Execution Version
First Amended and Restated
Agreement of Limited Partnership
Quest Midstream Partners, L.P.
December 22, 2006
TABLE OF CONTENTS
Page
ARTICLE I. Definitions.......................................................1
Section 1.1 Definitions...................................................1
Section 1.2 Construction.................................................23
ARTICLE II. Organization....................................................23
Section 2.1 Formation....................................................23
Section 2.2 Name.........................................................23
Section 2.3 Registered Office; Registered Agent; Principal Office;
Other Offices................................................24
Section 2.4 Purpose and Business.........................................24
Section 2.5 Powers.......................................................24
Section 2.6 Power of Attorney............................................24
Section 2.7 Term.........................................................26
Section 2.8 Title to Partnership Assets..................................26
ARTICLE III. Rights of Limited Partners.....................................26
Section 3.1 Limitation of Liability......................................26
Section 3.2 Management of Business.......................................27
Section 3.3 Outside Activities of the Limited Partners...................27
Section 3.4 Rights of Limited Partners...................................27
ARTICLE IV. Certificates; Record Holders; Transfer of Partnership
Interests; Redemption of Partnership Interests..................28
Section 4.1 Certificates.................................................28
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates............28
Section 4.3 Record Holders...............................................29
Section 4.4 Transfer Generally...........................................30
Section 4.5 Registration and Transfer of Limited Partner Interests.......30
Section 4.6 Transfer of the General Partner's General Partner Interest...31
Section 4.7 Transfer of Incentive Distribution Rights....................31
Section 4.8 Restrictions on Transfers....................................32
Section 4.9 Citizenship Certificates; Non-citizen Assignees..............33
Section 4.10 Redemption of Partnership Interests of Non-citizen
Assignees...................................................34
ARTICLE V. Capital Contributions and Issuance of Partnership Interests......36
Section 5.1 Organizational Contributions.................................36
Section 5.2 Contributions by QRC and the General Partner.................36
Section 5.3 Contributions by Initial Limited Partners....................37
Section 5.4 Interest and Withdrawal......................................37
Section 5.5 Capital Accounts.............................................37
Section 5.6 Issuances of Additional Partnership Securities...............40
Section 5.7 Conversion of Class A Subordinated Units.....................41
Section 5.8 Conversion of Class B Subordinated Units.....................42
Section 5.9 Limited Preemptive Right....................................43
Section 5.10 Splits and Combinations.....................................44
Section 5.11 Fully Paid and Non-Assessable Nature of Limited Partner
Interests...................................................45
Section 5.12 Issuance of Class C Units in Connection with Reset
of Incentive Distribution Rights..........................45
ARTICLE VI. Allocations and Distributions...................................46
Section 6.1 Allocations for Capital Account Purposes....................44
Section 6.2 Allocations for Tax Purposes................................54
Section 6.3 Requirement and Characterization of Distributions;
Distributions to Record Holders.............................55
Section 6.4 Distributions of Available Cash from Operating Surplus.....56
Section 6.5 Distributions of Available Cash from Capital Surplus.......58
Section 6.6 Adjustment of Minimum Quarterly Distribution
and Target Distribution Levels..............................58
Section 6.7 Special Provisions Relating to the Holders of
Subordinated Units and Class C Units........................59
Section 6.8 Special Provisions Relating to the Holders of Incentive
Distribution Rights.........................................60
Section 6.9 Entity-Level Taxation.......................................60
ARTICLE VII. Management and Operation of Business...........................64
Section 7.1 Management..................................................64
Section 7.2 Certificate of Limited Partnership..........................66
Section 7.3 Restrictions on the General Partner's Authority.............67
Section 7.4 Reimbursement of the General Partner........................67
Section 7.5 Outside Activities..........................................67
Section 7.6 Loans from the General Partner; Loans or Contributions
from the Partnership or Group Members.......................69
Section 7.7 Indemnification.............................................70
Section 7.8 Liability of Indemnitees....................................71
Section 7.9 Resolution of Conflicts of Interest; Standards of
Conduct and Modification of Duties..........................72
Section 7.10 Other Matters Concerning the General Partner................74
Section 7.11 Purchase or Sale of Partnership Securities..................74
Section 7.12 Registration Rights of the General Partner and its
Affiliates..................................................74
Section 7.13 Reliance by Third Parties...................................78
ARTICLE VIII. Books, Records, Accounting and Reports........................78
Section 8.1 Records and Accounting.......................................78
Section 8.2 Fiscal Year..................................................79
Section 8.3 Reports......................................................79
ARTICLE IX. Tax Matters.....................................................79
Section 9.1 Tax Returns and Information..................................79
Section 9.2 Tax Elections................................................79
Section 9.3 Tax Controversies............................................80
Section 9.4 Withholding..................................................80
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ARTICLE X. Admission of Partners............................................80
Section 10.1 Admission of Limited Partners...............................80
Section 10.2 Admission of Successor General Partner......................81
Section 10.3 Amendment of Agreement and Certificate of Limited
Partnership..................................................81
ARTICLE XI. Withdrawal or Removal of Partners...............................82
Section 11.1 Withdrawal of the General Partner...........................82
Section 11.2 Removal of the General Partner..............................83
Section 11.3 Interest of Departing General Partner and Successor
General Partner.............................................84
Section 11.4 Termination of Subordination Period, Conversion of
Subordinated Units and Extinguishment of Cumulative
Common Unit Arrearages......................................85
Section 11.5 Withdrawal of Limited Partners..............................86
ARTICLE XII. Dissolution and Liquidation....................................86
Section 12.1 Dissolution.................................................86
Section 12.2 Continuation of the Business of the Partnership
After Dissolution...........................................86
Section 12.3 Liquidator..................................................87
Section 12.4 Liquidation.................................................87
Section 12.5 Cancellation of Certificate of Limited Partnership..........88
Section 12.6 Return of Contributions.....................................88
Section 12.7 Waiver of Partition.........................................88
Section 12.8 Capital Account Restoration.................................88
ARTICLE XIII................................................................89
Amendment of Partnership Agreement; Meetings; Record Date...................89
Section 13.1Amendments to be Adopted Solely by the General Partner.......89
Section 13.2Amendment Procedures.........................................90
Section 13.3 Amendment Requirements....................................91
Section 13.4Special Meetings.............................................91
Section 13.5Notice of a Meeting..........................................92
Section 13.6Record Date..................................................92
Section 13.7Adjournment..................................................92
Section 13.8Waiver of Notice; Approval of Meeting; Approval of Minutes...92
Section 13.9Quorum and Voting............................................92
Section 13.10 Conduct of a Meeting......................................93
Section 13.11 Action Without a Meeting..................................93
Section 13.12 Right to Vote and Related Matters.........................94
ARTICLE XIV. Merger, Consolidation or Conversion............................94
Section 14.1Authority....................................................95
Section 14.2Procedure for Merger, Consolidation or Conversion............95
Section 14.3Approval by Limited Partners.................................97
Section 14.4Certificate of Merger........................................98
Section 14.5 Effect of Merger, Consolidation or Conversion.............98
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ARTICLE XV. Right to Acquire Limited Partner Interests......................99
Section 15.1 Right to Acquire Limited Partner Interests................99
ARTICLE XVI. General Provisions............................................101
Section 16.1 Addresses and Notices....................................101
Section 16.2 Further Action...........................................102
Section 16.3 Binding Effect...........................................102
Section 16.4 Integration..............................................102
Section 16.5 Creditors................................................102
Section 16.6 Waiver...................................................102
Section 16.7 Third-Party Beneficiaries................................102
Section 16.8 Counterparts.............................................102
Section 16.9 Applicable Law...........................................102
Section 16.10 Invalidity of Provisions.................................102
Section 16.11 Consent of Partners......................................102
Section 16.12 Facsimile Signatures.....................................103
iv
First Amended and Restated
Agreement of Limited Partnership
of
Quest Midstream Partners, L.P.
This First Amended and Restated Agreement of Limited Partnership of Quest
Midstream Partners, L.P., dated as of December 22, 2006, is entered into by and
between Quest Midstream GP, LLC, a Delaware limited liability company, as the
General Partner, and Quest Resource Corporation, a Nevada corporation, as the
Organizational Limited Partner, together with any other Persons who become
Partners in the Partnership or parties hereto as provided herein. In
consideration of the covenants, conditions and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I.
Definitions
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Acquisition" means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such transaction; provided,
however, that any acquisition of properties or assets of another Person that is
made solely for temporary investment purposes shall not constitute an
Acquisition.
"Additional Book Basis" means the portion of any remaining Carrying Value
of an Adjusted Property that is attributable to positive adjustments made to
such Carrying Value as a result of Book-Up Events. For purposes of determining
the extent that Carrying Value constitutes Additional Book Basis:
(a) Any negative adjustment made to the Carrying Value of an
Adjusted Property as a result of either a Book-Down Event or a Book-Up
Event shall first be deemed to offset or decrease that portion of the
Carrying Value of such Adjusted Property that is attributable to any prior
positive adjustments made thereto pursuant to a Book-Up Event or Book-Down
Event.
(b) If Carrying Value that constitutes Additional Book Basis is
reduced as a result of a Book-Down Event and the Carrying Value of other
property is increased as a result of such Book-Down Event, an allocable
portion of any such increase in Carrying Value shall be treated as
Additional Book Basis; provided, that the amount treated as Additional
Book Basis pursuant hereto as a result of such Book-Down Event shall not
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exceed the amount by which the Aggregate Remaining Net Positive
Adjustments after such Book-Down Event exceeds the remaining Additional
Book Basis attributable to all of the Partnership's Adjusted Property
after such Book-Down Event (determined without regard to the application
of this clause (b) to such Book-Down Event).
"Additional Book Basis Derivative Items" means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis. To the extent
that the Additional Book Basis attributable to all of the Partnership's Adjusted
Property as of the beginning of any taxable period exceeds the Aggregate
Remaining Net Positive Adjustments as of the beginning of such period (the
"Excess Additional Book Basis"), the Additional Book Basis Derivative Items for
such period shall be reduced by the amount that bears the same ratio to the
amount of Additional Book Basis Derivative Items determined without regard to
this sentence as the Excess Additional Book Basis bears to the Additional Book
Basis as of the beginning of such period.
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i)
or Section 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is
intended to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The
"Adjusted Capital Account" of a Partner in respect of a General Partner Unit, a
Common Unit, a Subordinated Unit, a Class C Unit or an Incentive Distribution
Right or any other Partnership Interest shall be the amount that such Adjusted
Capital Account would be if such General Partner Unit, Common Unit, Subordinated
Unit, Class C Unit, Incentive Distribution Right or other Partnership Interest
were the only interest in the Partnership held by such Partner from and after
the date on which such General Partner Unit, Common Unit, Subordinated Unit,
Class C Unit, Incentive Distribution Right or other Partnership Interest was
first issued.
"Adjusted Operating Surplus" means, with respect to any period, Operating
Surplus generated with respect to such period (a) less (i) any net increase in
Working Capital Borrowings with respect to such period and (ii) any net decrease
in cash reserves for Operating Expenditures with respect to such period not
relating to an Operating Expenditure made with respect to such period, and (b)
plus (i) any net decrease in Working Capital Borrowings with respect to such
period, (ii) any net decrease made in subsequent periods in cash reserves for
Operating Expenditures initially established with respect to such period to the
extent such decrease results in a reduction in Adjusted Operating Surplus in
subsequent periods under clause (a) above and (iii) any net increase in cash
reserves for Operating Expenditures with respect to such period to the extent
such reserve is required by any debt instrument for the repayment of principal,
interest
2
or premium. Adjusted Operating Surplus does not include that portion of
Operating Surplus included in clause (a)(i) of the definition of Operating
Surplus.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 5.5(d)(i) or Section 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise. For the avoidance of doubt, as of the Closing Date, the Initial
Private Purchasers are not "Affiliates" of the Partnership Group.
"Aggregate Remaining Net Positive Adjustments" means, as of the end of any
taxable period, the sum of the Remaining Net Positive Adjustments of all the
Partners.
"Aggregate Quantity of Class C Units" has the meaning assigned to such
term in Section 5.12(a).
"Agreed Allocation" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including a Curative Allocation (if appropriate to
the context in which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the General Partner. The General Partner shall use such method as it
determines to be appropriate to allocate the aggregate Agreed Value of
Contributed Properties contributed to the Partnership in a single or integrated
transaction among each separate property on a basis proportional to the fair
market value of each Contributed Property.
"Agreement" means this First Amended and Restated Agreement of Limited
Partnership of Quest Midstream Partners, L.P., as it may be amended,
supplemented or restated from time to time.
"Approved Working Capital Facility" means a credit facility or other
arrangement entered into by one or more of the Group Members subsequent to the
Closing Date that will provide the Partnership with an ability to make
borrowings used solely for working capital purposes or to pay distributions to
the Limited Partners; provided that the terms and conditions of such facility
shall be approved by the Investor Representatives.
"Associate" means, when used to indicate a relationship with any Person,
(a) any corporation or organization of which such Person is a director, officer
or partner or is, directly or indirectly, the owner of 20% or more of any class
of voting stock or other voting interest; (b) any trust or other estate in which
such Person has at least a 20% beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; and (c) any relative or
spouse of such Person, or any relative of such spouse, who has the same
principal residence as such
3
Person. For the avoidance of doubt, as of the Closing Date, the Initial Private
Purchasers are not "Associates" of the Partnership Group.
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date:
(a) the sum of (i) all cash and cash equivalents of the Partnership
Group (or the Partnership's proportionate share of cash and cash
equivalents in the case of Subsidiaries that are not wholly owned) on hand
at the end of such Quarter, and (ii) all additional cash and cash
equivalents of the Partnership Group (or the Partnership's proportionate
share of cash and cash equivalents in the case of Subsidiaries that are not
wholly owned) on hand on the date of determination of Available Cash with
respect to such Quarter resulting from Working Capital Borrowings made
subsequent to the end of such Quarter, less
(b) the amount of any cash reserves established by the General Partner
to (i) provide for the proper conduct of the business of the Partnership
Group (including reserves for future capital expenditures and for
anticipated future credit needs of the Partnership Group) subsequent to
such Quarter, (ii) comply with applicable law or any loan agreement,
security agreement, mortgage, debt instrument or other agreement or
obligation to which any Group Member is a party or by which it is bound or
its assets are subject or (iii) provide funds for distributions under
Section 6.4 or Section 6.5 ----------- ----------- in respect of any one or
more of the next four Quarters; provided, however, that the General Partner
may not establish cash reserves pursuant to (iii) above if the effect of
such reserves would be that the Partnership is unable to distribute the
Minimum Quarterly Distribution on all Common Units, plus any Cumulative
Common Unit Arrearage on all Common Units, with respect to such Quarter;
and, provided further, that disbursements made by a Group Member or cash
reserves established, increased or reduced after the end of such Quarter
but on or before the date of determination of Available Cash with respect
to such Quarter shall be deemed to have been made, established, increased
or reduced, for purposes of determining Available Cash, within such Quarter
if the General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.
"Board of Directors" means, with respect to the Board of Directors of the
General Partner, its board of directors or managers, as applicable, if a
corporation or limited liability company, or if a limited partnership, the board
of directors or board of managers of the general partner of the General Partner.
"Book Basis Derivative Items" means any item of income, deduction, gain or
loss included in the determination of Net Income or Net Loss that is computed
with reference to the Carrying Value of an Adjusted Property (e.g.,
depreciation, depletion, or gain or loss with respect to an Adjusted Property).
"Book-Down Event" means an event that triggers a negative adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).
4
"Book-Tax Disparity" means with respect to any item of Contributed Property
or Adjusted Property, as of the date of any determination, the difference
between the Carrying Value of such Contributed Property or Adjusted Property and
the adjusted basis thereof for federal income tax purposes as of such date. A
Partner's share of the Partnership's Book-Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner's Capital Account balance as maintained pursuant to Section
5.5 and the hypothetical balance of such Partner's Capital Account computed as
if it had been maintained strictly in accordance with federal income tax
accounting principles.
"Book-Up Event" means an event that triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the State of Oklahoma shall not be regarded as a Business Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Unit, a Common Unit, a Subordinated Unit, a Class C Unit, an
Incentive Distribution Right or any Partnership Interest shall be the amount
that such Capital Account would be if such General Partner Unit, Common Unit,
Subordinated Unit, Class C Unit, Incentive Distribution Right or other
Partnership Interest were the only interest in the Partnership held by such
Partner from and after the date on which such General Partner Unit, Common Unit,
Subordinated Unit, Class C Unit, Incentive Distribution Right or other
Partnership Interest was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership.
"Capital Improvement" means any (a) addition or improvement to the capital
assets owned by any Group Member, (b) acquisition of existing, or the
construction of new, capital assets (including gathering lines, treating
facilities, processing plants, fractionation facilities, pipelines, terminals,
docks, truck racks, tankage and other storage, distribution or transportation
facilities and related or similar midstream assets) or (c) capital contributions
by a Group Member to a Person that is not a Subsidiary in which a Group Member
has an equity interest to fund such Group Member's pro rata share of the cost of
the acquisition of existing, or the construction of new, capital assets
(including gathering lines, treating facilities, processing plants,
fractionation facilities, pipelines, terminals, docks, truck racks, tankage and
other storage, distribution or transportation facilities and related or similar
midstream assets) by such Person, in each case if such addition, improvement,
acquisition or construction is made to increase the operating capacity or
revenues of the assets of the Partnership Group, in the case of clauses (a) and
(b), or such Person, in the case of clause (c), from the operating capacity or
revenues of the Partnership Group or such Person, as the case may be, existing
immediately prior to such addition, improvement, acquisition or construction;
provided, however, that any such addition, improvement, acquisition or
construction that is made solely for temporary investment purposes shall not
constitute a Capital Improvement.
"Capital Surplus" has the meaning assigned to such term in Section 6.3(a).
5
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' Capital
Accounts in respect of such Contributed Property, and (b) with respect to any
other Partnership property, the adjusted basis of such property for federal
income tax purposes, all as of the time of determination. The Carrying Value of
any property shall be adjusted from time to time in accordance with Section
5.5(d)(i) and Section 5.5(d)(ii) and to reflect changes, additions or other
adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Cause" means a court of competent jurisdiction has entered a final,
non-appealable judgment finding the General Partner liable for actual fraud or
willful misconduct in its capacity as a general partner of the Partnership.
"Certificate" means (a) a certificate (i) substantially in the form of
Exhibit A to this Agreement, (ii) issued in global form in accordance with the
rules and regulations of the Depositary or (iii) in such other form as may be
adopted by the General Partner, issued by the Partnership evidencing ownership
of one or more Common Units or (b) a certificate, in such form as may be adopted
by the General Partner, issued by the Partnership evidencing ownership of one or
more other Partnership Securities.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Delaware as referenced in Section 7.2, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"Citizenship Certification" means a properly completed certificate in such
form as may be specified by the General Partner by which a Limited Partner
certifies that he (and if he is a nominee holding for the account of another
Person, that to the best of his knowledge such other Person) is an Eligible
Citizen.
"claim" (as used in Section 7.12(d)) has the meaning assigned to such term
in Section 7.12(d).
"Class A Subordinated Unit" means a Partnership Security representing a
fractional part of the Partnership Interests of all Limited Partners and having
the rights and obligations specified with respect to Class A Subordinated Units
in this Agreement.
"Class B Subordinated Unit" means a Partnership Security representing a
fractional part of the Partnership Interests of all Limited Partners and having
the rights and obligations specified with respect to Class B Subordinated Units
in this Agreement.
"Class C Unit" means a Partnership Security representing a fractional part
of the Partnership Interests of all Limited Partners and having the rights and
obligations specified with respect to Class C Units in this Agreement.
"Closing Date" means the date on which the transactions contemplated by
the Purchase Agreement close.
6
"Closing Price" has the meaning assigned to such term in Section 15.1(a).
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
any successor law.
"Combined Interest" has the meaning assigned to such term in Section
11.3(a).
"Commences Commercial Service" refers to the date a Capital Improvement is
first put into commercial service following completion of construction and
testing.
"Commission" means the United States Securities and Exchange Commission.
"Commodity Hedge Contract" means any commodity exchange, swap, forward,
cap, floor, collar or other similar agreement or arrangement entered into for
the purpose of hedging the Partnership Group's exposure to fluctuations in the
price of hydrocarbons (including liquefied natural gas or liquefied petroleum
gas) in their operations and not for speculative purposes.
"Common Unit" means a Partnership Security representing a fractional part
of the Partnership Interests of all Limited Partners and having the rights and
obligations specified with respect to Common Units in this Agreement. The term
"Common Unit" does not include a Subordinated Unit or Class C Unit prior to its
conversion into a Common Unit pursuant to the terms hereof.
"Common Unit Arrearage" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, the excess, if any,
of (a) the Minimum Quarterly Distribution with respect to a Common Unit in
respect of such Quarter over (b) the sum of all Available Cash distributed with
respect to a Common Unit in respect of such Quarter pursuant to Section
6.4(a)(i).
"Conflicts Committee" means a committee of the Board of Directors of the
General Partner composed entirely of two or more directors, each of whom (a) is
not a security holder, officer or employee of the General Partner, (b) is not an
officer, director or employee of any Affiliate of the General Partner, (c) is
not a holder of any ownership interest in the Partnership Group other than
Common Units and (d) meets the independence standards required of directors who
serve on an audit committee of a board of directors established by the
Securities Exchange Act and the rules and regulations of the Commission
thereunder and by the Nasdaq Global Market.
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership. Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 5.5(d), such property shall no longer constitute a
Contributed Property, but shall be deemed an Adjusted Property.
"Contribution Agreement" means that certain Contribution, Conveyance and
Assumption Agreement, dated as of the Closing Date, among the General Partner,
the Partnership, the Operating Company and the other parties named therein,
together with the
7
additional conveyance documents and instruments contemplated or referenced
thereunder, as such may be amended, supplemented or restated from time to time.
"Converted Common Units" has the meaning assigned to such term in Section
6.1(d)(x)(B).
"Cumulative Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters within the Subordination Period
ending on or before the last day of such Quarter over (b) the sum of any
distributions theretofore made pursuant to Section 6.4(a)(ii) and the second
sentence of Section 6.5 with respect to an Initial Common Unit (including any
distributions to be made in respect of the last of such Quarters).
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
"Current Market Price" has the meaning assigned to such term in Section
15.1(a).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. Section 17-101, et seq., as amended, supplemented or restated from time
to time, and any successor to such statute.
"Departing General Partner" means a former General Partner from and after
the effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or Section 11.2.
"Depositary" means, with respect to any Units issued in global form, The
Depository Trust Company and its successors and permitted assigns.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"Eligible Citizen" means a Person qualified to own interests in real
property in jurisdictions in which any Group Member does business or proposes to
do business from time to time, and whose status as a Limited Partner the General
Partner determines does not or would not subject such Group Member to a
significant risk of cancellation or forfeiture of any of its properties or any
interest therein.
"Estimated Incremental Quarterly Tax Amount" has the meaning assigned to
such term in Section 6.9.
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Expansion Capital Expenditures" means cash expenditures for Acquisitions
or Capital Improvements, and shall not include Maintenance Capital Expenditures
or Investment Capital Expenditures. Expansion Capital Expenditures shall include
interest (and related fees) on debt incurred and distributions on equity issued,
in each case, to finance the construction or
8
development of a Capital Improvement and paid during the period beginning on the
date that the Partnership enters into a binding commitment to commence
construction or development of a Capital Improvement and ending on the earlier
to occur of the date that such Capital Improvement Commences Commercial Service
or the date that such Capital Improvement is abandoned or disposed of. Debt
incurred or equity issued to fund such construction or development period
interest payments (including periodic net payments under related interest rate
swap agreements) or such construction or development period distributions on
equity paid during such period, shall also be deemed to be debt or equity, as
the case may be, issued to finance the construction or development of a Capital
Improvement.
"Final Subordinated Units" has the meaning assigned to such term in
Section 6.1(d)(x)(A).
"First Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(E).
"First Target Distribution" means $0.4675 per Unit per Quarter (or, with
respect to the period commencing on December 1, 2006 and ending on December 31,
2006, it means the product of $0.4675 multiplied by a fraction of which the
numerator is the number of days in such period, and of which the denominator is
92), subject to adjustment in accordance with Section 5.12, Section 6.6 and
Section 6.9.
"Fully Diluted Basis" means, when calculating the number of Outstanding
Units for any period, a basis that includes, in addition to the Outstanding
Units, all Partnership Securities and options, rights, warrants and appreciation
rights relating to an equity interest in the Partnership (a) that are
convertible into or exercisable or exchangeable for Units that are senior to or
pari passu with the Subordinated Units, (b) whose conversion, exercise or
exchange price is less than the Current Market Price on the date of such
calculation, (c) that may be converted into or exercised or exchanged for such
Units prior to or during the Quarter immediately following the end of the period
for which the calculation is being made without the satisfaction of any
contingency beyond the control of the holder other than the payment of
consideration and the compliance with administrative mechanics applicable to
such conversion, exercise or exchange and (d) that were not converted into or
exercised or exchanged for such Units during the period for which the
calculation is being made; provided, however, that for purposes of determining
the number of Outstanding Units on a Fully Diluted Basis when calculating
whether the Subordination Period has ended or Subordinated Units are entitled to
convert into Common Units pursuant to Section 5.8, such Partnership Securities,
options, rights, warrants and appreciation rights shall be deemed to have been
Outstanding Units only for the four Quarters that comprise the last four
Quarters of the measurement period; provided, further, that if consideration
will be paid to any Group Member in connection with such conversion, exercise or
exchange, the number of Units to be included in such calculation shall be that
number equal to the difference between (i) the number of Units issuable upon
such conversion, exercise or exchange and (ii) the number of Units that such
consideration would purchase at the Current Market Price.
"General Partner" means Quest Midstream GP, LLC, a Delaware limited
liability company, and its successors and permitted assigns that are admitted to
the Partnership as general
9
partner of the Partnership, in its capacity as general partner of the
Partnership (except as the context otherwise requires).
"General Partner Interest" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it), which is evidenced by
General Partner Units, and includes any and all benefits to which the General
Partner is entitled as provided in this Agreement, together with all obligations
of the General Partner to comply with the terms and provisions of this
Agreement.
"General Partner Unit" means a fractional part of the General Partner
Interest having the rights and obligations specified in this Agreement with
respect to the General Partner Interest. A General Partner Unit is not a Unit.
"Group" means a Person that with or through any of its Affiliates or
Associates has any contract, arrangement, understanding or relationship for the
purpose of acquiring, holding, voting (except voting pursuant to a revocable
proxy or consent given to such Person in response to a proxy or consent
solicitation made to 10 or more Persons), exercising investment power or
disposing of any Partnership Interests with any other Person that beneficially
owns, or whose Affiliates or Associates beneficially own, directly or
indirectly, Partnership Interests.
"Group Member" means a member of the Partnership Group.
"Group Member Agreement" means the partnership agreement of any Group
Member, other than the Partnership, that is a limited or general partnership,
the limited liability company agreement of any Group Member that is a limited
liability company, the certificate of incorporation and bylaws or similar
organizational documents of any Group Member that is a corporation, the joint
venture agreement or similar governing document of any Group Member that is a
joint venture and the governing or organizational or similar documents of any
other Group Member that is a Person other than a limited or general partnership,
limited liability company, corporation or joint venture, as such may be amended,
supplemented or restated from time to time.
"Holder" as used in Section 7.12, has the meaning assigned to such term in
Section 7.12(a).
"IDR Reset Election" has the meaning assigned to such term in Section
5.12(a).
"Incentive Distribution Right" means a non-voting Limited Partner Interest
issued to the General Partner in connection with the transfer of all of its
interests in Bluestem to the Partnership pursuant to the Contribution Agreement,
which Limited Partner Interest will confer upon the holder thereof only the
rights and obligations specifically provided in this Agreement with respect to
Incentive Distribution Rights (and no other rights otherwise available to or
other obligations of a holder of a Partnership Interest). Notwithstanding
anything in this Agreement to the contrary, the holder of an Incentive
Distribution Right shall not be entitled to vote such Incentive Distribution
Right on any Partnership matter except as may otherwise be required by law.
10
"Incentive Distributions" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Section 6.4(a)(v)(B),
Section 6.4(a)(vi)(B), Section 6.4(a)(vii)(B), Section 6.4(b)(iii)(B), Section
6.4(b)(iv)(B), Section 6.4(b)(v)(B) and Section 6.4(c).
"Incremental Income Tax" has the meaning assigned to such term in Section
6.9.
"Indemnified Persons" has the meaning assigned to such term in Section
7.12(d).
"Indemnitee" means (a) the General Partner, (b) any Departing General
Partner, (c) any Person who is or was an Affiliate of the General Partner or any
Departing General Partner, (d) any Person who is or was a member, partner,
director, officer, fiduciary or trustee of any Group Member, the General Partner
or any Departing General Partner or any Affiliate of any Group Member, the
General Partner or any Departing General Partner, (e) any Person who is or was
serving at the request of the General Partner or any Departing General Partner
or any Affiliate of the General Partner or any Departing General Partner as an
officer, director, member, partner, fiduciary or trustee of another Person;
provided that a Person shall not be an Indemnitee by reason of providing, on a
fee-for-services basis, trustee, fiduciary or custodial services, and (f) any
Person the General Partner designates as an "Indemnitee" for purposes of this
Agreement.
"Initial Common Units" means the Common Units sold pursuant to the
Purchase Agreement.
"Initial Limited Partner" means QRC and each of the Initial Private
Purchasers, in each case upon being admitted to the Partnership in accordance
with Section 10.1 (with respect to the Common Units, Subordinated Units and
Incentive Distribution Rights, if any, received by them pursuant to Section
5.2).
"Initial Private Purchaser" means each Person named as a purchaser in
Schedule I to the Purchase Agreement who purchased Common Units pursuant
thereto.
"Initial Public Offering" means the initial public offering of Common
Units by the Partnership that results in the Common Units being listed for
trading on the New York Stock Exchange or the Nasdaq Global Market.
"Initial Unit Price" means (a) with respect to the Common Units, (i) if
the Initial Public Offering has not yet occurred, the price paid by the Initial
Private Purchasers pursuant to the Purchase Agreement, less any indemnification
proceeds received by the Initial Private Purchasers pursuant to Article VI of
the Purchase Agreement, and (i) if the Initial Public Offering has occurred, the
initial public offering price per Common Unit at which the Underwriters agreed
to offer such Common Units for sale to the public as set forth on the cover page
of the final prospectus filed pursuant to Rule 424(b) of the rules and
regulations of the Commission with respect to such Initial Public Offering, or
(b) with respect to any other class or series of Units, the price per Unit at
which such class or series of Units is initially sold by the Partnership, as
determined by the General Partner, in each case adjusted as the General Partner
determines to be appropriate to give effect to any distribution, subdivision or
combination of ▇▇▇▇▇.
