EXHIBIT 3.1
APPENDIX A
First Amended and Restated
Agreement of Limited Partnership
EV Energy Partners, L.P.
September 29, 2006
TABLE OF CONTENTS
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ARTICLE I. Definitions............................................................................ A-1
SECTION 1.1 Definitions.................................................................... A-1
SECTION 1.2 Construction................................................................... A-16
ARTICLE II. Organization.......................................................................... A-17
SECTION 2.1 Formation...................................................................... A-17
SECTION 2.2 Name........................................................................... A-17
SECTION 2.3 Registered Office; Registered Agent; Principal Office; Other Offices........... A-17
SECTION 2.4 Purpose and Business........................................................... A-17
SECTION 2.5 Powers......................................................................... A-17
SECTION 2.6 Power of Attorney.............................................................. A-18
SECTION 2.7 Term........................................................................... A-19
SECTION 2.8 Title to Partnership Assets.................................................... A-19
ARTICLE III. Rights of Limited Partners........................................................... A-19
SECTION 3.1 Limitation of Liability........................................................ A-19
SECTION 3.2 Management of Business......................................................... A-19
SECTION 3.3 Outside Activities of the Limited Partners..................................... A-19
SECTION 3.4 Rights of Limited Partners..................................................... A-19
ARTICLE IV. Certificates; Record Holders; Transfer of Partnership Interests; Redemption of
Partnership Interests.......................................................................... A-20
SECTION 4.1 Certificates................................................................... A-20
SECTION 4.2 Mutilated, Destroyed, Lost or Stolen Certificates.............................. A-21
SECTION 4.3 Record Holders................................................................. A-21
SECTION 4.4 Transfer Generally............................................................. A-21
SECTION 4.5 Registration and Transfer of Limited Partner Interests......................... A-22
SECTION 4.6 Transfer of the General Partner's General Partner Interest..................... A-22
SECTION 4.7 Transfer of Incentive Distribution Rights...................................... A-23
SECTION 4.8 Restrictions on Transfers...................................................... A-23
SECTION 4.9 Citizenship Certificates; Non-citizen Assignees................................ A-24
SECTION 4.10 Redemption of Partnership Interests of Non-citizen Assignees................... A-25
ARTICLE V. Capital Contributions and Issuance of Partnership Interests............................ A-26
SECTION 5.1 Organizational Contributions................................................... A-26
SECTION 5.2 Contributions by the General Partner and its Affiliates and [EnCap]............ A-26
SECTION 5.3 Contributions by Initial Limited Partners...................................... A-26
SECTION 5.4 Interest and Withdrawal........................................................ A-27
SECTION 5.5 Capital Accounts............................................................... A-27
SECTION 5.6 Issuances of Additional Partnership Securities................................. A-29
SECTION 5.7 Conversion of Subordinated Units............................................... A-30
SECTION 5.8 Limited Preemptive Right....................................................... A-31
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SECTION 5.9 Splits and Combinations.......................................................... A-32
SECTION 5.10 Fully Paid and Non-Assessable Nature of Limited Partner Interests................ A-32
SECTION 5.11 Issuance of Class B Units in Connection with Reset of Incentive Distribution
Rights........................................................................... A-32
ARTICLE VI. Allocations and Distributions........................................................... A-34
SECTION 6.1 Allocations for Capital Account Purposes......................................... A-34
SECTION 6.2 Allocations for Tax Purposes..................................................... A-40
SECTION 6.3 Requirement and Characterization of Distributions; Distributions to Record
Holders.......................................................................... A-42
SECTION 6.4 Distributions of Available Cash from Operating Surplus........................... A-42
SECTION 6.5 Distributions of Available Cash from Capital Surplus............................. A-44
SECTION 6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels...... A-44
SECTION 6.7 Special Provisions Relating to the Holders of Subordinated Units and Class B
Units............................................................................ A-44
SECTION 6.8 Special Provisions Relating to the Holders of Incentive Distribution Rights...... A-45
SECTION 6.9 Entity-Level Taxation............................................................ A-45
ARTICLE VII. Management and Operation of Business................................................... A-46
SECTION 7.1 Management....................................................................... A-46
SECTION 7.2 Certificate of Limited Partnership............................................... A-47
SECTION 7.3 Restrictions on the General Partner's Authority.................................. A-48
SECTION 7.4 Reimbursement of the General Partner............................................. A-48
SECTION 7.5 Outside Activities............................................................... A-49
SECTION 7.6 Loans from the General Partner; Loans or Contributions from the Partnership or
Group Members.................................................................... A-50
SECTION 7.7 Indemnification.................................................................. A-50
SECTION 7.8 Liability of Indemnitees......................................................... A-51
SECTION 7.9 Resolution of Conflicts of Interest; Standards of Conduct and Modification of
Duties........................................................................... A-52
SECTION 7.10 Other Matters Concerning the General Partner..................................... A-53
