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DRAFT 12/4/96
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CORNERSTONE PROPANE, L.P.
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE II
ORGANIZATION
SECTION 2.1 FORMATION. . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 2.2 NAME . . . . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 2.3 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE;
OTHER OFFICES. . . . . . . . . . . . . . . . . . . . . . .12
SECTION 2.4 PURPOSE AND BUSINESS . . . . . . . . . . . . . . . . . . .12
SECTION 2.5 POWERS . . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 2.6 POWER OF ATTORNEY. . . . . . . . . . . . . . . . . . . . .13
SECTION 2.7 TERM . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 2.8 TITLE TO PARTNERSHIP ASSETS. . . . . . . . . . . . . . . .15
ARTICLE III
RIGHTS OF LIMITED PARTNERS
SECTION 3.1 LIMITATION OF LIABILITY. . . . . . . . . . . . . . . . . .15
SECTION 3.2 MANAGEMENT OF BUSINESS . . . . . . . . . . . . . . . . . .15
SECTION 3.3 OUTSIDE ACTIVITIES OF THE LIMITED PARTNERS . . . . . . . .16
SECTION 3.4 RIGHTS OF LIMITED PARTNERS . . . . . . . . . . . . . . . .16
ARTICLE IV
TRANSFER OF PARTNERSHIP INTERESTS
SECTION 4.1 TRANSFER GENERALLY . . . . . . . . . . . . . . . . . . . .17
SECTION 4.2 TRANSFER OF A GENERAL PARTNER'S PARTNERSHIP INTEREST . . .17
SECTION 4.3 TRANSFER OF THE LIMITED PARTNERS' PARTNERSHIP INTERESTS. .18
SECTION 4.4 RESTRICTIONS ON TRANSFERS. . . . . . . . . . . . . . . . .18
ARTICLE V
CONTRIBUTIONS AND INITIAL TRANSFERS
SECTION 5.1 INITIAL CONTRIBUTIONS. . . . . . . . . . . . . . . . . . .18
SECTION 5.2 CONTRIBUTIONS AND INITIAL TRANSFERS BY THE GENERAL
PARTNERS AND THEIR AFFILIATES. . . . . . . . . . . . . . .19
SECTION 5.3 ADDITIONAL CAPITAL CONTRIBUTIONS . . . . . . . . . . . . .19
SECTION 5.4 INTEREST AND WITHDRAWAL. . . . . . . . . . . . . . . . . .19
SECTION 5.5 CAPITAL ACCOUNTS . . . . . . . . . . . . . . . . . . . . .20
SECTION 5.6 LOANS FROM PARTNERS. . . . . . . . . . . . . . . . . . . .23
SECTION 5.7 LIMITED PREEMPTIVE RIGHTS. . . . . . . . . . . . . . . . .23
SECTION 5.8 FULLY PAID AND NON-ASSESSABLE NATURE OF LIMITED PARTNER
PARTNERSHIP INTERESTS. . . . . . . . . . . . . . . . . . .23
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES . . . . . . . . .24
SECTION 6.2 ALLOCATIONS FOR TAX PURPOSES . . . . . . . . . . . . . . .28
SECTION 6.3 SPECIAL DISTRIBUTION . . . . . . . . . . . . . . . . . . .30
SECTION 6.4 GENERAL DISTRIBUTIONS. . . . . . . . . . . . . . . . . . .30
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP . . . . . . . . . . . .33
SECTION 7.3 RESTRICTIONS ON GENERAL PARTNERS' AUTHORITY. . . . . . . .33
SECTION 7.4 REIMBURSEMENT OF THE MANAGING GENERAL PARTNER. . . . . . .34
SECTION 7.5 OUTSIDE ACTIVITIES . . . . . . . . . . . . . . . . . . . .35
SECTION 7.6 LOANS FROM THE GENERAL PARTNERS; LOANS OR CONTRIBUTIONS
FROM THE PARTNERSHIP; CONTRACTS WITH AFFILIATES; CERTAIN
RESTRICTIONS ON THE GENERAL PARTNERS . . . . . . . . . . .36
SECTION 7.7 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . .38
SECTION 7.8 LIABILITY OF INDEMNITEES . . . . . . . . . . . . . . . . .40
SECTION 7.9 RESOLUTION OF CONFLICTS OF INTEREST. . . . . . . . . . . .40
SECTION 7.10 OTHER MATTERS CONCERNING THE MANAGING GENERAL PARTNER. . .42
SECTION 7.11 RELIANCE BY THIRD PARTIES. . . . . . . . . . . . . . . . .43
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ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 RECORDS AND ACCOUNTING . . . . . . . . . . . . . . . . . .43
SECTION 8.2 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . .44
ARTICLE IX
TAX MATTERS
SECTION 9.1 TAX RETURNS AND INFORMATION. . . . . . . . . . . . . . . .44
SECTION 9.2 TAX ELECTIONS. . . . . . . . . . . . . . . . . . . . . . .44
SECTION 9.3 TAX CONTROVERSIES. . . . . . . . . . . . . . . . . . . . .44
SECTION 9.4 WITHHOLDING. . . . . . . . . . . . . . . . . . . . . . . .45
ARTICLE X
ADMISSION OF PARTNERS
SECTION 10.1 ADMISSION OF THE GENERAL PARTNERS AND THE MLP. . . . . . .45
SECTION 10.2 ADMISSION OF SUBSTITUTED LIMITED PARTNERS. . . . . . . . .45
SECTION 10.3 ADMISSION OF SUCCESSOR OR TRANSFEREE GENERAL PARTNER . . .46
SECTION 10.4 ADMISSION OF ADDITIONAL LIMITED PARTNERS . . . . . . . . .46
SECTION 10.5 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED
PARTNERSHIP. . . . . . . . . . . . . . . . . . . . . . . .46
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 11.1 WITHDRAWAL OF THE GENERAL PARTNERS . . . . . . . . . . . .47
SECTION 11.2 REMOVAL OF THE MANAGING GENERAL PARTNER. . . . . . . . . .49
SECTION 11.3 INTEREST OF DEPARTING PARTNER AND SUCCESSOR GENERAL
PARTNER. . . . . . . . . . . . . . . . . . . . . . . . . .49
SECTION 11.4 WITHDRAWAL OF THE LIMITED PARTNER. . . . . . . . . . . . .49
ARTICLE XII
DISSOLUTION AND LIQUIDATION
SECTION 12.1 DISSOLUTION. . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 12.2 CONTINUATION OF THE BUSINESS OF THE PARTNERSHIP AFTER
DISSOLUTION. . . . . . . . . . . . . . . . . . . . . . . .50
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SECTION 12.3 LIQUIDATOR . . . . . . . . . . . . . . . . . . . . . . . .51
SECTION 12.4 LIQUIDATION. . . . . . . . . . . . . . . . . . . . . . . .52
SECTION 12.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP . . . .53
SECTION 12.6 RETURN OF CONTRIBUTIONS. . . . . . . . . . . . . . . . . .53
SECTION 12.7 WAIVER OF PARTITION. . . . . . . . . . . . . . . . . . . .53
SECTION 12.8 CAPITAL ACCOUNT RESTORATION. . . . . . . . . . . . . . . .53
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
SECTION 13.1 AMENDMENT TO BE ADOPTED SOLELY BY THE MANAGING GENERAL
PARTNER. . . . . . . . . . . . . . . . . . . . . . . . . .54
SECTION 13.2 AMENDMENT PROCEDURES . . . . . . . . . . . . . . . . . . .55
ARTICLE XIV
MERGER
SECTION 14.1 AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . .56
SECTION 14.2 PROCEDURE FOR MERGER OR CONSOLIDATION. . . . . . . . . . .56
SECTION 14.3 APPROVAL BY LIMITED PARTNER OF MERGER OR CONSOLIDATION . .57
SECTION 14.4 CERTIFICATE OF MERGER. . . . . . . . . . . . . . . . . . .58
SECTION 14.5 EFFECT OF MERGER . . . . . . . . . . . . . . . . . . . . .58
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 ADDRESSES AND NOTICES. . . . . . . . . . . . . . . . . . .58
SECTION 15.2 REFERENCES . . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 15.3 FURTHER ACTION . . . . . . . . . . . . . . . . . . . . . .59
SECTION 15.4 BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . .59
SECTION 15.5 INTEGRATION. . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 15.6 CREDITORS. . . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 15.7 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 15.8 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . .59
SECTION 15.9 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . .60
SECTION 15.10 INVALIDITY OF PROVISIONS . . . . . . . . . . . . . . . . .60
SECTION 15.11 CONSENT OF PARTNERS. . . . . . . . . . . . . . . . . . . .60
iv
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
CORNERSTONE PROPANE, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CORNERSTONE
PROPANE, L.P. dated as of , 1996, is entered into by and
among Cornerstone Propane GP, Inc., a California corporation, as the Managing
General Partner, SYN Inc., a Delaware corporation, as Special General Partner
and Cornerstone Propane Partners, L.P., a Delaware limited partnership, as the
Organizational Limited Partner, together with any other Persons who become
Partners in the Partnership or parties hereto as provided herein. In
consideration of the covenants, conditions and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 10.4 and who is shown as such on the books
and records of the Partnership.
"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 interest
or any other specified interest in the Partnership shall be the amount which
such Adjusted Capital Account would be if such general partner interest or other
interest in the Partnership were
the only interest in the Partnership held by a Partner from and after the date
on which such general partner interest or other interest was first issued.
"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). Once an Adjusted Property
is deemed distributed by, and recontributed to, the Partnership for federal
income tax purposes upon a termination thereof pursuant to Treasury Regulation
Section 1.708-1(b)(1)(iv) such property shall thereafter constitute a
Contributed Property until the Carrying Value of such property is subsequently
adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Upon a termination of the
Partnership following the publication of Proposed Treasury Regulation
1.708-1(b)(1)(iv) as a final regulation, an Adjusted Property deemed contributed
to a new partnership in exchange for an interest in the new partnership,
followed by the deemed liquidation of the Partnership, shall thereafter
constitute a Contributed Property until the Carrying Value of such property is
subsequently 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.
