
Stock for cash in a public offering by the Company or any of its stockholders,
the Company shall notify the Shareholders of its intention to file that
registration statement at least 30 days prior to the filing thereof. The
notice shall state the total number of shares of Common Stock proposed to be
registered thereby. If a Shareholder notifies the Company within 10 days after
receipt of such notice from the Company of the desire of the Shareholder to
have included in that registration statement any of his shares of Common Stock,
then, subject to Section 2(e), the Company shall include those shares in that
registration statement ("Company Registration"). Neither the delivery of a
notice under this Section 2(a) nor a request by a Shareholder under this
Section 2(a) shall in any way, obligate the Company to file any registration
statement and notwithstanding the filing of such a registration statement, the
Company may, at any time before the effective date thereof, elect to terminate
the entire registration process without any further obligation to a Shareholder
with respect thereto. A registration request pursuant to this Section 2(a)
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective for such period as is described in
Section 2(c), (ii) if after it has become effective such registration is
interfered with by any stop order, injunction or other order or requirement of
the Securities and Exchange Commission or other governmental authority and
(iii) unless the amount of shares offered and sold by the Company as part of
such underwritten public offering shall have created an active trading market
for such shares immediately following such offering in the reasonable judgment
of the managing underwriter or underwriters in respect
- 3 -
<PAGE> 5
of such offering. If the registration demanded pursuant to this Section 2(a)
shall not have been deemed to be so effected, the Shareholder shall be entitled
to exercise his registration rights as provided herein until the registration
demanded pursuant to this Section 2(a) shall be deemed to be so effected.
(b) Shareholders holding not less than forty percent (40%) of the Common
Stock subject to the provisions hereof may, subject to the terms and conditions
contained in this Section 2, exercise the demand registration rights contained
in this Section 2(b) at any time and from time to time following expiration of
the 180 day period contained in that certain Lock-Up Agreement with Merrill
Lynch & Co. The Company will be obligated to effect only three Demand
Registrations (as defined below) pursuant to this Section 2(b). The
Shareholders shall have the right to make a demand on the Company to effect the
registration (a "Demand Registration") for an underwritten public offering
involving a secondary offering of all or a portion of the shares of Common
Stock held by them on Form S-1 (or other form available for registration of
sales of securities for cash) subject to Section 2(d). Shareholders shall
notify the Company of their desire to exercise each Demand Registration by
delivering to the Company written notice (a "Demand Notice") specifying the
number of shares of Common Stock which they desire to be included in the Demand
Registration. Upon receipt of the Demand Notice, the Company shall promptly
give written notice of the Demand Registration to all other holders of shares
of Common Stock, if any, that are entitled to have such shares included in such
registration (the "Other Holders") and otherwise comply with the registration
procedures contained herein. Each of the Other Holders may elect to
participate in the Demand Registration by giving the Company written notice of
such Other Holder's election to include its shares of Common Stock in the
Demand Registration within 15 days from the date on which the notice to Other
Holders is given by the Company, which notice shall specify the number of
shares of Common Stock which such Other Holder desires to be included in the
Demand Registration. A registration demanded pursuant to this Section 2(b)
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective for such period as is described in
Section 2(c) and (ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the Securities and Exchange Commission or other governmental authority. If the
registration demanded pursuant to this Section 2(b) shall not have been deemed
to be so effected, such registration shall not be counted against the number of
Demand Registrations permitted by this Section 2(b).
(c) Upon the Company's receipt of a Demand Notice and the responses from
Other Holders (or the expiration of the 15-day period referred to above), the
Company shall prepare and file with the Securities and Exchange Commission, as
soon as practicable but no longer than 60 days from the date of the Company's
receipt of the Demand Notice, a registration statement
- 4 -
<PAGE> 6
covering the shares of Common Stock requested to be included in the Demand
Registration by a Shareholder and the Other Holders, and shall use its best
efforts to cause such registration statement to become effective as
expeditiously as possible. The Company shall in no event be required to
maintain the effectiveness under the Securities Act of any registration
statement relating to a Demand Registration for more than 15 months following
the date such registration statement became effective. In connection with the
Demand Notice and the filing of such registration statement, the Company will:
(i) Prepare and file with the Securities and Exchange Commission such
amendments to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the sale
of such securities.
(ii) Cause all securities covered by such registration statement to be
listed on each securities exchange, if any, on which securities of such
class, if any, are then listed if requested by the Shareholder.
(iii) Cooperate and assist in any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD") and the
performance of any due diligence investigation by the underwriters (including
any "qualified independent underwriter" that is required to be retained in
accordance with the rules and regulations of the NASD).
(iv) Use its best efforts to register or qualify the securities covered
by such registration statement for sale under such other securities or blue
sky laws of such jurisdictions as the holders of the securities covered
thereby (hereinafter in this Section referred to as "such holders")
participating in such registration may reasonably request and do any and all
other acts and things which may be reasonably necessary or desirable to
enable such holders to consummate the disposition in such jurisdictions of
the securities covered thereby owned by such holders.
(v) Furnish to such holders participating in such registration and to
the underwriters of the securities being registered a reasonable number of
copies of the registration statement, preliminary prospectus, final
prospectus, and such other documents as such holders or underwriters may
reasonably request in order to facilitate the public offering of such
securities.
(vi) Notify such holders participating in such registration, promptly
after it shall receive notice thereof, of the time when such registration
statement has become effective or a supplement to any prospectus forming a
part of such registration statement has been filed.
- 5 -
<PAGE> 7
(vii) Notify such holders promptly of any request by the Securities and
Exchange Commission for the amending or supplementing of such registration
statement or prospectus or for additional information.
(viii) Prepare and file with the Securities and Exchange Commission,
promptly upon the request of any such holders, any amendments or supplements
to such registration statement or prospectus which, in the opinion of special
counsel for such holders (and concurred in by counsel for the Company), is
required under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the securities by such holders.
(ix) Prepare and promptly file with the Securities and Exchange
Commission and promptly notify such holders of the filing of such amendment
or supplement to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statement therein, in the light of the circumstances in which they
were made, not misleading.
(x) Advise such holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Securities
and Exchange Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for the purpose
and promptly use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such stop order should be issued.
(xi) As soon as practicable and in no event less than one day prior to
the filing of any amendment or supplement to such registration statement or
prospectus, furnish copies thereof to such holders and refrain from filing
any such amendment or supplement to which a majority in interest of such
holders shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements of
the Securities Act or the rules and regulations thereunder, unless in the
opinion of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities under any
applicable federal or state law and such filing will not violate applicable
law.
(xii) Allow the managing underwriter (and its counsel) to conduct "due
diligence" investigations of the
- 6 -
<PAGE> 8
Company and participate in the preparation of the registration statement, and
at the request of any such holder, enter into an underwriting agreement
containing customary terms, conditions and furnish on the date or dates
provided for in the underwriting agreement: (i) an opinion of counsel
satisfactory to such holder, addressed to the underwriters and to such holder
or holders making such request, opining as to such matters as such
underwriters and holder or holders may reasonably request; and (ii) a letter
or letters from the independent certified public accountants of the Company,
addressed to the underwriter and to such holder or holders making such
request, covering such matters as such underwriters and holder or holders may
reasonably request, in which letters such accountants shall state (without
limiting the generality of the foregoing) that they are independent certified
public accountants within the meaning of the Securities Act and that in the
opinion of such accountants the financial statements and other financial data
of the Company included in the registration statement or any amendment or
supplement there to comply in all material respects with the applicable
accounting requirements of the Securities Act.
(d) The obligations of the Company under Section 2(b) to comply with
requests for Demand Registrations are subject to the following limitations:
(i) The Company shall be entitled to postpone up to 60 days in any
twelve month period the filing of any registration statement otherwise
required to be prepared and filed by it pursuant to Section 2(b) if, at the
time it receives a Demand Notice, the Company determines, in its reasonable
and good faith judgment, that such registration and sale would materially
interfere with any financing, acquisition, corporate reorganization or other
material transaction involving the Company or any of its Subsidiaries and
promptly gives the Shareholders written notice of such determination. If the
Company shall so postpone the filing of a registration statement, the Demand
Notice received by the Company shall not be counted for purposes of
determining the number of Demand Registrations to which Shareholders are
entitled pursuant to this Section 2.
(ii) Any Demand Notice shall be for the registration of shares of Common
Stock representing at least 25% of the total number of shares of Common Stock
issued to the Shareholders on the date of this Agreement, or, if less, all
shares of Common Stock owned by the Shareholders delivering such Demand
Notice and their Permitted Transferees.
(iii) In the event of a Demand Registration, sales shall be made through a
managing underwriter or underwriters mutually selected by the Shareholders
and the Company.
- 7 -
<PAGE> 9
(e) Notwithstanding the provisions of Section 2(a) and 2(b): (i) in the
event of any Company Registration in which the managing underwriter(s) notify
the Company that the aggregate amount of securities of the Company proposed to
be offered by the Company, the Shareholders and Other Holders would adversely
affect the ability to effect such offering, then the number of shares of Common
Stock proposed to be offered by the Shareholders and any Other Holders shall be
reduced (if need be to zero) to the aggregate amount determined by the managing
underwriter(s) that can be offered without adversely affecting the ability to
effect such offering, such reductions to be made pro rata among the
Shareholders and such Other Holders in accordance with the number of shares of
Common Stock proposed to be offered by each such offeror; and (ii) in the event
of any Demand Registration in which the managing underwriter(s) notify the
Company that the aggregate amount of securities of the Company proposed to be
offered by the Company, the Shareholders and any Other Holders would adversely
affect the ability to effect such offering, then the number of shares of Common
Stock proposed to be offered by BREA, as one of the other Holders, if any,
shall first be included in such registration; then the shares of Common Stock,
if any, proposed to be included in such registration by the Company, the
Shareholders and any Other Holders (other than BREA) shall be reduced (if need
be to zero) to the aggregate amount determined by the managing underwriter(s)
that can be offered without adversely affecting the ability to effect such
offering, such reductions to be made pro rata in accordance with the number of
shares of Common Stock proposed to be offered by each such offeror.
3. REGISTRATION EXPENSES. To the extent permitted by applicable law, the
Company shall pay all expenses in connection with any Company Registration or
Demand Registration, including, without limitation, (a) all expenses incident
to filing with the NASD, (b) registration fees, (c) printing expenses, (d)
accounting and legal fees and expenses of one accounting firm and one law firm
to represent all selling Shareholders (selected by a majority of the
Shareholders participating in such registration, in the case of any Demand
Registration, and reasonably acceptable to a majority of the Shareholders, in
the case of any Company Registration), (e) expenses of any special audits
incident to or required by any such registration or qualification, (f) premiums
for insurance in such amount, if any, deemed appropriate by the managing
underwriter, and (g) expenses of complying with the securities or blue sky laws
of any jurisdictions in connection with such registration or qualification;
provided, however, the Company shall not be liable for (l) any discounts or
commissions to any underwriter attributable to shares of Common Stock being
sold by any selling stockholder, (2) any stock transfer taxes incurred in
respect of the shares of Common Stock being sold by any selling stockholder, or
(3) the legal fees of any selling stockholder (other than as set forth in
clause 3(d) above).
- 8 -
<PAGE> 10
4. BLUE SKY LAWS. In any registration under Sections 2(a) and 2(b), the
Company shall use its best efforts to register, qualify, or effect an exemption
with respect to the shares of Common Stock of the Shareholders under the "blue
sky" laws of such states as may be reasonably requested by the Shareholders or
the managing underwriter(s); provided, however, that the Company shall not be
required to qualify to do business or to file a general consent to service of
process in any such jurisdictions.
5. INDEMNIFICATION. In connection with any registration pursuant to
Section 2:
(a) The Company hereby agrees to indemnify and hold harmless, to the
fullest extent permitted by law, each Shareholder, and each of their
respective shareholders, partners, members, officers, directors, employees,
heirs, personal or legal representatives and agents, and any Affiliates (as
defined in the Securities Act), against any losses, costs, expenses, claims,
damages, liabilities, actions or judgments, including reasonable attorneys'
fees and disbursements (collectively, "Damages"), joint or several, to which
any of them may become subject under the Securities Act or otherwise, insofar
as such Damages arise out of or are based upon any untrue or alleged untrue
statement of a material fact contained in a registration statement filed with
the Securities and Exchange Commission by the Company, or preliminary or
final prospectus contained therein, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order
to make the statements made therein not misleading; and will reimburse each
Shareholder and their respective shareholders, partners, members, officers,
directors, employees, heirs, personal or legal representatives, and any
Affiliates, for any legal or other expenses incurred by any of them in
connection with investigating or defending against any such Damages; except
that the Company will not be liable in any such case to a Shareholder or any
other person or entity to the extent that any Damages arise out of or are
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in a registration statement, or preliminary or final
prospectus contained therein, or any amendment or supplement thereto, in
reliance upon and in conformity with written information furnished by or on
behalf of such Shareholder specifically for use therein.
(b) Each Shareholder, severally, agrees to indemnify and hold harmless, to
the fullest extent permitted by law, the Company, each of its shareholders,
directors, officers, employees, agents, and any Affiliates (as defined in the
Securities Act) of the Company and each person who controls the Company
(within the meaning of the Securities Act or the
- 9 -
<PAGE> 11
Exchange Act), against any Damages, joint or several, to which any of them
may become subject under the Securities Act or otherwise, insofar as such
Damages arise out of or are based upon any untrue or alleged untrue statement
of a material fact contained in a registration statement filed with the
Securities and Exchange Commission by the Company, or preliminary or final
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such untrue or alleged untrue statement
or omission or alleged omission is made in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Shareholder, specifically for use therein, and will reimburse the Company,
its directors, officers, agents, and Affiliates or control persons, for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such Damages.
(c) Any person entitled to indemnification hereunder shall give prompt
notice to the indemnifying person of any claim with respect to which it shall
seek indemnification and shall permit such indemnifying person to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
person; provided, that any person entitled to indemnification hereunder shall
have the right to employ separate counsel and to participate in the defense
of such claim, but the fees and expenses of such counsel shall be at the
expense of such person unless (i) the indemnifying person shall have agreed
to pay such fees or expenses, or (ii) the indemnifying person shall have
failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such person, or (iii) in the opinion of outside counsel to
such person there may be one or more legal defenses available to such person
which are different from or in addition to those available to the
indemnifying person with respect to such claims (in which case, if the person
notifies the indemnifying person in writing that such person elects to employ
separate counsel at the expense of the indemnifying person, the indemnifying
person shall not have the right to assume the defense of such claim on behalf
of such person). If such defense is not assumed by the indemnifying person,
the indemnifying person shall not be subject to any liability for any
settlement made without its consent (but such consent shall not be
unreasonably withheld). No indemnified person shall be required to consent
to entry of any judgment or enter into any settlement that does not include
as an unconditional term thereof the giving by the claimant or plaintiff to
such indemnified person of a written release in form and substance reasonably
satisfactory to such indemnified person from all liability in respect of such
claim or litigation. An indemnifying person who is not
- 10 -
<PAGE> 12
entitled to, or elects not to, assume the defense of a claim shall not be
obligated to pay the fees and expenses of more than one firm of counsel (and,
if necessary, local counsel) for all persons indemnified by such indemnifying
person with respect to such claim, unless in the written opinion of outside
counsel to an indemnified person a conflict of interest as to the subject
matter exists between such indemnified person and another indemnified person
with respect to such claim, in which event the indemnifying person shall be
obligated to pay the fees and expenses of additional counsel for such
indemnified person.
(d) If for any reason the indemnification provided for herein is
unavailable to an indemnified person or is insufficient to hold it harmless
as contemplated hereby, then the indemnifying person shall contribute to the
amount paid or payable by the indemnified person as a result of such loss,
cost, expense, claim, damage, liability, action or judgment in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnified person and the indemnifying person, but also the
relative fault of the indemnified person and the indemnifying person, as well
as any other relevant equitable considerations.
6. RIGHT OF FIRST OFFER.
(a) An Employee Shareholder shall not Transfer any shares of Common Stock
other than in compliance with this Section 6. Any such attempted Transfer not
in compliance herewith shall be null and void, ab initio, and the Company shall
not give effect to any such attempted Transfer in the stock transfer ledgers of
the Company.
(b) If an Employee Shareholder proposes to Transfer any shares of Common
Stock, he shall give written notice (the "First Offer Notice") of such proposal
to Milton Fine or his representative ("Fine") at least 5 days in advance
thereof, setting forth the number of shares which he desires to Transfer (the
"First Offer Shares"), the cash purchase price therefor and the other terms and
conditions of such proposed Transfer. Fine, on behalf of himself or his
designee, may, in his sole discretion, at any time within 5 days after delivery
by such Employee Shareholder of the First Offer Notice (the "First Offer
Period") elect, pursuant to a written offer, to purchase (a "Purchase Offer")
all (but not less than all) of the First Offer Shares covered by such First
Offer Notice at a per share cash price and upon the terms and conditions set
forth in the First Offer Notice. In the event Fine or his designee elects to
purchase all of the First Offer Shares, the parties shall thereafter promptly
(and in any event within 10 days of the date of such written acceptance) close
the purchase and sale of the First Offer Shares covered by the Purchase Offer.
At such closing, the Employee Shareholder shall deliver the First Offer Shares
to Fine or his designee against a cash payment therefor in
- 11 -
<PAGE> 13
full by wire transfer of immediately available funds to such account or
accounts as may be designated by the Employee Shareholder. Such closing shall
take place at the principal office of the Company.
(c) If no Purchase Offer is received by such Employee Shareholder within
the First Offer Period, such Employee Shareholder shall be entitled, for a
period of 120 days following the date of delivery of the First Offer Notice
(the "Free Transfer Period"), to Transfer all (but not less than all, excluding
shares covered by a First Offer Notice which are Transferred during the Free
Transfer Period in reliance on the provisions of Section 6(d) below) of the
First Offer Shares at a per share cash price no less than the 90% of per share
price specified in the First Offer Notice and on terms and conditions
materially similar to those specified in the First Offer Notice.
(d) The provisions of this Section 6 shall not apply to Transfers by
Employee Shareholders (including Transfers of First Offer Shares during the
Free Transfer Period) (i) of Common Stock pursuant to a Public Sale (1)
involving a public offering registered under the Securities Act or (2)
consistent with the "manner of sale" requirements specified in Rule 144(f)
under the Securities Act; or (ii) to a Permitted Transferee of an Employee
Shareholder; provided that, in the case of clause (ii), such Permitted
Transferee has agreed in writing to be bound by the terms and conditions of
this Agreement, in form and substance reasonably satisfactory to the Company,
to the same extent and in the same manner applicable to such Employee
Shareholder.
7. LOCK-UP PROVISION. Each Shareholder agrees in connection with any
public offering of the Company's securities following the date hereof that,
upon the request of the managing underwriter(s) in the case of any underwritten
public offering, or the Company in the case of a non-underwritten public
offering, each Shareholder shall not sell or offer to sell any shares of Common
Stock or any other securities of the Company, other than shares of Common Stock
included in the public offering, during the period commencing on the
distribution of a "red herring" prospectus for such offering and ending 90 days
following the date of the final prospectus used in such offering.
8. PARTICIPATION IN REGISTRATIONS The Shareholders may not participate
in any registration of securities of the Company unless such Shareholder:
(a) agrees to sell its securities on the basis provided in any
underwriting arrangements approved by the Company and reasonably acceptable
to the Shareholder (in the case of any Demand Registration) which are
customary and which are not in direct contradiction of any rights granted to
the Shareholder under this Agreement; and
- 12 -
<PAGE> 14
(b) completes and executes all questionnaires, powers of attorney,
custodial agreements, indemnities, underwriting agreements and other
documents required under the terms of such underwriting arrangements which
are customary and which are not in direct contradiction of any rights granted
to the Shareholder under this Agreement.
9. REQUEST TO DEREGISTER. The Company will promptly deregister any of a
Shareholder's shares initially included in a registration statement pursuant to
Section 2 if a Shareholder should thereafter desire to withdraw such shares
from the proposed offering, provided that (a) the registration statement has
not been declared effective, or (b) if the registration statement has been
declared effective, it is not current under the requirement of the Securities
Act due to the lapse of time or material changes in the affairs of the Company.
Such deregistration by the Company shall in no way indicate that the Company or
its counsel deem that any such shares meet the requirements for sale under such
rule.
10. TERMINATION. The Company's obligation to effect a Company Registration
or Demand Registration shall expire on the fifth anniversary hereof.
11. LEGEND ON STOCK CERTIFICATES. Each certificate evidencing shares of
Common Stock will be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
REGISTRATION RIGHTS AND SHAREHOLDERS AGREEMENT, DATED AS OF JUNE 25, 1996,
AMONG INTERSTATE HOTELS COMPANY (THE "COMPANY") AND THE STOCKHOLDERS NAMED
THEREIN. A COPY OF SUCH AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
The Company will imprint such legends on certificates evidencing shares of
Common Stock outstanding prior to the date hereof. The legend set forth in the
paragraph above shall be removed at such time as the Shareholders no longer own
any Common Stock.
12. SEVERAL OBLIGATIONS. Any and all obligations of the Shareholders
hereunder shall be several as to itself and its own actions and not joint
obligations.
13. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES. The
stipulations, terms, covenants and agreements contained in this Agreement shall
inure to the benefit of, and shall be binding upon, the parties hereto and
their respective successors and Permitted Transferees and nothing herein
expressed or implied shall give or be construed to give to any person or
entity, other than the parties hereto and such successors and Permitted
Transferees, any legal or equitable rights hereunder.
- 13 -
<PAGE> 15
14. ASSIGNMENT. This Agreement may not be assigned by the Company without
the consent of a majority of the Shareholders party hereto and this Agreement
may not be assigned by a Shareholder (except to a Permitted Transferee) without
the consent of the Company. Notwithstanding any such assignment, the assigning
party will continue to remain primarily liable under this Agreement.
15. NOTICES. All notices, demands or requests made pursuant to, under or
by virtue of this Agreement must be in writing and shall be (i) personally
delivered, (ii) delivered by express mail, Federal Express or other comparable
overnight courier service, (iii) telecopied or (iv) mailed to the party to
which the notice, demand or request is being made by certified or registered
mail, postage prepaid, return receipt requested, as follows:
To a Shareholder:
At the address set forth opposite such Shareholder's name on the signature
page hereto.
To the Company:
Interstate Hotels Corporation
Foster Plaza X
680 Andersen Drive
Pittsburgh, Pennsylvania 15220
Attention: Mr. W. Thomas Parrington, Jr.
Facsimile: 412-937-8053
with copies thereof to:
Interstate Hotels Corporation
Foster Plaza X
680 Andersen Drive
Pittsburgh, Pennsylvania 15220
Attention: Marvin I. Droz, Esq.
Facsimile: 412-937-3265
and
Jones, Day, Reavis & Pogue
2300 Trammel Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: David Lowery, Esq.
Facsimile: 214-969-5100
All notices (i) shall be deemed to have been given on the date that the same
shall have been delivered in accordance with the provisions of this Section and
(ii) may be given either by a
- 14 -
<PAGE> 16
party or by such party's attorneys. Any party may, from time to time, specify
as its address for purposes of this Agreement any other address upon the giving
of 10 days' notice thereof to the other parties.
16. ENTIRE AGREEMENT. This Agreement contains all of the terms agreed
upon between the parties hereto with respect to the subject matter hereof, and
all understandings and agreements heretofore had or made among the parties
hereto are merged in this Agreement which alone fully and completely expresses
the agreement of the parties hereto.
17. AMENDMENTS. This Agreement may not be amended, modified, supplemented
or terminated, nor may any of the obligations of the Parties hereto be waived,
except by written agreement executed by the party or parties to be charged.
18. NO WAIVER. No waiver by any party of any failure or refusal by the
other party to comply with its obligations hereunder shall be deemed a waiver
of any other or subsequent failure or refusal to so comply.
19. REMEDIES. The Parties hereto will be entitled to enforce their rights
under this Agreement specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights existing in their favor. The parties hereto
agree and acknowledge that money damages will not be an adequate remedy for any
breach of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity or competent jurisdiction for
specific performance and/or injunctive relief in order to enforce or prevent
any violation of the provisions of this Agreement.
20. GOVERNING LAW. This Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with the internal laws of the
Commonwealth of Pennsylvania.
21. SUBMISSION TO JURISDICTION. Each Shareholder and the Company
irrevocably submits to the jurisdiction of (a) the Supreme Court of the State
of New York, New York County, (b) the United States District Count for the
Southern District of New York, and (c) the United States District Court for the
Western District of Pennsylvania for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated
hereby. Each Shareholder and the Company further agrees that service of any
process, summons, notice or document by U.S. registered mail to such party's
respective address set forth above shall be effective service of process for
any action, suit or proceeding in New York or Pennsylvania with respect to any
matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each Shareholder and the Company irrevocably
and unconditionally waives trial by jury and irrevocably and unconditionally
waives
- 15 -
<PAGE> 17
any objection to the laying of venue of any action, suit or proceeding arising
out of this Agreement or the transactions contemplated hereby in (a) the
Supreme Court of the State of New York, New York County, (b) the United States
District Court for the Southern District of New York, and (c) the United States
District Court for the Western District of Pennsylvania, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
22. SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
23. SECTION HEADINGS. The headings of the various Sections of this
Agreement have been inserted only for purposes of convenience, are not part of
this Agreement and shall not be deemed in any manner to modify, explain, expand
or restrict any of the provisions of this Agreement.
24. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
25. CHANGES IN SHAREHOLDERS. All Common Stock Transferred to third parties
in conformity with this Agreement shall remain subject to the provisions of
this Agreement and shall bear the legend set forth in Section 11 hereof. In
the event that, in compliance with the other terms and conditions of this
Agreement, shares of Common Stock are Transferred (including, without
limitation, pursuant to a distribution to the partners or members of any
Shareholder) to a person who, or trust which, is not a party to this Agreement,
such person or trust shall, prior to the transfer of such shares and as a
condition precedent to such transfer, become a party to this Agreement by
executing an agreement and consent to join in and be bound by the terms and
conditions of this Agreement, which agreement and consent shall be attached to
and become a part of this Agreement; and thereafter such person or trust shall
be a party to this Agreement for all purposes. Notwithstanding the foregoing,
in the event any such transferee or assignee does not execute such an
agreement, such Common Stock shall remain subject to the provisions of this
Agreement and such person or trust will take such shares of Common Stock
subject to the terms and conditions of this Agreement and by accepting such
shares of Common Stock will be deemed to be a party to this Agreement as if an
original
- 16 -
<PAGE> 18
signatory hereto without further action on the part of such party and/or the
Company.
26. SECONDARY OFFERING. If the closing of a Company Registration or a
Demand Registration of the Company's Common Stock occurs while this Agreement
is still in effect, each Employee Shareholder shall sell in connection with
such secondary public offering the lesser of (i) all of such Employee
Shareholder's shares of Common Stock or (ii) the number of such shares
necessary to provide net sales proceeds to the Employee Shareholder (after the
payment by the Employee Shareholder of all applicable federal, state and local
taxes relating to such sale) equal to the balance due under that certain
Promissory Note, dated as of May ___, 1996, from the Employee Shareholder to
Milton Fine, Trustee, U/A dated 11/17/89 as amended, FBO Milton Fine.
[Remainder of page intentionally left blank.]
- 17 -
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, all as of the day and year first above written.
INTERSTATE HOTELS COMPANY
By: /s/ W. Thomas Parrington
-----------------------------
Title: President
--------------------------
/s/ Milton Fine
- ---------------------------------
Milton Fine, Trustee, U/A dated
11/17/89, as amended,
FBO Milton Fine
/s/ David J. Fine
- ---------------------------------
David J. Fine, Trustee for the
Milton Fine Grantor Annuity
Trust U/A
date March 31, 1996
/s/ David J. Fine
- ---------------------------------
David J. Fine, Trustee, U/A
dated 12/15/89
FBO Sibyl A. Fine King
/s/ David J. Fine
- ---------------------------------
David J. Fine, Trustee, U/A
dated 12/15/89
FBO Carolyn Fine Friedman
/s/ David J. Fine
- ---------------------------------
David J. Fine, Trustee, U/A
dated 12/15/89
FBO David J. Fine
/s/ W. Thomas Parrington
- ---------------------------------
W. Thomas Parrington
- 18 -
<PAGE> 20
/s/ J. William Richardson
- ---------------------------------
J. William Richardson
/s/ Robert L. Froman
- ---------------------------------
Robert L. Froman
/s/ Marvin I. Droz
- ---------------------------------
Marvin I. Droz
/s/ Marvin I. Droz, POA
- ---------------------------------
Henry L. Ciaffone
/s/ Marvin I. Droz, POA
- ---------------------------------
Kevin P. Kilkeary
/s/ Marvin I. Droz, POA
- ---------------------------------
Jay A. Litt
/s/ Marvin I. Droz, POA
- ---------------------------------
Gregory W. Ade
/s/ Marvin I. Droz, POA
- ---------------------------------
Robert D. Cowan
/s/ Marvin I. Droz, POA
- ---------------------------------
Robert C. Holland
/s/ Marvin I. Droz, POA
- ---------------------------------
Jay Wold
/s/ Milton Fine
- ---------------------------------
Milton Fine
- 19 -
<PAGE> 21
IHC ASSOCIATES LIMITED PARTNERSHIP
By: IHC Associates Corporation,
General Partner
By: /s/ Milton Fine
---------------------------------
Title: President
------------------------------
HILLTOP INVESTMENTS PARTNERSHIP, L.P.
By: /s/ Milton Fine
---------------------------------
Milton Fine, Trustee, U/A
dated 11/17/89, as amended,
FBO Milton Fine, General Partner
INTERPRO, LTD.
By: Interstate Hotels Corporation #1018, General Partner
By: /s/ Milton Fine
---------------------------------
Title: Chairman
------------------------------
- 20 -
<PAGE> 1
EXHIBIT 10(c)
================================================================================
INTERSTONE THREE PARTNERS I L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
Dated as of June 25, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE I
Definitions . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II
General Provisions . . . . . . . . . . . . . . . . . . . 13
SECTION 2.1 Continuation of Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.2 Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.3 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.5 Purpose; Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.6 Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.7 Alternative Investment Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.8 Parallel Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III
Management and Operation of the
Partnership; Identification and Approval of
Investments; Partner Services . . . . . . . . . . . . . . . . . 16
SECTION 3.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.2 Joint Control by the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.3 Blackstone Partners Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.4 Certain Duties and Obligations of the Partners . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.5 Restrictions on Authority of the General Partners . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.6 Right of First Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.7 Right of First Opportunity; Exclusive Rights; Investment Parameters . . . . . . . . . . . . . . 28
SECTION 3.8 Termination of Right of First Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.9 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.10 Financial Advisory Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.11 Other Partner Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.12 Marketing Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IV
Other Activities Permitted . . . . . . . . . . . . . . . . . 36
ARTICLE V
Capital Contributions;
Distributions . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.1 Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.2 Partner Loans for Failure to Fund Committed Capital . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.3 Dilution for Failure to Fund Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.4 Distributions Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.5 Distributions of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.6 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.7 Partnership Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI
Books and Reports; Tax Matters;
Capital Accounts; Allocations . . . . . . . . . . . . . . . . 41
SECTION 6.1 General Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.2 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.4 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VII
Dissolution . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.2 Winding-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.3 Final Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VIII
Transfer of Partners' Interests . . . . . . . . . . . . . . . 49
SECTION 8.1 Restrictions on Transfer of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.2 Other Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IX
Miscellaneous . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.1 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.2 Ownership and Use of Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.5 Access; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.9 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.10 Section Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.11 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
ii
<PAGE> 4
Schedules
SCHEDULE A Name, Address and Sharing Percentages
Exhibits
Exhibit A Form of Management Agreement
Exhibit B Form of Project Partnership Agreement
Exhibit C Form of Confirmation and Acknowledgment
of Right of First Opportunity
Exhibit D Pre-Existing Projects
Exhibit E Excluded Projects
iii
<PAGE> 5
INTERSTONE THREE PARTNERS I L.P.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT, dated as of June 25,
1996 by and among BJS INTERSTONE MANAGEMENT ASSOCIATES, a Delaware general
partnership, as a general partner, IHC/INTERSTONE CORPORATION, a Delaware
corporation, as a general partner, and BLACKSTONE REAL ESTATE PARTNERS I
L.P. and IHC/INTERSTONE PARTNERSHIP II, L.P., each a Delaware limited
partnership, as limited partners.
PRELIMINARY STATEMENT
A. The Blackstone Group and the Interstate Group each have the capability
for identifying, acquiring, improving, operating and disposing of individual
hotel, motel and other lodging properties and groups of hotel, motel and other
lodging properties, hotel and motel management companies (for which the
ownership of hotels and motels is a significant part of their business) and
public and private companies whose primary holdings are comprised of such
assets or operations ("Target Investment" or "Target Investments").
B. The Blackstone Partners and the Interstate Partners, individually and
acting through the Partnership, in each case in accordance with the terms of
this Agreement, wish to continue an exclusive arrangement with each other under
which, for the duration thereof and subject to the terms set forth below, the
Partnership, the Blackstone Partners and the Interstate Partners through the
Partnership and the Parallel Partnerships, will have the first opportunity to
acquire, operate and dispose of certain Target Investments which are hereafter
identified by the Blackstone Group and/or the Interstate Group, as the case may
be, and approved for investment in accordance with this Agreement (each Target
Investment proposed or approved, as the context indicates, for acquisition
pursuant to this Agreement is referred to as a "Project").
C. In order to effect the foregoing, the parties hereto entered into a
limited partnership agreement dated as of December 15, 1995 (the "Existing
Agreement") and formed a partnership under the laws of the State of Delaware
with the name Interstone Three Partners I L.P. (the "Partnership").
D. Each of the Partners of the Partnership have agreed to amend and restate
the Existing Agreement in its entirety as set forth herein.
AGREEMENT
Accordingly, in consideration of the mutual promises and agreements herein
made and intending to be legally bound
<PAGE> 6
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hereby, the parties hereto agree to amend and restate the Existing Agreement to
read as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Unless the context otherwise requires, the
following terms shall have the following meanings for purposes of this
Agreement:
"ACKNOWLEDGEMENT" has the meaning set forth in Section 3.6(a).
"ADJUSTED CAPITAL ACCOUNT BALANCE" shall mean, with respect to any Partner,
the balance in such Partner's Capital Account adjusted (i) by taking into
account the adjustments, allocations and distributions described in
Regulations section 1.704-1(b)(2)(ii)(d)(4), (5), and (6); and (ii) by adding
to such balance such Partner's share of partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain, determined pursuant to Regulations section
1.704-2(g)(1) and 1.704-2(i)(5).
"AFFILIATE" with respect to any person means (i) any other person who
controls, is controlled by or is under common control with such person, (ii)
any director, officer, partner or employee of such person or any person
specified in clause (i) above or (iii) any immediate family member of any
person specified in clause (i) or (ii) above. Notwithstanding the foregoing,
for the purposes of this Agreement, none of the Blackstone Partners nor their
Affiliates shall be deemed to be Affiliates of any of the Interstone Partners
or the Interstone Related Parties, none of the Interstate Partners nor their
Affiliates shall be deemed to be Affiliates of any of the Blackstone Partners
or the Blackstone Related Parties, and no officer or director of any member
of the Blackstone Group which is also an officer or director of any member of
the Interstone Group shall be deemed to be an Affiliate of any of the
Interstate Partners or Interstate Related Parties, and no member of the
Interstone Group shall be deemed an Affiliate of any member of the Blackstone
Group.
"AGREEMENT" means this Amended and Restated Limited Partnership Agreement,
as it may be amended, supplemented, modified or restated from time to time.
"ASSET MANAGEMENT AGREEMENT" has the meaning set forth in Section 3.6(f).
"AUTHORIZED REPRESENTATIVES" of a General Partner shall be those
representatives designated by notice to all
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Partners by each General Partner from time to time to represent such General
Partner in connection with the Partnership. The term "Authorized
Representative" shall refer to any one of the Authorized Representatives of a
Partner. The initial Authorized Representatives of the General Partners are
set forth in Section 3.1(e) below.
"BLACKSTONE GENERAL PARTNER" means BJS Interstone Management Associates, a
Delaware general partnership, or any Affiliate of any member of the
Blackstone Group who replaces BJS Interstone Management Associates as a
general partner hereunder, or is admitted as an additional general partner
hereunder.
"BLACKSTONE GROUP" means the Blackstone Partners, Affiliates of the
Blackstone Partners and the Blackstone Related Parties; provided, that the
Blackstone Group shall not include investors in the Blackstone Partners who
are not Affiliates of Blackstone Group Holdings L.P., to the extent such
investors are not investing through any Affiliate of Blackstone Group
Holdings L.P.
"BLACKSTONE LIMITED PARTNER" means Blackstone Real Estate Partners I L.P., a
Delaware limited partnership, or any Affiliate of any member of the
Blackstone Group who replaces Blackstone Real Estate Partners I L.P. as a
limited partner hereunder, or is admitted as an additional limited partner
hereunder.
"BLACKSTONE PARTNERS" means collectively, the Blackstone General Partner and
the Blackstone Limited Partners and any other Partner admitted to the
Partnership which is an Affiliate of any of the foregoing and any permitted
assigns of such Partners.
"BLACKSTONE RELATED PARTIES" means (i) Blackstone Group Holdings L.P., (ii)
each of the general partners of Blackstone Group Holdings L.P. and his
immediate family members, for so long as he is such a partner and (iii) any
corporation, partnership, limited liability company, joint venture or other
like entity in which the Blackstone Partners or the parties referred to in
(i) and (ii) above individually or collectively, hold a fifty percent (50%)
or greater, direct or indirect (through one or more business entities),
ownership interest, but shall not include any such entity in which the
collective ownership interest of these parties is less than fifty percent
(50%) or which is a publicly traded company.
"BROKEN DEAL" shall mean a proposed Project that is not ultimately acquired
by the Partnership.
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"BUSINESS DAY" shall mean any day on which commercial banks are authorized
to do business and are not required by law or executive order to close in New
York, New York.
"CAPITAL ACCOUNT" has the meaning set forth in Section 6.3.
"CAPITAL CONTRIBUTIONS" means the net fair market value of any capital
contributions made by the Partners to the Partnership and shall include (i)
the contributions of such Partner made pursuant to Sections 3.6, 3.9, 3.10,
5.1 and 5.7 and (ii) such Partner's payments made to third party creditors of
the Partnership with respect to Partnership obligations to the extent such
Partner is authorized by this Agreement to make any such payment, unless and
until reimbursed by the Partnership.
"CAPITAL PROCEEDS" means (A) the cash or other consideration received by the
Partnership (including interest on installment sales when received) as a
result of (i) any sale, exchange, abandonment, foreclosure, insurance award,
condemnation, easement sale or other similar transaction relating to any
property of the Partnership, (ii) any financing or refinancing (to the extent
such refinancing is deemed a Disposition hereunder) relating to any property
of the Partnership, (iii) capital contributions to the Partnership upon
admission of new partners, (iv) any other transaction which, in accordance
with generally accepted accounting principles, would be treated as a capital
event, in each case less (B) any such cash which is applied to (i) the
payment of transaction costs and expenses, (ii) the repayment of debt of the
Partnership which is required under the terms of any indebtedness of the
Partnership or has been authorized by the General Partners, (iii) the repair,
restoration or other improvement of Partnership Assets which is required
under any contractual obligation of the Partnership or has been authorized by
the General Partners and (iv) the establishment of reserves by the General
Partners. "Capital Proceeds" shall also mean any of the foregoing which are
received by a partnership or other vehicle in which the Partnership is a
partner or investor or in which the Partnership otherwise has an interest, to
the extent received by the Partnership as dividends or distributions.
"CARRYING VALUE" shall mean, with respect to any Partnership Asset, the
asset's adjusted basis for U.S. federal income tax purposes, except that the
Carrying Values of all Partnership Assets shall be adjusted to equal their
respective fair market values, in accordance with the rules set forth in
Regulations Section 1.704-1(b)(2)(iv)(f), except as otherwise provided
herein, as of: (a) the date of the acquisition of any additional Partnership
interest by any new or existing Partner in exchange for more than a de
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5
minimis Capital Contribution, other than pursuant to the initial formation of
the Partnership; (b) the date of the distribution of more than a de minimis
amount of Partnership property to a Partner; (c) the date a Partnership
interest is relinquished to the Partnership or (d) the date of the
termination of the Partnership under Section 708(b)(i)(B) of the Code;
provided, however, that adjustments pursuant to clauses (a), (b) and (c)
above shall be made only if the General Partners determine that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners. The Carrying Value of any Partnership Asset
distributed to any Partner shall be adjusted immediately prior to such
distribution to equal its fair market value. Depreciation shall be
calculated by reference to Carrying Value, instead of tax basis once Carrying
Value differs from tax basis.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute. Any reference herein to a particular
provision of the Code shall mean, where appropriate, the corresponding
provision in any successor statute.
"COMMITTED CAPITAL" shall mean, the aggregate amount of $29,400,000 for the
Blackstone Partners and the Blackstone Partners of the Parallel Partnerships,
and the aggregate amount of $30,600,000 for the Interstate Partners and the
Interstate Partners of the Parallel Partnership.
"COMPETITIVE RATE" shall mean, with respect to a particular service at a
Target Investment, the lower of (i) the rate charged on an arm's length basis
for the same or similar service for comparable properties in the geographic
area in which the relevant Target Investment is located by unaffiliated
persons providing or performing such service on an ongoing basis and (ii) the
lowest rate charged by any Affiliates of the Interstate General Partner for
the same or similar service for comparable properties in the geographic area
in which the relevant Target Investment is located.
"CONSENT" shall mean the approval, direction or determination, as the case
may be, of a Partner, given as provided in Section 3.1, to do the act or
thing for which the approval is solicited or with respect to which the
direction or determination is given or made, or the act of granting such
approval or giving such direction or making such determination, as the
context may require. Any Consent required to be given by the Blackstone
General Partner shall be given by any one Authorized Representative of the
Blackstone General Partner. Any Consent to be given by the Interstate
General Partner shall be given by any two Authorized Representatives of the
Interstate General Partner.
<PAGE> 10
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"CONSIDERATION" means the gross value of all cash, securities and other
properties paid or payable, directly or indirectly, in one transaction or in
a series or combination of transactions, in connection with an acquisition or
disposition of a Target Investment or a transaction related thereto
(including, without limitation, amounts paid (A) pursuant to covenants not to
compete, employment contracts, employee benefit plans or other similar
arrangements and (B) to holders of any warrants, stock purchase rights,
convertible securities or similar rights and to holders of any options or
stock appreciation rights, whether or not vested). Consideration shall also
include the value of any long-term liabilities (including the principal
amount of any mortgage indebtedness or other indebtedness for borrowed money,
preferred stock obligations, any pension liabilities and guarantees)
indirectly or directly assumed or acquired, or otherwise repaid or retired,
in connection with or anticipation of such acquisition. If an acquisition
takes the form of a purchase of assets, to the extent applicable
Consideration shall also include (i) the value of any current assets not
purchased, minus (ii) the value of any current liabilities not assumed. If
the Consideration to be paid is computed in any foreign currency, the value
of such foreign currency shall, for purposes hereof, be converted into U.S.
dollars at the prevailing exchange rate on the date or dates on which such
Consideration is paid. In this Agreement, the value of any securities
(whether debt or equity) or other property paid or payable as part of the
Consideration shall be determined as follows: (1) the value of securities
that are freely tradable in an established public market will be determined
on the basis of the last market closing price prior to the public
announcement of the acquisition; and (2) the value of the securities that are
not freely tradable or have no established public market or, if the
Consideration utilized consists of property other than securities, the value
of such other property shall be the fair market value thereof as reasonably
determined by the General Partners.
"CONTRIBUTING PARTNER" has the meaning set forth in Section 5.2.
"DISABLING EVENT" means any event which would cause a General Partner to
cease to be a general partner of the Partnership pursuant to Section 17-402
of the Partnership Act.
"DISPOSITION" of a Project shall mean the sale, exchange or other
disposition by the Partnership of all or any portion of such Project for
cash, and shall include the receipt by the Partnership of a liquidating
dividend or other like distribution in cash. A refinancing of a Project
shall be deemed a Disposition of such Project unless the General Partners
agree otherwise. Whenever a portion of a
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Project (but not the entire Project) is the subject of a Disposition, that
portion shall be treated as having been a separate project from that portion
of the Project that is retained by the Partnership, and the Capital
Contributions for such Project and the Proceeds (other than the Proceeds of
such Disposition of a portion of a Project) distributed to the Partners with
respect to such Project shall be treated as having been divided between the
portion subject to the Disposition and the retained portion on a pro rata
basis. For purposes of calculating the Internal Rate of Return, a Broken
Deal shall be considered a Project subject to a Disposition that did not
yield any Proceeds.
"FAIR MARKET VALUE" of a Project as of a specific date shall mean the fair
market value of such project on such date as reasonably determined by the
General Partners (taking into consideration all factors which may reasonably
affect the sales price of the Project), less the principal amount of any debt
and other similar liabilities secured by or otherwise related to such
Project, and less a reasonable estimate of transaction costs and expenses
which would be incurred upon a Disposition of such Project on such date. If
the General Partners can not reach agreement on the Fair Market Value of a
Project, the matter shall be settled by arbitration in New York, New York in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect, except that the number and method of selection of
the arbitrators shall be as follows: each General Partner shall select one
qualified real estate investment banker or MAI appraiser who is experienced
in valuing assets and liabilities of the type in question; the average of the
Fair Market Values of such Project determined by such arbitrators shall be
the Fair Market Value of such Project, and shall be final, conclusive and
binding on the Partners.
"FISCAL PERIOD" means each fiscal quarter or such other period as may be
established by the General Partners.
"FISCAL YEAR" means the calendar year ending on December 31 of each year.
"GENERAL PARTNERS" mean the Blackstone General Partner, the Interstate
General Partner and any other person admitted to the Partnership as an
additional or substitute general partner of the Partnership in accordance
with the provisions of this Agreement, until such time as such person ceases
to be a general partner of the Partnership as provided herein.
"INTERNAL RATE OF RETURN" shall mean with respect to any Partner as of the
date of a cash distribution of Proceeds to such Partner, the rate of return
(calculated as provided below, taking into account the time value of money)
which (x) the Proceeds for which the return is being
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calculated represent on (y) all Capital Contributions made by such Partner as
of such date with respect to the Project or Projects for which the return is
being calculated.
In determining the Internal Rate of Return, the following shall apply:
(i) subject to the provisions of clause (ii) of this definition, all
present value calculations are to be made as of the date such Capital
Contributions were contributed to the Partnership;
(ii) all Capital Contributions shall be treated as having been
contributed to the Partnership on the first day of the month during which
a Partner's funds were actually delivered to the Partnership;
(iii) all distributions shall be treated as if received on the last
day of the month in which the distribution was made;
(iv) all distribution amounts shall be based on the amount of the
distribution prior to the application of any federal, state or local
taxation to Partners (including any withholding or deduction
requirements); and
(v) the rates of return shall be per annum rates and all amounts
shall be calculated on a compounded annual basis, and on the basis of a
365-day year.
When calculating the Internal Rate of Return (and for such purpose only), a
Partner's Capital Contribution to a Project shall not be deemed to include
60% of such Partner's share of any amounts paid to the Blackstone General
Partner or its Affiliates pursuant to Sections 3.9 and 3.10 below for such
Project. When calculating the Internal Rate of Return, a Partner's initial
Capital Contributions shall be deemed given on the date of admission of such
Partner to the Partnership, not on the date that the transferor of such
Partner's interest in the Partnership made its Capital Contributions; such
Capital Contributions shall be deemed Capital Contributions of the transferor
for the period from when made until the transfer to the new Partner.
"INTERSTATE GENERAL PARTNER" means IHC/Interstone Corporation, a Delaware
corporation, or any Affiliate of any member of the Interstate Group who
replaces IHC/Interstone Corporation as a general partner hereunder or is
admitted as an additional general partner hereunder.
"INTERSTATE GROUP" means the Interstate Partners, Affiliates of the
Interstate Partners and the Interstate Related Parties.
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"INTERSTATE LIMITED PARTNER" means IHC/Interstone Partnership II, L.P., a
Delaware limited partnership, or any Affiliate of any member of the
Interstate Group who replaces IHC/Interstone Partnership II, L.P. as a
limited partner hereunder or is admitted as an additional limited partner
hereunder.
"INTERSTATE PARTNERS" means collectively, the Interstate General Partner,
the Interstate Limited Partner and any other Partner admitted to the
Partnership which is an Affiliate of any of the foregoing and any permitted
assigns of such Partners.
"INTERSTATE RELATED PARTIES" means (i) Interstate Hotels Corporation, (ii)
each of the senior executives of Interstate Hotels Company and Interstate
Hotels Corporation and his immediate family members, for so long as he is
employed by Interstate Hotels Company and/or Interstate Hotels Corporation,
(iii) Milton Fine and his immediate family members and (iv) any corporation,
partnership, limited liability company, joint venture or other like entity in
which the Interstate Partners or the parties referred to in (i), (ii) and
(iii) above individually or collectively, hold a fifty percent (50%) or
greater, direct or indirect (through one or more business entities),
ownership interest but shall not include any such entity in which the
collective ownership interest of these parties is less than fifty percent
(50%) or which is a publicly traded company.
"LIMITED PARTNERS" means the Blackstone Limited Partners, the Interstate
Limited Partner and any person admitted to the Partnership as an additional
or substitute limited partner of the Partnership in accordance with the
provisions of this Agreement.
"LIQUIDATOR" has the meaning set forth in Section 7.2.
"MANAGEMENT AGREEMENT" shall mean a Management Agreement in the form
attached hereto as Exhibit A, as such agreement may be amended from time to
time in accordance with the terms thereof and hereof.
"MINIMUM GAIN" shall have the meaning set forth in Regulations section
1.704-2(d)(1) and shall mean the amount determined by (i) computing for each
nonrecourse liability of the Partnership any gain the Partnership would
realize if it disposed of the property subject to that liability for no
consideration other than full satisfaction of the liability and (ii)
aggregating the separately computed gains. If the Carrying Value of any
Partnership Asset differs from the adjusted tax basis of such property, the
calculation of Minimum Gain pursuant to the preceding sentence shall be made
by reference to the Carrying Value. For purposes
<PAGE> 14
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hereof, a liability of the Partnership is a nonrecourse liability to the
extent that no Partner or related person bears the economic risk of loss for
that liability within the meaning of Regulations section 1.752-1.
"NET INCOME (LOSS)" shall mean for each Fiscal Year or other period, the
taxable income or loss of the Partnership, or particular items thereof,
determined in accordance with the accounting method used by the Partnership
for U.S. federal income tax purposes with the following adjustments: (i) all
items of income, gain, loss or deduction allocated pursuant to Section 6.4(c)
through (e) shall not be taken into account in computing such taxable income
or loss; (ii) any income of the Partnership that is exempt from U.S. federal
income taxation and not otherwise taken into account in computing Net Income
and Net Loss shall be added to such taxable income or loss; (iii) if the
Carrying Value of any asset differs from its adjusted tax basis for U.S.
federal income tax purposes, any depreciation, amortization or gain resulting
from a disposition of such asset shall be calculated with reference to such
Carrying Value; (iv) upon an adjustment to the Carrying Value of any asset,
pursuant to the definition of Carrying Value, the amount of the adjustment
shall be included as gain or loss in computing such taxable income or loss;
and (v) except for items in (i) above, any expenditures of the Partnership
not deductible in computing taxable income or loss, not properly
capitalizable and not otherwise taken into account in computing Net Income
and Net Loss pursuant to this definition shall be treated as deductible
items.
"NON-CAPITAL PROCEEDS" means (x) any cash or other consideration received by
the Partnership other than Capital Proceeds less (y) any such cash that is
applied to the establishment of reserves which have been established by the
General Partners and to expenses of the Partnership.
"NON-CONTRIBUTING PARTNER" has the meaning set forth in Section 5.2.
"NONRECOURSE DEDUCTIONS" shall have the meaning ascribed to such term in
Regulations section 1.704-2(b)(1).
"ORGANIZATIONAL EXPENSES" means all reasonable third-party costs and
expenses pertaining to the organization of the Partnership and the
registration, qualification or exemption of the Partnership under any
applicable federal, state or foreign laws, including fees of counsel to the
Partnership and the Partners.
"PARALLEL PARTNERSHIPS" has the meaning set forth in Section 2.8.
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"PARTNER" means any person who is a partner of the Partnership, whether a
General Partner, a Limited Partner or both.
"PARTNER NONRECOURSE DEBT" shall have the meaning ascribed to such term in
Regulations section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" shall have the meaning ascribed to
such term in Regulations section 1.704-2(i)(2).
"PARTNER NONRECOURSE DEDUCTIONS" shall mean any item of partnership loss,
deduction, or expenditure under section 705(a)(2)(B) of the Code that is
attributable to a Partner Nonrecourse Debt, as determined pursuant to
Regulations section 1.704-2(i)(2).
"PARTNERSHIP" means Interstone Three Partners I L.P.
"PARTNERSHIP ACT" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. Section Section 17-101, et seq., as it may be amended from
time to time, and any successor to such statute.
"PARTNERSHIP ASSETS" means all right, title and interest of the Partnership
in and to all or any portion of the assets of the Partnership and any
property (real or personal) or estate acquired in exchange therefor or in
connection therewith.
"PRE-EXISTING PROJECTS" has the meaning set forth in Section 3.6(a).
"PROCEEDS" means the collective reference to Capital Proceeds and
Non-Capital Proceeds.
"PROJECT" has the meaning set forth in the Preliminary Statement.
"PROJECT LIMITED LIABILITY COMPANY AGREEMENT" shall mean a limited liability
company agreement in a form to be agreed upon by the General Partners, as
such agreement may be amended from time to time in accordance with the terms
thereof and hereof, formed pursuant to this Agreement to own Projects
purchased hereunder.
"PROJECT PARTNERSHIP AGREEMENT" shall mean a partnership agreement in the
form attached hereto as Exhibit B, (with such changes as required to provide
the Blackstone General Partner therein and the Interstate General Partner
therein with the same management rights as the Blackstone General Partner
herein and the Interstate General Partner herein, respectively, have pursuant
to this Agreement), as such agreement may be amended from time to time in
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accordance with the terms thereof and hereof, formed pursuant to this
Agreement to own Projects purchased hereunder.
"REGULATIONS" means the regulations promulgated under the Code.
"RELATED PARTIES" means the Blackstone Related Parties and the Interstate
Related Parties.
"REQUEST FOR PRELIMINARY APPROVAL" has the meaning set forth in Section
3.6(b).
"REQUEST FOR FINAL APPROVAL" has the meaning set forth in Section 3.6(f).
"SHARING PERCENTAGE" means the percentage interest of a Partner as set forth
on Schedule A hereto, as amended from time to time in accordance herewith.
Notwithstanding the foregoing, at the election of the Blackstone General
Partner or the Interstate General Partner made prior to the purchase of any
Target Investment by the Partnership, the Sharing Percentages of the
Interstate Limited Partner shall be reduced to 49.5% and the Sharing
Percentage of the Blackstone Limited Partner shall be increased to 49.5%. In
such event, appropriate changes shall be made in Section 6.4(a) and 6.4(d)(i)
below.
"TARGET INVESTMENT" has the meaning set forth in the Preliminary Statement.
"TAX MATTERS PARTNER" has the meaning set forth in Section 6.2.
"TRANSFER" has the meaning set forth in Section 8.1(a).
"TRANSFEREE" has the meaning set forth in Section 8.1(b).
"UNREALIZED LOSS" with respect to a Project on a date of a distribution of
Capital Proceeds shall mean the excess of the total Capital Contributions
with respect to such Project as of such date over the Fair Market Value of
such Project as of such date. A Project shall not have any Unrealized Loss
on a date of a distribution if the calculation pursuant to this definition
for such Project on such date equals zero or less.
SECTION 1.2 TERMS GENERALLY. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The term "person" includes individuals,
partnerships, joint ventures, corporations, trusts, governments
<PAGE> 17
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(or agencies or political subdivisions thereof) and other associations and
entities. Unless the context requires otherwise, the words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation". The term "hereunder" shall mean this entire Agreement as
a whole unless reference to a specific section of this Agreement is made.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.1 CONTINUATION OF PARTNERSHIP. The Blackstone General Partner
and the Interstate General Partner, as the General Partners, and the Blackstone
Limited Partners and the Interstate Limited Partner, as limited partners,
hereby agree to continue the Partnership and the Partners agree that the
Partnership shall continue for the limited purposes set forth and on the other
terms and conditions set forth in this Agreement. The Blackstone General
Partner hereby represents that each of the Blackstone Limited Partners is an
Affiliate of the Blackstone General Partner or its Affiliates.
SECTION 2.2 PARTNERS. Schedule A hereto contains the name, address and
Sharing Percentage of each Partner as of the date of this Agreement. Schedule
A shall be revised by the General Partners from time to time to reflect the
admission or withdrawal of a Partner or the transfer or assignment of interests
in the Partnership in accordance with the terms of this Agreement and other
modifications to or changes in the information set forth therein.
SECTION 2.3 NAME. The Partnership shall conduct its activities under the
name of Interstone Three Partners I L.P. The General Partners shall have the
power at any time to change the name of the Partnership; provided, that the
name shall always contain the words "Limited Partnership" or the letters "L.P."
The General Partners shall give prompt notice of any such change to each
Partner.
SECTION 2.4 TERM. The term of the Partnership shall commence on the date
of this Agreement and shall continue until December 31, 2045, unless sooner
dissolved, wound up and terminated in accordance with Article VII of this
Agreement.
SECTION 2.5 PURPOSE; POWERS. (a) The purpose of the Partnership shall be
(i) to implement the right of first opportunity with the Blackstone Group and
the Interstate Group, including review and approval or disapproval by the
General Partners of due diligence investigation of proposed Target Investments,
and, upon final approval by the General Partners, causing the acquisition by
the Partnership of such Target Investments either by itself or directly or
indirectly through entities in which the Partnership shall have a direct or
indirect
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ownership interest; (ii) operating, managing and disposing of any Target
Investments approved for acquisition pursuant to this Agreement; and (iii) to
do all things necessary or incidental to any of the foregoing.
(b) In furtherance of its purposes, the Partnership shall have all powers
necessary, suitable or convenient for the accomplishment of its purposes, alone
or with others, including the following:
(i) to invest and reinvest the cash assets of the Partnership in
money-market or other short-term investments;
(ii) to have and maintain one or more offices within or without the
State of Delaware, and, in connection therewith, to rent or acquire
office space, engage personnel and compensate them and do such other acts
and things as may be advisable or necessary in connection with the
maintenance of such office or offices;
(iii) to open, maintain and close bank accounts and draw checks and
other orders for the payment of moneys;
(iv) to engage employees (with such titles and delegated
responsibilities as may be determined), accountants, consultants,
auditors, custodians, investment advisers, attorneys and any and all
other agents and assistants, both professional and nonprofessional, and
to compensate them as may be necessary or advisable;
(v) to form or cause to be formed and to own the stock of one or more
corporations, whether foreign or domestic, and to form or cause to be
formed and to participate in partnerships, joint ventures and limited
liability companies, whether foreign or domestic;
(vi) to enter into, make and perform all contracts, agreements and
other undertakings as may be necessary or advisable or incident to
carrying out its purposes;
(vii) to sue, prosecute, settle or compromise all claims against
third parties, to compromise, settle or accept judgment of claims against
the Partnership, and to execute all documents and make all
representations, admissions and waivers in connection therewith;
(viii) to distribute, subject to the terms of this Agreement, at any
time and from time to time to Partners cash or investments or other
property of the Partnership, or any combination thereof;
(ix) to borrow money, whether secured or unsecured, and to make,
issue, accept, endorse and execute promissory notes, drafts, bills of
exchange and other instruments and
<PAGE> 19
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evidences of indebtedness, all without limit as to amount, and to secure
the payment thereof by mortgage, pledge, or assignment of, or security
interest in, the assets then owned or thereafter acquired by the
Partnership;
(x) to buy, sell, operate and otherwise deal with Target Investments;
(xi) to hold, receive, mortgage, pledge, lease, transfer, exchange or
otherwise dispose of, grant options with respect to, and otherwise deal
in and exercise all rights, powers, privileges and other incidents of
ownership or possession with respect to, all property held or owned by
the Partnership; and
(xii) to take such other actions necessary or incidental thereto as
may be permitted under applicable law.
SECTION 2.6 PLACE OF BUSINESS. The Partnership shall maintain a
registered office at The Corporation Trust Company, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801, or such other office within the
State of Delaware as is chosen by the General Partners. The Partnership shall
maintain an office and principal place of business at 345 Park Avenue, New
York, New York 10154, or at such other place as may from time to time be
determined as its principal place of business by the General Partners; the
General Partners shall give notice to the other Partners of any change in the
Partnership's principal place of business. The name and address of the
Partnership's registered agent as of the date of this Agreement is The
Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
SECTION 2.7 ALTERNATIVE INVESTMENT STRUCTURE. If the Blackstone General
Partner determines that for legal, tax, regulatory or other reasons it is in
the best interests of the Partners that a Target Investment be made through an
alternative investment structure, and all of the other General Partners
unanimously Consent to such alternative structure (which Consent shall not be
unreasonably withheld), the Blackstone General Partner shall structure the
making of all or any portion of such Target Investment outside of the
Partnership by requiring any Partner or Partners to make such Target Investment
either directly or indirectly through a partnership or other vehicle (such as
the purchase of stock, the purchase of partnership interests, or the formation
of another partnership or as tenants in common) that will invest on a parallel
basis with or in lieu of the Partnership, as the case may be. The Partners
shall be required to make capital contributions directly to each such vehicle
to the same extent, for the same purposes and on the same terms and conditions
as Partners are required to make Capital Contributions to the Partnership, and
such capital contributions shall reduce the unused Committed Capital of the
Partners to the same extent as if Capital Contributions were made to the
<PAGE> 20
16
Partnership with respect thereto. Each Partner shall have the same economic
interest in all material respects in Target Investments made pursuant to this
Section 2.7 as such Partner would have if such Target Investment had been made
solely by the Partnership, and the other terms of such vehicle shall be
substantially identical in all material respects to those of the Partnership,
to the maximum extent applicable; provided, that such vehicle (or the entity in
which such vehicle invests) shall provide for the limited liability of the
Limited Partners as a matter of the organizational documents of such vehicle
(or the entity in which such vehicle invests) and as a matter of local law; and
provided, further, that the General Partners or Affiliates thereof will serve
as the general partners or in some other similar fiduciary capacity with
respect to such vehicle.
SECTION 2.8 PARALLEL PARTNERSHIPS. The General Partners have established
one or more additional collective partnerships (the "Parallel Partnerships")
organized pursuant to partnership agreements in substantially the same form as
this Agreement for certain types of investors to invest in Target Investments
together with the Partnership. The Blackstone General Partner, or an Affiliate
thereof, shall be a general partner of any such Parallel Partnerships, and the
Blackstone Limited Partners, or Affiliates thereof, shall be limited partners
of any such Parallel Partnerships. The Interstate General Partner, or an
Affiliate thereof, shall be a general partner of any such Parallel Partnerships
and the Interstate Limited Partner, or an Affiliate thereof, shall be a limited
partner of any such Parallel Partnerships. The economic terms of each Parallel
Partnership shall be the same as those of the Partnership.
ARTICLE III
MANAGEMENT AND OPERATION OF THE
PARTNERSHIP; IDENTIFICATION AND APPROVAL OF
INVESTMENTS; PARTNER SERVICES
SECTION 3.1 MANAGEMENT. (a) The General Partners shall have the full and
complete responsibility for managing the business of the Partnership and shall
make all of the decisions affecting the business of the Partnership. Except as
otherwise set forth in this Agreement, the Limited Partners shall have no right
of Consent with respect to such decisions. The General Partners shall have all
of the rights, powers and authorities permitted to be exercised by a general
partner of a limited partnership formed under the Partnership Act. The General
Partners shall exercise all powers necessary and convenient for the purposes of
the Partnership, including those enumerated in Section 2.5, on behalf and in
the name of the Partnership.
(b) Except as otherwise provided herein, the Limited Partners as such shall
not have the right to, and shall not, take
<PAGE> 21
17
part in the management or affairs of the Partnership, nor in any event shall
any Limited Partner have the power to act for or bind the Partnership unless
delegated such power by the General Partners. The exercise by any Limited
Partner of any right or power conferred herein shall not be construed to
constitute participation by such Limited Partner in the control of the business
of the Partnership so as to make such Limited Partner liable as a general
partner for the debts and obligations of the Partnership for purposes of the
Partnership Act.
(c) Any Consent required by this Agreement may be given as follows:
(1) by a written Consent given by the approving Partner at or prior to the
doing of the act or thing of which the Consent is solicited, provided that
such Consent shall not have been nullified by notice to all of the General
Partners by the approving Partner at or prior to the time, or by the negative
vote by such approving Partner at any meeting held to consider the doing, of
such act or thing; or
(2) by the Consent given by the approving Partner to the doing of the act
or thing for which the Consent is solicited at any meeting called or held to
consider the doing of such act or thing.
(d) Unless the General Partners agree on a different procedure, any matter
requiring the Consent of all or any of the Partners pursuant to this Agreement
may be considered at a meeting of the Partners held not less than three (3) nor
more than fifteen (15) Business Days after notice thereof shall have been given
by a General Partner to all Partners. Such notice (i) may be given by any
General Partner, in its discretion, at any time. Any such notice shall state
briefly the purpose, time and place of the meeting. All such meetings shall be
held within or outside the State of Delaware at such reasonable place as the
General Partners shall designate and during normal business hours. Unless
otherwise provided by the General Partners, meetings may be held
telephonically.
(e) The written statements and representations of an Authorized
Representative for a General Partner shall be the only authorized statements
and representations of such General Partner with respect to the matter covered
by this Agreement. The initial Authorized Representatives are (i) Kenneth C.
Whitney, Thomas Saylak and John Schreiber for the Blackstone General Partner
and (ii) W. Thomas Parrington, J. William Richardson and Marvin I. Droz for the
Interstate General Partner. The written statement or representation of any one
Authorized Representative of the Blackstone General Partner shall be sufficient
to bind the Blackstone General Partner with respect to all matters pertaining
to the Partnership and addressed in such statement or representation. The
written statement or representation of any
<PAGE> 22
18
two Authorized Representatives of the Interstate General Partner shall be
sufficient to bind the Interstate General Partner with respect to all matters
pertaining to the Partnership and addressed in such statement or
representation.
(f) The failure to vote by any Partner on any matter requiring such
Partner's Consent within five business days after such vote is requested shall
be deemed to be a negative vote with respect to such matter.
(g) A Partner shall not be obligated to abstain from voting on any matter
(or vote in any particular manner) because of any interest (or conflict of
interest) of such Partner (or any Affiliate thereof) in such matter.
(h) Each Partner agrees that, except as otherwise expressly provided
herein and to the fullest extent permitted by applicable law, the approval of
any proposed action of or relating to the Partnership by all of the General
Partners as provided herein (or if this Agreement grants one General Partner
sole approval rights over a certain action, the approval of such action by such
General Partner) shall bind each Partner and shall have the same legal effect
as the approval of each Partner of such action.
