EXHIBIT B-1
THE SECURITIES REPRESENTED BY THIS AGREEMENT OF LIMITED
PARTNERSHIP HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME
WHATSOEVER, EXCEPT UPON REGISTRATION OR UPON DELIVERY TO THE
PARTNERSHIP OF AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL
PARTNERS THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR
THE SUBMISSION TO THE GENERAL PARTNERS OF THE PARTNERSHIP OF SUCH
OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE GENERAL PARTNERS TO
THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF
THE SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE
SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED UNDER SUCH
ACT OR LAWS.
AGREEMENT OF LIMITED PARTNERSHIP
OF
SOUTHERN MISSOURI GAS COMPANY, L.P.
This Agreement of Limited Partnership ("Partnership
Agreement") is made as of ___________, 1995 (the "Effective
Date"), by and among the Partners (as defined below).
Although upon the formation of the Partnership, the
Partnership Interests will be solely held by Tartan Limited
Partnership of Missouri and the Individuals, such Partnership
Interests shall immediately be distributed and/or conveyed as
contemplated under the Formation Agreement. Accordingly, the
execution of this Agreement by the Partners is either in their
capacity as partners in Tartan Limited Partnership of Missouri
and Individuals or as Partners.
In consideration of the mutual promises made herein, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Partners hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms used in this
Partnership Agreement shall (unless otherwise expressly provided
herein or unless the context otherwise requires) have the
following respective meanings:
"Act" means The Missouri Revised Uniform Limited Partnership
Act, Vernon's Annotated Missouri Statutes tit. XXIII Ch. 359 et
seq. (1994), as it may be amended from time to time, and any
successor act.
"Adjusted Capital Account Deficit" means, with respect to
any Partner, the deficit balance, if any, in such Partner's
Capital Account as of the end of the relevant fiscal year, after
(a) increasing such Capital Account by any amounts that such
Partner is obligated to restore under the standards set by Treas.
Reg. Sec. 1.704-1(b)(2)(ii)(c) (relating to a Partner's obligation
to restore the deficit balance in its capital account), or is
deemed obligated to restore under Treas. Reg. Sec. 1.704-2(g) and
1.704-2(i)(5) (as those provisions may apply to obligations to
restore for debts owed to the Partnership by such Partners, or
relating to a Partner's share of minimum gain) and (b) decreasing
such Capital Account by the amount of all losses and deductions
for the items described in Treas. Reg. Sec. 1.704-1(b)(2)(ii)(d)(5)
(relating to allocations of loss and deductions that, as of the
end of the year, are reasonably expected to be made) and
1.704-1(b)(2)(ii)(d)(6) (relating to year-end distributions).
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treas. Reg. Sec. 1.704-
1(b)(2)(ii)(d) (relating to the "alternate test for economic
effect") and shall be interpreted consistently therewith.
"Affiliate" or "Affiliates" means with respect to any
Person, except as otherwise provided herein: (i) any person or
entity directly or indirectly controlling, controlled by or under
common control with such Person; (ii) any person or entity owning
or controlling 10% or more of the outstanding voting securities
of such Person; and (iii) if such Person is an officer, director,
partner or member, any company for which such Person acts in such
capacity.
"Capital Account" means, with respect to a Partner, the
Capital Account maintained for such Partner in accordance with
the following provisions:
(a) To each Partner's Capital Account there shall be
credited such Partner's Capital Contributions, such Partner's
distributive share of Profits, any items in the nature of income
or gain which are specially or curatively allocated pursuant to
Section 5.4 hereof, and the amount of any Partnership liabilities
assumed by such Partner or which are secured by any asset of the
Partnership distributed to such Partner.
(b) To each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any
Partnership asset distributed to such Partner pursuant to any
provision of this Partnership Agreement, such Partner's distribu-
tive share of Losses and any items in the nature of deductions or
losses that are specially allocated pursuant to Section 5.3
hereof, and the amount of any liabilities of such Partner assumed
by the Partnership or which are secured by any property con-
tributed by such Partner to the Partnership.
(c) In the event all or a portion of a Partnership
Interest is transferred in accordance with the terms of this
Partnership Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the
transferred Partnership Interest.
(d) In determining the amount of any liability for
purposes of this definition of Capital Accounts, there shall be
taken into account Code Sec. 752(c) and any other applicable
provisions of the Code and Regulations.
The foregoing provisions and the other provisions of this
Partnership Agreement relating to the maintenance of Capital
Accounts are intended to comply with Treas. Reg. Sec. 1.704-1(b)
(relating to whether such allocations shall have a "substantial
economic effect" for tax purposes), and shall be interpreted and
applied in a manner consistent with such Regulations.
"Capital Contributions" means, with respect to any Partner,
the amount of money and the initial Gross Asset Value of any
property (other than money) contributed to the Partnership with
respect to the Partnership Interest held by such Partner. Loans
to the Partnership shall not be included in the Capital Account
of any Partner. The principal amount of a promissory note which
is not readily traded on an established securities market and
which is contributed to the Partnership by the maker of the note
shall not be included in the Capital Account of any Partner until
the Partnership makes a taxable disposition of the note or until
(and to the extent) principal payments are made on the note, all
in accordance with Treas. Reg. Sec. 1.704-1(b)(2)(iv)(d)(2)
(relating to the contributions to a partnership of promissory
notes).
"Certificate of Limited Partnership" means the Certificate
of Limited Partnership of Southern Missouri Gas Company, L.P.
filed with the Secretary of the State of Missouri, as it may be
amended and/or restated from time to time.
"Change" or "Changes" means (i) a Transfer of a Partnership
Interest, (ii) the issuance of additional Units upon a Capital
Contribution, (iii) any redemption of Units, or (iv) any
combination thereof.
"Chemical Bank Credit Agreement" means the Credit Agreement,
dated October __, 1995, between Tartan Energy Company of
Missouri, L.C. and Chemical Bank as in effect on the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time (or any corresponding provisions of succeeding
law).
"Departing Partner" shall mean a former General Partner,
from and after the effective date of any withdrawal or removal of
such former General Partner pursuant to Article VIII.
"Depreciation" means, for each fiscal year or other period,
an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such
year or other period, except that if the Gross Asset Value of an
asset differs from its adjusted basis for Federal income tax
purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the Federal income tax
depreciation, amortization, or other cost recovery deduction for
such year or other period bears to such beginning adjusted tax
basis; provided, however, that if the Federal income tax
depreciation, amortization, or other cost recovery deduction for
such year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any
reasonable method selected by Tartan Management or its successor.
"Effective Date" shall have the meaning set forth in the
introduction to this Partnership Agreement.
"Formation Agreement" means that certain Formation
Agreement, dated as of October 12, 1995, by and among MCN, Tartan
Energy Company of Missouri, L.C., Tartan Management, Tartan
Limited Partnership of Missouri, TEMI and the Individuals party
thereto.
"General Partner" or "General Partners" means MCN and Tartan
Management, and any additional Persons admitted to the
Partnership as a general partner of the Partnership, but does not
include any Person who has ceased to be a general partner of the
Partnership.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for Federal income tax purposes, except as
follows:
(a) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross
fair market value of such asset, as determined by the con-
tributing Partner and the Partnership;
(b) The Gross Asset Values of all Partnership assets
shall be adjusted to equal their respective gross fair market
values, as determined by the General Partners, as of the
following times: (a) the acquisition of an additional interest
in the Partnership by any new or existing Partner in exchange for
more than a de minimis Capital Contribution; (b) the distribution
by the Partnership to a General Partner or Limited Partner of
more than a de minimis amount of Property as consideration for an
interest in the Partnership; and (c) the liquidation of the
Partnership within the meaning of Treas. Reg. Sec. 1.704-
1(b)(2)(ii)(g) (relating to when a liquidation of a partnership
occurs); provided, however, that adjustments pursuant to clauses
(a) and (b) above shall be made only if the General Partners,
with the consent of a Majority in Interest of the Limited
Partners, determine that such adjustments are necessary or
appropriate to reflect the relative economic interests of the
General Partners and Limited Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset
distributed to any General Partner or Limited Partner shall be
the gross fair market value of such asset on the date of
distribution; and
(d) The Gross Asset Values of Partnership assets shall
be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Sec. 734(b) or Code
Sec. 743(b), but only to the extent that such adjustments are taken
into account in determining Capital Accounts pursuant to Treas.
Reg. Sec. 1.704-1(b)(2)(iv)(m) (relating to a Code Sec. 754
election) and the definition of Capital Account hereof.
"Indemnitee" shall mean (i) a Partner, (ii) any Departing
Partner, (iii) any Person who is or was an Affiliate of the
Partner or any Departing Partner, (iv) any Person who is or was
an officer, director, employee, partner, agent or trustee of the
Partner, the Partnership, any Departing Partner or any such
Affiliate, or (v) any Person who is or was serving at the request
of a Partner, any Departing Partner or any such Affiliate as a
director, officer, employee, partner, agent, attorney or trustee
of another Person.
"Limited Partner" or "Limited Partners" means Tartan
Management, MCN and TEMI and their successors, and any other
person or entity admitted as a Limited Partner of the Partnership
pursuant to this Partnership Agreement, or a General Partner
whose Partnership Interest becomes that of a Limited Partner
pursuant to this Partnership Agreement but does not include any
Person who has ceased to be a Limited Partner.
"Majority in Interest of the Limited Partners" means such of
the Limited Partners as have, at the time of determination, more
than fifty percent of the Partnership Percentages of all Limited
Partners.
"Majority in Interest of the Partners" means such of the
Partners as have, at the time of determination, more than fifty
percent of the Partnership Percentages of all Partners.
"Management Agreement" means that certain Construction,
Operation, and Maintenance Management Agreement, dated as of
__________, 1995, by and between Tartan Energy Company of
Missouri, L.C. d/b/a Southern Missouri Gas Company, L.C. and
Tartan Management.
"MCN" means MCN Corporation, a Michigan corporation.
"Partners" or "Partner" means the General Partners and the
Limited Partners, or any of them individually.
"Partnership" means Southern Missouri Gas Company, L.P., a
Missouri limited partnership.
"Partnership Agreement" has the meaning given that term in
the introductory paragraph hereof.
"Partnership Interest" means that equity interest of a
Partner in the Partnership, as reflected by such Partner's
Partnership Percentage.
"Partnership Percentage" means, unless there has been a
conversion pursuant to Section 4.1(d)(iii), the ownership
percentage of each Partner which shall be as set forth below:
(a) General Partners - 2% collectively, which
immediately following the Second Closing (as defined in the
Formation Agreement) shall be allocated 1% to MCN and 1% to
Tartan Management; and
(b) Limited Partners - 98% collectively, which
immediately following the Second Closing (as defined in the
Formation Agreement) shall be allocated 47.5% to TEMI, 46.5% to
MCN and 4% to Tartan Management.
Upon the occurrence of a Change or Changes, however, such
Partnership Percentages shall be subject to adjustment pro rata
so as to reflect such Change or Changes.
"Person" means any individual, joint venture, partnership,
limited liability company, corporation, trust or other entity.
"Profits" and "Losses" means, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or
loss for such year or period applicable to a particular class of
Units, determined in accordance with Code Sec. 703(a) (for this
purpose, all items of income, gain, loss, or deduction required
to be stated separately pursuant to Code Sec. 703(a)(1) shall be
included in taxable income or loss), with the following ad-
justments:
(a) Any income of the Partnership applicable to such
class of Units that is exempt from Federal income tax and not
otherwise taken into account in computing Profits or Losses
pursuant to this definition of Profits and Losses shall be added
to such taxable income or loss;
(b) Any expenditures of the Partnership applicable to
such class of Units described in Code Sec. 705(a)(2)(B) or treated
as Code Sec. 705(a)(2)(B) expenditures pursuant to Treas. Reg. Sec.
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of
Profits and Losses, shall be subtracted from such taxable income
or loss;
(c) In the event the Gross Asset Value of any
Partnership asset attributable to such class of Units is adjusted
as required by the terms of the definition of Gross Asset Value
hereof, the amount of such adjustment shall be taken into account
as gain or loss from the disposition of such asset for purposes
of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of
Partnership assets attributable to such class of Units with
respect to which gain or loss is recognized for Federal income
tax purposes shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding that the
adjusted tax basis of such property differs from its Gross Asset
Value; and
(e) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing
such taxable income or loss for such class of Units, there shall
be taken into account Depreciation for such fiscal year or other
period, computed in accordance with the definition of
Depreciation herein.
"Project" means that certain local distribution company gas
project located in southern Missouri and more fully described in
Exhibit "A" attached hereto.
"Section 754 Election" means an election under Section 754 of the
Code relating to the adjustment for tax purposes of the basis of
the assets of the Partnership.
"Service" means the Internal Revenue Service of the United
States of America.
"Substituted Limited Partner" shall refer to a Transferee of
a Limited Partner's Partnership Interest who is admitted to the
Partnership as a Limited Partner in accordance with the
provisions of Section 7.1 of this Partnership Agreement.
"Tartan Management" means Tartan Management Company of
Missouri, L.C., a Missouri limited liability company.
"TEMI" means Torch Energy Marketing, Inc., a Delaware
corporation.
"Transfer" means, as a noun, any voluntary or involuntary
transfer, assignment, sale, pledge, gift, hypothecation or other
disposition and, as a verb, voluntarily or involuntarily to
transfer, assign, sell, pledge, gift, hypothecate or otherwise
dispose of.
"Transferee" shall have the meaning set forth in Section 7.1
hereof.
"Transferor" shall have the meaning set forth in Section 7.1
hereof.
"Treasury Regulations" or "Treas. Reg." means the income tax
regulations, including proposed and temporary Regulations,
promulgated under the Code, as such regulations may be amended
from time to time (including corresponding provisions of
succeeding regulations).
"Units" shall have the meaning set forth in Section 4.1
hereof.
1.2 Other Terms. Other terms may be defined elsewhere in
the text of this Partnership Agreement and shall have the meaning
indicated therein.
ARTICLE II
FORMATION OF LIMITED PARTNERSHIP
2.1 Formation. The parties hereby agree to form the
Partnership pursuant to the Act, upon the terms and conditions
set forth herein.
