AGREEMENT OF LIMITED PARTNERSHIP OF LPI HOLDINGS I LP Dated as of December 31, 2005
EXHIBIT 10.1
CONFIDENTIAL
TREATMENT REQUESTED
INFORMATION
FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND IS IDENTIFIED
BY THREE ASTERISKS, AS FOLLOWS “
*
* *
”. AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
AGREEMENT
OF LIMITED PARTNERSHIP
OF
LPI
HOLDINGS I LP
Dated
as
of December 31, 2005
AGREEMENT
OF LIMITED PARTNERSHIP
OF
LPI
HOLDINGS I LP
THIS
AGREEMENT OF LIMITED PARTNERSHIP of LPI HOLDINGS I LP (the “Partnership”),
is
dated as of December 31, 2005 (the “Effective
Date”),
and
is entered into by and among LPI GP I LLC, a Delaware limited liability company
(the “General
Partner”),
and
the Persons specified on Schedule
2
hereto
as limited partners (each, a “Limited
Partner”
and
collectively, the Limited
Partners”).
The
General Partner and the Limited Partners are sometimes referred to herein
collectively, on a several and not joint basis, as the “Partners”
and
individually as a “Partner”.
DEFINITIONS
Capitalized
words and phrases used in this Agreement shall have the meanings set forth
on
Schedule
1 unless
defined elsewhere herein.
GENERAL
PROVISIONS
(a) The
initial location of the principal office of the Partnership shall be c/o the
General Partner at its address set forth on Schedule
2
hereto.
The General Partner may change the principal office or executive offices of
the
Partnership to another location within the United States after providing notice
of any such change to the Limited Partners of the Partnership.
(b) The
registered office and registered agent of the Partnership in the State of
Delaware shall be the initial registered office and initial registered agent
as
designated in the Certificate, or such other office or Person as the Partners
may designate from time to time.
(a) The
purpose of the Partnership (and its Subsidiaries, if any) is to, directly or
indirectly, engage in the sourcing, acquisition, management, ownership, holding
and disposition of (in whole or in part), or otherwise dealing in Eligible
Investments, and to conduct such other lawful activities as may be necessary
or
incidental in furtherance of the foregoing purpose that are acceptable to the
General Partner.
(b) For
the
sake of clarification and subject to the provisions of Section 8.7,
(i) the
General Partner and any of its Affiliates shall not be prohibited from engaging
in the business of the Partnership as provided in Section
2.4(a),
or
acquiring any other asset for its own account by or through any Person other
than the Partnership, (ii) the General Partner and any of its Affiliates may
have other business interests or may engage in other business ventures,
transactions or activities of any nature or description whatsoever, whether
currently existing or hereafter created, (iii) neither the General Partner
nor
any of its Affiliates shall incur any liability to the Partnership or any
Limited Partner as a result of its pursuit of, or engaging in, such other
business interests or ventures, transactions or activities, (iv) neither the
Partnership, the Limited Partners, the Manager nor any other Person shall have
any right to participate in such other business interests or ventures,
transactions or activities or to receive or share in any income or profits
derived therefrom, (v) all Eligible Investments sourced, originated and
purchased by the Manager may be purchased through the Partnership or any
Investment Vehicle and (vi) subject
to Section 11.1(b((i)(A)
of the
Investment Management Agreement. the General Partner shall not be under any
obligation to approve the acquisition of any Investment by the Partnership
or
any Investment Vehicle, and the General Partner and its Affiliates shall not
have any liability to any Limited Partner, the Manager or any other Person
arising out of the General Partner’s election not to approve or pursue any such
acquisition or any minimum number of Investments.
(a) If
no
Eligible Investments are acquired by the Partnership, each Partner shall be
responsible for its own and its Affiliates’ costs and expenses in connection
with the formation and organization of the Partnership (all such expenses,
“Formation
Expenses”);
provided,
however,
that if
and to the extent the Partnership acquires one or more Eligible Investments,
each such Partner shall be reimbursed for its respective Formation Expenses
to
the extent provided in Section
5.1;
provided,
further,
that
the foregoing notwithstanding, the Partnership shall be under no obligation
to
reimburse: (i) the General Partner and Mammoth for
Formation Expenses incurred by them in an amount that exceeds [*
* *]
in the aggregate; and (ii) LPH for Formation Expenses incurred by LPH
in
an amount that exceeds [* * *] in the aggregate.
(b) A
Partner
may incur or pay on the Partnership’s behalf, subject to the General Partner’s
prior written approval, third-party or other similar expenses in connection
with
due diligence, acquiring, closing, servicing, management and collection of
Eligible Investments (all such expenses, including travel, legal, other
professional fees, “Reimbursable
Expenses”).
The
Partners shall be reimbursed for Reimbursable Expenses (provided that such
expenses were incurred in accordance with the terms of this Agreement) upon
receipt of proof of payment and any other supporting documentation regarding
such expenses that the General Partner may reasonably request, to the extent
provided in Section
5.1.
(a) If
the
General Partner determines in good faith that for legal, tax, regulatory or
other similar reasons it would be in the best interests of some or all the
Partners to purchase or otherwise acquire an Eligible Investment through an
alternative investment structure (such structure shall be referred to as an
“Alternative
Investment Vehicle”),
the
General Partner shall be permitted to structure the making of all or any portion
of such Investment outside of the Partnership, by requiring any Partner or
Partners to make such Investment through one or more entities other than the
Partnership that will invest on a parallel basis with, or in lieu of, the
Partnership, as the case may be. The Partners shall be required to make Capital
Contributions directly to each such Alternative Investment Vehicle to the same
extent, for the same purposes and on the same terms and conditions, as Partners
are required to make Capital Contributions to the Partnership. Each Partner
shall have the same economic interest, in all material respects, in Investments
made through an Alternative Investment Vehicle pursuant to this Section
2.10(a),
as such
Partner would have if such Investments had been made solely by the Partnership,
and the other terms of such vehicle shall be substantially identical in all
material respects to those of the Partnership, to the maximum extent applicable;
provided
that:
(i) such
Alternative Investment Vehicle (or the entity in which such Alternative
Investment Vehicle invests) shall provide for the limited liability of the
Limited Partners and, to the extent practicable, the General Partner, as a
matter of the organizational documents of such Alternative Investment Vehicle
(or the entity in which such Alternative Investment Vehicle invests) and as
a
matter of local law to the same extent in all material respects as is provided
to the Partners under the Act and this Agreement or on more favorable terms
to
the extent practicable;
(ii) the
Partners shall serve in a similar management role with respect to such
Alternative Investment Vehicle;
(iii) distributions
of cash and other property and the allocations of income, gain, loss, deduction,
expense and credit from such Alternative Investment Vehicle, and the
determination of allocations and distributions pursuant to Articles
IV
and
V
and of
any clawback payment pursuant to Section
5.4
shall be
determined as if each Investment made by such Alternative Investment Vehicle
were an Investment made by the Partnership; and
(iv) such
Alternative Investment Vehicle shall, to the extent applicable, have terms
similar in all substantive respects to those contained in this
Agreement.
(b) The
General Partner shall have the discretion to apply and modify the provisions
of
this Agreement in order to effectuate the intent of such provisions as they
may
relate to, or be affected by, any Investment Vehicle, whether or not express
reference to an Investment Vehicle is included in such provisions.
CAPITAL
CONTRIBUTIONS AND INTERESTS
(a) Except
as
otherwise provided in this Agreement, the General Partner shall from time to
time request Capital Contributions (“Mandatory
Capital Contributions”)
(x) from Mammoth only for the Margin Amounts and (y) from the Partners
pro rata in accordance with each Partner’s respective Investment Allocation, in
the amounts and at the times required by the Partnership in order to pay all
Partnership expenses (other than the Margin Amounts), including (i)
organizational expenses of the Partnership and any Subsidiaries, (ii) operating
expenses of the Partnership and any Subsidiaries, (iii) amounts required to
be
paid with respect to any indemnification obligations of the Partnership or
its
Subsidiaries pursuant to Section
6.6
and (iv)
any other expenditure authorized by the Partners in accordance with the terms
of
this Agreement, including, without limitation, to fund an Investment and the
making of premium payments in respect of any such Investment. To the extent
the
Partnership requires any amounts that would otherwise be funded through the
making of a Mandatory Capital Contribution pursuant to this Section
3.3,
the
Partnership shall, prior to requesting any amounts from the Partners as provided
hereunder, obtain any such amounts from the funds deposited in the Escrow
Account on behalf of each Partner as initial Capital Contributions pursuant
to
Section
3.2
consistent with the Escrow Agreement until such time as there are no longer
any
amounts remaining in the Escrow Account attributable to such Partner in respect
of the initial Capital Contributions.
(b) In
addition to, but without limiting the foregoing, simultaneously with the
acquisition of an Investment, (i) LPH shall be required to deposit an
amount equal to the product of: (x) twelve (12) months of premium payments
in
respect of the Investment; and (y) LPH’s Investment Allocation into a
separate bank account (the “Premium
Account”)
and,
in connection therewith, enter into an account control agreement with the
Partnership in a form satisfactory to LPH and the Partnership giving the
Partnership control over the disposition of cash from such account; provided,
however,
that
every ninety (90) days following the Effective Date, LPH shall deposit into
the
Premium Account an amount such that the amount in the Premium Account
immediately after such deposit equals the product of: (x) twelve (12) months
of
premium payments in respect of all Investments then owned by the Partnership;
and (y) LPH’s Investment Allocation. Notwithstanding the foregoing
sentence, neither the General Partner nor Mammoth shall be required to place
its
pro rata share of any premium payments into a separate account, and such premium
payments will be funded as Mandatory Capital Contributions when due pursuant
to
Section
3.3(a).
(c) If
there
is a Mandatory Capital Contribution due from the Partners in accordance with
Section
3.3(a),
the
General Partner shall give the Limited Partners at least three (3) Business
Days’ prior written notice of: (i) the amount of the Mandatory Capital
Contribution; (ii) the date on which such Mandatory Capital Contribution shall
be made to the Partnership; and (iii) the purpose(s) for which the Mandatory
Capital Contribution is being made. Mandatory Capital Contributions shall be
made by wire transfer of immediately available funds to an account designated
in
such notice.