SECTION 3.2 JOINT CONTROL BY THE GENERAL PARTNERS. Except as specifically
provided in this Agreement, the business, affairs and operations of the
Partnership shall be managed, and all Partnership decisions shall be jointly
made, by both General Partners, and no single General Partner, acting alone in
its capacity as such, shall have the authority to bind or make any decision for
the Partnership or to conduct or manage the Partnership's business or affairs.
Without limiting the foregoing in any way, the following are examples of
decisions of the Partnership which shall be made jointly by the General
Partners:
(a) the reorganization of the Partnership as a corporation or other
entity, or the creation of a holding corporation, partnership or limited
liability company to own all or any substantial portion of the assets of or
all the equity interests in the Partnership, provided that the surviving
entity remains a pass-through entity for taxation purposes;
(b) the termination or settlement of any litigation by the Partnership;
(c) the making of any change in the Fiscal Period, any determination of
reserves under this Agreement, any distribution of cash or investments or
other property of the Partnership to the Partners, or any withdrawals of
capital from the Partnership;
<PAGE> 23
19
(d) the making of any change in the name of the Partnership or the use of
another name by the Partnership to carry on any business of the Partnership;
(e) the making of the determination and approval of such tax matters as
are specified in Section 6.2;
(f) the making of the allocation of amounts in respect of an interest in
the Partnership Transferred pursuant to Section 8.2(e);
(g) the authorization of a Partner to disclose information agreed to be
held confidential under Sections 9.5;
(h) the admission of an additional Partner to the Partnership pursuant to
the terms of this Agreement if such additional Partner is not an Affiliate of
either any member of the Blackstone Group or any member of the Interstate
Group;
(i) (A) the sale, exchange or other transfer of any Partnership Asset, (B)
the merger or consolidation of the Partnership with or into any other
business entity provided that the surviving entity remains a pass-through
entity for taxation purposes, and (C) the right to require each of the
Partners to exchange, transfer or otherwise convey some or all of its
partnership interest in the Partnership as part of an exit or disposition
strategy for the Partnership;
(j) the making of any expenditure incurred in connection with the
administration of the Partnership;
(k) the entering into of any lease by the Partnership as lessor;
(l) the engagement of any independent accountant, counsel, actuary or
consultant to the Partnership, or any change in or termination of any engaged
independent accountant, counsel, actuary or consultant to the Partnership;
(m) the maintenance of a registered office in Delaware other than that
specified in Section 2.6;
(n) the determination of any titles and responsibilities of employees of
the Partner pursuant to Section 2.5(b)(iv);
(o) the approval of budgets;
(p) the expenditure by the Partnership of any funds in connection with
the disposition of a Target Investment or the expenditure by the Partnership
of any funds required in
<PAGE> 24
20
connection with the operation of any Target Investments which are not
included within the approved budget for such Target Investment;
(q) any termination, replacement or other change in the franchisor of any
Target Investment in accordance with the terms of the franchise agreement (or
the manager of any Target Investment if such manager is not the Interstate
General Partner or an Affiliate thereof), or the execution, modification or
termination of any agreement which is material to the Partnership (except as
set forth in Section 3.3(a);
(r) the dissolution, termination and winding up of the Partnership as
provided in Section 7.1(a);
(s) any amendment to this Agreement which would have a material adverse
effect on any Partner's economic interest in the Partnership;
(t) extending the term of the Partnership beyond December 31, 2045;
(u) in accordance with Section 3.6 below, the decision for the Partnership
to investigate a Target Investment and the decision for the Partnership to
acquire a Target Investment, or the decision for the Partnership to acquire
any other asset;
(v) the borrowing of money;
(w) the filing of a petition under any bankruptcy or other insolvency law
by the Partnership, or the admission in writing by the Partnership of its
bankruptcy, insolvency or general inability to pay its debts;
(x) the commencement of any litigation by the Partnership;
(y) a transaction or other matter involving any actual or potential
conflict of interest affecting any Partner or Affiliate thereof other than
the entering into of any agreements or the payment of any amounts provided
for in this Agreement; and
(z) a change in the business of the Partnership to include any business
other than that specified in Section 2.5 which takes the focus of the
Partnership's business away from the lodging industry.
Notwithstanding the foregoing and without limiting the foregoing in any way,
any General Partner may delegate in writing to (i) the other General Partner,
its right to make any decisions concerning the Partnership or take any actions
on behalf of the
<PAGE> 25
21
Partnership and/or (ii) to any manager of any Target Investment, the day to day
administrative duties in connection with the operation of such property.
SECTION 3.3 BLACKSTONE PARTNERS RIGHTS. Notwithstanding any other
provision of this Agreement, the Blackstone General Partner may take any of the
following actions with out the Consent of any of the Interstate Partners:
(a) with respect to any Target Investment in which an Affiliate of the
Interstate General Partner is the manager, any termination, replacement or
other change in such manager in accordance with the terms of the management
agreement (provided that the Blackstone General Partner shall consult with
the Interstate General Partner with respect to any replacement manager and
shall act reasonably with respect to its selection of a replacement manager,
but the Interstate General Partner shall not have any consent rights with
respect to such replacement manager), the declaration of a default or event
of default under any management agreement for such manager, and the exercise
of any remedies under such management agreement;
(b) the approval of the admission of any additional partner to the
Partnership if such additional partner is an Affiliate of any member of the
Blackstone Group or any member of the Interstate Group; and
(c) such other actions and decisions which are expressly given solely to
the Blackstone General Partner pursuant to the terms of this Agreement.
SECTION 3.4 CERTAIN DUTIES AND OBLIGATIONS OF THE PARTNERS.
(a) Subjectto the terms of this Agreement, the General Partners shall take
all action which may be reasonably necessary or appropriate (i) for the
formation and continuation of the Partnership as a limited partnership under
the laws of the State of Delaware and (ii) for the development, maintenance,
preservation and operation of the business of the Partnership in accordance
with the provisions of this Agreement and applicable laws and regulations.
(b) No Partner shall take any action so as to cause the Partnership to be
classified for Federal income tax purposes as an association taxable as a
corporation and not as a partnership.
(c) The General Partners shall take (and each Partner agrees to cooperate
with the General Partners and approves of the General Partners taking on its
behalf) all action which is necessary to form or qualify the Partnership to
conduct the business in which the Partnership is engaged under the laws of any
jurisdiction in which the Partnership is doing business and to continue in
effect such formation or qualification.
<PAGE> 26
22
(d) The General Partners shall not take, or cause to be taken, any action
that would result in any Limited Partner having any personal liability for the
obligations of the Partnership. The General Partners shall be under a duty as
described herein to conduct the affairs of the Partnership in the best
interests of the Partnership and of the Partners including the safekeeping and
use of all Partnership funds and assets and the use thereof for the exclusive
benefit of the Partnership. Neither any Partner nor any Affiliate of any
Partner shall enter into any transaction with the Partnership unless the
transaction (i) is expressly permitted hereunder, (ii) is entered into on
arm's-length terms in the ordinary course of Partnership business or (iii) is
approved by all of the General Partners upon disclosure of any direct or
indirect interest such Partner or any Affiliate thereof may have in the
transaction.
(e) No General Partner shall be liable, responsible or accountable in
damages or otherwise to the Partnership or to any Partner for (a) any act
performed within the scope of the authority conferred on such General Partner
by this Agreement except for the gross negligence or willful misconduct of
such General Partner in carrying out its obligations hereunder, (b) such
General Partner's failure or refusal to perform any act, except those
expressly required by or pursuant to the terms of this Agreement, (c) such
General Partner's performance of, or failure to perform, any act on the
reasonable reliance on advice of legal counsel to the Partnership or (d) the
negligence, dishonesty or bad faith of any agent, consultant or broker of the
Partnership selected, engaged or retained and monitored with reasonable care.
In any threatened, pending or completed action, suit or proceeding, each
General Partner shall be fully protected and indemnified and held harmless by
the Partnership against all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, proceedings, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
reasonable attorneys' fees, costs of investigation, fines, judgments and
amounts paid in settlement, actually incurred by such General Partner in
connection with such action, suit or proceeding) by virtue of its status as a
General Partner or with respect to any action or omission taken or suffered in
good faith, other than liabilities and losses resulting from the gross
negligence or willful misconduct of such General Partner; provided, however,
that a General Partner shall not be so indemnified for any acts determined to
be in contravention of this Agreement or in breach of its fiduciary duties.
The indemnification provided by this paragraph shall be recoverable only out
of the assets of the Partnership, and no Partner shall have any personal
liability on account thereof.
SECTION 3.5 RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNERS. The
General Partners shall not have the authority to:
(a) do any act in contravention of this Agreement (including under Section
3.2 or Section 3.3);
<PAGE> 27
23
(b) do any act which would make it impossible to carry on the ordinary
business of the Partnership, except in connection with the dissolution,
winding up and termination of the Partnership as provided by Article VII;
(c) possess Partnership property, or assign their respective rights in
specific Partnership property, for other than a Partnership purpose;
(d) admit a person as a Partner except as provided in this Agreement; or
(e) knowingly perform any act that would subject any Limited Partner to
liability as a general partner in any jurisdiction.
SECTION 3.6 RIGHT OF FIRST OPPORTUNITY. (a) Subject to Section 3.7(b)
below, and until expiration or termination of the right of first opportunity in
favor of the Partnership set forth below (which right has been confirmed and
acknowledged in the Confirmation and Acknowledgment of Right of First
Opportunity ("Acknowledgment"), in the form attached hereto as Exhibit C, which
has been executed simultaneously herewith), each member of the Blackstone Group
and the Interstate Group shall offer to the Partnership (along with the
Parallel Partnerships) a right of first opportunity to invest in each Target
Investment which (x) is identified by such member after the date of this
Agreement or (y) which is identified on the list of Projects attached hereto as
Exhibit D (the "Pre-Existing Projects"), in each case, upon and subject to the
terms set forth in the remainder of this Section 3.6.
(b) Except as provided in Section 3.7(b) below, promptly upon its
identification of a Target Investment as a potential investment, each member of
the Blackstone Group and the Interstate Group shall notify each of the General
Partners about such Target Investment (such notification, a "Request for
Preliminary Approval") and shall provide each of the General Partners with such
information reasonably necessary to evaluate such investment.
(c) Within five (5) Business Days after delivery to the General Partners
of the Request for Preliminary Approval and the accompanying information
pursuant to paragraph (b) above with respect to a proposed Target Investment,
and provided that notice shall have first been given from the party requesting
such action that approval is being sought under this Section, the General
Partners shall either approve or disapprove pursuit of such proposed Target
Investment (including the incurring of due diligence costs and expenditures,
the negotiation and documentation of the terms of purchase and financing, and
the posting of deposits). If the General Partners, having first been notified
that approval under this Section is being sought, fail to unanimously approve
the investigation of a proposed Target
<PAGE> 28
24
Investment within such five (5) Business Day period, the proposed Target
Investment shall be deemed disapproved. Any General Partner shall have the
right to reasonably request additional information regarding the proposed
Project within three (3) Business Days after receipt of the Request for
Preliminary Approval and the accompanying information. If any General Partner
requests such additional information, the five (5) Business Day period referred
to above shall commence on the day such General Partner receives all such
additional information. The General Partners shall each have the right to
approve or disapprove investigation of any proposed Project in their sole and
absolute discretion. Once investigation of a Target Investment is approved,
the due diligence costs and expenditures reasonably incurred by the Partnership
and within the scope approved by the General Partners with respect to such
Project shall become the obligation of the Partnership.
(1) All due diligence costs and expenditures reasonably incurred by the
Partnership pursuant to this Section and within the scope of the approved due
diligence shall be funded if and when required for payment, and shall be
funded solely from, and shall constitute, Capital Contributions to the
Partnership by the Partners. In no event shall due diligence expenses be
funded from operating revenues of the Partnership. The due diligence
expenses incurred by the Partnership shall be allocated for book and tax
accounting purposes between and among each Project in such manner as the
General Partners may reasonably approve. Due diligence expenses from a
Project shall be allocated among the Parallel Partnerships in such a manner
as the Blackstone General Partner shall determine, in its sole discretion.
Each Partner shall contribute its pro rata share of such due diligence
expenses, based upon such Partner's Sharing Percentage.
(2) The Partners intend that all due diligence will be conducted through
the Partnership in accordance with any Consent given by the General Partners;
however, a General Partner may elect to perform, at its own cost, its own due
diligence in addition to that being performed by the Partnership.
(d) If the General Partners approve investigation of a Project, the
Partnership shall promptly undertake due diligence investigation and at
appropriate times during and, in any event, prior to the conclusion of that due
diligence investigation, the Partnership shall make available to each Partner
copies of the material due diligence information obtained by the Partnership
with respect to the applicable Target Investment.
(e) If any General Partner has elected to participate in the due diligence
investigation of a proposed Project pursuant to Section 3.6(c)(2) above, then
all due diligence activities
<PAGE> 29
25
shall be coordinated with such General Partner as reasonably necessary to
facilitate such participation.
(f) At such time, if any, as any member of the Blackstone Group or the
Interstate Group determines that a request for final authority to proceed with
acquisition of a Project is required because such party reasonably believes
that a binding commitment (i.e. a letter of intent which is, or could become
binding or a contract for purchase and sale) to proceed with the acquisition
must be executed by the Partnership or the opportunity to acquire such interest
would be lost, such party shall request the General Partners to give their
final approval to proceed with such acquisition (such notification, a "Request
for Final Approval"). Upon the request of any General Partner, a Request for
Final Approval shall be made in writing. In connection with any Request for
Final Approval, such party shall, to the extent applicable, (i) submit to the
General Partners the form of any purchase agreement and/or other relevant
documents pursuant to which the Partnership may acquire an interest in a
Project, and (ii) notify the General Partners of whether an Affiliate of the
Interstate General Partner is being proposed as the property manager for the
Project. Within five (5) Business Days after delivery of the Request for Final
Approval, the General Partners shall meet and either approve or disapprove, in
writing, the proposed Project, including a timetable for closing of the
acquisition, the posting of any non-refundable deposits, if applicable, and the
terms of engagement of any Affiliate of the Interstate General Partner for
property or asset management of the Project, as applicable. Each General
Partner shall have the right to grant final approval or disapproval of the
Project in its sole and absolute discretion. However, unless all of the
General Partners agree to extend the five (5) Business Day decision period set
forth above, the General Partners shall either approve or disapprove the
Project within that period without exception, and any failure to act within
that period, as it may be extended by the General Partners in their sole
discretion, shall constitute a disapproval of the Project. The Blackstone
Partners specifically acknowledge that, unless transfer of management is not
feasible or practical, the Interstate General Partner contemplates the
engagement by the Partnership of an Affiliate of the Interstate General Partner
on an arm's length basis in connection with the property management of one or
more of the Projects and contemplates that one or more of the Project proposals
may propose such engagement. If transfer of management is not feasible or
practical, then, unless such engagement is not feasible or practical, the
Partnership shall engage an Affiliate of the Interstate General Partner as an
asset manager for such Project pursuant to an Asset Management Agreement in
form and substance satisfactory to the parties thereto (the "Asset Management
Agreement"), and the fees payable by the Partnership under such Asset
Management Agreement shall be at Competitive Rates. Unless the General
Partners unanimously agree otherwise, no nonrefundable deposit shall be posted
with respect to a Project until that Project has received final
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26
Project approval pursuant to this subsection 3.6(f) and the General Partners
have had the opportunity to review the purchase agreement and/or the other
documents pursuant to which the Partnership may acquire an interest in such
Project. The final Project approval shall specify the amount of each remaining
funding obligation with respect to the applicable Project and the date(s) by
which each such amount is to be funded, it being the intent of the Partners
that they not fund to the Partnership those amounts due to the seller of (or if
applicable, escrow agent for the transfer of) the Project more than three (3)
Business Days prior to the date such amounts are due to the Seller or escrow
agent, as applicable. The funding obligations with respect to a Project shall
be allocated among the Parallel Partnerships in such a manner as the Blackstone
General Partner shall determine, in its sole discretion. By each funding date,
the Partners shall fund to the Partnership their pro rata portion of the
funding obligation then due, based upon each Partner's Sharing Percentage,
including any purchase deposits contemplated in connection with the Consent to
such Project. In no event shall final Project approval funding requirements be
funded from operating revenues of the Partnership. All such contributions to
the Partnership shall constitute Capital Contributions. Each of the General
Partners will consult with the other General Partners in connection with the
negotiation of any documents necessary for the acquisition of a Target
Investment.
(g) If the General Partners approve a proposed Project pursuant to
subsection 3.6(f) above, unless the Project shall be purchased through another
form, the Partnership shall promptly finalize the form of the Project
Partnership Agreement or Project Limited Liability Company Agreement, as
applicable, for the ownership of the proposed Project (with such Project
specific modifications as are necessary to address any Project specific
characteristics not addressed by the form of Project Partnership Agreement or
Project Limited Liability Company Agreement, as applicable), and promptly
finalize the form of a Management Agreement or an Asset Management Agreement,
as applicable, to be entered into (with such Project specific modifications as
are necessary to address any Project specific characteristics not addressed by
the form of Management Agreement or Asset Management Agreement, as applicable,
and which the Manager and the Blackstone General Partner may approve), which
Management Agreement (if applicable) shall provide for aggregate fees not
greater than 2.8% of Gross Operating Revenues (as defined in the Management
Agreement). In no event shall any party hereunder have any liability to the
other party for failure to finalize or enter into any Management Agreement or
Asset Management Agreement, as applicable, so long as the parties have
proceeded in good faith to attempt to consummate such documentation following
approval of the General Partners of any proposed Project pursuant to Section
3.6.
(h) The General Partners agree that in the event that (A) material facts
or circumstances or a material change in any
<PAGE> 31
27
facts or circumstances regarding a Target Investment which was approved for
acquisition by the General Partners become known to any General Partner which
were not previously known by such General Partner and (B) with the knowledge of
such new or changed facts or circumstances, such General Partner no longer
desires to proceed with such acquisition and (C) at the time of the occurrence
of the event or events referred to in clause (A) above, (x) the Partnership is
not irrevocably committed to consummate the acquisition of such Target
Investment pursuant to a binding legal agreement and (y) the Partnership's
obligations under such agreement would not be breached by the failure to
consummate such acquisition, then such General Partner may, by written notice
to the other General Partners, revoke its Consent to consummate such
acquisition at which time such Target Investment shall no longer be deemed
approved.
(i) Notwithstanding anything in this Section to the contrary, if, with
respect to a Project, a member of the Blackstone Group or the Interstate Group
reasonably believes it must take some action to retain the opportunity to
purchase such Project before it has sufficient time to follow the procedures
for approval set forth in this Section, such party may take such action
(including the making of a deposit or the entering into a binding agreement if
assignable to the Partnership) in its own name only and at its own risk without
violating the terms of this Agreement, provided such party promptly submits
such Project to the Partnership for its consideration. If the General Partners
subsequently approve such Project, such party shall assign all of its rights in
the Project to the Partnership and the Parallel Partnerships, as appropriate.
If the General Partners subsequently disapprove such Project, the Partnership
shall not be bound in any way to such Project, and the party who proposed the
Project may proceed with such Project only if the conditions of Section 3.7(b)
and Section 3.7(c) have been met.
(j) Any General Partner may request that any of the time periods set forth
herein be reduced or extended, if reasonably necessary.
(k) Notwithstanding anything in this Section to the contrary, none of the
Interstate Partners shall be deemed in default hereunder for failure to notify
the Blackstone Group as required herein if notice has been given to the
Blackstone General Partner of any of the Parallel Partnerships.
(l) Notwithstanding anything contained in this Agreement to the contrary,
unless all of the General Partners unanimously agree otherwise, each Project in
which the Partnership invests shall secure mortgage debt financing in principal
amounts and with terms that are consistent with the then currently prevailing
market conditions, but in any event in principal amounts between 60% and 75% of
the total acquisition cost of such Project.
<PAGE> 32
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SECTION 3.7 RIGHT OF FIRST OPPORTUNITY; EXCLUSIVE RIGHTS; INVESTMENT
PARAMETERS. (a) Subject to the terms of this Agreement as set forth above,
the Blackstone Partners and the Interstate Partners each covenant to provide to
the Partnership, and each other, during the term of this Agreement, the right
of first opportunity as provided in Section 3.6 above to invest in (x) those
Target Investments which are hereafter identified by them and (y) the
Pre-Existing Projects. By their previous execution of the Acknowledgement,
Interstate Hotels Corporation (in the case of (A) below) and Blackstone Group
Holdings L.P. (in the case of (B) below) have agreed and hereby ratify and
confirm that they agree, and agree to cause (A) the Interstate Group and (B)
the Blackstone Group, respectively, to submit any Target Investments in which
they or the Interstate Group and the Blackstone Group would otherwise wish to
invest independent of the Partnership to the right of first opportunity set
forth herein, and, in connection therewith, they shall, and shall cause the
Interstate Group and the Blackstone Group to, subject to Section 3.7(b) below,
refer all such investment opportunities to the Interstate General Partner or
the Blackstone General Partner, as applicable, for submission to the
Partnership pursuant to the terms set forth above.
(b) Notwithstanding anything herein to the contrary, the Interstate Group
and the Blackstone Group expressly retain the right to undertake acquisition or
development of any Target Investment or any other investment whatsoever,
without the consent of the others, and free of any right of first opportunity
hereunder, at such time, in such form and upon such terms as they, acting in
their sole discretion, may determine appropriate, where any one of the
following conditions is satisfied:
(i) such Project is a Project that was disapproved or deemed
disapproved solely by action or inaction of the General Partners after
proper notice; provided, that if a Project is disapproved or deemed
disapproved by a General Partner who is a member of the same group (i.e.,
the Blackstone Group or the Interstate Group) as the party who submitted
the Request for Preliminary Approval or Request for Final Approval, as
applicable, then the condition contained in this clause (i) shall not be
deemed satisfied for any member of such group;
(ii) such Project fails to meet the definition of a Target Investment;
(iii) except as expressly provided below, such Project is listed on
Exhibit E hereto, subject to the qualifications and agreements described
in such Exhibit;
(iv) such Project is identified or undertaken after the termination of
the right of first opportunity pursuant to the terms of this Agreement;
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(v) such party is acquiring, directly or indirectly, the stock or
assets of an entity which owns one or more Target Investments but whose
assets and/or operations are not primarily composed of Target
Investments;
(vi) such party is acquiring, directly or indirectly, the stock or
assets of an entity which primarily owns and/or operates hotel or motel
franchise systems or hotel or motel reservations systems;
(vii) the Consideration being paid for such Target Investment in the
aggregate is less than $10,000,000 or the equity portion of the
Consideration being paid for such Target Investment in the aggregate is
less than $5,000,000; or
(viii) with respect to a Target Investment, the Interstate Group or
the Blackstone Group, as applicable, certifies, at any time (whether or
not such Project has been submitted to the Partners and the Partnership
under Section 3.6 above), that in its judgment, involvement with the
Blackstone Group or the Interstate Group, as applicable, in such Target
Investment would not be appropriate, feasible or practical.
(c) Notwithstanding anything in Section 3.7(b) above to the contrary, the
right of first opportunity set forth herein will apply to any acquisition
undertaken by any member of the Blackstone Group or the Interstate Group during
the term of this right of first opportunity with respect to the Pre-Existing
Projects. In the event that a party is undertaking the acquisition of a Target
Investment free of the right of first opportunity pursuant to Section
3.7(b)(i), such party shall acquire such Target Investment upon terms that are
no more favorable than the terms presented to the General Partners with respect
to such Target Investment.
(d) The Partners acknowledge that, without limiting the definition of
Target Investment, it is their intent that the Target Investments ultimately
acquired by the Partnership will be Target Investments which (i) are mid to
high quality (3-4 stars), (ii) are located in growing markets, (iii) are well
positioned vis-a-vis the competition and, (iv) provide significant opportunity
for enhanced performance through intensive management repositioning and/or
redevelopment. Additionally, there is a preference for multi-asset
acquisitions over single properties in order to provide for the most efficient
and cost effective underwriting and investment process. Further, such
acquisitions should provide minimum going-in free and clear returns of 11%
(after management and FF&E reserve), unless immediate opportunity for enhanced
performance can be demonstrated. Nevertheless, certain Target Investments may
be approved hereunder even if they do not fall within the above- referenced
investment parameters. Accordingly, except as otherwise provided herein
(including
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without limitation Section 3.7(b) above), all Target Investments, including,
those that do not fall within the above-referenced investment parameters, shall
be subject to the right of first opportunity set forth in Section 3.6 above.
SECTION 3.8 TERMINATION OF RIGHT OF FIRST OPPORTUNITY.
(a) The Blackstone General Partner shall have the right to terminate the
right of first opportunity set forth in Section 3.6 if any member of the
Interstate Group defaults in the performance of any of its obligations
hereunder or under the Acknowledgement after the Blackstone General Partner has
given such Partner or any other such party notice of such default and such
Partner or other party has failed to cure such default within 30 days after
receipt of such notice.
(b) The Interstate General Partner shall have the right to terminate the
right of first opportunity set forth in Section 3.6 if any member of the
Blackstone Group defaults in the performance of any of its obligations
hereunder or under the Acknowledgement after the Interstate General Partner has
given such Partner or any other such party notice of such default and such
Partner or other party has failed to cure such default within 30 days after
receipt of such notice.
(c) The right of first opportunity set forth in Section 3.6 shall
automatically terminate upon the earlier to occur of (i) December 15, 1997 or
(ii) the date upon which the members of the Blackstone Group in the Partnership
and in the Parallel Partnerships shall have contributed an aggregate of
$29,400,000 to the Partnership and the Parallel Partnerships and the members of
the Interstate Group in the Partnership and the Parallel Partnerships shall
have contributed an aggregate of $30,600,000 to the Partnership and the
Parallel Partnerships.
(d) At any time after $54,000,000 has been invested (either through
acquisitions that are closed or through binding commitments to close
acquisitions) in the aggregate by the Partnership and the Parallel
Partnerships, then any Partner may elect to terminate the right of first
opportunity set forth in Section 3.6 upon three (3) Business Days notice to all
the other Partners.
(e) The General Partners may, in their discretion, extend the right of
first opportunity set forth in Section 3.6 for such period of time as they may
mutually agree.
SECTION 3.9 FINANCING. The Blackstone General Partner, acting directly or
through one or more of its Affiliates, shall endeavor to secure an acquisition
financing facility for the Partnership and the Parallel Partnerships in an
initial amount between $60,000,000 and $80,000,000, such facility
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to be subject to borrowings by the Partnership and the Parallel Partnerships to
acquire Target Investments in the event that sufficient seller financing is not
available in connection with the acquisition of any such Target Investment and
for other related purposes. If needed, the Blackstone General Partner may
secure additional debt facilities for the Partnership and the Parallel
Partnerships up to an aggregate amount (including the initial $60,000,000 to
$80,000,000) between $140,000,000 and $180,000,000. The General Partners must
unanimously approve the terms and conditions of such financing. In the event
such financing is obtained, in addition to any other fees, expenses or other
compensation payable to the Blackstone General Partner and/or its Affiliates
hereunder or any fees payable to third parties in connection with such
financing, the Partnership and the Parallel Partnerships shall pay to the
Blackstone General Partner and/or its Affiliates, as the case may be, a fee for
placing such debt facilities in an amount equal to one percent (1%) of the
maximum principal amount of each such debt facility. The portion of such fee
allocated to the Partnership shall be determined by the Blackstone General
Partner, in its sole discretion. At the time such fee is payable, each Partner
shall fund to the Partnership, as a Capital Contribution, its pro rata portion
of such fee, based upon such Partner's Sharing Percentage, to the extent not
financed as part of the overall transaction. No fee shall be payable under
this Section in connection with the refinancing of any such debt facilities.
SECTION 3.10 FINANCIAL ADVISORY SERVICES. Each time that the Partnership
acquires a Target Investment, the Partnership and any Parallel Partnerships
invested in such Target Investment shall pay to whichever of the Blackstone
General Partner (and/or its Affiliates) or the Interstate General Partners
(and/or its Affiliates) proposed such Target Investment to the Partnership, an
aggregate advisory fee equal to one percent (1%) of the amount of the
Consideration for the acquisition of such Target Investment; provided that the
Blackstone General Partner or its Affiliates shall not be entitled to such a
fee after the occurrence and during the continuance of a default hereunder by
any of the Blackstone Partners (after any notice and opportunity to cure); and
provided further that the Interstate General Partner or its Affiliates shall
not be entitled to such a fee after the occurrence and during the continuance
of a default hereunder by any of the Interstate Partners (after any notice and
opportunity to cure). The portion of such fee allocated to the Partnership
shall be determined by the Blackstone General Partner. At the time such fee is
payable, each Partner shall fund to the Partnership, as a Capital Contribution,
its pro rata portion of such fee, based upon such Partner's Sharing Percentage,
to the extent not financed as part of the overall transaction.
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SECTION 3.11 OTHER PARTNER SERVICES.
(a) Until such time as the General Partners hire, as an employee or
employees of the Partnership, a portfolio manager, a controller and/or an
administrative staff to conduct and oversee the overall administration of the
Partnership, the Interstate General Partner shall conduct all the
administrative affairs of the Partnership at the then Competitive Rate;
provided, however, that the General Partners agree to hire an employee or
employees of the Partnership to perform such tasks promptly after the needs of
the Partnership so require. Any such employee may be employed jointly by the
Parallel Partnerships. The Interstate General Partner shall also, at no cost
to the Partnership (except where otherwise provided in this Agreement),
conduct, oversee and/or manage all (i) pre-acquisition due diligence, (ii)
property-level management, (iii) performance tracking, (iv) the making of
capital improvements to any Project, (v) overall portfolio management of the
Partnership Assets and (vi) negotiation of franchise fee arrangements. The
Interstate General Partner shall also be responsible for preparing
administrative, operating and capital budgets for the Partnership. The
Interstate General Partner shall submit to the General Partners all relevant
information regarding all proposed budgets, proposed franchise fee arrangements
and related financial matters, and the General Partners shall have the right to
Consent to all such materials before they are implemented by the Partnership.
(b) The Partners acknowledge that Affiliates of the Interstate General
Partner have the capability of providing to the Partnership various insurance
and purchasing services. At the direction of the Blackstone General Partner
acting in its sole discretion (including, as to insurance, approval by the
Blackstone General Partner of the financial soundness of any proposed insurance
company and its reinsurers), the Partnership may engage such Affiliates of the
Interstate General Partner to perform such services (in which case such
services shall be performed at Competitive Rates) or the Partnership may engage
independent third parties to perform such services, provided, that if the
Partnership has received an offer from any such independent third party to
perform such services, Affiliates of the Interstate General Partner shall have
the right to match such offer and, if such offer is matched, the Partnership
will engage such Affiliates on the terms of such offer.
(c) In performance of the services pursuant to this Section 3.11 and
otherwise, the Partners agree that they shall cooperate and consult with each
other in an effort to minimize duplication of efforts and costs.
SECTION 3.12 MARKETING RIGHTS. At any time after December 25, 1997 the
Blackstone Partners, acting jointly, or the Interstate Partners, acting
jointly, may propose the sale of a
<PAGE> 37
33
Project or Projects (but not a portion of any Project) in accordance with the
following terms:
(a) All of the Blackstone Partners may jointly serve upon all of the
Interstate Partners, or all of the Interstate Partners may jointly serve upon
the all of the Blackstone Partners, a notice (an "Offering Notice") as
described below. The partners serving an Offering Notice shall be referred
to in this Section as the "Offering Group". The partners receiving an
Offering Notice shall be referred to in this Section as the "Offeree Group".
Each Offering Notice shall specify one or more Projects (the "Offered
Projects") that the Offeror Group proposes to be sold (either by causing the
Project Partnerships which own such Offered Projects to sell such Offered
Projects or by selling all of the partnership interests in such Project
Partnerships) and designate a price for the sale of each Offered Project (the
"Offer Price"). The Offeree Group with respect to a Project may not deliver
an Offering Notice with respect to such Project until the expiration of the
Sale Option Period (as defined below) for such Project with respect to the
Offering Notice of the Offeror Group with respect to such Project. The
Offering Notice may not propose to sell a portion of any Project. An
Offering Notice delivered under this Agreement must be simultaneously
delivered under the partnership agreement of each of the Parallel
Partnerships, and for the purposes of this Section 3.12, the Offeror Group
shall consist of all of the members of the Offeror Groups in each of the
Parallel Partnerships, the Offeree Group shall consist of all of the members
of the Offeree Groups in each of the Parallel Partnerships, the Offered
Projects shall consist of the interest of all of the Parallel Partnerships in
such Offered Projects, and the Offeree Deposit (as defined below) shall be
delivered in the aggregate by all of the Parallel Partnerships,
(b) Within 30 days after the receipt by the Offeree Group of an Offering
Notice (an "Offeree Option Period"), the Offeree Group may in a writing to
the Offeror Group (an "Offeree Reply Notice") (i) elect to purchase all of
the Offered Projects listed in such Offering Notice (an "Offeror Group
Interest") at a price equal to the aggregate Offer Price for the Offered
Projects, (ii) offer to purchase all of the Offered Projects listed in such
Offering Notice for a price (the "Counteroffer Price") listed by the Offeree
Group in the Offeree Reply Notice (the "Counteroffer"), or (iii) decline to
purchase such Offered Projects. With respect to each Offering Notice, if the
Offeree Group fails to deliver an Offeree Reply Notice to the Offeror Group
prior to the expiration of the Offeree Option Period, the Offeree Group shall
for all purposes be conclusively deemed to have declined to purchase the
Offered Projects listed in such Offering Notice. If the Offeree Group elects
to purchase all of the Offered Projects, the Offeree Group shall deliver
<PAGE> 38
34
to a mutually acceptable escrow agent, a nonrefundable deposit in an amount
equal to 5% of the aggregate Offer Price for the Offered Projects (the
"Offeree Deposit"); in such case, the Offeree Reply Notice shall not be
deemed delivered until such time as the escrow agent has received the Offeree
Deposit. If the Offeree Group makes a Counteroffer, the Offeror Group may
accept such Counteroffer or decline such Counteroffer. If the Offeror Group
accepts such Counteroffer, the Offeree Group shall deliver to a mutually
acceptable escrow agent, the Offeree Deposit equal to 5% of the Counteroffer
Price. The Offeror Group and the Offeree Group shall endeavor to structure
any sale of the Offered Projects to the Offeree Group in a tax efficient
manner.
(c) If, with respect to an Offering Notice, the Offeree Group elects to
purchase the Offered Projects or the Offeror Group accepts a Counteroffer of
the Offeree Group, the closing of the purchase of such Offered Projects (the
"Closing") will be held on a date selected by the Offeree Group upon five
Business Days' notice to the Offeror Group but no later than 90 days after
the Offeror Group's receipt of the Offeree Reply Notice (the "Outside
Purchase Date"). Each Closing shall be held in New York City at a location
designated by the General Partner in the Offeror Group. At the Closing, the
Partnership (or the Project Partnership, as applicable) shall execute such
transfer documents as the Offeree Group shall reasonably require to transfer
the Offered Projects to the Offeree Group (which shall include a special
warranty deed if reasonably required by the title company for the Offeree
Group), as is, where is; the Offeree Group shall pay to the Partnership (or
Project Partnership, as applicable), in immediately available funds, the
aggregate Offer Price for all of the Offered Projects listed in such Offering
Notice; the Project Partnership and the Partnership shall each immediately
distribute such Offer Price to its Partners, pro rata in accordance with this
Agreement, and the Offeree Deposit shall be returned to the Offeree Group.
To the extent the execution by a member or Affiliate of a member of the
Offeree Group is required on behalf of the Partnership or Project
Partnership, each member or Affiliate of a member of the Offeree Group shall
promptly execute and deliver any such document or instrument, and each
Partner of the Offeree Group hereby constitutes and appoints each Partner in
the Offeror Group its attorney in fact to execute, acknowledge and deliver
any such documents or instruments in its stead. Transfer taxes and closing
costs with respect to an Offered Project shall be paid by whichever of the
seller (the Partnership or Project Partnership) or the purchaser (the Offeree
Group) customarily pays such costs in the state in which such Offered Project
is located.
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(d) An Offeree Reply Notice in which the Offeree Group elects to purchase
the Offered Projects, or in which the Offeree Group makes a Counteroffer
which is accepted by the Offeror Group, shall create an irrevocable binding
obligation of the Offeree Group and the Offeror Group. If the Offeree Group
elects in an Offeree Reply Notice to purchase the Offered Projects or makes a
Counteroffer which is accepted by the Offeror Group, and the Offeree Group
fails to purchase such Offered Projects by the applicable Offeree Outside
Purchase Date, (i) the Offeree Group shall immediately forfeit all of its
rights under this Section 3.12 with respect to any Projects, including
without limitation the right to send out Offering Notices with respect to any
Projects, (ii) the Offeror Group shall be entitled to retain the Offeree
Deposit as liquidated damages, and (iii) the Offeror Group shall be entitled
to exercise any and all other remedies available at law and equity, including
specific performance since the parties hereto recognize that damages alone
would be inadequate.
(e) With respect to an Offering Notice, if the Offeree Group declines (or is
deemed to have declined) to purchase the Offered Projects listed therein, or
if the Offeror Group rejects a Counteroffer made by the Offeree Group, the
Offeror Group shall have the right, without the consent of any Partner of the
Offeree Group, within 90 days after the earlier of (i) the Offeror Group's
receipt of an Offeree Reply Notice in which the Offeree Group declines to
purchase the Offered Projects, and (ii) the expiration of the Offeree Option
Period (such 90 day period, the "Sale Option Period"), to cause the sale for
all cash of all of the Offered Projects listed in such Offering Notice
(including the sale to any member of the Offeror Group). Each Partner of the
Offeree Group shall promptly execute and deliver any document or instrument
the Offeror Group reasonably requires in order to consummate the sale of such
Offered Projects during the Sale Option Period, and each Partner of the
Offeree Group hereby constitutes and appoints each Partner in the Offeror
Group its attorney in fact to execute, acknowledge and deliver any such
documents or instruments in its stead. Notwithstanding the foregoing, the
Offeror Group shall not be entitled to cause the sale of an Offered Project
during the Sale Option Period for a sales price less than 95% of the Offer
Price for such Offered Project listed in such Offering Notice (or the
Counteroffer Price in the case of a rejected Counteroffer, or 100% of the
Offer Price for such Offered Project if the purchaser is any member of the
Offeror Group or any affiliate of any member of the Offeror Group). If an
Offered Project is not sold prior to the expiration of the Sale Option
Period, the Offeror Group may not cause the sale of such Offered Project
without again complying with all of the provisions of this Section (unless
all of the other Partners consent). No Partner may exercise its rights under
this Section with respect to any particular
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Project more than once in any twelve month period (but such Partner may
exercise its rights under this Section with respect to other Projects). The
Offeror Group and the Offeree Group shall endeavor to structure any sale of
the Offered Projects to the Offeror Group (or any member thereof) in a tax
efficient manner.
ARTICLE IV
OTHER ACTIVITIES PERMITTED
Except as expressly provided hereunder, this Agreement shall not be
construed in any manner to preclude any Partner or any of its Affiliates from
engaging in any activity whatsoever permitted by applicable law (whether or not
such activity might compete, or constitute a conflict of interest, with the
Partnership), including, without limitation, the provision of financial or
investment advisory services to any person, managing investments or receiving
compensation or profit from any of the foregoing.
ARTICLE V
CAPITAL CONTRIBUTIONS;
DISTRIBUTIONS
SECTION 5.1 CAPITAL CONTRIBUTIONS. (a) No Partner shall be required to
make a Capital Contribution except as provided in this Section. Each Partner
agrees to make Capital Contributions (i) as required by this Agreement,
including, without limitation, Sections 3.6, 3.9, 3.10 and 5.7 of this
Agreement, (ii) to pay for fees, costs and expenses specifically payable by the
Partnership pursuant to this Agreement or (iii) in the event that the General
Partners determine that the Partnership requires additional funds to meet its
then existing obligations, including to cover operating shortfalls, and funds
are not otherwise available from Partnership revenues or from loans to the
Partnership for such purposes. Notwithstanding the foregoing, if additional
Capital Contributions are necessary to fund operating expenses of any Target
Investment (other than for payments to Affiliates of the Interstate General
Partner or the Blackstone General Partner) after the deferring of payables to
the extent reasonable, income has not been used in the immediately preceding
three months to pay amounts to Affiliates of the Blackstone General Partner of
the Interstate General Partner beyond amounts set forth in the relevant budget
(any such expenses meeting the foregoing conditions, "Necessary Expenses"), and
the General Partners do not agree on the need for such Capital Contribution
after a reasonable amount of time (but in no event after the time failure to
pay would have a material adverse effect on the Partnership), either General
Partner may nonetheless, to the extent of Necessary Expenses, require a
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Capital Contribution, not to exceed $1,000,000 in the aggregate to cover
Necessary Expenses for such Target Investment. If any Partner fails to make
such Capital Contribution, the provisions of Section 5.2 below shall apply
(except that the provision allowing the election of the remedy set forth in
Section 5.3 shall not be applicable). Each of the Partners shall be required
to make Capital Contributions to the Partnership in accordance with such
Partner's Sharing Percentage (as determined in accordance with Section 3.6(f)
above); provided that, except for amounts to be contributed under clause (iii)
above (for which no limit shall apply), the aggregate amount of Capital
Contributions made by the Blackstone Partners hereof and by the Blackstone
Partners in the Parallel Partnerships shall not exceed $29,400,000, and the
aggregate amount of Capital Contributions made by the Interstate Partners
hereof and by the Interstate Partners in the Parallel Partnerships shall not
exceed $30,600,000. It is understood and agreed that the commitment by the
Blackstone Partners and the Interstate Partners to fund their respective
Committed Capital is not revolving in nature and at such time as the date such
Partner's Committed Capital shall have been funded in full, such commitment
will expire and be of no further force or effect.
(b) No Partner shall have any obligation to restore any negative balance
in the Partner's Capital Account upon liquidation of the Partnership. No
Partner shall be entitled to withdraw all or any part of its Capital
Contributions except as expressly provided in this Partnership Agreement. No
interest shall be payable by the Partnership on the Capital Contributions of
any Partner except as otherwise provided herein. In no event shall any Partner
be entitled to demand any property from the Partnership other than cash.
(c) When Capital Contributions are required under paragraph (a) above from
the Partners, the General Partners shall give notice to all of the Partners of
the amount of funds required and the date such funds shall be due, which due
date shall be, unless otherwise provided in this Agreement, no less than 10
Business Days from the date such notice is given.
SECTION 5.2 PARTNER LOANS FOR FAILURE TO FUND COMMITTED CAPITAL. If any
Partner shall fail to timely make a Capital Contribution required in Section
5.1 (such Partner is hereinafter referred to as a "Non-Contributing Partner")
and such default is not cured within 10 days of the date such Capital
Contribution was due, then any other Partner (a "Contributing Partner") may
fund all or part of such Capital Contribution and, unless the Contributing
Partner otherwise elects the remedy of the dilution of such Non-Contributing
Partner's Interest in the Partnership as set forth in Section 5.3 below, any
amounts funded by a Contributing Partner on behalf of a Non-Contributing
Partner shall be made directly to the Partnership but shall be treated as (i) a
recourse demand loan made by the Contributing Partner to the Non-Contributing
Partner (bearing interest at a fluctuating
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rate of interest equal to 10% per annum in excess of the prime rate of interest
publicly announced by Citibank, N.A. from time to time, but not less than 15%
per annum, but in no event in excess of the maximum rate permitted by
applicable law), followed by (ii) a Capital Contribution by such
Non-Contributing Partner to the Partnership. Any such recourse loan (to the
extent of unpaid principal and interest) shall be payable on demand by the
Contributing Partner and shall be repaid directly by the Partnership on behalf
of the Non-Contributing Partner to the Contributing Partner from Non-Capital
Proceeds and Capital Proceeds otherwise distributable to the Non-Contributing
Partner. Amounts paid directly by the Partnership to the Contributing Partner
on account of the loan shall be deemed distributions to the Non-Contributing
Partner. Any Non-Capital Proceeds and Capital Proceeds used to repay such loan
shall be applied first to interest and then to principal thereof.
SECTION 5.3 DILUTION FOR FAILURE TO FUND CAPITAL. (a) If a
Non-Contributing Partner fails to contribute any amounts required to be
contributed pursuant to Section 5.1 above as and when required to be
contributed and such funds are contributed to the Partnership by a Contributing
Partner, the Non-Contributing Partner's Sharing Percentage shall be, if the
Contributing Partner elects to apply the provisions of this Section 5.3 in lieu
of the loan mechanism provided in Section 5.2, adjusted pursuant to Section
5.3(b) below as of the day on which the Contributing Partner contributes such
funds. In such an event the contribution of such funds shall be treated as a
Capital Contribution to the Partnership by the Contributing Partner.
(b) The Sharing Percentage of a Non-Contributing Partner may be reduced
(but not below zero), upon the election described in Section 5.3(a) above, by
an amount equal to the product of (i) 1.6 times (ii) a fraction expressed as a
percentage, (A) the numerator of which is the amount of the Capital
Contribution which such Non-Contributing Partner fails to contribute and (B)
the denominator of which is the aggregate of the Capital Contributions made by
the Partners up to and including such time, including the Capital Contribution
which such Non-Contributing Partner fails to make. The Sharing Percentage of
the Contributing Partner shall be increased by the amount of the reduction in
the Sharing Percentage of the Non-Contributing Partner. Notwithstanding the
foregoing, if within 90 days after the reduction of the Non-Contributing
Partner's Sharing Percentage described herein, the Non-Contributing Partner
pays to the Contributing Partner the amount which the Non- Contributing Partner
failed to contribute and such Contributing Partner contributed, together with
interest thereon (at a rate equal to 10% per annum in excess of the prime rate
of interest publicly announced by Citibank, N.A. from time to time, but not
less than 15% per annum, and in no event in excess of the maximum rate
permitted by applicable law), the Non-Contributing Partner's Sharing Percentage
and the Contributing Partner's Sharing
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Percentage shall be reinstated as if the Non-Contributing Partner had timely
made such Capital Contribution.
SECTION 5.4 DISTRIBUTIONS GENERALLY. Capital Proceeds shall be
distributed as soon as practicable but in any event within 45 days after the
date that such Proceeds are received by the Partnership. Non-Capital Proceeds
shall be distributed at such times and intervals as the General Partners shall
determine, but in no event later than 30 days after the end of each calendar
quarter. The Partnership shall make such distributions in cash among the
Partners in accordance with this Article V.
SECTION 5.5 DISTRIBUTIONS OF PROCEEDS.
(a) Each distribution of Non-Capital Proceeds from a Project shall be made
to the Partners to the extent of, and pro rata in accordance with, each of
their Sharing Percentages (as the same may be adjusted hereunder).
Notwithstanding the foregoing, Non-Capital Proceeds from a Project otherwise
distributable to a Blackstone Partner shall be distributed as follows:
(i) First, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from such Project in an amount equal to the
Capital Contributions made by such Partner with respect to such Project; and
(ii) Second, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from such Project, in excess of any amounts
distributed under Section 5.5(a)(i) above, in an amount which generates a 20%
Internal Rate of Return on the Capital Contributions made by such Partner with
respect to such Project; and
(iii) Thereafter, 86.532% to such Blackstone Partner and 13.468% to the
Interstate Partners (pro rata in accordance with their Sharing Percentages).
(b) Each distribution of Capital Proceeds from a Project shall be made to
the Partners to the extent of, and pro rata in accordance with, each of their
Sharing Percentages (as the same may be adjusted hereunder). Notwithstanding
the foregoing, Capital Proceeds from a Project otherwise distributable to a
Blackstone Partner shall be distributed as follows:
(i) First, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in an amount equal
to the sum of the Capital Contributions made by such Partner as of such date
with respect to all Projects
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which have been subject to a Disposition on or prior to such date; and
(ii) Second, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in excess of any
amounts distributed under Section 5.5(b)(i) above, in an amount which
generates a 20% Internal Rate of Return on the Capital Contributions made by
such Partner as of such date with respect to all Projects which have been
subject to a Disposition on or prior to such date and all Projects for which
an Unrealized Loss exists on such date; and
(iii) Third, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in excess of any
amounts distributed under Sections 5.5(b)(i) and (ii) above, in an amount
equal to the total of such Partner's pro rata shares of Unrealized Loss from
all Projects for which an Unrealized Loss exists on such date (based on such
Partner's Sharing Percentage); and
(iv) Thereafter, 86.532% to such Blackstone Partner and 13.468% to the
Interstate Partners (pro rata in accordance with their Sharing Percentages).
SECTION 5.6 RESTRICTED PAYMENTS. Notwithstanding any provisions to the
contrary in this Agreement, neither the Partnership nor the General Partners on
behalf of the Partnership shall make a distribution if such distribution would
violate the Partnership Act.
SECTION 5.7 PARTNERSHIP EXPENSES. (a) Promptly after the date of this
Agreement, the Partnership, to the extent it does not pay such costs and
expenses directly, will reimburse each Partner for Organizational Expenses
incurred by such Partner.
(b) The following expenses shall be borne by the Partnership:
(i) To the extent not reimbursed, all expenses (other than any Partner's
overhead) reasonably incurred in the operation of the Partnership (and
approved by the General Partners if required hereunder), including without
limitation, any taxes imposed on the Partnership, fees and expenses for
attorneys and accountants, the costs and expenses of any insurance purchased
by the Partnership, and the costs and expenses of any litigation involving the
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Partnership and the amount of any judgments or settlements paid in connection
therewith; and
(ii) All third party professional services which have been approved by the
General Partners and incurred in connection with a proposed Target Investment
that is not ultimately made or a proposed disposition of a Project which is
not actually consummated, including, without limitation, (i) commitment fees
that become payable in connection with a proposed Target Investment that is
not ultimately made, (ii) legal fees, accounting fees and other third party
professional due diligence costs and expenses and (iii) all travel and similar
out of pocket costs and expenses of employees of the Partners in connection
with approved due diligence.
Partnership expenses shall be paid directly by the Partnership or the
Partnership shall reimburse the Partner who incurred such expenses for the
payment thereof, as the case may be.
ARTICLE VI
BOOKS AND REPORTS; TAX MATTERS;
CAPITAL ACCOUNTS; ALLOCATIONS
SECTION 6.1 GENERAL ACCOUNTING MATTERS. (a) Allocations of Net Income
(Loss) pursuant to Section 6.4 shall be made by or under the direction of the
General Partners at the end of each Fiscal Period.
(b) Each Partner shall be supplied with the Partnership information
necessary to enable such Partner to prepare in a timely manner its Federal,
state and local income tax returns and such other financial or other statements
and reports that are approved by the General Partners.
(c) The Interstate General Partner shall keep or cause to be kept books
and records pertaining to the Partnership's business showing all of its assets
and liabilities, receipts and disbursements, realized profits and losses,
Partners' Capital Accounts and all transactions entered into by the
Partnership. Such books and records of the Partnership shall be kept at the
office of the Interstate General Partner and the Partners and their
representatives shall at all reasonable times have free access thereto for the
purpose of inspecting or copying the same. The Partnership's books of account
shall be kept on an accrual basis or as otherwise provided by the General
Partners, and otherwise in accordance with generally accepted accounting
principles, except that for income tax purposes such books shall be kept in
accordance with applicable tax accounting principles.
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(d) Except as otherwise provided herein, all determinations, valuations
and other matters of judgment required to be made for accounting and tax
purposes under this Agreement shall be made by or under the direction of the
General Partners and shall be conclusive and binding on all Partners, former
Partners, their successors or legal representatives and any other person except
for computational errors or fraud, and to the fullest extent permitted by law
no such person shall have the right to an accounting or an appraisal of the
assets of the Partnership or any successor thereto except for computational
errors or fraud.
(e) The books of the Partnership shall be examined, certified and audited
annually as of the end of each Fiscal Year, by such recognized firm of
independent certified public accountants that is designated by the General
Partners. For each Fiscal Year of the Partnership, such accountants shall
determine and prepare full financial statements, including, without limitation,
a balance sheet, an income statement, a statement of changes in financial
position and a statement of the Non-Capital Proceeds and Capital Proceeds of
the Partnership. The General Partners shall promptly upon receipt of such
financial statements, and in any event within 90 days after the end of each
such Fiscal Year, transmit copies thereof to each Partner, together with the
report and management letter of such accountants covering the results of such
audit. The cost of all audits and reports provided to the Partners pursuant to
this Section shall be an expense of the Partnership.
SECTION 6.2 CERTAIN TAX MATTERS.
The taxable year of the Partnership shall be the same as its Fiscal Year.
The Tax Matters Partner (as defined below) shall cause to be prepared all
Federal, state and local tax returns of the Partnership for each year for which
such returns are required to be filed and, after approval of such returns by
the General Partners, shall cause such returns to be timely filed. The General
Partners shall determine the appropriate treatment of each item of income,
gain, loss, deduction and credit of the Partnership and the accounting methods
and conventions under the tax laws of the United States, the several states and
other relevant jurisdictions as to the treatment of any such item or any other
method or procedure related to the preparation of such tax returns. The Tax
Matters Partner shall make the election provided for in Section 754 of the
Code, if, and only if the Partner who or which has acquired an interest in the
Partnership or a distribution of Partnership property with respect to which the
election is made will have provided to the Tax Matters Partner concurrently, or
within 30 days after the Transfer of such interest, its undertaking to the
effect that it, and its successors in interest hereunder, will reimburse the
Partnership annually for its additional administrative costs incurred by reason
of such election as determined by the auditor of the Partnership. The Tax
Matters Partner shall also make the
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43
election to amortize Organizational Expenses pursuant to Code Section 709 and
the regulation promulgated thereunder. In addition, the General Partners may
cause the Partnership to make or refrain from making any and all other
elections permitted by the tax laws of the United States, the several states
and other relevant jurisdictions. The Tax Matters Partner for purposes of
Section 6231(a)(7) of the Code (the "Tax Matters Partner") shall be the
Blackstone General Partner. The Tax Matters Partner shall have all of the
rights, duties, powers and obligations provided for in Sections 6221 through
6232 of the Code with respect to the Partnership provided, however, that the
following provisions shall apply with respect to the Tax Matters Partner:
(a) The Tax Matters Partner shall be responsible for the filing of the
Partnership information returns required under Section 6031 of the Code.
Within thirty (30) days after the end of each Fiscal Year, the Tax Matters
Partner shall furnish to the Partnership's accountants sufficient information
for the preparation of all required Partnership tax returns.
(b) A Partner shall provide notice to the Tax Matters Partner of its intent
to file an original or an amended income tax return of which such Partner
will take a position with respect to a partnership item that is inconsistent
with the position taken by the Tax Matters Partner on the Partnership return.
Such notice must be given at least thirty (30) days prior to the filing of
such return. At such time, such Partner shall provide the Tax Matters
Partner with a statement detailing the inconsistent item or items contained
in such return. Within ten (10) days of receipt of such statement, the Tax
Matters Partner shall provide a copy of such statement to each Partner.
(c) The Tax Matters Partner shall include in each Partnership return
sufficient information to entitle each eligible Partner and any indirect
partner (at its request) to notice from the Internal Revenue Service pursuant
to Section 6223(a) of the Code.
(d) Each Partner reserves the right to participate in an audit proceeding.
(e) Each Partner reserves the right to enter into a separate settlement
agreement with the Internal Revenue Service. A Partner who enters into a
settlement agreement with the Internal Revenue Service concerning a
partnership item shall notify the Tax Matters Partner of its terms within ten
(10) days of such agreement, and the Tax Matters Partner shall notify the
other Partners of the terms of such agreement within ten (10) days after
receiving such notice. The Tax Matters Partner shall notify each other
Partner of the terms of any settlement offer received by it within ten (10)
days of receiving such offer.
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(f) The Tax Matters Partner shall not file an administrative adjustment
request without the Consent of all of the General Partners. Each Partner,
other than the Tax Matter partner, reserves the right to file an
administrative adjustment request under Section 6227 of the Code. Any
Partner filing an administrative adjustment request shall notify the Tax
Matters Partner of its contents within ten (10) days after filing such
request. The Tax Matters Partner shall notify each Partner of the contents
of such request within ten (10) days of the receipt of such notice.
(g) All Partners shall report to the Tax Matters Partner the conversion of a
partnership item to a nonpartnership item under Section 6231(b) or any other
provision of the Code within ten (10) days of learning of the conversion.
(h) Each Partner reserves the right to file a petition for judicial review
and to participate in a judicial proceeding under Section 6226 and 6228 of
the Code. If the Tax Matters Partner files a petition for judicial review or
an appeal under Section 6226 of the Code, it shall notify each Partner of
such petition or appeal within ten (10) days of such filing. Any other
Partner filing a petition for judicial review or any appeal under Sections
6226 or 6228 of the Code shall notify the Tax Matters Partner of such
petition or appeal on or before the date of filing. The Tax Matters Partner
shall notify each Partner of such filing within ten (10) days of receipt of
such notice from the filing partner.
(i) The Tax Matters Partner shall not agree to extend the statute of
limitations for assessment without the Consent of all of the General
Partners.
(j) The Tax Matters Partner shall be authorized to incur expenses in the
performance of its duties pursuant to this Agreement. Notwithstanding any
other provision of this Agreement, such expenses shall be borne by the
persons who were Partners of the Partnership at any time during the
applicable taxable year without regard to whether such persons are Partners
at the time the expense is incurred. Such expenses shall be allocated to the
Partners and former Partners having an interest in the proceeding at the time
the cost is incurred in proportion to their relative Sharing Percentages for
the applicable taxable year.
(k) The provisions of this Section shall govern the conduct of all parties
who are currently Partners and all parties who were Partners during the
applicable Partnership taxable year. A Partner shall not be relieved of any
duties or responsibilities imposed under this Section by the termination or
transfer of its interest in the Partnership.
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45
(l) All terms used in this Section that are defined in Section 6231(a) of the
Code shall have the meanings set forth therein.
SECTION 6.3 CAPITAL ACCOUNTS. There shall be established for each Partner
on the books of the Partnership as of the date hereof, or such later date on
which such Partner is admitted to the Partnership, a capital account (each
being a "Capital Account"). Each Capital Contribution shall be credited to the
Capital Account of such Partner on the date such contribution of capital is
paid to the Partnership. In addition, each Partner's Capital Account shall be
(a) credited with such Partner's allocable share of any Net Income of the
Partnership, (b) debited with (i) distributions to such Partner of cash or the
fair market value of other property and (ii) such Partner's allocable share of
Net Loss of the Partnership and expenditures of the Partnership described or
treated under Section 704(b) as described in Section 705(a)(2)(B) of the Code,
and (c) otherwise maintained in accordance with the provisions of the Code.
Any other item which is required to be reflected in a Partner's Capital Account
under Section 704(b) of the Code or otherwise under this Agreement shall be so
reflected. Capital Accounts shall be appropriately adjusted to reflect
transfers of part (but not all) of a Partner's interest in the Partnership.
Interest shall not be payable on Capital Account balances. Notwithstanding
anything to the contrary contained in this Agreement, the Partnership shall
maintain the Capital Accounts of the Partners in accordance with the principles
and requirements set forth in section 704(b) of the Code and Regulations
section 1.704-1(b)(2)(iv).
SECTION 6.4 ALLOCATIONS. (a) Net Income of the Partnership shall be
allocated to the Partners having deficit balances in their Capital Accounts
(computed after taking into account distributions pursuant to Section 5.5 with
respect to such fiscal year, and after adding back each Partner's share of
partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, determined
pursuant to Regulations sections 1.704- 2(g)(1) and 1.704-2(i)(5)) in
proportion to, and to the extent of, such deficits. Any remaining Net Income
and all Net Loss shall be allocated among the Partners either 49% to the
Blackstone Partners (pro rata in proportion to their Sharing Percentages) and
51% to the Interstate Partners (pro rata in accordance with their Sharing
Percentages) or 42.401% to the Blackstone Partners (pro rata in proportion to
their Sharing Percentages) and 57.599% to the Interstate Partners pro rata in
accordance with their Sharing Percentages) so as to produce to the extent
possible Capital Accounts for the Partners (computed in the manner set forth in
the preceding sentence) such that if an amount of cash equal to such positive
Capital Account balances were distributed in accordance with such positive
Capital Account balances, such distribution would be in the amounts, sequence
and priority set forth in Section 5.5 and to the extent Net Loss exceeds the
positive Adjusted Capital Account Balances of the Partners, the
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46
excess shall be allocated first, to those Partners with positive Adjusted
Capital Account Balances, in proportion to, and to the extent of, such Adjusted
Capital Account Balances, and thereafter, to the General Partners, in the ratio
that the Sharing Percentage of each General Partner bears to the Sharing
Percentage of all General Partners. Notwithstanding the foregoing, if an
allocation of Net Loss in the ratio of 42.401% to the Blackstone Partners and
57.599% to the Interstate Partners is in excess of amounts of Net Income
previously allocated in the ratio of 42.401% to the Blackstone Partners and
57.599% to the Interstate Partners, then such allocation of Net Loss shall
instead be made 49% to the Blackstone Partners (pro rata in proportion to their
Sharing Percentages) and 51% to the Interstate Partners (pro rata in accordance
with their Sharing Percentages). Notwithstanding the foregoing, if an
allocation of Net Income or Net Loss would not result in Capital Accounts for
the Partners (computed in the manner set forth in the first sentence of this
paragraph (a)) being equal to cash distributions in the amounts, sequence and
priority set forth in Section 5.5, Net Income may be allocated 100% to the
Interstate Partners (pro rata in accordance with their Sharing Percentages) or
Net Loss may be allocated 100% to the Blackstone Partners (pro rata in
accordance with their Sharing Percentages) if (and to the extent necessary) to
produce Capital Accounts equal (or in proportion) to the cash distributions set
forth in Section 5.5.
(b) Notwithstanding anything herein to the contrary, in the event any
Partner unexpectedly receives any adjustments, allocations or distributions
described in paragraphs (b)(2)(ii)(d)(4), (5) or (6) of Section 1.704-1 of the
regulations under the Code, there shall be specially allocated to such Partner
such items of Partnership income and gain, at such times and in such amounts as
will eliminate as quickly as possible that portion of any deficit in its
Capital Account caused or increased by such adjustments, allocations or
distributions. To the extent permitted by the Code and the regulations
thereunder, any special allocations of items of income or gain pursuant to this
Section 6.4(c) shall be taken into account in computing subsequent allocations
of Net Income (Loss) pursuant to this Section 6.4 so that the net amount of any
items so allocated and the subsequent allocations of Net Income (Loss) to the
Partners pursuant to this Section 6.4 shall, to the extent possible, be equal
to the net amounts that would have been allocated to each such Partner pursuant
to the provisions of this Section 6.4 if such unexpected adjustments,
allocations or distributions had not occurred.
(c) All items of income, gain, loss, deduction and credit of the
Partnership shall be allocated among the Partners for Federal, state and local
income tax purposes consistent with the manner that the corresponding
constituent items of Net Income (Loss) shall be allocated among the Partners
pursuant to this Agreement, except as may otherwise be provided herein or by
the Code. To the extent Treasury Regulations promulgated pursuant to
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Subchapter K of the Code (including under Sections 704(b) and (c) of the Code)
require allocations for tax purposes that differ from the foregoing
allocations, the General Partners may determine the manner in which such tax
allocations shall be made so as to comply more fully with such Treasury
Regulations or other applicable law and, at the same time to the extent
reasonably possible, preserve the economic relationships among the Partners as
set forth in this Agreement.
(d) Notwithstanding the provisions of this Section 6.4, net income, net
gain, and net loss of the Partnership (or items of income, gain, loss,
deduction, or credit, as the case may be) shall be allocated in accordance with
the following provisions of this Section 6.4 to the extent such provisions
shall be applicable.
(i) Nonrecourse Deductions of the Partnership for any Fiscal Year shall be
specially allocated to the Partners in the same proportion as Net Income or
Net Loss is allocated for such Fiscal Year; provided that if an allocation of
Nonrecourse Deductions in the ratio of 42.401% to the Blackstone Partners and
57.599% to the Interstate Partners is in excess of amounts of Net Income
previously allocated in the ratio of 42.401% to the Blackstone Partners and
57.599% to the Interstate Partners, then such allocation of Nonrecourse
Deductions shall instead be made 49% to the Blackstone Partners (pro rata in
proportion to their Sharing Percentages) and 51% to the Interstate Partners
(pro rata in accordance with their Sharing Percentages). Partner Nonrecourse
Deductions of the Partnership for any Fiscal Year shall be specially allocated
to the Partner who bears the economic risk of loss for the liability in
question. The provisions of this Section 6.4(e)(i) are intended to satisfy
the requirements of Regulations sections 1.704-2(e)(2) and 1.704-2(i)(1) and
shall be interpreted in accordance therewith for all purposes under this
Agreement.
(ii) If there is a net decrease in the Minimum Gain of the Partnership
during any Partnership Fiscal Year, each Partner shall be specially allocated
items of Partnership income and gain for such year equal to that Partner's
share of the net decrease in Minimum Gain, within the meaning of Regulations
section 1.704-2(g)(2). The provisions of this Section 6.4(e)(ii) are intended
to comply with the Minimum Gain chargeback requirements of Regulations section
1.704-2(f) and shall be interpreted in accordance therewith for all purposes
under this Agreement.
(iii) If there is a net decrease in Partner Nonrecourse Debt Minimum Gain
during any Fiscal Year, each Partner that has a share of such partner
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Nonrecourse Debt Minimum Gain, determined in accordance with Regulations
section 1.704-2(i)(5), as of the beginning of such year shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, for succeeding years) equal to such Partner's share of the net
decrease in Partner Nonrecourse Debt Minimum Gain. The provisions of this
Section 6.4(e)(iii) are intended to comply with the Partner Nonrecourse Debt
Minimum Gain chargeback requirement of Regulations section 1.704-2(i)(4) and
shall be interpreted in accordance therewith for all purposes under this
Agreement.
ARTICLE VII
DISSOLUTION
SECTION 7.1 DISSOLUTION. The Partnership shall be dissolved and
subsequently terminated upon the occurrence of the first of the following
events:
(a) decision of all of the General Partners to dissolve and subsequently
terminate the Partnership;
(b) December 31, 2045;
(c) the occurrence of a Disabling Event with respect to the sole remaining
General Partner, provided that the Partnership shall not be dissolved if,
within 90 days after such Disabling Event, all of the Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of the Disabling Event, of another General Partner;
or
(d) if, after the right of first opportunity under Article 3 shall no
longer be in effect, all of the Partnership Assets are sold or otherwise
disposed of.
SECTION 7.2 WINDING-UP. When the Partnership is dissolved, the business
and property of the Partnership shall be wound up and liquidated by the General
Partners or, in the event of a Disabling Event with respect to any General
Partner, by the remaining General Partners or, in the event of a Disabling
Event with respect to each of the General Partners, such liquidating trustee as
may be named by Limited Partners holding a majority of the Sharing Percentages
held by all Limited Partners (the party conducting the liquidation being
hereinafter referred to as the "Liquidator"). The Liquidator shall use its
best efforts to reduce to cash and cash equivalent items such assets of the
Partnership as the Liquidator shall deem it advisable to sell, subject to
obtaining fair value for such assets and any tax or other legal considerations.