2.2 Name. The name of the Partnership shall be, and the
business of the Partnership shall be conducted under the name of
"Southern Missouri Gas Company, L.P." The words "Limited
Partnership" or the initials "Ltd." shall be included in the
Partnership's name and substituted for the term "L.P." where
necessary for the purposes of complying with the laws of any
jurisdiction that so requires. The Partnership's business may be
conducted under any other name or names deemed advisable by the
General Partners. The General Partners in their sole discretion
may change the name of the Partnership at any time and from time
to time by amending this Partnership Agreement without the vote
or concurrence of the Limited Partners.
2.3 Registered Office; Principal Office and Registered
Agent. The address of the registered office of the Partnership
in the State of Missouri shall be The Corporation Company,
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; Telecopy: (314)
721-0336. The principal office of the Partnership shall be c/o
Tartan Management Company of Missouri, L.C., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ or
such other place as the General Partners may from time to time
designate to the Partners. The Corporation Company shall serve
as the registered agent for service of process on the Partnership
in the State of Missouri at the above registered office. A
General Partner may be the registered agent for service of
process in any other jurisdiction in which the Partnership is
qualified to do business or may select another suitable
representative. The Partnership may maintain offices at such
other place or places as the General Partners deem advisable.
2.4 Term of Partnership. The Partnership shall commence as
of the date of the filing of the Certificate of Limited
Partnership as required under the Act and shall continue for a
period ending the earlier of:
(a) September 30, 2035;
(b) The date on which all of the assets acquired by
the Partnership have been sold and converted to cash (or to cash
equivalents, or securities tradeable on a national securities
exchange) or otherwise disposed of and all installment obligation
receivables have been collected;
(c) The date on which the Partnership is voluntarily
dissolved by the agreement of the General Partners and of a
Majority in Interest of the Limited Partners;
(d) The date on which the Partnership is dissolved by
operation of law or judicial decree; or
(e) The occurrence of an event of withdrawal of the
General Partners as set forth in Section 359.241 of the Act,
except as provided in Section 8.3 hereof.
2.5 Purpose. The purpose and business of the Partnership
shall be any business which may lawfully be conducted by a
limited partnership organized pursuant to the Act, including,
without limitation, the acquisition, development, marketing and
operation of the Project as a commercial venture.
ARTICLE III
MANAGEMENT OF THE PARTNERSHIP
3.1 General Authority and Powers of the General Partners.
(a) Except as otherwise provided in this Partnership
Agreement, the General Partners shall have full and complete
charge of all affairs of the Partnership, and the management and
control of the Partnership's business shall rest exclusively with
the General Partners. Except as otherwise provided in this
Partnership Agreement, the General Partners will have the
exclusive right, without any requirement of prior consultation
with the Limited Partners, to do all things that, in their sole
and reasonable judgment, are necessary, proper or desirable to
carry out their duties and responsibilities as General Partners.
The General Partners shall have a fiduciary responsibility for
the safekeeping and use of all funds of the Partnership, whether
or not in the General Partners' immediate possession or control.
The General Partners shall not use or permit another to use such
funds or assets in any manner except for the exclusive benefit of
the Partnership and subject, however, to Section 3.2. Except as
otherwise provided in the Management Agreement or in this
Partnership Agreement, the General Partners acting jointly shall
have the rights, powers and authority granted hereunder and by
law to obligate and bind the Partnership and, on behalf and in
the name of the Partnership, to take such action as the General
Partners jointly deem necessary or advisable (subject only to the
limitations of authority as specifically set forth in this
Partnership Agreement or in the Management Agreement), including,
without limitation, the following:
(i) To cause the Partnership to enter into any
amendments to the Management Agreement;
(ii) To cause the Partnership to borrow money only to
the extent called for by the Chemical Bank Credit Agreement
and, if security is required therefor, to mortgage or
subject any Partnership investment to any other security
device, to obtain replacements of any mortgage or other
security device, and to prepay, in whole or in part,
refinance, increase, modify, consolidate, or extend any
mortgage or other security device, all of the foregoing at
such terms and in such amounts as the General Partners, in
their sole discretion, deem to be in the best interests of
the Partnership;
(iii) To cause the Partnership to place record
title to or the right to use Partnership assets in the name
or names of a nominee or nominees, or trustee or trustees,
for any purpose convenient or beneficial to the Partnership;
(iv) To cause the Partnership to acquire and enter into
any contract of insurance which the General Partners deem
necessary or appropriate for the protection of the
Partnership and the General Partners, for the conservation
of Partnership assets or for any purpose convenient or
beneficial to the Partnership;
(v) To cause the Partnership to employ persons in the
operations and management of the business of the Partnership
on such terms and for such compensation as the General
Partners shall determine;
(vi) To prepare or cause to be prepared reports,
statements and other relevant information for distribution
to the Limited Partners, including annual and quarterly
reports as required by Article XII of this Partnership
Agreement;
(vii) To open accounts and deposits and maintain
funds in the name of the Partnership in banks or other
financial institutions or to invest such funds as the
General Partners deem appropriate;
(viii) To cause the Partnership to make or revoke
any of the elections referred to in Section 754 of the Code
or any similar provisions enacted in lieu thereof;
(ix) To cause the Partnership to invest and reinvest
excess Partnership funds during the term of the Partnership
in such short-term investments as the General Partners deem
appropriate, subject to the maintenance of such working
capital and contingency reserves as the General Partners
deem appropriate;
(x) To amend this Partnership Agreement without the
consent or vote of the Limited Partners: (a) to reflect the
addition or substitution of Limited Partners; (b) to add to
the representations, duties or obligations of the General
Partners or their Affiliates or surrender any right or power
granted to the General Partners or their Affiliates herein,
for the benefit of the Limited Partners; (c) to cure any
ambiguity, or to correct or supplement any provision herein
which may be inconsistent with any other provision herein;
(d) to change the registered and/or principal office of the
Partnership; and (e) to restate the Partnership Agreement
periodically to consolidate amendments thereto which have
been properly adopted by the Partners or otherwise adopted
in accordance with the Partnership Agreement;
(xi) To cause the Partnership to Transfer a Limited
Partner's Partnership Interest in accordance with
Article VII hereof;
(xii) To execute, acknowledge and deliver any and
all instruments to effectuate the rights, authority and
powers of the General Partners, and to take all such action
in connection therewith as the General Partners shall deem
necessary or appropriate;
(xiii) To prepare, file and publish any and all
instruments or documents necessary to enable the Partnership
to transact business or otherwise to exist, operate and be
recognized as a limited partnership in jurisdictions outside
of Missouri;
(xiv) To cause the Partnership to enter into such
contracts and agreements as may be necessary or appropriate;
(xv) To cause the Partnership to comply with all
applicable federal, state and local laws, regulations and
ordinances;
(xvi) To create management positions and Part-
nership offices to conduct the business of the Partnership
and to designate individuals to assume the responsibilities
of such positions as officers which offices may include the
following: President, Vice President, Secretary and
Treasurer;
(xvii) To cause the Partnership to issue additional
Units in accordance with Section 4.1 hereof; and
(xviii) To set compensation levels for the officers
of the Partnership, if any.
(b) The General Partners shall, except as otherwise
provided in this Partnership Agreement, have all of the rights
and powers and shall be subject to all of the restrictions and
liabilities of a partner in a general partnership.
3.2 Restrictions on Authority of the General Partners.
(a) Notwithstanding anything to the contrary in this
Partnership Agreement, including the provisions set forth in
Section 3.1, the following actions of the General Partners shall
require the consent of the Majority in Interest of Limited
Partners (in the manner set forth in Section 13.3 hereof) and
without such consent, may not be taken by the Partnership (nor
any Partner or other Person on behalf of the Partnership):
(i) The sale, exchange, lease, mortgage, or other
disposition of 25% or more of the fair market value of the
business or assets of the Partnership, or the merger or
consolidation with another entity;
(ii) Any incurrence or prepayment of indebtedness (or
provide guaranties of another Person's indebtedness) other
than in the ordinary course of business or, if in the
ordinary course of business, in an amount in excess of
$1,000,000;
(iii) Admission of any additional limited or
general partner, or adjusting any Partner's Partnership
Percentage;
(iv) Dissolution or liquidation of the Partnership or
appointment of a liquidating partner other than the General
Partners;
(v) Causing the Partnership to commence a voluntary
case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law
or of any other voluntary case or proceeding to be
adjudicated a bankrupt or insolvent;
(vi) Causing the Partnership to consent to (1) the
entry of a decree or order for relief against the
Partnership in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, (2) the commencement of
any bankruptcy or insolvency case or proceeding against the
Partnership, (3) the filing of a petition or answer or
consent seeking reorganization or relief under any
applicable federal or state law, or (4) to the appointment
of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar
official of any substantial part of the Partnership's
property;
(vii) Causing the Partnership to file a petition or
answer or consent seeking reorganization or relief under any
applicable federal or state law;
(viii) Entering into, or effecting a material
amendment of (i) any gas purchase agreement, (ii) any firm
gas transportation contract, (iii) any negotiated third
party gas sales contract in an amount in excess of $10,000,
or (iv) any contract (other than a gas sales contract or a
contract pertaining to an expansion which has been approved
under Section 3.5 of the Management Agreement) with a third
party in excess of $100,000 per year;
(ix) Making any capital expenditure in excess of
$500,000;
(x) Materially amending any material government
permit, materially amend any material filing with any
governmental body, or seek any governmental action other
than is ordinarily required in the ordinary conduct of
business;
(xi) Making a determination with respect to the
disposition of insurance proceeds in excess of $500,000 or
the repair or rebuilding of the Partnership facilities in
the event of substantial damage or destruction;
(xii) Settling a dispute or litigation involving
the Partnership that would materially adversely affect the
Partnership or require payment by the Partnership of more
than $1,000,000;
(xiii) Engaging in any transaction with any General
Partner or an Affiliate of a General Partner except where
such transaction is effectuated on terms no less favorable
to the Partnership in an arm's-length transaction with an
unaffiliated Person;
(xiv) Adopting and operating under an annual budget
for the Partnership that includes an increase of 10% for any
category of expenses over the amount included in the prior
year's budget, or an aggregate increase of 5%;
(xv) Modifying the annual budget of the Partnership to
result in an increase of 10% for any category of expenses or
an aggregate of 5%;
(xvi) Granting to a General Partner or any Af-
filiate of a General Partner any contractual rights or
undertaking other than in accordance with this Partnership
Agreement;
(xvii) Pledging or encumbering on behalf of the
Partnership any assets of the Partnership other than in
connection with financings relating to the acquisition or
improvement of assets used or to be used in the business of
the Partnership or a refinancing of such indebtedness or for
the purpose of obtaining working capital;
(xviii) Possessing any Partnership property or as-
signing the rights of the Partnership in specific Partner-
ship property for other than a Partnership purpose;
(xix) Commingling Partnership funds with those of
any other person or entity;
(xx) Causing the Partnership to lend money to a General
Partner or an Affiliate thereof for other than a "bona fide"
Partnership purpose;
(xxi) Causing the Partnership to require any
Partner to make additional Capital Contributions other than
in accordance with this Partnership Agreement or the
Formation Agreement;
(xxii) Causing the Partnership to make an assignment
for the benefit of creditors, or the admission by the
Partnership in writing of its inability to pay its debts
generally as they become due, or to take action in
furtherance of any such action;
(xxiii) Causing the Partnership to approve a
materially different method by which the Partnership keeps
its books as provided in Article XII; or
(xxiv) Causing the Partnership to enter into any
contract to do any of the foregoing.
(b) Without first obtaining unanimous approval from
the Limited Partners (in the manner set forth in Section 13.3),
the General Partners shall not have the authority to perform any
act (other than an act required by this Partnership Agreement or
any act taken in good faith reliance upon counsel's opinion that
such act will not subject any Limited Partner to liability as a
general partner) which would, at the time the act occurred,
subject any Limited Partner to liability as a general partner
under the law of any applicable jurisdiction.
3.3 Indemnification.
(a) To the fullest extent permitted by law but subject
to the limitations expressly provided in this Partnership
Agreement, each Indemnitee shall be indemnified and held harmless
by the Partnership from and against any and all losses, claims,
damages, liabilities (joint or several), expenses (including
without limitation, reasonable legal fees and expenses),
judgments, fines, settlements and other amounts arising from any
and all claims, demands, actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than
claims by or on behalf of the Partnership), in which any
Indemnitee may be involved, or is threatened to be involved, as a
party or otherwise, by reason of its status as an Indemnitee;
provided, that in each case the Indemnitee acted in good faith,
in a manner which such Indemnitee believed to be in, or not
opposed to, the best interests of the Partnership and, with
respect to any criminal proceeding, had no reasonable cause to
believe its conduct was unlawful; and provided further that, in
each case, the Indemnitee acted not in express violation of the
direction of at least one General Partner. The termination of
any action, suit or proceeding by judgment, order, settlement
conviction or upon a plea of nolo contendere, or its equivalent,
shall not create a presumption that the Indemnitee acted in a
manner contrary to that specified above. Any indemnification
pursuant to this Section 3.3 shall be made only out of the assets
of the Partnership.
(b) To the fullest extent permitted by law, expenses
(including without limitation, reasonable legal fees and
expenses) incurred by an Indemnitee in defending any claim,
demand, action, suit or proceeding shall, from time to time, be
advanced by the Partnership prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by
the Partnership of an undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined that
the Indemnitee is not entitled to be indemnified as authorized in
this Section 3.3.
(c) The indemnification provided by this Section 3.3
shall be in addition to any other rights to which an Indemnitee
may be entitled under any agreement pursuant to any vote of the
Partners, as a matter of law or otherwise, as to actions in the
Indemnitees' capacity as an Indemnitee and shall continue as to
an Indemnitee who has ceased to serve in such capacity and as to
actions in any other capacity.
(d) The Partnership may purchase and maintain (or
reimburse a General Partner or its Affiliates for the cost of)
insurance, on behalf of the Partners and such other Persons as
the General Partners shall determine, against any liability that
may be asserted against or expense that may be incurred by any
such Person in connection with the Partnership's activities,
whether or not the Partnership would have the power to indemnify
such Person against such liabilities under the provisions of this
Partnership Agreement.
(e) In no event may an Indemnitee subject the Limited
Partners to personal liability by reason of the indemnification
provisions set forth in this Partnership Agreement.
(f) An Indemnitee shall not be denied indemnification
in whole or in part under this Section 3.3 because the Indemnitee
had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise
permitted by the terms of this Partnership Agreement.
(g) The provisions of this Section 3.3 are for the
benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for
the benefit of any other Persons.