▇▇
"▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Transactions" means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness (other than Working Capital Borrowings and other than for items
purchased on open account in the ordinary course of business) by any Group
Member and sales of debt securities of any Group Member; (b) sales of equity
interests of any Group Member; (c) sales or other voluntary or involuntary
dispositions of any assets of any Group Member other than (i) sales or other
dispositions of production, inventory, accounts receivable and other assets in
the ordinary course of business, and (ii) sales or other dispositions of assets
as part of normal retirements or replacements; (d) the termination of Commodity
Hedge Contracts or interest rate swap agreements prior to the termination date
otherwise specified therein; (e) capital contributions received; or (f)
corporate reorganizations or restructurings.
"Investment Capital Expenditures" means capital expenditures other than
Maintenance Capital Expenditures and Expansion Capital Expenditures.
"Investor Representatives" means the members of the Board of Directors of
GP designated by Swank and ACM or their successors pursuant to the terms of the
Investors' Rights Agreement.
"Investors' Rights Agreement" means the Investors' Rights Agreement, dated
as of even date herewith, by and among the Partnership, the General Partner, QRC
and the Initial Private Purchasers.
"Issue Price" means the price at which a Unit is purchased from the
Partnership, net of any sales commission or underwriting discount charged to the
Partnership.
"Limited Partner" means, unless the context otherwise requires, the
Organizational Limited Partner prior to its withdrawal from the Partnership,
each Initial Limited Partner, each additional Person that becomes a Limited
Partner pursuant to the terms of this Agreement and any Departing General
Partner upon the change of its status from General Partner to Limited Partner
pursuant to Section 11.3, in each case, in such Person's capacity as limited
partner of the Partnership; provided, however, that when the term "Limited
Partner" is used herein in the context of any vote or other approval, including
Article XIII and Article XIV, such term shall not, solely for such purpose,
include any holder of an Incentive Distribution Right (solely with respect to
its Incentive Distribution Rights and not with respect to any other Limited
Partner Interest held by such Person) except as may otherwise be required by
law.
"Limited Partner Interest" means the ownership interest of a Limited
Partner in the Partnership, which may be evidenced by Common Units, Class C
Units, Subordinated Units, Incentive Distribution Rights or other Partnership
Securities or a combination thereof or interest therein, and includes any and
all benefits to which such Limited Partner is entitled as provided in this
Agreement, together with all obligations of such Limited Partner to comply with
the terms and provisions of this Agreement; provided, however, that when the
term "Limited Partner Interest" is used herein in the context of any vote or
other approval, including Article XIII and Article XIV, such term shall not,
solely for such purpose, include any Incentive Distribution Right except as may
otherwise be required by law.
12
"Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the holders of Outstanding Units have the right to elect to
continue the business of the Partnership has expired without such an election
being made, and (b) in the case of any other event giving rise to the
dissolution of the Partnership, the date on which such event occurs.
"Liquidator" means one or more Persons selected by the General Partner to
perform the functions described in Section 12.4 as liquidating trustee of the
Partnership within the meaning of the Delaware Act.
"Maintenance Capital Expenditures" means cash expenditures (including
expenditures for the addition or improvement to the capital assets owned by any
Group Member or for the acquisition of existing, or the construction of new,
capital assets) if such expenditures are made to maintain, including over the
long term, the operating capacity or revenues of the Partnership Group.
Maintenance Capital Expenditures shall not include (a) Expansion Capital
Expenditures or (b) Investment Capital Expenditures.
"Merger Agreement" has the meaning assigned to such term in Section 14.1.
"Midstream Services and Gas Dedication Agreement" means that certain
Midstream Services and Gas Dedication Agreement dated the Closing Date by and
between the Operating Company and QRC.
"Minimum Quarterly Distribution" means $0.425 per Unit per Quarter (or
with respect to the period commencing on December 1, 2006 and ending on December
31, 2006, it means the product of $0.425 multiplied by a fraction of which the
numerator is the number of days in such period and of which the denominator is
92), subject to adjustment in accordance with Section 5.12, Section 6.6 and
Section 6.9.
"National Securities Exchange" means the New York Stock Exchange and the
Nasdaq Global Market.
"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, (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 5.5(d)(ii)) at the time such property is distributed,
reduced by any indebtedness either assumed by such Partner upon such
distribution or to which such property is subject at the time of distribution,
in either case, as determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain, Net Termination Loss or
Required Sale Gain) for such taxable year over the Partnership's items of loss
and deduction (other than those items taken into account in the computation of
Net Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Income shall be determined in accordance with
Section 5.5(b)
13
and shall not include any items specially allocated under Section 6.1(d);
provided, that the determination of the items that have been specially allocated
under Section 6.1(d) shall be made as if Section 6.1(d)(xii) were not in this
Agreement.
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain, Net Termination Loss or
Required Sale Gain) for such taxable year over the Partnership's items of income
and gain (other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Loss shall be determined in accordance with
Section 5.5(b) and shall not include any items specially allocated under Section
6.1(d); provided, that the determination of the items that have been specially
allocated under Section 6.1(d) shall be made as if Section 6.1(d)(xii) were not
in this Agreement.
"Net Positive Adjustments" means, with respect to any Partner, the excess,
if any, of the total positive adjustments over the total negative adjustments
made to the Capital Account of such Partner pursuant to Book-Up Events and
Book-Down Events.
"Net Termination Gain" means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date (other than items taken into account in the
computation of Required Sale Gain). The items included in the determination of
Net Termination Gain shall be determined in accordance with Section 5.5(b) and
shall not include any items of income, gain or loss specially allocated under
Section 6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date (other than items taken into account in the
computation of Required Sale Gain). The items included in the determination of
Net Termination Loss shall be determined in accordance with Section 5.5(b) and
shall not include any items of income, gain or loss specially allocated under
Section 6.1(d).
"Non-citizen Assignee" means a Person whom the General Partner has
determined does not constitute an Eligible Citizen and as to whose Partnership
Interest the General Partner has become the Limited Partner, pursuant to Section
4.9.
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Section 6.2(b)(i)(A), Section
6.2(b)(ii)(A), and Section 6.2(b)(iii) if such properties were disposed of in a
taxable transaction in full satisfaction of such liabilities and for no other
consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction or
expenditure (including any expenditure described in Section 705(a)(2)(B) of the
Code) that, in accordance with the principles of Treasury Regulation Section
1.704-2(b), are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
14
"Notice of Election to Purchase" has the meaning assigned to such term in
Section 15.1(b).
"Omnibus Agreement" means that certain Omnibus Agreement, dated as of the
Closing Date, among QRC, the General Partner, the Partnership, the Operating
Company, and certain other parties thereto, as such may be amended, supplemented
or restated from time to time.
"Operating Company" means Bluestem Pipeline, LLC, a Delaware limited
liability company, the membership interests of which were acquired by the
Partnership pursuant to the Contribution Agreement, and any successors thereto.
"Operating Expenditures" means all Partnership Group cash expenditures (or
the Partnership's proportionate share of expenditures in the case of
Subsidiaries that are not wholly owned), including taxes, reimbursements of the
General Partner in accordance with this Agreement, interest payments, repayment
of Working Capital Borrowings, Maintenance Capital Expenditures and non-Pro Rata
repurchases of Units (other than those made with the proceeds of an Interim
Capital Transaction), payments made in the ordinary course of business under
Commodity Hedge Contracts (excluding payments made in connection with any
termination of a Commodity Hedge Contract prior to its stated expiration or
termination date), provided that with respect to amounts paid in connection with
the initial purchase or placing of a Commodity Hedge Contract, such amount(s)
shall be amortized over the expected term of the applicable Commodity Hedge
Contract and, if earlier, upon its termination, subject to the following:
(a) Payments (including prepayments and prepayment penalties) of
principal of and premium on indebtedness other than Working Capital
Borrowings shall not constitute Operating Expenditures.
(b) Operating Expenditures shall not include (i) Expansion Capital
Expenditures (ii) Investment Capital Expenditures, (iii) payment of
transaction expenses (including taxes) relating to Interim Capital
Transactions or (iv) distributions to Partners.
(c) Where capital expenditures are made in part for Expansion Capital
Expenditures and in part for other purposes, the General Partner, with
Special Approval, shall determine the allocation between the amounts paid
for each.
"Operating Surplus" means, with respect to any period ending prior to the
Liquidation Date, on a cumulative basis and without duplication,
(d) the sum of (i) $8 million, (ii) all cash receipts of the
Partnership Group (or the Partnership's proportionate share of cash
receipts in the case of Subsidiaries that are not wholly owned) for the
period beginning on the Closing Date and ending on the last day of such
period, but excluding cash receipts from Interim Capital Transactions
(except to the extent specified in Section 6.4), (iii) all cash receipts of
the Partnership Group (or the Partnership's proportionate share of cash
receipts in the case of Subsidiaries that are not wholly owned) after the
end of such period but on or before the date of determination of Operating
Surplus with respect to such period resulting from Working Capital
Borrowings and (iv) the amount of distributions paid on equity issued in
connection with the construction or development of a Capital Improvement
and paid during the period
15
beginning on the date that the Partnership enters into a binding
commitment to commence construction or development of such Capital
Improvement and ending on the earlier to occur of the date that such
Capital Improvement Commences Commercial Service and the date that it is
abandoned or disposed of (equity issued to fund the construction or
development period interest payments on debt incurred (including periodic
net payments under related interest rate swap agreements), or construction
or development period distributions on equity issued, to finance the
construction or development of a Capital Improvement shall also be deemed
to be equity issued to finance the construction or development of a
Capital Improvement for purposes of this clause (iv)), less
(e) the sum of (i) Operating Expenditures for the period beginning on
the Closing Date and ending on the last day of such period and (ii) the
amount of cash reserves established by the General Partner to provide funds
for future Operating Expenditures; provided, however, that disbursements
made (including contributions to a Group Member or disbursements on behalf
of a Group Member) or cash reserves established, increased or reduced after
the end of such period but on or before the date of determination of
Available Cash with respect to such period shall be deemed to have been
made, established, increased or reduced, for purposes of determining
Operating Surplus, within such period if the General Partner so determines.
Notwithstanding the foregoing, "Operating Surplus" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
"Opinion of Counsel" means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner or any of its
Affiliates) acceptable to the General Partner.
"Option Closing Date" means the date or dates on which any Common Units
are sold by the Partnership to the Underwriters upon exercise of the
Over-Allotment Option.
"Organizational Limited Partner" means QRC in its capacity as the
organizational limited partner of the Partnership pursuant to this Agreement.
"Outstanding" means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
outstanding on the Partnership's books and records as of the date of
determination; provided, however, that if at any time any Person or Group (other
than the General Partner, QRC or their Affiliates) beneficially owns 20% or more
of the Outstanding Partnership Securities of any class then Outstanding, all
Partnership Securities owned by such Person or Group shall not be voted on any
matter and shall not be considered to be Outstanding when sending notices of a
meeting of Limited Partners to vote on any matter (unless otherwise required by
law), calculating required votes, determining the presence of a quorum or for
other similar purposes under this Agreement, except that Units so owned shall be
considered to be Outstanding for purposes of Section 11.1(b)(iv) (such Units
shall not, however, be treated as a separate class of Partnership Securities for
purposes of this Agreement); provided, further, that the foregoing limitation
shall not apply to (i) any Person or Group who acquired 20% or more of the
Outstanding Partnership Securities of any class then
16
Outstanding directly from the General Partner or its Affiliates, (ii) any Person
or Group who acquired 20% or more of the Outstanding Partnership Securities of
any class then Outstanding directly or indirectly from a Person or Group
described in clause (i) provided that the General Partner shall have notified
such Person or Group in writing that such limitation shall not apply, (iii) any
Person or Group who acquired 20% or more of any Partnership Securities issued by
the Partnership with the prior approval of the Board of Directors or (iv) any
Person or Group who acquired an aggregate of 20% or more of the Outstanding
Partnership Securities of any class then outstanding by virtue of a purchase
made from an Initial Private Purchaser or its Affiliates.
"Over-Allotment Option" means an over-allotment option granted to the
Underwriters by the Partnership pursuant to an underwriting agreement.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including any expenditure described in Section
705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury
Regulation Section 1.704-2(i), are attributable to a Partner Nonrecourse Debt.
"Partners" means the General Partner and the Limited Partners.
"Partnership" means Quest Midstream Partners, L.P., a Delaware limited
partnership.
"Partnership Group" means the Partnership and its Subsidiaries treated as
a single consolidated entity.
"Partnership Interest" means an interest in the Partnership, which shall
include the General Partner Interest and Limited Partner Interests.
"Partnership Minimum Gain" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"Partnership Security" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation rights
relating to an equity interest in the Partnership), including Common Units,
Class C Units, Subordinated Units, General Partner Units and Incentive
Distribution Rights.
"Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partner or any Affiliate of the General Partner
who holds Units.
"Percentage Interest" means as of any date of determination (a) as to the
General Partner with respect to General Partner Units and as to any Unitholder
with respect to Units, the product obtained by multiplying (i) 100% less the
percentage applicable to clause (b) below by (ii) the
17
quotient obtained by dividing (A) the number of General Partner Units held by
the General Partner or the number of Units held by such Unitholder, as the case
may be, by (B) the total number of Outstanding Units and General Partner Units,
and (b) as to the holders of other Partnership Securities issued by the
Partnership in accordance with Section 5.6, the percentage established as a part
of such issuance. The Percentage Interest with respect to an Incentive
Distribution Right shall at all times be zero.
"Person" means an individual or a corporation, firm, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other entity.
"Pro Rata" means (a) when used with respect to Units or any class thereof,
apportioned equally among all designated Units in accordance with their relative
Percentage Interests, (b) when used with respect to Partners or Record Holders,
apportioned among all Partners or Record Holders in accordance with their
relative Percentage Interests and (c) when used with respect to holders of
Incentive Distribution Rights, apportioned equally among all holders of
Incentive Distribution Rights in accordance with the relative number or
percentage of Incentive Distribution Rights held by each such holder.
"Purchase Agreement" means that certain Purchase Agreement dated as of
even date herewith among the Partnership and the Initial Private Purchasers
providing for the purchase of Common Units from the Partnership.
"Purchase Date" means the date determined by the General Partner as the
date for purchase of all Outstanding Limited Partner Interests of a certain
class (other than Limited Partner Interests owned by the General Partner and its
Affiliates) pursuant to Article XV.
"QRC" means Quest Resource Corporation, a Nevada corporation.
"Quarter" means, unless the context requires otherwise, a fiscal quarter
of the Partnership, or, with respect to the first fiscal quarter of the
Partnership after the Closing Date, the portion of such fiscal quarter
commencing on December 1, 2006.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Partnership, which
gain is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Record Date" means the date established by the General Partner or
otherwise in accordance with this Agreement for determining (a) the identity of
the Record Holders entitled to notice of, or to vote at, any meeting of Limited
Partners or entitled to vote by ballot or give approval of Partnership action in
writing without a meeting or entitled to exercise rights in respect of any
lawful action of Limited Partners or (b) the identity of Record Holders entitled
to receive any report or distribution or to participate in any offer.
"Record Holder" means the Person in whose name a Common Unit is registered
on the books of the Transfer Agent as of the opening of business on a particular
Business Day, or with
18
respect to other Partnership Interests, the Person in whose name any such other
Partnership Interest is registered on the books that the General Partner has
caused to be kept as of the opening of business on such Business Day.
"Redeemable Interests" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated as of even date herewith among the Partnership and the Initial
Private Purchasers.
"Remaining Net Positive Adjustments" means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units, Class C Units
or Subordinated Units, the excess of (a) the Net Positive Adjustments of the
Unitholders holding Common Units, Class C Units or Subordinated Units as of the
end of such period over (b) the sum of those Partners' Share of Additional Book
Basis Derivative Items for each prior taxable period, (ii) with respect to the
General Partner (as holder of the General Partner Units), the excess of (a) the
Net Positive Adjustments of the General Partner as of the end of such period
over (b) the sum of the General Partner's Share of Additional Book Basis
Derivative Items with respect to the General Partner Units for each prior
taxable period, and (iii) with respect to the holders of Incentive Distribution
Rights, the excess of (a) the Net Positive Adjustments of the holders of
Incentive Distribution Rights as of the end of such period over (b) the sum of
the Share of Additional Book Basis Derivative Items of the holders of the
Incentive Distribution Rights for each prior taxable period.
"Required Allocations" means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or Section
6.1(c)(ii) and (b) any allocation of an item of income, gain, loss or deduction
pursuant to Section 6.1(d)(i), Section 6.1(d)(ii), Section 6.1(d)(iv), Section
6.1(d)(v), Section 6.1(d)(vii) or Section 6.1(d)(ix).
"Required Sale" means the right of the Initial Private Purchasers to force
a sale of the Partnership or its assets as more specifically described in the
Investors' Rights Agreement.
"Required Sale Gain" means, for any taxable year, the sum, if positive, of
all items of income, gain, loss or deduction recognized by the Partnership upon
a sale of its assets in a Required Sale.
"Required Sale Loss" means, for any taxable year, the sum, if negative, of
all items of income, gain, loss or deduction recognized by the Partnership upon
a sale of its assets in a Required Sale.
"Required Sale Premium" means (i) 110% if the Required Sale is completed
within 180 days or less after the Initial Private Purchasers provided notice of
their exercise of their right to a Required Sale in accordance with the
Investors' Rights Agreement, (ii) 117.5% if the Required Sale is completed no
less than 181 days nor more than 270 days after the Initial Private Purchasers
provided notice of their exercise of their right to a Required Sale in
accordance with the Investors' Rights Agreement, (iii) 125% if the Required Sale
is completed no less than 271 days nor more than 360 days after the Initial
Private Purchasers provided notice of their exercise of their right to a
Required Sale in accordance with the Investors' Rights Agreement, (iv) 132.5% if
the Required Sale is completed no less than 361 days nor more than 450 days
after the
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Initial Private Purchasers provided notice of their exercise of their right to a
Required Sale in accordance with the Investors' Rights Agreement and (v) 140% if
the Required Sale is completed more than 450 days after the Initial Private
Purchasers provided notice of their exercise of their right to a Required Sale
in accordance with the Investors' Rights Agreement.
"Reset Notice" has the meaning assigned to such term in Section 5.12(b).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or Section 6.2(b)(ii)(A), respectively, to
eliminate Book-Tax Disparities.
"Retained Converted Subordinated Unit" has the meaning assigned to such
term in Section 5.5(c)(ii).
"Second Liquidation Target Amount" has the meaning assigned to such term
in Section 6.1(c)(i)(F).
"Second Target Distribution" means $0.5325 per Unit per Quarter (or, with
respect to the period commencing on December 1, 2006 and ending on December 31,
2006, it means the product of $0.5325 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92), subject to adjustment in accordance with Section 5.12,
Section 6.6 and Section 6.9.
"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such statute.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time and any successor to such
statute.
"Share of Additional Book Basis Derivative Items" means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable period,
(i) with respect to the Unitholders holding Common Units, Class C Units or
Subordinated Units, the amount that bears the same ratio to such Additional Book
Basis Derivative Items as the Unitholders' Remaining Net Positive Adjustments as
of the end of such period bears to the Aggregate Remaining Net Positive
Adjustments as of that time, (ii) with respect to the General Partner (as holder
of the General Partner Units), the amount that bears the same ratio to such
Additional Book Basis Derivative Items as the General Partner's Remaining Net
Positive Adjustments as of the end of such period bears to the Aggregate
Remaining Net Positive Adjustment as of that time, and (iii) with respect to the
Partners holding Incentive Distribution Rights, the amount that bears the same
ratio to such Additional Book Basis Derivative Items as the Remaining Net
Positive Adjustments of the Partners holding the Incentive Distribution Rights
as of the end of such period bears to the Aggregate Remaining Net Positive
Adjustments as of that time.
"Special Approval" means approval by a majority of the members of the
Conflicts Committee acting in good faith.
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"Subordinated Unit" means a Class A Subordinated Unit or a Class B
Subordinated Unit. The term "Subordinated Unit" does not include a Common Unit
or Class C Unit. A Subordinated Unit that is convertible into a Common Unit
shall not constitute a Common Unit until such conversion occurs.
"Subordination Period" means the period commencing on the Closing Date and
ending on the first to occur of the following dates:
(f) The first day of any Quarter beginning after the seventh
anniversary of the Closing Date or, if the Initial Public Offering has
occurred, the first day of any Quarter beginning after the fifth
anniversary of the closing of the Initial Public Offering, in either case
in respect of which (i) (A) distributions of Available Cash from Operating
Surplus on each of the Outstanding Common Units, Subordinated Units and
General Partner Units and any other Outstanding Units that are senior or
equal in right of distribution to the Subordinated Units with respect to
each of the three consecutive, non-overlapping four-Quarter periods
immediately preceding such date equaled or exceeded the sum of the Minimum
Quarterly Distribution on all Outstanding Common Units, Subordinated Units
and General Partner Units and any other Outstanding Units that are senior
or equal in right of distribution to the Subordinated Units during such
periods and (B) the Adjusted Operating Surplus for each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Common Units, Subordinated Units and General Partner Units
and any other Units that are senior or equal in right of distribution to
the Subordinated Units that were Outstanding during such periods on a Fully
Diluted Basis and (ii) there are no Cumulative Common Unit Arrearages; and
(g) the date on which the General Partner is removed as general
partner of the Partnership upon the requisite vote by holders of
Outstanding Units under circumstances where Cause does not exist and Units
held by the General Partner and its Affiliates are not voted in favor of
such removal.
"Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
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"Target Distribution" means, collectively, the First Target Distribution,
the Second Target Distribution and the Third Target Distribution.
"Third Liquidation Target Amount" has the meaning assigned to such terms
in Section 6.1(c)(1)(G).
"Third Target Distribution" means $0.6375 per Unit per Quarter (or, with
respect to the period commencing on December 1, 2006 and ending on December 31,
2006, it means the product of $0.6375 multiplied by a fraction of which the
numerator is equal to the number of days in such period and of which the
denominator is 92) subject to adjustment in accordance with Section 5.12,
Section 6.6 and Section 6.9.
"Trading Day" has the meaning assigned to such term in Section 15.1(a).
"transfer" has the meaning assigned to such term in Section 4.4(a).
"Transfer Agent" means such bank, trust company or other Person (including
the General Partner or one of its Affiliates) as shall be appointed from time to
time by the General Partner to act as registrar and transfer agent for the
Common Units; provided, that if no Transfer Agent is specifically designated for
any other Partnership Securities, the General Partner shall act in such
capacity.
"Underwriters" means the underwriters in the Initial Public Offering.
"Unit" means a Partnership Security that is designated as a "Unit" and
shall include Common Units, Class C Units and Subordinated Units, each a
separate class, but shall not include (i) General Partner Units (or the General
Partner Interest represented thereby) or (ii) Incentive Distribution Rights.
"Unit Majority" means (i) during the Subordination Period, at least a
majority of the Outstanding Common Units (excluding Common Units owned by the
General Partner and its Affiliates), voting as a class, and at least a majority
of the Outstanding Subordinated Units, voting as a class, and (ii) after the end
of the Subordination Period, at least a majority of the Outstanding Common Units
and Class C Units, if any, voting as a single class.
"Unitholders" means the holders of Units.
"Unpaid MQD" has the meaning assigned to such term in Section
6.4(c)(i)(2).
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date (as determined under Section 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).
22
"Unrecovered Initial Unit Price" means at any time, with respect to a
Unit, the Initial Unit Price less the sum of all distributions constituting
Capital Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the General Partner
determines to be appropriate to give effect to any distribution, subdivision or
combination of such Units. From and after the closing of the Initial Public
Offering, the Unrecovered Initial Unit Price shall be determined by reference to
the Initial Unit Price per Common Unit in such Initial Public Offering.
"U.S. GAAP" means United States generally accepted accounting principles
consistently applied.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 11.1(b).
"Working Capital Borrowings" means borrowings used solely for working
capital purposes or to pay distributions to Partners made pursuant to a credit
facility or other arrangement requiring all such borrowings thereunder to be
reduced to a relatively small amount each year for an economically meaningful
period of time.
Section 1.2 Construction. Unless the context requires otherwise: (a) any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa; (b) references to Articles and Sections
refer to Articles and Sections of this Agreement; (c) the terms "include",
"includes", "including" or words of like import shall be deemed to be followed
by the words "without limitation"; and (d) the terms "hereof", "herein" or
"hereunder" refer to this Agreement as a whole and not to any particular
provision of this Agreement. The table of contents and headings contained in
this Agreement are for reference purposes only, and shall not affect in any way
the meaning or interpretation of this Agreement.
ARTICLE II.
Organization
Section 2.1 Formation. The General Partner and the Organizational Limited
Partner have previously formed the Partnership as a limited partnership pursuant
to the provisions of the Delaware Act and hereby amend and restate the original
Agreement of Limited Partnership of Quest Midstream Partners, L.P. in its
entirety. This amendment and restatement shall become effective on the date of
this Agreement. Except as expressly provided to the contrary in this Agreement,
the rights, duties (including fiduciary duties), liabilities and obligations of
the Partners and the administration, dissolution and termination of the
Partnership shall be governed by the Delaware Act. All Partnership Interests
shall constitute personal property of the owner thereof for all purposes.
Section 2.2 Name. The name of the Partnership shall be "Quest Midstream
Partners, L.P." The Partnership's business may be conducted under any other name
or names as
23
determined by the General Partner, including the name of the General Partner.
The words "Limited Partnership," "L.P.," "Ltd." or similar words or letters
shall be included in the Partnership's name where necessary for the purpose of
complying with the laws of any jurisdiction that so requires. The General
Partner may change the name of the Partnership at any time and from time to time
and shall notify the Limited Partners of such change in the next regular
communication to the Limited Partners.
Section 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices. Unless and until changed by the General Partner, the registered office
of the Partnership in the State of Delaware shall be located at ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the registered agent for service of
process on the Partnership in the State of Delaware at such registered office
shall be The Corporation Trust Company. The principal office of the Partnership
shall be located at ▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, or such other place as the General Partner may from time to time
designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner shall determine necessary or appropriate. 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 Partners.
Section 2.4 Purpose and Business. The purpose and nature of the business to
be conducted by the Partnership shall be to (a) engage directly in, or enter
into or form, hold and dispose of any corporation, partnership, joint venture,
limited liability company or other arrangement to engage indirectly in, any
business activity that is approved by the General Partner and that lawfully may
be conducted by a limited partnership organized pursuant to the Delaware Act
and, in connection therewith, to exercise all of the rights and powers conferred
upon the Partnership pursuant to the agreements relating to such business
activity, and (b) do anything necessary or appropriate to the foregoing,
including the making of capital contributions or loans to a Group Member;
provided, however, that the General Partner shall not cause the Partnership to
engage, directly or indirectly, in any business activity that the General
Partner determines would cause the Partnership to be treated as an association
taxable as a corporation or otherwise taxable as an entity for federal income
tax purposes. To the fullest extent permitted by law, the General Partner, and,
to the extent the approval of the Investor Representatives is required by any
provision of this Agreement, the Investor Representatives shall have no duty or
obligation to propose or approve, and may decline to propose or approve, the
conduct by the Partnership of any business free of any fiduciary or other duty
or obligation whatsoever to the Partnership or any Limited Partner and, in
declining to so propose or approve, shall not be required to act in good faith
or pursuant to any other standard imposed by this Agreement, any Group Member
Agreement, any other agreement contemplated hereby or under the Delaware Act or
any other law, rule or regulation or at equity.
Section 2.5 Powers. The Partnership shall be empowered to do any and all
acts and things necessary or appropriate for the furtherance and accomplishment
of the purposes and business described in Section 2.4 and for the protection and
benefit of the Partnership.
Section 2.6 Power of Attorney.
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(a) Each Limited Partner hereby constitutes and appoints the General
Partner and, if a Liquidator shall have been selected pursuant to Section
12.3, the Liquidator (and any successor to the Liquidator by merger,
transfer, assignment, election or otherwise) and each of their authorized
officers and attorneys-in-fact, as the case may be, with full power of
substitution, as his true and lawful agent and attorney-in-fact, with full
power and authority in his name, place and ▇▇▇▇▇, to:
(i) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (A) all certificates, documents and
other instruments (including this Agreement and the Certificate of
Limited Partnership and all amendments or restatements hereof or
thereof) that the General Partner or the Liquidator determines to be
necessary or appropriate to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) in
the State of Delaware and in all other jurisdictions in which the
Partnership may conduct business or own property; (B) all
certificates, documents and other instruments that the General Partner
or the Liquidator determines to be necessary or appropriate to
reflect, in accordance with its terms, any amendment, change,
modification or restatement of this Agreement; (C) all certificates,
documents and other instruments (including conveyances and a
certificate of cancellation) that the General Partner or the
Liquidator determines to be necessary or appropriate to reflect the
dissolution and liquidation of the Partnership pursuant to the terms
of this Agreement; (D) all certificates, documents and other
instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described in,
Article IV, Article X, Article XI or Article XII; (E) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of any class
or series of Partnership Securities issued pursuant to Section 5.6;
and (F) all certificates, documents and other instruments (including
agreements and a certificate of merger) relating to a merger,
consolidation or conversion of the Partnership pursuant to Article
XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and
other instruments that the General Partner or the Liquidator
determines to be necessary or appropriate to 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 effectuate the terms or
intent of this Agreement; provided, that when required by Section 13.3
or any other provision of this Agreement that establishes a percentage
of the Limited Partners or of the Limited Partners of any class or
series required to take any action, the General Partner and the
Liquidator may exercise the power of attorney made in this Section
2.6(a)(ii) only after the necessary vote, consent or approval of the
Limited Partners or of the Limited Partners of such class or series,
as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing the
General Partner to amend this Agreement except in accordance with Article XIII
or as may be otherwise expressly provided for in this Agreement.
25
(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and, to the maximum
extent permitted by law, not be affected by the subsequent death, incompetency,
disability, incapacity, dissolution, bankruptcy or termination of any Limited
Partner 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. Each such 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 each
such Limited Partner, to the maximum extent permitted by law, hereby waives any
and all defenses that may be available to contest, negate or disaffirm the
action of the General Partner or the Liquidator taken in good faith under such
power of attorney. Each Limited Partner shall execute and deliver to the General
Partner or the Liquidator, within 15 days after receipt of the request therefor,
such further designation, powers of attorney and other instruments as the
General Partner or the Liquidator may request in order to effectuate this
Agreement and the purposes of the Partnership.
Section 2.7 Term. The term of the Partnership commenced upon the filing of
the Certificate of Limited Partnership in accordance with the Delaware Act and
shall continue in existence until the dissolution of the Partnership in
accordance with the provisions of Article XII. The existence of the Partnership
as a separate legal entity shall continue until the cancellation of the
Certificate of Limited Partnership as provided in the Delaware Act.
Section 2.8 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner, one or more of its
Affiliates or one or more nominees, as the General Partner may determine. The
General Partner hereby declares and warrants that any Partnership assets for
which record title is held in the name of the General Partner or one or more of
its Affiliates or one or more nominees shall be held by the General Partner or
such Affiliate or nominee for the use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use reasonable efforts to cause record title to such
assets (other than those assets in respect of which the General Partner
determines that the expense and difficulty of conveyancing makes transfer of
record title to the Partnership impracticable) to be vested in the Partnership
as soon as reasonably practicable; provided, further, that, prior to the
withdrawal or removal of the General Partner or as soon thereafter as
practicable, the General Partner shall use reasonable efforts to effect the
transfer of record title to the Partnership and, prior to any such transfer,
will provide for the use of such assets in a manner satisfactory to the General
Partner. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which record
title to such Partnership assets is held.