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SECTION 7.3 FINAL DISTRIBUTION. Within 90 calendar days after the
effective date of dissolution of the Partnership, the assets of the Partnership
shall be distributed in the following manner and order:
(a) to the payment of the expenses of the winding-up, liquidation and
dissolution of the Partnership;
(b) to pay all creditors of the Partnership, other than Partners, either by
the payment thereof or the making of reasonable provision therefor;
(c) to establish reserves, in amounts established by the Liquidator, to
meet other liabilities of the Partnership; and
(d) to pay, in accordance with the provisions of this Agreement applicable
to such loans or in accordance with the terms agreed among them and otherwise
on a pro rata basis, all creditors of the Partnership that are Partners,
either by the payment thereof or the making of reasonable provision therefor.
The remaining assets of the Partnership shall be applied and distributed in
accordance with the positive balances of the Partners' Capital Accounts, as
determined after taking into account all adjustments to Capital Accounts for
the Partnership taxable year during which the liquidation occurs.
ARTICLE VIII
TRANSFER OF PARTNERS' INTERESTS
SECTION 8.1 RESTRICTIONS ON TRANSFER OF PARTNERSHIP INTERESTS. (a) No
Partner may, directly or indirectly, assign, sell, exchange, transfer, pledge,
hypothecate or otherwise dispose of all or any part of its interest in the
Partnership (a "Transfer") to any person, other than in accordance with
paragraphs (b), (c), (d), (e) and (f) below. A change in the ultimate
beneficial ownership of a Partner shall be deemed a Transfer for purposes of
this Agreement (other than changes in the ownership of the common stock of
Interstate Hotels Company sold to the public).
(b) Any Partner may Transfer all or part of its interest in the
Partnership to any person; provided, however, that upon any Transfer of a
Partner's interest in accordance with this paragraph, the person (the
"Transferee") to whom the Partner's interest was Transferred shall not be
admitted as a substitute Partner without receiving the prior written Consent of
the Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion) and the Transferee has given written acceptance and
adoption of all of the terms and
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provisions of this Agreement; and provided, further, that the prior written
Consent of each of the General Partners shall be required to admit the
Transferee as a substitute Partner (which Consent may be withheld in their sole
and absolute discretion) (i) if the Transferee is not an Affiliate of any
member of the Blackstone Group or the Interstate Group, or (ii) if the
aggregate Sharing Percentages of the Interstate Partners is 20% or less at the
time of the Transfer.
(c) A Partner may mortgage, pledge, hypothecate or otherwise encumber all
or any portion of such Partner's rights to receive a portion of the Non-Capital
Proceeds, Capital Proceeds, Net Income and Net Losses to any person; provided,
however, that the holder of such mortgage, pledge, hypothecation or encumbrance
shall not be admitted as a substitute Partner without the prior Consent of the
Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion), provided that (i) if the Transferee is not an Affiliate
of any member of the Blackstone Group or the Interstate Group or (ii) if the
aggregate Sharing Percentages of the Interstate Partners is 20% or less at the
time of the Transfer, the prior written Consent of each of the General Partners
shall be required, which Consent may be withheld in their sole and absolute
discretion.
(d) At any time, any Blackstone Partner may transfer its interest in
Non-Capital Proceeds, Capital Proceeds, Net Income and Net Losses to any other
Blackstone Partner or its Affiliates but the Transferee shall not be admitted
as a substitute Partner and the transferor shall not be permitted to withdraw
from the Partnership without, in each case, the Consent of the Blackstone
General Partner (which Consent may be withheld in its sole and absolute
discretion), or, if the aggregate Sharing Percentages of the Interstate
Partners is 20% or less at the time of the Transfer, the Consent of each of the
General Partners (which Consent may be withheld in their sole and absolute
discretion).
(e) At any time, any Interstate Partner may transfer its interest in
Non-Capital Proceeds, Capital Proceeds, Net Income and Net Losses to any other
Interstate Partner or their Affiliates, but the Transferee shall not be
admitted as a substitute Partner and the transferor shall not be permitted to
withdraw from the Partnership without, in each case, the Consent of the
Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion).
(f) At any time, the ultimate beneficial ownership of a Partner may be
changed without any requirement for Consent hereunder, provided that day to day
management of such Partner is, at all times thereafter, directly or indirectly
controlled by the Blackstone General Partner or an Affiliate thereof or by the
Interstate General Partner or an Affiliate thereof.
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SECTION 8.2 OTHER TRANSFER PROVISIONS. (a) Any purported Transfer by a
Partner of all or any part of its interest in the Partnership in violation of
this Article VIII shall be null and void and of no force or effect.
(b) Except as provided in this Article VIII, no Partner shall have the
right to withdraw from the Partnership prior to its termination and no
additional Partner may be admitted to the Partnership without the prior written
consent of the General Partners. In the event of any withdrawal of a General
Partner in violation of this Agreement, including as a result of a Disabling
Event, such General Partner shall be liable to the Partnership as provided in
Section 17-602 of the Partnership Act.
(c) Notwithstanding any provision of this Agreement to the contrary, a
Partner may not Transfer all or any part of its interest in the Partnership if
such Transfer would jeopardize the status of the Partnership as a partnership
for federal income tax purposes, cause a dissolution of the Partnership under
the Partnership Act or would violate, or would cause the Partnership to
violate, any applicable law or regulation (including any applicable federal or
state securities laws) or contract to which the Partnership is a party.
(d) Concurrently with the admission of any substitute or additional
Partner, the General Partners shall forthwith cause any necessary papers to be
filed and recorded and notice to be given wherever and to the extent required
showing the substitution of a Transferee as a substitute Partner in place of
the Partner Transferring its interest, or the admission of an additional
Partner, all at the expense, including payment of any professional and filing
fees incurred, of such substituted or additional Partner. The admission of any
person as a substitute or additional Partner shall be conditioned upon such
person's written acceptance and adoption of all the terms and provisions of
this Agreement.
(e) If any interest in the Partnership is Transferred during any
accounting period in compliance with the provisions of this Article VIII, each
item of income, gain, loss, expense, deduction and credit and all other items
attributable to such interest for such period shall be divided and allocated
between the transferor and the transferee by taking into account their varying
interests during such period in accordance with Section 706(d) of the Code,
using any conventions permitted by law and selected by the General Partners.
All distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such allocations and distributions, the
Partnership shall recognize a Transfer on the date that the General Partners
receive notice of the Transfer which complies with this Article VIII from the
Partner Transferring its interest.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1 EQUITABLE RELIEF. The Partners hereby confirm that damages at
law may be an inadequate remedy for a breach or threatened breach of this
Agreement and agree that, in the event of a breach or threatened breach of any
provision hereof, the respective rights and obligations hereunder shall be
enforceable by specific performance, injunction or other equitable remedy, but,
nothing herein contained is intended to, nor shall it, limit or affect any
right or rights at law or by statute or otherwise of a Partner aggrieved as
against the other for a breach or threatened breach of any provision hereof, it
being the intention by this Section 9.1 to make clear the agreement of the
Partners that the respective rights and obligations of the Partners hereunder
shall be enforceable in equity as well as at law or otherwise and that the
mention herein of any particular remedy shall not preclude a Partner from any
other remedy it or he might have, either in law or in equity.
SECTION 9.2 OWNERSHIP AND USE OF NAMES. Rights to the name "Blackstone"
shall belong solely to the designated Blackstone Partners. Rights to the name
"Interstate" and "Interstate Hotels" shall belong solely to the designated
Interstate Partners. The ownership of, and the right to use, sell or otherwise
dispose of, the name, Interstone Three Partners I L.P. or any abbreviation or
modification thereof, shall belong to the Partnership. The Interstate General
Partner agrees to take all actions and to approve, execute and file any
document or instrument proposed by any Blackstone Partner to protect the rights
of the Blackstone Partners to the name "Blackstone". The Blackstone General
Partner agrees to take all actions and to approve, execute and file any
document or instrument proposed by any Interstate Partner to protect the rights
of the Interstate Partners to the name "Interstate" and "Interstate Hotels".
The Partners each agree to take all actions and to approve, execute and file
any document or instrument proposed by the General Partners to protect the
rights of the Partnership to the name "Interstone Three Partners I L.P.".
SECTION 9.3 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. In particular,
the Partnership is formed pursuant to the Partnership Act, and the rights and
liabilities of the General Partners and Limited Partners shall be as provided
therein, except as herein otherwise expressly provided.
SECTION 9.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors and assigns.
SECTION 9.5 ACCESS; CONFIDENTIALITY. By executing this Agreement, each
Partner expressly agrees, at all times
<PAGE> 57
53
during the term of the Partnership and thereafter and whether or not at the
time a Partner of the Partnership (i) not to issue any press release or
advertisement or take any similar action concerning the Partnership's business
or affairs without first obtaining the Consent of all of the General Partners,
(ii) not to publicize detailed financial information concerning the Partnership
without the Consent of all of the General Partners and (iii) not to disclose
the Partnership's affairs generally without using reasonable efforts to consult
with the other Partners prior to such disclosure; provided, however, the
foregoing shall not restrict any Partner from disclosing information required
to be disclosed by applicable law or concerning such Partner's investment in
the Partnership to its officers, directors, employees, agents, legal counsel,
accountants, other professional advisors, limited partners and Affiliates, or
to prospective or existing investors in such Partner or its Affiliates or to
prospective or existing lenders to such Partner or its Affiliates, or to
prospective purchasers of any property owned by the Partnership. The
provisions of this Section 9.5 shall survive the termination of the
Partnership.
SECTION 9.6 NOTICES. Whenever notice is required or permitted by this
Agreement to be given, such notice need not be in writing unless otherwise
required herein or requested by the receiving Partner. If in writing, such
notice shall be given to any Partner at its address or facsimile number shown
in the Partnership's books and records (including Schedule A hereto). Each
such notice shall be effective (i) if given by facsimile, upon oral
confirmation of receipt, (ii) if given by mail, on the fourth day after deposit
in the mails (certified or registered return receipt requested) addressed as
aforesaid and (iii) if given by any other means, when delivered to and
receipted for at the address of such Partner specified as aforesaid.
SECTION 9.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which together shall constitute a single instrument.
SECTION 9.8 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter hereof.
SECTION 9.9 AMENDMENTS. Any amendment to this Agreement shall be
effective only if such amendment is evidenced by a written instrument duly
executed by and delivered to the General Partners; provided, however, no such
amendment shall be effective or binding against a Partner unless executed by
such Partner if such amendment materially and adversely affects such Partner in
a specific manner separate and distinct from the
<PAGE> 58
54
amendment's treatment of other Partners; and provided, further that any
amendment which would have a material adverse effect on any Partner's economic
interest in the Partnership shall require the Consent of all of the General
Partners.
SECTION 9.10 SECTION TITLES. Section titles are for descriptive purposes
only and shall not control or alter the meaning of this Agreement as set forth
in the text hereof.
SECTION 9.11 REPRESENTATIONS AND WARRANTIES. (a) Each Partner represents,
warrants and covenants to each other Partner and to the Partnership that:
(i) such Partner, if not a natural person, is duly formed and validly
existing under the laws of the jurisdiction of its organization with full
power and authority to conduct its business to the extent contemplated in
this Agreement;
(ii) this Agreement has been duly authorized, executed and delivered by
such Partner and constitutes the valid and legally binding agreement of such
Partner enforceable in accordance with its terms against such Partner except
as enforceability hereof may be limited by bankruptcy, insolvency, moratorium
and other similar laws relating to creditors' rights generally and by general
equitable principles;
(iii) the execution and delivery of this Agreement by such Partner and the
performance of its duties and obligations hereunder do not result in a breach
of any of the terms, conditions or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, credit agreement, note or
other evidence of indebtedness, or any lease or other agreement, or any
license, permit, franchise or certificate, to which such Partner is a party
or by which it is bound or to which its properties are subject, or require
any authorization or approval under or pursuant to any of the foregoing, or
violate any statute, regulation, law, order, writ, injunction, judgment or
decree to which such Partner is subject;
(iv) such Partner is not in default (nor has any event occurred which with
notice, lapse of time, or both, would constitute a default) in the
performance of any obligation, agreement or condition contained in any
indenture, mortgage, deed of trust, credit agreement, note or other evidence
of indebtedness or any lease or other agreement, or any license, permit,
franchise or certificate, to which it is a party or by which it is bound or
to which the properties of it are subject, nor is it in violation of any
statute, regulation, law, order, writ, injunction, judgment or decree
<PAGE> 59
55
to which it is subject, which default or violation would materially adversely
affect such Partner's ability to carry out its obligations under this
Agreement;
(v) except as disclosed to the Partners prior to the date hereof, there is
no litigation, investigation or other proceeding pending or, to the knowledge
of such Partner, threatened against such Partner or any of its Affiliates
which, if adversely determined, would materially adversely affect such
Partner's ability to carry out its obligations under this Agreement; and
(vi) no consent, approval or authorization of, or filing, registration or
qualification with, any court or governmental authority on the part of such
Partner is required for the execution and delivery of this Agreement by such
Partner and the performance of its obligations and duties hereunder.
(b) IHC/Interstone Partnership II, L.P. represents that not less than 90%
of its interests are owned by Interstate Hotels Corporation.
<PAGE> 60
56
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Limited Partnership Agreement of Interstone Three Partners I L.P. as of the day
and year first above written.
GENERAL PARTNERS:
BJS INTERSTONE MANAGEMENT
ASSOCIATES
By: Blackstone Real Estate Inc.,
general partner
By: /s/ GARY M. SUMERS
-----------------------------
Gary M. Sumers
Vice President
IHC/INTERSTONE CORPORATION
By: /s/ MARVIN I. DROZ
-----------------------------
Marvin I. Droz
Vice President
LIMITED PARTNERS:
BLACKSTONE REAL ESTATE
PARTNERS I L.P.
By: Blackstone Real Estate
Associates L.P., general
partner
By: BREA L.L.C., general
partner
By: /s/ GARY M. SUMERS
------------------------
Gary M. Sumers
Vice President
IHC/INTERSTONE PARTNERSHIP II, L.P.
By: IHC Member Corporation,
general partner
By: /s/ MARVIN I. DROZ
-----------------------------
Marvin I. Droz
Vice President
<PAGE> 61
SCHEDULE A
PARTNERS OF THE PARTNERSHIP
<TABLE>
<CAPTION>
Sharing
Percentage as
General of June __,
Partners Address 1996
- -------- ------- -------------
<S> <C> <C>
BJS Interstone Management 345 Park Avenue
Associates New York, NY 10154 0.5%
IHC/Interstone c/o Interstate Hotels Corporation
Corporation Foster Plaza X
680 Anderson Drive
Pittsburgh, PA 15220-8126 0.5%
Limited
Partners
- --------
Blackstone Real Estate 345 Park Avenue
Partners I L.P. New York, NY 10154 48.5%
IHC/Interstone c/o Interstate Hotels Corporation
Partnership II, L.P. Foster Plaza X
680 Anderson Drive 50.5%
Pittsburgh, PA 15220-8126
</TABLE>
<PAGE> 62
EXHIBIT A
FORM OF MANAGEMENT AGREEMENT
<PAGE> 63
EXHIBIT B
FORM OF PROJECT PARTNERSHIP AGREEMENT
<PAGE> 64
EXHIBIT C
FORM OF CONFIRMATION AND ACKNOWLEDGMENT
OF RIGHT OF FIRST OPPORTUNITY
This Confirmation and Acknowledgment of Right of First Opportunity
("Confirmation") is made and entered into as of the ____ day of ________, 19__
by and among THE BLACKSTONE GROUP HOLDINGS L.P. ("Blackstone") and INTERSTATE
HOTELS CORPORATION ("Interstate").
RECITALS
A. Sections 3.6 through 3.8 of that certain Amended and Restated Limited
Partnership Agreement of Interstone Three Partners I L.P., dated as of the date
hereof (as amended, supplemented or otherwise modified from time to time, the
"Partnership Agreement") sets forth the scope, operation, duration, termination
and other terms relating to a right of first opportunity provided by the
Blackstone Group and the Interstate Group in favor of the Partnership with
respect to certain Target Investments identified for investment by the
Blackstone Group and the Interstate Group. Except as otherwise expressly
provided herein, any defined term used in this Confirmation shall have the
meaning prescribed for that term in the Partnership Agreement.
B. The parties wish to enter into this Confirmation in order to confirm and
acknowledge their obligations to each other with respect to the foregoing
matters and any other obligations each may have to the other pursuant to the
express terms of Sections 3.6 through 3.8 of the Partnership Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follow:
1. The provisions of Sections 3.6 through 3.8 of the Partnership Agreement
are hereby incorporated by reference as though set forth in full herein. Each
party hereto hereby confirms its obligation to comply with all terms,
provisions, covenants, conditions and restrictions and perform all obligations
applicable to such party under said Sections 3.6 through 3.8 of the Partnership
Agreement. Without limiting the generality of the foregoing, Blackstone and
Interstate hereby agree to comply, and to cause the Blackstone Related Parties
and the Interstate Related Parties, respectively, to comply, with their
obligations pertaining to the right of first opportunity set forth in said
Sections of the Partnership Agreement in accordance with the terms applicable
thereto.
<PAGE> 65
2
2. This Confirmation confirms and acknowledges the terms, provisions,
covenants, conditions, obligations and restrictions set forth in Sections 3.6
through 3.8 of the Partnership Agreement. It shall not be construed or
understood to modify, in any way, such terms, provisions, covenants,
conditions, obligations and restrictions, and, in the event of any conflict
between this Confirmation and the Partnership Agreement, the provisions of
Sections 3.6 through 3.8 of the Partnership Agreement shall control. In no
event shall this Confirmation be construed or understood to extend the duration
of the restrictions on Blackstone, Interstate and the Related Parties arising
from the right of first opportunity, which shall terminate as set forth in the
Partnership Agreement. The provisions of Sections 9.1, 9.3, and 9.5 through
9.10 of the Partnership Agreement are incorporated herein, except that all
references therein to the "Agreement" shall be deemed to be references to this
Confirmation, all references therein to the "Partners" shall be deemed to be
references to the parties hereto and delivery of notices to Blackstone
hereunder or under the Partnership Agreement shall be delivered to the same
address as the Blackstone General Partner, and delivery of notices to
Interstate hereunder shall be delivered to the same address as the Interstate
General Partner, unless any such parties shall change the address for delivery
of notice in accordance with the procedures established under Section 9.6 of
the Partnership Agreement. Nothing in this Confirmation shall be understood or
construed to render the parties hereto joint venturers or partners for any
purposes. Nothing in this Confirmation shall be understood or construed to
modify or expand the extent of any recourse between the Partners beyond that
expressly provided by the Partnership Agreement.
THE BLACKSTONE GROUP HOLDINGS, L.P.
By:
-----------------------------
INTERSTATE HOTELS CORPORATION
By:
-----------------------------
<PAGE> 66
EXHIBIT D
PRE-EXISTING PROJECTS
NONE
<PAGE> 67
EXHIBIT E
EXCLUDED PROJECTS
BLACKSTONE EXCLUDED PROJECTS
1. Any business activities with the Davidson Hotel Company ("Davidson"),
including a merger or a combination of Davidson or its assets with any
other entity or with the assets of any other entity, a REIT involving
Davidson or some or all of its assets, an initial public offering or other
capital event involving Davidson; provided, that this exclusion shall not
include the acquisition of other hotels by Davidson (other than through a
combination with another entity or a combination with the assets of
another entity) which were first identified by the affiliates of the
Blackstone Group which are investors in Davidson (as opposed to
acquisitions first identified by the non-affiliated Davidson investors).
INTERSTATE EXCLUDED PROJECTS
1. Four to six hotel acquisitions from an institutional owner only in
conjunction with the Carlyle Group or The Apollo Group
2. Acquisition of Checkers Hotel in Los Angeles, California only in
conjunction with The Apollo Group
3. Any investment in a hotel which is incidental to Interstate taking over
management of such hotel such as those currently under consideration by
Interstate in Farmington, Connecticut, Irvine, California, Warner Center,
California and Burlington, Massachusetts.
With respect to Interstate's investment opportunities described in
clauses 1 and 2 above, if The Apollo Group or The Carlyle Group decides not
to participate in such investment or is willing to admit additional
partners or participants other than Interstate, Interstate will present
such opportunity to the Partnership in the manner prescribed in Section 3.6
of the Partnership Agreement.
With respect to Interstate's investment opportunities described in
clauses 1 and 2 above, Interstate (i) shall exercise best efforts to
increase its equity stake in such investments (up to the maximum
<PAGE> 68
2
of 50% of the total equity invested), and (ii) shall offer the Blackstone
Group (outside of the Partnership) an opportunity to acquire 50% of
whatever interest is available to Interstate on terms and conditions
acceptable to Interstate and the Blackstone Group.
<PAGE> 1
EXHIBIT 10(d)
==============================================================================
INTERSTONE THREE PARTNERS II L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
Dated as of June 25, 1996
==============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE II
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.1 Continuation of Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.2 Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.3 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.5 Purpose; Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.6 Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.7 Alternative Investment Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.8 Parallel Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III
Management and Operation of the Partnership; Identification and Approval of
Investments; Partner Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.2 Joint Control by the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.3 Blackstone Partners Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.4 Certain Duties and Obligations of the Partners . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.5 Restrictions on Authority of the General Partners . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.6 Right of First Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.7 Right of First Opportunity; Exclusive Rights; Investment Parameters . . . . . . . . . . . . 28
SECTION 3.8 Termination of Right of First Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.9 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.10 Financial Advisory Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.11 Other Partner Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.12 Marketing Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IV
Other Activities Permitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE V
Capital Contributions; Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.1 Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.2 Partner Loans for Failure to Fund Committed Capital . . . . . . . . . . . . . . . . . . . . 37
SECTION 5.3 Dilution for Failure to Fund Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.4 Distributions Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.5 Distributions of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.6 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.7 Partnership Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE VI
Books and Reports; Tax Matters; Capital Accounts; Allocations . . . . . . . . . . . . . . . . . . 41
SECTION 6.1 General Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.2 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.4 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VII
Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.2 Winding-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.3 Final Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VIII
Transfer of Partners' Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.1 Restrictions on Transfer of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.2 Other Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IX
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.1 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.2 Ownership and Use of Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.5 Access; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.9 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.10 Section Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.11 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
ii
<PAGE> 4
Schedules
SCHEDULE A Name, Address and Sharing Percentages
Exhibits
Exhibit A Form of Management Agreement
Exhibit B Form of Project Partnership Agreement
Exhibit C Form of Confirmation and Acknowledgment
of Right of First Opportunity
Exhibit D Pre-Existing Projects
Exhibit E Excluded Projects
iii
<PAGE> 5
INTERSTONE THREE PARTNERS II L.P.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT, dated as of June 25,
1996 by and among BJS INTERSTONE MANAGEMENT ASSOCIATES, a Delaware general
partnership, as a general partner, IHC/INTERSTONE CORPORATION, a Delaware
corporation, as a general partner, and BLACKSTONE REAL ESTATE PARTNERS II
L.P. and IHC/INTERSTONE PARTNERSHIP II, L.P., each a Delaware limited
partnership, as limited partners.
PRELIMINARY STATEMENT
A. The Blackstone Group and the Interstate Group each have the capability
for identifying, acquiring, improving, operating and disposing of individual
hotel, motel and other lodging properties and groups of hotel, motel and other
lodging properties, hotel and motel management companies (for which the
ownership of hotels and motels is a significant part of their business) and
public and private companies whose primary holdings are comprised of such
assets or operations ("Target Investment" or "Target Investments").
B. The Blackstone Partners and the Interstate Partners, individually and
acting through the Partnership, in each case in accordance with the terms of
this Agreement, wish to continue an exclusive arrangement with each other under
which, for the duration thereof and subject to the terms set forth below, the
Partnership, the Blackstone Partners and the Interstate Partners through the
Partnership and the Parallel Partnerships, will have the first opportunity to
acquire, operate and dispose of certain Target Investments which are hereafter
identified by the Blackstone Group and/or the Interstate Group, as the case may
be, and approved for investment in accordance with this Agreement (each Target
Investment proposed or approved, as the context indicates, for acquisition
pursuant to this Agreement is referred to as a "Project").
C. In order to effect the foregoing, the parties hereto entered into a
limited partnership agreement dated as of December 15, 1995 (the "Existing
Agreement") and formed a partnership under the laws of the State of Delaware
with the name Interstone Three Partners II L.P. (the "Partnership").
D. Each of the Partners of the Partnership have agreed to amend and restate
the Existing Agreement in its entirety as set forth herein.
AGREEMENT
Accordingly, in consideration of the mutual promises and agreements herein
made and intending to be legally bound
<PAGE> 6
hereby, the parties hereto agree to amend and restate the Existing Agreement to
read as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Unless the context otherwise requires, the
following terms shall have the following meanings for purposes of this
Agreement:
"ACKNOWLEDGEMENT" has the meaning set forth in Section 3.6(a).
"ADJUSTED CAPITAL ACCOUNT BALANCE" shall mean, with respect to any Partner,
the balance in such Partner's Capital Account adjusted (i) by taking into
account the adjustments, allocations and distributions described in
Regulations section 1.704-1(b)(2)(ii)(d)(4), (5), and (6); and (ii) by adding
to such balance such Partner's share of partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain, determined pursuant to Regulations section
1.704-2(g)(1) and 1.704-2(i)(5).
"AFFILIATE" with respect to any person means (i) any other person who
controls, is controlled by or is under common control with such person, (ii)
any director, officer, partner or employee of such person or any person
specified in clause (i) above or (iii) any immediate family member of any
person specified in clause (i) or (ii) above. Notwithstanding the foregoing,
for the purposes of this Agreement, none of the Blackstone Partners nor their
Affiliates shall be deemed to be Affiliates of any of the Interstone Partners
or the Interstone Related Parties, none of the Interstate Partners nor their
Affiliates shall be deemed to be Affiliates of any of the Blackstone Partners
or the Blackstone Related Parties, and no officer or director of any member
of the Blackstone Group which is also an officer or director of any member of
the Interstone Group shall be deemed to be an Affiliate of any of the
Interstate Partners or Interstate Related Parties, and no member of the
Interstone Group shall be deemed an Affiliate of any member of the Blackstone
Group.
"AGREEMENT" means this Amended and Restated Limited Partnership Agreement,
as it may be amended, supplemented, modified or restated from time to time.
"ASSET MANAGEMENT AGREEMENT" has the meaning set forth in Section 3.6(f).
"AUTHORIZED REPRESENTATIVES" of a General Partner shall be those
representatives designated by notice to all
<PAGE> 7
3
Partners by each General Partner from time to time to represent such General
Partner in connection with the Partnership. The term "Authorized
Representative" shall refer to any one of the Authorized Representatives of a
Partner. The initial Authorized Representatives of the General Partners are
set forth in Section 3.1(e) below.
"BLACKSTONE GENERAL PARTNER" means BJS Interstone Management Associates, a
Delaware general partnership, or any Affiliate of any member of the
Blackstone Group who replaces BJS Interstone Management Associates as a
general partner hereunder, or is admitted as an additional general partner
hereunder.
"BLACKSTONE GROUP" means the Blackstone Partners, Affiliates of the
Blackstone Partners and the Blackstone Related Parties; provided, that the
Blackstone Group shall not include investors in the Blackstone Partners who
are not Affiliates of Blackstone Group Holdings L.P., to the extent such
investors are not investing through any Affiliate of Blackstone Group
Holdings L.P.
"BLACKSTONE LIMITED PARTNER" means Blackstone Real Estate Partners II L.P.,
a Delaware limited partnership, or any Affiliate of any member of the
Blackstone Group who replaces Blackstone Real Estate Partners II L.P. as a
limited partner hereunder, or is admitted as an additional limited partner
hereunder.
"BLACKSTONE PARTNERS" means collectively, the Blackstone General Partner and
the Blackstone Limited Partners and any other Partner admitted to the
Partnership which is an Affiliate of any of the foregoing and any permitted
assigns of such Partners.
"BLACKSTONE RELATED PARTIES" means (i) Blackstone Group Holdings L.P., (ii)
each of the general partners of Blackstone Group Holdings L.P. and his
immediate family members, for so long as he is such a partner and (iii) any
corporation, partnership, limited liability company, joint venture or other
like entity in which the Blackstone Partners or the parties referred to in
(i) and (ii) above individually or collectively, hold a fifty percent (50%)
or greater, direct or indirect (through one or more business entities),
ownership interest, but shall not include any such entity in which the
collective ownership interest of these parties is less than fifty percent
(50%) or which is a publicly traded company.
"BROKEN DEAL" shall mean a proposed Project that is not ultimately acquired
by the Partnership.
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4
"BUSINESS DAY" shall mean any day on which commercial banks are authorized
to do business and are not required by law or executive order to close in New
York, New York.
"CAPITAL ACCOUNT" has the meaning set forth in Section 6.3.
"CAPITAL CONTRIBUTIONS" means the net fair market value of any capital
contributions made by the Partners to the Partnership and shall include (i)
the contributions of such Partner made pursuant to Sections 3.6, 3.9, 3.10,
5.1 and 5.7 and (ii) such Partner's payments made to third party creditors of
the Partnership with respect to Partnership obligations to the extent such
Partner is authorized by this Agreement to make any such payment, unless and
until reimbursed by the Partnership.
"CAPITAL PROCEEDS" means (A) the cash or other consideration received by the
Partnership (including interest on installment sales when received) as a
result of (i) any sale, exchange, abandonment, foreclosure, insurance award,
condemnation, easement sale or other similar transaction relating to any
property of the Partnership, (ii) any financing or refinancing (to the extent
such refinancing is deemed a Disposition hereunder) relating to any property
of the Partnership, (iii) capital contributions to the Partnership upon
admission of new partners, (iv) any other transaction which, in accordance
with generally accepted accounting principles, would be treated as a capital
event, in each case less (B) any such cash which is applied to (i) the
payment of transaction costs and expenses, (ii) the repayment of debt of the
Partnership which is required under the terms of any indebtedness of the
Partnership or has been authorized by the General Partners, (iii) the repair,
restoration or other improvement of Partnership Assets which is required
under any contractual obligation of the Partnership or has been authorized by
the General Partners and (iv) the establishment of reserves by the General
Partners. "Capital Proceeds" shall also mean any of the foregoing which are
received by a partnership or other vehicle in which the Partnership is a
partner or investor or in which the Partnership otherwise has an interest, to
the extent received by the Partnership as dividends or distributions.
"CARRYING VALUE" shall mean, with respect to any Partnership Asset, the
asset's adjusted basis for U.S. federal income tax purposes, except that the
Carrying Values of all Partnership Assets shall be adjusted to equal their
respective fair market values, in accordance with the rules set forth in
Regulations Section 1.704-1(b)(2)(iv)(f), except as otherwise provided
herein, as of: (a) the date of the acquisition of any additional Partnership
interest by any new or existing Partner in exchange for more than a de
<PAGE> 9
5
minimis Capital Contribution, other than pursuant to the initial formation of
the Partnership; (b) the date of the distribution of more than a de minimis
amount of Partnership property to a Partner; (c) the date a Partnership
interest is relinquished to the Partnership or (d) the date of the
termination of the Partnership under Section 708(b)(i)(B) of the Code;
provided, however, that adjustments pursuant to clauses (a), (b) and (c)
above shall be made only if the General Partners determine that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners. The Carrying Value of any Partnership Asset
distributed to any Partner shall be adjusted immediately prior to such
distribution to equal its fair market value. Depreciation shall be
calculated by reference to Carrying Value, instead of tax basis once Carrying
Value differs from tax basis.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute. Any reference herein to a particular
provision of the Code shall mean, where appropriate, the corresponding
provision in any successor statute.
"COMMITTED CAPITAL" shall mean, the aggregate amount of $29,400,000 for the
Blackstone Partners and the Blackstone Partners of the Parallel Partnerships,
and the aggregate amount of $30,600,000 for the Interstate Partners and the
Interstate Partners of the Parallel Partnership.
"COMPETITIVE RATE" shall mean, with respect to a particular service at a
Target Investment, the lower of (i) the rate charged on an arm's length basis
for the same or similar service for comparable properties in the geographic
area in which the relevant Target Investment is located by unaffiliated
persons providing or performing such service on an ongoing basis and (ii) the
lowest rate charged by any Affiliates of the Interstate General Partner for
the same or similar service for comparable properties in the geographic area
in which the relevant Target Investment is located.
"CONSENT" shall mean the approval, direction or determination, as the case
may be, of a Partner, given as provided in Section 3.1, to do the act or
thing for which the approval is solicited or with respect to which the
direction or determination is given or made, or the act of granting such
approval or giving such direction or making such determination, as the
context may require. Any Consent required to be given by the Blackstone
General Partner shall be given by any one Authorized Representative of the
Blackstone General Partner. Any Consent to be given by the Interstate
General Partner shall be given by any two Authorized Representatives of the
Interstate General Partner.
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"CONSIDERATION" means the gross value of all cash, securities and other
properties paid or payable, directly or indirectly, in one transaction or in
a series or combination of transactions, in connection with an acquisition or
disposition of a Target Investment or a transaction related thereto
(including, without limitation, amounts paid (A) pursuant to covenants not to
compete, employment contracts, employee benefit plans or other similar
arrangements and (B) to holders of any warrants, stock purchase rights,
convertible securities or similar rights and to holders of any options or
stock appreciation rights, whether or not vested). Consideration shall also
include the value of any long-term liabilities (including the principal
amount of any mortgage indebtedness or other indebtedness for borrowed money,
preferred stock obligations, any pension liabilities and guarantees)
indirectly or directly assumed or acquired, or otherwise repaid or retired,
in connection with or anticipation of such acquisition. If an acquisition
takes the form of a purchase of assets, to the extent applicable
Consideration shall also include (i) the value of any current assets not
purchased, minus (ii) the value of any current liabilities not assumed. If
the Consideration to be paid is computed in any foreign currency, the value
of such foreign currency shall, for purposes hereof, be converted into U.S.
dollars at the prevailing exchange rate on the date or dates on which such
Consideration is paid. In this Agreement, the value of any securities
(whether debt or equity) or other property paid or payable as part of the
Consideration shall be determined as follows: (1) the value of securities
that are freely tradable in an established public market will be determined
on the basis of the last market closing price prior to the public
announcement of the acquisition; and (2) the value of the securities that are
not freely tradable or have no established public market or, if the
Consideration utilized consists of property other than securities, the value
of such other property shall be the fair market value thereof as reasonably
determined by the General Partners.
"CONTRIBUTING PARTNER" has the meaning set forth in Section 5.2.
"DISABLING EVENT" means any event which would cause a General Partner to
cease to be a general partner of the Partnership pursuant to Section 17-402
of the Partnership Act.
"DISPOSITION" of a Project shall mean the sale, exchange or other
disposition by the Partnership of all or any portion of such Project for
cash, and shall include the receipt by the Partnership of a liquidating
dividend or other like distribution in cash. A refinancing of a Project
shall be deemed a Disposition of such Project unless the General Partners
agree otherwise. Whenever a portion of a
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Project (but not the entire Project) is the subject of a Disposition, that
portion shall be treated as having been a separate project from that portion
of the Project that is retained by the Partnership, and the Capital
Contributions for such Project and the Proceeds (other than the Proceeds of
such Disposition of a portion of a Project) distributed to the Partners with
respect to such Project shall be treated as having been divided between the
portion subject to the Disposition and the retained portion on a pro rata
basis. For purposes of calculating the Internal Rate of Return, a Broken
Deal shall be considered a Project subject to a Disposition that did not
yield any Proceeds.
"FAIR MARKET VALUE" of a Project as of a specific date shall mean the fair
market value of such project on such date as reasonably determined by the
General Partners (taking into consideration all factors which may reasonably
affect the sales price of the Project), less the principal amount of any debt
and other similar liabilities secured by or otherwise related to such
Project, and less a reasonable estimate of transaction costs and expenses
which would be incurred upon a Disposition of such Project on such date. If
the General Partners can not reach agreement on the Fair Market Value of a
Project, the matter shall be settled by arbitration in New York, New York in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect, except that the number and method of selection of
the arbitrators shall be as follows: each General Partner shall select one
qualified real estate investment banker or MAI appraiser who is experienced
in valuing assets and liabilities of the type in question; the average of the
Fair Market Values of such Project determined by such arbitrators shall be
the Fair Market Value of such Project, and shall be final, conclusive and
binding on the Partners.
"FISCAL PERIOD" means each fiscal quarter or such other period as may be
established by the General Partners.
"FISCAL YEAR" means the calendar year ending on December 31 of each year.
"GENERAL PARTNERS" mean the Blackstone General Partner, the Interstate
General Partner and any other person admitted to the Partnership as an
additional or substitute general partner of the Partnership in accordance
with the provisions of this Agreement, until such time as such person ceases
to be a general partner of the Partnership as provided herein.
"INTERNAL RATE OF RETURN" shall mean with respect to any Partner as of the
date of a cash distribution of Proceeds to such Partner, the rate of return
(calculated as provided below, taking into account the time value of money)
which (x) the Proceeds for which the return is being
<PAGE> 12
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calculated represent on (y) all Capital Contributions made by such Partner as
of such date with respect to the Project or Projects for which the return is
being calculated.
In determining the Internal Rate of Return, the following shall apply:
(i) subject to the provisions of clause (ii) of this definition, all
present value calculations are to be made as of the date such Capital
Contributions were contributed to the Partnership;
(ii) all Capital Contributions shall be treated as having been contributed
to the Partnership on the first day of the month during which a Partner's
funds were actually delivered to the Partnership;
(iii) all distributions shall be treated as if received on the last day of
the month in which the distribution was made;
(iv) all distribution amounts shall be based on the amount of the
distribution prior to the application of any federal, state or local taxation
to Partners (including any withholding or deduction requirements); and
(v) the rates of return shall be per annum rates and all amounts shall be
calculated on a compounded annual basis, and on the basis of a 365-day year.
When calculating the Internal Rate of Return (and for such purpose only), a
Partner's Capital Contribution to a Project shall not be deemed to include
60% of such Partner's share of any amounts paid to the Blackstone General
Partner or its Affiliates pursuant to Sections 3.9 and 3.10 below for such
Project. When calculating the Internal Rate of Return, a Partner's initial
Capital Contributions shall be deemed given on the date of admission of such
Partner to the Partnership, not on the date that the transferor of such
Partner's interest in the Partnership made its Capital Contributions; such
Capital Contributions shall be deemed Capital Contributions of the transferor
for the period from when made until the transfer to the new Partner.
"INTERSTATE GENERAL PARTNER" means IHC/Interstone Corporation, a Delaware
corporation, or any Affiliate of any member of the Interstate Group who
replaces IHC/Interstone Corporation as a general partner hereunder or is
admitted as an additional general partner hereunder.
"INTERSTATE GROUP" means the Interstate Partners, Affiliates of the
Interstate Partners and the Interstate Related Parties.
<PAGE> 13
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"INTERSTATE LIMITED PARTNER" means IHC/Interstone Partnership II, L.P., a
Delaware limited partnership, or any Affiliate of any member of the
Interstate Group who replaces IHC/Interstone Partnership II, L.P. as a
limited partner hereunder or is admitted as an additional limited partner
hereunder.
"INTERSTATE PARTNERS" means collectively, the Interstate General Partner,
the Interstate Limited Partner and any other Partner admitted to the
Partnership which is an Affiliate of any of the foregoing and any permitted
assigns of such Partners.
"INTERSTATE RELATED PARTIES" means (i) Interstate Hotels Corporation, (ii)
each of the senior executives of Interstate Hotels Company and Interstate
Hotels Corporation and his immediate family members, for so long as he is
employed by Interstate Hotels Company and/or Interstate Hotels Corporation,
(iii) Milton Fine and his immediate family members and (iv) any corporation,
partnership, limited liability company, joint venture or other like entity in
which the Interstate Partners or the parties referred to in (i), (ii) and
(iii) above individually or collectively, hold a fifty percent (50%) or
greater, direct or indirect (through one or more business entities),
ownership interest but shall not include any such entity in which the
collective ownership interest of these parties is less than fifty percent
(50%) or which is a publicly traded company.
"LIMITED PARTNERS" means the Blackstone Limited Partners, the Interstate
Limited Partner and any person admitted to the Partnership as an additional
or substitute limited partner of the Partnership in accordance with the
provisions of this Agreement.
"LIQUIDATOR" has the meaning set forth in Section 7.2.
"MANAGEMENT AGREEMENT" shall mean a Management Agreement in the form
attached hereto as Exhibit A, as such agreement may be amended from time to
time in accordance with the terms thereof and hereof.
"MINIMUM GAIN" shall have the meaning set forth in Regulations section
1.704-2(d)(1) and shall mean the amount determined by (i) computing for each
nonrecourse liability of the Partnership any gain the Partnership would
realize if it disposed of the property subject to that liability for no
consideration other than full satisfaction of the liability and (ii)
aggregating the separately computed gains. If the Carrying Value of any
Partnership Asset differs from the adjusted tax basis of such property, the
calculation of Minimum Gain pursuant to the preceding sentence shall be made
by reference to the Carrying Value. For purposes
<PAGE> 14
10
hereof, a liability of the Partnership is a nonrecourse liability to the
extent that no Partner or related person bears the economic risk of loss for
that liability within the meaning of Regulations section 1.752-1.
"NET INCOME (LOSS)" shall mean for each Fiscal Year or other period, the
taxable income or loss of the Partnership, or particular items thereof,
determined in accordance with the accounting method used by the Partnership
for U.S. federal income tax purposes with the following adjustments: (i) all
items of income, gain, loss or deduction allocated pursuant to Section 6.4(c)
through (e) shall not be taken into account in computing such taxable income
or loss; (ii) any income of the Partnership that is exempt from U.S. federal
income taxation and not otherwise taken into account in computing Net Income
and Net Loss shall be added to such taxable income or loss; (iii) if the
Carrying Value of any asset differs from its adjusted tax basis for U.S.
federal income tax purposes, any depreciation, amortization or gain resulting
from a disposition of such asset shall be calculated with reference to such
Carrying Value; (iv) upon an adjustment to the Carrying Value of any asset,
pursuant to the definition of Carrying Value, the amount of the adjustment
shall be included as gain or loss in computing such taxable income or loss;
and (v) except for items in (i) above, any expenditures of the Partnership
not deductible in computing taxable income or loss, not properly
capitalizable and not otherwise taken into account in computing Net Income
and Net Loss pursuant to this definition shall be treated as deductible
items.
"NON-CAPITAL PROCEEDS" means (x) any cash or other consideration received by
the Partnership other than Capital Proceeds less (y) any such cash that is
applied to the establishment of reserves which have been established by the
General Partners and to expenses of the Partnership.
"NON-CONTRIBUTING PARTNER" has the meaning set forth in Section 5.2.
"NONRECOURSE DEDUCTIONS" shall have the meaning ascribed to such term in
Regulations section 1.704-2(b)(1).
"ORGANIZATIONAL EXPENSES" means all reasonable third-party costs and
expenses pertaining to the organization of the Partnership and the
registration, qualification or exemption of the Partnership under any
applicable federal, state or foreign laws, including fees of counsel to the
Partnership and the Partners.
"PARALLEL PARTNERSHIPS" has the meaning set forth in Section 2.8.
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"PARTNER" means any person who is a partner of the Partnership, whether a
General Partner, a Limited Partner or both.
"PARTNER NONRECOURSE DEBT" shall have the meaning ascribed to such term in
Regulations section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" shall have the meaning ascribed to
such term in Regulations section 1.704-2(i)(2).
"PARTNER NONRECOURSE DEDUCTIONS" shall mean any item of partnership loss,
deduction, or expenditure under section 705(a)(2)(B) of the Code that is
attributable to a Partner Nonrecourse Debt, as determined pursuant to
Regulations section 1.704-2(i)(2).
"PARTNERSHIP" means Interstone Three Partners II L.P.
"PARTNERSHIP ACT" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. Section Section 17-101, et seq., as it may be amended from
time to time, and any successor to such statute.
"PARTNERSHIP ASSETS" means all right, title and interest of the Partnership
in and to all or any portion of the assets of the Partnership and any
property (real or personal) or estate acquired in exchange therefor or in
connection therewith.
"PRE-EXISTING PROJECTS" has the meaning set forth in Section 3.6(a).
"PROCEEDS" means the collective reference to Capital Proceeds and
Non-Capital Proceeds.
"PROJECT" has the meaning set forth in the Preliminary Statement.
"PROJECT LIMITED LIABILITY COMPANY AGREEMENT" shall mean a limited liability
company agreement in a form to be agreed upon by the General Partners, as
such agreement may be amended from time to time in accordance with the terms
thereof and hereof, formed pursuant to this Agreement to own Projects
purchased hereunder.
"PROJECT PARTNERSHIP AGREEMENT" shall mean a partnership agreement in the
form attached hereto as Exhibit B, (with such changes as required to provide
the Blackstone General Partner therein and the Interstate General Partner
therein with the same management rights as the Blackstone General Partner
herein and the Interstate General Partner herein, respectively, have pursuant
to this Agreement), as such agreement may be amended from time to time in
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accordance with the terms thereof and hereof, formed pursuant to this
Agreement to own Projects purchased hereunder.
"REGULATIONS" means the regulations promulgated under the Code.
"RELATED PARTIES" means the Blackstone Related Parties and the Interstate
Related Parties.
"REQUEST FOR PRELIMINARY APPROVAL" has the meaning set forth in Section
3.6(b).
"REQUEST FOR FINAL APPROVAL" has the meaning set forth in Section 3.6(f).
"SHARING PERCENTAGE" means the percentage interest of a Partner as set forth
on Schedule A hereto, as amended from time to time in accordance herewith.
Notwithstanding the foregoing, at the election of the Blackstone General
Partner or the Interstate General Partner made prior to the purchase of any
Target Investment by the Partnership, the Sharing Percentages of the
Interstate Limited Partner shall be reduced to 49.5% and the Sharing
Percentage of the Blackstone Limited Partner shall be increased to 49.5%. In
such event, appropriate changes shall be made in Section 6.4(a) and 6.4(d)(i)
below.
"TARGET INVESTMENT" has the meaning set forth in the Preliminary Statement.
"TAX MATTERS PARTNER" has the meaning set forth in Section 6.2.
"TRANSFER" has the meaning set forth in Section 8.1(a).
"TRANSFEREE" has the meaning set forth in Section 8.1(b).
"UNREALIZED LOSS" with respect to a Project on a date of a distribution of
Capital Proceeds shall mean the excess of the total Capital Contributions
with respect to such Project as of such date over the Fair Market Value of
such Project as of such date. A Project shall not have any Unrealized Loss
on a date of a distribution if the calculation pursuant to this definition
for such Project on such date equals zero or less.
SECTION 1.2 TERMS GENERALLY. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The term "person" includes individuals,
partnerships, joint ventures, corporations, trusts, governments
<PAGE> 17
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(or agencies or political subdivisions thereof) and other associations and
entities. Unless the context requires otherwise, the words "include",
"includes" and "including" shall be deemed to be followed by the phrase
"without limitation". The term "hereunder" shall mean this entire Agreement as
a whole unless reference to a specific section of this Agreement is made.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.1 CONTINUATION OF PARTNERSHIP. The Blackstone General Partner
and the Interstate General Partner, as the General Partners, and the Blackstone
Limited Partners and the Interstate Limited Partner, as limited partners,
hereby agree to continue the Partnership and the Partners agree that the
Partnership shall continue for the limited purposes set forth and on the other
terms and conditions set forth in this Agreement. The Blackstone General
Partner hereby represents that each of the Blackstone Limited Partners is an
Affiliate of the Blackstone General Partner or its Affiliates.
SECTION 2.2 PARTNERS. Schedule A hereto contains the name, address and
Sharing Percentage of each Partner as of the date of this Agreement. Schedule
A shall be revised by the General Partners from time to time to reflect the
admission or withdrawal of a Partner or the transfer or assignment of interests
in the Partnership in accordance with the terms of this Agreement and other
modifications to or changes in the information set forth therein.
SECTION 2.3 NAME. The Partnership shall conduct its activities under the
name of Interstone Three Partners II L.P. The General Partners shall have the
power at any time to change the name of the Partnership; provided, that the
name shall always contain the words "Limited Partnership" or the letters "L.P."
The General Partners shall give prompt notice of any such change to each
Partner.
SECTION 2.4 TERM. The term of the Partnership shall commence on the date
of this Agreement and shall continue until December 31, 2045, unless sooner
dissolved, wound up and terminated in accordance with Article VII of this
Agreement.
SECTION 2.5 PURPOSE; POWERS. (a) The purpose of the Partnership shall be
(i) to implement the right of first opportunity with the Blackstone Group and
the Interstate Group, including review and approval or disapproval by the
General Partners of due diligence investigation of proposed Target Investments,
and, upon final approval by the General Partners, causing the acquisition by
the Partnership of such Target Investments either by itself or directly or
indirectly through entities in which the Partnership shall have a direct or
indirect
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ownership interest; (ii) operating, managing and disposing of any Target
Investments approved for acquisition pursuant to this Agreement; and (iii) to
do all things necessary or incidental to any of the foregoing.
(b) In furtherance of its purposes, the Partnership shall have all powers
necessary, suitable or convenient for the accomplishment of its purposes, alone
or with others, including the following:
(i) to invest and reinvest the cash assets of the Partnership in
money-market or other short-term investments;
(ii) to have and maintain one or more offices within or without the
State of Delaware, and, in connection therewith, to rent or acquire office
space, engage personnel and compensate them and do such other acts and
things as may be advisable or necessary in connection with the maintenance of
such office or offices;
(iii) to open, maintain and close bank accounts and draw checks and other
orders for the payment of moneys;
(iv) to engage employees (with such titles and delegated responsibilities
as may be determined), accountants, consultants, auditors, custodians,
investment advisers, attorneys and any and all other agents and assistants,
both professional and nonprofessional, and to compensate them as may be
necessary or advisable;
(v) to form or cause to be formed and to own the stock of one or more
corporations, whether foreign or domestic, and to form or cause to be formed
and to participate in partnerships, joint ventures and limited liability
companies, whether foreign or domestic;
(vi) to enter into, make and perform all contracts, agreements and other
undertakings as may be necessary or advisable or incident to carrying out its
purposes;
(vii) to sue, prosecute, settle or compromise all claims against third
parties, to compromise, settle or accept judgment of claims against the
Partnership, and to execute all documents and make all representations,
admissions and waivers in connection therewith;
(viii) to distribute, subject to the terms of this Agreement, at any time
and from time to time to Partners cash or investments or other property of the
Partnership, or any combination thereof;
(ix) to borrow money, whether secured or unsecured, and to make, issue,
accept, endorse and execute promissory notes, drafts, bills of exchange and
other instruments and
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evidences of indebtedness, all without limit as to amount, and to secure the
payment thereof by mortgage, pledge, or assignment of, or security interest
in, the assets then owned or thereafter acquired by the Partnership;
(x) to buy, sell, operate and otherwise deal with Target Investments;
(xi) to hold, receive, mortgage, pledge, lease, transfer, exchange or
otherwise dispose of, grant options with respect to, and otherwise deal in and
exercise all rights, powers, privileges and other incidents of ownership or
possession with respect to, all property held or owned by the Partnership; and
(xii) to take such other actions necessary or incidental thereto as may be
permitted under applicable law.
SECTION 2.6 PLACE OF BUSINESS. The Partnership shall maintain a
registered office at The Corporation Trust Company, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801, or such other office within the
State of Delaware as is chosen by the General Partners. The Partnership shall
maintain an office and principal place of business at 345 Park Avenue, New
York, New York 10154, or at such other place as may from time to time be
determined as its principal place of business by the General Partners; the
General Partners shall give notice to the other Partners of any change in the
Partnership's principal place of business. The name and address of the
Partnership's registered agent as of the date of this Agreement is The
Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
SECTION 2.7 ALTERNATIVE INVESTMENT STRUCTURE. If the Blackstone General
Partner determines that for legal, tax, regulatory or other reasons it is in
the best interests of the Partners that a Target Investment be made through an
alternative investment structure, and all of the other General Partners
unanimously Consent to such alternative structure (which Consent shall not be
unreasonably withheld), the Blackstone General Partner shall structure the
making of all or any portion of such Target Investment outside of the
Partnership by requiring any Partner or Partners to make such Target Investment
either directly or indirectly through a partnership or other vehicle (such as
the purchase of stock, the purchase of partnership interests, or the formation
of another partnership or as tenants in common) that will invest on a parallel
basis with or in lieu of the Partnership, as the case may be. The Partners
shall be required to make capital contributions directly to each such vehicle
to the same extent, for the same purposes and on the same terms and conditions
as Partners are required to make Capital Contributions to the Partnership, and
such capital contributions shall reduce the unused Committed Capital of the
Partners to the same extent as if Capital Contributions were made to the
<PAGE> 20
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Partnership with respect thereto. Each Partner shall have the same economic
interest in all material respects in Target Investments made pursuant to this
Section 2.7 as such Partner would have if such Target Investment had been made
solely by the Partnership, and the other terms of such vehicle shall be
substantially identical in all material respects to those of the Partnership,
to the maximum extent applicable; provided, that such vehicle (or the entity in
which such vehicle invests) shall provide for the limited liability of the
Limited Partners as a matter of the organizational documents of such vehicle
(or the entity in which such vehicle invests) and as a matter of local law; and
provided, further, that the General Partners or Affiliates thereof will serve
as the general partners or in some other similar fiduciary capacity with
respect to such vehicle.
SECTION 2.8 PARALLEL PARTNERSHIPS. The General Partners have established
one or more additional collective partnerships (the "Parallel Partnerships")
organized pursuant to partnership agreements in substantially the same form as
this Agreement for certain types of investors to invest in Target Investments
together with the Partnership. The Blackstone General Partner, or an Affiliate
thereof, shall be a general partner of any such Parallel Partnerships, and the
Blackstone Limited Partners, or Affiliates thereof, shall be limited partners
of any such Parallel Partnerships. The Interstate General Partner, or an
Affiliate thereof, shall be a general partner of any such Parallel Partnerships
and the Interstate Limited Partner, or an Affiliate thereof, shall be a limited
partner of any such Parallel Partnerships. The economic terms of each Parallel
Partnership shall be the same as those of the Partnership.
ARTICLE III
MANAGEMENT AND OPERATION OF THE
PARTNERSHIP; IDENTIFICATION AND APPROVAL OF
INVESTMENTS; PARTNER SERVICES
SECTION 3.1 MANAGEMENT. (a) The General Partners shall have the full and
complete responsibility for managing the business of the Partnership and shall
make all of the decisions affecting the business of the Partnership. Except as
otherwise set forth in this Agreement, the Limited Partners shall have no right
of Consent with respect to such decisions. The General Partners shall have all
of the rights, powers and authorities permitted to be exercised by a general
partner of a limited partnership formed under the Partnership Act. The General
Partners shall exercise all powers necessary and convenient for the purposes of
the Partnership, including those enumerated in Section 2.5, on behalf and in
the name of the Partnership.
(b) Except as otherwise provided herein, the Limited Partners as such shall
not have the right to, and shall not, take
<PAGE> 21
17
part in the management or affairs of the Partnership, nor in any event shall
any Limited Partner have the power to act for or bind the Partnership unless
delegated such power by the General Partners. The exercise by any Limited
Partner of any right or power conferred herein shall not be construed to
constitute participation by such Limited Partner in the control of the business
of the Partnership so as to make such Limited Partner liable as a general
partner for the debts and obligations of the Partnership for purposes of the
Partnership Act.
(c) Any Consent required by this Agreement may be given as follows:
(1) by a written Consent given by the approving Partner at or prior to the
doing of the act or thing of which the Consent is solicited, provided that
such Consent shall not have been nullified by notice to all of the General
Partners by the approving Partner at or prior to the time, or by the negative
vote by such approving Partner at any meeting held to consider the doing, of
such act or thing; or
(2) by the Consent given by the approving Partner to the doing of the act
or thing for which the Consent is solicited at any meeting called or held to
consider the doing of such act or thing.
(d) Unless the General Partners agree on a different procedure, any matter
requiring the Consent of all or any of the Partners pursuant to this Agreement
may be considered at a meeting of the Partners held not less than three (3) nor
more than fifteen (15) Business Days after notice thereof shall have been given
by a General Partner to all Partners. Such notice (i) may be given by any
General Partner, in its discretion, at any time. Any such notice shall state
briefly the purpose, time and place of the meeting. All such meetings shall be
held within or outside the State of Delaware at such reasonable place as the
General Partners shall designate and during normal business hours. Unless
otherwise provided by the General Partners, meetings may be held
telephonically.
(e) The written statements and representations of an Authorized
Representative for a General Partner shall be the only authorized statements
and representations of such General Partner with respect to the matter covered
by this Agreement. The initial Authorized Representatives are (i) Kenneth C.
Whitney, Thomas Saylak and John Schreiber for the Blackstone General Partner
and (ii) W. Thomas Parrington, J. William Richardson and Marvin I. Droz for the
Interstate General Partner. The written statement or representation of any one
Authorized Representative of the Blackstone General Partner shall be sufficient
to bind the Blackstone General Partner with respect to all matters pertaining
to the Partnership and addressed in such statement or representation. The
written statement or representation of any
<PAGE> 22
18
two Authorized Representatives of the Interstate General Partner shall be
sufficient to bind the Interstate General Partner with respect to all matters
pertaining to the Partnership and addressed in such statement or
representation.
(f) The failure to vote by any Partner on any matter requiring such
Partner's Consent within five business days after such vote is requested shall
be deemed to be a negative vote with respect to such matter.
(g) A Partner shall not be obligated to abstain from voting on any matter
(or vote in any particular manner) because of any interest (or conflict of
interest) of such Partner (or any Affiliate thereof) in such matter.
(h) Each Partner agrees that, except as otherwise expressly provided
herein and to the fullest extent permitted by applicable law, the approval of
any proposed action of or relating to the Partnership by all of the General
Partners as provided herein (or if this Agreement grants one General Partner
sole approval rights over a certain action, the approval of such action by such
General Partner) shall bind each Partner and shall have the same legal effect
as the approval of each Partner of such action.
SECTION 3.2 JOINT CONTROL BY THE GENERAL PARTNERS. Except as specifically
provided in this Agreement, the business, affairs and operations of the
Partnership shall be managed, and all Partnership decisions shall be jointly
made, by both General Partners, and no single General Partner, acting alone in
its capacity as such, shall have the authority to bind or make any decision for
the Partnership or to conduct or manage the Partnership's business or affairs.
Without limiting the foregoing in any way, the following are examples of
decisions of the Partnership which shall be made jointly by the General
Partners:
(a) the reorganization of the Partnership as a corporation or other
entity, or the creation of a holding corporation, partnership or limited
liability company to own all or any substantial portion of the assets of or
all the equity interests in the Partnership, provided that the surviving
entity remains a pass-through entity for taxation purposes;
(b) the termination or settlement of any litigation by the Partnership;
(c) the making of any change in the Fiscal Period, any determination of
reserves under this Agreement, any distribution of cash or investments or
other property of the Partnership to the Partners, or any withdrawals of
capital from the Partnership;
<PAGE> 23
19
(d) the making of any change in the name of the Partnership or the use of
another name by the Partnership to carry on any business of the Partnership;
(e) the making of the determination and approval of such tax matters as
are specified in Section 6.2;
(f) the making of the allocation of amounts in respect of an interest in
the Partnership Transferred pursuant to Section 8.2(e);
(g) the authorization of a Partner to disclose information agreed to be
held confidential under Sections 9.5;
(h) the admission of an additional Partner to the Partnership pursuant to
the terms of this Agreement if such additional Partner is not an Affiliate of
either any member of the Blackstone Group or any member of the Interstate
Group;
(i) (A) the sale, exchange or other transfer of any Partnership Asset, (B)
the merger or consolidation of the Partnership with or into any other
business entity provided that the surviving entity remains a pass-through
entity for taxation purposes, and (C) the right to require each of the
Partners to exchange, transfer or otherwise convey some or all of its
partnership interest in the Partnership as part of an exit or disposition
strategy for the Partnership;
(j) the making of any expenditure incurred in connection with the
administration of the Partnership;
(k) the entering into of any lease by the Partnership as lessor;
(l) the engagement of any independent accountant, counsel, actuary or
consultant to the Partnership, or any change in or termination of any engaged
independent accountant, counsel, actuary or consultant to the Partnership;
(m) the maintenance of a registered office in Delaware other than that
specified in Section 2.6;
(n) the determination of any titles and responsibilities of employees of
the Partner pursuant to Section 2.5(b)(iv);
(o) the approval of budgets;
(p) the expenditure by the Partnership of any funds in connection with
the disposition of a Target Investment or the expenditure by the Partnership
of any funds required in
<PAGE> 24
20
connection with the operation of any Target Investments which are not
included within the approved budget for such Target Investment;
(q) any termination, replacement or other change in the franchisor of any
Target Investment in accordance with the terms of the franchise agreement (or
the manager of any Target Investment if such manager is not the Interstate
General Partner or an Affiliate thereof), or the execution, modification or
termination of any agreement which is material to the Partnership (except as
set forth in Section 3.3(a);
(r) the dissolution, termination and winding up of the Partnership as
provided in Section 7.1(a);
(s) any amendment to this Agreement which would have a material adverse
effect on any Partner's economic interest in the Partnership;
(t) extending the term of the Partnership beyond December 31, 2045;
(u) in accordance with Section 3.6 below, the decision for the Partnership
to investigate a Target Investment and the decision for the Partnership to
acquire a Target Investment, or the decision for the Partnership to acquire
any other asset;
(v) the borrowing of money;
(w) the filing of a petition under any bankruptcy or other insolvency law
by the Partnership, or the admission in writing by the Partnership of its
bankruptcy, insolvency or general inability to pay its debts;
(x) the commencement of any litigation by the Partnership;
(y) a transaction or other matter involving any actual or potential
conflict of interest affecting any Partner or Affiliate thereof other than
the entering into of any agreements or the payment of any amounts provided
for in this Agreement; and
(z) a change in the business of the Partnership to include any business
other than that specified in Section 2.5 which takes the focus of the
Partnership's business away from the lodging industry.
Notwithstanding the foregoing and without limiting the foregoing in any way,
any General Partner may delegate in writing to (i) the other General Partner,
its right to make any decisions concerning the Partnership or take any actions
on behalf of the
<PAGE> 25
21
Partnership and/or (ii) to any manager of any Target Investment, the day to day
administrative duties in connection with the operation of such property.
SECTION 3.3 BLACKSTONE PARTNERS RIGHTS. Notwithstanding any other
provision of this Agreement, the Blackstone General Partner may take any of the
following actions with out the Consent of any of the Interstate Partners:
(a) with respect to any Target Investment in which an Affiliate of the
Interstate General Partner is the manager, any termination, replacement or
other change in such manager in accordance with the terms of the management
agreement (provided that the Blackstone General Partner shall consult with
the Interstate General Partner with respect to any replacement manager and
shall act reasonably with respect to its selection of a replacement manager,
but the Interstate General Partner shall not have any consent rights with
respect to such replacement manager), the declaration of a default or event
of default under any management agreement for such manager, and the exercise
of any remedies under such management agreement;
(b) the approval of the admission of any additional partner to the
Partnership if such additional partner is an Affiliate of any member of the
Blackstone Group or any member of the Interstate Group; and
(c) such other actions and decisions which are expressly given solely to
the Blackstone General Partner pursuant to the terms of this Agreement.
SECTION 3.4 CERTAIN DUTIES AND OBLIGATIONS OF THE PARTNERS. (a) Subject
to the terms of this Agreement, the General Partners shall take all action
which may be reasonably necessary or appropriate (i) for the formation and
continuation of the Partnership as a limited partnership under the laws of the
State of Delaware and (ii) for the development, maintenance, preservation and
operation of the business of the Partnership in accordance with the provisions
of this Agreement and applicable laws and regulations.
(b) No Partner shall take any action so as to cause the Partnership to be
classified for Federal income tax purposes as an association taxable as a
corporation and not as a partnership.
(c) The General Partners shall take (and each Partner agrees to cooperate
with the General Partners and approves of the General Partners taking on its
behalf) all action which is necessary to form or qualify the Partnership to
conduct the business in which the Partnership is engaged under the laws of any
jurisdiction in which the Partnership is doing business and to continue in
effect such formation or qualification.
<PAGE> 26
22
(d) The General Partners shall not take, or cause to be taken, any action
that would result in any Limited Partner having any personal liability for the
obligations of the Partnership. The General Partners shall be under a duty as
described herein to conduct the affairs of the Partnership in the best
interests of the Partnership and of the Partners including the safekeeping and
use of all Partnership funds and assets and the use thereof for the exclusive
benefit of the Partnership. Neither any Partner nor any Affiliate of any
Partner shall enter into any transaction with the Partnership unless the
transaction (i) is expressly permitted hereunder, (ii) is entered into on
arm's-length terms in the ordinary course of Partnership business or (iii) is
approved by all of the General Partners upon disclosure of any direct or
indirect interest such Partner or any Affiliate thereof may have in the
transaction.
(e) No General Partner shall be liable, responsible or accountable in
damages or otherwise to the Partnership or to any Partner for (a) any act
performed within the scope of the authority conferred on such General Partner
by this Agreement except for the gross negligence or willful misconduct of such
General Partner in carrying out its obligations hereunder, (b) such General
Partner's failure or refusal to perform any act, except those expressly
required by or pursuant to the terms of this Agreement, (c) such General
Partner's performance of, or failure to perform, any act on the reasonable
reliance on advice of legal counsel to the Partnership or (d) the negligence,
dishonesty or bad faith of any agent, consultant or broker of the Partnership
selected, engaged or retained and monitored with reasonable care. In any
threatened, pending or completed action, suit or proceeding, each General
Partner shall be fully protected and indemnified and held harmless by the
Partnership against all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, proceedings, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
reasonable attorneys' fees, costs of investigation, fines, judgments and
amounts paid in settlement, actually incurred by such General Partner in
connection with such action, suit or proceeding) by virtue of its status as a
General Partner or with respect to any action or omission taken or suffered in
good faith, other than liabilities and losses resulting from the gross
negligence or willful misconduct of such General Partner; provided, however,
that a General Partner shall not be so indemnified for any acts determined to
be in contravention of this Agreement or in breach of its fiduciary duties.
The indemnification provided by this paragraph shall be recoverable only out of
the assets of the Partnership, and no Partner shall have any personal liability
on account thereof.
SECTION 3.5 RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNERS. The
General Partners shall not have the authority to:
(a) do any act in contravention of this Agreement (including under Section
3.2 or Section 3.3);
<PAGE> 27
23
(b) do any act which would make it impossible to carry on the ordinary
business of the Partnership, except in connection with the dissolution,
winding up and termination of the Partnership as provided by Article VII;
(c) possess Partnership property, or assign their respective rights in
specific Partnership property, for other than a Partnership purpose;
(d) admit a person as a Partner except as provided in this Agreement; or
(e) knowingly perform any act that would subject any Limited Partner to
liability as a general partner in any jurisdiction.