"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, without limitation, 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 Managing General Partner using such reasonable method of valuation as it
may adopt; provided, however, that the Agreed Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code (whether before
or after finalization of Proposed Treasury Regulation Section 1.708-1(b)(1)(iv))
shall be determined in accordance with Section 5.5(c). Subject to Section
5.5(c), the Managing General Partner shall, in its discretion, use such method
as it deems reasonable and 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 Amended and Restated Agreement of Limited
Partnership of Cornerstone Propane, L.P., as it may be amended, supplemented or
restated from time to time.
2
"Assets" means the asset being conveyed by the General Partners and EESC,
to the Partnership on the Closing Date pursuant to Section 5.2(a) and the
Contribution and Conveyance Agreement.
"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.
"Assumed Liabilities" means the liabilities that the Partnership is either
assuming or taking subject in connection with the conveyance of the Assets
pursuant to Section 5.2(a) and the Contribution and Conveyance Agreement.
"Audit Committee" means a committee of the Board of Directors of the
Managing General Partner composed entirely of two or more directors who are
neither officers nor employees of either of the General Partners nor officers,
directors or employees of any Affiliate of the General Partners.
"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 borrowings for
working capital purposes made subsequent to the end of such Quarter, less
(b) the amount of any cash reserves that is necessary or appropriate in
the reasonable discretion of the Managing General Partner to (i) provide for the
proper conduct of the business of the Partnership Group (including reserves for
future capital expenditures and for the 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 of the MLP Agreement in respect of any one or more of the
next four Quarters; provided, however, that the Managing General Partner may not
establish cash reserves pursuant to (iii) above if the effect of such reserves
would be that the MLP is unable to distribute the Minimum Quarterly Distribution
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 Managing General Partner so determines.
3
Notwithstanding the foregoing, "Available Cash" with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.
"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.
"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 states of New York or California 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 interest or any other Partnership Interest shall be the amount
which such Capital Account would be if such general partner interest or other
Partnership Interest were the only interest in the Partnership held by a Partner
from and after the date on which such general partner interest 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
pursuant to this Agreement.
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' Capital Accounts in respect of such Contributed Property, and
(b) with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be 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 Managing
General Partner.
"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 2.1, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"Closing Date" means the first date on which Common Units are sold by the
MLP to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
4
"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
successor law.
"Common Unit" has the meaning assigned to such term in the MLP Agreement.
"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 (or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code whether before or
after finalization of Proposed Treasury Regulation Section 1.708-1(b)(1)(iv)).
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 and Conveyance Agreement" means that certain Contribution,
Conveyance and Assumption Agreement, dated as of the Closing Date, among the
General Partners, the Partnership, the MLP and certain other parties, together
with the additional conveyance documents and instruments contemplated or
referenced thereunder.
"Cornerstone Propane GP, Inc." means Cornerstone Propane GP, Inc., a
California corporation, which is currently the Managing General Partner of the
Partnership.
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(ix).
"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 Partner" means a former General Partner (either Managing General
Partner or Special General Partner) from and after the effective date of any
withdrawal or removal of such former General Partner pursuant to Section 11.1 or
11.2.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"EESC" means Empire Energy SC Corporation, a Delaware corporation.
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"General Partners" means the Managing General Partner and the Special
General Partner and their successors and permitted assigns as general partners
of the Partnership.
5
"Group Member" means a member of the Partnership Group.
"Indemnitee" means (a) any General Partner, any Departing Partner and any
Person who is or was an Affiliate of any General Partner or any Departing
Partner, (b) any Person who is or was a director, officer, employee, agent or
trustee of a Group Member, (c) any Person who is or was an officer, member,
partner, director, employee, agent or trustee of any General Partner or any
Departing Partner or any Affiliate of the General Partner or any Departing
Partner, or any Affiliate of any such Person, (d) any Person who is or was
serving at the request of any General Partner or any Departing Partner or any
such Affiliate as a director, officer, employee, member, partner, agent,
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.
"Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
"Limited Partner" means any Person that is admitted to the Partnership as a
limited partner pursuant to the terms and conditions of this Agreement; but the
term Limited Partner shall not include any Person from and after the time such
Person withdraws as a Limited Partner from the Partnership.
"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 Partners have the right to elect to reconstitute the
Partnership and continue its business 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 Managing General
Partner to perform the functions described in Section 12.3 as liquidating
trustee of the Partnership within the meaning of the Delaware Act.
"Managing General Partner" means Cornerstone Propane GP, Inc. and its
successors and permitted assigns as general partner of the Partnership.
"Merger Agreement" has the meaning assigned to such term in Section 14.1.
"Minimum Quarterly Distribution" has the meaning assigned to such term in
the MLP Agreement.
"MLP" means Cornerstone Propane Partners, L.P., a Delaware limited
partnership.
"MLP Agreement" means the Amended and Restated Agreement of Limited
Partnership of the MLP, dated __________.
6
"National Securities Exchange" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such
statute, or the Nasdaq Stock Market or any successor thereto.
"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 or
Assignee 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 or
Assignee 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).
"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).
"Net Note Proceeds" means $74,051,000 of proceeds remaining from the
issuance of the Partnership's Notes after the Partnership repays a portion of
the Assumed Liabilities.
"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
after the Liquidation Date. 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).
"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
after the Liquidation Date. 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).
7
"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
expenditures (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).
"Notes" means the $220 million of Senior Secured Notes issued by the
Partnership in a private placement in conjunction with the Initial Offering.
"OLP Subsidiary" means a Subsidiary of the Partnership.
"Opinion of Counsel" means a written opinion of counsel (who may be regular
counsel to the Partnership or the General Partners or any of their Affiliates)
acceptable to the Managing General Partner in its reasonable discretion.
"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, without limitation, 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 Partners and the Limited Partner.
"Partnership" means Cornerstone Propane, L.P., a Delaware limited
partnership, and any successors thereto.
"Partnership Group" means the Partnership and the OLP Subsidiaries, treated
as a single consolidated entity.
8
"Partnership Interest" means an ownership interest of a Partner in the
Partnership.
"Partnership Minimum Gain" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"Percentage Interest" means (a) as to the General Partners (in their
capacity as general partners of the Partnership) 1.0101% and (b) as to the
Limited Partner 98.9899%.
"Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"Pro Rata" means when modifying the General Partners, apportioned 76.8645%
to the Managing General Partner and 23.1355% to the Special General Partner,
provided, however, to the extent an allocation of losses pursuant to Section
6.1(b) or Section 6.1(c)(ii) would cause the Special General Partner to have a
deficit balance in its Adjusted Capital Account at the end of such taxable year
(or increase any existing deficit in its Adjusted Capital Account), then Pro
Rata shall mean 100% to the Managing General Partner and zero to the Special
General Partner.
"Quarter" means, unless the context requires otherwise, a fiscal quarter of
the Partnership.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Sections 734 or 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.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-13879) as it has been or as it may be amended or
supplemented from time to time, filed by the MLP with the Commission under the
Securities Act to register the offering and sale of the Common Units in the
Initial Offering.
"Required Allocations" means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or 6.1(c)(ii) and
(b) any allocation of an item of income, gain, loss or deduction pursuant to
Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or 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 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
9
"Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.
"Special Approval" means approval by a majority of the members of the Audit
Committee.
"Special General Partner" mean SYN and it successors and assigns as special
general partner of the Partnership.
"Subordinated Unit" has the meaning assigned to such term in the MLP
Agreement.
"Subordination Period" has the meaning assigned to such term in the MLP
Agreement.
"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.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 10.2 in place of and with all the
rights of a Limited Partner and who is shown as a Limited Partner on the books
and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"SYN" means SYN Inc., a Delaware corporation.
"Transfer" has the meaning assigned to such term in Section 4.1(a).
"Underwriter" means each Person named as an underwriter in Schedule I to
the Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement dated ____, 1996,
among the Underwriters, the MLP and certain other parties, providing for the
purchase of Common Units by such Underwriters.
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"Unit" has the meaning assigned to such term in the MLP Agreement.
"Unit Majority" has the meaning assigned to such term in the MLP Agreement.
"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)).
"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).
SECTION 1.2 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; and (c) "include" or "includes" means includes,
without limitation, and "including" means including, without limitation.
ARTICLE II
ORGANIZATION
SECTION 2.1 FORMATION.
The Managing 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 of Limited Partnership of Cornerstone Propane Partners, L.P. 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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SECTION 2.2 NAME.
The name of the Partnership shall be "Cornerstone Propane, L.P." The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the Managing General Partner in its sole discretion,
including the name of the Managing 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 Managing General Partner in its
discretion may change the name of the Partnership at any time and from time to
time and shall notify the Limited Partner of such change in the next regular
communication to the Limited Partners.
SECTION 2.3 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE; OTHER
OFFICES.
Unless and until changed by the Managing General Partner, the registered
office of the Partnership in the State of Delaware shall be located at 0000
Xxxxxx Xxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxxxx, 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 000 Xxxxxxxxx Xxxxx, Xxxxxxxxxxx,
Xxxxxxxxxx 00000 or such other place as the Managing 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 Managing General Partner deems necessary or appropriate. The
address of the Managing General Partner shall be 000 Xxxxxxxxx Xxxxx,
Xxxxxxxxxxx, Xxxxxxxxxx 00000 or such other place as the Managing General
Partner may from time to time designate by notice to the Limited Partners.
SECTION 2.4 PURPOSE AND BUSINESS.
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) acquire, manage and operate the Assets and any similar assets or
properties, (b) engage directly in, or enter into or form any corporation,
partnership, joint venture, limited liability company or other arrangement to
engage indirectly in, any type of business or activity engaged in by the General
Partners and their predecessors prior to the Closing Date 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,
(c) engage directly in, or enter into or form any corporation, partnership,
joint venture, limited liability company or other arrangement to engage
indirectly in, any business activity that is approved by the Managing General
Partner and which 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; provided, however, that the Managing General
Partner reasonably determines, as of the date of the acquisition or commencement
of such activity, that such activity (i) generates "qualifying income" (as such
term is defined pursuant to Section 7704 of the Code) or (ii) enhances the
operations of an activity of the Partnership that generates qualifying income,
and (d) do anything necessary or appropriate to the foregoing, including the
making of capital contributions or loans to
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a Group Member, the MLP or any Subsidiary of the MLP. The Managing General
Partner has no obligation or duty to the Partnership, the Limited Partners, or
the Assignees to propose or approve, and in its discretion may decline to
propose or approve, the conduct by the Partnership of any business.
