EXHIBIT ▇▇.▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇, L.P.
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of February 6, 1996
THE LIMITED PARTNERSHIP INTEREST REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF CERTAIN STATES AND HAVE BEEN OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENT OF THE ACT AND SUCH LAWS. THE LIMITED PARTNERSHIP
INTEREST IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY BE
TRANSFERRED ONLY IN A MANNER WHICH IS IN COMPLIANCE WITH THE PROVISIONS OF THIS
AGREEMENT, AND MAY ONLY BE TRANSFERRED IN A TRANSACTION THAT IS REGISTERED UNDER
THE ACT OR EXEMPT FROM SUCH REGISTRATION.
TABLE OF CONTENTS
LIST OF SCHEDULES
Schedule 1.1(a) Calculation of Internal Rate of Return
Schedule 1.1(b) Project Budget
Schedule 1.1(c) Project Documents
Schedule 1.1(d) Site
Schedule 6.3 Initial Officers of the Partnership
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AGREEMENT OF LIMITED PARTNERSHIP
This Agreement of Limited Partnership dated as of February 6, 1996 of
VILLAGE FARMS OF TEXAS, L.P. (the "Partnership") is by and among COGENTRIX OF
FORT ▇▇▇▇▇ I, INC., a Delaware corporation ("Cogentrix GP" and a "General
Partner"), COGENTRIX OF FORT DAVIS II, INC., a Delaware corporation ("Cogentrix
LP" and a "Limited Partner"), VILLAGE FARMS OF DELAWARE, L.L.C., a Delaware
limited liability company ("VF Delaware" and a "General Partner"), and VILLAGE
FARMS, L.L.C., a Delaware limited liability company ("VF" and a "limited
partner").
VF Delaware is a newly-formed Delaware limited liability company owned 99%
by Agro Power Development, Inc., a New York corporation ("Agro Power"), and 1%
by VF. VF is a newly-formed Delaware limited liability company owned 99% by Agro
Power and 1% by VF Delaware. Agro Power has entered into agreements and
instruments (as more fully defined hereafter, the "Project Documents") related
to the development and operation of a venlo style greenhouse located in the
vicinity of Fort ▇▇▇▇▇, Texas for the purpose of producing and selling beefsteak
tomatoes (as more fully defined hereafter, the "Project"). In order to continue
with the development of the Project and obtain financing for construction and
working capital needs, Agro Power desires that Cogentrix GP and Cogentrix LP
contribute in the aggregate $4,656,781.00 to the Project. In order to encourage
Cogentrix to contribute such funds to the Project, Agro Power has agreed (1) to
organize VF Delaware and VF and cause them to form the Partnership with
Cogentrix GP and Cogentrix LP pursuant to which all Project Documents will be
assigned to the Partnership, as VF Delaware's contribution to the Partnership,
in exchange for a 1% interest in the Partnership, and likewise as VF's
contribution to the Partnership in exchange for a 49% interest in the
Partnership, (2) that, in exchange for a contribution to the capital of the
Partnership of $980 by Cogentrix LP, Cogentrix LP will receive a 49% interest in
the Partnership, and (3) that, in exchange for a contribution to the capital of
the Partnership of $20 by Cogentrix GP, Cogentrix GP will receive a 1% interest
in the Partnership. Cogentrix GP and Cogentrix LP have agreed to make such
contributions to the capital of the Partnership on the terms and conditions set
forth herein.
Accordingly, in consideration of the covenants and agreements contained
herein and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms.
As used in this Agreement, the following terms have the following meanings
(such definitions to be equally applicable to both singular and plural forms of
the terms defined):
"Abandonment" has the meaning set forth in subsection 6.2(e).
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Partner is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentence of
Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"Administrative Agent" means CoBank, ACB.
"Adverse Consequence" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, liabilities, obligations, Taxes, liens, losses, expenses and
fees, including, but not limited to, court costs, arbitral costs, costs of
investigation, and attorneys' fees.
"Affiliate" of any designated Person, means each Person which, directly or
indirectly, controls or is controlled by or is under common control with such
designated Person and, without limiting the generality of the foregoing, shall
include (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting securities of such designated Person or ten percent
(10%) or more of the equity interest in such designated Person and (b) any
Person of which such designated Person beneficially owns and holds ten percent
(10%) or more of any class of voting securities or in which such designated
Person beneficially owns or holds ten percent (10%) or more of the equity
interest. For the purposes of this definition, the terms "controls", "controlled
by" and "under common control with," as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. Notwithstanding the
foregoing, neither Cogentrix GP or Cogentrix LP, on the one hand, nor VF
Delaware or VF, on the other hand, shall be deemed to be Affiliates of one
another.
"After-Tax" means after deducting Cogentrix GP's or Cogentrix LP's, as
applicable, notional project Federal and state income tax. As used in this
definition of After-Tax, the notional project Federal and state income tax of
Cogentrix GP and Cogentrix LP shall be calculated as follows:
(a) The Partnership's taxable income would be calculated from the
Schedule K most recently filed with the Internal Revenue Service (or the
appropriate successor form or schedule), which for purposes of clarity
would include operating income as
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shown on such Schedule and all separately stated items of income or loss
(except tax exempt income) as shown on such Schedule.
(b) Assuming the Partnership were taxable as a for-profit corporation,
the Partnership's Federal and state income tax would be determined based on
the taxable income calculated in (a). For these purposes, it will be
assumed that all of the Partnership's taxable income shall be taxed at a
blended Federal/state rate of 38.0% (subject to adjustment upward or
downward, as applicable, to reflect changes in the highest marginal
corporate Federal tax rate).
(c) The Partnership's notional income tax obligation as calculated in
(b) shall be allocated among the Partners in the same manner as Profits and
Losses are allocated among the Partners under Article IV hereof.
Provided that, for each quarter end and at year end until such time as the
Partnership has filed a Schedule K with the Internal Revenue Service and a
true-up of taxable income has occurred, notional project Federal and state
income tax for Cogentrix GP and Cogentrix LP shall be calculated by multiplying
Estimated Taxable Income allocated to Cogentrix GP and Cogentrix LP under
Article IV hereof, as the case may be, by 38.0% (subject to adjustment upward or
downward, as applicable, to reflect changes in the highest marginal corporate
Federal tax rate).
"Agreement" means this Agreement of Limited Partnership, as amended,
supplemented or otherwise modified and in effect from time to time.
"Agro Power" means Agro Power Development Inc., a New York corporation with
offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
"Agro Power Investment" means all cash contributions to the capital of the
Partnership made by VF Delaware and VF pursuant to this Agreement.
"Appraisal Procedure" means a procedure whereby two independent appraisers,
one chosen by each General Partner, shall agree upon the determinations then the
subject of appraisal. Each General Partner shall deliver a written notice to the
other appointing its appraiser within 15 days after receipt from the other of a
written notice appointing its appraiser. Each appraiser then shall prepare a
written appraisal with respect to the determinations which then are the subject
of appraisal. If within 30 days after appointment of the two appraisers they are
unable to agree upon the amount in question, a third independent appraiser shall
be chosen within 10 days thereafter by the mutual consent of such first two
appraisers or, if such first two appraisers fail to agree upon the appointment
of a third appraiser, such appointment shall be made by the American Arbitration
Association, or any organization successor thereto, from a panel of arbitrators
having experience in the business of operating a hydroponic hot house and
marketing the product produced therein and a familiarity with equipment used or
operated in such business. The decision of the third appraiser so appointed and
chosen shall be given within 30 days after the selection of such third
appraiser. If three appraisers shall be appointed and the determination of one
appraiser is disparate from the median by more than twice the amount by which
the other determination is disparate from the median, then the determination of
such appraiser shall be excluded, the remaining two determinations shall be
averaged and such
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average shall be binding and conclusive on the General Partners; otherwise the
average of all three determinations shall be binding and conclusive on the
General Partners. (For example, if the two appraisers appointed by the General
Partners determine a value of $100 and $200, and the third appraiser determines
a value of $150, then the involved value shall be conclusively determined to be
$150 ($100 + $200 + $150 divided by 3). As a further example, consider the first
example but the third appraiser places a value of $190. In this case, the $100
valuation shall be disregarded and the value shall be conclusively determined to
be $195 ($190 + $200 divided by 2). The $100 valuation is disregarded because
the median of the three appraisers was $190 and the difference between $100 and
$190 is $90, which is more than twice the difference between $200 and $190 which
is $10, which multiplied by two is $20.) If a General Partner shall appoint an
appraiser and the other Person shall fail to appoint an appraiser in the manner
specified herein, the determination of the appraiser so appointed shall be
binding and conclusive on the General Partners. The expenses of the appraisal
procedure shall be borne solely by the Partnership.
"Budgets" has the meaning set forth in subsection 6.2(i).
"Business Day" means a day other than a Saturday, a Sunday or any other day
on which commercial banks in Texas, North Carolina or New Jersey are authorized
or required by law or executive order to be closed.
"Buy-Out Offer" has the meaning set forth in Section 11.2.
"Buy-Out Offeree" has the meaning set forth in Section 11.2.
"Buy-Out Offeror" has the meaning set forth in Section 11.2.
"Capital Account" means, with respect to any Partner, the capital account
maintained for such Partner in the Partnership Books in accordance with the
following provisions:
(a) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Profits and any other items in the nature of income or gain which are
allocated under this Agreement.
(b) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property (other than money)
(net of any liabilities assumed by such Partner or to which the property is
subject) distributed to such Partner pursuant to any provision of this
Agreement, and such Partner's distributive share of Losses and any other
items in the nature of deductions or losses which are allocated under this
Agreement.
(c) In the event all or a portion of an interest in the Partnership is
transferred in accordance with the terms of this Agreement in a transaction
that does not result in a termination of the Partnership under Code Section
708(b)(1)(B), the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred interest.
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(d) In determining the amount of any liability for purposes of clause
(a) and clause (b) hereof, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and the Regulations.
(e) If a Partner owns more than one Partnership Interest, one Capital
Account shall be maintained for the Partnership Interests of the Partner.
(f) Each Partner's Capital Account shall in all other respects be
maintained in accordance with the provisions of Regulations Section
1.704-1(b).
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of capital accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations.
"Capital Contribution" means, with respect to any Partner, the amount of
money and the initial Gross Asset Value of any property (other than money) (net
of any liabilities assumed by the Partnership or to which the property is
subject) contributed to the Partnership with respect to any Partnership Interest
held by such Partner pursuant to the terms of this Agreement.
"Capital Lease" means any lease of property, real or personal, which in
accordance with GAAP, would be required to be capitalized on a balance sheet of
the lessee.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Cogentrix GP Designee" has the meaning set forth in Section 6.1(a).