SECTION 3.6 RIGHT OF FIRST OPPORTUNITY. (a) Subject to Section 3.7(b)
below, and until expiration or termination of the right of first opportunity in
favor of the Partnership set forth below (which right has been confirmed and
acknowledged in the Confirmation and Acknowledgment of Right of First
Opportunity ("Acknowledgment"), in the form attached hereto as Exhibit C, which
has been executed simultaneously herewith), each member of the Blackstone Group
and the Interstate Group shall offer to the Partnership (along with the
Parallel Partnerships) a right of first opportunity to invest in each Target
Investment which (x) is identified by such member after the date of this
Agreement or (y) which is identified on the list of Projects attached hereto as
Exhibit D (the "Pre-Existing Projects"), in each case, upon and subject to the
terms set forth in the remainder of this Section 3.6.
(b) Except as provided in Section 3.7(b) below, promptly upon its
identification of a Target Investment as a potential investment, each member of
the Blackstone Group and the Interstate Group shall notify each of the General
Partners about such Target Investment (such notification, a "Request for
Preliminary Approval") and shall provide each of the General Partners with such
information reasonably necessary to evaluate such investment.
(c) Within five (5) Business Days after delivery to the General Partners
of the Request for Preliminary Approval and the accompanying information
pursuant to paragraph (b) above with respect to a proposed Target Investment,
and provided that notice shall have first been given from the party requesting
such action that approval is being sought under this Section, the General
Partners shall either approve or disapprove pursuit of such proposed Target
Investment (including the incurring of due diligence costs and expenditures,
the negotiation and documentation of the terms of purchase and financing, and
the posting of deposits). If the General Partners, having first been notified
that approval under this Section is being sought, fail to unanimously approve
the investigation of a proposed Target
<PAGE> 28
24
Investment within such five (5) Business Day period, the proposed Target
Investment shall be deemed disapproved. Any General Partner shall have the
right to reasonably request additional information regarding the proposed
Project within three (3) Business Days after receipt of the Request for
Preliminary Approval and the accompanying information. If any General Partner
requests such additional information, the five (5) Business Day period referred
to above shall commence on the day such General Partner receives all such
additional information. The General Partners shall each have the right to
approve or disapprove investigation of any proposed Project in their sole and
absolute discretion. Once investigation of a Target Investment is approved,
the due diligence costs and expenditures reasonably incurred by the Partnership
and within the scope approved by the General Partners with respect to such
Project shall become the obligation of the Partnership.
(1) All due diligence costs and expenditures reasonably incurred by the
Partnership pursuant to this Section and within the scope of the approved due
diligence shall be funded if and when required for payment, and shall be
funded solely from, and shall constitute, Capital Contributions to the
Partnership by the Partners. In no event shall due diligence expenses be
funded from operating revenues of the Partnership. The due diligence
expenses incurred by the Partnership shall be allocated for book and tax
accounting purposes between and among each Project in such manner as the
General Partners may reasonably approve. Due diligence expenses from a
Project shall be allocated among the Parallel Partnerships in such a manner
as the Blackstone General Partner shall determine, in its sole discretion.
Each Partner shall contribute its pro rata share of such due diligence
expenses, based upon such Partner's Sharing Percentage.
(2) The Partners intend that all due diligence will be conducted through
the Partnership in accordance with any Consent given by the General Partners;
however, a General Partner may elect to perform, at its own cost, its own due
diligence in addition to that being performed by the Partnership.
(d) If the General Partners approve investigation of a Project, the
Partnership shall promptly undertake due diligence investigation and at
appropriate times during and, in any event, prior to the conclusion of that due
diligence investigation, the Partnership shall make available to each Partner
copies of the material due diligence information obtained by the Partnership
with respect to the applicable Target Investment.
(e) If any General Partner has elected to participate in the due diligence
investigation of a proposed Project pursuant to Section 3.6(c)(2) above, then
all due diligence activities
<PAGE> 29
25
shall be coordinated with such General Partner as reasonably necessary to
facilitate such participation.
(f) At such time, if any, as any member of the Blackstone Group or the
Interstate Group determines that a request for final authority to proceed with
acquisition of a Project is required because such party reasonably believes
that a binding commitment (i.e. a letter of intent which is, or could become
binding or a contract for purchase and sale) to proceed with the acquisition
must be executed by the Partnership or the opportunity to acquire such interest
would be lost, such party shall request the General Partners to give their
final approval to proceed with such acquisition (such notification, a "Request
for Final Approval"). Upon the request of any General Partner, a Request for
Final Approval shall be made in writing. In connection with any Request for
Final Approval, such party shall, to the extent applicable, (i) submit to the
General Partners the form of any purchase agreement and/or other relevant
documents pursuant to which the Partnership may acquire an interest in a
Project, and (ii) notify the General Partners of whether an Affiliate of the
Interstate General Partner is being proposed as the property manager for the
Project. Within five (5) Business Days after delivery of the Request for Final
Approval, the General Partners shall meet and either approve or disapprove, in
writing, the proposed Project, including a timetable for closing of the
acquisition, the posting of any non-refundable deposits, if applicable, and the
terms of engagement of any Affiliate of the Interstate General Partner for
property or asset management of the Project, as applicable. Each General
Partner shall have the right to grant final approval or disapproval of the
Project in its sole and absolute discretion. However, unless all of the
General Partners agree to extend the five (5) Business Day decision period set
forth above, the General Partners shall either approve or disapprove the
Project within that period without exception, and any failure to act within
that period, as it may be extended by the General Partners in their sole
discretion, shall constitute a disapproval of the Project. The Blackstone
Partners specifically acknowledge that, unless transfer of management is not
feasible or practical, the Interstate General Partner contemplates the
engagement by the Partnership of an Affiliate of the Interstate General Partner
on an arm's length basis in connection with the property management of one or
more of the Projects and contemplates that one or more of the Project proposals
may propose such engagement. If transfer of management is not feasible or
practical, then, unless such engagement is not feasible or practical, the
Partnership shall engage an Affiliate of the Interstate General Partner as an
asset manager for such Project pursuant to an Asset Management Agreement in
form and substance satisfactory to the parties thereto (the "Asset Management
Agreement"), and the fees payable by the Partnership under such Asset
Management Agreement shall be at Competitive Rates. Unless the General
Partners unanimously agree otherwise, no nonrefundable deposit shall be posted
with respect to a Project until that Project has received final
<PAGE> 30
26
Project approval pursuant to this subsection 3.6(f) and the General Partners
have had the opportunity to review the purchase agreement and/or the other
documents pursuant to which the Partnership may acquire an interest in such
Project. The final Project approval shall specify the amount of each remaining
funding obligation with respect to the applicable Project and the date(s) by
which each such amount is to be funded, it being the intent of the Partners
that they not fund to the Partnership those amounts due to the seller of (or if
applicable, escrow agent for the transfer of) the Project more than three (3)
Business Days prior to the date such amounts are due to the Seller or escrow
agent, as applicable. The funding obligations with respect to a Project shall
be allocated among the Parallel Partnerships in such a manner as the Blackstone
General Partner shall determine, in its sole discretion. By each funding date,
the Partners shall fund to the Partnership their pro rata portion of the
funding obligation then due, based upon each Partner's Sharing Percentage,
including any purchase deposits contemplated in connection with the Consent to
such Project. In no event shall final Project approval funding requirements be
funded from operating revenues of the Partnership. All such contributions to
the Partnership shall constitute Capital Contributions. Each of the General
Partners will consult with the other General Partners in connection with the
negotiation of any documents necessary for the acquisition of a Target
Investment.
(g) If the General Partners approve a proposed Project pursuant to
subsection 3.6(f) above, unless the Project shall be purchased through another
form, the Partnership shall promptly finalize the form of the Project
Partnership Agreement or Project Limited Liability Company Agreement, as
applicable, for the ownership of the proposed Project (with such Project
specific modifications as are necessary to address any Project specific
characteristics not addressed by the form of Project Partnership Agreement or
Project Limited Liability Company Agreement, as applicable), and promptly
finalize the form of a Management Agreement or an Asset Management Agreement,
as applicable, to be entered into (with such Project specific modifications as
are necessary to address any Project specific characteristics not addressed by
the form of Management Agreement or Asset Management Agreement, as applicable,
and which the Manager and the Blackstone General Partner may approve), which
Management Agreement (if applicable) shall provide for aggregate fees not
greater than 2.8% of Gross Operating Revenues (as defined in the Management
Agreement). In no event shall any party hereunder have any liability to the
other party for failure to finalize or enter into any Management Agreement or
Asset Management Agreement, as applicable, so long as the parties have
proceeded in good faith to attempt to consummate such documentation following
approval of the General Partners of any proposed Project pursuant to Section
3.6.
(h) The General Partners agree that in the event that (A) material facts
or circumstances or a material change in any
<PAGE> 31
27
facts or circumstances regarding a Target Investment which was approved for
acquisition by the General Partners become known to any General Partner which
were not previously known by such General Partner and (B) with the knowledge of
such new or changed facts or circumstances, such General Partner no longer
desires to proceed with such acquisition and (C) at the time of the occurrence
of the event or events referred to in clause (A) above, (x) the Partnership is
not irrevocably committed to consummate the acquisition of such Target
Investment pursuant to a binding legal agreement and (y) the Partnership's
obligations under such agreement would not be breached by the failure to
consummate such acquisition, then such General Partner may, by written notice
to the other General Partners, revoke its Consent to consummate such
acquisition at which time such Target Investment shall no longer be deemed
approved.
(i) Notwithstanding anything in this Section to the contrary, if, with
respect to a Project, a member of the Blackstone Group or the Interstate Group
reasonably believes it must take some action to retain the opportunity to
purchase such Project before it has sufficient time to follow the procedures
for approval set forth in this Section, such party may take such action
(including the making of a deposit or the entering into a binding agreement if
assignable to the Partnership) in its own name only and at its own risk without
violating the terms of this Agreement, provided such party promptly submits
such Project to the Partnership for its consideration. If the General Partners
subsequently approve such Project, such party shall assign all of its rights in
the Project to the Partnership and the Parallel Partnerships, as appropriate.
If the General Partners subsequently disapprove such Project, the Partnership
shall not be bound in any way to such Project, and the party who proposed the
Project may proceed with such Project only if the conditions of Section 3.7(b)
and Section 3.7(c) have been met.
(j) Any General Partner may request that any of the time periods set forth
herein be reduced or extended, if reasonably necessary.
(k) Notwithstanding anything in this Section to the contrary, none of the
Interstate Partners shall be deemed in default hereunder for failure to notify
the Blackstone Group as required herein if notice has been given to the
Blackstone General Partner of any of the Parallel Partnerships.
(l) Notwithstanding anything contained in this Agreement to the contrary,
unless all of the General Partners unanimously agree otherwise, each Project in
which the Partnership invests shall secure mortgage debt financing in principal
amounts and with terms that are consistent with the then currently prevailing
market conditions, but in any event in principal amounts between 60% and 75% of
the total acquisition cost of such Project.
<PAGE> 32
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SECTION 3.7 RIGHT OF FIRST OPPORTUNITY; EXCLUSIVE RIGHTS; Investment
Parameters. (a) Subject to the terms of this Agreement as set forth above,
the Blackstone Partners and the Interstate Partners each covenant to provide to
the Partnership, and each other, during the term of this Agreement, the right
of first opportunity as provided in Section 3.6 above to invest in (x) those
Target Investments which are hereafter identified by them and (y) the
Pre-Existing Projects. By their previous execution of the Acknowledgement,
Interstate Hotels Corporation (in the case of (A) below) and Blackstone Group
Holdings L.P. (in the case of (B) below) have agreed and hereby ratify and
confirm that they agree, and agree to cause (A) the Interstate Group and (B)
the Blackstone Group, respectively, to submit any Target Investments in which
they or the Interstate Group and the Blackstone Group would otherwise wish to
invest independent of the Partnership to the right of first opportunity set
forth herein, and, in connection therewith, they shall, and shall cause the
Interstate Group and the Blackstone Group to, subject to Section 3.7(b) below,
refer all such investment opportunities to the Interstate General Partner or
the Blackstone General Partner, as applicable, for submission to the
Partnership pursuant to the terms set forth above.
(b) Notwithstanding anything herein to the contrary, the Interstate Group
and the Blackstone Group expressly retain the right to undertake acquisition or
development of any Target Investment or any other investment whatsoever,
without the consent of the others, and free of any right of first opportunity
hereunder, at such time, in such form and upon such terms as they, acting in
their sole discretion, may determine appropriate, where any one of the
following conditions is satisfied:
(i) such Project is a Project that was disapproved or deemed disapproved
solely by action or inaction of the General Partners after proper notice;
provided, that if a Project is disapproved or deemed disapproved by a General
Partner who is a member of the same group (i.e., the Blackstone Group or the
Interstate Group) as the party who submitted the Request for Preliminary
Approval or Request for Final Approval, as applicable, then the condition
contained in this clause (i) shall not be deemed satisfied for any member of
such group;
(ii) such Project fails to meet the definition of a Target Investment;
(iii) except as expressly provided below, such Project is listed on Exhibit
E hereto, subject to the qualifications and agreements described in such
Exhibit;
(iv) such Project is identified or undertaken after the termination of the
right of first opportunity pursuant to the terms of this Agreement;
<PAGE> 33
29
(v) such party is acquiring, directly or indirectly, the stock or assets
of an entity which owns one or more Target Investments but whose assets and/or
operations are not primarily composed of Target Investments;
(vi) such party is acquiring, directly or indirectly, the stock or
assets of an entity which primarily owns and/or operates hotel or motel
franchise systems or hotel or motel reservations systems;
(vii) the Consideration being paid for such Target Investment in the
aggregate is less than $10,000,000 or the equity portion of the Consideration
being paid for such Target Investment in the aggregate is less than
$5,000,000; or
(viii) with respect to a Target Investment, the Interstate Group or the
Blackstone Group, applicable, certifies, at any time (whether or not such
Project has been submitted to the Partners and the Partnership under Section
3.6 above), that in its judgment, involvement with the Blackstone Group or
the Interstate Group, as applicable, in such Target Investment would not be
appropriate, feasible or practical.
(c) Notwithstanding anything in Section 3.7(b) above to the contrary, the
right of first opportunity set forth herein will apply to any acquisition
undertaken by any member of the Blackstone Group or the Interstate Group during
the term of this right of first opportunity with respect to the Pre-Existing
Projects. In the event that a party is undertaking the acquisition of a Target
Investment free of the right of first opportunity pursuant to Section
3.7(b)(i), such party shall acquire such Target Investment upon terms that are
no more favorable than the terms presented to the General Partners with respect
to such Target Investment.
(d) The Partners acknowledge that, without limiting the definition of
Target Investment, it is their intent that the Target Investments ultimately
acquired by the Partnership will be Target Investments which (i) are mid to
high quality (3-4 stars), (ii) are located in growing markets, (iii) are well
positioned vis-a-vis the competition and, (iv) provide significant opportunity
for enhanced performance through intensive management repositioning and/or
redevelopment. Additionally, there is a preference for multi-asset
acquisitions over single properties in order to provide for the most efficient
and cost effective underwriting and investment process. Further, such
acquisitions should provide minimum going-in free and clear returns of 11%
(after management and FF&E reserve), unless immediate opportunity for enhanced
performance can be demonstrated. Nevertheless, certain Target Investments may
be approved hereunder even if they do not fall within the above- referenced
investment parameters. Accordingly, except as otherwise provided herein
(including
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30
without limitation Section 3.7(b) above), all Target Investments, including,
those that do not fall within the above-referenced investment parameters, shall
be subject to the right of first opportunity set forth in Section 3.6 above.
SECTION 3.8 TERMINATION OF RIGHT OF FIRST OPPORTUNITY.
(a) The Blackstone General Partner shall have the right to terminate the
right of first opportunity set forth in Section 3.6 if any member of the
Interstate Group defaults in the performance of any of its obligations
hereunder or under the Acknowledgement after the Blackstone General Partner has
given such Partner or any other such party notice of such default and such
Partner or other party has failed to cure such default within 30 days after
receipt of such notice.
(b) The Interstate General Partner shall have the right to terminate the
right of first opportunity set forth in Section 3.6 if any member of the
Blackstone Group defaults in the performance of any of its obligations
hereunder or under the Acknowledgement after the Interstate General Partner has
given such Partner or any other such party notice of such default and such
Partner or other party has failed to cure such default within 30 days after
receipt of such notice.
(c) The right of first opportunity set forth in Section 3.6 shall
automatically terminate upon the earlier to occur of (i) December 15, 1997 or
(ii) the date upon which the members of the Blackstone Group in the Partnership
and in the Parallel Partnerships shall have contributed an aggregate of
$29,400,000 to the Partnership and the Parallel Partnerships and the members of
the Interstate Group in the Partnership and the Parallel Partnerships shall
have contributed an aggregate of $30,600,000 to the Partnership and the
Parallel Partnerships.
(d) At any time after $54,000,000 has been invested (either through
acquisitions that are closed or through binding commitments to close
acquisitions) in the aggregate by the Partnership and the Parallel
Partnerships, then any Partner may elect to terminate the right of first
opportunity set forth in Section 3.6 upon three (3) Business Days notice to all
the other Partners.
(e) The General Partners may, in their discretion, extend the right of
first opportunity set forth in Section 3.6 for such period of time as they may
mutually agree.
SECTION 3.9 FINANCING. The Blackstone General Partner, acting directly or
through one or more of its Affiliates, shall endeavor to secure an acquisition
financing facility for the Partnership and the Parallel Partnerships in an
initial amount between $60,000,000 and $80,000,000, such facility
<PAGE> 35
31
to be subject to borrowings by the Partnership and the Parallel Partnerships to
acquire Target Investments in the event that sufficient seller financing is not
available in connection with the acquisition of any such Target Investment and
for other related purposes. If needed, the Blackstone General Partner may
secure additional debt facilities for the Partnership and the Parallel
Partnerships up to an aggregate amount (including the initial $60,000,000 to
$80,000,000) between $140,000,000 and $180,000,000. The General Partners must
unanimously approve the terms and conditions of such financing. In the event
such financing is obtained, in addition to any other fees, expenses or other
compensation payable to the Blackstone General Partner and/or its Affiliates
hereunder or any fees payable to third parties in connection with such
financing, the Partnership and the Parallel Partnerships shall pay to the
Blackstone General Partner and/or its Affiliates, as the case may be, a fee for
placing such debt facilities in an amount equal to one percent (1%) of the
maximum principal amount of each such debt facility. The portion of such fee
allocated to the Partnership shall be determined by the Blackstone General
Partner, in its sole discretion. At the time such fee is payable, each Partner
shall fund to the Partnership, as a Capital Contribution, its pro rata portion
of such fee, based upon such Partner's Sharing Percentage, to the extent not
financed as part of the overall transaction. No fee shall be payable under
this Section in connection with the refinancing of any such debt facilities.
SECTION 3.10 FINANCIAL ADVISORY SERVICES. Each time that the Partnership
acquires a Target Investment, the Partnership and any Parallel Partnerships
invested in such Target Investment shall pay to whichever of the Blackstone
General Partner (and/or its Affiliates) or the Interstate General Partners
(and/or its Affiliates) proposed such Target Investment to the Partnership, an
aggregate advisory fee equal to one percent (1%) of the amount of the
Consideration for the acquisition of such Target Investment; provided that the
Blackstone General Partner or its Affiliates shall not be entitled to such a
fee after the occurrence and during the continuance of a default hereunder by
any of the Blackstone Partners (after any notice and opportunity to cure); and
provided further that the Interstate General Partner or its Affiliates shall
not be entitled to such a fee after the occurrence and during the continuance
of a default hereunder by any of the Interstate Partners (after any notice and
opportunity to cure). The portion of such fee allocated to the Partnership
shall be determined by the Blackstone General Partner. At the time such fee is
payable, each Partner shall fund to the Partnership, as a Capital Contribution,
its pro rata portion of such fee, based upon such Partner's Sharing Percentage,
to the extent not financed as part of the overall transaction.
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SECTION 3.11 OTHER PARTNER SERVICES.
(a) Until such time as the General Partners hire, as an employee or
employees of the Partnership, a portfolio manager, a controller and/or an
administrative staff to conduct and oversee the overall administration of the
Partnership, the Interstate General Partner shall conduct all the
administrative affairs of the Partnership at the then Competitive Rate;
provided, however, that the General Partners agree to hire an employee or
employees of the Partnership to perform such tasks promptly after the needs of
the Partnership so require. Any such employee may be employed jointly by the
Parallel Partnerships. The Interstate General Partner shall also, at no cost
to the Partnership (except where otherwise provided in this Agreement),
conduct, oversee and/or manage all (i) pre-acquisition due diligence, (ii)
property-level management, (iii) performance tracking, (iv) the making of
capital improvements to any Project, (v) overall portfolio management of the
Partnership Assets and (vi) negotiation of franchise fee arrangements. The
Interstate General Partner shall also be responsible for preparing
administrative, operating and capital budgets for the Partnership. The
Interstate General Partner shall submit to the General Partners all relevant
information regarding all proposed budgets, proposed franchise fee arrangements
and related financial matters, and the General Partners shall have the right to
Consent to all such materials before they are implemented by the Partnership.
(b) The Partners acknowledge that Affiliates of the Interstate General
Partner have the capability of providing to the Partnership various insurance
and purchasing services. At the direction of the Blackstone General Partner
acting in its sole discretion (including, as to insurance, approval by the
Blackstone General Partner of the financial soundness of any proposed insurance
company and its reinsurers), the Partnership may engage such Affiliates of the
Interstate General Partner to perform such services (in which case such
services shall be performed at Competitive Rates) or the Partnership may engage
independent third parties to perform such services, provided, that if the
Partnership has received an offer from any such independent third party to
perform such services, Affiliates of the Interstate General Partner shall have
the right to match such offer and, if such offer is matched, the Partnership
will engage such Affiliates on the terms of such offer.
(c) In performance of the services pursuant to this Section 3.11 and
otherwise, the Partners agree that they shall cooperate and consult with each
other in an effort to minimize duplication of efforts and costs.
SECTION 3.12 MARKETING RIGHTS. At any time after December 25, 1997 the
Blackstone Partners, acting jointly, or the Interstate Partners, acting
jointly, may propose the sale of a
<PAGE> 37
33
Project or Projects (but not a portion of any Project) in accordance with the
following terms:
(a) All of the Blackstone Partners may jointly serve upon all of the
Interstate Partners, or all of the Interstate Partners may jointly serve upon
the all of the Blackstone Partners, a notice (an "Offering Notice") as
described below. The partners serving an Offering Notice shall be referred
to in this Section as the "Offering Group". The partners receiving an
Offering Notice shall be referred to in this Section as the "Offeree Group".
Each Offering Notice shall specify one or more Projects (the "Offered
Projects") that the Offeror Group proposes to be sold (either by causing the
Project Partnerships which own such Offered Projects to sell such Offered
Projects or by selling all of the partnership interests in such Project
Partnerships) and designate a price for the sale of each Offered Project (the
"Offer Price"). The Offeree Group with respect to a Project may not deliver
an Offering Notice with respect to such Project until the expiration of the
Sale Option Period (as defined below) for such Project with respect to the
Offering Notice of the Offeror Group with respect to such Project. The
Offering Notice may not propose to sell a portion of any Project. An
Offering Notice delivered under this Agreement must be simultaneously
delivered under the partnership agreement of each of the Parallel
Partnerships, and for the purposes of this Section 3.12, the Offeror Group
shall consist of all of the members of the Offeror Groups in each of the
Parallel Partnerships, the Offeree Group shall consist of all of the members
of the Offeree Groups in each of the Parallel Partnerships, the Offered
Projects shall consist of the interest of all of the Parallel Partnerships in
such Offered Projects, and the Offeree Deposit (as defined below) shall be
delivered in the aggregate by all of the Parallel Partnerships,
(b) Within 30 days after the receipt by the Offeree Group of an Offering
Notice (an "Offeree Option Period"), the Offeree Group may in a writing to
the Offeror Group (an "Offeree Reply Notice") (i) elect to purchase all of
the Offered Projects listed in such Offering Notice (an "Offeror Group
Interest") at a price equal to the aggregate Offer Price for the Offered
Projects, (ii) offer to purchase all of the Offered Projects listed in such
Offering Notice for a price (the "Counteroffer Price") listed by the Offeree
Group in the Offeree Reply Notice (the "Counteroffer"), or (iii) decline to
purchase such Offered Projects. With respect to each Offering Notice, if the
Offeree Group fails to deliver an Offeree Reply Notice to the Offeror Group
prior to the expiration of the Offeree Option Period, the Offeree Group shall
for all purposes be conclusively deemed to have declined to purchase the
Offered Projects listed in such Offering Notice. If the Offeree Group elects
to purchase all of the Offered Projects, the Offeree Group shall deliver
<PAGE> 38
34
to a mutually acceptable escrow agent, a nonrefundable deposit in an amount
equal to 5% of the aggregate Offer Price for the Offered Projects (the
"Offeree Deposit"); in such case, the Offeree Reply Notice shall not be
deemed delivered until such time as the escrow agent has received the Offeree
Deposit. If the Offeree Group makes a Counteroffer, the Offeror Group may
accept such Counteroffer or decline such Counteroffer. If the Offeror Group
accepts such Counteroffer, the Offeree Group shall deliver to a mutually
acceptable escrow agent, the Offeree Deposit equal to 5% of the Counteroffer
Price. The Offeror Group and the Offeree Group shall endeavor to structure
any sale of the Offered Projects to the Offeree Group in a tax efficient
manner.
(c) If, with respect to an Offering Notice, the Offeree Group elects to
purchase the Offered Projects or the Offeror Group accepts a Counteroffer of
the Offeree Group, the closing of the purchase of such Offered Projects (the
"Closing") will be held on a date selected by the Offeree Group upon five
Business Days' notice to the Offeror Group but no later than 90 days after
the Offeror Group's receipt of the Offeree Reply Notice (the "Outside
Purchase Date"). Each Closing shall be held in New York City at a location
designated by the General Partner in the Offeror Group. At the Closing, the
Partnership (or the Project Partnership, as applicable) shall execute such
transfer documents as the Offeree Group shall reasonably require to transfer
the Offered Projects to the Offeree Group (which shall include a special
warranty deed if reasonably required by the title company for the Offeree
Group), as is, where is; the Offeree Group shall pay to the Partnership (or
Project Partnership, as applicable), in immediately available funds, the
aggregate Offer Price for all of the Offered Projects listed in such Offering
Notice; the Project Partnership and the Partnership shall each immediately
distribute such Offer Price to its Partners, pro rata in accordance with this
Agreement, and the Offeree Deposit shall be returned to the Offeree Group.
To the extent the execution by a member or Affiliate of a member of the
Offeree Group is required on behalf of the Partnership or Project
Partnership, each member or Affiliate of a member of the Offeree Group shall
promptly execute and deliver any such document or instrument, and each
Partner of the Offeree Group hereby constitutes and appoints each Partner in
the Offeror Group its attorney in fact to execute, acknowledge and deliver
any such documents or instruments in its stead. Transfer taxes and closing
costs with respect to an Offered Project shall be paid by whichever of the
seller (the Partnership or Project Partnership) or the purchaser (the Offeree
Group) customarily pays such costs in the state in which such Offered Project
is located.
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35
(d) An Offeree Reply Notice in which the Offeree Group elects to purchase
the Offered Projects, or in which the Offeree Group makes a Counteroffer
which is accepted by the Offeror Group, shall create an irrevocable binding
obligation of the Offeree Group and the Offeror Group. If the Offeree Group
elects in an Offeree Reply Notice to purchase the Offered Projects or makes a
Counteroffer which is accepted by the Offeror Group, and the Offeree Group
fails to purchase such Offered Projects by the applicable Offeree Outside
Purchase Date, (i) the Offeree Group shall immediately forfeit all of its
rights under this Section 3.12 with respect to any Projects, including
without limitation the right to send out Offering Notices with respect to any
Projects, (ii) the Offeror Group shall be entitled to retain the Offeree
Deposit as liquidated damages, and (iii) the Offeror Group shall be entitled
to exercise any and all other remedies available at law and equity, including
specific performance since the parties hereto recognize that damages alone
would be inadequate.
(e) With respect to an Offering Notice, if the Offeree Group declines (or is
deemed to have declined) to purchase the Offered Projects listed therein, or
if the Offeror Group rejects a Counteroffer made by the Offeree Group, the
Offeror Group shall have the right, without the consent of any Partner of the
Offeree Group, within 90 days after the earlier of (i) the Offeror Group's
receipt of an Offeree Reply Notice in which the Offeree Group declines to
purchase the Offered Projects, and (ii) the expiration of the Offeree Option
Period (such 90 day period, the "Sale Option Period"), to cause the sale for
all cash of all of the Offered Projects listed in such Offering Notice
(including the sale to any member of the Offeror Group). Each Partner of the
Offeree Group shall promptly execute and deliver any document or instrument
the Offeror Group reasonably requires in order to consummate the sale of such
Offered Projects during the Sale Option Period, and each Partner of the
Offeree Group hereby constitutes and appoints each Partner in the Offeror
Group its attorney in fact to execute, acknowledge and deliver any such
documents or instruments in its stead. Notwithstanding the foregoing, the
Offeror Group shall not be entitled to cause the sale of an Offered Project
during the Sale Option Period for a sales price less than 95% of the Offer
Price for such Offered Project listed in such Offering Notice (or the
Counteroffer Price in the case of a rejected Counteroffer, or 100% of the
Offer Price for such Offered Project if the purchaser is any member of the
Offeror Group or any affiliate of any member of the Offeror Group). If an
Offered Project is not sold prior to the expiration of the Sale Option
Period, the Offeror Group may not cause the sale of such Offered Project
without again complying with all of the provisions of this Section (unless
all of the other Partners consent). No Partner may exercise its rights under
this Section with respect to any particular
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36
Project more than once in any twelve month period (but such Partner may
exercise its rights under this Section with respect to other Projects). The
Offeror Group and the Offeree Group shall endeavor to structure any sale of
the Offered Projects to the Offeror Group (or any member thereof) in a tax
efficient manner.
ARTICLE IV
OTHER ACTIVITIES PERMITTED
Except as expressly provided hereunder, this Agreement shall not be
construed in any manner to preclude any Partner or any of its Affiliates from
engaging in any activity whatsoever permitted by applicable law (whether or not
such activity might compete, or constitute a conflict of interest, with the
Partnership), including, without limitation, the provision of financial or
investment advisory services to any person, managing investments or receiving
compensation or profit from any of the foregoing.
ARTICLE V
CAPITAL CONTRIBUTIONS;
DISTRIBUTIONS
SECTION 5.1 CAPITAL CONTRIBUTIONS. (a) No Partner shall be required to
make a Capital Contribution except as provided in this Section. Each Partner
agrees to make Capital Contributions (i) as required by this Agreement,
including, without limitation, Sections 3.6, 3.9, 3.10 and 5.7 of this
Agreement, (ii) to pay for fees, costs and expenses specifically payable by the
Partnership pursuant to this Agreement or (iii) in the event that the General
Partners determine that the Partnership requires additional funds to meet its
then existing obligations, including to cover operating shortfalls, and funds
are not otherwise available from Partnership revenues or from loans to the
Partnership for such purposes. Notwithstanding the foregoing, if additional
Capital Contributions are necessary to fund operating expenses of any Target
Investment (other than for payments to Affiliates of the Interstate General
Partner or the Blackstone General Partner) after the deferring of payables to
the extent reasonable, income has not been used in the immediately preceding
three months to pay amounts to Affiliates of the Blackstone General Partner of
the Interstate General Partner beyond amounts set forth in the relevant budget
(any such expenses meeting the foregoing conditions, "Necessary Expenses"), and
the General Partners do not agree on the need for such Capital Contribution
after a reasonable amount of time (but in no event after the time failure to
pay would have a material adverse effect on the Partnership), either General
Partner may nonetheless, to the extent of Necessary Expenses, require a
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37
Capital Contribution, not to exceed $1,000,000 in the aggregate to cover
Necessary Expenses for such Target Investment. If any Partner fails to make
such Capital Contribution, the provisions of Section 5.2 below shall apply
(except that the provision allowing the election of the remedy set forth in
Section 5.3 shall not be applicable). Each of the Partners shall be required
to make Capital Contributions to the Partnership in accordance with such
Partner's Sharing Percentage (as determined in accordance with Section 3.6(f)
above); provided that, except for amounts to be contributed under clause (iii)
above (for which no limit shall apply), the aggregate amount of Capital
Contributions made by the Blackstone Partners hereof and by the Blackstone
Partners in the Parallel Partnerships shall not exceed $29,400,000, and the
aggregate amount of Capital Contributions made by the Interstate Partners
hereof and by the Interstate Partners in the Parallel Partnerships shall not
exceed $30,600,000. It is understood and agreed that the commitment by the
Blackstone Partners and the Interstate Partners to fund their respective
Committed Capital is not revolving in nature and at such time as the date such
Partner's Committed Capital shall have been funded in full, such commitment
will expire and be of no further force or effect.
(b) No Partner shall have any obligation to restore any negative balance
in the Partner's Capital Account upon liquidation of the Partnership. No
Partner shall be entitled to withdraw all or any part of its Capital
Contributions except as expressly provided in this Partnership Agreement. No
interest shall be payable by the Partnership on the Capital Contributions of
any Partner except as otherwise provided herein. In no event shall any Partner
be entitled to demand any property from the Partnership other than cash.
(c) When Capital Contributions are required under paragraph (a) above from
the Partners, the General Partners shall give notice to all of the Partners of
the amount of funds required and the date such funds shall be due, which due
date shall be, unless otherwise provided in this Agreement, no less than 10
Business Days from the date such notice is given.
SECTION 5.2 PARTNER LOANS FOR FAILURE TO FUND COMMITTED CAPITAL. If any
Partner shall fail to timely make a Capital Contribution required in Section
5.1 (such Partner is hereinafter referred to as a "Non-Contributing Partner")
and such default is not cured within 10 days of the date such Capital
Contribution was due, then any other Partner (a "Contributing Partner") may
fund all or part of such Capital Contribution and, unless the Contributing
Partner otherwise elects the remedy of the dilution of such Non-Contributing
Partner's Interest in the Partnership as set forth in Section 5.3 below, any
amounts funded by a Contributing Partner on behalf of a Non-Contributing
Partner shall be made directly to the Partnership but shall be treated as (i) a
recourse demand loan made by the Contributing Partner to the Non-Contributing
Partner (bearing interest at a fluctuating
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rate of interest equal to 10% per annum in excess of the prime rate of interest
publicly announced by Citibank, N.A. from time to time, but not less than 15%
per annum, but in no event in excess of the maximum rate permitted by
applicable law), followed by (ii) a Capital Contribution by such
Non-Contributing Partner to the Partnership. Any such recourse loan (to the
extent of unpaid principal and interest) shall be payable on demand by the
Contributing Partner and shall be repaid directly by the Partnership on behalf
of the Non-Contributing Partner to the Contributing Partner from Non-Capital
Proceeds and Capital Proceeds otherwise distributable to the Non-Contributing
Partner. Amounts paid directly by the Partnership to the Contributing Partner
on account of the loan shall be deemed distributions to the Non-Contributing
Partner. Any Non-Capital Proceeds and Capital Proceeds used to repay such loan
shall be applied first to interest and then to principal thereof.
SECTION 5.3 DILUTION FOR FAILURE TO FUND CAPITAL. (a) If a
Non-Contributing Partner fails to contribute any amounts required to be
contributed pursuant to Section 5.1 above as and when required to be
contributed and such funds are contributed to the Partnership by a Contributing
Partner, the Non-Contributing Partner's Sharing Percentage shall be, if the
Contributing Partner elects to apply the provisions of this Section 5.3 in lieu
of the loan mechanism provided in Section 5.2, adjusted pursuant to Section
5.3(b) below as of the day on which the Contributing Partner contributes such
funds. In such an event the contribution of such funds shall be treated as a
Capital Contribution to the Partnership by the Contributing Partner.
(b) The Sharing Percentage of a Non-Contributing Partner may be reduced
(but not below zero), upon the election described in Section 5.3(a) above, by
an amount equal to the product of (i) 1.6 times (ii) a fraction expressed as a
percentage, (A) the numerator of which is the amount of the Capital
Contribution which such Non-Contributing Partner fails to contribute and (B)
the denominator of which is the aggregate of the Capital Contributions made by
the Partners up to and including such time, including the Capital Contribution
which such Non-Contributing Partner fails to make. The Sharing Percentage of
the Contributing Partner shall be increased by the amount of the reduction in
the Sharing Percentage of the Non-Contributing Partner. Notwithstanding the
foregoing, if within 90 days after the reduction of the Non-Contributing
Partner's Sharing Percentage described herein, the Non-Contributing Partner
pays to the Contributing Partner the amount which the Non- Contributing Partner
failed to contribute and such Contributing Partner contributed, together with
interest thereon (at a rate equal to 10% per annum in excess of the prime rate
of interest publicly announced by Citibank, N.A. from time to time, but not
less than 15% per annum, and in no event in excess of the maximum rate
permitted by applicable law), the Non-Contributing Partner's Sharing Percentage
and the Contributing Partner's Sharing
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Percentage shall be reinstated as if the Non-Contributing Partner had timely
made such Capital Contribution.
SECTION 5.4 DISTRIBUTIONS GENERALLY. Capital Proceeds shall be
distributed as soon as practicable but in any event within 45 days after the
date that such Proceeds are received by the Partnership. Non-Capital Proceeds
shall be distributed at such times and intervals as the General Partners shall
determine, but in no event later than 30 days after the end of each calendar
quarter. The Partnership shall make such distributions in cash among the
Partners in accordance with this Article V.
SECTION 5.5 DISTRIBUTIONS OF PROCEEDS.
(a) Each distribution of Non-Capital Proceeds from a Project shall be made
to the Partners to the extent of, and pro rata in accordance with, each of
their Sharing Percentages (as the same may be adjusted hereunder).
Notwithstanding the foregoing, Non-Capital Proceeds from a Project otherwise
distributable to a Blackstone Partner shall be distributed as follows:
(i) First, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from such Project in an amount equal to the
Capital Contributions made by such Partner with respect to such Project; and
(ii) Second, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from such Project, in excess of any amounts
distributed under Section 5.5(a)(i) above, in an amount which generates a 20%
Internal Rate of Return on the Capital Contributions made by such Partner with
respect to such Project; and
(iii) Thereafter, 86.532% to such Blackstone Partner and 13.468% to the
Interstate Partners (pro rata in accordance with their Sharing Percentages).
(b) Each distribution of Capital Proceeds from a Project shall be made to
the Partners to the extent of, and pro rata in accordance with, each of their
Sharing Percentages (as the same may be adjusted hereunder). Notwithstanding
the foregoing, Capital Proceeds from a Project otherwise distributable to a
Blackstone Partner shall be distributed as follows:
(i) First, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in an amount equal
to the sum of the Capital Contributions made by such Partner as of such date
with respect to all Projects
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which have been subject to a Disposition on or prior to such date; and
(ii) Second, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in excess of any
amounts distributed under Section 5.5(b)(i) above, in an amount which
generates a 20% Internal Rate of Return on the Capital Contributions made by
such Partner as of such date with respect to all Projects which have been
subject to a Disposition on or prior to such date and all Projects for which
an Unrealized Loss exists on such date; and
(iii) Third, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in excess of any
amounts distributed under Sections 5.5(b)(i) and (ii) above, in an amount
equal to the total of such Partner's pro rata shares of Unrealized Loss from
all Projects for which an Unrealized Loss exists on such date (based on such
Partner's Sharing Percentage); and
(iv) Thereafter, 86.532% to such Blackstone Partner and 13.468% to the
Interstate Partners (pro rata in accordance with their Sharing Percentages).
SECTION 5.6 RESTRICTED PAYMENTS. Notwithstanding any provisions to the
contrary in this Agreement, neither the Partnership nor the General Partners on
behalf of the Partnership shall make a distribution if such distribution would
violate the Partnership Act.
SECTION 5.7 PARTNERSHIP EXPENSES. (a) Promptly after the date of this
Agreement, the Partnership, to the extent it does not pay such costs and
expenses directly, will reimburse each Partner for Organizational Expenses
incurred by such Partner.
(b) The following expenses shall be borne by the Partnership:
(i) To the extent not reimbursed, all expenses (other than any Partner's
overhead) reasonably incurred in the operation of the Partnership (and
approved by the General Partners if required hereunder), including without
limitation, any taxes imposed on the Partnership, fees and expenses for
attorneys and accountants, the costs and expenses of any insurance purchased
by the Partnership, and the costs and expenses of any litigation involving the
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Partnership and the amount of any judgments or settlements paid in connection
therewith; and
(ii) All third party professional services which have been approved by the
General Partners and incurred in connection with a proposed Target Investment
that is not ultimately made or a proposed disposition of a Project which is
not actually consummated, including, without limitation, (i) commitment fees
that become payable in connection with a proposed Target Investment that is
not ultimately made, (ii) legal fees, accounting fees and other third party
professional due diligence costs and expenses and (iii) all travel and similar
out of pocket costs and expenses of employees of the Partners in connection
with approved due diligence.
Partnership expenses shall be paid directly by the Partnership or the
Partnership shall reimburse the Partner who incurred such expenses for the
payment thereof, as the case may be.
ARTICLE VI
BOOKS AND REPORTS; TAX MATTERS;
CAPITAL ACCOUNTS; ALLOCATIONS
SECTION 6.1 GENERAL ACCOUNTING MATTERS. (a) Allocations of Net Income
(Loss) pursuant to Section 6.4 shall be made by or under the direction of the
General Partners at the end of each Fiscal Period.
(b) Each Partner shall be supplied with the Partnership information
necessary to enable such Partner to prepare in a timely manner its Federal,
state and local income tax returns and such other financial or other statements
and reports that are approved by the General Partners.
(c) The Interstate General Partner shall keep or cause to be kept books
and records pertaining to the Partnership's business showing all of its assets
and liabilities, receipts and disbursements, realized profits and losses,
Partners' Capital Accounts and all transactions entered into by the
Partnership. Such books and records of the Partnership shall be kept at the
office of the Interstate General Partner and the Partners and their
representatives shall at all reasonable times have free access thereto for the
purpose of inspecting or copying the same. The Partnership's books of account
shall be kept on an accrual basis or as otherwise provided by the General
Partners, and otherwise in accordance with generally accepted accounting
principles, except that for income tax purposes such books shall be kept in
accordance with applicable tax accounting principles.
<PAGE> 46
42
(d) Except as otherwise provided herein, all determinations, valuations
and other matters of judgment required to be made for accounting and tax
purposes under this Agreement shall be made by or under the direction of the
General Partners and shall be conclusive and binding on all Partners, former
Partners, their successors or legal representatives and any other person except
for computational errors or fraud, and to the fullest extent permitted by law
no such person shall have the right to an accounting or an appraisal of the
assets of the Partnership or any successor thereto except for computational
errors or fraud.
(e) The books of the Partnership shall be examined, certified and audited
annually as of the end of each Fiscal Year, by such recognized firm of
independent certified public accountants that is designated by the General
Partners. For each Fiscal Year of the Partnership, such accountants shall
determine and prepare full financial statements, including, without limitation,
a balance sheet, an income statement, a statement of changes in financial
position and a statement of the Non-Capital Proceeds and Capital Proceeds of
the Partnership. The General Partners shall promptly upon receipt of such
financial statements, and in any event within 90 days after the end of each
such Fiscal Year, transmit copies thereof to each Partner, together with the
report and management letter of such accountants covering the results of such
audit. The cost of all audits and reports provided to the Partners pursuant to
this Section shall be an expense of the Partnership.
SECTION 6.2 CERTAIN TAX MATTERS.
The taxable year of the Partnership shall be the same as its Fiscal Year.
The Tax Matters Partner (as defined below) shall cause to be prepared all
Federal, state and local tax returns of the Partnership for each year for which
such returns are required to be filed and, after approval of such returns by
the General Partners, shall cause such returns to be timely filed. The General
Partners shall determine the appropriate treatment of each item of income,
gain, loss, deduction and credit of the Partnership and the accounting methods
and conventions under the tax laws of the United States, the several states and
other relevant jurisdictions as to the treatment of any such item or any other
method or procedure related to the preparation of such tax returns. The Tax
Matters Partner shall make the election provided for in Section 754 of the
Code, if, and only if the Partner who or which has acquired an interest in the
Partnership or a distribution of Partnership property with respect to which the
election is made will have provided to the Tax Matters Partner concurrently, or
within 30 days after the Transfer of such interest, its undertaking to the
effect that it, and its successors in interest hereunder, will reimburse the
Partnership annually for its additional administrative costs incurred by reason
of such election as determined by the auditor of the Partnership. The Tax
Matters Partner shall also make the
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43
election to amortize Organizational Expenses pursuant to Code Section 709 and
the regulation promulgated thereunder. In addition, the General Partners may
cause the Partnership to make or refrain from making any and all other
elections permitted by the tax laws of the United States, the several states
and other relevant jurisdictions. The Tax Matters Partner for purposes of
Section 6231(a)(7) of the Code (the "Tax Matters Partner") shall be the
Blackstone General Partner. The Tax Matters Partner shall have all of the
rights, duties, powers and obligations provided for in Sections 6221 through
6232 of the Code with respect to the Partnership provided, however, that the
following provisions shall apply with respect to the Tax Matters Partner:
(a) The Tax Matters Partner shall be responsible for the filing of the
Partnership information returns required under Section 6031 of the Code.
Within thirty (30) days after the end of each Fiscal Year, the Tax Matters
Partner shall furnish to the Partnership's accountants sufficient information
for the preparation of all required Partnership tax returns.
(b) A Partner shall provide notice to the Tax Matters Partner of its intent
to file an original or an amended income tax return of which such Partner
will take a position with respect to a partnership item that is inconsistent
with the position taken by the Tax Matters Partner on the Partnership return.
Such notice must be given at least thirty (30) days prior to the filing of
such return. At such time, such Partner shall provide the Tax Matters
Partner with a statement detailing the inconsistent item or items contained
in such return. Within ten (10) days of receipt of such statement, the Tax
Matters Partner shall provide a copy of such statement to each Partner.
(c) The Tax Matters Partner shall include in each Partnership return
sufficient information to entitle each eligible Partner and any indirect
partner (at its request) to notice from the Internal Revenue Service pursuant
to Section 6223(a) of the Code.
(d) Each Partner reserves the right to participate in an audit proceeding.
(e) Each Partner reserves the right to enter into a separate settlement
agreement with the Internal Revenue Service. A Partner who enters into a
settlement agreement with the Internal Revenue Service concerning a
partnership item shall notify the Tax Matters Partner of its terms within ten
(10) days of such agreement, and the Tax Matters Partner shall notify the
other Partners of the terms of such agreement within ten (10) days after
receiving such notice. The Tax Matters Partner shall notify each other
Partner of the terms of any settlement offer received by it within ten (10)
days of receiving such offer.
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44
(f) The Tax Matters Partner shall not file an administrative adjustment
request without the Consent of all of the General Partners. Each Partner,
other than the Tax Matter partner, reserves the right to file an
administrative adjustment request under Section 6227 of the Code. Any
Partner filing an administrative adjustment request shall notify the Tax
Matters Partner of its contents within ten (10) days after filing such
request. The Tax Matters Partner shall notify each Partner of the contents
of such request within ten (10) days of the receipt of such notice.
(g) All Partners shall report to the Tax Matters Partner the conversion of a
partnership item to a nonpartnership item under Section 6231(b) or any other
provision of the Code within ten (10) days of learning of the conversion.
(h) Each Partner reserves the right to file a petition for judicial review
and to participate in a judicial proceeding under Section 6226 and 6228 of
the Code. If the Tax Matters Partner files a petition for judicial review or
an appeal under Section 6226 of the Code, it shall notify each Partner of
such petition or appeal within ten (10) days of such filing. Any other
Partner filing a petition for judicial review or any appeal under Sections
6226 or 6228 of the Code shall notify the Tax Matters Partner of such
petition or appeal on or before the date of filing. The Tax Matters Partner
shall notify each Partner of such filing within ten (10) days of receipt of
such notice from the filing partner.
(i) The Tax Matters Partner shall not agree to extend the statute of
limitations for assessment without the Consent of all of the General
Partners.
(j) The Tax Matters Partner shall be authorized to incur expenses in the
performance of its duties pursuant to this Agreement. Notwithstanding any
other provision of this Agreement, such expenses shall be borne by the
persons who were Partners of the Partnership at any time during the
applicable taxable year without regard to whether such persons are Partners
at the time the expense is incurred. Such expenses shall be allocated to the
Partners and former Partners having an interest in the proceeding at the time
the cost is incurred in proportion to their relative Sharing Percentages for
the applicable taxable year.
(k) The provisions of this Section shall govern the conduct of all parties
who are currently Partners and all parties who were Partners during the
applicable Partnership taxable year. A Partner shall not be relieved of any
duties or responsibilities imposed under this Section by the termination or
transfer of its interest in the Partnership.
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45
(l) All terms used in this Section that are defined in Section 6231(a) of
the Code shall have the meanings set forth therein.
SECTION 6.3 CAPITAL ACCOUNTS. There shall be established for each Partner
on the books of the Partnership as of the date hereof, or such later date on
which such Partner is admitted to the Partnership, a capital account (each
being a "Capital Account"). Each Capital Contribution shall be credited to the
Capital Account of such Partner on the date such contribution of capital is
paid to the Partnership. In addition, each Partner's Capital Account shall be
(a) credited with such Partner's allocable share of any Net Income of the
Partnership, (b) debited with (i) distributions to such Partner of cash or the
fair market value of other property and (ii) such Partner's allocable share of
Net Loss of the Partnership and expenditures of the Partnership described or
treated under Section 704(b) as described in Section 705(a)(2)(B) of the Code,
and (c) otherwise maintained in accordance with the provisions of the Code.
Any other item which is required to be reflected in a Partner's Capital Account
under Section 704(b) of the Code or otherwise under this Agreement shall be so
reflected. Capital Accounts shall be appropriately adjusted to reflect
transfers of part (but not all) of a Partner's interest in the Partnership.
Interest shall not be payable on Capital Account balances. Notwithstanding
anything to the contrary contained in this Agreement, the Partnership shall
maintain the Capital Accounts of the Partners in accordance with the principles
and requirements set forth in section 704(b) of the Code and Regulations
section 1.704-1(b)(2)(iv).
SECTION 6.4 ALLOCATIONS. (a) Net Income of the Partnership shall be
allocated to the Partners having deficit balances in their Capital Accounts
(computed after taking into account distributions pursuant to Section 5.5 with
respect to such fiscal year, and after adding back each Partner's share of
partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, determined
pursuant to Regulations sections 1.704-2(g)(1) and 1.704-2(i)(5)) in
proportion to, and to the extent of, such deficits. Any remaining Net Income
and all Net Loss shall be allocated among the Partners either 49% to the
Blackstone Partners (pro rata in proportion to their Sharing Percentages) and
51% to the Interstate Partners (pro rata in accordance with their Sharing
Percentages) or 42.401% to the Blackstone Partners (pro rata in proportion to
their Sharing Percentages) and 57.599% to the Interstate Partners pro rata in
accordance with their Sharing Percentages) so as to produce to the extent
possible Capital Accounts for the Partners (computed in the manner set forth in
the preceding sentence) such that if an amount of cash equal to such positive
Capital Account balances were distributed in accordance with such positive
Capital Account balances, such distribution would be in the amounts, sequence
and priority set forth in Section 5.5 and to the extent Net Loss exceeds the
positive Adjusted Capital Account Balances of the Partners, the
<PAGE> 50
46
excess shall be allocated first, to those Partners with positive Adjusted
Capital Account Balances, in proportion to, and to the extent of, such Adjusted
Capital Account Balances, and thereafter, to the General Partners, in the ratio
that the Sharing Percentage of each General Partner bears to the Sharing
Percentage of all General Partners. Notwithstanding the foregoing, if an
allocation of Net Loss in the ratio of 42.401% to the Blackstone Partners and
57.599% to the Interstate Partners is in excess of amounts of Net Income
previously allocated in the ratio of 42.401% to the Blackstone Partners and
57.599% to the Interstate Partners, then such allocation of Net Loss shall
instead be made 49% to the Blackstone Partners (pro rata in proportion to their
Sharing Percentages) and 51% to the Interstate Partners (pro rata in accordance
with their Sharing Percentages). Notwithstanding the foregoing, if an
allocation of Net Income or Net Loss would not result in Capital Accounts for
the Partners (computed in the manner set forth in the first sentence of this
paragraph (a)) being equal to cash distributions in the amounts, sequence and
priority set forth in Section 5.5, Net Income may be allocated 100% to the
Interstate Partners (pro rata in accordance with their Sharing Percentages) or
Net Loss may be allocated 100% to the Blackstone Partners (pro rata in
accordance with their Sharing Percentages) if (and to the extent necessary) to
produce Capital Accounts equal (or in proportion) to the cash distributions set
forth in Section 5.5.
(b) Notwithstanding anything herein to the contrary, in the event any
Partner unexpectedly receives any adjustments, allocations or distributions
described in paragraphs (b)(2)(ii)(d)(4), (5) or (6) of Section 1.704-1 of the
regulations under the Code, there shall be specially allocated to such Partner
such items of Partnership income and gain, at such times and in such amounts as
will eliminate as quickly as possible that portion of any deficit in its
Capital Account caused or increased by such adjustments, allocations or
distributions. To the extent permitted by the Code and the regulations
thereunder, any special allocations of items of income or gain pursuant to this
Section 6.4(c) shall be taken into account in computing subsequent allocations
of Net Income (Loss) pursuant to this Section 6.4 so that the net amount of any
items so allocated and the subsequent allocations of Net Income (Loss) to the
Partners pursuant to this Section 6.4 shall, to the extent possible, be equal
to the net amounts that would have been allocated to each such Partner pursuant
to the provisions of this Section 6.4 if such unexpected adjustments,
allocations or distributions had not occurred.
(c) All items of income, gain, loss, deduction and credit of the
Partnership shall be allocated among the Partners for Federal, state and local
income tax purposes consistent with the manner that the corresponding
constituent items of Net Income (Loss) shall be allocated among the Partners
pursuant to this Agreement, except as may otherwise be provided herein or by
the Code. To the extent Treasury Regulations promulgated pursuant to
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Subchapter K of the Code (including under Sections 704(b) and (c) of the Code)
require allocations for tax purposes that differ from the foregoing
allocations, the General Partners may determine the manner in which such tax
allocations shall be made so as to comply more fully with such Treasury
Regulations or other applicable law and, at the same time to the extent
reasonably possible, preserve the economic relationships among the Partners as
set forth in this Agreement.
(d) Notwithstanding the provisions of this Section 6.4, net income, net
gain, and net loss of the Partnership (or items of income, gain, loss,
deduction, or credit, as the case may be) shall be allocated in accordance with
the following provisions of this Section 6.4 to the extent such provisions
shall be applicable.
(i) Nonrecourse Deductions of the Partnership for any Fiscal Year shall be
specially allocated to the Partners in the same proportion as Net Income or
Net Loss is allocated for such Fiscal Year; provided that if an allocation of
Nonrecourse Deductions in the ratio of 42.401% to the Blackstone Partners and
57.599% to the Interstate Partners is in excess of amounts of Net Income
previously allocated in the ratio of 42.401% to the Blackstone Partners and
57.599% to the Interstate Partners, then such allocation of Nonrecourse
Deductions shall instead be made 49% to the Blackstone Partners (pro rata in
proportion to their Sharing Percentages) and 51% to the Interstate Partners
(pro rata in accordance with their Sharing Percentages). Partner Nonrecourse
Deductions of the Partnership for any Fiscal Year shall be specially allocated
to the Partner who bears the economic risk of loss for the liability in
question. The provisions of this Section 6.4(e)(i) are intended to satisfy
the requirements of Regulations sections 1.704-2(e)(2) and 1.704-2(i)(1) and
shall be interpreted in accordance therewith for all purposes under this
Agreement.
(ii) If there is a net decrease in the Minimum Gain of the Partnership
during any Partnership Fiscal Year, each Partner shall be specially allocated
items of Partnership income and gain for such year equal to that Partner's
share of the net decrease in Minimum Gain, within the meaning of Regulations
section 1.704-2(g)(2). The provisions of this Section 6.4(e)(ii) are intended
to comply with the Minimum Gain chargeback requirements of Regulations section
1.704-2(f) and shall be interpreted in accordance therewith for all purposes
under this Agreement.
(iii) If there is a net decrease in Partner Nonrecourse Debt Minimum Gain
during any Fiscal Year, each Partner that has a share of such partner
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Nonrecourse Debt Minimum Gain, determined in accordance with Regulations
section 1.704-2(i)(5), as of the beginning of such year shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, for succeeding years) equal to such Partner's share of the net
decrease in Partner Nonrecourse Debt Minimum Gain. The provisions of this
Section 6.4(e)(iii) are intended to comply with the Partner Nonrecourse Debt
Minimum Gain chargeback requirement of Regulations section 1.704-2(i)(4) and
shall be interpreted in accordance therewith for all purposes under this
Agreement.
ARTICLE VII
DISSOLUTION
SECTION 7.1 DISSOLUTION. The Partnership shall be dissolved and
subsequently terminated upon the occurrence of the first of the following
events:
(a) decision of all of the General Partners to dissolve and subsequently
terminate the Partnership;
(b) December 31, 2045;
(c) the occurrence of a Disabling Event with respect to the sole remaining
General Partner, provided that the Partnership shall not be dissolved if,
within 90 days after such Disabling Event, all of the Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of the Disabling Event, of another General Partner;
or
(d) if, after the right of first opportunity under Article 3 shall no
longer be in effect, all of the Partnership Assets are sold or otherwise
disposed of.
SECTION 7.2 WINDING-UP. When the Partnership is dissolved, the business
and property of the Partnership shall be wound up and liquidated by the General
Partners or, in the event of a Disabling Event with respect to any General
Partner, by the remaining General Partners or, in the event of a Disabling
Event with respect to each of the General Partners, such liquidating trustee as
may be named by Limited Partners holding a majority of the Sharing Percentages
held by all Limited Partners (the party conducting the liquidation being
hereinafter referred to as the "Liquidator"). The Liquidator shall use its
best efforts to reduce to cash and cash equivalent items such assets of the
Partnership as the Liquidator shall deem it advisable to sell, subject to
obtaining fair value for such assets and any tax or other legal considerations.
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SECTION 7.3 FINAL DISTRIBUTION. Within 90 calendar days after the
effective date of dissolution of the Partnership, the assets of the Partnership
shall be distributed in the following manner and order:
(a) to the payment of the expenses of the winding-up, liquidation and
dissolution of the Partnership;
(b) to pay all creditors of the Partnership, other than Partners, either by
the payment thereof or the making of reasonable provision therefor;
(c) to establish reserves, in amounts established by the Liquidator, to
meet other liabilities of the Partnership; and
(d) to pay, in accordance with the provisions of this Agreement applicable
to such loans or in accordance with the terms agreed among them and otherwise
on a pro rata basis, all creditors of the Partnership that are Partners,
either by the payment thereof or the making of reasonable provision therefor.
The remaining assets of the Partnership shall be applied and distributed in
accordance with the positive balances of the Partners' Capital Accounts, as
determined after taking into account all adjustments to Capital Accounts for
the Partnership taxable year during which the liquidation occurs.
ARTICLE VIII
TRANSFER OF PARTNERS' INTERESTS
SECTION 8.1 RESTRICTIONS ON TRANSFER OF PARTNERSHIP INTERESTS. (a) No
Partner may, directly or indirectly, assign, sell, exchange, transfer, pledge,
hypothecate or otherwise dispose of all or any part of its interest in the
Partnership (a "Transfer") to any person, other than in accordance with
paragraphs (b), (c), (d), (e) and (f) below. A change in the ultimate
beneficial ownership of a Partner shall be deemed a Transfer for purposes of
this Agreement (other than changes in the ownership of the common stock of
Interstate Hotels Company sold to the public).
(b) Any Partner may Transfer all or part of its interest in the
Partnership to any person; provided, however, that upon any Transfer of a
Partner's interest in accordance with this paragraph, the person (the
"Transferee") to whom the Partner's interest was Transferred shall not be
admitted as a substitute Partner without receiving the prior written Consent of
the Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion) and the Transferee has given written acceptance and
adoption of all of the terms and
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50
provisions of this Agreement; and provided, further, that the prior written
Consent of each of the General Partners shall be required to admit the
Transferee as a substitute Partner (which Consent may be withheld in their sole
and absolute discretion) (i) if the Transferee is not an Affiliate of any
member of the Blackstone Group or the Interstate Group, or (ii) if the
aggregate Sharing Percentages of the Interstate Partners is 20% or less at the
time of the Transfer.
(c) A Partner may mortgage, pledge, hypothecate or otherwise encumber all
or any portion of such Partner's rights to receive a portion of the Non-Capital
Proceeds, Capital Proceeds, Net Income and Net Losses to any person; provided,
however, that the holder of such mortgage, pledge, hypothecation or encumbrance
shall not be admitted as a substitute Partner without the prior Consent of the
Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion), provided that (i) if the Transferee is not an Affiliate
of any member of the Blackstone Group or the Interstate Group or (ii) if the
aggregate Sharing Percentages of the Interstate Partners is 20% or less at the
time of the Transfer, the prior written Consent of each of the General Partners
shall be required, which Consent may be withheld in their sole and absolute
discretion.
(d) At any time, any Blackstone Partner may transfer its interest in
Non-Capital Proceeds, Capital Proceeds, Net Income and Net Losses to any other
Blackstone Partner or its Affiliates but the Transferee shall not be admitted
as a substitute Partner and the transferor shall not be permitted to withdraw
from the Partnership without, in each case, the Consent of the Blackstone
General Partner (which Consent may be withheld in its sole and absolute
discretion), or, if the aggregate Sharing Percentages of the Interstate
Partners is 20% or less at the time of the Transfer, the Consent of each of the
General Partners (which Consent may be withheld in their sole and absolute
discretion).
(e) At any time, any Interstate Partner may transfer its interest in
Non-Capital Proceeds, Capital Proceeds, Net Income and Net Losses to any other
Interstate Partner or their Affiliates, but the Transferee shall not be
admitted as a substitute Partner and the transferor shall not be permitted to
withdraw from the Partnership without, in each case, the Consent of the
Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion).
(f) At any time, the ultimate beneficial ownership of a Partner may be
changed without any requirement for Consent hereunder, provided that day to day
management of such Partner is, at all times thereafter, directly or indirectly
controlled by the Blackstone General Partner or an Affiliate thereof or by the
Interstate General Partner or an Affiliate thereof.
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SECTION 8.2 OTHER TRANSFER PROVISIONS. (a) Any purported Transfer by a
Partner of all or any part of its interest in the Partnership in violation of
this Article VIII shall be null and void and of no force or effect.
(b) Except as provided in this Article VIII, no Partner shall have the
right to withdraw from the Partnership prior to its termination and no
additional Partner may be admitted to the Partnership without the prior written
consent of the General Partners. In the event of any withdrawal of a General
Partner in violation of this Agreement, including as a result of a Disabling
Event, such General Partner shall be liable to the Partnership as provided in
Section 17-602 of the Partnership Act.
(c) Notwithstanding any provision of this Agreement to the contrary, a
Partner may not Transfer all or any part of its interest in the Partnership if
such Transfer would jeopardize the status of the Partnership as a partnership
for federal income tax purposes, cause a dissolution of the Partnership under
the Partnership Act or would violate, or would cause the Partnership to
violate, any applicable law or regulation (including any applicable federal or
state securities laws) or contract to which the Partnership is a party.
(d) Concurrently with the admission of any substitute or additional
Partner, the General Partners shall forthwith cause any necessary papers to be
filed and recorded and notice to be given wherever and to the extent required
showing the substitution of a Transferee as a substitute Partner in place of
the Partner Transferring its interest, or the admission of an additional
Partner, all at the expense, including payment of any professional and filing
fees incurred, of such substituted or additional Partner. The admission of any
person as a substitute or additional Partner shall be conditioned upon such
person's written acceptance and adoption of all the terms and provisions of
this Agreement.
(e) If any interest in the Partnership is Transferred during any
accounting period in compliance with the provisions of this Article VIII, each
item of income, gain, loss, expense, deduction and credit and all other items
attributable to such interest for such period shall be divided and allocated
between the transferor and the transferee by taking into account their varying
interests during such period in accordance with Section 706(d) of the Code,
using any conventions permitted by law and selected by the General Partners.
All distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such allocations and distributions, the
Partnership shall recognize a Transfer on the date that the General Partners
receive notice of the Transfer which complies with this Article VIII from the
Partner Transferring its interest.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1 EQUITABLE RELIEF. The Partners hereby confirm that damages at
law may be an inadequate remedy for a breach or threatened breach of this
Agreement and agree that, in the event of a breach or threatened breach of any
provision hereof, the respective rights and obligations hereunder shall be
enforceable by specific performance, injunction or other equitable remedy, but,
nothing herein contained is intended to, nor shall it, limit or affect any
right or rights at law or by statute or otherwise of a Partner aggrieved as
against the other for a breach or threatened breach of any provision hereof, it
being the intention by this Section 9.1 to make clear the agreement of the
Partners that the respective rights and obligations of the Partners hereunder
shall be enforceable in equity as well as at law or otherwise and that the
mention herein of any particular remedy shall not preclude a Partner from any
other remedy it or he might have, either in law or in equity.
SECTION 9.2 OWNERSHIP AND USE OF NAMES. Rights to the name "Blackstone"
shall belong solely to the designated Blackstone Partners. Rights to the name
"Interstate" and "Interstate Hotels" shall belong solely to the designated
Interstate Partners. The ownership of, and the right to use, sell or otherwise
dispose of, the name, Interstone Three Partners II L.P. or any abbreviation or
modification thereof, shall belong to the Partnership. The Interstate General
Partner agrees to take all actions and to approve, execute and file any
document or instrument proposed by any Blackstone Partner to protect the rights
of the Blackstone Partners to the name "Blackstone". The Blackstone General
Partner agrees to take all actions and to approve, execute and file any
document or instrument proposed by any Interstate Partner to protect the rights
of the Interstate Partners to the name "Interstate" and "Interstate Hotels".
The Partners each agree to take all actions and to approve, execute and file
any document or instrument proposed by the General Partners to protect the
rights of the Partnership to the name "Interstone Three Partners II L.P.".
SECTION 9.3 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. In particular,
the Partnership is formed pursuant to the Partnership Act, and the rights and
liabilities of the General Partners and Limited Partners shall be as provided
therein, except as herein otherwise expressly provided.
SECTION 9.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors and assigns.
SECTION 9.5 ACCESS; CONFIDENTIALITY. By executing this Agreement, each
Partner expressly agrees, at all times
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during the term of the Partnership and thereafter and whether or not at the
time a Partner of the Partnership (i) not to issue any press release or
advertisement or take any similar action concerning the Partnership's business
or affairs without first obtaining the Consent of all of the General Partners,
(ii) not to publicize detailed financial information concerning the Partnership
without the Consent of all of the General Partners and (iii) not to disclose
the Partnership's affairs generally without using reasonable efforts to consult
with the other Partners prior to such disclosure; provided, however, the
foregoing shall not restrict any Partner from disclosing information required
to be disclosed by applicable law or concerning such Partner's investment in
the Partnership to its officers, directors, employees, agents, legal counsel,
accountants, other professional advisors, limited partners and Affiliates, or
to prospective or existing investors in such Partner or its Affiliates or to
prospective or existing lenders to such Partner or its Affiliates, or to
prospective purchasers of any property owned by the Partnership. The
provisions of this Section 9.5 shall survive the termination of the
Partnership.