SECTION 7.11 Purchase or Sale of Partnership Securities....................................... A-53
SECTION 7.12 Registration Rights of the General Partner and its Affiliates.................... A-54
SECTION 7.13 Reliance by Third Parties........................................................ A-56
ARTICLE VIII. Books, Records, Accounting and Reports................................................ A-57
SECTION 8.1 Records and Accounting........................................................... A-57
SECTION 8.2 Fiscal Year...................................................................... A-57
SECTION 8.3 Reports.......................................................................... A-57
ARTICLE IX. Tax Matters............................................................................. A-57
SECTION 9.1 Tax Returns and Information...................................................... A-57
SECTION 9.2 Tax Elections.................................................................... A-57
SECTION 9.3 Tax Controversies................................................................ A-58
SECTION 9.4 Withholding...................................................................... A-58
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ARTICLE X. Admission of Partners................................................................. A-58
SECTION 10.1 Admission of Limited Partners................................................. A-58
SECTION 10.2 Admission of Successor General Partner........................................ A-59
SECTION 10.3 Amendment of Agreement and Certificate of Limited Partnership................. A-59
ARTICLE XI. Withdrawal or Removal of Partners.................................................... A-59
SECTION 11.1 Withdrawal of the General Partner............................................. A-59
SECTION 11.2 Removal of the General Partner................................................ A-60
SECTION 11.3 Interest of Departing General Partner and Successor General Partner........... ▇-▇▇
▇▇▇▇▇▇▇ ▇▇.▇ ▇▇▇▇▇▇▇▇▇▇▇ of Subordination Period, Conversion of Subordinated Units and
Extinguishment of Cumulative Common Unit Arrearages........................... A-62
SECTION 11.5 Withdrawal of Limited Partners................................................ A-62
ARTICLE XII. Dissolution and Liquidation......................................................... A-62
SECTION 12.1 Dissolution................................................................... A-62
SECTION 12.2 Continuation of the Business of the Partnership After Dissolution............. A-62
SECTION 12.3 Liquidator.................................................................... A-63
SECTION 12.4 Liquidation................................................................... A-63
SECTION 12.5 Cancellation of Certificate of Limited Partnership............................ A-64
SECTION 12.6 Return of Contributions....................................................... A-64
SECTION 12.7 Waiver of Partition........................................................... A-64
SECTION 12.8 Capital Account Restoration................................................... A-64
ARTICLE XIII. Amendment of Partnership Agreement; Meetings; Record Date.......................... A-64
SECTION 13.1 Amendments to be Adopted Solely by the General Partner........................ A-64
SECTION 13.2 Amendment Procedures.......................................................... A-65
SECTION 13.3 Amendment Requirements........................................................ A-66
SECTION 13.4 Special Meetings.............................................................. A-66
SECTION 13.5 Notice of a Meeting........................................................... A-67
SECTION 13.6 Record Date................................................................... A-67
SECTION 13.7 Adjournment................................................................... A-67
SECTION 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.................... ▇-▇▇
▇▇▇▇▇▇▇ ▇▇.▇ ▇▇▇▇▇▇ and Voting............................................................. A-67
SECTION 13.10 Conduct of a Meeting.......................................................... A-68
SECTION 13.11 Action Without a Meeting...................................................... A-68
SECTION 13.12 Right to Vote and Related Matters............................................. A-68
ARTICLE XIV. Merger, Consolidation or Conversion................................................. A-69
SECTION 14.1 Authority..................................................................... A-69
SECTION 14.2 Procedure for Merger, Consolidation or Conversion............................. A-69
SECTION 14.3 Approval by Limited Partners.................................................. A-70
SECTION 14.4 Certificate of Merger......................................................... A-71
SECTION 14.5 Effect of Merger, Consolidation or Conversion................................. A-71
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ARTICLE XV. Right to Acquire Limited Partner Interests.......................................... A-72
SECTION 15.1 Right to Acquire Limited Partner Interests................................... A-72
ARTICLE XVI. General Provisions................................................................. ▇-▇▇
▇▇▇▇▇▇▇ ▇▇.▇ ▇▇▇▇▇▇▇▇▇ and Notices........................................................ A-73
SECTION 16.2 Further Action............................................................... A-74
SECTION 16.3 Binding Effect............................................................... A-74
SECTION 16.4 Integration.................................................................. A-74
SECTION 16.5 Creditors.................................................................... A-74
SECTION 16.6 Waiver....................................................................... A-74
SECTION 16.7 Third-Party Beneficiaries.................................................... A-74
SECTION 16.8 Counterparts................................................................. A-74
SECTION 16.9 Applicable Law............................................................... A-74
SECTION 16.10 Invalidity of Provisions..................................................... A-74
SECTION 16.11 Consent of Partners.......................................................... A-74
SECTION 16.12 Facsimile Signatures......................................................... ▇-▇▇
▇-▇▇
First Amended and Restated
Agreement of Limited Partnership
of
EV Energy Partners, L.P.
