EXHIBIT 3.2
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
RIO VISTA ENERGY PARTNERS L.P.
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS................................................................................1
SECTION 1.1 Definitions.......................................................................1
SECTION 1.2 Construction.....................................................................19
ARTICLE II ORGANIZATION..............................................................................20
SECTION 2.1 Formation........................................................................20
SECTION 2.2 Name.............................................................................20
SECTION 2.3 Registered Office; Registered Agent; Principal Office; Other Offices.............20
SECTION 2.4 Purpose and Business.............................................................20
SECTION 2.5 Powers...........................................................................21
SECTION 2.6 Power of Attorney................................................................21
SECTION 2.7 Term.............................................................................22
SECTION 2.8 Title to Partnership Assets......................................................23
ARTICLE III RIGHTS OF LIMITED PARTNERS................................................................24
SECTION 3.1 Limitation of Liability..........................................................24
SECTION 3.2 Management of Business...........................................................24
SECTION 3.3 Outside Activities of the Limited Partners.......................................24
SECTION 3.4 Rights of Limited Partners.......................................................24
ARTICLE IV CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF
PARTNERSHIP INTERESTS.....................................................................25
SECTION 4.1 Certificates.....................................................................25
SECTION 4.2 Mutilated, Destroyed, Lost or Stolen Certificates................................25
SECTION 4.3 Record Holders...................................................................26
SECTION 4.4 Transfer Generally...............................................................27
SECTION 4.5 Registration and Transfer of Limited Partner Interests...........................27
SECTION 4.6 Transfer of the General Partner's General Partner Interest.......................28
SECTION 4.7 Transfer of Incentive Distribution Rights........................................29
SECTION 4.8 Restrictions on Transfers........................................................29
SECTION 4.9 Citizenship Certificates; Non-citizen Assignees..................................30
SECTION 4.10 Redemption of Partnership Interests of Non-citizen Assignees.....................31
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ARTICLE V CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS...............................32
SECTION 5.1 Organizational Contributions.....................................................32
SECTION 5.2 Contributions by the General Partner and its Affiliates..........................32
SECTION 5.3 Contributions by Initial Limited Partners and Distributions to the General
Partner..........................................................................32
SECTION 5.4 Interest and Withdrawal..........................................................33
SECTION 5.5 Capital Accounts.................................................................33
SECTION 5.6 Issuances of Additional Partnership Securities...................................36
SECTION 5.7 Limitations on Issuance of Additional Partnership Securities.....................36
SECTION 5.8 [Reserved].......................................................................37
SECTION 5.9 Limited Preemptive Right.........................................................37
SECTION 5.10 Splits and Combinations..........................................................37
SECTION 5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests................38
ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS.............................................................38
SECTION 6.1 Allocations for Capital Account Purposes.........................................38
SECTION 6.2 Allocations for Tax Purposes.....................................................45
SECTION 6.3 Requirement and Characterization of Distributions; Distributions to Record
Holders..........................................................................47
SECTION 6.4 Distributions of Available Cash from Operating Surplus...........................48
SECTION 6.5 Distributions of Available Cash from Capital Surplus.............................49
SECTION 6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels......49
SECTION 6.7 [Reserved].......................................................................50
SECTION 6.8 Special Provisions Relating to the Holders of Incentive Distribution Rights......50
SECTION 6.9 Entity-Level Taxation............................................................50
ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS......................................................50
SECTION 7.1 Management.......................................................................50
SECTION 7.2 Certificate of Limited Partnership...............................................53
SECTION 7.3 Restrictions on the General Partner's Authority..................................53
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SECTION 7.4 Reimbursement of the General Partner.............................................54
SECTION 7.5 Outside Activities...............................................................55
SECTION 7.6 Loans from the General Partner; Loans or Contributions from the Partnership;
Contracts with Affiliates; Certain Restrictions on the General Partner...........56
SECTION 7.7 Indemnification..................................................................57
SECTION 7.8 Liability of Indemnitees.........................................................59
SECTION 7.9 Resolution of Conflicts of Interest..............................................60
SECTION 7.10 Other Matters Concerning the General Partner.....................................61
SECTION 7.11 Purchase or Sale of Partnership Securities.......................................62
SECTION 7.12 Registration Rights of the General Partner and its Affiliates....................62
SECTION 7.13 Reliance by Third Parties........................................................64
ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS....................................................65
SECTION 8.1 Records and Accounting...........................................................65
SECTION 8.2 Fiscal Year......................................................................65
SECTION 8.3 Reports..........................................................................65
ARTICLE IX TAX MATTERS...............................................................................66
SECTION 9.1 Tax Returns and Information......................................................66
SECTION 9.2 Tax Elections....................................................................66
SECTION 9.3 Tax Controversies................................................................66
SECTION 9.4 Withholding......................................................................66
ARTICLE X ADMISSION OF PARTNERS.....................................................................67
SECTION 10.1 Admission of Initial Limited Partners............................................67
SECTION 10.2 Admission of Substituted Limited Partner.........................................67
SECTION 10.3 Admission of Successor General Partner...........................................68
SECTION 10.4 Admission of Additional Limited Partners.........................................68
SECTION 10.5 Amendment of Agreement and Certificate of Limited Partnership....................68
ARTICLE XI WITHDRAWAL OR REMOVAL OF PARTNERS.........................................................68
SECTION 11.1 Withdrawal of the General Partner................................................68
SECTION 11.2 Removal of the General Partner...................................................70
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SECTION 11.3 Interest of Departing Partner and Successor General Partner......................71
SECTION 11.4 Withdrawal of Limited Partners...................................................72
ARTICLE XII DISSOLUTION AND LIQUIDATION...............................................................72
SECTION 12.1 Dissolution......................................................................72
SECTION 12.2 Continuation of the Business of the Partnership After Dissolution................73
SECTION 12.3 Liquidator.......................................................................74
SECTION 12.4 Liquidation......................................................................74
SECTION 12.5 Cancellation of Certificate of Limited Partnership...............................75
SECTION 12.6 Return of Contributions..........................................................75
SECTION 12.7 Waiver of Partition..............................................................75
SECTION 12.8 Capital Account Restoration......................................................75
ARTICLE XIII AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE.................................75
SECTION 13.1 Amendment to be Adopted Solely by the General Partner............................75
SECTION 13.2 Amendment Procedures.............................................................77
SECTION 13.3 Amendment Requirements...........................................................78
SECTION 13.4 Special Meetings.................................................................78
SECTION 13.5 Notice of a Meeting..............................................................79
SECTION 13.6 Record Date......................................................................79
SECTION 13.7 Adjournment......................................................................79
SECTION 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.......................79
SECTION 13.9 Quorum...........................................................................80
SECTION 13.10 Conduct of a Meeting.............................................................80
SECTION 13.11 Action Without a Meeting.........................................................81
SECTION 13.12 Voting and Other Rights..........................................................81
ARTICLE XIV MERGER....................................................................................82
SECTION 14.1 Authority........................................................................82
SECTION 14.2 Procedure for Merger or Consolidation............................................82
SECTION 14.3 Approval by Limited Partners of Merger or Consolidation..........................83
SECTION 14.4 Certificate of Merger............................................................84
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SECTION 14.5 Effect of Merger.................................................................84
ARTICLE XV GENERAL PROVISIONS........................................................................84
SECTION 15.1 Addresses and Notices............................................................84
SECTION 15.2 Further Action...................................................................85
SECTION 15.3 Binding Effect...................................................................85
SECTION 15.4 Integration......................................................................85
SECTION 15.5 Creditors........................................................................85
SECTION 15.6 Waiver...........................................................................85
SECTION 15.7 Counterparts.....................................................................85
SECTION 15.8 Applicable Law...................................................................86
SECTION 15.9 Invalidity of Provisions.........................................................86
SECTION 15.10 Consent of Partners..............................................................86
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FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
RIO VISTA ENERGY PARTNERS L.P.
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF RIO
VISTA ENERGY PARTNERS L.P., dated as of ________________________ is entered into
by and among Rio Vista GP LLC, a
Delaware limited liability company, as the
General Partner, and Penn Octane Corporation, a
Delaware corporation, as the
Organizational Limited Partner, together with any other Persons who become
Partners in the Partnership or parties hereto as provided herein. In
consideration of the covenants, conditions and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following definitions shall be for all
purposes, unless otherwise clearly indicated to the contrary, applied to the
terms used in this Agreement.
"Acquisition" means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such transaction.
"Additional Book Basis" means the portion of any remaining Carrying
Value of an Adjusted Property that is attributable to positive adjustments made
to such Carrying Value as a result of Book-Up Events. For purposes of
determining the extent that Carrying Value constitutes Additional Book Basis:
(a) Any negative adjustment made to the Carrying Value of an
Adjusted Property as a result of either a Book-Down Event or a
Book-Up Event shall first be deemed to offset or decrease that
portion of the Carrying Value of such Adjusted Property that
is attributable to any prior positive adjustments made thereto
pursuant to a Book-Up Event or Book-Down Event.
(b) If Carrying Value that constitutes Additional Book Basis is
reduced as a result of a Book-Down Event and the Carrying
Value of other property is increased as a result of such
Book-Down Event, an allocable portion of any such increase in
Carrying Value shall be treated as Additional Book Basis;
provided that the amount treated as Additional Book Basis
pursuant hereto as a result of such Book-Down Event shall not
exceed the amount by which the Aggregate Remaining Net
Positive Adjustments after such Book-Down Event exceeds the
remaining Additional Book Basis attributable to all of the
Partnership's Adjusted Property after such Book-Down Event
(determined without regard to the application of this clause
(b) to such Book-Down Event).
1
"Additional Book Basis Derivative Items" means any Book Basis
Derivative Items that are computed with reference to Additional Book Basis. To
the extent that the Additional Book Basis attributable to all of the
Partnership's Adjusted Property as of the beginning of any taxable period
exceeds the Aggregate Remaining Net Positive Adjustments as of the beginning of
such period (the "Excess Additional Book Basis"), the Additional Book Basis
Derivative Items for such period shall be reduced by the amount that bears the
same ratio to the amount of Additional Book Basis Derivative Items determined
without regard to this sentence as the Excess Additional Book Basis bears to the
Additional Book Basis as of the beginning of such period.
"Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 10.4 and who is shown as such on the
books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each 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 6.1(d)(i)
or 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The
"Adjusted Capital Account" of a Partner in respect of a General Partner
Interest, a Common Unit or an Incentive Distribution Right or any other
specified interest in the Partnership shall be the amount which such Adjusted
Capital Account would be if such General Partner Interest, Common Unit,
Incentive Distribution Right or other interest in the Partnership were the only
interest in the Partnership held by such Partner from and after the date on
which such General Partner Interest, Common Unit, Incentive Distribution Right
or other interest was first issued.
"Adjusted Operating Surplus" means, with respect to any period,
Operating Surplus generated during such period (a) less (i) any net increase in
Working Capital Borrowings with respect to such period and (ii) any net
reduction in cash reserves for Operating Expenditures with respect to such
period not relating to an Operating Expenditure made during such period, and (b)
plus (i) any net decrease in Working Capital Borrowings with respect to such
period, and (ii) any net increase in cash reserves for Operating Expenditures
with respect to such period required by any debt instrument for the repayment of
principal, interest or premium. Adjusted Operating Surplus does not include that
portion of Operating Surplus included in clause (a)(i) of the definition of
Operating Surplus.
2
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Aggregate Remaining Net Positive Adjustments" means, as of the end of
any taxable period, the sum of the Remaining Net Positive Adjustments of all the
Partners.
"Agreed Allocation" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including, without limitation, a Curative Allocation
(if appropriate to the context in which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value
of such property or other consideration at the time of contribution as
determined by the General Partner using such reasonable method of valuation as
it may adopt. The General Partner shall, in its discretion, use such method as
it deems reasonable and appropriate to allocate the aggregate Agreed Value of
Contributed Properties contributed to the Partnership in a single or integrated
transaction among each separate property on a basis proportional to the fair
market value of each Contributed Property. With respect to the Contributed
Property deemed contributed to the Partnership by an Initial Limited Partner (as
described in the definition of Contributed Property), the Agreed Value shall be
the value assigned for federal income tax purposes by the General Partner (in
its reasonable discretion) to such Contributed Property.
"Agreement" means this First Amended and Restated Agreement of Limited
Partnership of Rio Vista Energy Partners L.P., as it may be amended,
supplemented or restated from time to time.
"Assignee" means a Non-citizen Assignee or a Person to whom one or more
Limited Partner Interests have been transferred in a manner permitted under this
Agreement and who has executed and delivered a Transfer Application as required
by this Agreement, but who has not been admitted as a Substituted Limited
Partner.
"Associate" means, when used to indicate a relationship with any
Person, (a) any corporation or organization of which such Person is a director,
officer or partner or is, directly or indirectly, the owner of 20% or more of
any class of voting stock or other voting interest; (b) any trust or other
estate in which such Person has at least a 20% beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary capacity; and (c)
any relative or spouse of such Person, or any relative of such spouse, who has
the same principal residence as such Person.
3
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date:
(a) the sum of (i) all cash and cash equivalents of the
Partnership Group on hand at the end of such Quarter, and (ii)
all additional cash and cash equivalents of the Partnership
Group on hand on the date of determination of Available Cash
with respect to such Quarter resulting from Working Capital
Borrowings made subsequent to the end of such Quarter, less
(b) the amount of any cash reserves that are necessary or
appropriate in the reasonable discretion of the General
Partner to (i) provide for the proper conduct of the business
of the Partnership Group (including reserves for future
capital expenditures and for anticipated future credit needs
of the Partnership Group) subsequent to such Quarter, (ii)
comply with applicable law or any loan agreement, security
agreement, mortgage, debt instrument or other agreement or
obligation to which any Group Member is a party or by which it
is bound or its assets are subject or (iii) provide funds for
distributions under Section 6.4 or 6.5 in respect of any one
or more of the next four Quarters; provided, however, that the
General Partner may not establish cash reserves pursuant to
(iii) above if the effect of such reserves would be that the
Partnership is unable to distribute the Minimum Quarterly
Distribution on all Common Units, plus any Cumulative Common
Unit Arrearage on all Common Units, with respect to such
Quarter; and, provided further, that disbursements made by a
Group Member or cash reserves established, increased or
reduced after the end of such Quarter but on or before the
date of determination of Available Cash with respect to such
Quarter shall be deemed to have been made, established,
increased or reduced, for purposes of determining Available
Cash, within such Quarter if the General Partner so
determines.
Notwithstanding the foregoing, "Available Cash" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
"Book Basis Derivative Items" means any item of income, deduction, gain
or loss included in the determination of Net Income or Net Loss that is computed
with reference to the Carrying Value of an Adjusted Property (e.g.,
depreciation, depletion, or gain or loss with respect to an Adjusted Property).
"Book-Down Event" means an event which triggers a negative adjustment
to the Capital Accounts of the Partners pursuant to Section 5.5(d).
"Book-Tax Disparity" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 5.5 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
4
"Book-Up Event" means an event which triggers a positive adjustment to
the Capital Accounts of the Partners pursuant to Section 5.5(d).
"Business" has the meaning assigned to such term in the Omnibus
Agreement.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the State of Texas shall not be regarded as a Business Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Interest, a Common Unit, an Incentive Distribution Right or any
other Partnership Interest shall be the amount which such Capital Account would
be if such General Partner Interest, Common Unit, Distribution Right or other
Partnership Interest were the only interest in the Partnership held by such
Partner from and after the date on which such General Partner Interest, Common
Unit, Incentive Distribution Right or other Partnership Interest was first
issued.
"Capital Contribution" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Partner contributes to the
Partnership pursuant to this Agreement or the Contribution Agreement.
"Capital Improvement" means any (a) addition or improvement to the
capital assets owned by any Group Member or (b) acquisition of existing, or the
construction of new, capital assets (including, without limitation, LPG
transportation, storage facilities and logistics assets, and related assets), in
each case if such addition, improvement, acquisition or construction is made to
increase the operating capacity or revenues of the Partnership Group from the
operating capacity or revenues of the Partnership Group existing immediately
prior to such addition, improvement, acquisition or construction.
"Capital Surplus" has the meaning assigned to such term in Section
6.3(a).
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' 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 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
"Cause" means a court of competent jurisdiction has entered a final,
non-appealable judgment finding the General Partner liable for actual fraud,
gross negligence or willful or wanton misconduct in its capacity as a general
partner of the Partnership.
"Certificate" means a certificate (i) substantially in the form of
Exhibit A to this Agreement, (ii) issued in global form in accordance with the
rules and regulations of the
5
Depositary or (iii) in such other form as may be adopted by the General Partner
in its discretion, issued by the Partnership evidencing ownership of one or more
Common Units or a certificate, in such form as may be adopted by the General
Partner in its discretion, issued by the Partnership evidencing ownership of one
or more other Partnership Securities.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Delaware as such Certificate of Limited Partnership may be amended, supplemented
or restated from time to time.
"Citizenship Certification" means a properly completed certificate in
such form as may be specified by the General Partner by which a Limited Partner
or an Assignee certifies that he (and if he is a nominee holding for the account
of another Person, that to the best of his knowledge such other Person) is an
Eligible Citizen.
"Claim" has the meaning assigned to such term in Section 7.12(c).
"Closing Date" means the date of the Distribution.
"Closing Price" means the last sale price on such day, regular way, or
in case no such sale takes place on such day, the average of the closing bid and
asked prices on such day, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted for trading on the principal National Securities Exchange
(other than the Nasdaq Stock Market) on which such Limited Partner Interests of
such class are listed or admitted to trading or, if such Limited Partner
Interests of such class are not listed or admitted to trading on any National
Securities Exchange (other than the Nasdaq Stock Market), the last quoted price
on such day or, if not so quoted, the average of the high bid and low asked
prices on such day in the over-the-counter market, as reported by the Nasdaq
Stock Market or such other system then in use, or, if on any such day such
Limited Partner Interests of such class are not quoted by any such organization,
the average of the closing bid and asked prices on such day as furnished by a
professional market maker making a market in such Limited Partner Interests of
such class selected by the General Partner, or if on any such day no market
maker is making a market in such Limited Partner Interests of such class, the
fair value of such Limited Partner Interests on such day as determined
reasonably and in good faith by the General Partner.
"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.
"Combined Interest" has the meaning assigned to such term in Section
11.3(a).
"Commission" means the United States Securities and Exchange
Commission.
"Common Unit" means a Partnership Security representing a fractional
part of the Partnership Interests of all Limited Partners and Assignees and of
the General Partner, and having the rights and obligations specified with
respect to Common Units in this Agreement.
6
"Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, the excess, if any, of (a) the Minimum Quarterly Distribution
with respect to a Common Unit in respect of such Quarter over (b) the sum of all
Available Cash distributed with respect to a Common Unit in respect of such
Quarter pursuant to Section 6.4(a)(i).
"Conflicts Committee" means a committee of the Board of Managers of the
General Partner composed entirely of two or more managers who are not (a)
security holders, officers or employees of the General Partner, (b) officers,
directors or employees of any Affiliate of the General Partner or (c) holders of
any ownership interest in the Partnership Group other than Common Units and who
also meet the independence standards required to serve on an audit committee of
a board of directors by the National Securities Exchange on which the Common
Units are listed for trading.
"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 5.5(d), such property shall no longer constitute a
Contributed Property, but shall be deemed an Adjusted Property. For purposes of
this definition, each Limited Partner who receives Initial Common Units in the
Distribution shall be treated as having received a distribution of an undivided
interest in the assets contributed pursuant to the Contribution Agreement by
Penn Octane Corporation to the Partnership, subject to applicable liabilities
described in the Contribution Agreement, followed immediately thereafter by a
contribution of the Partner's undivided interest in such assets subject to
applicable liabilities, to the Partnership in exchange for the Partner's Initial
Common Units received in the Distribution. For this purpose, each Limited
Partner's undivided interest in the assets expressed as a percentage shall be
the same percentage as the Limited Partner's Percentage Interest determined
immediately following the Distribution.
"Contribution Agreement" means that certain Contribution, Conveyance
and Assumption Agreement, dated as of _______, 2004, among the General Partner,
the Partnership, the Operating Partnership, Penn Octane Corporation and certain
other Affiliates of Penn Octane Corporation, together with the additional
conveyance documents and instruments contemplated or referenced thereunder.
"Controlled Person" means any corporation or partnership of which the
Partnership or any Subsidiary owns or controls an interest in excess of 25%.
"Cumulative Common Unit Arrearage" means, with respect to any Common
Unit, whenever issued, and as of the end of any Quarter, the excess, if any, of
(a) the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each Quarter ending on or before the last day of such
Quarter over (b) the sum of any distributions theretofore made pursuant to
Section 6.4(a)(ii) and the second sentence of Section 6.5 with respect to an
Initial Common Unit (including any distributions to be made in respect of the
last of such Quarters).
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(x).
7
"Current Market Price" as of any date of any class of Limited Partner
Interests means the average of the daily Closing Prices per Limited Partner
Interest of such class for the 20 consecutive Trading Days immediately prior to
such date.
"
Delaware Act" means the
Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. Section 17-101, et seq., as amended, supplemented or restated
from time to time, and any successor to such statute.
"Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.
"Depositary" means, with respect to any Units issued in global form,
The Depository Trust Company and its successors and permitted assigns.
"Distribution" means the pro rata distribution by Penn Octane
Corporation of all of its Common Units representing a 98% Limited Partner
Interest to the stockholders of Penn Octane Corporation, as described in the
Registration Statement.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"Eligible Citizen" means a Person who is (i) qualified to own interests
in real property in jurisdictions in which any Group Member does business or
proposes to do business from time to time, and whose status as a Limited Partner
or Assignee does not or would not subject such Group Member to a significant
risk of cancellation or forfeiture of any of its properties or any interest
therein and (ii) is not a Non-citizen.
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"First Liquidation Target Amount" has the meaning assigned to such term
in Section 6.1(c)(i)(C).
"First Target Distribution" means $0.292 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on the last day
of the calendar quarter that includes the Closing Date, it means the product of
$0.292 multiplied by a fraction of which the numerator is the number of days in
such period, and of which the denominator is 91), subject to adjustment in
accordance with Sections 6.6 and 6.9.
"Fully Diluted Basis" means, when calculating the number of Outstanding
Units for any period, a basis that includes, in addition to the Outstanding
Units, all Partnership Securities and options, rights, warrants and appreciation
rights relating to an equity interest in the Partnership (a) that are
convertible into or exercisable or exchangeable for Units that are senior to or
pari passu with the Common Units, (b) whose conversion, exercise or exchange
price is less than the Current Market Price on the date of such calculation, (c)
that may be converted into or exercised or exchanged for such Units prior to or
during the Quarter following the end of the last Quarter contained in the period
for which the calculation is being made without the satisfaction of any
contingency beyond the control of the holder other than the payment of
consideration and the
8
compliance with administrative mechanics applicable to such conversion, exercise
or exchange, and (d) were not converted into or exercised or exchanged for such
Units prior to the end of the last quarter referred to in clause (c) above.
"General Partner" means Rio Vista GP LLC and its successors and
permitted assigns as general partner of the Partnership.
"General Partner Interest" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it) which may be evidenced by
Partnership Securities or a combination thereof or interest therein, and
includes any and all benefits to which the General Partner is entitled as
provided in this Agreement, together with all obligations of the General Partner
to comply with the terms and provisions of this Agreement.
"Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent given to such Person in response to a proxy or consent solicitation made
to 10 or more Persons) or disposing of any Partnership Securities with any other
Person that beneficially owns, or whose Affiliates or Associates beneficially
own, directly or indirectly, Partnership Securities.
"Group Member" means a member of the Partnership Group.
"Holder" as used in Section 7.12, has the meaning assigned to such term
in Section 7.12(a).
"Incentive Distribution Right" means a non-voting Limited Partner
Interest issued to the General Partner in exchange for the conveyance by the
General Partner of $1,000 to the Partnership pursuant to Section 5.2, which
Partnership Interest will confer upon the holder thereof only the rights and
obligations specifically provided in this Agreement with respect to Incentive
Distribution Rights (and no other rights otherwise available to or other
obligations of a holder of a Partnership Interest). Notwithstanding anything in
this Agreement to the contrary, the holder of an Incentive Distribution Right
shall not be entitled to vote such Incentive Distribution Right on any
Partnership matter except as may otherwise be required by law.
"Incentive Distributions" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Sections 6.4(a)(iv),
(v), and (vi).
"Indemnified Persons" has the meaning assigned to such term in Section
7.12(c).
