Exhibit 3.2
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
INERGY, L.P.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1. Definitions............................................................... 1
Section 1.2. Construction.............................................................. 20
ARTICLE II
ORGANIZATION
Section 2.1. Formation................................................................ 20
Section 2.2. Name..................................................................... 21
Section 2.3. Registered Office; Registered Agent; Principal Office; Other Offices..... 21
Section 2.4. Purpose and Business..................................................... 21
Section 2.5. Powers................................................................... 22
Section 2.6. Power of Attorney........................................................ 22
Section 2.7. Term..................................................................... 23
Section 2.8. Title to Partnership Assets.............................................. 24
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1. Limitation of Liability.................................................. 24
Section 3.2. Management of Business................................................... 24
Section 3.3. Outside Activities of the Limited Partners............................... 25
Section 3.4. Rights of Limited Partners............................................... 25
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
Section 4.1. Certificates............................................................. 26
Section 4.2. Mutilated, Destroyed, Lost or Stolen Certificates........................ 26
Section 4.3. Record Holders........................................................... 27
Section 4.4. Transfer Generally....................................................... 27
Section 4.5. Registration and Transfer of Limited Partner Interests................... 28
Section 4.6. Transfer of the Managing General Partner's General Partner Interest..... 29
Section 4.7. Transfer of Incentive Distribution Rights................................ 30
Section 4.8. Restrictions on Transfers................................................ 30
Section 4.9. Citizenship Certificates; Non-citizen Assignees.......................... 31
Section 4.10. Redemption of Partnership Interests of Non-citizen Assignees............. 32
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1. Organizational Contributions............................................. 33
Section 5.2. Contributions by the Non-Managing General Partner and its Affiliates..... 33
Section 5.3. Contributions by Initial Limited Partners................................ 34
Section 5.4. Interest and Withdrawal.................................................. 34
-i-
Section 5.5. Capital Accounts.......................................................... 34
Section 5.6. Issuances of Additional Partnership Securities............................ 37
Section 5.7. Limitations on Issuance of Additional Partnership Securities.............. 38
Section 5.8. Conversion of Subordinated Units.......................................... 40
Section 5.9. Limited Preemptive Right.................................................. 44
Section 5.10. Splits and Combinations................................................... 44
Section 5.11. Fully Paid and Non-Assessable Nature of Limited Partner Interests......... 45
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1. Allocations for Capital Account Purposes.................................. 45
Section 6.2. Allocations for Tax Purposes.............................................. 53
Section 6.3. Requirement and Characterization of Distributions; Distributions to
Record Holders............................................................ 55
Section 6.4. Distributions of Available Cash from Operating Surplus.................... 56
Section 6.5. Distributions of Available Cash from Capital Surplus...................... 58
Section 6.6. Adjustment of Minimum Quarterly Distribution and Target Distribution
Levels.................................................................... 58
Section 6.7. Special Provisions Relating to the Holders of Senior Subordinated
Units and Junior Subordinated Units....................................... 59
Section 6.8. Special Provisions Relating to the Holders of Incentive
Distribution Rights....................................................... 59
Section 6.9. Entity-Level Taxation..................................................... 60
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1. Management................................................................ 60
Section 7.2. Certificate of Limited Partnership........................................ 62
Section 7.3. Restrictions on General Partners' Authority............................... 63
Section 7.4. Reimbursement of the General Partners..................................... 63
Section 7.5. Outside Activities........................................................ 64
Section 7.6. Loans from the General Partners; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the
General Partners.......................................................... 65
Section 7.7. Indemnification........................................................... 67
Section 7.8. Liability of Indemnitees.................................................. 69
Section 7.9. Resolution of Conflicts of Interest....................................... 69
Section 7.10. Other Matters Concerning the General Partners............................. 71
Section 7.11. Purchase or Sale of Partnership Securities................................ 71
Section 7.12. Registration Rights of the General Partners and their Affiliates.......... 72
Section 7.13. Reliance by Third Parties................................................. 74
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1. Records and Accounting.................................................... 74
Section 8.2. Fiscal Year............................................................... 75
Section 8.3. Reports................................................................... 75
-ii-
ARTICLE IX
TAX MATTERS
Section 9.1. Tax Returns and Information............................................................ 75
Section 9.2. Tax Elections.......................................................................... 75
Section 9.3. Tax Controversies...................................................................... 76
Section 9.4. Withholding............................................................................ 76
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1. Admission of Initial Limited Partners.................................................. 76
Section 10.2. Admission of Substituted Limited Partner............................................... 77
Section 10.3. Admission of Successor General Partners................................................ 77
Section 10.4. Admission of Additional Limited Partners............................................... 77
Section 10.5. Amendment of Agreement and Certificate of Limited Partnership.......................... 78
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1. Withdrawal of the Managing General Partner............................................. 78
Section 11.2. Removal of the Managing General Partner................................................ 80
Section 11.3. Interest of Departing Partner and Successor General Partners........................... 80
Section 11.4. Withdrawal of Non-Managing General Partner............................................. 82
Section 11.5. Termination of Subordination Period, Conversion of Senior Subordinated Units
and Junior Units and Extinguishment of Cumulative Common Unit
Arrearages............................................................................. 83
Section 11.6. Withdrawal of Limited Partners......................................................... 83
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1. Dissolution............................................................................ 83
Section 12.2. Continuation of the Business of the Partnership After Dissolution...................... 84
Section 12.3. Liquidator............................................................................. 84
Section 12.4. Liquidation............................................................................ 85
Section 12.5. Cancellation of Certificate of Limited Partnership..................................... 86
Section 12.6. Return of Contributions................................................................ 86
Section 12.7. Waiver of Partition.................................................................... 86
Section 12.8. Capital Account Restoration............................................................ 86
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
Section 13.1. Amendment to be Adopted Solely by the Managing General Partner......................... 87
Section 13.2. Amendment Procedures................................................................... 88
Section 13.3. Amendment Requirements................................................................. 88
Section 13.4. Special Meetings....................................................................... 89
Section 13.5. Notice of a Meeting.................................................................... 90
Section 13.6. Record Date............................................................................ 90
-iii-
Section 13.7. Adjournment............................................................. 90
Section 13.8. Waiver of Notice; Approval of Meeting; Approval of Minutes.............. 90
Section 13.9. Quorum.................................................................. 91
Section 13.10. Conduct of a Meeting.................................................... 91
Section 13.11. Action Without a Meeting................................................ 92
Section 13.12. Voting and Other Rights................................................. 92
ARTICLE XIV
MERGER
Section 14.1. Authority............................................................... 93
Section 14.2. Procedure for Merger or Consolidation................................... 93
Section 14.3. Approval by Limited Partners of Merger or Consolidation................. 94
Section 14.4. Certificate of Merger................................................... 95
Section 14.5. Effect of Merger........................................................ 95
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Section 15.1. Right to Acquire Limited Partner Interests.............................. 95
ARTICLE XVI
GENERAL PROVISIONS
Section 16.1. Addresses and Notices................................................... 97
Section 16.2. Further Action.......................................................... 98
Section 16.3. Binding Effect.......................................................... 98
Section 16.4. Integration............................................................. 98
Section 16.5. Creditors............................................................... 98
Section 16.6. Waiver.................................................................. 98
Section 16.7. Counterparts............................................................ 98
Section 16.8. Applicable Law.......................................................... 99
Section 16.9. Invalidity of Provisions................................................ 99
Section 16.10. Consent of Partners..................................................... 99
-iv-
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
INERGY, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF INERGY, L.P.
dated as of July 31, 2001, is entered into by and among Inergy GP LLC, a
Delaware limited liability company, as the Managing General Partner, Inergy
Partners, LLC, a Delaware limited liability company, as the Non-Managing General
Partner and as the Organizational Limited Partner, New Inergy Propane, LLC, a
Delaware limited liability company, Inergy Holdings, LLC, a Delaware limited
liability company, 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.
"Acquisition" means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such transaction.
"Additional Book Basis" means the portion of any remaining Carrying Value
of an Adjusted Property that is attributable to positive adjustments made to
such Carrying Value as a result of Book-Up Events. For purposes of determining
the extent that Carrying Value constitutes Additional Book Basis:
(i) Any negative adjustment made to the Carrying Value of an Adjusted
Property as a result of either a Book-Down Event or a Book-Up Event shall
first be deemed to offset or decrease that portion of the Carrying Value of
such Adjusted Property that is attributable to any prior positive
adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.
(ii) If Carrying Value that constitutes Additional Book Basis is
reduced as a result of a Book-Down Event and the Carrying Value of other
property is increased as a result of such Book-Down Event, an allocable
portion of any such increase in Carrying Value shall be treated as
Additional Book Basis; provided that the amount treated as Additional Book
Basis pursuant hereto as a result of such Book-Down Event shall not exceed
the amount by which the Aggregate Remaining Net Positive Adjustments after
such Book-Down Event exceeds the remaining Additional Book Basis
attributable to all
of the Partnership's Adjusted Property after such Book-Down Event
(determined without regard to the application of this clause (ii) to such
Book-Down Event).
"Additional Book Basis Derivative Items" means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis. To the extent
that the Additional Book Basis attributable to all of the Partnership's Adjusted
Property as of the beginning of any taxable period exceeds the Aggregate
Remaining Net Positive Adjustments as of the beginning of such period (the
"Excess Additional Book Basis"), the Additional Book Basis Derivative Items for
such period shall be reduced by the amount that bears the same ratio to the
amount of Additional Book Basis Derivative Items determined without regard to
this sentence as the Excess Additional Book Basis bears to the Additional Book
Basis as of the beginning of such period.
"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, a Common
Unit, a Senior Subordinated Unit, a Junior Subordinated Unit or an Incentive
Distribution Right or any other specified interest in the Partnership shall be
the amount which such Adjusted Capital Account would be if such General Partner
Interest, Common Unit, Senior Subordinated Unit, Junior Subordinated Unit,
Incentive Distribution Right 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, Common Unit, Senior Subordinated Unit, Junior
Subordinated Unit, Incentive Distribution Right or other interest was first
issued.
"Adjusted Operating Surplus" means, with respect to any period, Operating
Surplus generated during such period (a) less (i) any net increase in Working
Capital Borrowings with respect to such period and (ii) any net reduction in
cash reserves for Operating Expenditures with respect to such period not
relating to an Operating Expenditure made with respect to such period, and (b)
plus (i) any net decrease in Working Capital Borrowings with respect to such
period and (ii) any net increase in cash reserves for Operating Expenditures
with respect to such period required by any debt instrument for the repayment of
principal, interest or premium. Adjusted
-2-
Operating Surplus does not include that portion of Operating Surplus included in
clause (a)(i) of the definition of Operating Surplus.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Aggregate Remaining Net Positive Adjustments" means, as of the end of any
taxable period, the sum of the Remaining Net Positive Adjustments of all the
Partners.
"Agreed Allocation" means any allocation, other than a Required Allocation,
of an item of income, gain, loss or deduction pursuant to the provisions of
Section 6.1, including, 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. 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 Inergy, L.P., as it may be amended, supplemented or restated from
time to time.
"Assignee" means a Non-citizen Assignee or a Person to whom one or more
Limited Partner Interests have been transferred in a manner permitted under this
Agreement and who has executed and delivered a Transfer Application as required
by this Agreement, but who has not been admitted as a Substituted Limited
Partner.
"Associate" means, when used to indicate a relationship with any Person,
(a) any corporation or organization of which such Person is a director, officer
or partner or is, directly or indirectly, the owner of 20% or more of any class
of voting stock or other voting interest; (b) any trust or other estate in which
such Person has at least a 20% beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same
principal residence as such Person.
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date,
-3-
(a) the sum of (i) all cash and cash equivalents of the Partnership
Group on hand at the end of such Quarter, and (ii) all additional cash and
cash equivalents of the Partnership Group on hand on the date of
determination of Available Cash with respect to such Quarter resulting from
Working Capital Borrowings made subsequent to the end of such Quarter, less
(b) the amount of any cash reserves 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 anticipated future credit
needs of the Partnership Group) subsequent to such Quarter, (ii) comply
with applicable law or any loan agreement, security agreement, mortgage,
debt instrument or other agreement or obligation to which any Group Member
is a party or by which it is bound or its assets are subject or (iii)
provide funds for distributions under Section 6.4 or 6.5 in respect of any
one or more of the next four Quarters; provided, however, that the Managing
General Partner may not establish cash reserves pursuant to (iii) above if
the effect of such reserves would be that the Partnership is unable to
distribute the Minimum Quarterly Distribution on all Common Units, plus any
Cumulative Common Unit Arrearage on all Common Units, with respect to such
Quarter; and, provided further, that disbursements made by a Group Member
or cash reserves established, increased or reduced after the end of such
Quarter but on or before the date of determination of Available Cash with
respect to such Quarter shall be deemed to have been made, established,
increased or reduced, for purposes of determining Available Cash, within
such Quarter if the Managing General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter
shall equal zero.
"Book Basis Derivative Items" means any item of income, deduction, gain or
loss included in the determination of Net Income or Net Loss that is computed
with reference to the Carrying Value of an Adjusted Property (e.g.,
depreciation, depletion, or gain or loss with respect to an Adjusted Property).
"Book-Down Event" means an event which triggers a negative adjustment to
the Capital Accounts of the Partners pursuant to Section 5.5(d).
"Book-Tax Disparity" means with respect to any item of Contributed Property
or Adjusted Property, as of the date of any determination, the difference
between the Carrying Value of such Contributed Property or Adjusted Property and
the adjusted basis thereof for federal income tax purposes as of such date. A
Partner's share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner's Capital Account balance as maintained pursuant to Section
5.5 and the hypothetical balance of such Partner's Capital Account computed as
if it had been maintained strictly in accordance with federal income tax
accounting principles.
"Book-Up Event" means an event which triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).
-4-
"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 Missouri 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, a Common Unit, a Senior Subordinated Unit, a Junior
Subordinated Unit, an Incentive Distribution Right or any other Partnership
Interest shall be the amount which such Capital Account would be if such General
Partner Interest, Common Unit, Senior Subordinated Unit, Junior Subordinated
Unit, Incentive Distribution Right 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, Common Unit, Senior Subordinated Unit, Junior
Subordinated Unit, Incentive Distribution Right or other Partnership Interest
was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to this Agreement or the Contribution and Conveyance Agreement.
"Capital Improvement" means any (a) addition or improvement to the capital
assets owned by any Group Member or (b) acquisition of existing, or the
construction of new capital assets (including, without limitation, retail
distribution centers, propane tanks, pipeline systems, storage facilities and
related assets), in each case made to increase the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such addition, improvement,
acquisition or construction.
"Capital Surplus" has the meaning assigned to such term in Section 6.3(a).
"Carrying Value" 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.
"Cause" means a court of competent jurisdiction has entered a final, non-
appealable judgment finding the Managing General Partner liable for actual
fraud, gross negligence or willful or wanton misconduct in its capacity as a
general partner of the Partnership.
"Certificate" means a certificate (i) substantially in the form of Exhibit
A to this Agreement, (ii) issued in global form in accordance with the rules and
regulations of the Depositary or (iii) in such other form as may be adopted by
the Managing General Partner in its discretion, issued by the Partnership
evidencing ownership of one or more Common Units or a certificate, in such form
as may be adopted by the Managing General Partner in its discretion, issued by
the Partnership evidencing ownership of one or more other Partnership
Securities.
-5-
"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.
"Citizenship Certification" means a properly completed certificate in such
form as may be specified by the Managing General Partner by which an Assignee or
a Limited Partner certifies that he (and if he is a nominee holding for the
account of another Person, that to the best of his knowledge such other Person)
is an Eligible Citizen.
"Claim" has the meaning assigned to such term in Section 7.12(c).
"Closing Date" means the first date on which Common Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"Closing Price" has the meaning assigned to such term in Section 15.1(a).
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of
the Code shall be deemed to include a reference to any corresponding provision
of successor law.
"Combined Interest" has the meaning assigned to such term in Section
11.3(a).
"Commission" means the United States Securities and Exchange Commission.
"Common Unit" means a Partnership Security representing a fractional part
of the Partnership Interests of all Limited Partners and Assignees, and having
the rights and obligations specified with respect to Common Units in this
Agreement. The term "Common Unit" does not refer to a Senior Subordinated Unit
or a Junior Subordinated Unit prior to its conversion into a Common Unit
pursuant to the terms hereof.
"Common Unit Arrearage" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, the excess, if any,
of (a) the Minimum Quarterly Distribution with respect to a Common Unit in
respect of such Quarter over (b) the sum of all Available Cash distributed with
respect to a Common Unit in respect of such Quarter pursuant to Section
6.4(a)(i).
"Conflicts Committee" means a committee of the Board of Directors of the
Managing General Partner composed entirely of two or more directors who are not
(a) security holders, officers or employees of the Managing General Partner, (b)
officers, directors or employees of any Affiliate of the Managing General
Partner or (c) holders of any ownership interest in the Partnership Group other
than Common Units and who also meet the independence standards required to serve
on an audit committee of a board of directors by the National Securities
Exchange on which the Common Units are listed for trading.
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership. Once the
-6-
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, Assumption and Assignment Agreement, dated as of the Closing Date,
among the Managing General Partner, the Non-Managing General Partner, the
Partnership, the Operating Company and certain other parties, together with the
additional conveyance documents and instruments contemplated or referenced
thereunder.
"Cumulative Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters within the Subordination Period
ending on or before the last day of such Quarter over (b) the sum of any
distributions theretofore made pursuant to Section 6.4(a)(ii) and the second
sentence of Section 6.5 with respect to an Initial Common Unit (including any
distributions to be made in respect of the last of such Quarters).
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
"Current Market Price" has the meaning assigned to such term in Section
15.1(a).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. (S) 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 from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1, 11.2 or 11.4.
"Depositary" means, with respect to any Units issued in global form, The
Depository Trust Company and its successors and permitted assigns.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"Eligible Citizen" means a Person qualified to own interests in real
property in jurisdictions in which any Group Member does business or proposes to
do business from time to time, and whose status as a Limited Partner or Assignee
does not or would not subject such Group Member to a significant risk of
cancellation or forfeiture of any of its properties or any interest therein.
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Final Subordinated Units" has the meaning assigned to such term in Section
6.1(d)(x).
"First Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(E).
-7-
"First Target Distribution" means $0.66 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
2001, it means the product of $0.66 multiplied by a fraction of which the
numerator is the number of days in such period, and of which the denominator is
92), subject to adjustment in accordance with Sections 6.6 and 6.9.
"Fully Diluted Basis" means, when calculating the number of Outstanding
Units for any period, a basis that includes, in addition to the Outstanding
Units, all Partnership Securities and options, rights, warrants and appreciation
rights relating to an equity interest in the Partnership (a) that are
convertible into or exercisable or exchangeable for Partnership Units that are
senior to or pari passu with the Junior Subordinated Units, (b) whose
conversion, exercise or exchange price is less than the Current Market Price on
the date of such calculation, and (c) that may be converted into or exercised or
exchanged for such Partnership Units during the Quarter following the end of the
last Quarter contained in the period for which the calculation is being made
without the satisfaction of any contingency beyond the control of the holder
other than the payment of consideration and the compliance with administrative
mechanics applicable to such conversion, exercise or exchange; provided that for
purposes of determining the number of Outstanding Units on a Fully Diluted Basis
when calculating whether the Subordination Period has ended or Senior
Subordinated Units or Junior Subordinated Units are entitled to convert into
Common Units pursuant to Section 5.8, such Partnership Securities, options,
rights, warrants and appreciation rights shall be deemed to have been
Outstanding Units only for the four Quarters that comprise the last four
Quarters of the measurement period; provided, further, that if consideration
will be paid to any Group Member in connection with such conversion, exercise or
exchange, the number of Partnership Units to be included in such calculation
shall be that number equal to the difference between (i) the number of
Partnership Units issuable upon such conversion, exercise or exchange and (ii)
the number of Partnership Units which such consideration would purchase at the
Current Market Price.
"General Partners" means the Managing General Partner and the Non-Managing
General Partner and their successors and permitted assigns as managing general
partner and non-managing general partner, respectively, of the Partnership.
"General Partner Interest" means the ownership interest of a General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it) which may be evidenced by
Partnership Securities or a combination thereof or interest therein, and
includes any and all benefits to which a General Partner is entitled as provided
in this Agreement, together with all obligations of a General Partner to comply
with the terms and provisions of this Agreement.
"Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent given to such Person in response to a proxy or consent solicitation made
to 10 or more Persons) or disposing of any Partnership Securities with any other
Person that beneficially owns, or whose Affiliates or Associates beneficially
own, directly or indirectly, Partnership Securities.
"Group Member" means a member of the Partnership Group.
-8-
"Holder" as used in Section 7.12, has the meaning assigned to such term in
Section 7.12(a).
"Incentive Distribution Right" means a non-voting Limited Partner Interest
issued to Inergy Holdings, LLC pursuant to Section 5.2, which Partnership
Interest will confer upon the holder thereof only the rights and obligations
specifically provided in this Agreement with respect to Incentive Distribution
Rights (and no other rights otherwise available to or other obligations of a
holder of a Partnership Interest). Notwithstanding anything in this Agreement
to the contrary, the holder of an Incentive Distribution Right shall not be
entitled to vote such Incentive Distribution Right on any Partnership matter
except as may otherwise be required by law.
"Incentive Distributions" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Sections 6.4(a)(vi),
(vii) and (viii) and 6.4(b)(iii), (iv) and (v).
"Indemnified Persons" has the meaning assigned to such term in Section
7.12(c).
"Indemnitee" means (a) each General Partner, (b) any Departing Partner, (c)
any Person who is or was an Affiliate of a General Partner or any Departing
Partner, (d) any Person who is or was a member, partner, officer, director,
employee, agent or trustee of any Group Member, a General Partner or any
Departing Partner or any Affiliate of any Group Member, a General Partner or any
Departing Partner, and (e) any Person who is or was serving at the request of a
General Partner or any Departing Partner or any Affiliate of a General Partner
or any Departing Partner as an officer, director, 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 Common Units" means the Common Units sold in the Initial Offering.
"Initial Limited Partners" means Inergy Partners, LLC, New Inergy Propane,
LLC and the Underwriters, in each case upon being admitted to the Partnership in
accordance with Section 10.1.
"Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
"Initial Unit Price" means (a) with respect to the Common Units, the Senior
Subordinated Units and the Junior Subordinated Units, the initial public
offering price per Common Unit at which the Underwriters offered the Common
Units to the public for sale as set forth on the cover page of the prospectus
included as part of the Registration Statement and first issued at or after the
time the Registration Statement first became effective or (b) with respect to
any other class or series of Units, the price per Unit at which such class or
series of Units is initially sold by the Partnership, as determined by the
Managing General Partner, in each case adjusted as the Managing General Partner
determines to be appropriate to give effect to any distribution, subdivision or
combination of Units.
-9-
"Interim Capital Transactions" means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness and sales of debt securities (other than Working Capital
Borrowings and other than for items purchased on open account in the ordinary
course of business) by any Group Member; (b) sales of equity interests by any
Group Member (including the Common Units sold to the Underwriters pursuant to
the exercise of their over-allotment option); and (c) sales or other voluntary
or involuntary dispositions of any assets of any Group Member other than (i)
sales or other dispositions of inventory, accounts receivable and other assets
in the ordinary course of business, and (ii) sales or other dispositions of
assets as part of normal retirements or replacements.
"Issue Price" means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.
"Junior Subordinated Units" means a Unit representing a fractional part of
the Partnership Interests of all Limited Partners and Assignees, and having the
rights and obligations specified with respect to Junior Subordinated Units in
this Agreement.
"Limited Partner" means, unless the context otherwise requires, (a) the
Organizational Limited Partner prior to its withdrawal from the Partnership,
each Initial Limited Partner, each Substituted Limited Partner, each Additional
Limited Partner and any Departing Partner upon the change of its status from
General Partner to Limited Partner pursuant to Section 11.3 or (b) solely for
purposes of Articles V, VI, VII and IX, each Assignee; provided, however, that
when the term "Limited Partner" is used herein in the context of any vote or
other approval, including without limitation Articles XIII and XIV, such term
shall not, solely for such purpose, include any holder of an Incentive
Distribution Right except as may otherwise be required by law.
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by Common Units,
Senior Subordinated Units, Junior Subordinated Units, Incentive Distribution
Rights or other Partnership Securities or a combination thereof or interest
therein, and includes any and all benefits to which such Limited Partner or
Assignee is entitled as provided in this Agreement, together with all
obligations of such Limited Partner or Assignee to comply with the terms and
provisions of this Agreement; provided, however, that when the term "Limited
Partner Interest" is used herein in the context of any vote or other approval,
including without limitation Articles XIII and XIV, such term shall not, solely
for such purpose, include any holder of an Incentive Distribution Right except
as may otherwise be required by law.
"Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the holders of Outstanding Units have the right to elect to
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.
-10-
"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 Inergy GP, LLC and its successors and
permitted assigns as managing general partner of the Partnership.
"Merger Agreement" has the meaning assigned to such term in Section 14.1.
"Minimum Quarterly Distribution" means $0.60 per Unit per Quarter (or with
respect to the period commencing on the Closing Date and ending on September 30,
2001, it means the product of $0.60 multiplied by a fraction of which the
numerator is the number of days in such period and of which the denominator is
92), subject to adjustment in accordance with Sections 6.6 and 6.9.
"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 National 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); provided that
the determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this Agreement.
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Loss shall be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section 6.1(d); provided that the
determination of the
-11-
items that have been specially allocated under Section 6.1(d) shall be made as
if Section 6.1(d)(xii) were not in this Agreement.
"Net Positive Adjustments" means, with respect to any Partner, the excess,
if any, of the total positive adjustments over the total negative adjustments
made to the Capital Account of such Partner pursuant to Book-Up Events and Book-
Down Events.
"Net Termination Gain" means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
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).
"Non-citizen Assignee" means a Person whom the Managing General Partner has
determined in its discretion does not constitute an Eligible Citizen and as to
whose Partnership Interest the Managing General Partner has become the
Substituted Limited Partner, pursuant to Section 4.9.
"Non-Managing General Partner" means Inergy Partners, LLC and its
successors and permitted assigns as non-managing general partner of the
Partnership.
"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 (including, without limitation, any 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).
"Notice of Election to Purchase" has the meaning assigned to such term in
Section 15.1(b).
"Operating Company" means Inergy Propane, LLC, a Delaware limited liability
company, and any successors thereto.
-12-
"Operating Company Agreement" means the Limited Liability Company Agreement
of the Operating Company, as it may be amended, supplemented or restated from
time to time.
"Operating Expenditures" means all Partnership Group expenditures,
including, but not limited to, taxes, reimbursements of the Managing General
Partner, repayment of Working Capital Borrowings, debt service payments, and
capital expenditures, subject to the following:
(a) Payments (including prepayments) of principal of and premium on
indebtedness other than Working Capital Borrowings shall not constitute
Operating Expenditures.
(b) Operating Expenditures shall not include (i) capital expenditures
made for Acquisitions or for Capital Improvements, (ii) payment of
transaction expenses relating to Interim Capital Transactions or (iii)
distributions to Partners. Where capital expenditures are made in part for
Acquisitions or for Capital Improvements and in part for other purposes,
the Managing General Partner's good faith allocation between the amounts
paid for each shall be conclusive.
"Operating Surplus" means, with respect to any period ending prior to the
Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of (i) $8.5 million plus all cash and cash equivalents of
the Partnership Group on hand as of the close of business on the Closing
Date, (ii) all cash receipts of the Partnership Group for the period
beginning on the Closing Date and ending with the last day of such period,
other than cash receipts from Interim Capital Transactions (except to the
extent specified in Section 6.5) and (iii) all cash receipts of the
Partnership Group after the end of such period but on or before the date of
determination of Operating Surplus with respect to such period resulting
from Working Capital Borrowings, less
(b) the sum of (i) Operating Expenditures for the period beginning on
the Closing Date and ending with the last day of such period and (ii) the
amount of cash reserves that is necessary or advisable in the reasonable
discretion of the Managing General Partner to provide funds for future
Operating Expenditures; provided, however, that disbursements made
(including contributions to a Group Member or disbursements on behalf of a
Group Member) or cash reserves established, increased or reduced after the
end of such period but on or before the date of determination of Available
Cash with respect to such period shall be deemed to have been made,
established, increased or reduced, for purposes of determining Operating
Surplus, within such period if the Managing General Partner so determines.
Notwithstanding the foregoing, "Operating Surplus" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
"Opinion of Counsel" means a written opinion of counsel (who may be regular
counsel to the Partnership or either of the General Partners or any of their
Affiliates) acceptable to the Managing General Partner in its reasonable
discretion.
-13-
"Option Closing Date" means the date or dates on which any Common Units are
sold by the Partnership to the Underwriters upon exercise of the Over-Allotment
Option.
"Organizational Limited Partner" means Inergy Partners, LLC in its capacity
as the organizational limited partner of the Partnership pursuant to this
Agreement.
"Outstanding" means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
outstanding on the Partnership's books and records as of the date of
determination; provided, however, that if at any time any Person or Group (other
than the General Partners or their Affiliates) beneficially owns 20% or more of
any Outstanding Partnership Securities of any class then Outstanding, all
Partnership Securities owned by such Person or Group shall not be voted on any
matter and shall not be considered to be Outstanding when sending notices of a
meeting of Limited Partners to vote on any matter (unless otherwise required by
law), calculating required votes, determining the presence of a quorum or for
other similar purposes under this Agreement, except that Common Units so owned
shall be considered to be Outstanding for purposes of Section 11.1(b)(iv) (such
Common Units shall not, however, be treated as a separate class of Partnership
Securities for purposes of this Agreement); provided, further, that the
foregoing limitation shall not apply (i) to any Person or Group who acquired 20%
or more of any Outstanding Partnership Securities of any class then Outstanding
directly from the General Partners or their Affiliates, (ii) to any Person or
Group who acquired 20% or more of any Outstanding Partnership Securities of any
class then Outstanding directly or indirectly from a Person or Group described
in clause (i) provided that the General Partners shall have notified such Person
or Group in writing that such limitation shall not apply or (iii) to any Person
or Group who acquired 20% or more of any Partnership Securities issued by the
Partnership with the approval of the board of directors of the Managing General
Partner.
"Over-Allotment Option" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.
"Parity Units" means Common Units and all other Units of any other class or
series that have the right to receive (i) distributions of Available Cash from
Operating Surplus pursuant to each of subclauses (a)(i) and (a)(ii) of Section
6.4 in the same order of priority with respect to the participation of Common
Units in such distributions or (ii) to participate in allocations of Net
Termination Gain pursuant to Section 6.1(c)(i)(B) in the same order of priority
with the Common Units, in each case regardless of whether the amounts or value
so distributed or allocated on each Parity Unit equals the amount or value so
distributed or allocated on each Common Unit. Units whose participation in such
(i) distributions of Available Cash from Operating Surplus and (ii) allocations
of Net Termination Gain are subordinate in order of priority to such
distributions and allocations on Common Units shall not constitute Parity Units
even if such Units are convertible under certain circumstances into Common Units
or Parity Units.
"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).
-14-
"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 Partners.
"Partnership" means Inergy, L.P., a Delaware limited partnership, and any
successors thereto.
"Partnership Group" means the Partnership, the Operating Company and any
Subsidiary of any such entity, treated as a single consolidated entity.
"Partnership Interest" means an interest in the Partnership, which shall
include the General Partner Interests and Limited Partner Interests.
"Partnership Minimum Gain" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"Partnership Security" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation rights
relating to an equity interest in the Partnership), including without
limitation, Common Units, Senior Subordinated Units, Junior Subordinated Units
and Incentive Distribution Rights.
"Percentage Interest" means as of any date of determination (a) as to the
Non-Managing General Partner (with respect to its General Partner Interest),
2.0%, (b) as to any Unitholder or Assignee holding Units, the product obtained
by multiplying (i) 98% less the percentage applicable to paragraph (c) by (ii)
the quotient obtained by dividing (A) the number of Units held by such
Unitholder or Assignee by (B) the total number of all Outstanding Units, and (c)
as to the holders of additional Partnership Securities issued by the Partnership
in accordance with Section 5.6, the percentage established as a part of such
issuance. The Percentage Interest with respect to the Managing General
Partner's General Partner Interest shall be zero. The Percentage Interest with
respect to an Incentive Distribution Right shall at all times be zero.
"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.
"Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partners or any Affiliate of either of the General
Partners who holds Units.
"Pro Rata" means (a) when modifying Units or any class thereof, apportioned
equally among all designated Units in accordance with their relative Percentage
Interests, (b) when modifying Partners and Assignees, apportioned among all
Partners and Assignees in accordance with their relative Percentage Interests
and (c) when modifying holders of Incentive Distribution Rights, apportioned
equally among all holders of Incentive Distribution Rights in accordance with
the relative number of Incentive Distribution Rights held by each such holder.
-15-
"Purchase Date" means the date determined by the Managing General Partner
as the date for purchase of all Outstanding Units of a certain class (other than
Units owned by the General Partners and their Affiliates) pursuant to Article
XV.
"Quarter" means, unless the context requires otherwise, a fiscal quarter,
or with respect to the first fiscal quarter after the Closing Date the portion
of such fiscal quarter after the Closing Date, of the Partnership.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Partnership, which
gain is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Record Date" means the date established by the Managing General Partner
for determining (a) the identity of the Record Holders entitled to notice of, or
to vote at, any meeting of Limited Partners or entitled to vote by ballot or
give approval of Partnership action in writing without a meeting or entitled to
exercise rights in respect of any lawful action of Limited Partners or (b) the
identity of Record Holders entitled to receive any report or distribution or to
participate in any offer.
"Record Holder" means the Person in whose name a Common Unit is registered
on the books of the Transfer Agent as of the opening of business on a particular
Business Day, or with respect to other Partnership Securities, the Person in
whose name any such other Partnership Security is registered on the books which
the Managing General Partner has caused to be kept as of the opening of business
on such Business Day.
"Redeemable Interests" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-56976) as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the Commission
under the Securities Act to register the offering and sale of the Common Units
in the Initial Offering.
"Remaining Net Positive Adjustments" means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units, Senior
Subordinated Units or Junior Subordinated Units, the excess of (a) the Net
Positive Adjustments of the Unitholders holding Common Units, Senior
Subordinated Units or Junior Subordinated Units as of the end of such period
over (b) the sum of those Partners' Share of Additional Book Basis Derivative
Items for each prior taxable period, (ii) with respect to the Non-Managing
General Partner (as holder of the Non-Managing Partner's General Partner
Interest), the excess of (a) the Net Positive Adjustments of the Non-Managing
General Partner as of the end of such period over (b) the sum of the
-16-
Share of Additional Book Basis Derivative Items of the holders of the Incentive
Distribution Rights for each prior taxable period.
"Required Allocations" means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or 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.
"Second Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(F).
"Second Target Distribution" means $0.75 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
2001, it means the product of $0.75 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 6.6 and
6.9.
"Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.
"Senior Subordinated Units" means a Unit representing a fractional part of
the Partnership Interests of all Limited Partners and Assignees, and having the
rights and obligations specified with respect to Senior Subordinated Units in
this Agreement.
"Share of Additional Book Basis Derivative Items" means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable period,
(i) with respect to the Unitholders holding Common Units, Senior Subordinated
Units or Junior Subordinated Units, the amount that bears the same ratio to such
Additional Book Basis Derivative Items as the Unitholders' Remaining Net
Positive Adjustments as of the end of such period bears to the Aggregate
Remaining Net Positive Adjustments as of that time, (ii) with respect to the
Non-Managing General Partner (as holder of the Non-Managing Partner's General
Partner Interest), the amount that bears the same ratio to such additional Book
Basis Derivative Items as the Non-Managing General Partner's Remaining Net
Positive Adjustments as of the end of such period bears to the Aggregate
Remaining Net Positive Adjustment as of that time, and (iii) with respect to the
Partners holding Incentive Distribution Rights, the amount that bears the same
ratio to such Additional Book Basis Derivative Items as the Remaining Net
Positive Adjustments of the Partners holding the Incentive Distribution Rights
as of the end of such period bears to the Aggregate Remaining Net Positive
Adjustments as of that time.
"Special Approval" means approval by a majority of the members of the
Conflicts Committee.
-17-
"Subordinated Unit" means a Senior Subordinated Unit or a Junior
Subordinated Unit. The term "Subordinated Unit" as used herein does not include
a Common Unit or Parity Unit. A Subordinated Unit that is convertible into a
Common Unit or a Parity Unit shall not constitute a Common Unit or Parity Unit
until such conversion occurs.
"Subordination Period" means the period commencing on the Closing Date and
ending on the first to occur of the following dates:
(a) the first day of any Quarter beginning after June 30, 2006, in the
case of the Senior Subordinated Units, or June 30, 2008, in the case of the
Junior Subordinated Units, in respect of which (i) (A) distributions of
Available Cash from Operating Surplus on each of the Outstanding Common
Units, Senior Subordinated Units and Junior Subordinated Units and any
other Outstanding Units that are senior or equal in right of distribution
to the Junior Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
(or portion thereof for the first fiscal quarter after the Closing Date) on
all Outstanding Common Units, Senior Subordinated Units and Junior
Subordinated Units during such periods and any other Outstanding Units that
are senior or equal in right of distribution to the Junior Subordinated
Units and (B) the Adjusted Operating Surplus generated during each of the
three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Common Units, Senior Subordinated Units and
Junior Subordinated Units and any other Units that are senior or equal in
right of distribution to the Junior Subordinated Units that were
Outstanding during such periods on a Fully Diluted Basis, plus the related
distribution on the General Partner Interest during such periods and (ii)
there are no Cumulative Common Unit Arrearages; and
(b) the date on which the Managing General Partner is removed as
general partner of the Partnership upon the requisite vote by holders of
Outstanding Units under circumstances where Cause does not exist and Units
held by the General Partners and their Affiliates are not voted in favor of
such removal.
"Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such-Person.
-18-
"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).
"Third Target Distribution" means $0.90 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
2001, it means the product of $0.90 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 6.6 and
6.9.
"Third Target Liquidation Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(G).
"Trading Day" has the meaning assigned to such term in Section 15.1(a).
"Transfer" has the meaning assigned to such term in Section 4.4(a).
"Transfer Agent" means such bank, trust company or other Person (including
the Managing General Partner or one of its Affiliates) as shall be appointed
from time to time by the Partnership to act as registrar and transfer agent for
the Common Units; provided that if no Transfer Agent is specifically designated
for any other Partnership Securities, the Managing General Partner shall act in
such capacity.
"Transfer Application" means an application and agreement for transfer of
Units in the form set forth on the back of a Certificate or in a form
substantially to the same effect in a separate instrument.
"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 July 25,
2001 among the Underwriters, the Partnership and certain other parties,
providing for the purchase of Common Units by such Underwriters.
"Unit" means a Partnership Security that is designated as a "Unit" and
shall include Common Units and Subordinated Units but shall not include (i) a
General Partner Interest or (ii) Incentive Distribution Rights.
"Unitholders" means the holders of Common Units and Subordinated Units.
"Unit Majority" means, during the Subordination Period, at least a majority
of the Outstanding Common Units (excluding Common Units owned by the General
Partners and their Affiliates), voting as a class, and at least a majority of
the Outstanding Senior Subordinated Units and Junior Subordinated Units, voting
together as a single class, and thereafter, at least a majority of the
Outstanding Common Units.
-19-
"Unpaid MQD" has the meaning assigned to such term in Section 6.1(c)(i)(B).
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date (as determined under Section 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).
"Unrecovered Capital" means at any time, with respect to a Unit, the
Initial Unit Price less the sum of all distributions constituting Capital
Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the Managing General
Partner determines to be appropriate to give effect to any distribution,
subdivision or combination of such Units.
"US GAAP" means United States Generally Accepted Accounting Principles
consistently applied.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 11.1(b).
"Working Capital Borrowings" means borrowings exclusively for working
capital purposes made pursuant to a credit facility or other arrangement
requiring all such borrowings thereunder to be reduced to a relatively small
amount each year (or for the year in which the Initial Offering is consummated,
the 12-month period beginning on the Closing Date) for an economically
meaningful period of time.
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) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.
ARTICLE II
ORGANIZATION
Section 2.1. Formation.
The Managing General Partner, the Non-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
-20-
Agreement of Limited Partnership of Inergy, 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 and a Partner has no
interest in specific Partnership property.
Section 2.2. Name.
The name of the Partnership shall be "Inergy, 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,"
"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 Partners 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, 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 0000 Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxxxxxxx 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 0000 Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxxxxxxx 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) serve as a member of the Operating Company and, in connection
therewith, to exercise all the rights and powers conferred upon the Partnership
as a member of the Operating Company pursuant to the Operating Company Agreement
or otherwise, (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 business activity that the Operating Company is
permitted to engage in by the Operating Company Agreement 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 entity or arrangement to engage
indirectly in, any business activity that the Managing General Partner approves
and which lawfully may be conducted by a limited partnership organized pursuant
to the Delaware Act and,
-21-
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 a Subsidiary, or a Partnership activity that
generates qualifying income, or (ii) enhances the operations of an activity of
the Operating Company and (d) do anything necessary or appropriate to the
foregoing, including the making of capital contributions or loans to a Group
Member. The Managing General Partner has no obligation or duty to the
Partnership, the Limited Partners, the Non-Managing General Partner 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) 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 (and any successor to the
Liquidator by merger, transfer, assignment, election or otherwise) and each of
their authorized officers and attorneys-in-fact, as the case may be, with full
power of substitution, as his true and lawful agent and attorney-in-fact, with
full power and authority in his name, place and xxxxx, to:
(i) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements hereof or thereof) that the
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
-22-
and other instruments (including agreements and a certificate of merger)
relating to a merger or consolidation of the Partnership pursuant to
Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments 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 Section 13.3 or any other
provision of this Agreement that establishes a percentage of the Limited
Partners or of the Limited Partners of any class or series required to take
any action, the 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
Limited Partner's or Assignee's Partnership Interest and shall extend to such
Limited Partner's or Assignee's heirs, successors, assigns and personal
representatives. Each such 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 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 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 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.
-23-
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,
the Managing General Partner, one or more of its Affiliates or one or more
nominees, as the Managing General Partner may determine. The Managing General
Partner hereby declares and warrants that any Partnership assets for which
record title is held in the name of the Managing General Partner or one or more
of its Affiliates or one or more nominees shall be held by the Managing General
Partner or such Affiliate or nominee for the use and benefit of the Partnership
in accordance with the provisions of this Agreement; provided, however, that the
Managing 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 the Managing General Partner or as soon thereafter
as practicable, the Managing 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 a General Partner or any officer, director,
employee, manager, member, general partner, agent or trustee of a General
Partner or any of its Affiliates, or any officer, director, employee, manager,
member, general partner, agent or trustee of a Group Member, in its capacity as
such, shall not be deemed to be participation in the control of the business of
the Partnership by a limited partner of the Partnership (within the meaning of
Section 17-303(a) of the Delaware Act) and shall not affect, impair or eliminate
the limitations on the liability of the Limited Partners or Assignees under this
Agreement.
-24-
Section 3.3. Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5, 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.
(b) The Managing General Partner 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 Partnership Group, (B) could
damage the Partnership Group or (C) that any Group Member is required by law or
by agreement with any third party to keep confidential (other than agreements
with Affiliates of the Partnership the primary purpose of which is to circumvent
the obligations set forth in this Section 3.4).
-25-
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
Section 4.1. Certificates.
Upon the Partnership's issuance of Common Units, Senior Subordinated Units
or Junior Subordinated Units to any Person, the Partnership shall issue one or
more Certificates in the name of such Person evidencing the number of such Units
being so issued. In addition, (a) upon a Managing General Partner's request,
the Partnership shall issue to it one or more Certificates in the name of such
Managing General Partner evidencing its interests in the Partnership; (b) upon
the request of the Non-Managing General Partner, the Partnership shall issue to
it one or more Certificates in the name of the Non-Managing General Partner
evidencing its interests in the Partnership; and (c) upon the request of any
Person owning Incentive Distribution Rights or any other Partnership Securities
other than Common Units, Senior Subordinated Units or Junior Subordinated Units,
the Partnership shall issue to such Person one or more certificates evidencing
such Incentive Distribution Rights or other Partnership Securities other than
Common Units, Senior Subordinated Units or Junior Subordinated Units.
