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EXHIBIT 3.4
EXECUTION COPY
SOUTHERN FOODS GROUP, L.P.
(A Delaware Limited Partnership)
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of September 3, 1997
THE LIMITED PARTNER INTERESTS REFERENCED HEREIN HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, NOR PURSUANT TO THE PROVISIONS OF ANY STATE SECURITIES ACT
CERTAIN RESTRICTIONS ON TRANSFERS OF LIMITED
PARTNER INTERESTS ARE SET FORTH HEREIN
2
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
SOUTHERN FOODS GROUP, L.P.
Page
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ARTICLE I NAME AND OFFICE; PURPOSE; POWERS AND TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Name and Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Registered Office and Registered Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.4 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.6 Amended and Restated Agreement of Limited Partnership . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II CAPITAL CONTRIBUTIONS; MEMBER CLASSES; LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Common Partner Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2 Initial Capital Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3 No Further Contributions or Loans Required . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 Preferred Limited Partner Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.5 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.6 Nature of Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.7 Optional Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.8 Ownership of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III RIGHTS, POWERS, AND DUTIES OF THE GENERAL PARTNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.1 Management of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.2 Authorized Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.3 Restrictions on Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.4 Duties and Liabilities of the General Partner . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.6 Specific Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.7 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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ARTICLE IV RIGHTS AND STATUS OF LIMITED PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.2 Liability of the Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V PROFITS AND LOSSES; DISTRIBUTIONS; TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.1 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.2 Distributions to Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.3 Definition of "Net Operating Cash Flow" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.4 Distributions of Proceeds of Terminating Capital Transaction . . . . . . . . . . . . . . . . . 20
Section 5.5 Tax Withholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.6 Special Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.7 Additional Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.8 Restricted Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI DISSOLUTION AND WINDING-UP OF THE PARTNERSHIP;DISTRIBUTION OF PROCEEDS . . . . . . . . . . . . . . . . . . 21
Section 6.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.2 Winding Up and Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII LIMITATIONS ON TRANSFERS OF INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.1 Limitations on Transfers of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.2 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.3 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 7.4 Prohibited Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII VOLUNTARY OR INVOLUNTARY TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.1 Third Party Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.2 Option to Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.4 Release from Restriction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.5 Changed Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.6 Form of Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.7 Option on the Part of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.8 Substituted Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.9 Rights of Unadmitted Transferees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.10 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.11 Put Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.12 Call Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 8.13 Limitations on Transfers of Interest Having Adverse Legal Effects . . . . . . . . . . . . . 31
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ARTICLE IX VOTING RIGHTS OF CLASSES OF PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.1 Voting Rights for Common Partner Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 9.2 Voting Rights for Preferred Limited Partner Interest . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE X FISCAL YEAR; RECORDS; REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 10.1 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 10.2 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 10.3 Annual Statements and Partnership Returns . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 10.4 Adjustment to Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 10.5 Tax Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 10.6 Tax Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 10.7 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 10.8 Competitively Sensitive Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE XI ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.1 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.2 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.3 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.6 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 12.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.8 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.9 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.10 Execution of Agreement Constitutes Consent . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.11 Joinder of Xxxxx for Limited Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 12.12 Sequence of Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE XIII DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 13.1 General Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 13.2 Definitions for Provisions Requiring Prior Notice to Amend . . . . . . . . . . . . . . . . 44
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Exhibit 1 Partners, Common Partner Interests and Preferred Limited
Partner Interests as of the date of the Second Amended and
Restated Agreement of Limited Partnership
Exhibit 2 Amended and Restated Designation of Series A 10%
Payment-in-Kind Preferred Limited Partner Interests
Exhibit 3 Designation of Series B 10% Payment-in-Kind Preferred
Limited Partner Interests
Exhibit 4 Designation of Series C 10% Payment-in-Kind Preferred
Limited Partner Interests
Exhibit 5 Designation of Series D 9 1/2% Preferred Limited Partner
Interests
Exhibit 6 Designation of Series E 10% Payment-in-Kind Preferred
Limited Partner Interests
Appendix
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SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SOUTHERN FOODS GROUP, L.P.
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
(this "Agreement") is made and entered into as of September 3, 1997 to be
effective as of 3:00 p.m. on September 3, 1997 (the "Effective Time"), by and
among SFG Management Limited Liability Company ("SFG LLC"), as the sole general
partner ("General Partner") and each of the Persons identified as "Limited
Partners" on Exhibit 1 attached hereto and incorporated herein by reference,
pursuant to the provisions of the DRULPA.
RECITALS
WHEREAS, SFG LLC and Southern Foods Group, Inc., a Delaware
corporation ("SFG Inc."), entered into that certain Limited Partnership
Agreement (the "Original Limited Partnership Agreement") dated December 20,
1994 to form a Delaware limited partnership under the name Southern Foods
Group, L.P. (the "Original Partnership"), pursuant to which SFG LLC owned a 1%
interest in the Original Partnership as the General Partner and SFG Inc. owned
a 99% interest in the Original Partnership as the Limited Partner; and
WHEREAS, in December 1996, SFG Inc. merged into Difcal Corporation
("Difcal"), and as a result of that merger Difcal became the Limited Partner in
the Original Partnership; and
WHEREAS, by an Amended and Restated Agreement of Limited Partnership
dated January 1, 1997 (the "Amended and Restated Agreement"), (a) Xxxx Xxxxxxxx
("Xxxxxxxx") and Xxxxx X. Xxxxx ("Xxxxx") became Limited Partners, each holding
a 24.75% Common Partner Interest, and (b) Difcal's Limited Partner interest was
separated into a 49.5% Common Limited Partner Interest and a Series A Preferred
Capital Interest in the stated amount of $76,947,000 (the "Original Series A
Preferred Interests"); and
WHEREAS, pursuant to a First Amendment to the Amended and Restated
Agreement of Limited Partnership of Southern Foods Group, L.P., dated February
7, 1997 (the "Amendment"), Barbe's Dairy, Inc. ("Barbe's") was admitted as a
Preferred Limited Partner, receiving $8,000,000 in stated amount of Series A
Preferred Capital Interests in exchange for the contribution of certain assets
and liabilities owned by Barbe's (the "Barbe's Contribution"); and
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WHEREAS, in February 1997, Barbe's was merged into Difcal, and Difcal
assumed the position of Barbe's as a Preferred Limited Partner in the
Partnership; and
WHEREAS, on February 28, 1997, Difcal merged into Mid-America
Dairymen, Inc. ("Mid-Am") and as a result Mid-Am assumed the position of Difcal
as a Limited Partner; and
WHEREAS, the Partnership is currently owned by Mid-Am (49.5% Common
Limited Partner Interest), Xxxxxxxx (24.75% Common Limited Partner Interest)
and Xxxxx (24.75% Common Limited Partner Interest), as Limited Partners, and by
the General Partner (1% Common General Partner Interest), and Mid-Am holds
Original Series A Preferred Interests in the original stated amount of
$84,947,000; and
WHEREAS, the Partnership desires to make certain distributions to its
Common Partners, including distributions of Series E Preferred Interests, and
to receive certain additional capital contributions, all as further described
herein; and
WHEREAS, Xxxxxxxx will purchase all of the Limited Partner Interest of
Xxxxx in the Partnership (the "Ownership Change"); and
WHEREAS, Mid-Am will contribute certain assets and liabilities
relating to certain of the dairy operations of Xxxxxx located in the western
United States that manufacture and sell dairy products primarily under the
Meadow Gold and Viva trademarks (the "Meadow Gold Dairies Contribution") in
exchange for the issuance of Series B Preferred Interests; and
WHEREAS, Mid-Am Capital, LLC ("Mid-Am Capital") will contribute $15
million in exchange for the issuance of Series C Preferred Interests and will
contribute $30 million in exchange for the issuance of Series D Preferred
Interests; and
WHEREAS, as a result of the transactions described above (the
"Partnership Transactions"), which the parties hereto desire to take place on
or after the Effective Time but in the sequence and at the times established by
Section 12.12 of this Agreement, the parties desire to amend and restate in its
entirety the Amended and Restated Agreement and to replace and supersede such
agreement with this Agreement, such amendment and restatement to be effective
as of the Effective Time.
NOW, THEREFORE, for and in consideration of the mutual covenants
contained in this Agreement, the General Partner and the Limited Partners agree
to continue the business of the Original Partnership, without dissolution as a
limited partnership, pursuant to the DRULPA, such continuing limited
partnership hereinafter referred to as the "Partnership", for the purposes and
on the terms and conditions set forth as follows:
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ARTICLE I
NAME AND OFFICE; PURPOSE; POWERS AND TERM
Section 1.1 Name and Principal Office. The Partnership shall be
conducted under the name of Southern Foods Group, L.P. The principal office of
the Partnership initially shall be at 0000 Xxxxx Xxxxxxx, Xxxxxx, Xxxxx 00000.
The General Partner may at any time change the location of such principal
office and shall give due notice of any such change to the Limited Partners.
Section 1.2 Registered Office and Registered Agent. The
registered office of the Partnership shall be the office of the initial
registered agent named in the certificate of limited partnership or such other
office selected by the General Partner from time to time. The registered agent
of the Partnership is the initial registered agent named in the certificate of
limited partnership or such other person selected by the General Partner from
time to time.
Section 1.3 Purpose. The purpose of the Partnership shall be to
engage in any lawful act or activity for which limited partnerships may now or
hereafter be organized under the laws of the State of Delaware.
Section 1.4 Powers. In furtherance of the purpose of the
Partnership as specified in Section 1.3, the Partnership shall have all powers
available to it as a limited partnership under the laws of the State of
Delaware including, without limitation, the power to make and perform all
contracts and engage in all activities and transactions necessary or advisable
to carry out the purpose of the Partnership. The General Partner is authorized
to do all such acts and exercise all such powers in the name of and on behalf
of the Partnership.
Section 1.5 Term. The Partnership commenced as of December 20,
1994, and shall end only as provided in Article VI hereof.
Section 1.6 Amended and Restated Agreement of Limited
Partnership. This Agreement amends, restates, replaces and supersedes the
Amended and Restated Agreement of Limited Partnership in its entirety.
However, as provided in Sections 5.2, 5.6 and 5.7 hereof, the Partners
acknowledge certain obligations to Xxxxx as a former Partner that arose under
the terms of the Amended and Restated Agreement of Limited Partnership, which
obligations will be paid as provided in Sections 5.2, 5.6 and 5.7.
ARTICLE II
CAPITAL CONTRIBUTIONS; MEMBER CLASSES; LOANS
Section 2.1 Common Partner Interest. "Common Partner Interest"
means any interest in the Partnership other than a Preferred Limited Partner
Interest as that term is defined in Section 2.4 hereto.
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Section 2.2 Initial Capital Contributions.
(a) Prior Initial Capital Contributions. Each of the Partners
(other than Mid-Am Capital) previously made Initial Capital
Contributions. After the occurrence of the Ownership Change,
Xxxxxxxx'x Capital Account shall be adjusted in accordance
with Section A.3(c) of the Appendix.
(b) Series B Preferred Limited Partner Contribution. Pursuant to
a Capital Contribution Agreement between Mid-Am and the
Partnership (the "Mid-Am Contribution Agreement"), in
accordance with the timing specified in Section 12.12, Mid-Am
shall transfer and assign to the Partnership, as a Series B
Preferred Limited Partner Contribution, the assets and
properties described in, and the Partnership shall assume the
liabilities and obligations to the extent specified in, the
Mid-Am Contribution Agreement. As a result of the Meadow Gold
Dairies Contribution, Mid-Am's Capital Account shall reflect a
Capital Contribution with respect to the Series B Preferred
Interests of Ninety Million Dollars ($90,000,000), which the
Partners agree is the net amount equal to the excess of the
Gross Asset Value of the assets so contributed over the face
amount of the debts assumed, or taken subject to, pursuant to
the Mid-Am Contribution Agreement.
(c) Series C Preferred Limited Partner Contribution. Pursuant to
the Capital Contribution Agreement between Mid-Am Capital and
the Partnership (the "Mid-Am Capital Contribution Agreement"),
in accordance with the timing specified in Section 12.12,
Mid-Am Capital shall contribute Fifteen Million Dollars
($15,000,000) as a Series C Preferred Limited Partner
Contribution. As a result of such Capital Contribution, the
Capital Account of Mid-Am Capital shall reflect a Capital
Contribution with respect to the Series C Preferred Interests
of Fifteen Million Dollars ($15,000,000).
(d) Series D Preferred Limited Partner Contribution. Pursuant to
the Mid-Am Capital Contribution Agreement, in accordance with
the timing specified in Section 12.12, Mid-Am Capital shall
contribute Thirty Million Dollars ($30,000,000) as a Series D
Preferred Limited Partner Contribution. As a result of such
Capital Contribution, the Capital Account of Mid-Am Capital
shall reflect a Capital Contribution with respect to the
Series D Preferred Interests of Thirty Million Dollars
($30,000,000).
(e) Additional Capital Contributions by Common Limited Partners.
In accordance with the timing specified in Section 12.12, each
of Mid-Am and Xxxxxxxx shall contribute to the Partnership a
stated amount of Series E Preferred Interests equal to the
amount of Series E Preferred Interests received by Xxxxxxxx as
part of the Special Distribution pursuant to Section 5.6.
Each such contribution shall be deemed to cause an increase of
the contributing Partner's Capital Account with respect to its
Common Partner Interest resulting from a Capital Contribution
by such Partner with
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respect to its Common Partner Interest, and a corresponding
decrease in its Capital Account with respect to its Series E
Preferred Interests.
(f) Partners. Upon their execution of this Agreement, and after
consummation of the Partnership Transactions, SFG LLC shall
constitute the sole General Partner, Mid-Am and Xxxxxxxx shall
constitute all of the Common Limited Partners, and Mid-Am and
Mid-Am Capital shall constitute all of the Preferred Limited
Partners, and the Common Partner Interests of the General
Partner and the Common Limited Partners (collectively "Common
Partners") and the Preferred Limited Partner Interests of the
Preferred Limited Partners, shall be as set forth on Exhibit 1
attached hereto.
Section 2.3 No Further Contributions or Loans Required. Except
as otherwise specifically provided herein or required by DRULPA, (i) the
liability of a Partner to the Partnership is limited to the amount of such
Partner's Capital Contribution, and (ii) the Capital Contribution of a Partner
represents the only funds or property such Partner is required to furnish to
the Partnership, whether by way of contribution, loan or otherwise. No Partner
shall have any obligation at any time to restore a deficit or negative balance
in the Capital Account of such Partner. Except for additional Capital
Contributions approved by the Common Partners, the General Partner shall not
have the right to make additional Capital Contributions to the Partnership.
Section 2.4 Preferred Limited Partner Interest. "Preferred
Limited Partner Interest" means a Limited Partner Interest designated pursuant
to Sections 2.4(a), (b), (c), (d), (e) or (g).
(a) Series A 10% Payment-in-Kind Preferred Limited Partner
Interests. In connection with the Amended and Restated
Agreement, the Partnership issued the Original Series A
Preferred Interests to the predecessor in interest of Mid-Am.
At the Effective Time the designation with respect to the
Original Series A Preferred Interests shall be amended and
restated, the Original Series A Preferred Interests shall be
renamed "Series A 10% Payment-in-Kind Preferred Limited
Partner Interests" and the Series A Preferred Interests shall
have the designations set forth on Exhibit 2 to this
Agreement.
(b) Series B 10% Payment-in-Kind Preferred Limited Partner
Interests. In accordance with the timing specified in Section
12.12, the Partnership shall issue Series B 10%
Payment-in-Kind Preferred Limited Partner Interests to Mid-Am
in exchange for the Meadow Gold Dairies Contribution. The
Series B Preferred Interests shall have the designations set
forth in Exhibit 3 to this Agreement.
(c) Series C 10% Payment-in-Kind Preferred Limited Partner
Interests. In accordance with the timing specified in Section
12.12, the Partnership shall issue Series C 10%
Payment-in-Kind Preferred Limited Partner Interests to Mid-Am
Capital in exchange for $15,000,000 as set forth in the Mid-Am
Capital Contribution Agreement. The
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Series C Preferred Interests shall have the designations set forth in
Exhibit 4 to this Agreement.
(d) Series D 9 1/2% Preferred Limited Partner Interests. In
accordance with the timing specified in Section 12.12, the
Partnership shall issue Series D 9 1/2% Preferred Limited
Partner Interests to Mid- Am Capital in exchange for
$30,000,000 as set forth in the Mid-Am Capital Contribution
Agreement. The Series D Preferred Interests shall have the
designations set forth in Exhibit 5 to this Agreement.
(e) Series E 10% Payment-in-Kind Preferred Limited Partner
Interests. The Partnership shall be authorized to issue from
time to time Series E 10% Payment-in-Kind Preferred Limited
Partner Interests, which Series E Preferred Interests shall
have the designations set forth on Exhibit 6 to this
Agreement. The Partnership shall issue Series E Preferred
Interests under the circumstances specified in Sections 5.6
and 5.7.
(f) Preferred Return. Each series of Preferred Limited Partner
Interests shall be entitled to a Preferred Return as shall be
set forth in the designation for such series.
(g) Authorized Additional Preferred Limited Partner Interests. The
parties acknowledge that in the future it might be advisable
to issue Additional Preferred Limited Partner Interests. The
parties agree that the Partnership shall be authorized to
issue Additional Preferred Limited Partner Interests from time
to time of one or more series as may be necessary pursuant to
the requirements of this Section 2.4(g).
(i) In connection with the foregoing and without limiting
the generality thereof, the General Partner is hereby
expressly authorized, without the vote or approval of
any Limited Partner, to create, under the provisions
of this Section 2.4(g), one or more series of
Additional Preferred Limited Partner Interests. The
Partners hereby expressly authorize the General
Partner to negotiate and set the following terms,
without the vote of any Limited Partner, and to
execute, swear to, acknowledge, deliver, file and
record whatever documents may be required in
connection with the creation of Additional Preferred
Limited Partner Interests.
(A) The distinctive designation of such series
which shall distinguish it from other series;
(B) The number of Additional Preferred Limited
Partner Interests included in such series,
which number may be increased or decreased
from time to time unless otherwise provided
by the General Partner in creating the
series;
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12
(C) The rate of return payable on the Additional
Preferred Limited Partner Interests and
whether such return is intended to be a
"guaranteed payment" within the meaning of
Code Section 707(c) or is to be determined by
reference to the Partnership's profits and
losses;
(D) The annual distribution rate (or method of
determining such rate) and/or allocation and
distribution of profits and losses for
Additional Preferred Limited Partner
Interests of such series and the date or
dates upon which such amounts shall be
payable;
(E) Whether the distributions on the Additional
Preferred Limited Partner Interests of such
series shall be cumulative, and, in the case
of Additional Preferred Limited Partner
Interests of any series having such
cumulative rights, the date or dates or
method of determining the date or dates from
which the rate of return or distributions on
the Additional Preferred Limited Partner
Interests of such series shall be cumulative;
(F) The amount or amounts which shall be paid out
of the assets of the Partnership to the
holders of the Additional Preferred Limited
Partner Interests of such series upon
voluntary or involuntary dissolution, winding
up or termination of the Partnership;
(G) The price or prices at which, the period or
periods within which, and the terms and
conditions upon which, the Additional
Preferred Limited Partner Interests of such
series may be redeemed or purchased, in whole
or in part, at the option of the Partnership;
(H) The obligation, if any, of the Partnership to
purchase or redeem Additional Preferred
Limited Partner Interests of such series, and
the price or prices at which, the period or
periods within which, and the terms and
conditions upon which, the Additional
Preferred Limited Partner Interests of such
series shall be redeemed, in whole or in
part, pursuant to such obligation; and
(I) Any other relative rights, powers,
preferences or limitations of the Additional
Preferred Limited Partner Interests of the
series not inconsistent with this Agreement
or with applicable law.
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13
(ii) The authority of the General Partner to create or
establish Additional Preferred Limited Partner
Interests does not include the authority to create or
establish Additional Preferred Limited Partner
Interests with the following terms unless the
requirements of this subsection are met:
(A) The General Partner is not authorized to
create or establish any Additional Preferred
Limited Partner Interest that permits any
right to vote as a Partner unless required by
this Agreement or the DRULPA, or permits any
right to participate in the management of the
Partnership, unless all Partners holding
Common Partner Interests consent in writing
to the granting to the holders of such
Additional Preferred Limited Partner
Interests of such voting rights or rights to
participate in management.
(B) The General Partner is not authorized to
create or establish any Additional Preferred
Limited Partner Interest that is ranked
above, has priority over, or affects the
rights of, any existing holders of Preferred
Limited Partner Interests or Common Partner
Interests without the prior written approval
of all Partners so affected.