"Cogentrix GP" means Cogentrix of Fort ▇▇▇▇▇ Texas I, Inc., a Delaware
corporation.
"Cogentrix Investment" means (a) the respective Initial Capital
Contribution of Cogentrix GP and Cogentrix LP, (b) all subsequent contributions
to the capital of the Partnership made by Cogentrix GP or Cogentrix LP (as the
case may be) pursuant to this Agreement in excess of any Agro Power Investment
and (c) all payments made by Cogentrix GP, Cogentrix LP or any of their
Affiliates pursuant to any of the Project Loan Documents (it being understood
for purposes of (c) that the Partnership is not an Affiliate of Cogentrix GP or
Cogentrix LP) which shall be allocated for the purposes of this Agreement
between Cogentrix GP and Cogentrix LP pursuant to their agreement.
"Cogentrix LP" means Cogentrix of Fort ▇▇▇▇▇ Texas II, Inc., a Delaware
corporation.
"Commonly Controlled Entity" means, with respect to any Person, an entity,
whether or not incorporated, which is under common control with such Person
within the meaning of Section 414(b) or (c) of the Code.
"Construction Agreement" means the Commercial Design and Construction
Contract dated February 12, 1996, by and among the Partnership, Cogentrix
Energy, Inc. and Agro Power, as it may be amended, supplemented or otherwise
modified and in effect from time to time.
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"Construction/Term Facility" means a loan facility in the amount of
$21,123,125.00 provided by the Construction/Term Lender pursuant to the Project
Loan Documents.
"Construction/Term Lender" means Farm Credit Bank of Texas or its successor
under the Construction/Term Facility.
"Cumulative Distributions to Cogentrix" means the aggregate, cumulative
distributions of Net Distributable Cash received by Cogentrix GP and Cogentrix
LP from the Partnership.
"Cumulative Distributions to VF" means the aggregate, cumulative
distributions of Net Distributable Cash received by VF Delaware and VF from the
Partnership.
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del.C. " 17-101, et seq., as it may be amended from time to time and any
successor to such Act.
"Depreciation" means, for each fiscal year or other period, an amount equal
to the deprecation, amortization, or other cost recovery deduction allocable
with respect to an asset for such period, except that if the Gross Asset Value
of an asset differs from its adjusted basis for Federal tax purposes at the
beginning of such period, Depreciation shall be an amount which bears the same
ratio to such beginning Gross Asset Value as the Federal income tax
depreciation, amortization or other cost recovery deduction for such period
bears to such beginning adjusted tax basis; provided that if the Federal income
tax depreciation, amortization, or other cost recovery deduction for such period
is zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Management Committee.
"Dollars" and "$" means dollars in lawful currency of the United States of
America.
"Equity Funding Date" means the day on which all of the conditions to the
initial drawdown under the Construction/Term Loan Facility (other than the
contributions to the capital of the Partnership to be made by Cogentrix GP and
Cogentrix LP under Section 3.2) have been met to the satisfaction of the
Administrative Agent and the Construction/Term Lender.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means, with respect to any Person, any corporation or
trade or business which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code) as such Person or is under
common control (within the meaning of Section 414(c) of the Code) with such
Person.
"Estimated Taxable Income" means book income of the Partnership
computed in accordance with GAAP adjusted to reflect the estimated depreciation
and amortization timing differences between financial reporting and income tax
reporting.
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"First Priority Return" means the receipt by Cogentrix GP and Cogentrix LP
of cash distributions from Net Distributable Cash in an aggregate amount
sufficient to provide each of Cogentrix GP and Cogentrix LP, as the case may be,
with an Internal Rate of Return on its respective Cogentrix Investment hereunder
of [information omitted and subject to request for confidential treatment]%
calculated in accordance with Schedule 1.1(a) (it being understood that any
amounts which are part of Cogentrix Investment pursuant to subsection (b) or (c)
of the definition of Cogentrix Investment shall only be entitled to such return
from the date they are actually paid or made).
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"General Partner" means each of Cogentrix GP and VF Delaware and any Person
admitted to the Partnership as an additional General Partner in accordance with
the provisions of this Agreement, until such time as such Person ceases to be a
general partner of the Partnership as provided herein or in the Delaware Act.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Gross Asset Value" means, with respect to any asset, the asset's adjusted
basis for Federal income tax purposes, except as follows:
The initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset, as
determined by agreement of the Partners;
The Gross Asset Value of all Partnership assets shall be adjusted to
equal their respective gross fair market values, as determined by agreement
of the Partners, and in the event the Partners fail to so agree, as
determined by the Appraisal Procedure, as of the following times: (i) The
acquisition of an additional interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Partnership to a Partner of more
than a de minimis amount of property as consideration for an interest in
the Partnership if the Management Committee reasonably determines that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership; and (iii) the liquidation of
the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g);
the Gross Asset Value of any Partnership asset distributed to any
Partner shall be the gross fair market value of such asset on the date of
distribution as determined by agreement of the Partners and, in the event
the Partners fail to so agree, as determined by the Appraisal Procedure;
the Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the
extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided,
however, that Gross Asset Values shall not be adjusted to the extent the
Partners agree (and in the event the Partners fail to so agree, as
determined by the Appraisal Procedure) that an adjustment pursuant to
clause (ii) of this definition is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to
clause (iv) of this definition. If the Gross Asset Value of an asset has
been determined or adjusted pursuant to clauses (i) and (ii) of this
definition or clause (iv) of this definition, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect
to such asset; and
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the Gross Asset Value of any asset owned indirectly by the Partnership
through a subsidiary partnership shall be determined pursuant to the terms
of the partnership agreement for such subsidiary partnership.
"Indebtedness" means, with respect to any Person, (a) indebtedness of such
Person for borrowed money or for the deferred purchase price of property or of
services (other than obligations under agreements for the purchase of goods and
services in the normal course of business which are not more than 30 days past
due; (b) obligations of such Person under Capital Leases; (c) obligations of
such Person pursuant to interest hedging transactions; (d) obligations of such
Person in respect of letters of credit; (e) obligations of such Person under
direct and indirect guarantees in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise assure a creditor
against loss in respect of, indebtedness or obligations of others of the kinds
referred to in clause (a), (b,), (c) or (d) above (other than endorsements of
negotiable instruments in the ordinary course of business); and (f) any
obligations of such Person or a Commonly Controlled Entity to a Multi-Employer
Plan. For purposes of clarity, "Indebtedness" includes the obligations of the
Partnership to repay amounts borrowed under, and to pay other amounts owing
under, the Project Loan Documents.
"Initial Capital Contribution" means, with respect to Cogentrix GP, the
amount of $20 and, with respect to Cogentrix LP, means the amount of $980.
"Internal Rate of Return" (whether or not capitalized) means the return to
capital calculated at each calendar quarter end in accordance with Schedule
1.1(a), attached hereto and incorporated herein by reference.
"Lien" means any mortgage, deed of trust, security interest, pledge,
hypothecation, encumbrance or lien (statutory or other) of any kind or nature
whatsoever (including, without limitation, any agreement to give any of the
foregoing, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any such
agreement, and the filing of any statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
"Limited Partner" means each of Cogentrix LP and VF and any Person who
becomes a limited partner of the Partnership in accordance with the terms of
this Agreement and is shown as such on the books and records of the Partnership.
"Losses" has the meaning given to it in the definition of "Profits."
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"Management Agreement" means the Management Agreement dated the same date
as this Agreement by and between the Partnership and Agro Power, as it may be
amended, supplemented or otherwise modified and in effect from time to time,
pursuant to which Agro Power will provide operation and maintenance services to
the Partnership.
"Management Committee" means the Management Committee of the Partnership
referred to in Section 6.1.
"Marketing Agreement" means the Marketing Agreement dated the same date as
this Agreement by and between the Partnership and VF, as it may be amended,
supplemented or otherwise modified and in effect from time to time, pursuant to
which VF will agree to market tomatoes produced by the Partnership.
"Multi-Employer Plan" means, with respect to any Person, a Multi-Employer
Plan as defined in Section 3(37) of ERISA to which contributions have been made
by such Person or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Distributable Cash" means for any period, an amount equal to all cash
received by the Partnership during such period, including cash, but not limited
to, cash from operations, reductions in reserves, casualty proceeds, rebates and
other extraordinary items, less (a) principal, interest and other payments made
under or pursuant to the Construction Term Facility, (b) interest and fees paid
pursuant to the Revolving Facility, or other borrowings, (c) all cash
expenditures of and payments made by the Partnership, and (d) any reserves
established by the Management Committee of the Partnership, and subject to the
limitations on distributions, if any, imposed pursuant to the terms of the
Project Loan Documents.
"Nonrecourse Deductions" shall have the meaning set forth in Regulations
Sections 1.704-2(b) and (c). The amount of Nonrecourse Deductions for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partnership minimum gain during the fiscal year over the
aggregate amount of any distributions during that fiscal year of proceeds of a
nonrecourse liability that are allocable to an increase in Partnership minimum
gain, determined according to the provisions of Regulations Section 1.704-2(c).
"Operating Budget" means the business plan and budget required to be
provided to the Partnership pursuant to the Management Agreement.
"Operating Management Fee" means a management fee to be paid to Agro Power
in accordance with the Management Agreement.
"Partner" means any of the General Partners or the Limited Partners.
"Partner Nonrecourse Deductions" shall have the meaning specified in
Regulations Section 1.704-2(i)(2).
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"Partnership" means Village Farms of Texas, L.P., the limited partnership
formed pursuant to this Agreement and the filing of the Certificate of Limited
Partnership with the Delaware Secretary of State.
"Partnership Books" means the books and records maintained by the
Partnership and reviewed within sixty (60) days of each fiscal year end by the
Management Committee, in which records and information relating to the ownership
of the Partnership, the constituency of the Management Committee and actions
taken by the Management Committee or the Partners is maintained, including but
not limited to, a register of the Partners, each Partner's Capital Account, each
Partner's Percentage Interest, actions taken by the Management Committee and the
Partners, and this Agreement and any amendments hereto.
"Partnership Interest" means, with respect to any Partner, the interest of
such Partner in the Partnership, whether general or limited, at any particular
time, including the rights and obligations of such Partner as provided in this
Agreement and the Delaware Act.
