EXHIBIT 3.8
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
SEPTEMBER 21, 2001
TABLE OF CONTENTS
ARTICLE I - ORGANIZATIONAL MATTERS......................................................2
1.1 Formation...................................................................2
1.2 Name........................................................................2
1.3 Registered Office: Principal Office.........................................2
1.4 Power of Attorney...........................................................2
1.5 Term........................................................................4
ARTICLE II - DEFINITIONS................................................................4
Adjusted Capital Account.............................................................4
Adjusted Property....................................................................4
Affiliate............................................................................4
Agreed Allocation....................................................................4
Agreed Value.........................................................................4
Agreement............................................................................4
Available Cash.......................................................................5
Book-Tax Disparity...................................................................5
Capital Account......................................................................5
Capital Contributor..................................................................5
Carrying Value.......................................................................5
Certificate of Limited Partnership...................................................6
Closing Date.........................................................................6
Code.................................................................................6
Contributed Property.................................................................6
Contributing Partner.................................................................6
Contribution Agreement...............................................................6
Curative Allocation..................................................................6
Delaware Act.........................................................................6
Departing Partner....................................................................6
Economic Risk of Loss................................................................6
Event of Withdrawal..................................................................6
Exchange Act.........................................................................6
General Partner......................................................................7
General Partner Equity Value.........................................................7
Indemnitee...........................................................................7
Initial Offering.....................................................................7
Investor Partnership.................................................................7
Investor Partnership Agreement.......................................................7
Limited Partner......................................................................7
Limited Partner Equity Value.........................................................7
Liquidator...........................................................................7
Merger Agreement.....................................................................7
Minimum Gain Attributable to Partner Nonrecourse.....................................7
National Securities Exchange.........................................................7
Net Agreed Value.....................................................................7
Net Income...........................................................................8
Net Loss.............................................................................8
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Net Termination Gain.................................................................8
Net Termination Loss.................................................................8
Nonrecourse Built-in Gain............................................................8
Nonrecourse Deduction................................................................9
Nonrecourse Liability................................................................9
Opinion of Counsel...................................................................9
Outstanding..........................................................................9
Partner..............................................................................9
Partner Nonrecourse..................................................................9
Partner Nonrecourse Deductions.......................................................9
Partnership..........................................................................9
Partnership Inception................................................................9
Partnership Interests................................................................9
Partnership Minimum Gain.............................................................9
Partnership Year.....................................................................9
PEC..................................................................................9
Percentage Interest..................................................................9
Person...............................................................................9
Predecessor General Partner.........................................................10
Recapture Income....................................................................10
Record Holder.......................................................................10
Registration Statement..............................................................10
Required Allocations................................................................10
Residual Gain.......................................................................10
Securities Act......................................................................10
Substituted Limited Partner.........................................................10
Surviving Business Entity...........................................................10
Termination Capital Transactions....................................................10
Unit................................................................................10
Unitholder..........................................................................10
Unrealized Gain.....................................................................11
Unrealized Loss.....................................................................11
ARTICLE III - PURPOSE..................................................................11
3.1 Purpose and Business.......................................................11
3.2 Powers.....................................................................11
ARTICLE IV - CAPITAL CONTRIBUTIONS.....................................................11
4.1 Initial Contributions......................................................11
4.2 Additional Capital Contribution by the Investor Partnership................11
4.3 Preemptive Rights..........................................................11
4.4 Capital Accounts...........................................................12
4.5 Interest...................................................................14
4.6 No Withdrawal..............................................................14
4.7 Loans from Partners........................................................14
ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS..............................................14
5.1 Allocations for Capital Account Purposes...................................14
5.2 Allocations for Tax Purposes...............................................18
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5.3 Requirement of Distributions...............................................20
ARTICLE VI - MANAGEMENT AND OPERATION OF BUSINESS......................................20
6.1 Management.................................................................20
6.2 Certificate of Limited Partnership.........................................21
6.3 Restrictions on General Partner's Authority................................22
6.4 Reimbursement of the General Partner.......................................22
6.5 Outside Activities.........................................................23
6.6 Loans to and from the General Partner; Contracts with Affiliates...........23
6.7 Indemnification............................................................24
6.8 Liability of Indemnitees...................................................26
6.9 Resolution of Conflicts of Interest........................................26
6.10 Other Matters Concerning the General Partner...............................27
6.11 Title to Partnership Assets................................................28
6.12 Reliance by Third Parties..................................................28
ARTICLE VII - RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER............................29
7.1 Limitation of Liability....................................................29
7.2 Management of Business.....................................................29
7.3 Return of Capital..........................................................29
7.4 Rights of the Limited Partner Relating to the Partnership..................29
ARTICLE VIII - BOOKS, RECORDS, ACCOUNTING AND REPORTS..................................30
8.1 Records and Accounting.....................................................30
8.2 Fiscal Year................................................................30
ARTICLE IX - TAX MATTERS...............................................................30
9.1 Preparation of Tax Returns.................................................30
9.2 Tax Elections..............................................................30
9.3 Tax Controversies..........................................................31
9.4 Organizational Expenses....................................................31
9.5 Withholding................................................................31
9.6 Opinions of Counsel........................................................31
ARTICLE X - TRANSFER OF INTERESTS......................................................31
10.1 Transfer...................................................................31
10.2 Transfer of General Partner's Partnership Interest.........................32
10.3 Transfer of the Limited Partner's Partnership Interest.....................32
ARTICLE XI - ADMISSION OF PARTNERS.....................................................32
11.1 Admission of Substituted Limited Partner...................................32
11.2 Admission of Successor or General Partner..................................33
11.3 Amendment of Agreement and Certificate of Limited Partnership..............33
ARTICLE XII - WITHDRAWAL OR REMOVAL OF PARTNERS........................................33
12.1 Withdrawal of the General Partner..........................................33
12.2 Removal of the General Partner.............................................34
12.3 Interest of Departing Partner and Successor General Partner................34
12.4 Reimbursement of Departing Partner.........................................35
12.5 Withdrawal of the Limited Partner..........................................35
ARTICLE XIII - DISSOLUTION AND LIQUIDATION.............................................35
13.1 Dissolution................................................................35
13.2 Liquidation................................................................36
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13.3 Distributions in Kind......................................................36
13.4 Cancellation of Certificate of Limited Partnership.........................37
13.5 Reasonable Time for Winding Up.............................................37
13.6 Return of Capital..........................................................37
13.7 No Capital Account Restoration.............................................37
13.8 Waiver of Partition........................................................37
ARTICLE XIV - AMENDMENT OF PARTNERSHIP AGREEMENT.......................................37
14.1 Amendment to be Adopted Solely by General Partner..........................37
14.2 Amendment Procedures.......................................................38
ARTICLE XV - MERGER....................................................................39
15.1 Authority..................................................................39
15.2 Procedure for Merger or Consolidation......................................39
15.3 Approval by Limited Partner of Merger or Consolidation.....................40
15.4 Certificate of Merger......................................................40
15.5 Effect of Merger...........................................................40
ARTICLE XVI - GENERAL PROVISIONS.......................................................41
16.1 Addresses and Notice.......................................................41
16.2 Titles and Captions........................................................41
16.3 Pronouns and Plurals.......................................................41
16.4 Further Action.............................................................41
16.5 Binding Effect.............................................................41
16.6 Integration................................................................41
16.7 Creditors..................................................................41
16.8 Waiver.....................................................................41
16.9 Counterparts...............................................................41
16.10 Applicable Law..........................................................41
16.11 Invalidity of Provisions................................................41
16.12 Amendments to Reflect the Contribution Agreement........................42
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SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TE PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TE
PRODUCTS PIPELINE COMPANY, LIMITED PARTNERSHIP, dated as of September 21, 2001
is entered into by and among TEPPCO GP, Inc., a
Delaware corporation, as the
General Partner and TEPPCO Partners, L.P., a
Delaware limited partnership, as
the Limited Partner.
WHEREAS, the Predecessor General Partner (as defined herein) and the
Limited Partner entered into that certain Agreement of Limited Partnership of
the Partnership dated March 7, 1990 (the "1990 Agreement"); and
WHEREAS, pursuant to Section 14.1 of the 1990 Agreement, the
Predecessor General Partner amended and restated the 1990 Agreement on July 21,
1998 (the "1998 Agreement"); and
WHEREAS, pursuant to the Contribution, Assignment and Amendment
Agreement dated July 26, 2001 by and among the General Partner and the other
parties thereto (the "Contribution Agreement"), the Limited Partner, the General
Partner and the Predecessor General Partner amended the 1998 Agreement to
provide for the withdrawal of the Predecessor General Partner and the succession
of the General Partner as general partner of the Partnership (as defined
herein); and
WHEREAS, pursuant to the Contribution Agreement, the Predecessor
General Partner transferred a revised general partner interest in the
Partnership to a newly formed, wholly owned subsidiary, the General Partner; and
WHEREAS, pursuant to the Contribution Agreement, the Limited Partner,
the General Partner and the Predecessor General Partner amended the 1998
Agreement to provide for the conversion of the Predecessor General Partner's
remaining general partner interest in the Partnership into a limited partner
interest in the Partnership; and
WHEREAS, pursuant to the Contribution Agreement, the Predecessor
General Partner contributed its remaining limited partnership interest in the
Partnership along with all the outstanding capital stock of the General Partner
to the Investor Partnership (as defined herein); and
WHEREAS, the General Partner and the Limited Partner desire to amend
and restate the 1998 Agreement in its entirety to more fully reflect the
transactions contemplated and the amendments made by the Contribution Agreement
together with such other changes as the General Partner and the Limited Partner
have determined are necessary and appropriate;
NOW, THEREFORE, pursuant to Article XIV of the 1998 Agreement, the
General Partner and the Limited Partner do hereby amend and restate the 1998
Agreement to provide, in its entirety, as follows:
ARTICLE I - ORGANIZATIONAL MATTERS
1.1 Formation. The General Partner and the Limited Partner hereby
continue the Partnership as a limited partnership pursuant to the provisions of
the
Delaware Act, and hereby amend and restate the original Agreement of Limited
Partnership in its entirety. Except as expressly provided to the contrary in
this Agreement, the rights and obligations of the Partners and the
administration, dissolution and termination of the Partnership shall be governed
by the
Delaware Act. The Partnership Interest of each Partner shall be personal
property for all purposes.
1.2 Name. The name of the Partnership shall be "TE Products Pipeline
Company, Limited Partnership." The Partnership's business may be conducted under
any other name or names deemed necessary or appropriate by the General Partner,
including, without limitation, the name of the General Partner or any Affiliate
thereof. The words "Limited Partnership, "L.P.," "Ltd." or similar words or
letters shall be included in the Partnership's name where necessary for the
purposes of complying with the laws of any jurisdiction that so requires. The
General Partner in its sole discretion may change the name of the Partnership at
any time and from time to time and shall notify the Limited Partner of such
change in the next regular communication to the Limited Partner. Notwithstanding
the foregoing, unless otherwise permitted by PEC and Duke, the Partnership shall
change its name to a name not including "TE," "TEPPCO," "Texas Eastern",
"PanEnergy" or "Duke" and shall cease using the name "TE," "TEPPCO," "Texas
Eastern," "PanEnergy" or Duke or other names or symbols associated therewith at
such time as neither Texas Eastern Products Pipeline Company nor another
Affiliate of PanEnergy or Duke is the general partner of the Partnership.
1.3 Registered Office: Principal Office. Unless and until changed by
the General Partner, the registered office of the Partnership in the State of
Delaware shall be located at The Corporation Trust Center, 1209 Orange Street,
New Castle County, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and the registered agent for
service of process on the Partnership in the State of
Delaware at such
registered office shall be The Corporation Trust Company. The principal office
of the Partnership and the address of the General Partner shall be ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such other place as the General Partner
may from time to time designate by notice to the Limited Partner. The
Partnership may maintain offices at such other place or places within or outside
the State of
Delaware as the General Partner deems advisable.