SECTION 2.5 POWERS.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.
SECTION 2.6 POWER OF ATTORNEY.
(a) The Special General Partner, each Limited Partner and each Assignee
hereby constitutes and appoints the Managing General Partner and, if a
Liquidator shall have been selected pursuant to Section 12.3, the Liquidator,
severally (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 stead, 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 Managing General Partner or the Liquidator deems 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 Managing General Partner or the Liquidator deems 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 Managing General Partner or the
Liquidator deems 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, X, XI or 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) relating to a merger or consolidation of the
Partnership pursuant to Article XIV; and
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(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the discretion of the Managing
General Partner or the Liquidator, to 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 is necessary or appropriate, in the discretion of
the Managing General Partner or the Liquidator, to effectuate the terms
or intent of this Agreement; provided, that when required by any
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 Managing 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.
Nothing contained in this Section 2.6(a) shall be construed as
authorizing the Managing 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 or Assignee and the transfer of all or any portion of such Special
General Partner's, Limited Partner's or Assignee's Partnership Interest and
shall extend to such Special General Partner's. Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Special
General Partner's, Limited Partner or Assignee hereby agrees to be bound by any
representation made by the Managing General Partner or the Liquidator acting in
good faith pursuant to such power of attorney; and each such Special General
Partner's, Limited Partner or Assignee, 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 Managing General Partner or the Liquidator taken in
good faith under such power of attorney. Each Special General Partner's, Limited
Partner or Assignee shall execute and deliver to the Managing 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 Managing
General Partner or the Liquidator deems necessary to effectuate this Agreement
and the purposes of the Partnership.
SECTION 2.7 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 close of Partnership business on December 31, 2086 or until
the earlier 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.
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SECTION 2.8 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 or Assignee, 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,
a General Partner, one or more of its Affiliates or one or more nominees, as the
Managing General Partner may determine. The General Partners hereby declare and
warrant that any Partnership assets for which record title is held in the name
of a General Partner or one or more of its Affiliates or one or more nominees
shall be held by such 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 such General Partner shall use reasonable
efforts to cause record title to such assets (other than those assets in respect
of which the Managing 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 such General Partner or as
soon thereafter as practicable, such 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 Managing 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.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
SECTION 3.1 LIMITATION OF LIABILITY.
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or the Delaware Act.
SECTION 3.2 MANAGEMENT OF BUSINESS.
No Limited Partner or Assignee, 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 Managing General Partner or any officer,
director, employee, member, general partner, agent or trustee of the Managing
General Partner or any of its Affiliates, or any officer, director, employee,
member, general partner or agent or trustee of a Group Member, the MLP or any
Subsidiary of the MLP, 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
15
not affect, impair or eliminate the limitations on the liability of the Limited
Partners or Assignees under this Agreement.
SECTION 3.3 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 or Assignees, any Limited Partner or
Assignee 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 or Assignees shall
have any rights by virtue of this Agreement in any business ventures of any
Limited Partner or Assignee.
SECTION 3.4 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
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;
(ii) promptly after becoming available, to obtain a
copy of the Partnership's federal, state and local income tax returns for
each year;
(iii) to have furnished to him a current list of the
name and last known business, residence or mailing address of each
Partner;
(iv) to have furnished to him a copy of this
Agreement and the Certificate of Limited Partnership and all amendments
thereto, together with a copy 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 which 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.
16
(b) The General Partners may keep confidential from the Limited
Partners and Assignees, for such period of time as the Managing General Partner
deems reasonable, (i) any information that the Managing General Partner
reasonably believes to be in the nature of trade secrets or (ii) other
information the disclosure of which the Managing General Partner in good faith
believes (A) is not in the best interests of the MLP or the Partnership Group,
(B) could damage the MLP or the Partnership Group or (C) that the MLP or 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).
ARTICLE IV
TRANSFER OF PARTNERSHIP INTERESTS
SECTION 4.1 TRANSFER GENERALLY.
(a) The term "transfer," when used in this Agreement with
respect to a Partnership Interest, shall be deemed to refer to a transaction
by which a Partner assigns its Partnership Interest to another Person, and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation,
mortgage, exchange or any other disposition by law or otherwise.
(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 shareholder of a General Partner of any or
all of the issued and outstanding capital stock of a General Partner.
SECTION 4.2 TRANSFER OF A GENERAL PARTNER'S PARTNERSHIP [caad 214]INTEREST.
If a General Partner transfers its Partnership Interest as the general
partner of the MLP to any Person in accordance with the provisions of the MLP
Agreement, such General Partner shall contemporaneously therewith transfer all,
but not less than all, of its Partnership Interest as the general partner of the
Partnership to such Person, and the Limited Partners hereby expressly consent to
such transfer. Except as set forth in the immediately preceding sentence and in
Section 5.2, a General Partner may not transfer all or any part of its
Partnership Interest as the general partner of the Partnership; provided,
however, that this provision shall not preclude or limit a General Partner's
ability to mortgage, pledge, hypothecate or grant a security interest in its
Partnership Interest as the General Partner of the Partnership and shall not
prevent any forced sale of any or all of its Partnership Interest as the General
Partner of the Partnership pursuant to the foreclosure of, or other realization
upon, any such encumbrance.
17
SECTION 4.3 TRANSFER OF THE LIMITED PARTNERS' PARTNERSHIP INTERESTS.
Any Limited Partner may transfer all, but not less than all, of its
Partnership Interest as a limited partner of the Partnership in connection with
the merger, consolidation or other combination of any of the Limited Partners
with or into any other Person or the transfer by any of the Limited Partners of
all or substantially all of its assets to another Person, and following any such
transfer such Person may become a Substituted Limited Partner pursuant to
Article X. Except as set forth in the immediately preceding sentence and in
Section 5.2, or in connection with any pledge of (or any related foreclosure on)
the Limited Partner's Partnership Interest as a limited partner of the
Partnership solely for the purpose of securing, directly or indirectly,
indebtedness of the Partnership or the MLP, and except for the transfers
contemplated by Sections 5.2 and 10.1, a Limited Partner may not transfer all or
any part of its Partnership Interest or withdraw from the Partnership.
SECTION 4.4 RESTRICTIONS ON TRANSFERS.
(a) Notwithstanding the other provisions of this Article IV, no
transfer of any Partnership Interest 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 or the MLP under the laws of the
jurisdiction of its formation or (iii) cause the Partnership or the MLP 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 Managing General Partner may impose restrictions on the
transfer of Partnership Interests if a subsequent Opinion of Counsel determines
that such restrictions are necessary to avoid a significant risk of the
Partnership or the MLP becoming taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes. The restrictions may be
imposed by making such amendments to this Agreement as the Managing General
Partner may determine to be necessary or appropriate to impose such
restrictions.
ARTICLE V
CONTRIBUTIONS AND INITIAL TRANSFERS
SECTION 5.1 INITIAL CONTRIBUTIONS.
In connection with the formation of the Partnership under the Delaware
Act, the Managing General Partner made an initial Capital Contribution to
the Partnership in the amount of $_____ in exchange for an interest in the
Partnership and has been admitted as a general partner of the Partnership,
and the MLP made an initial Capital Contribution to the Partnership in the
amount of $_____ in exchange for an interest in the Partnership and has been
admitted as a limited partner fo the Partnership.
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SECTION 5.2 CONTRIBUTIONS AND INITIAL TRANSFERS BY THE GENERAL PARTNERS AND
THEIR AFFILIATES.
On the Closing Date, pursuant to, and subject to the conditions of, the
Contribution and Conveyance Agreement, the following transactions shall occur in
the following order:
(a) The General Partners and ESSC shall convey the Assets to the
Partnership. In exchange, the Partnership shall (A) continue the General
Partners' 1.0101% general partner interest in the Partnership, (B) issue to the
General Partners and EESC a 98.9899% limited partner interest in the Partnership
and (C) assume the Assumed Liabilities. The Managing General Partner's interest
in 1.0101% in the general partner described in (A) above shall be 76.8645% and
the remaining 23.1355% belongs to the Special General Partner. The Managing
General Partner and EESC shall share their combined 76.8645% of the 98.9899%
limited partner interest based on the relative Net Agreed Value of the Property
each contributed for such interest.
(b) The General Partners and EESC shall transfer all of their limited
partner interest in the Partnership to the MLP in exchange for the consideration
provided for in the Contribution and Conveyance Agreement.
SECTION 5.3 ADDITIONAL CAPITAL CONTRIBUTIONS.
With the consent of the Managing General Partner, any Limited Partner may,
but shall not be obligated to, make additional Capital Contributions to the
Partnership. Contemporaneously with the making of any Capital Contributions by
a Limited Partner in addition to those provided in Sections 5.1 and 5.2, the
General Partners shall be obligated to make an additional combined Capital
Contribution to the Partnership in an amount equal to 1.0101 DIVIDED BY 98.9899
of the Net Agreed Value of the additional Capital Contribution then made by such
Limited Partner (other than with respect to additional Capital Contributions by
the Limited Partner of the net proceeds received by the MLP upon the issuance of
Common Units pursuant to the Over-allotment Option). Each General Partner shall
contribute its Pro Rata share of such additional combined Capital Contribution.
Except as set forth in the immediately preceding sentence and Article XII, the
General Partners shall not be obligated to make any additional Capital
Contributions to the Partnership.
SECTION 5.4 INTEREST AND WITHDRAWAL.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee 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 or Assignee shall have
priority over any other Partner or Assignee 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 and Assignees agree within the meaning of
Section 17-502(b) of the Delaware Act.
19
SECTION 5.5 CAPITAL ACCOUNTS.
