CAPSTAR MANAGEMENT COMPANY, L.P.
First Amendment to Amended and
RESTATED AGREEMENT OF LIMITED PARTNERSHIP
THIS FIRST AMENDMENT ("Amendment") is entered into as of the 1st day
of April, 1997 by and among CapStar Hotel Company, a Delaware corporation, as
General Partner, and the Persons listed on Exhibit A annexed hereto, as Limited
Partners, for the purpose of amending that certain Amended and Restated
Agreement of Limited Partnership of CapStar Management Company, L.P. (the
"Partnership") dated as of August 23, 1996 (the "Existing Partnership
Agreement"). Capitalized terms used and not otherwise defined herein shall have
the respective meanings given such terms in the Existing Partnership Agreement.
W I T N E S S E T H :
1. The Persons designated as "Contributors" on Exhibit A annexed
hereto are this day making Capital Contributions to the Partnership, which
Capital Contributions are more particularly described in Exhibit A annexed
hereto.
2. The General Partner wishes, in connection with the making of such
Capital Contributions, to admit the Contributors as Additional Limited Partners.
3. The General Partner wishes, pursuant to Section 4.2 of the
Existing Partnership Agreement, to cause the Partnership to issue to the
Contributors Partnership Interests having the rights, preferences and other
privileges hereinafter described.
4. The General Partner wishes to amend certain provisions of the
Existing Partnership Agreement.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. AMENDMENTS TO EXISTING PARTNERSHIP AGREEMENT.
1.1 The following changes are hereby made to the definitions set
forth in Article 1 of the Existing Partnership Agreement:
1.1.1 The words "or the Carrying Value of such property as
determined pursuant to Exhibit B hereof, as the case may be" shall be inserted
after the words "704(c) Value of such property" in the definition of "Carrying
Value".
1.1.2 The word "of," as it appears prior to "(C)" in the
definition of "Indemnitees," is hereby deleted and the word "or" inserted in its
place.
1.1.3 The words "or a Limited Partner" are hereby inserted
after the words "General Partner" in clauses (i)(A) and (i)(B) of the definition
of "Indemnitee".
1.1.4 The language "representing a fractional part of the
Partnership Interests of all Partners," contained in the definition of "Limited
Partner Interest," is hereby deleted.
1.1.5 The word "not," contained in the definition of
"Nonrecourse Built-In Gain," is hereby deleted and the word "no" inserted in its
place.
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1.1.6 The first sentence of the definition of "Partnership
Unit" is hereby amended to read as follows:
"Partnership Unit" means (i) a fractional undivided share of the
Partnership Interests of all Partners (other than the Preferred Units);
and (ii) each Preferred Unit.
1.1.7 The following language is hereby inserted after the
words "Partnership Units," each time they appear, in the definition of
"Percentage Interest":
"(other than Preferred Units)".
1.1.8 The following definitions are hereby added to Article 1
of the Existing Partnership Agreement:
"CMC II" means CapStar Management Company II, L.P., a Delaware
limited partnership of which the Partnership is a limited partner.
Notwithstanding anything to the contrary contained in this Article, CMC II
shall be deemed a Subsidiary of the Partnership for purposes of this
Agreement.
"CapStar General" means CapStar General Corp., a Delaware
corporation which is the general partner of CMC II. CapStar General is a
wholly-owned subsidiary of CapStar. "CapStar General" also includes any
successor general partner of CMC II.
"Effective Tax Rate" means, for any year, the percentage determined
by the General Partner to be a reasonable estimate of the combined
effective rate of Federal, state and local income tax (giving effect to
the deduction of state and local income taxes, as applicable, for Federal
and state income tax purposes) that would be applicable to the Partnership
if it were a C corporation.
"Final Determination" means (i) a decision, judgment, decree or
other order by a court of original jurisdiction which has become final
(i.e., the time for filing an appeal shall have expired without any appeal
having been filed), (ii) a closing agreement made under Section 7121 of
the Code or any other settlement agreement entered into in connection with
an administrative or judicial proceeding, (iii) the expiration of the time
for instituting a claim for refund, or if a claim was filed, the
expiration of the time for instituting suit with respect thereto, or (iv)
in any case where judicial review shall be
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unavailable, a decision, judgment, decree or other order of an
administrative official or agency which has become final.
"Operating Partnership" means each of CMC II and the Partnership.
"Preferred Capital," with respect to each Preferred Unit, means an
amount equal to $25.50.
"Preferred Return," with respect to each Preferred Unit, means a
preferred distribution right at the rate of 6.5% per annum, compounded
quarterly to the extent not distributed pursuant to Section 5.1.A(1), on
the Preferred Capital with respect to such Preferred Unit.
"Preferred Sub-Account," with respect to a Preferred Unitholder,
means an account maintained on the same basis as the Partners' Capital
Accounts, but taking into account only the aggregate Preferred Capital,
allocations of Net Income and Net Loss and distributions with respect to
its Preferred Units (including distributions of Preferred Return).
"Preferred Unit" means a Partnership Unit having the rights,
preferences and privileges assigned to Preferred Units pursuant to the
further provisions of this Agreement. The ownership of Preferred Units by
the Partners is as set forth in Exhibit A annexed hereto, as such Exhibit
may be amended from time to time.