SECTION 9.6 NOTICES. Whenever notice is required or permitted by this
Agreement to be given, such notice need not be in writing unless otherwise
required herein or requested by the receiving Partner. If in writing, such
notice shall be given to any Partner at its address or facsimile number shown
in the Partnership's books and records (including Schedule A hereto). Each
such notice shall be effective (i) if given by facsimile, upon oral
confirmation of receipt, (ii) if given by mail, on the fourth day after deposit
in the mails (certified or registered return receipt requested) addressed as
aforesaid and (iii) if given by any other means, when delivered to and
receipted for at the address of such Partner specified as aforesaid.
SECTION 9.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which together shall constitute a single instrument.
SECTION 9.8 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter hereof.
SECTION 9.9 AMENDMENTS. Any amendment to this Agreement shall be
effective only if such amendment is evidenced by a written instrument duly
executed by and delivered to the General Partners; provided, however, no such
amendment shall be effective or binding against a Partner unless executed by
such Partner if such amendment materially and adversely affects such Partner in
a specific manner separate and distinct from the
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amendment's treatment of other Partners; and provided, further that any
amendment which would have a material adverse effect on any Partner's economic
interest in the Partnership shall require the Consent of all of the General
Partners.
SECTION 9.10 SECTION TITLES. Section titles are for descriptive purposes
only and shall not control or alter the meaning of this Agreement as set forth
in the text hereof.
SECTION 9.11 REPRESENTATIONS AND WARRANTIES. (a) Each Partner represents,
warrants and covenants to each other Partner and to the Partnership that:
(i) such Partner, if not a natural person, is duly formed and validly
existing under the laws of the jurisdiction of its organization with full
power and authority to conduct its business to the extent contemplated in
this Agreement;
(ii) this Agreement has been duly authorized, executed and delivered by
such Partner and constitutes the valid and legally binding agreement of such
Partner enforceable in accordance with its terms against such Partner except
as enforceability hereof may be limited by bankruptcy, insolvency, moratorium
and other similar laws relating to creditors' rights generally and by general
equitable principles;
(iii) the execution and delivery of this Agreement by such Partner and the
performance of its duties and obligations hereunder do not result in a breach
of any of the terms, conditions or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, credit agreement, note or
other evidence of indebtedness, or any lease or other agreement, or any
license, permit, franchise or certificate, to which such Partner is a party
or by which it is bound or to which its properties are subject, or require
any authorization or approval under or pursuant to any of the foregoing, or
violate any statute, regulation, law, order, writ, injunction, judgment or
decree to which such Partner is subject;
(iv) such Partner is not in default (nor has any event occurred which with
notice, lapse of time, or both, would constitute a default) in the
performance of any obligation, agreement or condition contained in any
indenture, mortgage, deed of trust, credit agreement, note or other evidence
of indebtedness or any lease or other agreement, or any license, permit,
franchise or certificate, to which it is a party or by which it is bound or
to which the properties of it are subject, nor is it in violation of any
statute, regulation, law, order, writ, injunction, judgment or decree
<PAGE> 59
55
to which it is subject, which default or violation would materially adversely
affect such Partner's ability to carry out its obligations under this
Agreement;
(v) except as disclosed to the Partners prior to the date hereof, there is
no litigation, investigation or other proceeding pending or, to the knowledge
of such Partner, threatened against such Partner or any of its Affiliates
which, if adversely determined, would materially adversely affect such
Partner's ability to carry out its obligations under this Agreement; and
(vi) no consent, approval or authorization of, or filing, registration or
qualification with, any court or governmental authority on the part of such
Partner is required for the execution and delivery of this Agreement by such
Partner and the performance of its obligations and duties hereunder.
(b) IHC/Interstone Partnership II, L.P. represents that not less than 90%
of its interests are owned by Interstate Hotels Corporation.
<PAGE> 60
56
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Limited Partnership Agreement of Interstone Three Partners II L.P. as of the
day and year first above written.
GENERAL PARTNERS:
BJS INTERSTONE MANAGEMENT ASSOCIATES
By: Blackstone Real Estate Inc.,
general partner
-----------------------------
By: /s/ Gary M. Sumers
-----------------------------
Gary M. Sumers
Vice President
IHC/INTERSTONE CORPORATION
By: /s/ Marvin I. Droz
-----------------------------
Marvin I. Droz
Vice President
LIMITED PARTNERS:
BLACKSTONE REAL ESTATE
PARTNERS II L.P.
By: Blackstone Real Estate Associates L.P.,
general partner
-----------------------------
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
-----------------------------
Gary M. Sumers
Vice President
IHC/INTERSTONE PARTNERSHIP II, L.P.
By: IHC Member Corporation,
general partner
-----------------------------
By: /s/ Marvin I. Droz
-----------------------------
Marvin I. Droz
Vice President
<PAGE> 61
57
SCHEDULE A
PARTNERS OF THE PARTNERSHIP
<TABLE>
<CAPTION>
Sharing
Percentage as of
June __, 1996
--------------
General
Partners Address
-------- -------
<S> <C> <C>
BJS Interstone Management 345 Park Avenue
Associates New York, NY 10154 0.5%
IHC/Interstone c/o Interstate Hotels Corporation
Corporation Foster Plaza X
680 Anderson Drive
Pittsburgh, PA 15220-8126 0.5%
Limited Partners
----------------
Blackstone Real Estate 345 Park Avenue
Partners II L.P. New York, NY 10154 48.5%
IHC/Interstone c/o Interstate Hotels Corporation
Partnership II, L.P. Foster Plaza X
680 Anderson Drive 50.5%
Pittsburgh, PA 15220-8126
</TABLE>
<PAGE> 62
EXHIBIT A
FORM OF MANAGEMENT AGREEMENT
<PAGE> 63
EXHIBIT B
FORM OF PROJECT PARTNERSHIP AGREEMENT
<PAGE> 64
EXHIBIT C
FORM OF CONFIRMATION AND ACKNOWLEDGMENT
OF RIGHT OF FIRST OPPORTUNITY
This Confirmation and Acknowledgment of Right of First Opportunity
("Confirmation") is made and entered into as of the ____ day of ________, 19__
by and among THE BLACKSTONE GROUP HOLDINGS L.P. ("Blackstone") and INTERSTATE
HOTELS CORPORATION ("Interstate").
RECITALS
A. Sections 3.6 through 3.8 of that certain Amended and Restated Limited
Partnership Agreement of Interstone Three Partners II L.P., dated as of the
date hereof (as amended, supplemented or otherwise modified from time to time,
the "Partnership Agreement") sets forth the scope, operation, duration,
termination and other terms relating to a right of first opportunity provided
by the Blackstone Group and the Interstate Group in favor of the Partnership
with respect to certain Target Investments identified for investment by the
Blackstone Group and the Interstate Group. Except as otherwise expressly
provided herein, any defined term used in this Confirmation shall have the
meaning prescribed for that term in the Partnership Agreement.
B. The parties wish to enter into this Confirmation in order to confirm and
acknowledge their obligations to each other with respect to the foregoing
matters and any other obligations each may have to the other pursuant to the
express terms of Sections 3.6 through 3.8 of the Partnership Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follow:
1. The provisions of Sections 3.6 through 3.8 of the Partnership Agreement
are hereby incorporated by reference as though set forth in full herein. Each
party hereto hereby confirms its obligation to comply with all terms,
provisions, covenants, conditions and restrictions and perform all obligations
applicable to such party under said Sections 3.6 through 3.8 of the Partnership
Agreement. Without limiting the generality of the foregoing, Blackstone and
Interstate hereby agree to comply, and to cause the Blackstone Related Parties
and the Interstate Related Parties, respectively, to comply, with their
obligations pertaining to the right of first opportunity set forth in said
Sections of the Partnership Agreement in accordance with the terms applicable
thereto.
<PAGE> 65
2
2. This Confirmation confirms and acknowledges the terms, provisions,
covenants, conditions, obligations and restrictions set forth in Sections 3.6
through 3.8 of the Partnership Agreement. It shall not be construed or
understood to modify, in any way, such terms, provisions, covenants,
conditions, obligations and restrictions, and, in the event of any conflict
between this Confirmation and the Partnership Agreement, the provisions of
Sections 3.6 through 3.8 of the Partnership Agreement shall control. In no
event shall this Confirmation be construed or understood to extend the duration
of the restrictions on Blackstone, Interstate and the Related Parties arising
from the right of first opportunity, which shall terminate as set forth in the
Partnership Agreement. The provisions of Sections 9.1, 9.3, and 9.5 through
9.10 of the Partnership Agreement are incorporated herein, except that all
references therein to the "Agreement" shall be deemed to be references to this
Confirmation, all references therein to the "Partners" shall be deemed to be
references to the parties hereto and delivery of notices to Blackstone
hereunder or under the Partnership Agreement shall be delivered to the same
address as the Blackstone General Partner, and delivery of notices to
Interstate hereunder shall be delivered to the same address as the Interstate
General Partner, unless any such parties shall change the address for delivery
of notice in accordance with the procedures established under Section 9.6 of
the Partnership Agreement. Nothing in this Confirmation shall be understood or
construed to render the parties hereto joint venturers or partners for any
purposes. Nothing in this Confirmation shall be understood or construed to
modify or expand the extent of any recourse between the Partners beyond that
expressly provided by the Partnership Agreement.
THE BLACKSTONE GROUP HOLDINGS, L.P.
By: ____________________________
INTERSTATE HOTELS CORPORATION
By: _____________________________
<PAGE> 66
EXHIBIT D
PRE-EXISTING PROJECTS
NONE
<PAGE> 67
EXHIBIT E
EXCLUDED PROJECTS
BLACKSTONE EXCLUDED PROJECTS
1. Any business activities with the Davidson Hotel Company ("Davidson"),
including a merger or a combination of Davidson or its assets with any
other entity or with the assets of any other entity, a REIT involving
Davidson or some or all of its assets, an initial public offering or other
capital event involving Davidson; provided, that this exclusion shall not
include the acquisition of other hotels by Davidson (other than through a
combination with another entity or a combination with the assets of
another entity) which were first identified by the affiliates of the
Blackstone Group which are investors in Davidson (as opposed to
acquisitions first identified by the non-affiliated Davidson investors).
INTERSTATE EXCLUDED PROJECTS
1. Four to six hotel acquisitions from an institutional owner only in
conjunction with the Carlyle Group or The Apollo Group
2. Acquisition of Checkers Hotel in Los Angeles, California only in
conjunction with The Apollo Group
3. Any investment in a hotel which is incidental to Interstate taking over
management of such hotel such as those currently under consideration by
Interstate in Farmington, Connecticut, Irvine, California, Warner Center,
California and Burlington, Massachusetts.
With respect to Interstate's investment opportunities described in clauses
1 and 2 above, if The Apollo Group or The Carlyle Group decides not to
participate in such investment or is willing to admit additional partners or
participants other than Interstate, Interstate will present such opportunity
to the Partnership in the manner prescribed in Section 3.6 of the
Partnership Agreement.
With respect to Interstate's investment opportunities described in clauses
1 and 2 above, Interstate (i) shall exercise best efforts to increase its
equity stake in such investments (up to the maximum
<PAGE> 68
2
of 50% of the total equity invested), and (ii) shall offer the Blackstone
Group (outside of the Partnership) an opportunity to acquire 50% of whatever
interest is available to Interstate on terms and conditions acceptable to
Interstate and the Blackstone Group.
<PAGE> 1
EXHIBIT 10(e)
================================================================================
INTERSTONE THREE PARTNERS III L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
Dated as of June 25, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.1 Continuation of Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.2 Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.3 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.5 Purpose; Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.6 Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.7 Alternative Investment Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.8 Parallel Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III
Management and Operation of the
Partnership; Identification and Approval of
Investments; Partner Services . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.2 Joint Control by the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.3 Blackstone Partners Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.4 Certain Duties and Obligations of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.5 Restrictions on Authority of the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.6 Right of First Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.7 Right of First Opportunity; Exclusive Rights; Investment Parameters . . . . . . . . . . . . . . . . . . . 29
SECTION 3.8 Termination of Right of First Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.9 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.10 Financial Advisory Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.11 Other Partner Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.12 Marketing Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IV
Other Activities Permitted . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V
Capital Contributions;
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.1 Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.2 Partner Loans for Failure to Fund Committed Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.3 Dilution for Failure to Fund Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.4 Distributions Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.5 Distributions of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.6 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.7 Partnership Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI
Books and Reports; Tax Matters;
Capital Accounts; Allocations . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.1 General Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.2 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 6.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 6.4 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VII
Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.2 Winding-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.3 Final Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VIII
Transfer of Partners' Interests . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.1 Restrictions on Transfer of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 8.2 Other Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE IX
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.1 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.2 Ownership and Use of Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.5 Access; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.9 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.10 Section Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 9.11 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
ii
<PAGE> 4
Schedules
SCHEDULE A Name and Address
Exhibits
Exhibit A Form of Management Agreement
Exhibit B Form of Project Partnership Agreement
Exhibit C Form of Confirmation and Acknowledgment
of Right of First Opportunity
Exhibit D Pre-Existing Projects
Exhibit E Excluded Projects
iii
<PAGE> 5
INTERSTONE THREE PARTNERS III L.P.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT, dated as of June 25,
1996 by and among BJS INTERSTONE MANAGEMENT ASSOCIATES, a Delaware general
partnership, as a general partner, IHC/INTERSTONE CORPORATION, a Delaware
corporation, as a general partner, and BLACKSTONE REAL ESTATE PARTNERS III
L.P., BLACKSTONE REAL ESTATE HOLDINGS L.P., BLACKSTONE RE CAPITAL PARTNERS
L.P., BLACKSTONE RE OFFSHORE CAPITAL PARTNERS L.P., and IHC/INTERSTONE
PARTNERSHIP II, L.P., each a Delaware limited partnership, as limited
partners.
PRELIMINARY STATEMENT
A. The Blackstone Group and the Interstate Group each have the capability
for identifying, acquiring, improving, operating and disposing of individual
hotel, motel and other lodging properties and groups of hotel, motel and other
lodging properties, hotel and motel management companies (for which the
ownership of hotels and motels is a significant part of their business) and
public and private companies whose primary holdings are comprised of such
assets or operations ("Target Investment" or "Target Investments").
B. The Blackstone Partners and the Interstate Partners, individually and
acting through the Partnership, in each case in accordance with the terms of
this Agreement, wish to continue an exclusive arrangement with each other under
which, for the duration thereof and subject to the terms set forth below, the
Partnership, the Blackstone Partners and the Interstate Partners through the
Partnership and the Parallel Partnerships, will have the first opportunity to
acquire, operate and dispose of certain Target Investments which are hereafter
identified by the Blackstone Group and/or the Interstate Group, as the case may
be, and approved for investment in accordance with this Agreement (each Target
Investment proposed or approved, as the context indicates, for acquisition
pursuant to this Agreement is referred to as a "Project").
C. In order to effect the foregoing, the parties hereto entered into a
limited partnership agreement dated as of December 15, 1995 (the "Existing
Agreement") and formed a partnership under the laws of the State of Delaware
with the name Interstone Three Partners III L.P. (the "Partnership").
D. Each of the Partners of the Partnership have agreed to amend and restate
the Existing Agreement in its entirety as set forth herein.
<PAGE> 6
AGREEMENT
Accordingly, in consideration of the mutual promises and agreements herein
made and intending to be legally bound hereby, the parties hereto agree to
amend and restate the Existing Agreement to read as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Unless the context otherwise requires, the
following terms shall have the following meanings for purposes of this
Agreement:
"ACKNOWLEDGEMENT" has the meaning set forth in Section 3.6(a).
"ADJUSTED CAPITAL ACCOUNT BALANCE" shall mean, with respect to any Partner,
the balance in such Partner's Capital Account adjusted (i) by taking into
account the adjustments, allocations and distributions described in
Regulations section 1.704-1(b)(2)(ii)(d)(4), (5), and (6); and (ii) by adding
to such balance such Partner's share of partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain, determined pursuant to Regulations section
1.704-2(g)(1) and 1.704-2(i)(5).
"AFFILIATE" with respect to any person means (i) any other person who
controls, is controlled by or is under common control with such person, (ii)
any director, officer, partner or employee of such person or any person
specified in clause (i) above or (iii) any immediate family member of any
person specified in clause (i) or (ii) above. Notwithstanding the foregoing,
for the purposes of this Agreement, none of the Blackstone Partners nor their
Affiliates shall be deemed to be Affiliates of any of the Interstone Partners
or the Interstone Related Parties, none of the Interstate Partners nor their
Affiliates shall be deemed to be Affiliates of any of the Blackstone Partners
or the Blackstone Related Parties, and no officer or director of any member
of the Blackstone Group which is also an officer or director of any member of
the Interstone Group shall be deemed to be an Affiliate of any of the
Interstate Partners or Interstate Related Parties, and no member of the
Interstone Group shall be deemed an Affiliate of any member of the Blackstone
Group.
"AGREEMENT" means this Amended and Restated Limited Partnership Agreement,
as it may be amended, supplemented, modified or restated from time to time.
<PAGE> 7
3
"ASSET MANAGEMENT AGREEMENT" has the meaning set forth in Section 3.6(f).
"AUTHORIZED REPRESENTATIVES" of a General Partner shall be those
representatives designated by notice to all Partners by each General Partner
from time to time to represent such General Partner in connection with the
Partnership. The term "Authorized Representative" shall refer to any one of
the Authorized Representatives of a Partner. The initial Authorized
Representatives of the General Partners are set forth in Section 3.1(e)
below.
"BLACKSTONE GENERAL PARTNER" means BJS Interstone Management Associates, a
Delaware general partnership, or any Affiliate of any member of the
Blackstone Group who replaces BJS Interstone Management Associates as a
general partner hereunder, or is admitted as an additional general partner
hereunder.
"BLACKSTONE GROUP" means the Blackstone Partners, Affiliates of the
Blackstone Partners and the Blackstone Related Parties; provided, that the
Blackstone Group shall not include investors in the Blackstone Partners who
are not Affiliates of Blackstone Group Holdings L.P., to the extent such
investors are not investing through any Affiliate of Blackstone Group
Holdings L.P.
"BLACKSTONE LIMITED PARTNER" means, collectively, Blackstone Real Estate
Partners III L.P., Blackstone Real Estate Holdings L.P., Blackstone RE
Capital Partners L.P., Blackstone RE Offshore Capital Partners L.P., each a
Delaware limited partnership, or any Affiliate of any member of the
Blackstone Group who replaces any of the foregoing as a limited partner
hereunder, or is admitted as an additional limited partner hereunder.
"BLACKSTONE PARTNERS" means collectively, the Blackstone General Partner and
the Blackstone Limited Partners and any other Partner admitted to the
Partnership which is an Affiliate of any of the foregoing and any permitted
assigns of such Partners.
"BLACKSTONE RELATED PARTIES" means (i) Blackstone Group Holdings L.P., (ii)
each of the general partners of Blackstone Group Holdings L.P. and his
immediate family members, for so long as he is such a partner and (iii) any
corporation, partnership, limited liability company, joint venture or other
like entity in which the Blackstone Partners or the parties referred to in
(i) and (ii) above individually or collectively, hold a fifty percent (50%)
or greater, direct or indirect (through one or more business entities),
ownership interest, but shall not include any such entity in which the
collective ownership interest of
<PAGE> 8
4
these parties is less than fifty percent (50%) or which is a publicly traded
company.
"BROKEN DEAL" shall mean a proposed Project that is not ultimately acquired
by the Partnership.
"BUSINESS DAY" shall mean any day on which commercial banks are authorized
to do business and are not required by law or executive order to close in New
York, New York.
"CAPITAL ACCOUNT" has the meaning set forth in Section 6.3.
"CAPITAL CONTRIBUTIONS" means the net fair market value of any capital
contributions made by the Partners to the Partnership and shall include (i)
the contributions of such Partner made pursuant to Sections 3.6, 3.9, 3.10,
5.1 and 5.7 and (ii) such Partner's payments made to third party creditors of
the Partnership with respect to Partnership obligations to the extent such
Partner is authorized by this Agreement to make any such payment, unless and
until reimbursed by the Partnership.
"CAPITAL PROCEEDS" means (A) the cash or other consideration received by the
Partnership (including interest on installment sales when received) as a
result of (i) any sale, exchange, abandonment, foreclosure, insurance award,
condemnation, easement sale or other similar transaction relating to any
property of the Partnership, (ii) any financing or refinancing (to the extent
such refinancing is deemed a Disposition hereunder) relating to any property
of the Partnership, (iii) capital contributions to the Partnership upon
admission of new partners, (iv) any other transaction which, in accordance
with generally accepted accounting principles, would be treated as a capital
event, in each case less (B) any such cash which is applied to (i) the
payment of transaction costs and expenses, (ii) the repayment of debt of the
Partnership which is required under the terms of any indebtedness of the
Partnership or has been authorized by the General Partners, (iii) the repair,
restoration or other improvement of Partnership Assets which is required
under any contractual obligation of the Partnership or has been authorized by
the General Partners and (iv) the establishment of reserves by the General
Partners. "Capital Proceeds" shall also mean any of the foregoing which are
received by a partnership or other vehicle in which the Partnership is a
partner or investor or in which the Partnership otherwise has an interest, to
the extent received by the Partnership as dividends or distributions.
"CARRYING VALUE" shall mean, with respect to any Partnership Asset, the
asset's adjusted basis for U.S. federal income tax purposes, except that the
Carrying Values
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5
of all Partnership Assets shall be adjusted to equal their respective fair
market values, in accordance with the rules set forth in Regulations Section
1.704-1(b)(2)(iv)(f), except as otherwise provided herein, as of: (a) the
date of the acquisition of any additional Partnership interest by any new or
existing Partner in exchange for more than a de minimis Capital Contribution,
other than pursuant to the initial formation of the Partnership; (b) the date
of the distribution of more than a de minimis amount of Partnership property
to a Partner; (c) the date a Partnership interest is relinquished to the
Partnership or (d) the date of the termination of the Partnership under
Section 708(b)(i)(B) of the Code; provided, however, that adjustments
pursuant to clauses (a), (b) and (c) above shall be made only if the General
Partners determine that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Partners. The Carrying Value
of any Partnership Asset distributed to any Partner shall be adjusted
immediately prior to such distribution to equal its fair market value.
Depreciation shall be calculated by reference to Carrying Value, instead of
tax basis once Carrying Value differs from tax basis.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute. Any reference herein to a particular
provision of the Code shall mean, where appropriate, the corresponding
provision in any successor statute.
"COMMITTED CAPITAL" shall mean, the aggregate amount of $29,400,000 for the
Blackstone Partners and the Blackstone Partners of the Parallel Partnerships,
and the aggregate amount of $30,600,000 for the Interstate Partners and the
Interstate Partners of the Parallel Partnership.
"COMPETITIVE RATE" shall mean, with respect to a particular service at a
Target Investment, the lower of (i) the rate charged on an arm's length basis
for the same or similar service for comparable properties in the geographic
area in which the relevant Target Investment is located by unaffiliated
persons providing or performing such service on an ongoing basis and (ii) the
lowest rate charged by any Affiliates of the Interstate General Partner for
the same or similar service for comparable properties in the geographic area
in which the relevant Target Investment is located.
"CONSENT" shall mean the approval, direction or determination, as the case
may be, of a Partner, given as provided in Section 3.1, to do the act or
thing for which the approval is solicited or with respect to which the
direction or determination is given or made, or the act of granting such
approval or giving such direction or making such determination, as the
context may require. Any Consent required to be given by the Blackstone
General Partner shall
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6
be given by any one Authorized Representative of the Blackstone General
Partner. Any Consent to be given by the Interstate General Partner shall be
given by any two Authorized Representatives of the Interstate General
Partner.
"CONSIDERATION" means the gross value of all cash, securities and other
properties paid or payable, directly or indirectly, in one transaction or in
a series or combination of transactions, in connection with an acquisition or
disposition of a Target Investment or a transaction related thereto
(including, without limitation, amounts paid (A) pursuant to covenants not to
compete, employment contracts, employee benefit plans or other similar
arrangements and (B) to holders of any warrants, stock purchase rights,
convertible securities or similar rights and to holders of any options or
stock appreciation rights, whether or not vested). Consideration shall also
include the value of any long-term liabilities (including the principal
amount of any mortgage indebtedness or other indebtedness for borrowed money,
preferred stock obligations, any pension liabilities and guarantees)
indirectly or directly assumed or acquired, or otherwise repaid or retired,
in connection with or anticipation of such acquisition. If an acquisition
takes the form of a purchase of assets, to the extent applicable
Consideration shall also include (i) the value of any current assets not
purchased, minus (ii) the value of any current liabilities not assumed. If
the Consideration to be paid is computed in any foreign currency, the value
of such foreign currency shall, for purposes hereof, be converted into U.S.
dollars at the prevailing exchange rate on the date or dates on which such
Consideration is paid. In this Agreement, the value of any securities
(whether debt or equity) or other property paid or payable as part of the
Consideration shall be determined as follows: (1) the value of securities
that are freely tradable in an established public market will be determined
on the basis of the last market closing price prior to the public
announcement of the acquisition; and (2) the value of the securities that are
not freely tradable or have no established public market or, if the
Consideration utilized consists of property other than securities, the value
of such other property shall be the fair market value thereof as reasonably
determined by the General Partners.
"CONTRIBUTING PARTNER" has the meaning set forth in Section 5.2.
"DISABLING EVENT" means any event which would cause a General Partner to
cease to be a general partner of the Partnership pursuant to Section 17-402
of the Partnership Act.
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"DISPOSITION" of a Project shall mean the sale, exchange or other
disposition by the Partnership of all or any portion of such Project for
cash, and shall include the receipt by the Partnership of a liquidating
dividend or other like distribution in cash. A refinancing of a Project
shall be deemed a Disposition of such Project unless the General Partners
agree otherwise. Whenever a portion of a Project (but not the entire
Project) is the subject of a Disposition, that portion shall be treated as
having been a separate project from that portion of the Project that is
retained by the Partnership, and the Capital Contributions for such Project
and the Proceeds (other than the Proceeds of such Disposition of a portion of
a Project) distributed to the Partners with respect to such Project shall be
treated as having been divided between the portion subject to the Disposition
and the retained portion on a pro rata basis. For purposes of calculating
the Internal Rate of Return, a Broken Deal shall be considered a Project
subject to a Disposition that did not yield any Proceeds.
"FAIR MARKET VALUE" of a Project as of a specific date shall mean the fair
market value of such project on such date as reasonably determined by the
General Partners (taking into consideration all factors which may reasonably
affect the sales price of the Project), less the principal amount of any debt
and other similar liabilities secured by or otherwise related to such
Project, and less a reasonable estimate of transaction costs and expenses
which would be incurred upon a Disposition of such Project on such date. If
the General Partners can not reach agreement on the Fair Market Value of a
Project, the matter shall be settled by arbitration in New York, New York in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect, except that the number and method of selection of
the arbitrators shall be as follows: each General Partner shall select one
qualified real estate investment banker or MAI appraiser who is experienced
in valuing assets and liabilities of the type in question; the average of the
Fair Market Values of such Project determined by such arbitrators shall be
the Fair Market Value of such Project, and shall be final, conclusive and
binding on the Partners.
"FISCAL PERIOD" means each fiscal quarter or such other period as may be
established by the General Partners.
"FISCAL YEAR" means the calendar year ending on December 31 of each year.
"GENERAL PARTNERS" mean the Blackstone General Partner, the Interstate
General Partner and any other person admitted to the Partnership as an
additional or substitute general partner of the Partnership in accordance
with the provisions
<PAGE> 12
8
of this Agreement, until such time as such person ceases to be a general
partner of the Partnership as provided herein.
"INTERNAL RATE OF RETURN" shall mean with respect to any Partner as of the
date of a cash distribution of Proceeds to such Partner, the rate of return
(calculated as provided below, taking into account the time value of money)
which (x) the Proceeds for which the return is being calculated represent on
(y) all Capital Contributions made by such Partner as of such date with
respect to the Project or Projects for which the return is being calculated.
In determining the Internal Rate of Return, the following shall apply:
(i) subject to the provisions of clause (ii) of this definition, all
present value calculations are to be made as of the date such Capital
Contributions were contributed to the Partnership;
(ii) all Capital Contributions shall be treated as having been
contributed to the Partnership on the first day of the month during which
a Partner's funds were actually delivered to the Partnership;
(iii) all distributions shall be treated as if received on the last day
of the month in which the distribution was made;
(iv) all distribution amounts shall be based on the amount of the
distribution prior to the application of any federal, state or local
taxation to Partners (including any withholding or deduction
requirements); and
(v) the rates of return shall be per annum rates and all amounts shall
be calculated on a compounded annual basis, and on the basis of a 365-day
year.
When calculating the Internal Rate of Return (and for such purpose only), a
Partner's Capital Contribution to a Project shall not be deemed to include
60% of such Partner's share of any amounts paid to the Blackstone General
Partner or its Affiliates pursuant to Sections 3.9 and 3.10 below for such
Project. When calculating the Internal Rate of Return, a Partner's initial
Capital Contributions shall be deemed given on the date of admission of such
Partner to the Partnership, not on the date that the transferor of such
Partner's interest in the Partnership made its Capital Contributions; such
Capital Contributions shall be deemed Capital Contributions of the transferor
for the period from when made until the transfer to the new Partner.
<PAGE> 13
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"INTERSTATE GENERAL PARTNER" means IHC/Interstone Corporation, a Delaware
corporation, or any Affiliate of any member of the Interstate Group who
replaces IHC/Interstone Corporation as a general partner hereunder or is
admitted as an additional general partner hereunder.
"INTERSTATE GROUP" means the Interstate Partners, Affiliates of the
Interstate Partners and the Interstate Related Parties.
"INTERSTATE LIMITED PARTNER" means IHC/Interstone Partnership II, L.P., a
Delaware limited partnership, or any Affiliate of any member of the
Interstate Group who replaces IHC/Interstone Partnership II, L.P. as a
limited partner hereunder or is admitted as an additional limited partner
hereunder.
"INTERSTATE PARTNERS" means collectively, the Interstate General Partner,
the Interstate Limited Partner and any other Partner admitted to the
Partnership which is an Affiliate of any of the foregoing and any permitted
assigns of such Partners.
"INTERSTATE RELATED PARTIES" means (i) Interstate Hotels Corporation, (ii)
each of the senior executives of Interstate Hotels Company and Interstate
Hotels Corporation and his immediate family members, for so long as he is
employed by Interstate Hotels Company and/or Interstate Hotels Corporation,
(iii) Milton Fine and his immediate family members and (iv) any corporation,
partnership, limited liability company, joint venture or other like entity in
which the Interstate Partners or the parties referred to in (i), (ii) and
(iii) above individually or collectively, hold a fifty percent (50%) or
greater, direct or indirect (through one or more business entities),
ownership interest but shall not include any such entity in which the
collective ownership interest of these parties is less than fifty percent
(50%) or which is a publicly traded company.
"LIMITED PARTNERS" means the Blackstone Limited Partners, the Interstate
Limited Partner and any person admitted to the Partnership as an additional
or substitute limited partner of the Partnership in accordance with the
provisions of this Agreement.
"LIQUIDATOR" has the meaning set forth in Section 7.2.
"MANAGEMENT AGREEMENT" shall mean a Management Agreement in the form
attached hereto as Exhibit A, as such agreement may be amended from time to
time in accordance with the terms thereof and hereof.
<PAGE> 14
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"MINIMUM GAIN" shall have the meaning set forth in Regulations section
1.704-2(d)(1) and shall mean the amount determined by (i) computing for each
nonrecourse liability of the Partnership any gain the Partnership would
realize if it disposed of the property subject to that liability for no
consideration other than full satisfaction of the liability and (ii)
aggregating the separately computed gains. If the Carrying Value of any
Partnership Asset differs from the adjusted tax basis of such property, the
calculation of Minimum Gain pursuant to the preceding sentence shall be made
by reference to the Carrying Value. For purposes hereof, a liability of the
Partnership is a nonrecourse liability to the extent that no Partner or
related person bears the economic risk of loss for that liability within the
meaning of Regulations section 1.752-1.
"NET INCOME (LOSS)" shall mean for each Fiscal Year or other period, the
taxable income or loss of the Partnership, or particular items thereof,
determined in accordance with the accounting method used by the Partnership
for U.S. federal income tax purposes with the following adjustments: (i) all
items of income, gain, loss or deduction allocated pursuant to Section 6.4(c)
through (e) shall not be taken into account in computing such taxable income
or loss; (ii) any income of the Partnership that is exempt from U.S. federal
income taxation and not otherwise taken into account in computing Net Income
and Net Loss shall be added to such taxable income or loss; (iii) if the
Carrying Value of any asset differs from its adjusted tax basis for U.S.
federal income tax purposes, any depreciation, amortization or gain resulting
from a disposition of such asset shall be calculated with reference to such
Carrying Value; (iv) upon an adjustment to the Carrying Value of any asset,
pursuant to the definition of Carrying Value, the amount of the adjustment
shall be included as gain or loss in computing such taxable income or loss;
and (v) except for items in (i) above, any expenditures of the Partnership
not deductible in computing taxable income or loss, not properly
capitalizable and not otherwise taken into account in computing Net Income
and Net Loss pursuant to this definition shall be treated as deductible
items.
"NON-CAPITAL PROCEEDS" means (x) any cash or other consideration received by
the Partnership other than Capital Proceeds less (y) any such cash that is
applied to the establishment of reserves which have been established by the
General Partners and to expenses of the Partnership.
"NON-CONTRIBUTING PARTNER" has the meaning set forth in Section 5.2.
"NONRECOURSE DEDUCTIONS" shall have the meaning ascribed to such term in
Regulations section 1.704-2(b)(1).
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"ORGANIZATIONAL EXPENSES" means all reasonable third-party costs and
expenses pertaining to the organization of the Partnership and the
registration, qualification or exemption of the Partnership under any
applicable federal, state or foreign laws, including fees of counsel to the
Partnership and the Partners.
"PARALLEL PARTNERSHIPS" has the meaning set forth in Section 2.8.
"PARTNER" means any person who is a partner of the Partnership, whether a
General Partner, a Limited Partner or both.
"PARTNER NONRECOURSE DEBT" shall have the meaning ascribed to such term in
Regulations section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" shall have the meaning ascribed to
such term in Regulations section 1.704-2(i)(2).
"PARTNER NONRECOURSE DEDUCTIONS" shall mean any item of partnership loss,
deduction, or expenditure under section 705(a)(2)(B) of the Code that is
attributable to a Partner Nonrecourse Debt, as determined pursuant to
Regulations section 1.704-2(i)(2).
"PARTNERSHIP" means Interstone Three Partners III L.P.
"PARTNERSHIP ACT" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. Section Section 17-101, et seq., as it may be amended from
time to time, and any successor to such statute.
"PARTNERSHIP ASSETS" means all right, title and interest of the Partnership
in and to all or any portion of the assets of the Partnership and any
property (real or personal) or estate acquired in exchange therefor or in
connection therewith.
"PRE-EXISTING PROJECTS" has the meaning set forth in Section 3.6(a).
"PROCEEDS" means the collective reference to Capital Proceeds and
Non-Capital Proceeds.
"PROJECT" has the meaning set forth in the Preliminary Statement.
"PROJECT LIMITED LIABILITY COMPANY AGREEMENT" shall mean a limited liability
company agreement in a form to be agreed upon by the General Partners, as
such agreement may be amended from time to time in accordance with the terms
<PAGE> 16
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thereof and hereof, formed pursuant to this Agreement to own Projects
purchased hereunder.
"PROJECT PARTNERSHIP AGREEMENT" shall mean a partnership agreement in the
form attached hereto as Exhibit B, (with such changes as required to provide
the Blackstone General Partner therein and the Interstate General Partner
therein with the same management rights as the Blackstone General Partner
herein and the Interstate General Partner herein, respectively, have pursuant
to this Agreement), as such agreement may be amended from time to time in
accordance with the terms thereof and hereof, formed pursuant to this
Agreement to own Projects purchased hereunder.
"REGULATIONS" means the regulations promulgated under the Code.
"RELATED PARTIES" means the Blackstone Related Parties and the Interstate
Related Parties.
"REQUEST FOR PRELIMINARY APPROVAL" has the meaning set forth in Section
3.6(b).
"REQUEST FOR FINAL APPROVAL" has the meaning set forth in Section 3.6(f).
"SHARING PERCENTAGE" means the percentage interest of a Partner with respect
to each Project, determined in accordance with Section 3.6(f) of this
Agreement, as amended from time to time in accordance herewith.
Notwithstanding the foregoing, at the election of the Blackstone General
Partner or the Interstate General Partner made prior to the purchase of any
Target Investment by the Partnership, the Sharing Percentages of the
Interstate Limited Partner shall be reduced to 49.5% with respect to each
Projecct and the Sharing Percentage of the Blackstone Limited Partner shall
be increased to 49.5% in the aggregate with respect to each Projecct. In
such event, appropriate changes shall be made in Section 6.4(a) and 6.4(d)(i)
below.
"TARGET INVESTMENT" has the meaning set forth in the Preliminary Statement.
"TAX MATTERS PARTNER" has the meaning set forth in Section 6.2.
"TRANSFER" has the meaning set forth in Section 8.1(a).
"TRANSFEREE" has the meaning set forth in Section 8.1(b).
"UNREALIZED LOSS" with respect to a Project on a date of a distribution of
Capital Proceeds shall mean the excess
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of the total Capital Contributions with respect to such Project as of such
date over the Fair Market Value of such Project as of such date. A Project
shall not have any Unrealized Loss on a date of a distribution if the
calculation pursuant to this definition for such Project on such date equals
zero or less.
SECTION 1.2 TERMS GENERALLY. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The term "person" includes individuals,
partnerships, joint ventures, corporations, trusts, governments (or agencies or
political subdivisions thereof) and other associations and entities. Unless
the context requires otherwise, the words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The term
"hereunder" shall mean this entire Agreement as a whole unless reference to a
specific section of this Agreement is made.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.1 CONTINUATION OF PARTNERSHIP. The Blackstone General Partner
and the Interstate General Partner, as the General Partners, and the Blackstone
Limited Partners and the Interstate Limited Partner, as limited partners,
hereby agree to continue the Partnership and the Partners agree that the
Partnership shall continue for the limited purposes set forth and on the other
terms and conditions set forth in this Agreement. The Blackstone General
Partner hereby represents that each of the Blackstone Limited Partners is an
Affiliate of the Blackstone General Partner or its Affiliates.
SECTION 2.2 PARTNERS. Schedule A hereto contains the name, address and
Sharing Percentage of each Partner as of the date of this Agreement. Schedule
A shall be revised by the General Partners from time to time to reflect the
admission or withdrawal of a Partner or the transfer or assignment of interests
in the Partnership in accordance with the terms of this Agreement and other
modifications to or changes in the information set forth therein.
SECTION 2.3 NAME. The Partnership shall conduct its activities under the
name of Interstone Three Partners III L.P. The General Partners shall have the
power at any time to change the name of the Partnership; provided, that the
name shall always contain the words "Limited Partnership" or the letters "L.P."
The General Partners shall give prompt notice of any such change to each
Partner.
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SECTION 2.4 TERM. The term of the Partnership shall commence on the date
of this Agreement and shall continue until December 31, 2045, unless sooner
dissolved, wound up and terminated in accordance with Article VII of this
Agreement.
SECTION 2.5 PURPOSE; POWERS. (a) The purpose of the Partnership shall be
(i) to implement the right of first opportunity with the Blackstone Group and
the Interstate Group, including review and approval or disapproval by the
General Partners of due diligence investigation of proposed Target Investments,
and, upon final approval by the General Partners, causing the acquisition by
the Partnership of such Target Investments either by itself or directly or
indirectly through entities in which the Partnership shall have a direct or
indirect ownership interest; (ii) operating, managing and disposing of any
Target Investments approved for acquisition pursuant to this Agreement; and
(iii) to do all things necessary or incidental to any of the foregoing.
(b) In furtherance of its purposes, the Partnership shall have all powers
necessary, suitable or convenient for the accomplishment of its purposes, alone
or with others, including the following:
(i) to invest and reinvest the cash assets of the Partnership in
money-market or other short-term investments;
(ii) to have and maintain one or more offices within or without the State
of Delaware, and, in connection therewith, to rent or acquire office space,
engage personnel and compensate them and do such other acts and things as may
be advisable or necessary in connection with the maintenance of such office or
offices;
(iii) to open, maintain and close bank accounts and draw checks and other
orders for the payment of moneys;
(iv) to engage employees (with such titles and delegated responsibilities
as may be determined), accountants, consultants, auditors, custodians,
investment advisers, attorneys and any and all other agents and assistants,
both professional and nonprofessional, and to compensate them as may be
necessary or advisable;
(v) to form or cause to be formed and to own the stock of one or more
corporations, whether foreign or domestic, and to form or cause to be formed
and to participate in partnerships, joint ventures and limited liability
companies, whether foreign or domestic;
(vi) to enter into, make and perform all contracts, agreements and other
undertakings as may be necessary or advisable or incident to carrying out its
purposes;
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(vii) to sue, prosecute, settle or compromise all claims against third
parties, to compromise, settle or accept judgment of claims against the
Partnership, and to execute all documents and make all representations,
admissions and waivers in connection therewith;
(viii) to distribute, subject to the terms of this Agreement, at any time
and from time to time to Partners cash or investments or other property of the
Partnership, or any combination thereof;
(ix) to borrow money, whether secured or unsecured, and to make, issue,
accept, endorse and execute promissory notes, drafts, bills of exchange and
other instruments and evidences of indebtedness, all without limit as to
amount, and to secure the payment thereof by mortgage, pledge, or assignment
of, or security interest in, the assets then owned or thereafter acquired by
the Partnership;
(x) to buy, sell, operate and otherwise deal with Target Investments;
(xi) to hold, receive, mortgage, pledge, lease, transfer, exchange or
otherwise dispose of, grant options with respect to, and otherwise deal in and
exercise all rights, powers, privileges and other incidents of ownership or
possession with respect to, all property held or owned by the Partnership; and
(xii) to take such other actions necessary or incidental thereto as may be
permitted under applicable law.
SECTION 2.6 PLACE OF BUSINESS. The Partnership shall maintain a
registered office at The Corporation Trust Company, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801, or such other office within the
State of Delaware as is chosen by the General Partners. The Partnership shall
maintain an office and principal place of business at 345 Park Avenue, New
York, New York 10154, or at such other place as may from time to time be
determined as its principal place of business by the General Partners; the
General Partners shall give notice to the other Partners of any change in the
Partnership's principal place of business. The name and address of the
Partnership's registered agent as of the date of this Agreement is The
Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
SECTION 2.7 ALTERNATIVE INVESTMENT STRUCTURE. If the Blackstone General
Partner determines that for legal, tax, regulatory or other reasons it is in
the best interests of the Partners that a Target Investment be made through an
alternative investment structure, and all of the other General Partners
unanimously Consent to such alternative structure (which Consent shall not be
unreasonably withheld), the Blackstone General
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Partner shall structure the making of all or any portion of such Target
Investment outside of the Partnership by requiring any Partner or Partners to
make such Target Investment either directly or indirectly through a partnership
or other vehicle (such as the purchase of stock, the purchase of partnership
interests, or the formation of another partnership or as tenants in common)
that will invest on a parallel basis with or in lieu of the Partnership, as the
case may be. The Partners shall be required to make capital contributions
directly to each such vehicle to the same extent, for the same purposes and on
the same terms and conditions as Partners are required to make Capital
Contributions to the Partnership, and such capital contributions shall reduce
the unused Committed Capital of the Partners to the same extent as if Capital
Contributions were made to the Partnership with respect thereto. Each Partner
shall have the same economic interest in all material respects in Target
Investments made pursuant to this Section 2.7 as such Partner would have if
such Target Investment had been made solely by the Partnership, and the other
terms of such vehicle shall be substantially identical in all material respects
to those of the Partnership, to the maximum extent applicable; provided, that
such vehicle (or the entity in which such vehicle invests) shall provide for
the limited liability of the Limited Partners as a matter of the organizational
documents of such vehicle (or the entity in which such vehicle invests) and as
a matter of local law; and provided, further, that the General Partners or
Affiliates thereof will serve as the general partners or in some other similar
fiduciary capacity with respect to such vehicle.
SECTION 2.8 PARALLEL PARTNERSHIPS. The General Partners have established
one or more additional collective partnerships (the "Parallel Partnerships")
organized pursuant to partnership agreements in substantially the same form as
this Agreement for certain types of investors to invest in Target Investments
together with the Partnership. The Blackstone General Partner, or an Affiliate
thereof, shall be a general partner of any such Parallel Partnerships, and the
Blackstone Limited Partners, or Affiliates thereof, shall be limited partners
of any such Parallel Partnerships. The Interstate General Partner, or an
Affiliate thereof, shall be a general partner of any such Parallel Partnerships
and the Interstate Limited Partner, or an Affiliate thereof, shall be a limited
partner of any such Parallel Partnerships. The economic terms of each Parallel
Partnership shall be the same as those of the Partnership.
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ARTICLE III
MANAGEMENT AND OPERATION OF THE
PARTNERSHIP; IDENTIFICATION AND APPROVAL OF
INVESTMENTS; PARTNER SERVICES
SECTION 3.1 MANAGEMENT. (a) The General Partners shall have the full and
complete responsibility for managing the business of the Partnership and shall
make all of the decisions affecting the business of the Partnership. Except as
otherwise set forth in this Agreement, the Limited Partners shall have no right
of Consent with respect to such decisions. The General Partners shall have all
of the rights, powers and authorities permitted to be exercised by a general
partner of a limited partnership formed under the Partnership Act. The General
Partners shall exercise all powers necessary and convenient for the purposes of
the Partnership, including those enumerated in Section 2.5, on behalf and in
the name of the Partnership.
(b) Except as otherwise provided herein, the Limited Partners as such shall
not have the right to, and shall not, take part in the management or affairs of
the Partnership, nor in any event shall any Limited Partner have the power to
act for or bind the Partnership unless delegated such power by the General
Partners. The exercise by any Limited Partner of any right or power conferred
herein shall not be construed to constitute participation by such Limited
Partner in the control of the business of the Partnership so as to make such
Limited Partner liable as a general partner for the debts and obligations of
the Partnership for purposes of the Partnership Act.
(c) Any Consent required by this Agreement may be given as follows:
(1) by a written Consent given by the approving Partner at or prior to the
doing of the act or thing of which the Consent is solicited, provided that
such Consent shall not have been nullified by notice to all of the General
Partners by the approving Partner at or prior to the time, or by the negative
vote by such approving Partner at any meeting held to consider the doing, of
such act or thing; or
(2) by the Consent given by the approving Partner to the doing of the act
or thing for which the Consent is solicited at any meeting called or held to
consider the doing of such act or thing.
(d) Unless the General Partners agree on a different procedure, any matter
requiring the Consent of all or any of the Partners pursuant to this Agreement
may be considered at a meeting of the Partners held not less than three (3) nor
more than fifteen (15) Business Days after notice thereof shall have been given
by a General Partner to all Partners. Such notice (i)
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may be given by any General Partner, in its discretion, at any time. Any such
notice shall state briefly the purpose, time and place of the meeting. All
such meetings shall be held within or outside the State of Delaware at such
reasonable place as the General Partners shall designate and during normal
business hours. Unless otherwise provided by the General Partners, meetings
may be held telephonically.
(e) The written statements and representations of an Authorized
Representative for a General Partner shall be the only authorized statements
and representations of such General Partner with respect to the matter covered
by this Agreement. The initial Authorized Representatives are (i) Kenneth C.
Whitney, Thomas Saylak and John Schreiber for the Blackstone General Partner
and (ii) W. Thomas Parrington, J. William Richardson and Marvin I. Droz for the
Interstate General Partner. The written statement or representation of any one
Authorized Representative of the Blackstone General Partner shall be sufficient
to bind the Blackstone General Partner with respect to all matters pertaining
to the Partnership and addressed in such statement or representation. The
written statement or representation of any two Authorized Representatives of
the Interstate General Partner shall be sufficient to bind the Interstate
General Partner with respect to all matters pertaining to the Partnership and
addressed in such statement or representation.
(f) The failure to vote by any Partner on any matter requiring such
Partner's Consent within five business days after such vote is requested shall
be deemed to be a negative vote with respect to such matter.
(g) A Partner shall not be obligated to abstain from voting on any matter
(or vote in any particular manner) because of any interest (or conflict of
interest) of such Partner (or any Affiliate thereof) in such matter.
(h) Each Partner agrees that, except as otherwise expressly provided
herein and to the fullest extent permitted by applicable law, the approval of
any proposed action of or relating to the Partnership by all of the General
Partners as provided herein (or if this Agreement grants one General Partner
sole approval rights over a certain action, the approval of such action by such
General Partner) shall bind each Partner and shall have the same legal effect
as the approval of each Partner of such action.
SECTION 3.2 JOINT CONTROL BY THE GENERAL PARTNERS. Except as specifically
provided in this Agreement, the business, affairs and operations of the
Partnership shall be managed, and all Partnership decisions shall be jointly
made, by both General Partners, and no single General Partner, acting alone in
its capacity as such, shall have the authority to bind or make any decision for
the Partnership or to conduct or manage the Partnership's business or affairs.
Without limiting the
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19
foregoing in any way, the following are examples of decisions of the
Partnership which shall be made jointly by the General Partners:
(a) the reorganization of the Partnership as a corporation or other
entity, or the creation of a holding corporation, partnership or limited
liability company to own all or any substantial portion of the assets of or
all the equity interests in the Partnership, provided that the surviving
entity remains a pass-through entity for taxation purposes;
(b) the termination or settlement of any litigation by the Partnership;
(c) the making of any change in the Fiscal Period, any determination of
reserves under this Agreement, any distribution of cash or investments or
other property of the Partnership to the Partners, or any withdrawals of
capital from the Partnership;
(d) the making of any change in the name of the Partnership or the use of
another name by the Partnership to carry on any business of the Partnership;
(e) the making of the determination and approval of such tax matters as
are specified in Section 6.2;
(f) the making of the allocation of amounts in respect of an interest in
the Partnership Transferred pursuant to Section 8.2(e);
(g) the authorization of a Partner to disclose information agreed to be
held confidential under Sections 9.5;
(h) the admission of an additional Partner to the Partnership pursuant to
the terms of this Agreement if such additional Partner is not an Affiliate of
either any member of the Blackstone Group or any member of the Interstate
Group;
(i) (A) the sale, exchange or other transfer of any Partnership Asset, (B)
the merger or consolidation of the Partnership with or into any other
business entity provided that the surviving entity remains a pass-through
entity for taxation purposes, and (C) the right to require each of the
Partners to exchange, transfer or otherwise convey some or all of its
partnership interest in the Partnership as part of an exit or disposition
strategy for the Partnership;
(j) the making of any expenditure incurred in connection with the
administration of the Partnership;
<PAGE> 24
20
(k) the entering into of any lease by the Partnership as lessor;
(l) the engagement of any independent accountant, counsel, actuary or
consultant to the Partnership, or any change in or termination of any engaged
independent accountant, counsel, actuary or consultant to the Partnership;
(m) the maintenance of a registered office in Delaware other than that
specified in Section 2.6;
(n) the determination of any titles and responsibilities of employees of
the Partner pursuant to Section 2.5(b)(iv);
(o) the approval of budgets;
(p) the expenditure by the Partnership of any funds in connection with
the disposition of a Target Investment or the expenditure by the Partnership
of any funds required in connection with the operation of any Target
Investments which are not included within the approved budget for such Target
Investment;
(q) any termination, replacement or other change in the franchisor of any
Target Investment in accordance with the terms of the franchise agreement (or
the manager of any Target Investment if such manager is not the Interstate
General Partner or an Affiliate thereof), or the execution, modification or
termination of any agreement which is material to the Partnership (except as
set forth in Section 3.3(a);
(r) the dissolution, termination and winding up of the Partnership as
provided in Section 7.1(a);
(s) any amendment to this Agreement which would have a material adverse
effect on any Partner's economic interest in the Partnership;
(t) extending the term of the Partnership beyond December 31, 2045;
(u) in accordance with Section 3.6 below, the decision for the Partnership
to investigate a Target Investment and the decision for the Partnership to
acquire a Target Investment, or the decision for the Partnership to acquire
any other asset;
(v) the borrowing of money;
(w) the filing of a petition under any bankruptcy or other insolvency law
by the Partnership, or the admission in
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21
writing by the Partnership of its bankruptcy, insolvency or general inability
to pay its debts;
(x) the commencement of any litigation by the Partnership;
(y) a transaction or other matter involving any actual or potential
conflict of interest affecting any Partner or Affiliate thereof other than
the entering into of any agreements or the payment of any amounts provided
for in this Agreement; and
(z) a change in the business of the Partnership to include any business
other than that specified in Section 2.5 which takes the focus of the
Partnership's business away from the lodging industry.
Notwithstanding the foregoing and without limiting the foregoing in any way,
any General Partner may delegate in writing to (i) the other General Partner,
its right to make any decisions concerning the Partnership or take any actions
on behalf of the Partnership and/or (ii) to any manager of any Target
Investment, the day to day administrative duties in connection with the
operation of such property.
SECTION 3.3 BLACKSTONE PARTNERS RIGHTS. Notwithstanding any other
provision of this Agreement, the Blackstone General Partner may take any of the
following actions with out the Consent of any of the Interstate Partners:
(a) with respect to any Target Investment in which an Affiliate of the
Interstate General Partner is the manager, any termination, replacement or
other change in such manager in accordance with the terms of the management
agreement (provided that the Blackstone General Partner shall consult with
the Interstate General Partner with respect to any replacement manager and
shall act reasonably with respect to its selection of a replacement manager,
but the Interstate General Partner shall not have any consent rights with
respect to such replacement manager), the declaration of a default or event
of default under any management agreement for such manager, and the exercise
of any remedies under such management agreement;
(b) the approval of the admission of any additional partner to the
Partnership if such additional partner is an Affiliate of any member of the
Blackstone Group or any member of the Interstate Group; and
(c) such other actions and decisions which are expressly given solely to
the Blackstone General Partner pursuant to the terms of this Agreement.
<PAGE> 26
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SECTION 3.4 CERTAIN DUTIES AND OBLIGATIONS OF THE PARTNERS. (a) Subject
to the terms of this Agreement, the General Partners shall take all action
which may be reasonably necessary or appropriate (i) for the formation and
continuation of the Partnership as a limited partnership under the laws of the
State of Delaware and (ii) for the development, maintenance, preservation and
operation of the business of the Partnership in accordance with the provisions
of this Agreement and applicable laws and regulations.
(b) No Partner shall take any action so as to cause the Partnership to be
classified for Federal income tax purposes as an association taxable as a
corporation and not as a partnership.
(c) The General Partners shall take (and each Partner agrees to cooperate
with the General Partners and approves of the General Partners taking on its
behalf) all action which is necessary to form or qualify the Partnership to
conduct the business in which the Partnership is engaged under the laws of any
jurisdiction in which the Partnership is doing business and to continue in
effect such formation or qualification.
(d) The General Partners shall not take, or cause to be taken, any action
that would result in any Limited Partner having any personal liability for the
obligations of the Partnership. The General Partners shall be under a duty as
described herein to conduct the affairs of the Partnership in the best
interests of the Partnership and of the Partners including the safekeeping and
use of all Partnership funds and assets and the use thereof for the exclusive
benefit of the Partnership. Neither any Partner nor any Affiliate of any
Partner shall enter into any transaction with the Partnership unless the
transaction (i) is expressly permitted hereunder, (ii) is entered into on
arm's-length terms in the ordinary course of Partnership business or (iii) is
approved by all of the General Partners upon disclosure of any direct or
indirect interest such Partner or any Affiliate thereof may have in the
transaction.
(e) No General Partner shall be liable, responsible or accountable in
damages or otherwise to the Partnership or to any Partner for (a) any act
performed within the scope of the authority conferred on such General Partner
by this Agreement except for the gross negligence or willful misconduct of such
General Partner in carrying out its obligations hereunder, (b) such General
Partner's failure or refusal to perform any act, except those expressly
required by or pursuant to the terms of this Agreement, (c) such General
Partner's performance of, or failure to perform, any act on the reasonable
reliance on advice of legal counsel to the Partnership or (d) the negligence,
dishonesty or bad faith of any agent, consultant or broker of the Partnership
selected, engaged or retained and monitored with reasonable care. In any
threatened, pending or completed action, suit or proceeding, each General
Partner shall be fully protected
<PAGE> 27
23
and indemnified and held harmless by the Partnership against all liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suits,
proceedings, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, reasonable attorneys' fees, costs of
investigation, fines, judgments and amounts paid in settlement, actually
incurred by such General Partner in connection with such action, suit or
proceeding) by virtue of its status as a General Partner or with respect to any
action or omission taken or suffered in good faith, other than liabilities and
losses resulting from the gross negligence or willful misconduct of such
General Partner; provided, however, that a General Partner shall not be so
indemnified for any acts determined to be in contravention of this Agreement or
in breach of its fiduciary duties. The indemnification provided by this
paragraph shall be recoverable only out of the assets of the Partnership, and
no Partner shall have any personal liability on account thereof.
SECTION 3.5 RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNERS. The
General Partners shall not have the authority to:
(a) do any act in contravention of this Agreement (including under Section
3.2 or Section 3.3);
(b) do any act which would make it impossible to carry on the ordinary
business of the Partnership, except in connection with the dissolution,
winding up and termination of the Partnership as provided by Article VII;
(c) possess Partnership property, or assign their respective rights in
specific Partnership property, for other than a Partnership purpose;
(d) admit a person as a Partner except as provided in this Agreement; or
(e) knowingly perform any act that would subject any Limited Partner to
liability as a general partner in any jurisdiction.
SECTION 3.6 RIGHT OF FIRST OPPORTUNITY. (a) Subject to Section 3.7(b)
below, and until expiration or termination of the right of first opportunity in
favor of the Partnership set forth below (which right has been confirmed and
acknowledged in the Confirmation and Acknowledgment of Right of First
Opportunity ("Acknowledgment"), in the form attached hereto as Exhibit C, which
has been executed simultaneously herewith), each member of the Blackstone Group
and the Interstate Group shall offer to the Partnership (along with the
Parallel Partnerships) a right of first opportunity to invest in each Target
Investment which (x) is identified by such member after the date of this
Agreement or (y) which is identified on the list of Projects attached hereto as
Exhibit D (the "Pre-Existing
<PAGE> 28
24
Projects"), in each case, upon and subject to the terms set forth in the
remainder of this Section 3.6.
(b) Except as provided in Section 3.7(b) below, promptly upon its
identification of a Target Investment as a potential investment, each member of
the Blackstone Group and the Interstate Group shall notify each of the General
Partners about such Target Investment (such notification, a "Request for
Preliminary Approval") and shall provide each of the General Partners with such
information reasonably necessary to evaluate such investment.
(c) Within five (5) Business Days after delivery to the General Partners
of the Request for Preliminary Approval and the accompanying information
pursuant to paragraph (b) above with respect to a proposed Target Investment,
and provided that notice shall have first been given from the party requesting
such action that approval is being sought under this Section, the General
Partners shall either approve or disapprove pursuit of such proposed Target
Investment (including the incurring of due diligence costs and expenditures,
the negotiation and documentation of the terms of purchase and financing, and
the posting of deposits). If the General Partners, having first been notified
that approval under this Section is being sought, fail to unanimously approve
the investigation of a proposed Target Investment within such five (5) Business
Day period, the proposed Target Investment shall be deemed disapproved. Any
General Partner shall have the right to reasonably request additional
information regarding the proposed Project within three (3) Business Days after
receipt of the Request for Preliminary Approval and the accompanying
information. If any General Partner requests such additional information, the
five (5) Business Day period referred to above shall commence on the day such
General Partner receives all such additional information. The General Partners
shall each have the right to approve or disapprove investigation of any
proposed Project in their sole and absolute discretion. Once investigation of
a Target Investment is approved, the due diligence costs and expenditures
reasonably incurred by the Partnership and within the scope approved by the
General Partners with respect to such Project shall become the obligation of
the Partnership.
(1) All due diligence costs and expenditures reasonably incurred by the
Partnership pursuant to this Section and within the scope of the approved due
diligence shall be funded if and when required for payment, and shall be
funded solely from, and shall constitute, Capital Contributions to the
Partnership by the Partners. In no event shall due diligence expenses be
funded from operating revenues of the Partnership. The due diligence
expenses incurred by the Partnership shall be allocated for book and tax
accounting purposes between and among each Project in such manner as the
General Partners may reasonably approve. Due diligence expenses from a
Project shall be allocated
<PAGE> 29
25
among the Parallel Partnerships in such a manner as the Blackstone General
Partner shall determine, in its sole discretion. The Interstate General
Partner and the Blackstone General Partner shall each make a Capital
Contribution equal to 0.5% of the due diligence expenses allocated to the
Partnership. The Interstate Limited Partner shall make a Capital
Contribution equal to 50.5% (or 49.5% if the election set forth in the
definition of "Sharing Percentage" below is exercised) of the due diligence
expenses allocated to the Partnership. The remaining 48.5% (or 49.5% if the
election set forth in the definition of "Sharing Percentage" below is
exercised) of the due diligence expenses allocated to the Partnership shall
be funded from Capital Contributions of the Blackstone Limited Partners, with
each Blackstone Limited Partner contributing a percentage of the total due
diligence expenses to be determined by the Blackstone General Partner, in its
sole discretion.
(2) The Partners intend that all due diligence will be conducted through
the Partnership in accordance with any Consent given by the General Partners;
however, a General Partner may elect to perform, at its own cost, its own due
diligence in addition to that being performed by the Partnership.
(d) If the General Partners approve investigation of a Project, the
Partnership shall promptly undertake due diligence investigation and at
appropriate times during and, in any event, prior to the conclusion of that due
diligence investigation, the Partnership shall make available to each Partner
copies of the material due diligence information obtained by the Partnership
with respect to the applicable Target Investment.
(e) If any General Partner has elected to participate in the due diligence
investigation of a proposed Project pursuant to Section 3.6(c)(2) above, then
all due diligence activities shall be coordinated with such General Partner as
reasonably necessary to facilitate such participation.
(f) At such time, if any, as any member of the Blackstone Group or the
Interstate Group determines that a request for final authority to proceed with
acquisition of a Project is required because such party reasonably believes
that a binding commitment (i.e. a letter of intent which is, or could become
binding or a contract for purchase and sale) to proceed with the acquisition
must be executed by the Partnership or the opportunity to acquire such interest
would be lost, such party shall request the General Partners to give their
final approval to proceed with such acquisition (such notification, a "Request
for Final Approval"). Upon the request of any General Partner, a Request for
Final Approval shall be made in writing. In connection with any Request for
Final Approval, such party shall, to the extent applicable, (i) submit to the
General Partners the
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26
form of any purchase agreement and/or other relevant documents pursuant to
which the Partnership may acquire an interest in a Project, and (ii) notify the
General Partners of whether an Affiliate of the Interstate General Partner is
being proposed as the property manager for the Project. Within five (5)
Business Days after delivery of the Request for Final Approval, the General
Partners shall meet and either approve or disapprove, in writing, the proposed
Project, including a timetable for closing of the acquisition, the posting of
any non-refundable deposits, if applicable, and the terms of engagement of any
Affiliate of the Interstate General Partner for property or asset management of
the Project, as applicable. Each General Partner shall have the right to grant
final approval or disapproval of the Project in its sole and absolute
discretion. However, unless all of the General Partners agree to extend the
five (5) Business Day decision period set forth above, the General Partners
shall either approve or disapprove the Project within that period without
exception, and any failure to act within that period, as it may be extended by
the General Partners in their sole discretion, shall constitute a disapproval
of the Project. The Blackstone Partners specifically acknowledge that, unless
transfer of management is not feasible or practical, the Interstate General
Partner contemplates the engagement by the Partnership of an Affiliate of the
Interstate General Partner on an arm's length basis in connection with the
property management of one or more of the Projects and contemplates that one or
more of the Project proposals may propose such engagement. If transfer of
management is not feasible or practical, then, unless such engagement is not
feasible or practical, the Partnership shall engage an Affiliate of the
Interstate General Partner as an asset manager for such Project pursuant to an
Asset Management Agreement in form and substance satisfactory to the parties
thereto (the "Asset Management Agreement"), and the fees payable by the
Partnership under such Asset Management Agreement shall be at Competitive
Rates. Unless the General Partners unanimously agree otherwise, no
nonrefundable deposit shall be posted with respect to a Project until that
Project has received final Project approval pursuant to this subsection 3.6(f)
and the General Partners have had the opportunity to review the purchase
agreement and/or the other documents pursuant to which the Partnership may
acquire an interest in such Project. The final Project approval shall specify
the amount of each remaining funding obligation with respect to the applicable
Project and the date(s) by which each such amount is to be funded, it being the
intent of the Partners that they not fund to the Partnership those amounts due
to the seller of (or if applicable, escrow agent for the transfer of) the
Project more than three (3) Business Days prior to the date such amounts are
due to the Seller or escrow agent, as applicable. The funding obligations with
respect to a Project shall be allocated among the Parallel Partnerships in such
a manner as the Blackstone General Partner shall determine, in its sole
discretion.
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By each funding date, the Partners shall fund to the Partnership a portion of
the funding obligation then due, including any purchase deposits contemplated
in connection with the Consent to such Project. The Interstate General Partner
and the Blackstone General Partner shall each make a Capital Contribution equal
to 0.5% of the funding obligations allocated to the Partnership (which
percentage shall be such Partner's Sharing Percentage in such Project). The
Interstate Limited Partner shall make a Capital Contribution equal to 50.5% (or
49.5% if the election set forth in the definition of "Sharing Percentage" below
is exercised) of the funding obligations allocated to the Partnership (which
percentage shall be such Partner's Sharing Percentage in such Project). The
Blackstone Limited Partners shall, in the aggregate, make Capital Contributions
equal to 48.5% (or 49.5% if the election set forth in the definition of
"Sharing Percentage" below is exercised) of the funding obligations allocated
to the Partnership, and each Blackstone Limited Partner's share thereof shall
be determined by the Blackstone General Partner, in its sole discretion, and
recorded in the books and records of the Partnership (each Blackstone Limited
Partner's share thereof, as determined by the Blackstone General Partner, shall
be such Partner's Sharing Percentage in such Project). In no event shall final
Project approval funding requirements be funded from operating revenues of the
Partnership. All such contributions to the Partnership shall constitute
Capital Contributions. Each of the General Partners will consult with the
other General Partners in connection with the negotiation of any documents
necessary for the acquisition of a Target Investment.
