EXHIBIT 3.4
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
RIO VISTA OPERATING PARTNERSHIP L.P.
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS............................................................................... 14
Section 1.1 Definitions.......................................................................... 14
Section 1.2 Construction......................................................................... 22
ARTICLE II ORGANIZATION.............................................................................. 22
Section 2.1 Formation............................................................................ 22
Section 2.2 Name................................................................................. 23
Section 2.3 Registered Office; Registered Agent; Principal Office; Other Offices................. 23
Section 2.4 Purpose and Business................................................................. 23
Section 2.5 Powers............................................................................... 24
Section 2.6 Power of Attorney.................................................................... 24
Section 2.7 Term................................................................................. 25
Section 2.8 Title to Partnership Assets.......................................................... 25
ARTICLE III RIGHTS OF LIMITED PARTNERS................................................................ 26
Section 3.1 Limitation of Liability.............................................................. 26
Section 3.2 Management of Business............................................................... 26
Section 3.3 Outside Activities of the Limited Partners........................................... 26
Section 3.4 Rights of Limited Partners........................................................... 26
ARTICLE IV TRANSFERS OF PARTNERSHIP INTERESTS........................................................ 27
Section 4.1 Transfer Generally................................................................... 27
Section 4.2 Transfer of General Partner's General Partner Interest............................... 27
Section 4.3 Transfer of a Limited Partner's Partnership Interest................................. 28
Section 4.4 Restrictions on Transfers............................................................ 28
ARTICLE V CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS............................... 29
Section 5.1 Initial Contributions................................................................ 29
Section 5.2 Contributions Pursuant to the Contribution Agreement................................. 29
Section 5.3 Additional Capital Contributions..................................................... 29
Section 5.4 Interest and Withdrawal.............................................................. 29
Section 5.5 Capital Accounts..................................................................... 29
-i-
TABLE OF CONTENTS
(continued)
PAGE
Section 5.6 Loans from Partners.................................................................. 32
Section 5.7 Issuances of Additional Partnership Securities....................................... 32
Section 5.8 Limited Preemptive Rights............................................................ 33
Section 5.9 Fully Paid and Non-Assessable Nature of Limited Partner Interests.................... 33
ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS............................................................. 33
Section 6.1 Allocations for Capital Account Purposes............................................. 33
Section 6.2 Allocations for Tax Purposes......................................................... 37
Section 6.3 Distributions........................................................................ 39
ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS...................................................... 39
Section 7.1 Management........................................................................... 40
Section 7.2 Certificate of Limited Partnership................................................... 41
Section 7.3 Restrictions on the General Partner's Authority...................................... 42
Section 7.4 Reimbursement of the General Partner................................................. 42
Section 7.5 Outside Activities................................................................... 43
Section 7.6 Loans from the General Partner; Loans or Contributions from the Partnership;
Contracts with Affiliates; Certain Restrictions on the General Partner.............. 44
Section 7.7 Indemnification...................................................................... 46
Section 7.8 Liability of Indemnitees............................................................. 47
Section 7.9 Resolution of Conflicts of Interest.................................................. 48
Section 7.10 Other Matters Concerning the General Partner......................................... 50
Section 7.11 Reliance by Third Parties............................................................ 50
ARTICLE VIII BOOKS, RECORDS AND ACCOUNTING............................................................. 51
Section 8.1 Records and Accounting............................................................... 51
Section 8.2 Fiscal Year.......................................................................... 51
ARTICLE IX TAX MATTERS............................................................................... 51
Section 9.1 Tax Returns and Information.......................................................... 51
Section 9.2 Tax Elections........................................................................ 51
Section 9.3 Tax Controversies.................................................................... 52
Section 9.4 Withholding.......................................................................... 52
ARTICLE X ADMISSION OF PARTNERS..................................................................... 52
-ii-
TABLE OF CONTENTS
(continued)
PAGE
Section 10.1 Admission of Partners................................................................ 52
Section 10.2 Admission of Substituted Limited Partner............................................. 52
Section 10.3 Admission of Additional Limited Partners............................................. 53
Section 10.4 Admission of Successor or Transferee General Partner................................. 53
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership........................ 54
ARTICLE XI WITHDRAWAL OR REMOVAL OF PARTNERS......................................................... 54
Section 11.1 Withdrawal of the General Partner.................................................... 54
Section 11.2 Removal of the General Partner....................................................... 55
Section 11.3 Interest of Departing Partner........................................................ 55
Section 11.4 Withdrawal of a Limited Partner...................................................... 56
ARTICLE XII DISSOLUTION AND LIQUIDATION............................................................... 56
Section 12.1 Dissolution.......................................................................... 56
Section 12.2 Continuation of the Business of the Partnership After Dissolution.................... 57
Section 12.3 Liquidator........................................................................... 57
Section 12.4 Liquidation.......................................................................... 58
Section 12.5 Cancellation of Certificate of Limited Partnership................................... 59
Section 12.6 Return of Contributions.............................................................. 59
Section 12.7 Waiver of Partition.................................................................. 59
Section 12.8 Capital Account Restoration.......................................................... 59
ARTICLE XIII AMENDMENT OF PARTNERSHIP AGREEMENT........................................................ 59
Section 13.1 Amendment to be Adopted Solely by the General Partner................................ 59
Section 13.2 Amendment Procedures................................................................. 61
ARTICLE XIV MERGER.................................................................................... 61
Section 14.1 Authority............................................................................ 61
Section 14.2 Procedure for Merger or Consolidation................................................ 61
Section 14.3 Approval by Limited Partners of Merger or Consolidation.............................. 62
Section 14.4 Certificate of Merger................................................................ 63
Section 14.5 Effect of Merger..................................................................... 63
ARTICLE XV GENERAL PROVISIONS........................................................................ 63
Section 15.1 Addresses and Notices................................................................ 63
-iii-
TABLE OF CONTENTS
(continued)
PAGE
Section 15.2 Further Action....................................................................... 64
Section 15.3 Binding Effect....................................................................... 64
Section 15.4 Integration.......................................................................... 64
Section 15.5 Creditors............................................................................ 64
Section 15.6 Waiver............................................................................... 64
Section 15.7 Counterparts......................................................................... 64
Section 15.8 Applicable Law....................................................................... 64
Section 15.9 Invalidity of Provisions............................................................. 64
Section 15.10 Consent of Partners.................................................................. 64
-iv-
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
RIO VISTA OPERATING PARTNERSHIP L.P.
This FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of RIO
VISTA OPERATING PARTNERSHIP L.P., dated as of ____________, 2003, is entered
into by and between Rio Vista Operating GP LLC, a Delaware limited liability
company, as the General Partner, and Rio Vista Energy Partners L.P., a Delaware
limited partnership, as the Limited Partner, together with any other Persons who
hereafter become Partners in the Partnership or parties hereto as provided
herein.
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. Capitalized terms used herein but not otherwise
defined shall have the meanings assigned to such terms in the MLP Agreement.
"Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 10.3 and who is s such on the books and
records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each fiscal year of the Partnership, (a) increased
by any amounts that such Partner is obligated to restore under the standards set
by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i)
or 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The
"Adjusted Capital Account" of a Partner in respect of a General Partner Interest
or any other specified interest in the Partnership shall be the amount that such
Adjusted Capital Account would be if such General Partner Interest or other
interest in the Partnership were the only interest in the Partnership held by
such Partner from and after the date on which such General Partner Interest or
other interest in the Partnership was first issued.
1
"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.
"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 General Partner using such reasonable method of valuation as
it may adopt. The 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 Agreement of Limited Partnership of Rio Vista
Operating Partnership L.P., as it may be amended, supplemented restated from
time to time.
"Assets" means all assets conveyed, contributed or otherwise
transferred to the Partnership Group pursuant to the Contribution Agreement.
"Assignee" means a Person to whom one or more Limited Partner Interests
have been transferred in a manner permitted under this Agreement, but who has
not been admitted as a Substituted Limited.
"Associate" means, when used to indicate a relationship with any
Person, (a) any corporation or organization of which such Person is a director,
officer or partner or is, directly or indirectly, the owner of 20% or more of
any class of voting stock or other voting interest; (b) any trust or other
estate in which such Person has at least a 20% beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary capacity; and (c)
any relative or spouse of such Person, or any relative of such spouse, who has
the same principal residence as such Person.
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date:
(a) the sum of (i) all cash and cash equivalents of the
Partnership on hand at the end of such Quarter, and (ii) all additional cash and
cash equivalents of the Partnership 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
2
(b) the amount of any cash reserves that is necessary or
appropriate in the reasonable discretion of the General Partner to (i) provide
for the proper conduct of the business of the Partnership (including reserves
for future capital expenditures and for anticipated future credit needs of the
Partnership) subsequent to such Quarter, (ii) comply with applicable law or any
loan agreement, security agreement, mortgage, debt instrument or other agreement
or obligation to which any Group Member is a party or by which it is bound or
its assets are subject or (iii) provide funds for distributions under Section
6.4 or 6.5 of the MLP Agreement in respect of any one or more of the next four
Quarters; provided, however, that the General Partner may not establish cash
reserves pursuant to (iii) above if the effect of such reserves would be that
the MLP is unable to distribute the Minimum Quarterly Distribution on all Common
Units, plus any Cumulative Common Unit Arrearage on all Common Units, with
respect to such Quarter; and, provided further, that disbursements made by a
Group Member or cash reserves established, increased or reduced after the end of
such Quarter but on or before the date of determination of Available Cash with
respect to such Quarter shall be deemed to have been made, established,
increased or reduced, for purposes of determining Available Cash, within such
Quarter if the General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
"Book-Tax Disparity" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 5.5 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5 . The "Capital Account" of a Partner in respect of a
General Partner Interest or any other Partnership Interest shall be the amount
that such Capital Account would be if such General Partner Interest or other
specified interest in the Partnership were the only interest in the Partnership
held by such Partner from and after the date on which such General Partner
Interest or other specified interest in the Partnership 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 Agreement.
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' Capital Accounts in respect of such Contributed Property, and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections
3
5.5(d)(i) and 5.5(d)(ii) and to reflect changes, additions or other adjustments
to the Carrying Value for dispositions and acquisitions of Partnership
properties, as deemed appropriate by the General Partner.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Delaware as referenced in Section 7.2, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"Closing Date" means the first date on which the Registration Statement
is declared effective by the Commission.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of any successor law.
"Commission" means the United States Securities and Exchange
Commission.