(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 Managing General Partner in its sole discretion) 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). Such
Capital Account shall be increased by (i) the amount of all Capital
Contributions made to the Partnership with respect to such Partnership Interest
pursuant to this Agreement and (ii) all items of Partnership income and gain
(including, without limitation, 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 pursuant to this Agreement 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,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the
Partnership shall be treated as owning directly its proportionate share
(as determined by the Managing General Partner) of all property owned by
any OLP Subsidiary that is classified as a partnership for federal income
tax purposes.
(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 and,
as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of
the Code, without regard to the fact that such items are not includable
in gross income or are neither currently deductible nor capitalized for
federal income tax purposes. 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
20
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) 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 (A) as
if the adjusted basis of such property were equal to the Carrying Value
of such property immediately following such adjustment and (B) using a
rate of depreciation, cost recovery or amortization derived from the same
method and useful life (or, if applicable, the remaining useful life) as
is applied for federal income tax purposes; provided, however, that, if
the asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization deductions shall be
determined using any reasonable method that the Managing General Partner
may adopt.
(vi) If the Partnership's adjusted basis in a depreciable
or cost recovery property is reduced for federal income tax purposes
pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of such
reduction shall, solely for purposes hereof, be deemed to be an
additional depreciation or cost recovery deduction in the year such
property is placed in service and shall be allocated among the Partners
pursuant to Section 6.1. Any restoration of such basis pursuant to
Section 48(q)(2) of the Code shall, to the extent possible, be allocated
in the same manner to the Partners to whom such deemed deduction was
allocated.
(c) 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; provided, however, that if the transfer
causes a termination of the Partnership under Section 708(b)(1)(B) of the Code,
the Partnership's properties and liabilities shall be deemed (i) to have been
distributed in liquidation of the Partnership to the Partners (including any
transferee of a Partnership Interest that is a party to the transfer causing
such termination) pursuant to Section 12.4 (after adjusting the balance of the
Capital Accounts of the Partners as provided in Section 5.5(d)(ii) and
recontributed by such Partners in reconstitution of the Partnership or (ii) in
the event of a termination of the Partnership that occurs after the finalization
of Proposed Treasury Regulation Section 1.704-1(b)(1)(iv), to have been
contributed to a new partnership which will be deemed to make liquidating
distributions of the interests in this new partnership to the Partners
(including any transferee of a
21
Partnership Interest that is a party to the transfer causing such termination)
pursuant to Section 12.4 (after adjusting the balance of the Capital Accounts of
the Partners as provided in Section 5.5(d)(ii)). Any such deemed distribution
and contribution, in the case of a characterization under clause (i) of the
preceding sentence, or any such deemed contribution and distribution, in the
case of a characterization under clause (ii) of the preceding sentence, shall be
treated as an actual contribution and distribution for purposes of this Section
5.5. In such event, the Carrying Values of the Partnership's properties shall
be adjusted immediately prior to such deemed distribution and contribution, or
deemed contribution and distribution, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv) and this Section 5.5 and such Carrying Values shall then
constitute the Agreed Values of such properties upon such deemed contribution to
the new partnership. In either case, the Capital Accounts of the new
partnership that results under the applicable characterization shall be
maintained in accordance with the principles of this Section 5.5.
(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 or the conversion of the
General Partners' Combined Interest to Common Units pursuant to
Section 11.3(a) (or upon the occurance of any other event list in
such regulation), the Capital Account 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 immediately prior
to such issuance and had been allocated to the Partners at such time
pursuant to Section 6.1 in the same manner as any item of gain or loss
actually recognized during such period would have to be allocated. In
determining such Unrealized Gain or Unrealized Loss, the aggregate
cash amount and fair market value of all Partnership assets
(including, without limitation, cash or cash equivalents)
immediately prior to the issuance of additional Partnership
Interests shall be determined by the Managing General Partner using
such reasonable method of valuation as it may adopt; provided,
however, that the Managing 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 Managing General
Partner shall allocate such aggregate value among the assets of the
Partnership (in such manner as it determines in its discretion to be
reasonable) 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 in a sale of 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 in the
same manner as any item of gain or loss
22
actually recognized during such period 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, without
limitation, cash or cash equivalents) immediately prior to a distribution
shall (A) in the case of an actual distribution which is not made pursuant
to Section 12.4 or in the case of a deemed contribution and/or distribution
occurring as a result of a termination of the Partnership pursuant to
Section 708 of the Code, 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 reasonable method of valuation as it may adopt.
SECTION 5.6 LOANS FROM PARTNERS.
Loans by a Partner to the Partnership shall not constitute Capital
Contributions. If any Partner shall advance funds to the Partnership in excess
of the amounts required hereunder to be contributed by it to the capital of the
Partnership, the making of such excess advances shall not result in any increase
in the amount of the Capital Account of such Partner. The amount of any such
excess advances shall be a debt obligation of the Partnership to such Partner
and shall be payable or collectible only out of the Partnership assets in
accordance with the terms and conditions upon which such advances are made.
SECTION 5.7 LIMITED PREEMPTIVE RIGHTS.
Except as provided in Section 5.3, no Person shall have preemptive,
preferential or other similar rights with respect to (a) additional Capital
Contributions; (b) issuance or sale of any class or series of Partnership
Interests, whether unissued, held in the treasury or hereafter created; (c)
issuance of any obligations, evidences of indebtedness or other securities of
the Partnership convertible into or exchangeable for, or carrying or accompanied
by any rights to receive, purchase or subscribe to, any such Partnership
Interests; (d) issuance of any right of subscription to or right to receive, or
any warrant or option for the purchase of, any such Partnership Interests; or
(e) issuance or sale of any other securities that may be issued or sold by the
Partnership.
SECTION 5.8 FULLY PAID AND NON-ASSESSABLE NATURE OF LIMITED PARTNER
PARTNERSHIP INTERESTS.
All Limited Partner Partnership Interests issued pursuant to, and in
accordance with the requirements of, this Article V shall be fully paid and
non-assessable Limited Partner Partnership Interests in the Partnership, except
as such non-assessability may be affected by Section 17-607 of the Delaware Act.
23
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES.
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 Section 5.5(b)) 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 Partners, Pro Rata, until the
aggregate Net Income allocated to the General Partners 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
Partners pursuant to Section 6.1(b)(ii) for all previous taxable years;
(ii) Second, 1.0101% to the General Partners, Pro Rata, and
98.9899% the Limited Partners, 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, 1.0101% to the General Partners, Pro Rata, and
98.9899% the Limited Partners, in accordance with their respective
Percentage Interests; provided, that Net Losses shall not be allocated
pursuant to this Section 6.1(b)(i) to the extent that such allocation would
cause a Limited Partner 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);
(ii) Second, the balance, if any, 100% to the General
Partners, Pro Rata.
(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
have been made with respect to the taxable period
24
ending on or before the Liquidation Date; 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 between the General Partners, Pro Rata, and the Limited 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; and
(B) Second, 100% to the General Partners, Pro Rata,
and the Limited Partners in accordance with their respective
Percentage Interests.
(ii) If a Net Termination Loss is recognized (or deemed
recognized pursuant to Section 5.5(d)), such Net Termination Loss shall be
allocated to the Partners in the following manner:
(A) First, 100% to the General Partners, Pro Rata, and
the Limited Partners in proportion to, and to the extent of, the
positive balances in their respective Capital Accounts; and
(B) Second, the balance, if any, 100% to the General
Partners, Pro Rata.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(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 Sections 6.1(d)(v) and 6.1(d)(vi)). This
Section 6.1(d)(i) is intended to comply with the
25
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 Sections 6.1(d)(v) and 6.1(d)(vi), 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.
(iii) 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 (ii).
(iv) 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 gross income and gain in
the amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 6.1(d)(iv) 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)(iv) were
not in this Agreement.
(v) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any
taxable period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the Managing General Partner determines
in its good faith discretion that the
26
Partnership's Nonrecourse Deductions must 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 Managing 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.
(vi) 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.
(vii) 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.
(viii) 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(c) 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.
(ix) 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
27
to the extent that there has been a decrease in Partner Nonrecourse
Debt Minimum Gain. Allocations pursuant to this Section 6.1(d)(ix)(A)
shall only be made with respect to Required Allocations to the extent
the Managing General Partner reasonably determines that such
allocations will otherwise be inconsistent with the economic agreement
among the Partners. Further, allocations pursuant to this
Section 6.1(d)(ix)(A) shall be deferred with respect to allocations
pursuant to clauses (1) and (2) hereof to the extent the Managing
General Partner reasonably determines that such allocations are likely
to be offset by subsequent Required Allocations.
(B) The Managing General Partner shall have reasonable
discretion, with respect to each taxable period, to (1) apply the
provisions of Section 6.1(d)(ix)(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)(ix)(A) among the Partners in a manner that is likely to
minimize such economic distortions.
SECTION 6.2 ALLOCATIONS FOR TAX PURPOSES.
(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.
(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 5.5(d)(ii), and
(2) second, in the event such property was originally a Contributed
Property, be allocated among the Partners
28
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(iii) The Managing 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 Units or other limited partner interests of
the MLP (or any class or classes thereof), the Managing General Partner shall
have sole discretion to (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, without limitation, 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
Units or other limited partner interests of the MLP (or any class or classes
thereof). The Managing 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 Units or other limited partner interests of the MLP issued and
Outstanding or the Partnership, and if such allocations are consistent with the
principles of Section 704 of the Code.
(d) The Managing General Partner in its discretion 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 Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-l(a)(6) or the legislative history of Section 197 of
the Code. If the Managing General Partner determines that such reporting
position cannot reasonably be taken, the Managing General Partner may adopt
depreciation and amortization conventions under which all purchasers acquiring
Limited Partner Interests of the MLP 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
Managing General Partner chooses not to utilize such aggregate method, the
Managing General Partner may use any other reasonable depreciation and
amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any Limited Partner Interests of the MLP that would not have
a material adverse effect on the Limited Partners or the holders of any class or
classes of Limited Partner Interests of the MLP.
(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
29
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 which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) The Managing General Partner may adopt such methods of allocation
of income, gain, loss or deduction between a transferor and a transferee of a
Partnership Interest as it determines necessary, to the extent permitted or
required by Section 706 of the Code and the regulations or rulings promulgated
thereunder.
