EXHIBIT 3.13
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
EOTT ENERGY LIQUIDS, L.P.
TABLE OF CONTENTS
ARTICLE I ORGANIZATIONAL MATTERS............................................ 1
1.1 FORMATION........................................................... 1
1.2 NAME................................................................ 1
1.3 REGISTERED OFFICE; PRINCIPAL OFFICE................................. 1
1.4 POWER OF ATTORNEY................................................... 1
1.5 TERM................................................................ 2
1.6 POSSIBLE RESTRICTIONS ON TRANSFER................................... 2
ARTICLE II DEFINITIONS...................................................... 3
ARTICLE III PURPOSE......................................................... 9
3.1 PURPOSE AND BUSINESS................................................ 9
3.2 POWERS.............................................................. 9
ARTICLE IV CAPITAL CONTRIBUTIONS............................................ 10
4.1 INITIAL CONTRIBUTIONS............................................... 10
4.2 ADDITIONAL CAPITAL CONTRIBUTIONS.................................... 10
4.3 NO PREEMPTIVE RIGHTS................................................ 10
4.4 CAPITAL ACCOUNTS.................................................... 10
4.5 INTEREST............................................................ 12
4.6 NO WITHDRAWAL....................................................... 12
4.7 LOANS FROM PARTNERS................................................. 12
ARTICLE V ALLOCATIONS AND DISTRIBUTIONS..................................... 13
5.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES............................ 13
5.2 ALLOCATIONS FOR TAX PURPOSES........................................ 16
5.3 REQUIREMENT OF DISTRIBUTIONS........................................ 18
ARTICLE VI MANAGEMENT AND OPERATION OF BUSINESS............................. 18
6.1 MANAGEMENT.......................................................... 18
6.2 CERTIFICATE OF LIMITED PARTNERSHIP.................................. 19
6.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY......................... 19
6.4 REIMBURSEMENT OF THE GENERAL PARTNER................................ 20
6.5 OUTSIDE ACTIVITIES.................................................. 20
6.6 INDEMNIFICATION..................................................... 20
6.7 LIABILITY OF INDEMNITEES............................................ 22
6.8 RESOLUTION OF CONFLICTS OF INTEREST................................. 22
6.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER........................ 22
6.10 TITLE TO PARTNERSHIP ASSETS......................................... 23
6.11 RELIANCE BY THIRD PARTIES........................................... 23
ARTICLE VII RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER................... 24
7.1 LIMITATION OF LIABILITY............................................. 24
7.2 MANAGEMENT OF BUSINESS.............................................. 24
7.3 RETURN OF CAPITAL................................................... 24
7.4 RIGHTS OF THE LIMITED PARTNER RELATING TO THE PARTNERSHIP........... 24
ARTICLE VIII BOOKS, RECORDS, ACCOUNTING AND REPORTS......................... 25
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8.1 RECORDS AND ACCOUNTING.............................................. 25
8.2 FISCAL YEAR......................................................... 25
ARTICLE IX TAX MATTERS...................................................... 25
9.1 PREPARATION OF TAX RETURNS.......................................... 25
9.2 TAX ELECTIONS....................................................... 25
9.3 TAX CONTROVERSIES................................................... 25
9.4 ORGANIZATIONAL EXPENSES............................................. 26
9.5 WITHHOLDING......................................................... 26
9.6 OPINIONS OF COUNSEL................................................. 26
ARTICLE X TRANSFER OF INTERESTS............................................. 26
10.1 TRANSFER............................................................ 26
10.2 TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP INTEREST.............. 26
10.3 TRANSFER OF THE LIMITED PARTNER'S PARTNERSHIP INTEREST.............. 26
ARTICLE XI ADMISSION OF PARTNERS............................................ 27
11.1 ADMISSION OF SUBSTITUTED LIMITED PARTNERS........................... 27
11.2 ADMISSION OF SUCCESSOR GENERAL PARTNER.............................. 27
11.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP....... 27
11.4 ADMISSION OF ADDITIONAL LIMITED PARTNERS............................ 27
ARTICLE XII WITHDRAWAL OR REMOVAL OF PARTNERS............................... 28
12.1 WITHDRAWAL OF THE GENERAL PARTNER................................... 28
12.2 INTEREST OF DEPARTING PARTNER AND SUCCESSOR GENERAL PARTNER......... 28
12.3 REIMBURSEMENT OF DEPARTING PARTNER.................................. 29
12.4 WITHDRAWAL OF THE LIMITED PARTNER................................... 29
ARTICLE XIII DISSOLUTION AND LIQUIDATION.................................... 29
13.1 DISSOLUTION......................................................... 29
13.2 CONTINUATION OF THE BUSINESS OF THE PARTNERSHIP AFTER DISSOLUTION... 29
13.3 LIQUIDATION......................................................... 30
13.4 DISTRIBUTIONS IN KIND............................................... 31
13.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP.................. 31
13.6 REASONABLE TIME FOR WINDING UP...................................... 31
13.7 RETURN OF CAPITAL................................................... 31
13.8 NO CAPITAL ACCOUNT RESTORATION...................................... 31
13.9 WAIVER OF PARTITION................................................. 31
ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT.............................. 32
14.1 AMENDMENT TO BE ADOPTED SOLELY BY GENERAL PARTNER................... 32
14.2 AMENDMENT PROCEDURES................................................ 33
ARTICLE XV MERGER........................................................... 33
15.1 AUTHORITY........................................................... 33
15.2 PROCEDURE FOR MERGER OR CONSOLIDATION............................... 33
15.3 APPROVAL BY LIMITED PARTNER OF MERGER OR CONSOLIDATION.............. 34
15.4 CERTIFICATE OF MERGER............................................... 34
15.5 EFFECT OF MERGER.................................................... 34
ARTICLE XVI GENERAL PROVISIONS.............................................. 34
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16.1 ADDRESSES AND NOTICES............................................... 34
16.2 REFERENCES.......................................................... 34
16.3 PRONOUNS AND PLURALS................................................ 35
16.4 FURTHER ACTION...................................................... 35
16.5 BINDING EFFECT...................................................... 35
16.6 INTEGRATION......................................................... 35
16.7 CREDITORS........................................................... 35
16.8 WAIVER.............................................................. 35
16.9 COUNTERPARTS........................................................ 35
16.10 APPLICABLE LAW.................................................... 35
16.11 INVALIDITY OF PROVISIONS.......................................... 35
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AGREEMENT OF LIMITED PARTNERSHIP OF
EOTT ENERGY LIQUIDS, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP OF EOTT ENERGY LIQUIDS, L.P., dated
as of June 28, 2001, is entered into by and among EOTT Energy General Partner,
L.L.C., a Delaware limited liability company, as the General Partner, and EOTT
Energy Operating Limited Partnership, a Delaware limited partnership, as the
Limited Partner, together with any other Persons who become Partners in the
Partnership as provided herein. In consideration of the covenants, conditions
and agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 FORMATION. The Partners have formed a limited partnership pursuant to
the provisions of the Delaware Act. Except as expressly provided to the contrary
in this Agreement, the rights 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.
1.2 NAME. The name of the Partnership shall be, and the business of the
Partnership shall be conducted under the name of, "EOTT Energy Liquids, L.P."
The Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the General Partner, including, without limitation,
the name of the General Partner or any Affiliate thereof. The words "Limited
Partnership," "L.P.," "Ltd." or similar words or letters shall be included in
the Partnership's name where necessary for the purposes of complying with the
laws of any jurisdiction that so requires. The General Partner in its sole
discretion may change the name of the Partnership at any time and from time to
time and shall notify the Limited Partner of such change in the next regular
communication to the Limited Partner.
1.3 REGISTERED OFFICE; PRINCIPAL OFFICE. Unless and until changed by the
General Partner, the registered office of the Partnership in the State of
Delaware shall be located at 0 X. Xxxxxxxxxx Xxxxxx, Xxxxx, Xxxxxxxx 00000, and
the registered agent for service of process on the Partnership in the State of
Delaware at such registered office shall be National Registered Agents, Inc..
The principal office of the Partnership and the address of the General Partner
shall be 0000 Xxxx Xxx Xxxxxxx Xxxxxxx Xxxxx, 0xx Xxxxx, Xxxxxxx, Xxxxx 00000,
or such other place as the General Partner may from time to time designate by
notice to the Limited Partner. The Partnership may maintain offices at such
other place or places within or outside the State of Delaware as the General
Partner deems necessary or appropriate.
