SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF BLUEKNIGHT ENERGY PARTNERS, L.P.
Exhibit
3.1
SECOND
AMENDED AND RESTATED
AGREEMENT
OF LIMITED PARTNERSHIP
OF
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TABLE
OF CONTENTS
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ARTICLE
I
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DEFINITIONS
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Section
1.1
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2
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Section
1.2
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24
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ARTICLE
II
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ORGANIZATION
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Section
2.1
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24
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Section
2.2
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24
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Section
2.3
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25
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Section
2.4
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25
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Section
2.5
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25
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Section
2.6
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26
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Section
2.7
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27
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Section
2.8
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27
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ARTICLE
III
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RIGHTS
OF LIMITED PARTNERS
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Section
3.1
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28
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Section
3.2
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28
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Section
3.3
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28
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Section
3.4
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28
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ARTICLE
IV
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CERTIFICATES;
RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF
PARTNERSHIP INTERESTS
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Section
4.1
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30
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Section
4.2
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30
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Section
4.3
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31
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Section
4.4
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32
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Section
4.5
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32
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Section
4.6
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33
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Section
4.7
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34
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Section
4.8
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34
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Section
4.9
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36
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Section
4.10
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37
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Section
4.11
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38
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Section
4.12
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39
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ARTICLE
V
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CAPITAL
CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
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Section
5.1
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41
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Section
5.2
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41
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Section
5.3
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42
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Section
5.4
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42
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Section
5.5
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43
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Section
5.6
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47
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Section
5.7
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48
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Section
5.8
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48
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Section
5.9
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49
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Section
5.10
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49
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Section
5.11
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50
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i
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ARTICLE
VI
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ALLOCATIONS
AND DISTRIBUTIONS
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Section
6.1
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52
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Section
6.2
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61
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Section
6.3
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64
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Section
6.4
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64
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Section
6.5
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67
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Section
6.6
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67
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Section
6.7
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68
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Section
6.8
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69
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Section
6.9
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69
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ARTICLE
VII
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MANAGEMENT
AND OPERATION OF BUSINESS
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Section
7.1
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70
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Section
7.2
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72
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Section
7.3
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73
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Section
7.4
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73
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Section
7.5
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74
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Section
7.6
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76
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Section
7.7
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77
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Section
7.8
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78
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Section
7.9
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79
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Section
7.10
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81
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Section
7.11
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81
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Section
7.12
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82
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Section
7.13
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85
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ARTICLE
VIII
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BOOKS,
RECORDS, ACCOUNTING AND REPORTS
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Section
8.1
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86
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Section
8.2
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86
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Section
8.3
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86
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ARTICLE
IX
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TAX
MATTERS
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Section
9.1
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87
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Section
9.2
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87
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Section
9.3
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87
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Section
9.4
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88
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ARTICLE
X
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ADMISSION
OF PARTNERS
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Section
10.1
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88
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Section
10.2
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89
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Section
10.3
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89
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ARTICLE
XI
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WITHDRAWAL
OR REMOVAL OF PARTNERS
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Section
11.1
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89
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Section
11.2
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92
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Section
11.3
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92
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Section
11.4
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94
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Section
11.5
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94
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ii
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ARTICLE
XII
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DISSOLUTION
AND LIQUIDATION
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Section
12.1
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94
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Section
12.2
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95
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Section
12.3
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96
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Section
12.4
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96
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Section
12.5
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97
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Section
12.6
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97
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Section
12.7
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97
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Section
12.8
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97
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ARTICLE
XIII
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AMENDMENT
OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
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Section
13.1
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98
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Section
13.2
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99
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Section
13.3
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100
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Section
13.4
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101
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Section
13.5
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101
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Section
13.6
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101
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Section
13.7
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102
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Section
13.8
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102
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Section
13.9
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102
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Section
13.10
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103
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Section
13.11
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103
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Section
13.12
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104
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ARTICLE
XIV
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MERGER,
CONSOLIDATION OR CONVERSION
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Section
14.1
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104
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Section
14.2
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104
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Section
14.3
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106
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Section
14.4
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108
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Section
14.5
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108
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ARTICLE
XV
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RIGHT
TO ACQUIRE LIMITED PARTNER INTERESTS
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Section
15.1
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110
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ARTICLE
XVI
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GENERAL
PROVISIONS
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Section
16.1
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112
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Section
16.2
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112
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Section
16.3
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113
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Section
16.4
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113
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Section
16.5
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113
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Section
16.6
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113
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Section
16.7
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113
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Section
16.8
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113
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Section
16.9
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113
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Section
16.10
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114
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Section
16.11
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114
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Section
16.12
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114
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iii
SECOND
AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP
OF BLUEKNIGHT ENERGY PARTNERS, L.P.
THIS
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF BLUEKNIGHT
ENERGY PARTNERS, L.P. dated as of December 1, 2009, is entered into by and
between Blueknight Energy Partners G.P., L.L.C., a Delaware limited liability
company, as the General Partner, and the other Persons who are or who become
Partners in the Partnership or parties hereto as provided herein.
RECITALS
WHEREAS,
the Partnership was formed on February 22, 2007 by filing of the Certificate of
Limited Partnership with the Delaware Secretary of State;
WHEREAS,
the General Partner and the other parties thereto entered into the First Amended
and Restated Agreement of Limited Partnership of the Partnership on July 20,
2007 (the “Original
Agreement”);
WHEREAS,
pursuant to Section 13.1(d) of the Original Agreement, the General Partner
executed Amendment No. 1 to the First Amended and Restated Agreement of Limited
Partnership of the Partnership on April 14, 2008, to be effective as of July 20,
2007 (the “First
Amendment”);
WHEREAS,
pursuant to Section 13.1(d) of the Original Agreement, the General Partner
executed Amendment No. 2 to the First Amended and Restated Agreement of Limited
Partnership of the Partnership on June 25, 2008 (the “Second
Amendment”);
WHEREAS,
the Board of Directors of the General Partner has authorized, approved and
instructed that the name of the Partnership be changed from SemGroup Energy
Partners, L.P. to Blueknight Energy Partners, L.P. (the “Name
Change”);
WHEREAS,
acting pursuant to the power and authority granted to it under
Section 13.1(a) of the Partnership Agreement, the General Partner has
determined that an amendment to effect the Name Change does not require the
approval of any Limited Partner; and
WHEREAS,
pursuant to Section 13.1(a) and 13.1(d) of the Original Agreement, the General
Partner has determined to amend and restate the Original Agreement in its
entirety to effect the Name Change and to reflect the amendments pursuant to the
First Amendment and the Second Amendment.
NOW
THEREFORE, in consideration of the covenants, conditions and agreements
contained herein, the the Original Agreement (as amended prior to the date
hereto) is hereby amended and restated in its entirety as follows:
ARTICLE
I
DEFINITIONS
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Definitions.
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The
following definitions shall be for all purposes, unless otherwise clearly
indicated to the contrary, applied to the terms used in this
Agreement.
“Acquisition” means any
transaction in which any Group Member acquires (through an asset acquisition,
merger, stock acquisition or other form of investment) control over all or a
portion of the assets, properties or business of another Person for the purpose
of increasing the long-term operating capacity or revenues of the Partnership
Group from the operating capacity or revenues of the Partnership Group existing
immediately prior to such transaction.
“Additional Book Basis” means
the portion of any remaining Carrying Value of an Adjusted Property that is
attributable to positive adjustments made to such Carrying Value as a result of
Book-Up Events. For purposes of determining the extent that Carrying Value
constitutes Additional Book Basis:
(a) Any
negative adjustment made to the Carrying Value of an Adjusted Property as a
result of either a Book-Down Event or a Book-Up Event shall first be deemed to
offset or decrease that portion of the Carrying Value of such Adjusted Property
that is attributable to any prior positive adjustments made thereto pursuant to
a Book-Up Event or Book-Down Event.
(b) If
Carrying Value that constitutes Additional Book Basis is reduced as a result of
a Book-Down Event and the Carrying Value of other property is increased as a
result of such Book-Down Event, an allocable portion of any such increase in
Carrying Value shall be treated as Additional Book Basis; provided, that the amount
treated as Additional Book Basis pursuant hereto as a result of such Book-Down
Event shall not exceed the amount by which the Aggregate Remaining Net Positive
Adjustments after such Book-Down Event exceeds the remaining Additional Book
Basis attributable to all of the Partnership’s Adjusted Property after such
Book-Down Event (determined without regard to the application of this clause (b)
to such Book-Down Event).
“Additional Book Basis Derivative
Items” means any Book Basis Derivative Items that are computed with
reference to Additional Book Basis. To the extent that the Additional Book Basis
attributable to all of the Partnership’s Adjusted Property as of the beginning
of any taxable period exceeds the Aggregate Remaining Net Positive Adjustments
as of the beginning of such period (the “Excess Additional Book
Basis”), the Additional Book Basis Derivative Items for such period shall
be reduced by the amount that bears the same ratio to the amount of Additional
Book Basis Derivative Items determined without regard to this sentence as the
Excess Additional Book Basis bears to the Additional Book Basis as of the
beginning of such period.
2
“Adjusted Capital Account”
means the Capital Account maintained for each Partner as of the end of each
fiscal year of the Partnership, (a) increased by any amounts that such Partner
is obligated to restore under the standards set by Treasury Regulation
Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under
Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b) decreased by
(i) the amount of all losses and deductions that, as of the end of such fiscal
year, are reasonably expected to be allocated to such Partner in subsequent
years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation
Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions that,
as of the end of such fiscal year, are reasonably expected to be made to such
Partner in subsequent years in accordance with the terms of this Agreement or
otherwise to the extent they exceed offsetting increases to such Partner’s
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i)
or 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The
“Adjusted Capital Account” of a Partner in respect of a General Partner Unit, a
Common Unit, a Subordinated Unit, a Class B Unit or an Incentive Distribution
Right or any other Partnership Interest shall be the amount that such Adjusted
Capital Account would be if such General Partner Unit, Common Unit, Subordinated
Unit, Class B Unit, Incentive Distribution Right or other Partnership Interest
were the only interest in the Partnership held by such Partner from and after
the date on which such General Partner Unit, Common Unit, Class B Unit,
Subordinated Unit, Incentive Distribution Right or other Partnership Interest
was first issued.
“Adjusted Operating Surplus”
means, with respect to any period, Operating Surplus generated with respect to
such period (a) less (i) any net increase in Working Capital Borrowings with
respect to such period and (ii) any net decrease in cash reserves for Operating
Expenditures with respect to such period not relating to an Operating
Expenditure made with respect to such period, and (b) plus (i) any net decrease
in Working Capital Borrowings with respect to such period and (ii) any net
increase in cash reserves for Operating Expenditures with respect to such period
required by any debt instrument for the repayment of principal, interest or
premium. Adjusted Operating Surplus does not include that portion of Operating
Surplus included in clause (a)(i) of the definition of Operating
Surplus.
“Adjusted Property” means any
property the Carrying Value of which has been adjusted pursuant to Section
5.5(d)(i) or 5.5(d)(ii).
“Affiliate” means, with
respect to any Person, any other Person that directly or indirectly through one
or more intermediaries controls, is controlled by or is under common control
with, the Person in question. As used herein, the term “control” means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
3
“Aggregate Quantity of Class B
Units” has the meaning assigned to such term in Section
5.11(a).
“Aggregate Remaining Net Positive
Adjustments” means, as of the end of any taxable period, the sum of the
Remaining Net Positive Adjustments of all the Partners.
“Agreed Allocation” means any
allocation, other than a Required Allocation, of an item of income, gain, loss
or deduction pursuant to the provisions of Section 6.1, including a Curative
Allocation (if appropriate to the context in which the term “Agreed Allocation”
is used).
“Agreed Value” of any
Contributed Property means the fair market value of such property or other
consideration at the time of contribution as determined by the General Partner.
The General Partner shall use such method as it determines to be appropriate to
allocate the aggregate Agreed Value of Contributed Properties contributed to the
Partnership in a single or integrated transaction among each separate property
on a basis proportional to the fair market value of each Contributed
Property.
“Agreement” means this Second
Amended and Restated Agreement of Limited
Partnership of Blueknight Energy Partners, L.P., as it may be amended,
supplemented or restated from time to time.
“Associate” means, when used
to indicate a relationship with any Person, (a) any corporation or organization
of which such Person is a director, officer or partner or is, directly or
indirectly, the owner of 20% or more of any class of voting stock or other
voting interest; (b) any trust or other estate in which such Person has at least
a 20% beneficial interest or as to which such Person serves as trustee or in a
similar fiduciary capacity; and (c) any relative or spouse of such Person, or
any relative of such spouse, who has the same principal residence as such
Person.
“Available Cash” means, with
respect to any Quarter ending prior to the Liquidation Date:
(a) the sum
of (i) all cash and cash equivalents of the Partnership Group on hand at the end
of such Quarter, and (ii) all additional cash and cash equivalents of the
Partnership Group on hand on the date of determination of Available Cash with
respect to such Quarter resulting from Working Capital Borrowings made
subsequent to the end of such Quarter, less
(b) the
amount of any cash reserves established by the General Partner to (i) provide
for the proper conduct of the business of the Partnership Group (including
reserves for future capital expenditures and for anticipated future credit needs
of the Partnership Group) subsequent to such Quarter, (ii) comply with
applicable law or any loan agreement, security agreement, mortgage, debt
instrument or other agreement or obligation to which any Group Member is a party
or by which it is bound or its assets are subject or (iii) provide funds for
distributions under Section 6.4 or 6.5 in respect of any one or more of the next
four Quarters; provided, however, that the General
Partner may not establish cash reserves pursuant to clause (iii) above if
the effect of such reserves would be that the Partnership is unable to
distribute the Minimum Quarterly Distribution on all Common Units, plus any
Cumulative Common Unit Arrearage on all Common Units, with respect to such
Quarter; and, provided
further, that disbursements made by a Group Member or cash reserves
established, increased or reduced after the end of such Quarter but on or before
the date of determination of Available Cash with respect to such Quarter shall
be deemed to have been made, established, increased or reduced, for purposes of
determining Available Cash, within such Quarter if the General Partner so
determines.
4
Notwithstanding
the foregoing, “Available
Cash” with respect to the Quarter in which the Liquidation Date occurs
and any subsequent Quarter shall equal zero.
“Board of Directors” means the
board of directors or managers of a corporation or limited liability company or
the board of directors or board of managers of the general partner of a limited
partnership, as applicable.
“Book Basis Derivative Items”
means any item of income, deduction, gain or loss included in the determination
of Net Income or Net Loss that is computed with reference to the Carrying Value
of an Adjusted Property (e.g., depreciation, depletion, or gain or loss with
respect to an Adjusted Property).
“Book-Down Event” means an
event that triggers a negative adjustment to the Capital Accounts of the
Partners pursuant to Section 5.5(d).
“Book-Tax Disparity” means
with respect to any item of Contributed Property or Adjusted Property, as of the
date of any determination, the difference between the Carrying Value of such
Contributed Property or Adjusted Property and the adjusted basis thereof for
federal income tax purposes as of such date. A Partner’s share of the
Partnership’s Book-Tax Disparities in all of its Contributed Property and
Adjusted Property will be reflected by the difference between such Partner’s
Capital Account balance as maintained pursuant to Section 5.5 and the
hypothetical balance of such Partner’s Capital Account computed as if it had
been maintained strictly in accordance with federal income tax accounting
principles.
“Book-Up Event” means an event
that triggers a positive adjustment to the Capital Accounts of the Partners
pursuant to Section 5.5(d).
“Business Day” means Monday
through Friday of each week, except that a legal holiday recognized as such by
the government of the United States of America or the State of Oklahoma shall
not be regarded as a Business Day.
“Capital Account” means the
capital account maintained for a Partner pursuant to Section 5.5. The
“Capital Account” of a
Partner in respect of a General Partner Unit, a Common Unit, a Subordinated
Unit, a Class B Unit, an Incentive Distribution Right or any Partnership
Interest shall be the amount that such Capital Account would be if such General
Partner Unit, Common Unit, Subordinated Unit, Class B Unit, Incentive
Distribution Right or other Partnership Interest were the only interest in the
Partnership held by such Partner from and after the date on which such General
Partner Unit, Common Unit, Class B Unit, Subordinated Unit, Incentive
Distribution Right or other Partnership Interest was first issued.
“Capital Contribution” means
any cash, cash equivalents or the Net Agreed Value of Contributed Property that
a Partner contributes to the Partnership.
5
“Capital Improvement” means
any (a) addition or improvement to the capital assets owned by any Group Member,
(b) acquisition of existing, or the construction of new, capital assets
(including pipelines, terminals, tankage, tanker trucks, docks, truck racks and
other storage, distribution or transportation facilities and related or similar
midstream assets or other assets that produce “qualifying income” as defined by
Section 7704 of the Code) or (c) capital contributions by a Group Member to a
Person in which a Group Member has an equity interest to fund such Group
Member’s pro rata share of the cost of the acquisition of existing, or the
construction of new, capital assets (including pipelines, terminals, tankage,
tanker trucks, docks, truck racks and other storage, distribution or
transportation facilities and related or similar midstream assets or other
assets that produce “qualifying income” as defined by Section 7704 of the Code)
by such Person, in each case if such addition, improvement, acquisition or
construction is made to increase the long-term operating capacity or revenues of
the Partnership Group, in the case of clauses (a) and (b), or such Person, in
the case of clause (c), from the operating capacity or revenues of the
Partnership Group or such Person, as the case may be, existing immediately prior
to such addition, improvement, acquisition or construction.
“Capital Surplus” has the
meaning assigned to such term in Section 6.3(a).
“Carrying Value” initially
means (a) with respect to a Contributed Property, the Agreed Value of such
property as of the time of Contribution, and (b) with respect to any other
Partnership property, the initial adjusted tax basis of such property for
federal income tax purposes as of the time of its acquisition by the
Partnership. The initial Carrying Value of any property shall thereafter be (i)
reduced (but not below zero) by all depreciation, amortization and cost recovery
deductions charged to the Partners’ Capital Accounts in respect of such property
and (ii) adjusted from time to time in accordance with Sections 5.5(d)(i)
and 5.5(d)(ii) and to reflect changes, additions or other adjustments to the
Carrying Value for dispositions and acquisitions of Partnership properties, as
deemed appropriate by the General Partner.
“Cause” means a court of
competent jurisdiction has entered a final, non-appealable judgment finding the
General Partner liable for actual fraud or willful misconduct in its capacity as
a general partner of the Partnership.
“Certificate” means (a) a
certificate (i) substantially in the form of Exhibit A to this Agreement, (ii)
issued in global form in accordance with the rules and regulations of the
Depositary or (iii) in such other form as may be adopted by the General Partner,
issued by the Partnership evidencing ownership of one or more Common Units or
(b) a certificate, in such form as may be adopted by the General Partner, issued
by the Partnership evidencing ownership of one or more other Partnership
Securities.
“Certificate of Limited
Partnership” means the Certificate of Limited Partnership of the
Partnership filed with the Secretary of State of the State of Delaware as
referenced in Section 7.2, as such Certificate of Limited Partnership may
be amended, supplemented or restated from time to time.
6
“Citizenship Certification”
means a properly completed certificate in such form as may be specified by the
General Partner by which a Limited Partner certifies that he (and if he is a
nominee holding for the account of another Person, that to the best of his
knowledge such other Person) is an Eligible Citizen.
“claim” (as used in Section
7.12(d)) has the meaning assigned to such term in
Section 7.12(d).
“Class B Units” means a
Partnership Security representing a fractional part of the Partnership Interests
of all Limited Partners, and having the rights and obligations specified with
respect to Class B Units in this Agreement.
“Closing Date” means the first
date on which Common Units are sold by SemGroup Holdings to the
Underwriters pursuant to the provisions of the Underwriting
Agreement.
“Closing Price” has the
meaning assigned to such term in Section 15.1(a).
“Code” means the Internal
Revenue Code of 1986, as amended and in effect from time to time. Any reference
herein to a specific section or sections of the Code shall be deemed to include
a reference to any corresponding provision of any successor law.
“Combined Interest” has the
meaning assigned to such term in Section 11.3(a).
“Commences Commercial Service”
means the date upon which a Capital Improvement is first put into commercial
service following construction and testing.
“Commission” means the United
States Securities and Exchange Commission.
“Commodity Hedge Contract”
means any commodity exchange, swap, forward, cap, floor, collar or other similar
agreement or arrangement entered into for the purpose of hedging the Partnership
Group’s exposure to fluctuations in the price of hydrocarbons.
“Common Unit” means a
Partnership Security representing a fractional part of the Partnership Interests
of all Limited Partners, and having the rights and obligations specified with
respect to Common Units in this Agreement. The term “Common Unit” does not
include a Subordinated Unit or Class B Unit prior to its conversion into a
Common Unit pursuant to the terms hereof.
“Common Unit Arrearage” means,
with respect to any Common Unit, whenever issued, as to any Quarter within the
Subordination Period, the excess, if any, of (a) the Minimum Quarterly
Distribution with respect to a Common Unit in respect of such Quarter over (b)
the sum of all Available Cash distributed with respect to a Common Unit in
respect of such Quarter pursuant to Section 6.4(a)(i).
7
“Conflicts Committee” means a
committee of the Board of Directors of the General Partner composed entirely of
two or more directors, each of whom (a) is not a security holder, officer or
employee of the General Partner, (b) is not an officer, director or employee of
any Affiliate of the General Partner, (c) is not a holder of any ownership
interest in the Partnership Group other than Common Units and (d) meets the
independence standards required of directors who serve on an audit committee of
a board of directors established by the Securities Exchange Act and the rules
and regulations of the Commission thereunder and by the National Securities
Exchange on which the Common Units are listed or admitted to
trading.
“Contributed Property” means
each property or other asset, in such form as may be permitted by the Delaware
Act, but excluding cash, contributed to the Partnership. Once the Carrying Value
of a Contributed Property is adjusted pursuant to Section 5.5(d), such property
shall no longer constitute a Contributed Property, but shall be deemed an
Adjusted Property.
“Contribution Agreement” means
that certain Closing Contribution, Conveyance, Assignment and Assumption
Agreement, dated as of July 20, 2007, among SemGroup Holdings, the General
Partner, the Partnership, the Operating Company and certain other parties,
together with the additional conveyance documents and instruments contemplated
or referenced thereunder, as such may be amended, supplemented or restated from
time to time.
“Converted Common Units” has
the meaning assigned to such term in Section 6.1(d)(x)(B).
“Cumulative Common Unit
Arrearage” means, with respect to any Common Unit, whenever issued, and
as of the end of any Quarter, the excess, if any, of (a) the sum resulting from
adding together the Common Unit Arrearage as to an Initial Common Unit for each
of the Quarters within the Subordination Period ending on or before the last day
of such Quarter over (b) the sum of any distributions theretofore made pursuant
to Section 6.4(a)(ii) and the second sentence of Section 6.5 with respect to an
Initial Common Unit (including any distributions to be made in respect of the
last of such Quarters).
“Curative Allocation” means
any allocation of an item of income, gain, deduction, loss or credit pursuant to
the provisions of Section 6.1(d)(xi).
“Current Market Price” has the
meaning assigned to such term in Section 15.1(a).
“Delaware Act” means the
Delaware Revised Uniform Limited Partnership Act, 6 Del C. Section 17-101, et
seq., as amended, supplemented or restated from time to time, and any successor
to such statute.
“Departing General Partner”
means a former general partner from and after the effective date of any
withdrawal or removal of such former general partner pursuant to
Section 11.1 or Section 11.2.
8
“Depositary” means, with
respect to any Units issued in global form, The Depository Trust Company and its
successors and permitted assigns.
“Disposed of Adjusted
Property” has the meaning assigned to such term in Section
6.1(d)(xii)(B).
“Economic Risk of Loss” has
the meaning set forth in Treasury Regulation
Section 1.752-2(a).
“Eligible Citizen” means a
Person qualified to own interests in real property in jurisdictions in which any
Group Member does business or proposes to do business from time to time, and
whose status as a Limited Partner the General Partner determines does not or
would not subject such Group Member to a significant risk of cancellation or
forfeiture of any of its properties or any interest therein.
“Eligible Holder” means a
Person either (a) subject to United States federal income taxation on the income
generated by the Partnership or (b) in the case of entities that are pass
through entities for United States federal income taxation, all of whose
beneficial owners are subject to United States federal income taxation on the
income generated by the Partnership.
“Estimated Incremental Quarterly Tax
Amount” has the meaning assigned to such term in
Section 6.9.
“Event of Withdrawal” has the
meaning assigned to such term in Section 11.1(a).
“Expansion Capital
Expenditures” means cash expenditures for Acquisitions or Capital
Improvements, and shall not include Maintenance Capital
Expenditures. Expansion Capital Expenditures shall include interest
(and related fees) on debt incurred to finance the construction or development
of a Capital Improvement and paid during the period beginning on the date that
the Partnership enters into a binding commitment to commence construction or
development of a Capital Improvement and ending on the earlier to occur of the
date that such Capital Improvement Commences Commercial Service and the date
that such Capital Improvement is abandoned or disposed of. Debt incurred to fund
such construction period interest payments (including periodic net payments
under related interest rate swap agreements) paid during such period shall also
be deemed to be debt incurred to finance the construction or development of a
Capital Improvement.
“FERC” means the Federal
Energy Regulatory Commission.
“FERC Notice” means the giving
of notice by the Partnership to the Limited Partners in the manner specified in
Section 16.1 that the Partnership is implementing procedures pursuant to this
Agreement to require a Limited Partner or a transferee of a Limited Partner
Interest to certify that such Person is a Eligible Holder.
“Final Subordinated Units” has
the meaning assigned to such term in Section 6.1(d)(x).
9
“First Amendment” has the
meaning assigned to such term in the Recitals.
“First Liquidation Target
Amount” has the meaning assigned to such term in
Section 6.1(c)(i)(E).
“First Target Distribution”
means $0.3594 per Unit per Quarter (or, with respect to the period commencing on
the Closing Date and ending on September 30, 2007, it means the product of
$0.3594 multiplied by a fraction of which the numerator is the number of days in
such period, and of which the denominator is 92), subject to adjustment in
accordance with Sections 5.11, 6.6 and 6.9.
“Fully Diluted Basis” means,
when calculating the number of Outstanding Units for any period, a basis that
includes, in addition to the Outstanding Units, all Partnership Securities and
options, rights, warrants and appreciation rights relating to an equity interest
in the Partnership (a) that are convertible into or exercisable or
exchangeable for Units that are senior to or pari passu with the Subordinated
Units, (b) whose conversion, exercise or exchange price is less than the
Current Market Price on the date of such calculation, (c) that may be
converted into or exercised or exchanged for such Units prior to or during the
Quarter immediately following the end of the period for which the calculation is
being made without the satisfaction of any contingency beyond the control of the
holder other than the payment of consideration and the compliance with
administrative mechanics applicable to such conversion, exercise or exchange and
(d) that were not converted into or exercised or exchanged for such Units during
the period for which the calculation is being made; provided, however, that for purposes of
determining the number of Outstanding Units on a Fully Diluted Basis when
calculating whether the Subordination Period has ended or Subordinated Units are
entitled to convert into Common Units pursuant to Section 5.7, such
Partnership Securities, options, rights, warrants and appreciation rights shall
be deemed to have been Outstanding Units only for the four Quarters that
comprise the last four Quarters of the measurement period; provided, further, that if
consideration will be paid to any Group Member in connection with such
conversion, exercise or exchange, the number of Units to be included in such
calculation shall be that number equal to the difference between (i) the
number of Units issuable upon such conversion, exercise or exchange and
(ii) the number of Units that such consideration would purchase at the
Current Market Price.
“General Partner” means
Blueknight Energy Partners, G.P., L.L.C., a Delaware limited liability company
(formerly known as SemGroup Energy Partners, G.P., L.L.C.), and its successors
and permitted assigns that are admitted to the Partnership as general partner of
the Partnership, in its capacity as general partner of the Partnership (except
as the context otherwise requires).
“General Partner Interest”
means the ownership interest of the General Partner in the Partnership (in its
capacity as a general partner without reference to any Limited Partner Interest
held by it), which is evidenced by General Partner Units, and includes any and
all benefits to which the General Partner is entitled as provided in this
Agreement, together with all obligations of the General Partner to comply with
the terms and provisions of this Agreement.
10
“General Partner Unit” means a
fractional part of the General Partner Interest having the rights and
obligations specified with respect to the General Partner Interest. A General
Partner Unit is not a Unit.
“Group” means a Person that
with or through any of its Affiliates or Associates has any contract,
arrangement, understanding or relationship for the purpose of acquiring,
holding, voting (except voting pursuant to a revocable proxy or consent given to
such Person in response to a proxy or consent solicitation made to 10 or more
Persons), exercising investment power or disposing of any Partnership Interests
with any other Person that beneficially owns, or whose Affiliates or Associates
beneficially own, directly or indirectly, Partnership Interests.
“Group Member” means a member
of the Partnership Group.
“Group Member Agreement” means
the partnership agreement of any Group Member, other than the Partnership, that
is a limited or general partnership, the limited liability company agreement of
any Group Member that is a limited liability company, the certificate of
incorporation and bylaws or similar organizational documents of any Group Member
that is a corporation, the joint venture agreement or similar governing document
of any Group Member that is a joint venture and the governing or organizational
or similar documents of any other Group Member that is a Person other than a
limited or general partnership, limited liability company, corporation or joint
venture, as such may be amended, supplemented or restated from time to
time.
“Holder” as used in Section
7.12, has the meaning assigned to such term in
Section 7.12(a).
“IDR Reset Election” has the
meaning assigned to such term in Section 5.11(a).
“Incentive Distribution Right”
means a non-voting Limited Partner Interest issued to the General Partner, which
Limited Partner Interest will confer upon the holder thereof only the rights and
obligations specifically provided in this Agreement with respect to Incentive
Distribution Rights (and no other rights otherwise available to or other
obligations of a holder of a Partnership Interest). Notwithstanding anything in
this Agreement to the contrary, the holder of an Incentive Distribution Right
shall not be entitled to vote such Incentive Distribution Right on any
Partnership matter except as may otherwise be required by law.
“Incentive Distributions”
means any amount of cash distributed to the holders of the Incentive
Distribution Rights pursuant to Sections 6.4(a)(v), (vi) and (vii) and
6.4(b)(iii), (iv) and (v).
“Incremental Income Taxes” has
the meaning assigned to such term in Section 6.9.
“Indemnified Persons” has the
meaning assigned to such term in Section 7.12(d).
11
“Indemnitee” means (a) the
General Partner, (b) any Departing General Partner, (c) any Person who is or was
an Affiliate of the General Partner or any Departing General Partner, (d) any
Person who is or was a member, partner, director, officer, fiduciary or trustee
of any Group Member, the General Partner or any Departing General Partner or any
Affiliate of any Group Member, the General Partner or any Departing General
Partner, (e) any Person who is or was serving at the request of the General
Partner or any Departing General Partner or any Affiliate of the General Partner
or any Departing General Partner as an officer, director, member, partner,
fiduciary or trustee of another Person; provided that a Person shall
not be an Indemnitee by reason of providing, on a fee-for-services basis,
trustee, fiduciary or custodial services, and (f) any Person the General Partner
designates as an “Indemnitee” for purposes of this Agreement.
“Ineligible Assignee” means a
Person whom the General Partner has determined is not an Eligible
Holder.
“Initial Common Units” means
the Common Units sold in the Initial Offering.
“Initial Limited Partner”
means the Organizational Limited Partner, the General Partner (with respect to
the Incentive Distribution Rights received by it pursuant to Section 5.2) and
the Underwriters upon the issuance by the Partnership of Common Units as
described in Section 5.3(a) in connection with the Initial
Offering.
“Initial Offering” means the
initial offering and sale of Common Units to the public, as described in the
Registration Statement.
“Initial Unit Price” means (a)
with respect to the Common Units and the Subordinated Units, the initial public
offering price per Common Unit at which the Common Units were first offered to
the public for sale as set forth on the cover page of the prospectus included as
part of the Registration Statement and first issued at or after the time the
Registration Statement first became effective or (b) with respect to any other
class or series of Units, the price per Unit at which such class or series of
Units is initially sold by the Partnership, as determined by the General
Partner, in each case adjusted as the General Partner determines to be
appropriate to give effect to any distribution, subdivision or combination of
Units.
“Interim Capital Transactions”
means the following transactions if they occur prior to the Liquidation Date:
(a) borrowings, refinancings or refundings of indebtedness (other than Working
Capital Borrowings and other than for items purchased on open account in the
ordinary course of business) by any Group Member and sales of debt securities of
any Group Member; (b) sales of equity interests of any Group Member (including
the Common Units sold to the Underwriters pursuant to the exercise of the
Over-Allotment Option); (c) sales or other voluntary or involuntary dispositions
of any assets of any Group Member other than (i) sales or other dispositions of
inventory, accounts receivable and other assets in the ordinary course of
business, and (ii) sales or other dispositions of assets as part of normal
retirements or replacements; (d) capital contributions received; or (e)
corporate reorganizations or restructurings.
12
“Issue Price” means the price
at which a Unit is purchased pursuant to the Underwriting Agreement, net of any
sales commission or underwriting discount.
“Limited Partner” means,
unless the context otherwise requires, the Organizational Limited Partner prior
to its withdrawal from the Partnership, each Initial Limited Partner, each
additional Person that becomes a Limited Partner pursuant to the terms of this
Agreement and any Departing General Partner upon the change of its status from
General Partner to Limited Partner pursuant to Section 11.3, in each case, in
such Person’s capacity as limited partner of the Partnership; provided, however, that when the term
“Limited Partner” is used herein in the context of any vote or other approval,
including Articles XIII and XIV, such term shall not, solely for such purpose,
include any holder of an Incentive Distribution Right (solely with respect to
its Incentive Distribution Rights and not with respect to any other Limited
Partner Interest held by such Person) except as may otherwise be required by
law.
“Limited Partner Interest”
means the ownership interest of a Limited Partner in the Partnership, which may
be evidenced by Common Units, Class B Units, Subordinated Units, Incentive
Distribution Rights or other Partnership Securities or a combination thereof or
interest therein, and includes any and all benefits to which such Limited
Partner is entitled as provided in this Agreement, together with all obligations
of such Limited Partner to comply with the terms and provisions of this
Agreement; provided,
however, that when the
term “Limited Partner Interest” is used herein in the context of any vote or
other approval, including Articles XIII and XIV, such term shall not, solely for
such purpose, include any Incentive Distribution Right except as may otherwise
be required by law.
“Liquidation Date” means (a)
in the case of an event giving rise to the dissolution of the Partnership of the
type described in clauses (a) and (b) of the first sentence of Section 12.2, the
date on which the applicable time period during which the holders of Outstanding
Units have the right to elect to continue the business of the Partnership has
expired without such an election being made, and (b) in the case of any other
event giving rise to the dissolution of the Partnership, the date on which such
event occurs.