Certificates shall be executed on behalf of the Partnership by the Chairman of
the Board, President or any Vice President and the Secretary or any Assistant
Secretary of the Managing General Partner. No Common Unit Certificate shall be
valid for any purpose until it has been countersigned by the Transfer Agent;
provided, however, that if the Managing General Partner elects to issue Common
Units in global form, the Common Unit Certificates shall be valid upon receipt
of a certificate from the Transfer Agent certifying that the Common Units have
been duly registered in accordance with the directions of the Partnership and
the Underwriters. Subject to the requirements of Section 6.7(b), the Partners
holding Certificates evidencing Senior Subordinated Units or Junior Subordinated
Units may exchange such Certificates for Certificates evidencing Common Units on
or after the date on which such Senior Subordinated Units or Junior Subordinated
Units are converted into Common Units pursuant to the terms of Section 5.8.
Section 4.2. Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer
Agent, the appropriate officers of the Managing General Partner on behalf of the
Partnership shall execute, and the Transfer Agent shall countersign and deliver
in exchange therefor, a new Certificate evidencing the same number and type of
Partnership Securities as the Certificate so surrendered.
(b) The appropriate officers of the Managing General Partner on
behalf of the Partnership shall execute and deliver, and the Transfer Agent
shall countersign a new Certificate in place of any Certificate previously
issued if the Record Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory
to the Partnership, that a previously issued Certificate has been lost,
destroyed or stolen;
(ii) requests the issuance of a new Certificate before the
Partnership has notice that the Certificate has been acquired by a
purchaser for value in good faith and without notice of an adverse claim;
-26-
(iii) if requested by the Partnership, delivers to the Partnership a
bond, in form and substance satisfactory to the Partnership, with surety or
sureties and with fixed or open penalty as the Partnership may reasonably
direct, in its sole discretion, to indemnify the Partnership, the Partners,
the Managing General Partner and the Transfer Agent against any claim that
may be made on account of the alleged loss, destruction or theft of the
Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
Partnership.
If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable time after he has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Limited Partner Interests represented by the
Certificate is registered before the Partnership, the Managing General Partner
or the Transfer Agent receives such notification, the Limited Partner or
Assignee shall be precluded from making any claim against the Partnership, the
Managing General Partner or the Transfer Agent for such transfer or for a new
Certificate.
(c) As a condition to the issuance of any new Certificate under this
Section 4.2, the Partnership may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Transfer
Agent) reasonably connected therewith.
Section 4.3. Record Holders.
The Partnership shall be entitled to recognize the Record Holder as the
Partner or Assignee with respect to any Partnership Interest and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such Partnership Interest on the part of any other Person, regardless of whether
the Partnership shall have actual or other notice thereof, except as otherwise
provided by law or any applicable rule, regulation, guideline or requirement of
any National Securities Exchange on which such Partnership Interests are listed
for trading. Without limiting the foregoing, when a Person (such as a broker,
dealer, bank, trust company or clearing corporation or an agent of any of the
foregoing) is acting as nominee, agent or in some other representative capacity
for another Person in acquiring and/or holding Partnership Interests, as between
the Partnership on the one hand, and such other Persons on the other, such
representative Person (a) shall be the Partner or Assignee (as the case may be)
of record and beneficially, (b) must execute and deliver a Transfer Application
and (c) shall be bound by this Agreement and shall have the rights and
obligations of a Partner or Assignee (as the case may be) hereunder and as, and
to the extent, provided for herein.
Section 4.4. 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
General Partner assigns its General Partner Interest to another Person who
becomes a General Partner, by which the holder of a Limited Partner Interest
assigns such Limited Partner Interest to another Person who is or becomes a
Limited Partner or an Assignee, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise.
-27-
(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 member of a General Partner of any or all of the issued and
outstanding membership interests of such General Partner.
Section 4.5. Registration and Transfer of Limited Partner Interests.
(a) The Partnership shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Limited Partner Interests. The
Transfer Agent is hereby appointed registrar and transfer agent for the purpose
of registering Common Units and transfers of such Common Units as herein
provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers are effected in the
manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers of the Managing General Partner on behalf of the Partnership shall
execute and deliver, and in the case of Common Units, the Transfer Agent shall
countersign and deliver, in the name of the holder or the designated transferee
or transferees, as required pursuant to the holder's instructions, one or more
new Certificates evidencing the same aggregate number and type of Limited
Partner Interests as was evidenced by the Certificate so surrendered.
(b) Except as otherwise provided in Section 4.9, the Partnership
shall not recognize any transfer of Limited Partner Interests until the
Certificates evidencing such Limited Partner Interests are surrendered for
registration of transfer and such Certificates are accompanied by a Transfer
Application duly executed by the transferee (or the transferee's attorney-in-
fact duly authorized in writing). No charge shall be imposed by the Partnership
for such transfer; provided, that as a condition to the issuance of any new
Certificate under this Section 4.5, the Partnership may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
with respect thereto.
(c) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests and
the admission of any new Limited Partner shall not constitute an amendment to
this Agreement.
(d) Until admitted as a Substituted Limited Partner pursuant to
Section 10.2, the Record Holder of a Limited Partner Interest shall be an
Assignee in respect of such Limited Partner Interest. Limited Partners may
include custodians, nominees or any other individual or entity in its own or any
representative capacity.
(e) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested admission
as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and
to have executed this
-28-
Agreement, (iii) represented and warranted that such transferee has the right,
power and authority and, if an individual, the capacity to enter into this
Agreement, (iv) granted the powers of attorney set forth in this Agreement and
(v) given the consents and approvals and made the waivers contained in this
Agreement.
(f) Each General Partner and its Affiliates shall have the right at
any time to transfer their Senior Subordinated Units, Junior Subordinated Units
and Common Units (whether issued upon conversion of the Subordinated Units or
otherwise) to one or more Persons.
Section 4.6. Transfer of the Managing General Partner's General Partner
Interest.
(a) Subject to Section 4.6(c) below, prior to June 30, 2011, the
Managing General Partner shall not transfer all or any part of its General
Partner Interest to a Person unless such transfer (i) has been approved by the
prior written consent or vote of the holders of at least a majority of the
Outstanding Common Units (excluding Common Units held by the General Partners
and their Affiliates) or (ii) is of all, but not less than all, of its General
Partner Interest to (A) an Affiliate of the Managing General Partner (other than
an individual) or (B) another Person (other than an individual) in connection
with the merger or consolidation of the Managing General Partner with or into
another Person (other than an individual) or the transfer by such General
Partner of all or substantially all of its assets to another Person (other than
an individual).
(b) Subject to Section 4.6(c) below, on or after June 30, 2011, a
General Partner may transfer all or any of its General Partner Interest without
Unitholder approval.
(c) Notwithstanding anything herein to the contrary, no transfer by a
General Partner of all or any part of its General Partner Interest to another
Person shall be permitted unless (i) the transferee agrees to assume the rights
and duties of such General Partner under this Agreement and to be bound by the
provisions of this Agreement, (ii) the Partnership receives an Opinion of
Counsel that such transfer would not result in the loss of limited liability of
any Limited Partner or of any member of the Operating Company or cause the
Partnership or the Operating Company 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), (iii) in the case of
the Managing General Partner's General Partner Interest, such transferee also
agrees to purchase all (or the appropriate portion thereof, if applicable) of
the partnership or membership interest of the Managing General Partner as the
general partner or managing member, if any, of each other Group Member and (iv)
in the case of the Non-Managing Partner's General Partner Interest, (x) such
transferee also agrees to purchase all (or the appropriate portion thereof, if
applicable) of the partnership or membership interest of the Non-Managing
General Partner as the general partner or member, if any, of each other Group
Member and (y) the Managing General Partner consents to such transfer. In the
case of a transfer pursuant to and in compliance with this Section 4.6, the
transferee or successor (as the case may be) shall, subject to compliance with
the terms of Section 10.3, be admitted to the Partnership as a General Partner
immediately prior to the transfer of the Partnership Interest, and the business
of the Partnership shall continue without dissolution.
-29-
Section 4.7. Transfer of Incentive Distribution Rights.
Prior to June 30, 2011, a holder of Incentive Distribution Rights may
transfer any or all of the Incentive Distribution Rights held by such holder
without any consent of the Unitholders (a) to an Affiliate of such holder (other
than an individual) or (b) to another Person (other than an individual) in
connection with (i) the merger or consolidation of such holder of Incentive
Distribution Rights with or into such other Person or (ii) the transfer by such
holder of all or substantially all of its assets to such other Person provided
that the transferee also owns, controls or is controlled by the owner of the
Managing General Partner. Any other transfer of the Incentive Distribution
Rights prior to June 30, 2011, shall require the prior approval of holders at
least a majority of the Outstanding Common Units (excluding Common Units held by
the General Partners and their Affiliates). On or after June 30, 2011, the Non-
Managing General Partner, Inergy Holdings, LLC, or any other holder of Incentive
Distribution Rights may transfer any or all of its Incentive Distribution Rights
without Unitholder approval. Notwithstanding anything herein to the contrary,
no transfer of Incentive Distribution Rights to another Person shall be
permitted unless the transferee agrees to be bound by the provisions of this
Agreement.
Section 4.8. Restrictions on Transfers.
(a) Except as provided in Section 4.8(d) below, but notwithstanding
the other provisions of this Article IV, no transfer of any Partnership
Interests shall be made if such transfer would (i) violate the then applicable
federal or state securities laws or rules and regulations of the Commission, any
state securities commission or any other governmental authority with
jurisdiction over such transfer, (ii) terminate the existence or qualification
of the Partnership or Operating Company under the laws of the jurisdiction of
its formation, or (iii) cause the Partnership or Operating Company 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 Operating Company 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; provided, however, that any amendment that the Managing General
Partner believes, in the exercise of its reasonable discretion, could result in
the delisting or suspension of trading of any class of Limited Partner Interests
on the principal National Securities Exchange on which such class of Limited
Partner Interests is then traded must be approved, prior to such amendment being
effected, by the holders of at least a majority of the Outstanding Limited
Partner Interests of such class.
(c) The transfer of a Subordinated Unit that has converted into a
Common Unit shall be subject to the restrictions imposed by Section 6.7(b).
(d) Nothing contained in this Article IV, or elsewhere in this
Agreement, shall preclude the settlement of any transactions involving
Partnership Interests entered into through
-30-
the facilities of any National Securities Exchange on which such Partnership
Interests are listed for trading.
Section 4.9. Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state
or local law or regulation that, in the reasonable determination of the Managing
General Partner, creates a substantial risk of cancellation or forfeiture of any
property in which the Group Member has an interest based on the nationality,
citizenship or other related status of a Limited Partner or Assignee, the
Managing General Partner may request any Limited Partner or Assignee to furnish
to the Managing General Partner, within 30 days after receipt of such request,
an executed Citizenship Certification or such other information concerning his
nationality, citizenship or other related status (or, if the Limited Partner or
Assignee is a nominee holding for the account of another Person, the
nationality, citizenship or other related status of such Person) as the Managing
General Partner may request. If a Limited Partner or Assignee fails to furnish
to the Managing General Partner within the aforementioned 30-day period such
Citizenship Certification or other requested information or if upon receipt of
such Citizenship Certification or other requested information the Managing
General Partner determines, with the advice of counsel, that a Limited Partner
or Assignee is not an Eligible Citizen, the Partnership Interests owned by such
Limited Partner or Assignee shall be subject to redemption in accordance with
the provisions of Section 4.10. In addition, the Managing General Partner may
require that the status of any such Partner or Assignee be changed to that of a
Non-citizen Assignee and, thereupon, the Managing General Partner shall be
substituted for such Non-citizen Assignee as the Limited Partner in respect of
his Limited Partner Interests.
(b) The Managing General Partner shall, in exercising voting rights
in respect of Limited Partner Interests held by it on behalf of Non-citizen
Assignees, distribute the votes in the same ratios as the votes of Partners
(including without limitation the General Partners) in respect of Limited
Partner Interests other than those of Non-citizen Assignees are cast, either
for, against or abstaining as to the matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall
have no right to receive a distribution in kind pursuant to Section 12.4 but
shall be entitled to the cash equivalent thereof, and the Partnership shall
provide cash in exchange for an assignment of the Non-citizen Assignee's share
of the distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the Non-citizen
Assignee of his Limited Partner Interest (representing his right to receive his
share of such distribution in kind).
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the General
Partner, request admission as a Substituted Limited Partner with respect to any
Limited Partner Interests of such Non-citizen Assignee not redeemed pursuant to
Section 4.10, and upon his admission pursuant to Section 10.2, the Managing
General Partner shall cease to be deemed to be the Limited Partner in respect of
the Non-citizen Assignee's Limited Partner Interests.
-31-
Section 4.10. Redemption of Partnership Interests of Non-citizen Assignees.
(a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.9(a), or if upon receipt of such Citizenship
Certification or other information the General Partner determines, with the
advice of counsel, that a Limited Partner or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee establishes
to the satisfaction of the Managing General Partner that such Limited Partner or
Assignee is an Eligible Citizen or has transferred his Partnership Interests to
a Person who is an Eligible Citizen and who furnishes a Citizenship
Certification to the Managing General Partner prior to the date fixed for
redemption as provided below, redeem the Partnership Interest of such Limited
Partner or Assignee as follows:
(i) The Managing General Partner shall, not later than the 30th day
before the date fixed for redemption, give notice of redemption to the
Limited Partner or Assignee, at his last address designated on the records
of the Partnership or the Transfer Agent, by registered or certified mail,
postage prepaid. The notice shall be deemed to have been given when so
mailed. The notice shall specify the Redeemable Interests, the date fixed
for redemption, the place of payment, that payment of the redemption price
will be made upon surrender of the Certificate evidencing the Redeemable
Interests and that on and after the date fixed for redemption no further
allocations or distributions to which the Limited Partner or Assignee would
otherwise be entitled in respect of the Redeemable Interests will accrue or
be made.
(ii) The aggregate redemption price for Redeemable Interests shall be
an amount equal to the Current Market Price (the date of determination of
which shall be the date fixed for redemption) of Limited Partner Interests
of the class to be so redeemed multiplied by the number of Limited Partner
Interests of each such class included among the Redeemable Interests. The
redemption price shall be paid, in the discretion of the Managing General
Partner, in cash or by delivery of a promissory note of the Partnership in
the principal amount of the redemption price, bearing interest at the rate
of 10% annually and payable in three equal annual installments of principal
together with accrued interest, commencing one year after the redemption
date.
(iii) Upon surrender by or on behalf of the Limited Partner or
Assignee, at the place specified in the notice of redemption, of the
Certificate evidencing the Redeemable Interests, duly endorsed in blank or
accompanied by an assignment duly executed in blank, the Limited Partner or
Assignee or his duly authorized representative shall be entitled to receive
the payment therefor.
(iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Limited Partner Interests.
(b) The provisions of this Section 4.10 shall also be applicable to
Limited Partner Interests held by a Limited Partner or Assignee as nominee
of a Person determined to be other than an Eligible Citizen.
-32-
(c) Nothing in this Section 4.10 shall prevent the recipient of a
notice of redemption from transferring his Limited Partner Interest before the
redemption date if such transfer is otherwise permitted under this Agreement.
Upon receipt of notice of such a transfer, the Managing General Partner shall
withdraw the notice of redemption, provided the transferee of such Limited
Partner Interest certifies to the satisfaction of the Managing General Partner
in a Citizenship Certification delivered in connection with the Transfer
Application that he is an Eligible Citizen. If the transferee fails to make such
certification, such redemption shall be effected from the transferee on the
original redemption date.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1. Organizational Contributions.
In connection with the formation of the Partnership under the Delaware Act,
Managing General Partner has been admitted as the Managing General Partner of
the Partnership without any economic interest in the Partnership, the Non-
Managing General Partner made an initial Capital Contribution to the Partnership
in the amount of $10.00 for an interest in the Partner-Group and has been
admitted as the Non-Managing General Partner of the Partnership and the
Organizational Limited Partner made an initial Capital Contribution to the
Partnership in the amount of $990.00 for an interest in the Partnership and has
been admitted as a Limited Partner of the Partnership. As of the Closing Date,
the interest of the Organizational Limited Partner shall be redeemed as provided
in the Contribution and Conveyance Agreement; the initial Capital Contribution
of each Partner shall thereupon be refunded; and the Organizational Limited
Partner shall cease to be a Limited Partner of the Partnership. Ninety-nine
percent of any interest or other profit that may have resulted from the
investment or other use of such initial Capital Contribution shall be allocated
and distributed to the Organizational Limited Partner, and the balance thereof
shall be allocated and distributed to the Non-Managing General Partner.
Section 5.2. Contributions by the Non-Managing General Partner and its
Affiliates.
(a) On the Closing Date and pursuant to the Contribution and
Conveyance Agreement, (i) the Non-Managing General Partner shall contribute to
the Partnership, as a Capital Contribution, all of its interest in the Operating
Company in exchange for (A) the 2% Non-Managing General Partner Interest,
subject to all of the rights, privileges and duties of the Non-Managing General
Partner under this Agreement, (B) 3,143,143 Senior Subordinated Units, (C)
497,839 Junior Subordinated Units, (D) the Incentive Distribution Rights and (E)
the assumption by the Partnership of all liability for funded debt of the Non-
Managing General Partner and (ii) New Inergy Propane, LLC shall contribute to
the Partnership, as a Capital Contribution, its preferred interest in the
Operating Company in exchange for 170,224 Senior Subordinated Units and 74,703
Junior Subordinated Units.
(b) Upon the issuance of any additional Limited Partner Interests by
the Partnership (other than the issuance of the Common Units issued in the
Initial Offering or pursuant to the Over-Allotment Option), the Non-Managing
General Partner shall be required to make additional Capital Contributions equal
to 1/98th of any amount contributed to the Partnership by the Limited Partners
in exchange for such additional Limited Partner Interests.
-33-
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 5.3. Contributions by Initial Limited Partners.
(a) On the Closing Date and pursuant to the Underwriting Agreement,
each Underwriter shall contribute to the Partnership cash in an amount equal to
the Issue Price per Initial Common Unit multiplied by the number of Common Units
specified in the Underwriting Agreement to be purchased by such Underwriter at
the Closing Date. In exchange for such Capital Contributions by the
Underwriters, the Partnership shall issue Common Units to each Underwriter on
whose behalf such Capital Contribution is made in an amount equal to the
quotient obtained by dividing (i) the cash contribution to the Partnership by or
on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.
(b) Upon the exercise of the Over-Allotment Option, each Underwriter
shall contribute to the Partnership cash in an amount equal to the Issue Price
per Initial Common Unit, multiplied by the number of Common Units specified in
the Underwriting Agreement to be purchased by such Underwriter at the Option
Closing Date. In exchange for such Capital Contributions by the Underwriters,
the Partnership shall issue Common Units to each Underwriter on whose behalf
such Capital Contribution is made in an amount equal to the quotient obtained by
dividing (i) the cash contributions to the Partnership by or on behalf of such
Underwriter by (ii) the Issue Price per Initial Common Unit.
(c) No Limited Partner Interests will be issued or issuable as of or
at the Closing Date other than (i) the Common Units issuable pursuant to
subparagraph (a) hereof in aggregate number equal to 1,600,000 Units, (ii) the
"Option Units" as such term is used in the Underwriting Agreement issuable upon
exercise of the Over-Allotment Option pursuant to subparagraph (b) hereof in an
aggregate number of up to 240,000 Units, (iii) the 3,313,367 Senior Subordinated
Units and the 572,542 Junior Subordinated Units issuable to Inergy Partners, LLC
and New Inergy Propane, LLC pursuant to Section 5.2 hereof, and (iv) the
Incentive Distribution Rights.
Section 5.4. Interest and Withdrawal.
No interest on Capital Contributions shall be paid by the Partnership. 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 17-502(b) of the Delaware Act.
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
-34-
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 based upon the provisions of the Operating Company
Agreement) of all property owned by the Operating Company or any other
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 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
-35-
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) (i) A transferee of a Partnership Interest shall succeed to a
pro rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(ii) Immediately prior to the transfer of a Subordinated Unit or of a
Subordinated Unit that has converted into a Common Unit pursuant to Section
5.8 by a holder thereof (other than a transfer to an Affiliate unless the
Managing General Partner elects to have this subparagraph 5.5(c)(ii)
apply), the Capital Account maintained for such Person with respect to its
Subordinated Units or converted Subordinated Units will (A) first, be
allocated to the Subordinated Units or converted Subordinated Units to be
transferred in an amount equal to the product of (x) the number of such
Subordinated Units or converted Subordinated Units to be transferred and
(y) the Per Unit Capital Amount for a Common Unit, and (B) second, any
remaining balance in such Capital Account will be retained by the
transferor, regardless of whether it has retained any Subordinated Units or
converted Subordinated Units. Following any such allocation, the
transferor's Capital Account, if any, maintained with respect to the
retained Subordinated Units or converted Subordinated Units, if any, will
have a balance equal to the amount allocated under clause (B) above, and
the transferee's Capital Account established with respect to the
transferred Subordinated Units or converted Subordinated Units will have a
balance equal to the amount allocated under clause (A) above.
-36-
(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 a General Partner's Combined Interest
to Common Units pursuant to Section 11.3(b), 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(c) in the same manner as any item
of gain or loss 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 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(c) in the same manner as any item of gain or loss
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, 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. Issuances of Additional Partnership Securities.
(a) Subject to Section 5.7, the Partnership may issue additional
Partnership Securities and options, rights, warrants and appreciation rights
relating to the Partnership Securities for any Partnership purpose at any time
and from time to time to such Persons for such consideration and on such terms
and conditions as shall be established by the Managing General Partner in its
sole discretion, all without the approval of any Limited Partners.
-37-
(b) Each additional Partnership Security authorized to be issued by
the Partnership pursuant to Section 5.6(a) may be issued in one or more classes,
or one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series of
Partnership Securities), as shall be fixed by the Managing General Partner in
the exercise of its sole discretion, including (i) the right to share
Partnership profits and losses or items thereof; (ii) the right to share in
Partnership distributions; (iii) the rights upon dissolution and liquidation of
the Partnership; (iv) whether, and the terms and conditions upon which, the
Partnership may redeem the Partnership Security; (v) whether such Partnership
Security is issued with the privilege of conversion or exchange and, if so, the
terms and conditions of such conversion or exchange; (vi) the terms and
conditions upon which each Partnership Security will be issued, evidenced by
certificates and assigned or transferred; and (vii) the right, if any, of each
such Partnership Security to vote on Partnership matters, including matters
relating to the relative designations, preferences, rights, powers and duties of
such Partnership Security.
