EXHIBIT 3.20
AGREEMENT OF LIMITED PARTNERSHIP
OF
NETCO-RESIDUALS MANAGEMENT, LIMITED PARTNERSHIP
A DELAWARE LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS............................................................................................1
ARTICLE II THE PARTNERSHIP ORGANIZATION AND ITS BUSINESS.........................................................6
2.1 Formation and Continuation..............................................................................6
2.2 Name....................................................................................................6
2.3 Principal Place of Business.............................................................................6
2.4 Term....................................................................................................6
2.5 Business Purpose and Powers.............................................................................6
2.6 Methods.................................................................................................6
2.7 Agent for Service of Process............................................................................7
2.8 Name and Business Address of Each Partner...............................................................7
ARTICLE III MANAGEMENT OF PARTNERSHIP BUSINESS; POWERS OF THE GENERAL PARTNER....................................7
3.1 Management and Control..................................................................................7
3.2 Admission of Additional Limited Partners................................................................7
3.3 Limited Partners Shall Not Manage or Control............................................................8
3.4 Acts of the Partnership.................................................................................8
3.5 Independent Activities of the General Partner...........................................................8
ARTICLE IV CAPITAL CONTRIBUTIONS AND LIABILITY Of PARTNERS.......................................................8
4.1 Capital Contributions...................................................................................8
4.2 Default by a Limited Partner............................................................................9
4.3 Liability of Partners..................................................................................10
4.4 Return of' Distributions to Limited Partners...........................................................10
4.5 No Priority............................................................................................11
ARTICLE V CAPITAL ACCOUNTS......................................................................................11
5.1 Partner's Accounts.....................................................................................11
5.2 Allocations............................................................................................11
5.3 Limitation on Allocation of Net Losses.................................................................11
5.4 Credits and Charges to Capital Account.................................................................11
5.5 Special Allocations....................................................................................12
5.6 Other Allocation Rules.................................................................................14
5.7 Tax Allocations: Code Section 704(c)...................................................................14
ARTICLE VI DISTRIBUTIONS; WITHDRAWALS OF CAPITAL................................................................15
6.1 Allocation of Distributions............................................................................15
6.2 Distributions Net of Expenses of the Partnership.......................................................15
6.3 Withdrawals of Capital.................................................................................15
ARTICLE VII TRANSFER OF PARTNERSHIP INTERESTS...................................................................15
7.1 Transfer by General Partner............................................................................15
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7.2 Prohibition on Transfer by Limited Partner.............................................................16
7.3 Voluntary Withdrawal by Limited Partner................................................................16
7.4 Death, Incompetence or Bankruptcy of Limited Partner...................................................16
7.5 Acquisition of Limited Partner's Interest by the General Partner.......................................16
ARTICLE VIII BANKRUPTCY, DISSOLUTION OR REMOVAL OF GENERAL
PARTNER .........................................................................................................16
8.1 Dissolution of Partnership.............................................................................16
8.2 Voluntary Resignation, Withdrawal or Dissolution of General Partner....................................17
8.3 Removal of General Partner for Cause...................................................................17
8.4 Continuation of Partnership............................................................................17
ARTICLE IX EXPENSES OF THE PARTNERSHIP..........................................................................17
ARTICLE X INDEMNIFICATION OF THE GENERAL PARTNER................................................................17
10.1 Liability.............................................................................................17
10.2 Indemnification.......................................................................................18
10.3 Survival..............................................................................................18
ARTICLE XI TERMINATION OF PARTNERSHIP; LIQUIDATION AND DISTRIBUTION OF ASSETS...................................19
11.1 Termination Events....................................................................................19
11.2 Liquidation and Distribution upon Termination.........................................................19
ARTICLE XII BOOKS Of ACCOUNT, ACCOUNTING AND REPORTS............................................................19
12.1 Books of Account......................................................................................19
12.2 Tax Realms and Elections..............................................................................19
12.3 Tax Matters Partner...................................................................................20
12.4 Banking...............................................................................................20
12.5 Accounting Method.....................................................................................20
12.6 Determination of Certain Matters......................................................................20
ARTICLE XIII POWER OF ATTORNEY..................................................................................20
13.1 Power of Attorney.....................................................................................20
13.2 Irrevocability........................................................................................21
ARTICLE XIV MISCELLANEOUS PROVISIONS............................................................................21
14.1 Notice................................................................................................21
14.2 Severability..........................................................................................21
14.3 Execution in Several Counterparts.....................................................................21
14.4 Amendments to Agreement...............................................................................22
14.5 Governing Law.........................................................................................22
14.6 Captions..............................................................................................22
14.7 Further Assurances....................................................................................22
14.8 Persons Bound.........................................................................................22
14.9 Admission of Additional Limited Partners..............................................................22
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AGREEMENT OF LIMITED PARTNERSHIP
of
NETCO-RESIDUALS MANAGEMENT, LIMITED PARTNERSHIP
A
Delaware Limited Partnership
AGREEMENT OF LIMITED PARTNERSHIP (such agreement, as the same may from
time to time be modified, supplemented or amended, being hereinafter referred to
as this "Agreement") dated as of February 7, 1994, made and entered into by and
among NETCO-RESIDUALS MANAGEMENT SYSTEMS, INC., a corporation organized under
the laws of the State of
Delaware and having an address at c/o New England
Treatment Company, Inc., 00 Xxx Xxxxx Xxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000,
as General Partner, and each person or entity becoming a party to this Agreement
as a Limited Partner.
WHEREAS, the General Partner and the Limited Partners desire to form a
limited partnership pursuant to the provisions of the
Delaware Revised Uniform
Limited Partnership Act.
NOW, THEREFORE, pursuant to the terms, covenants and conditions set
forth herein and in consideration of the mutual premises contained herein, the
parties, intending to be legally bound, do hereby agree as follows:
ARTICLE I
DEFINITIONS
"Act" shall mean the
Delaware Revised Uniform Limited Partnership Act,
as amended from time to time (6
Delaware Code Section 17-101 et seq.).
"Adjusted Capital Account Deficit" means with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant Fiscal Year, after:
(i) crediting to such Capital Account any amounts
that such Partner is obligated to restore to the Partnership pursuant
to Treasury Regulations Section 1.704 1(b) (3) (ii) (c) or is deemed to
be obligated to restore pursuant to the penultimate sentences of
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(1)(5); and
(ii) debiting from such Capital Account the items
described in Treasury Regulations Sections 1.7041(b) (2) (ii) (d) (4),
1.704-1(b) (2) (ii) (d) (5), and 1.7041(b) (2) (ii) (d) (6) .
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Capital Contribution" shall mean, at any specified time, the
aggregate amount of Capital Contributions of each Partner that has been actually
paid to the Partnership pursuant to Section 4.1.
"Affiliate" shall mean any person directly or indirectly controlling,
controlled by or under common control with the specified person and the term
"control" shall mean the ownership of a majority of the combined voting power of
the outstanding voting securities of a corporation or the outstanding ownership
interests in a non-corporate entity.
"Agreement" shall mean this Agreement of Limited Partnership.