"Partnership Percentage" means, with respect to any Partner, at any time,
the percentage specified as such Partner's "Partnership Percentage" at the time
such Partner was admitted to the Partnership, as adjusted in accordance with the
terms of this Agreement. The initial Partnership Percentages are as follows:
Cogentrix GP 1%
Cogentrix LP 49%
VF Delaware 1%
VF 49%
"Permitted Liens" means Liens in favor of any Person other than the
Partners or any of their respective Affiliates, that (a) arise in the ordinary
course of business of the Partnership (including, without limitation, landlord's
materialmen's, mechanic's, worker's, repairmen's and employee's Liens and
similar Liens which arise in connection with any tax, assessment, governmental
charge or levy) and (b) do not secure Indebtedness.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Profits" and "Losses" mean, for any period, an amount equal to the
Partnership's taxable income or loss for such period, determined in accordance
with Code Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code Section 703(a)(1)
shall be included in taxable income or loss), with the following adjustments:
Income of the Partnership that is exempt from federal income tax and
not otherwise taken into account in computing Profits or Losses pursuant to
this definition shall be added to such taxable income or loss;
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any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into
account in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
gain and loss with respect to the disposition of any Partnership asset
(both directly owned assets and assets owned indirectly through a
subsidiary partnership) shall be computed with respect to the Gross Asset
Value rather than adjusted tax basis of such asset;
in lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing taxable income or loss, there
shall be taken into account Depreciation for such fiscal year or other
period; and
in the event of an adjustment in the Gross Asset Value of any
Partnership asset pursuant to clause (b) of the definition of "Gross Asset
Value" herein, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing
Profits and Losses.
"Project" means an approximately 41-acre venlo style greenhouse to be
located on the Site which is to be constructed in two phases of 20.5-acres each
and on which the Partnership will produce tomatoes for sale under the Marketing
Agreement.
"Project Assets" has the meaning set forth in Section 3.1(a).
"Project Budget" means the pro forma budget of total Project costs attached
hereto as Schedule 1.1(b), as amended or modified from time to time in
accordance with subsection 6.2(i).
"Project Credit Facilities" means, collectively, the Construction/Term
Facility and the Revolving Facility.
"Project Documents" means the agreements and instruments listed on Schedule
1.1(c) attached hereto and incorporated herein by reference as the same may be
amended, supplemented or otherwise modified in accordance with Section 6.2
hereof and in effect from time to time.
"Project Loan Documents" means the agreements and instruments executed by,
between or among the Partnership, Administrative Agent, Construction/Term Loan
Lender, Revolver Lender, and any other party relating to the Construction/Term
Loan Facility and/or the Revolving Facility, as the same may be amended,
supplemented or otherwise modified in accordance with Section 6.2 hereof and in
effect from time to time.
"Regulations" means the temporary, proposed and final regulations under the
Code and any successor provisions thereto.
"Requirement of Law" means, as to any Person, (a) the certificate of
incorporation and by-laws or partnership agreement or other organizational or
governing documents of such
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Person, and (b) any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its properties or to which such Person
or any of its properties is subject and the violation of which, or which
determination, could reasonably be expected to (i) have a material adverse
effect on the business, operations, properties, condition (financial or
otherwise) or prospects of such Person or (ii) materially adversely affect the
ability of such Person to perform its obligations under the Project Loan
Documents or the Project Documents to which it is a party.
"Revolver Lender" means Texas Production Credit Association or its
successor under the Revolving Facility.
"Revolving Facility" means a loan facility in the amount of $2,500,000.00
provided by the Revolver Lender pursuant to the Project Loan Documents.
"Second Priority Return" means the receipt by Cogentrix GP and Cogentrix LP
of cash distributions of Net Distributable Cash in an aggregate amount
sufficient to provide each of Cogentrix GP and Cogentrix LP, as the case may be,
with an Internal Rate of Return on its respective Cogentrix Investment of
[information omitted and subject to request for confidential treatment]%
inclusive of the First Priority Return) calculated in accordance with Schedule
1.1(a), (it being understood that any amounts which are part of Cogentrix
Investment pursuant to subsection (b) or (c) of the definition of Cogentrix
Investment shall only be entitled to such return for the date they are actually
paid or made). For purposes of Article V hereof, Internal Rate of Return shall
be calculated at each calendar quarter end.
"Site" means a parcel of approximately 202-acres located in the vicinity of
Fort ▇▇▇▇▇, Texas and more fully described on Schedule 1.1(d) attached hereto
and incorporated herein by reference.
"Subsidiary" means with respect to any Person, an Affiliate that is
controlled (directly or indirectly through one or more intermediaries) by that
Person.
"Taxes" means any and all income or gross receipt taxes, franchise taxes,
levies, imposts, duties, assessments, fees, charges and withholdings of any
nature whatsoever, whether or not presently in existence, imposed by any
Governmental Authority.
"VF" means Village Farms, L.L.C., a Delaware limited liability company, 99%
of which is owned by Agro Power and 1% of which is owned by VF Delaware.
"VF Delaware" means Village Farms of Delaware, L.L.C., a Delaware limited
liability company, 99% of which is owned by Agro Power and 1% of which is owned
by VF.
"Withdraw" or "Withdrawal", with respect to any Partner, means a Partner
ceasing to be a partner of the Partnership for any reason, whether voluntary or
involuntary, and "Withdrawn", with respect to a Partner, means a Partner who has
ceased to be a partner of the Partnership.
"Withdrawal Date" means the date of the Withdrawal from the Partnership of
a Withdrawn Partner.
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Other Definitional Provisions.
All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto, unless otherwise defined therein.
As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined in Section 1.1, and
accounting terms partly defined in Section 1.1 to the extent not defined,
shall have the respective meanings given to them under GAAP.
The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section,
schedule and exhibit references are to this Agreement unless otherwise
specified.
Unless the context requires otherwise, any reference in this Agreement
to any of the Project Documents or the Project Loan Documents shall mean
any of such documents as amended, supplemented or modified and in effect
from time to time.
ARTICLE
GENERAL PROVISIONS
Formation of Partnership. The Partners hereby form and establish a limited
partnership under the terms and provisions of this Agreement and the provisions
of the Delaware Act, and the rights and liabilities of the Partners shall be as
provided in this Agreement and in the Delaware Act. Concurrently with the
execution of the Agreement by VF Delaware, VF, Cogentrix GP and Cogentrix LP, VF
Delaware and Cogentrix GP shall execute and file with the Office of Secretary of
State of the State of Delaware a Certificate of Limited Partnership in
accordance with Section 17-201 of the Delaware Act, in form and substance
satisfactory to both VF Delaware and Cogentrix GP.
Name of the Partnership. The name of the Partnership shall be Village Farms
of Texas, L.P., or such other name as the Partners from time to time may
designate.
Business of the Partnership. The business of the Partnership is to develop,
construct, and operate the Project. In furtherance of its business, the
Partnership shall have and may exercise all the powers now or hereafter
conferred by the laws of the State of Delaware on partnerships formed under the
laws of that state, and shall do any and all things necessary or desirable for
the accomplishment of the above purposes. The Partnership shall engage in no
other business except as permitted by the Management Committee in accordance
with Section 6.2 below.
Registered Office of the Partnership. The Partnership shall maintain a
registered office at, and the name and address of the Partnership's registered
agent in Delaware is, The
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Corporation Trust Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Liability of the Partners Generally.
Except as otherwise provided in the Delaware Act, each General Partner
shall have the liabilities of a partner in a partnership without limited
partners to Persons other than the Partnership and the Limited Partners.
Except as otherwise provided in this Agreement or the Delaware Act, no
Limited Partner (or former Limited Partner) shall be obligated to make any
contribution of capital to the Partnership or have any liability for the
debts and obligations of the Partnership.
Office of the Partnership. The Partnership shall maintain an office and
principal place of business in Fort ▇▇▇▇▇, Texas. Pursuant to the Management
Agreement, the books of account and other records with respect to the operations
of the Partnership shall be maintained at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇. The Partnership shall not have or maintain any office or other
place of business outside of Fort ▇▇▇▇▇, Texas.
Duration of the Partnership. The Partnership shall commence on the date of
this Agreement, and shall continue until its termination in accordance with the
provisions of Article X.
ARTICLE
CAPITAL CONTRIBUTIONS
Capital Contributions.
Simultaneously with the execution of the Agreement by VF Delaware, VF,
Cogentrix GP and Cogentrix LP, VF Delaware and VF shall convey, grant,
transfer and assign (or cause to be conveyed, granted, transferred and
assigned) to the Partnership all of the Project Documents, all the rights
of Agro Power or any Affiliate of Agro Power under the Project Documents
and all the assets and business of every kind and description, wherever
located, real, personal and mixed, tangible or intangible, owned or held or
used by Agro Power and any Affiliate of Agro Power solely in connection
with the Project (collectively, the "Project Assets"). The Partnership
hereby assumes and agrees to pay when due all liabilities and obligations
of Agro Power and any Affiliate of Agro Power with respect to the Project
Assets and agrees to be bound by all of the terms of, and to undertake all
of the obligations of Agro Power and any Affiliate of Agro Power under the
Project Documents. For the purposes of the initial Capital Accounts of the
Partners, the Project Assets and Project Documents contributed to the
Partnership by VF Delaware and VF shall be deemed to have an aggregate
gross fair market value (net of liabilities) of $1,000.
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If any consent or approval is required in connection with the
assignment and contribution to the Partnership pursuant to this subsection
3.1(a) of any Project Asset or any Project Document, VF Delaware and VF
shall have obtained such consent or approval prior to such assignment and
contribution.
Cogentrix GP shall contribute to the Partnership on execution of this
Agreement by all of the Partners $20 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
Cogentrix LP shall contribute to the Partnership on execution of this
Agreement by all of the Partners $980 by wire transfer of immediately
available funds to an account designated in writing by the Partnership.
Additional Capital Contribution. Upon the satisfaction of or waiver of the
conditions set forth in Section 3.3 hereof, on the Equity Funding Date Cogentrix
GP shall contribute to the Partnership $93,116 and Cogentrix LP shall contribute
to the Partnership $4,562,665 by wire transfer of immediately available funds to
an account designated in writing by the Partnership.
Conditions. The obligation of Cogentrix GP and Cogentrix LP to make the
contributions described in Section 3.2 are subject to the satisfaction of each
of the following conditions precedent (except those conditions, if any, that may
be specifically waived in writing by Cogentrix GP or Cogentrix LP, as
appropriate):
The Project Credit Facilities and the Project Loan Documents shall
have been approved by the Management Committee and the Project Loan
Documents will be executed by all parties thereto. An original executed
copy of each Project Loan Document will be delivered to Cogentrix GP and a
copy thereof delivered to Cogentrix LP as soon as available.
All conditions to the closing of the Construction/Term Facility shall
have occurred or been satisfied (other than evidence that the capital
contributions described in Section 3.2 have been made) and all governmental
consents, approvals, permits and licenses and other deliveries in
connection with the Project which are required to be received by the
Construction/Term Lender and/or the Administrative Agent as a condition to
the funding of the Construction/Term Facility shall have been delivered or
received. A copy of all such deliveries and other evidence of the closing
shall be provided to Cogentrix GP and Cogentrix LP.