ARTICLE III.
Rights of Limited Partners
Section 3.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement except as expressly provided in this Agreement or
the Delaware Act.
26
Section 3.2 Management of Business. No Limited Partner, in its capacity as
such, shall participate in the operation, management or control (within the
meaning of the Delaware Act) of the Partnership's business, transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership. Any action taken by any Affiliate of the General
Partner or any officer, director, employee, manager, member, general partner,
agent or trustee of the General Partner or any of its Affiliates, or any
officer, director, employee, manager, member, general partner, agent or trustee
of a Group Member, in its capacity as such, shall not be deemed to be
participation in the control of the business of the Partnership by a limited
partner of the Partnership (within the meaning of Section 17-303(a) of the
Delaware Act) and shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners under this Agreement.
Section 3.3 Outside Activities of the Limited Partners. Subject to the
provisions of Section 7.5, which shall continue to be applicable to the Persons
referred to therein, any Limited Partner shall be entitled to and may have
business interests and engage in business activities in addition to those
relating to the Partnership, including business interests and activities in
direct competition with the Partnership Group. Neither the Partnership nor any
of the other Partners shall have any rights by virtue of this Agreement in any
business ventures of any Limited Partner.
Section 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each Limited
Partner shall have the right, for a purpose reasonably related to such
Limited Partner's interest as a Limited Partner in the Partnership, upon
reasonable written demand stating the purpose of such demand, and at such
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 its becoming available, to obtain a copy of
the Partnership's federal, state and local income tax returns for each
year;
(iii) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(iv) to obtain a copy of this Agreement and the Certificate of
Limited Partnership and all amendments thereto, together with copies
of the executed copies of all powers of attorney pursuant to which
this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of
cash and a description and statement of the Net Agreed Value of any
other Capital Contribution by each Partner and that each Partner has
agreed to contribute in the future, and the date on which each became
a Partner; and
27
(vi) to obtain such other information regarding the affairs of
the Partnership as is just and reasonable.
(b) The General Partner may keep confidential from the Limited
Partners, for such period of time as the General Partner deems reasonable,
(i) any information that the General Partner reasonably believes to be in
the nature of trade secrets or (ii) other information the disclosure of
which the General Partner in good faith believes (A) is not in the best
interests of the Partnership Group, (B) could damage the Partnership Group
or its business or (C) that any Group Member is required by law or by
agreement with any third party to keep confidential (other than agreements
with Affiliates of the Partnership the primary purpose of which is to
circumvent the obligations set forth in this Section 3.4).
ARTICLE IV.
Certificates; Record Holders;
Transfer of Partnership Interests;
Redemption of Partnership Interests
Section 4.1 Certificates. Upon the Partnership's issuance of Common
Units, Subordinated Units or Class C Units to any Person, the Partnership
shall issue, upon the request of such Person, one or more Certificates in
the name of such Person evidencing the number of such Units being so
issued. In addition, (a) upon the General Partner's request, the
Partnership shall issue to it one or more Certificates in the name of the
General Partner evidencing its General Partner Units and (b) upon the
request of any Person owning Incentive Distribution Rights or any other
Partnership Securities other than Common Units, Subordinated Units or Class
C Units, the Partnership shall issue to such Person one or more
certificates evidencing such Incentive Distribution Rights or other
Partnership Securities other than Common Units, Subordinated Units or Class
C Units. Certificates shall be executed on behalf of the Partnership by the
Chairman of the Board, President or any Executive Vice President, Senior
Vice President or Vice President and the Secretary or any Assistant
Secretary of the General Partner. No Common Unit Certificate shall be valid
for any purpose until it has been countersigned by the Transfer Agent;
provided, however, that if the General Partner elects to issue Common Units
in global form, the Common Unit Certificates shall be valid upon receipt of
a certificate from the Transfer Agent certifying that the Common Units have
been duly registered in accordance with the directions of the Partnership.
Subject to the requirements of Section 6.7(c) and Section 6.7(e), the
Partners holding Certificates evidencing Subordinated Units may exchange
such Certificates for Certificates evidencing Common Units on or after the
date on which such Subordinated Units are converted into Common Units
pursuant to the terms of Section 5.8. Subject to the requirements of
Section 6.7(e), the Partners holding Certificates evidencing Class C Units
may exchange such Certificates for Certificates evidencing Common Units on
or after the period set forth in Section 5.12(f) pursuant to the terms of
Section 5.12.
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer Agent
(for Common Units) or the General Partner (for Partnership Securities other
than Common Units), the appropriate officers of the General Partner on
behalf of the Partnership shall execute, and the
28
Transfer Agent (for Common Units) or the General Partner (for Partnership
Securities other than Common Units) shall countersign and deliver in exchange
therefor, a new Certificate evidencing the same number and type of Partnership
Securities as the Certificate so surrendered.
(b) The appropriate officers of the General Partner on behalf of the
Partnership shall execute and deliver, and the Transfer Agent (for Common
Units) shall countersign, a new Certificate in place of any Certificate
previously issued if the Record Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory
to the General Partner, that a previously issued Certificate has been
lost, destroyed or stolen;
(ii) requests the issuance of a new Certificate before the
General Partner has notice that the Certificate has been acquired by a
purchaser for value in good faith and without notice of an adverse
claim;
(iii) if requested by the General Partner, delivers to the
General Partner a bond, in form and substance satisfactory to the
General Partner, with surety or sureties and with fixed or open
penalty as the General Partner may direct to indemnify the
Partnership, the Partners, the General Partner and the Transfer Agent
against any claim that may be made on account of the alleged loss,
destruction or theft of the Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
General Partner.
If a Limited Partner fails to notify the General Partner within a
reasonable period of time after he has notice of the loss, destruction or theft
of a Certificate, and a transfer of the Limited Partner Interests represented by
the Certificate is registered before the Partnership, the General Partner or the
Transfer Agent receives such notification, the Limited Partner shall be
precluded from making any claim against the Partnership, the General Partner or
the Transfer Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under this
Section 4.2, the General Partner may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Transfer Agent) reasonably connected therewith.
Section 4.3 Record Holders. The Partnership shall be entitled to recognize
the Record Holder as the Partner with respect to any Partnership Interest and,
accordingly, shall not be bound to recognize any equitable or other claim to, or
interest in, such Partnership Interest on the part of any other Person,
regardless of whether the Partnership shall have actual or other notice thereof,
except as otherwise provided by law or any applicable rule, regulation,
guideline or requirement of any National Securities Exchange on which such
Partnership Interests are listed or admitted to trading. Without limiting the
foregoing, when a Person (such as a broker, dealer, bank, trust company or
clearing corporation or an agent of any of the foregoing) is acting as nominee,
agent or in some other representative capacity for another Person in acquiring
and/or holding Partnership Interests, as between the Partnership on the one
hand, and such other Persons on the other, such representative Person shall be
the Record Holder of such Partnership Interest.
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Section 4.4 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction (i) by which the
General Partner assigns its General Partner Units to another Person or by which
a holder of Incentive Distribution Rights assigns its Incentive Distribution
Rights to another Person, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise or (ii) by which the holder of a Limited Partner Interest (other
than an Incentive Distribution Right) assigns such Limited Partner Interest to
another Person who is or becomes a Limited Partner, and includes a sale,
assignment, gift, exchange or any other disposition by law or otherwise,
including any transfer upon foreclosure of any pledge, encumbrance,
hypothecation or mortgage.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent a
disposition by any stockholder, member, partner or other owner of the General
Partner of any or all of the shares of stock, membership interests, partnership
interests or other ownership interests in the General Partner.
Section 4.5 Registration and Transfer of Limited Partner Interests.
(a) The General Partner shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Limited Partner Interests. The
Transfer Agent is hereby appointed registrar and transfer agent for the purpose
of registering Common Units and transfers of such Common Units as herein
provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers are effected in the
manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers of the General Partner on behalf of the Partnership shall execute and
deliver, and in the case of Common Units, the Transfer Agent shall countersign
and deliver, in the name of the holder or the designated transferee or
transferees, as required pursuant to the holder's instructions, one or more new
Certificates evidencing the same aggregate number and type of Limited Partner
Interests as was evidenced by the Certificate so surrendered.
(b) Except as otherwise provided in Section 4.9, the General Partner shall
not recognize any transfer of Limited Partner Interests until the Certificates
evidencing such Limited Partner Interests are surrendered for registration of
transfer. No charge shall be imposed by the General Partner for such transfer;
provided, that as a condition to the issuance of any new Certificate under this
Section 4.5, the General Partner may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed with respect
thereto.
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(c) Subject to (i) the foregoing provisions of this Section 4.5, (ii)
Section 4.3, (iii) Section 4.8, (iv) with respect to any class or series of
Limited Partner Interests, the provisions of any statement of designations or an
amendment to this Agreement establishing such class or series, (v) any
contractual provisions binding on any Limited Partner and (vi) provisions of
applicable law including the Securities Act, Limited Partner Interests (other
than the Incentive Distribution Rights) shall be freely transferable.
(d) The General Partner and its Affiliates and QRC and its Affiliates shall
have the right at any time to transfer their Subordinated Units, Class C Units
and Common Units (whether issued upon conversion of the Subordinated Units or
otherwise) to one or more Persons.
Section 4.6 Transfer of the General Partner's General Partner Interest.
(a) Subject to Section 4.6(c), prior to the first day of the first Quarter
beginning after the tenth anniversary of the Closing Date, the General Partner
shall not transfer all or any part of its General Partner Interest (represented
by General Partner Units) to a Person unless such transfer (i) has been approved
by the prior written consent or vote of the holders of at least a majority of
the Outstanding Common Units (excluding Common Units held by the General Partner
and its Affiliates) or (ii) is of all, but not less than all, of its General
Partner Interest to (A) an Affiliate of the General Partner (other than an
individual) or (B) another Person (other than an individual) in connection with
the merger or consolidation of the General Partner with or into such other
Person or the transfer by the General Partner of all or substantially all of its
assets to such other Person.
(b) Subject to Section 4.6(c), on or after the first day of the first
Quarter beginning after the tenth anniversary of the Closing Date, the General
Partner may transfer all or any of its General Partner Interest without
Unitholder approval.
(c) Notwithstanding anything herein to the contrary, no transfer by the
General Partner of all or any part of its General Partner Interest to another
Person shall be permitted unless (i) the transferee agrees to assume the rights
and duties of the General Partner under this Agreement and to be bound by the
provisions of this Agreement, (ii) the Partnership receives an Opinion of
Counsel that such transfer would not result in the loss of limited liability of
any Limited Partner under the Delaware Act or cause the Partnership to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed) and (iii) such transferee also agrees to purchase all (or the
appropriate portion thereof, if applicable) of the partnership or membership
interest of the General Partner as the general partner or managing member, if
any, of each other Group Member. In the case of a transfer pursuant to and in
compliance with this Section 4.6, the transferee or successor (as the case may
be) shall, subject to compliance with the terms of Section 10.3, be admitted to
the Partnership as the General Partner immediately prior to the transfer of the
General Partner Interest, and the business of the Partnership shall continue
without dissolution.
Section 4.7 Transfer of Incentive Distribution Rights. Prior to the first
day of the first Quarter beginning after the tenth anniversary of the Closing
Date, a holder of Incentive Distribution Rights may transfer any or all of the
Incentive Distribution Rights held by such
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holder without any consent of the Unitholders to (a) an Affiliate of such holder
(other than an individual) or (b) another Person (other than an individual) in
connection with (i) the merger or consolidation of such holder of Incentive
Distribution Rights with or into such other Person or (ii) the transfer by such
holder of all or substantially all of its assets to such other Person. Any other
transfer of the Incentive Distribution Rights prior to the first day of the
first Quarter beginning after the tenth anniversary of the Closing Date shall
require the prior approval of holders of at least a majority of the Outstanding
Common Units (excluding Common Units held by the General Partner and its
Affiliates). On or after the first day of the first Quarter beginning after the
tenth anniversary of the Closing Date, or if the Initial Public Offering has
occurred, on or after the first day of the first Quarter beginning after the
tenth anniversary of the Initial Public Offering, the General Partner or any
other holder of Incentive Distribution Rights may transfer any or all of its
Incentive Distribution Rights without Unitholder approval. Notwithstanding
anything herein to the contrary, (i) the transfer of Class C Units issued
pursuant to Section 5.12, or the transfer of Common Units issued upon conversion
of the Class C Units, shall not be treated as a transfer of all or any part of
the Incentive Distribution Rights and (ii) no transfer of Incentive Distribution
Rights to another Person shall be permitted unless the transferee agrees to be
bound by the provisions of this Agreement.
Section 4.8 Restrictions on Transfers.
(a) Except as provided in Section 4.8(d), but notwithstanding the other
provisions of this Article IV, no transfer of any Partnership Interests shall be
made if such transfer would (i) violate the then applicable federal or state
securities laws or rules and regulations of the Commission, any state securities
commission or any other governmental authority with jurisdiction over such
transfer, (ii) terminate the existence or qualification of the Partnership under
the laws of the jurisdiction of its formation, or (iii) cause the Partnership to
be treated as an association taxable as a corporation or otherwise to be taxed
as an entity for federal income tax purposes (to the extent not already so
treated or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if it receives an Opinion of Counsel that such
restrictions are necessary to avoid a significant risk of the Partnership
becoming taxable as a corporation or otherwise becoming taxable as an entity for
federal income tax purposes. The General Partner may impose such restrictions by
amending this Agreement; provided, however, that any amendment that would result
in the delisting or suspension of trading of any class of Limited Partner
Interests on the principal National Securities Exchange on which such class of
Limited Partner Interests is then listed or admitted to trading must be
approved, prior to such amendment being effected, by the holders of at least a
majority of the Outstanding Limited Partner Interests of such class.
(c) The transfer of a Subordinated Unit that has converted into a Common
Unit shall be subject to the restrictions imposed by Section 6.7(c).
(d) The transfer of a Class C Unit that has converted into a Common Unit
shall be subject to the restrictions imposed by Section 6.7(e).
(e) Nothing contained in this Article IV, or elsewhere in this Agreement,
shall preclude the settlement of any transactions involving Partnership
Interests entered into through
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the facilities of any National Securities Exchange on which such Partnership
Interests are listed or admitted to trading.
(f) Each certificate evidencing Partnership Interests shall bear a
conspicuous legend in substantially the following form:
THE HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF QUEST
MIDSTREAM PARTNERS, L.P. THAT THIS SECURITY MAY NOT BE SOLD, OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED IF SUCH TRANSFER WOULD (A)
VIOLATE THE THEN APPLICABLE FEDERAL OR STATE SECURITIES LAWS OR RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE
SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL AUTHORITY WITH
JURISDICTION OVER SUCH TRANSFER, (B) TERMINATE THE EXISTENCE OR
QUALIFICATION OF QUEST MIDSTREAM PARTNERS, L.P. UNDER THE LAWS OF THE
STATE OF DELAWARE, (C) CAUSE QUEST MIDSTREAM PARTNERS, L.P. TO BE TREATED
AS AN ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN
ENTITY FOR FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO
TREATED OR TAXED), (D) VIOLATE THE TERMS AND CONDITIONS OF THE FIRST
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF QUEST MIDSTREAM
PARTNERS, L.P., DATED DECEMBER ___, 2006, AS THE SAME MAY BE AMENDED FROM
TIME TO TIME, OR (E) VIOLATE THE TERMS AND CONDITIONS OF THE INVESTORS'
RIGHTS AGREEMENT, DATED DECEMBER ___, 2006, AS THE SAME MAY BE AMENDED
FROM TIME TO TIME, BY AND AMONG QUEST MIDSTREAM PARTNERS, L.P. AND ITS
GENERAL AND LIMITED PARTNERS. QUEST MIDSTREAM GP, LLC, THE GENERAL PARTNER
OF QUEST MIDSTREAM PARTNERS, L.P., MAY IMPOSE ADDITIONAL RESTRICTIONS ON
THE TRANSFER OF THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT
SUCH RESTRICTIONS ARE NECESSARY TO AVOID A SIGNIFICANT RISK OF QUEST
MIDSTREAM PARTNERS, L.P. BECOMING TAXABLE AS A CORPORATION OR OTHERWISE
BECOMING TAXABLE AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES. THE
RESTRICTIONS SET FORTH ABOVE SHALL NOT PRECLUDE THE SETTLEMENT OF ANY
TRANSACTIONS INVOLVING THIS SECURITY ENTERED INTO THROUGH THE FACILITIES
OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS LISTED OR
ADMITTED TO TRADING.
Section 4.9 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state or
local law or regulation that the General Partner determines would create a
substantial risk of cancellation or forfeiture of any property in which the
Group Member has an interest based on the nationality, citizenship or other
related status of a Limited Partner, the General Partner may request any
33
Limited Partner to furnish to the General Partner, within 30 days after receipt
of such request, an executed Citizenship Certification or such other information
concerning his nationality, citizenship or other related status (or, if the
Limited Partner is a nominee holding for the account of another Person, the
nationality, citizenship or other related status of such Person) as the General
Partner may request. If a Limited Partner fails to furnish to the General
Partner within the aforementioned 30-day period such Citizenship Certification
or other requested information or if upon receipt of such Citizenship
Certification or other requested information the General Partner determines that
a Limited Partner is not an Eligible Citizen, the Limited Partner Interests
owned by such Limited Partner shall be subject to redemption in accordance with
the provisions of Section 4.10. In addition, the General Partner may require
that the status of any such Limited Partner be changed to that of a Non-citizen
Assignee and, thereupon, the General Partner shall be substituted for such
Non-citizen Assignee as the Limited Partner in respect of the Non-citizen
Assignee's Limited Partner Interests.
(b) The General Partner shall, in exercising voting rights in respect of
Limited Partner Interests held by it on behalf of Non-citizen Assignees,
distribute the votes in the same ratios as the votes of Partners (including the
General Partner) in respect of Limited Partner Interests other than those of
Non-citizen Assignees are cast, either for, against or abstaining as to the
matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have
no right to receive a distribution in kind pursuant to Section 12.4 but shall be
entitled to the cash equivalent thereof, and the Partnership shall provide cash
in exchange for an assignment of the Non-citizen Assignee's share of any
distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by the Partnership from the Non-citizen
Assignee of his Limited Partner Interest (representing his right to receive his
share of such distribution in kind).
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the General
Partner, request that with respect to any Limited Partner Interests of such
Non-citizen Assignee not redeemed pursuant to Section 4.10, such Non-citizen
Assignee be admitted as a Limited Partner, and upon approval of the General
Partner, such Non-citizen Assignee shall be admitted as a Limited Partner and
shall no longer constitute a Non-citizen Assignee and the General Partner shall
cease to be deemed to be the Limited Partner in respect of the Non-citizen
Assignee's Limited Partner Interests.
Section 4.10 Redemption of Partnership Interests of Non-citizen Assignees.
(a) If at any time a Limited Partner fails to furnish a Citizenship
Certification or other information requested within the 30-day period specified
in Section 4.9(a), or if upon receipt of such Citizenship Certification or other
information the General Partner determines, with the advice of counsel, that a
Limited Partner is not an Eligible Citizen, the Partnership may, unless the
Limited Partner establishes to the satisfaction of the General Partner that such
Limited Partner is an Eligible Citizen or has transferred his Partnership
Interests to a Person who is an Eligible Citizen and who furnishes a Citizenship
Certification to the General Partner prior to the date fixed for redemption as
provided below, redeem the Limited Partner Interest of such Limited Partner as
follows:
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(i) The General Partner shall, not later than the 30th day before the
date fixed for redemption, give notice of redemption to the Limited
Partner, at his last address designated on the records of the Partnership
or the Transfer Agent, by registered or certified mail, postage prepaid.
The notice shall be deemed to have been given when so mailed. The notice
shall specify the Redeemable Interests, the date fixed for redemption, the
place of payment, that payment of the redemption price will be made upon
surrender of the Certificate evidencing the Redeemable Interests and that
on and after the date fixed for redemption no further allocations or
distributions to which the Limited Partner would otherwise be entitled in
respect of the Redeemable Interests will accrue or be made.
(ii) The aggregate redemption price for Redeemable Interests shall be
an amount equal to the Current Market Price (the date of determination of
which shall be the date fixed for redemption) of Limited Partner Interests
of the class to be so redeemed multiplied by the number of Limited Partner
Interests of each such class included among the Redeemable Interests. The
redemption price shall be paid, as determined by the General Partner, in
cash or by delivery of a promissory note of the Partnership in the
principal amount of the redemption price, bearing interest at the rate of
5% annually and payable in three equal annual installments of principal
together with accrued interest, commencing one year after the redemption
date.
(iii) Upon surrender by or on behalf of the Limited Partner, at the
place specified in the notice of redemption, of the Certificate evidencing
the Redeemable Interests, duly endorsed in blank or accompanied by an
assignment duly executed in blank, the Limited Partner or his duly
authorized representative shall be entitled to receive the payment
therefor.
(iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Limited Partner Interests.
(b) The provisions of this Section 4.10 shall also be applicable to Limited
Partner Interests held by a Limited Partner as nominee of a Person determined to
be other than an Eligible Citizen.
(c) Nothing in this Section 4.10 shall prevent the recipient of a notice of
redemption from transferring his Limited Partner Interest before the redemption
date if such transfer is otherwise permitted under this Agreement. Upon receipt
of notice of such a transfer, the General Partner shall withdraw the notice of
redemption, provided the transferee of such Limited Partner Interest certifies
to the satisfaction of the General Partner that he is an Eligible Citizen. If
the transferee fails to make such certification, such redemption shall be
effected from the transferee on the original redemption date.
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ARTICLE V.
Capital Contributions and
Issuance of Partnership Interests
Section 5.1 Organizational Contributions. In connection with the formation
of the Partnership under the Delaware Act, the General Partner made an initial
Capital Contribution to the Partnership in the amount of $20.00, for a 2%
General Partner Interest in the Partnership and has been admitted as the General
Partner of the Partnership, and the Organizational Limited Partner made an
initial Capital Contribution to the Partnership in the amount of $980.00 for a
98% Limited Partner Interest in the Partnership and has been admitted as a
Limited Partner of the Partnership. As of the Closing Date, the interest of the
Organizational Limited Partner shall be redeemed as provided in the Contribution
Agreement; and the initial Capital Contribution of the Organizational Limited
Partner shall thereupon be refunded. Ninety-eight percent of any interest or
other profit that may have resulted from the investment or other use of such
initial Capital Contributions shall be allocated and distributed to the
Organizational Limited Partner, and the balance thereof shall be allocated and
distributed to the General Partner.
Section 5.2 Contributions by QRC and the General Partner.
(a) On the Closing Date and pursuant to the Contribution Agreement: (i) the
General Partner shall contribute to the Partnership, as a Capital Contribution,
2.64% of the limited liability company membership interests in the Operating
Company, in exchange for (A) 200,000 General Partner Units representing a
continuation of its 2% General Partner Interest, subject to all of the rights,
privileges and duties of the General Partner under this Agreement and (B) the
Incentive Distribution Rights, and (ii) QRC shall contribute to the Partnership
as a Capital Contribution, 97.36% of the limited liability company membership
interests in the Operating Company, in exchange for an aggregate of 35,134 Class
A Subordinated Units, 4,900,000 Class B Subordinated Units and the right to
receive a cash payment of $38,807,877 million (which shall reimburse QRC for
certain capital expenditures made by QRC); provided that $15 million of such
cash payment to which QRC shall be entitled shall be retained by the Partnership
until such time as one or more Group Members enter into an Approved Working
Capital Facility. Upon entering into an Approved Working Capital Facility, such
$15 million shall be distributed to QRC.
(b) Upon the issuance of any additional Limited Partner Interests by the
Partnership (other than the Common Units issued pursuant to the Purchase
Agreement, the Common Units and Subordinated Units issued pursuant to Section
5.2(a), any Class C Units issued pursuant to Section 5.12 and any Common Units
issued upon conversion of Subordinated Units or Class C Units), the General
Partner may, in exchange for a proportionate number of General Partner Units,
make additional Capital Contributions in an amount equal to the product obtained
by multiplying (i) the quotient determined by dividing (A) the General Partner's
Percentage Interest immediately prior to the issuance of such additional Limited
Partner Interests by (B) 100 less the General Partner's Percentage Interest
immediately prior to the issuance of such additional Limited Partner Interests
times (ii) the amount contributed to the Partnership by the Limited Partners in
exchange for such additional Limited Partner Interests. Except as set forth in
Article
36
XII, the General Partner shall not be obligated to make any additional Capital
Contributions to the Partnership.
Section 5.3 Contributions by Initial Limited Partners.
(a) On the Closing Date and pursuant to the Purchase Agreement, each
Initial Private Purchaser shall contribute to the Partnership cash in an amount
equal to the Issue Price per Initial Common Unit, multiplied by the number of
Common Units specified in the Purchase Agreement to be purchased by such Initial
Private Purchaser at the Closing Date. In exchange for such Capital
Contributions by the Initial Private Purchasers, the Partnership shall issue the
number of Common Units specified in the Purchase Agreement to be purchased by
such Initial Private Purchaser.
(b) No Limited Partner Interests will be issued or issuable as of or at the
Closing Date other than (i) the Common Units issuable pursuant to subparagraph
(a) hereof in aggregate number equal to 4,864,866, (ii) the 35,134 Class A
Subordinated Units issuable pursuant to Section 5.2(a), (iii) the 4,900,000
Class B Subordinated Units issuable pursuant to Section 5.2(a), and (iv) the
Incentive Distribution Rights.
Section 5.4 Interest and Withdrawal. No interest shall be paid by the
Partnership on Capital Contributions. No Partner shall be entitled to the
withdrawal or return of its Capital Contribution, except to the extent, if any,
that distributions made pursuant to this Agreement or upon termination of the
Partnership may be considered as such by law and then only to the extent
provided for in this Agreement. Except to the extent expressly provided in this
Agreement, no Partner shall have priority over any other Partner either as to
the return of Capital Contributions or as to profits, losses or distributions.
Any such return shall be a compromise to which all Partners agree within the
meaning of Section 17-502(b) of the Delaware Act.
Section 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial owner
of Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner) owning a Partnership Interest a separate Capital Account with respect
to such Partnership Interest in accordance with the rules of Treasury Regulation
Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the
amount of all Capital Contributions made to the Partnership with respect to such
Partnership Interest and (ii) all items of Partnership income and gain
(including income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest and (y) all items of Partnership deduction and loss
computed in accordance with Section 5.5(b) and allocated with respect to such
Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income, gain, loss
or deduction that is to be allocated pursuant to Article VI and is to be
reflected in the Partners' Capital Accounts, the determination, recognition and
classification of any such item shall be the
37
same as its determination, recognition and classification for federal income tax
purposes (including any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall be
treated as owning directly its proportionate share (as determined by the
General Partner based upon the provisions of the applicable Group Member
Agreement) of all property owned by (x) any other Group Member that is
classified as a partnership or disregarded entity for federal income tax
purposes and (y) any other partnership, limited liability company,
unincorporated business or other entity classified as a partnership or
disregarded entity for federal income tax purposes of which a Group Member
is, directly or indirectly, a partner.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can be neither
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 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under Section
754 of the Code that may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes. To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.
(iv) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery or amortization attributable
to any Contributed Property shall be determined as if the adjusted basis of
such property on the date it was acquired by the Partnership were equal to
the Agreed Value of such property. Upon an adjustment pursuant to Section
5.5(d) to the Carrying Value of any Partnership property subject to
depreciation, cost recovery or amortization, any further deductions for
such depreciation, cost recovery or amortization attributable to such
property shall be determined (A) as if the adjusted basis of such property
were equal to the Carrying Value of such property immediately following
such adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income tax
purposes;
38
provided, however, that, if the asset has a zero adjusted basis for
federal income tax purposes, depreciation, cost recovery or amortization
deductions shall be determined using any method that the General Partner
may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed
in service and shall be allocated among the Partners pursuant to Section
6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
shall, to the extent possible, be allocated in the same manner to the
Partners to whom such deemed deduction was allocated.
(c) (i) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Partnership
Interest so transferred.
(ii) Subject to Section 6.7(c), immediately prior to the transfer of a
Subordinated Unit or of a Subordinated Unit that has converted into a
Common Unit pursuant to Section 5.8 by a holder thereof (other than a
transfer to an Affiliate unless the General Partner elects to have this
Section 5.5(c)(ii) apply), the Capital Account maintained for such Person
with respect to its Subordinated Units or converted Subordinated Units will
(A) first, be allocated to the Subordinated Units or converted Subordinated
Units to be transferred in an amount equal to the product of (x) the number
of such Subordinated Units or converted Subordinated Units to be
transferred and (y) the Per Unit Capital Amount for a Common Unit, and (B)
second, any remaining balance in such Capital Account will be retained by
the transferor, regardless of whether it has retained any Subordinated
Units or converted Subordinated Units ("Retained Converted Subordinated
Units"). Following any such allocation, the transferor's Capital Account,
if any, maintained with respect to the retained Subordinated Units or
Retained Converted Subordinated Units, if any, will have a balance equal to
the amount allocated under clause (B) hereinabove, and the transferee's
Capital Account established with respect to the transferred Subordinated
Units or converted Subordinated Units will have a balance equal to the
amount allocated under clause (A) hereinabove.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for
cash or Contributed Property, the issuance of Partnership Interests as
consideration for the provision of services or the conversion of the General
Partner's Combined Interest to Common Units pursuant to Section 11.3(b), the
Capital Account of all Partners and the Carrying Value of each Partnership
property immediately prior to such issuance shall be adjusted upward or downward
to reflect any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property immediately prior to such
issuance and had been allocated to the Partners at such time pursuant to Section
6.1 in the same manner as any item of gain or loss actually recognized during
such period would have been allocated. In determining such Unrealized Gain or
Unrealized Loss, the aggregate cash amount and fair market value of all
Partnership assets (including cash or cash equivalents) immediately prior to the
issuance of additional Partnership Interests shall be determined by the General
39
Partner using such method of valuation as it may adopt; provided, however, that
the General Partner, in arriving at such valuation, must take fully into account
the fair market value of the Partnership Interests of all Partners at such time.
The General Partner shall allocate such aggregate value among the assets of the
Partnership (in such manner as it determines) to arrive at a fair market value
for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of all Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as if such Unrealized Gain or Unrealized Loss
had been recognized in a sale of such property immediately prior to such
distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 6.1 in the
same manner as any item of gain or loss actually recognized during such
period would have been allocated. In determining such Unrealized Gain or
Unrealized Loss the aggregate cash amount and fair market value of all
Partnership assets (including cash or cash equivalents) immediately prior
to a distribution shall (A) in the case of an actual distribution that is
not made pursuant to Section 12.4 or in the case of a deemed distribution,
be determined and allocated in the same manner as that provided in Section
5.5(d)(i) or (B) in the case of a liquidating distribution pursuant to
Section 12.4, be determined and allocated by the Liquidator using such
method of valuation as it may adopt.