This First Amended and Restated Agreement of Limited Partnership of EV
Energy Partners, L.P., dated as of , 2006, is entered into by and between EV
Energy GP, L.P., a Delaware limited partnership, as the General Partner, and
EnerVest Management Partners, Ltd., a Texas limited partnership, as the
Organizational Limited Partner, together with any other Persons who become
Partners in the Partnership or parties hereto as provided herein. In
consideration of the covenants, conditions and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I.
Definitions
SECTION 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Acquisition" means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing the production, over the long
term, of the oil and gas properties owned by of the Partnership Group or the
operating capacity of the other assets owned by the Partnership Group from the
production, over the long term, or operating capacity of the Partnership Group
existing immediately prior to such transaction.
"Additional Book Basis" means the portion of any remaining Carrying Value
of an Adjusted Property that is attributable to positive adjustments made to
such Carrying Value as a result of Book-Up Events. For purposes of determining
the extent that Carrying Value constitutes Additional Book Basis:
Any negative adjustment made to the Carrying Value of an Adjusted
Property as a result of either a Book-Down Event or a Book-Up Event shall
first be deemed to offset or decrease that portion of the Carrying Value
of such Adjusted Property that is attributable to any prior positive
adjustments made thereto pursuant to a Book-Up Event or Book-Down Event.
If Carrying Value that constitutes Additional Book Basis is reduced
as a result of a Book-Down Event and the Carrying Value of other property
is increased as a result of such Book-Down Event, an allocable portion of
any such increase in Carrying Value shall be treated as Additional Book
Basis; provided, that the amount treated as Additional Book Basis pursuant
hereto as a result of such Book-Down Event shall not exceed the amount by
which the Aggregate Remaining Net Positive Adjustments after such
Book-Down Event exceeds the remaining Additional Book Basis attributable
to all of the Partnership's Adjusted Property after such Book-Down Event
(determined without regard to the application of this clause (b) to such
Book-Down Event).
"Additional Book Basis Derivative Items" means any Book Basis Derivative
Items that are computed with reference to Additional Book Basis. To the extent
that the Additional Book Basis attributable to all of the Partnership's Adjusted
Property as of the beginning of any taxable period exceeds the Aggregate
Remaining Net Positive Adjustments as of the beginning of such period (the
"EXCESS ADDITIONAL BOOK BASIS"), the Additional Book Basis Derivative Items for
such period shall be reduced by the amount that bears the same ratio to the
amount of Additional Book Basis Derivative Items determined without regard to
this sentence as the Excess Additional Book Basis bears to the Additional Book
Basis as of the beginning of such period.