(h) No amendment, modification or repeal of this
Section 3.3 or any other provision hereof shall in any manner
terminate, reduce or impair the right of any past, present or
future Indemnitee to be indemnified by the Partnership, nor the
obligation of the Partnership to indemnify any such Indemnitee
under and in accordance with the provisions of this Section 3.3
as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters
occurring, in whole or in part, prior to such amendment
modification or repeal, regardless of when such claims may arise
or be asserted.
(i) The General Partners shall indemnify and hold
harmless the Partnership, the Limited Partners, and their
respective directors, officers, shareholders and agents from and
against any and all claims, actions, demands, costs and
liabilities (including reasonable attorney's fees) arising out of
any act or omission of such General Partner that constitutes
fraud, willful misconduct, gross negligence or bad faith.
3.4 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth
in this Partnership Agreement, no Indemnitee shall be liable for
monetary damages to the Partnership or the Limited Partners for
losses sustained or liabilities incurred as a result of any act
or omission if such Indemnitee acted in good faith and in
compliance with this Agreement.
(b) Subject to its obligations and duties as General
Partner set forth in Article III and without limiting the General
Partner's indemnity obligations under Section 3.3.(i), the
General Partners may exercise any of the powers granted to them
by this Partnership Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its
agents, and the General Partners shall not be responsible for any
misconduct or negligence on the part of any such agent appointed
by a General Partner in good faith.
(c) Any amendment, modification or repeal of this
Section 3.4 or any other provision hereof shall be prospective
only and shall not in any way affect the limitations on the
liability to the Partnership and the Limited Partners of a
General Partners, its directors, officers and employees under
this Section 3.4 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.
3.5 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this
Partnership Agreement, whenever a potential conflict of interest
exists or arises between any General Partner or any of its
Affiliates, on the one hand, and the Partnership, any Partner or
any of their Affiliates, on the other hand, any resolution or
course of action in respect of such conflict of interest shall be
permitted and deemed approved by all Partners, and shall not
constitute a breach of this Partnership Agreement, of any
agreement contemplated herein, or of any duty stated or implied
by law or equity, if the resolution or course of action is or, by
operation of this Partnership Agreement, is deemed to be, fair
and reasonable to the Partnership. The General Partners shall be
authorized in connection with its resolution of any conflict of
interest to consider: (i) the relative interests of any party to
such conflict, agreement, transaction or situation and the
benefits and burdens relating to such interest; (ii) any
customary or accepted industry practices and any customary or
historical dealings with a particular Person; (iii) any
applicable generally accepted accounting or other practices or
principles; and (iv) such additional factors as the General
Partners determine in their sole discretion to be relevant,
reasonable or appropriate under the circumstances. Nothing
contained in this Partnership Agreement, however, is intended to
nor shall it be construed to require the General Partners to
consider the interests of any Person other than the Partnership.
In the absence of fraud, willful misconduct, gross negligence or
bad faith by a General Partner, the resolution, action or terms
so made, taken or provided by a General Partner with respect to
such matter shall not constitute a breach of this Partnership
Agreement or any other agreement contemplated herein or a breach
of any standard of care or duty imposed herein or therein or
under the Act or any other law, rule or regulation.
(b) Whenever this Partnership Agreement or any other
agreement contemplated hereby provides that a General Partner, a
Majority in Interest of the Partners, or any of their respective
Affiliates is permitted or required to make a decision (i) in its
"sole discretion" or "discretion" that it deems "necessary or
appropriate" or under a grant of similar authority or latitude,
such Person shall be entitled to consider only such interests and
factors as it desires and shall have no duty or obligation to
give any consideration to any interest of, or factors affecting,
any other Person, or (ii) in "good faith" or under another
express standard, such Person shall act under such express
standard and shall not be subject to any other or different
standards imposed by this Partnership Agreement, any other
agreement contemplated hereby or under the Act or any other law,
rule or regulation. The General Partners shall have no duty,
express or implied, to sell or otherwise dispose of any asset of
the Partnership, other than in the ordinary course of business.
No borrowing by the Partnership or the approval thereof by a
General Partner shall be deemed to constitute a breach of any
duty of a General Partner to the Partnership or the Limited
Partners by reason of the fact that the purpose or effect of such
borrowing is directly or indirectly to enable the General
Partners to receive payments as set forth herein.
(c) Whenever a particular transaction, arrangement or
resolution of a conflict of interest is required under this
Partnership Agreement to be "fair and reasonable" to any Person,
the fair and reasonable nature of such transaction, arrangement
or resolution shall be considered in the context of all similar
or related transactions.
(d) The Partners recognize that each of the Partners,
directly or through its respective affiliates, may be currently
engaged in numerous businesses in the gas industry including,
without limitation, buying, selling, marketing, and oil and gas
and derivative products for profit. Each Partner agrees that
each other Partner may continue such activities, may form new
Affiliates to engage in such activities, and may expand the
present scope of such activities, in each case irrespective of
whether such activities might be deemed in competition with the
business and activities of the Partnership, without in any manner
being obligated to disclose such activities to the Partnership or
the other Partners, or to permit the Partnership or the Partners
to participate therein, and without any liability to the
Partnership or the Partners for breach of any duty arising out of
such other Partner's position as a Partner in the Partnership.
(e) Notwithstanding anything else in this Agreement,
no Partner shall take any action as a Partner pursuant to this
Agreement in any circumstance where such Partner or any of its
Affiliates has any economic or other interest (other than as a
Partner hereunder) in the outcome of such action, whether as a
party to an agreement, party to a transaction or otherwise. In
any case where the terms of this Agreement would require the vote
or consent of such Partner in order to authorize the proposed
action, no vote or consent of such Partner shall be required and
the determination of whether the requisite proportion of the
Partners has approved or otherwise consented to such action shall
be determined by calculating the proportion of Partners
authorized to vote, authorize or otherwise consent to such action
(after taking into account the immediately preceding sentence and
limited to Partners of an appropriate class if appropriate) that
have voted, authorized or otherwise approved such action.
3.6 Other Matters Concerning the General Partners.
(a) The General Partners may rely and shall be
protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, bond, debenture, or other paper
or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
(b) The General Partners may consult with legal
counsel, accountants, appraisers, management consultants,
investment bankers and other consultants and advisers selected by
it and any act taken or omitted in reliance upon an opinion
(including, without limitation, a written opinion of Counsel (who
may be regular counsel to the Partnership or the General
Partners)) acceptable to the General Partners of such Persons as
to matters that the General Partners reasonably believe to be
within such Person's professional or expert competence shall be
conclusively presumed to have been done or omitted in good faith
and in accordance with such opinion.
(c) The General Partners shall have the right, in
respect of any of their powers or obligations hereunder, to act
through any of their duly authorized officers and a duly
appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partners in the
power of attorney, have full power and authority to do and
perform each and every act and duty that is permitted or required
to be done by the General Partners hereunder.
(d) Any standard of care and duty imposed by this
Partnership Agreement or under the Act or any applicable law,
rule or regulation shall be modified, waived or limited as
required to permit the General Partners to act under this
Partnership Agreement or any other agreement contemplated by this
Partnership Agreement and to make any decision pursuant to the
authority prescribed in this Partnership Agreement, so long as
such action is reasonably believed by the General Partners to be
in the best interests of the Partnership.
3.7 Title to Partnership Assets. Title to assets of the
Partnership, whether real, personal or mixed and whether tangible
or intangible, shall be deemed to be owned by the Partnership as
an entity, and no Partner, individually or collectively, shall
have any ownership interest in such assets of the Partnership or
any portion thereof. Title to any or all of the assets of the
Partnership may be held in the name of the Partnership, the
General Partners or one or more nominees, as the General Partners
may determine. The General Partners hereby declare and warrant
that any assets of the Partnership for which title is held in the
name of such General Partner shall be held by such General
Partner for the exclusive use and benefit of the Partnership in
accordance with the provisions of this Partnership Agreement;
provided, however, that each General Partner shall use its
reasonable efforts to cause record title to such assets (other
than these assets in respect of which a General Partner
determines that the expense and difficulty of conveyancing makes
transfer of record title to the Partnership impracticable) to be
vested in the Partnership as soon as reasonably practicable. All
assets of the Partnership shall be recorded as the property of
the Partnership in the books and records, irrespective of the
name in which record title to such assets are held.
3.8 Reliance by Third Parties. Notwithstanding anything to
the contrary in this Partnership Agreement, any Person dealing
with the Partnership shall be entitled to assume that, unless
such Person has actual or constructive knowledge to the contrary,
the General Partners together have full power and authority to
encumber, sell or otherwise use in any manner any and all assets
of the Partnership and to enter into any contracts on behalf of
the Partnership, and such Person shall be entitled to deal with
the General Partners together as if they, acting together, were
the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such
Person to contest, negate or disaffirm any action of the General
Partners in connection with any such dealing unless such Person
has actual or constructive knowledge to the contrary. In no
event shall any Person dealing with the General Partners or their
representatives be obligated to ascertain that the terms of this
Partnership Agreement have been complied with or to inquire into
the necessity or expedience of any act or action of the General
Partners or their representatives. Each and every certificate,
document or other instrument executed on behalf of the
Partnership by the General Partners together or their
representatives shall be conclusive evidence in favor of any and
every Person relying thereon or claiming thereunder and without
knowledge to the contrary that (a) at the time of the execution
and delivery of such certificate, document or instrument, this
Partnership Agreement was in full force and effect, (b) the
Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on
behalf of the Partnership, and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the
terms and provisions of this Partnership Agreement, and is
binding upon the Partnership.
3.9 Powers and Duties of the Limited Partners.
(a) Except as otherwise provided in this Partnership
Agreement, the Limited Partners shall not participate in the
management or control of the business affairs of the Partnership,
transact any business on behalf of the Partnership, or have any
power or authority to bind or obligate the Partnership. The
General Partners shall have exclusive management and control of
the business of the Partnership in accordance with the provisions
of the Act. Notwithstanding the foregoing, the Limited Partners
shall have the right to vote with respect to: (i) all such
activities set forth in Sections 3.2(a) and (b) above; (ii) in
certain circumstances, the reconstitution of the Partnership;
(iii) the election of additional and/or successor General Part-
ners; (iv) the election of additional and/or successor Limited
Partners; (v) the amendment of this Partnership Agreement except
as provided herein; and (vi) the approval of other matters as
otherwise provided in this Partnership Agreement. In addition, a
Majority in Interest of the Limited Partners shall have the right
to call meetings of the Partnership in accordance with the
provisions of Section 13.3 and to propose votes on the above
items.
(b) Although all Limited Partners have the express
authority to vote with respect to the activities set forth in
Section 3.2(a), the General Partners need only obtain the written
consent of a Majority in Interest of the Limited Partners,
pursuant to the procedures set forth in Section 13.3(c) hereof,
to proceed with any such activities unless a greater percentage
is otherwise provided for under this Partnership Agreement.
(c) No vote or consent of any Limited Partners shall
be effective to change any Partner's Partnership Percentage in an
adverse and discriminatory manner without the affirmative vote or
written consent of such Partner, except a vote to amend the
agreement to increase the number of Units available for issuance.
3.10 No Right of Limited Partners to Receive Property Other
Than Cash. No right is given to a Limited Partner to demand and
receive property other than cash in return for his Capital
Contribution. However, the General Partners may, in their sole
discretion, make a distribution of property other than cash upon
the dissolution and liquidation of the Partnership to any or all
of the Partners.
3.11 Other Activities. Subject to the restrictions
otherwise placed on the General Partners by this Article III,
none of the parties hereto shall have any obligation with respect
to the Partnership or to any of the other parties insofar as
making other investment opportunities available to the
Partnership. Accordingly, the parties may, notwithstanding the
existence of this Partnership Agreement, engage in whatever
activities they choose, whether the same are competitive with the
Partnership or otherwise, without having or incurring any
obligation to offer any interest in such activities to the
Partnership or any party hereto. The General Partners are
required to devote only so much of their time to the business of
the Partnership as in their respective judgment is reasonably
required to satisfy their obligations under this Agreement.
3.12 Management Agreement. On the Effective Date, Tartan
Energy Company of Missouri, L.C. will be merged with and into the
Partnership with the result that the Partnership will succeed to
the rights and obligations of Tartan Energy Company of Missouri,
L.C. under the Management Agreement. As a result, under the
Management Agreement, Tartan Management will be the manager of
the Project and thus be responsible for managing the
construction, operation and maintenance of the Project, and such
other activities as may be specified in the Management Agreement,
all in accordance with the terms of the Management Agreement.
The parties hereto acknowledge the delegation of authority to the
manager pursuant to the Management Agreement. All activities
undertaken or performed by Tartan Management, its Affiliates and
their respective officers, directors, employees, partners, and
agents in performing the duties and obligations of Manager under
the Management Agreement shall be considered to be undertaken or
performed in the capacity of manager of the Partnership and not
as a Partner under this Partnership Agreement. Accordingly, the
terms of the Management Agreement, and not the terms of this
Partnership Agreement, will govern all such activities. Further,
it is recognized and acknowledged that the obligations of Tartan
Management as a General Partner under the Partnership Agreement
shall not apply to Tartan Management as manager of the
Partnership, inasmuch as the Management Agreement shall establish
the rights and obligations of Tartan Management as such manager.
ARTICLE IV
FINANCING OF THE PARTNERSHIP
4.1 Initial Capital Contributions.
(a) Units. Subject to the provisions of this
Partnership Agreement, the General Partners are authorized to
sell ownership interests in the Partnership designated as "Units"
and to issue such Units in classes pursuant to Section 4.1(b) of
this Partnership Agreement. Fractional Units may be issued for a
pro rata Capital Contribution based on a whole Unit purchase
price. The number of Units, class thereof purchased by each
Partner, the amount of such Partner's Capital Contribution and
the residential address of each Partner (or principal business
address if not an individual) shall be listed on Exhibit "B"
which shall be attached hereto and amended from time to time by
the General Partners as warranted.
(b) Additional Units or Securities.
(i) From time to time, the General Partners are
authorized to offer and sell Units authorized to be sold
pursuant to Section 4.1(a) and to admit the purchaser(s) of
such Units to the Partnership as Limited Partners designated
by the class of Units so purchased. Units to be issued by
the Partnership under this Section 4.1(b) shall be issuable
from time to time in one or more subclassifications or
series with such designations, preferences and relative,
participating, optional or other special rights as set forth
below; provided, however, that all Units of every such
subclassifications or series shall have identical voting
rights to the Total Units issued.