The contribution by VF Delaware contemplated by Section 3.1(a) shall
have been made to the satisfaction of Cogentrix GP and Cogentrix LP and
evidence thereof reasonably satisfactory to Cogentrix GP and Cogentrix LP
shall have been provided to them by VF Delaware.
The following representations or warranties shall be true and correct
in all respects, and are hereby made to Cogentrix GP and Cogentrix LP by VF
Delaware and VF as an inducement to their making capital contributions to
the Partnership:
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Each of VF and VF Delaware (A) is a limited liability company
duly organized, validly existing and in good standing under the laws
of the State of Delaware, the ownership of which is 99% by Agro Power
and 1% by VF (in the case of VF Delaware) or 1% by VF Delaware (in the
case of VF), (B) has full power and authority and the legal right to
incur the obligations provided for in this Agreement, and (C) has
taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the Project Documents and Project
Loan Documents to which it is a party.
This Agreement and the Project Documents and Project Loan
Documents to which it is a party have been duly authorized, executed
and delivered by VF Delaware and VF and constitute the legal, valid
and binding obligations of each of VF Delaware and VF enforceable
against it in accordance with their terms, except as enforceability
may be limited by general equitable principles and by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally.
Neither the execution, delivery or performance by VF Delaware or
VF of this Agreement or any of the Project Documents or Project Loan
Documents to which it is a party, nor compliance by it with the terms
and provisions hereof or thereof, including, without limitation, the
assignment of the Project Documents and Project Assets to the
Partnership, requires the consent or authorization of any other party
(except such as have been duly obtained), or conflicts or will
conflict with or result in a breach or violation of its charter
documents or by-laws or any of the terms, conditions or provisions of
any Requirement of Law applicable to it or its assets or business.
It is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
The representations and warranties of VF Delaware or VF or any of
their respective Affiliates in or pursuant to any of the Project
Documents or Project Loan Documents are true and correct as of the
date hereof and are hereby deemed to be made to Cogentrix GP and
Cogentrix LP, mutatis mutandis, as if fully set forth herein.
Interest. No interest shall accrue on any contribution to the capital of
the Partnership.
Withdrawals of Capital. No Partner shall have the right to withdraw or to
be repaid or returned any capital contributed by it, except as otherwise
provided herein.
Additional Capital Contributions. Unless otherwise unanimously agreed by
the Management Committee, no Partner shall be required to make any contribution
to the capital of the Partnership other than its capital contributions set forth
in this Article III. If the Management
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Committee has agreed that an additional cash contribution to the capital of the
Partnership is to be made but a Partner does not make such contribution as and
when required, then any other Partner may (but shall not be required to), at its
election, either make all or a portion of the cash contribution to the capital
of the Partnership (which, in the case of such an investment by Cogentrix GP or
Cogentrix LP, would increase the Cogentrix Investment of such Partner or, in the
case of an investment by VF or VF Delaware, would constitute (and in the case of
subsequent investments would increase) an Agro Power Investment of such Partner)
or loan all or a portion of the amount of such non-contributing Partner's
portion of such agreed-upon cash capital contribution to the Partnership. In the
event the Partner elects to make an additional cash contribution, the Partner's
ownership percentage shall not change but, in the case of Cogentrix GP and
Cogentrix LP, the amount of the contribution will increase its respective
Cogentrix Investment and, in the case of VF and VF Delaware, would constitute
(or in the case of subsequent contributions would increase) its respective Agro
Power Investment. (As a result, for example, if Cogentrix were to make an
additional cash contribution to the Partnership under this Section 3.6, and, if
at that time, distributions of cash from Net Distributable Cash are being
allocated pursuant to Section 5.1(b), then distributions shall continue to be
made under Section 5.1(b) until Cogentrix GP and Cogentrix LP have received
distributions of cash from Net Distributable Cash that will provide Cogentrix GP
and Cogentrix LP with the Second Priority Return on the Cogentrix Investment
(which will have been increased by the amount of such cash contribution under
this Section 3.6)). In the event the Partner elects to make a loan, then such
loan shall be on customary terms and conditions, shall be evidenced by a
customary promissory note, and shall provide that (a) the loan shall be repaid
in full together with interest thereon prior to any distribution of cash by the
Partnership to the Partners, (b) it shall bear interest at the same rate of
interest as the interest rate then in effect under the Revolving Facility plus
1% per annum and (c) shall comply in all respects with Project Loan Documents.
ARTICLE
ALLOCATION OF PROFITS AND LOSSES
Profits and Losses.
After giving effect to the special allocations set forth in Sections 4.3,
4.4, 4.5, 4.6, 4.7 and 4.10 hereof, the Partners shall share Profits and Losses
as follows:
(i) Profits shall be allocated among the Partners as follows:
(A) Profits shall first be allocated to the General Partners to
offset any prior allocations of Loss made to the General Partners
under Section 4.1(a)(ii)(B) hereof which have not previously been
offset.
(B) Thereafter, Profits shall be allocated to the Partners to
offset any prior allocations of Loss made to the Partners under
Section 4.1(a)(ii)(A) which have not previously been offset.
(C) Thereafter, Profits shall be allocated 2% to Cogentrix GP and
98% to Cogentrix LP until the aggregate cumulative Profits allocated
to Cogentrix GP
- 17 -
and Cogentrix LP under this subsection (B) equals the excess of (I)
Cumulative Distributions to Cogentrix over (II) the sum of Cumulative
Distributions to VF and the Cogentrix Investment.
(D) Thereafter, Profits shall be allocated among the Partners in
proportion to their Partnership Percentages.
(ii) Losses shall be allocated among the Partners as follows:
(A) Losses shall first be allocated to the Partners in accordance
with their positive Capital Accounts.
(B) Thereafter, Losses shall be allocated to the General Partners
in the proportion of their Partnership Percentages.
For Federal income tax purposes, each item of income, gain, loss,
deduction or credit entering into the computation of the Partnership's
taxable income shall be allocated in the same proportion.
The Profits and Losses of the Partnership shall be unanimously
determined by the Management Committee and shall be allocated as
described in Section 4.1(a) (i) at the end of each fiscal quarter,
(ii) upon the transfer of the Partnership Interest of any Partner
pursuant to Article VIII, (iii) upon the Withdrawal of any Partner
pursuant to Article IX, (iv) upon the admission of any Partner to the
Partnership pursuant to Article IX and (vi) at such other times that
the Management Committee may determine.
Capital Account Balances. Each Partner's Capital Account shall be
maintained in accordance with the principles of applicable Treasury Regulations
promulgated under Section 704(b) of the Code and as otherwise provided in the
definition of "Capital Accounts" and in this Article IV.
Minimum Gain Chargeback.
Notwithstanding any other provision in this Agreement, if there is a
net decrease in Partnership minimum gain (determined in accordance with the
principles of Regulations Sections 1.704-2(b)(2) and 1.704-2(d)) during any
Partnership taxable year, the Partners who would otherwise have an Adjusted
Capital Account Deficit at the end of such year shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount and manner sufficient to
eliminate as quickly as possible such Adjusted Capital Account Deficit. The
items to be so allocated shall be determined in accordance with Regulations
Section 1.704-2(g). This subsection 4.3(a) is intended to comply with the
minimum gain chargeback requirements in such Regulation Sections and shall
be interpreted consistently therewith.
Notwithstanding any other provision in this Agreement, if there is a
net decrease in Partnership minimum gain attributable to a partner
nonrecourse debt of the Partnership (within the meaning of Regulations
Sections 1.704-2(b)) during any
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Partnership fiscal year, each Person who has a share of the Partnership
minimum gain attributable to such nonrecourse debt of the Partnership,
determined in accordance with Regulation Section 1.704-2(i)(5), shall be
specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to the greater of
(i) the portion of such Person's share of the net decrease in minimum gain
of the Partnership attributable to such nonrecourse debt of the
Partnership, determined in accordance with Regulations Section
1.704-2(i)(b), that is allocable to the disposition of property of the
Partnership subject to such nonrecourse debt of the Partnership, determined
in accordance with Regulations Section 1.704-2(i)(4), or (ii) if such
Person would otherwise have an Adjusted Capital Account Deficit at the end
of such year, an amount sufficient to eliminate such Adjusted Capital
Account Deficit. Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to
each Partner pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulations Section 1.704-2(i)(4). This
subsection 4.3(b) is intended to comply with the minimum gain chargeback
requirement in such Regulations Section and shall be interpreted
consistently therewith. Solely for purposes of this subsection 4.3(b), each
Person's Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to this Article IV with respect to such fiscal
year, other than allocations pursuant to subsection 4.3(a) hereof.
Nonrecourse Deductions. Nonrecourse Deductions for any taxable year shall
be specifically allocated among the Partners in proportion to their Percentage
Interests.
Partner Nonrecourse Deductions. Nonrecourse Deductions attributable to
otherwise nonrecourse debt with respect to which a Partner or a related person
of a Partner described in Regulations Section 1.752-2(c) is the creditor or
otherwise bears the "economic risk of loss" as defined in Regulations Section
1.752-2(b) shall be allocated to such Partner.
Qualified Income Offset. Notwithstanding anything in this Agreement to the
contrary, in the event any Partner unexpectedly receives any adjustments,
allocations or distributions described in paragraphs (b)(2)(ii)(d)(4), (5) or
(6) of Regulations Section 1.704-1, there shall be specially allocated to such
Partner such items of Partnership income and gain, at such times and in such
amounts as will eliminate as quickly as possible that portion of its Adjusted
Capital Account Deficit caused or increased by such adjustments, allocations or
distributions.
Curative Allocations. The allocations set forth in Sections 4.3, 4.4, 4.5,
4.6 and 4.10 hereof are intended to comply with certain requirements of
Regulations Section, 1.704-1(b). Notwithstanding any other provisions of this
Article IV (other than Sections 4.3, 4.4, 4.5, 4.6 and 4.10), allocations that
have taken place pursuant to Sections 4.3, 4.4, 4.5, 4.6 and 4.10 shall be taken
into account in allocating other items of income, gain, loss, deduction and
credit so that, to the extent possible, the net amount of such other allocations
and the Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations to each Partner shall
equal the net amount that would have been allocated to each Partner if the
Sections 4.3, 4.4, 4.5, 4.6, and 4.10 allocations had not occurred.
- 19 -
Tax Allocations. Except as provided in Sections 4.7 and 4.9 hereof, for
income tax purposes each item of income, gain, loss and deduction shall be
allocated in the same manner as the corresponding book item is allocated for
Capital Account purposes.
Property Subject to 704(b) and 704(c). In the case of any Partnership asset
(directly or indirectly owned) the Gross Asset Value of which differs from its
adjusted tax basis, income, gain, loss and deduction with respect to such asset
shall, solely for tax purposes, be allocated in accordance with the principles
of Code Sections 704(b) and 704(c) to take account of such difference.