1.4 Power of Attorney.
(a) The Limited Partner hereby constitutes and appoints each
of the General Partner and, if a Liquidator shall have been selected pursuant to
Section 13.2, the Liquidator severally (and any successor to either thereof by
merger, transfer, assignment, election or otherwise) and each of their
authorized officers and attorneys-in-fact, with full power of substitution, as
his true and lawful agent and attorney-in-fact, with full power and authority in
his name, place and ▇▇▇▇▇, to:
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(i) execute, swear to, acknowledge, deliver, file and record
in the appropriate public offices (A) all certificates, documents and
other instruments (including, without limitation, this Agreement and
the Certificate of Limited Partnership and all amendments or
restatements thereof) that the General Partner or the Liquidator deems
necessary or appropriate to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) in
the State of
Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (B) all certificates,
documents and other instruments that the General Partner or the
Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of
this Agreement; (C) all certificates, documents and other instruments
(including, without limitation, conveyances and a certificate of
cancellation) that the General Partner or the Liquidator deems
necessary or appropriate to reflect the dissolution and liquidation of
the Partnership pursuant to the terms of this Agreement; (D) all
certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article X, XI, XII or XIII or the
Capital Contribution of any Partner; (E) all certificates, documents
and other instruments (including, without limitation, agreements and a
certificate of merger) relating to a merger or consolidation of the
Partnership pursuant to Article XV; and
(ii) execute, swear to, acknowledge, deliver, file and record
all ballots, consents, approvals, waivers, certificates and other
instruments necessary or appropriate, in the sole discretion of the
General Partner or the Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action that is
made or given by the Partners hereunder or is consistent with the terms
of this Agreement or is necessary or appropriate, in the sole
discretion of the General Partner or the Liquidator, to effectuate the
terms or intent of this Agreement; provided, that when the consent or
approval of the Limited Partner is required by any provision of this
Agreement, the General Partner or the Liquidator may exercise the power
of attorney made in this Section 1.4(a) (ii) only after the necessary
consent or approval of the Limited Partner.
Nothing contained in this Section 1.4 shall be construed as authorizing the
General Partner to amend this Agreement except in accordance with Article XIV,
or as may be otherwise expressly provided for in this Agreement
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and not
be affected by the subsequent death, incompetency, disability, incapacity,
dissolution, bankruptcy or termination of the Limited Partner and the transfer
of all or any portion of such Limited Partner's Partnership Interest and shall
extend to such Limited Partner's heirs, successors, assigns and personal
representatives. The Limited Partner hereby agrees to be bound by any
representation made by the General Partner or the Liquidator acting in good
faith pursuant to such power of attorney; and the Limited Partner hereby waives
any and all defenses that may be available to contest, negate or disaffirm the
action of the General Partner or the Liquidator taken in good faith under such
power of attorney. The Limited Partner shall execute and deliver to the General
Partner or the Liquidator, within fifteen days after receipt of the General
Partner's or the Liquidator's request therefor,
3
such further designation, powers of attorney and other instruments as the
General Partner or the Liquidator deems necessary to effectuate this Agreement
and the purposes of the Partnership.
1.5 Term. The Partnership commenced upon the filing of the Certificate
of Limited Partnership in accordance with the
Delaware Act and shall continue in
existence until the close of Partnership business on December 31, 2084, or until
the earlier termination of the Partnership in accordance with the provisions of
Article XIII.
ARTICLE II - DEFINITIONS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each fiscal year of the Partnership, (a) increased
by any amounts that such Partner is obligated to restore under the standards set
by Treasury Regulation Section 1.704-(2)(g)(i) and 1.701-2(i)(5) to be allocated
to such Partner in subsequent years under items described in Treasury Regulation
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-2(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account is
intended to comply with the provisions of Treasury Regulation Section
1.704-(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 4.4(d).
"Affiliate" means, with respect to any Person, any Other Person that
directly or indirectly controls, is controlled by or is under common control
with, the Person in question. As used herein, the term control means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agreed Allocation" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 5.1 including, without limitation, a Curative Allocation
(if appropriate to the context in which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value
of such property or other consideration at the time of contribution as
determined by the General Partner using such reasonable method of valuation as
it may adopt; and the General Partner shall, in its sole discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate Agreed
Value of Contributed Properties conveyed to the Partnership in a single or
integrated transaction among each separate property on a basis proportional to
the fair market value of each Contributed Property.
"Agreement" means this Agreement of Limited Partnership of TE Products
Pipeline Company, Limited Partnership, as it may be amended, supplemented or
restated from time to time.
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"Available Cash" means, with respect to any calendar quarter, (i) the
sum of (A) all cash receipts of the Partnership during such quarter from all
sources and (B) any reduction in reserves established in prior quarters, less
(ii) the sum of (aa) all cash disbursements of the Partnership during such
quarter (excluding cash distributions to Partners, but including disbursements
for taxes of the Partnership as an entity, debt service and capital
expenditures) and (bb) any reserves established in such quarter in such amounts
as the General Partner determines to be necessary or appropriate in its
reasonable discretion (x) to provide for the proper conduct of the business of
the Partnership (including reserves for future rate refunds or capital
expenditures) or (y) to provide funds for distributions with respect to any of
the next four calendar quarters and (cc) any other reserves established in such
quarter in such amounts as the General Partner determines in its reasonable
discretion to be necessary because the distribution of such amounts would be
prohibited by applicable law or by any loan agreement, security agreement,
mortgage, debt instrument or other agreement or obligation to which the
Partnership is a party or by which it is bound or its assets are subject. Taxes
paid by the Partnership on behalf of, or amounts withheld with respect to, all
or less than all of the Partners shall not be considered cash disbursements of
the Partnership which reduce "Available Cash," but the payment or withholding
thereof shall be deemed to be a distribution of Available Cash to Partners.
Alternatively, in the discretion of the General Partner, such taxes (if
pertaining to all partners) may be considered to be cash disbursements of the
Partnership which reduce "Available Cash", but the payment or withholding
thereof shall not be deemed to be a distribution of Available Cash to Partners.
Notwithstanding the foregoing, "Available Cash" shall not include any cash
receipts or reductions in reserves or take into account any disbursements made
or reserves established after commencement of the dissolution and liquidation of
the Partnership.
"Book-Tax Disparity" means with respect to any item of Contributed
Property o: Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 4.4 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly ire accordance with federal
income tax accounting principles.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 4.4.
"Capital Contributor" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Partner has contributed or may
contribute to the Partnership pursuant to Section 4.1, 4.2 or 4.4(c)(i).
"Carrying Value" means (a) with respect to a Contributed Property the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' Capital
Accounts, and (b) with respect to any other Partnership property, the adjusted
basis of such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from time to
time in accordance with Sections 4.4(d)(i) and 4.4(d)(ii) and to reflect
changes, additions or other
5
adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership filed with the Secretary of State of the State of Delaware as
referenced in Section 6.2 hereof, as such Certificate may be amended and/or
restated from time to time.
"Closing Date" means the date on which the "First Time of Delivery"
occurs as such term is defined in the Underwriting Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"Contributed Property" means each property or other asset, in such form
as may be permitted by the Delaware Act, but excluding cash contributed to the
Partnership (or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code or otherwise). Once
the Carrying Value of a Contributed Property is adjusted pursuant to Section
4.4(d)(i), such property shall no longer constitute a Contributed Property, but
shall be deemed an Adjusted Property.
"Contributing Partner" means each Partner contributing (or deemed to
have contributed on termination and reconstitution of the Partnership pursuant
to Section 708 of the Code or otherwise) a Contributed Property.
"Contribution Agreement" has the means set forth in the recitals
hereto.
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 5.1(d) (ix).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. Section 17-101, et. seq., as amended, supplemented or restated
from time to time, and any successor to such statute.
"Departing Partner" means a former General Partner, from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 12.1 or Section 12.2.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.704-2(i)(1).
"Event of Withdrawal" has the meaning assigned to such term in Section
12.1(a).
"Exchange Act" means the Securities Exchange Act of 1934 as amended,
supplemented or restated from time to time, and any successor to such statute.
6
"General Partner" means TEPPCO GP, Inc., a Delaware corporation, as
successor to the Predecessor General Partner, and its successors as general
partner of the Partnership and, if the context so requires, its predecessor in
interest.
"General Partner Equity Value" means, as of any date of determination,
the fair market value of the General Partner's Partnership Interest, as
determined by the General Partner using whatever reasonable method of valuation
it may adopt.
"Indemnitee" means the General Partner, any Departing Partner, any
Person who is or was an Affiliate of the General Partner or any Departing
Partner, any Person who is or was an officer, director, employee, partner, agent
or trustee of the General Partner or any Departing Partner or any such
Affiliate, or any Person who is or was serving at the request of the General
Partner or any Departing Partner or any such Affiliate as a director, officer,
employee, partner, agent or trustee of another Person.
"Initial Offering" means the initial offering of Units to the public,
as described in the Registration Statement.
"Investor Partnership" means TEPPCO Partners, L.P. a Delaware limited
partnership.
"Investor Partnership Agreement" means the Agreement of
Limited
Partnership Agreement of the Investor Partnership, dated March 7, 1990, as such
agreement has been amended or restated, or may in the future be amended or
restated in accordance with its terms.
"Limited Partner" means the Limited Partner, each Substituted Limited
Partner, if any, and each other Person, if any, that is admitted to the
Partnership as a limited partner pursuant to Section 11.1 and that is shown as a
limited partner on the books and records of the Partnership.
"Limited Partner Equity Value" means, as of any date of determination,
the fair market value of the Limited Partner's Partnership Interest, as
determined by the General Partner using whatever reasonable method of valuation
it may adopt.
"Liquidator" means the General Partner or other Person approved
pursuant to Section 13.2 who performs the functions described therein.
"Merger Agreement" has the meaning assigned to such term in Section
15.1.
"Minimum Gain Attributable to Partner Nonrecourse" means that amount
determined in accordance with the principles of Treasury Regulation Section
1.704-2(i)(3).
"National Securities Exchange" means an exchange registered with the
Securities and Exchange Commission under Section 6(a) of the Exchange Act.
"Net Agreed Value" means, (a) in the case of any Contributed Property,
the Agreed Value of such property reduced by any liabilities either assumed by
the Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner by the
Partnership, the Partnership's Carrying Value of such property (as adjusted
pursuant to Section 4.4(d) (ii)) at the time such property is distributed,
7
reduced by any indebtedness either assumed by such Partner upon such
distribution or to which such property is subject at the time of distribution,
in either case, as determined under Section 752 of the Code.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain (other than those items attributable to
dispositions constituting Termination Capital Transactions) for such taxable
period over the Partnership's items of loss and deduction (other than those
items attributable to dispositions constituting Termination Capital
Transactions) for such taxable period. The items included in the calculation of
Net Income shall be determined in accordance with Section 4.4(b) and shall not
include any items specially allocated under Section 5.1(d). Once an item of
income, gain, loss or deduction that has been included in the initial
computation of Net Income is subjected to a Required Allocation or a Curative
Allocation, the applicable Net Income or Net Loss shall be recomputed without
regard to such item.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction (other than those items attributable
to dispositions constituting Termination Capital Transactions) for such taxable
period over the Partnership's items of income and gain (other than those items
attributable to dispositions constituting Termination Capital Transactions) for
such taxable period. The items included in the calculation of Net Loss shall be
determined in accordance with Section 4.4(b) and shall not include any items
specifically allocated under Section 5.1(d). Once an item of income, gain, loss
or deduction that has been included in the initial computation of Net Loss is
subjected to a Required Allocation or a Curative Allocation, the applicable Net
Income or Net Loss shall be recomputed without regard to such item.
"Net Termination Gain" means, for any taxable period, the sum, if
positive, of all items of income, gain or loss recognized by the Partnership
from Termination Capital Transactions occurring in such taxable period. The
items included in the determination of Net Termination Gain shall be determined
in accordance with Section 4.4(b) and shall not include any items of income,
gain or loss specifically allocated under Section 5.1(d). Once an item of
income, gain or loss that has been included in the initial computation of Net
Termination Gain is subjected to a Required Allocation or a Curative Allocation,
the applicable Net Termination Gain or Net Termination Loss shall be recomputed
without regard to such item;
"Net Termination Loss" means, for any taxable period, the sum, if
negative, of any items of income, gain or loss recognized by the Partnership
from Termination Capital Transactions occurring in such taxable period. The
items included in the determination of Net Termination Loss shall be determined
in accordance with Section 4.4(b) and shall not include any items or income,
gain or loss specifically allocated under section 5.1(d). Once an item of gain
or loss that has been included in the initial computation of Net Termination
Loss is subjected to a Required Allocation or a Curative Allocation, the
applicable Net Termination Gain or Net Termination Loss shall be recomputed
without regard to such item;
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Sections 5.2(b) (i) (A), 5.2(b)
(ii) (A) or 5.2(b) (iv) if such properties were disposed of in a taxable
transaction in full satisfaction of such liabilities and for no other
consideration.