1.4 POWER OF ATTORNEY. (a) The Limited Partner hereby constitutes and
appoints each of the General Partner and, if a Liquidator shall have been
selected pursuant to Section 13.3, the Liquidator severally (and any successor
to either thereof by merger, transfer, assignment, election or otherwise) and
each of their authorized officers and attorneys-in-fact, with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in its name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate of Limited Partnership and all amendments or restatements
thereof) that the General Partner or the Liquidator deems necessary or
appropriate to form, qualify or continue the existence or qualification of
the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) in the State of Delaware and in
all
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other jurisdictions in which the Partnership may conduct business or own
property; (B) all certificates, documents and other instruments that the
General Partner or the Liquidator deems necessary or appropriate to
reflect, in accordance with its terms, any amendment, change, modification
or restatement of this Agreement; (C) all certificates, documents and
other instruments (including, without limitation, conveyances and a
certificate of cancellation) that the General Partner or the Liquidator
deems necessary or appropriate to reflect the dissolution and liquidation
of the Partnership pursuant to the terms of this Agreement; (D) all
certificates, documents and other instruments relating to the admission,
withdrawal, removal or substitution of any Partner pursuant to, or other
events described in, Article X, XI, XII or XIII or the Capital
Contribution of any Partner; (E) all certificates, documents and other
instruments relating to the determination of the rights, preferences and
privileges of any class or series of Partnership Interests; and (F) all
certificates, documents and other instruments (including, without
limitation, agreements and a certificate of merger) relating to a merger
or consolidation of the Partnership pursuant to Article XV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the sole discretion of the
General Partner or the Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action that is made
or given by the Partners hereunder or is consistent with the terms of this
Agreement or is necessary or appropriate, in the sole discretion of the
General Partner or the Liquidator, to effectuate the terms or intent of
this Agreement; provided, that when the consent or approval of the Limited
Partner is required by any provision of this Agreement, the General
Partner or the Liquidator may exercise the power of attorney made in this
Section 1.4(a)(ii) only after the necessary consent or approval of the
Limited Partner is obtained.
Nothing contained in this Section 1.4(a) shall be construed as authorizing the
General Partner to amend this Agreement except in accordance with Article XIV 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 not be affected
by the subsequent death, incompetency, disability, incapacity, dissolution,
bankruptcy or termination of the Limited Partner and the transfer of all or any
portion of the Limited Partner's Partnership Interest and shall extend to the
Limited Partner's heirs, successors, assigns and personal representatives. The
Limited Partner 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 the Limited Partner 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. The Limited
Partner shall execute and deliver to the General Partner or the Liquidator,
within 15 days after receipt of the General Partner's or the Liquidator's
request therefor, such further designation, powers of attorney and other
instruments as the General Partner or the Liquidator deems necessary to
effectuate this Agreement and the purposes of the Partnership.
1.5 TERM. 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 close of Partnership business on March 31, 2084, or until
the earlier termination of the Partnership in accordance with the provisions of
Article XIII.
1.6 POSSIBLE RESTRICTIONS ON TRANSFER. Notwithstanding anything to the
contrary contained in this Agreement, in the event of (a) the enactment (or
imminent enactment) of any legislation, (b) the publication of any temporary or
final regulation by the Treasury Department, (c) any ruling by the
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Internal Revenue Service or (d) any judicial decision, that, in any such case,
in the Opinion of Counsel, would result in the taxation of the Partnership as an
association taxable as a corporation or would otherwise result in the
Partnership being taxed as an entity for federal income tax purposes, then, the
General Partner may impose such restrictions on the transfer of Partnership
Interests as may be required, in the Opinion of Counsel, to prevent the
Partnership from being taxed as an association taxable as a corporation or
otherwise as an entity for federal income tax purposes, including, without
limitation, making any amendments to this Agreement as the General Partner in
its sole discretion may determine to be necessary or appropriate to impose such
restrictions.
ARTICLE II
DEFINITIONS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 11.5 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 5.1(d)(i) or 5.1(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.
"ADJUSTED PROPERTY" means any property the Carrying Value of which
has been adjusted pursuant to Section 4.4(d)(i) or 4.4(d)(ii). Once an
Adjusted Property is deemed distributed by, and recontributed to, the
Partnership for federal income tax purposes upon a termination thereof
pursuant to Section 708 of the Code, such property shall thereafter
constitute a Contributed Property until the Carrying Value of such
property is subsequently adjusted pursuant to Section 4.4(d)(i) or
4.4(d)(ii).
"AFFILIATE" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by or is under common
control with, the Person in question. As used herein, the term "control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a Person, whether
through ownership of voting securities, by contract or otherwise.
"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 5.1, including, without
3
limitation, a Curative Allocation (if appropriate to the context in which
the term "Agreed Allocation" is used).
"AGREED VALUE" of any Contributed Property means the fair market
value of such property or other consideration at the time of contribution
as determined by the General Partner using such reasonable method of
valuation as it may adopt; provided, however, that the Agreed Value of any
property deemed contributed to the Partnership for federal income tax
purposes upon termination and reconstitution thereof pursuant to Section
708 of the Code shall be determined in accordance with Section 4.4(c).
Subject to Section 4.4(c), the General Partner shall, in its sole
discretion, use such method as it deems reasonable and appropriate to
allocate the aggregate Agreed Value of Contributed Properties contributed
to the Partnership in a single or integrated transaction among each
separate property on a basis proportional to the fair market value of each
Contributed Property.
"AGREEMENT" means this Agreement of Limited Partnership of EOTT
Energy Liquids, L.P., as it may be amended, supplemented or restated from
time to time.
"AVAILABLE CASH" means with respect to any calendar quarter and
without duplication:
(a) the sum of:
(i) all cash receipts of the Partnership during such quarter
from all sources; and
(ii) any reduction in a reserve with respect to such quarter
from the level of such reserve at the end of the prior quarter;
(b) less the sum of:
(i) all cash disbursements of the Partnership during such
quarter, including, without limitation, disbursements for operating
expenses, taxes, if any, and debt service (including, without
limitation, the payment of principal, premium and interest), but
excluding all cash distributions to Partners and any cash
disbursements with respect to which, and to the extent that, a
reserve was established in a prior quarter; and
(ii) any reserves established with respect to such quarter,
and any increase in reserves established with respect to prior
quarters, in such amounts as the General Partner determines in its
reasonable discretion to be necessary or appropriate (A) to provide
for the proper conduct of the business of the Partnership or (B)
because the distribution of such amounts would be prohibited by
applicable law or by any loan agreement, security agreement,
mortgage, debt instrument or other agreement or obligation to which
the Partnership is a party or by which it is bound or its assets
are subject.
Notwithstanding the foregoing, "Available Cash" with respect to any period
shall not include any cash receipts or reductions in reserves or take into
account any disbursements made or reserves established after the
Liquidation Date after the end of such period but on or before the date on
which the Partnership makes its distribution of Available Cash in respect
of such period pursuant to Section 5.3.
"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
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of such Contributed Property or Adjusted Property and the adjusted basis
thereof for federal income tax purposes as of such date. A Partner's share
of the Partnership's Book-Tax Disparities in all of its Contributed
Property and Adjusted Property will be reflected by the difference between
such Partner's Capital Account balance as maintained pursuant to Section
4.4 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal
income tax accounting principles.
"BUSINESS DAY" means Monday through Friday of each week, except that
a legal holiday recognized as such by the government of the United States
or the states of New York or Texas shall not be regarded as a Business
Day.
"CAPITAL ACCOUNT" means the capital account maintained for a Partner
pursuant to Section 4.4.
"CAPITAL CONTRIBUTION" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Partner contributes to the
Partnership pursuant to Section 4.1 or 4.2.
"CARRYING VALUE" means (a) with respect to a Contributed Property,
the Agreed Value of such property reduced (but not below zero) by all
depreciation, amortization and cost recovery deductions charged to the
Partners' Capital Accounts in respect of such Contributed Property, and
(b) with respect to any other Partnership property, the adjusted basis of
such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Sections 4.4(d)(i) and 4.4(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.
"CERTIFICATE OF LIMITED PARTNERSHIP" means the Certificate of
Limited Partnership filed with the Secretary of State of the State of
Delaware as referenced in Section 6.2, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision
of future law.
"CONTRIBUTED PROPERTY" means each property or other asset, in such
form as may be permitted by the Delaware Act, but excluding cash,
contributed to the Partnership (or deemed contributed to the Partnership
on termination and reconstitution thereof pursuant to Section 708 of the
Code). Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 4.4(d)(i), such property shall no longer constitute a
Contributed Property, but shall be deemed an Adjusted Property.
"CURATIVE ALLOCATION" means any allocation of an item of income,
gain, deduction, loss or credit pursuant to the provisions of Section
5.1(d)(ix).
"DELAWARE ACT" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del C.Section 17-101, et seq., as amended, supplemented
or restated from time to time, and any successor to such statute.
"DEPARTING PARTNER" means a General Partner with respect to which an
Event of Withdrawal of the type described in Section 12.1 has occurred.
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"ECONOMIC RISK OF LOSS" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"ENRON" means Enron Corp., a Delaware corporation.
"EVENT OF WITHDRAWAL" has the meaning assigned to such term in
Section 12.1(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to
such statute.
"GENERAL PARTNER" means EOTT Energy General Partner, L.L.C. and its
successors as general partner of the Partnership, unless the context
otherwise requires.
"INDEMNITEE" means the General Partner, any Departing Partner, any
Person who is or was an Affiliate of the General Partner or any Departing
Partner, any Person who is or was an officer, director, employee, partner,
agent or trustee of the General Partner or any Departing Partner or any
such Affiliate, or any Person who is or was serving at the request of the
General Partner or any Departing Partner or any such Affiliate as a
director, officer, employee, partner, agent or trustee of another Person.
"LIMITED PARTNER" means EOTT Energy Operating Limited Partnership, a
Delaware limited partnership, each Substituted Limited Partner, if any,
each Additional Limited Partner and any Departing Partner upon the change
of its status from General Partner to Limited Partner pursuant to Section
12.3, but excluding any such Person from and after the time it withdraws
from the Partnership.
"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 13.2, the date on which the
applicable time period during which the Partners 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 the General Partner or other Person approved
pursuant to Section 13.3 who performs the functions described therein.
"MERGER AGREEMENT" has the meaning assigned to such term in Section
15.1.