"Contributed Property" means each property or other asset, in such form
as may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership. Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 5.5(d), such property shall no longer constitute a
Contributed Property, but shall be deemed an Adjusted Property.
"Contribution Agreement" means that certain Contribution, Conveyance
and Assumption Agreement among the Partnership, the MLP General Partner, the
MLP, and Penn Octane Corporation, together with the additional conveyance
documents and instruments contemplated or referenced thereunder.
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(ix).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. Section 17-101 et seq., as amended, supplemented or restated from
time to time, and any successor to such statute.
"Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.
"Distribution" means the distribution of Common Units of the MLP to the
stockholders of Penn Octane Corporation, as described in the Registration
Statement.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
4
"General Partner" means Rio Vista Operating GP LLC and its successors
and permitted assigns as general partner of the Partnership.
"General Partner Interest" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner) and includes
any and all benefits to which the General Partner is entitled as provided in
this Agreement, together with all obligations of the General Partner to comply
with the terms and provisions of this Agreement.
"Group Member" means a member of the Partnership Group.
"Indemnitee" means (a) the General Partner, (b) any Departing Partner,
(c) any Person who is or was an Affiliate of the 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, the General Partner or
any Departing Partner or any Affiliate of any Group Member, the General Partner
or any Departing Partner, and (e) any Person who is or was serving at the
request of the General Partner or any Departing Partner or any Affiliate of the
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.
"Limited Partner" means any Person that is admitted to the Partnership
as a limited partner pursuant to the terms and conditions of this Agreement; but
the term "Limited Partner" shall not include any Person from and after the time
such Person withdraws as a Limited Partner from the Partnership.
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership 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.
"Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the Partners have the right to elect to reconstitute the
Partnership and continue its business has expired without such an election being
made, and (b) in the case of any other event giving rise to the dissolution of
the Partnership, the date on which such event occurs.
"Liquidator" means one or more Persons selected by the General Partner
to perform the functions described in Section 12.3 as liquidating trustee of the
Partnership within the meaning of the Delaware Act.
"Merger Agreement" has the meaning assigned to such term in Section
14.1.
"MLP" means Rio Vista Energy Partners L.P., a Delaware limited
partnership.
"MLP Agreement" means the Agreement of Limited Partnership of Rio Vista
Energy Partners L.P., as it may be amended, supplemented or restated from time
to time.
5
"MLP General Partner" means Rio Vista GP LLC, a Delaware limited
liability company and the general partner of the MLP.
"Net Agreed Value" means, (a) in the case of any Contributed Property,
the Agreed Value of such property reduced by any liabilities either assumed by
the Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the time
of distribution, in either case, as determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of loss and deduction (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Income shall be determined in accordance with Section 5.5(b) and shall
not include any items specially allocated under Section 6.1(d).
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year.
The items included in the calculation of Net Loss shall be determined in
accordance with Section 5.5(b) and shall not include any items specially
allocated under Section 6.1(d).
"Net 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).
"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.
6
"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(b), are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2).
"OLP Subsidiary" means a Subsidiary of the Partnership.
"Omnibus Agreement" means that Omnibus Agreement, dated as of the
Closing Date, among the Partnership, Penn Octane Corporation, the MLP General
Partner and the MLP.
"Opinion of Counsel" means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner or any of its
Affiliates) acceptable to the General Partner in its reasonable discretion.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation Section 1.704-2(i), are attributable to a
Partner Nonrecourse Debt.
"Partners" means the General Partner and the Limited Partners.
"Partnership" means Rio Vista Operating Partnership L.P., a Delaware
limited partnership, and any successors thereto.
"Partnership Group" means the Partnership and all OLP Subsidiaries,
treated as a single consolidated entity.
"Partnership Interest" means an ownership interest of a Partner in the
Partnership, which shall include the General Partner Interest and the Limited
Partner Interest(s).
"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).
7
"Percentage Interest" means the percentage interest in the Partnership
owned by each Partner upon completion of the transactions in Section 5.2 and
shall mean, (a) as to the General Partner, 0.10% and (b) as to the MLP, 99.90%.
"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.
"Quarter" means, unless the context requires otherwise, a fiscal
quarter (or, with respect to the fiscal quarter during which the Closing Date
occurs, the portion of such fiscal quarter remaining 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.
"Registration Statement" means the Registration Statement on Form 10
(Registration No. _______) as it has been or as it may be amended or
supplemented from time to time, filed by the MLP with the Commission under the
Securities Act to register the distribution of the Common Units in the
Distribution.
"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 an 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.
"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such statute.
"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
8
partnership) in which such Person, one or more Subsidiaries of such Person, or a
combination thereof, directly or indirectly, at the date of determination, has
(i) at least a majority ownership interest or (ii) the power to elect or direct
the election of a majority of the directors or other governing body of such
Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 10.2 in place of and with
all the rights of a Limited Partner and who is shown as a Limited Partner on the
books and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"transfer" has the meaning assigned to such term in Section 4.1(a).
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of such date (as determined under Section
5.5(d)) over (b) the Carrying Value of such property as of such date (prior to
any adjustment to be made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the Carrying
Value of such property as of such date (prior to any adjustment to be made
pursuant to Section 5.5(d) as of such date) over (b) the fair market value of
such property as of such date (as determined under Section 5.5(d)).
"U.S. GAAP" means United States Generally Accepted Accounting
Principles consistently applied.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term
in Section 11.1(b).
"Working Capital Borrowings" means borrowings used solely for working
capital purposes or to pay distributions to Partners made pursuant to a credit
facility or other arrangement to the extent such borrowings are required to be
reduced to a relatively small amount each year (or for the year in which the
Distribution 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.
9
ARTICLE II
ORGANIZATION
Section 2.1 Formation. 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 "Rio Vista
Operating Partnership L.P." The Partnership's business may be conducted under
any other name or names deemed necessary or appropriate by the General Partner
in its sole discretion, including the name of the General Partner. The words
"Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be
included in the Partnership's name where necessary for the purpose of complying
with the laws of any jurisdiction that so requires. The General Partner 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 General Partner, the
registered office of the Partnership in the State of Delaware shall be located
at 000 Xxxxx XxXxxx Xxxxxxx, Xxxxx, XX 00000, and the registered agent for
service of process on the Partnership in the State of Delaware at such
registered office shall be Capitol Services, Inc. The principal office of the
Partnership shall be located at 000 Xxxxxxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxx
00000, or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems necessary or appropriate. The address of the General
Partner shall be 000 Xxxxxxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, or such
other place as the General Partner may from time to time designate by notice to
the Limited Partners.
Section 2.4 Purpose and Business. The purpose and nature of the
business to be conducted by the Partnership shall be to (a) acquire, manage,
operate and sell the Assets and any similar assets or properties now or
hereafter acquired by the Partnership, (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
Partnership is permitted to engage in, or any type of business or activity
engaged in by the General Partner prior to the Closing Date and, in connection
therewith, to exercise all of the rights and powers conferred upon the
Partnership pursuant to the agreements relating to such business activity, (c)
engage directly in, or enter into or form any corporation, partnership, joint
venture, limited liability company or other arrangement to engage indirectly in,
any business activity that is approved by the General Partner and that lawfully
may be conducted by a limited partnership organized pursuant to the Delaware Act
and, in connection therewith, to exercise all of the rights and powers conferred
upon the Partnership pursuant to the agreements relating to such business
activity; provided, however, that the General Partner reasonably determines, as
of the date of the acquisition or commencement of such activity, that such
activity (i) generates "qualifying
10
income" (as such term is defined pursuant to Section 7704 of the Code) or (ii)
enhances the operations of an activity of the Partnership that generates
qualifying income, and (d) do anything necessary or appropriate to the
foregoing, including the making of capital contributions or loans to a Group
Member, the MLP or any Subsidiary of the MLP. The General Partner has no
obligation or duty to the Partnership, the Limited Partners or the Assignees to
propose or approve, and in its discretion may decline to propose or approve, the
conduct by the Partnership of any business.
Section 2.5 Powers. The Partnership shall be empowered to do any
and all acts and things necessary, appropriate, proper, advisable, incidental to
or convenient for the furtherance and accomplishment of the purposes and
business described in Section 2.4 and for the protection and benefit of the
Partnership.
Section 2.6 Power of Attorney.
(a) Each Limited Partner and each Assignee hereby
constitutes and appoints the General Partner and, if a Liquidator shall have
been selected pursuant to Section 12.3, the Liquidator (and any successor to the
Liquidator by merger, transfer, assignment, election or otherwise) and each of
their authorized officers and attorneys-in-fact, as the case may be, with full
power of substitution, as its true and lawful agent and attorney-in-fact, with
full power and authority in his name, place and xxxxx, to:
(i) execute, swear to, acknowledge, deliver,
file and record in the appropriate public offices (A) all certificates,
documents and other instruments (including this Agreement and the Certificate of
Limited Partnership and all amendments or restatements hereof or thereof) that
the General Partner or the Liquidator 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 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 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 Interests issued pursuant hereto; and (F) all
certificates, documents and other instruments (including agreements and a
certificate of merger) relating to a merger or consolidation of the Partnership
pursuant to Article XIV; and
(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 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
11
the Partners hereunder or is consistent with the terms of this Agreement or is
necessary or appropriate, in the discretion of the General Partner or the
Liquidator, to effectuate the terms or intent of this Agreement; provided, that
when required by any provision of this Agreement that establishes a percentage
of the Limited Partners or of the Limited Partners of any class or series
required to take any action, the 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 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 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
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
General Partner or the Liquidator, within 15 days after receipt of the request
therefor, such further designation, powers of attorney and other instruments as
the General Partner or the Liquidator 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.
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 General
Partner, one or more of its Affiliates or one or more nominees, as the General
Partner may determine. The General Partner hereby declares and warrants that any
Partnership assets for which record title is held in the name of the General
Partner or one or more of its Affiliates or one or more nominees shall be held
by the General Partner or such Affiliate or nominee for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partner shall use reasonable efforts to cause record
title to such assets (other than those assets in respect of which the General
Partner determines that the expense and difficulty of
12
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 any withdrawal or removal of the General Partner or as
soon thereafter as practicable, the General Partner shall use reasonable efforts
to effect the transfer of record title to the Partnership and, prior to any such
transfer, will provide for the use of such assets in a manner satisfactory to
the General Partner. All Partnership assets shall be recorded as the property of
the Partnership in its books and records, irrespective of the name in which
record title to such Partnership assets is held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability. The Limited Partners and the
Assignees shall have no liability under this Agreement except as expressly
provided in this Agreement or the Delaware Act.