"Preferred Unitholder" means a Limited Partner that holds one or
more Preferred Units.
"Unpaid Preferred Return," with respect to each Preferred Unit,
means an amount equal to the excess, if any, of (x) the aggregate
Preferred Return on the Preferred Capital with respect to such Preferred
Unit over (y) the aggregate of all amounts previously distributed with
respect to such Preferred Unit pursuant to Section 5.1.A(1).
1.2 The penultimate sentence of Section 4.1 of the Existing
Partnership Agreement is hereby amended to read as follows:
A number of Partnership Units held by the General Partner equal to one
percent (1%) of all outstanding Partnership Units (other than Preferred
Units) shall be the General Partner Interest.
1.3 The words "(other than such portion of such proceeds as is
contributed to CapStar General as described in Section 4.2.C)" are hereby
inserted
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after the words "shares of the General Partner" in clause (a)(2) of Section
4.2.A of the Existing Partnership Agreement.
1.4 The words "subject to the provisions of Section 4.2.C" are
hereby inserted at the beginning of clause (y) at the end of Section 4.2.B of
the Existing Partnership Agreement.
1.5 The following Section 4.2.C is hereby added to the Existing
Partnership Agreement.
C. The parties acknowledge (i) that CMC II carries on activities
similar to those of the Partnership, (ii) that the General Partner may, in
connection with the redemption of interests in CMC II, issue New
Securities to the partners of CMC II and (iii) that the General Partner
may otherwise issue New Securities and cause the net proceeds of such
issuance to be contributed to CapStar General (which will thereupon
contribute such net proceeds to CMC II) and not to the Partnership as
hereinabove provided. The parties further acknowledge that,
notwithstanding anything to the contrary set forth in Section 4.2.B, the
General Partner shall have the right so to issue such New Securities
without contributing the net proceeds from the issuance thereof (or from
the exercise of rights contained therein) to the Partnership so long as
the General Partner determines in good faith that such issuance, and/or
the contribution of the net proceeds thereof to CapStar General or the
partners of CMC II, is in the interest of CapStar and is not prejudicial
to the Partnership.
1.6 The following words are hereby inserted after the words "Section
4.2" in Section 4.3 of the Existing Partnership Agreement: "in each case to the
extent the proceeds thereof are required to be contributed to the Partnership as
provided in Section 4.2.B hereof,".
1.7 Section 5.1 of the Existing Partnership Agreement is hereby
amended to read as follows:
SECTION 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS
A. Distributions shall be made to the Partners as follows and in the
following order of priority:
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(1) First, except to the extent the General Partner, by
resolution of its Board of Directors, determines that the Partnership does
not have cash available for distribution, to the Preferred Unitholders
with respect to their Preferred Units, in proportion to and to the extent
of their respective amounts of Unpaid Preferred Return on such Preferred
Units at such time; and
(2) Thereafter, to the extent that the General Partner
determines that the Partnership has cash available for distribution, to
the Partners in accordance with their respective Percentage Interests.
Distributions made pursuant to clause (1) shall be made on a quarterly
basis.
B. (1) Notwithstanding the provisions of Section 5.1.A, if it is
anticipated that the Partners will recognize taxable income with respect
to the Partnership for any year, the General Partner shall make a good
faith estimate of the amount of such taxable income to be recognized by
each of the Partners (other than any taxable income recognized as a result
of the allocations of Net Income pursuant to Sections 6.1.A(1), (2) and
(3)), and distributions of Partnership cash shall be made to the Partners,
in proportion to their respective Percentage Interests, in an aggregate
amount sufficient to permit each of the Partners to pay taxes (calculated
at a rate equal to the Effective Tax Rate) on their distributive shares of
such taxable income. Distributions required to be made pursuant to this
Section 5.1.B(1) shall be made at such times as may be appropriate to
permit the Partners to make estimated tax payments; provided that if any
Partnership Unit is redeemed pursuant to Section 8.6 or 8.7, the fact that
such Partner may no longer hold any Partnership Units after such
redemption shall not affect such Partner's right to receive any
distributions required pursuant to this Section 5.1.B(1) with respect to
the applicable taxable income allocated to such Partnership Unit up to and
including the date of such redemption.
(2) The computation of the amounts required to be distributed
pursuant to Section 5.1.B(1) for any year shall be adjusted (i) prior to
each distribution for such year, (ii) upon the filing of the Partnership's
Federal income tax return for such year, (iii) upon any Final
Determination of the Partnership's taxable income for such year and (iv)
at any other time when in the good faith judgment of the General Partner
it appears that a prior estimate has been incorrect, in each case so as to
take into account actual determinations and/or revised estimates of the
Partners' shares of taxable income for such year for Federal income tax
purposes. Following any such adjustment, the amounts to be distributed
pursuant to Section 5.1.B(1) shall be adjusted appropriately, or
additional distributions shall be made, so as to give effect to such
actual determinations and/or revised estimates.