8
"Nonrecourse Deduction" means any and all items of loss, deduction or
expenditure (described in Section 705(a) (2) (B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b)(1) and
1.704-2(c), are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulation Section 1.704-2(b).
"Opinion of Counsel" means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner) acceptable to the
General Partner.
"Outstanding" means all Partnership Interests of the Limited Partner
that are issued by the Partnership and reflected as outstanding on the
Partnership's books and records as of the date of determination.
"Partner" means the General Partner and the Limited Partner.
"Partner Nonrecourse" has the meaning set forth in Treasury Regulation
Section 1.704-2(b).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including any expenditure described in Section 705(a)
(2) (B) of the Code) that, in accordance with the principles of Treasury
Regulation Section 1.704-2(i)(1) and 1.704-2(i)(2), are attributable to a
Partner Nonrecourse Debt.
"Partnership" means TE Products Pipeline Company, Limited Partnership,
a Delaware limited partnership established pursuant to this Partnership
Agreement, and any successor thereto.
"Partnership Inception" means the March 7, 1990.
"Partnership Interests" means the interest of a Partner in the
Partnership.
"Partnership Minimum Gain" means the amount determined in accordance
with the principles of Treasury Regulation Sections 1.704-2(b)(2) and
1.704-2(d).
"Partnership Year" means the fiscal year of the Partnership, which
shall be the calendar year.
"PEC" means PanEnergy Corp., a Delaware corporation.
"Percentage Interest" means as of the date of such determination (a) as
to the General Partner, .001% and (b) as to the Limited Partner, 99.999%.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
9
"Predecessor General Partner " means Texas Eastern Products Pipeline
Company, LLC, in its capacity as general partner of the Partnership prior to the
transfer of the Predecessor General Partner's Partnership Interests to the
General Partner pursuant to the Contribution Agreement.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Sections 734 or 743 of
the Code) upon the disposition of any property or asset of the Partnership,
which gain is characterized as ordinary income because it represents the
recapture of deductions previously taken with respect to such property or
assets.
"Record Holder" has the meaning assigned to such term in the Investor
Partnership Agreement.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 33-32203), as it may have been amended or supplemented from
time to time, filed by the Investor Partnership with the Securities and Exchange
Commission under the Securities Act to register the offering and sale of the
Units in the Initial Offering.
"Required Allocations" means any allocation (or limitation imposed on
any allocation) of an item of income, gain, deduction or loss pursuant to (a)
the proviso- clause of Sections 5.1(b)(i) or (b) Sections 5.1(d)(i), 5.1(d)
(ii), 5.1(d) (iii), 5.1(d)(iv) 5.1(d)(v), 5.1(d) (vi) and 5.1(d) (viii), such
allocations (or limitations thereon) being directly or indirectly required by
the Treasury Regulations promulgated under Section 704(b) of the Code.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Sections 5.2(b)(i)(A) or 5.2(b) (ii) (A), respectively, to eliminate
Book-Tax Disparities.
"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such statute.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.2 in place of and with
all the rights of a Limited Partner and who is shown as a Limited Partner on the
books and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 15.2(b).
"Termination Capital Transactions" means any sale, transfer or other
disposition of property of the Partnership occurring upon or incident to the
liquidation and winding up of the Partnership pursuant to Article XIII.
"Unit" has the meaning assigned to such term in the Investor
Partnership Agreement.
"Unitholder" means a Person who holds Units.
10
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of such date (as determined under Section
4.4(d)) over (b) the Carrying Value of such property as of such date (prior to
any adjustment to be made pursuant to Section 4.4(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination the excess, if any, of (a) the (Carrying
Value of such property as of such date (prior to any adjustment to be made
pursuant to Section 4.4(d) as of such date) over (b) the fair market value of
such property as of such date (as determined under Section 4.4(d)).
ARTICLE III - PURPOSE
3.1 Purpose and Business. The purpose and nature of the business to be
conducted by the Partnership shall be (i) to engage in the common carrier
transportation of refined petroleum products and liquefied petroleum gases and
related products and related terminaling, storage and other activities through
ownership of the Pipeline System,, (ii) to engage directly in, or to enter into
any partnership, joint venture or similar arrangement to engage in, any business
activity that may be lawfully conducted by a limited partnership organized
pursuant to the Delaware Act and, in connection therewith, to exercise all of
the rights and powers conferred upon the Partnership pursuant to the agreements
relating to such business activity, (iii) to do anything necessary or
appropriate to the foregoing, and (iv) to engage in any other business activity
as permitted under Delaware law. The General Partner has no obligation or duty
to the Partnership or the Limited Partner to propose or approve, and in its sole
discretion may decline to propose or approve, the conduct by the Partnership
pursuant to such clauses (ii) and (iv) above of any business other than as
contemplated by clause (i) above.
3.2 Powers. The Partnership shall be Empowered to do any and all acts
and things necessary, appropriate, proper, advisable, incidental to or
convenient for the furtherance and accomplishment of the purposes and business
described in Section 3.1 and for the protection and benefit of the Partnership.
ARTICLE IV - CAPITAL CONTRIBUTIONS
4.1 Initial Contributions. The initial Capital Contributions of the
General Partner in the initial Limited Partners were made in accordance with
Article IV of the 1990 Agreement.
4.2 Additional Capital Contribution by the Investor Partnership. The
Investor Partnership, with the consent of the General Partner, may, but shall
not be obligated to, make additional Capital Contributions to the Partnership.
4.3 Preemptive Rights. The Limited Partner shall have preemptive rights
with respect to (a) additional Capital Contributions; (b) issuance or sale of
any class or series of Partnership Interests, whether unissued, held in the
treasury or hereafter created; (c) issuance of any obligations, evidences of
indebtedness or other securities of the Partnership convertible into or
exchangeable for, or carrying or accompanied by any rights to receive, purchase
or subscribe to, any such Partnership Interests; (d) issuance of any right of
subscription to or right to receive, or any warrant or option for the purchase
of, any such Partnership Interests; or (e) issuance or sale of any other
securities that may be issued or sold by the Partnership.
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4.4 Capital Accounts.
(a) The Partnership shall maintain for each Partner a separate
Capital Account in accordance with the rules of Treasury Regulation Section
1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of
all Capital Contributions made to the Partnership pursuant to this Agreement and
(ii) all items of Partnership income and gain (including, without limitation,
income and gain exempt from tax) computed in accordance with Section 4.4(b) and
allocated pursuant to Section 5.1 and decreased by (x) the amount of cash or Net
Agreed Value of all actual and deemed distributions of cash or property made to
such Partner pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 4.4(b) and allocated to
such Partner pursuant to Section 5.1.
(b) For purposes of computing the amount of any item of
income, gain, loss or deduction to be reflected in the Partners' Capital
Accounts, the determination, recognition and classification of any such item
shall be the same as its determination, recognition and classification for
federal income tax purposes (including, without limitation, any method of
depreciation, cost recovery or amortization used for that purpose), provided
that:
(i) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can
neither be deducted nor amortized under Section 709 of the Code, if
any, shall, for purposes of Capital Account maintenance, be treated as
an item of deduction at the time such fees and other expenses are
incurred and shall be allocated among the Partners pursuant to Section
5.1.
(ii) Except as otherwise provided in Treasury Regulation
Section 1.704-1(b) (2) (iv) (m), the computation of all items of
income, gain, loss and deduction shall be made without regard to any
election under Section 754 of the Code which may be made by the
Partnership and, as to those items described in Section 705(a)(l)(B) or
705(a) (2) (B) of the Code, without regard to the fact that such items
are not includable in gross income or are neither currently deductible
nor capitalized for federal income tax purposes.
(iii) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be determined as if the
adjusted basis of such property as of such date of disposition were
equal in amount to the Partnership's Carrying Value with respect to
such property as of such date.
(iv) In accordance with the requirements of Section 704(b) of
the Code, any deductions for depreciation, cost recovery or
amortization attributable to any Contributed Property shall be
determined as if the adjusted basis of such property on the date it was
acquired by the Partnership were equal to the Agreed Value of such
property. Upon an adjustment pursuant to Section 4.4(d) to the Carrying
Value of any Partnership property subject to depreciation, cost
recovery or amortization, any further deductions for such depreciation,
cost recovery or amortization attributable to such property shall be
determined (A) as if the adjusted basis of such property were equal to
the Carrying Value of such property immediately following such
adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life
12
(or, if applicable, the remaining useful life) as is applied for
federal income tax purposes; provided, however, that, if the asset has
a zero adjusted basis for federal income tax purposes, depreciation,
cost recovery or amortization deductions shall be determined using any
reasonable method that the General Partner may adopt.
(v) If the Partnership's adjusted basis in depreciable or cost
recovery property is reduced for federal income tax purposes pursuant
to Section 48(q) (1) or 48(q)(3) of the Code, the amount of such
reduction shall, solely for purposes hereof, be deemed to be an
additional depreciation or cost recovery deduction in the year such
property is placed in service and shall be allocated among the Partners
pursuant to Section 5.1. Any restoration of such basis pursuant to
Section 48(q) (2) of the Code shall, to the extent possible, be
allocated in the same manner to the Partners to whom such deemed
deduction was allocated.
(c) A transferee of a Partnership Interest shall succeed to a
pro rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(d) (i) Consistent with the provisions of Treasury Regulation
Section 1.704-1(b)(2)iv)(f), on an issuance of additional Partnership Interests
for cash or Contributed Property, the Capital Accounts of all Partners and the
Carrying Value of each Partnership property immediately prior to such issuance
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership Property, as if such Unrealized
Gain or Unrealized Loss had been recognized on an actual sale of each such
Property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 5.1. In determining such Unrealized
Gain or Unrealized Loss, the aggregate cash amount and fair market value of all
Partnership assets (including, without limitation, cash or cash equivalents)
immediately prior to the issuance of Partnership interests shall be determined
by the General Partner using such reasonable method of valuation as it may
adopt; provided however, the General Partner, in arriving at such valuation must
take into account the Limited Partner Equity Value and the General Partner
Equity Value, at such time. The General Partner shall allocate such aggregate
value among the assets of the Partnership (in such manner as it determines in
its sole discretion to be reasonable) to arrive at a fair market value for
individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-1(b) (2) (iv)
(f), immediately prior to any actual or deemed distribution to a Partner of any
Partnership property (other than a distribution of cash that is not in
redemption or retirement of a Partnership Interest), the Capital Accounts of all
Partners and the Carrying Value of each Partnership property shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized Gain or
Unrealized Loss had been recognized in a sale of such property immediately prior
to such distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 5.1. Any Unrealized
Gain or Unrealized Loss attributable to such property shall be allocated in the
same manner as Net Termination Gain or Net Termination Loss pursuant to Section
5.1(c); provided, however, that, in making any such allocation, Net Termination
Gain or Net Termination Loss actually realized shall be allocated first. In
determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount
and fair market value of all Partnership assets (including,
13
without limitation, cash or cash equivalents) immediately prior to a
distribution shall be determined and allocated by the Liquidator using such
reasonable methods of valuation as it may adopt.
4.5 Interest. No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
4.6 No Withdrawal. No Partner shall be entitled to withdraw any part of
its Capital Contributions or its Capital Account or to receive any distribution
from the Partnership, except as provided herein.
4.7 Loans from Partners. Loans by a Partner to the Partnership shall
not constitute Capital Contributions. If any Partner shall advance funds to the
Partnership in excess of the amounts required hereunder to be contributed by it
to the capital of the Partnership, the making of such excess advances shall not
result in any increase in the amount of the Capital Account of such Partner. The
amount of any such excess advances shall be a debt obligation of the Partnership
to such Partner and shall be payable or collectible only out of the Partnership
assets in accordance with the terms and conditions upon which such advances are
made.
ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations for Capital Account Purposes. For purposes of
maintaining the Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section 4.4(b)) shall be allocated among the
Partners in each taxable year (or portion thereof) as provided hereinbelow.
(a) Net Income. After giving effect to the special allocations
set forth in Section 5.1(d), Net Income for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable period shall be allocated as follows:
(i) First, 100% to the General Partner until the aggregate Net
Income allocated to the General Partner pursuant to this Section 5.1(a)
(i) for the current taxable year and all previous taxable years is
equal to the aggregate Net Losses allocated to the General Partner
pursuant to Section 5.1(b) (ii) for all previous taxable years; and
(ii) Second, the balance, if any, 100% to the General Partner
and the Limited Partner in accordance with their respective Percentage
Interests.