"Basic Capital Contributions" shall have the meaning set forth in
Section 4.1.
"Capital Account" shall mean the account maintained for each Partner
pursuant to Section 5.1.
"Capital Contributions" shall have the meaning set. forth in Section
4.1.
"Certificate" shall mean the Certificate of Limited Partnership of the
Partnership prepared and filed in accordance with the Act, as the same may be
amended from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent revenue laws.
"Defaulting Partner" shall have the meaning set forth in Section 4.2.
"Depreciation" means, for each fiscal year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable for
federal income tax purposes with respect to an asset for such year, except that
if the Gross Asset Value of an asset differs from its adjusted. basis for
federal income tax purposes at the beginning of such year, Depreciation shall by
an amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis.
"Distribution" shall mean distributions to Partners pursuant to Article
VI.
"Fiscal Year" shall mean the fiscal year of the Partnership, which
shall be the calendar year; but, upon termination of the Partnership, "Fiscal
Year" shall mean the period from the end of the last preceding Fiscal Year to
the date of such termination.
"General Partner" shall mean NETCO-Residuals Management Systems, Inc.,
a
Delaware corporation, and any substitute General Partner admitted to the
Partnership pursuant to Article VIII hereof.
"Gross Asset Value" shall mean, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
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(a) The initial Gross Asset Value of any asset contributed by a Partner
to the Partnership shall be the gross fair market value of that asset as
determined by the contributing Partner and the Partnership;
(b) The Gross Asset Values of all assets of the Partnership shall be
adjusted to equal their respective gross fair market values, as determined by
the General Partner, as of the following times: (i) the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis capital Contribution; (ii) the distribution
by the Partnership to a Partner of more than a de minimis amount of Partnership
property as consideration for an interest in the Partnership; and (iii) the
liquidation of the Partnership within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(q); provided, however, that the adjustments pursuant
to clauses (i) and (ii) above shall be made only if the General Partner
determines that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset distributed to any
Partner shall be the gross fair market value of such asset as determined by the
distributes and the Partnership on the date of distribution; and
(d) The Gross Asset Value of the assets of the Partnership shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and
Section 5.5(g); provided, however, that Gross Asset Value shall not be adjusted
pursuant to this paragraph (d) to the extent that an adjustment was made
pursuant to paragraph (b) of this definition in connection with any transaction
that would otherwise have resulted in an adjustment pursuant to this paragraph
(d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraph (a), (b), or (d) of this definition, the Gross Asset Value
of such asset shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing Net Income and Net
Loss.
"Indemnified Liabilities" shall have the meaning set forth in Section
10.2.
"Indemnitees" shall have the meaning set forth in Section 10.2.
"Interest" shall mean a Partner's interest in the Net Income, Net Loss
and Distributions of the Partnership as specified in Article V and Article VI.
"Limited Partners" shall mean such persons or entities whose names are
set forth on the signature pages hereof and any other person or entity who is
(i) admitted to the Partnership as a substitute Limited Partner or (ii)
designated as a special limited partner by the General Partner and having such
rights and obligations as are agreed to between the General Partner and such
special limited partner.
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"Majority In Interest of Limited Partners" shall mean those Limited
Partners whose combined Basic Capital Contributions constitute more than fifty
percent (50%) of the aggregate Basic Capital Contributions of all the Limited
Partners.
"Net Income" or "Net Loss" shall mean, for each fiscal year, an amount
equal to the Partnership's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Net Income or Net
Loss shall be added to such taxable income or loss;
(b) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(x)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1 (b)(2)(iv)(i), and not otherwise taken into
account in computing Net Income or Net Loss shall be subtracted from such
taxable income or loss;
(c) If the Gross Asset Value of any Partnership asset is adjusted
pursuant to paragraph (b) or (c) of the definition of Gross Asset Value, the
amount of such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net Income or Net Loss;
(d) Gain or loss resulting from any disposition of Partnership
Property with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value; and
(e) In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such fiscal year.
(f) To the extent that a Code Section 734(b) or Code Section 743(b)
adjustment is required to be taken into account in determining Capital Account,
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), the amount of
such adjustment will be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall betaken into account for
purposes of computing Net Income or Net Loss;
(g) Notwithstanding anything to the contrary in the definition of the
terms "Not Income" and "Net Loss," any items that are specially allocated
pursuant to Section 5.5 of this Agreement shall be excluded in computing Net
Income or Net Loss; and
(h) For purposes of this Agreement, any deduction for a loss on a sale
or exchange of Partnership property that is disallowed to the Partnership under
Code Section 267(a)(1) or Code Section 707(b) shall be treated as a Code Section
705(a)(2)(S) expenditure.
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"Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(1), which provides generally that the amount of
Nonrecourse Deductions for a Fiscal Year shall equal the net-increase, if any,
in Partnership Minimum Gain during that Fiscal Year, reduced (but not below
zero) by the aggregate distributions made during that Fiscal Year of proceeds of
a Nonrecourse Liability that are allocable to an increase in Partnership Minimum
Gain, determined in accordance with Treasury Regulations Section 1.704-2(c).
"Nonrecourse Liability" means any liability that is, or is treated as,
a nonrecourse liability of the Partnership for which no Partner bears (or is
treated as bearing) the economic risk of loss, as determined pursuant to
Treasury Regulations Section 1.752-2.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulations Section 1.704-2(i)(2), which provides generally that the
amount of Partnership Minimum Gain shall be determined in accordance with
Treasury Regulations Section 1.704-2(1)(3).
"Partner Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(i)(1), which provides generally that the amount of
Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a
Fiscal Year shall equal the net increase, if any, in Partner Nonrecourse Debt
Minimum Gain during that Fiscal Year, reduced (but not below zero) by proceeds
of the liability distributed during the year to the Partner bearing the economic
risk of loss for the liability that are both attributable to the liability and
allocable to an increase in the Partner Nonrecourse Debt Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-2 (i) (2).
"Partners" shall mean, collectively, the General Partner and all
Limited Partners. Reference to a Partner shall mean any one of the Partners.
"Partnership Minimum Gain" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2), which provides generally that the amount of
Partnership Minimum Gain shall be determined by first computing for each
Nonrecourse Liability any gain the Partnership would realize if it disposed of
the property subject to that Nonrecourse Liability for no consideration other
than full satisfaction of such Nonrecourse Liability, and then aggregating the
separately computed gains, in accordance with Treasury Regulations Section
1.704-2(d).
"Partnership" shall mean the limited partnership created pursuant to
this Agreement.
"Partnership Property" shall mean all of the Partnership's interest or
rights in all property, whether tangible or intangible, real or personal.
"Replacement Limited Partner" shall mean any person admitted to the
Partnership as a Limited Partner pursuant to the provisions of Section 4.2.
"Securities Act" shall mean the Securities Act of 1933, as amended.
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"Supplemental Capital Contributions" shall have the meaning set forth
in Section 4.1.
"Termination Date" shall have the meaning set forth in Section 2.4.
"Treasury Regulations" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
ARTICLE II
THE PARTNERSHIP ORGANIZATION AND ITS BUSINESS
2.1 Formation and Continuation. The parties hereby agree to form a
limited partnership in accordance with and pursuant to the provisions of the
Act.