Section 3.2 Management of Business. No Limited Partner or
Assignee, in its capacity as such, shall participate in the operation,
management or control (within the meaning of the Delaware Act) of the
Partnership's business, transact any business in the Partnership's name or have
the power to sign documents for or otherwise bind the Partnership. Any action
taken by any Affiliate of the General Partner or any officer, director,
employee, manager, member, general partner, agent or trustee of the General
Partner or any of its Affiliates, or any officer, director, employee, manager,
member, general partner, agent or trustee of a Group Member, in its capacity as
such, shall not be deemed to be participation in the control of the business of
the Partnership by a limited partner of the Partnership (within the meaning of
Section 17-303(a) of the Delaware Act) and shall not affect, impair or eliminate
the limitations on the liability of the Limited Partners or Assignees under this
Agreement.
Section 3.3 Outside Activities of the Limited Partners. Subject
to the provisions of Article II and the Omnibus Agreement, which shall continue
to be applicable to the Persons referred to therein, regardless of whether such
Persons shall also be Limited Partners or Assignees, any Limited Partner or
Assignee shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Partnership, including
business interests and activities in direct competition with the Partnership
Group. Neither the Partnership nor any of the other Partners or Assignees shall
have any rights by virtue of this Agreement in any business ventures of any
Limited Partner or Assignee.
Section 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this
Agreement or by applicable law, and except as limited by Section 3.4(b), each
Limited Partner shall have the right, for a purpose reasonably related to such
Limited Partner's interest as a limited partner in the Partnership, upon
reasonable written demand and at such Limited Partner's own expense:
(i) promptly after becoming available, to obtain
a copy of the Partnership's federal, state and local income tax returns for each
year;
13
(ii) to have furnished to him a current list of
the name and last known business, residence or mailing address of each Partner;
(iii) 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;
(iv) to obtain true and full information
regarding the amount of cash and a description and statement of the Net Agreed
Value of any other Capital Contribution by each Partner and that each Partner
has agreed to contribute in the future, and the date on which each became a
Partner; and
(v) to obtain such other information regarding
the affairs of the Partnership as is just and reasonable; and
(vi) to obtain true and full information
regarding the status of the business and financial condition of the Partnership.
(b) The General Partner may keep confidential from the
Limited Partners and Assignees, for such period of time as the General Partner
deems reasonable, (i) any information that the General Partner reasonably
believes to be in the nature of trade secrets or (ii) other information the
disclosure of which the General Partner in good faith believes (A) is not in the
best interests of the MLP or the Partnership Group, (B) could damage the MLP or
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).
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
Section 4.1 Transfer Generally.
(a) The term "transfer," when used in this Agreement with
respect to a Partnership Interest, shall be deemed to refer to a transaction by
which a General Partner assigns its General Partner Interest to another Person
who becomes the General Partner or 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.
(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.
14
(c) Nothing contained in this Agreement shall be
construed to prevent a disposition by any member of the General Partner of any
or all of the issued and outstanding member interests of the General Partner.
Section 4.2 Transfer of General Partner's General Partner
Interest. No provision of this Agreement shall be construed to prevent (and the
Limited Partners do hereby expressly consent to) (i) the transfer by the General
Partner of all or a portion of its General Partner Interest to one or more
Affiliates, which transferred General Partner Interest, to the extent not
transferred to a successor General Partner, shall constitute a Limited Partner
Interest or (ii) the transfer by the General Partner, in whole and not in part,
of its General Partner Interest upon (a) its merger, consolidation or other
combination into any other Person or the transfer by it of all or substantially
all of its assets to another Person or (b) sale of all or substantially all of
the membership interests of the General Partner by its members if, in the case
of a transfer described in either clause (i) or (ii) of this sentence, the
rights and duties of the General Partner with respect to the General Partner
Interest so transferred are assumed by the transferee and the transferee agrees
to be bound by the provisions of this Agreement; provided, however, that in
either such case, the transferee is primarily controlled, directly or
indirectly, by the MLP or the MLP General Partner or any Person primarily
controlling, directly or indirectly, the MLP or the MLP General Partner;
provided, further, that in either such case, such transferee furnishes to the
Partnership an Opinion of Counsel that such merger, consolidation, combination,
transfer or assumption will not result in a loss of limited liability of any
Limited Partner or cause the Partnership to be 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). In the case of a transfer pursuant to
this Section 4.2 to a Person proposed as a successor general partner of the
Partnership, the transferee or successor (as the case may be) shall, subject to
compliance with the terms of Section 10.4, be admitted to the Partnership as the
General Partner immediately prior to the transfer of the Partnership Interest,
and the business of the Partnership shall continue without dissolution.
Section 4.3 Transfer of a Limited Partner's Partnership Interest.
A Limited Partner may transfer all, but not less than all, of its Partnership
Interest as a Limited Partner in connection with the merger, consolidation or
other combination of such Limited Partner with or into any other Person or the
transfer by such Limited Partner of all or substantially all of its assets to
another Person and, following any such transfer, such Person may become a
Substituted Limited Partner pursuant to Article X. Except as set forth in the
immediately preceding sentence, or in connection with any pledge of (or any
related foreclosure on) a Partnership Interest of a Limited Partner solely for
the purpose of securing, directly or indirectly, indebtedness of the Partnership
or the MLP, a Limited Partner may not transfer all or any part of its
Partnership Interest or withdraw from the Partnership.
Section 4.4 Restrictions on Transfers.
(a) Notwithstanding the other provisions of this Article
IV, no transfer of any Partnership Interest shall be made if such transfer would
(i) violate the then applicable federal or state securities laws or the rules
and regulations of the Commission, any state securities commission or any other
governmental authority with jurisdiction over such transfer, (ii)
15
terminate the existence or qualification of the Partnership or the MLP under the
laws of the jurisdiction of its formation or (iii) cause the Partnership or the
MLP to be treated as an association taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes (to the extent not already so
treated or taxed).
(b) The General Partner may impose restrictions on the
transfer of Partnership Interests if a subsequent Opinion of Counsel determines
that such restrictions are necessary to avoid a significant risk of the
Partnership or the MLP becoming taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes. The restrictions may be
imposed by making such amendments to this Agreement as the General Partner may
determine to be necessary or appropriate to impose such restrictions.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Initial Contributions. In connection with the
formation of the Partnership under the Delaware Act, the General Partner
purchased a 0.10% General Partner Interest for $1.00 and was admitted as General
Partner, and Penn Octane Corporation purchased a 99.9% Limited Partner Interest
in the Partnership for $999.00 and was admitted as a Limited Partner.
Section 5.2 Contributions Pursuant to the Contribution Agreement.
(a) Pursuant to the Contribution Agreement, Penn Octane
Corporation contributed to the Partnership all of its right, title and interest
in the Assets as a Capital Contribution.
(b) Penn Octane Corporation then, pursuant to the
Contribution Agreement, contributed its 99.9% Limited Partner Interest in the
Partnership to the MLP as a capital contribution.
(c) Following the foregoing transactions, the General
Partner continues to own a 0.10% General Partner Interest, the MLP owns a 99.9%
Limited Partner Interest and Penn Octane Corporation no longer owns any
Partnership Interest.
Section 5.3 Additional Capital Contributions. With the consent of
the General Partner, any Limited Partner may, but shall not be obligated to,
make additional Capital Contributions to the Partnership. Contemporaneously with
the making of any Capital Contributions by a Limited Partner, in addition to
those provided in Sections 5.1 and 5.2, the General Partner shall be obligated
to make an additional Capital Contribution to the Partnership in an amount equal
to 0.10 divided by 99.9 times the amount of the additional Capital Contribution
then made by such Limited Partner. Except as set forth in the immediately
preceding sentence and in Article XII, the General Partner shall not be
obligated to make any additional Capital Contributions to the Partnership.
Section 5.4 Interest and Withdrawal. No interest shall be paid by
the Partnership on Capital Contributions. No Partner or Assignee shall be
entitled to the withdrawal or return of its
16
Capital Contribution, except to the extent, if any, that distributions made
pursuant to this Agreement or upon termination of the Partnership may be
considered as such by law and then only to the extent provided for in this
Agreement. Except to the extent expressly provided in this Agreement, no Partner
or Assignee shall have priority over any other Partner or Assignee either as to
the return of Capital Contributions or as to profits, losses or distributions.
Any such return shall be a compromise to which all Partners and Assignees agree
within the meaning of Section 17-502(b) of the Delaware Act.
Section 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a
beneficial owner of Partnership Interests held by a nominee in any case in which
the nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the 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 that 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 General Partner) of all property owned by any OLP Subsidiary
that is classified as a partnership for federal income tax purposes.
(ii) All fees and other expenses incurred by the
Partnership to promote the sale of (or to sell) a Partnership Interest that can
neither be deducted nor amortized under Section 709 of the Code, if any, shall,
for purposes of Capital Account maintenance, be treated as an item of deduction
at the time such fees and other expenses are incurred and shall be allocated
among the Partners pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury
Regulation Section 1.704-1(b)(2)(iv)(m), computation of all items of income,
gain, loss and deduction shall be made without regard to any election under
Section 754 of the Code that may be made by the
17
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 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 General Partner may adopt.
(vi) If the Partnership's adjusted basis in a
depreciable or cost recovery property is reduced for federal income tax purposes
pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of such
reduction shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed in
service and shall be allocated among the Partners pursuant to Section 6.1. Any
restoration of such basis pursuant to Section 48(q)(2) of the Code shall, to the
extent possible, be allocated in the same manner to the Partners to whom such
deemed deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed
to a pro rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for
cash or Contributed Property, the Capital Accounts of all Partners and the
Carrying Value of each Partnership property immediately prior to such issuance
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as if such Unrealized
Gain or Unrealized Loss had been recognized on an actual sale of each such
property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 6.1 in the same manner as any item of
gain or loss actually recognized during such
18
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 General Partner using such reasonable method of valuation as
it may adopt; provided, however, that the General Partner, in arriving at such
valuation, must take fully into account the fair market value of the Partnership
Interests of all Partners at such time. The General Partner shall allocate such
aggregate value among the assets of the Partnership (in such manner as it
determines 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 that is not made pursuant to Section 12.4 or in the case of a
deemed distribution, be determined and allocated in the same manner as that
provided in Section 5.5(d)(i) or (B) in the case of a liquidating distribution
pursuant to Section 12.4, be determined and allocated by the Liquidator using
such reasonable method of valuation as it may adopt.