(e) The Partners acknowledge and agree that the distribution to Quest
Cherokee, LLC pursuant to Section 3.4 of the Contribution Agreement shall not be
deemed to be a distribution to QRC or any other Partner for purposes of this
Agreement and shall not have any impact on any Partners' Capital Account.
Section 5.6 Issuances of Additional Partnership Securities.
(a) Subject to the provisions of Section 5.6(e), the Partnership may issue
such additional Partnership Securities and options, rights, warrants and
appreciation rights relating to the Partnership Securities for any Partnership
purpose at any time and from time to time to such Persons for such consideration
and on such terms and conditions as the General Partner shall determine, all
without the approval of any Limited Partners.
(b) Each additional Partnership Security authorized to be issued by the
Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or
one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series of
Partnership Securities), as shall be fixed by the General Partner, including (i)
the right to share in Partnership profits and losses or items thereof; (ii) the
right to share in Partnership distributions; (iii) the rights upon dissolution
and liquidation of the Partnership; (iv) whether, and the terms and conditions
upon which, the Partnership may or shall be required to redeem the Partnership
Security; (v) whether such Partnership Security is issued with the privilege of
conversion or exchange and, if so, the terms and conditions of such conversion
or exchange; (vi) the terms and conditions upon which each Partnership Security
will
40
be issued, evidenced by certificates and assigned or transferred; (vii) the
method for determining the Percentage Interest as to such Partnership Security;
and (viii) the right, if any, of each such Partnership Security to vote on
Partnership matters, including matters relating to the relative rights,
preferences and privileges of such Partnership Security.
(c) The General Partner shall take all actions that it determines to be
necessary or appropriate in connection with (i) each issuance of Partnership
Securities and options, rights, warrants and appreciation rights relating to
Partnership Securities pursuant to this Section 5.6, (ii) the conversion of the
General Partner Interest (represented by General Partner Units) or any Incentive
Distribution Rights into Units pursuant to the terms of this Agreement, (iii)
the issuance of Class C Units pursuant to Section 5.12 and issuance of Common
Units upon the conversion of Class C Units pursuant to Section 5.12(f), (iv) the
issuance of Common Units upon the conversion of Subordinated Units pursuant to
Section 5.8, (v) reflecting admission of such additional Limited Partners in the
books and records of the Partnership as the Record Holder of such Limited
Partner Interests and (vi) all additional issuances of Partnership Securities.
The General Partner shall determine the relative rights, powers and duties of
the holders of the Units or other Partnership Securities being so issued. The
General Partner shall do all things necessary to comply with the Delaware Act
and is authorized and directed to do all things that it determines to be
necessary or appropriate in connection with any future issuance of Partnership
Securities or in connection with the conversion of the General Partner Interest
or any Incentive Distribution Rights into Units pursuant to the terms of this
Agreement, including compliance with any statute, rule, regulation or guideline
of any federal, state or other governmental agency or any National Securities
Exchange on which the Units or other Partnership Securities are listed or
admitted to trading.
(d) No fractional Units shall be issued by the Partnership.
(e) Notwithstanding the terms of Section 5.6(a), (b), (c) and (d), the
issuance by the Partnership of any Partnership Securities pursuant to this
Section 5.6 shall be subject to the following provisions, restrictions and
limitations:
(i) before the closing of the Initial Public Offering, the Partnership
shall not issue additional Partnership Securities having rights to
distribution or in liquidation ranking prior or senior to the Common Units,
unless the issuance has been approved by a majority of the Outstanding
Common Units; and
(ii) at any time, the Partnership shall not issue additional
Partnership Securities in violation of Section 4 of the Investors' Rights
Agreement.
Section 5.7 Conversion of Class A Subordinated Units.
(a) All of the Outstanding Class A Subordinated Units will convert
automatically into Common Units on a one-for-one basis on the first trading day
following the Initial Public Offering.
(b) A Class A Subordinated Unit that has converted into a Common Unit shall
be subject to the provisions of Section 6.7(b) and Section 6.7(c).
41
Notwithstanding any other provision of this Agreement, all the then
Outstanding Class A Subordinated Units will automatically convert into Common
Units on a one-for-one basis as set forth in, and pursuant to the terms of,
Section 11.4.
Section 5.8 Conversion of Class B Subordinated Units.
(a) A total of 25% of the Outstanding Class B Subordinated Units will
convert automatically into Common Units on a one-for-one basis on the second
Business Day following the distribution of Available Cash to Partners pursuant
to Section 6.3(a) in respect of any Quarter ending on or after the last day of
the Quarter containing the third anniversary of the Initial Public Offering, in
respect of which:
(i) distributions of Available Cash from Operating Surplus under
Section 6.4(a) on each of the Outstanding Common Units, Subordinated Units
and General Partner Units and any other Outstanding Units that are senior
or equal in right of distribution to the Subordinated Units with respect to
each of the three consecutive, non-overlapping four-Quarter periods
immediately preceding such date equaled or exceeded the sum of the Minimum
Quarterly Distribution on all of the Outstanding Common Units, Subordinated
Units and General Partner Units, and any other Outstanding Units that are
senior or equal in right of distribution to the Subordinated Units during
such periods;
(ii) the Adjusted Operating Surplus for each of the three consecutive,
non-overlapping four-Quarter periods immediately preceding such date
equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the Common Units, Subordinated Units and General Partner Units any other
Units that are senior or equal in right of distribution to the Subordinated
Units that were Outstanding during such periods on a Fully Diluted Basis;
and
(iii) there are no Cumulative Common Unit Arrearages.
(b) An additional 25% of the Outstanding Class B Subordinated Units
(without giving effect to the reduction in the number of Outstanding Class B
Subordinated Units as a result of the conversion of Class B Subordinated Units
pursuant to Section 5.8(a)) will convert into Common Units on a one-for-one
basis on the second Business Day following the distribution of Available Cash to
Partners pursuant to Section 6.3(a) in respect of any Quarter ending on or after
the later of last day of the Quarter containing the fourth anniversary of the
Initial Public Offering, in respect of which:
(i) distributions of Available Cash from Operating Surplus under
Section 6.4(a) on each of the Outstanding Common Units, Subordinated Units
and General Partner Units, and any other Outstanding Units that are senior
or equal in right of distribution to the Subordinated Units with respect to
each of the three consecutive, non-overlapping four-Quarter periods
immediately preceding such date equaled or exceeded the sum of the Minimum
Quarterly Distribution on all of the Outstanding Common Units, Subordinated
Units and General Partner Units, and any other Outstanding Units that are
senior or equal in right of distribution to the Subordinated Units during
such periods;
42
(ii) the Adjusted Operating Surplus for each of the three consecutive,
non-overlapping four-Quarter periods immediately preceding such date
equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the Common Units, Subordinated Units and General Partner Units any other
Units that are senior or equal in right of distribution to the Subordinated
Units that were Outstanding during such periods on a Fully Diluted Basis;
and
(iii) there are no Cumulative Common Unit Arrearages;
provided, however, that the conversion of the Class B Subordinated Units
pursuant to this Section 5.8(b) may not occur until at least one year
following the end of the last four-Quarter period in respect of which
conversion of the Class B Subordinated Units pursuant to Section 5.8(a)
occurred.
(c) In the event that less than all of the Outstanding Class B Subordinated
Units shall convert into Common Units pursuant to Section 5.8(a) or Section
5.8(b) at a time when there shall be more than one holder of Class B
Subordinated Units, then, unless all of the holders of Class B Subordinated
Units shall agree to a different allocation, the Class B Subordinated Units that
are to be converted into Common Units shall be allocated among the holders of
Class B Subordinated Units pro rata based on the number of Class B Subordinated
Units held by each such holder.
(d) Any Class B Subordinated Units that are not converted into Common Units
pursuant to Section 5.8(a) or Section 5.8(b) shall convert into Common Units on
a one-for-one basis on the second Business Day following the distribution of
Available Cash to Partners pursuant to Section 6.3(a) in respect of the final
Quarter of the Subordination Period.
(e) Notwithstanding any other provision of this Agreement, all the then
Outstanding Class B Subordinated Units will automatically convert into Common
Units on a one-for-one basis as set forth in, and pursuant to the terms of,
Section 11.4.
(f) A Class B Subordinated Unit that has converted into a Common Unit shall
be subject to the provisions of Section 6.7(b) and Section 6.7(c).
(g) If the Partnership fails to file the shelf registration statement
required by Section 2(a) of the Registration Rights Agreement within the
required time period, or if such shelf registration statement is not declared
effective within the required time period, the financial tests required for the
conversion of Class B Subordinated Units pursuant to Section 5.8(a), Section
5.8(b) and Section 5.8(c) shall not commence until the Partnership has complied
with these obligations. In addition, if the Partnership violates its obligations
under Section 2 of the Registration Rights Agreement after such shelf
registration statement is effective, any conversion of Class B Subordinated
Units pursuant to Section 5.8(a), Section 5.8(b) or Section 5.8(c) shall be
delayed one Quarter for aggregate violations that continue up to 90 days and
shall be delayed an additional Quarter each time such continuing violations
exceed an additional 90 days.
Section 5.9 Limited Preemptive Right. Except as provided in this Section
5.9 and Section 5.2, no Person shall have any preemptive, preferential or other
similar right with respect to the issuance of any Partnership Security, whether
unissued, held in the treasury or hereafter
43
created. The General Partner shall have the right, which it may from time to
time assign in whole or in part to any of its Affiliates, to purchase
Partnership Securities from the Partnership whenever, and on the same terms
that, the Partnership issues Partnership Securities to Persons other than the
General Partner and its Affiliates, to the extent necessary to maintain the
Percentage Interests of the General Partner and its Affiliates equal to that
which existed immediately prior to the issuance of such Partnership Securities.
Section 5.10 Splits and Combinations.
(a) Subject to Section 5.10(d), Section 6.3, Section 6.6 and Section 6.9,
the Partnership may make a Pro Rata distribution of Partnership Securities to
all Record Holders or may effect a subdivision or combination of Partnership
Securities so long as, after any such event, each Partner shall have the same
Percentage Interest in the Partnership as before such event, and any amounts
calculated on a per Unit basis or stated as a number of Units are
proportionately adjusted.
(b) Whenever such a distribution, subdivision or combination of Partnership
Securities is declared, the General Partner shall select a Record Date as of
which the distribution, subdivision or combination shall be effective and shall
send notice thereof at least 20 days prior to such Record Date to each Record
Holder as of a date not less than 10 days prior to the date of such notice. The
General Partner also may cause a firm of independent public accountants selected
by it to calculate the number of Partnership Securities to be held by each
Record Holder after giving effect to such distribution, subdivision or
combination. In addition, with respect to any such distribution, subdivision or
combination of any class of Partnership Securities that is convertible into
another class of Partnership Securities or into which any class of Partnership
Securities is convertible or exchangeable, appropriate adjustment shall be made
either to assure that the specified conversion or exchange ratio is maintained
or, alternatively, is appropriately adjusted to give effect to such Pro Rata
distribution or subdivision or combination, as the case may be, as the General
Partner determines to be appropriate. The General Partner shall be entitled to
rely on any certificate provided by such firm as conclusive evidence of the
accuracy of such calculation.
(c) Promptly following any such distribution, subdivision or combination,
the Partnership may issue Certificates to the Record Holders of Partnership
Securities as of the applicable Record Date representing the new number of
Partnership Securities held by such Record Holders, or the General Partner may
adopt such other procedures that it determines to be necessary or appropriate to
reflect such changes. If any such combination results in a smaller total number
of Partnership Securities Outstanding, the Partnership shall require, as a
condition to the delivery to a Record Holder of such new Certificate, the
surrender of any Certificate held by such Record Holder immediately prior to
such Record Date.
(d) The Partnership shall not issue fractional Units upon any distribution,
subdivision or combination of Units. If a distribution, subdivision or
combination of Units would result in the issuance of fractional Units but for
the provisions of this Section 5.10(d), each fractional Unit shall be rounded up
or down to the nearest whole Unit (and a 0.5 Unit shall be rounded to the next
higher Unit).
44
Section 5.11 Fully Paid and Non-Assessable Nature of Limited Partner
Interests. All Limited Partner Interests issued pursuant to, and in accordance
with the requirements of, this Article V shall be fully paid and non-assessable
Limited Partner Interests in the Partnership, except as such non-assessability
may be affected by Section 17-607 and Section 17-804 of the Delaware Act.
Section 5.12 Issuance of Class C Units in Connection with Reset of
Incentive Distribution Rights.
(a) Subject to the provisions of this Section 5.12, the holder of the
Incentive Distribution Rights (or, if there is more than one holder of the
Incentive Distribution Rights, the holders of a majority in interest of the
Incentive Distribution Rights) shall have the right, at any time when there are
no Subordinated Units outstanding and the Partnership has made a distribution
pursuant to Section 6.4(b)(v) for each of the four most recently completed
Quarters and the amount of each such distribution did not exceed Adjusted
Operating Surplus for such Quarter, to make an election (the "IDR Reset
Election") to cause the Minimum Quarterly Distribution and the Target
Distributions to be reset in accordance with the provisions of Section 5.12(e)
and, in connection therewith, the holder or holders of the Incentive
Distribution Rights will become entitled to receive their respective
proportionate share of a number of Class C Units derived by dividing (i) the
average amount of cash distributions made by the Partnership for the two full
Quarters immediately preceding the giving of the Reset Notice (as defined in
Section 5.12(b)) in respect of the Incentive Distribution Rights by (ii) the
average of the cash distributions made by the Partnership in respect of each
Common Unit for each of the two full Quarters immediately preceding the giving
of the Reset Notice (the number of Class C Units determined by such quotient is
referred to herein as the "Aggregate Quantity of Class C Units"). The making of
the IDR Reset Election in the manner specified in Section 5.12(b) shall cause
the Minimum Quarterly Distribution and the Target Distributions to be reset in
accordance with the provisions of Section 5.12(e) and, in connection therewith,
the holder or holders of the Incentive Distribution Rights will become entitled
to receive Class C Units on the basis specified above, without any further
approval required by the General Partner or the Unitholders, at the time
specified in Section 5.12(c) unless the IDR Reset Election is rescinded pursuant
to Section 5.12(d).
(b) To exercise the right specified in Section 5.12(a), the holder of the
Incentive Distribution Rights (or, if there is more than one holder of the
Incentive Distribution Rights, the holders of a majority in interest of the
Incentive Distribution Rights) shall deliver a written notice (the "Reset
Notice") to the Partnership. Within 10 Business Days after the receipt by the
Partnership of such Reset Notice, as the case may be, the Partnership shall
deliver a written notice to the holder or holders of the Incentive Distribution
Rights of the Partnership's determination of the aggregate number of Class C
Units which each holder of Incentive Distribution Rights will be entitled to
receive.
(c) The holder or holders of the Incentive Distribution Rights will be
entitled to receive the Aggregate Quantity of Class C Units on the fifteenth
Business Day after receipt by the Partnership of the Reset Notice, and the
Partnership shall issue Certificates for the Class C Units to the holder or
holders of the Incentive Distribution Rights; provided, however, that the
issuance of Class C Units to the holder or holders of the Incentive Distribution
Rights shall not
45
occur prior to the approval of the listing or admission for trading of the
Common Units into which the Class C Units are convertible pursuant to Section
5.12(f) by the principal National Securities Exchange upon which the Common
Units are then listed or admitted for trading if any such approval is required
pursuant to the rules and regulations of such National Securities Exchange.
(d) In the event that the principal National Securities Exchange upon which
the Common Units are then traded have not approved the listing or admission for
trading of the Common Units into which the Class C Units are convertible
pursuant to Section 5.12(f) on or before the 30th calendar day following the
Partnership's receipt of the Reset Notice and such approval is required by the
rules and regulations of such National Securities Exchange, then the holder of
the Incentive Distribution Rights (or, if there is more than one holder of the
Incentive Distribution Rights, the holders of a majority in interest of the
Incentive Distribution Rights) shall have the right to either rescind the IDR
Reset Election or elect to receive other Partnership Securities having such
terms as the General Partner may approve, with the approval of the Conflicts
Committee, that will provide (i) the same economic value, in the aggregate, as
the Aggregate Quantity of Class C Units would have had at the time of the
Partnership's receipt of the Reset Notice, as determined by the General Partner,
and (ii) for the subsequent conversion of such Partnership Securities into
Common Units within not more than 12 months following the Partnership's receipt
of the Reset Notice upon the satisfaction of one or more conditions that are
reasonably acceptable to the holder of the Incentive Distribution Rights (or, if
there is more than one holder of the Incentive Distribution Rights, the holders
of a majority in interest of the Incentive Distribution Rights).
(e) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution and Third Target Distribution shall be adjusted at the time
of the issuance of Common Units or other Partnership Securities pursuant to this
Section 5.12 such that (i) the Minimum Quarterly Distribution shall be reset to
equal the average cash distribution amount per Common Unit for the two Quarters
immediately prior to the Partnership's receipt of the Reset Notice (the "Reset
MQD"), (ii) the First Target Distribution shall be reset to equal 115% of the
Reset MQD, (iii) the Second Target Distribution shall be reset to equal 125% of
the Reset MQD; and (iv) the Third Target Distribution shall be reset to equal
150% of the Reset MQD.
(f) Any holder of Class C Units shall have the right to elect, by giving
written notice to the General Partner, to convert all or a portion of the Class
C Units held by such holder, at any time following the first anniversary of the
issuance of such Class C Units, into Common Units on a one-for-one basis, such
conversion to be effective on the second Business Day following the General
Partner's receipt of such written notice.
ARTICLE VI.
Allocations and Distributions
Section 6.1 Allocations for Capital Account Purposes. For purposes of
maintaining the Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section
46
5.5(b)) shall be allocated among the Partners in each taxable year (or portion
thereof) as provided herein.
(a) Net Income. After giving effect to the special allocations set forth in
Section 6.1(d), Net Income for each taxable year and all items of income, gain,
loss and deduction taken into account in computing Net Income for such taxable
year shall be allocated as follows:
(i) First, 100% to the General Partner, until the aggregate Net Income
allocated to the General Partner pursuant to this Section 6.1(a)(i) for the
current taxable year and all previous taxable years is equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(iii) for all previous taxable years;
(ii) Second, 100% to the General Partner and the Unitholders, in
accordance with their respective Percentage Interests, until the aggregate
Net Income allocated to such Partners pursuant to this Section 6.1(a)(ii)
for the current taxable year and all previous taxable years is equal to the
aggregate Net Losses allocated to such Partners pursuant to Section
6.1(b)(ii) for all previous taxable years; and
(iii) Thereafter, the balance, if any, 100% to the General Partner and
to the Unitholders, in accordance with their respective Percentage
Interests.
(b) Net Losses. After giving effect to the special allocations set forth in
Section 6.1(d), Net Losses for each taxable period and all items of income,
gain, loss and deduction taken into account in computing Net Losses for such
taxable period shall be allocated as follows:
(i) First, 100% to the General Partner and the Unitholders, in
accordance with their respective Percentage Interests, until the aggregate
Net Losses allocated to such Partners pursuant to this Section 6.1(b)(i)
for the current taxable year and all previous taxable years is equal to the
aggregate Net Income allocated to such Partners pursuant to Section
6.1(a)(iii) for all previous taxable years, provided that the Net Losses
shall not be allocated pursuant to this Section 6.1(b)(i) to the extent
that such allocation would cause any Unitholder to have a deficit balance
in its Adjusted Capital Account at the end of such taxable year (or
increase any existing deficit balance in its Adjusted Capital Account);
(ii) Second, 100% to the General Partner and the Unitholders, in
accordance with their respective Percentage Interests; provided, that Net
Losses shall not be allocated pursuant to this Section 6.1(b)(ii) to the
extent that such allocation would cause any Unitholder to have a deficit
balance in its Adjusted Capital Account at the end of such taxable year (or
increase any existing deficit balance in its Adjusted Capital Account); and
(iii) Thereafter, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the special
allocations set forth in Section 6.1(d), all items of income, gain, loss and
deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated
47
hereunder. All allocations under this Section 6.1(c) shall be made after Capital
Account balances have been adjusted by all other allocations provided under this
Section 6.1 and after all distributions of Available Cash provided under Section
6.4 and Section 6.5 have been made; provided, however, that solely for purposes
of this Section 6.1(c), Capital Accounts shall not be adjusted for distributions
made pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
among the Partners in the following manner (and the Capital Accounts of the
Partners shall be increased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its
Capital Account, in the proportion that such deficit balance bears to
the total deficit balances in the Capital Accounts of all Partners,
until each such Partner has been allocated Net Termination Gain equal
to any such deficit balance in its Capital Account;
(B) Second, (x) to the General Partner in accordance with its
Percentage Interest and (y) to all Unitholders holding Common Units or
Class C Units, Pro Rata, a percentage equal to 100% less the
percentage applicable to subclause (x) of this clause (B), until the
Capital Account in respect of each Common Unit and each Class C Unit
then Outstanding is equal to the sum of (1) its Unrecovered Initial
Unit Price, (2) the Minimum Quarterly Distribution for the Quarter
during which the Liquidation Date occurs, reduced by any distribution
pursuant to Section 6.4(a)(i) or Section 6.4(b)(i) with respect to
such Common Unit or Class C Unit for such Quarter (the amount
determined pursuant to this clause (2) is hereinafter defined as the
"Unpaid MQD") and (3) any then existing Cumulative Common Unit
Arrearage;
(C) Third, if such Net Termination Gain is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit, (x) to the General Partner in
accordance with its Percentage Interest and (y) to all Unitholders
holding Subordinated Units, Pro Rata, a percentage equal to 100% less
the percentage applicable to subclause (x) of this clause (C), until
the Capital Account in respect of each Subordinated Unit then
Outstanding equals the sum of (1) its Unrecovered Initial Unit Price,
determined for the taxable year (or portion thereof) to which this
allocation of gain relates, and (2) the Minimum Quarterly Distribution
for the Quarter during which the Liquidation Date occurs, reduced by
any distribution pursuant to Section 6.4(a)(iii) with respect to such
Subordinated Unit for such Quarter;
(D) Fourth, 100% to the General Partner and all Unitholders in
accordance with their respective Percentage Interests, until the
Capital Account in respect of each Common Unit then Outstanding is
equal to the sum of (1) its Unrecovered Initial Unit Price, (2) the
Unpaid MQD, (3) any then existing Cumulative Common Unit Arrearage,
and (4) the excess of (aa) the First Target
48
Distribution less the Minimum Quarterly Distribution for each Quarter
of the Partnership's existence over (bb) the cumulative per Unit
amount of any distributions of Available Cash that is deemed to be
Operating Surplus made pursuant to Section 6.4(a)(v) and Section
6.4(b)(ii) (the sum of (1), (2), (3) and (4) is hereinafter defined as
the "First Liquidation Target Amount");
(E) Fifth, (x) to the General Partner in accordance with its
Percentage Interest, (y) 13% to the holders of the Incentive
Distribution Rights, Pro Rata, and (z) to all Unitholders, Pro Rata, a
percentage equal to 100% less the sum of the percentages applicable to
subclause (x) and (y) of this clause (E), until the Capital Account in
respect of each Common Unit then Outstanding is equal to the sum of
(1) the First Liquidation Target Amount, and (2) the excess of (aa)
the Second Target Distribution less the First Target Distribution for
each Quarter of the Partnership's existence over (bb) the cumulative
per Unit amount of any distributions of Available Cash that is deemed
to be Operating Surplus made pursuant to Section 6.4(a)(vi) and
Section 6.4(b)(iii) (the sum of (1) and (2) is hereinafter defined as
the "Second Liquidation Target Amount"); and
(F) Sixth, (x) to the General Partner in accordance with its
Percentage Interest, (y) 23% to the holders of the Incentive
Distribution Rights, Pro Rata, and (z) to all Unitholders, Pro Rata, a
percentage equal to 100% less the sum of the percentages applicable to
subclause (x) and (y) of this clause (F), until the Capital Account in
respect of each Common Unit then Outstanding is equal to the sum of
(1) the First Liquidation Target Amount, (2) the Second Liquidation
Target Amount and (3) the excess of (aa) the Third Target Distribution
less the Second Target Distribution for each Quarter of the
Partnership's existence over (bb) the cumulative per Unit amount of
any distributions of Available Cash that is deemed to be Operating
Surplus made pursuant to Section 6.4(a)(vii) and Section 6.4(b)(iv)
(the sum of (1) and (2) is hereinafter defined as the "Third
Liquidation Target Amount"); and
(G) Thereafter, (x) to the General Partner in accordance with its
Percentage Interest, (y) 48% to the holders of the Incentive
Distribution Rights, Pro Rata, and (z) to all Unitholders, Pro Rata, a
percentage equal to 100% less the sum of the percentages applicable to
subclause (x) and (y) of this clause (G),
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated
among the Partners in the following manner:
(A) First, if such Net Termination Loss is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit, (x) to the General Partner in
accordance with its Percentage Interest and (y) to all Unitholders
holding Subordinated Units, Pro Rata, a percentage equal to 100% less
the percentage applicable to subclause (x) of this clause (A), until
the Capital Account in respect of each Subordinated Unit then
Outstanding has been reduced to zero;
49
(B) Second, (x) to the General Partner in accordance with its
Percentage Interest and (y) to all Unitholders holding Common Units or
Class C Units, Pro Rata, a percentage equal to 100% less the
percentage applicable to subclause (x) of this clause (B) until the
Capital Account in respect of each Common Unit and each Class C Unit
then Outstanding has been reduced to zero; and
(C) Thereafter, the balance, if any, 100% to the General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d) with respect to such taxable period (other than an
allocation pursuant to Section 6.1(d)(vi) and Section 6.1(d)(vii)). This
Section 6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
Section 6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d), other than Section 6.1(d)(i) and other than an
allocation pursuant to Section 6.1(d)(vi) and Section 6.1(d)(vii), with
respect to such taxable period. This Section 6.1(d)(ii) is intended to
comply with the chargeback of items of income and gain requirement in
Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(iii) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value of any property
distributed (except cash or property distributed pursuant to Section
12.4) to any
50
Unitholder with respect to its Units for a taxable year is greater (on
a per Unit basis) than the amount of cash or the Net Agreed Value of
property distributed to the other Unitholders with respect to their
Units (on a per Unit basis), then (1) there shall be allocated income
and gain to each Unitholder receiving such greater cash or property
distribution until the aggregate amount of such items allocated
pursuant to this Section 6.1(d)(iii)(A) for the current taxable year
and all previous taxable years is equal to the product of (aa) the
amount by which the distribution (on a per Unit basis) to such
Unitholder exceeds the distribution (on a per Unit basis) to the
Unitholders receiving the smallest distribution and (bb) the number of
Units owned by the Unitholder receiving the greater distribution; and
(2) the General Partner shall be allocated income and gain in an
aggregate amount equal to the product obtained by multiplying (aa) the
quotient determined by dividing (x) the General Partner's Percentage
Interest at the time in which the greater cash or property
distribution occurs by (y) the sum of 100 less the General Partner's
Percentage Interest at the time in which the greater cash or property
distribution occurs times (bb) the sum of the amounts allocated in
clause (1).
(B) After the application of Section 6.1(d)(iii)(A), all or any
portion of the remaining items of Partnership income or gain for the
taxable period, if any, shall be allocated (1) to the holders of
Incentive Distribution Rights, Pro Rata, until the aggregate amount of
such items allocated to the holders of Incentive Distribution Rights
pursuant to this Section 6.1(d)(iii)(B) for the current taxable year
and all previous taxable years is equal to the cumulative amount of
all Incentive Distributions made to the holders of Incentive
Distribution Rights from the Closing Date to a date 45 days after the
end of the current taxable year; and (2) to the General Partner an
amount equal to the product of (aa) an amount equal to the quotient
determined by dividing (x) the General Partner's Percentage Interest
by (y) the sum of 100 less the General Partner's Percentage Interest
times (bb) the sum of the amounts allocated in clause (1).
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership
income and gain shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i)
or Section 6.1(d)(ii).
(v) Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable period
in excess of the sum of (A) the amount such Partner is required to restore
pursuant to the provisions of this Agreement and (B) the amount such
Partner is deemed obligated to restore pursuant to Treasury Regulation
Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be specially
allocated items of Partnership income and gain in the amount of such excess
as quickly as possible; provided, that an allocation pursuant to this
Section 6.1(d)(v) shall be
51
made only if and to the extent that such Partner would have a deficit
balance in its Capital Account as adjusted after all other allocations
provided for in this Section 6.1 have been tentatively made as if this
Section 6.1(d)(v) were not in this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines that the
Partnership's Nonrecourse Deductions should be allocated in a different
ratio to satisfy the safe harbor requirements of the Treasury Regulations
promulgated under Section 704(b) of the Code, the General Partner is
authorized, upon notice to the other Partners, to revise the prescribed
ratio to the numerically closest ratio that does satisfy such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that bears
the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner bears
the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Partners in accordance with the ratios in which they
share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (A) the amount of Partnership
Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be
allocated among the Partners in accordance with their respective Percentage
Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(b) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item of
gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Treasury Regulations.
(x) Economic Uniformity.
(A) At the election of the General Partner with respect to any
taxable period ending upon, or after, the termination of the
Subordination Period, all or a portion of the remaining items of
Partnership income or gain for such taxable period, after taking into
account allocations pursuant to Section 6.1(d)(iii), shall be
allocated 100% to each Partner holding Subordinated Units that are
Outstanding as of the termination of the Subordination Period ("Final
Subordinated Units") in the proportion of the number of Final
Subordinated Units held by such Partner to the total number of Final
Subordinated Units then
52
Outstanding, until each such Partner has been allocated an amount of
income or gain that increases the Capital Account maintained with
respect to such Final Subordinated Units to an amount equal to the
product of (A) the number of Final Subordinated Units held by such
Partner and (B) the Per Unit Capital Amount for a Common Unit. The
purpose of this allocation is to establish uniformity between the
Capital Accounts underlying Final Subordinated Units and the Capital
Accounts underlying Common Units held by Persons other than the
General Partner and its Affiliates immediately prior to the
conversion of such Final Subordinated Units into Common Units. This
allocation method for establishing such economic uniformity will be
available to the General Partner only if the method for allocating
the Capital Account maintained with respect to the Subordinated
Units between the transferred and retained Subordinated Units
pursuant to Section 5.5(c)(ii) does not otherwise provide such
economic uniformity to the Final Subordinated Units.
(B) At the election of the General Partner with respect to any
taxable period ending upon, or after, the conversion of the Class C
Units pursuant to Section 5.12(f), all or a portion of the remaining
items of Partnership income or gain for such taxable period, after
taking into account allocations pursuant to Section 6.1(d)(iii) and
Section 6.1(d)(x)(A), shall be allocated 100% to the holder or holders
of the Common Units resulting from the conversion pursuant to Section
5.12(f) ("Converted Common Units") in the proportion of the number of
the Converted Common Units held by such holder or holders to the total
number of Converted Common Units then Outstanding, until each such
holder has been allocated an amount of income or gain that increases
the Capital Account maintained with respect to such Converted Common
Units to an amount equal to the product of (A) the number of Converted
Common Units held by such holder and (B) the Per Unit Capital Amount
for a Common Unit. The purpose of this allocation is to establish
uniformity between the Capital Accounts underlying Converted Common
Units and the Capital Accounts underlying Common Units held by Persons
other than the General Partner and its Affiliates immediately prior to
the receipt of Common Units pursuant to Section 5.12(f).