2.2 Name. The name of the Partnership shall be NETCO-Residuals
Management, Limited Partnership.
2.3 Principal Place of Business. The principal place of business of the
Partnership shall be located at 0000 Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000,
or at such other place or places as the General Partner may hereafter determine.
The General Partner may register or qualify the Partnership to do business in
any jurisdiction where the General Partner deems such registration or
qualification necessary or advisable.
2.4 Term. The term of the Partnership shall commence upon the filing of
the Certificate in the Office of the Secretary of State of the State of
Delaware
and shall terminate on December 31, 2014, unless the Partnership term is
terminated sooner in accordance with the provisions of Article XI of this
Agreement or by operation of law.
2.5 Business Purpose and Powers.
(a) The business purpose of the Partnership shall be to
process waste and wastewater residuals, to develop and operate management
facilities and operations relating to waste and wastewater residuals, to engage
in the hauling and trucking of waste and wastewater residuals, and related
business; and to invest in other related businesses; and to engage in all
transactions necessary or incidental to the foregoing and to do all things
necessary or appropriate to accomplish any of the foregoing, upon and subject to
the terms and conditions of this Agreement and the provisions of the Act.
(b) The Partnership shall have the power to engage in all
activities and transactions in connection with, or incidental to, the foregoing
purpose.
2.6 Methods. The Partnership's business purpose and the exercise of its
powers, as described in Section 2.5, may be accomplished through such actions as
the General Partner deems in its discretion to be necessary, advisable or
appropriate for the operation of the Partnership, which, by way of illustration
but not by way of limitation, shall include:
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(a) the employment of such parties and personnel and such
legal, accounting, management, advisory or consultative services as the General
Partner in its discretion deems advisable;
(b) the borrowing of money from, and the giving of guarantees
to, banks or other lenders for Partnership purposes and the pledging of
Partnership Property for the securing of such loans and guarantees; and
(c) the execution of all agreements, documents or instruments
of any hind, the engaging in such transactions and the taking of such other
actions, as the General Partner may, in its discretion, deem necessary,
advisable or appropriate for the carrying out of the foregoing purposes and
powers of the Partnership.
2.7 Agent for Service of Process. The name and address of the
registered agent for service of process is Corporation Service Company, 0000
Xxxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000.
2.8 Name and Business Address of Each Partner. The name and business
address of the General Partner are set forth in the heading of this Agreement.
The name and business address of each Limited Partner are set forth on the
signature pages of this Agreement.
ARTICLE III
MANAGEMENT OF PARTNERSHIP BUSINESS;
POWERS OF THE GENERAL PARTNER
3.1 Management and Control. The management and conduct of the
Partnership and its business shall be controlled exclusively by the General
Partner in accordance with the terms of this Agreement. The General Partner
shall have all the rights and powers which may be possessed by a general partner
pursuant to the Act, and such rights and powers as are otherwise conferred by
this Agreement or by law or which are necessary, advisable or appropriate to the
management of the business and affairs and accomplishment of the business
purpose of the Partnership.
Neither the General Partner nor any of its Affiliates shall be entitled to any
compensation, other than reimbursement for expenses, from the Partnership for
services rendered to the Partnership other than its Interest.
3.2 Admission of Additional Limited Partners. Additional Limited
Partners may be admitted to the Partnership at any time, subject to the approval
of the General Partner; provided, however, that no person shall be admitted to
the Partnership as an additional Limited Partner unless:
(a) such person shall execute and acknowledge such
instruments, in form and substance reasonably satisfactory to the General
Partner, as the General Partner may deem necessary or desirable to effectuate
such admission and to confirm that such person has agreed to be bound by all the
covenants, terms and conditions of this Agreement, as the same may have been
amended; and
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(b) such person shall pay all reasonable expenses in
connection with such admission as a Limited Partner, including, without
limitation, the cost (including reasonable attorneys' fees) of the preparation,
filing and publication of documents required by Subsection (a) above.
3.3 Limited Partners Shall Not Manage or Control. The Limited Partners
shall take no part in the management or control of the Partnership business, and
shall have no power to act for or to bind the Partnership. Without limiting the
generality of the foregoing, no Limited Partner and no director, officer,
partner or stockholder thereof (other than natural persons who are United States
citizens acting in their capacities as officers or directors of the General
Partner) shall (i) act as an employee of the Partnership; (ii) act as an
independent contractor or agent with respect to the Partnership; (iii)
communicate with the General Partner on matters pertaining to the day-to-day.
operations of the Partnership; (iv) become actively involved in the management
or operation of the Partnership; (v) vote on any matter pertaining to the
day-to-day operations or investment decisions of the Partnership; or (vi) vote
on the admission of additional general partners to the Partnership except as
provided in Section 8.4 hereof.
3.4 Acts of the Partnership. Whenever in this Agreement or elsewhere it
is provided that consent is required of, or a demand shall be-made by, or an act
or thing shall be done by or at the direction of, the Partnership, it shall be
deemed that all such consents, demands, acts and things are to be made, given or
done upon the consent of the General Partner or an employee acting under its
authority, unless a contrary intention is expressly indicated in this Agreement.
3.5 Independent Activities of the General Partner. Unless otherwise
expressly consented to in writing by all of the Limited Partners, the General
Partner may not engage in activities other than as may be required or permitted
under this Agreement, whether the same be competitive with the Partnership or
otherwise.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND LIABILITY Of PARTNERS
4.1 Capital Contributions.
(a) Each Partner shall contribute to the capital of the
Partnership an amount equal to the amount set forth opposite its name on the
signature page hereof (the "Basic Capital Contributions"). Each Partner may be
required by the General Partner to make further capital contributions to the
Partnership (the "Supplemental Capital Contributions"; together with the Basic
Capital Contributions, the "Capital Contributions") to enable the General
Partner (i) to conduct the business of the Partnership and (ii) to pay any
expenses of the Partnership contemplated by Article IX hereof; provided,
however, that the aggregate Capital Contributions required to be made pursuant
to this Section 4.1 by all Limited Partners shall not exceed $250,000.
(b) The Basic Capital Contribution of each Partner shall be
paid to the Partnership simultaneously with such Partner becoming a Partner of
the Partnership.
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(c) Supplemental Capital Contributions shall be made by each
Partner within sixty (60) days after a call therefor by the General Partner. Any
such call shall be made only if, when and to the extent that the General Partner
reasonably anticipates that funds will be required by the Partnership to pay any
expenses of the Partnership contemplated by Article IX hereof. Calls for Capital
Contributions shall be made on all of the Partners pro rata according to their
respective Basic Capital contributions.
(d) The General Partner shall maintain a Capital Account
balance equal to the lesser of (i) 1% of the total positive Capital Account
balances for the Partnership, or (ii) Five Hundred Thousand Dollars ($500,000).
If there is more than one General Partner, then the requirement of this Section
4.1(d) shall be satisfied by the total Capital Account balances of all the
General Partners in the aggregate. Whenever a Limited Partner makes a Capital
Contribution pursuant to this Section 4.1, or upon issuance by the Partnership
of a new Limited Partner Interest, the General Partner shall make an additional
Capital Contribution to the Partnership in an amount equal to 1.01% of such
Limited Partner's Capital Contribution or such lesser amount as may be necessary
to comply with this Section 4.1(d).
