Exhibit 3.1
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TC PIPELINES, LP
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Definitions............................................................ 1
Section 1.2 Construction........................................................... 16
ARTICLE II
ORGANIZATION
Section 2.1 Formation.............................................................. 16
Section 2.2 Name................................................................... 17
Section 2.3 Registered Office; Registered Agent; Principal Office; Other Offices... 17
Section 2.4 Purpose and Business................................................... 17
Section 2.5 Powers................................................................. 18
Section 2.6 Power of Attorney...................................................... 18
Section 2.7 Term................................................................... 19
Section 2.8 Title to Partnership Assets............................................ 19
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability................................................ 20
Section 3.2 Management of Business................................................. 20
Section 3.3 Outside Activities of the Limited Partners............................. 20
Section 3.4 Rights of Limited Partners............................................. 20
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP
INTERESTS; REDEMPTION OF PARTNERSHIP INTERESTS
Section 4.1 Certificates........................................................... 21
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates...................... 21
Section 4.3 Record Holders......................................................... 22
Section 4.4 Transfer Generally..................................................... 22
Section 4.5 Registration and Transfer of Limited Partner Interests................. 23
Section 4.6 Transfer of the General Partner's General Partner Interest............. 23
Section 4.7 Transfer of Incentive Distribution Rights.............................. 24
Section 4.8 Restrictions on Transfers.............................................. 24
Section 4.9 Citizenship Certificates; Non-citizen Assignees........................ 25
Section 4.10 Redemption of Partnership Interests of Non-citizen Assignees........... 26
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Organizational Contributions........................................... 27
Section 5.2 Contributions to the Partnership....................................... 27
Section 5.3 Contributions by Initial Limited Partners and Reimbursement of the
General Partner........................................................ 27
Section 5.4 Interest and Withdrawal................................................ 28
Section 5.5 Capital Accounts....................................................... 28
Section 5.6 Issuances of Additional Partnership Securities......................... 31
Section 5.7 Limitations on Issuance of Additional Partnership Securities........... 32
Section 5.8 Conversion of Subordinated Units....................................... 33
Section 5.9 Limited Preemptive Right............................................... 34
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Section 5.10 Splits and Combination................................................. 34
Section 5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests...... 35
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes............................... 35
Section 6.2 Allocations for Tax Purposes........................................... 41
Section 6.3 Requirement and Characterization of Distributions; Distributions to
Record Holders......................................................... 43
Section 6.4 Distributions of Available Cash from Operating Surplus................. 44
Section 6.5 Distributions of Available Cash from Capital Surplus................... 45
Section 6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution
Levels................................................................. 45
Section 6.7 Special Provisions Relating to the Holders of Subordinated Units....... 46
Section 6.8 Special Provisions Relating to the Holders of Incentive Distribution
Rights................................................................. 46
Section 6.9 Entity-Level Taxation.................................................. 47
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management............................................................. 47
Section 7.2 Certificate of Limited Partnership..................................... 49
Section 7.3 Restrictions on General Partner's Authority............................ 49
Section 7.4 Reimbursement of the General Partner................................... 50
Section 7.5 Outside Activities..................................................... 51
Section 7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the
General Partner........................................................ 52
Section 7.7 Indemnification........................................................ 53
Section 7.8 Liability of Indemnitees............................................... 54
Section 7.9 Resolution of Conflicts of Interest.................................... 55
Section 7.10 Other Matters Concerning the General Partner........................... 56
Section 7.11 Purchase or Sale of Partnership Securities............................. 57
Section 7.12 Registration Rights of the General Partner and its Affiliates.......... 57
Section 7.13 Reliance by Third Parties.............................................. 59
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting................................................. 59
Section 8.2 Fiscal Year............................................................ 60
Section 8.3 Reports................................................................ 60
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information............................................ 60
Section 9.2 Tax Elections.......................................................... 60
Section 9.3 Tax Controversies...................................................... 61
Section 9.4 Withholding............................................................ 61
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Initial Limited Partners.................................. 61
Section 10.2 Admission of Substituted Limited Partner............................... 61
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Section 10.3 Admission of Successor General Partner................................. 62
Section 10.4 Admission of Additional Limited Partners............................... 62
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership.......... 62
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner...................................... 62
Section 11.2 Removal of the General Partner......................................... 64
Section 11.3 Interest of Departing Partner and Successor General Partner............ 64
Section 11.4 Termination of Subordination Period, Conversion of Subordinated Units
and Extinguishment of Cumulative Common Unit Arrearages................ 65
Section 11.5 Withdrawal of Limited Partners......................................... 66
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution............................................................ 66
Section 12.2 Continuation of the Business of the Partnership After Dissolution...... 66
Section 12.3 Liquidator............................................................. 67
Section 12.4 Liquidation............................................................ 67
Section 12.5 Cancellation of Certificate of Limited Partnership..................... 68
Section 12.6 Return of Contributions................................................ 68
Section 12.7 Waiver of Partition.................................................... 68
Section 12.8 Capital Account Restoration............................................ 68
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
Section 13.1 Amendment to be Adopted Solely by the General Partner.................. 69
Section 13.2 Amendment Procedures................................................... 70
Section 13.3 Amendment Requirements................................................. 70
Section 13.4 Special Meetings....................................................... 71
Section 13.5 Notice of a Meeting.................................................... 71
Section 13.6 Record Date............................................................ 71
Section 13.7 Adjournment............................................................ 72
Section 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes............. 72
Section 13.9 Quorum................................................................. 72
Section 13.10 Conduct of a Meeting................................................... 73
Section 13.11 Action Without a Meeting............................................... 73
Section 13.12 Voting and Other Rights................................................ 73
ARTICLE XIV
MERGER
Section 14.1 Authority.............................................................. 74
Section 14.2 Procedure for Merger or Consolidation.................................. 74
Section 14.3 Approval by Limited Partners of Merger or Consolidation................ 75
Section 14.4 Certificate of Merger.................................................. 75
Section 14.5 Effect of Merger....................................................... 76
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Section 15.1 Right to Acquire Limited Partner Interests............................. 76
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ARTICLE XVI
GENERAL PROVISIONS
Section 16.1 Addresses and Notices.................................................. 78
Section 16.2 Further Action......................................................... 78
Section 16.3 Binding Effect......................................................... 78
Section 16.4 Integration............................................................ 78
Section 16.5 Creditors.............................................................. 78
Section 16.6 Waiver................................................................. 78
Section 16.7 Counterparts........................................................... 79
Section 16.8 Applicable Law......................................................... 79
Section 16.9 Invalidity of Provisions............................................... 79
Section 16.10 Consent of Partners.................................................... 79
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF TC PIPELINES, LP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TC
PIPELINES, LP dated as of May 28, 1999, is entered into by and among TC
PipeLines GP, Inc., a Delaware corporation, as the General Partner, and
TransCan Northern Ltd., a Delaware corporation, as the Organizational Limited
Partner, together with any other Persons who become Partners in the
Partnership or parties hereto as provided herein. In consideration of the
covenants, conditions and agreements contained herein, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ACQUISITION" means (a) any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or substantially all of the assets, properties or
business of another Person (or a division or line of business of such Person)
for the purpose of increasing the operating capacityor revenues of the
Partnership Group from the operating capacity or revenues of the Partnership
Group existing immediately prior to such transaction, (b) any similar
transaction entered into by a JV Entity as a result of which a Group Member
becomes obligated to make a capital contribution or similar payment to such JV
Entity; and (c) any similar transaction entered into by a JV Entity as a result
of which a Group Member is requested, but not obligated, to make a capital
contribution or similar payment to such JV Entity and such Group Member
reasonably believes such capital contribution or similar payment to be necessary
to protect or enhance its investment in the JV Entity.
"ADDITIONAL BOOK BASIS" means the portion of any remaining Carrying Value of
an Adjusted Property that is attributable to positive adjustments made to such
Carrying Value as a result of Book-Up Events. For purposes of determining the
extent that Carrying Value constitutes Additional Book Basis:
(i) Any negative adjustment made to the Carrying Value of an Adjusted
Property as a result of either a Book-Down Event or a Book-Up Event
shall first be deemed to offset or decrease that portion of the
Carrying Value of such Adjusted Property that is attributable to any
prior positive adjustments made thereto pursuant to a Book-Up Event or
Book-Down Event.
(ii) If Carrying Value that constitutes Additional Book Basis is reduced as
a result of a Book-Down Event and the Carrying Value of other property
is increased as a result of such Book-Down Event, an allocable portion
of any such increase in Carrying Value shall be treated as Additional
Book Basis; provided that the amount treated as Additional Book Basis
pursuant hereto as a result of such Book-Down Event shall not exceed
the amount by which the Aggregate Remaining Net Positive Adjustments
after such Book-Down Event exceeds the remaining Additional Book Basis
attributable to all of the Partnership's Adjusted Property after such
Book-Down Event (determined without regard to the application of this
clause (ii) to such Book-Down Event).
"ADDITIONAL BOOK BASIS DERIVATIVE ITEMS" means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis. To the extent
that the Additional Book Basis attributable to all of the Partnership's Adjusted
Property as of the beginning of any taxable period
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exceeds the Aggregate Remaining Net Positive Adjustments as of the beginning of
such period (the "EXCESS ADDITIONAL BOOK BASIS"), the Additional Book Basis
Derivative Items for such period shall be reduced by the amount that bears the
same ratio to the amount of Additional Book Basis Derivative Items determined
without regard to this sentence as the Excess Additional Book Basis bears to the
Additional Book Basis as of the beginning of such period.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the Partnership as a
Limited Partner pursuant to Section 10.4 and who is shown as such on the books
and records of the Partnership.
"ADJUSTED CAPITAL ACCOUNT" means the Capital Account maintained for each
Partner as of the end of each taxable period of the Partnership, (a) increased
by any amounts that such Partner is obligated to restore under the standards set
by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such period, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such period, are reasonably expected to be made to such
Partner in subsequent years in accordance with the terms of this Agreement or
otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i)
or 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The
"Adjusted Capital Account" of a Partner in respect of a General Partner
Interest, a Common Unit, a Subordinated Unit or an Incentive Distribution Right
or any other specified interest in the Partnership shall be the amount which
such Adjusted Capital Account would be if such General Partner Interest, Common
Unit, Subordinated Unit, Incentive Distribution Right or other interest in the
Partnership were the only interest in the Partnership held by a Partner from and
after the date on which such General Partner Interest, Common Unit, Subordinated
Unit, Incentive Distribution Right or other interest was first issued.
"ADJUSTED OPERATING SURPLUS" means, with respect to any period, Operating
Surplus generated during such period (a) less (i) any net increase in Working
Capital Borrowings during such period and (ii) any net reduction in cash
reserves for Operating Expenditures during such period not relating to an
Operating Expenditure made during such period, and (b) plus (i) any net decrease
in Working Capital Borrowings during such period and (ii) any net increase in
cash reserves for Operating Expenditures during such period required by any debt
instrument for the repayment of principal, interest or premium. Adjusted
Operating Surplus does not include that portion of Operating Surplus included in
clause (a)(i) of the definition of Operating Surplus.
"ADJUSTED PROPERTY" means any property the Carrying Value of which has been
adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "CONTROL" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"AGGREGATE REMAINING NET POSITIVE ADJUSTMENTS" means, as of the end of any
taxable period of the Partnership, the sum of the Remaining Net Positive
Adjustments of all the Partners.
"AGREED ALLOCATION" means any allocation, other than a Required Allocation,
of an item of income, gain, loss or deduction pursuant to the provisions of
Section 6.1, including, without
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limitation, a Curative Allocation (if appropriate to the context in which the
term "AGREED ALLOCATION" is used).
"AGREED VALUE" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the General Partner using such reasonable method of valuation as it may
adopt. The General Partner shall, in its discretion, use such method as it deems
reasonable and appropriate to allocate the aggregate Agreed Value of Contributed
Properties contributed to the Partnership in a single or integrated transaction
among each separate property on a basis proportional to the fair market value of
each Contributed Property.
"AGREEMENT" means this Amended and Restated Agreement of Limited Partnership
of TC PipeLines, LP, as it may be amended, supplemented or restated from time to
time.
"ASSIGNEE" means a Non-citizen Assignee or a Person to whom one or more
Limited Partner Interests have been transferred in a manner permitted under this
Agreement and who has executed and delivered a Transfer Application as required
by this Agreement, but who has not been admitted as a Substituted Limited
Partner.
"ASSOCIATE" means, when used to indicate a relationship with any Person, (a)
any corporation or organization of which such Person is a director, officer or
partner or is, directly or indirectly, the owner of 20% or more of any class of
voting stock or other voting interest; (b) any trust or other estate in which
such Person has at least a 20% beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same
principal residence as such Person.
"AVAILABLE CASH" means, with respect to any Quarter ending prior to the
Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the Partnership on hand
at the end of such Quarter, and (ii) all additional cash and cash
equivalents of the Partnership on hand on the date of determination of
Available Cash with respect to such Quarter resulting from Working
Capital Borrowings made subsequent to the end of such Quarter, less
(b) the amount of any cash reserves that is necessary or appropriate in the
reasonable discretion of the General Partner to (i) provide for the
proper conduct of the business of the Partnership (including reserves for
future capital expenditures and for anticipated future credit needs of
the Partnership Group or any JV Entity) subsequent to such Quarter, (ii)
comply with applicable law or any loan agreement, security agreement,
mortgage, debt instrument or other agreement or obligation to which any
Group Member is a party or by which it is bound or its assets are subject
or (iii) provide funds for distributions under Section 6.4 or 6.5 in
respect of any one or more of the next four Quarters; provided, however,
that the General Partner may not establish cash reserves pursuant to
(iii) above if the effect of such reserves would be that the Partnership
is unable to distribute the Minimum Quarterly Distribution on all Common
Units, plus any Cumulative Common Unit Arrearage on all Common Units,
with respect to such Quarter; and, provided further, that disbursements
made by the Partnership or cash reserves established, increased or
reduced after the end of such Quarter but on or before the date of
determination of Available Cash with respect to such Quarter shall be
deemed to have been made, established, increased or reduced, for purposes
of determining Available Cash, within such Quarter if the General Partner
so determines.
Notwithstanding the foregoing, "AVAILABLE CASH" with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.
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"BOOK BASIS DERIVATIVE ITEMS" means any item of income, deduction, gain or
loss included in the determination of Net Income or Net Loss that is computed
with reference to the Carrying Value of an Adjusted Property (e.g.,
depreciation, depletion, gain or loss with respect to an Adjusted Property).
"BOOK-DOWN EVENT" means an event which triggers a negative adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).
"BOOK-TAX DISPARITY" means with respect to any item of Contributed Property
or Adjusted Property, as of the date of any determination, the difference
between the Carrying Value of such Contributed Property or Adjusted Property and
the adjusted basis thereof for federal income tax purposes as of such date. A
Partner's share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner's Capital Account balance as maintained pursuant to Section
5.5 and the hypothetical balance of such Partner's Capital Account computed as
if it had been maintained strictly in accordance with federal income tax
accounting principles.
"BOOK-UP EVENT" means an event which triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).
"BUSINESS DAY" means Monday through Friday of each week, except that a legal
holiday recognized as such by the government of the United States of America,
the State of New York, Canada or the Province of Alberta shall not be regarded
as a Business Day.
"CAPITAL ACCOUNT" means the capital account maintained for a Partner
pursuant to Section 5.5. The "CAPITAL ACCOUNT" of a Partner in respect of a
General Partner Interest, a Common Unit, a Subordinated Unit, an Incentive
Distribution Right or any other Partnership Interest shall be the amount which
such Capital Account would be if such General Partner Interest, Common Unit,
Subordinated Unit, Incentive Distribution Right or other Partnership Interest
were the only interest in the Partnership held by a Partner from and after the
date on which such General Partner Interest, Common Unit, Subordinated Unit,
Incentive Distribution Right or other Partnership Interest was first issued.
"CAPITAL CONTRIBUTION" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to this Agreement or the Contribution and Conveyance Agreement.
"CAPITAL IMPROVEMENT" means any (a) addition or improvement to the capital
assets owned by any Group Member, (b) acquisition of existing, or the
construction of new, capital assets (including, without limitation, pipeline
systems, terminalling and storage facilities and related assets), in each case
made to increase the operating capacity or revenues of the Partnership Group
from the operating capacity or revenues of the Partnership Group existing
immediately prior to such addition, improvement, acquisition or construction,
(c) any similar addition, improvement, acquisition or construction by a JV
Entity as a result of which a Group Member becomes obligated to make a capital
contribution or similar payment to such JV Entity; and (d) any similar addition,
improvement, acquisition or construction by a JV Entity as a result of which a
Group Member is requested, but not obligated, to make a capital contribution or
similar payment to such JV Entity and such Group Member reasonably believes such
capital contribution or similar payment to be necessary to protect or enhance
its investment in the JV Entity.
"CAPITAL SURPLUS" has the meaning assigned to such term in Section 6.3(a).
"CARRYING VALUE" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' Capital
Accounts in respect of such Contributed Property, and
4
(b) with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
"CAUSE" means a court of competent jurisdiction has entered a final,
non-appealable judgment finding the General Partner liable for actual fraud,
gross negligence or willful or wanton misconduct in its capacity as general
partner of the Partnership.
"CERTIFICATE" means a certificate (i) substantially in the form of Exhibit A
to this Agreement, (ii) issued in global form in accordance with the rules and
regulations of the Depositary or (iii) in such other form as may be adopted by
the General Partner in its discretion, issued by the Partnership evidencing
ownership of one or more Common Units or a certificate, in such form as may be
adopted by the General Partner in its discretion, issued by the Partnership
evidencing ownership of one or more other Partnership Securities.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Delaware as referenced in Section 2.1, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"CITIZENSHIP CERTIFICATION" means a properly completed certificate in such
form as may be specified by the General Partner by which an Assignee or a
Limited Partner certifies that he (and if he is a nominee holding for the
account of another Person, that to the best of his knowledge such other Person)
is an Eligible Citizen.
"CLAIM" has the meaning assigned to such term in Section 7.12(c).
"CLOSING DATE" means the first date on which Common Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"CLOSING PRICE" has the meaning assigned to such term in Section 15.1(a).
"CODE" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
successor law.
"COMBINED INTEREST" has the meaning assigned to such term in Section
11.3(a).
"COMMISSION" means the United States Securities and Exchange Commission.
"COMMON UNIT" means a Unit representing a fractional part of the Partnership
Interests of all Limited Partners and Assignees other than holders of Incentive
Distribution Rights) and having the rights and obligations specified with
respect to Common Units in this Agreement. The term "COMMON UNIT" does not refer
to a Subordinated Unit prior to its conversion into a Common Unit pursuant to
the terms hereof.
"COMMON UNIT ARREARAGE" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, the excess, if any,
of (a) the Minimum Quarterly Distribution with respect to a Common Unit in
respect of such Quarter over (b) the sum of all Available Cash distributed with
respect to a Common Unit in respect of such Quarter pursuant to Section
6.4(a)(i).
"CONFLICTS COMMITTEE" means a committee of the Board of Directors of the
General Partner composed entirely of two or more directors who are neither
security holders, officers nor employees of the General Partner nor officers or
employees of any Affiliate of the General Partner.
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"CONTRIBUTED PROPERTY" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership (or deemed contributed to a new partnership on termination of the
Partnership pursuant to Section 708 of the Code). Once the Carrying Value of a
Contributed Property is adjusted pursuant to Section 5.5(d), such property shall
no longer constitute a Contributed Property, but shall be deemed an Adjusted
Property.
"CONTRIBUTION AND CONVEYANCE AGREEMENT" means that certain Contribution,
Conveyance and Assumption Agreement, dated as of the Closing Date, among the
General Partner, the Partnership, the Intermediate Partnership, TransCan
Northern, TransCanada Border Pipeline and certain other parties, together with
the additional conveyance documents and instruments contemplated or referenced
thereunder.
"CUMULATIVE COMMON UNIT ARREARAGE" means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters within the Subordination Period
ending on or before the last day of such Quarter over (b) the sum of any
distributions theretofore made pursuant to Section 6.4(a)(ii) and the second
sentence of Section 6.5 with respect to an Initial Common Unit (including any
distributions to be made in respect of the last of such Quarters).
"CURATIVE ALLOCATION" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
"CURRENT MARKET PRICE" has the meaning assigned to such term in Section
15.1(a).
"DELAWARE ACT" means the Delaware Revised Uniform Limited Partnership Act, 6
Del C. Section 17-101, et seq., as amended, supplemented or restated from time
to time, and any successor to such statute.
"DEPARTING PARTNER" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.
"DEPOSITARY" means, with respect to any Units issued in global form, The
Depository Trust Company and its successors and permitted assigns.
"ECONOMIC RISK OF LOSS" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"ELIGIBLE CITIZEN" means a Person qualified to own interests in real
property in jurisdictions in which any Group Member or JV Entity does business
or proposes to do business from time to time, and whose status as a Limited
Partner or Assignee does not or would not subject such Group Member or JV Entity
to a significant risk of cancellation or forfeiture of any of its properties or
any interest therein.
"EVENT OF WITHDRAWAL" has the meaning assigned to such term in Section
11.1(a).
"FINAL SUBORDINATED UNITS" has the meaning assigned to such term in Section
6.1(d)(x).
"FIRST LIQUIDATION TARGET AMOUNT" has the meaning assigned to such term in
Section 6.1(c)(i)(D).
"FIRST TARGET DISTRIBUTION" means $0.5275 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on June 30,
1999, it means the product of $0.5275 multiplied by a fraction of which the
numerator is the number of days in such period, and of which the denominator is
91), subject to adjustment in accordance with Sections 6.6 and 6.9.
"GENERAL PARTNER" means TC PipeLines GP, Inc., a Delaware corporation, and
its successors and permitted assigns as general partner of the Partnership.
6
"GENERAL PARTNER INTEREST" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it), and includes any and all
benefits to which the General Partner is entitled as provided in this Agreement,
together with all obligations of the General Partner to comply with the terms
and provisions of this Agreement.
"GROUP" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent given to such Person in response to a proxy or consent solicitation made
to 10 or more Persons) or disposing of any Partnership Securities with any other
Person that beneficially owns, or whose Affiliates or Associates beneficially
own, directly or indirectly, Partnership Securities.
"GROUP MEMBER" means a member of the Partnership Group.
"HOLDER" as used in Section 7.12, has the meaning assigned to such term in
Section 7.12(a).
"INCENTIVE DISTRIBUTION RIGHT" means a non-voting Limited Partner Interest
initially held by the General Partner, which Partnership Interest will confer
upon the holder thereof only the rights and obligations specifically provided in
this Agreement with respect to Incentive Distribution Rights (and no other
rights otherwise available to or other obligations of a holder of a Partnership
Interest). Notwithstanding anything in this Agreement to the contrary, the
holder of an Incentive Distribution Right shall not be entitled to vote such
Incentive Distribution Right on any Partnership matter except as may otherwise
be required by law.
"INCENTIVE DISTRIBUTIONS" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Sections 6.4(a)(iv),
(v) and (vi) and 6.4(b)(ii), (iii) and (iv).
"INDEMNIFIED PERSONS" has the meaning assigned to such term in Section
7.12(c).
"INDEMNITEE" means (a) the General Partner, (b) any Departing Partner, (c)
any Person who is or was an Affiliate of the General Partner or any Departing
Partner, (d) any Person who is or was a member, partner, officer, director,
employee, agent or trustee of any Group Member, the General Partner or any
Departing Partner or any Affiliate of any Group Member, the General Partner or
any Departing Partner, and (e) any Person who is or was serving at the request
of the General Partner or any Departing Partner or any Affiliate of the General
Partner or any Departing Partner as an officer, director, employee, member,
partner, agent or trustee of another Person; provided, that a Person shall not
be an Indemnitee by reason of providing, on a fee-for-services basis, trustee,
fiduciary or custodial services.
"INITIAL COMMON UNITS" means the Common Units sold in the Initial Offering.
"INITIAL LIMITED PARTNERS" means TC PipeLines GP, Inc. (with respect to the
Common Units, Subordinated Units and the Incentive Distribution Rights received
by it pursuant to Section 5.2) and the Underwriters, in each case upon being
admitted to the Partnership in accordance with Section 10.1.
"INITIAL OFFERING" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
7
"INITIAL UNIT PRICE" means (a) with respect to the Common Units and the
Subordinated Units, the initial public offering price per Common Unit at which
the Underwriters offered the Common Units to the public for sale as set forth on
the cover page of the prospectus included as part of the Registration Statement
and first issued at or after the time the Registration Statement first became
effective or (b) with respect to any other class or series of Units, the price
per Unit at which such class or series of Units is initially sold by the
Partnership, as determined by the General Partner, in each case adjusted as the
General Partner determines to be appropriate to give effect to any distribution,
subdivision or combination of Units.
"INTERIM CAPITAL TRANSACTIONS" means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness and sales of debt securities (other than Working Capital
Borrowings and other than for items purchased on open account in the ordinary
course of business) by any Group Member or JV Entity; (b) sales of equity
interests by any Group Member or JV Entity (other than the Common Units sold to
the Underwriters pursuant to the exercise of their over-allotment option); and
(c) sales, exchanges or other voluntary or involuntary dispositions of any
assets of any Group Member or JV Entity other than (i) sales, exchanges or other
dispositions of inventory, accounts receivable and other assets in the ordinary
course of business, and (ii) sales, exchanges or other dispositions of assets as
part of normal retirements or replacements.
"INTERMEDIATE PARTNERSHIP" means TC PipeLines Intermediate Limited
Partnership, a Delaware limited partnership, and any successors thereto.
"INTERMEDIATE PARTNERSHIP AGREEMENT" means the Agreement of Limited
Partnership of TC PipeLines Intermediate Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"ISSUE PRICE" means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.
"JV ENTITY" means a Person other than an individual in which a Group Member
holds a interest but which does not constitute a Subsidiary, including, without
limitation, Northern Border Pipeline.
"LIMITED PARTNER" means, unless the context otherwise requires, (a) the
Organizational Limited Partner prior to its withdrawal from the Partnership,
each Initial Limited Partner, each Substituted Limited Partner, each Additional
Limited Partner and any Partner upon the change of its status from General
Partner to Limited Partner pursuant to Section 11.3 or (b) solely for purposes
of Articles V, VI, VII and IX and Sections 12.3 and 12.4, each Assignee;
provided, however, that when the term "LIMITED PARTNER" is used herein in the
context of any vote or other approval, including without limitation Articles
XIII and XIV, such term shall not, solely for such purpose, include any holder
of an Incentive Distribution Right except as may otherwise be required by law.
"LIMITED PARTNER INTEREST" means the ownership interest of a Limited Partner
or Assignee in the Partnership, which may be evidenced by Common Units,
Subordinated Units, Incentive Distribution Rights or other Partnership
Securities or a combination thereof or interest therein, and includes any and
all benefits to which such Limited Partner or Assignee is entitled as provided
in this Agreement, together with all obligations of such Limited Partner or
Assignee to comply with the terms and provisions of this Agreement; provided,
however, that when the term "LIMITED PARTNER INTEREST" is used herein in the
context of any vote or other approval, including without limitation Articles
XIII and XIV, such term shall not, solely for such purpose, include any holder
of an Incentive Distribution Right except as may otherwise be required by law.
"LIQUIDATION DATE" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the holders of Outstanding Units have the
8
right to elect to reconstitute the Partnership and continue its business has
expired without such an election being made, and (b) in the case of any other
event giving rise to the dissolution of the Partnership, the date on which such
event occurs.
"LIQUIDATOR" means one or more Persons selected by the General Partner to
perform the functions described in Section 12.3 as liquidating trustee of the
Partnership within the meaning of the Delaware Act.
"MERGER AGREEMENT" has the meaning assigned to such term in Section 14.1.
