EXHIBIT 3.1
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FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
XXXXX ENERGY PARTNERS, L.P.
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.............................................................................. 1
Section 1.2 Construction............................................................................. 20
ARTICLE II
ORGANIZATION
Section 2.1 Formation................................................................................ 21
Section 2.2 Name..................................................................................... 21
Section 2.3 Registered Office; Registered Agent; Principal Office; Other Offices..................... 21
Section 2.4 Purpose and Business..................................................................... 21
Section 2.5 Powers................................................................................... 22
Section 2.6 Power of Attorney........................................................................ 22
Section 2.7 Term..................................................................................... 23
Section 2.8 Title to Partnership Assets.............................................................. 23
ARTICLE III
RIGHTS OF LIMITED PARTNERS
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............................................................... 25
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF
PARTNERSHIP INTERESTS; REDEMPTION OF
PARTNERSHIP INTERESTS
Section 4.1 Certificates............................................................................. 26
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates........................................ 26
Section 4.3 Record Holders........................................................................... 27
Section 4.4 Transfer Generally....................................................................... 27
Section 4.5 Registration and Transfer of Limited Partner Interests................................... 28
Section 4.6 Transfer of the General Partner's General Partner Interest............................... 29
Section 4.7 Transfer of Incentive Distribution Rights................................................ 29
Section 4.8 Restrictions on Transfers................................................................ 30
Section 4.9 Citizenship Certificates; Non-citizen Assignees.......................................... 30
Section 4.10 Redemption of Partnership Interests of Non-citizen Assignees............................. 31
XXXXX ENERGY PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF
PARTNERSHIP INTERESTS
Section 5.1 Organizational Contributions............................................................. 33
Section 5.2 Contributions by the General Partner and its Affiliates.................................. 33
Section 5.3 Contributions by Initial Limited Partners and Distributions to the General Partner and
its Affiliates........................................................................... 34
Section 5.4 Interest and Withdrawal.................................................................. 35
Section 5.5 Capital Accounts......................................................................... 35
Section 5.6 Issuances of Additional Partnership Securities........................................... 38
Section 5.7 Limitations on Issuance of Additional Partnership Securities............................. 39
Section 5.8 Conversion of Subordinated Units......................................................... 42
Section 5.9 Limited Preemptive Right................................................................. 43
Section 5.10 Splits and Combinations.................................................................. 43
Section 5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests........................ 44
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes................................................. 44
Section 6.2 Allocations for Tax Purposes............................................................. 51
Section 6.3 Requirement and Characterization of Distributions; Distributions to Record Holders....... 53
Section 6.4 Distributions of Available Cash from Operating Surplus................................... 54
Section 6.5 Distributions of Available Cash from Capital Surplus..................................... 56
Section 6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels.............. 56
Section 6.7 Special Provisions Relating to the Holders of Subordinated Units......................... 57
Section 6.8 Special Provisions Relating to the Holders of Incentive Distribution Rights.............. 57
Section 6.9 Entity-Level Taxation.................................................................... 57
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management............................................................................... 58
Section 7.2 Certificate of Limited Partnership....................................................... 60
Section 7.3 Restrictions on the General Partner's Authority.......................................... 60
Section 7.4 Reimbursement of the General Partner..................................................... 61
Section 7.5 Outside Activities....................................................................... 62
XXXXX ENERGY PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
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Section 7.6 Loans from the General Partner; Loans or Contributions from the Partnership or Group
Members.................................................................................. 63
Section 7.7 Indemnification.......................................................................... 64
Section 7.8 Liability of Indemnitees................................................................. 65
Section 7.9 Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties..... 66
Section 7.10 Other Matters Concerning the General Partner............................................. 68
Section 7.11 Purchase or Sale of Partnership Securities............................................... 68
Section 7.12 Registration Rights of the General Partner and its Affiliates............................ 68
Section 7.13 Reliance by Third Parties................................................................ 70
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting................................................................... 71
Section 8.2 Fiscal Year.............................................................................. 71
Section 8.3 Reports.................................................................................. 71
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information.............................................................. 72
Section 9.2 Tax Elections............................................................................ 72
Section 9.3 Tax Controversies........................................................................ 72
Section 9.4 Withholding.............................................................................. 73
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Initial Limited Partners.................................................... 73
Section 10.2 Admission of Substituted Limited Partners................................................ 73
Section 10.3 Admission of Successor General Partner................................................... 74
Section 10.4 Admission of Additional Limited Partners................................................. 74
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership............................ 75
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner........................................................ 75
Section 11.2 Removal of the General Partner........................................................... 77
Section 11.3 Interest of Departing Partner and Successor General Partner.............................. 77
XXXXX ENERGY PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
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Section 11.4 Termination of Subordination Period, Conversion of Subordinated Units and
Extinguishment of Cumulative Common Unit Arrearages...................................... 78
Section 11.5 Withdrawal of Limited Partners........................................................... 79
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution.............................................................................. 79
Section 12.2 Continuation of the Business of the Partnership After Dissolution........................ 79
Section 12.3 Liquidator............................................................................... 80
Section 12.4 Liquidation.............................................................................. 81
Section 12.5 Cancellation of Certificate of Limited Partnership....................................... 81
Section 12.6 Return of Contributions.................................................................. 82
Section 12.7 Waiver of Partition...................................................................... 82
Section 12.8 Capital Account Restoration.............................................................. 82
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT;
MEETINGS; RECORD DATE
Section 13.1 Amendments to be Adopted Solely by the General Partner................................... 82
Section 13.2 Amendment Procedures..................................................................... 84
Section 13.3 Amendment Requirements................................................................... 84
Section 13.4 Special Meetings......................................................................... 85
Section 13.5 Notice of a Meeting...................................................................... 85
Section 13.6 Record Date.............................................................................. 85
Section 13.7 Adjournment.............................................................................. 86
Section 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes............................... 86
Section 13.9 Quorum and Voting........................................................................ 86
Section 13.10 Conduct of a Meeting..................................................................... 87
Section 13.11 Action Without a Meeting................................................................. 87
Section 13.12 Right to Vote and Related Matters........................................................ 88
ARTICLE XIV
MERGER
Section 14.1 Authority................................................................................ 88
Section 14.2 Procedure for Merger or Consolidation.................................................... 88
Section 14.3 Approval by Limited Partners of Merger or Consolidation.................................. 89
Section 14.4 Certificate of Merger.................................................................... 90
Section 14.5 Effect of Merger......................................................................... 90
XXXXX ENERGY PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
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ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Section 15.1 Right to Acquire Limited Partner Interests............... 91
ARTICLE XVI
GENERAL PROVISIONS
Section 16.1 Addresses and Notices.................................... 93
Section 16.2 Further Action........................................... 93
Section 16.3 Binding Effect........................................... 93
Section 16.4 Integration.............................................. 94
Section 16.5 Creditors................................................ 94
Section 16.6 Waiver................................................... 94
Section 16.7 Counterparts............................................. 94
Section 16.8 Applicable Law........................................... 94
Section 16.9 Invalidity of Provisions................................. 94
Section 16.10 Consent of Partners...................................... 94
XXXXX ENERGY PARTNERS, L.P.
FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
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FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF XXXXX ENERGY PARTNERS, L.P.
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF XXXXX
ENERGY PARTNERS, L.P. dated as of July 13, 2004, is entered into by and between
HEP Logistics Holdings, L.P., a Delaware limited partnership, as the General
Partner, and Xxxxx 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.
"Accretion Test" has the meaning assigned to such term in Section 5.7(g).
"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:
(i) Any negative adjustment made to the Carrying Value of an
Adjusted Property as a result of either a Book-Down Event or a Book-Up
Event shall first be deemed to offset or decrease that portion of the
Carrying Value of such Adjusted Property that is attributable to any prior
positive adjustments made thereto pursuant to a Book-Up Event or Book-Down
Event.
(ii) If Carrying Value that constitutes Additional Book Basis is
reduced as a result of a Book-Down Event and the Carrying Value of other
property is increased as a result of such Book-Down Event, an allocable
portion of any such increase in Carrying Value shall be treated as
Additional Book Basis; provided, that the amount treated as Additional
Book Basis pursuant hereto as a result of such Book-Down Event shall not
exceed the amount by which the Aggregate Remaining Net Positive
Adjustments after such Book-Down Event exceeds the remaining Additional
Book Basis attributable to all
of the Partnership's Adjusted Property after such Book-Down Event
(determined without regard to the application of this clause (ii) to such
Book-Down Event).
"Additional Book Basis Derivative Items" means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis. To the extent
that the Additional Book Basis attributable to all of the Partnership's Adjusted
Property as of the beginning of any taxable period 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, a Subordinated Unit or an Incentive Distribution Right
or any other Partnership Interest shall be the amount which such Adjusted
Capital Account would be if such General Partner Interest, Common Unit,
Subordinated Unit, Incentive Distribution Right or other 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, Subordinated Unit,
Incentive Distribution Right or other Partnership Interest was first issued.
"Adjusted Operating Surplus" means, with respect to any period, Operating
Surplus generated with respect to 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 with respect to 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.
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Adjusted Operating Surplus does not include that portion of Operating Surplus
included in clauses (a)(i) and (a)(ii) of the definition of Operating Surplus.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Aggregate Remaining Net Positive Adjustments" means, as of the end of any
taxable period, 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. The General Partner shall use such method as it
determines to be appropriate to allocate the aggregate Agreed Value of
Contributed Properties contributed to the Partnership in a single or integrated
transaction among each separate property on a basis proportional to the fair
market value of each Contributed Property.
"Agreement" means this First Amended and Restated Agreement of Limited
Partnership of Xxxxx 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.
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date:
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(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 established by 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.
"Board of Directors" means, with respect to the Board of Directors of the
General Partner, its board of directors or managers, as applicable, if a
corporation or limited liability company, or if a limited partnership, the board
of directors or board of managers of the general partner of the General Partner.
"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 that 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.
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"Book-Up Event" means an event that triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America 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, a Subordinated Unit, an Incentive
Distribution Right or any other Partnership Interest shall be the amount which
such Capital Account would be if such General Partner Interest, Common Unit,
Subordinated Unit, Incentive Distribution Right or other Partnership Interest
were the only interest in the Partnership held by such Partner from and after
the date on which such General Partner Interest, Common Unit, Subordinated Unit,
Incentive Distribution Right or other Partnership Interest was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership.
"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, pipelines,
terminals, docks, truck racks, tankage and other storage and distribution
facilities 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 Depositary or (iii) in such other form as may be adopted by
the General Partner, issued by the Partnership evidencing ownership of one or
more Common Units or a certificate, in such form as
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may be adopted by the General Partner, issued by the Partnership evidencing
ownership of one or more other Partnership Securities.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Delaware as referenced in Section 7.2, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"Citizenship Certification" means a properly completed certificate in such
form as may be specified by the General Partner by which an Assignee or a
Limited Partner certifies that he (and if he is a nominee holding for the
account of another Person, that to the best of his knowledge such other Person)
is an Eligible Citizen.
"Claim" (as used in Section 7.12(c)) has the meaning assigned to such term
in Section 7.12(c).
"Closing Date" means the first date on which Common Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"Closing Price" has the meaning assigned to such term in Section 15.1(a).
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
successor law.
"Combined Interest" has the meaning assigned to such term in Section
11.3(a).
"Commenced Commercial Service" and "Commencement of Commercial Service"
shall mean the date a Capital Improvement is first put into service following
completion of construction and testing.
"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 having
the rights and obligations specified with respect to Common Units in this
Agreement. The term "Common Unit" does not refer to a Subordinated Unit prior to
its conversion into a Common Unit pursuant to the terms hereof.
"Common Unit Arrearage" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, the excess, if any,
of (a) the Minimum Quarterly Distribution with respect to a Common Unit in
respect of such Quarter over (b) the sum of all Available Cash distributed with
respect to a Common Unit in respect of such Quarter pursuant to Section
6.4(a)(i).
"Conflicts Committee" means a committee of the Board of Directors of the
General Partner composed entirely of two or more directors who are not (a)
security holders, officers or employees of the General Partner, (b) officers,
directors or employees of any Affiliate of the
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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 of directors who serve on an audit committee of a board of directors
established by the Securities Exchange Act of 1934, as amended, and the rules
and regulations of the Commission thereunder and by the National Securities
Exchange on which the Common Units are listed.
"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.
"Contribution Agreement" means that certain Contribution, Conveyance and
Assumption Agreement, dated as of the Closing Date, among the General Partner,
the Partnership, the Operating Partnership, Xxxxx Corporation and certain other
parties, together with the additional conveyance documents and instruments
contemplated or referenced thereunder.
"Cumulative Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters within the Subordination Period
ending on or before the last day of such Quarter over (b) the sum of any
distributions theretofore made pursuant to Section 6.4(a)(ii) and the second
sentence of Section 6.5 with respect to an Initial Common Unit (including any
distributions to be made in respect of the last of such Quarters).
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
"Current Market Price" has the meaning assigned to such term in Section
15.1(a).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. Section 17-101, et seq., as amended, supplemented or restated from time
to time, and any successor to such statute.
"Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.
"Depositary" means, with respect to any Units issued in global form, The
Depository Trust Company and its successors and permitted assigns.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"Eligible Citizen" means a Person qualified to own interests in real
property in jurisdictions in which any Group Member 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.
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"Estimated Incremental Quarterly Tax Amount" has the meaning assigned to
such term in Section 6.9.