(iii) All terms and conditions of any Additional Preferred
Limited Partner Interests created by the General
Partner pursuant to the provisions of this Section
2.4(g) shall be deemed an amendment and supplement to
and a part of this Agreement.
(iv) Each Person purchasing any newly-issued Additional
Preferred Limited Partner Interests shall sign this
Agreement and shall be admitted to the Partnership as
an additional Preferred Limited Partner on the date
on which the Partnership issues such additional
Preferred Limited Partner Interests to such Person in
exchange for a Capital Contribution. Each Person so
admitted as an additional Preferred Limited Partner
shall be subject to and bound by this Agreement, as
previously amended, as if an original party hereto.
No other action or consent of any Partner shall be
required for the admission of an additional Preferred
Limited Partner pursuant to this subsection, and each
Person who is or shall become a Partner hereby
consents to each and every admission to the
Partnership pursuant to this subsection.
Section 2.5 Indemnity. Notwithstanding any other provision of
this Agreement, each Partner hereby agrees to indemnify and hold harmless the
Partnership and the other Partners from and against any and all losses,
liabilities, claims and expenses, including reasonable attorneys' fees and
costs, arising out of any breach of this Agreement by such indemnifying Partner
for actions or omissions of such indemnifying Partner outside the scope of its
authority as a Partner under the terms of this Agreement. Any provision of
this Agreement to the contrary notwithstanding, the
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Partners agree that the Assumed Indebtedness will be borne by the Common
Partners in proportion to their respective Common Partner Interests in the
Partnership. For the purposes of this Section 2.5, "Assumed Indebtedness"
means any debt or liability assumed by the Partnership pursuant to the Barbe's
Contribution under the First Amendment to the Amended and Restated Agreement.
Each Common Partner hereby agrees, in the event of default in payment of any
Assumed Indebtedness by the Partnership, to indemnify and hold the other Common
Partners harmless from any payments required to be made by the other Common
Partners toward such Assumed Indebtedness which are in excess of such other
Common Partners' proportionate share of such Assumed Indebtedness, whether such
payment is made with respect to a guarantee of the Assumed Indebtedness by such
Common Partners or otherwise. The indemnity required by the preceding sentence
shall be satisfied within a reasonable time after the Assumed Indebtedness
becomes due and payable, but in no event later than the later of (a) the end of
the year in which the indemnifying Common Partner's interest is liquidated, or
(b) ninety (90) days after liquidation of the Partnership.
Section 2.6 Nature of Contributions. All Capital Contributions
shall be non-interest bearing. No Partner shall have the right to withdraw,
reduce, or demand the return of its Capital Contribution except as otherwise
provided in this Agreement. No interest shall be paid with respect to the
Capital Account of any Partner.
Section 2.7 Optional Loans. The Partnership is empowered to
borrow such sums as it considers necessary or appropriate, and in connection
therewith, to pledge the property of the Partnership as security therefor.
Loans may be made to the Partnership by the General Partner, the Limited
Partners, commercial lending institutions and other available sources. Such
loans shall be obtained by the General Partner on such terms and conditions as
the General Partner considers commercially reasonable and appropriate;
provided, however, that the General Partner shall not have the authority to
borrow sums on behalf of the Partnership in any manner or on any basis that
makes the Limited Partners liable for the repayment of such indebtedness
without the prior written agreement and consent of the Limited Partners. The
amount of any loan made to the Partnership by a Partner shall not be considered
as an increase in the amount of the Capital Contributions of such Partner to
the Partnership capital or otherwise a contribution to the Partnership, nor
shall the making of such loan entitle such Partner to an increased share of the
profits of the Partnership or any other distributions made pursuant to the
provisions of this Agreement.
Section 2.8 Ownership of Assets. All assets of the Partnership
shall be owned by the Partnership, subject to the terms and provisions of this
Agreement, and no Partner shall have any individual ownership of such assets.
Except as otherwise provided in this Agreement, and notwithstanding any statute
or principle of law to the contrary, each Partner hereby agrees that it shall
have no right (and hereby waives any right that it might otherwise have had) to
cause any Partnership property to be partitioned and/or distributed in kind.
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ARTICLE III
RIGHTS, POWERS, AND DUTIES OF THE GENERAL PARTNER
Section 3.1 Management of Partnership. The General Partner
shall have exclusive control over the management of the Partnership business.
The Limited Partners shall not participate in, or have any control over, the
Partnership business or any authority or right to act for or bind the
Partnership, except as otherwise required by law.
Section 3.2 Authorized Acts. Subject to all other provisions of
this Agreement, the General Partner is authorized and empowered to carry out
and implement the purpose of the Partnership, as provided in Section 1.3, and
to exercise the powers of the Partnership, as provided in Section 1.4, for, in
the name of, and on behalf of, the Partnership. In connection with the
foregoing, it is understood that the General Partner will act by and through a
Board of Representatives and/or duly authorized employees, agents and officers
pursuant to the terms of the Limited Liability Company Agreement. Except for
reimbursement by the Partnership of all out-of-pocket expenses and costs
incurred by the General Partner to third parties in connection with the
management of the Partnership (including, without limitation, salaries of
employees of the General Partner), the General Partner shall receive no fees or
other compensation for its services rendered to the Partnership.
Section 3.3 Restrictions on Authority. Without the prior written
consent of the Common Limited Partners, the General Partner shall not have the
authority:
(a) to do any act in contravention of this Agreement;
(b) to do any act which would make it impossible to carry out the
purpose of the Partnership, as provided in Section 1.3;
(c) to do any act which would cause a Limited Partner to be
personally liable to a creditor of the Partnership; or
(d) to possess Partnership property or to assign any rights in
specific Partnership property, for other than a Partnership
purpose.
Section 3.4 Duties and Liabilities of the General Partner. The
General Partner acting by and through a Board of Representatives and/or its
officers, agents and employees shall manage the Partnership affairs in
accordance with customary industry practices, the DRULPA and all other legal
requirements and contractual obligations applicable to the Partnership. The
General Partner may also delegate to one or more other Persons its rights and
powers to manage and control the Partnership's affairs, including delegation to
agents and employees who may be designated as officers of the Partnership. The
General Partner shall devote itself to the business of the Partnership to the
extent it may determine necessary for the efficient conduct of such business
and reasonably
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16
required for the Partnership's welfare and success. The General Partner shall
not be liable, responsible or accountable, in damages or otherwise, to any
other Partner, as such, or to the Partnership for any act or omission performed
or omitted on behalf of the Partnership within the scope of the authority
conferred by this Agreement or by law, except for its own gross negligence,
willful misconduct or breach of a material provision of this Agreement, nor
shall the General Partner be liable, responsible or accountable for the gross
negligence or willful misconduct (including dishonesty or bad faith) of any of
its employees or agents or any employee or agent of the Partnership which the
General Partner has selected with reasonable care.
Section 3.5 Indemnification.
(a) The Partnership shall indemnify to the fullest extent
permitted by law the General Partner and its officers,
managers, employees, members and agents ("Indemnified
Parties") from and against all costs and expenses, including
attorneys' fees, judgments, fines, settlements and/or
liabilities incurred by or imposed upon any Indemnified Party
in connection with, or resulting from, any action, suit or
proceeding whether civil, criminal, legislative or otherwise
(or any appeal thereof) to which any Indemnified Party may be
made a party or become otherwise involved or with which any
Indemnified Party may be threatened, in each case by reason
of, or in connection with, the Indemnified Party being or
having been associated with or otherwise acting for the
Partnership, or by reason of any action or alleged action,
omission or alleged omission by any Indemnified Party in any
such capacity, provided that the Indemnified Party is not
ultimately adjudged to have engaged in gross negligence,
willful misconduct or breach of a material provision of this
Agreement.
(b) The Partnership shall pay the expenses incurred by an
Indemnified Party in investigating, preparing or defending any
civil or criminal action, suit or proceeding, in advance of
the final disposition thereof, upon receipt of an undertaking
by the Indemnified Party to repay such payment if there is a
final adjudication or determination that he is not entitled to
indemnification as provided herein. It shall not be required
that the Partnership determine the ability of the Indemnified
Party to repay such expenses prior to making such payments in
the event the Indemnified Party is later determined to be not
entitled to indemnification.
(c) The Partnership shall make all indemnification provided for
pursuant to this Section 3.5 solely out of Partnership Assets,
and only to the extent of such assets. The Limited Partners
shall not have any personal liability for any indemnification
required or permitted pursuant to this Section 3.5. None of
the provisions of this Section 3.5 shall be deemed to create
or grant any rights in favor of Indemnified Parties which
cannot be discharged out of Partnership Assets or in favor of
anyone other than Indemnified Parties; this provision excludes
among other things, any right of subrogation in favor of any
insurer or surety. Subject to the above restrictions, the
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rights of indemnification granted hereunder shall survive the
termination, dissolution and winding up of the Partnership.
Section 3.6 Specific Transactions. The Partnership, and the
General Partner on behalf of the Partnership, may enter into, execute, deliver
and perform any and all documents relating to the transactions contemplated in
the Offering Memorandum of the Partnership and SFG Capital Corporation,
regarding the 9 7/8% Senior Subordinated Notes due 2007, and the Credit
Agreement, and all documents relating thereto, without any further act, vote or
approval of any other Partner notwithstanding any other provision of this
Agreement, the DRULPA or other applicable law, rule or regulation. The General
Partner is hereby authorized to enter into the documents described in the
preceding sentence on behalf of the Partnership, but such authorization shall
not be deemed a restriction on the power of the General Partner to enter into
other agreements or documents on behalf of the Partnership.
Section 3.7 Merger. The Partnership may merge with, or
consolidate into, another Delaware limited partnership or other business entity
(as defined in Section 17-211(a) of the DRULPA) or convert to another form of
business entity upon the unanimous approval of the Common Partners. In
accordance with Section 17-211 of the DRULPA (including Section 17-211(g)),
notwithstanding anything to the contrary contained in this Agreement, an
agreement of merger or consolidation approved by the unanimous consent of the
Common Partners may (a) effect any amendment to this Agreement or (b) effect
the adoption of a new partnership agreement for the Partnership if it is the
surviving or resulting limited partnership of the merger or consolidation. Any
amendment to this Agreement or adoption of a new partnership agreement made
pursuant to the foregoing sentence shall be effective at the effective time or
date of the merger or consolidation. The provisions of this Section 3.7 shall
not be construed to limit the accomplishment of a merger or of any of the
matters referred to herein by any other means otherwise permitted by law.
ARTICLE IV
RIGHTS AND STATUS OF LIMITED PARTNERS
Section 4.1 General. The Limited Partners have the rights and
the status of a limited partner as specified in the DRULPA except as otherwise
provided in this Agreement. The Limited Partners may not take part in the
management or control of the Partnership business or sign for or bind the
Partnership, such power being vested exclusively in the General Partner.
Section 4.2 Liability of the Limited Partners. Subject to the
provisions of the DRULPA and except as otherwise provided in this Agreement,
the Limited Partners, in their capacity as such, shall not be liable for any
debts, liabilities, contracts or obligations of the Partnership in excess of
the amount of their respective Capital Contributions. The Limited Partners, in
their capacity as such, shall not be liable for any debts, liabilities,
contracts or obligations of any other Partner.
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ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS; TAX MATTERS
Section 5.1 Allocations. The profits of the Partnership and any
losses shall be allocated among the Partners in accordance with the provisions
of the Appendix to this Agreement.
Section 5.2 Distributions to Partners. Except as otherwise
required by this Article V and Section 6.2, all distributions of any nature
whatsoever, including, without limitation, partial returns of capital, profit
distributions, refinancing proceeds and liquidating distributions, shall be
made solely to the Partners as follows:
(a) Net Operating Cash Flow (as defined in Section 5.3) in an
amount equal to the Partnership Tax Amount shall be
distributed to the Eligible Partners in accordance with the
provisions of this Section 5.2. In addition, subject to the
limitations provided in Section 5.2(a)(ii), Net Operating Cash
Flow shall be distributed to the Preferred Limited Partners
entitled to receive cash distributions of Preferred Returns
within sixty (60) days after the end of each semi-annual
period of each fiscal year in accordance with Section
5.2(a)(ii). The General Partner, in its discretion, may
authorize the distribution of any additional amounts of Net
Operating Cash Flow to the Common Partners or to the Preferred
Limited Partners as provided in Section 5.2(a)(iii).
Notwithstanding the foregoing, except for distributions made
in accordance with Section 5.2(a)(i), no distribution of the
Net Operating Cash Flow of the Partnership shall be made if
and to the extent that, after the distribution is made, the
liabilities of the Partnership, excluding the Partnership's
liability to the Partners for their Capital Contributions,
shall exceed the fair market value of the assets of the
Partnership. Subject to Section 6.2 below, Net Operating Cash
Flow required or authorized to be distributed shall be
distributed among the Partners in the following order of
priority:
(i) First, Net Operating Cash Flow for each calendar year
or other taxable period shall be distributed among
the Eligible Partners until each of the Eligible
Partners has received the Partnership Tax Amount:
(A) "Partnership Tax Amount" means the amount of
money directly or indirectly payable as a
distribution with respect to the Eligible
Partner's direct or indirect partnership
interests in the Partnership (including such
Eligible Partner's direct or indirect
interests in the General Partner) to enable
such Eligible Partner to pay Federal, state
and local Income Taxes (including quarterly
estimated Income Taxes) with respect to the
Partnership's net income or any division or
segment thereof allocable to such Eligible
Partner. For the purpose of this definition:
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(1) "Eligible Partner" means Xxxxxxxx as
a holder of a direct or indirect
partnership interest in the
Partnership or any taxable
successor(s) to all or part of his
direct or indirect partnership
interest in the Partnership. For
the period up to and including Xx.
Xxxxxxxx'x purchase of Xxxxx'x
direct or indirect partnership
interests in the Partnership,
"Eligible Partner" also includes
Xxxxx as a former holder of a
partnership interest in the
Partnership.
(2) "Income Taxes" means all Federal,
state and local taxes, fees,
assessments or charges of any kind,
imposed on, or determined with
reference to, net income of the
Partnership or any division or
segment thereof, or any allocable
portion thereof, including without
limitation any self-employment or
similar tax imposed with respect to
an Eligible Partner's allocable
share of net income or any division
or segment thereof, and "Income Tax"
means any one of such Income Taxes.
(3) "Governmental Authority" means the
government of the United States of
America, any other nation, or any
political subdivision thereof,
whether state or local, and any
agency, authority, instrumentality,
regulatory body, court, central bank
or other entity exercising
executive, legislative, judicial,
taxing, regulatory or administrative
powers or functions of or pertaining
to government.
(4) The Partnership Tax Amount in any
applicable fiscal year shall equal
the greater of (1) the product of
(i) the sum of (A) the highest
marginal federal tax rate (taking
into account deductions or credits
for state and local taxes)
applicable to the Eligible Partner
(at either individual or corporate
rates, as applicable) with respect
to the Partnership's taxable income
directly or indirectly allocable to
such Eligible Partner with respect
to such applicable fiscal year, (B)
the highest state tax rate (taking
into account deductions or credits
for local taxes) applicable to the
Eligible Partner (at either
individual or corporate rates, as
applicable) with respect to the
Partnership's taxable income
directly or indirectly allocable to
such Eligible Partner with respect
to such applicable fiscal year and
(C) the highest local tax rate
applicable to the Eligible Partner
(at either individual or corporate
rates, as applicable) with respect
to the Partnership's taxable income,
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directly or indirectly allocable to
such Eligible Partner with respect
to such applicable fiscal year,
multiplied by (ii) the Partnership's
taxable income directly or
indirectly allocable to such
Eligible Partner with respect to
such fiscal year or (2) the product
of (i) the sum of (A) the highest
Federal alternative minimum tax rate
(taking into account deductions or
credits for state and local taxes)
applicable to the Eligible Partner
(at either individual or corporate
rates, as applicable) with respect
to the Partnership's alternative
minimum taxable income directly or
indirectly allocable to such
Eligible Partner with respect to
such applicable fiscal year, (B) the
highest state tax rate (taking into
account deductions or credits for
local taxes) applicable to the
Eligible Partner (at either
individual or corporate rates, as
applicable) with respect to the
Partnership's taxable income or
alternative minimum taxable income,
as applicable, directly or
indirectly allocable to such
Eligible Partner with respect to
such applicable fiscal year and (C)
the highest local tax rate
applicable to the Eligible Partner
(at either individual or corporate
rates, as applicable) with respect
to the Partnership's taxable income
or alternative minimum taxable
income, as applicable, directly or
indirectly allocable to such
Eligible Partner with respect to
such applicable fiscal year,
multiplied by (ii) the Partnership's
taxable income or alternative
minimum taxable income, as
applicable, directly or indirectly
allocable to such Eligible Partner
with respect to such fiscal year.
The Partnership Tax Amount for each
applicable fiscal year shall be
appropriately adjusted to reflect
(i) any tax losses of the
Partnership arising in any prior
fiscal year (assuming that any such
losses are carried forward and used
to offset the Partnership's taxable
income in the applicable fiscal
year) and (ii) the Partnership's
payment of any withholding taxes
that would give rise to a credit or
other tax benefit to the Partnership
(or the Eligible Partner).
(5) Payments or distributions in
connection with the Partnership Tax
Amount related to payments of
estimated Federal Income Tax shall
be payable in quarterly installments
with respect to the applicable
fiscal year, in each case no more
than five days prior to the Federal
estimated tax due dates applicable
to the Eligible Partner. Such
quarterly installments shall be
based upon the Partnership's then
good faith estimate of its taxable
income (or alternative minimum
taxable income, as
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applicable) directly or indirectly
allocable to the Eligible Partner
(as calculated in the manner
described in paragraph (4) above),
subject to appropriate adjustment to
reflect over and under payment of
any prior quarterly periods during
the applicable fiscal year, and in
each quarter shall be no greater
than the applicable estimated tax
payment to be paid by such Eligible
Partner to the applicable
Governmental Authority.
(6) Payments or distributions in
connection with the Partnership Tax
Amount related to the filing of
extensions of time for filing Income
Tax returns for a fiscal year shall
be payable in each case no more than
five days prior to the applicable
date on which such payment of Income
Tax is due, shall be based on the
Partnership's then good faith
estimate of its taxable income (or
alternative minimum taxable income,
as applicable) directly or
indirectly allocable to the Eligible
Partner for such fiscal year, and
shall be no greater than the
applicable tax payment to be paid by
such Eligible Partner to the
applicable Governmental Authority.
(7) The aggregate amount of all payments
made in connection with the
Partnership Tax Amount with respect
to the applicable fiscal year shall
be based upon the Partnership's
taxable income (or alternative
minimum taxable income, as
applicable) directly or indirectly
allocable to the Eligible Partner
with respect to such applicable
fiscal year as shown on the
Partnership's filed Federal Income
Tax return for such fiscal year, or
if such Federal Income Tax Return
has not been filed when a payment is
due in connection with the
Partnership Tax Amount for a fiscal
year, the Partnership's good faith
estimate of the amount of its
taxable income (or alternative
minimum taxable income, as
applicable), taking into account any
separately stated items, for such
fiscal year. In the event that the
Partnership files an amended Income
Tax return (or upon the
Partnership's filing of its original
return for the applicable fiscal
year if the Partnership Tax Amount
was based upon the Partnership's
good faith estimate of its taxable
income or alternative minimum
taxable income, as applicable, that
is inconsistent with its calculation
of its taxable income (or
alternative minimum taxable income,
as applicable) for any such fiscal
year(s), or in the event that a
Governmental Authority determines
that information reflected in any of
the Partnership's Income Tax returns
for such fiscal
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22
year is inaccurate or incomplete,
then the Partnership shall make a
proper adjustment (including any
penalties, interest or other charges
related to the adjustment or
correction of information reflected
in such return(s) or the filing of
such return(s)) to the amount
payable in connection with the
Partnership Tax Amount for such
fiscal year(s). According to whether
such adjustments to the amounts
payable in connection with the
Partnership Tax Amount for the
applicable year are positive or
negative with respect to the
Eligible Partner, the Partnership
shall, as applicable, either
promptly pay to the Eligible Partner
as a distribution as needed to fund
payment of such adjustment to such
Partnership Tax Amount to a
Governmental Authority by such
Eligible Partner, or shall require
the Eligible Partner to promptly pay
to it, the amount of any such
adjustment (and no further payments
in connection with the Partnership
Tax Amount shall be paid until the
Eligible Partner has repaid any such
excess to the Partnership). Payments
or distributions to the Eligible
Partner upon the Eligible Partner
filing original Income Tax returns
for a fiscal year shall be payable
in each case no more than five days
prior to the applicable date on
which the Income Tax payment is due
in connection with such return
filing, and shall be no greater than
the applicable tax payment to be
paid by such Eligible Partner to the
applicable Governmental Authority.
