EXHIBIT 4.6
AMENDED AND RESTATED
TRUST AGREEMENT
OF
APPALACHIAN GAS ROYALTY TRUST
AMONG
ENERGY CORPORATION OF AMERICA
AND
JPMORGAN CHASE BANK, N.A.
AND
WILMINGTON TRUST COMPANY
DATED: AS OF __________, 2005
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
NAME AND PURPOSE OF THE TRUST; DECLARATION OF TRUST
Section 2.01 Name; Certificate of Trust................................................................6
Section 2.02 Purpose...................................................................................6
Section 2.03 Transfer of Trust Property to the Trust...................................................7
Section 2.04 Creation of the Trust.....................................................................7
Section 2.05 Principal Offices and Delaware Trustee....................................................8
ARTICLE III
ADMINISTRATION OF THE TRUST AND POWERS OF THE TRUSTEE AND THE
DELAWARE TRUSTEE
Section 3.01 General Authority.........................................................................8
Section 3.02 Limited Power of Disposition..............................................................9
Section 3.03 No Power to Engage in Business or Make Investments.......................................11
Section 3.04 Interest on Cash Reserves................................................................11
Section 3.05 Power to Settle Claims...................................................................12
Section 3.06 Power to Contract for Services...........................................................12
Section 3.07 Payment of Liabilities of Trust..........................................................12
Section 3.08 Income and Principal.....................................................................13
Section 3.09 Term of Contracts........................................................................13
Section 3.10 Transactions With Entity Serving as the Trustee or the Delaware Trustee..................13
Section 3.11 No Security Required.....................................................................13
Section 3.12 Filing of Securities Act Registration Statement, Exchange Act Registration Statement
and Other Reports, Listing of Trust Units, etc.; Certain Fees and Expenses...............13
Section 3.13 Reserve Report...........................................................................15
Section 3.14 No Liability for Recordation.............................................................15
Section 3.15 ECA Quarterly Incentive Distribution Payments............................................15
ARTICLE IV
TRUST UNITS AND UNCERTIFICATED BENEFICIAL INTEREST
Section 4.01 Creation and Distribution................................................................16
Section 4.02 Rights of Trust Unitholders; Limitation on Personal Liability of Trust Unitholders.......16
Section 4.03 Effect of Transfer.......................................................................17
Section 4.04 Determination of Ownership...............................................................17
ARTICLE V
ACCOUNTING AND DISTRIBUTIONS; REPORTS
Section 5.01 Fiscal Year and Accounting Method........................................................18
Section 5.02 Quarterly Distributions..................................................................18
i
Section 5.03 Reports to Trust Unitholders and Others..................................................18
Section 5.04 Federal Income Tax Provisions............................................................19
ARTICLE VI
LIABILITY OF DELAWARE TRUSTEE AND TRUSTEE AND METHOD OF
SUCCESSION
Section 6.01 Liability of Delaware Trustee, Trustee and Agents........................................19
Section 6.02 Indemnification of Trustee or Delaware Trustee...........................................20
Section 6.03 Resignation of Delaware Trustee and Trustee..............................................22
Section 6.04 Removal of Delaware Trustee and Trustee..................................................22
Section 6.05 Appointment of Successor Delaware Trustee or Trustee.....................................22
Section 6.06 Laws of Other Jurisdictions..............................................................23
Section 6.07 Reliance on Experts......................................................................24
Section 6.08 Force Majeure............................................................................24
Section 6.09 Failure of Action by ECA.................................................................24
Section 6.10 Action Upon Instructions.................................................................24
Section 6.11 Management of Trust Estate...............................................................25
Section 6.12 Validity.................................................................................25
Section 6.13 Rights and Powers; Litigation............................................................25
Section 6.14 No Duty to Act Under Certain Circumstances...............................................25
ARTICLE VII
COMPENSATION OF THE TRUSTEE AND THE DELAWARE TRUSTEE
Section 7.01 Compensation of Trustee and Delaware Trustee.............................................26
Section 7.02 Reimbursement of ECA.....................................................................26
Section 7.03 Source of Funds..........................................................................26
Section 7.04 Ownership of Units by ECA, the Delaware Trustee and the Trustee..........................26
ARTICLE VIII
MEETINGS OF TRUST UNITHOLDERS
Section 8.01 Purpose of Meetings......................................................................27
Section 8.02 Call and Notice of Meetings..............................................................27
Section 8.03 Method of Voting and Vote Required.......................................................27
Section 8.04 Conduct of Meetings......................................................................28
ARTICLE IX
DURATION, REVOCATION AND TERMINATION OF TRUST
Section 9.01 Revocation...............................................................................28
Section 9.02 Termination..............................................................................28
Section 9.03 Disposition and Distribution of Assets and Properties....................................28
Section 9.04 Reorganization or Business Combination...................................................29
ARTICLE X
AMENDMENTS
Section 10.01 Prohibited Amendments....................................................................30
Section 10.02 Permitted Amendments.....................................................................30
ii
ARTICLE XI
ARBITRATION
ARTICLE XII
MISCELLANEOUS
Section 12.01 Inspection of Books......................................................................33
Section 12.02 Disability of a Trust Unitholder.........................................................33
Section 12.03 Merger or Consolidation of Delaware Trustee or Trustee...................................34
Section 12.04 Change in Trust Name.....................................................................34
Section 12.05 Filing of this Agreement.................................................................34
Section 12.06 Choice of Law............................................................................34
Section 12.07 Separability.............................................................................35
Section 12.08 Notices..................................................................................35
Section 12.09 Counterparts.............................................................................36
Schedule A - Fee Schedule of Trustee
Schedule B - Fee Schedule of Delaware Trustee
Exhibit A - Federal Income Tax Provisions
iii
AMENDED AND RESTATED
TRUST AGREEMENT
OF
APPALACHIAN GAS ROYALTY TRUST
This Amended and Restated Trust Agreement of Appalachian Gas Royalty
Trust (the "Trust") is entered into effective as of the _____ day of __________,
2005, by and among ENERGY CORPORATION OF AMERICA, a West Virginia corporation
with its principal office in Denver, Colorado (together with its wholly owned
subsidiaries and its successors and assigns, "ECA") as trustor, and WILMINGTON
TRUST COMPANY, a banking corporation organized under the laws of the State of
Delaware with its principal office in Wilmington, Delaware ("Wilmington Trust"),
as Delaware Trustee (as hereinafter defined), and JPMORGAN CHASE BANK, N.A., a
national association organized under the laws of the State of New York with its
principal place of business in New York, New York (the "Bank"), as Trustee (as
hereinafter defined).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, ECA is engaged in the exploration, development, production,
transportation and marketing of natural gas and oil and owns mineral interests
in properties located in the Appalachian Basin that contain proved reserves of
natural gas; and
WHEREAS, ECA has determined to convey to the Trust the Royalty
Interests (hereinafter defined) pursuant to the Conveyances (hereinafter
defined) and the Hedge Agreements (hereinafter defined) in exchange for
7,750,000 Trust Units (hereinafter defined); and
WHEREAS, ECA, Wilmington Trust and the Bank have previously formed the
Trust pursuant to the Organizational Trust Agreement (hereinafter defined) in
accordance with the provisions of the Trust Act (hereinafter defined) and, in
connection therewith, ECA has previously delivered to the Bank, on behalf of the
Trust, good and valuable consideration, which the Bank has accepted, to have and
to hold, in trust, such property and all other properties that may hereafter be
received hereunder, for the purposes and subject to the terms and conditions
hereinafter provided; and
NOW, THEREFORE, ECA, Wilmington Trust and the Bank hereby amend and
restate the Organizational Trust Agreement of Appalachian Gas Royalty Trust in
its entirety.
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings indicated:
"Administrative Services Agreement" means the Administrative Services
Agreement dated _________, 2005 entered into between ECA and the Trustee, on
behalf of the Trust.
"Affiliate" means, for any specified Person, another Person that
controls, is controlled by, or is under common control with, the specified
Person. "Control," in the preceding sentence, refers to the possession by one
Person, directly or indirectly, of the right or power to direct or cause the
direction of the management and policies of another Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agent" has the meaning assigned to that term in Section 3.06 hereof.
"Agreement" means this Amended and Restated Trust Agreement of
Appalachian Gas Royalty Trust, as it may be further amended, supplemented or
restated from time to time.
"Bank" means JPMorgan Chase Bank, N.A., a national association
organized under the laws of the State of New York, and its successors and
assigns.
"Beneficial Interest" means the aggregate beneficial interest of all
Trust Unitholders in the Trust Estate, including without limitation the proceeds
from the conversion of the Royalty Interests to cash, and in the right to cash
resulting from such conversion of the Royalty Interests, which beneficial
interest is expressed in Trust Units, but such beneficial interest does not
include any ownership interest, legal or equitable, in or to the Royalty
Interests, or any part thereof, or in or to any other asset of the Trust Estate
to the extent that an interest in such asset would cause the interest of a Trust
Unitholder to be treated (other than for federal income tax purposes) as other
than an intangible personal property interest.
"Business Day" means any day that is not a Saturday, Sunday, a holiday
determined by the New York Stock Exchange, Inc. as "affecting `ex' dates" or any
other day on which national banking institutions in New York, New York are
closed as authorized or required by law.
"Closing" means the closing of the initial public offering of Trust
Units contemplated by the Securities Act Registration Statement.
"Closing Date" means the date of Closing.
"Commission" means the Securities and Exchange Commission.
"Conveyances" means, collectively, the Term Royalty Conveyances, each
dated as of __________, 2005 from ECA, as grantor, to the Trust, as grantee,
pursuant to which the Royalty Interests are conveyed.
"Delaware Trustee" means the Entity serving as a trustee (other than as
the Trustee) hereunder having its principal place of business in Delaware, not
in its individual capacity but solely in its fiduciary capacity. Further, any
benefit, indemnity, release or protection granted to the Delaware Trustee herein
shall extend to and shall be fully applicable and effective with regard to any
Entity serving as the Delaware Trustee, including, without limitation,
Wilmington Trust.
"Development Agreement" means the Development Agreement dated
_________, 2005 entered into between ECA and the Trustee, on behalf of the
Trust.
2
"ECA" means Energy Corporation of America, a West Virginia corporation,
its wholly owned subsidiaries and its successors and assigns.
"Entity" means a corporation, partnership, trust, estate or other
entity, organization or association.
"Environmental Laws" means all laws relating to pollution or protection
of the environment, including laws relating to emissions, discharges, releases
or threatened releases, treatment, storage or disposal of pollutants,
contaminants, hazardous substances or industrial or hazardous wastes into the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata), and also including laws relating to the protection,
preservation, or enhancement of endangered or threatened species, historic and
archaeological resources, or wetlands and tidelands, as well as all codes,
decrees, injunctions, judgments, orders, rules or regulations issued, entered,
promulgated or approved thereunder pursuant to the requirements of applicable
administrative procedures, acts and agency procedural rules.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act Registration Statement" means the registration statement
pursuant to which the Trust Units may be registered under Section 12 of the
Exchange Act.
"Expenses" has the meaning assigned to that term in Section 6.02(a)
thereof.
"Fair Value" means, with respect to any portion of the Royalty
Interests to be released pursuant to Section 3.02(a) in connection with a sale
of Underlying Properties, an amount of net proceeds which could reasonably be
expected to be obtained from the sale of such portion of the Royalty Interests
to a party which is not an Affiliate of either ECA or the Trust on an
arms'-length negotiated basis, taking into account relevant market conditions
and factors existing at the time of any such proposed sale or release, such net
proceeds to be determined by deducting the Trust's proportionate share of sales
costs, commissions and brokerage fees, if any (based on the relative fair market
value of the Underlying Properties being transferred without giving effect to
either the Royalty Interests being released or the fair market value of the
Royalty Interests being released).
"Hedge Agreements" means the right of the Trust to receive payments
pursuant to the Assignment Agreement dated ________, 2005 between Eastern
American Energy Corporation and the Trust that assigns to the Trust certain
rights under the ISDA Master Agreement dated as of March 12, 2004 by and between
BP Energy Company and Eastern American Energy Corporation and the Option
Confirmations thereunder dated March 17, 2005 as they relate to the option
transactions identified as BP (Nucleus) ID: 601108 and 603289.
"Independent Reserve Engineers" means Xxxxx Xxxxx Company, L.P.,
independent petroleum engineers, or any successor petroleum engineering
consultants employed by the Trust to provide information and reports with
respect to the Royalty Interests.
"Initial Trust Unit Price" means the offering price to the public of a
Trust Unit, as set forth in the Prospectus.
3
"Liquidation Date" means December 31, 2024.
"Net Proceeds" has the meaning assigned to that term in the
Conveyances.
"Organizational Trust Agreement" means the Trust Agreement of
Appalachian Gas Royalty Trust, entered into and effective as of March 17, 2005
by and among ECA, the Bank and Wilmington Trust.
"Person" means a natural person or an Entity.
"Prospectus" means the final prospectus constituting a part of the
Securities Act Registration Statement, as filed pursuant to Rule 424(b) of the
Commission.
"Quarterly Cash Distribution" means, for each Quarterly Period, an
amount equal to the Quarterly Distribution Amount minus the Quarterly Incentive
Distribution.
"Quarterly Distribution Amount" means, for each Quarterly Period, an
amount determined by the Trustee pursuant to Section 5.02 hereof to be equal to
the excess, if any, of (a) the cash received by the Trust, attributable to the
Royalty Interests and the Hedge Agreements during such Quarterly Period,
provided that such cash is received by the Trust on or before the 10th calendar
day of the third month following the end of the Quarterly Period, plus any
decrease during such Quarterly Period in any cash reserve theretofore
established by the Trustee for the payment of liabilities of the Trust, plus any
other cash receipts of the Trust during such Quarterly Period (including Sales
Proceeds Amounts), plus an amount equal to interest estimated by the Trustee to
be earned on cash reserves invested pursuant to Section 3.04 to the respective
Quarterly Payment Date (which estimated amount when actually earned shall not be
included in the Quarterly Distribution Amount in respect of any other Quarterly
Period) over (b) the liabilities of the Trust paid during such Quarterly Period,
plus the amount of any cash used during such Quarterly Period by the Trustee to
establish or increase a cash reserve established for the payment of any
liabilities of the Trust.
"Quarterly Incentive Distribution" means, for each Quarterly Period,
the amount of cash equal to (i) the Quarterly Distribution Amount for such
Quarterly Period minus the Target Cash Distribution applicable to such Quarterly
Period, multiplied by (ii) 30%.
"Quarterly Payment Date" means, for each Quarterly Period, the 15th day
of the third calendar month following the end of such Quarterly Period, or if
such day is not a Business Day, on the next Business Day.
"Quarterly Period" means each of the calendar quarters ending on the
last day of March, June, September and December of each year.
"Quarterly Record Date" means, for each Quarterly Period, the close of
business on the sixtieth day following the end of such Quarterly Period (or the
Business Day next following such day if such day is not a Business Day) or such
other date established by the Trustee in order to comply with applicable law or
the rules of any securities exchange or quotation system on which the Depositary
Units may be listed or admitted to trading, in which event "Quarterly Record
Date" means such other date.
4
"Record Date Trust Unitholders" has the meaning assigned to that term
in Section 8.02 hereof.
"Responsible Officer" means (a) with respect to the Delaware Trustee,
any officer in the Corporate Trust Administration office of the Delaware Trustee
having direct responsibility for the administration of this Agreement, and with
respect to a particular corporate trust matter, any officer of the Delaware
Trustee to whom such matter is referred because of his or her knowledge of and
familiarity with the particular subject, and (b) with respect to the Trustee
[__________].