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1,
other than the Required Allocations, the Required Allocations shall be
taken into account in making the Agreed Allocations so that, to the
extent possible, the net amount of items of income, gain, loss and
deduction allocated to each Partner pursuant to the Required
Allocations and the Agreed Allocations, together, shall be equal to
the net amount of such items that would have been allocated to each
such Partner under the Agreed Allocations had the Required Allocations
and the related Curative Allocation not otherwise been provided in
this Section 6.1. Notwithstanding the preceding sentence, Required
Allocations relating to (1) Nonrecourse Deductions shall not be taken
into account except to the extent that there has been a decrease in
Partnership Minimum Gain and (2) Partner Nonrecourse Deductions shall
not be taken into account except to the extent that
53
there has been a decrease in Partner Nonrecourse Debt Minimum Gain.
Allocations pursuant to this Section 6.1(d)(xi)(A) shall only be
made with respect to Required Allocations to the extent the General
Partner determines that such allocations will otherwise be
inconsistent with the economic agreement among the Partners.
Further, allocations pursuant to this Section 6.1(d)(xi)(A) shall be
deferred with respect to allocations pursuant to clauses (1) and (2)
hereof to the extent the General Partner determines that such
allocations are likely to be offset by subsequent Required
Allocations.
(B) The General Partner shall, with respect to each taxable
period, (1) apply the provisions of Section 6.1(d)(xi)(A) in whatever
order is most likely to minimize the economic distortions that might
otherwise result from the Required Allocations, and (2) divide all
allocations pursuant to Section 6.1(d)(xi)(A) among the Partners in a
manner that is likely to minimize such economic distortions.
(xii) Corrective Allocations. In the event of any allocation of Additional
Book Basis Derivative Items or any Book-Down Event or any recognition of a Net
Termination Loss, the following rules shall apply:
(A) In the case of any allocation of Additional Book Basis Derivative
Items (other than an allocation of Unrealized Gain or Unrealized Loss under
Section 5.5(d)), the General Partner shall allocate additional items of
income and gain away from the holders of Incentive Distribution Rights to
the Unitholders and the General Partner, or additional items of deduction
and loss away from the Unitholders and the General Partner to the holders
of Incentive Distribution Rights, to the extent that the Additional Book
Basis Derivative Items allocated to the Unitholders or the General Partner
exceed their Share of Additional Book Basis Derivative Items. For this
purpose, the Unitholders and the General Partner shall be treated as being
allocated Additional Book Basis Derivative Items to the extent that such
Additional Book Basis Derivative Items have reduced the amount of income
that would otherwise have been allocated to the Unitholders or the General
Partner under the Partnership Agreement (e.g., Additional Book Basis
Derivative Items taken into account in computing cost of goods sold would
reduce the amount of book income otherwise available for allocation among
the Partners). Any allocation made pursuant to this Section 6.1(d)(xii)(A)
shall be made after all of the other Agreed Allocations have been made as
if this Section 6.1(d)(xii) were not in this Agreement and, to the extent
necessary, shall require the reallocation of items that have been allocated
pursuant to such other Agreed Allocations.
(B) In the case of any negative adjustments to the Capital Accounts of
the Partners resulting from a Book-Down Event or from the recognition of a
Net Termination Loss, such negative adjustment (1) shall first be
allocated, to the extent of the Aggregate Remaining Net Positive
Adjustments, in such a manner, as determined by the General Partner, that
to the extent possible the aggregate Capital Accounts of the Partners will
equal the amount that would have been the Capital Account balance of the
Partners if no prior Book-Up Events had occurred,
54
and (2) any negative adjustment in excess of the Aggregate Remaining Net
Positive Adjustments shall be allocated pursuant to Section 6.1(c).
(C) In making the allocations required under this Section 6.1(d)(xii),
the General Partner may apply whatever conventions or other methodology it
determines will satisfy the purpose of this Section 6.1(d)(xii).
(e) Required Sale Gain or Loss. If the Partnership recognizes Required Sale
Gain or Required Sale Loss upon a sale of its assets in any taxable period,
after giving effect to the special allocations set forth in Section 6.1(d), such
Required Sale Gain or Required Sale Loss shall be allocated among the Partners
in such a manner that, as of the end of such taxable period, the Capital Account
of each Partner shall be equal to the respective net amounts, positive or
negative, which would be distributed to them or for which they would be liable
to the Partnership under the Delaware Act, determined as if the Partnership were
to (i) liquidate the assets of the Partnership for an amount equal to the
proceeds received by the Partnership in the Required Sale and (ii) distribute
the proceeds of such liquidation pursuant to Section 6.4(c).
The Partners agree that the aggregate proceeds received by the Partners
upon any sale of all their interests in the Partnership in a Required Sale shall
be distributed among the Partners in a manner such that each Partner receives
the same amount of proceeds as it would have received from the Partnership if
the Partnership had (i) sold all its assets for an amount equal to the aggregate
proceeds received by the Partners in the Required Sale, (ii) allocated Required
Sale Gain among the Partners in accordance with Section 6.1(e), and (iii)
liquidated in accordance with Section 6.4(c), assuming that the aggregate
proceeds received by the Partners would be the amount available for distribution
after payment of all Partnership liabilities.
Section 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction shall be allocated among the
Partners in the same manner as its correlative item of "book" income, gain, loss
or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between
the Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to
55
such property and the allocations thereof pursuant to Section 5.5(d)(i) or
Section 5.5(d)(ii), and (2) second, in the event such property was
originally a Contributed Property, be allocated among the Partners in a
manner consistent with Section 6.1(b)(i)(A); and (B) any item of Residual
Gain or Residual Loss attributable to an Adjusted Property shall be
allocated among the Partners in the same manner as its correlative item of
"book" gain or loss is allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities, except as
otherwise determined by the General Partner with respect to goodwill
contributed to the Partnership upon formation.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the General Partner shall (i) adopt such conventions as it
deems appropriate in determining the amount of depreciation, amortization and
cost recovery deductions; (ii) make special allocations for federal income tax
purposes of income (including gross income) or deductions; and (iii) amend the
provisions of this Agreement as appropriate (x) to reflect the proposal or
promulgation of Treasury Regulations under Section 704(b) or Section 704(c) of
the Code or (y) otherwise to preserve or achieve uniformity of the Limited
Partner Interests (or any class or classes thereof). The General Partner may
adopt such conventions, make such allocations and make such amendments to this
Agreement as provided in this Section 6.2(c) only if such conventions,
allocations or amendments would not have a material adverse effect on the
Partners, the holders of any class or classes of Limited Partner Interests
issued and Outstanding or the Partnership, and if such allocations are
consistent with the principles of Section 704 of the Code.
(d) The General Partner may determine to depreciate or amortize the portion
of an adjustment under Section 743(b) of the Code attributable to unrealized
appreciation in any Adjusted Property (to the extent of the unamortized Book-Tax
Disparity) using a predetermined rate derived from the depreciation or
amortization method and useful life applied to the Partnership's common basis of
such property, despite any inconsistency of such approach with Treasury
Regulation Section 1.167(c)-l(a)(6) or any successor regulations thereto. If the
General Partner determines that such reporting position cannot reasonably be
taken, the General Partner may adopt depreciation and amortization conventions
under which all purchasers acquiring Limited Partner Interests in the same month
would receive depreciation and amortization deductions, based upon the same
applicable rate as if they had purchased a direct interest in the Partnership's
property. If the General Partner chooses not to utilize such aggregate method,
the General Partner may use any other depreciation and amortization conventions
to preserve the uniformity of the intrinsic tax characteristics of any Limited
Partner Interests, so long as such conventions would not have a material adverse
effect on the Limited Partners or the Record Holders of any class or classes of
Limited Partner Interests.
(e) In accordance with Treasury Regulation Section 1.1245-1(e), any gain
allocated to the Partners upon the sale or other taxable disposition of any
Partnership asset shall, to the extent possible, after taking into account other
required allocations of gain pursuant to this Section 6.2, be characterized as
Recapture Income in the same proportions and to the same
56
extent as such Partners (or their predecessors in interest) have been allocated
any deductions directly or indirectly giving rise to the treatment of such gains
as Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by the
Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code that may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted (in the
manner determined by the General Partner) to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction, for federal
income tax purposes, shall be determined on an annual basis and prorated on a
monthly basis and shall be allocated to the Partners as of the opening of the
National Securities Exchange on which the Common Units may then be listed or
admitted for trading on the first Business Day of each month; provided, however,
that following an Initial Public Offering, such items for the period beginning
on the closing of the Initial Public Offering and ending on the last day of the
month in which the Option Closing Date or the expiration of the Over-Allotment
Option occurs shall be allocated to the Partners as of the opening of the
National Securities Exchange on which the Common Units may then be listed or
admitted for trading on the first Business Day of the next succeeding month; and
provided, further, that gain or loss on a sale or other disposition of any
assets of the Partnership or any other extraordinary item of income or loss
realized and recognized other than in the ordinary course of business, as
determined by the General Partner, shall be allocated to the Partners as of the
opening of the National Securities Exchange on which the Common Units may then
be listed or admitted for trading on the first Business Day of the month in
which such gain or loss is recognized for federal income tax purposes. The
General Partner may revise, alter or otherwise modify such methods of allocation
to the extent permitted or required by Section 706 of the Code and the
regulations or rulings promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner under the
provisions of this Article VI shall instead be made to the beneficial owner of
Limited Partner Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method determined by the General
Partner.
Section 6.3 Requirement and Characterization of Distributions;
Distributions to Record Holders.
(a) Except as described in Section 6.3(b)), within 45 days following the
end of each Quarter commencing with the Quarter ending on December 31, 2006, an
amount equal to 100% of Available Cash with respect to such Quarter shall,
subject to Section 17-607 of the Delaware Act, be distributed in accordance with
this Article VI by the Partnership to the Partners as of the Record Date
selected by the General Partner. All amounts of Available Cash distributed by
the Partnership on any date from any source shall be deemed to be Operating
Surplus until the sum of all amounts of Available Cash theretofore distributed
by the Partnership to the Partners pursuant to Section 6.4 equals the Operating
Surplus from the Closing Date through the close of the immediately preceding
Quarter. Any remaining amounts of Available Cash distributed by the Partnership
on such date shall, except as otherwise provided in Section 6.5, be deemed to be
57
"Capital Surplus." All distributions required to be made under this Agreement
shall be made subject to Section 17-607 of the Delaware Act.
(b) With respect to the distribution for the Quarter in which the Initial
Public Offering occurs, the amount of Available Cash distributed to the Partners
in accordance with Section 6.3(a) shall equal 100% of the Available Cash with
respect to such Quarter multiplied by a fraction of which the numerator is the
number of days in the period commencing on the Closing Date and ending on the
last day of the Quarter in which the Initial Public Offering occurs and of which
the denominator is the number of days in such Quarter. The remaining Available
Cash with respect to such Quarter shall be distributed to the Partners of the
Partnership immediately prior to the closing of the Initial Public Offering Pro
Rata.
(c) Notwithstanding Section 6.3(a), in the event of the dissolution and
liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs shall be applied and distributed
solely in accordance with, and subject to the terms and conditions of, Section
12.4.
(d) The General Partner may treat taxes paid by the Partnership on behalf
of, or amounts withheld with respect to, all or less than all of the Partners,
as a distribution of Available Cash to such Partners.
(e) Each distribution in respect of a Partnership Interest shall be paid by
the Partnership, directly or through the Transfer Agent or through any other
Person or agent, only to the Record Holder of such Partnership Interest as of
the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such
payment by reason of an assignment or otherwise.
Section 6.4 Distributions of Available Cash from Operating Surplus.
(a) During Subordination Period. Available Cash with respect to any Quarter
within the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or Section 6.5 shall, subject to Section 17-607
of the Delaware Act, be distributed as follows, except as otherwise contemplated
by Section 5.6(b) in respect of other Partnership Securities issued pursuant
thereto:
(i) First, to the General Partner and the Unitholders holding Common
Units, in accordance with their respective Percentage Interests, until
there has been distributed in respect of each Common Unit then Outstanding
an amount equal to the Minimum Quarterly Distribution for such Quarter;
(ii) Second, to the General Partner and the Unitholders holding Common
Units, in accordance with their respective Percentage Interests, until
there has been distributed in respect of each Common Unit then Outstanding
an amount equal to the Cumulative Common Unit Arrearage existing with
respect to such Quarter;
(iii) Third, to the General Partner and the Unitholders holding
Subordinated Units, in accordance with their respective Percentage
Interests, until there has been
58
distributed in respect of each Subordinated Unit then Outstanding an
amount equal to the Minimum Quarterly Distribution for such Quarter;
(iv) Fourth, to the General Partner and all Unitholders, in accordance
with their respective Percentage Interests, until there has been
distributed in respect of each Unit then Outstanding an amount equal to the
excess of the First Target Distribution over the Minimum Quarterly
Distribution for such Quarter;
(v) Fifth, (A) to the General Partner in accordance with its
Percentage Interest; (B) 13% to the holders of the Incentive Distribution
Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a percentage equal
to 100% less the sum of the percentages applicable to subclauses (A) and
(B) of this clause (v) until there has been distributed in respect of each
Unit then Outstanding an amount equal to the excess of the Second Target
Distribution over the First Target Distribution for such Quarter; and
(vi) Sixth, (A) to the General Partner in accordance with its
Percentage Interest; (B) 23% to the holders of the Incentive Distribution
Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a percentage equal
to 100% less the sum of the percentages applicable to subclauses (A) and
(B) of this clause (vi) until there has been distributed in respect of each
Unit then Outstanding an amount equal to the excess of the Third Target
Distribution over the Second Target Distribution for such Quarter; and
(vii) Thereafter, (A) to the General Partner in accordance with its
Percentage Interest, (B) 48% to the holders of the Incentive Distribution
Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a percentage equal
to 100% less the sum of the percentages applicable to subclauses (A) and
(B) of this subclause (vii);
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with this Section
6.4(a)(vii).
(b) After Subordination Period. Available Cash with respect to any Quarter
after the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or Section 6.5, subject to Section 17-607 of
the Delaware Act, shall be distributed as follows, except as otherwise required
by Section 5.6(b) in respect of additional Partnership Securities issued
pursuant thereto:
(i) First, 100% to the General Partner and the Unitholders in
accordance with their respective Percentage Interests, until there has been
distributed in respect of each Unit then Outstanding an amount equal to the
Minimum Quarterly Distribution for such Quarter;
(ii) Second, 100% to the General Partner and the Unitholders in
accordance with their respective Percentage Interests, until there has been
distributed in respect of
59
each Unit then Outstanding an amount equal to the excess of the First
Target Distribution over the Minimum Quarterly Distribution for such
Quarter;
(iii) Third, (A) to the General Partner in accordance with its
Percentage Interest; (B) 13% to the holders of the Incentive Distribution
Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a percentage equal
to 100% less the sum of the percentages applicable to subclauses (A) and
(B) of this clause (iii), until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the Second
Target Distribution over the First Target Distribution for such Quarter;
and
(iv) Fourth, (A) to the General Partner in accordance with its
Percentage Interest; (B) 23% to the holders of the Incentive Distribution
Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a percentage equal
to 100% less the sum of the percentages applicable to subclauses (A) and
(B) of this clause (iv), until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the Third
Target Distribution over the Second Target Distribution for such Quarter;
and
(v) Thereafter, (A) to the General Partner in accordance with its
Percentage Interest; (B) 48% to the holders of the Incentive Distribution
Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a percentage equal
to 100% less the sum of the percentages applicable to subclause (A) and (B)
of this clause (v);
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with this Section
6.4(b)(v).
(c) Required Sale. The proceeds of any Required Sale remaining after
the payment of costs and liabilities payable pursuant to Section 12.4(b)
shall be distributed as follows, except as otherwise contemplated by
Section 5.6 in respect of other Partnership Securities issued pursuant
thereto:
(i) to all Unitholders holding Common Units, Pro Rata until each
Common Unit then Outstanding receives the sum of (1) its Initial Unit
Price multiplied by the Required Sale Premium, (2) the Minimum
Quarterly Distribution for the Quarter during which the Required Sale
occurs, reduced by any distribution pursuant to Section 6.4(a)(i) or
Section 6.4(b)(i) with respect to such Common Units for such Quarter
(the amount determined pursuant to this clause (2) is hereafter
defined as "Unpaid MQD"), and (3) any then existing Cumulative Common
Unit Arrearage;
(ii) Second, if a Required Sale occurs prior to the conversion of
the last Outstanding Subordinated Unit (x) to the General Partner in
accordance with its Percentage Interest and (y) to all Unitholders
holding Subordinated Units, Pro Rata, a percentage equal to 100% less
the percentage applicable to subclause (x) of this clause (ii), until
there has been distributed in respect of each Subordinated Unit then
Outstanding an amount equal to the sum of (1) its Unrecovered Initial
Unit Price, and (2)
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the Minimum Quarterly Distribution for the Quarter during which the
Required Sale occurs reduced by any distribution pursuant to Section
6.4(a)(iii) with respect to such Subordinated Units for such Quarter; and
(iii) Third, to the General Partner and all Unitholders, in
accordance with their respective Percentage Interests, until there has
been distributed in respect of each Unit then Outstanding an amount
equal to the excess of the First Target Distribution over the Minimum
Quarterly Distribution for such Quarter;
(iv) Fourth, (A) to the General Partner in accordance with its
Percentage Interest; (B) 13% to the holders of the Incentive
Distribution Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a
percentage equal to 100% less the sum of the percentages applicable to
subclauses (A) and (B) of this clause (iv) until there has been
distributed in respect of each Unit then Outstanding an amount equal
to the excess of the Second Target Distribution over the First Target
Distribution for such Quarter; and
(v) Fifth, (A) to the General Partner in accordance with its
Percentage Interest; (B) 23% to the holders of the Incentive
Distribution Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a
percentage equal to 100% less the sum of the percentages applicable to
subclauses (A) and (B) of this clause (v) until there has been
distributed in respect of each Unit then Outstanding an amount equal
to the excess of the Third Target Distribution over the Second Target
Distribution for such Quarter; and
(vi) Thereafter, (A) to the General Partner in accordance with
its Percentage Interest, (B) 48% to the holders of the Incentive
Distribution Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a
percentage equal to 100% less the sum of the percentages applicable to
subclauses (A) and (B) of this subclause (vii);
Section 6.5 Distributions of Available Cash from Capital Surplus.
Available Cash that is deemed to be Capital Surplus pursuant to the
provisions of Section 6.3(a) shall, subject to Section 17-607 of the Delaware
Act, be distributed, unless the provisions of Section 6.3 require otherwise,
100% to the General Partner and the Unitholders in accordance with their
respective Percentage Interests, until a hypothetical holder of a Common Unit
acquired on the Closing Date has received with respect to such Common Unit,
during the period since the Closing Date through such date, distributions of
Available Cash that are deemed to be Capital Surplus in an aggregate amount
equal to the Initial Unit Price. Available Cash that is deemed to be Capital
Surplus shall then be distributed to the General Partner and all Unitholders
holding Common Units and all Unitholders holding Class C Units, in accordance
with their respective Percentage Interests, until there has been distributed in
respect of each Common Unit and Class C Unit then Outstanding an amount equal to
the Cumulative Common Unit Arrearage. Thereafter, all Available Cash shall be
distributed as if it were Operating Surplus and shall be distributed in
accordance with Section 6.4.
Section 6.6 Adjustment of Minimum Quarterly Distribution and Target
Distribution Levels.
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(a) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution, Third Target Distribution, Common Unit Arrearages, and
Cumulative Common Unit Arrearages shall be proportionately adjusted in the event
of any distribution, combination or subdivision (whether effected by a
distribution payable in Units or otherwise) of Units or other Partnership
Securities in accordance with Section 5.10. In the event of a distribution of
Available Cash that is deemed to be from Capital Surplus, the then applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, shall be adjusted proportionately
downward to equal the product obtained by multiplying the otherwise applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, as the case may be, by a fraction of
which the numerator is the Unrecovered Initial Unit Price of the Common Units
immediately after giving effect to such distribution and of which the
denominator is the Unrecovered Initial Unit Price of the Common Units
immediately prior to giving effect to such distribution.
(b) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution and Third Target Distribution shall also be subject to
adjustment pursuant to Section 5.12 and Section 6.9.
Section 6.7 Special Provisions Relating to the Holders of Subordinated
Units and Class C Units.
(a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Subordinated Unit shall have all of the rights and obligations of a Unitholder
holding Common Units hereunder; provided, however, that immediately upon the
conversion of Subordinated Units into Common Units pursuant to Section 5.7 or
Section 5.8, as applicable, the Unitholder holding a Subordinated Unit shall
possess all of the rights and obligations of a Unitholder holding Common Units
hereunder, including the right to vote as a Common Unitholder and the right to
participate in allocations of income, gain, loss and deduction and distributions
made with respect to Common Units; provided, however, that such converted
Subordinated Units shall remain subject to the provisions of Section 5.5(c)(ii),
Section 6.1(d)(x)(A), Section 6.7(b) and Section 6.7(c).
(b) A Unitholder shall not be permitted to transfer a Subordinated Unit or
a Subordinated Unit that has converted into a Common Unit pursuant to Section
5.7 or Section 5.8, as applicable, (other than a transfer to an Affiliate) if
the remaining balance in the transferring Unitholder's Capital Account with
respect to the retained Subordinated Units or Retained Converted Subordinated
Units would be negative after giving effect to the allocation under Section
5.5(c)(ii)(B).
(c) The Unitholder holding a Common Unit that has resulted from the
conversion of a Subordinated Unit pursuant to Section 5.7 or Section 5.8, as
applicable, shall not be issued a Common Unit Certificate pursuant to Section
4.1, and shall not be permitted to transfer such Common Units to a Person that
is not an Affiliate of the holder until such time as the General Partner
determines, based on advice of counsel, that each such Common Unit should have,
as a substantive matter, like intrinsic economic and federal income tax
characteristics, in all material
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respects, to the intrinsic economic and federal income tax characteristics of an
Initial Common Unit. In connection with the condition imposed by this Section
6.7(c), the General Partner may take whatever steps are required to provide
economic uniformity to such Common Units in preparation for a transfer of such
Common Units, including the application of Section 5.5(c)(ii), Section 6.1(d)(x)
and Section 6.7(b); provided, however, that no such steps may be taken that
would have a material adverse effect on the Unitholders holding Common Units
represented by Common Unit Certificates. For purposes of this Section 6.7(c), a
Common Unit that has resulted from the conversion of a Subordinated Unit shall
have like intrinsic economic and United States federal income tax
characteristics if each such Common Unit (i) has the same right to cash
distributions pursuant to Section 6.4 and Section 6.5 as does an Initial Common
Unit, (ii) has a Per Unit Capital Amount equal to the Per Unit Capital Amount
for an Initial Common Unit and (iii) is treated the same for United States
federal income tax purposes as an Initial Common Unit in the hands of a
purchaser.
(d) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Class C Unit shall have all the rights and obligations of a Unitholder holding
Common Units; provided, however, that immediately upon the conversion of Class C
Units into Common Units pursuant to Section 5.12, a Unitholder holding a Class C
Unit shall possess all the rights and obligations of a Unitholder holding Common
Units hereunder, including the right to vote as a Common Unitholder and the
right to participate in allocations of income, gain, loss and deduction and
distributions made with respect to Common Units; provided, however, that such
converted Class C Units shall remain subject to the provisions of Section
6.1(d)(x)(B) and Section 6.7(e).
(e) The holder or holders of Common Units resulting from the conversion
pursuant to Section 5.12(f) of any Class C Units pursuant to Section 5.12 shall
not be issued a Common Unit Certificate pursuant to Section 4.1, and shall not
be permitted to transfer such Common Units until such time as the General
Partner determines, based on advice of counsel, that each such Common Unit
should have, as a substantive matter, like intrinsic economic and federal income
tax characteristics, in all material respects, to the intrinsic economic and
federal income tax characteristics of an Initial Common Unit. In connection with
the condition imposed by this Section 6.7(e), the General Partner may take
whatever steps are required to provide economic uniformity to such Common Units,
including the application of Section 6.1(d)(x)(B); provided, however, that no
such steps may be taken that would have a material adverse effect on the
Unitholders holding Common Units represented by Common Unit Certificates. For
purposes of this Section 6.7(e), a Common Unit that has resulted from the
conversion of a Class C Unit shall have like intrinsic economic and United
States federal income tax characteristics if each such Common Unit (i) has the
same right to cash distributions pursuant to Section 6.4 and Section 6.5 as does
an Initial Common Unit, (ii) has a Per Unit Capital Amount equal to the Per Unit
Capital Amount for an Initial Common Unit and (iii) is treated the same for
United States federal income tax purposes as an Initial Common Unit in the hands
of a purchaser.
Section 6.8 Special Provisions Relating to the Holders of Incentive
Distribution Rights. Notwithstanding anything to the contrary set forth in this
Agreement, the holders of the Incentive Distribution Rights (a) shall (i)
possess the rights and obligations provided in this Agreement
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with respect to a Limited Partner pursuant to Article III and Article VII and
(ii) have a Capital Account as a Partner pursuant to Section 5.5 and all other
provisions related thereto and (b) shall not (i) be entitled to vote on any
matters requiring the approval or vote of the holders of Outstanding Units,
except as provided by law, (ii) be entitled to any distributions other than as
provided in Section 6.4(a)(v), Section 6.4(a)(vi), Section 6.4(a)(vii), Section
6.4(b)(iii), Section 6.4(b)(iv), Section 6.4(b)(v) and Section 12.4 or (iii) be
allocated items of income, gain, loss or deduction other than as specified in
this Article VI.
Section 6.9 Entity-Level Taxation. If legislation is enacted or the
interpretation of existing language is modified by a governmental taxing
authority so that a Group Member is treated as an association taxable as a
corporation or is otherwise subject to an entity-level tax for federal, state or
local income tax purposes, then the General Partner may reduce the Minimum
Quarterly Distribution, the First Target Distribution, the Second Target
Distribution and the Third Target Distribution by the amount of income taxes
that are payable by reason of any such new legislation or interpretation (the
"Incremental Income Taxes"), or any portion thereof selected by the General
Partner, in the manner provided in this Section 6.9. If the General Partner
elects to reduce the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
for any Quarter with respect to all or a portion of any Incremental Income
Taxes, the General Partner shall estimate for such Quarter the Partnership
Group's aggregate liability (the "Estimated Incremental Quarterly Tax Amount")
for all (or the relevant portion of) such Incremental Income Taxes; provided
that any difference between such estimate and the actual tax liability for
Incremental Income Taxes (or the relevant portion thereof) for such Quarter may,
to the extent determined by the General Partner be taken into account in
determining the Estimated Incremental Quarterly Tax Amount with respect to each
Quarter in which any such difference can be determined. For each such Quarter,
the Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, shall be the product obtained by
multiplying (a) the amounts therefor that are set out herein prior to the
application of this Section 6.9 times (b) the quotient obtained by dividing (i)
Available Cash with respect to such Quarter by (ii) the sum of Available Cash
with respect to such Quarter and the Estimated Incremental Quarterly Tax Amount
for such Quarter, as determined by the General Partner. For purposes of the
foregoing, Available Cash with respect to a Quarter will be deemed reduced by
the Estimated Incremental Quarterly Tax Amount for that Quarter.
ARTICLE VII.
Management and Operation of Business
Section 7.1 Management.
(a) The General Partner shall conduct, direct and manage all activities of
the Partnership. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership shall be
exclusively vested in the General Partner, and no Limited Partner shall have any
management power over the business and affairs of the Partnership. In addition
to the powers now or hereafter granted a general partner of a limited
partnership under applicable law or that are granted to the General Partner
under any other provision of this Agreement, the General Partner, subject to
Section 7.3, shall have full power
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and authority to do all things and on such terms as it determines to be
necessary or appropriate to conduct the business of the Partnership, to exercise
all powers set forth in Section 2.5 and to effectuate the purposes set forth in
Section 2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of money,
the assumption or guarantee of, or other contracting for, indebtedness and
other liabilities, the issuance of evidences of indebtedness, including
indebtedness that is convertible into Partnership Securities, and the
incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership or
the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3 and Article XIV);
(iv) the use of the assets of the Partnership (including cash on hand)
for any purpose consistent with the terms of this Agreement, including the
financing of the conduct of the operations of the Partnership Group;
subject to Section 7.6(a), the lending of funds to other Persons (including
other Group Members); the repayment or guarantee of obligations of any
Group Member; and the making of capital contributions to any Group Member;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including instruments that limit the
liability of the Partnership under contractual arrangements to all or
particular assets of the Partnership, with the other party to the contract
to have no recourse against the General Partner or its assets other than
its interest in the Partnership, even if same results in the terms of the
transaction being less favorable to the Partnership than would otherwise be
the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring;
(viii) the maintenance of insurance for the benefit of the Partnership
Group, the Partners and Indemnitees;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited or
general partnerships, joint ventures, corporations, limited liability
companies or other relationships (including the acquisition of interests
in, and the contributions of property to, any Group Member from time to
time) subject to the restrictions set forth in Section 2.4;
65
(x) the control of any matters affecting the rights and obligations of
the Partnership, including the bringing and defending of actions at law or
in equity and otherwise engaging in the conduct of litigation, arbitration
or mediation and the incurring of legal expense and the settlement of
claims and litigation;
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National
Securities Exchange and the delisting of some or all of the Limited Partner
Interests from, or requesting that trading be suspended on, any such
exchange (subject to any prior approval that may be required under Section
4.8);
(xiii) the purchase, sale or other acquisition or disposition of
Partnership Securities, or the issuance of options, rights, warrants and
appreciation rights relating to Partnership Securities;
(xiv) the undertaking of any action in connection with the
Partnership's participation in any Group Member; and
(xv) the entering into of agreements with any of its Affiliates to
render services to a Group Member or to itself in the discharge of its
duties as General Partner of the Partnership.
(b) Notwithstanding any other provision of this Agreement, any Group Member
Agreement, the Delaware Act or any applicable law, rule or regulation, each of
the Partners and each other Person who may acquire an interest in Partnership
Securities hereby (i) approves, ratifies and confirms the execution, delivery
and performance by the parties thereto of this Agreement, any Group Member
Agreement, the Purchase Agreement, the Registration Rights Agreement, the
Omnibus Agreement, the Contribution Agreement and the Midstream Services and Gas
Dedication Agreement; (ii) agrees that the General Partner (on its own or
through any officer of the Partnership) is authorized to execute, deliver and
perform the agreements referred to in clause (i) of this sentence and the other
agreements, acts, transactions and matters described in or contemplated by the
Purchase Agreement on behalf of the Partnership without any further act,
approval or vote of the Partners or the other Persons who may acquire an
interest in Partnership Securities; and (iii) agrees that the execution,
delivery or performance by the General Partner, any Group Member or any
Affiliate of any of them of this Agreement or any agreement authorized or
permitted under this Agreement (including the exercise by the General Partner or
any Affiliate of the General Partner of the rights accorded pursuant to Article
XV) shall not constitute a breach by the General Partner of any duty that the
General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement (or any other agreements) or of any duty stated or
implied by law or equity.