Section 5.6 Loans from Partners. Loans by a Partner to the
Partnership shall not constitute Capital Contributions. If any Partner shall
advance funds to the Partnership in excess of the amounts required hereunder to
be contributed by it to the capital of the Partnership, the making of such
excess advances shall not result in any increase in the amount of the Capital
Account of such Partner. The amount of any such excess advances shall be a debt
obligation of the Partnership to such Partner and shall be payable or
collectible only out of the Partnership assets in accordance with the terms and
conditions upon which such advances are made.
Section 5.7 Issuances of Additional Partnership Securities.
(a) The Partnership may issue additional Partnership
Securities and options, rights, warrants and appreciation rights relating to the
Partnership Securities for any Partnership purpose at any time and from time to
time to such Persons for such consideration and on such terms and conditions as
shall be established by the General Partner in its sole discretion. The issuance
by the Partnership of Partnership Securities or rights, warrants or appreciation
rights in respect thereof shall be deemed an amendment to this Agreement.
19
(b) Each additional Partnership Security authorized to be
issued by the Partnership pursuant to Section 5.7(a) may be issued in one or
more classes, or one or more series of any such classes, with such designations,
preferences, rights, powers and duties (which may be senior to existing classes
and series of Partnership Securities), as shall be fixed by the General Partner
in 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
such 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 the holder 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 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
5.7, (ii) the admission of Additional Limited Partners and (iii) all additional
issuances of Partnership Securities. The General Partner is further authorized
and directed to specify the relative rights, powers and duties of the holders of
the Partnership Interests or other Partnership Securities being so issued. The
General Partner shall do all things necessary to comply with the Delaware Act
and is authorized and directed to do all things it deems necessary or advisable
in connection with any future issuance of Partnership Securities, including
compliance with any statute, rule, regulation or guideline of any federal, state
or other governmental agency.
Section 5.8 Limited Preemptive Rights. Except as provided in
Section 5.3, no Person shall have preemptive, preferential or other similar
rights with respect to (a) additional Capital Contributions; (b) issuance or
sale of any class or series of Partnership Interests, whether unissued, held in
the treasury or hereafter created; (c) issuance of any obligations, evidences of
indebtedness or other securities of the Partnership convertible into or
exchangeable for, or carrying or accompanied by any rights to receive, purchase
or subscribe to, any such Partnership Interests; (d) issuance of any right of
subscription to or right to receive, or any warrant or option for the purchase
of, any such Partnership Interests; or (e) issuance or sale of any other
securities that may be issued or sold by the Partnership.
Section 5.9 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, except as such non-assessability may
be affected by Section 17-607 of the Delaware Act.
20
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 among the Partners as
follows:
(i) First, 100% to the General Partner, until
the aggregate Net Income allocated to the General Partner pursuant to this
Section 6.1(a)(i) for the current taxable year and all previous taxable years is
equal to the aggregate Net Losses allocated to the General Partner pursuant to
Section 6.1(b)(ii) for all previous taxable years;
(ii) Second, 0.10% to the General Partner and
99.9% to the Limited Partners in accordance with their respective Percentage
Interests.
(b) Net Losses. After giving effect to the special
allocations set forth in Section 6.1(d), Net Losses for each taxable period and
all items of income, gain, loss and deduction taken into account in computing
Net Losses for such taxable period shall be allocated among the Partners as
follows:
(i) First, 0.10% to the General Partner and
99.9% to the Limited Partners, in accordance with their respective Percentage
Interests; provided, however, that Net Losses shall not be allocated to a
Limited Partner pursuant to this Section 6.1(b)(i) to the extent that such
allocation would cause a Limited Partner to have a deficit balance in its
Adjusted Capital Account at the end of such taxable year (or increase any
existing deficit balance in such Limited Partner's Adjusted Capital Account);
(ii) Second, the balance, if any, 100% to the
General Partner.
(c) Net Termination Gains and Losses. After giving effect
to the special allocations set forth in Section 6.1(d), all items of income,
gain, loss and deduction taken into account in computing Net Termination Gain or
Net Termination Loss for such taxable period shall be allocated in the same
manner as such Net Termination Gain or Net Termination Loss is allocated
hereunder. All allocations under this Section 6.1(c) shall be made after Capital
Account balances have been adjusted by all other allocations provided under this
Section 6.1 and after all distributions of Available Cash provided under Section
6.4 have been made with respect to the taxable period ending on or before the
Liquidation Date; provided, however, that solely for purposes of this Section
6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant
to Section 12.4.
(i) If a Net Termination Gain is recognized (or
deemed recognized pursuant to Section 5.5(d)), such Net Termination Gain shall
be allocated among the Partners in the following manner (and the Capital
Accounts of the Partners shall be increased by the amount
21
so allocated in each of the following subclauses, in the order listed, before an
allocation is made pursuant to the next succeeding subclause):
(A) First, to each Partner having a
deficit balance in its Capital Account, in the proportion that such deficit
balance bears to the total deficit balances in the Capital Accounts of all
Partners, until each such Partner has been allocated Net Termination Gain equal
to any such deficit balance in its Capital Account; and
(B) Second, 0.10% to the General
Partner and 99.9% to the Limited Partners, in accordance with their respective
Percentage Interests.
(ii) If a Net Termination Loss is recognized (or
deemed recognized pursuant to Section 5.5(d)), such Net Termination Loss shall
be allocated among the Partners in the following manner:
(A) First, to the General Partner and
the Limited Partners in proportion to, and to the extent of, the positive
balances in their respective Capital Accounts; and
(B) Second, the balance, if any, 100%
to the General Partner.
(d) Special Allocations. Notwithstanding any other
provision of this Section 6.1, the following special allocations shall be made
for such taxable period:
(i) Partnership Minimum Gain Chargeback.
Notwithstanding any other provision of this Section 6.1, if there is a net
decrease in Partnership Minimum Gain during any Partnership taxable period, each
Partner shall be allocated items of Partnership income and gain for such period
(and, if necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i),
or any successor provision. For purposes of this Section 6.1(d), each Partner's
Adjusted Capital Account balance shall be determined, and the allocation of
income or gain required hereunder shall be effected, prior to the application of
any other allocations pursuant to this Section 6.1(d) with respect to such
taxable period (other than an allocation pursuant to Sections 6.1(d)(v) and
6.1(d)(vi)). This Section 6.1(d)(i) is intended to comply with the 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
22
6.1(d)(v) and 6.1(d)(vi), with respect to such taxable period. This Section
6.1(d)(ii) is intended to comply with the chargeback of items of income and gain
requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any
Partner unexpectedly receives any adjustments, allocations or distributions
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income
and gain shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations
promulgated under Section 704(b) of the Code, the deficit balance, if any, in
its Adjusted Capital Account created by such adjustments, allocations or
distributions as quickly as possible unless such deficit balance is otherwise
eliminated pursuant to Section 6.1(d)(i) or (ii).
(iv) Gross Income Allocations. In the event any
Partner has a deficit balance in its Capital Account at the end of any
Partnership taxable period in excess of the sum of (A) the amount such Partner
is required to restore pursuant to the provisions of this Agreement and (B) the
amount such Partner is deemed obligated to restore pursuant to Treasury
Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership gross income and gain in the amount of
such excess as quickly as possible; provided, that an allocation pursuant to
this Section 6.1(d)(iv) shall be made only if and to the extent that such
Partner would have a deficit balance in its Capital Account as adjusted after
all other allocations provided for in this Section 6.1 have been tentatively
made as if this Section 6.1(d)(iv) were not in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse
Deductions for any taxable period shall be allocated to the Partners in
accordance with their respective Percentage Interests. If the 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.
(vi) Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions for any taxable period shall be allocated 100% to the
Partner that bears the Economic Risk of Loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Treasury Regulation Section 1.704-2(i). If more than one
Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse
Debt, such Partner Nonrecourse Deductions attributable thereto shall be
allocated between or among such Partners in accordance with the ratios in which
they share such Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of
Treasury Regulation Section 1.752-3(a)(3), the Partners agree that Nonrecourse
Liabilities of the Partnership in excess of the sum of (A) the amount of
Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain
shall be allocated among the Partners in accordance with their respective
Percentage Interests.
23
(viii) Code Section 754 Adjustments. To the extent
an adjustment to the adjusted tax basis of any Partnership asset pursuant to
Section 734(b) or 743(c) of the Code is required, pursuant to Treasury
Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis), and such item of gain or loss
shall be specially allocated to the Partners in a manner consistent with the
manner in which their Capital Accounts are required to be adjusted pursuant to
such Section of the Treasury Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision
of this Section 6.1, other than the Required Allocations, the Required
Allocations shall be taken into account in making the Agreed Allocations so
that, to the extent possible, the net amount of items of income, gain, loss and
deduction allocated to each Partner pursuant to the Required Allocations and the
Agreed Allocations, together, shall be equal to the net amount of such items
that would have been allocated to each such Partner under the Agreed Allocations
had the Required Allocations and the related Curative Allocation not otherwise
been provided in this Section 6.1. Notwithstanding the preceding sentence,
Required Allocations relating to (1) Nonrecourse Deductions shall not be taken
into account except to the extent that there has been a decrease in Partnership
Minimum Gain and (2) Partner Nonrecourse Deductions shall not be taken into
account except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section
6.1(d)(ix)(A) shall only be made with respect to Required Allocations to the
extent the General Partner reasonably determines that such allocations will
otherwise be inconsistent with the economic agreement among the Partners.
Further, allocations pursuant to this Section 6.1(d)(ix)(A) shall be deferred
with respect to allocations pursuant to clauses (1) and (2) hereof to the extent
the General Partner reasonably determines that such allocations are likely to be
offset by subsequent Required Allocations.
(B) The General Partner shall have
reasonable discretion, with respect to each taxable period, to (1) apply the
provisions of Section 6.1(d)(ix)(A) in whatever order is most likely to minimize
the economic distortions that might otherwise result from the Required
Allocations, and (2) divide all allocations pursuant to Section 6.1(d)(ix)(A)
among the Partners in a manner that is likely to minimize such economic
distortions.