“Liquidator” means one or more
Persons selected by the General Partner to perform the functions described in
Section 12.4 as liquidating trustee of the Partnership within the meaning of the
Delaware Act.
“Maintenance Capital
Expenditures” means cash expenditures (including expenditures for the
addition or improvement to the capital assets owned by any Group Member or for
the acquisition of existing, or the construction of new, capital assets) if such
expenditures are made to maintain, including over the long term, the operating
capacity or revenues of the Partnership Group.
“Merger Agreement” has the
meaning assigned to such term in Section 14.1.
“Minimum Quarterly
Distribution” means $0.3125 per Unit per Quarter (or with respect to the
period commencing on the Closing Date and ending on September 30, 2007, it means
the product of $0.3125 multiplied by a fraction of which the numerator is the
number of days in such period and of which the denominator is 92), subject to
adjustment in accordance with Sections 5.11, 6.6 and 6.9.
13
“Name Change” has the meaning
assigned to such term in the Recitals.
“National Securities Exchange”
means an exchange registered with the Commission under Section 6(a) of the
Securities Exchange Act.
“Net Agreed Value” means, (a)
in the case of any Contributed Property, the Agreed Value of such property
reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed, and (b) in
the case of any property distributed to a Partner by the Partnership, the
Partnership’s Carrying Value of such property (as adjusted pursuant to Section
5.5(d)(ii)) at the time such property is distributed, reduced by any
indebtedness either assumed by such Partner upon such distribution or to which
such property is subject at the time of distribution, in either case, as
determined under Section 752 of the Code.
“Net Income” means, for any
taxable year, the excess, if any, of the Partnership’s items of income and gain
(other than those items taken into account in the computation of Net Termination
Gain or Net Termination Loss) for such taxable year over the Partnership’s items
of loss and deduction (other than those items taken into account in the
computation of Net Termination Gain or Net Termination Loss) for such taxable
year. The items included in the calculation of Net Income shall be determined in
accordance with Section 5.5(b) and shall not include any items specially
allocated under Section 6.1(d); provided, that the
determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this
Agreement.
“Net Loss” means, for any
taxable year, the excess, if any, of the Partnership’s items of loss and
deduction (other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year over the
Partnership’s items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year. The items included in the calculation of Net Loss shall be
determined in accordance with Section 5.5(b) and shall not include any items
specially allocated under Section 6.1(d); provided, that the
determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this
Agreement.
“Net Positive Adjustments”
means, with respect to any Partner, the excess, if any, of the total positive
adjustments over the total negative adjustments made to the Capital Account of
such Partner pursuant to Book-Up Events and Book-Down Events.
“Net Termination Gain” means,
for any taxable year, the sum, if positive, of all items of income, gain, loss
or deduction recognized by the Partnership (a) after the Liquidation Date or (b)
upon the sale, exchange or other disposition of all or substantially all of the
assets of the Partnership Group, taken as a whole, in a single transaction or a
series of related transactions (excluding any disposition to a member of the
Partnership Group). The items included in the determination of Net
Termination Gain shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).
14
“Net Termination Loss” means,
for any taxable year, the sum, if negative, of all items of income, gain, loss
or deduction recognized by the Partnership (a) after the Liquidation Date or (b)
upon the sale, exchange or other disposition of all or substantially all of the
assets of the Partnership Group, taken as a whole, in a single transaction or a
series of related transactions (excluding any disposition to a member of the
Partnership Group). The items included in the determination of Net
Termination Loss shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).
“New BKEP Crude” has the
meaning assigned to such term in Section 5.2(a).
“Non-citizen Assignee” means a
Person whom the General Partner has determined does not constitute an Eligible
Citizen and as to whose Partnership Interest the General Partner has become the
substituted limited partner, pursuant to Section 4.9.
“Nonrecourse Built-in Gain”
means with respect to any Contributed Properties or Adjusted Properties that are
subject to a mortgage or pledge securing a Nonrecourse Liability, the amount of
any taxable gain that would be allocated to the Partners pursuant to
Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and 6.2(b)(iii) if such properties
were disposed of in a taxable transaction in full satisfaction of such
liabilities and for no other consideration.
“Nonrecourse Deductions” means
any and all items of loss, deduction or expenditure (including any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation Section 1.704-2(b), are attributable to a
Nonrecourse Liability.
“Nonrecourse Liability” has
the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
“Notice of Election to
Purchase” has the meaning assigned to such term in
Section 15.1(b).
“Omnibus Agreement” means that
certain Omnibus Agreement, dated as of the July 20, 2007, among SemGroup, L.P.,
SemManagement, L.L.C., the General Partner and the Partnership, as such
agreement may be amended, supplemented or restated from time to
time.
“Operating Company” means
Blueknight Energy Partners Operating, L.L.C., a Delaware limited liability
company (formerly known as SemGroup Energy Partners Operating, L.L.C.), and any
successors thereto.
“Operating Expenditures” means
all Partnership Group cash expenditures, including, but not limited to, taxes,
reimbursements of the General Partner in accordance with this Agreement,
interest payments, repayment of Working Capital Borrowings, Maintenance Capital
Expenditures and non-Pro Rata repurchases of Units (other than those made with
the proceeds of an Interim Capital Transaction), subject to the
following:
15
(a) repayment of
Working Capital Borrowings deducted from Operating Surplus pursuant to clause
(b)(iii) of the definition of Operating Surplus shall not constitute Operating
Expenditures when actually repaid;
(b) payments
(including prepayments and prepayment penalties) of principal of and premium on
indebtedness other than Working Capital Borrowings shall not constitute
Operating Expenditures; and
(c) Operating
Expenditures shall not include (i) Expansion Capital Expenditures, (ii) payment
of transaction expenses (including taxes) relating to Interim Capital
Transactions or (iii) distributions to Partners. Where capital expenditures
consist of both Maintenance Capital Expenditures and Expansion Capital
Expenditures, the General Partner, with the concurrence of the Conflicts
Committee, shall determine the allocation between the portion consisting of
Maintenance Capital Expenditures and the portion consisting of Expansion Capital
Expenditures.
“Operating Surplus” means,
with respect to any period ending prior to the Liquidation Date, on a cumulative
basis and without duplication,
(a) the sum
of (i) an amount equal to two times the amount needed for any one Quarter for
the Partnership to pay a distribution on all Units, the General Partner Units
and the Incentive Distribution Rights at the same per Unit amount as was
distributed immediately preceding the date of determination (or with respect to
the period commencing on the Closing Date and ending on September 30, 2007, it
means the product of (x) $0.3125 multiplied by (y) a fraction of which the
numerator is the number of days in such period and the denominator is 92
multiplied by (z) the number of Units and General Partner Units Outstanding on
the Record Date with respect to such period), (ii) all cash receipts of the
Partnership Group for the period beginning on the Closing Date and ending on the
last day of such period, but excluding cash receipts from Interim Capital
Transactions (except to the extent specified in Section 6.5 and provided that
cash receipts from the termination of a Commodity Hedge Contract or interest
rate swap prior to its specified termination date shall be included in Operating
Surplus in equal quarterly installments over the remaining scheduled life of
such Commodity Hedge Contract or interest rate swap), (iii) all cash receipts of
the Partnership Group after the end of such period but on or before the date of
determination of Operating Surplus with respect to such period resulting from
Working Capital Borrowings and (iv) the amount of distributions paid on equity
issued in connection with the construction or development of a Capital
Improvement or replacement asset that are paid during the period beginning on
the date that the Partnership enters into a binding commitment to commence
construction or development of such Capital Improvement or replacement asset and
ending on the earlier to occur of the date that such Capital Improvement or
replacement asset Commences Commercial Service and the date that it is abandoned
or disposed of (equity issued to fund the construction period interest payments
on debt incurred (including periodic net payments under related interest rate
swap agreements), or construction period distributions on equity issued, to
finance the construction of a Capital Improvement or replacement asset shall
also be deemed to be equity issued to finance the construction or development of
a Capital Improvement or replacement asset for purposes of this clause (iv)),
less
16
(b) the sum
of (i) Operating Expenditures for the period beginning on the Closing Date and
ending on the last day of such period, (ii) the amount of cash reserves
established by the General Partner to provide funds for future Operating
Expenditures and (iii) all Working Capital Borrowings not repaid within
twelve months after having been incurred; provided, however, that disbursements
made (including contributions to a Group Member or disbursements on behalf of a
Group Member) or cash reserves established, increased or reduced after the end
of such period but on or before the date of determination of Available Cash with
respect to such period shall be deemed to have been made, established, increased
or reduced, for purposes of determining Operating Surplus, within such period if
the General Partner so determines.
Notwithstanding
the foregoing, “Operating
Surplus” with respect to the Quarter in which the Liquidation Date occurs
and any subsequent Quarter shall equal zero.
“Opinion of Counsel” means a
written opinion of counsel (who may be regular counsel to the Partnership or the
General Partner or any of its Affiliates) acceptable to the General
Partner.
“Option Closing Date” means
the date or dates on which any Common Units are sold by the Partnership to the
Underwriters upon exercise of the Over-Allotment Option.
“Organizational Limited
Partner” means SemGroup Holdings in its capacity as the organizational
limited partner of the Partnership pursuant to the Original
Agreement.
“Original Agreement” has the
meaning assigned to such term in the Recitals.
“Outstanding” means, with
respect to Partnership Securities, all Partnership Securities that are issued by
the Partnership and reflected as outstanding on the Partnership’s books and
records as of the date of determination; provided, however, that if at any time
any Person or Group (other than the General Partner or its Affiliates)
beneficially owns 20% or more of the Outstanding Partnership Securities of any
class then Outstanding, all Partnership Securities owned by such Person or Group
shall not be voted on any matter and shall not be considered to be Outstanding
when sending notices of a meeting of Limited Partners to vote on any matter
(unless otherwise required by law), calculating required votes, determining the
presence of a quorum or for other similar purposes under this Agreement, except
that Units so owned shall be considered to be Outstanding for purposes of
Section 11.1(b)(iv) (such Units shall not, however, be treated as a separate
class of Partnership Securities for purposes of this Agreement); provided, further, that the foregoing
limitation shall not apply to (i) any Person or Group who acquired 20% or more
of the Outstanding Partnership Securities of any class then Outstanding directly
from the General Partner or its Affiliates, (ii) any Person or Group who
acquired 20% or more of the Outstanding Partnership Securities of any class then
Outstanding directly or indirectly from a Person or Group described in clause
(i) provided that the
General Partner shall have notified such Person or Group in writing that such
limitation shall not apply, or (iii) any Person or Group who acquired 20% or
more of any Partnership Securities issued by the Partnership with the prior
approval of the Board of Directors of the General Partner.
17
“Over-Allotment Option” means
the over-allotment option granted to the Underwriters by the Partnership
pursuant to the Underwriting Agreement.
“Partner Nonrecourse Debt” has
the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
“Partner Nonrecourse Debt Minimum
Gain” has the meaning set forth in Treasury Regulation Section
1.704-2(i)(2).
“Partner Nonrecourse
Deductions” means any and all items of loss, deduction or expenditure
(including any expenditure described in Section 705(a)(2)(B) of the Code) that,
in accordance with the principles of Treasury Regulation Section 1.704-2(i), are
attributable to a Partner Nonrecourse Debt.
“Partners” means the General
Partner and the Limited Partners.
“Partnership” means Blueknight
Energy Partners, L.P., a Delaware limited partnership (formerly known as
SemGroup Energy Partners, L.P.).
“Partnership Group” means the
Partnership and its Subsidiaries treated as a single consolidated
entity.
“Partnership Interest” means
an interest in the Partnership, which shall include the General Partner Interest
and Limited Partner Interests.
“Partnership Minimum Gain”
means that amount determined in accordance with the principles of Treasury
Regulation Section 1.704-2(d).
“Partnership Security” means
any class or series of equity interest in the Partnership (but excluding any
options, rights, warrants and appreciation rights relating to an equity interest
in the Partnership), including Common Units, Class B Units, Subordinated Units,
General Partner Units and Incentive Distribution Rights.
“Per Unit Capital Amount”
means, as of any date of determination, the Capital Account, stated on a per
Unit basis, underlying any Unit held by a Person other than the General Partner
or any Affiliate of the General Partner who holds Units.
“Percentage Interest” means as
of any date of determination (a) as to the General Partner with respect to
General Partner Units and as to any Unitholder with respect to Units, the
product obtained by multiplying (i) 100% less the percentage applicable to
clause (b) below by (ii) the quotient obtained by dividing (A) the number of
General Partner Units held by the General Partner or the number of Units held by
such Unitholder, as the case may be, by (B) the total number of Outstanding
Units and General Partner Units, and (b) as to the holders of other Partnership
Securities issued by the Partnership in accordance with Section 5.6, the
percentage established as a part of such issuance. The Percentage Interest with
respect to an Incentive Distribution Right shall at all times be
zero.
18
“Person” means an individual
or a corporation, firm, limited liability company, partnership, joint venture,
trust, unincorporated organization, association, government agency or political
subdivision thereof or other entity.
“Plan of Conversion” has the
meaning assigned to such term in Section 14.1.
“Pro Rata” means (a) when used
with respect to Units or any class thereof, apportioned equally among all
designated Units in accordance with their relative Percentage Interests, (b)
when used with respect to Partners or Record Holders, apportioned among all
Partners or Record Holders in accordance with their relative Percentage
Interests and (c) when used with respect to holders of Incentive Distribution
Rights, apportioned equally among all holders of Incentive Distribution Rights
in accordance with the relative number or percentage of Incentive Distribution
Rights held by each such holder.
“Purchase Date” means the date
determined by the General Partner as the date for purchase of all Outstanding
Limited Partner Interests of a certain class (other than Limited Partner
Interests owned by the General Partner and its Affiliates) pursuant to Article
XV.
“Quarter” means, unless the
context requires otherwise, a fiscal quarter of the Partnership, or, with
respect to the fiscal quarter of the Partnership which includes the Closing
Date, the portion of such fiscal quarter after the Closing Date.
“Recapture Income” means any
gain recognized by the Partnership (computed without regard to any adjustment
required by Section 734 or Section 743 of the Code) upon the disposition of any
property or asset of the Partnership, which gain is characterized as ordinary
income because it represents the recapture of deductions previously taken with
respect to such property or asset.
“Record Date” means the date
established by the General Partner or otherwise in accordance with this
Agreement for determining (a) the identity of the Record Holders entitled to
notice of, or to vote at, any meeting of Limited Partners or entitled to vote by
ballot or give approval of Partnership action in writing without a meeting or
entitled to exercise rights in respect of any lawful action of Limited Partners
or (b) the identity of Record Holders entitled to receive any report or
distribution or to participate in any offer.
“Record Holder” means the
Person in whose name a Common Unit is registered on the books of the Transfer
Agent as of the opening of business on a particular Business Day, or with
respect to other Partnership Interests, the Person in whose name any such other
Partnership Interest is registered on the books that the General Partner has
caused to be kept as of the opening of business on such Business
Day.
“Redeemable Interests” means
any Partnership Interests for which a redemption notice has been given, and has
not been withdrawn, pursuant to Section 4.10 or Section 4.12.
19
“Registration Statement” means
the Registration Statement on Form S-1 as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the Commission
under the Securities Act to register the offering and sale of the Common Units
in the Initial Offering.
“Remaining Net Positive
Adjustments” means as of the end of any taxable period, (i) with respect
to the Unitholders holding Common Units, Class B Units or Subordinated
Units, the excess of (a) the Net Positive Adjustments of the Unitholders holding
Common Units, Class B Units or Subordinated Units as of the end of such
period over (b) the sum of those Partners’ Share of Additional Book Basis
Derivative Items for each prior taxable period, (ii) with respect to the General
Partner (as holder of the General Partner Units), the excess of (a) the Net
Positive Adjustments of the General Partner as of the end of such period over
(b) the sum of the General Partner’s Share of Additional Book Basis Derivative
Items with respect to the General Partner Units for each prior taxable period,
and (iii) with respect to the holders of Incentive Distribution Rights, the
excess of (a) the Net Positive Adjustments of the holders of Incentive
Distribution Rights as of the end of such period over (b) the sum of the Share
of Additional Book Basis Derivative Items of the holders of the Incentive
Distribution Rights for each prior taxable period.
“Required Allocations” means
(a) any limitation imposed on any allocation of Net Losses or Net Termination
Losses under Section 6.1(b) or Section 6.1(c)(ii) and (b) any allocation of an
item of income, gain, loss or deduction pursuant to Section 6.1(d)(i), Section
6.1(d)(ii), Section 6.1(d)(iv), Section 6.1(d)(vii) or Section
6.1(d)(ix).
“Residual Gain” or “Residual Loss” means any item
of gain or loss, as the case may be, of the Partnership recognized for federal
income tax purposes resulting from a sale, exchange or other disposition of a
Contributed Property or Adjusted Property, to the extent such item of gain or
loss is not allocated pursuant to Section 6.2(b)(i)(A) or Section 6.2(b)(ii)(A),
respectively, to eliminate Book-Tax Disparities.
“Reset MQD” has the meaning
assigned to such term in Section 5.11(e).
“Reset Notice” has the meaning
assigned to such term in Section 5.11(b).
“Retained Converted Subordinated
Unit” has the meaning assigned to such term in
Section 5.5(c)(ii).
“Second Amendment” has the
meaning assigned to such term in the Recitals.
“Second Liquidation Target
Amount” has the meaning assigned to such term in
Section 6.1(c)(i)(F).
“Second Target Distribution”
means $0.3906 per Unit per Quarter (or, with respect to the period commencing on
the Closing Date and ending on September 30, 2007, it means the product of
$0.3906 multiplied by a fraction of which the numerator is equal to the number
of days in such period and of which the denominator is 92), subject to
adjustment in accordance with Section 5.11, Section 6.6 and Section
6.9.
20
“Securities Act” means the
Securities Act of 1933, as amended, supplemented or restated from time to time
and any successor to such statute.
“Securities Exchange Act”
means the Securities Exchange Act of 1934, as amended, supplemented or restated
from time to time and any successor to such statute.
“SemGroup Holdings” has the
meaning assigned to such term in Section 5.3(a).
“Share of Additional Book Basis
Derivative Items” means in connection with any allocation of Additional
Book Basis Derivative Items for any taxable period, (i) with respect to the
Unitholders holding Common Units, Class B Units or Subordinated Units, the
amount that bears the same ratio to such Additional Book Basis Derivative Items
as the Unitholders’ Remaining Net Positive Adjustments as of the end of such
period bears to the Aggregate Remaining Net Positive Adjustments as of that
time, (ii) with respect to the General Partner (as holder of the General Partner
Units), the amount that bears the same ratio to such Additional Book Basis
Derivative Items as the General Partner’s Remaining Net Positive Adjustments as
of the end of such period bears to the Aggregate Remaining Net Positive
Adjustment as of that time, and (iii) with respect to the Partners holding
Incentive Distribution Rights, the amount that bears the same ratio to such
Additional Book Basis Derivative Items as the Remaining Net Positive Adjustments
of the Partners holding the Incentive Distribution Rights as of the end of such
period bears to the Aggregate Remaining Net Positive Adjustments as of that
time.
“Special Approval” means
approval by a majority of the members of the Conflicts Committee acting in good
faith.
“Subordinated Unit” means a
Partnership Security representing a fractional part of the Partnership Interests
of all Limited Partners and having the rights and obligations specified with
respect to Subordinated Units in this Agreement. The term “Subordinated Unit”
does not include a Common Unit or Class B Unit. A Subordinated Unit that is
convertible into a Common Unit shall not constitute a Common Unit until such
conversion occurs.
“Subordination Period” means
the period commencing on the Closing Date and ending on the first to occur
of:
(a) the first
day of any Quarter beginning after June 30, 2010 in respect of which (i) (A)
distributions of Available Cash from Operating Surplus on each of the
Outstanding Common Units, Subordinated Units and General Partner Units and any
other Outstanding Units that are senior or equal in right of distribution to the
Subordinated Units with respect to each of the three consecutive,
non-overlapping four-Quarter periods immediately preceding such date equaled or
exceeded the sum of the Minimum Quarterly Distribution on all Outstanding Common
Units, Subordinated Units and General Partner Units and any other Outstanding
Units that are senior or equal in right of distribution to the Subordinated
Units during such periods and (B) the Adjusted Operating Surplus generated
during each of the three consecutive, non-overlapping four-Quarter periods
immediately preceding such date equaled or exceeded the sum of the Minimum
Quarterly Distribution on all of the Common Units, Subordinated Units and
General Partner Units and any other Units that are senior or equal in right of
distribution to the Subordinated Units that were Outstanding during such periods
on a Fully Diluted Basis and (ii) there are no Cumulative Common Unit
Arrearages;
21
(b) the first
date on which there are no longer outstanding any Subordinated Units due to the
conversion of Subordinated Units into Common Units pursuant to Section 5.7 or
otherwise; and
(c) the date
on which the General Partner is removed as general partner of the Partnership
upon the requisite vote by holders of Outstanding Units under circumstances
where Cause does not exist and Units held by the General Partner and its
Affiliates are not voted in favor of such removal.
“Subsidiary” means, with
respect to any Person, (a) a corporation of which more than 50% of the voting
power of shares entitled (without regard to the occurrence of any contingency)
to vote in the election of directors or other governing body of such corporation
is owned, directly or indirectly, at the date of determination, by such Person,
by one or more Subsidiaries of such Person or a combination thereof, (b) a
partnership (whether general or limited) in which such Person or a Subsidiary of
such Person is, at the date of determination, a general or limited partner of
such partnership, but only if more than 50% of the partnership interests of such
partnership (considering all of the partnership interests of the partnership as
a single class) is owned, directly or indirectly, at the date of determination,
by such Person, by one or more Subsidiaries of such Person, or a combination
thereof, or (c) any other Person (other than a corporation or a partnership) in
which such Person, one or more Subsidiaries of such Person, or a combination
thereof, directly or indirectly, at the date of determination, has (i) at least
a majority ownership interest or (ii) the power to elect or direct the election
of a majority of the directors or other governing body of such
Person.
“Surviving Business Entity”
has the meaning assigned to such term in Section 14.2(b).
“Target Distributions” means,
collectively, the First Target Distribution, Second Target Distribution and
Third Target Distribution.
“Taxation Certification” means
a properly completed certificate in such form as may be specified by the General
Partner by which a Limited Partner certifies that he (and if he is a nominee
holding for the account of another Person, that to the best of his knowledge
such other Person) is an Eligible Holder.
“Third Target Distribution”
means $0.4688 per Unit per Quarter (or, with respect to the period commencing on
the Closing Date and ending on September 30, 2007, it means the product of
$0.4688 multiplied by a fraction of which the numerator is equal to the number
of days in such period and of which the denominator is 92), subject to
adjustment in accordance with Sections 5.11, 6.6 and 6.9.
“Throughput Agreement” means
that certain Throughput Agreement, dated as of July 20, 2007, among SemGroup,
L.P., SemCrude, L.P., Eaglwing, L.P., the Partnership and New SemCrude LLC, as
such may be amended, supplemented or restated from time to time.
“Trading Day” has the meaning
assigned to such term in Section 15.1(a).
22
“transfer” has the meaning
assigned to such term in Section 4.4(a).
“Transfer Agent” means such
bank, trust company or other Person (including the General Partner or one of its
Affiliates) as shall be appointed from time to time by the General Partner to
act as registrar and transfer agent for the Common Units; provided, that if no Transfer
Agent is specifically designated for any other Partnership Securities, the
General Partner shall act in such capacity.
“Underwriter” means each
Person named as an underwriter in Schedule I to the Underwriting Agreement who
purchases Common Units pursuant thereto.
“Underwriting Agreement” means
that certain Underwriting Agreement dated as of July 17, 2007 among the
Underwriters, SemGroup Holdings, the Partnership, the General Partner, the
Operating Company and other parties thereto, providing for the purchase of
Common Units by the Underwriters.
“Unit” means a Partnership
Security that is designated as a “Unit” and shall include Common Units,
Class B Units and Subordinated Units but shall not include (i) General
Partner Units (or the General Partner Interest represented thereby) or (ii)
Incentive Distribution Rights.
“Unit Majority” means (i)
during the Subordination Period, at least a majority of the Outstanding Common
Units (excluding Common Units owned by the General Partner and its Affiliates),
voting as a class, and at least a majority of the Outstanding Subordinated
Units, voting as a class, and (ii) after the end of the Subordination Period, at
least a majority of the Outstanding Common Units and Class B Units, if any,
voting as a single class.
“Unitholders” means the
holders of Units.
“Unpaid MQD” has the meaning
assigned to such term in Section 6.1(c)(i)(B).
“Unrealized Gain” attributable
to any item of Partnership property means, as of any date of determination, the
excess, if any, of (a) the fair market value of such property as of such date
(as determined under Section 5.5(d)) over (b) the Carrying Value of such
property as of such date (prior to any adjustment to be made pursuant to Section
5.5(d) as of such date).
“Unrealized Loss” attributable
to any item of Partnership property means, as of any date of determination, the
excess, if any, of (a) the Carrying Value of such property as of such date
(prior to any adjustment to be made pursuant to Section 5.5(d) as of such date)
over (b) the fair market value of such property as of such date (as determined
under Section 5.5(d)).
“Unrecovered Initial Unit
Price” means at any time, with respect to a Unit, the Initial Unit Price
less the sum of all distributions constituting Capital Surplus theretofore made
in respect of an Initial Common Unit and any distributions of cash (or the Net
Agreed Value of any distributions in kind) in connection with the dissolution
and liquidation of the Partnership theretofore made in respect of an Initial
Common Unit, adjusted as the General Partner determines to be appropriate to
give effect to any distribution, subdivision or combination of such
Units.
23
“U.S. GAAP” means United
States generally accepted accounting principles consistently
applied.
“Withdrawal Opinion of
Counsel” has the meaning assigned to such term in
Section 11.1(b).
“Working Capital Borrowings”
means borrowings used solely for working capital purposes or to pay
distributions to Partners, made pursuant to a credit facility, commercial paper
facility or similar financing arrangement; provided that when incurred
it is the intent of the borrower to repay such borrowings within 12 months from
other than additional Working Capital Borrowings.
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Construction.
|
Unless
the context requires otherwise: (a) any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa; (b)
references to Articles and Sections refer to Articles and Sections of this
Agreement; (c) the terms “include”, “includes”, “including” or words of like
import shall be deemed to be followed by the words “without limitation”; and (d)
the terms “hereof”, “herein” or “hereunder” refer to this Agreement as a whole
and not to any particular provision of this Agreement. The table of contents and
headings contained in this Agreement are for reference purposes only, and shall
not affect in any way the meaning or interpretation of this
Agreement.
ARTICLE
II
ORGANIZATION
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Formation.
|
The
General Partner and the Organizational Limited Partner have previously formed
the Partnership as a limited partnership pursuant to the provisions of the
Delaware Act and hereby amend and restate the Original Agreement in its
entirety. This amendment and restatement shall become effective on the date of
this Agreement. Except as expressly provided to the contrary in this Agreement,
the rights, duties (including fiduciary duties), liabilities and obligations of
the Partners and the administration, dissolution and termination of the
Partnership shall be governed by the Delaware Act. All Partnership Interests
shall constitute personal property of the owner thereof for all
purposes.
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Name.
|
The name
of the Partnership shall be “Blueknight Energy Partners, L.P.” The Partnership’s
business may be conducted under any other name or names as determined by the
General Partner, including the name of the General Partner. The words “Limited
Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in
the Partnership’s name where necessary for the purpose of complying with the
laws of any jurisdiction that so requires. The General Partner may change the
name of the Partnership at any time and from time to time and shall notify the
Limited Partners of such change in the next regular communication to the Limited
Partners.
24
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Registered
Office; Registered Agent; Principal Office; Other
Offices
|
Unless
and until changed by the General Partner, the registered office of the
Partnership in the State of Delaware shall be located at 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx 00000, and the registered agent for
service of process on the Partnership in the State of Delaware at such
registered office shall be The Corporation Trust Company. The principal office
of the Partnership shall be located at 0000 Xxxxx Xxxx Xxxxxx, Xxxxx 000, Xxxxx,
Xxxxxxxx 00000, or such other place as the General Partner may from
time to time designate by notice to the Limited Partners. The Partnership may
maintain offices at such other place or places within or outside the State of
Delaware as the General Partner shall determine necessary or appropriate. The
address of the General Partner shall be 0000 Xxxxx Xxxx Xxxxxx, Xxxxx 000,
Xxxxx, Xxxxxxxx 00000, or such other place as the General Partner may from time
to time designate by notice to the Limited Partners.
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Purpose
and Business.
|
The
purpose and nature of the business to be conducted by the Partnership shall be
to (a) engage directly in, or enter into or form, hold and dispose of any
corporation, partnership, joint venture, limited liability company or other
arrangement to engage indirectly in, any business activity that is approved by
the General Partner and that lawfully may be conducted by a limited partnership
organized pursuant to the Delaware Act and, in connection therewith, to exercise
all of the rights and powers conferred upon the Partnership pursuant to the
agreements relating to such business activity, and (b) do anything necessary or
appropriate to the foregoing, including the making of capital contributions or
loans to a Group Member; provided, however, that the
General Partner shall not cause the Partnership to engage, directly or
indirectly, in any business activity that the General Partner determines would
cause the Partnership to be treated as an association taxable as a corporation
or otherwise taxable as an entity for federal income tax purposes. To the
fullest extent permitted by law, the General Partner shall have no duty or
obligation to propose or approve, and may decline to propose or approve, the
conduct by the Partnership of any business free of any fiduciary duty or
obligation whatsoever to the Partnership or any Limited Partner and, in
declining to so propose or approve, shall not be required to act in good faith
or pursuant to any other standard imposed by this Agreement, any Group Member
Agreement, any other agreement contemplated hereby or under the Delaware Act or
any other law, rule or regulation or at equity.
|
Powers.
|
The
Partnership shall be empowered to do any and all acts and things necessary or
appropriate for the furtherance and accomplishment of the purposes and business
described in Section 2.4 and for the protection and benefit of the
Partnership.
25
|
Power
of Attorney.
|
(a) Each
Limited Partner hereby constitutes and appoints the General Partner and, if a
Liquidator shall have been selected pursuant to Section 12.3, the Liquidator
(and any successor to the Liquidator by merger, transfer, assignment, election
or otherwise) and each of their authorized officers and attorneys-in-fact, as
the case may be, with full power of substitution, as his true and lawful agent
and attorney-in-fact, with full power and authority in his name, place and
xxxxx, to:
(i) execute,
swear to, acknowledge, deliver, file and record in the appropriate public
offices (A) all certificates, documents and other instruments (including this
Agreement and the Certificate of Limited Partnership and all amendments or
restatements hereof or thereof) that the General Partner or the Liquidator
determines to be necessary or appropriate to form, qualify or continue the
existence or qualification of the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) in the State
of Delaware and in all other jurisdictions in which the Partnership may conduct
business or own property; (B) all certificates, documents and other instruments
that the General Partner or the Liquidator determines to be necessary or
appropriate to reflect, in accordance with its terms, any amendment, change,
modification or restatement of this Agreement; (C) all certificates, documents
and other instruments (including conveyances and a certificate of cancellation)
that the General Partner or the Liquidator determines to be necessary or
appropriate to reflect the dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement; (D) all certificates, documents and
other instruments relating to the admission, withdrawal, removal or substitution
of any Partner pursuant to, or other events described in, Article IV, Article X,
Article XI or Article XII; (E) all certificates, documents and other instruments
relating to the determination of the rights, preferences and privileges of any
class or series of Partnership Securities issued pursuant to Section 5.6; and
(F) all certificates, documents and other instruments (including agreements and
a certificate of merger or conversion) relating to a merger, consolidation or
conversion of the Partnership pursuant to Article XIV; and
(ii) execute,
swear to, acknowledge, deliver, file and record all ballots, consents,
approvals, waivers, certificates, documents and other instruments that the
General Partner or the Liquidator determines to be necessary or appropriate to
(A) make, evidence, give, confirm or ratify any vote, consent, approval,
agreement or other action that is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or (B) effectuate the terms or
intent of this Agreement; provided, that when required
by Section 13.3 or any other provision of this Agreement that establishes a
percentage of the Limited Partners or of the Limited Partners of any class or
series required to take any action, the General Partner and the Liquidator may
exercise the power of attorney made in this Section 2.6(a)(ii) only after the
necessary vote, consent or approval of the Limited Partners or of the Limited
Partners of such class or series, as applicable.
26
Nothing
contained in this Section 2.6(a) shall be construed as authorizing the General
Partner to amend this Agreement except in accordance with Article XIII or as may
be otherwise expressly provided for in this Agreement.
(b) The
foregoing power of attorney is hereby declared to be irrevocable and a power
coupled with an interest, and it shall survive and, to the maximum extent
permitted by law, not be affected by, the subsequent death, incompetency,
disability, incapacity, dissolution, bankruptcy or termination of any Limited
Partner and the transfer of all or any portion of such Limited Partner’s Limited
Partner Interest and shall extend to such Limited Partner’s heirs, successors,
assigns and personal representatives. Each such Limited Partner hereby agrees to
be bound by any representation made by the General Partner or the Liquidator
acting in good faith pursuant to such power of attorney; and each such Limited
Partner, to the maximum extent permitted by law, hereby waives any and all
defenses that may be available to contest, negate or disaffirm the action of the
General Partner or the Liquidator taken in good faith under such power of
attorney. Each Limited Partner shall execute and deliver to the General Partner
or the Liquidator, within 15 days after receipt of the request therefor, such
further designation, powers of attorney and other instruments as the General
Partner or the Liquidator may request in order to effectuate this Agreement and
the purposes of the Partnership.
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Term.
|
The term
of the Partnership commenced upon the filing of the Certificate of Limited
Partnership in accordance with the Delaware Act and shall continue in existence
until the dissolution of the Partnership in accordance with the provisions of
Article XII. The existence of the Partnership as a separate legal entity shall
continue until the cancellation of the Certificate of Limited Partnership as
provided in the Delaware Act.
|
Title
to Partnership Assets.
|
Title to
Partnership assets, whether real, personal or mixed and whether tangible or
intangible, shall be deemed to be owned by the Partnership as an entity, and no
Partner, individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partner, one or more of its Affiliates or one or more nominees, as the General
Partner may determine. The General Partner hereby declares and warrants that any
Partnership assets for which record title is held in the name of the General
Partner or one or more of its Affiliates or one or more nominees shall be held
by the General Partner or such Affiliate or nominee for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided, however, that the General
Partner shall use reasonable efforts to cause record title to such assets (other
than those assets in respect of which the General Partner determines that the
expense and difficulty of conveyancing makes transfer of record title to the
Partnership impracticable) to be vested in the Partnership as soon as reasonably
practicable; provided,
further, that, prior to
the withdrawal or removal of the General Partner or as soon thereafter as
practicable, the General Partner shall use reasonable efforts to effect the
transfer of record title to the Partnership and, prior to any such transfer,
will provide for the use of such assets in a manner satisfactory to the General
Partner. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which record
title to such Partnership assets is held.