Limitations. Notwithstanding anything to the contrary in this Article IV,
no allocation under this Article IV shall be made to a Limited Partner that
would cause such Limited Partner to have, or that would increase, an Adjusted
Capital Account Deficit. Any amount not allocated as a result of this limitation
shall be reallocated to the General Partners pro rata in accordance with their
relative Partnership Interests.
ARTICLE
DISTRIBUTIONS
Distribution of Net Distributable Cash. Subject to Section 5.2 hereof, Net
Distributable Cash for each fiscal quarter shall be distributed to the Partners
within thirty (30) days after the end of such quarter as follows:
First, from the date hereof and until each of Cogentrix GP and
Cogentrix LP shall have received distributions of cash from Net
Distributable Cash sufficient to provide both Cogentrix GP and Cogentrix LP
with the First Priority Return, 89.1% to Cogentrix LP, 0.9% to Cogentrix
GP, 9.9% to VF Delaware and 0.1% to VF,
Thereafter until each of Cogentrix GP and Cogentrix LP shall have
received distributions of cash from Net Distributable Cash sufficient to
provide both Cogentrix GP and Cogentrix LP with the Second Priority Return,
64.386% to Cogentrix LP, 1.314% to Cogentrix GP, 33.614% to VF Delaware,
and 0.686% to VF, and
Thereafter, 49% to Cogentrix LP, 1% to Cogentrix GP, 49% to VF
Delaware and 1% to VF.
Default Allocations for Cogentrix. In the event VF Delaware, VF or Agro
Power defaults or breaches any of its obligations under this Agreement, the
Management Agreement, the Marketing Agreement or the Construction Agreement and
such default or breach has not been remedied within any applicable cure period,
or any representation or warranty made by VF Delaware, VF or any of their
respective Affiliates under this Agreement or any such other agreement or
document proves to have been untrue when made and (a) as a result thereof the
Partnership, Cogentrix GP and Cogentrix LP (or any of them) incurs or suffers an
Adverse Consequence and (b) Cogentrix GP or Cogentrix LP gives written notice of
such Adverse Consequence to the Partnership and, if the amount thereof is
unknown, its good faith estimate of the amount of such Adverse Consequence, then
the Partnership shall thereafter refrain from
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making any distributions to VF Delaware and VF (or either of them) under this
Agreement (any such distribution that would have been made but for this Section
5.2 is hereinafter referred to as a "Blocked Distribution") and shall take the
following steps:
The Partnership shall distribute to Cogentrix GP or Cogentrix LP from
such Blocked Distributions an aggregate amount equal to 100% of any such
Adverse Consequence suffered or actually incurred by Cogentrix GP and
Cogentrix LP or either of them (or, if the amount thereof is not known,
100% of Cogentrix GP's or Cogentrix LP's written good faith estimate
thereof). Any such distribution made by the Partnership under this
subsection 5.2(i) shall satisfy pro tanto the obligation of the Partnership
to make distributions to VF Delaware and VF (or either of them) with
respect to the Blocked Distributions. For the purposes of this Agreement,
any Adverse Consequence suffered or incurred by the Partnership shall be
deemed to have been suffered or incurred, on a dollar-for-dollar basis, 1%
by Cogentrix GP and 49% by Cogentrix LP.
Upon distribution to Cogentrix GP and Cogentrix LP of 100% of the
aggregate amount of any such Adverse Consequence (or their good faith
estimate thereof) from Blocked Distributions, the Partnership may
thereafter make distributions to VF Delaware and VF under Section 5.1,
unless and until it receives a subsequent notification from Cogentrix LP or
Cogentrix GP under this Section 5.2.
Default Allocations for VF. In the event Cogentrix GP, Cogentrix LP or
Cogentrix Energy, Inc. defaults or breaches any of its obligations under this
Agreement or the Construction Agreement and such default or breach has not been
remedied within any applicable cure period, or any representation or warranty
made by Cogentrix GP or Cogentrix LP under this Agreement proves to have been
untrue when made and (a) as a result thereof the Partnership, VF Delaware and VF
(or any of them) incurs or suffers an Adverse Consequence and (b) VF Delaware or
VF gives written notice of such Adverse Consequence to the Partnership and, if
the amount thereof is unknown, its good faith estimate of the amount of such
Adverse Consequence, then the Partnership shall thereafter refrain from making
any distributions to Cogentrix GP and Cogentrix LP (or either of them) under
this Agreement (any such distribution that would have been made but for this
Section 5.3 is hereinafter referred to as a "Blocked Distribution") and shall
take the following steps:
The Partnership shall distribute to VF Delaware or VF from such
Blocked Distributions an aggregate amount equal to 100% of any such Adverse
Consequence suffered or actually incurred by VF Delaware and VF or either
of them (or, if the amount thereof is not known, 100% of VF Delaware's or
VF's written good faith estimate thereof). Any such distribution made by
the Partnership under this subsection 5.3(i) shall satisfy pro tanto the
obligation of the Partnership to make distributions to Cogentrix GP or
Cogentrix LP (or either of them) with respect to the Blocked Distributions.
For the purposes of this Agreement, any Adverse Consequence suffered or
incurred by the Partnership shall be deemed to have been suffered or
incurred, on a dollar-for-dollar basis, 1% by VF and 49% by VF Delaware.
Upon distribution to VF Delaware and VF of 100% of the aggregate
amount of any such Adverse Consequence (or their good faith estimate
thereof) from
- 21 -
Blocked Distributions, the Partnership may thereafter make distributions to
Cogentrix GP and Cogentrix LP under Section 5.1, unless and until it
receives a subsequent notification from VF Delaware or VF under this
Section 5.3.
ARTICLE
MANAGEMENT
Management of the Partnership.
The overall management and control of the business affairs of the
Partnership shall be vested in the Management Committee, subject to the
limitations contained in Section 6.2 or elsewhere in this Agreement. The
Management Committee shall consist of four members, two designated by
Cogentrix GP (each a "Cogentrix GP Designee") and two designated by VF
Delaware (each a "VF Delaware Designee"), and a quorum of the Management
Committee shall require at least three members of the Management Committee.
No action at any meeting may be taken by the Management Committee unless a
quorum is present (acting in person or by proxy). The Management Committee
shall meet not less frequently than quarterly. Members of the Management
Committee may participate in a meeting of the Management Committee by means
of conference telephone. No action may be taken by the Management Committee
with respect to any of the matters described in Section 6.2 hereof unless
such action is in the form of a writing signed by all members of the
Management Committee. Unless otherwise agreed, all meetings of the
Management Committee shall take place at Cogentrix's offices in Charlotte,
North Carolina, Agro Power's offices in East Brunswick, New Jersey or such
other place as the Management Committee may unanimously agree.
Except as set forth in Section 6.2, any action by the Management
Committee shall require the approval of a majority of the members of the
Management Committee.
Any General Partner may, at any time, replace any of its respective
Designees to the Management Committee with a new Designee and, upon such
change, or upon the death or resignation of any Designee, a successor shall
be designated in writing by the party that appointed the Designee being
replaced.
Any General Partner or member of the Management Committee may, at any
time, request a meeting of the Management Committee by sending written
notice specifying in reasonable detail the purpose(s) of such meeting to
all other Partners and to the members of the Management Committee at least
ten (10) days in advance of the proposed date for the meeting, which notice
may be waived by all members of the Management Committee and all Partners.
Any member of the Management Committee may propose that an action be
submitted to the Management Committee for approval, and there shall be no
requirement of notice of the issues to be addressed at any meeting of the
Management Committee.
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Fundamental Matters. The following matters shall require the prior
unanimous authorization and approval of the Management Committee:
Any transaction in which the Partnership (i) acquires, purchases or
leases any asset or right for consideration having a fair market value in
excess of $25,000, (ii) consolidates or merges with or into any other
Person, (iii) sells, assigns, leases or otherwise transfers any asset or
right having a fair market value in excess of $25,000, or (iv) assumes any
liability or obligation in connection with Section 6.2(a)(i) above in
excess of $25,000.
The approval, execution and delivery of any contract, lease or
agreement following the Effective Date; provided, that no such approval
shall be required for (i) any contracts and permit applications in
existence prior to the Effective Date and listed on Schedule 1.1(c) hereto,
or (ii) any other contract, lease or agreement which is expressly
non-recourse to the Partners so long as the amounts to be paid by the
Partnership thereunder, together with all other amounts to be paid by the
Partnership pursuant to contracts, leases or agreements that have not been
unanimously approved or ratified by the Management Committee, does not
exceed $50,000 in the aggregate excluding contracts, leases or agreements
for supplies used in the ordinary course of business and contemplated in
the Operating Budget.
The approval, execution or delivery of any amendments to, modification
or termination of, enforcement of rights under, or any consents or waivers
in connection with any contract, lease or agreement, other than contracts
entered into without prior unanimous approval of the Management Committee
pursuant to subsection 6.2(a) or clause (ii) of subsection 6.2(b) above.
The sale or issuance by the Partnership of any interest, or of any
option, warrant or similar right to acquire any interest, of any kind in
the Partnership.
Any decision to (i) terminate all or any substantial part of the
Project (an "Abandonment") or (ii) engage in any activity not contemplated
by this Agreement.
The incurrence or assumption of any Indebtedness by the Partnership,
except for (i) Indebtedness which, when the principal amount thereof is
aggregated with the principal amount of Indebtedness previously incurred
pursuant to this subsection 6.2(f) which remains outstanding, does not
exceed $25,000 and (ii) the Indebtedness represented by the Project Loan
Documents.
The granting of any Lien (other than Permitted Liens) on the assets or
rights of the Partnership.
The repayment (other than (i) repayments in accordance with scheduled
maturity and (ii) paydowns on the Revolving Credit Facility), voluntary
prepayment or redemption of, or any refinancing or other modification of
the terms of, any Indebtedness.
- 23 -
The adoption and modification of the Operating Budget or the Project
Budget (collectively, the "Budgets").
The approval of any expenditure or investment not previously
authorized in any Budget; provided, however, that no such approval shall be
required for any expenditure or investment so long as the amount expended
by the Partnership, together with the amounts of all other expenditures by
the Partnership during any fiscal year that have not been approved or
ratified by the Management Committee, does not exceed $25,000 in the
aggregate.
The initiation of any legal proceedings or arbitration on behalf of
the Partnership, or the settlement of any claim by or against the
Partnership with respect to claims in excess of $25,000 or which include
requests for an injunction, specific performance or other equitable relief.
The selection, removal, or determination of authority and
responsibility of the officers of the Partnership, general or special
counsel for the Partnership, accountants and auditors for the Partnership
and the Project and the approval of any change in the accounting or tax
policy of the Partnership or the Project.