"Royalty Interests" means, collectively, the royalty interests to be
conveyed to the Trust pursuant to the Conveyances.
"Sales Proceeds Amount" means any cash paid to the Trust in
consideration for Royalty Interests pursuant to Section 3.02(a) hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Act Registration Statement" means the Registration
Statement on Form S-l (Registration No. 333-_____) as it has been or as it may
be amended or supplemented from time to time, filed by ECA with the Commission
under the Securities Act to register the offering and sale of the Trust Units.
"Subject Development Lands" means the Subject Development Lands subject
to the Royalty Interests, as "Subject Development Lands" are defined in the
Conveyances.
"Target Cash Distribution" means the targeted levels of the Quarterly
Distribution Amount in a given calendar year as set forth in Section 3.15 used
to calculate the amount of the Quarterly Incentive Distribution.
"Transferee" means, as to any Trust Unitholder or former Trust
Unitholder, any Person succeeding to the interest of such Trust Unitholder or
former Trust Unitholder in one or more Trust Units, whether as purchaser, donee,
legatee or otherwise.
"Trust" means Appalachian Gas Royalty Trust, the Delaware statutory
trust created pursuant to the Organizational Trust Agreement and continued by
and administered under the terms of this Agreement.
"Trust Act" means the Delaware Statutory Trust Act, Title 12, Chapter
38 of the Delaware Code, Sections 3801 et seq., as amended from time to time
during the term of this Agreement.
"Trust Estate" means the assets held by the Trust under this Agreement,
including both income and principal.
"Trust Unit" means an uncertificated, undivided pro rata fractional
interest in the Beneficial Interest, determined as hereinafter provided.
5
"Trust Unitholder" means the owner of one or more Trust Units as
reflected on the books of the Trustee pursuant to Section 4.01 or in the records
of The Depository Trust Company.
"Trustee" means the Entity serving as a trustee (other than the
Delaware Trustee) under this Agreement, in its fiduciary capacity. Further, any
benefit, indemnity, release or protection granted to the Trustee herein shall
extend to and shall be fully applicable and effective with regard to any Entity
serving as Trustee, including, without limitation, the Bank. The term "principal
office" of the Trustee shall mean the principal office of the Trustee in Austin,
Texas, at which at any particular time its corporate trust business may be
administered.
"Trustee Conveyance" means a conveyance executed by the Trustee
pursuant to Section 3.02 of this Agreement covering that portion of the Royalty
Interests to be conveyed pursuant to said Section and in such form as the
Trustee is advised by counsel is sufficient to release or transfer the right,
title and interest of the Trust therein and to provide for payment to the
Trustee of all the net proceeds attributable thereto through the effective date
of such Trustee Conveyance.
"Underlying Properties" means the Subject Interests and Xxxxx subject
to the Royalty Interests, as "Subject Interests" and "Xxxxx" are defined in the
Conveyances.
"Wilmington Trust" means Wilmington Trust Company, a banking
corporation organized under the laws of the State of Delaware, and its
successors and assigns.
ARTICLE II
NAME AND PURPOSE OF THE TRUST; DECLARATION OF TRUST
Section 2.01 Name; Certificate of Trust. The Trust continued by this
Agreement shall remain a Delaware statutory trust under the Trust Act. The Trust
shall continue to be known as the Appalachian Gas Royalty Trust, and the Trustee
may transact the Trust's affairs in that name. The continuation and operation of
the Trust shall be in accordance with this Agreement, which shall constitute the
"governing instrument" of the Trust within the meaning of Section 3801(f) of the
Trust Act. In the event that a Responsible Officer of either the Delaware
Trustee or the Trustee becomes aware that any statement contained or matter
described in the Trust's Certificate of Trust has changed, making it false in
any material respect, it will notify the other trustee and the Delaware Trustee
shall promptly file or cause to be filed in the office of the Secretary of State
of Delaware an amendment of same at the written direction of the Trustee, duly
executed in accordance with Section 3811 of the Trust Act, in order to effect
such change thereto, such filing to be in accordance with Section 3810(b) of the
Trust Act. Upon the completion of the dissolution and winding up of the Trust in
accordance with Section 3808 of the Trust Act and Section 9.02 hereof, the
Delaware Trustee shall, at the written direction of the Trustee, file or cause
to be filed a certificate of cancellation of the Trust's Certificate of Trust,
duly executed by the Delaware Trustee in accordance with Section 3811 of the
Trust Act.
Section 2.02 Purpose. The purposes of the Trust are:
(a) to protect and conserve, for the benefit of the Trust
Unitholders, the Trust Estate;
6
(b) to receive and hold the Royalty Interests, the Hedge
Agreements, the Development Agreement, the Administrative Services
Agreement and the other assets of the Trust Estate;
(c) to convert the Royalty Interests to cash either by (1)
retaining the Royalty Interests and collecting the proceeds of
production payable with respect to the Royalty Interests until
production has ceased or the Royalty Interests have been sold or
transferred or the Royalty Interests have otherwise terminated or (2)
selling or otherwise disposing of all or any portion of the Royalty
Interests in accordance with the terms of this Agreement;
(d) to convert the Hedge Agreements into cash by collecting the
proceeds of any payments that the Trust is entitled to receive under the
terms of the Hedge Agreements until the Hedge Agreements have
terminated;
(e) to pay, or provide for the payment of, any liabilities
incurred in carrying out the purposes of the Trust, and thereafter to
distribute the remaining amounts of cash received by the Trust to the
Trust Unitholders on a pro rata basis determined by the number of Trust
Units held by each Trust Unitholder in accordance with Section 5.02;
(f) to incur indebtedness and grant security interests in or
otherwise encumber the Trust Estate in order to pay the liabilities of
the Trust as they become due, if necessary;
(g) to cause to be prepared and file reports required to be
filed under the Exchange Act, any reports required by the rules of any
securities exchange or quotation system on which the Trust Units are
listed or admitted to trading and any reports or forms required to be
filed pursuant to tax laws and other applicable laws and regulations;
and
(h) to engage in such other activities as are necessary or
convenient for the attainment of any of the foregoing or are incident
thereto and which may be engaged in or carried on by a statutory trust
under the Trust Act.
Section 2.03 Transfer of Trust Property to the Trust. Upon the formation
of the Trust, ECA paid good and valuable consideration to the Trust, in trust,
for the uses and purposes provided in the Organizational Trust Agreement and in
this Agreement. At (and subject to the occurrence of) the Closing, ECA shall, or
shall cause its Affiliates to, grant, bargain, sell, convey and assign to the
Trust for the uses and purposes provided herein (i) the Royalty Interests
pursuant to the Conveyances and (ii) the Hedge Agreements in consideration for
7,750,000 Trust Units to be issued by the Trust to ECA, which Trust Units shall
collectively represent the entire Beneficial Interest in accordance with Section
4.01 of this Agreement. The issuance of the 7,750,000 Trust Units is hereby duly
authorized and, upon issuance at the Closing, such Trust Units shall be duly and
validly issued and outstanding and, upon receipt by the Trust at the Closing of
the consideration described in the preceding sentence, the Trust Units will be
fully paid without the requirement of any further consideration.
Section 2.04 Creation of the Trust. The Trustee declares that it shall
hold the Trust Estate in trust for the benefit of the Trust Unitholders, upon
the terms and conditions set forth in
7
this Agreement. As set forth above and amplified herein, the Trust is intended
to be a passive entity limited to the receipt of revenues attributable to the
Royalty Interests and the Hedge Agreements and the distribution of such
revenues, after payment of or provision for Trust expenses and liabilities, to
ECA and the Trust Unitholders. It is not the intention of the parties hereto
to create, and nothing in this Agreement shall be construed as creating, for
tax purposes, a partnership, joint venture, joint stock company or similar
business association, between or among Trust Unitholders, present or future,
or between or among Trust Unitholders, or any of them, the Delaware Trustee,
the Trustee and/or ECA. Neither the Trustee nor the Delaware Trustee, in its
individual capacity, makes any representation as to the validity or sufficiency
of this Trust Agreement.
Section 2.05 Principal Offices and Delaware Trustee. Unless and
until changed by the Trustee, the address of the principal office of the Trustee
is 000 Xxxxxx, 0xx Xxxxx, Xxxxxx, Xxxxx 00000-0000. Unless and until changed by
the Delaware Trustee, the principal place of business of the Delaware Trustee is
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, Attention: Corporate
Trust Administration. The Trust may maintain offices at such other place or
places within or without the State of Delaware as the Trustee deems advisable.
ARTICLE III
ADMINISTRATION OF THE TRUST AND POWERS OF THE TRUSTEE AND THE
DELAWARE TRUSTEE
Section 3.01 General Authority.
(a) The Trustee accepts the trust hereby created and agrees to
perform its duties hereunder with respect to the same, but only upon the
terms of this Agreement. Subject to the limitations set forth in this
Agreement, the Trustee, acting alone, without the approval or consent
of, or notice to, the Delaware Trustee or any Trust Unitholder, is
authorized to take such action as in its judgment is necessary,
desirable or advisable to best achieve the purposes of the Trust,
including the authority to enter into, deliver and perform on behalf of
the Trust the Hedge Agreements, the Development Agreement and the
Administrative Services Agreement (which the Trustee is hereby directed
to do), to re-convey on behalf of the Trust the Royalty Interests to ECA
and to release on behalf of the Trust such Royalty Interests and the
conveyance with respect to a portion of the Subject Development Lands in
accordance with Section 1.05 of the Conveyances (which the Trustee is
hereby directed to do) and to agree on behalf of the Trust to
modifications of the terms of the Conveyances or to settle disputes with
respect thereto, so long as such modifications or settlements do not
alter the nature of the Royalty Interests as rights to receive a share
of the net proceeds from production from the Underlying Properties in
accordance with the Conveyances which, with respect to the Trust, are
free of any operating rights, expenses or obligations but subject to
applicable taxes and post-production costs. The Trustee shall not (i)
dispose of any part of the Trust Estate except as provided in Sections
3.02 and 3.07 hereof or (ii) agree to amend or waive any provision of,
give any consent or release with respect to, or terminate the
Conveyances, the Hedge Agreements or the Development Agreement without
the approval of the Trust Unitholders as provided in Article VIII.
Without in any way limiting the power and authority of the Trustee, the
Trustee is expressly authorized and empowered to enter into
8
such amendments or modifications to, or waive any rights with respect
to, the Administrative Services Agreement without obtaining the approval
of the Trust Unitholders as provided in Article VIII.
(b) The Delaware Trustee accepts the trust hereby continued and
agrees to perform its duties hereunder with respect to the same, but
only upon the express terms of this Agreement. The Delaware Trustee is
authorized to take only such actions, and shall be required to perform
only such duties and obligations, with respect to the Trust as are
specifically set forth in this Agreement, and no implied duties,
obligations or powers shall be read into this Agreement in respect to
the Delaware Trustee. The Delaware Trustee shall not otherwise manage or
take part in the business or affairs of the Trust in any manner.
(c) Notwithstanding any other provision of this Agreement,
unless specifically authorized in writing by the Trustee and consented
to by the Delaware Trustee, the Delaware Trustee shall not participate
in any decisions or possess any authority with respect to the
administration of the Trust, the investment of the Trust's property or
the payment of dividends or other distributions of income or principal
to the Trust Unitholders. The Delaware Trustee shall have the power and
authority to execute, deliver, acknowledge and file all necessary
documents and to maintain all necessary records of the Trust as required
by the Trust Act. The Delaware Trustee shall provide prompt written
notice to the Trustee of its performance of any of the foregoing acts.
The Trustee shall reasonably keep the Delaware Trustee informed of any
material action taken by the Trustee with respect to the Trust.
Section 3.02 Limited Power of Disposition. The Trustee shall not sell or
otherwise dispose of all or any part of the Trust Estate, including, without
limitation, all or any portion of the Royalty Interests, the Hedge Agreements or
the Development Agreement, or any interest therein, except that the Trustee is
directed to sell and convey Royalty Interests as provided in this Section 3.02
and Section 3.07 of this Agreement and no Trust Unitholder approval shall be
required for any sale or conveyance in accordance with any of such provisions.
(a) ECA and its Affiliates may at any time and from time to
time sell, but only in accordance with the provisions set forth below
and in accordance with the terms of the Conveyances, a divided or
undivided portion of their interests in the Underlying Properties, free
from and unburdened by the Royalty Interests without the consent of the
Trustee or the Trust Unitholders. Upon receipt of written notice of such
a sale given by ECA or its Affiliates, the Trustee shall execute and
deliver at the closing of such sale a partial release and consent, and
such other instruments, agreements and documents as ECA or its
Affiliates may reasonably request, to evidence or effect the transfer of
such portion of ECA's or its Affiliates' interests in the Underlying
Properties, free from and unburdened by the Royalty Interests, provided
that:
(i) no sale of a portion of ECA's or its Affiliates'
interests in the Underlying Properties free from and unburdened
by the Royalty Interests that would otherwise burden such
portion of ECA's or its Affiliates' interests shall be
permitted under this paragraph (a) if (A) the sale is to a
Person who is an Affiliate
9
of ECA, (B) the sale relates to a well that accounted for in
excess of 0.25% of the total production from all Underlying
Properties during the most recently completed 12 calendar
months, (C) the sale, together with all other sales pursuant to
this paragraph (a), would result in the sale of more than five
xxxxx during the most recently completed 12 calendar months, or
(D) the aggregate sales proceeds to be received by the Trust
pursuant to clause (ii) of this paragraph (a) with respect to
the Royalty Interests to be released by the Trustee, plus the
aggregate sales proceeds received by the Trust pursuant to
clause (ii) of this paragraph (a) with respect to all other
Royalty Interests previously released by the Trustee pursuant
to this paragraph (a) during the most recently completed 12
calendar months, would exceed $500,000;
(ii) in connection with any sale pursuant to this
paragraph (a), the Trust shall receive from ECA an amount equal
to the Fair Value to the Trust for the Royalty Interests to be
released by the Trustee in connection with the sale of the
Underlying Properties; and
(iii) the Trustee shall have received (A) in the
event that the gross purchase price to be received by ECA and
its Affiliates for the sale of Underlying Properties in a
single transaction or a series of related transactions is less
than $500,000, a certificate from ECA executed by the
President, any Vice President, the Treasurer or the Secretary
thereof certifying to the Trustee and the Trust that the cash
to be received by the Trust pursuant to clause (ii) above
represents the Fair Value to the Trust for the Royalty
Interests to be released by the Trustee in connection therewith
or (B) in the event that the gross purchase price to be
received by ECA and its Affiliates for the sale of Underlying
Properties in a single transaction or a series of related
transactions is more than $500,000, at the expense of ECA an
appraisal of such Underlying Properties from an independent
appraiser in the business of evaluating or appraising natural
gas properties selected by mutual agreement of ECA and the
Trustee, which appraisal confirms that the cash to be received
by the Trust pursuant to clause (ii) of this paragraph (a)
represents the Fair Value to the Trust for the Royalty
Interests to be released by the Trust in connection therewith.
Any other sale of all or any portion of the Underlying Properties will
not relieve ECA of its obligations with respect to the Royalty
Interests.