"MINIMUM QUARTERLY DISTRIBUTION" means $0.45 per Unit per Quarter (or with
respect to the period commencing on the Closing Date and ending on June 30,
1999, it means the product of $0.45 multiplied by a fraction of which the
numerator is the number of days in such period and of which the denominator is
91), subject to adjustment in accordance with Sections 6.6 and 6.9.
"NATIONAL SECURITIES EXCHANGE" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such
statute, or the Nasdaq Stock Market or any successor thereto.
"NET AGREED VALUE" means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any liabilities either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the time
of distribution, in either case, as determined under Section 752 of the Code.
"NET INCOME" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable period over the Partnership's items of loss and deduction (other
than those items taken into account in the computation of Net Termination Gain
or Net Termination Loss) for such taxable period. The items included in the
calculation of Net Income shall be determined in accordance with Section 5.5(b)
and shall not include any items specially allocated under Section 6.1(d);
provided that the determination of the items that have been specially allocated
under Section 6.1(d) shall be made as if Section 6.1(d)(xii) were not in this
Agreement.
"NET LOSS" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable period over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable period. The items included in the calculation
of Net Loss shall be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section 6.1(d); provided that the
determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this Agreement.
"NET POSITIVE ADJUSTMENTS" means, with respect to any Partner, the excess,
if any, of the total positive adjustments over the total negative adjustments
made to the Capital Account of such Partner pursuant to Book-Up Events and
Book-Down Events.
"NET TERMINATION GAIN" means, for any taxable period, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Gain shall be determined in accordance with
9
Section 5.5(b) and shall not include any items of income, gain, loss or
deduction specially allocated under Section 6.1(d).
"NET TERMINATION LOSS" means, for any taxable period, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Loss shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain, loss or deduction specially allocated
under Section 6.1(d).
"NON-CITIZEN ASSIGNEE" means a Person whom the General Partner has
determined in its discretion does not constitute an Eligible Citizen and as to
whose Partnership Interest the General Partner has become the Substituted
Limited Partner, pursuant to Section 4.9.
"NONRECOURSE BUILT-IN GAIN" means with respect to any Contributed Properties
or Adjusted Properties that are subject to a mortgage, pledge or other lien
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and
6.2(b)(iii) if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
"NONRECOURSE DEDUCTIONS" means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in accordance
with the principles of Treasury Regulation Section 1.704-2(b), are attributable
to a Nonrecourse Liability.
"NONRECOURSE LIABILITY" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
"NORTHERN BORDER PIPELINE" means Northern Border Pipeline Company, a Texas
general partnership.
"NOTICE OF ELECTION TO PURCHASE" has the meaning assigned to such term in
Section 15.1(b).
"OPERATING EXPENDITURES" means all Partnership expenditures, including, but
not limited to, operating expenses, taxes, reimbursements of the General
Partner, debt service payments, and capital expenditures, subject to the
following:
(a) Payments (including prepayments) of principal of and premium on
indebtedness shall not be an Operating Expenditure if the payment is (i)
required in connection with the sale or other disposition of assets or
(ii) made in connection with the refinancing or refunding of indebtedness
with the proceeds from new indebtedness or from the sale of equity
interests. For purposes of the foregoing, at the election and in the
reasonable discretion of the General Partner, any payment of principal or
premium shall be deemed to be refunded or refinanced by any indebtedness
incurred or to be incurred by the Partnership within 180 days before or
after such payment to the extent of the principal amount of such
indebtedness.
(b) Operating Expenditures shall not include (i) capital expenditures made
for Acquisitions or for Capital Improvements, (ii) payment of transaction
expenses relating to Interim Capital Transactions or (iii) distributions
to Partners. Where capital expenditures are made in part for Acquisitions
or for Capital Improvements and in part for other purposes, the General
Partner's good faith allocation between the amounts paid for each shall
be conclusive.
"OPERATING SURPLUS" means, with respect to any period ending prior to the
Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of (i) $20 million plus all cash and cash equivalents of the
Partnership on hand as of the close of business on the Closing Date, (ii)
all cash receipts of the Partnership for the period beginning on the
Closing Date and ending with the last day of such period, other than cash
receipts from Interim Capital Transactions (except to the extent
specified in
10
Section 6.5) and (iii) all cash receipts of the Partnership after the end
of such period but on or before the date of determination of Operating
Surplus with respect to such period resulting from Working Capital
Borrowings, less
(b) the sum of (i) Operating Expenditures for the period beginning on the
Closing Date and ending with the last day of such period and (ii) the
amount of cash reserves that is necessary or advisable in the reasonable
discretion of the General Partner to provide funds for future Operating
Expenditures; provided, however, that disbursements made (including
contributions to a Group Member or disbursements on behalf of a Group
Member) or cash reserves established, increased or reduced after the end
of such period but on or before the date of determination of Available
Cash with respect to such period shall be deemed to have been made,
established, increased or reduced, for purposes of determining Operating
Surplus, within such period if the General Partner so determines.
Notwithstanding the foregoing, "OPERATING SURPLUS" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
"OPINION OF COUNSEL" means a written opinion of counsel (who may be regular
counsel to the Partnership or the General Partner or any of its Affiliates)
acceptable to the General Partner in its reasonable discretion.
"ORGANIZATIONAL LIMITED PARTNER" means TransCan Northern in its capacity as
the organizational limited partner of the Partnership pursuant to this
Agreement.
"OUTSTANDING" means, with respect to Partnership Securities, all Partnership
Securities that are issued by the Partnership and reflected as outstanding on
the Partnership's books and records as of the date of determination; provided,
however, that if at any time any Person or Group (other than the General Partner
or its Affiliates) beneficially owns 20% or more of any Outstanding Partnership
Securities of any class then Outstanding, all Partnership Securities owned by
such Person or Group shall not be voted on any matter and shall not be
considered to be Outstanding when sending notices of a meeting of Limited
Partners to vote on any matter (unless otherwise required by law), calculating
required votes, determining the presence of a quorum or for other similar
purposes under this Agreement, except that Common Units so owned shall be
considered to be Outstanding for purposes of Section 11.1(b)(iv) (such Common
Units shall not, however, be treated as a separate class of Partnership
Securities for purposes of this Agreement); provided, further, that the
foregoing limitation shall not apply (i) to any Person or Group who acquired 20%
or more of any Outstanding Partnership Securities of any class then Outstanding
directly from the General Partner or its Affiliates or (ii) to any Person or
Group who acquired 20% or more of any Outstanding Partnership Securities of any
class then Outstanding directly or indirectly from a Person or Group described
in clause (i) provided that the General Partner shall have notified such Person
or Group in writing that such limitation shall not apply.
"OVER-ALLOTMENT OPTION" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.
"PARITY UNITS" means Common Units and all other Units having rights to
distributions or in liquidation ranking on a parity with the Common Units.
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"PARTNER NONRECOURSE DEDUCTIONS" means any and all items of loss, deduction
or expenditure (including, without limitation, any expenditure described in
Section 705(a)(2)(B) of the Code) that, in
11
accordance with the principles of Treasury Regulation Section 1.704-2(i), are
attributable to a Partner Nonrecourse Debt.
"PARTNERS" means the General Partner and the Limited Partners.
"PARTNERSHIP" means TC PipeLines, LP, a Delaware limited partnership, and
any successors thereto.
"PARTNERSHIP GROUP" means the Partnership, the Intermediate Partnership and
any Subsidiary of any such entity, treated as a single consolidated entity.
"PARTNERSHIP INTEREST" means an interest in the Partnership, which shall
include the General Partner Interest and Limited Partner Interests.
"PARTNERSHIP MINIMUM GAIN" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"PARTNERSHIP SECURITY" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation rights
relating to an equity interest in the Partnership), including without
limitation, Common Units, Subordinated Units and Incentive Distribution Rights.
"PERCENTAGE INTEREST" means as of any date of determination (a) as to the
General Partner (with respect to its General Partner Interest), an aggregate 1%,
(b) as to any Unitholder or Assignee holding Units, the product obtained by
multiplying (i) 99% less the percentage applicable to paragraph (c) by (ii) the
quotient obtained by dividing (A) the number of Units held by such Unitholder or
Assignee by (B) the total number of all Outstanding Units, and (c) as to the
holders of additional Partnership Securities issued by the Partnership in
accordance with Section 5.6, the percentage established as a part of such
issuance. The Percentage Interest with respect to an Incentive Distribution
Right shall at all times be zero.
"PERSON" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"PER UNIT CAPITAL AMOUNT" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partner or any Affiliate of the General Partner
who holds Units.
"PRO RATA" means (a) when modifying Units or any class thereof, apportioned
equally among all designated Units in accordance with their relative Percentage
Interests, (b) when modifying Partners and Assignees, apportioned among all
Partners and Assignees in accordance with their relative Percentage Interests
and (c) when modifying holders of Incentive Distribution Rights, apportioned
equally among all holders of Incentive Distribution Rights in accordance with
the relative number of Incentive Distribution Rights held by each such holder.
"PURCHASE DATE" means the date determined by the General Partner as the date
for purchase of all Outstanding Units of a certain class (other than Units held
by the General Partner and its Affiliates) pursuant to Article XV.
"QUARTER" means, unless the context requires otherwise, a fiscal quarter of
the Partnership.
"RECAPTURE INCOME" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Partnership, which
gain is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
12
"RECORD DATE" means the date established by the General Partner for
determining (a) the identity of the Record Holders entitled to notice of, or to
vote at, any meeting of Limited Partners or entitled to vote by ballot or give
approval of Partnership action in writing without a meeting or entitled to
exercise rights in respect of any lawful action of Limited Partners or (b) the
identity of Record Holders entitled to receive any report or distribution or to
participate in any offer.
"RECORD HOLDER" means the Person in whose name a Common Unit is registered
on the books of the Transfer Agent as of the opening of business on a particular
Business Day, or with respect to other Partnership Securities, the Person in
whose name any such other Partnership Security is registered on the books which
the General Partner has caused to be kept as of the opening of business on such
Business Day.
"REDEEMABLE INTERESTS" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.
"REGISTRATION STATEMENT" means the Registration Statement on Form S-1
(Registration No. 333-69947) as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the Commission
under the Securities Act to register the offering and sale of the Common Units
in the Initial Offering.
"REMAINING NET POSITIVE ADJUSTMENTS" means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units or Subordinated
Units, the excess of (a) the Net Positive Adjustments of the Unitholders holding
Common Units or Subordinated Units as of the end of such period over (b) the sum
of those Unitholders' Share of Additional Book Basis Derivative Items for each
prior taxable period, (ii) with respect to the General Partner (as holder of the
General Partner Interest), the excess of (a) the Net Positive Adjustments of the
General Partner as of the end of such period over (b) the sum of the General
Partner's Share of Additional Book Basis Derivative Items with respect to the
General Partner Interest for each prior taxable period, and (iii) with respect
to the holders of Incentive Distribution Rights, the excess of (a) the Net
Positive Adjustments of the holders of Incentive Distribution Rights as of the
end of such period over (b) the sum of the Share of Additional Book Basis
Derivative Items of the holders of the Incentive Distribution Rights for each
prior taxable period.
"REQUIRED ALLOCATIONS" means (a) any limitation imposed on any allocation of
Net Losses or Net Termination Losses under Section 6.1(b) or 6.1(c)(ii) and (b)
any allocation of an item of income, gain, loss or deduction pursuant to Section
6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or 6.1(d)(ix).
"RESIDUAL GAIN" or "RESIDUAL LOSS" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
"SECOND LIQUIDATION TARGET AMOUNT" has the meaning assigned to such term in
Section 6.1(c)(i)(E).
"SECOND TARGET DISTRIBUTION" means $0.6900 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on June 30,
1999, it means the product of $0.6900 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 91), subject to adjustment in accordance with Sections 6.6 and
6.9.
"SECURITIES ACT" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.
"SHARE OF ADDITIONAL BOOK BASIS DERIVATIVE ITEMS" means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable period,
(i) with respect to the Unitholders holding Common Units or Subordinated Units,
the amount that bears the same ratio to such
13
Additional Book Basis Derivative Items as the Unitholders' Remaining Net
Positive Adjustments as of the end of such period bears to the Aggregate
Remaining Net Positive Adjustments as of that time, (ii) with respect to the
General Partner (as holder of the General Partner Interest), the amount that
bears the same ratio to such additional Book Basis Derivative Items as the
General Partner's Remaining Net Positive Adjustments as of the end of such
period bears to the Aggregate Remaining Net Positive Adjustment as of that time,
and (iii) with respect to the Partners holding Incentive Distribution Rights,
the amount that bears the same ratio to such Additional Book Basis Derivative
Items as the Remaining Net Positive Adjustments of the Partners holding the
Incentive Distribution Rights as of the end of such period bears to the
Aggregate Remaining Net Positive Adjustments as of that time.
"SPECIAL APPROVAL" means approval by a majority of the members of the
Conflicts Committee.
"SUBORDINATED UNIT" means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees (other than of
holders of the Incentive Distribution Rights) and having the rights and
obligations specified with respect to Subordinated Units in this Agreement. The
term "SUBORDINATED UNIT" as used herein does not include a Common Unit.
"SUBORDINATION PERIOD" means the period commencing on the Closing Date and
ending on the first to occur of the following dates:
(a) the first day of any Quarter beginning after June 30, 2004 in respect of
which (i) (A) distributions of Available Cash from Operating Surplus on
each of the Outstanding Common Units and Outstanding Subordinated Units
with respect to each of the three consecutive, non-overlapping
four-Quarter periods immediately preceding such date equaled or exceeded
the sum of the Minimum Quarterly Distribution on all Common Units and
Subordinated Units that were Outstanding during such periods and (B) the
Adjusted Operating Surplus generated during each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Common Units and Subordinated Units that were
Outstanding during such periods on a fully diluted basis (i.e., taking
into account for purposes of such determination all Outstanding Common
Units, all Outstanding Subordinated Units, all Common Units and
Subordinated Units issuable upon exercise of employee options that have,
as of the date of determination, already vested or are scheduled to vest
prior to the end of the Quarter immediately following the Quarter with
respect to which such determination is made, and all Common Units and
Subordinated Units that have as of the date of determination, been earned
by but not yet issued to management of the Partnership in respect of
incentive compensation), plus the related distribution on the General
Partner Interest in the Partnership and on the general partner interest
in the Intermediate Partnership, during such periods and (ii) there are
no Cumulative Common Unit Arrearages; and
(b) the date on which the General Partner is removed as general partner of
the Partnership upon the requisite vote by holders of Outstanding Units
under circumstances where Cause does not exist and Units held by the
General Partner and its Affiliates are not voted in favor of such
removal.
"SUBSIDIARY" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at
14
the date of determination, by such Person, by one or more Subsidiaries of such
Person, or a combination thereof, or (c) any other Person (other than a
corporation or a partnership) in which such Person, one or more Subsidiaries of
such Person, or a combination thereof, directly or indirectly, at the date of
determination, has (i) at least a majority ownership interest or (ii) the power
to elect or direct the election of a majority of the directors or other
governing body of such Person. The foregoing definition shall not include any JV
Entity, including, without limitation, Northern Border Pipeline.
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 10.2 in place of and with all the
rights of a Limited Partner and who is shown as a Limited Partner on the books
and records of the Partnership.
"SURVIVING BUSINESS ENTITY" has the meaning assigned to such term in Section
14.2(b).
"TRADING DAY" has the meaning assigned to such term in Section 15.1(a).
"TRANSCANADA" means TransCanada PipeLines Limited, a Canadian corporation.
"TRANSCANADA BORDER PIPELINE" means TransCanada Border Pipeline Ltd., a
Nevada corporation and a wholly-owned subsidiary of TransCanada.
"TRANSCAN NORTHERN" means TransCan Northern Ltd., a Delaware corporation and
a wholly-owned subsidiary of TransCanada.
"TRANSFER" has the meaning assigned to such term in Section 4.4(a).
"TRANSFER AGENT" means such bank, trust company or other Person (including
the General Partner or one of its Affiliates) as shall be appointed from time to
time by the Partnership to act as registrar and transfer agent for the Common
Units; provided that if no Transfer Agent is specifically designated for any
other Partnership Securities, the General Partner shall act in such capacity.
"TRANSFER APPLICATION" means an application and agreement for transfer of
Units in the form set forth on the back of a Certificate or in a form
substantially to the same effect in a separate instrument.
"TREASURY REGULATIONS" means the permanent, temporary or proposed
regulations of the United States Department of the Treasury promulgated under
the Code, as such regulations may be amended and in effect from time to time.
Any reference herein to a specific section or sections of the Treasury
Regulations shall be deemed to include a reference to any corresponding
provision of successor law.
"UNDERWRITER" means each Person named as an underwriter in Schedule I to the
Underwriting Agreement who purchases Common Units pursuant thereto.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement dated May 24,
1999 among the Underwriters, the Partnership, the Intermediate Partnership,
the General Partner, TransCanada and others, providing for the purchase of
Common Units by such Underwriters.
"UNIT" means a Partnership Security that is designated as a "UNIT" and shall
include Common Units and Subordinated Units but shall not include (i) a General
Partner Interest or (ii) Incentive Distribution Rights.
"UNITHOLDERS" means the holders of Common Units and Subordinated Units.
"UNIT MAJORITY" means, during the Subordination Period, at least a majority
of the Outstanding Common Units voting as a class and at least a majority of the
Outstanding Subordinated Units voting as a class, and thereafter, at least a
majority of the Outstanding Common Units.
"UNPAID MQD" has the meaning assigned to such term in Section 6.1(c)(i)(B).
"UNREALIZED GAIN" attributable to any item of Partnership property means, as
of any date of determination, the excess, if any, of (a) the fair market value
of such property as of such date (as
15
determined under Section 5.5(d)) over (b) the Carrying Value of such property as
of such date (prior to any adjustment to be made pursuant to Section 5.5(d) as
of such date).
"UNREALIZED LOSS" attributable to any item of Partnership property means, as
of any date of determination, the excess, if any, of (a) the Carrying Value of
such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).
"UNRECOVERED CAPITAL" means at any time, with respect to a Unit, the Initial
Unit Price less the sum of all distributions constituting Capital Surplus
theretofore made in respect of an Initial Common Unit and any distributions of
cash (or the Net Agreed Value of any distributions in kind) in connection with
the dissolution and liquidation of the Partnership theretofore made in respect
of an Initial Common Unit, adjusted as the General Partner determines to be
appropriate to give effect to any distribution, subdivision or combination of
such Units.
"U.S. GAAP" means United States Generally Accepted Accounting Principles
consistently applied.
"WITHDRAWAL OPINION OF COUNSEL" has the meaning assigned to such term in
Section 11.1(b).
"WORKING CAPITAL BORROWINGS" means borrowings exclusively for working
capital purposes. Amounts drawn from a credit facility to enable the Partnership
to pay distributions to partners of the Partnership if there has been a
temporary interruption or delay in receipt of distributions from Northern Border
Pipeline shall also constitute Working Capital Borrowings.
Section 1.2 CONSTRUCTION.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "INCLUDE" or "INCLUDES" means
includes, without limitation, and "INCLUDING" means including, without
limitation.
ARTICLE II
ORGANIZATION
Section 2.1 FORMATION.
The General Partner and the Organizational Limited Partner have previously
formed the Partnership as a limited partnership pursuant to the provisions of
the Delaware Act and hereby amend and restate the original Agreement of Limited
Partnership of TC Pipelines, LP in its entirety. This amendment and restatement
shall become effective on the date of this Agreement. Except as expressly
provided to the contrary in this Agreement, the rights, duties (including
fiduciary duties), liabilities and obligations of the Partners and the
administration, dissolution and termination of the Partnership shall be governed
by the Delaware Act. All Partnership Interests shall constitute personal
property of the owner thereof for all purposes and a Partner has no interest in
specific Partnership property.
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Section 2.2 NAME.
The name of the Partnership shall be "TC PipeLines, LP" The Partnership's
business may be conducted under any other name or names deemed necessary or
appropriate by the General Partner in its sole discretion, including the name of
the General Partner. The words "Limited Partnership," "L.P.," "Ltd." or similar
words or letters shall be included in the Partnership's name where necessary for
the purpose of complying with the laws of any jurisdiction that so requires. The
General Partner in its discretion may change the name of the Partnership at any
time and from time to time and shall notify the Limited Partners of such change
in the next regular communication to the Limited Partners.
Section 2.3 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE; OTHER
OFFICES.
Unless and until changed by the General Partner, the registered office of
the Partnership in the State of Delaware shall be located at Corporation Trust
Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000, and the registered agent for
service of process on the Partnership in the State of Delaware at such
registered office shall be The Corporation Trust Company, Corporation Trust
Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000. The principal office of the
Partnership shall be located at Four Greenspoint Plaza, 00000 Xxxxxxxxxx Xxxxx,
Xxxxxxx, XX 00000 or such other place as the General Partner may from time to
time designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems necessary or appropriate. The address of the General
Partner shall be Four Greenspoint Plaza, 00000 Xxxxxxxxxx Xxxxx, Xxxxxxx, XX
00000 or such other place as the General Partner may from time to time designate
by notice to the Limited Partners.
Section 2.4 PURPOSE AND BUSINESS.
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) serve as a partner of the Intermediate Partnership and, in
connection therewith, to exercise all the rights and powers conferred upon the
Partnership as a partner of the Intermediate Partnership pursuant to the
Intermediate Partnership Agreement or otherwise, (b) engage directly in, or
enter into or form any corporation, partnership, joint venture, limited
liability company or other arrangement to engage indirectly in, any business
activity that the Intermediate Partnership is permitted to engage in by the
Intermediate Partnership Agreement and, in connection therewith, to exercise all
of the rights and powers conferred upon the Partnership pursuant to the
agreements relating to such business activity, (c) engage directly in, or enter
into or form any corporation, partnership, joint venture, limited liability
company or other arrangement to engage indirectly in, any business activity that
is approved by the General Partner and which lawfully may be conducted by a
limited partnership organized pursuant to the Delaware Act and, in connection
therewith, to exercise all of the rights and powers conferred upon the
Partnership pursuant to the agreements relating to such business activity;
provided, however, that the General Partner reasonably determines, as of the
date of the acquisition or commencement of such activity, that such activity (i)
generates "QUALIFYING INCOME" (as such term is defined pursuant to Section 7704
of the Code) or (ii) enhances the operations of an activity of the Intermediate
Partnership or a Partnership activity that generates qualifying income, and (d)
do anything necessary or appropriate to the foregoing, including the making of
capital contributions or loans to a Group Member or JV Entity. The General
Partner has no obligation or duty to the Partnership, the Limited Partners or
the Assignees to propose or approve, and in its discretion may decline to
propose or approve, the conduct by the Partnership of any business.
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Section 2.5 POWERS.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4.
Section 2.6 POWER OF ATTORNEY.
(a) Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner and, if a Liquidator shall have been selected
pursuant to Section 12.3, the Liquidator, (and any successor to the
Liquidator by merger, transfer, assignment, election or otherwise) and each
of their authorized officers and attorneys-in-fact, as the case may be, with
full power of substitution, as his true and lawful agent and
attorney-in-fact, with full power and authority in his name, place and
xxxxx, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements hereof or thereof) that
the General Partner or the Liquidator deems necessary or appropriate to
form, qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) in the State of Delaware and in
all other jurisdictions in which the Partnership may conduct business or
own property; (B) all certificates, documents and other instruments that
the General Partner or the Liquidator deems necessary or appropriate to
reflect, in accordance with its terms, any amendment, change,
modification or restatement of this Agreement; (C) all certificates,
documents and other instruments (including conveyances and a certificate
of cancellation) that the General Partner or the Liquidator deems
necessary or appropriate to reflect the dissolution and liquidation of
the Partnership pursuant to the terms of this Agreement; (D) all
certificates, documents and other instruments relating to the admission,
withdrawal, removal or substitution of any Partner pursuant to, or other
events described in, Article IV, X, XI or XII; (E) all certificates,
documents and other instruments relating to the determination of the
preferences, rights, powers, privileges and duties of any class or series
of Partnership Securities issued pursuant to Section 5.6; and (F) all
certificates, documents and other instruments (including agreements and a
certificate of merger) relating to a merger or consolidation of the
Partnership pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the discretion of the General
Partner or the Liquidator, to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other action that is made or given
by the Partners hereunder or is consistent with the terms of this
Agreement or is necessary or appropriate, in the discretion of the
General Partner or the Liquidator, to effectuate the terms or intent of
this Agreement; provided, that when required by Section 13.3 or any other
provision of this Agreement that establishes a percentage of the Limited
Partners or of the Limited Partners of any class or series required to
take any action, the General Partner and the Liquidator may exercise the
power of attorney made in this Section 2.6(a)(ii) only after the
necessary vote, consent or approval of the Limited Partners or of the
Limited Partners of such class or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Article
XIII or as may be otherwise expressly provided for in this Agreement.
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(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and, to the
maximum extent permitted by law, not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination
of any Limited Partner or Assignee and the transfer of all or any portion of
such Limited Partner's or Assignee's Partnership Interest and shall extend
to such Limited Partner's or Assignee's heirs, successors, assigns and
personal representatives. Each such Limited Partner or Assignee hereby
agrees to be bound by any representation made by the General Partner or the
Liquidator acting in good faith pursuant to such power of attorney; and each
such Limited Partner or Assignee, to the maximum extent permitted by law,
hereby waives any and all defenses that may be available to contest, negate
or disaffirm the action of the General Partner or the Liquidator taken in
good faith under such power of attorney. Each Limited Partner or Assignee
shall execute and deliver to the General Partner or the Liquidator, within
15 days after receipt of the request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator deems necessary to effectuate this Agreement and the purposes of
the Partnership.
Section 2.7 TERM.
The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the close of Partnership business on December 31, 2097 or until
the earlier dissolution of the Partnership in accordance with the provisions of
Article XII. The existence of the Partnership as a separate legal entity shall
continue until the cancellation of the Certificate of Limited Partnership as
provided in the Delaware Act.
Section 2.8 TITLE TO PARTNERSHIP ASSETS.
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner, one or more of its Affiliates or one or more nominees, as
the General Partner may determine. The General Partner hereby declares and
warrants that any Partnership assets for which record title is held in the name
of the General Partner or one or more of its Affiliates or one or more nominees
shall be held by the General Partner or such Affiliate or nominee for the use
and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use reasonable
efforts to cause record title to such assets (other than those assets in respect
of which the General Partner determines that the expense and difficulty of
conveyancing makes transfer of record title to the Partnership impracticable) to
be vested in the Partnership as soon as reasonably practicable; provided,
further, that, prior to the withdrawal or removal of the General Partner or as
soon thereafter as practicable, the General Partner shall use reasonable efforts
to effect the transfer of record title to the Partnership and, prior to any such
transfer, will provide for the use of such assets in a manner satisfactory to
the General Partner. All Partnership assets shall be recorded as the property of
the Partnership in its books and records, irrespective of the name in which
record title to such Partnership assets is held.
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ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 LIMITATION OF LIABILITY.
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or the Delaware Act.
Section 3.2 MANAGEMENT OF BUSINESS.
No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware Act)
of the Partnership's business, transact any business in the Partnership's name
or have the power to sign documents for or otherwise bind the Partnership. Any
action taken by any Affiliate of the General Partner or any officer, director,
employee, member, general partner, agent or trustee of the General Partner or
any of its Affiliates, or any officer, director, employee, member, general
partner, agent or trustee of a Group Member, in its capacity as such, shall not
be deemed to be participation in the control of the business of the Partnership
by a limited partner of the Partnership (within the meaning of Section 17-303(a)
of the Delaware Act) and shall not affect, impair or eliminate the limitations
on the liability of the Limited Partners or Assignees under this Agreement.
Section 3.3 OUTSIDE ACTIVITIES OF THE LIMITED PARTNERS.