(g) If the General Partners approve a proposed Project pursuant to
subsection 3.6(f) above, unless the Project shall be purchased through another
form, the Partnership shall promptly finalize the form of the Project
Partnership Agreement or Project Limited Liability Company Agreement, as
applicable, for the ownership of the proposed Project (with such Project
specific modifications as are necessary to address any Project specific
characteristics not addressed by the form of Project Partnership Agreement or
Project Limited Liability Company Agreement, as applicable), and promptly
finalize the form of a Management Agreement or an Asset Management Agreement,
as applicable, to be entered into (with such Project specific modifications as
are necessary to address any Project specific characteristics not addressed by
the form of Management Agreement or Asset Management Agreement, as applicable,
and which the Manager and the Blackstone General Partner may approve), which
Management Agreement (if applicable) shall provide for aggregate fees not
greater than 2.8% of Gross Operating Revenues (as defined in the Management
Agreement). In no event shall any party hereunder have any liability to the
other party for failure to finalize or enter into any Management Agreement or
Asset Management Agreement, as applicable, so long as the parties have
proceeded in good faith to attempt to consummate such documentation
<PAGE> 32
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following approval of the General Partners of any proposed Project pursuant to
Section 3.6.
(h) The General Partners agree that in the event that (A) material facts
or circumstances or a material change in any facts or circumstances regarding a
Target Investment which was approved for acquisition by the General Partners
become known to any General Partner which were not previously known by such
General Partner and (B) with the knowledge of such new or changed facts or
circumstances, such General Partner no longer desires to proceed with such
acquisition and (C) at the time of the occurrence of the event or events
referred to in clause (A) above, (x) the Partnership is not irrevocably
committed to consummate the acquisition of such Target Investment pursuant to a
binding legal agreement and (y) the Partnership's obligations under such
agreement would not be breached by the failure to consummate such acquisition,
then such General Partner may, by written notice to the other General Partners,
revoke its Consent to consummate such acquisition at which time such Target
Investment shall no longer be deemed approved.
(i) Notwithstanding anything in this Section to the contrary, if, with
respect to a Project, a member of the Blackstone Group or the Interstate Group
reasonably believes it must take some action to retain the opportunity to
purchase such Project before it has sufficient time to follow the procedures
for approval set forth in this Section, such party may take such action
(including the making of a deposit or the entering into a binding agreement if
assignable to the Partnership) in its own name only and at its own risk without
violating the terms of this Agreement, provided such party promptly submits
such Project to the Partnership for its consideration. If the General Partners
subsequently approve such Project, such party shall assign all of its rights in
the Project to the Partnership and the Parallel Partnerships, as appropriate.
If the General Partners subsequently disapprove such Project, the Partnership
shall not be bound in any way to such Project, and the party who proposed the
Project may proceed with such Project only if the conditions of Section 3.7(b)
and Section 3.7(c) have been met.
(j) Any General Partner may request that any of the time periods set forth
herein be reduced or extended, if reasonably necessary.
(k) Notwithstanding anything in this Section to the contrary, none of the
Interstate Partners shall be deemed in default hereunder for failure to notify
the Blackstone Group as required herein if notice has been given to the
Blackstone General Partner of any of the Parallel Partnerships.
(l) Notwithstanding anything contained in this Agreement to the contrary,
unless all of the General Partners unanimously agree otherwise, each Project in
which the Partnership invests shall secure mortgage debt financing in
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principal amounts and with terms that are consistent with the then currently
prevailing market conditions, but in any event in principal amounts between 60%
and 75% of the total acquisition cost of such Project.
SECTION 3.7 RIGHT OF FIRST OPPORTUNITY; EXCLUSIVE RIGHTS; INVESTMENT
PARAMETERS. (a) Subject to the terms of this Agreement as set forth above,
the Blackstone Partners and the Interstate Partners each covenant to provide to
the Partnership, and each other, during the term of this Agreement, the right
of first opportunity as provided in Section 3.6 above to invest in (x) those
Target Investments which are hereafter identified by them and (y) the
Pre-Existing Projects. By their previous execution of the Acknowledgement,
Interstate Hotels Corporation (in the case of (A) below) and Blackstone Group
Holdings L.P. (in the case of (B) below) have agreed and hereby ratify and
confirm that they agree, and agree to cause (A) the Interstate Group and (B)
the Blackstone Group, respectively, to submit any Target Investments in which
they or the Interstate Group and the Blackstone Group would otherwise wish to
invest independent of the Partnership to the right of first opportunity set
forth herein, and, in connection therewith, they shall, and shall cause the
Interstate Group and the Blackstone Group to, subject to Section 3.7(b) below,
refer all such investment opportunities to the Interstate General Partner or
the Blackstone General Partner, as applicable, for submission to the
Partnership pursuant to the terms set forth above.
(b) Notwithstanding anything herein to the contrary, the Interstate Group
and the Blackstone Group expressly retain the right to undertake acquisition or
development of any Target Investment or any other investment whatsoever,
without the consent of the others, and free of any right of first opportunity
hereunder, at such time, in such form and upon such terms as they, acting in
their sole discretion, may determine appropriate, where any one of the
following conditions is satisfied:
(i) such Project is a Project that was disapproved or deemed disapproved
solely by action or inaction of the General Partners after proper notice;
provided, that if a Project is disapproved or deemed disapproved by a General
Partner who is a member of the same group (i.e., the Blackstone Group or the
Interstate Group) as the party who submitted the Request for Preliminary
Approval or Request for Final Approval, as applicable, then the condition
contained in this clause (i) shall not be deemed satisfied for any member of
such group;
(ii) such Project fails to meet the definition of a Target Investment;
(iii) except as expressly provided below, such Project is listed on Exhibit
E hereto, subject to the qualifications and agreements described in such
Exhibit;
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30
(iv) such Project is identified or undertaken after the termination of the
right of first opportunity pursuant to the terms of this Agreement;
(v) such party is acquiring, directly or indirectly, the stock or assets
of an entity which owns one or more Target Investments but whose assets and/or
operations are not primarily composed of Target Investments;
(vi) such party is acquiring, directly or indirectly, the stock or assets
of an entity which primarily owns and/or operates hotel or motel franchise
systems or hotel or motel reservations systems;
(vii) the Consideration being paid for such Target Investment in the
aggregate is less than $10,000,000 or the equity portion of the Consideration
being paid for such Target Investment in the aggregate is less than
$5,000,000; or
(viii) with respect to a Target Investment, the Interstate Group or the
Blackstone Group, as applicable, certifies, at any time (whether or not such
Project has been submitted to the Partners and the Partnership under Section
3.6 above), that in its judgment, involvement with the Blackstone Group or the
Interstate Group, as applicable, in such Target Investment would not be
appropriate, feasible or practical.
(c) Notwithstanding anything in Section 3.7(b) above to the contrary, the
right of first opportunity set forth herein will apply to any acquisition
undertaken by any member of the Blackstone Group or the Interstate Group during
the term of this right of first opportunity with respect to the Pre-Existing
Projects. In the event that a party is undertaking the acquisition of a Target
Investment free of the right of first opportunity pursuant to Section
3.7(b)(i), such party shall acquire such Target Investment upon terms that are
no more favorable than the terms presented to the General Partners with respect
to such Target Investment.
(d) The Partners acknowledge that, without limiting the definition of
Target Investment, it is their intent that the Target Investments ultimately
acquired by the Partnership will be Target Investments which (i) are mid to
high quality (3-4 stars), (ii) are located in growing markets, (iii) are well
positioned vis-a-vis the competition and, (iv) provide significant opportunity
for enhanced performance through intensive management repositioning and/or
redevelopment. Additionally, there is a preference for multi-asset
acquisitions over single properties in order to provide for the most efficient
and cost effective underwriting and investment process. Further, such
acquisitions should provide minimum going-in free and clear returns of 11%
(after management and FF&E reserve), unless immediate opportunity
<PAGE> 35
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for enhanced performance can be demonstrated. Nevertheless, certain Target
Investments may be approved hereunder even if they do not fall within the
above-referenced investment parameters. Accordingly, except as otherwise
provided herein (including without limitation Section 3.7(b) above), all Target
Investments, including, those that do not fall within the above-referenced
investment parameters, shall be subject to the right of first opportunity set
forth in Section 3.6 above.
SECTION 3.8 TERMINATION OF RIGHT OF FIRST OPPORTUNITY.
(a) The Blackstone General Partner shall have the right to terminate the
right of first opportunity set forth in Section 3.6 if any member of the
Interstate Group defaults in the performance of any of its obligations
hereunder or under the Acknowledgement after the Blackstone General Partner has
given such Partner or any other such party notice of such default and such
Partner or other party has failed to cure such default within 30 days after
receipt of such notice.
(b) The Interstate General Partner shall have the right to terminate the
right of first opportunity set forth in Section 3.6 if any member of the
Blackstone Group defaults in the performance of any of its obligations
hereunder or under the Acknowledgement after the Interstate General Partner has
given such Partner or any other such party notice of such default and such
Partner or other party has failed to cure such default within 30 days after
receipt of such notice.
(c) The right of first opportunity set forth in Section 3.6 shall
automatically terminate upon the earlier to occur of (i) December 15, 1997 or
(ii) the date upon which the members of the Blackstone Group in the Partnership
and in the Parallel Partnerships shall have contributed an aggregate of
$29,400,000 to the Partnership and the Parallel Partnerships and the members of
the Interstate Group in the Partnership and the Parallel Partnerships shall
have contributed an aggregate of $30,600,000 to the Partnership and the
Parallel Partnerships.
(d) At any time after $54,000,000 has been invested (either through
acquisitions that are closed or through binding commitments to close
acquisitions) in the aggregate by the Partnership and the Parallel
Partnerships, then any Partner may elect to terminate the right of first
opportunity set forth in Section 3.6 upon three (3) Business Days notice to all
the other Partners.
(e) The General Partners may, in their discretion, extend the right of
first opportunity set forth in Section 3.6 for such period of time as they may
mutually agree.
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SECTION 3.9 FINANCING. The Blackstone General Partner, acting directly or
through one or more of its Affiliates, shall endeavor to secure an acquisition
financing facility for the Partnership and the Parallel Partnerships in an
initial amount between $60,000,000 and $80,000,000, such facility to be subject
to borrowings by the Partnership and the Parallel Partnerships to acquire
Target Investments in the event that sufficient seller financing is not
available in connection with the acquisition of any such Target Investment and
for other related purposes. If needed, the Blackstone General Partner may
secure additional debt facilities for the Partnership and the Parallel
Partnerships up to an aggregate amount (including the initial $60,000,000 to
$80,000,000) between $140,000,000 and $180,000,000. The General Partners must
unanimously approve the terms and conditions of such financing. In the event
such financing is obtained, in addition to any other fees, expenses or other
compensation payable to the Blackstone General Partner and/or its Affiliates
hereunder or any fees payable to third parties in connection with such
financing, the Partnership and the Parallel Partnerships shall pay to the
Blackstone General Partner and/or its Affiliates, as the case may be, a fee for
placing such debt facilities in an amount equal to one percent (1%) of the
maximum principal amount of each such debt facility. The portion of such fee
allocated to the Partnership shall be determined by the Blackstone General
Partner, in its sole discretion. At the time such fee is payable, each Partner
shall fund to the Partnership, as a Capital Contribution, a portion of such
fee, to the extent not financed as part of the overall transaction. The
Interstate General Partner and the Blackstone General Partner shall each make a
Capital Contribution equal to 0.5% of such fee allocated to the Partnership.
The Interstate Limited Partner shall make a Capital Contribution equal to 50.5%
(or 49.5% if the election set forth in the definition of "Sharing Percentage"
below is exercised) of such fee allocated to the Partnership. The Blackstone
Limited Partners shall, in the aggregate, make Capital Contributions equal to
48.5% (or 49.5% if the election set forth in the definition of "Sharing
Percentage" below is exercised) of such fee allocated to the Partnership, and
each Blackstone Limited Partner's share thereof shall be determined by the
Blackstone General Partner, in its sole discretion, and recorded in the books
and records of the Partnership. No fee shall be payable under this Section in
connection with the refinancing of any such debt facilities.
SECTION 3.10 FINANCIAL ADVISORY SERVICES. Each time that the Partnership
acquires a Target Investment, the Partnership and any Parallel Partnerships
invested in such Target Investment shall pay to whichever of the Blackstone
General Partner (and/or its Affiliates) or the Interstate General Partners
(and/or its Affiliates) proposed such Target Investment to the Partnership, an
aggregate advisory fee equal to one percent (1%) of the amount of the
Consideration for the acquisition of such Target Investment; provided that the
Blackstone General Partner or its Affiliates shall not be
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33
entitled to such a fee after the occurrence and during the continuance of a
default hereunder by any of the Blackstone Partners (after any notice and
opportunity to cure); and provided further that the Interstate General Partner
or its Affiliates shall not be entitled to such a fee after the occurrence and
during the continuance of a default hereunder by any of the Interstate Partners
(after any notice and opportunity to cure). The portion of such fee allocated
to the Partnership shall be determined by the Blackstone General Partner. At
the time such fee is payable, each Partner shall fund to the Partnership, as a
Capital Contribution, a portion of such fee, to the extent not financed as part
of the overall transaction. The Interstate General Partner and the Blackstone
General Partner shall each make a Capital Contribution equal to 0.5% of such
fee allocated to the Partnership. The Interstate Limited Partner shall make a
Capital Contribution equal to 50.5% (or 49.5% if the election set forth in the
definition of "Sharing Percentage" below is exercised) of such fee allocated to
the Partnership. The Blackstone Limited Partners shall, in the aggregate, make
Capital Contributions equal to 48.5% (or 49.5% if the election set forth in the
definition of "Sharing Percentage" below is exercised) of such fee allocated to
the Partnership, and each Blackstone Limited Partner's share thereof shall be
determined by the Blackstone General Partner, in its sole discretion, and
recorded in the books and records of the Partnership.
SECTION 3.11 OTHER PARTNER SERVICES.
(a) Until such time as the General Partners hire, as an employee or
employees of the Partnership, a portfolio manager, a controller and/or an
administrative staff to conduct and oversee the overall administration of the
Partnership, the Interstate General Partner shall conduct all the
administrative affairs of the Partnership at the then Competitive Rate;
provided, however, that the General Partners agree to hire an employee or
employees of the Partnership to perform such tasks promptly after the needs of
the Partnership so require. Any such employee may be employed jointly by the
Parallel Partnerships. The Interstate General Partner shall also, at no cost
to the Partnership (except where otherwise provided in this Agreement),
conduct, oversee and/or manage all (i) pre-acquisition due diligence, (ii)
property-level management, (iii) performance tracking, (iv) the making of
capital improvements to any Project, (v) overall portfolio management of the
Partnership Assets and (vi) negotiation of franchise fee arrangements. The
Interstate General Partner shall also be responsible for preparing
administrative, operating and capital budgets for the Partnership. The
Interstate General Partner shall submit to the General Partners all relevant
information regarding all proposed budgets, proposed franchise fee arrangements
and related financial matters, and the General Partners shall have the right to
Consent to all such materials before they are implemented by the Partnership.
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(b) The Partners acknowledge that Affiliates of the Interstate General
Partner have the capability of providing to the Partnership various insurance
and purchasing services. At the direction of the Blackstone General Partner
acting in its sole discretion (including, as to insurance, approval by the
Blackstone General Partner of the financial soundness of any proposed insurance
company and its reinsurers), the Partnership may engage such Affiliates of the
Interstate General Partner to perform such services (in which case such
services shall be performed at Competitive Rates) or the Partnership may engage
independent third parties to perform such services, provided, that if the
Partnership has received an offer from any such independent third party to
perform such services, Affiliates of the Interstate General Partner shall have
the right to match such offer and, if such offer is matched, the Partnership
will engage such Affiliates on the terms of such offer.
(c) In performance of the services pursuant to this Section 3.11 and
otherwise, the Partners agree that they shall cooperate and consult with each
other in an effort to minimize duplication of efforts and costs.
SECTION 3.12 MARKETING RIGHTS. At any time after December 25, 1997 the
Blackstone Partners, acting jointly, or the Interstate Partners, acting
jointly, may propose the sale of a Project or Projects (but not a portion of
any Project) in accordance with the following terms:
(a) All of the Blackstone Partners may jointly serve upon all of the
Interstate Partners, or all of the Interstate Partners may jointly serve upon
the all of the Blackstone Partners, a notice (an "Offering Notice") as
described below. The partners serving an Offering Notice shall be referred
to in this Section as the "Offering Group". The partners receiving an
Offering Notice shall be referred to in this Section as the "Offeree Group".
Each Offering Notice shall specify one or more Projects (the "Offered
Projects") that the Offeror Group proposes to be sold (either by causing the
Project Partnerships which own such Offered Projects to sell such Offered
Projects or by selling all of the partnership interests in such Project
Partnerships) and designate a price for the sale of each Offered Project (the
"Offer Price"). The Offeree Group with respect to a Project may not deliver
an Offering Notice with respect to such Project until the expiration of the
Sale Option Period (as defined below) for such Project with respect to the
Offering Notice of the Offeror Group with respect to such Project. The
Offering Notice may not propose to sell a portion of any Project. An
Offering Notice delivered under this Agreement must be simultaneously
delivered under the partnership agreement of each of the Parallel
Partnerships, and for the purposes of this Section 3.12, the Offeror Group
shall consist of all of the members of the Offeror Groups in each of the
Parallel Partnerships,
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the Offeree Group shall consist of all of the members of the Offeree Groups
in each of the Parallel Partnerships, the Offered Projects shall consist of
the interest of all of the Parallel Partnerships in such Offered Projects,
and the Offeree Deposit (as defined below) shall be delivered in the
aggregate by all of the Parallel Partnerships,
(b) Within 30 days after the receipt by the Offeree Group of an Offering
Notice (an "Offeree Option Period"), the Offeree Group may in a writing to
the Offeror Group (an "Offeree Reply Notice") (i) elect to purchase all of
the Offered Projects listed in such Offering Notice (an "Offeror Group
Interest") at a price equal to the aggregate Offer Price for the Offered
Projects, (ii) offer to purchase all of the Offered Projects listed in such
Offering Notice for a price (the "Counteroffer Price") listed by the Offeree
Group in the Offeree Reply Notice (the "Counteroffer"), or (iii) decline to
purchase such Offered Projects. With respect to each Offering Notice, if the
Offeree Group fails to deliver an Offeree Reply Notice to the Offeror Group
prior to the expiration of the Offeree Option Period, the Offeree Group shall
for all purposes be conclusively deemed to have declined to purchase the
Offered Projects listed in such Offering Notice. If the Offeree Group elects
to purchase all of the Offered Projects, the Offeree Group shall deliver to a
mutually acceptable escrow agent, a nonrefundable deposit in an amount equal
to 5% of the aggregate Offer Price for the Offered Projects (the "Offeree
Deposit"); in such case, the Offeree Reply Notice shall not be deemed
delivered until such time as the escrow agent has received the Offeree
Deposit. If the Offeree Group makes a Counteroffer, the Offeror Group may
accept such Counteroffer or decline such Counteroffer. If the Offeror Group
accepts such Counteroffer, the Offeree Group shall deliver to a mutually
acceptable escrow agent, the Offeree Deposit equal to 5% of the Counteroffer
Price. The Offeror Group and the Offeree Group shall endeavor to structure
any sale of the Offered Projects to the Offeree Group in a tax efficient
manner.
(c) If, with respect to an Offering Notice, the Offeree Group elects to
purchase the Offered Projects or the Offeror Group accepts a Counteroffer of
the Offeree Group, the closing of the purchase of such Offered Projects (the
"Closing") will be held on a date selected by the Offeree Group upon five
Business Days' notice to the Offeror Group but no later than 90 days after
the Offeror Group's receipt of the Offeree Reply Notice (the "Outside
Purchase Date"). Each Closing shall be held in New York City at a location
designated by the General Partner in the Offeror Group. At the Closing, the
Partnership (or the Project Partnership, as applicable) shall execute such
transfer documents as the Offeree Group shall reasonably require to transfer
the Offered Projects to the Offeree Group (which shall include a
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36
special warranty deed if reasonably required by the title company for the
Offeree Group), as is, where is; the Offeree Group shall pay to the
Partnership (or Project Partnership, as applicable), in immediately available
funds, the aggregate Offer Price for all of the Offered Projects listed in
such Offering Notice; the Project Partnership and the Partnership shall each
immediately distribute such Offer Price to its Partners, pro rata in
accordance with this Agreement, and the Offeree Deposit shall be returned to
the Offeree Group. To the extent the execution by a member or Affiliate of a
member of the Offeree Group is required on behalf of the Partnership or
Project Partnership, each member or Affiliate of a member of the Offeree
Group shall promptly execute and deliver any such document or instrument, and
each Partner of the Offeree Group hereby constitutes and appoints each
Partner in the Offeror Group its attorney in fact to execute, acknowledge and
deliver any such documents or instruments in its stead. Transfer taxes and
closing costs with respect to an Offered Project shall be paid by whichever
of the seller (the Partnership or Project Partnership) or the purchaser (the
Offeree Group) customarily pays such costs in the state in which such Offered
Project is located.
(d) An Offeree Reply Notice in which the Offeree Group elects to purchase
the Offered Projects, or in which the Offeree Group makes a Counteroffer
which is accepted by the Offeror Group, shall create an irrevocable binding
obligation of the Offeree Group and the Offeror Group. If the Offeree Group
elects in an Offeree Reply Notice to purchase the Offered Projects or makes a
Counteroffer which is accepted by the Offeror Group, and the Offeree Group
fails to purchase such Offered Projects by the applicable Offeree Outside
Purchase Date, (i) the Offeree Group shall immediately forfeit all of its
rights under this Section 3.12 with respect to any Projects, including
without limitation the right to send out Offering Notices with respect to any
Projects, (ii) the Offeror Group shall be entitled to retain the Offeree
Deposit as liquidated damages, and (iii) the Offeror Group shall be entitled
to exercise any and all other remedies available at law and equity, including
specific performance since the parties hereto recognize that damages alone
would be inadequate.
(e) With respect to an Offering Notice, if the Offeree Group declines (or is
deemed to have declined) to purchase the Offered Projects listed therein, or
if the Offeror Group rejects a Counteroffer made by the Offeree Group, the
Offeror Group shall have the right, without the consent of any Partner of the
Offeree Group, within 90 days after the earlier of (i) the Offeror Group's
receipt of an Offeree Reply Notice in which the Offeree Group declines to
purchase the Offered Projects, and (ii) the expiration of the Offeree Option
Period (such 90 day period, the "Sale Option
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Period"), to cause the sale for all cash of all of the Offered Projects
listed in such Offering Notice (including the sale to any member of the
Offeror Group). Each Partner of the Offeree Group shall promptly execute and
deliver any document or instrument the Offeror Group reasonably requires in
order to consummate the sale of such Offered Projects during the Sale Option
Period, and each Partner of the Offeree Group hereby constitutes and appoints
each Partner in the Offeror Group its attorney in fact to execute,
acknowledge and deliver any such documents or instruments in its stead.
Notwithstanding the foregoing, the Offeror Group shall not be entitled to
cause the sale of an Offered Project during the Sale Option Period for a
sales price less than 95% of the Offer Price for such Offered Project listed
in such Offering Notice (or the Counteroffer Price in the case of a rejected
Counteroffer, or 100% of the Offer Price for such Offered Project if the
purchaser is any member of the Offeror Group or any affiliate of any member
of the Offeror Group). If an Offered Project is not sold prior to the
expiration of the Sale Option Period, the Offeror Group may not cause the
sale of such Offered Project without again complying with all of the
provisions of this Section (unless all of the other Partners consent). No
Partner may exercise its rights under this Section with respect to any
particular Project more than once in any twelve month period (but such
Partner may exercise its rights under this Section with respect to other
Projects). The Offeror Group and the Offeree Group shall endeavor to
structure any sale of the Offered Projects to the Offeror Group (or any
member thereof) in a tax efficient manner.
ARTICLE IV
OTHER ACTIVITIES PERMITTED
Except as expressly provided hereunder, this Agreement shall not be
construed in any manner to preclude any Partner or any of its Affiliates from
engaging in any activity whatsoever permitted by applicable law (whether or not
such activity might compete, or constitute a conflict of interest, with the
Partnership), including, without limitation, the provision of financial or
investment advisory services to any person, managing investments or receiving
compensation or profit from any of the foregoing.
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ARTICLE V
CAPITAL CONTRIBUTIONS;
DISTRIBUTIONS
SECTION 5.1 CAPITAL CONTRIBUTIONS. (a) No Partner shall be required to
make a Capital Contribution except as provided in this Section. Each Partner
agrees to make Capital Contributions (i) as required by this Agreement,
including, without limitation, Sections 3.6, 3.9, 3.10 and 5.7 of this
Agreement, (ii) to pay for fees, costs and expenses specifically payable by the
Partnership pursuant to this Agreement or (iii) in the event that the General
Partners determine that the Partnership requires additional funds to meet its
then existing obligations, including to cover operating shortfalls, and funds
are not otherwise available from Partnership revenues or from loans to the
Partnership for such purposes. Notwithstanding the foregoing, if additional
Capital Contributions are necessary to fund operating expenses of any Target
Investment (other than for payments to Affiliates of the Interstate General
Partner or the Blackstone General Partner) after the deferring of payables to
the extent reasonable, income has not been used in the immediately preceding
three months to pay amounts to Affiliates of the Blackstone General Partner of
the Interstate General Partner beyond amounts set forth in the relevant budget
(any such expenses meeting the foregoing conditions, "Necessary Expenses"), and
the General Partners do not agree on the need for such Capital Contribution
after a reasonable amount of time (but in no event after the time failure to
pay would have a material adverse effect on the Partnership), either General
Partner may nonetheless, to the extent of Necessary Expenses, require a Capital
Contribution, not to exceed $1,000,000 in the aggregate to cover Necessary
Expenses for such Target Investment. If any Partner fails to make such Capital
Contribution, the provisions of Section 5.2 below shall apply (except that the
provision allowing the election of the remedy set forth in Section 5.3 shall
not be applicable). With respect to each Project, each of the Partners shall
be required to make Capital Contributions to the Partnership in accordance with
such Partner's Sharing Percentage in such Project (as determined in accordance
with Section 3.6(f) above); provided that, except for amounts to be contributed
under clause (iii) above (for which no limit shall apply), the aggregate amount
of Capital Contributions made by the Blackstone Partners hereof and by the
Blackstone Partners in the Parallel Partnerships shall not exceed $29,400,000,
and the aggregate amount of Capital Contributions made by the Interstate
Partners hereof and by the Interstate Partners in the Parallel Partnerships
shall not exceed $30,600,000. It is understood and agreed that the commitment
by the Blackstone Partners and the Interstate Partners to fund their respective
Committed Capital is not revolving in nature and at such time as the date such
Partner's Committed Capital shall have been funded in full, such commitment
will expire and be of no further force or effect.
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(b) No Partner shall have any obligation to restore any negative balance
in the Partner's Capital Account upon liquidation of the Partnership. No
Partner shall be entitled to withdraw all or any part of its Capital
Contributions except as expressly provided in this Partnership Agreement. No
interest shall be payable by the Partnership on the Capital Contributions of
any Partner except as otherwise provided herein. In no event shall any Partner
be entitled to demand any property from the Partnership other than cash.
(c) When Capital Contributions are required under paragraph (a) above from
the Partners, the General Partners shall give notice to all of the Partners of
the amount of funds required and the date such funds shall be due, which due
date shall be, unless otherwise provided in this Agreement, no less than 10
Business Days from the date such notice is given.
SECTION 5.2 PARTNER LOANS FOR FAILURE TO FUND COMMITTED CAPITAL. If any
Partner shall fail to timely make a Capital Contribution required in Section
5.1 (such Partner is hereinafter referred to as a "Non-Contributing Partner")
and such default is not cured within 10 days of the date such Capital
Contribution was due, then any other Partner (a "Contributing Partner") may
fund all or part of such Capital Contribution and, unless the Contributing
Partner otherwise elects the remedy of the dilution of such Non-Contributing
Partner's Interest in the Partnership as set forth in Section 5.3 below, any
amounts funded by a Contributing Partner on behalf of a Non-Contributing
Partner shall be made directly to the Partnership but shall be treated as (i) a
recourse demand loan made by the Contributing Partner to the Non-Contributing
Partner (bearing interest at a fluctuating rate of interest equal to 10% per
annum in excess of the prime rate of interest publicly announced by Citibank,
N.A. from time to time, but not less than 15% per annum, but in no event in
excess of the maximum rate permitted by applicable law), followed by (ii) a
Capital Contribution by such Non-Contributing Partner to the Partnership. Any
such recourse loan (to the extent of unpaid principal and interest) shall be
payable on demand by the Contributing Partner and shall be repaid directly by
the Partnership on behalf of the Non- Contributing Partner to the Contributing
Partner from Non-Capital Proceeds and Capital Proceeds otherwise distributable
to the Non-Contributing Partner. Amounts paid directly by the Partnership to
the Contributing Partner on account of the loan shall be deemed distributions
to the Non- Contributing Partner. Any Non-Capital Proceeds and Capital
Proceeds used to repay such loan shall be applied first to interest and then to
principal thereof.
SECTION 5.3 DILUTION FOR FAILURE TO FUND CAPITAL. (a) With respect to a
Project, if a Non-Contributing Partner fails to contribute any amounts required
to be contributed pursuant to Section 5.1 above as and when required to be
contributed and such funds are contributed to the Partnership by a Contributing
Partner, the Non-Contributing Partner's Sharing
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Percentage in such Project shall be, if the Contributing Partner elects to
apply the provisions of this Section 5.3 in lieu of the loan mechanism provided
in Section 5.2, adjusted pursuant to Section 5.3(b) below as of the day on
which the Contributing Partner contributes such funds. In such an event the
contribution of such funds shall be treated as a Capital Contribution to the
Partnership by the Contributing Partner.
(b) With respect to a Project, the Sharing Percentage in such Project of a
Non-Contributing Partner may be reduced (but not below zero), upon the election
described in Section 5.3(a) above, by an amount equal to the product of (i) 1.6
times (ii) a fraction expressed as a percentage, (A) the numerator of which is
the amount of the Capital Contribution which such Non-Contributing Partner
fails to contribute with respect to such Project and (B) the denominator of
which is the aggregate of the Capital Contributions made by the Partners with
respect to such Project up to and including such time, including the Capital
Contribution which such Non-Contributing Partner fails to make. The Sharing
Percentage of the Contributing Partner shall be increased by the amount of the
reduction in the Sharing Percentage of the Non-Contributing Partner.
Notwithstanding the foregoing, if within 90 days after the reduction of the
Non-Contributing Partner's Sharing Percentage described herein, the
Non-Contributing Partner pays to the Contributing Partner the amount which the
Non-Contributing Partner failed to contribute and such Contributing Partner
contributed, together with interest thereon (at a rate equal to 10% per annum
in excess of the prime rate of interest publicly announced by Citibank, N.A.
from time to time, but not less than 15% per annum, and in no event in excess
of the maximum rate permitted by applicable law), the Non-Contributing
Partner's Sharing Percentage in such Project and the Contributing Partner's
Sharing Percentage in such Project shall be reinstated as if the
Non-Contributing Partner had timely made such Capital Contribution.
SECTION 5.4 DISTRIBUTIONS GENERALLY. Capital Proceeds shall be
distributed as soon as practicable but in any event within 45 days after the
date that such Proceeds are received by the Partnership. Non-Capital Proceeds
shall be distributed at such times and intervals as the General Partners shall
determine, but in no event later than 30 days after the end of each calendar
quarter. The Partnership shall make such distributions in cash among the
Partners in accordance with this Article V.
SECTION 5.5 DISTRIBUTIONS OF PROCEEDS.
(a) Each distribution of Non-Capital Proceeds from a Project shall be made
to the Partners to the extent of, and pro rata in accordance with, each of
their Sharing Percentages in such Project (as the same may be adjusted
hereunder). Notwithstanding the foregoing, Non-Capital Proceeds from a
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Project otherwise distributable to a Blackstone Partner shall be distributed as
follows:
(i) First, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from such Project in an amount equal to the
Capital Contributions made by such Partner with respect to such Project; and
(ii) Second, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from such Project, in excess of any amounts
distributed under Section 5.5(a)(i) above, in an amount which generates a 20%
Internal Rate of Return on the Capital Contributions made by such Partner with
respect to such Project; and
(iii) Thereafter, 86.532% to such Blackstone Partner and 13.468% to the
Interstate Partners (pro rata in accordance with their Sharing Percentages in
such Project).
(b) Each distribution of Capital Proceeds from a Project shall be made to
the Partners to the extent of, and pro rata in accordance with, each of their
Sharing Percentages (as the same may be adjusted hereunder). Notwithstanding
the foregoing, Capital Proceeds from a Project otherwise distributable to a
Blackstone Partner shall be distributed as follows:
(i) First, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in an amount equal
to the sum of the Capital Contributions made by such Partner as of such date
with respect to all Projects which have been subject to a Disposition on or
prior to such date; and
(ii) Second, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in excess of any
amounts distributed under Section 5.5(b)(i) above, in an amount which
generates a 20% Internal Rate of Return on the Capital Contributions made by
such Partner as of such date with respect to all Projects which have been
subject to a Disposition on or prior to such date and all Projects for which
an Unrealized Loss exists on such date; and
(iii) Third, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in excess
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of any amounts distributed under Sections 5.5(b)(i) and (ii) above, in an
amount equal to the total of such Partner's pro rata shares of Unrealized
Loss from all Projects for which an Unrealized Loss exists on such date
(based on such Partner's Sharing Percentage in such Project); and
(iv) Thereafter, 86.532% to such Blackstone Partner and 13.468% to the
Interstate Partners (pro rata in accordance with their Sharing Percentages in
such Project).
SECTION 5.6 RESTRICTED PAYMENTS. Notwithstanding any provisions to the
contrary in this Agreement, neither the Partnership nor the General Partners on
behalf of the Partnership shall make a distribution if such distribution would
violate the Partnership Act.
SECTION 5.7 PARTNERSHIP EXPENSES. (a) Promptly after the date of this
Agreement, the Partnership, to the extent it does not pay such costs and
expenses directly, will reimburse each Partner for Organizational Expenses
incurred by such Partner.
(b) The following expenses shall be borne by the Partnership:
(i) To the extent not reimbursed, all expenses (other than any Partner's
overhead) reasonably incurred in the operation of the Partnership (and
approved by the General Partners if required hereunder), including without
limitation, any taxes imposed on the Partnership, fees and expenses for
attorneys and accountants, the costs and expenses of any insurance purchased
by the Partnership, and the costs and expenses of any litigation involving the
Partnership and the amount of any judgments or settlements paid in connection
therewith; and
(ii) All third party professional services which have been approved by the
General Partners and incurred in connection with a proposed Target Investment
that is not ultimately made or a proposed disposition of a Project which is
not actually consummated, including, without limitation, (i) commitment fees
that become payable in connection with a proposed Target Investment that is
not ultimately made, (ii) legal fees, accounting fees and other third party
professional due diligence costs and expenses and (iii) all travel and similar
out of pocket costs and expenses of employees of the Partners in connection
with approved due diligence.
Partnership expenses shall be paid directly by the Partnership or the
Partnership shall reimburse the Partner who incurred such expenses for the
payment thereof, as the case may be.
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ARTICLE VI
BOOKS AND REPORTS; TAX MATTERS;
CAPITAL ACCOUNTS; ALLOCATIONS
SECTION 6.1 GENERAL ACCOUNTING MATTERS. (a) Allocations of Net Income
(Loss) pursuant to Section 6.4 shall be made by or under the direction of the
General Partners at the end of each Fiscal Period.
(b) Each Partner shall be supplied with the Partnership information
necessary to enable such Partner to prepare in a timely manner its Federal,
state and local income tax returns and such other financial or other statements
and reports that are approved by the General Partners.
(c) The Interstate General Partner shall keep or cause to be kept books
and records pertaining to the Partnership's business showing all of its assets
and liabilities, receipts and disbursements, realized profits and losses,
Partners' Capital Accounts and all transactions entered into by the
Partnership. Such books and records of the Partnership shall be kept at the
office of the Interstate General Partner and the Partners and their
representatives shall at all reasonable times have free access thereto for the
purpose of inspecting or copying the same. The Partnership's books of account
shall be kept on an accrual basis or as otherwise provided by the General
Partners, and otherwise in accordance with generally accepted accounting
principles, except that for income tax purposes such books shall be kept in
accordance with applicable tax accounting principles.
(d) Except as otherwise provided herein, all determinations, valuations
and other matters of judgment required to be made for accounting and tax
purposes under this Agreement shall be made by or under the direction of the
General Partners and shall be conclusive and binding on all Partners, former
Partners, their successors or legal representatives and any other person except
for computational errors or fraud, and to the fullest extent permitted by law
no such person shall have the right to an accounting or an appraisal of the
assets of the Partnership or any successor thereto except for computational
errors or fraud.
(e) The books of the Partnership shall be examined, certified and audited
annually as of the end of each Fiscal Year, by such recognized firm of
independent certified public accountants that is designated by the General
Partners. For each Fiscal Year of the Partnership, such accountants shall
determine and prepare full financial statements, including, without limitation,
a balance sheet, an income statement, a statement of changes in financial
position and a statement of the Non-Capital Proceeds and Capital Proceeds of
the Partnership. The General Partners shall promptly upon receipt of such
financial statements, and in any event within 90 days after the end of each
<PAGE> 48
44
such Fiscal Year, transmit copies thereof to each Partner, together with the
report and management letter of such accountants covering the results of such
audit. The cost of all audits and reports provided to the Partners pursuant to
this Section shall be an expense of the Partnership.
SECTION 6.2 CERTAIN TAX MATTERS.
The taxable year of the Partnership shall be the same as its Fiscal Year.
The Tax Matters Partner (as defined below) shall cause to be prepared all
Federal, state and local tax returns of the Partnership for each year for which
such returns are required to be filed and, after approval of such returns by
the General Partners, shall cause such returns to be timely filed. The General
Partners shall determine the appropriate treatment of each item of income,
gain, loss, deduction and credit of the Partnership and the accounting methods
and conventions under the tax laws of the United States, the several states and
other relevant jurisdictions as to the treatment of any such item or any other
method or procedure related to the preparation of such tax returns. The Tax
Matters Partner shall make the election provided for in Section 754 of the
Code, if, and only if the Partner who or which has acquired an interest in the
Partnership or a distribution of Partnership property with respect to which the
election is made will have provided to the Tax Matters Partner concurrently, or
within 30 days after the Transfer of such interest, its undertaking to the
effect that it, and its successors in interest hereunder, will reimburse the
Partnership annually for its additional administrative costs incurred by reason
of such election as determined by the auditor of the Partnership. The Tax
Matters Partner shall also make the election to amortize Organizational
Expenses pursuant to Code Section 709 and the regulation promulgated
thereunder. In addition, the General Partners may cause the Partnership to
make or refrain from making any and all other elections permitted by the tax
laws of the United States, the several states and other relevant jurisdictions.
The Tax Matters Partner for purposes of Section 6231(a)(7) of the Code (the
"Tax Matters Partner") shall be the Blackstone General Partner. The Tax
Matters Partner shall have all of the rights, duties, powers and obligations
provided for in Sections 6221 through 6232 of the Code with respect to the
Partnership provided, however, that the following provisions shall apply with
respect to the Tax Matters Partner:
(a) The Tax Matters Partner shall be responsible for the filing of the
Partnership information returns required under Section 6031 of the Code.
Within thirty (30) days after the end of each Fiscal Year, the Tax Matters
Partner shall furnish to the Partnership's accountants sufficient information
for the preparation of all required Partnership tax returns.
(b) A Partner shall provide notice to the Tax Matters Partner of its intent
to file an original or an amended
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45
income tax return of which such Partner will take a position with respect to
a partnership item that is inconsistent with the position taken by the Tax
Matters Partner on the Partnership return. Such notice must be given at
least thirty (30) days prior to the filing of such return. At such time,
such Partner shall provide the Tax Matters Partner with a statement detailing
the inconsistent item or items contained in such return. Within ten (10)
days of receipt of such statement, the Tax Matters Partner shall provide a
copy of such statement to each Partner.
(c) The Tax Matters Partner shall include in each Partnership return
sufficient information to entitle each eligible Partner and any indirect
partner (at its request) to notice from the Internal Revenue Service pursuant
to Section 6223(a) of the Code.
(d) Each Partner reserves the right to participate in an audit proceeding.
(e) Each Partner reserves the right to enter into a separate settlement
agreement with the Internal Revenue Service. A Partner who enters into a
settlement agreement with the Internal Revenue Service concerning a
partnership item shall notify the Tax Matters Partner of its terms within ten
(10) days of such agreement, and the Tax Matters Partner shall notify the
other Partners of the terms of such agreement within ten (10) days after
receiving such notice. The Tax Matters Partner shall notify each other
Partner of the terms of any settlement offer received by it within ten (10)
days of receiving such offer.
(f) The Tax Matters Partner shall not file an administrative adjustment
request without the Consent of all of the General Partners. Each Partner,
other than the Tax Matter partner, reserves the right to file an
administrative adjustment request under Section 6227 of the Code. Any
Partner filing an administrative adjustment request shall notify the Tax
Matters Partner of its contents within ten (10) days after filing such
request. The Tax Matters Partner shall notify each Partner of the contents
of such request within ten (10) days of the receipt of such notice.
(g) All Partners shall report to the Tax Matters Partner the conversion of a
partnership item to a nonpartnership item under Section 6231(b) or any other
provision of the Code within ten (10) days of learning of the conversion.
(h) Each Partner reserves the right to file a petition for judicial review
and to participate in a judicial proceeding under Section 6226 and 6228 of
the Code. If the Tax Matters Partner files a petition for judicial review or
an appeal under Section 6226 of the Code, it shall notify
<PAGE> 50
46
each Partner of such petition or appeal within ten (10) days of such filing.
Any other Partner filing a petition for judicial review or any appeal under
Sections 6226 or 6228 of the Code shall notify the Tax Matters Partner of
such petition or appeal on or before the date of filing. The Tax Matters
Partner shall notify each Partner of such filing within ten (10) days of
receipt of such notice from the filing partner.
(i) The Tax Matters Partner shall not agree to extend the statute of
limitations for assessment without the Consent of all of the General
Partners.
(j) The Tax Matters Partner shall be authorized to incur expenses in the
performance of its duties pursuant to this Agreement. Notwithstanding any
other provision of this Agreement, such expenses shall be borne by the
persons who were Partners of the Partnership at any time during the
applicable taxable year without regard to whether such persons are Partners
at the time the expense is incurred. Such expenses shall be allocated to the
Partners and former Partners having an interest in the proceeding at the time
the cost is incurred in proportion to their relative Sharing Percentages for
the applicable taxable year.
(k) The provisions of this Section shall govern the conduct of all parties
who are currently Partners and all parties who were Partners during the
applicable Partnership taxable year. A Partner shall not be relieved of any
duties or responsibilities imposed under this Section by the termination or
transfer of its interest in the Partnership.
(l) All terms used in this Section that are defined in Section 6231(a) of
the Code shall have the meanings set forth therein.
SECTION 6.3 CAPITAL ACCOUNTS. There shall be established for each Partner
on the books of the Partnership as of the date hereof, or such later date on
which such Partner is admitted to the Partnership, a capital account (each
being a "Capital Account"). Each Capital Contribution shall be credited to the
Capital Account of such Partner on the date such contribution of capital is
paid to the Partnership. In addition, each Partner's Capital Account shall be
(a) credited with such Partner's allocable share of any Net Income of the
Partnership, (b) debited with (i) distributions to such Partner of cash or the
fair market value of other property and (ii) such Partner's allocable share of
Net Loss of the Partnership and expenditures of the Partnership described or
treated under Section 704(b) as described in Section 705(a)(2)(B) of the Code,
and (c) otherwise maintained in accordance with the provisions of the Code.
Any other item which is required to be reflected in a Partner's Capital Account
under Section 704(b) of the Code or otherwise under this Agreement shall be so
reflected. Capital Accounts
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47
shall be appropriately adjusted to reflect transfers of part (but not all) of a
Partner's interest in the Partnership. Interest shall not be payable on
Capital Account balances. Notwithstanding anything to the contrary contained
in this Agreement, the Partnership shall maintain the Capital Accounts of the
Partners in accordance with the principles and requirements set forth in
section 704(b) of the Code and Regulations section 1.704-1(b)(2)(iv).
SECTION 6.4 ALLOCATIONS. (a) Net Income of the Partnership shall be
allocated to the Partners having deficit balances in their Capital Accounts
(computed after taking into account distributions pursuant to Section 5.5 with
respect to such fiscal year, and after adding back each Partner's share of
partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, determined
pursuant to Regulations sections 1.704- 2(g)(1) and 1.704-2(i)(5)) in
proportion to, and to the extent of, such deficits. Any remaining Net Income
and all Net Loss shall be allocated among the Partners either 49% to the
Blackstone Partners (pro rata in proportion to their Sharing Percentages) and
51% to the Interstate Partners (pro rata in accordance with their Sharing
Percentages) or 42.401% to the Blackstone Partners (pro rata in proportion to
their Sharing Percentages) and 57.599% to the Interstate Partners pro rata in
accordance with their Sharing Percentages) so as to produce to the extent
possible Capital Accounts for the Partners (computed in the manner set forth in
the preceding sentence) such that if an amount of cash equal to such positive
Capital Account balances were distributed in accordance with such positive
Capital Account balances, such distribution would be in the amounts, sequence
and priority set forth in Section 5.5 and to the extent Net Loss exceeds the
positive Adjusted Capital Account Balances of the Partners, the excess shall be
allocated first, to those Partners with positive Adjusted Capital Account
Balances, in proportion to, and to the extent of, such Adjusted Capital Account
Balances, and thereafter, to the General Partners, in the ratio that the
Sharing Percentage of each General Partner bears to the Sharing Percentage of
all General Partners. Notwithstanding the foregoing, if an allocation of Net
Loss in the ratio of 42.401% to the Blackstone Partners and 57.599% to the
Interstate Partners is in excess of amounts of Net Income previously allocated
in the ratio of 42.401% to the Blackstone Partners and 57.599% to the
Interstate Partners, then such allocation of Net Loss shall instead be made 49%
to the Blackstone Partners (pro rata in proportion to their Sharing
Percentages) and 51% to the Interstate Partners (pro rata in accordance with
their Sharing Percentages). Notwithstanding the foregoing, if an allocation of
Net Income or Net Loss would not result in Capital Accounts for the Partners
(computed in the manner set forth in the first sentence of this paragraph (a))
being equal to cash distributions in the amounts, sequence and priority set
forth in Section 5.5, Net Income may be allocated 100% to the Interstate
Partners (pro rata in accordance with their Sharing Percentages) or Net Loss
may be allocated 100% to the Blackstone Partners (pro rata in
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48
accordance with their Sharing Percentages) if (and to the extent necessary) to
produce Capital Accounts equal (or in proportion) to the cash distributions set
forth in Section 5.5.
(b) Notwithstanding anything herein to the contrary, in the event any
Partner unexpectedly receives any adjustments, allocations or distributions
described in paragraphs (b)(2)(ii)(d)(4), (5) or (6) of Section 1.704-1 of the
regulations under the Code, there shall be specially allocated to such Partner
such items of Partnership income and gain, at such times and in such amounts as
will eliminate as quickly as possible that portion of any deficit in its
Capital Account caused or increased by such adjustments, allocations or
distributions. To the extent permitted by the Code and the regulations
thereunder, any special allocations of items of income or gain pursuant to this
Section 6.4(c) shall be taken into account in computing subsequent allocations
of Net Income (Loss) pursuant to this Section 6.4 so that the net amount of any
items so allocated and the subsequent allocations of Net Income (Loss) to the
Partners pursuant to this Section 6.4 shall, to the extent possible, be equal
to the net amounts that would have been allocated to each such Partner pursuant
to the provisions of this Section 6.4 if such unexpected adjustments,
allocations or distributions had not occurred.
(c) All items of income, gain, loss, deduction and credit of the
Partnership shall be allocated among the Partners for Federal, state and local
income tax purposes consistent with the manner that the corresponding
constituent items of Net Income (Loss) shall be allocated among the Partners
pursuant to this Agreement, except as may otherwise be provided herein or by
the Code. To the extent Treasury Regulations promulgated pursuant to
Subchapter K of the Code (including under Sections 704(b) and (c) of the Code)
require allocations for tax purposes that differ from the foregoing
allocations, the General Partners may determine the manner in which such tax
allocations shall be made so as to comply more fully with such Treasury
Regulations or other applicable law and, at the same time to the extent
reasonably possible, preserve the economic relationships among the Partners as
set forth in this Agreement.
(d) Notwithstanding the provisions of this Section 6.4, net income, net
gain, and net loss of the Partnership (or items of income, gain, loss,
deduction, or credit, as the case may be) shall be allocated in accordance with
the following provisions of this Section 6.4 to the extent such provisions
shall be applicable.
(i) Nonrecourse Deductions of the Partnership for any Fiscal Year shall be
specially allocated to the Partners in the same proportion as Net Income or
Net Loss is allocated for such Fiscal Year; provided that if an allocation of
Nonrecourse Deductions in the ratio of 42.401% to the Blackstone Partners and
57.599% to
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49
the Interstate Partners is in excess of amounts of Net Income previously
allocated in the ratio of 42.401% to the Blackstone Partners and 57.599% to
the Interstate Partners, then such allocation of Nonrecourse Deductions shall
instead be made 49% to the Blackstone Partners (pro rata in proportion to
their Sharing Percentages) and 51% to the Interstate Partners (pro rata in
accordance with their Sharing Percentages). Partner Nonrecourse Deductions
of the Partnership for any Fiscal Year shall be specially allocated to the
Partner who bears the economic risk of loss for the liability in question.
The provisions of this Section 6.4(e)(i) are intended to satisfy the
requirements of Regulations sections 1.704-2(e)(2) and 1.704-2(i)(1) and
shall be interpreted in accordance therewith for all purposes under this
Agreement.
(ii) If there is a net decrease in the Minimum Gain of the Partnership
during any Partnership Fiscal Year, each Partner shall be specially allocated
items of Partnership income and gain for such year equal to that Partner's
share of the net decrease in Minimum Gain, within the meaning of Regulations
section 1.704-2(g)(2). The provisions of this Section 6.4(e)(ii) are intended
to comply with the Minimum Gain chargeback requirements of Regulations section
1.704-2(f) and shall be interpreted in accordance therewith for all purposes
under this Agreement.
(iii) If there is a net decrease in Partner Nonrecourse Debt Minimum Gain
during any Fiscal Year, each Partner that has a share of such partner
Nonrecourse Debt Minimum Gain, determined in accordance with Regulations
section 1.704-2(i)(5), as of the beginning of such year shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, for succeeding years) equal to such Partner's share of the net
decrease in Partner Nonrecourse Debt Minimum Gain. The provisions of this
Section 6.4(e)(iii) are intended to comply with the Partner Nonrecourse Debt
Minimum Gain chargeback requirement of Regulations section 1.704-2(i)(4) and
shall be interpreted in accordance therewith for all purposes under this
Agreement.
ARTICLE VII
DISSOLUTION
SECTION 7.1 DISSOLUTION. The Partnership shall be dissolved and
subsequently terminated upon the occurrence of the first of the following
events:
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50
(a) decision of all of the General Partners to dissolve and subsequently
terminate the Partnership;
(b) December 31, 2045;
(c) the occurrence of a Disabling Event with respect to the sole remaining
General Partner, provided that the Partnership shall not be dissolved if,
within 90 days after such Disabling Event, all of the Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of the Disabling Event, of another General Partner;
or
(d) if, after the right of first opportunity under Article 3 shall no
longer be in effect, all of the Partnership Assets are sold or otherwise
disposed of.
SECTION 7.2 WINDING-UP. When the Partnership is dissolved, the business
and property of the Partnership shall be wound up and liquidated by the General
Partners or, in the event of a Disabling Event with respect to any General
Partner, by the remaining General Partners or, in the event of a Disabling
Event with respect to each of the General Partners, such liquidating trustee as
may be named by Limited Partners holding a majority of the Sharing Percentages
(with respect to all of the Projects) held by all Limited Partners (the party
conducting the liquidation being hereinafter referred to as the "Liquidator").
The Liquidator shall use its best efforts to reduce to cash and cash equivalent
items such assets of the Partnership as the Liquidator shall deem it advisable
to sell, subject to obtaining fair value for such assets and any tax or other
legal considerations.
SECTION 7.3 FINAL DISTRIBUTION. Within 90 calendar days after the
effective date of dissolution of the Partnership, the assets of the Partnership
shall be distributed in the following manner and order:
(a) to the payment of the expenses of the winding-up, liquidation and
dissolution of the Partnership;
(b) to pay all creditors of the Partnership, other than Partners, either by
the payment thereof or the making of reasonable provision therefor;
(c) to establish reserves, in amounts established by the Liquidator, to
meet other liabilities of the Partnership; and
(d) to pay, in accordance with the provisions of this Agreement applicable
to such loans or in accordance with the terms agreed among them and otherwise
on a pro rata basis, all creditors of the Partnership that are Partners,
either
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51
by the payment thereof or the making of reasonable provision therefor.
The remaining assets of the Partnership shall be applied and distributed in
accordance with the positive balances of the Partners' Capital Accounts, as
determined after taking into account all adjustments to Capital Accounts for
the Partnership taxable year during which the liquidation occurs.
ARTICLE VIII
TRANSFER OF PARTNERS' INTERESTS
SECTION 8.1 RESTRICTIONS ON TRANSFER OF PARTNERSHIP INTERESTS. (a) No
Partner may, directly or indirectly, assign, sell, exchange, transfer, pledge,
hypothecate or otherwise dispose of all or any part of its interest in the
Partnership (a "Transfer") to any person, other than in accordance with
paragraphs (b), (c), (d), (e) and (f) below. A change in the ultimate
beneficial ownership of a Partner shall be deemed a Transfer for purposes of
this Agreement (other than changes in the ownership of the common stock of
Interstate Hotels Company sold to the public).
(b) Any Partner may Transfer all or part of its interest in the
Partnership to any person; provided, however, that upon any Transfer of a
Partner's interest in accordance with this paragraph, the person (the
"Transferee") to whom the Partner's interest was Transferred shall not be
admitted as a substitute Partner without receiving the prior written Consent of
the Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion) and the Transferee has given written acceptance and
adoption of all of the terms and provisions of this Agreement; and provided,
further, that the prior written Consent of each of the General Partners shall
be required to admit the Transferee as a substitute Partner (which Consent may
be withheld in their sole and absolute discretion) (i) if the Transferee is not
an Affiliate of any member of the Blackstone Group or the Interstate Group, or
(ii) if the aggregate Sharing Percentages (with respect to all of the Projects)
of the Interstate Partners is 20% or less at the time of the Transfer.
(c) A Partner may mortgage, pledge, hypothecate or otherwise encumber all
or any portion of such Partner's rights to receive a portion of the Non-Capital
Proceeds, Capital Proceeds, Net Income and Net Losses to any person; provided,
however, that the holder of such mortgage, pledge, hypothecation or encumbrance
shall not be admitted as a substitute Partner without the prior Consent of the
Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion), provided that (i) if the Transferee is not an Affiliate
of any member of the Blackstone Group or the Interstate Group or (ii) if the
aggregate
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52
Sharing Percentages of the Interstate Partners (with respect to all of the
Projects) is 20% or less at the time of the Transfer, the prior written Consent
of each of the General Partners shall be required, which Consent may be
withheld in their sole and absolute discretion.
(d) At any time, any Blackstone Partner may transfer its interest in
Non-Capital Proceeds, Capital Proceeds, Net Income and Net Losses to any other
Blackstone Partner or its Affiliates but the Transferee shall not be admitted
as a substitute Partner and the transferor shall not be permitted to withdraw
from the Partnership without, in each case, the Consent of the Blackstone
General Partner (which Consent may be withheld in its sole and absolute
discretion), or, if the aggregate Sharing Percentages of the Interstate
Partners (with respect to all of the Projects) is 20% or less at the time of
the Transfer, the Consent of each of the General Partners (which Consent may be
withheld in their sole and absolute discretion).
(e) At any time, any Interstate Partner may transfer its interest in
Non-Capital Proceeds, Capital Proceeds, Net Income and Net Losses to any other
Interstate Partner or their Affiliates, but the Transferee shall not be
admitted as a substitute Partner and the transferor shall not be permitted to
withdraw from the Partnership without, in each case, the Consent of the
Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion).
(f) At any time, the ultimate beneficial ownership of a Partner may be
changed without any requirement for Consent hereunder, provided that day to day
management of such Partner is, at all times thereafter, directly or indirectly
controlled by the Blackstone General Partner or an Affiliate thereof or by the
Interstate General Partner or an Affiliate thereof.
SECTION 8.2 OTHER TRANSFER PROVISIONS. (a) Any purported Transfer by a
Partner of all or any part of its interest in the Partnership in violation of
this Article VIII shall be null and void and of no force or effect.
(b) Except as provided in this Article VIII, no Partner shall have the
right to withdraw from the Partnership prior to its termination and no
additional Partner may be admitted to the Partnership without the prior written
consent of the General Partners. In the event of any withdrawal of a General
Partner in violation of this Agreement, including as a result of a Disabling
Event, such General Partner shall be liable to the Partnership as provided in
Section 17-602 of the Partnership Act.
(c) Notwithstanding any provision of this Agreement to the contrary, a
Partner may not Transfer all or any part of its interest in the Partnership if
such Transfer would jeopardize the status of the Partnership as a partnership
for federal income tax
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53
purposes, cause a dissolution of the Partnership under the Partnership Act or
would violate, or would cause the Partnership to violate, any applicable law or
regulation (including any applicable federal or state securities laws) or
contract to which the Partnership is a party.
(d) Concurrently with the admission of any substitute or additional
Partner, the General Partners shall forthwith cause any necessary papers to be
filed and recorded and notice to be given wherever and to the extent required
showing the substitution of a Transferee as a substitute Partner in place of
the Partner Transferring its interest, or the admission of an additional
Partner, all at the expense, including payment of any professional and filing
fees incurred, of such substituted or additional Partner. The admission of any
person as a substitute or additional Partner shall be conditioned upon such
person's written acceptance and adoption of all the terms and provisions of
this Agreement.
(e) If any interest in the Partnership is Transferred during any
accounting period in compliance with the provisions of this Article VIII, each
item of income, gain, loss, expense, deduction and credit and all other items
attributable to such interest for such period shall be divided and allocated
between the transferor and the transferee by taking into account their varying
interests during such period in accordance with Section 706(d) of the Code,
using any conventions permitted by law and selected by the General Partners.
All distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such allocations and distributions, the
Partnership shall recognize a Transfer on the date that the General Partners
receive notice of the Transfer which complies with this Article VIII from the
Partner Transferring its interest.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 EQUITABLE RELIEF. The Partners hereby confirm that damages at
law may be an inadequate remedy for a breach or threatened breach of this
Agreement and agree that, in the event of a breach or threatened breach of any
provision hereof, the respective rights and obligations hereunder shall be
enforceable by specific performance, injunction or other equitable remedy, but,
nothing herein contained is intended to, nor shall it, limit or affect any
right or rights at law or by statute or otherwise of a Partner aggrieved as
against the other for a breach or threatened breach of any provision hereof, it
being the intention by this Section 9.1 to make clear the agreement of the
Partners that the respective rights and obligations of the Partners hereunder
shall be enforceable in
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equity as well as at law or otherwise and that the mention herein of any
particular remedy shall not preclude a Partner from any other remedy it or he
might have, either in law or in equity.
SECTION 9.2 OWNERSHIP AND USE OF NAMES. Rights to the name "Blackstone"
shall belong solely to the designated Blackstone Partners. Rights to the name
"Interstate" and "Interstate Hotels" shall belong solely to the designated
Interstate Partners. The ownership of, and the right to use, sell or otherwise
dispose of, the name, Interstone Three Partners III L.P. or any abbreviation or
modification thereof, shall belong to the Partnership. The Interstate General
Partner agrees to take all actions and to approve, execute and file any
document or instrument proposed by any Blackstone Partner to protect the rights
of the Blackstone Partners to the name "Blackstone". The Blackstone General
Partner agrees to take all actions and to approve, execute and file any
document or instrument proposed by any Interstate Partner to protect the rights
of the Interstate Partners to the name "Interstate" and "Interstate Hotels".
The Partners each agree to take all actions and to approve, execute and file
any document or instrument proposed by the General Partners to protect the
rights of the Partnership to the name "Interstone Three Partners III L.P.".
SECTION 9.3 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. In particular,
the Partnership is formed pursuant to the Partnership Act, and the rights and
liabilities of the General Partners and Limited Partners shall be as provided
therein, except as herein otherwise expressly provided.
SECTION 9.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors and assigns.
SECTION 9.5 ACCESS; CONFIDENTIALITY. By executing this Agreement, each
Partner expressly agrees, at all times during the term of the Partnership and
thereafter and whether or not at the time a Partner of the Partnership (i) not
to issue any press release or advertisement or take any similar action
concerning the Partnership's business or affairs without first obtaining the
Consent of all of the General Partners, (ii) not to publicize detailed
financial information concerning the Partnership without the Consent of all of
the General Partners and (iii) not to disclose the Partnership's affairs
generally without using reasonable efforts to consult with the other Partners
prior to such disclosure; provided, however, the foregoing shall not restrict
any Partner from disclosing information required to be disclosed by applicable
law or concerning such Partner's investment in the Partnership to its officers,
directors, employees, agents, legal counsel, accountants, other professional
advisors, limited partners and Affiliates, or to prospective or existing
investors in such Partner or its Affiliates or to prospective or existing
lenders
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55
to such Partner or its Affiliates, or to prospective purchasers of any property
owned by the Partnership. The provisions of this Section 9.5 shall survive the
termination of the Partnership.
SECTION 9.6 NOTICES. Whenever notice is required or permitted by this
Agreement to be given, such notice need not be in writing unless otherwise
required herein or requested by the receiving Partner. If in writing, such
notice shall be given to any Partner at its address or facsimile number shown
in the Partnership's books and records (including Schedule A hereto). Each
such notice shall be effective (i) if given by facsimile, upon oral
confirmation of receipt, (ii) if given by mail, on the fourth day after deposit
in the mails (certified or registered return receipt requested) addressed as
aforesaid and (iii) if given by any other means, when delivered to and
receipted for at the address of such Partner specified as aforesaid.
SECTION 9.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which together shall constitute a single instrument.
SECTION 9.8 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter hereof.
SECTION 9.9 AMENDMENTS. Any amendment to this Agreement shall be
effective only if such amendment is evidenced by a written instrument duly
executed by and delivered to the General Partners; provided, however, no such
amendment shall be effective or binding against a Partner unless executed by
such Partner if such amendment materially and adversely affects such Partner in
a specific manner separate and distinct from the amendment's treatment of other
Partners; and provided, further that any amendment which would have a material
adverse effect on any Partner's economic interest in the Partnership shall
require the Consent of all of the General Partners.
SECTION 9.10 SECTION TITLES. Section titles are for descriptive purposes
only and shall not control or alter the meaning of this Agreement as set forth
in the text hereof.
SECTION 9.11 REPRESENTATIONS AND WARRANTIES. (a) Each Partner represents,
warrants and covenants to each other Partner and to the Partnership that:
(i) such Partner, if not a natural person, is duly formed and validly
existing under the laws of the jurisdiction of its organization with full
power and
<PAGE> 60
56
authority to conduct its business to the extent contemplated in this
Agreement;
(ii) this Agreement has been duly authorized, executed and delivered by
such Partner and constitutes the valid and legally binding agreement of such
Partner enforceable in accordance with its terms against such Partner except
as enforceability hereof may be limited by bankruptcy, insolvency, moratorium
and other similar laws relating to creditors' rights generally and by general
equitable principles;
(iii) the execution and delivery of this Agreement by such Partner and the
performance of its duties and obligations hereunder do not result in a breach
of any of the terms, conditions or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, credit agreement, note or
other evidence of indebtedness, or any lease or other agreement, or any
license, permit, franchise or certificate, to which such Partner is a party
or by which it is bound or to which its properties are subject, or require
any authorization or approval under or pursuant to any of the foregoing, or
violate any statute, regulation, law, order, writ, injunction, judgment or
decree to which such Partner is subject;
(iv) such Partner is not in default (nor has any event occurred which with
notice, lapse of time, or both, would constitute a default) in the
performance of any obligation, agreement or condition contained in any
indenture, mortgage, deed of trust, credit agreement, note or other evidence
of indebtedness or any lease or other agreement, or any license, permit,
franchise or certificate, to which it is a party or by which it is bound or
to which the properties of it are subject, nor is it in violation of any
statute, regulation, law, order, writ, injunction, judgment or decree to
which it is subject, which default or violation would materially adversely
affect such Partner's ability to carry out its obligations under this
Agreement;
(v) except as disclosed to the Partners prior to the date hereof, there is
no litigation, investigation or other proceeding pending or, to the knowledge
of such Partner, threatened against such Partner or any of its Affiliates
which, if adversely determined, would materially adversely affect such
Partner's ability to carry out its obligations under this Agreement; and
(vi) no consent, approval or authorization of, or filing, registration or
qualification with, any court or governmental authority on the part of such
Partner is required for the execution and delivery of this Agreement by such
Partner and the performance of its obligations and duties hereunder.
<PAGE> 61
57
(b) IHC/Interstone Partnership II, L.P. represents that not less than 90%
of its interests are owned by Interstate Hotels Corporation.
<PAGE> 62
58
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Limited Partnership Agreement of Interstone Three Partners III L.P. as of the
day and year first above written.
GENERAL PARTNERS:
BJS INTERSTONE MANAGEMENT ASSOCIATES
By: Blackstone Real Estate Inc.,
general partner
By: /s/ Gary M. Sumers
------------------------------
Gary M. Sumers
Vice President
IHC/INTERSTONE CORPORATION
By: /s/ Marvin I. Droz
------------------------------
Marvin I. Droz
Vice President
LIMITED PARTNERS:
BLACKSTONE REAL ESTATE
PARTNERS III L.P.
By: Blackstone Real Estate Associates L.P.,
general partner
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
------------------------------
Gary M. Sumers
Vice President
BLACKSTONE REAL ESTATE
HOLDINGS L.P.
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
------------------------------
Gary M. Sumers
Vice President
<PAGE> 63
59
BLACKSTONE RE CAPITAL PARTNERS L.P.
By: Blackstone Real Estate Associates L.P.,
general partner
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
------------------------------
Gary M. Sumers
Vice President
BLACKSTONE RE OFFSHORE CAPITAL PARTNERS L.P.
By: Blackstone Real Estate Associates L.P.,
general partner
By: BREA L.L.C., general partner
By: /s/ Gary M. Sumers
------------------------------
Gary M. Sumers
Vice President
IHC/INTERSTONE PARTNERSHIP II, L.P.