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Final Subordinated Units" has the meaning assigned to such term in
Section 6.1(d)(x).
"First Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(D).
"First Target Distribution" means $0.55 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
2004, it means the product of $0.55 multiplied by a fraction of which the
numerator is the number of days in such period, and of which the denominator is
92), 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 Subordinated 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 immediately following the end of 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 compliance with administrative mechanics applicable to
such conversion, exercise or exchange and (d) that were not converted into or
exercised or exchanged for such Units during the period for which the
calculation is being made; provided, that for purposes of determining the number
of Outstanding Units on a Fully Diluted Basis when calculating whether the
Subordination Period has ended or Subordinated Units are entitled to convert
into Common Units pursuant to Section 5.8, such Partnership Securities, options,
rights, warrants and appreciation rights shall be deemed to have been
Outstanding Units only for the four Quarters that comprise the last four
Quarters of the measurement period; provided, further, that if consideration
will be paid to any Group Member in connection with such conversion, exercise or
exchange, the number of Units to be included in such calculation shall be that
number equal to the difference between (i) the number of Units issuable upon
such conversion, exercise or exchange and (ii) the number of Units that such
consideration would purchase at the Current Market Price.
"General Partner" means HEP Logistics Holdings, L.P., a Delaware limited
partnership, 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.
8
"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.
"Group Member Agreement" means the partnership agreement of any Group
Member, other than the Partnership, that is a limited or general partnership,
the limited liability company agreement of any Group Member that is a limited
liability company, the certificate of incorporation and bylaws or similar
organizational documents of any Group Member that is a corporation, the joint
venture agreement or similar governing document of any Group Member that is a
joint venture and the governing or organizational or similar documents of any
other Group Member that is a Person other than a limited or general partnership,
limited liability company, corporation or joint venture, as such may be amended,
supplemented or restated from time to time.
"Holder" as used in Section 7.12, has the meaning assigned to such term in
Section 7.12(a).
"Xxxxx GP" means Xxxxx Logistic Services, L.L.C., a Delaware limited
liability company and the general partner of the General Partner, and its
successors and permitted assigns as the general partner of the General Partner.
"Incentive Distribution Right" means a non-voting Limited Partner Interest
issued to the General Partner in connection with the transfer of all of its
interests in HEP Pipeline Assets, Limited Partnership, HEP Pipeline GP, L.L.C.,
Navajo Southern, L.P. and HEP Pipeline, L.L.C. 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)(v),
(vi) and (vii) and 6.4(b)(iii), (iv) and (v).
"Indemnified Persons" has the meaning assigned to such term in Section
7.12(c).
"Indemnitee" means (a) the General Partner, (b) Xxxxx GP, (c) any
Departing Partner, (d) any Person who is or was an Affiliate of Xxxxx GP, the
General Partner or any Departing Partner, (e) any Person who is or was a member,
partner, director, officer, fiduciary or trustee of any Person which any of the
preceding clauses of this definition describes, (f) any Person who is or was
serving at the request of Xxxxx GP, the General Partner or any Departing Partner
or any Affiliate of Xxxxx GP, the General Partner or any Departing Partner as an
officer, director,
9
member, partner, fiduciary or trustee of another Person, provided that that
Person shall not be an Indemnitee by reason of providing, on a fee-for-services
basis, trustee, fiduciary or custodial services, and (g) any Person the General
Partner designates as an "Indemnitee" for purposes of this Agreement.
"Initial Common Units" means the Common Units sold in the Initial
Offering.
"Initial Limited Partners" means Xxxxx Corporation, Navajo Refining
Company, L.P., Xxxxx Cross Refining Company, L.L.C., the General Partner (with
respect to the Common Units, Subordinated Units and Incentive Distribution
Rights received by it pursuant to Section 5.2), and the Underwriters, in each
case upon being admitted to the Partnership in accordance with Section 10.1.
"Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
"Initial Unit Price" means (a) with respect to the Common Units and the
Subordinated Units, the initial public offering price per Common Unit at which
the Underwriters offered the Common Units to the public for sale as set forth on
the cover page of the prospectus included as part of the Registration Statement
and first issued at or after the time the Registration Statement first became
effective or (b) with respect to any other class or series of Units, the price
per Unit at which such class or series of Units is initially sold by the
Partnership, as determined by the General Partner, in each case adjusted as the
General Partner determines to be appropriate to give effect to any distribution,
subdivision or combination of Units.
"Interim Capital Transactions" means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness (other than Working Capital Borrowings and other than for items
purchased on open account in the ordinary course of business) by any Group
Member and sales of debt securities of any Group Member; (b) sales of equity
interests of any Group Member (including the Common Units sold to the
Underwriters pursuant to the exercise of the Over-Allotment Option); 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 its withdrawal from the Partnership,
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.
10
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by Common Units,
Subordinated Units, Incentive Distribution Rights or other Partnership
Securities or a combination thereof or interest therein, and includes any and
all benefits to which such Limited Partner or Assignee is entitled as provided
in this Agreement, together with all obligations of such Limited Partner or
Assignee to comply with the terms and provisions of this Agreement; provided,
however, that when the term "Limited Partner Interest" is used herein in the
context of any vote or other approval, including without limitation Articles
XIII and XIV, such term shall not, solely for such purpose, include any holder
of an Incentive Distribution Right except as may otherwise be required by law.
"Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the holders of Outstanding Units have the 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 12.4 as liquidating trustee of the
Partnership within the meaning of the Delaware Act.
"Merger Agreement" has the meaning assigned to such term in Section 14.1.
"Minimum Quarterly Distribution" means $0.50 per Unit per Quarter (or with
respect to the period commencing on the Closing Date and ending on September 30,
2004, it means the product of $0.50 multiplied by a fraction of which the
numerator is the number of days in such period and of which the denominator is
92), 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
11
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)(xii) 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)(xii) were not in this Agreement.
"Net Positive Adjustments" means, with respect to any Partner, the excess,
if any, of the total positive adjustments over the total negative adjustments
made to the Capital Account of such Partner pursuant to Book-Up Events and
Book-Down Events.
"Net Termination Gain" means, for any taxable 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 Assignee" means a Person whom the General Partner has
determined does not constitute an Eligible Citizen and as to whose Partnership
Interest the General Partner has become the Substituted Limited Partner,
pursuant to Section 4.9.
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage 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.
12
"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 Xxxxx Corporation, the General Partner, the Partnership, HEP
Logistics GP, L.L.C. 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 Expenditures; and
(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, with
the concurrence of the Conflicts Committee, shall determine the allocation
between the amounts paid for each and, with respect to the part of such capital
expenditures made for other purposes, the period over which the capital
expenditures made for other purposes will be deducted as an Operating
Expenditure in calculating Operating Surplus.
"Operating Partnership" means HEP Operating Company, L.P., a Delaware
limited partnership, and any successors thereto.
"Operating Partnership Agreement" means the Agreement of Limited
Partnership 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) $10 million, (ii) all cash and cash equivalents of
the Partnership Group on hand as of the close of business on the Closing Date,
(iii) all cash receipts of the Partnership Group for the period beginning on the
Closing Date and ending on the last day of such period, other than cash receipts
from Interim Capital Transactions (except to the extent specified in Section
6.5) and (iv) 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 on the last day of such period and (ii) the amount
of cash reserves established by the General Partner to provide funds for future
Operating Expenditures; provided, however, that disbursements made (including
contributions to a Group Member or disbursements
13
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.
"Option Closing Date" means the date or dates on which any Common Units
are sold by the Partnership to the Underwriters upon exercise of the
Over-Allotment Option.
"Organizational Limited Partner" means Xxxxx 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, (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 Partnership Securities issued by the
Partnership with the prior approval of the board of directors of the General
Partner.
"Over-Allotment Option" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.
"Parity Units" means Common Units and all other Units of any other class
or series that have the right (i) to receive distributions of Available Cash
from Operating Surplus pursuant to each of subclauses (a)(i) and (a)(ii) of
Section 6.4 in the same order of priority with respect to the participation of
Common Units in such distributions or (ii) to participate in allocations of Net
Termination Gain pursuant to Section 6.1(c)(i)(B) in the same order of priority
with the Common Units, in each case regardless of whether the amounts or value
so distributed or allocated on each Parity Unit equals the amount or value so
distributed or allocated on each Common Unit. Units
14
whose participation in such (i) distributions of Available Cash from Operating
Surplus and (ii) allocations of Net Termination Gain are subordinate in order of
priority to such distributions and allocations on Common Units shall not
constitute Parity Units even if such Units are convertible under certain
circumstances into Common Units or Parity Units.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in 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 Xxxxx Energy Partners, L.P., a Delaware limited
partnership, and any successors thereto.
"Partnership Group" means the Partnership and its Subsidiaries treated as
a single consolidated entity.
"Partnership Interest" means an interest in the Partnership, which shall
include the General Partner Interest and Limited Partner Interests.
"Partnership Minimum Gain" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"Partnership Security" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation rights
relating to an equity interest in the Partnership), including without
limitation, Common Units, Subordinated Units and Incentive Distribution Rights.
"Percentage Interest" means as of any date of determination (a) as to the
General Partner (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.
"Person" means an individual or a corporation, firm, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, governmental agency or political subdivision thereof or other
entity.
15
"Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partner or any Affiliate of the General Partner
who holds Units.
"Pro Rata" means (a) when modifying Units or any class thereof,
apportioned equally among all designated Units in accordance with their relative
Percentage Interests, (b) when modifying Partners and Assignees, apportioned
among all Partners and Assignees in accordance with their relative Percentage
Interests and (c) when modifying holders of Incentive Distribution Rights,
apportioned equally among all holders of Incentive Distribution Rights in
accordance with the relative number or percentage 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 that
the General Partner has caused to be kept as of the opening of business on such
Business Day.
"Redeemable Interests" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-113588) as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership with the Commission
under the Securities Act to register the offering and sale of the Common Units
in the Initial Offering.
"Remaining Basket Amount" has the meaning assigned to such term in Section
5.7(g).
16
"Remaining Net Positive Adjustments" means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units or Subordinated
Units, the excess of (a) the Net Positive Adjustments of the Unitholders holding
Common Units or Subordinated Units as of the end of such period over (b) the sum
of those 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) or 6.1(c)(ii) and
(b) any allocation of an item of income, gain, loss or deduction pursuant to
Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vii) or 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
"Restricted Business" has the meaning assigned to such term in the Omnibus
Agreement.
"Second Liquidation Target Amount" has the meaning assigned to such term
in Section 6.1(c)(i)(E).
"Second Target Distribution" means $0.625 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
2004, it means the product of $0.625 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 6.6 and
6.9.
"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such statute.
"Share of Additional Book Basis Derivative Items" means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable period,
(i) with respect to the Unitholders holding Common Units or Subordinated Units,
the amount that bears the same ratio to such 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
17
to the Partners holding Incentive Distribution Rights, the amount that bears the
same ratio to such Additional Book Basis Derivative Items as the Remaining Net
Positive Adjustments of the Partners holding the Incentive Distribution Rights
as of the end of such period bears to the Aggregate Remaining Net Positive
Adjustments as of that time.
"Special Approval" means approval by a majority of the members of the
Conflicts Committee.
"Subordinated Unit" means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees and having the
rights and obligations specified with respect to Subordinated Units in this
Agreement. The term "Subordinated Unit" as used herein does not include a Common
Unit or Parity Unit. A Subordinated Unit that is convertible into a Common Unit
or a Parity Unit shall not constitute a Common Unit or Parity Unit until such
conversion occurs.
"Subordination Period" means the period commencing on the Closing Date and
ending on the first to occur of the following dates:
(a) the first day of any Quarter beginning after June 30, 2009 in
respect of which (i) (A) distributions of Available Cash from Operating Surplus
on each of the Outstanding Common Units and Subordinated Units and any other
Outstanding Units that are senior or equal in right of distribution to the
Subordinated Units with respect to each of the three consecutive,
non-overlapping four-Quarter periods immediately preceding such date equaled or
exceeded the sum of the Minimum Quarterly Distribution on all Outstanding Common
Units and Subordinated Units and any other Outstanding Units that are senior or
equal in right of distribution to the Subordinated Units during such periods and
(B) the Adjusted Operating Surplus generated during each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding such
date equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the Common Units and Subordinated Units and any other Units that are senior or
equal in right of distribution to the Subordinated Units that were Outstanding
during such periods on a Fully Diluted Basis, plus the related distribution on
the General Partner Interest, during such periods and (ii) there are no
Cumulative Common Unit Arrearages; and
(b) the date on which the General Partner is removed as general partner
of the Partnership upon the requisite vote by holders of Outstanding Units under
circumstances where Cause does not exist and Units held by the General Partner
and its Affiliates are not voted in favor of such removal.
"Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such
18
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)(F).
"Third Target Distribution" means $0.75 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
2004, it means the product of $0.75 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Sections 6.6 and
6.9.
"Trading Day" has the meaning assigned to such term in Section 15.1(a).
"Transfer" has the meaning assigned to such term in Section 4.4(a).
"Transfer Agent" means such bank, trust company or other Person (including
the General Partner or one of its Affiliates) as shall be appointed from time to
time by the Partnership to act as registrar and transfer agent for the Common
Units; provided, that if no Transfer Agent is specifically designated for any
other Partnership Securities, the General Partner shall act in such capacity.