To the extent not specified in this Agreement, (i) any distribution of
income or any assets or rights of the Partnership or (ii) the redemption,
purchase or other acquisition of any interest in the Partnership.
Except as contemplated in Article X of this Agreement, liquidating or
dissolving, or proposing to liquidate or dissolve, or effecting, or
proposing to effect, a recapitalization in any form of transaction, of the
Partnership.
(i) Commencing any case, proceeding or other action (A) under any
existing or future law or any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for All or any substantial part of its assets;
(ii) making, or proposing to make, a general assignment for the benefit of
its creditors; (iii) admitting or proposing to admit in writing its
inability to pay its debts as they become due; (iv) filing or proposing to
file any plan of reorganization pursuant to 11 U.S.C. " 101 et seq.; (v)
taking, or proposing to take, any action in furtherance of, or indicating
its consent to, approval of or acquiescence in, any of the acts set forth
in clause (i) or (ii) above.
Establishing any operating or capital reserves other than those
required by the Project Loan Documents.
Establishing committees of the Management Committee and delegating
voting authority to such committees.
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The approval, execution or delivery of any amendments to, modification
or termination of, or any waivers of any rights under, or the grant of any
consents under or in connection with any Project Document, any Project Loan
Document, the Marketing Agreement or the Management Agreement.
The approval or taking of any action that would be an event of default
or that would give rise to a right of termination under any Project
Document or any Project Loan Document.
The approval or taking with any action that would give rise to an
event of default under any Project Loan Document or that would give rise to
a right of acceleration or termination under any Project Loan Document.
The reimbursement by the Partnership of any General Partner under
Section 6.4(b) hereof of any amount in excess of $5,000 during any fiscal
quarter.
Any change in or termination of any insurance policies maintained by
the Partnership.
Any agreement to undertake any action that would require the approval
of the Management Committee under this Section 6.2.
Any act in contravention of this Agreement or the Act.
Any act which would make it impossible to carry on the ordinary
business of the Partnership.
Possession of Partnership property by any Partner, or the assignment,
transfer or pledge of rights of the Partnership in specific Partnership
property for other than a Partnership purpose or other than for the benefit
of the Partnership, or any commingling the funds of the Partnership with
the funds of any other person.
Any action which would cause the Partnership to be treated as other
than a partnership for Federal income tax purposes.
Any confession of a judgment against the Partnership or any Partner.
The grant of any power of attorney or appointment of any agent or
attorney (other than customs brokers).
The grant of signature authority to any Person with respect to any of
the Partnership's bank or investment accounts.
Officers of the Partnership. The Partnership may have such officers as may
be designated by the Management Committee from time to time. Such officers shall
(a) serve at the pleasure of the Management Committee, (b) subject to Section
6.2 and to the instructions and directions of the Management Committee, have
such powers as are usually exercised by
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comparable designated officers of a Delaware corporation and (c) have the power
to bind the Partnership through the exercise of such powers to the extent
consistent with the terms hereof. The initial officers of the Partnership shall
be those persons listed on Schedule 6.3 attached hereto and incorporated herein
by reference. Following the execution hereof, officers shall be appointed or
removed only by action of the Management Committee in accordance with the
provisions of Section 6.1.
No Compensation; Reimbursement.
Except as expressly provided herein, the General Partners, members of
the Management Committee and officers shall receive no compensation for
performing their duties as General Partners, members of the Management
Committee or officers under this Agreement; provided, however, that this
provision shall not affect any Partners' right to receive its share of
distributions as set forth in Article V hereof.
Subject to the limitation, if any, imposed by the Project Loan
Documents and subject to subsection 6.2(u), each General Partner shall be
entitled to receive, out of any Partnership funds available therefor,
reimbursement of all amounts expended by such General Partner in payment of
properly incurred and documented Partnership obligations paid by such
General Partner out of its own funds so long as such expenditures are made
in accordance with the Budgets.
Insurance. The Partnership shall (a) maintain, with insurers or
underwriters of good repute, in the name of the Partnership, such insurance
relating to the operations of the Partnership as is customary for comparable
businesses to that of the Partnership to maintain, against such risks and
pursuant to such terms (including deductible limits or self-insured retentions)
as are customary for such businesses, and (b) pay all premiums and other sums
payable in order to maintain such insurance. For purposes of clarity, it is
hereby agreed that the Partnership shall maintain the insurance required by the
Project Loan Documents and all insurance policies shall name Cogentrix GP and VF
Delaware as an additional insured and provided that they may not be cancelled or
terminated except with 30 days' prior written notice to Cogentrix GP and VF
Delaware.
Cooperation on Tax Matters. The Partnership shall cooperate fully as and to
the extent reasonably requested by Cogentrix GP or VF Delaware in connection
with the preparation and filing of any Tax return, statement, report or form,
and any audit, litigation or other proceeding with respect to Taxes relating to
or arising out of the Project. Such cooperation shall include the retention and,
upon request by either Cogentrix GP or VF Delaware, the provision of records and
information that are reasonably relevant to any such audit, litigation or other
proceeding. The Partnership agrees to (a) retain all books and records with
respect to Tax matters pertinent to the Project and (b) give Cogentrix GP and VF
Delaware reasonable written notice prior to destroying or discarding any such
books and records. The Partnership shall retain any records requested by either
Cogentrix GP or VF Delaware to be retained.
ARTICLE
BOOKS, RECORDS AND BANK ACCOUNTS
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Books and Records. In addition to the Partnership Books, the Partnership
shall also keep such books of account and other records with respect to the
operations of the Partnership as will sufficiently explain the transactions and
financial position of the Partnership and enable financial statements to be
prepared in accordance with GAAP and shall cause such books and other records to
be kept in such manner as will enable them to be properly audited. The
Partnership Books and such other books and records shall be maintained at the
principal places of business of the Partnership and all Partners and their duly
authorized representatives shall at all times have access to and the right to
review and copy such books and records.
Accounting Basis and Fiscal Year. The books of the Partnership (a) shall be
kept on an accrual basis in accordance with GAAP, (b) shall reflect all
Partnership transactions, (c) shall be appropriate and adequate for the
Partnership's business and for the carrying out of all provisions of this
Agreement, and (d) shall be closed and balanced as of the end of each fiscal
year, as soon as practicable after the end of such fiscal year. The fiscal year
of the Partnership shall be January 1 through December 31 of each year or such
other fiscal year that may be selected with the unanimous approval of the
Management Committee.
Reports.
Unless otherwise required by the Management Committee, the Partnership
shall cause to be delivered to each Partner, within 120 days after the end
of each fiscal year, an annual report containing the following:
A balance sheet as of the end of the Partnership's fiscal year
and statements of income, Partners' equity and cash flows for the year
then ended, each of which shall be audited and reported on by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Co. or such other independent certified public accountants,
which shall be a nationally recognized accounting firm, as may be
selected by the Management Committee;
a general description of the activities of the Partnership during
such year; and
a report of any material transaction between the Partnership and
any Partner or any of its Affiliates, including fees and compensation
and reimbursements paid by the Partnership and the products supplied
and services performed by such Partner or any such Affiliate for such
fees or compensation and the expenses so reimbursed; provided,
however, that no report shall be required for any products supplied
and services performed if such products and services are provided
pursuant to the terms of a Project Document, the Management Agreement,
the Marketing Agreement, an agreement approved by the Management
Committee or set out in any Budget and the compensation therefor is in
accordance with the terms of such agreement.
Within 45 days after the end of each quarter of each fiscal year, the
Partnership shall cause to be delivered to each Partner a quarterly report
containing a balance sheet as of the end of such quarter and a statement of
income for such quarter,
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each of which may be unaudited but which shall be certified by the chief
financial officer of the Partnership as fairly presenting the financial
position of the Partnership at the end of such quarter and results of
operations of the Partnership for such quarter and as having been prepared
in accordance with the accounting methods followed by the Partnership for
Federal income tax purposes and otherwise in accordance with GAAP applied
on a basis substantially consistent with that of the Partnership's audited
financial statements (subject to normal year end adjustments).
Within 120 days of the end of each fiscal year, the Partnership will
cause to be delivered to each Partner all information necessary for the
preparation of such Partner's Federal income tax returns, including a
statement showing such Partner's share of income, gains, losses, deductions
and credits for such year for Federal income tax purposes and the amount of
any distributions made to or for the account of such Partner pursuant to
this Agreement.
Bank Accounts. The Partnership shall maintain one or more accounts in one
or more banks located in Fort ▇▇▇▇▇, Texas and such other locations as may be
approved by the Management Committee, each of which shall be a member the
Federal Deposit Insurance Corporation. In addition, the Partnership shall
establish such other accounts and deposit amounts as required by the Project
Loan Documents. All such amounts shall be and remain the property of the
Partnership, and shall be received, held and disbursed by the Partnership for
the purposes specified in this Agreement. There shall not be deposited in any of
said accounts any funds other than funds belonging to the Partnership, and no
other funds shall in any way be commingled with such Partnership funds.
Tax Returns. The Management Committee shall cause income tax returns for
the Partnership to be prepared and timely filed with the appropriate
authorities.
Tax Elections. The Management Committee shall, from time to time, make such
tax elections as it deems necessary or advisable to carry out the business of
the Partnership or the purposes of this Agreement.
Tax Matters Partner. Cogentrix GP shall be the Partnership's "tax matters
partner" for purposes of the Code and with respect to all other Federal, state
and local Taxes. The approval of the tax matters partner shall be required
before the Partnership or any Partner (with respect to Partnership matters)
files any document with any Governmental Authority including, but not limited
to, returns, amendments, requests for refunds, appeals, or waivers or extensions
of statutes of limitations. The tax matters partner shall take such actions as
the Management Committee may lawfully require in connection with the
Partnership's Federal, state and local Tax matters.
Withholdings. Except and only to the extent required by applicable law and
except as permitted hereunder, the Partnership will not deduct or withhold any
amount in respect of any tax from any payment or distribution by the Partnership
to any Partner unless the Partnership has first received written authorization
from such Partner so to withhold or to deduct.
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ARTICLE
TRANSFER OF INTERESTS
Transfer of a Partner's Interest.
No Partner may sell, transfer, participate, assign or otherwise
dispose of (whether voluntarily or by operation of law) (collectively,
"transfer") all or any part of its Partnership Interest without the prior
written consent of the non-transferring General Partner(s).