4.2 Default by a Limited Partner.
(a) Upon the failure of any Limited Partner (a "Defaulting
Partner") to pay in full when due any portion of its Capital Contribution called
for by the General Partner pursuant to Section 4.1 and continuation of such
failure for sixty (60) days after notice thereof by the General Partner acting
on behalf of the Partnership to the Defaulting Partner, the General Partner
acting on behalf of the Partnership shall have the right either (i) to take any
and all actions permitted under applicable law to collect the defaulted Capital
Contribution, or (ii) by notice to the Defaulting Partner, to terminate all of
the profits interest of the Defaulting Partner in the Partnership. Upon such
termination, the Defaulting Partner shall have no rights or interest in the
Partnership except that upon liquidation of the Partnership; the Defaulting
Partner shall participate in distributions pursuant to Article VI, but only in
an amount up to the lowest of (i) the positive balance, if any, of the
Defaulting Partner's Capital Account at the time of the default, or (ii) the
Defaulting Partner's Adjusted Capital Contributions, or (iii) the amount the
Defaulting Partner would have received if his profits interest in the
Partnership had not been terminated pursuant to this Section 4.2. Upon such
termination, the Defaulting Partner shall have no right to have its rights or
interest reinstated. Upon such termination, the Defaulting Partner shall be
excluded for all purposes from any vote or action of the Limited Partners,
including those requiring consent. The taking by the General Partner acting on
behalf of the Partnership of any action or the commencement of any proceeding to
collect a defaulted Capital Contribution shall not preclude the General Partner
acting on behalf of the Partnership prior to collection thereof from terminating
the profits interest of a Defaulting Partner in the Partnership pursuant to this
Section 4.2(a).
(b) In addition to the rights provided under Section 4.2(a),
the General Partner acting on behalf of the Partnership shall have the right to
substitute for any Defaulting Partner any other Person as a Replacement Limited
Partner who will acquire all the rights and assume all the obligations of the
Defaulting Partner (without giving effect to the limitations on such rights in
Section 4.2(a)), provided that such Replacement Limited Partner executes and
delivers to the General Partner acting on behalf of the Partnership any
documents or instruments necessary or
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appropriate to evidence the foregoing. If the General Partner acting on behalf
of the Partnership elects to find a Replacement Limited Partner for a Defaulting
Partner, each Limited Partner other than the Defaulting Partner shall be given
the opportunity, for a period of five (5) days after notice by the General
Partner, to elect to be substituted as a Replacement Limited Partner with
respect to a proportionate share (based on the Capital Contributions of the
Limited Partners other than the Defaulting Partner) of the Defaulting Partner's
Interest. The Replacement Limited Partner shall have no obligation to the
Defaulting Partner, and the Defaulting Partner shall have no rights or interest
in the Partnership except that upon liquidation of the Partnership the
Defaulting Partner shall receive up to the amount specified in Section 4.2(a),
and such amount shall reduce the distributions otherwise required to be made to
the Replacement Limited Partner upon liquidation.
(c) In the event the General Partner acting on behalf of the
Partnership elects to collect a defaulted Capital Contribution from a Defaulting
Partner rather than to rescind and terminate such Defaulting Partner's profits
interest in the Partnership, such Defaulting Partner shall remain liable for all
of its obligations under this Agreement, including the obligation to make
Capital Contributions.
4.3 Liability of Partners.
(a) General Partner. The General Partner shall have unlimited
liability for the repayment and discharge of all debts and obligations of the
Partnership attributable to any Fiscal Year or portion thereof during which it
was or is a general partner of the Partnership. A Former General Partner (as
defined below) shall not be liable for the repayment and discharge of debts and
obligations of the Partnership attributable to any Fiscal Year or portion
thereof during which it was not General Partner of the Partnership. As used in
this Agreement, the term "Former General Partner" refers to such persons as
hereafter from time to time cease to be General Partner pursuant to the terms
and provisions of this Agreement.
(b) Limited Partners. The Limited Partner shall be liable for
the repayment and discharge of all debts and obligations of the Partnership
attributable to any Fiscal Year or portion thereof during which they are or were
Limited Partners of the Partnership only to the extent of their respective
Capital Contributions in the Partnership as set forth on the signature pages,
but such limitation shall not relieve them of liability for any unpaid Capital
Contribution they have covenanted in writing to contribute. In no event shall
the Limited Partners (or former Limited Partners) be obligated to make any
contribution whatsoever to the Partnership, except as provided in Section 4.1,
or have any liability for the repayment and discharge of the debts and
obligations of the Partnership (apart from their respective Capital Contribution
in the Partnership), except as required by applicable law.
4.4 Return of Distributions to Limited Partners. In accordance with
applicable law, a limited partner of a partnership may, under certain
circumstances, be required to return to the partnership for the benefit of
partnership creditors, amounts previously distributed to such limited partner as
,a return of capital. It is the intent of the Partners that any Distributions to
any Limited Partners pursuant to Article VI hereof, to the extent possible,
shall not be deemed a return or withdrawal of capital, and that no Limited
Partner shall be obligated to pay any such amount to or for the account of the
Partnership or any creditor of the Partnership. However, if a
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court of competent jurisdiction holds that, notwithstanding the provisions of
this Agreement, any Limited Partner is obligated to make such payment, that
obligation shall be the obligation of such Limited Partner and not of the
General Partner.
4.5 No Priority. No Partner shall have priority over another Partner in
connection with the return of its Capital Contribution or as to Distributions by
the Partnership.
ARTICLE V
CAPITAL ACCOUNTS
5.1 Partner's Accounts. A separate Capital Account shall be maintained
for each Partner in accordance with Treasury Regulations 1.704-1(b) (2) (iv).
5.2 Allocations. After giving effect to the special allocations set
forth in Section 5.5 hereof, for each Fiscal Year (or portion thereof) of the
Partnership, all Net Income and Net Loss shall be allocated ninety-nine percent
(99%) to the Limited Partners and one percent (1%) to the General Partner,
subject to the limitations set forth in Section 5.3 hereof. Subject to the
special allocations set forth in Section 5.5 hereof, the General Partner will be
allocated at least one percent (1%) of all items of Partnership income, gain,
loss or deductions.
5.3 Limitation on Allocation of Net Losses. The Net Losses allocated
pursuant to Section 5.2 hereof shall not exceed the maximum amount of Net Losses
that can be so allocated without causing any Limited Partner to have an Adjusted
Capital Account Deficit at the end of any Fiscal Year. In the event that some,
but not all, of the Limited Partners would have Adjusted Capital Account
Deficits as a consequence of an allocation of Net Losses pursuant to Section 5.2
hereof, the limitation set forth in this Section 5.3 shall be applied separately
to each Limited Partner so as to allocate the maximum permissible Net Losses to
each Limited Partner under Treasury Regulations Section 1.704-1(b)(2)(ii)(d).