(ii) Upon the issuance of any subclassifications
or series of Units, the General Partners (pursuant to the
General Partners' powers of attorney from the Limited
Partners), without the consent at the time of any Limited
Partner or its assignee (each person purchasing Units being
deemed to consent to such amendment) may increase or
decrease the number of Units in a class, although no such
decrease shall reduce the number of any class of Units below
the number then outstanding and any such amendment shall
comply with Sections 3.2 and 3.4 hereof, and execute, swear
to, acknowledge, deliver, file and record, if required, an
amended Certificate of Limited Partnership and whatever
other documents may be required in connection therewith.
(iii) The General Partners are also authorized
to cause the issuance of any other type of security of the
Partnership from time to time to Partners or other persons
or entities on terms and conditions established in the sole
and complete discretion of the General Partners. Such
securities may include, without limitation, unsecured and
secured debt obligations of the Partnership, debt
obligations of the Partnership convertible into Units, and
options, rights or warrants to purchase any such Units. The
General Partners are authorized and directed to do all
things which it deems to be necessary, convenient,
appropriate or advisable in connection therewith. As and
when any Units are issued, the General Partners shall amend
Exhibit "B" accordingly to reflect the change in the number
of outstanding Units.
(iv) In the event any additional Units are issued
to any party other than Tartan Management or its Affiliates,
there shall be issued to Tartan Management, simultaneously with
such issuance of additional Units and without requiring
additional consideration therefor, additional Units in an amount
equal to 5% of the total of such new Units being issued and
Tartan Management's Partnership Percentage shall be adjusted to
reflect such issuance.
(c) Class A Units. There is hereby established, out
of the authorized but unissued Units of the Partnership, a class
of Units to be designated "Class A Units" ("Class A Units") to
have the preferences, limitations and relative rights as set
forth herein:
(i) The Class A Units shall be reserved for
issuance to the General Partners to evidence such General
Partner's Capital Contributions.
(ii) In the initial offering of Units, the General
Partners shall issue Class A Units to MCN and Class A Units
to Tartan Management in the amounts and for the
consideration specified on Exhibit B. The General Partner
shall, if necessary, purchase additional Class A Units out
of the authorized but unissued Class A Units upon the
subsequent issuances of other classes of Units so as to
ensure that each General Partner's aggregate Partnership
Percentage is no less than one percent (1%).
(iii) Unless there has been a conversion
pursuant to Section 4.1(d)(iii), the Class A Units, in the
aggregate, shall be entitled to receive as an allocation
from the Partnership 2.0% of any allocation made in
accordance with Article V hereof ("Class A Allocation").
Each owner of a Class A Unit shall receive such proportion
of the Class A Allocation so as to reflect such owner's
Partnership Percentage.
(d) Class B Units. There is hereby established out of
the authorized but unissued Units of the Partnership, a class of
Units to be designated "Class B Units" ("Class B Units") to have
the preferences, limitations, and relative rights as set forth
herein:
(i) In the initial offering of Units, the General
Partners shall issue Class B Units to TEMI, MCN and Tartan
Management in the amounts and for the consideration
specified on Exhibit B.
(ii) Unless there has been a conversion pursuant
to Section 4.1(d)(iii), the Class B Units, in the aggregate,
shall be entitled to receive as an allocation from the
Partnership 98.0% of any allocation made in accordance with
Article V hereof ("Class B Allocation"). Each owner of a
Class B Unit shall receive such proportion of the Class B
Allocation so as to reflect such owner's Partnership
Percentage.
(iii) Notwithstanding anything to the contrary
in this Agreement, TEMI shall have the independent right to
convert enough Class B Units owned by it into Class A Units
representing a General Partner Partnership Interest equal to
1%, and MCN, Tartan Management and TEMI shall have the right
to simultaneously convert all Class B Units owned by them
into Class A Units, and in each case to establish a
management committee composed of one representative of each
of them to manage the business and operations of the
Partnership, or otherwise reform the ownership of the
Project, if the Limited Partners unanimously determine that
their status as holding companies pursuant to the Public
Utility Holding Company Act of 1935, as amended, would not
be affected by such change. In the event of a conversion
pursuant to this subsection (iii), the Partnership
Percentages and Partnership allocations specified elsewhere
in this Partnership Agreement shall be appropriately
modified to provide each Partner with the same aggregate
Partnership Percentage and profit allocation to which it was
entitled prior to such conversion. In addition, in the
event of any such conversion, the parties will make such
other mutually agreeable modifications to this Agreement to
reflect such conversion.
4.2 Additional Capital Contributions of the General
Partners. If from time to time the Limited Partners make
additional Capital Contributions to the Partnership pursuant to
Section 4.3 below, the General Partners shall, if necessary, make
additional Capital Contributions to the Partnership in such
amounts as to provide that its aggregate Capital Contributions
are at all times not less than 1% of the aggregate Capital
Contributions of the Partnership.
4.3 Additional Capital Contributions of the Limited
Partners. From time to time the Partners, subject to the
approval of the General Partners and a Majority in Interest of
the Limited Partners (in the manner set forth in Section 13.3),
may make additional Capital Contributions to the Partnership in
the form of cash or other property. For purposes of this
section, contributions of property shall be deemed to be Capital
Contributions in an amount equal to the fair market value of the
contributed property on the date of contribution. All Partners
shall be permitted to make such contributions based on their
Partnership Percentages provided, however, that no Limited
Partner shall be required to make an additional Capital
Contribution but the failure to do so shall reduce that Limited
Partner's Partnership Interest; provided however, Tartan
Management's limited partnership interest shall not be reduced
below the smallest limited partnership interest Tartan Management
has owned from the period following the Second Closing (as
defined in the Formation Agreement) to the date at which such
additional capital contribution was not made. Determination of
such Partner's Partnership Percentage shall be based on the
method described in the definition provisions of this Partnership
Agreement.
4.4 Capital Accounts. A separate Capital Account shall be
established and maintained by the Partnership for each Partner in
the manner described in the definition of the term "Capital
Account" in Article I hereof.
4.5 Loans by Partners. Except as otherwise provided for in
this Partnership Agreement, neither the General Partners nor the
Limited Partners shall be required to make loans to the
Partnership. Loans may be made, however, with the consent of the
General Partners, by any Partner to the Partnership and such
loans shall not be considered contributions to the capital of the
Partnership. To the extent loans are made by any Partner to the
Partnership, they shall be made on terms, as to interest rates
and other finance charges as are comparable to amounts that are
charged by unrelated banks and other financial institutions on
comparable loans for the same purpose.
4.6 Interest. No interest shall be paid to any Partner on
the initial or any subsequent Capital Contribution to the
Partnership.
4.7 Time for Return of Contributions. No Partner shall be
entitled to require the return of his Capital Contribution. Upon
the full and complete winding up and liquidation of the business
and affairs of the Partnership, the Partners shall be entitled to
distributions as set forth in Article X.
4.8 Right of Participation. If the Partnership proposes to
issue any Units or debt securities of the Partnership after the
Effective Date other than those Units described in Section
4.1(e), the General Partner shall give written notice to each
Limited Partner at least thirty (30) days prior to the proposed
issuance ("Participation Notice"). The Participation Notice
shall specify the type and number of Units or debt securities the
Partnership proposes to sell along with the price, terms and
closing date of such proposed sale. Each Limited Partner must
notify the General Partner in writing within fifteen (15) days of
the receipt (as set forth in Section 13.1 hereof) of the
Participation Notice whether such Limited Partner shall accept
the offer to purchase a portion of the Units or debt securities,
such portion to be as set forth below, on the terms and at the
price stipulated in the Participation Notice. If no response has
been received by the General Partner from a Limited Partner at
such time, the Limited Partner shall be deemed to have refused
the offer. The maximum number of Units or debt securities a
Limited Partner electing to participate shall be eligible to
purchase shall be equal to the total number of Units or debt
securities offered multiplied by a fraction (i) the numerator of
which is the number of Units then owned by such Limited Partner,
and (ii) the denominator of which is the total number of Units
then owned by all Limited Partners electing to participate. The
notice given by the Limited Partner must state the number of
Units or debt securities the Limited Partner desires to purchase;
provided, however, that the notice may indicate that the Limited
Partner desires to purchase a greater percentage of the proposed
offering than may be allocated to such Limited Partner in the
event another Limited Partner fails to accept the entire amount
of such other Limited Partner's allocation, such other Limited
Partner's allocation being the "Nonparticipation Units." The
closing of the proposed sale to the Limited Partners and to the
third party (if the Limited Partners do not accept the entire
proposed offering) shall be on the closing date and on the terms
and conditions stipulated in the Participation Notice. If the
proposed sale is not completed on such terms within six months
from the date of the Participation Notice, the Partnership may
not issue Units or debt securities of the Partnership without
again complying with this Section 4.8.
4.9 Limited Liability of the Limited Partners.
Notwithstanding anything to the contrary contained herein, the
liability of a Limited Partner for any of the debts, losses or
obligations of the Partnership shall by limited to the Limited
Partner's Capital Contributions which have contributed to the
Partnership. No Limited Partner shall have any personal
liability whatsoever, whether to the Partnership or any third
party, for the debts of the Partnership or any of its losses.
4.10 Benefits of Agreement. Nothing in this Partnership
Agreement, and, without limiting the generality of the foregoing,
in this Article IV, expressed or implied, is intended or shall be
construed to give to any creditor of the Partnership or any
creditor of any Partner of any other person or entity whatsoever,
other than the Partners and the Partnership, any legal or
equitable right, remedy or claim under or in respect of this
Partnership Agreement or any covenant, condition or provisions
herein contained, and such provisions are and shall be held to be
for the sole and exclusive benefit of the Partners and the
Partnership.
4.11 Tartan Management Capital Contributions.
Notwithstanding any other provision of this Partnership
Agreement, Tartan Management shall not be required (i) to make
Capital Contributions, other than its initial Capital
Contribution or (ii) to purchase additional Units.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Profits and Capital Distributions. After giving effect
to the special and curative allocations set forth in Section 5.4
hereof, Profits for any fiscal year shall be allocated to the
Partners based on the applicable Partnership Percentage in effect
during such fiscal year.
5.2 Losses. After giving effect to the special and
curative allocations set forth in Section 5.4 hereof, Losses for
any fiscal year shall be allocated to the Partners based on the
applicable Partnership Percentage in effect at the time such Loss
was incurred or realized, which allocation may cause a Partner to
have an Adjusted Capital Account Deficit at the end of a fiscal
year.
5.3 Allocation Upon Sale of Assets. Upon the sale of
substantially all of the assets of the Partnership, the Profits
attributable to such sale shall be allocated to the Partners as
follows:
(a) First, in accordance with any regulatory
allocations as required under Section 5.4 hereof.
(b) Second, all items of Partnership income, gain,
loss, and deduction realized by the Partnership upon the sale or
other disposition of its assets pursuant to this Section shall be
allocated among the Partners for Federal income tax purposes and
shall be credited or charged to the Capital Accounts of the
Partners in the following manner:
(i) In the event the sum of the items of Partner-
ship income, gain, loss, deduction, and credit result in
taxable income, all the items comprising such gain shall be
allocated and credited as follows:
(1) First, to the Limited Partners, if any, whose
Capital Account possess a negative balance at
the time such gain is realized, in the same
ratio as such Limited Partner's negative
Capital Account balances are to the total of
all Limited Partners' negative Capital
Account balances, until such Limited Part-
ner's Capital Account balance is zero.
(2) Second, to the Partners in an amount neces-
sary to cause the positive balances of their
Capital Accounts to be in the same ratio as
their respective Partnership Percentage.
(3) Third, to the Partners in the same ratio as
their respective Partnership Percentage.
(ii) In the event the sum of the items of Partner-
ship income, gain, loss, deduction, and credit result in
taxable loss, all the items comprising such loss shall be
allocated and credited as follows:
(1) First, to the Partners in an amount necessary
to cause the positive balances of their
Capital Accounts to be in the same ratio as
their respective Partnership Percentage.
(2) Second, to the Partners in the same ratio as
their respective Partnership Percentage until
the Limited Partners' Capital Accounts attain
a zero balance.
(3) Third, to the General Partners in the same
ratio as their respective Partnership
Percentage.
(c) Third, after the Capital Accounts of the Partners
have been adjusted in the manner required in the immediately
preceding paragraph, the General Partners, as liquidator, shall
ascertain the fair market value by appraisal or other reasonable
method of all the unsold assets of the Partnership and shall
adjust the Capital Accounts of the Partners by assuming the
taxable sale of all the remaining unsold assets of the
Partnership for cash equal to the fair market value thereof as of
the date of the dissolution of the Partnership and debiting or
crediting the Capital Account of each Partner with its respective
share of the hypothetical gain and/or loss resulting from such
hypothetical sale. Such hypothetical gain or loss shall be
allocated in accordance with the provisions of 5.3(b) immediately
above.
(d) Notwithstanding any other provision of this
Partnership Agreement to the contrary, no allocation of income,
gain, loss, deduction or credit shall be made to a Partner if
such allocation would not have "substantial economic effect"
pursuant to Treas. Reg. Secs. 1.704-1(b) et seq., as such
regulations may be amended and in effect from time to time and
any corresponding provisions of succeeding regulations, or
otherwise be in accordance with such Partner's interest in the
Partnership as provided for in such regulations.
5.4 Regulatory Allocations. Notwithstanding the general
allocation rules set forth above, the following special
allocation rules ("Regulatory Allocations") shall apply under the
following circumstances described, in the following order:
(a) Limitation of Losses and Deductions. The losses
and deductions allocated to any Partner with respect to any
fiscal year shall not exceed the maximum amount of losses and
deductions that can be allocated without causing such Partner to
have a deficit in its Adjusted Capital Account at the end of such
fiscal year. All losses and deductions in excess of the
limitation set forth in the preceding sentence shall be allocated
so as to allocate the maximum permissible losses and deductions
to each Partner under Treas. Reg. Sec. 1.704-1(b)(2)(ii)(d).
(b) Partnership Minimum Gain Chargeback. If there is
a net decrease in Partnership Minimum Gain during any fiscal
year, each Partner, in accordance with Treas. Reg. Sec. 1.704-2(g)
shall be allocated items of income and gain for such fiscal year
(and, if necessary, for subsequent fiscal years) in proportion
to, and to the extent of, an amount equal to the portion of such
Partner's share of the net decrease in Partnership Minimum Gain
during such fiscal year, subject to the exceptions set forth in
Treas. Reg. Sec. 1.704-2(f); provided that, if the Partnership has
any discretion as to an exception set forth in Treas. Reg. Sec.