Subject to the provisions of Section 7.5, which shall continue to be
applicable to the Persons referred to therein, regardless of whether such
Persons shall also be Limited Partners or Assignees, any Limited Partner or
Assignee shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Partnership, including
business interests and activities in direct competition with any Group Member or
JV Entity. Neither the Partnership nor any of the other Partners or Assignees
shall have any rights by virtue of this Agreement in any business ventures of
any Limited Partner or Assignee.
Section 3.4 RIGHTS OF LIMITED PARTNERS.
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each Limited
Partner shall have the right, for a purpose reasonably related to such
Limited Partner's interest as a limited partner in the Partnership, upon
reasonable written demand and at such Limited Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any other
Capital Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner;
and
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(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) The General Partner may keep confidential from the Limited Partners
and Assignees, for such period of time as the General Partner deems
reasonable, (i) any information that the General Partner reasonably believes
to be in the nature of trade secrets or (ii) other information the
disclosure of which the General Partner in good faith believes (A) is not in
the best interests of any Group Member or JV Entity, (B) could damage any
Group Member or JV Entity or (C) that any Group Member or JV Entity is
required by law or by agreement with any third party to keep confidential
(other than agreements with Affiliates of the Partnership the primary
purpose of which is to circumvent the obligations set forth in this Section
3.4).
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF
PARTNERSHIP INTERESTS
Section 4.1 CERTIFICATES.
Upon the Partnership's issuance of Common Units or Subordinated Units to any
Person, the Partnership shall issue one or more Certificates in the name of such
Person evidencing the number of such Units being so issued. In addition, (a)
upon the General Partner's request, the Partnership shall issue to it one or
more Certificates in the name of the General Partner evidencing its interests in
the Partnership and (b) upon the request of any Person holding Incentive
Distribution Rights or any other Partnership Securities other than Common Units
or Subordinated Units, the Partnership shall issue to such Person one or more
certificates evidencing such Incentive Distribution Rights or other Partnership
Securities other than Common Units or Subordinated Units. Certificates shall be
executed on behalf of the Partnership by the Chairman, President or any
Executive Vice President or Vice President and the Secretary or any Assistant
Secretary of the General Partner. No Common Unit Certificate shall be valid for
any purpose until it has been countersigned by the Transfer Agent; provided,
however, that if the General Partner elects to issue Common Units in global
form, the Common Unit Certificates shall be valid upon receipt of a certificate
from the Transfer Agent certifying that the Common Units have been duly
registered in accordance with the directions of the Partnership and the
Underwriters. Subject to the requirements of Section 6.7(b), the Partners
holding Certificates evidencing Subordinated Units may exchange such
Certificates for Certificates evidencing Common Units on or after the date on
which such Subordinated Units are converted into Common Units pursuant to the
terms of Section 5.8.
Section 4.2 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
(a) If any mutilated Certificate is surrendered to the Transfer Agent,
the appropriate officers of the General Partner on behalf of the Partnership
shall execute, and the Transfer Agent shall countersign and deliver in
exchange therefor, a new Certificate evidencing the same number and type of
Partnership Securities as the Certificate so surrendered.
(b) The appropriate officers of the General Partner on behalf of the
Partnership shall execute and deliver, and the Transfer Agent shall
countersign a new Certificate in place of any Certificate previously issued
if the Record Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to
the Partnership, that a previously issued Certificate has been lost,
destroyed or stolen;
(ii) requests the issuance of a new Certificate before the
Partnership has notice that the Certificate has been acquired by a
purchaser for value in good faith and without notice of an adverse claim;
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(iii) if requested by the Partnership, delivers to the Partnership a
bond, in form and substance satisfactory to the Partnership, with surety
or sureties and with fixed or open penalty as the Partnership may
reasonably direct, in its sole discretion, to indemnify the Partnership,
the Partners, the General Partner and the Transfer Agent against any
claim that may be made on account of the alleged loss, destruction or
theft of the Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
Partnership.
If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable time after he has notice of the loss, destruction or theft of a
Certificate, and a transfer of the Limited Partner Interests represented by the
Certificate is registered before the Partnership, the General Partner or the
Transfer Agent receives such notification, the Limited Partner or Assignee shall
be precluded from making any claim against the Partnership, the General Partner
or the Transfer Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under this
Section 4.2, the Partnership may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the
Transfer Agent) reasonably connected therewith.
Section 4.3 RECORD HOLDERS.
The Partnership shall be entitled to recognize the Record Holder as the
Partner or Assignee with respect to any Partnership Interest and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such Partnership Interest on the part of any other Person, regardless of whether
the Partnership shall have actual or other notice thereof, except as otherwise
provided by law or any applicable rule, regulation, guideline or requirement of
any National Securities Exchange on which such Partnership Interests are listed
for trading. Without limiting the foregoing, when a Person (such as a broker,
dealer, bank, trust company or clearing corporation or an agent of any of the
foregoing) is acting as nominee, agent or in some other representative
capacityfor another Person in acquiring and/or holding Partnership Interests, as
between the Partnership on the one hand, and such other Persons on the other,
such representative Person (a) shall be the Partner or Assignee (as the case may
be) of record and beneficially, (b) must execute and deliver a Transfer
Application and (c) shall be bound by this Agreement and shall have the rights
and obligations of a Partner or Assignee (as the case may be) hereunder and as,
and to the extent, provided for herein.
Section 4.4 TRANSFER GENERALLY.
(a) The term "TRANSFER," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner assigns its General Partner Interest to another Person who
becomes the General Partner, by which the holder of a Limited Partner
Interest assigns such Limited Partner Interest to another Person who is or
becomes a Limited Partner or an Assignee, and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article
IV. Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent a
disposition by any stockholder of the General Partner of any or all of the
issued and outstanding stock of the General Partner.
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Section 4.5 REGISTRATION AND TRANSFER OF LIMITED PARTNER INTERESTS.
(a) The Partnership shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as
it may prescribe and subject to the provisions of Section 4.5(b), the
Partnership will provide for the registration and transfer of Limited
Partner Interests. The Transfer Agent is hereby appointed registrar and
transfer agent for the purpose of registering Common Units and transfers of
such Common Units as herein provided. The Partnership shall not recognize
transfers of Certificates evidencing Limited Partner Interests unless such
transfers are effected in the manner described in this Section 4.5. Upon
surrender of a Certificate for registration of transfer of any Limited
Partner Interests evidenced by a Certificate, and subject to the provisions
of Section 4.5(b), the appropriate officers of the General Partner on behalf
of the Partnership shall execute and deliver, and in the case of Common
Units, the Transfer Agent shall countersign and deliver, in the name of the
holder or the designated transferee or transferees, as required pursuant to
the holder's instructions, one or more new Certificates evidencing the same
aggregate number and type of Limited Partner Interests as was evidenced by
the Certificate so surrendered.
(b) Except as otherwise provided in Section 4.9, the Partnership shall
not recognize any transfer of Limited Partner Interests until the
Certificates evidencing such Limited Partner Interests are surrendered for
registration of transfer and such Certificates are accompanied by a Transfer
Application duly executed by the transferee (or the transferee's
attorney-in-fact duly authorized in writing). No charge shall be imposed by
the Partnership for such transfer; provided, that as a condition to the
issuance of any new Certificate under this Section 4.5, the Partnership may
require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed with respect thereto.
(c) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests
and the admission of any new Limited Partner shall not constitute an
amendment to this Agreement.
(d) Until admitted as a Substituted Limited Partner pursuant to Section
10.2, the Record Holder of a Limited Partner Interest shall be an Assignee
in respect of such Limited Partner Interest. Limited Partners may include
custodians, nominees or any other individual or entity in its own or any
representative capacity.
(e) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested
admission as a Substituted Limited Partner, (ii) agreed to comply with and
be bound by and to have executed this Agreement, (iii) represented and
warranted that such transferee has the right, power and authority and, if an
individual, the capacity to enter into this Agreement, (iv) granted the
powers of attorney set forth in this Agreement and (v) given the consents
and approvals and made the waivers contained in this Agreement.
(f) The General Partner and its Affiliates shall have the right at any
time to transfer their Subordinated Units and Common Units (whether issued
upon conversion of the Subordinated Units or otherwise) to one or more
Persons.
Section 4.6 TRANSFER OF THE GENERAL PARTNER'S GENERAL PARTNER INTEREST.
(a) Subject to Section 4.6(c) below, prior to June 30, 2009, the General
Partner shall not transfer all or any part of its General Partner Interest
to a Person unless such transfer (i) has been approved by the prior written
consent or vote of the holders of at least a majority of the Outstanding
Common Units (excluding Common Units held by the General Partner and its
Affiliates) or (ii) is of all, but not less than all, of its General Partner
Interest to (A) an Affiliate of the General Partner or (B) another Person in
connection with the merger or consolidation of the
23
General Partner with or into another Person or the transfer by the General
Partner of all or substantially all of its assets to another Person.
(b) Subject to Section 4.6(c) below, on or after June 30, 2009, the
General Partner may transfer all or any of its General Partner Interest
without Unitholder approval.
(c) Notwithstanding anything herein to the contrary, no transfer by the
General Partner of all or any part of its General Partner Interest to
another Person shall be permitted unless (i) the transferee agrees to assume
the rights and duties of the General Partner under this Agreement and of the
general partner under the Intermediate Partnership Agreement and to be bound
by the provisions of this Agreement and the Intermediate Partnership
Agreement, (ii) the Partnership receives an Opinion of Counsel that such
transfer would not result in the loss of limited liability of any Limited
Partner or of any limited partner of the Intermediate Partnership or cause
the Partnership or the Intermediate Partnership to be treated as an
association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not already so treated or
taxed) and (iii) such transferee also agrees to purchase all (or the
appropriate portion thereof, if applicable) of the interest of the General
Partner as the general partner or managing member of each other Group
Member. In the case of a transfer pursuant to and in compliance with this
Section 4.6, the transferee or successor (as the case may be) shall, subject
to compliance with the terms of Section 10.3, be admitted to the Partnership
as a General Partner immediately prior to the transfer of the Partnership
Interest, and the business of the Partnership shall continue without
dissolution.
Section 4.7 TRANSFER OF INCENTIVE DISTRIBUTION RIGHTS.
Prior to June 30, 2009, a holder of Incentive Distribution Rights may
transfer any or all of the Incentive Distribution Rights held by such holder
without any consent of the Unitholders (a) to an Affiliate or (b) to another
Person in connection with (i) the merger or consolidation of such holder of
Incentive Distribution Rights with or into such other Person or (ii) the
transfer by such holder of all or substantially all of its assets to such other
Person. Any other transfer of the Incentive Distribution Rights prior to June
30, 2009, shall require the prior approval of holders at least a majority of the
Outstanding Common Units (excluding Common Units held by the General Partner and
its Affiliates). On or after June 30, 2009, the General Partner or any other
holder of Incentive Distribution Rights may transfer any or all of its Incentive
Distribution Rights without Unitholder approval. Notwithstanding anything herein
to the contrary, no transfer of Incentive Distribution Rights to another Person
shall be permitted unless the transferee agrees to be bound by the provisions of
this Agreement. The General Partner shall have the authority (but shall not be
required) to adopt such reasonable restrictions on the transfer of Incentive
Distribution Rights and requirements for registering the transfer of Incentive
Distribution Rights as the General Partner, in its sole discretion, shall
determine are necessary or appropriate.
Section 4.8 RESTRICTIONS ON TRANSFERS.
(a) Except as provided in Section 4.8(d) below, but notwithstanding the
other provisions of this Article IV, no transfer of any Partnership
Interests shall be made if such transfer would (i) violate the then
applicable federal or state securities laws or rules and regulations of the
Commission, any state securities commission or any other governmental
authority with jurisdiction over such transfer, (ii) terminate the existence
or qualification of the Partnership or the Intermediate Partnership under
the laws of the jurisdiction of its formation, or (iii) cause the
Partnership or the Intermediate Partnership to be treated as an association
taxable as a corporation or otherwise to be taxed as an entity for federal
income tax purposes (to the extent not already so treated or taxed).
24
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if it determines based upon a subsequent Opinion of
Counsel that such restrictions are necessary to avoid a significant risk of
the Partnership or the Intermediate Partnership being treated as an
association taxable as a corporation or otherwise being taxed as an entity
for federal income tax purposes. The restrictions may be imposed by making
such amendments to this Agreement as the General Partner may determine to be
necessary or appropriate to impose such restrictions; provided, however,
that any amendment that the General Partner believes, in the exercise of its
reasonable discretion, could result in the delisting or suspension of
trading of any class of Limited Partner Interests on the principal National
Securities Exchange on which such class of Limited Partner Interests is then
traded must be approved, prior to such amendment being effected, by the
holders of at least a majority of the Outstanding Limited Partner Interests
of such class.
(c) The transfer of a Subordinated Unit that has converted into a Common
Unit shall be subject to the restrictions imposed by Section 6.7(b).
(d) Nothing contained in this Article IV or elsewhere in this Agreement,
shall preclude the settlement of any transactions involving Partnership
Interests entered into through the facilities of any National Securities
Exchange on which such Partnership Interests are listed for trading.
Section 4.9 CITIZENSHIP CERTIFICATES; NON-CITIZEN ASSIGNEES.
(a) If any Group Member or JV Entity is or becomes subject to any
federal, state or local law or regulation that, in the reasonable
determination of the General Partner, creates a substantial risk of
cancellation or forfeiture of any property in which the Group Member or JV
Entity has an interest based on the nationality, citizenship or other
related status of a Limited Partner or Assignee, the General Partner may
request any Limited Partner or Assignee to furnish to the General Partner,
within 30 days after receipt of such request, an executed Citizenship
Certification or such other information concerning his nationality,
citizenship or other related status (or, if the Limited Partner or Assignee
is a nominee holding for the account of another Person, the nationality,
citizenship or other related status of such Person) as the General Partner
may request. If a Limited Partner or Assignee fails to furnish to the
General Partner within the aforementioned 30-day period such Citizenship
Certification or other requested information or if upon receipt of such
Citizenship Certification or other requested information the General Partner
determines, with the advice of counsel, that a Limited Partner or Assignee
is not an Eligible Citizen, the Partnership Interests owned by such Limited
Partner or Assignee shall be subject to redemption in accordance with the
provisions of Section 4.10. In addition, the General Partner may require
that the status of any such Partner or Assignee be changed to that of a
Non-citizen Assignee and, thereupon, the General Partner shall be
substituted for such Non-citizen Assignee as the Limited Partner in respect
of his Limited Partner Interests.
(b) The General Partner shall, in exercising voting rights in respect of
Limited Partner Interests held by it on behalf of Non-citizen Assignees,
distribute the votes in the same ratios as the votes of Partners (including
without limitation the General Partner) in respect of Limited Partner
Interests other than those of Non-citizen Assignees are cast, either for,
against or abstaining as to the matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall
have no right to receive a distribution in kind pursuant to Section 12.4 but
shall be entitled to the cash equivalent thereof, and the Partnership shall
provide cash in exchange for an assignment of the Non-citizen Assignee's
share of the distribution in kind. Such payment and assignment shall be
treated for Partnership purposes as a purchase by the Partnership from the
Non-citizen
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Assignee of his Limited Partner Interest (representing his right to receive
his share of such distribution in kind).
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the
General Partner, request admission as a Substituted Limited Partner with
respect to any Limited Partner Interests of such Non-citizen Assignee not
redeemed pursuant to Section 4.10, and upon his admission pursuant to
Section 10.2, the General Partner shall cease to be deemed to be the Limited
Partner in respect of the Non-citizen Assignee's Limited Partner Interests.
Section 4.10 REDEMPTION OF PARTNERSHIP INTERESTS OF NON-CITIZEN ASSIGNEES.
(a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.9(a), or if upon receipt of such Citizenship
Certification or other information the General Partner determines, with the
advice of counsel, that a Limited Partner or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee
establishes to the satisfaction of the General Partner that such Limited
Partner or Assignee is an Eligible Citizen or has transferred his
Partnership Interests to a Person who is an Eligible Citizen and who
furnishes a Citizenship Certification to the General Partner prior to the
date fixed for redemption as provided below, redeem the Partnership Interest
of such Limited Partner or Assignee as follows:
(i) The General Partner shall, not later than the 30th day before the
date fixed for redemption, give notice of redemption to the Limited
Partner or Assignee, at his last address designated on the records of the
Partnership or the Transfer Agent, by registered or certified mail,
postage prepaid. The notice shall be deemed to have been given when so
mailed. The notice shall specify the Redeemable Interests, the date fixed
for redemption, the place of payment, that payment of the redemption
price will be made upon surrender of the Certificate evidencing the
Redeemable Interests and that on and after the date fixed for redemption
no further allocations or distributions to which the Limited Partner or
Assignee would otherwise be entitled in respect of the Redeemable
Interests will accrue or be made.
(ii) The aggregate redemption price for Redeemable Interests shall be
an amount equal to the Current Market Price (the date of determination of
which shall be the date fixed for redemption) of Limited Partner
Interests of the class to be so redeemed multiplied by the number of
Limited Partner Interests of each such class included among the
Redeemable Interests. The redemption price shall be paid, in the
discretion of the General Partner, in cash or by delivery of a promissory
note of the Partnership in the principal amount of the redemption price,
bearing interest at the rate of 10% annually and payable in three equal
annual installments of principal together with accrued interest,
commencing one year after the redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner or
Assignee, at the place specified in the notice of redemption, of the
Certificate evidencing the Redeemable Interests, duly endorsed in blank
or accompanied by an assignment duly executed in blank, the Limited
Partner or Assignee or his duly authorized representative shall be
entitled to receive the payment therefor.
(iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Limited Partner Interests.
(b) The provisions of this Section 4.10 shall also be applicable to
Limited Partner Interests held by a Limited Partner or Assignee as nominee
of a Person determined to be other than an Eligible Citizen.
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(c) Nothing in this Section 4.10 shall prevent the recipient of a notice
of redemption from transferring his Limited Partner Interest before the
redemption date if such transfer is otherwise permitted under this
Agreement. Upon receipt of notice of such a transfer, the General Partner
shall withdraw the notice of redemption, provided the transferee of such
Limited Partner Interest certifies to the satisfaction of the General
Partner in a Citizenship Certification delivered in connection with the
Transfer Application that he is an Eligible Citizen. If the transferee fails
to make such certification, such redemption shall be effected from the
transferee on the original redemption date.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 ORGANIZATIONAL CONTRIBUTIONS.
In connection with the formation of the Partnership under the Delaware Act,
the General Partner made an initial Capital Contribution to the Partnership in
the amount of $10.00, for a certain interest in the Partnership and has been
admitted as the General Partner and as a Limited Partner of the Partnership, and
the Organizational Limited Partner made an initial Capital Contribution to the
Partnership in the amount of $990.00 for an interest in the Partnership and has
been admitted as a Limited Partner of the Partnership. As of the Closing Date,
the interest of the Organizational Limited Partner shall be redeemed; the
initial Capital Contributions of each Partner shall thereupon be refunded; and
the Organizational Limited Partner shall cease to be a Limited Partner of the
Partnership. Ninety-nine percent of any interest or other profit that may have
resulted from the investment or other use of such initial Capital Contributions
shall be allocated and distributed to the Organizational Limited Partner, and
the balance thereof shall be allocated and distributed to the General Partner.
Section 5.2 CONTRIBUTIONS TO THE PARTNERSHIP.
(a) On the Closing Date and pursuant to the Contribution and Conveyance
Agreement, (i) TransCanada Border PipeLine contributed to the Partnership,
as a Capital Contribution, all of its limited partner interest in the
Intermediate Partnership in exchange for (A) a 1% general partner interest,
(B) 3,200,000 Subordinated Units, (C) 14,286 Common Units, and (D) the
Incentive Distribution Rights, (ii) TransCan Northern contributed to the
Partnership, as a Capital Contribution, all of its limited partner interest
in the Intermediate Partnership in exchange for 14,285,714 Common Units,
(iii) the Partnership redeemed all of the Common Units issued to TransCanada
Border PipeLine and TransCan Northern for cash, and (iv) TransCanada Border
Pipeline transferred all of its interests in the Partnership and the
Intermediate Partnership to the General Partner.
(b) Upon the issuance of any additional Limited Partner Interests by the
Partnership (other than the issuance of the Common Units issued in the
Initial Offering or pursuant to the Over-Allotment Option), the General
Partner shall be required to make additional Capital Contributions equal to
1/99th of any amount contributed to the Partnership by the Limited Partners
in exchange for such additional Limited Partner Interests. Except as set
forth in the immediately preceding sentence and Article XII, the General
Partner shall not be obligated to make any additional Capital Contributions
to the Partnership.
Section 5.3 CONTRIBUTIONS BY INITIAL LIMITED PARTNERS AND REIMBURSEMENT OF THE
GENERAL PARTNER.
(a) On the Closing Date and pursuant to the Underwriting Agreement,
each Underwriter shall contribute to the Partnership cash in an amount
equal to the Issue Price per Initial Common Unit, multiplied by the
number of Common Units specified in the Underwriting Agreement to be
purchased by such Underwriter at the Closing Date. On the Closing Date,
an affiliate of TransCanada shall contribute to the Partnership cash in
an amount equal to the Issue Price per Initial Common Unit, multiplied by
the 2,800,000 Common Units to be purchased by such affiliate of
TransCanada at the Closing Date. In exchange for such Capital
Contributions by the Underwriters and such affiliate of TransCanada, the
Partnership shall issue Common Units to each
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Underwriter or affiliate of TransCanada on whose behalf such Capital
Contribution is made in an amount equal to the quotient obtained by
dividing (i) the cash contribution to the Partnership by or on behalf of
such Underwriter or affiliate of TransCanada by (ii) the Issue Price per
Initial Common Unit.
(b) Upon the exercise of the Over-Allotment Option, each Underwriter
shall contribute to the Partnership cash in an amount equal to the Issue
Price per Initial Common Unit, multiplied by the number of Common Units
specified in the Underwriting Agreement to be purchased by such Underwriter
at the Option Closing Date. In exchange for such Capital Contributions by
the Underwriters, the Partnership shall issue Common Units to each
Underwriter on whose behalf such Capital Contribution is made in an amount
equal to the quotient obtained by dividing (i) the cash contributions to the
Partnership by or on behalf of such Underwriter by (ii) the Issue Price per
Initial Common Unit. Upon receipt by the Partnership of the Capital
Contributions from the Underwriters as provided in this Section 5.3(b), the
Partnership shall use such cash to redeem from the General Partner or its
Affiliates that number of Subordinated Units held by the General Partner or
its Affiliates equal to the number of Common Units issued to the
Underwriters as provided in this Section 5.3(b).
(c) No Limited Partner Interests will be issued or issuable as of or at
the Closing Date other than (i) the Common Units issuable pursuant to
Section 5.3(a) in an aggregate number equal to 14,300,000, (ii) the
"OPTIONAL UNITS" as such term is used in the Underwriting Agreement in an
aggregate number up to 1,725,000 issuable upon exercise of the
Over-Allotment Option pursuant to Section 5.3(b), (iii) the 3,200,000
Subordinated Units issuable pursuant to Section 5.2, and (iv) the Incentive
Distribution Rights.
Section 5.4 INTEREST AND WITHDRAWAL.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Partnership may be considered as such
by law and then only to the extent provided for in this Agreement. Except to the
extent expressly provided in this Agreement, no Partner or Assignee shall have
priority over any other Partner or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions. Any such return shall
be a compromise to which all Partners and Assignees agree within the meaning of
Section 17-502(b) of the Delaware Act.
Section 5.5 CAPITAL ACCOUNTS.
(a) The Partnership shall maintain for each Partner (or a beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable
to the General Partner in its sole discretion) holding a Partnership
Interest a separate Capital Account with respect to such Partnership
Interest in accordance with the rules of Treasury Regulation Section
1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount
of all Capital Contributions made to the Partnership with respect to such
Partnership Interest pursuant to this Agreement and (ii) all items of
Partnership income and gain (including, without limitation, income and gain
exempt from tax) computed in accordance with Section 5.5(b) and allocated
with respect to such Partnership Interest pursuant to Section 6.1, and
decreased by (x) the amount of cash or Net Agreed Value of all actual and
deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of
Partnership deduction and loss computed in accordance with Section 5.5(b)
and allocated with respect to such Partnership Interest pursuant to Section
6.1.
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(b) For purposes of computing the amount of any item of income, gain,
loss or deduction which is to be allocated pursuant to Article VI and is to
be reflected in the Partners' Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax
purposes (including, without limitation, any method of depreciation, cost
recovery or amortization used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall be
treated as owning directly its proportionate share (as determined by the
General Partner based upon the provisions of the Intermediate Partnership
Agreement) of all property owned by the Intermediate Partnership or any
other Subsidiary that is classified as a partnership for federal income
tax purposes.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither
be deducted nor amortized under Section 709 of the Code, if any, shall,
for purposes of Capital Account maintenance, be treated as an item of
deduction at the time such fees and other expenses are incurred and shall
be allocated among the Partners pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under Section
754 of the Code which may be made by the Partnership and, as to those
items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code,
without regard to the fact that such items are not includable in gross
income or are neither currently deductible nor capitalized for federal
income tax purposes. To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Section 734(b) or 743(b) of
the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment in the Capital Accounts shall be
treated as an item of gain or loss.
(iv) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis
of such property as of such date of disposition were equal in amount to
the Partnership's Carrying Value with respect to such property as of such
date.
(v) In accordance with the requirements of Section 704(b) of the
Code, any deductions for depreciation, cost recovery or amortization
attributable to any Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the
Partnership were equal to the Agreed Value of such property. Upon an
adjustment pursuant to Section 5.5(d) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery or
amortization, any further deductions for such depreciation, cost recovery
or amortization attributable to such property shall be determined (A) as
if the adjusted basis of such property were equal to the Carrying Value
of such property immediately following such adjustment and (B) using a
rate of depreciation, cost recovery or amortization derived from the same
method and useful life (or, if applicable, the remaining useful life) as
is applied for federal income tax purposes; provided, however, that, if
the asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization deductions shall be
determined using any reasonable method that the General Partner may
adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an
29
additional depreciation or cost recovery deduction in the year such
property is placed in service and shall be allocated among the Partners
pursuant to Section 6.1. Any restoration of such basis pursuant to
Section 48(q)(2) of the Code shall, to the extent possible, be allocated
in the same manner to the Partners to whom such deemed deduction was
allocated.
(c) (i)A transferee of a Partnership Interest shall succeed to a pro
rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(ii) Immediately prior to the transfer of a Subordinated Unit or of a
Subordinated Unit that has converted into a Common Unit pursuant to
Section 5.8 by a holder thereof (other than a transfer to an Affiliate
unless the General Partner elects to have this subparagraph 5.5(c)(ii)
apply), the Capital Account maintained for such Person with respect to
its Subordinated Units or converted Subordinated Units will (A) first, be
allocated to the Subordinated Units or converted Subordinated Units to be
transferred in an amount equal to the product of (x) the number of such
Subordinated Units or converted Subordinated Units to be transferred and
(y) the Per Unit Capital Amount for a Common Unit, and (B) second, any
remaining balance in such Capital Account will be retained by the
transferor, regardless of whether it has retained any Subordinated Units
or converted Subordinated Units. Following any such allocation, the
transferor's Capital Account, if any, maintained with respect to the
retained Subordinated Units or converted Subordinated Units, if any, will
have a balance equal to the amount allocated under clause (B)
hereinabove, and the transferee's Capital Account established with
respect to the transferred Subordinated Units or converted Subordinated
Units will have a balance equal to the amount allocated under clause (A)
hereinabove.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for
cash or Contributed Property or the conversion of the General Partner's
Combined Interest to Common Units pursuant to Section 11.3(b), the Capital
Account of all Partners and the Carrying Value of each Partnership property
immediately prior to such issuance shall be adjusted upward or downward to
reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property immediately prior to such
issuance and had been allocated to the Partners at such time pursuant to
Section 6.1 in the same manner as any item of gain or loss actually
recognized during such period would have been allocated. In determining such
Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair
market value of all Partnership assets (including, without limitation, cash
or cash equivalents) immediately prior to the issuance of additional
Partnership Interests shall be determined by the General Partner using such
reasonable method of valuation as it may adopt; provided, however, that the
General Partner, in arriving at such valuation, must take fully into account
the fair market value of the Partnership Interests of all Partners at such
time. The General Partner shall allocate such aggregate value among the
assets of the Partnership (in such manner as it determines in its discretion
to be reasonable) to arrive at a fair market value for individual
properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of all Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable
to such Partnership property, as if such Unrealized Gain or Unrealized
Loss had been recognized in a sale of such property immediately prior to
such distribution for an amount equal to its fair market value, and had
been allocated to the Partners, at such
30
time, pursuant to Section 6.1 in the same manner as any item of gain or
loss actually recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss the aggregate cash
amount and fair market value of all Partnership assets (including,
without limitation, cash or cash equivalents) immediately prior to a
distribution shall (A) in the case of an actual distribution which is not
made pursuant to Section 12.4 or in the case of a deemed distribution, be
determined and allocated in the same manner as that provided in Section
5.5(d)(i) or (B) in the case of a liquidating distribution pursuant to
Section 12.4, be determined and allocated by the Liquidator using such
reasonable method of valuation as it may adopt.