(d) Upon
receipt of a Mandatory Capital Contribution by the Partnership, the General
Partner shall indicate in a ledger in substantially the form attached as
Schedule
3,
the
following information with respect to each Mandatory Capital Contribution:
(i)
the date of such Capital Contribution; (ii) the Investment, if any, in respect
of which such Capital Contribution was made; (iii) the total amount of the
Capital Contribution, (iv) the total amount of the Capital Contribution made
by
each Partner based on such Partner’s Investment Allocation; and (v) the total
amounts to date under clauses (iii) and (iv) above.
(e) In
the
event of any change with respect to the information stated on Schedule
3
hereto
(as amended from time to time), the General Partner shall promptly cause
Schedule
3
to be
amended to reflect such change and a copy of the revised Schedule
3
to be
provided to each of the Partners; provided,
however,
the
failure of the General Partner to cause Schedule
3
to be
amended or cause a revised copy of Schedule
3
to be
provided to the Partners shall not prevent the effectiveness of, or otherwise
affect the underlying adjustments that would be reflected in, such an amendment;
provided,
further,
that no
such amendment or revision shall be made if the change so reflected would be
prohibited by the terms of this Agreement. Revisions to Schedule
3
as
contemplated by this Section
3.3
shall
not constitute amendments to this Agreement for purposes of Section
12.16.
(a) In
addition to any other remedies that may be available at law or in equity,
including, without limitation, pursuant to this Agreement or the Investment
Management Agreement, if a Partner (a “Non-Contributing
Partner”)
fails
to fund any Mandatory Capital Contribution in accordance with, and within the
time specified in, Section
3.3,
then
any other Partner who has then funded the Mandatory Capital Contributions
required to be funded by such Partner (a “Contributing
Partner”),
shall
have the right, but not the obligation, to contribute to the Partnership an
amount (the “Covering
Contribution”)
equal
to such Contributing Partner’s pro rata share (as among all Contributing
Partners) of the amount of the Mandatory Capital Contribution (or portion
thereof) that the Non-Contributing Partner failed to make.
(b) In
the
event one or more Contributing Partners make Covering Contributions, the
Non-Contributing Partner shall be obligated to repay each Contributing Partner
the amount of its Covering Contribution as soon as reasonably practicable
following the making of such Covering Contribution, together with interest
at
the rate of [* * *] per annum (compounded annually) or, if less, the highest
rate of interest allowed by applicable law, from the date such balance was
due
and payable through the date of payment in full (such amounts are not a penalty
but an approximation of part of the damages that are likely to be suffered
due
to such failure to pay). The Non-Contributing Partner agrees to execute such
documents and agreements as may be reasonably requested by the Contributing
Partner(s) to evidence the right to such repayment. To the extent such amounts
(including interest) have not otherwise been repaid by the Non-Contributing
Partner, such amounts shall be deducted from any amounts otherwise distributable
or payable to such Non-Contributing Partner or its Affiliates hereunder or
under
the Investment Management Agreement or Master Purchase Agreement (including
under Section
5.1
or
10.2
hereof)
and shall be paid instead to the Contributing Partners, pro rata in accordance
with their respective Covering Contributions and, to the extent so deducted,
shall be deemed to have been distributed to such Non-Contributing Partner for
all purposes of this Agreement, the Investment Management Agreement or Master
Purchase Agreement, as applicable.
CAPITAL
ACCOUNTS; ALLOCATION OF PROFITS AND LOSSES
(a) Capital
Accounts.
A
Capital Account shall be established for each Partner. Each Partner’s Capital
Account shall be credited with (i) the amount of cash contributed by such
Partner to the Partnership; (ii) the amount of such Partner’s allocable share of
Net Income (or items thereof), including tax-exempt income and gain and any
item
of income or gain that are specially allocated to such Partner pursuant to
Section
4.3
hereof;
(iii) the amount, if any, of any Partnership liabilities that are assumed by
such Partner as provided in Regulations Section
1.704-1(b)(2)(iv)(c)(1);
and (iv) the Gross Asset Value of any property contributed to the Partnership
by
such Partner (net of liabilities secured by such contributed property that
the
Partnership is considered to assume or take subject to under Code Section 752).
Each Partner’s Capital Account shall be charged with (i) the amount of cash
distributed to such Partner by the Partnership, (ii) the amount of such
Partner’s allocable share of Net Losses and any items of Partnership loss and
deduction that are specially allocated to such Partner pursuant to Section
4.4
hereof,
and (iii) the Gross Asset Value of any property distributed to such Partner
by
the Partnership (net of liabilities secured by such distributed property that
such Partner is considered to assume or take subject to under Code Section
752).
(b) Capital
Account Balance of the General Partner.
The
General Partner must maintain a Capital Account balance at least equal to its
Investment Allocation of the total Capital Account balances for the Partnership.
Whenever a Limited Partner makes a Capital Contribution, the General Partner
will immediately contribute whatever amount, if any, necessary to meet the
requirements of the preceding sentence.
(c) Interest
on Capital Accounts.
Interest shall not be payable or paid to the Partners in respect of their
Capital Account balances.
(a) Section
704(b) Allocation Limitations.
Notwithstanding Section
4.1,
special
allocations of Net Income or specific items of income or gain may be specially
allocated for any Fiscal Year (or other period) as follows (the “Special
Allocations”):
(i) Minimum
Gain Chargeback.
The
Partnership shall allocate items of income and gain among the Partners at such
times and in such amounts as necessary to satisfy the minimum gain chargeback
requirements of Regulations Sections 1.704-2(f) and 1.704-2(i)(4).
(ii) Qualified
Income Offset.
The
Partnership shall specially allocate items of income and gain when and to the
extent required to satisfy the “qualified income offset” requirements within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(d).
(iii) Gross
Income Allocation.
In the
event any Partner has an Adjusted Capital Account Deficit, each such Partner
shall be specially allocated items of income and gain in an amount and manner
sufficient to eliminate such Partner’s Adjusted Capital Account Deficit as
quickly as possible; provided
that an
allocation pursuant to this Section
4.4(a)(iii)
shall be
made only if and to the extent that such Partner’s Capital Account would have an
Adjusted Capital Account Deficit after all allocations provided for in this
Section
4.4
have
been made as if Section
4.4(a)(ii)
and this
Section
4.4(a)(iii)
were not
in this Agreement.
(b) Net
Losses.
The Net
Losses allocated pursuant to Section
4.3
shall
not exceed the maximum amount of losses that can be so allocated without causing
any Partner to have an Adjusted Capital Account Deficit at the end of any
taxable year. In the event that some but not all of the Partners would have
Adjusted Capital Account Deficits as a consequence of an allocation of Net
Losses pursuant to Section
4.3,
the
limitation set forth in this Section
4.4(b)
shall be
applied on a Partner-by-Partner basis so as to allocate the maximum permissible
Net Losses to each Partner under Regulations Section
1.704-1(b)(2)(ii)(d).
(c) Nonrecourse
Deductions.
Nonrecourse Deductions for any Fiscal Year (or other applicable period) shall
be
specially allocated pro rata
among
the Partners in proportion to their respective Investment Allocations, except
to
the extent that applicable Regulations require that such deductions be allocated
in some other manner. Any Partner Nonrecourse Deductions for any Fiscal Year
(or
other applicable period) shall be specially allocated to the Partner who bears
the economic risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(1).
NONLIQUIDATING
DISTRIBUTIONS
(b) First,
to LPH,
until the amount distributed to LPH equals the sum of any unreimbursed Formation
Expenses (subject to the limitation in Section
2.9(a))
and
Reimbursable Expenses incurred by LPH, consistent with this
Agreement;
(c) Second,
to the
General Partner and Mammoth, until the aggregate amounts distributed to the
General Partner and Mammoth equal the sum of any unreimbursed Formation Expenses
(subject to the limitation in Section 2.9(a)) and Reimbursable Expenses
incurred by the General Partner and Mammoth, consistent with this Agreement
(distributed on a pro rata basis based upon their respective share of aggregate
amounts of unreimbursed Formation Expenses (subject to the limitation in
Section
2.9(a)
and
Reimbursable Expenses);
(d) Third,
to the
Partners, in an amount sufficient to provide the Partners (i) the Preferred
Return (pro rata based on the then-outstanding amount of a Partner’s Preferred
Return as among all Partners) and (ii) an amount equal to their then-unreturned
Capital Contributions (pro rata based on the outstanding amount of each
Partner’s then-unreturned Capital Contributions as among all Partners). For
purposes of computing Preferred Return, Available Cash distributed in accordance
with clause (ii) of this Section
5.1(c)
shall be
applied towards returning the earliest Capital Contributions first. If there
is
insufficient Available Cash to pay all amounts otherwise payable under this
clause (c), Available Cash shall be allocated first to pay amounts in respect
of
clause (i) in full and then to pay amounts in respect of clause (ii);
and
(e) Fourth,
(i) on
a pro rata basis, 80% to the Partners in accordance with their respective
Investment Allocation and (ii) 20% to LPH (the “Performance
Allocation”);
provided,
however,
that
the Performance Allocation (x) shall not be distributed to LPH until
fulfillment of the Maximum Investment Amount, and (y) shall be distributed
monthly thereafter; provided,
further,
that if
any Performance Allocation accrues but is not otherwise payable to LPH due
to
the fact that the foregoing proviso restricts payment of the Performance
Allocation, such amounts will be held by the Partnership and shall continue
to
accrue a Preferred Return until the foregoing proviso ceases to restrict such
payment, after which any such amounts shall be remitted to LPH (subject to
the
other provisions of this Article
V
).
Notwithstanding
the foregoing, for the purpose of calculating the Preferred Return and any
Performance Allocation under clauses (c) and (d) above, respectively, any funds
held in the Escrow Account shall count towards Mammoth’s basis from the date
such funds are deposited into escrow. The General Partner and Mammoth shall
not
take any action or adjust their conduct from past practice where such action
or
adjustment is intended and designed to prevent the fulfillment of the Maximum
Investment Amount to circumvent LPH’s entitlement to receive payment of the
Performance Allocation and has no other valid business purpose.
(a) Replacement
Manager.