(c) The Managing General Partner is hereby authorized and directed to
take all actions that it deems necessary or appropriate in connection with (i)
each issuance of Partnership Securities and options, rights, warrants and
appreciation rights relating to Partnership Securities pursuant to this Section
5.6, (ii) the conversion of the Non-Managing General Partner Interest and
Incentive Distribution Rights into Units pursuant to the terms of this
Agreement, (iii) the admission of Additional Limited Partners and (iv) all
additional issuances of Partnership Securities. The Managing General Partner is
further authorized and directed to specify the relative rights, powers and
duties of the holders of the Units or other Partnership Securities being so
issued. The Managing General Partner shall do all things necessary to comply
with the Delaware Act and is authorized and directed to do all things it deems
to be necessary or advisable in connection with any future issuance of
Partnership Securities or in connection with the conversion of the Non-Managing
General Partner Interest and Incentive Distribution Rights into Units pursuant
to the terms of this Agreement, including compliance with any statute, rule,
regulation or guideline of any federal, state or other governmental agency or
any, National Securities Exchange on which the Units or other Partnership
Securities are listed for trading.
Section 5.7. Limitations on Issuance of Additional Partnership Securities.
The issuance of Partnership Securities pursuant to Section 5.6 shall be
subject to the following restrictions and limitations:
(a) Until all Outstanding Senior Subordinated Units have been
converted into Common Units, the Partnership shall not issue (and shall not
issue any options, rights, warrants or appreciation rights relating to) an
aggregate of more than 800,000 additional Parity Units without the prior
approval of the holders of a Unit Majority. In applying this limitation, there
shall be excluded Common Units and other Parity Units issued (A) in connection
with the exercise of the Over-Allotment Option pursuant to Section 5.3(b), (B)
in accordance with Section 5.7(b), (C) upon conversion of Subordinated Units
pursuant to Section 5.8, (D) upon conversion of the Non-Managing General Partner
Interest and Incentive Distribution Rights pursuant to Section 11.3(b), (E)
pursuant to the employee benefit plans of the Managing General Partner, the
Partnership or any other Group Member, (F) upon a conversion or exchange of
Parity Units issued after the date hereof into Common Units or other Parity
Units; provided that
-38-
the total amount of Available Cash required to pay the Minimum Quarterly
Distribution on the Common Units and all Parity Units does not increase as a
result of this conversion or exchange and (G) in the event of a combination or
subdivision of Common Units.
(b) The Partnership may also issue an unlimited number of Parity
Units, prior to the end of the Subordination Period and without the prior
approval of the Unitholders, if such issuance occurs (i) in connection with an
Acquisition or a Capital Improvement or (ii) within 365 days of, and the net
proceeds from such issuance are used to repay debt incurred in connection with,
an Acquisition or a Capital Improvement, in each case where such Acquisition or
Capital Improvement involves assets that, if acquired by the Partnership as of
the date that is one year prior to the first day of the Quarter in which such
Acquisition is to be consummated or such Capital Improvement is to be completed,
would have resulted, on a pro forma basis, in an increase in:
(A) the amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding Units) with
respect to the four most recently completed Quarters taken as a
whole (on a pro forma basis as described below) as compared to
(B) the actual amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding Units)
(excluding Adjusted Operating Surplus attributable to the
Acquisition or Capital Improvement) with respect to such four
most recently completed Quarters taken as a whole.
If the issuance of Parity Units with respect to an Acquisition or Capital
Improvement occurs within the first four full Quarters after the Closing Date,
then Adjusted Operating Surplus as used in clauses (A) (subject to the
succeeding sentence) and (B) above shall be calculated (i) for each Quarter, if
any, that commenced after the Closing Date for which actual results of
operations are available, based on the actual Adjusted Operating Surplus of the
Partnership generated with respect to such Quarter, and (ii) for each other
Quarter, on a pro forma basis consistent with the procedures, as applicable, set
forth in Appendix D to the Registration Statement. Furthermore, the amount in
clause (A) shall be determined on a pro forma basis assuming that (1) all of the
Parity Units to be issued in connection with or within 365 days of such
Acquisition or Capital Improvement had been issued and outstanding, (2) all
indebtedness for borrowed money to be incurred or assumed in connection with
such Acquisition or Capital Improvement (other than any such indebtedness that
is to be repaid with the proceeds of such issuance of Parity Units) had been
incurred or assumed, in each case as of the commencement of such four-Quarter
period, (3) the personnel expenses that would have been incurred by the
Partnership in the operation of the acquired assets are the personnel expenses
for employees to be retained by the Partnership in the operation of the acquired
assets, and (4) the non-personnel costs and expenses are computed on the same
basis as those incurred by the Partnership in the operation of the Partnership's
business at similarly situated Partnership facilities.
(c) During the Subordination Period, without the prior approval of
the holders of a Unit Majority, the Partnership shall not issue any additional
Partnership Securities (or options, rights, warrants or appreciation rights
related thereto) (i) that are entitled in any Quarter
-39-
to receive in respect of the Subordination Period any distribution of Available
Cash from Operating Surplus before the Common Units and any Parity Units have
received (or amounts have been set aside for payment of) the Minimum Quarterly
Distribution and any Cumulative Common Unit Arrearage for such Quarter or (ii)
that are entitle to allocations in respect of the Subordination Period of Net
Termination Gain before the Common Units and any Parity Units have been
allocated Net Termination Gain pursuant to Section 6.1(c)(i)(B).
(d) During the Subordination Period, without the prior approval of
the holders of a Unit Majority, the Partnership may issue additional Partnership
Securities (or options, rights, warrants or appreciation rights related thereto)
(i) that are not entitled in any Quarter during the Subordination Period to
receive any distributions of Available Cash from Operating Surplus until after
the Common Units and any Parity Units have received (or amounts have been set
aside for payment of) the Minimum Quarterly Distribution and any Cumulative
Common Unit Arrearage for such Quarter and (ii) that are not entitled to
allocations in respect of the Subordination Period of Net Termination Gain
before the Common Units and Parity Units have been allocated Net Termination
Gain pursuant to Section 6.1(c)(i)(B), even if (A) the amount of Available Cash
from Operating Surplus to which each such Partnership Security is entitled to
receive after the Minimum Quarterly Distribution and any Cumulative Common Unit
Arrearage have been paid or set aside for payment on the Common Units exceeds
the Minimum Quarterly Distribution, (B) the amount of Net Termination Gain to be
allocated to such Partnership Security after Net Termination Gain has been
allocated to any Common Units and Parity Units pursuant to Section 6.1(c)(i)(B)
exceeds the amount of such Net Termination Gain to be allocated to each Common
Unit or Parity Unit or (C) the holders of such additional Partnership Securities
have the right to require the Partnership or its Affiliates to repurchase such
Partnership Securities at a discount, par or a premium.
(e) No fractional Units shall be issued by the Partnership.
Section 5.8. Conversion of Subordinated Units.
(a) A total of 828,342 of the outstanding Senior Subordinated Units
will convert into Common Units on a one-for-one basis immediately after the
distribution of Available Cash to Partners pursuant to Section 6.3(a) in respect
of any Quarter ending on or after June 30, 2004, in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units, Senior Subordinated Units and Junior Subordinated Units and
any other Outstanding Units that are senior or equal in right of
distribution to the Junior Subordinated Units with respect to each of the
three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Outstanding Common Units, Senior Subordinated
Units and Junior Subordinated Units and any other Outstanding Units that
are senior or equal in right of distribution to the Junior Subordinated
Units during such periods;
(ii) the Adjusted Operating Surplus generated during each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date
-40-
equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the Common Units, Senior Subordinated Units, Junior Subordinated Units and
any other Units that are senior or equal in right of distribution to the
Junior Subordinated Units that were Outstanding during such periods on a
Fully-Diluted Basis, plus the related distribution on the General Partner
Interests during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero.
(b) An additional 828,342 of the Outstanding Senior Subordinated
Units will convert into Common Units on a one-for-one basis immediately after
the distribution of Available Cash to Partners pursuant to Section 6.3(a) in
respect of any Quarter ending on or after June 30, 2005, in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units, Senior Subordinated Units and Junior Subordinated Units and
any other Outstanding Units that are senior or equal in right of
distribution to the Junior Subordinated Units with respect to each of the
three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Outstanding Common Units, Senior Subordinated
Units and Junior Subordinated Units and any other Outstanding Units that
are senior or equal in right of distribution to the Junior Subordinated
Units during such periods;
(ii) the Adjusted Operating Surplus generated during each of the
three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Common Units, Senior Subordinated Units, Junior
Subordinated Units and any other Units that are senior or equal in right of
distribution to the Junior Subordinated Units that were Outstanding during
such periods on a Fully Diluted Basis, plus the related distribution on the
General Partner Interests during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero;
provided, however, that the conversion of Senior Subordinated Units pursuant to
this Section 5.8(b) may not occur until at least one year following the
conversion of Senior Subordinated Units pursuant to Section 5.8(a).
(c) A total of 143,136 of the outstanding Junior Subordinated Units
will convert into Common Units on a one-for-one basis immediately after the
distribution of Available Cash to Partners pursuant to Section 6.3(a) in respect
of any Quarter ending on or after June 30, 2006, in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units, Senior Subordinated Units and Junior Subordinated Units and
any other Outstanding Units that are senior or equal in right of
distribution to the Junior Subordinated Units with respect to each of the
three consecutive, non-overlapping four-
-41-
Quarter periods immediately preceding such date equaled or exceeded the sum
of the Minimum Quarterly Distribution on all of the Outstanding Common
Units, Senior Subordinated Units and Junior Subordinated Units and any
other Outstanding Units that are senior or equal in right of distribution
to the Junior Subordinated Units during such periods;
(ii) the Adjusted Operating Surplus generated during each of the
three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Common Units, Senior Subordinated Units, Junior
Subordinated Units and any other Units that are senior or equal in right of
distribution to the Junior Subordinated Units that were Outstanding during
such periods on a Fully-Diluted Basis, plus the related distribution on the
General Partner Interests during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero.
(d) An additional 143,136 of the Outstanding Junior Subordinated
Units will convert into Common Units on a one-for-one basis immediately after
the distribution of Available Cash to Partners pursuant to Section 6.3(a) in
respect of any Quarter ending on or after June 30, 2007, in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units, Senior Subordinated Units and Junior Subordinated Units and
any other Outstanding Units that are senior or equal in right of
distribution to the Junior Subordinated Units with respect to each of the
three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Outstanding Common Units, Senior Subordinated
Units and Junior Subordinated Units and any other Outstanding Units that
are senior or equal in right of distribution to the Junior Subordinated
Units during such periods;
(ii) the Adjusted Operating Surplus generated during each of the
three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Common Units, Senior Subordinated Units, Junior
Subordinated Units and any other Units that are senior or equal in right of
distribution to the Junior Subordinated Units that were Outstanding during
such periods on a Fully-Diluted Basis, plus the related distribution on the
General Partner Interests during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero;
provided, however, that the conversion of Junior Subordinated Units pursuant to
this Section 5.8(d) may not occur until at least one year following the
conversion of Junior Subordinated Units pursuant to Section 5.8(c).
-42-
(e) In the event that less than all of the Outstanding Senior
Subordinated Units shall convert into Common Units pursuant to Section 5.8(a) or
5.8(b) at a time when there shall be more than one holder of Senior Subordinated
Units, then, unless all of the holders of Senior Subordinated Units shall agree
to a different allocation, the Senior Subordinated Units that are to be
converted into Common Units shall be allocated among the holders of Senior
Subordinated Units pro rata based on the number of Senior Subordinated Units
held by each such holder.
(f) In the event that less than all of the Outstanding Junior
Subordinated Units shall convert into Common Units pursuant to Section 5.8(c) or
5.8(d) at a time when there shall be more than one holder of Junior Subordinated
Units, then, unless all of the holders of Junior Subordinated Units shall agree
to a different allocation, the Junior Subordinated Units that are to be
converted into Common Units shall be allocated among the holders of Junior
Subordinated Units pro rata based on the number of Junior Subordinated Units
held by each such holder.
(g) Any Subordinated Units that are not converted into Common Units
pursuant to Sections 5.8(a), 5.8(b), 5.8(c) and 5.8(d) shall convert into Common
Units on a one-for-one basis immediately after the distribution of Available
Cash to Partners pursuant to Section 6.3(a) in respect of the final Quarter of
the Subordination Period.
(h) Notwithstanding any other provision of this Agreement, all
Outstanding Junior Subordinated Units will convert into Common Units on a one-
for-one basis immediately after the distribution of Available Cash to Partners
pursuant to Section 6.3(a) in respect of any Quarter ending on or after June 30,
2006, in respect of which
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units, Senior Subordinated Units and Junior Subordinated Units and
any other Outstanding Units that are senior or equal in right of
distribution to the Junior Subordinated Units with respect to each of the
three consecutive, non-overlapping four-Quarter periods immediately prior
to such date have equaled or exceeded $2.80 per Unit,
(ii) the Adjusted Operating Surplus generated during each of the
three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of $2.80 on all of the
Common Units, Senior Subordinated Units, Junior Subordinated Units and any
other Units that are senior or equal in night of distribution to the Junior
Subordinated Units that were Outstanding during such periods on a Fully-
Diluted Basis, plus the related distribution on the General Partner
Interests during such periods;
(iii) no Senior Subordinated Units are outstanding, and
(iv) the Cumulative Common Unit Arrearage on all of the Common Units
is zero.
(i) Notwithstanding any other provision of this Agreement, all the
then Outstanding Subordinated Units will automatically convert into Common Units
on a one-for-one basis as set forth in, and pursuant to the terms of, Section
11.5.
-43-
(j) A Subordinated Unit that has converted into a Common Unit shall
be subject to the provisions of Section 6.7(b).
Section 5.9. Limited Preemptive Right.
Except as provided in this Section 5.9 and in Section 5.2, no Person shall
have any preemptive, preferential or other similar right with respect to the
issuance of any Partnership Security, whether unissued, held in the treasury or
hereafter created. The Non-Managing General Partner shall have the right, which
it may from time to time assign in whole or in part to any of its Affiliates, to
purchase Partnership Securities from the Partnership whenever, and on the same
terms that, the Partnership issues Partnership Securities to Persons other than
the Non-Managing General Partner and its Affiliates, to the extent necessary to
maintain the Percentage Interests of the Non-Managing General Partner and its
Affiliates equal to that which existed immediately prior to the issuance of such
Partnership Securities.
Section 5.10. Splits and Combinations.
(a) Subject to Sections 5.10(d), 6.6 and 6.9 (dealing with
adjustments of distribution levels), the Partnership may make a Pro Rata
distribution of Partnership Securities to all Record Holders or may effect a
subdivision or combination of Partnership Securities so long as, after any such
event, each Partner shall have the same Percentage Interest in the Partnership
as before such event, and any amounts calculated on a per Unit basis (including
any Common Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a
number of Units (including the number of Senior Subordinated Units and Junior
Subordinated Units that may convert prior to the end of the Subordination Period
and the number of additional Parity Units that may be issued pursuant to Section
5.7 without a Unitholder vote) are proportionately adjusted retroactive to the
beginning of the Partnership.
(b) Whenever such a distribution, subdivision or combination of
Partnership Securities is declared, the Managing General Partner shall select a
Record Date as of which the distribution, subdivision or combination shall be
effective and shall send notice thereof at least 20 days prior to such Record
Date to each Record Holder as of a date not less than 10 days prior to the date
of such notice. The Managing General Partner also may cause a firm of
independent public accountants selected by it to calculate the number of
Partnership Securities to be held by each Record Holder after giving effect to
such distribution, subdivision or combination. The Managing General Partner
shall be entitled to rely on any certificate provided by such firm as conclusive
evidence of the accuracy of such calculation.
(c) Promptly following any such distribution, subdivision or
combination, the Partnership may issue Certificates to the Record Holders of
Partnership Securities as of the applicable Record Date representing the new
number of Partnership Securities held by such Record Holders, or the Managing
General Partner may adopt such other procedures as it may deem appropriate to
reflect such changes. If any such combination results in a smaller total number
of Partnership Securities Outstanding, the Partnership shall require, as a
condition to the delivery to a Record Holder of such new Certificate, the
surrender of any Certificate held by such Record Holder immediately prior to
such Record Date.
-44-
(d) The Partnership shall not issue fractional Units upon any
distribution, subdivision or combination of Units. If a distribution,
subdivision or combination of Units would result in the issuance of fractional
Units but for the provisions of Section 5.7(d) and this Section 5.10(d), each
fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall
be rounded to the next higher Unit).
Section 5.11. Fully Paid and Non-Assessable Nature of Limited Partner
Interests.
All Limited Partner Interests issued pursuant to, and in accordance with
the requirements of, this Article V shall be fully paid and non-assessable
Limited Partner Interests in the Partnership, except as such non assessability
may be affected by Section 17-607 of the Delaware Act.
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 Non-Managing General Partner in an amount
equal to the aggregate Net Losses allocated to the Non-Managing General
Partner pursuant to Section 6.1(b)(iii) for all previous taxable years
until the aggregate Net Income allocated to the Non-Managing General
Partner pursuant to this Section 6.1(a)(i) for the current taxable year and
all previous taxable years is equal to the aggregate Net Losses allocated
to the Non-Managing General Partner pursuant to Section 6.1(b)(iii) for all
previous taxable years;
(ii) Second, 2% to the Non-Managing General Partner in an amount
equal to the aggregate Net Losses allocated to the Non-Managing General
Partner pursuant to Section 6.1(b)(ii) for all previous taxable years and
98% to the Unitholders, in accordance with their respective Percentage
Interests, until the aggregate Net Income allocated to such Partners
pursuant to this Section 6.1(a)(ii) for the current taxable year and all
previous taxable years is equal to the aggregate Net Losses allocated to
such Partners pursuant to Section 6.1(b)(ii) for all previous taxable
years; and
(iii) Third, the balance, if any, 2% to the Non-Managing General
Partner and 98% to the Unitholders, in accordance with their respective
Percentage Interests.
-45-
(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, 2% to the Non-Managing General Partner and 98% to the
Unitholders, in accordance with their respective Percentage Interests,
until the aggregate Net Losses allocated pursuant to this Section 6.1(b)(i)
for the current taxable year and all previous taxable years is equal to the
aggregate Net Income allocated to such Partners pursuant to Section
6.1(a)(iii) for all previous taxable years, provided that the Net Losses
shall not be allocated pursuant to this Section 6.1(b)(i) to the extent
that such allocation would cause any Unitholder to have a deficit balance
in its Adjusted Capital Account at the end of such taxable year (or
increase any existing deficit balance in its Adjusted Capital Account);
(ii) Second, 2% to the Non-Managing General Partner and 98% to the
Unitholders in accordance with their respective Percentage Interests;
provided, that Net Losses shall not be allocated pursuant to this Section
6.1(b)(ii) to the extent that such allocation would cause any Unitholder to
have a deficit balance in its Adjusted Capital Account at the end of such
taxable year (or increase any existing deficit balance in its Adjusted
Capital Account);
(iii) Third, the balance, if any, 100% to the Non-Managing General
Partner.
(c) Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 6.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Sections 6.4
and 6.5 have been made; provided, however, that solely for purposes of this
Section 6.1(c), Capital Accounts shall not be adjusted for distributions made
pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
among the Partners in the following manner (and the Capital Accounts of the
Partners shall be increased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its Capital
Account, in the proportion that such deficit balance bears to
the total deficit balances in the Capital Accounts of all
Partners, until each such Partner has been allocated Net
Termination Gain equal to any such deficit balance in its
Capital Account;
-46-
(B) Second, 98% to all Unitholders holding Common Units, Pro Rata,
and 2% to the Non-Managing General Partner until the Capital
Account in respect of each Common Unit then Outstanding is equal
to the sum of (1) its Unrecovered Capital plus (2) the Minimum
Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution pursuant to
Section 6.4(a)(i) or (b)(i) with respect to such Common Unit for
such Quarter (the amount determined pursuant to this clause (2)
is hereinafter defined as the "Unpaid MQD") plus (3) any then
existing Cumulative Common Unit Arrearage;
(C) Third, if such Net Termination Gain is recognized (or is deemed
to be recognized) prior to the expiration of the Subordination
Period, 98% to all Unitholders holding Senior Subordinated
Units, Pro Rata, and 2% to the Non-Managing General Partner
until the Capital Account in respect of each Senior Subordinated
Unit then Outstanding equals the sum of (1) its Unrecovered
Capital, determined for the taxable year (or portion thereof) to
which this allocation of gain relates, plus (2) the Minimum
Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution pursuant to
Section 6.4(a)(iii) with respect to such Senior Subordinated
Unit for such Quarter;
(D) Fourth, if such Net Termination Gain is recognized (or is deemed
to be recognized) prior to the expiration of the Subordination
Period, 98% to all Unitholders holding Junior Subordinated
Units, Pro Rata, and 2% to the Non-Managing General Partner
until the Capital Account in respect of each Junior Subordinated
Unit then Outstanding equals the sum of (1) its Unrecovered
Capital, determined for the taxable year (or portion thereof) to
which this allocation of gain relates, plus (2) the Minimum
Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution pursuant to
Section 6.4(a)(iv) with respect to such Junior Subordinated Unit
for such Quarter;
(E) Fifth, 98% to all Unitholders, Pro Rata, and 2% to the Non-
Managing General Partner until the Capital Account in respect of
each Common Unit then Outstanding is equal to the sum of (1) its
Unrecovered Capital, plus (2) the Unpaid MQD, plus (3) any then
existing Cumulative Common Unit Arrearage, plus (4) the excess
of (aa) the First Target Distribution less the Minimum Quarterly
Distribution for each Quarter of the Partnership's existence
over (bb) the cumulative per Unit amount of any distributions of
Available Cash that is deemed to be Operating Surplus made
pursuant to Sections 6.4(a)(v) and 6.4(b)(ii) (the sum of (1)
plus (2) plus (3) plus (4) is hereinafter defined as the "First
Liquidation Target Amount");
(F) Sixth, 85% to all Unitholders, Pro Rata, 13% to the holders of
the Incentive Distribution Rights, Pro Rata, and 2% to the Non-
Managing General Partner until the Capital Account in respect of
each Common Unit then Outstanding is equal to the sum of (1) the
First Liquidation Target
-47-
Amount, plus (2) the excess of (aa) the Second Target
Distribution less the First Target Distribution for each Quarter
of the Partnership's existence over (bb) the cumulative per Unit
amount of any distributions of Available Cash that is deemed to
be Operating Surplus made pursuant to Sections 6.4(a)(vi) and
6.4(b)(iii) (the sum of (1) plus (2) is hereinafter defined as
the "Second Liquidation Target Amount");
(G) Seventh, 75% to all Unitholders, Pro Rata, 23% to the holders of
the Incentive Distribution Rights, Pro Rata, and 2% to the Non-
Managing General Partner until the Capital Account in respect of
each Common Unit then Outstanding is equal to the sum of (1) the
Second Liquidation Target Amount, plus (2) the excess of (aa)
the Third Target Distribution less the Second Target
Distribution for each Quarter of the Partnership's existence
over (bb) the cumulative per Unit amount of any distributions of
Available Cash that is deemed to be Operating Surplus made
pursuant to Sections 6.4(a)(vii) and 6.4(b)(iv) (the sum of (1)
plus (2) is hereinafter defined as the "Third Liquidation Target
Amount");
(H) Finally, any remaining amount 50% to all Unitholders, Pro Rata,
48% to the holders of the Incentive Distribution Rights, Pro
Rata, and 2% to the Non-Managing General Partner.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated among
the Partners in the following manner:
(A) First, if such Net Termination Loss is recognized (or is deemed
to be recognized) prior to the conversion of the last
Outstanding Junior Subordinated Unit, 98% to the Unitholders
holding Junior Subordinated Units, Pro Rata, and 2% to the Non-
Managing General Partner until the Capital Account in respect of
each Junior Subordinated Unit then Outstanding has been reduced
to zero;
(B) Second, if such Net Termination Loss is recognized (or is deemed
to be recognized) prior to the conversion of the last
Outstanding Senior Subordinated Unit, 98% to the Unitholders
holding Senior Subordinated Units, Pro Rata, and 2% to the Non-
Managing General Partner until the Capital Account in respect of
each Senior Subordinated Unit then Outstanding has been reduced
to zero;
(C) Third, 98% to all Unitholders holding Common Units, Pro Rata,
and 2% to the Non-Managing General Partner until the Capital
Account in respect of each Common Unit then Outstanding has been
reduced to zero; and
(D) Fourth, the balance, if any, 100% to the Non-Managing General
Partner.