Section 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities
attributable to a Contributed Property or Adjusted Property, items of income,
gain, loss, depreciation, amortization and cost recovery deductions shall be
allocated for federal income tax purposes among the Partners as follows:
24
(i) (A) In the case of a Contributed Property,
such items attributable thereto shall be allocated among the Partners in the
manner provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted basis at
the time of contribution; and (B) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the Partners in
the same manner as its correlative item of "book" gain or loss is allocated
pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property,
such items shall (1) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized Loss attributable to such property and
the allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2)
second, in the event such property was originally a Contributed Property, be
allocated among the Partners in a manner consistent with Section 6.2(b)(i)(A);
and (B) any item of Residual Gain or Residual Loss attributable to an Adjusted
Property shall be allocated among the Partners in the same manner as its
correlative item of "book" gain or loss is allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the
principles of Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax
Disparities.
(c) For the proper administration of the Partnership and
for the preservation of uniformity of the Units or other limited partner
interests of the MLP (or any class or classes thereof), the General Partner
shall have sole discretion to (i) adopt such conventions as it deems appropriate
in determining the amount of depreciation, amortization and cost recovery
deductions; (ii) make special allocations for federal income tax purposes of
income (including, without limitation, gross income) or deductions; and (iii)
amend the provisions of this Agreement as appropriate (x) to reflect the
proposal or promulgation of Treasury Regulations under Section 704(b) or Section
704(c) of the Code or (y) otherwise to preserve or achieve uniformity of the
Units or other limited partner interests of the MLP (or any class or classes
thereof). The General Partner may adopt such conventions, make such allocations
and make such amendments to this Agreement as provided in this Section 6.2(c)
only if such conventions, allocations or amendments would not have a material
adverse effect on the Partners, the holders of any class or classes of Units or
other limited partner interests of the MLP issued and outstanding or the
Partnership, and if such allocations are consistent with the principles of
Section 704 of the Code.
(d) The 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)-l(a)(6) or any successor
regulations thereto.
If the General Partner determines that such reporting position cannot
reasonably be taken, the General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring limited partner interests of
the MLP in the same month would receive depreciation and amortization
deductions, based upon the same applicable rate as if they had purchased a
direct interest in the Partnership's property. If the General Partner chooses
not to
25
utilize such aggregate method, the General Partner may use any other reasonable
depreciation and amortization conventions to preserve the uniformity of the
intrinsic tax characteristics of any limited partner interests of the MLP that
would not have a material adverse effect on the Partners or the holders of any
class or classes of limited partner interests of the MLP.
(e) Any gain allocated to the Partners upon the sale or
other taxable disposition of any Partnership asset shall, to the extent
possible, after taking into account other required allocations of gain pursuant
to this Section 6.2, be characterized as Recapture Income in the same
proportions and to the same extent as such Partners (or their predecessors in
interest) have been allocated any deductions directly or indirectly giving rise
to the treatment of such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit
recognized by the Partnership for federal income tax purposes and allocated to
the Partners in accordance with the provisions hereof shall be determined
without regard to any election under Section 754 of the Code that may be made by
the Partnership; provided, however, that such allocations, once made, shall be
adjusted as necessary or appropriate to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of
allocation of income, gain, loss or deduction between a transferor and a
transferee of a Partnership Interest as it determines necessary 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 Partner
under the provisions of this Article VI shall instead be made to the beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion.
Section 6.3 Distributions.
(a) Within 45 days following the end of each Quarter
commencing with the Quarter ending on December 31, 2003, an amount equal to 100%
of Available Cash with respect to such Quarter shall, subject to Section 17-607
of the Delaware Act, be distributed in accordance with this Article VI by the
Partnership to the Partners in accordance with their respective Percentage
Interests. The immediately preceding sentence shall not require any distribution
of cash if and to the extent such distribution would be prohibited by applicable
law or by any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which the Partnership is a party or by which it
is bound or its assets are subject. All distributions required to be made under
this Agreement shall be made subject to Section 17-607 of the Delaware Act.
(b) In the event of the dissolution and liquidation of
the Partnership, all receipts received during or after the Quarter in which the
Liquidation Date occurs, other than
26
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 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.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management.
(a) The General Partner shall conduct, direct and manage
all activities of the Partnership. Except as otherwise expressly provided in
this Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner, and no Limited
Partner 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 that are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to Section 7.3, shall have full power and authority to
do all things and on such terms as it, 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 a Partnership Interest, and the
incurring of any other obligations;
(ii) the making of tax, regulatory and other
filings, or rendering of periodic or other reports to governmental or other
agencies having jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage,
pledge, encumbrance, hypothecation or exchange of any or all of the assets of
the Partnership or the merger or other combination of the Partnership with or
into another Person (the matters described in this clause (iii) being subject,
however, to any prior approval that may be required by Section 7.3);
(iv) the use of the assets of the Partnership
(including cash on hand) for any purpose consistent with the terms of this
Agreement, including the financing of the conduct of the operations of the
Partnership Group; subject to Section 7.6, the lending of funds to other Persons
(including the MLP and any member of the Partnership Group); the repayment of
obligations of the MLP or any member of the Partnership Group and the making of
capital contributions to any member of the Partnership Group;
27
(v) the negotiation, execution and performance
of any contracts, conveyances or other instruments (including instruments that
limit the liability of the Partnership under contractual arrangements to all or
particular assets of the Partnership, with the other party to the contract to
have no recourse against the General Partner or its assets other than its
interest in the Partnership, even if same results in the terms of the
transaction being less favorable to the Partnership than would otherwise be the
case);
(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, corporations, limited
liability companies or other relationships subject to the restrictions set forth
in Section 2.4;
(x) the control of any matters affecting the
rights and obligations of the Partnership, including the bringing and defending
of actions at law or in equity and otherwise engaging in the conduct of
litigation and the incurring of legal expense and the settlement of claims and
litigation; and
(xi) the indemnification of any Person against
liabilities and contingencies to the extent permitted by law.
(b) Notwithstanding any other provision of this
Agreement, the MLP Agreement, the Delaware Act or any applicable law, rule or
regulation, each of the Partners and the Assignees and each other Person who may
acquire an interest in the Partnership hereby (i) approves, ratifies and
confirms the execution, delivery and performance by the parties thereto of this
Agreement, the Omnibus Agreement, the Contribution Agreement and the other
agreements and documents described in or filed as exhibits to the Registration
Statement that are related to the transactions contemplated by the Registration
Statement; (ii) agrees that the General Partner (on its own or through any
officer of the Partnership) is authorized to execute, deliver and perform the
agreements referred to in clause (i) of this sentence, as applicable, 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 the Partnership; and (iii) agrees that the execution,
delivery or performance by the General Partner, the MLP, any Group Member or any
Affiliate of any of them, of this Agreement or any agreement authorized or
permitted under this Agreement (including the exercise by the General Partner or
any Affiliate of the General Partner of the rights accorded pursuant to Article
XV), shall not constitute a breach
28
by the General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this Agreement
(or any other agreements) or of any duty stated or implied by law or equity.
Section 7.2 Certificate of Limited Partnership. The General
Partner has caused the Certificate of Limited Partnership to be filed with the
Secretary of State of the State of Delaware as required by the Delaware Act. The
General Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents as may be determined by the 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 General
Partner in its sole discretion to be reasonable and necessary or appropriate,
the General Partner shall file amendments to and restatements of the Certificate
of Limited Partnership and do all things to maintain the Partnership as a
limited partnership (or a partnership or other entity in which the limited
partners have limited liability) under the laws of the State of Delaware or of
any other state in which the Partnership may elect to do business or own
property. Subject to the terms of Section 3.4(a), the General Partner shall not
be required, before or after filing, to deliver or mail a copy of the
Certificate of Limited Partnership, any qualification document or any amendment
thereto to any Limited Partner or Assignee.
Section 7.3 Restrictions on the General Partner's Authority.
(a) The General Partner may not, without written approval
of the specific act by the Limited Partners or by other written instrument
executed and delivered by the Limited Partners 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
General Partner Interest.
(b) Except as provided in Articles XII and XIV, the
General Partner may not sell, exchange or otherwise dispose of all or
substantially all of the Partnership's assets in a single transaction or a
series of related transactions (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 Partnership,
without the approval of the Limited Partners; provided however that this
provision shall not preclude or limit the General Partner's ability to mortgage,
pledge, hypothecate or grant a security interest in all or substantially all of
the assets of the Partnership and shall not apply to any forced sale of any or
all of the assets of the Partnership pursuant to the foreclosure of, or other
realization upon, any such encumbrance.
Section 7.4 Reimbursement of the General Partner.
29
(a) Except as provided in this Section 7.4 and elsewhere
in this Agreement or in the Omnibus Agreement, the General Partner shall not be
compensated for its services as General Partner or as general partner or
managing member of any Group Member.
(b) The General Partner shall be reimbursed on a monthly
basis, or such other reasonable basis as the 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 General Partner to perform services for the Partnership or for the
General Partner in the discharge of its duties to the Partnership), and (ii) all
other necessary or appropriate expenses allocable to the Partnership or
otherwise reasonably incurred by the General Partner in connection with
operating the Partnership's business (including expenses allocated to the
General Partner by its Affiliates). The General Partner shall determine the
expenses that are allocable to the Partnership in any reasonable manner
determined by the General Partner in its sole discretion. Reimbursements
pursuant to this Section 7.4 shall be in addition to any reimbursement to the
General Partner as a result of indemnification pursuant to Section 7.7.
(c) Subject to Section 5.7, the General Partner, in its
sole discretion and without the approval of the Limited Partners (who shall have
no right to vote in respect thereof), may propose and adopt on behalf of the
Partnership employee benefit plans, employee programs and employee practices, or
cause the Partnership to issue Partnership Interests in connection with or
pursuant to any employee benefit plan, employee program or employee practice
maintained or sponsored by the General Partner or any of its Affiliates, in each
case for the benefit of employees of the General Partner, any Group Member or
any Affiliate, or any of them, in respect of services performed, directly or
indirectly, for the benefit of the Partnership Group. Expenses incurred by the
General Partner in connection with any such plans, programs and practices shall
be reimbursed in accordance with Section 7.4(b). Any and all obligations of the
General Partner under any employee benefit plans, employee programs or employee
practices adopted by the General Partner as permitted by this Section 7.4(c)
shall constitute obligations of the General Partner hereunder and shall be
assumed by any successor General Partner approved pursuant to Section 11.1 or
11.2 or the transferee of or successor to all of the General Partner's General
Partner Interest pursuant to Section 4.2.