In the
event the Partnership is required to obtain a replacement manager as a result
of
the termination of the Manager under the Investment Management Agreement (other
than as a result of a voluntarily termination by the Partnership under
Section
11.1(a)(i)(A)
thereof), the reasonable fees and expenses incurred by the Partnership in
connection therewith (the “Replacement
Costs”),
using
commercially reasonably efforts to obtain a replacement manager in an
arms-length negotiation with a third-party manager, shall be charged against
and
deducted from any distributions to be made to LPH under paragraphs (a) through
(d) of Section
5.1
or
Section
10.2
until
such time as the entire amount of Replacement Costs have been recovered by
the
Partnership.
(b) Right
of Setoff.
In the
event LPH, the Manager or any of their respective Affiliates owes any amounts
to
the Partnership, the General Partner, Mammoth or their respective Affiliates,
whether pursuant to this Agreement, the Investment Management Agreement, the
Master Purchase Agreement or the Letter Agreement (but, in relation to the
Letter Agreement, only in respect of the Initial Portfolio), the Partnership
may
deduct such amounts from Distributions otherwise to be made to LPH under
paragraphs (a) through (d) of this Section
5.1
or
Section
10.2
until
such time as the entire amount has been recovered and the Partnership may remit
such amounts directly to the Person to whom such amounts are owed.
(c) Obligation
to Make Payments.
The
foregoing notwithstanding, nothing in this Agreement, the Investment Management
Agreement or the Master Purchase Agreement shall relieve or affect the
obligation of LPH or the Manager, as the case may be, to make payments to the
Partnership for amounts due under any such agreement.
MANAGEMENT
(a) Except
to
the extent otherwise expressly provided in this Agreement, the Investment
Management Agreement or required by the Act or other applicable law, the
management, operations and control of the Partnership, its business and the
Investments shall be vested solely in the General Partner. The acts of the
General Partner in carrying on the business and activities of the Partnership
(and the management, operation and control thereof) as authorized herein shall
bind the Partnership. Unless authorized to do so by the General Partner, this
Agreement or the Investment Management Agreement, neither the Limited Partner,
nor the Manager shall have any power or authority to act for, or to assume
any
obligation or responsibility on behalf of, the Partnership or to otherwise
bind
the Partnership in any way. The day-to-day management of the Investments shall
be vested in the Manager pursuant to the Investment Management Agreement, but
subject to the limitations imposed therein and in this Agreement.
(b) The
General Partner shall perform its duties under Section
6.1(a)
in good
faith and with that degree of care that an ordinarily prudent person in a like
position would use under similar circumstances. In performing its duties, the
General Partner shall be entitled to rely on information, opinions, reports
or
statements, including financial statements and other financial data, in each
case, prepared or presented by: (i) the other Partners, (ii) the Manager, (iii)
one or more officers, agents or employees of the Partnership or (iv) other
Persons (including, without limitation, counsel, accountants and other
professionals) as to matters that the General Partner believes to be within
such
Person’s professional or expert competence.
(c) In
addition to the limitations set forth in Section
6.7,
except
as required by applicable law in respect of its capacity as a general partner
of
a limited partnership, in performing its duties under Section
6.1(a),
the
General Partner shall not be liable to the Partnership, the other Partners
or
the Manager for any debts, obligations or liabilities of the Partnership, any
other Partner or the Manager, whether arising in tort, contract or otherwise,
solely by reason of managing, operating and controlling the Partnership under
Section
6.1(a)
or
acting (or omitting to act) in such capacities or participating in the conduct
of the business of the Partnership; provided,
however,
that
the foregoing shall not eliminate or limit the liability of the General Partner
as finally determined by a court of competent jurisdiction (i) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, or (ii) for any transaction from which the General Partner
derived an improper personal benefit.
(d) In
furtherance of and without limiting the foregoing, to the extent permitted
under
applicable law, the Partners hereby waive any fiduciary duty of the General
Partner not expressly set forth in this Agreement associated with self-dealing,
corporate opportunities or otherwise, so long as the General Partner conducts
itself in a manner consistent with this Agreement.
(a) General.
The
General Partner shall have authority to take all actions which may be necessary
or appropriate for, or incidental to, the conduct of the Partnership’s business
and the acquisition, financing, investment, maintenance, preservation, operation
and/or disposition of the Investments, in accordance with the provisions of
this
Agreement, the Act and other applicable laws and regulations. Notwithstanding
anything contained herein or in the Investment Management Agreement or the
Master Purchase Agreement to the contrary, any decisions to be made by the
Partnership in the Investment Management Agreement or the Master Purchase
Agreement shall be made solely by the General Partner. The General Partner’s
decision-making authority and control includes, without limitation, the
following:
(i) the
making of any Investment, including the material terms thereof or otherwise
engaging in any aspect of the Partnership’s business as described in
Section 2.4;
(ii) modification
of the terms of any Investment agreements or documents related to any such
Investment;
(iii) retention
of (and any fee paid, or to be paid, in respect of) third party service
providers;
(iv) sale,
disposition, Transfer, pledge or hypothecation of, or determination of
resolution strategies relating to, all or any portion of any Investment, or
entering into a binding commitment to do any of the foregoing;
(v) formation
of any Investment Vehicle;
(vi) determination
of the Gross Asset Value of any asset or liabilities of the
Partnership;
(vii) transactions,
the purpose of which is to hedge against currency fluctuations or interest
rate
fluctuations associated with any Investment;
(viii) establishment
of Reserves;
(ix) the
bringing, compromising, settling and defending of actions at law or in
equity;
(x) except
as
expressly provided herein, the Partnership, any of its Subsidiaries or any
Investment Vehicle (A) making or revoking any of the elections under the Code
(or state, local or foreign tax law) that are made at the Partnership (or
Subsidiary or Investment Vehicle) level, (B) requesting and obtaining
interpretative or exceptive advice and orders from, or engaging in discussions
with respect to any tax matter with, Federal, state and local or foreign taxing
authorities or (C) taking any other action with respect to any tax
matter;
(xi) making
any Distributions of assets or property of the Partnership other than in
cash;
(xii) except
as
expressly provided herein, take any action that, in the reasonable judgment
of
the General Partner at the time such action is taken, will cause the dissolution
of the Partnership;
(xiii) distribute
Available Cash pursuant to Section
5.1;
(xiv) select
or
replace the Partnership’s or any of its Subsidiaries’ auditors or change the
Partnership’s or any of its Subsidiaries’ Fiscal Year;
(xv) change
the name of the Partnership, any Subsidiary or any Investment
Vehicle;
(xvi) exercise
the Partnership’s rights or remedies under the Investment Management
Agreement;
(xvii) incur,
guaranty, prepay, in whole or in part, refinance, renew, modify or extend any
indebtedness for borrowed money (including, without limitation, capitalized
lease obligations relating to the Partnership, any of its Subsidiaries, or
any
Investment Vehicle or the Investments), or release any liens or encumbrances
on
any property or asset;
(xviii) disseminate
any press releases or make any external communications naming the General
Partner or its Affiliates; or
(xix) agree
to
do, or enter into any agreement to do, any matters similar to those listed
in
clauses (i) through (xviii) of this Section
6.1(a).
Notwithstanding
anything contained in this Section
6.1(a)
or
elsewhere in this Agreement to the contrary, the approval by the General Partner
of any action taken by the Partnership shall not limit or otherwise affect
the
obligations or liabilities of the Manager or any other Partner under this
Agreement, nor shall such approval act as a waiver thereof.
(b) Right
of the General Partner to Compel Sale of Investments or the Partnership;
Mandatory Sale and Liquidation.
Notwithstanding anything to the contrary in this Agreement, the Investment
Management Agreement or the Master Purchase Agreement, the General Partner
shall
have full control over the sale, Transfer, liquidation or other disposition
of
Investments, including the right to compel the sale, Transfer, or liquidation
of
all, or a part of, the Investments and/or the sale of the Partnership at any
time. If at any time the General Partner seeks to sell, Transfer, liquidate
or
dispose all or part of the Investments or to sell the Partnership pursuant
to
this Section
6.2(b),
the
General Partner shall give written notice (the “Sale
Notice”)
thereof to the Limited Partners and the Manager at least fifteen (15) days
prior
to such sale. The Sale Notice shall identify the Investment(s) that the General
Partner seeks to sell at such time (the “Subject
Assets’’),
or,
in the case of a sale of the Partnership that the General Partner desires to
sell the Partnership, and the proposed date of such sale. Thereafter, the
Subject Assets or the Partnership, as the case may be, shall be sold on
arm’s-length terms in accordance with processes and procedures established by
the General Partner in its reasonable discretion and at the Partnership’s
expense. The Partners and the Manager shall fully cooperate with, and be
permitted to bid in, such sale. Each Subject Asset or the Partnership, as the
case may be, shall be sold to the highest cash bidder in such sale
process.
(c) Operation
of the Partnership as a Separate Enterprise.
The
General Partner shall, consistent with the terms of this Agreement, cause the
Partnership to conduct its business and operations separate from that of any
other Person, including, without limitation, any of the Partners, the Manager
or
any of their respective Affiliates, including, (i) segregating Investments
and
not allowing funds or other Investments of the Partnership to be commingled
with
the funds or other assets of, owned by or registered in the name of, any other
Person; (ii) maintaining books, bank accounts and financial records of the
Partnership separate from those of any other Person; (iii) observing all
Partnership procedures and formalities, including maintaining current records
of
Partnership affairs and minutes of Partnership meetings and written consents
of
the Partners; (iv) acting on behalf of the Partnership pursuant to, and in
accordance with, this Agreement; (v) causing the Partnership to pay its
liabilities from the assets of the Partnership; and (vi) causing the Partnership
to conduct its dealings with third parties in its own name and in all respects
hold itself out as a separate and independent legal entity.
(a) Tax
Classification.
The
Partners (including the Manager) shall cause the Partnership to comply with
such
conditions as may be required from time to time to have the Partnership treated
as a partnership for federal, state and local income tax purposes and not as
an
association taxable as a corporation or a publicly traded partnership taxable
as
a corporation.
(b) State
Compliance.
The
Partners (including the Manager) shall: (i) take all action which shall be
necessary or appropriate for the continuation of the Partnership’s valid
existence as a limited partnership under the laws of the State of Delaware
and
any jurisdiction in which the Partnership does business, including, without
limitation, the execution, delivery and filing of any necessary or advisable
amendments or restatements to the Certificate and any other certificates,
notices, statements or other instruments (and any amendments or statements
thereof) necessary or advisable for the operation of the Partnership in all
jurisdictions where the Partnership may elect to do business, and (ii) refrain
from taking any action that would adversely affect the limited liability of
the
Limited Partners.