Section 7.2 Certificate of Limited Partnership. The General Partner has
caused the Certificate of Limited Partnership to be filed with the Secretary of
State of the State of Delaware as required by the Delaware Act. The General
Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents that the General Partner determines to be necessary
66
or appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware or any other state in which the Partnership
may elect to do business or own property. To the extent the General Partner
determines such action to be necessary or appropriate, the General Partner shall
file amendments to and restatements of the Certificate of Limited Partnership
and do all things to maintain the Partnership as a limited partnership (or a
partnership or other entity in which the limited partners have limited
liability) under the laws of the State of Delaware or of any other state in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 3.4(a), the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate of Limited
Partnership, any qualification document or any amendment thereto to any Limited
Partner.
Section 7.3 Restrictions on the General Partner's Authority. Except as
provided in Article XII and Article XIV, the General Partner may not sell,
exchange or otherwise dispose of all or substantially all of the assets of the
Partnership Group, taken as a whole, in a single transaction or a series of
related transactions (including by way of merger, consolidation, other
combination or sale of ownership interests of the Partnership's Subsidiaries)
without the approval of holders of a Unit Majority; provided, however, that this
provision shall not preclude or limit the General Partner's ability to mortgage,
pledge, hypothecate or grant a security interest in all or substantially all of
the assets of the Partnership Group and shall not apply to any forced sale of
any or all of the assets of the Partnership Group pursuant to the foreclosure
of, or other realization upon, any such encumbrance. Without the approval of
holders of a Unit Majority, the General Partner shall not, on behalf of the
Partnership, except as permitted under Section 4.6, Section 11.1 and Section
11.2, elect or cause the Partnership to elect a successor general partner of the
Partnership.
Section 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this Agreement,
the General Partner shall not be compensated for its services as a general
partner or managing member of any Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or such
other basis as the General Partner may determine, for (i) all direct and
indirect expenses it incurs or payments it makes on behalf of the Partnership
Group (including salary, bonus, incentive compensation and other amounts paid to
any Person, including Affiliates of the General Partner to perform services for
the Partnership Group or for the General Partner in the discharge of its duties
to the Partnership Group), and (ii) all other expenses allocable to the
Partnership Group or otherwise incurred by the General Partner in connection
with operating the Partnership Group's business (including expenses allocated to
the General Partner by its Affiliates). The General Partner shall determine the
expenses that are allocable to the Partnership Group. Reimbursements pursuant to
this Section 7.4 shall be in addition to any reimbursement to the General
Partner as a result of indemnification pursuant to Section 7.7.
(c) Subject to the restrictions on the number of Partnership Units issuable
under the LTIP and subject to the Investors' Rights Agreement, the General
Partner, without the approval of the Limited Partners (who shall have no right
to vote in respect thereof), may propose and
67
adopt on behalf of the Partnership employee benefit plans, employee programs and
employee practices (including plans, programs and practices involving the
issuance of Partnership Securities or options to purchase or rights, warrants or
appreciation rights relating to Partnership Securities), or cause the
Partnership to issue Partnership Securities in connection with, or pursuant to,
any employee benefit plan, employee program or employee practice maintained or
sponsored by the General Partner, Group Member or any Affiliates in each case
for the benefit of employees of the General Partner or any of its Affiliates, in
respect of services performed, directly or indirectly, for the benefit of the
Partnership Group. The Partnership agrees to issue and sell to the General
Partner or any of its Affiliates any Partnership Securities that the General
Partner or such Affiliates are obligated to provide to any employees pursuant to
any such employee benefit plans, employee programs or employee practices.
Expenses incurred by the General Partner in connection with any such plans,
programs and practices (including the net cost to the General Partner or such
Affiliates of Partnership Securities purchased by the General Partner or such
Affiliates from the Partnership to fulfill options or awards under such plans,
programs and practices) shall be reimbursed in accordance with Section 7.4(b).
Any and all obligations of the General Partner under any employee benefit plans,
employee programs or employee practices adopted by the General Partner as
permitted by this Section 7.4(c) shall constitute obligations of the General
Partner hereunder and shall be assumed by any successor General Partner approved
pursuant to Section 11.1 or Section 11.2 or the transferee of or successor to
all of the General Partner's General Partner Interest (represented by General
Partner Units) pursuant to Section 4.6.
Section 7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so long as it is the
General Partner of the Partnership (i) agrees that its sole business will be to
act as a general partner or managing member, as the case may be, of the
Partnership and any other partnership or limited liability company of which the
Partnership is, directly or indirectly, a partner or member and to undertake
activities that are ancillary or related thereto (including being a limited
partner in the Partnership) and (ii) shall not engage in any business or
activity or incur any debts or liabilities except in connection with or
incidental to (A) its performance as general partner or managing member, if any,
of one or more Group Members or (B) the acquiring, owning or disposing of debt
or equity securities in any Group Member.
(b) It shall be deemed not to be a breach of any duty (including any
fiduciary duty) existing hereunder, at law, in equity or otherwise, or any other
obligation of any type whatsoever of (i) any Indemnitee to engage in outside
business interests and activities in preference to or to the exclusion of the
Partnership or in direct competition with the Partnership, except as provided in
the Omnibus Agreement; provided such Indemnitee does not engage in such business
or activity as a result of or using confidential or proprietary information
provided by or on behalf of the Partnership to such Indemnitee or (ii) any
director, officer or employee of the General Partner to be a director, officer,
employee, manager or consultant of any Affiliate of an Indemnitee, provided that
the Board of Directors is advised of such other relationship and does not object
thereto; and further, provided, that such director, officer or employee does not
engage in such business or activity as a result of or using confidential or
proprietary information provided by or on behalf of the Partnership to such
Person.
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(c) Except as set forth in the Omnibus Agreement, none of the Indemnitees
shall have any obligation hereunder or as a result of any duty expressed or
implied by law, in equity or otherwise to present business opportunities to the
Partnership that may become available to such Indemnitees or their Affiliates or
of which directors, officers or employees of the General Partner acquire
knowledge other than while serving in such capacity. None of any Group Member,
any Limited Partner or any other Person shall have any rights by virtue of this
Agreement, any Group Member Agreement, or the partnership relationship
established hereby in any business ventures of any Indemnitee.
(d) Notwithstanding anything to the contrary in this Agreement, to the
extent that any provisions of this Section 7.5 purport or are interpreted to
have the effect of restricting, eliminating or otherwise modifying the duties
(including fiduciary duties) that might otherwise arise, as a result of the
Delaware Act or other applicable law, be owed by the General Partner or the
directors or officers of the General Partner to the Partnership and its Limited
Partners, or to constitute a waiver or consent by the Limited Partners to any
such restriction, elimination or modification, such provisions in this Section
7.5 shall be deemed to have been approved by the Partners, and the Partners
hereby agree that such provisions shall replace or eliminate such duties.
Section 7.6 Loans from the General Partner; Loans or Contributions from the
Partnership or Group Members.
(a) The General Partner or any of its Affiliates may lend to any Group
Member, and any Group Member may borrow from the General Partner or any of its
Affiliates, funds needed or desired by the Group Member for such periods of time
and in such amounts as the General Partner may determine; provided, however,
that in any such case the lending party may not charge the borrowing party
interest at a rate greater than the rate that would be charged the borrowing
party or impose terms less favorable to the borrowing party than would be
charged or imposed on the borrowing party by unrelated lenders on comparable
loans made on an arm's-length basis (without reference to the lending party's
financial abilities or guarantees), all as determined by the General Partner.
The borrowing party shall reimburse the lending party for any costs (other than
any additional interest costs) incurred by the lending party in connection with
the borrowing of such funds. For purposes of this Section 7.6(a) and Section
7.6(b), the term "Group Member" shall include any Affiliate of a Group Member
that is controlled by the Group Member.
(b) The Partnership may lend or contribute to any Group Member, and any
Group Member may borrow from the Partnership, funds on terms and conditions
determined by the General Partner. No Group Member may lend funds to the General
Partner or any of its Affiliates (other than another Group Member).
(c) No borrowing by any Group Member or the approval thereof by the General
Partner shall be deemed to constitute a breach of any duty, expressed or
implied, of the General Partner or its Affiliates to the Partnership or the
Limited Partners by reason of the fact that the purpose or effect of such
borrowing is directly or indirectly to (i) enable distributions to the General
Partner or its Affiliates (including in their capacities as Limited Partners) to
exceed the General Partner's Percentage Interest of the total amount distributed
to all partners or (ii) hasten
69
the expiration of the Subordination Period or the conversion of any Subordinated
Units into Common Units.
Section 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the limitations
expressly provided in this Agreement, all Indemnitees shall be indemnified and
held harmless by the Partnership from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including legal fees and
expenses), judgments, fines, penalties, interest, settlements or other amounts
arising from any and all claims, demands, actions, suits or proceedings, whether
civil, criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as an Indemnitee; provided, that the Indemnitee shall not be
indemnified and held harmless if there has been a final and non-appealable
judgment entered by a court of competent jurisdiction determining that, in
respect of the matter for which the Indemnitee is seeking indemnification
pursuant to this Section 7.7, the Indemnitee acted in bad faith or engaged in
fraud, willful misconduct or, in the case of a criminal matter, acted with
knowledge that the Indemnitee's conduct was unlawful; provided, further, no
indemnification pursuant to this Section 7.7 shall be available to the General
Partner or its Affiliates (other than a Group Member) with respect to its or
their obligations incurred pursuant to the Purchase Agreement, the Registration
Rights Agreement, the Omnibus Agreement, the Contribution Agreement, the
Investors' Rights Agreement or the Midstream Services and Gas Dedication
Agreement (other than obligations incurred by the General Partner on behalf of
the Partnership). Any indemnification pursuant to this Section 7.7 shall be made
only out of the assets of the Partnership, it being agreed that the General
Partner shall not be personally liable for such indemnification and shall have
no obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal fees
and expenses) incurred by an Indemnitee who is indemnified pursuant to Section
7.7(a) in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Partnership prior to a determination that the
Indemnitee is not entitled to be indemnified upon receipt by the Partnership of
any undertaking by or on behalf of the Indemnitee to repay such amount if it
shall be determined that the Indemnitee is not entitled to be indemnified as
authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the holders of Outstanding Limited Partner Interests, as
a matter of law or otherwise, both as to actions in the Indemnitee's capacity as
an Indemnitee and as to actions in any other capacity (including any capacity
under the Purchase Agreement), and shall continue as to an Indemnitee who has
ceased to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General
Partner or its Affiliates for the cost of) insurance, on behalf of the General
Partner, its Affiliates and such other Persons as the General Partner shall
determine, against any liability that may be asserted against, or expense that
may be incurred by, such Person in connection with the Partnership's
70
activities or such Person's activities on behalf of the Partnership, regardless
of whether the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute "fines"
within the meaning of Section 7.7(a); and action taken or omitted by it with
respect to any employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the best interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose that is in the
best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
Section 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this Agreement,
no Indemnitee shall be liable for monetary damages to the Partnership, the
Limited Partners, or any other Persons who have acquired interests in the
Partnership Securities, for losses sustained or liabilities incurred as a result
of any act or omission of an Indemnitee unless there has been a final and
non-appealable judgment entered by a court of competent jurisdiction determining
that, in respect of the matter in question, the Indemnitee acted in bad faith or
engaged in fraud, willful misconduct or, in the case of a criminal matter, acted
with knowledge that the Indemnitee's conduct was criminal.
(b) Subject to its obligations and duties as General Partner set forth in
Section 7.1(a), the General Partner may exercise any of the powers granted to it
by this Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and the
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General Partner shall not be responsible for any misconduct or negligence on the
part of any such agent appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or to the Partners, the General Partner and any other Indemnitee acting in
connection with the Partnership's business or affairs shall not be liable to the
Partnership or to any Partner for its good faith reliance on the provisions of
this Agreement.
(d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability of the Indemnitees under this Section 7.8 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
Section 7.9 Resolution of Conflicts of Interest; Standards of Conduct and
Modification of Duties.
(a) Unless otherwise expressly provided in this Agreement or any Group
Member Agreement, whenever a potential conflict of interest exists or arises
between the General Partner or any of its Affiliates or an Indemnitee, on the
one hand, and the Partnership, any Group Member or any Partner, on the other,
any resolution or course of action by the General Partner or its Affiliates or
an Indemnitee in respect of such conflict of interest shall be permitted and
deemed approved by all Partners, and shall not constitute a breach of this
Agreement, of any Group Member Agreement, of any agreement contemplated herein
or therein, or of any duty stated or implied by law or equity, if the resolution
or course of action in respect of such conflict of interest is (i) approved by
Special Approval, (ii) approved by the vote of a majority of the Common Units
(excluding Common Units owned by the General Partner and its Affiliates), (iii)
on terms no less favorable to the Partnership than those generally being
provided to or available from unrelated third parties or (iv) fair and
reasonable to the Partnership, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership). The General
Partner shall be authorized but not required in connection with its resolution
of such conflict of interest to seek Special Approval of such resolution, and
the General Partner may also adopt a resolution or course of action that has not
received Special Approval. If Special Approval is not sought and the Board of
Directors determines that the resolution or course of action taken with respect
to a conflict of interest satisfies either of the standards set forth in clauses
(iii) or (iv) above, then it shall be presumed that, in making its decision, the
Board of Directors acted in good faith, and in any proceeding brought by any
Limited Partner or by or on behalf of such Limited Partner or any other Limited
Partner or the Partnership challenging such approval, the Person bringing or
prosecuting such proceeding shall have the burden of overcoming such
presumption.
(b) Whenever the General Partner makes a determination or takes or declines
to take any other action, or any of its Affiliates causes it to do so, in its
capacity as the general partner of the Partnership as opposed to in its
individual capacity, whether under this Agreement, any Group Member Agreement or
any other agreement contemplated hereby or otherwise, then,
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unless another express standard is provided for in this Agreement, the General
Partner, or such Affiliates causing it to do so, shall make such determination
or take or decline to take such other action in good faith and shall not be
subject to any other or different standards imposed by this Agreement, any Group
Member Agreement, any other agreement contemplated hereby or under the Delaware
Act or any other law, rule or regulation or at equity. In order for a
determination or other action to be in "good faith" for purposes of this
Agreement, the Person or Persons making such determination or taking or
declining to take such other action must believe that the determination or other
action is in the best interests of the Partnership.
(c) Whenever the General Partner makes a determination or takes or declines
to take any other action, or any of its Affiliates causes it to do so, in its
individual capacity as opposed to in its capacity as the general partner of the
Partnership, whether under this Agreement, any Group Member Agreement or any
other agreement contemplated hereby or otherwise, then the General Partner, or
such Affiliates causing it to do so, are entitled to make such determination or
to take or decline to take such other action free of any fiduciary duty or
obligation whatsoever to the Partnership, any Limited Partner, and the General
Partner, or such Affiliates causing it to do so, shall not be required to act in
good faith or pursuant to any other standard imposed by this Agreement, any
Group Member Agreement, any other agreement contemplated hereby or under the
Delaware Act or any other law, rule or regulation or at equity. By way of
illustration and not of limitation, whenever the phrase, "at the option of the
General Partner," or some variation of that phrase, is used in this Agreement,
it indicates that the General Partner is acting in its individual capacity. For
the avoidance of doubt, whenever the General Partner votes or transfers its
Partnership Interests, or refrains from voting or transferring its Partnership
Interests, it shall be acting in its individual capacity. The General Partner's
organizational documents may provide that determinations to take or decline to
take any action in its individual, rather than representative, capacity may or
shall be determined by its members, if the General Partner is a limited
liability company, stockholders, if the General Partner is a corporation, or the
members or stockholders of the General Partner's general partner, if the General
Partner is a partnership.
(d) Notwithstanding anything to the contrary in this Agreement, the General
Partner and its Affiliates shall have no duty or obligation, express or implied,
to (i) sell or otherwise dispose of any asset of the Partnership Group other
than in the ordinary course of business or (ii) permit any Group Member to use
any facilities or assets of the General Partner and its Affiliates or any
Indemnitee, except as may be provided in contracts entered into from time to
time specifically dealing with such use. Any determination by the General
Partner or any of its Affiliates or any Indemnitee to enter into such contracts
shall be at its option.
(e) Except as expressly set forth in this Agreement, neither the General
Partner nor any other Indemnitee shall have any duties or liabilities, including
fiduciary duties, to the Partnership or any Limited Partner and the provisions
of this Agreement, to the extent that they restrict, eliminate or otherwise
modify the duties and liabilities, including fiduciary duties, of the General
Partner or any other Indemnitee otherwise existing at law or in equity, are
agreed by the Partners to replace such other duties and liabilities of the
General Partner or such other Indemnitee.
(f) The Unitholders hereby authorize the General Partner, on behalf of the
Partnership as a partner or member of a Group Member, to approve of actions by
the general
73
partner or managing member of such Group Member similar to those actions
permitted to be taken by the General Partner pursuant to this Section 7.9.
Section 7.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that the General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
officers of the Partnership.
Section 7.11 Purchase or Sale of Partnership Securities. The General
Partner may cause the Partnership to purchase or otherwise acquire Partnership
Securities; provided that, except as permitted pursuant to Section 4.10, the
General Partner may not cause any Group Member to purchase Subordinated Units.
Such Partnership Securities shall be held by the Partnership as treasury
securities unless they are expressly cancelled by action of an appropriate
officer of the General Partner. As long as Partnership Securities are held by
any Group Member, such Partnership Securities shall not be considered
Outstanding for any purpose, except as otherwise provided herein. The General
Partner or any Affiliate of the General Partner may also purchase or otherwise
acquire and sell or otherwise dispose of Partnership Securities for its own
account, subject to the provisions of Article IV and Article X.
Section 7.12 Registration Rights of the General Partner and its Affiliates.
(a) If (i) the General Partner or any Affiliate of the General Partner
(including for purposes of this Section 7.12, any Person that is an Affiliate of
the General Partner at the date hereof notwithstanding that it may later cease
to be an Affiliate of the General Partner) holds Partnership Securities that it
desires to sell and (ii) Rule 144 of the Securities Act (or any successor rule
or regulation to Rule 144) or another exemption from registration is not
available to enable such holder of Partnership Securities (the "Holder") to
dispose of the number of Partnership Securities it desires to sell at the time
it desires to do so without registration under the Securities Act, then at the
option and upon the request of the Holder, the Partnership shall file with the
Commission as promptly as practicable after receiving such request, and use all
commercially reasonable efforts to cause to become effective and remain
effective for a period of not less than six months following its effective date
or such shorter period as shall terminate when all Partnership Securities
covered by such registration statement have been sold, a registration statement
under the Securities Act registering the offering and sale of the number of
74
Partnership Securities specified by the Holder; provided, however, that the
Partnership shall not be required to effect more than three registrations
pursuant to Sections 7.12(a) and 7.12(b); provided, however, that if the
Conflicts Committee determines in good faith that the requested registration
would be materially detrimental to the Partnership and its Partners because such
registration would (x) materially interfere with a significant acquisition,
reorganization or other similar transaction involving the Partnership, (y)
require premature disclosure of material information that the Partnership has a
bona fide business purpose for preserving as confidential or (z) render the
Partnership unable to comply with requirements under applicable securities laws,
then the Partnership shall have the right to postpone such requested
registration for a period of not more than six months after receipt of the
Holder's request, such right pursuant to this Section 7.12(a) or Section 7.12(b)
not to be utilized more than once in any twelve-month period. Except as provided
in the preceding sentence, the Partnership shall be deemed not to have used all
commercially reasonable efforts to keep the registration statement effective
during the applicable period if it voluntarily takes any action that would
result in Holders of Partnership Securities covered thereby not being able to
offer and sell such Partnership Securities at any time during such period,
unless such action is required by applicable law. In connection with any
registration pursuant to the first sentence, the Partnership shall (i) promptly
prepare and file (A) such documents as may be necessary to register or qualify
the securities subject to such registration under the securities laws of such
states as the Holder shall reasonably request; provided, however, that no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Partnership would become subject to general service of process or to
taxation or qualification to do business as a foreign corporation or partnership
doing business in such jurisdiction solely as a result of such registration, and
(B) such documents as may be necessary to apply for listing or to list the
Partnership Securities subject to such registration on such National Securities
Exchange as the Holder shall reasonably request, and (ii) do any and all other
acts and things that may be necessary or appropriate to enable the Holder to
consummate a public sale of such Partnership Securities in such states. Except
as set forth in Section 7.12(d), all costs and expenses of any such registration
and offering (other than the underwriting discounts and commissions) shall be
paid by the Partnership, without reimbursement by the Holder.
(b) If, after the Initial Public Offering, any Holder holds Partnership
Securities that it desires to sell and Rule 144 of the Securities Act (or any
successor rule or regulation to Rule 144) or another exemption from registration
is not available to enable such Holder to dispose of the number of Partnership
Securities it desires to sell at the time it desires to do so without
registration under the Securities Act, then at the option and upon the request
of the Holder, the Partnership shall file with the Commission as promptly as
practicable after receiving such request, and use all commercially reasonable
efforts to cause to become effective and remain effective for a period of not
less than six months following its effective date or such shorter period as
shall terminate when all Partnership Securities covered by such shelf
registration statement have been sold, a "shelf" registration statement covering
the Partnership Securities specified by the Holder on an appropriate form under
Rule 415 under the Securities Act, or any similar rule that may be adopted by
the Commission; provided, however, that the Partnership shall not be required to
effect more than three registrations pursuant to Section 7.12(a) and this
Section 7.12(b); and provided further, however, that if the Conflicts Committee
determines in good faith that any offering under, or the use of any prospectus
forming a part of, the shelf registration statement would be materially
detrimental to the Partnership and its Partners because such offering or use
would (x) materially interfere with a significant acquisition, reorganization
75
or other similar transaction involving the Partnership, (y) require premature
disclosure of material information that the Partnership has a bona fide business
purpose for preserving as confidential or (z) render the Partnership unable to
comply with requirements under applicable securities laws, then the Partnership
shall have the right to suspend such offering or use for a period of not more
than six months after receipt of the Holder's request, such right pursuant to
Section 7.12(a) or this Section 7.12(b) not to be utilized more than once in any
twelve-month period. Except as provided in the preceding sentence, the
Partnership shall be deemed not to have used all commercially reasonable efforts
to keep the shelf registration statement effective during the applicable period
if it voluntarily takes any action that would result in Holders of Partnership
Securities covered thereby not being able to offer and sell such Partnership
Securities at any time during such period, unless such action is required by
applicable law. In connection with any shelf registration pursuant to this
Section 7.12(b), the Partnership shall (i) promptly prepare and file (A) such
documents as may be necessary to register or qualify the securities subject to
such shelf registration under the securities laws of such states as the Holder
shall reasonably request; provided, however, that no such qualification shall be
required in any jurisdiction where, as a result thereof, the Partnership would
become subject to general service of process or to taxation or qualification to
do business as a foreign corporation or partnership doing business in such
jurisdiction solely as a result of such shelf registration, and (B) such
documents as may be necessary to apply for listing or to list the Partnership
Securities subject to such shelf registration on such National Securities
Exchange as the Holder shall reasonably request, and (ii) do any and all other
acts and things that may be necessary or appropriate to enable the Holder to
consummate a public sale of such Partnership Securities in such states. Except
as set forth in Section 7.12(d), all costs and expenses of any such shelf
registration and offering (other than the underwriting discounts and
commissions) shall be paid by the Partnership, without reimbursement by the
Holder.
(c) If the Partnership shall at any time propose to file a registration
statement under the Securities Act for an offering of equity securities of the
Partnership for cash (other than an offering relating solely to an employee
benefit plan), the Partnership shall use all commercially reasonable efforts to
include such number or amount of securities held by any Holder in such
registration statement as the Holder shall request; provided, that the
Partnership is not required to make any effort or take any action to so include
the securities of the Holder once the registration statement becomes or is
declared effective by the Commission, including any registration statement
providing for the offering from time to time of securities pursuant to Rule 415
of the Securities Act. If the proposed offering pursuant to this Section 7.12(c)
shall be an underwritten offering, then, in the event that the managing
underwriter or managing underwriters of such offering advise the Partnership and
the Holder in writing that in their opinion the inclusion of all or some of the
Holder's Partnership Securities would adversely and materially affect the
success of the offering and subject to any superior rights granted under the
Registration Rights Agreement, the Partnership shall include in such offering
only that number or amount, if any, of securities held by the Holder that, in
the opinion of the managing underwriter or managing underwriters, will not so
adversely and materially affect the offering. Except as set forth in Section
7.12(d), all costs and expenses of any such registration and offering (other
than the underwriting discounts and commissions) shall be paid by the
Partnership, without reimbursement by the Holder.
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(d) If underwriters are engaged in connection with any registration
referred to in this Section 7.12, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of the Partnership's obligation under Section
7.7, the Partnership shall, to the fullest extent permitted by law, indemnify
and hold harmless the Holder, its officers, directors and each Person who
controls the Holder (within the meaning of the Securities Act) and any agent
thereof (collectively, "Indemnified Persons") from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnified Person may be involved, or is threatened to be involved, as a
party or otherwise, under the Securities Act or otherwise (hereinafter referred
to in this Section 7.12(d) as a "claim" and in the plural as "claims") based
upon, arising out of or resulting from any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which any Partnership Securities were registered under the Securities Act or any
state securities or Blue Sky laws, in any preliminary prospectus (if used prior
to the effective date of such registration statement), or in any summary or
final prospectus or in any amendment or supplement thereto (if used during the
period the Partnership is required to keep the registration statement current),
or arising out of, based upon or resulting from the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements made therein not misleading; provided, however, that the
Partnership shall not be liable to any Indemnified Person to the extent that any
such claim arises out of, is based upon or results from an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, such preliminary, summary or final prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Partnership by or on behalf of such Indemnified
Person specifically for use in the preparation thereof.
(e) The provisions of Sections 7.12(a), 7.12(b) and 7.12(c) shall continue
to be applicable with respect to the General Partner (and any of the General
Partner's Affiliates), after it ceases to be a general partner of the
Partnership, during a period of two years subsequent to the effective date of
such cessation and for so long thereafter as is required for the Holder to sell
all of the Partnership Securities with respect to which it has requested during
such two-year period inclusion in a registration statement otherwise filed or
that a registration statement be filed; provided, however, that the Partnership
shall not be required to file successive registration statements covering the
same Partnership Securities for which registration was demanded during such
two-year period. The provisions of Section 7.12(d) shall continue in effect
thereafter.
(f) The rights to cause the Partnership to register Partnership Securities
pursuant to this Section 7.12 may be assigned (but only with all related
obligations) by a Holder to a transferee or assignee of such Partnership
Securities, provided (i) the Partnership is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the Partnership Securities with respect to which such
registration rights are being assigned; and (ii) such transferee or assignee
agrees in writing to be bound by and subject to the terms set forth in this
Section 7.12.
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(g) Any request to register Partnership Securities pursuant to this Section
7.12 shall (i) specify the Partnership Securities intended to be offered and
sold by the Person making the request, (ii) express such Person's present intent
to offer such Partnership Securities for distribution, (iii) describe the nature
or method of the proposed offer and sale of Partnership Securities, and (iv)
contain the undertaking of such Person to provide all such information and
materials and take all action as may be required in order to permit the
Partnership to comply with all applicable requirements in connection with the
registration of such Partnership Securities.
Section 7.13 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner and any officer of the General
Partner authorized by the General Partner to act on behalf of and in the name of
the Partnership has full power and authority to encumber, sell or otherwise use
in any manner any and all assets of the Partnership and to enter into any
authorized contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner or any such officer as if it were the
Partnership's sole party in interest, both legally and beneficially. Each
Limited Partner hereby waives any and all defenses or other remedies that may be
available against such Person to contest, negate or disaffirm any action of the
General Partner or any such officer in connection with any such dealing. In no
event shall any Person dealing with the General Partner or any such officer or
its representatives be obligated to ascertain that the terms of this Agreement
have been complied with or to inquire into the necessity or expedience of any
act or action of the General Partner or any such officer or its representatives.
Each and every certificate, document or other instrument executed on behalf of
the Partnership by the General Partner or its representatives shall be
conclusive evidence in favor of any and every Person relying thereon or claiming
thereunder that (a) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (b) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Partnership and (c) such certificate, document or instrument was duly executed
and delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
ARTICLE VIII.
Books, Records, Accounting and Reports
Section 8.1 Records and Accounting. The General Partner shall keep or cause
to be kept at the principal office of the Partnership appropriate books and
records with respect to the Partnership's business, including all books and
records necessary to provide to the Limited Partners any information required to
be provided pursuant to Section 3.4(a). Any books and records maintained by or
on behalf of the Partnership in the regular course of its business, including
the record of the Record Holders of Units or other Partnership Securities, books
of account and records of Partnership proceedings, may be kept on, or be in the
form of, computer disks, hard drives, punch cards, magnetic tape, photographs,
micrographics or any other information storage device; provided, that the books
and records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial reporting purposes, on an accrual basis in accordance
with U.S. GAAP.
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Section 8.2 Fiscal Year. The fiscal year of the Partnership shall be a
fiscal year ending December 31.
Section 8.3 Reports.
(a) As soon as practicable, but in no event later than 120 days after the
close of each fiscal year of the Partnership, the General Partner shall use its
best efforts to cause to be mailed or made available, by any reasonable means
(including posting on or accessible through the Partnership's website) to each
Record Holder of a Unit as of a date selected by the General Partner, an annual
report containing financial statements of the Partnership for such fiscal year
of the Partnership, presented in accordance with U.S. GAAP, including a balance
sheet and statements of operations, Partnership equity and cash flows, such
statements to be audited by a firm of independent public accountants selected by
the General Partner.
(b) As soon as practicable, but in no event later than 90 days after the
close of each Quarter except the last Quarter of each fiscal year, the General
Partner shall use its best efforts to cause to be mailed or made available, by
any reasonable means (including posting on or accessible through the
Partnership's website) to each Record Holder of a Unit, as of a date selected by
the General Partner, a report containing unaudited financial statements of the
Partnership and such other information as may be required by applicable law,
regulation or rule of any National Securities Exchange on which the Units are
listed or admitted to trading, or as the General Partner determines to be
necessary or appropriate.
ARTICLE IX.
Tax Matters
Section 9.1 Tax Returns and Information. The Partnership shall timely file
all returns of the Partnership that are required for federal, state and local
income tax purposes on the basis of the accrual method and the taxable year or
years that it is required by law to adopt, from time to time, as determined by
the General Partner. In the event the Partnership is required to use a taxable
year other than a year ending on December 31, the General Partner shall use
reasonable efforts to change the taxable year of the Partnership to a year
ending on December 31. The tax information reasonably required by Record Holders
for federal and state income tax reporting purposes with respect to a taxable
year shall be furnished to them within 90 days of the close of the calendar year
in which the Partnership's taxable year ends. The classification, realization
and recognition of income, gain, losses and deductions and other items shall be
on the accrual method of accounting for federal income tax purposes.