Section 7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so
long as it is the General Partner of the Partnership, (i) agrees that its sole
business will be to act as the General Partner of the Partnership and a general
partner or managing member, as the case may be, of any other partnership or
limited liability company of which the Partnership is, directly or indirectly, a
partner or member, and to undertake activities that are ancillary or related
thereto, 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 of the Partnership or one or more Group Members
or as described in or contemplated by the Registration Statement or (B) the
acquiring, owning or disposing of debt or equity securities in any Group Member.
30
(b) Except as specifically restricted by Section 7.5(a)
and the Omnibus Agreement, each Indemnitee (other than the General Partner)
shall have the right to engage in businesses of every type and description and
other activities for profit and to engage in and possess an interest in other
business ventures of any and every type or description, whether in businesses
engaged in or anticipated to be engaged in by the MLP or any Group Member,
independently or with others, including business interests and activities in
direct competition with the business and activities of the MLP or any Group
Member, and none of the same shall constitute a breach of this Agreement or any
duty express or implied by law to the MLP or any Group Member or any Partner or
Assignee. Neither the MLP nor any Group Member, any Limited Partner nor any
other Person shall have any rights by virtue of this Agreement, the MLP
Agreement or the partnership relationship established hereby or thereby in any
business ventures of any Indemnitee.
(c) Subject to the terms of Section 7.5(a), Section
7.5(b) and the Omnibus Agreement, but otherwise notwithstanding anything to the
contrary in this Agreement, (i) the engaging in competitive activities by any
Indemnitee (other than the General Partner) in accordance with the provisions of
this Section 7.5 is hereby approved by the Partnership and all Partners, (ii) it
shall be deemed not to be a breach of the General Partner's fiduciary duty or
any other obligation of any type whatsoever of the General Partner for the
Indemnitees (other than the General Partner) to engage in such business
interests and activities in preference to or to the exclusion of the Partnership
and (iii) except as set forth in the Omnibus Agreement, the Indemnitees shall
have no obligation to present business opportunities to the Partnership.
(d) The General Partner and any of its Affiliates may
acquire Units or other MLP 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 relating to such Units or MLP 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 MLP or any Group Member.
(f) Anything in this Agreement to the contrary
notwithstanding, to the extent that provisions of Sections 7.7, 7.8, 7.9, 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 Partner to the
Partnership and its Limited Partners, or to constitute a waiver or consent by
the Limited Partners to any such restriction, such provisions shall be
inapplicable and have no effect in determining whether the General Partner has
complied with its fiduciary duties in connection with determinations made by it
under this Section 7.5.
Section 7.6 Loans from the General Partner; Loans or
Contributions from the Partnership; Contracts with Affiliates; Certain
Restrictions on the General Partner.
(a) The General Partner or any of its Affiliates may lend
to the Partnership, the MLP or any Group Member, and the Partnership, the MLP or
any Group Member may
31
borrow from the General Partner or any of its Affiliates, funds needed or
desired by the MLP or the Group Member for such periods of time and in such
amounts as the General Partner may determine; provided, however, that in any
such case the lending party may not charge the borrowing party interest at a
rate greater than the rate that would be charged the borrowing party or impose
terms less favorable to the borrowing party than would be charged or imposed on
the borrowing party by unrelated lenders on comparable loans made on an
arm's-length basis (without reference to the lending party's financial abilities
or guarantees). The borrowing party shall reimburse the lending party for any
costs (other than any additional interest costs) incurred by the lending party
in connection with the borrowing of such funds. For purposes of this Section
7.6(a) and Section 7.6(b), the term "Group Member" shall include any Affiliate
of a Group Member that is controlled by the Group Member.
(b) The Partnership may lend or contribute to any Group
Member, and any Group Member may borrow from the Partnership, funds on terms and
conditions established in the sole discretion of the 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 Partner's financial abilities or guarantees) by unrelated lenders
on comparable loans. The foregoing authority shall be exercised by the 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 Partner may itself, or may enter into an
agreement with the MLP General Partner or any of its Affiliates to, render
services to a Group Member or to the General Partner in the discharge of its
duties as general partner of the Partnership. Any services rendered to a Group
Member by the General Partner, the MLP General Partner or any of their
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 the General Partner nor any of its 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
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
32
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 Group), is equitable to the Partnership.
(f) The General Partner and its Affiliates will have no
obligation to permit any Group Member to use any facilities or assets of the
General Partner and its Affiliates, except as may be provided in contracts
entered into from time to time specifically dealing with such use, nor shall
there be any obligation on the part of the General Partner or its 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
Partner) not opposed to, the best interests of the Partnership and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 7.7
shall be available to the General Partner with respect to its obligations
incurred pursuant to the Underwriting Agreement or the Contribution Agreement
(other than obligations incurred by the General Partner on behalf of the
Partnership). 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 Partner shall not be personally liable for such indemnification
and shall have no obligation to contribute or loan any monies or property to the
Partnership to enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses
(including legal fees and expenses) incurred by an Indemnitee who is indemnified
pursuant to Section 7.7(a) in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Partnership prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Partnership of any undertaking by or on behalf of the Indemnitee to repay
such amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 7.7.
33
(c) The indemnification provided by this Section 7.7
shall be in addition to any other rights to which an Indemnitee may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and
as to actions in any other capacity (including any capacity under the
Underwriting Agreement), and shall continue as to an Indemnitee who has ceased
to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or
reimburse the General Partner or its Affiliates for the cost of) insurance, on
behalf of the General Partner, its Affiliates and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expense that may be incurred by such Person in connection with the
Partnership's activities or such Person's activities on behalf of the
Partnership, regardless of whether the Partnership would have the power to
indemnify such Person against such liability under the provisions of this
Agreement.
(e) For purposes of this Section 7.7, the Partnership
shall be deemed to have requested an Indemnitee to serve as fiduciary of an
employee benefit plan whenever the performance by it of its duties to the
Partnership also imposes duties on, or otherwise involves services by, it to the
plan or participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action taken
or omitted by it with respect to any employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
that 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 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.
34
Section 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in
this Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who have
acquired interests in the Units or other MLP 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 General
Partner set forth in Section 7.1(a), the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents, and the General
Partner shall not be responsible for any misconduct or negligence on the part of
any such agent appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an
Indemnitee has duties (including fiduciary duties) and liabilities relating
thereto to the Partnership or to the Partners, the General Partner and any other
Indemnitee acting in connection with the Partnership's business or affairs shall
not be liable to the Partnership or to any Partner for its good faith reliance
on the provisions of this Agreement. 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 Partner, and the Partnership's and General Partner's
directors, officers and employees under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
Section 7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement
or the MLP Agreement, whenever a potential conflict of interest exists or arises
between the General Partner or any of its Affiliates, on the one hand, and the
Partnership, the MLP, any Partner or any Assignee, on the other, any resolution
or course of action by the General Partner or its Affiliates in respect of such
conflict of interest shall be permitted and deemed approved by all Partners, and
shall not constitute a breach of this Agreement, of the MLP Agreement, of any
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 General
Partner shall be authorized but not required in connection with its resolution
of such conflict of interest to seek Special Approval of such resolution and the
General Partner may also adopt a resolution or course of action that has not
received Special Approval. Any Special Approval shall be subject to the
presumption that, in making its decision, the Conflicts Committee acted on an
informed basis, in good faith and in the honest belief that the action taken was
in the best interests of the Partnership and the MLP and, in any proceeding
35
brought by any Limited Partner or by or on behalf of such Limited Partner or any
other Limited Partners or the Partnership challenging such approval, the Person
bringing or prosecuting such proceeding shall have the burden of overcoming such
presumption. Any conflict of interest and any resolution of such conflict of
interest shall be conclusively deemed fair and reasonable to the Partnership if
such conflict of interest or resolution is (i) approved by Special Approval,
(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 General Partner may also
adopt a resolution or course of action that has not received Special Approval.
The General Partner 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 General Partner determines in its sole discretion
to be relevant, reasonable or appropriate under the circumstances. In any
proceeding brought by any Limited Partner or by or on behalf of such Limited
Partner or any other Limited Partners or the Partnership alleging that such a
resolution by the General Partner is not fair to the Partnership, such Limited
Partner shall have the burden of proof of overcoming such conclusion. Nothing
contained in this Agreement, however, is intended to nor shall it be construed
to require the General Partner to consider the interests of any Person other
than the Partnership. In the absence of bad faith by the General Partner, the
resolution, action or terms so made, taken or provided by the 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 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 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 MLP, 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 General Partner or such Affiliate shall act under
such express standard and shall not be subject to any other or different
standards imposed by this Agreement, the MLP Agreement, any other agreement
contemplated hereby or under the Delaware Act or any other law, rule or
regulation. In addition, any actions taken by the General Partner or such
Affiliate consistent with the standards of "reasonable discretion" set forth in
the definition of Available Cash shall not constitute a breach of any duty of
the General Partner to the Partnership or the Limited Partners. The 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
36
by the General Partner shall be deemed to constitute a breach of any duty of the
General Partner to the Partnership 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 General Partner or its Affiliates to exceed 0.10% of
the total amount distributed to all Partners or (B) hasten the expiration of the
Subordination Period or the conversion of any Subordinated Units into Common
Units.
(c) Whenever a particular transaction, arrangement or
resolution of a conflict of interest is required under this Agreement to be
"fair and reasonable" to any Person, the fair and reasonable nature of such
transaction, arrangement or resolution shall be considered in the context of all
similar or related transactions.
(d) The Limited Partner hereby authorizes the General
Partner, on behalf of the Partnership as a partner or member of a Group Member,
to approve of actions by the general partner or managing member of such Group
Member similar to those actions permitted to be taken by the General Partner
pursuant to this Section 7.9.
Section 7.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected
in acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture or
other paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion (including an Opinion of Counsel) of such
Persons as to matters that the General Partner reasonably believes to be within
such Person's professional or expert competence shall be conclusively presumed
to have been done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect
of any of its powers or obligations hereunder, to act through any of its duly
authorized officers, a duly appointed attorney or attorneys-in-fact or the duly
authorized officers of the Partnership.
(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 Partner to act under this Agreement or any other
agreement contemplated by this Agreement and to make any decision pursuant to
the authority prescribed in this Agreement, so long as such action is reasonably
believed by the General Partner to be in, or not inconsistent with, the best
interests of the Partnership.
Section 7.11 Reliance by Third Parties. Notwithstanding anything
to the contrary in this Agreement, any Person dealing with the Partnership shall
be entitled to assume that the General Partner and any officer of the General
Partner authorized by the General Partner to act on behalf of and in the name of
the Partnership has full power and authority to encumber, sell or
37
otherwise use in any manner any and all assets of the Partnership and to enter
into any authorized contracts on behalf of the Partnership, and such Person
shall be entitled to deal with the General Partner or any such officer as if it
were the Partnership's sole party in interest, both legally and beneficially.