Section 5.6 ISSUANCES OF ADDITIONAL PARTNERSHIP SECURITIES.
(a) Subject to Section 5.7, the Partnership may issue additional
Partnership Securities and options, rights, warrants and appreciation rights
relating to the Partnership Securities for any Partnership purpose at any
time and from time to time to such Persons for such consideration and on
such terms and conditions as shall be established by the General Partner in
its sole discretion, all without the approval of any Limited Partners.
(b) Each additional Partnership Security authorized to be issued by the
Partnership pursuant to Section 5.6(a) may be issued in one or more classes,
or one or more series of any such classes, with such designations,
preferences, rights, powers, privileges and duties (which may be senior to
existing classes and series of Partnership Securities), as shall be fixed by
the General Partner in the exercise of its sole discretion, including (i)
the right to share Partnership profits and losses or items thereof; (ii) the
right to share in Partnership distributions; (iii) the rights upon
dissolution and liquidation of the Partnership; (iv) whether, and the terms
and conditions upon which, the Partnership may redeem the Partnership
Security; (v) whether such Partnership Security is issued with the privilege
of conversion or exchange and, if so, the terms and conditions of such
conversion or exchange; (vi) the terms and conditions upon which each
Partnership Security will be issued, evidenced by certificates and assigned
or transferred; and (vii) the right, if any, of each such Partnership
Security to vote on Partnership matters, including matters relating to the
relative rights, preferences and privileges of such Partnership Security.
(c) The General Partner is hereby authorized and directed to take all
actions that it deems necessary or appropriate in connection with (i) each
issuance of Partnership Securities and options, rights, warrants and
appreciation rights relating to Partnership Securities pursuant to this
Section 5.6, (ii) the conversion of the General Partner Interest and
Incentive Distribution Rights into Units pursuant to the terms of this
Agreement, (iii) the admission of Additional Limited Partners and (iv) all
additional issuances of Partnership Securities. The General Partner is
further authorized and directed to specify the relative preferences, rights,
powers, privileges and duties of the holders of the Units or other
Partnership Securities being so issued. The General Partner shall do all
things necessary to comply with the Delaware Act and is authorized and
directed to do all things it deems to be necessary or advisable in
connection with any future issuance of Partnership Securities or in
connection with the conversion of the General Partner Interest and Incentive
Distribution Rights into Units pursuant to the terms of this Agreement,
including compliance with any statute, rule, regulation or guideline of any
federal, state or other governmental agency or any National Securities
Exchange on which the Units or other Partnership Securities are listed for
trading.
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Section 5.7 LIMITATIONS ON ISSUANCE OF ADDITIONAL PARTNERSHIP SECURITIES.
The issuance of Partnership Securities pursuant to Section 5.6 shall be
subject to the following restrictions and limitations:
(a) During the Subordination Period, the Partnership shall not issue
(and shall not issue any options, rights, warrants or appreciation rights
relating to) an aggregate of more than 8,580,000 additional Parity Units
without the prior approval of the holders of a Unit Majority. In applying
this limitation, there shall be excluded Common Units and other Parity Units
issued (A) in connection with the exercise of the Over-Allotment Option, (B)
in accordance with Sections 5.7(b) and 5.7(c), (C) upon conversion of
Subordinated Units pursuant to Section 5.8, (D) upon conversion of the
General Partner Interest and Incentive Distribution Rights pursuant to
Section 11.3(b), (E) pursuant to the employee benefit plans of the General
Partner, the Partnership or any other Group Member and (F) in the event of a
combination or subdivision of Common Units.
(b) The Partnership may also issue an unlimited number of Parity Units,
prior to the end of the Subordination Period and without the prior approval
of the Unitholders, if such issuance occurs (i) in connection with an
Acquisition or a Capital Improvement or (ii) within 365 days of, and the net
proceeds from such issuance are used to repay debt incurred in connection
with, an Acquisition or a Capital Improvement, in each case where such
Acquisition or Capital Improvement involves assets that, if such assets had
been acquired by the Partnership as of the date that is one year prior to
the first day of the Quarter in which such Acquisition is to be consummated
or such Capital Improvement is to be completed, would have resulted, on a
pro forma basis, in an increase in:
(A) the amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding Units) with respect
to each of the four most recently completed Quarters (on a pro forma
basis as described below) as compared to
(B) the actual amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all Outstanding Units) (excluding
Adjusted Operating Surplus attributable to the Acquisition or Capital
Improvement) with respect to each of such four most recently completed
Quarters.
If the issuance of Parity Units with respect to an Acquisition or Capital
Improvement occurs within the first four full Quarters after the Closing Date,
then Adjusted Operating Surplus as used in clauses (A) (subject to the
succeeding sentence) and (B) above shall be calculated (i) for each Quarter, if
any, that commenced after the Closing Date for which actual results of
operations are available, based on the actual Adjusted Operating Surplus of the
Partnership generated with respect to such Quarter, and (ii) for each other
Quarter, on a pro forma basis consistent with the procedures, as applicable, set
forth in Appendix D to the Registration Statement. Furthermore, the amount in
clause (A) shall be determined on a pro forma basis assuming that (1) all of the
Parity Units to be issued in connection with or within 365 days of such
Acquisition or Capital Improvement had been issued and outstanding, (2) all
indebtedness for borrowed money to be incurred or assumed in connection with
such Acquisition or Capital Improvement (other than any such indebtedness that
is to be repaid with the proceeds of such issuance of Parity Units) had been
incurred or assumed, in each case as of the commencement of such four-Quarter
period, (3) the personnel expenses that would have been incurred by the
Partnership in the operation of the acquired assets are the personnel expenses
for employees to be retained by the Partnership in the operation of the acquired
assets, and (4) the non-personnel costs and expenses are computed on the same
basis as those incurred by the Partnership in the operation of the Partnership's
business at similarly situated Partnership facilities.
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(c) During the Subordination Period, the Partnership shall not issue
(and shall not issue any options, rights, warrants or appreciation rights
relating to) additional Partnership Securities having rights to
distributions or in liquidation ranking prior or senior to the Common Units,
without the prior approval of the holders of a Unit Majority.
(d) No fractional Units shall be issued by the Partnership.
Section 5.8 CONVERSION OF SUBORDINATED UNITS.
(a) A total of one-third of the Subordinated Units Outstanding
immediately after the closing of the Over-Allotment Option (or the
expiration of the Over-Allotment Option unexercised) will convert into
Common Units on a one-for-one basis on the first day after the Record Date
for distribution in respect of any Quarter ending on or after June 30, 2002,
in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units and Outstanding Subordinated Units with respect to each of
the three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Common Units and Subordinated Units that were
Outstanding during such periods;
(ii) the Adjusted Operating Surplus generated during each of the
three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Common Units and Subordinated Units that were
Outstanding during such periods on a fully-diluted basis (i.e. taking
into account for purposes of such determination all Outstanding Common
Units, all Outstanding Subordinated Units, all Common Units and
Subordinated Units issuable upon exercise of employee options that have,
as of the date of determination, already vested or are scheduled to vest
prior to the end of the Quarter immediately following the Quarter with
respect to which such determination is made, and all Common Units and
Subordinated Units that have, as of the date of determination, been
earned by but not yet issued to management of the Partnership in respect
of incentive compensation), plus the related distribution on the General
Partner Interest in the Partnership and the general partner interest in
the Intermediate Partnership, during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero.
(b) An additional one-third of the Subordinated Units Outstanding
immediately after the closing of the Over-Allotment Option (or the
expiration of the Over-Allotment Option unexercised) will convert into
Common Units on a one-for-one basis on the first day after the Record Date
for distribution in respect of any Quarter ending on or after June 30, 2003,
in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units and Outstanding Subordinated Units with respect to each of
the three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Common Units and Subordinated Units that were
Outstanding during such periods;
(ii) the Adjusted Operating Surplus generated during each of the
three consecutive, non-overlapping four-Quarter periods immediately
preceding such date equaled or exceeded the sum of the Minimum Quarterly
Distribution on all of the Common Units and Subordinated Units that were
Outstanding during such periods on a fully-diluted basis (i.e. taking
into account for purposes of such determination all Outstanding Common
Units, all Outstanding Subordinated Units, all Common Units and
Subordinated Units issuable upon exercise of employee options that have,
as of the date of determination, already vested or are scheduled to vest
prior to the end of the Quarter immediately following the Quarter with
respect to which such determination is made, and all Common Units and
33
Subordinated Units that have, as of the date of determination, been
earned by but not yet issued to management of the Partnership in respect
of incentive compensation), plus the related distribution on the General
Partner Interest in the Partnership and the general partner interest in
the Intermediate Partnership, during such periods; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero;
provided, however, that the conversion of Subordinated Units pursuant to this
Section 5.8(b) may not occur until at least one year following the conversion of
Subordinated Units pursuant to Section 5.8(a).
(c) In the event that less than all of the Outstanding Subordinated
Units shall convert into Common Units pursuant to Section 5.8(a) or 5.8(b)
at a time when there shall be more than one holder of Subordinated Units,
then, unless all of the holders of Subordinated Units shall agree to a
different allocation, the Subordinated Units that are to be converted into
Common Units shall be allocated among the holders of Subordinated Units pro
rata based on the number of Subordinated Units held by each such holder.
(d) Any Subordinated Units that are not converted into Common Units
pursuant to Sections 5.8(a) and (b) shall convert into Common Units on a
one-for-one basis on the first day following the Record Date for
distributions in respect of the final Quarter of the Subordination Period.
(e) Notwithstanding any other provision of this Agreement, all the then
Outstanding Subordinated Units will automatically convert into Common Units
on a one-for-one basis as set forth in, and pursuant to the terms of,
Section 11.4.
(f) A Subordinated Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b).
Section 5.9 LIMITED PREEMPTIVE RIGHT.
Except as provided in this Section 5.9 and in Section 5.2(b), no Person
shall have any preemptive, preferential or other similar right with respect to
the issuance of any Partnership Security, whether unissued, held in the treasury
or hereafter created. The General Partner shall have the right (but not
obligation), which it may from time to time assign in whole or in part to any of
its Affiliates, to purchase Partnership Securities from the Partnership
whenever, and on the same terms that, the Partnership issues Partnership
Securities to Persons other than the General Partner and its Affiliates, to the
extent necessary to maintain the Percentage Interests of the General Partner and
its Affiliates equal to that which existed immediately prior to the issuance of
such Partnership Securities.
Section 5.10 SPLITS AND COMBINATION.
(a) Subject to Sections 5.10(d), 6.6 and 6.9 (dealing with adjustments
of distribution levels), the Partnership may make a Pro Rata distribution of
Partnership Securities to all Record Holders or may effect a subdivision or
combination of Partnership Securities so long as, after any such event, each
Partner shall have the same Percentage Interest in the Partnership as before
such event, and any amounts calculated on a per Unit basis (including any
Common Unit Arrearage, Cumulative Common Unit Arrearage or Unrecovered
Capital) or stated as a number of Units (including the number of
Subordinated Units that may convert prior to the end of the Subordination
Period and the number of additional Parity Units that may be issued pursuant
to Section 5.7 without a Unitholder vote) are proportionately adjusted
retroactive to the beginning of the Partnership.
(b) Whenever such a distribution, subdivision or combination of
Partnership Securities is declared, the General Partner shall select a
Record Date as of which the distribution, subdivision or combination shall
be effective and shall send notice thereof at least 20 days
34
prior to such Record Date to each Record Holder as of a date not less than
10 days prior to the date of such notice. The General Partner also may cause
a firm of independent public accountants selected by it to calculate the
number of Partnership Securities to be held by each Record Holder after
giving effect to such distribution, subdivision or combination. The General
Partner shall be entitled to rely on any certificate provided by such firm
as conclusive evidence of the accuracy of such calculation.
(c) Promptly following any such distribution, subdivision or
combination, the Partnership may issue Certificates to the Record Holders of
Partnership Securities as of the applicable Record Date representing the new
number of Partnership Securities held by such Record Holders, or the General
Partner may adopt such other procedures as it may deem appropriate to
reflect such changes. If any such combination results in a smaller total
number of Partnership Securities Outstanding, the Partnership shall require,
as a condition to the delivery to a Record Holder of such new Certificate,
the surrender of any Certificate held by such Record Holder immediately
prior to such Record Date.
(d) The Partnership shall not issue fractional Units upon any
distribution, subdivision or combination of Units. If a distribution,
subdivision or combination of Units would result in the issuance of
fractional Units but for the provisions of Section 5.7(d) and this Section
5.10(d), each fractional Unit shall be rounded to the nearest whole Unit
(and a 0.5 Unit shall be rounded to the next higher Unit).
Section 5.11 FULLY PAID AND NON-ASSESSABLE NATURE OF LIMITED PARTNER INTERESTS.
All Limited Partner Interests issued pursuant to, and in accordance with the
requirements of, this Article V shall be fully paid and non-assessable Limited
Partner Interests in the Partnership, except as such non-assessability may be
affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
(a) NET INCOME. After giving effect to the special allocations set forth
in Section 6.1(d), Net Income for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Income
for such taxable period shall be allocated as follows:
(i) First, 100% to the General Partner in an amount equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(iii) for all previous taxable periods until the aggregate Net
Income allocated to the General Partner pursuant to this Section
6.1(a)(i) for the current taxable period and all previous taxable periods
is equal to the aggregate Net Losses allocated to the General Partner
pursuant to Section 6.1(b)(iii) for all previous taxable periods;
(ii) Second, 1% to the General Partner in an amount equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(ii) for all previous taxable periods and 99% to the Unitholders,
in accordance with their respective Percentage Interests, until the
aggregate Net Income allocated to such Partners pursuant to this Section
6.1(a)(ii) for the current taxable period and all previous taxable
periods is equal to the aggregate Net Losses allocated to such Partners
pursuant to Section 6.1(b)(ii) for all previous taxable periods; and
35
(iii) Third, the balance, if any, 100% to the General Partner and the
Unitholders in accordance with their respective Percentage Interests.
(b) NET LOSSES. After giving effect to the special allocations set forth
in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses
for such taxable period shall be allocated as follows:
(i) First, 1% to the General Partner and 99% to the Unitholders, Pro
Rata, until the aggregate Net Losses allocated pursuant to this Section
6.1(b)(i) for the current taxable period and all previous taxable periods
is equal to the aggregate Net Income allocated to such Partners pursuant
to Section 6.1(a)(iii) for all previous taxable periods, provided that
the Net Losses shall not be allocated pursuant to this Section 6.1(b)(i)
to the extent that such allocation would cause any Unitholder to have a
deficit balance in its Adjusted Capital Account at the end of such
taxable period (or increase any existing deficit balance in its Adjusted
Capital Account);
(ii) Second, 1% to the General Partner and 99% to the Unitholders,
Pro Rata; provided, that Net Losses shall not be allocated pursuant to
this Section 6.1(b)(ii) to the extent that such allocation would cause
any Unitholder to have a deficit balance in its Adjusted Capital Account
at the end of such taxable period (or increase any existing deficit
balance in its Adjusted Capital Account);
(iii) Third, the balance, if any, 100% to the General Partner.
(c) NET TERMINATION GAINS AND LOSSES. After giving effect to the special
allocations set forth in Section 6.1(d), all items of income, gain, loss and
deduction taken into account in computing Net Termination Gain or Net
Termination Loss for each taxable period shall be allocated in the same
manner as such Net Termination Gain or Net Termination Loss is allocated
hereunder. All allocations under this Section 6.1(c) shall be made after
Capital Account balances have been adjusted by all other allocations
provided under this Section 6.1 and after all distributions of Available
Cash provided under Sections 6.4 and 6.5 have been made; provided, however,
that solely for purposes of this Section 6.1(c), Capital Accounts shall not
be adjusted for distributions made pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
among the Partners in the following manner (and the Capital Accounts of
the Partners shall be increased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its Capital
Account, in the proportion that such deficit balance bears to the total
deficit balances in the Capital Accounts of all Partners, until each such
Partner has been allocated Net Termination Gain equal to any such deficit
balance in its Capital Account;
(B) Second, 99% to all Unitholders holding Common Units, Pro Rata,
and 1% to the General Partner until the Capital Account in respect of
each Common Unit then Outstanding is equal to the sum of (1) its
Unrecovered Capital plus (2) the Minimum Quarterly Distribution for the
Quarter during which the Liquidation Date occurs, reduced by any
distribution pursuant to Section 6.4(a)(i) or (b)(i) with respect to such
Common Unit for such Quarter (the amount determined pursuant to this
clause (2) is hereinafter defined as the "UNPAID MQD") plus (3) any then
existing Cumulative Common Unit Arrearage;
(C) Third, if such Net Termination Gain is recognized (or is deemed
to be recognized) prior to the expiration of the Subordination Period,
99% to all Unitholders holding
36
Subordinated Units, Pro Rata, and 1% to the General Partner until the
Capital Account in respect of each Subordinated Unit then Outstanding
equals the sum of (1) its Unrecovered Capital, plus (2) the Minimum
Quarterly Distribution for the Quarter during which the Liquidation Date
occurs, reduced by any distribution pursuant to Section 6.4(a)(iii) with
respect to such Subordinated Unit for such Quarter;
(D) Fourth, 85.8673% to all Unitholders, Pro Rata, 13.1327% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until the Capital Account in respect of each Common Unit
then Outstanding is equal to the sum of (1) its Unrecovered Capital, plus
(2) the Unpaid MQD, plus (3) any then existing Cumulative Common Unit
Arrearage, plus (4) the excess of (aa) the First Target Distribution less
the Minimum Quarterly Distribution for each Quarter of the Partnership's
existence over (bb) the cumulative per Unit amount of any distributions
of Operating Surplus that was distributed pursuant to Sections 6.4(a)(iv)
and 6.4(b)(ii) (the sum of (1) plus (2) plus (3) plus (4) is hereinafter
defined as the "FIRST LIQUIDATION TARGET AMOUNT");
(E) Fifth, 75.7653% to all Unitholders, Pro Rata, 23.2347% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until the Capital Account in respect of each Common Unit
then Outstanding is equal to the sum of (1) the First Liquidation Target
Amount, plus (2) the excess of (aa) the Second Target Distribution less
the First Target Distribution for each Quarter of the Partnership's
existence over (bb) the cumulative per Unit amount of any distributions
of Operating Surplus that was distributed pursuant to Sections 6.4(a)(v)
and 6.4(b)(iii) (the sum of (1) plus (2) is hereinafter defined as the
"SECOND LIQUIDATION TARGET AMOUNT");
(F) Finally, any remaining amount 50.5102% to all Unitholders, Pro
Rata, 48.4898% to the holders of the Incentive Distribution Rights, Pro
Rata, and 1% to the General Partner.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated
among the Partners in the following manner (and the Capital Accounts of
the Partners shall be decreased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, if such Net Termination Loss is recognized (or is deemed
to be recognized) prior to the conversion of the last Outstanding
Subordinated Unit, 99% to the Unitholders holding Subordinated Units, Pro
Rata, and 1% to the General Partner until the Capital Account in respect
of each Subordinated Unit then Outstanding has been reduced to zero;
(B) Second, 99% to all Unitholders holding Common Units, Pro Rata,
and 1% to the General Partner until the Capital Account in respect of
each Common Unit then Outstanding has been reduced to zero; and
(C) Third, the balance, if any, 100% to the General Partner.
(d) SPECIAL ALLOCATIONS. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such
taxable period:
(i) PARTNERSHIP MINIMUM GAIN CHARGEBACK. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i). For purposes of this Section 6.1(d), each Partner's
Adjusted Capital Account balance shall be determined, and the allocation
of income or gain required hereunder shall be effected,
37
prior to the application of any other allocations pursuant to this
Section 6.1(d) with respect to such taxable period (other than an
allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii)). This Section
6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and
shall be interpreted consistently therewith.
(ii) CHARGEBACK OF PARTNER NONRECOURSE DEBT MINIMUM GAIN.
Notwithstanding any other provision of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain
for such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii). For purposes of this Section 6.1(d), each Partner's
Adjusted Capital Account balance shall be determined, and the allocation
of income or gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.1(d),
other than Section 6.1(d)(i) and other than an allocation pursuant to
Sections 6.1(d)(vi) and 6.1(d)(vii), with respect to such taxable period.
This Section 6.1(d)(ii) is intended to comply with the chargeback of
items of income and gain requirement in Treasury Regulation Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(III) PRIORITY ALLOCATIONS. (A) If the amount of cash or the Net
Agreed Value of any property distributed (except cash or property
distributed pursuant to Section 12.4) to any Unitholder with respect to
its Units for any taxable period is greater (on a per Unit basis) than
the amount of cash or the Net Agreed Value of property distributed to the
other Unitholders with respect to their Units (on a per Unit basis), then
(1) each Unitholder receiving such greater cash or property distribution
shall be allocated gross income in an amount equal to the product of (aa)
the amount by which the distribution (on a per Unit basis) to such
Unitholder exceeds the distribution (on a per Unit basis) to the
Unitholders receiving the smallest distribution and (bb) the number of
Units held by the Unitholder receiving the greater distribution; and (2)
the General Partner shall be allocated gross income in an aggregate
amount equal to 1/99th of the sum of the amounts allocated in clause (1)
above.
(B) After the application of Section 6.1(d)(iii)(A), all or any
portion of the remaining items of Partnership gross income or gain for
the taxable period, if any, shall be allocated 100% to the holders of
Incentive Distribution Rights, Pro Rata, until the aggregate amount of
such items allocated to the holders of Incentive Distribution Rights
pursuant to this paragraph 6.1(d)(iii)(B) for the current taxable period
and all previous taxable periods is equal to the cumulative amount of all
Incentive Distributions made to the holders of Incentive Distribution
Rights from the Closing Date to a date 45 days after the end of the
current taxable period.
(iv) QUALIFIED INCOME OFFSET. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership
income and gain shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate, to the extent required by the
Treasury Regulations promulgated under Section 704(b) of the Code, the
deficit balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section
6.1(d)(i) or (ii).
38
(v) GROSS INCOME ALLOCATIONS. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable
period in excess of the sum of (A) the amount such Partner is required to
restore pursuant to the provisions of this Agreement and (B) the amount
such Partner is deemed obligated to restore pursuant to Treasury
Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership gross income and gain in the
amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 6.1(d)(v) shall be made only if and
to the extent that such Partner would have a deficit balance in its
Capital Account as adjusted after all other allocations provided for in
this Section 6.1 have been tentatively made as if this Section 6.1(d)(v)
were not in this Agreement.
(vi) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its
good faith discretion that the Partnership's Nonrecourse Deductions must
be allocated in a different ratio to satisfy the safe harbor requirements
of the Treasury Regulations promulgated under Section 704(b) of the Code,
the General Partner is authorized, upon notice to the other Partners, to
revise the prescribed ratio to the numerically closest ratio that does
satisfy such requirements.
(vii) PARTNER NONRECOURSE DEDUCTIONS. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that bears
the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner
bears the Economic Risk of Loss with respect to a Partner Nonrecourse
Debt, such Partner Nonrecourse Deductions attributable thereto shall be
allocated between or among such Partners in accordance with the ratios in
which they share such Economic Risk of Loss.
(viii) NONRECOURSE LIABILITIES. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (A) the amount of Partnership
Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall
be allocated among the Partners in accordance with their respective
Percentage Interests.
(ix) CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(c) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to such Section of the Treasury Regulations.
(x) ECONOMIC UNIFORMITY. At the election of the General Partner with
respect to any taxable period ending upon, or after, the termination of
the Subordination Period, all or a portion of the remaining items of
Partnership gross income or gain for such taxable period, after taking
into account allocations pursuant to Section 6.1(d)(iii), shall be
allocated 100% to each Partner holding Subordinated Units that are
Outstanding as of the termination of the Subordination Period ("FINAL
SUBORDINATED UNITS") in the proportion of the number of Final
Subordinated Units held by such Partner to the total number of Final
Subordinated Units then Outstanding, until each such Partner has been
allocated an amount of gross income or gain which increases the Capital
Account maintained with respect to such Final
39
Subordinated Units to an amount equal to the product of (A) the number of
Final Subordinated Units held by such Partner and (B) the Per Unit
Capital Amount for a Common Unit. The purpose of this allocation is to
establish uniformity between the Capital Accounts underlying Final
Subordinated Units and the Capital Accounts underlying Common Units held
by Persons other than the General Partner and its Affiliates immediately
prior to the conversion of such Final Subordinated Units into Common
Units. This allocation method for establishing such economic uniformity
will only be available to the General Partner if the method for
allocating the Capital Account maintained with respect to the
Subordinated Units between the transferred and retained Subordinated
Units pursuant to Section 5.5(c)(ii) does not otherwise provide such
economic uniformity to the Final Subordinated Units.
(XI) CURATIVE ALLOCATION.
(A) Notwithstanding any other provision of this Section 6.1, other
than the Required Allocations, the Required Allocations shall be taken
into account in making the Agreed Allocations so that, to the extent
possible, the net amount of items of income, gain, loss and deduction
allocated to each Partner pursuant to the Required Allocations and the
Agreed Allocations, together, shall be equal to the net amount of such
items that would have been allocated to each such Partner under the
Agreed Allocations had the Required Allocations and the related Curative
Allocation not otherwise been provided in this Section 6.1.
Notwithstanding the preceding sentence, Required Allocations relating to
(1) Nonrecourse Deductions shall not be taken into account except to the
extent that there has been a decrease in Partnership Minimum Gain and (2)
Partner Nonrecourse Deductions shall not be taken into account except to
the extent that there has been a decrease in Partner Nonrecourse Debt
Minimum Gain. Allocations pursuant to this Section 6.1(d)(xi)(A) shall
only be made with respect to Required Allocations to the extent the
General Partner reasonably determines that such allocations will
otherwise be inconsistent with the economic agreement among the Partners.
Further, allocations pursuant to this Section 6.1(d)(xi)(A) shall be
deferred with respect to allocations pursuant to Sections 6.1(d)(xi)(A)
(1) and (2) to the extent the General Partner reasonably determines that
such allocations are likely to be offset by subsequent Required
Allocations.
(B) The General Partner shall have reasonable discretion, with
respect to each taxable period, to (1) apply the provisions of Section
6.1(d)(xi)(A) in whatever order is most likely to minimize the economic
distortions that might otherwise result from the Required Allocations,
and (2) divide all allocations pursuant to Section 6.1(d)(xi)(A) among
the Partners in a manner that is likely to minimize such economic
distortions.