(8) In the event that the aggregate
amount of payments in connection
with the Partnership Tax Amount
actually distributed in respect of
any fiscal year exceeds the amounts
determined as indicated in paragraph
(4) above for such fiscal year, the
Eligible Partner shall promptly
repay any such excess to the
Partnership (and no further payments
in connection with the Partnership
Tax Amount shall be paid until the
Eligible Partner has repaid any such
excess to the Partnership).
(9) For all periods from and after the
inception of the Partnership, the
amount of the aggregate
distributions in connection with the
Partnership Tax Amount made with
respect to the direct or indirect
partnership interests held by an
Eligible Partner for each fiscal
year shall be appropriately adjusted
in the current fiscal year or in
future fiscal years, regardless of
whether such Eligible Partner has
held, or now or in the future holds a
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23
direct or indirect partnership
interest in the Partnership by making
additional mandatory distributions
for the benefit of such Eligible
Partner in the case of tax increases
or in the case of tax decreases by
the Eligible Partner paying any tax
decrease to the Partnership) to
reflect any adjustments in Income Tax
as a result of adjustments made for
any reason to items of income, gain,
loss, deduction or credit of the
Partnership, or adjustments made in
the Eligible Partner's allocable
shares of such items (regardless of
whether occurring as a result of the
Partnership's filing of an amended
return or as a result of an
examination or audit by a
Governmental Authority).
(B) In the event that, for any reason, all or any
portion of the Partnership Tax Amount cannot
be distributed to an Eligible Partner, such
deficiency in payments in connection with the
Partnership Tax Amount shall be distributed
as soon thereafter as Net Operating Cash Flow
is available.
(C) In the event that an Entity taxable as a
corporation shall become an Eligible Partner
or a Flow-Through Owner, the amount and
timing of the distributions under this
Section 5.2(a)(i) with respect to such
Eligible Partner or Flow-Through Owner shall
be appropriately adjusted to reflect its
status as a corporation subject to income
tax.
(D) In the event that a self-employment tax or
similar tax is imposed on an Eligible Partner
or any of its Flow-Through Owner(s) based in
whole or in part on such Eligible Partner's
allocable share of Partnership net income,
such tax constitutes an Income Tax and the
tax rate applicable to such self-employment
or similar tax (taking into account the
deductibility, if any, of such
self-employment or similar tax) shall be
added to, and treated as such constituent
part of, the Income Tax rate (and, if
applicable, the alternative minimum tax rate)
of the applicable taxing jurisdiction.
(E) The intent of this Section 5.2(a)(i) is that
each Eligible Partner shall receive such
distributions as necessary to fully reimburse
such Eligible Partner or its Flow- Through
Owner(s) for all Income Taxes, together with
any interest and any penalties, additions to
tax or additional amounts with respect
thereto, incurred as a result of such
Eligible Partner or its Flow-Through Owner(s)
being required to report, and pay Income Tax
with respect to, his, her or its allocable
share of the items of income, gain, loss,
deduction and credit of the
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Partnership, regardless of whether such
Income Taxes result from paying estimated
Income Taxes, or from paying Income Taxes as
a result of filing income tax returns or
other reports or amending such returns or
reports, or whether such Income Taxes are
incurred pursuant to examinations or audits
of such returns or reports by any tax
authority. The provisions of this Section
5.2(a)(i) shall be interpreted consistent
with the foregoing stated intent.
"Flow-Through Owner" means the direct or
indirect owner of an interest in an Eligible
Partner that is taxable on such Partner's
share of the various items of taxable income
or loss or alternative minimum taxable income
or loss of the Partnership by reason of
owning a direct or indirect interest in the
Partnership through one or more S
corporations or Entities taxed as
partnerships for federal income purposes.
(ii) Next, unless limited by the terms of any outstanding
financing arrangements set forth in any agreement or
agreements to which the Partnership is a party, Net
Operating Cash Flow shall be distributed among the
Preferred Limited Partners until each has received a
distribution with respect to Preferred Returns equal
to the excess, if any, of (i) the aggregate amount of
Net Income allocated to such Preferred Limited
Partner under Section A.4.1(a)(i) of the Appendix
from the inception of the Partnership, over (ii) the
sum of all prior distributions of Preferred Returns
to such Preferred Limited Partner pursuant to this
Section 5.2(a) and Section 6.2(c)(ii)(A) (such
excess, the "Undistributed Preferred Return of the
Partner"). All cash distributions pursuant to this
Section 5.2(a)(ii) shall be distributed among the
Preferred Limited Partners based on the proportion
that the Undistributed Preferred Return due each
Preferred Limited Partner bears to the aggregate
Undistributed Preferred Return due all Preferred
Limited Partners; provided, however, that, in
determining such proportions, there shall be excluded
from the Undistributed Preferred Return due each
Preferred Limited Partner and from the Undistributed
Preferred Return due all Preferred Limited Partners
all Undistributed Preferred Return due on all series
of Preferred Limited Partner Interests on which cash
distributions are not then allowed pursuant to either
(i) the terms and conditions applicable to such
series of Preferred Limited Partner Interest or (ii)
the terms of any outstanding financing arrangements
set forth in any agreement or agreements to which the
Partnership is a party.
(iii) In the sole discretion of the General Partner, the
balance, if any, of Net Operating Cash Flow may be
distributed to (A) the Common Partners in proportion
to their respective Common Partner Interests as shown
on Exhibit 1 or (B) the Preferred Limited Partners to
reduce the Unreturned Preferred Limited Partner
Balances of holders of Preferred Limited Partner
Interests,
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provided that no such distributions shall be
permitted if distributions are not allowed pursuant
to the terms of any outstanding financing
arrangements set forth in any agreement or agreements
to which the Partnership is a party. Any
distribution made pursuant to this Section
5.2(a)(iii) to Preferred Limited Partners shall be
distributed to the Preferred Limited Partners in
proportion to their respective Unreturned Preferred
Limited Partner Balances for all series of
outstanding Preferred Limited Partner Interests with
respect to which distributions under this Section
5.2(a)(iii) are permitted at the time of such
distribution.
Provided, however, except in the case of distributions under Section
5.2(a)(i), no distribution of Net Operating Cash Flow shall be made if
such distribution would reduce a Partner's Capital Account below zero.
(b) The Partnership shall make the distributions described in
Sections 5.6 and 5.7 under the circumstances described
therein.
Section 5.3 Definition of "Net Operating Cash Flow". "Net
Operating Cash Flow" shall be determined in the discretion of the General
Partner, but generally shall mean the gross cash proceeds from Partnership
operations less the portion thereof required to pay Partnership expenses less
any reserves established by the General Partner for direct operating expenses,
taxes, maintenance, insurance, capital expenditures, repairs and other items
deemed reasonable and necessary for the Partnership's business operations. In
addition, Net Operating Cash Flow shall include any net cash proceeds received
from the sale, financing or refinancing of Partnership assets, other than a
Terminating Capital Transaction.
Section 5.4 Distributions of Proceeds of Terminating Capital
Transaction. Subject to Section 6.2, the proceeds of any Terminating Capital
Transaction shall be distributed in the following order of priority:
(a) To the payment of the expenses of the Terminating Capital
Transaction including, without limitation, brokerage
commissions, legal fees, accounting fees and closing costs.
(b) To the payment of debts, return of Capital Accounts and
distribution to Partners according to the priorities defined
by Article VI hereof.
Section 5.5 Tax Withholdings. To the extent the Partnership is
required by federal, state or local law or any tax treaty to withhold or to
make tax payments on behalf of or with respect to any Partner, the General
Partner shall withhold such amounts and make such tax payments as so required.
The amount of such payments shall constitute an advance by the Partnership to
such Partner and shall be repaid to the Partnership by reducing the amount of
the current or next succeeding distribution or distributions which would
otherwise have been made to such Partner or,
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if such distributions are not sufficient for that purpose, by so reducing the
proceeds of liquidation otherwise payable to such Partner or, if such proceeds
are insufficient, such Partner shall pay to the Partnership the amount of such
insufficiency.
Section 5.6 Special Distributions. In accordance with the timing
specified in Section 12.12, the Common Partners shall receive the following
special distributions (the "Special Distributions"). Xxxxx and Xxxxxxxx shall
receive special cash distributions with respect to their respective Common
Partner Interests as follows: Xxxxx in the amount of One Million One Hundred
Thousand Dollars ($1,100,000) and Xxxxxxxx in the amount of Seven Hundred
Thousand Dollars ($700,000). In addition, subject to the provisions of Section
2.2(e), Xxxxxxxx shall receive Four Hundred Thousand Dollars ($400,000) in
stated amount of Series E Preferred Interests and Mid-Am shall receive a
distribution of Two Million Two Hundred Thousand Dollars ($2,200,000) in stated
amount of Series E Preferred Interests.
Section 5.7 Additional Distributions. In the case of cash
distributions made pursuant to Section 5.2(a)(i) hereof for Required
Distribution Amounts, in the event that any Common Partner does not receive a
cash distribution that would be proportionate to such distribution, in
accordance with the relative Common Partner Interests held by all Common
Partners, such Common Partner shall nevertheless be deemed, at the time of such
distribution under Section 5.2(a)(i), to have received its proportionate
distribution in cash in accordance with the proportion that such Common
Partner's Common Partner Interest bears to all Common Partner Interests and to
have immediately contributed such deemed cash distribution to the Partnership
as a Series E Preferred Limited Partner Contribution to acquire an equal stated
amount of Series E Preferred Interests. Further, pursuant to Section
5.2(a)(i), the Partnership shall make Required Distributions to Xxxxx and
Xxxxxxxx in mid-September 1997, of approximately Two Million Dollars
($2,000,000) each in cash in respect of certain tax liabilities, and to Mid-Am,
pursuant to this Section 5.7, a corresponding distribution in kind of
approximately Four Million Dollars ($4,000,000) in stated amount of Series E
Preferred Interests; provided, however, that payment of such amounts shall not
preclude any Common Limited Partner (including Xxxxx) from receiving any other
amount which may be due to them with respect to such tax liabilities under
Section 5.2(a)(i) or this Section 5.7.
Section 5.8 Restricted Distributions. Notwithstanding any
provision to the contrary contained in this Agreement, the Partnership, and the
General Partner on behalf of the Partnership, shall not make a distribution to
any Partner on account of its interest in the Partnership if such distribution
would violate Section 17-607 of the DRULPA or other applicable law.
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ARTICLE VI
DISSOLUTION AND WINDING-UP OF THE PARTNERSHIP;
DISTRIBUTION OF PROCEEDS
Section 6.1 Dissolution.
(a) The Partnership shall be dissolved and its affairs shall be
wound up upon the first to occur of any of the following:
(i) December 31, 2050;
(ii) The sale of all or substantially all of the assets of
the Partnership;
(iii) The written consent of all Partners;
(iv) The withdrawal or bankruptcy of the General Partner
or assignment by the General Partner of its entire
interest in the Partnership or the occurrence of any
other event that results in the General Partner
ceasing to be a general partner of the Partnership
under the DRULPA, provided, the Partnership shall not
be dissolved and required to be wound up in
connection with any of the events specified in this
clause (iv) if (A) at the time of the occurrence of
such event there is a least one remaining general
partner of the Partnership who is hereby authorized
to and does carry on the business of the Partnership,
or (B) within ninety (90) days after the occurrence
of such event, all remaining Common Partners agree in
writing to continue the business of the Partnership
and to the appointment effective as of the date of
such event, if required, of one or more additional
general partners of the Partnership; or
(v) The entry of a decree of judicial dissolution under
Section 17-802 of the DRULPA.
(b) The Mid-Am Parties will not seek the dissolution, winding up
or liquidation of the Partnership (including by removal of the
General Partner) except where the General Partner has been:
(i) declared bankrupt, insolvent, or placed in
receivership;
(ii) indicted for or convicted of a felony; or
(iii) held by a court or arbitrator to have committed fraud
against the Mid-Am Parties or the Partnership;
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provided, however, the Mid-Am Parties may seek the dissolution,
winding up or liquidation of the Partnership pursuant to Section
6.1(a)(v) or the removal of the General Partner where they have
persuaded an Independent Decisionmaker, acting independently and using
his or her own business judgment, that such dissolution, winding up or
liquidation of the Partnership or the removal of the General Partner
is necessary to minimize the long- term financial losses to the
Partnership. Except as set forth in the preceding sentence, the
Mid-Am Parties hereby expressly waive to the fullest extent permitted
by the DRULPA any right which they may otherwise have to obtain the
entry of a decree of judicial dissolution under Section 17-802 of the
DRULPA with respect to the Partnership.
Section 6.2 Winding Up and Liquidation. Upon dissolution of the
Partnership, it shall be wound up and liquidated as quickly as circumstances
will allow. The assets of the Partnership shall be applied in the following
order and priority:
(a) To pay or provide for all amounts owing by the Partnership to
creditors other than Partners in the order of priority as
provided by law, and for expenses of winding up.
(b) To pay or provide for all amounts owing by the Partnership to
Partners other than for capital and profits.
(c) To make distributions to the Partners in respect of capital
and for profits, as follows:
(i) The Partners' Capital Accounts shall be adjusted as
if the assets of the Partnership were sold for fair
market value and the gain or loss therefrom allocated
to the Partners according to the Appendix. Fair
market value shall be determined by unanimous
agreement among the Partners, or failing unanimous
agreement, determined as follows: the General
Partner and the Common Limited Partners (acting as
one Common Limited Partner) shall each name an
appraiser of independent standing. The two
appraisers shall establish the fair market value of
the assets by mutual agreement but, if they do not
reach such agreement within 30 days after the
appointment of the later of them, they shall name a
third appraiser and, in such event, the average of
the two closest appraisals shall be the final
determination of the fair market value of the assets.
(ii) Thereafter distributions shall be made to the
Partners in respect of capital and for profits in the
following order and priority:
(A) Distributions shall be made to the Preferred
Limited Partners in an amount equal to the
aggregate Undistributed Preferred Returns of
all Preferred Limited Partners; provided,
however, that no distribution shall be made
pursuant to this Section 6.2 that creates or
increases a Capital Account deficit for any
Partner who is not a General Partner
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which exceeds such Partner's obligation,
deemed or actual, to restore such deficit,
determined as follows: Distributions shall
first be determined tentatively pursuant to
this Section 6.2 without regard to the
Partners' Capital Accounts, and then the
allocation provisions of the Appendix shall
be applied tentatively as if such tentative
distributions had been made. If any Partner
who is not a General Partner shall thereby
have a deficit Capital Account which exceeds
his deemed or actual obligation to restore
such deficit, the actual distribution to such
Partner pursuant to this Section 6.2 shall be
equal to the tentative distribution to such
Partner less the amount of the excess to such
Partner. Each distribution made pursuant to
this Section 6.2(c)(ii)(A) shall be
distributed to the Preferred Limited Partners
in proportion to their respective
Undistributed Preferred Returns at the time
of such distribution. Solely for purposes of
this Section 6.2(c)(ii), Undistributed
Preferred Returns shall be determined by
excluding from the calculation of
distributions of Preferred Returns made
pursuant to Section 5.2(a) and this Section
6.2(c)(ii)(A) the stated amounts of Preferred
Limited Partner Interests issued in payment
of Preferred Returns.
(B) Distributions shall be made to the Preferred
Limited Partners in an amount equal to the
aggregate Unreturned Preferred Limited
Partner Balances of all Preferred Limited
Partners. Each distribution made pursuant to
this Section 6.2(c)(ii)(B) shall be
distributed to the Preferred Limited Partners
in proportion to their respective Unreturned
Preferred Limited Partner Balances.
(C) Each Partner shall be paid an amount equal to
the amount of each Partner's Capital Account.
Distributions may be made in cash or in kind.
(D) Any remaining assets shall be distributed to
the Common Partners in cash or in kind pro
rata according to their respective Common
Partner Interests.
Upon the completion of the liquidation of the Partnership and the
distribution of all Partnership funds, the General Partner or whoever
is instead appointed by the Common Limited Partners shall be
authorized to execute and record all documents required to effectuate
the dissolution and termination of the Partnership.
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ARTICLE VII
LIMITATIONS ON TRANSFERS OF INTERESTS
Section 7.1 Limitations on Transfers of Interests. While this
Agreement is in force, no Partner may directly or indirectly transfer all or
any part of such Partner's interest in the Partnership, whether now owned or
hereafter acquired, without first complying with the terms and conditions of
this Agreement. Any attempted transfer in contravention of this Agreement
shall be null and void.
Section 7.2 Transfers. For purposes of this Agreement, a
transfer shall mean any direct or indirect act, whether voluntary, involuntary,
or by operation of law, which causes a disposition or encumbrance of all or any
part of a Partner's interest, including, but not limited to, a sale,
foreclosure, assignment, gift, exchange, pledge, hypothecation, bequest or
attachment.
Section 7.3 Exceptions. Notwithstanding the foregoing
restrictions on transfers of interests, a Partner may at any time transfer all
or part of such Partner's interest in the Partnership (referred to as
"Permitted Transfers") to a third party provided that the provisions of Article
VIII have been complied with. In addition:
(a) Xxxxxxxx shall have the right to transfer his Common Partner
Interest, without complying with Sections 8.1 through 8.7
hereof, into an Entity in which Xxxxxxxx and the members of
his family, consisting of the persons described in Section
318(a)(1) of the Code, own more than a fifty percent (50%)
interest ("Family Controlled Entity"). Upon the transfer by
Xxxxxxxx of such Partner's Common Partner Interest to a Family
Controlled Entity, such Family Controlled Entity shall become
a Substituted Partner pursuant to the terms and conditions of
Section 8.8 hereto without requiring the unanimous written
consent of the Common Partners so long as the other conditions
to becoming a Substituted Partner contained in Section 8.8(b)
have been satisfied by such Family Controlled Entity.
(b) Mid-Am shall have the right to transfer its Common Partner
Interest and Preferred Limited Partner Interests to any
successor of Mid-Am by merger or consolidation without the
necessity of complying with Sections 8.1 through 8.7 hereof.
Upon the transfer by Mid-Am of such Partner's Common Partner
Interest and/or Preferred Limited Partner Interests to a
successor, such successor shall become a Substituted Partner
pursuant to the terms and conditions of Section 8.8 hereof
without requiring the unanimous written consent of the Common
Partners so long as the other conditions to becoming a
Substituted Partner contained in Section 8.8(b) have been
satisfied by such successor.
(c) Mid-Am Capital shall have the right to transfer its Preferred
Limited Partner Interests to any successor of Mid-Am Capital
by merger or consolidation without the necessity of complying
with Sections 8.1 through 8.7 hereof. Upon the transfer by
Mid-Am
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Capital of such partner's Preferred Limited Partner Interests
to a successor, such successor shall become a Substituted
Partner pursuant to the terms and conditions of Section 8.8
hereof without requiring the unanimous written consent of the
Common Partners so long as the other conditions to becoming a
Substituted Partner contained in Section 8.8(b) have been
satisfied by such successor.
(d) The General Partner and Xxxxxxxx may pledge and hypothecate
such Partners' interest in the Partnership pursuant to the
terms of that certain Credit Agreement dated as of September
4, 1997, among the Partnership, Mid-Am, the lenders that are
parties thereto (the "Lenders") and The Chase Manhattan Bank,
as administrative agent (as amended from time to time, the
"Credit Agreement") and related Loan Documents (as defined in
the Credit Agreement). In addition, in the event the Lenders
under the Credit Agreement shall foreclose upon or sell such
Partners' interests in the Partnership, the Partners, by
execution of this Agreement, hereby waive the restrictions on
transfer contained in this Article VII and agree that any such
subsequent holder of the interests of the Partners shall
become a Substituted Partner, pursuant to the terms and
conditions of Section 8.8 hereof without requiring the
unanimous written consent of the Common Partners so long as
the other conditions to becoming a Substituted Partner
contained in Section 8.8(b) have been satisfied by such
holder. In the event such Lenders shall foreclose upon or
sell the General Partner's interest in the Partnership, and
the subsequent holder of such interest becomes a Substituted
Partner, the admission of such Person shall be deemed to occur
immediately prior to the transfer and such Person shall
continue the business of the Partnership without dissolution.
Section 7.4 Prohibited Transfers.