Each Limited Partner hereby waives any and all defenses or other remedies that
may be available against such Person to contest, negate or disaffirm any action
of the General Partner or any such officer in connection with any such dealing.
In no event shall any Person dealing with the General Partner or any such
officer or its representatives be obligated to ascertain that the terms of the
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or any such officer or its
representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the General Partner or its
representatives shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (a) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (b) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership and (c) such certificate, document or instrument was
duly executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.
ARTICLE VIII
BOOKS, RECORDS AND ACCOUNTING
Section 8.1 Records and Accounting. The General Partner shall
keep or cause to be kept at the principal office of the Partnership appropriate
books and records with respect to the Partnership's business, including all
books and records necessary to provide to the Limited Partners any information
required to be provided pursuant to Section 3.4(a). Any books and records
maintained by or on behalf of the Partnership in the regular course of its
business, including books of account and records of Partnership proceedings, may
be kept on, or be in the form of, computer disks, hard drives, punch cards,
magnetic tape, photographs, micrographics or any other information storage
device; provided, that the books and records so maintained are convertible into
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained, for financial reporting purposes, on an
accrual basis in accordance with U.S. GAAP.
Section 8.2 Fiscal Year. The fiscal year of the Partnership shall
be a fiscal year ending December 31.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information. The Partnership shall
timely file all returns of the Partnership that are required for federal, state
and local income tax purposes on the basis of the accrual method and a taxable
year ending on December 31. The tax information reasonably required by the
Partners for federal and state income tax reporting purposes with respect to a
taxable year shall be furnished to them within 90 days of the close of the
calendar
38
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) To the extent applicable for federal income tax
purposes, the Partnership shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the General Partner's
determination that such revocation is in the best interests of the Limited
Partners.
(b) To the extent applicable for federal income tax
purposes, 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 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 General Partner is designated as the Tax Matters Partner (as defined in the
Code) and is authorized and required to represent the Partnership (at the
Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional services and costs
associated therewith. Each Partner agrees to cooperate with the General Partner
and to do or refrain from doing any or all things reasonably required by the
General Partner to conduct such proceedings.
Section 9.4 Withholding. Notwithstanding any other provision of
this Agreement, the General Partner is authorized to take any action that it
determines in its discretion to be necessary or appropriate to cause the
Partnership to comply with any withholding requirements established under the
Code or any other federal, state or local law including, without limitation,
pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that
the Partnership is required or elects to withhold and pay over to any taxing
authority any amount resulting from the allocation or distribution of income to
any Partner or Assignee (including, without limitation, by reason of Section
1446 of the Code), the amount withheld may at the discretion of the 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 Partners. As a result of the
consummation of the transfers and conveyances described in Section 5.2, the
General Partner shall be the sole General Partner of the Partnership and the MLP
shall be the sole Limited Lartner of the Partnership.
39
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 Limited Partner Interest
shall, however, only have the authority to convey to a purchaser or other
transferee (a) the right to negotiate such Limited Partner Interest to a
purchaser or other transferee and (b) 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 shall 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 General Partner consents thereto, which consent
may be given or withheld in the 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 remain 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 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. If
no such written direction is received, such Partnership Interests will not be
voted. An Assignee shall have no other rights of a Limited Partner.
Section 10.3 Admission of Additional Limited Partners.
(a) A Person (other than the General Partner, the MLP or
a Substituted Limited Partner) who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner:
(i) evidence of acceptance in form satisfactory
to the 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 General Partner to effect such Person's
admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this
Section 10.3, no Person shall be admitted as an Additional Limited Partner
without the consent of the General Partner, which consent may be given or
withheld in the 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 General Partner to such admission.
Section 10.4 Admission of Successor or Transferee General Partner.
A successor General Partner approved pursuant to Section 11.1 or 11.2 or the
transferee of or successor to all
40
of the General Partner's Partnership Interest pursuant to Section 4.2 who is
proposed to be admitted as a successor General Partner shall, subject to
compliance with the terms of Section 11.3, if applicable, be admitted to the
Partnership as the General Partner, effective immediately prior to the
withdrawal or removal of the predecessor or transferring General Partner
pursuant to Section 11.1 or 11.2 or the transfer of the General Partner Interest
pursuant to Section 4.2, provided, however, that no such successor shall be
admitted to the Partnership until compliance with the terms of Section 4.2 has
occurred and such successor has executed and delivered such other documents or
instruments as may be required to effect such admission. Any such successor
shall, subject to the terms hereof, carry on the business of the members of the
Partnership Group without dissolution.
Section 10.5 Amendment of Agreement and Certificate of Limited
Partnership. To effect the admission to the Partnership of any Partner, the
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 General Partner shall prepare and file an
amendment to the Certificate of Limited Partnership, and the General Partner may
for this purpose, among others, exercise the power of attorney granted pursuant
to Section 2.6.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn
from the Partnership upon the occurrence of any one of the following events
(each such event herein referred to as an "Event of Withdrawal");
(i) The General Partner voluntarily withdraws
from the Partnership by giving written notice to the other Partners;
(ii) The General Partner transfers all of its
rights as General Partner pursuant to Section 4.2;
(iii) The General Partner is removed pursuant to
Section 11.2;
(iv) The General Partner (A) makes a general
assignment for the benefit of creditors; (B) files a voluntary bankruptcy
petition for relief under Chapter 7 of the United States Bankruptcy Code; (C)
files a petition or answer seeking for itself a liquidation, dissolution or
similar relief (but not a reorganization) under any law; (D) files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in a proceeding of the type described
in clauses (A)-(C) of this Section 11.1(a)(iv); or (E) seeks, consents to or
acquiesces in the appointment of a trustee (but not a debtor-in-possession),
receiver or liquidator of the General Partner or of all or any substantial part
of its properties;
41
(v) A final and non-appealable order of relief
under Chapter 7 of the United States Bankruptcy Code is entered by a court with
appropriate jurisdiction pursuant to a voluntary or involuntary petition by or
against the General Partner; or
(vi) (A) in the event the General Partner is a
corporation, a certificate of dissolution or its equivalent is filed for the
General Partner, or 90 days expire after the date of notice to the General
Partner of revocation of its charter without a reinstatement of its charter,
under the laws of its state of incorporation; (B) in the event the General
Partner is a partnership or limited liability company, the dissolution and
commencement of winding up of the General Partner; (C) in the event the General
Partner is acting in such capacity by virtue of being a trustee of a trust, the
termination of the trust; (D) in the event the General Partner is a natural
person, his death or adjudication of incompetency; and (E) otherwise in the
event of the termination of the General Partner. If an Event of Withdrawal
specified in Section 11.1(a)(iv), (v) or (vi)(A), (B), (C) or (E) occurs, the
withdrawing General Partner shall give notice to the Limited Partners within 30
days after such occurrence. The Partners hereby agree that only the Events of
Withdrawal described in this Section 11.1 shall result in the withdrawal of the
General Partner from the Partnership.
(b) Withdrawal of the General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall not constitute a
breach of this Agreement under the following circumstances: (i) at any time
during the period beginning on the Closing Date and ending at 12:00 midnight,
Eastern Time, on October 31, 2008, the General Partner voluntarily withdraws by
giving at least 90 days' advance notice of its intention to withdraw to the
Limited Partners; provided that prior to the effective date of such withdrawal,
the withdrawal is approved by the Limited Partners and the General Partner
delivers to the Partnership an Opinion of Counsel ("Withdrawal Opinion of
Counsel") that such withdrawal (following the selection of the successor General
Partner) would not result in the loss of the limited liability of any Limited
Partner or of the limited partners of the MLP or cause the Partnership or the
MLP to be treated as an association taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes (to the extent not previously
treated as such); (ii) at any time after 12:00 midnight, Eastern Standard Time,
on October 31, 2008, the General Partner voluntarily withdraws by giving at
least 90 days' advance notice to the Limited Partners, such withdrawal to take
effect on the date specified in such notice; (iii) at any time that the General
Partner ceases to be the General Partner pursuant to Section 11.1(a)(ii) or
(iii). If the General Partner gives a notice of withdrawal pursuant to Section
11.1(a)(i) hereof, the Limited Partners may, prior to the effective date of such
withdrawal, elect a successor General Partner. If, prior to the effective date
of the General Partner's withdrawal, a successor is not selected by the Limited
Partners as provided herein or the Partnership does not receive a Withdrawal
Opinion of Counsel, the Partnership shall be dissolved in accordance with
Section 12.1. Any successor 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 General Partner. The General Partner
may be removed by the MLP. Upon the removal of the General Partner by the MLP,
the MLP shall elect a successor general partner for the Partnership. The
admission of any such successor General Partner to the Partnership shall be
subject to the provisions of Section 10.3.
42
Section 11.3 Interest of Departing Partner.
(a) The Partnership Interest of the Departing Partner
departing as a result of withdrawal or removal pursuant to Section 11.1 or 11.2
shall be purchased by the successor to the Departing Partner for an amount in
cash equal to the fair market value of such Partnership Interest, such amount to
be determined and payable as of the effective date of the Departing Partner's
departure. Such purchase shall be a condition to the admission to the
Partnership of the successor as the General Partner. Any successor General
Partner shall indemnify the Departing Partner as to all debts and liabilities of
the Partnership arising on or after the effective date of the withdrawal or
removal of the Departing Partner.
For purposes of this Section 11.3(a), the fair market value of the
Departing Partner's General Partner 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
General Partner Interest of the Departing Partner. In making its determination,
such third independent investment banking firm or other independent expert may
consider the value of the Partnership's assets, the rights and obligations of
the Departing Partner and other factors it may deem relevant.
(b) The Departing Partner shall be entitled to receive
all reimbursements due such Departing Partner pursuant to Section 7.4, including
any employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by such Departing
Partner for the benefit of the Partnership.
Section 11.4 Withdrawal of a Limited Partner. Without the prior
written consent of the General Partner, which may be granted or withheld in its
sole discretion, and except as provided in Section 10.1, no Limited Partner
shall have the right to withdraw from the Partnership.