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under
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Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b) decreased by
(i) the amount of all deductions in respect of depletion that, as of the end of
such fiscal year, are reasonably expected to be made to such Partner's Capital
Account in respect of the oil and gas properties of the partnership, (ii) the
amount of all losses and deductions that, as of the end of such fiscal year, are
reasonably expected to be allocated to such Partner in subsequent years under
Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section
1.751-1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end
of such fiscal year, are reasonably expected to be made to such Partner in
subsequent years in accordance with the terms of this Agreement or otherwise to
the extent they exceed offsetting increases to such Partner's Capital Account
that are reasonably expected to occur during (or prior to) the year in which
such distributions are reasonably expected to be made (other than increases as a
result of a minimum gain chargeback pursuant to Section 6.1(d)(i) or Section
6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended to
comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith. The "Adjusted Capital Account"
of a Partner in respect of a General Partner Interest, a Common Unit, a
Subordinated Unit, a Class B Unit or an Incentive Distribution Right or any
other Partnership Interest shall be the amount that such Adjusted Capital
Account would be if such General Partner Interest, Common Unit, Subordinated
Unit, Class B Unit, Incentive Distribution Right or other Partnership Interest
were the only interest in the Partnership held by such Partner from and after
the date on which such General Partner Interest, Common Unit, Subordinated Unit,
Incentive Distribution Right or other Partnership Interest was first issued.
"Adjusted Operating Surplus" means, with respect to any period, Operating
Surplus generated with respect to such period (a) less (i) any net increase in
Working Capital Borrowings with respect to such period and (ii) any net decrease
in cash reserves for Operating Expenditures with respect to such period not
relating to an Operating Expenditure made with respect to such period, and (b)
plus (i) any net decrease in Working Capital Borrowings with respect to such
period, (ii) any net increase made in subsequent periods in cash reserves for
Operating Expenditures initially established with respect to such period and
(iii) any net increase in cash reserves for Operating Expenditures with respect
to such period required by any debt instrument for the repayment of principal,
interest or premium. Adjusted Operating Surplus does not include that portion of
Operating Surplus included in clause (a)(i) of the definition of Operating
Surplus.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or Section 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As used
herein, the term "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Aggregate Remaining Net Positive Adjustments" means, as of the end of any
taxable period, the sum of the Remaining Net Positive Adjustments of all the
Partners.
"Agreed Allocation" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including a Curative Allocation (if appropriate to
the context in which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the General Partner. The General Partner shall use such method as it
determines to be appropriate to allocate the aggregate Agreed Value of
Contributed Properties contributed to the Partnership in a single or integrated
transaction among each separate property on a basis proportional to the fair
market value of each Contributed Property.
"Agreement" means this First Amended and Restated Agreement of Limited
Partnership of EV Energy Partners, L.P., as it may be amended, supplemented or
restated from time to time.
"Associate" means, when used to indicate a relationship with any Person,
(a) any corporation or organization of which such Person is a director, officer
or partner or is, directly or indirectly, the owner of
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20% or more of any class of voting stock or other voting interest; (b) any trust
or other estate in which such Person has at least a 20% beneficial interest or
as to which such Person serves as trustee or in a similar fiduciary capacity;
and (c) any relative or spouse of such Person, or any relative of such spouse,
who has the same principal residence as such Person.
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date:
(a) the sum of (i) all cash and cash equivalents of the Partnership
Group on hand at the end of such Quarter, and (ii) if the General Partner
so determines, all or any portion of any additional cash and cash
equivalents of the Partnership Group on hand on the date of determination
of Available Cash with respect to such Quarter, including cash from
Working Capital Borrowings, less
(b) the amount of any cash reserves established by the General
Partner to (i) provide for the proper conduct of the business of the
Partnership Group (including reserves for future capital expenditures and
for anticipated future credit needs of the Partnership Group) subsequent
to such Quarter, (ii) comply with applicable law or any loan agreement,
security agreement, mortgage, debt instrument or other agreement or
obligation to which any Group Member is a party or by which it is bound or
its assets are subject or (iii) provide funds for distributions under
Section 6.4 or Section 6.5 in respect of any one or more of the next four
Quarters; provided, however, that the General Partner may not establish
cash reserves pursuant to (iii) above if the effect of such reserves would
be that the Partnership is unable to distribute the Minimum Quarterly
Distribution on all Common Units, plus any Cumulative Common Unit
Arrearage on all Common Units, with respect to such Quarter; and, provided
further, that disbursements made by a Group Member or cash reserves
established, increased or reduced after the end of such Quarter but on or
before the date of determination of Available Cash with respect to such
Quarter shall be deemed to have been made, established, increased or
reduced, for purposes of determining Available Cash, within such Quarter
if the General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter shall
equal zero.