27
ARTICLE
III
RIGHTS
OF LIMITED PARTNERS
|
Limitation
of Liability.
|
The
Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement or the Delaware Act.
|
Management
of Business.
|
No
Limited Partner, in its capacity as such, shall participate in the operation,
management or control (within the meaning of the Delaware Act) of the
Partnership’s business, transact any business in the Partnership’s name or have
the power to sign documents for or otherwise bind the Partnership. Any action
taken by any Affiliate of the General Partner or any officer, director,
employee, manager, member, general partner, agent or trustee of the General
Partner or any of its Affiliates, or any officer, director, employee, manager,
member, general partner, agent or trustee of a Group Member, in its capacity as
such, shall not be deemed to be participation in the control of the business of
the Partnership by a limited partner of the Partnership (within the meaning of
Section 17-303(a) of the Delaware Act) and shall not affect, impair or eliminate
the limitations on the liability of the Limited Partners under this
Agreement.
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Outside
Activities of the Limited Partners.
|
Subject
to the provisions of Section 7.5, which shall continue to be applicable to the
Persons referred to therein, regardless of whether such Persons shall also be
Limited Partners, any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities in direct competition
with the Partnership Group. Neither the Partnership nor any of the other
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner.
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Rights
of Limited Partners.
|
(a) In
addition to other rights provided by this Agreement or by applicable law, and
except as limited by Section 3.4(b), each Limited Partner shall have the right,
for a purpose reasonably related to such Limited Partner’s interest as a Limited
Partner in the Partnership, upon reasonable written demand stating the purpose
of such demand, and at such Limited Partner’s own expense:
(i) to obtain
true and full information regarding the status of the business and financial
condition of the Partnership (provided that the
requirements of this Section 3.4(a)(i) shall be satisfied by furnishing to
a Limited Partner upon its demand pursuant to this Section 3.4(a)(i) the
Partnership’s most recent filings with the Commission on Form 10-K and any
subsequent filings on Form 10-Q and 8-K);
28
(ii) promptly
after its becoming available, to obtain a copy of the Partnership’s federal,
state and local income tax returns for each year;
(iii) to obtain
a current list of the name and last known business, residence or mailing address
of each Partner;
(iv) to obtain
a copy of this Agreement and the Certificate of Limited Partnership and all
amendments thereto, together with copies of the executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate of Limited
Partnership and all amendments thereto have been executed;
(v) to obtain
true and full information regarding the amount of cash and a description and
statement of the Net Agreed Value of any other Capital Contribution by each
Partner and that each Partner has agreed to contribute in the future, and the
date on which each became a Partner; and
(vi) to obtain
such other information regarding the affairs of the Partnership as is just and
reasonable.
(b) The
General Partner may keep confidential from the Limited Partners, for such period
of time as the General Partner deems reasonable, (i) any information that the
General Partner reasonably believes to be in the nature of trade secrets or (ii)
other information the disclosure of which the General Partner in good faith
believes (A) is not in the best interests of the Partnership Group, (B) could
damage the Partnership Group or its business or (C) that any Group Member is
required by law or by agreement with any third party to keep confidential (other
than agreements with Affiliates of the Partnership the primary purpose of which
is to circumvent the obligations set forth in this Section 3.4).
29
ARTICLE
IV
CERTIFICATES;
RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION
OF PARTNERSHIP INTERESTS
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Certificates.
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Upon the
Partnership’s issuance of Common Units, Subordinated Units or Class B Units to
any Person, the Partnership shall issue, upon the request of such Person, one or
more Certificates in the name of such Person (or, if issued in global form, in
the name of the Depositary or its nominee) evidencing the number of such Units
being so issued. In addition, (a) upon the General Partner’s request, the
Partnership shall issue to it one or more Certificates in the name of the
General Partner evidencing its General Partner Units and (b) upon the request of
any Person owning Incentive Distribution Rights or any other Partnership
Securities other than Common Units, Subordinated Units or Class B Units, the
Partnership shall issue to such Person one or more certificates evidencing such
Incentive Distribution Rights or other Partnership Securities other than Common
Units, Subordinated Units or Class B Units. Certificates shall be executed on
behalf of the Partnership by the Chairman of the Board, Chief Executive Officer,
President or any Executive Vice President, Senior Vice President or Vice
President and the Secretary or any Assistant Secretary of the General Partner.
No Common Unit Certificate shall be valid for any purpose until it has been
countersigned by the Transfer Agent; provided, however, that the Units may
be certificated or uncertificated as provided in the Delaware Act; provided further that if the
General Partner elects to issue Common Units in global form, the Common Unit
Certificates shall be valid upon receipt of a certificate from the Transfer
Agent certifying that the Common Units have been duly registered in accordance
with the directions of the Partnership. Subject to the requirements of Section
6.7(c), the Partners holding Certificates evidencing Subordinated Units may
exchange such Certificates for Certificates evidencing Common Units on or after
the date on which such Subordinated Units are converted into Common Units
pursuant to the terms of Section 5.7. Subject to the requirements of Section
6.7(e), the Partners holding Certificates evidencing Class B Units may exchange
such Certificates for Certificates evidencing Common Units on or after the
period set forth in Section 5.11(f) pursuant to the terms of Section
5.11. The Partnership hereby irrevocably elects that all Subordinated
Units shall be securities governed by Article 8 of the Uniform Commercial Code
as in effect in the State of Delaware.
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Mutilated,
Destroyed, Lost or Stolen
Certificates.
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(a) If any
mutilated Certificate is surrendered to the Transfer Agent (for Common Units) or
the General Partner (for Partnership Securities other than Common Units), the
appropriate officers of the General Partner on behalf of the Partnership shall
execute, and the Transfer Agent (for Common Units) or the General Partner (for
Partnership Securities other than Common Units) shall countersign and deliver in
exchange therefor, a new Certificate evidencing the same number and type of
Partnership Securities as the Certificate so surrendered.
30
(b) The
appropriate officers of the General Partner on behalf of the Partnership shall
execute and deliver, and the Transfer Agent (for Common Units) shall
countersign, a new Certificate in place of any Certificate previously issued, or
issue uncertificated Common Units, if the Record Holder of the
Certificate:
(i) makes
proof by affidavit, in form and substance satisfactory to the General Partner,
that a previously issued Certificate has been lost, destroyed or
stolen;
(ii) requests
the issuance of a new Certificate or the issuance of uncertificated Units before
the General Partner has notice that the Certificate has been acquired by a
purchaser for value in good faith and without notice of an adverse
claim;
(iii) if
requested by the General Partner, delivers to the General Partner a bond, in
form and substance satisfactory to the General Partner, with surety or sureties
and with fixed or open penalty as the General Partner may direct to indemnify
the Partnership, the Partners, the General Partner and the Transfer Agent
against any claim that may be made on account of the alleged loss, destruction
or theft of the Certificate; and
(iv) satisfies
any other reasonable requirements imposed by the General Partner.
If a
Limited Partner fails to notify the General Partner within a reasonable period
of time after he has notice of the loss, destruction or theft of a Certificate,
and a transfer of the Limited Partner Interests represented by the Certificate
is registered before the Partnership, the General Partner or the Transfer Agent
receives such notification, the Limited Partner shall be precluded from making
any claim against the Partnership, the General Partner or the Transfer Agent for
such transfer or for a new Certificate or uncertificated Units.
(c) As a
condition to the issuance of any new Certificate or uncertificated Unit under
this Section 4.2, the General Partner may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Transfer Agent) reasonably connected therewith.
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Record
Holders.
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The
Partnership shall be entitled to recognize the Record Holder as the Partner with
respect to any Partnership Interest and, accordingly, shall not be bound to
recognize any equitable or other claim to, or interest in, such Partnership
Interest on the part of any other Person, regardless of whether the Partnership
shall have actual or other notice thereof, except as otherwise provided by law
or any applicable rule, regulation, guideline or requirement of any National
Securities Exchange on which such Partnership Interests are listed or admitted
to trading. Without limiting the foregoing, when a Person (such as a broker,
dealer, bank, trust company or clearing corporation or an agent of any of the
foregoing) is acting as nominee, agent or in some other representative capacity
for another Person in acquiring and/or holding Partnership Interests, as between
the Partnership on the one hand, and such other Persons on the other, such
representative Person shall be the Record Holder of such Partnership
Interest.
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Transfer
Generally.
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(a) The term
“transfer,”
when used in this Agreement with respect to a Partnership Interest, shall be
deemed to refer to a transaction (i) by which the General Partner assigns its
General Partner Units to another Person or by which a holder of Incentive
Distribution Rights assigns its Incentive Distribution Rights to another Person,
and includes a sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange or any other disposition by law or otherwise or (ii) by which
the holder of a Limited Partner Interest (other than an Incentive Distribution
Right) assigns such Limited Partner Interest to another Person who is or becomes
a Limited Partner, and includes a sale, assignment, gift, exchange or any other
disposition by law or otherwise, excluding a pledge, encumbrance, hypothecation
or mortgage but including any transfer upon foreclosure of any pledge,
encumbrance, hypothecation or mortgage.
(b) No
Partnership Interest shall be transferred, in whole or in part, except in
accordance with the terms and conditions set forth in this Article IV. Any
transfer or purported transfer of a Partnership Interest not made in accordance
with this Article IV shall be null and void.
(c) Nothing
contained in this Agreement shall be construed to prevent a disposition by any
stockholder, member, partner or other owner of the General Partner of any or all
of the shares of stock, membership interests, partnership interests or other
ownership interests in the General Partner.
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Registration
and Transfer of Limited Partner
Interests.
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(a) The
General Partner shall keep or cause to be kept on behalf of the Partnership a
register in which, subject to such reasonable regulations as it may prescribe
and subject to the provisions of Section 4.5(b), the Partnership will provide
for the registration and transfer of Limited Partner Interests. The Transfer
Agent is hereby appointed registrar and transfer agent for the purpose of
registering Common Units and transfers of such Common Units as herein provided.
The Partnership shall not recognize transfers of Certificates evidencing Limited
Partner Interests unless such transfers are effected in the manner described in
this Section 4.5. Upon surrender of a Certificate for registration of transfer
of any Limited Partner Interests evidenced by a Certificate, and subject to the
provisions of Section 4.5(b), the appropriate officers of the General Partner on
behalf of the Partnership shall execute and deliver, and in the case of Common
Units, the Transfer Agent shall countersign and deliver, in the name of the
holder or the designated transferee or transferees, as required pursuant to the
holder’s instructions, one or more new Certificates evidencing the same
aggregate number and type of Limited Partner Interests as was evidenced by the
Certificate so surrendered.
(b) Except as
otherwise provided in Section 4.9 and Section 4.11, the General Partner shall
not recognize any transfer of Limited Partner Interests until (i) the
Certificates evidencing such Limited Partner Interests are surrendered for
registration of transfer and (ii) following a FERC Notice, such Certificates are
accompanied by a Taxation Certification, properly completed and duly executed by
the transferee (or the transferee’s attorney-in-fact duly authorized in
writing). No charge shall be imposed by the General Partner for such
transfer; provided,
that as a condition to the issuance of any new Certificate under this Section
4.5, the General Partner may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed with respect
thereto.
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(c) Upon the
receipt of proper transfer instructions from the registered owner of
uncertificated Common Units, such uncertificated Common Units shall be
cancelled, issuance of new equivalent uncertificated Common Units or
Certificates shall be made to the holder of Common Units entitled thereto and
the transaction shall be recorded upon the books of the
Partnership.
(d) Subject
to (i) the foregoing provisions of this Section 4.5, (ii) Section 4.3, (iii)
Section 4.8, (iv) with respect to any class or series of Limited Partner
Interests, the provisions of any statement of designations or an amendment to
this Agreement establishing such class or series, (v) any contractual provisions
binding on any Limited Partner and (vi) provisions of applicable law including
the Securities Act, Limited Partner Interests (other than the Incentive
Distribution Rights) shall be freely transferable.
(e) The
General Partner and its Affiliates shall have the right at any time to transfer
their Subordinated Units, Class B Units and Common Units (whether issued upon
conversion of the Subordinated Units or otherwise) to one or more
Persons.
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Transfer
of the General Partner’s General Partner
Interest.
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(a) Subject
to Section 4.6(c) below, prior to June 30, 2017, the General Partner shall not
transfer all or any part of its General Partner Interest (represented by General
Partner Units) to a Person unless such transfer (i) has been approved by the
prior written consent or vote of the holders of at least a majority of the
Outstanding Common Units (excluding Common Units held by the General Partner and
its Affiliates) or (ii) is of all, but not less than all, of its General Partner
Interest to (A) an Affiliate of the General Partner (other than an individual)
or (B) another Person (other than an individual) in connection with the merger
or consolidation of the General Partner with or into such other Person or the
transfer by the General Partner of all or substantially all of its assets to
such other Person.
(b) Subject
to Section 4.6(c) below, on or after June 30, 2017, the General Partner may
transfer all or any of its General Partner Interest without Unitholder
approval.
(c) Notwithstanding
anything herein to the contrary, no transfer by the General Partner of all or
any part of its General Partner Interest to another Person shall be permitted
unless (i) the transferee agrees to assume the rights and duties of the General
Partner under this Agreement and to be bound by the provisions of this
Agreement, (ii) the Partnership receives an Opinion of Counsel that such
transfer would not result in the loss of limited liability of any Limited
Partner under the Delaware Act or cause the Partnership to be treated as an
association taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes (to the extent not already so treated or taxed) and
(iii) such transferee also agrees to purchase all (or the appropriate portion
thereof, if applicable) of the partnership or membership interest of the General
Partner as the general partner or managing member, if any, of each other Group
Member. In the case of a transfer pursuant to and in compliance with this
Section 4.6, the transferee or successor (as the case may be) shall, subject to
compliance with the terms of Section 10.3, be admitted to the Partnership as the
General Partner immediately prior to the transfer of the General Partner
Interest, and the business of the Partnership shall continue without
dissolution.
33
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Transfer
of Incentive Distribution Rights.
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Prior to
June 30, 2017, a holder of Incentive Distribution Rights may transfer any or all
of the Incentive Distribution Rights held by such holder without any consent of
the Unitholders to (a) an Affiliate of such holder (other than an individual) or
(b) another Person (other than an individual) in connection with (i) the merger
or consolidation of such holder of Incentive Distribution Rights with or into
such other Person, (ii) the transfer by such holder of all or substantially all
of its assets to such other Person or (iii) the sale of all the ownership
interests in such holder. Any other transfer of the Incentive Distribution
Rights prior to June 30, 2017 shall require the prior approval of holders of at
least a majority of the Outstanding Common Units (excluding Common Units held by
the General Partner and its Affiliates). On or after June 30, 2017, the General
Partner or any other holder of Incentive Distribution Rights may transfer any or
all of its Incentive Distribution Rights without Unitholder approval.
Notwithstanding anything herein to the contrary, (i) the transfer of
Class B Units issued pursuant to Section 5.11, or the transfer of
Common Units issued upon conversion of the Class B Units, shall not be
treated as a transfer of all or any part of the Incentive Distribution Rights
and (ii) no transfer of Incentive Distribution Rights to another Person
shall be permitted unless the transferee agrees to be bound by the provisions of
this Agreement.
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Restrictions
on Transfers.
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(a) Except as
provided in Section 4.8(d) below, and notwithstanding the other provisions of
this Article IV, no transfer of any Partnership Interests shall be made if such
transfer would (i) violate the then applicable federal or state securities laws
or rules and regulations of the Commission, any state securities commission or
any other governmental authority with jurisdiction over such transfer, (ii)
terminate the existence or qualification of the Partnership under the laws of
the jurisdiction of its formation, or (iii) cause the Partnership to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed).
(b) The
General Partner may impose restrictions on the transfer of Partnership Interests
if it receives an Opinion of Counsel that such restrictions are necessary to
avoid a significant risk of the Partnership becoming taxable as a corporation or
otherwise becoming taxable as an entity for federal income tax purposes. The
General Partner may impose such restrictions by amending this Agreement; provided, however, that any amendment
that would result in the delisting or suspension of trading of any class of
Limited Partner Interests on the principal National Securities Exchange on which
such class of Limited Partner Interests is then listed or admitted to trading
must be approved, prior to such amendment being effected, by the holders of at
least a majority of the Outstanding Limited Partner Interests of such
class.
(c) The
transfer of a Subordinated Unit that has converted into a Common Unit shall be
subject to the restrictions imposed by Section 6.7(c).
34
(d) The
transfer of a Class B Unit that has converted into a Common Unit shall be
subject to the restrictions imposed by Section 6.7(e).
(e) Nothing
contained in this Article IV, or elsewhere in this Agreement, shall preclude the
settlement of any transactions involving Partnership Interests entered into
through the facilities of any National Securities Exchange on which such
Partnership Interests are listed or admitted to trading.
(f) Each
certificate evidencing Partnership Interests shall bear a conspicuous legend in
substantially the following form:
THE
HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF BLUEKNIGHT ENERGY
PARTNERS, L.P. THAT THIS SECURITY MAY NOT BE SOLD, OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED IF SUCH TRANSFER WOULD (A) VIOLATE THE THEN APPLICABLE
FEDERAL OR STATE SECURITIES LAWS OR RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL
AUTHORITY WITH JURISDICTION OVER SUCH TRANSFER, (B) TERMINATE THE EXISTENCE OR
QUALIFICATION OF BLUEKNIGHT ENERGY PARTNERS, L.P. UNDER THE LAWS OF THE STATE OF
DELAWARE, OR (C) CAUSE BLUEKNIGHT ENERGY PARTNERS, L.P. TO BE TREATED AS AN
ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY FOR
FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED).
BLUEKNIGHT ENERGY PARTNERS G.P., L.L.C., THE GENERAL PARTNER OF BLUEKNIGHT
ENERGY PARTNERS, L.P., MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE TRANSFER OF
THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH RESTRICTIONS ARE
NECESSARY TO AVOID A SIGNIFICANT RISK OF BLUEKNIGHT ENERGY PARTNERS, L.P.
BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE AS AN ENTITY FOR
FEDERAL INCOME TAX PURPOSES. THE RESTRICTIONS SET FORTH ABOVE SHALL NOT PRECLUDE
THE SETTLEMENT OF ANY TRANSACTIONS INVOLVING THIS SECURITY ENTERED INTO THROUGH
THE FACILITIES OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS
LISTED OR ADMITTED TO TRADING.
35
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Citizenship
Certificates; Non-citizen
Assignees.
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(a) If any
Group Member is or becomes subject to any federal, state or local law or
regulation that the General Partner determines would create a substantial risk
of cancellation or forfeiture of any property in which the Group Member has an
interest based on the nationality, citizenship or other related status of a
Limited Partner, the General Partner may request any Limited Partner to furnish
to the General Partner, within 30 days after receipt of such request, an
executed Citizenship Certification or such other information concerning his
nationality, citizenship or other related status (or, if the Limited Partner is
a nominee holding for the account of another Person, the nationality,
citizenship or other related status of such Person) as the General Partner may
request. If a Limited Partner fails to furnish to the General Partner within the
aforementioned 30-day period such Citizenship Certification or other requested
information or if upon receipt of such Citizenship Certification or other
requested information the General Partner determines that a Limited Partner is
not an Eligible Citizen, the Limited Partner Interests owned by such Limited
Partner shall be subject to redemption in accordance with the provisions of
Section 4.10. In addition, the General Partner may require that the status of
any such Limited Partner be changed to that of a Non-citizen Assignee and,
thereupon, the General Partner shall be substituted for such Non-citizen
Assignee as the Limited Partner in respect of the Non-citizen Assignee’s Limited
Partner Interests; provided, however, that such
Non-citizen Assignee shall continue to receive allocations and distributions
until the date fixed for redemption of such Limited Partner Interests (if
applicable) pursuant to Section 4.10(a)(i).
(b) The
General Partner shall, in exercising voting rights in respect of Limited Partner
Interests held by it on behalf of Non-citizen Assignees, distribute the votes in
the same ratios as the votes of Partners (including the General Partner) in
respect of Limited Partner Interests other than those of Non-citizen Assignees
are cast, either for, against or abstaining as to the matter.
(c) Upon
dissolution of the Partnership, a Non-citizen Assignee shall have no right to
receive a distribution in kind pursuant to Section 12.4 but shall be entitled to
the cash equivalent thereof, and the Partnership shall provide cash in exchange
for an assignment of the Non-citizen Assignee’s share of any distribution in
kind. Such payment and assignment shall be treated for Partnership purposes as a
purchase by the Partnership from the Non-citizen Assignee of his Limited Partner
Interest (representing his right to receive his share of such distribution in
kind).
(d) At any
time after he can and does certify that he has become an Eligible Citizen, a
Non-citizen Assignee may, upon application to the General Partner, request that
with respect to any Limited Partner Interests of such Non-citizen Assignee not
redeemed pursuant to Section 4.10, such Non-citizen Assignee be admitted as a
Limited Partner, and upon approval of the General Partner, such Non-citizen
Assignee shall be admitted as a Limited Partner and shall no longer constitute a
Non-citizen Assignee and the General Partner shall cease to be deemed to be the
Limited Partner in respect of the Non-citizen Assignee’s Limited Partner
Interests.
36
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Redemption
of Partnership Interests of Non-citizen
Assignees.
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(a) If at any
time a Limited Partner fails to furnish a Citizenship Certification or other
information requested within the 30-day period specified in Section 4.9(a), or
if upon receipt of such Citizenship Certification or other information the
General Partner determines that a Limited Partner is not an Eligible Citizen,
the Partnership may, unless the Limited Partner establishes to the satisfaction
of the General Partner prior to the date fixed for redemption as provided below
that such Limited Partner is an Eligible Citizen or has transferred his
Partnership Interests to a Person who is an Eligible Citizen and who furnishes a
Citizenship Certification to the General Partner prior to the date fixed for
redemption as provided below, redeem the Limited Partner Interest of such
Limited Partner as follows:
(i) The
General Partner shall, not later than the 30th day before the date fixed for
redemption, give notice of redemption to the Limited Partner, at his last
address designated on the records of the Partnership or the Transfer Agent, by
registered or certified mail, postage prepaid. The notice shall be deemed to
have been given when so mailed. The notice shall specify the Redeemable
Interests, the date fixed for redemption, the place of payment, that payment of
the redemption price will be made upon surrender of the Certificate evidencing
the Redeemable Interests or, if uncertificated, upon receipt of evidence
satisfactory to the General Partner of the ownership of the Redeemable
Interests, and that on and after the date fixed for redemption no further
allocations or distributions to which the Limited Partner would otherwise be
entitled in respect of the Redeemable Interests will accrue or be
made.
(ii) The
aggregate redemption price for Redeemable Interests shall be an amount equal to
the Current Market Price (the date of determination of which shall be the date
fixed for redemption) of Limited Partner Interests of the class to be so
redeemed multiplied by the number of Limited Partner Interests of each such
class included among the Redeemable Interests. The redemption price shall be
paid, as determined by the General Partner, in cash or by delivery of a
promissory note of the Partnership in the principal amount of the redemption
price, bearing interest at the rate of 5% annually and payable in three equal
annual installments of principal together with accrued interest, commencing one
year after the redemption date.
(iii) Upon
surrender by or on behalf of the Limited Partner, at the place specified in the
notice of redemption, of (x) if certificated, the Certificate evidencing the
Redeemable Interests, duly endorsed in blank or accompanied by an assignment
duly executed in blank, or (y) if uncertificated, upon receipt of evidence
satisfactory to the General Partner of the ownership of the Redeemable
Interests, the Limited Partner or his duly authorized representative shall be
entitled to receive the payment therefor.
37
(iv) After the
redemption date, Redeemable Interests shall no longer constitute issued and
Outstanding Limited Partner Interests.
(b) The
provisions of this Section 4.10 shall also be applicable to Limited Partner
Interests held by a Limited Partner as nominee of a Person determined to be
other than an Eligible Citizen.
(c) Nothing
in this Section 4.10 shall prevent the recipient of a notice of redemption from
transferring his Limited Partner Interest before the redemption date if such
transfer is otherwise permitted under this Agreement. Upon receipt of notice of
such a transfer, the General Partner shall withdraw the notice of redemption,
provided the transferee
of such Limited Partner Interest certifies to the satisfaction of the General
Partner that he is an Eligible Citizen. If the transferee fails to make such
certification, such redemption shall be effected from the transferee on the
original redemption date.
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Taxation
Certifications; Ineligible
Assignees.
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(a) Following
a FERC Notice, if a transferee of a Limited Partner Interest fails to furnish a
properly completed Taxation Certification in the manner specified in Section
4.5(b) or if, upon receipt of such Taxation Certification or otherwise, the
General Partner determines that such transferee is not an Eligible Holder, the
Limited Partner Interests owned by such transferee shall be subject to
redemption in accordance with the provisions of Section 4.12.
(b) Following
a FERC Notice, the General Partner may request any Limited Partner to furnish to
the General Partner, within 30 days after receipt of such request, an executed
Taxation Certification or such other information concerning his federal income
tax status with respect to the income and loss generated by the Partnership (or,
if the Limited Partner is a nominee holding for the account of another Person,
the federal income tax status of such Person) as the General Partner may
reasonably request. If a Limited Partner or Assignee fails to furnish
to the General Partner within the aforementioned 30-day period such Taxation
Certification or other requested information or if upon receipt of such Taxation
Certification or other requested information the General Partner determines that
a Limited Partner is an Ineligible Assignee, the Limited Partner Interests owned
by such Limited Partner shall be subject to redemption in accordance with the
provisions of Section 4.12. The General Partner shall be
substituted for such Ineligible Assignee as the Limited Partner in respect of
the Ineligible Assignee’s Limited Partner Interests; provided, however, that such Ineligible
Assignee shall continue to receive allocations and distributions until the date
fixed for redemption of such Limited Partner Interests (if applicable) pursuant
to Section 4.12(a)(i).
(c) Following
a FERC Notice, the General Partner shall, in exercising voting rights in respect
of Limited Partner Interests held by it on behalf of Ineligible Assignees,
distribute the votes in the same ratios as the votes of Partners (including
without limitation the General Partner) in respect of Limited Partner Interests
other than those of Ineligible Assignees are cast, either for, against or
abstaining as to the matter.
38
(d) Upon
dissolution of the Partnership, an Ineligible Assignee shall have no right to
receive a distribution in kind pursuant to Section 12.4 but shall be
entitled to the cash equivalent thereof, and the Partnership shall provide cash
in exchange for an assignment of the Ineligible Assignee’s share of any
distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the Ineligible
Assignee of his Limited Partner Interest (representing his right to receive his
share of such distribution in kind).
(e) At any
time after an Ineligible Assignee can and does certify that it has become an
Eligible Holder, such Ineligible Assignee may, upon application to the General
Partner, request that with respect to any Limited Partner Interests of such
Ineligible Assignee not redeemed pursuant to Section 4.12, such Ineligible
Assignee be admitted as a Limited Partner, and upon approval of the General
Partner, such Ineligible Assignee shall be admitted as a Limited Partner and
shall no longer constitute a Ineligible Assignee and the General Partner shall
cease to be deemed to be the Limited Partner in respect of such Ineligible
Assignee’s Limited Partner Interests.
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Redemption
of Partnership Interests of Ineligible
Assignees.
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(a) If at any
time following a FERC Notice, a transferee of a Limited Partner Interest fails
to furnish the General Partner a Taxation Certification in the manner specified
in Section 4.5(b) or any Limited Partner fails to furnish the General Partner a
Taxation Certification or other information requested within the 30-day period
specified in Section 4.11(b), or if upon receipt of such Taxation Certification
or other information the General Partner determines that a Limited Partner or
transferee is not an Eligible Holder, the Partnership may redeem the Limited
Partner Interest of such Limited Partner or transferee as follows:
(i) The
General Partner shall, not later than the 30th day before the date fixed for
redemption, give notice of redemption to the Limited Partner or transferee, at
his last address designated on the records of the Partnership or the Transfer
Agent, by registered or certified mail, postage prepaid. The notice shall be
deemed to have been given when so mailed. The notice shall specify the
Redeemable Interests, the date fixed for redemption, the place of payment, that
payment of the redemption price will be made upon surrender of the Certificate
evidencing the Redeemable Interests or, if uncertificated, upon receipt of
evidence satisfactory to the General Partner of the ownership of the Redeemable
Interests, and that on and after the date fixed for redemption no further
allocations or distributions to which the Limited Partner would otherwise be
entitled in respect of the Redeemable Interests will accrue or be
made.
39
(ii) The
aggregate redemption price for Redeemable Interests shall be an amount equal to
the lesser of (A) the Current Market Price (the date of determination of which
shall be the date fixed for redemption) of Limited Partner Interests of the
class to be so redeemed multiplied by the number of Limited Partner Interests of
each such class included among the Redeemable Interests and (B) the price paid
for such Limited Partner Interests by the Limited Partner or transferee. The
redemption price shall be paid as determined by the General Partner, in cash or
by delivery of a promissory note of the Partnership in the principal amount of
the redemption price, bearing interest at the rate of 5% annually and payable in
three equal annual installments of principal together with accrued interest,
commencing one year after the redemption date.
(iii) Upon
surrender by or on behalf of the Limited Partner, at the place specified in the
notice of redemption, of (x) if certificated, the Certificate evidencing the
Redeemable Interests, duly endorsed in blank or accompanied by an assignment
duly executed in blank, or (y) if uncertificated, upon receipt of evidence
satisfactory to the General Partner of the ownership of the Redeemable
Interests, the Limited Partner or transferee or his duly authorized
representative shall be entitled to receive the payment therefor.
(iv) After the
redemption date, Redeemable Interests shall no longer constitute issued and
Outstanding Limited Partner Interests.
(b) The
provisions of this Section 4.12 shall also be applicable to Limited Partner
Interests held by a Limited Partner as nominee of a Person determined to be
other than an Eligible Holder.
(c) Nothing
in this Section 4.12 shall prevent the recipient of a notice of redemption
from transferring his Limited Partner Interest before the redemption date if
such transfer is otherwise permitted under this Agreement. Upon receipt of
notice of such a transfer, the General Partner shall withdraw the notice of
redemption, provided the transferee of such Limited Partner Interest certifies
to the satisfaction of the General Partner in a Taxation Certification that he
is an Eligible Holder. If the transferee fails to make such certification, such
redemption shall be effected from the transferee on the original redemption
date.
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ARTICLE
V
CAPITAL
CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
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Organizational
Contributions.
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In
connection with the formation of the Partnership under the Delaware Act, the
General Partner made an initial Capital Contribution to the Partnership in the
amount of $20.00, for a 2% General Partner Interest in the Partnership and has
been admitted as the General Partner of the Partnership, and each of the
Organizational Limited Partner made an initial Capital Contribution to the
Partnership in the amount of $980.00 for a 98% Limited Partner Interest in the
Partnership and has been admitted as a Limited Partner of the Partnership. On
July 20, 2007, pursuant to the Contribution Agreement, the interest of the
Organizational Limited Partner was partially redeemed in exchange for the return
of the initial Capital Contribution of the Organizational Limited Partner.
Ninety-eight percent of any interest or other profit that may have resulted from
the investment or other use of such initial Capital Contributions shall be
allocated and distributed to the Organizational Limited Partner, and the balance
thereof shall be allocated and distributed to the General Partner.
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Contributions
by the General Partner.
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(a) On July
20, 2007 and pursuant to the Contribution Agreement, the General Partner
contributed to the Partnership, as a Capital Contribution, a 2% interest in BKEP
Crude, L.L.C., a Delaware limited liability company (“New BKEP
Crude”) (formerly known as SemGroup Energy Partners, L.L.C.), in exchange
for (i) 511,643 General Partner Units representing a continuation of its 2%
General Partner Interest, subject to all of the rights, privileges and duties of
the General Partner under this Agreement and (ii) the Incentive Distribution
Rights.
(b) Upon the
issuance of additional Common Units pursuant to the Over-Allotment Option, the
Partnership issued to the General Partner that number of additional General
Partner Units equal to 2/98ths of the number of Common Units so issued pursuant
to the Over-Allotment Option, and the General Partner was not be obligated to
make any additional Capital Contribution to the Partnership in exchange for such
issuance.
(c) Upon the
issuance of any additional Limited Partner Interests by the Partnership (other
than the Common Units issued pursuant to the Over-Allotment Option, the Common
Units and Subordinated Units issued pursuant to Section 5.3(a), any Class B
Units issued pursuant to Section 5.11 and any Common Units issued upon
conversion of Class B Units), the General Partner may, in exchange for a
proportionate number of General Partner Units with rights to allocations and
distributions that correspond to those applicable to such additional Limited
Partner Interests, make additional Capital Contributions in an amount equal to
the product obtained by multiplying (i) the quotient determined by dividing (A)
the General Partner’s Percentage Interest immediately prior to the issuance of
such additional Limited Partner Interests by the Partnership by (B) 100 less the
General Partner’s Percentage Interest immediately prior to the issuance of such
additional Limited Partner Interests by the Partnership times (ii) the amount
contributed to the Partnership by the Limited Partners in exchange for such
additional Limited Partner Interests. Except as set forth in Article XII, the
General Partner shall not be obligated to make any additional Capital
Contributions to the Partnership.
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Contributions
by Initial Limited Partners.
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(a) On July
20, 2007 and pursuant to the Contribution Agreement, SemGroup Holdings, L.P., a
Delaware limited partnership (“SemGroup
Holdings”), contributed to the Partnership, as a Capital Contribution, a
98% interest in New SemCrude LLC in exchange for 12,500,000 Common Units and
12,570,504 Subordinated Units.
(b) Upon the
issuance of additional Common Units pursuant to the Over-Allotment Option, each
Underwriter shall contribute to the Partnership cash in an amount equal to the
Issue Price per Initial Common Unit, multiplied by the number of Common Units to
be purchased by such Underwriter at the Option Closing Date. In exchange for
such Capital Contributions by the Underwriters, the Partnership shall issue
Common Units to each Underwriter on whose behalf such Capital Contribution is
made in an amount equal to the quotient obtained by dividing (i) the cash
contributions to the Partnership by or on behalf of such Underwriter by (ii) the
Issue Price per Initial Common Unit.