All Net Losses in excess of the limitations set forth in this Section 5.3 shall
be allocated to the General Partner.
5.4 Credits and Charges to Capital Account. The Capital Account of each
Partner shall be credited and charged as follows:
(a) Such Capital Account shall be credited with (i) the sum of
such Partners Capital Contributions, (ii) the Gross Asset Value of property, if
any, contributed by such Partner to the Partnership (net of any liabilities that
are secured by such contributed property, or that Partnership or any other:
Partner is considered to assume under Code Section 752); (iii) the amount of Net
income allocated to such Partner pursuant to Section 5.2, and (iv) the amount of
any Partnership liabilities assumed by such Partner or secured by any
Partnership Property distributed to such Partner.
(b) Such Capital Account shall be charged with (i) the amount
of money and the Gross Asset Value of any Partnership Property distributed to
such Partner (net of liabilities that are secured by such distributed property
or that such Partner is considered to assume or take subject to under Code
Section 752), (ii) the amount of Net Loss allocated to such Partner pursuant to
Section 5.2, (iii) the amount of any liabilities of such Partner that are
assumed by the Partnership or that are secured by any property contributed by
such Partner to the Partnership,
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and (iv) the amount of any expenses of the Partnership contemplated by Article
IX hereof, to the extent not taken into account in determining Net Income or Net
Loss.
(c) In the event that any Interest in the Partnership is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred Interest.
(d) In the event the Gross Asset Value of any Partnership
Property is adjusted pursuant to the terms of this Agreement, the Capital
Accounts of all Partners shall be adjusted simultaneously to reflect the
aggregate net adjustment as if the Partnership recognized gain or loss equal to
the amount of such aggregate net adjustment.
(e) Notwithstanding any provision herein to the contrary,
Capital Accounts shall at all times be maintained in conformance with all the
provisions of Treasury Regulations Section 1.704-1(b)(2)(iv).
5.5 Special Allocations.
(a) Qualified Income Offset. Notwithstanding any other
provision of this Agreement to the contrary (except paragraphs (b) and (c)
hereof which will be applied first), if in any Fiscal Year or other period any
Partner unexpectedly receives any adjustments, allocations, or distributions
described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6)
which result in an Adjusted Capital Account Deficit for such Partner (determined
after the allocation of income, gain or loss under Section 5.2), there will be
allocated to each such Partner a pro rata share of items of Net Income,
unreduced by any deduction, in proportion to such negative balances until the
Adjusted Capital Account Deficit for each such Partner is increased to zero.
(b) Partnership Minimum Gain Chargeback. Notwithstanding any
other provision of this Agreement to the contrary, if in any Fiscal Year or
other period there is a net decrease in the amount of the Partnership Minimum
Gain, then each Partner shall first be allocated items of Partnership income and
gain for such year or period (and, if necessary, subsequent years or periods) in
an amount equal to that Partner's share of the net decrease in such Partnership
Minimum Gain during such year or period (as determined under Treasury
Regulations Section 1.7042(g)) (the "Partnership Minimum Gain Chargeback");
provided however, that this Section 5.5(b) shall not apply to the extent the
circumstances described in Treasury Regulations Sections 1.704-2(f)(2),
1.704-2(f)(3)0 1.704-2(f)(4) or 1.704-2(f)(5) exist. This Section 5.5(b) is
intended to comply with the minimum gain chargeback requirement in Treasury
Regulations Section 1.704-2(f), and shall be interpreted consistently therewith.
(c) Partner Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement to the contrary other than Section 5.5(b), if in any
Fiscal Year or other period there is a net decrease in the amount of Partner
Nonrecourse Debt Minimum Gain, then each Partner will first be allocated items
of Partnership income and gain for such year or period (and, if necessary,
subsequent years or periods) in an amount equal to that Partner's share of the
net decrease in such Partner Nonrecourse Debt Minimum Gain during such year or
period (as determined under Treasury Regulation Section 1.704-2(1)(4)) (the
"Partner Minimum Gain
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Chargeback"), provided, however, that this Section 5.5(c) shall not apply to the
extent the circumstances described in the third and fifth sentences of Treasury
Regulations Section 1.704-2(1)(4) exist. This Section 5.5(c) is intended to
comply with the minimum gain chargeback requirement in Treasury Regulations
Section 1.704-2(1)(4) and shall be interpreted consistently therewith.
(d) Partnership Nonrecourse Deductions. Nonrecourse Deductions
for any Fiscal Year or other period will be specially allocated among the
Partners as items of Net Loss as provided in Section 5.2 hereto and in
accordance with Treasury Regulations Section 1.704-2 (j) (1) (ii).
(e) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year or other period will be specially allocated
solely to the Partner or Partners who bear(s) 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 (1) (2).
(f) Gross Income Allocation. If any Partner has a deficit
Capital Account at the end of any Fiscal Year that is in excess of the sun
of,(i) the amount such Partner is obligated to restore to the Partnership
pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c), (ii) the amount
such Partner is deemed to be obligated to restore pursuant to the penultimate
sentence of Treasury Regulations Section 1.704-2(g)(1), and (iii) the amount
such Partner is demand to be obligated to restore pursuant to the penultimate
sentence of Treasury Regulations Section 1.704-2(1)(5), such Partner shall be
specially allocated items of Partnership income and gain in the amount of such
excess as quickly as possible; provided, however, that an allocation pursuant to
this Section 5.5(f) shall be made if and only to the extent that such Partner
would have a deficit Capital Account in excess of such sum after all other
allocations provided for in this Article 5 have been tentatively made as if
Section 5.5(2) and this Section 5.5(f) were not in this Agreement.
(g) Section 754 Adjustment. To the extent any adjustment to
the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b)
or Code Section 743(b) is required, pursuant to Treasury Regulations Section
1.7041(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment 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 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 Regulations: Any
election permitted under Code Section 754 shall be made by the General Partner
in its sole discretion.
(h) Curative Allocation. In the event that any items of Net
Income or Net Loss are specially allocated pursuant to paragraphs (a) and (b)
hereof, upon reasonable notice to the Partners, the General Partner will
allocate to the Partners subsequent items of Net Income and Net Loss in the
minimum amount sufficient, in the reasonable judgment of the General Partner
with the advice of counsel, to the extent permitted by law, to result as nearly
as practicable in implementing the Partners' intended business arrangement, by
causing each Partner to have a Capital Account balance equal to that which would
have resulted had the
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original special allocation not occurred. In determining the allocations under
this Section 5.5(h), consideration-shall be given to future allocations under
Sections 5.5(b) and 5.5(c) that although not yet required, are likely to offset
allocations under Sections 5.5(d) and 5.5(e).
(i) In accordance with Section 706 of the Code, the
Partnership shall use the closing of the books methodology for purposes of
allocating Net Income and Net Loss.
5.6 Other Allocation Rules.
(a) For purposes of determining a Partner's proportionate
share of the "excess nonrecourse liabilities" of the Partnership within the
meaning of Treasury Regulations Section 1.752-3(a)(3), the Partners' interests
in Partnership profits are proportionate to their Adjusted Capital Contribution.