"Board of Directors" means, with respect to the Board of Directors of the
General Partner, its board of directors or managers, as applicable, if a
corporation or limited liability company, or if a limited partnership, the board
of directors or board of managers of the general partner of the General Partner.
"Book Basis Derivative Items" means any item of income, deduction, gain,
loss, Simulated Depletion, Simulated Gain or Simulated Loss included in the
determination of Net Income or Net Loss that is computed with reference to the
Carrying Value of an Adjusted Property (e.g., depreciation, Simulated Depletion,
gain, loss, Simulated Gain or Simulated Loss with respect to an Adjusted
Property).
"Book-Down Event" means an event that triggers a negative adjustment to
the Capital Accounts of the Partners pursuant to Section 5.5(d).
"Book-Tax Disparity" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Section 5.5 and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Book-Up Event" means an event that triggers a positive adjustment to the
Capital Accounts of the Partners pursuant to Section 5.5(d).
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the State of Texas shall not be regarded as a Business Day.
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"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Interest, a Common Unit, a Subordinated Unit, a Class B Unit, an
Incentive Distribution Right or any Partnership Interest shall be the amount
that such Capital Account would be if such General Partner Interest, Common
Unit, Subordinated Unit, Class B Unit, Incentive Distribution Right or other
Partnership Interest were the only interest in the Partnership held by such
Partner from and after the date on which such General Partner Interest, Common
Unit, Subordinated Unit, Incentive Distribution Right or other Partnership
Interest was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership.
"Capital Improvement" means any (a) addition or improvement to the capital
assets owned by any Group Member, (b) acquisition of existing, or the
construction of new, capital assets (including, without limitation, oil and gas
leases, mineral interests, drilling rigs, gathering lines, treating facilities,
processing plants, pipelines and related or similar upstream assets) or (c)
capital contributions by a Group Member to a Person in which a Group Member has
an equity interest to fund such Group Member's pro rata share of the cost of the
acquisition of existing, or the construction of new, capital assets (including,
without limitation, oil and gas leases, mineral interests, drilling rigs,
gathering lines, treating facilities, processing plants, pipelines and related
or similar upstream assets) by such Person, in each case if such addition,
improvement, acquisition or construction is made to increase the production,
over the long term, from oil and gas properties or the operating capacity of
other assets of the Partnership Group, in the case of clauses (a) and (b), or
such Person, in the case of clause (c), from the production, over the long term,
or operating capacity of the Partnership Group or such Person, as the case may
be, existing immediately prior to such addition, improvement, acquisition or
construction.
"Capital Surplus" has the meaning assigned to such term in Section 6.3(a).
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
depletion (including Simulated Depletion), amortization and cost recovery
deductions charged to the Partners' Capital Accounts in respect of such
Contributed Property, and (b) with respect to any other Partnership property,
the adjusted basis of such property for federal income tax purposes, all as of
the time of determination. The Carrying Value of any property shall be adjusted
from time to time in accordance with Section 5.5(d)(i) and Section 5.5(d)(ii)
and to reflect changes, additions or other adjustments to the Carrying Value for
dispositions and acquisitions of Partnership properties, as deemed appropriate
by the General Partner.
"Cause" means a court of competent jurisdiction has entered a final,
non-appealable judgment finding the General Partner liable for actual fraud or
willful misconduct in its capacity as a general partner of the Partnership.
"Certificate" means (a) a certificate (i) substantially in the form of
Exhibit A to this Agreement, (ii) issued in global form in accordance with the
rules and regulations of the Depository or (iii) in such other form as may be
adopted by the General Partner, issued by the Partnership evidencing ownership
of one or more Common Units or (b) a certificate, in such form as may be adopted
by the General Partner, issued by the Partnership evidencing ownership of one or
more other Partnership Securities.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the State of
Delaware as referenced in Section 7.2, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"CGas" means CGas Exploration, Inc., an Ohio corporation.
"Citizenship Certification" means a properly completed certificate in such
form as may be specified by the General Partner by which a Limited Partner
certifies that he (and if he is a nominee holding for the account of another
Person, that to the best of his knowledge such other Person) is an Eligible
Citizen.
"claim" (as used in Section 7.12(d)) has the meaning assigned to such term
in Section 7.12(d).
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"Class B Units" means a Partnership Security representing a factional part
of the Partnership Interests of all Limited Partners, and having the rights and
obligations specified with respect to Class B Units in this Agreement.