"Indemnitee" means (a) the General Partner, (b) any Departing Partner,
(c) any Person who is or was an Affiliate of the General Partner or any
Departing Partner, (d) any Person who is or was a member, partner, officer,
director, employee, manager, agent or trustee of any Group Member, the General
Partner or any Departing Partner or any Affiliate of any Group Member, the
General Partner or any Departing Partner, and (e) any Person who is or was
serving at the request of the General Partner or any Departing Partner or any
Affiliate of the General Partner or any Departing Partner as an officer,
director, employee, member, manager, partner, agent,
9
fiduciary or trustee of another Person; provided, that a Person shall not be an
Indemnitee by reason of providing, on a fee-for-services basis, trustee,
fiduciary or custodial services.
"Initial Common Units" means the Common Units distributed in the
Distribution.
"Initial Limited Partners" means the General Partner and the
stockholders of Penn Octane Corporation that receive Initial Common Units in the
Distribution, in each case upon being admitted to the Partnership in accordance
with Section 10.1.
"Initial Unit Capital Account" means (a) with respect to each Initial
Limited Partner, the value assigned for federal income tax purposes by the
General Partner (in its reasonable discretion) to the Contributed Property
contributed by an Initial Limited Partner to the Partnership (as described in
the definition of Contributed Property) in exchange for the Initial Common
Units, reduced by the amount of liabilities to which such property is subject as
determined by the General Partner in its reasonable discretion or (b) with
respect to any other class or series of Units, the price per Unit at which such
class or series of Units is initially sold by the Partnership, as determined by
the General Partner, in each case adjusted as the General Partner determines to
be appropriate to give effect to any distribution, subdivision or combination of
Units.
"Interim Capital Transactions" means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness and sales of debt securities (other than Working Capital
Borrowings and other than for items purchased on open account in the ordinary
course of business) by any Group Member; (b) sales of equity interests by any
Group Member; and (c) sales or other voluntary or involuntary dispositions of
any assets of any Group Member other than (i) sales or other dispositions of
inventory, accounts receivable and other assets in the ordinary course of
business, and (ii) sales or other dispositions of assets as part of normal
retirements or replacements.
"Issue Price" means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.
"Limited Partner" means, unless the context otherwise requires, (a) the
Organizational Limited Partner prior to the Distribution, each Initial Limited
Partner, each Substituted Limited Partner, each Additional Limited Partner and
any Departing Partner upon the change of its status from General Partner to
Limited Partner pursuant to Section 11.3 or (b) solely for purposes of Articles
V, VI, VII and IX, each Assignee; provided, however, that when the term "Limited
Partner" is used herein in the context of any vote or other approval, including
without limitation Articles XIII and XIV, such term shall not, solely for such
purpose, include any holder of an Incentive Distribution Right except as may
otherwise be required by law.
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by Common Units,
Incentive Distribution Rights or other Partnership Securities or a combination
thereof or interest therein, and includes any and all benefits to which such
Limited Partner or Assignee is entitled as provided in this Agreement, together
with all obligations of such Limited Partner or Assignee to comply with the
terms and
10
provisions of this Agreement; provided, however, that when the term "Limited
Partner Interest" is used herein in the context of any vote or other approval,
including without limitation Articles XIII and XIV, such term shall not, solely
for such purpose, include any holder of an Incentive Distribution Right except
as may otherwise be required by law.
"Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the holders of Outstanding Units have the right to elect to
reconstitute the Partnership and continue its business has expired without such
an election being made, and (b) in the case of any other event giving rise to
the dissolution of the Partnership, the date on which such event occurs.
"Liquidator" means one or more Persons selected by the General Partner
to perform the functions described in Section 12.3 as liquidating trustee of the
Partnership within the meaning of the
Delaware Act.
"Minimum Quarterly Distribution" means $0.25 per Unit per Quarter (or
with respect to the period commencing on the Closing Date and ending on the last
day of the calendar quarter that includes the Closing Date, it means the product
of $0.25 multiplied by a fraction of which the numerator is the number of days
in such period and of which the denominator is 91), subject to adjustment in
accordance with Sections 6.6 and 6.9.
"National Securities Exchange" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such
statute, or the Nasdaq Stock Market or any successor thereto.
"Net Agreed Value" means, (a) in the case of any Contributed Property,
the Agreed Value of such property reduced by any liabilities either assumed by
the Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the time
of distribution, in either case, as determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of loss and deduction (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Income shall be determined in accordance with Section 5.5(b) and shall
not include any items specially allocated under Section 6.1(d); provided that
the determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xi) were not in this Agreement.
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Loss shall be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section 6.1(d); provided that the
determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xi) were not in this Agreement.
11
"Net Positive Adjustments" means, with respect to any Partner, the
excess, if any, of the total positive adjustments over the total negative
adjustments made to the Capital Account of such Partner pursuant to Book-Up
Events and Book-Down Events.
"Net Termination Gain" means, for any taxable year, the sum, if
positive, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the determination
of Net Termination Gain shall be determined in accordance with Section 5.5(b)
and shall not include any items of income, gain or loss specially allocated
under Section 6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if
negative, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the determination
of Net Termination Loss shall be determined in accordance with Section 5.5(b)
and shall not include any items of income, gain or loss specially allocated
under Section 6.1(d).
"Non-citizen" means (1) any person (including any individual, a
partnership, a corporation or an association) who is not a United States
citizen, within the meaning of Section 2 of the Shipping Act, 1916, as amended
or as it may hereafter be amended; (2) any foreign government or representative
thereof; (3) any corporation, the president, chief executive officer or chairman
of the board of directors of which is a Non-citizen, or of which more than a
minority or the number of its directors necessary to constitute a quorum are
Non-citizens; (4) any corporation organized under the laws of any foreign
government; (5) any corporation of which 25% or greater interest is owned
beneficially or of record, or may be voted by, a Non-citizen or Non-citizens, or
which by any other means whatsoever is controlled by or in which control is
permitted to be exercised by a Non-citizen or Non-citizens (the General Partner
being authorized to determine reasonably the meaning of "control" for this
purpose); (6) any partnership or association which is controlled by a
Non-citizen or Non-citizens; or (7) any person (including an individual,
partnership, corporation or association) who acts as representative of or
fiduciary for any person described in clauses (1) through (6) above.
"Non-citizen Assignee" means a Person whom the General Partner has
determined in its discretion does not constitute an Eligible Citizen and as to
whose Partnership Interest the General Partner has become the Substituted
Limited Partner pursuant to Section 4.9.
12
"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 6.2(b)(i)(A), 6.2(b)(ii)(A) and
6.2(b)(iii) if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction or
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).
"Notice of Election to Purchase" has the meaning assigned to such term
in Section 15.1(b).
"Omnibus Agreement" means that Omnibus Agreement, dated as of the
Closing Date, among Penn Octane Corporation, the General Partner, the
Partnership and the Operating Partnership.
"Operating Expenditures" means all Partnership Group expenditures,
including, but not limited to, taxes, reimbursements of the General Partner,
repayment of Working Capital Borrowings, debt service payments and capital
expenditures, subject to the following:
(a) Payments (including prepayments) of principal of and premium
on indebtedness other than Working Capital Borrowings shall
not constitute Operating
(b) Operating Expenditures shall not include (i) capital
expenditures made for Acquisitions or for Capital
Improvements, (ii) payment of transaction expenses relating to
Interim Capital Transactions or (iii) distributions to
Partners. Where capital expenditures are made in part for
Acquisitions or for Capital Improvements and in part for other
purposes, the General Partner's good faith allocation between
the amounts paid for each shall be conclusive.
"Operating Partnership" means Rio Vista Operating Partnership L.P., a
Delaware limited partnership, and any successors thereto.
"Operating Partnership Agreement" means the Partnership Agreement of
the Operating Partnership, as it may be amended, supplemented or restated from
time to time.
"Operating Surplus" means, with respect to any period ending prior to
the Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of (i) all cash and cash equivalents of the
Partnership Group on hand as of the close of business on the
Closing Date, (ii) all cash receipts of the Partnership Group
for the period beginning on the Closing Date and ending with
the last day
13
of such period, other than cash receipts from Interim Capital
Transactions (except to the extent specified in Section 6.5)
and (iii) all cash receipts of the Partnership Group after the
end of such period but on or before the date of determination
of Operating Surplus with respect to such period resulting
from Working Capital Borrowings, less
(b) the sum of (i) Operating Expenditures for the period beginning
on the Closing Date and ending with the last day of such
period and (ii) the amount of cash reserves that is necessary
or advisable in the reasonable discretion of the General
Partner to provide funds for future Operating Expenditures;
provided, however, that disbursements made (including
contributions to a Group Member or disbursements on behalf of
a Group Member) or cash reserves established, increased or
reduced after the end of such period but on or before the date
of determination of Available Cash with respect to such period
shall be deemed to have been made, established, increased or
reduced, for purposes of determining Operating Surplus, within
such period if the General Partner so determines.
Notwithstanding the foregoing, "Operating Surplus" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
"Opinion of Counsel" means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner or any of its
Affiliates) acceptable to the General Partner in its reasonable discretion.
"Organizational Limited Partner" means Penn Octane Corporation in its
capacity as the organizational limited partner of the Partnership pursuant to
this Agreement.
"Outstanding" means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
outstanding on the Partnership's books and records as of the date of
determination; provided, however, that if at any time any Person or Group (other
than the General Partner or its Affiliates) beneficially owns 20% or more of any
Outstanding Partnership Securities of any class then Outstanding, all
Partnership Securities owned by such Person or Group shall not be voted on any
matter and shall not be considered to be Outstanding when sending notices of a
meeting of Limited Partners to vote on any matter (unless otherwise required by
law), calculating required votes, determining the presence of a quorum or for
other similar purposes under this Agreement, except that Common Units so owned
shall be considered to be Outstanding for purposes of Section 11.1(b)(iv) (such
Common Units shall not, however, be treated as a separate class of Partnership
Securities for purposes of this Agreement); provided, further, that the
foregoing limitation shall not apply (i) to any Person or Group who acquired 20%
or more of any Outstanding Partnership Securities of any class then Outstanding
directly from the General Partner or its Affiliates, including any Person or
Group who acquired 20% or more of any Outstanding Partnership Securities in the
Distribution, (ii) to any Person or Group who acquired 20% or more of any
Outstanding Partnership Securities of any class then Outstanding directly or
indirectly from a Person or Group described in clause (i) provided that the
General Partner shall have notified such Person or Group in writing that such
limitation shall not apply, or (iii) to any Person or Group who acquired 20% or
more of any
14
Partnership Securities issued by the Partnership with the prior approval of the
Board of Managers of the General Partner; provided further, that the provisions
contained herein may be amended by the General Partner as provided in Section
13.1 hereof.
"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.
"Partners" means the General Partner and the Limited Partners.
"Partnership" means Rio Vista Energy Partners L.P., a
Delaware limited
partnership, and any successors thereto.
"Partnership Group" means the Partnership, the Operating Partnership
and any Subsidiary of any such entity, treated as a single consolidated entity.
"Partnership Interest" means an interest in the Partnership, which
shall include the General Partner Interest and Limited Partner Interests.
"Partnership Minimum Gain" means that amount determined in accordance
with the principles of Treasury Regulation Section 1.704-2(d).
"Partnership Security" means any class or series of equity interest in
the Partnership (but excluding any options, rights, warrants and appreciation
rights relating to an equity interest in the Partnership), including without
limitation, Common Units and Incentive Distribution Rights.
"Percentage Interest" means as of any date of determination (a) as to
the General Partner (in its capacity as General Partner without reference to any
Limited Partner Interests held by it), 2.0%, (b) as to any Unitholder or
Assignee holding Units, the product obtained by multiplying (i) 98% less the
percentage applicable to paragraph (c) by (ii) the quotient obtained by dividing
(A) the number of Units held by such Unitholder or Assignee by (B) the total
number of all Outstanding Units, and (c) as to the holders of additional
Partnership Securities issued by the Partnership in accordance with Section 5.6,
the percentage established as a part of such issuance. The Percentage Interest
with respect to an Incentive Distribution Right shall at all times be zero.
"Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partner or any Affiliate of the General Partner
who holds Units.
15
"Person" means an individual or a corporation, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other entity.
"Pro Rata" means (a) when modifying Units or any class thereof,
apportioned equally among all designated Units in accordance with their relative
Percentage Interests, (b) when modifying Partners and Assignees, apportioned
among all Partners and Assignees in accordance with their relative Percentage
Interests and (c) when modifying holders of Incentive Distribution Rights,
apportioned equally among all holders of Incentive Distribution Rights in
accordance with the relative number of Incentive Distribution Rights held by
each such holder.
"Purchase Date" means the date determined by the General Partner as the
date for purchase of all Outstanding Units of a certain class (other than Units
owned by the General Partner and its Affiliates) pursuant to Article XV.
"Quarter" means, unless the context requires otherwise, a fiscal
quarter, or, with respect to the first fiscal quarter after the Closing Date,
the portion of such fiscal quarter after the Closing Date, of the Partnership.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or Section
743 of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to such
property or asset.
"Record Date" means the date established by the General Partner for
determining (a) the identity of the Record Holders entitled to notice of, or to
vote at, any meeting of Limited Partners or entitled to vote by ballot or give
approval of Partnership action in writing without a meeting or entitled to
exercise rights in respect of any lawful action of Limited Partners or (b) the
identity of Record Holders entitled to receive any report or distribution or to
participate in any offer.
"Record Holder" means the Person in whose name a Common Unit is
registered on the books of the Transfer Agent as of the opening of business on a
particular Business Day, or with respect to other Partnership Securities, the
Person in whose name any such other Partnership Security is registered on the
books which the General Partner has caused to be kept as of the opening of
business on such Business Day.
"Redeemable Interests" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.
"Registration Statement" means the Registration Statement on Form 10
(File No. 0-50394) as it has been or as it may be amended or supplemented from
time to time, filed by the Partnership with the Commission under the Securities
Act to register the Common Units distributed in the Distribution.
"Remaining Net Positive Adjustments" means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units, the excess of
(a) the Net Positive
16
Adjustments of the Unitholders holding Common Units as of the end of such period
over (b) the sum of those Partners' Share of Additional Book Basis Derivative
Items for each prior taxable period, (ii) with respect to the General Partner
(as holder of the General Partner Interest), the excess of (a) the Net Positive
Adjustments of the General Partner as of the end of such period over (b) the sum
of the General Partner's Share of Additional Book Basis Derivative Items with
respect to the General Partner Interest for each prior taxable period, and (iii)
with respect to the holders of Incentive Distribution Rights, the excess of (a)
the Net Positive Adjustments of the holders of Incentive Distribution Rights as
of the end of such period over (b) the sum of the Share of Additional Book Basis
Derivative Items of the holders of the Incentive Distribution Rights for each
prior taxable period.
"Required Allocations" means (a) any limitation imposed on any
allocation of Net Losses or Net Termination Losses under Section 6.1(b) and (b)
any allocation of an item of income, gain, loss or deduction pursuant to Section
6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii), 6.1(d)(ix) or 6.1(d)(x).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
"Second Liquidation Target Amount" has the meaning assigned to such
term in Section 6.1(c)(i)(D).
"Second Target Distribution" means $0.362 per Unit per Quarter (or,
with respect to the period commencing on the Closing Date and ending on the last
day of the calendar quarter that includes the Closing Date, it means the product
of $0.362 multiplied by a fraction of which the numerator is equal to the number
of days in such period and of which the denominator is 91), subject to
adjustment in accordance with Sections 6.6 and 6.9.
"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such statute.
"Share of Additional Book Basis Derivative Items" means in connection
with any allocation of Additional Book Basis Derivative Items for any taxable
period, (i) with respect to the Unitholders holding Common Units, the amount
that bears the same ratio to such Additional Book Basis Derivative Items as the
Unitholders' Remaining Net Positive Adjustments as of the end of such period
bears to the Aggregate Remaining Net Positive Adjustments as of that time, (ii)
with respect to the General Partner (as holder of the General Partner Interest),
the amount that bears the same ratio to such Additional Book Basis Derivative
Items as the General Partner's Remaining Net Positive Adjustments as of the end
of such period bears to the Aggregate Remaining Net Positive Adjustment as of
that time, and (iii) with respect to the Partners holding Incentive Distribution
Rights, the amount that bears the same ratio to such Additional Book Basis
Derivative Items as the Remaining Net Positive Adjustments of the Partners
holding the
17
Incentive Distribution Rights as of the end of such period bears to the
Aggregate Remaining Net Positive Adjustments as of that time.
"Special Approval" means approval by a majority of the members of the
Conflicts Committee.
"Subsidiary" means, with respect to any Person, (a) a corporation of
which more than 50% of the voting power of shares entitled (without regard to
the occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 10.2 in place of and with
all the rights of a Limited Partner and who is shown as a Limited Partner on the
books and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"Third Liquidation Target Amount" has the meaning assigned to such term
in Section 6.1(c)(i)(E).
"Third Target Distribution" means $0.462 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on the last day
of the calendar quarter that includes the Closing Date, it means the product of
$0.462 multiplied by a fraction of which the numerator is equal to the number of
days in such period and of which the denominator is 91), subject to adjustment
in accordance with Sections 6.6 and 6.9.
"Trading Day" means a day on which the principal National Securities
Exchange on which such Limited Partner Interests of any class are listed or
admitted to trading is open for the transaction of business or, if Limited
Partner Interests of a class are not listed or admitted to trading on any
National Securities Exchange, a day on which banking institutions in New York
City generally are open.
"transfer" has the meaning assigned to such term in Section 4.4(a).
"Transfer Agent" means such bank, trust company or other Person
(including the General Partner or one of its Affiliates) as shall be appointed
from time to time by the Partnership to act as registrar and transfer agent for
the Common Units; provided that if no Transfer Agent is
18
specifically designated for any other Partnership Securities, the General
Partner shall act in such capacity.
"Transfer Application" means an application and agreement for transfer
of Units in the form set forth on the back of a Certificate or in a form
substantially to the same effect in a separate instrument.
"Unit" means a Partnership Security that is designated as a "Unit" and
shall include Common Units but shall not include (i) a General Partner Interest
or (ii) Incentive Distribution Rights.
"Unit Majority" means at least a majority of the Outstanding Common
Units.
"Unitholders" means the holders of Units.
"Unpaid MQD" has the meaning assigned to such term in Section
6.1(c)(i)(B).
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of such date (as determined under Section
5.5(d)) over (b) the Carrying Value of such property as of such date (prior to
any adjustment to be made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the Carrying
Value of such property as of such date (prior to any adjustment to be made
pursuant to Section 5.5(d) as of such date) over (b) the fair market value of
such property as of such date (as determined under Section 5.5(d)).
"Unrecovered Capital" means at any time, with respect to a Unit, the
Initial Unit Capital Account less the sum of all distributions constituting
Capital Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the General Partner
determines to be appropriate to give effect to any distribution, subdivision or
combination of such Units.
"U.S. GAAP" means United States Generally Accepted Accounting
Principles consistently applied.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term
in Section 11.1(b).
"Working Capital Borrowings" means borrowings used solely for working
capital purposes or to pay distributions to Partners made pursuant to a credit
facility or other arrangement to the extent such borrowings are required to be
reduced to a relatively small amount each year (or for the year in which the
Initial Offering is consummated, the 12-month period beginning on the Closing
Date) for an economically meaningful period of time.
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SECTION 1.2 Construction. Unless the context requires otherwise: (a)
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa; (b) references to Articles and Sections
refer to Articles and Sections of this Agreement; and (c) the term "include" or
"includes" means includes, without limitation, and "including" means including,
without limitation.
ARTICLE II
ORGANIZATION SECTION 2.1 Formation. The General Partner and the
Organizational Limited Partner have previously formed the Partnership as a
limited partnership pursuant to the provisions of the
Delaware Act and hereby
amend and restate the original Agreement of Limited Partnership of Rio Vista
Energy Partners L.P. in its entirety. This amendment and restatement shall
become effective on the date of this Agreement. Except as expressly provided to
the contrary in this Agreement, the rights, duties (including fiduciary duties),
liabilities and obligations of the Partners and the administration, dissolution
and termination of the Partnership shall be governed by the Delaware Act. All
Partnership Interests shall constitute personal property of the owner thereof
for all purposes and a Partner has no interest in specific Partnership property.
SECTION 2.2 Name. The name of the Partnership shall be "Rio Vista
Energy Partners L.P." The Partnership's business may be conducted under any
other name or names deemed necessary or appropriate by the General Partner in
its sole discretion, including the name of the General Partner. The words
"Limited Partnership," "L.P.," "Ltd." or similar words or letters shall be
included in the Partnership's name where necessary for the purpose of complying
with the laws of any jurisdiction that so requires. The General Partner in its
discretion may change the name of the Partnership at any time and from time to
time and shall notify the Limited Partners of such change in the next regular
communication to the Limited Partners.
SECTION 2.3 Registered Office; Registered Agent; Principal Office;
Other Offices. Unless and until changed by the General Partner, the registered
office of the Partnership in the State of Delaware shall be located at 000 Xxxxx
XxXxxx Xxxxxxx, Xxxx xx Xxxxx, Xxxxxx of Xxxx, Xxxxxxxx 00000, and the
registered agent for service of process on the Partnership in the State of
Delaware at such registered office shall be Capitol Services, Inc. The principal
office of the Partnership shall be located at 000 Xxxxxxx Xxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000 or such other place as the General Partner may from time to
time designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems necessary or appropriate. The address of the General
Partner shall be 000 Xxxxxxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 or such
other place as the General Partner may from time to time designate by notice to
the Limited Partners.
SECTION 2.4 Purpose and Business. The purpose and nature of the
business to be conducted by the Partnership shall be to (a) own the equity of
the general partner of the Operating Partnership and to serve as a limited
partner of the Operating Partnership and, in connection therewith, to exercise
all the rights and powers conferred upon the Partnership as a
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partner of the Operating Partnership pursuant to the Operating Partnership
Agreement or otherwise, (b) engage directly in, or enter into or form any
corporation, partnership, joint venture, limited liability company or other
arrangement to engage indirectly in, any business activity that the Operating
Partnership is permitted to engage in by the Operating Partnership Agreement or
that its subsidiaries are permitted to engage in by their limited liability
company or partnership agreements and, in connection therewith, to exercise all
of the rights and powers conferred upon the Partnership pursuant to the
agreements relating to such business activity, (c) engage directly in, or enter
into or form any corporation, partnership, joint venture, limited liability
company or other arrangement to engage indirectly in, any business activity that
is approved by the General Partner and which lawfully may be conducted by a
limited partnership organized pursuant to the Delaware Act and, in connection
therewith, to exercise all of the rights and powers conferred upon the
Partnership pursuant to the agreements relating to such business activity;
provided, however, that the General Partner reasonably determines, as of the
date of the acquisition or commencement of such activity, that such activity (i)
generates "qualifying income" (as such term is defined pursuant to Section 7704
of the Code) or a Subsidiary or a Partnership activity that generates qualifying
income or (ii) enhances the operations of an activity of the Operating
Partnership, and (d) do anything necessary or appropriate to the foregoing,
including the making of capital contributions or loans to a Group Member. The
General Partner has no obligation or duty to the Partnership, the Limited
Partners or the Assignees to propose or approve, and in its discretion may
decline to propose or approve, the conduct by the Partnership of any business.
SECTION 2.5 Powers. The Partnership shall be empowered to do any and
all acts and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described in Section 2.4 and for the protection and benefit of the Partnership.