By: IHC Member Corporation,
general partner
By: /s/ Marvin I. Droz
------------------------------
Marvin I. Droz
Vice President
<PAGE> 64
SCHEDULE A
PARTNERS OF THE PARTNERSHIP
<TABLE>
<CAPTION>
Sharing
Percentage as of
June __, 1996
---------------
General
Partners Address
-------- -------
<S> <C> <C>
BJS Interstone Management 345 Park Avenue
Associates New York, NY 10154 0.5%
IHC/Interstone c/o Interstate Hotels Corporation
Corporation Foster Plaza X
680 Anderson Drive
Pittsburgh, PA 15220-8126 0.5%
Limited Partners
----------------
Blackstone Real Estate 345 Park Avenue
Partners III L.P. New York, NY 10154 48.5%
IHC/Interstone c/o Interstate Hotels Corporation
Partnership II, L.P. Foster Plaza X
680 Anderson Drive 50.5%
Pittsburgh, PA 15220-8126
</TABLE>
<PAGE> 65
EXHIBIT A
FORM OF MANAGEMENT AGREEMENT
<PAGE> 66
EXHIBIT B
FORM OF PROJECT PARTNERSHIP AGREEMENT
<PAGE> 67
EXHIBIT C
FORM OF CONFIRMATION AND ACKNOWLEDGMENT
OF RIGHT OF FIRST OPPORTUNITY
This Confirmation and Acknowledgment of Right of First Opportunity
("Confirmation") is made and entered into as of the ____ day of ________, 19__
by and among THE BLACKSTONE GROUP HOLDINGS L.P. ("Blackstone") and INTERSTATE
HOTELS CORPORATION ("Interstate").
RECITALS
A. Sections 3.6 through 3.8 of that certain Amended and Restated Limited
Partnership Agreement of Interstone Three Partners III L.P., dated as of the
date hereof (as amended, supplemented or otherwise modified from time to time,
the "Partnership Agreement") sets forth the scope, operation, duration,
termination and other terms relating to a right of first opportunity provided
by the Blackstone Group and the Interstate Group in favor of the Partnership
with respect to certain Target Investments identified for investment by the
Blackstone Group and the Interstate Group. Except as otherwise expressly
provided herein, any defined term used in this Confirmation shall have the
meaning prescribed for that term in the Partnership Agreement.
B. The parties wish to enter into this Confirmation in order to confirm and
acknowledge their obligations to each other with respect to the foregoing
matters and any other obligations each may have to the other pursuant to the
express terms of Sections 3.6 through 3.8 of the Partnership Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follow:
1. The provisions of Sections 3.6 through 3.8 of the Partnership Agreement
are hereby incorporated by reference as though set forth in full herein. Each
party hereto hereby confirms its obligation to comply with all terms,
provisions, covenants, conditions and restrictions and perform all obligations
applicable to such party under said Sections 3.6 through 3.8 of the Partnership
Agreement. Without limiting the generality of the foregoing, Blackstone and
Interstate hereby agree to comply, and to cause the Blackstone Related Parties
and the Interstate Related Parties, respectively, to comply, with their
obligations pertaining to the right of first opportunity set forth in said
Sections of the Partnership Agreement in accordance with the terms applicable
thereto.
<PAGE> 68
2
2. This Confirmation confirms and acknowledges the terms, provisions,
covenants, conditions, obligations and restrictions set forth in Sections 3.6
through 3.8 of the Partnership Agreement. It shall not be construed or
understood to modify, in any way, such terms, provisions, covenants,
conditions, obligations and restrictions, and, in the event of any conflict
between this Confirmation and the Partnership Agreement, the provisions of
Sections 3.6 through 3.8 of the Partnership Agreement shall control. In no
event shall this Confirmation be construed or understood to extend the duration
of the restrictions on Blackstone, Interstate and the Related Parties arising
from the right of first opportunity, which shall terminate as set forth in the
Partnership Agreement. The provisions of Sections 9.1, 9.3, and 9.5 through
9.10 of the Partnership Agreement are incorporated herein, except that all
references therein to the "Agreement" shall be deemed to be references to this
Confirmation, all references therein to the "Partners" shall be deemed to be
references to the parties hereto and delivery of notices to Blackstone
hereunder or under the Partnership Agreement shall be delivered to the same
address as the Blackstone General Partner, and delivery of notices to
Interstate hereunder shall be delivered to the same address as the Interstate
General Partner, unless any such parties shall change the address for delivery
of notice in accordance with the procedures established under Section 9.6 of
the Partnership Agreement. Nothing in this Confirmation shall be understood or
construed to render the parties hereto joint venturers or partners for any
purposes. Nothing in this Confirmation shall be understood or construed to
modify or expand the extent of any recourse between the Partners beyond that
expressly provided by the Partnership Agreement.
THE BLACKSTONE GROUP HOLDINGS, L.P.
By: ____________________________
INTERSTATE HOTELS CORPORATION
By: _____________________________
<PAGE> 69
EXHIBIT D
PRE-EXISTING PROJECTS
NONE
<PAGE> 70
EXHIBIT E
EXCLUDED PROJECTS
BLACKSTONE EXCLUDED PROJECTS
1. Any business activities with the Davidson Hotel Company ("Davidson"),
including a merger or a combination of Davidson or its assets with any
other entity or with the assets of any other entity, a REIT involving
Davidson or some or all of its assets, an initial public offering or other
capital event involving Davidson; provided, that this exclusion shall not
include the acquisition of other hotels by Davidson (other than through a
combination with another entity or a combination with the assets of
another entity) which were first identified by the affiliates of the
Blackstone Group which are investors in Davidson (as opposed to
acquisitions first identified by the non-affiliated Davidson investors).
INTERSTATE EXCLUDED PROJECTS
1. Four to six hotel acquisitions from an institutional owner only in
conjunction with the Carlyle Group or The Apollo Group
2. Acquisition of Checkers Hotel in Los Angeles, California only in
conjunction with The Apollo Group
3. Any investment in a hotel which is incidental to Interstate taking over
management of such hotel such as those currently under consideration by
Interstate in Farmington, Connecticut, Irvine, California, Warner Center,
California and Burlington, Massachusetts.
With respect to Interstate's investment opportunities described in
clauses 1 and 2 above, if The Apollo Group or The Carlyle Group decides
not to participate in such investment or is willing to admit additional
partners or participants other than Interstate, Interstate will present
such opportunity to the Partnership in the manner prescribed in
Section 3.6 of the Partnership Agreement.
With respect to Interstate's investment opportunities described in
clauses 1 and 2 above, Interstate (i) shall exercise best efforts to
increase its equity stake in such investments (up to the maximum
<PAGE> 71
2
of 50% of the total equity invested), and (ii) shall offer the Blackstone
Group (outside of the Partnership) an opportunity to acquire 50% of whatever
interest is available to Interstate on terms and conditions acceptable to
Interstate and the Blackstone Group.
<PAGE> 1
EXHIBIT 10(f)
================================================================================
INTERSTONE THREE PARTNERS IV L.P.
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
Dated as of June 25, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE II
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.1 Continuation of Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.2 Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.3 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.4 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2.5 Purpose; Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.6 Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.7 Alternative Investment Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.8 Parallel Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III
Management and Operation of the
Partnership; Identification and Approval of
Investments; Partner Services . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 3.2 Joint Control by the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.3 Blackstone Partners Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.4 Certain Duties and Obligations of the Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.5 Restrictions on Authority of the General Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.6 Right of First Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.7 Right of First Opportunity; Exclusive Rights; Investment Parameters . . . . . . . . . . . . . . . . . . . 28
SECTION 3.8 Termination of Right of First Opportunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.9 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.10 Financial Advisory Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.11 Other Partner Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.12 Marketing Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IV
Other Activities Permitted . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE V
Capital Contributions;
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.1 Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 5.2 Partner Loans for Failure to Fund Committed Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5.3 Dilution for Failure to Fund Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.4 Distributions Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.5 Distributions of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.6 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.7 Partnership Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VI
Books and Reports; Tax Matters;
Capital Accounts; Allocations . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.1 General Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 6.2 Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.4 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VII
Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 7.2 Winding-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 7.3 Final Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VIII
Transfer of Partners' Interests . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.1 Restrictions on Transfer of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.2 Other Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE IX
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.1 Equitable Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.2 Ownership and Use of Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.5 Access; Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 9.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.9 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.10 Section Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 9.11 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
ii
<PAGE> 4
Schedules
SCHEDULE A Name, Address and Sharing Percentages
Exhibits
Exhibit A Form of Management Agreement
Exhibit B Form of Project Partnership Agreement
Exhibit C Form of Confirmation and Acknowledgment
of Right of First Opportunity
Exhibit D Pre-Existing Projects
Exhibit E Excluded Projects
iii
<PAGE> 5
INTERSTONE THREE PARTNERS IV L.P.
AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT, dated as of June 25,
1996 by and among BJS INTERSTONE MANAGEMENT ASSOCIATES, a Delaware general
partnership, as a general partner, IHC/INTERSTONE CORPORATION, a Delaware
corporation, as a general partner, and BLACKSTONE REAL ESTATE PARTNERS IV
L.P., BLACKSTONE RE CAPITAL PARTNERS II L.P., and IHC/INTERSTONE PARTNERSHIP
II, L.P., each a Delaware limited partnership, as limited partners.
PRELIMINARY STATEMENT
A. The Blackstone Group and the Interstate Group each have the capability
for identifying, acquiring, improving, operating and disposing of individual
hotel, motel and other lodging properties and groups of hotel, motel and other
lodging properties, hotel and motel management companies (for which the
ownership of hotels and motels is a significant part of their business) and
public and private companies whose primary holdings are comprised of such
assets or operations ("Target Investment" or "Target Investments").
B. The Blackstone Partners and the Interstate Partners, individually and
acting through the Partnership, in each case in accordance with the terms of
this Agreement, wish to continue an exclusive arrangement with each other under
which, for the duration thereof and subject to the terms set forth below, the
Partnership, the Blackstone Partners and the Interstate Partners through the
Partnership and the Parallel Partnerships, will have the first opportunity to
acquire, operate and dispose of certain Target Investments which are hereafter
identified by the Blackstone Group and/or the Interstate Group, as the case may
be, and approved for investment in accordance with this Agreement (each Target
Investment proposed or approved, as the context indicates, for acquisition
pursuant to this Agreement is referred to as a "Project").
C. In order to effect the foregoing, the parties hereto entered into a
limited partnership agreement dated as of December 15, 1995 (the "Existing
Agreement") and formed a partnership under the laws of the State of Delaware
with the name Interstone Three Partners IV L.P. (the "Partnership").
D. Each of the Partners of the Partnership have agreed to amend and restate
the Existing Agreement in its entirety as set forth herein.
<PAGE> 6
2
AGREEMENT
Accordingly, in consideration of the mutual promises and agreements herein
made and intending to be legally bound hereby, the parties hereto agree to
amend and restate the Existing Agreement to read as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. Unless the context otherwise requires, the
following terms shall have the following meanings for purposes of this
Agreement:
"ACKNOWLEDGEMENT" has the meaning set forth in Section 3.6(a).
"ADJUSTED CAPITAL ACCOUNT BALANCE" shall mean, with respect to any Partner,
the balance in such Partner's Capital Account adjusted (i) by taking into
account the adjustments, allocations and distributions described in
Regulations section 1.704-1(b)(2)(ii)(d)(4), (5), and (6); and (ii) by adding
to such balance such Partner's share of partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain, determined pursuant to Regulations section
1.704-2(g)(1) and 1.704-2(i)(5).
"AFFILIATE" with respect to any person means (i) any other person who
controls, is controlled by or is under common control with such person, (ii)
any director, officer, partner or employee of such person or any person
specified in clause (i) above or (iii) any immediate family member of any
person specified in clause (i) or (ii) above. Notwithstanding the foregoing,
for the purposes of this Agreement, none of the Blackstone Partners nor their
Affiliates shall be deemed to be Affiliates of any of the Interstone Partners
or the Interstone Related Parties, none of the Interstate Partners nor their
Affiliates shall be deemed to be Affiliates of any of the Blackstone Partners
or the Blackstone Related Parties, and no officer or director of any member
of the Blackstone Group which is also an officer or director of any member of
the Interstone Group shall be deemed to be an Affiliate of any of the
Interstate Partners or Interstate Related Parties, and no member of the
Interstone Group shall be deemed an Affiliate of any member of the Blackstone
Group.
"AGREEMENT" means this Amended and Restated Limited Partnership Agreement,
as it may be amended, supplemented, modified or restated from time to time.
<PAGE> 7
3
"ASSET MANAGEMENT AGREEMENT" has the meaning set forth in Section 3.6(f).
"AUTHORIZED REPRESENTATIVES" of a General Partner shall be those
representatives designated by notice to all Partners by each General Partner
from time to time to represent such General Partner in connection with the
Partnership. The term "Authorized Representative" shall refer to any one of
the Authorized Representatives of a Partner. The initial Authorized
Representatives of the General Partners are set forth in Section 3.1(e)
below.
"BLACKSTONE GENERAL PARTNER" means BJS Interstone Management Associates, a
Delaware general partnership, or any Affiliate of any member of the
Blackstone Group who replaces BJS Interstone Management Associates as a
general partner hereunder, or is admitted as an additional general partner
hereunder.
"BLACKSTONE GROUP" means the Blackstone Partners, Affiliates of the
Blackstone Partners and the Blackstone Related Parties; provided, that the
Blackstone Group shall not include investors in the Blackstone Partners who
are not Affiliates of Blackstone Group Holdings L.P., to the extent such
investors are not investing through any Affiliate of Blackstone Group
Holdings L.P.
"BLACKSTONE LIMITED PARTNER" means, collectively, Blackstone Real Estate
Partners IV L.P., Blackstone RE Capital Partners II L.P., each a Delaware
limited partnership, or any Affiliate of any member of the Blackstone Group
who replaces Blackstone Real Estate Partners IV L.P. or Blackstone RE Capital
Partners II L.P. as a limited partner hereunder, or is admitted as an
additional limited partner hereunder.
"BLACKSTONE PARTNERS" means collectively, the Blackstone General Partner and
the Blackstone Limited Partners and any other Partner admitted to the
Partnership which is an Affiliate of any of the foregoing and any permitted
assigns of such Partners.
"BLACKSTONE RELATED PARTIES" means (i) Blackstone Group Holdings L.P., (ii)
each of the general partners of Blackstone Group Holdings L.P. and his
immediate family members, for so long as he is such a partner and (iii) any
corporation, partnership, limited liability company, joint venture or other
like entity in which the Blackstone Partners or the parties referred to in
(i) and (ii) above individually or collectively, hold a fifty percent (50%)
or greater, direct or indirect (through one or more business entities),
ownership interest, but shall not include any such entity in which the
collective ownership interest of
<PAGE> 8
4
these parties is less than fifty percent (50%) or which is a publicly traded
company.
"BROKEN DEAL" shall mean a proposed Project that is not ultimately acquired
by the Partnership.
"BUSINESS DAY" shall mean any day on which commercial banks are authorized
to do business and are not required by law or executive order to close in New
York, New York.
"CAPITAL ACCOUNT" has the meaning set forth in Section 6.3.
"CAPITAL CONTRIBUTIONS" means the net fair market value of any capital
contributions made by the Partners to the Partnership and shall include (i)
the contributions of such Partner made pursuant to Sections 3.6, 3.9, 3.10,
5.1 and 5.7 and (ii) such Partner's payments made to third party creditors of
the Partnership with respect to Partnership obligations to the extent such
Partner is authorized by this Agreement to make any such payment, unless and
until reimbursed by the Partnership.
"CAPITAL PROCEEDS" means (A) the cash or other consideration received by the
Partnership (including interest on installment sales when received) as a
result of (i) any sale, exchange, abandonment, foreclosure, insurance award,
condemnation, easement sale or other similar transaction relating to any
property of the Partnership, (ii) any financing or refinancing (to the extent
such refinancing is deemed a Disposition hereunder) relating to any property
of the Partnership, (iii) capital contributions to the Partnership upon
admission of new partners, (iv) any other transaction which, in accordance
with generally accepted accounting principles, would be treated as a capital
event, in each case less (B) any such cash which is applied to (i) the
payment of transaction costs and expenses, (ii) the repayment of debt of the
Partnership which is required under the terms of any indebtedness of the
Partnership or has been authorized by the General Partners, (iii) the repair,
restoration or other improvement of Partnership Assets which is required
under any contractual obligation of the Partnership or has been authorized by
the General Partners and (iv) the establishment of reserves by the General
Partners. "Capital Proceeds" shall also mean any of the foregoing which are
received by a partnership or other vehicle in which the Partnership is a
partner or investor or in which the Partnership otherwise has an interest, to
the extent received by the Partnership as dividends or distributions.
"CARRYING VALUE" shall mean, with respect to any Partnership Asset, the
asset's adjusted basis for U.S. federal income tax purposes, except that the
Carrying Values
<PAGE> 9
5
of all Partnership Assets shall be adjusted to equal their respective fair
market values, in accordance with the rules set forth in Regulations Section
1.704-1(b)(2)(iv)(f), except as otherwise provided herein, as of: (a) the
date of the acquisition of any additional Partnership interest by any new or
existing Partner in exchange for more than a de minimis Capital Contribution,
other than pursuant to the initial formation of the Partnership; (b) the date
of the distribution of more than a de minimis amount of Partnership property
to a Partner; (c) the date a Partnership interest is relinquished to the
Partnership or (d) the date of the termination of the Partnership under
Section 708(b)(i)(B) of the Code; provided, however, that adjustments
pursuant to clauses (a), (b) and (c) above shall be made only if the General
Partners determine that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Partners. The Carrying Value
of any Partnership Asset distributed to any Partner shall be adjusted
immediately prior to such distribution to equal its fair market value.
Depreciation shall be calculated by reference to Carrying Value, instead of
tax basis once Carrying Value differs from tax basis.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute. Any reference herein to a particular
provision of the Code shall mean, where appropriate, the corresponding
provision in any successor statute.
"COMMITTED CAPITAL" shall mean, the aggregate amount of $29,400,000 for the
Blackstone Partners and the Blackstone Partners of the Parallel Partnerships,
and the aggregate amount of $30,600,000 for the Interstate Partners and the
Interstate Partners of the Parallel Partnership.
"COMPETITIVE RATE" shall mean, with respect to a particular service at a
Target Investment, the lower of (i) the rate charged on an arm's length basis
for the same or similar service for comparable properties in the geographic
area in which the relevant Target Investment is located by unaffiliated
persons providing or performing such service on an ongoing basis and (ii) the
lowest rate charged by any Affiliates of the Interstate General Partner for
the same or similar service for comparable properties in the geographic area
in which the relevant Target Investment is located.
"CONSENT" shall mean the approval, direction or determination, as the case
may be, of a Partner, given as provided in Section 3.1, to do the act or
thing for which the approval is solicited or with respect to which the
direction or determination is given or made, or the act of granting such
approval or giving such direction or making such determination, as the
context may require. Any Consent required to be given by the Blackstone
General Partner shall
<PAGE> 10
6
be given by any one Authorized Representative of the Blackstone General
Partner. Any Consent to be given by the Interstate General Partner shall be
given by any two Authorized Representatives of the Interstate General
Partner.
"CONSIDERATION" means the gross value of all cash, securities and other
properties paid or payable, directly or indirectly, in one transaction or in
a series or combination of transactions, in connection with an acquisition or
disposition of a Target Investment or a transaction related thereto
(including, without limitation, amounts paid (A) pursuant to covenants not to
compete, employment contracts, employee benefit plans or other similar
arrangements and (B) to holders of any warrants, stock purchase rights,
convertible securities or similar rights and to holders of any options or
stock appreciation rights, whether or not vested). Consideration shall also
include the value of any long-term liabilities (including the principal
amount of any mortgage indebtedness or other indebtedness for borrowed money,
preferred stock obligations, any pension liabilities and guarantees)
indirectly or directly assumed or acquired, or otherwise repaid or retired,
in connection with or anticipation of such acquisition. If an acquisition
takes the form of a purchase of assets, to the extent applicable
Consideration shall also include (i) the value of any current assets not
purchased, minus (ii) the value of any current liabilities not assumed. If
the Consideration to be paid is computed in any foreign currency, the value
of such foreign currency shall, for purposes hereof, be converted into U.S.
dollars at the prevailing exchange rate on the date or dates on which such
Consideration is paid. In this Agreement, the value of any securities
(whether debt or equity) or other property paid or payable as part of the
Consideration shall be determined as follows: (1) the value of securities
that are freely tradable in an established public market will be determined
on the basis of the last market closing price prior to the public
announcement of the acquisition; and (2) the value of the securities that are
not freely tradable or have no established public market or, if the
Consideration utilized consists of property other than securities, the value
of such other property shall be the fair market value thereof as reasonably
determined by the General Partners.
"CONTRIBUTING PARTNER" has the meaning set forth in Section 5.2.
"DISABLING EVENT" means any event which would cause a General Partner to
cease to be a general partner of the Partnership pursuant to Section 17-402
of the Partnership Act.
<PAGE> 11
7
"DISPOSITION" of a Project shall mean the sale, exchange or other
disposition by the Partnership of all or any portion of such Project for
cash, and shall include the receipt by the Partnership of a liquidating
dividend or other like distribution in cash. A refinancing of a Project
shall be deemed a Disposition of such Project unless the General Partners
agree otherwise. Whenever a portion of a Project (but not the entire
Project) is the subject of a Disposition, that portion shall be treated as
having been a separate project from that portion of the Project that is
retained by the Partnership, and the Capital Contributions for such Project
and the Proceeds (other than the Proceeds of such Disposition of a portion of
a Project) distributed to the Partners with respect to such Project shall be
treated as having been divided between the portion subject to the Disposition
and the retained portion on a pro rata basis. For purposes of calculating
the Internal Rate of Return, a Broken Deal shall be considered a Project
subject to a Disposition that did not yield any Proceeds.
"FAIR MARKET VALUE" of a Project as of a specific date shall mean the fair
market value of such project on such date as reasonably determined by the
General Partners (taking into consideration all factors which may reasonably
affect the sales price of the Project), less the principal amount of any debt
and other similar liabilities secured by or otherwise related to such
Project, and less a reasonable estimate of transaction costs and expenses
which would be incurred upon a Disposition of such Project on such date. If
the General Partners can not reach agreement on the Fair Market Value of a
Project, the matter shall be settled by arbitration in New York, New York in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect, except that the number and method of selection of
the arbitrators shall be as follows: each General Partner shall select one
qualified real estate investment banker or MAI appraiser who is experienced
in valuing assets and liabilities of the type in question; the average of the
Fair Market Values of such Project determined by such arbitrators shall be
the Fair Market Value of such Project, and shall be final, conclusive and
binding on the Partners.
"FISCAL PERIOD" means each fiscal quarter or such other period as may be
established by the General Partners.
"FISCAL YEAR" means the calendar year ending on December 31 of each year.
"GENERAL PARTNERS" mean the Blackstone General Partner, the Interstate
General Partner and any other person admitted to the Partnership as an
additional or substitute general partner of the Partnership in accordance
with the provisions
<PAGE> 12
8
of this Agreement, until such time as such person ceases to be a general
partner of the Partnership as provided herein.
"INTERNAL RATE OF RETURN" shall mean with respect to any Partner as of the
date of a cash distribution of Proceeds to such Partner, the rate of return
(calculated as provided below, taking into account the time value of money)
which (x) the Proceeds for which the return is being calculated represent on
(y) all Capital Contributions made by such Partner as of such date with
respect to the Project or Projects for which the return is being calculated.
In determining the Internal Rate of Return, the following shall apply:
(i) subject to the provisions of clause (ii) of this definition, all
present value calculations are to be made as of the date such Capital
Contributions were contributed to the Partnership;
(ii) all Capital Contributions shall be treated as having been contributed
to the Partnership on the first day of the month during which a Partner's
funds were actually delivered to the Partnership;
(iii) all distributions shall be treated as if received on the last day of
the month in which the distribution was made;
(iv) all distribution amounts shall be based on the amount of the
distribution prior to the application of any federal, state or local taxation
to Partners (including any withholding or deduction requirements); and
(v) the rates of return shall be per annum rates and all amounts shall be
calculated on a compounded annual basis, and on the basis of a 365-day year.
When calculating the Internal Rate of Return (and for such purpose only), a
Partner's Capital Contribution to a Project shall not be deemed to include
60% of such Partner's share of any amounts paid to the Blackstone General
Partner or its Affiliates pursuant to Sections 3.9 and 3.10 below for such
Project. When calculating the Internal Rate of Return, a Partner's initial
Capital Contributions shall be deemed given on the date of admission of such
Partner to the Partnership, not on the date that the transferor of such
Partner's interest in the Partnership made its Capital Contributions; such
Capital Contributions shall be deemed Capital Contributions of the transferor
for the period from when made until the transfer to the new Partner.
<PAGE> 13
9
"INTERSTATE GENERAL PARTNER" means IHC/Interstone Corporation, a Delaware
corporation, or any Affiliate of any member of the Interstate Group who
replaces IHC/Interstone Corporation as a general partner hereunder or is
admitted as an additional general partner hereunder.
"INTERSTATE GROUP" means the Interstate Partners, Affiliates of the
Interstate Partners and the Interstate Related Parties.
"INTERSTATE LIMITED PARTNER" means IHC/Interstone Partnership II, L.P., a
Delaware limited partnership, or any Affiliate of any member of the
Interstate Group who replaces IHC/Interstone Partnership II, L.P. as a
limited partner hereunder or is admitted as an additional limited partner
hereunder.
"INTERSTATE PARTNERS" means collectively, the Interstate General Partner,
the Interstate Limited Partner and any other Partner admitted to the
Partnership which is an Affiliate of any of the foregoing and any permitted
assigns of such Partners.
"INTERSTATE RELATED PARTIES" means (i) Interstate Hotels Corporation, (ii)
each of the senior executives of Interstate Hotels Company and Interstate
Hotels Corporation and his immediate family members, for so long as he is
employed by Interstate Hotels Company and/or Interstate Hotels Corporation,
(iii) Milton Fine and his immediate family members and (iv) any corporation,
partnership, limited liability company, joint venture or other like entity in
which the Interstate Partners or the parties referred to in (i), (ii) and
(iii) above individually or collectively, hold a fifty percent (50%) or
greater, direct or indirect (through one or more business entities),
ownership interest but shall not include any such entity in which the
collective ownership interest of these parties is less than fifty percent
(50%) or which is a publicly traded company.
"LIMITED PARTNERS" means the Blackstone Limited Partners, the Interstate
Limited Partner and any person admitted to the Partnership as an additional
or substitute limited partner of the Partnership in accordance with the
provisions of this Agreement.
"LIQUIDATOR" has the meaning set forth in Section 7.2.
"MANAGEMENT AGREEMENT" shall mean a Management Agreement in the form
attached hereto as Exhibit A, as such agreement may be amended from time to
time in accordance with the terms thereof and hereof.
<PAGE> 14
10
"MINIMUM GAIN" shall have the meaning set forth in Regulations section
1.704-2(d)(1) and shall mean the amount determined by (i) computing for each
nonrecourse liability of the Partnership any gain the Partnership would
realize if it disposed of the property subject to that liability for no
consideration other than full satisfaction of the liability and (ii)
aggregating the separately computed gains. If the Carrying Value of any
Partnership Asset differs from the adjusted tax basis of such property, the
calculation of Minimum Gain pursuant to the preceding sentence shall be made
by reference to the Carrying Value. For purposes hereof, a liability of the
Partnership is a nonrecourse liability to the extent that no Partner or
related person bears the economic risk of loss for that liability within the
meaning of Regulations section 1.752-1.
"NET INCOME (LOSS)" shall mean for each Fiscal Year or other period, the
taxable income or loss of the Partnership, or particular items thereof,
determined in accordance with the accounting method used by the Partnership
for U.S. federal income tax purposes with the following adjustments: (i) all
items of income, gain, loss or deduction allocated pursuant to Section 6.4(c)
through (e) shall not be taken into account in computing such taxable income
or loss; (ii) any income of the Partnership that is exempt from U.S. federal
income taxation and not otherwise taken into account in computing Net Income
and Net Loss shall be added to such taxable income or loss; (iii) if the
Carrying Value of any asset differs from its adjusted tax basis for U.S.
federal income tax purposes, any depreciation, amortization or gain resulting
from a disposition of such asset shall be calculated with reference to such
Carrying Value; (iv) upon an adjustment to the Carrying Value of any asset,
pursuant to the definition of Carrying Value, the amount of the adjustment
shall be included as gain or loss in computing such taxable income or loss;
and (v) except for items in (i) above, any expenditures of the Partnership
not deductible in computing taxable income or loss, not properly
capitalizable and not otherwise taken into account in computing Net Income
and Net Loss pursuant to this definition shall be treated as deductible
items.
"NON-CAPITAL PROCEEDS" means (x) any cash or other consideration received by
the Partnership other than Capital Proceeds less (y) any such cash that is
applied to the establishment of reserves which have been established by the
General Partners and to expenses of the Partnership.
"NON-CONTRIBUTING PARTNER" has the meaning set forth in Section 5.2.
"NONRECOURSE DEDUCTIONS" shall have the meaning ascribed to such term in
Regulations section 1.704-2(b)(1).
<PAGE> 15
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"ORGANIZATIONAL EXPENSES" means all reasonable third-party costs and
expenses pertaining to the organization of the Partnership and the
registration, qualification or exemption of the Partnership under any
applicable federal, state or foreign laws, including fees of counsel to the
Partnership and the Partners.
"PARALLEL PARTNERSHIPS" has the meaning set forth in Section 2.8.
"PARTNER" means any person who is a partner of the Partnership, whether a
General Partner, a Limited Partner or both.
"PARTNER NONRECOURSE DEBT" shall have the meaning ascribed to such term in
Regulations section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" shall have the meaning ascribed to
such term in Regulations section 1.704-2(i)(2).
"PARTNER NONRECOURSE DEDUCTIONS" shall mean any item of partnership loss,
deduction, or expenditure under section 705(a)(2)(B) of the Code that is
attributable to a Partner Nonrecourse Debt, as determined pursuant to
Regulations section 1.704-2(i)(2).
"PARTNERSHIP" means Interstone Three Partners IV L.P.
"PARTNERSHIP ACT" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. Section Section 17-101, et seq., as it may be amended from
time to time, and any successor to such statute.
"PARTNERSHIP ASSETS" means all right, title and interest of the Partnership
in and to all or any portion of the assets of the Partnership and any
property (real or personal) or estate acquired in exchange therefor or in
connection therewith.
"PRE-EXISTING PROJECTS" has the meaning set forth in Section 3.6(a).
"PROCEEDS" means the collective reference to Capital Proceeds and
Non-Capital Proceeds.
"PROJECT" has the meaning set forth in the Preliminary Statement.
"PROJECT LIMITED LIABILITY COMPANY AGREEMENT" shall mean a limited liability
company agreement in a form to be agreed upon by the General Partners, as
such agreement may be amended from time to time in accordance with the terms
<PAGE> 16
12
thereof and hereof, formed pursuant to this Agreement to own Projects
purchased hereunder.
"PROJECT PARTNERSHIP AGREEMENT" shall mean a partnership agreement in the
form attached hereto as Exhibit B, (with such changes as required to provide
the Blackstone General Partner therein and the Interstate General Partner
therein with the same management rights as the Blackstone General Partner
herein and the Interstate General Partner herein, respectively, have pursuant
to this Agreement), as such agreement may be amended from time to time in
accordance with the terms thereof and hereof, formed pursuant to this
Agreement to own Projects purchased hereunder.
"REGULATIONS" means the regulations promulgated under the Code.
"RELATED PARTIES" means the Blackstone Related Parties and the Interstate
Related Parties.
"REQUEST FOR PRELIMINARY APPROVAL" has the meaning set forth in Section
3.6(b).
"REQUEST FOR FINAL APPROVAL" has the meaning set forth in Section 3.6(f).
"SHARING PERCENTAGE" means the percentage interest of a Partner as set forth
on Schedule A hereto, as amended from time to time in accordance herewith.
Notwithstanding the foregoing, at the election of the Blackstone General
Partner or the Interstate General Partner made prior to the purchase of any
Target Investment by the Partnership, the Sharing Percentages of the
Interstate Limited Partner shall be reduced to 49.5% and the Sharing
Percentage of the Blackstone Limited Partner shall be increased to 49.5% in
the aggregate. In such event, appropriate changes shall be made in Section
6.4(a) and 6.4(d)(i) below.
"TARGET INVESTMENT" has the meaning set forth in the Preliminary Statement.
"TAX MATTERS PARTNER" has the meaning set forth in Section 6.2.
"TRANSFER" has the meaning set forth in Section 8.1(a).
"TRANSFEREE" has the meaning set forth in Section 8.1(b).
"UNREALIZED LOSS" with respect to a Project on a date of a distribution of
Capital Proceeds shall mean the excess of the total Capital Contributions
with respect to such Project as of such date over the Fair Market Value of
such
<PAGE> 17
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Project as of such date. A Project shall not have any Unrealized Loss on a
date of a distribution if the calculation pursuant to this definition for
such Project on such date equals zero or less.
SECTION 1.2 TERMS GENERALLY. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The term "person" includes individuals,
partnerships, joint ventures, corporations, trusts, governments (or agencies or
political subdivisions thereof) and other associations and entities. Unless
the context requires otherwise, the words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The term
"hereunder" shall mean this entire Agreement as a whole unless reference to a
specific section of this Agreement is made.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.1 CONTINUATION OF PARTNERSHIP. The Blackstone General Partner
and the Interstate General Partner, as the General Partners, and the Blackstone
Limited Partners and the Interstate Limited Partner, as limited partners,
hereby agree to continue the Partnership and the Partners agree that the
Partnership shall continue for the limited purposes set forth and on the other
terms and conditions set forth in this Agreement. The Blackstone General
Partner hereby represents that each of the Blackstone Limited Partners is an
Affiliate of the Blackstone General Partner or its Affiliates.
SECTION 2.2 PARTNERS. Schedule A hereto contains the name, address and
Sharing Percentage of each Partner as of the date of this Agreement. Schedule
A shall be revised by the General Partners from time to time to reflect the
admission or withdrawal of a Partner or the transfer or assignment of interests
in the Partnership in accordance with the terms of this Agreement and other
modifications to or changes in the information set forth therein.
SECTION 2.3 NAME. The Partnership shall conduct its activities under the
name of Interstone Three Partners IV L.P. The General Partners shall have the
power at any time to change the name of the Partnership; provided, that the
name shall always contain the words "Limited Partnership" or the letters "L.P."
The General Partners shall give prompt notice of any such change to each
Partner.
SECTION 2.4 TERM. The term of the Partnership shall commence on the date
of this Agreement and shall continue until
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December 31, 2045, unless sooner dissolved, wound up and terminated in
accordance with Article VII of this Agreement.
SECTION 2.5 PURPOSE; POWERS. (a) The purpose of the Partnership shall be
(i) to implement the right of first opportunity with the Blackstone Group and
the Interstate Group, including review and approval or disapproval by the
General Partners of due diligence investigation of proposed Target Investments,
and, upon final approval by the General Partners, causing the acquisition by
the Partnership of such Target Investments either by itself or directly or
indirectly through entities in which the Partnership shall have a direct or
indirect ownership interest; (ii) operating, managing and disposing of any
Target Investments approved for acquisition pursuant to this Agreement; and
(iii) to do all things necessary or incidental to any of the foregoing.
(b) In furtherance of its purposes, the Partnership shall have all powers
necessary, suitable or convenient for the accomplishment of its purposes, alone
or with others, including the following:
(i) to invest and reinvest the cash assets of the Partnership in
money-market or other short-term investments;
(ii) to have and maintain one or more offices within or without the State
of Delaware, and, in connection therewith, to rent or acquire office space,
engage personnel and compensate them and do such other acts and things as may
be advisable or necessary in connection with the maintenance of such office or
offices;
(iii) to open, maintain and close bank accounts and draw checks and other
orders for the payment of moneys;
(iv) to engage employees (with such titles and delegated responsibilities
as may be determined), accountants, consultants, auditors, custodians,
investment advisers, attorneys and any and all other agents and assistants,
both professional and nonprofessional, and to compensate them as may be
necessary or advisable;
(v) to form or cause to be formed and to own the stock of one or more
corporations, whether foreign or domestic, and to form or cause to be formed
and to participate in partnerships, joint ventures and limited liability
companies, whether foreign or domestic;
(vi) to enter into, make and perform all contracts, agreements and other
undertakings as may be necessary or advisable or incident to carrying out its
purposes;
(vii) to sue, prosecute, settle or compromise all claims against third
parties, to compromise, settle or accept
<PAGE> 19
15
judgment of claims against the Partnership, and to execute all documents and
make all representations, admissions and waivers in connection therewith;
(viii) to distribute, subject to the terms of this Agreement, at any time
and from time to time to Partners cash or investments or other property of the
Partnership, or any combination thereof;
(ix) to borrow money, whether secured or unsecured, and to make, issue,
accept, endorse and execute promissory notes, drafts, bills of exchange and
other instruments and evidences of indebtedness, all without limit as to
amount, and to secure the payment thereof by mortgage, pledge, or assignment
of, or security interest in, the assets then owned or thereafter acquired by
the Partnership;
(x) to buy, sell, operate and otherwise deal with Target Investments;
(xi) to hold, receive, mortgage, pledge, lease, transfer, exchange or
otherwise dispose of, grant options with respect to, and otherwise deal in and
exercise all rights, powers, privileges and other incidents of ownership or
possession with respect to, all property held or owned by the Partnership; and
(xii) to take such other actions necessary or incidental thereto as may be
permitted under applicable law.
SECTION 2.6 PLACE OF BUSINESS. The Partnership shall maintain a
registered office at The Corporation Trust Company, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801, or such other office within the
State of Delaware as is chosen by the General Partners. The Partnership shall
maintain an office and principal place of business at 345 Park Avenue, New
York, New York 10154, or at such other place as may from time to time be
determined as its principal place of business by the General Partners; the
General Partners shall give notice to the other Partners of any change in the
Partnership's principal place of business. The name and address of the
Partnership's registered agent as of the date of this Agreement is The
Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
SECTION 2.7 ALTERNATIVE INVESTMENT STRUCTURE. If the Blackstone General
Partner determines that for legal, tax, regulatory or other reasons it is in
the best interests of the Partners that a Target Investment be made through an
alternative investment structure, and all of the other General Partners
unanimously Consent to such alternative structure (which Consent shall not be
unreasonably withheld), the Blackstone General Partner shall structure the
making of all or any portion of such Target Investment outside of the
Partnership by requiring any
<PAGE> 20
16
Partner or Partners to make such Target Investment either directly or
indirectly through a partnership or other vehicle (such as the purchase of
stock, the purchase of partnership interests, or the formation of another
partnership or as tenants in common) that will invest on a parallel basis with
or in lieu of the Partnership, as the case may be. The Partners shall be
required to make capital contributions directly to each such vehicle to the
same extent, for the same purposes and on the same terms and conditions as
Partners are required to make Capital Contributions to the Partnership, and
such capital contributions shall reduce the unused Committed Capital of the
Partners to the same extent as if Capital Contributions were made to the
Partnership with respect thereto. Each Partner shall have the same economic
interest in all material respects in Target Investments made pursuant to this
Section 2.7 as such Partner would have if such Target Investment had been made
solely by the Partnership, and the other terms of such vehicle shall be
substantially identical in all material respects to those of the Partnership,
to the maximum extent applicable; provided, that such vehicle (or the entity in
which such vehicle invests) shall provide for the limited liability of the
Limited Partners as a matter of the organizational documents of such vehicle
(or the entity in which such vehicle invests) and as a matter of local law; and
provided, further, that the General Partners or Affiliates thereof will serve
as the general partners or in some other similar fiduciary capacity with
respect to such vehicle.
SECTION 2.8 PARALLEL PARTNERSHIPS. The General Partners have established
one or more additional collective partnerships (the "Parallel Partnerships")
organized pursuant to partnership agreements in substantially the same form as
this Agreement for certain types of investors to invest in Target Investments
together with the Partnership. The Blackstone General Partner, or an Affiliate
thereof, shall be a general partner of any such Parallel Partnerships, and the
Blackstone Limited Partners, or Affiliates thereof, shall be limited partners
of any such Parallel Partnerships. The Interstate General Partner, or an
Affiliate thereof, shall be a general partner of any such Parallel Partnerships
and the Interstate Limited Partner, or an Affiliate thereof, shall be a limited
partner of any such Parallel Partnerships. The economic terms of each Parallel
Partnership shall be the same as those of the Partnership.
ARTICLE III
MANAGEMENT AND OPERATION OF THE
PARTNERSHIP; IDENTIFICATION AND APPROVAL OF
INVESTMENTS; PARTNER SERVICES
SECTION 3.1 MANAGEMENT. (a) The General Partners shall have the full and
complete responsibility for managing the business of the Partnership and shall
make all of the decisions
<PAGE> 21
17
affecting the business of the Partnership. Except as otherwise set forth in
this Agreement, the Limited Partners shall have no right of Consent with
respect to such decisions. The General Partners shall have all of the rights,
powers and authorities permitted to be exercised by a general partner of a
limited partnership formed under the Partnership Act. The General Partners
shall exercise all powers necessary and convenient for the purposes of the
Partnership, including those enumerated in Section 2.5, on behalf and in the
name of the Partnership.
(b) Except as otherwise provided herein, the Limited Partners as such shall
not have the right to, and shall not, take part in the management or affairs of
the Partnership, nor in any event shall any Limited Partner have the power to
act for or bind the Partnership unless delegated such power by the General
Partners. The exercise by any Limited Partner of any right or power conferred
herein shall not be construed to constitute participation by such Limited
Partner in the control of the business of the Partnership so as to make such
Limited Partner liable as a general partner for the debts and obligations of
the Partnership for purposes of the Partnership Act.
(c) Any Consent required by this Agreement may be given as follows:
(1) by a written Consent given by the approving Partner at or prior to the
doing of the act or thing of which the Consent is solicited, provided that
such Consent shall not have been nullified by notice to all of the General
Partners by the approving Partner at or prior to the time, or by the negative
vote by such approving Partner at any meeting held to consider the doing, of
such act or thing; or
(2) by the Consent given by the approving Partner to the doing of the act
or thing for which the Consent is solicited at any meeting called or held to
consider the doing of such act or thing.
(d) Unless the General Partners agree on a different procedure, any matter
requiring the Consent of all or any of the Partners pursuant to this Agreement
may be considered at a meeting of the Partners held not less than three (3) nor
more than fifteen (15) Business Days after notice thereof shall have been given
by a General Partner to all Partners. Such notice (i) may be given by any
General Partner, in its discretion, at any time. Any such notice shall state
briefly the purpose, time and place of the meeting. All such meetings shall be
held within or outside the State of Delaware at such reasonable place as the
General Partners shall designate and during normal business hours. Unless
otherwise provided by the General Partners, meetings may be held
telephonically.
<PAGE> 22
18
(e) The written statements and representations of an Authorized
Representative for a General Partner shall be the only authorized statements
and representations of such General Partner with respect to the matter covered
by this Agreement. The initial Authorized Representatives are (i) Kenneth C.
Whitney, Thomas Saylak and John Schreiber for the Blackstone General Partner
and (ii) W. Thomas Parrington, J. William Richardson and Marvin I. Droz for the
Interstate General Partner. The written statement or representation of any one
Authorized Representative of the Blackstone General Partner shall be sufficient
to bind the Blackstone General Partner with respect to all matters pertaining
to the Partnership and addressed in such statement or representation. The
written statement or representation of any two Authorized Representatives of
the Interstate General Partner shall be sufficient to bind the Interstate
General Partner with respect to all matters pertaining to the Partnership and
addressed in such statement or representation.
(f) The failure to vote by any Partner on any matter requiring such
Partner's Consent within five business days after such vote is requested shall
be deemed to be a negative vote with respect to such matter.
(g) A Partner shall not be obligated to abstain from voting on any matter
(or vote in any particular manner) because of any interest (or conflict of
interest) of such Partner (or any Affiliate thereof) in such matter.
(h) Each Partner agrees that, except as otherwise expressly provided
herein and to the fullest extent permitted by applicable law, the approval of
any proposed action of or relating to the Partnership by all of the General
Partners as provided herein (or if this Agreement grants one General Partner
sole approval rights over a certain action, the approval of such action by such
General Partner) shall bind each Partner and shall have the same legal effect
as the approval of each Partner of such action.
SECTION 3.2 JOINT CONTROL BY THE GENERAL PARTNERS. Except as specifically
provided in this Agreement, the business, affairs and operations of the
Partnership shall be managed, and all Partnership decisions shall be jointly
made, by both General Partners, and no single General Partner, acting alone in
its capacity as such, shall have the authority to bind or make any decision for
the Partnership or to conduct or manage the Partnership's business or affairs.
Without limiting the foregoing in any way, the following are examples of
decisions of the Partnership which shall be made jointly by the General
Partners:
<PAGE> 23
19
(a) the reorganization of the Partnership as a corporation or other
entity, or the creation of a holding corporation, partnership or limited
liability company to own all or any substantial portion of the assets of or
all the equity interests in the Partnership, provided that the surviving
entity remains a pass-through entity for taxation purposes;
(b) the termination or settlement of any litigation by the Partnership;
(c) the making of any change in the Fiscal Period, any determination of
reserves under this Agreement, any distribution of cash or investments or
other property of the Partnership to the Partners, or any withdrawals of
capital from the Partnership;
(d) the making of any change in the name of the Partnership or the use of
another name by the Partnership to carry on any business of the Partnership;
(e) the making of the determination and approval of such tax matters as
are specified in Section 6.2;
(f) the making of the allocation of amounts in respect of an interest in
the Partnership Transferred pursuant to Section 8.2(e);
(g) the authorization of a Partner to disclose information agreed to be
held confidential under Sections 9.5;
(h) the admission of an additional Partner to the Partnership pursuant to
the terms of this Agreement if such additional Partner is not an Affiliate of
either any member of the Blackstone Group or any member of the Interstate
Group;
(i) (A) the sale, exchange or other transfer of any Partnership Asset, (B)
the merger or consolidation of the Partnership with or into any other business
entity provided that the surviving entity remains a pass-through entity for
taxation purposes, and (C) the right to require each of the Partners to
exchange, transfer or otherwise convey some or all of its partnership interest
in the Partnership as part of an exit or disposition strategy for the
Partnership;
(j) the making of any expenditure incurred in connection with the
administration of the Partnership;
(k) the entering into of any lease by the Partnership as lessor;
<PAGE> 24
20
(l) the engagement of any independent accountant, counsel, actuary or
consultant to the Partnership, or any change in or termination of any engaged
independent accountant, counsel, actuary or consultant to the Partnership;
(m) the maintenance of a registered office in Delaware other than that
specified in Section 2.6;
(n) the determination of any titles and responsibilities of employees of
the Partner pursuant to Section 2.5(b)(iv);
(o) the approval of budgets;
(p) the expenditure by the Partnership of any funds in connection with
the disposition of a Target Investment or the expenditure by the Partnership
of any funds required in connection with the operation of any Target
Investments which are not included within the approved budget for such Target
Investment;
(q) any termination, replacement or other change in the franchisor of any
Target Investment in accordance with the terms of the franchise agreement (or
the manager of any Target Investment if such manager is not the Interstate
General Partner or an Affiliate thereof), or the execution, modification or
termination of any agreement which is material to the Partnership (except as
set forth in Section 3.3(a);
(r) the dissolution, termination and winding up of the Partnership as
provided in Section 7.1(a);
(s) any amendment to this Agreement which would have a material adverse
effect on any Partner's economic interest in the Partnership;
(t) extending the term of the Partnership beyond December 31, 2045;
(u) in accordance with Section 3.6 below, the decision for the Partnership
to investigate a Target Investment and the decision for the Partnership to
acquire a Target Investment, or the decision for the Partnership to acquire
any other asset;
(v) the borrowing of money;
(w) the filing of a petition under any bankruptcy or other insolvency law
by the Partnership, or the admission in writing by the Partnership of its
bankruptcy, insolvency or general inability to pay its debts;
<PAGE> 25
21
(x) the commencement of any litigation by the Partnership;
(y) a transaction or other matter involving any actual or potential
conflict of interest affecting any Partner or Affiliate thereof other than the
entering into of any agreements or the payment of any amounts provided for in
this Agreement; and
(z) a change in the business of the Partnership to include any business
other than that specified in Section 2.5 which takes the focus of the
Partnership's business away from the lodging industry.
Notwithstanding the foregoing and without limiting the foregoing in any way,
any General Partner may delegate in writing to (i) the other General Partner,
its right to make any decisions concerning the Partnership or take any actions
on behalf of the Partnership and/or (ii) to any manager of any Target
Investment, the day to day administrative duties in connection with the
operation of such property.
SECTION 3.3 BLACKSTONE PARTNERS RIGHTS. Notwithstanding any other
provision of this Agreement, the Blackstone General Partner may take any of the
following actions with out the Consent of any of the Interstate Partners:
(a) with respect to any Target Investment in which an Affiliate of the
Interstate General Partner is the manager, any termination, replacement or
other change in such manager in accordance with the terms of the management
agreement (provided that the Blackstone General Partner shall consult with
the Interstate General Partner with respect to any replacement manager and
shall act reasonably with respect to its selection of a replacement manager,
but the Interstate General Partner shall not have any consent rights with
respect to such replacement manager), the declaration of a default or event
of default under any management agreement for such manager, and the exercise
of any remedies under such management agreement;
(b) the approval of the admission of any additional partner to the
Partnership if such additional partner is an Affiliate of any member of the
Blackstone Group or any member of the Interstate Group; and
(c) such other actions and decisions which are expressly given solely to
the Blackstone General Partner pursuant to the terms of this Agreement.
SECTION 3.4 CERTAIN DUTIES AND OBLIGATIONS OF THE PARTNERS. (a) Subject
to the terms of this Agreement, the General Partners shall take all action
which may be reasonably necessary or appropriate (i) for the formation and
continuation
<PAGE> 26
22
of the Partnership as a limited partnership under the laws of the State of
Delaware and (ii) for the development, maintenance, preservation and operation
of the business of the Partnership in accordance with the provisions of this
Agreement and applicable laws and regulations.
(b) No Partner shall take any action so as to cause the Partnership to be
classified for Federal income tax purposes as an association taxable as a
corporation and not as a partnership.
(c) The General Partners shall take (and each Partner agrees to cooperate
with the General Partners and approves of the General Partners taking on its
behalf) all action which is necessary to form or qualify the Partnership to
conduct the business in which the Partnership is engaged under the laws of any
jurisdiction in which the Partnership is doing business and to continue in
effect such formation or qualification.
(d) The General Partners shall not take, or cause to be taken, any action
that would result in any Limited Partner having any personal liability for the
obligations of the Partnership. The General Partners shall be under a duty as
described herein to conduct the affairs of the Partnership in the best
interests of the Partnership and of the Partners including the safekeeping and
use of all Partnership funds and assets and the use thereof for the exclusive
benefit of the Partnership. Neither any Partner nor any Affiliate of any
Partner shall enter into any transaction with the Partnership unless the
transaction (i) is expressly permitted hereunder, (ii) is entered into on
arm's-length terms in the ordinary course of Partnership business or (iii) is
approved by all of the General Partners upon disclosure of any direct or
indirect interest such Partner or any Affiliate thereof may have in the
transaction.
(e) No General Partner shall be liable, responsible or accountable in
damages or otherwise to the Partnership or to any Partner for (a) any act
performed within the scope of the authority conferred on such General Partner
by this Agreement except for the gross negligence or willful misconduct of such
General Partner in carrying out its obligations hereunder, (b) such General
Partner's failure or refusal to perform any act, except those expressly
required by or pursuant to the terms of this Agreement, (c) such General
Partner's performance of, or failure to perform, any act on the reasonable
reliance on advice of legal counsel to the Partnership or (d) the negligence,
dishonesty or bad faith of any agent, consultant or broker of the Partnership
selected, engaged or retained and monitored with reasonable care. In any
threatened, pending or completed action, suit or proceeding, each General
Partner shall be fully protected and indemnified and held harmless by the
Partnership against all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, proceedings, costs, expenses and
disbursements of any kind or nature whatsoever (including,
<PAGE> 27
23
without limitation, reasonable attorneys' fees, costs of investigation, fines,
judgments and amounts paid in settlement, actually incurred by such General
Partner in connection with such action, suit or proceeding) by virtue of its
status as a General Partner or with respect to any action or omission taken or
suffered in good faith, other than liabilities and losses resulting from the
gross negligence or willful misconduct of such General Partner; provided,
however, that a General Partner shall not be so indemnified for any acts
determined to be in contravention of this Agreement or in breach of its
fiduciary duties. The indemnification provided by this paragraph shall be
recoverable only out of the assets of the Partnership, and no Partner shall
have any personal liability on account thereof.
SECTION 3.5 RESTRICTIONS ON AUTHORITY OF THE GENERAL PARTNERS. The
General Partners shall not have the authority to:
(a) do any act in contravention of this Agreement (including under Section
3.2 or Section 3.3);
(b) do any act which would make it impossible to carry on the ordinary
business of the Partnership, except in connection with the dissolution,
winding up and termination of the Partnership as provided by Article VII;
(c) possess Partnership property, or assign their respective rights in
specific Partnership property, for other than a Partnership purpose;
(d) admit a person as a Partner except as provided in this Agreement; or
(e) knowingly perform any act that would subject any Limited Partner to
liability as a general partner in any jurisdiction.
SECTION 3.6 RIGHT OF FIRST OPPORTUNITY. (a) Subject to Section 3.7(b)
below, and until expiration or termination of the right of first opportunity in
favor of the Partnership set forth below (which right has been confirmed and
acknowledged in the Confirmation and Acknowledgment of Right of First
Opportunity ("Acknowledgment"), in the form attached hereto as Exhibit C, which
has been executed simultaneously herewith), each member of the Blackstone Group
and the Interstate Group shall offer to the Partnership (along with the
Parallel Partnerships) a right of first opportunity to invest in each Target
Investment which (x) is identified by such member after the date of this
Agreement or (y) which is identified on the list of Projects attached hereto as
Exhibit D (the "Pre-Existing Projects"), in each case, upon and subject to the
terms set forth in the remainder of this Section 3.6.
(b) Except as provided in Section 3.7(b) below, promptly upon its
identification of a Target Investment as a
<PAGE> 28
24
potential investment, each member of the Blackstone Group and the Interstate
Group shall notify each of the General Partners about such Target Investment
(such notification, a "Request for Preliminary Approval") and shall provide
each of the General Partners with such information reasonably necessary to
evaluate such investment.
(c) Within five (5) Business Days after delivery to the General Partners
of the Request for Preliminary Approval and the accompanying information
pursuant to paragraph (b) above with respect to a proposed Target Investment,
and provided that notice shall have first been given from the party requesting
such action that approval is being sought under this Section, the General
Partners shall either approve or disapprove pursuit of such proposed Target
Investment (including the incurring of due diligence costs and expenditures,
the negotiation and documentation of the terms of purchase and financing, and
the posting of deposits). If the General Partners, having first been notified
that approval under this Section is being sought, fail to unanimously approve
the investigation of a proposed Target Investment within such five (5) Business
Day period, the proposed Target Investment shall be deemed disapproved. Any
General Partner shall have the right to reasonably request additional
information regarding the proposed Project within three (3) Business Days after
receipt of the Request for Preliminary Approval and the accompanying
information. If any General Partner requests such additional information, the
five (5) Business Day period referred to above shall commence on the day such
General Partner receives all such additional information. The General Partners
shall each have the right to approve or disapprove investigation of any
proposed Project in their sole and absolute discretion. Once investigation of
a Target Investment is approved, the due diligence costs and expenditures
reasonably incurred by the Partnership and within the scope approved by the
General Partners with respect to such Project shall become the obligation of
the Partnership.
(1) All due diligence costs and expenditures reasonably incurred by the
Partnership pursuant to this Section and within the scope of the approved due
diligence shall be funded if and when required for payment, and shall be
funded solely from, and shall constitute, Capital Contributions to the
Partnership by the Partners. In no event shall due diligence expenses be
funded from operating revenues of the Partnership. The due diligence
expenses incurred by the Partnership shall be allocated for book and tax
accounting purposes between and among each Project in such manner as the
General Partners may reasonably approve. Due diligence expenses from a
Project shall be allocated among the Parallel Partnerships in such a manner
as the Blackstone General Partner shall determine, in its sole discretion.
Each Partner shall contribute its pro rata share of such due diligence
expenses, based upon such Partner's Sharing Percentage.
<PAGE> 29
25
(2) The Partners intend that all due diligence will be conducted through
the Partnership in accordance with any Consent given by the General Partners;
however, a General Partner may elect to perform, at its own cost, its own due
diligence in addition to that being performed by the Partnership.
(d) If the General Partners approve investigation of a Project, the
Partnership shall promptly undertake due diligence investigation and at
appropriate times during and, in any event, prior to the conclusion of that due
diligence investigation, the Partnership shall make available to each Partner
copies of the material due diligence information obtained by the Partnership
with respect to the applicable Target Investment.
(e) If any General Partner has elected to participate in the due diligence
investigation of a proposed Project pursuant to Section 3.6(c)(2) above, then
all due diligence activities shall be coordinated with such General Partner as
reasonably necessary to facilitate such participation.
(f) At such time, if any, as any member of the Blackstone Group or the
Interstate Group determines that a request for final authority to proceed with
acquisition of a Project is required because such party reasonably believes
that a binding commitment (i.e. a letter of intent which is, or could become
binding or a contract for purchase and sale) to proceed with the acquisition
must be executed by the Partnership or the opportunity to acquire such interest
would be lost, such party shall request the General Partners to give their
final approval to proceed with such acquisition (such notification, a "Request
for Final Approval"). Upon the request of any General Partner, a Request for
Final Approval shall be made in writing. In connection with any Request for
Final Approval, such party shall, to the extent applicable, (i) submit to the
General Partners the form of any purchase agreement and/or other relevant
documents pursuant to which the Partnership may acquire an interest in a
Project, and (ii) notify the General Partners of whether an Affiliate of the
Interstate General Partner is being proposed as the property manager for the
Project. Within five (5) Business Days after delivery of the Request for Final
Approval, the General Partners shall meet and either approve or disapprove, in
writing, the proposed Project, including a timetable for closing of the
acquisition, the posting of any non-refundable deposits, if applicable, and the
terms of engagement of any Affiliate of the Interstate General Partner for
property or asset management of the Project, as applicable. Each General
Partner shall have the right to grant final approval or disapproval of the
Project in its sole and absolute discretion. However, unless all of the
General Partners agree to extend the five (5) Business Day decision period set
forth above, the General Partners shall either approve or disapprove the
Project within that period without exception, and any failure to act within
that period, as it may be extended by the General Partners in their sole
<PAGE> 30
26
discretion, shall constitute a disapproval of the Project. The Blackstone
Partners specifically acknowledge that, unless transfer of management is not
feasible or practical, the Interstate General Partner contemplates the
engagement by the Partnership of an Affiliate of the Interstate General Partner
on an arm's length basis in connection with the property management of one or
more of the Projects and contemplates that one or more of the Project proposals
may propose such engagement. If transfer of management is not feasible or
practical, then, unless such engagement is not feasible or practical, the
Partnership shall engage an Affiliate of the Interstate General Partner as an
asset manager for such Project pursuant to an Asset Management Agreement in
form and substance satisfactory to the parties thereto (the "Asset Management
Agreement"), and the fees payable by the Partnership under such Asset
Management Agreement shall be at Competitive Rates. Unless the General
Partners unanimously agree otherwise, no nonrefundable deposit shall be posted
with respect to a Project until that Project has received final Project
approval pursuant to this subsection 3.6(f) and the General Partners have had
the opportunity to review the purchase agreement and/or the other documents
pursuant to which the Partnership may acquire an interest in such Project. The
final Project approval shall specify the amount of each remaining funding
obligation with respect to the applicable Project and the date(s) by which each
such amount is to be funded, it being the intent of the Partners that they not
fund to the Partnership those amounts due to the seller of (or if applicable,
escrow agent for the transfer of) the Project more than three (3) Business Days
prior to the date such amounts are due to the Seller or escrow agent, as
applicable. The funding obligations with respect to a Project shall be
allocated among the Parallel Partnerships in such a manner as the Blackstone
General Partner shall determine, in its sole discretion. By each funding date,
the Partners shall fund to the Partnership their pro rata portion of the
funding obligation then due, based upon each Partner's Sharing Percentage,
including any purchase deposits contemplated in connection with the Consent to
such Project. In no event shall final Project approval funding requirements be
funded from operating revenues of the Partnership. All such contributions to
the Partnership shall constitute Capital Contributions. Each of the General
Partners will consult with the other General Partners in connection with the
negotiation of any documents necessary for the acquisition of a Target
Investment.
(g) If the General Partners approve a proposed Project pursuant to
subsection 3.6(f) above, unless the Project shall be purchased through another
form, the Partnership shall promptly finalize the form of the Project
Partnership Agreement or Project Limited Liability Company Agreement, as
applicable, for the ownership of the proposed Project (with such Project
specific modifications as are necessary to address any Project specific
characteristics not addressed by the form of Project Partnership Agreement or
Project Limited Liability Company Agreement, as applicable), and promptly
finalize the form of a Management
<PAGE> 31
27
Agreement or an Asset Management Agreement, as applicable, to be entered into
(with such Project specific modifications as are necessary to address any
Project specific characteristics not addressed by the form of Management
Agreement or Asset Management Agreement, as applicable, and which the Manager
and the Blackstone General Partner may approve), which Management Agreement (if
applicable) shall provide for aggregate fees not greater than 2.8% of Gross
Operating Revenues (as defined in the Management Agreement). In no event shall
any party hereunder have any liability to the other party for failure to
finalize or enter into any Management Agreement or Asset Management Agreement,
as applicable, so long as the parties have proceeded in good faith to attempt
to consummate such documentation following approval of the General Partners of
any proposed Project pursuant to Section 3.6.
(h) The General Partners agree that in the event that (A) material facts
or circumstances or a material change in any facts or circumstances regarding a
Target Investment which was approved for acquisition by the General Partners
become known to any General Partner which were not previously known by such
General Partner and (B) with the knowledge of such new or changed facts or
circumstances, such General Partner no longer desires to proceed with such
acquisition and (C) at the time of the occurrence of the event or events
referred to in clause (A) above, (x) the Partnership is not irrevocably
committed to consummate the acquisition of such Target Investment pursuant to a
binding legal agreement and (y) the Partnership's obligations under such
agreement would not be breached by the failure to consummate such acquisition,
then such General Partner may, by written notice to the other General Partners,
revoke its Consent to consummate such acquisition at which time such Target
Investment shall no longer be deemed approved.
(i) Notwithstanding anything in this Section to the contrary, if, with
respect to a Project, a member of the Blackstone Group or the Interstate Group
reasonably believes it must take some action to retain the opportunity to
purchase such Project before it has sufficient time to follow the procedures
for approval set forth in this Section, such party may take such action
(including the making of a deposit or the entering into a binding agreement if
assignable to the Partnership) in its own name only and at its own risk without
violating the terms of this Agreement, provided such party promptly submits
such Project to the Partnership for its consideration. If the General Partners
subsequently approve such Project, such party shall assign all of its rights in
the Project to the Partnership and the Parallel Partnerships, as appropriate.
If the General Partners subsequently disapprove such Project, the Partnership
shall not be bound in any way to such Project, and the party who proposed the
Project may proceed with such Project only if the conditions of Section 3.7(b)
and Section 3.7(c) have been met.
<PAGE> 32
28
(j) Any General Partner may request that any of the time periods set forth
herein be reduced or extended, if reasonably necessary.
(k) Notwithstanding anything in this Section to the contrary, none of the
Interstate Partners shall be deemed in default hereunder for failure to notify
the Blackstone Group as required herein if notice has been given to the
Blackstone General Partner of any of the Parallel Partnerships.
(l) Notwithstanding anything contained in this Agreement to the contrary,
unless all of the General Partners unanimously agree otherwise, each Project in
which the Partnership invests shall secure mortgage debt financing in principal
amounts and with terms that are consistent with the then currently prevailing
market conditions, but in any event in principal amounts between 60% and 75% of
the total acquisition cost of such Project.
SECTION 3.7 RIGHT OF FIRST OPPORTUNITY; EXCLUSIVE RIGHTS; INVESTMENT
PARAMETERS. (a) Subject to the terms of this Agreement as set forth above,
the Blackstone Partners and the Interstate Partners each covenant to provide to
the Partnership, and each other, during the term of this Agreement, the right
of first opportunity as provided in Section 3.6 above to invest in (x) those
Target Investments which are hereafter identified by them and (y) the
Pre-Existing Projects. By their previous execution of the Acknowledgement,
Interstate Hotels Corporation (in the case of (A) below) and Blackstone Group
Holdings L.P. (in the case of (B) below) have agreed and hereby ratify and
confirm that they agree, and agree to cause (A) the Interstate Group and (B)
the Blackstone Group, respectively, to submit any Target Investments in which
they or the Interstate Group and the Blackstone Group would otherwise wish to
invest independent of the Partnership to the right of first opportunity set
forth herein, and, in connection therewith, they shall, and shall cause the
Interstate Group and the Blackstone Group to, subject to Section 3.7(b) below,
refer all such investment opportunities to the Interstate General Partner or
the Blackstone General Partner, as applicable, for submission to the
Partnership pursuant to the terms set forth above.
(b) Notwithstanding anything herein to the contrary, the Interstate Group
and the Blackstone Group expressly retain the right to undertake acquisition or
development of any Target Investment or any other investment whatsoever,
without the consent of the others, and free of any right of first opportunity
hereunder, at such time, in such form and upon such terms as they, acting in
their sole discretion, may determine appropriate, where any one of the
following conditions is satisfied:
(i) such Project is a Project that was disapproved or deemed disapproved
solely by action or inaction of the General Partners after proper notice;
provided, that if a
<PAGE> 33
29
Project is disapproved or deemed disapproved by a General Partner who is a
member of the same group (i.e., the Blackstone Group or the Interstate Group)
as the party who submitted the Request for Preliminary Approval or Request for
Final Approval, as applicable, then the condition contained in this clause (i)
shall not be deemed satisfied for any member of such group;
(ii) such Project fails to meet the definition of a Target Investment;
(iii) except as expressly provided below, such Project is listed on Exhibit
E hereto, subject to the qualifications and agreements described in such
Exhibit;
(iv) such Project is identified or undertaken after the termination of the
right of first opportunity pursuant to the terms of this Agreement;
(v) such party is acquiring, directly or indirectly, the stock or assets
of an entity which owns one or more Target Investments but whose assets and/or
operations are not primarily composed of Target Investments;
(vi) such party is acquiring, directly or indirectly, the stock or assets
of an entity which primarily owns and/or operates hotel or motel franchise
systems or hotel or motel reservations systems;
(vii) the Consideration being paid for such Target Investment in the
aggregate is less than $10,000,000 or the equity portion of the Consideration
being paid for such Target Investment in the aggregate is less than
$5,000,000; or
(viii) with respect to a Target Investment, the Interstate Group or the
Blackstone Group, as applicable, certifies, at any time (whether or not such
Project has been submitted to the Partners and the Partnership under Section
3.6 above), that in its judgment, involvement with the Blackstone Group or the
Interstate Group, as applicable, in such Target Investment would not be
appropriate, feasible or practical.