(b) Net Losses. After giving effect to the special allocations
set forth in Section 5.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated as follows:
(i) First, 100% to the General Partner and the Limited Partner
in accordance with their respective Percentage Interests, provided,
that Net Losses shall not be allocated pursuant to this Section 5.1(b)
(ii) to the extent that such allocation would cause any
14
Limited Partner to have a deficit balance in its Adjusted Capital
Account at the end of such taxable year (or increase any existing
deficit balance in its Adjusted Capital Account); and
(ii) Second, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to
the special allocations set forth in Section 5.1(d), all items of gain and loss
taken into account in computing Net Termination Gain or Net Termination Loss for
such taxable period shall be allocated in the same manner as such Net
Termination Gain or Net Termination Loss is allocated hereunder. All allocations
under this Section 5.1(c) shall be made after Capital Account balances have been
adjusted by all other allocations provided under this Section 5.1 and after all
distributions of Available Cash have been made with respect to the taxable
period ending on the date of the Partnership's liquidation pursuant to Section
13.2.
(i) If a Net Termination Gain is recognized (or deemed
recognized pursuant to Section 4.4(d)) from Termination Capital
Transactions, such Net Termination Gain shall be allocated between the
General Partner and the Limited Partner in the following manner:
(A) First, to each Partner having a deficit balance
in its Capital Account, in the proportion that such deficit
balance bears to the total deficit balances in the Capital
Accounts of all Partners, until each such Partner has been
allocated Net Termination Gain equal to any such deficit
balance in its Capital Account; and
(B) Second, 100% to the General Partner and the
Limited Partner, in accordance with their respective
Percentage Interests.
(ii) If a Net Termination Loss is recognized (or deemed
recognized pursuant to Section 4.4(d)) from Termination Capital
Transactions, such Net Termination Loss shall be allocated to the
Partners in the following manner:
(A) First, 100% to the General Partner and the
Limited Partner in proportion to, and to the extent of the
positive balances in their respective Capital Accounts; and
(B) Second, the balance, if any, 100% to the General
Partner.
(d) Special Allocation. Notwithstanding any other provision of
this Section 5.1, the following special allocations shall be made for such
taxable period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any
other provision of this Section 5.1, if there is a net decrease in
Partnership Minimum Gain during any Partnership taxable period, each
Partner shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in proportion to,
and to the extent of, an amount equal to the greater of (A) the portion
of such Partner's share of the net decrease in Partnership Minimum Gain
during such
15
taxable period that is allocable (in accordance with the principles set
forth in Treasury Regulation Section 1.704-(2)(g)) to the disposition
of Partnership property subject to one or more Nonrecourse Liabilities
of the Partnership, or (B) the deficit balance in such Partner's
Adjusted Capital Account at the end of such taxable period (modified,
as appropriate, by Treasury Regulation Section 1.704-2(g)). The items
to be so allocated shall be determined in accordance with Treasury
Regulation Section 1.704-(2)(f)(6) and 1.704-2(j)(2) and, for purposes
of this Section 5.1(d), each Partner's Adjusted Capital Account balance
shall be determined, and the allocation of income or gain required
hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 5.1(d) with respect to such
taxable period. This Section 5.1(d)(i) is intended to comply with the
Partnership Minimum Gain chargeback requirement in Treasury Regulation
Section 1.704-2(f) and shall be interpreted consistently therewith.
(ii) Chargeback of Minimum Gain Attributable to Partner
Nonrecourse Debt. Notwithstanding the other provisions of this Section
5.1 (other than Section 5.1(d)(i)), if there is a net decrease in
Minimum Gain Attributable to Partner Nonrecourse Debt during any
Partnership taxable period, any Partner with a share of Minimum Gain
Attributable to Partner Nonrecourse Debt at the beginning of such
taxable period shall be allocated items of Partnership income and gain
for such period (and, if necessary, subsequent periods) in proportion
to, and to the extent of, an amount equal to the greater of (A) the
portion of such Partner's share of the net decrease in the Minimum Gain
Attributable to Partner Nonrecourse Debt that is allocable (in
accordance with the principles set forth in Treasury Regulation Section
1.704-2(i)) to the disposition of Partnership property subject to such
Partner Nonrecourse Debt or (B) the deficit balance in such Partner's
Adjusted Capital Account at the end of such taxable period (modified,
as appropriate, by Treasury Regulation Section 1.704-2(i)). The items
to be so allocated shall be determined in a manner consistent with the
principles of Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2) and, for purposes of this Section 5.1(d), each Partner's
Adjusted Capital Account balance shall be determined, and the
allocation of income or gain required hereunder shall be effected,
prior to the application of any other allocations pursuant to this
Section 5.1(d), other than Section 5.1(d)(i), with respect to such
taxable period. This Section 5.1(d) (ii) is intended to comply with the
chargeback of items of income and gain requirement in Treasury
Regulation Section 1.704-2(i) and shall be interpreted consistently
therewith.
(iii) Qualified Income Offset. Except as provided in Sections
5.1(d)(i) and 5.1(d) (ii), in the event any Partner unexpectedly
receives any adjustments, allocation or distributions described in
Treasury Regulation Section 1.704-1(b) (2) (ii) (d) (4), 1.704-1(b) (2)
(ii) (d) (5), or 1.704-1(b) (2) (ii) (d) (6), items of Partnership
income and gain shall be specifically allocated to such Partner in an
amount and manner sufficient to eliminate, to the extent required by
the Treasury Regulations, the deficit balance, if any, in its Adjusted
Capital Account created by such adjustments, allocations or
distributions as quickly as possible; provided, that an allocation
pursuant to this Section 5.1(d) (iii) shall be made only if and to the
extent that such partner would have a deficit balance in its Adjusted
Capital Account after all other allocations provided in this Section
5.1 have been tentatively made as if this Section 5.1(d) (iii) were not
in this Agreement.
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(iv) Gross Income Allocations. In the event any Partner has a
deficit balance in its Capital Account at the end of any Partnership
taxable Period that is in excess of the sum of (A) the amount such
Partner is obligated to restore pursuant to any provision of this
Agreement and (B) the amount such Partner is deemed to be obligated to
restore pursuant to the penultimate sentences of Treasury Regulation
Sections 1.704-2(g)(i) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership gross income and gain in the
amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 5.1(d) (iv) 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 5.1 have been tentatively made as if Section 5.1(d)
(iii) and this Section 5.1(d)(iv) were not in this Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable period shall be allocated to the Partners in the same ratios
that Net Income or Net Losses, as the case may be, is allocated for the
taxable year. If the General Partner determines in its good faith
discretion that the Partnership's Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements
of the Treasury Regulations promulgated under Section 704(b) of the
Code, the General Partner is authorized, upon notice to the Limited
Partners, to revise the prescribed ratio to the numerically closest
ratio that does satisfy such requirements.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any taxable period shall be allocated 100% to the
Partner that bears the Economic Risk of Loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions
are attributable in accordance with Treasury Regulation Section
1.704-1T(b)(4)(iv)(h). If more than one Partner bears the Economic Risk
of Loss with respect to a Partner Nonrecourse Debt, such Partner
Nonrecourse Deductions attributable thereto shall be allocated between
or among such Partners in accordance with the ratios in which they
share such Economic Risk of Loss.
(vii) Nonrecourse Liabilities. The Partners agree that
Nonrecourse Liabilities of the Partnership in excess of the sum of (A)
the amount of Partnership Minimum Gain and (B) the total amount of
Nonrecourse Built-in Gain shall be allocated among the Partners in
accordance with their respective Percentage Interests.
(viii) Code Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant
to Section 734(b) or 743(b) of the Code is required, pursuant to
Treasury Regulation Section 1.704-1(b) (2) (iv) (m), to be taken into
account in determining Capital Accounts, the amount of such adjustment
to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to
such Section of the Treasury Regulations.
(ix) Curative Allocation. (A) Notwithstanding any other
provision of this Section 5.1, other than the Required Allocation
provisions, the Required Allocations shall
17
be taken into account in making the Agreed Allocations so that, to the
extent possible, the net amount of items of income, gain, loss and
deduction allocated to each Partner pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to the
net amount of such items that would have been allocated to each such
Partner under the Agreed Allocations had the Required Allocations and
this Curative Allocation not otherwise been provided in this Section
5.1. Notwithstanding the preceding sentence, Required Allocations
relating to (l) Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partnership
Minimum Gain and (2) Partner Nonrecourse Deductions shall not be taken
into account except to the extent that there has been a decrease in
Minimum Gain Attributable to Partner Nonrecourse Debt. Allocations
pursuant to this Section 5.1(d) (ix) (A) shall only be made with
respect to Required Allocations to the extent the General Partner
reasonably determines that such allocations will otherwise be
inconsistent with the economic agreement among the Partners. Further,
allocations pursuant to this Section 5.1(d) (ix) (A) shall be deferred
with respect to allocations pursuant to clauses (l) and (2) hereof to
the extent the General Partner reasonably determines that such
allocations are likely to be offset by subsequent Required Allocations.
(B) The General Partner shall have reasonable discretion, with
respect to each taxable period, to (1) apply the provisions of Section
5.1(d) (ix) (A) in whatever order is most likely to minimize the
economic distortions that might otherwise result from the Required
Allocations, and (2) divide all allocations pursuant to Section 5 1(d)
(ix) (A) among the Partners in a manner that is likely to minimize such
economic distortions.
5.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income
tax purposes, each item of income, gain, loss and deduction shall be allocated
among the Partners in the same manner as its correlative item of "book" income,
gain, loss or deduction is allocated pursuant to Section 5.1.
(b) In an attempt to eliminate Book-Tax Disparities
attributable to a Contributed Property or Adjusted Property, items of income,
gain, loss, depreciation, amortization and cost recovery deductions shall be
allocated for federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the
manner provided under Section 704(c) of the Code that takes into
account the variation between the Agreed Value of such property and its
adjusted basis at the time of contribution; and (B) except as otherwise
provided in Section 5.2(b) (iv), any item of Residual Gain or Residual
Loss attributable to a Contributed Property shall be allocated among
the Partners in the same manners as its correlative items of "book"
gain or loss is allocated pursuant to Section 5.1.
(ii) (A) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner consistent with
the principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to
18
such property and the allocators thereof pursuant to Section 4.4(d)(i)
or (ii), and (2) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a manner
consistent with Section 5.2(b) (i) (A); and (B) except as otherwise
provided in Section 5.2(b) (iv), any item of Residual Gain or Residual
Loss attributable to an Adjusted Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Section 5.1.
(iii) Except as otherwise provided in Section 5.2(b) (iv), all
other items of income, gain, loss and deduction shall be allocated
among the Partners in the same manner as their correlative item of
"book" gain or loss is allocated pursuant to Section 5.1.
(iv) Any items of income, gain, loss or deduction otherwise
allocable under Section 5.2(b)(i)(B), 5.2(b) (ii) (B) or 5.2(b) (iii)
shall be subject to allocation by the General Partner in a manner
designed to eliminate, to the maximum extent possible, Book-Tax
Disparities in a Contributed Property or Adjusted Property otherwise
resulting from the application of the "ceiling" limitation (under
Section 704(c) of the Code or Section 704(c) principles) to the
allocations provided under Section 5.2(b) (i) (A) or 5.2(b) (ii) (A)
(c) For the proper administration of the Partnership and for
the preservation of uniformity of the Units of the Investor Partnership (or any
class or classes thereof), the General Partner shall have sole discretion to (i)
adopt such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of this
Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury
Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise
to preserve or achieve uniformity of the Units of the Investor Partnership (or
any class or classes thereof). The General Partner may adopt such conventions,
make such allocations and make such amendments to this Agreement as provided in
this Section 5.2(c) only if such conventions, allocations or amendments would
not have a material adverse effect on the Partners, the holders of any class or
classes of Units of the Investor Partnership issued and outstanding or the
Partnership, and if such allocations are consistent with the principles of
Section 704 of the Code.
(d) The General Partner in its sole discretion may determine
to depreciate the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation method and useful life applied to the Partnership's common
basis of such property, despite the inconsistency of such approach with Treasury
Regulation Section 1.167(c)-1(a) (6). If the General Partner determines that
such reporting position cannot reasonably be taken, the General Partner may
adopt a depreciation convention under which all purchasers acquiring Units of
the Investor Partnership in the same month would receive depreciation, based
upon the same applicable rate as if they had purchased a direct interest in the
Partnership's property. If the General Partner chooses not to utilize such
aggregate method, the General Partner may use any other reasonable depreciation
convention to preserve the uniformity of the intrinsic tax characteristics of
any Units of the Investor Partnership
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that would not have a material adverse effect on the Limited Partners or the
Record Holders of any class or classes of Units of the Investor Partnership.