(d) Special Allocations. Notwithstanding any other provision of
this Section 6.1, the following special allocations shall be made for such
taxable period:
-48-
(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)(vi) and 6.1(d)(vii)). This
Section 6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall be
interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain. Notwithstanding
the other provisions of this Section 6.1 (other than Section 6.1(d)(i)), except
as provided in Treasury Regulation Section 1.704-2(i)(4), if there is a net
decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership taxable
period, any Partner with a share of Partner Nonrecourse Debt Minimum Gain at the
beginning of such taxable period shall be allocated items of Partnership income
and gain for such period (and, if necessary, subsequent periods) in the manner
and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-
2(j)(2)(ii), or any successor provisions. For purposes of this Section 6.1(d),
each Partner's Adjusted Capital Account balance shall be determined, and the
allocation of income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.1(d), other than
Section 6.1(d)(i) and other than an allocation pursuant to Sections 6.1(d)(vi)
and 6.1(d)(vii), with respect to such taxable period. This Section 6.1(d)(ii) is
intended to comply with the chargeback of items of income and gain requirement
in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(iii) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value of any property
distributed (except cash or property distributed pursuant to Section
12.4) to any Unitholder with respect to its Units for a taxable year
is greater (on a per Unit basis) than the amount of cash or the Net
Agreed Value of property distributed to the other Unitholders with
respect to their Units (on a per Unit basis), then (1) each
Unitholder receiving such greater cash or property distribution shall
be allocated gross income in an amount equal to the product of (aa)
the amount by which the distribution (on a per Unit basis) to such
Unitholder exceeds the distribution (on a per Unit basis) to the
Unitholders receiving the smallest distribution and (bb) the number
of Units owned by the Unitholder receiving the greater distribution;
and (2) the Non-Managing General Partner shall be allocated gross
income in an aggregate amount equal to 1/98/th/ of the sum of the
amounts allocated in clause (1) above.
-49-
(B) After the application of Section 6.1(d)(iii)(A), all or any portion
of the remaining items of Partnership gross income or gain for the
taxable period, if any, shall be allocated 100% to the holders of
Incentive Distribution Rights, Pro Rata, until the aggregate amount
of such items allocated to the holders of Incentive Distribution
Rights pursuant to this paragraph 6.1(d)(iii)(B) for the current
taxable year and all previous taxable years is equal to the
cumulative amount of all Incentive Distributions made to the holders
of Incentive Distribution Rights from the Closing Date to a date 45
days after the end of the current taxable year.
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulations promulgated under Section 704(b)
of the Code, the deficit balance, if any, in its Adjusted Capital Account
created by such adjustments, allocations or distributions as quickly as possible
unless such deficit balance is otherwise eliminated pursuant to Section
6.1(d)(i) or (ii).
(v) Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable period in
excess of the sum of (A) the amount such Partner is required to restore pursuant
to the provisions of this Agreement and (B) the amount such Partner is deemed
obligated to restore pursuant to Treasury Regulation Sections 1.704-2(g) and
1.704-2(i)(5), such Partner shall be specially allocated items of Partnership
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)(v) shall be made
only if and to the extent that such Partner would have a deficit balance in its
Capital Account as adjusted after all other allocations provided for in this
Section 6.1 have been tentatively made as if this Section 6.1(d)(v) were not in
this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period
shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the Managing General Partner determines in its good
faith discretion that the 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 General Partner is
authorized, upon notice to the other Partners, to revise the prescribed ratio to
the numerically closest ratio that does satisfy such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for
any taxable period shall be allocated 100% to the Partner that bears the
Economic Risk of Loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable in accordance with Treasury
Regulation Section 1.704-2(i). If more than one Partner bears the Economic Risk
of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse
Deductions attributable thereto shall be
-50-
allocated between or among such Partners in accordance with the ratios in which
they share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain
and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among
the Partners in accordance with their respective Percentage Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(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.
(x) Economic Uniformity. At the election of the Managing General Partner
with respect to any taxable period ending upon, or after, the termination of the
Subordination Period with respect to any class of Units, all or a portion of the
remaining items of Partnership gross income or gain for such taxable period,
after taking into account allocations pursuant to Section 6.1(d)(iii), shall be
allocated 100% to each Partner holding Units of that class that are Outstanding
as of the termination of the Subordination Period ("Final Subordinated Units")
in the proportion of the number of Final Subordinated Units held by such Partner
to the total number of Final Subordinated Units then Outstanding, until each
such Partner has been allocated an amount of gross income or gain which
increases the Capital Account maintained with respect to such Final Subordinated
Units to an amount equal to the product of (A) the number of Final Subordinated
Units held by such Partner and (B) the Per Unit Capital Amount for a Common
Unit. The purpose of this allocation is to establish uniformity between the
Capital Accounts underlying Final Subordinated Units and the Capital Accounts
underlying Common Units held by Persons other than the General Partners and
their Affiliates immediately prior to the conversion of such Final Subordinated
Units into Common Units. This allocation method for establishing such economic
uniformity will only be available to the Managing General Partner if the method
for allocating the Capital Account maintained with respect to the Subordinated
Units between the transferred and retained Subordinated Units pursuant to
Section 5.5(c)(ii) does not otherwise provide such economic uniformity to the
Final Subordinated Units.
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1, other than
the Required Allocations, the Required Allocations shall be taken
into account in making the Agreed Allocations so that, to the extent
possible, the net amount of items of income, gain, loss and
deduction allocated to each
-51-
Partner pursuant to the Required Allocations and the Agreed
Allocations, together, shall be equal to the net amount of such
items that would have been allocated to each such Partner under
the Agreed Allocations had the Required Allocations and the
related Curative Allocation not otherwise been provided in this
Section 6.1. Notwithstanding the preceding sentence, Required
Allocations relating to (1) Nonrecourse Deductions shall not be
taken into account except to the extent that there has been a
decrease in Partnership Minimum Gain and (2) Partner Nonrecourse
Deductions shall not be taken into account except to the extent
that there has been a decrease in Partner Nonrecourse Debt
Minimum Gain. Allocations pursuant to this Section 6.1(d)(xi)(A)
shall only be made with respect to Required Allocations to the
extent the General Partner 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)(xi)(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)(xi)(A) in whatever order is most likely to
minimize the economic distortions that might otherwise result
from the Required Allocations, and (2) divide all allocations
pursuant to Section 6.1(d)(xi)(A) among the Partners in a manner
that is likely to minimize such economic distortions.
(xii) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event or any recognition
of a Net Termination Loss, the following rules shall apply:
(A) In the case of any allocation of Additional Book Basis
Derivative Items (other than an allocation of Unrealized Gain or
Unrealized Loss under Section 5.5(d) hereof), the Managing
General Partner shall allocate additional items of gross income
and gain away from the holders of Incentive Distribution Rights
to the Unitholders and the Non-Managing General Partner, or
additional items of deduction and loss away from the Unitholders
and the Non-Managing General Partner to the holders of Incentive
Distribution Rights, to the extent that the Additional Book
Basis Derivative Items allocated to the Unitholders or the Non-
Managing General Partner exceed their Share of Additional Book
Basis Derivative Items. For this purpose, the Unitholders and
the Non-Managing General Partner shall be treated as being
allocated Additional Book Basis Derivative Items to the extent
that such Additional Book Basis Derivative Items have reduced
the amount of income that would otherwise have been allocated to
the Unitholders or the Non-Managing General Partner under the
Partnership Agreement (e.g., Additional Book Basis Derivative
Items taken into account in computing cost of goods sold would
reduce the
-52-
amount of book income otherwise available for allocation among
the Partners). Any allocation made pursuant to this Section
6.1(d)(xii)(A) shall be made after all of the other Agreed
Allocations have been made as if this Section 6.1(d)(xii) were
not in this Agreement and, to the extent necessary, shall
require the reallocation of items that have been allocated
pursuant to such other Agreed Allocations.
(B) In the case of any negative adjustments to the Capital Accounts
of the Partners resulting from a Book-Down Event or from the
recognition of a Net Termination Loss, such negative adjustment
(1) shall first be allocated, to the extent of the Aggregate
Remaining Net Positive Adjustments, in such a manner, as
reasonably determined by the Managing General Partner, that to
the extent possible the aggregate Capital Accounts of the
Partners will equal the amount which would have been the Capital
Account balance of the Partners if no prior Book-Up Events had
occurred, and (2) any negative adjustment in excess of the
Aggregate Remaining Net Positive Adjustments shall be allocated
pursuant to Section 6.1(c) hereof.
(C) In making the allocations required under this Section
6.1(d)(xii), the Managing General Partner, in its sole
discretion, may apply whatever conventions or other methodology
it deems reasonable to satisfy the purpose of this Section
6.1(d)(xii).
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
-53-
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 in a manner
consistent with Section 6.2(b)(i)(A); and (B) any item of Residual Gain or
Residual Loss attributable to an Adjusted Property shall be allocated among
the Partners in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Section 6.1.
(iii) The 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 Limited Partner Interests (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 Limited Partner Interests (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 Limited Partner Interests 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 Treasury Regulation Section 1.167(c)-1(a)(6) or any successor
regulations thereto. 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 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 that would not have a material adverse effect on
the Limited Partners or the Record Holders of any class or classes of Limited
Partner Interests.
(e) 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)
-54-
have been allocated any deductions directly or indirectly giving rise to the
treatment of such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized
by the Partnership for federal income tax purposes and allocated to the Partners
in accordance with the provisions hereof shall be determined without regard to
any election under Section 754 of the Code 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) Each item of Partnership income, gain, loss and deduction, shall
for federal income tax purposes, be determined on an annual basis and prorated
on a monthly basis and shall be allocated to the Partners as of the opening of
the New York Stock Exchange on the first Business Day of each month; provided,
however, that (i) such items for the period beginning on the Closing Date and
ending on the last day of the month in which the Option Closing Date or the
expiration of the Over-allotment Option occurs shall be allocated to the
Partners as of the opening of the New York Stock Exchange on the first Business
Day of the next succeeding month; and provided, further, that gain or loss on a
sale or other disposition of any assets of the Partnership or any other
extraordinary item of income or loss realized and recognized other than in the
ordinary course of business, as determined by the Managing General Partner in
its sole discretion, shall be allocated to the Partners as of the opening of the
New York Stock Exchange on the first Business Day of the month in which such
gain or loss is recognized for federal income tax purposes. The Managing General
Partner may revise, alter or otherwise modify such methods of allocation as it
determines necessary or appropriate in its sole discretion, to the extent
permitted or required by Section 706 of the Code and the regulations or rulings
promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner
under the provisions of this Article VI shall instead be made to the beneficial
owner of Limited Partner Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the Managing General Partner in its sole discretion.
Section 6.3. Requirement and Characterization of Distributions; Distributions
to Record Holders.
(a) Within 45 days following the end of each Quarter commencing with
the Quarter ending on September 30, 2001, an amount equal to 100% of Available
Cash with respect to such Quarter shall, subject to Section 17-607 of the
Delaware Act, be distributed in accordance with this Article VI by the
Partnership to the Partners as of the Record Date selected by the Managing
General Partner in its reasonable discretion. All amounts of Available Cash
distributed by the Partnership on any date from any source shall be deemed to be
Operating Surplus until the sum of all amounts of Available Cash theretofore
distributed by the Partnership to the Partners pursuant to Section 6.4 equals
the Operating Surplus from the Closing Date through the close of the immediately
preceding Quarter. Any remaining amounts of Available Cash distributed by the
Partnership on such date shall, except as otherwise provided in Section
-55-
6.5, be deemed to be "Capital Surplus." All distributions required to be made
under this Agreement shall be made subject to Section 17-607 of the Delaware
Act.
(b) Notwithstanding Section 6.3(a), in the event of the dissolution
and liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, 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.
(d) Each distribution in respect of a Partnership Interest shall be
paid by the Partnership, directly or through the Transfer Agent or through any
other Person or agent, only to the Record Holder of such Partnership Interest as
of the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such
payment by reason of an assignment or otherwise.
Section 6.4. Distributions of Available Cash from Operating Surplus.
(a) During Subordination Period. Available Cash with respect to any
Quarter within the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or 6.5 shall, subject to Section 17-
607 of the Delaware Act, be distributed as follows, except as otherwise required
by Section 5.6(b) in respect of additional Partnership Securities issued
pursuant thereto:
(i) First, 98% to the Unitholders holding Common Units, Pro Rata,
and 2% to the Non-Managing General Partner until there has been distributed
in respect of each Common Unit then Outstanding an amount equal to the
Minimum Quarterly Distribution for such Quarter;
(ii) Second, 98% to the Unitholders holding Common Units, Pro Rata,
and 2% to the Non-Managing General Partner until there has been distributed
in respect of each Common Unit then Outstanding an amount equal to the
Cumulative Common Unit Arrearage existing with respect to such Quarter;
(iii) Third, 98% to the Unitholders holding Senior Subordinated Units,
Pro Rata, and 2% to the Non-Managing General Partner until there has been
distributed in respect of each Senior Subordinated Unit then Outstanding an
amount equal to the Minimum Quarterly Distribution for such Quarter;
(iv) Fourth, 98% to the Unitholders holding Junior Subordinated
Units, Pro Rata, and 2% to the Non-Managing General Partner until there has
been distributed in respect of each Junior Subordinated Unit then
Outstanding an amount equal to the Minimum Quarterly Distribution for such
Quarter;
-56-
(v) Fifth, 98% to all Unitholders, Pro Rata, and 2% to the Non-
Managing General Partner until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the First
Target Distribution over the Minimum Quarterly Distribution for such
Quarter;
(vi) Sixth, 85% to all Unitholders, Pro Rata, 13% to the holders of
the Incentive Distribution Rights, Pro Rata, and 2% to the Non-Managing
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the Second Target
Distribution over the First Target Distribution for such Quarter;
(vii) Seventh, 75% to all Unitholders, Pro Rata, 23% to the holders
of the Incentive Distribution Rights, Pro Rata, and 2% to the Non-Managing
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the Third Target
Distribution over the Second Target Distribution for such Quarter; and
(viii) Thereafter, 50% to all Unitholders, Pro Rata, 48% to the
holders of the Incentive Distribution Rights, Pro Rata, and 2% to the Non-
Managing General Partner;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section
6.4(a)(viii).
(b) After Subordination Period. Available Cash with respect to any
Quarter after the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or 6.5, subject to Section 17-607 of
the Delaware Act, shall be distributed as follows, except as otherwise required
by Section 5.6(b) in respect of additional Partnership Securities issued
pursuant thereto:
(i) First, 98% to all Unitholders, Pro Rata, and 2% to the Non-
Managing General Partner until there has been distributed in respect of
each Unit then Outstanding an amount equal to the Minimum Quarterly
Distribution for such Quarter;
(ii) Second, 98% to all Unitholders, Pro Rata, and 2% to the Non-
Managing General Partner until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the First
Target Distribution over the Minimum Quarterly Distribution for such
Quarter;
(iii) Third, 85% to all Unitholders, Pro Rata, and 13% to the holders
of the Incentive Distribution Rights, Pro Rata, and 2% to the Non-Managing
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the Second Target
Distribution over the First Target Distribution for such Quarter;
-57-
(iv) Fourth, 75% to all Unitholders, Pro Rata, and 23% to the
holders of the Incentive Distribution Rights, Pro Rata, and 2% to the Non-
Managing General Partner until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the Third
Target Distribution over the Second Target Distribution for such Quarter;
and
(v) Thereafter, 50% to all Unitholders, Pro Rata, and 48% to the
holders of the Incentive Distribution Rights, Pro Rata, and 2% to the Non-
Managing General Partner;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section 6.4(b)(v).
Section 6.5. Distributions of Available Cash from Capital Surplus.
Available Cash that is deemed to be Capital Surplus pursuant to the
provisions of Section 6.3(a) shall, subject to Section 17-607 of the Delaware
Act, be distributed, unless the provisions of Section 6.3 require otherwise, 98%
to all Unitholders, Pro Rata, and 2% to the Non-Managing General Partner until a
hypothetical holder of a Common Unit acquired on the Closing Date has received
with respect to such Common Unit, during the period since the Closing Date
through such date, distributions of Available Cash that are deemed to be Capital
Surplus in an aggregate amount equal to the Initial Unit Price. Available Cash
that is deemed to be Capital Surplus shall then be distributed 98% to all
Unitholders holding Common Units, Pro Rata, and 2% to the Non-Managing General
Partner until there has been distributed in respect of each Common Unit then
Outstanding an amount equal to the Cumulative Common Unit Arrearage. Thereafter,
all Available Cash shall be distributed as if it were Operating Surplus and
shall be distributed in accordance with Section 6.4.
Section 6.6. Adjustment of Minimum Quarterly Distribution and Target
Distribution Levels.
(a) The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution, Third Target Distribution Common Unit Arrearages and
Cumulative Common Unit Arrearages shall be proportionately adjusted in the event
of any distribution, combination or subdivision (whether effected by a
distribution payable in Units or otherwise) of Units or other Partnership
Securities in accordance with Section 5.10. In the event of a distribution of
Available Cash that is deemed to be from Capital Surplus, the then applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution shall be adjusted proportionately
downward to equal the product obtained by multiplying the otherwise applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, as the case may be, by a fraction of
which the numerator is the Unrecovered Capital of the Common Units immediately
after giving effect to such distribution and of which the denominator is the
Unrecovered Capital of the Common Units immediately prior to giving effect to
such distribution.
-58-
(b) The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution and Third Target Distribution shall also be subject
to adjustment pursuant to Section 6.9.
Section 6.7. Special Provisions Relating to the Holders of Senior Subordinated
Units and Junior Subordinated Units.
(a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Senior Subordinated Unit or a Junior Subordinated Unit shall have all of the
rights and obligations of a Unitholder holding Common Units hereunder; provided,
however, that immediately upon the conversion of Subordinated Units into Common
Units pursuant to Section 5.8, the Unitholder holding a Subordinated Unit shall
possess all of the rights and obligations of a Unitholder holding Common Units
hereunder, including the right to vote as a Common Unitholder and the right to
participate in allocations of income, gain, loss and deduction and distributions
made with respect to Common Units; provided, however, that such converted
Subordinated Units shall remain subject to the provisions of Sections
5.5(c)(ii), 6.1(d)(x) and 6.7(b).
(b) The Unitholder holding a Senior Subordinated Unit or a Junior
Subordinated Unit which has converted into a Common Unit pursuant to Section 5.8
shall not be issued a Common Unit Certificate pursuant to Section 4.1, and shall
not be permitted to transfer its converted Subordinated Units to a Person which
is not an Affiliate of the holder until such time as the Managing General
Partner determines, based on advice of counsel, that a converted Subordinated
Unit should have, as a substantive matter, like intrinsic economic and federal
income tax characteristics, in all material respects, to the intrinsic economic
and federal income tax characteristics of an Initial Common Unit. In connection
with the condition imposed by this Section 6.7(b), the Managing General Partner
may take whatever reasonable steps are required to provide economic uniformity
to the converted Subordinated Units in preparation for a transfer of such
converted Subordinated Units, including the application of Sections 5.5(c)(ii)
and 6.1(d)(x); provided, however, that no such steps may be taken that would
have a material adverse effect on the Unitholders holding Common Units
represented by Common Unit Certificates.
Section 6.8. Special Provisions Relating to the Holders of Incentive
Distribution Rights.
Notwithstanding anything to the contrary set forth in this Agreement, the
holders of the Incentive Distribution Rights (a) shall (i) possess the rights,
and obligations provided in this Agreement with respect to a Limited Partner
pursuant to Articles III and VII and (ii) have a Capital Account as a Partner
pursuant to Section 5.5 and all other provisions related thereto and (b) shall
not (i) be entitled to vote on any matters requiring the approval or vote of the
holders of Outstanding Units, (ii) be entitled to any distributions other than
as provided in Sections 6.4(a)(vi), (vii) and (viii), 6.4(b)(iii), (iv) and (v),
and 12.4 or (iii) be allocated items of income, gain, loss or deduction other
than as specified in this Article VI.