(b) In the event that a portion of the Royalty Interests is to
be released pursuant to Section 3.02(a) of this Agreement, upon receipt
of (i) funds equal to the required payment, (ii) an accurate description
of said portion of the Royalty Interests and (iii) sufficient
information to evidence conclusively that the conditions to purchase
referred to in the applicable section of the Conveyances have been
satisfied, then within a reasonable time thereafter, and upon advice of
such experts as may be retained by the Trustee with the written consent
of ECA, the Trustee shall execute and deliver a Trustee Conveyance
covering said Royalty Interests to ECA or its assignee.
10
(c) In addition to the transfers permitted by paragraph (a) of
Section 3.02 and subject to the terms of the Conveyances, ECA or any of
its Affiliates may at any time or from time to time sell a divided or
undivided portion of its interest in the Underlying Properties, provided
that such sale is subject to and burdened by the Royalty Interests that
burden such portion of ECA's interest, without the consent of the Trust
Unitholders. Promptly after completion of any such sale, ECA shall so
notify the Trustee in writing. Any purchaser of such Underlying
Properties shall be the assignee of ECA to the extent of the interest
sold and shall be bound by the obligations of ECA under this Agreement
and the Conveyances to such extent.
(d) Anything herein to the contrary notwithstanding, the
Trustee shall not agree to any distribution of the Royalty Interests or
any other asset of the Trust that would cause the interest of a Trust
Unitholder to be treated as other than an intangible personal property
interest. Unless required to sell pursuant to this Section 3.02, or
pursuant to Section 3.07 hereof, or to distribute pursuant to Section
5.02 hereof, the Trustee is authorized to retain any part of the Trust
Estate in the form in which such property was transferred to the
Trustee, without regard to any requirement to diversify investments or
other requirements.
Section 3.03 No Power to Engage in Business or Make Investments. Neither
the Trustee nor the Delaware Trustee shall cause the Trust to acquire any asset
other than the Royalty Interests and the Hedge Agreements and proceeds
therefrom, the rights of the Trust to enforce the terms and provisions of the
Development Agreement and the Administrative Services Agreement, and other
amounts paid to the Trust as set forth herein, or engage in any business or
investment activity of any kind whatsoever, except for the activities permitted
herein. Neither the Trustee nor the Delaware Trustee shall have any
responsibility or authority relating to the operations of the Underlying
Properties or the marketing of any production therefrom.
Section 3.04 Interest on Cash Reserves. Cash being held by the Trustee
as a reserve for, or in anticipation of, the distribution of a Quarterly
Incentive Distribution, Quarterly Cash Distribution or for the payment of any
liabilities, other than current routine administrative costs, shall be placed by
the Trustee with one or more banks or financial institutions (which, to the
extent to which authorized pursuant to the Trust Act and other applicable laws,
may be, or may include, any bank serving as the Trustee or the Delaware Trustee)
and invested in (i) accounts payable on demand without penalty, (ii) obligations
issued by (or unconditionally guaranteed by) the United States of America or any
agency or instrumentality thereof (provided such agency or instrumentality
obligations are guaranteed by the full faith and credit of the United States of
America), (iii) repurchase agreements secured by obligations qualifying under
(ii) above or (iv) certificates of deposit of any bank or banks having combined
capital, surplus and undivided profits in excess of $100,000,000 which, in the
case of (ii), (iii) and (iv) above, mature prior to the date on which such
Quarterly Distribution Amount is to be distributed or any such liability is to
be paid. Any government obligation, repurchase agreement or certificate of
deposit held by the Trustee shall be held until maturity. The interest rate on
reserves placed with any bank or financial institution serving as the Trustee or
the Delaware Trustee shall be the interest rate that such bank pays in the
normal course of business on amounts placed with it, taking into account the
amount involved, the period held and other relevant factors. Subject to Section
6.01, the Trustee shall not be liable for its selection of permitted investments
or for any investment losses
11
resulting from such investments. Notwithstanding anything herein to the
contrary, the Delaware Trustee shall not be obligated to accept any such cash or
other assets for investment or otherwise. To the extent that the Delaware
Trustee decides in its sole absolute discretion to accept cash for investment
pursuant to this Section 3.04, the Delaware Trustee shall invest such cash
pursuant to the written instructions of the Trustee, and the Delaware Trustee
shall not be liable to the Trust for any losses resulting from such investments
absent its own gross negligence or willful misconduct.
Section 3.05 Power to Settle Claims. The Trustee is authorized to
prosecute or defend, and to settle by arbitration or otherwise, any claim of or
against the Trustee, the Trust or the Trust Estate, to waive or release rights
of any kind and to pay or satisfy any debt, tax or claim upon any evidence by it
deemed sufficient, without the joinder or consent of any Trust Unitholder,
including enforcing the rights of the Trust under the Administrative Services
Agreement, the Development Agreement and the Conveyances. The Trust Unitholders
shall have no power to prosecute any claim of the Trust or the Trust Estate
against any Person other than to prosecute a claim to compel performance by the
Trustee on behalf of the Trust or the Trust Estate.
Section 3.06 Power to Contract for Services. In the administration of
the Trust, the Trustee is empowered to employ oil and gas consultants (which may
include the Independent Reserve Engineers), accountants (with the consent of
ECA, which consent shall not be unreasonably withheld), attorneys (who may, but
need not be, counsel to ECA or any of its Affiliates) and other professional and
expert Persons, to employ or contract for clerical and other administrative
assistance (including assistance from ECA or any of its Affiliates), to delegate
to agents, employees, officers, directors, custodians or nominees (individually,
an "Agent" and collectively, "Agents") any matter, whether ministerial or
discretionary, and to act through such Agents and to make payments of all fees
for services or expenses in any manner thus incurred out of the Trust Estate.
Section 3.07 Payment of Liabilities of Trust. Except as otherwise
provided herein, the Trustee may and shall use all money received by it for the
payment or reimbursement of all liabilities of the Trust, including but without
limiting the generality of the foregoing, all expenses, taxes, liabilities
incurred of all kinds, compensation to it for its services hereunder, as
provided for in Article VII, and compensation to such parties as may be employed
as provided for in Section 3.06 hereof. With respect to any liability that is
contingent or uncertain in amount or that otherwise is not currently due and
payable, the Trustee may, but is not obligated to, establish a cash reserve for
the payment of such liability. The Trustee shall not pay any liability of the
Trust with funds set aside pursuant to Section 5.02 hereof for the payment of a
Quarterly Incentive Distribution or a Quarterly Cash Distribution. If at any
time the cash on hand and to be received by the Trustee and available to pay
liabilities is not, or will not be, in the judgment of the Trustee, sufficient
to pay liabilities of the Trust as they become due, the Trustee is authorized to
cause the Trust to borrow the funds required to pay such liabilities. In such
event, no further distributions will be made to Trust Unitholders (except in
respect of previously determined Quarterly Distribution Amounts) until the
indebtedness created by such borrowings has been paid in full. Such funds may be
borrowed from any Person, including, without limitation, the Bank while serving
as Trustee or any other Entity serving as a fiduciary hereunder, on a secured or
unsecured basis; provided that neither the Bank nor any other Entity shall be
required to make
12
any such loan. Under no circumstances shall the Trustee or the Delaware Trustee
be personally liable for any indebtedness of the Trust. To secure payment of
such indebtedness (including any indebtedness to the Bank or any other Entity
serving as a fiduciary hereunder), the Trustee is authorized to (i) mortgage,
pledge, grant security interests in or otherwise encumber the Trust Estate, or
any portion thereof, including the Royalty Interests, (ii) include any and all
terms, powers, remedies, covenants and provisions deemed necessary or advisable
in the Trustee's discretion, including, without limitation, confession of
judgment and the power of sale with or without judicial proceedings and (iii)
provide for the exercise of those and other remedies available to a secured
lender in the event of a default on such loan. If such funds are loaned to the
Trust by the Trustee or any other such Entity while the Trustee or such other
Entity is serving as a fiduciary hereunder, the terms of such indebtedness and
security interest shall be similar to the terms which the Trustee or such other
Entity would grant to a similarly situated commercial customer with whom it did
not have, directly or indirectly, a fiduciary relationship, and the Trustee or
such other Entity shall be entitled to enforce its rights with respect to any
such indebtedness and security interest as if it were not, directly or
indirectly, and had never been, directly or indirectly, the Trustee or a
fiduciary hereunder. No provision of this Trust Agreement shall require either
the Delaware Trustee, the Trustee or any other Entity serving as a fiduciary
hereunder, to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
Section 3.08 Income and Principal. The Trustee shall not be required to
keep separate accounts or records for income and principal. However, if the
Trustee does keep such separate accounts or records, then the Trustee is
authorized to treat all or any part of the receipts from the Royalty Interests
or the Hedge Agreements as income or principal, without having to maintain any
reserve therefor, and in general to determine all questions as between income
and principal and to credit or charge to income or principal or to apportion
between them any receipt or gain and any charge, disbursement or loss as is
deemed advisable under the circumstances of each case.
Section 3.09 Term of Contracts. In exercising the rights and powers
granted hereunder, the Trustee is authorized to make the term of any transaction
or contract or other instrument extend beyond the term of the Trust.
Section 3.10 Transactions With Entity Serving as the Trustee or the
Delaware Trustee. To the extent such conduct is not prohibited by applicable law
and except as otherwise provided herein, both the Trustee and the Delaware
Trustee are each authorized in exercising its powers under this Agreement to
make contracts and have dealings with itself, directly and indirectly, in any
other fiduciary or individual capacity.
Section 3.11 No Security Required. No Entity serving as a trustee
hereunder shall be required to furnish any bond or security of any kind.
Section 3.12 Filing of Securities Act Registration Statement, Exchange
Act Registration Statement and Other Reports, Listing of Trust Units, etc.;
Certain Fees and Expenses.
13
(a) In connection with the initial public offering of Trust
Units, the Trustee shall, on behalf of the Trust, use commercially
reasonable efforts without the incurrence of unreasonable expense to
cause:
(i) the Securities Act Registration Statement to be
prepared, signed, filed with the Commission, and declared
effective by the Commission;
(ii) the Exchange Act Registration Statement to be
prepared, signed, filed with the Commission and declared
effective by the Commission; and
(iii) the Trust Units to be listed for trading on the
New York Stock Exchange, Inc. or another national securities
exchange, as ECA shall select, or, if listing on a national
securities exchange is not feasible or is undesirable as
determined by ECA, to cause the Trust Units to be admitted for
quotation on the National Association of Securities Dealers
Automated Quotation System National Market System (the
"NASDAQ").
(b) After the registration of the Trust Units pursuant to the
Exchange Act and/or the listing of the Trust Units for trading on the
New York Stock Exchange, Inc. or another national securities exchange or
the quotation of the Trust Units on the NASDAQ, the Trustee, on behalf
of the Trust and acting upon the advice of counsel, shall cause the
Trust to comply with all of the rules, orders and regulations of the
Commission, such exchange or the National Association of Securities
Dealers, Inc. related to such registration, listing or quotation, as the
case may be, and take all such other reasonable actions necessary for
the Trust Units to remain so registered, listed or quoted until the
Trust is terminated. In addition, the Trustee is authorized to make, and
the Trustee shall take, all reasonable actions to prepare and mail to
Trust Unitholders any reports, press releases or statements, financial
or otherwise, that the Trustee determines are required to be provided to
Trust Unitholders by law or governmental regulation or the requirements
of any securities exchange or quotation system on which the Trust Units
are listed or admitted to trading.
(c) The Trustee shall execute, by and on behalf of the Trust,
any documents incidental or related to the objectives specified in
paragraphs (a) and (b) of this Section 3.12.
(d) The Trust is hereby authorized and empowered to take all
steps, make all filings and applications and pay all fees necessary,
customary or appropriate to the accomplishment of the objectives set
forth in paragraphs (a) and (b) of this Section 3.12 including, without
limitation, the entering into the Administrative Services Agreement with
ECA.
(e) Except as otherwise provided in Article VI of this
Agreement, the fees, charges, expenses, disbursements and other costs
incurred by the Trustee or the Delaware Trustee in connection with the
discharge of its duties pursuant to this Agreement, including, without
limitation, trustee fees, engineering, audit, accounting and legal fees,
printing and mailing costs, amounts reimbursed or paid to ECA pursuant
to Section 3.06
14
or Section 7.02 hereof, and the fees and expenses of legal counsel for
the Trustee, the Delaware Trustee, and the Trust (including legal fees
and expenses incurred by the Trustee or the Delaware Trustee in
connection with the formation of the Trust and issuance of Trust Units),
shall be paid out of the Trust Estate as an administrative expense of
the Trust, provided that the Trustee's and the Delaware Trustee's
acceptance fees paid by ECA upon execution hereof shall be reimbursed to
ECA. All other organizational expenses of the Trust will be paid by ECA,
and ECA shall not be entitled to reimbursement thereof.
Section 3.13 Reserve Report. The Trustee shall cause a reserve report to
be prepared by or for the Trust by Independent Reserve Engineers as of December
31 of each year in accordance with criteria established by the Commission
showing estimated proved gas reserves attributable to the Royalty Interests as
of December 31 of such year and other reserve information required to comply
with Section 5.04 of this Agreement. ECA, to the extent it is the operator of
the Underlying Properties, shall use commercially reasonable efforts to
cooperate with the Trust and the Independent Reserve engineers in connection
with the preparation of any such reserve report. The Trustee shall cause each
reserve report prepared pursuant to this Section 3.13 to be completed and
delivered to it within 75 days of the last day of the prior calendar year.
Section 3.14 No Liability for Recordation. ECA shall be solely
responsible, and the Trustee and the Delaware Trustee shall have no
responsibility, for the filing of the Conveyances in the real property records
of any jurisdiction in which the Underlying Properties are located. Neither the
Trustee, the Delaware Trustee, the Bank nor any of their respective Agents shall
be liable to the Trust Estate or any Trust Unitholder for any loss, claim or
damage resulting from, or arising out of, the failure to file, or failure to
properly file, the Conveyances in any real property records of any jurisdiction.