"NATIONAL SECURITIES EXCHANGE" means an exchange registered with the
Securities and Exchange Commission under Section 6(a) of the Exchange Act.
"NET AGREED VALUE" means, (a) in the case of any Contributed
Property, the Agreed Value of such property reduced by any liabilities
either assumed by the Partnership upon such contribution or to which such
property is subject when contributed, and (b) in the case of any property
distributed to a Partner by the Partnership, the Partnership's Carrying
Value of such property (as adjusted pursuant to Section 4.4(d)(ii)) at the
time such property is distributed, reduced by any indebtedness either
assumed by such Partner upon such distribution or to which such property
is subject at the time of distribution, in either case, as determined
under Section 752 of the Code.
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"NET INCOME" means, for any taxable period, the excess, if any, of
the Partnership's items of income and gain (other than those items
attributable to dispositions constituting Termination Capital
Transactions) for such taxable period over the Partnership's items of loss
and deduction (other than those items attributable to dispositions
constituting Termination Capital Transactions) for such taxable period.
The items included in the calculation of Net Income shall be determined in
accordance with Section 4.4(b) and shall not include any items specially
allocated under Section 5.1(d). Once an item of income, gain, loss or
deduction that has been included in the initial computation of Net Income
is subjected to a Required Allocation or a Curative Allocation, Net Income
or Net Loss, whichever the case may be, shall be recomputed without regard
to such item.
"NET LOSS" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction (other than those items
attributable to dispositions constituting Termination Capital
Transactions) for such taxable period over the Partnership's items of
income and gain (other than those items attributable to dispositions
constituting Termination Capital Transactions) for such taxable period.
The items included in the calculation of Net Loss shall be determined in
accordance with Section 4.4(b) and shall not include any items specially
allocated under Section 5.1(d). Once an item of income, gain, loss or
deduction that has been included in the initial computation of Net Loss is
subjected to a Required Allocation or a Curative Allocation, Net Income,
or Net Loss, whichever the case may be, shall be recomputed without regard
to such item.
"NET TERMINATION GAIN" means, for any taxable period, the sum, if
positive, of all items of income, gain, loss or deduction recognized by
the Partnership from Termination Capital Transactions occurring in such
taxable period. The items included in the determination of Net Termination
Gain shall be determined in accordance with Section 4.4(b) and shall not
include any items of income, gain or loss specially allocated under
Section 5.1(d). Once an item of income, gain or loss that has been
included in the initial computation of Net Termination Gain is subjected
to a Required Allocation or a Curative Allocation, Net Termination Gain or
Net Termination Loss, whichever the case may be, shall be recomputed
without regard to such item;
"NET TERMINATION LOSS" means, for any taxable period, the sum, if
negative, of all items of income, gain, loss or deduction recognized by
the Partnership from Termination Capital Transactions occurring in such
taxable period. The items included in the determination of Net Termination
Loss shall be determined in accordance with Section 4.4(b) and shall not
include any items of income, gain or loss specially allocated under
Section 5.1(d). Once an item of gain or loss that has been included in the
initial computation of Net Termination Loss is subjected to a Required
Allocation or a Curative Allocation, Net Termination Gain or Net
Termination Loss, whichever the case may be, shall be recomputed without
regard to such item;
"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 5.2(b)(i)(A),
5.2(b)(ii)(A) or 5.2(b)(iv) 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 expenditures (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.
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"NONRECOURSE LIABILITY" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2).
"OPINION OF COUNSEL" means a written opinion of counsel (who may be
regular counsel to Enron, any Affiliate of Enron, the Partnership or the
General Partner) acceptable to the General Partner.
"PARTNERS" means the General Partner and the Limited Partner.
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"PARTNER NONRECOURSE DEDUCTIONS" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with
the principles of Treasury Regulation Section 1.704-2(i), are attributable
to a Partner Nonrecourse Debt.
"PARTNERSHIP" means the limited partnership heretofore formed
pursuant to this Agreement.
"PARTNERSHIP INTEREST" means the interest of a Partner in the
Partnership.
"PARTNERSHIP MINIMUM GAIN" means that amount determined in
accordance with the principles of Treasury Regulation Section 1.704-2(d).
"PERCENTAGE INTEREST" means (a) as to the General Partner, in its
capacity as such, .01% and (b) as to the Limited Partner, 99.99%.
"PERSON" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"PURCHASE AND SALE AGREEMENT" means the Purchase and Sale Agreement
dated June 29, 2001 between Enron Corp. and EOTT Energy Partners, L.P.
"RECAPTURE INCOME" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Sections 734 or 743
of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to
such property or asset.
"REQUIRED ALLOCATIONS" means any allocation (or limitation imposed
on any allocation) of an item of income, gain, deduction or loss pursuant
to (a) Section 5.1(b)(i) or (b) Sections 5.1(d)(i)-(vi) and (viii), such
allocations (or limitations thereon) being directly or indirectly required
by the Treasury regulations promulgated under Section 704(b) of the Code.
"RESIDUAL GAIN" or "RESIDUAL LOSS" 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
8
or loss is not allocated pursuant to Sections 5.2(b)(i)(A) or
5.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such
statute.
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.2 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 15.2(b).
"TERMINATION CAPITAL TRANSACTIONS" means any sale, transfer or other
disposition of property of the Partnership occurring upon or incident to
the liquidation and winding up of the Partnership pursuant to Article
XIII.
"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 4.4(d)) over (b) the Carrying Value of such property as of such
date (prior to any adjustment to be made pursuant to Section 4.4(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 4.4(d) as of such date) over (b) the fair
market value of such property as of such date (as determined under Section
4.4(d)).
"WITHDRAWAL OPINION OF COUNSEL" has the meaning assigned to such
term in Section 12.1(b).
ARTICLE III
PURPOSE
3.1 PURPOSE AND BUSINESS. The purpose and nature of the business to be
conducted by the Partnership shall be (a) to acquire, manage, and operate the
assets described in the Purchase and Sale Agreement as being transferred to the
Partnership and any similar assets or properties and, in connection therewith,
to exercise all of the rights and powers conferred upon the Partnership pursuant
to the agreements relating to such assets, (b) to engage directly in, or enter
into or form any corporation, limited liability company, partnership, joint
venture or other arrangement to engage indirectly in, any business activity that
is approved by the General Partner and which may lawfully 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
(c) to engage in activities incidental to, resulting from, or otherwise
necessary to facilitate the activities referred to in the foregoing clauses (a)
and (b), including, without limitation, the making of contributions and loans,
and to engage in such actions as are expressly required to be taken pursuant to
this Agreement. The General Partner has no obligation or duty to the Partnership
or the Limited Partner to propose or approve, and in its sole discretion may
decline to propose or approve, the conduct by the Partnership of any business.
3.2 POWERS. The Partnership shall be empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described in
Section 3.1 and for the protection and benefit of the Partnership.
9
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 INITIAL CONTRIBUTIONS. In connection with the formation of the
Partnership under the Delaware Act, the General Partner has made an initial
Capital Contribution to the Partnership in the amount of $1 for an interest in
the Partnership and has been admitted as the general partner of the Partnership,
and the Limited Partner has made a Capital Contribution to the Partnership in
the amount of $9,999 for an interest in the Partnership and has been admitted as
a limited partner of the Partnership.
4.2 ADDITIONAL CAPITAL CONTRIBUTIONS. With the consent of the General
Partner, the Limited Partner may, but shall not be obligated to, make additional
Capital Contributions to the Partnership. Contemporaneously with the making of
any such additional Capital Contributions by the Limited Partner, the General
Partner shall be obligated to make an additional Capital Contribution to the
Partnership such that the General Partner shall at all times have at least a
.01% interest in each item of Partnership income, gain, loss, deduction and
credit. Except as set forth in the immediately preceding sentence and Section
5.3(b), the General Partner shall not be obligated to make any additional
Capital Contributions to the Partnership.
4.3 NO PREEMPTIVE RIGHTS. Except as provided in Section 4.2, no Person
shall have any preemptive, preferential or other similar right with respect to
(a) additional Capital Contributions; (b) issuance or sale of any class or
series of Partnership Interests, whether unissued, held in the treasury or
hereafter created; (c) issuance of any obligations, evidences of indebtedness or
other securities of the Partnership convertible into or exchangeable for, or
carrying or accompanied by any rights to receive, purchase or subscribe to, any
such Partnership Interests; (d) issuance of any right of subscription to or
right to receive, or any warrant or option for the purchase of, any such
Partnership Interests; or (e) issuance or sale of any other securities that may
be issued or sold by the Partnership.
4.4 CAPITAL ACCOUNTS. (a) The Partnership shall maintain for each 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 pursuant to this Agreement and (ii) all items of
Partnership income and gain (including, without limitation, income and gain
exempt from tax) computed in accordance with Section 4.4(b) and allocated with
respect to such Partnership Interest pursuant to Section 5.1, and decreased by
(x) the amount of cash or the Net Agreed Value of all actual and deemed
distributions of cash or property made with respect to such Partnership Interest
pursuant to this Agreement and (y) all items of Partnership deduction and loss
computed in accordance with Section 4.4(b) and allocated with respect to such
Partnership Interest pursuant to Section 5.1.
(b) For purposes of computing the amount of any item of income, gain, loss
or deduction to be reflected in the Partners' Capital Accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes (including, without limitation, any method of depreciation, cost
recovery or amortization used for that purpose), provided, that:
(i) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither
be deducted nor amortized under Section 709 of the Code, if any, shall,
for purposes of Capital Account maintenance, be treated as an item of
deduction at the time such fees and other expenses are incurred and shall
be allocated among the Partners pursuant to Section 5.1.
