Exhibit 3.25
AGREEMENT OF LIMITED PARTNERSHIP
OF
CHAPARRAL STEEL MIDLOTHIAN, LP
TABLE OF CONTENTS
Page
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ARTICLE 1.
DEFINITIONS; REFERENCES ................... 1
1.1 Definitions ................................................... 1
1.2 References .................................................... 8
ARTICLE 2.
FORMATION, NAME, PURPOSE, REGISTERED OFFICE,
REGISTERED AGENT AND TERM ................... 8
2.1 Formation of the Limited Partnership .......................... 8
2.2 Partnership Name .............................................. 8
2.3 Purpose ....................................................... 8
2.4 Principal and Registered Office ............................... 8
2.5 Term of the Partnership ....................................... 8
ARTICLE 3.
CAPITAL CONTRIBUTIONS; PARTNER LOANS ............. 8
3.1 Initial Capital Contributions of General Partner .............. 8
3.2 Initial Capital Contribution of Limited Partner ............... 9
3.3 Authorization of Partner Loans ................................ 9
3.4 Additional Capital Contributions .............................. 9
ARTICLE 4.
DISTRIBUTIONS AND ALLOCATIONS ................ 10
4.1 Distribution of Net Cash Flow ................................. 10
4.2 Distribution of Net Proceeds of a Capital Transaction ......... 10
4.3 Return of and Interest on Capital Contributions ............... 10
4.4 Payments ...................................................... 10
4.5 In-Kind Distributions ......................................... 19
4.6 Allocations of Net Profit and Net Loss......................... 10
4.7 Partnership Minimum Gain Chargeback ........................... 12
4.8 Minimum Gain Chargeback for Partner Nonrecourse Debt .......... 12
(i)
4.9 Qualified Income Offset ....................................... 12
4.10 Limit on Loss Allocations ..................................... 12
4.11 Net Loss from Partner Nonrecourse Debt ........................ 13
4.12 Nonrecourse Deductions ........................................ 13
4.13 Code Section 754 Adjustments .................................. 13
4.14 Reversal of Mandatory Allocations ............................. 13
4.15 Compliance with Code .......................................... 13
4.16 Tax Allocations -- Code Section 704(c) ........................ 13
4.17 Allocation on Transfer ........................................ 14
4.18 Minimum Interest of General Partner ........................... 14
ARTICLE 5. ......................... 14
5.1 Capital Accounts .............................................. 14
5.2 Adjustment for In-Kind Distributions .......................... 14
5.3 Property Revaluation .......................................... 15
5.4 Interpretation ................................................ 15
5.5 Obligation to Repay or Restore ................................ 15
5.6 Tax Elections ................................................. 16
ARTICLE 6.
OPERATING EXPENSES ..................... 16
6.1 Operating Expenses and Reimbursements ......................... 16
ARTICLE 7.
ADMISSION OF PARTNERS; ASSIGNMENT OF INTERESTS ..... 16
7.1 Admission of Additional Partners .............................. 16
7.2 Assignment or Transfer of Partnership Interests ............... 17
ARTICLE 8.
MANAGEMENT DUTIES AND RESTRICTIONS ............. 17
8.1 Powers of General Partner ..................................... 17
8.2 Authority as to Third Persons ................................. 20
8.3 Compensation and Expenses of the General Partner .............. 20
8.4 Covenants of the General Partner .............................. 21
8.5 Limitations on Authority ...................................... 21
8.6 No Withdrawal From Partnership ................................ 21
ARTICLE 9.
DISSOLUTION OF THE PARTNERSHIP ............... 21
9.1 Dissolution ................................................... 21
9.2 Continuation .................................................. 21
9.3 Events Affecting a Limited Partner ............................ 22
9.4 Liquidation Procedures ........................................ 22
(ii)
9.5 Termination ................................................... 23
9.6 No Petition for Dissolution ................................... 23
9.7 Compliance with Timing Requirements of Treasury Regulations ... 23
ARTICLE 10.
FINANCIAL ACCOUNTING AND REPORTS ............ 23
10.1 Financial and Tax Accounting and Reports ...................... 23
10.2 Valuation...................................................... 24
10.3 Supervision; Inspection of Books .............................. 24
10.4 Quarterly Reports ............................................. 24
10.5 Annual Report; Financial Statements ........................... 24
10.6 Consent in Lieu of Meeting .................................... 24
10.7 Withholding ................................................... 24
ARTICLE 11.
OTHER PROVISIONS ...................... 25
11.1 Execution and Filing of Documents ............................. 25
11.2 Other Instruments and Acts .................................... 25
11.3 Binding Agreement ............................................. 25
11.4 Governing Law ................................................. 25
11.5 Notices ....................................................... 25
11.6 Power of Attorney ............................................. 25
11.7 Amendment ..................................................... 26
11.8 Entire Agreement .............................................. 27
11.9 Titles; Subtitles ............................................. 27
11.10 Exculpation ................................................... 27
11.11 Indemnification of the General Partner ........................ 27
11.12 Limitation of Liability of the Limited Partners ............... 27
11.13 Ambiguities ................................................... 27
11.14 No Right to Partition ......................................... 28
(iii)
AGREEMENT OF LIMITED PARTNERSHIP
OF
CHAPARRAL STEEL MIDLOTHIAN, LP
THIS AGREEMENT OF LIMITED PARTNERSHIP, made and entered into as of
this 29th day of February, 1996, by and between Chaparral Steel Texas, Inc., a
Delaware corporation (the "General Partner") and Chaparral Steel Company, a
Delaware corporation (the "Limited Partner").
NOW, THEREFORE, the General Partner and the Limited Partner hereby
agree to the terms and conditions of this Agreement of Limited Partnership as
follows:
ARTICLE 1.
DEFINITIONS; REFERENCES
1.1 Definitions. Unless the context requires otherwise, the following
terms shall have the meanings specified in this Section 1.1:
1.1.1 Act: The Delaware Revised Uniform Limited Partnership Act.
1.1.2 Additional Capital Contributions: The additional capital
contributions described in Section 3.4.
1.1.3 Adjusted Capital Account Deficit: With respect to any
Partner, the deficit balance, if any, in such Partner's
Capital Account as of the end of the relevant taxable year,
after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such
Partner (1) is obligated to restore to the Partnership
upon liquidation of its interest in the Partnership (or
which is so treated pursuant to Regulations Section
1.704-1(b)(2)(ii)(c)) pursuant to the terms of this
Agreement or under state law or (2) is deemed to be
obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5) and (3) the Partner's share (as
determined under Code Section 752) of any recourse
indebtedness of the Partnership to the extent that such
indebtedness could not be repaid out of the
Partnership's assets if all of the Partnership's assets
were sold at their respective Book Values as of the end
of the Fiscal Year or other period and the proceeds
from the sales were used to pay the Partnership's
liabilities; and
(b) Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations.
The foregoing definition of Adjusted Capital Account Deficit
is intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith. For purposes of clause
(a)(3) above, the amounts computed pursuant to clause (a)(1)
above for each Partner shall be considered to be proceeds
from the sale of the assets of the Partnership to the extent
such amounts would be available to satisfy (directly or
indirectly) the indebtedness specified in clause (a)(3).
1.1.4 Affiliate: With respect to any Person, a Person that
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with
the Person in question. As used herein, the term "control"
means the possession, 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 or interests, by contract, or otherwise.
1.1.5 Agreement: This Agreement of Limited Partnership of
Chaparral Steel Midlothian, LP and any amendments hereto.