SECTION 6.3 SPECIAL DISTRIBUTION.
Immediately following the Note Offering, the Partnership shall, subject to
Section 17-607 of the Delaware Act, distribute to the General Partners and EESC,
the Net Note Proceeds. $59,245,000 of such proceeds will be distributed to the
Special General Partner and the $17,369,000 balance will be distributed 23.1355%
to the Special General Partner and 76.8645% to the Managing General Partner.
SECTION 6.4 GENERAL DISTRIBUTIONS.
(a) Within 45 days following the end of each Quarter commencing with
the Quarter ending on March 31, 1997, 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 in accordance with their respective Percentage Interests. The
immediately preceding sentence shall not require any distribution of cash if and
to the extent such distribution would be prohibited by applicable law or by any
loan agreement, security agreement, mortgage, debt instrument or other agreement
or obligation to which the Partnership is a party or by which it is bound or its
assets are subject. All distributions required to be made under this Agreement
shall be made subject to Section 17-607 of the Delaware Act.
(b) 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, other than from borrowings described in (a)(ii) of the
definition of Available Cash, shall be applied and distributed solely in
accordance with, and subject to the terms and conditions of, Section 12.4.
(c) The Managing General Partner shall have the discretion to 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.
30
ARTICLE VII.
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 MANAGEMENT.
(a) The Managing 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 Managing General Partner, neither
the Special General Partner nor any Limited Partner or Assignee 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 which are granted to the Managing General
Partner under any other provision of this Agreement, the Managing General
Partner, subject to Section 7.3, shall have full power and authority to do all
things and on such terms as it, in its sole discretion, may deem 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
Interests, 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);
(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) the lending of funds to other Persons
(including the MLP, the General Partners and their Affiliates), the
repayment of obligations of the Partnership, the MLP or Partnership Group
and the making of capital contributions to any member of the Partnership
Group;
(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
31
the other party to the contract to have no recourse against the General
Partners or their assets other than their 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);
(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 such insurance for the benefit of the
Partnership Group and the Partners (including the assets of the
Partnership) as it deems necessary or appropriate;
(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 or other
relationships 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 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;
(b) Notwithstanding any other provision of this Agreement, the MLP
Agreement, the Delaware Act or any applicable law, rule or regulation, each of
the Partners hereby (i) approves, ratifies and confirms the execution, delivery
and performance by the parties thereto of the MLP Agreement, the Underwriting
Agreement, the Contribution and Conveyance Agreement, the agreements and other
documents filed as exhibits to the Registration Statement, and the other
agreements described in or filed as a part of the Registration Statement;
(ii) agrees that the Managing 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; and (iii) agrees that the execution, delivery or performance by
the General Partners, the MLP, 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 Managing General Partner or any Affiliate of the
Managing General Partner of the rights accorded pursuant to Article XV), shall
not constitute a breach by the Managing General Partner of any duty that the
General Partners may owe the
32
Partnership or the Limited Partners or the Assignees or any other Persons under
this Agreement (or any other agreements) or of any duty stated or implied by law
or equity.
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP.
The Managing 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 and shall use all reasonable efforts to cause to be
filed such other certificates or documents as may be determined by the Managing
General Partner in its sole discretion to be reasonable and 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 that such action is
determined by the Managing General Partner in its sole discretion to be
reasonable and necessary or appropriate, the Managing 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 Managing 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 or Assignee.
SECTION 7.3 RESTRICTIONS ON GENERAL PARTNERS' AUTHORITY.
(a) The Managing General Partner may not, without written approval of
the specific act by the Limited Partner or by other written instrument executed
and delivered by the Limited Partner subsequent to the date of this Agreement,
take any action in contravention of this Agreement, including, except as
otherwise provided in this Agreement, (i) committing any act that would make it
impossible to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner; or (v) transferring its interest as
general partner of the Partnership.
(b) Except as provided in Articles XII and XIV, the Managing General
Partner may not sell, exchange or otherwise dispose of all or substantially all
of the Partnership's assets in a single transaction or a series of related
transactions or approve on behalf of the Partnership the sale, exchange or other
disposition of all or substantially all of the assets of the Partnership,
without the approval of the Limited Partners; provided however that this
provision shall not preclude or limit the Managing General Partner's ability to
mortgage, pledge, hypothecate or grant a security interest in all or
substantially all of the assets of the Partnership and shall not apply to any
forced sale of any or all of the assets of the Partnership pursuant to the
foreclosure of, or other realization upon, any such encumbrance. Without the
approval of holders of at least a Unit Majority, the Managing General Partner
shall not, on behalf of the MLP, (i) consent to any amendment to this Agreement
33
or, except as expressly permitted by Section 7.9(d) of the MLP Agreement, take
any action permitted to be taken by a partner of the Partnership, in either
case, that would have a material adverse effect on the MLP as a partner of the
Partnership or (ii) except as permitted under Sections 4.6, 11.1 and 11.2 of the
MLP Agreement, elect or cause the MLP to elect a successor general partner of
the Partnership.
(c) At all times while serving as a General Partner of the
Partnership, each of the General Partners shall not make any dividend or
distribution on, or repurchase any shares of, its stock or take any other action
within its control if the effect of such action would cause their combined net
worth, independent of their interest in the Partnership Group, to be less than
$15.0 million or such lower amount, which lower amount is based on an Opinion of
Counsel that states, (i) based on a change in the position of the Internal
Revenue Service with respect to partnership status pursuant to Code
Section 7701, such lower amount would not cause the Partnership or the MLP to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes and (ii) would not result in the loss
of the limited liability of any Limited Partner.
SECTION 7.4 REIMBURSEMENT OF THE MANAGING GENERAL PARTNER.
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement or in the MLP Agreement, the Managing General Partner shall not be
compensated for its services as general partner of the MLP or any Group Member.
(b) The Managing General Partner shall be reimbursed on a monthly
basis, or such other reasonable basis as the Managing General Partner may
determine in its sole discretion, for (i) all direct and indirect expenses it
incurs or payments it makes on behalf of the Partnership (including salary,
bonus, incentive compensation and other amounts paid to any Person including
Affiliates of the Managing General Partner to perform services for the
Partnership or for the Managing General Partner in the discharge of its duties
to the Partnership), and (ii) all other necessary or appropriate expenses
allocable to the Partnership or otherwise reasonably incurred by the Managing
General Partner in connection with operating the Partnership's business
(including expenses allocated to the Managing General Partner by its
Affiliates). The Managing General Partner shall determine the expenses that are
allocable to the Partnership in any reasonable manner determined by the Managing
General Partner in its sole discretion. Reimbursements pursuant to this
Section 7.4 shall be in addition to any reimbursement to the Managing General
Partner as a result of indemnification pursuant to Section 7.7.
(c) Subject to Section 5.7, the Managing General Partner, in
its sole discretion and 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, or cause the Partnership to issue partnership securities, in
connection with, pursuant to any employee benefit plan, employee program or
employee practice maintained or sponsored by the Managing General Partner or any
of its Affiliates, in each case for the benefit of
34
employees of the Managing General Partner, any Group Member or any Affiliate, or
any of them, in respect of services performed, directly or indirectly, for the
benefit of the Partnership Group. Expenses incurred by the Managing General
Partner in connection with any such plans, programs and practices shall be
reimbursed in accordance with Section 7.4(b). Any and all obligations of the
Managing General Partner under any employee benefit plans, employee programs or
employee practices adopted by the Managing General Partner as permitted by this
Section 7.4(c) shall constitute obligations of the Managing General Partner
hereunder and shall be assumed by any successor Managing General Partner
approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to
all of the Managing General Partner's Partnership Interest as a general partner
in the Partnership pursuant to Section 4.2.
SECTION 7.5 OUTSIDE ACTIVITIES.
(a) After the Closing Date, the Managing General Partner, for so long
as it is the Managing General Partner of the Partnership (i) agrees that its
sole business will be to act as a general partner of the Partnership, the MLP,
and any other partnership of which the Partnership or the MLP is, directly or
indirectly, a partner and to undertake activities that are ancillary or related
thereto (including being a limited partner in the MLP), (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 of the MLP or 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 the MLP or any Group Member and (iii) shall not engage in the retail sale of
propane to end users in the continental United States. Except as provided in
this Section 7.5(a) with respect to the retail sale of propane to end users in
the continental United States, nothing herein contained in this paragraph shall
prohibit an Affiliate of the Managing General Partner (including the Special
General Partner) from competing with the Partnership.
Affiliates of the Managing General Partner (including the Special General
Partner) may engage in a business activity that involves the retail sales of
propane to end users in the continental United States only if (i) the Managing
General Partner determines in its reasonable judgment, prior to the commencement
of such activity, that it is not in the best interests of the Partnership to
engage in such activity either (A) because of the financial commitments or
operating characteristics associated with such activity or (B) because such
activity is not consistent with the Partnership's business strategy or cannot
otherwise be integrated with the Partnership's operations on a beneficial basis
to the Partnership or (ii) such activity is being undertaken as provided in a
joint venture agreement or other agreement between the Partnership and an
Affiliate of a General Partner and such joint venture or other agreement was
determined at the time it was entered into to be fair to the Partnership in the
reasonable judgment of the Managing General Partner.
(b) Except as specifically restricted by Section 7.5(a), each
Indemnitee 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 the MLP or
any Group Member,
35
independently or with others, including business interests and activities in
direct competition with the business and activities of the MLP or any Group
Member, and none of the same shall constitute a breach of this Agreement or any
duty express or implied by law to the MLP or any Group Member or any Partner or
Assignee. Neither the MLP, any Group Member, any Limited Partner nor any other
Person shall have any rights by virtue of this Agreement, the MLP Agreement or
the partnership relationship established hereby or thereby in any business
ventures of any Indemnitee.