10
(ii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be 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.
(iii) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if the
adjusted basis of such property as of such date of disposition were equal
in amount to the Partnership's Carrying Value with respect to such
property as of such date.
(iv) In accordance with the requirements of Section 704(b) of the
Code, any deductions for depreciation, cost recovery or amortization
attributable to any Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the
Partnership were equal to the Agreed Value of such property. Upon an
adjustment pursuant to Section 4.4(d) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery or
amortization, any further deductions for such depreciation, cost recovery
or amortization attributable to such property shall be determined (A) as
if the adjusted basis of such property were equal to the Carrying Value of
such property immediately following such adjustment and (B) using a rate
of depreciation, cost recovery or amortization derived from the same
method and useful life (or, if applicable, the remaining useful life) as
is applied for federal income tax purposes; provided, however, that, if
the asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization deductions shall be determined
using any reasonable method that the General Partner may adopt.
(v) 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 5.1. Any restoration of such basis pursuant to Section 48(q)(2) of
the Code shall, to the extent possible, be allocated in the same manner to
the Partners to whom such deemed deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Partnership
Interest so transferred; provided, however, that, if the transfer causes a
termination of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership's properties shall be deemed to have been distributed in liquidation
of the Partnership to the Partners (including any transferee of a Partnership
Interest that is a party to the transfer causing such termination) pursuant to
Sections 13.3 and 13.4 and recontributed by such Partners in reconstitution of
the Partnership. Any such deemed distribution shall be treated as an actual
distribution for purposes of this Section 4.4. In such event, the Carrying
Values of the Partnership properties shall be adjusted immediately prior to such
deemed distribution pursuant to Section 4.4(d)(ii) and such Carrying Values
shall then constitute the Agreed Values of such properties upon such deemed
contribution to the reconstituted Partnership. The Capital Accounts of such
reconstituted Partnership shall be maintained in accordance with the principles
of this Section 4.4.
(d) (i) Consistent with the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests
for cash or Contributed Property, the Capital Account of all Partners and
the Carrying Value of each Partnership property immediately prior to such
issuance shall be adjusted upward or downward to reflect any
11
Unrealized Gain or Unrealized Loss attributable to such Partnership
property, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property immediately prior to
such issuance and had been allocated to the Partners at such time pursuant
to Section 5.1. In determining such Unrealized Gain or Unrealized Loss,
the aggregate cash amount and fair market value of all Partnership assets
(including, without limitation, cash or cash equivalents) immediately
prior to the issuance of additional Partnership Interests shall be
determined by the General Partner using such reasonable method of
valuation as it may adopt; provided, however, the General Partner, in
arriving at such valuation, must take fully into account the fair market
value of the Partnership Interests of all Partners at such time. The
General Partner shall allocate such aggregate value among the assets of
the Partnership (in such manner as it determines in its sole discretion to
be reasonable) to arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of such 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 5.1. Any
Unrealized Gain or Unrealized Loss attributable to such property shall be
allocated in the same manner as Net Termination Gain or Net Termination
Loss pursuant to Section 5.1(c); provided, however, that, in making any
such allocation, Net Termination Gain or Net Termination Loss actually
realized shall be allocated first. In determining such Unrealized Gain or
Unrealized Loss the aggregate cash amount and fair market value of all
Partnership assets (including, without limitation, cash or cash
equivalents) immediately prior to a distribution shall (A) in the case of
a deemed distribution occurring as a result of a termination of the
Partnership pursuant to Section 708 of the Code, be determined and
allocated in the same manner as that provided in Section 4.4(d)(i) or (B)
in the case of a liquidating distribution pursuant to Section 14.3 or
14.4, be determined and allocated by the Liquidator using such reasonable
method of valuation as it may adopt.
4.5 INTEREST. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
4.6 NO WITHDRAWAL. No Partner shall be entitled to withdraw any part of
its Capital Contributions or its Capital Account or to receive any distribution
from the Partnership, except as provided in Articles V, VII, XII and XIII.
4.7 LOANS FROM PARTNERS. Loans by a Partner to the Partnership shall not
constitute Capital Contributions. If any Partner shall advance funds to the
Partnership in excess of the amounts required hereunder to be contributed by it
to the capital of the Partnership, the making of such excess advances shall not
result in any increase in the amount of the Capital Account of such Partner. The
amount of any such excess advances shall be a debt obligation of the Partnership
to such Partner and shall be payable or collectible only out of the Partnership
assets in accordance with the terms and conditions upon which such advances are
made.
12
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES. For purposes of maintaining
the Capital Accounts and in determining the rights of the Partners among
themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section 4.4(b)) shall be allocated among the
Partners in each taxable year (or portion thereof) as provided hereinbelow.
(a) Net Income. After giving effect to the special allocations set
forth in Section 5.1(d), Net Income for each taxable period and all items
of income, gain, loss and deduction taken into account in computing Net
Income for such taxable period shall be allocated as follows:
(i) First, 100% to the General Partner until the aggregate Net
Income allocated to the General Partner pursuant to this Section
5.1(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 5.1(b)(ii) for all previous taxable
years; and
(ii) Second, the balance, if any, 100% to the General Partner
and the Limited Partner in accordance with their respective
Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set
forth in Section 5.1(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, 100% to the General Partner and the Limited Partner
in accordance with their respective Percentage Interests; provided,
that Net Losses shall not be allocated pursuant to this Section
5.1(b)(i) to the extent that such allocation would cause any Partner
to have a deficit balance in its Adjusted Capital Account at the end
of such taxable year (or increase any existing deficit balance in
its Adjusted Capital Account); and
(ii) Second, 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 5.1(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 5.1(c) shall be
made after Capital Account balances have been adjusted by all other
allocations provided under this Section 5.1 and after all distributions of
Available Cash provided under Section 5.3 have been made with respect to
the taxable period ending on the date of the Partnership's liquidation
pursuant to Section 13.3.
(i) If a Net Termination Gain is recognized (or deemed
recognized pursuant to Section 4.4(d)) from Termination Capital
Transactions, such Net Termination Gain shall be allocated between
the General Partner and the Limited Partner in the following manner
(and the Adjusted Capital Accounts of the Partners shall be
increased by the amount so allocated in each of the following
subclauses, and 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 Adjusted Capital Account, in the proportion that such
deficit balance bears to the total
13
deficit balances in the Adjusted Capital Accounts of all
Partners, until each such Partner has been allocated Net
Termination Gain equal to any such deficit balance in its
Adjusted Capital Account; and
(B) Second, 100% to the General Partner and the Limited
Partner in accordance with their respective Percentage
Interests.
(ii) If a Net Termination Loss is recognized (or deemed
recognized pursuant to Section 4.4(d)) from Termination Capital
Transactions, such Net Termination Loss shall be allocated to the
Partners in the following manner:
(A) First, 100% to the General Partner and the Limited
Partner in proportion to, and to the extent of, the positive
balances in their respective Adjusted Capital Accounts; and
(B) Second, the balance, if any, 100% to the General
Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 5.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 5.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
5.1(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 5.1(d) with respect to such taxable period (other than an
allocation pursuant to Sections 5.1(d)(v) and (vi)). This Section
5.1(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 5.1 (other than
Section 5.1(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 5.1(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 5.1(d), other than Section 5.1(d)(i) and other than an
allocation pursuant to Sections 5.1(d)(v) and (vi), with respect to such
taxable period. This Section 5.1(d)(ii) is intended to comply with the
chargeback of items of income and gain requirement in Treasury Regulation
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation
14
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
specifically 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 5.1(d)(i) or (ii).
(iv) Gross Income Allocations. In the event any Partner has a
deficit balance in its Adjusted Capital Account at the end of any
Partnership taxable period such Partner shall be specially allocated items
of Partnership gross income and gain in the amount of such excess as
quickly as possible; provided, that an allocation pursuant to this Section
5.1(d)(iv) shall be made only if and to the extent that such Partner would
have a deficit balance in its Adjusted Capital Account after all other
allocations provided in this Section 5.1 have been tentatively made as if
this Section 5.1(d)(iv) were not in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its
good faith discretion that the Partnership's Nonrecourse Deductions must
be allocated in a different ratio to satisfy the safe harbor requirements
of the Treasury Regulations promulgated under Section 704(b) of the Code,
the General Partner is authorized, upon notice to the Limited Partner, to
revise the prescribed ratio to the numerically closest ratio that does
satisfy such requirements.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that bears
the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner
bears the Economic Risk of Loss with respect to a Partner Nonrecourse
Debt, such Partner Nonrecourse Deductions attributable thereto shall be
allocated between or among such Partners in accordance with the ratios in
which they share such Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (A) the amount of Partnership
Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall
be allocated among the Partners in accordance with their respective
Percentage Interests.
(viii) Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section 734(b)
or 743(b) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Treasury regulations.
15
(ix) Curative Allocation.