1.1.6 Bankruptcy: A Person shall be deemed bankrupt if:
(a) any proceeding is commenced against such Person as
"debtor" for any relief under bankruptcy or insolvency
laws, or laws relating to the relief of debtors,
reorganizations, arrangements, compositions, or
extensions and such proceeding is not dismissed within
sixty (60) days after such proceeding has commenced, or
(b) such Person commences any proceeding for relief under
bankruptcy or insolvency laws or laws relating to the
relief of debtors, reorganizations, arrangements,
compositions, or extensions.
1.1.7 Book Value: With respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(a) the initial Book Value of any asset contributed (or
deemed contributed under Regulations Section
1.708-1(b)(1)(iv)) by a Partner to the Partnership
shall be the asset's gross fair market value at the
time of the contribution;
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(b) the Book Value of all Partnership assets shall be
adjusted to equal their respective gross fair market
values, as determined by the General Partner in its
reasonable judgment:
(i) if the General Partner reasonably determines an
adjustment is necessary or appropriate to reflect
the relative economic interests of the Partners in
the Partnership as of (1) the acquisition of an
additional interest in the Partnership by any new
or existing Partner in exchange for more than a de
minimis capital contribution, or (2) the
distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership
property as consideration for an interest in the
Partnership; and
(ii) as of the liquidation of the Partnership within
the meaning of Regulations Section
1.704-1(b)(2)(ii)(g);
(c) the Book Value of any Partnership asset distributed to
any Partner will be the gross fair market value of the
asset on the date of distribution; and
(d) the Book Values of Partnership assets will be increased
or decreased to reflect any adjustment to the adjusted
basis of the assets under Code Sections 734(b) or
743(b), but only to the extent that the adjustment is
taken into account in determining Capital Accounts
under Regulations Section 1.704-1(b)(2)(iv)(m),
provided that Book Values will not be adjusted
hereunder to the extent that the General Partner
determines that an adjustment under clause (b) is
necessary or appropriate in connection with a
transaction that would otherwise result in an
adjustment under this clause (d).
After the Book Value of any asset has been adjusted under
clause (a), clause (b) or clause (d) above, Book Value will
be adjusted by the Depreciation taken into account with
respect to the asset for purposes of computing Net Profit
and Net Loss.
1.1.8 Capital Account: The capital account of a Partner
established and maintained in accordance with Section 5.1.
1.1.9 Capital Contributions: With respect to any Partner, the
amount of money actually contributed (or deemed contributed
pursuant to Regulations Section 1.704-1(b)(2)(iv)(c)) to the
Partnership and the initial Book Value of any property
(other than money) contributed to the Partnership with
respect to the interest in the Partnership held by that
Partner (net of any liabilities secured by such property
that the Partnership is considered to assume or to take
subject to Code Section
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752). Any reference in this Agreement to the Capital
Contribution of a Partner will include a Capital
Contribution made by any prior Partner with respect to the
Partnership interest of the Partner.
1.1.10 Capital Transaction: The sale, exchange or other disposition
of all or any portion of the property of the Partnership
other than in the ordinary course of business of the
Partnership. Capital Transactions include the financing or
refinancing of Partnership property which creates excess
funds not needed for Operations and which funds, in the
opinion of the General Partner, are available for
distribution to the Partners.
1.1.11 Code: The United States Internal Revenue Code of 1986, as
now existing or hereafter amended. References to sections of
the Code include successor provisions to those sections.
1.1.12 Depreciation: For each taxable year or other period, an
amount equal to the depreciation, amortization or other cost
recovery deduction allowable with respect to an asset for
the year or other period, except that if the Book Value of
an asset differs from its adjusted basis for federal income
tax purposes at the beginning of the year or other period,
Depreciation will be an amount which bears the same ratio to
the beginning Book Value as the federal income tax
depreciation, amortization or other cost recovery deduction
for the year or other period bears to the beginning adjusted
tax basis, provided that if the federal income tax
depreciation, amortization, or other cost recovery deduction
for the year or other period is zero, Depreciation will be
determined with reference to the beginning Book Value using
any reasonable method selected by the General Partner.
1.1.13 Fiscal Year: The period commencing on June 1 of each year
and ending on May 31 of such year.
1.1.14 General Partner: Chaparral Steel Texas, Inc., a Delaware
corporation.
1.1.15 Gross Income: For each Fiscal Year or other period, an
amount equal to the Partnership's gross income as determined
for federal income tax purposes for such Fiscal Year or
period but computed with the adjustments specified in
Section 1.1.20(a) and (c).
1.1.16 Initial Capital Contributions: The Capital Contributions of
the General Partner made pursuant to Section 3.1 and the
Limited Partners made pursuant to Sections 3.2 and 3.3.
1.1.17 Limited Partners: Chaparral Steel Company, a Delaware
corporation, the transferees pursuant to the Initial
Transfer and Subsequent Transfer as defined in Section 7.2.2
hereof, and any other Person who
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is admitted to the Partnership as a Limited Partner and
shown as a Limited Partner on the books and records of the
Partnership.
1.1.18 Net Cash Flow: All cash funds from operations of the
Partnership on hand or on deposit from time to time after
(i) payment of all operating expenses payable as of the date
in question, (ii) provision for payment of all outstanding
and unpaid Partnership obligations due and payable as of the
date in question or within sixty (60) days thereafter, and
(iii) the establishment of such reasonable reserves as the
General Partner, in its sole discretion, deems appropriate
for the operating needs of the Partnership. "Net Cash Flow"
shall not include or reflect any proceeds received or
expenses incurred in connection with a Capital Transaction.
1.1.19 Net Proceeds of a Capital Transaction: The net proceeds
received by the Partnership in connection with a Capital
Transaction after payment of all costs and expenses incurred
by the Partnership in connection with such Capital
Transaction, including, without limitation, brokers'
commissions, loan fees, other closing costs, the cost of any
alteration, improvement, restoration or repair of
Partnership assets necessitated by or incurred in connection
with such Capital Transaction, any reserves that the General
Partner believes in good faith should be established and the
payment of any loans owed by the Partnership to any of the
Partners, plus any other loans that should be appropriately
paid, as determined by the General Partner in its reasonable
discretion.
1.1.20 Net Profit and Net Loss: For each Fiscal Year or other
period, an amount equal to the Partnership's taxable income
or loss for such Fiscal Year or period, determined in
accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall
be included in taxable income or loss) with the following
adjustments:
(a) any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account
in computing Net Profit or Net Loss shall be added to
such taxable income or loss;
(b) any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures under Regulations Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into
account in computing Net Profit or Net Loss shall be
subtracted from such taxable income or loss;
(c) gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss
is recognized for federal income
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tax purposes shall be computed by reference to the Book
Value of such property notwithstanding that the Book
Value of such asset differs from its adjusted tax
basis;
(d) gain or loss resulting from any adjustment pursuant to
Section 1.1.7(b) shall be taken into account as gain or
loss from disposition of the asset for purposes of
computing Net Profit or Net Loss hereunder;
(e) gain or loss resulting from any adjustment attributable
to an in-kind distribution of assets to any Partner
pursuant to Sections 5.2 shall be taken into account as
gain or loss from disposition of the asset for purposes
of computing Net Profit or Net Loss hereunder;
(f) in lieu of the depreciation, amortization and other
cost recovery deductions taken into account in
computing taxable income or loss, there shall be taken
into account Depreciation for such Fiscal Year or other
period as determined under Regulations Section
1.704-1(b)(2)(iv)(g)(3);
(g) the amount of any Gross Income specially allocated to
the Partners pursuant to Sections 4.7 through 4.9 and
4.14 shall not be included as income or revenue; and
(h) any amount allocated pursuant to Sections 4.11 through
4.14 shall not be included as a gain, loss or
deduction.