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1.8 Sections 6.1.A and 6.1.B of the Existing Partnership Agreement
are hereby amended to read as follows:
A. NET INCOME. After giving effect to the special allocations set
forth in Section 1 of Exhibit C, Net Income shall be allocated as follows
and
in the following order of priority:
(1) First, to the General Partner until the aggregate amount
of Net Income allocated to it pursuant to this clause (1) for the current
and all prior years equals the aggregate amount of Net Loss previously
allocated to it pursuant to the proviso of Section 6.1.B(3);
(2) Second, to the Partners, in proportion to and to the
extent of any deficit balances in their respective Capital Accounts;
(3) Third, to the Preferred Unitholders with respect to their
Preferred Units, in proportion to and to the extent of the excess, if any,
of (x) each such Preferred Unitholder's aggregate Preferred Capital with
respect to such Preferred Units over (y) the balance of such Preferred
Unitholder's Preferred Sub-Account; and
(4) Thereafter, to the Partners in accordance with their
respective Percentage Interests.
B. NET LOSS. After giving effect to the special allocations set
forth in Section 1 of Exhibit C, Net Loss shall be allocated as follows
and in the
following order of priority:
(1) First, to the Partners in proportion to and to the extent
of the excess, if any, of (x) each such Partner's Capital Account balance
over (y) such Partner's aggregate Preferred Capital with respect to such
Partner's Preferred Units (if any);
(2) Second, to the Preferred Unitholders, in proportion to
and to the extent of their remaining Capital Account balances; and
(3) Thereafter, to the Partners in accordance with their
respective Percentage Interests; provided that, to the extent any such
allocation to a Limited Partner would (after giving effect to the
allocations required under Sections 1.A and 1.B of Exhibit C) give such
Limited Partner an Adjusted Capital Account Deficit, such amount of Net
Loss shall instead be allocated to the General Partner.
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1.9 The words "or the exercise by the General Partner of its rights
under Section 8.7" are hereby inserted after the words "Section 8.6" in Section
7.1(A)(20) of the Existing Partnership Agreement.
1.10 The following words are hereby inserted at the end of Section
7.4.B of the Existing Partnership Agreement:
Notwithstanding anything to the contrary contained in the foregoing: (i)
to the extent costs and expenses of the General Partner relate exclusively
to the ownership and operation of, or are for the exclusive benefit of,
CMC II, the Partnership shall have no obligation to reimburse the General
Partner for such costs and expenses; and (ii) costs and expenses of the
General Partner which do not relate exclusively to the ownership or
operation of, and are not for the exclusive benefit of, either the
Partnership or CMC II shall be shared by the Partnership and CMC II in
such manner the General Partner shall determine in good faith.
1.11 The following words are hereby inserted at the end of Section
7.4.C of the Existing Partnership Agreement:
To the extent such expenses relate to the organization or reorganization
of the General Partner or the issuance of CapStar Shares or New
Securities, they shall be reimbursed on the basis described in clause (ii)
of the last sentence of Section 7.4.B.
1.12 Section 7.4.D of the Existing Partnership Agreement is hereby
amended and restated in its entirety to read as follows:
D. In the event that the General Partner shall elect to purchase
from its shareholders CapStar Shares for the purpose of delivering such
shares to satisfy an obligation under any dividend reinvestment program
adopted by the General Partner, any employee stock purchase plan adopted
by the General Partner, or any similar obligation or arrangement
undertaken by the General Partner in the future, the purchase price paid
by the General Partner for such CapStar Shares and any other expenses
incurred by the General Partner in connection with such purchase shall be
considered expenses of the Partnership and CMC II and shall be reimbursed
to the General Partner by the Partnership and CMC II on the basis
described in clause (ii) of the last sentence of Section 7.4.B, subject to
the condition that: (i) if such CapStar Shares subsequently are to be sold
by the General Partner, the General Partner shall pay to the
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Partnership and CMC II any proceeds received by the General Partner for
such CapStar Shares in the same proportion as the reimbursements made with
respect to such CapStar Shares pursuant to the preceding portion of this
sentence (provided that a transfer of CapStar Shares for Partnership Units
pursuant to Section 8.6 or 8.7 (or for partnership units in CMC II
pursuant to the corresponding provisions of the partnership agreement of
CMC II) shall not be considered a sale for such purposes); and (ii) if
such CapStar Shares are not retransferred by the General Partner within 30
days after the purchase thereof, the General Partner shall cause the
Partnership to cancel a number of Partnership Units (rounded to the
nearest whole Partnership Unit) held by the General Partner equal to the
product obtained by multiplying the number of such CapStar Shares (to the
extent the reimbursement with respect thereto was made by the Partnership
and not by CMC II) by a fraction, the numerator of which is one and the
denominator of which is the Conversion Factor.
1.13 Section 7.5.A of the Existing Partnership Agreement is hereby
amended and restated in its entirety to read as follows:
A. The General Partner shall not directly or indirectly enter into
or conduct any business, other than in connection with the ownership,
acquisition and disposition of stock, partnership interests or other
interests in the Partnership, CapStar General and any other entity formed
to own interests in the Partnership or CMC II (including CapStar LP), the
management of the businesses of the Partnership, CapStar General and any
other such entity, the management of the business of CMC II (to the extent
such management is delegated to the General Partner by CapStar General)
and such activities as are incidental thereto. The General Partner shall
not incur any debts other than (i) debt of the Partnership or CMC II for
which it may be liable in its capacity as General Partner of the
Partnership or as a guarantor or co-borrower, and (ii) indebtedness for
borrowed money the proceeds from which borrowing are loaned to the
Partnership, CapStar General or CMC II on the same terms and conditions as
the borrowing by the General Partner. The General Partner shall not hold
any assets other than the stock, partnership interests and other interests
hereinabove referred to, other than such bank accounts or similar
instruments or accounts as it deems necessary to carry out its
responsibilities contemplated under this Agreement, the responsibilities
with respect to CMC II delegated to it by CapStar General and other
activities consistent with the foregoing provisions of this Section 7.5A.