1.704-2(f)(5), the Tax Matters Partner (with the consent of the
other General Partner(s), if any) shall exercise such discretion
on behalf of the Partnership. The Tax Matters Partner shall, if
the application of this Section 5.4(b) would cause a distortion
in the economic arrangement among the Partners, ask the
Commissioner of Internal Revenue to waive the Partnership Minimum
Gain chargeback requirements pursuant to Treas. Reg. Sec. 1.704-
2(f)(4). To the extent this Section 5.4(b) is inconsistent with
Treas. Reg. Sec. 1.704-2(f) or incomplete with respect to such
Sections of the Treasury Regulations, the Partnership Minimum
Gain chargeback provided for herein shall be applied and
interpreted in accordance with such Sections of the Treasury
Regulations.
(c) Partner Minimum Gain Chargeback. If there is a
net decrease in Partner Minimum Gain during any fiscal year, each
Partner shall be allocated items of income and gain for such
fiscal year (and, if necessary, for subsequent fiscal years) in
an amount equal to the such Partner's share of the net decrease
in Partner Minimum Gain during such fiscal year in accordance
with Treas. Reg. Sec. 1.704-2(i)(5), subject to the exceptions set
forth in Treas. Reg. Sec. 1.704-2(i)(4). The Tax Matters Partner
shall, if the application of this Section 5.4(c) would cause a
distortion in the economic arrangement among the Partners, ask
the Commissioner of Internal Revenue to waive the Partnership
Minimum Gain chargeback requirements pursuant to Treas. Reg.
Sec. 1.704-2(i)(4). To the extent this Section 5.4(c) is
inconsistent with Treas. Reg. Sec. 1.704-2(i)(4) or incomplete
with respect to such Sections of the Treasury Regulations, the
Partnership Minimum Gain chargeback provided for herein shall be
applied and interpreted in accordance with such Sections of the
Treasury Regulations.
(d) Qualified Income Offset. If in any fiscal year a
Partner unexpectedly receives an adjustment, allocation or
distribution described in Treas. Reg. Sec. 1.704-1(b)(2)(ii)(d)(4),
(5) or (6), and such adjustment allocation or distribution causes
or increases an Adjusted Capital Account Deficit for such
Partner, then, such Partner shall be allocated items of income
and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain) in an amount
and manner sufficient to eliminate such Adjusted Capital Account
Deficit as quickly as possible, provided that an allocation
pursuant to this Section 5.4(d) shall be made only if and to the
extent that a Partner would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Section
5 have been tentatively made as if this Section 5.4(d) were not
in the Agreement.
(e) Gross Income Allocation. In the event any Partner
has an Adjusted Capital Account Deficit at the end of any fiscal
year, each such Partner shall be allocated items of income and
gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain) in an amount
and manner sufficient to eliminate such Adjusted Capital Account
Deficit as quickly as possible, provided that an allocation
pursuant to this Section 5.4(e) shall be made only if and to the
extent that a Limited Partner would have an Adjusted Capital
Account Deficit after all the other allocations provided for in
this Section 5 have been tentatively made as if this Section
5.4(e) were not in the Agreement.
(f) Nonrecourse Deductions. Nonrecourse deductions
for any fiscal year shall be allocated to the Partners in the
same ratio as their Partnership Percentage.
(g) Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions shall be allocated among the Partners in
accordance with the ratios in which the Partners share the
economic risk of loss for the Partner Nonrecourse Debt that gave
rise to those deductions as determined under Treas. Reg. Sec. 1.752-
2. This allocation is intended to comply with the requirements
of Treas. Reg. Sec. 1.704-2(i) and shall be interpreted and applied
consistent therewith.
(h) The Regulatory Allocations set forth in this
Section 5.4 shall be applied only to the extent required by
applicable Treasury Regulations for the resulting allocations
provided for in Sections 5.1 through 5.3, taking into account
such Regulatory Allocations, to be respected for Federal income
tax purposes. The Regulatory Allocations are intended to comply
with the requirements of Treas. Reg. Sec. 1.704-1(b), 1.704-2 and
1.752-1 through 1.752-5 (the "Allocation Regulations") and shall
be interpreted and applied consistently therewith.
5.5 Curative Allocations. Notwithstanding any other
provision of this Section 5 other than the Regulatory
Allocations, allocations shall be taken into account in making
the allocations under Sections 5.1 through 5.3 (the "Agreed
Allocations") so that, to the extent possible, the net amount of
items of income, gain, loss and deduction allocated to each
Partner pursuant to the Regulatory Allocations and the Agreed
Allocations, together, shall be equal to the net amount of such
items that would have been allocated to each Partner under the
Agreed Allocations had the Regulatory Allocations and this
curative allocation not otherwise been provided in this Section
5.
5.6 Other Allocation Rules.
(a) Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset
pursuant to Code Sec. 734(b) or Code Sec. 743(b) is required, pursuant
to Treas. Reg. Sec. 1.704-1(b)(2)(iv)(m), to be taken into account
in determining Capital Accounts, the amount of such adjustment
shall increase the basis of the asset or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner
in which their Capital Accounts are required to be adjusted
pursuant to such Section.
(b) Tax Allocations: Code Section 704(c). In
accordance with Code Sec. 704(c) and the Regulations thereunder,
income, gain, loss and deduction with respect to any property
contributed to the capital of the Partnership shall, solely for
tax purposes, be allocated among the General Partners and Limited
Partners so as to take account of any variation between the
adjusted basis of such property to the Partnership for Federal
income tax purposes and its initial Gross Asset Value using the
"traditional method with curative allocations" as set forth in
Treas. Reg. Sec. 1.704-3(c).
In the event the Gross Asset Value of any Partnership asset is
adjusted as required by the definition of "Gross Asset Value" as
contained in this Partnership Agreement, subsequent allocations
of income, gain, loss and deduction with respect to such asset
shall take account of any variation between the adjusted basis of
such asset for Federal income tax purposes and its Gross Asset
Value in the same manner as under Code Sec. 704(c) and the
Regulations thereunder. Any elections or other decisions
relating to such allocations shall be made by the General
Partners in any manner that reasonably reflects the purpose and
intention of this Partnership Agreement. Allocations pursuant to
this Section 5.6(b) are solely for purposes of federal, state,
and local taxes and shall not affect, or in any way be taken into
account in computing, any Person's Capital Account or share of
Profits, Losses, other items, or distributions pursuant to any
provision of this Partnership Agreement.
5.7 Distributions. Except as provided in Article X below
and as may otherwise be allowed in Article IV above, the General
Partners in their sole discretion shall have the authority to
cause the Partnership to allocate and distribute cash or other
property to the Partners monthly on a basis in accordance with
this Partnership Agreement and shall distribute such cash or
other property at least once a year as necessary to provide the
Partners with funds to pay any required taxes due to the
operation of the Partnership, including its liquidation.
5.8 Amounts Withheld. All amounts withheld pursuant to the
Code or any provision of any state or local tax law with respect
to any payment or distribution to the Partnership, the General
Partners, or the Limited Partners shall be treated as distributed
to the General Partners and the Limited Partners pursuant to
Article V for all purposes under this Partnership Agreement. The
General Partners shall allocate such amounts among the General
Partners and the Limited Partners in a manner that is consistent
with Article V hereof and applicable law.
ARTICLE VI
GENERAL PARTNERS' COMPENSATION
AND REIMBURSEMENT
6.1 Compensation to General Partners. Except as expressly
provided in this Article VI and as provided in Article IV, the
General Partners shall receive no compensation from the
Partnership for services rendered in their capacity as General
Partners of the Partnership.
6.2 Expenses in Connection with Organization of the
Partnership. The Partnership shall be responsible for all
reasonable out-of-pocket fees, costs and expenses actually
incurred in connection with (a) the organization of the
Partnership; (b) the qualification of the Partnership to do
business in any state in which the General Partners determine
that such qualification is advisable; (c) the legal (including
tax advice) and accounting fees and disbursements of the
Partnership; and (d) other out-of-pocket expenses of a similar
nature incurred in connection with such activities.
6.3 Operational Expenses. Subject to the terms of the
Management Agreement, the General Partners shall provide all
managerial services for the Partnership. In connection with such
services, the Partnership shall be obligated to reimburse the
General Partners or their respective Affiliates or designees, on
a monthly basis, for all reasonable and necessary costs and
expenses incurred in connection with providing the day-to-day
management of the Partnership, including (i) the direct costs and
expenses of the General Partners or such Affiliate or designee
for capital equipment, based upon usage of such capital equipment
in connection with Partnership matters, and (ii)
reasonable, direct out-of-pocket expenses for any legal,
accounting, printing, appraisal and similar reasonable general
office services rendered by unaffiliated third parties. No
Partner shall allocate its overhead expenses to the Partnership.
ARTICLE VII
ASSIGNABILITY OF PARTNERS' INTERESTS
7.1 Restrictions on Transfer of Limited Partner's Interest.
Except as set forth in Section 7.3, no Limited Partner may
Transfer all or a portion of its Partnership Interest (the
"Transferor"), unless the Transferor and transferee (the
"Transferee"), comply with the provisions of this Section 7.1.
No portion of a Limited Partner's right to receive his allocable
share of income and losses and distributions of the Partnership
may be Transferred without the Transfer of the same portion of a
Limited Partner's Partnership Interest. Failure to comply with
this Section 7.1 shall render the purported Transfer null and
void and of no force or effect.
(a) Written Consent of Partners. The Transferor shall
give prior written notice of its desire to Transfer all or a
portion of its Partnership Interest, specifying the name of the
Transferee, the consideration and the terms and provisions of the
proposed transaction. Each General Partner shall have twenty
(20) days after receipt of the Transferor's notice to exercise
its right, but not the obligation, to purchase the portion of the
Partnership Interest to be sold on the same terms and conditions
as specified in the notice. Such General Partner shall give
written notice to the Transferor of such election and shall
purchase and pay for such Partnership Interest at the office of
the Partnership on the later of (i) within thirty (30) days from
the delivery of the General Partners' election to purchase or
(ii) the second business day following expiration of any required
governmental waiting periods or the issuance of any governmental
consents. If a General Partner does not exercise its rights to
purchase, the Transferor shall still be required to obtain, prior
to the consummation of such Transfer, the approval of the General
Partners and the approval of a Majority in Interest of the
Limited Partners (which approval shall be subject to the
completion of all acts required in this Section 7.1 and may be
given or withheld in the General Partners' and Limited Partners'
sole discretion and in the manner set forth in Section 13.3).
(b) Opinion of Counsel. The Transferor shall deliver
to the General Partners evidence satisfactory to the General
Partners, (including, if requested by the General Partner, an
opinion of counsel in form and substance satisfactory to counsel
to the Partnership), that:
(i) such Transfer and any offerings made in
connection therewith are in compliance with applicable
federal and state securities laws;
(ii) such Transfer will not cause a termination of
the Partnership for tax purposes or cause it to be
classified as an association; and
(iii) the Transfer will comply with all
applicable rules and regulations of government authorities.
(c) Investment Letter. The Transferee of all or a
portion of a Limited Partner's Partnership Interest shall execute
a statement satisfactory to the General Partners that he is
acquiring such Partnership Interest or part thereof for his own
account for investment and not with a view to the distribution or
resale thereof.
(d) Transfer Expenses. The Transferee and Transferor
shall agree (in writing) with the Partnership to pay all
reasonable expenses (including legal and accounting expenses
incurred by the Partnership) in connection with the Transfer
(which may be shared between them in the proportions they
desire).
(e) Substituted Limited Partner. A Transferee may
become a Substituted Limited Partner on the last business day of
the month following the date on which the Transfer occurred if:
(i) In case of Transfers other than by operation
of law, the Transferor states its intention in writing to
have the Transferee become a Substituted Limited Partner as
concerns the portion of its Partnership Interest to be
Transferred;
(ii) The Transferee agrees to pay any filing fees,
reasonable counsel fees, and other reasonable expenses in
connection with its becoming a Substituted Limited Partner;
and
(iii) The Transferee agrees in writing to be
bound by all of the terms and provisions of the Partnership
Agreement and any other document or instrument executed by
or otherwise binding upon the Limited Partners as if an
original party to the Partnership Agreement or other such
document or instrument.
(f) Tax Consequences. Any Transfer of all or a
portion of a Limited Partner's Partnership Interest (whether or
not such Transferee becomes a Substituted Limited Partner) shall
be null and void if it prejudices or affects the continuity of
the Partnership for the purposes of Section 708 of the Code. The
General Partners are expressly authorized to enforce this
provision by notifying the Partners that all Transfers will be
suspended or limited for a period of up to 12 months whenever
Partnership Interests totalling 25% or more of all Partnership
Interests shall have been Transferred in any consecutive 12 month
period. Prior to any such Transfer becoming effective, the
General Partners may require an opinion of counsel in form and
substance satisfactory to the General Partners to the effect that
the Transfer will not cause adverse tax consequences to any of
the nontransferring Partners, and such Transferor shall be
responsible for paying said counsel's fee for such opinion. At
such time as a Transfer of all or a portion of a Limited
Partner's Partnership Interest is possible in accordance with the
Code, any such Transfer shall be approved in accordance with this
Partnership Agreement in the order in which any such requests are
received by the General Partners after such time. Any Partner
whose action or inaction caused a termination pursuant to Section 708
of the Code prior to the time provided in this Partnership
Agreement shall indemnify and hold harmless the other Partners
from any and all incremental federal, state and local tax
liability incurred as a result of such termination unless each
Partner agrees to waive this provision.
(g) Recognition of Transferee as Limited Partner.
Upon the effective Transfer of all or a portion of a Partnership
Interest and compliance with the other paragraphs of this Section
7.1, the General Partners shall, to the extent required by law
execute, file and record with the appropriate governmental
agencies such documents as are required to accomplish the
substitution of the Transferee as a Substituted Limited Partner.
If required by law, the Certificate of Limited Partnership shall
be amended and recorded not more often than quarterly, to
recognize the admission of Substituted Limited Partners. Nothing
contained herein is meant to require the filing of a Certificate
of Limited Partnership (or amendment thereto) which includes the
names of all Limited Partners and Substituted Limited Partners,
if under applicable state law the inclusion of such names is dis-
cretionary. In all events the General Partners shall amend this
Partnership Agreement to reflect the admittance to the Part-
nership of the Substituted Limited Partner. The Partnership
shall treat a Transferee who becomes a Substituted Limited
Partner pursuant to the provisions of this Section 7.1 as a
Substituted Limited Partner with respect to the Partnership
Interest, or part thereof, assigned from the last business day of
the calendar quarter following the acceptance by the General
Partners of the Transfer, notwithstanding the time consumed in
preparing and filing the necessary documents with governmental
agencies necessary to effectuate the substitution.