Section 3.15 ECA Quarterly Incentive Distribution Payments. With respect
to each Quarterly Period, the Trust shall pay to ECA the Quarterly Incentive
Distribution in the event that the Quarterly Distribution Amount for such
Quarterly Period, determined in the manner specified in Section 5.02, exceeds
the Target Cash Distribution for such Quarterly Period as set forth in the
following table:
QUARTER TARGET LEVEL OF CASH QUARTER TARGET LEVEL OF CASH
ENDING DISTRIBUTIONS PER TRUST UNIT(1) ENDING DISTRIBUTIONS PER TRUST UNIT(1)
------------------ ------------------------------- ------------------ -------------------------------
March 31, 2005 $0.4457 March 31, 2015 $0.5190
June 30, 2005 $0.5246 June 30, 2015 $0.5120
September 30, 2005 $0.5694 September 30, 2015 $0.5051
December 31, 2005 $0.6066 December 31, 2015 $0.4983
March 31, 2006 $0.5976 March 31, 2016 $0.5033
June 30, 2006 $0.6270 June 30, 2016 $0.4965
September 30, 2006 $0.6500 September 30, 2016 $0.4898
December 31, 2006 $0.6748 December 31, 2016 $0.4832
March 31, 2007 $0.6465 March 31, 2017 $0.4881
June 30, 2007 $0.6693 June 30, 2017 $0.4815
September 30, 2007 $0.6912 September 30, 2017 $0.4750
December 31, 2007 $0.7124 December 31, 2017 $0.4686
March 31, 2008 $0.6820 March 31, 2018 $0.4734
June 30, 2008 $0.7029 June 30, 2018 $0.4670
September 30, 2008 $0.6807 September 30, 2018 $0.4607
December 31, 2008 $0.6623 December 31, 2018 $0.4545
March 31, 2009 $0.6615 March 31, 2019 $0.4557
June 30, 2009 $0.6461 June 30, 2019 $0.4495
September 30, 2009 $0.6321 September 30, 2019 $0.4434
December 31, 2009 $0.6197 December 31, 2019 $0.4374
March 31, 2010 $0.6224 March 31, 2020 $0.4313
June 30, 2010 $0.6113 June 30, 2020 $0.4255
September 30, 2010 $0.6007 September 30, 2020 $0.4197
December 31, 2010 $0.5907 December 31, 2020 $0.4140
March 31, 2011 $0.5949 March 31, 2021 $0.4082
June 30, 2011 $0.5855 June 30, 2021 $0.4026
September 30, 2011 $0.5766 September 30, 2021 $0.3971
December 31, 2011 $0.5679 December 31, 2021 $0.3917
00
XXXXXXX XXXXXX XXXXX XX XXXX XXXXXXX XXXXXX LEVEL OF CASH
ENDING DISTRIBUTIONS PER TRUST UNIT(1) ENDING DISTRIBUTIONS PER TRUST UNIT(1)
------------------ ------------------------------- ------------------ -------------------------------
March 31, 2012 $0.5729 March 31, 2022 $0.3862
June 30, 2012 $0.5646 June 30, 2022 $0.3807
September 30, 2012 $0.5557 September 30, 2022 $0.3752
December 31, 2012 $0.5474 December 31, 2022 $0.3701
March 31, 2013 $0.5526 March 31, 2023 $0.3648
June 30, 2013 $0.5450 June 30, 2023 $0.3598
September 30, 2013 $0.5376 September 30, 2023 $0.3549
December 31, 2013 $0.5302 December 31, 2023 $0.3500
March 31, 2014 $0.5353 March 31, 2024 $0.3450
June 30, 2014 $0.5280 June 30, 2024 $0.3403
September 30, 2014 $0.5209 September 30, 2024 $0.3355
December 31, 2014 $0.5138 December 31, 2024 $0.3308
The Trust shall pay to ECA the Quarterly Incentive Distribution with respect to
any Quarterly Period at the same time as the Quarterly Cash Distribution is paid
for such Quarterly Period for the Trust Unitholders.
ARTICLE IV
TRUST UNITS AND UNCERTIFICATED BENEFICIAL INTEREST
Section 4.01 Creation and Distribution. Ownership of the entire
Beneficial Interest shall be divided into 7,750,000 Trust Units. The ownership
of the Trust Units shall be uncertificated and evidenced by entry of a notation
in an ownership ledger maintained for such purpose by the Trustee. The holders
of the Trust Units from time to time shall be the sole beneficiaries of
principal and interest of the Trust.
Section 4.02 Rights of Trust Unitholders; Limitation on Personal
Liability of Trust Unitholders. Each Trust Unit shall represent pro rata
undivided ownership of the Beneficial Interest and shall entitle its holder to
participate pro rata in the rights and benefits of holders of Trust Units under
this Agreement. A Trust Unitholder (whether by assignment or otherwise) shall
take and hold each Trust Unit subject to all the terms and provisions of this
Agreement and the Conveyances, which shall be binding upon and inure to the
benefit of the successors, assigns, legatees, heirs and personal representatives
of such Trust Unitholder. By an assignment or a transfer of one or more Trust
Units, the assignor thereby shall, with respect to such assigned or transferred
Trust Unit or Trust Units, part with, except as provided in Section 4.03 hereof
in the case of a transfer after a Quarterly Record Date and prior to the
corresponding Quarterly Payment Date, (i) all of its Beneficial Interest
attributable to such Trust Unit or Trust Units and (ii) all interests, rights
and benefits of a Trust Unitholder under the Trust and this Agreement that are
attributable to such Trust Unit or Trust Units as against all other Trust
Unitholders, the Trust
16
and the Trustee, including, without limiting the generality of the foregoing,
any and all rights to any Quarterly Cash Distribution, or any portion thereof,
attributable to any Trust Units so assigned or transferred, for any Quarterly
Period or Quarterly Periods subsequent to the Quarterly Period which relates to
the last Quarterly Record Date on which the assignor owned such Trust Units. The
Trust Units and the rights, benefits and interests evidenced thereby (including,
without limiting the foregoing, the entire Beneficial Interest) are and, for all
purposes, shall be construed (except for tax purposes), to be in all respects
intangible personal property, and the Trust Units shall be bequeathed, assigned,
disposed of and distributed as intangible personal property. No Trust Unitholder
as such shall have any title, legal or equitable, in or to any real property
interest or tangible personal property interest that may be considered a part of
the Trust Estate, including, without limiting the foregoing, the Royalty
Interests or any part thereof, or in or to any asset of the Trust Estate to the
extent that an interest in such asset would cause the interest of a Trust
Unitholder to be treated as other than an intangible personal property interest,
but the sole interest of each Trust Unitholder shall be his ownership in the
Beneficial Interest. No Trust Unitholder shall have the right to call for or
demand or secure any partition or distribution of the Royalty Interests or any
other asset of the Trust Estate or any accounting during the continuance of the
Trust or during the period of liquidation and winding up under Section 9.03 of
this Agreement. Pursuant to Section 3803(a) of the Trust Act, the Trust
Unitholders shall be entitled, to the fullest extent permitted by law, to the
same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
Section 4.03 Effect of Transfer. As to matters affecting the title,
ownership, warranty or transfer of Trust Units, Article 8 of the Uniform
Commercial Code, the Uniform Act for Simplification of Fiduciary Security
Transfers, and other statutes and rules with respect to the transfer of
securities, each as is adopted and then in force in the State of Delaware, shall
govern and apply. The death of any Trust Unitholder shall not entitle the
Transferee of such Trust Unitholder to an accounting or valuation for any
purpose pursuant to the terms hereof.
Section 4.04 Determination of Ownership. In the event of any
disagreement between Persons claiming to be Transferees of any Trust Unit, or in
the event of any question on the part of the Trustee when presented with a
request for transfer of a Trust Unit, which the Trustee believes is not fully
resolved by opinions of counsel or other documents obtained in connection
therewith, then, in addition to other rights which it may have under applicable
law, the Trustee shall be entitled at its option to refuse to recognize any such
claim so long as such disagreement or question shall continue. In so refusing,
the Trustee, and any Entity serving in such capacity, may elect to make no
disposition of the interest represented by the Trust Unit involved, or any part
thereof, or of any sum or sums of money accrued or accruing thereunder, and, in
so doing, the Trustee shall not be or become liable to any Person for the
failure or refusal of the Trustee to comply with such conflicting claims or
requests for transfer, and shall be entitled to continue so to refrain and
refuse so to act, until:
(a) the rights of the adverse claimants or the questions of the
Trustee have been adjudicated by a final nonappealable judgment of a
court assuming and having jurisdiction of the parties and the interest
and money involved or
17
(b) all differences have been adjusted by valid agreement
between said parties and the Trustee shall have been notified thereof in
writing signed by all of the interested parties.
ARTICLE V
ACCOUNTING AND DISTRIBUTIONS; REPORTS
Section 5.01 Fiscal Year and Accounting Method. The Trust shall adopt
the calendar year as its fiscal year and shall maintain its books on an
appropriate basis to comply with Sections 5.03 and 5.04, except to the extent
such books must be maintained on any other basis pursuant to applicable law.
Section 5.02 Quarterly Distributions. At least five Business Days (or
such longer period of time as may be required by the rules of any securities
exchange or quotation system on which the Trust Units are listed or admitted to
trading) prior to each Quarterly Record Date, the Trustee shall, in the manner
required by the rules of any securities exchange or quotation system on which
the Trust Units are listed or admitted to trading, communicate to the Trust
Unitholders its determination of the amount of the Quarterly Cash Distribution
for the relevant Quarterly Period based on (i) information provided to the
Trustee by ECA pursuant to the terms of the Conveyances with respect to the cash
proceeds to be received by the Trust in respect of the Royalty Interests, (ii)
the amount of interest estimated by the Trustee to be earned on such cash
proceeds during the period held by the Trust and (iii) the calculation by the
Trust of the amount of any Quarterly Incentive Distribution. Any excess of
interest actually earned on such cash proceeds over the interest expected to be
earned thereon shall be included in the next Quarterly Distribution Amount. Any
deficit in interest actually earned compared to the interest expected to be
earned shall be made up from appropriate cash reserves of the Trust established
for that purpose, and the amount of any reduction in such reserve shall be
treated as an administrative expense of the Trust for the Quarterly Period in
which the deficit is realized. On each Quarterly Payment Date, the Trustee shall
distribute pro rata the Quarterly Cash Distribution with respect to the
immediately preceding Quarterly Period, which shall include an amount previously
determined by the Trustee, pursuant to this Section 5.02, as that amount of
interest expected to be earned on each such amount from the date of receipt
thereof by the Trustee to the Quarterly Payment Date, to Trust Unitholders of
record on the Quarterly Record Date for such Quarterly Period.
Section 5.03 Reports to Trust Unitholders and Others.
(a) Within 75 days following the end of each of the first three
Quarterly Periods of each calendar year or such shorter period of time
as may be required by the rules and regulations of the Commission
adopted with respect to the Exchange Act or by the rules of any
securities exchange or quotation system on which the Trust Units are
listed or admitted to trading, the Trustee shall mail to each Person who
was a Trust Unitholder of record on the Quarterly Record Date for such
Quarterly Period a report which shall show in reasonable detail the
assets and liabilities and receipts and disbursements of the Trust for
such Quarterly Period. Within 120 days following the end of each fiscal
year or such shorter period of time as may be required by the rules and
regulations of the Commission adopted with respect to the Exchange Act
or by the rules
18
of any securities exchange or quotation system on which the Trust Units
are listed or admitted to trading, the Trustee shall mail to each
Person who was a Trust Unitholder of record on a date to be selected by
the Trustee an annual report, containing financial statements audited
by a nationally recognized firm of independent public accountants
selected by the Trustee, plus such annual reserve information regarding
the Royalty Interests as may be required by any regulatory authority
having jurisdiction.
(b) Notwithstanding any time limit imposed by paragraph (a) or
(b) of this Section 5.03, if, due to a delay in receipt by the Trustee
of information necessary for preparation of a report or reports
required by such paragraphs, the Trustee shall be unable to prepare and
mail such report or reports within such time limit, the Trustee shall
prepare and mail such report or reports as soon thereafter as
practicable.
Section 5.04 Federal Income Tax Provisions. The provisions attached
hereto as Exhibit A are intended to comply with federal income tax law governing
the allocation of such items of income, gain, loss and deduction of the Trust
and the maintenance of the capital accounts of the Trust Unitholders and are
incorporated herein by reference.
ARTICLE VI
LIABILITY OF DELAWARE TRUSTEE AND TRUSTEE AND METHOD OF
SUCCESSION
Section 6.01 Liability of Delaware Trustee, Trustee and Agents.
(a) Notwithstanding any other provision of this Agreement,
each of the Delaware Trustee and the Trustee, in carrying out its
powers and performing its duties, may act directly or in its
discretion, at the expense of the Trust, through Agents or attorneys
pursuant to agreements entered into with any of them, and each Entity
serving as Delaware Trustee or Trustee shall be personally or
individually liable only for (a) its own fraud or acts or omissions in
bad faith or which constitute gross negligence and (b) taxes, fees or
other charges on, based on or measured by any fees, commissions or
compensation received by it in connection with any of the transactions
contemplated by this Agreement, and shall not otherwise be individually
or personally liable under any circumstances whatsoever, including but
not limited to any act or omission of any Agent unless such Entity has
acted in bad faith or with gross negligence in the selection, retention
or supervision of such Agent. Notwithstanding any other provision of
this Agreement, each Agent of the Delaware Trustee and the Trustee
(including ECA and any of the Affiliates when acting as Agents), in
carrying out its powers and performing its duties, may act directly or
in its discretion, at the expense of the Trust, through agents or
attorneys engaged by such Agent, and shall not otherwise be
individually or personally liable for any act or omission unless such
Agent has acted in bad faith or with gross negligence. Neither the
Trustee nor the Delaware Trustee shall have any liability to any
Persons other than the Trust Unitholders in accordance with Section
3803 of the Trust Act and, for the avoidance of any doubt, shall not
have any liability hereunder to the Trust Unitholders absent its own
gross negligence or willful misconduct. No Entity serving as Trustee or
Delaware Trustee shall be individually liable by reason of any act or
omission of any other Entity serving as Trustee or Delaware Trustee.
19
(b) Each of the Delaware Trustee and the Trustee, and each
Entity serving in any such fiduciary capacity or as an Agent of the
Delaware Trustee or the Trustee (including ECA and any of its
Affiliates when acting as Agents), shall be protected in relying or
reasonably acting upon any notice, certificate, assignment, opinion or
advice of counsel, report of certified accountant, petroleum engineer,
auditor or other expert, credential, or any other document or
instrument. Each of the Delaware Trustee and the Trustee, and each
Entity serving in any such fiduciary capacity or as an Agent of the
Delaware Trustee or the Trustee (including ECA and any of its
Affiliates when acting as Agents), is specifically authorized to rely
upon the application of Article 8 of the Uniform Commercial Code, the
application of the Uniform Act for Simplification of Fiduciary Security
Transfers and the application of other statutes and rules with respect
to the transfer of securities, each as is adopted and then in force in
the State of Delaware, as to all matters affecting title, ownership,
warranty or transfer of the Trust Units, without any personal liability
for such reliance, and the indemnity granted under Section 6.02 of this
Agreement shall specifically extend to any matters arising as a result
thereof. Further, and without limiting the foregoing, each of the
Delaware Trustee, the Trustee and each Entity serving in either such
capacity is specifically authorized and directed to rely upon the
validity of each of the Conveyances and the title held by the Trust in
the Royalty Interests pursuant thereto, and is further specifically
authorized and directed to rely upon opinions of counsel in each of the
states in which Underlying Properties are located, without any
liability in any capacity for such reliance.
Section 6.02 Indemnification of Trustee or Delaware Trustee.
(a) Each Entity serving as the Trustee or the Delaware
Trustee, as well as each of their respective Agents (including ECA and
any of its Affiliates when acting as Agents) and stockholders, shall be
indemnified and held harmless by, and receive reimbursement from, the
Trust Estate against and from any and all liabilities, obligations,
actions, suits, costs, expenses, claims, damages, losses, penalties,
taxes, fees and other charges (collectively, "Expenses," excluding,
however, any taxes and fees payable by the Trustee and the Delaware
Trustee on, based on or measured by any fees, commissions or
compensation received by the Trustee and the Delaware Trustee for their
services hereunder) incurred by it individually in the administration
of the Trust and the Trust Estate or any part or parts thereof, or in
the doing of any act done or performed or omission occurring on account
of its being Trustee or Delaware Trustee, except such Expenses as to
which it is liable under Section 6.01 of this Agreement (it being
understood that each Entity serving as the Trustee or the Delaware
Trustee (and their respective Agents and stockholders) shall be
indemnified by, and receive reimbursement from, the Trust Estate
against such Entity's own negligence which does not constitute gross
negligence). Each Entity serving as the Trustee or the Delaware Trustee
shall have a lien upon the Trust Estate for payment of such
indemnification and reimbursement (including, without limitation,
repayment of any funds borrowed from any Entity serving as a fiduciary
hereunder), as well as for compensation to be paid to such Entity, in
each case entitling such Entity to priority as to payment thereof over
payment to any other Person under this Agreement. Neither the Trustee,
the Delaware Trustee nor any Entity serving in either of such
capacities, nor any Agent thereof shall be entitled to any
reimbursement or indemnification from any Trust Unitholder for any
Expense incurred
20
by the Delaware Trustee or the Trustee or any such Entity or Agent
thereof, their right of reimbursement and indemnification, if any,
except as provided in Section 6.02(b) below, being limited solely to
the Trust Estate, whether or not the Trust Estate is exhausted without
full reimbursement or indemnification of the Trustee, the Delaware
Trustee or any such Entity or Agent thereof. All legal or other
expenses reasonably incurred by the Trustee or the Delaware Trustee in
connection with the investigation or defense of any Expenses as to
which such Entity is entitled to indemnity under this Section 6.02(a)
shall be paid out of the Trust Estate.