SECTION 2.6 Power of Attorney. Each Limited Partner and each Assignee
hereby constitutes and appoints the General Partner and, if a Liquidator shall
have been selected pursuant to Section 12.3, the Liquidator (and any successor
to the Liquidator by merger, transfer, assignment, election or otherwise) and
each of their authorized officers and attorneys-in-fact, as the case may be,
with full power of substitution, as his true and lawful agent and
attorney-in-fact, with full power and authority in his name, place and xxxxx,
to:
(i) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (A) all certificates, documents
and other instruments (including this Agreement and the
Certificate of Limited Partnership and all amendments or
restatements hereof or thereof) that the General Partner or
the Liquidator deems necessary or appropriate to form, qualify
or continue the existence or qualification of the Partnership
as a limited partnership (or a partnership in which the
limited partners have limited liability) in the State of
Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (B) all
certificates, documents and other instruments that the General
Partner or the Liquidator deems necessary or appropriate to
reflect, in accordance with its terms, any amendment, change,
modification or restatement of this Agreement; (C) all
certificates, documents and other instruments (including
conveyances and a
21
certificate of cancellation) that the General Partner or the
Liquidator deems necessary or appropriate to reflect the
dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement; (D) all certificates, documents and
other instruments relating to the admission, withdrawal,
removal or substitution of any Partner pursuant to, or other
events described in, Article IV, X, XI or XII; (E) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of any
class or series of Partnership Securities issued pursuant to
Section 5.6; and (F) all certificates, documents and other
instruments (including agreements and a certificate of merger)
relating to a merger or consolidation of the Partnership
pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents
and other instruments necessary or appropriate, in the
discretion of the General Partner or the Liquidator, to make,
evidence, give, confirm or ratify any vote, consent, approval,
agreement or other action that is made or given by the
Partners hereunder or is consistent with the terms of this
Agreement or is necessary or appropriate, in the discretion of
the General Partner or the Liquidator, to effectuate the terms
or intent of this Agreement; provided, that when required by
Section 13.3 or any other provision of this Agreement that
establishes a percentage of the Limited Partners or of the
Limited Partners of any class or series required to take any
action, the General Partner and the Liquidator may exercise
the power of attorney made in this Section 2.6(a)(ii) only
after the necessary vote, consent or approval of the Limited
Partners or of the Limited Partners of such class or series,
as applicable. Nothing contained in this Section 2.6(a) shall
be construed as authorizing the General Partner to amend this
Agreement except in accordance with Article XIII or as may be
otherwise expressly provided for in this Agreement. b) The
foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall
survive and, to the maximum extent permitted by law, not be
affected by the subsequent death, incompetency, disability,
incapacity, dissolution, bankruptcy or termination of any
Limited Partner or Assignee and the transfer of all or any
portion of such Limited Partner's or Assignee's Partnership
Interest and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal
representatives. Each Limited Partner or Assignee hereby
agrees to be bound by any representation made by the General
Partner or the Liquidator acting in good faith pursuant to
such power of attorney; and each Limited Partner or Assignee
hereby waives, to the maximum extent permitted by law, any and
all defenses that may be available to contest, negate or
disaffirm the action of the General Partner or the Liquidator
taken in good faith under such power of attorney. Each Limited
Partner or Assignee shall execute and deliver to the General
Partner or the Liquidator, within 15 days after receipt of the
request therefor, such further designation, powers of attorney
and other instruments as the General Partner or the Liquidator
deems necessary to effectuate this Agreement and the purposes
of the Partnership.
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SECTION 2.7 Term. The term of the Partnership commenced upon the filing
of the Certificate of Limited Partnership in accordance with the Delaware Act
and shall continue in existence until the dissolution of the Partnership in
accordance with the provisions of Article XII. The existence of the Partnership
as a separate legal entity shall continue until the cancellation of the
Certificate of Limited Partnership as provided in the Delaware Act.
SECTION 2.8 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner or Assignee,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Title to any or all of the
Partnership assets may be held in the name of the Partnership, the General
Partner, one or more of its Affiliates or one or more nominees, as the General
Partner may determine. The General Partner hereby declares and warrants that any
Partnership assets for which record title is held in the name of the General
Partner or one or more of its Affiliates or one or more nominees shall be held
by the General Partner or such Affiliate or nominee for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partner shall use reasonable efforts to cause record
title to such assets (other than those assets in respect of which the General
Partner determines that the expense and difficulty of conveyancing makes
transfer of record title to the Partnership impracticable) to be vested in the
Partnership as soon as reasonably practicable; provided, further, that, prior to
the withdrawal or removal of the General Partner or as soon thereafter as
practicable, the General Partner shall use reasonable efforts to effect the
transfer of record title to the Partnership and, prior to any such transfer,
will provide for the use of such assets in a manner satisfactory to the General
Partner. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which record
title to such Partnership assets is held.
23
ARTICLE III
RIGHTS OF LIMITED PARTNERS
SECTION 3.1 Limitation of Liability. The Limited Partners and the
Assignees shall have no liability under this Agreement except as expressly
provided in this Agreement or the Delaware Act.
SECTION 3.2 Management of Business. No Limited Partner or Assignee, in
its capacity as such, shall participate in the operation, management or control
(within the meaning of the Delaware Act) of the Partnership's business, transact
any business in the Partnership's name or have the power to sign documents for
or otherwise bind the Partnership. Any action taken by any Affiliate of the
General Partner or any officer, director, employee, manager, member, general
partner, agent or trustee of the General Partner or any of its Affiliates, or
any officer, director, employee, manager, member, general partner, agent or
trustee of a Group Member, in its capacity as such, shall not be deemed to be
participation in the control of the business of the Partnership by a limited
partner of the Partnership (within the meaning of Section 17-303(a) of the
Delaware Act) and shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
SECTION 3.3 Outside Activities of the Limited Partners. Subject to the
provisions of Section 7.5 and the Omnibus Agreement, which shall continue to be
applicable to the Persons referred to therein, regardless of whether such
Persons shall also be Limited Partners or Assignees, any Limited Partner or
Assignee shall be entitled to and may have business interests and engage in
business activities in addition to those relating to the Partnership, including
business interests and activities in direct competition with the Partnership
Group. Neither the Partnership nor any of the other Partners or Assignees shall
have any rights by virtue of this Agreement in any business ventures of any
Limited Partner or Assignee.
SECTION 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon reasonable written demand
and at such Limited Partner's own expense:
(i) to obtain true and full information regarding the
status of the business and financial condition of the
Partnership;
(ii) promptly after becoming available, to obtain a copy
of the Partnership's federal, state and local income
tax returns for each year;
(iii) to have furnished to him a current list of the name
and last known business, residence or mailing address
of each Partner;
(iv) to have furnished to him a copy of this Agreement and
the Certificate of Limited Partnership and all
amendments thereto, together with a copy of
24
the executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate of
Limited Partnership and all amendments thereto have
been executed;
(v) to obtain true and full information regarding the
amount of cash and a description and statement of the
Net Agreed Value of any other Capital Contribution by
each Partner and which each Partner has agreed to
contribute in the future, and the date on which each
became a Partner; and
(vi) to obtain such other information regarding the
affairs of the Partnership as is just and reasonable.
(b) The General Partner may keep confidential from the Limited Partners
and Assignees, for such period of time as the General Partner deems reasonable,
(i) any information that the General Partner reasonably believes to be in the
nature of trade secrets or (ii) other information the disclosure of which the
General Partner in good faith believes (A) is not in the best interests of the
Partnership Group, (B) could damage the Partnership Group or (C) that any Group
Member is required by law or by agreement with any third party to keep
confidential (other than agreements with Affiliates of the Partnership the
primary purpose of which is to circumvent the obligations set forth in this
Section 3.4).
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
SECTION 4.1 Certificates. Upon the Partnership's issuance of Common
Units to any Person, the Partnership shall issue one or more Certificates in the
name of such Person evidencing the number of such Units being so issued. In
addition, (a) upon the General Partner's request, the Partnership shall issue to
it one or more Certificates in the name of the General Partner evidencing its
interests in the Partnership and (b) upon the request of any Person owning
Incentive Distribution Rights or any other Partnership Securities other than
Common Units, the Partnership shall issue to such Person one or more
certificates evidencing such Incentive Distribution Rights or other Partnership
Securities other than Common Units. Certificates shall be executed on behalf of
the Partnership by the Chairman of the Board, President or any Vice President
and the Secretary or any Assistant Secretary of the General Partner. No Common
Unit Certificate shall be valid for any purpose until it has been countersigned
by the Transfer Agent; provided, however, that if the General Partner elects to
issue Common Units in global form, the Common Unit Certificates shall be valid
upon receipt of a certificate from the Transfer Agent certifying that the Common
Units have been duly registered in accordance with the directions of the
Partnership.
SECTION 4.2 Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer
Agent, the appropriate officers of the General Partner on
behalf of the Partnership shall execute, and the
25
Transfer Agent shall countersign and deliver in exchange
therefor, a new Certificate evidencing the same number and
type of Partnership Securities as the Certificate so
surrendered.
(b) The appropriate officers of the General Partner on behalf of
the Partnership shall execute and deliver, and the Transfer
Agent shall countersign a new Certificate in place of any
Certificate previously issued if the Record Holder of the
Certificate:
(i) makes proof by affidavit, in form and substance
satisfactory to the General Partner, that a
previously issued Certificate has been lost,
destroyed or stolen;
(ii) requests the issuance of a new Certificate before the
General Partner has notice that the Certificate has
been acquired by a purchaser for value in good faith
and without notice of an adverse claim;
(iii) if requested by the General Partner, delivers to the
General Partner a bond, in form and substance
satisfactory to the General Partner, with surety or
sureties and with fixed or open penalty as the
General Partner may reasonably direct, in its sole
discretion, to indemnify the Partnership, the
Partners, the General Partner and the Transfer Agent
against any claim that may be made on account of the
alleged loss, destruction or theft of the
Certificate; and
(iv) satisfies any other reasonable requirements imposed
by the General Partner.
If a Limited Partner or Assignee fails to notify the General Partner
within a reasonable time after he has notice of the loss, destruction or theft
of a Certificate, and a transfer of the Limited Partner Interests represented by
the Certificate is registered before the Partnership, the General Partner or the
Transfer Agent receives such notification, the Limited Partner or Assignee shall
be precluded from making any claim against the Partnership, the General Partner
or the Transfer Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under
this Section 4.2, the General Partner may require the payment
of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Transfer
Agent) reasonably connected therewith.
SECTION 4.3 Record Holders. The Partnership shall be entitled to
recognize the Record Holder as the Partner or Assignee with respect to any
Partnership Interest and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such Partnership Interest on the part
of any other Person, regardless of whether the Partnership shall have actual or
other notice thereof, except as otherwise provided by law or any applicable
rule, regulation, guideline or requirement of any National Securities Exchange
on which such Partnership Interests are listed for trading. Without limiting the
foregoing, when a Person (such as a broker, dealer, bank,
26
trust company or clearing corporation or an agent of any of the foregoing) is
acting as nominee, agent or in some other representative capacity for another
Person in acquiring and/or holding Partnership Interests, as between the
Partnership on the one hand, and such other Persons on the other, such
representative Person (a) shall be the Partner or Assignee (as the case may be)
of record and beneficially, (b) must execute and deliver a Transfer Application
and (c) shall be bound by this Agreement and shall have the rights and
obligations of a Partner or Assignee (as the case may be) hereunder and as, and
to the extent, provided for herein.
SECTION 4.4 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner assigns its General Partner Interest to another Person who
becomes the general partner of the Partnership, by which the holder of a Limited
Partner Interest assigns such Limited Partner Interest to another Person who is
or becomes a Limited Partner or an Assignee, and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent a
disposition by any member of the General Partner of any or all of the limited
liability company interests of the General Partner. At any time, any member of
the General Partner may sell or transfer all or part of such member's limited
liability company interests in the General Partner without Unitholder approval.
SECTION 4.5 Registration and Transfer of Limited Partner Interests.
(a) The Partnership shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Limited Partner Interests. The
Transfer Agent is hereby appointed registrar and transfer agent for the purpose
of registering Common Units and transfers of such Common Units as herein
provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers are effected in the
manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers of the General Partner on behalf of the Partnership shall execute and
deliver, and in the case of Common Units, the Transfer Agent shall countersign
and deliver, in the name of the holder or the designated transferee or
transferees, as required pursuant to the holder's instructions, one or more new
Certificates evidencing the same aggregate number and type of Limited Partner
Interests as was evidenced by the Certificate so surrendered.
27
(b) Except as otherwise provided in Section 4.9, the Partnership shall
not recognize any transfer of Limited Partner Interests until the Certificates
evidencing such Limited Partner Interests are surrendered for registration of
transfer and such Certificates are accompanied by a Transfer Application duly
executed by the transferee (or the transferee's attorney-in-fact duly authorized
in writing). No charge shall be imposed by the Partnership for such transfer;
provided, that as a condition to the issuance of any new Certificate under this
Section 4.5, the Partnership may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed with respect
thereto.
(c) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests and
the admission of any new Limited Partner shall not constitute an amendment to
this Agreement.
(d) Until admitted as a Substituted Limited Partner pursuant to Section
10.2, the Record Holder of a Limited Partner Interest shall be an Assignee in
respect of such Limited Partner Interest. Limited Partners may include
custodians, nominees or any other individual or entity in its own or any
representative capacity.
(e) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested admission
as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and
to have executed this Agreement, (iii) represented and warranted that such
transferee has the right, power and authority and, if an individual, the
capacity to enter into this Agreement, (iv) granted the powers of attorney set
forth in this Agreement and (v) given the consents and approvals and made the
waivers contained in this Agreement.
(f) The General Partner and its Affiliates shall have the right at any
time to transfer their Common Units, if any, to one or more Persons.
SECTION 4.6 Transfer of the General Partner's General Partner Interest.
(a) Subject to Section 4.6(c) below, prior to October 31, 2008, the
General Partner shall not transfer all or any part of its General Partner
Interest to a Person unless such transfer (i) has been approved by the prior
written consent or vote of the holders of at least a majority of the Outstanding
Common Units (excluding Common Units held by the General Partner and its
Affiliates) or (ii) is of all, but not less than all, of its General Partner
Interest to (A) an Affiliate of the General Partner (other than an individual)
or (B) another Person (other than an individual) in connection with the merger
or consolidation of the General Partner with or into another Person (other than
an individual) or the transfer by the General Partner of all or substantially
all of its assets to another Person (other than an individual).
(b) Subject to Section 4.6(c) below, on or after October 31, 2008, the
General Partner may transfer all or any of its General Partner Interest without
Unitholder approval.
(c) Notwithstanding anything herein to the contrary, no transfer by the
General Partner of all or any part of its General Partner Interest to another
Person shall be permitted unless (i) the transferee agrees to assume the rights
and duties of the General Partner under this
28
Agreement and to be bound by the provisions of this Agreement, (ii) the
Partnership receives an Opinion of Counsel that such transfer would not result
in the loss of limited liability of any Limited Partner or of any limited
partner of the Operating Partnership or cause the Partnership or the Operating
Partnership to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not already so treated or taxed) and (iii) such transferee also agrees to
purchase all (or the appropriate portion thereof, if applicable) of the
partnership or membership interest of the General Partner as the general partner
or managing member, if any, of each other Group Member. In the case of a
transfer pursuant to and in compliance with this Section 4.6, the transferee or
successor (as the case may be) shall, subject to compliance with the terms of
Section 10.3, be admitted to the Partnership as the General Partner immediately
prior to the transfer of the Partnership Interest, and the business of the
Partnership shall continue without dissolution.
SECTION 4.7 Transfer of Incentive Distribution Rights. Prior to
October 31, 2008, a holder of Incentive Distribution Rights may transfer any or
all of the Incentive Distribution Rights held by such holder without any consent
of the Unitholders (a) to an Affiliate of such holder (other than an individual)
or (b) to another Person (other than an individual) in connection with (i) the
merger or consolidation of such holder of Incentive Distribution Rights with or
into such other Person or (ii) the transfer by such holder of all or
substantially all of its assets to such other Person or (iii) the sale of all or
substantially all of the equity interests of such holder to such other Person.
Any other transfer of the Incentive Distribution Rights prior to October 31,
2008, shall require the prior approval of holders of at least a majority of the
Outstanding Common Units (excluding Common Units held by the General Partner and
its Affiliates). On or after October 31, 2008, any holder of Incentive
Distribution Rights may transfer any or all of its Incentive Distribution Rights
without Unitholder approval. Notwithstanding anything herein to the contrary, no
transfer of Incentive Distribution Rights to another Person shall be permitted
unless the transferee agrees to be bound by the provisions of this Agreement.
SECTION 4.8 Restrictions on Transfers.
(a) Except as provided in Section 4.8(d) below, but notwithstanding the
other provisions of this Article IV, no transfer of any Partnership Interests
shall be made if such transfer would (i) violate the then applicable federal or
state securities laws or rules and regulations of the Commission, any state
securities commission or any other governmental authority with jurisdiction over
such transfer, (ii) terminate the existence or qualification of the Partnership
or the Operating Partnership under the laws of the jurisdiction of its
formation, or (iii) cause the Partnership or the Operating Partnership to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership or the
Operating Partnership becoming an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes. The
restrictions may be imposed by making such amendments to this Agreement as the
General Partner may determine to be necessary or appropriate to impose such
restrictions; provided,
29
however, that any amendment that the General Partner believes, in the exercise
of its reasonable discretion, could result in the delisting or suspension of
trading of any class of Limited Partner Interests on the principal National
Securities Exchange on which such class of Limited Partner Interests is then
traded must be approved, prior to such amendment being effected, by the holders
of at least a majority of the Outstanding Limited Partner Interests of such
class.
(c) [RESERVED]
(d) Nothing contained in this Article IV, or elsewhere in this
Agreement, shall preclude the settlement of any transactions involving
Partnership Interests entered into through the facilities of any National
Securities Exchange on which such Partnership Interests are listed for trading.
SECTION 4.9 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state or
local law or regulation that, in the reasonable determination of the General
Partner, creates a substantial risk of cancellation or forfeiture of any
property in which the Group Member has an interest based on the nationality,
citizenship or other related status of a Limited Partner or Assignee, the
General Partner may request any Limited Partner or Assignee to furnish to the
General Partner, within 30 days after receipt of such request, an executed
Citizenship Certification or such other information concerning his nationality,
citizenship or other related status (or, if the Limited Partner or Assignee is a
nominee holding for the account of another Person, the nationality, citizenship
or other related status of such Person) as the General Partner may request. If a
Limited Partner or Assignee fails to furnish to the General Partner within the
aforementioned 30-day period such Citizenship Certification or other requested
information or if upon receipt of such Citizenship Certification or other
requested information the General Partner determines, with the advice of
counsel, that a Limited Partner or Assignee is not an Eligible Citizen, the
Partnership Interests owned by such Limited Partner or Assignee shall be subject
to redemption in accordance with the provisions of Section 4.10. In addition,
the General Partner may require that the status of any such Partner or Assignee
be changed to that of a Non-citizen Assignee and, thereupon, the General Partner
shall be substituted for such Non-citizen Assignee as the Limited Partner in
respect of his Limited Partner Interests.
(b) The General Partner shall, in exercising voting rights in respect
of Limited Partner Interests held by it on behalf of Non-citizen Assignees,
distribute the votes in the same ratios as the votes of Partners (including
without limitation the General Partner) in respect of Limited Partner Interests
other than those of Non-citizen Assignees are cast, either for, against or
abstaining as to the matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall
have no right to receive a distribution in kind pursuant to Section 12.4 but
shall be entitled to the cash equivalent thereof, and the Partnership shall
provide cash in exchange for an assignment of the Non-citizen Assignee's share
of the distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the Non-citizen
Assignee of his Limited Partner Interest (representing his right to receive his
share of such distribution in kind).
30
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the General
Partner, request admission as a Substituted Limited Partner with respect to any
Limited Partner Interests of such Non-citizen Assignee not redeemed pursuant to
Section 4.10, and upon his admission pursuant to Section 10.2, the General
Partner shall cease to be deemed to be the Limited Partner in respect of the
Non-citizen Assignee's Limited Partner Interests.
SECTION 4.10 Redemption of Partnership Interests of Non-citizen
Assignees.
(a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.9(a), or if upon receipt of such Citizenship
Certification or other information the General Partner determines, with the
advice of counsel, that a Limited Partner or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee establishes
to the satisfaction of the General Partner that such Limited Partner or Assignee
is an Eligible Citizen or has transferred his Partnership Interests to a Person
who is an Eligible Citizen and who furnishes a Citizenship Certification to the
General Partner prior to the date fixed for redemption as provided below, redeem
the Partnership Interest of such Limited Partner or Assignee as follows:
(i) The General Partner shall, not later than the 30th day before
the date fixed for redemption, give notice of redemption to
the Limited Partner or Assignee, at his last address
designated on the records of the Partnership or the Transfer
Agent, by registered or certified mail, postage prepaid. The
notice shall be deemed to have been given when so mailed. The
notice shall specify the Redeemable Interests, the date fixed
for redemption, the place of payment, that payment of the
redemption price will be made upon surrender of the
Certificate evidencing the Redeemable Interests and that on
and after the date fixed for redemption no further allocations
or distributions to which the Limited Partner or Assignee
would otherwise be entitled in respect of the Redeemable
Interests will accrue or be made.
(ii) The aggregate redemption price for Redeemable Interests shall
be an amount equal to the Current Market Price (the date of
determination of which shall be the date fixed for redemption)
of Limited Partner Interests of the class to be so redeemed
multiplied by the number of Limited Partner Interests of each
such class included among the Redeemable Interests. The
redemption price shall be paid, in the discretion of the
General Partner, in cash or by delivery of a promissory note
of the Partnership in the principal amount of the redemption
price, bearing interest at the rate of 10% annually and
payable in three equal annual installments of principal
together with accrued interest, commencing one year after the
redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner or
Assignee, at the place specified in the notice of redemption,
of the Certificate evidencing the Redeemable Interests, duly
endorsed in blank or accompanied by an assignment duly
executed in blank, the Limited Partner or Assignee or his duly
authorized representative shall be entitled to receive the
payment therefor.
31
(iv) After the redemption date, Redeemable Interests shall no
longer constitute issued and Outstanding Limited Partner
Interests.
(b) The provisions of this Section 4.10 shall also be applicable to
Limited Partner Interests held by a Limited Partner or Assignee as nominee of a
Person determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.10 shall prevent the recipient of a
notice of redemption from transferring his Limited Partner Interest before the
redemption date if such transfer is otherwise permitted under this Agreement.
Upon receipt of notice of such a transfer, the General Partner shall withdraw
the notice of redemption, provided the transferee of such Limited Partner
Interest certifies to the satisfaction of the General Partner in a Citizenship
Certification delivered in connection with the Transfer Application that he is
an Eligible Citizen. If the transferee fails to make such certification, such
redemption shall be effected from the transferee on the original redemption
date.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
SECTION 5.1 Organizational Contributions. In connection with the
formation of the Partnership under the Delaware Act, the General Partner
purchased a 2% General Partner Interest in the Partnership for $20.00 and has
been admitted as a General Partner of the Partnership, and the Organizational
Limited Partner purchased Common Units representing a 98% Limited Partner
Interest in the Partnership for $980.00 and has been admitted as a Limited
Partner of the Partnership. As of the Closing Date, the Organizational Limited
Partner shall cease to be a Limited Partner of the Partnership.
SECTION 5.2 Contributions by the General Partner and its Affiliates.
(a) On or prior to the Closing Date and pursuant to the Contribution
Agreement, (i) the General Partner shall convey to the Partnership, $1,000.00 in
exchange for (the Incentive Distribution Rights, and (ii) the Organizational
Limited Partner shall contribute to the Partnership its limited partner interest
in the Operating Partnership as a Capital Contribution.
(b) Upon the issuance of any additional Limited Partner Interests by
the Partnership, the General Partner shall be required to make additional
Capital Contributions equal to 2/98ths of any amount contributed to the
Partnership by the Limited Partners in exchange for such additional Limited
Partner Interests. Except as set forth in the immediately preceding sentence and
Article XII, the General Partner shall not be obligated to make any additional
Capital Contributions to the Partnership.
SECTION 5.3 Contributions by Initial Limited Partners and Distributions
to the General Partner.
(a) [RESERVED]
(b) [RESERVED]
(c) [RESERVED]
32
SECTION 5.4 Interest and Withdrawal. No interest shall be paid by the
Partnership on Capital Contributions. No Partner or Assignee shall be entitled
to the withdrawal or return of its Capital Contribution, except to the extent,
if any, that distributions made pursuant to this Agreement or upon termination
of the Partnership may be considered as such by law and then only to the extent
provided for in this Agreement. Except to the extent expressly provided in this
Agreement, no Partner or Assignee shall have priority over any other Partner or
Assignee either as to the return of Capital Contributions or as to profits,
losses or distributions. Any such return shall be a compromise to which all
Partners and Assignees agree within the meaning of Section 17-502(b) of the
Delaware Act.
SECTION 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a
beneficial owner of Partnership Interests held by a nominee in any case in which
the nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion) 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 pursuant to this
Agreement and (ii) all items of Partnership income and gain (including, without
limitation, income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income, gain,
loss or deduction which is to be allocated pursuant to Article VI and is to be
reflected in the Partners' Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall
be treated as owning directly its proportionate share (as
determined by the General Partner based upon the provisions of
the Operating Partnership Agreement) of all property owned by
the Operating Partnership or any other Subsidiary that is
classified as a partnership for federal income tax purposes.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that
can neither be deducted nor amortized under
33
Section 709 of the Code, if any, shall, for purposes of
Capital Account maintenance, be treated as an item of
deduction at the time such fees and other expenses are
incurred and shall be allocated among the Partners pursuant to
Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income,
gain, loss and deduction shall be made without regard to any
election under Section 754 of the Code which may be made by
the Partnership and, as to those items described in Section
705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to
the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal
income tax purposes. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to
Section 734(b) or 743(b) of the Code is required, pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken
into account in determining Capital Accounts, the amount of
such adjustment in the Capital Accounts shall be treated as an
item of gain or loss.
