Exhibit 3.1
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
KANEB PIPE LINE PARTNERS, L.P.
SEPTEMBER 18, 1995
AS REVISED: JULY 23, 1998
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS.............................................................................................1
Additional Limited Partner...............................................................................1
Adjusted Capital Account.................................................................................1
Adjusted Property........................................................................................1
Affiliate................................................................................................2
Agreed Allocation........................................................................................2
Agreed Value.............................................................................................2
Agreement................................................................................................2
Assignee.................................................................................................2
Assignment of Leases.....................................................................................2
Available Cash...........................................................................................2
Book-Tax Disparity.......................................................................................2
Business Day.............................................................................................2
Capital Account..........................................................................................2
Capital Asset............................................................................................2
Capital Contribution.....................................................................................2
Carrying Value...........................................................................................2
Cash from Interim Capital Transactions...................................................................3
Cash from Operations.....................................................................................3
Certificate..............................................................................................3
Certificate of Limited Partnership.......................................................................3
Citizenship Certification................................................................................3
Closing Date.............................................................................................3
Closing Price............................................................................................3
Code.....................................................................................................3
Combined Interest........................................................................................3
Commission...............................................................................................3
Common Unit..............................................................................................3
Contributed Property.....................................................................................3
Contributing Partner.....................................................................................3
Contribution Agreement...................................................................................3
Cumulative Preference Unit Deficiency....................................................................4
Cumulative Senior Preference Unit Deficiency.............................................................4
Curative Allocation......................................................................................4
Current Market Price.....................................................................................4
Delaware Act.............................................................................................4
Departing Partner........................................................................................4
Economic Risk of Loss....................................................................................4
Eligible Citizen.........................................................................................4
Exchange Act.............................................................................................4
Exchangeable Amount......................................................................................4
Exchange Date............................................................................................4
Exchange Factor..........................................................................................4
Expansive Capital Expenditures...........................................................................4
First Liquidation Target Amount..........................................................................4
First Target Distribution................................................................................4
First Target Distribution Cumulative Deficiency..........................................................4
General Partner..........................................................................................4
General Partner Equity Value.............................................................................4
Indemnitee...............................................................................................5
Independent Committee....................................................................................5
Initial Offering.........................................................................................5
Interim Capital Transaction..............................................................................5
Kaneb....................................................................................................5
KPL......................................................................................................5
Limited Partner..........................................................................................5
Limited Partner Equity Value.............................................................................5
Liquidating Trustee......................................................................................5
LP Unit..................................................................................................5
Majority Interest........................................................................................5
Minimum Gain Attributable to Partner Nonrecourse Debt....................................................5
Minimum Quarterly Distribution...........................................................................5
NASDAQ...................................................................................................5
National Securities Exchange.............................................................................6
Net Agreed Value.........................................................................................6
Net Income...............................................................................................6
Net Loss.................................................................................................6
Net Termination Sales Gain...............................................................................6
Net Termination Sales Loss...............................................................................6
New Entity...............................................................................................6
Non-citizen Assignee.....................................................................................6
Nonrecourse Built-in Gain................................................................................6
Nonrecourse Deductions...................................................................................6
Nonrecourse Liability....................................................................................6
Notice of Election to Purchase...........................................................................6
Operating Partnership....................................................................................6
Operating Partnership Agreement:.........................................................................7
Opinion of Counsel.......................................................................................7
Outstanding..............................................................................................7
Partner..................................................................................................7
Partner Nonrecourse Debt.................................................................................7
Partner Nonrecourse Deductions...........................................................................7
Partnership..............................................................................................7
Partnership Assets.......................................................................................7
Partnership Interest.....................................................................................7
Partnership Minimum Gain.................................................................................7
Partnership Securities...................................................................................7
Partnership Year.........................................................................................7
Partnership's Accountants................................................................................7
Payment Priority Agreement...............................................................................7
Per Unit Capital Amount..................................................................................7
Percentage Interest......................................................................................7
Permitted Indebtedness...................................................................................8
Person...................................................................................................8
Pipeline System..........................................................................................8
Preference Period........................................................................................8
Preference Unit..........................................................................................8
Preference B Unit........................................................................................8
Preference Unit Deficiency...............................................................................8
Preference B Unit Deficiency.............................................................................8
Purchase Date............................................................................................8
Recapture Income.........................................................................................8
Recaptured Credits.......................................................................................8
Reconstituted Partnership................................................................................8
Record Date..............................................................................................8
Record Holder............................................................................................8
Redeemable Units.........................................................................................8
Registrar................................................................................................8
Registration Statement...................................................................................9
Remaining Capital........................................................................................9
Required Allocation......................................................................................9
Residual Gain............................................................................................9
Residual Loss............................................................................................9
Second Liquidation Target Amount.........................................................................9
Second Target Distribution...............................................................................9
Second Target Distribution Cumulative Deficiency.........................................................9
Section 754 Election.....................................................................................9
Securities Act...........................................................................................9
Senior Preference Unit...................................................................................9
Senior Preference Unit Deficiency........................................................................9
Special Approval.........................................................................................9
Substituted Limited Partner..............................................................................9
Subsidiaryof any Person..................................................................................9
Subsidiary...............................................................................................9
Subsidiary Partnership Agreement.........................................................................9
Surviving Business Entity................................................................................9
Terminating Capital Transaction.........................................................................10
Third Liquidation Target Amount.........................................................................10
Third Target Distribution...............................................................................10
Third Target Distribution Cumulative Deficiency.........................................................10
Trading Day.............................................................................................10
Transfer Agent..........................................................................................10
Transfer Application....................................................................................10
Underwriting Agreement..................................................................................10
Unit Certificate........................................................................................10
Unit Price..............................................................................................10
Unrealized Gain.........................................................................................10
Unrealized Loss.........................................................................................10
Unrecovered Capital.....................................................................................10
ARTICLE 2 FORMATION AND CONTINUATION OF PARTNERSHIP.............................................................11
2.1 Formation and Continuation.........................................................................11
2.2 Name...............................................................................................11
2.3 Names and Addresses of Partners....................................................................11
2.4 Principal Office of the Partnership; Registered Office and Agent...................................11
2.5 Term...............................................................................................11
2.6 Possible Restrictions on Transfer..................................................................11
ARTICLE 3 PURPOSE...............................................................................................12
ARTICLE 4 CAPITAL ACCOUNTS; CAPITAL CONTRIBUTIONS...............................................................12
4.1 Initial Contributions..............................................................................12
4.2 Contributions on the Closing Date..................................................................12
4.3 Additional Issuances of Securities.................................................................12
4.4 Limitations on Issuances During the Preference Period..............................................13
4.5 Capital Accounts...................................................................................13
4.6 Interest...........................................................................................15
4.7 No Withdrawal......................................................................................15
4.8 Loans from Partners................................................................................15
4.9 No Fractional LP Units.............................................................................15
4.10 Record of Contributions...........................................................................15
4.11 Splits and Combinations...........................................................................16
4.12 No Preemptive Rights..............................................................................16
ARTICLE 5 ALLOCATIONS AND DISTRIBUTIONS.........................................................................16
5.1 Allocations For Capital Account Purposes...........................................................16
5.2 Allocations for Tax Purposes.......................................................................21
5.3 Requirement and Characterization of Distributions..................................................22
5.4 Distributions During Preference Period.............................................................23
5.5 Distributions After Preference Period..............................................................24
5.6 Distributions of Cash from Interim Capital Transactions............................................24
5.7 Definitions........................................................................................25
5.8 Adjustment of Distribution and Target Distribution Levels..........................................28
5.9 Exchange of LP Units...............................................................................28
5.10 Restrictions on Distributions on, and Acquisitions of, Preference Units, Preference B Units and Common Units
during the Preference Period...................................................................29
5.11 Reimbursements and Payments.......................................................................29
ARTICLE 6 MANAGEMENT AND OPERATION OF BUSINESS..................................................................29
6.1 Management.........................................................................................29
6.2 Reliance By Third Parties..........................................................................31
6.3 Purchase or Sale of LP Units.......................................................................31
6.4 Compensation and Reimbursement of the General Partner..............................................31
6.5 Partnership Funds..................................................................................32
6.6 Loans from the General Partner; Contracts with Affiliates..........................................32
6.7 Liability of Indemnitees...........................................................................32
6.8 Indemnification....................................................................................33
6.9 Other Matters Concerning the General Partner.......................................................34
6.10 Registration Rights of KPL and its Affiliates.....................................................34
6.11 Title to Partnership Assets.......................................................................35
6.12 Resolution of Conflicts of Interest...............................................................35
6.13 Restrictions on General Partner's Authority.......................................................36
6.14 Outside Activities................................................................................37
ARTICLE 7 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS............................................................38
7.1 Limitation of Liability............................................................................38
7.2 Management of Business.............................................................................38
7.3 Outside Activities.................................................................................38
7.4 Return of Capital..................................................................................38
7.5 Access to Information..............................................................................38
ARTICLE 8 BOOKS, RECORDS, ACCOUNTING AND REPORTS................................................................39
8.1 Records and Accounting.............................................................................39
8.2 Fiscal Year........................................................................................39
8.3 Reports............................................................................................39
ARTICLE 9 TAX MATTERS...........................................................................................39
9.1 Section 754 Allocations............................................................................39
9.2 Preparation of Tax Returns.........................................................................39
9.3 Tax Elections......................................................................................40
9.4 Tax Controversies..................................................................................40
9.5 Tax Basis and Value Determinations.................................................................40
9.6 Entity-Level Taxation..............................................................................40
9.7 Entity-Level Deficiency Collections................................................................40
9.8 Opinions of Counsel................................................................................41
9.9 Withholding........................................................................................41
9.10 General Partner Net Worth..........................................................................41
ARTICLE 10 POWER OF ATTORNEY....................................................................................41
ARTICLE 11 ISSUANCE OF UNIT CERTIFICATES........................................................................42
11.1 Issuance of Unit Certificates.....................................................................42
11.2 Registration, Registration of Transfer and Exchange...............................................42
11.3 Lost, Stolen or Destroyed Certificates............................................................43
11.4 Registered Owner..................................................................................43
ARTICLE 12 TRANSFER OF PARTNERSHIP INTERESTS....................................................................43
12.1 Transfer..........................................................................................43
12.2 Transfer of Interests of the General Partner......................................................44
12.3 Transfer of LP Units..............................................................................44
12.4 Restrictions on Transfers.........................................................................45
12.5 Citizenship Certificates; Non-citizen Assignees...................................................45
12.6 Redemption of Interests...........................................................................46
ARTICLE 13 ADMISSION OF PARTNERS................................................................................47
13.1 Admission of Substituted Limited Partners.........................................................47
13.2 Admission of Additional Limited Partners..........................................................47
13.3 Admission of Successor or Additional General Partner..............................................48
ARTICLE 14 WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER.........................................................48
14.1 Withdrawal or Removal of the General Partner......................................................48
14.2 Withdrawal........................................................................................49
14.3 Removal...........................................................................................49
14.4 Opinion of Counsel................................................................................49
14.5 Amendment of Certificate of Limited Partnership...................................................49
14.6 Interest of Departing Partner and Successor.......................................................50
ARTICLE 15 DISSOLUTION AND LIQUIDATION..........................................................................51
15.1 Dissolution.......................................................................................51
15.2 Continuation of the Business of the Partnership...................................................51
15.3 Liquidation.......................................................................................52
15.4 Distribution in Kind..............................................................................52
15.5 Cancellation of Certificate of Limited Partnership................................................53
15.6 Reasonable Time for Winding Up....................................................................53
15.7 Return of Contributions...........................................................................53
15.8 No Capital Account Restoration....................................................................53
15.9 Waiver of Partition...............................................................................53
ARTICLE 16 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE............................................53
16.1 Amendments to be Adopted Solely by the General Partner............................................53
16.2 Amendment Procedures..............................................................................54
16.3 Special Amendment Requirements....................................................................54
16.4 Meetings..........................................................................................54
16.5 Notice of a Meeting...............................................................................55
16.6 Record Date.......................................................................................55
16.7 Adjournment.......................................................................................55
16.8 Waiver of Notice..................................................................................55
16.9 Quorum............................................................................................55
16.10 Conduct of Meeting...............................................................................55
16.11 Action Without a Meeting.........................................................................56
16.12 Voting and Other Rights..........................................................................56
ARTICLE 17 MERGER...............................................................................................56
17.1 Authority.........................................................................................56
17.2 Procedure for Merger or Consolidation.............................................................57
17.3 Approval by Limited Partners of Merger or Consolidation...........................................57
17.4 Certificate of Merger.............................................................................58
17.5 Effect of Merger..................................................................................58
ARTICLE 18 RIGHT TO PURCHASE LP UNITS...........................................................................58
18.1 Right to Purchase.................................................................................58
18.2 Procedure.........................................................................................58
ARTICLE 19 GENERAL PROVISIONS...................................................................................59
19.1 Addresses and Notices.............................................................................59
19.2 Consent of Limited Partners.......................................................................59
19.3 Titles and Captions...............................................................................59
19.4 Pronouns and Plurals..............................................................................59
19.5 Further Action....................................................................................59
19.6 Binding Effect....................................................................................59
19.7 Integration.......................................................................................59
19.8 Creditors.........................................................................................60
19.9 Waiver............................................................................................60
19.10 Counterparts.....................................................................................60
19.11 Applicable Law...................................................................................60
19.12 Invalidity of Provisions.........................................................................60
APPENDIX X-0
XXXXXXXX X-0
APPENDIX A-3
APPENDIX A-4
APPENDIX B
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
KANEB PIPE LINE PARTNERS, L.P.
This Amended and Restated Agreement of Limited Partnership of Kaneb
Pipe Line Partners, L.P. (herein called this ?Agreement?) is entered into by and
among Kaneb Pipe Line Company, a Delaware corporation (?KPL?), as general
partner of the Partnership, and the limited partners of the Partnership, as
hereinafter provided.
WHEREAS, KPL and the other parties thereto entered into that certain
Amended and Restated Agreement of Limited Partnership of the Partnership dated
as of September 27, 1989; and
WHEREAS, such agreement was subsequently amended by Amendment No. 1
thereto dated July 28, 1994; and
WHEREAS, such agreement was subsequently amended and restated on
September 18, 1995; and
WHEREAS, KPL now desires to further amend Section 5.9 of such agreement
as set forth herein and to restate the agreement of limited partnership of the
Partnership, as so amended ; and
WHEREAS, Section 16.1 of such agreement of limited partnership permits
the General Partner to amend such agreement to reflect a change that, in the
sole discretion of the General Partner, does not adversely affect the Limited
Partners in any material respect or, subject to Section 4.4, a change that is
necessary or desirable in connection with the issuance of any class of LP Units
pursuant to Section 4.3; and
WHEREAS, the General Partner has determined that each of the changes
effected hereby is permitted by an amendment to the agreement of limited
partnership of the Partnership effected by the General Partner without the
consent of any Limited Partner or Assignee;
NOW, THEREFORE, the General Partner does hereby amend and restate the
agreement of limited partnership of the Partnership to provide, in its entirety,
as follows:
ARTICLE 1 DEFINITIONS
Unless clearly indicated to the contrary, the terms defined in this
Article 1 shall, for the purposes of this Agreement, have the meanings herein
specified.
Additional Limited Partner: A Person admitted to the Partnership as a
Limited Partner pursuant to Section 13.2 and who is shown as such on the books
and records of the Partnership.
Adjusted Capital Account: The Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership (a) increased by
any amounts which such Partner is obligated to restore under the standards set
by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases pursuant to a minimum gain chargeback pursuant to Section 5.1.4.1 and
5.1.4.2, 5.1.4.2). 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.
Adjusted Property: Any property the Carrying Value of which has been
adjusted pursuant to Section 4.5.4.1 or 4.5.4.2. Once an Adjusted Property is
deemed distributed by, and recontributed to, the Partnership for federal income
tax purposes pursuant to Section 708 of the Code, such property shall thereafter
constitute a Contributed Property until the Carrying Value of such property is
further adjusted pursuant to Section 4.5.4.1 or 4.5.4.2.
Affiliate: Any Person directly or indirectly controlling, controlled by
or under common control with the Person in question. As used in this definition
of ?Affiliate?, the term ?control? means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract or
otherwise.
Agreed Allocation: Any allocation, other than a Required Allocation, of
an item of income, gain, deduction or loss pursuant to the provisions of Section
5.1, including 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; provided, however, that the Agreed Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Section 4.5.3. Subject to Section 4.5.3, the
General Partner shall, in its sole 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 their fair market
values.
Agreement: This Amended and Restated Agreement of Limited Partnership,
as it may be amended, supplemented or restated from time to time.
Assignee: A Non-citizen Assignee or Person to whom one or more LP Units
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 become a Substituted Limited Partner.
Assignment of Leases: Collectively, those two certain Assignment of
Lease Agreements dated October 3, 1989, among KPL, Kaneb and the Partnership.
Available Cash: Has the meaning set forth in Section 5.7.1.
Book-Tax Disparity: 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
4.5 and the hypothetical balance of such Partner's Capital Account computed as
if it had been maintained strictly in accordance with federal income tax
accounting principles.
Business Day: Monday through Friday of each week, except that a legal
holiday recognized as such by the Government of the United States or the State
of New York shall not be regarded as a Business Day.
Capital Account: The capital account maintained for a Partner or
Assignee pursuant to Section 4.5.
Capital Asset: Any asset on the Partnership's balance sheet, other than
inventory, accounts receivable or any other current asset and assets disposed of
in connection with normal retirements or replacements.
Capital ContributionCapital Contribution: Any cash, cash equivalents or
the Net Agreed Value of Contributed Property which a Partner contributes to the
Partnership pursuant to Section 4.1, 4.2, 4.3, 4.5 or 14.6.2.2.
Carrying Value: (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 Partner's and
Assignee's Capital Accounts, and (b) with respect to any other Partnership
property, the adjusted basis of such property for federal income tax purposes,
all as of the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Section 4.5.4.1 and 4.5.4.2, and
to reflect changes, additions or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership Assets, as deemed appropriate by
the General Partner.
Cash from Interim Capital Transactions: Has the meaning set forth in
Section 5.7.2.
Cash from Operations: Has the meaning set forth in Section 5.7.3.
Certificate: A certificate issued by the Partnership evidencing
ownership of one or more LP Units.
Certificate of Limited Partnership: The Certificate of Limited
Partnership, and any and all amendments thereto and restatements thereof, filed
on behalf of the Partnership as required under the Delaware Act.
Citizenship Certification: 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 his best knowledge such other Person) is an
Eligible Citizen.
Closing Date: October 3, 1989.
Closing Price: With respect to 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 on the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the LP Units are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the National Securities
Exchange on which the LP Units are listed or admitted or trading or, if the LP
Units are not listed or admitted to trading on any National Securities Exchange,
the last quoted price on such day or, if not so quoted, the average of the high
bid and low asked prices on such day in the over-the-counter market, as reported
by NASDAQ or such other system then in use, or, if on any such day the LP Units
are not quoted by any such organization, the average of the closing bid and
asked prices on such day as furnished by a professional market maker making a
market in the LP Units selected by the Independent Committee or, if on such day
no market maker is making a market in the LP Units, the fair market value of
such LP Units on such day as determined reasonably and in good faith by the
Independent Committee.
Code: The Internal Revenue Code of 1986, as amended and hereafter
amended, and applicable regulations thereunder. Any reference herein to a
specific section or sections of the Code or applicable regulations shall be
deemed to include a reference to any corresponding provision of future law or
regulation.
Combined Interest: Has the meaning set forth in Section 14.6.1.
Commission: The Securities and Exchange Commission.
Common Unit: One of that certain class of LP Units with those special
rights and obligations specified in this Agreement as being appurtenant to a
?Common Unit?.
Contributed Property: Each property or other asset, in such form as may
be permitted by the Delaware Act, but excluding cash and cash equivalents,
contributed to the Partnership (or deemed contributed to the Partnership on
termination and reconstitution thereof pursuant to Section 708 of the Code or
otherwise). Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 4.5.4.1, such property shall no longer constitute a
Contributed Property but shall be deemed an Adjusted Property for such purposes.
Contributing Partner: Any Partner contributing (or deemed to have
contributed on the termination and reconstitution of the Partnership pursuant to
Section 708 of the Code or otherwise) Contributed Property to the Partnership.
Contribution Agreement: That certain Contribution Agreement dated as of
October 3, 1989, among KPL, the Partnership, the Operating Partnership and Kaneb
wherein KPL agrees (i) to contribute to the Operating Partnership certain
designated assets and the Operating Partnership agrees to assume certain
designated liabilities and (ii) to contribute its limited partner interest in
the Operating Partnership to the Partnership in exchange for LP Units.
Cumulative Preference Unit Deficiency: Has the meaning set forth in
Section 5.7.4.
Cumulative Preference B Unit Deficiency: Has the meaning set forth in
Section 5.7.5.
Cumulative Senior Preference Unit Deficiency: Has the meaning set forth
in Section 5.7.6.
Curative Allocation: Any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 5.1.4.11.
Current Market Price: With respect to an LP Unit as of any date means
the average of the daily Closing Price per LP Unit for the 20 consecutive
Trading Days immediately prior to such date.
Delaware Act: The Delaware Revised Uniform Limited Partnership Act (6
Del. C. ?17-101, et seq.), as it may be amended from time to time, and any
successor to such statute.
Departing Partner: A former General Partner, as of the effective date
of any withdrawal or removal of such General Partner pursuant to Section 14.1.
Economic Risk of Loss: Has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
Eligible Citizen: A Person qualified to own interests in real property
in jurisdictions in which the Partnership or the Operating Partnership 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 the Partnership or the
Operating Partnership to a substantial risk of cancellation or forfeiture of any
of their property or any interest therein.
Exchange Act: The Securities Exchange Act of 1934, as amended, and any
successor to such statute.
Exchangeable Amount: Has the meaning set forth in Section 5.9.1
Exchange Date: Has the meaning set forth in Section 5.9.1.
Exchange Factor: Has the meaning set forth in Section 5.9.1.
Expansive Capital Expenditures: Cash capital expenditures made to
increase the throughput or deliverable capacity or terminaling capacity
(assuming normal operating conditions, including down-time and maintenance) of
the assets of the Partnership, the Operating Partnership and any Subsidiary,
taken as a whole, from the throughput or deliverable capacity or terminaling
capacity (assuming normal operating conditions, including down-time and
maintenance) existing immediately prior to such capital expenditures. Where cash
capital expenditures are made in part to increase the throughput or deliverable
capacity or terminaling capacity of the assets of the Partnership, taken as a
whole, and in part for other purposes, the General Partner's good faith
allocation thereof between the portion increasing capacity and the portion for
other purposes shall be conclusive.
First Liquidation Target Amount: Has the meaning set forth in Section
5.7.7.
First Target Distribution: Has the meaning set
forth in Section 5.7.8.
First Target Distribution Cumulative Deficiency: Has the meaning set
forth in Section 5.7.9.
General Partner: KPL or any successor or additional General Partner
admitted pursuant to Section 13.3.
General Partner Equity Value: As of any date of determination, the fair
market value of the General Partner's Partnership Interest (including any LP
Units owned by the General Partner or any Affiliate of the General Partner), as
determined by the General Partner using whatever reasonable method of valuation
it may adopt.
Indemnitee: The General Partner, any Departing Partner, any Person who
is or was an Affiliate of the General Partner or any Departing Partner, any
Person who is or was an officer, director, employee, partner, agent or trustee
of the General Partner or any Departing Partner or any Affiliate of the General
Partner or Departing Partner, or 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 the Departing Partner as a director, officer, employee, partner,
agent or trustee of another Person.
Independent Committee: A committee of the Board of Directors of the
General Partner composed entirely of directors who are neither officers nor
employees of Kaneb, the General Partner or any of their Affiliates.
Initial Offering: The initial public offering of Senior Preference
Units, as described in the Registration Statement.
Interim Capital Transaction: Has the meaning set forth in Section
5.7.10.
Kaneb: Kaneb Services, Inc., a Delaware corporation.
KPL: Kaneb Pipe Line Company, a Delaware corporation.
Limited Partner: Kaneb, each Additional Limited Partner, any Departing
Partner upon the change of its status from General Partner to Limited Partner
pursuant to Section 14.6.2, each Substituted Limited Partner and, solely for
purposes of Articles 4, 5 and 6 and Sections 15.3 and 15.4, each Assignee.
Limited Partner Equity Value: As of any date of determination, the
amount equal to the product of (a) the total number of LP Units Outstanding
(immediately prior to an issuance of LP Units or distribution of cash or
Partnership property), other than LP Units owned by the General Partner or an
Affiliate of the General Partner, multiplied by (b)(i) in the case of a
valuation required by Section 4.5.4.1 (other than valuations caused by sales of
a de minimis quantity of LP Units), the price at which an LP Unit is purchased
from the Partnership or (ii) in the case of a valuation required by Section
4.5.4.2 (or a valuation required by Section 4.5.4.1 caused by sales of a de
minimis quantity of LP Units) the Closing Price.