1.1.21 Net Profit and Net Loss from Capital Transactions: Net
Profit and Net Loss including only those items of income,
gain, loss and deduction relating to Capital Transactions.
1.1.22 Net Profit and Net Loss from Operations: Net Profit and Net
Loss excluding those items of income, gain, loss and
deduction related solely to Capital Transactions.
1.1.23 Nonrecourse Deductions: Losses, deductions or Code Section
705(a)(2)(B) expenditures attributable to Nonrecourse
Liabilities of the Partnership. The amount of Nonrecourse
Deductions for any Fiscal Year or other period shall be
determined in accordance with the provisions of Regulations
Section 1.704-2(c).
1.1.24 Nonrecourse Liability: A nonrecourse liability as defined in
Regulations Section 1.752-1(a)(2).
1.1.25 Operations: All operations and activities of the Partnership
other than those related to or consisting of a Capital
Transaction.
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1.1.26 Partner: A Partner of the Partnership, including the General
Partner and the Limited Partner.
1.1.27 Partner Nonrecourse Debt: Any Nonrecourse Liability of the
Partnership for which any Partner or related person bears
the economic risk of loss under Regulations Section 1.752-2.
1.1.28 Partner Nonrecourse Debt Minimum Gain: The minimum gain
attributable to Partner Nonrecourse Debt as determined under
Regulations Section 1.704-2(i)(3).
1.1.29 Partner Nonrecourse Deductions: Partnership losses,
deductions or Code Section 705(a)(2)(B) expenditures
attributable to a particular Partner Nonrecourse Debt. The
amount of Partner Nonrecourse Deductions for any Fiscal Year
or other period shall be determined in accordance with the
provisions of Regulations Section 1.704-2(i)(2).
1.1.30 Partnership: Chaparral Steel Midlothian, LP, a Delaware
limited partnership.
1.1.31 Partnership Certificate: The certificate of limited
partnership of the Partnership filed in conformance with the
Act.
1.1.32 Partnership Minimum Gain: The amount computed under
Regulations Section 1.704-2(d)(1) with respect to the
Partnership's Nonrecourse Liabilities.
1.1.33 Partnership Percentage or Percentages: The percentages of
the Partners as follows:
General Partner 1%
Limited Partner 99%
1.1.34 Partnership Term: The period of duration of the Partnership,
as set forth in Section 2.5.
1.1.35 Person: Any individual, partnership, corporation, trust or
other legal entity.
1.1.36 Regulations: The Income Tax Regulations promulgated under
the Code, as such regulations may be amended from time to
time (including corresponding provisions of succeeding
regulations).
1.1.37 Tax Matters Partner: The General Partner.
1.1.38 Transfer: Any sale, assignment, transfer, lease or other
disposal of property, including without limitation, an
interest in the Partnership.
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1.2 References. Unless otherwise specified herein, references in this
Agreement to "Section," "Subsection," "Article," or "Exhibit" refer to
the sections, subsections, articles, or exhibits in this Agreement.
ARTICLE 2.
FORMATION, NAME, PURPOSE, REGISTERED OFFICE,
REGISTERED AGENT AND TERM
2.1 Formation of the Limited Partnership. The General Partner and the
Limited Partner hereby form the Partnership as a limited partnership
pursuant to and in accordance with the provisions of the Act.
2.2 Partnership Name. The business of the Partnership will be conducted
under the name Chaparral Steel Midlothian, LP or such other name or
names as the General Partner may determine.
2.3 Purpose. The purpose of the Partnership is to (i) manufacture and
market steel products; (ii) own, manage, operate, mortgage, sell and
otherwise deal with the assets of the Partnership; and, (iii) engage
in such other activities as the General Partner shall deem
appropriate, to the extent such activities may be carried on under
applicable law and are not prohibited by the terms and provisions of
this Agreement.
2.4 Principal and Registered Office. The principal office of the
Partnership is at 000 Xxxx Xxxx, Xxxxxxxxxx, Xxxxx 00000. The General
Partner has a business office at the Partnership's principal office.
The registered office of the Partnership is at Corporation Trust
Center, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 and The
Corporation Trust Center is the registered agent of the Partnership.
The General Partner may change the principal or registered office or
registered agent of the Partnership from time to time. The General
Partner may establish, maintain and abandon one or more additional
places of business for the Partnership.
2.5 Term of the Partnership. The term of the Partnership shall commence
upon the filing and recording of the Partnership Certificate, and
shall continue until December 31, 2046, unless earlier terminated
pursuant to the terms of this Agreement.
ARTICLE 3.
CAPITAL CONTRIBUTIONS; PARTNER LOANS
3.1 Initial Capital Contributions of General Partner. Upon the formation
of the Partnership, the General Partner has contributed $10.00 to the
Partnership.
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Following the formation the General Partner shall contribute one
percent (1%) of the manufacturing and operating assets previously held
by Chaparral Steel Company (to consist of cash and receivables) to the
Partnership. The General Partner shall not otherwise be required to
make additional contributions to the Partnership except as provided in
Sections 3.4 and 5.5.
3.2 Initial Capital Contribution of Limited Partner. Upon the formation of
the Partnership, the Limited Partner has contributed $990.00 to the
Partnership. Following the formation Chaparral Steel Company shall
convey to the Partnership as a contribution on behalf of the Limited
Partner ninety-nine percent (99%) of the manufacturing and operating
assets of Chaparral Steel Company. Such conveyance shall be in lieu of
a conveyance to Chaparral Steel Holdings, Inc., a conveyance by
Chaparral Steel Holdings, Inc. to Chaparral Steel Trust, and a
conveyance by Chaparral Steel Trust to the Partnership. The Limited
Partner shall not be required to make additional contributions to the
Partnership except as specified in Sections 3.4 and 5.5.
3.3 Authorization of Partner Loans. Subject to the limitations herein and
to other agreements of the Partnership, the General Partner from time
to time may cause the Partnership to borrow required amounts from one
or more Partners or their Affiliates. Loans made by Partners or
Affiliates under this Section 3.3 will not be considered a
contribution to the capital of the Partnership, but will constitute
indebtedness of the Partnership to the advancing Partner or Affiliate,
payable from the first available net cash flow of the Partnership
unless otherwise agreed by the lending Partner or Affiliate and, to
the extent still unpaid, upon the termination and liquidation of the
Partnership. Each loan by a Partner or Affiliate will bear simple
interest compounded annually on the unpaid principal balance at the
interest rate approved by the General Partner. The Partners will not
be personally liable for loans made by Partners or Affiliates under
this Section 3.3 or be obligated to make contributions to the capital
of the Partnership to repay those loans. Loans made by Partners or
Affiliates under this Section 3.3 will be payable only from the assets
of the Partnership.
3.4 Additional Capital Contributions. The Partners may make Additional
Capital Contributions to the Partnership from time to time as may be
required to meet the demands of the business of the Partnership. The
Partners shall contribute such Additional Capital Contributions in
cash in proportion to the Partners' Partnership Percentages.
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ARTICLE 4.
DISTRIBUTIONS AND ALLOCATIONS
4.1 Distribution of Net Cash Flow. Net Cash Flow shall be distributed
among the Partners in accordance with their Partnership Percentages at
such times and in such amounts as shall be determined by the General
Partner.