(c) Subject to the terms of Section 7.5(a) and (b), but otherwise
notwithstanding anything to the contrary in this Agreement, (i) the engaging in
competitive activities by any Indemnitees (other than the Managing General
Partner) in accordance with the provisions of this Section 7.5 is hereby
approved by the Partnership and all Partners and (ii) it shall be deemed not to
be a breach of the Managing General Partner's fiduciary duty or any other
obligation of any type whatsoever of the General Partners for the Indemnitees
(other than the Managing General Partner) to engage in such business interests
and activities in preference to or to the exclusion of the Partnership
(including, without limitation, the Managing General Partner and the Indemnities
shall have no obligation to present business opportunities to the Partnership).
(d) The Managing General Partner and any of its Affiliates may
acquire Units or other Partnership Securities (as defined in the MLP Agreement)
of the MLP in addition to those acquired on the Closing Date and, except as
otherwise provided in this Agreement, shall be entitled to exercise all rights
of a General Partner or Limited Partner, as applicable, relating to such Units
or Partnership Securities of the MLP.
(e) The term "Affiliates" when used in Section 7.5(a) and
Section 7.5(b) with respect to the Managing General Partner shall not include
the MLP, any Group Member or any Subsidiary of the MLP or any Group Member.
(f) Anything in this Agreement to the contrary notwithstanding, to
the extent that provisions of Sections 7.7, 7.8, 7.9 or 7.10 or other Sections
of this Agreement purport or are interpreted to have the effect of restricting
the fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the Managing General Partner to the Partnership and
its Limited Partners, or to constitute a waiver or consent by the Limited
Partners to any such restriction, such provisions shall be inapplicable and have
no effect in determining whether the Managing General Partner has complied with
its fiduciary duties in connection with determinations made by it under this
Section 7.5.
SECTION 7.6 LOANS FROM THE GENERAL PARTNERS; LOANS OR CONTRIBUTIONS FROM THE
PARTNERSHIP; CONTRACTS WITH AFFILIATES; CERTAIN RESTRICTIONS ON
THE GENERAL PARTNERS.
(a) The General Partners or their Affiliates may lend to the MLP or
any Group Member, and the MLP or any Group Member may borrow from the General
Partners or any of their Affiliates, funds needed or desired by the MLP or the
Group Member for such periods of time and in such amounts as the Managing
General Partner may determine; provided, however, that in any
36
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). 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. No Group
Member may lend funds to the General Partners or any of their Affiliates (other
than the MLP, a Subsidiary of the MLP, any other Group Member or any Subsidiary
of a 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
established in the sole discretion of the Managing General Partner; provided,
however, that the Partnership may not charge the Group Member interest at a rate
less than the rate that would be charged to the Group Member (without reference
to the General Partners' financial abilities or guarantees) by unrelated lenders
on comparable loans. The foregoing authority shall be exercised by the Managing
General Partner in its sole discretion and shall not create any right or benefit
in favor of any Group Member or any other Person.
(c) The Managing General Partner may itself, or may enter into an
agreement with any of its Affiliates to, render services to a Group Member or to
the Managing General Partner in the discharge of its duties as general partner
of the Partnership. Any services rendered to a Group Member by the Managing
General Partner or any of its Affiliates shall be on terms that are fair and
reasonable to the Partnership; provided, however, that the requirements of this
Section 7.6(c) shall be deemed satisfied as to (1) any transaction approved by
Special Approval, (ii) any transaction, the terms of which are no less favorable
to the Partnership Group than those generally being provided to or available
from unrelated third parties or (iii) any transaction that, 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 Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this
Section 7.6(c).
(d) Any Group Member may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the General Partners nor any of their Affiliates shall
sell, transfer or convey any property to, or purchase any property from the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (1) the
transactions effected pursuant to Sections 5.2 and 5.3, the Contribution and
Conveyance Agreement and any other
37
transactions described in or contemplated by the Registration Statement,
(ii) any transaction approved by Special Approval, (iii) any transaction, the
terms of which are no less favorable to the Partnership than those generally
being provided to or available from unrelated third parties, or (iv) any
transaction that, 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), is equitable to the Partnership.
(f) The General Partners and their Affiliates will have no obligation
to permit any Group Member to use any facilities or assets of the General
Partners and their Affiliates, except as may be provided in contracts entered
into from time to time specifically dealing with such use, nor shall there be
any obligation on the part of the General Partners or their Affiliates to enter
into such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
SECTION 7.7 INDEMNIFICATION.
(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 in each case
the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than a General
Partner) not opposed to, the best interests of the Partnership and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 7.7
shall be available to the General Partners with respect to their obligations
incurred pursuant to the Underwriting Agreement or the Contribution and
Conveyance Agreement (other than obligations incurred by the Managing General
Partner on behalf of the Partnership or the MLP). The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere, or its equivalent, shall not create a presumption that
the Indemnitee acted in a manner contrary to that specified above. 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 Partners 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
38
prior to the final disposition of such claim, demand, action, suit or proceeding
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 Partners, 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 Partners or their Affiliates for the cost of) insurance, on behalf of
the General Partners, their Affiliates and such other Persons as the Managing
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.
(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 interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, 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
39
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.
SECTION 7.8 LIABILITY OF INDEMNITEES.
(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, the Assignees or any other Persons who have
acquired interests in the Units or other Partnership Securities of the MLP, for
losses sustained or liabilities incurred as a result of any act or omission if
such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as Managing General Partner
set forth in Section 7.1(a), the Managing 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 Managing
General Partner shall not be responsible for any misconduct or negligence on the
part of any such agent appointed by the Managing General Partner in good faith.
(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 Partners 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. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.
(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 to the Partnership, the Limited Partners, the
General Partners, and the Partnership's and General Partners' directors,
officers and employees 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.
SECTION 7.9 RESOLUTION OF CONFLICTS OF INTEREST.
(a) Unless otherwise expressly provided in this Agreement or the MLP
Agreement, whenever a potential conflict of interest exists or arises between
any of the General Partners or any of their Affiliates, on the one hand, and the
Partnership, the MLP, any Partner or any Assignee, on the other, any resolution
or course of action by the Managing 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 the MLP
Agreement, of any
40
agreement contemplated herein or therein, or of any duty stated or implied by
law or equity, if the resolution or course of action is, or by operation of this
Agreement is deemed to be, fair and reasonable to the Partnership. The Managing
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. Any conflict of interest and any resolution of such conflict of
interest shall be conclusively deemed fair and reasonable to the Partnership if
such conflict of interest or resolution is (i) approved by Special Approval (as
long as the material facts known to the Managing General Partner or any of its
Affiliates regarding any proposed transaction were disclosed to the Audit
Committee at the time it gave its approval), (ii) on terms no less favorable to
the Partnership than those generally being provided to or available from
unrelated third parties or (iii) fair 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 Managing General Partner may also adopt a resolution or course
of action that has not received Special Approval. The Managing General Partner
(including the Audit Committee in connection with Special Approval) shall be
authorized in connection with its determination of what is "fair and reasonable"
to the Partnership and in connection with its resolution of any conflict of
interest to consider (A) the relative interests of any party to such conflict,
agreement, transaction or situation and the benefits and burdens relating to
such interest; (B) any customary or accepted industry practices and any
customary or historical dealings with a particular Person; (C) any applicable
generally accepted accounting practices or principles; and (D) such additional
factors as the Managing General Partner (including the Audit Committee)
determines in its sole discretion to be relevant, reasonable or appropriate
under the circumstances. Nothing contained in this Agreement, however, is
intended to nor shall it be construed to require the Managing General Partner
(including the Audit Committee) to consider the interests of any Person other
than the Partnership. In the absence of bad faith by the Managing General
Partner, the resolution, action or terms so made, taken or provided by the
Managing General Partner with respect to such matter shall not constitute a
breach of this Agreement or any other agreement contemplated herein or a breach
of any standard of care or duty imposed herein or therein or, to the extent
permitted by law, under the Delaware Act or any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated
hereby provides that the Managing General Partner or any of its Affiliates is
permitted or required to make a decision (i) in its "sole discretion" or
"discretion," that it deems "necessary or appropriate" or "necessary or
advisable" or under a grant of similar authority or latitude, except as
otherwise provided herein, the Managing General Partner or such Affiliate shall
be entitled to consider only such interests and factors as it desires and shall
have no duty or obligation to give any consideration to any interest of, or
factors affecting, the Partnership, any Limited Partner or any Assignee, (ii) it
may make such decision in its sole discretion (regardless of whether there is a
reference to "sole discretion" or "discretion") unless another express standard
is provided for, or (iii) in "good faith" or under another express standard, the
Managing General Partner or such Affiliate shall act under such express standard
and shall not be subject to any other or different standards imposed by this
Agreement, the MLP Agreement, any other agreement contemplated hereby or under
the Delaware Act or any other Law, rule or regulation. In addition, any actions
taken by the Managing General
41
Partner or such Affiliate consistent with the standards of "reasonable
discretion" set forth in the definitions of Available Cash shall not constitute
a breach of any duty of the Managing General Partner to the Partnership, any
Limited Partner or any limited partner of the Limited Partner. The Managing
General Partner shall have no duty, express or implied, to sell or otherwise
dispose of any asset of the Partnership Group other than in the ordinary course
of business. No borrowing by any Group Member or the approval thereof by the
Managing General Partner shall be deemed to constitute a breach of any duty of
the Managing General Partner to the Partnership or any Limited Partners by
reason of the fact that the purpose or effect of such borrowing is directly or
indirectly to (A) enable distributions to the General Partners or their
Affiliates (including in their capacities as Limited Partners) to exceed 1% of
the total amount distributed to all partners or (B) hasten the expiration of the
Subordination Period or the conversion of any Subordinated Units into Common
Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Limited Partner hereby authorizes the Managing General
Partner, on behalf of the Partnership as a partner of a Group Member, to approve
of actions by the General Partner of such Group Member similar to those actions
permitted to be taken by the Managing General Partner pursuant to this
Section 7.9.
SECTION 7.10 OTHER MATTERS CONCERNING THE MANAGING GENERAL PARTNER.
(a) The Managing 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 Managing 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 Managing 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 Managing 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.