(e) Any gain allocated to the Partners upon the sale or other
taxable disposition of any Partnership asset shall, to the extent possible,
after taking into account other required allocations of gain pursuant to this
Section 5.2 be characterized as Recapture Income in the same proportions and to
the same extent as such Partners (or their predecessors in interest) have been
allocated any deductions directly or indirectly giving rise to the treatment of
such gains as Recapture Income.
(f) All items of income, gain, loss, deduction and credit
recognized by the Partnership for federal income tax purposes and allocated to
the Partners in accordance with the provisions hereof shall be determined
without regard to any election under Section 754 of the Code which may be made
by the Partnership; provided, however, that such allocations, once made, shall
be adjusted as necessary or appropriate to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of allocation
of income, gain, loss or deduction between a transferor and a transferee of a
Partnership Interest as it determines necessary, to the extent permitted or
required by Section 706 of the Code and the regulations or rulings promulgated
thereunder.
5.3 Requirement of Distributions. Within fifty days following the end
of each calendar quarter, an amount equal to 100% of Available Cash with respect
to much quarter (or period) shall be distributed by the Partnership to the
Partners in accordance with their respective Percentage Interests. The
immediately preceding sentence shall not require any distribution of cash if and
to the extent such distribution would be prohibited by applicable law or by any
loan agreement, security agreement, mortgage, debt instrument or other agreement
or obligation to which the Partnership is a party or by which it is bound or its
assets are subject.
ARTICLE VI - MANAGEMENT AND OPERATION OF BUSINESS
6.1 Management. The General Partner shall conduct, direct and exercise
full control over all activities of the Partnership. Except as otherwise
expressly provided in this Agreement, all management powers over the business
and affairs of the Partnership shall be exclusively vested in the General
Partner, and the Limited Partner shall have no right of control or management
power over the business and affairs of the Partnership. In addition to the
powers now or hereafter granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner under any other
provision of this Agreement, the General Partner, subject to Section 6.3, shall
have full power and authority to do all things and on such terms as it, in its
sole discretion, may deem necessary or desirable (i) to conduct the business of
the Partnership, to exercise all powers set forth in Section 3.2 and to
effectuate the purposes set forth in Section 3.1, including, without limitation,
(A) the making of any expenditures, the lending or borrowing of money, the
assumption or guarantee of, or other contracting for, indebtedness and other
liabilities, the issuance of evidences of indebtedness and the incurring of any
other obligations and the securing of same by mortgage, deed of trust or other
lien or encumbrance; (B) the making of tax, regulatory and other filings., or
rendering of periodic or
20
other reports to governmental or other agencies having jurisdiction over the
business or assets of the Partnership, (C) the acquisition, disposition,
mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the
assets of the Partnership or the merger or other combination of the Partnership
with or into another Person (the matters described in this clause (C) being
subject, however, to any prior approval that may be required by Section 6.3);
(D) the use of the assets of the Partnership (including, without limitation,
cash on hand) for any purpose consistent with the terms of this Agreement,
including, without limitation, the financing of the conduct of the operations of
the Partnership, the lending of funds to other Persons and the repayment of
obligations of the Partnership; (E) the negotiation, execution and performance
of any contracts, conveyances or other instruments (including, without
limitation, instruments that limit the liability of the Partnership under
contractual arrangements to all or particular assets of the Partnership, with
the other party to the contract to have no recourse against the General Partner
or its assets other than its interest in the Partnership, even if same results
in the terms of the transaction being less favorable to the Partnership than
would otherwise be the case); (F) the distribution of Partnership cash; (G) the
selection and dismissal of employees and agents (including without limitation,
employees having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring; (H) the maintenance of such insurance for the benefit of
the Partnership and the Partners as it deems necessary or appropriate; (I) the
formation of, or acquisition of an interest in, and the contribution of property
to, any further limited or general partnerships, joint ventures or other
relationships; (J) the control of any matters affecting the rights and
obligations of the Partnership, including, without limitation, the bringing and
defending of actions at law or in equity and otherwise engaging in the conduct
of litigation and the incurring of legal expense and the settlement of claims
and litigation; (K) the indemnification of any person against liabilities and
contingencies to the extent permitted by law; and (L) the undertaking of any
action in connection with the Partnership's participation in the business
activities that may be made available to it (including, without limitation,
contributions or loans of funds by the Partnership in connection with its
participation in such business activities).
6.2 Certificate of Limited Partnership. The General Partner has caused
the Certificate of Limited Partnership to be filed with the Secretary of State
of the State of Delaware as required by the Delaware Act and shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be determined by the General Partner in its sole discretion to be reasonable
and necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the Limited
Partner has limited liability) in the State of Delaware or any other state in
which the Partnership may elect to do business or own property. To the extent
that such action is determined by the General Partner in its sole discretion to
be reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate of Limited Partnership and do
all things to maintain the Partnership as a limited partnership (or a
partnership in which the Limited Partner has limited liability) under the laws
of the State of Delaware or of any other state in which the Partnership may
elect to do business or own property. Subject to the terms of Section 7.4(a),
the General Partner shall not be required, before or after filing, to deliver or
mail a copy of the Certificate of Limited Partnership, any qualification
document or any amendment thereto to the Limited Partner.
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6.3 Restrictions on General Partner's Authority.
(a) The General Partner may not, without written approval of
the specific act by the Limited Partner or by other written instrument executed
and delivered by the Limited Partner subsequent to the date of this Agreement,
take any action in contravention of this Agreement, including, without
limitation, (i) any act that would make it impossible to carry on the ordinary
business of the Partnership, except as otherwise provided in this Agreement;
(ii) possess Partnership property, Or assign any rights in specific Partnership
property, for other than a Partnership purpose; (iii) admit a Person as a
Partner, except as otherwise provided in this Agreement; (iv) amend this
Agreement in any manner, except as otherwise provided in this Agreement; or (v)
transfer its interest as general partner of the Partnership, except as otherwise
provided in this Agreement.
(b) Except as provided in Article XIII, the General Partner
may not sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination with any other
Person) without the approval of the Limited Partner; provided, however, that
this provision shall not preclude or limit the General Partner's ability to
mortgage, pledge, hypothecate or grant a security interest in all or
substantially all of the Partnership's assets and shall not apply to any forced
sale of any or all of the Partnership's assets pursuant to the foreclosure of,
or other realization upon, any such encumbrance.
(c) At all times while serving as the general partner of the
Partnership, the General Partner shall not make any dividend or distribution on,
or repurchase any shares of, its stock or take any other action within its
control if the effect of such dividend, distribution, repurchase or other action
would be to reduce its net worth below an amount necessary to receive an Opinion
of Counsel that the Partnership will be treated as a partnership for federal
income tax purposes.
6.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 6.4 and elsewhere in
this Agreement, the General Partner shall not be compensated for its serviced as
general partner of the Partnership
(b) The General Partner shall be reimbursed on a monthly
basis, or such other basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including, without limitation, amounts paid
to any Person to perform services for the Partnership) and (ii) that portion of
the General Partner's or its Affiliates' legal, accounting, investor
communications, utilities, telephone, secretarial, travel, entertainment,
bookkeeping, reporting, data processing, office rent and other office expenses
(including, without limitation, overhead charges), salaries, fees and other
compensation and benefit expenses of employees, officers and directors, other
administrative or overhead expenses and all other expenses, in each such case,
necessary or appropriate to the conduct of the Partnership's business and
allocable to the Partnership or otherwise incurred by the General Partner in
connection with operating the Partnership's business (including, without
limitation, expenses allocated to the General Partner by its
22
Affiliates). The General Partner shall determine the fees and expenses that are
allocable to the Partnership in any reasonable manner determined by the General
Partner in its sole discretion. Such reimbursements shall be in addition to any
reimbursement to the General Partner as a result of indemnification pursuant to
Section 6.7. Notwithstanding the foregoing grant of authority, expenses for
administrative services and overhead allocated to the Partnership, the Investor
Partnership and the General Partner, considered together, by PEC or its
Affiliates (excluding the General Partner) shall not exceed $5 million in 1990
and $4 million in each year thereafter during the Support Period (as defined in
the Investor Partnership Agreement), subject to a reasonable adjustment for
inflation beginning in 1992.
(c) The General Partner in its sole discretion and without the
approval of the Limited Partner may propose and adopt on behalf of the
Partnership employee benefit plans (including, without limitation, plans
involving the issuance of Units), for the benefit of employees of the General
Partner, the Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership.
6.5 Outside Activities.
(a) After the Closing Date, the General Partner shall limit
its activities to those required or authorized by this Agreement.
(b) Except as provided in Section 6.5(a), each Indemnitee is
free to engage in any business, including any business that is in competition
with the business of the Partnership. The General Partner and any other Persons
affiliated with the General Partner may acquire Units or other partnership
securities of the Investor Partnership and shall be entitled to exercise all
rights of an Assignee or limited partner, as applicable, relating to such Units
or partnership securities, as the case may be.
(c) Without limiting Sections 6.5(a) and 6.5(b), but
notwithstanding anything to the contrary in this Agreement, the competitive
activities of Indemnitees described in the Registration Statement are hereby
approved by all Partners, and it shall not be deemed to be a breach of the
General Partner's fiduciary duty for the General Partner to permit an Indemnitee
to engage in a business opportunity in preference to or to the exclusion of the
Partnership.
6.6 Loans to and from the General Partner; Contracts with Affiliates.
(a) The General Partner, the Limited Partner or any Affiliates
thereof may lend to the Partnership, and the Partnership may borrow, funds
needed or desired by the Partnership for such periods of time as the General
Partner may determine; provided, however, that neither the General Partner, the
Limited Partner or any of their Affiliates may charge the Partnership interest
at a rate greater than the rate that would be charged the Partnership (without
reference to the General Partner's financial abilities or guarantees) by
unrelated lenders on comparable loans. The Partnership shall reimburse the
General Partner, the Limited Partner or any of their Affiliates, as the case may
be, for any costs (other than any additional interest costs) incurred by it in
connection with the borrowing of funds obtained by the General Partner, the
Limited Partner or any of their Affiliates and loaned to the Partnership.
23
(b) The Investor Partnership may lend or contribute to the
Partnership, and the Partnership may borrow, funds on terms and conditions
established in the sole discretion of the General Partner. The foregoing
authority shall be exercised by the General Partner in its sole discretion and
shall not create any right or benefit in favor of the Investor Partnership or
any other Person. The Partnership may not lend funds to the General Partner or
any of its Affiliates, otherwise than for short-term funds management purposes.
(c) The General Partner may itself, or may enter into an
agreement with any of its Affiliates to, render services to the Partnership. Any
service rendered to the Partnership by the General Partner or any of its
Affiliates shall be on terms that are fair and reasonable to the Partnership;
provided, however, that the requirements of this Section 6.6(c) shall be deemed
satisfied as to any transaction the terms of which are no less favorable to the
Partnership than those generally being provided to or available from unrelated
third parties. The provisions of Section 6.4 shall apply to the rendering of
services described in this Section 6.6(c).
(d) The Partnership may transfer assets to joint ventures,
other Partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the General Partner nor any of its Affiliates
shall sell, transfer or convey any property to, or purchase any property from
the Partnership, directly or indirectly, except pursuant to transactions that
are fair and reasonable to the Partnership; provided, however, that the
requirements of this Section 6.6(e) shall be deemed to be satisfied as to any
transaction the terms of which are no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties.
(f) The General Partner and its Affiliates will have no
obligation to permit the Partnership or the Investor Partnership to use any
facilities of the General Partner and its Affiliates, except as may be provided
in contracts entered into from time to time specifically dealing with such use,
nor shall there be any obligation on the General Partner or its Affiliates to
enter into such contracts.
(g) Without limitation of Sections 6.6(a) through 6.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement under the caption
"Conflicts of Interest and Fiduciary Responsibility" are hereby approved by all
Partners.