(A) Notwithstanding any other provision of this Section 5.1,
other than the Required Allocations, the Required Allocations shall
be taken into account in making the Agreed Allocations so that, to
the extent possible, the net amount of items of income, gain, loss
and deduction allocated to each Partner pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to
the net amount of such items that would have been allocated to each
such Partner under the Agreed Allocations had the Required
Allocations and the related Curative Allocation not otherwise been
provided in this Section 5.1. Notwithstanding the preceding
sentence, Required Allocations relating to (1) Nonrecourse
Deductions shall not be taken into account except to the extent that
there has been a decrease in Partnership Minimum Gain and (2)
Partner Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section
5.1(d)(ix)(A) shall only be made with respect to Required
Allocations to the extent the General Partner reasonably determines
that such allocations will otherwise be inconsistent with the
economic agreement among the Partners. Further, allocations pursuant
to this Section 5.1(d)(ix)(A) shall be deferred with respect to
allocations pursuant to clauses (1) and (2) hereof to the extent the
General Partner reasonably determines that such allocations are
likely to be offset by subsequent Required Allocations.
(B) The General Partner shall have reasonable discretion, with
respect to each taxable period, to (1) apply the provisions of
Section 5.1(d)(ix)(A) in whatever order is most likely to minimize
the economic distortions that might otherwise result from the
Required Allocations, and (2) divide all allocations pursuant to
Section 5.1(d)(ix)(A) among the Partners in a manner that is likely
to minimize such economic distortions.
5.2 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 5.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted basis
at the time of contribution; and (B) except as otherwise provided in
Section 5.2(b)(iv), 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 5.1.
(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 4.4(d)(i) or (ii), and (2) second,
in the event such property
16
was originally a Contributed Property, be allocated among the Partners in
a manner consistent with Section 5.2(b)(i)(A); and (B) except as otherwise
provided in Section 5.2(b)(iv), 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 5.1.
(iii) Except as otherwise provided in Section 5.2(b)(iv), all other
items of income, gain, loss and deduction shall be allocated among the
Partners in the same manner as their correlative item of "book" gain or
loss is allocated pursuant to Section 5.1. Such allocations are intended
to comply with, and shall be effected by the General Partner in accordance
with the principles of Treasury Regulation Section 1.704-3(c).
(iv) Any items of income, gain, loss or deduction otherwise
allocable under Section 5.2(b)(i)(B), 5.2(b)(ii)(B) or 5.2(b)(iii) shall
be subject to allocation by the General Partner in a manner designed to
eliminate, to the maximum extent possible, Book-Tax Disparities in a
Contributed Property or Adjusted Property otherwise resulting from the
application of the "ceiling" limitation (under Section 704(c) of the Code
or Section 704(c) principles) to the allocations provided under Section
5.2(b)(i)(A) or 5.2(b)(ii)(A).
(c) For the proper administration of the Partnership and for the
preservation of uniformity of any class or classes of Partnership Interests),
the General Partner shall have sole discretion to (i) adopt such conventions as
it deems appropriate in determining the amount of depreciation, amortization and
cost recovery deductions; (ii) make special allocations for federal income tax
purposes of income (including, without limitation, gross income) or deductions;
and (iii) amend the provisions of this Agreement as appropriate (x) to reflect
the proposal or promulgation of Treasury regulations under Section 704(b) or
Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of
any class or classes of Partnership Interests). The General Partner may adopt
such conventions, make such allocations and make such amendments to this
Agreement as provided in this Section 5.2(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 Partnership Interests or the
Partnership, and if such allocations are consistent with the principles of
Section 704 of the Code.
(d) The General Partner in its sole discretion may determine to depreciate
or amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite the inconsistency of such
approach with Treasury Regulation Section 1.743-1(j)(4)(i)(B), Treasury
Regulation Section 1.167(c)-1(a)(6) or the regulations under Section 197 of the
Code. 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 Partnership Interests in the
same month would receive depreciation and amortization deductions, based upon
the same applicable rate as if they had purchased a direct interest in the
Partnership's property. If the General Partner chooses not to utilize such
aggregate method, the General Partner may use any other reasonable depreciation
and amortization conventions to preserve the uniformity of the intrinsic tax
characteristics of any class or classes of Partnership Interests that would not
have a material adverse effect on the Limited Partner or the holders of any
class or classes of Partnership 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 5.2, be
characterized as Recapture Income in the same proportions and to the
17
same extent as such Partners (or their predecessors in interest) have been
allocated any deductions directly or indirectly giving rise to the treatment of
such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by
the Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of allocation of income,
gain, loss or deduction between a transferor and a transferee of a Partnership
Interest as it determines necessary, to the extent permitted or required by
Section 706 of the Code and the regulations or rulings promulgated thereunder.
5.3 REQUIREMENT OF DISTRIBUTIONS. At such time as determined by the
General Partner, an amount equal to 100% of Available Cash with respect to such
period determined by the General Partner shall be distributed in accordance with
this Article V by the Partnership to the Partners in accordance with their
respective Percentage Interests. The immediately preceding sentence shall not
require any distribution of cash if and to the extent such distribution would be
prohibited by applicable law or by any loan agreement, security agreement,
mortgage, debt instrument or other agreement or obligation to which the
Partnership is a party or by which it is bound or its assets are subject.
(a) Notwithstanding the definition of Available Cash contained herein,
disbursements made or reserves established after the end of any quarter shall be
deemed to have been made or established, for purposes of determining Available
Cash, within such quarter if the General Partner so determines. Notwithstanding
the foregoing, in the event of the dissolution and liquidation of the
Partnership, all proceeds of such liquidation shall be applied and distributed
in accordance with, and subject to the terms and conditions of, Sections 13.3
and 13.4
ARTICLE VI
MANAGEMENT AND OPERATION OF BUSINESS
6.1 MANAGEMENT. The General Partner shall conduct, direct and manage all
activities of the Partnership in a manner that the General Partner determines is
in the best interest 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 the Limited
Partner shall have no right of control or management power over the business and
affairs of the Partnership. In addition to the powers now or hereafter granted a
general partner of a limited partnership under applicable law or which are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to Section 6.3, shall have full power and authority to
do all things and on such terms as it, in its sole discretion, may deem
necessary or appropriate to conduct the business of the Partnership, to exercise
all powers set forth in Section 3.2 and to effectuate the purposes set forth in
Section 3.1, including, without limitation, (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 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 (3) being subject, however,
to any prior approval that may be required by Section 6.3); (iv) the use
18
of the assets of the Partnership (including, without limitation, cash on hand)
for any purpose consistent with the terms of this Agreement, including, without
limitation, the financing of the conduct of the operations of the Partnership,
the lending of funds to other Persons and the repayment of obligations of the
Partnership; (v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including, without limitation, 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 and agents (including, without limitation, employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring; (viii) the maintenance of such insurance for the benefit
of the Partnership and the Partners (including, without limitation, the assets
of the Partnership) as it deems necessary or appropriate; (ix) the formation of,
or acquisition of an interest in, and the contribution of property to, any
further limited or general partnerships, joint ventures, corporations, limited
liability companies or other relationships; (x) the control of any matters
affecting the rights and obligations of the Partnership, including, without
limitation, the bringing and defending of actions at law or in equity and
otherwise engaging in the conduct of litigation and the incurring of legal
expense and the settlement of claims and litigation; and (xi) the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law.
6.2 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 and shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be determined by the General Partner in its sole discretion to be reasonable
and necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the Limited
Partner has 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
that such action is determined by the General Partner in its sole discretion to
be reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate of Limited Partnership and do
all things to maintain the Partnership as a limited partnership (or a
partnership in which the Limited Partner has 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 7.4(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 the Limited Partner.
6.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY. (a) The General Partner
may not, without written approval of the specific act by the Limited Partner or
by other written instrument executed and delivered by the Limited Partner
subsequent to the date of this Agreement, take any action in contravention of
this Agreement, including, without limitation, (i) any act that would make it
impossible to carry on the ordinary business of the Partnership, except as
otherwise provided in this Agreement; (ii) possess Partnership property, or
assign any rights in specific Partnership property, for other than a Partnership
purpose; (iii) admit a Person as a Partner, except as otherwise provided in this
Agreement; (iv) amend this Agreement in any manner, except as otherwise provided
in this Agreement; or (v) transfer its interest as general partner of the
Partnership, except as otherwise provided in this Agreement.
(b) Except as provided in Articles XIII and XV, the General Partner may
not sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
without the approval of the Limited Partner; 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 Partnership's assets and shall not apply to any forced sale
19
of any or all of the Partnership's assets pursuant to the foreclosure of, or
other realization upon, any such encumbrance.
(c) Unless approved by the Limited Partner, the General Partner shall not
take any action or refuse to take any reasonable action the effect of which, if
taken or not taken, as the case may be, would be to cause the Partnership to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes; provided that this Section 6.3(c)
shall not be construed to apply to amendments to this Agreement (which are
governed by Article XIV) or mergers or consolidations of the Partnership with
any Person (which are governed by Article XV).
(d) At all times while serving as the general partner of the Partnership,
the General Partner shall not make any dividend or distribution on, or
repurchase any shares of, its stock or take any other action within its control
if the effect of such dividend, distribution, repurchase or other action would
be to reduce its net worth below an amount necessary to receive an Opinion of
Counsel that the Partnership will be treated as a partnership for federal income
tax purposes.
6.4 REIMBURSEMENT OF THE GENERAL PARTNER. (a) Except as provided in this
Section 6.4 and elsewhere in this Agreement, the General Partner shall not be
compensated for its services as general partner of the Partnership.