(xii) CORRECTIVE ALLOCATIONS. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event or any
recognition of a Net Termination Loss, the following rules shall apply:
(A) In the case of any allocation of Additional Book Basis Derivative
Items (other than an allocation of Unrealized Gain or Unrealized Loss
under Section 5.5(d)), the General Partner shall allocate additional
items of gross income and gain away from the holders of Incentive
Distribution Rights to the Unitholders and the General Partner, or
additional items of deduction and loss away from the Unitholders and the
General Partner to the holders of Incentive Distribution Rights, to the
extent that the Additional Book Basis Derivative Items allocated to the
Unitholders or the General Partner exceed their Share of Additional Book
Basis Derivative Items. For this purpose, the Unitholders and the General
Partner shall be treated as being allocated Additional Book Basis
Derivative Items to the extent that such Additional Book Basis Derivative
Items have reduced the amount of income that would
40
otherwise have been allocated to the Unitholders or the General Partner
under the Partnership Agreement (e.g., Additional Book Basis Derivative
Items taken into account in computing cost of goods sold would reduce the
amount of book income otherwise available for allocation among the
Partners). Any allocation made pursuant to this Section 6.1(d)(xii)(A)
shall be made after all of the other Agreed Allocations have been made as
if this Section 6.1(d)(xii) were not in this Agreement and, to the extent
necessary, shall require the reallocation of items that have been
allocated pursuant to such other Agreed Allocations.
(B) In the case of any negative adjustments to the Capital Accounts
of the Partners resulting from a Book-Down Event or from the recognition
of a Net Termination Loss, such negative adjustment (1) shall first be
allocated, to the extent of the Aggregate Remaining Net Positive
Adjustments, in such a manner, as reasonably determined by the General
Partner, that to the extent possible the aggregate Capital Accounts of
the Partners will equal the amount which would have been the Capital
Account balance of the Partners if no prior Book-Up Events had occurred,
and (2) any negative adjustment in excess of the Aggregate Remaining Net
Positive Adjustments shall be allocated pursuant to Section 6.1(c).
(C) In making the allocations required under this Section
6.1(d)(xii), the General Partner, in its sole discretion, may apply
whatever conventions or other methodology it deems reasonable to satisfy
the purpose of this Section 6.1(d)(xii).
Section 6.2 ALLOCATIONS FOR TAX PURPOSES.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated
among the Partners in the same manner as its correlative item of "BOOK"
income, gain, loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated
for federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted
basis at the time of contribution; and (B) any item of Residual Gain or
Residual Loss attributable to a Contributed Property shall be allocated
among the Partners in the same manner as its correlative item of "BOOK"
gain or loss is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2)
second, in the event such property was originally a Contributed Property,
be allocated among the Partners in a manner consistent with Section
6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the
Partners in the same manner as its correlative item of "BOOK" gain or
loss is allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
41
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the General Partner shall have sole discretion to (i)
adopt such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of
this Agreement as appropriate (x) to reflect the proposal or promulgation of
Treasury Regulations under Section 704(b) or Section 704(c) of the Code or
(y) otherwise to preserve or achieve uniformity of the Limited Partner
Interests (or any class or classes thereof). The General Partner may adopt
such conventions, make such allocations and make such amendments to this
Agreement as provided in this Section 6.2(c) only if such conventions,
allocations or amendments would not have a material adverse effect on the
Partners, the holders of any class or classes of Limited Partner Interests
issued and Outstanding or the Partnership, and if such allocations are
consistent with the principles of Section 704 of the Code.
(d) The General Partner in its discretion may determine to depreciate or
amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the
extent of the unamortized Book-Tax Disparity) using a predetermined rate
derived from the depreciation or amortization method and useful life applied
to the Partnership's common basis of such property, despite any
inconsistency of such approach with Treasury Regulation Section
1.167(c)-l(a)(6), Proposed Treasury Regulation Section 1.197-2(g)(3), or any
successor regulations thereto. If the General Partner determines that such
reporting position cannot reasonably be taken, the General Partner may adopt
depreciation and amortization conventions under which all purchasers
acquiring Limited Partner Interests in the same month would receive
depreciation and amortization deductions, based upon the same applicable
rate as if they had purchased a direct interest in the Partnership's
property. If the General Partner chooses not to utilize such aggregate
method, the General Partner may use any other reasonable depreciation and
amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any Limited Partner Interests that would not have a
material adverse effect on the Limited Partners or the Record Holders of any
class or classes of Limited Partner Interests.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after
taking into account other required allocations of gain pursuant to this
Section 6.2, be characterized as Recapture Income in the same proportions
and to the same extent as such Partners (or their predecessors in interest)
have been allocated any deductions directly or indirectly giving rise to the
treatment of such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by
the Partnership for federal income tax purposes and allocated to the
Partners in accordance with the provisions hereof shall be determined
without regard to any election under Section 754 of the Code which may be
made by the Partnership; provided, however, that such allocations, once
made, shall be adjusted as necessary or appropriate to take into account
those adjustments permitted or required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction
attributable to a transferred Partnership Interest, shall for federal income
tax purposes, be determined on an annual basis and prorated on a monthly
basis and shall be allocated to the Partners as of the opening of the New
York Stock Exchange on the first Business Day of each month; provided,
however, that (i) such items for the period beginning on the Closing Date
and ending on the last day of the month in which the Option Closing Date or
the expiration of the Over-allotment Option occurs shall be allocated to the
Partners as of the opening of the New York Stock Exchange on the
42
first Business Day of the next succeeding month; and provided, further, that
gain or loss on a sale or other disposition of any assets of the Partnership
other than in the ordinary course of business shall be allocated to the
Partners as of the opening of the New York Stock Exchange on the first
Business Day of the month in which such gain or loss is recognized for
federal income tax purposes. The General Partner may revise, alter or
otherwise modify such methods of allocation as it determines necessary, to
the extent permitted or required by Section 706 of the Code and the
regulations or rulings promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner under
the provisions of this Article VI shall instead be made to the beneficial
owner of Limited Partner Interests held by a nominee in any case in which
the nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable
to the General Partner in its sole discretion.
Section 6.3 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS; DISTRIBUTIONS TO
RECORD HOLDERS.
(a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on June 30, 1999, an amount equal to 100% of Available Cash
with respect to such Quarter shall, subject to Section 17-607 of the
Delaware Act, be distributed in accordance with this Article VI by the
Partnership to the Partners as of the Record Date selected by the General
Partner in its reasonable discretion. All amounts of Available Cash
distributed by the Partnership on any date from any source shall be deemed
to be Operating Surplus until the sum of all amounts of Available Cash
theretofore distributed by the Partnership to the Partners pursuant to
Section 6.4 equals the Operating Surplus from the Closing Date through the
close of the immediately preceding Quarter. Any remaining amounts of
Available Cash distributed by the Partnership on such date shall, except as
otherwise provided in Section 6.5, be deemed to be "CAPITAL SURPLUS." All
distributions required to be made under this Agreement shall be made subject
to Section 17-607 of the Delaware Act.
(b) Notwithstanding Section 6.3(a), in the event of the dissolution and
liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, other than from borrowings
described in (a)(ii) of the definition of Available Cash, shall be applied
and distributed solely in accordance with, and subject to the terms and
conditions of, Section 12.4.
(c) The General Partner shall have the discretion to treat taxes paid by
the Partnership on behalf of, or amounts withheld with respect to, all or
less than all of the Partners, as a distribution of Available Cash to such
Partners.
(d) Each distribution in respect of a Partnership Interest shall be paid
by the Partnership, directly or through the Transfer Agent or through any
other Person or agent, only to the Record Holder of such Partnership
Interest as of the Record Date set for such distribution. Such payment shall
constitute full payment and satisfaction of the Partnership's liability in
respect of such payment, regardless of any claim of any Person who may have
an interest in such payment by reason of an assignment or otherwise.
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Section 6.4 DISTRIBUTIONS OF AVAILABLE CASH FROM OPERATING SURPLUS.
(a) DURING SUBORDINATION PERIOD. Available Cash with respect to any
Quarter within the Subordination Period that is deemed to be Operating
Surplus pursuant to the provisions of Section 6.3 or 6.5 shall, subject to
Section 17-607 of the Delaware Act, be distributed as follows, except as
otherwise required by Section 5.6(b) in respect of additional Partnership
Securities issued pursuant thereto:
(i) First, 99% to the Unitholders holding Common Units, Pro Rata, and
1% to the General Partner until there has been distributed in respect of
each Common Unit then Outstanding an amount equal to the Minimum
Quarterly Distribution for such Quarter;
(ii) Second, 99% to the Unitholders holding Common Units, Pro Rata,
and 1% to the General Partner until there has been distributed in respect
of each Common Unit then Outstanding an amount equal to the Cumulative
Common Unit Arrearage existing with respect to such Quarter;
(iii) Third, 99% to the Unitholders holding Subordinated Units, Pro
Rata, and 1% to the General Partner until there has been distributed in
respect of each Subordinated Unit then Outstanding an amount equal to the
Minimum Quarterly Distribution for such Quarter;
(iv) Fourth, 85.8673% to all Unitholders, Pro Rata, 13.1327% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the First Target
Distribution over the Minimum Quarterly Distribution for such Quarter;
(v) Fifth, 75.7653% to all Unitholders, Pro Rata, 23.2347% to the
holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the Second Target
Distribution over the First Target Distribution for such Quarter; and
(vi) Thereafter, 50.5102% to all Unitholders, Pro Rata, 48.4898% to
the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution and the Second Target Distribution have been reduced to zero
pursuant to the second sentence of Section 6.6(a), the distribution of Available
Cash that is deemed to be Operating Surplus with respect to any Quarter will be
made solely in accordance with Section 6.4(a)(vi).
(b) AFTER SUBORDINATION PERIOD. Available Cash with respect to any
Quarter after the Subordination Period that is deemed to be Operating
Surplus pursuant to the provisions of Section 6.3 or 6.5, subject to Section
17-607 of the Delaware Act, shall be distributed as follows, except as
otherwise required by Section 5.6(b) in respect of additional Partnership
Securities issued pursuant thereto:
(i) First, 99% to all Unitholders, Pro Rata, and 1% to the General
Partner until there has been distributed in respect of each Unit then
Outstanding an amount equal to the Minimum Quarterly Distribution for
such Quarter;
(ii) Second, 85.8673% to all Unitholders, Pro Rata, and 13.1327% to
the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been distributed in respect of each Unit
then Outstanding an amount equal to the excess of the First Target
Distribution over the Minimum Quarterly Distribution for such Quarter;
(iii) Third, 75.7653% to all Unitholders, Pro Rata, and 23.2347% to
the holders of the Incentive Distribution Rights, Pro Rata, and 1% to the
General Partner until there has been
44
distributed in respect of each Unit then Outstanding an amount equal to
the excess of the Second Target Distribution over the First Target
Distribution for such Quarter; and
(iv) Thereafter, 50.5102% to all Unitholders, Pro Rata, and 48.4898%
to the holders of the Incentive Distribution Rights, Pro Rata, and 1% to
the General Partner;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution and the Second Target Distribution have been reduced to zero
pursuant to the second sentence of Section 6.6(a), the distribution of Available
Cash that is deemed to be Operating Surplus with respect to any Quarter will be
made solely in accordance with Section 6.4(b)(iv).
Section 6.5 DISTRIBUTIONS OF AVAILABLE CASH FROM CAPITAL SURPLUS.
Available Cash that is deemed to be Capital Surplus pursuant to the
provisions of Section 6.3(a) shall, subject to Section 17-607 of the Delaware
Act, be distributed, unless the provisions of Section 6.3 require otherwise, 99%
to all Unitholders, Pro Rata, and 1% to the General Partner until a hypothetical
holder of a Common Unit acquired on the Closing Date has received with respect
to such Common Unit, during the period since the Closing Date through such date,
distributions of Available Cash that are deemed to be Capital Surplus in an
aggregate amount equal to the Initial Unit Price. Available Cash that is deemed
to be Capital Surplus shall then be distributed 99% to all Unitholders holding
Common Units, Pro Rata, and 1% to the General Partner until there has been
distributed in respect of each Common Unit then Outstanding an amount equal to
the Cumulative Common Unit Arrearage. Thereafter, all Available Cash shall be
distributed as if it were Operating Surplus and shall be distributed in
accordance with Section 6.4.
Section 6.6 ADJUSTMENT OF MINIMUM QUARTERLY DISTRIBUTION AND TARGET DISTRIBUTION
LEVELS.
(a) The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution, Common Unit Arrearages and Cumulative Common
Unit Arrearages shall be proportionately adjusted in the event of any
distribution, combination or subdivision (whether effected by a distribution
payable in Units or otherwise) of Units or other Partnership Securities in
accordance with Section 5.10. In the event of a distribution of Available
Cash that is deemed to be from Capital Surplus, the then applicable Minimum
Quarterly Distribution, First Target Distribution and Second Target
Distribution shall be adjusted proportionately downward to equal the product
obtained by multiplying the otherwise applicable Minimum Quarterly
Distribution, First Target Distribution and Second Target Distribution, as
the case may be, by a fraction of which the numerator is the Unrecovered
Capital of the Common Units immediately after giving effect to such
distribution and of which the denominator is the Unrecovered Capital of the
Common Units immediately prior to giving effect to such distribution. These
adjustments will not apply to the quarter in which the distributions of
Available Cash that are deemed to be from Capital Surplus trigger these
adjustments.
(b) The Minimum Quarterly Distribution, First Target Distribution and
Second Target Distribution shall also be subject to adjustment pursuant to
Section 6.9.
45
Section 6.7 SPECIAL PROVISIONS RELATING TO THE HOLDERS OF SUBORDINATED UNITS.
(a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain,
loss and deduction and distributions made with respect to Common Units, the
holder of a Subordinated Unit shall have all of the rights and obligations
of a Unitholder holding Common Units hereunder; provided, however, that
immediately upon the conversion of Subordinated Units into Common Units
pursuant to Section 5.8, the Unitholder holding a Subordinated Unit shall
possess all of the rights and obligations of a Unitholder holding Common
Units hereunder, including the right to vote as a Common Unitholder and the
right to participate in allocations of income, gain, loss and deduction and
distributions made with respect to Common Units; provided, however, that
such converted Subordinated Units shall remain subject to the provisions of
Sections 5.5(c)(ii), 6.1(d)(x) and 6.7(b).
(b) The Unitholder holding a Subordinated Unit which has converted into
a Common Unit pursuant to Section 5.8 shall not be issued a Common Unit
Certificate pursuant to Section 4.1, and shall not be permitted to transfer
its converted Subordinated Units to a Person which is not an Affiliate of
the holder until such time as the General Partner determines, based on
advice of counsel, that a converted Subordinated Unit should have, as a
substantive matter, like intrinsic economic and federal income tax
characteristics, in all material respects, to the intrinsic economic and
federal income tax characteristics of an Initial Common Unit. In connection
with the condition imposed by this Section 6.7(b), the General Partner may
take whatever reasonable steps are required to provide economic uniformity
to the converted Subordinated Units in preparation for a transfer of such
converted Subordinated Units, including the application of Sections
5.5(c)(ii) and 6.1(d)(x); provided, however, that no such steps may be taken
that would have a material adverse effect on the Unitholders holding Common
Units represented by Common Unit Certificates.
Section 6.8 SPECIAL PROVISIONS RELATING TO THE HOLDERS OF INCENTIVE DISTRIBUTION
RIGHTS.
Notwithstanding anything to the contrary set forth in this Agreement, the
holders of the Incentive Distribution Rights (a) shall (i) possess the rights
and obligations provided in this Agreement with respect to a Limited Partner
pursuant to Articles III and VII and (ii) have a Capital Account as a Partner
pursuant to Section 5.5 and all other provisions related thereto and (b) shall
not (i) be entitled to vote on any matters requiring the approval or vote of the
holders of Outstanding Units, (ii) be entitled to any distributions other than
as provided in Sections 6.4(a)(iv), (v) and (vi), 6.4(b)(ii), (iii) and (iv) and
12.4 or (iii) be allocated items of income, gain, loss or deduction other than
as specified in this Article VI.
46
Section 6.9 ENTITY-LEVEL TAXATION.
If legislation is enacted or the interpretation of existing legislation is
modified by the relevant governmental authority which causes the Partnership,
the Intermediate Partnership or Northern Border Pipeline to be treated as an
association taxable as a corporation or otherwise subjects the Partnership, the
Intermediate Partnership or Northern Border Pipeline to entity-level taxation
for federal income tax purposes, the then applicable Minimum Quarterly
Distribution, First Target Distribution and Second Target Distribution shall be
adjusted to equal the product obtained by multiplying (a) the amount thereof by
(b) one minus the sum of (i) the highest marginal federal corporate (or other
entity, as applicable) income tax rate that could apply to the Partnership, the
Intermediate Partnership or Northern Border Pipeline for the taxable year of the
Partnership, the Intermediate Partnership or Northern Border Pipeline in which
such Quarter occurs (expressed as a decimal) plus (ii) the effective overall
state and local income tax rate (expressed as a decimal) that would have been
applicable to the Partnership, the Intermediate Partnership or Northern Border
Pipeline for the calendar year next preceding the calendar year in which such
Quarter occurs (after taking into account the benefit of any deduction allowable
for federal income tax purposes with respect to the payment of state and local
income taxes), but only to the extent of the increase in such rates resulting
from such legislation or interpretation. Such effective overall state and local
income tax rate shall be determined for the taxable year next preceding the
first taxable year during which the Partnership, the Intermediate Partnership or
Northern Border Pipeline is taxable for federal income tax purposes as an
association taxable as a corporation or is otherwise subject to entity-level
taxation by determining such rate as if the Partnership, the Intermediate
Partnership or Northern Border Pipeline had been subject to such state and local
taxes during such preceding taxable year.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 MANAGEMENT.
(a) The General Partner shall conduct, direct and manage all activities
of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner, and no
Limited Partner or Assignee shall have any management power over the
business and affairs of the Partnership. In addition to the powers now or
hereafter granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner under any other
provision of this Agreement, the General Partner, subject to Section 7.3,
shall have full power and authority to do all things and on such terms as
it, in its sole discretion, may deem necessary or appropriate to conduct the
business of the Partnership, to exercise all powers set forth in Section 2.5
and to effectuate the purposes set forth in Section 2.4, including the
following:
(i) the making of any expenditures, the lending or borrowing of
money, the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness, including indebtedness that is convertible into Partnership
Securities, and the incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership
or the merger or other combination of the Partnership with or into
another Person (the matters described in this clause (iii) being subject,
however, to any prior approval that may be required by Section 7.3);
47
(iv) the use of the assets of the Partnership (including cash on
hand) for any purpose consistent with the terms of this Agreement,
including the financing of the conduct of the operations of the
Partnership Group or making investments in or loans to JV Entities;
subject to Section 7.6(a), the lending of funds to other Persons
(including the Intermediate Partnership); the repayment of obligations of
the Partnership Group or any JV Entity and the making of capital
contributions to any Group Member or JV Entity;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including contracts, conveyances or
instruments that limit the liability of the Partnership under contractual
arrangements to all or particular assets of the Partnership, with the
other party to the contract to have no recourse against the General
Partner or its assets other than its interest in the Partnership, even if
these arrangements result in the terms of the transaction being less
favorable to the Partnership than would otherwise be the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms
of employment or hiring;
(viii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited
or general partnerships, joint ventures, corporations or other
relationships (including the acquisition of interests in, and the
contributions of property to, the Intermediate Partnership from time to
time) subject to the restrictions set forth in Section 2.4;
(x) the control of any matters affecting the rights and obligations
of the Partnership, including the bringing and defending of actions at
law or in equity and otherwise engaging in the conduct of litigation and
the incurring of legal expense and the settlement of claims and
litigation;
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National
Securities Exchange and the delisting of some or all of the Limited
Partner Interests from, or requesting that trading be suspended on, any
such exchange (subject to any prior approval that may be required under
Section 4.8);
(xiii) unless restricted or prohibited by Section 5.7, the issuance,
purchase, sale or other acquisition or disposition of Partnership
Securities or options, rights, warrants and appreciation rights relating
to Partnership Securities; and
(xiv) the undertaking of any action in connection with the
Partnership's participation in the Intermediate Partnership as a partner.
(b) Notwithstanding any other provision of this Agreement, the
Intermediate Partnership Agreement, the Delaware Act or any applicable law,
rule or regulation, each of the Partners and the Assignees and each other
Person who may acquire an interest in Partnership Securities hereby (i)
approves, ratifies and confirms the execution, delivery and performance by
the parties thereto of the Intermediate Partnership Agreement, the
Underwriting Agreement, the Contribution and Conveyance Agreement and the
other agreements, documents and instruments described in or filed as
exhibits to the Registration Statement that are related to the transactions
contemplated by the Registration Statement; (ii) agrees that the General
Partner
48
(on its own or through any officer or attorney-in-fact of the Partnership)
is authorized to execute, deliver and perform the agreements referred to in
clause (i) of this sentence and the other agreements, acts, transactions and
matters described in or contemplated by the Registration Statement on behalf
of the Partnership without any further act, approval or vote of the Partners
or the Assignees or the other Persons who may acquire an interest in
Partnership Securities; and (iii) agrees that the execution, delivery or
performance by the General Partner, any Group Member or any Affiliate of any
of them, of this Agreement or any agreement authorized or permitted under
this Agreement (including the exercise by the General Partner or any
Affiliate of the General Partner of the rights accorded pursuant to Article
XV), shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or the Limited Partners or any
other Persons under this Agreement (or any other agreements) or of any duty
stated or implied by law or equity.
Section 7.2 CERTIFICATE OF LIMITED PARTNERSHIP.
The General Partner has caused the Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the limited partners have limited liability) in the
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership or other entity in which
the limited partners have limited liability) under the laws of the State of
Delaware or of any other state in which the Partnership may elect to do business
or own property. Subject to the terms of Section 3.4(a), the General Partner
shall not be required, before or after filing, to deliver or mail a copy of the
Certificate of Limited Partnership, any qualification document or any amendment
thereto to any Limited Partner.
Section 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY.
(a) The General Partner may not, without written approval of the
specific act by holders of all of the Outstanding Limited Partner Interests
or by other written instrument executed and delivered by holders of all of
the Outstanding Limited Partner Interests subsequent to the date of this
Agreement, take any action in contravention of this Agreement, including,
except as otherwise provided in this Agreement, (i) committing any act that
would make it impossible to carry on the ordinary business of the
Partnership; (ii) possessing Partnership property, or assigning any rights
in specific Partnership property, for other than a Partnership purpose;
(iii) admitting a Person as a Partner; (iv) amending this Agreement in any
manner; or (v) transferring its interest as general partner of the
Partnership.
(b) Except as provided in Articles XII and XIV, the General Partner may
not sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related
transactions (including by way of merger, consolidation or other
combination) or approve on behalf of the Partnership the sale, exchange or
other disposition of all or substantially all of the assets of the
Intermediate Partnership, taken as a whole, without the approval of holders
of a Unit Majority; provided however that this provision shall not preclude
or limit the General Partner's ability to mortgage, pledge, hypothecate or
grant a security interest in all or substantially all of the assets of the
Partnership or Intermediate Partnership and shall not apply to any sale of
any or all of the assets of the Partnership or Intermediate Partnership
pursuant to the foreclosure of, or other realization upon, any such
encumbrance. Without the approval of holders of a Unit Majority, the General
Partner shall not, on behalf of the Partnership, (i) consent to any
amendment to the Intermediate Partnership
49
Agreement or, except as expressly permitted by Section 7.9(d), take any
action permitted to be taken by a partner of the Intermediate Partnership,
in either case, that would have a material adverse effect on the Partnership
as a partner of the Intermediate Partnership or (ii) except as permitted
under Sections 4.6, 11.1 or 11.2, elect or cause the Partnership to elect a
successor general partner of the Partnership or the Intermediate
Partnership.
(c) The General Partner may not approve or consent to the conversion of
Northern Border Pipeline or any other JV Entity that is not then taxable as
an entity for federal income tax purposes to corporate form without first
obtaining the approval of the holders of at least 66 2/3% of the Outstanding
Units during the Subordination Period and at least a majority of the
Outstanding Units thereafter.
Section 7.4 REIMBURSEMENT OF THE GENERAL PARTNER.
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement or in the Intermediate Partnership Agreement, the General Partner
shall not be compensated for its services as general partner or managing
member of any Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or such
other reasonable basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments
it makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of
the General Partner to perform services for the Partnership or for the
General Partner in the discharge of its duties to the Partnership), and (ii)
all other necessary or appropriate expenses allocable to the Partnership or
otherwise reasonably incurred by the General Partner in connection with
operating the Partnership's business (including expenses allocated to the
General Partner by its Affiliates). The General Partner shall determine the
expenses that are allocable to the Partnership in any reasonable manner
determined by the General Partner in its sole discretion. Reimbursements
pursuant to this Section 7.4 shall be in addition to any reimbursement to
the General Partner as a result of indemnification pursuant to Section 7.7.
(c) Subject to Section 5.7, the General Partner, in its sole discretion
and without the approval of the Limited Partners (who shall have no right to
vote in respect thereof), may propose and adopt on behalf of the Partnership
employee benefit plans, employee programs and employee practices (including
plans, programs and practices involving the issuance of Partnership
Securities or options to purchase Partnership Securities), or cause the
Partnership to issue Partnership Securities in connection with, or pursuant
to, any employee benefit plan, employee program or employee practice
maintained or sponsored by the General Partner or any of its Affiliates, in
each case for the benefit of employees of the General Partner, any Group
Member or any Affiliate, or any of them, in respect of services performed,
directly or indirectly, for the benefit of the Partnership Group. The
Partnership agrees to issue and sell to the General Partner or any of its
Affiliates any Partnership Securities that the General Partner or such
Affiliate is obligated to provide to any employees pursuant to any such
employee benefit plans, employee programs or employee practices. Expenses
incurred by the General Partner in connection with any such plans, programs
and practices (including the net cost to the General Partner or such
Affiliate of Partnership Securities purchased by the General Partner or such
Affiliate from the Partnership to fulfill options or awards under such
plans, programs and practices) shall be reimbursed in accordance with
Section 7.4(b). Any and all obligations of the General Partner under any
employee benefit plans, employee programs or employee practices adopted by
the General Partner as permitted by this Section 7.4(c) shall constitute
obligations of the General Partner hereunder and shall be assumed by any
successor General Partner approved pursuant to Section 11.1 or 11.2 or the
transferee of or successor to all of the General Partner's General Partner
Interest pursuant to Section 4.6.
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Section 7.5 OUTSIDE ACTIVITIES.
(a) After the Closing Date, the General Partner, for so long as it is
the General Partner of the Partnership (i) agrees that its sole business
will be to act as the general partner (or managing member) of the
Partnership, the Intermediate Partnership, and any other partnership or
limited liability company of which the Partnership or the Intermediate
Partnership is, directly or indirectly, a partner or member and to undertake
activities that are ancillary or related thereto (including being a limited
partner in the Partnership) and (ii) shall not engage in any business or
activity or incur any debts or liabilities except in connection with or
incidental to (A) its performance as general partner (or managing member) of
one or more Group Members or as described in or contemplated by the
Registration Statement or (B) the acquiring, owning or disposing of debt or
equity securities or interests in any Group Member.
(b) Except as specifically restricted by Section 7.5(a), each Indemnitee
(other than the General Partner) shall have the right to engage in
businesses of any and every type and description and other activities for
profit and to engage in and possess an interest in other business ventures
of any and every type or description, whether in businesses engaged in or
anticipated to be engaged in by any Group Member or JV Entity, independently
or with others, including business interests and activities in direct
competition with the business and activities of any Group Member or JV
Entity, and none of the same shall constitute a breach of this Agreement or
any duty express or implied by law to any Group Member or JV Entity or any
Partner or Assignee. Neither any Group Member, any JV Entity, any Limited
Partner nor any other Person shall have any rights by virtue of this
Agreement, the Intermediate Partnership Agreement or the partnership
relationship established hereby or thereby in any business ventures of any
Indemnitee.