Liquidating Trustee: The General Partner, unless dissolution was caused
by an event described in Section 15.1.2 then the liquidator or liquidating
committee chosen pursuant to Section 15.3.
LP Unit: A Partnership Interest of a Limited Partner or Assignee in the
Partnership representing such fractional part of the Partnership Interests of
all the Limited Partners and Assignees as shall be determined by the General
Partner pursuant to this Agreement in connection with the issuance of
Partnership Interests pursuant to Article 4 and the making of Capital
Contributions by Additional Limited Partners and shall include the Senior
Preference Units, Preference Units, Preference B Units and Common Units;
provided, however, that each LP Unit of any class at any time outstanding shall
represent the same fractional part of the Partnership Interests of such class of
all Limited Partners as each other LP Unit of such class.
Majority Interest: Limited Partners holding more than 50% of the issued
and Outstanding LP Units at any given time, voting as a single class.
Minimum Gain Attributable to Partner Nonrecourse Debt: That amount
determined in accordance with the principles of Treasury Regulation Section
1.704-2(i)(3).
Minimum Quarterly Distribution: Has the meaning set forth in Section
5.7.11.
NASDAQ: The National Association of Securities Dealers, Inc. Automated
Quotation System.
National Securities Exchange: An exchange registered with the
Commission under Section 6(a) of the Exchange Act.
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
at the time such property is distributed, reduced by any indebtedness either
assumed by such Partner or Assignee upon such distribution or to which such
property is subject at the time of distribution, in either case, as determined
under Section 752 of the Code.
Net Income: For any taxable period, the excess, if any, of the
Partnership's items of income and gain (other than those items attributable to
dispositions constituting Terminating Capital Transactions) for such taxable
period over the Partnership's items of loss and deduction (other than those
items attributable to dispositions constituting Terminating Capital
Transactions) for such taxable period. The items included in the calculation of
Net Income shall be determined in accordance with Section 4.5.2 and shall not
include any items specially allocated under Section 5.1.4. Once an item of
income, gain, loss or deduction that has been included in the initial
computation of Net Income is subjected to a Required Allocation or a Curative
Allocation, Net Income or the resulting Net Loss, whichever the case may be,
shall be recomputed without regard to such item.
Net Loss: For any taxable period, the excess, if any, of the
Partnership's items of loss and deduction (other than those items attributable
to dispositions constituting Terminating Capital Transactions) for such taxable
period over the Partnership's items of income and gain (other than those items
attributable to dispositions constituting Terminating Capital Transactions) for
such taxable period. The items included in the calculation of Net Loss shall be
determined in accordance with Section 4.5.2 and shall not include any items
specially allocated under Section 5.1.4. Once an item of income, gain, loss or
deduction that has been included in the initial computation of Net Loss is
subjected to a Required Allocation or a Curative Allocation, Net Loss or the
resulting Net Income, whichever the case may be, shall be recomputed without
regard to such item.
Net Termination Sales Gain: Has the meaning set forth in Section
5.7.12.
Net Termination Sales Loss: Has the meaning set forth in Section
5.7.13.
New Entity: Has the meaning set forth in Section 2.6.
Non-citizen Assignee: A Person who the General Partner has determined
in its sole 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 12.5.
Nonrecourse Built-in Gain: With respect to any Contributed Properties
or Adjusted Properties that are subject to a mortgage or negative pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 5.2.2.1(A), 5.2.2.2(A) or 5.2.2.4
if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
Nonrecourse Deductions: Any and all items of loss, deduction or
expenditure (described in Section 705(a)(2)(B) of the Code) that, in accordance
with the principles of Treasury Regulation Section 1.704-2(b), are attributable
to a Nonrecourse Liability.
Nonrecourse Liability: Has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
Notice of Election to Purchase: Has the meaning set forth in Section
18.2.1.
Operating Partnership: Kaneb Pipe Line Operating Partnership, L.P., a
Delaware limited partnership established pursuant to the Operating Partnership
Agreement.
Operating Partnership Agreement: The Amended and Restated Agreement of
Limited Partnership of the Operating Partnership as it may be amended,
supplemented or restated from time to time.
Opinion of Counsel: A written opinion of counsel (who may be regular
counsel to the Partnership or the General Partner) acceptable to the General
Partner.
Outstanding: All LP Units or other 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.
Partner: A General Partner or a Limited Partner and solely for purposes
of Articles 4, 5 and 6 and Sections 15.3 and 15.4 shall include an Assignee.
Partner Nonrecourse Debt: Has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
Partner Nonrecourse Deductions: Any and all items of loss, deduction or
expenditure (described in Section 705(a)(2)(B) of the Code) that in accordance
with the principles of Treasury Regulation Section 1.704-2(i), are attributable
to a Partner Nonrecourse Debt.
Partnership: The limited partnership heretofore formed and continued
pursuant to this Agreement, and any successor thereto.
Partnership Assets: All assets, whether tangible or intangible and
whether real, personal or mixed, at any time owned by the Partnership.
Partnership Interest: As to any Partner, all of the interests of that
Partner in the Partnership, including, without limitation, his (i) right to a
distributive share of the profits and losses of the Partnership, (ii) right to a
distributive share of Partnership Assets and (iii) right, if the General
Partner, to participate in the management of the affairs of the Partnership.
Partnership Minimum Gain: That amount determined in accordance with the
principles of Treasury Regulation Section 1.704-2(d).
Partnership Securities: Has the meaning set forth in Section 4.3.1.
Partnership Year: Means the fiscal year of the Partnership, which shall
be the calendar year.
Partnership's Accountants: Such nationally recognized firm of
independent public accountants as is selected, from time to time, by the General
Partner.
Payment Priority Agreement: Means that certain Payment Priority
Agreement dated as of October 3, 1989, between KPL and the Operating
Partnership.
Per Unit Capital Amount: As of any date of determination, the Capital
Account, stated on a per LP Unit basis underlying any LP Unit held by a Person
other than the General Partner or any Affiliate of the General Partner who holds
LP Units.
Percentage Interest: Means, as of the date of determination, (a) as to
the General Partner in its capacity as such, 1/99th, (b) as to any Limited
Partner or Assignee holding LP Units, the product of (i) 98/99 multiplied by
(ii) the quotient of the number of LP Units held by such Limited Partner or
Assignee divided by the total number of all LP Units then Outstanding; provided,
however, that following any issuance of additional LP Units by the Partnership
pursuant to Section 4.3, proper adjustment shall be made to the Percentage
Interest represented by each LP Unit to reflect such issuance.
Permitted Indebtedness: $45 million, plus 80% of the aggregate
Expansive Capital Expenditures of the Partnership since the Closing Date greater
than $45 million. Permitted Indebtedness shall be determined on a consolidated
basis.
Person: Any individual, corporation, association, partnership, joint
venture, trust, estate or other entity or organization.
Pipeline System: shall mean the refined petroleum products pipeline
assets and related terminal facilities that was transferred to the Operating
Partnership by KPL on the Closing Date, as such facilities may be maintained or
improved from time to time.
Preference Period: Has the meaning set forth in Section 5.7.14.
Preference Unit: One of that certain class of LP Units with those
special rights and obligations specified in this Agreement as being appurtenant
to a ?Preference Unit?.
Preference B Unit: One of that certain class of LP Units with those
special rights and obligations specified in this Agreement as being appurtenant
to a ?Preference B Unit?.
Preference Unit Deficiency: Has the meaning set forth in Section
5.7.15.
Preference B Unit Deficiency: Has the
meaning set forth in Section 5.7.16.
Purchase Date: The date determined by the General Partner as the date
for purchase of all Outstanding LP Units (other than LP Units owned by the
General Partner and its Affiliates) pursuant to Section 18.2.
Recapture Income: Any gain recognized by the Partnership (computed
without regard to any adjustment required by Sections 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
Recaptured Credits: Credits previously taken against federal income tax
liability which are required to be recaptured upon the disposition of any
property by the Partnership prior to the end of such property's useful life in
determining the amount of the credit relating thereto.
Reconstituted Partnership: The new limited partnership formed in the
manner described in Section 15.2.
Record Date: The date established by the General Partner for
determining (i) the identity of Limited Partners or Assignees, if applicable,
entitled to (a) notice of or to vote at any meeting of Limited Partners, (b)
give consent in writing in lieu of or in connection with a meeting of Limited
Partners or (c) exercise rights in respect of any other lawful action of Limited
Partners or (ii) the identity of Record Holders entitled to receive any report,
distribution or notice.
Record Holder: As applied to an LP Unit, the Person in whose name the
Unit Certificate evidencing such LP Unit is issued and in whose name such LP
Unit is registered on the books of the Registrar as of the opening of business
on a particular Business Day.
Redeemable Units: Any LP Units for which a redemption notice has been
given and has not been withdrawn, under Section 12.6.
Registrar: American Stock Transfer & Trust Co., acting in its capacity
as a registered transfer agent of the LP Units, and any successor as registrar
of the LP Units.
Registration Statement: The Registration Statement on Form S-1
(Commission File No. 33-30330), 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 Senior Preference
Units in the Initial Offering.
Remaining Capital: Has the meaning set forth in Section 5.7.17.
Required Allocation: Any allocation (or limitation imposed on any
allocation) of an item of income, gain, deduction or loss pursuant to (a) the
proviso-clause of Section 5.1.2.2 and Sections 5.1.4.1, 5.1.4.2, 5.1.4.2,
5.1.4.4, 5.1.4.5, 5.1.4.6, 5.1.4.7, and 5.1.4.9, such allocations (or
limitations thereon) being directly or indirectly required by the Treasury
Regulations promulgated under Section 704(b) of the Code.
Residual Gain or Residual Loss: 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
Sections 5.2.2.1(A) or 5.2.2.2(A) to eliminate Book-Tax Disparities.
Second Liquidation Target Amount: Has the meaning set forth in Section
5.7.18.
Second Target Distribution: Has the meaning provided in Section 5.7.19.
Second Target Distribution Cumulative Deficiency: Has the meaning set
forth in Section 5.7.20.
Section 754 Election: An election under Section 754 of the Code
relating to the adjustment of the adjusted basis of Partnership Assets as
provided in Sections 734 and 743 of the Code.
Securities Act: The Securities Act of 1933, as amended, and any
successor to such statute.
Senior Preference Unit: One of that certain class of LP Units with
those special rights and obligations specified in this Agreement as being
appurtenant to a ?Senior Preference Unit?.
Senior Preference Unit Deficiency: Has the meaning set forth in Section
5.7.21.
Special Approval: Approval by a majority of the members of the Board of
Directors of the General Partner that includes approval by a majority of the
members of the Independent Committee.
Substituted Limited Partner: A Person who is admitted as a Limited
Partner in the Partnership pursuant to Section 13.1 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.
Subsidiary of any Person: Either (i) a corporation a majority of whose
voting capital stock is at the time, directly or indirectly, owned by such
Person, by one or more subsidiaries of such Person or by such Person and one or
more subsidiaries of such Person, (ii) a partnership in which such Person or
subsidiary of such Person is, at the date of determination, a general or limited
partner of such partnership, but only if such Person or its subsidiary is
entitled to receive more than fifty percent of the assets of such partnership
upon its dissolution, or (iii) any other Person (other than a corporation or
partnership) in which such Person, a subsidiary of such Person or such Person
and one or more subsidiaries of such Person, directly or indirectly, at the date
of determination thereof, has (x) at least a majority ownership interest or (y)
the power to elect or direct the election of a majority of the directors or
other governing body of such Person.
Subsidiary: Any subsidiary of the Partnership.
Subsidiary Partnership Agreement: With respect to any Subsidiary that
is a partnership, the agreement of the partners thereof as to the affairs and
the conduct of the business of such partnership.
Surviving Business Entity: Has the meaning set forth in Section 17.2.2
Terminating Capital Transaction: Has the meaning set forth in Section
5.7.22.
Third Liquidation Target Amount: Has the meaning set forth in Section
5.7.23.
Third Target Distribution: Has the meaning set forth in Sections
5.7.24.
Third Target Distribution Cumulative Deficiency: Has the meaning set
forth in Section 5.7.25.
Trading Day: Means a day on which the principal National Securities
Exchange on which such class or series of LP Units are listed or admitted to
trading is open for the transaction of business or, if no LP Units are listed or
admitted to trading on any National Securities Exchange, a day on which banking
institutions in New York City generally are open.
Transfer Agent: The Registrar or any bank, trust company or other
Person (including the General Partner or any of its Affiliates) appointed by the
Partnership to act as a transfer agent for the LP Units.
Transfer Application: An application and agreement for transfer of LP
Units for such class of LP Units in the form set forth on the back of the Unit
Certificate and attached to this Agreement as Appendix B by which a transferee
(i) requests admission to the Partnership as a Substituted Limited Partner, (ii)
agrees to be bound by the terms and conditions of this Agreement, (iii)
represents that he has authority to enter into this Agreement, (iv) grants a
power of attorney to the General Partner and the Liquidating Trustee, and (v)
makes the consents and waivers contained in this Agreement.
Underwriting Agreement: The agreement dated as of September 25, 1989,
among the Partnership, KPL, the Operating Partnership, Kaneb and the
underwriters named therein with respect to the Initial Offering.
Unit Certificate: Has the meaning set forth in Section 11.1.
Unit Price: Of an LP Unit of a given class, as of any date of
determination, (i) if the LP Units of such class are listed or admitted to
trading on one or more National Securities Exchanges, the average of the last
reported sales prices per LP Unit of such class regular way or, in case no such
reported sale takes place on any such day, the average of the last reported bid
and asked prices per LP Units of such class regular way, in either case on the
principal National Securities Exchange on which the LP Units of such class are
listed or admitted to trading, for the five trading days immediately preceding
the date of determination; (ii) if the LP Units of such class are not listed or
admitted to trading on a National Securities Exchange but are quoted by NASDAQ,
the average of the last reported sales prices per LP Unit of such class regular
way or, in case no reported sale takes place on any such day or the last
reported sales prices are not then quoted, the average of the closing bid prices
per LP Unit of such class for the five trading days immediately preceding such
date of determination, as furnished by the National Quotation Bureau
Incorporated or such other nationally recognized quotation service as may be
selected by the General Partner for such purpose, if such Bureau is not at the
time furnishing quotations; or (iii) if the LP Units of such class are not
listed or admitted to trading on a National Securities Exchange or quoted by
NASDAQ, an amount equal to the fair market value of an LP Unit of such class as
of such date of determination, as determined by the Independent Committee using
any reasonable method of valuation.
Unrealized Gain: Attributable to a Partnership property means, as of
any date of determination, the excess, if any, of the fair market value of such
property as of such date of determination over the Carrying Value of such
property as of such date of determination (prior to any adjustment to be made
pursuant to Section 4.5.4 as of such date).
Unrealized Loss: Attributable to a Partnership property means, as of
any date of determination, the excess, if any, of the Carrying Value of such
property as of such date of determination (prior to any adjustment to be made
pursuant to Section 4.5.4 as of such date) over the fair market value of such
property as of such date of determination.
Unrecovered Capital: Has the meaning set forth in Section 5.8.1.
ARTICLE 2 FORMATION AND CONTINUATION OF PARTNERSHIP
2.1 Formation and Continuation. Subject to the provisions of this
Agreement, the General Partner and each Limited Partner hereby continue the
Partnership as a limited partnership pursuant to the provisions of the Delaware
Act. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration, dissolution and termination
of the Partnership shall be governed by the Delaware Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
2.2 Name. The name of the Partnership shall be ?Kaneb Pipe Line
Partners, L.P.?. The business of the Partnership shall be conducted under the
name of ?Kaneb Pipe Line Partners, L.P.? or such other name, including the name
of the General Partner or any Affiliate, as the General Partner may from time to
time determine. The words ?L.P.? or ?Limited Partnership? 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 sole 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 Limited Partners. Notwithstanding
the foregoing, unless otherwise permitted by Kaneb, in the event that neither
KPL nor any Affiliate of Kaneb is the general partner of the Partnership, the
Partnership shall change its name to a name not including ?Kaneb? and shall
cease using the name ?Kaneb? or other names or symbols associated therewith.
2.3 Names and Addresses of Partners. The General Partner of the
Partnership is KPL. The business address of the General Partner is 0000 Xxxxx
Xxxxxxx Xxxxxxxxxx, Xxxxxxxxxx, Xxxxx 00000. The General Partner may change its
address at any time and from time to time. The date upon which the General
Partner became a Partner in the Partnership is as set forth in the books and
records of the Partnership. The names and business, residence or mailing
addresses of the Limited Partners and the date on which each such Person became
a Limited Partner are as set forth from time to time in the books and records of
the Partnership.
2.4 Principal Office of the Partnership; Registered Office and Agent.
The principal office of the Partnership shall be located at 0000 Xxxxx Xxxxxxx
Xxxxxxxxxx, Xxxxxxxxxx, Xxxxx 00000. The General Partner may, at any time and
from time to time, change the location of the Partnership's principal office and
may establish such additional offices of the Partnership as the General Partner
may from time to time determine. The General Partner shall provide the Limited
Partners with written notice of any change in the Partnership's principal office
within 90 days after such change. The name of the registered agent for service
of process on the Partnership in Delaware is The Corporation Trust Company. The
address of the registered agent and the address of the registered office of the
Partnership in Delaware is Corporation Trust Center, 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx, Xxxxxxxx 00000.
2.5 Term. The Partnership commenced upon the filing of the Certificate
of Limited Partnership in accordance with the Delaware Act on August 14, 1989,
and shall continue in existence until December 31, 2039, unless earlier
terminated in accordance with any provisions of this Agreement.
2.6 Possible Restrictions on Transfer. Notwithstanding anything to the
contrary herein, in the event of (i) the enactment (or imminent enactment) of
any legislation, (ii) the publication of any temporary or final regulation by
the Treasury Department, (iii) any ruling by the Internal Revenue Service or
(iv) any judicial decision, that, in any such case, in the Opinion of Counsel,
would result in the taxation of the Partnership for federal income tax purposes
as a corporation or as an association taxable as a corporation, then, either (a)
the General Partner may impose such restrictions on the transfer of LP Units or
Partnership Interests as may be required, in the Opinion of Counsel, to prevent
the taxation of the Partnership for federal income tax purposes as a corporation
or as an association taxable as a corporation, including making any amendments
to this Agreement as the General Partner in its sole discretion may determine to
be necessary or appropriate in order to impose such restrictions, provided, that
any such amendment to this Agreement which would result in the delisting or
suspension of trading of any class of LP Units on any National Securities
Exchange on which such class of LP Units is then traded must be approved by the
Record Holders of at least a majority in interest of the Outstanding LP Units of
such class of LP Units (excluding for purposes of such determination LP Units of
such class owned by the General Partner and its Affiliates unless the General
Partner and its Affiliates own all of the LP Units of such class of LP Units) or
(b) upon the recommendation of the General Partner and the approval of a
Majority Interest (excluding for purposes of such determination LP Units owned
by the General Partner and its Affiliates), the Partnership may be converted
into and reconstituted as a trust or any other type of legal entity (the ?New
Entity?) in the manner and on other terms so recommended and approved. In such
event, the business of the Partnership shall be continued by the New Entity in
the manner and on the terms so recommended and approved. Notwithstanding the
foregoing, no such reconstitution shall take place unless the Partnership shall
have received an Opinion of Counsel to the effect that the liability of the
Limited Partners for the debts and obligations of the New Entity shall not,
unless such Limited Partners take part in the control of the business of the New
Entity, exceed that which otherwise had been applicable to such Limited Partners
as limited partners of the Partnership under the Delaware Act.
ARTICLE 3 PURPOSE
The purpose and nature of the business to be conducted by the
Partnership shall be (i) to serve as limited partner in the Operating
Partnership and, in connection therewith, to exercise all of the rights and
powers conferred upon the Partnership as a limited partner in the Operating
Partnership pursuant to the Operating Partnership Agreement or otherwise, (ii)
to conduct any other business that may be lawfully conducted by a limited
partnership organized pursuant to the Delaware Act and (iii) to do anything
necessary or incidental to the foregoing (including, without limitation, the
making of capital contributions or loans to the Operating Partnership or any
Subsidiary). The General Partner has no obligation or duty to the Partnership,
Limited Partners or Assignees to propose or approve, and in its sole discretion
may decline to propose or approve, the conduct by the Partnership pursuant to
clause (ii) above of any business other than as contemplated by clause (i)
above. The General Partner 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 herein and
for the protection and benefit of the Partnership.
ARTICLE 4 CAPITAL ACCOUNTS; CAPITAL CONTRIBUTIONS
4.1 Initial Contributions. The initial Capital Contributions to the
Partnership consisted of $1,000, which the Partners contributed to the
Partnership upon the formation of the Partnership. The General Partner
contributed $10 in cash and received in exchange therefor a 1.0% Partnership
Interest as General Partner and Kaneb contributed $990 in cash and received in
exchange therefor 46 Senior Preference Units representing a 99% Partnership
Interest as Limited Partner in the Partnership.
4.2 Contributions on the Closing Date. On the Closing Date, the General
Partner contributed to the Partnership, as provided in the Contribution
Agreement, all of its interest as limited partner in the Operating Partnership
and received in exchange therefor (i) 4,649,954 Senior Preference Units,
6,000,000 Preference Units and 3,160,000 Common Units representing (together
with the 46 Senior Preference Units previously issued to Kaneb) in the aggregate
a 98/99th Partnership Interest as Limited Partner in the Partnership and (ii) a
Partnership Interest and a credit to its capital account as General Partner in
the amount required to increase such capital account to an amount equal to
1/99th of the aggregate capital accounts of all the Partners after giving effect
to the issuance of LP Units contemplated by clause (i) of this Section 4.2. The
Agreed Value of the General Partner's interest as limited partner in the
Operating Partnership on the Closing Date was $306,920,196.
4.3 Additional Issuances of Securities.
4.3.1 Subject to the provisions of Section 4.4, the General Partner is
authorized to cause the Partnership to issue LP Units or classes or series
thereof, or options, rights, warrants or appreciation rights relating thereto,
or any other type of equity security that the Partnership may lawfully issue,
any unsecured or secured debt obligations of the Partnership or debt obligations
of the Partnership convertible into any class or series of equity securities of
the Partnership (collectively ?Partnership Securities?), in addition to those
issued pursuant to Sections 4.1 and 4.2, from time to time to Partners or to
other Persons and to admit such Partners or other Persons to the Partnership as
Additional Limited Partners, all without the consent or approval of the Limited
Partners or any percentage or class thereof. The Partnership may assume
liabilities in connection with any such issuance. Subject to the provisions of
Section 4.4 and the requirements of the Delaware Act, the General Partner shall
have sole and complete discretion in determining the considerations and terms
and conditions with respect to any future issuance of Partnership Securities.
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 such future issuance, including, without
limitation, compliance with any statute, rule, regulation or guideline of any
federal, state or other governmental agency or any National Securities Exchange
on which any Partnership Securities are listed for trading. Subject to the terms
of Section 4.4, the General Partner is authorized to cause the issuance of
Partnership Securities pursuant to any plan for the benefit of employees
responsible for the operations of the Partnership or the Operating Partnership
maintained or sponsored by the General Partner, the Partnership, the Operating
Partnership or any Affiliate of any of them.
4.3.2 Subject to the provisions of Section 4.4 and the requirements of
the Delaware Act, but notwithstanding any other provision of this Agreement to
the contrary, Partnership Securities issuable by the Partnership pursuant to
this Section 4.3 shall be issuable from time to time in one or more classes or
series of classes with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to existing classes and series of Partnership
Securities, all as shall be fixed by the General Partner in the exercise of its
sole and complete discretion, including, without limitation, (i) the allocation,
for federal income and other purposes, to each such class or series of
Partnership Securities of items of Partnership income, gain, loss, deduction and
credit; (ii) the right of such class or series of Partnership Securities to
share in Partnership distributions; (iii) the rights of each such class or
series of Partnership Securities upon dissolution and liquidation of the
Partnership; (iv) whether such class or series of Partnership Securities is
redeemable by the Partnership and, if so, the price at, and the terms and
conditions on, which such class or series of Partnership Securities may be
redeemed by the Partnership; (v) whether such class or series of Partnership
Securities is issued with the privilege of conversion and, if so, the rate at,
and the terms and conditions upon, which such class or series of Partnership
Securities may be converted into any other class or series of Partnership
Securities; (vi) the terms and conditions of the issuance of such class or
series of Partnership Securities, the issuance of Unit Certificates in respect
thereof, and all other matters relating to the assignment thereof; and (vii) the
rights, if any, of each such class or series of Partnership Securities to vote
on matters relating to the Partnership and this Agreement. Upon the issuance of
any class or series of Partnership Securities, the General Partner (pursuant to
the General Partner's powers of attorney from the Limited Partners), without the
approval at the time of any Limited Partner or Assignee (each Person accepting
Partnership Securities being deemed to approve of such amendment) may amend any
provision of this Agreement, and execute, swear to, acknowledge, deliver, file
and record, if required, an amended Certificate of Limited Partnership and any
other documents that may be required in connection therewith, as shall be
necessary or desirable to reflect the authorization and issuance of such class
or series of Partnership Securities and the relative rights and preferences of
such class or series of Partnership Securities as to the matters set forth in
the preceding sentence.