(c) Notwithstanding anything in Section 3.7(b) above to the contrary, the
right of first opportunity set forth herein will apply to any acquisition
undertaken by any member of the Blackstone Group or the Interstate Group during
the term of this right of first opportunity with respect to the Pre-Existing
Projects. In the event that a party is undertaking the acquisition of a Target
Investment free of the right of first opportunity pursuant to Section
3.7(b)(i), such party shall acquire such Target Investment upon terms that are
no more
<PAGE> 34
30
favorable than the terms presented to the General Partners with respect to such
Target Investment.
(d) The Partners acknowledge that, without limiting the definition of
Target Investment, it is their intent that the Target Investments ultimately
acquired by the Partnership will be Target Investments which (i) are mid to
high quality (3-4 stars), (ii) are located in growing markets, (iii) are well
positioned vis-a-vis the competition and, (iv) provide significant opportunity
for enhanced performance through intensive management repositioning and/or
redevelopment. Additionally, there is a preference for multi-asset
acquisitions over single properties in order to provide for the most efficient
and cost effective underwriting and investment process. Further, such
acquisitions should provide minimum going-in free and clear returns of 11%
(after management and FF&E reserve), unless immediate opportunity for enhanced
performance can be demonstrated. Nevertheless, certain Target Investments may
be approved hereunder even if they do not fall within the above- referenced
investment parameters. Accordingly, except as otherwise provided herein
(including without limitation Section 3.7(b) above), all Target Investments,
including, those that do not fall within the above-referenced investment
parameters, shall be subject to the right of first opportunity set forth in
Section 3.6 above.
SECTION 3.8 TERMINATION OF RIGHT OF FIRST OPPORTUNITY.
(a) The Blackstone General Partner shall have the right to terminate the
right of first opportunity set forth in Section 3.6 if any member of the
Interstate Group defaults in the performance of any of its obligations
hereunder or under the Acknowledgement after the Blackstone General Partner has
given such Partner or any other such party notice of such default and such
Partner or other party has failed to cure such default within 30 days after
receipt of such notice.
(b) The Interstate General Partner shall have the right to terminate the
right of first opportunity set forth in Section 3.6 if any member of the
Blackstone Group defaults in the performance of any of its obligations
hereunder or under the Acknowledgement after the Interstate General Partner has
given such Partner or any other such party notice of such default and such
Partner or other party has failed to cure such default within 30 days after
receipt of such notice.
(c) The right of first opportunity set forth in Section 3.6 shall
automatically terminate upon the earlier to occur of (i) December 15, 1997 or
(ii) the date upon which the members of the Blackstone Group in the Partnership
and in the Parallel Partnerships shall have contributed an aggregate of
$29,400,000 to the Partnership and the Parallel Partnerships and the members of
the Interstate Group in the Partnership and the
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Parallel Partnerships shall have contributed an aggregate of $30,600,000 to the
Partnership and the Parallel Partnerships.
(d) At any time after $54,000,000 has been invested (either through
acquisitions that are closed or through binding commitments to close
acquisitions) in the aggregate by the Partnership and the Parallel
Partnerships, then any Partner may elect to terminate the right of first
opportunity set forth in Section 3.6 upon three (3) Business Days notice to all
the other Partners.
(e) The General Partners may, in their discretion, extend the right of
first opportunity set forth in Section 3.6 for such period of time as they may
mutually agree.
SECTION 3.9 FINANCING. The Blackstone General Partner, acting directly or
through one or more of its Affiliates, shall endeavor to secure an acquisition
financing facility for the Partnership and the Parallel Partnerships in an
initial amount between $60,000,000 and $80,000,000, such facility to be subject
to borrowings by the Partnership and the Parallel Partnerships to acquire
Target Investments in the event that sufficient seller financing is not
available in connection with the acquisition of any such Target Investment and
for other related purposes. If needed, the Blackstone General Partner may
secure additional debt facilities for the Partnership and the Parallel
Partnerships up to an aggregate amount (including the initial $60,000,000 to
$80,000,000) between $140,000,000 and $180,000,000. The General Partners must
unanimously approve the terms and conditions of such financing. In the event
such financing is obtained, in addition to any other fees, expenses or other
compensation payable to the Blackstone General Partner and/or its Affiliates
hereunder or any fees payable to third parties in connection with such
financing, the Partnership and the Parallel Partnerships shall pay to the
Blackstone General Partner and/or its Affiliates, as the case may be, a fee for
placing such debt facilities in an amount equal to one percent (1%) of the
maximum principal amount of each such debt facility. The portion of such fee
allocated to the Partnership shall be determined by the Blackstone General
Partner, in its sole discretion. At the time such fee is payable, each Partner
shall fund to the Partnership, as a Capital Contribution, its pro rata portion
of such fee, based upon such Partner's Sharing Percentage, to the extent not
financed as part of the overall transaction. No fee shall be payable under
this Section in connection with the refinancing of any such debt facilities.
SECTION 3.10 FINANCIAL ADVISORY SERVICES. Each time that the Partnership
acquires a Target Investment, the Partnership and any Parallel Partnerships
invested in such Target Investment shall pay to whichever of the Blackstone
General Partner (and/or its Affiliates) or the Interstate General Partners
(and/or its Affiliates) proposed such Target Investment to the Partnership, an
aggregate advisory fee equal to one
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percent (1%) of the amount of the Consideration for the acquisition of such
Target Investment; provided that the Blackstone General Partner or its
Affiliates shall not be entitled to such a fee after the occurrence and during
the continuance of a default hereunder by any of the Blackstone Partners (after
any notice and opportunity to cure); and provided further that the Interstate
General Partner or its Affiliates shall not be entitled to such a fee after the
occurrence and during the continuance of a default hereunder by any of the
Interstate Partners (after any notice and opportunity to cure). The portion of
such fee allocated to the Partnership shall be determined by the Blackstone
General Partner. At the time such fee is payable, each Partner shall fund to
the Partnership, as a Capital Contribution, its pro rata portion of such fee,
based upon such Partner's Sharing Percentage, to the extent not financed as
part of the overall transaction.
SECTION 3.11 OTHER PARTNER SERVICES.
(a) Until such time as the General Partners hire, as an employee or
employees of the Partnership, a portfolio manager, a controller and/or an
administrative staff to conduct and oversee the overall administration of the
Partnership, the Interstate General Partner shall conduct all the
administrative affairs of the Partnership at the then Competitive Rate;
provided, however, that the General Partners agree to hire an employee or
employees of the Partnership to perform such tasks promptly after the needs of
the Partnership so require. Any such employee may be employed jointly by the
Parallel Partnerships. The Interstate General Partner shall also, at no cost
to the Partnership (except where otherwise provided in this Agreement),
conduct, oversee and/or manage all (i) pre-acquisition due diligence, (ii)
property-level management, (iii) performance tracking, (iv) the making of
capital improvements to any Project, (v) overall portfolio management of the
Partnership Assets and (vi) negotiation of franchise fee arrangements. The
Interstate General Partner shall also be responsible for preparing
administrative, operating and capital budgets for the Partnership. The
Interstate General Partner shall submit to the General Partners all relevant
information regarding all proposed budgets, proposed franchise fee arrangements
and related financial matters, and the General Partners shall have the right to
Consent to all such materials before they are implemented by the Partnership.
(b) The Partners acknowledge that Affiliates of the Interstate General
Partner have the capability of providing to the Partnership various insurance
and purchasing services. At the direction of the Blackstone General Partner
acting in its sole discretion (including, as to insurance, approval by the
Blackstone General Partner of the financial soundness of any proposed insurance
company and its reinsurers), the Partnership
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may engage such Affiliates of the Interstate General Partner to perform such
services (in which case such services shall be performed at Competitive Rates)
or the Partnership may engage independent third parties to perform such
services, provided, that if the Partnership has received an offer from any such
independent third party to perform such services, Affiliates of the Interstate
General Partner shall have the right to match such offer and, if such offer is
matched, the Partnership will engage such Affiliates on the terms of such
offer.
(c) In performance of the services pursuant to this Section 3.11 and
otherwise, the Partners agree that they shall cooperate and consult with each
other in an effort to minimize duplication of efforts and costs.
SECTION 3.12 MARKETING RIGHTS. At any time after December 25, 1997 the
Blackstone Partners, acting jointly, or the Interstate Partners, acting
jointly, may propose the sale of a Project or Projects (but not a portion of
any Project) in accordance with the following terms:
(a) All of the Blackstone Partners may jointly serve upon all of the
Interstate Partners, or all of the Interstate Partners may jointly serve upon
the all of the Blackstone Partners, a notice (an "Offering Notice") as
described below. The partners serving an Offering Notice shall be referred
to in this Section as the "Offering Group". The partners receiving an
Offering Notice shall be referred to in this Section as the "Offeree Group".
Each Offering Notice shall specify one or more Projects (the "Offered
Projects") that the Offeror Group proposes to be sold (either by causing the
Project Partnerships which own such Offered Projects to sell such Offered
Projects or by selling all of the partnership interests in such Project
Partnerships) and designate a price for the sale of each Offered Project (the
"Offer Price"). The Offeree Group with respect to a Project may not deliver
an Offering Notice with respect to such Project until the expiration of the
Sale Option Period (as defined below) for such Project with respect to the
Offering Notice of the Offeror Group with respect to such Project. The
Offering Notice may not propose to sell a portion of any Project. An
Offering Notice delivered under this Agreement must be simultaneously
delivered under the partnership agreement of each of the Parallel
Partnerships, and for the purposes of this Section 3.12, the Offeror Group
shall consist of all of the members of the Offeror Groups in each of the
Parallel Partnerships, the Offeree Group shall consist of all of the members
of the Offeree Groups in each of the Parallel Partnerships, the Offered
Projects shall consist of the interest of all of the Parallel Partnerships in
such Offered Projects, and the Offeree Deposit (as defined below) shall be
delivered in the aggregate by all of the Parallel Partnerships,
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(b) Within 30 days after the receipt by the Offeree Group of an Offering
Notice (an "Offeree Option Period"), the Offeree Group may in a writing to
the Offeror Group (an "Offeree Reply Notice") (i) elect to purchase all of
the Offered Projects listed in such Offering Notice (an "Offeror Group
Interest") at a price equal to the aggregate Offer Price for the Offered
Projects, (ii) offer to purchase all of the Offered Projects listed in such
Offering Notice for a price (the "Counteroffer Price") listed by the Offeree
Group in the Offeree Reply Notice (the "Counteroffer"), or (iii) decline to
purchase such Offered Projects. With respect to each Offering Notice, if the
Offeree Group fails to deliver an Offeree Reply Notice to the Offeror Group
prior to the expiration of the Offeree Option Period, the Offeree Group shall
for all purposes be conclusively deemed to have declined to purchase the
Offered Projects listed in such Offering Notice. If the Offeree Group elects
to purchase all of the Offered Projects, the Offeree Group shall deliver to a
mutually acceptable escrow agent, a nonrefundable deposit in an amount equal
to 5% of the aggregate Offer Price for the Offered Projects (the "Offeree
Deposit"); in such case, the Offeree Reply Notice shall not be deemed
delivered until such time as the escrow agent has received the Offeree
Deposit. If the Offeree Group makes a Counteroffer, the Offeror Group may
accept such Counteroffer or decline such Counteroffer. If the Offeror Group
accepts such Counteroffer, the Offeree Group shall deliver to a mutually
acceptable escrow agent, the Offeree Deposit equal to 5% of the Counteroffer
Price. The Offeror Group and the Offeree Group shall endeavor to structure
any sale of the Offered Projects to the Offeree Group in a tax efficient
manner.
(c) If, with respect to an Offering Notice, the Offeree Group elects to
purchase the Offered Projects or the Offeror Group accepts a Counteroffer of
the Offeree Group, the closing of the purchase of such Offered Projects (the
"Closing") will be held on a date selected by the Offeree Group upon five
Business Days' notice to the Offeror Group but no later than 90 days after
the Offeror Group's receipt of the Offeree Reply Notice (the "Outside
Purchase Date"). Each Closing shall be held in New York City at a location
designated by the General Partner in the Offeror Group. At the Closing, the
Partnership (or the Project Partnership, as applicable) shall execute such
transfer documents as the Offeree Group shall reasonably require to transfer
the Offered Projects to the Offeree Group (which shall include a special
warranty deed if reasonably required by the title company for the Offeree
Group), as is, where is; the Offeree Group shall pay to the Partnership (or
Project Partnership, as applicable), in immediately available funds, the
aggregate Offer Price for all of the Offered Projects listed in such Offering
Notice; the Project Partnership and the Partnership shall each immediately
distribute such Offer
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Price to its Partners, pro rata in accordance with this Agreement, and the
Offeree Deposit shall be returned to the Offeree Group. To the extent the
execution by a member or Affiliate of a member of the Offeree Group is
required on behalf of the Partnership or Project Partnership, each member or
Affiliate of a member of the Offeree Group shall promptly execute and deliver
any such document or instrument, and each Partner of the Offeree Group hereby
constitutes and appoints each Partner in the Offeror Group its attorney in
fact to execute, acknowledge and deliver any such documents or instruments in
its stead. Transfer taxes and closing costs with respect to an Offered
Project shall be paid by whichever of the seller (the Partnership or Project
Partnership) or the purchaser (the Offeree Group) customarily pays such costs
in the state in which such Offered Project is located.
(d) An Offeree Reply Notice in which the Offeree Group elects to purchase
the Offered Projects, or in which the Offeree Group makes a Counteroffer
which is accepted by the Offeror Group, shall create an irrevocable binding
obligation of the Offeree Group and the Offeror Group. If the Offeree Group
elects in an Offeree Reply Notice to purchase the Offered Projects or makes a
Counteroffer which is accepted by the Offeror Group, and the Offeree Group
fails to purchase such Offered Projects by the applicable Offeree Outside
Purchase Date, (i) the Offeree Group shall immediately forfeit all of its
rights under this Section 3.12 with respect to any Projects, including
without limitation the right to send out Offering Notices with respect to any
Projects, (ii) the Offeror Group shall be entitled to retain the Offeree
Deposit as liquidated damages, and (iii) the Offeror Group shall be entitled
to exercise any and all other remedies available at law and equity, including
specific performance since the parties hereto recognize that damages alone
would be inadequate.
(e) With respect to an Offering Notice, if the Offeree Group declines (or is
deemed to have declined) to purchase the Offered Projects listed therein, or
if the Offeror Group rejects a Counteroffer made by the Offeree Group, the
Offeror Group shall have the right, without the consent of any Partner of the
Offeree Group, within 90 days after the earlier of (i) the Offeror Group's
receipt of an Offeree Reply Notice in which the Offeree Group declines to
purchase the Offered Projects, and (ii) the expiration of the Offeree Option
Period (such 90 day period, the "Sale Option Period"), to cause the sale for
all cash of all of the Offered Projects listed in such Offering Notice
(including the sale to any member of the Offeror Group). Each Partner of the
Offeree Group shall promptly execute and deliver any document or instrument
the Offeror Group reasonably requires in order to consummate the sale of such
Offered Projects during the Sale Option Period, and each Partner of the
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Offeree Group hereby constitutes and appoints each Partner in the Offeror
Group its attorney in fact to execute, acknowledge and deliver any such
documents or instruments in its stead. Notwithstanding the foregoing, the
Offeror Group shall not be entitled to cause the sale of an Offered Project
during the Sale Option Period for a sales price less than 95% of the Offer
Price for such Offered Project listed in such Offering Notice (or the
Counteroffer Price in the case of a rejected Counteroffer, or 100% of the
Offer Price for such Offered Project if the purchaser is any member of the
Offeror Group or any affiliate of any member of the Offeror Group). If an
Offered Project is not sold prior to the expiration of the Sale Option
Period, the Offeror Group may not cause the sale of such Offered Project
without again complying with all of the provisions of this Section (unless
all of the other Partners consent). No Partner may exercise its rights under
this Section with respect to any particular Project more than once in any
twelve month period (but such Partner may exercise its rights under this
Section with respect to other Projects). The Offeror Group and the Offeree
Group shall endeavor to structure any sale of the Offered Projects to the
Offeror Group (or any member thereof) in a tax efficient manner.
ARTICLE IV
OTHER ACTIVITIES PERMITTED
Except as expressly provided hereunder, this Agreement shall not be
construed in any manner to preclude any Partner or any of its Affiliates from
engaging in any activity whatsoever permitted by applicable law (whether or not
such activity might compete, or constitute a conflict of interest, with the
Partnership), including, without limitation, the provision of financial or
investment advisory services to any person, managing investments or receiving
compensation or profit from any of the foregoing.
ARTICLE V
CAPITAL CONTRIBUTIONS;
DISTRIBUTIONS
SECTION 5.1 CAPITAL CONTRIBUTIONS. (a) No Partner shall be required to
make a Capital Contribution except as provided in this Section. Each Partner
agrees to make Capital Contributions (i) as required by this Agreement,
including, without limitation, Sections 3.6, 3.9, 3.10 and 5.7 of this
Agreement, (ii) to pay for fees, costs and expenses specifically payable by the
Partnership pursuant to this Agreement or (iii) in the event that the General
Partners determine that the Partnership requires additional funds to meet its
then existing
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obligations, including to cover operating shortfalls, and funds are not
otherwise available from Partnership revenues or from loans to the Partnership
for such purposes. Notwithstanding the foregoing, if additional Capital
Contributions are necessary to fund operating expenses of any Target Investment
(other than for payments to Affiliates of the Interstate General Partner or the
Blackstone General Partner) after the deferring of payables to the extent
reasonable, income has not been used in the immediately preceding three months
to pay amounts to Affiliates of the Blackstone General Partner of the
Interstate General Partner beyond amounts set forth in the relevant budget (any
such expenses meeting the foregoing conditions, "Necessary Expenses"), and the
General Partners do not agree on the need for such Capital Contribution after a
reasonable amount of time (but in no event after the time failure to pay would
have a material adverse effect on the Partnership), either General Partner may
nonetheless, to the extent of Necessary Expenses, require a Capital
Contribution, not to exceed $1,000,000 in the aggregate to cover Necessary
Expenses for such Target Investment. If any Partner fails to make such Capital
Contribution, the provisions of Section 5.2 below shall apply (except that the
provision allowing the election of the remedy set forth in Section 5.3 shall
not be applicable). Each of the Partners shall be required to make Capital
Contributions to the Partnership in accordance with such Partner's Sharing
Percentage (as determined in accordance with Section 3.6(f) above); provided
that, except for amounts to be contributed under clause (iii) above (for which
no limit shall apply), the aggregate amount of Capital Contributions made by
the Blackstone Partners hereof and by the Blackstone Partners in the Parallel
Partnerships shall not exceed $29,400,000, and the aggregate amount of Capital
Contributions made by the Interstate Partners hereof and by the Interstate
Partners in the Parallel Partnerships shall not exceed $30,600,000. It is
understood and agreed that the commitment by the Blackstone Partners and the
Interstate Partners to fund their respective Committed Capital is not revolving
in nature and at such time as the date such Partner's Committed Capital shall
have been funded in full, such commitment will expire and be of no further
force or effect.
(b) No Partner shall have any obligation to restore any negative balance
in the Partner's Capital Account upon liquidation of the Partnership. No
Partner shall be entitled to withdraw all or any part of its Capital
Contributions except as expressly provided in this Partnership Agreement. No
interest shall be payable by the Partnership on the Capital Contributions of
any Partner except as otherwise provided herein. In no event shall any Partner
be entitled to demand any property from the Partnership other than cash.
(c) When Capital Contributions are required under paragraph (a) above from
the Partners, the General Partners shall give notice to all of the Partners of
the amount of funds required and the date such funds shall be due, which due
date
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shall be, unless otherwise provided in this Agreement, no less than 10 Business
Days from the date such notice is given.
SECTION 5.2 PARTNER LOANS FOR FAILURE TO FUND COMMITTED CAPITAL. If any
Partner shall fail to timely make a Capital Contribution required in Section
5.1 (such Partner is hereinafter referred to as a "Non-Contributing Partner")
and such default is not cured within 10 days of the date such Capital
Contribution was due, then any other Partner (a "Contributing Partner") may
fund all or part of such Capital Contribution and, unless the Contributing
Partner otherwise elects the remedy of the dilution of such Non-Contributing
Partner's Interest in the Partnership as set forth in Section 5.3 below, any
amounts funded by a Contributing Partner on behalf of a Non-Contributing
Partner shall be made directly to the Partnership but shall be treated as (i) a
recourse demand loan made by the Contributing Partner to the Non-Contributing
Partner (bearing interest at a fluctuating rate of interest equal to 10% per
annum in excess of the prime rate of interest publicly announced by Citibank,
N.A. from time to time, but not less than 15% per annum, but in no event in
excess of the maximum rate permitted by applicable law), followed by (ii) a
Capital Contribution by such Non-Contributing Partner to the Partnership. Any
such recourse loan (to the extent of unpaid principal and interest) shall be
payable on demand by the Contributing Partner and shall be repaid directly by
the Partnership on behalf of the Non- Contributing Partner to the Contributing
Partner from Non-Capital Proceeds and Capital Proceeds otherwise distributable
to the Non-Contributing Partner. Amounts paid directly by the Partnership to
the Contributing Partner on account of the loan shall be deemed distributions
to the Non- Contributing Partner. Any Non-Capital Proceeds and Capital
Proceeds used to repay such loan shall be applied first to interest and then to
principal thereof.
SECTION 5.3 DILUTION FOR FAILURE TO FUND CAPITAL. (a) If a
Non-Contributing Partner fails to contribute any amounts required to be
contributed pursuant to Section 5.1 above as and when required to be
contributed and such funds are contributed to the Partnership by a Contributing
Partner, the Non-Contributing Partner's Sharing Percentage shall be, if the
Contributing Partner elects to apply the provisions of this Section 5.3 in lieu
of the loan mechanism provided in Section 5.2, adjusted pursuant to Section
5.3(b) below as of the day on which the Contributing Partner contributes such
funds. In such an event the contribution of such funds shall be treated as a
Capital Contribution to the Partnership by the Contributing Partner.
(b) The Sharing Percentage of a Non-Contributing Partner may be reduced
(but not below zero), upon the election described in Section 5.3(a) above, by
an amount equal to the product of (i) 1.6 times (ii) a fraction expressed as a
percentage, (A) the numerator of which is the amount of the Capital
Contribution which such Non-Contributing Partner fails to
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contribute and (B) the denominator of which is the aggregate of the Capital
Contributions made by the Partners up to and including such time, including the
Capital Contribution which such Non-Contributing Partner fails to make. The
Sharing Percentage of the Contributing Partner shall be increased by the amount
of the reduction in the Sharing Percentage of the Non-Contributing Partner.
Notwithstanding the foregoing, if within 90 days after the reduction of the
Non-Contributing Partner's Sharing Percentage described herein, the
Non-Contributing Partner pays to the Contributing Partner the amount which the
Non-Contributing Partner failed to contribute and such Contributing Partner
contributed, together with interest thereon (at a rate equal to 10% per annum
in excess of the prime rate of interest publicly announced by Citibank, N.A.
from time to time, but not less than 15% per annum, and in no event in excess
of the maximum rate permitted by applicable law), the Non-Contributing
Partner's Sharing Percentage and the Contributing Partner's Sharing Percentage
shall be reinstated as if the Non-Contributing Partner had timely made such
Capital Contribution.
SECTION 5.4 DISTRIBUTIONS GENERALLY. Capital Proceeds shall be
distributed as soon as practicable but in any event within 45 days after the
date that such Proceeds are received by the Partnership. Non-Capital Proceeds
shall be distributed at such times and intervals as the General Partners shall
determine, but in no event later than 30 days after the end of each calendar
quarter. The Partnership shall make such distributions in cash among the
Partners in accordance with this Article V.
SECTION 5.5 DISTRIBUTIONS OF PROCEEDS.
(a) Each distribution of Non-Capital Proceeds from a Project shall be made
to the Partners to the extent of, and pro rata in accordance with, each of
their Sharing Percentages (as the same may be adjusted hereunder).
Notwithstanding the foregoing, Non-Capital Proceeds from a Project otherwise
distributable to a Blackstone Partner shall be distributed as follows:
(i) First, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from such Project in an amount equal to the
Capital Contributions made by such Partner with respect to such Project; and
(ii) Second, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from such Project, in excess of any amounts
distributed under Section 5.5(a)(i) above, in an amount which generates a 20%
Internal Rate of Return on the Capital Contributions made by such Partner with
respect to such Project; and
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(iii) Thereafter, 86.532% to such Blackstone Partner and 13.468% to the
Interstate Partners (pro rata in accordance with their Sharing Percentages).
(b) Each distribution of Capital Proceeds from a Project shall be made to
the Partners to the extent of, and pro rata in accordance with, each of their
Sharing Percentages (as the same may be adjusted hereunder). Notwithstanding
the foregoing, Capital Proceeds from a Project otherwise distributable to a
Blackstone Partner shall be distributed as follows:
(i) First, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in an amount equal
to the sum of the Capital Contributions made by such Partner as of such date
with respect to all Projects which have been subject to a Disposition on or
prior to such date; and
(ii) Second, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in excess of any
amounts distributed under Section 5.5(b)(i) above, in an amount which
generates a 20% Internal Rate of Return on the Capital Contributions made by
such Partner as of such date with respect to all Projects which have been
subject to a Disposition on or prior to such date and all Projects for which
an Unrealized Loss exists on such date; and
(iii) Third, 100% to such Blackstone Partner until such Blackstone Partner
has received cumulative Proceeds from (x) all Projects which have been subject
to a Disposition on or prior to the date of such distribution and (y) all
Projects for which an Unrealized Loss exists on such date, in excess of any
amounts distributed under Sections 5.5(b)(i) and (ii) above, in an amount
equal to the total of such Partner's pro rata shares of Unrealized Loss from
all Projects for which an Unrealized Loss exists on such date (based on such
Partner's Sharing Percentage); and
(iv) Thereafter, 86.532% to such Blackstone Partner and 13.468% to the
Interstate Partners (pro rata in accordance with their Sharing Percentages).
SECTION 5.6 RESTRICTED PAYMENTS. Notwithstanding any provisions to the
contrary in this Agreement, neither the Partnership nor the General Partners on
behalf of the Partnership shall make a distribution if such distribution would
violate the Partnership Act.
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SECTION 5.7 PARTNERSHIP EXPENSES. (a) Promptly after the date of this
Agreement, the Partnership, to the extent it does not pay such costs and
expenses directly, will reimburse each Partner for Organizational Expenses
incurred by such Partner.
(b) The following expenses shall be borne by the Partnership:
(i) To the extent not reimbursed, all expenses (other than any Partner's
overhead) reasonably incurred in the operation of the Partnership (and
approved by the General Partners if required hereunder), including without
limitation, any taxes imposed on the Partnership, fees and expenses for
attorneys and accountants, the costs and expenses of any insurance purchased
by the Partnership, and the costs and expenses of any litigation involving the
Partnership and the amount of any judgments or settlements paid in connection
therewith; and
(ii) All third party professional services which have been approved by the
General Partners and incurred in connection with a proposed Target Investment
that is not ultimately made or a proposed disposition of a Project which is
not actually consummated, including, without limitation, (i) commitment fees
that become payable in connection with a proposed Target Investment that is
not ultimately made, (ii) legal fees, accounting fees and other third party
professional due diligence costs and expenses and (iii) all travel and similar
out of pocket costs and expenses of employees of the Partners in connection
with approved due diligence.
Partnership expenses shall be paid directly by the Partnership or the
Partnership shall reimburse the Partner who incurred such expenses for the
payment thereof, as the case may be.
ARTICLE VI
BOOKS AND REPORTS; TAX MATTERS;
CAPITAL ACCOUNTS; ALLOCATIONS
SECTION 6.1 GENERAL ACCOUNTING MATTERS. (a) Allocations of Net Income
(Loss) pursuant to Section 6.4 shall be made by or under the direction of the
General Partners at the end of each Fiscal Period.
(b) Each Partner shall be supplied with the Partnership information
necessary to enable such Partner to prepare in a timely manner its Federal,
state and local income tax returns and such other financial or other statements
and reports that are approved by the General Partners.
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(c) The Interstate General Partner shall keep or cause to be kept books
and records pertaining to the Partnership's business showing all of its assets
and liabilities, receipts and disbursements, realized profits and losses,
Partners' Capital Accounts and all transactions entered into by the
Partnership. Such books and records of the Partnership shall be kept at the
office of the Interstate General Partner and the Partners and their
representatives shall at all reasonable times have free access thereto for the
purpose of inspecting or copying the same. The Partnership's books of account
shall be kept on an accrual basis or as otherwise provided by the General
Partners, and otherwise in accordance with generally accepted accounting
principles, except that for income tax purposes such books shall be kept in
accordance with applicable tax accounting principles.
(d) Except as otherwise provided herein, all determinations, valuations
and other matters of judgment required to be made for accounting and tax
purposes under this Agreement shall be made by or under the direction of the
General Partners and shall be conclusive and binding on all Partners, former
Partners, their successors or legal representatives and any other person except
for computational errors or fraud, and to the fullest extent permitted by law
no such person shall have the right to an accounting or an appraisal of the
assets of the Partnership or any successor thereto except for computational
errors or fraud.
(e) The books of the Partnership shall be examined, certified and audited
annually as of the end of each Fiscal Year, by such recognized firm of
independent certified public accountants that is designated by the General
Partners. For each Fiscal Year of the Partnership, such accountants shall
determine and prepare full financial statements, including, without limitation,
a balance sheet, an income statement, a statement of changes in financial
position and a statement of the Non-Capital Proceeds and Capital Proceeds of
the Partnership. The General Partners shall promptly upon receipt of such
financial statements, and in any event within 90 days after the end of each
such Fiscal Year, transmit copies thereof to each Partner, together with the
report and management letter of such accountants covering the results of such
audit. The cost of all audits and reports provided to the Partners pursuant to
this Section shall be an expense of the Partnership.
SECTION 6.2 CERTAIN TAX MATTERS.
The taxable year of the Partnership shall be the same as its Fiscal Year.
The Tax Matters Partner (as defined below) shall cause to be prepared all
Federal, state and local tax returns of the Partnership for each year for which
such returns are required to be filed and, after approval of such returns by
the General Partners, shall cause such returns to be timely filed. The General
Partners shall determine the appropriate treatment of each item of income,
gain, loss, deduction and
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credit of the Partnership and the accounting methods and conventions under the
tax laws of the United States, the several states and other relevant
jurisdictions as to the treatment of any such item or any other method or
procedure related to the preparation of such tax returns. The Tax Matters
Partner shall make the election provided for in Section 754 of the Code, if,
and only if the Partner who or which has acquired an interest in the
Partnership or a distribution of Partnership property with respect to which the
election is made will have provided to the Tax Matters Partner concurrently, or
within 30 days after the Transfer of such interest, its undertaking to the
effect that it, and its successors in interest hereunder, will reimburse the
Partnership annually for its additional administrative costs incurred by reason
of such election as determined by the auditor of the Partnership. The Tax
Matters Partner shall also make the election to amortize Organizational
Expenses pursuant to Code Section 709 and the regulation promulgated
thereunder. In addition, the General Partners may cause the Partnership to
make or refrain from making any and all other elections permitted by the tax
laws of the United States, the several states and other relevant jurisdictions.
The Tax Matters Partner for purposes of Section 6231(a)(7) of the Code (the
"Tax Matters Partner") shall be the Blackstone General Partner. The Tax
Matters Partner shall have all of the rights, duties, powers and obligations
provided for in Sections 6221 through 6232 of the Code with respect to the
Partnership provided, however, that the following provisions shall apply with
respect to the Tax Matters Partner:
(a) The Tax Matters Partner shall be responsible for the filing of the
Partnership information returns required under Section 6031 of the Code.
Within thirty (30) days after the end of each Fiscal Year, the Tax Matters
Partner shall furnish to the Partnership's accountants sufficient information
for the preparation of all required Partnership tax returns.
(b) A Partner shall provide notice to the Tax Matters Partner of its intent
to file an original or an amended income tax return of which such Partner
will take a position with respect to a partnership item that is inconsistent
with the position taken by the Tax Matters Partner on the Partnership return.
Such notice must be given at least thirty (30) days prior to the filing of
such return. At such time, such Partner shall provide the Tax Matters
Partner with a statement detailing the inconsistent item or items contained
in such return. Within ten (10) days of receipt of such statement, the Tax
Matters Partner shall provide a copy of such statement to each Partner.
(c) The Tax Matters Partner shall include in each Partnership return
sufficient information to entitle each eligible Partner and any indirect
partner (at its request) to notice from the Internal Revenue Service pursuant
to Section 6223(a) of the Code.
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44
(d) Each Partner reserves the right to participate in an audit proceeding.
(e) Each Partner reserves the right to enter into a separate settlement
agreement with the Internal Revenue Service. A Partner who enters into a
settlement agreement with the Internal Revenue Service concerning a
partnership item shall notify the Tax Matters Partner of its terms within ten
(10) days of such agreement, and the Tax Matters Partner shall notify the
other Partners of the terms of such agreement within ten (10) days after
receiving such notice. The Tax Matters Partner shall notify each other
Partner of the terms of any settlement offer received by it within ten (10)
days of receiving such offer.
(f) The Tax Matters Partner shall not file an administrative adjustment
request without the Consent of all of the General Partners. Each Partner,
other than the Tax Matter partner, reserves the right to file an
administrative adjustment request under Section 6227 of the Code. Any
Partner filing an administrative adjustment request shall notify the Tax
Matters Partner of its contents within ten (10) days after filing such
request. The Tax Matters Partner shall notify each Partner of the contents
of such request within ten (10) days of the receipt of such notice.
(g) All Partners shall report to the Tax Matters Partner the conversion of a
partnership item to a nonpartnership item under Section 6231(b) or any other
provision of the Code within ten (10) days of learning of the conversion.
(h) Each Partner reserves the right to file a petition for judicial review
and to participate in a judicial proceeding under Section 6226 and 6228 of
the Code. If the Tax Matters Partner files a petition for judicial review or
an appeal under Section 6226 of the Code, it shall notify each Partner of
such petition or appeal within ten (10) days of such filing. Any other
Partner filing a petition for judicial review or any appeal under Sections
6226 or 6228 of the Code shall notify the Tax Matters Partner of such
petition or appeal on or before the date of filing. The Tax Matters Partner
shall notify each Partner of such filing within ten (10) days of receipt of
such notice from the filing partner.
(i) The Tax Matters Partner shall not agree to extend the statute of
limitations for assessment without the Consent of all of the General
Partners.
(j) The Tax Matters Partner shall be authorized to incur expenses in the
performance of its duties pursuant to this Agreement. Notwithstanding any
other provision of this Agreement, such expenses shall be borne by the
persons who
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45
were Partners of the Partnership at any time during the applicable taxable
year without regard to whether such persons are Partners at the time the
expense is incurred. Such expenses shall be allocated to the Partners and
former Partners having an interest in the proceeding at the time the cost is
incurred in proportion to their relative Sharing Percentages for the
applicable taxable year.
(k) The provisions of this Section shall govern the conduct of all parties
who are currently Partners and all parties who were Partners during the
applicable Partnership taxable year. A Partner shall not be relieved of any
duties or responsibilities imposed under this Section by the termination or
transfer of its interest in the Partnership.
(l) All terms used in this Section that are defined in Section 6231(a) of
the Code shall have the meanings set forth therein.
SECTION 6.3 CAPITAL ACCOUNTS. There shall be established for each Partner
on the books of the Partnership as of the date hereof, or such later date on
which such Partner is admitted to the Partnership, a capital account (each
being a "Capital Account"). Each Capital Contribution shall be credited to the
Capital Account of such Partner on the date such contribution of capital is
paid to the Partnership. In addition, each Partner's Capital Account shall be
(a) credited with such Partner's allocable share of any Net Income of the
Partnership, (b) debited with (i) distributions to such Partner of cash or the
fair market value of other property and (ii) such Partner's allocable share of
Net Loss of the Partnership and expenditures of the Partnership described or
treated under Section 704(b) as described in Section 705(a)(2)(B) of the Code,
and (c) otherwise maintained in accordance with the provisions of the Code.
Any other item which is required to be reflected in a Partner's Capital Account
under Section 704(b) of the Code or otherwise under this Agreement shall be so
reflected. Capital Accounts shall be appropriately adjusted to reflect
transfers of part (but not all) of a Partner's interest in the Partnership.
Interest shall not be payable on Capital Account balances. Notwithstanding
anything to the contrary contained in this Agreement, the Partnership shall
maintain the Capital Accounts of the Partners in accordance with the principles
and requirements set forth in section 704(b) of the Code and Regulations
section 1.704-1(b)(2)(iv).
SECTION 6.4 ALLOCATIONS. (a) Net Income of the Partnership shall be
allocated to the Partners having deficit balances in their Capital Accounts
(computed after taking into account distributions pursuant to Section 5.5 with
respect to such fiscal year, and after adding back each Partner's share of
partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, determined
pursuant to Regulations sections 1.704- 2(g)(1) and 1.704-2(i)(5)) in
proportion to, and to the extent of, such
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46
deficits. Any remaining Net Income and all Net Loss shall be allocated among
the Partners either 49% to the Blackstone Partners (pro rata in proportion to
their Sharing Percentages) and 51% to the Interstate Partners (pro rata in
accordance with their Sharing Percentages) or 42.401% to the Blackstone
Partners (pro rata in proportion to their Sharing Percentages) and 57.599% to
the Interstate Partners pro rata in accordance with their Sharing Percentages)
so as to produce to the extent possible Capital Accounts for the Partners
(computed in the manner set forth in the preceding sentence) such that if an
amount of cash equal to such positive Capital Account balances were distributed
in accordance with such positive Capital Account balances, such distribution
would be in the amounts, sequence and priority set forth in Section 5.5 and to
the extent Net Loss exceeds the positive Adjusted Capital Account Balances of
the Partners, the excess shall be allocated first, to those Partners with
positive Adjusted Capital Account Balances, in proportion to, and to the extent
of, such Adjusted Capital Account Balances, and thereafter, to the General
Partners, in the ratio that the Sharing Percentage of each General Partner
bears to the Sharing Percentage of all General Partners. Notwithstanding the
foregoing, if an allocation of Net Loss in the ratio of 42.401% to the
Blackstone Partners and 57.599% to the Interstate Partners is in excess of
amounts of Net Income previously allocated in the ratio of 42.401% to the
Blackstone Partners and 57.599% to the Interstate Partners, then such
allocation of Net Loss shall instead be made 49% to the Blackstone Partners
(pro rata in proportion to their Sharing Percentages) and 51% to the Interstate
Partners (pro rata in accordance with their Sharing Percentages).
Notwithstanding the foregoing, if an allocation of Net Income or Net Loss would
not result in Capital Accounts for the Partners (computed in the manner set
forth in the first sentence of this paragraph (a)) being equal to cash
distributions in the amounts, sequence and priority set forth in Section 5.5,
Net Income may be allocated 100% to the Interstate Partners (pro rata in
accordance with their Sharing Percentages) or Net Loss may be allocated 100% to
the Blackstone Partners (pro rata in accordance with their Sharing Percentages)
if (and to the extent necessary) to produce Capital Accounts equal (or in
proportion) to the cash distributions set forth in Section 5.5.
(b) Notwithstanding anything herein to the contrary, in the event any
Partner unexpectedly receives any adjustments, allocations or distributions
described in paragraphs (b)(2)(ii)(d)(4), (5) or (6) of Section 1.704-1 of the
regulations under the Code, there shall be specially allocated to such Partner
such items of Partnership income and gain, at such times and in such amounts as
will eliminate as quickly as possible that portion of any deficit in its
Capital Account caused or increased by such adjustments, allocations or
distributions. To the extent permitted by the Code and the regulations
thereunder, any special allocations of items of income or gain pursuant to this
Section 6.4(c) shall be taken into account in computing subsequent allocations
of Net Income
<PAGE> 51
47
(Loss) pursuant to this Section 6.4 so that the net amount of any items so
allocated and the subsequent allocations of Net Income (Loss) to the Partners
pursuant to this Section 6.4 shall, to the extent possible, be equal to the net
amounts that would have been allocated to each such Partner pursuant to the
provisions of this Section 6.4 if such unexpected adjustments, allocations or
distributions had not occurred.
(c) All items of income, gain, loss, deduction and credit of the
Partnership shall be allocated among the Partners for Federal, state and local
income tax purposes consistent with the manner that the corresponding
constituent items of Net Income (Loss) shall be allocated among the Partners
pursuant to this Agreement, except as may otherwise be provided herein or by
the Code. To the extent Treasury Regulations promulgated pursuant to
Subchapter K of the Code (including under Sections 704(b) and (c) of the Code)
require allocations for tax purposes that differ from the foregoing
allocations, the General Partners may determine the manner in which such tax
allocations shall be made so as to comply more fully with such Treasury
Regulations or other applicable law and, at the same time to the extent
reasonably possible, preserve the economic relationships among the Partners as
set forth in this Agreement.
(d) Notwithstanding the provisions of this Section 6.4, net income, net
gain, and net loss of the Partnership (or items of income, gain, loss,
deduction, or credit, as the case may be) shall be allocated in accordance with
the following provisions of this Section 6.4 to the extent such provisions
shall be applicable.
(i) Nonrecourse Deductions of the Partnership for any Fiscal Year shall be
specially allocated to the Partners in the same proportion as Net Income or
Net Loss is allocated for such Fiscal Year; provided that if an allocation of
Nonrecourse Deductions in the ratio of 42.401% to the Blackstone Partners and
57.599% to the Interstate Partners is in excess of amounts of Net Income
previously allocated in the ratio of 42.401% to the Blackstone Partners and
57.599% to the Interstate Partners, then such allocation of Nonrecourse
Deductions shall instead be made 49% to the Blackstone Partners (pro rata in
proportion to their Sharing Percentages) and 51% to the Interstate Partners
(pro rata in accordance with their Sharing Percentages). Partner Nonrecourse
Deductions of the Partnership for any Fiscal Year shall be specially allocated
to the Partner who bears the economic risk of loss for the liability in
question. The provisions of this Section 6.4(e)(i) are intended to satisfy
the requirements of Regulations sections 1.704-2(e)(2) and 1.704-2(i)(1) and
shall be interpreted in accordance therewith for all purposes under this
Agreement.
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48
(ii) If there is a net decrease in the Minimum Gain of the Partnership
during any Partnership Fiscal Year, each Partner shall be specially allocated
items of Partnership income and gain for such year equal to that Partner's
share of the net decrease in Minimum Gain, within the meaning of Regulations
section 1.704-2(g)(2). The provisions of this Section 6.4(e)(ii) are intended
to comply with the Minimum Gain chargeback requirements of Regulations section
1.704-2(f) and shall be interpreted in accordance therewith for all purposes
under this Agreement.
(iii) If there is a net decrease in Partner Nonrecourse Debt Minimum Gain
during any Fiscal Year, each Partner that has a share of such partner
Nonrecourse Debt Minimum Gain, determined in accordance with Regulations
section 1.704-2(i)(5), as of the beginning of such year shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, for succeeding years) equal to such Partner's share of the net
decrease in Partner Nonrecourse Debt Minimum Gain. The provisions of this
Section 6.4(e)(iii) are intended to comply with the Partner Nonrecourse Debt
Minimum Gain chargeback requirement of Regulations section 1.704-2(i)(4) and
shall be interpreted in accordance therewith for all purposes under this
Agreement.
ARTICLE VII
DISSOLUTION
SECTION 7.1 DISSOLUTION. The Partnership shall be dissolved and
subsequently terminated upon the occurrence of the first of the following
events:
(a) decision of all of the General Partners to dissolve and subsequently
terminate the Partnership;
(b) December 31, 2045;
(c) the occurrence of a Disabling Event with respect to the sole remaining
General Partner, provided that the Partnership shall not be dissolved if,
within 90 days after such Disabling Event, all of the Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of the Disabling Event, of another General Partner;
or
(d) if, after the right of first opportunity under Article 3 shall no
longer be in effect, all of the Partnership Assets are sold or otherwise
disposed of.
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49
SECTION 7.2 WINDING-UP. When the Partnership is dissolved, the business
and property of the Partnership shall be wound up and liquidated by the General
Partners or, in the event of a Disabling Event with respect to any General
Partner, by the remaining General Partners or, in the event of a Disabling
Event with respect to each of the General Partners, such liquidating trustee as
may be named by Limited Partners holding a majority of the Sharing Percentages
held by all Limited Partners (the party conducting the liquidation being
hereinafter referred to as the "Liquidator"). The Liquidator shall use its
best efforts to reduce to cash and cash equivalent items such assets of the
Partnership as the Liquidator shall deem it advisable to sell, subject to
obtaining fair value for such assets and any tax or other legal considerations.
SECTION 7.3 FINAL DISTRIBUTION. Within 90 calendar days after the
effective date of dissolution of the Partnership, the assets of the Partnership
shall be distributed in the following manner and order:
(a) to the payment of the expenses of the winding-up, liquidation and
dissolution of the Partnership;
(b) to pay all creditors of the Partnership, other than Partners, either by
the payment thereof or the making of reasonable provision therefor;
(c) to establish reserves, in amounts established by the Liquidator, to
meet other liabilities of the Partnership; and
(d) to pay, in accordance with the provisions of this Agreement applicable
to such loans or in accordance with the terms agreed among them and otherwise
on a pro rata basis, all creditors of the Partnership that are Partners,
either by the payment thereof or the making of reasonable provision therefor.
The remaining assets of the Partnership shall be applied and distributed in
accordance with the positive balances of the Partners' Capital Accounts, as
determined after taking into account all adjustments to Capital Accounts for
the Partnership taxable year during which the liquidation occurs.
ARTICLE VIII
TRANSFER OF PARTNERS' INTERESTS
SECTION 8.1 RESTRICTIONS ON TRANSFER OF PARTNERSHIP INTERESTS. (a) No
Partner may, directly or indirectly, assign, sell, exchange, transfer, pledge,
hypothecate or otherwise dispose of all or any part of its interest in the
Partnership (a "Transfer") to any person, other than in accordance with
<PAGE> 54
50
paragraphs (b), (c), (d), (e) and (f) below. A change in the ultimate
beneficial ownership of a Partner shall be deemed a Transfer for purposes of
this Agreement (other than changes in the ownership of the common stock of
Interstate Hotels Company sold to the public).
(b) Any Partner may Transfer all or part of its interest in the
Partnership to any person; provided, however, that upon any Transfer of a
Partner's interest in accordance with this paragraph, the person (the
"Transferee") to whom the Partner's interest was Transferred shall not be
admitted as a substitute Partner without receiving the prior written Consent of
the Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion) and the Transferee has given written acceptance and
adoption of all of the terms and provisions of this Agreement; and provided,
further, that the prior written Consent of each of the General Partners shall
be required to admit the Transferee as a substitute Partner (which Consent may
be withheld in their sole and absolute discretion) (i) if the Transferee is not
an Affiliate of any member of the Blackstone Group or the Interstate Group, or
(ii) if the aggregate Sharing Percentages of the Interstate Partners is 20% or
less at the time of the Transfer.
(c) A Partner may mortgage, pledge, hypothecate or otherwise encumber all
or any portion of such Partner's rights to receive a portion of the Non-Capital
Proceeds, Capital Proceeds, Net Income and Net Losses to any person; provided,
however, that the holder of such mortgage, pledge, hypothecation or encumbrance
shall not be admitted as a substitute Partner without the prior Consent of the
Blackstone General Partner (which Consent may be withheld in its sole and
absolute discretion), provided that (i) if the Transferee is not an Affiliate
of any member of the Blackstone Group or the Interstate Group or (ii) if the
aggregate Sharing Percentages of the Interstate Partners is 20% or less at the
time of the Transfer, the prior written Consent of each of the General Partners
shall be required, which Consent may be withheld in their sole and absolute
discretion.
(d) At any time, any Blackstone Partner may transfer its interest in
Non-Capital Proceeds, Capital Proceeds, Net Income and Net Losses to any other
Blackstone Partner or its Affiliates but the Transferee shall not be admitted
as a substitute Partner and the transferor shall not be permitted to withdraw
from the Partnership without, in each case, the Consent of the Blackstone
General Partner (which Consent may be withheld in its sole and absolute
discretion), or, if the aggregate Sharing Percentages of the Interstate
Partners is 20% or less at the time of the Transfer, the Consent of each of the
General Partners (which Consent may be withheld in their sole and absolute
discretion).
(e) At any time, any Interstate Partner may transfer its interest in
Non-Capital Proceeds, Capital Proceeds, Net
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51
Income and Net Losses to any other Interstate Partner or their Affiliates, but
the Transferee shall not be admitted as a substitute Partner and the transferor
shall not be permitted to withdraw from the Partnership without, in each case,
the Consent of the Blackstone General Partner (which Consent may be withheld in
its sole and absolute discretion).
(f) At any time, the ultimate beneficial ownership of a Partner may be
changed without any requirement for Consent hereunder, provided that day to day
management of such Partner is, at all times thereafter, directly or indirectly
controlled by the Blackstone General Partner or an Affiliate thereof or by the
Interstate General Partner or an Affiliate thereof.
SECTION 8.2 Other Transfer Provisions. (a) Any purported Transfer by a
Partner of all or any part of its interest in the Partnership in violation of
this Article VIII shall be null and void and of no force or effect.
(b) Except as provided in this Article VIII, no Partner shall have the
right to withdraw from the Partnership prior to its termination and no
additional Partner may be admitted to the Partnership without the prior written
consent of the General Partners. In the event of any withdrawal of a General
Partner in violation of this Agreement, including as a result of a Disabling
Event, such General Partner shall be liable to the Partnership as provided in
Section 17-602 of the Partnership Act.
(c) Notwithstanding any provision of this Agreement to the contrary, a
Partner may not Transfer all or any part of its interest in the Partnership if
such Transfer would jeopardize the status of the Partnership as a partnership
for federal income tax purposes, cause a dissolution of the Partnership under
the Partnership Act or would violate, or would cause the Partnership to
violate, any applicable law or regulation (including any applicable federal or
state securities laws) or contract to which the Partnership is a party.
(d) Concurrently with the admission of any substitute or additional
Partner, the General Partners shall forthwith cause any necessary papers to be
filed and recorded and notice to be given wherever and to the extent required
showing the substitution of a Transferee as a substitute Partner in place of
the Partner Transferring its interest, or the admission of an additional
Partner, all at the expense, including payment of any professional and filing
fees incurred, of such substituted or additional Partner. The admission of any
person as a substitute or additional Partner shall be conditioned upon such
person's written acceptance and adoption of all the terms and provisions of
this Agreement.
(e) If any interest in the Partnership is Transferred during any
accounting period in compliance with the provisions of
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52
this Article VIII, each item of income, gain, loss, expense, deduction and
credit and all other items attributable to such interest for such period shall
be divided and allocated between the transferor and the transferee by taking
into account their varying interests during such period in accordance with
Section 706(d) of the Code, using any conventions permitted by law and selected
by the General Partners. All distributions on or before the date of such
Transfer shall be made to the transferor, and all distributions thereafter
shall be made to the transferee. Solely for purposes of making such
allocations and distributions, the Partnership shall recognize a Transfer on
the date that the General Partners receive notice of the Transfer which
complies with this Article VIII from the Partner Transferring its interest.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 EQUITABLE RELIEF. The Partners hereby confirm that damages at
law may be an inadequate remedy for a breach or threatened breach of this
Agreement and agree that, in the event of a breach or threatened breach of any
provision hereof, the respective rights and obligations hereunder shall be
enforceable by specific performance, injunction or other equitable remedy, but,
nothing herein contained is intended to, nor shall it, limit or affect any
right or rights at law or by statute or otherwise of a Partner aggrieved as
against the other for a breach or threatened breach of any provision hereof, it
being the intention by this Section 9.1 to make clear the agreement of the
Partners that the respective rights and obligations of the Partners hereunder
shall be enforceable in equity as well as at law or otherwise and that the
mention herein of any particular remedy shall not preclude a Partner from any
other remedy it or he might have, either in law or in equity.
SECTION 9.2 OWNERSHIP AND USE OF NAMES. Rights to the name "Blackstone"
shall belong solely to the designated Blackstone Partners. Rights to the name
"Interstate" and "Interstate Hotels" shall belong solely to the designated
Interstate Partners. The ownership of, and the right to use, sell or otherwise
dispose of, the name, Interstone Three Partners IV L.P. or any abbreviation or
modification thereof, shall belong to the Partnership. The Interstate General
Partner agrees to take all actions and to approve, execute and file any
document or instrument proposed by any Blackstone Partner to protect the rights
of the Blackstone Partners to the name "Blackstone". The Blackstone General
Partner agrees to take all actions and to approve, execute and file any
document or instrument proposed by any Interstate Partner to protect the rights
of the Interstate Partners to the name "Interstate" and "Interstate Hotels".
The Partners each agree to take all actions and to approve, execute and file
any document or instrument
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53
proposed by the General Partners to protect the rights of the Partnership to
the name "Interstone Three Partners IV L.P.".
SECTION 9.3 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. In particular,
the Partnership is formed pursuant to the Partnership Act, and the rights and
liabilities of the General Partners and Limited Partners shall be as provided
therein, except as herein otherwise expressly provided.
SECTION 9.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, their respective
successors and assigns.
SECTION 9.5 ACCESS; CONFIDENTIALITY. By executing this Agreement, each
Partner expressly agrees, at all times during the term of the Partnership and
thereafter and whether or not at the time a Partner of the Partnership (i) not
to issue any press release or advertisement or take any similar action
concerning the Partnership's business or affairs without first obtaining the
Consent of all of the General Partners, (ii) not to publicize detailed
financial information concerning the Partnership without the Consent of all of
the General Partners and (iii) not to disclose the Partnership's affairs
generally without using reasonable efforts to consult with the other Partners
prior to such disclosure; provided, however, the foregoing shall not restrict
any Partner from disclosing information required to be disclosed by applicable
law or concerning such Partner's investment in the Partnership to its officers,
directors, employees, agents, legal counsel, accountants, other professional
advisors, limited partners and Affiliates, or to prospective or existing
investors in such Partner or its Affiliates or to prospective or existing
lenders to such Partner or its Affiliates, or to prospective purchasers of any
property owned by the Partnership. The provisions of this Section 9.5 shall
survive the termination of the Partnership.
SECTION 9.6 NOTICES. Whenever notice is required or permitted by this
Agreement to be given, such notice need not be in writing unless otherwise
required herein or requested by the receiving Partner. If in writing, such
notice shall be given to any Partner at its address or facsimile number shown
in the Partnership's books and records (including Schedule A hereto). Each
such notice shall be effective (i) if given by facsimile, upon oral
confirmation of receipt, (ii) if given by mail, on the fourth day after deposit
in the mails (certified or registered return receipt requested) addressed as
aforesaid and (iii) if given by any other means, when delivered to and
receipted for at the address of such Partner specified as aforesaid.
SECTION 9.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which together shall constitute a single instrument.
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SECTION 9.8 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter hereof.
SECTION 9.9 AMENDMENTS. Any amendment to this Agreement shall be
effective only if such amendment is evidenced by a written instrument duly
executed by and delivered to the General Partners; provided, however, no such
amendment shall be effective or binding against a Partner unless executed by
such Partner if such amendment materially and adversely affects such Partner in
a specific manner separate and distinct from the amendment's treatment of other
Partners; and provided, further that any amendment which would have a material
adverse effect on any Partner's economic interest in the Partnership shall
require the Consent of all of the General Partners.
SECTION 9.10 SECTION TITLES. Section titles are for descriptive purposes
only and shall not control or alter the meaning of this Agreement as set forth
in the text hereof.
SECTION 9.11 REPRESENTATIONS AND WARRANTIES. (a) Each Partner represents,
warrants and covenants to each other Partner and to the Partnership that:
(i) such Partner, if not a natural person, is duly formed and validly
existing under the laws of the jurisdiction of its organization with full
power and authority to conduct its business to the extent contemplated in this
Agreement;
(ii) this Agreement has been duly authorized, executed and delivered by
such Partner and constitutes the valid and legally binding agreement of such
Partner enforceable in accordance with its terms against such Partner except
as enforceability hereof may be limited by bankruptcy, insolvency, moratorium
and other similar laws relating to creditors' rights generally and by general
equitable principles;
(iii) the execution and delivery of this Agreement by such Partner and the
performance of its duties and obligations hereunder do not result in a breach
of any of the terms, conditions or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, credit agreement, note or other
evidence of indebtedness, or any lease or other agreement, or any license,
permit, franchise or certificate, to which such Partner is a party or by which
it is bound or to which its properties are subject, or require any
authorization or approval under or
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55
pursuant to any of the foregoing, or violate any statute, regulation, law,
order, writ, injunction, judgment or decree to which such Partner is subject;
(iv) such Partner is not in default (nor has any event occurred which with
notice, lapse of time, or both, would constitute a default) in the
performance of any obligation, agreement or condition contained in any
indenture, mortgage, deed of trust, credit agreement, note or other evidence
of indebtedness or any lease or other agreement, or any license, permit,
franchise or certificate, to which it is a party or by which it is bound or
to which the properties of it are subject, nor is it in violation of any
statute, regulation, law, order, writ, injunction, judgment or decree to
which it is subject, which default or violation would materially adversely
affect such Partner's ability to carry out its obligations under this
Agreement;
(v) except as disclosed to the Partners prior to the date hereof, there is
no litigation, investigation or other proceeding pending or, to the knowledge
of such Partner, threatened against such Partner or any of its Affiliates
which, if adversely determined, would materially adversely affect such
Partner's ability to carry out its obligations under this Agreement; and
(vi) no consent, approval or authorization of, or filing, registration or
qualification with, any court or governmental authority on the part of such
Partner is required for the execution and delivery of this Agreement by such
Partner and the performance of its obligations and duties hereunder.
(b) IHC/Interstone Partnership II, L.P. represents that not less than 90%
of its interests are owned by Interstate Hotels Corporation.
<PAGE> 60
56
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Limited Partnership Agreement of Interstone Three Partners IV L.P. as of the
day and year first above written.
GENERAL PARTNERS:
BJS INTERSTONE MANAGEMENT
ASSOCIATES
By: Blackstone Real Estate Inc.,
general partner
By: /s/ GARY M. SUMERS
---------------------------
Gary M. Sumers
Vice President
IHC/INTERSTONE CORPORATION
By: /s/ MARVIN I. DROZ
--------------------------
Marvin I. Droz
Vice President
LIMITED PARTNERS:
BLACKSTONE REAL ESTATE
PARTNERS IV L.P.
By: Blackstone Real Estate
Associates L.P., general
partner
By: BREA L.L.C., general
partner
By: /s/ GARY M. SUMERS
--------------------------
Gary M. Sumers
Vice President
BLACKSTONE RE CAPITAL
PARTNERS L.P.
By: Blackstone Real Estate
Associates L.P., general
partner
By: BREA L.L.C., general
partner
By: /s/ GARY M. SUMERS
--------------------------
Gary M. Sumers
Vice President
<PAGE> 61
57
IHC/INTERSTONE PARTNERSHIP II, L.P.
By: IHC Member Corporation,
general partner
By: /s/ MARVIN I. DROZ
---------------------------
Marvin I. Droz
Vice President
<PAGE> 62
SCHEDULE A
PARTNERS OF THE PARTNERSHIP
<TABLE>
<CAPTION>
i Sharing
Percentage as
General of June __,
Partners Address 1996
- -------- ------- -------------
<S> <C> <C>
BJS Interstone Management 345 Park Avenue
Associates New York, NY 10154 0.5%
IHC/Interstone c/o Interstate Hotels Corporation
Corporation Foster Plaza X
680 Anderson Drive
Pittsburgh, PA 15220-8126 0.5%
Limited
Partners
- --------
Blackstone Real Estate 345 Park Avenue
Partners IV L.P. New York, NY 10154 29.76%
Blackstone Real Estate 345 Park Avenue
Partners IV L.P. New York, NY 10154 18.74%
IHC/Interstone c/o Interstate Hotels Corporation
Partnership II, L.P. Foster Plaza X
680 Anderson Drive 50.50%
Pittsburgh, PA 15220-8126
</TABLE>
<PAGE> 63
EXHIBIT A
FORM OF MANAGEMENT AGREEMENT
<PAGE> 64
EXHIBIT B
FORM OF PROJECT PARTNERSHIP AGREEMENT
<PAGE> 65
EXHIBIT C
FORM OF CONFIRMATION AND ACKNOWLEDGMENT
OF RIGHT OF FIRST OPPORTUNITY
This Confirmation and Acknowledgment of Right of First Opportunity
("Confirmation") is made and entered into as of the ____ day of ________, 19__
by and among THE BLACKSTONE GROUP HOLDINGS L.P. ("Blackstone") and INTERSTATE
HOTELS CORPORATION ("Interstate").
RECITALS
A. Sections 3.6 through 3.8 of that certain Amended and Restated Limited
Partnership Agreement of Interstone Three Partners IV L.P., dated as of the
date hereof (as amended, supplemented or otherwise modified from time to time,
the "Partnership Agreement") sets forth the scope, operation, duration,
termination and other terms relating to a right of first opportunity provided
by the Blackstone Group and the Interstate Group in favor of the Partnership
with respect to certain Target Investments identified for investment by the
Blackstone Group and the Interstate Group. Except as otherwise expressly
provided herein, any defined term used in this Confirmation shall have the
meaning prescribed for that term in the Partnership Agreement.
B. The parties wish to enter into this Confirmation in order to confirm and
acknowledge their obligations to each other with respect to the foregoing
matters and any other obligations each may have to the other pursuant to the
express terms of Sections 3.6 through 3.8 of the Partnership Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto, intending to be legally bound, do hereby
agree as follow:
1. The provisions of Sections 3.6 through 3.8 of the Partnership Agreement
are hereby incorporated by reference as though set forth in full herein. Each
party hereto hereby confirms its obligation to comply with all terms,
provisions, covenants, conditions and restrictions and perform all obligations
applicable to such party under said Sections 3.6 through 3.8 of the Partnership
Agreement. Without limiting the generality of the foregoing, Blackstone and
Interstate hereby agree to comply, and to cause the Blackstone Related Parties
and the Interstate Related Parties, respectively, to comply, with their
obligations pertaining to the right of first opportunity set forth in said
Sections of the Partnership Agreement in accordance with the terms applicable
thereto.
<PAGE> 66
2
2. This Confirmation confirms and acknowledges the terms, provisions,
covenants, conditions, obligations and restrictions set forth in Sections 3.6
through 3.8 of the Partnership Agreement. It shall not be construed or
understood to modify, in any way, such terms, provisions, covenants,
conditions, obligations and restrictions, and, in the event of any conflict
between this Confirmation and the Partnership Agreement, the provisions of
Sections 3.6 through 3.8 of the Partnership Agreement shall control. In no
event shall this Confirmation be construed or understood to extend the duration
of the restrictions on Blackstone, Interstate and the Related Parties arising
from the right of first opportunity, which shall terminate as set forth in the
Partnership Agreement. The provisions of Sections 9.1, 9.3, and 9.5 through
9.10 of the Partnership Agreement are incorporated herein, except that all
references therein to the "Agreement" shall be deemed to be references to this
Confirmation, all references therein to the "Partners" shall be deemed to be
references to the parties hereto and delivery of notices to Blackstone
hereunder or under the Partnership Agreement shall be delivered to the same
address as the Blackstone General Partner, and delivery of notices to
Interstate hereunder shall be delivered to the same address as the Interstate
General Partner, unless any such parties shall change the address for delivery
of notice in accordance with the procedures established under Section 9.6 of
the Partnership Agreement. Nothing in this Confirmation shall be understood or
construed to render the parties hereto joint venturers or partners for any
purposes. Nothing in this Confirmation shall be understood or construed to
modify or expand the extent of any recourse between the Partners beyond that
expressly provided by the Partnership Agreement.
THE BLACKSTONE GROUP HOLDINGS, L.P.
By:
-----------------------------
INTERSTATE HOTELS CORPORATION
By:
-----------------------------
<PAGE> 67
EXHIBIT D
PRE-EXISTING PROJECTS
NONE
<PAGE> 68
EXHIBIT E
EXCLUDED PROJECTS
BLACKSTONE EXCLUDED PROJECTS
1. Any business activities with the Davidson Hotel Company ("Davidson"),
including a merger or a combination of Davidson or its assets with any
other entity or with the assets of any other entity, a REIT involving
Davidson or some or all of its assets, an initial public offering or other
capital event involving Davidson; provided, that this exclusion shall not
include the acquisition of other hotels by Davidson (other than through a
combination with another entity or a combination with the assets of
another entity) which were first identified by the affiliates of the
Blackstone Group which are investors in Davidson (as opposed to
acquisitions first identified by the non-affiliated Davidson investors).
INTERSTATE EXCLUDED PROJECTS
1. Four to six hotel acquisitions from an institutional owner only in
conjunction with the Carlyle Group or The Apollo Group
2. Acquisition of Checkers Hotel in Los Angeles, California only in
conjunction with The Apollo Group
3. Any investment in a hotel which is incidental to Interstate taking over
management of such hotel such as those currently under consideration by
Interstate in Farmington, Connecticut, Irvine, California, Warner Center,
California and Burlington, Massachusetts.
With respect to Interstate's investment opportunities described in clauses
1 and 2 above, if The Apollo Group or The Carlyle Group decides not to
participate in such investment or is willing to admit additional partners or
participants other than Interstate, Interstate will present such opportunity
to the Partnership in the manner prescribed in Section 3.6 of the
Partnership Agreement.
With respect to Interstate's investment opportunities described in clauses
1 and 2 above, Interstate (i) shall exercise best efforts to increase its
equity stake in such investments (up to the maximum
<PAGE> 69
2
of 50% of the total equity invested), and (ii) shall offer the Blackstone
Group (outside of the Partnership) an opportunity to acquire 50% of whatever
interest is available to Interstate on terms and conditions acceptable to
Interstate and the Blackstone Group.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AT JUNE 30, 1996 AND CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001012624
<NAME> INTERSTATE HOTELS CO.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 38,078
<SECURITIES> 0
<RECEIVABLES> 24,091
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 70,622
<PP&E> 412,144
<DEPRECIATION> (36,068)
<TOTAL-ASSETS> 484,926
<CURRENT-LIABILITIES> 44,091
<BONDS> 224,791
0
0
<COMMON> 272
<OTHER-SE> 211,444
<TOTAL-LIABILITY-AND-EQUITY> 484,926
<SALES> 0
<TOTAL-REVENUES> 28,241
<CGS> 0
<TOTAL-COSTS> 29,409
<OTHER-EXPENSES> 751
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,015
<INCOME-PRETAX> (1,432)
<INCOME-TAX> 6,631
<INCOME-CONTINUING> (8,063)
<DISCONTINUED> 0
<EXTRAORDINARY> (7,643)
<CHANGES> 0
<NET-INCOME> (15,706)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0<F1>
<FN>
<F1>
The Company believes historical earnings per share are not meaningful due to
predecessor entities being organized as S corporations, partnerships, and
limited liability companies. Rather, pro forma earnings per share are a more
meaningful measure of the Company's results of operations for the period
presented. Pro forma earnings per share for the six months ended June 30, 1996,
and 1995 were $.38 and $.25, respectively.
</FN>
</TABLE>