4.2 Distribution of Net Proceeds of a Capital Transaction. Net Proceeds of
a Capital Transaction shall be distributed among the Partners in
accordance with their Partnership Percentages at such times and in
such total amounts as shall be determined by the General Partner.
4.3 Return of and Interest on Capital Contributions. No Partner is
entitled to the return of his Capital Contributions or his Capital
Account or to be paid interest in respect of either his Capital
Account or any Capital Contribution made by him to the Partnership
except as provided in this Agreement.
4.4 Payments. The amount of any distribution or payment to a Partner
whether pursuant to Article 4 or Article 9 hereof may be made in cash
or in-kind or partially in cash and partially in-kind in the
reasonable discretion of the General Partner or the liquidating
trustees, as the case may be, less reasonable reserves established in
the reasonable discretion of the General Partner or the liquidating
trustees, as the case may be, for known or unknown liabilities of the
Partnership.
4.5 In-Kind Distributions. All distributions of assets in-kind shall be
made at Book Value as determined pursuant to Section 5.3 and shall be
distributed to the Partners in the same manner as a distribution of
Net Proceeds of a Capital Transaction would have been made if such
assets had been sold. The Net Profit or Net Loss resulting from
distribution will be allocated in accordance with Section 4.6.3 or
Section 4.6.4, as the case may be.
4.6 Allocations of Net Profit and Net Loss.
4.6.1 Net Profit From Operations.
(a) If any Net Loss has been allocated to the Partners
pursuant to Section 4.6.2 or Section 4.6.4, then Net
Profit from Operations shall first be allocated to the
Partners, in the same proportions as such Net Loss was
allocated, until each Partner's Capital Account balance
equals what it would have been had there been no such
allocation of Net Loss.
(b) After any allocation required pursuant to Section
4.6.1(a), Net Profit from Operations shall be allocated
among the Partners in accordance with their Partnership
Percentages.
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4.6.2 Net Loss From Operations.
(a) If any Net Profit has been allocated to the Partners
pursuant to Section 4.6.1 or Section 4.6.3, then Net
Loss from Operations shall first be allocated to the
Partners, in the same proportions as such Net Profit
was allocated, until each Partner's Capital Account
balance equals what it would have been had there been
no such allocation of Net Profit.
(b) After any allocation required pursuant to Section
4.6.2(a) Net Loss from Operations shall be allocated
among the Partners in proportion to their Capital
Accounts until such Capital Account balances equal
zero.
(c) After any allocation required pursuant to Section
4.6.2(b), Net Loss from Operations shall be allocated
to the General Partner.
4.6.3 Net Profit From Capital Transactions.
(a) If any Net Loss has been allocated to the Partners
pursuant to Section 4.6.2 or Section 4.6.4, then Net
Profit from Capital Transactions shall first be
allocated to the Partners, in the same proportions as
such Net Loss was allocated, until each Partner's
Capital Account balance equals what it would have been
had there been no such allocation of Net Loss.
(b) After any allocation required pursuant to Section
4.6.3(a), Net Profit from Capital Transactions shall be
allocated among the Partners in accordance with their
Partnership Percentages.
4.6.4 Net Loss From Capital Transactions.
(a) If any Net Profit has been allocated to the Partners
pursuant to Section 4.6.1 or Section 4.6.3, then Net
Loss from Capital Transactions shall first be allocated
to the Partners, in the same proportions as such Net
Profit was allocated, until each Partner's Capital
Account balance equals what it would have been had
there been no such allocation of Net Profit.
(b) After any allocation required pursuant to Section
4.6.4(a) Net Loss from Capital Transactions shall be
allocated among the Partners in proportion to their
Capital Accounts until such Capital Account balances
equal zero.
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(c) After any allocation required pursuant to Section
4.6.4(b), Net Loss from Capital Transactions shall be
allocated to the General Partner.
4.7 Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement to the contrary, if in any Fiscal Year or
other period there is a net decrease in the amount of the Partnership
Minimum Gain, then each Partner shall first be allocated items of
Gross Income for such year (and, if necessary, subsequent years) in an
amount equal to such Partner's share of the net decrease in such
Minimum Gain during such year (as determined under Regulations Section
1.704-2(g)(2)); provided, however, if there is insufficient Gross
Income in a year to make the allocation specified above for all
Partners for such year, the Gross Income shall be allocated among the
Partners in proportion to the respective amounts they would have been
allocated had there been an unlimited amount of Gross Income for such
year.
4.8 Minimum Gain Chargeback for Partner Nonrecourse Debt. Notwithstanding
any other provision of this Agreement to the contrary other than
Section 4.7, if in any year there is a net decrease in the amount of
the Partner Nonrecourse Debt Minimum Gain, then each Partner shall
first be allocated items of Gross Income for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's
share of the net decrease in such Minimum Gain during such year (as
determined under Regulations Section 1.7042(i)(4)); provided, however,
if there is insufficient Gross Income in a year to make the allocation
specified above for all Partners for such year, the Gross Income shall
be allocated among the Partners in proportion to the respective
amounts they would have been allocated had there been an unlimited
amount of Gross Income for such year.
4.9 Qualified Income Offset. Notwithstanding any other provision of this
Agreement to the contrary (except Sections 4.7 and 4.8 which shall be
applied first), if in any Fiscal Year or other period a Partner
unexpectedly receives an adjustment, allocation or distribution
described in Regulations Section 1.7041(b)(2)(ii)(d)(4),(5) or (6),
such Partner will be specially allocated items of Gross Income in an
amount and manner sufficient to eliminate, to the extent required by
the Regulations, the Adjusted Capital Account Deficit of such Partner
as quickly as possible.
4.10 Limit on Loss Allocations. Notwithstanding the provisions of Section
4.6.2, 4.6.4 or any other provision of this Agreement to the contrary,
Net Loss (or items thereof) shall not be allocated to a Partner if
such allocation would cause or increase such Partner's Adjusted
Capital Account Deficit and shall be reallocated to the other
Partners, subject to the limitations of this Section 4.10.
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4.11 Net Loss from Partner Nonrecourse Debt. Any Net Loss or deductions
attributable to Partner Nonrecourse Debt shall be allocated to the
Partner who bears the economic risk of loss with respect to such debt.
4.12 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year or
other period shall be allocated among the Partners in accordance with
their Partnership Percentages.
4.13 Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset under Code Sections 734(b)
or 743(b) is required to be taken into account in determining Capital
Accounts under Regulations Section 1.704-1(b)(2)(iv)(m), the amount of
the adjustment to the Capital Accounts will be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases the basis), and the gain or loss will be
specially allocated to the Partners in a manner consistent with the
manner in which their Capital Accounts are required to be adjusted
under Regulations Section 1.704-1(b)(2)(iv)(m).
4.14 Reversal of Mandatory Allocations. In the event that any Gross Income
or Net Loss is allocated pursuant to Section 4.7 through 4.10,
subsequent Gross Income, Net Profit or Net Loss (or items thereof)
will first be allocated (subject to Sections 4.7 through 4.10) to the
Partners in a manner which will result in each Partner having a
Capital Account balance equal to that which would have resulted had
the original allocation of Gross Income or Net Loss (or items thereof)
pursuant to Sections 4.7 through 4.10 not occurred.
4.15 Compliance with Code. The foregoing provisions of this Agreement
relating to the allocation of Net Profit and Net Loss are intended to
comply with Regulations under Section 704(b) of the Code and shall be
interpreted and applied in a manner consistent with such Regulations.