(c) No
Limited Partner Interests were issued or issuable as of or at the Closing Date
other than (i) the 12,500,000 Common Units issued to SemGroup Holdings pursuant
to Section 5.2, (ii) the “Option Units” as such term is used in the
Underwriting Agreement in an aggregate number up to 1,875,000 issuable upon
exercise of the Over-Allotment Option pursuant to subparagraph (b) hereof, (iii)
the 12,570,504 Subordinated Units issued to SemGroup Holdings pursuant to
Section 5.2 and (iv) the Incentive Distribution Rights.
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Interest
and Withdrawal.
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No
interest shall be paid by the Partnership on Capital Contributions. No
Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Partnership may be considered as such
by law and then only to the extent provided for in this Agreement. Except to the
extent expressly provided in this Agreement, no Partner shall have priority over
any other Partner either as to the return of Capital Contributions or as to
profits, losses or distributions. Any such return shall be a compromise to which
all Partners agree within the meaning of Section 17-502(b) of the Delaware
Act.
42
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Capital
Accounts.
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(a) The
Partnership shall maintain for each Partner (or a beneficial owner of
Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner) owning a Partnership Interest a separate Capital Account with respect
to such Partnership Interest in accordance with the rules of Treasury Regulation
Section 1.704-1(b)(2)(iv). The initial Capital Account balance attributable to
the General Partner Units issued to the General Partner pursuant to Section
5.2(a) shall equal the Net Agreed Value of the Capital Contribution specified in
Section 5.2(a), which shall be deemed to equal the product of the number of
General Partner Units issued to the General Partner pursuant to Section 5.2(a)
and the Initial Unit Price for each Common Unit (and the initial Capital Account
balance attributable to each General Partner Unit shall equal the Initial Unit
Price for each Common Unit). The initial Capital Account balance
attributable to the Common Units and Subordinated Units issued to SemGroup
Holdings pursuant to Section 5.3(a) shall equal the Net Agreed Value of the
Capital Contribution specified in Section 5.3(a), which shall be deemed to equal
the product of the number of Common Units and Subordinated Units issued to
SemGroup Holdings pursuant to Section 5.3(a) and the Initial Unit Price for each
such Common Unit and Subordinated Unit (and the initial Capital Account balance
attributable to each such Common Unit and Subordinated Unit shall equal its
Initial Unit Price). The initial Capital Account balance attributable
to the Common Units issued to the Underwriters pursuant to Section 5.3(b) shall
equal the product of the number of Common Units so issued to the Underwriters
and the Initial Unit Price for each such Common Unit (and the initial Capital
Account balance attributable to each such Common Unit shall equal its Initial
Unit Price). Thereafter, the Capital Account shall in respect of each
such Partnership Interest be increased by (i) the amount of all cash and the Net
Agreed Value of any property contributed to the Partnership with respect to such
Partnership Interest and (ii) all items of Partnership income and gain
(including income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest and (y) all items of Partnership deduction and loss
computed in accordance with Section 5.5(b) and allocated with respect to
such Partnership Interest pursuant to Section 6.1.
(b) For
purposes of computing the amount of any item of income, gain, loss or deduction
which is to be allocated pursuant to Article VI and is to be reflected in the
Partners’ Capital Accounts, the determination, recognition and classification of
any such item shall be the same as its determination, recognition and
classification for federal income tax purposes (including any method of
depreciation, cost recovery or amortization used for that purpose), provided, that:
43
(i) Solely
for purposes of this Section 5.5, the Partnership shall be treated as owning
directly its proportionate share (as determined by the General Partner based
upon the provisions of the applicable Group Member Agreement or governing,
organizational or similar documents) of all property owned by (x) any other
Group Member that is classified as a partnership for federal income tax purposes
and (y) any other partnership, limited liability company, unincorporated
business or other entity classified as a partnership for federal income tax
purposes of which a Group Member is, directly or indirectly, a
partner.
(ii) All fees
and other expenses incurred by the Partnership to promote the sale of (or to
sell) a Partnership Interest that can neither be deducted nor amortized under
Section 709 of the Code, if any, shall, for purposes of Capital Account
maintenance, be treated as an item of deduction at the time such fees and other
expenses are incurred and shall be allocated among the Partners pursuant to
Section 6.1.
(iii) Except as
otherwise provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m), the
computation of all items of income, gain, loss and deduction shall be made
without regard to any election under Section 754 of the Code which may be made
by the Partnership. To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the Code
is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be
taken into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.
(iv) Any
income, gain or loss attributable to the taxable disposition of any Partnership
property shall be determined as if the adjusted basis of such property as of
such date of disposition were equal in amount to the Partnership’s Carrying
Value with respect to such property as of such date.
(v) An item
of income of the Partnership that is described in Section 705(a)(1)(B) of the
Code (with respect to items of income that are exempt from tax) shall be treated
as an item of income for the purpose of this Section 5.5(b), and an item of
expense of the Partnership that is described in Section 705(a)(2)(B) of the Code
(with respect to expenditures that are not deductible and not chargeable to
capital accounts), shall be treated as an item of deduction for the purpose of
this Section 5.5(b).
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(vi) In
accordance with the requirements of Section 704(b) of the Code, any deductions
for depreciation, cost recovery or amortization attributable to any Contributed
Property shall be determined as if the adjusted basis of such property on the
date it was acquired by the Partnership were equal to the Agreed Value of such
property. Upon an adjustment pursuant to Section 5.5(d) to the Carrying Value of
any Partnership property subject to depreciation, cost recovery or amortization,
any further deductions for such depreciation, cost recovery or amortization
attributable to such property shall be determined as if the adjusted basis of
such property were equal to the Carrying Value of such property immediately
following such adjustment.
(c) (i) A transferee of a Partnership Interest shall
succeed to a pro rata portion of the Capital Account of the transferor relating
to the Partnership Interest so transferred.
(ii) Subject to
Section 6.7(c), immediately prior to the transfer of a Subordinated Unit or of a
Subordinated Unit that has converted into a Common Unit pursuant to Section 5.7
by a holder thereof (other than a transfer to an Affiliate unless the General
Partner elects to have this subparagraph 5.5(c)(ii) apply), the Capital Account
maintained for such Person with respect to its Subordinated Units or converted
Subordinated Units will (A) first, be allocated to the Subordinated Units or
converted Subordinated Units to be transferred in an amount equal to the product
of (x) the number of such Subordinated Units or converted Subordinated Units to
be transferred and (y) the Per Unit Capital Amount for a Common Unit, and (B)
second, any remaining balance in such Capital Account will be retained by the
transferor, regardless of whether it has retained any Subordinated Units or
converted Subordinated Units (“Retained
Converted Subordinated Units”). Following any such allocation, the
transferor’s Capital Account, if any, maintained with respect to the retained
Subordinated Units or Retained Converted Subordinated Units, if any, will have a
balance equal to the amount allocated under clause (B) hereinabove, and the
transferee’s Capital Account established with respect to the transferred
Subordinated Units or converted Subordinated Units will have a balance equal to
the amount allocated under clause (A) hereinabove. Immediately after
the issuance of Class B Units to the holder of the Incentive Distribution Rights
pursuant to Section 5.11, the entire Capital Account balance of such holder with
respect to its Incentive Distribution Rights immediately prior to such issuance
shall (A) first, be allocated to (and will constitute such holder’s initial
Capital Account balance in respect of) the Class B Units issued in an amount
equal to the product of (x) the number of such Class B Units to be issued and
(y) the Per Unit Capital Amount for a Common Unit, and (B) second, any remaining
balance in such Capital Account will constitute such holder’s Capital Account
balance with respect to the Incentive Distribution Rights retained by such
holder.
45
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for
cash or Contributed Property, the issuance of Partnership Interests as
consideration for the provision of services or the conversion of the General
Partner’s Combined Interest to Common Units pursuant to Section 11.3(b), the
Capital Accounts of all Partners and the Carrying Value of each Partnership
property immediately prior to such issuance shall be adjusted upward or downward
to reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property for an amount equal to its
fair market value immediately prior to such issuance and had been allocated to
the Partners at such time pursuant to Section 6.1(c) in the same manner as any
item of gain or loss actually recognized following an event giving rise to the
dissolution of the Partnership would have been allocated. In determining such
Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market
value of all Partnership assets (including cash or cash equivalents) immediately
prior to the issuance of additional Partnership Interests shall be determined by
the General Partner using such method of valuation as it may adopt; provided,
however, that the General Partner, in arriving at such valuation, must take
fully into account the fair market value of the Partnership Interests of all
Partners at such time. The General Partner shall allocate such aggregate value
among the assets of the Partnership (in such manner as it determines) to arrive
at a fair market value for individual properties.
(ii) In
accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f), immediately
prior to any actual or deemed distribution to a Partner of any Partnership
property (other than a distribution of cash that is not in redemption or
retirement of a Partnership Interest), the Capital Accounts of all Partners and
the Carrying Value of all Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property immediately prior to such
distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 6.1(c) in the same
manner as any item of gain or loss actually recognized following an event giving
rise to the dissolution of the Partnership would have been allocated. In
determining such Unrealized Gain or Unrealized Loss the aggregate cash amount
and fair market value of all Partnership assets (including cash or cash
equivalents) immediately prior to a distribution shall (A) in the case of an
actual distribution that is not made pursuant to Section 12.4 or in the case of
a deemed distribution, be determined and allocated in the same manner as that
provided in Section 5.5(d)(i) or (B) in the case of a liquidating distribution
pursuant to Section 12.4, be determined and allocated by the Liquidator using
such method of valuation as it may adopt.
46
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Issuances
of Additional Partnership
Securities.
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(a) The
Partnership may issue additional Partnership Securities and options, rights,
warrants and appreciation rights relating to the Partnership Securities for any
Partnership purpose at any time and from time to time to such Persons for such
consideration and on such terms and conditions as the General Partner shall
determine, all without the approval of any Limited Partners.
(b) Each
additional Partnership Security authorized to be issued by the Partnership
pursuant to Section 5.6(a) may be issued in one or more classes, or one or more
series of any such classes, with such designations, preferences, rights, powers
and duties (which may be senior to existing classes and series of Partnership
Securities), as shall be fixed by the General Partner, including (i) the right
to share in Partnership profits and losses or items thereof; (ii) the right to
share in Partnership distributions; (iii) the rights upon dissolution and
liquidation of the Partnership; (iv) whether, and the terms and conditions upon
which, the Partnership may or shall be required to redeem the Partnership
Security; (v) whether such Partnership Security is issued with the privilege of
conversion or exchange and, if so, the terms and conditions of such conversion
or exchange; (vi) the terms and conditions upon which each Partnership Security
will be issued, evidenced by certificates and assigned or transferred; (vii) the
method for determining the Percentage Interest as to such Partnership Security;
and (viii) the right, if any, of each such Partnership Security to vote on
Partnership matters, including matters relating to the relative rights,
preferences and privileges of such Partnership Security.
(c) The
General Partner shall take all actions that it determines to be necessary or
appropriate in connection with (i) each issuance of Partnership Securities and
options, rights, warrants and appreciation rights relating to Partnership
Securities pursuant to this Section 5.6, (ii) the conversion of the General
Partner Interest (represented by General Partner Units) or any Incentive
Distribution Rights into Units pursuant to the terms of this Agreement, (iii)
the issuance of Class B Units pursuant to Section 5.11 and the conversion of
Class B Units into Common Units pursuant to the terms of this Agreement, (iv)
reflecting admission of such additional Limited Partners in the books and
records of the Partnership as the Record Holder of such Limited Partner Interest
and (v) all additional issuances of Partnership Securities. The General Partner
shall determine the relative rights, powers and duties of the holders of the
Units or other Partnership Securities being so issued. The General Partner shall
do all things necessary to comply with the Delaware Act and is authorized and
directed to do all things that it determines to be necessary or appropriate in
connection with any future issuance of Partnership Securities or in connection
with the conversion of the General Partner Interest or any Incentive
Distribution Rights into Units pursuant to the terms of this Agreement,
including compliance with any statute, rule, regulation or guideline of any
federal, state or other governmental agency or any National Securities Exchange
on which the Units or other Partnership Securities are listed or admitted to
trading.
(d) No
fractional Units shall be issued by the Partnership.
47
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Conversion
of Subordinated Units.
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(a) All of
the Subordinated Units shall convert into Common Units on a one-for-one basis on
the second Business Day following the distribution of Available Cash to Partners
pursuant to Section 6.3(a) in respect of the final Quarter of the Subordination
Period.
(b) Notwithstanding
Section 5.7(a) above, the Subordination Period shall terminate and all
Outstanding Subordinated Units shall convert into Common Units on a one-for-one
basis on the second Business Day following the distribution of Available Cash to
Partners pursuant to Section 6.3(a) in respect of any Quarter ending on or after
June 30, 2008 in respect of which:
(i) distributions
of Available Cash from Operating Surplus under Section 6.4 in respect of all
Outstanding Common Units, Subordinated Units and General Partner Units and any
other Outstanding Units that are senior or equal in right of distribution to the
Subordinated Units with respect to the four-Quarter period immediately preceding
such date equaled or exceeded the sum of the Third Target Distribution on all of
the Outstanding Common Units, Subordinated Units and General Partner Units and
any other Outstanding Units that are senior or equal in right of distribution to
the Subordinated Units during such period;
(ii) the
Adjusted Operating Surplus generated during the four-Quarter period immediately
preceding such date equaled or exceeded the sum of the Third Target Distribution
on all of the Common Units, Subordinated Units and General Partner Units and any
other Units that are senior or equal in right of distribution to the
Subordinated Units that were Outstanding during such period on a Fully Diluted
Basis; and
(iii) there are
no Cumulative Common Unit Arrearages.
(c) Notwithstanding
any other provision of this Agreement, all the then Outstanding Subordinated
Units will automatically convert into Common Units on a one-for-one basis as set
forth in, and pursuant to the terms of, Section 11.4.
(d) A
Subordinated Unit that has converted into a Common Unit shall be subject to the
provisions of Section 6.7(b) and Section 6.7(c).
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Limited
Preemptive Right.
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Except as
provided in this Section 5.8 and in Section 5.2, no Person shall have any
preemptive, preferential or other similar right with respect to the issuance of
any Partnership Security, whether unissued, held in the treasury or hereafter
created. The General Partner shall have the right, which it may from time to
time assign in whole or in part to any of its Affiliates, to purchase
Partnership Securities from the Partnership whenever, and on the same terms
that, the Partnership issues Partnership Securities to Persons other than the
General Partner and its Affiliates, to the extent necessary to maintain the
Percentage Interests of the General Partner and its Affiliates equal to that
which existed immediately prior to the issuance of such Partnership
Securities.
48
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Splits
and Combinations.
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(a) Subject
to Section 5.9(d), Section 6.6 and Section 6.9 (dealing with adjustments of
distribution levels), the Partnership may make a Pro Rata distribution of
Partnership Securities to all Record Holders or may effect a subdivision or
combination of Partnership Securities so long as, after any such event, each
Partner shall have the same Percentage Interest in the Partnership as before
such event, and any amounts calculated on a per Unit basis (including any Common
Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a number of
Units (including the number of Subordinated Units that may convert prior to the
end of the Subordination Period) are proportionately adjusted.
(b) Whenever
such a distribution, subdivision or combination of Partnership Securities is
declared, the General Partner shall select a Record Date as of which the
distribution, subdivision or combination shall be effective and shall send
notice thereof at least 20 days prior to such Record Date to each Record Holder
as of a date not less than 10 days prior to the date of such notice. The General
Partner also may cause a firm of independent public accountants selected by it
to calculate the number of Partnership Securities to be held by each Record
Holder after giving effect to such distribution, subdivision or combination. The
General Partner shall be entitled to rely on any certificate provided by such
firm as conclusive evidence of the accuracy of such calculation.
(c) Promptly
following any such distribution, subdivision or combination, the Partnership may
issue Certificates or uncertificated Partnership Securities to the Record
Holders of Partnership Securities as of the applicable Record Date representing
the new number of Partnership Securities held by such Record Holders, or the
General Partner may adopt such other procedures that it determines to be
necessary or appropriate to reflect such changes. If any such combination
results in a smaller total number of Partnership Securities Outstanding, the
Partnership shall require, as a condition to the delivery to a Record Holder of
such new Certificate, the surrender of any Certificate held by such Record
Holder immediately prior to such Record Date.
(d) The
Partnership shall not issue fractional Units upon any distribution, subdivision
or combination of Units. If a distribution, subdivision or combination of Units
would result in the issuance of fractional Units but for the provisions of this
Section 5.9(d), each fractional Unit shall be rounded to the nearest whole Unit
(and a 0.5 Unit shall be rounded to the next higher Unit).
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Fully
Paid and Non-Assessable Nature of Limited Partner
Interests.
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All
Limited Partner Interests issued pursuant to, and in accordance with the
requirements of, this Article V shall be fully paid and non-assessable Limited
Partner Interests in the Partnership, except as such non-assessability may be
affected by Sections 17-607 and 17-804 of the Delaware Act.
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Issuance of Class B Units in
Connection with Reset of Incentive Distribution
Rights.
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(a) Subject
to the provisions of this Section 5.11, the holder of the Incentive Distribution
Rights (or, if there is more than one holder of the Incentive Distribution
Rights, the holders of a majority in interest of the Incentive Distribution
Rights) shall have the right, at any time when there are no Subordinated Units
outstanding and the Partnership has made a distribution pursuant to Section
6.4(b)(v) for each of the four most recently completed Quarters and the amount
of each such distribution did not exceed Adjusted Operating Surplus for such
Quarter, to make an election (the “IDR Reset
Election”) to cause the Minimum Quarterly Distribution and the Target
Distributions to be reset in accordance with the provisions of Section 5.11(e)
and, in connection therewith, the holder or holders of the Incentive
Distribution Rights will become entitled to receive their respective
proportionate share of a number of Class B Units derived by dividing (i)
the average amount of cash distributions made by the Partnership for the two
full Quarters immediately preceding the giving of the Reset Notice (as defined
in Section 5.11(b)) in respect of the Incentive Distribution Rights by (ii) the
average of the cash distributions made by the Partnership in respect of each
Common Unit for the two full Quarters immediately preceding the giving of the
Reset Notice (the number of Class B Units determined by such quotient is
referred to herein as the “Aggregate
Quantity of Class B Units”). Upon the issuance of such Class B
Units, the Partnership will issue to the General Partner that number of
additional General Partner Units equal to the product of (x) the quotient
obtained by dividing (A) the Percentage Interest of the General Partner
immediately prior to such issuance by (B) a percentage equal to 100% less such
Percentage Interest by (y) the number of such Class B Units, and the General
Partner shall not be obligated to make any additional Capital Contribution to
the Partnership in exchange for such issuance. The making of the IDR Reset
Election in the manner specified in Section 5.11(b) shall cause the Minimum
Quarterly Distribution and the Target Distributions to be reset in accordance
with the provisions of Section 5.11(e) and, in connection therewith, the holder
or holders of the Incentive Distribution Rights will become entitled to receive
Class B Units and General Partner Units on the basis specified above,
without any further approval required by the General Partner or the Unitholders,
at the time specified in Section 5.11(c) unless the IDR Reset Election is
rescinded pursuant to Section 5.11(d).
(b) To
exercise the right specified in Section 5.11(a), the holder of the
Incentive Distribution Rights (or, if there is more than one holder of the
Incentive Distribution Rights, the holders of a majority in interest of the
Incentive Distribution Rights) shall deliver a written notice (the “Reset
Notice”) to the Partnership. Within 10 Business Days after the receipt by
the Partnership of such Reset Notice, the Partnership shall deliver a written
notice to the holder or holders of the Incentive Distribution Rights of the
Partnership’s determination of the aggregate number of Class B Units that
each holder of Incentive Distribution Rights will be entitled to
receive.
50
(c) The
holder or holders of the Incentive Distribution Rights will be entitled to
receive the Aggregate Quantity of Class B Units and related additional
General Partner Units on the fifteenth Business Day after receipt by the
Partnership of the Reset Notice, and the Partnership shall issue Certificates
for the Class B Units to the holder or holders of the Incentive Distribution
Rights; provided, however, that the issuance of
Class B Units to the holder or holders of the Incentive Distribution Rights
shall not occur prior to the approval of the listing or admission for trading of
the Common Units into which the Class B Units are convertible pursuant to
Section 5.11(f) by the principal National Securities Exchange upon which
the Common Units are then listed or admitted for trading if any such approval is
required pursuant to the rules and regulations of such National Securities
Exchange.
(d) If the
principal National Securities Exchange upon which the Common Units are then
traded have not approved the listing or admission for trading of the Common
Units into which the Class B Units are convertible pursuant to
Section 5.11(f) on or before the 30th calendar day following the
Partnership’s receipt of the Reset Notice and such approval is required by the
rules and regulations of such National Securities Exchange, then the holder of
the Incentive Distribution Rights (or, if there is more than one holder of the
Incentive Distribution Rights, the holders of a majority in interest of the
Incentive Distribution Rights) shall have the right to either rescind the IDR
Reset Election or elect to receive other Partnership Securities having such
terms as the General Partner may approve, with the approval of the Conflicts
Committee, that will provide (i) the same economic value, in the aggregate,
as the Aggregate Quantity of Class B Units would have had at the time of
the Partnership’s receipt of the Reset Notice, as determined by the General
Partner, and (ii) for the subsequent conversion of such Partnership
Securities into Common Units within not more than 12 months following the
Partnership’s receipt of the Reset Notice upon the satisfaction of one or more
conditions that are reasonably acceptable to the holder of the Incentive
Distribution Rights (or, if there is more than one holder of the Incentive
Distribution Rights, the holders of a majority in interest of the Incentive
Distribution Rights).
(e) The
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution shall be adjusted at the time of the
issuance of Class B Units or other Partnership Securities pursuant to this
Section 5.11 such that (i) the Minimum Quarterly Distribution shall be reset to
equal the average cash distribution amount per Common Unit for the two Quarters
immediately prior to the Partnership’s receipt of the Reset Notice (the “Reset
MQD”), (ii) the First Target Distribution shall be reset to equal 115% of
the Reset MQD, (iii) the Second Target Distribution shall be reset to equal to
125% of the Reset MQD and (iv) the Third Target Distribution shall be reset to
equal 150% of the Reset MQD.
(f) Any
holder of Class B Units shall have the right to elect, by giving written notice
to the General Partner, to convert all or a portion of the Class B Units
held by such holder, at any time following the first anniversary of the issuance
of such Class B Units, into Common Units on a one-for-one basis, such conversion
to be effective on the second Business Day following the General Partner’s
receipt of such written notice.
51
ARTICLE
VI
ALLOCATIONS
AND DISTRIBUTIONS
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Allocations
for Capital Account Purposes.
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For
purposes of maintaining the Capital Accounts and in determining the rights of
the Partners among themselves, the Partnership’s items of income, gain, loss and
deduction (computed in accordance with Sections 5.5(b) and (d)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
(a) Net Income. After giving
effect to the special allocations set forth in Section 6.1(d), Net Income
for each taxable year and all items of income, gain, loss and deduction taken
into account in computing Net Income for such taxable year shall be allocated as
follows:
(i) First,
100% to the General Partner, in an amount equal to the aggregate Net Losses
allocated to the General Partner pursuant to Section 6.1(b)(iii) for all
previous taxable years until the aggregate Net Income allocated to the General
Partner pursuant to this Section 6.1(a)(i) for the current taxable year and all
previous taxable years is equal to the aggregate Net Losses allocated to the
General Partner pursuant to Section 6.1(b)(iii) for all previous taxable
years;
(ii) Second,
100% to the General Partner and the Unitholders, in proportion to, and until the
aggregate Net Income allocated to such Partners pursuant to this Section
6.1(a)(ii) for the current taxable year and all previous taxable years is equal
to, the aggregate Net Losses allocated to such Partners pursuant to Section
6.1(b)(ii) for all previous taxable years; and
(iii) Third,
the balance, if any, 100% to the General Partner and the Unitholders, in
accordance with their respective Percentage Interests.
(b) Net Losses. After giving
effect to the special allocations set forth in Section 6.1(d), Net Losses
for each taxable period and all items of income, gain, loss and deduction taken
into account in computing Net Losses for such taxable period shall be allocated
as follows:
(i) First,
100% to the General Partner and the Unitholders, in proportion to, and until the
aggregate Net Losses allocated pursuant to this Section 6.1(b)(i) for the
current taxable year and all previous taxable years is equal to, the aggregate
Net Income allocated to such Partners pursuant to Section 6.1(a)(iii) for all
previous taxable years, provided that the Net Losses
shall not be allocated pursuant to this Section 6.1(b)(i) to the extent that
such allocation would cause any Unitholder to have a deficit balance in its
Adjusted Capital Account at the end of such taxable year (or increase any
existing deficit balance in its Adjusted Capital Account);
52
(ii) Second,
100% to the General Partner and the Unitholders, in accordance with their
respective Percentage Interests; provided, that Net Losses
shall not be allocated pursuant to this Section 6.1(b)(ii) to the extent that
such allocation would cause any Unitholder to have a deficit balance in its
Adjusted Capital Account at the end of such taxable year (or increase any
existing deficit balance in its Adjusted Capital Account); and
(iii) Third,
the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and
Losses. After giving effect to the special allocations set forth in
Section 6.1(d), all items of income, gain, loss and deduction taken into account
in computing Net Termination Gain or Net Termination Loss for such taxable
period shall be allocated in the same manner as such Net Termination Gain or Net
Termination Loss is allocated hereunder. All allocations under this Section
6.1(c) shall be made after Capital Account balances have been adjusted by all
other allocations provided under this Section 6.1 and after all distributions of
Available Cash provided under Section 6.4 and Section 6.5 have been made; provided, however, that solely for
purposes of this Section 6.1(c), Capital Accounts shall not be adjusted for
distributions made pursuant to Section 12.4.
(i) If a Net
Termination Gain is recognized (or deemed recognized pursuant to Section
5.5(d)), such Net Termination Gain shall be allocated among the Partners in the
following manner (and the Capital Accounts of the Partners shall be increased by
the amount so allocated in each of the following subclauses, in the order
listed, before an allocation is made pursuant to the next succeeding
subclause):
(A) First, to
each Partner having a deficit balance in its Capital Account, in the proportion
that such deficit balance bears to the total deficit balances in the Capital
Accounts of all Partners, until each such Partner has been allocated Net
Termination Gain equal to any such deficit balance in its Capital
Account;
(B) Second,
(x) to the General Partner in accordance with its Percentage Interest and (y) to
all Unitholders holding Common Units, Pro Rata, a percentage equal to 100% less
the General Partner's Percentage Interest, until the Capital Account in respect
of each Common Unit then Outstanding is equal to the sum of (1) its Unrecovered
Initial Unit Price, (2) the Minimum Quarterly Distribution for the Quarter
during which the Liquidation Date occurs, reduced by any distribution pursuant
to Section 6.4(a)(i) or Section 6.4(b)(i) with respect to such Common Unit
for such Quarter (the amount determined pursuant to this clause (2) is
hereinafter defined as the “Unpaid
MQD”) and (3) any then existing Cumulative Common Unit
Arrearage;
53
(C) Third, if
such Net Termination Gain is recognized (or is deemed to be recognized) prior to
the conversion of the last Outstanding Class B Unit, (x) to the General Partner
in accordance with its Percentage Interest and (y) to all Unitholders holding
Class B Units, Pro Rata, a percentage equal to 100% less the General Partner's
Percentage Interest, until the Capital Account in respect of each Class B Unit
then Outstanding equals the sum of (1) its Unrecovered Initial Unit Price, and
(2) the Minimum Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution pursuant to Section
6.4(b)(i) with respect to such Class B Unit for such Quarter;
(D) Fourth,
if such Net Termination Gain is recognized (or is deemed to be recognized) prior
to the conversion of the last Outstanding Subordinated Unit, (x) to the General
Partner in accordance with its Percentage Interest and (y) to all Unitholders
holding Subordinated Units, Pro Rata, a percentage equal to 100% less the
General Partner's Percentage Interest, until the Capital Account in respect of
each Subordinated Unit then Outstanding equals the sum of (1) its Unrecovered
Initial Unit Price and (2) the Minimum Quarterly Distribution for the Quarter
during which the Liquidation Date occurs, reduced by any distribution pursuant
to Section 6.4(a)(iii) with respect to such Subordinated Unit for such
Quarter;
(E) Fifth, to
the General Partner and all Unitholders, in accordance with their respective
Percentage Interests, until the Capital Account in respect of each Common Unit
then Outstanding is equal to the sum of (1) its Unrecovered Initial Unit Price,
(2) the Unpaid MQD, (3) any then existing Cumulative Common Unit Arrearage, and
(4) the excess of (aa) the First Target Distribution less the Minimum Quarterly
Distribution for each Quarter of the Partnership’s existence over (bb) the
cumulative per Unit amount of any distributions of Available Cash that is deemed
to be Operating Surplus made pursuant to Section 6.4(a)(iv) and Section
6.4(b)(ii) (the sum of (1), (2), (3) and (4) is hereinafter defined as the
“First
Liquidation Target Amount”);
(F) Sixth,
(x) to the General Partner in accordance with its Percentage Interest, (y) 13%
to the holders of the Incentive Distribution Rights, Pro Rata, and (z) to all
Unitholders, Pro Rata, a percentage equal to 100% less the sum of the
percentages applicable to subclauses (x) and (y) of this clause (F), until the
Capital Account in respect of each Common Unit then Outstanding is equal to the
sum of (1) the First Liquidation Target Amount, and (2) the excess of (aa) the
Second Target Distribution less the First Target Distribution for each Quarter
of the Partnership’s existence over (bb) the cumulative per Unit amount of any
distributions of Available Cash that is deemed to be Operating Surplus made
pursuant to Section 6.4(a)(v) and Section 6.4(b)(iii) (the sum of (1) and (2) is
hereinafter defined as the “Second
Liquidation Target Amount”);
54
(G) Seventh,
(x) to the General Partner in accordance with its Percentage Interest, (y) 23%
to the holders of the Incentive Distribution Rights, Pro Rata, and (z) to all
Unitholders, Pro Rata, a percentage equal to 100% less the sum of the
percentages applicable to subclauses (x) and (y) of this clause (G), until the
Capital Account in respect of each Common Unit then Outstanding is equal to the
sum of (1) the Second Liquidation Target Amount, and (2) the excess of (aa) the
Third Target Distribution less the Second Target Distribution for each Quarter
of the Partnership’s existence over (bb) the cumulative per Unit amount of any
distributions of Available Cash that is deemed to be Operating Surplus made
pursuant to Section 6.4(a)(vi) and Section 6.4(b)(iv); and
(H) Finally,
(x) to the General Partner in accordance with its Percentage Interest, (y) 48%
to the holders of the Incentive Distribution Rights, Pro Rata, and (z) to all
Unitholders, Pro Rata, a percentage equal to 100% less the sum of the
percentages applicable to subclauses (x) and (y) of this clause
(H).
(ii) If a Net
Termination Loss is recognized (or deemed recognized pursuant to Section
5.5(d)), such Net Termination Loss shall be allocated among the Partners in the
following manner:
(A) First, if
such Net Termination Loss is recognized (or is deemed to be recognized) prior to
the conversion of the last Outstanding Subordinated Unit, to the General Partner
and to all Unitholders holding Subordinated Units, in accordance with their
respective Percentage Interests, until the Capital Account in respect of each
Subordinated Unit then Outstanding has been reduced to zero;
(B) Second,
to the General Partner and to the Class B Unitholders, in accordance with their
respective Percentage Interests, until the Capital Account in respect of each
Class B Unit then Outstanding has been reduced to zero;
(C) Third,
(x) to the General Partner in accordance with its Percentage Interest and (y) to
all Unitholders, Pro Rata, a percentage equal to 100% less the percentage
applicable to the General Partner pursuant to subclause (x) of this clause (B)
until the Capital Account in respect of each Unit then Outstanding has been
reduced to zero; and
(D) Fourth,
the balance, if any, 100% to the General Partner.
(d) Special Allocations.
Notwithstanding any other provision of this Section 6.1, the following special
allocations shall be made for such taxable period:
55
(i) Partnership Minimum Gain
Chargeback. Notwithstanding any other provision of this Section 6.1, if
there is a net decrease in Partnership Minimum Gain during any Partnership
taxable period, each Partner shall be allocated items of Partnership income and
gain for such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2)
and 1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
6.1(d), each Partner’s Adjusted Capital Account balance shall be determined, and
the allocation of income or gain required hereunder shall be effected, prior to
the application of any other allocations pursuant to this Section 6.1(d) with
respect to such taxable period (other than an allocation pursuant to Section
6.1(d)(vi) and Section 6.1(d)(vii)). This Section 6.1(d)(i) is intended to
comply with the Partnership Minimum Gain chargeback requirement in Treasury
Regulation Section 1.704-2(f) and shall be interpreted consistently
therewith.
(ii) Chargeback of Partner Nonrecourse
Debt Minimum Gain. Notwithstanding the other provisions of this Section
6.1 (other than Section 6.1(d)(i)), except as provided in Treasury Regulation
Section 1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a share of
Partner Nonrecourse Debt Minimum Gain at the beginning of such taxable period
shall be allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in Treasury
Regulation Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor
provisions. For purposes of this Section 6.1(d), each Partner’s Adjusted Capital
Account balance shall be determined, and the allocation of income or gain
required hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 6.1(d), other than Section 6.1(d)(i)
and other than an allocation pursuant to Section 6.1(d)(vi) and Section
6.1(d)(vii), with respect to such taxable period. This Section 6.1(d)(ii)
is intended to comply with the chargeback of items of income and gain
requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
56
(iii) Priority
Allocations.
(A) If the
amount of cash or the Net Agreed Value of any property distributed (except cash
or property distributed pursuant to Section 12.4) to any Unitholder with respect
to its Units for a taxable year is greater (on a per Unit basis) than the amount
of cash or the Net Agreed Value of property distributed to the other Unitholders
with respect to their Units (on a per Unit basis), then (1) there shall be
allocated income and gain to each Unitholder receiving such greater cash or
property distribution until the aggregate amount of such items allocated
pursuant to this Section 6.1(d)(iii)(A) for the current taxable year and all
previous taxable years is equal to the product of (aa) the amount by which the
distribution (on a per Unit basis) to such Unitholder exceeds the distribution
(on a per Unit basis) to the Unitholders receiving the smallest distribution and
(bb) the number of Units owned by the Unitholder receiving the greater
distribution; and (2) the General Partner shall be allocated income and gain in
an aggregate amount equal to the product obtained by multiplying (aa) the
quotient determined by dividing (x) the General Partner’s Percentage Interest at
the time in which the greater cash or property distribution occurs by (y) 100%
less the General Partner’s Percentage Interest at the time in which the greater
cash or property distribution occurs times (bb) the sum of the amounts allocated
in clause (1) above.