The non-transferring General Partner(s) may condition its (their)
consent to any transfer on compliance by the Partner desiring to transfer
its Partnership Interest with all or any of the following:
The transferring Partner must give written notice to the General
Partners identifying in reasonable detail the proposed transferee(s)
and the terms and conditions of the proposed transfer and the
non-transferring General Partner(s) shall have a period of twenty (20)
Business Days from the date of such notice either to consent in
writing to the proposed transferee(s), or to give written notice that
it does not consent to such transferee(s);
within ten (10) Business Days after the non-transferring
General Partner(s) gives written notice that it does not consent
to a proposed transferee, it shall provide to the transferring
Partner a written explanation of the reasons therefor;
such transfer does not release the transferring Partner from
its obligations hereunder;
the transferee shall not have the right to be separately
represented on the Management Committee unless the transferring
Partner is a General Partner that previously had the right to
appoint Designee's to the Management Committee and the transfer
involves all of such General Partner's Partnership Interest;
the non-transferring General Partner(s) shall notify each
other Partner in writing of its decision to consent to the
transfer within five (5) Business Days of its grant of such
consent (which notice shall include a copy of the notice sent to
the non-transferring General Partner(s) by the transferring
Partner) and, prior to any such transfer, each Partner (which
term, for purposes of clarity, includes for purposes of this
subsection (v) the non-transferring General Partner and excludes
the transferring Partner) shall have the right for thirty (30)
Business Days following such notice to purchase the Partnership
Interest being sold by the transferring Partner pursuant to this
Article VIII on the same terms and conditions as were set forth
in such notice. In the event that none of the nontransferring
Partners exercises its right to purchase such Partnership
Interest being sold, then the transferring Partner shall have
forty-five (45) days thereafter to complete the
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sale in accordance with the terms of the notice, after which time
the transferring Partner must again comply with the procedures
set forth in this Article VIII. In the event more than one
Partner exercises its right to purchase such Partnership Interest
proposed to be transferred, then such exercising Partners shall
exercise such right on a pro-rata basis based on their respective
Partnership Percentages (without considering the Partnership
Percentage of the transferring Partner or the Partners (if any)
not electing to exercise such right); or
(vii) such transferee shall not have the right to sell,
transfer, participate, assign or otherwise dispose of all or a
portion of such party's Partnership Interest except in accordance
with the terms of this Section 8.1; and
(viii) the transferee shall execute documents satisfactory
to the Management Committee sufficient to make the transferee a
party to and be bound by the terms of this Agreement and (B) the
transferee shall expressly assume all obligations of the
transferring Partner hereunder.
ARTICLE
ADDITIONAL PARTNERS; WITHDRAWAL OF PARTNERS
Additional Partners. Persons other than the undersigned may from time to
time be admitted to the Partnership as General Partners or Limited Partners only
with the unanimous consent of the Management Committee and only on such terms
and conditions as may be prescribed by the Management Committee.
Withdrawal of Partners.
No Partner may withdraw from the Partnership except as provided in this
Section 9.2.
A Partner shall immediately cease to be a Partner and shall be deemed
to have Withdrawn from the Partnership, in the event:
Such Partner shall commence a voluntary case or other proceedings
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing; or
an involuntary case or other proceeding shall be commenced
against such Partner seeking liquidation, reorganization or other
relief with
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respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of sixty (60) days, or an order for relief shall be entered against
such Partner under the federal bankruptcy laws as now or hereafter in
effect; or
such Partner defaults in its obligation to make a capital
contribution pursuant to Sections 3.1 and 3.2 (and such default is not
cured within two (2) days of written notice of such default from a
General Partner); or
it is required to Withdraw as a Partner pursuant to the Delaware
Act.
Such Partner's Withdrawal Date shall be the day such Withdrawal occurs.
Any Partner may Withdraw voluntarily from the Partnership on not less
than thirty (30) days' prior written notice by such Partner to the other
Partners either (i) in the event that such Withdrawal is after March 31,
1996 and conditions to the initial draw under the Construction/Term Loan
Documents have not been satisfied or (ii) with the prior unanimous consent
of the Management Committee. Such Partner's Withdrawal Date shall be the
date on which a written notice of Withdrawal is made.
Upon the Withdrawal of any Partner pursuant to subsections 9.2(b) or
(c), such Partner's Capital Account and Partnership Percentage shall be
allocated, as of the Withdrawal Date, among the other Partners in
proportion to their respective Partnership Percentages on such Withdrawal
Date (it being understood that such allocation shall not result in a
Limited Partner becoming a General Partner). After its Withdrawal Date, a
Withdrawn Partner shall not have any rights with respect to the profits,
capital or affairs of the Partnership (including, but not limited to, any
rights of representation on the Management Committee or any committee
thereof or any rights on liquidation of the Partnership pursuant to Article
X).
On the Withdrawal Date for any Partner that Withdraws pursuant to
Section 9.2(b) or Section 9.2(c)(ii), such Partner shall pay to the
Partnership in cash any negative balance in such Partner's capital account.
If the sum of such Partner's capital account has a positive balance on the
Withdrawal Date, the Partnership shall pay such amount to such Partner upon
its withdrawal.
ARTICLE
DISSOLUTION AND LIQUIDATION
Events of Dissolution.
The Partnership shall be dissolved upon:
- 31 -
an Abandonment pursuant to subsection 6.2(e);
the occurrence of an event requiring dissolution under the
Delaware Act;
the unanimous consent of the General Partners; or
at the election of Cogentrix GP, if Agro Power ceases, at any
time, to control (as defined in the definition of "Affiliate") VF
Delaware or VF.
Dissolution of the Partnership shall be effective on the day on which
the event occurs giving rise to the dissolution, but the Partnership shall
not terminate until the assets and rights of the Partnership shall have
been distributed as provided herein. Notwithstanding the dissolution of the
Partnership, prior to the termination of the Partnership, as aforesaid, the
business of the Partnership and the affairs of the Partners, as such, shall
continue to be governed by this Agreement. Upon dissolution, the Management
Committee shall liquidate the assets of the Partnership and apply and
distribute the proceeds thereof as contemplated by this Agreement.
Distributions Upon Liquidation.
After payment of liabilities owing to creditors (but excluding any
liabilities payable with respect to the Management Agreement or the
Marketing Agreement other than amounts then due and owing), the Management
Committee or the liquidator, if any, shall set up such reserves as it deems
reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership (other than liability and obligation owing
with respect to the Management Agreement and the Marketing Agreement). Said
reserves may be paid over by the Management Committee or the liquidator to
a bank, to be held in escrow for the purpose of paying any such contingent
or unforeseen liabilities or obligations and, at the expiration of such
period as the Management Committee or the liquidator may deem advisable,
such reserves shall be distributed to the Partners or their assigns in the
manner set forth in subsection (b) below.
If any General Partner has a negative Capital Account at the time of
dissolution of the Partnership, such General Partner shall be required to
restore to the Partnership the amount of the negative balance in its
Capital Account. If any Limited Partner has a negative Capital Account
balance at the time of dissolution of the Partnership, such Limited Partner
shall have no obligation to restore to the Partnership the amount of the
negative balance in its Capital Account.
After paying the liabilities and providing for the reserves referred
to in subsection 10.2(a) and the payment of any restoration amounts under
subsection 10.2(b), the Management Committee or the liquidator shall, by
the end of the Partnership's taxable year in which the Partnership
dissolves (or, if later, within 90 days after the date of such
termination), cause the net assets of the Partnership to be distributed in
accordance with Article V hereof, provided, however, that no distribution
shall be made pursuant to this
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sentence that creates or increases a Capital Account deficit for any
Partner which exceeds such Partner's obligation to restore such deficit
(under subsection 10.2(b) above), determined as follows:
Distributions shall be first determined provisionally without regard
to Capital Accounts, and the allocation provisions of Article IV hereof
shall also be applied provisionally. If as a result of such provisional
calculations and allocations, any Partner would thereby have a Capital
Account deficit which exceeds its obligation to restore such deficit under
subsection 10.2(b) above, the actual distributions pursuant to this
subsection (c) shall be equal to such provisional distribution less the
amount of such excess and actual allocations shall be made in accordance
with Article IV taking into account such actual distributions.
Any remaining net assets shall be allocated among the Partners in
accordance with their positive Capital Accounts.
If such distributions are insufficient to return to any Partner the full amount
of its capital contributions, it shall have no recourse against any other
Partner. Each Partner shall receive its share of the net assets in cash or in
kind, and the proportion of such share that is received in cash shall be the
same for each Partner. In the event that any part of such net assets consists of
notes or accounts receivable or other non-cash assets, the Management Committee
or the liquidator shall take whatever steps it deems appropriate to convert such
assets into cash or into any other form which would facilitate the distribution
thereof. If any assets of the Partnership are to be distributed in kind, such
assets shall be distributed on the basis of their fair market value, as
determined by the Management Committee or the liquidator, if any, acting in its
sole discretion.
ARTICLE
DISPUTE RESOLUTION
Arbitration.
In the event a dispute arises between or among any Partners relating
to the terms of this Agreement and any Partner gives written notice of such
dispute to the Management Committee, then each of the Partners involved in
such dispute shall refer the dispute to its senior management. The senior
management of each Partner involved in such dispute shall meet and confer
regarding the resolution of the dispute. In the event a resolution of such
dispute is not reached within 30 days of the written notice, then any of
the Partners involved in such dispute may submit the dispute to arbitration
in accordance with Section 11.1(b).
Arbitration of disputes pursuant to this Section 14.1(b) shall be held
in Charlotte, North Carolina under the commercial arbitration rules of the
American Arbitration Association, and shall be heard by three arbitrators
selected in accordance with such rules. Each arbitrator shall have at least
five years experience in the United States in a profession or professions
related to the subject matter involved in the dispute
- 33 -
and shall not be a past or present officer, director or employee of, or
have any interest in or material relationship with, any Partner or any
Affiliate of any Partner. Any arbitral award shall be final and binding and
may be entered by any Partner in any state or Federal court having
jurisdiction thereof. Costs of arbitration (including reasonable attorney's
fees and costs) shall be paid either equally by the parties to the
arbitration or in accordance with the decision of the arbitrators.
Buy/Sell Option.