(h) Binding Effect. Any Transferee admitted to the
Partnership as a Substituted Limited Partner shall be subject to
and bound by all the provisions of the Partnership Agreement as
if an original party to the Partnership Agreement.
7.2 Restrictions on Transfer of General Partners' Interest.
Except as set forth in Section 7.3, no portion of a General
Partners' Partnership Interest (including the General Partners'
right to receive their allowable share of income and losses and
distribution of the Partnership) may be Transferred except in
accordance with this Section 7.2. Failure to comply with this
Section 7.2 shall render the purported Transfer null and void and
of no force or effect.
(a) Written Consent of Partners. A General Partner
shall give prior written notice of its desire to Transfer its
Partnership Interest, specifying the name of the transferee the
consideration and the terms and provisions of the proposed
transaction. The Limited Partners shall have twenty (20) days
after receipt of the General Partner's notice to exercise their
right, but not their obligation, to purchase the portion of the
Partnership Interest to be sold on the same terms and conditions
as specified in the notice, and if so purchased, at the election
of the purchasing Limited Partner, the General Partnership
Interest so purchased may be converted into a Limited Partnership
Interest. The Limited Partners shall give written notice to such
General Partner of such election and shall purchase and pay for
such Partnership Interest at the office of the Partnership on the
later of (i) thirty (30) days from the delivery of the Limited
Partners' election to purchase or (ii) the second business day
following expiration of any required governmental waiting periods
or the issuance of any governmental consents. If the Limited
Partners do not exercise their right to purchase, such General
Partner shall still be required to obtain, prior to the
consummation of such Transfer, the approval of a Majority in
Interest of the Limited Partners (in the manner set forth in
Section 13.3).
(b) Opinion of Counsel. The Partnership must receive
an opinion of counsel from the Partnership that such transfer and
admission
(i) would not cause the loss of limited liability
of the Limited Partners under this Partnership Agreement,
and
(ii) would not cause the Partnership to be treated
as an association taxable as a corporation for Federal
income tax purposes, and
(iii) would not affect the status of the
Partnership, the Partners or any of their respective
Affiliates under the Public Utility Holding Company Act of
1935.
(c) Prior to the transfer of all of a General
Partner's Partnership Interest, the Partnership shall have
admitted another entity or individual as a General Partner so as
not to cause the dissolution of the Partnership.
7.3 Permitted Transfers of Partnership Interests.
Notwithstanding any provision of this Article VII or the
Partnership Agreement to the contrary:
(a) Any Limited Partner may Transfer (i) to another
person or entity its Partnership Interest in connection with such
Limited Partners merger or consolidation with another person or
entity or (ii) all or a portion of its Partnership Interest to an
Affiliate controlled by such Limited Partner;
(b) the General Partners and the Limited Partners may
pledge or otherwise encumber their Partnership Interests to
secure indebtedness of the Partnership which the General Partners
in their sole discretion have deemed it in the best interest of
the Partnership to incur;
(c) subject to Section 7.2(a) above, each of the
General Partners may Transfer its Partnership Interest in partial
or complete liquidation of its Partnership Interest; provided
that prior to such Transfer the remaining General Partner admits
an additional or substitute General Partner as General Partner of
the Partnership in accordance with Section 8.5; and
(d) any corporate General Partner may Transfer all or
a portion of its Partnership Interest upon its merger or
consolidation with another person or entity or the transfer by it
of all or substantially all its assets to another person, the
assumption of the rights and duties of such corporate General
Partner by such person, and the admission of such person to the
Partnership as a General Partner, provided such person
(i) if it is other than an individual, is
organized under the laws of the United States of America or
any State thereof;
(ii) shall represent to the Partnership that it
has, or will have following the transaction, substantially
the same or greater tangible net worth as the transferring
General Partner; and
(iii) furnishes to the Partnership an opinion of
independent counsel to the effect that such merger,
consolidation, transfer or assumption (A) would not cause
the loss of limited liability of the Limited Partner under
this Partnership Agreement and (B) would not cause the
Partnership to be treated as an association taxable as a
corporation for Federal income tax purposes.
ARTICLE VIII
WITHDRAWAL AND REMOVAL OF A GENERAL PARTNER;
ADMISSION OF SUCCESSOR AND ADDITIONAL GENERAL PARTNER
8.1 Voluntary Withdrawal. Each General Partner hereby
agrees that it may withdraw from the Partnership only with the
prior consent of a Majority in Interest of the Limited Partners
both as to withdrawal and the terms and conditions thereof which
consent shall not be unreasonably withheld as long as the
operation of the Partnership is not materially adversely
affected; and any withdrawal without such prior consent shall
constitute a breach of this Partnership Agreement by the
withdrawing General Partner.
8.2 Other Withdrawal Events. The occurrence of any of the
events described in 17-402(a)(4) and (5) of the Act shall not
effect the withdrawal of a General Partner until the latter of
(i) 60 days subsequent to such occurrence or (ii) 30 days after a
General Partner (whether or not such General Partner was the
General Partner affected by such event) gives notice of the
occurrence to the Limited Partners. The General Partner shall
give notice of such event to the Limited Partners within 10 days
of the occurrence of such event.
8.3 Removal of the General Partner.
(a) A General Partner may not be removed as a general
partner except (i) for Cause (as defined below) with the removal
for any such reason approved by a Majority in Interest of Limited
Partners (in the manner set forth in Section 13.3), or (ii) by
the vote or consent of at least 66 % of Partnership Percentages
of all Limited Partners (in the manner set forth in Section
13.3). "Cause" shall mean (i) the failure of a General Partner
to timely make a required capital contribution, (ii) the failure
of a General Partner to obtain the approval of a Majority in
Interest of the Limited Partners before undertaking those actions
which require the approval of the Limited Partners, (iii) the
commencement of bankruptcy or insolvency proceedings by or
against a General Partner or its affiliates, (iv) a General
Partner's breach of any provision of this Partnership Agreement
which has a material adverse effect on the construction,
operation or maintenance of the operations of the Partnership or
on the Limited Partners' equity investment in the Partnership,
(v) gross negligence, fraud or breach of a General Partner's
fiduciary duties pursuant to this Partnership Agreement or (vi) a
45% or greater change in the stock ownership of Tartan
Management. For purposes of clause (iii) above, the term
affiliate with respect to a General Partner shall mean any Person
or entity owning 50% or more of the outstanding voting securities
of such General Partner.
(b) Written notice setting forth the effective date of
such removal (which date shall not be less than 30 days after the
service of such notice) shall be served upon the General Partner
to be removed pursuant to the notice provisions contained in
Section 13.1 of this Partnership Agreement. As of the effective
date of such removal, all of such person's rights and powers as a
General Partner shall cease and such General Partner's
Partnership Interest shall be converted automatically into a
limited partner interest (based on the fair market value of such
General Partner's Partnership Interest).
8.4 Liability of a Withdrawn General Partner. Any General
Partner which shall voluntarily or involuntarily for any reason
(including bankruptcy, death or adjudication of incompetency)
withdraw from the Partnership, or sell, transfer or assign its
general partner Partnership Interest, shall be and remain liable
for all obligations and liabilities incurred by such General
Partner prior to the time such withdrawal, conversion, sale,
transfer or assignment, has become effective, but shall be free
of any obligation or liability incurred on account of the
activities of the Partnership from and after the time such
withdrawal, conversion, sale, or transfer or assignment shall
have become effective except for any liabilities or damages
attributable to its action in withdrawing from the Partnership.
8.5 Additional or Successor General Partner.
(a) A General Partner may admit additional or
successor General Partners in connection with a transfer of all
or a part of the General Partner's Partnership Interest subject
to Section 7.2(a) above. If a General Partner withdraws or is
removed pursuant to Sections 8.1, 8.2 or 8.3 and if such
withdrawal or removal would leave the Partnership without a
General Partner, then prior to the effective date of such removal
or withdrawal, the Limited Partners shall meet to select and
appoint one or more successor General Partners to continue the
business of the Partnership, which selection and appointment
shall be effected by the approval of a Majority in Interest of
the Limited Partners (in the manner set forth in Section 13.3)
and become effective prior to the removal or withdrawal of a sole
General Partner. A 1% partnership interest shall be reallocated
from the Limited Partners, pro rata, to any successor General
Partner(s) required pursuant to this Section 8.5, unless the
successor General Partner makes a capital contribution to the
Partnership equal to or greater than 1% of the total of the
Capital Contributions to the Partnership.
(b) If Tartan Management is removed for Cause, a
single purpose subsidiary of TEMI will succeed to the 1% general
partner interest of Tartan Management or the Limited Partners may
select another Person as a successor General Partner in
accordance with the terms hereof, in each case, without the
consent of Tartan Management, and the 1% general partnership
interest of Tartan Management shall be converted pursuant to
Section 8.3.
8.6 Successor General Partner. If a General Partner
withdraws or is removed in its capacity as a General Partner by
the affirmative vote of a Majority in Interest of the Limited
Partners, then prior to the effective date of such removal or
withdrawal, the Limited Partners shall meet to select and appoint
a successor General Partner, which selection and appointment
shall be effected by the approval of a Majority in Interest of
the Limited Partners (in the manner set forth in Section 13.3)
and become effective prior to the removal or withdrawal of the
General Partner.
8.7 Continuation of Partnership. In the event of an event
which causes the dissolution of the Partnership by the provisions
of this Partnership Agreement, the Partnership may be
reconstituted and its business continued without being wound up:
(a) by the remaining General Partner(s) (without the
approval of any of the Limited Partners) if there remains at
least one General Partner; or
(b) within 90 days after such dissolution or on the
date of the withdrawal of a General Partner, by the agreement in
writing of all Partners (whether or not there remains at least
one General Partner).
ARTICLE IX
DISSOLUTION AND LIQUIDATION
9.1 Dissolution. The Partnership shall be dissolved:
(a) upon the expiration of its term as provided in
Section 2.4 or the occurrence of any other event in Section 2.4;
and
(b) upon any other event that, under this Partnership
Agreement or Section 359.241 of the Act, causes its dissolution,
except as otherwise provided herein.
9.2 Liquidation. Upon dissolution of the Partnership,
unless the Partnership is continued pursuant to the provisions of
this Partnership Agreement, either the General Partners (or a
liquidator selected by a Majority in Interest of the Partners)
shall proceed with the winding up of the business and the
liquidation of the Partnership as set forth under Article X.
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS ON LIQUIDATION
10.1 Liquidation and Termination.
(a) In the event of the dissolution of the Partnership
in accordance with Section 9.1 above, unless the remaining
Partners, if any, elect to continue the business of the
Partnership as provided by the terms of this Partnership
Agreement, the General Partners or the liquidator of the
Partnership shall proceed with the winding up of the affairs of
the Partnership. Upon the dissolution of the Partnership no
further business shall be conducted, except for such action as
shall be necessary for the winding up of the affairs of the
Partnership and the distribution of its assets to the Partners
pursuant to the provisions of this section. The General Partners
shall act as liquidating trustees or may appoint in writing one
or more liquidating trustees who shall have full authority to
wind up the affairs of the Partnership and to make final
distribution as provided herein; provided, however, if the
Partnership is dissolved by an act which constitutes a breach of
this Partnership Agreement by a General Partner, the Limited
Partners shall, by a vote of the Majority in Interest of the
Limited Partners, designate a party to act as the liquidating
trustee.
(b) Upon dissolution of the Partnership, the
liquidating trustee or trustees may sell any or all Partnership
property, at the best cash price available or it may distribute
those properties in kind. The General Partners may, if they so
desire, purchase or cause an Affiliate or Affiliates of either of
them to purchase all of the Partnership property upon liquidation
following thirty (30) days prior public notice of the proposed
sale and provided at least thirty (30) days advance notice of the
proposed sale has been given to the Limited Partners. The price
paid by the General Partners or any of their Affiliates for any
Partnership property shall in no event be less than the greater
of (i) the highest bid received from a third party, or (ii) the
General Partners' estimate of the fair market value of such
property (the fair market value shall be determined by an
independent third party deemed by the General Partners, competent
to appraise such assets).
(c) The General Partners shall apply and distribute
the assets of the Partnership as follows:
(i) First, to the payment and discharge of all of
the Partnership's debts and liabilities to creditors other
than the General Partners or Limited Partners;
(ii) Second, to the payment and discharge of all
of the Partnership's debts and liabilities to the General
Partners or Limited Partners; and
(iii) Third, according to the Partners
respective Partnership Percentage.
10.2 Capital Account Deficits and Special Distributions. If
any Partner has a deficit balance in his Capital Account (after
giving effect to all contributions, distributions and allocations
for all taxable years, including the year during which such
liquidation occurs), such Partner shall have no obligation to
make any contribution to the capital of the Partnership with
respect to such deficit, and such deficit shall not be considered
a debt owed to the Partnership or to any other Person for any
purpose whatsoever. In the discretion of the General Partners, a
pro rata portion of the distributions that would otherwise be
made to the General Partners and Limited Partners pursuant to
this Article X may be:
(a) distributed to a trust established for the benefit
of the General Partners and Limited Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to the
Partnership, and paying any contingent or unforeseen liabilities
or obligations of the Partnership or of the General Partners
arising out of or in connection with the Partnership. The assets
of any such trust shall be distributed to the General Partners
and Limited Partners from time to time, in the reasonable
discretion of the General Partners, in the same proportions as
the amount distributed to such trust by the Partnership would
otherwise have been distributed to the General Partners and
Limited Partners pursuant to this Partnership Agreement; or
(b) withheld to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect
the unrealized portion of any installment obligations owed to the
Partnership, provided that such withheld amounts shall be
distributed to the General Partners and Limited Partners as soon
as practicable.
10.3 Deemed Distribution and Recontribution. Notwith-
standing any other provision of this Article X, in the event the
Partnership is liquidated within the meaning of Treas. Reg. Sec.