(b) To the extent permitted by Treasury Regulations Sections
1.704-2(h) and 1.704-2(i)(6), the General Partner shall endeavor to treat
distributions as having been made from the proceeds of a Nonrecourse Liability
or a Partner Nonrecourse Debt only to the extent that such distributions would
otherwise cause or increase an Adjusted Capital Account Deficit for any Partner.
(c) If any fees or other payments deducted for federal income
tax purposes by the Partnership are recharacterized by a final determination of
the Internal Revenue Service as nondeductible distributions to any Partner,
then, notwithstanding all other allocation provisions (other than the Curative
Allocations pursuant to Section 5.5(h) hereof), gross income shall be allocated
to such Partner (for each Fiscal Year in which such recharacterization occurs)
in an amount equal to the fees or payments recharacterized.
(d) Subject to Section 5.5 hereof, the General Partner shall
be allocated at least 1% of each material item of Partnership income, gain,
loss, deduction or credit at all times during the existence of the Partnership.
(e) With respect to any Fiscal Year or other period during
which any Partner's interest in the Partnership changes, whether by reason of
the admission of a Partner, the withdrawal of a Partner, a non-pro rata
contribution of capital to the Partnership or any other event described in
Section 706(d)(1) of the Code and the Treasury Regulations thereunder,
allocations of Net Income or Net Loss shall take into account the varying
interests of the partners during such period in a manner consistent with Section
706(d)(1) and the Treasury Regulations thereunder.
5.7 Tax Allocations: Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss, and deductions with respect to any
property contributed to the Partnership shall, solely for tax purposes, be
allocated among the Partners so as to xxxxx into account any variation between
the adjusted basis of such property contributed to the Partnership for federal
income tax purposes and that property's initial Gross Asset Value at the time of
contribution.
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(b) In the event that the Gross Asset Value of any Partnership
Property is adjusted pursuant to this Agreement, subsequent allocations of
income, gain, loss and deduction with respect to such asset shall take account
of any variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Treasury Regulations thereunder.
(c) Any elections or other decisions relating to such
allocations shall be made by t~$-a General Partner in any manner that reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant to
this Section 5.7 are solely for purposes of federal, state and local taxes and
shall not affect, or in any way be taken into account in computing, any personas
Capital Account or share of Net Income, Net Loss, other items, or distributions
pursuant to any provision of this Agreement.
ARTICLE VI
DISTRIBUTIONS; WITHDRAWALS OF CAPITAL
6.1 Allocation of Distributions. The Partnership may make distributions
from time to time in the discretion of the General Partner and in accordance
with the Provisions of the Act. Any such distributions shall be allocated
ninety-nine percent (99%) to the Limited Partners and one percent (1%) to the
General Partner. Nothing contained in this Section 6.1 shall prohibit any
distributions to a withdrawing Limited Partner pursuant to Section 7.3 hereof.
6.2 Distributions Net of Expenses of the Partnership. Notwithstanding
anything to the contrary contained herein, all distributions under Section 6.1
above shall be net of any expenses of the Partnership contemplated by Article IX
hereof, except to the extent that the Partnership has received Supplemental
Capital Contributions with respect thereto.
6.3 Withdrawals of Capital. Except as otherwise expressly provided in
this Agreement, a Partner shall not be entitled to withdraw any amount of such
Partner's Capital Contribution from the Partnership.
ARTICLE VII
TRANSFER OF PARTNERSHIP INTERESTS
7.1 Transfer by General Partner.
(a) The General Partner shall not sell, assign or otherwise
dispose of all or any part of its Interest in the Partnership (including any
beneficial interest therein) without the prior written consent of all of the
Limited Partners, and any attempt to do so shall be null and void. No person to
whom the General Partner sells, assigns or otherwise disposes of all or any part
of its interest (including any pledges or assignee of rights to receive
Distributions) may be admitted as the General Partner without the prior written
consent of all of the Limited Partners.
(b) Subject to the second sentence in Section 7.1(a), the
General Partner may sell, assign or otherwise dispose of all or any part o! its
Interest in the Partnership (including any beneficial interest therein) without
the prior written consent of all of the Limited Partners, if such
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sale, assignment or other disposition results by operation of law or is required
to effect compliance by the General Partner with the provisions of any law.
7.2 Prohibition on Transfer by Limited Partner. No Limited Partner
shall sell, assign, transfer, pledge or otherwise encumber or dispose of all or
any part of its Interest (including any beneficial interest therein).
7.3 Voluntary Withdrawal by Limited Partner. Except as provided in
Article XI hereof, a Limited Partner may not withdraw prior to the Termination
Date without the prior written consent of the General Partner.
7.4 Death, Incompetence or Bankruptcy of Limited Partner. In the event
that a Limited Partner dies or is adjudicated incompetent or bankrupt, the
executor, administrator, trustee, committee or other legal representative or
successor in interest of such Limited Partner (hereinafter collectively referred
to as the "Legal Representative") shall succeed to the rights of such Limited
Partner to receive allocations, distributions and reports hereunder, and may, at
the sole discretion of the General Partner, be admitted into the Partnership as
a Limited Partner in the place and stead of such Limited Partner; provided,
however, that at any time after the death or adjudication of incompetence or
bankruptcy of a Limited Partner but prior to an admission of such Limited
Partner's Legal Representative as a Limited Partner pursuant to this Section
7.4, the General Partner may, in its sole discretion, effect a liquidation of
such Limited Partner's Interest by causing the Partnership to make a payment to
the Legal Representative of such Limited Partner in an amount which, in the
reasonable judgment of the General Partner, shall reflect the fair market value
of the interest held by such Legal Representative at the time of the
liquidation, and upon such liquidation all rights to receive allocations,
distributions and reports hereunder with respect to such interest shall
terminate.
7.5 Acquisition of Limited Partner's Interest by the General Partner.
Except as expressly provided in this Agreement, if a General Partner acquires an
Interest of a Limited Partner, said General Partner shall, with respect to such
Interest, enjoy all of the rights and be subject to all of the obligations and
duties of a Limited Partner.
ARTICLE VIII
BANKRUPTCY, DISSOLUTION OR REMOVAL OF GENERAL PARTNER
8.1 Dissolution of Partnership. Subject to the provisions of Section
8.4, in the event of the filing of a petition in bankruptcy, insolvency or for
dissolution, or in the event of the removal or resignation of the General
Partner, the Partnership shall thereupon be dissolved and terminated pursuant to
Article XI. The date of the General Partners filing of such petition for
bankruptcy, insolvency or for dissolution, or the date of such removal or
resignation, whichever is applicable, shall be deemed the last day of a Fiscal
Year, unless the Partnership is continued pursuant to Section 8.4. If the
Limited Partners fail to continue the business of the Partnership as provided in
Section 8.4, the Partnership shall forthwith be terminated and the Partnership
shall be dissolved as required by law.
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8.2 Voluntary Resignation, Withdrawal or Dissolution of General
Partner. The General Partner shall not resign or withdraw as the General Partner
of the Partnership or voluntarily dissolve itself or voluntarily cause its own
dissolution unless it has received the prior written consent of a Majority In
Interest of Limited Partners (other than Limited Partners who are also
Affiliates of the General Partner).