(B) After the
application of Section 6.1(d)(iii)(A), all or any portion of the remaining items
of Partnership income or gain for the taxable period, if any, shall be allocated
(1) to the holders of Incentive Distribution Rights, Pro Rata, until the
aggregate amount of such items allocated to the holders of Incentive
Distribution Rights pursuant to this Section 6.1(d)(iii)(B) for the current
taxable year and all previous taxable years is equal to the cumulative amount of
all Incentive Distributions made to the holders of Incentive Distribution Rights
from the Closing Date to a date 45 days after the end of the current taxable
year; and (2) to the General Partner an amount equal to the product
obtained by multiplying (aa) an amount equal to the quotient determined by
dividing (x) the General Partner’s Percentage Interest by (y) 100% less the
General Partner’s Percentage Interest times (bb) the sum of the amounts
allocated in clause (1) above.
(iv) Qualified Income Offset. In
the event any Partner unexpectedly receives any adjustments, allocations or
distributions described in Treasury Regulation
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulations promulgated under Section 704(b)
of the Code, the deficit balance, if any, in its Adjusted Capital Account
created by such adjustments, allocations or distributions as quickly as possible
unless such deficit balance is otherwise eliminated pursuant to Section
6.1(d)(i) or Section 6.1(d)(ii).
57
(v) Gross Income Allocations. In
the event any Partner has a deficit balance in its Capital Account at the end of
any Partnership taxable period in excess of the sum of (A) the amount such
Partner is required to restore pursuant to the provisions of this Agreement and
(B) the amount such Partner is deemed obligated to restore pursuant to Treasury
Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible; provided, that an allocation
pursuant to this Section 6.1(d)(v) shall be made only if and to the extent that
such Partner would have a deficit balance in its Capital Account as adjusted
after all other allocations provided for in this Section 6.1 have been
tentatively made as if this Section 6.1(d)(v) were not in this
Agreement.
(vi) Nonrecourse Deductions.
Nonrecourse Deductions for any taxable period shall be allocated to the Partners
in accordance with their respective Percentage Interests. If the General Partner
determines that the Partnership’s Nonrecourse Deductions should be allocated in
a different ratio to satisfy the safe harbor requirements of the Treasury
Regulations promulgated under Section 704(b) of the Code, the General Partner is
authorized, upon notice to the other Partners, to revise the prescribed ratio to
the numerically closest ratio that does satisfy such requirements.
(vii) Partner Nonrecourse
Deductions. Partner Nonrecourse Deductions for any taxable period shall
be allocated 100% to the Partner that bears the Economic Risk of Loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury Regulation Section
1.704-2(i). If more than one Partner bears the Economic Risk of Loss with
respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions
attributable thereto shall be allocated between or among such Partners in
accordance with the ratios in which they share such Economic Risk of
Loss.
(viii) Nonrecourse Liabilities. For
purposes of Treasury Regulation Section 1.752-3(a)(3), the Partners agree
that Nonrecourse Liabilities of the Partnership in excess of the sum of (A) the
amount of Partnership Minimum Gain and (B) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with their
respective Percentage Interests.
(ix) Code Section 754 Adjustments.
To the extent an adjustment to the adjusted tax basis of any Partnership asset
pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis), and such
item of gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Treasury Regulations.
58
(x) Economic
Uniformity.
(A) At the
election of the General Partner with respect to any taxable period ending upon,
or after, the termination of the Subordination Period, all or a portion of the
remaining items of Partnership income or gain for such taxable period, after
taking into account allocations pursuant to Section 6.1(d)(iii), shall be
allocated 100% to each Partner holding Subordinated Units that are Outstanding
as of the termination of the Subordination Period (“Final
Subordinated Units”) in the proportion of the number of Final
Subordinated Units held by such Partner to the total number of Final
Subordinated Units then Outstanding, until each such Partner has been allocated
an amount of income or gain that increases the Capital Account maintained with
respect to such Final Subordinated Units to an amount equal to the product of
(A) the number of Final Subordinated Units held by such Partner and (B) the Per
Unit Capital Amount for a Common Unit. The purpose of this allocation is to
establish uniformity between the Capital Accounts underlying Final Subordinated
Units and the Capital Accounts underlying Common Units held by Persons other
than the General Partner and its Affiliates immediately prior to the conversion
of such Final Subordinated Units into Common Units. This allocation method for
establishing such economic uniformity will be available to the General Partner
only if the method for allocating the Capital Account maintained with respect to
the Subordinated Units between the transferred and retained Subordinated Units
pursuant to Section 5.5(c)(ii) does not otherwise provide such economic
uniformity to the Final Subordinated Units.
(B) At the
election of the General Partner with respect to any taxable period ending upon,
or after, the conversion of the Class B Units pursuant to Section 5.11(f), all
or a portion of the remaining items of Partnership income or gain for such
taxable period, after taking into account allocations pursuant to Section
6.1(d)(iii) and Section 6.1(d)(x)(A), or all or a portion of the Partnership’s
items of loss and deduction, shall be allocated 100% to the holder or holders of
the Common Units resulting from the conversion pursuant to Section 5.11(f) (“Converted
Common Units”) in the proportion of the number of the Converted Common
Units held by such holder or holders to the total number of Converted Common
Units then Outstanding, until each such holder has been allocated an amount of
income or gain that increases, or an amount of loss and deduction, as the case
may be, the Capital Account maintained with respect to such Converted Common
Units to an amount equal to the product of (A) the number of Converted Common
Units held by such holder and (B) the Per Unit Capital Amount for a Common Unit.
The purpose of this allocation is to establish uniformity between the Capital
Accounts underlying Converted Common Units and the Capital Accounts underlying
Common Units held by Persons other than the General Partner and its Affiliates
immediately prior to the receipt of Common Units pursuant to
Section 5.11(f).
59
(xi) Curative
Allocation.
(A) Notwithstanding
any other provision of this Section 6.1, other than the Required Allocations,
the Required Allocations shall be taken into account in making the Agreed
Allocations so that, to the extent possible, the net amount of items of income,
gain, loss and deduction allocated to each Partner pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to the net
amount of such items that would have been allocated to each such Partner under
the Agreed Allocations had the Required Allocations and the related Curative
Allocation not otherwise been provided in this Section 6.1. Notwithstanding the
preceding sentence, Required Allocations relating to (1) Nonrecourse Deductions
shall not be taken into account except to the extent that there has been a
decrease in Partnership Minimum Gain and (2) Partner Nonrecourse Deductions
shall not be taken into account except to the extent that there has been a
decrease in Partner Nonrecourse Debt Minimum Gain. Allocations pursuant to this
Section 6.1(d)(xi)(A) shall only be made with respect to Required Allocations to
the extent the General Partner determines that such allocations will otherwise
be inconsistent with the economic agreement among the Partners. Further,
allocations pursuant to this Section 6.1(d)(xi)(A) shall be deferred with
respect to allocations pursuant to clauses (1) and (2) hereof to the extent the
General Partner determines that such allocations are likely to be offset by
subsequent Required Allocations.
(B) The
General Partner shall, with respect to each taxable period, (1) apply the
provisions of Section 6.1(d)(xi)(A) in whatever order is most likely to minimize
the economic distortions that might otherwise result from the Required
Allocations, and (2) divide all allocations pursuant to Section 6.1(d)(xi)(A)
among the Partners in a manner that is likely to minimize such economic
distortions.
(xii) Corrective and Other
Allocations. In the event of any allocation of Additional Book
Basis Derivative Items or any Book-Down Event or any recognition of a Net
Termination Loss, the following rules shall apply:
(A) Except
as provided in Section 6.1(d)(xii)(B), in the case of any allocation of
Additional Book Basis Derivative Items (other than an allocation of Unrealized
Gain or Unrealized Loss under Section 5.5(d) hereof) with respect to any
Partnership property, the General Partner shall allocate such Additional Book
Basis Derivative Items (1) to (aa) the holders of Incentive Distribution Rights
and (bb) the General Partner in the same manner that the Unrealized Gain or
Unrealized Loss attributable to such property is allocated pursuant to Section
5.5(d)(i) or Section 5.5(d)(ii) and (2) to all Unitholders, Pro Rata, to the
extent that the Unrealized Gain or Unrealized Loss attributable to such property
is allocated to any Unitholders pursuant to Section 5.5(d)(i) or Section
5.5(d)(ii).
60
(B) In
the case of any allocation of Additional Book Basis Derivative Items (other than
an allocation of Unrealized Gain or Unrealized Loss under Section 5.5(d) hereof
or an allocation of Net Termination Gain or Net Termination Loss pursuant to
Section 6.1(c) hereof) as a result of a sale or other taxable disposition of any
Partnership asset that is an Adjusted Property (“Disposed of
Adjusted Property”), the General Partner shall allocate (1) additional
items of income and gain (aa) away from the holders of Incentive Distribution
Rights and the General Partner and (bb) to the Unitholders, or (2) additional
items of deduction and loss (aa) away from the Unitholders and (bb) to the
holders of Incentive Distribution Rights and the General Partner, to the extent
that the Additional Book Basis Derivative Items allocated to the Unitholders
exceed their Share of Additional Book Basis Derivative Items with respect to
such Disposed of Adjusted Property. For this purpose, the Unitholders shall be
treated as being allocated Additional Book Basis Derivative Items to the extent
that such Additional Book Basis Derivative Items have reduced the amount of
income that would otherwise have been allocated to the Unitholders under this
Agreement (e.g., Additional Book Basis Derivative Items taken into account in
computing cost of goods sold would reduce the amount of book income otherwise
available for allocation among the Partners). Any allocation made pursuant to
this Section 6.1(d)(xii)(B) shall be made after all of the other Agreed
Allocations have been made as if this Section 6.1(d)(xii) were not in this
Agreement and, to the extent necessary, shall require the reallocation of items
that have been allocated pursuant to such other Agreed Allocations.
(C) In
the case of any negative adjustments to the Capital Accounts of the Partners
resulting from a Book-Down Event or from the recognition of a Net Termination
Loss, such negative adjustment (1) shall first be allocated, to the extent of
the Aggregate Remaining Net Positive Adjustments, in such a manner, as
determined by the General Partner, that to the extent possible the aggregate
Capital Accounts of the Partners will equal the amount that would have been the
Capital Account balance of the Partners if no prior Book-Up Events had occurred,
and (2) any negative adjustment in excess of the Aggregate Remaining Net
Positive Adjustments shall be allocated pursuant to Section 6.1(c)
hereof.
(D) In
making the allocations required under this Section 6.1(d)(xii), the General
Partner may apply whatever conventions or other methodology it determines will
satisfy the purpose of this Section 6.1(d)(xii).
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Allocations
for Tax Purposes.
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(a) Except as
otherwise provided herein, for federal income tax purposes, each item of income,
gain, loss and deduction shall be allocated among the Partners in the same
manner as its correlative item of “book” income, gain, loss or deduction is
allocated pursuant to Section 6.1.
61
(b) In an
attempt to eliminate Book-Tax Disparities attributable to a Contributed Property
or Adjusted Property, items of income, gain, loss, depreciation, amortization
and cost recovery deductions shall be allocated for federal income tax purposes
among the Partners as follows:
(i) (A) In
the case of a Contributed Property, such items attributable thereto shall be
allocated among the Partners in the manner provided under Section 704(c) of the
Code that takes into account the variation between the Agreed Value of such
property and its adjusted basis at the time of contribution; and (B) any item of
Residual Gain or Residual Loss attributable to a Contributed Property shall be
allocated among the Partners in the same manner as its correlative item of
“book” gain or loss is allocated pursuant to Section 6.1.
(ii) (A) In
the case of an Adjusted Property, such items shall (1) first, be allocated among
the Partners in a manner consistent with the principles of Section 704(c) of the
Code to take into account the Unrealized Gain or Unrealized Loss attributable to
such property and the allocations thereof pursuant to Section 5.5(d)(i) or
Section 5.5(d)(ii), and (2) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a manner consistent
with Section 6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners in
the same manner as its correlative item of “book” gain or loss is allocated
pursuant to Section 6.1.
(iii) The
General Partner shall apply the principles of Treasury Regulation Section
1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the
proper administration of the Partnership and for the preservation of uniformity
of the Limited Partner Interests (or any class or classes thereof), the General
Partner shall (i) adopt such conventions as it deems appropriate in determining
the amount of depreciation, amortization and cost recovery deductions; (ii) make
special allocations for federal income tax purposes of income (including gross
income) or deductions; and (iii) amend the provisions of this Agreement as
appropriate (x) to reflect the proposal or promulgation of Treasury Regulations
under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve
or achieve uniformity of the Limited Partner Interests (or any class or classes
thereof). The General Partner may adopt such conventions, make such allocations
and make such amendments to this Agreement as provided in this Section 6.2(c)
only if such conventions, allocations or amendments would not have a material
adverse effect on the Partners, the holders of any class or classes of Limited
Partner Interests issued and Outstanding or the Partnership, and if such
allocations are consistent with the principles of Section 704 of the
Code.
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(d) The
General Partner may determine to depreciate or amortize the portion of an
adjustment under Section 743(b) of the Code attributable to unrealized
appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax
Disparity) using a predetermined rate derived from the depreciation or
amortization method and useful life applied to the Partnership’s common basis of
such property, despite any inconsistency of such approach with Treasury
Regulation Section 1.167(c)-l(a)(6), Treasury Regulation Section 1.197-2(g)(3),
the legislative history to Section 743 or any successor regulations thereto. If
the General Partner determines that such reporting position cannot reasonably be
taken, the General Partner may adopt depreciation and amortization conventions
under which all purchasers acquiring Limited Partner Interests in the same month
would receive depreciation and amortization deductions, based upon the same
applicable rate as if they had purchased a direct interest in the Partnership’s
property. If the General Partner chooses not to utilize such aggregate method,
the General Partner may use any other depreciation and amortization conventions
to preserve the uniformity of the intrinsic tax characteristics of any Limited
Partner Interests, so long as such conventions would not have a material adverse
effect on the Limited Partners or the Record Holders of any class or classes of
Limited Partner Interests.
(e) In
accordance with Treasury Regulation Section 1.1245-1(e), any gain allocated to
the Partners upon the sale or other taxable disposition of any Partnership asset
shall, to the extent possible, after taking into account other required
allocations of gain pursuant to this Section 6.2, be characterized as Recapture
Income in the same proportions and to the same extent as such Partners (or their
predecessors in interest) have been allocated any deductions directly or
indirectly giving rise to the treatment of such gains as Recapture
Income.
(f) All items
of income, gain, loss, deduction and credit recognized by the Partnership for
federal income tax purposes and allocated to the Partners in accordance with the
provisions hereof shall be determined without regard to any election under
Section 754 of the Code that may be made by the Partnership; provided, however, that such
allocations, once made, shall be adjusted (in the manner determined by the
General Partner) to take into account those adjustments permitted or required by
Sections 734 and 743 of the Code.
(g) Each item
of Partnership income, gain, loss and deduction, for federal income tax
purposes, shall be determined on an annual basis and prorated on a monthly basis
and shall be allocated to the Partners as of the opening of the National
Securities Exchange on which the Partnership Interests are listed or admitted to
trading on the first Business Day of each month; provided, however, such items for the
period beginning on the Closing Date and ending on the last day of the month in
which the Option Closing Date or the expiration of the Over-Allotment Option
occurs shall be allocated to the Partners as of the opening of the National
Securities Exchange on which the Partnership Interests are listed or admitted to
trading on the first Business Day of the next succeeding month; and provided, further, that gain
or loss on a sale or other disposition of any assets of the Partnership or any
other extraordinary item of income or loss realized and recognized other than in
the ordinary course of business, as determined by the General Partner, shall be
allocated to the Partners as of the opening of the National Securities Exchange
on which the Partnership Interests are listed or admitted to trading on the
first Business Day of the month in which such gain or loss is recognized for
federal income tax purposes. The General Partner may revise, alter or otherwise
modify such methods of allocation to the extent permitted or required by Section
706 of the Code and the regulations or rulings promulgated
thereunder.
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(h) Allocations
that would otherwise be made to a Limited Partner under the provisions of this
Article VI shall instead be made to the beneficial owner of Limited Partner
Interests held by a nominee in any case in which the nominee has furnished the
identity of such owner to the Partnership in accordance with Section 6031(c) of
the Code or any other method determined by the General Partner.
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Requirement
and Characterization of Distributions; Distributions to Record
Holders.
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(a) Within 45
days following the end of each Quarter commencing with the Quarter ending on
September 30, 2007, an amount equal to 100% of Available Cash with respect to
such Quarter shall, subject to Section 17-607 of the Delaware Act, be
distributed in accordance with this Article VI by the Partnership to the
Partners as of the Record Date selected by the General Partner. All amounts of
Available Cash distributed by the Partnership on any date from any source shall
be deemed to be Operating Surplus until the sum of all amounts of Available Cash
theretofore distributed by the Partnership to the Partners pursuant to Section
6.4 equals the Operating Surplus from the Closing Date through the close of the
immediately preceding Quarter. Any remaining amounts of Available Cash
distributed by the Partnership on such date shall, except as otherwise provided
in Section 6.5, be deemed to be “Capital Surplus.” Notwithstanding any provision
to the contrary contained in this Agreement, the Partnership shall not make a
distribution to any Partner on account of its interest in the Partnership if
such distribution would violate the Delaware Act or any other applicable
law.
(b) Notwithstanding
Section 6.3(a), in the event of the dissolution and liquidation of the
Partnership, all receipts received during or after the Quarter in which the
Liquidation Date occurs shall be applied and distributed solely in accordance
with, and subject to the terms and conditions of, Section 12.4.
(c) The
General Partner may treat taxes paid by the Partnership on behalf of, or amounts
withheld with respect to, all or less than all of the Partners, as a
distribution of Available Cash to such Partners.
(d) Each
distribution in respect of a Partnership Interest shall be paid by the
Partnership, directly or through the Transfer Agent or through any other Person
or agent, only to the Record Holder of such Partnership Interest as of the
Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership’s liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such
payment by reason of an assignment or otherwise.
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Distributions
of Available Cash from Operating
Surplus.
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(a) During Subordination Period.
Available Cash with respect to any Quarter within the Subordination Period that
is deemed to be Operating Surplus pursuant to the provisions of Section 6.3 or
6.5 shall, subject to Section 17-607 of the Delaware Act, be distributed as
follows, except as otherwise contemplated by Section 5.6 in respect of other
Partnership Securities issued pursuant thereto:
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(i) First,
(x) to the General Partner in accordance with its Percentage Interest and (y) to
the Unitholders holding Common Units, Pro Rata, a percentage equal to 100% less
the General Partner's Percentage Interest, until there has been distributed in
respect of each Common Unit then Outstanding an amount equal to the Minimum
Quarterly Distribution for such Quarter;
(ii) Second,
(x) to the General Partner in accordance with its Percentage Interest and (y) to
the Unitholders holding Common Units, Pro Rata, a percentage equal to 100% less
the General Partner's Percentage Interest, until there has been distributed in
respect of each Common Unit then Outstanding an amount equal to the Cumulative
Common Unit Arrearage existing with respect to such Quarter;
(iii) Third,
(x) to the General Partner in accordance with its Percentage Interest and (y) to
the Unitholders holding Subordinated Units, Pro Rata, a percentage equal to 100%
less the General Partner's Percentage Interest, until there has been distributed
in respect of each Subordinated Unit then Outstanding an amount equal to the
Minimum Quarterly Distribution for such Quarter;
(iv) Fourth,
to the General Partner and all Unitholders, in accordance with their respective
Percentage Interests, until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the First Target Distribution
over the Minimum Quarterly Distribution for such Quarter;
(v) Fifth,
(A) to the General Partner in accordance with its Percentage Interest, (B) 13%
to the holders of the Incentive Distribution Rights, Pro Rata, and (C) to all
Unitholders, Pro Rata, a percentage equal to 100% less the sum of the
percentages applicable to subclauses (A) and (B) of this clause (v), until there
has been distributed in respect of each Unit then Outstanding an amount equal to
the excess of the Second Target Distribution over the First Target Distribution
for such Quarter;
(vi) Sixth,
(A) to the General Partner in accordance with its Percentage Interest, (B) 23%
to the holders of the Incentive Distribution Rights, Pro Rata, and (C) to all
Unitholders, Pro Rata, a percentage equal to 100% less the sum of the
percentages applicable to subclauses (A) and (B) of this subclause (vi), until
there has been distributed in respect of each Unit then Outstanding an amount
equal to the excess of the Third Target Distribution over the Second Target
Distribution for such Quarter; and
(vii) Thereafter,
(A) to the General Partner in accordance with its Percentage Interest, (B) 48%
to the holders of the Incentive Distribution Rights, Pro Rata, and (C) to all
Unitholders, Pro Rata, a percentage equal to 100% less the sum of the
percentages applicable to subclauses (A) and (B) of this clause
(vii);
65
provided, however, if the
Minimum Quarterly Distribution, the First Target Distribution, the Second Target
Distribution and the Third Target Distribution have been reduced to zero
pursuant to the second sentence of Section 6.6(a), the distribution of Available
Cash that is deemed to be Operating Surplus with respect to any Quarter will be
made solely in accordance with Section 6.4(a)(vii).
(b) After Subordination Period.
Available Cash with respect to any Quarter after the Subordination Period that
is deemed to be Operating Surplus pursuant to the provisions of Section 6.3 or
Section 6.5, subject to Section 17-607 of the Delaware Act, shall be distributed
as follows, except as otherwise required by Section 5.6(b) in respect of
additional Partnership Securities issued pursuant thereto:
(i) First,
100% to the General Partner and the Unitholders in accordance with their
respective Percentage Interests, until there has been distributed in respect of
each Unit then Outstanding an amount equal to the Minimum Quarterly Distribution
for such Quarter;
(ii) Second,
100% to the General Partner and the Unitholders in accordance with their
respective Percentage Interests, until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the First Target
Distribution over the Minimum Quarterly Distribution for such
Quarter;
(iii) Third,
(A) to the General Partner in accordance with its Percentage Interest, (B) 13%
to the holders of the Incentive Distribution Rights, Pro Rata, and (C) to all
Unitholders, Pro Rata, a percentage equal to 100% less the sum of the
percentages applicable to subclauses (A) and (B) of this clause (iii), until
there has been distributed in respect of each Unit then Outstanding an amount
equal to the excess of the Second Target Distribution over the First Target
Distribution for such Quarter;
(iv) Fourth,
(A) to the General Partner in accordance with its Percentage Interest, (B) 23%
to the holders of the Incentive Distribution Rights, Pro Rata, and (C) to all
Unitholders, Pro Rata, a percentage equal to 100% less the sum of the
percentages applicable to subclause (A) and (B) of this clause (iv), until there
has been distributed in respect of each Unit then Outstanding an amount equal to
the excess of the Third Target Distribution over the Second Target Distribution
for such Quarter; and
(v) Thereafter,
(A) to the General Partner in accordance with its Percentage Interest, (B) 48%
to the holders of the Incentive Distribution Rights, Pro Rata, and (C) to all
Unitholders, Pro Rata, a percentage equal to 100% less the sum of the
percentages applicable to subclauses (A) and (B) of this clause
(v);
provided, however, if the
Minimum Quarterly Distribution, the First Target Distribution, the Second Target
Distribution and the Third Target Distribution have been reduced to zero
pursuant to the second sentence of Section 6.6(a), the distribution of Available
Cash that is deemed to be Operating Surplus with respect to any Quarter will be
made solely in accordance with Section 6.4(b)(v).
66
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Distributions
of Available Cash from Capital
Surplus.
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Available
Cash that is deemed to be Capital Surplus pursuant to the provisions of
Section 6.3(a) shall, subject to Section 17-607 of the Delaware Act, be
distributed, unless the provisions of Section 6.3 require otherwise, 100% to the
General Partner and the Unitholders in accordance with their respective
Percentage Interests, until a hypothetical holder of a Common Unit acquired on
the Closing Date has received with respect to such Common Unit, during the
period since the Closing Date through such date, distributions of Available Cash
that are deemed to be Capital Surplus in an aggregate amount equal to the
Initial Unit Price. Available Cash that is deemed to be Capital Surplus shall
then be distributed (A) to the General Partner in accordance with its Percentage
Interest and (B) to all Unitholders holding Common Units, Pro Rata, a percentage
equal to 100% less the General Partner's in Percentage Interest, until there has
been distributed in respect of each Common Unit then Outstanding an amount equal
to the Cumulative Common Unit Arrearage. Thereafter, all Available Cash shall be
distributed as if it were Operating Surplus and shall be distributed in
accordance with Section 6.4.
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Adjustment
of Minimum Quarterly Distribution and Target Distribution
Levels.
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(a) The
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution, Third Target Distribution, Common Unit Arrearages and Cumulative
Common Unit Arrearages shall be proportionately adjusted in the event of any
distribution, combination or subdivision (whether effected by a distribution
payable in Units or otherwise) of Units or other Partnership Securities in
accordance with Section 5.9. In the event of a distribution of Available Cash
that is deemed to be from Capital Surplus, the then applicable Minimum Quarterly
Distribution, First Target Distribution, Second Target Distribution and Third
Target Distribution, shall be adjusted proportionately downward to equal the
product obtained by multiplying the otherwise applicable Minimum Quarterly
Distribution, First Target Distribution, Second Target Distribution and Third
Target Distribution, as the case may be, by a fraction of which the numerator is
the Unrecovered Initial Unit Price of the Common Units immediately after giving
effect to such distribution and of which the denominator is the Unrecovered
Initial Unit Price of the Common Units immediately prior to giving effect to
such distribution.
(b) The
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, shall also be subject to adjustment
pursuant to Section 5.11 and Section 6.9.
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Special
Provisions Relating to the Holders of Subordinated Units and Class B
Units.
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(a) Except
with respect to the right to vote on or approve matters requiring the vote or
approval of a percentage of the holders of Outstanding Common Units and the
right to participate in allocations of income, gain, loss and deduction and
distributions made with respect to Common Units, the holder of a Subordinated
Unit shall have all of the rights and obligations of a Unitholder holding Common
Units hereunder; provided, however, that immediately
upon the conversion of Subordinated Units into Common Units pursuant to Section
5.7, the Unitholder holding a Subordinated Unit shall possess all of the rights
and obligations of a Unitholder holding Common Units hereunder, including the
right to vote as a Common Unitholder and the right to participate in allocations
of income, gain, loss and deduction and distributions made with respect to
Common Units; provided,
however, that such
converted Subordinated Units shall remain subject to the provisions of Sections
5.5(c)(ii), 6.1(d)(x)(A), 6.7(b) and 6.7(c).
(b) A
Unitholder shall not be permitted to transfer a Subordinated Unit or a
Subordinated Unit that has converted into a Common Unit pursuant to Section 5.7
(other than a transfer to an Affiliate) if the remaining balance in the
transferring Unitholder’s Capital Account with respect to the retained
Subordinated Units or Retained Converted Subordinated Units would be negative
after giving effect to the allocation under Section 5.5(c)(ii)(B).
(c) The
Unitholder holding a Common Unit that has resulted from the conversion of a
Subordinated Unit pursuant to Section 5.7 shall not be issued a Common Unit
Certificate pursuant to Section 4.1, and shall not be permitted to transfer
such Common Unit to a Person that is not an Affiliate of the holder until such
time as the General Partner determines, based on advice of counsel, that each
such Common Unit should have, as a substantive matter, like intrinsic economic
and federal income tax characteristics, in all material respects, to the
intrinsic economic and federal income tax characteristics of an Initial Common
Unit. In connection with the condition imposed by this Section 6.7(c), the
General Partner shall take whatever steps are required to provide economic
uniformity to such Common Units in preparation for a transfer of such Common
Units, including the application of Sections 5.5(c)(ii) and 6.7(b) and electing
to allocate income as provided in Section 6.1(d)(x); provided, however, that no such steps
may be taken that would have a material adverse effect on the Unitholders
holding Common Units represented by Common Unit Certificates.
(d) Except
with respect to the right to vote on or approve matters requiring the vote or
approval of a percentage of the holders of Outstanding Common Units and the
right to participate in allocations of income, gain, loss and deduction and
distributions made with respect to Common Units, the holders of Class B Units
shall have all the rights and obligations of a Unitholder holding Common Units;
provided, however, that
immediately upon the conversion of Class B Units into Common Units pursuant to
Section 5.11, the Unitholders holding a Class B Unit shall possess all the
rights and obligations of a Unitholder holding Common Units hereunder, including
the right to vote as a Common Unitholder and the right to participate in
allocations of income, gain, loss and deduction and distributions made with
respect to Common Units; provided, however, that such converted Class B
Units shall remain subject to the provisions of Sections 6.1(d)(x)(B) and
6.7(e).
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(e) The
holder or holders of Common Units resulting from the conversion pursuant to
Section 5.11(f) of any Class B Units pursuant to Section 5.11
shall not be issued a Common Unit Certificate pursuant to Section 4.1, and
shall not be permitted to transfer such Common Units to a Person that is not an
Affiliate of the holder until such time as the General Partner determines, based
on advice of counsel, that each such Common Unit should have, as a substantive
matter, like intrinsic economic and federal income tax characteristics, in all
material respects, to the intrinsic economic and federal income tax
characteristics of an Initial Common Unit. In connection with the condition
imposed by this Section 6.7(e), the General Partner may take whatever steps
are required to provide economic uniformity to such Common Units, including the
application of Section 6.1(d)(x)(B); provided, however, that no such steps
may be taken that would have a material adverse effect on the Unitholders
holding Common Units represented by Common Unit Certificates.
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Special
Provisions Relating to the Holders of Incentive Distribution
Rights.
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Notwithstanding
anything to the contrary set forth in this Agreement, the holders of the
Incentive Distribution Rights (a) shall (i) possess the rights and obligations
provided in this Agreement with respect to a Limited Partner pursuant to Article
III and Article VII and (ii) have a Capital Account as a Partner pursuant to
Section 5.5 and all other provisions related thereto and (b) shall not (i) be
entitled to vote on any matters requiring the approval or vote of the holders of
Outstanding Units, except as provided by law, (ii) be entitled to any
distributions other than as provided in Sections 6.4(a)(v), (vi) and (vii),
Sections 6.4(b)(iii), (iv) and (v), and Section 12.4 or (iii) be allocated items
of income, gain, loss or deduction other than as specified in this Article
VI.
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Entity-Level
Taxation.
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If
legislation is enacted or the interpretation of existing language is modified by
a governmental taxing authority so that a Group Member is treated as an
association taxable as a corporation or is otherwise subject to an entity-level
tax for federal, state or local income tax purposes, then the General Partner
may reduce the Minimum Quarterly Distribution, the First Target Distribution,
the Second Target Distribution and the Third Target Distribution by the amount
of income taxes that are payable by reason of any such new legislation or
interpretation (the “Incremental
Income Taxes”), or any portion thereof selected by the General Partner,
in the manner provided in this Section 6.9. If the General Partner elects to
reduce the Minimum Quarterly Distribution, the First Target Distribution, the
Second Target Distribution and the Third Target Distribution for any Quarter
with respect to all or a portion of any Incremental Income Taxes, the General
Partner shall estimate for such Quarter the Partnership Group’s aggregate
liability (the “Estimated
Incremental Quarterly Tax Amount”) for all (or the relevant portion of)
such Incremental Income Taxes; provided that any difference between such
estimate and the actual tax liability for Incremental Income Taxes (or the
relevant portion thereof) for such Quarter may, to the extent determined by the
General Partner be taken into account in determining the Estimated Incremental
Quarterly Tax Amount with respect to each Quarter in which any such difference
can be determined. For each such Quarter, the Minimum Quarterly Distribution,
First Target Distribution, Second Target Distribution and Third Target
Distribution, shall be the product obtained by multiplying (a) the amounts
therefor that are set out herein prior to the application of this Section 6.9
times (b) the quotient obtained by dividing (i) Available Cash with respect to
such Quarter by (ii) the sum of Available Cash with respect to such Quarter and
the Estimated Incremental Quarterly Tax Amount for such Quarter, as determined
by the General Partner. For purposes of the foregoing, Available Cash with
respect to a Quarter will be deemed reduced by the Estimated Incremental
Quarterly Tax Amount for that Quarter.
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ARTICLE
VII
MANAGEMENT
AND OPERATION OF BUSINESS
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Management.
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(a) The
General Partner shall conduct, direct and manage all activities of the
Partnership. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership shall be
exclusively vested in the General Partner, and no Limited Partner shall have any
management power over the business and affairs of the Partnership. In addition
to the powers now or hereafter granted a general partner of a limited
partnership under applicable law or that are granted to the General Partner
under any other provision of this Agreement, the General Partner, subject to
Section 7.3, shall have full power and authority to do all things and on such
terms as it determines to be necessary or appropriate to conduct the business of
the Partnership, to exercise all powers set forth in Section 2.5 and to
effectuate the purposes set forth in Section 2.4, including the
following:
(i) the
making of any expenditures, the lending or borrowing of money, the assumption or
guarantee of, or other contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness, including indebtedness that is
convertible into Partnership Securities, and the incurring of any other
obligations;
(ii) the
making of tax, regulatory and other filings, or rendering of periodic or other
reports to governmental or other agencies having jurisdiction over the business
or assets of the Partnership;
(iii) the
acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or
exchange of any or all of the assets of the Partnership or the merger or other
combination of the Partnership with or into another Person (the matters
described in this clause (iii) being subject, however, to any prior approval
that may be required by Section 7.3 and Article XIV);
(iv) the use
of the assets of the Partnership (including cash on hand) for any purpose
consistent with the terms of this Agreement, including the financing of the
conduct of the operations of the Partnership Group; subject to Section 7.6(a),
the lending of funds to other Persons (including other Group Members); the
repayment or guarantee of obligations of any Group Member; and the making of
capital contributions to any Group Member;
(v) the
negotiation, execution and performance of any contracts, conveyances or other
instruments (including instruments that limit the liability of the Partnership
under contractual arrangements to all or particular assets of the Partnership,
with the other party to the contract to have no recourse against the General
Partner or its assets other than its interest in the Partnership, even if same
results in the terms of the transaction being less favorable to the Partnership
than would otherwise be the case);
70
(vi) the
distribution of Partnership cash;
(vii) the
selection and dismissal of employees (including employees having titles such as
“president,” “vice president,” “secretary” and “treasurer”) and agents, outside
attorneys, accountants, consultants and contractors and the determination of
their compensation and other terms of employment or hiring;
(viii) the
maintenance of insurance for the benefit of the Partnership Group, the Partners
and Indemnitees;
(ix) the
formation of, or acquisition of an interest in, and the contribution of property
and the making of loans to, any further limited or general partnerships, joint
ventures, corporations, limited liability companies or other relationships
(including the acquisition of interests in, and the contributions of property
to, any Group Member from time to time) subject to the restrictions set forth in
Section 2.4;
(x) the
control of any matters affecting the rights and obligations of the Partnership,
including the bringing and defending of actions at law or in equity and
otherwise engaging in the conduct of litigation, arbitration or mediation and
the incurring of legal expense and the settlement of claims and
litigation;
(xi) the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;
(xii) the
entering into of listing agreements with any National Securities Exchange and
the delisting of some or all of the Limited Partner Interests from, or
requesting that trading be suspended on, any such exchange (subject to any prior
approval that may be required under Section 4.8);
(xiii) the
purchase, sale or other acquisition or disposition of Partnership Securities, or
the issuance of options, rights, warrants, appreciation rights and tracking and
phantom interests relating to Partnership Securities;
(xiv) the
undertaking of any action in connection with the Partnership’s participation in
any Group Member; and
(xv) the
entering into of agreements with any of its Affiliates to render services to a
Group Member or to itself in the discharge of its duties as General Partner of
the Partnership.