(c) Subject to the terms of Section 7.5(a) and Section 7.5(b), but
otherwise notwithstanding anything to the contrary in this Agreement, (i)
the engaging in competitive activities by any Indemnitees (other than the
General Partner) in accordance with the provisions of this Section 7.5 is
hereby approved by the Partnership and all Partners, (ii) it shall be deemed
not to be a breach of the General Partner's fiduciary duty or any other
obligation of any type whatsoever of the General Partner for the Indemnitees
(other than the General Partner) to engage in such business interests and
activities in preference to or to the exclusion of the Partnership and (iii)
the General Partner and the Indemnities shall have no obligation to present
business opportunities to the Partnership.
(d) The General Partner and any of its Affiliates may acquire Units or
other Partnership Securities in addition to those acquired on the Closing
Date and, except as otherwise provided in this Agreement, shall be entitled
to exercise all rights, powers and privileges (as General Partner, Limited
Partner or Assignee, as applicable) relating to such Units or Partnership
Securities.
(e) The term "AFFILIATES" when used in Section 7.5(a) and Section 7.5(d)
with respect to the General Partner shall not include any Group Member or
any Subsidiary of a Group Member.
(f) Anything in this Agreement to the contrary notwithstanding, to the
extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of
this Agreement purport or are interpreted to have the effect of restricting
the fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the General Partner to the Partnership and its
Limited Partners, or to constitute a waiver or consent by the Limited
Partners to any such restriction, such provisions shall be inapplicable and
have no effect in determining whether the General Partner has complied with
its fiduciary duties in connection with determinations made by it under
Section 7.5(a).
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Section 7.6 LOANS FROM THE GENERAL PARTNER; LOANS OR CONTRIBUTIONS FROM THE
PARTNERSHIP; CONTRACTS WITH AFFILIATES; CERTAIN RESTRICTIONS ON THE
GENERAL PARTNER.
(a) The General Partner or its Affiliates may lend to any Group Member
or JV Entity, and any Group Member or JV Entity may borrow from the General
Partner or any of its Affiliates, funds needed or desired by the Group
Member or JV Entity for such periods of time and in such amounts as the
General Partner may determine; provided, however, that in any such case the
lending party may not charge the borrowing party interest at a rate greater
than the rate that would be charged the borrowing party or impose terms less
favorable to the borrowing party than would be charged or imposed on the
borrowing party by unrelated lenders on comparable loans made on an
arm's-length basis (without reference to the lending party's financial
abilities or guarantees). The borrowing party shall reimburse the lending
party for any costs (other than any additional interest costs) incurred by
the lending party in connection with the borrowing of such funds. For
purposes of this Section 7.6(a) and Section 7.6(b), the term "GROUP MEMBER"
shall include any Affiliate of a Group Member that is controlled by the
Group Member. No Group Member may lend funds to the General Partner or any
of its Affiliates (other than another Group Member).
(b) The Partnership may lend or contribute to any Group Member or JV
Entity, and any Group Member or JV Entity may borrow from the Partnership,
funds on terms and conditions established in the sole discretion of the
General Partner; provided, however, that the Partnership may not charge the
Group Member or JV Entity interest at a rate less than the rate that would
be charged to the Group Member or JV Entity (without reference to the
General Partner's financial abilities or guarantees) by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member, JV Entity or any other Person.
(c) The General Partner may itself, or may enter into an agreement with
any of its Affiliates to, render services to a Group Member or JV Entity or
to the General Partner in the discharge of its duties as general partner of
the Partnership. Any services rendered to a Group Member or JV Entity by the
General Partner or any of its Affiliates shall be on terms that are fair and
reasonable to the Partnership; provided, however, that the requirements of
this Section 7.6(c) shall be deemed satisfied as to (i) any transaction
approved by Special Approval, (ii) any transaction, the terms of which are
no less favorable to such Group Member or JV Entity than those generally
being provided to or available from unrelated third parties or (iii) any
transaction that, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to such Group Member or JV Entity),
is equitable to such Group Member or JV Entity . The provisions of Section
7.4 shall apply to the rendering of services described in this Section
7.6(c).
(d) The Partnership Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and
applicable law.
(e) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, any other Group Member or any JV Entity directly or indirectly,
except pursuant to transactions that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 7.6(e)
shall be deemed to be satisfied as to (i) the transactions effected pursuant
to Sections 5.2 and 5.3, the Contribution and Conveyance Agreement and any
other transactions described in or contemplated by the Registration
Statement, (ii) any transaction approved by Special Approval, (iii) any
transaction, the terms of which are no less favorable to the Partnership
than those generally being provided to or available from unrelated third
parties, or (iv) any transaction that,
52
taking into account the totality of the relationships between the parties
involved (including other transactions that may be particularly favorable or
advantageous to the Partnership), is equitable to the Partnership. With
respect to any contribution of assets to the Partnership in exchange for
Partnership Securities, the Conflicts Committee, in determining whether the
appropriate number of Partnership Securities are being issued, may take into
account, among other things, the fair market value of the assets, the
liquidated and contingent liabilities assumed, the tax basis in the assets,
the extent to which tax-only allocations to the transferor will protect the
existing partners of the Partnership against a low tax basis, and such other
factors as the Conflicts Committee deems relevant under the circumstances.
(f) The General Partner and its Affiliates will have no obligation to
permit any Group Member or JV Entity to use any facilities or assets of the
General Partner and its Affiliates, except as may be provided in contracts
entered into from time to time specifically dealing with such use, nor shall
there be any obligation on the part of the General Partner or its Affiliates
to enter into such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement (including
Sections 7.6(a) through 7.6(f), (i) the existence of the conflicts of
interest described in the Registration Statement and (ii) the Revolving
Credit Facility described in the Registration Statement and any extension,
refunding or replacement on substantially similar terms, including interest
rate, are hereby approved by all Partners.
Section 7.7 INDEMNIFICATION.
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and
all losses, claims, damages, liabilities, joint or several, expenses
(including legal fees and expenses), judgments, fines, penalties, interest,
settlements or other amounts arising from any and all claims, demands,
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, in which any Indemnitee may be involved, or is threatened to
be involved, as a party or otherwise, by reason of its status as an
Indemnitee; provided, that in each case the Indemnitee acted in good faith
and in a manner that such Indemnitee reasonably believed to be in, or (in
the case of a Person other than the General Partner) not opposed to, the
best interests of the Partnership and, with respect to any criminal
proceeding, had no reasonable cause to believe its conduct was unlawful;
provided, further, no indemnification pursuant to this Section 7.7 shall be
available to the General Partner with respect to its obligations incurred
pursuant to the Underwriting Agreement or the Contribution and Conveyance
Agreement (other than obligations incurred by the General Partner on behalf
of the Partnership or the Intermediate Partnership). The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere, or its equivalent, shall not create a
presumption that the Indemnitee acted in a manner contrary to that specified
above. Any indemnification pursuant to this Section 7.7 shall be made only
out of the assets of the Partnership, it being agreed that the General
Partner shall not be personally liable for such indemnification and shall
have no obligation to contribute or loan any monies or property to the
Partnership to enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal
fees and expenses) incurred by an Indemnitee who is indemnified pursuant to
Section 7.7(a) in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by the Partnership prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt
by the Partnership of any undertaking by or on behalf of the Indemnitee to
repay such amount if it shall be determined that the Indemnitee is not
entitled to be indemnified as authorized in this Section 7.7.
53
(c) The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee may be entitled under
any agreement, pursuant to any vote of the holders of Outstanding Limited
Partner Interests, as a matter of law or otherwise, both as to actions in
the Indemnitee's capacity as an Indemnitee and as to actions in any other
capacity(including any capacity under the Underwriting Agreement), and shall
continue as to an Indemnitee who has ceased to serve in such capacity and
shall inure to the benefit of the heirs, successors, assigns and
administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General
Partner or its Affiliates for the cost of) insurance, on behalf of the
General Partner, its Affiliates and such other Persons as the General
Partner shall determine, against any liability that may be asserted against
or expense that may be incurred by such Person in connection with the
Partnership's activities or such Person's activities on behalf of the
Partnership, regardless of whether the Partnership would have the power to
indemnify such Person against such liability under the provisions of this
Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by it of its duties to the Partnership also
imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable
law shall constitute "FINES" within the meaning of Section 7.7(a); and
action taken or omitted by it with respect to any employee benefit plan in
the performance of its duties for a purpose reasonably believed by it to be
in the interest of the participants and beneficiaries of the plan shall be
deemed to be for a purpose which is in, or not opposed to, the best
interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in
this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right
of any past, present or future Indemnitee to be indemnified by the
Partnership, nor the obligations of the Partnership to indemnify any such
Indemnitee under and in accordance with the provisions of this Section 7.7
as in effect immediately prior to such amendment, modification or repeal
with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal,
regardless of when such claims may arise or be asserted.
Section 7.8 LIABILITY OF INDEMNITEES.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who
have acquired interests in the Partnership Securities, for losses sustained
or liabilities incurred as a result of any act or omission if such
Indemnitee acted in good faith.
(b) Subject to its obligations and duties as General Partner set forth
in Section 7.1(a), the General Partner may exercise any of the powers
granted to it by this Agreement and perform
54
any of the duties imposed upon it hereunder either directly or by or through
its agents, and the General Partner shall not be responsible for any
misconduct or negligence on the part of any such agent appointed by the
General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the
Partnership or to the Partners, the General Partner and any other Indemnitee
acting in connection with the Partnership's business or affairs shall not be
liable to the Partnership or to any Partner for its good faith reliance on
the provisions of this Agreement. The provisions of this Agreement, to the
extent that they restrict or otherwise modify the duties and liabilities of
an Indemnitee otherwise existing at law or in equity, are agreed by the
Partners to replace such other duties and liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect
the limitations on the liability to the Partnership, the Limited Partners,
the General Partner, and the Partnership's and General Partner's directors,
officers and employees under this Section 7.8 as in effect immediately prior
to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise
or be asserted.
Section 7.9 RESOLUTION OF CONFLICTS OF INTEREST.
(a) Unless otherwise expressly provided in this Agreement or the
Intermediate Partnership Agreement, whenever a potential conflict of
interest exists or arises between the General Partner or any of its
Affiliates, on the one hand, and the Partnership, the Intermediate
Partnership, any Partner or any Assignee, on the other, any resolution or
course of action by the General Partner or its Affiliates in respect of such
conflict of interest shall be permitted and deemed approved by all Partners,
and shall not constitute a breach of this Agreement, of the Intermediate
Partnership Agreement, of any agreement contemplated herein or therein, or
of any duty stated or implied by law or equity, if the resolution or course
of action is, or by operation of this Agreement is deemed to be, fair and
reasonable to the Partnership. The General Partner shall be authorized but
not required in connection with its resolution of such conflict of interest
to seek Special Approval of such resolution. Any conflict of interest and
any resolution of such conflict of interest shall be conclusively deemed
fair and reasonable to the Partnership if such conflict of interest or
resolution is (i) approved by Special Approval (as long as the material
facts known to the General Partner or any of its Affiliates regarding any
proposed transaction were disclosed to the Conflicts Committee at the time
it gave its approval), (ii) on terms no less favorable to the Partnership
than those generally being provided to or available from unrelated third
parties or (iii) fair to the Partnership, taking into account the totality
of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership). The General Partner may also adopt a resolution or course of
action that has not received Special Approval. The General Partner
(including the Conflicts Committee in connection with Special Approval)
shall be authorized in connection with its determination of what is "fair
and reasonable" to the Partnership and in connection with its resolution of
any conflict of interest to consider (A) the relative interests of any party
to such conflict, agreement, transaction or situation and the benefits and
burdens relating to such interest; (B) any customary or accepted industry
practices and any customary or historical dealings with a particular Person;
(C) any applicable generally accepted accounting practices or principles;
and (D) such additional factors as the General Partner (including the
Conflicts Committee) determines in its sole discretion to be relevant,
reasonable or appropriate under the circumstances. Nothing contained in this
Agreement, however, is intended to nor shall it be construed to require the
General Partner (including the Conflicts Committee) to consider the
interests of any Person other than the
55
Partnership. In the absence of bad faith by the General Partner, the
resolution, action or terms so made, taken or provided by the General
Partner with respect to such matter shall not constitute a breach of this
Agreement or any other agreement contemplated herein or a breach of any
standard of care or duty imposed herein or therein or, to the extent
permitted by law, under the Delaware Act or any other law, rule or
regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its "sole discretion" or "discretion,"
that it deems "necessary or appropriate" or "necessary or advisable" or
under a grant of similar authority or latitude, except as otherwise provided
herein, the General Partner or such Affiliate shall be entitled to consider
only such interests and factors as it desires and shall have no duty or
obligation to give any consideration to any interest of, or factors
affecting, the Partnership, any other Group Member or JV Entity, any Limited
Partner or any Assignee, (ii) it may make such decision in its sole
discretion (regardless of whether there is a reference to "sole discretion"
or "discretion") unless another express standard is provided for, or (iii)
in "good faith" or under another express standard, the General Partner or
such Affiliate shall act under such express standard and shall not be
subject to any other or different standards imposed by this Agreement, the
Intermediate Partnership Agreement, any other agreement contemplated hereby
or under the Delaware Act or any other law, rule or regulation. In addition,
any actions taken by the General Partner or such Affiliate consistent with
the standards of "reasonable discretion" set forth in the definitions of
Available Cash or Operating Surplus shall not constitute a breach of any
duty of the General Partner to the Partnership or the Limited Partners. The
General Partner shall have no duty, express or implied, to sell or otherwise
dispose of any asset of the Partnership Group other than in the ordinary
course of business. No borrowing by any Group Member or the approval thereof
by the General Partner shall be deemed to constitute a breach of any duty of
the General Partner to the Partnership or the Limited Partners by reason of
the fact that the purpose or effect of such borrowing is directly or
indirectly to (A) enable distributions to the General Partner or its
Affiliates (including in their capacities as Limited Partners) to exceed 1%
of the total amount distributed to all Partners or (B) hasten the expiration
of the Subordination Period or the conversion of any Subordinated Units into
Common Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such
transaction, arrangement or resolution shall be considered in the context of
all similar or related transactions.
(d) The Unitholders hereby authorize the General Partner, on behalf of
the Partnership as a partner or member of a Group Member, to approve of
actions by the general partner or managing member of such Group Member
similar to those actions permitted to be taken by the General Partner
pursuant to this Section 7.9.
Section 7.10 OTHER MATTERS CONCERNING THE GENERAL PARTNER.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond,
debenture or other paper or document believed by it to be genuine and to
have been signed or presented by the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants
and advisers selected by it, and any act taken or omitted to be taken in
reliance upon the opinion (including an Opinion of Counsel) of such Persons
as to matters that the General Partner reasonably believes to be
56
within such Person's professional or expert competence and in accordance
with such opinion shall be conclusively presumed to have been done or
omitted in good faith.
(c) The General Partner shall have the right, in respect of any of its
rights, powers or obligations hereunder, to act through any of its duly
authorized officers, a duly appointed attorney or attorneys-in-fact or the
duly authorized officers of the Partnership.
(d) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified,
waived or limited, to the extent permitted by law, as required to permit the
General Partner to act under this Agreement or any other agreement
contemplated by this Agreement and to make any decision pursuant to the
authority prescribed in this Agreement, so long as such action is reasonably
believed by the General Partner to be in, or not inconsistent with, the best
interests of the Partnership.
Section 7.11 PURCHASE OR SALE OF PARTNERSHIP SECURITIES.
The General Partner may cause the Partnership to purchase or otherwise
acquire Partnership Securities; provided that, except as permitted pursuant to
Section 4.10, the General Partner may not cause any Group Member to purchase
Subordinated Units during the Subordination Period. As long as Partnership
Securities are held by any Group Member, such Partnership Securities shall not
be considered Outstanding for any purpose, except as otherwise provided herein.
The General Partner or any Affiliate of the General Partner may also purchase or
otherwise acquire and sell or otherwise dispose of Partnership Securities for
its own account, subject to the provisions of Articles IV and X.
Section 7.12 REGISTRATION RIGHTS OF THE GENERAL PARTNER AND ITS AFFILIATES.
(a) If (i) the General Partner or any Affiliate of the General Partner
(including for purposes of this Section 7.12, any Person that is an
Affiliate of the General Partner at the date hereof notwithstanding that it
may later cease to be an Affiliate of the General Partner) holds Partnership
Securities that it desires to sell and (ii) Rule 144 of the Securities Act
(or any successor rule or regulation to Rule 144) or another exemption from
registration is not available to enable such holder of Partnership
Securities (the "HOLDER") to dispose of the number of Partnership Securities
it desires to sell at the time it desires to do so without registration
under the Securities Act, then upon the request of the General Partner or
any of its Affiliates, the Partnership shall file with the Commission as
promptly as practicable after receiving such request, and use all reasonable
efforts to cause to become effective and remain effective for a period of
not less than six months following its effective date or such shorter period
as shall terminate when all Partnership Securities covered by such
registration statement have been sold, a registration statement under the
Securities Act registering the offering and sale of the number of
Partnership Securities specified by the Holder; provided, however, that the
Partnership shall not be required to effect more than three registrations
pursuant to this Section 7.12(a); and provided further, however, that if the
Conflicts Committee determines in its good faith judgment that a
postponement of the requested registration for up to six months would be in
the best interests of the Partnership and its Partners due to a pending
transaction, investigation or other event, the filing of such registration
statement or the effectiveness thereof may be deferred for up to six months,
but not thereafter. In connection with any registration pursuant to the
immediately preceding sentence, the Partnership shall promptly prepare and
file (x) such documents as may be necessary to register or qualify the
securities subject to such registration under the securities laws of such
states as the Holder shall reasonably request; provided, however, that no
such qualification shall be required in any jurisdiction where, as a result
thereof, the Partnership would become subject to general service of process
or to taxation or qualification to do business as a foreign corporation or
partnership doing business in such jurisdiction solely as a result of such
registration, and (y) such documents as
57
may be necessary to apply for listing or to list the Partnership Securities
subject to such registration on such National Securities Exchange as the
Holder shall reasonably request, and do any and all other acts and things
that may reasonably be necessary or advisable to enable the Holder to
consummate a public sale of such Partnership Securities in such states.
Except as set forth in Section 7.12(c), all costs and expenses of any such
registration and offering (other than the underwriting discounts and
commissions) shall be paid by the Partnership, without reimbursement by the
Holder.
(b) If the Partnership shall at any time propose to file a registration
statement under the Securities Act for an offering of equity securities of
the Partnership for cash (other than an offering relating solely to an
employee benefit plan), the Partnership shall use all reasonable efforts to
include such number or amount of securities held by the Holder in such
registration statement as the Holder shall request. If the proposed offering
pursuant to this Section 7.12(b) shall be an underwritten offering, then, in
the event that the managing underwriter or managing underwriters of such
offering advise the Partnership and the Holder in writing that in their
opinion the inclusion of all or some of the Holder's Partnership Securities
would adversely and materially affect the success of the offering, the
Partnership shall include in such offering only that number or amount, if
any, of securities held by the Holder which, in the opinion of the managing
underwriter or managing underwriters, will not so adversely and materially
affect the offering. Except as set forth in Section 7.12(c), all costs and
expenses of any such registration and offering (other than the underwriting
discounts and commissions) shall be paid by the Partnership, without
reimbursement by the Holder.
(c) If underwriters are engaged in connection with any registration
referred to in this Section 7.12, the Partnership shall provide
indemnification, representations, covenants, opinions and other assurance to
the underwriters in form and substance reasonably satisfactory to such
underwriters. Further, in addition to and not in limitation of the
Partnership's obligation under Section 7.7, the Partnership shall, to the
fullest extent permitted by law, indemnify and hold harmless the Holder and
each Person who controls the Holder (within the meaning of the Securities
Act) and their respective directors, officers, employees, members, partners
or agents (collectively, "INDEMNIFIED PERSONS") against any losses, claims,
demands, actions, causes of action, assessments, damages, liabilities (joint
or several), costs and expenses (including interest, penalties and
reasonable attorneys' fees and disbursements), resulting to, imposed upon,
or incurred by the Indemnified Persons, directly or indirectly, under the
Securities Act or otherwise (hereinafter referred to in this Section 7.12(c)
as a "CLAIM" and in the plural as "CLAIMS") based upon, arising out of or
resulting from any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which any
Partnership Securities were registered under the Securities Act or any state
securities or Blue Sky laws, in any preliminary prospectus (if used prior to
the effective date of such registration statement), or in any summary or
final prospectus or in any amendment or supplement thereto (if used during
the period the Partnership is required to keep the registration statement
current), or arising out of, based upon or resulting from the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements made therein not misleading;
provided, however, that the Partnership shall not be liable to any
Indemnified Person to the extent that any such claim arises out of, is based
upon or results from an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, such
preliminary, summary or final prospectus or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Partnership by or on behalf of such Indemnified Person specifically for use
in the preparation thereof.
(d) The provisions of Section 7.12(a) and Section 7.12(b) shall continue
to be applicable with respect to the General Partner (and any of the General
Partner's Affiliates) after it ceases
58
to be a Partner of the Partnership, during a period of two years subsequent
to the effective date of such cessation and for so long thereafter as is
required for the Holder to sell all of the Partnership Securities with
respect to which it has requested during such two-year period inclusion in a
registration statement otherwise filed or that a registration statement be
filed; provided, however, that the Partnership shall not be required to file
successive registration statements covering the same Partnership Securities
for which registration was demanded during such two-year period. The
provisions of Section 7.12(c) shall continue in effect thereafter.
(e) Any request to register Partnership Securities pursuant to this
Section 7.12 shall (i) specify the Partnership Securities intended to be
offered and sold by the Person making the request, (ii) express such
Person's present intent to offer such shares for distribution, (iii)
describe the nature or method of the proposed offer and sale of Partnership
Securities, and (iv) contain the undertaking of such Person to provide all
such information and materials and take all action as may be required in
order to permit the Partnership to comply with all applicable requirements
in connection with the registration of such Partnership Securities.
Section 7.13 RELIANCE BY THIRD PARTIES.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that (i) the General
Partner and (ii) any officer or attorney-in-fact of the General Partner
authorized by the General Partner to act on behalf of and in the name of the
Partnership, has full power and authority to encumber, sell or otherwise use in
any manner any and all assets of the Partnership and to enter into any
authorized contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner or any such officer or
attorney-in-fact as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such Person to contest,
negate or disaffirm any action of the General Partner or any such officer or
attorney-in-fact in connection with any such dealing. In no event shall any
Person dealing with the General Partner or any such officer or attorney-in-fact
be obligated to ascertain that the terms of the Agreement have been complied
with or to inquire into the necessity or expedience of any act or action of the
General Partner or any such officer or attorney-in-fact. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or any such officer or attorney-in-fact shall be
conclusive evidence in favor of any and every Person relying thereon or claiming
thereunder that (a) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (b) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Partnership and (c) such certificate, document or instrument was duly executed
and delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 RECORDS AND ACCOUNTING.
The General Partner shall keep or cause to be kept at the principal office
of the Partnership appropriate books and records with respect to the
Partnership's business, including all books and records necessary to provide to
the Limited Partners any information required to be provided pursuant to Section
3.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including the record of the Record Holders
and Assignees of Units or other Partnership Securities, books of account and
records of Partnership proceedings, may be kept on, or be in the form of,
computer disks, hard drives, punch cards, magnetic tape,
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photographs, micrographics or any other information storage device; provided,
that the books and records so maintained are convertible into clearly legible
written form within a reasonable period of time. The books of the Partnership
shall be maintained, for financial reporting purposes, on an accrual basis in
accordance with U.S. GAAP.
Section 8.2 FISCAL YEAR.
The fiscal year of the Partnership shall be a fiscal year ending December
31.
Section 8.3 REPORTS.
(a) As soon as practicable, but in no event later than 120 days after
the close of each fiscal year of the Partnership, the General Partner shall
cause to be mailed or furnished to each Record Holder of a Unit, as of a
date selected by the General Partner in its discretion, an annual report
containing financial statements of the Partnership for such fiscal year of
the Partnership, presented in accordance with U.S. GAAP, including a balance
sheet and statements of operations, Partnership equity and cash flows, such
statements to be audited by a firm of independent public accountants
selected by the General Partner.
(b) As soon as practicable, but in no event later than 90 days after the
close of each Quarter except the last Quarter of each fiscal year, the
General Partner shall cause to be mailed or furnished to each Record Holder
of a Unit, as of a date selected by the General Partner in its discretion, a
report containing unaudited financial statements of the Partnership and such
other information as may be required by applicable law, regulation or rule
of any National Securities Exchange on which the Units are listed for
trading, or as the General Partner determines to be necessary or
appropriate.
ARTICLE IX
TAX MATTERS
Section 9.1 TAX RETURNS AND INFORMATION.
The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by Record Holders for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
Section 9.2 TAX ELECTIONS.
(a) The Partnership shall make the election under Section 754 of the
Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the
General Partner's determination that such revocation is in the best
interests of the Limited Partners. Notwithstanding any other provision
herein contained, for the purposes of computing the adjustments under
Section 743(b) of the Code, the General Partner shall be authorized (but not
required) to adopt a convention whereby the price paid by a transferee of a
Limited Partner Interest will be deemed to be the lowest quoted closing
price of the Limited Partner Interests on any National Securities Exchange
on which such Limited Partner Interests are traded during the calendar month
in which such transfer is deemed to occur pursuant to Section 6.2(g) without
regard to the actual price paid by such transferee.
(b) The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
(c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted
by the Code.
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Section 9.3 TAX CONTROVERSIES.
Subject to the provisions hereof, the General Partner is designated as the
Tax Matters Partner (as defined in the Code) and is authorized and required to
represent the Partnership (at the Partnership's expense) in connection with all
examinations of the Partnership's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. Each Partner
agrees to cooperate with the General Partner and to do or refrain from doing any
or all things reasonably required by the General Partner to conduct such
proceedings.
Section 9.4 WITHHOLDING.
Notwithstanding any other provision of this Agreement, the General Partner
is authorized to take any action that it determines in its discretion to be
necessary or appropriate to cause the Partnership and the Intermediate
Partnership to comply with any withholding requirements established under the
Code or any other federal, state or local law including, without limitation,
pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that
the Partnership is required or elects to withhold and pay over to any taxing
authority any amount resulting from the allocation or distribution of income to
any Partner or Assignee (including, without limitation, by reason of Section
1446 of the Code), the amount withheld may at the discretion of the General
Partner be treated by the Partnership as a distribution of cash pursuant to
Section 6.3 in the amount of such withholding from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 ADMISSION OF INITIAL LIMITED PARTNERS.
Upon the transfer of Common Units, Subordinated Units and Incentive
Distribution Rights to the General Partner as described in Section 5.2, the
General Partner shall be deemed to have been admitted to the Partnership as a
Limited Partner in respect of the Common Units, Subordinated Units and Incentive
Distribution Rights transferred to it. Upon the issuance by the Partnership of
Common Units to the Underwriters as described in Section 5.3 in connection with
the Initial Offering and the execution by each Underwriter of a Transfer
Application, the General Partner shall admit the Underwriters to the Partnership
as Initial Limited Partners in respect of the Common Units purchased by them.
Section 10.2 ADMISSION OF SUBSTITUTED LIMITED PARTNER.