6.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, each Indemnitee shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities (joint or several), expenses (including,
without limitation, legal fees and expenses), judgments, fines, settlements and
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status
24
as (i) the General Partner, a Departing Partner or any of their Affiliates, (ii)
an officer, director, employee, partner, agent or trustee of the General
Partner, any Departing Partner or any of their Affiliates or (iii) a Person
serving at the request of the Partnership in another entity in a similar
capacity, provided, that in each case the Indemnitee acted in good faith, in a
manner which such Indemnitee believed to be in, or not opposed to, the best
interests of the Partnership and, with respect to any criminal proceeding, had
no reasonable cause to believe its conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere, or its equivalent, shall not create a Presumption that
the Indemnitee acted in a manner contrary to that specified above. Any
indemnification pursuant to this Section 6.7 shall be made only out of the
assets of the Partnership.
(b) To the fullest extent permitted by law, expenses
(including, without limitation, legal fees and expenses) incurred by an
Indemnitee in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Partnership prior to the final disposition
of such claim, demand, action, suit or proceeding upon receipt by the
Partnership of an undertaking by or on behalf of the Indemnitee to repay such
amount if it shall be determined that the Indemnitee is not entitled to be
indemnified as authorized in this Section 6.7.
(c) The indemnification provided by this Section 6.7 shall be
in addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitees' capacity as (i) the General
Partner, a Departing Partner or an Affiliate thereof, (ii) an officer, director,
employee, partner, agent or Departing Partner or an Affiliate thereof or (iii) a
Person serving at the request of the Partnership in another entity in a similar
capacity, and shall continue as to an Indemnitee who has ceased to serve in such
capacity and as to actions in any other capacity.
(d) The Partnership may purchase and maintain (or reimburse
the General Partner or its Affiliates for the cost of) insurance, on behalf of
the General Partner and such other Person as the General Partner shall
determine, against any liability that may be asserted against or expense that
may be incurred by such Person in connection with the Partnership's activities,
whether or not the Partnership would have the power to indemnify such Person
against such liabilities under the provisions of this Agreement.
(e) For purposes of this Section 6.7, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the Partnership
also imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 6.7(a); and action taken
or omitted by it with respect to an employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partner
to personal liability by reason of the indemnification provisions set forth in
this Agreement.
25
(g) An Indemnitee shall not be denied indemnification in whole
or in Part under this Section 6.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 6.7 are for the benefit of
the Indemnitees their heirs, successors, assigns and administrators and shall
not be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 6.7
or any provision hereof shall in any manner terminate, reduce or impair the
right of any past, present or future Indemnitee to be indemnified by the
Partnership, nor the obligation of the Partnership to indemnify any such
Indemnitee under and in accordance with the provisions of this Section 6.7 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
6.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partner, or any other Persons who have acquired
interests in the Partnerships, for losses sustained or liabilities incurred as a
result of any act or omission if such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as General Partner
set forth in Section 6.1(a), the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents, and the General Partner
shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by the General Partner in good faith.
(c) Any amendment, modification or repeal of this Section 6.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the liability to the Partnership and the Limited
Partner of the General Partner, its directors, officers and employees under this
Section 6.8 as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.
6.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or
the Investor Partnership Agreement, whenever a potential conflict of interest
exists or arises between the General Partner or any of its Affiliates, on the
one hand, and the Partnership, or the Investor Partnership, on the other hand,
any resolution or course of action in respect of such conflict of interest shall
be permitted and deemed approved by the Limited Partner, and shall not
constitute a breach of this Agreement, of the Investor Partnership Agreement, of
any agreement contemplated herein or therein, or of any duty stated or implied
by law or equity, if the resolution or course of action is or, by operation of
this Agreement is deemed to be, fair and reasonable to
26
the Partnership. The General Partner shall be authorized in connection with its
resolution of any conflict of interest to consider (i) the relative interests of
any party to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interests (ii) any customary or accepted industry
practices and any customary or historical dealings with a Particular Person;
(iii) any applicable generally accepted accounting or engineering practices or
Principles; and (iv) such additional factors as the General Partner determines
in its sole discretion to be relevant, reasonable or appropriate under the
circumstances. Nothing contained in this Agreement, however, is intended to nor
shall it be construed to require the General Partner to consider the interests
of any Person other than the Partnership. In the absence of bad faith by the
General Partner, the resolution, action or terms so made, taken or provided by
the General Partner with respect to such matter shall not constitute a breach of
this Agreement or any other agreement contemplated herein or a breach of any
standard of care or duty imposed herein or therein or under the Delaware Act or
any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement
contemplated hereby provides that the General Partner or any of its Affiliates
is permitted or required to make a decision (i) in its "sole discretion" or
"discretion," that it deems necessary or appropriate" or under a grant of
similar authority or latitude, the General Partner or such Affiliate shall be
entitled to consider only such interests and factors as it desires and shall
have no duty or obligation to give any consideration to any interest of, or
factors affecting, the Partnership, the Investor Partnership, the Limited
Partner or any holder of Units, or (ii) in "good faith" or under another express
standard, the General Partner or such Affiliate shall act under such express
standard and shall not be subject to any other or different standards imposed by
this Agreement, the Investor Partnership Agreement, any other agreement
contemplated hereby or under the Delaware Act or any other law, rule or
regulation. In addition, any actions taken by the General Partner consistent
with the standards of "reasonable discretion" set forth in the definition of
Available Cash shall not constitute a breach of any duty of the General Partner
to the Partnership or the Limited Partner. The General Partner shall have no
duty, express or implied, to sell or otherwise dispose of any asset of the
Partnership, other than in the ordinary course of business. No borrowing by the
Partnership or the approval thereof by the General Partner shall be deemed to
constitute a breach of any duty of the General Partner to the Partnership or the
Limited Partner by reason of the fact that the purpose or effect of such
borrowing is directly or indirectly to enable the General Partner to receive
incentive distributions pursuant to the Investor Partnership Agreement.
(c) Whenever a particular transaction, arrangement or
resolution of a conflict of interest is required under this Agreement to be
"fair and reasonable" to any Person, the fair and reasonable nature of such
transaction, arrangement or resolution shall be considered in the context of all
similar or related transactions.
6.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
27
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted in
reliance upon the opinion (including, without limitation, an Opinion of Counsel)
of such Persons as to matters that such General Partner reasonably believes to
be within such Person's professional or expert competence shall be conclusively
presumed to have been done or committed in good faith and in accordance with
such opinion.
(c) The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney or attorneys-fact. Each such
attorney shall, to the extent provided by the General Partner in the power of
attorney, have full power and authority to do and perform each and every act and
duty that is permitted or required to be done by the General Partner hereunder.
(d) Any standard of care and duty imposed by this Agreement or
under the Delaware Act or any applicable law, rule or regulation shall be
modified, waived or limited as required to permit the General Partner to act
under this Agreement or any other agreement contemplated by this Agreement and
to make any decision pursuant to the authority prescribed in this Agreement so
long as such action is reasonably believed by the General Partner to be in the
best interests of the Partnership.
6.11 Title to Partnership Assets. Title to Partnership Assets, whether
real, personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any Ownership interest in such Partnership Assets or
any portion thereof. Title to any or all of the Partnership Assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine. The General Partner hereby declares and
warrants that any Partnership Assets for which record title is held in the name
of the General Partner shall be held by the General Partner for the use and
benefit of the Partnership in accordance with the provisions of this Agreement;
provided, however, that the General Partner shall use its reasonable efforts to
cause record title to such assets (other than those assets in respect of which
the General Partner determines that the expense and difficulty of conveyancing
makes transfer of record title to the Partnership impracticable) to be vested in
the Partnership as soon as reasonably practicable. All Partnership Assets shall
be recorded as the property of the Partnership in its books and records,
irrespective of the name in which record title to such Partnership Assets are
held.
6.12 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any contracts on behalf of the Partnership, and
such Person shall be entitled to deal with the General Partner as if it were the
Partnership's sole party in interest, both legally and beneficially. The Limited
Partner hereby waives any and all defenses or other remedies that may be
available against such Person to contest, negate or disaffirm any action of the
General Partner in connection with any such dealing. In no event shall any
Person dealing with the General Partner or its representatives be obligated to
ascertain that the terms of this Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
its representatives. Each and every
28
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (a) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect, (b) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership and (c)
such certificate, document or instrument was duly executed and delivered in
accordance with the terms and provisions of this Agreement and is binding upon
the Partnership.
ARTICLE VII - RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER
7.1 Limitation of Liability. The Limited Partner shall have no
liability under this Agreement except as expressly provided in this Agreement or
the Delaware Act.
7.2 Management of Business. The Limited Partner shall not take part in
the operation, management or control (within the meaning of the Delaware Act) of
the Partnership's business, transact any business in the Partnership's name or
have the power to sign documents for or otherwise bind the Partnership. The
transaction of any such business by the General Partner, any of its Affiliates
or any officer, director, employee, partner, agent or trustee of the General
Partner or any of its Affiliates, in its capacity as such, shall not affect,
impair or eliminate the limitations on the liability of the Limited Partner
under this Agreement.
7.3 Return of Capital. The Limited Partner shall not be entitled to the
withdrawal or return of his Capital Contribution, except to the extent, if any,
that distributions made pursuant to this Agreement or upon termination of the
Partnership may be considered as such by law and then only to the extent
provided for in this Agreement.
7.4 Rights of the Limited Partner Relating to the Partnership.
(a) In addition to other rights provided by this Agreement or
by applicable law and except as limited by Section 7.4(b), the Limited Partner
shall have the right, for a purpose reasonably related to the Limited Partner's
interest as a limited partner to the Partnership, upon reasonable demand and at
the Limited Partner's own expense:
(i) to obtain true and full information regarding the status
of the business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of
the Partnership's federal, state and local tax returns for each year;
(iii) to have furnished to him, upon notification to the
General Partner, a current list of the name and last known business,
residence or mailing address of each Partner;
(iv) to have furnished to him, upon notification to the
General Partner, a copy of this Agreement and the Certificate of
Limited Partnership and all amendments thereto;
29
(v) to obtain true and full information regarding the amount
of cash and description and statement of the Agreed Value of any other
Capital Contribution by each Partner and which each Partner has agreed
to contribute in the future, and the date on which each became a
Partner; and
(vi) to obtain such other information regarding the affairs of
the Partnership as is just and reasonable.
(b) Notwithstanding any other provision of this Agreement, the
General Partner may keep confidential from the Limited Partner for such period
of time as the General Partner deems reasonable, any information that the
General Partner reasonably believes to be in the nature of trade secrets or
other information the disclosure of which the General Partner in good faith
believes is not in the best interests of the Partnership or could damage the
partnership or the Investor Partnership or that the Partnership or the Investor
Partnership is required by law or by agreements with third parties to keep
confidential.
ARTICLE VIII - BOOKS, RECORDS, ACCOUNTING AND REPORTS
8.1 Records and Accounting. The General Partner shall keep or cause to
be kept at the principal office of the Partnership appropriate books and records
with respect to the Partnership business including, without limitation, all
books and records necessary to provide to the Limited Partner any information,
lists and copies of documents required to be provided pursuant to Section
7.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including, without limitation, books of
account and records of Partnership proceedings, may be kept on, or be in the
form of, computer disks, hard disks, punch cards, magnetic tape, photographs,
micrographics or any other information storage device, provided, that the books
and records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial reporting purposes, on an accrual basis in accordance
with generally accepted accounting principles.
8.2 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
ARTICLE IX - TAX MATTERS
9.1 Preparation of Tax Returns. The General Partner shall arrange for
the preparation and timely filing of all returns of Partnership income, gains,
deductions, losses and other items required of the Partnership for federal and
state income tax purposes and shall use all reasonable efforts to furnish,
within ninety days of the close of each taxable year of the Partnership, the tax
information reasonably required by the Limited Partner for federal and state
income tax reporting purposes. The classification, realization and recognition
of income, gain, losses and deductions and other items shall be on the accrual
method of accounting for federal income tax purposes. The taxable year of the
Partnership shall be the calendar year.
9.2 Tax Elections. Except as otherwise provided herein, the General
Partner shall in its sole discretion, determine whether to make any available
election pursuant to the Code; provided, however, that the General Partner shall
make the election under Section 754 of the Code in accordance with applicable
regulations thereunder. The General Partner shall have the
30
right to seek to revoke any such election (including, without limitation, the
election under Section 754 of the Code) upon the General Partner's determination
in its sole discretion that such revocation is in the best interests of the
Limited Partner.
9.3 Tax Controversies. Subject to the provisions hereof, the General
Partner is designated the Tax Matters Partner (as defined in Section 6231 of the
Code), and is authorized and required to represent the Partnership (at the
Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities, including, without limitation, resulting
administrative and judicial proceedings, and to expend Partnership funds for
professional services and costs associated therewith. The Limited Partner agrees
to cooperate with the General Partner and to do or refrain from doing any or all
things reasonably required by the General Partner to conduct such proceedings.