4.16 Tax Allocations -- Code Section 704(c). In accordance with Code
Section 704(c) and the related Regulations, income, gain, loss and
deduction with respect to any property contributed to the capital of
the Partnership, solely for tax purposes, will be allocated among the
Partners so as to take account of any variation between the adjusted
basis to the Partnership of the property for federal income tax
purposes and the initial Book Value of the property. If the Book Value
of any Partnership asset is adjusted under Section 1.1.7, subsequent
allocations of income, gain, loss and deduction with respect to that
asset will take account of any variation between the adjusted basis of
the asset for federal income tax purposes and its Book Value in the
same manner as under Code Section 704(c) and the related Regulations.
Any elections or other decisions relating to allocations under this
Section 4.16 will be made in any manner that the General Partner
determines reasonably reflects the purpose and intention of this
Agreement. Allocations under this Section 4.16 are solely for purposes
of federal, state and local taxes and will not affect, or in any way
be taken into account in computing, any Partner's
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Capital Account or share of Net Profit, Net Loss or other items or
distributions under any provision of this Agreement.
4.17 Allocation on Transfer. If any interest in the Partnership is
transferred, or is increased or decreased by reason of the admission
of a new Partner or otherwise, during any Fiscal Year, the Partnership
shall make an interim closing of its books as of the effective date of
such date of transfer or admission and shall allocate Net Income or
Net Loss or items thereof based on such interim closing. All transfers
of interests or admissions or exclusions of Partners occurring at any
time during a month shall be deemed effective as of the opening of
business on the first day of the subsequent month.
4.18 Minimum Interest of General Partner. Notwithstanding any indication to
the contrary, the General Partner's interest in each item of
Partnership income, gain, loss, deduction and credit shall be not less
than 1%, except as otherwise required pursuant to Section 704(b) or
Section 704(c) of the Code.
ARTICLE 5.
CAPITAL ACCOUNTS
5.1 Capital Accounts. A separate capital account ("Capital Account") shall
be maintained for each Partner. There shall be credited to each
Partner's Capital Account the amount of any cash actually contributed
by such Partner to the capital of the Partnership (or deemed
contributed pursuant to Regulations Section 1.704-1(b)(2)(iv)(c)), the
Book Value of any property contributed by such Partner to the capital
of the Partnership (net of any liabilities secured by such property
that the Partnership is considered to assume or to take subject to
under Code Section 752), such Partner's share of the Net Profit (and
all items in the nature of income or gain that are specially allocated
to the Partner under Article 4 hereof) of the Partnership and the
amount of any Partnership liabilities that are assumed by the Partner
or secured by any Partnership property distributed to the Partner.
There shall be charged against each Partner's Capital Account the
amount of all cash distributed to such Partner by the Partnership (or
deemed distributed pursuant to Regulations Section
1.704-1(b)(2)(iv)(c)), the Book Value of any property distributed to
such Partner by the Partnership (net of any liability secured by such
property that the Partner is considered to assume or take subject to
under Code Section 752), such Partner's share of the Net Loss (and all
items in the nature of deduction or loss that are specially allocated
to the Partner under Article 4 hereof) of the Partnership and the
amount of any liabilities of the Partner assumed by the Partnership or
which are secured by any property contributed by the Partner to the
Partnership.
5.2 Adjustment for In-Kind Distributions. If the Partnership at any time
distributes any of its assets in-kind to any Partner, the Capital
Account of each
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Partner shall be adjusted as contemplated by Section 4.5, as
applicable, to account for that Partner's allocable share (as
determined under Article 4 above) of the Net Profit or Net Loss that
would have been realized by the Partnership had it sold the assets
distributed for their respective fair market values immediately prior
to their distribution.
5.3 Property Revaluation. The Capital Accounts shall be adjusted to
reflect a revaluation of Partnership property to its fair market value
on the date of adjustment upon the occurrence of any of the following
events:
5.3.1 an increase in any new or existing Partner's Partnership
Percentage resulting from the contribution of money or
property by such Partner to the Partnership including a
conversion of debt into Partnership interests,
5.3.2 any reduction in a Partner's Partnership Percentage
resulting from a distribution to such Partner in
consideration of all or part of his Partnership interest,
unless such distribution is pro rata to all Partners in
accordance with their respective Partnership Percentages,
and
5.3.3 whenever else allowed under Regulations Section
1.704-1(b)(2)(iv)(f).
The adjustments to Capital Accounts shall reflect the manner in which
the unrealized Net Profit or Net Loss inherent in the property would
be allocated if there were a disposition of the Partnership's property
at its fair market value on the date of adjustment.
5.4 Interpretation. It is the intention of the Partners that the Capital
Accounts be maintained strictly in accordance with the capital account
maintenance requirements of Regulations under Code Section 704(b). The
foregoing provisions and the other provisions of this Agreement
relating to the maintenance of the Capital Accounts are intended to
comply with such Regulations and shall be interpreted and applied in a
manner consistent with such Regulations and any amendment or successor
provision thereto. The General Partner also shall make any appropriate
modifications if unanticipated events might otherwise cause this
Agreement not to comply with the Regulations, so long as such changes
would not cause a material change in the relative economic benefits of
the Partners under this Agreement.
5.5 Obligation to Repay or Restore. If the Limited Partner has received
distributions of Net Cash Flow or Net Proceeds of a Capital
Transaction, it may be obligated under the Act to repay or restore to
the Partnership all or a portion of the amount received if such
distributions cause the fair market value of the Partnership's assets
to be less than the Partnership's liabilities. Subject to the
foregoing requirement, the Limited Partner shall not be required to
pay to the Partnership or to any other Partner any deficit or negative
balance which may exist from time to time in its Capital Account;
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provided, however, in the event the Limited Partner erroneously
receives distributions in excess of his interest in such distributions
as specified in Sections 4.1, 4.2 and 4.3 hereof ("Excess
Distributions"), then, as between the Partners but not for the benefit
of other Persons, such Partner shall be indebted to the Partnership
for such Excess Distributions, and such indebtedness shall be payable
on terms or on demand as may be prescribed by the General Partner. The
General Partner shall contribute, prior to the dissolution and
liquidation of the Partnership, an amount equal to the lesser of (a)
an amount which will cause the total Capital Contributions made by the
General Partner during the Partnership Term to equal one percent (1%)
of the total Capital Contributions made to the Partnership (including
the Capital Contribution to be made by the General Partner pursuant to
this Section 5.5), or (b) the deficit balance in its Capital Account
as of the date of such dissolution and liquidation.
5.6 Tax Elections. The General Partner is authorized, in its reasonable
discretion, to make all elections permitted or required of the
Partnership under Regulations Section 1.704-1, Code Section 754 and
any other provisions of the Code.
ARTICLE 6.
OPERATING EXPENSES
6.1 Operating Expenses and Reimbursements. The Partnership shall bear (or
reimburse the General Partner for its payment of) all costs and
expenses of every kind and description incurred in connection with
the organization, operation, liquidation and dissolution of the
Partnership including, but not limited to, travel expenses, fees of
consultants, accountants, and attorneys, fees and expenses of the
preparation of quarterly unaudited financial statements, the annual
audit, if any, and tax returns of the Partnership, interest on
indebtedness of the Partnership, and fees and expenses incurred in any
litigation by or against the Partnership.
ARTICLE 7.
ADMISSION OF PARTNERS; ASSIGNMENT OF INTERESTS
7.1 Admission of Additional Partners. Other than Chaparral Steel Holdings,
Inc., a Delaware corporation and Chaparral Steel Trust, a Delaware
business trust, which shall be admitted to the Partnership pursuant to
the provisions of Section 7.2.2 hereof, no additional partners shall
be admitted to the Partnership.