The General Partner and any Affiliates of the General Partner may acquire
Limited Partner Interests and shall be entitled to exercise all rights of
a Limited Partner relating to such Limited Partner Interests.
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1.14 Section 7.5.B of the Existing Partnership Agreement is hereby
amended and restated in its entirety to read as follows:
B. The General Partner may, from time to time, purchase and/or
redeem CapStar Shares (including, without limitation, in connection with a
stock repurchase or similar program) if the General Partner determines
that it is in the interest of the Partnership and CMC II to purchase
and/or redeem CapStar Shares. In the event that the General Partner
purchases and/or redeems CapStar Shares, then the General Partner and
CapStar General shall cause the Partnership and CMC II to purchase from
the General Partner and/or CapStar General (and/or any other Partner (or
partner in CMC II) in which the General Partner owns a direct or indirect
interest), concurrently with the CapStar Share purchase or redemption,
Partnership Units and partnership units in CMC II (the "CMC II Units").
The relative amounts of Partnership Units and CMC II Units (collectively,
"Units") purchased by the Operating Partnerships shall be determined by
reference to the number of Units in each Operating Partnership owned
directly or indirectly by the General Partner. The purchase of such Units
shall be for the same consideration (including any fees, concessions and
expenses payable by the General Partner) and on the same terms as those
applicable to the purchase or redemption by the General Partner of the
related CapStar Shares.
1.15 The words "Except as provided in" at the beginning of Section
7.6.B of the Existing Partnership Agreement are hereby deleted and replaced by
the words "Subject to the provisions of".
1.16 The following words are hereby inserted at the end of Section
7.6.D of the Existing Partnership Agreement: "If any such employees also
perform, directly or indirectly, services for CMC II or any of its Subsidiaries,
then the plans benefitting such employees shall be funded by the Partnership and
CMC II in such relative amounts as the General Partner and CapStar General shall
determine in good faith."
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1.17 The words "(including CMC II and CapStar General)" are hereby
inserted after the words "Affiliates of the Partnership" in Section 7.6.E of the
Existing Partnership Agreement.
1.18 Section 7.8.B of the Existing Partnership Agreement is hereby
amended and restated in its entirety to read as follows:
B. The Limited Partners expressly acknowledge that, so long as the
General Partner acts in good faith and in accordance with the provisions
of this Agreement, the General Partner shall not be liable to the
Partnership or to any Partner for monetary damages or otherwise, and no
Limited Partner shall have any claim against the General Partner, by
reason of any action, decision or omission which is alleged to have
benefitted the General Partner or CMC II at the expense of, or without
corresponding benefit to, the Partnership (including, without limitation,
any decision to cause a hotel to be acquired by CMC II or any of its
Subsidiaries rather than by the Partnership or any of its Subsidiaries) or
which is alleged not to have taken into account the separate interests of
the Limited Partners.
1.19 The following language is hereby added at the end of Section
8.6.A of the Existing Partnership Agreement:
Notwithstanding anything to the contrary set forth above, if any Preferred
Unitholder shall exercise the Redemption Right with respect to any
Preferred Units, the Partnership shall be obligated to pay to such
Preferred Unitholder, together with the Cash Amount, the Unpaid Preferred
Return attributable to the Preferred Units being redeemed as of the date
such payment is made.
1.20 The following language is hereby inserted after the words
"Section 8.6" in Section 8.4 of the Existing Partnership Agreement: "(including
any such right exercised after the giving of a Mandatory Redemption Notice as
provided in Section 8.7)".
1.21 Section 8.5(D) of the Existing Partnership Agreement is hereby
renumbered Section 8.6(D), and the numeral "180" in said Section is hereby
replaced by the numeral "30."
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1.22 The words "Except as provided in Section 8.6.B," are inserted
at the beginning of the fourth sentence of Section 8.6.A of the Existing
Partnership Agreement.
1.23 The last sentence of the first paragraph of Section 8.6.A of
the Existing Partnership Agreement is hereby deleted.
1.24 The word "in" in the last sentence of the first paragraph of
Section 8.6.B of the Existing Partnership Agreement is hereby deleted, and the
words "on the" are hereby inserted in its place.
1.25 The following language is inserted at the end of Section 8.6.B
of the Existing Partnership Agreement:
Notwithstanding anything to the contrary contained in the foregoing or in
Section 8.6.A, if the Cash Amount with respect to a redemption of
Partnership Units is, pursuant to Section 8.6.D hereof, paid after the
Specified Redemption Date, then (i) such redemption shall not occur until
the Cash Amount is paid and (ii) the Limited Partner in question (or its
Assignee) shall have the right to continue receiving distributions
hereunder until the date of such redemption or as otherwise provided in
Section 5.1.B(1).