Section 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the General Partner's
determination that such revocation is in the best interests of the Limited
Partners. Notwithstanding any other provision herein contained, for the purposes
of computing the adjustments under Section 743(b) of the Code, after the Initial
Public Offering, the General Partner shall be authorized (but not required) to
adopt a convention
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whereby the price paid by a transferee of a Limited Partner Interest will be
deemed to be the lowest quoted closing price of the Limited Partner Interests on
any National Securities Exchange on which such Limited Partner Interests are
listed or admitted to trading during the calendar month in which such transfer
is deemed to occur pursuant to Section 6.2(g) without regard to the actual price
paid by such transferee.
(b) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
Section 9.3 Tax Controversies. Subject to the provisions hereof, the
General Partner is designated as the Tax Matters Partner (as defined in the
Code) and is authorized and required to represent the Partnership (at the
Partnership's expense) in connection with all examinations of the Partnership's
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Partnership funds for professional services and costs
associated therewith. Each Partner agrees to cooperate with the General Partner
and to do or refrain from doing any or all things reasonably required by the
General Partner to conduct such proceedings.
Section 9.4 Withholding. Notwithstanding any other provision of this
Agreement, the General Partner is authorized to take any action that may be
required to cause the Partnership and other Group Members to comply with any
withholding requirements established under the Code or any other federal, state
or local law including pursuant to Sections 1441, 1442, 1445 and 1446 of the
Code. To the extent that the Partnership is required or elects to withhold and
pay over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or assignee (including by reason of
Section 1446 of the Code), the General Partner may treat the amount withheld as
a distribution of cash pursuant to Section 6.3 in the amount of such withholding
from such Partner.
ARTICLE X.
Admission of Partners
Section 10.1 Admission of Initial Limited Partners. Upon the issuance by
the Partnership of Common Units, Subordinated Units and Incentive Distribution
Rights to the General Partner, QRC and the Initial Private Purchasers as
described in Article V in connection with the Purchase Agreement, the General
Partner shall admit such Persons to the Partnership as Initial Limited Partners
in respect of the Common Units, Subordinated Units or Incentive Distribution
Rights issued to them.
Section 10.2 ....Admission of Limited Partners.
(a) By acceptance of the transfer of any Limited Partner Interests in
accordance with Article IV or the acceptance of any Limited Partner Interests
issued pursuant to Article V or pursuant to a merger or consolidation pursuant
to Article XIV, and except as provided in Section 4.9, each transferee of, or
other such Person acquiring, a Limited Partner Interest (including any nominee
holder or an agent or representative acquiring such Limited Partner Interests
for the account of another Person) (i) shall be admitted to the Partnership as a
Limited Partner with respect to the Limited Partner Interests so transferred or
issued to such Person when any such
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transfer, issuance or admission is reflected in the books and records of the
Partnership and such Limited Partner becomes the Record Holder of the Limited
Partner Interests so transferred, (ii) shall become bound by the terms of this
Agreement, (iii) represents that the transferee has the capacity, power and
authority to enter into this Agreement, (iv) grants the powers of attorney set
forth in this Agreement and (v) makes the consents and waivers contained in this
Agreement, all with or without execution of this Agreement by such Person. The
transfer of any Limited Partner Interests and the admission of any new Limited
Partner shall not constitute an amendment to this Agreement. A Person may become
a Limited Partner or Record Holder of a Limited Partner Interest without the
consent or approval of any of the Partners. A Person may not become a Limited
Partner without acquiring a Limited Partner Interest and until such Person is
reflected in the books and records of the Partnership as the Record Holder of
such Limited Partner Interest. The rights and obligations of a Person who is a
Non-citizen Assignee shall be determined in accordance with Section 4.9.
(b) The name and mailing address of each Limited Partner shall be listed on
the books and records of the Partnership maintained for such purpose by the
Partnership or the Transfer Agent. The General Partner shall update the books
and records of the Partnership from time to time as necessary to reflect
accurately the information therein (or shall cause the Transfer Agent to do so,
as applicable). A Limited Partner Interest may be represented by a Certificate,
as provided in Section 4.1.
(c) Any transfer of a Limited Partner Interest shall not entitle the
transferee to share in the profits and losses, to receive distributions, to
receive allocations of income, gain, loss, deduction or credit or any similar
item or to any other rights to which the transferor was entitled until the
transferee becomes a Limited Partner pursuant to Section 10.2(a).
Section 10.3 Admission of Successor General Partner. A successor General
Partner approved pursuant to Section 11.1 or Section 11.2 or the transferee of
or successor to all of the General Partner Interest pursuant to Section 4.6 who
is proposed to be admitted as a successor General Partner shall be admitted to
the Partnership as the General Partner, effective immediately prior to the
withdrawal or removal of the predecessor or transferring General Partner,
pursuant to Section 11.1 or Section 11.2 or the transfer of the General Partner
Interest pursuant to Section 4.6, provided, however, that no such successor
shall be admitted to the Partnership until compliance with the terms of Section
4.6 has occurred and such successor has executed and delivered such other
documents or instruments as may be required to effect such admission. Any such
successor shall, subject to the terms hereof, carry on the business of the
members of the Partnership Group without dissolution.
Section 10.4 Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary or appropriate under the Delaware Act to amend
the records of the Partnership to reflect such admission and, if necessary, to
prepare as soon as practicable an amendment to this Agreement and, if required
by law, the General Partner shall prepare and file an amendment to the
Certificate of Limited Partnership, and the General Partner may for this
purpose, among others, exercise the power of attorney granted pursuant to
Section 2.6.
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ARTICLE XI.
Withdrawal or Removal of Partners
Section 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");
(i) The General Partner voluntarily withdraws from the Partnership by
giving written notice to the other Partners;
(ii) The General Partner transfers all of its rights as General
Partner pursuant to Section 4.6;
(iii) The General Partner is removed pursuant to Section 11.2;
(iv) The General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition for relief
under Chapter 7 of the United States Bankruptcy Code; (C) files a petition
or answer seeking for itself a liquidation, dissolution or similar relief
(but not a reorganization) under any law; (D) files an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in a proceeding of the type
described in clauses (A)-(C) of this Section 11.1(a)(iv); or (E) seeks,
consents to or acquiesces in the appointment of a trustee (but not a
debtor-in-possession), receiver or liquidator of the General Partner or of
all or any substantial part of its properties;
(v) A final and non-appealable order of relief under Chapter 7 of the
United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the General Partner; or
(vi) (A) in the event the General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the General
Partner, or 90 days expire after the date of notice to the General Partner
of revocation of its charter without a reinstatement of its charter, under
the laws of its state of incorporation; (B) in the event the General
Partner is a partnership or a limited liability company, the dissolution
and commencement of winding up of the General Partner; (C) in the event the
General Partner is acting in such capacity by virtue of being a trustee of
a trust, the termination of the trust; (D) in the event the General Partner
is a natural person, his death or adjudication of incompetency; and (E)
otherwise in the event of the termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), Section 11.1(a)(v),
or Section 11.1(a)(vi)(A), Section 11.1(a)(vi)(B), Section 11.1(a)(vi)(C) or
Section 11.1(a)(vi)(E) occurs, the withdrawing General Partner shall give notice
to the Limited Partners within 30 days after such occurrence. The Partners
hereby agree that only the Events of Withdrawal described in this Section 11.1
shall result in the withdrawal of the General Partner from the Partnership.
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(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:01 a.m., Eastern Standard Time,
on the first day of the first Quarter beginning after the tenth anniversary of
the Closing Date, the General Partner voluntarily withdraws by giving at least
90 days' advance notice of its intention to withdraw to the Limited Partners;
provided, that prior to the effective date of such withdrawal, the withdrawal is
approved by Unitholders holding at least a majority of the Outstanding Common
Units (excluding Common Units held by the General Partner and its Affiliates)
and the General Partner delivers to the Partnership an Opinion of Counsel
("Withdrawal Opinion of Counsel") that such withdrawal (following the selection
of the successor General Partner) would not result in the loss of the limited
liability of any Limited Partner or any Group Member or cause any Group Member
to be treated as an association taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes (to the extent not already so
treated or taxed); (ii) at any time after 12:01 a.m., Eastern Standard Time, on
the first day of the first Quarter beginning after the tenth anniversary of the
Closing Date, the General Partner voluntarily withdraws by giving at least 90
days' advance notice to the Unitholders, such withdrawal to take effect on the
date specified in such notice; (iii) at any time that the General Partner ceases
to be the General Partner pursuant to Section 11.1(a)(ii) or is removed pursuant
to Section 11.2; or (iv) notwithstanding clause (i) of this sentence, at any
time that the General Partner voluntarily withdraws by giving at least 90 days'
advance notice of its intention to withdraw to the Limited Partners, such
withdrawal to take effect on the date specified in the notice, if at the time
such notice is given one Person and its Affiliates (other than the General
Partner and its Affiliates) own beneficially or of record or control at least
50% of the Outstanding Units. The withdrawal of the General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall also constitute
the withdrawal of the General Partner as general partner or managing member, if
any, to the extent applicable, of the other Group Members. If the General
Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the holders
of a Unit Majority, may, prior to the effective date of such withdrawal, elect a
successor General Partner. The Person so elected as successor General Partner
shall automatically become the successor general partner or managing member, to
the extent applicable, of the other Group Members of which the General Partner
is a general partner or a managing member. If, prior to the effective date of
the General Partner's withdrawal, a successor is not selected by the Unitholders
as provided herein or the Partnership does not receive a Withdrawal Opinion of
Counsel, the Partnership shall be dissolved in accordance with Section 12.1. Any
successor General Partner elected in accordance with the terms of this Section
11.1 shall be subject to the provisions of Section 10.3.
Section 11.2 Removal of the General Partner. The General Partner may be
removed if such removal is approved by the Unitholders holding at least 66 2/3%
of the Outstanding Units (including Units held by the General Partner and its
Affiliates) voting as a single class. Any such action by such holders for
removal of the General Partner must also provide for the election of a successor
General Partner by the Unitholders holding a majority of the Outstanding Common
Units and Class C Units, if any, voting as a single class, and a majority of the
Outstanding Subordinated Units voting as a single class (including, in each
case, Units held by the General Partner and its Affiliates). Such removal shall
be effective immediately following the admission of a successor General Partner
pursuant to Section 10.3. The removal of the General Partner shall also
automatically constitute the removal of the General Partner as general partner
or
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managing member, to the extent applicable, of the other Group Members of which
the General Partner is a general partner or a managing member. If a Person is
elected as a successor General Partner in accordance with the terms of this
Section 11.2, such Person shall, upon admission pursuant to Section 10.3,
automatically become a successor general partner or managing member, to the
extent applicable, of the other Group Members of which the General Partner is a
general partner or a managing member. The right of the holders of Outstanding
Units to remove the General Partner shall not exist or be exercised unless the
Partnership has received an opinion of counsel opining as to the matters covered
by a Withdrawal Opinion of Counsel. Any successor General Partner elected in
accordance with the terms of this Section 11.2 shall be subject to the
provisions of Section 10.3.
Section 11.3 Interest of Departing General Partner and Successor General
Partner.
(a) In the event of (i) withdrawal of the General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of the General Partner by the holders of Outstanding Units under
circumstances where Cause does not exist, if the successor General Partner is
elected in accordance with the terms of Section 11.1 or Section 11.2, the
Departing General Partner shall have the option, exercisable prior to the
effective date of the departure of such Departing General Partner, to require
its successor to purchase its General Partner Interest and its general partner
interest (or equivalent interest), if any, in the other Group Members and all of
its Incentive Distribution Rights (collectively, the "Combined Interest") in
exchange for an amount in cash equal to the fair market value of such Combined
Interest, such amount to be determined and payable as of the effective date of
its departure. If the General Partner is removed by the Unitholders under
circumstances where Cause exists or if the General Partner withdraws under
circumstances where such withdrawal violates this Agreement, and if a successor
General Partner is elected in accordance with the terms of Section 11.1 or
Section 11.2 (or if the business of the Partnership is continued pursuant to
Section 12.2 and the successor General Partner is not the former General
Partner), such successor shall have the option, exercisable prior to the
effective date of the departure of such Departing General Partner (or, in the
event the business of the Partnership is continued, prior to the date the
business of the Partnership is continued), to purchase the Combined Interest for
such fair market value of such Combined Interest of the Departing General
Partner. In either event, the Departing General Partner shall be entitled to
receive all reimbursements due such Departing General Partner pursuant to
Section 7.4, including any employee-related liabilities (including severance
liabilities), incurred in connection with the termination of any employees
employed by the Departing General Partner or its Affiliates (other than any
Group Member) for the benefit of the Partnership or the other Group Members.
For purposes of this Section 11.3(a), the fair market value of the
Departing General Partner's Combined Interest shall be determined by agreement
between the Departing General Partner and its successor or, failing agreement
within 30 days after the effective date of such Departing General Partner's
departure, by an independent investment banking firm or other independent expert
selected by the Departing General Partner and its successor, which, in turn, may
rely on other experts, and the determination of which shall be conclusive as to
such matter. If such parties cannot agree upon one independent investment
banking firm or other independent expert within 45 days after the effective date
of such departure, then the Departing General Partner shall designate an
independent investment banking firm or other independent expert, the
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Departing General Partner's successor shall designate an independent investment
banking firm or other independent expert, and such firms or experts shall
mutually select a third independent investment banking firm or independent
expert, which third independent investment banking firm or other independent
expert shall determine the fair market value of the Combined Interest of the
Departing General Partner. In making its determination, such third independent
investment banking firm or other independent expert may consider the then
current trading price of Units on any National Securities Exchange on which
Units are then listed or admitted to trading, the value of the Partnership's
assets, the rights and obligations of the Departing General Partner and other
factors it may deem relevant.
(b) If the Combined Interest is not purchased in the manner set forth in
Section 11.3(a), the Departing General Partner (or its transferee) shall become
a Limited Partner and its Combined Interest shall be converted into Common Units
pursuant to a valuation made by an investment banking firm or other independent
expert selected pursuant to Section 11.3(a), without reduction in such
Partnership Interest (but subject to proportionate dilution by reason of the
admission of its successor). Any successor General Partner shall indemnify the
Departing General Partner (or its transferee) as to all debts and liabilities of
the Partnership arising on or after the date on which the Departing General
Partner (or its transferee) becomes a Limited Partner. For purposes of this
Agreement, conversion of the Combined Interest of the Departing General Partner
to Common Units will be characterized as if the Departing General Partner (or
its transferee) contributed its Combined Interest to the Partnership in exchange
for the newly issued Common Units.
(c) If a successor General Partner is elected in accordance with the terms
of Section 11.1 or Section 11.2 (or if the business of the Partnership is
continued pursuant to Section 12.2 and the successor General Partner is not the
former General Partner) and the option described in Section 11.3(a) is not
exercised by the party entitled to do so, the successor General Partner shall,
at the effective date of its admission to the Partnership, contribute to the
Partnership cash in the amount equal to the product of the Percentage Interest
of the Departing General Partner and the Net Agreed Value of the Partnership's
assets on such date. In such event, such successor General Partner shall,
subject to the following sentence, be entitled to its Percentage Interest of all
Partnership allocations and distributions to which the Departing General Partner
was entitled. In addition, the successor General Partner shall cause this
Agreement to be amended to reflect that, from and after the date of such
successor General Partner's admission, the successor General Partner's interest
in all Partnership distributions and allocations shall be its Percentage
Interest.
Section 11.4 Termination of Subordination Period, Conversion of
Subordinated Units and Extinguishment of Cumulative Common Unit Arrearages.
Notwithstanding any provision of this Agreement, if the General Partner is
removed as general partner of the Partnership under circumstances where Cause
does not exist and Units held by the General Partner and its Affiliates are not
voted in favor of such removal, (i) the Subordination Period will end and all
Outstanding Subordinated Units will immediately and automatically convert into
Common Units on a one-for-one basis, (ii) all Cumulative Common Unit Arrearages
on the Common Units will be extinguished and (iii) the General Partner will have
the right to convert its General Partner Interest (represented by General
Partner Units) and its Incentive Distribution Rights into Common Units or to
receive cash in exchange therefor in accordance with Section 11.3.
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Section 11.5 Withdrawal of Limited Partners. No Limited Partner shall have
any right to withdraw from the Partnership; provided, however, that when a
transferee of a Limited Partner's Limited Partner Interest becomes a Record
Holder of the Limited Partner Interest so transferred, such transferring Limited
Partner shall cease to be a Limited Partner with respect to the Limited Partner
Interest so transferred.
ARTICLE XII.
Dissolution and Liquidation
Section 12.1 Dissolution. The Partnership shall not be dissolved by the
admission of additional Limited Partners or by the admission of a successor
General Partner in accordance with the terms of this Agreement. Upon the removal
or withdrawal of the General Partner, if a successor General Partner is elected
pursuant to Section 11.1 or Section 11.2, the Partnership shall not be dissolved
and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) an Event of Withdrawal of the General Partner as provided in Section
11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected and an
Opinion of Counsel is received as provided in Section 11.1(b) or Section 11.2
and such successor is admitted to the Partnership pursuant to Section 10.3;
(b) an election to dissolve the Partnership by the General Partner that is
approved by the holders of a Unit Majority;
(c) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(d) at any time there are no Limited Partners, unless the Partnership is
continued without dissolution in accordance with the Delaware Act.
Section 12.2 Continuation of the Business of the Partnership After
Dissolution. Upon (a) dissolution of the Partnership following an Event of
Withdrawal caused by the withdrawal or removal of the General Partner as
provided in Section 11.1(a)(i) or Section 11.1(a)(iii) and the failure of the
Partners to select a successor to such Departing General Partner pursuant to
Section 11.1 or Section 11.2, then within 90 days thereafter, or (b) dissolution
of the Partnership upon an event constituting an Event of Withdrawal as defined
in Section 11.1(a)(iv), Section 11.1(a)(v) or Section 11.1(a)(vi), then, to the
maximum extent permitted by law, within 180 days thereafter, the holders of a
Unit Majority may elect to continue the business of the Partnership on the same
terms and conditions set forth in this Agreement by appointing as a successor
General Partner a Person approved by the holders of a Unit Majority. Unless such
an election is made within the applicable time period as set forth above, the
Partnership shall conduct only activities necessary to wind up its affairs. If
such an election is so made, then:
(i) the Partnership shall continue without dissolution unless earlier
dissolved in accordance with this Article XII;
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(ii) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be treated
in the manner provided in Section 11.3; and
(iii) the successor General Partner shall be admitted to the
Partnership as General Partner, effective as of the Event of Withdrawal, by
agreeing in writing to be bound by this Agreement; provided, that the right
of the holders of a Unit Majority to approve a successor General Partner
and to continue the business of the Partnership shall not exist and may not
be exercised unless the Partnership has received an Opinion of Counsel that
(x) the exercise of the right would not result in the loss of limited
liability of any Limited Partner and (y) neither the Partnership nor any
Group Member would be treated as an association taxable as a corporation or
otherwise be taxable as an entity for federal income tax purposes upon the
exercise of such right to continue (to the extent not already so treated or
taxed).
Section 12.3 Liquidator. Upon dissolution of the Partnership, unless the
business of the Partnership is continued pursuant to Section 12.2, the General
Partner shall select one or more Persons to act as Liquidator. The Liquidator
(if other than the General Partner) shall be entitled to receive such
compensation for its services as may be approved by holders of at least a
majority of the Outstanding Common Units and Subordinated Units voting as a
single class. The Liquidator (if other than the General Partner) shall agree not
to resign at any time without 15 days' prior notice and may be removed at any
time, with or without cause, by notice of removal approved by holders of at
least a majority of the Outstanding Common Units, Class C Units (if any), and
Subordinated Units voting as a single class. Upon dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall
have and succeed to all rights, powers and duties of the original Liquidator)
shall within 30 days thereafter be approved by holders of at least a majority of
the Outstanding Common Units, Class C Units (if any), and Subordinated Units
voting as a single class. The right to approve a successor or substitute
Liquidator in the manner provided herein shall be deemed to refer also to any
such successor or substitute Liquidator approved in the manner herein provided.
Except as expressly provided in this Article XII, the Liquidator approved in the
manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto, all of the powers
conferred upon the General Partner under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sale set forth in
Section 7.3) necessary or appropriate to carry out the duties and functions of
the Liquidator hereunder for and during the period of time required to complete
the winding up and liquidation of the Partnership as provided for herein.
Section 12.4 Liquidation. The Liquidator shall proceed to dispose of the
assets of the Partnership, discharge its liabilities, and otherwise wind up its
affairs in such manner and over such period as determined by the Liquidator,
subject to Section 17-804 of the Delaware Act and the following:
(a) The assets may be disposed of by public or private sale or by
distribution in kind to one or more Partners on such terms as the Liquidator and
such Partner or Partners may agree. If any property is distributed in kind, the
Partner receiving the property shall be deemed for purposes of Section 12.4(c)
to have received cash equal to its fair market value; and
87
contemporaneously therewith, appropriate cash distributions must be made to the
other Partners. The Liquidator may defer liquidation or distribution of the
Partnership's assets for a reasonable time if it determines that an immediate
sale or distribution of all or some of the Partnership's assets would be
impractical or would cause undue loss to the Partners. The Liquidator may
distribute the Partnership's assets, in whole or in part, in kind if it
determines that a sale would be impractical or would cause undue loss to the
Partners.
(b) Liabilities of the Partnership include amounts owed to the Liquidator
as compensation for serving in such capacity (subject to the terms of Section
12.3) and amounts to Partners otherwise than in respect of their distribution
rights under Article VI. With respect to any liability that is contingent,
conditional or unmatured or is otherwise not yet due and payable, the Liquidator
shall either settle such claim for such amount as it thinks appropriate or
establish a reserve of cash or other assets to provide for its payment. When
paid, any unused portion of the reserve shall be distributed as additional
liquidation proceeds.
(c) Except as provided in Section 6.4(c), all property and all cash in
excess of that required to discharge liabilities as provided in Section 12.4(b)
shall be distributed to the Partners in accordance with, and to the extent of,
the positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).
Section 12.5 ....Cancellation of Certificate of Limited Partnership. Upon the
completion of the distribution of Partnership cash and property as provided in
Section 12.4 in connection with the liquidation of the Partnership, the
Certificate of Limited Partnership and all qualifications of the Partnership as
a foreign limited partnership shall be canceled and such other actions as may be
necessary to terminate the Partnership shall be taken.
Section 12.6 Return of Contributions. The General Partner shall not be
personally liable for, and shall have no obligation to contribute or loan any
monies or property to the Partnership to enable it to effectuate, the return of
the Capital Contributions of the Limited Partners or Unitholders, or any portion
thereof, it being expressly understood that any such return shall be made solely
from Partnership assets.
Section 12.7 Waiver of Partition. To the maximum extent permitted by law,
each Partner hereby waives any right to partition of the Partnership property.
Section 12.8 Capital Account Restoration. No Limited Partner shall have any
obligation to restore any negative balance in its Capital Account upon
liquidation of the Partnership. The General Partner shall be obligated to
restore any negative balance in its Capital Account upon liquidation of its
interest in the Partnership by the end of the taxable year of the Partnership
during which such liquidation occurs, or, if later, within 90 days after the
date of such liquidation.
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ARTICLE XIII.
Amendment of Partnership Agreement;
Meetings; Record Date
Section 13.1 Amendments to be Adopted Solely by the General Partner. Each
Partner agrees that the General Partner, without the approval of any Partner,
may amend any provision of this Agreement and execute, swear to, acknowledge,
deliver, file and record whatever documents may be required in connection
therewith, to reflect:
(a) a change in the name of the Partnership, the location of the principal
place of business of the Partnership, the registered agent of the Partnership or
the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that the General Partner determines to be necessary or
appropriate to qualify or continue the qualification of the Partnership as a
limited partnership or a partnership in which the Limited Partners have limited
liability under the laws of any state or to ensure that the Group Members will
not be treated as associations taxable as corporations or otherwise taxed as
entities for federal income tax purposes;
(d) a change that the General Partner determines, (i) does not adversely
affect the Limited Partners (including any particular class of Partnership
Interests as compared to other classes of Partnership Interests) in any material
respect, (ii) to be necessary or appropriate to (A) satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order, ruling or
regulation of any federal or state agency or judicial authority or contained in
any federal or state statute (including the Delaware Act) or (B) facilitate the
trading of the Units (including the division of any class or classes of
Outstanding Units into different classes to facilitate uniformity of tax
consequences within such classes of Units) or comply with any rule, regulation,
guideline or requirement of any National Securities Exchange on which the Units
are or will be listed or admitted to trading, (iii) to be necessary or
appropriate in connection with action taken by the General Partner pursuant to
Section 5.10 or (iv) is required to effect the intent expressed in the Purchase
Agreement, this Agreement or the registration statement for the Initial Public
Offering or is otherwise contemplated by this Agreement; provided, however, that
with respect to clause (i) above, prior to the Initial Public Offering, the
Investor Representatives must consent to such amendment;
(e) a change in the fiscal year or taxable year of the Partnership and any
other changes that the General Partner determines to be necessary or appropriate
as a result of a change in the fiscal year or taxable year of the Partnership
including, if the General Partner shall so determine, a change in the definition
of "Quarter" and the dates on which distributions are to be made by the
Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to prevent
the Partnership, or the General Partner or its directors, officers, trustees or
agents from in any manner being subjected to the provisions of the Investment
Company Act of 1940, as amended,
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the Investment Advisers Act of 1940, as amended, or "plan asset" regulations
adopted under the Employee Retirement Income Security Act of 1974, as amended,
regardless of whether such are substantially similar to plan asset regulations
currently applied or proposed by the United States Department of Labor;
(g) an amendment that the General Partner determines to be necessary or
appropriate in connection with the authorization of issuance of any class or
series of Partnership Securities pursuant to Section 5.6, including any
amendment that the General Partner determines is necessary or appropriate in
connection with (i) the adjustments of the Minimum Quarterly Distribution, First
Target Distribution, Second Target Distribution and Third Target Distribution
pursuant to the provisions of Section 5.12, (ii) the implementation of the
provisions of Section 5.12 or (iii) any modifications to the Incentive
Distribution Rights made in connection with the issuance of Partnership
Securities pursuant to Section 5.6, provided that, with respect to this clause
(iii), the modifications to the Incentive Distribution Rights and the related
issuance of Partnership Securities have received Special Approval;
(h) any amendment expressly permitted in this Agreement to be made by the
General Partner acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that the General Partner determines to be necessary or
appropriate to reflect and account for the formation by the Partnership of, or
investment by the Partnership in, any corporation, partnership, joint venture,
limited liability company or other entity, in connection with the conduct by the
Partnership of activities permitted by the terms of Section 2.4;
(k) merger, conveyance or conversion pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
Section 13.2 Amendment Procedures. Except as provided in Section 13.1 and
Section 13.3, all amendments to this Agreement shall be made in accordance with
the following requirements. Amendments to this Agreement may be proposed only by
the General Partner; provided, however, that the General Partner shall have no
duty or obligation to propose any amendment to this Agreement and may decline to
do so free of any fiduciary duty or obligation whatsoever to the Partnership or
any Limited Partner and, in declining to propose an amendment, to the fullest
extent permitted by law shall not be required to act in good faith or pursuant
to any other standard imposed by this Agreement, any Group Member Agreement, any
other agreement contemplated hereby or under the Delaware Act or any other law,
rule or regulation or at equity. A proposed amendment shall be effective upon
its approval by the General Partner and the holders of a Unit Majority, unless a
greater or different percentage is required under this Agreement or by Delaware
law. Each proposed amendment that requires the approval of the holders of a
specified percentage of Outstanding Units shall be set forth in a writing that
contains the text of the proposed amendment. If such an amendment is proposed,
the General Partner shall seek the written approval of the requisite percentage
of Outstanding Units or call a meeting of
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the Unitholders to consider and vote on such proposed amendment. The General
Partner shall notify all Record Holders upon final adoption of any such proposed
amendments.
Section 13.3 Amendment Requirements.
(a) Notwithstanding the provisions of Section 13.1 and Section 13.2, no
provision of this Agreement that establishes a percentage of Outstanding Units
(including Units deemed owned by the General Partner) required to take any
action shall be amended, altered, changed, repealed or rescinded in any respect
that would have the effect of reducing such voting percentage unless such
amendment is approved by the written consent or the affirmative vote of holders
of Outstanding Units whose aggregate Outstanding Units constitute not less than
the voting requirement sought to be reduced.
(b) Notwithstanding the provisions of Section 13.1 and Section 13.2, no
amendment to this Agreement may (i) enlarge the obligations of any Limited
Partner without its consent, unless such shall be deemed to have occurred as a
result of an amendment approved pursuant to Section 13.3(c), or (ii) enlarge the
obligations of, restrict in any way any action by or rights of, or reduce in any
way the amounts distributable, reimbursable or otherwise payable to, the General
Partner or any of its Affiliates without its consent, which consent may be given
or withheld at its option.
(c) Except as provided in Section 14.3, and without limiting the General
Partner's authority to adopt amendments to this Agreement without the approval
of any Partners or assignees as contemplated in Section 13.1, any amendment that
would have a material adverse effect on the rights or preferences of any class
of Partnership Interests in relation to other classes of Partnership Interests
must be approved by the holders of not less than a majority of the Outstanding
Partnership Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 13.1 and except as otherwise provided by Section
14.3(b), no amendments shall become effective without the approval of the
holders of at least 90% of the Outstanding Units voting as a single class unless
the Partnership obtains an Opinion of Counsel to the effect that such amendment
will not affect the limited liability of any Limited Partner under applicable
partnership law of the state under whose laws the Partnership is organized.
(e) Except as provided in Section 13.1, this Section 13.3 shall only be
amended with the approval of the holders of at least 90% of the Outstanding
Units.
Section 13.4 Special Meetings. All acts of Limited Partners to be taken
pursuant to this Agreement shall be taken in the manner provided in this Article
XIII. Special meetings of the Limited Partners may be called by the General
Partner or by Limited Partners owning 20% or more of the Outstanding Units of
the class or classes for which a meeting is proposed. Limited Partners shall
call a special meeting by delivering to the General Partner one or more requests
in writing stating that the signing Limited Partners wish to call a special
meeting and indicating the general or specific purposes for which the special
meeting is to be called. Within 60 days after receipt of such a call from
Limited Partners or within such greater time as may be reasonably necessary for
the Partnership to comply with any statutes, rules, regulations, listing
agreements
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or similar requirements governing the holding of a meeting or the solicitation
of proxies for use at such a meeting, the General Partner shall send a notice of
the meeting to the Limited Partners either directly or indirectly through the
Transfer Agent. A meeting shall be held at a time and place determined by the
General Partner on a date not less than 10 days nor more than 60 days after the
mailing of notice of the meeting. Limited Partners shall not vote on matters
that would cause the Limited Partners to be deemed to be taking part in the
management and control of the business and affairs of the Partnership so as to
jeopardize the Limited Partners' limited liability under the Delaware Act or the
law of any other state in which the Partnership is qualified to do business.