(b) ECA shall indemnify and hold harmless each Entity serving
as the Delaware Trustee or the Trustee (but not the Trust Estate or
Trust Unitholders), and any Agents and stockholders thereof,
individually and as trustee, against any Expenses to which such Entity
or Agent thereof may become subject as a result of its position and
service as trustee under or with respect to any Environmental Law,
insofar as such Expenses arise out of, are based upon or connected with
the Underlying Properties, except for Expenses arising from any acts of
such Entity or Agent not contemplated hereunder. The obligations of ECA
hereunder may be assigned or transferred to any Entity acquiring the
Underlying Property to which each Expense relates, provided such Entity
unconditionally agrees in writing, reasonably satisfactory to the
Trustee and the Delaware Trustee, to assume ECA's obligations under
this Section 6.02(b).
(c) If any action or proceeding shall be brought or asserted
against the Trustee or the Delaware Trustee or any Agent or stockholder
thereof (each referred to as an "Indemnified Party" and, collectively,
the "Indemnified Parties") in respect of which indemnity may be sought
from ECA (the "Indemnifying Party") pursuant to Section 6.02(b) hereof,
of which the Indemnified Party shall have received notice, the
Indemnified Party shall promptly notify the Indemnifying Party in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all expenses. The Indemnified
Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Indemnified
Party unless (i) the Indemnifying Party has agreed to pay such fees and
expenses, (ii) the Indemnifying Party shall have failed to assume the
defense of such action or proceeding and employ counsel reasonably
satisfactory (including the qualifications of such counsel) to the
Indemnified Party on any such action or proceeding or (iii) the named
parties to any such action or proceeding include both the Indemnified
Party and the Indemnifying Party, and the Indemnified Party shall have
been advised by counsel that there may be one or more legal defenses
available to such Indemnified Party that are different from or
additional to those available to the Indemnifying Party (in which case,
if the Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense of such action or proceeding on behalf of the
Indemnified Party and the Indemnified Party may employ such counsel for
the defense of such action or proceeding as is reasonably satisfactory
to the Indemnifying Party; it being understood, however, that the
Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same
21
jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys for the Indemnified Parties at any time).
The Indemnifying Party shall not be liable for any settlement of any
such action or proceeding effected without the written consent of the
Indemnifying Party, but, if settled with such written consent, or if
there be a final judgment for the plaintiff in any such action or
proceeding, the Indemnifying Party agrees (to the extent stated above)
to indemnify and hold harmless the Indemnified Party from and against
any loss or liability by reason of such settlement or judgment.
(d) Any claim for indemnification pursuant to this Section
6.02 shall survive the termination of this Agreement.
Section 6.03 Resignation of Delaware Trustee and Trustee. Any Entity
serving as the Delaware Trustee or the Trustee may resign, as such, with or
without cause, at any time by written notice to ECA, to any other Entity serving
as the Delaware Trustee or the Trustee, and to each of the then Trust
Unitholders of record in accordance with Section 12.08 of this Agreement. Such
notice shall specify a date when such resignation shall take effect, which shall
be a Business Day not less than 60 days after the date such notice is mailed;
provided, however, that in no event shall any resignation of the Trustee be
effective until a successor Trustee has accepted its appointment as Trustee
pursuant to the terms hereof; and provided further that in no event shall any
resignation of the Delaware Trustee be effective until a successor Delaware
Trustee has accepted its appointment as Delaware Trustee pursuant to the terms
hereof.
Section 6.04 Removal of Delaware Trustee and Trustee. Each Entity
serving as the Delaware Trustee or the Trustee may be removed as trustee
hereunder, with or without cause, by the vote of not less than a majority of the
then outstanding Trust Units at a meeting held in accordance with the
requirements of Article VIII, provided that any removal of the Delaware Trustee
shall be effective only at such time as a successor Delaware Trustee, fulfilling
the requirements of Section 3807(a) of the Trust Act, has been appointed and has
accepted such appointment, and provided further that any removal of the Trustee
shall be effective only at such time as a successor Trustee has been appointed
and has accepted such appointment. The Trust Unitholders present or represented
at any such meeting where a trustee is removed may elect, in accordance with the
requirements of Article VIII of this Agreement, a successor trustee at such
meeting, who may accept such appointment effective as of the close of such
meeting.
Section 6.05 Appointment of Successor Delaware Trustee or Trustee. In
the event of the resignation or removal of the Entity serving as the Delaware
Trustee or the Trustee or if any such Entity has given notice of its intention
to resign as the Delaware Trustee or the Trustee, the Trust Unitholders
represented at a meeting held in accordance with the requirements of Article
VIII may appoint a successor trustee. Nominees for appointment may be made by
(i) ECA, (ii) the resigned, resigning or removed trustee or (iii) any Trust
Unitholder or Trust Unitholders owning of record at least 10% of the then
outstanding Trust Units. Any successor to the Trustee shall be a bank or trust
company having combined capital, surplus and undivided profits of at least
$100,000,000. Any successor to the Delaware Trustee shall be a bank or trust
company having its principal place of business in the State of Delaware and
having combined capital, surplus and undivided profits of at least $20,000,000.
Notwithstanding any provision herein to the contrary, in the event that a new
trustee has not been approved within 60 days after
22
a notice of resignation, a vote of Trust Unitholders removing a Trustee or other
occurrence of a vacancy, a successor trustee may be appointed by any State or
Federal District Court having jurisdiction in New Castle County, Delaware, upon
the application of any Trust Unitholder, ECA or the Entity tendering its
resignation or being removed as trustee filed with such court, and in the event
any such application is filed, such court may appoint a temporary trustee at any
time after such application is filed, which shall, pending the final appointment
of a trustee, have such powers and duties as the court appointing such temporary
trustee shall provide in its order of appointment, consistent with the
provisions of this Agreement. Any such temporary trustee need not meet the
minimum standards of capital, surplus and undivided profits otherwise required
of a successor trustee under this Section 6.05. Nothing herein shall prevent the
same Entity from serving as both the Delaware Trustee and the Trustee if it
meets the qualifications thereof.
Immediately upon the appointment of any successor trustee, all rights,
titles, duties, powers and authority of the succeeded trustee hereunder (except
to the succeeded trustee's rights to amounts payable under Article VII or
Section 6.02 hereof accruing through the appointment of such successor trustee)
shall be vested in and undertaken by the successor trustee, which shall be
entitled to receive from the predecessor trustee all of the Trust Estate held by
it hereunder and all records and files of the predecessor trustee in connection
therewith. Any resigning or removed trustee shall account to its successor for
its administration of the Trust. All successor trustees shall be fully protected
in relying upon such accounting and no successor trustee shall be obligated to
examine or seek alteration of any account of any preceding trustee, nor shall
any successor trustee be personally liable for failing to do so or for any act
or omission of any preceding trustee. The preceding sentence shall not prevent
any successor trustee or anyone else from taking any action otherwise
permissible in connection with any such account.
Section 6.06 Laws of Other Jurisdictions. If notwithstanding the other
provisions of this Agreement (including, without limitation, Section 12.06
hereof) the laws of jurisdictions other than the State of Delaware (each being
referred to below as "such jurisdiction") apply to the administration of
properties under this Agreement, the following provisions shall apply. If it is
necessary or advisable for a trustee to serve in such jurisdiction and if the
Trustee is disqualified from serving in such jurisdiction or for any other
reason fails or ceases to serve there, the ancillary trustee in such
jurisdiction shall be such Entity, which need not meet the requirements set
forth in the third sentence of Section 6.05 of this Agreement, as shall be
designated in writing by ECA and the Trustee. To the extent permitted under the
laws of such jurisdiction, ECA and the Trustee may remove the trustee in such
jurisdiction, without cause and without necessity of court proceeding, and may
or may not appoint a successor trustee in such jurisdiction from time to time.
The trustee serving in such jurisdiction shall, to the extent not prohibited
under the laws of such jurisdiction, appoint the Trustee to handle the details
of administration in such jurisdiction. The trustee in such jurisdiction shall
have all rights, powers, discretions, responsibilities and duties as are
delegated in writing by the Trustee, subject to such limitations and directions
as shall be specified by the Trustee in the instrument evidencing such
appointment. Any trustee in such jurisdiction shall be responsible to the
Trustee for all assets with respect to which such trustee is empowered to act.
To the extent the provisions of this Agreement and Delaware law cannot be made
applicable to the administration in such jurisdiction, the rights, powers,
duties and liabilities of the trustee in such jurisdiction shall be the same (or
as near the same as permitted under the laws of such jurisdiction if applicable)
as if governed by Delaware law. In all events, the administration in such
jurisdiction shall be as free
23
and independent of court control and supervision as permitted under the laws of
such jurisdiction. The fees and expenses of any ancillary trustee shall
constitute an administrative expense of the Trust payable from the Trust Estate.
Whenever the term "Trustee" is applied in this Agreement to the administration
in such jurisdiction, it shall refer only to the trustee then serving in such
jurisdiction.
Section 6.07 Reliance on Experts. The Trustee and the Delaware Trustee
may, but shall not be required to, consult with counsel (which may but need not
be counsel to ECA), accountants, geologists, engineers and other parties deemed
by the Trustee or the Delaware Trustee to be qualified as experts on the matters
submitted to them, and, subject to Section 6.01 but notwithstanding any other
provision of this Agreement the opinion or advice of any such party on any
matter submitted to it by the Trustee or the Delaware Trustee shall be full and
complete authorization and protection in respect of any action taken, omitted or
suffered by the Trustee or the Delaware Trustee hereunder in good faith in
reliance upon and in accordance with the opinion or advice of any such party.
Each of the Trustee and the Delaware Trustee is authorized to make payments of
all reasonable fees for services and expenses thus incurred out of the Trust
Estate. Neither the Delaware Trustee nor the Trustee shall incur any liability
to anyone in acting upon any signature, instrument, notice, resolution, request,
consent, order, certificate, report, opinion, bond or other document or paper
reasonably believed by it to be genuine and reasonably believed by it to be
signed by the proper party or parties. The Delaware Trustee and the Trustee may
accept a certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the manner or ascertainment of which is not
specifically prescribed herein, the Delaware Trustee and the Trustee may for all
purposes hereof rely on a certificate, signed by the president or any vice
president or by the treasurer or any assistant treasurer and by the secretary or
any assistant secretary of the relevant party, as to such fact or matter, and
such certificate shall constitute full protection and authorization to the
Delaware Trustee and the Trustee for any action taken or omitted to be taken by
it in good faith in reliance thereon.
Section 6.08 Force Majeure. The Trustee and the Delaware Trustee shall
not incur any liability to any Trust Unitholder if, by reason of any current or
future law or regulation thereunder of the federal government or any other
governmental authority, or by reason of any act of God, war or other
circumstance beyond its control, the Trustee or the Delaware Trustee is
prevented or forbidden from doing or performing any act or thing required by the
terms hereof to be done or performed; nor shall the Trustee or the Delaware
Trustee incur any liability to any Trust Unitholder by reason of any
nonperformance or delay caused as aforesaid in the performance of any act or
thing required by the terms hereof to be done or performed, or by reason of any
exercise of, or failure to exercise, any discretion provided for herein caused
as aforesaid.
Section 6.09 Failure of Action by ECA. In the event that ECA shall fail
or is unable to take any action as required under any provision of this
Agreement, the Trustee is empowered to take such action.
Section 6.10 Action Upon Instructions. Whenever the Delaware Trustee is
unable to decide between alternative courses of action permitted or required by
the terms of this
24
Agreement, or is unsure as to the application, intent, interpretation or meaning
of any provision of this Agreement, the Delaware Trustee shall promptly give
notice (in such form as shall be appropriate under the circumstances) to the
Trustee requesting instruction as to the course of action to be adopted, and, to
the extent the Delaware Trustee acts in good faith in accordance with any such
instruction received, the Delaware Trustee shall not be liable on account of
such action to any Person. If the Delaware Trustee shall not have received
appropriate instructions within ten calendar days of sending such notice to the
Trustee (or within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances) it may, but shall be
under no duty to, take or refrain from taking such action which is consistent,
in its view, with this Agreement, and the Delaware Trustee shall have no
liability to any Person for any such action or inaction.
Section 6.11 Management of Trust Estate. The Delaware Trustee shall
have no duty or obligation to manage, control, prepare, file or maintain any
report, license or registration, use, sell, dispose of or otherwise deal with
the Trust Estate, or otherwise to take or refrain from taking any action under
or in connection with this Agreement, or any other document or instrument,
except as expressly required hereby.
Section 6.12 Validity. The Delaware Trustee shall not be responsible
for or in respect of and makes no representations as to the validity or
sufficiency of any provision of this Agreement or for the due execution hereof
by the other parties hereto or for the form, character, genuineness,
sufficiency, value or validity of any of the Trust Estate, and the Delaware
Trustee shall in no event assume or incur any liability, duty or obligation to
ECA, the Trustee or any Trust Unitholder, other than as expressly provided for
herein. The Delaware Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any of the Trust Units.
Section 6.13 Rights and Powers; Litigation. The Delaware Trustee shall
be under no obligation to exercise any of the rights or powers vested in it by
this Agreement, or to institute, conduct or defend any litigation or arbitration
under this Agreement or otherwise or in relation to this Agreement, at the
request, order or direction of the Trustee, any Trust Unitholder or ECA unless
the Trustee, Trust Unitholder or ECA, as the case may be, has or have offered to
the Delaware Trustee security or indemnity reasonably satisfactory to it against
the costs, expenses and liabilities that may be incurred by the Delaware Trustee
therein or thereby. The Delaware Trustee shall be under no obligation to appear
in, prosecute or defend any action, or to take any other action other than the
giving of notices, which in its opinion may require it to incur any
out-of-pocket expense or any liability unless it shall be furnished with such
security and indemnity against such expense or liability as it may reasonably
require. The right of the Delaware Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the Delaware
Trustee shall not be personally liable or accountable for the performance of any
such act except as specifically provided in Section 6.01.
Section 6.14 No Duty to Act Under Certain Circumstances.
Notwithstanding anything contained herein to the contrary, the Delaware Trustee
will not be required to take any action in any jurisdiction other than in the
State of Delaware if the taking of such action would (i) require the consent of
approval or authorization or order of or the giving of notice to, or the
registration with or taking of any action in respect of, any state or other
governmental authority
25
or agency of any jurisdiction other than in the State of Delaware, (ii) result
in any fee, tax or governmental charge under the laws of any jurisdiction or any
political subdivisions thereof other than the State of Delaware becoming payable
by the Delaware Trustee; or (iii) subject the Delaware Trustee to personal
jurisdiction in any jurisdiction other than the State of Delaware for causes of
action arising from acts unrelated to the consummation of the transactions by
the Delaware Trustee contemplated hereby.