In addition, notwithstanding anything to the contrary contained in Section
8.6.A, if the General Partner exercises its right to satisfy the
Redemption Right pursuant to this Section 8.6.B, then, if the Redeeming
Partner is a Preferred Unitholder: (i) the General Partner shall be
obligated to pay to such Preferred Unitholder, together with the payment
of the Cash Amount or the delivery of CapStar Shares, an amount equal to
the Unpaid Preferred Return attributable to such Preferred Units as of the
date such payment is made; and (ii) if the General Partner has elected to
deliver CapStar Shares to such Preferred Unitholder, the General Partner
shall have the right to satisfy its obligation under clause (i) of this
sentence by delivering to such Preferred Unitholder a number of CapStar
Shares equal to the amount of such Unpaid Preferred Return DIVIDED BY the
Value on the Valuation Date of one CapStar Share (rounded down to the
nearest whole number of CapStar Shares if such quotient is not a whole
number).
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1.26 The following Section 8.6.E is hereby added to the Existing
Partnership Agreement:
E. Notwithstanding anything to the contrary hereinabove contained, except
as provided in Section 8.7.A, no Limited Partner shall be entitled to
exercise the Redemption Right with respect to any Preferred Unit as to
which the Mandatory Redemption Notice (as hereinafter defined) has been
given.
1.27 The following Section 8.6.F is hereby added to the Existing
Partnership Agreement:
F. In addition to the right of redemption hereinabove provided for
in this Section 8.6, the Limited Partners, other than CapStar LP, shall
have the right, on one occasion only on or after the seventh anniversary
of the date of this Agreement, to require the Partnership to redeem all of
their Preferred Units then outstanding at a redemption price equal to
$25.50 per Preferred Unit. If such right is exercised, then, for purposes
of this Agreement but subject to the further provisions of this Section
8.6.F, (i) such exercise shall be deemed to constitute, as to each Limited
Partner (other than CapStar LP), the exercise of the Redemption Right,
(ii) each such Limited Partner shall be deemed a Redeeming Partner, and
(iii) such redemption shall, except as provided above and except as
hereinafter provided, be treated in the same manner as a redemption
pursuant to Section 8.6.A hereof; provided that (A) the Notice of
Redemption shall be signed by all such Limited Partners, (B) each Notice
of Redemption shall state specifically that it is being given under this
Section 8.6.F and (C) such Limited Partners shall be entitled to elect
(which election shall be indicated in the Notice of Redemption) whether to
be paid the Cash Amount (which term, for purposes of this Section 8.6.F,
shall mean the redemption price provided for above) or to receive CapStar
Shares in exchange for their Preferred Units (the number of CapStar Shares
so to be delivered to such Limited Partners to be computed in accordance
with Section 8.7.B hereof). In the event such Limited Partners elect to
receive CapStar Shares in exchange for their Preferred Units, the
provisions of Section 8.6.B shall apply (except that references therein to
the General Partners's election to deliver CapStar Shares to the Redeeming
Partners shall instead be deemed references to the election of the Limited
Partners to receive CapStar Shares). The redemption right provided for in
this Section 8.6.F may be exercised only in conjunction with the exercise
of the redemption right provided for in Section 8.6.F of the CMC II
Partnership Agreement, and the Limited Partners' election hereunder
whether to be paid the Cash Amount or
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to receive CapStar Shares shall correspond to the election of the limited
partners of CMC II under said Section 8.6.F.
1.28 The following Section 8.7 is hereby added to the Existing
Partnership Agreement:
SECTION 8.7 MANDATORY REDEMPTION.
A. Except as otherwise provided in the last sentence of this
Section 8.7.A, the Partnership shall have the right ("Mandatory Redemption
Right"), at any time on or after the third anniversary of the date of this
Amendment, to redeem all or any portion of the Preferred Units at a
redemption price equal to $25.50 per Preferred Unit; provided, however,
that any such redemption shall be effected on a PRO RATA basis among all
of the Preferred Unitholders. The Mandatory Redemption Right shall be
exercised pursuant to a notice (the "Mandatory Redemption Notice")
delivered by the Partnership to the Preferred Unitholders whose Preferred
Units are being redeemed. If the Mandatory Redemption Notice is given to a
Preferred Unitholder, then the redemption of such Preferred Unitholder's
Preferred Units shall take place on the tenth Business Day after the
giving of such Notice. On such tenth Business Day, the Partnership shall
pay to such Preferred Unitholder the redemption price hereinabove provided
for, and such Preferred Unitholder shall deliver to the Partnership such
instruments of transfer as the Partnership shall reasonably require
assigning to the Partnership the Preferred Units being redeemed, free and
clear of all liens and encumbrances. Such Preferred Unitholder shall pay
any state or local property transfer tax payable in connection with such
transfer. Notwithstanding anything to the contrary contained in the
foregoing, if, within 5 Business Days after the giving of the Mandatory
Redemption Notice, any Preferred Unitholder gives the Redemption Notice
with respect to the Preferred Units specified in such Mandatory Redemption
Notice, then such Mandatory Redemption Notice shall be deemed null and
void and the provisions of Section 8.6 shall apply with respect to such
Preferred Units.