(iv) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as
if the adjusted basis of such property as of such date of
disposition were equal in amount to the Partnership's Carrying
Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the
Code, any deductions for depreciation, cost recovery or
amortization attributable to any Contributed Property shall be
determined as if the adjusted basis of such property on the
date it was acquired by the Partnership were equal to the
Agreed Value of such property. Upon an adjustment pursuant to
Section 5.5(d) to the Carrying Value of any Partnership
property subject to depreciation, cost recovery or
amortization, any further deductions for such depreciation,
cost recovery or amortization attributable to such property
shall be determined (A) as if the adjusted basis of such
property were equal to the Carrying Value of such property
immediately following such adjustment and (B) using a rate of
depreciation, cost recovery or amortization derived from the
same method and useful life (or, if applicable, the remaining
useful life) as is applied for federal income tax purposes;
provided, however, that, if the asset has a zero adjusted
basis for federal income tax purposes, depreciation, cost
recovery or amortization deductions shall be determined using
any reasonable method that the General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes
pursuant to Section 48(q)(1) or 48(q)(3) of the Code, the
amount of such reduction shall, solely for purposes hereof, be
deemed to be an additional depreciation or cost recovery
deduction in the year such property is placed in service and
shall be allocated among the Partners pursuant to Section 6.1.
Any restoration of such basis pursuant to Section 48(q)(2) of
the Code shall, to the extent possible, be allocated in the
same manner to the Partners to whom such deemed deduction was
allocated.
34
(c) (i) A transferee of a Partnership Interest shall succeed to a pro
rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(ii) [RESERVED]
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership
Interests for cash or Contributed Property or the conversion
of the General Partner's Combined Interest to Common Units
pursuant to Section 11.3(b), the Capital Account of all
Partners and the Carrying Value of each Partnership property
immediately prior to such issuance shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an
actual sale of each such property immediately prior to such
issuance and had been allocated to the Partners at such time
pursuant to Section 6.1 in the same manner as any item of gain
or loss actually recognized during such period would have been
allocated. In determining such Unrealized Gain or Unrealized
Loss, the aggregate cash amount and fair market value of all
Partnership assets (including, without limitation, cash or
cash equivalents) immediately prior to the issuance of
additional Partnership Interests shall be determined by the
General Partner using such reasonable method of valuation as
it may adopt; provided, however, that the General Partner, in
arriving at such valuation, must take fully into account the
fair market value of the Partnership Interests of all Partners
at such time. The General Partner shall allocate such
aggregate value among the assets of the Partnership (in such
manner as it determines in its discretion to be reasonable) to
arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or
deemed distribution to a Partner of any Partnership property
(other than a distribution of cash that is not in redemption
or retirement of a Partnership Interest), the Capital Accounts
of all Partners and the Carrying Value of all Partnership
property shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized
Loss had been recognized in a sale of such property
immediately prior to such distribution for an amount equal to
its fair market value, and had been allocated to the Partners,
at such time, pursuant to Section 6.1 in the same manner as
any item of gain or loss actually recognized during such
period would have been allocated. In determining such
Unrealized Gain or Unrealized Loss, the aggregate cash amount
and fair market value of all Partnership assets (including,
without limitation, cash or cash equivalents) immediately
prior to a distribution shall (A) in the case of an actual
distribution which is not made pursuant to Section 12.4 or in
the case of a deemed distribution, be determined and allocated
in the same manner as that provided in Section 5.5(d)(i) or
(B) in the case of a liquidating distribution pursuant to
Section 12.4, be determined and allocated by the Liquidator
using such reasonable method of valuation as it may adopt.
35
SECTION 5.6 Issuances of Additional Partnership Securities.
(a) Subject to Section 5.7, the Partnership may issue additional
Partnership Securities and options, rights, warrants and appreciation rights
relating to the Partnership Securities for any Partnership purpose at any time
and from time to time to such Persons for such consideration and on such terms
and conditions as shall be established by the General Partner in its sole
discretion, all without the approval of any Limited Partners.
(b) Each additional Partnership Security authorized to be issued by the
Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or
one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series of
Partnership Securities), as shall be fixed by the General Partner in the
exercise of its sole discretion, including (i) the right to share Partnership
profits and losses or items thereof; (ii) the right to share in Partnership
distributions; (iii) rights upon dissolution and liquidation of the Partnership;
(iv) whether, and the terms and conditions upon which, the Partnership may
redeem the Partnership Security; (v) whether such Partnership Security is issued
with the privilege of conversion or exchange and, if so, the terms and
conditions of such conversion or exchange; (vi) the terms and conditions upon
which each Partnership Security will be issued, evidenced by certificates and
assigned or transferred; and (vii) the right, if any, of each such Partnership
Security to vote on Partnership matters, including matters relating to the
relative rights, preferences and privileges of such Partnership Security.
(c) The General Partner is hereby authorized and directed to take all
actions that it deems necessary or appropriate in connection with (i) each
issuance of Partnership Securities and options (and the exercise thereof),
rights (and the exercise thereof), warrants (and the exercise thereof) and
appreciation rights relating to Partnership Securities pursuant to this Section
5.6, (ii) the conversion of the General Partner Interest or any Incentive
Distribution Rights into Units pursuant to the terms of this Agreement, (iii)
the admission of Additional Limited Partners and (iv) all additional issuances
of Partnership Securities. The General Partner is further authorized and
directed to specify the relative rights, powers and duties of the holders of the
Units or other Partnership Securities being so issued. The General Partner shall
do all things necessary to comply with the Delaware Act and is authorized and
directed to do all things it deems to be necessary or advisable in connection
with any future issuance of Partnership Securities or in connection with the
conversion of the General Partner Interest or any Incentive Distribution Rights
into Units pursuant to the terms of this Agreement, including compliance with
any statute, rule, regulation or guideline of any federal, state or other
governmental agency or any National Securities Exchange on which the Units or
other Partnership Securities are listed for trading.
SECTION 5.7 Limitations on Issuance of Additional Partnership
Securities. Except as otherwise specified in this Section 5.7, the issuance of
Partnership Securities pursuant to Section 5.6 shall be subject to the following
restrictions and limitations:
(a) No fractional Units shall be issued by the Partnership.
36
SECTION 5.8 [RESERVED].
SECTION 5.9 Limited Preemptive Right. Except as provided in this
Section 5.9 and in Section 5.2, no Person shall have any preemptive,
preferential or other similar right with respect to the issuance of any
Partnership Security, whether unissued, held in the treasury or hereafter
created. The General Partner shall have the right, which it may from time to
time assign in whole or in part to any of its Affiliates, to purchase
Partnership Securities from the Partnership whenever, and on the same terms
that, the Partnership issues Partnership Securities to Persons other than the
General Partner and its Affiliates, to the extent necessary to maintain the
Percentage Interests of the General Partner and its Affiliates equal to that
which existed immediately prior to the issuance of such Partnership Securities.
SECTION 5.10 Splits and Combinations.
(a) Subject to Sections 5.10(d), 6.6 and 6.9 (dealing with adjustments
of distribution levels), the Partnership may make a Pro Rata distribution of
Partnership Securities to all Record Holders or may effect a subdivision or
combination of Partnership Securities so long as, after any such event, each
Partner shall have the same Percentage Interest in the Partnership as before
such event, and any amounts calculated on a per Unit basis (including any Common
Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a number of
Units are proportionately adjusted retroactive to the beginning of the
Partnership.
(b) Whenever such a distribution, subdivision or combination of
Partnership Securities is declared, the General Partner shall select a Record
Date as of which the distribution, subdivision or combination shall be effective
and shall send notice thereof at least 20 days prior to such Record Date to each
Record Holder as of a date not less than 10 days prior to the date of such
notice. The General Partner also may cause a firm of independent public
accountants selected by it to calculate the number of Partnership Securities to
be held by each Record Holder after giving effect to such distribution,
subdivision or combination. The General Partner shall be entitled to rely on any
certificate provided by such firm as conclusive evidence of the accuracy of such
calculation.
(c) Promptly following any such distribution, subdivision or
combination, the Partnership may issue Certificates to the Record Holders of
Partnership Securities as of the applicable Record Date representing the new
number of Partnership Securities held by such Record Holders, or the General
Partner may adopt such other procedures as it may deem appropriate to reflect
such changes. If any such combination results in a smaller total number of
Partnership Securities Outstanding, the Partnership shall require, as a
condition to the delivery to a Record Holder of such new Certificate, the
surrender of any Certificate held by such Record Holder immediately prior to
such Record Date.
(d) The Partnership shall not issue fractional Units upon any
distribution, subdivision or combination of Units. If a distribution,
subdivision or combination of Units would result in the issuance of fractional
Units but for the provisions of Section 5.7(a) and this Section 5.10(d), each
fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall
be rounded to the next higher Unit).
37
SECTION 5.11 Fully Paid and Non-Assessable Nature of Limited Partner
Interests. All Limited Partner Interests issued pursuant to, and in accordance
with the requirements of, this Article V shall be fully paid and non-assessable
Limited Partner Interests in the Partnership, except as such non-accessibility
may be affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
SECTION 6.1 Allocations for Capital Account Purposes. For purposes of
maintaining the Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section 5.5(b)) shall be allocated among the
Partners in each taxable year (or portion thereof) as provided herein below.
(a) Net Income. After giving effect to the special allocations set
forth in Section 6.1(d), Net Income for each taxable year and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable year shall be allocated as follows:
(i) First, 100% to the General Partner, in an amount equal to the
aggregate Net Losses allocated to the General Partner pursuant
to Section 6.1(b)(iii) for all previous taxable years until
the aggregate Net Income allocated to the General Partner
pursuant to this Section 6.1(a)(i) for the current taxable
year and all previous taxable years is equal to the aggregate
Net Losses allocated to the General Partner pursuant to
Section 6.1(b)(iii) for all previous taxable years;
(ii) Second, 2% to the General Partner, in an amount equal to the
aggregate Net Losses allocated to the General Partner pursuant
to Section 6.1(b)(ii) for all previous taxable years and 98%
to the Unitholders, in accordance with their respective
Percentage Interests, until the aggregate Net Income allocated
to such Partners pursuant to this Section 6.1(a)(ii) for the
current taxable year and all previous taxable years is equal
to the aggregate Net Losses allocated to such Partners
pursuant to Section 6.1(b)(ii) for all previous taxable years;
and
(iii) Third, 2% to the General Partner, and 98% to the Unitholders,
Pro Rata.
(b) Net Losses. After giving effect to the special allocations set
forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated as follows:
(i) First, 2% to the General Partner, and 98% to the Unitholders,
Pro Rata, until the aggregate Net Losses allocated pursuant to
this Section 6.1(b)(i) for the current taxable year and all
previous taxable years is equal to the aggregate Net Income
allocated to such Partners pursuant to Section 6.1(a)(iii) for
all previous taxable years, provided that the Net Losses shall
not be allocated pursuant to this Section 6.1(b)(i) to the
extent that such allocation would cause any Unitholder to have
a
38
deficit balance in its Adjusted Capital Account at the end of
such taxable year (or increase any existing deficit balance in
its Adjusted Capital Account);
(ii) Second, 2% to the General Partner, and 98% to the Unitholders,
Pro Rata; provided, that Net Losses shall not be allocated
pursuant to this Section 6.1(b)(ii) to the extent that such
allocation would cause any Unitholder to have a deficit
balance in its Adjusted Capital Account at the end of such
taxable year (or increase any existing deficit balance in its
Adjusted Capital Account);
(iii) Third, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 6.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Sections 6.4
and 6.5 have been made; provided, however, that solely for purposes of this
Section 6.1(c), Capital Accounts shall not be adjusted for distributions made
pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall
be allocated among the Partners in the following manner (and
the Capital Accounts of the Partners shall be increased by the
amount so allocated in each of the following subclauses, in
the order listed, before an allocation is made pursuant to the
next succeeding subclause):
(A) First, to each Partner having a deficit balance in
its Capital Account, in the proportion that such
deficit balance bears to the total deficit balances
in the Capital Accounts of all Partners, until each
such Partner has been allocated Net Termination Gain
equal to any such deficit balance in its Capital
Account;
(B) Second, 98% to all Unitholders holding Common Units,
Pro Rata, and 2% to the General Partner, until the
Capital Account in respect of each Common Unit then
Outstanding is equal to the sum of (1) its
Unrecovered Capital plus (2) the Minimum Quarterly
Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution
pursuant to Section 6.4(a)(i) with respect to such
Common Unit for such Quarter (the amount determined
pursuant to this clause (2) is hereinafter defined as
the "Unpaid MQD") plus (3) any then existing
Cumulative Common Unit Arrearage;
(C) Third, 98% to all Unitholders, Pro Rata, and 2% to
the General Partner, until the Capital Account in
respect of each Common Unit then
39
Outstanding is equal to the sum of (1) its
Unrecovered Capital, plus (2) the Unpaid MQD, plus
(3) any then existing Cumulative Common Unit
Arrearage, plus (4) the excess of (aa) the First
Target Distribution less the Minimum Quarterly
Distribution for each Quarter of the Partnership's
existence over (bb) the cumulative per Unit amount of
any distributions of Available Cash that is deemed to
be Operating Surplus made pursuant to Section
6.4(a)(iii) (the sum of (1) plus (2) plus (3) plus
(4) is hereinafter defined as the "First Liquidation
Target Amount");
(D) Fourth, 85% to all Unitholders, Pro Rata, 13% to the
holders of the Incentive Distribution Rights, Pro
Rata, and 2% to the General Partner, until the
Capital Account in respect of each Common Unit then
Outstanding is equal to the sum of (1) the First
Liquidation Target Amount, plus (2) the excess of
(aa) the Second Target Distribution less the First
Target Distribution for each Quarter of the
Partnership's existence over (bb) the cumulative per
Unit amount of any distributions of Available Cash
that is deemed to be Operating Surplus made pursuant
to Section 6.4(a)(iv) (the sum of (1) plus (2) is
hereinafter defined as the "Second Liquidation Target
Amount");
(E) Fifth, 75% to all Unitholders, Pro Rata, 23% to the
holders of the Incentive Distribution Rights, Pro
Rata, and 2% to the General Partner, until the
Capital Account in respect of each Common Unit then
Outstanding is equal to the sum of (1) the Second
Liquidation Target Amount, plus (2) the excess of
(aa) the Third Target Distribution less the Second
Target Distribution for each Quarter of the
Partnership's existence over (bb) the cumulative per
Unit amount of any distributions of Available Cash
that is deemed to be Operating Surplus made pursuant
to Section 6.4(a)(v) (the sum of (1) plus (2) is
hereinafter defined as the "Third Liquidation Target
Amount"); and
(F) Finally, any remaining amount 50% to all Unitholders,
Pro Rata, 48% to the holders of the Incentive
Distribution Rights, Pro Rata, and 2% to the General
Partner.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall
be allocated among the Partners in the following manner:
(A) First, 98% to all Unitholders holding Common Units,
Pro Rata, and 2% to the General Partner, until the
Capital Account in respect of each Common Unit then
Outstanding has been reduced to zero; and
(B) Second, the balance, if any, 100% to the General
Partner.
40
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding
any other provision of this Section 6.1, if there is
a net decrease in Partnership Minimum Gain during any
Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods)
in the manner and amounts provided in Treasury
Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For
purposes of this Section 6.1(d), each Partner's
Adjusted Capital Account balance shall be determined,
and the allocation of income or gain required
hereunder shall be effected, prior to the application
of any other allocations pursuant to this Section
6.1(d) with respect to such taxable period (other
than an allocation pursuant to Sections 6.1(d)(vi)
and 6.1(d)(vii)). This Section 6.1(d)(i) is intended
to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section
1.704-2(f) and shall be interpreted consistently
therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section
6.1 (other than Section 6.1(d)(i)), except as
provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain during any Partnership
taxable period, any Partner with a share of Partner
Nonrecourse Debt Minimum Gain at the beginning of
such taxable period shall be allocated items of
Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections
1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor
provisions. For purposes of this Section 6.1(d), each
Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain
required hereunder shall be effected, prior to the
application of any other allocations pursuant to this
Section 6.1(d), other than Section 6.1(d)(i) and
other than an allocation pursuant to Sections
6.1(d)(vi) and 6.1(d)(vii), with respect to such
taxable period. This Section 6.1(d)(ii) is intended
to comply with the chargeback of items of income and
gain requirement in Treasury Regulation Section
1.704-2(i)(4) and shall be interpreted consistently
therewith.
(iii) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value of any
property distributed (except cash or property
distributed pursuant to Section 12.4) to any
Unitholder with respect to its Units for a taxable
year is greater (on a per
41
Unit basis) than the amount of cash or the Net Agreed
Value of property distributed to the other
Unitholders with respect to their Units (on a per
Unit basis), then (1) each Unitholder receiving such
greater cash or property distribution shall be
allocated gross income in an amount equal to the
product of (aa) the amount by which the distribution
(on a per Unit basis) to such Unitholder exceeds the
distribution (on a per Unit basis) to the Unitholders
receiving the smallest distribution and (bb) the
number of Units owned by the Unitholder receiving the
greater distribution; and (2) the General Partner
shall be allocated gross income in an aggregate
amount equal to 1/98th of the sum of the amounts
allocated in clause (1) above.
(B) After the application of Section 6.1(d)(iii)(A), all
or any portion of the remaining items of Partnership
gross income or gain for the taxable period, if any,
shall be allocated 100% to the holders of Incentive
Distribution Rights, Pro Rata, until the aggregate
amount of such items allocated to the holders of
Incentive Distribution Rights pursuant to this
paragraph 6.1(d)(iii)(B) for the current taxable year
and all previous taxable years is equal to the
cumulative amount of all Incentive Distributions made
to the holders of Incentive Distribution Rights from
the Closing Date to a date 45 days after the end of
the current taxable year.
(iv) Qualified Income Offset. Notwithstanding the other provisions
of this Section 6.1 (other than Sections 6.1(d)(i) and
(d)(ii)), 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),
704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of
Partnership income and gain shall be specially allocated to
such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Treasury Regulations promulgated
under Section 704(b) of the Code, the deficit balance, if any,
in its Adjusted Capital Account created by such adjustments,
allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to
Section 6.1(d)(i) or (ii).
(v) Gross Income Allocations. In the event any Partner has a
deficit balance in its Capital Account at the end of any
Partnership taxable period in excess of the sum of (A) the
amount such Partner is required to restore pursuant to the
provisions of this Agreement and (B) the amount such Partner
is deemed obligated to restore pursuant to Treasury Regulation
Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership gross income and gain
in the amount of such excess as quickly as possible; provided,
that an allocation pursuant to this Section 6.1(d)(v) shall be
made only if and to the extent that such Partner would have a
deficit balance in its Capital Account as adjusted after all
other allocations provided for in this Section 6.1 have been
tentatively made as if this Section 6.1(d)(v) were not in this
Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with
their respective Percentage Interests. If the General Partner
determines in its good faith discretion that the Partnership's
42
Nonrecourse Deductions must be allocated in a different ratio
to satisfy the safe harbor requirements of the Treasury
Regulations promulgated under Section 704(b) of the Code, the
General Partner is authorized, upon notice to the other
Partners, to revise the prescribed ratio to the numerically
closest ratio that does satisfy such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner
that bears the Economic Risk of Loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Treasury
Regulation Section 1.704-2(i). If more than one Partner bears
the Economic Risk of Loss with respect to a Partner
Nonrecourse Debt, such Partner Nonrecourse Deductions
attributable thereto shall be allocated between or among such
Partners in accordance with the ratios in which they share
such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse
Liabilities of the Partnership in excess of the sum of (A) the
amount of Partnership Minimum Gain and (B) the total amount of
Nonrecourse Built-in Gain shall be allocated among the
Partners in accordance with their respective Percentage
Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to
Section 734(b) or 743(c) of the Code is required, pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken
into account in determining Capital Accounts, the amount of
such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and
such item of gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such
Section of the Treasury Regulations.
(x) Curative Allocation.
(A) Notwithstanding any other provision of this Section
6.1, other than the Required Allocations, the
Required Allocations shall be taken into account in
making the Agreed Allocations so that, to the extent
possible, the net amount of items of income, gain,
loss and deduction allocated to each Partner pursuant
to the Required Allocations and the Agreed
Allocations, together, shall be equal to the net
amount of such items that would have been allocated
to each such Partner under the Agreed Allocations had
the Required Allocations and the related Curative
Allocation not otherwise been provided in this
Section 6.1. Notwithstanding the preceding sentence,
Required Allocations relating to (1) Nonrecourse
Deductions shall not be taken into account except to
the extent that there has been a decrease in
Partnership Minimum Gain and (2) Partner Nonrecourse
Deductions shall not be taken into account except to
the extent that there
43
has been a decrease in Partner Nonrecourse Debt
Minimum Gain. Allocations pursuant to this Section
6.1(d)(x)(A) shall only be made with respect to
Required Allocations to the extent the General
Partner reasonably determines that such allocations
will otherwise be inconsistent with the economic
agreement among the Partners. Further, allocations
pursuant to this Section 6.1(d)(x)(A) shall be
deferred with respect to allocations pursuant to
clauses (1) and (2) hereof to the extent the General
Partner reasonably determines that such allocations
are likely to be offset by subsequent Required
Allocations.
(B) The General Partner shall have reasonable
discretion, with respect to each taxable
period, to (1) apply the provisions of Section
6.1(d)(x)(A) in whatever order is most likely to
minimize the economic distortions that might
otherwise result from the Required Allocations, and
(2) divide all allocations pursuant to Section
6.1(d)(x)(A) among the Partners in a manner that is
likely to minimize such economic distortions.
(xi) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event
or any recognition of a Net Termination Loss, the following
rules shall apply:
(A) In the case of any allocation of Additional Book
Basis Derivative Items (other than an allocation of
Unrealized Gain or Unrealized Loss under Section
5.5(d) hereof), the General Partner shall allocate
additional items of gross income and gain away from
the holders of Incentive Distribution Rights to the
Unitholders and the General Partner, or additional
items of deduction and loss away from the Unitholders
and the General Partner to the holders of Incentive
Distribution Rights, to the extent that the
Additional Book Basis Derivative Items allocated to
the Unitholders or the General Partner exceed their
Share of Additional Book Basis Derivative Items. For
this purpose, the Unitholders and the General Partner
shall be treated as being allocated Additional Book
Basis Derivative Items to the extent that such
Additional Book Basis Derivative Items have reduced
the amount of income that would otherwise have been
allocated to the Unitholders or the General Partner
under the Partnership Agreement (e.g., Additional
Book Basis Derivative Items taken into account in
computing cost of goods sold would reduce the amount
of book income otherwise available for allocation
among the Partners). Any allocation made pursuant to
this Section 6.1(d)(xi)(A) shall be made after all of
the other Agreed Allocations have been made as if
this Section 6.1(d)(xi) were not in this Agreement
and, to the extent necessary, shall require the
reallocation of items that have been allocated
pursuant to such other Agreed Allocations.
(B) In the case of any negative adjustments to the
Capital Accounts of the Partners resulting from a
Book-Down Event or from the recognition of a
44
Net Termination Loss, such negative adjustment (1)
shall first be allocated, to the extent of the
Aggregate Remaining Net Positive Adjustments, in such
a manner, as reasonably determined by the General
Partner, that to the extent possible the aggregate
Capital Accounts of the Partners will equal the
amount which would have been the Capital Account
balance of the Partners if no prior Book-Up Events
had occurred, and (2) any negative adjustment in
excess of the Aggregate Remaining Net Positive
Adjustments shall be allocated pursuant to Section
6.1(c) hereof.
(C) In making the allocations required under this Section
6.1(d)(xi), the General Partner, in its sole
discretion, may apply whatever conventions or other
methodology it deems reasonable to satisfy the
purpose of this Section 6.1(d)(xi).
SECTION 6.2 .Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable
to a Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in
the manner provided under Section 704(c) of the Code that
takes into account the variation between the Agreed Value of
such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual
Loss attributable to a Contributed Property shall be allocated
among the Partners in the same manner as its correlative item
of "book" gain or loss is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent
with the principles of Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized Loss attributable to
such property and the allocations thereof pursuant to Section
5.5(d)(i) or 5.5(d)(ii), and (2) second, in the event such
property was originally a Contributed Property, be allocated
among the Partners in a manner consistent with Section
6.2(b)(i)(A); and (B) any item of Residual Gain or Residual
Loss attributable to an Adjusted Property shall be allocated
among the Partners in the same manner as its correlative item
of "book" gain or loss is allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax
Disparities.