ARTICLE VII
COMPENSATION OF THE TRUSTEE AND THE DELAWARE TRUSTEE
Section 7.01 Compensation of Trustee and Delaware Trustee. The Entity
serving as the Trustee hereunder shall receive compensation for its services as
the Trustee hereunder as set forth in Schedule A attached hereto. The Entity
serving as the Delaware Trustee hereunder shall receive compensation for its
services as the Delaware Trustee hereunder as set forth in the Fee Agreement
attached hereto as Schedule B. Entities serving as the Trustee or the Delaware
Trustee hereunder shall be reimbursed for all actual expenditures made in
connection with administration of the Trust, including those made on account of
any unusual duties in connection with matters pertaining to the Trust and the
reasonable compensation and expenses of their counsel, accountants or other
skilled persons and of all other persons not regularly in their employ. Any
unusual or extraordinary services rendered by the Entity serving as Trustee or
by the Entity serving as Delaware Trustee in connection with the administration
of the Trust shall be treated as trustee administrative services for purpose of
computing the respective administrative fee to be paid to each Entity serving as
trustee hereunder.
Section 7.02 Reimbursement of ECA. ECA shall be entitled to
reimbursement from the Trust for all out-of-pocket costs and expenses paid by
ECA, acting in its capacity as Agent of the Trust (including without limitation
legal, accounting, engineering and printing costs) but excluding those costs and
expenses specified in paragraph (a) of Section 3.12 and in paragraph (b) of
Section 6.02 of this Agreement as costs and expenses to be paid by ECA, promptly
upon submission of written evidence thereof to the Trustee.
Section 7.03 Source of Funds. Except as provided in paragraph (a) of
Section 3.12 and paragraph (b) of Section 6.02 of this Agreement, all
compensation, reimbursements, and other charges owing to any Entity as a result
of its services as a trustee hereunder shall constitute indebtedness hereunder,
shall be payable by the Trust out of the Trust Estate and such Entity shall have
a lien on the Trust Estate for payment of such compensation, reimbursements and
other charges, entitling such Entities to priority as to payment thereof over
payment to any other Person under this Agreement.
Section 7.04 Ownership of Units by ECA, the Delaware Trustee and the
Trustee. Each of the Delaware Trustee and, the Trustee, in its individual or
other capacity, may become the owner or pledgee of Trust Units with the same
rights it would have if it were not a trustee hereunder. ECA and each of its
Affiliates may become the owner of Trust Units with the same rights and entitled
to the same benefits as any other Trust Unitholder.
26
ARTICLE VIII
MEETINGS OF TRUST UNITHOLDERS
Section 8.01 Purpose of Meetings. A meeting of the Trust Unitholders
may be called at any time and from time to time pursuant to the provisions of
this Article VIII to transact any matter that the Trust Unitholders may be
authorized to transact.
Section 8.02 Call and Notice of Meetings. Any such meeting of the Trust
Unitholders may be called by the Trustee or by Trust Unitholders owning of
record not less than 10% in number of the then outstanding Trust Units. The
Trustee may, but shall not be obligated to, call meetings of Trust Unitholders
to consider amendments, waivers, consents and other changes relating to the
Conveyances, the Hedge Agreements or the Development Agreement. In addition, at
the written request of the Delaware Trustee, the Trustee shall call such a
meeting but only for the purpose of appointing a successor to the Delaware
Trustee upon its resignation. All such meetings shall be held at such time and
at such place as the notice of any such meeting may designate. Except as may
otherwise be required by any applicable law or by any securities exchange on
which the Trust Units may be listed or admitted to trading or the NASDAQ,
written notice of every meeting of the Trust Unitholders signed by the Trustee
or the Trust Unitholders calling the meeting, setting forth the time and place
of the meeting and in general terms the matters proposed to be acted upon at
such meeting, shall be given in person or by mail not more than 60 nor less than
20 days before such meeting is to be held to all of the Trust Unitholders of
record at the close of business on a record date selected by the Trustee (the
"Record Date Trust Unitholders"), which shall be not more than 60 days before
the date of such mailing. If such notice is given to any Trust Unitholder by
mail, it shall be directed to such Trust Unitholder at its last address as shown
by the ownership ledger of the Trustee and shall be deemed duly given when so
addressed and deposited in the United States mail, postage paid. No matter other
than that stated in the notice shall be acted upon at any meeting unless such
action is approved by the Trust Unitholders. Only Record Date Trust Unitholders
shall be entitled to notice of and to exercise rights at or in connection with
the meeting. All costs associated with calling any meeting of the Trust
Unitholders shall be borne by the Trust other than a meeting of the Trust
Unitholders called by Trust Unitholders owning of record not less than 10% in
number of the then outstanding Trust Units, which costs shall be borne by the
Trust Unitholders that called such meeting of Trust Unitholders.
Section 8.03 Method of Voting and Vote Required. Each Record Date Trust
Unitholder shall be entitled to one vote for each Trust Unit owned by such
Record Date Trust Unitholder, and any Record Date Trust Unitholder may vote in
person or by duly executed written proxy. At any such meeting, the presence in
person or by proxy of Record Date Trust Unitholders holding a majority of the
Trust Units held by all Record Date Trust Unitholders shall constitute a quorum,
and, except as otherwise provided herein, any matter shall be deemed to have
been approved by the Trust Unitholders (including, but not limited to,
appointment of a successor trustee and approval of amendments, waivers, consents
and other changes relating to the Conveyances, the Hedge Agreements or the
Development Agreement) if it is approved by the vote of Record Date Trust
Unitholders holding more than 50% of the Trust Units represented at the meeting.
27
Section 8.04 Conduct of Meetings. The Trustee may make such reasonable
regulations consistent with the provisions hereof as it may deem advisable for
any meeting of the Trust Unitholders, for the appointment of proxies, and in
regard to the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
the preparation and use at the meeting of a list authenticated by or on behalf
of the Trustee of the Trust Unitholders entitled to vote at the meeting and such
other matters concerning the conduct of the meeting as it shall deem advisable.
ARTICLE IX
DURATION, REVOCATION AND TERMINATION OF TRUST
Section 9.01 Revocation. Subject to the third sentence of this Section
9.01, the Trust is and shall be irrevocable and ECA, as trustor, after the
Closing, retains no power to alter, amend (except as provided otherwise in this
Article IX and in Section 10.02 hereof), revoke or terminate the Trust. The
Trust shall be terminable only as provided in Section 9.02 of this Agreement,
and shall continue until so terminated. Prior to the Closing, ECA may revoke the
Trust by written notice to the Trustee, in which event the Trustee shall
reconvey the Trust Estate, less any expenses or liabilities of the Trust, to
ECA.
Section 9.02 Termination. The Trust shall dissolve and commence
winding-up its business and affairs upon the first to occur of the following
events or times:
(a) the disposition of all Royalty Interests and any cash or
other assets, tangible or intangible, including accounts receivable and
claims or rights to payment;
(b) the action by Trust Unitholders of record holding a
majority of the then outstanding Trust Units in accordance with Article
VIII of this Agreement to terminate the Trust;
(c) annual cash proceeds received by the Trust attributable to
the Royalty Interests and the Hedge Agreements are less than $1 million
for each of two consecutive years; and
(d) the Liquidation Date.
Section 9.03 Disposition and Distribution of Assets and Properties.
Notwithstanding the dissolution of the Trust pursuant to Section 9.02, the
Trustee and the Delaware Trustee shall continue to act as trustees of the Trust
Estate and as such shall exercise the powers granted under this Agreement until
their duties have been fully performed and the Trust Estate finally distributed
so that the affairs of the Trust may be liquidated and wound up. The net
proceeds from any sale of the Royalty Interests made as provided in Section
3.02(a) shall be Sales Proceeds Amounts, which are treated as cash receipts of
the Trust during the Quarterly Period in which the net proceeds are received;
provided that the Trustee shall first pay, satisfy and discharge all liabilities
of the Trust, or if necessary, set up cash reserves in such amounts as the
Trustee in its discretion deems appropriate for contingent liabilities. The
Trustee shall not be required to obtain approval of the Trust Unitholders prior
to performing any of its duties pursuant to this Section 9.03. Upon making final
distribution to the Trust Unitholders, neither the
28
Trustee nor the Entity serving in such capacity shall be under further liability
except as provided in Section 6.01.
Section 9.04 Reorganization or Business Combination.
(a) The Trust may merge or consolidate with or into one or
more limited partnerships, general partnerships, corporations,
statutory trusts, common law trusts, limited liability companies, or
associations, or unincorporated businesses in accordance with Section
3815 of the Trust Act if such transaction (i) is agreed to by the
Trustee and by the affirmative vote of Trust Unitholders owning more
than 50% of the then outstanding Trust Units at a meeting duly called
and held in accordance with Article VIII, and (ii) is permitted under
the Trust Act and any other applicable law. The Trustee shall give
prompt notice of such reorganization or business combination to the
Delaware Trustee. Pursuant to and in accordance with the provisions of
Section 3815(f) of the Trust Act, and notwithstanding anything else
herein, an agreement of merger or consolidation approved in accordance
with this Section may effect any amendment to this Agreement or effect
the adoption of a new trust agreement if it is the surviving or
resulting trust in the merger or consolidation.
(b) Upon the effective date of a certificate of merger duly
filed in accordance with the Trust Act, the following shall be deemed
to occur, in addition to such effects as may be specified under the
Trust Act as then in effect:
(i) all of the rights, privileges and powers of each
of the business entities that has merged or consolidated, and
all property, real, personal and mixed, and all debts due to
any of those business entities and all other things and causes
of action belonging to each of those business entities shall
be vested in the surviving business entity and, after the
merger or consolidation, shall be the property of the
surviving business entity to the extent they were part of each
constituent business entity;
(ii) the title to any real property vested by deed or
otherwise in any of those constituent business entities shall
not revert and shall not be in any way impaired because of the
merger or consolidation;
(iii) all rights of creditors and all liens on or
security interest in property of any of those constituent
business entities shall be preserved unimpaired;
(iv) all debts, liabilities and duties of those
constituent business entities shall attach to the surviving
business entity, and may be enforced against it to the same
extent as if the debts, liabilities and duties had been
incurred or contacted by it; and
(v) if the Trust is the surviving or resulting
entity, the governing instrument of the Trust shall be amended
or a new governing instrument adopted as set forth in the
certificate of merger.
29
(c) A merger or consolidation effected pursuant to this
Section 9.04 shall not be deemed to result in a transfer or assignment
of assets or liabilities from one entity to another having occurred.
ARTICLE X
AMENDMENTS
Section 10.01 Prohibited Amendments. After the Closing, no amendment
may be made to any provision of this Agreement that would:
(a) increase the power of the Delaware Trustee or the Trustee
to engage in business or investment activities;
(b) alter the right of the Trust Unitholders vis-a-vis each
other; or
(c) unless consented to in writing by ECA, have the effect of
amending Sections 3.02, 6.02, 7.02, 9.03, 10.01 or 10.02 hereof.
Section 10.02 Permitted Amendments. Prior to the Closing, amendments to
the provisions of this Agreement may be made by mutual agreement of the Delaware
Trustee, the Trustee and ECA, jointly, and no party shall have liability to any
Trust Unitholder for any amendment, including any amendment that increases or
decreases any right, benefit or liability of any present or future Trust
Unitholder. After the Closing, the Delaware Trustee and the Trustee may,
jointly, from time to time supplement or amend this Agreement, the Conveyances,
the Hedge Agreements or the Development Agreement without the approval of Trust
Unitholders in order to cure any ambiguity, to correct or supplement any
provision contained herein or therein which may be defective or inconsistent
with any other provisions herein or therein, to grant any benefit to all of the
Trust Unitholders, or to change the name of the Trust, provided that such
supplement or amendment does not adversely affect the interests of the Trust
Unitholders, and provided further that any amendment to this Agreement made to
change the name of the Trust in accordance with Section 12.04 hereof or
otherwise shall be conclusively deemed not to affect adversely the interests of
the Trust Unitholders. The Trustee and the Delaware Trustee, subject to the
provisions of Sections 6.01 and 6.07 are entitled to, and may rely upon, a
written opinion of counsel as conclusive evidence that any amendment or
supplement pursuant to the immediately preceding sentence complies with the
provisions of this Section 10.02. All other permitted amendments to the
provisions of this Agreement may be made only by a vote of the Trust Unitholders
of record holding a majority of the then outstanding Trust Units at a meeting
held in accordance with the requirements of Article VIII. No amendment that
increases the obligations, duties or liabilities or affects the rights of the
Delaware Trustee, the Trustee or any Entity serving in any such capacity shall
be effective without the express written approval of such trustee or Entity.
ARTICLE XI
ARBITRATION
THE PARTIES TO THIS AGREEMENT AGREE THAT, EXCEPT AS PROVIDED IN
PARAGRAPH (I) OF THIS ARTICLE XI, ANY DISPUTE, CONTROVERSY OR CLAIM THAT MAY
ARISE BETWEEN OR AMONG ECA (ON THE ONE HAND) AND THE
30
TRUST OR THE TRUSTEE (ON THE OTHER HAND) IN CONNECTION WITH OR OTHERWISE
RELATING TO THIS AGREEMENT, THE CONVEYANCES, THE HEDGE AGREEMENTS OR THE
DEVELOPMENT AGREEMENT OR THE APPLICATION, IMPLEMENTATION, VALIDITY OR BREACH OF
THIS AGREEMENT OR THE CONVEYANCES OR ANY PROVISION OF THIS INDENTURE OR THE
CONVEYANCES (INCLUDING, WITHOUT LIMITATION, CLAIMS BASED ON CONTRACT, TORT OR
STATUTE), SHALL BE FINALLY, CONCLUSIVELY AND EXCLUSIVELY SETTLED BY BINDING
ARBITRATION IN CHARLESTON, WEST VIRGINIA IN ACCORDANCE WITH THE COMMERCIAL
ARBITRATION RULES (THE "RULES") OF THE AMERICAN ARBITRATION ASSOCIATION OR ANY
SUCCESSOR THERETO ("AAA") THEN IN EFFECT. THE PARTIES TO THIS AGREEMENT (AND ON
BEHALF OF THE TRUST) HEREBY EXPRESSLY WAIVE THEIR RIGHT TO SEEK REMEDIES IN
COURT, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO TRIAL BY JURY, WITH RESPECT
TO ANY MATTER SUBJECT TO ARBITRATION PURSUANT TO THIS ARTICLE XI. ANY PARTY TO
THIS AGREEMENT MAY BRING AN ACTION, INCLUDING, WITHOUT LIMITATION, A SUMMARY OR
EXPEDITED PROCEEDING, IN ANY COURT HAVING JURISDICTION, TO COMPEL ARBITRATION OF
ANY DISPUTE, CONTROVERSY OR CLAIM TO WHICH THIS ARTICLE XI APPLIES. EXCEPT WITH
RESPECT TO THE FOLLOWING PROVISIONS (THE "SPECIAL PROVISIONS") WHICH SHALL APPLY
WITH RESPECT TO ANY ARBITRATION PURSUANT TO THIS ARTICLE XI, THE INITIATION AND
CONDUCT OF ARBITRATION SHALL BE AS SET FORTH IN THE RULES, WHICH RULES ARE
INCORPORATED IN THIS AGREEMENT BY REFERENCE WITH THE SAME EFFECT AS IF THEY WERE
SET FORTH IN THIS AGREEMENT.