-59-
Section 6.9. Entity-Level Taxation.
If legislation is enacted or the interpretation of existing language is
modified by the relevant governmental authority which causes the Partnership or
the Operating Company to be treated as an association taxable as a corporation
or otherwise subjects the Partnership or the Operating Company to entity-level
taxation for federal income tax purposes, the then applicable Minimum Quarterly
Distribution, First Target Distribution, Second Target Distribution and Third
Target Distribution shall be adjusted to equal the product obtained by
multiplying (a) the amount thereof by (b) one minus the sum of (i) the highest
marginal federal corporate (or other entity, as applicable) income tax rate of
the Partnership or the Operating Company for the taxable year of the Partnership
or the Operating Company in which such Quarter occurs (expressed as a
percentage) plus (ii) the effective overall state and local income tax rate
(expressed as a percentage) applicable to the Partnership or the Operating
Company for the calendar year next preceding the calendar year in which such
Quarter occurs (after taking into account the benefit of any deduction allowable
for federal income tax purposes with respect to the payment of state and local
income taxes), but only to the extent of the increase in such rates resulting
from such legislation or interpretation. Such effective overall state and local
income tax rate shall be determined for the taxable year next preceding the
first taxable year during which the Partnership or the Operating Company is
taxable for federal income tax purposes as an association taxable as a
corporation or is otherwise subject to entity-level taxation by determining such
rate as if the Partnership or the Operating Company had been subject to such
state and local taxes during such preceding taxable year.
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, and
neither the Non-Managing 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
Securities, and the incurring of any other obligations;
-60-
(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(a), the lending of funds to other Persons
(including the Operating Company); the repayment of obligations of the
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 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 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, limited liability companies,
corporations or other relationships (including the acquisition of interests
in, and the contributions of property to, the Operating Company from time
to time) subject to the restrictions set forth in Section 2.4;
(x) the control of any matters affecting the rights and obligations
of the Partnership, including the bringing and defending of actions at law
or in equity and otherwise engaging in the conduct of litigation 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;
-61-
(xii) the entering into of listing agreements with any National
Securities Exchange and the delisting of some or all of the Limited Partner
Interests from, or requesting that trading be suspended on, any such
exchange (subject to any prior approval that may be required under Section
4.8);
(xiii) unless restricted or prohibited by Section 5.7, the purchase,
sale or other acquisition or disposition of Partnership Securities, or the
issuance of additional options, rights, warrants and appreciation rights
relating to Partnership Securities; and
(xiv) the undertaking of any action in connection with the
Partnership's participation in the Operating Company as a member.
(b) Notwithstanding any other provision of this Agreement, the
Operating Company Agreement, the Delaware Act or any applicable law, rule or
regulation, each of the Partners and the Assignees and each other Person who may
acquire an interest in Partnership Securities hereby (i) approves, ratifies and
confirms the execution, delivery and performance by the parties thereto of the
Operating Company Agreement, the Underwriting Agreement, the Contribution and
Conveyance Agreement, and the other agreements and other described in or filed
as exhibits to the Registration Statement that are related to the transactions
contemplated by the Registration Statement; (ii) agrees that the 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 or the
Assignees or the other Persons who may acquire an interest in Partnership
Securities; and (iii) agrees that the execution, delivery or performance by the
General Partners, 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 General Partners of any duty that the General
Partners may owe the Partnership or the Limited Partners or any other Persons
under this Agreement (or any other agreements) or of any duty stated or implied
by law or equity.
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
-62-
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.
Section 7.3. Restrictions on General Partners' Authority.
(a) The General Partners may not, without written approval of the
specific act by holders of all of the Outstanding Limited Partner Interests or
by other written instrument executed and delivered by holders of all of the
Outstanding Limited Partner Interests 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, no General Partner
may 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
(including by way of merger, consolidation or other combination) or approve on
behalf of the Partnership the sale, exchange or other disposition of all or
substantially all of the assets of the Operating Company, without the approval
of holders of a Unit Majority; provided however that this provision shall not
preclude or limit the General Partners' ability to mortgage, pledge, hypothecate
or grant a security interest in all or substantially all of the assets of the
Partnership or Operating Company and shall not apply to any forced sale of any
or all of the assets of the Partnership or Operating Company pursuant to the
foreclosure of, or other realization upon, any such encumbrance. Without the
approval of holders of a Unit Majority, the Managing General Partner shall not,
on behalf of the Partnership, (i) consent to any amendment to the Operating
Company Agreement or, except as expressly permitted by Section 7.9(d), take any
action permitted to be taken by a member of the Operating Company, in either
case, that would adversely affect the Limited Partners (including any particular
class of Partnership Interests as compared to any other class of Partnership
Interests) in any material respect or (ii) except as permitted under Sections
4.6, 11.1 and 11.2, elect or cause the Partnership to elect a successor general
partner of the Partnership.
Section 7.4. Reimbursement of the General Partners.
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement, the General Partners shall not be compensated for their services as
general partners or managing members of 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),
-63-
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 General Partners 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
(including plans, programs and practices involving the issuance of Partnership
Securities or options to purchase Partnership Securities), or cause the
Partnership to issue Partnership Securities in connection with, or pursuant to,
any employee benefit plan, employee program or employee practice maintained or
sponsored by the Managing General Partner or any one of its Affiliates, in each
case for the benefit of 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. The
Partnership agrees to issue and sell to the Managing General Partner or any of
its Affiliates any Partnership Securities that the Managing General Partner or
such Affiliates are obligated to provide to any employees pursuant to any such
employee benefit plans, employee programs or employee practices. Expenses
incurred by the Managing General Partner in connection with any such plans,
programs and practices (including the net cost to the Managing General Partner
or such Affiliates of Partnership Securities purchased by the Managing General
Partner or such Affiliates from the Partnership to fulfill options or awards
under such plans, programs and practices) shall be reimbursed in accordance with
Section 7.4(b). Any and all obligations of the 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, 11.2 or 11.4 or the transferee of or successor to all of the Managing
General Partner's General Partner Interest.
Section 7.5. Outside Activities.
(a) After the Closing Date, the Managing General Partner, for so long
as it is a General Partner of the Partnership (i) agrees that its sole business
will be to act as a general partner or managing member of the Partnership and
any other partnership or limited liability company of which the Partnership or
the Operating Company is, directly or indirectly, a partner or member and to
undertake activities that are ancillary or related thereto (including being a
limited partner in the Partnership) and (ii) shall not engage in any business or
activity or incur any debts or liabilities except in connection with or
incidental to (A) its performance as general partner or managing member of one
or more Group Members or as described in or contemplated by the Registration
Statement or (B) the acquiring, owning or disposing of debt or equity securities
in any Group Member.
(b) Except as specifically restricted by Section 7.5(a), each
Indemnitee (other than the Managing General Partner) shall have the right to
engage in businesses of every type
-64-
and description and other activities for profit and to engage in and possess an
interest in other business ventures of any and every type or description,
whether in businesses engaged in or anticipated to be engaged in by any Group
Member, independently or with others, including business interests and
activities in direct competition with the business and activities of any Group
Member, and none of the same shall constitute a breach of this Agreement or any
duty express or implied by law to any Group Member or any Partner or Assignee.
Neither any Group Member, any Limited Partner nor any other Person shall have
any rights by virtue of this Agreement, the Operating Company 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 Section 7.5(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, (ii) it shall be deemed not to be
a breach of the General Partners' fiduciary duties 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 and (iii) the General
Partners and the Indemnities shall have no obligation to present business
opportunities to the Partnership.
(d) The General Partners and any of their Affiliates may acquire
Units or other Partnership Securities 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.
(e) The term "Affiliates" when used in Section 7.5(a) and Section
7.5(d) with respect to the General Partner shall not include any Group Member or
any Subsidiary of the Group Member.
(f) Anything in this Agreement to the contrary notwithstanding, to
the extent that provisions of Sections 7.7, 7.8, 7.9, 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 General Partners 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 General Partners have complied with their
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) Each of the General Partners or any of their Affiliates may lend
to any Group Member, and any Group Member may borrow from a General Partner or
any of its Affiliates, funds needed or desired by the Group Member for such
periods of time and in such amounts as the Managing General Partner may
determine; provided, however, that in any such case the lending party may not
charge the borrowing party interest at a rate greater than the rate that would
be charged the borrowing party or impose terms less favorable to the borrowing
party
-65-
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 a General Partner or any of its
Affiliates (other than another 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 General Partners may, or may enter into an agreement with any
of their Affiliates to, render services to a Group Member or to the General
Partners in the discharge of their duties as general partners of the
Partnership. Any services rendered to a Group Member by a 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 (i) 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) The Partnership Group 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 General Partner 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 (i) the
transactions effected pursuant to Sections 5.2 and 5.3, the Contribution and
Conveyance Agreement and any other 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. With respect to
-66-
any contribution of assets to the Partnership in exchange for Partnership
Securities, the Conflicts Committee, in determining whether the appropriate
number of Partnership Securities are being issued, may take into account, among
other things, the fair market value of the assets, the liquidated and contingent
liabilities assumed, the tax basis in the assets, the extent to which tax-only
allocations to the transferor will protect the existing partners of the
Partnership against a low tax basis, and such other factors as the Conflicts
Committee deems relevant under the circumstances.
(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 the General
Partners) 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 General
Partners on behalf of the Partnership or the Operating Company). 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 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
-67-
amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the holders of Outstanding Limited Partner
Interests, as a matter of law or otherwise, both as to actions in the
Indemnitee's capacity as an Indemnitee and as to actions in any other capacity
(including any capacity under the Underwriting Agreement), and shall continue as
to an Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the
General 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 the Indemnitee 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 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
-68-
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 Partnership Securities, 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
Operating Company Agreement, whenever a potential conflict of interest exists or
arises between a General Partner or any of its Affiliates, on the one hand, and
the Partnership, the Operating Company, any Partner or any Assignee, on the
other, any resolution or course of action by a 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
Operating Company Agreement, of any agreement contemplated herein or therein, or
of any duty stated or implied by law or equity, if the resolution or course of
action 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
-69-
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
Conflicts 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 Conflicts Committee in connection with any 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 Conflicts
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 Conflicts 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, the Operating Company, 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 Operating Company
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 Partner or such Affiliate consistent with the standards of
"reasonable discretion" set forth in the definitions of Available Cash or
Operating Surplus shall not constitute a breach of any duty of the Managing
General Partner to the Partnership or the Limited Partners. 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
-70-
or the 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 Non-
Managing General Partner or its Affiliates (including in their capacities as
Limited Partners) to exceed 2% of the total amount distributed to all partners
or (B) hasten the expiration of the Subordination Period or the conversion of
any Senior Subordinated Units or Junior 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 Unitholders hereby authorize the Managing General Partner, on
behalf of the Partnership as a partner or member of a Group Member, to approve
of actions by the general partner or managing member of such Group Member
similar to those actions permitted to be taken by the Managing General Partner
pursuant to this Section 7.9.
Section 7.10. Other Matters Concerning the General Partners.
(a) A 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) A 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 such 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) A 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 extent permitted by law, as required to permit the
General Partners 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. Purchase or Sale of Partnership Securities.
The Managing General Partner may cause the Partnership to purchase or
otherwise acquire Partnership Securities; provided that, except as permitted
pursuant to Section 4.10, the Managing General Partner may not cause any Group
Member to purchase Subordinated Units during the Subordination Period. As long
as Partnership Securities are held by any Group
-71-
Member, such Partnership Securities shall not be considered Outstanding for any
purpose, except as otherwise provided herein. The General Partners or any of
their Affiliates may also purchase or otherwise acquire and sell or otherwise
dispose of Partnership Securities for their own account, subject to the
provisions of Articles IV and X.
Section 7.12. Registration Rights of the General Partners and their Affiliates.
(a) If (i) either of the General Partners or any Affiliate of either
of the General Partners (including for purposes of this Section 7.12, any Person
that is an Affiliate of either of the General Partners at the date of this
Agreement notwithstanding that it may later cease to be an Affiliate of the
General Partner) holds Partnership Securities that it desires to sell and (ii)
Rule 144 of the Securities Act (or any successor rule or regulation to Rule 144)
or another exemption from registration is not available to enable such holder of
Partnership Securities (the "Holder") to dispose of the number of Partnership
Securities it desires to sell at the time it desires to do so without
registration under the Securities Act, then upon the request of such General
Partner or any of its Affiliates, the Partnership shall file with the Commission
as promptly as practicable after receiving such request, and use all reasonable
efforts to cause to become effective and remain effective for a period of not
less than six months following its effective date or such shorter period as
shall terminate when all Partnership Securities covered by such registration
statement have been sold, a registration statement under the Securities Act
registering the offering and sale of the number of Partnership Securities
specified by the Holder; provided, however, that the Partnership shall not be
required to effect more than three registrations pursuant to this Section
7.12(a); and provided further, that if the Conflicts Committee determines in its
good faith judgment that a postponement of the requested registration for up to
six months would be in the best interests of the Partnership and its Partners
due to a pending transaction, investigation or other event, the filing of such
registration statement or the effectiveness thereof may be deferred for up to
six months, but not thereafter. In connection with any registration pursuant to
the immediately preceding sentence, the Partnership shall promptly prepare and
file (x) such documents as may be necessary to register or qualify the
securities subject to such registration under the securities laws of such states
as the Holder shall reasonably request; provided, however, that no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Partnership would become subject to general service of process or to
taxation or qualification to do business as a foreign corporation or partnership
doing business in such jurisdiction solely as a result of such registration, and
(y) such documents as may be necessary to apply for listing or to list the
Partnership Securities subject to such registration on such National Securities
Exchange as the Holder shall reasonably request, and do any and all other acts
and things that may reasonably be necessary or advisable to enable the Holder to
consummate a public sale of such Partnership Securities in such states. Except
as set forth in Section 7.12(c), all costs and expenses of any such registration
and offering (other than the underwriting discounts and commissions) shall be
paid by the Partnership, without reimbursement by the Holder.
(b) If the Partnership shall at any time propose to file a
registration statement under the Securities Act for an offering of equity
securities of the Partnership for cash (other than an offering relating solely
to an employee benefit plan), the Partnership shall use all reasonable efforts
to include such number or amount of securities held by the Holder in such
registration statement as the Holder shall request. If the proposed offering
pursuant to this Section 7.12(b)
-72-
shall be an underwritten offering, then, in the event that the managing
underwriter or managing underwriters of such offering advise the Partnership and
the Holder in writing that in their opinion the inclusion of all or some of the
Holder's Partnership Securities would adversely and materially affect the
success of the offering, the Partnership shall include in such offering only
that number or amount, if any, of securities held by the Holder which, in the
opinion of the managing underwriter or managing underwriters, will not so
adversely and materially affect the offering. Except as set forth in Section
7.12(c), all costs and expenses of any such registration and offering (other
than the underwriting discounts and commissions) shall be paid by the
Partnership, without reimbursement by the Holder.
(c) If underwriters are engaged in connection with any registration
referred to in this Section 7.12, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of the Partnership's obligation under Section
7.7, the Partnership shall, to the fullest extent, permitted by law, indemnify
and hold harmless the Holder, its officers, directors and each Person who
controls the Holder (within the meaning of the Securities Act) and any agent
thereof (collectively, "Indemnified Persons") against any losses, claims,
demands, actions, causes of action, assessments, damages, liabilities (joint or
several), costs and expenses (including interest, penalties and reasonable
attorneys' fees and disbursements), resulting to, imposed upon, or incurred by
the Indemnified Persons, directly or indirectly, under the Securities Act or
otherwise (hereinafter referred to in this Section 7.12(c) as a "claim" and in
the plural as "claims") based upon, arising out of or resulting from any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which any Partnership Securities were registered
under the Securities Act or any state securities or Blue Sky laws, in any
preliminary prospectus (if used prior to the effective date of such registration
statement), or in any summary or final prospectus or in any amendment or
supplement thereto (if used during the period the Partnership is required to
keep the registration statement current), or arising out of, based upon or
resulting from the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements made therein
not misleading; provided, however, that the Partnership shall not be liable to
any Indemnified Person to the extent that any such claim arises out of, is based
upon or results from an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, such preliminary,
summary or final prospectus or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Partnership by or on
behalf of such Indemnified Person specifically for use in the preparation
thereof.
(d) The provisions of Section 7.12(a) and 7.12(b) shall continue to
be applicable with respect to the General Partners (and any of the General
Partners' Affiliates) after they cease to be Partners of the Partnership, during
a period of two years subsequent to the effective date of such cessation and for
so long thereafter as is required for the Holder to sell all of the Partnership
Securities with respect to which it has requested during such two-year period
inclusion in a registration statement otherwise filed or that a registration
statement be filed; provided, however, that the Partnership shall not be
required to file successive registration statements covering the same
Partnership Securities for which registration was demanded during such two-year
period. The provisions of Section 7.12(c) shall continue in effect thereafter.
-73-
(e) (e) Any request to register Partnership Securities pursuant to
this Section 7.12 shall (i) specify the Partnership Securities intended to be
offered and sold by the Person making the request, (ii) express such Person's
present intent to offer such shares for distribution, (iii) describe the nature
or method of the proposed offer and sale of Partnership Securities, and (iv)
contain the undertaking of such Person to provide all such information and
materials and take all action as may be required in order to permit the
Partnership to comply with all applicable requirements in connection with the
registration of such Partnership Securities.
Section 7.13. 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 the
Partnership has full power and authority to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any
authorized contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the 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 the record of the
Record Holders and Assignees of Units or other Partnership Securities, books of
account and records of Partnership proceedings, may be kept on, or be in the
form of, computer disks, hard drives, punch cards, magnetic tape, photographs,
micrographics or any other information storage device; provided, that the books
and records so maintained are convertible into clearly legible written form
within
-74-
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 December
31.
Section 8.3. Reports.
(a) As soon as practicable, but in no event later than 120 days after
the close of each fiscal year of the Partnership, the Managing General Partner
shall cause to be mailed or furnished to each Record Holder of a Unit as of a
date selected by the Managing General Partner in its discretion, an annual
report containing financial statements of the Partnership for such fiscal year
of the Partnership, presented in accordance with U.S. GAAP, including a balance
sheet and statements of operations, Partnership equity and cash flows, such
statements to be audited by a firm of independent public accountants selected by
the Managing General Partner.
(b) As soon as practicable, but in no event later than 90 days after
the close of each Quarter except the last Quarter of each fiscal year, the
Managing General Partner shall cause to be mailed or furnished to each Record
Holder of a Unit, as of a date selected by the Managing General Partner in its
discretion, a report containing unaudited financial statements of the
Partnership and such other information as may be required by applicable law,
regulation or rule of any National Securities Exchange on which the Units are
listed for trading, or as the Managing General Partner determines to be
necessary or appropriate.
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 Record Holders for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
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. Notwithstanding any other provision herein contained, for
the purposes of computing the adjustments under Section 743(b) of the Code, the
Managing General Partner shall be authorized (but not required) to adopt a
convention whereby the price paid by a transferee of a Limited Partner Interest
will be deemed to be the lowest quoted closing price of the Limited Partner
Interests on any National Securities Exchange
-75-
on which such Limited Partner Interests are traded during the calendar month in
which such transfer is deemed to occur pursuant to Section 6.2(g) without regard
to the actual price paid by such transferee.
(b) 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 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 and the Operating Company
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 Initial Limited Partners.
Upon the issuance by the Partnership of Common Units, Senior Subordinated
Units, Junior Subordinated Units and Incentive Distribution Rights to Inergy
Partners, LLC, New Inergy Propane, LLC, Inergy Holdings, LLC and the
Underwriters as described in Section 5.3 in connection with the Initial
Offering, the Managing General Partner shall admit such parties to the
Partnership as Initial Limited Partners in respect of the Common Units, Senior
Subordinated Units, Junior Subordinated Units or Incentive Distribution Rights
issued to them.
-76-
Section 10.2. Admission of Substituted Limited Partner.
By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Certificate
representing a Limited Partner Interest shall, however, only have the authority
to convey to a purchaser or other transferee who does not execute and deliver a
Transfer Application (a) the right to negotiate such Certificate to a purchaser
or other transferee and (b) the right to transfer the right to request admission
as a Substituted Limited Partner to such purchaser or other transferee in
respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest (including any nominee holder or an agent acquiring
such Limited Partner Interest for the account of another Person) who executes
and delivers a Transfer Application shall, by virtue of such execution and
delivery, be an Assignee and be deemed to have applied to become a Substituted
Limited Partner with respect to the Limited Partner Interests so transferred to
such Person. Such Assignee shall become a Substituted Limited Partner (x) at
such time as the Managing General Partner consents thereto, which consent may be
given or withheld in the Managing General Partner's discretion, and (y) when any
such admission is shown on the books and records of the Partnership. If such
consent is withheld, such transferee shall be an Assignee. An Assignee shall
have an interest in the Partnership equivalent to that of a Limited Partner with
respect to allocations and distributions, including liquidating distributions,
of the Partnership. With respect to voting rights attributable to Limited
Partner Interests that are held by Assignees, the Managing General Partner shall
be deemed to be the Limited Partner with respect thereto and shall, in
exercising the voting rights in respect of such Limited Partner Interests on any
matter, vote such Limited Partner Interests at the written direction of the
Assignee who is the Record Holder of such Limited Partner Interests. If no such
written direction is received, such Limited Partner Interests will not be voted.
An Assignee shall have no other rights of a Limited Partner.
Section 10.3. Admission of Successor General Partners.
A successor General Partner approved pursuant to Section 11.1, 11.2 or 11.4
or the transferee of or successor to such General Partner Interest pursuant to
Section 4.6 who is proposed to be admitted as a successor General Partner shall
be admitted to the Partnership as the Non-Managing General Partner or the
Managing General Partner, as the case may be, effective immediately prior to the
withdrawal or removal of the predecessor or transferring General Partner
pursuant to Section 11.1, 11.2 or 11.4 or the transfer of such General Partner's
General Partner Interest pursuant to Section 4.6; provided, however, that no
such successor shall be admitted to the Partnership until compliance with the
terms of Section 4.6 has occurred and such successor has executed and delivered
such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.
Section 10.4. Admission of Additional Limited Partners.
(a) A Person (other than the General Partners, an Initial Limited
Partner 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
-77-
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.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1. Withdrawal of the Managing General Partner.