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 General Partner in accordance with the terms
of this Agreement. Upon the removal or withdrawal of the General Partner, if a
successor General Partner is elected pursuant to Section 11.1 or 11.2, the
Partnership shall not be dissolved and such successor General Partner shall
43
continue the business of the Partnership. The Partnership shall dissolve, and
(subject to Section 12.2) its affairs shall be wound up, upon:
(a) an Event of Withdrawal of the General Partner as
provided in Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor
is elected and an Opinion of Counsel is received as provided in Section 11.1(b)
or 11.2 and such successor is admitted to the Partnership pursuant to Section
10.4;
(b) an election to dissolve the Partnership by the
General Partner that is approved by all of the Limited Partners;
(c) the entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Delaware Act;
(d) the sale of all or substantially all of the assets
and properties of the Partnership Group; or
(e) the dissolution of the MLP.
Section 12.2 Continuation of the Business of the Partnership After
Dissolution. Upon dissolution of the Partnership following an Event of
Withdrawal caused by the withdrawal or removal of the General Partner as
provided in Section 11.1(a)(i) or (iii) and the failure of the Partners to
select a successor to such Departing Partner pursuant to Section 11.1 or 11.2,
then within 90 days thereafter, all of the Limited Partners may elect to
reconstitute the Partnership and continue its business on the same terms and
conditions set forth in this Agreement by forming a new limited partnership on
terms identical to those set forth in this Agreement and having as a general
partner a Person approved by a majority in interest of the Limited Partners. In
addition, upon dissolution of the Partnership pursuant to Section 12.1(e), if
the MLP is reconstituted pursuant to Section 12.2 of the MLP Agreement, the
reconstituted MLP may, within 180 days after such event of dissolution, acting
alone, regardless of whether there are any other Limited Partners, elect to
reconstitute the Partnership in accordance with the immediately preceding
sentence. Upon any such election by the Limited Partners or the MLP, as the case
may be, all Partners shall be bound thereby and shall be deemed to have approved
same. Unless such an election is made within the applicable time period as set
forth above, the Partnership shall conduct only activities necessary to wind up
its affairs. If such an election is so made, then:
(a) the reconstituted Partnership shall continue unless
earlier dissolved in accordance with this Article XII;
(b) if the successor General Partner is not the former
General Partner, then the interest of the former General Partner shall be
purchased by the successor General Partner; and
(c) all necessary steps shall be taken to cancel this
Agreement and the Certificate of Limited Partnership and to enter into and, as
necessary, to file, a new partnership agreement and certificate of limited
partnership, and the successor General Partner may for this purpose exercise the
powers of attorney granted the General Partner pursuant to Section 2.6;
provided, that the right to approve a successor General Partner and to
reconstitute and to
44
continue the business of the Partnership shall not exist and may not be
exercised unless the Partnership has received an Opinion of Counsel that (x) the
exercise of the right would not result in the loss of limited liability of the
Limited Partners or any limited partner of the MLP and (y) neither the
Partnership, the reconstituted limited partnership, the MLP nor any Group Member
would be treated as an association taxable as a corporation or otherwise be
taxable as an entity for federal income tax purposes upon the exercise of such
right to continue.
Section 12.3 Liquidator. Upon dissolution of the Partnership,
unless the Partnership is continued under an election to reconstitute and
continue the Partnership pursuant to Section 12.2, the General Partner shall
select one or more Persons to act as Liquidator. The Liquidator (if other than
the General Partner) shall be entitled to receive such compensation for its
services as may be approved by a majority of the Limited Partners. The
Liquidator (if other than the General Partner) shall agree not to resign at any
time without 15 days' prior notice and may be removed at any time, with or
without cause, by notice of removal approved by a majority in interest of the
Limited Partners. 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 at least a majority in interest of the Limited Partners. The right
to approve a successor or substitute Liquidator in the manner provided herein
shall be deemed to refer also to any such successor or substitute Liquidator
approved in the manner herein provided. Except as expressly provided in this
Article XII, the Liquidator approved in the manner provided herein shall have
and may exercise, without further authorization or consent of any of the parties
hereto, all of the powers conferred upon the General Partner under the terms of
this Agreement (but subject to all of the applicable limitations, contractual
and otherwise, upon the exercise of such powers, other than the limitation on
sale set forth in Section 7.3(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.
45
(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 owed to
Partners otherwise than in respect of their distribution rights under Article
VI. With respect to any liability that is contingent, conditional or unmatured
or is otherwise not yet due and payable, the Liquidator shall either settle such
claim for such amount as it thinks appropriate or establish a reserve of cash or
other assets to provide for its payment. When paid, any unused portion of the
reserve shall be distributed as additional liquidation proceeds.
(c) Liquidation Distributions. All property and all cash
in excess of that required to discharge liabilities as provided in Section
12.4(b) shall be distributed to the Partners in accordance with, and to the
extent of, the positive balances in their respective Capital Accounts, as
determined after taking into account all Capital Account adjustments (other than
those made by reason of distributions pursuant to this Section 12.4(c)) for the
taxable year of the Partnership during which the liquidation of the Partnership
occurs (with such date of occurrence being determined pursuant to Treasury
Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution shall be made by
the end of such taxable year (or, if later, within 90 days after said date of
such occurrence).
Section 12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership,
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware, shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
Section 12.6 Return of Contributions. The General Partner shall
not be personally liable for, and shall have no obligation to contribute or loan
any monies or property to the Partnership to enable it to effectuate, the return
of the Capital Contributions of the Limited Partners, or 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. The General Partner shall be obligated to
restore any negative balance in its Capital Account upon liquidation of its
interest in the Partnership by the end of the taxable year of the Partnership
during which such liquidation occurs, or, if later, within 90 days after the
date of such liquidation.
46
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
Section 13.1 Amendment to be Adopted Solely by the General
Partner. Each Partner agrees that the 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 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 no
Group Member will 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 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 limited partner interests of
the MLP (including the division of any class or classes of outstanding limited
partner interests of the MLP into different classes to facilitate uniformity of
tax consequences within such classes of limited partner interests of the MLP) or
comply with any rule, regulation, guideline or requirement of any National
Securities Exchange on which such limited partner interests are or will be
listed for trading, compliance with any of which the General Partner determines
in its discretion to be in the best interests of the MLP and the limited
partners of the MLP, (iii) is required to effect the intent expressed in the
Registration Statement or the intent of the provisions of this Agreement or is
otherwise contemplated by this Agreement or (iv) is required to conform the
provisions of this Agreement with the provisions of the MLP Agreement as the
provisions of the MLP Agreement may be amended, supplemented or restated from
time to time;
(e) a change in the fiscal year or taxable year of the
Partnership and any changes that, in the discretion of the 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 General Partner shall so determine, a
change in the definition of "Quarter" and the dates on which distributions are
to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of
Counsel, to prevent the Partnership, or the General Partner or its members,
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
47
under the Employee Retirement Income Security Act of 1974, as amended,
regardless of whether such are substantially similar to plan asset regulations
currently applied or proposed by the United States Department of Labor;
(g) any amendment expressly permitted in this Agreement
to be made by the General Partner acting alone;
(h) an amendment effected, necessitated or contemplated
by a Merger Agreement approved in accordance with Section 14.3;
(i) an amendment that, in the discretion of the General
Partner, is necessary or advisable to reflect, account for and deal with
appropriately the formation by the Partnership of, or investment by the
Partnership in, any corporation, partnership, joint venture, limited liability
company or other entity, in connection with the conduct by the Partnership of
activities permitted by the terms of Section 2.4;
(j) a merger or conveyance pursuant to Section 14.3(d);
or
(k) any other amendments substantially similar to the
foregoing.
Section 13.2 Amendment Procedures. Except with respect to
amendments of the type described in Section 13.1, all amendments to this
Agreement shall be made in accordance with the following requirements:
Amendments to this Agreement may be proposed only by or with the consent of the
General Partner, which consent may be given or withheld in its sole discretion.
A proposed amendment shall be effective upon its approval by the Limited
Partners.
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 General Partner. If the General Partner shall determine, in the
exercise of its discretion, to consent to the merger or consolidation, the
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");
48
(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) that 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 or other similar charter or
governing document) of the Surviving Business Entity to be effected by such
merger or consolidation;
(f) the effective time of the merger, which may be the
date of the filing of the certificate of merger pursuant to Section 14.4 or a
later date specified in or determinable in accordance with the Merger Agreement
(provided, that if the effective time of the merger is to be later than the date
of the filing of the certificate of merger, the effective time shall be fixed no
later than the time of the filing of the certificate of merger and stated
therein); and
(g) such other provisions with respect to the proposed
merger or consolidation as are deemed necessary or appropriate by the 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 the 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 Limited Partners.
(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
49
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 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 that 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 General Partner
has received an Opinion of Counsel that the merger or conveyance, as the case
may be, would not result in the loss of the limited liability of any Limited
Partner or any limited partner in the MLP or cause the Partnership or the MLP to
be treated as an association taxable as a corporation or otherwise to be taxed
as an entity for federal income tax purposes (to the extent not previously
treated as such), (ii) the sole purpose of such merger or conveyance is to
effect a mere change in the legal form of the Partnership into another limited
liability entity and (iii) the governing instruments of the new entity provide
the Limited Partners and the General Partner with substantially the same rights
and obligations as are herein contained.
Section 14.4 Certificate of Merger. Upon the required approval by
the General Partner and the Limited Partners 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.
50
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notices. Any notice, demand, request,
report or proxy materials required or permitted to be given or made to a
Partner or Assignee under this Agreement shall be in writing and shall be deemed
given or made when 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 appearing on the books and records of the Partnership. Any notice to
the Partnership shall be deemed given if received by the General Partner at the
principal office of the Partnership designated pursuant to Section 2.3. The
General Partner may rely and shall be protected in relying on any notice or
other document from a Partner, Assignee or other Person if believed by it to be
genuine.
Section 15.2 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 15.3 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 15.4 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 15.5 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 15.6 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 breach of any other covenant, duty, agreement or
condition.
Section 15.7 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, independently of the
signature of any other party.
Section 15.8 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 15.9 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.
51
Section 15.10 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.
[Remainder of Page Intentionally Left Blank]
52
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
RIO VISTA OPERATING GP LLC
By: Rio Vista Energy Partners, L.P.
its Managing Member
By: Rio Vista GP LLC
Its: General Partner
By:_______________________________
Name:_____________________________
Its:______________________________
LIMITED PARTNER:
RIO VISTA ENERGY PARTNERS L.P.
By: Rio Vista GP LLC
Its General Partner
By:_______________________________
Name:_____________________________
Its:______________________________
53