(a) Indemnification;
Advancement of Expenses.
Each
Partner and officer of the Partnership, or any member, partner, manager,
director or officer of its Subsidiaries serving in such capacity at the
Partnership’s direction or request (any of the foregoing, an “Indemnitee”)
shall,
to the fullest extent permitted or required by the Act, as amended from time
to
time, or other applicable law, be exculpated from, and indemnified and defended
by, the Partnership against any Indemnifiable Losses that in any way relates
to
or arises out of, or is alleged to relate to or arise out of, any action or
inaction on the part of the Partnership or such Indemnitee acting on behalf
of
the Partnership, including, without limitation, any Indemnifiable Losses that
the General Partner may suffer or incur under applicable law in respect of
its
capacity as a general partner of a limited partnership, except to the extent
such Indemnifiable Losses, as finally determined by a court of competent
jurisdiction, are attributable to (i) such Indemnitee’s acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of
law
or (ii) such Indemnitee having derived an improper personal benefit from any
transaction. The Partnership shall advance expenses incurred by such Indemnitee
upon the receipt by the Partnership of the signed statement of such Indemnitee
agreeing to reimburse the Partnership for such advance in the event it is
ultimately determined that such Indemnitee is not entitled to be indemnified
by
the Partnership for such expenses.
(b) Exculpation.
Except
with respect to the General Partner as required by applicable law, including,
without limitation, any Indemnifiable Losses that the General Partner may suffer
or incur under applicable law in respect of its capacity as a general partner
of
a limited partnership, no Indemnitee shall be liable to the Partnership or
its
Partners for monetary damages for an act or omission in such Person’s capacity
as a Partner or as an officer or in the capacity as a member, partner, manager,
director or officer of any Subsidiary, except to the extent such damages, as
finally determined by a court of competent jurisdiction, are attributable to
(i)
such Indemnitee’s acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law or (ii) such Indemnitee
having derived an improper personal benefit from any transaction. If the Act
is
amended to authorize further elimination of or limitations on the liability
of
Persons serving in the capacity as Indemnitees, then the liability of each
such
Indemnitee shall be eliminated or limited to the fullest extent permitted by
the
Act as so amended. Any repeal or modification of this Section
6.6
shall
not adversely affect the right or protection of such Indemnitee existing at
the
time of such repeal or modification.
(c) Not
Exclusive.
The
indemnification and advancement of expenses provided by or granted pursuant
to
this Section
6.6
shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any agreement,
approval of the Partners or otherwise.
(d) Insurance.
The
Partnership and its Subsidiaries may purchase and maintain insurance on behalf
of any Person who is or was a Partner, officer, employee or agent of the
Partnership, or is or was serving at the request of the Partnership as a member,
partner, manager, director, officer, employee or agent of another Organization,
against any liability asserted against him or her and incurred by him or her
in
any such capacity, or arising out of his or her status as such, whether or
not
he or she would be entitled to indemnity against such liability under the
provisions of this Section
6.6.
(e) Beneficiaries.
The
indemnification and advancement of expenses provided by, or granted pursuant
to,
this Section
6.6
shall
continue as to a Person who has ceased to be a Partner, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a Person.
(f) Limitations
on Exculpation and Indemnification.
For the
avoidance of doubt, nothing in this Section
6.6
shall
limit or affect a Person’s obligations under this Agreement, the Investment
Management Agreement, the Master Purchase Agreement or the Letter Agreement
to
make any payment or otherwise abide by any such agreement.
LIMITED
PARTNERS
Only
the
General Partner and such officers, employees or other agents of the Partnership
authorized by the General Partner (or as otherwise provided herein) shall have
the authority to bind the Partnership or have any rights or powers to conduct
the business or affairs of the Partnership except conferred on the Limited
Partners by the Act or other applicable law or as otherwise set forth in the
Investment Management Agreement. Any act of a Limited Partner in contravention
of this Article
VII
shall be
null and void and without force or effect.
BOOKS
AND RECORDS; CERTAIN COVENANTS
(a) Tax
Information.
As soon
as practicable, but in any event within one hundred twenty (120) days after
the
end of each Fiscal Year of the Partnership, such information concerning the
Partnership (including Schedule K-1 or successor schedule) as is necessary
for a
Partner to complete and file its Federal, state and local tax reporting
requirements.
(b) Financial
Information.
Within
one hundred twenty (120) days after the end of each Fiscal Year of the
Partnership, a written annual report containing the financial statements of
the
Partnership for such Fiscal Year audited by the Partnership’s accountants. To
the extent that any information required to be included in a report or furnished
to a Partner pursuant to this Section
8.2
is
reasonably available only from the Manager and is not furnished by the Manager
on a timely basis, the General Partner shall be authorized to omit such
information from such report or to include in its stead such information as
is
available to the General Partner without unreasonable effort or
expense.
(a) Each
Partner, or the authorized representative(s) thereof, shall have access to
and
may inspect, photocopy and conduct audits of all books, records, accounts and
materials of the Partnership. The exercise of the rights contained in this
Section
8.5
shall be
made at such times that may be reasonably arranged. Each Partner shall bear
the
costs and expenses related to that Partner’s exercise of the rights provided
under this Section
8.5,
except
as otherwise permitted by the General Partner in its sole discretion. An audit
may be conducted by any Person or Persons that Partner selects at such Partner’s
cost.
(b) Subject
to such reasonable standards as may be established by the General Partner,
each
Limited Partner shall have the rights set forth in Section 17-305 of the
Act.
(a) Each
Partner and the Manager shall, and shall cause its Affiliates to, keep
confidential any Confidential Information regarding the Partnership, any of
the
Partnership’s, its Subsidiaries’, its Partners, the Manager and any activity
conducted or proposed to be conducted by the Partnership, its Subsidiaries,
its
Partners or the Manager, use such Confidential Information only in relation
to
the Partnership or any of its Subsidiaries as expressly permitted by this
Agreement and shall not disclose such Confidential Information to any
third-party without the prior written consent of the other Partners, the Manager
(to the extent such Confidential Information relates solely to the Manager)
or
the Partnership, as applicable. Each Partner and the Manager shall maintain
the
Confidential Information of the other Partners or the Manager (to the extent
such Confidential Information relates solely to the Manager) and the Partnership
or any of its Subsidiaries in confidence using at least the same degree of
care
as it employs in maintaining in confidence its own proprietary and confidential
information, but in no event less than a reasonable degree of care.
(b) For
the
purpose of this Section
8.7,
the
term “Confidential
Information”
shall
include all data, reports, interpretations, forecasts and records, financial
or
otherwise, including or reflecting information about or concerning the
Partnership, its Subsidiaries, any Partner or any Affiliate of such Partner,
the
Manager, the business of the Partnership, its Subsidiaries, any Partner or
any
Affiliate of such Partner, or the Investments (including any material received
regarding prospective Investments or Investments which may be used by the
Partnership, the Manager or any of its Subsidiaries) which is not available
to
the general public (whether received before or after the Effective Date and
whether transmitted orally or in writing), including this Agreement, the
Investment Management Agreement, the Master Agreement, the Letter Agreement
and
all agreements and documents related hereto or thereto on the terms of any
of
the foregoing, and the identity of any Partner or its Affiliates, and including
the systems, processes and procedures of the Manager in evaluating, acquiring,
servicing and disposing Eligible Investments, and all improvements or
modifications thereto (the “Manager
Information”).
The
term “Confidential Information” does not include information that: (i) is or
becomes generally available to the public other than as a result of a disclosure
by any Partner or the Manager; (ii) was or becomes available to a Partner or
the
Manager on a non-confidential basis from a source other than the Partnership,
the Manager or the other Partners; provided
that
such source is not bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Partnership
or any other Person with respect to such information; (iii) is developed by
the
receiving Partner or the Manager independently of, or was known by the receiving
Partner or the Manager prior to, any disclosure of such information made by
the
disclosing Partner or the Manager; (iv) is required to be disclosed by order
of
a court of competent jurisdiction, administrative agency or governmental body,
or by any law, rule or regulation, or by subpoena, summons or any other
administrative or legal process, or by applicable regulatory standards, after
notice of such requirement has been given to the Partnership, the disclosing
Partner, or the Manager, as applicable, and the Partnership, the disclosing
Partner, or the Manager, as applicable, has had a reasonable opportunity to
oppose such disclosure; or (v) is disclosed with the written consent of the
disclosing Partner or the Manager (to the extent such Confidential Information
relates solely to the Manager or is Manager Information).
(c) Notwithstanding
Section
8.7(b),
the
Partnership shall be permitted to disclose to any potential purchaser of one
or
more Investments or the Partnership, in connection with any due diligence
investigation by such purchaser, the Manager Information; provided
that
such potential purchaser agrees to execute a non-disclosure agreement agreeing
to keep such Manager Information confidential.
(d) Notwithstanding
anything contained herein to the contrary, LPH and the Manager shall not, and
shall cause its Affiliates not to, publicize or use the names set forth on
Schedule
5
hereto,
or any other similar names or derivatives thereof in connection with its
advertisement, business or in any manner or take any action that may imply
any
relationship between the Manager and the General Partner, without the prior
written consent of the General Partner.
(e) Except
as
otherwise contemplated herein and to the extent otherwise necessary to operate
the business of the Partnership under its name, the General Partner and Mammoth
shall not, and shall cause their respective Affiliates not to, publicize or
use
the “Life Partners” name or take any action that may imply any relationship
between the Manager and the General Partner, without the prior written consent
of the Manager.
(f) During
the term of the Investment Management Agreement and for a period of one (1)
year
thereafter, no Partner or its Affiliates shall solicit or offer to employ any
employee, manager, director or officer of the Manager; provided,
however,
that
nothing in this Section
8.7(f)
shall
restrict or limit any Partner or its Affiliates from: (i) soliciting or hiring
any employee, manager, director or officer of the Manager whose employment
or
relationship with the Manager was terminated by the Manager; or (ii) engaging
in
general solicitations not specifically directed at any employee, manager,
director or officer of the Manager.
(g) The
Partnership and each Partner acknowledge that LPH is a publicly traded company
and that the financial information pertaining to the Partnership and LPH’s
participation herein may constitute material non-public information. During
the
term of this Partnership and so long thereafter as any Partner is in possession
of material, non-public information relating to LPH, neither the Partnership
(nor such Partner or their Affiliate) shall engage in any transactions involving
the securities of LPH.