"Transfer Application" means an application and agreement for transfer of
Units in the form set forth on the back of a Certificate or in a form
substantially to the same effect in a separate instrument.
"Underwriter" means each Person named as an underwriter in Schedule I to
the Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement dated July 7,
2004 among the Underwriters, the Partnership, the General Partner, Xxxxx GP, HEP
Logistics GP, LLC, the Operating Partnership, Xxxxx Corporation and Navajo
Pipeline Co., L.P., providing for the purchase of Common Units by such
Underwriters.
"Unit" means a Partnership Security that is designated as a "Unit" and
shall include Common Units and Subordinated Units but shall not include (i) a
General Partner Interest or (ii) Incentive Distribution Rights.
"Unitholders" means the holders of Xxxxx.
00
"Xxxx Xxxxxxxx" means, during the Subordination Period, at least a
majority of the Outstanding Common Units (excluding Common Units owned by the
General Partner and its Affiliates) voting as a class and at least a majority of
the Outstanding Subordinated Units voting as a class, and after the end of the
Subordination Period, at least a majority of the Outstanding Common Units.
"Unpaid MQD" has the meaning assigned to such term in Section
6.1(c)(i)(B).
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date (as determined under Section 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).
"Unrecovered Capital" means at any time, with respect to a Unit, the
Initial Unit Price less the sum of all distributions constituting Capital
Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the General Partner
determines to be appropriate to give effect to any distribution, subdivision or
combination of such Units.
"U.S. GAAP" means United States generally accepted accounting principles
consistently applied.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 11.1(b).
"Working Capital Borrowings" means borrowings 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.
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; (c) the term "include" or "includes" means includes,
without limitation, and "including" means including, without limitation; and (d)
for so long as the General Partner has a general partner, references to
directors, officers and employees of the General Partner shall mean the
directors, officers and employees of Xxxxx GP (and its successors and permitted
assigns) acting for or on behalf of the General Partner.
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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 Xxxxx 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 "Xxxxx Energy Partners, L.P." The
Partnership's business may be conducted under any other name or names as
determined by the General Partner, 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 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 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000, and the registered agent for service of process on
the Partnership in the State of Delaware at such registered office shall be The
Corporation Trust Company. The principal office of the Partnership shall be
located at 000 Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx, 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 determines
to be necessary or appropriate. The address of the General Partner shall be 000
Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx, 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) 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 that 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, and (b) do anything necessary or appropriate
to the foregoing, including the making of
21
capital contributions or loans to a Group Member; provided, however, that the
General Partner shall not cause the Partnership to engage, directly or
indirectly, in any business activity that the General Partner determines would
cause the Partnership to be treated as an association taxable as a corporation
or otherwise taxable as an entity for federal income tax purposes. The General
Partner shall have no duty or obligation to propose or approve, and may decline
to propose or approve, the conduct by the Partnership of any business free of
any fiduciary duty or obligation whatsoever to the Partnership, any Limited
Partner or Assignee and, in declining to so propose or approve, shall not be
required to act in good faith or pursuant to any other standard imposed by this
Agreement, any Group Member Agreement, any other agreement contemplated hereby
or under the Delaware Act or any other law, rule or regulation.
Section 2.5 Powers.
The Partnership shall be empowered to do any and all acts and things
necessary and appropriate 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.
(a) Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner and, if a Liquidator shall have been selected
pursuant to Section 12.3, the Liquidator (and any successor to the Liquidator by
merger, transfer, assignment, election or otherwise) and each of their
authorized officers and attorneys-in-fact, as the case may be, with full power
of substitution, as his true and lawful agent and attorney-in-fact, with full
power and authority in his name, place and xxxxx, to:
(i) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements hereof or thereof) that the
General Partner or the Liquidator determines to be 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 determines to be necessary or
appropriate to reflect, in accordance with its terms, any amendment,
change, modification or restatement of this Agreement; (C) all
certificates, documents and other instruments (including conveyances and a
certificate of cancellation) that the General Partner or the Liquidator
determines to be 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, consolidation or
conversion of the Partnership pursuant to Article XIV; and
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(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments that the General Partner or the Liquidator determines to be
necessary or appropriate to (A) 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 (B) 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 such Limited
Partner or Assignee hereby agrees to be bound by any representation made
by the General Partner or the Liquidator acting in good faith pursuant to
such power of attorney; and each such Limited Partner or Assignee, to the
maximum extent permitted by law, hereby waives any and all defenses that
may be available to contest, negate or disaffirm the action of the General
Partner or the Liquidator taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to
the General Partner or the Liquidator, within 15 days after receipt of the
request therefor, such further designation, powers of attorney and other
instruments as the General Partner or the Liquidator determines to be
necessary or appropriate to effectuate this Agreement and the purposes of
the Partnership.
Section 2.7 Term.
The term of the Partnership commenced upon the filing of the Certificate
of Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the 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
23
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.
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, 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
24
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) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(ii) to have furnished to him a current list of the name and last
known business, residence or mailing address of each Partner;
(iii) 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;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the status of
the business and financial condition of the Partnership Group; 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).
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ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
Section 4.1 Certificates.
Upon the Partnership's issuance of Common Units or Subordinated Units to
any Person, the Partnership shall issue, upon the request of such Person, 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 or Subordinated Units, the
Partnership shall issue to such Person one or more certificates evidencing such
Incentive Distribution Rights or other Partnership Securities other than Common
Units or Subordinated Units. Certificates shall be executed on behalf of the
Partnership by the Chairman of the Board, President or any Executive Vice
President or Vice President and the Chief Financial Officer or 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. Subject to
the requirements of Section 6.7(b), the Partners holding Certificates evidencing
Subordinated Units may exchange such Certificates for Certificates evidencing
Common Units on or after the date on which such Subordinated Units are converted
into Common Units pursuant to the terms of Section 5.8.
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer Agent,
the appropriate officers of the General Partner on behalf of the Partnership
shall execute, and the Transfer Agent shall countersign and deliver in exchange
therefor, a new Certificate evidencing the same number and type of Partnership
Securities as the Certificate so surrendered.
(b) The appropriate officers of the General Partner on behalf of the
Partnership shall execute and deliver, and the Transfer Agent shall countersign,
a new Certificate in place of any Certificate previously issued if the Record
Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory
to the 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 direct to indemnify the Partnership, the
26
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.
Without limiting the foregoing, when a Person (such as a broker, dealer, bank,
trust company or clearing corporation or an agent of any of the foregoing) is
acting as nominee, agent or in some other representative 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 (i) by which the
General Partner assigns its General Partner Interest to another Person or by
which a holder of Incentive Distribution Rights assigns its Incentive
Distribution Rights to another Person, and includes a sale, assignment, gift,
pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition
by law or otherwise or (ii) by which the holder of a Limited Partner Interest
(other than an Incentive Distribution Right) assigns such Limited Partner
Interest to another Person who is or becomes a Limited Partner or an Assignee,
and includes a sale, assignment, gift, exchange or any other disposition by law
or otherwise, including any transfer upon foreclosure of any pledge,
encumbrance, hypothecation or mortgage.
27
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent a
disposition by any stockholder, member, partner or other owner of the General
Partner of any or all of the shares of stock, membership interests, partnership
interests or other ownership interests in the General Partner.
Section 4.5 Registration and Transfer of Limited Partner Interests.
(a) The General Partner shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Limited Partner Interests. The
Transfer Agent is hereby appointed registrar and transfer agent for the purpose
of registering Common Units and transfers of such Common Units as herein
provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers are effected in the
manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers of the General Partner on behalf of the Partnership shall execute and
deliver, and in the case of Common Units, the Transfer Agent shall countersign
and deliver, in the name of the holder or the designated transferee or
transferees, as required pursuant to the holder's instructions, one or more new
Certificates evidencing the same aggregate number and type of Limited Partner
Interests as was evidenced by the Certificate so surrendered.
(b) Except as otherwise provided in Section 4.9, the General Partner
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
General Partner for such transfer; provided, that as a condition to the issuance
of any new Certificate under this Section 4.5, the General Partner 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
28
Partner, (ii) agreed to comply with and be bound by and to have executed this
Agreement, (iii) represented and warranted that such transferee has the right,
power and authority and, if an individual, the capacity to enter into this
Agreement, (iv) granted the powers of attorney set forth in this Agreement and
(v) given the consents and approvals and made the waivers contained in this
Agreement.
(f) The General Partner and its Affiliates shall have the right at any
time to transfer their Subordinated Units and Common Units (whether issued upon
conversion of the Subordinated Units or otherwise) to one or more Persons.
Section 4.6 Transfer of the General Partner's General Partner Interest.
(a) Subject to Section 4.6(c) below, prior to June 30, 2014, 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 such other Person or the transfer by the
General Partner of all or substantially all of its assets to such other Person.
(b) Subject to Section 4.6(c) below, on or after June 30, 2014, the
General Partner may transfer all or any of its General Partner Interest without
Unitholder approval.
(c) Notwithstanding anything herein to the contrary, no transfer by the
General Partner of all or any part of its General Partner Interest to another
Person shall be permitted unless (i) the transferee agrees to assume the rights
and duties of the General Partner under this Agreement and 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 or member of any other Group
Member or cause the Partnership or any other 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 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 General Partner
Interest, and the business of the Partnership shall continue without
dissolution.
Section 4.7 Transfer of Incentive Distribution Rights.
Prior to June 30, 2014, 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 to (a) an Affiliate of such holder (other
than an individual) or (b) another Person (other than an individual) in
connection with (i) the merger or consolidation of such holder of Incentive
29
Distribution Rights with or into such other Person or (ii) the transfer by such
holder of all or substantially all of its assets to such other Person. Any other
transfer of the Incentive Distribution Rights prior to June 30, 2014 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 June 30, 2014, the General Partner or any other holder
of Incentive Distribution Rights may transfer any or all of its Incentive
Distribution Rights without Unitholder approval. Notwithstanding anything herein
to the contrary, no transfer of Incentive Distribution Rights to another Person
shall be permitted unless the transferee agrees to be bound by the provisions of
this Agreement.
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 any Group Member under the laws of the jurisdiction of its formation, or
(iii) 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 already so treated or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if it receives an Opinion of Counsel that such
restrictions are necessary to avoid a significant risk of any Group Member
becoming taxable as a corporation or otherwise becoming taxable as an entity for
federal income tax purposes. The General Partner may impose such restrictions by
amending this Agreement; provided, however, that any amendment that would 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 listed must be approved, prior to such
amendment being effected, by the holders of at least a majority of the
Outstanding Limited Partner Interests of such class.
(c) The transfer of a Subordinated Unit that has converted into a Common
Unit shall be subject to the restrictions imposed by Section 6.7(b).
(d) Nothing contained in this Article IV, or elsewhere in this
Agreement, shall preclude the settlement of any transactions involving
Partnership Interests entered into through the facilities of any National
Securities Exchange on which such Partnership Interests are listed for trading.
Section 4.9 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state or
local law or regulation that the General Partner determines would create 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
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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 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 the Non-citizen Assignee's 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 any 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).
(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:
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(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, as determined by the
General Partner, in cash or by delivery of a promissory note of the
Partnership in the principal amount of the redemption price, bearing
interest at the rate of 10% annually and payable in three equal annual
installments of principal together with accrued interest, commencing one
year after the redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner or
Assignee, at the place specified in the notice of redemption, of the
Certificate evidencing the Redeemable Interests, duly endorsed in blank or
accompanied by an assignment duly executed in blank, the Limited Partner
or Assignee or his duly authorized representative shall be entitled to
receive the payment therefor.
(iv) After the redemption date, Redeemable Interests shall no
longer constitute issued and Outstanding Limited Partner Interests.
(b) The provisions of this Section 4.10 shall also be applicable to
Limited Partner Interests held by a Limited Partner or Assignee as nominee of a
Person determined to be other than an Eligible Citizen.
(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.
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ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Organizational Contributions.
In connection with the formation of the Partnership under the Delaware
Act, the General Partner made an initial Capital Contribution to the Partnership
in the amount of $20.00, for a 2% General Partner Interest in the Partnership
and has been admitted as the General Partner of the Partnership, and the
Organizational Limited Partner made an initial Capital Contribution to the
Partnership in the amount of $980.00 for a 98% Limited Partner Interest in the
Partnership and has been admitted as a Limited Partner of the Partnership. As of
the Closing Date, the interest of the Organizational Limited Partner shall be
redeemed as provided in the Contribution Agreement; and the initial Capital
Contribution of the Organizational Limited Partner shall thereupon be refunded.
Ninety-eight percent of any interest or other profit that may have resulted from
the investment or other use of such initial Capital Contributions shall be
allocated and distributed to the Organizational Limited Partner, and the balance
thereof shall be allocated and distributed to the General Partner.
Section 5.2 Contributions by the General Partner and its Affiliates.