9.4 Organizational Expenses. The Partnership shall elect to deduct
expenses, if any, incurred by it in organizing the Partnership ratably over a
sixty-month period as provided in Section 709 of the Code.
9.5 Withholding. Notwithstanding any other provision of this Agreement,
the General Partner is authorized to take any action that it determines in its
sole discretion to be necessary or appropriate to cause the Partnership to
comply with any withholding requirements established under the Code or any other
federal, state or local law including, without limitation, pursuant to Sections
1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is
required to withhold and pay over to any taxing authority any amount resulting
from the allocation or distribution of income to any Partner (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld shall be
treated as a distribution of cash pursuant to Section 5.3 in the amount of such
withholding from such Partner.
9.6 Opinions of Counsel. Notwithstanding any other provision of this
Agreement, if the Partnership is taxable for federal income tax purposes as a
corporation or otherwise taxed for federal income tax purposes as an entity at
any time and, pursuant to the provisions of this Agreement, an Opinion of
Counsel could otherwise be required to the effect that an action will not cause
the Partnership to become so taxable as a corporation or other entity or to be
treated as an association taxable as a corporation, such requirement for an
Opinion of Counsel shall be deemed automatically waived.
ARTICLE X - TRANSFER OF INTERESTS
10.1 Transfer.
(a) The term "transfer," when used in this Article X with
respect to a Partnership Interest, shall be deemed to refer to an appropriate
transaction by which a Partner disposes of its Partnership Interest to another
Person and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article X. Any transfer or purported
31
transfer of a Partnership Interest not made in accordance with this Article X
shall be null and void.
10.2 Transfer of General Partner's Partnership Interest.
(a) Except as set forth in Section 10.2(b), the General
Partner may not transfer all or any part of its Partnership Interest.
(b) Neither Section 10.2(a) nor any other provision of this
Agreement shall, be construed to prevent (and the Limited Partner does hereby
expressly consent to) (i) the transfer by the General Partner of all or a
portion of its Partnership Interest to one or more Affiliates, which transferred
Partnership Interest, to the extent not transferred to a successor General
Partner, shall constitute a Limited Partner's Partnership Interest or (ii) the
transfer by the General Partner of all its Partnership Interest upon its merger,
consolidation or other combination into any other Person or the transfer by it
of all or substantially all of its assets to another Person if, in the case of a
transfer described in either clause (i) or (ii) of this sentence, the rights and
duties of the General Partner with respect to the Partnership Interest so
transferred as a General Partner's Partnership Interest (or the rights and
duties of a Limited Partner with respect to the Partnership Interest so
transferred as a Limited Partner's Partnership Interest) are assumed by the
transferee and the transferee agrees to be bound by the provisions of this
Agreement and the Investor Partnership Agreement; provided, that in either such
case, such transferee furnishes to the Partnership an Opinion of Counsel that
such merger, consolidation, combination, transfer or assumption will not result
in a loss of limited liability of the Limited Partner or cause the Partnership
to be taxable as a corporation or otherwise taxed as an entity for federal
income tax purposes. In the case of a transfer pursuant to this Section 10.2(b)
to a Person proposed as a successor general partner of the Partnership, the
transferee or successor (as the case may be) shall be admitted to the
Partnership as the General Partner immediately prior to the transfer of the
Partnership Interest, and the business of the Partnership shall continue without
dissolution.
10.3 Transfer of the Limited Partner's Partnership Interest. If the
Limited Partner merges, consolidates or otherwise combines into any other Person
or transfers all or substantially all of its assets to another Person, such
Person may become a substituted Limited Partner pursuant to Article XI. Except
as set forth in the immediately preceding sentence, the Limited Partner may not
transfer all or any part of its Partnership Interest or withdraw from the
Partnership.
ARTICLE XI - ADMISSION OF PARTNERS
11.1 Admission of Substituted Limited Partner. Any Person that is the
successor in interest to the Limited Partner as described in Section 10.3 shall
be admitted to the Partnership as a limited partner upon (a) furnishing to the
General Partner (i) acceptance in form satisfactory to the General Partner of
all of the terms and conditions of this Agreement and (ii) such other documents
or instruments as may be required to effect its admission as a limited partner
in the Partnership and (b) obtaining the consent of the General Partner, which
consent may be withheld or granted in the sole discretion of the General
Partner. Such Person shall be admitted to the Partnership as a Limited Partner
immediately prior to the transfer of the Partnership Interest, and the business
of the Partnership shall continue without dissolution.
32
11.2 Admission of Successor or General Partner. A successor General
Partner approved pursuant to Section 12.1 or the transferee of or successor to
all of the General Partner's Partnership Interest Pursuant to Section 10.2 who
is proposed to be admitted as a successor General Partner shall be admitted to
the Partnership as the General Partner, effective immediately prior to the
withdrawal or removal of the General Partner pursuant to Section 12.1 or the
transfer of the General Partner's Partnership Interest Pursuant to Section 10.2;
provided, however, that no such successor shall be admitted to the Partnership
until the terms of Section 10.2 have been complied with. Any such successor
shall carry on the business of the Partnership without dissolution. In each
case, the admission shall be subject to the successor General Partner executing
and delivering to the Partnership an acceptance of all of the terms and
conditions of this Agreement and such other documents or instruments as may be
required to effect the admission.
11.3 Amendment of Agreement and Certificate of Limited Partnership. To
effect the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Delaware Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement and, if required by law, to prepare and
file an amendment to the Certificate of Limited Partnership and may for this
purpose, among others, exercise the power of attorney granted pursuant to
Section 1.4.
ARTICLE XII - WITHDRAWAL OR REMOVAL OF PARTNERS
12.1 Withdrawal of the General Partner. The General Partner shall be
deemed to have withdrawn from the Partnership upon the occurrence of any one of
the following events (each such event herein referred to as an "Event of
Withdrawal");
(i) the General Partner voluntarily withdraws from the
Partnership by giving written notice to the Limited Partner;
(ii) the General Partner transfers all of its rights as
General Partner pursuant to Section 10.2;
(iii) the General Partner is removed pursuant to Section 12.2;
(iv) the general partner of the Investor Partnership withdraws
from, or is removed as the general partner of, the Investor Partnership
and a successor general partner is not appointed in accordance with the
Investor Partnership Agreement;
(v) the General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition; (C)
files a petition or answer seeking for itself a reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief under any law; (D) files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against the General Partner in a proceeding of the type described
in clauses (A)-(C) of this sentence; or (E) seeks, consents to or
acquiesces in the appointment of a trustee receiver or liquidator of
the General Partner or of all or any substantial part of its
properties;
33
(vi) a final and non-appealable judgment is entered by a court
with appropriate jurisdiction ruling that the General Partner is
bankrupt or insolvent, or a final and non-appealable order for relief
is entered by a court with appropriate jurisdiction against the General
Partner, in each case under any federal or state bankruptcy or
insolvency laws as now or hereafter in effect; or
(vii) a certificate of dissolution or its equivalent is filed
for the General Partner, or ninety days expire after the date of notice
to the General Partner of revocation of its charter without a
reinstatement of its charter, under the laws of its state of
incorporation.
If an Event of Withdrawal specified in this Section 12.1(a)(v), (vi) or (vii)
occurs, the withdrawing General Partner shall give written notice to the Limited
Partner within thirty days after such occurrence. The Partners hereby agree that
only the Events of Withdrawal described in this Section 12.1 shall result in the
withdrawal of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership
upon the occurrence of an Event of Withdrawal will not constitute a breach of
this Agreement under the following circumstances: (i) at any time that the
General Partner ceases to be a General Partner pursuant to Section 12.1(a) (ii)
or is removed pursuant to Section 12.2; or (ii) at any time that the General
Partner is removed as provided in Section 12.1(a) (iii). If the General Partner
gives a notice of withdrawal pursuant to Section 12.1(a) (i) or if the General
Partner is removed pursuant to Section 12.2 or withdraws pursuant to Section
12.1(a) (ii), the Limited Partner may, prior to the effective date of such
withdrawal, elect a successor General Partner. If, prior to the effective date
of the General Partner's withdrawal or removal, a successor is not selected by
the Limited Partner as provided herein or the Partnership does not receive an
Opinion of Counsel that such withdrawal (following the selection of the
successor General Partner) would not result in the loss of the limited liability
of the Limited Partner or cause the Partnership to be taxable as a corporation
or otherwise taxed as an entity for federal income tax purposes, the Partnership
shall be dissolved in accordance with Section 13.1. If a successor General
Partner is elected and the Opinion of Counsel is rendered as provided in the
immediately preceding sentence, such successor shall be admitted (subject to
Section 11.2) immediately prior to the effective time of the withdrawal or
removal of the Departing Partner and shall continue the business of the
Partnership without dissolution.
12.2 Removal of the General Partner. The General Partner may be removed
if such removal is approved by the Limited Partner. Any such action by the
Limited Partner for removal of the General Partner must also provide for the
election and succession of a new General Partner. Such removal shall be
effective immediately following the admission of the successor General Partner
pursuant to Article XI. The right of the Limited Partner to remove the General
Partner shall not exist or be exercised unless the Partnership has received an
Opinion of Counsel that the removal of the General Partner and the selection of
a successor General Partner will not result in the loss of limited liability of
the Limited Partner or the taxation of the Partnership as a corporation or
otherwise result in the Partnership being taxed as an entity for federal income
tax purposes.
12.3 Interest of Departing Partner and Successor General Partner. The
Partnership Interest of a Departing Partner departing as a result of withdrawal
or removal pursuant to
34
Section 12.1 or 12.2 shall (unless it is otherwise required to be converted into
Units pursuant to Section 13.2(b) of the Investor Partnership Agreement) be
purchased by the successor to the Departing Partner for cash in an amount equal
to the fair market value of the Departing Partner's Partnership Interest,
determined as of the effective date of its departure in the manner specified in
the Investor Partnership Agreement for the purchase of a Departing Interest (as
defined in the Investor Partnership Agreement). Such purchase (or conversion
into Units, as applicable) shall be a condition to the admission to the
Partnership of the Successor as the General Partner. Notwithstanding the
foregoing, an assignment of all or any portion of a General Partner's (or
Departing General Partner's) Partnership Interest to the Investor Limited
Partnership as Limited Partner, or to any other Person (other than an
individual) the ownership interest of which is then transferred to the Investor
Limited Partnership, can be made in exchange for an increased interest in the
Investor Limited Partnership and in lieu of a cash purchase.
12.4 Reimbursement of Departing Partner. The Departing Partner shall be
entitled to receive all reimbursements due such Departing Partner pursuant to
Section 6.4, including, without limitation, any employee-related liabilities
(including, without limitation, severance liabilities), incurred in connection
with the termination of any employees employed by the General Partner for the
benefit of the Partnership.
12.5 Withdrawal of the Limited Partner. The Limited Partner shall not
have any right to withdraw from the Partnership without the prior consent of the
General Partner.
ARTICLE XIII - DISSOLUTION AND LIQUIDATION
13.1 Dissolution. The Partnership shall not be dissolved by the
admission of a Substituted Limited Partner or by the admission of a successor
General Partner in accordance with the terms of this Agreement. Upon the removal
or withdrawal of the General Partner any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs should be wound up, upon:
(a) the expiration of its term as provided in Section 1.5;
(b) an Event of Withdrawal of the General Partner as provided in
Section 12.1(a), unless a successor is named as provided in Section 12.1(b) and
the continuation of the business of the Partnership is approved by the Limited
Partner;
(c) an election to dissolve the Partnership by the General Partner that
is approved by the Limited Partner hereby;
(d) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act;
(e) the sale of all or substantially all of the assets and properties
of the Partnership; or
(f) the dissolution of the Investor Partnership.