(a) In the event of any inconsistency between the Rules and
the Special Provisions, the Special Provisions shall control.
References in the Rules to a sole arbitrator shall be deemed to refer
to the tribunal of arbitrators provided for under subparagraph (c)
below in this Article XI.
(b) The arbitration shall be administered by AAA.
(c) The arbitration shall be conducted by a tribunal of three
arbitrators. Within ten days after arbitration is initiated pursuant to
the Rules, the initiating party or parties (the "Claimant") shall send
written notice to the other party or parties (the "Respondent"), with a
copy to the East Providence, Rhode Island office of AAA, designating
the first arbitrator (who shall not be a representative or agent of any
party but may or may not be an AAA panel member and, in any case, shall
be reasonably believed by the Claimant to possess the requisite
experience, education and expertise in respect of the matters to which
the claim relates to enable such person to completely perform arbitral
duties). Within ten days after receipt of such notice, the Respondent
shall send written notice to the Claimant, with a copy to the East
Providence, Rhode Island office of AAA and to the first arbitrator,
designating the second arbitrator (who shall not be a representative or
agent of any party, but may or may not be an AAA panel member and, in
any case, shall be reasonably believed by the Respondent to possess the
requisite experience, education and expertise in respect of the matters
to which the claim relates to enable such person to competently perform
arbitral duties). Within ten days after such
31
notice from the Respondent is received by the Claimant, the Respondent
and the Claimant shall cause their respective designated arbitrators to
select any mutually agreeable AAA panel member as the third arbitrator.
If the respective designated arbitrators of the Respondent and the
Claimant cannot so agree within said ten day period, then the third
arbitrator will be determined pursuant to the Rules. For purposes of
this Article XI, ECA (on the one hand) and the Trust and the Trustee
(on the other hand) shall each be entitled to the selection of one
arbitrator. Prior to commencement of the arbitration proceeding, each
arbitrator shall have provided the parties with a resume outlining such
arbitrator's background and qualifications and shall certify that such
arbitrator is not a representative or agent of any of the parties. If
any arbitrator shall die, fail to act, resign, become disqualified or
otherwise cease to act, then the arbitration proceeding shall be
delayed for fifteen days and the party by or on behalf of whom such
arbitrator was appointed shall be entitled to appoint a substitute
arbitrator (meeting the qualifications set forth in this Article XI)
within such fifteen day period; provided, however, that if the party by
or on behalf of whom such arbitrator was appointed shall fail to
appoint a substitute arbitrator within such fifteen day period, the
substitute arbitrator shall be a neutral arbitrator appointed by the
AAA arbitrator within fifteen days thereafter.
(d) All arbitration hearings shall be commenced within one
hundred twenty days after arbitration is initiated pursuant to the
Rules, unless, upon a showing of good cause by a party to the
arbitration, the tribunal of arbitrators permits the extension of the
commencement of such hearing; provided, however, that any such
extension shall not be longer than sixty days.
(e) All claims presented for arbitration shall be particularly
identified and the parties to the arbitration shall each prepare a
statement of their position with recommended courses of action. These
statements of position and recommended courses of action shall be
submitted to the tribunal of arbitrators chosen as provided hereinabove
for binding decision. The tribunal of arbitrators shall not be
empowered to make decisions beyond the scope of the position papers.
(f) The arbitration proceeding will be governed by the
substantive laws of the State of Delaware and will be conducted in
accordance with such procedures as shall be fixed for such purpose by
the tribunal of arbitrators, except that (i) discovery in connection
with any arbitration proceeding shall be conducted in accordance with
the Federal Rules of Civil Procedure and applicable case law, (ii) the
tribunal of arbitrators shall have the power to compel discovery and
(iii) unless the parties otherwise agree and except as may be provided
in this Article XI, the arbitration shall be governed by the United
States Arbitration Act, 9 U.S.C.ss.ss.1-16, to the exclusion of any
provision of state law or other applicable law or procedure
inconsistent therewith or which would produce a different result. The
parties shall preserve their right to assert and to avail themselves of
the attorney-client and attorney-work-product privileges, and any other
privileges to which they may be entitled pursuant to applicable law. No
party to the arbitration or any arbitrator may compel or require
mediation and/or settlement conferences without the prior written
consent of all such parties and the tribunal of arbitrators.
32
(g) The tribunal of arbitrators shall make an arbitration
award as soon as possible after the later of the close of evidence or
the submission of final briefs, and in all cases the award shall be
made not later than thirty days following submission of the matter. The
finding and decision of a majority of the arbitrators shall be final
and shall be binding upon the parties. Judgment upon the arbitration
award or decision may be entered in any court having jurisdiction
thereof or application may be made to any such court for a judicial
acceptance of the award and an order of enforcement, as the case may
be. The tribunal of arbitrators shall have the authority to assess
liability for pre-award and post-award interest on the claims,
attorneys' fees, expert witness fees and all other expenses of
arbitration as such arbitrators shall deem appropriate based on the
outcome of the claims arbitrated. Unless otherwise agreed by the
parties to the arbitration in writing, the arbitration award shall
include findings of fact and conclusions of law.
(h) Nothing in this Article XI shall be deemed to (i) limit
the applicability of any otherwise applicable statute of limitations or
repose or any waivers contained in this Agreement, (ii) constitute a
waiver by any party hereto of the protections afforded by 12 U.S.C. ss.
91 or any successor statute thereto or any substantially equivalent
state law, or (iii) restrict the right of the Trustee to make
application to any state or federal district court having jurisdiction
in Charleston, West Virginia, to appoint a successor Trustee or to
request instructions with regard to any provision in this Agreement
when the Trustee is unsure of its obligations thereunder.
(i) This Article XI shall preclude participation by the Trust
in any class action brought against ECA by any Person who is not a
Trust Unitholder and the Trustee shall opt out of any such class action
in which the Trust is a purported class member, but shall not preclude
participation by the Trust in any such action brought by a Trust
Unitholders or in which Trust Unitholders holding more than 50% of the
Trust Units represented at a duly called and held meeting of the Trust
Unitholders in accordance with Section 8.02 request the Trustee to
participate.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Inspection of Books. Each Trust Unitholder and its duly
authorized agents and attorneys shall have the right, at its own expense and
during reasonable business hours upon reasonable prior notice, to examine and
inspect the records (including, without limitation, the ownership ledger) of the
Trust and the Trustee in reference thereto. The Trustee and its duly authorized
agents and attorneys shall have the right, at the expense of the Trust and
during reasonable business hours upon reasonable prior written notice, to
examine and inspect the records of ECA relating to the Royalty Interests and the
Underlying Properties.
Section 12.02 Disability of a Trust Unitholder. Any payment or
distribution to a Trust Unitholder may be made by check of the Trustee drawn to
the order of the Trust Unitholder, regardless of whether or not the Trust
Unitholder is a minor or under other legal disability, without the Trustee
having further responsibility with respect to such payment or distribution. This
Section 12.02 shall not be deemed to prevent the Trustee from making any payment
or distribution by any other method that is appropriate under law.
33
Section 12.03 Merger or Consolidation of Delaware Trustee or Trustee.
Neither a change of name of either the Delaware Trustee or the Trustee nor any
merger or consolidation of its corporate powers with another bank or with a
trust company nor the sale or transfer of all or substantially all of its trust
operations to a separate corporation shall affect its right or capacity to act
hereunder; provided, however, that the Delaware Trustee or any successor thereto
shall maintain its principal place of business in the State of Delaware; and
provided further that, in the case of any successor Trustee or Delaware Trustee,
it shall continue to meet the requirements of Section 6.05 of this Agreement.
Section 12.04 Change in Trust Name. Upon the written request by ECA
submitted to the Trustee and the Delaware Trustee, the Trustee shall, without
the vote or consent of any Trust Unitholders, take all action necessary to
change the name of the Trust to a name mutually agreeable to the Trustee and ECA
and, upon effecting such name change, the Delaware Trustee, acting pursuant to
the written instructions of the Trustee, shall amend the Certificate of Trust on
file in the office of the Secretary of State of Delaware to reflect such name
change.
Section 12.05 Filing of this Agreement. There is no obligation on the
part of the Trustee that this Agreement or any executed copy hereof be filed in
any county in which any of the Trust Estate is located, but the same may be
filed for record in any county by the Trustee. In order to avoid the necessity
of filing this Agreement for record, each of the Delaware Trustee and the
Trustee agrees that for the purpose of vesting the record title to the Trust
Estate in any successor trustee, the succeeded trustee shall, upon appointment
of any successor trustee, execute and deliver to such successor trustee
appropriate assignments or conveyances.
Section 12.06 Choice of Law. This Agreement and the Trust shall be
governed by the laws of the State of Delaware (without regard to the conflict of
laws principles thereof) in effect at any applicable time in all matters,
including the validity, construction and administration of this Agreement and
the Trust, the enforceability of the provisions of this Agreement, all rights
and remedies hereunder, and the services of the Delaware Trustee and Trustee
hereunder. Furthermore, except as otherwise provided in this Agreement, the
rights, powers, duties and liabilities of the Delaware Trustee and the Trustee
and the Trust Unitholders shall be as provided under the Trust Act and other
applicable laws of the State of Delaware and the United States of America in
effect at any applicable time; provided, however, that there shall not be
applicable to the Trustee, the Delaware Trustee, the Trust Unitholders, the
Trust or this Agreement any provision of the laws (common or statutory) of the
State of Delaware pertaining to trusts that relate to or regulate, in a manner
inconsistent with the terms hereof, (i) the filing with any court of
governmental body or agency of trustee accounts or schedules of trustee fees and
charges, (ii) affirmative requirements to post bonds for trustees, officers,
agents or employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets or
(vii) the establishment of fiduciary or other standards of responsibility or
limitations on the acts or powers of trustees that are inconsistent with the
limitations or authorities and powers of the trustees hereunder as set forth or
referenced in this Agreement. Section 3540 of Title 12 of the Delaware Code
shall not apply to the Trust.
34
Section 12.07 Separability. If any provision of this Agreement or the
application thereof to any Person or circumstances shall be finally determined
by a court of proper jurisdiction to be illegal, invalid or unenforceable to any
extent, the remainder of this Agreement or the application of such provision to
Persons or circumstances other than those as to which it is held illegal,
invalid or unenforceable shall not be affected thereby, and every remaining
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
Section 12.08 Notices. Any and all notices or demands permitted or
required to be given under this Agreement shall be in writing and shall be
validly given or made if (a) personally delivered, (b) delivered and confirmed
by facsimile or like instantaneous transmission service, or by Federal Express
or other overnight courier delivery service, which shall be effective as of
confirmation of receipt by the courier at the address for notice hereinafter
stated, (c) solely in the case of notice to any Trust Unitholder, by press
release in a nationally recognized and distributed media, or (d) deposited in
the United States mail, first class, postage prepaid, certified or registered,
return receipt requested, addressed as follows:
If to the Trustee, to:
JPMorgan Chase Bank, N.A.
000 Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxx X. Xxxxxx
Facsimile No.: (512) ___-____
If to the Delaware Trustee, to:
Wilmington Trust Company
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Corporate Trust Administration
Facsimile No.: (000) 000-0000
With a copy to:
Xxxx X. Xxxxxxxxx
Xxxxx, Xxxxxx & Xxxxxx, LLP
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to ECA, to:
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
35
Attention: [_________]
Facsimile No.: (___) ___-____
With a copy to:
000 00xx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Attention: [__________]
Facsimile No.: (___) ___-____
If to a Trust Unitholder, to:
the Trust Unitholder at its last address as shown on the ownership
records maintained by the Trustee
Notice that is mailed in the manner specified shall be conclusively
deemed given three days after the date postmarked or upon receipt, whichever is
sooner. Any party to this Agreement may change its address for the purpose of
receiving notices or demands by notice given as provided in this Section 12.08.
Section 12.09 Counterparts. This Agreement may be executed in a number
of counterparts, each of which shall constitute an original, but such
counterparts shall together constitute but one and the same instrument.
36
IN WITNESS WHEREOF, ECA, the Trustee and the Delaware Trustee have
caused this Agreement to be duly executed the day and year first above written.
ENERGY CORPORATION OF AMERICA
ATTEST:
By:
----------------------------
Name:
-----------------------------------------------------
Name: Title:
Title:
JPMORGAN CHASE BANK, N.A.
ATTEST:
By:
----------------------------
Name:
----------------------------------------------------- Title:
Name:
Title
WILMINGTON TRUST COMPANY
ATTEST:
By:
----------------------------
Name:
----------------------------------------------------- Title:
Name:
Title
37
EXHIBIT A
FEDERAL INCOME TAX PROVISIONS
1 Classification of the Trust as a Partnership. For federal income tax
purposes, the Trust will be classified and treated as a partnership and the
Trust Unitholders will be treated as the partners in such partnership. A
partnership is not a taxable entity and incurs no federal income tax liability.
Instead, each partner is required to take into account his allocable share of
items of income, gain, loss, deduction and credit of the partnership in
computing his federal income tax liability. This Exhibit A contains provisions
to comply with the federal income tax law governing the allocation of such items
of income, gain, loss and deduction of the Trust and the maintenance of the
Capital Accounts of the Trust Unitholders. For purposes of this Exhibit A, the
"Partnership" means the Trust, "Partner(s)" means Trust Unitholder(s),
"Partnership Interest" means the ownership interest in the Trust held by a Trust
Unitholder, "Capital Contribution" means a Trust Unitholders initial investment
in the Trust.
2 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the Trustee) owning a Partnership Interest a separate Capital Account with
respect to such Partnership Interest in accordance with the rules of Treasury
Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by
(i) the amount of all Capital Contributions made to the Partnership with respect
to such Partnership Interest and (ii) all items of Partnership income and gain
(including, without limitation, income and gain exempt from tax) computed in
accordance with Section 2(b) and allocated with respect to such Partnership
Interest pursuant to Section 3, and decreased by (x) the amount of cash
distributions made with respect to such Partnership Interest and (y) all items
of Partnership deduction and loss computed in accordance with Section 2(b) and
allocated with respect to such Partnership Interest pursuant to Section 3.
(b) For purposes of computing the amount of any item of income, gain,
loss or deduction which is to be allocated pursuant to Section 3 and is to be
reflected in the Partners' Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) 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
3.
(ii) 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
A-1
made without regard to any election under Section 754 of the Code which
may be made by the Partnership and, as to those items described in
Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the
fact that such items are not includable in gross income or are neither
currently deductible nor capitalized for federal income tax purposes.
To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of
such adjustment in the Capital Accounts shall be treated as an item of
gain or loss.
(iii) 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.
(iv) 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 2(d) to the Carrying
Value of any Partnership property subject to depreciation, cost
recovery or amortization, any further deductions for such depreciation,
cost recovery or amortization attributable to such property shall be
determined (A) as if the adjusted basis of such property were equal to
the Carrying Value of such property immediately following such
adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income
tax purposes; provided, however, that, if the asset has a zero adjusted
basis for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any method that the
Trustee may adopt.
(c) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Partnership
Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership
Interests for cash or Contributed Property, the Capital Account of all
Partners and the Carrying Value of each Partnership property
immediately prior to such issuance shall be adjusted upward or downward
to reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss had
been recognized on an actual sale of each such property immediately
prior to such issuance and had been allocated to the Partners at such
time pursuant to Section 3 in the same manner as any item of gain or
loss actually recognized during such period would have been allocated.