B. (i) Notwithstanding anything to the contrary contained in
Section 8.7.A, the General Partner shall have the right to purchase all or
any portion of the Preferred Units in lieu of the Partnership's exercise
of its Mandatory Redemption Right. Any such purchase by the General
Partner of the Preferred Units shall be on the terms and conditions set
forth in Section 8.7.A, with the General Partner performing the
obligations of the Partnership under such section; provided, however, that
the General Partner shall have the right (the "Share Exchange Right"), in
lieu of paying to the Preferred Unitholder in question the redemption
price provided for in Section 8.7.A, to deliver to such Preferred
Unitholder a number of CapStar
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Shares equal to (i) the number of Preferred Units being purchased,
multiplied by (ii) $25.50, divided by (iii) the Value per CapStar Share on
the Valuation Date (which amount shall be rounded down to the nearest
whole number if it is not a whole number). The Share Exchange Right shall
be exercised by notice included in the Mandatory Redemption Notice. For
purposes of this Section 8.7, the term "Valuation Date" shall mean the
date on which the Mandatory Redemption Notice is delivered to the
Preferred Unitholder in question or, if such date is not a Business Day,
the first Business Day thereafter. If the General Partner purchases
Preferred Units pursuant to this Section 8.7.B, the General Partner shall
thereafter be treated for all purposes as the owner of such Preferred
Units.
(ii) Notwithstanding anything to the contrary contained
in clause (i) this Section 8.7.B, if the General Partner shall exercise
the Share Exchange Right with respect to a Preferred Unitholder on or
after the third anniversary of the date hereof, such Preferred Unitholder
shall have the right, by notice given to the General Partner within five
Business Days after the giving of the Mandatory Redemption Notice, to
receive cash for its Preferred Units in lieu of accepting delivery of
CapStar Shares therefor. If any Preferred Unitholder shall exercise such
right, then the Partnership or the General Partner shall pay to such
Preferred Unitholder the redemption price for the Preferred Units being
redeemed as provided in Section 8.7.A or clause (i) of this Section 8.B,
as applicable. In addition to the foregoing, if the General Partner shall
exercise the Mandatory Redemption Right on or after the third anniversary
of the date hereof and shall not exercise the Share Exchange Right as to a
Preferred Unitholder, such Preferred Unitholder shall have the right, by
notice given to the General Partner within five Business Days after the
giving of the Mandatory Redemption Notice, to require the General Partner
to deliver CapStar Shares to such Preferred Unitholder in exchange for
such Preferred Unitholder's Preferred Units. If any Preferred Unitholder
shall exercise such right, then the General Partner shall so deliver such
CapStar Shares on the terms and conditions set forth in clause (i) of this
Section 8.7.B.
C. If the Mandatory Redemption Right is exercised or the
General Partner purchases Preferred Units pursuant to Section 8.7.B, then
the Partnership or the General Partner, as the case may be, shall be
required to pay to the Preferred Unitholder in question, in addition to
the payment or the delivery of CapStar Shares hereinabove provided for, an
amount equal to the Unpaid Preferred Return (as of the date such payment
is made) attributable to the Preferred Units being so redeemed or
purchased; provided, however, that if the General Partner has elected to
purchase Preferred Units by delivery of CapStar Stock and a Preferred
Unitholder has not elected, pursuant to Section 8.7.B, to receive cash in
lieu of CapStar Shares, or if a Preferred Unitholder shall elect pursuant
to Section 8.7.B to receive CapStar Shares in exchange for its Preferred
Units, the General Partner shall have the right, in lieu of
16
paying an amount equal to such Unpaid Preferred Return, to deliver to such
Preferred Unitholder a whole number of CapStar Shares equal to the amount
of such Unpaid Preferred Return (as of the date such payment is made)
DIVIDED BY the Value on the Valuation Date of one CapStar Share (rounded
down to the nearest whole number of CapStar Shares if such quotient is not
a whole number).
D. Notwithstanding the foregoing, in no event shall the
Mandatory Redemption Right be exercisable with respect to any Preferred
Unit as to which a Redemption Notice has been given as provided in Section
8.6.
1.29 The words "or Section 8.7" are hereby inserted at the end of
the last sentence of Section 11.1.A of the Existing Partnership Agreement.
1.30 The words "which has been approved by the requisite Consent of
the Partners pursuant to Section 7.3" are hereby deleted from Section 11.2.B of
the Existing Partnership Agreement.
1.31 Section 11.2.C of the Existing Partnership Agreement is hereby
amended and restated in its entirety to read as follows:
C. Notwithstanding anything to the contrary contained in Section
11.2.B, the General Partner may merge with another entity if immediately
after such merger substantially all of the assets of the surviving entity
are contributed, directly or indirectly, to the Partnership and CMC II as
capital contributions in exchange for Units having, as to each Operating
Partnership, a fair market value, as reasonably determined by the General
Partner, equal to the 704(c) Value of the assets so contributed to such
Operating Partnership. Such assets shall be allocated between the
Partnership and CMC II in such manner as the General Partner and CapStar
General shall determine in good faith.
1.32 The words "in connection with" are hereby substituted for the
word ", or" in Section 11.2.D of the Existing Partnership Agreement.