(a) On the Closing Date and pursuant to the Contribution Agreement: (i)
the General Partner shall contribute to the Partnership, as a Capital
Contribution, all of its ownership interests in HEP Pipeline Assets, Limited
Partnership, HEP Pipeline GP, L.L.C., Navajo Southern, L.P. and HEP Pipeline,
L.L.C. in exchange for (A) the 2% General Partner Interest, subject to all of
the rights, privileges and duties of the General Partner under this Agreement,
(B) the Incentive Distribution Rights, (C) 499,421 Common Units, (D) 7,000,000
Subordinated Units and (E) a special interest representing a right to receive
$25,797,442 from the Partnership on the Closing Date; (ii) Xxxxx Corporation
shall contribute to the Partnership, as a Capital Contribution, all of its
ownership interest in HEP Mountain Home, L.L.C. in exchange for (A) 87,334
Common Units and (B) a special interest representing a right to receive $33,653
from the Partnership on the Closing Date; (iii) Navajo Refining Company, L.P.
shall contribute to the Partnership as a Capital Contribution, all of its
interests in HEP Refining Assets, L.P. and HEP Refining GP, L.L.C. in exchange
for (A) 212,775 Common Units and (B) a special interest representing a right to
receive $44,701,811 from the Partnership on the Closing Date; and (iv) Xxxxx
Cross Refining Company, L.L.C. shall contribute to the Partnership, as a Capital
Contribution, all of its ownership interest in HEP Xxxxx Cross L.L.C. in
exchange for (A) 100,470 Common Units and (B) a special interest representing a
right to receive $11,430,000 from the Partnership on the Closing Date.
(b) Upon the issuance of any additional Limited Partner Interests by the
Partnership (other than the issuance of the Common Units issued in the Initial
Offering and other than the issuance of the Common Units issued pursuant to the
Over-Allotment Option), the General Partner shall be required to make additional
Capital Contributions equal to (i) 2/98ths of any amount contributed to the
Partnership by the Limited Partners in exchange for the additional Limited
Partner Interests issued to such Limited Partners less (ii) 2/98ths of any
amount so contributed by such Limited Partners that is used by the Partnership
concurrently with such
33
contribution to redeem or repurchase from any Person outstanding Limited Partner
Interests of the same class as the Limited Partner Interests issued to such
Limited Partners (including Parity Units if the Limited Partner Interests are
Common Units) at a price per Limited Partner Interest equal to the net proceeds
per Limited Partner Interest, before expenses, that the Partnership receives
from such issuances. 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 and its Affiliates.
(a) On the Closing Date and pursuant to the Underwriting Agreement, each
Underwriter shall contribute to the Partnership cash in an amount equal to the
Issue Price per Initial Common Unit, multiplied by the number of Common Units
specified in the Underwriting Agreement to be purchased by such Underwriter at
the Closing Date. In exchange for such Capital Contributions by the
Underwriters, the Partnership shall issue Common Units to each Underwriter on
whose behalf such Capital Contribution is made in an amount equal to the
quotient obtained by dividing (i) the cash contribution to the Partnership by or
on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.
(b) Notwithstanding anything else herein contained, $81,962,906 of the
proceeds received by the Partnership from the issuance of the Common Units
pursuant to Section 5.3(a) will be distributed as follows: $25,797,442 to the
General Partner, $33,653 to Xxxxx Corporation, $44,701,811 to Navajo Refining
Company, L.P. and $11,430,000 to Xxxxx Cross Refining Company, L.L.C. in
redemption of their special interests as set forth in Section 5.2(a). (c) Upon
the exercise of the Over-Allotment Option, each Underwriter shall contribute to
the Partnership cash in an amount equal to the Issue Price per Initial Common
Unit, multiplied by the number of Common Units specified in the Underwriting
Agreement to be purchased by such Underwriter at the Option Closing Date. In
exchange for such Capital Contributions by the Underwriters, the Partnership
shall issue Common Units to each Underwriter on whose behalf such Capital
Contribution is made in an amount equal to the quotient obtained by dividing (i)
the cash contributions to the Partnership by or on behalf of such Underwriter by
(ii) the Issue Price per Initial Common Unit. Upon receipt by the Partnership of
the Capital Contributions from the Underwriters as provided in this Section
5.3(b), the Partnership shall use such cash to redeem, on a pro rata basis, from
the General Partner, Xxxxx Corporation, Navajo Refining Company, L.P. and Xxxxx
Cross Refining Company, L.L.C. that number of Common Units held by the General
Partner, Xxxxx Corporation, Navajo Refining Company, L.P. and Xxxxx Cross
Refining Company, L.L.C. equal to the number of Common Units issued to the
Underwriters as provided in this Section 5.3(b).
(d) No Limited Partner Interests will be issued or issuable as of or at
the Closing Date other than (i) the Common Units issuable pursuant to
subparagraph (a) hereof in aggregate number equal to 6,100,000, (ii) the
"Optional Units" as such term is used in the Underwriting Agreement in an
aggregate number up to 900,000 issuable upon exercise of the Over-Allotment
Option pursuant to subparagraph (c) hereof, (iii) the 7,000,000 Subordinated
Units issuable to
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pursuant to Section 5.2 hereof, (iv) the 900,000 Common Units issuable pursuant
to Section 5.2 hereof, and (v) the Incentive Distribution Rights.
Section 5.4 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any, that distributions made pursuant to
this Agreement or upon termination of the Partnership may be considered as such
by law and then only to the extent provided for in this Agreement. Except to the
extent expressly provided in this Agreement, no Partner or Assignee shall have
priority over any other Partner or Assignee either as to the return of Capital
Contributions or as to profits, losses or distributions. Any such return shall
be a compromise to which all Partners and Assignees agree within the meaning of
Section 17-502(b) of the Delaware Act.
Section 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner) owning a Partnership Interest a separate Capital Account
with respect to such Partnership Interest in accordance with the rules of
Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be
increased by (i) the amount of all Capital Contributions made to the Partnership
with respect to such Partnership Interest and (ii) all items of Partnership
income and gain (including, without limitation, income and gain exempt from tax)
computed in accordance with Section 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 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 applicable Group
Member Agreement) of all property owned any other Group Member that is
classified as a partnership for federal income tax purposes.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither
be deducted nor amortized under Section 709 of the Code, if any, shall,
for purposes of Capital Account maintenance, be
35
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 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.
(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.
36
(ii) Immediately prior to the transfer of a Subordinated Unit or of
a Subordinated Unit that has converted into a Common Unit pursuant to
Section 5.8 by a holder thereof (other than a transfer to an Affiliate
unless the General Partner elects to have this subparagraph 5.5(c)(ii)
apply), the Capital Account maintained for such Person with respect to its
Subordinated Units or converted Subordinated Units will (A) first, be
allocated to the Subordinated Units or converted Subordinated Units to be
transferred in an amount equal to the product of (x) the number of such
Subordinated Units or converted Subordinated Units to be transferred and
(y) the Per Unit Capital Amount for a Common Unit, and (B) second, any
remaining balance in such Capital Account will be retained by the
transferor, regardless of whether it has retained any Subordinated Units
or converted Subordinated Units. Following any such allocation, the
transferor's Capital Account, if any, maintained with respect to the
retained Subordinated Units or converted Subordinated Units, if any, will
have a balance equal to the amount allocated under clause (B) hereinabove,
and the transferee's Capital Account established with respect to the
transferred Subordinated Units or converted Subordinated Units will have a
balance equal to the amount allocated under clause (A) hereinabove.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for
cash or Contributed Property or the conversion of the General Partner's Combined
Interest to Common Units pursuant to Section 11.3(b), the Capital Account of all
Partners and the Carrying Value of each Partnership property immediately prior
to such issuance shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 6.1 in the same manner as any item of
gain or loss actually recognized during such period would have been allocated.
In determining such Unrealized Gain or Unrealized Loss, the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Partnership Interests shall be determined by the General Partner
using such 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) 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
37
equivalents) immediately prior to a distribution shall (A) in the case of
an actual distribution that 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 method of valuation as it may
adopt.
Section 5.6 Issuances of Additional Partnership Securities.
(a) Subject to Section 5.7, the Partnership may issue additional
Partnership Securities and options, rights, warrants and appreciation rights
relating to the Partnership Securities for any Partnership purpose at any time
and from time to time to such Persons for such consideration and on such terms
and conditions as the General Partner shall determine, 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, including (i)
the right to share Partnership profits and losses or items thereof; (ii) the
right to share in Partnership distributions; (iii) the rights upon dissolution
and liquidation of the Partnership; (iv) whether, and the terms and conditions
upon which, the Partnership may redeem the Partnership Security; (v) whether
such Partnership Security is issued with the privilege of conversion or exchange
and, if so, the terms and conditions of such conversion or exchange; (vi) the
terms and conditions upon which each Partnership Security will be issued,
evidenced by certificates and assigned or transferred; (vii) the method for
determining the Percentage Interest as to such Partnership Security; and (viii)
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 shall take all actions that it determines to be
necessary or appropriate in connection with (i) each issuance of Partnership
Securities and options, rights, warrants and appreciation rights relating to
Partnership Securities pursuant to this Section 5.6, (ii) the conversion of the
General Partner Interest 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 shall determine 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 that it determines to be
necessary or appropriate 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.
38
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) Unless approved by the holders of a Unit Majority, during the
Subordination Period, the Partnership shall not issue (and shall not issue any
options, rights, warrants or appreciation rights relating to) an aggregate of
more than 3,500,000 additional Parity Units. In applying this limitation, there
shall be excluded Common Units and other Parity Units issued (i) pursuant to
Sections 5.2(a) and 5.3(a), (ii) in accordance with Sections 5.7(b), 5.7(d),
5.7(e), 5.7(f) or 5.7(g), (iii) upon conversion of Subordinated Units pursuant
to Section 5.8, (iv) upon conversion of the General Partner Interest or any
Incentive Distribution Rights pursuant to Section 11.3(b), (v) pursuant to the
employee benefit plans of Xxxxx GP, the General Partner, the Partnership or any
other Group Member, (vi) upon a conversion or exchange of Parity Units issued
after the date hereof into Common Units or other Parity Units; provided that the
total amount of Available Cash required to pay the aggregate Minimum Quarterly
Distribution on all Common Units and all Parity Units does not increase as a
result of this conversion or exchange, and (vii) in the event of a combination
or subdivision of Common Units.
(b) Without the prior approval of the Limited Partners, during the
Subordination Period, the Partnership may issue an unlimited number of Parity
Units if such issuance occurs (i) in connection with an Acquisition or Capital
Improvement or (ii) within 365 days of, and the net proceeds from such issuance
are used to repay debt incurred in connection with, or to replenish cash
reserves to the extent drawn down in connection with, an Acquisition or Capital
Improvement, in each case where such Acquisition or Capital Improvement involves
assets that, if acquired (or in the case of a Capital Improvement, put into
commercial service) by the Partnership as of the date that is one year prior to
the first day of the Quarter in which such Acquisition was consummated or such
Capital Improvement was put into commercial service ("One Year Test Period"),
would have resulted, in the General Partner's determination, in an increase in:
(A) the amount of Adjusted Operating Surplus generated by
the Partnership on a per-Unit basis (for all Outstanding Units) with
respect to the One Year Test Period, on an estimated pro forma basis
(as described below), as compared to
(B) the actual amount of Adjusted Operating Surplus
generated by the Partnership on a per-Unit basis (for all
Outstanding Units) with respect to the One Year Test Period, as
adjusted as provided below.
The General Partner shall determine the amount in clause (A) above using such
assumptions as it believes are reasonable. There shall be excluded from the
amount in clause (B) above any Operating Surplus attributable to such
Acquisition or Capital Improvement (regardless of whether such Operating Surplus
is positive or negative). The number of Units deemed to be Outstanding for the
purpose of calculating the amount in clause (B) above shall be the weighted
average number of Units Outstanding during the One Year Test Period and shall
exclude the Units issued or to be issued in connection with such Acquisition or
Capital Improvement or
39
within 365 days of such Acquisition or Capital Improvement where the net
proceeds from such issuance are used to repay debt incurred, or to replenish
cash reserves to the extent drawn down, in connection with such Acquisition or
Capital Improvement. For the purposes of this Section 5.7(b), the term "debt"
shall be deemed to include the indebtedness used to extend, refinance, renew,
replace or defease debt originally incurred in connection with an Acquisition or
Capital Improvement; provided, that, the amount of such indebtedness does not
exceed the principal sum of, plus accrued interest on and any prepayment penalty
with respect to, the indebtedness so extended, refinanced, renewed, replaced or
defeased.
(c) Unless approved by the holders of a Unit Majority, during the
Subordination Period the Partnership shall not issue any additional Partnership
Securities (or options, rights, warrants or appreciation rights related thereto)
(i) that are entitled in any Quarter to receive in respect of the Subordination
Period any distribution of Available Cash from Operating Surplus before the
Common Units and any Parity Units have received (or amounts have been set aside
for payment of) the Minimum Quarterly Distribution and any Cumulative Common
Unit Arrearage for such Quarter or (ii) that are entitled to allocations in
respect of the Subordination Period of Net Termination Gain before the Common
Units and any Parity Units have been allocated Net Termination Gain pursuant to
Section 6.1(c)(i)(B).
(d) Without the prior approval of the Limited Partners, during the
Subordination Period the Partnership may issue additional Partnership Securities
(or options, rights, warrants or appreciation rights related thereto) (i) that
are not entitled in any Quarter during the Subordination Period to receive any
distributions of Available Cash from Operating Surplus until after the Common
Units and any Parity Units have received (or amounts have been set aside for
payment of) the Minimum Quarterly Distribution and any Cumulative Common Unit
Arrearage for such Quarter and (ii) that are not entitled to allocations in
respect of the Subordination Period of Net Termination Gain until after the
Common Units and Parity Units have been allocated Net Termination Gain pursuant
to Section 6.1(c)(i)(B), even if (A) the amount of Available Cash from Operating
Surplus to which each such Partnership Security is entitled to receive after the
Minimum Quarterly Distribution and any Cumulative Common Unit Arrearage have
been paid or set aside for payment on the Common Units exceeds the Minimum
Quarterly Distribution or (B) the amount of Net Termination Gain to be allocated
to such Partnership Security after Net Termination Gain has been allocated to
any Common Units and Parity Units pursuant to Section 6.1(c)(i)(B) exceeds the
amount of such Net Termination Gain to be allocated to each Common Unit or
Parity Unit.