TRANSFERS
OF INTERESTS; WITHDRAWAL
(a) Restriction
on Transfers.
Except
as otherwise provided in this Agreement, no Partner or Assignee shall Transfer
all or any portion of that Partner’s or Assignee’s Interest, except upon the
prior written authorization of all Partners. Such authorization may specify
the
rights and obligations the transferee shall have, including whether the
transferee to whom an Interest has been Transferred is to be admitted as a
Substituted Partner or have only the rights of an Assignee. If, however, the
authorization does not specify otherwise, the transferee shall be admitted
as a
Substituted Partner. Notwithstanding any of the foregoing, the General Partner
and/or Mammoth shall be entitled to Transfer all or any portion of its
respective Interest at any time to any Person that is an Affiliate of the
General Partner and/or Mammoth, and such transferee shall be admitted as a
Substituted Partner, without the consent of any Partner, and the General Partner
and/or Mammoth may grant an Assignee interest in all or a portion of the
Interests held by such Partner to one or more Persons without the consent of
any
Partner so long as such Person is not a direct competitor of LPH.
Notwithstanding any restriction on Transfers set forth in this Agreement, LPH
may grant an Assignee Interest in a portion of the Interest held by LPH to
one
or more Persons; provided,
however,
that
(i) the first [* * *] of Mandatory Capital Contributions required to be funded
by LPH under this Agreement shall be funded exclusively by LPH’s capital and
prior to such time as such Mandatory Capital Contributions have been so funded,
LPH shall not have the right to grant an Assignee Interest without the prior
written consent of the General Partner, (ii) the General Partner shall have
the
right to consent to such Assignee, which consent shall not be unreasonably
withheld (it being understood that such consent may be conditioned upon, among
other things, satisfactory background checks on the proposed Assignee and its
principals, and (iii) LPH shall at all times be the principal contact as to
the
Partnership and the other Partners in respect of LPH’s Interest, whether or not
LPH grants an Assignee Interest pursuant to this sentence. If a Partner desires
to so Transfer all or any portion of such Partner’s Interest as permitted in
this Section
9.1(a),
each
Partner and the Partnership shall provide any and all requested consents,
information and other relevant materials and otherwise cooperate with the
exercise of such right.
(b) Right
of First Offer; Encumbrances on Interests.
(i) Notwithstanding
anything contained herein to the contrary, in the event LPH or any of its
Affiliates desires to obtain financing with respect to any payment obligations
that LPH or its Affiliates has under this Agreement, the Investment Management
Agreement, the Master Purchase Agreement or the Letter Agreement, as the case
may be, LPH shall, and shall cause its Affiliates to, offer Mammoth and/or
one
or more of its Affiliates, in writing, the right to provide such financing
prior
to obtaining any such financing from any other Person, on terms reasonably
acceptable to the parties. Mammoth shall have ten (10) Business Days following
receipt of written notice from LPH or its Affiliates to provide LPH or its
Affiliates with written notice indicating whether Mammoth and/or one or more
of
its Affiliates or designees will (i) exercise its right to offer to provide
such
financing on terms more particularly set forth in such written notice by Mammoth
to LPH or its Affiliates or (ii) elect in writing not to provide the financing
on any terms. In the event Mammoth: (A) fails to provide an acceptance notice
on
or prior to the expiration of such 10-Business Day period; or (B) on or prior
to
the expiration of such 10-Business Day period, provides notice of its election
not to provide such financing; or (C) the terms of Mammoth’s notice are not
acceptable to LPH, then, in the case of each of (A), (B) or (C), LPH or its
Affiliates shall have the option, but not the obligation, to obtain such
financing from another Person on terms that are not more favorable to the
financing source than those offered by Mammoth or its Affiliate or designee,
as
applicable; provided
that
such Person is not a direct competitor of Mammoth or any of its Affiliates;
and
provided,
further,
that
LPH or its Affiliates shall inform Mammoth of the name of such Person and
Mammoth shall have the right to consent to such Person acting as a financing
source, which consent shall not be unreasonably withheld. In the event Mammoth
provides an acceptance notice to LPH or its Affiliates on a timely basis
exercising its right to provide such financing, Mammoth and/or one or more
of
its Affiliates or designees providing such financing, and, if the terms of
Mammoth’s notice are acceptable to LPH, LPH or its Affiliates, as applicable,
shall enter into such customary agreements, documents, certificates or
instruments necessary and appropriate to provide such financing, containing
customary representations, warranties, covenants and indemnities for
transactions of such kind, and in each case subject to the reasonable approval
of Mammoth and/or its Affiliates providing such financing.
(ii) In
connection with any financing consummated in accordance with this Section
9.1(b), LPH may pledge its Interest in the Partnership as collateral for such
financing; provided, however, that such pledge (x) shall only be as an Assignee
in respect of LPH’s Interest and (y) shall be subordinate and subject to
Mammoth’s rights under Section 9.6 to acquire LPH’s Interest free and clear of
all liens, claims and encumbrances, with the payment of the proceeds of sale
pursuant to Section 9.6 payable to such pledgee (it being acknowledged that
if
such sale proceeds are less than the amount then due to the pledgee, the
pledgee’s security interest and lien on the collateral shall nonetheless be
released and removed and if such sale proceeds exceed the amount then due to
the
pledgee, the pledge shall remit the excess to LPH). General Partner agrees
to
execute such agreements as may be reasonably requested by the lender(s) of
any
such financing in order to provide for the creation and perfection of such
pledge.
(c) `Rights
and Obligations of Transferor and Substituted Partner.
A
Substituted Partner shall have all the rights and powers, and shall be subject
to all the restrictions and liabilities, of the Partner from whom the
Transferred Interest was acquired relative to such Transferred Interest. The
admission of a Substituted Partner, without more, shall not release the
transferor Partner from any liability with respect to the Transferred Interest
(or otherwise) that may have existed prior to the substitution of
interest.
(a) Purchase
at Book Adjusted Value.
In the
event the Manager is terminated as the Manager under Article XI of the
Investment Management Agreement or any other investment management agreement
entered into between a New Partnership and the Manager (as contemplated by
the
Letter Agreement), as a result of a Cause Event (as defined therein) (a
“Book
Value Trigger Event”),
upon
receipt of a Call Notice from Mammoth or its Affiliates, as the case may be
(each, a “Purchasing
Party”),
LPH
shall be irrevocably required to sell, transfer and assign all of its Interests
to the Purchasing Party or Purchasing Parties, as the case may be, at a price
equal to (A) the lesser of (x) LPH’s then current [* * *]; and (y) the [* *
*] less (B) an amount
equal to the product of: (i) the sum of (x) the[* * *] and
(y)
the [* * *] and
(ii)
[* * *].
(b) Purchase
at Adjusted Fair Market Value.
In the
event the Manager: (x) shall cease acting as Manager under Article XI of the
Investment Management Agreement or any other investment management agreement
entered into between a New Partnership and the Manager (as contemplated by
the
Letter Agreement), as a result of an Event of Default (as defined therein),
other than as a result of a Cause Event; or (y) such Investment Management
Agreement or other investment management agreement entered into between a New
Partnership and the Manager (as contemplated by the Letter Agreement) shall
otherwise be terminated other than as a result of a Cause Event (either event,
a
“Fair
Value Trigger Event”),
upon
receipt of a Call Notice from the Purchasing Party or Purchasing Parties, as
the
case may be, LPH shall be irrevocably required to sell, assign and transfer
all
of its Interests to the Purchasing Party or Purchasing Parties, as the case
may
be, at a price equal to (A) the [* * *], less (B) an amount equal to the product
of: (i)
the
sum of (x) the[* * *] and
(y)
the [* * *] and
(ii)
[* * *]. For the avoidance of doubt, in the event of a purchase of LPH's
interest pursuant to this Section 9.6(b), the
price
payable to LPH shall include the value of the Performance Allocation, if any,
due to LPH, in a manner consistent with the definition of “Fair Market Value.”
All reasonable costs and expenses associated with the determination of the
Fair
Market Value shall be borne solely by the Partnership, except as provided in
Section
9.6(d).
(c) Call
Notice.
At any
time following a Book Value Trigger Event or Fair Value Trigger Event,
the
Purchasing Party or Purchasing Parties, as the case may be,
may
provide LPH with written notice (a “Call
Notice”),
which
Call Notice shall specify: (i) whether the purchase right hereunder is based
on
a Book Value Trigger Event or Fair Value Trigger Event; (ii) if a Book Value
Trigger Event, the amount of LPH’s then-current Capital Account balance and the
Book Value attributable to LPH’s Interests, (iii) if a Fair Value Trigger Event,
the Fair Market Value of LPH’s Interests, as determined by the Purchasing Party
or Purchasing Parties, as the case may be, and (iv) the amount of the deduction
pursuant to Section
9.6(a)(B)
or
Section
9.6(b)(B)
ass
determined by the Purchasing Party or Purchasing Parties, as the case may be.
Notwithstanding anything contained herein or in the Investment Management
Agreement to the contrary, upon the occurrence of an Event of Default resulting
from a Bankruptcy of LPH or the Manager, as set forth in Section 11.2(a) of
Investment Management Agreement or any other investment management agreement
as
contemplated under the Letter Agreement, the Purchasing Party shall be deemed
to
have automatically delivered a Call Notice to LPH upon the occurrence of such
Event of Default with the detail of such Call Notice to follow as soon as
reasonably practicable thereafter.
(d) Dispute
Resolution.