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7.2 Assignment or Transfer of Partnership Interests.
7.2.1 Except as provided in Section 7.2.2, no Partner shall sell,
assign, pledge, mortgage, or otherwise dispose of or
Transfer, in whole or in part, its Partnership interest or
its share of the Partnership's capital, assets or property
or enter into any agreement, the result of which would be
for another Person to become directly or indirectly
interested in the Partnership.
7.2.2 The Partnership interest of Chaparral Steel Company may be
transferred to Chaparral Steel Holdings, Inc. (the "Initial
Transfer") and the same Partnership interest may be
transferred by Chaparral Steel Holdings, Inc. to Chaparral
Steel Trust (the "Subsequent Transfer"). Upon the effective
time of the Initial Transfer, Chaparral Steel Company shall
withdraw from the Partnership and Chaparral Steel Holdings,
Inc. shall be admitted as a Partner with the same
Partnership interest as Chaparral Steel Company and upon the
effective time of the Subsequent Transfer Chaparral Steel
Holdings, Inc. shall withdraw and Chaparral Steel Trust
shall be admitted as a Partner with the same Partnership
interest as Chaparral Steel Holdings, Inc..
ARTICLE 8.
MANAGEMENT DUTIES AND RESTRICTIONS
8.1 Powers of General Partner.
8.1.1 General Authority of the General Partner. The business and
affairs of the Partnership will be managed exclusively by
the General Partner. Except as otherwise expressly provided
in this Agreement with respect to matters requiring the
approval of the Limited Partner, all determinations relating
to the business and affairs of the Partnership will be made
by the General Partner in its sole discretion and will not
give rise to any right or claim by any Partner or the
Partnership unless made in violation of an express provision
of this Agreement. Except as otherwise provided herein, the
General Partner will have complete authority to take, in its
own name or in the name of the Partnership, any action that
the General Partner determines to be appropriate under this
Agreement or for the conduct of the business of the
Partnership, including without limitation the actions
specified in Section 8.1.2. All decisions and actions taken
by the General Partner under the authority of this Section
8.1 will be binding upon all of the Partners and the
Partnership.
8.1.2 Specific Authority of General Partner. Except as otherwise
expressly set forth in this Agreement, the General Partner
shall have all rights
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and powers of a general partner under the Act. Subject to
the limitations contained in Section 8.1.3, the authority of
the General Partner to manage the business and affairs of
the Partnership will include complete authority:
(a) To acquire, dispose of, lease or exchange assets of the
Partnership;
(b) To borrow money or otherwise create or assume
indebtedness for the Partnership;
(c) To create an Encumbrance on all or any part of the
Partnership's assets in order to secure loans or
advances to or assumed by the Partnership or any Person
in which the Partnership has a direct or indirect
interest, or any obligation of the Partnership or any
Person in which the Partnership has a direct or
indirect interest, or for any other Partnership
purpose;
(d) To execute and deliver for the Partnership agreements
and other instruments (including, without limitation,
instruments creating an Encumbrance on Partnership
assets) for any purpose authorized by clause (c),
including without limitation agreements and instruments
in connection with loans or the Transfer of assets of
the Partnership;
(e) To collect all income of the Partnership and to satisfy
all obligations of the Partnership, including without
limitation expenses of the General Partner relating to
the Partnership described in Article 6 and Section 8.4
and the indemnification obligations arising under
Section 11.11;
(f) To prepare or cause to be prepared and file all tax
returns for the Partnership (but not the tax returns or
other reports of the Partners);
(g) To make all tax elections for the Partnership,
including without limitation any special basis
adjustments under Section 754 of the Code, provided
that the Partner requesting any Section 754 election
must agree to reimburse the Partnership for any costs
incurred by the Partnership in making the election or
in maintaining or preparing any additional records or
reports in connection with the election;
(h) To prosecute, defend and settle legal, arbitration or
administrative proceedings on behalf of or against the
Partnership;
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(i) To manage and maintain the assets of the Partnership or
any Person in which the Partnership has a direct or
indirect interest;
(j) To establish separate bank accounts for the deposit of
monies received on behalf of the Partnership and to
disburse all funds on deposit on behalf of the
Partnership in amounts and at times as required in
connection with the business of the Partnership;
(k) To procure and maintain insurance against risks and in
amounts determined to be appropriate by the General
Partner, including without limitation insurance under
which the General Partner and its partners, agents and
affiliates are insureds;
(1) To advance funds of the Partnership to any Person in
which the Partnership has a direct or indirect
interest;
(m) To do or cause to be done any other act which the
General Partner considers to be appropriate to carry
out any of its powers or in furtherance of the purposes
or character of the Partnership;
(n) To establish such reserves from Partnership funds as
the General Partner, in its sole discretion, may deem
necessary or advisable for Partnership operations and
for the payment of Partnership obligations;
(o) To exercise all rights, powers, privileges and other
incidents of ownership or possession with respect to
any Partnership assets, including, without limitation,
voting equity or debt securities held by the
Partnership;
(p) To consult with legal counsel, independent public
accountants, real estate brokers and other consultants
selected by the General Partner on behalf of the
Partnership;
(q) To take all action which may be necessary or
appropriate for the continuation of the Partnership's
valid existence as a limited partnership under the laws
of the State of Delaware and of each other jurisdiction
in which such existence is necessary to protect the
limited liability of the Limited Partner or to enable
the Partnership to conduct the business in which it is
engaged;
(r) To resolve, in its sole discretion, any ambiguity
regarding the application of any provision of this
Agreement in the manner it deems equitable, practicable
and consistent with this Agreement and applicable law;
and,
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(s) To do such other acts as the General Partner may deem
necessary or advisable, or as may be incidental to or
necessary for the conduct of the business of the
Partnership.
8.1.3 Actions Requiring Limited Partner Approval. Notwithstanding
Section 8.1.2, the General Partner may not, without the
written consent of the Limited Partner take or commit to
take any of the following actions:
(a) Transfer all or substantially all of the Partnership's
assets, whether in one transaction or a series of
related transactions;
(b) Effect the reorganization, merger or consolidation of
the Partnership with any other entity.
(c) Any act in contravention of this Agreement;
(d) Any act which would make it impossible to carry on the
ordinary business of the Partnership, other than a
Transfer of all or substantially all of the assets of
the Partnership authorized under Section 8.1.3(a) or a
reorganization, merger or consolidation authorized
under Sections 8.1.3(b);
(e) Confess a judgment against the Partnership except in
connection with the settlement of an action or
proceeding; or,
(f) Incur any debt, on behalf of the Partnership or
otherwise, for which the Limited Partner shall be
directly or personally liable to any extent.
8.2 Authority as to Third Persons. Notwithstanding Section 8.1.3, the
signed statement of the General Partner reciting that it has the
authority or necessary approval of the Limited Partner for any action,
as to any third Person, will be conclusive evidence of the authority
of the General Partner to take that action and of compliance with
Section 8.1.3, if applicable. The Limited Partner will promptly
execute instruments determined by the General Partner to be
appropriate to evidence the authority of the General Partner to
consummate any transaction permitted by this Agreement.
8.3 Compensation and Expenses of the General Partner. The General Partner
will not receive any compensation from the Partnership for serving as
General Partner, but all expenses incurred by the General Partner in
connection with its service as General Partner (including without
limitation charges for legal, accounting, data processing,
administrative, executive, tax and other services rendered) will be
paid or promptly reimbursed by the Partnership. Nothing contained in
this Section 8 is intended to affect the distributions to the General
Partner or the amounts that may be payable to the General Partner by
reason of its interest in the Partnership.