35
13.2 Liquidation. Upon dissolution of the Partnership, the General
Partner, or in the event the General Partner has been dissolved or removed,
become bankrupt as set forth in Section 12.1 or withdrawn from the Partnership,
a liquidator or liquidating committee approved by the Limited Partner, shall be
the Liquidator. The Liquidator (if other than the General Partner) shall be
entitled to receive such compensation for its services as may be approved by the
Limited Partner. The Liquidator shall agree not to resign at any time without
fifteen days' prior written notice and (if other than the General Partner) may
be removed at any time, with or without cause by notice of removal approved by
the Limited Partner. Upon dissolution, removal or resignation of the Liquidator,
a successor and substitute Liquidator (who shall have and succeed to all rights,
powers and duties of the original Liquidator) shall within thirty days
thereafter be approved by the Limited Partner. The right to approve a successor
or substitute Liquidator in the manner provided herein shall be deemed to refer
also to any such successor or substitute Liquidator approved in the manner
herein provided. Except as expressly provided in this Article XIII, the
Liquidator approved in the manner Provided herein shall have and may exercise,
without further authorization or consent of any of the parties hereto, all of
the powers conferred upon the General Partner under the terms of this Agreement
(but subject to all of the applicable limitations, contractual and otherwise,
upon the exercise of such powers, other than the limitation on sale set forth in
Section 6.3(b)) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein. The Liquidator shall
liquidate the assets of the Partnership, and apply and distribute the proceeds
of such liquidation in the following order of priority, unless otherwise
required by mandatory provisions of applicable law:
(a) the payment to creditors of the Partnership, including,
without limitation, Partners who are creditors, in the order of priority
provided by law; and the creation of a reserve of cash or other assets of the
Partnership for contingent liabilities in an amount, if any, determined by the
Liquidator to be appropriate for such purposes; and
(b) to all Partners in accordance with the positive balances
in their respective Capital Accounts after taking into account adjustments to
such Capital Accounts pursuant to Section 5.1(c).
13.3 Distributions in Kind. Notwithstanding the provisions of Section
13.2, which require the liquidation of the assets of the Partnership, but
subject to the order of priorities set forth therein, if prior to or upon
dissolution of the Partnership the Liquidator determines that an immediate sale
of part or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidator may, in its absolute discretion,
defer for a reasonable time the liquidation of any assets except those necessary
to satisfy liabilities of the Partnership (including, without limitation, those
to Partners as creditors) and/or distribute to the Partners, in lieu of cash, as
tenants in common and in accordance with the provisions of Section 13.2,
undivided interests in such Partnership assets as the Liquidator deems not
suitable for liquidation. Any such distributions in kind shall be made only if,
in the good faith judgment of the Liquidator, such distributions in kind are in
the best interest of the Limited Partner, and shall be subject to such
conditions relating to the disposition and management of such properties as the
Liquidator deems reasonable and equitable and to any agreement governing the
operation of
36
such properties at such time. The Liquidator shall determine the fair market
value of any property distributed in kind using such reasonable method of
valuation as it may adopt.
13.4 Cancellation of Certificate of Limited Partnership. Upon the
completion of the distribution of Partnership cash and property as provided in
Sections 13.2 and 13.3, the Partnership shall be terminated and the Certificate
of Limited Partnership and all qualifications of the Partnership as a foreign
limited partnership in jurisdictions other than the State of Delaware shall be
canceled and such other actions as may be necessary to terminate the Partnership
shall be taken.
13.5 Reasonable Time for Winding Up. A reasonable time shall be allowed
for the orderly winding up of business and affairs of the Partnership and the
liquidation of its assets pursuant to Section 13.2 in order to minimize any
losses otherwise attendant upon such winding up, and the provisions of this
Agreement shall remain in effect between the Partners during the period of
liquidation.
13.6 Return of Capital. The General Partner shall not be personally
liable for the return of the Capital Contributions of the Limited Partners, or
any portion thereof, it being expressly understood that any such return shall be
made solely from Partnership assets.
13.7 No Capital Account Restoration. No Partner shall have any
obligation to restore any negative balance in its Capital Account upon
liquidation of the Partnership.
13.8 Waiver of Partition. Each Partner hereby waives any right to
partition of the Partnership property.
ARTICLE XIV - AMENDMENT OF PARTNERSHIP AGREEMENT
14.1 Amendment to be Adopted Solely by General Partner. The Limited
Partner agrees that the General Partner (pursuant to its powers of attorney from
the Limited Partner), without the approval of the Limited Partner, may amend any
provision of this Agreement, and execute, swear to, acknowledge, deliver, file
and record whatever documents may be required in connection therewith, to
reflect:
(a) a change in the name of the Partnership, the location of
the principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners
in accordance with this Agreement;
(c) a change that, in the sole discretion of the General
Partner, is reasonable and necessary or appropriate to qualify or continue the
qualification of the Partnership as a limited partnership or a partnership in
which the limited partners have limited liability under the laws of any state or
that is necessary or advisable in the opinion of the General Partner to ensure
that the Partnership will not be taxable as a corporation or otherwise taxed as
an entity for federal income tax purposes;
37
(d) a change (i) that, in the sole discretion of the General
Partner, does not adversely affect the Limited Partner in any material respect,
(ii) that is necessary or appropriate to satisfy any requirements, conditions or
guidelines contained in any opinion, directive, order, ruling or regulation of
any federal or state agency or judicial authority or contained in any federal or
state statute (including, without limitation, the Delaware Act) or that is
necessary or appropriate to facilitate the trading of the Units (including,
without limitation, the division of Outstanding Units into different classes to
facilitate uniformity of tax consequences within such classes of Units) or
comply with any rule, regulation, guideline or requirement of any National
Securities Exchange on which the Units are or will be listed for trading,
compliance with any of which the General Partner determines in its sole
discretion to be in the best interests of the Partnership and the Limited
Partner or (iii) that is required to effect the intent of the provisions of this
Agreement or is otherwise contemplated by this Agreement;
(e) an amendment that is necessary, in the Opinion of Counsel,
to prevent the Partnership or the General Partner or its directors or officers
from in any manner being subjected to the provisions of the Investment Company
Act of 1940, as amended, the Investment Advisors Act of 1940, as amended, or
"plan asset" regulations adopted under the Employee Retirement Income Security
Act of 1974, as amended, whether or not substantially similar to plan asset
regulations currently applied or proposed by the United States Department of
Labor;
(f) any amendment expressly permitted in this Agreement to be
made by the General Partner acting alone;
(g) an amendment effected, necessitated or contemplated by a
Merger Agreement approved in accordance with Section 15.3; or
(h) any other amendments similar to the foregoing.
14.2 Amendment Procedures.
(a) Except as provided in Section 14.1 all amendments to this
Agreement shall be made in accordance with the following requirements.
Amendments to this Agreement may be proposed solely by the General Partner. Each
such proposal shall contain the text of the proposed amendment. A proposed
amendment shall be effective upon its approval by the Limited Partner.
(b) Notwithstanding the provisions of Sections 14.1 and 14.2,
no amendment to this Agreement may (i) enlarge the obligations of any Limited
Partner, or without its consent, which may be given or withheld in its sole
discretion, of the General Partner, (ii) modify the compensation payable to the
General Partner or any of its Affiliates by the Partnership or the Operating
Partnership, (iii) change Section 13.1(a) or (c), (iv) restrict in any way any
action by or rights of the General Partner as set forth in this Agreement, (v)
charge the term of the Partnership or, except as set forth in Section 13.1(c),
give any Person the right to dissolve the Partnership or (vi) modify the last
sentence of Section 1.2.
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ARTICLE XV - MERGER
15.1 Authority. The Partnership may merge or consolidate with one or
more corporations, business trusts, limited liability companies or associations,
real estate investment trusts, common law trusts or unincorporated businesses,
including, without limitation, a general partnership or limited partnership,
formed under the laws of the State of Delaware or any other state of the United
States of America, pursuant to a written agreement of merger or consolidation
("Merger Agreement") in accordance with this Article.
15.2 Procedure for Merger or Consolidation. Merger or consolidation of
the Partnership pursuant to this Article requires the prior approval of the
General Partner. If the General Partner shall determine, in the exercise of its
sole discretion, to consent to the merger or consolidation, the General Partner
shall approve the Merger Agreement, which shall set forth:
(a) The name and jurisdiction of formation or organization of
each of the business entities proposing to merge or consolidate;
(b) The name and jurisdictions of formation or organization of
the business entity that is to survive the proposed merger or consolidation
(hereafter designated as the "Surviving Business Entity");
(c) The terms and conditions of the proposed merger or
consolidation;
(d) The manner and basis of exchanging or converting the
equity securities of each constituent business entity for, or into, cash,
property or general or limited partnership interests, rights, securities or
obligations of the Surviving Business Entity; and (i) if any general or limited
partnership interests, securities or rights of any constituent business entity
are not to be exchanged or converted solely for, or into, cash, property or
general or limited partnership interests, rights, securities or obligations of
the Surviving Business Entity, the cash, property or general or limited
partnership interests, rights, securities or obligations of any limited
partnership, corporation, trust or other entity (other than the Surviving
Business Entity) which the holders of such general or limited partnership
Interest are to receive in exchange for, or upon conversion of, their securities
or rights, and (ii) in the case of securities represented by certificates, upon
the surrender of such certificates, which cash, property or general or limited
partnership interests, rights, securities or obligations of the Surviving
Business Entity or any limited partnership, corporation, trust or other entity
(other than the Surviving Business Entity), or evidences thereof, are to be
delivered;
(e) A statement of any changes in the constituent documents
(the articles or certificate of incorporation, articles of trust, declaration of
trust, certificate or agreement of limited partnership or other similar charter
or governing document) of the Surviving Business Entity to be effected by such
merger or consolidation;
(f) The effective time of the merger, which may be the date of
the filing of the certificate of merger pursuant to Section 15.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, it shall be fixed no later than the time of
the filing of the certificate of merger and stated therein); and
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(g) Any amendment to this Agreement or the adoption, if any,
of a new
limited partnership agreement for any limited partnership that is the
Surviving Business Entity, as permitted by Section 211(g) of the Delaware Act.
(h) Such other provisions with respect to the proposed merger
or consolidation as are deemed necessary or appropriate by the General Partner.
15.3 Approval by Limited Partner of Merger or Consolidation.
(a) The General Partner of the Partnership, upon its approval
of the Merger Agreement, shall submit a copy or summary of the Merger Agreement
to the Limited Partner for its approval.
(b) The Merger Agreement shall be approved upon receiving the
consent of the Limited Partner. After such approval by the Limited Partner, and
at any time prior to the filing of the certificate of merger pursuant to Section
15.4, the merger or consolidation may be abandoned pursuant to provisions
therefor, if any, set forth in the Merger Agreement.
15.4 Certificate of Merger. Upon the required approval by the General
Partner and the Limited Partner of a Merger Agreement, a certificate of merger
shall be executed and filed with the Secretary of State of the State of Delaware
in conformity with the requirements of the Delaware Act.
15.5 Effect of Merger.
(a) Upon the effective date of the certificate of merger:
(i) all of the rights, privileges and powers of each of the
business entities that has merged or consolidated, and all property,
real, personal and mixed, and all debts due to any of those business
entities and all other things and cause of action belonging to each of
those business entities shall be vested in the Surviving Business
Entity and after the merger or consolidation shall be the property of
the Surviving Business Entity to the extent they were of each
constituent business entity;
(ii) the title to any real property vested by deed or
otherwise in any of those constituent business entities shall not
revert and shall not be in any way impaired because of the merger or
consolidation;
(iii) all rights of creditors and all liens on or security
interest in property of any of those constituent business entities
shall be preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent
business entities shall attach to the Surviving Business Entity, and
may be enforced against it to the same extent as if the debts,
liabilities and duties had been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this
Article shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another having occurred.
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ARTICLE XVI - GENERAL PROVISIONS
16.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to a Partner under this Agreement
shall be in writing and shall be deemed given or made where received by it at
the principal office of the Partnership referred to in Section 1.3.
16.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
16.3 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice-versa.
16.4 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
16.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
16.6 Integration. This Agreement constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof and supersedes all
prior agreements and understandings pertaining thereto.
16.7 Creditors. None of the provisions of this Agreement shall be for
the benefit of, or shall be enforceable by, any creditor of the Partnership.
16.8 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
16.9 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute an agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart.
16.10 Applicable Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
16.11 Invalidity of Provisions. If any provision of this Agreement is
or becomes invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
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16.12 Amendments to Reflect the Contribution Agreement. In addition to
the amendments to this Agreement contained in the Contribution Agreement and
notwithstanding any other provision of this Agreement to the contrary, this
Agreement shall be deemed to be further amended and modified to the extent
necessary, but only to the extent necessary, to carry out the purposes and
intent of the Contribution Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
TEPPCO GP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior V.P., C.F.O. and Treasurer
LIMITED PARTNER:
TEPPCO PARTNERS, L.P.
By: Texas Eastern Products Pipeline Company, LLC
as general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior V.P., C.F.O. and Treasurer
43