(a) Notwithstanding anything to the contrary contained in this
Agreement, unless all of the Common Partners shall consent, no
Partner shall sell, pledge, transfer or assign any portion of
its interest in the Partnership if such sale, pledge, transfer
or assignment:
(i) When added to the total of all other sales, transfers
or assignments of interests in the Partnership within
the preceding twelve (12) months, would result in the
Partnership being considered to have terminated
within the meaning of Code Section 708; or
(ii) Would otherwise cause the Partnership to lose its
status as a partnership for federal income tax
purposes.
(b) Notwithstanding anything to the contrary contained in this
Agreement, neither the Mid-Am Parties shall purchase or accept
a transfer of, nor shall the Partnership repurchase or redeem,
all or any part of the Common Partner Interests, if such
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purchase, transfer, repurchase or redemption would cause the
Mid-Am Parties to own a percentage of voting Common Partner
Interests that is more than 50% of the total Common Partner
Interests in existence at the time of proposed transfer or
purchase.
ARTICLE VIII
VOLUNTARY OR INVOLUNTARY TRANSFER
Section 8.1 Third Party Offers. In the event a Partner receives
a bona fide offer from a third party to purchase such Partner's interest in the
Partnership (a "Third Party Offer"), such Partner (the "Selling Partner") shall
give written notice (the "Third Party Offer Notice") to the Common Partners
identifying the third party and the purchase price, terms and conditions of the
Third Party Offer. For purposes of this Agreement the term "bona fide offer"
shall mean a legally enforceable offer from a Person financially capable of
carrying out its terms, accompanied by a certified or cashier's check for at
least ten percent (10%) of the purchase price.
Section 8.2 Option to Purchase. For ninety (90) days after the
receipt of the Third Party Offer Notice, the Common Partners shall determine
whether or not they desire to purchase the interest which is the subject of the
Third Party Offer (the "Offered Interest"), for the purchase price, and on the
same terms and conditions provided for in the Third Party Offer Notice. If
some or all of the Common Partners elect to purchase the Offered Interest, the
purchasing Common Partners may divide the Offered Interest in any manner upon
which they all agree. In the absence of unanimous agreement, the Offered
Interest shall be divided among the purchasing Common Partners in proportion to
their percentage Common Partner Interests.
Section 8.3 Purchase Price. The purchase of the Offered Interest
shall be on the same terms and conditions set forth in the Third Party Offer
Notice.
Section 8.4 Release from Restriction. If a Partner offers to
sell its interest in the Partnership in connection with a Third Party Offer and
the Common Partners do not elect to purchase such interest, then the Partner
may sell its interest to the bona fide third party who made the Third Party
Offer at a price equal to or greater than the price originally offered to the
Common Partners, provided it is upon the exact terms and conditions originally
contained in the Third Party Offer Notice (except for increases in payments
required to accommodate a greater price), and provided further that such sale
is completed within sixty (60) days after the offer to the Common Partners has
been rejected by all of the Common Partners or expires, whichever first occurs.
Section 8.5 Changed Offer. If a Partner thereafter desires to
sell its interest in the Partnership at a price which is less than the price
originally offered to the Common Partners, or upon different terms or
conditions than those which were contained in the original Third Party Offer
Notice, or at a time which is more than sixty (60) days after the rejection or
expiration of the offer to the Common Partners, such Partner must first reoffer
its interest which is the subject of the Third
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Party Offer to the Common Partners at the price and upon the terms and
conditions which such Partner was willing to accept from the bona fide third
party. The new offer shall be made to the Common Partners in the same manner
and in accordance with the same procedures as provided for in this Article
VIII.
Section 8.6 Form of Offer. Notices of offers and acceptances
shall be made pursuant to the terms and conditions of Section 12.7.
Section 8.7 Option on the Part of Partnership. Upon the
unanimous vote of the Common Partners, other than the Selling Partner, the
Partnership itself may elect to acquire the interest of a Selling Partner
pursuant to the provisions of Sections 8.2 and 8.3, and in such event the
Partnership and not the Common Partners shall acquire the interest of the
Selling Partner.
Section 8.8 Substituted Partner. Any assignee or transferee who
is not now a Partner shall become a Partner only if (a) all of the Common
Partners, other than the Selling Partner, unanimously consent in writing to the
admission of the assignee or transferee as a Partner, (b) such assignee or
transferee agrees: (1) to become a Partner, (2) to execute and acknowledge such
documents and instruments of conveyance in form and substance as may be
necessary in the opinion of counsel to the Partnership to effect such transfer
and to confirm the agreement of the transferee, (3) to be bound by all of the
terms and conditions of this Agreement, as it may be amended from time to time,
and (4) to pay all reasonable expenses connected with such assignee's or
transferee's admission, including reasonable attorneys' fees required for the
preparation of such instruments to effect such admission to the Partnership,
and (c) the provisions of the preceding sections of this Article have been
satisfied. Any transfer or purported transfer of any Partner's Interest shall
be null and void unless made strictly in compliance with the provisions of this
Article. In the event the General Partner transfers its entire interest in the
Partnership and the transferee becomes a Substituted Partner, the admission of
such Person shall be deemed to occur immediately prior to the transfer and such
Person shall continue the business of the Partnership without dissolution. The
transferee of any Partner interest shall be subject to all terms, conditions,
restrictions and obligations of this Agreement. Notwithstanding anything
contained herein to the contrary, any Person who receives a Partner Interest in
a transfer permitted by Section 7.3 shall become a Substituted Partner without
the necessity of satisfying the conditions contained in Section 8.8(a) and (c).
Section 8.9 Rights of Unadmitted Transferees. If the assignee or
transferee of an interest in the Partnership does not become a Substituted
Partner, such assignee or transferee shall only be entitled to the share of
profits, Preferred Return or other compensation by way of income or return of
contributions to which the Partner whose interest is being transferred would
have been entitled to pursuant to this Agreement. The unadmitted Partner shall
have no right to participate in the business or management of the Partnership,
shall have no right to become a Partner, shall, to the extent permitted by
applicable law, have no right to any information or accounting as to the
affairs of the Partnership, shall not be entitled to inspect the books or
records of the Partnership and shall not have any of the rights of a Partner
under the DRULPA or this Agreement.
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Section 8.10 Closing.
(a) Time and Place of Closing. The closing of any purchase and
sale of an interest to be sold pursuant to the provisions of
this Article VIII shall be held at the time and place and in
such manner mutually agreeable to the parties to the purchase.
In the absence of agreement, the closing shall be held at the
principal office of the Partnership sixty (60) days after the
expiration of the last option to purchase under the provisions
of this Article VIII.
(b) Conditions to Closing. The closing of any purchase and sale
of a Partner's interest hereunder is expressly conditioned
upon compliance with all applicable terms and provisions of
this Agreement, including without limitation those specified
in Sections 7.1 and 8.8.
Section 8.11 Put Right.
(a) Put Option. At any time on or after January 1, 2003, Xxxxxxxx
or a Family Controlled Entity may elect to dispose of all of
his or its Common Partner Interest (the "Put Interest") at the
Put Price (as defined in subparagraph (c) below) by providing
written notice ( a "Put Notice") to the Partnership and Mid-Am
of such election (the "Put Option"). The Partnership shall
have until the 30th day following the date the Put Notice is
deemed to be delivered within which to notify Xxxxxxxx or a
Family Controlled Entity of the election of the Partnership
to purchase the Put Interest at the Put Price. In the event
that the Partnership does not elect to purchase the Put
Interest, then Mid-Am must purchase the Put Interest at the
Put Price. Notwithstanding anything in this Section 8.11(a)
to the contrary, if at any time after the date hereof,
Xxxxxxxx should die or become Disabled, Xxxxxxxx or the
personal representative of the estate of Xxxxxxxx, or if no
personal representative is appointed or no administration is
necessary, then the heirs at law of Xxxxxxxx (the "Successor
in Interest") or the Family Controlled Entity that owns the
Common Partner Interest of Xxxxxxxx shall provide a Put Notice
to the Partnership and Mid-Am within sixty (60) days of
Xxxxxxxx'x death or Disability. The Partnership shall have
until the 30th day following the date such Put Notice is
deemed to be delivered within which to notify the Successor in
Interest or the Family Controlled Entity, as applicable, of
the election of the Partnership to purchase the Put Interest
of Xxxxxxxx at the Put Price. In the event that the
Partnership does not elect to purchase the Put Interest, then,
subject to the limitations contained in Section 7.4(b), Mid-Am
must purchase the Put Interest at the Put Price. The
provisions of the three immediately-preceding sentences of
this Section 8.11(a) shall apply only in the event of the
death or Disability of Xxxxxxxx.
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(b) Put Closing. The closing of the purchase of the Put Interest
(the "Put Closing") shall take place at the offices of the
Partnership on a date not more than sixty (60) days after the
date on which the Put Notice is deemed to have been received
by the Partnership and Mid-Am, or at such other time and place
as Xxxxxxxx, the Successor in Interest, the Family Controlled
Entity, the Partnership or Mid-Am, as applicable, may agree
upon (the "Put Closing Date").
(c) Put Price. The price (the "Put Price") that Xxxxxxxx, the
Successor in Interest or the Family Controlled Entity shall
receive upon exercise of the Put Option provided for in
Section 8.11(a) shall be calculated as of the date on which
the Put Notice is given (the "Calculation Date") and shall be
the greater of (i) the sum of Six Million Eight Hundred
Thousand Dollars ($6,800,000) if the Put Notice date is on or
before September 4, 2002, and the sum of Ten Million Dollars
($10,000,000) thereafter or (ii) the Formula Put Price, as
hereinafter defined. For purposes of this Agreement, "Formula
Put Price" shall mean a sum equal to the amount obtained by
(A) multiplying six (6) times the average of the Partnership's
EBITDA for the three (3) most recently completed fiscal years
of the Partnership preceding the Calculation Date; (B)
subtracting from the result obtained after completing the
calculation provided for in subparagraph (A) the aggregate on
the Calculation Date of all of the Partnership's interest
bearing debt, all Unreturned Preferred Limited Partner
Balances and all Undistributed Preferred Returns; and (C)
multiplying the result obtained after completing the
calculation provided for in subparagraph (B) by a percentage
determined by dividing the amount of Common Partner Interests
held by Xxxxxxxx, the Successor in Interest or the Family
Controlled Entity on the Calculation Date by the total of all
outstanding Common Partner Interests on the Calculation Date.
For purposes of this Agreement, "EBITDA" means for each fiscal
year of the Partnership the sum of the following (all
determined from the audited financial statements of the
Partnership and in accordance with generally accepted
accounting principles consistently applied): (I) the
consolidated net income of the Partnership and its direct
subsidiaries, plus (II) all interest expense of the
Partnership and such subsidiaries, plus (III) all United
States Federal, state, local and foreign income taxes of the
Partnership and such subsidiaries, plus (IV) all depreciation
and amortization of assets (including goodwill and other
intangible assets of the Partnership and such subsidiaries),
in each case of items (II), (III) and (IV) above, to the
extent deducted in determining the consolidated net income of
the Partnership and such subsidiaries for the fiscal year in
question. In other words, the Formula Put Price shall be
determined in accordance with the following formula:
Formula Put Price = [(6 x EBITDA Amount) - D] x PI where
D = Aggregate amount on the Calculation
Date of all of the Partnership's
interest bearing debt, Unreturned
Preferred
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Limited Partner Balances, and
Undistributed Preferred Returns
EBITDA Amount = Average EBITDA of
the Partnership for the three
(3) most recently completed
fiscal years of the
Partnership
PI = The percentage determined by
dividing the amount of Common
Partner Interests held by Xxxxxxxx,
the Successor in Interest or the
Family Controlled Entity on the
Calculation Date by the total of all
outstanding Common Partner Interests
on the Calculation Date
(d) Method of Payment. The Put Price shall be payable in cash
unless the parties, with the requisite consent of any secured
lenders of the Partnership, agree otherwise.
(e) Deemed Put Right Exercise for Interest in SFG LLC. Any
exercise of the Put Option contained in this Section 8.11 by
Xxxxxxxx, the Successor in Interest or the Family Controlled
Entity shall also be deemed to be an exercise of any Put
Option of such person or entity for his or its ownership
interest in SFG LLC pursuant to the Limited Liability Company
Agreement.
Section 8.12 Call Right.
(a) Call Option. At any time on or after January 1, 2003, the
Partnership and Mid-Am shall each have the right, subject to
the limitations contained in Section 7.4(b), in accordance
with the terms hereof, by notice (the "Call Notice") to
Xxxxxxxx or, if applicable, to the Family Controlled Entity
that own Xxxxxxxx'x Common Partner Interest, to elect to
purchase an amount of Common Partner Interest that is equal to
or less than twenty percent (20%) of the total Common Partner
Interest owned in the aggregate by Xxxxxxxx and any Family
Controlled Entity that own Xxxxxxxx'x Common Partner Interest
(the "Call Option"). If Xxxxxxxx'x or a Family Controlled
Entity's Common Partner Interest in the Partnership has been
transferred to a third party pursuant to this Article VIII,
the Partnership or Mid-Am shall not have the right, pursuant
to this Section 8.12, to acquire the third party's Common
Partner Interest, even if that third party is a substituted
Common Limited Partner pursuant to Section 8.8.
(b) Call Option in Event of Death or Disability of Xxxxxxxx. In
the event of the death or Disability of Xxxxxxxx and should
Xxxxxxxx, the Successor in Interest or the Family Controlled
Entity fail to provide the Put Notice to the Partnership and
Mid-Am as described in Section 8.11(a), then the Partnership
or Mid-Am shall have the right to call the Put Interest by
notice (the "Call Notice Upon Death or Disability") to
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Xxxxxxxx, the Successor in Interest or the Family Controlled
Entity within ninety (90) days of Xxxxxxxx'x death or
Disability (the "Call Option Upon Death or Disability").
(c) Call Closing. The closing pursuant to this Section 8.12,
whether pursuant to a Call Notice or a Call Notice Upon Death
or Disability, shall take place (i) at the offices of the
Partnership on a date (the "Call Closing Date") not more than
sixty (60) days after the date on which Xxxxxxxx or the Family
Controlled Entity received the Call Notice or not more than
thirty (30) days after the date on which Xxxxxxxx, the
Successor in Interest or the Family Controlled Entity received
the Call Notice Upon Death or Disability, or (ii) at such
other time and place as Xxxxxxxx, the Successor in Interest,
the Family Controlled Entity, the Partnership, or Mid-Am, as
applicable, may agree upon.
(d) Call Price. The price (the "Call Price") that Xxxxxxxx, the
Successor in Interest or the Family Controlled Entity shall
receive upon exercise of the Call Option or the Call Option
Upon Death or Disability set forth herein shall be determined
in the same manner for determining the Put Price as provided
for in Section 8.11(c); provided, however, that the Call Price
(i) to be paid upon the exercise of the Call Option shall be
determined by multiplying the Call Price as determined
pursuant to Section 8.11(c) by the percentage interest which
the Partnership or Mid-Am has elected to purchase (up to 20%)
of the Common Partner Interest owned in the aggregate by
Xxxxxxxx and any Family Controlled Entity that own Xxxxxxxx'x
Common Partner Interest and (ii) to be paid upon the exercise
of the Call Option Upon Death shall be equal to the Put Price.
(e) Method of Payment. The Call Price payable pursuant to this
Section 8.12 shall be payable in cash on the Call Closing Date
unless the parties, with the requisite consent of any secured
lenders of the Partnership, agree otherwise.
(f) Deemed Call Option Exercise for Interest in SFG LLC. Any
exercise of the Call Option contained in this Section 8.12 by
the Partnership or Mid-Am shall also be deemed to be an
exercise of any Call Option granted to the Partnership or
Mid-Am pursuant to the Limited Liability Company Agreement for
the same person's or entity's interest in SFG LLC.
Section 8.13 Limitations on Transfers of Interest Having Adverse
Legal Effects. Notwithstanding any other provision of this Article VIII, the
Partners may not make any type of transfer of any part or all of their interest
in the Partnership if, in the opinion of counsel for the Partnership, such
transfer would result in a violation of applicable law, or would jeopardize the
status of the Partnership as a partnership for federal income tax purposes.
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ARTICLE IX
VOTING RIGHTS OF CLASSES OF PARTNERS
Section 9.1 Voting Rights for Common Partner Interests. A Common
Partner Interest, as defined pursuant to Section 2.1 hereto, held by the
General Partner entitles the holder of such interest to vote as a General
Partner on all matters specifically allowed to be voted on by the General
Partner pursuant to the terms of this Agreement and/or the DRULPA. A Common
Partner Interest held by a Common Limited Partner entitles the holder of such
interest to vote as a Limited Partner on all matters specifically required to
be voted on by Limited Partners pursuant to the terms of this Agreement and/or
the DRULPA.
Section 9.2 Voting Rights for Preferred Limited Partner
Interests. A Preferred Limited Partner Interest, as defined pursuant to
Section 2.4 hereto, does not entitle the holder of such interest to vote as a
Partner on any Partnership matter unless specifically authorized by this
Agreement or as required by the DRULPA.
ARTICLE X
FISCAL YEAR; RECORDS; REPORTS
Section 10.1 Fiscal Year. "Fiscal Year", as used in this
Agreement, means the fiscal year of the Partnership, which shall be the period
ending on December 31 of each year.
Section 10.2 Records. The General Partner shall maintain on
behalf of the Partnership all of the following items at the Partnership's
principal office:
(a) A current list of the full name and last known business or
residence address of each Partner together with records
regarding the Capital Contribution or Contributions and the
share in profits and losses of each Partner;
(b) A copy of the certificate of limited partnership of the
Partnership and all certificates of amendment thereto,
together with executed copies of any powers of attorney
pursuant to which any certificate has been executed;
(c) Copies of the Partnership's federal, state and local income
tax or information returns and reports, if any, for the six
most recent taxable years;
(d) Copies of the original Agreement of Limited Partnership, the
Amended and Restated Agreement, this Agreement and all
amendments hereafter;
(e) Financial statements of the Partnership for the six most
recent Fiscal Years; and
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(f) The Partnership's books and records for at least the current
and past three Fiscal Years.
Subject to Section 10.8, the Limited Partners shall have the right to
inspect and examine the Partnership's books and records at reasonable
times for any purpose reasonably related to such Limited Partner's
interest in the Partnership. The books of the Partnership shall be
closed and balanced at the end of each Fiscal Year.
Section 10.3 Annual Statements and Partnership Returns. The
General Partner shall cause to be prepared annual financial statements of the
Partnership's activities including at least an income statement and balance
sheet. Such annual statements shall be transmitted to the Limited Partners
within sixty (60) days of the close of the Fiscal Year of the Partnership. The
General Partner shall cause to be prepared and file all relevant federal, state
and local income tax returns and information statements. The General Partner
shall furnish to each Partner the Partner's Schedule K-1 within sixty (60) days
after the end of each Fiscal Year.
Section 10.4 Adjustment to Basis. In the event of a transfer of
all or part of a Partner's interest in the Partnership by sale or exchange, or
upon the death or dissolution of a Partner, or upon distribution by the
Partnership to a Partner of property of the Partnership, the General Partner,
at the request of any remaining Common Partner, shall cause the Partnership to
elect, pursuant to the provisions of Section 754 of the Code, to adjust the
basis of the property of the Partnership according to Sections 734 or 743 of
the Code. All other elections required or permitted to be made by the
Partnership under the Code shall be made by the General Partner in such manner
as will be most advantageous to the Partners. Each of the Partners will, upon
request, supply the information necessary to properly give effect to such
elections.
Section 10.5 Tax Audits. The General Partner will be treated as
the tax matters partner of the Partnership pursuant to Section 6231(a)(7) of
the Code. Subject to Treasury Regulations adopted under the Code, the General
Partner shall, without the necessity of consent of the Limited Partners, have
discretion in its capacity as tax matters partner to make such decisions and
take such actions, including the institution of legal proceedings and the
determination of the legal forum, as it deems appropriate in such capacity.
Section 10.6 Tax Classification. The Partners hereby intend that
the Partnership be taxed and classified as a partnership for federal and state
income tax purposes. The Partners shall take all steps, and do all acts and
things, including the filing of elections or tax returns with a federal, local,
municipal, state or other governmental body as are or may be reasonably
necessary or appropriate to ensure the Partnership is taxed and classified as a
partnership for federal and state income tax purposes. Unless otherwise
provided in this Agreement, no Partner shall take any action to change the
classification of the Partnership as a partnership for federal and/or state
income tax purposes without the unanimous written consent of all Partners.