4.4 Limitations on Issuances During the Preference Period.4.4
Limitations on Issuances During the Preference Period. Notwithstanding the terms
of Section 4.3, during the Preference Period the Partnership shall not issue (i)
an aggregate of more than 10,000,000 Senior Preference Units (excluding for
purposes of such determination the 5,000,000 Senior Preference Units issued by
the Partnership in connection with its initial public offering and Senior
Preference Units issued upon exchanges of Preference Units pursuant to Section
5.9.1); (ii) other Partnership Interests on a parity with, convertible into or
exchangeable for Senior Preference Units or (iii) other Partnership Interests
having rights to distributions or in liquidation ranking prior or senior to
Senior Preference Units; without the prior approval of the Record Holders of at
least a majority in interest of the Outstanding Senior Preference Units
(excluding for purposes of the approval, Senior Preference Units held by the
General Partner and its Affiliates).
4.5 Capital Accounts.
4.5.1 The Partnership shall maintain for each Partner (or a beneficial
owner of LP Units 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) a separate Capital Account 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 by such
Partner to the Partnership pursuant to this Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from tax) computed
in accordance with Section 4.5.2 and allocated to such Partner pursuant to
Article 5, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made to such Partner
pursuant to this Agreement and (y) all items of Partnership deduction and loss
computed in accordance with Section 4.5.2 and allocated to such Partner pursuant
to Section 5.1.
4.5.2 For purposes of computing the amount of any item of income, gain,
deduction or loss 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 any method of depreciation, cost recovery or amortization
used for that purpose), provided that:
4.5.2.1 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 5.1.
4.5.2.2 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 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 the basis of
the asset).
4.5.2.3 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.
4.5.2.4 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 4.5.4 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.
4.5.2.5 If the Partnership's adjusted basis in depreciable or
cost recovery property is reduced for federal income tax purposes
pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the amount of
such reduction shall, solely for purposes hereof, be deemed to be an
additional depreciation or cost recovery deduction in the year such
property is placed in service and shall be allocated among the Partners
pursuant to Section 5.1. 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.
4.5.2.6 Solely for the purpose of this Section 4.5.2, the
Partnership shall be treated as owning directly its proportionate share
(as determined by the General Partner based upon the provisions of the
Operating Partnership Agreement) of all property owned by the Operating
Partnership.
4.5.3 Generally, a transferee of a Partnership Interest shall succeed
to that portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred; provided, however, that, if the transfer
causes a termination of the Partnership under Section 708(b)(1)(B) of the Code,
the Partnership's properties shall be deemed to have been distributed in
liquidation of the Partnership to the Partners and recontributed by such
Partners in reconstitution of the Partnership. In such event, the Carrying
Values of the Partnership properties shall be adjusted immediately prior to such
deemed distribution pursuant to Section 4.5.4.2 and such Carrying Values shall
then constitute the Agreed Values of such properties. The Capital Accounts of
such reconstituted Partnership shall be maintained in accordance with the
principles of this Section 4.5.
4.5.4
4.5.4.1 Consistent with the provisions of Treasury Regulation
Section 1.704-1(b)(2)(iv)(f), on an issuance of additional LP Units for
cash or Contributed Property or the conversion of the General Partner's
Partnership Interest as the General Partner to Common Units pursuant to
Section 14.6.2.2, the Capital Accounts of all Partners and the Carrying
Value of each Partnership property immediately prior to such issuance
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual
sale of each such property immediately prior to such issuance and had
been allocated to the Partners at such time pursuant to Section 5.1. In
determining Unrealized Gain or Unrealized Loss for purposes of this
Section 4.5.4.1 the aggregate cash amount and fair market value of all
Partnership assets (including cash or cash equivalents) immediately
prior to the issuance of Partnership Interests shall be determined by
the General Partner using such reasonable method of valuation as it may
adopt; provided, however, the General Partner, in arriving at such
valuation, must take into account the Limited Partner Equity Value and
the General Partner Equity Value. The General Partner shall allocate
such aggregate value among the assets of the Partnership (in such
manner as it determines in its sole discretion to be reasonable) to
arrive at a fair market value for individual properties.
4.5.4.2 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 cash
or cash equivalents), the Capital Accounts of all Partners and the
Carrying Value of each Partnership property shall, immediately prior to
any such distribution, be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership
property, as if such Unrealized Gain or Unrealized Loss had been
recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 5.1. Any
Unrealized Gain or Unrealized Loss attributable to such property shall
be allocated in the same manner as Net Termination Sales Gain or Net
Termination Sales Loss pursuant to Section 5.1.3; provided, however,
that, in making any such allocation, Net Termination Sales Gain or Net
Termination Sales Loss actually realized shall be allocated first. In
determining Unrealized Gain or Unrealized Loss for purposes of this
Section 4.5.4.2, the aggregate cash amount and fair market values of
all Partnership assets (including cash or cash equivalents) immediately
prior to a distribution shall (A) in the case of a deemed distribution
occurring as a result of a termination of the Partnership pursuant to
Section 708 of the Code, be determined and allocated in the manner
provided in Section 4.5.4.1 or (B) in the case of a liquidating
distribution pursuant to Section 15.3 or 15.4 be determined and
allocated by the Liquidator using such reasonable methods of valuation
as it may adopt.
4.6 Interest. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
4.7 No Withdrawal. No Partner shall be entitled to withdraw any part of
his Capital Contribution or his Capital Account or to receive any distribution
from the Partnership, except as provided in Articles 5, 14 and 15.
4.8 Loans from Partners. Loans by a Partner to the Partnership shall
not constitute Capital Contributions. If any Partner shall advance funds to the
Partnership in excess of the amounts required hereunder to be contributed by it
to the capital of the Partnership, the making of such excess advances shall not
result in any increase in the amount of the Capital Account of such Partner. The
amount of any such excess advances shall be a debt obligation of the Partnership
to such Partner and shall be payable or collectible only out of the Partnership
Assets in accordance with the terms and conditions upon which such advances are
made.
4.9 No Fractional LP Units. No fractional LP Units shall be issued by
the Partnership.
4.10 Record of Contributions. The books and records of the Partnership
shall include true and full information regarding the amount of cash and cash
equivalents and a designation and statement of the Net Value of any other
property contributed by each Partner to the Partnership.
4.11 Splits and Combinations.
4.11.1 Subject to the provisions of Section 4.11.4, the General Partner
may make a distribution in Partnership Securities to all Record Holders or may
effect a subdivision or combination of Partnership Securities, but in each case
only on a pro rata basis so that, after any such distribution, subdivision or
combination, each Record Holder shall have the same Percentage Interest in the
Partnership as before such distribution, subdivision or combination.
4.11.2 Whenever such a distribution, subdivision or combination is
declared, the General Partner shall select a Record Date as of which the
distribution, subdivision or combination shall be effective and shall notify
each Record Holder of the distribution, subdivision or combination. The General
Partner may, but shall not be required to, cause a firm of independent public
accountants selected by it to calculate the number of LP Units 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 correctness of such a
calculation.
4.11.3 Promptly following such distribution, subdivision or
combination, the General Partner may cause the Partnership to issue to the
Record Holders as of such Record Date new Unit Certificates representing the new
number of LP Units held by such Record Holders, or adopt such other procedures
as it may deem appropriate to reflect such distribution, subdivision or
combination; provided, however, that in the case of any such distribution,
subdivision or combination resulting in a smaller total number of Outstanding LP
Units, the General Partner may require, as a condition to the delivery of such
new Unit Certificate, the surrender of any Unit Certificate representing the LP
Units prior to such declaration.
4.11.4 The Partnership shall not issue fractional LP Units upon any
distribution, subdivision or combination of LP Units. If a distribution,
subdivision or combination of LP Units would result in the issuance of
fractional LP Units but for the provisions of Section 4.9 and this Section
4.11.4, each fractional LP Unit shall be rounded to the nearest whole LP Unit
(and a 0.5 LP Unit shall be rounded to the next higher LP Unit).
4.12 No Preemptive Rights.12 No Preemptive Rights. No Person shall have
any preemptive, preferential or other similar right with respect to (i)
additional Capital Contributions; (ii) the issuance or sale of any class or
series of Partnership Securities, whether unissued or held in the treasury or
hereafter created; (iii) the issuance of any obligations, evidences of
indebtedness or other securities of the Partnership convertible into or
exchangeable for, or carrying or accompanied by any rights to receive, purchase
or subscribe to, any such Partnership Securities; (iv) the issuance of any right
of subscription to or right to receive, or any warrant or option for the
purchase of, any of the foregoing securities; or (v) the issuance or sale of any
other securities that may be issued or sold by the Partnership.
ARTICLE 5 ALLOCATIONS AND DISTRIBUTIONS
5.1 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 4.5.2) shall be allocated among the
Partners in each taxable year (or portion thereof) as provided herein below.
5.1.1 Net Income. After giving effect to the special allocations set
forth in Section 5.1.4, all items of income, gain, loss and deduction taken into
account in computing Net Income for such taxable period shall be allocated in
the same manner as such Net Income is allocated hereunder.
5.1.1.1 First, 100% to the General Partner until aggregate Net
Income allocated to the General Partner pursuant to this Section
5.1.1.1 for the current taxable year and all previous taxable years is
equal to the aggregate Net Losses allocated to the General Partner
pursuant to Section 5.1.2.3 for all previous taxable years;
5.1.1.2 Second, 100% to the Limited Partners and the General
Partner, in accordance with their respective Percentage Interests,
until the aggregate Net Income allocated to the Limited Partners and
the General Partner pursuant to this Section 5.1.1.2 for the current
taxable year and all previous taxable years is equal to the aggregate
Net Losses allocated to the Limited Partners and the General Partner
pursuant to Section 5.1.2.2 for all previous taxable years; and
5.1.1.3 Third, the balance, if any, shall be allocated between
the General Partner, in its capacity as general partner, and the
Limited Partners in each taxable year in the same proportion as
Available Cash for such taxable year (including, for this purpose,
distributions of Available Cash made in a subsequent taxable year with
respect to the last quarter of the Partnership year for which the item
of income, gain, loss, deduction or credit, as the case may be, is
being allocated) was distributed to the General Partner and the Limited
Partners. If the Partnership does not distribute any Available Cash in
respect of a taxable year, Net Income (computed in accordance with
Section 4.5.2) shall be allocated among the Partners in accordance with
their respective Percentage Interests. Except as otherwise provided in
this Section 5.1, each item of income, gain, loss, deduction or credit
(computed in accordance with Section 4.5.2) allocated to the Limited
Partners, in the aggregate, shall be allocated to each Limited Partner
pro rata in accordance with the number of LP Units held by such Limited
Partner.
5.1.2 Net Loss. After giving effect to the special allocations set
forth in Section 5.1.4, all items of income, gain, loss and deduction taken into
account in computing Net Loss for such taxable period shall be allocated in the
same manner as such Net Loss is allocated hereunder:
5.1.2.1 First, 100% to the General Partner and the Limited
Partners, until the aggregate Net Losses allocated pursuant to this
Section 5.1.2.1 for the current taxable year and all previous taxable
years is equal to the aggregate Net Income allocated to such Partners
pursuant to Section 5.1.1.3 for all previous taxable years. For
purposes of this Section 5.1.2.1, Net Loss for any taxable year shall
be allocated to the General Partner and the Limited Partners in the
same proportion as any Net Income was allocated to such Partners
pursuant to Section 5.1.1.3 in any previous taxable years (beginning
with the first such taxable year in which Net Income was allocated to
the Partners pursuant to Section 5.1.1.3 up to an amount equal to the
amount of Net Income allocated to the Partners in any such taxable
year);
5.1.2.2 Second, 100% to the Limited Partners and the General
Partner, in accordance with their respective Percentage Interests;
provided, that Net Loss shall not be allocated pursuant to this Section
5.1.2.2 to the extent that such allocation would cause any Limited
Partner to have a deficit balance in its Adjusted Capital Account at
the end of such taxable year (or increase any existing deficit balance
in its Adjusted Capital Account);
5.1.2.3 Third, the balance, if any, 100% to the General
Partner.
5.1.3 Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 5.1.4, all items of gain and loss taken
into account in computing Net Termination Sales Gain or Net Termination Sales
Loss for such taxable period shall be allocated in the same manner as such Net
Termination Sales Gain or Net Termination Sales Loss is allocated hereunder. All
allocations under this Section 5.1.3 shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
5.1 and after all distributions of Available Cash provided under Sections 5.4
and 5.5 have been made with respect to the taxable period ending on the
liquidation date.
5.1.3.1 If a Net Termination Sales Gain is recognized (or
deemed recognized pursuant to Section 4.5.4) such Net Termination Sales
Gain shall be allocated during the Preference Period between the
General Partner and the Limited Partners in the following manner (and
the Capital Accounts of the Partners shall be increased by the amount
so allocated in each of the following subclauses, in the order listed,
before an allocation is made pursuant to the next succeeding
subclause):
First, to each Partner having a deficit balance in such
Partner's Capital Account to the extent of and in proportion to such
deficit balances;
Second, 98/99ths to all Limited Partners holding Senior
Preference Units in the proportion that the respective number of Senior
Preference Units held by them bears to the total number of Senior
Preference Units Outstanding and 1/99th to the General Partner until
each such Limited Partner's Capital Account in respect of each Senior
Preference Unit (determined on a per LP Unit basis) is equal to the sum
of (aa) its Remaining Capital in respect of such Senior Preference Unit
plus (bb) any then existing Cumulative Senior Preference Unit
Deficiency;
Third, 98/99ths to all Limited Partners holding Preference
Units in the proportion that the respective number of Preference Units
held by them bears to the total number of Preference Units Outstanding
and 1/99th to the General Partner until each such Limited Partner's
Capital Account in respect of each Preference Unit (determined on a per
LP Unit basis) is equal to the sum of (aa) its Remaining Capital plus
(bb) any then existing Cumulative Preference Unit Deficiency;
Fourth, 98/99ths to all Limited Partners holding Preference B
Units in the proportion that the respective number of Preference B
Units held by them bears to the total number of Preference B Units
Outstanding and 1/99th to the General Partner until each such Limited
Partner's Capital Account in respect of each Preference B Unit
(determined on a per LP Unit basis) is equal to the sum of (aa) its
Remaining Capital plus (bb) any then existing Cumulative Preference B
Unit Deficiency;
Fifth, 98/99ths to all Limited Partners holding Common Units
in the proportion that the respective number of Common Units held by
them bears to the total number of Common Units Outstanding and 1/99th
to the General Partner until each such Limited Partner's Capital
Account in respect of each Common Unit (determined on a per LP Unit
basis) is equal to its Remaining Capital;
Sixth, 98/99ths to all Limited Partners in the proportion that
their respective Percentage Interest bears to 98/99ths and 1/99th to
the General Partner until each such Limited Partner's Capital Account
in respect of each LP Unit (determined on a per LP Unit basis) is equal
to the First Liquidation Target Amount;
Seventh, 90/99ths to all Limited Partners in the proportion
that their respective Percentage Interest bears to 98/99ths and 9/99ths
to the General Partner until each such Limited Partner's Capital
Account in respect of each LP Unit (determined on a per LP Unit basis)
is equal to the Second Liquidation Target Amount;
Eighth, 80/99ths to all Limited Partners in the proportion
that their respective Percentage Interest bears to 98/99ths and
19/99ths to the General Partner until each such Limited Partner's
Capital Account in respect of each LP Unit (determined on a per LP Unit
basis) is equal to the Third Liquidation Target Amount; and
Thereafter, 70/99ths to all Limited Partners in the proportion
that their respective Percentage Interest bears to 98/99ths and
29/99ths to the General Partner.
After the third calendar quarter of 1997, no allocations of Net
Termination Sales Gain shall be made under paragraph Fourth of this
Section 5.1.3.1 and the Preference B Units shall be deemed to be
Preference Units for purposes of this Section 5.1.3.1. In addition,
after the Preference Period, Net Termination Sales Gain shall be
allocated in the same manner as described above; provided, that, no
allocation will be made under paragraphs Second, Third and Fourth and
the references to ?Common Units? in paragraph Fifth shall after the
Preference Period refer to ?Units?.
5.1.3.2 If a Net Termination Sales Loss is recognized (or
deemed recognized pursuant to Section 4.5.4), such Net Termination
Sales Loss shall be allocated to the Partners in the following manner:
(i) First, 100% to the General Partner and the
Limited Partners in proportion to, and to the extent of, the
positive balances in their respective Capital Accounts; and
(ii) Second, the balance, if any, 100% to the General
Partner.
5.1.4 Special Allocations. Notwithstanding any other provision of this
Section 5.1, the following special allocations shall be made for such taxable
period:
5.1.4.1 Partnership Minimum Gain Chargeback. Notwithstanding
any other provision of this Section 5.1, if there is a net decrease in
Partnership Minimum Gain during any Partnership taxable period, each
Partner shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(f)(6),
1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For
purposes of this Section 5.1.4.1, 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 5.1.4 with respect to
such taxable period. This Section 5.1.4.1 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;
5.1.4.2 Chargeback of Minimum Gain Attributable to Partner
Nonrecourse Debt. Notwithstanding the other provisions of this Section
5.1 (other than Section 5.1.4.1), except as provided in Treasury
Regulation Section 1.704-2(i)(4), if there is a net decrease in Minimum
Gain Attributable to Partner Nonrecourse Debt during any Partnership
taxable period, any Partner with a share of Minimum Gain Attributable
to Partner Nonrecourse Debt at the beginning of such taxable period
shall be allocated items of Partnership income and gain for such period
(and, if necessary, subsequent periods) in the manner and amounts
provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
Section 5.1.4.2, 5.1.4.2, 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 5.1.4, other than Section
5.1.4.1, with respect to such taxable period. This Section 5.1.4.2,
5.1.4.2 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;
5.1.4.3 Priority Allocation. If the amount of cash distributed
(except cash distributed pursuant to Section 15.3) with respect to a
class or series of LP Units is disproportionately greater (on a per LP
Unit basis) than the amount of cash distributed with respect to the
Common Units (on a per LP Unit basis), then before the allocation of
Net Income or Net Loss, as the case may be, between the Limited
Partners and the General Partner pursuant to the other provisions of
this Section 5.1, (a) first, each Limited Partner holding LP Units with
respect to which such disproportionately greater cash distribution was
made shall be allocated gross income in an amount equal to the product
of (X) the amount by which the distribution with respect to such class
or series of LP Units exceeds (on a per LP Unit basis) the distribution
on the Common Units and (Y) the number of LP Units of such class or
series held by such Limited Partner receiving the disproportionately
greater distribution, (b) the General Partner shall be allocated gross
income in an amount equal to 1.01% of the gross income allocated
pursuant to the immediately preceding clause (a) and (c) the Net Income
or Net Loss otherwise allocable to the Partners under the other
provisions of this Agreement shall be recomputed by excluding the gross
income allocated pursuant to the immediately preceding clauses (a) and
(b);
5.1.4.4 Qualified Income Offset. Except as provided in Section
5.1.4.1 and 5.1.4.2, 5.1.4.2, 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, the deficit balance, if any, in
its Adjusted Capital Account created by such adjustments, allocations
or distributions as quickly as possible; provided, that an allocation
pursuant to this Section 5.1.4.4 shall be made only if and to the
extent that such Partner would have a deficit balance in its Adjusted
Capital Account after all other allocations provided in this Section
5.1 have been tentatively made as if this Section 5.1.4.4 was not in
this Agreement;
5.1.4.5 Gross Income Allocations. In the event any Partner has
a deficit balance in its Adjusted Capital Account at the end of any
Partnership taxable period, 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 5.1.4.5 shall be made only if and to the extent that such
Partner would have a deficit balance in its Adjusted Capital Account in
excess of such sum after all other allocations provided for in this
Section 5.1 have been tentatively made as if Section 5.1.4.4 and this
Section 5.1.4.5 were not in this Agreement;
5.1.4.6 Nonrecourse Deductions. Nonrecourse Deductions for any
taxable period shall be allocated to the Partners in the same ratios
that Net Income or Net Loss, as the case may be, is allocated for the
taxable year. 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 Limited
Partners, to revise the prescribed ratio to the numerically closest
ratio which does satisfy such requirements;
5.1.4.7 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;
5.1.4.8 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;
5.1.4.9 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(b) of the Code is to be taken into account in
determining Capital Accounts, the amount of such adjustment to the
Capital Accounts treated as an 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
Treasury Regulation Section 1.704-1(b)(2)(iv)(m);
5.1.4.10 Economic Uniformity. At the election of the General
Partner with respect to any taxable period ending upon, or after, the
termination of the Preference Period, all or a portion of the remaining
items of Partnership gross income or gain for such taxable period, if
any can be allocated 100% to each Partner holding Common Units, in the
proportion of the number of Common Units held by such Partner to the
total number of Common 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 Common Units to an
amount equal to the product of (A) the number of Common Units held by
such Partner and (B) the Per Unit Capital Amount. The purpose of this
allocation is to establish uniformity between the Capital Accounts
underlying Common Units and the Capital Accounts underlying LP Units
held by Persons other than the General Partner or any Affiliate of the
General Partner immediately prior to the sale of such Common Units to
unaffiliated third parties.
5.1.4.11 Curative Allocation.
(A) Notwithstanding any other provision of this
Section 5.1, 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 Partner
under the Agreed Allocations had the Required Allocations and
this Curative Allocation not otherwise been provided in this
Section 5.1. 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 Minimum Gain
Attributable to Partner Nonrecourse Debts. Allocations
pursuant to this Section 5.1.4.11(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
5.1.4.11(A) shall be deferred with respect to allocations
pursuant to clauses (1) and (2) hereof to the extent the
General Partner reasonably determines that such allocations
are likely to be offset by subsequent Required Allocations;
(B) The General Partner shall have reasonable
discretion, with respect to each taxable period, to (1) apply
the provisions of Section 5.1.4.11(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 5.1.4.11(A) among the
Partners in a manner that is likely to minimize such economic
distortions.
5.2 Allocations for Tax Purposes.
5.2.1 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 income, gain, loss or
deduction (computed in accordance with Section 4.5.2) is allocated pursuant to
Section 5.1.
5.2.2 In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation and cost recovery deductions shall be allocated for federal income
tax purposes among the Partners as follows:
5.2.2.1 (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) except as otherwise
provided in Section 5.2.2.4, 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 gain or loss is
allocated pursuant to Section 5.1.
5.2.2.2 (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 4.5.4.1 or 4.5.4.2, and
(2) second, in the event such property was originally a Contributed
Property, be allocated among the Partners in a manner consistent with
Section 5.2.2.1(A); and (B) except as otherwise provided in Section
5.2.2.4, 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 gain or loss is allocated pursuant to
Section 5.1.
5.2.2.3 Except as otherwise provided in Section 5.2.2.4, all
other items of income, gain, loss and deduction shall be allocated
among the Partners in the same manner as their correlative item of gain
or loss is allocated pursuant to Section 5.1.
5.2.2.4 Any items of income, gain, loss or deduction otherwise
allocable under Section 5.2.2.1(B), 5.2.2.2(B) or 5.2.2.3 shall be
subject to allocation by the General Partner in a manner designed to
eliminate, to the maximum extent possible, Book-Tax Disparities in a
Contributed Property or Adjusted Property otherwise resulting from the
applications of the ?ceiling? limitation (under Section 704(c) of the
Code or Section 704(c) principles) to the allocations provided under
Section 5.2.2.1(A) or 5.2.2.2(A).
5.2.3 For proper administration of the Partnership and for the
preservation of uniformity of the LP Units (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 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 LP Units (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 5.2.3 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 LP Units issued and outstanding or the Partnership, and if such
allocations are consistent with the principles of Section 704 of the Code.
5.2.4 The General Partner in its sole discretion may determine to
depreciate 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 method and useful life applied to the Partnership's common
basis of such property, despite the inconsistency of such approach with Proposed
Treasury Regulation Section 1.168-2(n) and Treasury Regulation Section
1.167(c)-1(a)(6). If the General Partner later determines that such reporting
position cannot reasonably be taken, the General Partner may adopt a
depreciation convention under which all purchasers acquiring LP Units in the
same month would receive depreciation, 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 convention to preserve the
uniformity of the intrinsic tax characteristics of any LP Units that would not
have a material adverse effect on the Limited Partners or the Record Holders of
any class or classes of LP Units.
5.2.5 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 5.2 be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners have been allocated any deductions directly or indirectly
giving rise to the treatment of such gains as Recapture Income.
5.2.6 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 or 743 of the Code.
5.2.7 Each item of Partnership income, gain, loss and deduction
attributable to a transferred Partnership Interest of the General Partner or to
transferred LP Units 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 gain or loss on a sale or other
disposition of any Partnership Assets 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.
5.2.8 Allocations that would otherwise be made to a Limited Partner
under the provisions of this Article 5 shall instead be made to the beneficial
owner of LP Units 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.