(d) Any standard of care and duty imposed by this Agreement or under
the Delaware Act or any applicable law, rule or regulation shall be modified,
waived or limited, to the
42
extent permitted by law, as required to permit the Managing General Partner to
act under this Agreement or any other agreement contemplated by this Agreement
and to make any decision pursuant to the authority prescribed in this Agreement,
so long as such action is reasonably believed by the Managing General Partner to
be in, or not inconsistent with, the best interests of the Partnership.
SECTION 7.11 RELIANCE BY THIRD PARTIES.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the Managing
General Partner and any officer of the Managing General Partner authorized by
the Managing General Partner to act on behalf of and in the name of 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
Managing 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 any and all defenses or other remedies that may be available
against such Person to contest, negate or disaffirm any action of the Managing
General Partner or any such officer in connection with any such dealing. In no
event shall any Person dealing with the Managing General Partner or any such
officer or its representatives be obligated to ascertain that the terms of the
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the Managing 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 Managing 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.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 RECORDS AND ACCOUNTING.
The Managing 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 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,
43
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.
SECTION 8.2 FISCAL YEAR.
The fiscal year of the Partnership shall be a fiscal year ending June 30.
ARTICLE IX
TAX MATTERS
SECTION 9.1 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 a taxable year ending on December 31. The tax information
reasonably required by the Partners 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.
SECTION 9.2 TAX ELECTIONS.
(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 Managing
General Partner's determination that such revocation is in the best interests of
the Limited Partners.
(b) The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
(c) Except as otherwise provided herein, the Managing General Partner
shall determine whether the Partnership should make any other elections
permitted by the Code.
SECTION 9.3 TAX CONTROVERSIES.
Subject to the provisions hereof, the Managing 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
44
the Managing General Partner and to do or refrain from doing any or all things
reasonably required by the Managing General Partner to conduct such proceedings.
SECTION 9.4 WITHHOLDING.
Notwithstanding any other provision of this Agreement, the Managing General
Partner is authorized to take any action that it determines in its discretion to
be necessary or appropriate to cause the Partnership to comply with any
withholding requirements established under the Code or any other federal, state
or local law including, without limitation, pursuant to Sections 1441, 1442,
1445 and 1446 of the Code. 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, without limitation, by reason of Section 1446 of the Code), the
amount withheld may at the discretion of the Managing General Partner be treated
by the Partnership as a distribution of cash pursuant to Section 6.3 in the
amount of such withholding from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
SECTION 10.1 ADMISSION OF THE GENERAL PARTNERS AND THE MLP.
Upon the conveyance referred to in Section 5.2(a), the General Partners and
EESC shall be admitted to the Partnership as Limited Partners. Upon the
transfer referred to in Section 5.2(b), the General Partners and EESC shall
withdraw from, and cease to be a Limited Partner of, the Partnership and the MLP
shall be admitted as a Limited Partner.
SECTION 10.2 ADMISSION OF SUBSTITUTED LIMITED PARTNERS.
Any person that is the successor in interest to a Limited Partner as
described in Section 4.3 shall be admitted to the Partnership as a Limited
Partner upon (a) furnishing to the General Partner (i) acceptance in form
satisfactory to the Managing General Partner of all of the terms and conditions
of this Agreement and (ii) such other documents or instruments as may be
required to effect its admission as a Limited Partner in the Partnership and (b)
obtaining the consent of the Managing General Partner, which consent may be
given or withheld in the Managing General Partner's sole discretion. Such
Person shall be admitted to the Partnership as a Limited Partner immediately
prior to the transfer of the Partnership Interest, and the business of the
Partnership shall continue without dissolution, except that the Managing General
Partner shall give such consent to a person who has become a successor in
interest pursuant to a bonafide pledge and foreclosure as contemplated by
Section 4.3.
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SECTION 10.3 ADMISSION OF SUCCESSOR OR TRANSFEREE GENERAL PARTNER.
A successor General Partner approved pursuant to Section 11.1 or 11.2 or
the transferee of or successor to all of a General Partner's Partnership
Interest as general partner in the Partnership pursuant to Section 4.2 who is
proposed to be admitted as a successor General Partner shall, subject to
compliance with the terms of Section 11.3, if applicable, be admitted to the
Partnership as a 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 a General Partner's Partnership Interest
as a general partner in the Partnership pursuant to Section 4.2, provided,
however, that no such successor shall be admitted to the Partnership until
compliance with the terms of Section 4.2 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.
SECTION 10.4 ADMISSION OF ADDITIONAL LIMITED PARTNERS.
(a) A Person (other than the General Partners, the MLP or a
Substituted Limited Partner) who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the Managing General Partner
(i) evidence of acceptance in form satisfactory to the Managing General Partner
of all of the terms and conditions of this Agreement, including the power of
attorney granted in Section 2.6, and (ii) such other documents or instruments as
may be required in the discretion of the Managing General Partner to effect such
Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the Managing General Partner, which consent may be given or withheld in the
Managing General Partner's discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded as such in the books and records of the
Partnership, following the consent of the Managing General Partner to such
admission.
SECTION 10.5 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP.
To effect the admission to the Partnership of any Partner, the Managing
General Partner shall take all steps necessary and 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 Managing General Partner shall prepare
and file an amendment to the Certificate of Limited Partnership, and the
Managing General Partner may for this purpose, among others, exercise the power
of attorney granted pursuant to Section 2.6.
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ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 11.1 WITHDRAWAL OF THE GENERAL PARTNERS.
(a) The Managing 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");
(i) The Managing General Partner voluntarily withdraws from
the Partnership by giving written notice to the Limited Partners;
(ii) The Managing General Partner transfers all of its rights
as Managing General Partner pursuant to Section 4.2;
(iii) The Managing General Partner is removed pursuant to
Section 11.2;
(iv) The Managing General Partner of the MLP withdraws from, or
is removed as the managing general partner of, the MLP;
(v) The Managing 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 Managing General
Partner in a proceeding of the type described in clauses (A)-(C) of this
Section 11.1(a)(v); or (E) seeks, consents to or acquiesces in the
appointment of a trustee (but not a debtor in possession), receiver or
liquidator of the Managing General Partner or of all or any substantial
part of its properties;
(vi) 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 Managing General Partner; or
(vii) (A) in the event the Managing General Partner is a
corporation, a certificate of dissolution or its equivalent is filed for
the Managing General Partner, or 90 days expire after the date of notice to
the Managing 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 Managing General Partner is a partnership, the
dissolution and commencement of winding up of the Managing General Partner;
(C) in the event the Managing 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 Managing General Partner is a natural
47
person, his death or adjudication of incompetency; and (E) otherwise in the
event of the termination of the Managing General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv)(with respect to
withdrawal), (v), (vi) or (vii)(A), (B), (C) or (E) occurs, the withdrawing
Managing 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
Managing General Partner from the Partnership.
(b) Withdrawal of the Managing 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, Eastern
Standard Time, on December 31, 2006, the Managing 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 the Limited Partner and the
Managing 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 of the limited partner of the MLP or cause
the Partnership or the MLP 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) at any time after
12:00 midnight, Eastern Standard Time, on December 31, 2006, the Managing
General Partner voluntarily withdraws by giving at least 90 days' advance notice
to the Limited Partners, such withdrawal to take effect on the date specified in
such notice; (iii) at any time that the Managing General Partner ceases to be
the Managing General Partner pursuant to Section 11.1(a)(ii), (iii) or (iv). If
the Managing General Partner gives a notice of withdrawal pursuant to
Section 11.1(a)(i) or Section 11.1(a)(1) of the MLP Agreement, the Limited
Partner may, prior to the effective date of such withdrawal, elect a successor
Managing General Partner; provided, however, that such successor shall be the
same person, if any, that is elected by the limited partners of the MLP pursuant
to Section 11.1 of the MLP Agreement as the successor to the Managing General
Partner in its capacity as general partner of the MLP. If, prior to the
effective date of the Managing General Partner's withdrawal, a successor is not
selected by the Limited Partners 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 Managing General Partner elected in
accordance with the terms of this Section 11.1 shall be subject to the
provisions of Section 10.3.
(c) An Event of Withdrawal of the Managing General Partner shall also
be an Event of Withdrawal of the Special General Partner from the Partnership
and as general partner of other Group Members of which the Special General
Partner is a general partner at the same time and upon the same conditions as
set forth in Section 11.1(a) and 11.1(b) with respect to the Managing General
Partner. The Partners hereby agree that only the Events of Withdrawal described
in Section 11.1 with respect to the Managing General Partner shall result in a
withdrawal of the Special General
48
Partner. Upon a withdrawal of the Special General Partner, the Limited Partners
are not required to elect a successor Special General Partner of the
Partnership.
SECTION 11.2 REMOVAL OF THE MANAGING GENERAL PARTNER.
The Managing General Partner shall be removed if such Managing General
Partner is removed as a Managing General Partner of the MLP pursuant to Section
11.2 of the MLP Agreement. Such removal shall be effective concurrently with
the effectiveness of the removal of such Managing General Partner as the
Managing General Partner of the MLP pursuant to the terms of the MLP Agreement.
If a successor Managing General Partner is elected in connection with the
removal of such Managing General Partner as a Managing General Partner of the
MLP, such successor Managing General Partner shall, upon admission pursuant to
Article X, automatically become a successor Managing General Partner of the
Partnership. The admission of any such successor Managing General Partner to the
Partnership shall be subject to the provisions of Section 10.3.
SECTION 11.3 INTEREST OF DEPARTING PARTNER AND SUCCESSOR GENERAL PARTNER.
(a) The Partnership Interest of a Departing Partner departing as a
result of withdrawal or removal pursuant to Section 11.1 or 11.2 shall (unless
it is otherwise required to be converted into Common Units pursuant to Section
11.3(b) of the MLP Agreement) be purchased by the successor to the Departing
Partner for cash in the manner specified in the MLP Agreement. Such purchase
(or conversion into Common Units, as applicable) shall be a condition to the
admission to the Partnership of the successor as the General Partner. Any
successor General Partner shall indemnify the Departing General Partner as to
all debts and liabilities of the Partnership arising on or after the effective
date of the withdrawal or removal of the Departing Partner.
(b) The Departing Partner shall be entitled to receive all
reimbursements due such Departing 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 such Departing
Partner for the benefit of the Partnership.