(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 other Partners;
(ii) The Managing General Partner transfers all of its rights as
Managing General Partner pursuant to Section 4.6;
(iii) The Managing General Partner is removed pursuant to Section
11.2;
(iv) 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)(iv); or (E)
seeks, consents to or acquiesces in
-78-
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;
(v) A final and non-appealable order of relief under Chapter 7 of
the United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the Managing General Partner; or
(vi) (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 or a limited liability company,
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 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), (v) or (vi)(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 June 30, 2011, 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 Unitholders holding at least a
majority of the Outstanding Common Units (excluding Common Units held by the
General Partners and their Affiliates) 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 Managing General
Partner) would not result in the loss of the limited liability of any Limited
Partner or of a member of the Operating Company or cause the Partnership or the
Operating Company 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 June 30, 2011, the Managing General Partner
voluntarily withdraws by giving at least 90 days' advance notice to the
Unitholders, such withdrawal to take effect on the date specified in such
notice; (iii) at any time that the Managing General Partner ceases to be the
Managing General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant
to Section 11.2; or (iv) notwithstanding clause (i) of this sentence, at any
time that the Managing General Partner voluntarily withdraws by giving at least
90 days' advance notice of its intention to withdraw to the Limited Partners,
such withdrawal to take effect on the date specified in the notice, if at the
time such notice is given one Person and its Affiliates (other than the Managing
General Partner and their Affiliates) own beneficially or of record or control
at least 50% of the
-79-
Outstanding Units. The withdrawal of the Managing General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall also constitute
the withdrawal of the Managing General Partner as general partner or managing
member, to the extent applicable, of the other Group Members. If the Managing
General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the
holders of a Unit Majority, may, prior to the effective date of such withdrawal,
elect a successor Managing General Partner. The Person so elected as successor
Managing General Partner shall automatically become the successor general
partner or managing member, to the extent applicable, of the other Group Members
of which the Managing General Partner is a general partner or a managing member.
If, prior to the effective date of the Managing General Partner's withdrawal
pursuant to Section 11.1(a)(i), a successor is not selected by the Unitholders
as provided herein or the Partnership does not receive a Withdrawal Opinion of
Counsel, the Partnership shall be dissolved in accordance with Section 12.1. Any
successor Managing General Partner elected in accordance with the terms of this
Section 11.1 shall be subject to the provisions of Section 10.3.
Section 11.2. Removal of the Managing General Partner.
The Managing General Partner may be removed if such removal is approved by
the Unitholders holding at least 66 2/3% of the Outstanding Units (including
Units held by the General Partners and their Affiliates). Any such action by
such holders for removal of the Managing General Partner must also provide for
the election of a successor Managing General Partner by the Unitholders holding
a Unit Majority (including Units held by the General Partners and their
Affiliates). Such removal shall be effective immediately following the admission
of a successor Managing General Partner pursuant to Section 10.3. The removal of
the Managing General Partner shall also automatically constitute the removal of
the Managing General Partner as general partner or managing member, to the
extent applicable, of the other Group Members of which the Managing General
Partner is a general partner or a managing member. If a Person is elected as a
successor Managing General Partner in accordance with the terms of this Section
11.2, such Person shall, upon admission pursuant to Section 10.3, automatically
become a successor general partner or managing member, to the extent applicable,
of the other Group Members of which the Managing General Partner is a general
partner or a managing member. The right of the holders of Outstanding Units to
remove the Managing General Partner shall not exist or be exercised unless the
Partnership has received an opinion opining as to the matters covered by a
Withdrawal Opinion of Counsel. Any successor Managing General Partner elected in
accordance with the terms of this Section 11.2 shall be subject to the
provisions of Section 10.3.
Section 11.3. Interest of Departing Partner and Successor General Partners.
(a) In the event of (i) withdrawal of a General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of a the Managing General Partner by the holders of Outstanding Units
under circumstances where Cause does not exist, if a successor General Partner
is elected in accordance with the terms of Section 11.1, 11.2 or 11.4, the
Departing Partner shall have the option exercisable prior to the effective date
of the departure of such Departing Partner to require its successor to purchase
(x) its General Partner Interest, (y) its general partner interest (or
equivalent interest), if any, in the other Group Members and (z) in the case of
the withdrawal or removal of the Managing General Partner,
-80-
Inergy Holdings, LLC shall have the right to require the successor Managing
General Partner to purchase the Incentive Distribution Rights and the General
Partner Interest held by Non-Managing General Partner ((x), (y) and (z)
collectively, the "Combined Interest") in exchange for an amount in cash equal
to the fair market value of such Combined Interest, such amount to be determined
and payable as of the effective date of its departure. If the Managing General
Partner is removed by the Unitholders under circumstances where Cause exists or
if the Managing General Partner withdraws under circumstances where such
withdrawal violates this Agreement, and if a successor Managing General Partner
is elected in accordance with the terms of Section 11.1 or 11.2, such successor
shall have the option, exercisable prior to the effective date of the departure
of such Departing Partner, to purchase the Combined Interest of the Departing
Partner for such fair market value of such Combined Interest of the Departing
Partner. In either event, 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 the Managing
General Partner for the benefit of the Partnership or the other Group Members.
For purposes of this Section 11.3(a), the fair market value of a Departing
Partner's Combined Interest shall be determined by agreement between the
Departing Partner and its successor or, failing agreement within 30 days after
the effective date of such Departing Partner's departure, by an independent
investment banking firm or other independent expert selected by the Departing
Partner and its successor, which, in turn, may rely on other experts, and the
determination of which shall be conclusive as to such matter. If such parties
cannot agree upon one independent investment banking firm or other independent
expert within 45 days after the effective date of such departure, then the
Departing Partner shall designate an independent investment banking firm or
other independent expert, the Departing Partner's successor shall designate an
independent investment banking firm or other independent expert, and such firms
or experts shall mutually select a third independent investment banking firm or
independent expert, which third independent investment banking firm or other
independent expert shall determine the fair market value of the Combined
Interest of the Departing Partner. In making its determination, such third
independent investment banking firm or other independent expert may consider the
then current trading price of Units on any National Securities Exchange on which
Units are then listed, the value of the Partnership's assets, the rights and
obligations of the Departing Partner and other factors it may deem relevant.
(b) If the Combined Interest is not purchased in the manner set forth
in Section 11.3(a), the Departing Partner (or its transferee) shall become a
Limited Partner and its Combined Interest shall be converted into Common Units
pursuant to a valuation made by an investment banking firm or other independent
expert selected pursuant to Section 11.3(a), without reduction in such
Partnership Interest (but subject to proportionate dilution by reason of the
admission of its successor). Any successor General Partner shall indemnify the
Departing Partner (or its transferee) as to all debts and liabilities of the
Partnership arising on or after the date on which the Departing Partner (or its
transferee) becomes a Limited Partner. For purposes of this Agreement,
conversion of the Combined Interest of the Departing Partner to Common Units
will be characterized as if such General Partner (or its transferee) contributed
its Combined Interest to the Partnership in exchange for the newly issued Common
Units.
-81-
(c) If a successor Non-Managing General Partner is elected in
accordance with the terms of Section 11.1, 11.2 or 11.4 and the option described
in Section 11.3(a) is not exercised, the successor Non-Managing General Partner
shall, at the effective date of its admission to the Partnership, contribute to
the Partnership cash in the amount equal to its Percentage Interest of 1/98th of
the Net Agreed Value of the Partnership's assets on such date. In such event,
such successor Non-Managing General Partner shall, subject to the following
sentence, be entitled to 2% of all Partnership allocations and distributions.
The Managing General Partner shall cause this Agreement to be amended to reflect
that, from and after the date of such successor Non-Managing General Partner's
admission, the successor Non-Managing General Partner's interest in all
Partnership distributions and allocations shall be 2%.
Section 11.4. Withdrawal of Non-Managing General Partner.
(a) The Non-Managing General Partner may withdraw from the
Partnership in the capacity of Non-Managing General Partner (i) upon 90 days'
advance written notice to the Managing General Partner or (ii) by transferring
its General Partner Interest in the Partnership pursuant to Section 4.6 hereof.
Such withdrawal shall take effect on the date specified in such notice. Upon
receiving such notice, the Managing General Partner shall select a successor
Non-Managing General Partner within such 90-day period. Any withdrawal of the
Non-Managing General Partner shall not become effective unless the Partnership
has received by the end of such 90-day period a Withdrawal Opinion of Counsel
that such withdrawal will not result in the loss of limited liability of any
Limited Partner or of a member of the Operating Company or cause the Partnership
or the Operating Company to be treated as a corporation or as an association
taxable as a corporation for federal income tax purposes. Following any
withdrawal of the Non-Managing General Partner, the business and operations of
the Partnership shall be continued by the Managing General Partner.
(b) In addition to the voluntary withdrawal described above, the Non-
Managing General Partner shall be deemed to have withdrawn (i) when and if, the
Non-Managing General Partner (A) makes a general assignment for the benefit of
creditors, (B) files a voluntary bankruptcy petition, (C) files a petition or
answer seeking for itself a reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any law, (D)
files an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Non-Managing General Partner in a
proceeding of the type described in clauses (A)-(C) of this subsection, or (E)
seeks, consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of the Non-Managing General Partner or of all or any substantial part
of its properties; or (ii), when a final and non-appealable judgment is entered
by a court with appropriate jurisdiction ruling that the Non-Managing General
Partner is bankrupt or insolvent, or a final and non-appealable order for relief
is entered by a court with appropriate jurisdiction against the Non-Managing
General Partner, in each case under any federal or state bankruptcy or
insolvency laws as now or hereinafter in effect; or (iii) (A) in the event the
Non-Managing General Partner is a corporation, when a certificate of dissolution
or its equivalent is filed for the Non-Managing General Partner, or 90 days
expire after the date of notice to the Non-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 Non-Managing General Partner
is a partnership or a limited liability company, the dissolution and
commencement of winding up of the Non-Managing General Partner, (C) in the event
the Non-Managing General Partner is acting in such
-82-
capacity by virtue of being a trustee of a trust, the termination of the trust,
(D) in the event the Non-Managing General Partner is a natural person, his death
or adjudication of incompetency, and (E) otherwise in the event of the
termination of the Non-Managing General Partner.
(c) Notwithstanding the other provisions of this Section 11.4, a
successor Non-Managing General Partner need not be selected if the Partnership
has received an Opinion of Counsel that the failure to select a successor would
not cause the Partnership or the Operating Company to be treated as a
corporation or as an association taxable as a corporation for federal income tax
purposes.
Section 11.5. Termination of Subordination Period, Conversion of Senior
Subordinated Units and Junior Subordinated Units and Extinguishment of
Cumulative Common Unit Arrearages.
Notwithstanding any provision of this Agreement, if the Managing General
Partner is removed as general partner of the Partnership under circumstances
where Cause does not exist and Units held by the General Partners and their
Affiliates are not voted in favor of such removal, (i) the Subordination Period
will end and all Outstanding Senior Subordinated Units and Junior Subordinated
Units will immediately and automatically convert into Common Units on a one-for-
one basis and (ii) all Cumulative Common Unit Arrearages on the Common Units
will be extinguished.
Section 11.6. Withdrawal of Limited Partners.
No Limited Partner shall have any right to withdraw from the Partnership;
provided, however, that when a transferee of a Limited Partner's Limited Partner
Interest becomes a Record Holder of the Limited Partner Interest so transferred,
such transferring Limited Partner shall cease to be a Limited Partner with
respect to the Limited Partner Interest so transferred.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
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 or a successor Non-Managing General Partner
in accordance with the terms of this Agreement or by the withdrawal of the Non-
Managing General Partner pursuant to Section 11.4. 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) 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;
-83-
(b) an election to dissolve the Partnership by the Managing General
Partner that is approved by the holders of a Unit Majority;
(c) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(d) the sale of all or substantially all of the assets and
properties of the Partnership Group.
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), then, to the maximum extent permitted by law, within 180 days thereafter,
the holders of a Unit Majority 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 the successor managing general partner a
Person approved by the holders of a Unit Majority. Unless such an election is
made within the applicable time period as set forth above, the Partnership shall
conduct only activities necessary to wind up its affairs. If such an election
is so made, then:
(i) the reconstituted Partnership shall continue unless earlier
dissolved in accordance with this Article XII;
(ii) if the successor Managing General Partner is not the former
Managing General Partner, then the interest of the former Managing General
Partner shall be treated in the manner provided in Section 11.3; 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 managing general partner may for this purpose exercise
the powers of attorney granted the Managing General Partner pursuant to
Section 2.6; provided, that the right of the holders of a Unit Majority to
approve a successor Managing 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 any Limited Partner and (y) neither the Partnership, the
reconstituted limited partnership nor the Operating Company 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
-84-
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 holders of at least a
majority of the Outstanding Common Units, Senior Subordinated Units and Junior
Subordinated Units voting as a single class. 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 holders of at least a majority of the Outstanding Common
Units, Senior Subordinated Units and Junior Subordinated Units voting as a
single class. Upon dissolution, removal or resignation of the Liquidator, a
successor and substitute Liquidator (who shall have and succeed to all rights,
powers and duties of the original Liquidator) shall within 30 days thereafter be
approved by holders of at least a majority of the Outstanding Common Units,
Senior Subordinated Units and Junior Subordinated Units voting as a single
class. The right to approve a successor or substitute Liquidator in the manner
provided herein shall be deemed to refer also to any such successor or
substitute Liquidator approved in the manner herein provided. Except as
expressly provided in this Article XII, the Liquidator approved in the manner
provided herein shall have and may exercise, without further authorization or
consent of any of the parties hereto, all of the powers conferred upon the
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 the Liquidator as compensation for serving in such capacity
(subject to the terms of Section 12.3) and amounts to Partners otherwise than in
respect of their distribution rights under Article VI. With respect to any
liability that is contingent, conditional or unmatured or is
-85-
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).
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.
No General Partner shall be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners or Unitholders, or any portion thereof, it being expressly understood
that any such return shall be made solely from Partnership assets.
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
General Partner shall be obligated to restore any negative balance in its
Capital Account upon liquidation of its interest in the Partnership by the end
of the taxable year of the Partnership during which such liquidation occurs, or,
if later, within 90 days after the date of such liquidation.
-86-
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
the Partnership and the Operating Company 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 Limited Partners (including any particular
class of Partnership Interests as compared to other classes of Partnership
Interests) 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 Limited Partner Interests
(including the division of any class or classes of Outstanding Limited Partner
Interests into different classes to facilitate uniformity of tax consequences
within such classes of Limited Partner Interests) or comply with any rule,
regulation, guideline or requirement of any National Securities Exchange on
which the Limited Partner Interests 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 necessary or advisable in connection with action taken by the
Managing General Partner pursuant to Section 5.10 or (iv) is required to effect
the intent expressed in the Registration Statement or the intent of the
provisions of this Agreement or is otherwise contemplated by this Agreement;
(e) a change in the fiscal year or taxable year of the Partnership
and any 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 Partner shall so
determine, a change in the definition of "Quarter" and the dates on which
distributions are to be made by the Partnership;
-87-
(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or either of 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) subject to the terms of Section 5.7, an amendment that, in the
discretion of the Managing General Partner, is necessary or advisable in
connection with the authorization of issuance of any class or series of
Partnership Securities pursuant to Section 5.6;
(h) any amendment expressly permitted in this Agreement to be made by
the Managing General Partner acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that, 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;
(k) a merger or conveyance pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
Section 13.2. Amendment Procedures.
Except as provided in Sections 13.1 and 13.3, 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 amendment shall be effective upon its approval by the
holders of a Unit Majority, unless a greater or different percentage is required
under this Agreement or by Delaware law. Each proposed amendment that requires
the approval of the holders of a specified percentage of Outstanding Units shall
be set forth in a writing that contains the text of the proposed amendment. If
such an amendment is proposed, the Managing General Partner shall seek the
written approval of the requisite percentage of Outstanding Units or call a
meeting of the Unitholders to consider and vote on such proposed amendment. The
Managing General Partner shall notify all Record Holders upon final adoption of
any such proposed amendments.
Section 13.3. Amendment Requirements.
(a) Notwithstanding the provisions of Sections 13.1 and 13.2, no
provision of this Agreement that establishes a percentage of Outstanding Units
(including Units deemed owned by the General Partners) required to take any
action shall be amended, altered, changed,
-88-
repealed or rescinded in any respect that would have the effect of reducing such
voting percentage unless such amendment is approved by the written consent or
the affirmative vote of holders of Outstanding Units whose aggregate Outstanding
Units constitute not less than the voting requirement sought to be reduced.
(b) Notwithstanding the provisions of Sections 13.1 and 13.2, no
amendment to this Agreement may (i) enlarge the obligations of any Limited
Partner without its consent, unless such shall be deemed to have occurred as a
result of an amendment approved pursuant to Section 13.3(c), (ii) enlarge the
obligations of, restrict in any way any action by or rights of, or reduce in any
way the amounts distributable, reimbursable or otherwise payable to, either of
the General Partners or any of their Affiliates without the consent of the
Managing General Partner, which consent may be given or withheld in its sole
discretion, (iii) change Section 12.1(b), or (iv) change the term of the
Partnership or, except as set forth in Section 12.1(b), give any Person the
right to dissolve the Partnership.
(c) Except as provided in Section 14.3, and except as otherwise
provided, and without limitation of the Managing General Partner's authority to
adopt amendments to this Agreement without the approval of any Partners or
Assignees as contemplated in Section 13.1, any amendment that would have a
material adverse effect on the rights or preferences of any class of Partnership
Interests in relation to other classes of Partnership Interests must be approved
by the holders of not less than a majority of the Outstanding Partnership
Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 13.1 and except as otherwise provided by Section
14.3(b), no amendments shall become effective without the approval of the
holders of at least 90% of the Outstanding Units voting as a single class unless
the Partnership obtains an Opinion of Counsel to the effect that such amendment
will not affect the limited liability of any Limited Partner under applicable
law.
(e) Except as provided in Section 13.1, this Section 13.3 shall only
be amended with the approval of the holders of at least 90% of the Outstanding
Units.
Section 13.4. Special Meetings.
All acts of Limited Partners to be taken pursuant to this Agreement shall
be taken in the manner provided in this Article XIII. Special meetings of the
Limited Partners may be called by the Managing General Partner or by Limited
Partners owning 20% or more of the Outstanding Partnership Securities of the
class or classes for which a meeting is proposed. Limited Partners shall call a
special meeting by delivering to the Managing General Partner one or more
requests in writing stating that the signing Limited Partners wish to call a
special meeting and indicating the general or specific purposes for which the
special meeting is to be called. Within 60 days after receipt of such a call
from Limited Partners or within such greater time as may be reasonably necessary
for the Partnership to comply with any statutes, rules, regulations, listing,
agreements or similar requirements governing the holding of a meeting or the
solicitation of proxies for use at such a meeting, the Managing General Partner
shall send a notice of the meeting to the Limited Partners either directly or
indirectly through the Transfer Agent. A
-89-
meeting shall be held at a time and place determined by the Managing General
Partner on a date not less than 10 days nor more than 60 days after the mailing
of notice of the meeting. Limited Partners shall not vote on matters that would
cause the Limited Partners to be deemed to be taking part in the management and
control of the business and affairs of the Partnership so as to jeopardize the
Limited Partners' limited liability under the Delaware Act or the law of any
other state in which the Partnership is qualified to do business.
Section 13.5. Notice of a Meeting.
Notice of a meeting called pursuant to Section 13.4 shall be given to the
Record Holders of the class or classes of Limited Partner Interests for which a
meeting is proposed in writing by mail or other means of written communication
in accordance with Section 16.1. The notice shall be deemed to have been given
at the time when deposited in the mail or sent by other means of written
communication.
Section 13.6. Record Date.
For purposes of determining the Limited Partners entitled to notice of or
to vote at a meeting of the Limited Partners or to give approvals without a
meeting as provided in Section 13.11 the Managing General Partner may set a
Record Date, which shall not be less than 10 nor more than 60 days before (a)
the date of the meeting (unless such requirement conflicts with any rule,
regulation, guideline or requirement of any National Securities Exchange on
which the Limited Partner Interests are listed for trading, in which case the
rule, regulation, guideline or requirement of such exchange shall govern) or (b)
in the event that approvals are sought without a meeting, the date by which
Limited Partners are requested in writing by the Managing General Partner to
give such approvals.
Section 13.7. Adjournment.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting and a new Record Date need not be fixed, if the
time and place thereof are announced at the meeting at which the adjournment is
taken, unless such adjournment shall be for more than 45 days. At the adjourned
meeting, the Partnership may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 45 days
or if a new Record Date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given in accordance with this Article XIII.
Section 13.8. Waiver of Notice; Approval of Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and
noticed, and whenever held, shall be as valid as if it had occurred at a meeting
duly held after regular call and notice, if a quorum is present, either in
person or by proxy, and if, either before or after the meeting, Limited Partners
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof. All waivers and approvals shall
be filed with the Partnership records or made a part of the minutes of the
meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting, except when the Limited Partner does not approve, at
the beginning of the meeting, of the transaction of any business because the
-90-
meeting is not lawfully called or convened; and except that attendance at a
meeting is not a waiver of any right to disapprove the consideration of matters
required to be included in the notice of the meeting, but not so included, if
the disapproval is expressly made at the meeting
Section 13.9. Quorum.
The holders of a majority of the Outstanding Partnership Securities of the
class or classes for which a meeting has been called (including Limited Partner
Interests deemed owned by the General Partners) represented in person or by
proxy shall constitute a quorum at a meeting of Limited Partners of such class
or classes unless any such action by the Limited Partners requires approval by
holders of a greater percentage of such Limited Partner Interests, in which case
the quorum shall be such greater percentage. At any meeting of the Limited
Partners duly called and held in accordance with this Agreement at which a
quorum is present, the act of Limited Partners holding Outstanding Partnership
Securities that in the aggregate represent a majority of the Outstanding
Partnership Securities entitled to vote and be present in person or by proxy at
such meeting shall be deemed to constitute the act of all Limited Partners,
unless a greater or different percentage is required with respect to such action
under the provisions of this Agreement, in which case the act of the Limited
Partners holding Outstanding Partnership Securities that in the aggregate
represent at least such greater or different percentage shall be required. The
Limited Partners present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Limited Partners to leave less than a quorum, if any action
taken (other than adjournment) is approved by the required percentage of
Outstanding Partnership Securities specified in this Agreement (including
Outstanding Partnership Securities deemed owned by the General Partners). In
the absence of a quorum any meeting of Limited Partners may be adjourned from
time to time by the affirmative vote of holders of at least a majority of the
Outstanding Partnership Securities entitled to vote at such meeting (including
Outstanding Partnership Securities deemed owned by the General Partners)
represented either in person or by proxy, but no other business may be
transacted, except as provided in Section 13.7.