5.2.9 The General Partner shall amend or supplement this Article 5 to
provide for the allocation of any item of income, gain, loss, deduction or
credit for federal, state or local income tax purposes for which provision is
not otherwise made herein in the manner that the General Partner determines to
be reasonable, taking into account the requirements of the Code.
5.2.10 Notwithstanding any other provision of this Section 5.2, if the
Internal Revenue Service is successful in asserting an adjustment to the taxable
income of the General Partner and, as a result of any such adjustment, the
Partnership is entitled to a deduction for federal income tax purposes with
respect to any portion of such adjustment, such deduction shall be allocated to
the General Partner.
5.3 Requirement and Characterization of Distributions. Within 45 days
following the end of each calendar quarter, an amount equal to 100% of Available
Cash with respect to such quarter (or period) shall be distributed in accordance
with this Article 5 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 treated for purposes of determining the order of priority for distributions
of Available Cash as Cash from Operations until the sum of all amounts of
Available Cash theretofore distributed by the Partnership to Partners pursuant
to Sections 5.4 and 5.5 equals the aggregate amount of all Cash from Operations
actually produced by the Partnership since the Closing Date through such date.
Any remaining amounts of Available Cash distributed by the Partnership on such
date shall, except as otherwise provided in Section 5.6, constitute Cash from
Interim Capital Transactions and shall be treated as such for purposes of
determining the order of priority for distributions of Available Cash.
5.4 Distributions During Preference Period. Available Cash with respect
to any calendar quarter within the Preference Period that constitutes or, for
purposes of determining the priority of distributions of Available Cash, is
treated as if it constitutes Cash from Operations pursuant to the provisions of
Section 5.3 or 5.6, shall be distributed as follows:
5.4.1 First, 98/99ths to Limited Partners holding Senior
Preference Units, in the proportion that the respective number of
Senior Preference Units held by them bears to the total number of
Senior Preference Units Outstanding and 1/99th to the General Partner
until there has been distributed in respect of each Senior Preference
Unit an amount equal to the Minimum Quarterly Distribution for such
quarter;
5.4.2 Second, 98/99ths to Limited Partners holding Senior
Preference Units, in the proportion that the respective number of
Senior Preference Units held by them bears to the total number of
Senior Preference Units Outstanding and 1/99th to the General Partner
until there has been distributed in respect of each Senior Preference
Unit an amount equal to any Cumulative Senior Preference Unit
Deficiency;
5.4.3 Third, 98/99ths to Limited Partners holding Preference
Units, in the proportion that the respective number of Preference Units
held by them bears to the total number of Preference Units Outstanding
and 1/99th to the General Partner until there has been distributed in
respect of each Preference Unit Outstanding an amount equal to the
Minimum Quarterly Distribution for such quarter;
5.4.4 Fourth, 98/99ths to Limited Partners holding Preference
Units, in the proportion that the respective number of Preference Units
held by them bears to the total number of Preference Units Outstanding
and 1/99th to the General Partner until there has been distributed in
respect of each Preference Unit an amount equal to any Cumulative
Preference Unit Deficiency;
5.4.5 Fifth, 98/99ths to Limited Partners holding Preference B
Units, in the proportion that the respective number of Preference B
Units held by them bears to the total number of Preference B Units
Outstanding and 1/99th to the General Partner until there has been
distributed in respect of each Preference B Unit Outstanding an amount
equal to the Minimum Quarterly Distribution for such quarter;
5.4.6 Sixth, 98/99ths to Limited Partners holding Preference B
Units, in the proportion that the respective number of Preference B
Units held by them bears to the total number of Preference B Units
Outstanding and 1/99th to the General Partner until there has been
distributed in respect of each Preference B Unit an amount equal to any
Cumulative Preference B Unit Deficiency;
5.4.7 Seventh, 98/99ths to Limited Partners holding Common
Units, in the proportion that the respective number of Common Units
held by them bears to the total number of Common Units Outstanding and
1/99th to the General Partner until there has been distributed in
respect of each Common Unit an amount equal to the Minimum Quarterly
Distribution for such quarter;
5.4.8 Eighth, 98/99ths to all Limited Partners, in the
proportion that their respective Percentage Interest bears to 98/99ths
and 1/99ths to the General Partner until there has been distributed in
respect of each LP Unit Outstanding an amount equal to the excess of
the First Target Distribution over the Minimum Quarterly Distribution;
5.4.9 Ninth, 90/99ths to all Limited Partners, in the
proportion that their respective Percentage Interest bears to 98/99ths
and 9/99ths to the General Partner until there has been distributed in
respect of each LP Unit Outstanding an amount equal to the excess of
the Second Target Distribution over the First Target Distribution;
5.4.10 Tenth, 80/99ths to all Limited Partners, in the
proportion that their respective Percentage Interest bears to 98/99ths,
and 19/99ths to the General Partner until there has been distributed in
respect of each LP Unit Outstanding an amount equal to the excess of
the Third Target Distribution over the Second Target Distribution;
5.4.11 Thereafter, 70/99ths to all Limited Partners, in the
proportion that their respective Percentage Interest bears to 98/99ths,
and 29/99ths to the General Partner;
provided, however, that after the distribution of Available Cash to holders of
Preference Units with respect to the third calendar quarter of 1997, no
distribution will be made pursuant to Sections 5.4.5 and 5.4.6, and the
Preference B Units shall be deemed to be Preference Units for purposes of this
Section 5.4.
5.5 Distributions After Preference Period. Available Cash with respect
to any calendar quarter after the Preference Period that constitutes or, for
purposes of determining the priority of distributions of Available Cash, is
treated as if it constitutes Cash from Operations pursuant to the provisions of
Section 5.3 or 5.6, shall be distributed as follows:
First, 98/99ths to all Limited Partners, in the proportion
that their respective Percentage Interest bears to 98/99ths, and 1/99th
to the General Partner until there has been distributed in respect of
each of the Outstanding LP Units an amount equal to the Minimum
Quarterly Distribution;
Second, 98/99ths to all Limited Partners, in the proportion
that their respective Percentage Interest bears to 98/99ths and 1/99th
to the General Partner until there has been distributed in respect of
each of the Outstanding LP Units an amount equal to the excess of the
First Target Distribution over the Minimum Quarterly Distribution;
Third, 90/99ths to all Limited Partners, in the proportion
that their respective Percentage Interest bears to 98/99ths, and
9/99ths to the General Partner until there has been distributed in
respect of each of the Outstanding LP Units an amount equal to the
excess of the Second Target Distribution over the First Target
Distribution; and
Fourth, 80/99ths to all Limited Partners, in the proportion
that their respective Percentage Interest bears to 98/99ths, and
19/99ths to the General Partner until there has been distributed in
respect of each of the Outstanding LP Units an amount equal to the
excess of the Third Target Distribution over the Second Target
Distribution;
Thereafter, 70/99ths to all Limited Partners, in the
proportion that their respective Percentage Interest bears to 98/99ths,
and 29/99ths to the General Partner.
5.6 Distributions of Cash from Interim Capital Transactions.
Distributions by the Partnership of Available Cash that constitutes Cash from
Interim Capital Transactions shall be distributed, unless the provisions of
Section 5.3 require otherwise, 98/99ths to all Limited Partners in proportion to
the respective number of LP Units held by them and 1/99th to the General Partner
until there has been distributed in respect of each Senior Preference Unit sold
in the Initial Offering, since the Closing Date through such date, distributions
of Available Cash that are deemed to be Cash from Interim Capital Transactions
in an aggregate amount equal to $22 per Senior Preference Unit. Thereafter, all
Available Cash shall be distributed as if it were Cash from Operations and shall
be distributed in accordance with Section 5.4 or 5.5, whichever is applicable.
5.7 Definitions. As used herein:
5.7.1 ?Available Cash?, with respect to any calendar quarter, means (i)
the sum of (a) all cash receipts of the Partnership during such quarter from all
sources (including distributions of cash received from the Operating
Partnership) and (b) any reduction in reserves established in prior quarters,
less (ii) the sum of (aa) all cash disbursements of the Partnership during such
quarter, including, without limitation, disbursements for operating expenses,
taxes on the Partnership as an entity or paid by the Partnership on behalf of,
or amounts withheld with respect to, all, but not less than all of the
Unitholders, if any, debt service (including the payment of principal, premium
and interest), capital expenditures and contributions, if any, to a subsidiary
corporation or partnership (but excluding all cash distributions to Partners),
(bb) any reserves established in such quarter in such amounts as the General
Partner determines in its reasonable discretion to be necessary or appropriate
(x) to provide for the proper conduct of the business of the Partnership
(including reserves for future capital expenditures) or (y) to provide funds for
distributions with respect to any one or more of the next four calendar quarters
and (cc) any other reserves established in such quarter in such amounts as the
General Partner determines in its reasonable discretion to be necessary because
the distribution of such amounts would be prohibited by applicable law or by any
loan agreement, security agreement, mortgage, debt instrument or other agreement
or obligation to which the Partnership is a party or by which it is bound or its
assets are subject. Taxes paid by the Partnership on behalf of, or amounts
withheld with respect to, less than all of the Unitholders shall not be
considered cash disbursements of the Partnership which reduce ?Available Cash?.
Notwithstanding the foregoing, ?Available Cash? shall not include any cash
receipts or reductions in reserves or take into account any disbursements made
or reserves established after commencement of the dissolution and liquidation of
the Partnership.
5.7.2 ?Cash from Interim Capital Transactions? means, at any date, such
amounts of Available Cash as are determined by the General Partner to be Cash
from Interim Capital Transactions pursuant to Section 5.3.
5.7.3 ?Cash from Operations? means, at any date but prior to
commencement of the dissolution and liquidation of the Partnership, on a
cumulative basis, all cash receipts of the Partnership plus any cash balance of
the Partnership on the Closing Date (including distributions of cash received
from the Operating Partnership and excluding any cash proceeds from any Interim
Capital Transactions or Terminating Capital Transactions) during the period
since the commencement of operations by the Partnership through such date, less
the sum of (a) all cash operating expenditures of the Partnership during such
period including, without limitation, taxes on the Partnership as an entity or
taxes paid by the Partnership on behalf of, or amounts withheld with respect to,
all, but not less than all of the Unitholders, if any, (b) all cash debt service
payments of the Partnership during such period (other than payments or
prepayments of principal and premium required by reason of loan agreements
(including covenants and default provisions therein) or by lenders, in each case
in connection with sales or other dispositions of assets or made in connection
with refinancings or refundings of indebtedness, provided that any payment or
prepayment of principal, whether or not then due, shall be determined at the
election and in the discretion of the General Partner, to be refunded or
refinanced by any indebtedness incurred or to be incurred by the Partnership
simultaneously with or within 180 days prior to or after such payment or
prepayment to the extent of the principal amount of such indebtedness so
incurred), (c) all cash capital expenditures of the Partnership during such
period (other than (i) Expansive Capital Expenditures and (ii) cash expenditures
made in payment of transaction expenses relating to Interim Capital
Transactions), (d) an amount equal to revenues collected pursuant to a rate
increase that are subject to possible refund, (e) any additional reserves
outstanding as of such date which the General Partner determines in its
reasonable discretion to be necessary or appropriate to provide for the future
cash payment of items of the type referred to in (a) through (c) above, and (f)
any reserves that the General Partner determines in its reasonable discretion to
be necessary or appropriate to provide funds for distributions with respect to
any one or more of the next four calendar quarters, all as determined on a
consolidated basis and after elimination of intercompany items and of the
interest attributable to the general partner interest in the Operating
Partnership. Taxes paid by the Partnership on behalf of less than all of the
Unitholders shall not be considered cash operating expenditures of the
Partnership which reduce ?Cash from Operations?.
5.7.4 ?Cumulative Preference Unit Deficiency? means, with respect to
any Preference Unit and as to any calendar quarter, the excess, if any, of (a)
the sum resulting from adding together the Preference Unit Deficiency as to a
Preference Unit acquired in the initial offering of the Preference Units for
each of the quarters within the Preference Period ending prior to such quarter
over (b) the sum of any distributions theretofore made with respect to a
Preference Unit acquired in the initial offering of the Preference Units
pursuant to Section 5.4.4.
5.7.5 ?Cumulative Preference B Unit Deficiency? means, with respect to
any Preference B Unit and as to any calendar quarter, the excess, if any, of (a)
the sum resulting from adding together the Preference B Unit Deficiency as to a
Preference B Unit acquired in the initial exchange of the Preference Units for
Preference B Units pursuant to Section 5.9.2 for each of the quarters within the
Preference Period ending prior to such quarter over (b) the sum of any
distributions theretofore made pursuant to Section 5.4.6 with respect to a
Preference B Unit acquired in the initial exchange of the Preference Units for
Preference B Units pursuant to Section 5.9.2.
5.7.6 ?Cumulative Senior Preference Unit Deficiency? means, with
respect to any Senior Preference Unit and as to any calendar quarter, the
excess, if any, of (a) the sum resulting from adding together the Senior
Preference Unit Deficiency as to a Senior Preference Unit acquired in the
Initial Offering for each of the quarters within the Preference Period ending
prior to such quarter over (b) the sum of any distributions theretofore made
with respect to a Senior Preference Unit acquired in the Initial Offering
pursuant to Section 5.4.2.
5.7.7 ?First Liquidation Target Amount? means, an amount, determined
with respect to any LP Unit, which equals, as of the date of its determination,
the sum of (a) the Remaining Capital, if any, attributable to such LP Unit, plus
(b)(i) in the case of a Senior Preference Unit, the Cumulative Senior Preference
Unit Deficiency, (ii) in the case of a Preference Unit, the Cumulative
Preference Unit Deficiency or (iii) in the case of a Preference B Unit, the
Cumulative Preference B Unit Deficiency, plus (c) the First Target Distribution
Cumulative Deficiency.
5.7.8 ?First Target Distribution? means $.60 per LP Unit per calendar
quarter, subject to adjustment in accordance with Sections 5.8 and 9.6.
5.7.9 ?First Target Distribution Cumulative Deficiency? means, an
amount attributable to any LP Unit and determined with respect to all preceding
calendar quarters, which equals the excess of (i) the First Target Distribution
less the Minimum Quarterly Distribution for each quarter of the Partnership's
existence over (ii) the amount of any distributions (on a per LP Unit basis) for
such quarter of Available Cash that were distributed pursuant to Section 5.4.8
or paragraph Second of Section 5.5.
5.7.10 ?Interim Capital Transaction? means (a) borrowing and sales of
debt securities (other than for working capital purposes and other than for
items purchased on open account in the ordinary course of business) by the
Partnership or the Operating Partnership, (b) sales of Interests in the
Partnership by the Partnership or the Operating Partnership and (c) sales or
other voluntary or involuntary dispositions of any assets of the Partnership or
the Operating Partnership (other than (x) sales or other dispositions of
inventory in the ordinary course of business, (y) sales or other dispositions of
other current assets including receivables and accounts or (z) sales or other
dispositions of assets as a part of normal retirements or replacements), in each
case prior to the commencement of the dissolution and liquidation of the
Partnership.
5.7.11 ?Minimum Quarterly Distribution? means $.55 per LP Unit per
calendar quarter, subject to adjustment in accordance with Sections 5.8 and 9.6.
5.7.12 ?Net Termination Sales Gain? means, for each Partnership Year or
shorter period, the sum, if positive, of all items of gain or loss recognized by
the Partnership (including such amounts recognized through the Operating
Partnership) from Terminating Capital Transactions occurring in such Partnership
Year or shorter period. The items included in the determination of Net
Termination Sales Gain shall be determined in accordance with Section 4.5.2 and
shall not include any items of income, gain or loss specially allocated under
Section 5.1. Once an item of income, gain or loss that has been included in the
initial computation of Net Termination Sales Gain is subjected to a Required
Allocation or a Curative Allocation, Net Termination Sales Gain or the resulting
Net Termination Sales Loss, whichever the case may be, shall be recomputed
without regard to such item.
5.7.13 ?Net Termination Sales Loss? means, for each Partnership Year or
shorter period, the sum, if negative, of all items of gain or loss recognized by
the Partnership (including such amounts recognized through the Operating
Partnership) from Terminating Capital Transactions occurring in such Partnership
Year or shorter period. The items included in the determination of Net
Termination Sales Loss shall be determined in accordance with Section 4.5.2 and
shall not include any items of income, gain or loss specially allocated under
Section 5.1.4. Once an item of gain or loss that has been included in the
initial computation of Net Termination Sales Loss is subjected to a Required
Allocation or a Curative Allocation, Net Termination Sales Loss or the resulting
Net Termination Sales Gain, whichever the case may be, shall be recomputed
without regard to such item.
5.7.14 ?Preference Period? means the period commencing upon the Closing
Date and ending effective as of the end of the calendar quarter as to which each
of the following conditions is met: (i) the Partnership shall have distributed
to all Unitholders in respect of such calendar quarter and each of the 11 full
consecutive preceding calendar quarters Available Cash that constitutes Cash
from Operations in an amount at least equal to the Minimum Quarterly
Distribution, and (ii) as of the end of such calendar quarter, the sum of (A)
plus (B) is less than an amount equal to Permitted Indebtedness where (A) is
equal to the outstanding principal balance as of such date of the Partnership's
consolidated indebtedness (excluding borrowings for working capital purposes)
and (B) is equal to the amount of revenues collected by the Partnership that (x)
are then subject to possible refund under a pending rate case and (y) are not
maintained by the Partnership in a separate reserve fund.
5.7.15 ?Preference Unit Deficiency? means, with respect to any
Preference Unit and as to any calendar quarter within the Preference Period, the
excess of (a) the Minimum Quarterly Distribution over (b) the sum of all
Available Cash distributed in such calendar quarter with respect to a Preference
Unit acquired in the initial offering of the Preference Units pursuant to
Section 5.4.3.
5.7.16 ?Preference B Unit Deficiency? means, with respect to any
Preference B Unit and as to any calendar quarter within the Preference Period,
the excess of (a) the Minimum Quarterly Distribution over (b) the sum of all
Available Cash distributed in such calendar quarter pursuant to Section 5.4.5
with respect to a Preference B Unit acquired in the initial exchange of the
Preference Units for Preference B Units pursuant to Section 5.9.2; provided
however, that after the Record Date for the distribution of Available Cash to
holders of Preference Units with respect to the third calendar quarter of 1997,
no Preference B Unit Deficiency shall exist, and for all quarters subsequent to
the third calendar quarter of 1997, the Preference B Units shall be deemed to be
Preference Units for purposes of Sections 5.7.4, 5.7.7 and 5.7.15.
5.7.17 ?Remaining Capital? means, at any time with respect to a class
or series of LP Units, the price per LP Unit at which such class or series of LP
Units was initially sold by the Partnership, as determined by the General
Partner, less the sum of any distributions of Available Cash constituting Cash
from Interim Capital Transactions 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 a LP Unit of
such class or series that was sold in the initial offering of such LP Units.
5.7.18 ?Second Liquidation Target Amount? means an amount, determined
with respect to any LP Unit which equals, as of the date of its determination,
the sum of (a) the First Liquidation Target Amount plus (b) the Second Target
Distribution Cumulative Deficiency.
5.7.19 ?Second Target Distribution? means $.65 per LP Unit, subject to
adjustment in accordance with Sections 5.8 and 9.6.
5.7.20 ?Second Target Distribution Cumulative Deficiency? means an
amount attributable to any LP Unit and determined with respect to all preceding
calendar quarters, which equals the excess of (i) the Second Target Distribution
less the First Target Distribution for each quarter of the Partnership's
existence over (ii) the amount of any distributions (on a per LP Unit basis) for
such quarter of Available Cash that were distributed pursuant to Section 5.4.9
or paragraph Third of Section 5.5.
5.7.21 ?Senior Preference Unit Deficiency? means, with respect to any
Senior Preference Unit and as to any calendar quarter within the Preference
Period, the excess of (a) the Minimum Quarterly Distribution over (b) the sum of
all Available Cash distributed in such calendar quarter with respect to a Senior
Preference Unit acquired in the Initial Offering pursuant to Section 5.4.1.
5.7.22 ?Terminating Capital Transaction? means any sale or other
disposition of assets of the Partnership or the Operating Partnership following
commencement of the dissolution and liquidation of the Partnership or the
Operating Partnership.
5.7.23 ?Third Liquidation Target Amount? means an amount, determined
with respect to any LP Unit, which equals, as of the date of its determination,
the sum of (a) the Second Liquidation Target Amount plus (b) the Third Target
Distribution Cumulative Deficiency.
5.7.24 ?Third Target Distribution? means $.70 per LP Unit, subject to
adjustment in accordance with Sections 5.8 and 9.6.
5.7.25 ?Third Target Distribution Cumulative Deficiency? means an
amount attributable to any LP Unit and determined with respect to all preceding
calendar quarters, which equals the excess of (i) the Third Target Distribution
less the Second Target Distribution for each quarter of the Partnership's
existence over (ii) the amount of any distributions (on a per LP Unit basis) for
such quarter of Available Cash that were distributed pursuant to Section 5.4.10
or paragraph Fourth of Section 5.5.
5.8 Adjustment of Distribution and Target Distribution Levels25.8
Adjustment of Distribution and Target Distribution Levels.
5.8.1 The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution and Third Target Distribution shall be
proportionately adjusted in the event of any distribution, combination or
subdivision (whether effected by a distribution payable in LP Units or
otherwise) of Partnership Securities in accordance with Section 4.11. In the
event of a distribution of Available Cash that constitutes, and which for
purposes of determining the priority of such distribution of Available Cash is
treated as constituting, Cash from Interim Capital Transactions in respect of
Interim Capital Transactions, the Minimum Quarterly Distribution, First Target
Distribution, Second Target Distribution and Third Target Distribution shall be
adjusted proportionately downward to equal the product of the otherwise
applicable Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution and Third Target Distribution, as the case may be, by a
fraction, of which the numerator is the Unrecovered Capital immediately after
giving effect to such distribution and of which the denominator shall be
Unrecovered Capital immediately prior to such distribution. For such purposes,
?Unrecovered Capital? means, at any time, an amount equal to the excess of $22
per LP Unit over the sum of all distributions theretofore made in respect of a
Senior Preference Unit acquired in the Initial Offering out of Available Cash
constituting, and which for purposes of determining the priority of such
distribution of Available Cash is treated as constituting, Cash from Interim
Capital Transactions.
5.8.2 The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution and Third Target Distribution shall also be subject
to adjustment pursuant to Section 9.6.
5.9 Exchange of LP Units.9 Exchange of LP Units.
5.9.1 After the Exchange Date, KPL may from time to time exchange an
aggregate of up to 2,650,000 Preference Units or Preference B Units or a
combination thereof (the ?Exchangeable Amount?) for an equal number of Senior
Preference Units; provided, however, that each such exchange shall be
conditioned upon receipt by the Partnership of an Opinion of Counsel that the
intrinsic economic and federal income tax characteristics of the Senior
Preference Units issuable upon such exchange are identical to the intrinsic
economic and federal income tax characteristics of the Senior Preference Units
outstanding immediately prior to such exchange. As used in this Section 5.9.1,
the ?Exchange Date? shall mean the later of (i) the Record Date for
distributions of Available Cash to the holders of Senior Preference Units with
respect to the third calendar quarter of 1997, and (ii) the end of the calendar
quarter as to which the Partnership shall have distributed to all Unitholders in
respect of such quarter and each of the three full consecutive preceding
calendar quarters Available Cash that constitutes Cash from Operations in an
amount at least equal to the Third Target Distribution; provided that, as of
such date, the sum of (A) plus (B) is less than Permitted Indebtedness where (A)
is equal to the outstanding principal balance as of such date of the
Partnership's consolidated indebtedness (excluding borrowings for working
capital purposes) and (B) is equal to the amount of revenues collected by the
Partnership that (x) are then subject to possible refund under a pending rate
case and (y) are not maintained by the Partnership in a separate reserve fund.
In the event of a distribution, combination or subdivision of the Preference
Units or Preference B Units pursuant to Section 4.11, the ?Exchangeable Amount?
shall be adjusted to and become that amount which bears the same ratio to the
aggregate number of Outstanding Preference Units and Outstanding Preference B
Units after giving effect to such distribution, combination or subdivision as
the Exchangeable Amount bears to the aggregate number of Outstanding Preference
Units and Outstanding Preference B Units immediately prior to such distribution,
combination or subdivision. In the event of a distribution, combination or
subdivision of the Senior Preference Units, the number of Senior Preference
Units for which one Preference Unit or Preference B Unit is exchangeable (the
?Exchange Factor?) shall be adjusted to and become that amount which bears the
same ratio to the number of Outstanding Senior Preference Units after giving
effect to such distribution, combination or subdivision as the Exchange Factor
immediately prior to such distribution, combination or subdivision bears to the
number of Outstanding Senior Preference Units after giving effect to such
distribution, combination or subdivision.