45
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the General Partner shall have sole discretion to (i) adopt
such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of this
Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury
Regulations under Section 704(b) or Section 704(c) of the Code (including
without limitation Treasury Regulations regarding compensatory and
noncompensatory options) or (y) otherwise to preserve or achieve uniformity of
the Limited Partner Interests (or any class or classes thereof). The General
Partner may adopt such conventions, make such allocations and make such
amendments to this Agreement as provided in this Section 6.2(c) only if such
conventions, allocations or amendments would not have a material adverse effect
on the Partners, the holders of any class or classes of Limited Partner
Interests issued and Outstanding or the Partnership, and if such allocations are
consistent with the principles of Section 704 of the Code. Additionally, the
General partner has the authority to amend the provisions of this Agreement as
necessary to conform to proposed or promulgated Treasury Regulations under
Subchapter K of the Code regarding compensatory and noncompensatory options to
acquire a Partnership Security.
(d) The General Partner in its discretion may determine to
depreciate or amortize the portion of an adjustment under Section 743(b) of the
Code attributable to unrealized appreciation in any Adjusted Property (to the
extent of the unamortized Book-Tax Disparity) using a predetermined rate derived
from the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Treasury Regulation Section 1.167(c)-l(a)(6) or any successor
regulations thereto. If the General Partner determines that such reporting
position cannot reasonably be taken, the General Partner may adopt depreciation
and amortization conventions under which all purchasers acquiring Limited
Partner Interests in the same month would receive depreciation and amortization
deductions, based upon the same applicable rate as if they had purchased a
direct interest in the Partnership's property. If the General Partner chooses
not to utilize such aggregate method, the General Partner may use any other
reasonable depreciation and amortization conventions to preserve the uniformity
of the intrinsic tax characteristics of any Limited Partner Interests that would
not have a material adverse effect on the Limited Partners or the Record Holders
of any class or classes of Limited Partner Interests.
(e) Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall, to the extent possible,
after taking into account other required allocations of gain pursuant to this
Section 6.2, be characterized as Recapture Income in the same proportions and to
the same extent as such Partners (or their predecessors in interest) have been
allocated any deductions directly or indirectly giving rise to the treatment of
such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit
recognized by the Partnership for federal income tax purposes and allocated to
the Partners in accordance with the provisions hereof shall be determined
without regard to any election under Section 754 of the Code which may be made
by the Partnership; provided, however, that such allocations, once
46
made, shall be adjusted as necessary or appropriate to take into account those
adjustments permitted or required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction
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 Nasdaq National Market on the first Business Day of each month;
provided, however, 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 General Partner in its sole discretion, shall be allocated to
the Partners as of the opening of the Nasdaq National Market on the first
Business Day of the month in which such gain or loss is recognized for federal
income tax purposes. The General Partner may revise, alter or otherwise modify
such methods of allocation as it determines necessary or appropriate in its sole
discretion, to the extent permitted or required by Section 706 of the Code and
the regulations or rulings promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner
under the provisions of this Article VI shall instead be made to the beneficial
owner of Limited Partner Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion.
SECTION 6.3 Requirement and Characterization of Distributions;
Distributions to Record Holders.
(a) Within 45 days following the end of each Quarter, an amount equal
to 100% of Available Cash with respect to such Quarter shall, subject to Section
17-607 of the Delaware Act, be distributed in accordance with this Article VI by
the Partnership to the Partners as of the Record Date selected by the General
Partner in its reasonable discretion. All amounts of Available Cash distributed
by the Partnership on any date from any source shall be deemed to be Operating
Surplus until the sum of all amounts of Available Cash theretofore distributed
by the Partnership to the Partners pursuant to Section 6.4 equals the Operating
Surplus from the Closing Date through the close of the immediately preceding
Quarter. Any remaining amounts of Available Cash distributed by the Partnership
on such date shall, except as otherwise provided in Section 6.5, be deemed to be
"Capital Surplus." All distributions required to be made under this Agreement
shall be made subject to Section 17-607 of the Delaware Act.
(b) Notwithstanding Section 6.3(a), in the event of the dissolution and
liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, other than from borrowings
described in (a)(ii) of the definition of Available Cash, shall be applied and
distributed solely in accordance with, and subject to the terms and conditions
of, Section 12.4.
(c) The General Partner shall have the discretion to treat taxes paid
by the Partnership on behalf of, or amounts withheld with respect to, all or
less than all of the Partners, as a distribution of Available Cash to such
Partners.
47
(d) Each distribution in respect of a Partnership Interest shall be
paid by the Partnership, directly or through the Transfer Agent or through any
other Person or agent, only to the Record Holder of such Partnership Interest as
of the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such
payment by reason of an assignment or otherwise.
SECTION 6.4 Distributions of Available Cash from Operating Surplus.
(a) Available Cash with respect to any Quarter that is deemed to be
Operating Surplus pursuant to the provisions of Section 6.3 or 6.5, subject to
Section 17-607 of the Delaware Act, shall be distributed as follows, except as
otherwise required by Section 5.6(b) in respect of additional Partnership
Securities issued pursuant thereto:
(i) First, 98% to all Unitholders, Pro Rata, and 2% to the General
Partner, until there has been distributed in respect of each
Unit then Outstanding an amount equal to the Minimum Quarterly
Distribution for such Quarter;
(ii) Second, 98% to the Unitholders, Pro Rata, and 2% to the
General Partner, until there has been distributed in respect
of each Common Unit then Outstanding an amount equal to the
Cumulative Common Unit Arrearage existing with respect to such
Quarter;
(iii) Third, 98% to all Unitholders, Pro Rata, and 2% to the General
Partner, until there has been distributed in respect of each
Unit then Outstanding an amount equal to the excess of the
First Target Distribution over the Minimum Quarterly
Distribution for such Quarter;
(iv) Fourth, 85% to all Unitholders, Pro Rata, 13% to the holders
of the Incentive Distribution Rights, Pro Rata, and 2% to the
General Partner, until there has been distributed in respect
of each Unit then Outstanding an amount equal to the excess of
the Second Target Distribution over the First Target
Distribution for such Quarter;
(v) Fifth, 75% to all Unitholders, Pro Rata, 23% to the holders of
the Incentive Distribution Rights, Pro Rata, and 2% to the
General Partner, until there has been distributed in respect
of each Unit then Outstanding an amount equal to the excess of
the Third Target Distribution over the Second Target
Distribution for such Quarter; and
(vi) Thereafter, 50% to all Unitholders, Pro Rata, 48% to the
holders of the Incentive Distribution Rights, Pro Rata, and 2%
to the General Partner;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section
6.4(a)(vi).
48
SECTION 6.5 Distributions of Available Cash from Capital Surplus.
Available Cash that is deemed to be Capital Surplus pursuant to the provisions
of Section 6.3(a) shall, subject to Section 17-607 of the Delaware Act, be
distributed, unless the provisions of Section 6.3 require otherwise, 98% to all
Unitholders, Pro Rata, and 2% to the General Partner, until a hypothetical
holder of an Initial Common Unit has received with respect to such Common Unit,
during the period since the Closing Date through such date, distributions of
Available Cash that are deemed to be Capital Surplus in an aggregate amount
equal to the Initial Unit Capital Account. Available Cash that is deemed to be
Capital Surplus shall then be distributed 98% to all Unitholders holding Common
Units, Pro Rata, and 2% to the General Partner, until there has been distributed
in respect of each Common Unit then Outstanding an amount equal to the
Cumulative Common Unit Arrearage. Thereafter, all Available Cash shall be
distributed as if it were Operating Surplus and shall be distributed in
accordance with Section 6.4.
SECTION 6.6 Adjustment of Minimum Quarterly Distribution and Target
Distribution Levels.
(a) The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution, Third Target Distribution, Common Unit Arrearages
and Cumulative Common Unit Arrearages shall be proportionately adjusted in the
event of any distribution, combination or subdivision (whether effected by a
distribution payable in Units or otherwise) of Units or other Partnership
Securities in accordance with Section 5.10. In the event of a distribution of
Available Cash that is deemed to be from Capital Surplus, the then applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, shall be adjusted proportionately
downward to equal the product obtained by multiplying the otherwise applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, as the case may be, by a fraction of
which the numerator is the Unrecovered Capital of the Common Units immediately
after giving effect to such distribution and of which the denominator is the
Unrecovered Capital of the Common Units immediately prior to giving effect to
such distribution.
(b) The Minimum Quarterly Distribution, First Target Distribution,
Second Target Distribution and Third Target Distribution, shall also be subject
to adjustment pursuant to Section 6.9.
SECTION 6.7 [RESERVED].
SECTION 6.8 Special Provisions Relating to the Holders of Incentive
Distribution Rights. Notwithstanding anything to the contrary set forth in this
Agreement, the holders of the Incentive Distribution Rights (a) shall (i)
possess the rights and obligations provided in this Agreement with respect to a
Limited Partner pursuant to Articles III and VII and (ii) have a Capital Account
as a Partner pursuant to Section 5.5 and all other provisions related thereto
and (b) shall not (i) be entitled to vote on any matters requiring the approval
or vote of the holders of Outstanding Units, (ii) be entitled to any
distributions other than as provided in Sections
49
6.4(a)(iv) through (vi), and 12.4 or (iii) be allocated items of income, gain,
loss or deduction other than as specified in this Article VI.
SECTION 6.9 Entity-Level Taxation. If legislation is enacted or the
interpretation of existing language is modified by the relevant governmental
authority which causes a Group Member to be treated as an association taxable as
a corporation or otherwise subjects a Group Member to entity-level taxation for
federal, state or local income tax purposes, the then applicable Minimum
Quarterly Distribution, First Target Distribution, Second Target Distribution
and Third Target Distribution, shall be adjusted to equal the product obtained
by multiplying (a) the amount thereof by (b) one minus the sum of (i) the
highest marginal federal corporate (or other entity, as applicable) income tax
rate of the Group Member for the taxable year of the Group Member in which such
Quarter occurs (expressed as a percentage) plus (ii) the effective overall state
and local income tax rate (expressed as a percentage) applicable to the Group
Member for the calendar year next preceding the calendar year in which such
Quarter occurs (after taking into account the benefit of any deduction allowable
for federal income tax purposes with respect to the payment of state and local
income taxes), but only to the extent of the increase in such rates resulting
from such legislation or interpretation. Such effective overall state and local
income tax rate shall be determined for the taxable year next preceding the
first taxable year during which the Group Member is taxable for federal income
tax purposes as an association taxable as a corporation or is otherwise subject
to entity-level taxation by determining such rate as if the Group Member had
been subject to such state and local taxes during such preceding taxable year.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 Management.
(a) The General Partner shall conduct, direct and manage all activities
of the Partnership. Except as otherwise expressly provided in this Agreement,
all management powers over the business and affairs of the Partnership shall be
exclusively vested in the General Partner, and no Limited Partner or Assignee
shall have any management power over the business and affairs of the
Partnership. In addition to the powers now or hereafter granted a general
partner of a limited partnership under applicable law or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner, subject to Section 7.3, shall have full power and authority to do all
things and on such terms as it, in its sole discretion, may deem necessary or
appropriate to conduct the business of the Partnership, to exercise all powers
set forth in Section 2.5 and to effectuate the purposes set forth in Section
2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of
money, the assumption or guarantee of, or other contracting
for, indebtedness and other liabilities, the issuance of
evidences of indebtedness, including indebtedness that is
convertible into Partnership Securities, and the incurring of
any other obligations;
50
(ii) the making of tax, regulatory and other filings, or rendering
of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the
Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the
Partnership or the merger or other combination of the
Partnership with or into another Person (the matters described
in this clause (iii) being subject, however, to any prior
approval that may be required by Section 7.3);
(iv) the use of the assets of the Partnership (including cash on
hand) for any purpose consistent with the terms of this
Agreement, including the financing of the conduct of the
operations of the Partnership Group; subject to Section
7.6(a), the lending of funds to other Persons (including other
Group Members), the repayment or guarantee of obligations of
the Partnership Group and the making of capital contributions
to any member of the Partnership Group;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including instruments that
limit the liability of the Partnership under contractual
arrangements to all or particular assets of the Partnership,
with the other party to the contract to have no recourse
against the General Partner or its assets other than its
interest in the Partnership, even if same results in the terms
of the transaction being less favorable to the Partnership
than would otherwise be the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president,"
"secretary" and "treasurer") and agents, outside attorneys,
accountants, consultants and contractors and the determination
of their compensation and other terms of employment or hiring;
(viii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or
appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any other
limited or general partnerships, joint ventures, corporations,
limited liability companies or other relationships (including
the acquisition of interests in, and the contributions of
property to, any Group Member from time to time) subject to
the restrictions set forth in Section 2.4;
(x) the control of any matters affecting the rights and
obligations of the Partnership, including the bringing and
defending of actions at law or in equity and otherwise
engaging in the conduct of litigation and the incurring of
legal expense and the settlement of claims and litigation;
51
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National
Securities Exchange and the delisting of some or all of the
Limited Partner Interests from, or requesting that trading be
suspended on, any such exchange (subject to any prior approval
that may be required under Section 4.8);
(xiii) unless restricted or prohibited by Section 5.7, the purchase,
sale or other acquisition or disposition of Partnership
Securities, or the issuance of additional options, rights,
warrants and appreciation rights relating to Partnership
Securities; and
(xiv) the undertaking of any action in connection with the
Partnership's participation in the Operating Partnership or
any other subsidiary of the Partnership as a member or
partner.
(b) Notwithstanding any other provision of this Agreement, the
Operating Partnership Agreement, the Delaware Act or any applicable law, rule or
regulation, each of the Partners and the Assignees and each other Person who may
acquire an interest in Partnership Securities hereby (i) approves, ratifies and
confirms the execution, delivery and performance by the parties thereto of the
Operating Partnership Agreement, the Omnibus Agreement, the Contribution
Agreement, the Distribution Agreement, and the Purchase Contract dated
_________, 2004 between Penn Octane Corporation and the Operating Partnership
and the other agreements described in or filed as exhibits to the Registration
Statement that are related to the transactions contemplated by the Registration
Statement; (ii) agrees that the General Partner (on its own or through any
officer of the Partnership) is authorized to execute, deliver and perform the
agreements referred to in clause (i) of this sentence and the other agreements,
acts, transactions and matters described in or contemplated by the Registration
Statement on behalf of the Partnership without any further act, approval or vote
of the Partners or the Assignees or the other Persons who may acquire an
interest in Partnership Securities; and (iii) agrees that the execution,
delivery or performance by the General Partner, any Group Member or any
Affiliate of any of them, of this Agreement or any agreement authorized or
permitted under this Agreement (including the exercise by the General Partner or
any Affiliate of the General Partner of the rights accorded pursuant to Article
XV), shall not constitute a breach by the General Partner of any duty that the
General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement (or any other agreements) or of any duty stated or
implied by law or equity.
SECTION 7.2 Certificate of Limited Partnership. The General Partner
has caused the Certificate of Limited Partnership to be filed with the Secretary
of State of the State of Delaware as required by the Delaware Act. The General
Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents as may be determined by the General Partner in its
sole discretion to be reasonable and necessary or appropriate for the formation,
continuation, qualification and operation of a limited partnership (or a
partnership in which the limited partners have limited liability) in the State
of Delaware or any other state in which the Partnership may
52
elect to do business or own property. To the extent that such action is
determined by the General Partner in its sole discretion to be reasonable and
necessary or appropriate, the General Partner shall file amendments to and
restatements of the Certificate of Limited Partnership and do all things to
maintain the Partnership as a limited partnership (or a partnership or other
entity in which the limited partners have limited liability) under the laws of
the State of Delaware or of any other state in which the Partnership may elect
to do business or own property. Subject to the terms of Section 3.4(a), the
General Partner shall not be required, before or after filing, to deliver or
mail a copy of the Certificate of Limited Partnership, any qualification
document or any amendment thereto to any Limited Partner.
SECTION 7.3 Restrictions on the General Partner's Authority.
(a) The General Partner may not, without written approval of the
specific act by holders of all of the Outstanding Limited Partner Interests or
by other written instrument executed and delivered by holders of all of the
Outstanding Limited Partner Interests subsequent to the date of this Agreement,
take any action in contravention of this Agreement, including, except as
otherwise provided in this Agreement, (i) committing any act that would make it
impossible to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner; or (v) transferring its interest as
a general partner of the Partnership.
(b) Except as provided in Articles XII and XIV, the General
Partner may not sell, exchange or otherwise dispose of all or substantially all
of the Partnership's assets in a single transaction or a series of related
transactions (including by way of merger, consolidation or other combination) or
approve on behalf of the Partnership the sale, exchange or other disposition of
all or substantially all of the assets of the Operating Partnership without the
approval of holders of a Unit Majority; provided however that this provision
shall not preclude or limit the General Partner's ability to mortgage, pledge,
hypothecate or grant a security interest in all or substantially all of the
assets of the Partnership or the Operating Partnership and shall not apply to
any forced sale of any or all of the assets of the Partnership or the Operating
Partnership pursuant to the foreclosure of, or other realization upon, any such
encumbrance. Without the approval of holders of a Unit Majority, the General
Partner shall not, on behalf of the Partnership, (i) consent to any amendment to
the Operating Partnership Agreement or (ii) except as expressly permitted by
Section 7.9(d), take any action permitted to be taken by a partner of the
Operating Partnership, in either case, that would adversely affect the Limited
Partners (including any particular class of Partnership Interests as compared to
any other class of Partnership Interests) in any material respect, except, in
either case, as permitted under Sections 4.6, 11.1 and 11.2 with respect to the
election of a successor general partner or managing member of any Group Member.
SECTION 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement, the General Partner shall not be compensated for its services as a
general partner or managing member of any Group Member.
53
(b) The General Partner shall be reimbursed on a monthly basis, or such
other reasonable basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of the
General Partner to perform services for the Partnership or for the General
Partner in the discharge of its duties to the Partnership), and (ii) all other
necessary or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business (including expenses allocated to the General Partner by
its Affiliates). The General Partner shall determine the expenses that are
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Reimbursements pursuant to this Section 7.4
shall be in addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 7.7.
(c) Subject to Section 5.7, the General Partner, in its sole discretion
and without the approval of the Limited Partners (who shall have no right to
vote in respect thereof), may propose and adopt on behalf of the Partnership
employee benefit plans, employee programs and employee practices (including
plans, programs and practices involving the issuance of Partnership Securities
or options to purchase Partnership Securities), or cause the Partnership to
issue Partnership Securities in connection with, or pursuant to, any employee
benefit plan, employee program or employee practice maintained or sponsored by
the General Partner or any of its Affiliates, in each case for the benefit of
employees of the General Partner, any Group Member or any Affiliate, or any of
them, in respect of services performed, directly or indirectly, for the benefit
of the Partnership Group. The Partnership agrees to issue and sell to the
General Partner or any of its Affiliates any Partnership Securities that the
General Partner or such Affiliates are obligated to provide to any employees
pursuant to any such employee benefit plans, employee programs or employee
practices. Expenses incurred by the General Partner in connection with any such
plans, programs and practices (including the net cost to the General Partner or
such Affiliates of Partnership Securities purchased by the General Partner or
such Affiliates from the Partnership to fulfill options or awards under such
plans, programs and practices) shall be reimbursed in accordance with Section
7.4(b). Any and all obligations of the General Partner under any employee
benefit plans, employee programs or employee practices adopted by the General
Partner as permitted by this Section 7.4(c) shall constitute obligations of the
General Partner hereunder and shall be assumed by any successor General Partner
approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to
all of the General Partner's General Partner Interest pursuant to Section 4.6.
SECTION 7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so long as it is
the General Partner of the Partnership agrees that its sole business will be to
act as a general partner or managing member, as the case may be, of the
Partnership and any other partnership or limited liability company of which the
Partnership or the Operating Partnership is, directly or indirectly, a partner
or member and to undertake activities that are ancillary or related thereto
(including being a limited partner in the Partnership).
54
(b) Penn Octane Corporation has entered into the Omnibus Agreement with
the General Partner, and the Partnership, which agreement sets forth certain
aspects of the business relationship between Penn Octane Corporation and its
Affiliates and the Partnership.
(c) Each Indemnitee (other than the General Partner) shall have the
right to engage in businesses of every type and description and other activities
for profit and to engage in and possess an interest in other business ventures
of any and every type or description, whether in businesses engaged in or
anticipated to be engaged in by any Group Member, independently or with others,
including business interests and activities in direct competition with the
business and activities of any Group Member, and none of the same shall
constitute a breach of this Agreement or any duty express or implied by law to
any Group Member or any Partner or Assignee. Neither any Group Member, any
Limited Partner nor any other Person shall have any rights by virtue of this
Agreement, the Operating Partnership Agreement, the limited liability company or
partnership agreement of any other Group Member or the partnership relationship
established hereby or thereby in any business ventures of any Indemnitee.
(d) Notwithstanding anything to the contrary in this Agreement, (i) the
engaging in competitive activities by any Indemnitees (other than the General
Partner) in accordance with the provisions of this Section 7.5 is hereby
approved by the Partnership and all Partners, (ii) it shall be deemed not to be
a breach of the General Partner's fiduciary duty or any other obligation of any
type whatsoever of the General Partner for the Indemnitees (other than the
General Partner) to engage in such business interests and activities in
preference to or to the exclusion of the Partnership and (iii) Penn Octane
Corporation, the General Partner and the Indemnitees shall have no obligation to
present business opportunities to the Partnership.
(e) The General Partner and any of its Affiliates may acquire Units or
other Partnership Securities in addition to those acquired on the Closing Date
and, except as otherwise provided in this Agreement, shall be entitled to
exercise all rights of the General Partner or Limited Partner, as applicable,
relating to such Units or Partnership Securities.
(f) The term "Affiliates" when used in Section 7.5(a) and Section
7.5(e) with respect to the General Partner shall not include any Group Member or
any Subsidiary of the Group Member.
(g) Anything in this Agreement to the contrary notwithstanding, to the
extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of this
Agreement purport or are interpreted to have the effect of restricting the
fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the General Partner to the Partnership and its
Limited Partners, or to constitute a waiver or consent by the Limited Partners
to any such restriction, such provisions shall be inapplicable and have no
effect in determining whether the General Partner has complied with its
fiduciary duties in connection with determinations made by it under this Section
7.5.
SECTION 7.6 Loans from the General Partner; Loans or Contributions from
the Partnership; Contracts with Affiliates; Certain Restrictions on the General
Partner.
55
(a) The General Partner or any of its Affiliates may lend to any Group
Member, and any Group Member may borrow from the General Partner or any of its
Affiliates, funds needed or desired by the Group Member for such periods of time
and in such amounts as the General Partner may determine; provided, however,
that in any such case the lending party may not charge the borrowing party
interest at a rate greater than the rate that would be charged the borrowing
party or impose terms less favorable to the borrowing party than would be
charged or imposed on the borrowing party by unrelated lenders on comparable
loans made on an arm's-length basis (without reference to the lending party's
financial abilities or guarantees). The borrowing party shall reimburse the
lending party for any costs (other than any additional interest costs) incurred
by the lending party in connection with the borrowing of such funds. For
purposes of this Section 7.6(a) and Section 7.6(b), the term "Group Member"
shall include any Affiliate of a Group Member that is controlled by the Group
Member. No Group Member may lend funds to the General Partner or any of its
Affiliates (other than another Group Member).
(b) The Partnership may lend or contribute to any Group Member, and any
Group Member may borrow from the Partnership, funds on terms and conditions
established in the sole discretion of the General Partner; provided, however,
that the Partnership may not charge the Group Member interest at a rate less
than the rate that would be charged to the Group Member (without reference to
the General Partner's financial abilities or guarantees) by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member or any other Person.
(c) The General Partner may itself, or may enter into an agreement with
any of its Affiliates to, render services to a Group Member or to the General
Partner in the discharge of its duties as General Partner of the Partnership.
Any services rendered to a Group Member by the General Partner or any of its
Affiliates shall be on terms that are fair and reasonable to the Partnership;
provided, however, that the requirements of this Section 7.6(c) shall be deemed
satisfied as to (i) any transaction approved by Special Approval, (ii) any
transaction, the terms of which are no less favorable to the Partnership Group
than those generally being provided to or available from unrelated third parties
or (iii) any transaction that, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership Group), is
equitable to the Partnership Group. The provisions of Section 7.4 shall apply to
the rendering of services described in this Section 7.6(c).
(d) The Partnership Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.2 and 5.3, the Contribution
Agreement and any other transactions
56
described in or contemplated by the Registration Statement, (ii) any transaction
approved by Special Approval, (iii) any transaction, the terms of which are no
less favorable to the Partnership than those generally being provided to or
available from unrelated third parties, or (iv) any transaction that, taking
into account the totality of the relationships between the parties involved
(including other transactions that may be particularly favorable or advantageous
to the Partnership), is equitable to the Partnership. With respect to any
contribution of assets to the Partnership in exchange for Partnership
Securities, the Conflicts Committee, in determining whether the appropriate
number of Partnership Securities are being issued, may take into account, among
other things, the fair market value of the assets, the liquidated and contingent
liabilities assumed, the tax basis in the assets, the extent to which tax-only
allocations to the transferor will protect the existing partners of the
Partnership against a low tax basis, and such other factors as the Conflicts
Committee deems relevant under the circumstances.