In determining such Unrealized Gain or Unrealized Loss, the aggregate
cash amount and fair market value of all Partnership assets (including,
without limitation, cash or cash equivalents) immediately prior to the
issuance of additional Partnership Interests shall be determined by the
Trustee using such method of valuation as it may adopt; provided,
however, that the Trustee, in arriving at such valuation, must take
fully into account the fair market
A-2
value of the Partnership Interests of all Partners at such time. The
Trustee shall allocate such aggregate value among the assets of the
Partnership (in such manner as it determines) to arrive at a fair
market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of all Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable
to such Partnership property, as if such Unrealized Gain or Unrealized
Loss had been recognized in a sale of such property immediately prior
to such distribution for an amount equal to its fair market value, and
had been allocated to the Partners, at such time, pursuant to Section 3
in the same manner as any item of gain or loss actually recognized
during such period would have been allocated. In determining such
Unrealized Gain or Unrealized Loss the aggregate cash amount and fair
market value of all Partnership assets (including, without limitation,
cash or cash equivalents) immediately prior to a distribution shall be
determined and allocated in the same manner as that provided in Section
2(d)(i).
3. 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 2(b)) shall be allocated among the Partners
in each taxable year (or portion thereof) as provided herein below.
(a) Net Income and Net Loss. After giving effect to the special
allocations set forth in Section 3(b), Net Income and Net Loss for each taxable
year and all items of income, gain, loss and deduction taken into account in
computing Net Income and Net Loss for such taxable year shall be allocated to
the Partners in accordance with their respective Percentage Interests.
(b) Special Allocations. Notwithstanding any other provision of this
Section 3, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any
other provision of this Section 3, 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 3(b), 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 3(b) with respect to such
taxable period (other than an allocation pursuant to Sections 3(b)(v)
and 3(b)(vi)). This Section 3(b) 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.
A-3
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 3(b) (other than
Section 3(b)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain
for such period (and, if necessary, subsequent periods) in the manner
and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
Section 3(b), 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 3(b), other than Section 3(b)(i) and other
than an allocation pursuant to Sections 3(b)(v) and 3(b)(vi), with
respect to such taxable period. This Section 3(b)(ii) is intended to
comply with the chargeback of items of income and gain requirement in
Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(iii) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of
Partnership income and gain shall be specially allocated to such
Partner in an amount and manner sufficient to eliminate, to the extent
required by the Treasury Regulations promulgated under Section 704(b)
of the Code, the deficit balance, if any, in its Adjusted Capital
Account created by such adjustments, allocations or distributions as
quickly as possible unless such deficit balance is otherwise eliminated
pursuant to Section 3(b)(i) or (ii).
(iv) Gross Income Allocations. In the event any Partner has a
deficit balance in its Capital Account at the end of any Partnership
taxable period in excess of the sum of (A) the amount such Partner is
required to restore pursuant to the provisions of this Agreement and
(B) the amount such Partner is deemed obligated to restore pursuant to
Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner
shall be specially allocated items of Partnership gross income and gain
in the amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 3(b)(iv) shall be made only if and
to the extent that such Partner would have a deficit balance in its
Capital Account as adjusted after all other allocations provided for in
this Section 3 have been tentatively made as if this Section 3(b)(iv)
were not in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable period shall be allocated to the Partners in accordance with
their respective Percentage Interests. If the Trustee determines that
the Partnership's Nonrecourse Deductions should 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 Trustee
is authorized, upon notice to the other Partners, to revise the
prescribed ratio to the numerically closest ratio that does satisfy
such requirements.
A-4
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any taxable period shall be allocated 100% to the
Partner that bears the Economic Risk of Loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions
are attributable in accordance with Treasury Regulation Section
1.704-2(i). If more than one Partner bears the Economic Risk of Loss
with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse
Deductions attributable thereto shall be allocated between or among
such Partners in accordance with the ratios in which they share such
Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of Treasury
Regulation Section 1.752-3(a)(3), the Partners agree that Nonrecourse
Liabilities of the Partnership in excess of the sum of (A) the amount
of Partnership Minimum Gain and (B) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with
their respective Percentage Interests.
(viii) Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant
to Section 734(b) or 743(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 such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to
such Section of the Treasury Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision of this
Section 3, other than the Required Allocations, the Required
Allocations shall be taken into account in making the Agreed
Allocations so that, to the extent possible, the net amount of
items of income, gain, loss and deduction allocated to each
Partner pursuant to the Required Allocations and the Agreed
Allocations, together, shall be equal to the net amount of
such items that would have been allocated to each such Partner
under the Agreed Allocations had the Required Allocations and
the related Curative Allocation not otherwise been provided in
this Section 3. Notwithstanding the preceding sentence,
Required Allocations relating to (1) Nonrecourse Deductions
shall not be taken into account except to the extent that
there has been a decrease in Partnership Minimum Gain and (2)
Partner Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this
Section 3(b)(ix)(A) shall only be made with respect to
Required Allocations to the extent the Trustee determines that
such allocations will otherwise be inconsistent with the
economic agreement among the Partners. Further, allocations
pursuant to this Section 3(b)(ix)(A) shall be deferred with
respect to allocations pursuant to clauses (1) and (2) hereof
to the extent the Trustee determines that such allocations are
likely to be offset by subsequent Required Allocations.
A-5
(B) The Trustee shall, with respect to each taxable
period, (1) apply the provisions of Section 3(b)(ix)(A) in
whatever order is most likely to minimize the economic
distortions that might otherwise result from the Required
Allocations, and (2) divide all allocations pursuant to
Section 3(b)(ix)(A) among the Partners in a manner that is
likely to minimize such economic distortions.
4. Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 3.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the
manner provided under Section 704(c) of the Code that takes into
account the variation between the Agreed Value of such property and its
adjusted basis at the time of contribution; and (B) any item of
Residual Gain or Residual Loss attributable to a Contributed Property
shall be allocated among the Partners in the same manner as its
correlative item of "book" gain or loss is allocated pursuant to
Section 3.
(ii) (A) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner consistent with
the principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and
the allocations thereof pursuant to Section 2(d)(i) or 2(d)(ii), and
(2) second, in the event such property was originally a Contributed
Property, be allocated among the Partners in a manner consistent with
Section 4(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Section 3.
(iii) The Trustee shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Trust Units, the Trustee shall (i) adopt such
conventions as it deems appropriate in determining the amount of depreciation,
amortization and cost recovery deductions; (ii) make special allocations for
federal income tax purposes of income (including, without limitation, gross
income) or deductions; and (iii) amend the provisions of this Agreement as
appropriate (x) to reflect the proposal or promulgation of Treasury Regulations
under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve
or achieve uniformity of the Trust Units. The Trustee may adopt such
conventions, make such allocations and make such amendments to this Agreement as
provided in this Section 4(c) only if such conventions,
A-6
allocations or amendments would not have a material adverse effect on the
Partners or the Partnership, and if such allocations are consistent with the
principles of Section 704 of the Code.
(d) The Trustee may determine to depreciate or amortize the portion of
an adjustment under Section 743(b) of the Code attributable to unrealized
appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax
Disparity) using a predetermined rate derived from the depreciation or
amortization method and useful life applied to the Partnership's common basis of
such property, despite any inconsistency of such approach with Treasury
Regulation Section 1.167(c)-l(a)(6) or any successor regulations thereto. If the
Trustee determines that such reporting position cannot reasonably be taken, the
Trustee may adopt depreciation and amortization conventions under which all
purchasers acquiring Trust Units in the same month would receive depreciation
and amortization deductions, based upon the same applicable rate as if they had
purchased a direct interest in the Partnership's property. If the Trustee
chooses not to utilize such aggregate method, the Trustee may use any other
depreciation and amortization conventions to preserve the uniformity of the
intrinsic tax characteristics of any Trust Units, so long as such conventions
would not have a material adverse effect on the Trust Unitholders.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 4, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by
the Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code that may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted (in the
manner determined by the Trustee) to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction shall for
federal income tax purposes, be determined on an annual basis and prorated on a
monthly basis and shall be allocated to the Partners as of the opening of the
New York Stock Exchange on the first Business Day of each month; provided,
however, such items for the period beginning on the Closing Date and ending on
the last day of the month in which the Option Closing Date or the expiration of
the Over-Allotment Option occurs shall be allocated to the Partners as of the
opening of the New York Stock Exchange on the first Business Day of the next
succeeding month; and provided, further, that gain or loss on a sale or other
disposition of any assets of the Partnership or any other extraordinary item of
income or loss realized and recognized other than in the ordinary course of
business, as determined by the Trustee, 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 Trustee may revise, alter or otherwise modify such methods of allocation to
the extent permitted or required by Section 706 of the Code and the regulations
or rulings promulgated thereunder.
A-7
(h) Allocations that would otherwise be made to a Trust Unitholder
under the provisions of this Section 4 shall instead be made to the beneficial
owner of Trust 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 determined by the Trustee.
5. Tax Matters.
(a) Tax Returns and Information. The Trustee shall timely file all
returns and reports of the Partnership that are required for federal, state and
local income tax purposes on the basis of the accrual method and a taxable year
ending on December 31. The tax information reasonably required by Record Holders
for federal and state income tax reporting purposes with respect to a taxable
year shall be furnished to them within 90 days of the close of the calendar year
in which the Partnership's taxable year ends. The classification, realization
and recognition of income, gain, losses and deductions and other items shall be
on the accrual method of accounting for federal income tax purposes.
(b) Tax Elections.
(i) The Partnership shall make the election under Section 754
of the Code in accordance with applicable regulations thereunder,
subject to the reservation of the right to seek to revoke any such
election upon the Trustee's determination that such revocation is in
the best interests of the Trust Unitholders. Notwithstanding any other
provision herein contained, for the purposes of computing the
adjustments under Section 743(b) of the Code, the Trustee shall be
authorized (but not required) to adopt a convention whereby the price
paid by a transferee of a Trust Unit will be deemed to be the lowest
quoted closing price of the Trust Units on the New York Stock Exchange
during the calendar month in which such transfer is deemed to occur
pursuant to Section 3(g) without regard to the actual price paid by
such transferee.
(ii) Except as otherwise provided herein, the Trustee shall
determine whether the Partnership should make any other elections
permitted by the Code.
(c) Tax Controversies. Subject to the provisions hereof, the Trustee
shall designate the Tax Matters Partner (as defined in the Code) and is
authorized and required to represent the Partnership (at the Partnership's
expense) in connection with all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial proceedings, and to
expend Partnership funds for professional services and costs associated
therewith. Each Partner agrees to cooperate with the Trustee and to do or
refrain from doing any or all things reasonably required by the Trustee to
conduct such proceedings.
(d) Withholding. Notwithstanding any other provision of this Agreement,
the Trustee is authorized to take any action that may be required to cause the
Partnership to comply with any withholding requirements established under the
Code or any other federal, state or local law including, without limitation,
pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that
the Partnership is required or elects to withhold and pay over to any taxing
authority any amount resulting from the allocation or distribution of income to
any Partner
A-8
(including, without limitation, by reason of Section 1446 of the Code), the
Trustee may treat the amount withheld as a distribution of cash in the amount of
such withholding from such Partner.
6. Additional Definitions.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each fiscal year of the Partnership, (a) increased
by any amounts that such Partner is obligated to restore under the standards set
by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 3(b)(i)
or 3(b)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 2(d)(i) or 2(d)(ii).
"Agreed Allocation" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 3, including, without limitation, a Curative Allocation
(if appropriate to the context in which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value
of such property or other consideration at the time of contribution as
determined by the Trustee. The Trustee shall use such method as it determines to
be appropriate to allocate the aggregate Agreed Value of Contributed Properties
contributed to the Partnership in a single or integrated transaction among each
separate property on a basis proportional to the fair market value of each
Contributed Property.
"Book-Tax Disparity" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 2 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 2.
A-9
"Capital Contribution" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Partner contributes to the
Partnership.
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' Capital
Accounts in respect of such Contributed Property, and (b) with respect to any
other Partnership property, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination. The Carrying Value of
any property shall be adjusted from time to time in accordance with Sections
2(d)(i) and 2(d)(ii) and to reflect changes, additions or other adjustments to
the Carrying Value for dispositions and acquisitions of Partnership properties,
as deemed appropriate by the Trustee.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of any successor law.
"Contributed Property" means each property or other asset, in such form
as may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership. Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 2(d), such property shall no longer constitute a Contributed
Property, but shall be deemed an Adjusted Property.
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 3(b)(ix).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del C. Section 17-101, et seq., as amended, supplemented or restated from
time to time, and any successor to such statute.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"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 by the
Partnership, the Partnership's Carrying Value of such property (as adjusted
pursuant to Section 2(d)(ii)) at the time such property is distributed, reduced
by any indebtedness either assumed by such Partner upon such distribution or to
which such property is subject at the time of distribution, in either case, as
determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain for such taxable year over the
Partnership's items of loss and deduction for such taxable year. The items
included in the calculation of Net Income shall be determined in accordance with
Section 2(b) and shall not include any items specially allocated under Section
3(b).
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction for such taxable year over the
Partnership's items of income and gain for such
A-10
taxable year. The items included in the calculation of Net Loss shall be
determined in accordance with Section 2(b) and shall not include any items
specially allocated under Section 3(b).
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 4(b)(i)(A), 4(b)(ii)(A) and
4(b)(iii) if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction or
expenditure (including, without limitation, any expenditure described in Section
705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury
Regulation Section 1.704-2(b), are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2).
"Option Closing Date" means the date or dates on which any Trust Units
are sold by the Partnership to the Underwriters upon exercise of the
Over-Allotment Option.
"Over-Allotment Option" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation Section 1.704-2(i), are attributable to a
Partner Nonrecourse Debt.
"Partnership Interest" means an interest in the Partnership.
"Partnership Minimum Gain" means that amount determined in accordance
with the principles of Treasury Regulation Section 1.704-2(d).
"Percentage Interest" means as of any date of determination as to any
Trust Unitholder holding Trust Units, the quotient obtained by dividing (A) the
number of Trust Units held by such Trust Unitholder by (B) the total number of
all outstanding Trust Units.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or Section
743 of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary
A-11
income because it represents the recapture of deductions previously taken with
respect to such property or asset.
"Record Holder" means the Person in whose name a Trust Unit is
registered on the books of the transfer agent as of the opening of business on a
particular Business Day.
"Required Allocations" means (a) any limitation imposed on any
allocation of Net Losses under Section 3(a) and (b) any allocation of an item of
income, gain, loss or deduction pursuant to Section 3(b)(i), 3(b)(ii),
3(b)(iii), 3(b)(vi) or 3(b)(viii).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 4(b)(i)(A) or 4(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
"Underwriter" means each Person named as an underwriter in Schedule I
to the Underwriting Agreement who purchases Trust Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement dated
_________, 2005 among the Underwriters, the Trust and ECA, providing for the
purchase of Trust Units by such Underwriters.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of such date (as determined under Section 2(d))
over (b) the Carrying Value of such property as of such date (prior to any
adjustment to be made pursuant to Section 2(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the Carrying
Value of such property as of such date (prior to any adjustment to be made
pursuant to Section 2(d) as of such date) over (b) the fair market value of such
property as of such date (as determined under Section 2(d)).
A-12