5.9.2 KPL may, at its option, exchange up to 1,000,000 Preference Units
for an equal number of Preference B Units. In addition, any holder of Preference
B Units may at its option, exercisable from time to time after the Record Date
for distributions of Available Cash to the holders of Senior Preference Units
with respect to the third calendar quarter of 1997, exchange Preference B Units
for an equal number of Preference Units. In the event of a distribution,
combination or subdivision of the Preference Units, the exchange ratio between
the Preference B Units and the Preference Units shall be adjusted to and become
that ratio which bears the same ratio to the number of Outstanding Preference
Units after giving effect to such distribution, combination or subdivision as
the exchange ratio immediately prior to such distribution, combination or
subdivision bears to the number of Outstanding Preference Units after giving
effect to such distribution, combination or subdivision.
5.9.3 Upon the expiration of the Preference Period, all differences and
distinctions between Senior Preference Units, Preference Units, Preference B
Units and Common Units shall automatically cease. The Senior Preference Units,
Preference Units, Preference B Units and Common Units shall remain separately
identified until such time as the Partnership has received an Opinion of Counsel
that the intrinsic economic and federal income tax characteristics of the Senior
Preference Units, the Preference Units, the Preference B Units and the Common
Units are identical. Upon receipt of such an Opinion of Counsel, the Senior
Preference Units, Preference Units and Common Units shall thereafter be
designated ?Units?, and each Unit Certificate of the Partnership purporting to
represent Senior Preference Units, Preference Units or Common Units shall be
deemed to represent Units.
5.10 Restrictions on Distributions on, and Acquisitions of, Preference
Units, Preference B Units and Common Units during the Preference Period.10
Restrictions on Distributions on, and Acquisitions of, Preference Units,
Preference B Units and Common Units during the Preference Period. The
Partnership will not distribute Available Cash on the Preference Units,
Preference B Units or Common Units or acquire Preference Units, Preference B
Units or Common Units with Available Cash in respect of any calendar quarter if
(i) the Preference Period continues in effect during the quarter in respect of
which the distribution or acquisition would be made and (ii) after giving effect
to such distribution or acquisition, the sum of (A) plus (B) would exceed an
amount equal to the Permitted Indebtedness where (A) is equal to the outstanding
principal balance as of the proposed distribution or acquisition date, as the
case may be, of the Partnership's consolidated indebtedness (excluding borrowing
for working capital purposes) and (B) is equal to the amount of revenues
collected by the Partnership that (i) are then subject to possible refund under
a pending rate case and (ii) are not maintained by the Partnership in a separate
reserve fund.
5.11 Reimbursements and Payments.11 Reimbursements and Payments.
Amounts payable as reimbursement of the General Partner pursuant to Section 6.4
or amounts payable to any Person other than in his capacity as a Partner, such
as for services rendered, goods purchased or money borrowed, shall not be
treated as distributions for purposes of this Article 5.
ARTICLE 6 MANAGEMENT AND OPERATION OF BUSINESS
6.1 Management.
6.1.1 Except as otherwise expressly provided in this Agreement, all
decisions respecting any matter set forth herein or otherwise affecting or
arising out of the conduct of the business of the Partnership shall be made by
the General Partner, and the General Partner shall have the exclusive right and
full authority to manage, conduct, control and operate the Partnership's
business and effect the purposes and provisions of this Agreement. Except as
otherwise expressly provided in this Agreement, the General Partner shall have
full authority to do all things on behalf of the Partnership deemed necessary or
desirable by it in the conduct of the business of the Partnership, including,
without limitation, (i) the making of any expenditures, the borrowing of money,
the guaranteeing of indebtedness and other liabilities, the issuance of
evidences of indebtedness and the incurring of any obligations it deems
necessary for the conduct of the activities of the Partnership; (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 assets of the Partnership or the
merger or other combination of the Partnership with or into another entity (all
of the foregoing subject to any prior approval which may be required by Section
6.13); (iv) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of this
Agreement and on any terms it sees fit, including, without limitation, the
financing of the conduct of the operations of the Partnership, the Operating
Partnership or any Subsidiary, the lending of funds to other persons (including
the Operating Partnership or any Subsidiary) and the repayment of obligations of
the Partnership, the Operating Partnership or any Subsidiary and the making of
capital contributions to the Operating Partnership and any Subsidiary; (v) the
negotiation and execution on any terms deemed desirable in its sole discretion
and the performance of any contracts, conveyances or other instruments that it
considers useful or necessary to the conduct of the Partnership operations or
the implementation of its powers under this Agreement; (vi) the distribution of
Partnership cash; (vii) the selection and dismissal of employees (including,
without limitation, 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 and the Partners as it deems
necessary or appropriate; (ix) the formation of, or acquisition of an interest
in, and the contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it deems desirable
(including, without limitation, the acquisition of interests in, and the
contributions of property to, the Operating Partnership or any Subsidiary from
time to time); (x) the control of any matters affecting the rights and
obligations of the Partnership, including the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation; (xi) 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 and the securing of same by mortgage, deed of trust or other
lien or encumbrance, the bringing and defending of actions at law or in equity
and the indemnification of any Person against liabilities and contingencies to
the extent permitted by law; (xii) the entering into of listing agreements with
the New York Stock Exchange and any other securities exchange and delisting some
or all of the LP Units from, or requesting that trading be suspended on, any
such exchange (subject to any prior approval which may be required under Section
2.6); and (xiii) the undertaking of any action in connection with the
Partnership's participation in the Operating Partnership as the limited partner
(including, without limitation, the contribution or loan by the Partnership to
the Operating Partnership of funds).
6.1.2 Each of the Partners and each other Person who may acquire an
interest in LP Units hereby approves, ratifies and confirms the execution,
delivery and performance by the parties thereof to the Operating Partnership
Agreement, the Underwriting Agreement, the Contribution Agreement, the
Conveyance and Assignment, the Assignment of Leases and the other agreements
described in the Registration Statement and agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions and such other agreements described in the Registration Statement
on behalf of the Partnership without any further act, approval or vote of the
Partners or any other Person who may acquire an interest in LP Units
notwithstanding any other provision of this Agreement, the Operating Partnership
Agreement, the Delaware Act or any applicable law, rule or regulation. None of
the execution, delivery or performance by the General Partner, the Partnership,
the Operating Partnership or any Affiliate of any of them of any agreement
authorized or permitted under this Agreement shall 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 of any duty
stated or implied by law or equity.
6.1.3 The General Partner has caused to be filed the Certificate of
Limited Partnership as required by the Delaware Act and shall cause to be filed
such other certificates or documents as may be required for the formation,
continuation, qualification and operation of a limited partnership in the State
of Delaware or any other state in which the Partnership elects to do business or
own property. The General Partner shall file any necessary amendments to the
Certificate of Limited Partnership, including, without limitation, amendments to
reflect a successor or additional General Partner admitted pursuant to Section
13.3, and shall otherwise use its best efforts to do all things (including the
appointment of registered agents of the Partnership and maintenance of
registered offices of the Partnership) requisite to the maintenance of the
Partnership as a limited partnership under the laws of the State of Delaware or
any other state in which the Partnership may elect to do business or own
property. Where applicable law so permits, the General Partner may omit from
certificates filed in the State of Delaware and in states in which the
Partnership elects to do business or own property all information not required
by law, including the names and addresses of Partners, and omit information
relating to capital contributions and shares of profits or compensation of
Partners, or state such information in the aggregate rather than on an
individual Partner basis. Except as provided in Section 7.5.1, the General
Partner shall not be required, before or after filing, to deliver or mail a copy
of the Certificate of Limited Partnership or any amendment thereto to any
Limited Partner or Record Holder.
6.2 Reliance By Third Parties. Notwithstanding any other provision of
this Agreement to the contrary, no lender, purchaser or other Person dealing
with the Partnership shall be required to look to the application of proceeds
hereunder or to verify any representation by the General Partner as to the
extent of the interest in Partnership Assets that the General Partner is
entitled to encumber, sell or otherwise use, and any such lender, purchaser or
other Person shall be entitled to rely exclusively on the representations of the
General Partner as to its authority to enter into such arrangements and shall be
entitled to deal with the General Partner, without the joinder of any other
Person, as if the General Partner were the sole party in interest therein, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such lender, purchaser
or other Person to contest, negate or disaffirm any action of the General
Partner in connection with any such arrangement. In no event shall any Person
dealing with the General Partner or the General Partner's representative with
respect to any business or property of the Partnership be obligated to ascertain
that the terms of this Agreement have been complied with, or be obligated to
inquire into the necessity or expedience of any act or action of the General
Partner or the General Partner's representative; and every contract, agreement,
deed, mortgage, security agreement, promissory note or other instrument or
document executed by the General Partner or the General Partner's representative
with respect to any business or property of the Partnership shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery thereof, this Agreement was
in full force and effect, (ii) such instrument or document was duly executed in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership and (iii) the General Partner or the General Partner's
representative was duly authorized and empowered to execute and deliver any and
every such instrument or document for and on behalf of the Partnership.
6.3 Purchase or Sale of LP Units. Subject to the provisions of Section
5.10, the General Partner may cause the Partnership to purchase or otherwise
acquire LP Units and may also purchase or otherwise acquire LP Units for its own
account and may sell or otherwise dispose of such LP Units. Any LP Units
purchased for or otherwise held by the Partnership shall not be deemed
outstanding for any purposes under this Agreement.
6.4 Compensation and Reimbursement of the General Partner.
6.4.1 Except as otherwise provided in this Section 6.4, the General
Partner shall not be compensated for its services as general partner of the
Partnership.
6.4.2 The General Partner shall be reimbursed for all expenses,
disbursements and advances incurred or made in connection with the organization
of the Partnership, the Initial Offering and the qualification of the
Partnership and the General Partner to do business.
6.4.3 The General Partner shall be reimbursed on a monthly basis, or
such other basis as the General Partner may determine in its sole discretion,
for (i) all direct expenses it incurs or makes on behalf of the Partnership
(including amounts paid to any Person to perform services for the Partnership)
and (ii) the portion of the General Partner's legal, accounting, utilities,
investor communication, telephone, secretarial, travel, entertainment,
bookkeeping, reporting, data processing, office rent and other office expenses
(including overhead charges), salaries, fees and other compensation and benefit
expenses of employees, officers and directors, other administrative or overhead
expenses and all other direct and indirect administrative and incidental
expenses, in each case necessary or appropriate to the conduct of the
Partnership's business (including, without limitation, expenses allocated to the
General Partner by its Affiliates). The General Partner shall determine such
fees and expenses that are allocated to the Partnership in any reasonable manner
in its sole discretion. Such reimbursements shall be in addition to any
reimbursement to the General Partner as a result of indemnification pursuant to
Section 6.8.
6.4.4 Subject to the provisions of Section 4.4, the General Partner may
propose and adopt or cause to be adopted on behalf of the Partnership, without
the approval of the Limited Partners, employee benefit plans, including plans
involving the issuance of LP Units, for the benefit of employees of the General
Partner, the Partnership, the Operating Partnership or any Affiliate of any such
Persons, with respect to services performed, directly or indirectly, for the
benefit of the Partnership or the Operating Partnership.
6.5 Partnership Funds. The funds of the Partnership shall be deposited
in such account or accounts as are designated by the General Partner. The
General Partner may, in its sole discretion, deposit funds of the Partnership in
a central account maintained by or in the name of the General Partner or the
Partnership in which funds of the Operating Partnership are also deposited,
provided that at all times books of account are maintained which show the amount
of funds of the Partnership on deposit in such account. All withdrawals from or
charges against such accounts shall be made by the General Partner or by its
officers or agents. Funds of the Partnership may be invested as determined by
the General Partner, except in connection with acts otherwise prohibited by this
Agreement.
6.6 Loans from the General Partner; Contracts with Affiliates.
6.6.1 The General Partner or any Affiliate thereof may lend to the
Partnership, the Operating Partnership or any Subsidiary funds needed by the
Partnership for such periods of time as the General Partner may determine;
provided, however, that the General Partner or such Affiliate may not charge the
Partnership, the Operating Partnership or any Subsidiary interest at a rate
greater than the lesser of (i) the actual interest cost (including points or
other financing charges or fees) that the General Partner or such Affiliate is
required to pay on funds borrowed by it from commercial banks and (ii) the rate
(including points or other financing charges or fees) that would be charged the
Partnership, the Operating Partnership or any Subsidiary (without reference to
the General Partner's financial abilities or guaranties) by unrelated lenders on
comparable loans. The Partnership, the Operating Partnership or such Subsidiary
shall reimburse the General Partner or any Affiliate, as the case may be, for
any costs incurred by it in connection with the borrowing of funds obtained by
the General Partner or such Affiliate and loaned to the Partnership, the
Operating Partnership or any Subsidiary. The Partnership may lend or contribute
to the Operating Partnership or any Subsidiary, and the Operating Partnership or
any Subsidiary may borrow funds from the Partnership, on terms and conditions
established at the sole discretion of the General Partner. The foregoing
authority shall be exercised by the General Partner in its reasonable discretion
and shall not create any right or benefit in favor of the Operating Partnership,
any Subsidiary or any other Person. The Partnership may not lend funds to the
General Partner or any of its Affiliates.
6.6.2 The General Partner may itself, or may enter into an agreement
with an Affiliate of the General Partner to, render services to the Partnership.
Any service rendered to the Partnership by the General Partner or any such
Affiliate shall be on terms that are fair and reasonable to the Partnership.
6.6.3 The General Partner or any of its Affiliates may use or lease
property (including, but not limited to, office equipment, computers, vehicles,
aircraft and office space) of the Partnership, and the General Partner or such
Affiliate will reimburse the Partnership based on the incremental cost to the
Partnership of such usage.
6.6.4 Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 6.6.4 shall be deemed to be satisfied as to the transactions
effected pursuant to Section 4.2, the Contribution Agreement and the Conveyance
and Assignment.
6.7 Liability of Indemnitees.7 Liability of Indemnitees.
6.7.1 No Indemnitee shall be liable to the Partnership, Limited
Partners, Assignees or any Persons who have acquired any interests in LP Units,
whether as Limited Partners, Assignees or otherwise, for losses sustained or
liabilities incurred as a result of any act or omission if such Indemnitee acted
in good faith and in a manner it reasonably believed to be in, or not opposed
to, the best interests of the Partnership and if such act or omission did not
constitute gross negligence or willful misconduct on the part of such
Indemnitee.
6.7.2 The General Partner may exercise any of the powers granted to it
by this Agreement and perform any of the duties imposed upon it hereunder either
directly or through its agents, and the General Partner shall not be responsible
for any act or omission on the part of any such agent appointed by the General
Partner in good faith if the agent acted in a manner it reasonably believed to
be in, or not opposed to, the best interests of the Partnership and if such act
or omission did not constitute gross negligence or willful misconduct on the
part of such Person.
6.7.3 Any amendment, modification or repeal of this Section 6.7 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations or the liability to the Partnership and the Limited Partners of the
General Partner, their directors, officers and employees under this Section 6.7
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.
6.8 Indemnification.
6.8.1 To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, each Indemnitee shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, whether joint or several, expenses
(including legal fees and expenses), judgments, fines, settlements and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise, by reason of
its status as (x) a General Partner, a Departing Partner or any of their
Affiliates, (y) an officer, director, employee, partner, trustee or agent of a
General Partner, any Departing Partner or any of their Affiliates or (z) a
Person serving at the request of the Partnership in another entity in a similar
capacity, regardless of whether the Indemnitee continues to be a General Partner
or an Affiliate of a General Partner or an officer, director, employee, partner
or agent of a General Partner or an Affiliate of a General Partner at the time
any such liability or expense is paid or incurred, provided that in each case
the Indemnitee acted in good faith and in a manner it reasonably believed to be
in, or not opposed to, the best interests of the Partnership and such action did
not constitute gross negligence or willful misconduct on the part of the
Indemnitee, and, with respect to any criminal proceeding, the Indemnitee had no
reasonable cause to believe its conduct was unlawful. The termination of any
action, suit or proceeding by a judgment, order, settlement, conviction or upon
a plea of nolo contendere, or its equivalent, shall not, of itself, create a
presumption that the Indemnitee acted in a manner contrary to that specified
above.
6.8.2 To the fullest extent permitted by law, expenses (including legal
fees and expenses) incurred by an Indemnitee in defending any claim, demand,
action, suit or proceeding subject to this Section 6.8, or in establishing any
right to indemnification hereunder, 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 (which need not
be secured) by or on behalf of the Indemnitee to repay such amount if it shall
be determined that such Person is not entitled to be indemnified as authorized
in this Section 6.8.
6.8.3 The advancement of expenses and indemnification provided by this
Section 6.8 shall be in addition to any other rights to which an Indemnitee may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, 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.
6.8.4 To the extent deemed commercially reasonable by the General
Partner, the Partnership shall purchase and maintain at the expense of the
Partnership insurance on behalf of the General Partner, its Affiliates, and
their respective officers, directors, employees, partners, agents and trustees
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 activities 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.
6.8.5 For purposes of this Section 6.8, 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 be deemed ?fines? within the meaning of Section 6.8.1; and action taken or
omitted by it with respect to an 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.
6.8.6 Any indemnification hereunder shall be satisfied solely out of
the assets of the Partnership. In no event may an Indemnitee subject the General
Partner, the Limited Partners or Assignees to personal liability by reason of
these indemnification provisions.
6.8.7 An Indemnitee shall not be denied indemnification in whole or in
part under this Section 6.8 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applied if the transaction
was otherwise permitted by the terms of this Agreement.
6.8.8 The indemnification provided in this Section 6.8 is for the
benefit of the Indemnitees and shall not be deemed to create any right to
indemnification for any other Persons.
6.8.9 No amendment, modification or repeal of this Section 6.8 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 6.8 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.
6.9 Other Matters Concerning the General Partner.
6.9.1 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.
6.9.2 The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it and any opinion of any such Person as to matters that
the General Partner reasonably believes to be within such Person's professional
or expert competence shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by the General Partner
hereunder in good faith and in accordance with such opinion.
6.9.3 The General Partner shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder.
6.10 Registration Rights of KPL and its Affiliates.
6.10.1 In the event that (i) KPL or any of its Affiliates holds
Partnership Securities which it desires to sell and (ii) Rule 144 of the
Securities Act (or any successor rule or regulation to Rule 144) is not
available to enable KPL or such Affiliate to dispose of the number of
Partnership Securities it desires to sell at the time it desires to do so, then
upon the request of KPL or such Affiliate, 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 not more than six months a registration statement under the Securities
Act registering the offering and sale of the number of Partnership Securities
specified by KPL or such Affiliate, provided, however, that if the General
Partner or, if at the time a request pursuant to this Section 6.10 is submitted
to the Partnership, KPL or such Affiliate requesting registration is the General
Partner or an Affiliate of the General Partner, the Independent Committee in
connection with Special Approval 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 preceding sentence, the
Partnership shall promptly prepare and file such documents as may be necessary
to register or qualify the securities subject to such registration under the
securities laws of such states as KPL or such Affiliate shall reasonably request
and do any and all other acts and things that may reasonably be necessary or
advisable to enable KPL or such Affiliate to consummate a public sale of such
Partnership Securities in such states; 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 limited partnership doing
business in such jurisdiction. In no event shall the Partnership be required to
effect a registration relating to Partnership Securities pursuant to this
Section 6.10 for less than $2 million in amount of such Partnership Securities.
All costs and expenses of any such registration shall be paid by KPL or such
Affiliate and none of such costs will be allocated to the Partnership.
6.10.2 If the Partnership shall at any time propose to file a
registration statement under the Securities Act for an offering of 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 KPL and any of its Affiliates in such
registration statement as KPL or any of its Affiliates shall request. If the
proposed offering pursuant to this Section 6.10.2 shall be an underwritten
offering, then, in the event that the managing underwriter advises the
Partnership and KPL or such Affiliate in writing that in its opinion the
inclusion of all or some of KPL's or such Affiliate's 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 KPL
or such Affiliate which, in the opinion of the managing underwriter, will not so
adversely and materially affect the offering. In connection with any
registration pursuant to this Section 6.10.2, KPL or such Affiliate shall bear
the expense of all underwriting discounts and commissions attributable to the
securities sold for its own account and shall reimburse the Partnership for all
incremental costs incurred by the Partnership in connection with such
registration resulting from the inclusion of securities held by KPL or such
Affiliate.
6.10.3 If underwriters are engaged in connection with any registration
referred to in this Section 6.10, the Partnership shall provide indemnification
to the underwriters in form and substance reasonably satisfactory to such
underwriters.
6.10.4 The provisions of this Section 6.10 shall continue to be
applicable with respect to KPL (and its Affiliates) if KPL ceases to be a
general partner of the Partnership, during a period of three years subsequent to
the effective date of such cessation and for so long thereafter as is reasonably
required for KPL or its Affiliates to sell all of the Partnership Securities
with respect to which it has requested during such three-year period that a
registration statement be filed.
6.10.5 The rights of KPL and its Affiliates under this Section 6.10 may
be assigned by KPL and any of its Affiliates to any Person acquiring LP Units
from KPL or any of its Affiliates, and any such assignee shall be entitled to
the benefits of this Section 6.10 during such period as the assignor was so
entitled.
6.11 Title to Partnership Assets. All Partnership Assets, whether real
or personal or mixed and whether tangible or intangible, shall be deemed to be
owned by the Partnership as an entity, and no Partner, 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 or one or more nominees, as
the General Partner may determine. The General Partner hereby declares and
warrants that any Partnership Assets for which legal title is held in the name
of the General Partner shall be held in trust by the General Partner for the use
and benefit of the Partnership in accordance with the terms and provisions of
this Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership Assets shall be
recorded as the property of the Partnership on its books and records,
irrespective of the name in which legal title to such Partnership Assets is
held.
6.12 Resolution of Conflicts of Interest.
6.12.1 Unless otherwise expressly provided in this Agreement, the
Operating Partnership Agreement or any Subsidiary 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
Operating Partnership, any Subsidiary or any Partner, on the other hand, any
resolution or course of action in respect of such conflict of interest shall be
permitted and deemed approved by all Partners, and shall not constitute a breach
of this Agreement, of the Operating Partnership Agreement, of any Subsidiary
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 a resolution of such conflict or course of action. Any
conflict of interest and any resolution of such conflict of interest shall be
deemed fair and reasonable to the Partnership upon Special Approval of such
conflict of interest or resolution. The General Partner may also adopt a
resolution or course of action that has not received Special Approval. Any such
resolution or course of action in respect of any conflict of interest shall not
constitute a breach of this Agreement, of the Operating Partnership Agreement,
any Subsidiary Partnership Agreement, of any other agreement contemplated herein
or therein or of any duties stated or implied by law or equity, if such
resolution or course of action is fair and reasonable to the Partnership. The
General Partner (including the Independent Committee in connection with Special
Approval) shall be authorized in connection with its resolution of any conflict
of interest to consider (i) the relative interests of any party to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interest; (ii) any customary or accepted industry practices;
(iii) any applicable generally accepted accounting or engineering practices or
principles; and (iv) such additional factors as the General Partner (including
such Independent 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 such Independent Committee) to consider the interest
of any Person other than the Partnership. In the absence of bad faith by the
General Partner, the resolutions, 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 under the Delaware Act or
any other law, rule or regulation.
6.12.2 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 ?discretion? or under a grant of
similar authority or latitude, the General Partner or such Affiliate shall be
entitled to consider only such interests and factors as it desires and shall
have no duty or obligation to give any consideration to any interest of, or
factors affecting, the Partnership, the Operating Partnership, any Subsidiary or
any Limited Partner, or (ii) 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 or any other agreement contemplated hereby. In addition, any actions
taken by the General Partner consistent with the standards of ?reasonable
discretion? set forth in the definitions of Available Cash or Cash from
Operations shall not constitute a breach of any duty of the General Partner to
the Partnership or the Limited Partners. During the Preference Period, the
General Partner shall have no duty, express or implied, to sell or otherwise
dispose of any asset of the Operating Partnership, any Subsidiary or the
Partnership, other than in the ordinary course of business. No borrowing by the
Partnership or any Subsidiary or the Operating Partnership 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 solely by
reason of the fact that the purpose or effect of such borrowing is directly or
indirectly to avoid subordination of the Preference Units, Preference B Units or
Common Units by reason of the provisions of Section 5.4 or 5.5.
6.12.3 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.
6.12.4 The Limited Partners hereby authorize the General Partner, on
behalf of the Partnership as limited partner of the Operating Partnership, to
approve of actions by the general partner of the Operating Partnership similar
to those actions permitted to be taken by the General Partner pursuant to this
Section 6.12.
6.13 Restrictions on General Partner's Authority.
6.13.1 The General Partner may not, without the written approval of the
specific act by all of the Limited Partners or by other written instrument
executed and delivered by all of the Limited Partners subsequent to the date of
this Agreement, take any action in contravention of this Agreement, including,
without limitation, (i) any act that would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise provided in this
Agreement; or (ii) possess Partnership property, or assign any rights in
specific Partnership property, for other than a Partnership purpose.