(f) The General Partner and its Affiliates will have no obligation to
permit any Group Member to use any facilities or assets of the General Partner
and its Affiliates, except as may be provided in contracts entered into from
time to time specifically dealing with such use, nor shall there be any
obligation on the part of the General Partner or its Affiliates to enter into
such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
SECTION 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided, that in each case
the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the General
Partner) not opposed to, the best interests of the Partnership and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 7.7
shall be available to the General Partner with respect to its obligations
incurred pursuant to the Omnibus Agreement, the Contribution Agreement and the
Distribution Agreement (other than obligations incurred by the General Partner
on behalf of the Partnership). The termination of any action, suit or proceeding
by judgment, order, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that the Indemnitee acted in a
manner contrary to that specified above. Any indemnification pursuant to this
Section 7.7 shall be made only out of the assets of the Partnership, it being
agreed that the General Partner shall not be personally liable for such
indemnification and shall have no obligation to contribute or loan any monies or
property to the Partnership to enable it to effectuate such indemnification.
57
(b) To the fullest extent permitted by law, expenses (including legal
fees and expenses) incurred by an Indemnitee who is indemnified pursuant to
Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Partnership prior to the final disposition
of such claim, demand, action, suit or proceeding upon receipt by the
Partnership of any undertaking by or on behalf of the Indemnitee to repay such
amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the holders of Outstanding Limited Partner
Interests, as a matter of law or otherwise, both as to actions in the
Indemnitee's capacity as an Indemnitee and as to actions in any other capacity,
and shall continue as to an Indemnitee who has ceased to serve in such capacity
and shall inure to the benefit of the heirs, successors, assigns and
administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General
Partner or its Affiliates for the cost of) insurance, on behalf of the General
Partner, its Affiliates and such other Persons as the General Partner shall
determine, against any liability that may be asserted against or expense that
may be incurred by such Person in connection with the Partnership's activities
or such Person's activities on behalf of the Partnership, regardless of whether
the Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by it of its duties to the Partnership also
imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action taken
or omitted by it with respect to any employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
58
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
SECTION 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who have
acquired interests in the Partnership Securities, for losses sustained or
liabilities incurred as a result of any act or omission if such Indemnitee acted
in good faith.
(b) Subject to its obligations and duties as General Partner set forth
in Section 7.1(a), the General Partner may exercise any of the powers granted to
it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents, and the General Partner shall not
be responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or to the Partners, the General Partner and any other Indemnitee acting in
connection with the Partnership's business or affairs shall not be liable to the
Partnership or to any Partner for its good faith reliance on the provisions of
this Agreement. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership, the Limited Partners, the
General Partner, and the Partnership's and General Partner's directors, officers
and employees under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
SECTION 7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement, the
Operating Partnership Agreement or the limited liability company agreement or
partnership agreement of any other Group Member, whenever a potential conflict
of interest exists or arises between the General Partner or any of its
Affiliates, on the one hand, and the Partnership, the Operating Partnership, any
other Group Member, any Partner or any Assignee, on the other, any resolution or
course of
59
action by the General Partner or its Affiliates in respect of such conflict of
interest shall be permitted and deemed approved by all Partners, and shall not
constitute a breach of this Agreement, of the Operating Partnership Agreement,
of any agreement contemplated herein or therein, or of any duty stated or
implied by law or equity, if the resolution or course of action is, or by
operation of this Agreement is deemed to be, fair and reasonable to the
Partnership. The General Partner shall be required in connection with its
resolution of such conflict of interest to seek Special Approval of such
resolution. Any such approval by the Conflicts Committee shall be subject to the
presumption that, in making its decision, the Conflicts Committee acted on an
informed basis, in good faith, and in the honest belief that the action taken
was in the best interests of the Partnership, and in any proceeding brought by
any Unitholder or by or on behalf of such Unitholder or any other Unitholders or
the Partnership challenging such approval, the Person bringing or prosecuting
such proceeding shall have the burden of overcoming such presumption. Any
conflict of interest and any resolution of such conflict of interest shall be
conclusively deemed fair and reasonable to the Partnership if such conflict of
interest or resolution is (i) approved by Special Approval, (ii) on terms no
less favorable to the Partnership than those generally being provided to or
available from unrelated third parties or (iii) fair to the Partnership, taking
into account the totality of the relationships between the parties involved
(including other transactions that may be particularly favorable or advantageous
to the Partnership). The General Partner (including the Conflicts Committee in
connection with Special Approval) shall be authorized in connection with its
determination of what is "fair and reasonable" to the Partnership and in
connection with its resolution of any conflict of interest to consider (A) the
relative interests of any party to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interest; (B) any
customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting practices or principles; and (D) such additional factors as the
General Partner (including the Conflicts Committee) determines in its sole
discretion to be relevant, reasonable or appropriate under the circumstances. In
any proceeding brought by any Unitholder by or on behalf of such Unitholder or
any other Unitholders or the Partnership alleging that such a resolution by the
General Partner (and not by the Conflicts Committee, whose resolution shall be
conclusive as provided above) is not fair to the Partnership, such Unitholder
shall have the burden of proof of overcoming such conclusion. Nothing contained
in this Agreement, however, is intended to nor shall it be construed to require
the General Partner (including the Conflicts Committee) to consider the
interests of any Person other than the Partnership. In the absence of bad faith
by the General Partner, the resolution, action or terms so made, taken or
provided by the General Partner with respect to such matter shall not constitute
a breach of this Agreement or any other agreement contemplated herein or a
breach of any standard of care or duty imposed herein or therein or, to the
extent permitted by law, under the Delaware Act or any other law, rule or
regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its "sole discretion" or "discretion," that
it deems "necessary or appropriate" or "necessary or advisable" or under a grant
of similar authority or latitude, except as otherwise provided herein, the
General Partner or such Affiliate shall be entitled to consider only such
interests and factors as it desires and shall have no duty or obligation to give
any consideration to any interest of, or factors affecting, the Partnership, the
Operating Partnership, any Group Member, any Limited
60
Partner or any Assignee, (ii) it may make such decision in its sole discretion
(regardless of whether there is a reference to "sole discretion" or
"discretion") unless another express standard is provided for, or (iii) in "good
faith" or under another express standard, the General Partner or such Affiliate
shall act under such express standard and shall not be subject to any other or
different standards imposed by this Agreement, the Operating Partnership
Agreement, the limited liability company agreement or partnership agreement of
any Group Member any other agreement contemplated hereby or under the Delaware
Act or any other law, rule or regulation. In addition, any actions taken by the
General Partner or such Affiliate consistent with the standards of "reasonable
discretion" set forth in the definitions of Available Cash or Operating Surplus
shall not constitute a breach of any duty of the General Partner to the
Partnership or the Limited Partners. The General Partner shall have no duty,
express or implied, to sell or otherwise dispose of any asset of the Partnership
Group other than in the ordinary course of business. No borrowing by any Group
Member or the approval thereof by the General Partner shall be deemed to
constitute a breach of any duty of the General Partner to the Partnership or the
Limited Partners by reason of the fact that the purpose or effect of such
borrowing is directly or indirectly to enable distributions to the General
Partner or its Affiliates (including in their capacities as Limited Partners) to
exceed 2% of the total amount distributed to all partners.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Unitholders hereby authorize the General Partner, on behalf of
the Partnership as a partner or member of a Group Member, to approve of actions
by the general partner or managing member of such Group Member similar to those
actions permitted to be taken by the General Partner pursuant to this Section
7.9.
SECTION 7.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that the General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
officers of the Partnership.
61
(d) Any standard of care and duty imposed by this Agreement or under
the Delaware Act or any applicable law, rule or regulation shall be modified,
waived or limited, to the extent permitted by law, as required to permit the
General Partner to act under this Agreement or any other agreement contemplated
by this Agreement and to make any decision pursuant to the authority prescribed
in this Agreement, so long as such action is reasonably believed by the General
Partner to be in, or not inconsistent with, the best interests of the
Partnership.
SECTION 7.11 Purchase or Sale of Partnership Securities. The General
Partner may cause the Partnership to purchase or otherwise acquire Partnership
Securities. As long as Partnership Securities are held by any Group Member, such
Partnership Securities shall not be considered Outstanding for any purpose,
except as otherwise provided herein. The General Partner or any Affiliate of the
General Partner may also purchase or otherwise acquire and sell or otherwise
dispose of Partnership Securities for its own account, subject to the provisions
of Articles IV and X.
SECTION 7.12 Registration Rights of the General Partner and its
Affiliates.
(a) If (i) the General Partner or any Affiliate of the General Partner
(including for purposes of this Section 7.12, any Person that is an Affiliate of
the General Partner at the date of this Agreement notwithstanding that it may
later cease to be an Affiliate of the General Partner) holds Partnership
Securities that it desires to sell and (ii) Rule 144 of the Securities Act (or
any successor rule or regulation to Rule 144) or another exemption from
registration is not available to enable such holder of Partnership Securities
(the "Holder") to dispose of the number of Partnership Securities it desires to
sell at the time it desires to do so without registration under the Securities
Act, then upon the request of any such Holder, the Partnership shall file with
the Commission as promptly as practicable after receiving such request, and use
all reasonable efforts to cause to become effective and remain effective for a
period of not less than six months following its effective date or such shorter
period as shall terminate when all Partnership Securities covered by such
registration statement have been sold, a registration statement under the
Securities Act registering the offering and sale of the number of Partnership
Securities specified by the Holder; provided, however, that the Partnership
shall not be required to effect more than three registrations pursuant to this
Section 7.12(a); and provided further, however, that if the Conflicts Committee
determines in its good faith judgment that a postponement of the requested
registration for up to six months would be in the best interests of the
Partnership and its Partners due to a pending transaction, investigation or
other event, the filing of such registration statement or the effectiveness
thereof may be deferred for up to six months, but not thereafter. In connection
with any registration pursuant to the immediately preceding sentence, the
Partnership shall promptly prepare and file (x) such documents as may be
necessary to register or qualify the securities subject to such registration
under the securities laws of such states as the Holder shall reasonably request;
provided, however, that no such qualification shall be required in any
jurisdiction where, as a result thereof, the Partnership would become subject to
general service of process or to taxation or qualification to do business as a
foreign corporation or partnership doing business in such jurisdiction solely as
a result of such registration, and (y) such documents as may be necessary to
apply for listing or to list the Partnership Securities subject to such
registration on such National Securities Exchange as the Holder shall reasonably
request, and do any and all other acts and things that may reasonably be
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necessary or advisable to enable the Holder to consummate a public sale of such
Partnership Securities in such states. Except as set forth in Section 7.12(c),
all costs and expenses of any such registration and offering (other than the
underwriting discounts and commissions) shall be paid by the Partnership,
without reimbursement by the Holder.
(b) If the Partnership shall at any time propose to file a registration
statement under the Securities Act for an offering of equity securities of the
Partnership for cash (other than an offering relating solely to an employee
benefit plan), the Partnership shall use all reasonable efforts to include such
number or amount of securities held by the Holder in such registration statement
as the Holder shall request. If the proposed offering pursuant to this Section
7.12(b) shall be an underwritten offering, then, in the event that the managing
underwriter or managing underwriters of such offering advise the Partnership and
the Holder in writing that in their opinion the inclusion of all or some of the
Holder's Partnership Securities would adversely and materially affect the
success of the offering, the Partnership shall include in such offering only
that number or amount, if any, of securities held by the Holder which, in the
opinion of the managing underwriter or managing underwriters, will not so
adversely and materially affect the offering. Except as set forth in Section
7.12(c), all costs and expenses of any such registration and offering (other
than the underwriting discounts and commissions) shall be paid by the
Partnership, without reimbursement by the Holder.
(c) If underwriters are engaged in connection with any registration
referred to in this Section 7.12, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of the Partnership's obligation under Section
7.7, the Partnership shall, to the fullest extent permitted by law, indemnify
and hold harmless the Holder, its officers, directors and each Person who
controls the Holder (within the meaning of the Securities Act) and any agent
thereof (collectively, "Indemnified Persons") against any losses, claims,
demands, actions, causes of action, assessments, damages, liabilities (joint or
several), costs and expenses (including interest, penalties and reasonable
attorneys' fees and disbursements), resulting to, imposed upon, or incurred by
the Indemnified Persons, directly or indirectly, under the Securities Act or
otherwise (hereinafter referred to in this Section 7.12(c) as a "claim" and in
the plural as "claims") based upon, arising out of or resulting from any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which any Partnership Securities were registered
under the Securities Act or any state securities or Blue Sky laws, in any
preliminary prospectus (if used prior to the effective date of such registration
statement), or in any summary or final prospectus or in any amendment or
supplement thereto (if used during the period the Partnership is required to
keep the registration statement current), or arising out of, based upon or
resulting from the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements made therein
not misleading; provided, however, that the Partnership shall not be liable to
any Indemnified Person to the extent that any such claim arises out of, is based
upon or results from an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, such preliminary,
summary or final prospectus or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Partnership by or on
behalf of such Indemnified Person specifically for use in the preparation
thereof.
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(d) The provisions of Section 7.12(a) and 7.12(b) shall continue to be
applicable with respect to the General Partner (and any of the General Partner's
Affiliates) after it ceases to be a Partner of the Partnership, during a period
of two years subsequent to the effective date of such cessation and for so long
thereafter as is required for the Holder to sell all of the Partnership
Securities with respect to which, during such two-year period, it has requested
inclusion in a registration statement pursuant to Section 7.12(b) or requested
that a registration statement be filed pursuant to Section 7.12(a); provided,
however, that the Partnership shall not be required to file successive
registration statements covering the same Partnership Securities for which
registration was demanded during such two-year period. The provisions of Section
7.12(c) shall continue in effect thereafter.
(e) Any request to register Partnership Securities pursuant to this
Section 7.12 shall (i) specify the Partnership Securities intended to be offered
and sold by the Person making the request, (ii) express such Person's present
intent to offer such Partnership Securities for distribution, (iii) describe the
nature or method of the proposed offer and sale of Partnership Securities, and
(iv) contain the undertaking of such Person to provide all such information and
materials and take all action as may be required in order to permit the
Partnership to comply with all applicable requirements in connection with the
registration of such Partnership Securities.
SECTION 7.13 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner and any officer of the General
Partner authorized by the General Partner to act on behalf of and in the name of
the Partnership has full power and authority to encumber, sell or otherwise use
in any manner any and all assets of the Partnership and to enter into any
authorized contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner or any such officer as if it were the
Partnership's sole party in interest, both legally and beneficially. Each
Limited Partner hereby waives any and all defenses or other remedies that may be
available against such Person to contest, negate or disaffirm any action of the
General Partner or any such officer in connection with any such dealing. In no
event shall any Person dealing with the General Partner or any such officer or
its representatives be obligated to ascertain that the terms of the Agreement
have been complied with or to inquire into the necessity or expedience of any
act or action of the General Partner or any such officer or its representatives.
Each and every certificate, document or other instrument executed on behalf of
the Partnership by the General Partner or its representatives shall be
conclusive evidence in favor of any and every Person relying thereon or claiming
thereunder that (a) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (b) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Partnership and (c) such certificate, document or instrument was duly executed
and delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
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ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 8.1 Records and Accounting. The General Partner shall keep or
cause to be kept at the principal office of the Partnership appropriate books
and records with respect to the Partnership's business, including all books and
records necessary to provide to the Limited Partners any information required to
be provided pursuant to Section 3.4(a). Any books and records maintained by or
on behalf of the Partnership in the regular course of its business, including
the record of the Record Holders and Assignees of Units or other Partnership
Securities, books of account and records of Partnership proceedings, may be kept
on, or be in the form of, computer disks, hard drives, punch cards, magnetic
tape, photographs, micrographics or any other information storage device;
provided, that the books and records so maintained are convertible into clearly
legible written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial reporting purposes, on an accrual
basis in accordance with U.S. GAAP.
SECTION 8.2 Fiscal Year. The fiscal year of the Partnership shall be a
fiscal year ending December 31.
SECTION 8.3 Reports.
(a) As soon as practicable, but in no event later than 120 days after
the close of each fiscal year of the Partnership, the General Partner shall
cause to be mailed or made available to each Record Holder of a Unit as of a
date selected by the General Partner in its discretion, an annual report
containing financial statements of the Partnership for such fiscal year of the
Partnership, presented in accordance with U.S. GAAP, including a balance sheet
and statements of operations, Partnership equity and cash flows, such statements
to be audited by a firm of independent public accountants selected by the
General Partner.
(b) As soon as practicable, but in no event later than 90 days after
the close of each Quarter except the last Quarter of each fiscal year, the
General Partner shall cause to be mailed or made available to each Record Holder
of a Unit, as of a date selected by the General Partner in its discretion, a
report containing unaudited financial statements of the Partnership and such
other information as may be required by applicable law, regulation or rule of
any National Securities Exchange on which the Units are listed for trading, or
as the General Partner determines to be necessary or appropriate.
ARTICLE IX
TAX MATTERS
SECTION 9.1 Tax Returns and Information. The Partnership shall timely
file all returns of the Partnership that are required for federal, state and
local income tax purposes on the basis of the accrual method and a taxable year
ending on December 31. The tax information reasonably required by Record Holders
for federal and state income tax reporting purposes with respect to a taxable
year shall be furnished to them within 90 days of the close of the calendar year
in which the Partnership's taxable year ends. The classification, realization
and recognition of income, gain, losses and deductions and other items shall be
on the accrual method of accounting for federal income tax purposes.
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SECTION 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of
the Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the General
Partner's determination that such revocation is in the best interests of the
Limited Partners. Notwithstanding any other provision herein contained, for the
purposes of computing the adjustments under Section 743(b) of the Code, the
General Partner shall be authorized (but not required) to adopt a convention
whereby the price paid by a transferee of a Limited Partner Interest will be
deemed to be the lowest quoted closing price of the Limited Partner Interests on
any National Securities Exchange on which such Limited Partner Interests are
traded during the calendar month in which such transfer is deemed to occur
pursuant to Section 6.2(g) without regard to the actual price paid by such
transferee.
(b) The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
(c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
SECTION 9.3 Tax Controversies. Subject to the provisions hereof, the
General Partner is designated as the Tax Matters Partner (as defined in the
Code) and is authorized and required to represent the Partnership (at the
Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional services and costs
associated therewith. Each Partner agrees to cooperate with the General Partner
and to do or refrain from doing any or all things reasonably required by the
General Partner to conduct such proceedings.
SECTION 9.4 Withholding. Notwithstanding any other provision of this
Agreement, the General Partner is authorized to take any action that it
determines in its discretion to be necessary or appropriate to cause the
Partnership and other Group Members to comply with any withholding requirements
established under the Code or any other federal, state or local law including,
without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code.
To the extent that the Partnership is required or elects to withhold and pay
over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or Assignee (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld may at
the discretion of the General Partner be treated by the Partnership as a
distribution of cash pursuant to Section 6.3 in the amount of such withholding
from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
SECTION 10.1 Admission of Initial Limited Partners. Effective upon the
Distribution, the General Partner shall admit such parties to the Partnership as
Initial Limited Partners in respect of the Initial Common Units distributed to
them in the Distribution. Each such Initial Limited Partner, by virtue of
receiving Initial Common Units in the Distribution,
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agrees to be bound by, and acknowledges and agrees to all of the terms of, this
Agreement without the need to execute this Agreement.
SECTION 10.2 Admission of Substituted Limited Partner. By transfer of a
Limited Partner Interest in accordance with Article IV, the transferor shall be
deemed to have given the transferee the right to seek admission as a Substituted
Limited Partner subject to the conditions of, and in the manner permitted under,
this Agreement. A transferor of a Certificate representing a Limited Partner
Interest shall, however, only have the authority to convey to a purchaser or
other transferee who does not execute and deliver a Transfer Application (a) the
right to negotiate such Certificate to a purchaser or other transferee and (b)
the right to transfer the right to request admission as a Substituted Limited
Partner to such purchaser or other transferee in respect of the transferred
Limited Partner Interests. Each transferee of a Limited Partner Interest
(including any nominee holder or an agent acquiring such Limited Partner
Interest for the account of another Person) who executes and delivers a Transfer
Application shall, by virtue of such execution and delivery, be an Assignee and
be deemed to have applied to become a Substituted Limited Partner with respect
to the Limited Partner Interests so transferred to such Person. Such Assignee
shall become a Substituted Limited Partner (x) at such time as the General
Partner consents thereto, which consent may be given or withheld in the General
Partner's discretion, and (y) when any such admission is shown on the books and
records of the Partnership. If such consent is withheld, such transferee shall
be an Assignee. An Assignee shall have an interest in the Partnership equivalent
to that of a Limited Partner with respect to allocations and distributions,
including liquidating distributions, of the Partnership. With respect to voting
rights attributable to Limited Partner Interests that are held by Assignees, the
General Partner shall be deemed to be the Limited Partner with respect thereto
and shall, in exercising the voting rights in respect of such Limited Partner
Interests on any matter, vote such Limited Partner Interests at the written
direction of the Assignee who is the Record Holder of such Limited Partner
Interests. If no such written direction is received, such Limited Partner
Interests will not be voted. An Assignee shall have no other rights of a Limited
Partner.
SECTION 10.3 Admission of Successor General Partner. A successor
General Partner approved pursuant to Section 11.1 or 11.2 or the transferee of
or successor to all of the General Partner Interest pursuant to Section 4.6 who
is proposed to be admitted as a successor General Partner shall be admitted to
the Partnership as the General Partner, effective immediately prior to the
withdrawal or removal of the predecessor or transferring General Partner,
pursuant to Section 11.1 or 11.2 or the transfer of the General Partner Interest
pursuant to Section 4.6; provided, however, that no such successor shall be
admitted to the Partnership until compliance with the terms of Section 4.6 has
occurred and such successor has executed and delivered such other documents or
instruments as may be required to effect such admission. Any such successor
shall, subject to the terms hereof, carry on the business of the members of the
Partnership Group without dissolution.
SECTION 10.4 Admission of Additional Limited Partners.
(a) A Person (other than the General Partner, an Initial Limited
Partner or a Substituted Limited Partner) who makes a Capital Contribution to
the Partnership in accordance
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with this Agreement shall be admitted to the Partnership as an Additional
Limited Partner only upon furnishing to the General Partner
(i) evidence of acceptance in form satisfactory to the
General Partner of all of the terms and conditions of
this Agreement, including the power of attorney
granted in Section 2.6, and
(ii) such other documents or instruments as may be
required in the discretion of the General Partner to
effect such Person's admission as an Additional
Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.4,
no Person shall be admitted as an Additional Limited Partner without the consent
of the General Partner, which consent may be given or withheld in the General
Partner's discretion. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person is
recorded as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
SECTION 10.5 Amendment of Agreement and Certificate of Limited
Partnership. To effect the admission to the Partnership of any Partner, the
General Partner shall take all steps necessary and appropriate under the
Delaware Act to amend the records of the Partnership to reflect such admission
and, if necessary, to prepare as soon as practicable an amendment to this
Agreement and, if required by law, the General Partner shall prepare and file an
amendment to the Certificate of Limited Partnership, and the General Partner may
for this purpose, among others, exercise the power of attorney granted pursuant
to Section 2.6.