In the
event LPH, in good faith, disagrees with the Fair Market Value attributed by
the
Purchasing Party or Purchasing Parties, as the case may be, to LPH’s Interests,
LPH shall provide such Person with written notice (a “Dispute
Notice”)
within
10 days following receipt of the Call Notice, which Dispute Notice shall state,
in reasonably sufficient detail, the grounds for such dispute and a reasonable
calculation of LPH’s determination of the Fair Market Value, including any
relevant information used by LPH in making such determination. During the 10-day
period following receipt of the Dispute Notice (the “Resolution
Period”),
the
Purchasing Party or Purchasing Parties, as the case may be, and LPH shall use
their good faith efforts to resolve such dispute and mutually agree upon a
Fair
Market Value. In the event that the Purchasing Party or Purchasing Parties,
as
the case may be, and LPH are unable to resolve such dispute within the
Resolution Period, the Purchasing Party or Purchasing Parties, as the case
may
be, and LPH, will submit such dispute for resolution to a mutually agreed upon
third party knowledgeable and experienced in providing valuations of the type
required by this Section
9.6(d)
of
recognized standing in the industry (the “Interest
Valuer”);
provided,
however,
that if
the Purchasing Party or Purchasing Parties, as the case may be, and LPH cannot
mutually agree upon an Interest Valuer within the 10-day period following the
expiration of the Resolution Period, the Purchasing Party or Purchasing Parties,
as the case may be, on the one hand, and LPH, on the other hand, shall each
select a third party knowledgeable and experienced in providing valuations
of
the type required by this Section
9.6(d)
of
recognized standing in the industry, and each such Person shall mutually select
the Interest Valuer, which selection shall be binding on each Purchasing Party
and LPH. The Interest Valuer shall promptly (but in any event within 30 days
following its appointment) determine the Fair Market Value, which determination
shall be delivered in writing to each Purchasing Party and LPH and shall be
conclusive and binding on each Purchasing Party and LPH. The fees and
disbursements of the Interest Valuer shall be borne equally by the Purchasing
Parties, on the one hand, and LPH, on the other hand. Notwithstanding any
provision of this Agreement to the contrary, Fair Market Value shall be
determined as of the date of the Call Notice and during the pendency of the
determination of Fair Market Value, LPH shall not have any rights in respect
of
the subject Interests, including, without limitation, the right to receive
Distributions, other than to receive the sales proceeds for such Interests
upon
the closing of the purchase contemplated by this Section
9.6.
(e) Closing.
The
closing of any purchase of the Interests of LPH by the Purchasing Party or
Purchasing Parties, as contemplated by this Section
9.6,
shall
occur promptly, but in no event later than thirty (30) days following delivery
of the Call Notice, subject to any extensions to obtain required governmental
approval, if applicable, or to await the dispute resolution of the Fair Market
Value by the Interest Valuer as provided in Section
9.6(d),
if
applicable. The Purchasing Party or Purchasing Parties, on the one hand, and
LPH, on the other hand, shall enter into customary agreements with customary
representations, warranties, covenants and indemnities for transactions of
this
kind (other than with respect to the Partnership and its business), and take
all
appropriate actions, to effect the purchase of the Interests. The Purchasing
Party or Purchasing Parties shall acquire good title to the Interests of LPH
pursuant to this Section
9.6
free and
clear of any and all liens, claims or encumbrances.
(f) Effect
of Repurchase.
Upon
delivery of a Call Notice, LPH shall cease to (i) be a Partner of the
Partnership and (ii) have any rights or entitlements under this Agreement,
other
than the right to receive proceeds from the sale of the Interests under this
Section
9.6.
DISSOLUTION
AND WINDING UP
(i) Creditors.
First,
to the payment (or reasonable provision therefor) of all of the Partnership’s
debts and liabilities to creditors of the Partnership (including the Partners
who are creditors, if any) in the order of priority provided by law, whether
by
payment or the making of reasonable provision for payment thereof, which may
include the setting up of such reserves as the General Partner (or liquidator,
as the case may be) with the approval of the Partners may deem necessary for
any
obligations or contingent liabilities of the Partnership, and the General
Partner (or liquidator) may hold such reserves for such period that they shall
reasonably deem advisable for the payment of such obligations and liabilities
as
they become due and at the expiration of such period, the balance of such
reserves, if any, shall be Distributed as provided in this Section
10.2;
and
(ii) Liquidating
Distributions.
The
balance, if any, to the Partners in accordance with Section
5.1 subject to the other provisions of Article V.
The
costs
and expenses relating to the winding up of the Partnership shall be borne by
the
Partnership.
Section
10.5 Certificate
of Cancellation.
On
completion of the Distribution pursuant to Section
10.2,
the
Partnership is terminated, and the General Partner (or liquidator, as the case
may be) shall file a certificate of cancellation with the Secretary of State
of
the State of Delaware and cancel any other filings and take such other actions
as may be necessary to terminate the Partnership.
REPRESENTATIONS
AND WARRANTIES
(a) Binding
Obligation.
This
Agreement constitutes the legal, valid and binding obligation of such Partner,
enforceable against such Partner in accordance with its terms.
(b) No
Conflict with Restrictions; No Default.
The
execution, delivery and performance of this Agreement by such Partner does
not
(and will not) conflict with, violate or result in a breach of (i) any law,
regulation, order, writ, injunction, decree, determination or award of any
court, any other Governmental Authority or any arbitrator, now applicable to
such Partner or any of its Affiliates or (ii) any of the terms of any agreement
or instrument to which such Partner or any of its Affiliates is a party or
is
bound.
(c) Litigation.
There
are no actions, suits, proceedings or investigations pending or, to the
knowledge of such Partner, threatened against or affecting such Partner or
any
of its Affiliates (or any of their properties, assets or businesses) in any
court or before or by any Governmental Authority, or any arbitrator which could,
if adversely determined, reasonably be expected to materially affect such
Partner’s ability to perform its obligations under this Agreement or its
financial condition. Neither such Partner nor any of his or its Affiliates
has
received any notice of any default, and neither such Partner nor any of his
or
its Affiliates is in default, under any applicable order, writ, injunction,
decree, permit, determination or award of any court, any other Governmental
Authority or any arbitrator which could reasonably be expected to materially
affect such Partner’s ability to perform its obligations under this Agreement or
its financial condition.
(d) Investigation
and Suitability.
Such
Partner (i) is financially able to bear all the risks of owning the Interests
such Partner is acquiring for an indefinite period of time; (ii) has such
knowledge and experience in financial and business matters to be able to
evaluate the merits and risks of the acquisition of the Interests and of making
an informed investment decision with respect thereto; (iii) has been provided,
or has had access to, all information such Partner has requested of the
Partnership in connection with the acquisition of the Interests; (iv) has been
afforded the opportunity to ask questions of, and receive answers from, the
Partnership concerning the terms and conditions of this Agreement and the
purchase of the Interests; (v) has been given the opportunity to obtain any
additional information necessary to verify the accuracy of the information
furnished by, or on behalf of, the Partnership; (vi) is acquiring the Interests
based upon such Partner’s own investigation of such relevant information
(including the foregoing) that it deems to be necessary or desirable and, in
connection therewith, has received the full cooperation of, and assistance
from,
the Partnership; and (vii) has consulted, to the extent that such Partner has
deemed necessary, with its tax, legal, accounting and financial advisors
concerning its acquisition of its Interests. The exercise by such Partner of
its
rights and the performance of its obligations under this Agreement is based
upon
such Partner’s own investigation, analysis and expertise.
(e) Purchase
for Own Account.
Such
Partner’s acquisition of said Interests is being made for that Partner’s own
account for investment, and not with a view to the sale or distribution thereof.
Such Partner acknowledges that the Interests that they represent, have not
been
registered under the Securities Act, or any foreign, state or other federal
securities laws, and, in addition to the other restrictions contained herein,
any Transfer or offer to Transfer thereof may require appropriate registration
or the availability of an exemption from such registration under said laws
and
the regulations issued thereunder and, therefore, is aware that the financial
risks of such investment must be borne for an indefinite period of
time.
MISCELLANEOUS
(a) if
to the
Partnership, to the Partnership at the address of its principal place of
business set forth in Section
2.3(a);
and
(b) if
to a
Partner, to the address set forth in Schedule
2
hereto
unless the General Partner or an appropriate officer has been notified in the
manner provided in this Section
12.1
by a
Partner of a change in such Partner’s address for receiving notices hereunder,
then to the address most recently designated by such Partner in the manner
provided in this Section
12.1(b).
Unless
otherwise indicated herein, any Notice shall be deemed to be delivered, given
and received for all purposes as of the date delivered, or if sent by first
class mail, five (5) days after the date on which the same was deposited in
a
receptacle, regularly maintained by the United States Postal Service for the
deposit of mail, whichever occurs first.
(a) Tax
Matters Partner.
Pursuant to Section 6231(a)(7) of the Code, the General Partner is hereby
designated the Tax Matters Partner of the Partnership (the “Tax
Matters Partner”).
Each
of the Partners hereby consents to such designation and agrees to take any
such
further action as may be required by Regulations or otherwise to effectuate
such
designation. The Tax Matters Partner is authorized to represent the Partnership
(at the Partnership’s expense) in connection with all examinations of the
Partnership’s affairs by any tax authorities, including resulting judicial and
administrative proceedings, and to expend Partnership funds for professional
services and costs associated therewith. The decisions of the Tax Matters
Partner shall be final and binding as to all Partners except to the extent
that
any Partner files a statement not to be bound by a settlement pursuant to Code
Section 6224(c)(3).
(b) Elections.
The
General Partner shall make all elections and other determinations for federal,
state, local and foreign tax purposes, on behalf of the
Partnership.
Section
12.8 Governing
Law.
The
laws of the State of Delaware, without reference to conflict of laws principles,
shall govern the validity, construction and interpretation of this
Agreement.
(a) Each
Partner agrees that the Partnership and the other Partners would be irreparably
damaged if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that monetary damages would not provide
an adequate remedy in such event. Accordingly, it is agreed that, in addition
to
any other remedy to which the Partnership and each Partner may be entitled,
at
law or in equity, they shall be entitled to injunctive relief to prevent or
remedy breaches of the provisions of this Agreement and specifically to enforce
the terms and provisions hereof in any action instituted in any court of
competent jurisdiction.
(b) Nothing
in this Agreement shall be deemed to limit the right of any Partner to obtain
from a court provisional or ancillary remedies, including temporary restraining
orders, preliminary injunctive relief, or the appointment of a receiver. The
institution or maintenance of an action for provisional or ancillary remedies
shall not constitute a waiver of the right of any Partner.
(a) Appointment.