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(b) Notwithstanding
any other provision of this Agreement, any Group Member Agreement, the Delaware
Act or any applicable law, rule or regulation, each of the Partners and each
other Person who may acquire an interest in Partnership Securities hereby (i)
approves, ratifies and confirms the execution, delivery and performance by the
parties thereto of this Agreement and the Group Member Agreement of each other
Group Member, the Underwriting Agreement, the Omnibus Agreement, the
Contribution Agreement, the Throughput Agreement, any Group Member Agreement and
the other agreements described in or filed as exhibits to the Registration
Statement that are related to the transactions contemplated by the Registration
Statement; (ii) agrees that the General Partner (on its own or through any
officer of the Partnership) is authorized to execute, deliver and perform the
agreements referred to in clause (i) of this sentence and the other agreements,
acts, transactions and matters described in or contemplated by the Registration
Statement on behalf of the Partnership without any further act, approval or vote
of the Partners or the other Persons who may acquire an interest in Partnership
Securities; and (iii) agrees that the execution, delivery or performance by the
General Partner, any Group Member or any Affiliate of any of them of this
Agreement or any agreement authorized or permitted under this Agreement
(including the exercise by the General Partner or any Affiliate of the General
Partner of the rights accorded pursuant to Article XV) shall not constitute a
breach by the General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this Agreement
(or any other agreements) or of any duty stated or implied by law or
equity.
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Certificate
of Limited Partnership.
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The
General Partner has caused the Certificate of Limited Partnership to be filed
with the Secretary of State of the State of Delaware as required by the Delaware
Act. The General Partner shall use all reasonable efforts to cause to be filed
such other certificates or documents that the General Partner determines to be
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware or any other state in
which the Partnership may elect to do business or own property. To the extent
the General Partner determines such action to be necessary or appropriate, the
General Partner shall file amendments to and restatements of the Certificate of
Limited Partnership and do all things to maintain the Partnership as a limited
partnership (or a partnership or other entity in which the limited partners have
limited liability) under the laws of the State of Delaware or of any other state
in which the Partnership may elect to do business or own property. Subject to
the terms of Section 3.4(a), the General Partner shall not be required, before
or after filing, to deliver or mail a copy of the Certificate of Limited
Partnership, any qualification document or any amendment thereto to any Limited
Partner.
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Restrictions
on the General Partner’s Authority.
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Except as
provided in Article XII and Article XIV, the General Partner may not sell,
exchange or otherwise dispose of all or substantially all of the assets of the
Partnership Group, taken as a whole, in a single transaction or a series of
related transactions (including by way of merger, consolidation, other
combination or sale of ownership interests of the Partnership’s Subsidiaries)
without the approval of holders of a Unit Majority; provided, however, that this provision
shall not preclude or limit the General Partner’s ability to mortgage, pledge,
hypothecate or grant a security interest in all or substantially all of the
assets of the Partnership Group and shall not apply to any forced sale of any or
all of the assets of the Partnership Group pursuant to the foreclosure of, or
other realization upon, any such encumbrance. Without the approval of holders of
a Unit Majority, the General Partner shall not, on behalf of the Partnership,
except as permitted under Section 4.6, Section 11.1 and Section 11.2, elect or
cause the Partnership to elect a successor general partner of the
Partnership.
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Reimbursement
of the General Partner.
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(a) Except as
provided in this Section 7.4 and elsewhere in this Agreement, the General
Partner shall not be compensated for its services as a general partner or
managing member of any Group Member.
(b) Subject
to the limitations contained in the Omnibus Agreement, the General Partner shall
be reimbursed on a monthly basis, or such other basis as the General Partner may
determine, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership Group (including salary, bonus, incentive
compensation and other amounts paid to any Person, including Affiliates of the
General Partner to perform services for the Partnership Group or for the General
Partner in the discharge of its duties to the Partnership Group), and (ii) all
other expenses allocable to the Partnership Group or otherwise incurred by the
General Partner in connection with operating the Partnership Group’s business
(including expenses allocated to the General Partner by its Affiliates). The
General Partner shall determine the expenses that are allocable to the
Partnership Group. Reimbursements pursuant to this Section 7.4 shall be in
addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.7.
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(c) The
General Partner, without the approval of the Limited Partners (who shall have no
right to vote in respect thereof), may propose and adopt on behalf of the
Partnership employee benefit plans, employee programs and employee practices
(including plans, programs and practices involving the issuance of Partnership
Securities or options to purchase or rights, warrants or appreciation rights or
phantom or tracking interests relating to Partnership Securities), or cause the
Partnership to issue Partnership Securities in connection with, or pursuant to,
any employee benefit plan, employee program or employee practice maintained or
sponsored by the General Partner, Group Member or any Affiliates in each case
for the benefit of employees and directors of the General Partner or any of its
Affiliates, in respect of services performed, directly or indirectly, for the
benefit of the Partnership Group. The Partnership agrees to issue and sell to
the General Partner or any of its Affiliates any Partnership Securities that the
General Partner or such Affiliates are obligated to provide to any employees and
directors pursuant to any such employee benefit plans, employee programs or
employee practices. Expenses incurred by the General Partner in connection with
any such plans, programs and practices (including the net cost to the General
Partner or such Affiliates of Partnership Securities purchased by the General
Partner or such Affiliates from the Partnership to fulfill options or awards
under such plans, programs and practices) shall be reimbursed in accordance with
Section 7.4(b). Any and all obligations of the General Partner under any
employee benefit plans, employee programs or employee practices adopted by the
General Partner as permitted by this Section 7.4(c) shall constitute obligations
of the General Partner hereunder and shall be assumed by any successor General
Partner approved pursuant to Section 11.1 or Section 11.2 or the transferee
of or successor to all of the General Partner’s General Partner Interest
(represented by General Partner Units) pursuant to Section 4.6.
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Outside
Activities.
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(a) After the
Closing Date, the General Partner, for so long as it is the General Partner of
the Partnership (i) agrees that its sole business will be to act as a general
partner or managing member, as the case may be, of the Partnership and any other
partnership or limited liability company of which the Partnership is, directly
or indirectly, a partner or member and to undertake activities that are
ancillary or related thereto (including being a limited partner in the
Partnership) and (ii) shall not engage in any business or activity or incur any
debts or liabilities except in connection with or incidental to (A) its
performance as general partner or managing member, if any, of one or more Group
Members or as described in or contemplated by the Registration Statement or (B)
the acquiring, owning or disposing of debt or equity securities in any Group
Member.
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(b) Each
Indemnitee (other than the General Partner) shall have the right to engage in
businesses of every type and description and other activities for profit and to
engage in and possess an interest in other business ventures of any and every
type or description, whether in businesses engaged in or anticipated to be
engaged in by any Group Member, independently or with others, including business
interests and activities in direct competition with the business and activities
of any Group Member, and none of the same shall constitute a breach of this
Agreement or any duty expressed or implied by law or equity to any Group Member
or any Partner. None of any Group Member, any Limited Partner or any
other Person shall have any rights by virtue of this Agreement, any Group Member
Agreement, or the partnership relationship established hereby in any business
ventures of any Indemnitee. Notwithstanding anything to the contrary in this
Agreement or any duty existing at law, in equity or otherwise, but subject to
Section 7.5(c), (i) the engaging in competitive activities by any Indemnitees
(other than the General Partner) in accordance with the provisions of this
Section 7.5 is hereby approved by the Partnership and all Partners, (ii) it
shall be deemed not to be a breach of any fiduciary duty or any other obligation
of any type whatsoever of any Indemnitee for the Indemnitees (other than the
General Partner) to engage in such business interests and activities in
preference to or to the exclusion of the Partnership and (iii) the Indemnitees
shall have no obligation hereunder or as a result of any duty expressed or
implied by law to present business opportunities to the Partnership.
Notwithstanding anything to the contrary in this Agreement, the doctrine of
corporate opportunity, or any analogous doctrine, shall not apply to any
Indemnitee (including the General Partner). No Indemnitee (including the General
Partner) who acquires knowledge of a potential transaction, agreement,
arrangement or other matter that may be an opportunity for the Partnership,
shall have any duty to communicate or offer such opportunity to the Partnership,
and such Indemnitee (including the General Partner) shall not be liable to the
Partnership, to any Limited Partner or any other Person for breach of any
fiduciary or other duty by reason of the fact that such Indemnitee (including
the General Partner) pursues or acquires for itself, directs such opportunity to
another Person or does not communicate such opportunity or information to the
Partnership; provided such Indemnitee does not engage in such business or
activity as a result of or using confidential or proprietary information
provided by or on behalf of the Partnership to such Indemnitee.
(c) The
General Partner and each of its Affiliates may acquire Units or other
Partnership Securities in addition to those acquired pursuant to the
Contribution Agreement and, except as otherwise provided in this Agreement,
shall be entitled to exercise, at their option, all rights relating to all Units
or other Partnership Securities acquired by them. The term “Affiliates” when
used in this Section 7.5(d) with respect to the General Partner shall not
include any Group Member.
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Loans
from the General Partner; Loans or Contributions from the Partnership or
Group Members.
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(a) The
General Partner or any of its Affiliates may lend to any Group Member, and any
Group Member may borrow from the General Partner or any of its Affiliates, funds
needed or desired by the Group Member for such periods of time and in such
amounts as the General Partner may determine; provided, however, that in any such
case the lending party may not charge the borrowing party interest at a rate
greater than the rate that would be charged the borrowing party or impose terms
less favorable to the borrowing party than would be charged or imposed on the
borrowing party by unrelated lenders on comparable loans made on an arm’s-length
basis (without reference to the lending party’s financial abilities or
guarantees), all as determined by the General Partner. The borrowing party shall
reimburse the lending party for any costs (other than any additional interest
costs) incurred by the lending party in connection with the borrowing of such
funds. For purposes of this Section 7.6(a) and Section 7.6(b), the term “Group
Member” shall include any Affiliate of a Group Member that is controlled by the
Group Member.
(b) The
Partnership may lend or contribute to any Group Member, and any Group Member may
borrow from the Partnership, funds on terms and conditions determined by the
General Partner. No Group Member may lend funds to the General Partner or any of
its Affiliates (other than another Group Member).
(c) No
borrowing by any Group Member or the approval thereof by the General Partner
shall be deemed to constitute a breach of any duty, expressed or implied, of the
General Partner or its Affiliates to the Partnership or the Limited Partners
existing hereunder, or existing at law, in equity or otherwise by reason of the
fact that the purpose or effect of such borrowing is directly or indirectly to
(i) enable distributions to the General Partner or its Affiliates (including in
their capacities as Limited Partners) to exceed the General Partner’s Percentage
Interest of the total amount distributed to all partners or (ii) hasten the
expiration of the Subordination Period or the conversion of any Subordinated
Units into Common Units.
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Indemnification.
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(a) To the
fullest extent permitted by law but subject to the limitations expressly
provided in this Agreement, all Indemnitees shall be indemnified and held
harmless by the Partnership from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including legal fees and
expenses), judgments, fines, penalties, interest, settlements or other amounts
arising from any and all claims, demands, actions, suits or proceedings, whether
civil, criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as an Indemnitee; provided, that the Indemnitee
shall not be indemnified and held harmless if there has been a final and
non-appealable judgment entered by a court of competent jurisdiction determining
that, in respect of the matter for which the Indemnitee is seeking
indemnification pursuant to this Section 7.7, the Indemnitee acted in bad
faith or engaged in fraud, willful misconduct or, in the case of a criminal
matter, acted with knowledge that the Indemnitee’s conduct was unlawful; provided, further, no indemnification
pursuant to this Section 7.7 shall be available to the General Partner or its
Affiliates (other than a Group Member) with respect to its or their obligations
incurred pursuant to the Underwriting Agreement, the Omnibus
Agreement, the Contribution Agreement or the Throughput Agreement
(other than obligations incurred by the General Partner on behalf of the
Partnership). Any indemnification pursuant to this Section 7.7 shall be made
only out of the assets of the Partnership, it being agreed that the General
Partner shall not be personally liable for such indemnification and shall have
no obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate such indemnification.
(b) To the
fullest extent permitted by law, expenses (including legal fees and expenses)
incurred by an Indemnitee who is indemnified pursuant to Section 7.7(a) in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Partnership prior to a determination that the
Indemnitee is not entitled to be indemnified upon receipt by the Partnership of
any undertaking by or on behalf of the Indemnitee to repay such amount if it
shall be determined that the Indemnitee is not entitled to be indemnified as
authorized in this Section 7.7.
(c) The
indemnification provided by this Section 7.7 shall be in addition to any other
rights to which an Indemnitee may be entitled under any agreement, pursuant to
any vote of the holders of Outstanding Limited Partner Interests, as a matter of
law or otherwise, both as to actions in the Indemnitee’s capacity as an
Indemnitee and as to actions in any other capacity (including any capacity under
the Underwriting Agreement), and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The
Partnership may purchase and maintain (or reimburse the General Partner or its
Affiliates for the cost of) insurance, on behalf of the General Partner, its
Affiliates and such other Persons as the General Partner shall determine,
against any liability that may be asserted against, or expense that may be
incurred by, such Person in connection with the Partnership’s activities or such
Person’s activities on behalf of the Partnership, regardless of whether the
Partnership would have the power to indemnify such Person against such liability
under the provisions of this Agreement.
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(e) For
purposes of this Section 7.7, the Partnership shall be deemed to have requested
an Indemnitee to serve as fiduciary of an employee benefit plan whenever the
performance by it of its duties to the Partnership also imposes duties on, or
otherwise involves services by, it to the plan or participants or beneficiaries
of the plan; excise taxes assessed on an Indemnitee with respect to an employee
benefit plan pursuant to applicable law shall constitute “fines” within the
meaning of Section 7.7(a); and action taken or omitted by it with respect to any
employee benefit plan in the performance of its duties for a purpose reasonably
believed by it to be in the best interest of the participants and beneficiaries
of the plan shall be deemed to be for a purpose that is in the best interests of
the Partnership.
(f) In no
event may an Indemnitee subject the Limited Partners to personal liability by
reason of the indemnification provisions set forth in this
Agreement.
(g) An
Indemnitee shall not be denied indemnification in whole or in part under this
Section 7.7 because the Indemnitee had an interest in the transaction with
respect to which the indemnification applies if the transaction was otherwise
permitted by the terms of this Agreement.
(h) The
provisions of this Section 7.7 are for the benefit of the Indemnitees, their
heirs, successors, assigns and administrators and shall not be deemed to create
any rights for the benefit of any other Persons.
(i) No
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall in any manner terminate, reduce or impair the right of any past, present
or future Indemnitee to be indemnified by the Partnership, nor the obligations
of the Partnership to indemnify any such Indemnitee under and in accordance with
the provisions of this Section 7.7 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be
asserted.
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Liability
of Indemnitees.
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(a) Notwithstanding
anything to the contrary set forth in this Agreement, no Indemnitee shall be
liable for monetary damages to the Partnership, the Limited Partners, or any
other Persons who have acquired interests in the Partnership Securities, for
losses sustained or liabilities incurred as a result of any act or omission of
an Indemnitee unless there has been a final and non-appealable judgment entered
by a court of competent jurisdiction determining that, in respect of the matter
in question, the Indemnitee acted in bad faith or engaged in fraud, willful
misconduct or, in the case of a criminal matter, acted with knowledge that the
Indemnitee’s conduct was criminal.
(b) Subject
to its obligations and duties as General Partner set forth in Section 7.1(a),
the General Partner may exercise any of the powers granted to it by this
Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and the General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
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(c) To the
extent that, at law or in equity, an Indemnitee has duties (including fiduciary
duties) and liabilities relating thereto to the Partnership or to the Partners,
the General Partner and any other Indemnitee acting in connection with the
Partnership’s business or affairs shall not be liable to the Partnership or to
any Partner for its good faith reliance on the provisions of this
Agreement.
(d) Any
amendment, modification or repeal of this Section 7.8 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
liability of the Indemnitees under this Section 7.8 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
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Resolution
of Conflicts of Interest; Standards of Conduct and Modification of
Duties.
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(a) Unless
otherwise expressly provided in this Agreement or any Group Member Agreement,
whenever a potential conflict of interest exists or arises between the General
Partner or any of its Affiliates, on the one hand, and the Partnership, any
Group Member or any Partner, on the other, any resolution or course of action by
the General Partner or its Affiliates in respect of such conflict of interest
shall be permitted and deemed approved by all Partners, and shall not constitute
a breach of this Agreement, of any Group Member Agreement, of any agreement
contemplated herein or therein, or of any duty stated or implied by law or
equity, if the resolution or course of action in respect of such conflict of
interest is (i) approved by Special Approval, (ii) approved by the vote of a
majority of the Outstanding Common Units (excluding Common Units owned by the
General Partner and its Affiliates), (iii) on terms no less favorable to the
Partnership than those generally being provided to or available from unrelated
third parties or (iv) fair and reasonable to the Partnership, taking into
account the totality of the relationships between the parties involved
(including other transactions that may be particularly favorable or advantageous
to the Partnership). The General Partner shall be authorized but not required in
connection with its resolution of such conflict of interest to seek Special
Approval of such resolution, and the General Partner may also adopt a resolution
or course of action that has not received Special Approval. If Special Approval
is sought, then it shall be presumed that, in making its decision, the Conflicts
Committee acted in good faith, and if Special Approval is not sought and the
Board of Directors of the General Partner determines that the resolution or
course of action taken with respect to a conflict of interest satisfies either
of the standards set forth in clauses (iii) or (iv) above, then it shall be
presumed that, in making its decision, the Board of Directors of the General
Partner acted in good faith, and in either case, in any proceeding brought by
any Limited Partner or by or on behalf of such Limited Partner or any other
Limited Partner or the Partnership challenging such approval, the Person
bringing or prosecuting such proceeding shall have the burden of overcoming such
presumption. Notwithstanding anything to the contrary in this Agreement or any
duty otherwise existing at law or equity, the existence of the conflicts of
interest described in the Registration Statement are hereby approved by all
Partners and shall not constitute a breach of this Agreement.
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(b) Whenever
the General Partner makes a determination or takes or declines to take any other
action, or any of its Affiliates causes it to do so, in its capacity as the
general partner of the Partnership as opposed to in its individual capacity,
whether under this Agreement, any Group Member Agreement or any other agreement
contemplated hereby or otherwise, then, unless another express standard is
provided for in this Agreement, the General Partner, or such Affiliates causing
it to do so, shall make such determination or take or decline to take such other
action in good faith and shall not be subject to any other or different
standards imposed by this Agreement, any Group Member Agreement, any other
agreement contemplated hereby or under the Delaware Act or any other law, rule
or regulation or at equity. In order for a determination or other action to be
in “good faith” for purposes of this Agreement, the Person or Persons making
such determination or taking or declining to take such other action must believe
that the determination or other action is in the best interests of the
Partnership.
(c) Whenever
the General Partner makes a determination or takes or declines to take any other
action, or any of its Affiliates causes it to do so, in its individual capacity
as opposed to in its capacity as the general partner of the Partnership, whether
under this Agreement, any Group Member Agreement or any other agreement
contemplated hereby or otherwise, then the General Partner, or such Affiliates
causing it to do so, are entitled to make such determination or to take or
decline to take such other action free of any fiduciary duty or obligation
whatsoever to the Partnership, any Limited Partner, and the General Partner, or
such Affiliates causing it to do so, shall not be required to act in good faith
or pursuant to any other standard imposed by this Agreement, any Group Member
Agreement, any other agreement contemplated hereby or under the Delaware Act or
any other law, rule or regulation or at equity. By way of illustration and not
of limitation, whenever the phrase, “at the option of the General Partner,” or
some variation of that phrase, is used in this Agreement, it indicates that the
General Partner is acting in its individual capacity. For the avoidance of
doubt, whenever the General Partner votes or transfers its Partnership
Interests, or refrains from voting or transferring its Partnership Interests, it
shall be acting in its individual capacity. The General Partner’s organizational
documents may provide that determinations to take or decline to take any action
in its individual, rather than representative, capacity may or shall be
determined by its members, if the General Partner is a limited liability
company, stockholders, if the General Partner is a corporation, or the members
or stockholders of the General Partner’s general partner, if the General Partner
is a partnership.
(d) Notwithstanding
anything to the contrary in this Agreement, the General Partner and its
Affiliates shall have no duty or obligation, express or implied, to (i) sell or
otherwise dispose of any asset of the Partnership Group other than in the
ordinary course of business or (ii) permit any Group Member to use any
facilities or assets of the General Partner and its Affiliates, except as may be
provided in contracts entered into from time to time specifically dealing with
such use. Any determination by the General Partner or any of its Affiliates to
enter into such contracts shall be at its option.
(e) Except as
expressly set forth in this Agreement or required by the Delaware Act, neither
the General Partner nor any other Indemnitee shall have any duties or
liabilities, including fiduciary duties, to the Partnership or any Limited
Partner and the provisions of this Agreement, to the extent that they restrict,
eliminate or otherwise modify the duties and liabilities, including fiduciary
duties, of the General Partner or any other Indemnitee otherwise existing at law
or in equity, are agreed by the Partners to replace such other duties and
liabilities of the General Partner or such other Indemnitee.
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(f) The
Unitholders hereby authorize the General Partner, on behalf of the Partnership
as a partner or member of a Group Member, to approve of actions by the general
partner or managing member of such Group Member similar to those actions
permitted to be taken by the General Partner pursuant to this Section
7.9.
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Other
Matters Concerning the General
Partner.
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(a) The
General Partner may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture or other paper or document
believed by it to be genuine and to have been signed or presented by the proper
party or parties.
(b) The
General Partner may consult with legal counsel, accountants, appraisers,
management consultants, investment bankers and other consultants and advisers
selected by it, and any act taken or omitted to be taken in reliance upon the
opinion (including an Opinion of Counsel) of such Persons as to matters that the
General Partner reasonably believes to be within such Person’s professional or
expert competence shall be conclusively presumed to have been done or omitted in
good faith and in accordance with such opinion.
(c) The
General Partner shall have the right, in respect of any of its powers or
obligations hereunder, to act through any of its duly authorized officers, a
duly appointed attorney or attorneys-in-fact or the duly authorized officers of
the Partnership or any Group Member.
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Purchase
or Sale of Partnership Securities.
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The
General Partner may cause the Partnership to purchase or otherwise acquire
Partnership Securities; provided that, except as
permitted pursuant to Section 4.10 or Section 4.12, the General Partner may not
cause any Group Member to purchase Subordinated Units during the Subordination
Period. Such Partnership Securities shall be held by the Partnership as treasury
securities unless they are expressly cancelled by action of an appropriate
officer of the General Partner. As long as Partnership Securities are held by
any Group Member, such Partnership Securities shall not be considered
Outstanding for any purpose, except as otherwise provided herein. The General
Partner or any Affiliate of the General Partner may also purchase or otherwise
acquire and sell or otherwise dispose of Partnership Securities for its own
account, subject to the provisions of Articles IV and X.
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Registration
Rights of the General Partner and its
Affiliates.
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(a) If (i)
the General Partner or any Affiliate of the General Partner (including for
purposes of this Section 7.12, any Person that is an Affiliate of the General
Partner at the date hereof notwithstanding that it may later cease to be an
Affiliate of the General Partner) holds Partnership Securities that it desires
to sell and (ii) Rule 144 of the Securities Act (or any successor rule or
regulation to Rule 144) or another exemption from registration is not available
to enable such holder of Partnership Securities (the “Holder”)
to dispose of the number of Partnership Securities it desires to sell at the
time it desires to do so without registration under the Securities Act, then at
the option and upon the request of the Holder, the Partnership shall file with
the Commission as promptly as practicable after receiving such request, and use
commercially reasonable efforts to cause to become effective and remain
effective for a period of not less than six months following its effective date
or such shorter period as shall terminate when all Partnership Securities
covered by such registration statement have been sold, a registration statement
under the Securities Act registering the offering and sale of the number of
Partnership Securities specified by the Holder; provided, however, that the Partnership
shall not be required to effect more than three registrations pursuant to this
Section 7.12(a) and Section 7.12(b); and provided further, however,
that if the Conflicts Committee determines in good faith that the requested
registration would be materially detrimental to the Partnership and its Partners
because such registration would (x) materially interfere with a significant
acquisition, reorganization or other similar transaction involving the
Partnership, (y) require premature disclosure of material information that the
Partnership has a bona fide business purpose for preserving as confidential or
(z) render the Partnership unable to comply with requirements under applicable
securities laws, then the Partnership shall have the right to postpone such
requested registration for a period of not more than six months after receipt of
the Holder’s request, such right pursuant to this Section 7.12(a) or Section
7.12(b) not to be utilized more than once in any twelve-month period. In
connection with any registration pursuant to the first sentence of this Section
7.12(a), the Partnership shall (i) promptly prepare and file (A) such documents
as may be necessary to register or qualify the securities subject to such
registration under the securities laws of such states as the Holder shall
reasonably request; provided, however, that no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Partnership would become subject to general service of process or to
taxation or qualification to do business as a foreign corporation or partnership
doing business in such jurisdiction solely as a result of such registration, and
(B) such documents as may be necessary to apply for listing or to list the
Partnership Securities subject to such registration on such National Securities
Exchange as the Holder shall reasonably request, and (ii) do any and all other
acts and things that may be necessary or appropriate to enable the Holder to
consummate a public sale of such Partnership Securities in such states. Except
as set forth in Section 7.12(d), all costs and expenses of any such registration
and offering (other than the underwriting discounts and commissions) shall be
paid by the Partnership, without reimbursement by the Holder.
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(b) If any
Holder holds Partnership Securities that it desires to sell and Rule 144 of the
Securities Act (or any successor rule or regulation to Rule 144) or another
exemption from registration is not available to enable such Holder to dispose of
the number of Partnership Securities it desires to sell at the time it desires
to do so without registration under the Securities Act, then at the option and
upon the request of the Holder, the Partnership shall file with the Commission
as promptly as practicable after receiving such request, and use commercially
reasonable efforts to cause to become effective and remain effective for a
period of not less than six months following its effective date or such shorter
period as shall terminate when all Partnership Securities covered by such shelf
registration statement have been sold, a “shelf” registration statement covering
the Partnership Securities specified by the Holder on an appropriate form under
Rule 415 under the Securities Act, or any similar rule that may be adopted by
the Commission; provided, however, that the Partnership
shall not be required to effect more than three registrations pursuant to
Section 7.12(a) and this Section 7.12(b); and provided further, however,
that if the Conflicts Committee determines in good faith that any offering
under, or the use of any prospectus forming a part of, the shelf registration
statement would be materially detrimental to the Partnership and its Partners
because such offering or use would (x) materially interfere with a significant
acquisition, reorganization or other similar transaction involving the
Partnership, (y) require premature disclosure of material information that the
Partnership has a bona fide business purpose for preserving as confidential or
(z) render the Partnership unable to comply with requirements under applicable
securities laws, then the Partnership shall have the right to suspend such
offering or use for a period of not more than six months after receipt of the
Holder’s request, such right pursuant to Section 7.12(a) or this Section 7.12(b)
not to be utilized more than once in any twelve-month period. In connection with
any shelf registration pursuant to this Section 7.12(b), the Partnership shall
(i) promptly prepare and file (A) such documents as may be necessary to register
or qualify the securities subject to such shelf registration under the
securities laws of such states as the Holder shall reasonably request; provided, however, that no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Partnership would become subject to general service of process or to
taxation or qualification to do business as a foreign corporation or partnership
doing business in such jurisdiction solely as a result of such shelf
registration, and (B) such documents as may be necessary to apply for listing or
to list the Partnership Securities subject to such shelf registration on such
National Securities Exchange as the Holder shall reasonably request, and (ii) do
any and all other acts and things that may be necessary or appropriate to enable
the Holder to consummate a public sale of such Partnership Securities in such
states. Except as set forth in Section 7.12(d), all costs and expenses of any
such shelf registration and offering (other than the underwriting discounts and
commissions) shall be paid by the Partnership, without reimbursement by the
Holder.
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(c) If the
Partnership shall at any time propose to file a registration statement under the
Securities Act for an offering of equity securities of the Partnership for cash
(other than an offering relating solely to an employee benefit plan), the
Partnership shall notify all Holders of such proposal and use all reasonable
efforts to include such number or amount of securities held by the Holder in
such registration statement as the Holder shall request; provided, that the
Partnership is not required to make any effort or take any action to so include
the securities of the Holder once the registration statement is declared
effective by the Commission or otherwise becomes effective, including any
registration statement providing for the offering from time to time of
securities pursuant to Rule 415 of the Securities Act. If the proposed offering
pursuant to this Section 7.12(c) shall be an underwritten offering, then, in the
event that the managing underwriter or managing underwriters of such offering
advise the Partnership and the Holder in writing that in their opinion the
inclusion of all or some of the Holder’s Partnership Securities would adversely
and materially affect the success of the offering, the Partnership shall include
in such offering only that number or amount, if any, of securities held by the
Holder that, in the opinion of the managing underwriter or managing
underwriters, will not so adversely and materially affect the offering. Except
as set forth in Section 7.12(d), all costs and expenses of any such registration
and offering (other than the underwriting discounts and commissions) shall be
paid by the Partnership, without reimbursement by the Holder.
(d) If
underwriters are engaged in connection with any registration referred to in this
Section 7.12, the Partnership shall provide indemnification, representations,
covenants, opinions and other assurance to the underwriters in form and
substance reasonably satisfactory to such underwriters. Further, in addition to
and not in limitation of the Partnership’s obligation under Section 7.7, the
Partnership shall, to the fullest extent permitted by law, indemnify and hold
harmless the Holder, its officers, directors and each Person who controls the
Holder (within the meaning of the Securities Act) and any agent thereof
(collectively, “Indemnified
Persons”) from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including legal fees and expenses),
judgments, fines, penalties, interest, settlements or other amounts arising from
any and all claims, demands, actions, suits or proceedings, whether civil,
criminal, administrative or investigative, in which any Indemnified Person may
be involved, or is threatened to be involved, as a party or otherwise, under the
Securities Act or otherwise (hereinafter referred to in this Section 7.12(d) as
a “claim” and
in the plural as “claims”)
based upon, arising out of or resulting from any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which any Partnership Securities were registered under the Securities Act
or any state securities or Blue Sky laws, in any preliminary prospectus (if used
prior to the effective date of such registration statement), or in any summary
or final prospectus or any free writing prospectus or in any amendment or
supplement thereto (if used during the period the Partnership is required to
keep the registration statement current), or arising out of, based upon or
resulting from the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements made therein
not misleading; provided, however, that the Partnership
shall not be liable to any Indemnified Person to the extent that any such claim
arises out of, is based upon or results from an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, such preliminary, summary or final prospectus or any free writing
prospectus or such amendment or supplement, in reliance upon and in conformity
with written information furnished to the Partnership by or on behalf of such
Indemnified Person specifically for use in the preparation thereof.
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(e) The
provisions of Section 7.12(a), Section 7.12(b) and Section 7.12(c) shall
continue to be applicable with respect to the General Partner (and any of the
General Partner’s Affiliates) after it ceases to be a general partner of the
Partnership, during a period of two years subsequent to the effective date of
such cessation and for so long thereafter as is required for the Holder to sell
all of the Partnership Securities with respect to which it has requested during
such two-year period inclusion in a registration statement otherwise filed or
that a registration statement be filed; provided, however, that the Partnership
shall not be required to file successive registration statements covering the
same Partnership Securities for which registration was demanded during such
two-year period. The provisions of Section 7.12(d) shall continue in effect
thereafter.
(f) The
rights to cause the Partnership to register Partnership Securities pursuant to
this Section 7.12 may be assigned (but only with all related obligations) by a
Holder to a transferee or assignee of such Partnership Securities, provided (i)
the Partnership is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
Partnership Securities with respect to which such registration rights are being
assigned; and (ii) such transferee or assignee agrees in writing to be bound by
and subject to the terms set forth in this Section 7.12.
(g) Any
request to register Partnership Securities pursuant to this Section 7.12 shall
(i) specify the Partnership Securities intended to be offered and sold by the
Person making the request, (ii) express such Person’s present intent to offer
such Partnership Securities for distribution, (iii) describe the nature or
method of the proposed offer and sale of Partnership Securities, and (iv)
contain the undertaking of such Person to provide all such information and
materials and take all action as may be required in order to permit the
Partnership to comply with all applicable requirements in connection with the
registration of such Partnership Securities.
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Reliance
by Third Parties.
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Notwithstanding
anything to the contrary in this Agreement, any Person dealing with the
Partnership shall be entitled to assume that the General Partner and any officer
of the General Partner authorized by the General Partner to act on behalf of and
in the name of the Partnership has full power and authority to encumber, sell or
otherwise use in any manner any and all assets of the Partnership and to enter
into any authorized contracts on behalf of the Partnership, and such Person
shall be entitled to deal with the General Partner or any such officer as if it
were the Partnership’s sole party in interest, both legally and beneficially.
Each Limited Partner hereby waives, to the fullest extent permitted by law, any
and all defenses or other remedies that may be available against such Person to
contest, negate or disaffirm any action of the General Partner or any such
officer in connection with any such dealing. In no event shall any Person
dealing with the General Partner or any such officer or its representatives be
obligated to ascertain that the terms of this Agreement have been complied with
or to inquire into the necessity or expedience of any act or action of the
General Partner or any such officer or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (a) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (b) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (c)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
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ARTICLE
VIII
BOOKS,
RECORDS, ACCOUNTING AND REPORTS
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Records
and Accounting.