(b) The General Partner shall be reimbursed on a monthly basis, or such
other basis as the General Partner may determine in its sole discretion, for (i)
all direct and indirect expenses it incurs or payments it makes on behalf of the
Partnership (including, without limitation, salary, bonus, incentive
compensation and other amounts paid to any Person to perform services for the
Partnership or for the General Partner in the discharge of its duties to the
Partnership) and (ii) all other necessary or appropriate expenses allocable to
the Partnership or otherwise reasonably incurred by the General Partner in
connection with operating the Partnership's business (including, without
limitation, expenses allocated to the General Partner by its Affiliates). The
General Partner shall determine the fees and expenses that are allocable to the
Partnership in any reasonable manner determined by the General Partner in its
sole discretion. Reimbursements pursuant to this Section 6.4 shall be in
addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 6.6.
6.5 OUTSIDE ACTIVITIES. 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 the general partner of the Partnership, or other limited partnerships in
which EOTT Energy Partners, L.P. has a direct or indirect interest, and to
undertake activities that are ancillary or related thereto, and (ii) shall not
enter into or conduct any business or incur any debts or liabilities except in
connection with or incidental to (A) its performance of the activities required
or authorized by this Agreement, and (B) the acquisition, ownership or
disposition of partnership interests in the Partnership, except that,
notwithstanding the foregoing, employees of the General Partner may perform
services for Enron and its Affiliates.
6.6 INDEMNIFICATION. (a) To the fullest extent permitted by law but
subject to the limitations expressly provided in this Agreement, the General
Partner, any Departing Partner, any Person who is or was an officer or director
of the Partnership, the General Partner or any Departing Partner and all other
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, without limitation, legal fees and expenses), judgments,
fines, penalties, interest, settlements and 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
(i) the General Partner, a Departing Partner or any of their Affiliates, (ii) an
officer, director, employee, partner, agent or trustee of the Partnership, the
General Partner, any Departing Partner
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or any of their Affiliates or (iii) a Person serving at the request of the
Partnership in another entity in a similar capacity, provided, that in each case
the Indemnitee acted in good faith and in a manner which such Indemnitee
believed to be in, or not opposed to, the best interests of the Partnership and,
with respect to any criminal proceeding, had no reasonable cause to believe its
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that the Indemnitee acted in a
manner contrary to that specified above. Any indemnification pursuant to this
Section 6.6 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, without
limitation, legal fees and expenses) incurred by an Indemnitee who is
indemnified pursuant to Section 6.6(a) in defending any claim, demand, action,
suit or proceeding shall, from time to time, be advanced by the Partnership
prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Partnership of an 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 6.6.
(c) The indemnification provided by this Section 6.6 shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the Partners, as a matter of law or otherwise, both as
to actions in the Indemnitee's capacity as (i) the General Partner, a Departing
Partner or an Affiliate thereof, (ii) an officer, director, employee, partner,
agent or trustee of the Partnership, the General Partner, any Departing Partner
or an Affiliate thereof or (iii) a Person serving at the request of the
Partnership in another entity in a similar capacity, and as to actions in any
other capacity, and shall continue as to an Indemnitee who has ceased to serve
in such capacity and shall inure to the benefit of the heirs, successors,
assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General
Partner or its Affiliates for the cost of) insurance, on behalf of the General
Partner 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, 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 6.6, 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 6.6(a); and action taken or omitted by it with
respect to an employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partner 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 6.6 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.
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(h) The provisions of this Section 6.6 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 6.6 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 obligation of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 6.6 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
6.7 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 Partner, or any other Persons who have acquired
interests in the Partnership, for losses sustained or liabilities incurred as a
result of any act or omission if such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as General Partner set forth in
Section 6.1, 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) Any amendment, modification or repeal of this Section 6.7 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership and the Limited Partner of the
General Partner, its directors, officers and employees under this Section 6.7 as
in effect immediately prior to such amendment, modification or repeal with
respect to claims arising from or relating to matters occurring, in whole or in
part, prior to such amendment, modification or repeal, regardless of when such
claims may arise or be asserted.
6.8 RESOLUTION OF CONFLICTS OF INTEREST. (a) Unless otherwise expressly
provided in this 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 or the Limited Partner, on the other hand, any resolution or
course of action in respect of such conflict of interest shall be permitted and
deemed approved by the Limited Partner, and shall not constitute a breach of
this Agreement or of any agreement contemplated herein, or of any duty stated or
implied by law or equity, if the resolution or course of action is or, by
operation of this Agreement is deemed to be, fair and reasonable to the
Partnership. This Section 6.8 constitutes a modification and disclaimer of
duties and obligations (express, implied, fiduciary or otherwise) with respect
to the matters described in this Section 6.8, pursuant to Section 17-1101 of the
Delaware Act. The Partnership and the Partners agree that the provisions of this
Section 6.8 are "express" and "conspicuous" for all purposes of applicable law.
(b) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
6.9 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.
22
(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, without limitation, an Opinion of Counsel) of such
Persons as to matters that such 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 and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform each and every act and duty that
is permitted or required to be done by the General Partner hereunder.
(d) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified, waived
or limited as required to permit the General Partner to act under this Agreement
or any other agreement contemplated by this Agreement and to make any decision
pursuant to the authority prescribed in this Agreement so long as such action is
not reasonably believed by the General Partner to be in, or not inconsistent
with, the best interests of the Partnership.
6.10 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, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner, one or more of its
Affiliates or one or more nominees, as the General Partner may determine. The
General Partner hereby declares and warrants that any Partnership assets for
which record title is held in the name of the General Partner or one or more of
its Affiliates or one or more nominees shall be held by the General Partner or
such Affiliate or nominee for the use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use its 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 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 Partnership. 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.
6.11 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 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 contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner as if it were the Partnership's sole
party in interest, both legally and beneficially. The 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 in
connection with any such dealing. In no event shall any Person dealing with the
General Partner 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 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,
23
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 VII
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER
7.1 LIMITATION OF LIABILITY. The Limited Partner shall have no liability
under this Agreement except as expressly provided in this Agreement or the
Delaware Act.
7.2 MANAGEMENT OF BUSINESS. The Limited Partner, in its capacity as such,
shall not 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. The transaction of any such business by the
Partnership, the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner or any of
its Affiliates, in its capacity as such, shall not affect, impair or eliminate
the limitations on the liability of the Limited Partners or Assignees under this
Agreement.
7.3 RETURN OF CAPITAL. The Limited Partner shall not 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.
7.4 RIGHTS OF THE LIMITED PARTNER RELATING TO THE PARTNERSHIP. (a) In
addition to other rights provided by this Agreement or by applicable law, and
except as limited by Section 7.4(b), the Limited Partner shall have the right,
for a purpose reasonably related to the Limited Partner's interest as a limited
partner in the Partnership, upon reasonable demand and at the Limited Partner's
own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local tax returns for each year;
(iii) to have furnished to it, upon notification to the General
Partner, a current list of the name and last known business, residence or
mailing address of each Partner;
(iv) to have furnished to it, upon notification to the General
Partner, 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 amount of cash
and description and statement of the Agreed Value of any other Capital
Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
24
(b) Notwithstanding any other provision of this Agreement, the General
Partner may keep confidential from the Limited Partner for such period of time
as the General Partner deems reasonable, any information that the General
Partner reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the General Partner in good faith believes
is not in the best interests of the Partnership or could damage the Partnership
or that the Partnership is required by law or by agreements with third parties
to keep confidential (other than agreements with Affiliates of the General
Partner the primary purpose of which is to circumvent the obligations set forth
in this Section 7.4).
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
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, without limitation, all
books and records necessary to provide to the Limited Partner any information,
lists and copies of documents required to be provided pursuant to Section
7.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including, without limitation, 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 generally accepted accounting principles.
8.2 FISCAL YEAR. The fiscal year of the Partnership shall be the calendar
year.
ARTICLE IX
TAX MATTERS
9.1 PREPARATION OF TAX RETURNS. The General Partner shall arrange for the
preparation and timely filing of all returns of Partnership income, gains,
deductions, losses and other items required of the Partnership for federal and
state income tax purposes and shall use all reasonable efforts to furnish,
within 90 days of the close of each taxable year of the Partnership, the tax
information reasonably required by the Partners for federal and state income tax
reporting purposes. The classification, realization and recognition of income,
gain, losses and deductions and other items shall be on the accrual method of
accounting for federal income tax purposes. The taxable year of the Partnership
shall be the calendar year.
9.2 TAX ELECTIONS. Except as otherwise provided herein, the General
Partner shall, in its sole discretion, determine whether to make any available
election pursuant to the Code; provided, however, that the General Partner shall
make the election under Section 754 of the Code in accordance with applicable
regulations thereunder. The General Partner shall have the right to seek to
revoke any such election (including, without limitation, the election under
Section 754 of the Code) upon the General Partner's determination in its sole
discretion that such revocation is in the best interests of the Limited Partner.
9.3 TAX CONTROVERSIES. Subject to the provisions hereof, the General
Partner is designated the Tax Matters Partner (as defined in Section 6231 of the
Code), and is authorized and required to represent the Partnership (at the
Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities, including, without limitation, resulting
administrative and judicial proceedings, and to expend Partnership funds for
professional services and costs associated therewith.
25
The Limited Partner agrees to cooperate with the General Partner and to do or
refrain from doing any or all things reasonably required by the General Partner
to conduct such proceedings.
9.4 ORGANIZATIONAL EXPENSES. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
60-month period as provided in Section 709 of the Code.