1.704-1(b)(2)(ii)(g) (regarding when a liquidation occurs) but
it has not dissolved pursuant to Section 9.1 hereof, the
Partnership shall not be liquidated, the Partnership's
liabilities shall not be paid or discharged, and the
Partnership's affairs shall not be wound up. Instead, the
Partnership shall be deemed to have distributed the property in
kind to the General Partners and Limited Partners, who shall be
deemed to have assumed and taken such property subject to all
Partnership liabilities, all in accordance with their respective
Capital Accounts. Immediately thereafter, the General Partners
and Limited Partners shall be deemed to have recontributed the
property in kind to the Partnership, which shall be deemed to
have assumed and taken such property subject to all such liabili-
ties.
ARTICLE XI
CERTIFICATES AND OTHER DOCUMENTS
11.1 General Partners as Attorney for Limited Partners.
(a) Each Limited Partner, by becoming a Limited Part-
ner, hereby constitutes and appoints the General Partners and
any successor of the General Partner, the true and lawful
attorney of, and in the name, place and stead of said Limited
Partner, from time to time:
(i) To make all agreements amending this Part-
nership Agreement, as now or thereafter amended, that may be
appropriate to reflect solely:
(1) A change of the name or the location of the
principal place of business or the Partner-
ship;
(2) The disposal by a Limited Partner of his
Partnership Interest, in any manner permitted
by this Partnership Agreement, and any return
of the Capital Contribution of a Limited
Partner (or any part thereof), if any,
provided for by this Partnership Agreement;
(3) A person becoming a Limited Partner of the
Partnership, as permitted by this Partnership
Agreement;
(4) A change in any provision of this Partnership
Agreement or the exercise by any person of
any right or rights thereunder not requiring
the consent of such Limited Partner; and
(5) The exercise by any person of any right or
rights under this Partnership Agreement re-
▇▇▇▇▇▇▇ the consent or approval of a majority
or a specified percentage of the Limited
Partners when the required consent or
approval has been given.
(b) To make such certificates, instruments and docu-
ments, including fictitious business name statements, as may be
required by, or may be appropriate under, the laws of the State
of Missouri in connection with the use of the name of the
Partnership by the Partnership and to make such applications and
filings to transact business as a foreign limited partnership in
those jurisdictions where the nature of the Partnership's
properties or business makes such action advisable;
(c) To make such certificates, instruments and docu-
ments, including those referenced in Section 11.2 below, and also
including amendments to this Partnership Agreement, as said
Limited Partner may be required or as may be appropriate for said
Limited Partner to make, by the laws of any state or other
jurisdiction solely to reflect:
(i) A change of address of such Limited Partner;
(ii) Any changes in or amendments to this
Partnership Agreement or the Certificate of Limited
Partnership, or pertaining to the Partnership, of any kind
referred to in paragraph 11.1(a); and
(iii) Any other changes in or amendments to
this Partnership Agreement or the Certificate of Limited
Partnership, but only if and when such Limited Partner has
agreed to such other changes or amendments by signing,
either personally or by duly appointed attorney (other than
the power of attorney set forth herein), an agreement
amending this Partnership Agreement.
(d) Each of such agreements, certificates, instruments
and documents shall be in such form as such attorney and counsel
for the Partnership shall deem appropriate. The powers hereby
conferred to make agreements, certificates, instruments and
documents shall be deemed to include the powers to sign, execute,
acknowledge, swear to, verify, deliver, file, record and publish
the same.
(e) Each Limited Partner authorizes such attorney to
take any further action which such attorney shall consider neces-
sary or convenient in connection with any of the foregoing and
hereby gives such attorney 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 ratifies and confirms all that such attorney shall
lawfully do or cause to be done by virtue hereof.
(f) The powers hereby conferred shall continue from
the date such Limited Partner becomes a Limited Partner in the
Partnership until such Limited Partner shall cease to be a
Limited Partner and, being coupled with an interest, shall be
irrevocable.
11.2 Making and Filing of Certificates. The General
Partners agree, when authorized pursuant to Section 11.1 hereof,
or otherwise, to make, file or record with the Secretary of State
of the State of Missouri or any other appropriate public
authority and (if required) to publish the certificate, any
amendments thereof, and such other certificates, instruments and
documents as may be required or appropriate in connection with
the business and affairs of the Partnership.
ARTICLE XII
BOOKS OF ACCOUNT, FINANCIAL
STATEMENTS AND FISCAL MATTERS
12.1 Books of Account. The Partners intend that the
Partnership shall be treated as a partnership for federal, state
and local tax purposes. Each Partner agrees not to make the
election described in Section 761(a) of the Code to be excluded
from the application of the provisions of Subchapter K of Chapter
1 of Subtitle A of the Code. Moreover, each Partner agrees not
to make an election to be excluded from the partnership
provisions of any applicable state or local taxation statute.
The General Partners shall, to the extent permissible under ex-
isting law, for income tax purposes, keep on an accrual basis,
adequate books of account of the Partnership wherein there shall
be recorded and reflected all of the Capital Contributions to the
Partnership and all of the expenses and transactions of the
Partnership. Such books of account shall be kept at the
principal place of business of the Partnership, and each Limited
Partner and his authorized representatives shall have at all
times, during reasonable business hours, free access to and the
right to inspect and copy such book of account and all records of
the Partnership, including the right to obtain by mail or to
inspect a list of the names and addresses and Partnership
Interests owned of the Limited Partners. All books and records
of the Partnership shall be kept on the basis of an annual
accounting period ending December 31, except for the final
accounting period which shall end on the dissolution or
termination of the Partnership without reconstitution.
Accelerated methods of depreciation may, if approved under
Section 3.2, be elected by the Partnership with respect to its
assets for purposes of reporting federal or state taxes.
12.2 Reports and Financial Statements. The General Partners
shall maintain a system of accounting established and
administered in accordance with Generally Accepted Accounting
Principals and shall provide the following reports and financial
statements to the Partners:
(a) Annual Report. Within 55 days after the end of
each calendar year, (i) a balance sheet as of the end of such
calendar year, together with a statement of income or loss and a
statement of changes in cash flows for the Partnership for such
year; (ii) a report summarizing the fees and other remuneration
(including reimbursable expenses) paid by the Partnership to the
General Partners or their Affiliates during the preceding year
and summarizing the activities of the Partnership for each year;
and (iii) a statement showing each Limited Partner's estimated
allocation of income, gains, losses and credits for Federal
income tax purposes. The balance sheet and financial statements
described in clause (i) of this Section 12.2(a) shall be audited
by a nationally or regionally recognized certified public
accounting firm or other certified public accounting firm
acceptable to the Limited Partners;
(b) Quarterly Reports. Within 30 days after the end
of each calendar quarter a report summarizing the principal
activities of the Partnership during the previous quarter;
(c) Monthly Reports. Within 30 days after the end of
each month, the balance sheet of the Partnership as of the end of
such month and the statement of income of the Partnership for
such month and for the period commencing at the end of the
previous fiscal year and ending with the end of such month, all
in reasonable detail; and
(d) Income Tax Information. Within 90 days after the
end of each calendar year, the Partnership will also furnish each
Limited Partner (and each transferee assignee of a Partnership
Interest who shall have not become a Substituted Limited Partner
and of whom the General Partner is aware) with the required
income tax information based upon the Partnership's tax return
which will be prepared and filed with the Service.
12.3 Tax Returns and Other Reports. The General Partners,
at the Partnership's expense, shall cause income tax returns for
the Partnership to be prepared and timely filed with the appro-
priate authorities. The General Partners, at Partnership
expense, shall cause to be prepared and timely filed, with
appropriate federal and state regulatory and administrative
bodies, all reports required to be filed with such entities under
then current applicable laws, rules and regulations. Such
reports shall be prepared on the accounting or reporting basis
required by such regulatory bodies. Any Limited Partner shall be
provided with a copy of any such report upon request without
expense to it.
12.4 Fiscal Year. The fiscal year of the Partnership shall
begin with the first day of January and end on the last day of
December in each year; provided, however, that the General
Partners, subject to approval under Section 3.2 and any requisite
approval by the Service and the applicable state taxing
authorities, may change the Partnership's fiscal year.
12.5 Bank Accounts, Funds and Assets. The funds of the
Partnership shall be invested in such accounts and investments as
described herein and such funds shall be withdrawn only by the
General Partners or their duly authorized agents. The General
Partners shall have fiduciary responsibility for the safekeeping
and use of all funds of the Partnership, whether or not in its
immediate possession or control, and it shall not employ, or
permit another to employ, such funds or assets in any manner
except for the exclusive benefit of the Partnership.
12.6 Elections. The Tax Matters Partner shall make the
following elections under the Code and Treasury Regulations and
any similar state or local statutes:
(a) To adopt the calendar year as the annual
accounting period, unless otherwise required by law;
(b) To adopt the accrual method of accounting;
(c) To compute the allowance for depreciation
utilizing the shortest life and fastest method permissible under
the Modified Accelerated Cost Recovery System or other applicable
depreciation system;
(d) To amortize start-up expenditures, if any, over a
sixty (60) month period in accordance with Section 195(b) of the Code
and any similar state statute;
(e) To amortize start-up expenditures if any, over a
sixty (60) month period in accordance with Section 709(b) of the Code
and any similar state statute;
(f) To make such other elections as it may deem
advisable to reduce Partnership taxable income to the maximum
extent possible and to take deductions in the earliest taxable
year possible; and
(g) To make the election provided under Section 754 of the
Code, upon the request of any Partner, if there is a distribution
of property as described in Section 734 of the Code or if there is a
transfer of an interest as described in Section 743 of the Code.
12.7 Other Partnership Records. The Partnership shall keep
and maintain in its principal office all records as required by
Section 359.051 of the Act. Such records shall include, but are
not limited to, the following:
(a) A current list that states: (i) the name and
mailing address of each Partner, separately identifying in
alphabetical order the General Partners and the Limited Partners
of the Partnership; (ii) the last known street address of the
business or residence of the General Partners; (iii) the names of
the Partners who are members of each specified class or group of
Partners; and (iv) the Partnership Percentage or Partnership In-
terest owned by each Partner.
(b) Copies of the Partnership's federal, state and
local information or income tax returns for each of the
Partnership's six most recent tax years, if applicable.
(c) A copy of the Partnership Agreement and the
Certificate of Limited Partnership, all amendments or restate-
ments, executed copies of any powers of attorney under which the
Partnership Agreement and the Certificate of Limited Partnership
and all amendments or restatements to the Partnership Agreement
and the Certificate of Limited Partnership have been executed,
and copies of any document that creates, in the manner provided
by the Partnership Agreement, classes or groups of Partners.
(d) A written statement of: (i) the amount of the
cash contribution and a description and statement of the agreed
value of any other contribution made by each Partner, and the
amount of the cash contribution and a description and statement
of the agreed value of any other contribution that the Partner
has agreed to make in the future as an additional contribution;
(ii) the times at which additional contributions are to be made
or events requiring additional contributions to be made; and
(iii) the date on which each Partner became a Partner.
(e) A written registration of all pledges and/or
grants of security interest by all Partners in any outstanding
Partnership Interest reflecting the name and address of all
secured parties or pledgees. The General Partners shall give all
notices of such pledges and grants of security interests to all
such parties as required by Article 9 of The Missouri Uniform
Commercial Code.
(f) Correct and complete books and records of account
of the Partnership.
12.8 Partnership-Level Tax Audits. The Partners recognize
and agree that Tartan Management shall be the "tax matters
partner" of the Partnership pursuant to Section 6231(a)(7) of the Code.
As tax matters partner, Tartan Management shall take such action
as may be necessary to cause all Partners to become "notice
partners" within the meaning of Section 6231(a)(8) of the Code. Tartan
Management shall keep all Partners informed of all matters that
come to its attention in its capacity as "tax matters partner" by
giving the Partners notice thereof within ten days after it
becomes informed of any such matters. Tartan Management shall
take no actions in its capacity as "tax matters partner" which
will bind the Partnership without the unanimous consent of all
Partners. Tartan Management shall have no obligation or
liability hereunder to the Partnership or any other Partner for
any omission, decision made or action taken in connection with
the discharge of its duties as "tax matters partner" unless such
omission, decision, or action is made or taken in bad faith or as
a result of willful misconduct.
12.9 Survival of Tax Provision. The provisions of the
Agreement relating to tax matters shall survive the termination
of the Agreement and the termination of any Partner's interest in
the Partnership and shall remain binding on that Partner for the
period of time necessary to resolve with any federal, state and
local tax authority and tax matters regarding the Partnership.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. Any notice, request, instruction,
correspondence or other document to be given hereunder by any
party (herein collectively called "Notice") shall be in writing
and delivered in person or by courier service requiring
acknowledgment of receipt of delivery or mailed by certified
mail, postage prepaid and return receipt requested, or by
telecopier, as follows:
if to MCN,
MCN Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice to):
Citizens Gas and Fuel
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to Tartan Management,
Tartan Management Company of Missouri, L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to TEMI,
Torch Energy Marketing, Inc.
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
if to any other Partner, addressed to the applicable
address provided by such Partner in writing to all
other Partners.
Notice given by personal delivery, courier service or mail shall
be effective upon actual receipt. Notice given by telecopier
shall be confirmed by appropriate answer back and shall be
effective upon actual receipt if received during the recipient's
normal business hours, or at the beginning of the recipient's
next business day after receipt if not received during the
recipient's normal business hours. All Notices by telecopier
shall be confirmed promptly after transmission in writing by
certified mail or personal delivery. All Notices by mail shall
be deemed received on the fifth business day following the date
on which the same is mailed. Any party may change any address to
which Notice is to be given to it by giving Notice as provided
above of such change of address.
13.2 Conveyances, Contracts and Documents. Any deed, ▇▇▇▇
of sale, mortgage, deed of trust, lease, contract of sale, or
other commitment purporting to purchase, sell, assign, convey or
encumber the interest of the Partnership in all of any portion of
any real or personal property at any time held in its name, and
any other contract, check, draft, document, communication or
notice to which the Partnership is a party, including any
documentation committing the Partnership to purchase any real or
personal property, may be signed by a General Partner, and no
other signature will be required.
13.3 Meetings of or Actions by the Limited Partners.
(a) Meetings of the Limited Partners to vote upon any
matters on which the Limited Partners are authorized to take
action under this Partnership Agreement or as the same may be
amended from time to time may be called at any time by any
General Partner or by a Majority in Interest of the Limited
Partners by delivering written notice, either in person or by
registered mail, of such call to either of the General Partners.