6.13.2 Except as provided in Article 15, 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 with any other
Person), or approve on behalf of the Partnership the sale, exchange or other
disposition of all or substantially all of the assets of the Operating
Partnership in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination with any other
Person): (a) during the Preference Period, without the approval of at least a
Majority Interest including the approval of the Record Holders of at least a
majority in interest of the Senior Preference Units (excluding Senior Preference
Units owned by the General Partner and its Affiliates) and (b) after the
Preference Period, without the approval of a Majority Interest; provided,
however, that this provision shall not preclude or limit the mortgage, pledge,
hypothecation or grant of a security interest in all or substantially all of the
Partnership's assets and shall not apply to any forced sale of any or all of the
Partnership's assets pursuant to the foreclosure of, or other realization upon,
any such encumbrance. Without the approval of a Majority Interest including,
during the Preference Period, the approval of the Record Holders of at least a
majority in interest of the Senior Preference Units (excluding Senior Preference
Units owned by the General Partner and its Affiliates), the General Partner
shall not, on behalf of the Partnership, (i) consent to any amendment to the
Operating Partnership Agreement or, except as expressly permitted by Section
6.12.4, take any action permitted to be taken by the limited partner of the
Operating Partnership, in either case, that would adversely affect the
Partnership as the limited partner of the Operating Partnership, (ii) amend the
Contribution Agreement, the Assignment of Leases or the Payment Priority
Agreement, (iii) except as permitted under Sections 12.2 and 14.1, elect or
cause the Partnership to elect a successor general partner of the Operating
Partnership or (iv) vote for or cause the Partnership to vote for the withdrawal
or removal of the general partner of the Operating Partnership.
6.13.3 Unless approved by the affirmative vote of the Record Holders of
at least a majority of each class of Outstanding LP Units (and during the
Preference Period the vote of the Record Holders of at least a majority in
interest of the Outstanding Senior Preference Units (excluding for purposes of
such determination Senior Preference Units owned by the General Partner and its
Affiliates)), the General Partner shall not take any action or refuse to take
any reasonable action the effect of which, if taken or not taken, as the case
may be, would be to cause the Partnership to become taxable as a corporation or
to be treated for federal income tax purposes as an association taxable as a
corporation.
6.13.4 At all times while serving as the general partner of the
Partnership, the General Partner will not pay any dividend on, repurchase any
shares of its capital stock or take any other action if the effect of such
dividend, repurchase or other action would be to reduce its net worth below an
amount necessary to receive an Opinion of Counsel that the Partnership will be
treated as a partnership for federal income tax purposes.
6.13.5 The Partnership will at all times own 100% of the limited
partner interests of the Operating Partnership and the General Partner will not
cause the Partnership to take or approve any action which will result in the
Partnership owning less than 100% of the limited partner interests of the
Operating Partnership and will not permit the Operating Partnership to issue
additional general partner interests, without the approval of a Majority
Interest, including during the Preference Period the approval of the Record
Holders of at least a majority in interest of the Senior Preference Units
(excluding Senior Preference Units owned by the General Partner and its
Affiliates).
6.14 Outside Activities.
6.14.1 Except as described in the Registration Statement or as provided
in Section 6.14.2, no Indemnitee shall be expressly or implicitly restricted or
proscribed pursuant to this Agreement, the Operating Partnership Agreement, or
any Subsidiary Partnership Agreement or the partnership relationship established
hereby or thereby from engaging in other activities for profit, whether in the
business engaged in by the Partnership, the Operating Partnership or any
Subsidiary or anticipated to be engaged in by the Partnership, the Operating
Partnership or any Subsidiary or otherwise, including, without limitation, those
businesses described in or contemplated by the Registration Statement or any
subsequent registration statement of the Partnership registering the sale of LP
Units. Without limitation of and subject to the foregoing and Section 6.14.2,
each Indemnitee shall have the right to engage in the transportation of refined
petroleum products, liquids terminaling and any other business of every type and
description and to engage in and possess an interest in other business ventures
of any and every type and description, independently or with others, including
business interests and activities in direct competition with the Partnership,
the Operating Partnership or any Subsidiary. Neither the Partnership, the
Operating Partnership, any Subsidiary, any Limited Partner, nor any other Person
shall have any rights by virtue of this Agreement, the Operating Partnership
Agreement, any Subsidiary Partnership Agreement or the partnership relationship
established hereby or thereby in any business ventures of any Indemnitee, and,
except as set forth in the Registration Statement, such Indemnitees shall have
no obligation to offer any interest in any such business ventures to the
Partnership, the Operating Partnership, any Subsidiary, any Limited Partner or
any such other Person. The General Partner and any other Persons affiliated with
the General Partner may acquire Partnership Securities, in addition to those
acquired by any of such Persons on the Closing Date, and shall be entitled
(except to the extent otherwise provided in this Agreement) to exercise all
rights of an Assignee or Limited Partner, as applicable, relating to such
Partnership Securities, as the case may be.
6.14.2 Without limitation of this Section 6.14, the competitive
activities of certain Indemnitees and the restrictions on the Partnership's
activities described in the Registration Statement under the caption ?Conflicts
of Interest and Fiduciary Responsibilities? are hereby approved by all Partners;
provided, however that this Section 6.14 shall not operate as a waiver by the
Partnership, the Operating Partnership, any Subsidiary or any Limited Partner of
any breach of fiduciary duty resulting from competition by an Indemnitee with
the Partnership, the Operating Partnership or any Subsidiary.
ARTICLE 7 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
7.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement except as provided in this Agreement or by the
Delaware Act.
7.2 Management of Business. No Limited Partner or Assignee (other than
the General Partner, any of its Affiliates or any director, officer, general
partner, employee or agent of the General Partner or any of its Affiliates, in
his capacity as such, if such Person shall also be a Limited Partner or an
Assignee) shall take part 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. The transaction of any such business by a
director, officer, general partner, employee or agent of the General Partner or
any of its Affiliates shall not affect, impair or eliminate the limitations on
the liability of any Limited Partner under this Agreement.
7.3 Outside Activities. Subject to the provisions of Section 6.14,
which shall continue to be applicable to the Persons referred to therein,
regardless of whether such Persons shall also be Limited Partners or Assignees,
each Limited Partner and Assignee shall have the right to engage in and possess
an interest in other business ventures of any and every type and description,
independently or with others, including business interests and activities in
direct competition with the Partnership, the Operating Partnership or any
Subsidiary. Neither the Partnership nor any of the Partners shall have any
rights by virtue of this Agreement or the partnership relationship created
hereby or thereby in any such business ventures, and each Limited Partner and
Assignee shall have no obligation to offer any interest in any such business
ventures to the Partnership or any Partner.
7.4 Return of Capital. No Limited 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 provided by Article 5 or as
otherwise expressly provided in this Agreement, no Limited Partner or Assignee
shall have priority over any other Limited Partner or Assignee either as to the
return of Capital Contribution or as to profits, losses or distributions.
7.5 Access to Information.
7.5.1 In addition to other rights provided by this Agreement or by
applicable law, each Limited Partner and Assignee, and each Limited Partner's
and Assignee's duly authorized representatives shall have the right at
reasonable times, upon reasonable notice which shall not be less than three
Business Days, and at such Person's own expense, but only upon its written
request and for a purpose reasonably related to such Person's interest as a
Limited Partner or Assignee, to (i) have true and full information regarding the
status of the business and financial condition of the Partnership, (ii) inspect
and copy, promptly after they become available, the Partnership's federal, state
and local income tax returns for each year, (iii) have on demand a current list
of the full name and last known business, residence or mailing address of each
Partner, (iv) have true and full information regarding the Net Agreed Value of
any Capital Contributions made by the General Partner and the Limited Partners
and the date on which each such Person became a General Partner or Limited
Partner, (v) have a copy of this Agreement and the Certificate of Limited
Partnership and all amendments thereto, together with copies of executed powers
of attorney pursuant to which this Agreement or any such Certificate has been
executed and (vi) have any other information regarding the affairs of the
Partnership as is just and reasonable.
7.5.2 Anything in Section 7.5.1 to the contrary notwithstanding, the
General Partner may keep confidential from the Limited Partners and Assignees,
and each Limited Partner's and Assignee's duly authorized representatives, for
such period of time as the General Partner deems reasonable, any information
that the General Partner reasonably believes to be in the nature of trade
secrets or other information the disclosure of which the General Partner in good
faith believes is not in the best interests of the Partnership, the Operating
Partnership or any Subsidiary or could damage the business of the Partnership,
the Operating Partnership or any Subsidiary or which the Partnership, the
Operating Partnership or any Subsidiary is required by law or by agreements with
third parties to keep confidential.
ARTICLE 8 BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 Records and Accounting. The General Partner shall keep or cause to
be kept complete and accurate books and records with respect to the
Partnership's business, which books and records shall at all times be kept at
the principal office of the Partnership. Any records maintained by the
Partnership in the regular course of its business, including books of account
and records of Partnership proceedings, may be kept on or be in the form of
punch cards, magnetic media, photographs, micrographics or any other information
storage device, provided that the records so kept are convertible into clearly
legible written form within a reasonable period of time. The books of the
Partnership shall be maintained on the accrual basis in accordance with
generally accepted accounting principles, except to the extent otherwise
required herein.
8.2 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
8.3 Reports.
8.3.1 As soon as practicable, but in no event later than 120 days after
the close of each Partnership Year, the General Partner shall deliver to each
Record Holder, as of a recent date selected by the General Partner, reports
containing financial statements of the Partnership for the fiscal year,
including a balance sheet and statements of operations, Partners' equity and
changes in financial position, all of which shall be prepared in accordance with
generally accepted accounting principles and shall be audited by the
Partnership's Accountants.
8.3.2 As soon as practicable, but in no event later than 60 days after
the close of each calendar quarter, except the last calendar quarter of each
fiscal year, the General Partner shall deliver to each Record Holder, as of a
recent date selected by the General Partner, a quarterly report for the calendar
quarter containing such financial and other information (which need not be
audited) as may be required by applicable law, regulation or rule of any
National Securities Exchange on which Partnership Securities are listed for
trading or as the General Partner deems appropriate.
8.3.3 The General Partner may release such information concerning the
operations of the Partnership to such sources as is customary in the industry or
required by law or regulation of any regulatory body.
ARTICLE 9 TAX MATTERS
9.1 Section 754 Allocations. The adjustments to basis to Partnership
Assets that are attributable to the Section 754 Election shall be allocated to
the Partners in the manner that the General Partner determines is reasonable,
however, no such adjustment shall be credited or charged to the Capital
Accounts.
9.2 Preparation of Tax Returns. The General Partner shall arrange for
the preparation and timely filing of all returns of the Partnership necessary
for federal income tax purposes and state and local income tax purposes in the
jurisdictions in which the Partnership conducts business and shall use all
reasonable efforts to furnish to the Record Holders within 75 days of the close
of the taxable year the tax information reasonably required for federal, state
and local income tax reporting purposes. 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. The taxable
year of the Partnership shall be the calendar year.
9.3 Tax Elections.
9.3.1 The Partnership shall make the Section 754 Election 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 interest of the Limited Partners and
Assignees.
9.3.2 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.
9.3.3 Except as otherwise provided herein, the General Partner shall
determine whether to make any other available elections (including the elections
provided for in Sections 167 and 168 of the Code) on behalf of the Partnership
under the Code.
9.3.4 For purposes of computing 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 LP Units will be deemed to
be the lowest quoted trading price of the LP Units on any National Securities
Exchange on which such LP Units are traded during the calendar month in which
such transfer is deemed to occur pursuant to Section 5.2.7 without regard to the
actual price paid by such transferee.
9.4 Tax Controversies. Subject to the provisions hereof, the General
Partner is designated as the Tax Matters Partner (as defined in Section 6231 of
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.
9.5 Tax Basis and Value Determinations. To the extent that the General
Partner is required to establish fair market values or allocate amounts
realized, tax basis, Carrying Values or Net Agreed Values, the General Partner
shall establish such values and make such allocations in a manner that is
reasonable and fair to the holders of LP Units, taking into account all
applicable laws, governmental regulations, rulings and decisions. The General
Partner may, in its sole discretion, modify or revise such allocations in order
to comply with such laws, governmental regulations, rulings or decisions or to
the extent it otherwise deems such modification or revision appropriate or
necessary. The General Partner is authorized, to the extent deemed by it to be
appropriate or necessary, to utilize the service of an independent appraiser in
establishing such values or allocations and the General Partner shall in such
cases be entitled to rely on the values or allocations established by such
independent appraiser.
9.6 Entity-Level Taxation. If legislation is enacted which causes the
Partnership to become treated as an association taxable as a corporation for
federal income tax purposes, the following shall occur: with respect to any
calendar quarter ending after the Preference Period, the Minimum Quarterly
Distribution, First Target Distribution, the Second Target Distribution or the
Third Target Distribution, as the case may be, shall be equal to the product of
(i) the amount of such distribution multiplied by (ii) 1 minus the sum of (x)
the highest marginal federal corporate income tax rate for the Partnership Year
in which such quarter occurs (expressed as a percentage) plus (y) the effective
overall state and local income tax rate (expressed as a percentage) applicable
to the Partnership 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). Such effective overall state and local income
tax rate shall be determined for the calendar year next preceding the first
calendar year during which the Partnership is taxable for federal income tax
purposes as a corporation or treated as an association taxable as a corporation
by determining such rate as if the Partnership had been subject to such state
and local taxes during such preceding calendar year.
9.7 Entity-Level Deficiency Collections. If the Partnership is required
by applicable law to pay any federal, state or local income tax on behalf of, or
withhold such amount with respect to, any Partner or Assignee or any former
Partner or Assignee but the Partnership is not required by applicable law and
does not elect to pay such tax on behalf of, or withhold such amount with
respect to, all Partners or Assignees (i) the General Partner shall cause the
Partnership to pay such tax on behalf of, or withhold such amount with respect
to, such Partner or Assignee or former Partner or Assignee from the funds of the
Partnership and such payment of tax shall not be deducted as a cash operating
expenditure of the Partnership in calculating ?Cash from Operations? pursuant to
Section 5.7.3, but shall be deemed to be a distribution of Available Cash to
such Partner or Assignee on whose behalf the tax was paid; and (ii) to the
extent any such Partner or Assignee (but not a former Partner or Assignee) is
not then entitled to such distribution under this Agreement, the General Partner
shall be authorized, without the approval of any Partner or Assignee, to amend
this Agreement insofar as is necessary to maintain or establish the uniformity
of intrinsic tax characteristics as to all LP Units or the uniformity of Capital
Accounts underlying all LP Units and to make subsequent adjustments to
distributions in a manner which, in the reasonable judgment of the General
Partner, will make as little alteration in the priority and amount of
distributions otherwise applicable under this Agreement, and will not otherwise
alter the distributions to which Partners and Assignees are entitled under the
Agreement. The General Partner shall be authorized (but not required) to cause
the Partnership to pay any state or local income tax on behalf of, or withhold
such amount with respect to, all the Partners or Assignees even though such
payment or amount withheld may be greater than the amount that would have been
required to be paid if such payment or withholding had been made directly by a
particular Partner or Assignee; provided, however, that such tax payment or
amount withheld shall be in the same amount with respect to each LP Unit and, in
the General Partner's sole discretion, that such payment of tax on behalf of, or
such withholding with respect to all of the Partners or Assignees is in the best
interests of the Partners or Assignees as a whole. Any amount so paid on behalf
of all Partners or Assignees shall be deducted as a cash operating expenditure
of the Partnership in calculating, ?Cash from Operations?, and shall be treated
as a distribution to the Partners or Assignees for purposes of Section 4.5.1,
but shall not be treated as a distribution of Available Cash for any other
purpose of this Agreement. The General Partner shall be authorized (but not
required) to take all necessary or appropriate actions to collect all or any
portion of a deficiency in the payment of any such tax which relates to prior
periods which is attributable to Persons who were Limited Partners or Assignees
when such deficiencies arose, from such Persons.
9.8 Opinions of Counsel. Notwithstanding any other provision of this
Agreement, if the Partnership is taxable for federal income tax purposes as a
corporation or treated as an association taxable as a corporation at any time
and, pursuant to the provisions hereof, an Opinion of Counsel would otherwise be
required to the effect that an action will not cause the Partnership to become
so taxable as a corporation or to be treated as an association taxable as a
corporation, such requirement for an Opinion of Counsel shall be deemed
automatically waived.
9.9 Withholding. The General Partner is authorized to take any action
that it determines in its sole discretion to be necessary or appropriate to
cause the Partnership to comply with any withholding requirements established
under the Code or any other federal, state or local law including, without
limitation, pursuant to Section 1441, 1442, 1445 and 1446 of the Code.
9.10 General Partner Net Worth. The General Partner shall not declare
or make payment of any dividends (except dividends payable solely in capital
stock), purchase, redeem, retire or otherwise acquire for value any of its
capital stock now or hereafter outstanding, return any capital or make any
distribution of assets on account of any shares of its capital stock, if any
such action would reduce its net worth (computed by excluding any net worth
attributable to its interest in, and accounts and notes receivable from, or
payable to, the Partnership, the Operating Partnership or any other limited
partnership in which it is a general partner) below $5,000,000.00 (or such other
lesser amount as may be required to obtain an Opinion of Counsel that the
Partnership is not taxable as a corporation and will not be treated as an
association taxable as a corporation).
ARTICLE 10 POWER OF ATTORNEY
Each Person who accepts LP Units is deemed to constitute and appoint
the General Partner and the Liquidating Trustee (and any successor by merger,
transfer, election or otherwise), and each of the General Partner's and the
Liquidating Trustee's authorized officers and attorneys-in-fact, with full power
of substitution, as its true and lawful agents and attorneys-in-fact, with full
power and authority in its name, place and stead to:
(a) execute, swear to, acknowledge, deliver, file and record
in the appropriate public offices (i) all certificates and other
instruments including, at the option of the General Partner, this
Agreement and the Certificate of Limited Partnership and all amendments
and restatements hereof and thereof that the General Partner or the
Liquidating Trustee deems appropriate or necessary to carry out the
purposes of this Agreement and 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 all jurisdictions in which the Partnership
may or may wish to conduct business or own property; (ii) all
instruments that the General Partner or the Liquidating Trustee deems
appropriate or necessary to reflect any amendment, change or
modification of this Agreement in accordance with its terms; (iii) all
conveyances and other instruments or documents that the General Partner
or the Liquidating Trustee deems appropriate or necessary to reflect
the dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement (including a certificate of cancellation); and
(iv) all instruments (including, if required by law, this Agreement and
the Certificate of Limited Partnership and amendments and restatements
thereof) relating to the admission of any Partner, the initial or
increased Capital Contribution of any Partner or the determination of
the rights, preferences and privileges of any class or series of LP
Units or other securities issued pursuant to Section 4.3; and
(b) sign, execute, swear to and acknowledge all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole discretion of the General Partner
or the Liquidating Trustee, 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 appropriate or necessary, in the sole discretion of the
General Partner or the Liquidating Trustee, to effectuate the terms or
intent of this Agreement; provided, however, that when required by any
provision of this Agreement which establishes a percentage of the
Limited Partners or Limited Partners of any class required to take any
action, the General Partner or the Liquidating Trustee may exercise the
power of attorney made in this subsection (b) only after the necessary
vote, consent or approval by the Limited Partners or of the Limited
Partners of such class or series.
Nothing herein contained shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article 16 or as may be
otherwise expressly provided for in this Agreement.
The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive, and shall not be
affected by, the subsequent death, incompetency, dissolution, disability,
incapacity, bankruptcy or termination of the Limited Partner and shall extend to
the Limited Partner's heirs, successors and assigns. Each Person who accepts LP
Units is deemed to consent to be bound by any representations made by the
General Partner or the Liquidating Trustee, acting in good faith hereby pursuant
to such power of attorney. Each Person who accepts LP Units is deemed to consent
to and waive any and all defenses that may be available to contest, negate or
disaffirm the action of the General Partner or Liquidating Trustee, taken in
good faith under such power of attorney. The Limited Partner shall execute and
deliver to the General Partner or Liquidating Trustee, within 15 days after
receipt of the General Partner's or Liquidating Trustee's request therefor, such
further designations, powers of attorney and other instruments as the General
Partner or Liquidating Trustee deems necessary to effectuate this Agreement and
the purposes of the Partnership.
ARTICLE 11 ISSUANCE OF UNIT CERTIFICATES
11.1 Issuance of Unit Certificates. Upon the issuance of LP Units to
any Person, the Partnership will issue one or more unit certificates (?Unit
Certificates?) in the name of such Person evidencing the number of such LP Units
being so issued. Unit Certificates shall be executed on behalf of the
Partnership by the General Partner. No Unit Certificate shall be valid for any
purpose until manually countersigned by the Registrar.
11.2 Registration, Registration of Transfer and Exchange.
11.2.1 The Partnership will cause to be kept a register in which,
subject to such reasonable regulations as it may prescribe, the Partnership will
provide for the registration of LP Units and of transfers of such LP Units. The
Registrar is hereby appointed Registrar for the purpose of registering Senior
Preference Units and Preference Units and transfers of such Senior Preference
Units and Preference Units as herein provided. The General Partner may from time
to time designate such additional or successor Registrars as it may deem
appropriate.
11.2.2 Upon surrender for registration of transfer or exchange of any
Unit Certificate, and subject to the provisions of Section 11.2.3 below, the
General Partner on behalf of the Partnership will execute, and the Registrar
will countersign and deliver, in the name of the Record Holder or the designated
transferee or transferees, as required pursuant to the Record Holder's
instructions, one or more new Unit Certificates, evidencing the same aggregate
number of LP Units of the same class as did the Unit Certificate so surrendered.
11.2.3 Every Unit Certificate surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the General Partner or the Registrar, as the
case may be, duly executed by the Record Holder thereof or such Record Holder's
attorney 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 Unit Certificate under this Section 11.2, the General Partner may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto.
11.3 Lost, Stolen or Destroyed Certificates. The Partnership shall
issue a new Unit Certificate in place of any Unit Certificate previously issued
if the registered owner of the Unit Certificate:
11.3.1 makes proof by affidavit, in form and substance satisfactory to
the General Partner, that a previously issued Unit Certificate has been lost,
destroyed or stolen;
11.3.2 requests the issuance of a new Unit Certificate before the
Partnership has notice that the Unit Certificate has been acquired by a
purchaser for value in good faith and without notice of an adverse claim;
11.3.3 if requested by the General Partner, delivers to the Partnership
a bond, in form and substance satisfactory to the General Partner, with such
surety or sureties and with fixed or open penalty, as the General Partner may
direct to indemnify the Partnership and the Registrar against any claim that may
be made on account of the alleged loss, destruction or theft of the Unit
Certificate; and
11.3.4 satisfies any other reasonable requirements imposed by the
General Partner.
When a Unit Certificate has been lost, destroyed or stolen, and the holder
thereof fails to notify the Partnership within a reasonable time after he has
notice of it, and a transfer of the LP Units represented by the Unit Certificate
is registered before the Partnership receives such notification, such holder
shall be precluded from making any claim against the Partnership, the Registrar
or any Transfer Agent for such transfer or for a new Unit Certificate.
11.4 Registered Owner. The Partnership shall be entitled to treat the
Record Holder as the Limited Partner or Assignee-in-fact of any LP Units and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such LP Units on the part of any other Person, regardless of whether
it 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 the LP Units 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 a nominee, agent or in some other representative capacity for another Person
in acquiring or holding LP Units, as between the Partnership on the one hand and
such Persons on the other hand, such representative Person (i) shall be the
Limited Partner or Assignee (as the case may be) of record and beneficially,
(ii) must execute and deliver a Transfer Application and (iii) shall be bound by
the Partnership Agreement and shall have the obligations of a Limited Partner or
Assignee (as the case may be) hereunder and as provided for herein.
ARTICLE 12 TRANSFER OF PARTNERSHIP INTERESTS
12.1 Transfer.
12.1.1 The term ?transfer?, when used in this Article 12 with respect
to a Partnership Interest, shall be deemed to refer to a transaction by which
the General Partner assigns all or any part of its Partnership Interest as the
General Partner (which is the Partnership Interest of the General Partner that
is not represented by LP Units) to another Person or by which the holder of an
LP Unit assigns the Partnership Interest evidenced thereby to another Person as
Assignee, and includes a sale, assignment, gift, pledge, hypothecation,
mortgage, exchange or any other disposition.
12.1.2 No Partnership Interest shall be transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article 12. Any transfer or purported transfer of any Partnership Interest not
made in accordance with this Article 12 shall be null and void.