1.33 The words "and Section 11.7" are hereby inserted after the
words "Section 11.3.F" in Section 11.3.A of the Existing Partnership Agreement.
17
1.34 The last sentence of Section 11.4.C of the Existing Partnership
Agreement is hereby deleted.
1.35 The words "or Section 8.7" are hereby inserted after the words
"Section 8.6" in Sections 11.6.A, 11.6.B and 11.6.D of the Existing Partnership
Agreement.
1.36 The last sentence of Section 11.6.D of the Existing Partnership
Agreement is hereby deleted and the following sentence inserted in its place:
Without derogating from the provisions of Section 5.1.B, all distributions
attributable to such Partnership Unit before the date of such transfer,
assignment or redemption shall be made to the transferor Partner or the
Redeeming Partner or the Partner whose Preferred Units are being redeemed,
as the case may be.
1.37 The words "pursuant to Section 5.1.B" are hereby inserted in
place of the words "of the Partner Distribution Amount with respect to which the
Partnership Record Date is" and the words "of the Partner Distribution Amount"
in the last sentence of Section 12.2.C of the Existing Partnership Agreement.
1.38 The words "or the Partner whose Preferred Units are being
redeemed pursuant to Section 8.7" are hereby inserted after the words "Redeeming
Partner" in the last sentence of Section 11.6.D of the Existing Partnership
Agreement, and the portion of such sentence after the words "as the case may be"
is hereby deleted.
1.39 The words "but subject to Section 14.1.C" are hereby inserted
after the numeral "14.1.A" in Section 14.1.B of the Existing Partnership
Agreement.
18
1.40 The words "Section 11.7 (as to any then existing Limited
Partner) or" are hereby inserted after the word "amend" in clause (vi) of
Section 14.1.C of the Existing Partnership Agreement.
1.41 The words ", or (vii) amend Section 2 of Exhibit C in a manner
adverse to such Partner" are hereby added at the end of Section 14.1.C of the
Existing Partnership Agreement.
1.42 A new Section 11.7 is hereby added to the Existing Partnership
Agreement as follows:
SECTION 11.7 PLEDGES OF PARTNERSHIP INTERESTS. Except as provided in
Section 11.3.F, no Limited Partner shall pledge, hypothecate or grant a
security interest in all or any portion of its Partnership Interest;
provided, however that any Limited Partner shall have the right, as
security for a borrowing from a bank, insurance company or other
commercial lending institution (an "Institutional Lender"), to pledge or
hypothecate to such Institutional Lender, or to grant and/or sell to
and/or purchase from such Institutional Lender or an Affiliate thereof an
option with respect to, or grant to such Institutional Lender a security
interest in, all or a portion of its Partnership Units, and any transfer
of such pledged Partnership Units to such Institutional Lender (or to its
transferee in any public or private sale by such Institutional Lender)
pursuant to the exercise of rights or remedies in connection with such
pledge or option shall be permitted hereunder.
1.43 The words "or Section 11.7" are hereby inserted after the words
"Section 11.3.F" in Section 11.3.C of the Existing Partnership Agreement.
1.44 The words "or Section 11.7" are hereby inserted after the words
"Section 11.3.F" in Section 11.4.C of the Existing Partnership Agreement.
1.45 The text of Section 13.4 of the Existing Partnership Agreement
is hereby deleted in its entirety, and the words "[Intentionally left blank]"
are inserted in their place.
19
1.46 The word "for" is hereby substituted for the words "provisions
of" in Section 13.6 of the Existing Partnership Agreement.
1.47 The term "Partnership Interests" is hereby replaced by the term
"Percentage Interests" in the first sentence of Section 14.1.A and the first
sentence of Section 14.2.A of the Existing Partnership Agreement.
1.48 The following changes are hereby made to Section 14.1.C of the
Existing Partnership Agreement: (A) the words "or Mandatory Redemption Right"
are inserted after the words "Redemption Right"; and (B) the word "Sections" in
clause (iv) is changed to "Section", and the language "or 8.7" is added after
the numeral "8.6" in such clause.
1.49 The words "Subject to Section 14.1, the" are hereby substituted
for the word "The" at the beginning of Section 7.3 of the Existing Partnership
Agreement.
1.50 Exhibit A to the Existing Partnership Agreement is hereby
deleted in its entirety and replaced with Exhibit A annexed hereto.
1.51 The words "and if the Regulations currently in effect are not
modified" are hereby inserted immediately after the words "the Code" in Section
1.C of Exhibit B to the Existing Partnership Agreement.
1.52 The words "and Section 1 of Exhibit C" are hereby inserted
immediately after the reference to Section 6.1 in Section 1.D(1) of Exhibit B to
the Existing Partnership Agreement.
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1.53 The last sentence of Section 1.E of Exhibit B to the Existing
Partnership Agreement is hereby deleted in its entirety.
1.54 The first sentence of Section 1.D of Exhibit C to the Existing
Partnership Agreement is hereby amended to read as follows:
Nonrecourse Deductions for any Partnership Year shall be allocated to the
Partners as Net Loss in accordance with Section 6.1.B of the Agreement.