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");
(i) The General Partner voluntarily withdraws from the
Partnership by giving written notice to the other
Partners;
(ii) The General Partner transfers all of its rights as
General Partner pursuant to Section 4.6;
(iii) The General Partner is removed pursuant to Section
11.2;
(iv) The General Partner (A) makes a general assignment
for the benefit of creditors; (B) files a voluntary
bankruptcy petition for relief under Chapter 7 of the
United States Bankruptcy Code; (C) files a petition
or answer
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seeking for itself a liquidation, dissolution or
similar relief (but not a reorganization) under any
law; (D) files an answer or other pleading admitting
or failing to contest the material allegations of a
petition filed against the General Partner in a
proceeding of the type described in clauses (A)-(C)
of this Section 11.1(a)(iv); or (E) seeks, consents
to or acquiesces in the appointment of a trustee (but
not a debtor-in-possession), receiver or liquidator
of the General Partner or of all or any substantial
part of its properties;
(v) A final and non-appealable order of relief under
Chapter 7 of the United States Bankruptcy Code is
entered by a court with appropriate jurisdiction
pursuant to a voluntary or involuntary petition by or
against the General Partner; or
(vi) (A) in the event the General Partner is a
corporation, a certificate of dissolution or its
equivalent is filed for the General Partner, or 90
days expire after the date of notice to the General
Partner of revocation of its charter without a
reinstatement of its charter, under the laws of its
state of incorporation; (B) in the event the General
Partner is a partnership or a limited liability
company, the dissolution and commencement of winding
up of the General Partner; (C) in the event the
General Partner is acting in such capacity by virtue
of being a trustee of a trust, the termination of the
trust; (D) in the event the General Partner is a
natural person, his death or adjudication of
incompetency; and (E) otherwise in the event of the
termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), (v) or (vi)(A), (B),
(C) or (E) occurs, the withdrawing General Partner shall give notice to the
Limited Partners within 30 days after such occurrence. The Partners hereby agree
that only the Events of Withdrawal described in this Section 11.1 shall result
in the withdrawal of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on October 31, 2008, the General Partner voluntarily withdraws by giving
at least 90 days' advance notice of its intention to withdraw to the Limited
Partners; provided that prior to the effective date of such withdrawal, the
withdrawal is approved by Unitholders holding at least a majority of the
Outstanding Common Units (excluding Common Units held by the General Partner and
its Affiliates) and the General Partner delivers to the Partnership an Opinion
of Counsel ("Withdrawal Opinion of Counsel") that such withdrawal (following the
selection of the successor General Partner) would not result in the loss of the
limited liability of any Limited Partner or any Group Member or cause any Group
Member to be treated as an association taxable as a corporation or otherwise to
be taxed as an entity for federal income tax purposes (to the extent not
previously treated as such); (ii) at any time after 12:00 midnight, Eastern
Standard Time, on October 31, 2008, the General Partner voluntarily withdraws by
giving at least 90 days' advance notice to the Unitholders, such withdrawal to
take effect on the date specified in such notice; (iii) at any time that the
General Partner ceases to be the General Partner pursuant to Section 11.1(a)(ii)
or is removed pursuant to Section 11.2; or (iv) notwithstanding clause (i) of
this sentence, at any time that the General Partner voluntarily withdraws by
giving at least 90 days' advance notice of its intention to withdraw to the
Limited Partners, such withdrawal to take
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effect on the date specified in the notice, if at the time such notice is given
one Person and its Affiliates (other than the General Partner and its
Affiliates) own beneficially or of record or control at least 50% of the
Outstanding Units. The withdrawal of the General Partner from the Partnership
upon the occurrence of an Event of Withdrawal shall also constitute the
withdrawal of the General Partner as general partner or managing member, to the
extent applicable, of the other Group Members. If the General Partner gives a
notice of withdrawal pursuant to Section 11.1(a)(i), the holders of a Unit
Majority, may, prior to the effective date of such withdrawal, elect a successor
General Partner. The Person so elected as successor General Partner shall
automatically become the successor general partner or managing member, to the
extent applicable, of the other Group Members of which the General Partner is a
general partner or a managing member. If, prior to the effective date of the
General Partner's withdrawal, a successor is not selected by the Unitholders as
provided herein or the Partnership does not receive a Withdrawal Opinion of
Counsel, the Partnership shall be dissolved in accordance with Section 12.1. Any
successor General Partner elected in accordance with the terms of this Section
11.1 shall be subject to the provisions of Section 10.3.
SECTION 11.2 Removal of the General Partner. The General Partner may be
removed if such removal is approved by the Unitholders holding at least 80% of
the Outstanding Units (including Units held by the General Partner and its
Affiliates). Any such action by such holders for removal of the General Partner
must also provide for the election of a successor General Partner by the
Unitholders holding a majority of the outstanding Common Units voting as a class
(including Units held by the General Partner and its Affiliates). Such removal
shall be effective immediately following the admission of a successor General
Partner pursuant to Section 10.3. The removal of the General Partner shall also
automatically constitute the removal of the General Partner as general partner
or managing member, to the extent applicable, of the other Group Members of
which the General Partner is a general partner or a managing member. If a Person
is elected as a successor General Partner in accordance with the terms of this
Section 11.2, such Person shall, upon admission pursuant to Section 10.3,
automatically become a successor general partner or managing member, to the
extent applicable, of the other Group Members of which the General Partner is a
general partner or a managing member. The right of the holders of Outstanding
Units to remove the General Partner shall not exist or be exercised unless the
Partnership has received an opinion opining as to the matters covered by a
Withdrawal Opinion of Counsel. Any successor General Partner elected in
accordance with the terms of this Section 11.2 shall be subject to the
provisions of Section 10.3. The percentage of the Outstanding Units required to
remove the General Partner may be amended by the General Partner as described in
Section 13.1 hereof.
SECTION 11.3 Interest of Departing Partner and Successor General
Partner.
(a) In the event of (i) withdrawal of the General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of the General Partner by the holders of Outstanding Units under
circumstances where Cause does not exist, if the successor
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General Partner is elected in accordance with the terms of Section 11.1 or 11.2,
the Departing Partner shall have the option, exercisable prior to the effective
date of the departure of such Departing Partner, to require its successor to
purchase its General Partner Interest and its general partner interest (or
equivalent interest, if any) in the other Group Members and all of its Incentive
Distribution Rights (collectively, the "Combined Interest") in exchange for an
amount in cash equal to the fair market value of such Combined Interest, such
amount to be determined and payable as of the effective date of its departure.
If the General Partner is removed by the Unitholders under circumstances where
Cause exists or if the General Partner withdraws under circumstances where such
withdrawal violates this Agreement, and if a successor General Partner is
elected in accordance with the terms of Section 11.1 or 11.2, such successor
shall have the option, exercisable prior to the effective date of the departure
of such Departing Partner, to purchase the Combined Interest for such fair
market value of such Combined Interest of the Departing Partner. In either
event, the Departing Partner shall be entitled to receive all reimbursements due
such Departing Partner pursuant to Section 7.4, including any employee-related
liabilities (including severance liabilities), incurred in connection with the
termination of any employees employed by the Departing Partner for the benefit
of the Partnership or the other Group Members. For purposes of this Section
11.3(a), the fair market value of the Departing Partner's Combined Interest
shall be determined by agreement between the Departing Partner and its successor
or, failing agreement within 30 days after the effective date of such Departing
Partner's departure, by an independent investment banking firm or other
independent expert selected by the Departing Partner and its successor, which,
in turn, may rely on other experts, and the determination of which shall be
conclusive as to such matter. If such parties cannot agree upon one independent
investment banking firm or other independent expert within 45 days after the
effective date of such departure, then the Departing Partner shall designate an
independent investment banking firm or other independent expert, the Departing
Partner's successor shall designate an independent investment banking firm or
other independent expert, and such firms or experts shall mutually select a
third independent investment banking firm or independent expert, which third
independent investment banking firm or other independent expert shall determine
the fair market value of the Combined Interest of the Departing Partner. In
making its determination, such third independent investment banking firm or
other independent expert may consider the then current trading price of Units on
any National Securities Exchange on which Units are then listed, the value of
the Partnership's assets, the rights and obligations of the Departing Partner
and other factors it may deem relevant.
(b) If the Combined Interest is not purchased in the manner set
forth in Section 11.3(a), the Departing Partner (or its transferee) shall become
a Limited Partner and its General Partner Interest shall be converted into
Common Units pursuant to a valuation made by an investment banking firm or other
independent expert selected pursuant to Section 11.3(a), without reduction in
such Partnership Interest (but subject to proportionate dilution by reason of
the admission of its successor) and its Incentive Distribution Rights shall
continue in full force and effect. Any successor General Partner shall indemnify
the Departing Partner (or its transferee) as to all debts and liabilities of the
Partnership arising on or after the date on which the Departing Partner (or its
transferee) becomes a Limited Partner. For purposes of this Agreement,
conversion of the General Partner Interest of the Departing Partner to Common
Units will be characterized as if the Departing Partner (or its transferee)
contributed its General Partner Interest to the Partnership in exchange for the
newly issued Common Units.
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(c) If a successor General Partner is elected in accordance with the
terms of Section 11.1 or 11.2 and the option described in Section 11.3(a) is not
exercised by the party entitled to do so, the successor General Partner shall,
at the effective date of its admission to the Partnership, contribute to the
Partnership cash in the amount equal to 2/98ths of the Net Agreed Value of the
Partnership's assets on such date. In such event, such successor General Partner
shall, subject to the following sentence, be entitled to 2% of all Partnership
allocations and distributions to which the Departing Partner was entitled. In
addition, the successor General Partner shall cause this Agreement to be amended
to reflect that, from and after the date of such successor General Partner's
admission, the successor General Partner's interest in all Partnership
distributions and allocations shall be 2%.
SECTION 11.4 Withdrawal of Limited Partners. No Limited Partner shall
have any right to withdraw from the Partnership; provided, however, that when a
transferee of a Limited Partner's Limited Partner Interest becomes a Record
Holder of the Limited Partner Interest so transferred, such transferring Limited
Partner shall cease to be a Limited Partner with respect to the Limited Partner
Interest so transferred.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
SECTION 12.1 Dissolution. The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited Partners or by
the admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the removal or withdrawal of the General Partner, if a
successor General Partner is elected pursuant to Section 11.1 or 11.2, the
Partnership shall not be dissolved and such successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
(subject to Section 12.2) its affairs shall be wound up, upon:
(a) an Event of Withdrawal of the General Partner as provided in
Section 11.1(a) (other than Section 11.1(a)(ii)), unless a
successor is elected and an Opinion of Counsel is received as
provided in Section 11.1(b) or 11.2 and such successor is
admitted to the Partnership pursuant to Section 10.3;
(b) an election to dissolve the Partnership by the General Partner
that is approved by the holders of a Unit Majority;
(c) the entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Delaware Act; or
(d) the sale of all or substantially all of the assets and
properties of the Partnership Group.
SECTION 12.2 Continuation of the Business of the Partnership After
Dissolution. Upon (a) dissolution of the Partnership following an Event of
Withdrawal caused by the withdrawal or removal of the General Partner as
provided in Section 11.1(a)(i) or (iii) and the failure of the Partners to
select a successor to such Departing Partner pursuant to Section 11.1 or
72
11.2, then within 90 days thereafter, or (b) dissolution of the Partnership upon
an event constituting an Event of Withdrawal as defined in Section 11.1(a)(iv),
(v) or (vi), then, to the maximum extent permitted by law, within 180 days
thereafter, the holders of a Unit Majority may elect to reconstitute the
Partnership and continue its business on the same terms and conditions set forth
in this Agreement by forming a new limited partnership on terms identical to
those set forth in this Agreement and having as the successor General Partner a
Person approved by the holders of a Unit Majority. Unless such an election is
made within the applicable time period as set forth above, the Partnership shall
conduct only activities necessary to wind up its affairs. If such an election is
so made, then:
(i) the reconstituted Partnership shall continue unless earlier
dissolved in accordance with this Article XII;
(ii) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall
be treated in the manner provided in Section 11.3; and
(iii) all necessary steps shall be taken to cancel this Agreement
and the Certificate of Limited Partnership and to enter into
and, as necessary, to file a new partnership agreement and
certificate of limited partnership, and the successor General
Partner may for this purpose exercise the powers of attorney
granted the General Partner pursuant to Section 2.6; provided,
that the right of the holders of a Unit Majority to approve a
successor General Partner and to reconstitute and to continue
the business of the Partnership shall not exist and may not be
exercised unless the Partnership has received an Opinion of
Counsel that (x) the exercise of the right would not result in
the loss of limited liability of any Limited Partner and (y)
neither the Partnership, the reconstituted limited partnership
nor the Operating Partnership or any other Group Member would
be treated as an association taxable as a corporation or
otherwise be taxable as an entity for federal income tax
purposes upon the exercise of such right to continue.
SECTION 12.3 Liquidator. Upon dissolution of the Partnership, unless
the Partnership is continued under an election to reconstitute and continue the
Partnership pursuant to Section 12.2, the General Partner shall select one or
more Persons to act as Liquidator, which may be the General Partner. The
Liquidator (if other than the General Partner) shall be entitled to receive such
compensation for its services as may be approved by holders of at least a
majority of the Outstanding Common Units. The Liquidator (if other than the
General Partner) shall agree not to resign at any time without 15 days' prior
notice and may be removed at any time, with or without cause, by notice of
removal approved by holders of at least a majority of the Outstanding Common
Units. Upon dissolution, removal or resignation of the Liquidator, a successor
and substitute Liquidator (who shall have and succeed to all rights, powers and
duties of the original Liquidator) shall within 30 days thereafter be approved
by holders of at least a majority of the Outstanding Common Units. The right to
approve a successor or substitute Liquidator in the manner provided herein shall
be deemed to refer also to any such successor or substitute Liquidator approved
in the manner herein provided. Except as expressly provided in this Article XII,
the Liquidator approved in the manner provided herein shall have and may
exercise, without
73
further authorization or consent of any of the parties hereto, all of the powers
conferred upon the General Partner under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sale set forth in
Section 7.3(b)) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein.
SECTION 12.4 Liquidation. The Liquidator shall proceed to dispose of
the assets of the Partnership, discharge its liabilities, and otherwise wind up
its affairs in such manner and over such period as the Liquidator determines to
be in the best interest of the Partners, subject to Section 17-804 of the
Delaware Act and the following:
(a) The assets may be disposed of by public or private sale or by
distribution in kind to one or more Partners on such terms as
the Liquidator and such Partner or Partners may agree. If any
property is distributed in kind, the Partner receiving the
property shall be deemed for purposes of Section 12.4(c) to
have received cash equal to its fair market value; and
contemporaneously therewith, appropriate cash distributions
must be made to the other Partners. The Liquidator may, in its
absolute discretion, defer liquidation or distribution of the
Partnership's assets for a reasonable time if it determines
that an immediate sale or distribution of all or some of the
Partnership's assets would be impractical or would cause undue
loss to the Partners. The Liquidator may, in its absolute
discretion, distribute the Partnership's assets, in whole or
in part, in kind if it determines that a sale would be
impractical or would cause undue loss to the Partners.
(b) Liabilities of the Partnership include amounts owed to the
Liquidator as compensation for serving in such capacity
(subject to the terms of Section 12.3) and amounts to Partners
otherwise than in respect of their distribution rights under
Article VI. With respect to any liability that is contingent,
conditional or unmatured or is otherwise not yet due and
payable, the Liquidator shall either settle such claim for
such amount as it thinks appropriate or establish a reserve of
cash or other assets to provide for its payment. When paid,
any unused portion of the reserve shall be distributed as
additional liquidation proceeds.
(c) All property and all cash in excess of that required to
discharge liabilities as provided in Section 12.4(b) shall be
distributed to the Partners in accordance with, and to the
extent of, the positive balances in their respective Capital
Accounts, as determined after taking into account all Capital
Account adjustments (other than those made by reason of
distributions pursuant to this Section 12.4(c)) for the
taxable year of the Partnership during which the liquidation
of the Partnership occurs (with such date of occurrence being
determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by
the end of such taxable year (or, if later, within 90 days
after said date of such occurrence).
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SECTION 12.5 Cancellation of Certificate of Limited Partnership. Upon
the completion of the distribution of Partnership cash and property as provided
in Section 12.4 in connection with the liquidation of the Partnership, the
Partnership shall be terminated and the Certificate of Limited Partnership and
all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
SECTION 12.6 Return of Contributions. The General Partner shall not be
personally liable for, and shall have no obligation to contribute or loan any
monies or property to the Partnership to enable it to effectuate, the return of
the Capital Contributions of the Limited Partners or Unitholders, or any portion
thereof, it being expressly understood that any such return shall be made solely
from Partnership assets.
SECTION 12.7 Waiver of Partition. To the maximum extent permitted by
law, each Partner hereby waives any right to partition of the Partnership
property.
SECTION 12.8 Capital Account Restoration. No Limited Partner shall have
any obligation to restore any negative balance in its Capital Account upon
liquidation of the Partnership. The General Partner shall be obligated to
restore any negative balance in its Capital Account upon liquidation of its
interest in the Partnership by the end of the taxable year of the Partnership
during which such liquidation occurs, or, if later, within 90 days after the
date of such liquidation.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
SECTION 13.1 Amendment to be Adopted Solely by the General Partner.
Each Partner agrees that the General Partner, without the approval of any
Partner or Assignee, may amend any provision of this Agreement and execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered
agent of the Partnership or the registered office of the
Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner,
is necessary or advisable to qualify or continue the
qualification of the Partnership as a limited partnership or a
partnership in which the Limited Partners have limited
liability under the laws of any state or to ensure that the
Group Members will not be treated as associations taxable as
corporations or otherwise taxed as entities for federal income
tax purposes;
(d) a change that, in the discretion of the General Partner, (i)
does not adversely affect
75
the Limited Partners (including any particular class of
Partnership Interests as compared to other classes of
Partnership Interests) in any material respect, (ii) is
necessary or advisable to (A) satisfy any requirements,
conditions or guidelines contained in any opinion, directive,
order, ruling or regulation of any federal or state agency or
judicial authority or contained in any federal or state
statute (including the Delaware Act) or (B) facilitate the
trading of the Units (including the division of any class or
classes of Outstanding Units into different classes to
facilitate uniformity of tax consequences within such classes
of Units) or comply with any rule, regulation, guideline or
requirement of any National Securities Exchange on which the
Units are or will be listed for trading, compliance with any
of which the General Partner determines in its discretion to
be in the best interests of the Partnership and the Limited
Partners, (iii) is necessary or advisable in connection with
action taken by the General Partner pursuant to Section 5.10,
(iv) is required to effect the intent expressed in the
Registration Statement or the intent of the provisions of this
Agreement or is otherwise contemplated by this Agreement or
(v) is required to conform to proposed or promulgated Treasury
Regulations under Subchapter K of the Code regarding
compensatory and noncompensatory options to acquire a
Partnership Security;
(e) a change in the fiscal year or taxable year of the Partnership
and any changes that, in the discretion of the General
Partner, are necessary or advisable as a result of a change in
the fiscal year or taxable year of the Partnership including,
if the General Partner shall so determine, a change in the
definition of "Quarter" and the dates on which distributions
are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or the General Partner or its
directors, officers, trustees or agents from in any manner
being subjected to the provisions of the Investment Company
Act of 1940, as amended, the Investment Advisers Act of 1940,
as amended, or "plan asset" regulations adopted under the
Employee Retirement Income Security Act of 1974, as amended,
regardless of whether such are substantially similar to plan
asset regulations currently applied or proposed by the United
States Department of Labor;
(g) subject to the terms of Section 5.7, an amendment that, in the
discretion of the General Partner, is necessary or advisable
in connection with the authorization of issuance of any class
or series of Partnership Securities pursuant to Section 5.6;
(h) any amendment expressly permitted in this Agreement to be made
by the General Partner acting alone;'
(i) an amendment effected, necessitated or contemplated by a
Merger Agreement approved in accordance with Section 14.3;
(j) an amendment that, in the discretion of the General Partner,
is necessary or advisable to reflect, account for and deal
with appropriately the formation by the
76
Partnership of, or investment by the Partnership in, any
corporation, partnership, joint venture, limited liability
company or other entity, in connection with the conduct by the
Partnership of activities permitted by the terms of Section
2.4;
(k) a merger or conveyance pursuant to Section 14.3(d);
(l) an amendment to Section 11.2 that would reduce the percentage
of the Outstanding Units required for the Unitholders to
remove the General Partner; provided, however, that once such
required percentage has been reduced, it may be further
reduced by the General Partner but such required percentage
may not be increased without a vote of the Unitholders;
provided further, however, that no such amendment may provide
that any class Units may vote separately as a class to remove
the General Partner;
(m) an amendment to the definition of "Outstanding" contained in
Section 1.1 hereof to increase from 20% or more the percentage
of Outstanding Partnership Securities, that if at any time
acquired by any Person or Group, shall not be voted on any
matter and shall not be considered to be Outstanding for the
other purposes described in such definition; provided,
however, that once such percentage has been increased, it may
be further increased by the General Partner, but such required
percentage may not be reduced without a vote of the
Unitholders; or
(n) any other amendments substantially similar to the foregoing.
SECTION 13.2 Amendment Procedures. Except as provided in Sections 13.1
and 13.3, all amendments to this Agreement shall be made in accordance with the
following requirements. Amendments to this Agreement may be proposed only by or
with the consent of the General Partner which consent may be given or withheld
in its sole discretion. A proposed amendment shall be effective upon its
approval by the holders of a Unit Majority, unless a greater or different
percentage is required under this Agreement or by Delaware law. Each proposed
amendment that requires the approval of the holders of a specified percentage of
Outstanding Units shall be set forth in a writing that contains the text of the
proposed amendment. If such an amendment is proposed, the General Partner shall
seek the written approval of the requisite percentage of Outstanding Units or
call a meeting of the Unitholders to consider and vote on such proposed
amendment. The General Partner shall notify all Record Holders upon final
adoption of any such proposed amendments.
SECTION 13.3 Amendment Requirements.
(a) Notwithstanding the provisions of Sections 13.1 and 13.2, no
provision of this Agreement that establishes a percentage of Outstanding Units
(including Units deemed owned by the General Partner) required to take any
action shall be amended, altered, changed, repealed or rescinded in any respect
that would have the effect of reducing such voting percentage unless such
amendment is approved by the written consent or the affirmative vote of holders
of Outstanding Units whose aggregate Outstanding Units constitute not less than
the voting requirement sought to be reduced.
77
(b) Notwithstanding the provisions of Sections 13.1 and 13.2, no
amendment to this Agreement may (i) enlarge the obligations of any Limited
Partner without its consent, unless such shall be deemed to have occurred as a
result of an amendment approved pursuant to Section 13.3(c), (ii) enlarge the
obligations of, restrict in any way any action by or rights of, or reduce in any
way the amounts distributable, reimbursable or otherwise payable to, the General
Partner or any of its Affiliates without its consent, which consent may be given
or withheld in its sole discretion, (iii) change Section 12.1(b), or (iv) change
the term of the Partnership or, except as set forth in Section 12.1(b), give any
Person the right to dissolve the Partnership.
(c) Except as provided in Section 14.3, and without limitation of the
General Partner's authority to adopt amendments to this Agreement without the
approval of any Partners or Assignees as contemplated in Section 13.1, any
amendment that would have a material adverse effect on the rights or preferences
of any class of Partnership Interests in relation to other classes of
Partnership Interests must be approved by the holders of not less than a
majority of the Outstanding Partnership Interests of the class affected. (d)
Notwithstanding any other provision of this Agreement, except for amendments
pursuant to Section 13.1 and except as otherwise provided by Section 14.3(b), no
amendments shall become effective without the approval of the holders of at
least 90% of the Outstanding Units voting as a single class unless the
Partnership obtains an Opinion of Counsel to the effect that such amendment will
not affect the limited liability of any Limited Partner under applicable law.
(e) Except as provided in Section 13.1, this Section 13.3 shall only be
amended with the approval of the holders of at least 90% of the Outstanding
Units.
SECTION 13.4 Special Meetings. All acts of Limited Partners to be taken
pursuant to this Agreement shall be taken in the manner provided in this Article
XIII. Special meetings of the Limited Partners may be called by the General
Partner or by Limited Partners owning 20% or more of the Outstanding Units of
the class or classes for which a meeting is proposed. Limited Partners shall
call a special meeting by delivering to the General Partner one or more requests
in writing stating that the signing Limited Partners wish to call a special
meeting and indicating the general or specific purposes for which the special
meeting is to be called. Within 60 days after receipt of such a call from
Limited Partners or within such greater time as may be reasonably necessary for
the Partnership to comply with any statutes, rules, regulations, listing
agreements or similar requirements governing the holding of a meeting or the
solicitation of proxies for use at such a meeting, the General Partner shall
send a notice of the meeting to the Limited Partners either directly or
indirectly through the Transfer Agent. A meeting shall be held at a time and
place determined by the General Partner on a date not less than 10 days nor more
than 60 days after the mailing of notice of the meeting. Limited Partners shall
not vote on matters that would cause the Limited Partners to be deemed to be
taking part in the management and control of the business and affairs of the
Partnership so as to jeopardize the Limited Partners' limited liability under
the Delaware Act or the law of any other state in which the Partnership is
qualified to do business.
78
SECTION 13.5 Notice of a Meeting. Notice of a meeting called pursuant
to Section 13.4 shall be given to the Record Holders of the class or classes of
Units for which a meeting is proposed in writing by mail or other means of
written communication in accordance with Section 16.1. The notice shall be
deemed to have been given at the time when deposited in the mail or sent by
other means of written communication.
SECTION 13.6 Record Date. For purposes of determining the Limited
Partners entitled to notice of or to vote at a meeting of the Limited Partners
or to give approvals without a meeting as provided in Section 13.11 the General
Partner may set a Record Date, which shall not be less than 10 nor more than 60
days before (a) the date of the meeting (unless such requirement conflicts with
any rule, regulation, guideline or requirement of any National Securities
Exchange on which the Units are listed for trading, in which case the rule,
regulation, guideline or requirement of such exchange shall govern) or (b) in
the event that approvals are sought without a meeting, the date by which Limited
Partners are requested in writing by the General Partner to give such approvals.