(e) Without the prior approval of the Limited Partners, during the
Subordination Period the Partnership may issue an unlimited number of Parity
Units if the proceeds from such issuance are used exclusively to repay
indebtedness of a Group Member where the aggregate amount of distributions that
would have been paid with respect to such newly issued Units, plus the related
distributions on the General Partner Interest in the Partnership in respect of
the four-Quarter period ending prior to the first day of the Quarter in which
the issuance is to be consummated (assuming such newly issued Parity Units had
been Outstanding throughout such period and that distributions equal to the
distributions that were actually paid on the Outstanding Units during the period
were paid on such newly issued Parity Units) would not have exceeded the
interest costs actually incurred during such period on the indebtedness that is
to be repaid (or, if such indebtedness was not outstanding throughout the entire
period, would have been incurred
40
had such indebtedness been outstanding for the entire period). In the event that
the Partnership is required to pay a prepayment penalty in connection with the
repayment of such indebtedness, for purposes of the foregoing test, the number
of Parity Units issued to repay such indebtedness shall be deemed increased by
the number of Parity Units that would need to be issued to pay such penalty.
(f) Without the prior approval of the Limited Partners, during the
Subordination Period the Partnership may issue an unlimited number of Parity
Units if the net proceeds of such issuance are used to redeem an equal number of
Parity Units at a price per unit equal to the net proceeds per unit, before
expenses, that the Partnership receives from such issuance.
(g) Without the prior approval of the Limited Partners, during the
Subordination Period the Partnership may issue, in connection with Acquisitions
that have not been completed or Capital Improvements that have not Commenced
Commercial Service, or both, an amount of Parity Units not to exceed the number
of Parity Units then available for issuance without Unitholder approval pursuant
to Section 5.7(a) (such number of Parity Units then available for issuance, the
"Remaining Basket Amount").
The following shall apply with respect to issuances of Parity Units
pursuant to this Section 5.7(g):
(i) With respect to such issuance, the aggregate number of Parity
Units to be issued (including Parity Units to be issued upon the exercise
of an underwriters' over-allotment or other similar option) shall be
deemed to have been issued from, and charged against, the Remaining Basket
Amount; provided, however, that in considering the Parity Units to be
issued upon the exercise of an underwriters' over-allotment or other
similar option, only the number of Parity Units actually issued pursuant
to such option on or prior to the expiration of such option will be deemed
to have been issued from, and charged against, the Remaining Basket
Amount.
(ii) With respect to Parity Units to be issued (including Parity
Units to be issued upon the exercise of an underwriters' over-allotment or
other similar option) in connection with an Acquisition that has not been
completed:
(1) Such Acquisition shall have been specifically identified in
the prospectus or prospectus supplement filed, or other
offering document used, in connection with the offer and sale
of such Parity Units as a proposed Acquisition for which the
net proceeds from the sale of such Parity Units will be used
if such Acquisition is completed.
(2) Upon completion of such Acquisition and application of the net
proceeds received from the sale of such Parity Units to
finance such Acquisition, the provisions of clause (i) above
shall not apply and the Parity Units issued (including Parity
Units issued upon the exercise of an underwriters'
over-allotment or other similar option) in connection with
such Acquisition shall not be deemed to have been issued from,
and charged against, the Remaining Basket Amount; provided,
however, that such Acquisition would
41
have resulted, on an estimated pro forma basis, in an increase
in the amount of Adjusted Operating Surplus per Unit (such
amount shall be calculated as set forth in Section 5.7(b) and
such calculation is referred to in this Section 5.7(g) as the
"Accretion Test").
(3) The Accretion Test in subclause (2) above shall be performed
immediately following completion of such Acquisition and in
accordance with Section 5.7(b).
(iii) With respect to Parity Units to be issued (including Parity
Units to be issued upon the exercise of an underwriters' over-allotment or
other similar option) in connection with a Capital Improvement that has
not Commenced Commercial Service:
(1) Such Capital Improvement shall have been specifically
identified in the prospectus or prospectus supplement filed,
or other offering document used, in connection with the offer
and sale of such Parity Units as a Capital Improvement for
which the net proceeds from the sale of such Parity Units will
used to finance such Capital Improvement.
(2) Upon such Capital Improvement having Commenced Commercial
Service and provided the net proceeds from the sale of such
Parity Units have been used to finance such Capital
Improvement, the provisions of clause (i) above shall not
apply and the Parity Units issued (including Parity Units
issued upon the exercise of an underwriters' over-allotment or
other similar option) in connection with such Capital
Improvement shall not be deemed to have been issued from, and
charged against, the Remaining Basket Amount; provided,
however, that such Capital Improvement meets the Accretion
Test.
(3) The Accretion Test in clause (2) above shall be performed
immediately following Commencement of Commercial Service and
in accordance with Section 5.7(b).
(h) No fractional Units shall be issued by the Partnership.
Section 5.8 Conversion of Subordinated Units.
(a) All Subordinated Units shall convert into Common Units on a
one-for-one basis on the second Business Day following the distribution of
Available Cash to Partners pursuant to Section 6.3(a) in respect of the final
Quarter of the Subordination Period.
(b) Notwithstanding any other provision of this Agreement, all the
Subordinated Units will automatically convert into Common Units on a one-for-one
basis as set forth in, and pursuant to the terms of, Section 11.4.
(c) A Subordinated Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b).
42
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 (including the number of Subordinated Units that may convert prior to the
end of the Subordination Period and the number of additional Parity Units
remaining to be issued pursuant to Section 5.7 without a Unitholder vote) are
proportionately adjusted.
(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 that it determines to be necessary or
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(h) and this Section 5.10(d), each
43
fractional Unit shall be rounded to the nearest whole Unit (and a 0.5 Unit shall
be rounded to the next higher Unit).
Section 5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests.
All Limited Partner Interests issued pursuant to, and in accordance with
the requirements of, this Article V shall be fully paid and non-assessable
Limited Partner Interests in the Partnership, except as such non-assessability
may be affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
(a) Net Income. After giving effect to the special allocations set forth
in Section 6.1(d), Net Income for each taxable 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
44
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 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) or
(b)(i) with respect to such Common Unit for such Quarter (the amount
determined pursuant to this clause (2) is hereinafter defined as the
"Unpaid MQD") plus (3) any then existing Cumulative Common Unit
Arrearage;
45
(C) Third, if such Net Termination Gain is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit, 98% to all Unitholders holding
Subordinated Units, Pro Rata, and 2% to the General Partner, until
the Capital Account in respect of each Subordinated Unit then
Outstanding equals the sum of (1) its Unrecovered Capital,
determined for the taxable year (or portion thereof) to which this
allocation of gain relates, plus (2) the Minimum Quarterly
Distribution for the Quarter during which the Liquidation Date
occurs, reduced by any distribution pursuant to Section 6.4(a)(iii)
with respect to such Subordinated Unit for such Quarter;
(D) Fourth, 98% to all Unitholders, 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 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 Sections
6.4(a)(iv) and 6.4(b)(ii) (the sum of (1) plus (2) plus (3) plus (4)
is hereinafter defined as the "First Liquidation Target Amount");
(E) Fifth, 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 Sections 6.4(a)(v) and
6.4(b)(iii) (the sum of (1) plus (2) is hereinafter defined as the
"Second Liquidation Target Amount");
(F) Sixth, 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 Sections 6.4(a)(vi)and
6.4(b)(iv) (the sum of (1) plus (2) is hereinafter defined as the
"Third Liquidation Target Amount"); and
(G) 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.
46
(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, if such Net Termination Loss is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit, 98% to the Unitholders holding
Subordinated Units, Pro Rata, and 2% to the General Partner, until
the Capital Account in respect of each Subordinated Unit then
Outstanding has been reduced to zero;
(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 has been reduced to
zero; and
(C) Third, the balance, if any, 100% to the General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), 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
47
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 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 2/98ths 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 (1) 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; and (2) to
the General Partner in an amount equal to 2/98ths of the sum of the
amounts allocated in clause (1) above.
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership
income and gain shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i)
or (ii).
(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
48
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 that
the Partnership's Nonrecourse Deductions should be allocated in a
different ratio to satisfy the safe harbor requirements of the Treasury
Regulations promulgated under Section 704(b) of the Code, the 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(b) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Treasury Regulations.
(x) Economic Uniformity. At the election of the General Partner
with respect to any taxable period ending upon, or after, the termination
of the Subordination Period, all or a portion of the remaining items of
Partnership gross income or gain for such taxable period, after taking
into account allocations pursuant to Section 6.1(d)(iii), shall be
allocated 100% to each Partner holding Subordinated Units that are
Outstanding as of the termination of the Subordination Period ("Final
Subordinated Units") in the proportion of the number of Final Subordinated
Units held by such Partner to the total number of Final Subordinated Units
then Outstanding, until each such Partner has been allocated an amount of
gross income or gain that increases the Capital Account
49
maintained with respect to such Final Subordinated Units to an amount
equal to the product of (A) the number of Final Subordinated Units held by
such Partner and (B) the Per Unit Capital Amount for a Common Unit. The
purpose of this allocation is to establish uniformity between the Capital
Accounts underlying Final Subordinated Units and the Capital Accounts
underlying Common Units held by Persons other than the General Partner and
its Affiliates immediately prior to the conversion of such Final
Subordinated Units into Common Units. This allocation method for
establishing such economic uniformity will be available to the General
Partner only if the method for allocating the Capital Account maintained
with respect to the Subordinated Units between the transferred and
retained Subordinated Units pursuant to Section 5.5(c)(ii) does not
otherwise provide such economic uniformity to the Final Subordinated
Units.
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1,
other than the Required Allocations, the Required Allocations shall
be taken into account in making the Agreed Allocations so that, to
the extent possible, the net amount of items of income, gain, loss
and deduction allocated to each Partner pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to
the net amount of such items that would have been allocated to each
such Partner under the Agreed Allocations had the Required
Allocations and the related Curative Allocation not otherwise been
provided in this Section 6.1. Notwithstanding the preceding
sentence, Required Allocations relating to (1) Nonrecourse
Deductions shall not be taken into account except to the extent that
there has been a decrease in Partnership Minimum Gain and (2)
Partner Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section
6.1(d)(xi)(A) shall only be made with respect to Required
Allocations to the extent the General Partner determines that such
allocations will otherwise be inconsistent with the economic
agreement among the Partners. Further, allocations pursuant to this
Section 6.1(d)(xi)(A) shall be deferred with respect to allocations
pursuant to clauses (1) and (2) hereof to the extent the General
Partner determines that such allocations are likely to be offset by
subsequent Required Allocations.
(B) The General Partner shall, with respect to each taxable
period, (1) apply the provisions of Section 6.1(d)(xi)(A) in
whatever order is most likely to minimize the economic distortions
that might otherwise result from the Required Allocations, and (2)
divide all allocations pursuant to Section 6.1(d)(xi)(A) among the
Partners in a manner that is likely to minimize such economic
distortions.
(xii) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event or any
recognition of a Net Termination Loss, the following rules shall apply:
(A) In the case of any allocation of Additional Book Basis
Derivative Items (other than an allocation of Unrealized Gain or
Unrealized Loss under
50
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)(xii)(A) shall be made after all of the other Agreed
Allocations have been made as if this Section 6.1(d)(xii) were not
in this Agreement and, to the extent necessary, shall require the
reallocation of items that have been allocated pursuant to such
other Agreed Allocations.
(B) In the case of any negative adjustments to the Capital
Accounts of the Partners resulting from a Book-Down Event or from
the recognition of a Net Termination Loss, such negative adjustment
(1) shall first be allocated, to the extent of the Aggregate
Remaining Net Positive Adjustments, in such a manner, as determined
by the General Partner, that to the extent possible the aggregate
Capital Accounts of the Partners will equal the amount that 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)(xii), the General Partner may apply whatever conventions or
other methodology it determines will satisfy the purpose of this
Section 6.1(d)(xii).
Section 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and
51
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.
(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 (i) adopt such conventions as it
deems appropriate in determining the amount of depreciation, amortization and
cost recovery deductions; (ii) make special allocations for federal income tax
purposes of income (including, without limitation, gross income) or deductions;
and (iii) amend the provisions of this Agreement as appropriate (x) to reflect
the proposal or promulgation of Treasury Regulations under Section 704(b) or
Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of
the Limited Partner Interests (or any class or classes thereof). The General
Partner may adopt such conventions, make such allocations and make such
amendments to this Agreement as provided in this Section 6.2(c) only if such
conventions, allocations or amendments would not have a material adverse effect
on the Partners, the holders of any class or classes of Limited Partner
Interests issued and Outstanding or the Partnership, and if such allocations are
consistent with the principles of Section 704 of the Code.