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The
General Partner shall keep or cause to be kept at the principal office of the
Partnership appropriate books and records with respect to the Partnership’s
business, including all books and records necessary to provide to the Limited
Partners any information required to be provided pursuant to Section 3.4(a). Any
books and records maintained by or on behalf of the Partnership in the regular
course of its business, including the record of the Record Holders of Units or
other Partnership Securities, books of account and records of Partnership
proceedings, may be kept on, or be in the form of, computer disks, hard drives,
punch cards, magnetic tape, photographs, micrographics or any other information
storage device; provided, that the books and
records so maintained are convertible into clearly legible written form within a
reasonable period of time. The books of the Partnership shall be maintained, for
financial reporting purposes, on an accrual basis in accordance with U.S.
GAAP.
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Fiscal
Year.
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The
fiscal year of the Partnership shall be a fiscal year ending December
31.
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Reports.
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(a) As soon
as practicable, but in no event later than 120 days after the close of each
fiscal year of the Partnership, the General Partner shall cause to be mailed or
made available, by any reasonable means (including posting on or accessible
through the Partnership’s or the SEC’s website) to each Record Holder of a Unit
as of a date selected by the General Partner, an annual report containing
financial statements of the Partnership for such fiscal year of the Partnership,
presented in accordance with U.S. GAAP, including a balance sheet and statements
of operations, Partnership equity and cash flows, such statements to be audited
by a firm of independent public accountants selected by the General
Partner.
(b) As soon
as practicable, but in no event later than 90 days after the close of each
Quarter except the last Quarter of each fiscal year, the General Partner shall
cause to be mailed or made available, by any reasonable means (including posting
on or accessible through the Partnership’s or the SEC’s website) to each Record
Holder of a Unit, as of a date selected by the General Partner, a report
containing unaudited financial statements of the Partnership and such other
information as may be required by applicable law, regulation or rule of any
National Securities Exchange on which the Units are listed or admitted to
trading, or as the General Partner determines to be necessary or
appropriate.
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ARTICLE
IX
TAX
MATTERS
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Tax
Returns and Information.
|
The
Partnership shall timely file all returns of the Partnership that are required
for federal, state and local income tax purposes on the basis of the accrual
method and the taxable year or years that it is required by law to adopt, from
time to time, as determined by the General Partner. In the event the Partnership
is required to use a taxable year other than a year ending on December 31, the
General Partner shall use reasonable efforts to change the taxable year of the
Partnership to a year ending on December 31. The tax information reasonably
required by Record Holders for federal and state income tax reporting purposes
with respect to a taxable year shall be furnished to them within 90 days of the
close of the calendar year in which the Partnership’s taxable year ends. The
classification, realization and recognition of income, gain, losses and
deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
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Tax
Elections.
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(a) The
Partnership shall make the election under Section 754 of the Code in accordance
with applicable regulations thereunder, subject to the reservation of the right
to seek to revoke any such election upon the General Partner’s determination
that such revocation is in the best interests of the Limited Partners.
Notwithstanding any other provision herein contained, for the purposes of
computing the adjustments under Section 743(b) of the Code, the General Partner
shall be authorized (but not required) to adopt a convention whereby the price
paid by a transferee of a Limited Partner Interest will be deemed to be the
lowest quoted closing price of the Limited Partner Interests on any National
Securities Exchange on which such Limited Partner Interests are listed or
admitted to trading during the calendar month in which such transfer is deemed
to occur pursuant to Section 6.2(g) without regard to the actual price paid by
such transferee.
(b) Except as
otherwise provided herein, the General Partner shall determine whether the
Partnership should make any other elections permitted by the Code.
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Tax
Controversies.
|
Subject
to the provisions hereof, the General Partner is designated as the Tax Matters
Partner (as defined in the Code) and is authorized and required to represent the
Partnership (at the Partnership’s expense) in connection with all examinations
of the Partnership’s affairs by tax authorities, including resulting
administrative and judicial proceedings, and to expend Partnership funds for
professional services and costs associated therewith. Each Partner agrees to
cooperate with the General Partner and to do or refrain from doing any or all
things reasonably required by the General Partner to conduct such
proceedings.
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Withholding.
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Notwithstanding
any other provision of this Agreement, the General Partner is authorized to take
any action that may be required to cause the Partnership and other Group Members
to comply with any withholding requirements established under the Code or any
other federal, state or local law including pursuant to Sections 1441, 1442,
1445 and 1446 of the Code, or established under any foreign law. To the extent
that the Partnership is required or elects to withhold and pay over to any
taxing authority any amount resulting from the allocation or distribution of
income to any Partner or Assignee (including by reason of Section 1446 of the
Code), the General Partner may treat the amount withheld as a distribution of
cash pursuant to Section 6.3 in the amount of such withholding from such
Partner.
ARTICLE
X
ADMISSION
OF PARTNERS
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Admission
of Limited Partners.
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(a) Upon the
issuance by the Partnership of Common Units, Subordinated Units and Incentive
Distribution Rights to the General Partner, SemGroup Holdings and the
Underwriters as described in Article V, the General Partner shall admit such
parties to the Partnership as Initial Limited Partners in respect of the Common
Units, Subordinated Units or Incentive Distribution Rights issued to
them.
(b) By
acceptance of the transfer of any Limited Partner Interests in accordance with
Article IV or the acceptance of any Limited Partner Interests issued pursuant to
Article V or pursuant to a merger or consolidation pursuant to Article XIV, and
except as provided in Section 4.9 or Section 4.11, each transferee of, or other
such Person acquiring, a Limited Partner Interest (including any nominee holder
or an agent or representative acquiring such Limited Partner Interests for the
account of another Person) (i) shall be admitted to the Partnership as a Limited
Partner with respect to the Limited Partner Interests so transferred or issued
to such Person when any such transfer, issuance or admission is reflected in the
books and records of the Partnership and such Limited Partner becomes the Record
Holder of the Limited Partner Interests so transferred, (ii) shall become bound
by the terms of this Agreement, (iii) represents that the transferee has the
capacity, power and authority to enter into this Agreement, (iv) grants the
powers of attorney set forth in this Agreement and (v) makes the consents and
waivers contained in this Agreement, all with or without execution of this
Agreement by such Person. The transfer of any Limited Partner Interests and the
admission of any new Limited Partner shall not constitute an amendment to this
Agreement. A Person may become a Limited Partner or Record Holder of a Limited
Partner Interest without the consent or approval of any of the Partners. A
Person may not become a Limited Partner without acquiring a Limited Partner
Interest and until such Person is reflected in the books and records of the
Partnership as the Record Holder of such Limited Partner Interest. The rights
and obligations of a Person who is a Non-citizen Assignee shall be determined in
accordance with Section 4.9, and the rights and obligations of a Person who is
an Ineligible Assignee shall be determined in accordance with Section
4.11.
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(c) The name
and mailing address of each Limited Partner shall be listed on the books and
records of the Partnership maintained for such purpose by the Partnership or the
Transfer Agent. The General Partner shall update the books and records of the
Partnership from time to time as necessary to reflect accurately the information
therein (or shall cause the Transfer Agent to do so, as applicable). A Limited
Partner Interest may be represented by a Certificate, as provided in Section 4.1
hereof.
(d) Any
transfer of a Limited Partner Interest shall not entitle the transferee to share
in the profits and losses, to receive distributions, to receive allocations of
income, gain, loss, deduction or credit or any similar item or to any other
rights to which the transferor was entitled until the transferee becomes a
Limited Partner pursuant to Section 10.2(a).
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Admission
of Successor General Partner.
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A
successor General Partner approved pursuant to Section 11.1 or Section 11.2 or
the transferee of or successor to all of the General Partner Interest
(represented by General Partner Units) pursuant to Section 4.6 who is proposed
to be admitted as a successor General Partner shall be admitted to the
Partnership as the General Partner, effective immediately prior to the
withdrawal or removal of the predecessor or transferring General Partner,
pursuant to Section 11.1 or 11.2 or the transfer of the General Partner Interest
(represented by General Partner Units) pursuant to Section 4.6, provided, however, that no such
successor shall be admitted to the Partnership until compliance with the terms
of Section 4.6 has occurred and such successor has executed and delivered such
other documents or instruments as may be required to effect such admission. Any
such successor shall, subject to the terms hereof, carry on the business of the
members of the Partnership Group without dissolution.
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Amendment
of Agreement and Certificate of Limited
Partnership.
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To effect
the admission to the Partnership of any Partner, the General Partner shall take
all steps necessary or appropriate under the Delaware Act to amend the records
of the Partnership to reflect such admission and, if necessary, to prepare as
soon as practicable an amendment to this Agreement and, if required by law, the
General Partner shall prepare and file an amendment to the Certificate of
Limited Partnership, and the General Partner may for this purpose, among others,
exercise the power of attorney granted pursuant to Section 2.6.
ARTICLE
XI
WITHDRAWAL
OR REMOVAL OF PARTNERS
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Withdrawal
of the General Partner.
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(a) The
General Partner shall be deemed to have withdrawn from the Partnership upon the
occurrence of any one of the following events (each such event herein referred
to as an “Event of
Withdrawal”);
89
(i) The
General Partner voluntarily withdraws from the Partnership by giving written
notice to the other Partners;
(ii) The
General Partner transfers all of its rights as General Partner pursuant to
Section 4.6;
(iii) The
General Partner is removed pursuant to Section 11.2;
(iv) The
General Partner (A) makes a general assignment for the benefit of creditors; (B)
files a voluntary bankruptcy petition for relief under Chapter 7 of the United
States Bankruptcy Code; (C) files a petition or answer seeking for itself a
liquidation, dissolution or similar relief (but not a reorganization) under any
law; (D) files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against the General Partner in a
proceeding of the type described in clauses (A)-(C) of this Section 11.1(a)(iv);
or (E) seeks, consents to or acquiesces in the appointment of a trustee (but not
a debtor-in-possession), receiver or liquidator of the General Partner or of all
or any substantial part of its properties;
(v) A final
and non-appealable order of relief under Chapter 7 of the United States
Bankruptcy Code is entered by a court with appropriate jurisdiction pursuant to
a voluntary or involuntary petition by or against the General Partner;
or
(vi) (A) in
the event the General Partner is a corporation, a certificate of dissolution or
its equivalent is filed for the General Partner, or 90 days expire after the
date of notice to the General Partner of revocation of its charter without a
reinstatement of its charter, under the laws of its state of incorporation; (B)
in the event the General Partner is a partnership or a limited liability
company, the dissolution and commencement of winding up of the General Partner;
(C) in the event the General Partner is acting in such capacity by virtue of
being a trustee of a trust, the termination of the trust; (D) in the event the
General Partner is a natural person, his death or adjudication of incompetency;
and (E) otherwise in the event of the termination of the General
Partner.
If an
Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A), (B), (C)
or (E) occurs, the withdrawing General Partner shall give notice to the Limited
Partners within 30 days after such occurrence. The Partners hereby agree that
only the Events of Withdrawal described in this Section 11.1 shall result in the
withdrawal of the General Partner from the Partnership.
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(b) Withdrawal
of the General Partner from the Partnership upon the occurrence of an Event of
Withdrawal shall not constitute a breach of this Agreement under the following
circumstances: (i) at any time during the period beginning on the Closing Date
and ending at 12:00 midnight, Central Time, on June 30, 2017, the General
Partner voluntarily withdraws by giving at least 90 days’ advance notice of its
intention to withdraw to the Limited Partners; provided, that prior to the
effective date of such withdrawal, the withdrawal is approved by Unitholders
holding at least a majority of the Outstanding Common Units (excluding Common
Units held by the General Partner and its Affiliates) and the General Partner
delivers to the Partnership an Opinion of Counsel (“Withdrawal
Opinion of Counsel”) that such withdrawal (following the selection of the
successor General Partner) would not result in the loss of the limited liability
of any Limited Partner or any Group Member or cause any Group Member to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed); (ii) at any time after 12:00 midnight, Central Time, on June 30,
2017, the General Partner voluntarily withdraws by giving at least 90 days’
advance notice to the Unitholders, such withdrawal to take effect on the date
specified in such notice; (iii) at any time that the General Partner ceases to
be the General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant to
Section 11.2; or (iv) notwithstanding clause (i) of this sentence, at any time
that the General Partner voluntarily withdraws by giving at least 90 days’
advance notice of its intention to withdraw to the Limited Partners, such
withdrawal to take effect on the date specified in the notice, if at the time
such notice is given one Person and its Affiliates (other than the General
Partner and its Affiliates) own beneficially or of record or control at least
50% of the Outstanding Units. The withdrawal of the General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall also constitute
the withdrawal of the General Partner as general partner or managing member, if
any, to the extent applicable, of the other Group Members. If the General
Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the holders
of a Unit Majority, may, prior to the effective date of such withdrawal, elect a
successor General Partner. The Person so elected as successor General Partner
shall automatically become the successor general partner or managing member, to
the extent applicable, of the other Group Members of which the General Partner
is a general partner or a managing member. If, prior to the effective date of
the General Partner’s withdrawal, a successor is not selected by the Unitholders
as provided herein or the Partnership does not receive a Withdrawal Opinion of
Counsel, the Partnership shall be dissolved in accordance with Section 12.1. Any
successor General Partner elected in accordance with the terms of this Section
11.1 shall be subject to the provisions of Section 10.3.
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Removal
of the General Partner.
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The
General Partner may be removed if such removal is approved by the Unitholders
holding at least 66 2/3% of the Outstanding Units (including Units held by
the General Partner and its Affiliates) voting as a single class. Any such
action by such holders for removal of the General Partner must also provide for
the election of a successor General Partner by the Unitholders holding a
majority of the outstanding Common Units and Class B Units, if any, voting as a
single class and a majority of the outstanding Subordinated Units (if any
Subordinated Units are then Outstanding) voting as a class (including, in each
case, Units held by the General Partner and its Affiliates). Such removal shall
be effective immediately following the admission of a successor General Partner
pursuant to Section 10.2. The removal of the General Partner shall also
automatically constitute the removal of the General Partner as general partner
or managing member, to the extent applicable, of the other Group Members of
which the General Partner is a general partner or a managing member. If a Person
is elected as a successor General Partner in accordance with the terms of this
Section 11.2, such Person shall, upon admission pursuant to Section 10.2,
automatically become a successor general partner or managing member, to the
extent applicable, of the other Group Members of which the General Partner is a
general partner or a managing member. The right of the holders of Outstanding
Units to remove the General Partner shall not exist or be exercised unless the
Partnership has received an opinion opining as to the matters covered by a
Withdrawal Opinion of Counsel. Any successor General Partner elected in
accordance with the terms of this Section 11.2 shall be subject to the
provisions of Section 10.2.
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Interest
of Departing General Partner and Successor General
Partner.
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(a) In the
event of (i) withdrawal of the General Partner under circumstances where such
withdrawal does not violate this Agreement or (ii) removal of the General
Partner by the holders of Outstanding Units under circumstances where Cause does
not exist, if the successor General Partner is elected in accordance with the
terms of Section 11.1 or Section 11.2, the Departing General Partner shall have
the option, exercisable prior to the effective date of the departure of such
Departing General Partner, to require its successor to purchase its General
Partner Interest (represented by General Partner Units) and its general partner
interest (or equivalent interest), if any, in the other Group Members and all of
its Incentive Distribution Rights (collectively, the “Combined
Interest”) in exchange for an amount in cash equal to the fair market
value of such Combined Interest, such amount to be determined and payable as of
the effective date of its departure. If the General Partner is removed by the
Unitholders under circumstances where Cause exists or if the General Partner
withdraws under circumstances where such withdrawal violates this Agreement, and
if a successor General Partner is elected in accordance with the terms of
Section 11.1 or Section 11.2 (or if the business of the Partnership is continued
pursuant to Section 12.2 and the successor General Partner is not the
former General Partner), such successor shall have the option, exercisable prior
to the effective date of the departure of such Departing General Partner (or, in
the event the business of the Partnership is continued, prior to the date the
business of the Partnership is continued), to purchase the Combined Interest for
such fair market value of such Combined Interest of the Departing General
Partner. In either event, the Departing General Partner shall be entitled to
receive all reimbursements due such Departing General Partner pursuant to
Section 7.4, including any employee-related liabilities (including severance
liabilities), incurred in connection with the termination of any employees
employed by the Departing General Partner or its Affiliates (other than any
Group Member) for the benefit of the Partnership or the other Group
Members.
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For
purposes of this Section 11.3(a), the fair market value of the Departing General
Partner’s Combined Interest shall be determined by agreement between the
Departing General Partner and its successor or, failing agreement within 30 days
after the effective date of such Departing General Partner’s departure, by an
independent investment banking firm or other independent expert selected by the
Departing General Partner and its successor, which, in turn, may rely on other
experts, and the determination of which shall be conclusive as to such matter.
If such parties cannot agree upon one independent investment banking firm or
other independent expert within 45 days after the effective date of such
departure, then the Departing General Partner shall designate an independent
investment banking firm or other independent expert, the Departing General
Partner’s successor shall designate an independent investment banking firm or
other independent expert, and such firms or experts shall mutually select a
third independent investment banking firm or independent expert, which third
independent investment banking firm or other independent expert shall determine
the fair market value of the Combined Interest of the Departing General Partner.
In making its determination, such third independent investment banking firm or
other independent expert may consider the then current trading price of Units on
any National Securities Exchange on which Units are then listed or admitted to
trading, the value of the Partnership’s assets, the rights and obligations of
the Departing General Partner and other factors it may deem
relevant.
(b) If the
Combined Interest is not purchased in the manner set forth in
Section 11.3(a), the Departing General Partner (or its transferee) shall
become a Limited Partner and its Combined Interest shall be converted into
Common Units pursuant to a valuation made by an investment banking firm or other
independent expert selected pursuant to Section 11.3(a), without reduction in
such Partnership Interest (but subject to proportionate dilution by reason of
the admission of its successor). Any successor General Partner shall indemnify
the Departing General Partner (or its transferee) as to all debts and
liabilities of the Partnership arising on or after the date on which the
Departing General Partner (or its transferee) becomes a Limited Partner. For
purposes of this Agreement, conversion of the Combined Interest of the Departing
General Partner to Common Units will be characterized as if the Departing
General Partner (or its transferee) contributed its Combined Interest to the
Partnership in exchange for the newly issued Common Units.
(c) If a
successor General Partner is elected in accordance with the terms of
Section 11.1 or Section 11.2 (or if the business of the Partnership is
continued pursuant to Section 12.2 and the successor General Partner is not
the former General Partner) and the option described in Section 11.3(a) is not
exercised by the party entitled to do so, the successor General Partner shall,
at the effective date of its admission to the Partnership, contribute to the
Partnership cash in the amount equal to the product of the (x) quotient obtained
by dividing (A) the Percentage Interest of the General Partner Interest of the
Departing General Partner by (B) a percentage equal to 100% less the Percentage
Interest of the General Partner Interest of the Departing General Partner and
(y) `the Net Agreed Value of the Partnership’s assets on such date. In such
event, such successor General Partner shall, subject to the following sentence,
be entitled to its Percentage Interest of all Partnership allocations and
distributions to which the Departing General Partner was entitled. In addition,
the successor General Partner shall cause this Agreement to be amended to
reflect that, from and after the date of such successor General Partner’s
admission, the successor General Partner’s interest in all Partnership
distributions and allocations shall be its Percentage Interest.
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Termination
of Subordination Period, Conversion of Subordinated Units and
Extinguishment of Cumulative Common Unit
Arrearages.
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Notwithstanding
any provision of this Agreement, if the General Partner is removed as general
partner of the Partnership under circumstances where Cause does not exist and
Units held by the General Partner and its Affiliates are not voted in favor of
such removal, (i) the Subordination Period will end and all Outstanding
Subordinated Units will immediately and automatically convert into Common Units
on a one-for-one basis, (ii) all Cumulative Common Unit Arrearages on the Common
Units will be extinguished and (iii) the General Partner will have the right to
convert its General Partner Interest (represented by General Partner Units) and
its Incentive Distribution Rights into Common Units or to receive cash in
exchange therefor in accordance with Section 11.3.
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Withdrawal
of Limited Partners.
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No
Limited Partner shall have any right to withdraw from the Partnership; provided, however, that when a
transferee of a Limited Partner’s Limited Partner Interest becomes a Record
Holder of the Limited Partner Interest so transferred, such transferring Limited
Partner shall cease to be a Limited Partner with respect to the Limited Partner
Interest so transferred.
ARTICLE
XII
DISSOLUTION
AND LIQUIDATION
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Dissolution.
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The
Partnership shall not be dissolved by the admission of additional Limited
Partners or by the admission of a successor General Partner in accordance with
the terms of this Agreement. Upon the removal or withdrawal of the General
Partner, if a successor General Partner is elected pursuant to Section 11.1 or
Section 11.2, the Partnership shall not be dissolved and such successor General
Partner shall continue the business of the Partnership. The Partnership shall
dissolve, and (subject to Section 12.2) its affairs shall be wound up,
upon:
(a) an Event
of Withdrawal of the General Partner as provided in Section 11.1(a) (other than
Section 11.1(a)(ii)), unless a successor is elected and an Opinion of Counsel is
received as provided in Section 11.1(b) or 11.2 and such successor is admitted
to the Partnership pursuant to Section 10.3;
(b) an
election to dissolve the Partnership by the General Partner that is approved by
the holders of a Unit Majority;
(c) the entry
of a decree of judicial dissolution of the Partnership pursuant to the
provisions of the Delaware Act; or
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(d) at any
time there are no Limited Partners, unless the Partnership is continued without
dissolution in accordance with the Delaware Act.
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Continuation
of the Business of the Partnership After
Dissolution.
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Upon (a)
dissolution of the Partnership following an Event of Withdrawal caused by the
withdrawal or removal of the General Partner as provided in Section 11.1(a)(i)
or (iii) and the failure of the Partners to select a successor to such Departing
General Partner pursuant to Section 11.1 or Section 11.2, then within 90
days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days thereafter,
the holders of a Unit Majority may elect to continue the business of the
Partnership on the same terms and conditions set forth in this Agreement by
appointing as a successor General Partner a Person approved by the holders of a
Unit Majority. Unless such an election is made within the applicable time period
as set forth above, the Partnership shall conduct only activities necessary to
wind up its affairs. If such an election is so made, then:
(i) the
Partnership shall continue without dissolution unless earlier dissolved in
accordance with this Article XII;
(ii) if the
successor General Partner is not the former General Partner, then the interest
of the former General Partner shall be treated in the manner provided in
Section 11.3; and
(iii) the
successor General Partner shall be admitted to the Partnership as General
Partner, effective as of the Event of Withdrawal, by agreeing in writing to be
bound by this Agreement; provided, that the right of
the holders of a Unit Majority to approve a successor General Partner and to
continue the business of the Partnership shall not exist and may not be
exercised unless the Partnership has received an Opinion of Counsel that (x) the
exercise of the right would not result in the loss of limited liability of any
Limited Partner and (y) neither the Partnership nor any Group Member would be
treated as an association taxable as a corporation or otherwise be taxable as an
entity for federal income tax purposes upon the exercise of such right to
continue (to the extent not already so treated or taxed).
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Liquidator.
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Upon
dissolution of the Partnership, unless the business of the Partnership is
continued pursuant to Section 12.2, the General Partner shall select one or more
Persons to act as Liquidator. The Liquidator (if other than the General Partner)
shall be entitled to receive such compensation for its services as may be
approved by holders of at least a majority of the Outstanding Common Units and
Subordinated Units voting as a single class. The Liquidator (if other than the
General Partner) shall agree not to resign at any time without 15 days’ prior
notice and may be removed at any time, with or without cause, by notice of
removal approved by holders of at least a majority of the Outstanding Common
Units, Class B Units (if any), and Subordinated Units voting as a single class.
Upon dissolution, removal or resignation of the Liquidator, a successor and
substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by holders of at least a majority of the Outstanding Common Units, Class B Units
(if any), and Subordinated Units voting as a single class. The right to approve
a successor or substitute Liquidator in the manner provided herein shall be
deemed to refer also to any such successor or substitute Liquidator approved in
the manner herein provided. Except as expressly provided in this Article XII,
the Liquidator approved in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the parties hereto,
all of the powers conferred upon the General Partner under the terms of this
Agreement (but subject to all of the applicable limitations, contractual and
otherwise, upon the exercise of such powers, other than the limitation on sale
set forth in Section 7.3) necessary or appropriate to carry out the duties and
functions of the Liquidator hereunder for and during the period of time required
to complete the winding up and liquidation of the Partnership as provided for
herein.
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Liquidation.
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The
Liquidator shall proceed to dispose of the assets of the Partnership, discharge
its liabilities, and otherwise wind up its affairs in such manner and over such
period as determined by the Liquidator, subject to Section 17-804 of the
Delaware Act and the following:
(a) The
assets may be disposed of by public or private sale or by distribution in kind
to one or more Partners on such terms as the Liquidator and such Partner or
Partners may agree. If any property is distributed in kind, the Partner
receiving the property shall be deemed for purposes of Section 12.4(c) to have
received cash equal to its fair market value; and contemporaneously therewith,
appropriate cash distributions must be made to the other Partners. The
Liquidator may defer liquidation or distribution of the Partnership’s assets for
a reasonable time if it determines that an immediate sale or distribution of all
or some of the Partnership’s assets would be impractical or would cause undue
loss to the Partners. The Liquidator may distribute the Partnership’s assets, in
whole or in part, in kind if it determines that a sale would be impractical or
would cause undue loss to the Partners.
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(b) Liabilities
of the Partnership include amounts owed to the Liquidator as compensation for
serving in such capacity (subject to the terms of Section 12.3) and amounts to
Partners otherwise than in respect of their distribution rights under Article
VI. With respect to any liability that is contingent, conditional or unmatured
or is otherwise not yet due and payable, the Liquidator shall either settle such
claim for such amount as it thinks appropriate or establish a reserve of cash or
other assets to provide for its payment. When paid, any unused portion of the
reserve shall be distributed as additional liquidation proceeds.
(c) All
property and all cash in excess of that required to discharge liabilities as
provided in Section 12.4(b) shall be distributed to the Partners in accordance
with, and to the extent of, the positive balances in their respective Capital
Accounts, as determined after taking into account all Capital Account
adjustments (other than those made by reason of distributions pursuant to this
Section 12.4(c)) for the taxable year of the Partnership during which the
liquidation of the Partnership occurs (with such date of occurrence being
determined pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), and
such distribution shall be made by the end of such taxable year (or, if later,
within 90 days after said date of such occurrence).
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Cancellation
of Certificate of Limited
Partnership.
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Upon the
completion of the distribution of Partnership cash and property as provided in
Section 12.4 in connection with the liquidation of the Partnership, the
Certificate of Limited Partnership and all qualifications of the Partnership as
a foreign limited partnership in jurisdictions other than the State of Delaware
shall be canceled and such other actions as may be necessary to terminate the
Partnership shall be taken.
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Return
of Contributions.
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The
General Partner shall not be personally liable for, and shall have no obligation
to contribute or loan any monies or property to the Partnership to enable it to
effectuate, the return of the Capital Contributions of the Limited Partners or
Unitholders, or any portion thereof, it being expressly understood that any such
return shall be made solely from Partnership assets.
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Waiver
of Partition.
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To the
maximum extent permitted by law, each Partner hereby waives any right to
partition of the Partnership property.
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Capital
Account Restoration.
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No
Limited Partner shall have any obligation to restore any negative balance in its
Capital Account upon liquidation of the Partnership. The General Partner shall
be obligated to restore any negative balance in its Capital Account upon
liquidation of its interest in the Partnership by the end of the taxable year of
the Partnership during which such liquidation occurs, or, if later, within 90
days after the date of such liquidation.
97
ARTICLE
XIII
AMENDMENT
OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
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Amendments
to be Adopted Solely by the General
Partner.
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Each
Partner agrees that the General Partner, without the approval of any Partner,
may amend any provision of this Agreement and execute, swear to, acknowledge,
deliver, file and record whatever documents may be required in connection
therewith, to reflect:
(a) a change
in the name of the Partnership, the location of the principal place of business
of the Partnership, the registered agent of the Partnership or the registered
office of the Partnership;
(b) admission,
substitution, withdrawal or removal of Partners in accordance with this
Agreement;
(c) a change
that the General Partner determines to be necessary or appropriate to qualify or
continue the qualification of the Partnership as a limited partnership or a
partnership in which the Limited Partners have limited liability under the laws
of any state or to ensure that the Group Members will not be treated as
associations taxable as corporations or otherwise taxed as entities for federal
income tax purposes;
(d) a change
that the General Partner determines, (i) does not adversely affect in any
material respect the Limited Partners (considered as a whole or any particular
class of Partnership Interests as compared to other classes of Partnership
Interests), (ii) to be necessary or appropriate to (A) satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order, ruling or
regulation of any federal or state agency or judicial authority or contained in
any federal or state statute (including the Delaware Act) or (B) facilitate the
trading of the Units (including the division of any class or classes of
Outstanding Units into different classes to facilitate uniformity of tax
consequences within such classes of Units) or comply with any rule, regulation,
guideline or requirement of any National Securities Exchange on which the Units
are or will be listed or admitted to trading, (iii) to be necessary or
appropriate in connection with action taken by the General Partner pursuant to
Section 5.9 or (iv) is required to effect the intent expressed in the
Registration Statement or the intent of the provisions of this Agreement or is
otherwise contemplated by this Agreement;
(e) a change
in the fiscal year or taxable year of the Partnership and any other changes that
the General Partner determines to be necessary or appropriate as a result of a
change in the fiscal year or taxable year of the Partnership including, if the
General Partner shall so determine, a change in the definition of “Quarter” and
the dates on which distributions are to be made by the Partnership;
(f) an
amendment that is necessary, in the Opinion of Counsel, to prevent the
Partnership, or the General Partner or its directors, officers, trustees or
agents from in any manner being subjected to the provisions of the Investment
Company Act of 1940, as amended, the Investment Advisers Act of 1940, as
amended, or “plan asset” regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, regardless of whether such are
substantially similar to plan asset regulations currently applied or proposed by
the United States Department of Labor;
98
(g) an
amendment that the General Partner determines to be necessary or appropriate in
connection with the authorization of issuance of any class or series of
Partnership Securities pursuant to Section 5.6, including any amendment that the
General Partner determines is necessary or appropriate in connection with (i)
the adjustments of the Minimum Quarterly Distribution, First Target
Distribution, Second Target Distribution and Third Target Distribution pursuant
to the provisions of Section 5.11, (ii) the implementation of the provisions of
Section 5.11 or (iii) any modifications to the Incentive Distribution
Rights made in connection with the issuance of Partnership Securities pursuant
to Section 5.6, provided that, with respect
to this clause (iii), the modifications to the Incentive Distribution Rights and
the related issuance of Partnership Securities have received Special
Approval;
(h) any
amendment expressly permitted in this Agreement to be made by the General
Partner acting alone;
(i) an
amendment effected, necessitated or contemplated by a Merger Agreement approved
in accordance with Section 14.3;
(j) an
amendment that the General Partner determines to be necessary or appropriate to
reflect and account for the formation by the Partnership of, or investment by
the Partnership in, any corporation, partnership, joint venture, limited
liability company or other entity, in connection with the conduct by the
Partnership of activities permitted by the terms of
Section 2.4;
(k) a merger,
conveyance or conversion pursuant to Section 14.3(d); or
(l) any other
amendments substantially similar to the foregoing.
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Amendment
Procedures.
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Except as
provided in Section 13.1 and Section 13.3, all amendments to this Agreement
shall be made in accordance with the requirements contained in this Section
13.2. Amendments to this Agreement may be proposed only by the General Partner;
provided, however, that to the fullest
extent permitted by law, the General Partner shall have no duty or obligation to
propose any amendment to this Agreement and may decline to do so free of any
fiduciary duty or obligation whatsoever to the Partnership or any Limited
Partner and, in declining to propose an amendment, to the fullest extent
permitted by law shall not be required to act in good faith or pursuant to any
other standard imposed by this Agreement, any Group Member Agreement, any other
agreement contemplated hereby or under the Delaware Act or any other law, rule
or regulation or at equity. A proposed amendment shall be effective upon its
approval by the General Partner and the holders of a Unit Majority, unless a
greater or different percentage is required under this Agreement or by Delaware
law. Each proposed amendment that requires the approval of the holders of a
specified percentage of Outstanding Units shall be set forth in a writing that
contains the text of the proposed amendment. If such an amendment is proposed,
the General Partner shall seek the written approval of the requisite percentage
of Outstanding Units or call a meeting of the Unitholders to consider and vote
on such proposed amendment. The General Partner shall notify all Record Holders
upon final adoption of any such proposed amendments.
99
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Amendment
Requirements.
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(a) Notwithstanding
the provisions of Section 13.1 and Section 13.2, no provision of this
Agreement that establishes a percentage of Outstanding Units (including Units
deemed owned by the General Partner) required to take any action shall be
amended, altered, changed, repealed or rescinded in any respect that would have
the effect of reducing such voting percentage unless such amendment is approved
by the written consent or the affirmative vote of holders of Outstanding Units
whose aggregate Outstanding Units constitute not less than the voting
requirement sought to be reduced.
(b) Notwithstanding
the provisions of Section 13.1 and Section 13.2, no amendment to this
Agreement may (i) enlarge the obligations of any Limited Partner without its
consent, unless such shall be deemed to have occurred as a result of an
amendment approved pursuant to Section 13.3(c), or (ii) enlarge the
obligations of, restrict in any way any action by or rights of, or reduce in any
way the amounts distributable, reimbursable or otherwise payable to, the General
Partner or any of its Affiliates without its consent, which consent may be given
or withheld at its option.
(c) Except as
provided in Section 14.3, and without limitation of the General Partner’s
authority to adopt amendments to this Agreement without the approval of any
Partners as contemplated in Section 13.1, any amendment that would have a
material adverse effect on the rights or preferences of any class of Partnership
Interests in relation to other classes of Partnership Interests must be approved
by the holders of not less than a majority of the Outstanding Partnership
Interests of the class affected.
(d) Notwithstanding
any other provision of this Agreement, except for amendments pursuant to Section
13.1 and except as otherwise provided by Section 14.3(b), no amendments shall
become effective without the approval of the holders of at least 90% of the
Outstanding Units voting as a single class unless the Partnership obtains an
Opinion of Counsel to the effect that such amendment will not affect the limited
liability of any Limited Partner under applicable partnership law of the state
under whose laws the Partnership is organized.
(e) Except as
provided in Section 13.1, this Section 13.3 shall only be amended with the
approval of the holders of at least 90% of the Outstanding Units.
100
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Special
Meetings.