By transfer of a Limited Partner Interest in accordance with Article IV, the
transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Certificate
representing a Limited Partner Interest shall, however, only have the authority
to convey to a purchaser or other transferee who does not execute and deliver a
Transfer Application (a) the right to negotiate such Certificate to a purchaser
or other transferee and (b) the right to transfer the right to request admission
as a Substituted Limited Partner to such purchaser or other transferee in
respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest (including any nominee holder or an agent acquiring
such Limited Partner Interest for the account of another Person) who executes
and delivers a Transfer Application shall, by virtue of such execution and
delivery, be an Assignee and be deemed to have applied to become a Substituted
Limited Partner with respect to the Limited Partner Interests so transferred to
such Person. Such Assignee shall become a Substituted Limited Partner (x) at
such time as the General Partner consents thereto, which consent may be given or
withheld in the General Partner's discretion, and (y) when any such admission is
shown on the books and records of the Partnership. If such consent is withheld,
such transferee shall be an Assignee. An Assignee shall have an interest in the
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Partnership equivalent to that of a Limited Partner with respect to allocations
and distributions, including liquidating distributions, of the Partnership. With
respect to voting rights attributable to Limited Partner Interests that are held
by Assignees, the General Partner shall be deemed to be the Limited Partner with
respect thereto and shall, in exercising the voting rights in respect of such
Limited Partner Interests on any matter, vote such Limited Partner Interests at
the written direction of the Assignee who is the holder of such Limited Partner
Interests. If no such written direction is received, such Limited Partner
Interests will not be voted. An Assignee shall have no other rights of a Limited
Partner.
Section 10.3 ADMISSION OF SUCCESSOR GENERAL PARTNER.
A successor General Partner approved pursuant to Section 11.1 or 11.2 or the
transferee of or successor to all of the General Partner Interest pursuant to
Section 4.6 who is proposed to be admitted as a successor General Partner shall
be admitted to the Partnership as the General Partner, effective immediately
prior to the withdrawal or removal of the predecessor or transferring General
Partner pursuant to Section 11.1 or 11.2 or the transfer of the General Partner
Interest pursuant to Section 4.6, provided, however, that no such successor
shall be admitted to the Partnership until compliance with the terms of Section
4.6 has occurred and such successor has executed and delivered such other
documents or instruments as may be required to effect such admission. Any such
successor shall, subject to the terms hereof, carry on the business of the
members of the Partnership Group without dissolution.
Section 10.4 ADMISSION OF ADDITIONAL LIMITED PARTNERS.
(a) A Person (other than the General Partner, an Initial Limited Partner
or a Substituted Limited Partner) who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the
General Partner (i) evidence of acceptance in form satisfactory to the
General Partner of all of the terms and conditions of this Agreement,
including the power of attorney granted in Section 2.6, and (ii) such other
documents or instruments as may be required in the discretion of the General
Partner to effect such Person's admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.4, no
Person shall be admitted as an Additional Limited Partner without the
consent of the General Partner, which consent may be given or withheld in
the General Partner's discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded as such in the books and records of the
Partnership, following the consent of the General Partner to such admission.
Section 10.5 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP.
To effect the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Delaware Act to
amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement and,
if required by law, the General Partner shall prepare and file an amendment to
the Certificate of Limited Partnership, and the General Partner may for this
purpose, among others, exercise the power of attorney granted pursuant to
Section 2.6.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 WITHDRAWAL OF THE GENERAL PARTNER.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each
such event herein referred to as an "EVENT OF WITHDRAWAL");
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(i) The General Partner voluntarily withdraws from the Partnership by
giving written notice to the other Partners (and it shall be deemed that
the General Partner has withdrawn pursuant to this Section 11.1(a)(i) if
the General Partner voluntarily withdraws as general partner of the
Intermediate Partnership);
(ii) The General Partner transfers all of its rights as General
Partner pursuant to Section 4.6;
(iii) The General Partner is removed pursuant to Section 11.2;
(iv) The General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition for
relief under Chapter 7 of the United States Bankruptcy Code; (C) files a
petition or answer seeking for itself a liquidation, dissolution or
similar relief (but not a reorganization) under any law; (D) files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the General Partner in a
proceeding of the type described in clauses (A)-(C) of this Section
11.1(a)(iv); or (E) seeks, consents to or acquiesces in the appointment
of a trustee (but not a debtor-in-possession), receiver or liquidator of
the General Partner or of all or any substantial part of its properties;
(v) A final and non-appealable order of relief under Chapter 7 of the
United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or
against the General Partner; or
(vi) (A) in the event the General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the General
Partner, or 90 days expire after the date of notice to the General
Partner of revocation of its charter without a reinstatement of its
charter, under the laws of its state of incorporation; (B) in the event
the General Partner is a partnership or a limited liability company, the
dissolution and commencement of winding up of the General Partner; (C) in
the event the General Partner is acting in such capacity by virtue of
being a trustee of a trust, the termination of the trust; (D) in the
event the General Partner is a natural person, his death or adjudication
of incompetency; and (E) otherwise in the event of the termination of the
General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A),
(B), (C) or (E) occurs, the withdrawing General Partner shall give notice to the
Limited Partners within 30 days after such occurrence. The Partners hereby agree
that only the Events of Withdrawal described in this Section 11.1 shall result
in the withdrawal of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the
period beginning on the Closing Date and ending at 12:00 midnight, Eastern
Standard Time, on June 30, 2009, the General Partner voluntarily withdraws
by giving at least 90 days' advance notice of its intention to withdraw to
the Limited Partners; provided that prior to the effective date of such
withdrawal, the withdrawal is approved by Unitholders holding at least a
majority of the Outstanding Common Units (excluding Common Units held by the
General Partner and its Affiliates) and the General Partner delivers to the
Partnership an Opinion of Counsel ("WITHDRAWAL OPINION OF COUNSEL") that
such withdrawal (following the selection of the successor General Partner)
would not result in the loss of the limited liability of any Limited Partner
or of a limited partner of the Intermediate Partnership or cause the
Partnership or the Intermediate Partnership to be treated as an association
taxable as a corporation or otherwise to be taxed as an entity for federal
income tax purposes (to the extent not previously treated as such); (ii) at
any time after 12:00 midnight, Eastern Standard Time, on June 30, 2009, the
General Partner voluntarily withdraws by giving at least 90 days' advance
notice to the Unitholders, such withdrawal to take effect on the date
specified in such notice; (iii) at any time that the General Partner ceases
to be the
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General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant to
Section 11.2; or (iv) notwithstanding clause (i) of this sentence, at any
time that the General Partner voluntarily withdraws by giving at least 90
days' advance notice of its intention to withdraw to the Limited Partners,
such withdrawal to take effect on the date specified in the notice, if at
the time such notice is given one Person and its Affiliates (other than the
General Partner and its Affiliates) own beneficially or of record or control
at least 50% of the Outstanding Units. The withdrawal of the General Partner
from the Partnership upon the occurrence of an Event of Withdrawal shall
also constitute the withdrawal of the General Partner as general partner or
managing member, as the case may be, of the other Group Members. If the
General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i),
the holders of a Unit Majority, may, prior to the effective date of such
withdrawal, elect a successor General Partner. The Person so elected as
successor General Partner shall automatically become the successor general
partner or managing member, as the case may be, of the other Group Members
of which the General Partner is a general partner or a managing member. If,
prior to the effective date of the General Partner's withdrawal, a successor
is not selected by the Unitholders as provided herein or the Partnership
does not receive a Withdrawal Opinion of Counsel, the Partnership shall be
dissolved in accordance with Section 12.1. Any successor General Partner
elected in accordance with the terms of this Section 11.1 shall be subject
to the provisions of Section 10.3.
Section 11.2 REMOVAL OF THE GENERAL PARTNER.
The General Partner may be removed if such removal is approved by the
Unitholders holding at least 66 2/3% of the Outstanding Units (including Units
held by the General Partner and its Affiliates). Any such action by such holders
for removal of the General Partner must also provide for the election of a
successor General Partner by the Unitholders holding a Unit Majority (including
Units held by the General Partner and its Affiliates). Such removal shall be
effective immediately following the admission of a successor General Partner
pursuant to Section 10.3. The removal of the General Partner shall also
automatically constitute the removal of the General Partner as general partner
or managing member, as the case may be, of the other Group Members of which the
General Partner is a general partner or a managing member. If a Person is
elected as a successor General Partner in accordance with the terms of this
Section 11.2, such Person shall, upon admission pursuant to Section 10.3,
automatically become a successor general partner or managing member, as the case
may be, of the other Group Members of which the General Partner is a general
partner or a managing member. The right of the holders of Outstanding Units to
remove the General Partner shall not exist or be exercised unless the
Partnership has received an opinion opining as to the matters covered by a
Withdrawal Opinion of Counsel. Any successor General Partner elected in
accordance with the terms of this Section 11.2 shall be subject to the
provisions of Section 10.3.
Section 11.3 INTEREST OF DEPARTING PARTNER AND SUCCESSOR GENERAL PARTNER.
(a) In the event of (i) withdrawal of the General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of the General Partner by the holders of Outstanding Units under
circumstances where Cause does not exist, if a successor General Partner is
elected in accordance with the terms of Section 11.1 or 11.2, the Departing
Partner shall have the option exercisable prior to the effective date of the
departure of such Departing Partner to require its successor to purchase its
General Partner Interest and its general partner interest (or equivalent
interest) in the other Group Members and all of its Incentive Distribution
Rights (collectively, the "COMBINED INTEREST") in exchange for an amount in
cash equal to the fair market value of such Combined Interest, such amount
to be determined and payable as of the effective date of its departure. If
the General Partner is removed by the Unitholders under circumstances where
Cause exists or if the General Partner withdraws under circumstances where
such withdrawal violates this Agreement or the Intermediate Partnership
Agreement, and
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if a successor General Partner is elected in accordance with the terms of
Section 11.1 or 11.2, such successor shall have the option, exercisable
prior to the effective date of the departure of such Departing Partner, to
purchase the Combined Interest for such fair market value of such Combined
Interest. In either event, the Departing Partner shall be entitled to
receive all reimbursements due such Departing Partner pursuant to Section
7.4, including any employee-related liabilities (including severance
liabilities), incurred in connection with the termination of any employees
employed by the General Partner for the benefit of the Partnership or the
other Group Members.
For purposes of this Section 11.3(a), the fair market value of the Combined
Interest shall be determined by agreement between the Departing Partner and its
successor or, failing agreement within 30 days after the effective date of such
Departing Partner's departure, by an independent investment banking firm or
other independent expert selected by the Departing Partner and its successor,
which, in turn, may rely on other experts, and the determination of which shall
be conclusive as to such matter. If such parties cannot agree upon one
independent investment banking firm or other independent expert within 45 days
after the effective date of such departure, then the Departing Partner shall
designate an independent investment banking firm or other independent expert,
the Departing Partner's successor shall designate an independent investment
banking firm or other independent expert, and such firms or experts shall
mutually select a third independent investment banking firm or independent
expert, which third independent investment banking firm or other independent
expert shall determine the fair market value of the Combined Interest. In making
its determination, such third independent investment banking firm or other
independent expert may consider the then current trading price of Units on any
National Securities Exchange on which Units are then listed, the value of the
Partnership's assets, the rights and obligations of the Departing Partner and
other factors it may deem relevant.
(b) If the Combined Interest is not purchased in the manner set forth in
Section 11.3(a), the Departing Partner (or its transferee) shall become a
Limited Partner and its Combined Interest shall be converted into Common
Units pursuant to a valuation made by an investment banking firm or other
independent expert selected pursuant to Section 11.3(a), without reduction
in such Partnership Interest (but subject to proportionate dilution by
reason of the admission of its successor). Any successor General Partner
shall indemnify the Departing Partner (or its transferee) as to all debts
and liabilities of the Partnership arising on or after the date on which the
Departing Partner (or its transferee) becomes a Limited Partner. For
purposes of this Agreement, conversion of the Combined Interest to Common
Units will be characterized as if the General Partner (or its transferee)
contributed its Combined Interest to the Partnership in exchange for the
newly issued Common Units.
(c) If a successor General Partner is elected in accordance with the
terms of Section 11.1 or 11.2 and the option described in Section 11.3(a) is
not exercised by the party entitled to do so, the successor General Partner
shall, at the effective date of its admission to the Partnership, contribute
to the Partnership cash in the amount equal to 1/99th of the Net Agreed
Value of the Partnership's assets on such date. In such event, such
successor General Partner shall, subject to the following sentence, be
entitled to 1% of all Partnership allocations and distributions. The
successor General Partner shall cause this Agreement to be amended to
reflect that, from and after the date of such successor General Partner's
admission, the successor General Partner's interest in all Partnership
distributions and allocations shall be 1%.
Section 11.4 TERMINATION OF SUBORDINATION PERIOD, CONVERSION OF SUBORDINATED
UNITS AND EXTINGUISHMENT OF CUMULATIVE COMMON UNIT ARREARAGES.
Notwithstanding any provision of this Agreement, if the General Partner is
removed as general partner of the Partnership under circumstances where Cause
does not exist and Units held by the General Partner and its Affiliates are not
voted in favor of such removal, (i) the Subordination Period
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will end and all Outstanding Subordinated Units will immediately and
automatically convert into Common Units on a one-for-one basis and (ii) all
Cumulative Common Unit Arrearages on the Common Units will be extinguished.
Section 11.5 WITHDRAWAL OF LIMITED PARTNERS.
No Limited Partner shall have any right to withdraw from the Partnership;
provided, however, that when a transferee of a Limited Partner's Limited Partner
Interest becomes a Record Holder of the Limited Partner Interest so transferred,
such transferring Limited Partner shall cease to be a Limited Partner with
respect to the Limited Partner Interest so transferred.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 DISSOLUTION.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner, if a successor General Partner
is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be
dissolved and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the General Partner as provided in Section
11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected and
an Opinion of Counsel is received as provided in Section 11.1(b) or 11.2 and
such successor is admitted to the Partnership pursuant to Section 10.3;
(c) an election to dissolve the Partnership by the General Partner that
is approved by the holders of a Unit Majority;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(e) the sale of all or substantially all of the assets and properties of
the Partnership Group.
Section 12.2 CONTINUATION OF THE BUSINESS OF THE PARTNERSHIP AFTER DISSOLUTION.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi), then, to the maximum extent permitted by law, within 180 days thereafter,
the holders of a Unit Majority may elect to reconstitute the Partnership and
continue its business on the same terms and conditions set forth in this
Agreement by forming a new limited partnership on terms identical to those set
forth in this Agreement and having as the successor general partner a Person
approved by the holders of a Unit Majority (subject to the proviso in the last
sentence of this Section 12.2). Unless such an election is made within the
applicable time period as set forth above, the Partnership shall conduct only
activities necessary to wind up its affairs. If such an election is so made,
then:
(i) the reconstituted Partnership shall continue until the end of the
term set forth in Section 2.7 unless earlier dissolved in accordance with
this Article XII;
(ii) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be treated
in the manner provided in Section 11.3; and
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(iii) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as
necessary, to file a new partnership agreement and certificate of limited
partnership, and the successor general partner may for this purpose
exercise the powers of attorney granted the General Partner pursuant to
Section 2.6;
provided, that the right of the holders of a Unit Majority to approve a
successor General Partner and to reconstitute and to continue the business of
the Partnership shall not exist and may not be exercised unless the Partnership
has received an Opinion of Counsel that (x) the exercise of the right would not
result in the loss of limited liability of any Limited Partner and (y) neither
the Partnership, the reconstituted limited partnership nor the Intermediate
Partnership would be treated as an association taxable as a corporation or
otherwise be taxable as an entity for federal income tax purposes upon the
exercise of such right to continue.
Section 12.3 LIQUIDATOR.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the General Partner shall select one or more Persons to act as
Liquidator. The Liquidator (if other than the General Partner) shall be entitled
to receive such compensation for its services as may be approved by holders of
at least a majority of the Outstanding Common Units and Outstanding Subordinated
Units voting as a single class. The Liquidator (if other than the General
Partner) shall agree not to resign at any time without 15 days' prior notice and
may be removed at any time, with or without cause, by notice of removal approved
by holders of at least a majority of the Outstanding Common Units and
Outstanding Subordinated Units voting as a single class. Upon dissolution,
removal or resignation of the Liquidator, a successor and substitute Liquidator
(who shall have and succeed to all rights, powers and duties of the original
Liquidator) shall within 30 days thereafter be approved by holders of at least a
majority of the Outstanding Common Units and Outstanding Subordinated Units
voting as a single class who shall also approve the compensation payable to such
Liquidator. The right to approve a successor or substitute Liquidator in the
manner provided herein shall be deemed to refer also to any such successor or
substitute Liquidator approved in the manner herein provided. Except as
expressly provided in this Article XII, the Liquidator approved in the manner
provided herein shall have and may exercise, without further authorization or
consent of any of the parties hereto, all of the powers conferred upon the
General Partner under the terms of this Agreement (but subject to all of the
applicable limitations, contractual and otherwise, upon the exercise of such
powers, other than the limitation on sale or other disposition set forth in
Section 7.3(b)) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein.
Section 12.4 LIQUIDATION.
The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:
(a) DISPOSITION OF ASSETS. The assets may be disposed of by public or
private sale or by distribution in kind to one or more Partners on such
terms as the Liquidator and such Partner or Partners may agree. If any
property is distributed in kind, the Partner receiving the property shall be
deemed for purposes of Section 12.4(c) to have received cash equal to its
fair market value; and contemporaneously therewith, appropriate cash
distributions must be made to the other Partners. The Liquidator may, in its
absolute discretion, defer liquidation or distribution of the Partnership's
assets for a reasonable time if it determines that an immediate sale or
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distribution of all or some of the Partnership's assets would be impractical
or would cause undue loss to the Partners. The Liquidator may, in its
absolute discretion, distribute the Partnership's assets, in whole or in
part, in kind if it determines that a sale would be impractical or would
cause undue loss to the Partners.
(b) DISCHARGE OF LIABILITIES. Liabilities of the Partnership include
amounts owed to Partners otherwise than in respect of their distribution
rights under Article VI. With respect to any liability that is contingent,
conditional or unmatured or is otherwise not yet due and payable, the
Liquidator shall either settle such claim for such amount as it thinks
appropriate or establish a reserve of cash or other assets to provide for
its payment. When paid, any unused portion of the reserve shall be
distributed as additional liquidation proceeds.
(c) LIQUIDATION DISTRIBUTIONS. All property and all cash in excess of
that required to discharge liabilities as provided in Section 12.4(b) shall
be distributed to the Partners in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made
by reason of distributions pursuant to this Section 12.4(c)) for the taxable
period during which the liquidation of the Partnership occurs (with such
date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of
such taxable period (or, if later, within 90 days after said date of such
occurrence).
Section 12.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP.
Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
Section 12.6 RETURN OF CONTRIBUTIONS.
The General Partner shall not be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners or Unitholders, or any portion thereof, it being expressly understood
that any such return shall be made solely from Partnership assets.
Section 12.7 WAIVER OF PARTITION.
To the maximum extent permitted by law, each Partner hereby waives any right
to partition of the Partnership property.
Section 12.8 CAPITAL ACCOUNT RESTORATION.
No Limited Partner shall have any obligation to restore any negative balance
in its Capital Account upon liquidation of the Partnership. The General Partner
shall be obligated to restore any negative balance in its Capital Account upon
liquidation of its interest in the Partnership by the end of the taxable period
during which such liquidation occurs, or, if later, within 90 days after the
date of such liquidation.
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ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
Section 13.1 AMENDMENT TO BE ADOPTED SOLELY BY THE GENERAL PARTNER.
Each Partner agrees that the General Partner, without the approval of any
Partner or Assignee, may amend any provision of this Agreement and execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
necessary or advisable to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or to ensure
that the Partnership and the Intermediate Partnership will not be treated as
an association taxable as a corporation or otherwise taxed as an entity for
federal income tax purposes;
(d) a change that, in the discretion of the General Partner, (i) does
not adversely affect the Limited Partners in any material respect, (ii) is
necessary or advisable to (A) satisfy any requirements, conditions or
guidelines contained in any opinion, directive, order, ruling or regulation
of any federal or state agency or judicial authority or contained in any
federal or state statute (including the Delaware Act) or (B) facilitate the
trading of the Limited Partner Interests (including the division of any
class or classes of Outstanding Limited Partner Interests into different
classes to facilitate uniformity of tax consequences within such classes of
Limited Partner Interests) or comply with any rule, regulation, guideline or
requirement of any National Securities Exchange on which the Limited Partner
Interests are or will be listed for trading, compliance with any of which
the General Partner determines in its discretion to be in the best interests
of the Partnership and the Limited Partners, (iii) is necessary or advisable
in connection with action taken by the General Partner pursuant to Section
5.10 or (iv) is required to effect the intent expressed in the Registration
Statement or the intent of the provisions of this Agreement or is otherwise
contemplated by this Agreement;
(e) a change in the fiscal year or taxable year of the Partnership and
any changes that, in the discretion of the General Partner, are necessary or
advisable as a result of a change in the fiscal year or taxable year of the
Partnership including, if the General Partner shall so determine, a change
in the definition of "QUARTER" and the dates on which distributions are to
be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or the General Partner or its directors, officers,
trustees or agents from in any manner being subjected to the provisions of
the Investment Company Act of 1940, as amended, the Investment Advisers Act
of 1940, as amended, or "plan asset" regulations adopted under the Employee
Retirement Income Security Act of 1974, as amended, regardless of whether
such are substantially similar to plan asset regulations currently applied
or proposed by the United States Department of Labor;
(g) subject to the terms of Section 5.7, an amendment that, in the
discretion of the General Partner, is necessary or advisable in connection
with the authorization or issuance of any class or series of Partnership
Securities (or options, rights, warrants and appreciation rights relating to
such Partnership Securities) pursuant to Section 5.6;
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(h) any amendment expressly permitted in this Agreement to be made by
the General Partner acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that, in the discretion of the General Partner, is
necessary or advisable to reflect, account for and deal with appropriately
the formation by the Partnership of, or investment by the Partnership in,
any corporation, partnership, joint venture, limited liability company or
other entity, in connection with the conduct by the Partnership of
activities permitted by the terms of Section 2.4;
(k) a merger or conveyance pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
Section 13.2 AMENDMENT PROCEDURES.
Except as provided in Sections 13.1 and 13.3, all amendments to this
Agreement shall be made in accordance with the following requirements.
Amendments to this Agreement may be proposed only by or with the consent of the
General Partner which consent may be given or withheld in its sole discretion. A
proposed amendment shall be effective upon its approval by the holders of a Unit
Majority, unless a greater or different percentage is required under this
Agreement or by Delaware law. Each proposed amendment that requires the approval
of the holders of a specified percentage of Outstanding Units shall be set forth
in a writing that contains the text of the proposed amendment. If such an
amendment is proposed, the General Partner shall seek the written approval of
the requisite percentage of Outstanding Units or call a meeting of the
Unitholders to consider and vote on such proposed amendment. The General Partner
shall notify all Record Holders upon final adoption of any such proposed
amendments.
Section 13.3 AMENDMENT REQUIREMENTS.
(a) Notwithstanding the provisions of Sections 13.1 and 13.2, no
provision of this Agreement that establishes a percentage of Outstanding
Units (including Units held, or deemed held, by the General Partner or its
Affiliates) required to take any action shall be amended, altered, changed,
repealed or rescinded in any respect that would have the effect of reducing
such voting percentage unless such amendment is approved by the written
consent or the affirmative vote of holders of Outstanding Units whose
aggregate Outstanding Units constitute not less than the voting requirement
sought to be reduced.
(b) Notwithstanding the provisions of Sections 13.1 and 13.2, no
amendment to this Agreement may (i) enlarge the obligations of any Limited
Partner without its consent, unless such shall be deemed to have occurred as
a result of an amendment approved pursuant to Section 13.3(c), (ii) enlarge
the obligations of, restrict in any way any action by or rights of, or
reduce in any way the amounts distributable, reimbursable or otherwise
payable to, the General Partner or any of its Affiliates without its
consent, which consent may be given or withheld in its sole discretion,
(iii) change Section 12.1(a) or 12.1(c), or (iv) change the term of the
Partnership or, except as set forth in Section 12.1(c), give any Person the
right to dissolve the Partnership.
(c) Except as provided in Section 14.3 or otherwise as may be provided
in this Agreement and without limitation of the General Partner's authority
to adopt amendments to this Agreement as contemplated in Section 13.1, any
amendment that would have a material adverse effect on the rights or
preferences of any class of Partnership Interests in relation to other
classes of Partnership Interests must be approved by the holders of not less
than a majority of the Outstanding Partnership Interests of the class
affected.
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(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 13.1 and except as otherwise provided by
Section 14.3(b), no amendments shall become effective without the approval
of the holders of at least 90% of the Outstanding Common Units and
Outstanding Subordinated Units voting as a single class unless the
Partnership obtains an Opinion of Counsel to the effect that such amendment
will not (i) adversely affect the limited liability of any Limited Partner
under the Delaware Act or the law of any other state in which the
Partnership is registered as a foreign limited partnership or is otherwise
qualified to do busines or (ii) cause the Partnership or the Intermediate
Partnership to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not previously treated as such).
(e) Except as provided in Section 13.1, this Section 13.3 shall only be
amended with the approval of the holders of at least 90% of the Outstanding
Units.
Section 13.4 SPECIAL MEETINGS.
All acts of Limited Partners to be taken pursuant to this Agreement shall be
taken in the manner provided in this Article XIII. Special meetings of the
Limited Partners may be called by the General Partner or by Limited Partners
holding 20% or more of the Outstanding Limited Partner Interests of the class or
classes for which a meeting is proposed. Limited Partners shall call a special
meeting by delivering to the General Partner one or more requests in writing
stating that the signing Limited Partners wish to call a special meeting and
indicating the general or specific purposes for which the special meeting is to
be called. Within 60 days after receipt of such a call from Limited Partners or
within such greater time as may be reasonably necessary for the Partnership to
comply with any statutes, rules, regulations, listing agreements or similar
requirements governing the holding of a meeting or the solicitation of proxies
for use at such a meeting, the General Partner shall send a notice of the
meeting to the Limited Partners either directly or indirectly through the
Transfer Agent. A meeting shall be held at a time and place determined by the
General Partner on a date not less than 10 days nor more than 60 days after the
mailing of notice of the meeting. Limited Partners shall not vote on matters
that would cause the Limited Partners to be deemed to be taking part in the
management and control of the business and affairs of the Partnership so as to
jeopardize the Limited Partners' limited liability under the Delaware Act or the
law of any other state in which the Partnership is registered as a foreign
limited partnership or is otherwise qualified to do business.
Section 13.5 NOTICE OF A MEETING.
Notice of a meeting called pursuant to Section 13.4 shall be given to the
Record Holders of the class or classes of Limited Partner Interests for which a
meeting is proposed in writing by mail or other means of written communication
in accordance with Section 16.1. The notice shall be deemed to have been given
at the time when deposited in the mail or sent by other means of written
communication.
Section 13.6 RECORD DATE.
For purposes of determining the Limited Partners entitled to notice of or to
vote at a meeting of the Limited Partners or to give approvals without a meeting
as provided in Section 13.11 the General Partner may set a Record Date, which
shall not be less than 10 nor more than 60 days before (a) the date of the
meeting (unless such requirement conflicts with any rule, regulation, guideline
or requirement of any National Securities Exchange on which the Limited Partner
Interests are listed for trading, in which case the rule, regulation, guideline
or requirement of such exchange shall govern) or (b) in the event that approvals
are sought without a meeting, the date by which Limited Partners are requested
in writing by the General Partner to give such approvals.
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Section 13.7 ADJOURNMENT.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting and a new Record Date need not be fixed, if the
time and place thereof are announced at the meeting at which the adjournment is
taken, unless such adjournment shall be for more than 45 days. At the adjourned
meeting, the Partnership may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 45 days
or if a new Record Date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given in accordance with this Article XIII.
Section 13.8 WAIVER OF NOTICE; APPROVAL OF MEETING; APPROVAL OF MINUTES.
The transactions of any meeting of Limited Partners, however called and
noticed, and whenever held, shall be as valid as if it had occurred at a meeting
duly held after regular call and notice, if a quorum is present either in person
or by proxy, and if, either before or after the meeting, Limited Partners
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof. All waivers and approvals shall
be filed with the Partnership records or made a part of the minutes of the
meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting, except when the Limited Partner does not approve, at
the beginning of the meeting, of the transaction of any business because the
meeting is not lawfully called or convened; and except that attendance at a
meeting is not a waiver of any right to disapprove the consideration of matters
required to be included in the notice of the meeting, but not so included, if
the disapproval is expressly made at the meeting.