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Section 10.7 Confidentiality. Notwithstanding any other provision
of this Agreement, the General Partner may, to the maximum extent permitted by
applicable law, keep confidential from the Limited Partners any information the
disclosure of which the General Partner reasonably believes is not in the best
interest of the Partnership or is adverse to the interest of the Partnership or
which the Partnership or the General Partner is required by law or by an
agreement with any Person to keep confidential.
Section 10.8 Competitively Sensitive Information. The Partners
acknowledge that the General Partner, the Partnership and its Partners will
possess certain non-Public, Competitively Sensitive Information which the
parties reasonably believe in good faith is not in the best interest of the
Partnership and the Partners to disclose to or among Partners or could damage
the Partnership, the Partners or their respective businesses if such
information is not kept confidential. The Partners hereby agree to the
following, which the Partners agree are (x) reasonable standards under the
DRULPA for disclosure of non-Public, Competitively Sensitive Information and
(y) will materially benefit the Partnership and the Partners:
(a) Non-Disclosure of Competitively Sensitive Information. The
General Partner and the Mid-Am Parties shall not, directly or
indirectly, discuss with or provide, disclose, or otherwise
make available to each other any non-Public, Competitively
Sensitive Information relating to Pasteurized Packaged Milk,
and the Mid-Am Parties shall have no right to inspect or copy
non-Public, Competitively Sensitive Information from the
books, records, reports, and accounts of the General Partner
or the Partnership relating to any of the foregoing.
(b) The Mid-Am Parties Right to Information. Notwithstanding
anything contained in Section 10.8(a) above, upon reasonable
notice, the Mid-Am Parties shall be entitled to request,
obtain, and retain copies of:
(i) on a quarterly basis, a true and full explanation
from the General Partner regarding material changes
to the general state of business and financial
condition of the Partnership; so long as such
explanation does not include non-Public,
Competitively Sensitive Information related to
Pasteurized Packaged Milk with respect to the
Partnership;
(ii) promptly after they become available, copies of the
Partnership's federal, state, and local income tax
returns or information statements for each year;
(iii) a list showing the names, addresses, and percentage
ownership interests of each owner of the Partnership;
(iv) monthly financial statements (prepared based on
generally accepted accounting principles), including
a balance sheet, a statement of profits and losses, a
statement of cash flow and any other information
regarding the
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general status or condition of the Mid-Am Parties'
interests in the Partnership;
(v) financial statements and other information as
required by the Mid-Am Parties' creditors (other than
any entity affiliated through ownership with any
Mid-Am Party) for the sole purpose of permitting such
creditors to monitor the Mid-Am Parties' overall
financial condition and/or to enforce any rights they
may have with regards to their credit arrangements
with the Mid-Am Parties; and
(vi) minutes of those portions of meetings of the
Representative Committee of the General Partner at
which the Mid-Am Parties were, or would be permitted
to be, in attendance.
(c) Audit Rights. Unless the Representative Committee of the
General Partner shall determine to the contrary, an
independent public accounting firm, which may be the
accounting firm that prepares audited financial statements for
a Partner, shall prepare audited financial statements for the
Partnership. In the event the Representative Committee of the
General Partner does not require audited financial statements
for the Partnership, upon prior written notice to the General
Partner, for so long as the Mid-Am Parties own an interest in
the Partnership and in the Mid-Am Parties' sole discretion,
the Mid- Am Parties may have conducted by an accounting firm
acting on the Mid-Am Parties' behalf, at the Partnership's
expense, one audit of the financial accounts and records of
the Partnership per calendar year; provided, however, that the
Mid-Am Parties may, for so long as the Mid-Am Parties own an
interest in the Partnership and in the Mid-Am Parties' sole
discretion, cause additional audits to be so conducted in any
given calendar year at its own expense; and further provided,
however, that any such accounting firm performing such audit
shall not provide to the Mid-Am Parties, and the Mid-Am
Parties shall not seek, any Competitively Sensitive
Information with respect to the business and operations of the
Partnership or the industry in which the Partnership operates
that is discovered or otherwise derived in the course of
conducting the audit of the financial accounts and records of
the Partnership.
ARTICLE XI
ARBITRATION
The Partners agree to submit all controversies, claims and matters of
difference to arbitration in Dallas, Texas according to the rules and practices
of the American Arbitration Association from time to time in force. This
submission and agreement to arbitrate shall be specifically enforceable.
Arbitration may proceed in the absence of one party if notice of the proceeding
has been given to such party. The parties agree to abide by all awards
rendered in such proceedings. Such awards
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shall be final and binding on all parties to the extent and in the manner
provided by the state rules of civil procedure. All awards may be filed with
the clerk of one or more courts, state or federal, having jurisdiction over the
party against whom such award is rendered or such party's property, as a basis
of judgment and of the issuance of execution for its collection. No party
shall be considered in default hereunder during the pendency of arbitration
proceedings relating to such default.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Counterparts. This Agreement may be executed by the
Partners in various counterparts, all of which shall constitute but one and the
same agreement among the Partners, and shall be binding upon the respective
Partners.
Section 12.2 Further Assurances. The Partners will execute,
acknowledge, and deliver such further instruments and do such further acts and
things as may be required to carry out the intent and purpose of this
Agreement.
Section 12.3 Captions. Captions contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit, extend,
or describe the scope of intent of this Agreement or of any of its provisions.
Section 12.4 Binding Effect. Except to the extent required under
the DRULPA and except for fees, rights to reimbursement and indemnity, and
other compensation, none of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditor, as such, of the Partnership. The
provisions of this Agreement shall be binding upon and shall inure to the
benefit of the successors and permitted assigns, if any, of the respective
Partners, except as otherwise provided in this Agreement, except the Provisions
Requiring Prior Notice to Amend shall not apply to any successor or permitted
assigns of the Mid-Am Parties so long as the successor or permitted assignee
is not a Mid-Am Party or an affiliate of a Mid-Am Party.
Section 12.5 Severability. If one or more of the provisions of
this Agreement or any application of any such provision shall be invalid,
illegal, or unenforceable in any respect, the validity, legality, and
enforceability of any other provisions contained in this Agreement, and any
other application of any such provision having any such invalid, illegal, or
unenforceable application, shall not in any way be affected or impaired because
of such invalidity, illegality, or unenforceability, and such other provisions
shall be interpreted as being consistent with each other and with the omission
of such invalid, illegal, or unenforceable provision or application to the
extent possible.
Section 12.6 Integration. This Agreement constitutes the entire
agreement among the parties pertaining to the subject matter of this Agreement
and supersedes all prior and
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contemporaneous agreements and understandings of the parties in connection with
this Agreement. No prior, contemporaneous, or future covenant, representation
or condition not expressed in this Agreement or in an amendment to this
Agreement in accordance with Section 12.9 shall affect or be effective to
interpret, change or restrict the express provisions of this Agreement.
Section 12.7 Notices. Except as otherwise specifically provided
in this Agreement, all notices or communications required or permitted
hereunder shall be in writing and shall be deemed to be delivered when (1)
hand- delivered, (2) when deposited in the United States mail, postage prepaid,
registered or certified U.S. mail, return receipt requested, or with a
reputable overnight delivery service, and addressed, in each such case, to the
address set forth in this Agreement for such Partner or Partnership or the
addresses as changed pursuant to the requirements of this Section, or (3) if
telexed or telecopied, to the telex or telecopier number given to the General
Partner by written notice by such Partner or Partnership or to such other
number as such Partner or Partnership may have subsequently provided in writing
pursuant to this Section.
Section 12.8 References. All references in this Agreement to any
numbered Articles or Sections are, unless otherwise indicated, references to
the Articles or Sections, as the case may be, of this Agreement which are so
numbered, as such may be amended. All references to numbered Exhibits are
references to the Exhibits so numbered which are appended to this Agreement, as
such Exhibits may be amended from time to time. Such references to Exhibits
are to be construed as incorporating by reference the contents of each Exhibit
to which such reference is made, as though such contents were set out in full
at the place in this Agreement where such reference is made.
Section 12.9 Amendments.
(a) Subject to Section 9.2, this Agreement may be amended only
with the unanimous written consent of the Common Partners.
(b) The Provisions Requiring Prior Notice to Amend shall not be
modified without 60 days prior written notice to the DOJ,
unless the DOJ shall consent to a shorter period. The
Provisions Requiring Prior Notice to Amend shall terminate if
the Mid-Am Parties shall cease to have any financial interest
in the General Partner or the Partnership.
Section 12.10 Execution of Agreement Constitutes Consent. By
executing this Agreement, Mid-Am consents to the transfer of the Partnership
Interests previously owned by Xxxxx to Xxxxxxxx and waives any rights it may
have under Article VIII to purchase such interest. Mid-Am also consents to the
amendment and restatement of the designation with respect to the Original
Series A Preferred Interests contained in the Exhibit 2 to this Agreement.
Each of Xxxxxxxx and Mid-Am agree that Mid-Am Capital shall be admitted as an
additional Partner, and Mid-Am, as the holder of the Series A Preferred
Interests, consents to the issuance of the Series B, C, D and E Preferred
Interests described in this Agreement.
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Section 12.11 Joinder of Xxxxx for Limited Purposes. Subject to
the rights granted to Xxxxx pursuant to Sections 5.2, 5.6 and 5.7 of this
Agreement, Xxxxx joins in the execution of this Agreement for the limited
purpose of acknowledging that, as of the effective time of the Ownership
Change, Xxxxx not longer has a Partnership Interest in the Partnership.
Section 12.12 Sequence of Events. The Partnership and the Partners
intend that the Partnership Transactions shall occur on or after the Effective
Time of this Agreement in the following order and at the following times:
(a) This Agreement shall become effective, including the amendment
and restatement of the Original Series A Preferred Interests
designation and the designation of the new Series B, C, D, and
E Preferred Interests, at the Effective Time;
(b) The Special Distributions described in Section 5.6 shall be
made to Xxxxxxxx, Xxxxx and Mid-Am at any time after the
Effective Time but before the Ownership Change;
(c) The Ownership Change shall occur at any time after the Special
Distributions are made but before the Meadow Gold Dairies
Contribution is made;
(d) Xxxxxxxx and Mid-Am shall contribute certain Series E
Preferred Interests in exchange for Common Limited Partner
Interests as set forth in Section 2.2(e) at any time after the
Ownership Change shall have occurred, but before the Meadow
Gold Dairies Contribution is made;
(e) Mid-Am shall make the Meadow Gold Dairies Contribution in
exchange for the issuance of the Series B Preferred Interests
at any time after the recontribution of the Common Limited
Partner Interests as set forth in 12.12 (d) above; and
(f) Mid-Am Capital shall contribute $45 million in exchange for
the Series C Preferred Interests and the Series D Preferred
Interests at any time after the Ownership Change.
ARTICLE XIII
DEFINED TERMS
Section 13.1 General Definitions. Capitalized terms that are used
in this Agreement and are defined in the Appendix shall have the meanings set
forth for such terms in the Appendix. Terms that are defined in Section 13.2
shall have the meanings set forth in such terms in Section 13.2. The following
terms, when used in this Agreement, have the following meanings, unless
otherwise expressly indicated:
"Additional Preferred Limited Partner Interest" means the interests in
the Partnership described in Section 2.4(g) hereto.
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"Affiliate" means any Person directly or indirectly controlling,
controlled by, or under common control with the Person in question; if
the Person in question is a corporation, any executive officer or
director of the Person in question or of any corporation directly or
indirectly controlling the Person in question. As used in this
definition of "Affiliate, " 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 the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this Second Amended and Restated Agreement of
Limited Partnership of the Partnership, with the Appendix and Exhibits
which are appended to and referred to in this Agreement, as such
Agreement, Appendix and Exhibits may be amended at any time and from
time to time.
"Amended and Restated Agreement" means the Amended and Restated
Agreement of Limited Partnership of the Partnership dated January 1,
1997, as amended.
"Amendment" means the First Amendment dated February 7, 1997 to the
Amended and Restated Agreement of Limited Partnership of the
Partnership dated January 1, 1997, as amended.
"Assumed Indebtedness" shall have the meaning set forth in Section
2.5.
"Barbe's" means Barbe's Dairy, Inc.
"Barbe's Contribution" shall have the meaning set forth in the
Recitals.
"Board of Representatives" means the Board of Representatives created
pursuant to the terms of the Limited Liability Company Agreement.
"Calculation Date" shall have the meaning set forth in Section
8.11(c).
"Call Closing Date" shall have the meaning set forth in Section
8.12(c).
"Call Notice" shall have the meaning set forth in Section 8.12(a).
"Call Notice Upon Death or Disability" shall have the meaning set
forth in Section 8.12(b).
"Call Option" shall have the meaning set forth in Section 8.12(a).
"Call Option Upon Death or Disability" shall have the meaning set
forth in Section 8.12(b).
"Call Price" shall have the meaning set forth in Section 8.12(d).
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"Capital Account" shall have the meaning set forth in Section A.3 of
the Appendix hereto.
"Capital Contribution" means, for each Partner, the sum of (a) such
Partner's Initial Capital Contribution, plus (b) such Partner's
Contribution to Capital, plus (c) such Partner's Preferred Limited
Partner Contributions, plus (d) such Partner's Additional Preferred
Limited Partner Contributions. "Initial Capital Contribution" and
"Contribution to Capital" means, for each Partner, the sum of cash and
the fair market value of property contributed by a Partner pursuant to
this Agreement, the Amended and Restated Agreement, the Original
Limited Partnership Agreement or any other agreement to obtain the
interest of such Partner in the Partnership. "Preferred Limited
Partner Contributions" means, for each Partner, the sum of cash and
the fair market value of property (as determined by agreement of the
Partners as of the date of contribution), if any, that is contributed
(or under Sections 5.6 or 5.7 is deemed to be contributed) to the
Partnership by such Partner for a Preferred Limited Partner Interest
pursuant to Section 2.4 hereof, and, when used with reference to a
particular series of Preferred Limited Partner Interest, means a
Preferred Limited Partner Contribution for such series, pursuant to
this Agreement, the Amended and Restated Agreement, the Original
Limited Partnership Agreement or any other agreement to obtain the
interest of such Partner in the Partnership. For example, "Series B
Preferred Limited Partner Contribution" means a Preferred Limited
Partner Contribution made to the Partnership for a Series B Preferred
Limited Partner Interest. The stated amount of Preferred Limited
Partner Interests issued in payment of Preferred Return shall not
constitute a Capital Contribution.
"Code" means the United States Internal Revenue Code of 1986, as
amended (or any successor thereto).
"Common Partner Interest" means the interest in the Partnership
defined in Sections 2.1 and 2.2 hereto.
"Common Partners" means the General Partner and all Common Limited
Partners.
"Common Limited Partners" means Xxxx Xxxxxxxx and Mid-America
Dairymen, Inc. individually, or collectively, as the context requires,
to the extent each owns a Common Partner Interest in the Partnership,
and any parties subsequently admitted to the Partnership as Common
Limited Partners pursuant to the provisions of this Agreement.
"Credit Agreement" shall have the meaning set forth in Section 7.3(d).
"Difcal" means Difcal Corporation.
"Disability" means the inability of Xxxxxxxx because of any physical
or emotional illness to perform his duties as the President and Chief
Executive Officer of the Partnership or the General Partner for more
than 30 hours per week.
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"DRULPA" means the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time.
"EBITDA" shall have the meaning set forth in Section 8.11(c).
"Eligible Partners" shall have the meaning set forth in Section
5.2(a)(i)(F).
"Effective Time" shall have the meaning set forth in the first
paragraph of this Agreement.
"Entity" means any business corporation, partnership, limited
liability company, unincorporated association, firm, organization,
sole proprietorship or any other business entity having one or more
leaders or managerial figures.
"Family Controlled Entity" has the meaning set forth in Section 7.3.
"Fiscal Year" has the meaning set forth in Section 10.1.
"Flow-Through Owner" shall have the meaning set forth in Section
5.2(a)(i)(F).
"Formula Put Price" shall have the meaning set forth in Section
8.11(c).
"General Partner" means SFG LLC, in its capacity as a general partner
of the Partnership.
"Income Taxes" shall have the meaning set forth in Section
5.2(a)(i)(F).
"Indemnified Parties" shall have the meaning set forth in Section
3.5(a).
"Lenders" shall have the meaning set forth in Section 7.3(d).
"Limited Liability Company Agreement" means the Second Amended and
Restated Limited Liability Company Agreement dated of even date
herewith of SFG LLC, as amended from time to time.
"Limited Partner" means any partner other than a General Partner, in
its capacity as a limited partner of the Partnership.
"Meadow Gold Dairies Contribution" shall have the meaning set forth in
the Recitals.
"Xxxxx" means Xxxxx X. Xxxxx.
"Mid-Am" means Mid-America Dairymen, Inc., a Kansas cooperative
association.
"Mid-Am Capital" means Mid-Am Capital, L.L.C.
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"Mid-Am Capital Contribution Agreement" shall have the meaning set
forth in Section 2.2(b).
"Mid-Am Contribution Agreement" shall have the meaning set forth in
Section 2.2(c).
"Net Operating Cash Flow" shall have the meaning set forth in Section
5.3.
"Offered Interest" shall have the meaning set forth in Section 8.2.
"Original Limited Partnership Agreement" means that certain Limited
Partnership Agreement of the Partnership dated December 20, 1994,
executed by SFG LLC and SFG, Inc.
"Original Partnership" means Southern Foods Group, L.P., a Delaware
limited partnership.
"Original Series A Preferred Interests" shall have the meaning set
forth in the Recitals.
"Ownership Change" shall have the meaning set forth in the Recitals.
"Partners" means the General Partner and the Limited Partners
individually or collectively, as the context requires.
"Partnership" means Southern Foods Group, L.P., a Delaware limited
partnership.
"Partnership Assets" means all assets and property of the Partnership
of any and every kind.
"Partnership Transactions" shall have the meaning set forth in the
Recitals.
"Partnership Interest" means the interest of a Partner in the
Partnership.
"Permitted Transfers" shall have the meaning set forth in Section 7.3.
"Person" shall have the meaning given to that term in the DRULPA.
"Preferred Return" means the return designated for each series of
Preferred Limited Partner Interests established pursuant to Section
2.4 of this Agreement.
"Preferred Limited Partner" means a Limited Partner to the extent that
such Partner holds a Preferred Limited Partner Interest.
"Preferred Limited Partner Interest" means the classes of Preferred
Partnership Interests defined pursuant to Section 2.4 hereto.
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"Xxx Xxxxxxx" shall have the meaning set forth in Section 8.11(b).
"Put Closing Date" shall have the meaning set forth in Section
8.11(b).
"Put Interest" shall have the meaning set forth in Section 8.11(a).
"Put Notice" shall have the meaning set forth in Section 8.11(a).
"Put Option" shall have the meaning set forth in Section 8.11(a).
"Put Price" shall have the meaning set forth in Section 8.11(c).
"Required Distribution Amount" shall have the meaning set forth in
Section 5.2(a)(i).
"Xxxxxxxx" means Xxxx Xxxxxxxx.
"Selling Partner" means a Partner who sells its interest in the
Partnership pursuant to the terms of Article VIII.
"Series A Preferred Interests" shall mean the series of Preferred
Interests designated in Section 2.4(a).
"Series B Preferred Interests" shall mean the series of Preferred
Interests designated in Section 2.4(b).
"Series C Preferred Interests" shall mean the series of Preferred
Interests designated in Section 2.4(c).
"Series D Preferred Interests" shall mean the series of Preferred
Interests designated in Section 2.4(d).
"Series E Preferred Interests" shall mean the series of Preferred
Interests designated in Section 2.4(e).
"SFG, Inc." means Southern Foods Group, Inc., a Delaware corporation.
"SFG LLC" means SFG Management Limited Liability Company, a Delaware
limited liability company.
"Special Distributions" shall have the meaning set forth in Section
5.6.
"Substituted Partner" means any transferee or assignee of a Partner's
Partnership Interest who is then admitted to the Partnership as a
Partner pursuant to Section 8.8.
- 44 -
50
"Successor in Interest" shall have the meaning set forth in Section
8.11(a).
"Terminating Capital Transaction" means a sale or other permanent
disposition (including casualty or condemnation) of all or
substantially all of the assets of the Partnership, or a dissolution
of the Partnership, or both.
"Third Party Offer" shall have the meaning set forth in Section 8.1.
"Third Party Offer Notice" shall have the meaning set forth in Section
8.1.
"Total Capital Contributions" means the total of the Capital
Contributions of all Partners.
"Total Taxable Income" shall have the meaning set forth in Section
5.2(a)(i).