Within 10 days following receipt of such request, the General
Partner receiving such notice shall cause a written notice to be
given, either in person or by registered mail, to the Limited
Partners entitled to vote advising them that a meeting,
convenient to the Limited Partners, will be held at a time and
place fixed by the General Partners. Such meeting will be held
not less than 10 days nor more than 60 days after the mailing of
the notice of the meeting. Included with the notice of the
meeting shall be a detailed statement of the action proposed,
including a verbatim statement of the wording of any resolution
proposed for adoption by the Limited Partners and of any proposed
amendments to this Partnership Agreement, as the same may from
time to time be amended. Meetings of the Partners may be
conducted by means of telephone conference or similar com-
munications equipment whereby all persons participating in the
meeting can hear and speak to each other. All expenses of the
meeting and notification shall be borne by the Partnership.
(b) A Majority in Interest of the Partners entitled to
vote on any such action shall constitute a quorum for the trans-
action of that specific action at any meeting. Personal presence
of the Limited Partners shall not be required, provided either
(a) an effective and notarized written consent to or rejection of
such proposed action is submitted to a General Partner or (b) a
proxy is submitted to a General Partner. Attendance by a Limited
Partner and voting in person at any meeting shall revoke any
written consents or rejections of such Limited Partner submitted
with respect to action proposed to be taken at such meeting.
(c) Any matter on which the Limited Partners are
authorized to take action under this Partnership Agreement or
under law may be taken by the Limited Partners without a meeting
and shall be as valid and effective as action taken by the Limit-
ed Partners at a meeting assembled, if (i) at least 10 calendar
days prior to the earliest date on which the action to be taken
by consent may occur, a General Partner shall cause written
notice describing such action to be given, either in person or by
registered mail, to the Limited Partners who would be entitled to
vote upon such action at a meeting and (ii) written consents to
such action by the Limited Partners are (A) signed by the Limited
Partners entitled to vote upon such action at a meeting who hold
the Partnership Percentages required to authorize such action,
and (B) are delivered to a General Partner. In the event that
there shall be no General Partner, the Limited Partners may take
action without a meeting by the written consent of Limited
Partners having a majority of such higher percentage as required
elsewhere herein of the voting power of the Limited Partners
entitled to vote.
13.4 Dispute Resolution.
(a) The General Partners shall attempt in good faith
to resolve any controversy or claim arising from or relating to
this Agreement promptly by negotiations. On the request of any
Partner, whether made before or after the institution of any
legal proceeding, any action, dispute, claim or controversy of
any kind now existing or hereafter arising between any of the
Partners in any way arising out of, pertaining to or in
connection with the management of the Partnership, this
Partnership Agreement or any other matter relating thereto or
arising therefrom (a "Dispute") shall be resolved by binding
arbitration in accordance with the terms hereof. Any party may,
by summary proceedings, bring an action in court to compel
arbitration of any Dispute.
(b) Any arbitration shall be administered by the
American Arbitration Association (the "AAA") in accordance with
the terms of this Section 13.4, the Commercial Arbitration Rules
of the AAA, and, to the maximum extent applicable, the Federal
Arbitration Act. Judgment on any award rendered by an arbitrator
may be entered in any court having jurisdiction.
(c) Any arbitration shall be conducted before one
arbitrator. The arbitrator shall be a practicing attorney
licensed to practice in the State of Missouri who is
knowledgeable in the subject matter of the Dispute selected by
agreement between the parties hereto. If the parties cannot
agree on an arbitrator within 30 days after the request for an
arbitration, then any party may request the AAA to select an
arbitrator. The arbitrator may engage consultants that the
arbitrator deems necessary to render a conclusion in the
arbitration proceeding.
(d) To the maximum extent practicable, an arbitration
proceeding hereunder shall be concluded within 180 days of the
filing of the Dispute with the AAA. Arbitration proceedings
shall be conducted in St. Louis, Missouri. Arbitrators shall be
empowered to impose sanctions and to take such other actions as
the arbitrators deem necessary to the same extent a judge could
impose sanctions or take such other actions pursuant to the
Federal Rules of Civil Procedure and applicable law. At the
conclusion of any arbitration proceeding, the arbitrator shall
make specific written findings of fact and conclusions of law.
The arbitrator shall have the power to award recovery of all
costs and fees to the prevailing party. Each party agrees to
keep all Disputes and arbitration proceedings strictly
confidential except for disclosure of information required by
applicable law.
(e) All fees of the arbitrator and any consultant
engaged by the arbitrator, shall be paid equally by the Partners
involved unless otherwise awarded by the arbitrator.
13.5 Captions and Pronouns. Any titles or captions or
articles or paragraphs contained in this Partnership Agreement
are for convenience only and shall not be deemed part of the
context of this Partnership Agreement. All pronouns and any
variations thereof shall be deemed to refer to the masculine,
feminine, neuter, singular or plural, as the identification of
the person or persons, firm or firms, corporation or corporations
may require.
13.6 Binding Effect. Except as otherwise herein provided,
this Partnership Agreement shall be binding upon and inure to the
benefit of the parties hereto, their heirs, executors,
administrators, successors and all persons hereafter having or
holding a Partnership Interest, whether as assignees, Substituted
Limited Partners, or otherwise. Nothing in this Partnership
Agreement, express or implied, is intended to confer upon any
person or entity other than the parties hereto and their
respective permitted successors and assigns, any rights, benefits
or obligations hereunder.
13.7 Additional Projects. If Tartan Management or any of
its Affiliates intends, directly or indirectly, to participate in
a pipeline project in the state of Missouri involving the
distribution of gas other than the Project ("Additional
Project"), then Tartan Management shall give written notice (an
"Additional Project Notice") to TEMI and MCN at least thirty (30)
days prior to Tartan Management entering into any definitive
agreement other agreement or document providing for the
Additional Project. Such notice shall specify the nature of the
project, shall contain reasonable detail of Tartan Management's
or its Affiliates' proposed involvement in such project, and
whether such project is an Equity Additional Project (as
hereinafter defined). It is understood that while Tartan
Management is required to give MCN and TEMI notice of all such
Additional Projects, the right of MCN and TEMI to participate in
any Additional Projects shall be limited to those Additional
Projects in which Tartan Management or any of its Affiliates,
directly or indirectly, has the right to invest or earn an
interest (the "Equity Additional Project"). In this regard,
Tartan Management agrees that it shall not circumvent the
provisions of this Section 13.7 by structuring its participation
in any Additional Project so that such Project is not an Equity
Additional Project. If such project is an Equity Additional
Project, then the Additional Project Notice shall also specify
the prospective parties and all material terms contemplated in
connection with such Equity Additional Project and shall contain
an offer to TEMI and MCN to participate in the Equity Additional
Project under the same terms and conditions as the Project. Each
of TEMI and MCN shall notify Tartan Management in writing within
thirty (30) days of the receipt (as set forth in Section 13.1
hereof) of the Additional Project Notice whether TEMI or MCN,
respectively, shall accept the offer to participate in the Equity
Additional Project on such terms and conditions. If one of
either TEMI or MCN declines to participate in the Equity
Additional Project, then the party that elected to participate in
the Equity Additional Project ("Electing Party") shall be
entitled to all of the rights offered to both TEMI and MCN in the
Additional Project Notice for such Equity Additional Project,
including without limitation the total ownership interest
originally offered both to TEMI and MCN. If the Electing Party
declines to participate to the extent of all of the rights of
both TEMI and MCN, then Tartan Management shall have the right to
participate for that portion of the Equity Additional Project in
which MCN or TEMI has declined to participate. If neither MCN
nor TEMI participate, Tartan Management or any of its Affiliates
may proceed on their own behalf with such Equity Additional
Project, subject to the written approvals of both MCN and Torch,
which approvals will not be unreasonably withheld. Any written
proposal of a proposed expansion of the System submitted by
Tartan Management under Section 3.5 of the Management Agreement
shall also constitute an Additional Project Notice under this
Section 13.7.
In the event of any dispute between Tartan Management, MCN
and TEMI regarding whether an Additional Project is an Equity
Additional Project, or whether Tartan Management has structured
its participation in an Additional Project so that such Project
is not an Equity Additional Project, such dispute shall be
resolved pursuant to Section 13.4 hereof.
13.8 Inspection of Property. The General Partners covenant
that they will permit any employee, agent or professional
consultant designated by a Partner in writing, at such Partner's
expense (except if a breach of this Partnership Agreement exists,
then at the Partnership's expense), to visit and inspect any of
the properties of the Partnership, to examine the Partnership
books and financial records of the Partnership and make copies
thereof or extracts therefrom and to discuss the affairs,
finances and accounts of the Partnership with the principal
officers of the General Partners and the Partnership's
independent public accountants, all at such reasonable times and
as often as a Partner may reasonably request. A Partner shall
have no duty to make any such inspection or examination nor shall
it incur any liability or obligation by reason of failing to make
any such inspection or examination. Should any examination of
such books and records demonstrate that any statement, report,
schedule, notice or other writing furnished by the General
Partners is untrue or incorrect in any material respect, the
General Partners shall forthwith upon request of any Partner
cause an independent certified public accounting firm to audit
the pertinent books and records of the Partnership and to furnish
a written opinion to each Partner concerning such books and
records, all at the sole cost and expense of the Partnership.
13.9 Proposed Partners. All Persons who purchase Units
("Proposed Partners"), shall take subject to the terms and
conditions of this Partnership Agreement. Any Proposed Partner
shall be required to become a party to this Partnership Agreement
by executing an Adoption Agreement in the form required by the
General Partner and shall have all the rights and obligations of
a Partner (limited or general, as applicable) hereunder.
13.10 Amendment of the Partnership Agreement. A General
Partner may, from time to time, propose amendments to this
Partnership Agreement. Such General Partner shall submit all
proposed amendments to all of the Partners, and such General
Partner shall include in such submission its recommendation as to
the proposed amendment. Except as otherwise stated in this
Partnership Agreement, the approval of the General Partners and a
Majority in Interest of the Limited Partners (in the manner set
forth in Section 13.3) shall be required to amend this
Partnership Agreement; provided, however, that the provisions of
Section 3.2(b) cannot be amended without the unanimous approval
of the Limited Partners and the provisions of Section 8.2, clause
(ii) cannot be amended without the approval of at least 66 % of
Partnership Percentages of all Limited Partners (in either case
in the manner set forth in Section 13.3) and the provisions of
Sections 3.9(c), 4.1(b)(iv) and 4.11 cannot be amended without
the written agreement of Tartan Management.
13.11 Entire Agreement. This Partnership Agreement
contains the entire understanding and agreements among the
parties hereto respecting the within subject matter, and
supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there
are no warranties, representations or other agreements between
the parties in connection with the subject matter hereof except
as set forth specifically herein or contemplated hereby.
13.12 Governing Law. THE PROVISIONS OF THIS PARTNERSHIP
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MISSOURI (EXCLUDING ANY
CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT MIGHT REFER SAME TO THE
LAWS OF ANOTHER JURISDICTION), EXCEPT TO THE EXTENT THAT SAME ARE
MANDATORILY SUBJECT TO THE LAWS OF ANOTHER JURISDICTION PURSUANT
TO THE LAWS OF SUCH OTHER JURISDICTION.
13.13 Tax Controversies. Should there be any contro-
versy with the Service or any other taxing authority involving
the Partnership or an individual Partner or Partners, the outcome
of which may adversely affect the Partnership either directly or
indirectly, the Partnership may incur expenses it deems necessary
and advisable in the interest of the Partnership to oppose such
proposed deficiency, including, without being limited thereto,
attorneys' and accountants' fees. The Partners hereby grant to
Tartan Management the authority to represent the Partnership
before any office of the Service or state or local tax agencies
with respect to any tax matters regarding the Partnership, to
appoint an attorney-in-fact to represent the Partnership before
such offices or agencies and to serve as "tax matters partner" of
the Partnership, as that term is defined in Section 6231(a)(7) of the
Code.
13.14 Counterparts and Execution. This Partnership
Agreement may be executed in multiple counterparts, each of which
shall be deemed an original Partnership Agreement, and all of
which shall constitute one Partnership Agreement, by each of the
parties hereto on the dates respectively indicated in the
signatures of said parties, notwithstanding that all of the
parties are not signatories to the original or to the same
counterpart, to be effective as of the day and year hereinabove
set forth.
13.15 Severability. If any provision of this Partner-
ship Agreement is held to be illegal, invalid or unenforceable
under present or future state or federal laws or rules and
regulations promulgated thereunder effective during the term
hereof, such provision shall be fully severable, and the
Partnership Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a
part hereof; and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom.
Furthermore, in lieu of such illegal, invalid, or unenforceable
provision, there shall be automatically as a part of this
Partnership Agreement a provision similar in terms to such
illegal, invalid, or unenforceable provision as may be possible
and be legal, valid and enforceable.
13.16 Waiver. None of the requirements of this Partner-
ship Agreement may be waived unless waived in writing by the
named party or all parties to this Partnership Agreement.
Failure by any party to enforce its rights hereunder shall not
subsequently act as a waiver of those or any other rights. The
waiver by any party of a breach of any provision of this
Partnership Agreement shall not operate or be construed as a
waiver by such party of any subsequent breach.
13.17 Attorneys' Fees. In any suit to enforce this
Partnership Agreement, the prevailing party shall have the right
to recover its costs and reasonable attorneys' fees and expenses,
including costs, fees and expenses on appeal if the finder of
facts determines that the non-prevailing party's arguments were
frivolous or totally without merit.
IN WITNESS WHEREOF, the Partners have executed this
Partnership Agreement to be effective as of the Effective Date.
GENERAL PARTNERS:
TARTAN MANAGEMENT COMPANY
OF MISSOURI, L.C.
By:
_____________________________
Name:
Title:
MCN CORPORATION
By:
_____________________________
Name:
Title:
LIMITED PARTNERS:
MCN CORPORATION
By:
_____________________________
Name:
Title:
TORCH ENERGY MARKETING, INC.
By:
_____________________________
Name:
Title:
TARTAN MANAGEMENT COMPANY
OF MISSOURI, L.C.
By:
_____________________________
Name:
Title:
_____________________________________
▇▇▇ ▇. ▇▇▇▇▇▇
_____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT "A"
Description of Gas Project
EXHIBIT "B"
Partner Contributions and Unit Ownership
Property Units Partnership
Percentage
TEMI Cash of 47.5%
$_____
MCN Cash of 47.5%
$_____
Tartan Intangibles 5% plus the
Management as defined in right to receive
the Recitals additional Units
of the as set forth in
Formation Section
Agreement. 4.1(b)(iv) of
the Partnership
Agreement