8.3 Removal of General Partner for Cause.
(a) A Majority In Interest of Limited Partners shall have the
right, exercisable by written notice to the General Partner, to remove the
General Partner for Cause. "Cause" shall mean gross negligence, fraud or willful
misconduct or a knowing violation of law.
(b) No removal under Subsection (a) above may be made unless a
court of competent jurisdiction or another impartial arbitrator selected by the
General Partner and the respective Limited Partners shall have determined, in an
action for declaratory judgment or for similar relief brought by or on behalf of
the respective Limited Partners, that such cause for such removal exists.
8.4 Continuation of Partnership. Notwithstanding Section 8.1, the
business of the Partnership shall be continued after the adjudication of
bankruptcy, insolvency or dissolution, or the resignation or removal of the
General Partner if, within ninety (90) days of such adjudication of bankruptcy,
insolvency or dissolution, or such resignation or removal, one or more
additional general partners shall have been appointed by unanimous consent of
all that Limited Partners and such additional appointed general partner or
general partners shall have agree in writing to be bound by all relevant terms
of this Agreement.
ARTICLE IX
EXPENSES OF THE PARTNERSHIP
The Partnership shall pay all of the costs and expenses which may be
incurred by the Partnership in connection with the operation of its business,
including, but not limited to, (a) legal and accounting services, (b) other
services rendered to the Partnership by consultants and advisors other than
NETCO-Residuals Management Systems, Inc., if any, (c) such administrative
services as the General Partner may deem necessary or advisable, and (d) any
taxes for which the Partnership may be liable.
ARTICLE X
INDEMNIFICATION OF THE GENERAL PARTNER
10.1 Liability. The General Partner shall not be liable to the
Partnership or the Limited Partners for any act performed or omitted by it
pursuant to the authority granted to the General Partner by this Agreement,
unless such act or omission constitutes gross negligence, fraud or willful
misconduct or a knowing violation of law.
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10.2 Indemnification.
(a) Subject to Section 10.1, the Partnership, its receiver or
its trustee shall, to the maximum extent permitted by law, indemnify and save
harmless the General Partner, its directors, officers and stockholders
(including the officers, directors and general partners of such stockholders),
and its or their employees and agents (individually, an "Indemnitee", and
collectively, the "Indemnitees") from any and all liabilities, damages,
judgments, interest on such judgments, fines, penalties, charges, costs, amounts
paid in settlement, expenses and attorneys' fees incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or commission,
whether pending or threatened, whether or not an Indemnitee is or may be a party
thereto, including interest on the foregoing, which, in the good faith judgment
of the General Partner, arise out of, relate to or are in connection with the
management or conduct of' the business or affairs of the Partnership, or are
incurred by reason of any act performed or omitted to be performed by the
General Partner or any other Indemnitee in connection therewith (all of the
foregoing being, collectively, "Indemnified Liabilities"). Any attorneys' fees
and expenses of the Indemnitees incurred in connection with the defense of any
action as to which such Indemnitee it indemnified hereunder shall be paid by the
Partnership as incurred.
(b) Subject to Section 10.1, in the event of any action by a
Limited Partner against the General Partner or any other Indemnitee, including a
Partnership derivative action, the Partnership shall indemnify, save harmless
and pay all expenses of the General Partner or any other Indemnitee and each of
its employees and agents, if any, including attorneys' fees incurred in the
defense of said action, which attorneys' fees shall be paid as incurred to the
extent that the Partnership has sufficient assets to pay such fees, and,
thereafter, shall be paid, jointly and severally, by the Limited Partners (other
than the Limited Partners who are also Indemnitees). If the General Partner or
any other Indemnitee is not successful in any action by the Limited Partners or
the Partnership against it, it will be obligated to reimburse the Partnership
and, where applicable, the Limited Partners for any attorneys' fees so advanced.
If the Limited Partner bringing the action for which indemnification is sought
pursuant to this Section 10.2(b) is not successful, it will be obligated to
reimburse any fees and expenses actually incurred by the General Partner or any
other Indemnitee, the Partnership and the other Limited Partners, as the case
may be. Neither the General Partner nor any other Indemnitee shall have any
liability for negligence.
(c) The right of any Indemnitee to the indemnification
provided herein shall be cumulative of, and in addition to, any and all rights
to which such Indemnitee may otherwise be entitled by contract or as a matter of
law or equity and shall extend to his heirs, successors, assigns and legal
representatives.
(d) All judgments against the Partnership and the General
Partner wherein the General Partner is entitled to indemnification must first be
satisfied from Partnership assets before the General Partner is responsible for
these obligations.
10.3 Survival. The rights of indemnification under this Article X shall
survive the removal or withdrawal of the General Partner from the Partnership.
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ARTICLE XI
TERMINATION OF PARTNERSHIP;
LIQUIDATION AND DISTRIBUTION OF ASSETS
11.1 Termination Events. The Partnership shall be dissolved and
terminated upon the earliest to occur of the following: (a) pursuant to Article
VIII, the adjudication of bankruptcy, insolvency or dissolution, or the
resignation or removal of, the General Partner, unless the business of the
Partnership is continued pursuant to the provisions of Section 8.4; (b) the
written consent of 1004 of the Limited Partners; (c) the expiration of the term
of the Partnership; or (d) the termination of the Partnership by operation of
law. Upon termination, the Partnership shall wind up its affairs and shall be
liquidated and a certificate of cancellation of the Partnership, as required by
law, shall be filed.
11.2 Liquidation and Distribution upon Termination. Upon a termination
of the Partnership for any reason, the General Partner shall liquidate the
property and assets of the Partnership as promptly as possible, in an orderly
and businesslike manner as is consistent with obtaining the fair value
therefrom. Thereafter, the General Partner shall pay first the expenses of the
liquidation and dissolution of the Partnership, and then apply and distribute
the assets of the Partnership in the following order:
(i) to the payment of creditors, including creditors of the
Partnership who are Partners, in order of priority as provided by law;
(ii) to the setting up of any reserves which the General
Partner may reasonably deem necessary for the payment of any contingent
or unforeseen liability of the Partnership;
(iii) to the Limited Partners and the General Partner in
accordance with the positive balances of their respective Capital
Accounts.
ARTICLE XII
BOOKS OF ACCOUNT, ACCOUNTING AND REPORTS
12.1 Books of Account. The General Partner shall keep books of account
of the Partnership wherein shall be recorded and reflected all of the
contributions to the capital of the Partnership and all of the income, expenses
and transactions of the Partnership. The methods of accounting for the
Partnership shall be determined by the General Partner. Such books of account
shall be kept at the place of business of the Partnership and each Limited
Partner and his authorized representatives shall have at all times, during
reasonable business hours, free access to and the right to inspect such books of
account, provided that such inspection is made in good faith and without any
intent to damage the Partnership or any of the Partners.