Each
Limited Partner hereby constitutes and appoints the General Partner, and any
successor in interest of the General Partner, its true and lawful
attorney-in-fact, with full power of substitution, for it and in its name,
place
and stead, from time to time:
(i) To
make,
execute, swear to, record and file the Certificate and any amendments thereto,
as required under the Act, and to do such other acts as are required to
constitute and continue the Partnership as a limited partnership under the
laws
of the State of Delaware;
(ii) To
make,
enter, execute, deliver and file any and all agreements, instruments,
certificates or other documents amending this Agreement and the Certificate,
as
presently constituted or hereafter amended, that may be necessary or appropriate
to reflect:
|
(A)
|
a
change in the name or location of the principal place of business
of the
Partnership or a change of name or address of any
Partner;
|
|
(B)
|
the
Transfer by a Partner of its interest in the Partnership or any part
thereof;
|
|
(C)
|
the
addition or substitution of a Partner as approved pursuant to the
terms of
this Agreement;
|
|
(D)
|
a
distribution in reduction of the Capital Contribution of a
Partner;
|
|
(E)
|
a
change in the capital of the
Partnership;
|
|
(F)
|
any
continuation, dissolution or termination of the Partnership in accordance
with the terms of this Agreement;
and
|
|
(G)
|
any
other amendment authorized pursuant to Section
12.16
hereof;
|
(iii) To
make,
enter, execute, deliver and file any and all agreements, instruments,
certificates or other documents to effect the purposes of the Partnership as
set
forth in this Agreement and to the extent authorized by the terms of this
Agreement;
(iv) To
sign,
execute, acknowledge, swear to, verify, deliver, file, record and publish any
and all of the foregoing; and
(v) To
take
any further action, including furnishing verified copies of this Agreement
and/or excerpts therefrom, which said attorney-in-fact shall consider necessary
or convenient in connection with any of the foregoing, hereby giving said
attorney-in-fact full power and authority to do and perform each and every
act
and thing whatsoever requisite and necessary to be done in and about the
foregoing as fully as such Limited Partner might or could do if personally
present, and hereby ratifying and confirming all that said attorney-in-fact
shall lawfully do or cause to be done by virtue hereof, so long as said acts
are
in accordance with the terms of this Agreement.
(b) The
foregoing grant of authority set forth in subparagraph (a) of this Section 12.18:
(i) Is
a
special power of attorney coupled with an interest, is irrevocable and shall
survive the death, incompetence, bankruptcy, dissolution or liquidation of
any
Limited Partner;
(ii) May
be
exercised by the General Partner for each Limited Partner by the signature
of
the General Partner or by listing all of the Limited Partners executing any
agreement, instrument, certificate or other document with the single signature
of the General Partner as attorney-in-fact for all of them; and
(iii) Shall
survive the Transfer by any Limited Partner of all or any part of its interest
in the Partnership, except that where the transferee or assignee thereof is
admitted as a Substituted Limited Partner as to all of such interest, this
power
of attorney shall survive the delivery of such Transfer for the sole purpose
of
enabling such attorney-in-fact to make, enter, execute, deliver and file any
such agreement, instrument, certificate or other document necessary to effect
such substitution.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the parties hereto have entered into this Agreement and
hereunto set their hands and seals as of the date first above
written.
THE
PARTNERSHIP:
LPI
HOLDINGS I LP
By:
________________________________
Name:
______________________________
Title:
GENERAL
PARTNER:
LPI
GP I
LLC
By:
________________________________
Name:
______________________________
Title:
LIMITED
PARTNERS:
MAMMOTH
LIFE LLC
By:
________________________________
Name:
______________________________
Title:
LIFE
PARTNERS HOLDINGS, INC.
By:
/s/
▇▇▇▇▇ ▇. ▇▇▇▇▇
Name:
▇▇▇▇▇
▇. ▇▇▇▇▇
Title:
Chairman and CEO
EXHIBIT
A
CERTIFICATE
OF LIMITED PARTNERSHIP
SCHEDULE
1
DEFINITIONS
“Acquisition
Vehicle”
means
an Organization that has been formed by the Partnership to acquire one or more
Investments on behalf of the Partnership, or as nominee of the
Partnership.
“Act”
means
the Delaware Revised Uniform Limited Partnership Act (Del. Code ▇▇▇. tit. 6,
§
17-101 et seq.),
as
adopted by the State of Delaware and as amended from time to time.
“Adjusted
Capital Account Deficit”
means
the deficit balance, if any, in a Partner’s Capital Account as of the end of a
Fiscal Year (or other applicable period), after giving effect to the following
adjustments, which adjustments shall be made only to the extent that such
Partner’s Capital Account balance is, in fact, affected by the provisions of the
Regulations to which reference is made in this definition of Adjusted Capital
Account Deficit:
(a) Credit
to
such Capital Account any amounts (i) described in section 1.704-1(b)(2)(ii)(c)
of the Regulations which such Partner is unconditionally obligated to contribute
to the Partnership pursuant to this Agreement or applicable law or (ii) which
such Partner is deemed obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5);
and
(b) Debit
to
such Capital Account the items described in Sections 1.704-l(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
“Affiliate”
of
a
specified Person means any other Person who (a) directly or indirectly controls,
is controlled by, or is under common control with, such specified Person; (b)
owns or controls either ten percent (10%) or more of the outstanding voting
stock or other voting equity or beneficial interests of such specified Person
or
ten percent (10%) or more of the value of the total outstanding stock or other
equity securities of such specified Person determined on a fully diluted basis;
(c) is an officer, director, general partner, trustee, manager or agent of
such
specified Person; or (d) is an officer, director, general partner, trustee,
manager, or agent of and owns or controls ten percent (10%) or more of the
outstanding voting interests of such other Person described in clause (a),
(b)
or (c) of this sentence. For purposes of the preceding sentence, “control” of a
Person means possession, directly or indirectly (through one or more
intermediaries), of the power to direct or cause the direction of management
and
policies of such Person through ownership of voting securities (or other
ownership interests), contract, voting trust or otherwise. For purposes of
this
Agreement, Mammoth and the General Partner shall each be considered an Affiliate
of the other.
“Agreement”
means
this Agreement of Limited Partnership of LPI HOLDINGS I LP, including all
schedules hereto, as the same may be amended, supplemented, modified or restated
from time to time.
“Alternative
Investment Vehicle”
is
defined in Section 2.10(a).
“Assignee”
means
a
Person (other than a Partner) to whom all or part of a Partner’s Interest has
been Transferred, but who has not been admitted as a Substituted Partner. Any
Person who owns only Assignee Interests shall be deemed to be an Assignee and
not a Partner of the Partnership.
“Assignee
Interests”
means
those Interests that confer only the economic rights of an Assignee and not
any
of the other rights of a Partner.
“Available
Cash”
means,
except as otherwise provided in Article
V,
all
cash funds of the Partnership (other than in respect of Capital Contributions
or
amounts borrowed by the Partnership) from interest, asset sales, settlement
proceeds, fees or other sources at any particular time available for
Distribution after the General Partner makes reasonable provision for (a)
payment of all operating expenses of the Partnership as of such time, (b)
payment of all outstanding and unpaid current obligations of the Partnership
as
of such time, including principal and interest payments in respect of the
Partnership’s and its Subsidiaries’ indebtedness for borrowed money, and (c)
Reserves. The General Partner shall make all determinations regarding the amount
of Available Cash (and its components) in its sole discretion.
“Bankruptcy”
means,
with respect to any Person, a “Voluntary Bankruptcy” or an “Involuntary
Bankruptcy.” A “Voluntary
Bankruptcy”
means,
with respect to any Person, the (a) institution (or consenting to the
institution) of proceedings or filing an answer or other pleading to be
adjudicated a bankrupt or insolvent or seeking for such Person any liquidation,
winding up, dissolution, reorganization, rearrangement, adjustment, protection,
composition or other similar relief of such Person or such Person’s debts under
any Bankruptcy Law; or (b) seeking, consenting to, or acquiescing in any entry
of an order for relief or the appointment of a receiver, trustee, liquidator
or
other similar official for such Person or all or any substantial part of such
Person’s property under any Bankruptcy Law. An “Involuntary
Bankruptcy”
means,
with respect to any Person, without the consent of such Person, (a) the entering
of an order for relief or approving a petition or other pleading for relief
or
reorganization or any other petition or other pleading seeking any liquidation,
winding up, dissolution, reorganization, rearrangement, adjustment, composition
or other similar relief against such Person under any Bankruptcy Law; (b) the
filing of any such petition or other pleading against such Person which petition
is not discharged or dismissed within sixty (60) days of such filing; or (c)
without the consent or acquiescence of such Person, the entering of an order
appointing a receiver, trustee, liquidator or other similar official for such
Person or of all or any substantial part of such Person’s property, which order
is not dismissed within sixty (60) days of the date it is entered.
“Bankruptcy
Law”
means
any law relating to bankruptcy, insolvency, reorganization, liquidation or
other
relief of debtors, including Title 11 of the United States Code, as
amended.
“Book
Value”
means,
with respect to the valuation of an Interest, the amount which equals the net
book value of such Interest (including premium payments and escrow payments)
as
reflected on the Partnership’s consolidated balance sheet for the Partnership’s
most recent completed fiscal quarter as determined by reference to the
particular rights and privileges associated with such Interest, including rights
to receive Distributions pursuant to Section
5.1,
but
excluding the value, if any, of the Performance Allocation.
“Book
Value Trigger Event”
is
defined in Section
9.6(a).
“Business
Day”
means
any day other than a Saturday, Sunday or any other day on which national banking
associations in the State of New York or Texas generally are closed for the
conduct of commercial banking business.
“Call
Notice”
is
defined in Section
9.6(c).
“Capital
Account”
means,
with respect to each Partner, the capital account of such Partner, maintained
in
accordance with the relevant provisions of Subchapter K of Chapter 1 of Subtitle
A of the Code and the Regulations promulgated thereunder.
“Capital
Contribution”
means,
with respect to each Interest, the amount of Capital Contributions made to
the
Partnership by a Partner in respect of such Interest, the aggregate initial
amount of which is set forth on Schedule
2
hereto
and, where the content requires, capital contributed to any Investment
Vehicle.
“Certificate”
means
the Certificate of Limited Partnership attached hereto as Exhibit
A,
as the
same may be amended from time to time in accordance with the terms of this
Agreement and filed with the Delaware Secretary of State in the manner required
by the Act.
“Code”
is
defined in Section
4.3.
“Confidential
Information”
is
defined in Section
8.7(b).
“Contributing
Partner”
is
defined in Section
3.4(a).
“Covering
Contribution”
is
defined in Section
3.4(a).
“Dispute
Notice”
is
defined in Section
9.6(d).
“Dissolution
Event”
is
defined in Section
10.1.