9.5 WITHHOLDING. Notwithstanding any other provision of this Agreement,
the General Partner is authorized to take any action that it determines in its
sole discretion to be necessary or appropriate to cause the Partnership to
comply with any withholding requirements established under the Code or any other
federal, state or local law including, without limitation, pursuant to Sections
1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is
required to withhold and pay over to any taxing authority any amount resulting
from the allocation or distribution of income to any Partner (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld shall be
treated as a distribution of cash pursuant to Section 5.3 in the amount of such
withholding from such Partner.
9.6 OPINIONS OF COUNSEL. Notwithstanding any other provision of this
Agreement, if the Partnership is treated as an association taxable as a
corporation at any time or is otherwise taxable for federal income tax purposes
as an entity at any time and, pursuant to the provisions of this Agreement, an
Opinion of Counsel would otherwise be required to the effect that an action will
not cause the Partnership to become so treated as an association taxable as a
corporation or otherwise taxable as an entity for federal income tax purposes,
such requirement for an Opinion of Counsel shall be deemed automatically waived.
ARTICLE X
TRANSFER OF INTERESTS
10.1 TRANSFER. (a) The term "transfer," when used in this Article X with
respect to a Partnership Interest, shall be deemed to refer to a transaction by
which a Partner disposes of its Partnership Interest to another Person and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article X.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article X shall be null and void.
(c) Nothing contained in this Article X shall be construed to prevent a
disposition by the parent entity of the General Partner of all of the issued and
outstanding capital stock of the General Partner.
10.2 TRANSFER OF THE GENERAL PARTNER'S PARTNERSHIP INTEREST. If the
General Partner merges, consolidates or otherwise combines into any other Person
or transfers all or substantially all of its assets to another Person, such
Person may become a Successor General Partner and the Limited Partner hereby
expressly consents to such transfer. Except as set forth in the immediately
preceding sentence, the General Partner may not transfer all or any part of its
Partnership Interest as a General Partner of the Partnership.
10.3 TRANSFER OF THE LIMITED PARTNER'S PARTNERSHIP INTEREST. If the
Limited Partner merges, consolidates or otherwise combines into any other Person
or transfers all or substantially all of its assets to another Person, such
Person may become a Substituted Limited Partner pursuant to Article XI. Except
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as set forth in the immediately preceding sentence, the Limited Partner may not
transfer all or any part of its Partnership Interest or withdraw from the
Partnership.
ARTICLE XI
ADMISSION OF PARTNERS
11.1 ADMISSION OF SUBSTITUTED LIMITED PARTNERS. Any person that is the
successor in interest to a Limited Partner as described in Section 10.3 shall be
admitted to the Partnership as a limited partner upon (a) furnishing to the
General Partner (i) acceptance in form satisfactory to the General Partner of
all of the terms and conditions of this Agreement and (ii) such other documents
or instruments as may be required to effect its admission as a limited partner
in the Partnership and (b) obtaining the consent of the General Partner, which
consent may be withheld or granted in the sole discretion of the General
Partner. Such Person shall be admitted to the Partnership as a limited partner
immediately prior to the transfer of the Partnership Interest, and the business
of the Partnership shall continue without dissolution.
11.2 ADMISSION OF SUCCESSOR GENERAL PARTNER. A successor General Partner
approved pursuant to Section 12.1 or 12.2 or the transferee of all of the
General Partner's Partnership Interest in the Partnership pursuant to Section
10.2 who is proposed to be admitted as a successor General Partner shall,
subject to compliance with the terms of Section 12.3, if applicable, be admitted
to the Partnership as the General Partner, effective immediately prior to the
withdrawal or removal of the General Partner pursuant to Section 12.1 or 12.2 or
the transferee of all of the General Partner's Partnership Interest in the
Partnership pursuant to Section 10.2. Any such successor shall, subject to the
terms hereof, carry on the business of the Partnership without dissolution. In
each case, the admission of such successor General Partner to the Partnership
shall, subject to the terms hereof, be subject to the successor General Partner
executing and delivering to the Partnership an acceptance of all of the terms
and conditions of this Agreement and such other documents or instruments as may
be required to effect such admission.
11.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP. To
effect the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Delaware Act to amend
the records of the Partnership to reflect such admission and, if necessary, to
prepare as soon as practical an amendment of this Agreement and, if required by
law, to prepare and file an amendment to the Certificate of Limited Partnership
and may for this purpose, among others, exercise the power of attorney granted
pursuant to Section 1.4.
11.4 ADMISSION OF ADDITIONAL LIMITED PARTNERS. (a) A Person (other than
the General 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, without limitation, the power of attorney granted in
Section 1.4, and (ii) such other documents or instruments as may be required in
the discretion of the General Partner to effect such Person's admission as an
Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 11.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole discretion. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person is
recorded as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
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ARTICLE XII
WITHDRAWAL OR REMOVAL OF PARTNERS
12.1 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 Limited Partner;
(ii) the General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition; (C) files
a petition or answer seeking for itself a reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
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 12.1(a)(iii); or (E) seeks, consents to or acquiesces in
the appointment of a trustee, receiver or liquidator of the General
Partner or of all or any substantial part of its properties;
(iii) a final and non-appealable judgment is entered by a court with
appropriate jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a
court with appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now or
hereafter in effect; or
(iv) 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.
If an Event of Withdrawal specified in Section 12.1(a)(ii), (iii) or (iv)
occurs, the withdrawing General Partner shall give notice to the Limited Partner
within 30 days after such occurrence. The Partners hereby agree that only the
Events of Withdrawal described in this Section 12.1 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 if the General Partner gives a notice of withdrawal pursuant to
Section 12.1(a)(i), and the Limited Partner, prior to the effective date of such
withdrawal or removal, elects a successor General Partner; provided that the
Limited Partner shall have no obligation to do so. If, prior to the effective
date of the General Partner's withdrawal, a successor is not selected by the
Limited Partner as provided herein or the Partnership does not receive a
Withdrawal Opinion of Counsel, the Partnership shall be dissolved in accordance
with Section 13.1. Any successor General Partner elected in accordance with the
terms of this Section 12.1 shall be subject to the provisions of Section 11.3.
12.2 INTEREST OF DEPARTING PARTNER AND SUCCESSOR GENERAL PARTNER. The
Partnership Interest of a Departing Partner departing as a result of withdrawal
pursuant to Section 12.1 shall be purchased by the successor to the Departing
Partner for an amount in cash equal to the fair market value of such Partnership
Interest, such amount to be determined and payable as of the effective date of
the departure of the Departing Partner. Such purchase shall be a condition to
the admission to the Partnership of the successor as a General Partner.
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12.3 REIMBURSEMENT OF DEPARTING PARTNER. The Departing Partner shall be
entitled to receive all reimbursements due such Departing Partner pursuant to
Section 6.4, including, without limitation, any employee-related liabilities
(including, without limitation, severance liabilities), incurred in connection
with the termination of any employees employed by such departing Partner for the
benefit of the Partnership.
12.4 WITHDRAWAL OF THE LIMITED PARTNER. Without the prior consent of the
General Partner, which may be granted or withheld in its sole discretion, the
Limited Partner shall not have the right to withdraw from the Partnership.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
13.1 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 any successor
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve and, subject to Section 13.2, its affairs should be wound up,
upon:
(a) the expiration of its term as provided in Section 1.5;
(b) an Event of Withdrawal of the General Partner as provided in
Section 12.1(a), unless a successor is elected and an Opinion of Counsel
is received as provided in Section 12.1(b) and such successor is admitted
to the Partnership pursuant to Section 11.3;
(c) an election to dissolve the Partnership by the General Partner
that is approved by the Limited Partner;
(d) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(e) the sale of all or substantially all of the assets and
properties of the Partnership.
13.2 CONTINUATION OF THE BUSINESS OF THE PARTNERSHIP AFTER DISSOLUTION.
Upon (a) dissolution of the Partnership following an Event of Withdrawal caused
by the withdrawal of the General Partner as provided in Section 12.1(a)(i) and
following a failure of the Limited Partner to appoint a successor General
Partner as provided in Section 12.1, then within 90 days thereafter or (b)
dissolution of the Partnership upon an event constituting an Event of Withdrawal
as defined in Section 12.1(a)(ii), (iii) or (iv), then within 180 days
thereafter, the Limited Partner 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 a general partner a Person approved by the
Limited Partner. Upon any such election by the Limited Partner, all Partners
shall be bound thereby and shall be deemed to have approved same. 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 until the end of
the term set forth in Section 1.5 unless earlier dissolved in accordance
with this Article XIII;
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(ii) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be
purchased by the successor General Partner in the manner described in
Section 12.2; 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 1.4; provided, that the right 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 the Limited
Partner and (y) neither the Partnership nor the reconstituted limited
partnership 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.