In the event that the Management Committee is unable to reach a
unanimous decision with respect to any matter set forth in Section 6.2,
either of the General Partners (such Partner herein referred to as a
"Buy-Out Offeror") shall have the right to make a written offer to buy (a
"Buy-Out Offer") all (but not less than all) of the Partnership Interests
of the other General Partner and its Affiliates. The Buy-Out Offer shall be
at a price determined in accordance with the Appraisal Procedure (the
"Aggregate Purchase Price") which shall be payment for all of the assets,
liabilities and business of the Partnership, and the amount to be paid to
any selling Partner under this Section 11.2 shall be equal to the amount
such selling Partner would receive if all the assets, liabilities and
business of the Partnership were sold at the Aggregate Purchase Price on
the date the Buy-Out Offer was made and the Partnership were then
immediately dissolved in accordance with Section 10.2. The General Partners
hereby agree to use their best efforts to cause the Appraisal Procedure to
be completed within ninety (90) days after it has been initiated. The
General Partner receiving a Buy-Out Offer (a "Buy-Out Offeree") shall,
within 30 days of the determination of the Aggregate Purchase Price in
accordance with the Appraisal Procedure, either (a) accept the Buy-Out
Offer on behalf of itself and its Affiliates who own Partnership Interests
or (b) agree to purchase all (but not less than all) of the Partnership
Interests of the Buy-Out Offeror and its Affiliates upon the foregoing
terms and using the same Aggregate Purchase Price as was determined in
accordance with the Appraisal Procedure to determine the amount owing to
each selling Partner. The failure of any Partner receiving a Buy-Out Offer
to respond to such Buy-Out Offer within such 30-day deadline of its receipt
thereof, either agreeing to accept such Buy-Out Offer on behalf of itself
and its Affiliates or by agreeing to purchase all (but not less than all)
of the Partnership Interest of the Buy-Out Offeror and its Affiliates on
the foregoing terms, shall constitute (without any further action by the
Buy-Out Offeror, the receiving General Partner or any other Partner) an
irrevocable acceptance of such Buy-Out Offer by the receiving General
Partner binding on and enforceable against such General Partner and its
Affiliates.
Any purchase of Partnership Interests required pursuant to subsection
11.2(a) shall be made through the redemption of such Partnership Interests
by the Partnership; provided, however, that if such redemption is
prohibited by the Project Loan Documents, such purchase shall be made
directly by the purchasing General Partner. The closing date for any such
purchase shall be on the date set by the purchasing General Partner which
may be at any time within 180 days of the acceptance of a Buy-Out Offer or
agreement to purchase, as the case may be. In the event the purchasing
General Partner does not close the purchase within such 180-day period,
then the purchasing General Partner's right to purchase Partnership
Interests under Section 11.2(a) shall at the
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close of business on such 180th day terminate and the other General Partner
shall thereafter have the right to purchase the Partnership Interests of
the purchasing General Partner and its Affiliates at a price determined by
using the same Aggregate Purchase Price and such other General Partner
shall have 180 days immediately following the expiration of the inital 180
day period in which to close such purchase. The price to be paid to each
selling Partner shall be paid by the purchasing General Partner in
immediately available funds at the closing.
ARTICLE
MISCELLANEOUS
Distributions and Notices. Distributions hereunder shall be sent, and
notices required or permitted hereunder shall be in writing and shall be sent,
to the address set forth for each Partner in signature pages hereof, or at such
other address as may be supplied by written notice given in conformity with the
terms of this Section 12.1. Notices to the Management Committee shall be sent
care of all Partners who have a right to designate members of the Management
Committee. Any notice required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given and/or delivered (a) when
personally delivered, (b) when sent by telefax and receipt is acknowledged via
telephone or otherwise as confirmation of such receipt but only if the sender
obtains a printed confirmation of the receipt by the recipient of the entire
document, (c) the second day following the day on which the same has been
delivered prepaid to a reputable overnight courier service providing proof of
receipt but only if sent for next business day delivery or (d) five (5) days
after the deposit in the United States mails, registered or certified, return
receipt requested and postage prepaid, in each case addressed to the party to
whom such notice is to be given at the address set forth on the signature pages
hereof), or at the most recent address(es) specified by written notice given to
the other party in the same manner provided in this section; provided, however,
that notice of an address change shall not be effective until actually received.
Distributions shall be deemed given only upon the receipt thereof by a Partner.
Disclosure Obligations. The Partnership hereby covenants and agrees for the
benefit of Cogentrix GP and VF Delaware that it shall (a) notify Cogentrix GP
and VF Delaware of any material fact necessary in order to make any of the
representations, warranties or other statements made by it in the Project
Documents, or any other written statement provided to Cogentrix GP or VF
Delaware not misleading and (b) disclose in writing to Cogentrix GP and VF
Delaware any fact which materially adversely affects, or which could reasonably
be expected in the future to materially adversely affect Cogentrix GP, VF
Delaware or the Project, in each case under clause (a) or (b) above promptly
upon receiving knowledge of any such fact.
Successors and Assigns. Subject to the restrictions on transfer set forth
herein, this Agreement, and, each and every provision hereof, shall be binding
upon and shall inure to the benefit of the Partners, their respective
successors, successors-in-title, heirs and assigns, and each and every
successor-in-interest to any Partner, whether such successor acquires such
interest by way of gift, purchase, foreclosure or by any other method, shall
hold such interest subject to all of the terms and provisions of this Agreement.
- 35 -
Amendments. This Agreement may not be released, discharged, amended or
modified in any manner except by an instrument in writing signed by a duly
authorized officer of each party hereto.
Partition. The Partners hereby agree that no Partner, nor any
successor-in-interest to any Partner, shall have the right while this Agreement
remains in effect to have the property of the Partnership partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property of the Partnership partitioned, and each Partner, on behalf of itself,
its successors, representatives, heirs and assigns, hereby waives any such
right. It is the intention of the Partners that during the term of this
Agreement, the rights of the Partners and their successors-in-interest, as among
themselves, shall be governed by the terms of this Agreement, and that the right
of any Partner or successor-in-interest to assign, transfer, sell or otherwise
dispose of its interest in the Partnership shall be subject to the limitations
and restrictions of this Agreement.
No Waiver. No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed by the party charged with such
waiver. The failure of any Partner to insist upon strict performance of a
covenant hereunder or of any obligation hereunder, irrespective of the length of
time for which such failure continues, shall not be a waiver of such Partner's
right subsequently to demand strict compliance. No consent or waiver to or of
any branch or default in the performance of any obligation hereunder, shall
constitute a consent or waiver to or of any other breach or default in the
performance of the same or any other obligation hereunder.
Entire Agreement. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings, promises and
representations made by either party to the other concerning the subject matter
hereof and the terms applicable hereto.
Captions. Titles or captions of articles, sections and subsections
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way are intended to define, limit, extend or describe the
scope of this Agreement or the intent of any provision hereof.
Counterparts. This Agreement may be executed in any number of counterparts,
all of which together shall for all purposes constitute one Agreement, binding
upon the Partners notwithstanding that all Partners may not have signed the same
counterpart.
Applicable Law. This Agreement shall be deemed to have been entered into
and shall be construed and enforced in accordance with the laws of the State of
Delaware as applied to contracts made and to be performed entirely within
Delaware.
Severability. If any provision of this Agreement is or becomes or is deemed
invalid, illegal or unenforceable in any jurisdiction, (a) such provision shall
be construed or deemed amended to conform to applicable laws so as to be valid
and enforceable, or, if it cannot be so construed or deemed amended without
materially altering the intention of the parties hereto, it shall be stricken,
(b) the validity, legality and enforceability of such provision will not
- 36 -
in any way be affected or impaired thereby in any other jurisdiction and (c) the
remainder of this Agreement shall remain in full force and effect.
[This space intentionally left blank.]
- 37 -
IN WITNESS WHEREOF, the Partners have executed this Agreement as of the
date first above mentioned.
COGENTRIX OF FORT ▇▇▇▇▇ I, INC.,
as General Partner
By
-----------------------------------
Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President - Finance
and Treasurer
Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Address for Distributions:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
VILLAGE FARMS OF DELAWARE, L.L.C.,
as General Partner
By: Agro Power Development, Inc.,
Managing Member
By
--------------------------
Printed Name: J. ▇▇▇▇▇ ▇▇▇▇
Title: Vice President
Address for Notices:
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Address for Distributions:
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
- 38 -
COGENTRIX OF FORT DAVIS II, INC.,
as Limited Partner
By
-----------------------------------
Printed Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President - Finance
and Treasurer
Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Address for Distributions:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Treasurer
VILLAGE FARMS, L.L.C.
By: Agro Power Development, Inc.,
Managing Member
By
--------------------------
Printed Name: J. ▇▇▇▇▇ ▇▇▇▇
Title: Vice President
Address for Notices:
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Address for Distributions:
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
- 39 -
Schedule 1.1(a)
Calculation of Internal Rate of Return
Internal Rate of Return Calculation
The calculation of the Internal Rate of Return in connection with determining
the First Priority Return and Second Priority Return will be based upon the cash
inflows and cash outflows for Cogentrix GP and Cogentrix LP. The Internal Rate
of Return shall be computed utilizing Microsoft Excel software version 5.0. The
Internal Rate of Return shall be computed utilizing the @XIRR function in Excel.
For purposes of calculating the Internal Rate of Return, the cash inflows and
cash outflows to Cogentrix GP and Cogentrix LP shall consist solely of the
following:
Partner Contributions
All contributions made by Cogentrix GP and Cogentrix LP will be reflected
as a cash inflow as of the date such contribution was received by the
Partnership. Cogentrix GP and Cogentrix LP will be credited for a partner
contribution at any time such Partner funds cash into the Partnership. In
addition, to the extent Cogentrix Energy, Inc. or any of its Affiliates
funds cash directly into the Partnership or pays amounts to other persons
to fulfill obligations under the Partnership Agreement or any of the
Project Documents or Project Loan Documents or incurs costs or fees
associated with securing an obligation to make a contribution to the
Partnership, then such funding into the Partnership or such other payments
and/or such costs or fees will be deemed a capital contribution by
Cogentrix GP and Cogentrix LP as of the day on which such funding or
payment is made or such costs or fees are incurred.
Distributions to Partners
All cash distributions will be reflected as a cash outflow on a net
After-Tax basis (based on allocations of the Partnership's taxable income
(loss) in accordance with Section 4.1) as of the date such cash
distribution was received by the Partner. In addition, any construction
profits received by Cogentrix Energy, Inc. in excess of $400,000 shall be
considered a distribution to Cogentrix GP and Cogentrix LP (in an aggregate
amount equal to such excess) for purposes of the Internal Rate of Return
calculation.
The Internal Rate of Return calculation shall be performed by Agro Power as of
the end of each calendar quarter and is subject to the approval of Cogentrix GP
and Cogentrix LP.
All capitalized terms used in this Schedule 1.1(a) and not otherwise defined
herein shall have the meaning set forth in this Agreement.
Schedule 1.1(c)
Project Documents
1. The Sales Contract dated as of February 8, 1996 by and between Agro Power
which has assigned its interest therein to the Partnership, and Southwest
Texas Municipal Gas Corporation.
2. The Letter Agreement dated January 15, 1996, as amended by the Addendum to
Letter Agreement, by and between Transok, Inc. and Agro Power which has
assigned its interest therein to the Partnerships.
Schedule 6.3
Initial Officers of the Partnership
Name Title
---- -----
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ President
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Vice President
J. ▇▇▇▇▇ ▇▇▇▇ Vice President
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Treasurer
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Secretary
▇▇▇▇ ▇. ▇▇▇▇▇▇ Assistant Secretary