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8.4 Covenants of the General Partner. The General Partner shall devote
such time, effort, and attention as may be reasonably necessary,
advisable, or appropriate to manage and direct the operations,
business and affairs of the Partnership.
8.5 Limitations on Authority. The authority of the General Partner over
the conduct of the operations, business, and affairs of the
Partnership shall be subject only to the Act and such further
limitations as are expressly stated in this Agreement.
8.6 No Withdrawal From Partnership. Except as contemplated by this
Agreement, no Partner may withdraw from the Partnership at any time.
ARTICLE 9.
DISSOLUTION OF THE PARTNERSHIP
9.1 Dissolution. The Partnership shall be dissolved upon the happening of
any of the following events:
9.1.1 the expiration of the Partnership Term;
9.1.2 with the prior consent of the General Partner and the
Limited Partner;
9.1.3 the Bankruptcy or dissolution of the General Partner;
9.1.4 the sale or distribution of all or substantially all of the
assets of the Partnership;
9.1.5 A Partner sells, assigns, Transfers, pledges or otherwise
disposes of or encumbers, directly or indirectly, all or any
part of its interest, except as permitted in this Agreement,
or allows such sale, assignment, transfer, pledge,
disposition or encumbrance to occur.
9.1.6 the occurrence of any other event causing the dissolution of
a limited partnership under the laws of the State of
Delaware.
9.2 Continuation. Upon the Bankruptcy, dissolution or removal of the
General Partner, the business of the Partnership will be continued if
within 90 calendar days the Limited Partner elects by written action
to continue the business of the Partnership and designate one or more
Persons to be a General Partner of the Partnership. If the business of
the Partnership is continued, the interest of the General Partner will
be converted to that of a limited partner. If the Limited Partner
fails to continue the Partnership's business as provided in this
Section 9.2, the Partnership will be liquidated under Section 9.4.
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9.3 Events Affecting a Limited Partner. The Bankruptcy, liquidation,
dissolution, reorganization, merger, sale of substantially all the
stock or assets of, or other change in the ownership or nature of the
Limited Partner shall not dissolve the Partnership.
9.4 Liquidation Procedures.
9.4.1 Upon dissolution of the Partnership the General Partner or,
if there is no General Partner, such Person or Persons as
the limited Partner shall designate as liquidating trustees
shall commence immediately to wind up the affairs of the
Partnership. The General Partner or such liquidating
trustees shall use their best judgment as to when to dispose
of the Partnership's assets or to make distributions in-kind
in order to maximize the return to the Partners from such
assets.
9.4.2 The assets of the Partnership remaining after payment of the
costs and expenses of winding up shall be applied in the
following priority:
(a) To payment of the costs and expenses of the winding up,
liquidation and termination of the Partnership;
(b) to the creditors of the Partnership, other than
Partners, all amounts due them from the Partnership in
the order of priority established by law;
(c) to the Partners, all amounts due them in repayment of
any loans to the Partnership pursuant to Section 3.3;
(d) To the establishment of any reserves deemed appropriate
by the General Partner or liquidating trustees for any
liabilities or obligations of the Partnership, which
reserves will be held for the purpose of paying
liabilities or obligations and, at the expiration of a
period the General Partner or liquidating trustees
deems appropriate, will be distributed in the manner
provided in Section 9.4.2(e); and,
(e) To the payment to the Partners of the positive balances
in their respective Capital Accounts, pro rata, in
proportion to the positive balances in those Capital
Accounts after giving effect to all allocations and
distributions under Article 4 for all prior periods,
including the period during which the process of
liquidation occurs.
If the General Partner or the liquidating trustees, in their
sole discretion, deem it not feasible or desirable to
liquidate to each Partner its allocable share of each asset
to be distributed in-kind, the General Partner or the
liquidating trustees may allocate and distribute
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specific assets to one or more Partners as the General
Partner or the liquidating trustees shall reasonably
determine to be fair and equitable, taking into
consideration, among other things, the value of the assets,
the indebtedness secured by the assets and the tax
consequences of the proposed distribution upon each of the
Partners. Any distributions in-kind shall be subject to such
conditions relating to the disposition and management
thereof as the General Partner or the liquidating trustees
deem reasonable and equitable.
9.5 Termination. The Partnership shall terminate when all property owned
by the Partnership has been disposed of, and any proceeds from the
sale or other disposition of all of the Partnership property, after
payment of or provision for all liabilities to creditors of the
Partnership, has been distributed to the Partners.
9.6 No Petition for Dissolution. The Partners agree that irreparable
damage would be done to the goodwill and reputation of the Partnership
if any Partner should bring an action in any court to dissolve the
Partnership and to have a liquidator or receiver for the Partnership
appointed. Care has been taken in this Agreement to provide what the
parties feel is fair and just payment in liquidation of the interest
of all Partners. Accordingly, each Partner hereby waives and renounces
its right to file or pursue any such petition for dissolution of the
Partnership or the partition of any Partnership property, or to seek
the appointment by any court of a liquidator or receiver for the
Partnership.
9.7 Compliance with Timing Requirements of Treasury Regulations.
Notwithstanding anything in this Article 9 to the contrary, in the
event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions will be made
to the Partners who have positive Capital Account balances pursuant to
Section 9.4 in a manner that complies with Regulations Section
1.704-1(b)(2)(ii)(b)(2). However, a liquidation occurring as a result
of a Partnership termination, as defined in Section 708(b)(1)(B) of
the Code, will not require an actual distribution of Partnership
assets, but will instead be treated as a constructive liquidation and
reformation in the manner described in Regulations Section
1.708-1(b)(1)(iv).
ARTICLE 10.
FINANCIAL ACCOUNTING AND REPORTS
10.1 Financial and Tax Accounting and Reports. The tax returns of the
Partnership shall be filed on an accrual basis. The General Partner
shall cause the Partnership's tax returns to be prepared and a
Schedule K-1 or any successor form to be prepared and delivered in a
timely manner to each of the Partners. In the event of an income tax
audit of the Partnership or any
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judicial or administrative proceeding in connection with the income
tax returns of the Partnership, the Tax Matters Partner shall be
authorized to act for and, to the extent provided by the Code, its
decision shall be binding upon the Partnership and the Partners. The
books and records of the Partnership shall be kept in accordance with
generally accepted accounting principles.
10.2 Valuation. The valuation of the assets of the Partnership for the
purpose of valuing distributions in-kind made pursuant to Section 4.5
or Section 9.4 of this Agreement and for any other purpose shall be
the fair market value as determined by the General Partner in good
faith, and such determination will be binding on the Partners.
10.3 Supervision; Inspection of Books. Proper and complete books of account
of the business of the Partnership shall be kept under the supervision
of the General Partner at the principal place of business of the
Partnership. Such books shall be open to inspection by the Limited
Partner, or its accredited representatives, at any reasonable time
during normal business hours.
10.4 Quarterly Reports. The General Partner shall transmit to the Limited
Partner within thirty (30) days after the close of each quarter, or as
soon as practicable thereafter, summary financial information of the
Partnership prepared in accordance with the accrual method of
accounting from its books without audit and subject to year-end
adjustments.