"Undistributed Preferred Return" shall have the meaning set forth in
Section 5.2(a)(ii).
"Unreturned Preferred Limited Partner Balance" means the aggregate
amount of all Preferred Limited Partner Contributions by a Partner,
less distributions to such Partner with respect to such Preferred
Limited Partner Interests which are not distributions of Preferred
Return.
Section 13.2 Definitions for Provisions Requiring Prior Notice to
Amend. The following terms used in the Provisions Requiring Prior Notice to
Amend (as defined below) shall have the following meanings:
"Competitively Sensitive Information" means information that is not
Public and could be used by a competitor or supplier to make
production, pricing or marketing decisions, including but not limited
to information relating to costs, capacity, distribution, marketing,
supply, market territories, customer relationships, the terms of
dealing with any particular customer (including the identity of
individual customers and the quantity sold to any particular
customer), and current and future prices, including discounts,
slotting allowances, bids, or price lists. Information is
presumptively not "Competitively Sensitive" if the information is
aggregated on an entity-wide basis so long as the entity operates more
than three (3) dairy processing plants or if the information is based
on data that is more than six (6) months old. Information that would
not be considered "Competitively Sensitive" includes, but is not
limited to, aggregate entity-wide financial information (including
monthly profit and loss statements, balance sheets, and statements of
cash flow), aggregate customer information, and aggregate price
information (including information on price trends).
"DOJ" means the United States Department of Justice.
"Independent Decisionmaker" means an individual, not an officer,
director, employee, or agent of the Mid-Am Parties or the General
Partner, the Partnership or any Partner, and who
- 45 -
51
is otherwise independent from the Mid-Am Parties, experienced in
accounting and financial matters, that is designated by the Board of
Representatives of the General Partner to perform the assigned
functions set forth in the Provisions Requiring Prior Notice to Amend.
"Mid-Am Parties" shall mean Mid-America Dairymen, Inc., its members,
directors, officers, employees, subsidiaries, Affiliates (other than
the Partnership, the General Partner and Xxxxxxxx and any other Person
affiliated with Mid-Am only as a result of their relationship with the
Partnership, the General Partner or Xxxxxxxx) and successors, and, so
long as it is owned in whole or in part by Mid-American Dairymen,
Inc., Mid- Am Capital, L.L.C., its subsidiaries, directors, officers,
and/or employees; provided, however, that with respect to matters that
relate to actions by the Partners, such term shall mean only those
Mid-Am Parties that are Partners.
"Packaged Pasteurized Milk" means pasteurized milk in final package
form for beverage use as currently defined in 21 C.F.R. Section
131.110(a).
"Provisions Requiring Prior Notice to Amend" means the provisions of
Sections 6.1(b), 7.4(b), 10.8, 12.9(b) and 13.2.
"Public" information is information that has been quoted in a
publication other than one authored by the General Partner, if it has
been disclosed to the public (other than a customer or supplier of the
Partnership by the General Partner) prior to disclosure to the Mid-Am
Parties, or is disclosed to the public (other than a customer or
supplier of the Partnership by the General Partner) at the same time
it is disclosed to the Mid-Am Parties.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 46 -
52
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of this 3rd day of September, 1997, to be effective as of the Effective Time.
GENERAL PARTNER:
SFG MANAGEMENT LIMITED LIABILITY
COMPANY
By:/s/ XXXX XXXXXXXX
------------------------------
Its:
-------------------------
COMMON LIMITED PARTNERS:
By:/s/ XXXX XXXXXXXX
------------------------------
Xxxx Xxxxxxxx
MID-AMERICA DAIRYMEN, INC.
By: /s/ XXXXXX X. XXX
------------------------------
Its: Vice President
-------------------------
53
PREFERRED LIMITED PARTNERS:
MID-AMERICA DAIRYMEN, INC.
By: /s/ XXXXXX X. XXX
------------------------------
Its: Vice President
-------------------------
MID-AM CAPITAL, L.L.C
By: /s/ XXXXXX X. XXX
------------------------------
Its:
-------------------------
Joining for the limited purpose specified in
Section 12.11 of the Agreement
/s/ XXXXX X. XXXXX
------------------------------
XXXXX X. XXXXX
- 48 -
54
EXHIBIT 1
PARTNERS, COMMON PARTNER INTERESTS AND
PREFERRED LIMITED PARTNER INTERESTS
AS OF THE DATE OF THE SECOND AMENDED AND
RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
SOUTHERN FOODS GROUP, L.P.
Common
Partner
Name and Addresses of: Interests
----------------------- ---------
General Partner
---------------
SFG Management Limited Liability Company
0000 Xxxxx Xxxxxxx 0%
Xxxxxx, Xxxxx 00000
Common Limited Partners
-----------------------
Xxxx Xxxxxxxx
0000 Xxxxx Xxxxxxx 49.50%
Xxxxxx, Xxxxx 00000
Mid-America Dairymen, Inc.
0000 Xxxx Xxxxxxxx Xxxxxxxxxx 00.00%
Xxxxxxxxxxx, XX 00000
Stated Amount of
Preferred Limited
Preferred Limited Partners Partner Interests
-------------------------- -----------------
Mid-America Dairymen, Inc. Series A - $84,947,000(1)
0000 Xxxx Xxxxxxxx Expressway Series B - $90,000,000
Xxxxxxxxxxx, XX 00000 Series E - $ 1,800,000(2)
Mid-Am Capital, L.L.C. Series C - $15,000,000
0000 Xxxx Xxxxxxxx Expressway Series D - $30,000,000
Xxxxxxxxxxx, XX 00000
__________________________________
(1) Plus the amount of all Undistributed Preferred Returns
on such Preferred Limited Partner Interests as of June 30,
1997.
(2 ) Does not include the Series E Preferred Interests
distributed to Mid-Am and Xxxxxxxx and recontributed by them
to the Partnership pursuant to Section 2.2(e).
EXHIBIT 1 - Solo Page
55
EXHIBIT 2
AMENDED AND RESTATED DESIGNATION OF
SERIES A 10% PAYMENT-IN-KIND PREFERRED LIMITED PARTNER INTERESTS
This Exhibit 2 constitutes an amendment and a restatement of a
designation of a series of Preferred Interests pursuant to Section 2.4 of the
Second Amended and Restated Agreement of Limited Partnership (the "Agreement").
This designation amends and restates the designation established in Appendix A
to the Amended and Restated Agreement for the issuance of Series A Preferred
Capital Interests of the Partnership on the terms set forth below. The defined
terms used but not defined in this Exhibit 2 shall have the meaning ascribed
thereto in the Agreement.
1. Designation. Effective January 1, 1997, the Partnership
designates and authorizes the issuance of Series A 10% Payment-in-Kind
Preferred Limited Partner Interests ("Series A Preferred Interests") previously
entitled the "Series A Preferred Capital Interests". Series A Preferred
Interests may not be issued by the Partnership in excess of an original stated
amount of $84,947,000, plus the amount of all Undistributed Preferred Returns
as of June 30, 1997, except that an unlimited stated amount of Series A
Preferred Interests may be issued by the Partnership in payment of Preferred
Returns in accordance with Section 4.
2. Ranking. So long as Series A Preferred Interests are
outstanding the Partnership will not issue any securities or interests ranking,
as to participation in the profits or assets of the Partnership, senior to the
Series A Preferred Interests other than in accordance with the Agreement and
with the unanimous written consent of all holders of Series A Preferred
Interests. The issuance of securities or interests ranking senior to the
Series A Preferred Interests shall be deemed to adversely affect the rights of
the Series A Preferred Interests under the Agreement. The Series A Preferred
Interests shall rank pari passu with the Series B, C, D and E Preferred
Interests and any other series that ranks pari passu with the Series A
Preferred Interests; provided, however, the Preferred Return on the Series D
Preferred Interests may, under certain conditions, be paid in cash.
3. Allocation of Net Profits. The Series A Preferred Interests
shall be entitled to receive an allocation of Net Profits, for purposes of
Section A.4.1(b) of the Appendix, equal to a preferred return (the "Preferred
Return") on the Series A Preferred Interests in an amount equal to the lesser
of (i) Allocated Net Profits, as hereinafter defined, or (ii) ten percent (10%)
per annum determined on the basis of a year of 365 or 366 days, as the case may
be, for the actual number of days occurring in the period for which the
Preferred Return is being determined, of the average daily balance of the
Unreturned Preferred Limited Partner Balance outstanding, if any, from time to
time during the period to which the Preferred Return relates, commencing on the
date on which the Series A Preferred Limited Partner Contribution was made by
the contributing Preferred Limited Partner. The Preferred Return shall be
calculated for each six month period as of June 30 and December 31. The
Preferred Return shall be treated as a priority return to the holders of the
Series A Preferred Interests and shall not constitute a guaranteed payment
under Section 707(c) of the Code. "Allocated Net Profits" means Net Profits as
allocated under Section A.4.1(a)(i) of the Appendix to the Series A Preferred
Interests held by a Preferred Limited Partner.
EXHIBIT 2 - Page 1
56
4. Payment of Preferred Return. Except as provided in Sections 6
and 9, the Partnership shall not pay the Preferred Return on Series A Preferred
Interests in cash, but such Preferred Return shall be paid by the issuance of
additional Series A Preferred Interests in a stated amount equal to the
Preferred Return for the semi-annual period. Such Preferred Return shall be
paid each June 30 and December 31. The Series A Preferred Interests issued in
payment of the Preferred Return shall be entitled to receive a Preferred Return
from the date of their issuance. Solely for purposes of determining such
Preferred Return, the stated amount of any Series A Preferred Interests
previously issued in payment of Preferred Return shall be considered as a
Series A Preferred Limited Partner Contribution made at the time such Series A
Preferred Interests were issued in payment of Preferred Return.
5. Subordination. The Series A Preferred Interests shall be
subordinated in right of payment to all indebtedness of the Partnership.
6. Payment Only Upon Dissolution. Except for the Optional
Redemption provided for in Section 9, the Series A Preferred Interests,
together with all accrued but unissued Preferred Returns, are payable in cash
only upon dissolution of the Partnership.
7. Preference on Liquidation. Upon dissolution of the
Partnership, the Series A Preferred Interests shall have the priority
established in Section 6.2 of the Agreement and shall be pari passu with the
Series B, C, D and E Preferred Interests and any other series that ranks pari
passu with the Series A Preferred Interests.
8. Voting Rights. No holder of Series A Preferred Interests
shall have voting rights or any right to participate in the management of the
Partnership by reason of holding Series A Preferred Interests.
9. Optional Redemption. Subject to the terms and provisions of
any financing arrangements set forth in any agreement to which the Partnership
is a party, the Series A Preferred Interests are redeemable in cash, at the
option of the Partnership, in whole or in part from time to time, at the Call
Price (as defined below).
(a) Redemption Price. The redemption price for
the Series A Preferred Interests (the "Call Price") shall be
the stated amount of the Series A Preferred Interests plus all
accrued but unissued Preferred Returns.
(b) Redemption Procedure.
(i) Notice of any redemption pursuant to
this Section 9 (a "Call Notice") of Series A Preferred
Interests will be given by the Partnership by mail to each
record holder to be redeemed not fewer than 30 nor more than
60 days prior to the date fixed for redemption thereof. For
purposes of the calculation of the date of redemption and the
dates on which the Call Notice is given, a Call Notice shall
be deemed to be given on the day such notice is first mailed
by first-class mail, postage prepaid, to such holders of
Series A Preferred Interests. Each Call Notice shall be
EXHIBIT 2 - Page 2
57
addressed to such holders of Series A Preferred Interests at
the address of the holder appearing in the books and records
of the Partnership. No defect in the Call Notice or in the
mailing thereof or publication of its contents shall affect
the validity of the redemption proceedings.
(ii) In the event that fewer than all the
outstanding Series A Preferred Interests are to be redeemed,
the Series A Preferred Interests to be redeemed will be
selected at the Partnership's discretion.
(iii) If the Partnership gives a Call
Notice in respect of Series A Preferred Interests, then upon
the date fixed for redemption of the Series A Preferred
Interests, all rights of the holders of the Series A Preferred
Interests so called for redemption will cease, except the
right of the holders of such securities to receive the Call
Price. In the event that any date fixed for redemption of
Series A Preferred Interests is not a business day, then
payment of the Call Price payable on such date will be made on
the next succeeding day which is a business day (and without
any interest or other payment in respect of any such delay),
except that, if such business day falls in the next calendar
year, such payment will be made on the immediately preceding
business day.
10. Effective Date and Transition. The amendment and restatement
of the designation of the Original Series A Preferred Interests shall be
effective as of 3:00 p.m. on September 3, 1997 (the "Effective Time"). With
respect to any Undistributed Preferred Return due with respect to the Series A
Preferred Interests, on or before June 30, 1997, such Undistributed Preferred
Return shall be paid in accordance with the amended and restated terms set
forth herein, and with respect to any Preferred Return due with respect to the
Series A Preferred Interests on or after June 30, 1997, such Preferred Return
shall be calculated and paid in accordance with the amended and restated terms
set forth herein, in each case by issuing additional Series A Preferred
Interests in a stated amount equal to the amount of such Preferred Return not
previously paid in cash.
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EXHIBIT 2 - Page 3
58
EXHIBIT 3
DESIGNATION OF
SERIES B 10% PAYMENT-IN-KIND PREFERRED LIMITED PARTNER INTERESTS
This Exhibit 3 constitutes a designation in accordance with Section
2.4 of the Second Amended and Restated Agreement of Limited Partnership (the
"Agreement"). This designation authorizes the issuance of Series B 10%
Payment- in-Kind Preferred Limited Partner Interests of the Partnership under
the terms set forth below. The defined terms used but not defined in this
Exhibit 3 shall have the meaning ascribed thereto in the Agreement.
1. Designation. The Partnership hereby designates and authorizes
the issuance of Series B 10% Payment-In- Kind Preferred Limited Partner
Interests ("Series B Preferred Interests"). Series B Preferred Interests may
not be issued by the Partnership in excess of an original stated amount of
$90,000,000, except that an unlimited stated amount of Series B Preferred
Interests may be issued by the Partnership in payment of Preferred Returns in
accordance with Section 4.
2. Ranking. So long as Series B Preferred Interests are
outstanding the Partnership will not issue any securities or interests ranking,
as to participation in the profits or assets of the Partnership, senior to the
Series B Preferred Interests other than in accordance with the Agreement and
with the unanimous written consent of all holders of Series B Preferred
Interests. The issuance of securities or interests ranking senior to the
Series B Preferred Interests shall be deemed to adversely affect the rights of
the Series B Preferred Interests under the Agreement. The Series B Preferred
Interests shall rank pari passu with the Series A, C, D and E Preferred
Interests and any other series that ranks pari passu with the Series B
Preferred Interests; provided, however, the Preferred Return on the Series D
Preferred Interests may, under certain conditions, be paid in cash prior to
dissolution of the Partnership.
3. Allocation of Net Profits. The Series B Preferred Interests
shall be entitled to receive an allocation of Net Profits, for purposes of
Section A.4.1(b) of the Appendix, equal to a preferred return (the "Preferred
Return") on the Series B Preferred Interests in an amount equal to the lesser
of (i) Allocated Net Profits, as hereinafter defined, or (ii) ten percent (10%)
per annum determined on the basis of a year of 365 or 366 days, as the case may
be, for the actual number of days occurring in the period for which the
Preferred Return is being determined, of the average daily balance the
Unreturned Preferred Limited Partner Balance outstanding, if any, from time to
time during the period to which the Preferred Return relates, commencing on the
date on which the Series B Preferred Limited Partner Contribution is made by
the contributing Preferred Limited Partner. The Preferred Return shall be
calculated for each six month period as of June 30 and December 31. The
Preferred Return shall be treated as a priority return to the holders of the
Series B Preferred Interests and shall not constitute a guaranteed payment
under Section 707(c) of the Code. "Allocated Net Profits" means Net Profits as
allocated under Section A.4.1(a)(i) of the Appendix to the Series B Preferred
Interests held by a Preferred Limited Partner.
EXHIBIT 3 - Page 1
59
4. Payment of Preferred Return. Except as provided in Sections 6
and 9, the Partnership shall not pay the Preferred Return on Series B Preferred
Interests in cash, but such Preferred Return shall be paid in additional Series
B Preferred Interests in a stated amount equal to the Preferred Return for the
semi-annual period. Such Preferred Return shall be paid each June 30 and
December 31. The Series B Preferred Interests issued in payment of the
Preferred Return shall be entitled to receive a Preferred Return from the date
of their issuance. Solely for purposes of determining such Preferred Return,
the stated amount of any Series B Preferred Interests previously issued in
payment of Preferred Return shall be considered as a Series B Preferred Limited
Partner Contribution made at the time such Series B Preferred Interests were
issued in payment of Preferred Return.
5. Subordination. The Series B Preferred Interests shall be
subordinated in right of payment to all indebtedness of the Partnership.
6. Payment Only Upon Dissolution. Except for the Optional
Redemption provided for in Section 9, the Series B Preferred Interests,
together with all accrued but unissued Preferred Returns, are payable in cash
only upon dissolution of the Partnership.
7. Preference on Liquidation. Upon dissolution of the
Partnership, the Series B Preferred Interests shall have the priority
established in Section 6.2 of the Agreement and shall be pari passu with the
Series A, C, D and E Preferred Interests and any other series that ranks pari
passu with the Series B Preferred Interests.
8. Voting Rights. No holder of Series B Preferred Interests
shall have voting rights or any right to participate in the management of the
Partnership by reason of holding Series B Preferred Interests.
9. Optional Redemption. Subject to the terms and provisions of
any financing arrangements set forth in any agreement to which the Partnership
is a party, the Series B Preferred Interests are redeemable in cash, at the
option of the Partnership, in whole or in part from time to time, at the Call
Price (as defined below).
(a) Redemption Price. The redemption price for
the Series B Preferred Interests (the "Call Price") shall be
the stated amount of the Series B Preferred Interests plus all
accrued but unissued Preferred Returns.
(b) Redemption Procedure.
(i) Notice of any redemption pursuant to
this Section 9 (a "Call Notice") of Series B Preferred
Interests will be given by the Partnership by mail to each
record holder to be redeemed not fewer than 30 nor more than
60 days prior to the date fixed for redemption thereof. For
purposes of the calculation of the date of redemption and the
dates on which the Call Notice is given, a Call Notice shall
be deemed to be given on the day such notice is first mailed
by first-class mail, postage prepaid, to such holders of
Series B Preferred Interests. Each Call Notice shall be
EXHIBIT 3 - Page 2
60
addressed to such holders of Series B Preferred Interests at
the address of the holder appearing in the books and records
of the Partnership. No defect in the Call Notice or in the
mailing thereof or publication of its contents shall affect
the validity of the redemption proceedings.
(ii) In the event that fewer than all the
outstanding Series B Preferred Interests are to be redeemed,
the Series B Preferred Interests to be redeemed will be
selected at the Partnership's discretion.
(iii) If the Partnership gives a Call
Notice in respect of Series B Preferred Interests, then upon
the date fixed for redemption of the Series B Preferred
Interests, all rights of the holders of the Series B Preferred
Interests so called for redemption will cease, except the
right of the holders of such securities to receive the Call
Price. In the event that any date fixed for redemption of
Series B Preferred Interests is not a business day, then
payment of the Call Price payable on such date will be made on
the next succeeding day which is a business day (and without
any interest or other payment in respect of any such delay),
except that, if such business day falls in the next calendar
year, such payment will be made on the immediately preceding
business day.
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EXHIBIT 3 - Page 3
61
EXHIBIT 4
DESIGNATION OF
SERIES C 10% PAYMENT-IN-KIND PREFERRED LIMITED PARTNER INTERESTS
This Exhibit 4 constitutes a designation in accordance with Section
2.4 of the Second Amended and Restated Agreement of Limited Partnership (the
"Agreement"). This designation authorizes the issuance of Series C 10%
Preferred Limited Partner Interests of the Partnership under the terms set
forth below. The defined terms used but not defined in this Exhibit 4 shall
have the meaning ascribed thereto in the Agreement.
1. Designation. The Partnership hereby designates and authorizes
the issuance of Series C 10% Payment-in- Kind Preferred Limited Partner
Interests ("Series C Preferred Interests"). Series C Preferred Interests may
not be issued by the Partnership in excess of an original stated amount of
$15,000,000 except that an unlimited stated amount of Series C Preferred
Interests may be issued by the Partnership in payment of Preferred Returns in
accordance with Section 4.