(d) The General Partner 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 depreciation and
amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any Limited Partner Interests, so long as such
52
conventions 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 that may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted (in the
manner determined by the General Partner) to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction shall for
federal income tax purposes, be determined on an annual basis and prorated on a
monthly basis and shall be allocated to the Partners as of the opening of the
New York Stock Exchange on the first Business Day of each month; provided,
however, such items for the period beginning on the Closing Date and ending on
the last day of the month in which the Option Closing Date or the expiration of
the Over-Allotment Option occurs shall be allocated to the Partners as of the
opening of the New York Stock Exchange on the first Business Day of the next
succeeding month; and provided, further, that gain or loss on a sale or other
disposition of any assets of the Partnership or any other extraordinary item of
income or loss realized and recognized other than in the ordinary course of
business, as determined by the General Partner, shall be allocated to the
Partners as of the opening of the New York Stock Exchange on the first Business
Day of the month in which such gain or loss is recognized for federal income tax
purposes. The General Partner may revise, alter or otherwise modify such methods
of allocation 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 determined by the General
Partner.
Section 6.3 Requirement and Characterization of Distributions; Distributions to
Record Holders.
(a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on September 30, 2004, 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. 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
53
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 may treat taxes paid by the Partnership on
behalf of, or amounts withheld with respect to, all or less than all of the
Partners, as a distribution of Available Cash to such Partners.
(d) Each distribution in respect of a Partnership Interest shall be paid
by the Partnership, directly or through the Transfer Agent or through any other
Person or agent, only to the Record Holder of such Partnership Interest as of
the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such
payment by reason of an assignment or otherwise.
Section 6.4 Distributions of Available Cash from Operating Surplus.
(a) During Subordination Period. Available Cash with respect to any
Quarter within the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or 6.5 shall, subject to Section
17-607 of the Delaware Act, be distributed as follows, except as otherwise
required by Section 5.6(b) in respect of other Partnership Securities issued
pursuant thereto:
(i) First, 98% to the 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 Minimum
Quarterly Distribution for such Quarter;
(ii) Second, 98% to the 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 existing with respect to such Quarter;
(iii) Third, 98% to the Unitholders holding Subordinated Units, Pro
Rata, and 2% to the General Partner, until there has been distributed in
respect of each Subordinated Unit then Outstanding an amount equal to the
Minimum Quarterly Distribution for such Quarter;
(iv) Fourth, 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
54
to the excess of the First Target Distribution over the Minimum Quarterly
Distribution for such Quarter;
(v) Fifth, 85% to all Unitholders, Pro Rata, 13% to the holders of
the Incentive Distribution Rights 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;
(vi) Sixth, 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
(vii) 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)(vii).
(b) After Subordination Period. Available Cash with respect to any
Quarter after the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or 6.5, subject to Section 17-607 of
the Delaware Act, shall be distributed as follows, except as otherwise required
by Section 5.6(b) in respect of additional Partnership Securities issued
pursuant thereto:
(i) First, 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 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;
(iii) Third, 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;
(iv) Fourth, 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
55
(v) 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(b)(v).
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 a Common Unit acquired on the Closing Date has received
with respect to such Common Unit, during the period since the Closing Date
through such date, distributions of Available Cash that are deemed to be Capital
Surplus in an aggregate amount equal to the Initial Unit Price. Available Cash
that is deemed to be Capital Surplus shall then be distributed 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.
56
Section 6.7 Special Provisions Relating to the Holders of Subordinated Units.
(a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Subordinated Unit shall have all of the rights and obligations of a Unitholder
holding Common Units hereunder; provided, however, that immediately upon the
conversion of Subordinated Units into Common Units pursuant to Section 5.8, the
Unitholder holding a Subordinated Unit shall possess all of the rights and
obligations of a Unitholder holding Common Units hereunder, including the right
to vote as a Common Unitholder and the right to participate in allocations of
income, gain, loss and deduction and distributions made with respect to Common
Units; provided, however, that such converted Subordinated Units shall remain
subject to the provisions of Sections 5.5(c)(ii), 6.1(d)(x) and 6.7(b).
(b) The Unitholder holding a Subordinated Unit that has converted into a
Common Unit pursuant to Section 5.8 shall not be issued a Common Unit
Certificate pursuant to Section 4.1, and shall not be permitted to transfer its
converted Subordinated Units to a Person that is not an Affiliate of the holder
until such time as the General Partner determines, based on advice of counsel,
that a converted Subordinated Unit should have, as a substantive matter, like
intrinsic economic and federal income tax characteristics, in all material
respects, to the intrinsic economic and federal income tax characteristics of an
Initial Common Unit. In connection with the condition imposed by this Section
6.7(b), the General Partner may take whatever steps are required to provide
economic uniformity to the converted Subordinated Units in preparation for a
transfer of such converted Subordinated Units, including the application of
Sections 5.5(c)(ii) and 6.1(d)(x); provided, however, that no such steps may be
taken that would have a material adverse effect on the Unitholders holding
Common Units represented by Common Unit Certificates.
Section 6.8 Special Provisions Relating to the Holders of Incentive Distribution
Rights.
Notwithstanding anything to the contrary set forth in this Agreement, the
holders of the Incentive Distribution Rights (a) shall (i) possess the rights
and obligations provided in this Agreement with respect to a Limited Partner
pursuant to Articles III and VII and (ii) have a Capital Account as a Partner
pursuant to Section 5.5 and all other provisions related thereto and (b) shall
not (i) be entitled to vote on any matters requiring the approval or vote of the
holders of Outstanding Units, (ii) be entitled to any distributions other than
as provided in Sections 6.4(a)(v), (vi) and (vii), 6.4(b)(iii), (iv) and (v),
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 a governmental taxing authority so that a Group Member is treated as
an association taxable as a corporation or is otherwise subject to an
entity-level tax for federal, state or local income tax purposes, then the
General Partner shall estimate for each Quarter the Partnership Group's
aggregate liability (the "Estimated Incremental Quarterly Tax Amount") for all
such income
57
taxes that are payable by reason of any such new legislation or interpretation;
provided that any difference between such estimate and the actual tax liability
for such Quarter that is owed by reason of any such new legislation or
interpretation shall be taken into account in determining the Estimated
Incremental Quarterly Tax Amount with respect to each Quarter in which any such
difference can be determined. For each such Quarter, the Minimum Quarterly
Distribution, First Target Distribution, Second Target Distribution and Third
Target Distribution, shall be the product obtained by multiplying (a) the
amounts therefor that are set out herein prior to the application of this
Section 6.9 times (b) the quotient obtained by dividing (i) Available Cash with
respect to such Quarter by (ii) the sum of Available Cash with respect to such
Quarter and the Estimated Incremental Quarterly Tax Amount for such Quarter, as
determined by the General Partner. For purposes of the foregoing, Available Cash
with respect to a Quarter will be deemed reduced by the Estimated Incremental
Quarterly Tax Amount for that Quarter.
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 that 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 determines to be necessary or appropriate to
conduct the business of the Partnership, to exercise all powers set forth in
Section 2.5 and to effectuate the purposes set forth in Section 2.4, including
the following:
(i) the making of any expenditures, the lending or borrowing of
money, the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness, including indebtedness that is convertible into Partnership
Securities, and the incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering
of periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership
or the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3);
(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
58
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 insurance for the benefit of the
Partnership Group and the Partners;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited
or general partnerships, joint ventures, corporations, 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, arbitration or mediation and the incurring of legal expense
and the settlement of claims and litigation;
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National
Securities Exchange and the delisting of some or all of the Limited
Partner Interests from, or requesting that trading be suspended on, any
such exchange (subject to any prior approval that may be required under
Section 4.8);
(xiii) unless restricted or prohibited by Section 5.7, the 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;
(xiv) the undertaking of any action in connection with the
Partnership's participation in any Group Member; and
59
(xv) the entering into of agreements with any of its Affiliates to
render services to a Group Member or to itself in the discharge of its
duties as General Partner of the .
(b) Notwithstanding any other provision of this Agreement, any Group
Member 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 this
Agreement, the Underwriting Agreement, the Omnibus Agreement, the Contribution
Agreement, any Group Member Agreement of any other Group Member 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 that the General Partner
determines to be necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of Delaware or any
other state in which the Partnership may elect to do business or own property.
To the extent the General Partner determines such action to be 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) Except as otherwise provided in this Agreement, 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
60
Outstanding Limited Partner Interests subsequent to the date of this Agreement,
take any action in contravention of this Agreement, including, (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
assets of the Partnership Group, taken as a whole, in a single transaction or a
series of related transactions (including by way of merger, consolidation or
other combination) 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 Group and shall not apply to
any forced sale of any or all of the assets of the Partnership Group 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, except as expressly permitted by Section 7.9(e), 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 or (ii) except as permitted under Sections
4.6, 11.1 and 11.2, elect or cause the Partnership to elect a successor general
partner of the Partnership.
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.
(b) The General Partner shall be reimbursed on a monthly basis, or such
other basis as the General Partner may determine, 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 expenses allocable to the Partnership or
otherwise 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. 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, 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 or
rights, warrants or appreciation rights relating to Partnership Securities), or
cause the
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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 (i) 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), (ii) shall not engage in
any business or activity or incur any debts or liabilities except in connection
with or incidental to (A) its performance as general partner or managing member,
if any, of one or more Group Members or as described in or contemplated by the
Registration Statement or (B) the acquiring, owning or disposing of debt or
equity securities in any Group Member and (iii) except to the extent permitted
in the Omnibus Agreement, shall not, and shall cause its Affiliates not to,
engage in any Restricted Business.
(b) Xxxxx Corporation and certain of its Affiliates have entered into the
Omnibus Agreement, which agreement sets forth certain restrictions on the
ability of Xxxxx Corporation and its Affiliates to engage in Restricted
Businesses.
(c) Except as specifically restricted by Section 7.5(a) and the Omnibus
Agreement, 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 expressed or implied by law to
any Group Member or any Partner or Assignee. None of any Group Member, any
Limited Partner or any other Person shall have any rights by virtue of this
Agreement, any Group Member Agreement, or the partnership relationship
established hereby in any business ventures of any Indemnitee.
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(d) Subject to the terms of Section 7.5(a), Section 7.5(b), Section 7.5(c)
and the Omnibus Agreement, but otherwise notwithstanding anything to the
contrary in this Agreement, (i) the engaging in competitive activities by any
Indemnitees (other than the General Partner) in accordance with the provisions
of this Section 7.5 is hereby approved by the Partnership and all Partners, (ii)
it shall be deemed not to be a breach of any fiduciary duty or any other
obligation of any type whatsoever of the General Partner or of any Indemnitee
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) except as set forth in the Omnibus Agreement, the General Partner and
the Indemnitees shall have no obligation hereunder or as a result of any duty
expressed or implied by law to present business opportunities to the
Partnership.
(e) The General Partner and each 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, at their option, all rights relating to all Units or other Partnership
Securities acquired by them.
(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.
(g) Notwithstanding anything to the contrary in this Agreement, to the
extent that any provision of this Agreement purports or is 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 or Group Members.
(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), all as determined by the General Partner.
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.
(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
determined by the
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General Partner. No Group Member may lend funds to the General Partner or any of
its Affiliates (other than another Group Member).
(c) No borrowing by any Group Member or the approval thereof by the
General Partner shall be deemed to constitute a breach of any duty, expressed or
implied, of the General Partner or its Affiliates 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 (i) enable distributions to the General
Partner or its Affiliates (including in their capacities as Limited Partners) to
exceed the General Partner's Percentage Interest of the total amount distributed
to all partners or (ii) hasten the expiration of the Subordination Period or the
conversion of any Subordinated Units into Common Units.
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 the Indemnitee shall not be
indemnified and held harmless if there has been a final and non-appealable
judgment entered by a court of competent jurisdiction determining that, in
respect of the matter for which the Indemnitee is seeking indemnification
pursuant to this Section 7.7, the Indemnitee acted in bad faith or engaged in
fraud, willful misconduct or gross negligence or, in the case of a criminal
matter, acted with knowledge that the Indemnitee's conduct was unlawful;
provided, further, no indemnification pursuant to this Section 7.7 shall be
available to the General Partner or its Affiliates (other than a Group Member)
with respect to its or their obligations incurred pursuant to the Underwriting
Agreement, the Omnibus Agreement or the Contribution Agreement (other than
obligations incurred by the General Partner on behalf of the Partnership). Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, it being agreed that the General Partner shall not be
personally liable for such indemnification and shall have no obligation to
contribute or loan any monies or property to the Partnership to enable it to
effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal fees
and expenses) incurred by an Indemnitee who is indemnified pursuant to Section
7.7(a) in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Partnership prior to a determination that the
Indemnitee is not entitled to be indemnified 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
64
(including any capacity under the Underwriting Agreement), and shall continue as
to an Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General
Partner or its Affiliates for the cost of) insurance, on behalf of the General
Partner, its Affiliates and such other Persons as the General Partner shall
determine, against any liability that may be asserted against, or expense that
may be incurred by, such Person in connection with the Partnership's activities
or such Person's activities on behalf of the Partnership, regardless of whether
the Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute "fines"
within the meaning of Section 7.7(a); and action taken or omitted by it with
respect to any employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the best interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose that is in the
best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
Section 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this Agreement,
no Indemnitee shall be liable for monetary damages to the Partnership, the
Limited Partners, the Assignees or any other Persons who have acquired interests
in the Partnership Securities, for losses sustained or liabilities incurred as a
result of any act or omission of an Indemnitee unless
65
there has been a final and non-appealable judgment entered by a court of
competent jurisdiction determining that, in respect of the matter in question,
the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or
gross negligence or, in the case of a criminal matter, acted with knowledge that
the Indemnitee's conduct was criminal.