10.5 Annual Report; Financial Statements. The General Partner shall
transmit to the Limited Partners within one hundred twenty (120) days
after the close of each Fiscal Year, or as soon as practicable
thereafter, financial statements of the Partnership prepared in
accordance with the accrual method of accounting, including an income
statement for the year then ended, a balance sheet as of the end of
such year, and a statement of changes in the Partners' Capital
Accounts. If the General Partner, in its sole discretion, determines
that audited financial reports are appropriate, then the financial
statements shall be audited by an independent public accounting firm
selected by the General Partner.
10.6 Consent in Lieu of Meeting. Any action which may be taken by the
Partners at a meeting may be effected through the execution of written
consents by the requisite Partnership Percentage of the Partners.
10.7 Withholding. Notwithstanding any provision in this Agreement to the
contrary, the General Partner may withhold from any distribution or
amount due to the Limited Partner any amounts required to be withheld
pursuant to any applicable federal, state, or local tax requirements,
with such withheld amount treated as if it was distributed to the
Limited Partner. The determination of the General Partner as to the
necessity of such withholding shall be binding upon the Limited
Partner.
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ARTICLE 11.
OTHER PROVISIONS
11.1 Execution and Filing of Documents. The General Partner and the Limited
Partner (or the General Partner as the Limited Partner's
attorney-in-fact) shall execute and file such certificates and other
documents as may be required by the Act and other applicable laws. The
General Partner shall cause the Partnership to be qualified, formed,
reformed or registered under the limited partnership laws, assumed or
fictitious name statutes or similar laws in any jurisdiction in which
the Partnership owns property or transacts business if such
qualification, formation, reformation or registration is necessary in
order to protect the limited liability of the Limited Partner or to
permit the Partnership lawfully to own property or transact business
as a limited partnership. The General Partner shall execute, file and
publish all such certificates, notices, statements or other
instruments appropriate to conduct the business of the Partnership and
to maintain the limited liability of the Limited Partner.
11.2 Other Instruments and Acts. The Partners agree to execute any other
instruments or perform any other acts that are or may be necessary to
effectuate and carry on the Partnership created by this Agreement.
11.3 Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the permitted transferees, successors, assigns, and
legal representatives of the Partners.
11.4 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware, without giving effect to the
principles of conflict of laws.
11.5 Notices. Any notice or other communication that one Partner desires to
give to another Partner or the Partnership or that the Partnership
desires to give to a Partner shall be in writing, and shall be deemed
effectively given upon (i) personal delivery, (ii) transmission by
facsimile or (iii) the third business day following deposit in any
United States mail box, by registered or certified mail, postage
prepaid, addressed, in the case of a Partner, to the Partner at the
address shown on the books and records of the Partnership or at such
other address as a Partner may designate by fifteen (15) days' advance
notice to the other Partners and, in the case of the Partnership, to
its principal office designated in Section 2.4.
11.6 Power of Attorney. The Limited Partner appoints the General Partner
its attorney-in-fact, with full power of substitution and
re-substitution, to execute in the Partner's name and deliver:
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(a) A Partnership Certificate and any amendments to the
Partnership Certificate that the General Partner deems
appropriate;
(b) Any instrument that the General Partner deems
appropriate in order to qualify the Partnership to do
business in any jurisdiction and any other instrument
relating to the qualification or registration of the
Partnership or the use of an assumed or fictitious name
that the General Partner deems appropriate;
(c) All certificates and other instruments that may be
appropriate to effect the dissolution and termination
of the Partnership under Article 9;
(d) All reports, forms and schedules that the General
Partner determines appropriate to file with any
governmental body in connection with any Partnership
activity,
(e) Any amendment to this Agreement appropriate to reflect
the Transfer of a Partnership interest permitted by
this Agreement, or the admission to, or withdrawal
from, the Partnership of a Partner permitted by this
Agreement, the conversion of a General Partner interest
into a Limited Partner interest as provided in this
Agreement or any Capital Contribution permitted by this
Agreement; and,
(f) Any amendment to this Agreement authorized under
Section 11.7.
The power of attorney granted under this Section 11.6 is coupled with
an interest and is irrevocable and will survive the death,
dissolution, bankruptcy and withdrawal from the Partnership of any
Partner or the Transfer of its Partnership interest
11.7 Amendment.
11.7.1 Except for such amendments as result from the operation of
the various provisions of this Agreement, this Agreement may
be amended only with the written consent of the Limited
Partners and the General Partner.
11.7.2 The General Partner, acting alone, may make ministerial
changes in the Partnership Agreement for the purpose of
correcting errors and inconsistencies and to comply with
federal, state and local rules, regulations and laws,
provided that the liability of the Limited Partner for
Partnership debts shall not be increased by such amendment
nor shall the right of the Limited Partner to Partnership
allocations or distributions be adversely affected thereby.
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11.8 Entire Agreement. This Agreement shall constitute the entire agreement
of the Partners and supersede all prior agreements between the
Partners with respect to the Partnership.
11.9 Titles; Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and shall not be considered in the
interpretation of this Agreement.
11.10 Exculpation. Neither the General Partner, nor any of its officers,
directors, employees, agents, or Affiliates, shall be liable to the
Limited Partner or the Partnership for any action taken or failure to
act on behalf of the Partnership within the scope of authority
conferred on the General Partner by this Agreement, or by law, or done
in reliance in good faith on the opinion of legal counsel, except in
the case of (i) its willful breach of a material provision of the Act
or this Agreement; (ii) the breach of its fiduciary responsibilities
to the Partnership or the Limited Partner, or, (iii) its gross
negligence in connection with the business and affairs of the
Partnership.
11.11 Indemnification of the General Partner. The Partnership, to the
extent of its assets legally available for that purpose, will
indemnify and hold harmless the General Partner and any partner,
shareholder, director, officer, agent, affiliate and professional or
other advisor of the General Partner (collectively, the "Indemnified
Persons"), from and against any and all loss, damage, expense
(including without limitation reasonable fees and expenses of
attorneys and other advisors and any court costs incurred by any
Indemnified Person) or liability by reason of anything any Indemnified
Person does or refrains from doing for, or in connection with the
business or affairs of, the Partnership, except to the extent that the
loss, damage, expense or liability results from (a) the Indemnified
Person's gross negligence, willful misconduct or knowing violation of
law, or (b) the Indemnified Person's breach of any fiduciary
responsibilities to the Partnership or the Limited Partner. These
indemnification rights are in addition to any rights the Indemnified
Persons may have against third parties.
Notwithstanding anything in this Agreement to the contrary, no Partner
shall be obligated to contribute any amount to the Partnership in
order to satisfy the Partnership's indemnification obligations under
this Section 11.11, such obligations being limited at all times to the
assets of the Partnership.
11.12 Limitation of Liability of the Limited Partners. No Limited Partner
shall be bound by, or be personally liable for, the expenses,
liabilities, or obligations of the Partnership in excess of its
Capital Contributions to the Partnership plus such additional amounts
determined pursuant to Section 5.5.
11.13 Ambiguities. The General Partner shall have full power and authority
to resolve questions of interpretation and construction arising under
this
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Agreement, and its resolution of such ambiguities or questions shall
be final and binding on the Partnership and all of its Partners and
their permitted transferees, successors, assigns and legal
representatives.
11.14 No Right to Partition. Each Partner hereby irrevocably waives any and
all rights that it may have to maintain or institute an action for
partition of the Partnership assets.
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IN WITNESS WHEREOF, the Partners have executed this Agreement as of the
date first above written.
GENERAL PARTNER:
CHAPARRAL STEEL TEXAS, INC.
By: /s/ Illegible
------------------------------
Its: Illegible
LIMITED PARTNER:
CHAPARRAL STEEL COMPANY
By: /s/ Illegible
------------------------------
Its: Illegible
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