12.2 Transfer of Interests of the General Partner.
12.2.1 The General Partner may not transfer any portion of its
Partnership Interest as the General Partner unless (i) (A) in the event such
transfer is to be effective at any time prior to January 1, 2000, such transfer
is approved by the affirmative vote of a Majority Interest (other than LP Units
owned by the General Partner and its Affiliates) and by the affirmative vote of
Record Holders of a majority of the Senior Preference Units (other than during
the Preference Period Senior Preference Units owned by the General Partner and
its Affiliates) and (B) the transferee agrees to assume and be bound by the
provisions of this Agreement and the Operating Partnership Agreement and (ii)
the Partnership receives an Opinion of Counsel that such transfer and admission
(A) may be taken without the approval of all Partners, (B) would not cause the
loss of limited liability of the Limited Partners under this Agreement or the
Operating Partnership Agreement and (C) would not cause the Partnership to be
taxable as a corporation or treated as an association taxable as a corporation
for federal income tax purposes. Notwithstanding the provisions of Section
14.6.1, but subject to the foregoing, upon any transfer by the General Partner
of all or any portion of its Partnership Interest pursuant to this Section
12.2.1, the General Partner may receive and retain such purchase price as it may
negotiate with the transferee.
12.2.2 No other provision of this Agreement shall be construed to
prevent (and all Partners hereby expressly approve of) (i) the transfer by the
General Partner of all or any part of its Partnership Interest to an Affiliate,
and the assumption of the rights and duties of the General Partner by such
Affiliate and its admission as General Partner; (ii) the transfer by the General
Partner of its Partnership Interest upon its merger or consolidation with or
into any other Person or the transfer by it of all or substantially all of its
assets to another Person and admission as General Partner, and the assumption of
the rights and duties of the General Partner by such transferee; (iii) the
transfer by the General Partner of any part (but not all) of its interest in
items of Partnership income, gain, losses, deductions, credits, distributions or
surplus; (iv) the transfer by the General Partner of all of its interest in
items of Partnership income, gain, losses, deduction, credits, distributions and
surplus if the General Partner agrees, notwithstanding Section 17-702(a)(4) of
the Delaware Act, to continue as the General Partner and, if it so agrees, all
Partners hereby agree that it shall continue as the General Partner; (v) the
General Partner's mortgaging, pledging, hypothecating or granting a security
interest in all or any part of its Partnership Interest; or (vi) the forced sale
by the General Partner of any or all of its Partnership Interest pursuant to the
foreclosure of, or other realization upon, any encumbrance created pursuant to
clause (v) of this Section 12.2.2; provided, in the event of a transfer pursuant
to clauses (i) through (vi) of this Section 12.2.2, such transferee furnishes to
the Partnership an Opinion of Counsel that such transfer, merger, consolidation
or assumption (i) may be taken without the approval of all Limited Partners to
such specific act, (ii) would not cause the loss of limited liability of the
Limited Partners under this Agreement or the Operating Partnership Agreement and
(iii) would not cause the Partnership to be treated as an association taxable as
a corporation for federal income tax purposes.
12.3 Transfer of LP Units.
12.3.1 LP Units, including LP Units held by the General Partner, may be
transferred as provided in Section 11.2.
12.3.2 A transferee who has completed and delivered a Transfer
Application shall be deemed to have (i) requested admission as a Substituted
Limited Partner and executed and agreed to comply with and be bound by this
Agreement, (ii) represented and warranted that he has all right, power and
authority necessary to enter into this Agreement, (iii) appointed the General
Partner and any Liquidating Trustee his attorney to execute, swear to,
acknowledge and file any document, including this Agreement, any amendment of
this Agreement and the Certificate of Limited Partnership, necessary or
appropriate for his admission as a Substituted Limited Partner and as a party to
this Agreement, (iv) granted the powers of attorney provided for in this
Agreement and (v) made the waivers and given the approvals contained in this
Agreement. Until admitted as a Substituted Limited Partner pursuant to Article
13, the Record Holder of LP Units shall be an Assignee in respect of such LP
Units. Limited Partners may include custodians, nominees or any other individual
or entity in its own or any representative capacity.
12.3.3 Each distribution in respect of LP Units of a given class shall
be paid by the Partnership, directly or through the Registrar or through any
other Person or agent, only to the Record Holders of LP Units of such class as
of the Record Date set for the 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 any assignment or otherwise.
12.4 Restrictions on Transfers. Notwithstanding the other provisions of
this Article 12, no transfer of any LP Unit or interest therein shall be made if
such transfer (i) would violate the then applicable federal or state securities
laws or rules and regulations of the Commission, any state securities commission
or any other governmental authorities with jurisdiction over such transfer, (ii)
would result in the taxation of the Partnership as a corporation or as an
association taxable as a corporation for federal income tax purposes or (iii)
would affect the Partnership's existence or qualification as a limited
partnership under the Delaware Act.
12.5 Citizenship Certificates; Non-citizen Assignees.
12.5.1 In the event that, because of the nationality (or any other
status) of a Limited Partner or Assignee, the Partnership is or becomes subject
to federal, state or local laws or regulations the effect of which would, in the
reasonable determination of the General Partner, cause cancellation or
forfeiture of any property in which the Partnership or the Operating Partnership
has an interest, the General Partner may request any such 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 status (or, if the Limited
Partner or Assignee is a nominee holding for the account of another Person, the
nationality, citizenship or other status of such Person) as the General Partner
may request. If a Limited Partner or Assignee fails to furnish such Citizenship
Certification or other information as may be requested, 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 an Assignee is
not an Eligible Citizen, the LP Units owned by such Limited Partner or Assignee
shall be subject to redemption in accordance with the provisions of Section
12.6. In addition to becoming subject to redemption, the General Partner may
require that the status of any such Limited 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 LP Units.
12.5.2 The General Partner shall, in exercising voting rights in
respect of LP Units held by it on behalf of Non-citizen Assignees, distribute
the votes in the same ratios as the votes of Limited Partners in respect of LP
Units other than those of Non-citizen Assignees are cast, either for, against or
abstaining as to the matter.
12.5.3 Upon dissolution of the Partnership, a Non-citizen Assignee
shall have no right to receive a distribution in kind pursuant to Section 15.4
but shall be entitled to the cash equivalent thereof, and the General Partner
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 General Partner from the
Non-citizen Assignee of his Partnership Interest (representing his right to
receive his share of such distribution in kind).
12.5.4 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
Partnership Interest of such Non-citizen Assignee not redeemed pursuant to
Section 12.6, and upon his admission pursuant to Section 13.2, the General
Partner shall cease to be deemed to be the Limited Partner in respect of the
Non-citizen Assignee's LP Units.
12.6 Redemption of Interests.
12.6.1 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 12.5.1, 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 LP Units to a person 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:
12.6.1.1 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, 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 Units, 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 Units 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 Units
will accrue or be made.
12.6.1.2 The aggregate redemption price for Redeemable Units
shall be an amount equal to the Current Market Price (the date of
determination of which shall be the date fixed for redemption) of LP
Units of the class to be so redeemed multiplied by the number of LP
Units of each such class included among the Redeemable Units. The
redemption price shall be paid, in the sole 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.
12.6.1.3 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 Units, 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.
12.6.1.4 After the redemption date, Redeemable Units shall no
longer constitute issued and Outstanding LP Units.
12.6.2 The provisions of this Section 12.6 shall be applicable to LP
Units held by a Limited Partner or Assignee as nominee of a Person determined to
be other than an Eligible Citizen.
12.6.3 Nothing in this Section 12.6 shall prevent the recipient of a
notice of redemption from transferring his LP Units 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 LP Units certifies in 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.
12.6.4 If the Partnership or the General Partner determines that
because of the nationality (or other status) of the General Partner, whether or
not in its capacity as such, the Partnership is or becomes subject to federal,
state or local regulations the effect of which would, in the reasonable
determination of the General Partner, cause cancellation or forfeiture of any
property in which the Partnership or the Operating Partnership has an interest,
the Partnership may, unless the General Partner has furnished a Citizenship
Certification to the Independent Committee or transferred his Partnership
Interest or LP Units to a Person who furnishes a Citizenship Certification prior
to the date fixed for redemption, redeem the Partnership Interest or Partnership
Interests of the General Partner in the Partnership as provided in Section
12.6.1, which redemption shall also constitute redemption of the general partner
interest of the general partner of the Operating Partnership. If such redemption
involves a redemption of the Combined Interest the redemption price thereof
shall be equal to the aggregate sum of the Current Market Price (the date of
determination for which shall be the date fixed for redemption) of each class of
LP Units then Outstanding, in each such case multiplied by the number of LP
Units of such class into which the Combined Interest would then be convertible
under the terms of Section 14.6.2, if the General Partner were to withdraw or be
removed as General Partner (the date of the determination for which shall be the
date fixed for redemption). The redemption price shall be paid 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.
ARTICLE 13 ADMISSION OF PARTNERS
13.1 Admission of Substituted Limited Partners.
13.1.1 A Limited Partner or Assignee shall have the power to give, and
by transfer of LP Units shall be deemed to have given, the transferee the right
to become a Substituted Limited Partner subject to the conditions of and in the
manner permitted under this Agreement. A transferor of LP Units shall only have
the power to give a transferee who does not execute and deliver a Transfer
Application, (i) the right to negotiate such LP Units to another transferee and
(ii) the right to transfer the right to become a Substituted Limited Partner
subject to the conditions of and in the manner permitted under this Agreement to
such other transferee. Each transferee of LP Units (including any Person, such
as a broker, dealer, bank, trust company, clearing corporation, other nominee
holder or an agent of any of the foregoing, acquiring such LP Units for the
account of another Person) shall apply to become a Substituted Limited Partner
with respect to LP Units transferred to such Person by executing and delivering
a Transfer Application at the time of such transfer as provided in Section 12.3.
A Record Holder of LP Units shall be an Assignee at and from the close of
business on the Business Day on which a properly executed Transfer Application
is received by the Registrar or a Transfer Agent until the General Partner
consents to the admission of the Assignee as a Substituted Limited Partner and
such admission is reflected on the books and records of the Partnership, after
which time such Record Holder shall be a Substituted Limited Partner. A Limited
Partner who has transferred his LP Units to an Assignee shall remain a Limited
Partner in respect of such LP Units until such Assignee is admitted as a
Substituted Limited Partner pursuant to this Section 13.1. The consent of the
General Partner may be granted or withheld in its sole discretion. Such consent
shall be deemed to have been given if the General Partner has not, in writing,
withheld its consent within 24 hours following the recordation of the name of
the Assignee on the books and records of the Partnership.
13.1.2 The Partnership will cause the Registrar to prepare as of the
close of business on the last Business Day of each month, a list or other
appropriate evidence of transfers of LP Units registered by all Transfer Agents
since the last Business Day of the preceding month (hereinafter called the
?transfer record?) and, as promptly as practicable after the last Business Day
of each month, to submit the transfer record to the General Partner. Upon
receipt of the transfer record by the General Partner, the name of the Assignees
appearing on such transfer record will be recorded on the books and records of
the Partnership, so that each transferee who is a Record Holder on the last
Business Day of the month is admitted as a Substituted Limited Partner in
respect of the underlying LP Units as promptly as practicable thereafter,
subject, however, to the right of the General Partner to withhold its consent to
the admission of any transferee as a Substituted Limited Partner.
13.1.3 Each Limited Partner, by requesting and receiving admission to
the Partnership, is deemed to approve of the admission of each Substituted
Limited Partner pursuant to the terms of this Agreement and no further approval
of Partners, other than that of the General Partner, shall be required to effect
such admission.
13.2 Admission of Additional Limited Partners.
13.2.1 A Person who makes a Contribution to the Partnership shall be
admitted to the Partnership as an Additional Limited Partner upon furnishing to
the General Partner (i) evidence of his acceptance, in form satisfactory to the
General Partner, of all the terms and conditions of this Agreement, including,
without limitation, the power of attorney granted in Article 10, and (ii) such
other documents or instruments as may be required in order to effect his
admission as a Limited Partner.
13.2.2 Notwithstanding anything in this Section 13.2 to the contrary,
no Person shall be admitted as an Additional Limited Partner until the General
Partner has consented to such admission, which consent may be withheld or
granted in the sole discretion of the General Partner. Such consent shall be
deemed to have been given if the General Partner has not, in writing, withheld
its consent within 24 hours following the recordation of the name of such Person
on the books and records of the Partnership. Each Limited Partner, by requesting
and receiving admission to the Partnership, is deemed to approve of the
admission of each Additional Limited Partner pursuant to the terms of this
Agreement and no further approval of partners, other than that of the General
Partner, shall be required to effect such admission.
13.2.3 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 on the books and records of the Partnership and the General Partner has
consented or is deemed to have consented to such admission pursuant to Section
13.2.2.
13.3 Admission of Successor or Additional General Partner. A successor
or additional General Partner selected pursuant to Section 14.1 or 15.1 or the
transferee or successor to of all or any portion of the Partnership Interest of
the General Partner pursuant to Section 12.2 shall be admitted to the
Partnership as a General Partner (in the place of or in addition to, as the case
may be, the transferor General Partner), effective as of the date that an
amendment to the Certificate of Limited Partnership, adding its name and other
required information, is filed pursuant to Section 6.1.3 (which, in the event
the successor or transferee General Partner is in the place of the withdrawing,
removed or transferor General Partner, shall be contemporaneous with the
withdrawal of such withdrawing, removed or transferor General Partner), and upon
receipt by the withdrawing, removed or transferor General Partner of all of the
following: (i) acceptance of all of the terms and provisions of this Agreement;
(ii) written agreement of the proposed General Partner to continue the business
of the Partnership; and (iii) such other documents or instruments as may be
required in order to effect its admission as a General Partner under this
Agreement and applicable law. Each Limited Partner by requesting and receiving
admission to the Partnership is deemed to approve of the admission of a
successor or additional General Partner selected pursuant to the terms of this
Agreement, and no further approval of Partners shall be required to effect such
admission.
ARTICLE 14 WITHDRAWAL OR REMOVAL OF THE GENERAL PARTNER
14.1 Withdrawal or Removal of the General Partner. The General Partner
shall be deemed to have withdrawn from the Partnership upon the occurrence of
any one of the following events listed in this Section 14.1 (each such event
herein referred to as an ?Event of Withdrawal?);
14.1.1 The General Partner voluntarily withdraws from the Partnership
by giving written notice to the other Partners.
14.1.2 The General Partner transfers all of its rights as General
Partner pursuant to Section 12.2 hereof.
14.1.3 The General Partner is removed pursuant to Section 14.3 hereof.
14.1.4 The General Partner
14.1.4.1 makes a general assignment for the benefit of
creditors;
14.1.4.2 files a voluntary bankruptcy petition;
14.1.4.3 files a petition or answer seeking for itself a
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law;
14.1.4.4 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 paragraphs
(a) through (c) of this subsection; or
14.1.4.5 seeks, consents to or acquiesces in the appointment
of a trustee, receiver or liquidator of the General Partner or of all
or any substantial part of its properties.
14.1.5 A final and non-appealable judgment is entered by a court with
appropriate jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a court
with appropriate jurisdiction against the General Partner, in each case under
any federal or state bankruptcy or insolvency laws as now or hereafter in
effect.
14.1.6 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.
14.1.7 The general partner of the Operating Partnership withdraws from,
or is removed as the general partner of, the Operating Partnership.
If an Event of Withdrawal specified in Sections 14.1.4, 14.1.5 or 14.1.6 occurs,
the withdrawing General Partner shall give written 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 14.1 shall result in
withdrawal of the General Partner from the Partnership.
14.2 Withdrawal. The General Partner covenants and agrees that it will
not voluntarily withdraw as the general partner of the Partnership prior to
January 1, 2000, other than a withdrawal effective upon the transfer of all of
the General Partner's Partnership Interest as the General Partner pursuant to
Section 12.2.1, unless such withdrawal is approved by a Majority Interest and
the affirmative vote of Record Holders of at least a majority in interest of the
Senior Preference Units (excluding Senior Preference Units held by the General
Partner and its Affiliates); provided that the General Partner may withdraw
without such approval by the Limited Partners upon 90 days' advance written
notice to the Limited Partners if more than 50% of the Outstanding LP Units are
held or controlled by one Person and its Affiliates other than the withdrawing
General Partner and its Affiliates. The General Partner may, at any time
subsequent to January 1, 2000, voluntarily withdraw from the Partnership
effective on at least 90 days' advance written notice to the Limited Partners,
such withdrawal to take effect on the date specified in such notice. The
withdrawal or removal of the General Partner from the Partnership shall also
constitute the withdrawal or removal of the General Partner from the Operating
Partnership. The General Partner shall have no liability on account of a
withdrawal permitted hereunder. If the General Partner gives notice of
withdrawal, a Majority Interest may, prior to the effective date of such
withdrawal, elect a successor General Partner. The Person so elected shall
automatically become the successor General Partner of the Operating Partnership,
as provided in the Operating Partnership Agreement. If, prior to the effective
date of the General Partner's withdrawal, no successor General Partner is
elected, the provisions of Section 15.1 shall apply. Any withdrawal permitted
pursuant to this Section shall not affect the LP Units owned by a withdrawing
General Partner.
14.3 Removal. The affirmative vote of (i) Limited Partners, voting as a
single class, holding at least 85% of the issued and Outstanding LP Units and
(ii) Limited Partners holding at least 85% of the issued and Outstanding LP
Units, with the holders of Senior Preference Units and Common Units voting as
separate classes and with the holders of Preference Units and Preference B Units
voting together as one separate class, in each case including LP Units held by
the General Partner and its Affiliates, shall be required to remove the General
Partner. Any such vote of the Limited Partners must also provide for the
election of a successor General Partner. Any removal pursuant to this Section
shall not affect the LP Units owned by a removed General Partner.
14.4 Opinion of Counsel. Notwithstanding the provisions of Section 14.2
or 14.3, the rights of the Limited Partners under Section 14.2 or 14.3 shall not
be exercised until such time as the Partnership has received an Opinion of
Counsel that the action in question (i) may be taken without the approval of all
Partners to such specific act, (ii) would not cause the loss of limited
liability of the Limited Partners under this Agreement or the Operating
Partnership Agreement, (iii) would not cause the Partnership or the Operating
Partnership to be taxable as a corporation or to be treated as an association
taxable as a corporation for federal income tax purposes and (iv) any required
consents of any regulatory authorities to such action have been obtained.
14.5 Amendment of Certificate of Limited Partnership. The Certificate
of Limited Partnership shall be amended to reflect the withdrawal, removal or
succession of the General Partner.
14.6 Interest of Departing Partner and Successor.
14.6.1 14.6.1.1 A successor General Partner shall have the option,
exercisable prior to the effective date of the departure of the Departing
Partner, to acquire such Departing Partner's Partnership Interest as the General
Partner as described in Section 14.6.1.2 for an amount in cash equal to the fair
market value of the Departing Partner's Partnership Interest as the General
Partner herein, determined as of the effective date of its departure. If the
successor General Partner acquires the Departing Partner's Partnership Interest
as the General Partner, such successor General Partner must also acquire at such
time the general partner interest of such Departing Partner or its Affiliate as
general partner of the Operating Partnership for an amount equal to the fair
market value of such interest, determined as of the effective date of departure.
14.6.1.2 For purposes of this Section 14.6, the fair market value of
the Departing Partner's Partnership Interest as the General Partner herein and
the partnership interest of such Departing Partner or its Affiliate as the
general partner of the Operating Partnership (collectively, 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 such firm shall be designated
by the independent investment banking firm or other independent expert selected
by each of the Departing Partner and its successor. In making its determination,
such independent investing banking firm or other independent expert shall
consider the then current trading price of LP Units on any National Securities
Exchange on which LP Units are then listed, the value of the Partnership's
assets, the rights and obligations of the General Partner and other factors it
may deem relevant.
14.6.2 14.6.2.1 If the Combined Interest is not acquired in the manner
set forth in Section 14.6, the Departing Partner shall become a Limited Partner
and its Combined Interest shall be converted into Common Units with a value
equivalent to the Combined Interest pursuant to a valuation made by an
investment banking firm or other independent expert selected pursuant to Section
14.6.1.2, without reduction in such Partnership Interest (but subject to
proportionate dilution by reason of admission of its successor). Any successor
General Partner shall indemnify the Departing Partner as to all debts and
liabilities of the Partnership arising on or after the date on which the
Departing Partner becomes a Limited Partner.
14.6.2.2 If the option described in Section 14.6.1 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 capital of
the Partnership cash equal to the greater of (i) 1/98th of the aggregate Capital
Account balances of the Unitholders as of such date or (ii) the fair market
value of a 1/99th general partner's interest in the Partnership, determined by a
valuation made by an investment banking firm or other independent expert
selected pursuant to Section 14.6.1. In such event, the successor General
Partner shall, subject to the following sentence, be entitled to such Percentage
Interest of all Partnership allocations and distributions and any other
allocations and distributions to which the Departing Partner was entitled as
general partner. In addition, such successor General Partner shall cause this
Partnership 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 1/99th and
that of the Unitholders shall be 98/99ths.
14.6.3 The Partnership shall reimburse the Departing Partner for
employee related liabilities including but not limited to, severance liabilities
incurred in connection with the termination of employees employed by the
Departing Partner for the benefit of the Partnership; and if the Partnership is
otherwise indebted to the Departing Partner at the effective time of its
departure for funds advanced, properties sold or services rendered to the
Partnership by the Departing Partner or otherwise, the Partnership shall, at the
option of the successor General Partner, either (i) within 60 days after the
effective time of such departure, pay to the Departing Partner the full amount
of such indebtedness or (ii) pay such indebtedness or any portion thereof in
accordance with its then existing terms. The successor to the Departing Partner
shall assume all obligations theretofore incurred by the Departing Partner as
the General Partner of the Partnership, and the Partnership and such successor
General Partner shall take all such action as shall be necessary to terminate
any guarantees of the Departing Partner and any of its Affiliates of any
obligations of the Partnership. If for whatever reason the creditors of the
Partnership will not consent to such termination of guarantees, the successor to
the Departing Partner shall be required to indemnify the Departing Partner for
any liabilities and expenses incurred by the Departing Partner on account of
such guarantees.
ARTICLE 15 DISSOLUTION AND LIQUIDATION
15.1 Dissolution. Except as provided in Section 15.2, the Partnership
shall be dissolved upon:
15.1.1 the expiration of its term as provided in Section 2.5;
15.1.2 An Event of Withdrawal of the General Partner as provided in
Section 14.1 (other than by reason of a transfer pursuant to Section 12.2 or
withdrawal occurring upon or after, or removal effective upon or after, approval
by the Limited Partners of a successor pursuant to Section 14.2 or 14.3, as the
case may be);
15.1.3 a written determination by the General Partner that projected
future revenues of the Partnership will be insufficient to enable payment of
projected Partnership costs and expenses or, if sufficient, will be such that
continued operation of the Partnership is not in the best interests of the
Partners;
15.1.4 an election to dissolve the Partnership by the General Partner
which is approved by the affirmative vote of a Majority Interest and the
approval of the Record Holders of at least a majority in interest of the
Outstanding Senior Preference Units (excluding Senior Preference Units owned by
the General Partner and its Affiliates); provided, that no such election shall
be effective at any time when the Partnership has outstanding any indebtedness
for borrowed money unless provision shall have been made in connection with such
dissolution for the payment in full of such indebtedness;
15.1.5 except as otherwise provided herein, any other event that, under
the Delaware Act, would cause its dissolution;
15.1.6 the sale of all or substantially all of the assets and
properties of the Partnership or the Operating Partnership.
The Partnership shall not be dissolved by the admission of a successor Limited
Partner or by the admission of additional or successor General Partners in
accordance with the terms of this Agreement.
15.2 Continuation of the Business of the Partnership.
15.2.1 Within 180 days following an event described in Section 15.1.2,
in the event action pursuant to Section 15.3 is not taken, a Majority Interest
may elect in writing to reconstitute and continue the business of the
Partnership by forming a Reconstituted Partnership on the same terms and
provisions as are set forth in this Agreement. Any such election must also
provide for the election of a general partner of the Reconstituted Partnership.
If such an election is made, all of the Limited Partners of the Partnership
shall continue as limited partners of the Reconstituted Partnership. No such
election shall be made, however, unless prior thereto the Partnership has
received an Opinion of Counsel that (i) the election may be made without the
approval of all Partners, (ii) the limited partners in the Reconstituted
Partnership will have the same limited liability as the Limited Partners in the
Partnership, (iii) the Reconstituted Partnership and the Operating Partnership
will be treated as partnerships and not as associations taxable as corporations
for federal income tax purposes and (iv) any required consents of any regulatory
authorities have been obtained. The Partnership Interest as General Partner of
the former General Partner shall be treated as though it were an equivalent
general partner's interest in the Reconstituted Partnership, and shall be
subject to disposition at the option of the general partner of the Reconstituted
Partnership in the manner provided in Section 14.6.1 (which option must be
exercised contemporaneously with the selection of the new general partner).
15.2.2 Upon an event described in this Section 15.2, all necessary
steps shall be taken to cancel this Agreement and the Certificate of Limited
Partnership of the Partnership and to enter into a new partnership agreement and
certificate of limited partnership of the Reconstituted Partnership, and the
general partner of the Reconstituted Partnership may for this purpose and all
purposes stated therein exercise the power of attorney granted pursuant to
Article 10 or in the Transfer Application.