13.3 LIQUIDATION. Upon dissolution of the Partnership, unless the
Partnership is continued under an election to reconstitute and continue the
Partnership pursuant to Section 13.2, the General Partner, or in the event the
General Partner has been dissolved, become bankrupt as set forth in Section 12.1
or withdrawn from the Partnership, a liquidator or liquidating committee
approved by the Limited Partner, shall be the Liquidator. The Liquidator (if
other than the General Partner) shall be entitled to receive such compensation
for its services as may be approved by the Limited Partner. The Liquidator shall
agree not to resign at any time without 15 days' prior notice and (if other than
the General Partner) may be removed at any time, with or without cause, by
notice of removal approved by the Limited Partner. 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 the Limited Partner. 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
XIII, the Liquidator approved in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the parties hereto,
all of the powers conferred upon the General Partner under the terms of this
Agreement (but subject to all of the applicable limitations, contractual and
otherwise, upon the exercise of such powers, other than the limitation on sale
set forth in Section 6.3(b)) to the extent necessary or desirable in the good
faith judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be reasonably
required in the good faith judgment of the Liquidator to complete the winding-up
and liquidation of the Partnership as provided for herein. The Liquidator shall
liquidate the assets of the Partnership, and apply and distribute the proceeds
of such liquidation in the following order of priority, unless otherwise
required by mandatory provisions of applicable law:
(a) the payment to creditors of the Partnership, including, without
limitation, Partners who are creditors, in the order of priority provided
by law; and the creation of a reserve of cash or other assets of the
Partnership for contingent liabilities in an amount, if any, determined by
the Liquidator to be appropriate for such purposes; and
(b) to all Partners in accordance with 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 this
clause) for the taxable year of the Partnership during which the
liquidation of the Partnership occurs (with the date of such occurrence
being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)); and such distribution shall be made by the end of
such taxable year (or, if later, within 90 days after said date of such
occurrence).
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13.4 DISTRIBUTIONS IN KIND. (a) Notwithstanding the provisions of Section
13.3, which require the liquidation of the assets of the Partnership, but
subject to the order of priorities set forth therein, if prior to or upon
dissolution of the Partnership the Liquidator determines that an immediate sale
of part or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidator may, in its absolute discretion,
defer for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Partnership (including, without limitation, those
to Partners as creditors) and/or distribute to the Partners or to specific
classes of Partners, in lieu of cash, as tenants in common and in accordance
with the provisions of Section 13.3, undivided interests in such Partnership
assets as the Liquidator deems not suitable for liquidation. Any such
distributions in kind shall be made only if, in the good faith judgment of the
Liquidator, such distributions in kind are in the best interest of the Limited
Partner, and shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidator deems reasonable and equitable
and to any agreements governing the operation of such properties at such time.
The Liquidator shall determine the fair market value of any property distributed
in kind using such reasonable method of valuation as it may adopt.
(b) In accordance with Section 704(c)(1)(B) of the Code, in the case of
any deemed distribution occurring as a result of a termination of the
Partnership pursuant to Section 708(b)(1)(B) of the Code, to the maximum extent
possible consistent with the priorities of Section 13.3, the General Partner
shall have sole discretion to treat the deemed distribution of Partnership
assets to Partners as occurring in a manner that will not cause a shift of the
Book-Tax Disparity attributable to a Partnership asset existing immediately
prior to the deemed distribution to another asset upon the deemed contribution
of assets to the reconstituted Partnership, including, without limitation,
deeming the distribution of any Partnership assets to be made either to the
Partner who contributed such assets or to the transferee of such Partner.
13.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP. Upon the
completion of the distribution of Partnership cash and property as provided in
Sections 13.3 and 13.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware shall be cancelled and such other
actions as may be necessary to terminate the Partnership shall be taken.
13.6 REASONABLE TIME FOR WINDING UP. A reasonable time shall be allowed
for the orderly winding up of business and affairs of the Partnership and the
liquidation of its assets pursuant to Section 13.3 in order to minimize any
losses otherwise attendant upon such winding up, and the provisions of this
Agreement shall remain in effect between the Partners during the period of
liquidation.
13.7 RETURN OF CAPITAL. 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 Partner, or any portion thereof, it being expressly
understood that any such return shall be made solely from Partnership assets.
13.8 NO CAPITAL ACCOUNT RESTORATION. No Partner shall have any obligation
to restore any negative balance in its Capital Account upon liquidation of the
Partnership.
13.9 WAIVER OF PARTITION. Each Partner hereby waives any right to
partition of the Partnership property.
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ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT
14.1 AMENDMENT TO BE ADOPTED SOLELY BY GENERAL PARTNER. The Limited
Partner agrees that the General Partner (pursuant to its powers of attorney from
the Limited Partner), without the approval of the Limited Partner, may amend any
provision of this Agreement, and execute, swear to, acknowledge, deliver, file
and record whatever documents may be required in connection therewith, to
reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of
the Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
reasonable and 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 that is necessary or advisable in the opinion of the General
Partner to ensure that the Partnership will not be treated as an
association taxable as a corporation or otherwise taxed as an entity for
federal income tax purposes;
(d) a change (i) that, in the sole discretion of the General
Partner, does not adversely affect the Limited Partner in any material
respect, (ii) that is necessary or desirable to satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order,
ruling or regulation of any federal or state agency or judicial authority
or contained in any federal or state statute (including, without
limitation, the Delaware Act), compliance with any of which the General
Partner determines in its sole discretion to be in the best interests of
the Partnership and the Limited Partner or (iii) that is required to
effect the intent of the provisions of this Agreement or is otherwise
contemplated by this Agreement;
(e) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership or the General Partner or its directors or
officers from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of
1940, as amended, or "plan asset" regulations adopted under the Employee
Retirement Income Security Act of 1974, as amended, whether or not
substantially similar to plan asset regulations currently applied or
proposed by the United States Department of Labor;
(f) any amendment expressly permitted in this Agreement to be made
by the General Partner acting alone;
(g) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 15.3;
(h) an amendment that, in the sole discretion of the General
Partner, is necessary or desirable to reflect, account for and deal with
appropriately the formation by the Partnership of, or investment by the
Partnership in, any corporation, partnership, joint venture, limited
liability company or other entity other than the Subsidiary Partnerships,
in connection with the conduct by the Partnership of activities permitted
by the terms of Section 3.1; or
(i) any other amendments substantially similar to the foregoing.
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14.2 AMENDMENT PROCEDURES. Except with respect to amendments of the type
described in Section 14.1, all amendments to this Agreement shall be made in
accordance with the following requirements. Amendments to this Agreement may be
proposed only by or with the consent of the General Partner. Each such proposal
shall contain the text of the proposed amendment. A proposed amendment shall be
effective upon its approval by the Limited Partner.
ARTICLE XV
MERGER
15.1 AUTHORITY. The Partnership may merge or consolidate with one or more
corporations, business trusts or associations, real estate investment trusts,
common law trusts or unincorporated businesses, including, without limitation, a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("MERGER AGREEMENT") in accordance
with this Article.
15.2 PROCEDURE FOR MERGER OR CONSOLIDATION. Merger or consolidation of the
Partnership pursuant to this Article requires the prior approval of the General
Partner. If the General Partner shall determine, in the exercise of its sole
discretion, to consent to the merger or consolidation, the General Partner shall
approve the Merger Agreement, which shall set forth:
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
(b) The name and jurisdictions 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 partnership interests, rights, securities
or obligations of the Surviving Business Entity; and (i) if any general or
limited partnership interests, securities or rights of any constituent
business entity are not to be exchanged or converted solely for, or into,
cash, property or general or limited partnership interests, rights,
securities or obligations of the Surviving Business Entity, the cash,
property or general or limited partnership interests, rights, securities
or obligations of any limited partnership, corporation, trust or other
entity (other than the Surviving Business Entity) which the holders of
such general or limited partnership interest are to receive in exchange
for, or upon conversion of, their 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 partnership
interests, rights, securities or obligations of the Surviving Business
Entity or any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity), or evidences thereof, are to
be delivered;
(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 15.4 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
33
later than the date of the filing of the certificate of merger, the
effective time shall be fixed no later than the time of the filing of the
certificate of merger and stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General
Partner.
15.3 APPROVAL BY LIMITED PARTNER OF MERGER OR CONSOLIDATION. (a) The
General Partner of the Partnership, upon its approval of the Merger Agreement,
shall direct that a copy or a summary of the Merger Agreement be submitted to
the Limited Partner for its approval.
(b) The Merger Agreement shall be approved upon receiving the consent of
the Limited Partner. After such approval by the Limited Partner, and at any time
prior to the filing of the certificate of merger pursuant to Section 15.4, the
merger or consolidation may be abandoned pursuant to provisions therefor, if
any, set forth in the Merger Agreement.
15.4 CERTIFICATE OF MERGER. Upon the required approval by the General
Partner and the Limited Partner 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.
15.5 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 interest
in property of any of those constituent business entities shall be
preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity, and may be
enforced against it to the same extent as if the debts, liabilities and
duties had been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article shall not
be deemed to result in a transfer or assignment of assets or liabilities from
one entity to another having occurred.
ARTICLE XVI
GENERAL PROVISIONS
16.1 ADDRESSES AND NOTICES. Any notice, demand, request or report required
or permitted to be given or made to a Partner under this Agreement shall be in
writing and shall be deemed given or made when received by it at the principal
office of the Partnership referred to in Section 1.3.
16.2 REFERENCES. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
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16.3 PRONOUNS AND PLURALS. Whenever the context may require, 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.
16.4 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.
16.5 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.
16.6 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.
16.7 CREDITORS. None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
16.8 WAIVER. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
16.9 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, independently of the signature of any other
party.
16.10 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.
16.11 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
EOTT ENERGY GENERAL PARTNER, L.L.C.
By: /s/ XXXX X. XXXXX
-----------------------------------------
Xxxx X. Xxxxx
President
EOTT ENERGY OPERATING LIMITED PARTNERSHIP
BY: EOTT ENERGY CORP.,
GENERAL PARTNER
By: /s/ XXXX X. XXXXX
--------------------------------------
Xxxx X. Xxxxx
President
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