(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.
(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 of the Indemnitees 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; Standards of Conduct and
Modification of Duties.
(a) Unless otherwise expressly provided in this Agreement or any Group
Member Agreement, whenever a potential conflict of interest exists or arises
between the General Partner or any of its Affiliates, on the one hand, and the
Partnership, any Group Member, any Partner or any Assignee, on the other, any
resolution or course of action by the General Partner or its Affiliates in
respect of such conflict of interest shall be permitted and deemed approved by
all Partners, and shall not constitute a breach of this Agreement, of any Group
Member 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
in respect of such conflict of interest is (i) approved by Special Approval,
(ii) approved by the vote of a majority of the Common Units (excluding Common
Units owned by the General Partner and its Affiliates), (iii) on terms no less
favorable to the Partnership than those generally being provided to or available
from unrelated third parties or (iv) fair and reasonable 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 shall be authorized but
not required in connection with its resolution of such conflict of interest to
seek Special Approval of such resolution, and the General Partner may also adopt
a resolution or course of action that has not received Special Approval. If
Special Approval is not sought and the Board of Directors of the General Partner
determines that the resolution or course of action taken with respect to a
conflict of interest satisfies either of the standards set forth in clauses
(iii) or (iv) above, then it shall be presumed that, in making its decision, the
Board of Directors acted in good faith, and in any
66
proceeding brought by any Limited Partner or Assignee or by or on behalf of such
Limited Partner or Assignee or any other Limited Partner or Assignee or the
Partnership challenging such approval, the Person bringing or prosecuting such
proceeding shall have the burden of overcoming such presumption. 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.
(b) Whenever the General Partner makes a determination or takes or
declines to take any other action, or any of its Affiliates causes it to do so,
in its capacity as the general partner of the Partnership as opposed to in its
individual capacity, whether under this Agreement, any Group Member Agreement or
any other agreement contemplated hereby or otherwise, then, unless another
express standard is provided for in this Agreement, the General Partner, or such
Affiliates causing it to do so, shall make such determination or take or decline
to take such other action in good faith and shall not be subject to any other or
different standards imposed by this Agreement, any Group Member Agreement, any
other agreement contemplated hereby or under the Delaware Act or any other law,
rule or regulation. In order for a determination or other action to be in "good
faith" for purposes of this Agreement, the Person or Persons making such
determination or taking or declining to take such other action must reasonably
believe that the determination or other action is in the best interests of the
Partnership, unless the context otherwise requires.
(c) Whenever the General Partner makes a determination or takes or
declines to take any other action, or any of its Affiliates causes it to do so,
in its individual capacity as opposed to in its capacity as the general partner
of the Partnership, whether under this Agreement, any Group Member Agreement or
any other agreement contemplated hereby or otherwise, then the General Partner,
or such Affiliates causing it to do so, are entitled to make such determination
or to take or decline to take such other action free of any fiduciary duty or
obligation whatsoever to the Partnership, any Limited Partner or Assignee, and
the General Partner, or such Affiliates causing it to do so, shall not be
required to act in good faith or pursuant to any other standard imposed by this
Agreement, any Group Member Agreement, any other agreement contemplated hereby
or under the Delaware Act or any other law, rule or regulation. By way of
illustration and not of limitation, whenever the phrase, "at the option of the
General Partner," or some variation of that phrase, is used in this Agreement,
it indicates that the General Partner is acting in its individual capacity.
(d) Notwithstanding anything to the contrary in this Agreement, the
General Partner and its Affiliates shall have no duty or obligation, express or
implied, to (i) sell or otherwise dispose of any asset of the Partnership Group
other than in the ordinary course of business or (ii) 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. Any determination by the General Partner or any of its
Affiliates to enter into such contracts shall be at its option.
(e) Except as expressly set forth in this Agreement, neither the General
Partner nor any other Indemnitee shall have any duties or liabilities, including
fiduciary duties, to the Partnership or any Limited Partner or Assignee and the
provisions of this Agreement, to the extent that they restrict or otherwise
modify the duties and liabilities, including fiduciary duties,
67
of the General Partner or any other Indemnitee otherwise existing at law or in
equity, are agreed by the Partners to replace such other duties and liabilities
of the General Partner or such other Indemnitee.
(f) 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.
Section 7.11 Purchase or Sale of Partnership Securities.
The General Partner may cause the Partnership to purchase or otherwise
acquire Partnership Securities; provided that, except as permitted pursuant to
Section 4.10, the General Partner may not cause any Group Member to purchase
Subordinated Units during the Subordination Period. As long as Partnership
Securities are held by any Group Member, such Partnership Securities shall not
be considered Outstanding for any purpose, except as otherwise provided herein.
The General Partner or any Affiliate of the General Partner may also purchase or
otherwise acquire and sell or otherwise dispose of Partnership Securities for
its own account, subject to the provisions of Articles IV and X.
Section 7.12 Registration Rights of the General Partner and its Affiliates.
(a) If (i) the General Partner or any Affiliate of the General Partner
(including for purposes of this Section 7.12, any Person that is an Affiliate of
the General Partner at the date hereof notwithstanding that it may later cease
to be an Affiliate of the General Partner) holds Partnership Securities that it
desires to sell and (ii) Rule 144 of the Securities Act (or any successor rule
or regulation to Rule 144) or another exemption from registration is not
available to enable such holder of Partnership Securities (the "Holder") to
dispose of the number of Partnership Securities it desires to sell at the time
it desires to do so without registration under the Securities Act, then at the
option and upon the request of the Holder, the Partnership shall file
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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 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 (i) promptly prepare
and file (A) 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
(B) 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 (ii) do any and all other
acts and things that may be necessary or appropriate 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; provided, that the Partnership is not required to
make any effort or take an action to so include the securities of the Holder
once the registration statement is declared effective by the Commission,
including any registration statement providing for the offering from time to
time of securities pursuant to Rule 415 of the Securities Act. 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 that, 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
69
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.
(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 it has requested during such two-year period
inclusion in a registration statement otherwise filed or that a registration
statement be filed; provided, however, that the Partnership shall not be
required to file successive registration statements covering the same
Partnership Securities for which registration was demanded during such two-year
period. The provisions of Section 7.12(c) shall continue in effect thereafter.
(e) Any request to register Partnership Securities pursuant to this
Section 7.12 shall (i) specify the Partnership Securities intended to be offered
and sold by the Person making the request, (ii) express such Person's present
intent to offer such 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
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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 this 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.
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, an annual report containing financial
statements of the Partnership for such fiscal year of the Partnership,
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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, 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, or as the General Partner determines to
be necessary or appropriate.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information.
The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by Record Holders for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
Section 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the General Partner's
determination that such revocation is in the best interests of the Limited
Partners. Notwithstanding any other provision herein contained, for the purposes
of computing the adjustments under Section 743(b) of the Code, the General
Partner shall be authorized (but not required) to adopt a convention whereby the
price paid by a transferee of a Limited Partner Interest will be deemed to be
the lowest quoted closing price of the Limited Partner Interests on any National
Securities Exchange on which such Limited Partner Interests are listed 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
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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 may be required 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 General Partner may treat the amount withheld as
a distribution of cash pursuant to Section 6.3 in the amount of such withholding
from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Initial Limited Partners.
Upon the issuance by the Partnership of Common Units, Subordinated Units
and Incentive Distribution Rights to the General Partner, Xxxxx Corporation,
Navajo Refining Company, L.P., Xxxxx Cross Refining Company, L.L.C. and the
Underwriters as described in Sections 5.2 and 5.3 in connection with the Initial
Offering, the General Partner shall admit such parties to the Partnership as
Initial Limited Partners in respect of the Common Units, Subordinated Units or
Incentive Distribution Rights issued to them.
Section 10.2 Admission of Substituted Limited Partners.
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. Such Assignee shall automatically be admitted to the
Partnership as a Substituted Limited Partner with respect to the Limited Partner
Interests so transferred to such Person at such time as such transfer is
recorded in the books and records of the Partnership, and until so recorded,
such transferee shall be an
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Assignee. The General Partner shall periodically, but no less frequently than on
the first Business Day of each calendar quarter, cause any unrecorded transfers
of Limited Partner Interests with respect to which a duly executed Transfer
Application has been received to be recorded in the books and records of the
Partnership. 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 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 by 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. 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.
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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 or 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 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
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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, Central Standard
Time, on June 30, 2014, 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 already
so treated or taxed); (ii) at any time after 12:00 midnight, Central Standard
Time, on June 30, 2014, 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 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, if
any, 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.
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Section 11.2 Removal of the General Partner.
The General Partner may be removed if such removal is approved by the
Unitholders holding at least 66 2/3% of the Outstanding Units (including Units
held by the General Partner and its Affiliates). Any such action by such holders
for removal of the General Partner must also provide for the election of a
successor General Partner by the Unitholders holding a majority of the
outstanding Common Units voting as a class and a majority of the outstanding
Subordinated 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.
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 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 (or if the
Partnership is reconstituted pursuant to Section 12.2 and the successor General
Partner is not the former General Partner), such successor shall have the
option, exercisable prior to the effective date of the departure of such
Departing Partner (or, in the event of a reconstituted Partnership, prior to the
effective date of the reconstitution of the Partnership), 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.
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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 Combined Interest shall be converted into Common Units
pursuant to a valuation made by an investment banking firm or other independent
expert selected pursuant to Section 11.3(a), without reduction in such
Partnership Interest (but subject to proportionate dilution by reason of the
admission of its successor). Any successor General Partner shall indemnify the
Departing Partner (or its transferee) as to all debts and liabilities of the
Partnership arising on or after the date on which the Departing Partner (or its
transferee) becomes a Limited Partner. For purposes of this Agreement,
conversion of the Combined Interest of the Departing Partner to Common Units
will be characterized as if the Departing Partner (or its transferee)
contributed its Combined Interest to the Partnership in exchange for the newly
issued Common Units.
(c) If a successor General Partner is elected in accordance with the terms
of Section 11.1 or 11.2 (or if the Partnership is reconstituted pursuant to
Section 12.2 and the successor General Partner is not the former General
Partner) 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 Termination of Subordination Period, Conversion of Subordinated
Units and Extinguishment of Cumulative Common Unit Arrearages.
Notwithstanding any provision of this Agreement, if the General Partner is
removed as general partner of the Partnership under circumstances where Cause
does not exist and Units
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held by the General Partner and its Affiliates are not voted in favor of such
removal, (i) the Subordination Period will end and all Outstanding Subordinated
Units will immediately and automatically convert into Common Units on a
one-for-one basis, (ii) all Cumulative Common Unit Arrearages on the Common
Units will be extinguished and (iii) the General Partner will have the right to
convert its General Partner Interest and its Incentive Distribution Rights into
Common Units or to receive cash in exchange therefor.
Section 11.5 Withdrawal of Limited Partners.
No Limited Partner shall have any right to withdraw from the Partnership;
provided, however, that when a transferee of a Limited Partner's Limited Partner
Interest becomes a Record Holder of the Limited Partner Interest so transferred,
such transferring Limited Partner shall cease to be a Limited Partner with
respect to the Limited Partner Interest so transferred.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner, if a successor General Partner
is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be
dissolved and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) an election to dissolve the Partnership by the General Partner that is
approved by the holders of a Unit Majority;
(b) the sale of all or substantially all of the assets and properties of
the Partnership Group;
(c) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(d) 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.
Section 12.2 Continuation of the Business of the Partnership After Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi), then, to the
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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 any 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 (to the extent not already so treated or taxed).
Section 12.3 Liquidator.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the General Partner shall select one or more Persons to act as
Liquidator. The Liquidator (if other than the General Partner) shall be entitled
to receive such compensation for its services as may be approved by holders of
at least a majority of the Outstanding Common Units and Subordinated Units
voting as a single class. The Liquidator (if other than the General Partner)
shall agree not to resign at any time without 15 days' prior notice and may be
removed at any time, with or without cause, by notice of removal approved by
holders of at least a majority of the Outstanding Common Units and Subordinated
Units voting as a single class. Upon dissolution, removal or resignation of the
Liquidator, a successor and substitute Liquidator (who shall have and succeed to
all rights, powers and duties of the original Liquidator) shall within 30 days
thereafter be approved by holders of at least a majority of the Outstanding
Common Units and Subordinated Units voting as a single class. The right to
approve a successor or substitute Liquidator in the manner provided herein shall
be deemed to refer also to any such successor or substitute Liquidator approved
in the manner herein provided. Except as expressly provided in this Article XII,
the Liquidator approved in the manner provided herein shall have and may
exercise, without further
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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)) necessary or appropriate to carry out the duties and functions
of the Liquidator hereunder for and during the period of time required 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 determined by the Liquidator, 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 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 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).