SECTION 13.7 Adjournment. When a meeting is adjourned to another time
or place, notice need not be given of the adjourned meeting and a new Record
Date need not be fixed, if the time and place thereof are announced at the
meeting at which the adjournment is taken, unless such adjournment shall be for
more than 45 days. At the adjourned meeting, the Partnership may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than 45 days or if a new Record Date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given in
accordance with this Article XIII.
SECTION 13.8 Waiver of Notice; Approval of Meeting; Approval of
Minutes. The transactions of any meeting of Limited Partners, however called and
noticed, and whenever held, shall be as valid as if it had occurred at a meeting
duly held after regular call and notice, if a quorum is present either in person
or by proxy, and if, either before or after the meeting, Limited Partners
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof. All waivers and approvals shall
be filed with the Partnership records or made a part of the minutes of the
meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting, except when the Limited Partner does not approve, at
the beginning of the meeting, of the transaction of any business because the
meeting is not lawfully called or convened; and except that attendance at a
meeting is not a waiver of any right to disapprove the consideration of matters
required to be included in the notice of the meeting, but not so included, if
the disapproval is expressly made at the meeting.
SECTION 13.9 Quorum. The holders of a majority of the Outstanding Units
of the class or classes for which a meeting has been called (including
Outstanding Units deemed owned by the General Partner) represented in person or
by proxy shall constitute a quorum at a meeting of Limited Partners of such
class or classes unless any such action by the Limited Partners requires
approval by holders of a greater percentage of such Units, in which case the
quorum shall be such greater percentage. At any meeting of the Limited Partners
duly called and held in accordance with this Agreement at which a quorum is
present, the act of Limited Partners holding Outstanding Units that in the
aggregate represent a majority of the Outstanding Units
79
entitled to vote and be present in person or by proxy at such meeting shall be
deemed to constitute the act of all Limited Partners, unless a greater or
different percentage is required with respect to such action under the
provisions of this Agreement, in which case the act of the Limited Partners
holding Outstanding Units that in the aggregate represent at least such greater
or different percentage shall be required. The Limited Partners present at a
duly called or held meeting at which a quorum is present may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
Limited Partners to leave less than a quorum, if any action taken (other than
adjournment) is approved by the required percentage of Outstanding Units
specified in this Agreement (including Outstanding Units deemed owned by the
General Partner). In the absence of a quorum any meeting of Limited Partners may
be adjourned from time to time by the affirmative vote of holders of at least a
majority of the Outstanding Units entitled to vote at such meeting (including
Outstanding Units deemed owned by the General Partner) represented either in
person or by proxy, but no other business may be transacted, except as provided
in Section 13.7.
SECTION 13.10 Conduct of a Meeting. The General Partner shall have full
power and authority concerning the manner of conducting any meeting of the
Limited Partners or solicitation of approvals in writing, including the
determination of Persons entitled to vote, the existence of a quorum, the
satisfaction of the requirements of Section 13.4, the conduct of voting, the
validity and effect of any proxies and the determination of any controversies,
votes or challenges arising in connection with or during the meeting or voting.
The General Partner shall designate a Person to serve as chairman of any meeting
and shall further designate a Person to take the minutes of any meeting. All
minutes shall be kept with the records of the Partnership maintained by the
General Partner. The General Partner may make such other regulations consistent
with applicable law and this Agreement as it may deem advisable concerning the
conduct of any meeting of the Limited Partners or solicitation of approvals in
writing, including regulations in regard to the appointment of proxies, the
appointment and duties of inspectors of votes and approvals, the submission and
examination of proxies and other evidence of the right to vote, and the
revocation of approvals in writing.
SECTION 13.11 Action Without a Meeting. If authorized by the General
Partner, any action that may be taken at a meeting of the Limited Partners may
be taken without a meeting if an approval in writing setting forth the action so
taken is signed by Limited Partners owning not less than the minimum percentage
of the Outstanding Units (including Units deemed owned by the General Partner)
that would be necessary to authorize or take such action at a meeting at which
all the Limited Partners were present and voted (unless such provision conflicts
with any rule, regulation, guideline or requirement of any National Securities
Exchange on which the Units are listed for trading, in which case the rule,
regulation, guideline or requirement of such exchange shall govern). Prompt
notice of the taking of action without a meeting shall be given to the Limited
Partners who have not approved in writing. The General Partner may specify that
any written ballot submitted to Limited Partners for the purpose of taking any
action without a meeting shall be returned to the Partnership within the time
period, which shall be not less than 20 days, specified by the General Partner.
If a ballot returned to the Partnership does not vote all of the Units held by
the Limited Partners, the Partnership shall be deemed to have failed to receive
a ballot for the Units that were not voted. If approval of the taking of any
action by the Limited Partners is solicited by any Person other than by or on
behalf of the General
80
Partner, the written approvals shall have no force and effect unless and until
(a) they are deposited with the Partnership in care of the General Partner, (b)
approvals sufficient to take the action proposed are dated as of a date not more
than 90 days prior to the date sufficient approvals are deposited with the
Partnership and (c) an Opinion of Counsel is delivered to the General Partner to
the effect that the exercise of such right and the action proposed to be taken
with respect to any particular matter (i) will not cause the Limited Partners to
be deemed to be taking part in the management and control of the business and
affairs of the Partnership so as to jeopardize the Limited Partners' limited
liability, and (ii) is otherwise permissible under the state statutes then
governing the rights, duties and liabilities of the Partnership and the
Partners.
SECTION 13.12 Voting and Other Rights.
(a) Only those Record Holders of the Units on the Record Date set
pursuant to Section 13.6 (and also subject to the limitations contained in the
definition of "Outstanding") shall be entitled to notice of, and to vote at, a
meeting of Limited Partners or to act with respect to matters as to which the
holders of the Outstanding Units have the right to vote or to act. All
references in this Agreement to votes of, or other acts that may be taken by,
the Outstanding Units shall be deemed to be references to the votes or acts of
the Record Holders of such Outstanding Units.
(b) With respect to Units that are held for a Person's account by
another Person (such as a broker, dealer, bank, trust company or clearing
corporation, or an agent of any of the foregoing), in whose name such Units are
registered, such other Person shall, in exercising the voting rights in respect
of such Units on any matter, and unless the arrangement between such Persons
provides otherwise, vote such Units in favor of, and at the direction of, the
Person who is the beneficial owner, and the Partnership shall be entitled to
assume it is so acting without further inquiry. The provisions of this Section
13.12(b) (as well as all other provisions of this Agreement) are subject to the
provisions of Section 4.3.
ARTICLE XIV
MERGER
SECTION 14.1 Authority. The Partnership may merge or consolidate with
one or more corporations, limited liability companies, business trusts or
associations, real estate investment trusts, common law trusts or unincorporated
businesses, including a general partnership or limited partnership, formed under
the laws of any state of the United States of America, pursuant to a written
agreement of merger or consolidation ("Merger Agreement") in accordance with
this Article XIV.
SECTION 14.2 Procedure for Merger or Consolidation. Merger or
consolidation of the Partnership pursuant to this Article XIV requires the prior
approval of the General Partner. If the General Partner shall determine, in the
exercise of its discretion, to consent to the merger or consolidation, the
General Partner shall approve the Merger Agreement, which shall set forth:
(a) the names and jurisdictions of formation or organization of
each of the business entities proposing to merge or
consolidate;
81
(b) the name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or
consolidation (the "Surviving Business Entity");
(c) the terms and conditions of the proposed merger or
consolidation;
(d) the manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into,
cash, property or general or limited partner interests,
rights, securities or obligations of the Surviving Business
Entity; and (i) if any general or limited partner interests,
securities or rights of any constituent business entity are
not to be exchanged or converted solely for, or into, cash,
property or general or limited partner interests, rights,
securities or obligations of the Surviving Business Entity,
the cash, property or general or limited partner interests,
rights, securities or obligations of any limited partnership,
corporation, trust or other entity (other than the Surviving
Business Entity) which the holders of such general or limited
partner interests, securities or rights are to receive in
exchange for, or upon conversion of their general or limited
partner interests, securities or rights, and (ii) in the case
of securities represented by certificates, upon the surrender
of such certificates, which cash, property or general or
limited partner interests, rights, securities or obligations
of the Surviving Business Entity or any general or limited
partnership, corporation, trust or other entity (other than
the Surviving Business Entity), or evidences thereof, are to
be delivered;
(e) a statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or
certificate of incorporation, articles of trust, declaration
of trust, certificate or agreement of limited partnership or
other similar charter or governing document) of the Surviving
Business Entity to be effected by such merger or
consolidation;
(f) the effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4
or a later date specified in or determinable in accordance
with the Merger Agreement (provided, that if the effective
time of the merger is to be later than the date of the filing
of the certificate of merger, the effective time shall be
fixed no later than the time of the filing of the certificate
of merger and stated therein); and
(g) such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the
General Partner.
SECTION 14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the General Partner, upon
its approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the
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requirements of Article XIII. A copy or a summary of the Merger Agreement shall
be included in or enclosed with the notice of a special meeting or the written
consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement shall
be approved upon receiving the affirmative vote or consent of the holders of a
Unit Majority unless the Merger Agreement contains any provision that, if
contained in an amendment to this Agreement, the provisions of this Agreement or
the Delaware Act would require for its approval the vote or consent of a greater
percentage of the Outstanding Units or of any class of Limited Partners, in
which case such greater percentage vote or consent shall be required for
approval of the Merger Agreement.
(c) Except as provided in Section 14.3(d), after such approval by vote
or consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger pursuant to Section 14.4, the merger or consolidation may
be abandoned pursuant to provisions therefor, if any, set forth in the Merger
Agreement.
(d) Notwithstanding anything else contained in this Article XIV or in
this Agreement, the General Partner is permitted, in its discretion, without
Limited Partner approval, to merge the Partnership or any Group Member into, or
convey all of the Partnership's assets to, another limited liability entity
which shall be newly formed and shall have no assets, liabilities or operations
at the time of such Merger other than those it receives from the Partnership or
other Group Member if (i) the General Partner has received an Opinion of Counsel
that the merger or conveyance, as the case may be, would not result in the loss
of the limited liability of any Limited Partner or any Group Member or cause the
Partnership or any Group Member to be treated as an association taxable as a
corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not previously treated as such), (ii) the sole purpose
of such merger or conveyance is to effect a mere change in the legal form of the
Partnership into another limited liability entity and (iii) the governing
instruments of the new entity provide the Limited Partners and the General
Partner with the same rights and obligations as are herein contained.
SECTION 14.4 Certificate of Merger. Upon the required approval by the
General Partner and the Unitholders of a Merger Agreement, a certificate of
merger shall be executed and filed with the Secretary of State of the State of
Delaware in conformity with the requirements of the Delaware Act.
SECTION 14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of
the business entities that has merged or
consolidated, and all property, real, personal and
mixed, and all debts due to any of those business
entities and all other things and causes of action
belonging to each of those business entities, shall
be vested in the Surviving Business Entity and after
the merger or consolidation shall be the property of
the Surviving Business Entity to the extent they were
of each constituent business entity;
83
(ii) the title to any real property vested by deed or
otherwise in any of those constituent business
entities shall not revert and is not in any way
impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security
interests in property of any of those constituent
business entities shall be preserved unimpaired; and
(iv) all debts, liabilities and duties of those
constituent business entities shall attach to the
Surviving Business Entity and may be enforced against
it to the same extent as if the debts, liabilities
and duties had been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article
shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another.
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 Addresses and Notices. Any notice, demand, request, report
or proxy materials required or permitted to be given or made to a Partner or
Assignee under this Agreement shall be in writing and shall be deemed given or
made when delivered in person or when sent by first class United States mail or
by other means of written communication to the Partner or Assignee at the
address described below. Any notice, payment or report to be given or made to a
Partner or Assignee hereunder shall be deemed conclusively to have been given or
made, and the obligation to give such notice or report or to make such payment
shall be deemed conclusively to have been fully satisfied, upon sending of such
notice, payment or report to the Record Holder of such Partnership Securities at
his address as shown on the records of the Transfer Agent or as otherwise shown
on the records of the Partnership, regardless of any claim of any Person who may
have an interest in such Partnership Securities by reason of any assignment or
otherwise. An affidavit or certificate of making of any notice, payment or
report in accordance with the provisions of this Section 16.1 executed by the
General Partner, the Transfer Agent or the mailing organization shall be prima
facie evidence of the giving or making of such notice, payment or report. If any
notice, payment or report addressed to a Record Holder at the address of such
Record Holder appearing on the books and records of the Transfer Agent or the
Partnership is returned by the United States Postal Service marked to indicate
that the United States Postal Service is unable to deliver it, such notice,
payment or report and any subsequent notices, payments and reports shall be
deemed to have been duly given or made without further mailing (until such time
as such Record Holder or another Person notifies the Transfer Agent or the
Partnership of a change in his address) if they are available for the Partner or
Assignee at the principal office of the Partnership for a period of one year
from the date of the giving or making of such notice, payment or report to the
other Partners and Assignees. Any notice to the Partnership shall be deemed
given if received by the General Partner at the principal office of the
Partnership designated pursuant to Section 2.3. The General Partner may rely and
shall be
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protected in relying on any notice or other document from a Partner, Assignee or
other Person if believed by it to be genuine.
SECTION 15.2 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
SECTION 15.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
SECTION 15.4 Integration. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
SECTION 15.5 Creditors. None of the provisions of this Agreement shall
be for the benefit of, or shall be enforceable by, any creditor of the
Partnership.
SECTION 15.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach of any other covenant, duty, agreement or
condition.
SECTION 15.7 Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute an agreement binding on all
the parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto or, in the case of a
Person acquiring a Unit, upon accepting the certificate evidencing such Unit or
executing and delivering a Transfer Application as herein described,
independently of the signature of any other party.
SECTION 15.8 Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
SECTION 15.9 Invalidity of Provisions. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
SECTION 15.10 Consent of Partners. Each Partner hereby expressly
consents and agrees that, whenever in this Agreement it is specified that an
action may be taken upon the affirmative vote or consent of less than all of the
Partners, such action may be so taken upon the concurrence of less than all of
the Partners and each Partner shall be bound by the results of such action.
[Signatures on following page]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
RIO VISTA GP LLC
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
ORGANIZATIONAL LIMITED PARTNER:
PENN OCTANE CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
LIMITED PARTNERS:
All Limited Partners now and hereafter
admitted as Limited Partners of the
Partnership, pursuant to powers of attorney
now and hereafter executed in favor of, and
granted and delivered to the General
Partner.
RIO VISTA GP LLC
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
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EXHIBIT A
TO THE FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
RIO VISTA ENERGY PARTNERS L.P.
CERTIFICATE EVIDENCING COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS IN
RIO VISTA ENERGY PARTNERS L.P.
No. Common Units
In accordance with Section 4.1 of the First Amended and Restated
Agreement of Limited Partnership of Rio Vista Energy Partners L.P., as amended,
supplemented or restated from time to time (the "Partnership Agreement"), Rio
Vista Energy Partners L.P., a Delaware limited partnership (the "Partnership"),
hereby certifies that _______________ (the "Holder") is the registered owner of
Common Units representing limited partner interests in the Partnership (the
"Common Units") transferable on the books of the Partnership, in person or by
duly authorized attorney, upon surrender of this Certificate properly endorsed
and accompanied by a properly executed application for transfer of the Common
Units represented by this Certificate. The rights, preferences and limitations
of the Common Units are set forth in, and this Certificate and the Common Units
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Partnership Agreement. Copies of the Partnership
Agreement are on file at, and will be furnished without charge on delivery of
written request to the Partnership at, the principal office of the Partnership
located at 000 Xxxxxxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000. Capitalized terms
used herein but not defined shall have the meanings given them in the
Partnership Agreement.
The Holder, by accepting this Certificate, is deemed to have (i)
requested admission as, and agreed to become, a Limited Partner and to have
agreed to comply with and be bound by and to have executed the Partnership
Agreement, (ii) represented and warranted that the Holder has all right, power
and authority and, if an individual, the capacity necessary to enter into the
Partnership Agreement, (iii) granted the powers of attorney provided for in the
Partnership Agreement and (iv) made the waivers and given the consents and
approvals contained in the Partnership Agreement.
This Certificate shall not be valid far any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.
Dated: RIO VISTA ENERGY PARTNERS L.P.
--------------------------
Countersigned and Registered by: By: Rio Vista GP LLC,
its General Partner
By:
-------------------------------- ---------------------------
as Transfer Agent and Registrar Name:
---------------------------
By: By:
-------------------------------- ---------------------------
Authorized Signature Secretary
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[REVERSE OF CERTIFICATE]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face
of this Certificate, shall be construed as follows according to applicable laws
or regulations:
TEN COM -- as tenants in common UNIF GIFT/TRANSFERS MIN ACT
TEN ENT -- as tenants by the entireties Custodian
(Cust) (Minor)
JT TEN -- as joint tenants with right of under Uniform Gifts/Transfers to CD
survivorship and not as tenants in Minors Act (State)
Common
Additional abbreviations, though not in the above list, may also be
used.
ASSIGNMENT OF COMMON UNITS
IN
RIO VISTA ENERGY PARTNERS L.P.
IMPORTANT NOTICE REGARDING INVESTOR RESPONSIBILITIES
DUE TO TAX SHELTER STATUS OF
RIO VISTA ENERGY PARTNERS L.P.
You have acquired an interest in Rio Vista Energy Partners L.P., 000
Xxxxxxx Xxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, whose taxpayer identification
number is ___________. The Internal Revenue Service has issued Rio Vista Energy
Partners L.P. the following tax shelter registration number:
YOU MUST REPORT THIS REGISTRATION NUMBER TO THE INTERNAL REVENUE
SERVICE IF YOU CLAIM ANY DEDUCTION, LOSS, CREDIT OR OTHER TAX BENEFIT OR REPORT
ANY INCOME BY REASON OF YOUR INVESTMENT IN RIO VISTA ENERGY PARTNERS L.P.
You must report the registration number as well as the name and
taxpayer identification number of Rio Vista Energy Partners L.P. on Form 8271.
FORM 8271 MUST BE ATTACHED TO THE RETURN ON WHICH YOU CLAIM THE DEDUCTION, LOSS,
CREDIT OR OTHER TAX BENEFIT OR REPORT ANY INCOME BY REASON OF YOUR INVESTMENT IN
RIO VISTA ENERGY PARTNERS L.P.
If you transfer your interest in Rio Vista Energy Partners L.P. to
another person, you are required by the Internal Revenue Service to keep a list
containing (a) that person's name, address and taxpayer identification number,
(b) the date on which you transferred the interest and (c) the name, address and
tax shelter registration number of Rio Vista Energy Partners L.P. If you do not
want to keep such a list, you must (1) send the information specified above to
the Partnership, which will keep the list for this tax shelter, and (2) give a
copy of this notice to the person to whom you transfer your interest. Your
failure to comply with any of the above-described responsibilities could result
in the imposition of a penalty under Section 6707(b) or
88
6708(a) of the Internal Revenue Code of 1986, as amended, unless such failure is
shown to be due to reasonable cause.
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS
INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED
BY THE INTERNAL REVENUE SERVICE.
FOR VALUE RECEIVED, ___________________ hereby assigns, conveys, sells
and transfers unto
--------------------------------------- ----------------------------------------
(Please print or typewrite name and (Please insert Social Security or other
address of Assignee) identifying number of Assignee)
89
_________ Common Units representing limited partner interests evidenced by this
Certificate, subject to the Partnership Agreement, and does hereby irrevocably
constitute and appoint ____________________ as its attorney-in-fact with full
power of substitution to transfer the same on the books of Rio Vista Energy
Partners L.P.
Date: NOTE: The signature to any endorsement
------------------------- hereon must correspond with the name as
written upon the face of this
Certificate in every particular, without
alteration, enlargement or change.
SIGNATURE(S) MUST BE GUARANTEED -----------------------------------
BY A MEMBER FIRM OF THE NATIONAL Signature
ASSOCIATION OF SECURITIES DEALERS,
INC. OR BY A COMMERCIAL BANK
OR TRUST COMPANY SIGNATURE(S)
-----------------------------------
GUARANTEED Signature
No transfer of the Common Units evidenced hereby will be registered on
the books of the Partnership, unless the Certificate evidencing the Common Units
to be transferred is surrendered for registration or transfer and an Application
for Transfer of Common Units has been executed by a transferee either (a) on the
form set forth below or (b) on a separate application that the Partnership will
furnish on request without charge. A transferor of the Common Units shall have
no duty to the transferee with respect to execution of the transfer application
in order for such transferee to obtain registration of the transfer of the
Common Units.
90
APPLICATION FOR TRANSFER OF COMMON UNITS
The undersigned ("Assignee") hereby applies for transfer to the name of
the Assignee of the Common Units evidenced hereby.
The Assignee (a) requests admission as a Substituted Limited Partner
and agrees to comply with and be bound by, and hereby executes, the Amended and
Restated Agreement of Limited Partnership of Rio Vista Energy Partners L.P. (the
"Partnership"), as amended, supplemented or restated to the date hereof (the
"Partnership Agreement"), (b) represents and warrants that the Assignee has all
right, power and authority and, if an individual, the capacity necessary to
enter into the Partnership Agreement, (c) appoints the General Partner of the
Partnership and, if a Liquidator shall be appointed, the Liquidator of the
Partnership as the Assignee's attorney-in-fact to execute, swear to, acknowledge
and file any document, including, without limitation, the Partnership Agreement
and any amendment thereto and the Certificate of Limited Partnership of the
Partnership and any amendment thereto, necessary or appropriate for the
Assignee's admission as a Substituted Limited Partner and as a party to the
Partnership Agreement, (d) gives the powers of attorney provided for in the
Partnership Agreement, and (e) makes the waivers and gives the consents and
approvals contained in the Partnership Agreement. Capitalized terms not defined
herein have the meanings assigned to such terms in the Partnership Agreement.
Date:
-------------------------
------------------------------------------- ------------------------------------------
Social Security or other identifying number Signature of Assignee
------------------------------------------- ------------------------------------------
Purchase Price including commissions, if any Name and Address of Assignee
Type of Entity (check one):
[ ] Individual [ ] Partnership [ ] Corporation
[ ] Trust [ ] Other (specify)
Nationality (check one):
[ ] U.S. Citizen, Resident or Domestic Entity
[ ] Foreign Corporation [ ] Non-resident Alien
If the U.S. Citizen, Resident or Domestic Entity box is checked, the
following certification must be completed.
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended
(the "Code"), the Partnership must withhold tax with respect to certain
transfers of property if a holder of an interest in the Partnership is a foreign
person. To inform the Partnership that no withholding is
91
required with respect to the undersigned Interestholder's interest in it, the
undersigned hereby certifies the following (or, if applicable, certifies the
following on behalf of the Interestholder).
Complete Either A or B:
A. Individual Interestholder
1. I am not a non-resident alien for purposes of U.S. income
taxation.
2 My U.S. taxpayer identification number (Social Security
Number) is _________________________.
3 My home address is
__________________________________________________________________.
B. Partnership, Corporation or Other Interestholder
1. ____________________________ is not a foreign corporation,
foreign partnership, foreign trust (Name of Interestholder) or
foreign estate (as those terms are defined in the Code and
Treasury Regulations).
2. The Interestholder's U.S. employer identification number is
_____________________________
3. The Interestholder's office address and place of incorporation
(if applicable) is ________________ .
The Interestholder agrees to notify the Partnership within sixty (60)
days of the date the Interestholder becomes a foreign person.
The Interestholder understands that this certificate may be disclosed
to the Internal Revenue Service by the Partnership and that any false statement
contained herein could be punishable by fine, imprisonment or both.
Under penalties of perjury, I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete and, if applicable, I further declare that I have authority to sign
this document on behalf of:
---------------------------
Name of Interestholder
---------------------------
Signature and Date
---------------------------
Title (if applicable)
92
Note: If the Assignee is a broker, dealer, bank, trust company,
clearing corporation, other nominee holder or an agent of any of the foregoing,
and is holding for the account of any other person, this application should be
completed by an officer thereof or, in the case of a broker or dealer, by a
registered representative who is a member of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc.,
or, in the case of any other nominee holder, a person performing a similar
function. If the Assignee is a broker, dealer, bank, trust company, clearing
corporation, other nominee owner or an agent of any of the foregoing, the above
certification as to any person for whom the Assignee will hold the Common Units
shall be made to the best of the Assignee's knowledge.
93