1.55 The following paragraph G is hereby inserted at the end of
Section 1 of Exhibit C to the Existing Partnership Agreement:
G. REGULATORY ALLOCATIONS. The allocations set forth in Sec tions
1.A through 1.F (the "REGULATORY ALLOCATIONS") shall be taken into account
in allocating items of income, gain, loss and deduction among the Partners
so that, to the extent possible, the net amount of such allocations of
other items and the Regulatory Allocations to each Partner shall be equal
to the net amount that would have been allocated to each such Partner if
the Regulatory Allocations had not occurred.
1.56 The words ", subject to the following, have the authority to
elect the method to be used by the Partnership and such election shall be
binding on all Partners. With respect to the Contributed Property transferred to
the Partnership on or about the Effective Date, the Partnership shall" shall be
deleted from Section 2.C of Exhibit C to the Existing Partnership Agreement.
1.57 The following paragraph D is hereby inserted at the end of
Section 2 of Exhibit C to the Existing Partnership Agreement:
D. Any foreign or other tax credits of the Partnership shall be
allocated among the Partners in proportion to the allocations of income
with respect to which such credits arose.
1.58 Exhibit D to the Existing Partnership Agreement is hereby
deleted in its entirety and replaced with Exhibit B annexed hereto.
21
1.59 All capitalized terms defined in the Existing Partnership
Agreement which are no longer used in such Agreement, as amended by this
Amendment, are hereby deleted.
2. Admission of Additional Limited Partners;
ADDITIONAL MATTERS RELATING TO CONTRIBUTORS
2.1 All capitalized terms used in this Article 2 or in Article 3 and
not otherwise defined shall have the respective meanings given them in the
Existing Partnership Agreement, as amended by this Amendment.
2.2 Each of the Contributors is hereby admitted to the Partnership
as a Limited Partner pursuant to Section 4.2.A of the Existing Partnership
Agreement. Each of the Contributors has contributed to the Partnership the
property described in Exhibit A annexed hereto, and each Contributor shall
receive, pursuant to this Amendment, the Partnership Units listed opposite the
name of such Contributor in said Exhibit A. Each Contributor hereby agrees to be
bound of all of the provisions of the Existing Partnership Agreement, as amended
hereby.
2.3 The parties agree that, for purposes of Section 8.6 of the
Partnership Agreement, the date before which the Redemption Right may not be
exercised by the Contributors shall be August 23, 1997.
3. RESTRUCTURING OF CAPSTAR ENTITIES. The parties (including, without
limitation, the Contributors) acknowledge that, in connection with a proposed
restructuring of the General Partner and its Subsidiaries, the General Partner
intends to cause the following actions to be accomplished: (i) the contribution
by the Partnership to CMC II of certain assets owned by the Partnership (such
assets to be
22
selected by the General Partner in its sole discretion) in exchange for a number
of CMC II Units to be determined in good faith by CGC, (ii) the distribution by
the Partnership to CHC of all of the Partnership's partnership units in CMC II
in redemption of an equal number of Partnership Units and (iii) the contribution
by CHC to CGC of all of such partnership units in CMC II. The Limited Partners
(including the Contributors) hereby consent to such actions and agree that,
notwithstanding anything to the contrary contained in the Existing Partnership
Agreement (including Section 14.1.C thereof), the General Partner shall have the
right, without the consent of the Limited Partners, to make such amendments to
the Existing Partnership Agreement, as amended hereby, as the General Partner
determines in good faith are necessary or desirable to accomplish such actions.
The provisions of Section 2.4 of the Existing Partnership Agreement shall apply
with respect to such amendments.
23
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the day and year first above written.
GENERAL PARTNER:
CAPSTAR HOTEL COMPANY
By: /s/ Xxxx X. Xxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxx
Title: Exec. V.P.
LIMITED PARTNERS:
CAPSTAR LP CORPORATION
By: /s/ Xxxx X. Xxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxx
Title: Exec. V.P.
24
GQ INDIANAPOLIS ASSOCIATES, LTD.
By: GQ Indianapolis Hospitality, Inc.
By: /s/ Xxxxxxx Xxxxxx
------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
NAME AND ADDRESS OF PARTNER PARTNERSHIP UNITS PARTNERSHIP INTEREST
--------------------------- ----------------- --------------------
GENERAL PARTNER:
CapStar Hotel Company 185,270 1%
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
LIMITED PARTNERS:
CapStar Hotel Company 18,118,170 97.79%
0000 Xxxxxxxxx Xxxxxx, X.X. No Preferred Xxxxx
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
CapStar LP Corporation 200,881 1.09%
0000 Xxxxxxxxx Xxxxxx, X.X. No Preferred Xxxxx
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
XXXXXXXXXXX
XX Indianapolis Associates Ltd. 22,743 .12%
545 E. Xxxx Xxxxxxxxx Freeway No Preferred Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
CAPITAL CONTRIBUTIONS MADE BY CONTRIBUTOR
Indianapolis Doubletree Hotel
EXHIBIT B
"EXHIBIT D
VALUE OF CONTRIBUTED PROPERTY
UNDERLYING PROPERTY 704(C) VALUE AGREED VALUE
------------------- ------------ ------------
All properties To be determined by general partner in the
exercise of its reasonable discretion