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All acts
of Limited Partners to be taken pursuant to this Agreement shall be taken in the
manner provided in this Article XIII. Special meetings of the Limited Partners
may be called by the General Partner or by Limited Partners owning 20% or more
of the Outstanding Units of the class or classes for which a meeting is
proposed. Limited Partners shall call a special meeting by delivering to the
General Partner one or more requests in writing stating that the signing Limited
Partners wish to call a special meeting and indicating the general or specific
purposes for which the special meeting is to be called. Within 60 days after
receipt of such a call from Limited Partners or within such greater time as may
be reasonably necessary for the Partnership to comply with any statutes, rules,
regulations, listing agreements or similar requirements governing the holding of
a meeting or the solicitation of proxies for use at such a meeting, the General
Partner shall send a notice of the meeting to the Limited Partners either
directly or indirectly through the Transfer Agent. A meeting shall be held at a
time and place determined by the General Partner on a date not less than 10 days
nor more than 60 days after the time notice of the meeting is given as provided
in Section 16.1. Limited Partners shall not vote on matters that would cause the
Limited Partners to be deemed to be taking part in the management and control of
the business and affairs of the Partnership so as to jeopardize the Limited
Partners’ limited liability under the Delaware Act or the law of any other state
in which the Partnership is qualified to do business.
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Notice
of a Meeting.
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Notice of
a meeting called pursuant to Section 13.4 shall be given to the Record Holders
of the class or classes of Units for which a meeting is proposed in writing by
mail or other means of written communication in accordance with Section 16.1.
The notice shall be deemed to have been given at the time when deposited in the
mail or sent by other means of written communication.
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Record
Date.
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For
purposes of determining the Limited Partners entitled to notice of or to vote at
a meeting of the Limited Partners or to give approvals without a meeting as
provided in Section 13.11 the General Partner may set a Record Date, which
shall not be less than 10 nor more than 60 days before (a) the date of the
meeting (unless such requirement conflicts with any rule, regulation, guideline
or requirement of any National Securities Exchange on which the Units are listed
or admitted to trading, in which case the rule, regulation, guideline or
requirement of such National Securities Exchange shall govern) or (b) in the
event that approvals are sought without a meeting, the date by which Limited
Partners are requested in writing by the General Partner to give such approvals.
If the General Partner does not set a Record Date, then (a) the Record Date for
determining the Limited Partners entitled to notice of or to vote at a meeting
of the Limited Partners shall be the close of business on the day next preceding
the day on which notice is given, and (b) the Record Date for determining the
Limited Partners entitled to give approvals without a meeting shall be the date
the first written approval is deposited with the Partnership in care of the
General Partner in accordance with Section 13.11.
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Adjournment.
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When a
meeting is adjourned to another time or place, notice need not be given of the
adjourned meeting and a new Record Date need not be fixed, if the time and place
thereof are announced at the meeting at which the adjournment is taken, unless
such adjournment shall be for more than 45 days. At the adjourned meeting, the
Partnership may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than 45 days or if a new Record
Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given in accordance with this Article XIII.
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Waiver
of Notice; Approval of Meeting.
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The
transactions of any meeting of Limited Partners, however called and noticed, and
whenever held, shall be as valid as if it had occurred at a meeting duly held
after regular call and notice, if a quorum is present either in person or by
proxy. Attendance of a Limited Partner at a meeting shall constitute a waiver of
notice of the meeting, except when the Limited Partner attends the 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; and except that attendance at a meeting is not a waiver of any right
to disapprove the consideration of matters required to be included in the notice
of the meeting, but not so included, if the disapproval is expressly made at the
meeting.
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Quorum
and Voting.
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The
holders of a majority of the Outstanding Units of the class or classes for which
a meeting has been called (including Outstanding Units deemed owned by the
General Partner) represented in person or by proxy shall constitute a quorum at
a meeting of Limited Partners of such class or classes unless any such action by
the Limited Partners requires approval by holders of a greater percentage of
such Units, in which case the quorum shall be such greater percentage. At any
meeting of the Limited Partners duly called and held in accordance with this
Agreement at which a quorum is present, the act of Limited Partners holding
Outstanding Units that in the aggregate represent a majority of the Outstanding
Units entitled to vote and be present in person or by proxy at such meeting
shall be deemed to constitute the act of all Limited Partners, unless a greater
or different percentage is required with respect to such action under the
provisions of this Agreement, in which case the act of the Limited Partners
holding Outstanding Units that in the aggregate represent at least such greater
or different percentage shall be required. The Limited Partners present at a
duly called or held meeting at which a quorum is present may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Limited Partners to leave less than a quorum, if any action taken (other than
adjournment) is approved by the required percentage of Outstanding Units
specified in this Agreement (including Outstanding Units deemed owned by the
General Partner). In the absence of a quorum any meeting of Limited Partners may
be adjourned from time to time by the affirmative vote of holders of at least a
majority of the Outstanding Units entitled to vote at such meeting (including
Outstanding Units deemed owned by the General Partner) represented either in
person or by proxy, but no other business may be transacted, except as provided
in Section 13.7.
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Conduct
of a Meeting.
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The
General Partner shall have full power and authority concerning the manner of
conducting any meeting of the Limited Partners or solicitation of approvals in
writing, including the determination of Persons entitled to vote, the existence
of a quorum, the satisfaction of the requirements of Section 13.4, the conduct
of voting, the validity and effect of any proxies and the determination of any
controversies, votes or challenges arising in connection with or during the
meeting or voting. The General Partner shall designate a Person to serve as
chairman of any meeting and shall further designate a Person to take the minutes
of any meeting. All minutes shall be kept with the records of the Partnership
maintained by the General Partner. The General Partner may make such other
regulations consistent with applicable law and this Agreement as it may deem
advisable concerning the conduct of any meeting of the Limited Partners or
solicitation of approvals in writing, including regulations in regard to the
appointment of proxies, the appointment and duties of inspectors of votes and
approvals, the submission and examination of proxies and other evidence of the
right to vote, and the revocation of approvals in writing.
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Action
Without a Meeting.
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If
authorized by the General Partner, any action that may be taken at a meeting of
the Limited Partners may be taken without a meeting if an approval in writing
setting forth the action so taken is signed by Limited Partners owning not less
than the minimum percentage of the Outstanding Units (including Units deemed
owned by the General Partner) that would be necessary to authorize or take such
action at a meeting at which all the Limited Partners were present and voted
(unless such provision conflicts with any rule, regulation, guideline or
requirement of any National Securities Exchange on which the Units are listed or
admitted to trading, in which case the rule, regulation, guideline or
requirement of such National Securities Exchange shall govern). Prompt notice of
the taking of action without a meeting shall be given to the Limited Partners
who have not approved in writing. The General Partner may specify that any
written ballot submitted to Limited Partners for the purpose of taking any
action without a meeting shall be returned to the Partnership within the time
period, which shall be not less than 20 days, specified by the General Partner.
If a ballot returned to the Partnership does not vote all of the Units held by
the Limited Partners, the Partnership shall be deemed to have failed to receive
a ballot for the Units that were not voted. If approval of the taking of any
action by the Limited Partners is solicited by any Person other than by or on
behalf of the General Partner, the written approvals shall have no force and
effect unless and until (a) they are deposited with the Partnership in care of
the General Partner, (b) approvals sufficient to take the action proposed are
dated as of a date not more than 90 days prior to the date sufficient approvals
are deposited with the Partnership and (c) an Opinion of Counsel is delivered to
the General Partner to the effect that the exercise of such right and the action
proposed to be taken with respect to any particular matter (i) will not cause
the Limited Partners to be deemed to be taking part in the management and
control of the business and affairs of the Partnership so as to jeopardize the
Limited Partners’ limited liability, and (ii) is otherwise permissible under the
state statutes then governing the rights, duties and liabilities of the
Partnership and the Partners.
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Right
to Vote and Related Matters.
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(a) Only
those Record Holders of the Units on the Record Date set pursuant to Section
13.6 (and also subject to the limitations contained in the definition of
“Outstanding”) shall be entitled to notice of, and to vote at, a meeting of
Limited Partners or to act with respect to matters as to which the holders of
the Outstanding Units have the right to vote or to act. All references in this
Agreement to votes of, or other acts that may be taken by, the Outstanding Units
shall be deemed to be references to the votes or acts of the Record Holders of
such Outstanding Units.
(b) With
respect to Units that are held for a Person’s account by another Person (such as
a broker, dealer, bank, trust company or clearing corporation, or an agent of
any of the foregoing), in whose name such Units are registered, such other
Person shall, in exercising the voting rights in respect of such Units on any
matter, and unless the arrangement between such Persons provides otherwise, vote
such Units in favor of, and at the direction of, the Person who is the
beneficial owner, and the Partnership shall be entitled to assume it is so
acting without further inquiry. The provisions of this Section 13.12(b) (as well
as all other provisions of this Agreement) are subject to the provisions of
Section 4.3.
ARTICLE
XIV
MERGER,
CONSOLIDATION OR CONVERSION
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Authority.
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The
Partnership may merge or consolidate with or into one or more corporations,
limited liability companies, statutory trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
partnership (whether general or limited (including a limited liability
partnership)) or convert into any such entity, whether such entity is formed
under the laws of the State of Delaware or any other state of the United States
of America, pursuant to a written plan of merger or consolidation (“Merger
Agreement”) or a written plan of conversion (“Plan of
Conversion”), as the case may be, in accordance with this Article
XIV.
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Procedure
for Merger, Consolidation or
Conversion.
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(a) Merger,
consolidation or conversion of the Partnership pursuant to this Article XIV
requires the prior consent of the General Partner, provided, however, that, to
the fullest extent permitted by law, the General Partner shall have no duty or
obligation to consent to any merger, consolidation or conversion of the
Partnership and may decline to do so free of any fiduciary duty or obligation
whatsoever to the Partnership, any Limited Partner and, in declining to consent
to a merger, consolidation or conversion, shall not be required to act in good
faith or pursuant to any other standard imposed by this Agreement, any other
agreement contemplated hereby or under the Act or any other law, rule or
regulation or at equity.
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(b) If the
General Partner shall determine to consent to the merger or consolidation, the
General Partner shall approve the Merger Agreement, which shall set
forth:
(i) name and
state of domicile of each of the business entities proposing to merge or
consolidate;
(ii) the name
and state of domicile of the business entity that is to survive the proposed
merger or consolidation (the “Surviving
Business Entity”);
(iii) the terms
and conditions of the proposed merger or consolidation;
(iv) the
manner and basis of exchanging or converting the equity securities of each
constituent business entity for, or into, cash, property or interests, rights,
securities or obligations of the Surviving Business Entity; and (i) if any
general or limited partner interests, securities or rights of any constituent
business entity are not to be exchanged or converted solely for, or into, cash,
property or general or limited partner interests, rights, securities or
obligations of the Surviving Business Entity, the cash, property or interests,
rights, securities or obligations of any general or limited partnership,
corporation, trust, limited liability company, unincorporated business or other
entity (other than the Surviving Business Entity) which the holders of such
general or limited partner interests, securities or rights are to receive in
exchange for, or upon conversion of their interests, securities or rights, and
(ii) in the case of securities represented by certificates, upon the surrender
of such certificates, which cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business Entity or
any general or limited partnership, corporation, trust, limited liability
company, unincorporated business or other entity (other than the Surviving
Business Entity), or evidences thereof, are to be delivered;
(v) a
statement of any changes in the constituent documents or the adoption of new
constituent documents (the articles or certificate of incorporation, articles of
trust, declaration of trust, certificate or agreement of limited partnership,
operating agreement or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or
consolidation;
(vi) the
effective time of the merger, which may be the date of the filing of the
certificate of merger pursuant to Section 14.4 or a later date specified in or
determinable in accordance with the Merger Agreement (provided, that if the
effective time of the merger is to be later than the date of the filing of such
certificate of merger, the effective time shall be fixed at a date or time
certain at or prior to the time of the filing of such certificate of merger and
stated therein); and
(vii) such
other provisions with respect to the proposed merger or consolidation that the
General Partner determines to be necessary or appropriate.
105
(c) If the
General Partner shall determine to consent to the conversion, the General
Partner shall approve the Plan of Conversion, which shall set
forth:
(i) the name
of the converting entity and the converted entity;
(ii) a
statement that the Partnership is continuing its existence in the organizational
form of the converted entity;
(iii) a
statement as to the type of entity that the converted entity is to be and the
state or country under the laws of which the converted entity is to be
incorporated, formed or organized;
(iv) the
manner and basis of exchanging or converting the equity securities of each
constituent business entity for, or into, cash, property or interests, rights,
securities or obligations of the converted entity;
(v) in an
attachment or exhibit, the certificate of limited partnership of the
Partnership; and
(vi) in an
attachment or exhibit, the certificate of limited partnership, articles of
incorporation, or other organizational documents of the converted
entity;
(vii) the
effective time of the conversion, which may be the date of the filing of the
articles of conversion or a later date specified in or determinable in
accordance with the Plan of Conversion (provided, that if the
effective time of the conversion is to be later than the date of the filing of
such articles of conversion, the effective time shall be fixed at a date or time
certain at or prior to the time of the filing of such articles of conversion and
stated therein); and
(viii) such
other provisions with respect to the proposed conversion that the General
Partner determines to be necessary or appropriate.
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Approval
by Limited Partners.
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(a) Except as
provided in Section 14.3(d), the General Partner, upon its approval of the
Merger Agreement or the Plan of Conversion, as the case may be, shall direct
that the Merger Agreement or the Plan of Conversion, as applicable, be submitted
to a vote of Limited Partners, whether at a special meeting or by written
consent, in either case in accordance with the requirements of Article XIII. A
copy or a summary of the Merger Agreement or the Plan of Conversion, as the case
may be, shall be included in or enclosed with the notice of a special meeting or
the written consent.
106
(b) Except as
provided in Section 14.3(d), the Merger Agreement or Plan of Conversion, as the
case may be, shall be approved upon receiving the affirmative vote or consent of
the holders of a Unit Majority.
(c) Except as
provided in Section 14.3(d), after such approval by vote or consent of the
Limited Partners, and at any time prior to the filing of the certificate of
merger or articles of conversion pursuant to Section 14.4, the merger,
consolidation or conversion may be abandoned pursuant to provisions therefor, if
any, set forth in the Merger Agreement or Plan of Conversion, as the case may
be.
(d) Notwithstanding
anything else contained in this Article XIV or in this Agreement, the General
Partner is permitted, without Limited Partner approval, to convert the
Partnership or any Group Member into a new limited liability entity, to merge
the Partnership or any Group Member into, or convey all of the Partnership’s
assets to, another limited liability entity that shall be newly formed and shall
have no assets, liabilities or operations at the time of such conversion, merger
or conveyance other than those it receives from the Partnership or other Group
Member if (i) the General Partner has received an Opinion of Counsel that the
conversion, merger or conveyance, as the case may be, would not result in the
loss of the limited liability of any Limited Partner or cause the Partnership to
be treated as an association taxable as a corporation or otherwise to be taxed
as an entity for federal income tax purposes (to the extent not previously
treated as such), (ii) the sole purpose of such conversion, merger, or
conveyance is to effect a mere change in the legal form of the Partnership into
another limited liability entity and (iii) the governing instruments of the new
entity provide the Limited Partners and the General Partner with the same rights
and obligations as are herein contained.
(e) Additionally,
notwithstanding anything else contained in this Article XIV or in this
Agreement, the General Partner is permitted, without Limited Partner approval,
to merge or consolidate the Partnership with or into another entity if (A) the
General Partner has received an Opinion of Counsel that the merger or
consolidation, as the case may be, would not result in the loss of the limited
liability of any Limited Partner or cause the Partnership to be treated as an
association taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes (to the extent not previously treated as such), (B)
the merger or consolidation would not result in an amendment to the Partnership
Agreement, other than any amendments that could be adopted pursuant to Section
13.1, (C) the Partnership is the Surviving Business Entity in such merger or
consolidation, (D) each Unit outstanding immediately prior to the effective date
of the merger or consolidation is to be an identical Unit of the Partnership
after the effective date of the merger or consolidation, and (E) the number of
Partnership Securities to be issued by the Partnership in such merger or
consolidation do not exceed 20% of the Partnership Securities Outstanding
immediately prior to the effective date of such merger or
consolidation.
(f) Pursuant
to Section 17-211(g) of the Delaware Act, an agreement of merger or
consolidation approved in accordance with this Article XIV may (a) effect any
amendment to this Agreement or (b) effect the adoption of a new partnership
agreement for the Partnership if it is the Surviving Business Entity. Any such
amendment or adoption made pursuant to this Section 14.3 shall be effective at
the effective time or date of the merger or consolidation.
107
|
Certificate
of Merger or Articles of
Conversion.
|
Upon the
required approval by the General Partner and the Unitholders of a Merger
Agreement or the Plan of Conversion, as the case may be, a certificate of merger
or articles of conversion, as applicable, shall be executed and filed with the
Secretary of State of the State of Delaware in conformity with the requirements
of the Delaware Act.
|
Effect
of Merger, Consolidation or
Conversion.
|
(a) At the
effective time of the certificate of merger:
(i) all of
the rights, privileges and powers of each of the business entities that has
merged or consolidated, and all property, real, personal and mixed, and all
debts due to any of those business entities and all other things and causes of
action belonging to each of those business entities, shall be vested in the
Surviving Business Entity and after the merger or consolidation shall be the
property of the Surviving Business Entity to the extent they were of each
constituent business entity;
(ii) the title
to any real property vested by deed or otherwise in any of those constituent
business entities shall not revert and is not in any way impaired because of the
merger or consolidation;
(iii) all
rights of creditors and all liens on or security interests in property of any of
those constituent business entities shall be preserved unimpaired;
and
(iv) all
debts, liabilities and duties of those constituent business entities shall
attach to the Surviving Business Entity and may be enforced against it to the
same extent as if the debts, liabilities and duties had been incurred or
contracted by it.
(b) At the
effective time of the articles of conversion:
(i) the
Partnership shall continue to exist, without interruption, but in the
organizational form of the converted entity rather than in its prior
organizational form;
(ii) all
rights, title, and interests to all real estate and other property owned by the
Partnership shall continue to be owned by the converted entity in its new
organizational form without reversion or impairment, without further act or
deed, and without any transfer or assignment having occurred, but subject to any
existing liens or other encumbrances thereon;
(iii) all
liabilities and obligations of the Partnership shall continue to be liabilities
and obligations of the converted entity in its new organizational form without
impairment or diminution by reason of the conversion;
108
(iv) all
rights of creditors or other parties with respect to or against the prior
interest holders or other owners of the Partnership in their capacities as such
in existence as of the effective time of the conversion will continue in
existence as to those liabilities and obligations and may be pursued by such
creditors and obligees as if the conversion did not occur;
(v) a
proceeding pending by or against the Partnership or by or against any of
Partners in their capacities as such may be continued by or against the
converted entity in its new organizational form and by or against the prior
partners without any need for substitution of parties; and
(vi) the
Partnership Units that are to be converted into partnership interests, shares,
evidences of ownership, or other securities in the converted entity as provided
in the plan of conversion shall be so converted, and Partners shall be entitled
only to the rights provided in the Plan of Conversion.
109
ARTICLE
XV
RIGHT
TO ACQUIRE LIMITED PARTNER INTERESTS
|
Right
to Acquire Limited Partner
Interests.
|
(a) Notwithstanding
any other provision of this Agreement, if at any time the General Partner and
its Affiliates hold more than 80% of the total Limited Partner Interests of any
class then Outstanding, the General Partner shall then have the right, which
right it may assign and transfer in whole or in part to the Partnership or any
Affiliate of the General Partner, exercisable at its option, to purchase all,
but not less than all, of such Limited Partner Interests of such class then
Outstanding held by Persons other than the General Partner and its Affiliates,
at the greater of (x) the Current Market Price as of the date three days prior
to the date that the notice described in Section 15.1(b) is mailed and (y) the
highest price paid by the General Partner or any of its Affiliates for any such
Limited Partner Interest of such class purchased during the 90-day period
preceding the date that the notice described in Section 15.1(b) is mailed. As
used in this Agreement, (i) “Current Market
Price” as of any date of any class of Limited Partner Interests means the
average of the daily Closing Prices (as hereinafter defined) per Limited Partner
Interest of such class for the 20 consecutive Trading Days (as hereinafter
defined) immediately prior to such date; (ii) “Closing
Price” for any day means the last sale price on such day, regular way, or
in case no such sale takes place on such day, the average of the closing bid and
asked prices on such day, regular way, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
National Securities Exchange (other than the Nasdaq Stock Market) on which such
Limited Partner Interests are listed or admitted to trading or, if such Limited
Partner Interests of such class are not listed or admitted to trading on any
National Securities Exchange (other than the Nasdaq Stock Market), the last
quoted price on such day or, if not so quoted, the average of the high bid and
low asked prices on such day in the over-the-counter market, as reported by the
Nasdaq Stock Market or such other system then in use, or, if on any such day
such Limited Partner Interests of such class are not quoted by any such
organization, the average of the closing bid and asked prices on such day as
furnished by a professional market maker making a market in such Limited Partner
Interests of such class selected by the General Partner, or if on any such day
no market maker is making a market in such Limited Partner Interests of such
class, the fair value of such Limited Partner Interests on such day as
determined by the General Partner; and (iii) “Trading
Day” means a day on which the principal National Securities Exchange on
which such Limited Partner Interests of any class are listed or admitted for
trading is open for the transaction of business or, if Limited Partner Interests
of a class are not listed or admitted for trading on any National Securities
Exchange, a day on which banking institutions in New York City generally are
open.
110
(b) If the
General Partner, any Affiliate of the General Partner or the Partnership elects
to exercise the right to purchase Limited Partner Interests granted pursuant to
Section 15.1(a), the General Partner shall deliver to the Transfer Agent notice
of such election to purchase (the “Notice of
Election to Purchase”) and shall cause the Transfer Agent to mail a copy
of such Notice of Election to Purchase to the Record Holders of Limited Partner
Interests of such class (as of a Record Date selected by the General Partner) at
least 10, but not more than 60, days prior to the Purchase Date. Such Notice of
Election to Purchase shall also be published for a period of at least three
consecutive days in at least two daily newspapers of general circulation printed
in the English language and published in the Borough of Manhattan, New York. The
Notice of Election to Purchase shall specify the Purchase Date and the price
(determined in accordance with Section 15.1(a)) at which Limited Partner
Interests will be purchased and state that the General Partner, its Affiliate or
the Partnership, as the case may be, elects to purchase such Limited Partner
Interests, upon surrender of Certificates representing such Limited Partner
Interests in exchange for payment, at such office or offices of the Transfer
Agent as the Transfer Agent may specify, or as may be required by any National
Securities Exchange on which such Limited Partner Interests are listed. Any such
Notice of Election to Purchase mailed to a Record Holder of Limited Partner
Interests at his address as reflected in the records of the Transfer Agent shall
be conclusively presumed to have been given regardless of whether the owner
receives such notice. On or prior to the Purchase Date, the General Partner, its
Affiliate or the Partnership, as the case may be, shall deposit with the
Transfer Agent cash in an amount sufficient to pay the aggregate purchase price
of all of such Limited Partner Interests to be purchased in accordance with this
Section 15.1. If the Notice of Election to Purchase shall have been duly given
as aforesaid at least 10 days prior to the Purchase Date, and if on or prior to
the Purchase Date the deposit described in the preceding sentence has been made
for the benefit of the holders of Limited Partner Interests subject to purchase
as provided herein, then from and after the Purchase Date, notwithstanding that
any Certificate shall not have been surrendered for purchase, all rights of the
holders of such Limited Partner Interests (including any rights pursuant to
Article IV, Article V, Article VI, and Article XII) shall thereupon cease,
except the right to receive the purchase price (determined in accordance with
Section 15.1(a)) for Limited Partner Interests therefor, without interest, upon
surrender to the Transfer Agent of the Certificates representing such Limited
Partner Interests, and such Limited Partner Interests shall thereupon be deemed
to be transferred to the General Partner, its Affiliate or the Partnership, as
the case may be, on the record books of the Transfer Agent and the Partnership,
and the General Partner or any Affiliate of the General Partner, or the
Partnership, as the case may be, shall be deemed to be the owner of all such
Limited Partner Interests from and after the Purchase Date and shall have all
rights as the owner of such Limited Partner Interests (including all rights as
owner of such Limited Partner Interests pursuant to Article IV, Article V,
Article VI and Article XII).
(c) At any
time from and after the Purchase Date, a holder of an Outstanding Limited
Partner Interest subject to purchase as provided in this Section 15.1 may
surrender his Certificate evidencing such Limited Partner Interest to the
Transfer Agent in exchange for payment of the amount described in Section
15.1(a), therefor, without interest thereon.
111
ARTICLE
XVI
GENERAL
PROVISIONS
|
Addresses
and Notices; Written
Communications.
|
(a) Any
notice, demand, request, report or proxy materials required or permitted to be
given or made to a Partner under this Agreement shall be in writing and shall be
deemed given or made when delivered in person or when sent by first class United
States mail or by other means of written communication to the Partner at the
address described below. Any notice, payment or report to be given or made to a
Partner hereunder shall be deemed conclusively to have been given or made, and
the obligation to give such notice or report or to make such payment shall be
deemed conclusively to have been fully satisfied, upon sending of such notice,
payment or report to the Record Holder of such Partnership Securities at his
address as shown on the records of the Transfer Agent or as otherwise shown on
the records of the Partnership, regardless of any claim of any Person who may
have an interest in such Partnership Securities by reason of any assignment or
otherwise. An affidavit or certificate of making of any notice, payment or
report in accordance with the provisions of this Section 16.1 executed by the
General Partner, the Transfer Agent or the mailing organization shall be prima
facie evidence of the giving or making of such notice, payment or report. If any
notice, payment or report addressed to a Record Holder at the address of such
Record Holder appearing on the books and records of the Transfer Agent or the
Partnership is returned by the United States Postal Service marked to indicate
that the United States Postal Service is unable to deliver it, such notice,
payment or report and any subsequent notices, payments and reports shall be
deemed to have been duly given or made without further mailing (until such time
as such Record Holder or another Person notifies the Transfer Agent or the
Partnership of a change in his address) if they are available for the Partner at
the principal office of the Partnership for a period of one year from the date
of the giving or making of such notice, payment or report to the other Partners.
Any notice to the Partnership shall be deemed given if received by the General
Partner at the principal office of the Partnership designated pursuant to
Section 2.3. The General Partner may rely and shall be protected in relying on
any notice or other document from a Partner or other Person if believed by it to
be genuine.
(b) The terms
“in writing”, “written communications,” “written notice” and words of similar
import shall be deemed satisfied under this Agreement by use of e-mail and other
forms of electronic communication.
|
Further
Action.
|
The
parties shall execute and deliver all documents, provide all information and
take or refrain from taking action as may be necessary or appropriate to achieve
the purposes of this Agreement.
112
|
Binding
Effect.
|
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their heirs, executors, administrators, successors, legal representatives
and permitted assigns.
|
Integration.
|
This
Agreement constitutes the entire agreement among the parties hereto pertaining
to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
|
Creditors.
|
None of
the provisions of this Agreement shall be for the benefit of, or shall be
enforceable by, any creditor of the Partnership.
|
Waiver.
|
No
failure by any party to insist upon the strict performance of any covenant,
duty, agreement or condition of this Agreement or to exercise any right or
remedy consequent upon a breach thereof shall constitute waiver of any such
breach of any other covenant, duty, agreement or condition.
|
Section 16.7
|
Third-Party
Beneficiaries.
|
Each
Partner agrees that any Indemnitee shall be entitled to assert rights and
remedies hereunder as a third-party beneficiary hereto with respect to those
provisions of this Agreement affording a right, benefit or privilege to such
Indemnitee.
|
Counterparts.
|
This
Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto or, in the case of a Person acquiring a Limited Partner
Interest, pursuant to Section 10.1(a) without execution hereto.
|
Applicable
Law.
|
This
Agreement shall be construed in accordance with and governed by the laws of the
State of Delaware, without regard to the principles of conflicts of
law.
113
|
Invalidity
of Provisions.
|
If any
provision of this Agreement is or becomes invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby.
|
Consent
of Partners.
|
Each
Partner hereby expressly consents and agrees that, whenever in this Agreement it
is specified that an action may be taken upon the affirmative vote or consent of
less than all of the Partners, such action may be so taken upon the concurrence
of less than all of the Partners and each Partner shall be bound by the results
of such action.
|
Facsimile
Signatures.
|
The use
of facsimile signatures affixed in the name and on behalf of the transfer agent
and registrar of the Partnership on certificates representing Common Units is
expressly permitted by this Agreement.
[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK.]
114
IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first written
above.
|
|
GENERAL
PARTNER:
|
BLUEKNIGHT
ENERGY PARTNERS G.P., L.L.C.
By:/s/ Xxxx X.
Xxxxxxxxx
Name: Xxxx
X. Xxxxxxxxx
Title: Chief
Financial Officer
|
|
LIMITED
PARTNERS:
|
All
Limited Partners now and hereafter admitted as Limited Partners of the
Partnership, pursuant to powers of attorney now and hereafter executed in favor
of, and granted and delivered to the General Partner.
BLUEKNIGHT
ENERGY PARTNERS G.P., L.L.C.
General
Partner, as attorney-in-fact for the Limited Partners pursuant to the Powers of
Attorney granted pursuant to Section 2.6.
By:/s/ Xxxx X.
Xxxxxxxxx
Name: Xxxx
X. Xxxxxxxxx
Title: Chief
Financial Officer
EXHIBIT
A
to
the First Amended and Restated
Agreement
of Limited Partnership of
Blueknight
Energy Partners, L.P.
Certificate
Evidencing Common Units
Representing
Limited Partner Interests in
Blueknight
Energy Partners, L.P.
|
No.
________
|
__________ Common Units
|
In
accordance with Section 4.1 of the Second Amended and Restated Agreement of
Limited Partnership of Blueknight Energy Partners, L.P., as amended,
supplemented or restated from time to time (the “Partnership
Agreement”), Blueknight Energy Partners, L.P., a Delaware limited
partnership (the “Partnership”),
hereby certifies that (the “Holder”)
is the registered owner of Common Units representing limited partner interests
in the Partnership (the “Common
Units”) transferable on the books of the Partnership, in person or by
duly authorized attorney, upon surrender of this Certificate properly endorsed.
The rights, preferences and limitations of the Common Units are set forth in,
and this Certificate and the Common Units represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Partnership
Agreement. Copies of the Partnership Agreement are on file at, and will be
furnished without charge on delivery of written request to the Partnership at,
the principal office of the Partnership located at 0000 Xxxxx Xxxx Xxxxxx, Xxxxx
000, Xxxxx, Xxxxxxxx 00000. Capitalized terms used herein but not defined shall
have the meanings given them in the Partnership Agreement.
THE
HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF BLUEKNIGHT ENERGY
PARTNERS, L.P. THAT THIS SECURITY MAY NOT BE SOLD, OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED IF SUCH TRANSFER WOULD (A) VIOLATE THE THEN APPLICABLE
FEDERAL OR STATE SECURITIES LAWS OR RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL
AUTHORITY WITH JURISDICTION OVER SUCH TRANSFER, (B) TERMINATE THE EXISTENCE OR
QUALIFICATION OF BLUEKNIGHT ENERGY PARTNERS, L.P. UNDER THE LAWS OF THE STATE OF
DELAWARE, OR (C) CAUSE BLUEKNIGHT ENERGY PARTNERS, L.P. TO BE TREATED AS AN
ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY FOR
FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED).
BLUEKNIGHT ENERGY PARTNERS, G.P., L.L.C., THE GENERAL PARTNER OF BLUEKNIGHT
ENERGY PARTNERS, L.P., MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE TRANSFER OF
THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH RESTRICTIONS ARE
NECESSARY TO AVOID A SIGNIFICANT RISK OF BLUEKNIGHT ENERGY PARTNERS, L.P.
BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE AS AN ENTITY FOR
FEDERAL INCOME TAX PURPOSES. THE RESTRICTIONS SET FORTH ABOVE SHALL NOT PRECLUDE
THE SETTLEMENT OF ANY TRANSACTIONS INVOLVING THIS SECURITY ENTERED INTO THROUGH
THE FACILITIES OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS
LISTED OR ADMITTED TO TRADING.
A-1
The
Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement,
(ii) represented and warranted that the Holder has all right, power and
authority and, if an individual, the capacity necessary to enter into the
Partnership Agreement, (iii) granted the powers of attorney provided for in
the Partnership Agreement and (iv) made the waivers and given the consents
and approvals contained in the Partnership Agreement.
This
Certificate shall not be valid for any purpose unless it has been countersigned
and registered by the Transfer Agent and Registrar.
|
|
Dated:_______________
|
Blueknight
Energy Partners, L.P.
|
|
|
By:
|
Blueknight
Energy Partners G.P., L.L.C.
|
|
|
By:
|
________________________________
|
|
|
|
President
and Chief Executive Officer
|
|
|
By:
|
________________________________
|
|
|
|
Secretary
|
|
|
Countersigned
and Registered by:
|
|
|
American
Stock Transfer & Trust
Company
|
|
|
as
Transfer Agent and
Registrar
|
|
By:
|
________________________________ |
|
|
Authorized
Signature
|
A-2
[Reverse of Certificate]
ABBREVIATIONS
The
following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as follows according to applicable laws or
regulations:
|
TEN
COM -
|
as
tenants in common
|
UNIF
GIFT/TRANSFERS MIN ACT
|
|
TEN
ENT -
|
as
tenants by the entireties
|
__________
Custodian _________
|
|
(Cust) (Minor)
|
||
|
JT
TEN -
|
as
joint tenants with right of survivorship and not as tenants in
common
|
under
Uniform Gifts/Transfers to CD Minors Act
(State)
|
Additional
abbreviations, though not in the above list, may also be used.
A-3
ASSIGNMENT
OF COMMON UNITS OF
BLUEKNIGHT
ENERGY PARTNERS, L.P.
FOR VALUE
RECEIVED, __________ hereby assigns, conveys, sells and transfers
unto
| _________________________________________ | |
| _________________________________________ | |
|
_________________________________________
|
_________________________________________ |
|
(Please
print or typewrite name and address of assignee)
|
(Please
insert Social Security or other identifying number of
assignee)
|
__________
Common Units representing limited partner interests evidenced by this
Certificate, subject to the Partnership Agreement, and does hereby irrevocably
constitute and appoint __________ as its attorney-in-fact with full power of
substitution to transfer the same on the books of Blueknight Energy Partners,
L.P.
|
Date: ____________
|
NOTE:
|
The
signature to any endorsement hereon must correspond with the name as
written upon the face of this Certificate in every particular, without
alteration, enlargement or change.
|
|
THE
SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15
______________________________________
|
______________________
(Signature)
______________________
(Signature)
|
No
transfer of the Common Units evidenced hereby will be registered on the books of
the Partnership, unless the Certificate evidencing the Common Units to be
transferred is surrendered for registration or transfer.
A-4