SECTION 11.4 WITHDRAWAL OF THE LIMITED PARTNER.
Without the prior written consent of the Managing General Partner, which
may be granted or withheld in its sole discretion, and except as provided in
Section 10.1, no Limited Partner shall have the right to withdraw from the
Partnership.
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ARTICLE XII
DISSOLUTION AND LIQUIDATION
SECTION 12.1 DISSOLUTION.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor Managing General Partner in accordance with the terms of this
Agreement. Upon the removal or withdrawal of the Managing General Partner, if a
successor Managing General Partner is elected pursuant to Section 11.1 or 11.2,
the Partnership shall not be dissolved and such successor Managing 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) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the Managing 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;
(c) an election to dissolve the Partnership by the Managing General
Partner that is approved by all the Limited Partners;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act;
(e) the sale of all or substantially all of the assets and properties
of the Partnership Group; or
(f) the dissolution of the MLP.
SECTION 12.2 CONTINUATION OF THE BUSINESS OF THE PARTNERSHIP AFTER
DISSOLUTION.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the Managing 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 Partner pursuant to Section 11.1 or 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) of the MLP Agreement, then, to the maximum extent permitted by law, within
180 days thereafter, all of the Limited Partners may elect to reconstitute the
Partnership and continue its business on the same terms and conditions set forth
in this Agreement by forming a new limited partnership on terms identical to
those set forth in this Agreement and having as a general partner a Person
approved by
50
the majority in interest of the Limited Partners. In addition, upon dissolution
of the Partnership pursuant to Section 12.1(f), if the MLP is reconstituted
pursuant to Section 12.2 of the MLP Agreement, the reconstituted MLP may, within
180 days after such event of dissolution, as the Limited Partner (whether or not
it is the sole limited partner), elect to reconstitute the Partnership in
accordance with the immediately preceding sentence. Upon any such election by
the Limited Partners, all Partners shall be bound thereby and shall be deemed to
have approved same. 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 reconstituted Partnership shall continue until the end
of the term set forth in Section 2.7 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 Partners shall be
purchased by the successor General Partner or converted into Common Units
of the MLP as provided in the MLP Agreement; and
(iii) all necessary steps shall be taken to cancel this
Agreement and the Certificate of Limited Partnership and to enter into and,
as necessary, to file a new partnership agreement and certificate of
limited partnership, and the successor General Partner may for this purpose
exercise the powers of attorney granted the General Partner pursuant to
Section 2.6; provided, that the right to approve a successor General
Partner and to reconstitute 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 the Limited Partners or any
limited partner of the MLP and (y) neither the Partnership, the
reconstituted limited 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.
SECTION 12.3 LIQUIDATOR.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the Managing General Partner shall select one or more Persons to
act as Liquidator. The Liquidator (if other than the Managing General Partner)
shall be entitled to receive such compensation for its services as may be
approved by the Limited Partners. The Liquidator (if other than the Managing
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 the Limited Partner. 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 the Limited Partner. 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
51
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 Managing 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(b)) to the extent necessary or desirable in the
good faith judgment of the Liquidator to carry out the duties and functions of
the Liquidator hereunder for and during such period of time as shall be
reasonably required in the good faith judgment of the Liquidator to complete the
winding up and liquidation of the Partnership as provided for herein.
SECTION 12.4 LIQUIDATION
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 the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:
(a) Disposition of Assets. 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, in its absolute discretion,
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, in its absolute discretion, 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.
(b) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed 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) Liquidation Distributions. 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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SECTION 12.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP.
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 Partnership shall be terminated and 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.
SECTION 12.6 RETURN OF CONTRIBUTIONS.
The General Partners 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 any portion thereof, it being expressly understood that any such
return shall be made solely from Partnership assets.
SECTION 12.7 WAIVER OF PARTITION.
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
SECTION 12.8 CAPITAL ACCOUNT RESTORATION.
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. Each of the
General Partners shall be obligated to restore any negative balance in their
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; provided, however,
the Special General Partner's total obligation, pursuant to this Section 12.8
and Section 12.8 of the MLP Agreement, shall be limited to $78,000,000. The
non-contributing General Partner shall indemnify the contributing General
Partner for amounts contributed to the Partnership pursuant to this Section 12.8
and Section 12.8 of the MLP Agreement to the extent it exceeds the contributing
General Partner's Pro Rata share of the amounts so contributed, provided,
however, that the Special General Partner's total indemnification obligation is
limited by the excess of $78,000,000 over the aggregate amount previously
contributed to the Partnership pursuant to this Section 12.8 and Section 12.8 of
the MLP Agreement.
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ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS;
RECORD DATE
SECTION 13.1 AMENDMENT TO BE ADOPTED SOLELY BY THE MANAGING GENERAL PARTNER.
Each Partner agrees that the Managing General Partner, without the approval
of any Partner or Assignee, 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, in the sole discretion of the Managing General
Partner, is necessary or advisable 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
neither the Partnership and the MLP will not be treated as an association
taxable as a corporation or otherwise taxed as an entity for federal income tax
purposes;
(d) a change that, in the discretion of the Managing General Partner,
(i) does not adversely affect the the Limited Partners in any material respect,
(ii) is necessary or advisable 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 or other Limited Partner Partnership Interests of the MLP (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 or other Limited Partner Partnership
Interests of the MLP are or will be listed for trading, compliance with any of
which the Managing General Partner determines in its discretion to be in the
best interests of the Partnership and the Limited Partners, (iii) 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 or
(iv) is required to conform the provisions of this Agreement with the provisions
of the MLP Agreement as the provisions of the MLP Agreement may be amended,
supplemented or restated from time to time;
(e) a change in the fiscal year or taxable year of the Partnership
and any changes that, in the discretion of the Managing General Partner, are
necessary or advisable as a result of a change in the fiscal year or taxable
year of the Partnership including, if the Managing General
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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 Partners or their 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;
(g) any amendment expressly permitted in this Agreement to be made by
the Managing General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(i) an amendment that, in the discretion of the Managing General
Partner, is necessary or advisable to reflect, account for and deal with
appropriately 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;
(j) a merger or conveyance pursuant to Section 14.3(d); or
(k) any other amendments substantially similar to the foregoing.
SECTION 13.2 AMENDMENT PROCEDURES.
Except with respect to amendments of he type described in Section 13.1, all
amendments to this Agreement shall be made in accordance with the following
requirements: Amendments to this Agreement may be proposed only by or with the
consent of the Managing General Partner which consent may be given or withheld
in its sole discretion. A proposed amendments shall be effective upon its
approval by the Limited Partner.
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ARTICLE XIV
MERGER
SECTION 14.1 AUTHORITY.
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article IV.
SECTION 14.2 PROCEDURE FOR MERGER OR CONSOLIDATION.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the Managing General Partner. If the Managing
General Partner shall determine, in the exercise of its discretion, to consent
to the merger or consolidation, the Managing General Partner shall approve the
Merger Agreement, which shall set forth:
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property or
general or limited partner 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 general or limited partner interests, rights, securities
or obligations of any limited partnership, corporation, trust 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 general or limited partner 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 or other entity
(other than the Surviving Business Entity), or evidences thereof, are to be
delivered;
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(e) 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 or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or consolidation;
(f) 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 the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the Managing General
Partner.
SECTION 14.3 APPROVAL BY LIMITED PARTNER OF MERGER OR CONSOLIDATION.
(a) Except as provided in Section 14.3(d), the Managing General
Partner, upon its approval of the Merger Agreement, shall direct that a copy or
a summary of the Merger Agreement be submitted to a vote of Limited Partner,
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 shall be included in or enclosed with the notice of a special meeting
or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement shall
be approved upon receiving the approval of the Limited Partner.
(c) After such approval by the Limited Partner, and at any time prior
to the filing of the certificate of merger pursuant to Section 14.4, the merger
or consolidation may be abandoned pursuant to provisions therefor, if any, set
forth in the Merger Agreement.
(d) Notwithstanding anything else contained in this Article XIV or in
this Agreement, the Managing General Partner is permitted, in its discretion,
without approval of the other Partners, to merge the Partnership or any Group
Member into, or convey all of the Partnership's assets to, another limited
liability entity which shall be newly formed and shall have no assets,
liabilities or operations at the time of such Merger other than those it
receives from the Partnership or other Group Member if (1) the Managing General
Partner has received an Opinion of Counsel that the merger or conveyance, as the
case may be, would not result in the loss of the limited liability of any
Limited Partner or any limited partner in the MLP or cause the Partnership or
the MLP 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 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
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Limited Partners and the Managing General Partner with the same rights and
obligations as are herein contained.
SECTION 14.4 CERTIFICATE OF MERGER.
Upon the required approval by the Managing General Partner and the Limited
Partner of a Merger Agreement, a certificate of merger shall be executed and
filed with the Secretary of State of the State of Delaware in conformity with
the requirements of the Delaware Act.
SECTION 14.5 EFFECT OF MERGER.
(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) A merger or consolidation effected pursuant to this Article shall
not be deemed to result in a transfer or assignment of assets or liabilities
from one entity to another.
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 ADDRESSES AND NOTICES.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when received by it at the
principal office of the Partnership referred to in Section 2.3.
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SECTION 15.2 REFERENCES.
Except as specifically provided as otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
SECTION 15.3 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.
SECTION 15.4 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.
SECTION 15.5 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.
SECTION 15.6 CREDITORS.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
SECTION 15.7 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 15.8 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, independently of the signature of any other party.
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SECTION 15.9 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.
SECTION 15.10 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.
SECTION 15.11 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
MANAGING GENERAL PARTNER:
CORNERSTONE PROPANE GP, INC.
By:___________________________
Name:
Title:
SPECIAL GENERAL PARTNER:
SYN INC.
By:___________________________
Name:
Title:
ORGANIZATIONAL LIMITED
PARTNER:
CORNERSTONE PROPANE
PARTNERS, L.P.
By:___________________________
Name:
Title:
LIMITED PARTNER
EMPIRE ENERGY SC CORPORATION
By:___________________________
Name:
Title:
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