15.3 Liquidation.
15.3.1 Upon dissolution of the Partnership, unless an election to
continue the business of the Partnership is made pursuant to Section 15.2, the
General Partner or in the event the dissolution was caused by an event described
in Section 15.1.2, a liquidator or liquidating committee elected by a Majority
Interest, shall be the Liquidating Trustee. The Liquidating Trustee shall
liquidate the Partnership Assets and apply and distribute the proceeds of such
liquidation in the following order of priority, unless otherwise required by
applicable law:
15.3.1.1 the payment to creditors of the Partnership, other
than Partners, in order of priority provided by law, including the
establishment of reserves for the payment thereof;
15.3.1.2 pro rata payment to Partners for loans or other
amounts owed to them by the Partnership;
15.3.1.3 to all Partners in accordance with the positive
balances in their respective Capital Accounts after taking into account
adjustments to such Capital Accounts pursuant to Section 5.1.3;
15.3.1.4 to the Partners in proportion to their respective
Percentage Interests.
15.3.2 The Liquidating Trustee (if other than the General Partner)
shall be entitled to receive such compensation for its services as may be
approved by the vote of a Majority Interest. The Liquidating Trustee shall agree
not to resign at any time without 60 days' prior written notice and (if other
than the General Partner) may be removed at any time, with or without cause, by
written notice of removal approved by the vote of a Majority Interest. Upon
dissolution, removal or resignation of the Liquidating Trustee, a successor and
substitute Liquidating Trustee (who shall have and succeed to all rights, powers
and duties of the original Liquidating Trustee) shall, within 90 days
thereafter, be selected by a Majority Interest. The right to appoint a successor
or substitute Liquidating Trustee in the manner provided herein shall be
recurring and continuing for so long as the functions and services of the
Liquidating Trustee are authorized to continue under the provisions hereof, and
every reference herein to the Liquidating Trustee will be deemed to refer also
to any such successor or substitute Liquidating Trustee appointed in the manner
herein provided. Except as expressly provided in this Article 15, the
Liquidating Trustee appointed 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) to the extent necessary or
desirable in the good faith judgment of the Liquidating Trustee to carry out the
duties and functions of the Liquidating Trustee hereunder (including the
establishment of reserves for liabilities that are contingent or uncertain in
amount) for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidating Trustee to complete the winding-up
and liquidation of the Partnership as provided for herein. In the event a
Majority Interest fails to approve of a Person to be the Liquidating Trustee as
herein provided within 120 days following the event of dissolution or fails to
approve of a successor and substitute Liquidating Trustee within the time period
set forth above, any Partner may make application to a Court of Chancery of the
State of Delaware to wind up the affairs of the Partnership and, if deemed
appropriate, to appoint a Liquidating Trustee.
15.4 Distribution in Kind. Notwithstanding the provisions of Section
15.3 which require the liquidation of the Partnership Assets, but subject to the
order of priorities set forth therein, if on dissolution of the Partnership the
Liquidating Trustee determines that an immediate sale of part or all of the
Partnership Assets would be impractical or would cause undue loss to the
Partners, the Liquidating Trustee may, in its absolute discretion, defer for a
reasonable time the liquidation of any Partnership Assets except those necessary
to satisfy liabilities of the Partnership and may, in its absolute discretion,
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with Section 15.3, undivided interests in such Partnership Assets as
the Liquidating Trustee deems not suitable for liquidation. Any distributions in
kind shall be subject to such conditions relating to the disposition and
management thereof as the Liquidating Trustee deems reasonable and equitable and
to any agreements governing the operation of such Partnership Assets at such
time. The Liquidating Trustee shall determine the fair market value of any
Partnership Assets distributed in kind using such reasonable method of valuation
as it may adopt.
15.5 Cancellation of Certificate of Limited Partnership. Upon the
completion of the distribution of Partnership Assets as provided in Sections
15.3 and 15.4, the Partnership shall be terminated, and the Liquidating Trustee
(or the General Partner or Limited Partners, if necessary) shall cause the
cancellation of the Certificate of Limited Partnership and all qualifications of
the Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware and shall take such other actions as may be necessary to
terminate the Partnership.
15.6 Reasonable Time for Winding Up. A reasonable time shall be allowed
for the orderly winding up of the business and affairs of the Partnership and
the liquidation of its assets pursuant to Section 15.3 in order to minimize any
losses otherwise attendant upon such winding up.
15.7 Return of Contributions. The General Partner shall not be liable
for the return of the Capital Contributions of the Limited Partners, or any
portion thereof, it being expressly understood that any such return shall be
made solely from Partnership Assets.
15.8 No Capital Account Restoration. No Partner shall have any
obligation to restore any negative balance in its Capital Account upon
liquidation of the Partnership.
15.9 Waiver of Partition. Each Partner hereby waives any and all rights
that it may have to maintain an action for partition of the Partnership's
Assets.
ARTICLE 16 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
16.1 Amendments to be Adopted Solely by the General Partner. The
General Partner (pursuant to the General Partner's power of attorney), without
the consent at the time of any Limited Partner or Assignee (each Person who
accepts LP Units being deemed to approve of any such amendment), 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:
16.1.1 a change in the name of the Partnership or the location
of the principal place of business of the Partnership;
16.1.2 the admission, substitution, withdrawal or removal of
Partners in accordance with this Agreement;
16.1.3 a change that is necessary or advisable in the opinion
of the General Partner 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 will not be taxable as a corporation or
treated as an association taxable as a corporation for federal income
tax purposes;
16.1.4 a change that (i) in the sole discretion of the General
Partner does not adversely affect the Limited Partners in any material
respect, (ii) is necessary or desirable to satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order,
ruling or regulation of any federal or state agency or contained in any
federal or state statute, (iii) is necessary or desirable to facilitate
the trading of the LP Units or comply with any rule, regulation,
guideline or requirement of any National Securities Exchange on which
the LP Units are or will be listed for trading, compliance with any of
which the General Partner deems to be in the best interests of the
Partnership and the Limited Partners or (iv) is required or
contemplated by this Agreement or the Registration Statement;
16.1.5 an amendment that is necessary, as reflected in an
Opinion of Counsel, to prevent the Partnership or the General Partner
or its directors or officers from in any manner being subjected to the
provisions of the Investment Company Act of 1940, as amended, the
Investment Advisors Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, or ?plan asset? regulations adopted
under the Employee Retirement Income Security Act of 1974, as amended,
whether or not substantially similar to plan asset regulations
currently applied or proposed by the United States Department of Labor;
16.1.6 a change in any provision of this Agreement which
requires any action to be taken by or on behalf of the General Partner
or the Partnership pursuant to the requirements of the Delaware Act if
the provisions of the Delaware Act are amended, modified or revoked so
that the taking of such action is no longer required; provided that
this Section 16.1.6 shall be applicable only if such changes are not
materially adverse to the Limited Partners;
16.1.7 Subject to the terms of Section 4.4, a change that is
necessary or desirable in connection with the issuance of any class of
LP Units pursuant to Section 4.3;
16.1.8 a change that is authorized by Section 9.7; or
16.1.9 any other amendments similar to the foregoing.
16.2 Amendment Procedures. Except as provided in Sections 16.1 and
16.3, all amendments to this Agreement shall be made in accordance with the
following requirements:
16.2.1 Amendments of this Agreement may be proposed solely by the
General Partner by submitting the text of the amendment to all Limited Partners
in writing.
16.2.2 If an amendment is proposed, the General Partner may call a
meeting of the Limited Partners to consider and vote on the proposed amendment
or solicit the written approval by the Limited Partners unless, in the opinion
of counsel to the Partnership, such proposed amendment would be illegal under
Delaware law if adopted. Subject to Section 16.3, a proposed amendment shall be
effective upon its adoption by the General Partner and the affirmative vote of a
Majority Interest unless a greater or different percentage or a class vote is
required by this Agreement. The General Partner shall keep all Partners advised
of the status of any proposed amendment and shall notify all Partners upon final
adoption or rejection of any proposed amendment.
16.3 Special Amendment Requirements. Notwithstanding the provisions of
Sections 16.1 and 16.2,
16.3.1 Unless approved by the General Partner and by Limited
Partners holding at least 90% of the issued and outstanding LP Units,
voting as separate classes, no amendment to this Agreement, other than
amendments pursuant to Section 16.1, shall be permitted unless the
Partnership has received an Opinion of Counsel that such amendment (i)
would not cause the loss of limited liability of the Limited Partners
under this Agreement or the limited partner of the Operating
Partnership under the Operating Partnership Agreement and (ii) would
not cause the Partnership or the Operating Partnership to be taxable as
a corporation or to be treated as an association taxable as a
corporation for federal income tax purposes.
16.3.2 If the effect of any amendment shall be to affect
materially and adversely any holders of LP Units of a particular class
in relation to any other class of LP Units or the General Partner
interest in the Partnership, the affirmative vote of Record Holder's
holding at least a majority in interest of the Outstanding LP Units of
the class so affected (excluding for purposes of such determination, LP
Units of such class owned by the General Partner and its Affiliates,
unless the General Partner and its Affiliates own all of the LP Units
of such class) shall be required to adopt such amendment.
16.3.3 No provision of this Agreement which establishes a
percentage of the Partners (or an identified class or other portion
thereof) 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 requirement, unless such amendment is
approved by written approval or the affirmative vote of Record Holders
whose aggregate LP Units constitute not less than the voting
requirement sought to be reduced.
16.4 Meetings. Meetings of the Limited Partners may be called only by
the General Partner or the Liquidating Trustee, if any. Action at the meeting
shall be limited to those matters specified in the call of the meeting. Limited
Partners may vote either in person or by proxy at any meeting. No action shall
be taken at any meeting unless the Partnership has received an Opinion of
Counsel that such action (i) would not cause the loss of limited liability of
the Limited Partners under this Agreement and (ii) would not cause the
Partnership to be taxed as a corporation or to be treated as an association
taxable as a corporation for federal income tax purposes. Each Limited Partner
shall have one vote for each LP Unit of which he is a Record Holder on the
Record Date for such vote, and may cast such vote in person or by proxy. Except
as provided in Section 16.11, no action shall be taken by the Limited Partners
without a meeting duly called and held. Except as otherwise required by the
terms of this Agreement, and except as otherwise required by law, when a quorum
is present at a meeting of Limited Partners as specified in Section 16.9, the
vote of a Majority Interest present in person or by proxy at such meeting shall
decide all matters submitted to the Limited Partners for determination at such
meeting. For meetings at which there is class voting, the foregoing provisions
shall be applied separately to the Limited Partners holding each class of LP
Units.
16.5 Notice of a Meeting. Notice of a meeting called pursuant to
Section 16.4 shall be given either personally in writing or by mail or other
means of written communication addressed to each Limited Partner at the address
of the Limited Partner appearing on the books of the Registrar or the
Partnership. An affidavit or certificate of mailing of any notice or report in
accordance with the provisions of this Article 16 executed by the General
Partner or the Registrar, Transfer Agent or mailing organization shall be prima
facie evidence of the giving of notice. If any notice addressed to a Limited
Partner at the address of the Limited Partner appearing on the books of the
Partnership or the Registrar is returned to the Partnership by the United States
Postal Service marked to indicate that the United States Postal Service is
unable to deliver it, such notice and any subsequent notices or reports shall be
deemed to have been duly given without further mailing if they are available for
the Limited Partner at the principal executive office of the Partnership for a
period of one year from the date of the giving of the notice to all other
Limited Partners.
16.6 Record Date. For purposes of determining the Limited Partners
entitled to notice of or to vote at a meeting of the Limited Partners, the
General Partner or the Liquidating Trustee, if any, may set a Record Date, which
shall not be less than ten days nor more than 60 days before the date of the
meeting (unless such requirement conflicts with any rule, regulation, guideline
or requirement of any National Securities Exchange on which the LP Units are
listed for trading, in which case the rule, regulation, guideline or requirement
of such National Securities Exchange shall govern).
16.7 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 that
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
16.
16.8 Waiver of Notice. Attendance of a Limited Partner at a meeting
shall constitute a waiver of notice of the meeting, except when the Limited
Partner objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened; except that
attendance at a meeting is not a waiver of any right to object to the
consideration of matters required to be included in the notice of the meeting,
but not so included, if the objection is expressly made at the meeting.
16.9 Quorum. A majority of the Outstanding LP Units of the class for
which a meeting is to be held represented in person or by proxy shall constitute
a quorum at a meeting of Limited Partners. 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 Limited Partners holding the requisite number of LP
Units specified in this Agreement. In the absence of a quorum, any meeting of
Limited Partners may be adjourned from time to time by the General Partner or
upon the affirmative vote of Limited Partners holding a majority of the LP Units
represented either in person or by proxy, but no other business may be
transacted. For meetings at which there is class voting, the foregoing
provisions shall be applied separately to the Limited Partners holding each
class of LP Units.
16.10 Conduct of Meeting. The General Partner or the Liquidating
Trustee, if any, shall have full power and authority concerning the manner of
conducting any meeting of Limited Partners including, without limitation, the
determination of Persons entitled to vote, the existence of a quorum, the
satisfaction of the requirements of Section 16.4, 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 or the Liquidating Trustee, as the case may be, shall
designate a Person to serve as chairman of any meeting and shall further
designate a Person to take the minutes of any meeting in either case including,
without limitation, a Partner or an employee or agent of the General Partner.
All minutes shall be kept with the records of the Partnership maintained by the
General Partner. The General Partner or the Liquidating Trustee, as the case may
be, may make such other regulations consistent with applicable law and this
Agreement as they may deem advisable concerning the conduct of any meeting of
the Limited Partners, including regulations in regard to the appointment of
proxies, the appointment and duties of inspectors of votes, the submission and
examination of proxies and other evidence of the right to vote.
16.11 Action Without a Meeting. Any action that may be taken at a
meeting of the Limited Partners may be taken without a meeting if (i) an
approval in writing setting forth the action so taken is signed by Limited
Partners holding not less than the minimum number of LP Units that would be
necessary to authorize or take such action at a meeting at which all the Limited
Partners were present and voted and (ii) such action is approved in writing by
the General Partner. Prompt notice of the taking of action without a meeting
shall be given to the Limited Partners who have not approved such action 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, not less than 20 days, specified by
the General Partner. If a ballot returned to the Partnership does not vote all
of the LP Units held by the Limited Partner, the Partnership shall be deemed to
have failed to receive a ballot for the LP Units 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 consents 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 subject the Limited Partners to unlimited liability, (ii) will not jeopardize
the status of the Partnership as a partnership under applicable tax laws and
regulations and (iii) is otherwise permissible under the state statutes then
governing the rights, duties and liabilities of the Partnership and the
Partners.
16.12 Voting and Other Rights.
16.12.1 Only Limited Partners who are Record Holders of LP Units on the
Record Date set pursuant to Section 16.6 shall be entitled to notice of, or to
vote at, a meeting of Limited Partners; provided, however, that the admission of
such Record Holder as a Limited Partner may have occurred at any time prior to
the taking of the vote at such meeting. With respect to voting rights
attributable to LP Units that are owned by Assignees who have not yet been
admitted as Limited Partners, the General Partner shall be deemed to be the
Limited Partner with respect thereto and shall, in exercising voting rights in
respect of such LP Units on any matter, vote such LP Units at the written
direction of such Record Holder; or, if no such direction is given, the General
Partner shall exercise voting rights with respect to such LP Units.
16.12.2 With respect to LP Units 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 LP Units
are registered, such broker, dealer or other agent shall, in exercising any
voting rights in respect of such LP Units on any matter, vote such LP Units in
favor of, and at the direction of, the Person on whose behalf such broker,
dealer or other agent is holding such LP Units, and the Partnership shall be
entitled to assume it is so acting without further inquiry.
16.12.3 Except as otherwise specifically provided herein, if the
General Partner is also a Limited Partner by virtue of its ownership of LP
Units, it may vote its LP Units on any matter submitted to the Limited Partners
for consideration in such manner as it in its sole discretion shall determine.
ARTICLE 17 MERGER
17.1 Authority. The Partnership may merge or consolidate with one or
more corporations, business trusts or associations, real estate investment
trusts, common law trusts or unincorporated businesses, including, without
limitation, 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.
17.2 Procedure for Merger or Consolidation. Merger or consolidation of
the Partnership pursuant to this Article requires the prior approval of the
General Partner. If the General Partner shall determine, in the exercise of its
sole discretion, to consent to the merger or consolidation, the General Partner
shall approve the Merger Agreement, which shall set forth:
17.2.1 The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
17.2.2 The name and jurisdictions of formation or organization of the
business entity that is to survive the proposed merger or consolidation
(hereafter designated as the ?Surviving Business Entity?);
17.2.3 The terms and conditions of the proposed merger or
consolidation;
17.2.4 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 partnership interests, rights, securities or obligations of
the Surviving Business Entity; and (a) if any general or limited partnership
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
partnership interests, rights, securities or obligations of the Surviving
Business Entity, the cash, property or general or limited partnership 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 partnership interests are to receive in exchange for, or
upon conversion of, their securities or rights, and (b) in the case of
securities represented by certificates, upon the surrender of such certificates,
which cash, property or general or limited partnership interests, rights,
securities or obligations of the Surviving Business Entity or any limited
partnership, corporation, trust or other entity (other than the Surviving
Business Entity), or evidences thereof, are to be delivered;
17.2.5 A statement of any changes in the constituent documents (the
articles or certificate of incorporation, articles of trust, declaration of
trust, certificate or agreement of limited partnership or other similar charter
or governing document) of the Surviving Business Entity to be effected by such
merger or consolidation;
17.2.6 The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section hereof 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, it shall be fixed no later than the time of
the filing of the certificate of merger and stated therein); and
17.2.7 Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or desirable.
17.3 Approval by Limited Partners of Merger or Consolidation.
17.3.1 The General Partner of the Partnership, upon its approval of the
Merger Agreement, shall direct that the Merger Agreement be submitted to a vote
of Limited Partners whether at a meeting or by written consent, in either case
in accordance with the requirements of Article 16 hereof. A copy or a summary of
the Merger Agreement shall be included in or enclosed with the notice of a
meeting or the written consent.
17.3.2 The Merger Agreement shall be approved upon receiving the
affirmative vote or consent of the holders of at least a majority of the
Outstanding LP Units of each class (provided that with respect to the class vote
of Senior Preference Units, Senior Preference Units owned by the General Partner
and its Affiliates shall be excluded and provided further that the holders of
Preference Units and Preference B Units shall vote together as a single class)
unless the Merger Agreement contains any provision which, if contained in an
amendment to the Agreement, the provisions of this Agreement or the Delaware Act
would require the vote or consent of a greater percentage of the Percentage
Interests of the Limited Partners 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.
17.3.3 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 17.4 hereof, the merger or consolidation may be abandoned pursuant to
provisions therefor, if any, set forth in the Merger Agreement.
17.4 Certificate of Merger. Upon the required approval by the General
Partner and Limited Partners of a Merger Agreement, a certificate of merger
shall be executed and filed with the Secretary of State of the State of Delaware
in conformity with the requirements of the Delaware Act.
17.5 Effect of Merger.
17.5.1 Upon the effective date of the certificate of merger:
17.5.1.1 all of the rights, privileges and powers of each of
the business entities that has merged or consolidated, and all
property, real, personal and mixed, and all debts due to any of those
business entities and all other things and causes of action belonging
to each of those business entities shall be vested in the Surviving
Business Entity and after the merger or consolidation shall be the
property of the Surviving Business Entity to the extent they were of
each constituent business Entity;
17.5.1.2 the title to any real property vested by deed or
otherwise in any of those constituent business entities shall not
revert and is not in any way impaired because of the merger or
consolidation;
17.5.1.3 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
17.5.1.4 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.
17.5.2 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 having occurred.
ARTICLE 18 RIGHT TO PURCHASE LP UNITS
18.1 Right to Purchase. Notwithstanding any other provision of this
Agreement, if at any time after the Preference Period less than 750,000 LP Units
(such number to be increased or decreased from time to time in proportion to any
distributions, combination or subdivisions of the LP Units) are held by Persons
other than the General Partner and its Affiliates, the General Partner shall
then have the right, which it may assign and transfer to the Partnership or any
of its Affiliates, exercisable in its sole discretion, to purchase all, but not
less than all, of the Outstanding LP Units held by Persons other than the
General Partner and its Affiliates. The price payable for any LP Units of a
particular class will be the greater of (i) the Current Market Price as of the
date the General Partner mails written notice of its election to purchase
Outstanding LP Units or (ii) the highest cash price paid by the General Partner
or any of its Affiliates for any LP Unit of such class purchased within the
ninety days next preceding the date on which a Notice of Election to Purchase is
given to the Registrar pursuant to Section 18.2.1, if any such purchase occurred
during such period.
18.2 Procedure.
18.2.1 In the event the General Partner, any Affiliate of the General
Partner or the Partnership elects to exercise such right to purchase LP Units
pursuant to this Article 18, the General Partner shall deliver to the Registrar
written notice of such election to purchase (hereinafter in this Article 18
called the ?Notice of Election to Purchase?) specifying the date (the ?Purchase
Date?) on which such purchase is to be effected and shall cause the Registrar to
mail a copy of such Notice of Election to Purchase to the Record Holders at
least ten, but not more than 60, days prior to the Purchase Date. Such Notice of
Election to Purchase shall also be printed in the English language and published
in daily newspapers of general circulation in the Borough of Manhattan, New
York. The Notice of Election to Purchase shall specify the class of LP Units to
be purchased, the Purchase Date and the Purchase Price and state that the
General Partner, its Affiliate or the Partnership, as the case may be, elects to
purchase such LP Units, upon surrender thereof in exchange for payment, at such
office or offices of the Registrar as the Registrar may specify, or as may be
required by any National Securities Exchange on which the LP Units are listed or
admitted to trading. Any such Notice of Election to Purchase mailed to a Record
Holder of LP Units at his address as reflected in the records of the Registrar
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 Registrar cash in an amount equal to the purchase price of the LP Units
to be purchased. If the Notice of Election to Purchase shall have been duly
given as aforesaid at least ten days prior to the Purchase Date, and if on or
prior to the Purchase Date the Purchase Funds shall have been deposited with the
Registrar in trust for the benefit of the holders of LP Units subject to
purchase as provided herein, then from and after the Purchase Date,
notwithstanding that any LP Unit Certificates shall not have been surrendered
for purchase, all rights of the holders of such LP Units (including, without
limitation, any rights pursuant to Articles 4, 5 and 16) shall thereupon cease,
except the right to receive the Purchase Price thereof, without interest, upon
surrender to the Registrar of the Unit Certificates representing LP Units, and
such LP Units 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 Registrar 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 owner of all such LP Units from and after the Purchase Date
and shall have the rights as the owner of such LP Units (including, without
limitation, all rights as owner of such LP Units pursuant to Articles 4, 5 and
16).
18.2.2 At any time from and after the Purchase Date, a Record Holder of
an issued and outstanding LP Unit subject to purchase as provided in this
Article 18 may surrender his Unit Certificate evidencing such LP Unit to the
Registrar in exchange for payment of the Purchase Price therefor, without
interest thereon.
ARTICLE 19 GENERAL PROVISIONS
19.1 Addresses and Notices. The address of the General Partner for all
purposes shall be the address set forth on the books and records of the
Partnership and for each Limited Partner or Assignee the address set forth in
the books and records of the Partnership or such other address of which the
General Partner has received written notice. Any notice, demand, request or
report required or permitted to be given or made to a Partner under this
Agreement shall be in writing and shall be deemed given or made when delivered
in person or when sent to the Partner at such address by first class mail or by
other means of written communication.
19.2 Consent of Limited Partners. By acceptance of a Unit Certificate,
each Limited Partner expressly approves and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
of less than all of the Limited Partners, such action may be so taken upon the
concurrence of less than all of the Limited Partners and each Limited Partner
shall be bound by the results of such action.
19.3 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof.
19.4 Pronouns and Plurals. Whenever the context may require, any
pronoun used herein 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.
19.5 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purpose of this Agreement.
19.6 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
19.7 Integration. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings pertaining thereto.
19.8 Creditors. Except for the provisions of Section 6.2, none of the
provisions of this Agreement shall be for the benefit of or enforceable by any
creditors of the Partnership.
19.9 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
19.10 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all the parties
notwithstanding that all the parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto, independently of the signature of any other
party.
19.11 Applicable Law. Notwithstanding the place where this Agreement
may be executed by any of the parties hereto, the parties expressly agree that
all of the terms and provisions hereof shall be construed under the substantive
laws of the State of Delaware as now adopted or as may hereafter be amended, and
such laws shall govern this Agreement, without regard to the principles of
conflicts of law.
19.12 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.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the 23rd day of July, 1998.
GENERAL PARTNER:
KANEB PIPE LINE COMPANY
By:..............................
Name:
Title:
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as limited partners of the
Partnership, pursuant to Powers of Attorney now and hereafter executed in
favor of, and granted and delivered to, the General Partner
By: Kaneb Pipe Line Company General Partner, as attorney-in-fact for all
Limited Partners pursuant to the Powers of Attorney granted pursuant
to Article 10 hereof
By:...............................
Name:
Title:
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