12.2 Tax Returns and Elections. The General Partner shall cause income
tax returns for the Partnership to be prepared and filed with the appropriate
authorities and, within ninety (90) days after the close of each Fiscal Year of
the Partnership, shall furnish to each Limited Partner the appropriate
information derived from the Partnership's income tax returns for such
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Fiscal Year as is necessary for the preparation of the Limited Partners' federal
and state income tax returns. The General Partner shall, in its sole discretion,
make all elections under applicable provisions of the Code as shall be necessary
or, when optional, in the interest of the Partnership, and shall timely file all
such elections as made.
12.3 Tax Matters Partner. The General Partner, shall be the "tax
matters partner" of the Partnership as described in Section 6231(x)(7) of the
Code. The tax matters partner shall provide all notices and perform all acts
required of a tax matters partner under Subchapter C of Chapter 63 of the Code
and the regulations thereunder.
12.4 Banking. All funds of the Partnership shall be deposited in a
separate bank account or accounts in the name of the Partnership as shall be
determined by the General Partner. All withdrawals therefrom shall be made upon
checks signed by any person or persons authorized to do so by the General
Partner.
12.5 Accounting Method. The Partnership shall adopt the cash method of
accounting.
12.6 Determination of Certain Matters. All matters concerning the
valuation of investments and other assets and the allocation of income,
deductions, gains, losses, credits and liabilities among the Partners, including
taxes thereon and accounting procedures, not expressly provided for by the terms
of this Agreement, shall be equitably determined in good faith by the General
Partner.
ARTICLE XIII
POWER OF ATTORNEY
13.1 Power of Attorney. Each Limited Partner hereby constitutes and
appoints the General Partner as its agent and attorney-in-fact, with full power
of substitution, and with full power and authority to act in its name and on its
behalf in the execution, acknowledgment, swearing to and filing of documents as
follows:
(a) the Certificate, as well as any amendment thereto, in such
form as shall be necessary under the laws of the State of
Delaware and
the law of any other states in which any such certificate is required
to be filed to give effect to the provisions of this Agreement and to
cause the admission of each Limited Partner to the Partnership;
(b) any other instrument which may be required to be filed by
the Partnership under the law of any state or by any governmental
agency, or which the General Partner deems it advisable to file; and
(c) any documents which may be required to affect the
continuation of the Partnership, the admission of an additional or
substitute Limited Partner or the dissolution and termination of the
Partnership, provided such continuation, admission or dissolution and
termination is in accordance with the terms of this Agreement, or any
other document which may be deemed necessary or desirable to effectuate
the provisions of this Agreement in accordance with its terms.
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13.2 Irrevocability. The Power of Attorney to be granted by each
Limited Partner to the General Partner as hereinabove provided:
(a) is a special power of attorney coupled with an interest and is
irrevocable and shall survive the disability or cessation of the existence as a
legal entity of a Limited Partner;
(b) may be exercised by the General Partner for each Limited
Partner by a facsimile signature of the General Partner or by listing each
Limited Partner executing any instrument with a facsimile signature of such
General Partner acting as attorney-in-fact for all of them; and
(c) shall survive the delivery of an assignment by a Limited
Partner of the whole or any portion of its Interest in the Partnership except
that, where that assignee thereof has been approved by the General Partner for
admission to the Partnership as a substitute Limited Partner, the power of
attorney shall survive the delivery of such assignment for the sole purpose of
enabling the General Partner to execute, acknowledge and file any instrument
necessary to effect such substitution.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Notice. All notices required to be given by this Agreement to
any Partner shall be in writing and shall be hand delivered, telexed, sent by
facsimile transmission or nationally recognized overnight courier, addressed (a)
in the case of such a notice to the General Partner, to the address first set
forth above, and (b) in the case of such a notice to the Limited Partners,
addressed to the respective Limited Partners at their addresses set forth on the
signature pages hereof, unless notice in writing is given of a change of address
in the manner set forth herein, in which case notices shall be sent to the new
address so designated. Any notice given by a nationally recognized overnight
courier shall be deemed to have been given two (2) days after deposit thereof
with such courier, and any notice given by hand delivery, telex or by facsimile
transmission shall be deemed to have been given on the same day hand delivered,
telexed or sent by facsimile transmission, provided that such hand delivery,
telex or facsimile transmission shall have been confirmed.
14.2 Severability. The terms of this Agreement shall be deemed to
be severable. If any provision of this Agreement or the application thereof to
any person or circumstance shall be determined to be invalid or unenforceable,
the remaining provisions of this Agreement or the application of such provision
to persons or circumstances other than those to which it is held invalid or
unenforceable shall not be affected thereby and shall be valid and enforceable
to the fullest extent permitted by law.
14.3 Execution in Several Counterparts. This Agreement may be
executed in several counterparts or by separate instruments, and all of such
counterparts and instruments shall constitute one agreement, binding on all of
the parties hereto, notwithstanding that all of the parties are not signatory to
the original or to the same counterpart or instrument.
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14.4 Amendments to Agreement.
(a) This Agreement represents the entire agreement and
understanding of the parties with respect to the subject matter hereof and may
not be amended other than by agreement in writing as provided in Sections
14.4(b) and (c).
(b) Notwithstanding Section 14.4(c), no amendment to this
Agreement shall, without the prior written consent of all Partners, modify (i)
the business purpose of the-Partnership as provided in Article II, (ii) the
allocation of profits or losses or the making of Distributions as provided in
Articles V and VI, (iii) the obligation of any Partner to make Capital
contributions, or (iv) the authority of the General Partner to consent to the
substitution of Limited Partners as provided in Article VII.
(c) The General Partner may amend or modify any provision of this
Agreement (with the exception of those provisions specifically set forth in
Subsection (b) above) by giving written notice of such amendment or modification
to the Limited Partners. Said modification or amendment shall be effective
unless a Majority In Interest of Limited Partners (other than Limited Partners
who are also Affiliates of the General Partner) object to same, in writing,
within ten (10) days.
14.5 Governing Law. All questions with respect to the construction of
this Agreement, and the rights and liabilities of the parties, shall be
determined in accordance with the provisions of the law of the State of
Delaware.
14.6 Captions. The captions in this Agreement are for convenience only
and shall not limit or define the text hereof.
14.7 Further Assurances. Each of the Limited Partners agrees hereafter
to execute, acknowledge, deliver, file, record and publish such further
certificates, instruments, agreements and other documents and to take all such
further action as may be required by law or deemed by the General Partner to be
necessary or useful in furtherance of the Partnership's purposes and the
objectives and intentions underlying this Agreement and not inconsistent with
the terms hereof.
14.8 Persons Bound. Except as herein provided to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties
signatory hereto, their distributees, personal representatives and assigns.
14.9 Admission of Additional Limited Partners. Each Limited Partner
agrees that the General Partner may, without the consent of the Limited
Partners, but subject to the requirements of Section 3.2, admit additional
Limited Partners to the Partnership at any time.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first hereinabove written.
GENERAL PARTNER
$1,000 NETCO-RESIDUALS MANAGEMENT
------------------------------- SYSTEMS, INC.
Basic Capital Contribution
By: /s/ Authorized Officer
-------------------------------------
LIMITED PARTNER
SYNAGRO TECHNOLOGIES, INC.
By:
-------------------------------------
Authorized Officer
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