Section 13.10. Conduct of a Meeting.
The Managing General Partner shall have full power and authority concerning
the manner of conducting any meeting of the Limited Partners or solicitation of
approvals in writing, including the determination of Persons entitled to vote,
the existence of a quorum, the satisfaction of the requirements of Section 13.4,
the conduct of voting, the validity and effect of any proxies and the
determination of any controversies, votes or challenges arising in connection
with or during the meeting or voting. The Managing General Partner shall
designate a Person to serve as chairman of any meeting and shall further
designate a Person to take the minutes of any meeting. All minutes shall be
kept with the records of the Partnership maintained by the Managing General
Partner. The Managing General Partner may make such other regulations
consistent with applicable law and this Agreement as it may deem advisable
concerning the conduct of any meeting of the Limited Partners or solicitation of
approvals in writing, including regulations in regard to the appointment of
proxies, the appointment and duties of inspectors of votes and approvals, the
submission and examination of proxies and other evidence of the right to vote,
and the revocation of approvals in writing.
-91-
Section 13.11. Action Without a Meeting.
If authorized by the Managing General Partner, any action that may be taken
at a meeting of the Limited Partners may be taken without a meeting if an
approval in writing setting forth the action so taken is signed by Limited
Partners owning not less than the minimum percentage of the Outstanding Limited
Partner Interests (including Limited Partner Interests deemed owned by the
General Partner) that would be necessary to authorize or take such action at a
meeting at which all the Limited Partners were present and voted (unless such
provision conflicts with any rule, regulation, guideline or requirement of any
National Securities Exchange on which the Limited Partner Interests are listed
for trading, in which case the rule, regulation, guideline or requirement of
such exchange shall govern). Prompt notice of the taking of action without a
meeting shall be given to the Limited Partners who have not approved in writing.
The Managing General Partner may specify that any written ballot submitted to
Limited Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within the time period, which shall be not less than
20 days, specified by the Managing General Partner. If a ballot returned to the
Partnership does not vote all of the Limited Partner Interests held by the
Limited Partners the Partnership shall be deemed to have failed to receive a
ballot for the Limited Partner Interests that were not voted. If approval of
the taking of any action by the Limited Partners is solicited by any Person
other than by or on behalf of the Managing General Partner, the written
approvals shall have no force and effect unless and until (a) they are deposited
with the Partnership in care of the Managing General Partner, (b) approvals
sufficient to take the action proposed are dated as of a date not more than 90
days prior to the date sufficient approvals are deposited with the Partnership
and (c) an Opinion of Counsel is delivered to the Managing General Partner to
the effect that the exercise of such right and the action proposed to be taken
with respect to any particular matter (i) will not cause the Limited Partners to
be deemed to be taking part in the management and control of the business and
affairs of the Partnership so as to jeopardize the Limited Partners' limited
liability, and (ii) are otherwise permissible under the state statutes then
governing the rights, duties and liabilities of the Partnership and the
Partners.
Section 13.12. Voting and Other Rights.
(a) Only those Record Holders of the Limited Partner Interests on the
Record Date set pursuant to Section 13.6 (and also subject to the limitations
contained in the definition of "Outstanding") shall be entitled to notice of,
and to vote at, a meeting of Limited Partners or to act with respect to matters
as to which the holders of the Outstanding Limited Partner Interests have the
right to vote or to act. All references in this Agreement to votes of, or other
acts that may be taken by, the Outstanding Limited Partner Interests shall be
deemed to be references to the votes or acts of the Record Holders of such
Outstanding Limited Partner Interests.
(b) With respect to Limited Partner Interests that are held for a
Person's account by another Person (such as a broker, dealer, bank, trust
company or clearing corporation, or an agent of any of the foregoing), in whose
name such Limited Partner Interests are registered, such other Person shall, in
exercising the voting rights in respect of such Limited Partner Interests on any
matter, and unless the arrangement between such Persons provides otherwise, vote
such Limited Partner Interests in favor of, and at the direction of, the Person
who is the beneficial owner, and the Partnership shall be entitled to assume it
is so acting without further
-92-
inquiry. The provisions of this Section 13.12(b) (as well as all other
provisions of this Agreement) are subject to the provisions of Section 4.3.
ARTICLE XIV
MERGER
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 XIV.
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;
(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, operating agreement or other
-93-
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 Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the General Partner, upon
its approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement 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 affirmative vote or consent of the holders of a
Unit Majority unless the Merger Agreement contains any provision that, if
contained in an amendment to this Agreement, the provisions of this Agreement or
the Delaware Act would require for its approval the vote or consent of a greater
percentage of the Outstanding Limited Partner Interests or of any class of
Limited Partners, in which case such greater percentage vote or consent shall be
required for approval of the Merger Agreement.
(c) Except as provided in Section 14.3(d), after such approval by
vote or consent of the Limited Partners, and at any time prior to the filing of
the certificate of merger 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 Limited Partner approval, 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 (i) 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 member in the Operating Company or cause the Partnership or the Operating
Company 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
-94-
instruments of the new entity provide the Limited Partners and the General
Partners 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
Unitholders 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
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Section 15.1. Right to Acquire Limited Partner Interests.
(a) Notwithstanding any other provision of this Agreement, if at any
time not more than 20% of the total Limited Partner Interests of any class then
Outstanding is held by Persons other than the General Partners and their
Affiliates, the Managing General Partner shall then have the right, which right
it may assign and transfer in whole or in part to the Partnership or any
Affiliate of the Managing General Partner, exercisable in its sole discretion,
to purchase all, but not less than all, of such Limited Partner Interests of
such class then Outstanding held by Persons other than the General Partners and
their Affiliates, at the greater of (x) the Current Market Price as of the date
three days prior to the date that the notice described in Section 15 is mailed
and (y) the highest price paid by a General Partner or any of its Affiliates for
any such
-95-
Limited Partner Interest of such class purchased during the 90-day period
preceding the date that the notice described in Section 15.1(b) is mailed. As
used in this Agreement, (i) "Current Market Price" as of any date of any class
of Limited Partner Interests means the average of the daily Closing Prices (as
hereinafter defined) per limited partner interest of such class for the 20
consecutive Trading Days (as hereinafter defined) immediately prior to such
date; (ii) "Closing Price" for any day means the last sale price on such day,
regular way, or in case no such sale takes place on such day, the average of the
closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted for trading on the principal National
Securities Exchange on which such Limited Partner Interests of such class are
listed or admitted to trading or, if such Limited Partner Interests of such
class are not listed or admitted to trading on any National Securities Exchange,
the last quoted price on such day or, if not so quoted, the average of the high
bid and low asked prices on such day in the over-the-counter market, as reported
by the Nasdaq Stock Market or any other system then in use, or, if on any such
day such Limited Partner Interests of such class are not quoted by any such
organization, the average of the closing bid and asked prices on such day as
furnished by a professional market maker making a market in such Limited Partner
Interests of such class selected by the Managing General Partner, or if on any
such day no market maker is making a market in such Limited Partner Interests of
such class, the fair value of such Limited Partner Interests on such day as
determined reasonably and in good faith by the Managing General Partner; and
(iii) "Trading Day" means a day on which the principal National Securities
Exchange on which such Limited Partner Interests of any class are listed or
admitted to trading is open for the transaction of business or, if Limited
Partner Interests of a class are not listed or admitted to trading on any
National Securities Exchange, a day on which banking institutions in New York
City generally are open.
(b) If the Managing General Partner, any Affiliate of the Managing
General Partner or the Partnership elects to exercise the right to purchase
Limited Partner Interests granted pursuant to Section 15.1(a), the Managing
General Partner shall deliver to the Transfer Agent notice of such election to
purchase (the "Notice of Election to Purchase") and shall cause the Transfer
Agent to mail a copy of such Notice of Election to Purchase to the Record
Holders of Limited Partner Interests of such class (as of a Record Date selected
by the Managing General Partner) at least 10, but not more than 60, days prior
to the Purchase Date. Such Notice of Election to Purchase shall also be
published for a period of at least three consecutive days in at least two daily
newspapers of general circulation printed in the English language and published
in the Borough of Manhattan, New York. The Notice of Election to Purchase shall
specify the Purchase Date and the price (determined in accordance with Section
15.1(a)) at which Limited Partner Interests will be purchased and state that the
Managing General Partner, its Affiliate or the Partnership, as the case may be,
elects to purchase such Limited Partner Interests, upon surrender of
Certificates representing such Limited Partner Interests in exchange for
payment, at such office or offices of the Transfer Agent as the Transfer Agent
may specify, or as may be required by any National Securities Exchange on which
such Limited Partner Interests are listed or admitted to trading. Any such
Notice of Election to Purchase mailed to a Record Holder of Limited Partner
Interests at his address as reflected in the records of the Transfer Agent shall
be conclusively presumed to have been given regardless of whether the owner
receives such notice. On or prior to the Purchase Date, the Managing General
Partner, its Affiliate or the Partnership, as the case may be, shall deposit
with the Transfer Agent cash in an amount sufficient to pay the aggregate
purchase price of all of such Limited Partner Interests to be purchased in
accordance
-96-
with this Section 15.1. If the Notice of Election to Purchase shall have been
duly given as aforesaid at least 10 days prior to the Purchase Date, and if on
or prior to the Purchase Date the deposit described in the preceding sentence
has been made for the benefit of the holders of Limited Partner Interests
subject to purchase as provided herein, then from and after the Purchase Date,
notwithstanding that any Certificate shall not have been surrendered for
purchase, all rights of the holders of such Limited Partner Interests (including
any rights pursuant to Articles IV, V, VI, and XII) shall thereupon cease,
except the right to receive the purchase price (determined in accordance with
Section 15.1(a)) for Limited Partner Interests therefor, without interest, upon
surrender to the Transfer Agent of the Certificates representing such Limited
Partner Interests, and such Limited Partner Interests shall thereupon be deemed
to be transferred to the Managing General Partner, its Affiliate or the
Partnership, as the case may be, on the record books of the Transfer Agent and
the Partnership, and the General Partner or any Affiliate of the Managing
General Partner, or the Partnership, as the case may be, shall be deemed to be
the owner of all such Limited Partner Interests from and after the Purchase Date
and shall have all rights as the owner of such Limited Partner Interests
(including all rights as owner of such Limited Partner Interests pursuant to
Articles IV, V, VI and XII).
(c) At any time from and after the Purchase Date, a holder of an
Outstanding Limited Partner Interest subject to purchase as provided in this
Section 15.1 may surrender his Certificate evidencing such Limited Partner
Interest to the Transfer Agent in exchange for payment of the amount described
in Section 15.1(a), therefor, without interest thereon.
ARTICLE XVI
GENERAL PROVISIONS
Section 16.1. 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 delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address described below. Any
notice, payment or report to be given or made to a Partner or Assignee hereunder
shall be deemed conclusively to have been given or made, and the obligation to
give such notice or report or to make such payment shall be deemed conclusively
to have been fully satisfied, upon sending of such notice, payment or report to
the Record Holder of such Partnership Securities at his address as shown on the
records of the Transfer Agent or as otherwise shown on the records of the
Partnership, regardless of any claim of any Person who may have an interest in
such Partnership Securities by reason of any assignment or otherwise. An
affidavit or certificate of making of any notice, payment or report in
accordance with the provisions of this Section 16.1 executed by the Managing
General Partner, the Transfer Agent or the mailing organization shall be prima
facie evidence of the giving or making of such notice, payment or report. If
any notice, payment or report addressed to a Record Holder at the address of
such Record Holder appearing on the books and records of the Transfer Agent or
the Partnership is returned by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver it, such
notice, payment or report and any subsequent notices, payments and reports shall
be deemed to have been duly given or made without further mailing (until such
time as such Record Holder or another Person notifies the Transfer Agent or the
Partnership of a change in his
-97-
address) if they are available for the Partner or Assignee at the principal
office of the Partnership for a period of one year from the date of the giving
or making of such notice, payment or report to the other Partners and Assignees.
Any notice to the Partnership shall be deemed given if received by the Managing
General Partner at the principal office of the Partnership designated pursuant
to Section 2.3. The Managing General Partner may rely and shall be protected in
relying on any notice or other document from a Partner, Assignee or other Person
if believed by it to be genuine.
Section 16.2. 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 16.3. 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 16.4. 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 16.5. 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 16.6. Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.
Section 16.7. Counterparts.
This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto or, in the case of a Person acquiring a Unit, upon accepting
the certificate evidencing such Unit or executing and delivering a Transfer
Application as herein described, independently of the signature of any other
party.
-98-
Section 16.8. 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 16.9. 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 16.10. 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.
[Rest of Page Intentionally Left Blank]
-99-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above:
MANAGING GENERAL PARTNER:
INERGY GP, LLC
By:____________________________________
Name:__________________________________
Title:_________________________________
NON-MANAGING GENERAL PARTNER:
INERGY PARTNERS, LLC
By:____________________________________
Name:__________________________________
Title:_________________________________
ORGANIZATIONAL LIMITED PARTNER:
INERGY PARTNERS, LLC
By:____________________________________
Name:__________________________________
Title:_________________________________
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as
Limited Partners of the Partnership, pursuant to
powers of attorney now and hereafter executed in
favor of, and granted and delivered to the
Managing General Partner.
NEW INERGY PROPANE, LLC
By:____________________________________
Name:__________________________________
Title:_________________________________
-100-
INERGY HOLDINGS, LLC
By:____________________________________
Name:__________________________________
Title:_________________________________
-101-
EXHIBIT A
to the Amended and
Restated Agreement of Limited Partnership of
Inergy, L.P.
Certificate Evidencing Common Units
Representing Limited Partner Interests in
Inergy, L.P.
No. __________ __________ Common Units
In accordance with Section 4.1 of the Amended and Restated Agreement of
Limited Partnership of Inergy, L.P., as amended, supplemented or restated from
time to time (the "Partnership Agreement"), Inergy, L.P., a Delaware limited
partnership (the "Partnership"), hereby certifies that ____________________ (the
"Holder") is the registered owner of Common Units representing limited partner
interests in the Partnership (the "Common Units") transferable on the books of
the Partnership, in person or by duly authorized attorney, upon surrender of
this Certificate properly endorsed and accompanied by a properly executed
application for transfer of the Common Units represented by this Certificate.
The rights, preferences and limitations of the Common Units are set forth in,
and this Certificate and the Common Units represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Partnership
Agreement. Copies of the Partnership Agreement are on file at, and will be
furnished without charge on delivery of written request to the Partnership at,
the principal office of the Partnership located at 0000 Xxxxxx, Xxxxx 0000,
Xxxxxx Xxxx, Xxxxxxxx 00000. Capitalized terms used herein but not defined shall
have the meanings given them in the Partnership Agreement.
The Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement, (ii)
represented and warranted that the Holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Partnership
Agreement, (iii) granted the powers of attorney provided for in the Partnership
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Partnership Agreement.
This Certificate shall not be valid far any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.
Dated:_______________ Inergy, L.P.
Countersigned and Registered by: By: Inergy GP LLC, its Managing General
Partner
By:__________________________________________
as Transfer Agent and Registrar Name:________________________________________
By:____________________________ By:__________________________________________
Authorized Signature Secretary
-102-
[Reverse of Certificate]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as follows according to applicable laws or
regulations:
TEN COM - as tenants in common UNIF GIFT/TRANSFERS MIN ACT
TEN ENT - as tenants by the entireties __________ Custodian _________
(Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts/Transfers to CD
survivorship and not as Minors Act (State)
tenants in common
Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF COMMON UNITS
in
INERGY, L.P.
IMPORTANT NOTICE REGARDING INVESTOR RESPONSIBILITIES
DUE TO TAX SHELTER STATUS OF INERGY, L.P.
You have acquired an interest in Inergy, L.P., 0000 Xxxxxx, Xxxxx 0000,
Xxxxxx Xxxx, Xxxxxxxx 00000, whose taxpayer identification number is 00-0000000.
The Internal Revenue Service has issued Inergy, L.P. the following tax shelter
registration number:
YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE SERVICE IF
YOU CLAIM ANY DEDUCTION, LOSS, CREDIT OR OTHER TAX BENEFIT OR REPORT ANY INCOME
BY REASON OF YOUR INVESTMENT IN INERGY, L.P.
You must report the registration number as well as the name and taxpayer
identification number of Inergy, L.P. on Form 8271. FORM 8271 MUST BE ATTACHED
TO THE RETURN ON WHICH YOU CLAIM THE DEDUCTION, LOSS, CREDIT OR OTHER TAX
BENEFIT OR REPORT ANY INCOME BY REASON OF YOUR INVESTMENT IN INERGY, L.P.
If you transfer your interest in Inergy, L.P. to another person, you are
required by the Internal Revenue Service to keep a list containing (a) that
person's name, address and taxpayer identification number, (b) the date on which
you transferred the interest and (c) the name, address and tax shelter
registration number of Inergy, L.P. If you do not want to keep such a list, you
must (1) send the information specified above to the Partnership, which will
keep the list for this tax shelter, and (2) give a copy of this notice to the
person to whom you transfer your interest. Your failure to comply with any of
the above-described responsibilities could result in the imposition of a penalty
under Section 6707(b) or 6708(a) of the Internal Revenue Code of 1986, as
amended, unless such failure is shown to be due to reasonable cause.
-103-
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS INVESTMENT OR
THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE
INTERNAL REVENUE SERVICE.
FOR VALUE RECEIVED, hereby assigns, conveys, sells and transfers unto
________________________________ _______________________________________
(Please print or typewrite name (Please insert Social Security or other
and address of Assignee) identifying number of Assignee)
__________ Common Units representing limited partner interests evidenced by this
Certificate, subject to the Partnership Agreement, and does hereby irrevocably
constitute and appoint __________ as its attorney-in-fact with full power of
substitution to transfer the same on the books of Inergy, L.P.
Date: NOTE: The signature to any endorsement hereon must
correspond with the name as written upon
the face of this Certificate in every
particular, without alteration, enlargement
or change.
SIGNATURE(S) MUST BE (Signature)
GUARANTEED BY A MEMBER
FIRM OF THE NATIONAL
ASSOCIATION OF
SECURITIES DEALERS, INC. (Signature)
OR BY A COMMERCIAL BANK
OR TRUST COMPANY
SIGNATURE(S) GUARANTEED
No transfer of the Common Units evidenced hereby will be registered on the
books of the Partnership, unless the Certificate evidencing the Common Units to
be transferred is surrendered for registration or transfer and an Application
for Transfer of Common Units has been executed by a transferee either (a) on the
form set forth below or (b) on a separate application that the Partnership will
furnish on request without charge. A transferor of the Common Units shall have
no duty to the transferee with respect to execution of the transfer application
in order for such transferee to obtain registration of the transfer of the
Common Units.
-104-
APPLICATION FOR TRANSFER OF COMMON UNITS
The undersigned ("Assignee") hereby applies for transfer to the name of the
Assignee of the Common Units evidenced hereby.
The Assignee (a) requests admission as a Substituted Limited Partner and
agrees to comply with and be bound by, and hereby executes, the Amended and
Restated Agreement of Limited Partnership of Inergy, L.P. (the "Partnership"),
as amended, supplemented or restated to the date hereof (the "Partnership
Agreement"), (b) represents and warrants that the Assignee has all right, power
and authority and, if an individual, the capacity necessary to enter into the
Partnership Agreement, (c) appoints the Managing General Partner of the
Partnership and, if a Liquidator shall be appointed, the Liquidator of the
Partnership as the Assignee's attorney-in-fact to execute, swear to, acknowledge
and file any document, including, without limitation, the Partnership Agreement
and any amendment thereto and the Certificate of Limited Partnership of the
Partnership and any amendment thereto, necessary or appropriate for the
Assignee's admission as a Substituted Limited Partner and as a party to the
Partnership Agreement, (d) gives the powers of attorney provided for in the
Partnership Agreement, and (e) makes the waivers and gives the consents and
approvals contained in the Partnership Agreement. Capitalized terms not defined
herein have the meanings assigned to such terms in the Partnership Agreement.
Date:__________________
___________________________________________ _________________________________
Social Security or other identifying number Signature of Assignee
___________________________________________ _________________________________
Purchase Price including commissions, if any Name and Address of Assignee
Type of Entity (check one):
[_] Individual [_] Partnership [_] Corporation
[_] Trust [_] Other (specify)
Nationality (check one):
[_] U.S. Citizen, Resident or Domestic Entity
[_] Foreign Corporation [_] Non-resident Alien
If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Partnership must withhold tax with respect to certain transfers of
property if a holder of an interest in the Partnership is a foreign person. To
inform the Partnership that no withholding is
-105-
required with respect to the undersigned interestholder's interest in it, the
undersigned hereby certifies the following (or, if applicable, certifies the
following on behalf of the interestholder).
Complete Either A or B:
A. Individual Interestholder
1. I am not a non-resident alien for purposes of U.S. income taxation.
2. My U.S. taxpayer identification number (Social Security Number) is
__________.
3. My home address is _____________________________________________.
B. Partnership, Corporation or Other Interestholder
1. ________________ is not a foreign corporation, foreign partnership,
foreign trust (Name of Interestholder) or foreign estate (as those
terms are defined in the Code and Treasury Regulations).
2. The interestholder's U.S. employer identification number is ________.
3. The interestholder's office address and place of incorporation (if
applicable) is ___________.
The interestholder agrees to notify the Partnership within sixty (60) days
of the date the interestholder becomes a foreign person.
The interestholder understands that this certificate may be disclosed to
the Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete and, if applicable, I further declare that I have authority to sign
this document on behalf of:
________________________________
Name of Interestholder
________________________________
Signature and Date
________________________________
Title (if applicable)
Note: If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing, and is
holding for the account of any other person, this application should be
completed by an officer thereof or, in the case of a broker or dealer, by a
registered representative who is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a person performing a similar
function. If the Assignee is a broker,
-106-
dealer, bank, trust company, clearing corporation, other nominee owner or an
agent of any of the foregoing, the above certification as to any person for whom
the Assignee will hold the Common Units shall be made to the best of the
Assignee's knowledge.
-107-