Section 13.9 QUORUM.
The holders of a majority of the Outstanding Limited Partner Interests of
the class or classes for which a meeting has been called (including Limited
Partner Interests held or deemed held by the General Partner or its Affiliates)
represented in person or by proxy shall constitute a quorum at a meeting of
Limited Partners of such class or classes unless any such action by the Limited
Partners requires approval by holders of a greater percentage of such Limited
Partner Interests, in which case the quorum shall be such greater percentage. At
any meeting of the Limited Partners duly called and held in accordance with this
Agreement at which a quorum is present, the act of Limited Partners holding
Outstanding Limited Partner Interests that in the aggregate represent a majority
of the Outstanding Limited Partner Interests entitled to vote and present in
person or by proxy at such meeting shall be deemed to constitute the act of all
Limited Partners, unless a greater or different percentage is required with
respect to such action under the provisions of this Agreement, in which case the
act of the Limited Partners holding Outstanding Limited Partner Interests that
in the aggregate represent at least such greater or different percentage shall
be required. The Limited Partners present at a duly called or held meeting at
which a quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Limited Partners to leave less than a
quorum, if any action taken (other than adjournment) is approved by the required
percentage of Outstanding Limited Partner Interests specified in this Agreement
(including Limited Partner Interests deemed owned by the General Partner). In
the absence of a quorum any meeting of Limited Partners may be adjourned from
time to time by the affirmative vote of holders of at least a majority of the
Outstanding Limited Partner Interests entitled to vote at such meeting
(including Limited Partner Interests held or deemed held by the General Partner
or its Affiliates) represented either in person or by proxy, but no other
business may be transacted, except as provided in Section 13.7.
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Section 13.10 CONDUCT OF A MEETING.
The General Partner shall have full power and authority concerning the
manner of conducting any meeting of the Limited Partners or solicitation of
approvals in writing, including the determination of Persons entitled to vote,
the existence of a quorum, the satisfaction of the requirements of Section 13.4,
the conduct of voting, the validity and effect of any proxies and the
determination of any controversies, votes or challenges arising in connection
with or during the meeting or voting. The General Partner shall designate a
Person to serve as chairman of any meeting and shall further designate a Person
to take the minutes of any meeting. All minutes shall be kept with the records
of the Partnership maintained by the General Partner. The General Partner may
make such other regulations consistent with applicable law and this Agreement as
it may deem advisable concerning the conduct of any meeting of the Limited
Partners or solicitation of approvals in writing, including regulations in
regard to the appointment of proxies, the appointment and duties of inspectors
of votes and approvals, the submission and examination of proxies and other
evidence of the right to vote, and the revocation of approvals in writing.
Section 13.11 ACTION WITHOUT A MEETING.
If authorized by the General Partner, any action that may be taken at a
meeting of the Limited Partners may be taken without a meeting if an approval in
writing setting forth the action so taken is signed by Limited Partners holding
not less than the minimum percentage of the Outstanding Limited Partner
Interests (including Limited Partner Interests held or deemed held by the
General Partner or its Affiliates) that would be necessary to authorize or take
such action at a meeting at which all the Limited Partners were present and
voted (unless such provision conflicts with any rule, regulation, guideline or
requirement of any National Securities Exchange on which the Limited Partner
Interests are listed for trading, in which case the rule, regulation, guideline
or requirement of such exchange shall govern). Prompt notice of the taking of
action without a meeting shall be given to the Limited Partners who have not
approved in writing. The General Partner may specify that any written ballot
submitted to Limited Partners for the purpose of taking any action without a
meeting shall be returned to the Partnership within the time period, which shall
be not less than 20 days, specified by the General Partner. If a ballot returned
to the Partnership does not vote all of the Limited Partner Interests held by a
Limited Partner, the Partnership shall be deemed to have failed to receive a
ballot for the Limited Partner Interests that were not voted. If approval of the
taking of any action by the Limited Partners is solicited by any Person other
than by or on behalf of the General Partner, the written approvals shall have no
force and effect unless and until (a) they are deposited with the Partnership in
care of the General Partner, (b) approvals sufficient to take the action
proposed are dated as of a date not more than 90 days prior to the date
sufficient approvals are deposited with the Partnership and (c) an Opinion of
Counsel is delivered to the General Partner to the effect that the exercise of
such right and the action proposed to be taken with respect to any particular
matter (i) will not cause the Limited Partners to be deemed to be taking part in
the management and control of the business and affairs of the Partnership so as
to jeopardize the Limited Partners' limited liability, and (ii) is otherwise
permissible under the state statutes then governing the rights, duties and
liabilities of the Partnership and the Partners.
Section 13.12 VOTING AND OTHER RIGHTS.
(a) Only those Record Holders of the Limited Partner Interests on the
Record Date set pursuant to Section 13.6 (and also subject to the
limitations contained in the definition of "OUTSTANDING") shall be entitled
to notice of, and to vote at, a meeting of Limited Partners or to act with
respect to matters as to which the holders of the Outstanding Limited
Partner Interests have the right to vote or to act. All references in this
Agreement to votes of, or other acts that may be taken by, the Outstanding
Limited Partner Interests shall be deemed to be references to the votes or
acts of the Record Holders of such Outstanding Limited Partner Interests.
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(b) With respect to Limited Partner Interests that are held for a
Person's account by another Person (such as a broker, dealer, bank, trust
company or clearing corporation, or an agent of any of the foregoing), in
whose name such Limited Partner Interests are registered, such other Person
shall, in exercising the voting rights in respect of such Limited Partner
Interests on any matter, and unless the arrangement between such Persons
provides otherwise, vote such Limited Partner Interests in favor of, and at
the direction of, the Person who is the beneficial owner, and the
Partnership shall be entitled to assume it is so acting without further
inquiry. The provisions of this Section 13.12(b) (as well as all other
provisions of this Agreement) are subject to the provisions of Section 4.3.
ARTICLE XIV
MERGER
Section 14.1 AUTHORITY.
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("MERGER AGREEMENT") in accordance
with this Article XIV.
Section 14.2 PROCEDURE FOR MERGER OR CONSOLIDATION.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the General Partner. If the General Partner shall
determine, in the exercise of its discretion, to consent to the merger or
consolidation, the General Partner shall approve the Merger Agreement, which
shall set forth:
(a) The names and jurisdictions of formation or organization of each of the
business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the business
entity that is to survive the proposed merger or consolidation (the "SURVIVING
BUSINESS ENTITY");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity securities
of each constituent business entity for, or into, cash, property or general or
limited partner interests, rights, securities or obligations of the Surviving
Business Entity; and (i) if any general or limited partner interests, securities
or rights of any constituent business entity are not to be exchanged or
converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business Entity,
the cash, property or general or limited partner interests, rights, securities
or obligations of any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity) which the holders of such general or
limited partner interests, securities or rights are to receive in exchange for,
or upon conversion of their general or limited partner interests, securities or
rights, and (ii) in the case of securities represented by certificates, upon the
surrender of such certificates, which cash, property or general or limited
partner interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity), or evidences thereof, are to be
delivered;
(e) A statement of any changes in the constituent documents or the adoption
of new constituent documents (the articles or certificate of incorporation,
articles of trust, declaration of
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trust, certificate or agreement of limited partnership or other similar charter
or governing document) of the Surviving Business Entity to be effected by such
merger or consolidation;
(f) The effective time of the merger, which may be the date of the filing
of the certificate of merger pursuant to Section 14.4 or a later date specified
in or determinable in accordance with the Merger Agreement (provided, that if
the effective time of the merger is to be later than the date of the filing of
the certificate of merger, the effective time shall be fixed no later than the
time of the filing of the certificate of merger and stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General Partner.
SECTION 14.3 APPROVAL BY LIMITED PARTNERS OF MERGER OR CONSOLIDATION
(a) Except as provided in Section 14.3(d), the General Partner, upon its
approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement shall be included in or
enclosed with the notice of a special meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement shall be
approved upon receiving the affirmative vote or consent of the holders of a Unit
Majority unless the Merger Agreement contains any provision that, if contained
in an amendment to this Agreement, the provisions of this Agreement or the
Delaware Act would require for its approval the vote or consent of a greater
percentage of the Outstanding Limited Partner Interests or of any class of
Limited Partners, in which case such greater percentage vote or consent shall be
required for approval of the Merger Agreement.
(c) Except as provided in Section 14.3(d), after such approval by vote or
consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger pursuant to Section 14.4, the merger or consolidation may
be abandoned pursuant to provisions therefor, if any, set forth in the Merger
Agreement.
(d) Notwithstanding anything else contained in this Article XIV or in this
Agreement, the General Partner is permitted, in its discretion, without Limited
Partner approval, to merge the Partnership or any Group Member into, or convey
all of the Partnership's assets to, another limited liability entity which shall
be newly formed and shall have no assets, liabilities or operations at the time
of such Merger other than those it receives from the Partnership or other Group
Member if (i) the General Partner has received an Opinion of Counsel that the
merger or conveyance, as the case may be, would not result in the loss of the
limited liability of any Limited Partner or any limited partner in the
Intermediate Partnership or cause the Partnership or the Intermediate
Partnership to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not previously treated as such), (ii) the sole purpose of such merger or
conveyance is to effect a mere change in the legal form of the Partnership into
another limited liability entity and (iii) the governing instruments of the new
entity provide the Limited Partners and the General Partner with the same rights
and obligations as are herein contained.
SECTION 14.4 CERTIFICATE OF MERGER.
Upon the required approval by the General Partner and the Unitholders of a
Merger Agreement, a certificate of merger shall be executed and filed with the
Secretary of State of the State of Delaware in conformity with the requirements
of the Delaware Act.
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SECTION 14.5 EFFECT OF MERGER.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all other
things and causes of action belonging to each of those business entities,
shall be vested in the Surviving Business Entity and after the merger or
consolidation shall be the property of the Surviving Business Entity to the
extent they were property of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any
of those constituent business entities shall not revert and shall not in any
way be impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests in
property of any of those constituent business entities shall be preserved
unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall not be
deemed to result in a transfer or assignment of assets or liabilities from one
entity to another.
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
SECTION 15.1 RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS.
(a) Notwithstanding any other provision of this Agreement, if at any time
not more than 20% of the total Limited Partner Interests of any class then
Outstanding is held by Persons other than the General Partner and its
Affiliates, the General Partner shall then have the right, which right it may
assign and transfer in whole or in part to the Partnership or any Affiliate of
the General Partner, exercisable in its sole discretion, to purchase all, but
not less than all, of such Limited Partner Interests of such class then
Outstanding held by Persons other than the General Partner and its Affiliates,
at the greater of (x) the Current Market Price as of the date three days prior
to the date that the notice described in Section 15.1(b) is mailed and (y) the
highest price paid by the General Partner or any of its Affiliates for any such
Limited Partner Interest of such class purchased during the 90-day period
preceding the date that the notice described in Section 15.1(b) is mailed. As
used in this Agreement, (i) "CURRENT MARKET PRICE" as of any date of any class
of Limited Partner Interests listed or admitted to trading on any National
Securities Exchange means the average of the daily Closing Prices (as
hereinafter defined) per limited partner interest of such class for the 20
consecutive Trading Days (as hereinafter defined) immediately prior to such
date; (ii) "CLOSING PRICE" for any day means the last sale price on such day,
regular way, or in case no such sale takes place on such day, the average of the
closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted for trading on the principal National
Securities Exchange (other than the Nasdaq Stock Market) on which such Limited
Partner Interests of such class are listed or admitted to trading or, if such
Limited Partner Interests of such class are not listed or admitted to trading on
any National Securities Exchange (other than the Nasdaq Stock Market), the last
quoted price on such day or, if not so quoted, the average of the high bid and
low asked prices on such day in the over-the-counter market, as reported by the
Nasdaq Stock Market or such other system then in use, or, if on any such day
such Limited Partner Interests of such class are not quoted by any such
organization, the average of the closing bid and asked prices on such day as
furnished by a
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professional market maker making a market in such Limited Partner Interests of
such class selected by the General Partner, or if on any such day no market
maker is making a market in such Limited Partner Interests of such class, the
fair value of such Limited Partner Interests on such day as determined
reasonably and in good faith by the General Partner; and (iii) "TRADING DAY"
means a day on which the principal National Securities Exchange on which such
Limited Partner Interests of any class are listed or admitted to trading is open
for the transaction of business or, if Limited Partner Interests of a class are
not listed or admitted to trading on any National Securities Exchange, a day on
which banking institutions in New York City generally are open.
(b) If the General Partner, any Affiliate of the General Partner or the
Partnership elects to exercise the right to purchase Limited Partner Interests
granted pursuant to Section 15.1(a), the General Partner shall deliver to the
Transfer Agent notice of such election to purchase (the "NOTICE OF ELECTION TO
PURCHASE") and shall cause the Transfer Agent to mail a copy of such Notice of
Election to Purchase to the Record Holders of Limited Partner Interests of such
class (as of a Record Date selected by the General Partner) at least 10, but not
more than 60, days prior to the Purchase Date. Such Notice of Election to
Purchase shall also be published for a period of at least three consecutive days
in at least two daily newspapers of general circulation printed in the English
language and published in the Borough of Manhattan, New York. The Notice of
Election to Purchase shall specify the Purchase Date and the price (determined
in accordance with Section 15.1(a)) at which Limited Partner Interests will be
purchased and state that the General Partner, its Affiliate or the Partnership,
as the case may be, elects to purchase such Limited Partner Interests, upon
surrender of Certificates representing such Limited Partner Interests in
exchange for payment, at such office or offices of the Transfer Agent as the
Transfer Agent may specify, or as may be required by any National Securities
Exchange on which such Limited Partner Interests are listed or admitted to
trading. Any such Notice of Election to Purchase mailed to a Record Holder of
Limited Partner Interests at his address as reflected in the records of the
Transfer Agent shall be conclusively presumed to have been given regardless of
whether the owner receives such notice. On or prior to the Purchase Date, the
General Partner, its Affiliate or the Partnership, as the case may be, shall
deposit with the Transfer Agent cash in an amount sufficient to pay the
aggregate purchase price of all of such Limited Partner Interests to be
purchased in accordance with this Section 15.1. If the Notice of Election to
Purchase shall have been duly given as aforesaid at least 10 days prior to the
Purchase Date, and if on or prior to the Purchase Date the deposit described in
the preceding sentence has been made for the benefit of the holders of Limited
Partner Interests subject to purchase as provided herein, then from and after
the Purchase Date, notwithstanding that any Certificate shall not have been
surrendered for purchase, all rights of the holders of such Limited Partner
Interests (including any rights pursuant to Articles IV, V, VI, and XII) shall
thereupon cease, except the right to receive the purchase price (determined in
accordance with Section 15.1(a)) for Limited Partner Interests therefor, without
interest, upon surrender to the Transfer Agent of the Certificates representing
such Limited Partner Interests, and such Limited Partner Interests shall
thereupon be deemed to be transferred to the General Partner, its Affiliate or
the Partnership, as the case may be, on the record books of the Transfer Agent
and the Partnership, and the General Partner or any Affiliate of the General
Partner, or the Partnership, as the case may be, shall be deemed to be the
holder of all such Limited Partner Interests from and after the Purchase Date
and shall have all rights as the holder of such Limited Partner Interests
(including all rights as holder of such Limited Partner Interests pursuant to
Articles IV, V, VI and XII).
(c) At any time from and after the Purchase Date, a holder of an Outstanding
Limited Partner Interest subject to purchase as provided in this Section 15.1
may surrender his Certificate evidencing such Limited Partner Interest to the
Transfer Agent in exchange for payment of the amount described in Section
15.1(a), therefor, without interest thereon.
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ARTICLE XVI
GENERAL PROVISIONS
SECTION 16.1 ADDRESSES AND NOTICES.
Any notice, demand, request, report or proxy materials required or permitted
to be given or made to a Partner or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class United States mail or by other means of written communication to
the Partner or Assignee at the address described below. Any notice, payment or
report to be given or made to a Partner or Assignee hereunder shall be deemed
conclusively to have been given or made, and the obligation to give such notice
or report or to make such payment shall be deemed conclusively to have been
fully satisfied, upon sending of such notice, payment or report to the Record
Holder of such Partnership Securities at his address as shown on the records of
the Transfer Agent or as otherwise shown on the records of the Partnership,
regardless of any claim of any Person who may have an interest in such
Partnership Securities by reason of any assignment or otherwise. An affidavit or
certificate of making of any notice, payment or report in accordance with the
provisions of this Section 16.1 executed by the General Partner, the Transfer
Agent or the mailing organization shall be prima facie evidence of the giving or
making of such notice, payment or report. If any notice, payment or report
addressed to a Record Holder at the address of such Record Holder appearing on
the books and records of the Transfer Agent or the Partnership is returned by
the United States Postal Service marked to indicate that the United States
Postal Service is unable to deliver it, such notice, payment or report and any
subsequent notices, payments and reports shall be deemed to have been duly given
or made without further mailing (until such time as such Record Holder or
another Person notifies the Transfer Agent or the Partnership of a change in his
address) if they are available for the Partner or Assignee at the principal
office of the Partnership for a period of one year from the date of the giving
or making of such notice, payment or report to the other Partners and Assignees.
Any notice to the Partnership shall be deemed given if received by the General
Partner at the principal office of the Partnership designated pursuant to
Section 2.3. The General Partner may rely and shall be protected in relying on
any notice or other document from a Partner, Assignee or other Person if
believed by it to be genuine.
SECTION 16.2 FURTHER ACTION.
The parties hereto shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
SECTION 16.3 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
SECTION 16.4 INTEGRATION.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
SECTION 16.5 CREDITORS.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
SECTION 16.6 WAIVER.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach
78
thereof shall constitute a waiver of any subsequent breach or any breach of any
other covenant, duty, agreement or condition.
SECTION 16.7 COUNTERPARTS.
This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto or, in the case of a Person acquiring a Unit, upon accepting
the certificate evidencing such Unit or executing and delivering a Transfer
Application as herein described, independently of the signature of any other
party.
SECTION 16.8 APPLICABLE LAW.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
SECTION 16.9 INVALIDITY OF PROVISIONS.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
SECTION 16.10 CONSENT OF PARTNERS.
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
TC PIPELINES GP, INC.
By: /s/ Xxxx X. XxxXxxxxx
---------------------------
Name: Xxxx X. XxxXxxxxx
Title: Vice-President,
Business Development
ORGANIZATIONAL LIMITED PARTNER:
TRANSCAN NORTHERN LTD.
By: /s/ Xxxx X. XxxXxxxxx
---------------------------
Name: Xxxx X. XxxXxxxxx
Title: Vice-President
LIMITED PARTNERS:
All Limited Partners now and hereafter
admitted as Limited Partners of the
Partnership, pursuant to powers of
attorney now and hereafter executed
in favor of, and granted and
delivered to the General Partner.
TC PIPELINES GP, INC.
By: /s/ Xxxx X. XxxXxxxxx
---------------------------
Name: Xxxx X. XxxXxxxxx
Title: Vice-President,
Business Development
80
EXHIBIT A
TO THE AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
TC PIPELINES, LP
CERTIFICATE EVIDENCING COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS IN
TC PIPELINES, LP
No. Common Units
In accordance with Section 4.1 of the Amended and Restated Agreement of
Limited Partnership of TC PipeLines, LP, as amended, supplemented or restated
from time to time (the "PARTNERSHIP AGREEMENT"), TC PipeLines, LP, a Delaware
limited partnership (the "PARTNERSHIP"), hereby certifies that
------------------- (the "HOLDER") is the registered owner of
------------ Common Units representing limited partner interests in the
Partnership (the "COMMON UNITS") transferable on the books of the Partnership,
in person or by duly authorized attorney, upon surrender of this Certificate
properly endorsed and accompanied by a properly executed application for
transfer of the Common Units represented by this Certificate. The rights,
preferences and limitations of the Common Units are set forth in, and this
Certificate and the Common Units represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Partnership Agreement.
Copies of the Partnership Agreement are on file at, and will be furnished
without charge on delivery of written request to the Partnership at, the
principal office of the Partnership located at
-------------------. Capitalized terms used herein but not defined shall have
the meanings given them in the Partnership Agreement.
The Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement, (ii)
represented and warranted that the Holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Partnership
Agreement, (iii) granted the powers of attorney provided for in the Partnership
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Partnership Agreement.
Except as otherwise provided in the Partnership Agreement, this Certificate
shall not be valid for any purpose unless it has been countersigned and
registered by the Transfer Agent and Registrar.
Dated: ------------------------ TC PIPELINES, LP
Countersigned and Registered by: By: TC PipeLines GP, Inc., its General
Partner
By: ----------------------------
as Transfer Agent and Registrar Name: ------------------------
By: ---------------------------- By: ----------------------------
Authorized Signature Secretary
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[REVERSE OF CERTIFICATE]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as follows according to applicable laws or
regulations:
TEN COM -- as tenants in common UNIF GIFT/TRANSFERS MIN ACT
TEN ENT -- as tenants by the entireties ------------ Custodian
(Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts/Transfers
survivorship and not as tenants in common to
Minors Act --------------------
(State)
Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF COMMON UNITS
IN
TC PIPELINES, LP
IMPORTANT NOTICE REGARDING INVESTOR RESPONSIBILITIES
DUE TO TAX SHELTER STATUS OF TC PIPELINES, LP
You have acquired an interest in TC PipeLines, LP, a Delaware limited
partnership, whose taxpayer identification number is 00-0000000. The Internal
Revenue Service has issued TC PipeLines, LP the following tax shelter
registration number:
------------.
YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE SERVICE IF
YOU CLAIM ANY DEDUCTION, LOSS, CREDIT OR OTHER TAX BENEFIT OR REPORT ANY INCOME
BY REASON OF YOUR INVESTMENT IN TC PIPELINES, LP
You must report the registration number as well as the name and taxpayer
identification number of TC PipeLines, LP on Form 8271. FORM 8271 MUST BE
ATTACHED TO THE RETURN ON WHICH YOU CLAIM THE DEDUCTION, LOSS, CREDIT OR OTHER
TAX BENEFIT OR REPORT ANY INCOME BY REASON OF YOUR INVESTMENT IN TC PIPELINES,
LP.
If you transfer your interest in TC PipeLines, LP to another person, you are
required by the Internal Revenue Service to keep a list containing (a) that
person's name, address and taxpayer identification number, (b) the date on which
you transferred the interest and (c) the name, address and tax shelter
registration number of TC PipeLines, LP. If you do not want to keep such a list,
you must (1) send the information specified above to the Partnership, which will
keep the list for this tax shelter, and (2) give a copy of this notice to the
person to whom you transfer your interest. Your failure to comply with any of
the above-described responsibilities could result in the imposition of a penalty
under Section 6707(b) or 6708(a) of the Internal Revenue Code of 1986, as
amended, unless such failure is shown to be due to reasonable cause.
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS INVESTMENT OR
THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE
INTERNAL REVENUE SERVICE.
FOR VALUE RECEIVED,
------------------ HEREBY ASSIGNS, CONVEYS, SELLS AND TRANSFERS UNTO
(Please print or typewrite name (Please insert Social Security or
and address of Assignee) other
identifying number of Assignee)
82
------------ Common Units representing limited partner interests evidenced by
this Certificate, subject to the Partnership Agreement, and does hereby
irrevocably constitute and appoint
------------------- as its attorney-in-fact with full power of substitution to
transfer the same on the books of TC PipeLines, LP
Date: NOTE: The signature to any endorsement hereon
must correspond with the name as written
upon the face of this Certificate in
every particular, without alteration,
enlargement or change.
SIGNATURE(S) MUST BE GUARANTEED BY A
MEMBER FIRM OF THE NATIONAL ASSOCIATION (Signature)
OF SECURITIES DEALERS, INC. OR BY A (Signature)
COMMERCIAL BANK OR TRUST COMPANY
SIGNATURE(S) GUARANTEED
No transfer of the Common Units evidenced hereby will be registered on the
books of the Partnership, unless the Certificate evidencing the Common Units to
be transferred is surrendered for registration or transfer and an Application
for Transfer of Common Units has been executed by a transferee either (a) on the
form set forth below or (b) on a separate application that the Partnership will
furnish on request without charge. A transferor of the Common Units shall have
no duty to the transferee with respect to execution of the transfer application
in order for such transferee to obtain registration of the transfer of the
Common Units.
83
APPLICATION FOR TRANSFER OF COMMON UNITS
The undersigned ("ASSIGNEE") hereby applies for transfer to the name of the
Assignee of the Common Units evidenced hereby.
The Assignee (a) requests admission as a Substituted Limited Partner and
agrees to comply with and be bound by, and hereby executes, the Amended and
Restated Agreement of Limited Partnership of TC PipeLines, LP (the
"PARTNERSHIP"), as amended, supplemented or restated to the date hereof (the
"PARTNERSHIP AGREEMENT"), (b) represents and warrants that the Assignee has all
right, power and authority and, if an individual, the capacity necessary to
enter into the Partnership Agreement, (c) appoints the General Partner of the
Partnership and, if a Liquidator shall be appointed, the Liquidator of the
Partnership as the Assignee's attorney-in-fact to execute, swear to, acknowledge
and file any document, including, without limitation, the Partnership Agreement
and any amendment thereto and the Certificate of Limited Partnership of the
Partnership and any amendment thereto, necessary or appropriate for the
Assignee's admission as a Substituted Limited Partner and as a party to the
Partnership Agreement, (d) gives the powers of attorney provided for in the
Partnership Agreement, and (e) makes the waivers and gives the consents and
approvals contained in the Partnership Agreement. Capitalized terms not defined
herein have the meanings assigned to such terms in the Partnership Agreement.
Date:
-------------------
Social Security or other identifying number Signature of Assignee
of Assignee
Purchase Price including commissions, if any Name and Address of Assignee
Type of Entity (check one):
o Individual o Partnership o Corporation
o Trust o Other (specify) ----------------------------
Nationality (check one):
o U.S. Citizen, Resident or Domestic Entity
o Foreign Corporation o Non-resident Alien
If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
"CODE"), the Partnership must withhold tax with respect to certain transfers of
property if a holder of an interest in the Partnership is a foreign person. To
inform the Partnership that no withholding is required with respect to the
undersigned interestholder's interest in it, the undersigned hereby certifies
the following (or, if applicable, certifies the following on behalf of the
interestholder).
Complete Either A or B:
A. Individual Interestholder
1. I am not a non-resident alien for purposes of U.S. income taxation.
2. My U.S. taxpayer identification number (Social Security Number) is
-----------------------.
84
3. My home address is
-----------------------.
B. Partnership, Corporation or Other Interestholder
1.
-------------------------- is not a foreign corporation, foreign
partnership, foreign trust
(Name of Interestholder)
or foreign estate (as those terms are defined in the Code and Treasury
Regulations).
2. The interestholder's U.S. employer identification number is
-----------------------.
3. The interestholder's office address and place of incorporation (if
applicable) is
--------------------------.
The interestholder agrees to notify the Partnership within sixty (60) days
of the date the interestholder becomes a foreign person.
The interestholder understands that this certificate may be disclosed to the
Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete and, if applicable, I further declare that I have authority to sign
this document on behalf of:
------------------------
Name of Interestholder
------------------------
Dated: Signature and Date
------------------------
Title (if applicable)
Note: If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee holder or an agent of any of the foregoing, and is
holding for the account of any other person, this application should be
completed by an officer thereof or, in the case of a broker or dealer, by a
registered representative who is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a person performing a similar
function. If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee owner or an agent of any of the foregoing, the above
certification as to any person for whom the Assignee will hold the Common Units
shall be made to the best of the Assignee's knowledge.
85