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
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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 Amendments 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 the General Partner determines to be necessary or
appropriate 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 the General Partner determines, (i) does not adversely
affect the Limited Partners (including any particular class of Partnership
Interests as compared to other
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classes of Partnership Interests) in any material respect, (ii) to be necessary
or appropriate 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,
(iii) to be necessary or appropriate in connection with action taken by the
General Partner pursuant to Section 5.10 or (iv) is required to effect the
intent expressed in the Registration Statement or the intent of the provisions
of this Agreement or is otherwise contemplated by this Agreement;
(e) a change in the fiscal year or taxable year of the Partnership and any
other changes that the General Partner determines to be necessary or appropriate
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 the General
Partner determines to be necessary or appropriate 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 the General Partner determines to be necessary or
appropriate to reflect and account for the formation by the Partnership of, or
investment by the Partnership in, any corporation, partnership, joint venture,
limited liability company or other entity, in connection with the conduct by the
Partnership of activities permitted by the terms of Section 2.4;
(k) a merger or conveyance pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
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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 the General Partner;
provided, however, that the General Partner shall have no duty or obligation to
propose any amendment to this Agreement and may decline to do so free of any
fiduciary duty or obligation whatsoever to the Partnership, any Limited Partner
or Assignee and, in declining to propose an amendment, shall not be required to
act in good faith or pursuant to any other standard imposed by this Agreement,
any Group Member Agreement, any other agreement contemplated hereby or under the
Delaware Act or any other law, rule or regulation. 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.
(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 at
its option, (iii) change Section 12.1(a), or (iv) change the term of the
Partnership or, except as set forth in Section 12.1(a), 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
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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.
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.
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Section 13.7 Adjournment.
When a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting and a new Record Date need not be fixed, if
the time and place thereof are announced at the meeting at which the adjournment
is taken, unless such adjournment shall be for more than 45 days. At the
adjourned meeting, the Partnership may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than 45
days or if a new Record Date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given in accordance with this Article XIII.
Section 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and
noticed, and whenever held, shall be as valid as if it had occurred at a meeting
duly held after regular call and notice, if a quorum is present either in person
or by proxy, and if, either before or after the meeting, Limited Partners
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof. All waivers and approvals shall
be filed with the Partnership records or made a part of the minutes of the
meeting. Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting, except when the Limited Partner attends the meeting
for the express purpose of objecting, at the beginning of the meeting, to 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 and Voting.
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 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
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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,
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 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.
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Section 13.12 Right to Vote and Related Matters.
(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 the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article XIV.
Section 14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior consent of the General Partner; provided, however, that the
General Partner shall have no duty or obligation to consent to any merger or
consolidation of the Partnership and may decline to do so free of any fiduciary
duty or obligation whatsoever to the Partnership, any Limited Partner or
Assignee and, in declining to consent to a merger or consolidation, shall not be
required to act in good faith or pursuant to any other standard imposed by this
Agreement, any Group Member Agreement, any other agreement contemplated hereby
or under the Delaware Act or any other law, rule or regulation. If the General
Partner shall determine 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;
88
(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 that the General Partner determines to be necessary or
appropriate.
Section 14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the General Partner, upon its
approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement shall be included in or
enclosed with the notice of a special meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement shall be
approved upon receiving the affirmative vote or consent of the holders of a Unit
Majority unless the Merger Agreement contains any provision that, if contained
in an amendment to this Agreement, the provisions of this Agreement or the
Delaware Act would require for its approval the vote or consent of a greater
percentage of the Outstanding Units or of any class of Limited Partners, in
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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 without Limited Partner approval, to
convert the Partnership or any Group Member into a new limited liability entity,
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
conversion, 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 conversion, 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;
(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
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(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall not
be deemed to result in a transfer or assignment of assets or liabilities from
one entity to another.
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
Section 15.1 Right to Acquire Limited Partner Interests.
(a) Notwithstanding any other provision of this Agreement, if at any time
the General Partner and its Affiliates hold more than 80% of the total Limited
Partner Interests of any class then Outstanding, the General Partner shall then
have the right, which right it may assign and transfer in whole or in part to
the Partnership or any Affiliate of the General Partner, exercisable at its
option, to purchase all, but not less than all, of such Limited Partner
Interests of such class then Outstanding held by Persons other than the General
Partner and its Affiliates, at the greater of (x) the Current Market Price as of
the date three days prior to the date that the notice described in Section
15.1(b) is mailed and (y) the highest price paid by the General Partner or any
of its Affiliates for any such Limited Partner Interest of such class purchased
during the 90-day period preceding the date that the notice described in Section
15.1(b) is mailed. As used in this Agreement, (i) "Current Market Price" as of
any date of any class of Limited Partner Interests means the average of the
daily Closing Prices (as hereinafter defined) per Limited Partner Interest of
such class for the 20 consecutive Trading Days (as hereinafter defined)
immediately prior to such date; (ii) "Closing Price" for any day means the last
sale price on such day, regular way, or in case no such sale takes place on such
day, the average of the closing bid and asked prices on such day, regular way,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal National Securities Exchange
(other than the Nasdaq Stock Market) on which such Limited Partner Interests are
listed or, if such Limited Partner Interests of such class are not listed 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 by the General Partner; and (iii) "Trading Day" means a day on which
the principal National Securities Exchange on which such Limited Partner
Interests of any class are listed is open for the transaction of business or, if
Limited Partner Interests of a class are not listed on any National Securities
Exchange, a day on which banking institutions in New York City generally are
open.
(b) If the General Partner, any Affiliate of the General Partner or the
Partnership elects to exercise the right to purchase Limited Partner Interests
granted pursuant to Section
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15.1(a), the General Partner shall deliver to the Transfer Agent notice of such
election to purchase (the "Notice of Election to Purchase") and shall cause the
Transfer Agent to mail a copy of such Notice of Election to Purchase to the
Record Holders of Limited Partner Interests of such class (as of a Record Date
selected by the General Partner) at least 10, but not more than 60, days prior
to the Purchase Date. Such Notice of Election to Purchase shall also be
published for a period of at least three consecutive days in at least two daily
newspapers of general circulation printed in the English language and published
in the Borough of Manhattan, New York. The Notice of Election to Purchase shall
specify the Purchase Date and the price (determined in accordance with Section
15.1(a)) at which Limited Partner Interests will be purchased and state that the
General Partner, its Affiliate or the Partnership, as the case may be, elects to
purchase such Limited Partner Interests, upon surrender of Certificates
representing such Limited Partner Interests in exchange for payment, at such
office or offices of the Transfer Agent as the Transfer Agent may specify, or as
may be required by any National Securities Exchange on which such Limited
Partner Interests are listed. Any such Notice of Election to Purchase mailed to
a Record Holder of Limited Partner Interests at his address as reflected in the
records of the Transfer Agent shall be conclusively presumed to have been given
regardless of whether the owner receives such notice. On or prior to the
Purchase Date, the General Partner, its Affiliate or the Partnership, as the
case may be, shall deposit with the Transfer Agent cash in an amount sufficient
to pay the aggregate purchase price of all of such Limited Partner Interests to
be purchased in accordance with this Section 15.1. If the Notice of Election to
Purchase shall have been duly given as aforesaid at least 10 days prior to the
Purchase Date, and if on or prior to the Purchase Date the deposit described in
the preceding sentence has been made for the benefit of the holders of Limited
Partner Interests subject to purchase as provided herein, then from and after
the Purchase Date, notwithstanding that any Certificate shall not have been
surrendered for purchase, all rights of the holders of such Limited Partner
Interests (including any rights pursuant to Articles IV, V, VI, and XII) shall
thereupon cease, except the right to receive the purchase price (determined in
accordance with Section 15.1(a)) for Limited Partner Interests therefor, without
interest, upon surrender to the Transfer Agent of the Certificates representing
such Limited Partner Interests, and such Limited Partner Interests shall
thereupon be deemed to be transferred to the General Partner, its Affiliate or
the Partnership, as the case may be, on the record books of the Transfer Agent
and the Partnership, and the General Partner or any Affiliate of the General
Partner, or the Partnership, as the case may be, shall be deemed to be the owner
of all such Limited Partner Interests from and after the Purchase Date and shall
have all rights as the owner of such Limited Partner Interests (including all
rights as owner of such Limited Partner Interests pursuant to Articles IV, V, VI
and XII).
(c) At any time from and after the Purchase Date, a holder of an
Outstanding Limited Partner Interest subject to purchase as provided in this
Section 15.1 may surrender his Certificate evidencing such Limited Partner
Interest to the Transfer Agent in exchange for payment of the amount described
in Section 15.1(a), therefor, without interest thereon.
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ARTICLE XVI
GENERAL PROVISIONS
Section 16.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address described below. Any
notice, payment or report to be given or made to a Partner or Assignee hereunder
shall be deemed conclusively to have been given or made, and the obligation to
give such notice or report or to make such payment shall be deemed conclusively
to have been fully satisfied, upon sending of such notice, payment or report to
the Record Holder of such Partnership Securities at his address as shown on the
records of the Transfer Agent or as otherwise shown on the records of the
Partnership, regardless of any claim of any Person who may have an interest in
such Partnership Securities by reason of any assignment or otherwise. An
affidavit or certificate of making of any notice, payment or report in
accordance with the provisions of this Section 16.1 executed by the General
Partner, the Transfer Agent or the mailing organization shall be prima facie
evidence of the giving or making of such notice, payment or report. If any
notice, payment or report addressed to a Record Holder at the address of such
Record Holder appearing on the books and records of the Transfer Agent or the
Partnership is returned by the United States Postal Service marked to indicate
that the United States Postal Service is unable to deliver it, such notice,
payment or report and any subsequent notices, payments and reports shall be
deemed to have been duly given or made without further mailing (until such time
as such Record Holder or another Person notifies the Transfer Agent or the
Partnership of a change in his address) if they are available for the Partner or
Assignee at the principal office of the Partnership for a period of one year
from the date of the giving or making of such notice, payment or report to the
other Partners and Assignees. Any notice to the Partnership shall be deemed
given if received by the General Partner at the principal office of the
Partnership designated pursuant to Section 2.3. The General Partner may rely and
shall be protected in relying on any notice or other document from a Partner,
Assignee or other Person if believed by it to be genuine.
Section 16.2 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 16.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
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Section 16.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
Section 16.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
Section 16.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.
Section 16.7 Counterparts.
This Agreement may be executed in counterparts, all of which together
shall constitute an agreement binding on all the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same
counterpart. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto or, in the case of a Person acquiring a Unit, upon
accepting the certificate evidencing such Unit or executing and delivering a
Transfer Application as herein described, independently of the signature of any
other party.
Section 16.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
Section 16.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 16.10 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
HEP LOGISTICS HOLDINGS, L.P.
By: Xxxxx Logistic Services, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
ORGANIZATIONAL LIMITED PARTNER:
XXXXX CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
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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.
HEP LOGISTICS HOLDINGS, L.P.
By: Xxxxx Logistic Services, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
96
EXHIBIT A
TO THE FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
XXXXX ENERGY PARTNERS, L.P.
CERTIFICATE EVIDENCING COMMON UNITS
REPRESENTING LIMITED PARTNER INTERESTS IN
XXXXX ENERGY PARTNERS, L.P.
No. __________ __________ Common Units
In accordance with Section 4.1 of the First Amended and Restated Agreement
of Limited Partnership of Xxxxx Energy Partners, L.P., as amended, supplemented
or restated from time to time (the "Partnership Agreement"), Xxxxx 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 Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx, 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 for any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.
Dated:_______________ Xxxxx Energy Partners L.P.
Countersigned and Registered by: By: HEP Logistics Holdings, L.P.,
its General Partner
By: Xxxxx Logistic Services, LLC,
its General Partner
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__________________________________ By:____________________________________
as Transfer Agent and Registrar Name:__________________________________
By:_______________________________ By:____________________________________
Authorized Signature Secretary
[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 Minors Act (State)
tenants in common
Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF COMMON UNITS
IN
XXXXX ENERGY PARTNERS, L.P.
IMPORTANT NOTICE REGARDING INVESTOR RESPONSIBILITIES
DUE TO TAX SHELTER STATUS OF
XXXXX ENERGY PARTNERS, L.P.
You have acquired an interest in Xxxxx Energy Partners, L.P., 000 Xxxxxxxx
Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, whose taxpayer identification number is
00-0000000. The Internal Revenue Service has issued Xxxxx 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 XXXXX ENERGY PARTNERS L.P.
You must report the registration number as well as the name and taxpayer
identification number of Xxxxx 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 XXXXX
ENERGY PARTNERS, L.P.
If you transfer your interest in Xxxxx 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 Xxxxx Energy Partners, L.P. If you do not
2
want to keep such a list, you must (1) send the information specified above to
Xxxxx Energy Partners, L.P., which will keep the list for this tax shelter, and
(2) give a copy of this notice to the person to whom you transfer your interest.
Your failure to comply with any of the above-described responsibilities could
result in the imposition of a penalty under Section 6707(b) or 6708(a) of the
Internal Revenue Code of 1986, as amended, unless such failure is shown to be
due to reasonable cause.
ISSUANCE OF A REGISTRATION NUMBER DOES NOT INDICATE THAT THIS INVESTMENT
OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED BY THE
INTERNAL REVENUE SERVICE.
FOR VALUE RECEIVED, __________ hereby assigns, conveys, sells and
transfers unto
_________________________________ _______________________________________
(Please print or typewrite name (Please insert Social Security or other
and address of Assignee) identifying number of Assignee)
__________ 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 Xxxxx 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.
THE SIGNATURE(S) MUST BE
GUARANTEED BY AN ______________________________
ELIGIBLE GUARANTOR (Signature)
INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH
MEMBERSHIP IN AN ______________________________
APPROVED SIGNATURE (Signature)
GUARANTEE MEDALLION
PROGRAM), PURSUANT TO
S.E.C. RULE 17d-15
_____________________________
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.
3
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 First Amended
and Restated Agreement of Limited Partnership of Xxxxx 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
4
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)
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,
5
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.
6