Section 13.5 Notice of a Meeting. Notice of a meeting called pursuant to
Section 13.4 shall be given to the Record Holders of the class or classes of
Units for which a meeting is proposed in writing by mail or other means of
written communication in accordance with Section 16.1. The notice shall be
deemed to have been given at the time when deposited in the mail or sent by
other means of written communication.
Section 13.6 Record Date. For purposes of determining the Limited Partners
entitled to notice of or to vote at a meeting of the Limited Partners or to give
approvals without a meeting as provided in Section 13.11, the General Partner
may set a Record Date, which shall not be less than 10 nor more than 60 days
before (a) the date of the meeting (unless such requirement conflicts with any
rule, regulation, guideline or requirement of any National Securities Exchange
on which the Units are listed or admitted to trading, in which case the rule,
regulation, guideline or requirement of such National Securities Exchange shall
govern) or (b) in the event that approvals are sought without a meeting, the
date by which Limited Partners are requested in writing by the General Partner
to give such approvals. If the General Partner does not set a Record Date, then
(a) the Record Date for determining the Limited Partners entitled to notice of
or to vote at a meeting of the Limited Partners shall be the close of business
on the day next preceding the day on which notice is given, and (b) the Record
Date for determining the Limited Partners entitled to give approvals without a
meeting shall be the date the first written approval is deposited with the
Partnership in care of the General Partner in accordance with Section 13.11.
Section 13.7 Adjournment. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting and a new Record Date
need not be fixed, if the time and place thereof are announced at the meeting at
which the adjournment is taken, unless such adjournment shall be for more than
45 days. At the adjourned meeting, the Partnership may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than 45 days or if a new Record Date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given in accordance with
this Article XIII.
Section 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and noticed,
and whenever held, shall be as valid as if it had occurred at a meeting duly
held after regular call and notice, if a quorum is present either in person or
by proxy, and if, either before or after the meeting, Limited Partners
representing such quorum who were present in person or by proxy and entitled to
vote, sign a written waiver of notice or an approval of the holding of the
meeting or an approval of the minutes thereof. All waivers and approvals shall
be filed with the Partnership records or made a part of the minutes of the
meeting. Attendance of a Limited Partner at a meeting shall constitute
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a waiver of notice of the meeting, except when the Limited Partner attends the
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened; and except that attendance at a meeting is not a waiver of any right
to disapprove the consideration of matters required to be included in the notice
of the meeting, but not so included, if the disapproval is expressly made at the
meeting.
Section 13.9 Quorum and Voting. The holders of a majority of the
Outstanding Units of the class or classes for which a meeting has been called
(including Outstanding Units deemed owned by the General Partner) represented in
person or by proxy shall constitute a quorum at a meeting of Limited Partners of
such class or classes unless any such action by the Limited Partners requires
approval by holders of a greater percentage of such Units, in which case the
quorum shall be such greater percentage. At any meeting of the Limited Partners
duly called and held in accordance with this Agreement at which a quorum is
present, the act of Limited Partners holding Outstanding Units that in the
aggregate represent a majority of the Outstanding Units entitled to vote and be
present in person or by proxy at such meeting shall be deemed to constitute the
act of all Limited Partners, unless a greater or different percentage is
required with respect to such action under the provisions of this Agreement, in
which case the act of the Limited Partners holding Outstanding Units that in the
aggregate represent at least such greater or different percentage shall be
required. The Limited Partners present at a duly called or held meeting at which
a quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Limited Partners to leave less than a
quorum, if any action taken (other than adjournment) is approved by the required
percentage of Outstanding Units specified in this Agreement (including
Outstanding Units deemed owned by the General Partner). In the absence of a
quorum any meeting of Limited Partners may be adjourned from time to time by the
affirmative vote of holders of at least a majority of the Outstanding Units
entitled to vote at such meeting (including Outstanding Units deemed owned by
the General Partner) represented either in person or by proxy, but no other
business may be transacted, except as provided in Section 13.7.
Section 13.10 Conduct of a Meeting. The General Partner shall have full
power and authority concerning the manner of conducting any meeting of the
Limited Partners or solicitation of approvals in writing, including the
determination of Persons entitled to vote, the existence of a quorum, the
satisfaction of the requirements of Section 13.4, the conduct of voting, the
validity and effect of any proxies and the determination of any controversies,
votes or challenges arising in connection with or during the meeting or voting.
The General Partner shall designate a Person to serve as chairman of any meeting
and shall further designate a Person to take the minutes of any meeting. All
minutes shall be kept with the records of the Partnership maintained by the
General Partner. The General Partner may make such other regulations consistent
with applicable law and this Agreement as it may deem advisable concerning the
conduct of any meeting of the Limited Partners or solicitation of approvals in
writing, including regulations in regard to the appointment of proxies, the
appointment and duties of inspectors of votes and approvals, the submission and
examination of proxies and other evidence of the right to vote, and the
revocation of approvals in writing.
Section 13.11 Action Without a Meeting. If authorized by the General
Partner, any action that may be taken at a meeting of the Limited Partners may
be taken without a meeting if
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an approval in writing setting forth the action so taken is signed by Limited
Partners owning not less than the minimum percentage of the Outstanding Units
(including Units deemed owned by the General Partner) that would be necessary to
authorize or take such action at a meeting at which all the Limited Partners
were present and voted (unless such provision conflicts with any rule,
regulation, guideline or requirement of any National Securities Exchange on
which the Units are listed or admitted to trading, in which case the rule,
regulation, guideline or requirement of such National Securities Exchange shall
govern). Prompt notice of the taking of action without a meeting shall be given
to the Limited Partners who have not approved such action in writing. The
General Partner may specify that any written ballot submitted to Limited
Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within the time period, which shall be not less than
20 days, specified by the General Partner. If a ballot returned to the
Partnership does not vote all of the Units held by the Limited Partners, the
Partnership shall be deemed to have failed to receive a ballot for the Units
that were not voted. If approval of the taking of any action by the Limited
Partners is solicited by any Person other than by or on behalf of the General
Partner, the written approvals shall have no force and effect unless and until
(a) they are deposited with the Partnership in care of the General Partner, (b)
approvals sufficient to take the action proposed are dated as of a date not more
than 90 days prior to the date sufficient approvals are deposited with the
Partnership and (c) an Opinion of Counsel is delivered to the General Partner to
the effect that the exercise of such right and the action proposed to be taken
with respect to any particular matter (i) will not cause the Limited Partners to
be deemed to be taking part in the management and control of the business and
affairs of the Partnership so as to jeopardize the Limited Partners' limited
liability, and (ii) is otherwise permissible under the state statutes then
governing the rights, duties and liabilities of the Partnership and the
Partners.
Section 13.12 Right to Vote and Related Matters.
(a) Only those Record Holders of the Units on the Record Date set pursuant
to Section 13.6 (and also subject to the limitations contained in the definition
of "Outstanding") shall be entitled to notice of, and to vote at, a meeting of
Limited Partners or to act with respect to matters as to which the holders of
the Outstanding Units have the right to vote or to act. All references in this
Agreement to votes of, or other acts that may be taken by, the Outstanding Units
shall be deemed to be references to the votes or acts of the Record Holders of
such Outstanding Units.
(b) With respect to Units that are held for a Person's account by another
Person (such as a broker, dealer, bank, trust company or clearing corporation,
or an agent of any of the foregoing), in whose name such Units are registered,
such other Person shall, in exercising the voting rights in respect of such
Units on any matter, and unless the arrangement between such Persons provides
otherwise, vote such Units in favor of, and at the direction of, the Person who
is the beneficial owner, and the Partnership shall be entitled to assume it is
so acting without further inquiry. The provisions of this Section 13.12(b) (as
well as all other provisions of this Agreement) are subject to the provisions of
Section 4.3.
ARTICLE XIV.
Merger, Consolidation or Conversion
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Section 14.1 Authority. The Partnership may merge or consolidate with or
into one or more corporations, limited liability companies, statutory trusts or
associations, real estate investment trusts, common law trusts or unincorporated
businesses, including a partnership (whether general or limited (including a
limited liability partnership)) or convert into any such entity, whether such
entity is formed under the laws of the State of Delaware or any other state of
the United States of America, pursuant to a written plan of merger or
consolidation ("Merger Agreement") or a written plan of conversion ("Plan of
Conversion"), as the case may be, in accordance with this Article XIV.
Section 14.2 Procedure for Merger, Consolidation or Conversion.
(a) Except as provided in the Investors' Rights Agreement, Merger,
consolidation or conversion of the Partnership pursuant to this Article XIV
requires the prior consent of the General Partner, provided, however, that, to
the fullest extent permitted by law, the General Partner shall have no duty or
obligation to consent to any merger, consolidation or conversion of the
Partnership and may decline to do so free of any fiduciary duty or obligation
whatsoever to the Partnership, or any Limited Partner and, in declining to
consent to a merger, consolidation or conversion, shall not be required to act
in good faith or pursuant to any other standard imposed by this Agreement, any
other agreement contemplated hereby or under the Delaware Act or any other law,
rule or regulation or at equity.
(b) If the General Partner shall determine to consent to the merger or
consolidation, the General partner shall approve the Merger Agreement, which
shall set forth:
(i) name and state of domicile of each of the business entities
proposing to merge or consolidate;
(ii) the name and state of domicile of the business entity that is to
survive the proposed merger or consolidation (the "Surviving Business
Entity");
(iii) the terms and conditions of the proposed merger or
consolidation;
(iv) the manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property
or interests, rights, securities or obligations of the Surviving Business
Entity; and (A) if any general or limited partner interests, securities or
rights of any constituent business entity are not to be exchanged or
converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business
Entity, the cash, property or interests, rights, securities or obligations
of any general or limited partnership, corporation, trust, limited
liability company, unincorporated business or other entity (other than the
Surviving Business Entity) which the holders of such general or limited
partner interests, securities or rights are to receive in exchange for, or
upon conversion of their interests, securities or rights, and (B) in the
case of securities represented by certificates, upon the surrender of such
certificates, which cash, property or general or limited partner interests,
rights, securities or obligations of the Surviving Business Entity or any
general or limited partnership, corporation, trust, limited liability
company, unincorporated business or
95
other entity (other than the Surviving Business Entity), or evidences
thereof, are to be delivered;
(v) a statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or
agreement of limited partnership, operating agreement or other similar
charter or governing document) of the Surviving Business Entity to be
effected by such merger or consolidation;
(vi) the effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later
date specified in or determinable in accordance with the Merger Agreement
(provided, that if the effective time of the merger is to be later than the
date of the filing of such certificate of merger, the effective time shall
be fixed at a date or time certain at or prior to the time of the filing of
such certificate of merger and stated therein); and
(vii) such other provisions with respect to the proposed merger or
consolidation that the General Partner determines to be necessary or
appropriate.
(c) If the General Partner shall determine to consent to the conversion,
the General Partner shall approve the Plan of Conversion, which shall set forth:
(i) the name of the converting entity and the converted entity;
(ii) a statement that the Partnership is continuing its existence in
the organizational form of the converted entity;
(iii) a statement as to the type of entity that the converted entity
is to be and the state or country under the laws of which the converted
entity is to be incorporated, formed or organized;
(iv) the manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property
or interests, rights, securities or obligations of the converted entity;
(v) in an attachment or exhibit, the certificate of limited
partnership of the Partnership; and
(vi) in an attachment or exhibit, the certificate of limited
partnership, articles of incorporation, or other organizational documents
of the converted entity;
(vii) the effective time of the conversion, which may be the date of
the filing of the articles of conversion or a later date specified in or
determinable in accordance with the Plan of Conversion (provided, that if
the effective time of the conversion is to be later than the date of the
filing of such articles of conversion, the effective time shall be fixed at
a date or time certain at or prior to the time of the filing of such
articles of conversion and stated therein); and
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(viii) such other provisions with respect to the proposed conversion
that the General Partner determines to be necessary or appropriate.
Section 14.3 Approval by Limited Partners.
(a) Except as provided in Section 14.3(d), the General Partner, upon its
approval of the Merger Agreement or the Plan of Conversion, as the case may be,
shall direct that the Merger Agreement or the Plan of Conversion, as applicable,
be submitted to a vote of Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement or the Plan of Conversion, as
the case may be, shall be included in or enclosed with the notice of a special
meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement or Plan of
Conversion, as the case may be, shall be approved upon receiving the affirmative
vote or consent of the holders of a Unit Majority.
(c) Except as provided in Section 14.3(d), after such approval by vote or
consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger or articles of conversion pursuant to Section 14.4, the
merger, consolidation or conversion may be abandoned pursuant to provisions
therefor, if any, set forth in the Merger Agreement or Plan of Conversion, as
the case may be.
(d) Notwithstanding anything else contained in this Article XIV or in this
Agreement, the General Partner is permitted, without Limited Partner approval,
to convert the Partnership or any Group Member into a new limited liability
entity, to merge the Partnership or any Group Member into, or convey all of the
Partnership's assets to, another limited liability entity that shall be newly
formed and shall have no assets, liabilities or operations at the time of such
conversion, merger or conveyance other than those it receives from the
Partnership or other Group Member if (i) the General Partner has received an
Opinion of Counsel that the conversion, merger or conveyance, as the case may
be, would not result in the loss of the limited liability of any Limited Partner
or cause the Partnership to be treated as an association taxable as a
corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not previously treated or taxed as such), (ii) the sole
purpose of such conversion, merger, or conveyance is to effect a mere change in
the legal form of the Partnership into another limited liability entity and
(iii) the governing instruments of the new entity provide the Limited Partners
and the General Partner with the same rights and obligations as are herein
contained, except for any changes which the General Partner would be permitted
to make pursuant to Section 13.1.
(e) Additionally, notwithstanding anything else contained in this Article
XIV or in this Agreement and subject to the Investors' Rights Agreement, the
General Partner is permitted, without Limited Partner approval, to merge or
consolidate the Partnership with or into another entity if (A) the General
Partner has received an Opinion of Counsel that the merger or consolidation, as
the case may be, would not result in the loss of the limited liability of any
Limited Partner or cause the Partnership to be treated as an association taxable
as a corporation or otherwise to be taxed as an entity for federal income tax
purposes (to the extent not previously treated or taxed as such), (B) the merger
or consolidation would not result in an amendment to
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the Partnership Agreement, other than any amendments that could be adopted
pursuant to Section 13.1, (C) the Partnership is the Surviving Business Entity
in such merger or consolidation, (D) each Unit outstanding immediately prior to
the effective date of the merger or consolidation is to be an identical Unit of
the Partnership after the effective date of the merger or consolidation, and (E)
the number of Partnership Securities to be issued by the Partnership in such
merger or consolidation does not exceed 20% of the Partnership Securities
Outstanding immediately prior to the effective date of such merger or
consolidation.
(f) Pursuant to Section 17-211(g) of the Delaware Act, an agreement of
merger or consolidation approved in accordance with this Article XIV may (a)
effect any amendment to this Agreement or (b) effect the adoption of a new
partnership agreement for the Partnership if it is the Surviving Business
Entity. Any such amendment or adoption made pursuant to this Section 14.3 shall
be effective at the effective time or date of the merger or consolidation.
Section 14.4 Certificate of Merger. Upon the required approval by the
General Partner and the Unitholders of a Merger Agreement or Plan of Conversion,
as the case may be, a certificate of merger or articles of conversion, as
applicable, shall be executed and filed with the Secretary of State of the State
of Delaware in conformity with the requirements of the Delaware Act.
Section 14.5 Effect of Merger, Consolidation or Conversion.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities, shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any
of those constituent business entities shall not revert and is not in any
way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests
in property of any of those constituent business entities shall be
preserved unimpaired; and
(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) At the effective time of the articles of conversion:
(i) the Partnership shall continue to exist, without interruption, but
in the organizational form of the converted entity rather than in its prior
organizational form;
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(ii) all rights, title, and interests to all real estate and other
property owned by the Partnership shall continue to be owned by the
converted entity in its new organizational form without reversion or
impairment, without further act or deed, and without any transfer or
assignment having occurred, but subject to any existing liens or other
encumbrances thereon;
(iii) all liabilities and obligations of the Partnership shall
continue to be liabilities and obligations of the converted entity in its
new organizational form without impairment or diminution by reason of the
conversion;
(iv) all rights of creditors or other parties with respect to or
against the prior interest holders or other owners of the Partnership in
their capacities as such in existence as of the effective time of the
conversion will continue in existence as to those liabilities and
obligations and may be pursued by such creditors and obligees as if the
conversion did not occur;
(v) a proceeding pending by or against the Partnership or by or
against any of Partners in their capacities as such may be continued by or
against the converted entity in its new organizational form and by or
against the prior partners without any need for substitution of parties;
and
(vi) the Partnership Units that are to be converted into partnership
interests, shares, evidences of ownership, or other securities in the
converted entity as provided in the Plan of Conversion shall be so
converted, and Partners shall be entitled only to the rights provided in
the Plan of Conversion.
ARTICLE XV.
Right to Acquire Limited Partner Interests
Section 15.1 Right to Acquire Limited Partner Interests.
(a) Notwithstanding any other provision of this Agreement, if at any time
the General Partner and its Affiliates hold more than 80% of the total Limited
Partner Interests of any class then Outstanding, the General Partner shall then
have the right, which right it may assign and transfer in whole or in part to
the Partnership or any Affiliate of the General Partner, exercisable at its
option, to purchase all, but not less than all, of such Limited Partner
Interests of such class then Outstanding held by Persons other than the General
Partner and its Affiliates, at the greater of (x) the Current Market Price as of
the date three days prior to the date that the notice described in Section
15.1(b) is mailed and (y) the highest price paid by the General Partner or any
of its Affiliates for any such Limited Partner Interest of such class purchased
during the 90-day period preceding the date that the notice described in Section
15.1(b) is mailed. As used in this Agreement, (i) "Current Market Price" as of
any date of any class of Limited Partner Interests means the average of the
daily Closing Prices (as hereinafter defined) per Limited Partner Interest of
such class for the 20 consecutive Trading Days (as hereinafter defined)
immediately prior to such date; (ii) "Closing Price" for any day means the last
sale price on such day, regular way, or in case no such sale takes place on such
day, the average of the closing bid and asked
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prices on such day, regular way, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
National Securities Exchange on which such Limited Partner Interests are listed
or admitted to trading or, if such Limited Partner Interests of such class are
not listed or admitted to trading on any National Securities Exchange, the last
quoted price on such day or, if not so quoted, the average of the high bid and
low asked prices on such day in the over-the-counter market, as reported by the
Nasdaq Stock Market or such other system then in use, or, if on any such day
such Limited Partner Interests of such class are not quoted by any such
organization, the average of the closing bid and asked prices on such day as
furnished by a professional market maker making a market in such Limited Partner
Interests of such class selected by the General Partner, or if on any such day
no market maker is making a market in such Limited Partner Interests of such
class, the fair value of such Limited Interests on such day as determined by the
General Partner; and (iii) "Trading Day" means a day on which the principal
National Securities Exchange on which such Limited Partner Interests of any
class are listed or admitted for trading is open for the transaction of business
or, if Limited Partner Interests of a class are not listed or admitted for
trading on any National Securities Exchange, a day on which banking institutions
in the City of New York, New York, generally are open.
(b) If the General Partner, any Affiliate of the General Partner or the
Partnership elects to exercise the right to purchase Limited Partner Interests
granted pursuant to Section 15.1(a), the General Partner shall deliver to the
Transfer Agent notice of such election to purchase (the "Notice of Election to
Purchase") and shall cause the Transfer Agent to mail a copy of such Notice of
Election to Purchase to the Record Holders of Limited Partner Interests of such
class (as of a Record Date selected by the General Partner) at least 10, but not
more than 60, days prior to the Purchase Date. Such Notice of Election to
Purchase shall also be published for a period of at least three consecutive days
in at least two daily newspapers of general circulation printed in the English
language and published in the Borough of Manhattan, New York. The Notice of
Election to Purchase shall specify the Purchase Date and the price (determined
in accordance with Section 15.1(a)) at which Limited Partner Interests will be
purchased and state that the General Partner, its Affiliate or the Partnership,
as the case may be, elects to purchase such Limited Partner Interests, upon
surrender of Certificates representing such Limited Partner Interests in
exchange for payment, at such office or offices of the Transfer Agent as the
Transfer Agent may specify, or as may be required by any National Securities
Exchange on which such Limited Partner Interests are listed. Any such Notice of
Election to Purchase mailed to a Record Holder of Limited Partner Interests at
his address as reflected in the records of the Transfer Agent shall be
conclusively presumed to have been given regardless of whether the owner
receives such notice. On or prior to the Purchase Date, the General Partner, its
Affiliate or the Partnership, as the case may be, shall deposit with the
Transfer Agent cash in an amount sufficient to pay the aggregate purchase price
of all of such Limited Partner Interests to be purchased in accordance with this
Section 15.1. If the Notice of Election to Purchase shall have been duly given
as aforesaid at least 10 days prior to the Purchase Date, and if on or prior to
the Purchase Date the deposit described in the preceding sentence has been made
for the benefit of the holders of Limited Partner Interests subject to purchase
as provided herein, then from and after the Purchase Date, notwithstanding that
any Certificate shall not have been surrendered for purchase, all rights of the
holders of such Limited Partner Interests (including any rights pursuant to
Article IV, Article V, Article VI, and Article XII) shall thereupon cease,
except the right to receive the purchase price (determined in accordance with
Section 15.1(a)) for Limited Partner
100
Interests therefor, without interest, upon surrender to the Transfer Agent of
the Certificates representing such Limited Partner Interests, and such Limited
Partner Interests shall thereupon be deemed to be transferred to the General
Partner, its Affiliate or the Partnership, as the case may be, on the record
books of the Transfer Agent and the Partnership, and the General Partner or any
Affiliate of the General Partner, or the Partnership, as the case may be, shall
be deemed to be the owner of all such Limited Partner Interests from and after
the Purchase Date and shall have all rights as the owner of such Limited Partner
Interests (including all rights as owner of such Limited Partner Interests
pursuant to Article IV, Article V, Article VI and Article XII).
(c) At any time from and after the Purchase Date, a holder of an
Outstanding Limited Partner Interest subject to purchase as provided in this
Section 15.1 may surrender his Certificate evidencing such Limited Partner
Interest to the Transfer Agent in exchange for payment of the amount described
in Section 15.1(a) therefor, without interest thereon.
ARTICLE XVI.
General Provisions
Section 16.1 Addresses and Notices. Any notice, demand, request, report or
proxy materials required or permitted to be given or made to a Partner under
this Agreement shall be in writing and shall be deemed given or made when
delivered in person or when sent by first class United States mail or by other
means of written communication to the Partner at the address described below.
Any notice, payment or report to be given or made to a Partner hereunder shall
be deemed conclusively to have been given or made, and the obligation to give
such notice or report or to make such payment shall be deemed conclusively to
have been fully satisfied, upon sending of such notice, payment or report to the
Record Holder of such Partnership Securities at his address as shown on the
records of the Transfer Agent or as otherwise shown on the records of the
Partnership, regardless of any claim of any Person who may have an interest in
such Partnership Securities by reason of any assignment or otherwise. An
affidavit or certificate of making of any notice, payment or report in
accordance with the provisions of this Section 16.1 executed by the General
Partner, the Transfer Agent or the mailing organization shall be prima facie
evidence of the giving or making of such notice, payment or report. If any
notice, payment or report addressed to a Record Holder at the address of such
Record Holder appearing on the books and records of the Transfer Agent or the
Partnership is returned by the United States Postal Service marked to indicate
that the United States Postal Service is unable to deliver it, such notice,
payment or report and any subsequent notices, payments and reports shall be
deemed to have been duly given or made without further mailing (until such time
as such Record Holder or another Person notifies the Transfer Agent or the
Partnership of a change in his address) if they are available for the Partner at
the principal office of the Partnership for a period of one year from the date
of the giving or making of such notice, payment or report to the other Partners.
Any notice to the Partnership shall be deemed given if received by the General
Partner at the principal office of the Partnership designated pursuant to
Section 2.3. The General Partner may rely and shall be protected in relying on
any notice or other document from a Partner or other Person if believed by it to
be genuine.
101
Section 16.2 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
Section 16.3 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives and permitted assigns.
Section 16.4 Integration. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements and understandings pertaining thereto.
Section 16.5 Creditors. None of the provisions of this Agreement shall be
for the benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 16.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach of any other covenant, duty, agreement or
condition.
Section 16.7 Third-Party Beneficiaries. Each Partner agrees that any
Indemnitee shall be entitled to assert rights and remedies hereunder as a
third-party beneficiary hereto with respect to those provisions of this
Agreement affording a right, benefit or privilege to such Indemnitee.
Section 16.8 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute an agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto or, in the case of a
Person acquiring a Limited Partner Interest, pursuant to Section 10.2(a) without
execution hereto.
Section 16.9 Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
Section 16.10 Invalidity of Provisions. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
Section 16.11 Consent of Partners. Each Partner hereby expressly consents
and agrees that, whenever in this Agreement it is specified that an action may
be taken upon the affirmative vote or consent of less than all of the Partners,
such action may be so taken upon the concurrence of less than all of the
Partners and each Partner shall be bound by the results of such action.
102
Section 16.12 Facsimile Signatures. The use of facsimile signatures affixed
in the name and on behalf of the transfer agent and registrar of the Partnership
on certificates representing Common Units is expressly permitted by this
Agreement.
Remainder of Page Intentionally Left Blank.
Signature Page Follows.
103
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
QUEST MIDSTREAM GP, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Chief Executive Officer
ORGANIZATIONAL LIMITED PARTNER:
QUEST RESOURCE CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Chief Executive Officer
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as Limited Partners of the
Partnership, pursuant to powers of attorney now and hereafter executed in favor
of, and granted and delivered to the General Partner or without execution hereof
pursuant to Section 10.2(a).
QUEST MIDSTREAM GP, LLC
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Chief Executive Officer
104
EXHIBIT A
to the
First Amended and Restated
Agreement of Limited Partnership
of
Quest Midstream Partners, L.P.
Certificate Evidencing Common Units
Representing Limited Partner Interests
in
Quest Midstream Partners, L.P.
No. [ ] [ ]Common Units
In accordance with Section 4.1 of the First Amended and Restated Agreement
of Limited Partnership of Quest Midstream Partners, L.P., as amended,
supplemented or restated from time to time (the "Partnership Agreement"), Quest
Midstream Partners, L.P., a Delaware limited partnership (the "Partnership"),
hereby certifies that [______________] (the "Holder") is the registered owner of
Common Units representing limited partner interests in the Partnership (the
"Common Units") transferable on the books of the Partnership, in person or by
duly authorized attorney, upon surrender of this Certificate properly endorsed.
The rights, preferences and limitations of the Common Units are set forth in,
and this Certificate and the Common Units represented hereby are issued and
shall in all respects be subject to the terms and provisions of, the Partnership
Agreement. Copies of the Partnership Agreement are on file at, and will be
furnished without charge on delivery of written request to the Partnership at,
the principal office of the Partnership located at
[_________________________________________]. Capitalized terms used herein but
not defined shall have the meanings given them in the Partnership Agreement.
THE HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF QUEST
MIDSTREAM PARTNERS, L.P. THAT THIS SECURITY MAY NOT BE SOLD, OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED IF SUCH TRANSFER WOULD (A) VIOLATE THE THEN
APPLICABLE FEDERAL OR STATE SECURITIES LAWS OR RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER
GOVERNMENTAL AUTHORITY WITH JURISDICTION OVER SUCH TRANSFER, (B) TERMINATE THE
EXISTENCE OR QUALIFICATION OF QUEST MIDSTREAM PARTNERS, L.P. UNDER THE LAWS OF
THE STATE OF DELAWARE, (C) CAUSE QUEST MIDSTREAM PARTNERS, L.P. TO BE TREATED AS
AN ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY
FOR FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED),
(D) VIOLATE THE TERMS AND CONDITIONS OF THE FIRST AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF QUEST MIDSTREAM PARTNERS, L.P., DATED DECEMBER ___,
2006, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, OR (E) VIOLATE THE TERMS AND
CONDITIONS OF THE
Exhibit A-1
INVESTORS' RIGHTS AGREEMENT, DATED DECEMBER ___, 2006, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, BY AND AMONG QUEST MIDSTREAM PARTNERS, L.P. AND ITS
GENERAL AND LIMITED PARTNERS. QUEST MIDSTREAM GP, LLC, THE GENERAL PARTNER OF
QUEST MIDSTREAM PARTNERS, L.P., MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE
TRANSFER OF THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH
RESTRICTIONS ARE NECESSARY TO AVOID A SIGNIFICANT RISK OF QUEST MIDSTREAM
PARTNERS, L.P. BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE
AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES. THE RESTRICTIONS SET FORTH ABOVE
SHALL NOT PRECLUDE THE SETTLEMENT OF ANY TRANSACTIONS INVOLVING THIS SECURITY
ENTERED INTO THROUGH THE FACILITIES OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH
THIS SECURITY IS LISTED OR ADMITTED TO TRADING.
The Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement, (ii)
represented and warranted that the Holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Partnership
Agreement, (iii) granted the powers of attorney provided for in the Partnership
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Partnership Agreement.
Exhibit A-2
This Certificate shall not be valid for any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.
Dated: Quest Midstream Partners, L.P.
-----------------------
Countersigned and Registered by:
By:
--------------------------------
By:
--------------------- as Transfer Agent and Registrar
Exhibit A-3
[Reverse of Certificate]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as follows according to applicable laws or
regulations:
TEN COM - as tenants in common UNIF GIFT/TRANSFERS MIN ACT
_____ Custodian ______
TEN ENT - as tenants by entireties (Cust) (Minor)
Under Uniform Gifts/Transfers to CD
JT TEN - as joint tenants with right of Minors Act (state)
survivorship and not as tenants in common
Additional abbreviations, though not in the above list, may also be used.
Exhibit A-4
ASSIGNMENT OF COMMON UNITS
Quest Midstream Partners, L.P.
FOR VALUE RECEIVED, hereby assigns, conveys, sells and transfers unto
(Please print or typewrite name and (Please insert Social Security or address of
Assignee) other identifying number of Assignee)
Common Units representing limited partner interests evidenced by this
Certificate, subject to the Partnership Agreement, and does hereby irrevocably
constitute and appoint _________________ as its attorney-in-fact with full power
of substitution to transfer the same on the books of Quest Midstream Partners,
L.P.
Date: NOTE: This signature to any
------------------------ endorsement hereon must correspond
with the name as written upon the face
of this Certificate in every
particular, without alteration,
enlargement or change.
SIGNATURES MUST BE GUARANTEED BY A
MEMBER OF THE FIRM OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALER, INC.
OR BY A COMMERCIAL BANK OR TRUST -----------------------------------
COMPANY SIGNATURE(S) GUARANTEED (Signature)
-----------------------------------
(Signature)
Exhibit A-5