“Distribute”
means
to make one or more Distributions.
“Distribution”
or
“Distributions”
means
with respect to a Partner, the amount of money and the net fair market value
(as
determined by the General Partner) of the property other than money distributed
to a Partner by the Partnership on account of that Partner’s Interest as
provided in Article
V
or
Section
10.2.
“Effective
Date”
is
defined in the introductory paragraph hereof.
“Eligible
Investment”
means
each life settlement contract approved for purchase by the General Partner
on
behalf of the Partnership in the manner set forth in the Investment Management
Agreement and sourced, originated and acquired by the Manager pursuant to the
terms of the Investment Management Agreement and the Master Purchase
Agreement.
“Escrow
Account”
means
the separate trust account to be established and maintained in accordance with
the terms of the Escrow Agreement.
“Escrow
Agreement”
means
that certain Escrow Agreement to be entered by and among the Partners, the
Partnership and the Escrow Agent, to be defined therein, as contemplated by
the
Letter Agreement.
“Fair
Market Value”
means,
with respect to the valuation of an Interest, the net realized cash amount
that
would be available for Distribution in respect of such Interest if the
Partnership and all of its Investments were liquidated in their entirety in
the
manner set forth in Article
X
hereof.
“Fair
Value Trigger Event”
is
defined in Section
9.6(b).
“Fiscal
Year”
means
the annual accounting period of the Partnership, which shall commence on January
1 of each year (or such later date as the Partnership shall commence its
existence) and end on the last day of December.
“Formation
Expenses”
is
defined in Section
2.9(a).
“GAAP”
means
United States generally accepted accounting principles.
“General
Partner”
is
defined in the introductory paragraph hereof.
“General
Partner Interest”
means
the Interests owned by the General Partner.
“Governmental
Authority”
means
any United States or non-United States governmental or regulatory entity,
agency, authority, commission, department, board, bureau, political subdivision,
court, tribunal, official arbitrator or arbitral body, or any other entity
entrusted by the aforesaid entities or authorized by Law to exercise
administrative power.
“Gross
Asset Value”
means,
with respect to any Partnership asset, the asset’s adjusted basis for U.S.
Federal income tax purposes, except that Gross Asset Values of all Partnership
assets shall be adjusted to equal their respective fair market values (as
determined by the General Partner), in accordance with the rules set forth
in
Treasury Regulations Section 1.704-1(b)(2)(iv)(f), except as otherwise provided
herein, immediately prior to: (a) the date of the acquisition of any additional
Interest by any new or existing Partner for more than a de minimus Capital
Contribution; or (b) the date of the distribution of more than a de minimus
amount of Partnership property (other than a pro rata distribution) to a
Partner, provided
that
adjustments pursuant to clauses (a) and (b) above shall be made only if the
General Partner reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Partners. The
Gross Asset Value of any Partnership asset shall be adjusted to equal its fair
market value upon a write-down in the value of the asset, as determined by
the
General Partner. The Gross Asset Value of any Partnership asset distributed
to
any Partner shall be adjusted immediately prior to such distribution to equal
its fair market value as determined by the General Partner. The initial Gross
Asset Value of any asset contributed by a Partner to the Partnership shall
be
the fair market value of such asset, as determined by the General Partner.
The
Gross Asset Values of the assets of the Partnership’s assets shall be increased
or decreased to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m).
“Indemnifiable
Losses”
means
any and all claims, liabilities, losses, damages, penalties, actions, judgments,
fines, forfeitures, amounts paid in settlement, costs or expenses of any kind
or
nature whatsoever, including all reasonable attorneys’ fees, costs, fees and
expenses of defense, appeal and settlement of any proceedings instituted against
any Indemnitee or other applicable Person, and all costs of investigation in
connection therewith.
“Indemnitee”
is
defined in Section
6.6(a).
“Interest”
of
any
Partner at any time means the entire ownership interest of such Partner in
the
Partnership at such time, represented as either a General Partner Interest
or a
Limited Partner Interest, including all benefits to which the owner of such
Interest is entitled under this Agreement or applicable law, including, without
limitation, the right to receive Distributions under Section
5.1 or 10.2,
together with all obligations of such Partner under this Agreement and
applicable law.
“Interest
Valuer”
is
defined in Section
9.6(d).
“Internal
Rate of Return”
means
the annual rate, compounded monthly, at which the net present value on the
date
of calculation, of all distributions, from all sources (including, without
limitation, all distributions pursuant to Sections
5.1(a),
(b)
and
(c),
by the
Partnership to a Partner (discounted at such annual rate from the dates such
distributions are made by the Partnership to such Partner), is equal to the
net
present value, as of the date of this Agreement, of the Capital Contributions,
Formation Expenses and Reimbursable Expenses made by or on behalf of such
Partner to the Partnership (discounted at such annual rate from the dates such
Capital Contributions were made by such Partner).
“Investment”
means
each Eligible Investment acquired by the Partnership (or by any Investment
Vehicle).
“Investment
Allocation”
means
the percentage allocation of the Partners set forth on Schedule
2
hereto.
“Investment
Management Agreement”
means
that certain Investment Management Agreement, dated as of the Effective Date,
by
and between the Manager and the Partnership, as the same may be amended,
supplemented, or otherwise modified from time to time.
“Investment
Vehicle”
means
any Acquisition Vehicle or Alternative Investment Vehicle.
“Laws”
means
any foreign, Federal, state or local laws, statutes, ordinances, rules,
regulations, orders, writs, judgments or decrees.
“Letter
Agreement”
means
that certain Letter Agreement dated as of the Effective Date.
“Limited
Partner Interest”
means
the Interests owned by a Limited Partner.
“LPH”
means
Life Partners Holdings, Inc., a Texas corporation.
“Mammoth”
means
Mammoth Life LLC, a Delaware limited liability company.
“Manager”
means
Life Partners, Inc. a subsidiary of LPH, in its capacity as Manager under the
Investment Management Agreement, or, to the extent applicable, such other
Organization as may appointed from time to time by the General Partner as
Manager.
“Mandatory
Capital Contribution”
is
defined in Section
3.3.
“Margin
Amount”
has
the
meaning set forth in the Master Purchase Agreement.
“Master
Purchase Agreement”
is
defined in the Investment Management Agreement.
“Maximum
Investment Amount”
has
the
meaning set forth in the Letter Agreement.
“Net
Income”
and
“Net
Losses”
as
appropriate, means, for any Fiscal Year, the taxable income or tax loss of
the
Partnership for such period or other applicable period for Federal income tax
purposes taking into account any separately stated items, increased by the
amount of any tax-exempt income of the Partnership during such period and
decreased by the amount of any Code Section 705(a)(2)(B) expenditures (within
the meaning of Regulations Section 1.704-1(b)(2)(iv)(i)) of the Partnership;
provided,
however,
that
Net Income or Net Losses of the Partnership shall be computed without regard
to
the amount of any items of income that are specially allocated pursuant to
Section
4.4.
“New
Partnership”
is
defined in the Letter Agreement.
“Non-Contributing
Partner”
is
defined in Section
3.4.
“Nonrecourse
Deductions”
means
Net Losses, deductions or Code Section 705(a)(2)(B) expenditures attributable
to
Partnership nonrecourse liabilities as defined in Regulations Section
1.704-2(b)(1).
“Notice”
is
defined in Section
12.1.
“Organization”
means
any corporation, partnership, joint venture or enterprise, limited liability
company, unincorporated association, trust, estate, governmental entity or
other
entity or organization, and shall include the successor (by merger or otherwise)
of any entity or organization.
“Partner
Amount”
is
defined in Section
5.4.
“Partners”
or
“Partner”
is
defined in the introductory paragraph hereof.
“Partnership”
is
defined in the introductory paragraph hereof.
“Performance
Allocation”
is
defined in Section
5.1(d).
“Person”
means
any natural person or any Organization.
“Preferred
Return”
means,
as of any date, an Internal Rate of Return of [* * *] per
annum
(compounded monthly) on such Partner’s outstanding Reimbursable Expenses,
Formation Expenses and unreturned Capital Contributions, calculated from the
date such amounts were contributed to the Partnership or otherwise paid on
the
Partnership’s behalf to the date as of which such calculation is being made;
provided
that the
Preferred Return on any Capital Contributions, Formation Expenses or
Reimbursable Expenses shall cease to accrue with respect to such Capital
Contributions, Formation Expenses or Reimbursable Expenses once they have been
repaid.
“Purchasing
Party”
is
defined in Section
9.6(c).
“Realization”
means,
with respect to each Investment, the earlier of (a) the payment of death
benefits to the Partnership attributable to such Investment, and (b) the sale,
exchange, liquidation, abandonment or other disposition or complete realization
of such Investment.
“Regulations”
means
the final and temporary regulations of the U.S. Department of the Treasury
promulgated under the Code.
“Reimbursable
Expenses”
is
defined in Section
2.9(b).
“Reserves”
means
the sum of funds or amounts reasonably required to be set aside or otherwise
allocated for working capital to pay taxes, insurance, costs associated with
the
Partnership’s business or operations, any future, anticipated or contingent
losses on one or more particular Investments to the extent reasonably identified
by the General Partner, debt service and future, anticipated or contingent
obligations and expenses incident to the Partnership’s operations or ownership
of its Investments that are not otherwise required to be paid by the Partners
pursuant to the terms of this Agreement.
“Resolution
Period”
is
defined in Section
9.6(d).
“Sale
Notice”
is
defined in Section
6.2(b).
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Special
Allocations”
is
defined in Section
4.4(a).
“Subject
Assets”
is
defined in Section
6.2(b).
“Subsidiary”
means
any Organization in which the Partnership or a Subsidiary thereof owns or
controls, directly or indirectly, either fifty percent (50%) or more of the
outstanding equity or beneficial interests or other equity securities determined
on a fully diluted basis.
“Substituted
Partner”
means
any Person who is admitted as a Partner of the Partnership in the manner
provided in Section
9.1(a).
“Tax
Matters Partner”
is
defined in Section
12.2(a).
“Transfer”
means
(a) as a noun, any conveyance or other transfer, sale, alienation, lease,
mortgage, pledge, encumbrance, lien, hypothecation or other disposition (whether
voluntary or involuntary), and (b) as a verb, the act of making any voluntary
or
involuntary Transfer.
“Unauthorized
Transfer”
is
defined in Section
9.2.
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