2. Ranking. So long as Series C Preferred Interests are
outstanding the Partnership will not issue any securities or interests ranking,
as to participation in the profits or assets of the Partnership, senior to the
Series C Preferred Interests other than in accordance with the Agreement and
with the unanimous written consent of all holders of Series C Preferred
Interests. The issuance of securities or interests ranking senior to the
Series C Preferred Interests shall be deemed to adversely affect the rights of
the Series C Preferred Interests under the Agreement. The Series C shall rank
pari passu with all Series A, B, D and E Preferred Interests and any other
series that ranks pari passu with the Series C Preferred Interests; provided,
however, the Preferred Return on the Series D Preferred Interests may, under
certain conditions, be paid in cash prior to dissolution of the Partnership.
3. Allocation of Net Profits. The Series C Preferred Interests
shall be entitled to receive an allocation of Net Profits, for purposes of
Section A.4.1(b) of the Appendix, equal to a preferred return (the "Preferred
Return") on the Series C Preferred Interests in an amount equal to the lesser
of (i) Allocated Net Profits, as hereinafter defined, or (ii) ten percent (10%)
per annum determined on the basis of a year of 365 or 366 days, as the case may
be, for the actual number of days occurring in the period for which the
Preferred Return is being determined, of the average daily balance of the
Unreturned Preferred Limited Partner Balance outstanding, if any, from time to
time during the period to which the Preferred Return relates, commencing on the
date on which the Series C Preferred Limited Partner Contribution is made by
the contributing Preferred Limited Partner. The Preferred Return shall be
calculated for each six month period as of June 30 and December 31. The
Preferred Return shall be treated as a priority return to the holders of Series
C Preferred Interests and shall not constitute a guaranteed payment under
Section 707(c) of the Code. "Allocated Net Profits" means Net Profits as
allocated under Section A.4.1(a)(i) of the Appendix to the Series C Preferred
Interests held by a Preferred Limited Partner.
EXHIBIT 4 - Page 1
62
4. Payment of Preferred Return. Except as provided in Sections 6
and 9, the Partnership shall not pay the Preferred Return on Series C Preferred
Interests in cash, but such Preferred Return shall be paid in additional Series
C Preferred Interests in a stated amount equal to the Preferred Return for the
semi-annual period. Such Preferred Return shall be paid each June 30 and
December 31. The Series C Preferred Interests issued in payment of the
Preferred Return shall be entitled to receive a Preferred Return from the date
of their issuance. Solely for purposes of determining such Preferred Return,
the stated amount of any Series C Preferred Interests previously issued in
payment of Preferred Return shall be considered as a Series C Preferred Limited
Partner Contribution made at the time such Series C Preferred Interests were
issued in payment of Preferred Return.
5. Subordination. The Series C Preferred Interests shall be
subordinated in right of payment to all indebtedness of the Partnership.
6. Payment Only Upon Dissolution. Except for the Optional
Redemption provided for in Section 9, the Series C Preferred Interests,
together with all accrued but unissued Preferred Returns, are payable in cash
only upon dissolution of the Partnership.
7. Preference on Liquidation. Upon dissolution of the
Partnership, the Series C Preferred Interests shall have the priority
established in Section 6.2 of the Agreement and shall be pari passu with the
Series A, B, D and E Preferred Interests and any other series that ranks pari
passu with the Series C Preferred Interests.
8. Voting Rights. No holder of Series C Preferred Interests
shall have voting rights or any right to participate in the management of the
Partnership by reason of holding Series C Preferred Interests.
9. Optional Redemption. Subject to the terms and provisions of
any financing arrangements set forth in any agreement to which the Partnership
is a party, the Series C Preferred Interests are redeemable in cash, at the
option of the Partnership, in whole or in part from time to time, at the Call
Price (as defined below).
(a) Redemption Price. The redemption price for
the Series C Preferred Interests (the "Call Price") shall be
the stated amount of the Series C Preferred Interests plus all
accrued but unissued Preferred Returns.
(b) Redemption Procedure.
(i) Notice of any redemption pursuant to
this Section 9 (a "Call Notice") of Series C Preferred
Interests will be given by the Partnership by mail to each
record holder to be redeemed not fewer than 30 nor more than
60 days prior to the date fixed for redemption thereof. For
purposes of the calculation of the date of redemption and the
dates on which the Call Notice is given, a Call Notice shall
be deemed to be given on the day such notice is first mailed
by first-class mail, postage prepaid, to such holders of
Series C Preferred Interests. Each Call Notice shall be
EXHIBIT 4 - Page 2
63
addressed to such holders of Series C Preferred Interests at
the address of the holder appearing in the books and records
of the Partnership. No defect in the Call Notice or in the
mailing thereof or publication of its contents shall affect
the validity of the redemption proceedings.
(ii) In the event that fewer than all the
outstanding Series C Preferred Interests are to be redeemed,
the Series C Preferred Interests to be redeemed will be
selected at the Partnership's discretion.
(iii) If the Partnership gives a Call
Notice in respect of Series C Preferred Interests, then upon
the date fixed for redemption of the Series C Preferred
Interests, all rights of the holders of the Series C Preferred
Interests so called for redemption will cease, except the
right of the holders of such securities to receive the Call
Price. In the event that any date fixed for redemption of
Series C Preferred Interests is not a business day, then
payment of the Call Price payable on such date will be made on
the next succeeding day which is a business day (and without
any interest or other payment in respect of any such delay),
except that, if such business day falls in the next calendar
year, such payment will be made on the immediately preceding
business day.
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EXHIBIT 4 - Page 3
64
EXHIBIT 5
DESIGNATION OF SERIES D 9 1/2% PREFERRED LIMITED PARTNER INTERESTS
This Exhibit 5 constitutes a designation in accordance with Section
2.4 of the Second Amended and Restated Agreement of Limited Partnership (the
"Agreement"). This designation authorizes the issuance of Series D 9 1/2%
Preferred Limited Partner Interests of the Partnership under the terms set
forth below. The defined terms used but not defined in this Exhibit 5 shall
have the meaning ascribed thereto in the Agreement.
1. Designation. The Partnership hereby designates and authorizes
the issuance of Series D 9 1/2% Preferred Limited Partner Interests ("Series D
Preferred Interests"). Series D Preferred Interests may not be issued by the
Partnership in excess of an original stated amount of $30,000,000 except that
an unlimited stated amount of Series D Preferred Interests may be issued by the
Partnership in payment of Preferred Returns in accordance with Section 4.
2. Ranking. So long as Series D Preferred Interests are
outstanding the Partnership will not issue any securities or interests ranking,
as to participation in the profits or assets of the Partnership, senior to the
Series D Preferred Interests other than in accordance with the Agreement and
with the unanimous written consent of all holders of Series D Preferred
Interests. The issuance of securities or interests ranking senior to the
Series D Preferred Interests shall be deemed to adversely affect the rights of
the Series D Preferred Interests under the Agreement. The Series D Preferred
Interests shall rank pari passu with the Series A, B, C and E Preferred
Interests and any other series that ranks pari passu with the Series D
Preferred Interests.
3. Allocation of Net Profits. The Series D Preferred Interests
shall be entitled to receive an allocation of Net Profits, for purposes of
Section A.4.1(b) of the Appendix, equal to a preferred return (the "Preferred
Return") on the Series D Preferred Interests in an amount equal to the lesser
of (i) Allocated Net Profits, as hereinafter defined, or (ii) nine and one-half
percent (9 1/2%) per annum determined on the basis of a year of 365 or 366
days, as the case may be, for the actual number of days occurring in the period
for which the Preferred Return is being determined, of the average daily
balance of Unreturned Preferred Limited Partner Balance outstanding, if any,
from time to time during the period to which the Preferred Return relates
commencing on the date on which the Series D Preferred Limited Partner
Contribution is made by the contributing Preferred Limited Partner. The
Preferred Return shall be calculated for each six month period as of June 30
and December 31. The Preferred Return shall be treated as a priority return to
the holders of Series D Preferred Interests and shall not constitute a
guaranteed payment under Section 707(c) of the Code. "Allocated Net Profits"
means Net Profits as allocated under Section A.4.1(a)(i) of the Appendix to the
Series D Preferred Interests held by a Preferred Limited Partner.
4. Payment of Preferred Return. The Preferred Return for the
Series D Preferred Interests shall be paid in cash on each June 30 and December
31, unless, at the time of such distribution, cash distributions are not
permitted pursuant to the terms of any agreement to which the Partnership is a
party. If payment of the Preferred Return in cash is so prohibited, the
Partnership
EXHIBIT 5 - Page 1
65
shall pay the Preferred Return in additional Series D Preferred Interests in a
stated amount equal to the accrued but unpaid Preferred Return for the
semi-annual payment. The Series D Preferred Interests issued in payment of the
Preferred Return shall be entitled to receive a Preferred Return from the date
of their issuance. Solely for purposes of determining such Preferred Return,
the stated amount of any Series D Preferred Interests previously issued in
payment of Preferred Return shall be considered as a Series D Preferred Limited
Partner Contribution made at the time such Series D Preferred Interests were
issued in payment of Preferred Return.
5. Subordination. The Series D Preferred Interests shall be
subordinated in right of payment to all indebtedness of the Partnership.
6. Payment Only Upon Dissolution. Except as provided in Sections
4 and 9, the Series D Preferred Interests, together with all Preferred Returns
not previously paid in cash or Series D Preferred Interests, are payable in
cash only upon dissolution of the Partnership.
7. Preference on Liquidation. Upon dissolution of the
Partnership, the Series D Preferred Interests shall have the priority
established in Section 6.2 of the Agreement and shall be pari passu with the
Series A, B, C and E Preferred Interests and any other series that ranks pari
passu with the Series D Preferred Interests.
8. Voting Rights. No holder of Series D Preferred Interests
shall have voting rights or any right to participate in the management of the
Company by reason of holding Series D Preferred Interests.
9. Optional Redemption. Subject to the terms and provisions of
any financing arrangements set forth in any agreement to which the Partnership
is a party, the Series D Preferred Interests are redeemable in cash, at the
option of the Partnership, in whole or in part from time to time, at the Call
Price (as defined below).
(a) Redemption Price. The redemption price for
the Series D Preferred Interests (the "Call Price") shall be
the stated amount of the Series D Preferred Interests plus
accrued and unpaid or unissued Preferred Returns.
(b) Redemption Procedure.
(i) Notice of any redemption pursuant to
this Section 9 (a "Call Notice") of Series D Preferred
Interests will be given by the Partnership by mail to each
record holder to be redeemed not fewer than 30 nor more than
60 days prior to the date fixed for redemption thereof. For
purposes of the calculation of the date of redemption and the
dates on which the Call Notice is given, a Call Notice shall
be deemed to be given on the day such notice is first mailed
by first-class mail, postage prepaid, to such holders of
Series D Preferred Interests. Each Call Notice shall be
addressed to such holders of Series D Preferred Interests at
the address of the holder appearing in the books and records
of the Partnership. No defect in the Call Notice
EXHIBIT 5 - Page 2
66
or in the mailing thereof or publication of its contents shall
affect the validity of the redemption proceedings.
(ii) In the event that fewer than all the
outstanding Series D Preferred Interests are to be redeemed,
the Series D Preferred Interests to be redeemed will be
selected at the Partnership's discretion.
(iii) If the Partnership gives a Call
Notice in respect of Series D Preferred Interests, then upon
the date fixed for redemption of the Series D Preferred
Interests, all rights of the holders of the Series D Preferred
Interests so called for redemption will cease, except the
right of the holders of such securities to receive the Call
Price. In the event that any date fixed for redemption of
Series D Preferred Interests is not a business day, then
payment of the Call Price payable on such date will be made on
the next succeeding day which is a business day (and without
any interest or other payment in respect of any such delay),
except that, if such business day falls in the next calendar
year, such payment will be made on the immediately preceding
business day.
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EXHIBIT 5 - Page 3
67
EXHIBIT 6
DESIGNATION OF
SERIES E 10% PAYMENT-IN-KIND PREFERRED LIMITED PARTNER INTERESTS
This Exhibit 6 constitutes a designation in accordance with Section
2.4 of the Second Amended and Restated Agreement of Limited Partnership (the
"Agreement"). This designation authorizes the issuance of Series E 10%
Payment- in-Kind Preferred Limited Partner Interests of the Partnership under
the terms set forth below. The defined terms used but not defined in this
Exhibit 6 shall have the meaning ascribed thereto in the Agreement.
1. Designation. The Partnership hereby designates and authorizes
the issuance of an unlimited amount of Series E 10% Payment-in-Kind Preferred
Limited Partner Interests ("Series E Preferred Interests").
2. Ranking. So long as Series E Preferred Interests are
outstanding the Partnership will not issue any securities or interests ranking,
as to participation in the profits or assets of the Partnership, senior to the
Series E Preferred Interests other than in accordance with the Agreement and
with the unanimous written consent of all holders of Series E Preferred
Interests. The issuance of securities or interests ranking senior to the
Series E Preferred Interests shall be deemed to adversely affect the rights of
the Series E Preferred Interests under the Agreement. The Series E Preferred
Interests shall rank pari passu with the Series A, B, C, and D Preferred
Interests and with any other series that ranks pari passu with the Series E
Preferred Interests; provided, however, the Preferred Return on the Series D
Preferred Interests may, under certain conditions, be paid in cash prior to
dissolution of the Partnership.
3. Allocation of Net Profits. The Series E Preferred Interests
shall be entitled to receive an allocation of Net Profits, for purposes of
Section A.4.1(b) of the Appendix, equal to a preferred return (the "Preferred
Return") on the Series E Preferred Interests in an amount equal to the lesser
of (i) Allocated Net Profits, as hereinafter defined, or (ii) ten percent (10%)
per annum determined on the basis of a year of 365 or 366 days, as the case may
be, for the actual number of days occurring in the period for which the
Preferred Return is being determined, of the average daily balance of the
Unreturned Preferred Limited Partner Balance outstanding, if any, from time to
time during the period to which the Preferred Return relates for the portion of
the calendar year for which such calculation is being made), commencing on the
date such interests are issued by the Partnership or the date on which any
Series E Preferred Limited Partner Contribution is made by the contributing
Preferred Limited Partner. The Preferred Return shall be calculated for each
six month period as of June 30 and December 31. The Preferred Return shall be
treated as a priority return to the holders of Series E Preferred Interests and
shall not constitute a guaranteed payment under Section 707(c) of the Code.
"Allocated Net Profits" means Net Profits as allocated under Section
A.4.1(a)(i) of the Appendix to the Series E Preferred Interests held by a
Preferred Limited Partner.
4. Payment of Preferred Return. Except as provided in Sections 6
and 9, the Partnership shall not pay the Preferred Return on Series E Preferred
Interests in cash, but such Preferred Return
EXHIBIT 6 - Page 1
68
shall be paid in additional Series E Preferred Interests in a stated amount
equal to the Preferred Return for the semi- annual period. Such Preferred
Return shall be paid each June 30 and December 31. The Series E Preferred
Interests issued in payment of the Preferred Return shall be entitled to
receive a Preferred Return from the date of their issuance. Solely for
purposes of determining such Preferred Return, the stated amount of any Series
E Preferred Interests previously issued in payment of Preferred Return shall be
considered as a Series E Preferred Limited Partner Contribution made at the
time such Series E Preferred Interests were issued in payment of Preferred
Return.
5. Subordination. The Series E Preferred Interests shall be
subordinated in right of payment to all indebtedness of the Partnership.
6. Payment Only Upon Dissolution. Except for the Optional
Redemption provided for in Section 9, the Series E Preferred Interests,
together with all accrued but unissued Preferred Returns, are payable in cash
only upon dissolution of the Partnership.
7. Preference on Liquidation. Upon dissolution of the
Partnership, the Series E Preferred Interests shall have the priority
established in Section 6.2 of the Agreement and shall be pari passu with the
Series A, B, C and D Preferred Interests and any other series that ranks pari
passu with the Series E Preferred Interests.
8. Voting Rights. No holder of Series E Preferred Interests
shall have voting rights or any right to participate in the management of the
Partnership by reason of holding Series E Preferred Interests.
9. Optional Redemption. Subject to the terms and provisions of
any financing arrangements set forth in any agreement to which the Partnership
is a party, the Series E Preferred Interests are redeemable in cash, at the
option of the Partnership, in whole or in part from time to time, at the Call
Price (as defined below).
(a) Redemption Price. The redemption price for
the Series E Preferred Interests (the "Call Price") shall be
the stated amount of the Series E Preferred Interests plus
accrued but unissued Preferred Returns.
(b) Redemption Procedure.
(i) Notice of any redemption pursuant to
this Section 9 (a "Call Notice") of Series E Preferred
Interests will be given by the Partnership by mail to each
record holder to be redeemed not fewer than 30 nor more than
60 days prior to the date fixed for redemption thereof. For
purposes of the calculation of the date of redemption and the
dates on which the Call Notice is given, a Call Notice shall
be deemed to be given on the day such notice is first mailed
by first-class mail, postage prepaid, to such holders of
Series E Preferred Interests. Each Call Notice shall be
addressed to such holders of Series E Preferred Interests at
the address of the holder appearing in the books and records
of the Partnership. No defect in the Call Notice
EXHIBIT 6 - Page 2
69
or in the mailing thereof or publication of its contents shall
affect the validity of the redemption proceedings.
(ii) In the event that fewer than all the
outstanding Series E Preferred Interests are to be redeemed,
the Series E Preferred Interests to be redeemed will be
selected at the Partnership's discretion.
(iii) If the Partnership gives a Call
Notice in respect of Series E Preferred Interests, then upon
the date fixed for redemption of the Series E Preferred
Interests, all rights of the holders of the Series E Preferred
Interests so called for redemption will cease, except the
right of the holders of such securities to receive the Call
Price. In the event that any date fixed for redemption of
Series E Preferred Interests is not a business day, then
payment of the Call Price payable on such date will be made on
the next succeeding day which is a business day (and without
any interest or other payment in respect of any such delay),
except that, if such business day falls in the next calendar
year, such payment will be made on the immediately preceding
business day.
10. Additional Issuance of Series E Preferred Interests
Authorized. The Partnership shall be authorized to issue additional Series E
Preferred Interests under the circumstances specified in Sections 5.6 and 5.7
of the Agreement. The Partnership shall also issue additional Series E
Preferred Interests to Mid-Am if it shall pay to Xxxxxx any additional amounts
relating to employee benefit plans in connection with the transactions
contemplated by that certain Stock Purchase and Merger Agreement among Mid-Am,
Xxxxxx, Inc., BDH Two, Inc. and Xxxxxx/Meadow Gold Dairies Holdings, Inc.,
dated May 22, 1997. In that event, additional Series E Preferred Interests in
a stated amount of the amount paid to Xxxxxx shall be issued to Mid-Am as of
the date of the payment to Xxxxxx.
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EXHIBIT 6 - Page 3
70
APPENDIX
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
SOUTHERN FOODS GROUP, L.P.
DATED AS OF SEPTEMBER 3, 1997
A.1 Introduction.
This Appendix sets forth principles under which items of income, gain,
loss, deduction and credit shall be allocated among the Partners. This
Appendix also provides for the determination and maintenance of Capital
Accounts, generally in accordance with Treasury Regulations promulgated under
Section 704(b) of the Code, for purposes of determining such allocations.
A.2 Definitions.
For purposes of this Appendix, the following terms have the meanings
set forth below. If a capitalized term is used herein but not defined in this
Section A.2, it shall have the meaning ascribed thereto in the Agreement,
unless the context otherwise indicates.
"Adjusted Capital Account Balance" means, with respect to any Partner,
the balance, if any, in such Partner's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts which such
Partner is obligated to restore pursuant to any provision of the
Agreement (including this Appendix) or is deemed to be obligated to
restore pursuant to the penultimate sentences of Treasury Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in
Treasury Regulations 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).
The foregoing definition of Adjusted Capital Account Balance is intended to
comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
APPENDIX - Page 1
71
(i) Credit to such Capital Account any amounts
which such Partner is obligated to restore pursuant to any
provision of the Agreement (including this Appendix) or is
deemed to be obligated to restore pursuant to the penultimate
sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704- 2(i)(5); and
(ii) Debit to such Capital Account the items described in
Treasury Regulations 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).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Capital Account" shall have the meaning set forth in Section A.3
hereof. In the event a Partner shall have more than one kind of Partnership
Interest, the General Partner shall be empowered to establish such subdivisions
of such Partner's Capital Account as are appropriate to reflect such Partner's
various interests in the Partnership.
"Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
General Partner.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross fair
market value of such asset, as determined by the contributing Partner
and the General Partner, provided that the initial Gross Asset Values
of the assets contributed to the Partnership pursuant to Exhibit 1 of
the Agreement shall be as set forth in such Exhibit 1 or as otherwise
agreed in writing between the contributing Partner and the
Partnership, and provided further that, if the contributing Partner is
a General Partner, the determination of the fair market value of any
other contributed asset shall require the consent of a majority of the
Common Limited Partners;
(ii) The Gross Asset Values of all Partnership assets
shall be adjusted to equal their respective gross fair market values,
as determined by the General Partner, as of the following times: (a)
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; (b) the distribution by the Partnership to a Partner of
more than a de minimis amount of property as consideration for an
interest in the Partnership; and (c) the liquidation of the
Partnership
APPENDIX - Page 2
72
within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to
clauses (a) and (b) above shall be made only if the General Partner
reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Partners
in the Partnership;
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be adjusted to equal the gross fair
market value of such asset on the date of distribution as determined
by the distributee and the General Partner, provided that, if the
distributee is a General Partner, the determination of the fair market
value of the distributed asset shall require the consent of a majority
of the Common Limited Partners; and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Treasury
Regulations Section 1.704-1(b)(2)(v)(m), subparagraph (vi) of the A.2
definition of Net Profits and Net Loss and Section A.4.2(f) hereof;
provided, however, that Gross Asset Values shall not be adjusted
pursuant to this definition to the extent the General Partner
determines that an adjustment pursuant to subparagraph (ii) of this
definition is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to
this definition.
If the Gross Asset Value of an asset has been determined or adjusted pursuant
to subparagraphs (i), (ii) or (iv) of this definition, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing Net Profits and Net Loss.
"Net Profits" and "Net Loss" means, for each Fiscal Year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into account in computing
Net Profits or Net Loss shall be added to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(b), and not otherwise taken into account in
computing Net Profits or Net Loss, shall be subtracted from such
taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership
asset is adjusted pursuant to subparagraphs (ii) or (iii) of the
Section A.2 definition of Gross Asset Value, the amount of such
adjustment shall be taken into account as gain or loss from
disposition of the asset for purposes of computing Net Profits and Net
Loss;
APPENDIX - Page 3
73
(iv) Gain or loss resulting from any disposition of
Partnership property with respect to which gain or loss is recognized
for federal income tax purposes shall be computed by reference to the
Gross Asset Value of the property disposed of (unreduced by any
liabilities attributable thereto), notwithstanding that the adjusted
tax basis of such property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization and other
cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for
such Fiscal Year or other period, computed in accordance with the
Section A.2 definition of Depreciation;
(vi) To the extent an adjustment to the adjusted tax basis
of any Partnership asset pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Treasury Regulations Section
1.704- 1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in
liquidation of a Partner's Interest, the amount of such adjustment
shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of
the asset) from the disposition of the asset and shall be taken into
account for purposes of computing Net Profits or Net Losses;
(vii) Notwithstanding any other provisions of this
definition, any items which are specially allocated pursuant to
Sections A.4.2, A.4.3 and A.4.4 hereof shall not be taken into account
in computing Net Profits or Net Loss; and
(vii) Any Terminating Capital Gain and any Terminating
Capital Loss, as applicable, shall be excluded from the calculation of
Net Profits and Net Loss.
The amounts of the items of Partnership income, gain, loss or deduction
available to be specially allocated pursuant to Sections A.4.2 and A.4.3 hereof
shall be determined by applying rules analogous to those set forth in
subparagraphs (i) through (iv) of this definition.
"Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(1) and shall be determined according to the
provisions of Treasury Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulations Section 1.704-2(i)(2) and shall be determined in
accordance with Treasury Regulations Section 1.704-2(i)(3).
APPENDIX - Page 4
74
"Partner Nonrecourse Deductions" has the meaning set forth in Treasury
Regulations Section 1.704-2(i)(1) and shall be determined in accordance with
Treasury Regulations Section 1.704-2(i)(2).
"Partnership Minimum Gain" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(2) and shall be determined in accordance with
Treasury Regulations Section 1.704-2(d).
"Terminating Capital Gain" and "Terminating Capital Loss",
respectively, means net gain or net loss, as applicable, to be allocated among
the Partners as a result of the occurrence of a Terminating Capital
Transaction, determined with the adjustments otherwise applicable in
determining Net Profits and Net Loss attributable to the dispositions of
Partnership property, provided that the calculation of such net gain or net
loss shall include without limitation the difference between the fair market
value and basis of assets to be allocated to the Capital Accounts pursuant to
Section 6.2(c)(i) of the Agreement.
A.3 Capital Accounts. The Partnership shall determine and maintain
Capital Accounts. "Capital Account" shall mean an account of each Partner
determined and maintained throughout the full term of the Partnership in
accordance with the capital accounting rules of Treasury Regulations Section
1.704-1(b)(2)(iv). Without limiting the generality of the foregoing, the
following rules shall apply:
(a) The Capital Account of each Partner shall be credited
with (i) an amount equal to such Partner's Capital Contributions and the fair
market value of property contributed (if permitted hereunder) to the
Partnership by such Partner (net of liabilities that the Partnership is
considered to assume or to which it is considered to take subject to Code
Section 752), (ii) such Partner's share of the Partnership's Net Profits
together with items of income or gain specially allocated to such Partner
pursuant to Sections A.4.2, A.4.3 and A.4.4, and (iii) the amount of any
Partnership liabilities assumed by such Partner or which are secured by
property distributed to such Partner.
(b) The Capital Account of each Partner shall be debited
by (i) the amount of cash and the fair market value of property distributed to
such Partner (net of liabilities assumed by such Partner and liabilities to
which such distributed property is subject), (ii) such Partner's share of the
Partnership's Net Loss together with items of loss or deduction specially
allocated to such Partner pursuant to Sections A.4.2, A.4.3 and A.4.4, and
(iii) the amount of any liabilities of such Partner assumed by the Partnership
or which are secured by any property contributed by such Partner to the
Partnership.
(c) Upon the transfer by a Partner of all or part of an
interest in the Partnership in accordance with the terms of the Agreement, the
Capital Account of the transferor that is attributable to the transferred
interest shall carry over to the transferee and the Capital Accounts of the
Partners shall be adjusted to the extent provided in Treasury Regulations
Section 1.704-1(b)(2)(iv)(m).
(d) In determining the amount of any liability for
purposes of Sections A.3(a) and A.3(b), Code Section 752(c) and any other
applicable provisions of the Code and the Treasury Regulations will be taken
into account.
APPENDIX - Page 5
75
(e) In the event that the Partnership distributes
property (other than money) to the Partners, the Capital Account balances of
the Partners shall be adjusted, in accordance with Treasury Regulations Section
1.704- 1(b)(2)(iv)(e), to reflect the manner in which any unrealized income,
gain, loss and deduction inherent in such property (that has not been reflected
in the Capital Accounts previously) would be allocated among the Partners if
such property were sold at its fair market value (which value in no event shall
be less than the amount of any nonrecourse indebtedness to which such property
is subject).
(f) Except as otherwise required by Treasury Regulations
Section 1.704-1(b)(2)(iv), adjustment to such Capital Accounts in respect of
Partnership income, gain, loss, deduction, and Code Section 705(a)(2)(B)
expenditures (or items thereof) shall be made with reference to the federal
income tax treatment of such items (and, in the case of book items, with
reference to the federal income tax treatment of the corresponding tax items)
at the Partnership level, without regard to any requisite or elective tax
treatment of such items at the Partner level.
(g) In the event the General Partner shall determine that
it is prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto (including, without limitation, debits or credits relating
to liabilities which are secured by contributions or distributed property or
which are assumed by the Partnership, General Partner, or Common Limited
Partners), are computed in order to comply with such Treasury Regulations, the
General Partner may make such modification, provided that it is not likely to
have a material effect on the amounts distributed to any Partner pursuant to
Article VI of the Agreement upon the dissolution of the Partnership. The
General Partner also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Treasury Regulations
Section 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate modifications in
the event unanticipated events (for example, the acquisition by the Partnership
of oil or gas properties) might otherwise cause this Agreement not to comply
with Treasury Regulations Section 1.704-1(b).
A.4 Allocations of Net Profits and Net Loss.
A.4.1 In General.
(a) Net Profits. After giving effect to the special
allocations set forth in Sections A.4.2, A.4.3 and A.4.4 hereof, Net Profits
for any Fiscal Year shall be allocated to the Partners as follows:
(i) First, Net Profits shall be allocated ratably
to the Preferred Limited Partners until the cumulative Net
Profits allocated to the Preferred Limited Partners equals the
cumulative Preferred Return (as defined in Section A.4.1(b)
hereof) distributable to such Partners for all prior and
current periods. The Net Profits allocated under this Section
A.4.1(a)(i) shall be allocated among each of the Preferred
Limited Partners whose cumulative Preferred Return exceeds the
cumulative Net Profits previously allocated to such Partner
(such excess, the "Unallocated Preferred Return") according to
the ratio that each such Partner's
APPENDIX - Page 6
76
Unallocated Preferred Return bears to the total of the
Unallocated Preferred Return of all Preferred Limited
Partners. In the case of a Preferred Limited Partner that
holds more than one series of Preferred Interests issued by
the Partnership, the Net Profits allocated to such Partner
under this Section A.4.1(a)(i) shall be further allocated
among each of such Partner's separate series of Preferred
Interests for which the cumulative Preferred Return for such
Partner exceeds the cumulative Net Profits previously
allocated to such series for such Partner (such excess, the
"Unallocated Series Preferred Return") according to the ratio
that the Unallocated Series Preferred Return of each series of
Preferred Interest held by such Partner bears to the total of
the Unallocated Series Preferred Return for all series of
Preferred Interests held by such Partner.
(ii) Next, to the extent that allocable Net
Profits exceed the Net Profits previously allocated for the
period under Section A.4.1(a)(i) hereof, Net Profits shall be
allocated ratably to eliminate any deficit balance in any
Partner's Adjusted Capital Account Balance, subject to the
provisions of Section A.4.1. The Net Profits allocated under
this Section A.4.1(a)(ii) shall be allocated among the
Partners with negative Adjusted Capital Account Balances
according to the ratio that each such negative Adjusted
Capital Account Balance bears to the total of the negative
Adjusted Capital Account Balances of all Partners.
(iii) Next, to the extent that allocable Net
Profits exceed the Net Profits previously allocated for the
period under Sections A.4.1(a)(i) and A.4.1(a)(ii) hereof, in
the event that Net Losses have been allocated in prior Fiscal
Years among the Common Partners in respect of their Common
Partner Interests in amounts that were not in proportion to
their respective Common Partner Interests, Net Profits shall
be allocated among the Common Partners insofar as possible to
cause their respective Capital Accounts related to their
Common Partner Interests to be in proportion to their Common
Partner Interests.
(iv) The balance, if any, of Net Profits shall be
allocated to the Common Partners pro rata in accordance with
their respective Common Partner Interests as set forth on
Exhibit 1 hereto.
(b) Preferred Return. Each of the Preferred Limited
Partners shall be entitled to receive an allocation of Net Profits equal to a
preferred return (the "Preferred Return") with respect to each series of
Preferred Limited Partner Interest held by such Preferred Limited Partner as
provided in the terms and provisions applicable to such series of Preferred
Limited Partner Interest. The terms and conditions applicable to each series
of Preferred Limited Partner Interest now authorized as provided in the
Agreement are as follows:
Series A 10% Payment-in-Kind Preferred Limited Partner Interest Exhibit 2
Series B 10% Payment-in-Kind Preferred Limited Partner Interest Exhibit 3
Series C 10% Payment-in-Kind Preferred Limited Partner Interest Exhibit 4
Series D 9 1/2% Preferred Limited Partner Interest Exhibit 5
Series E 10% Payment-in-Kind Preferred Limited Partner Interest Exhibit 6
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The parties intend that the Preferred Return be treated as a priority return to
the Preferred Limited Partners and shall not constitute a guaranteed payment
under Section 707(c) of the Code.
(c) Net Loss. After giving effect to the special
allocations set forth in Sections A.4.2, A.4.3 and A.4.4 hereof, Net Loss for
any Fiscal Year shall be allocated in the following manner:
(i) To the Common Partners pro rata in accordance
with their Common Partner Interests as set forth on Exhibit 1, subject
to the limitation set forth in Section A.4.1(c)(ii) below.
(ii) No Common Limited Partner shall receive an
allocation of Net Loss which would cause such Common Limited Partner
to have an Adjusted Capital Account Deficit at the end of any Fiscal
Year. In the event some but not all Common Limited Partners would
have Adjusted Capital Account Deficits as a consequence of an
allocation of Net Loss pursuant to Section A.4.1(c)(i) hereof, the
limitation set forth in this Section A.4.1(c)(ii) shall be applied on
a Common Limited Partner by Common Limited Partner basis so as to
allocate the maximum permissible Net Loss to each Common Limited
Partner under Treasury Regulations Section 1.704- 1(b)(2)(ii)(d). Net
Loss not allocated to the Common Limited Partners pursuant to this
subparagraph (ii) shall be allocated to the General Partner; provided,
however, that in making subsequent allocations of Net Profits and Net
Loss, the prior reallocation of Net Loss to the General Partner and/or
the Common Limited Partners shall be taken into account so that, to
the extent possible, the total allocation of Net Profits and Net Loss
to both the General Partner and the Common Limited Partners shall be
equal to the allocations that would have been made had the
reallocation to the General Partner and/or the Common Limited Partners
not occurred.
(d) Except as provided in Sections A.4.2, A.4.3 and A.4.4
hereof, upon the occurrence of a Terminating Capital Transaction, any resulting
Terminating Capital Gain or Terminating Capital Loss, as applicable, shall be
allocated to the Partners in a manner, to the extent possible, to cause the
Partners' respective Capital Accounts to equal the amounts that would be
distributable to the Partners upon liquidation of the Partnership in accordance
with Section 6.2 of the Agreement.
A.4.2 Special Allocations.
The following special allocations should be applied in the
order in which they are listed. Such ordering is intended to comply with the
ordering rules in Treasury Regulations Section 1.704-2(j) and shall be applied
consistently therewith.
(a) Minimum Gain Charge back. Except as otherwise
provided in Section 1.704-2(f) of the Treasury Regulations, notwithstanding
anything to the contrary in this Section A.4, if there is a net decrease in
Partnership Minimum Gain during any Fiscal Year, then there shall be
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allocated to each Partner items of income and gain for that year (and, if
necessary, subsequent Fiscal Years) equal to that Partner's share of the net
decrease in Partnership Minimum Gain (within the meaning of Treasury
Regulations Section 1.704-2(g)(2)). The foregoing is intended to be a "minimum
gain chargeback" provision as described in Treasury Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
(b) Partner Nonrecourse Debt Minimum Gain Charge back.
Except as otherwise provided in Section 1.704-2(i)(4) of the Treasury
Regulations, notwithstanding anything to the contrary in this Section A.4, if
during a Fiscal Year there is a net decrease in Partner Nonrecourse Debt
Minimum Gain, then, in addition to the amounts, if any, allocated pursuant to
Subsection 4.2(a), any Partner with a share of that Partner Nonrecourse Debt
Minimum Gain (determined in accordance with Treasury Regulations Section
1.704-2(i)(5)) as of the beginning of the Fiscal Year shall be allocated items
of Partnership income and gain for that year (and, if necessary, for subsequent
Fiscal Years) equal to that Partner's share of the net decrease in the Partner
Nonrecourse Debt Minimum Gain, determined in accordance with Treasury
Regulations Section 1.704-2(i)(4). The foregoing is intended to be the
"Chargeback of partner nonrecourse debt minimum gain" required by Treasury
Regulations Section 1.704-2(i)(4) and shall be interpreted and applied in all
respects in accordance with that Regulation.
(c) Qualified Income Offset. If any Partner unexpectedly
receives any adjustment, allocation or distribution described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership
income and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations, the Adjusted Capital Account Deficit of such Partner as quickly as
possible. An allocation pursuant to the foregoing sentence shall be made only
if and to the extent that such Partner would have an Adjusted Capital Account
Deficit after all other allocations provided for in Section A.4 have been
tentatively made as if this Section A.4.2(c) were not in this Appendix. This
allocation is intended to constitute a "qualified income offset" within the
meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(3) and shall be
construed in accordance with the requirements thereof.
In the event a Partner has a deficit Capital Account at the end of any
Partnership Fiscal Year which is in excess of the sum of (i) the amount (if
any) such Partner is obligated to restore pursuant to any provision of the
Agreement, and (ii) the amount such Partner is deemed to be obligated to
restore pursuant to the penultimate sentences of Treasury Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Partner shall be specially allocated
items of Partnership income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this clause shall be made
only if and to the extent that such Partner would have a deficit Capital
Account in excess of such sum after all other allocations provided for in this
Section A.4 have been made as if this Section A.4.2(c) were not in this
Appendix.
(d) Nonrecourse Deductions. Nonrecourse Deductions for
any Partnership Fiscal Year or other period shall be allocated among the
Partners in accordance with their Common Partner Interests.
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79
(e) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any Partnership Fiscal Year or other period shall be specially
allocated to the Partner who 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 Regulations Section 1.704-2(i)(1).
(f) Basis Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b)
or Code Section 743(b) is required under 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 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.
(g) Allocations Relating to Taxable Issuance of
Partnership Interests. Any income, gain, loss or deduction realized as a
direct or indirect result of the issuance of an interest by the Partnership to
a Partner (the "Issuance Items") shall be allocated among the General Partner
and Limited Partners so that, to the extent possible, the net amount of such
Issuance Items, together with all other allocations under this Appendix to each
Partner, shall be equal to the net amount that would have been allocated to
each such Partner if the Issuance Items had not been realized.
A.4.3 Curative Allocations. The allocations set forth in Section
A.4.2 hereof (except for Section A.4.2(g)) (the "Regulatory Allocations") are
intended to comply with certain requirements of the Treasury Regulations. It
is the intent of the Partners that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of Partnership income, gain, loss, or
deduction pursuant to this Section A.4.3. Therefore, notwithstanding any other
provisions of this Section A.4 (other than the Regulatory Allocations and
taking into account Section A.4.1(c)), the General Partner shall make such
offsetting special allocations of Partnership income, gain, loss, or deduction
in whatever manner it determines appropriate so that, after such offsetting
allocations are made, each Partner's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Partner would have had if
the Regulatory Allocations were not part of the Agreement and all Partnership
items were allocated pursuant to Sections A.4.1 and A.4.2(g). In exercising
its discretion under this Section A.4.3, the General Partner shall take into
account future Regulatory Allocations under Sections A.4.2(a) and A.4.2(b)
that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections A.4.2(d) and A.4.2(e).
A.4.4 Other Allocation Rules.
(a) For purposes of determining Net Profits, Net Loss or
any other item allocable to any period, Net Profits, Net Loss and other items
will be determined by the General Partners using any permissible method under
Code Section 706 and the related Treasury Regulations.
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(b) Unless otherwise required by the Agreement, all items
of credit shall be allocated to the Partners in the same manner as Net Profits.
(c) Solely for purposes of determining a Partner's
proportionate share of the "excess nonrecourse liabilities" of the Partnership
within the meaning of Treasury Regulations Section 1.752-3(a)(3), the Partners'
interests in Partnership profits shall be deemed to be in proportion to their
respective Common Partner Interests.
(d) To the extent permitted by Treasury Regulations
Section 1.704-2(h)(3), the General Partner may endeavor to treat distributions
as having been made from the proceeds of a Nonrecourse Liability or a Partner
Nonrecourse Debt only to the extent that such distributions would not cause or
increase an Adjusted Capital Account Deficit for any Limited Partner.
(e) The Partners are aware of the income tax consequences
of the allocations made by this Article 4 and hereby agree to be bound by the
provisions of this Article 4 in reporting their shares of Partnership income
and loss for income tax purposes.
A.5 Tax Allocations.
In accordance with Code Section 704(c) and the related Treasury
Regulations, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Partnership shall, solely for tax purposes,
be allocated among the Partners so as to take account of any variation between
the adjusted basis of such property to the Partnership for federal income tax
purposes and its Gross Asset Value. Any elections or other decisions relating
to allocations pursuant to this Section A.5 shall be made by the General
Partner in any manner that reasonably reflects the purpose and intention of
this Appendix and the Agreement. Allocations pursuant to this Section A.5 are
solely for purposes of U.S. federal, state, and local taxes and shall not
affect any Partner's Capital Account or share of Net Profits, Net Loss, or
other items or distributions pursuant to any provision of this Appendix and the
Agreement.
APPENDIX - Page 11