"Closing Date" means the first date on which Common Units are sold by the
Partnership to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"Closing Price" has the meaning assigned to such term in Section 15.1(a).
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
any successor law.
"Combined Interest" has the meaning assigned to such term in Section
11.3(a).
"Commission" means the United States Securities and Exchange Commission.
"Common Unit" means a Partnership Security representing a fractional part
of the Partnership Interests of all Limited Partners and Assignees, and having
the rights and obligations specified with respect to Common Units in this
Agreement. The term "Common Unit" does not include a Subordinated Unit or Class
B Unit prior to its conversion into a Common Unit pursuant to the terms hereof
except to the extent specified in Section 5.11.
"Common Unit Arrearage" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, the excess, if any,
of (a) the Minimum Quarterly Distribution with respect to a Common Unit in
respect of such Quarter over (b) the sum of all Available Cash distributed with
respect to a Common Unit in respect of such Quarter pursuant to Section
6.4(a)(i).
"Conflicts Committee" means a committee of the Board of Directors of the
General Partner composed entirely of two or more directors, each of whom (a) is
not a security holder, officer or employee of the General Partner, (b) is not an
officer, director or employee of any Affiliate of the General Partner (c) is not
a holder of any ownership interest in the Partnership Group other than Common
Units and (d) meets the independence standards required of directors who serve
on an audit committee of a board of directors established by the Securities
Exchange Act and the rules and regulations of the Commission thereunder and by
the National Securities Exchange on which the Common Units are listed or
admitted to trading.
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership. Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 5.5(d), such property shall no longer constitute a
Contributed Property, but shall be deemed an Adjusted Property.
"Converted Common Units" has the meaning assigned to such term in Section
6.1(d)(x)(B).
"Credit Agreement" means the Credit Agreement, dated as of , 2006, among
the Partnership, the Operating Partnership, the subsidiaries of the Operating
Partnership, and JPMorgan Chase Bank, N.A., as administrative agent for the
lenders named therein and any amendment, modification, renewal or replacement of
such Credit Agreement.
"Cumulative Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters within the Subordination Period
ending on or before the last day of such Quarter over (b) the sum of any
distributions theretofore made pursuant to Section 6.4(a)(ii) and the second
sentence of Section 6.5 with respect to an Initial Common Unit (including any
distributions to be made in respect of the last of such Quarters).
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
"Current Market Price" has the meaning assigned to such term in Section
15.1(a).
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"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. Section 17-101, et seq., as amended, supplemented or restated from time
to time, and any successor to such statute.
"Departing General Partner" means a former General Partner from and after
the effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or Section 11.2.
"Depository" means, with respect to any Units issued in global form, The
Depository Trust Company and its successors and permitted assigns.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"Eligible Citizen" means a Person qualified to own interests in real
property in jurisdictions in which any Group Member does business or proposes to
do business from time to time, and whose status as a Limited Partner the General
Partner determines does not or would not subject such Group Member to a
significant risk of cancellation or forfeiture of any of its properties or any
interest therein.
"EnCap Partnerships" means EnCap Energy Capital Fund V, L.P. a Texas
limited partnership, and EnCap V-B Acquisitions, L.P., a Texas limited
partnership.
"EnerVest" means EnerVest Management Partners, Ltd., a Texas limited
partnership.
"Estimated Incremental Quarterly Tax Amount" has the meaning assigned to
such term in Section 6.9.
"Estimated Average Maintenance Capital Expenditures" means an estimate,
made in good faith, by the Board of Directors with the concurrence of the
Conflicts Committee of the average quarterly Maintenance Capital Expenditures
that the Partnership Group will incur over the long term. The Board of Directors
will be permitted to make such estimate in any manner it deems reasonable in its
sole discretion. The estimate will be made annually and whenever an event occurs
that is likely to result in a material adjustment to the amount of quarterly
Maintenance Capital Expenditures. The Partnership shall disclose to the Partners
the amount of Estimated Average Maintenance Capital Expenditures. Except as
provided in the definition of Subordination Period, any adjustments to Estimated
Average Maintenance Capital Expenditures shall be prospective only.
"EVCG" means CGAS Properties, L.P., the Delaware limited partnership
formed to hold certain assets contributed by CGAS.
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"EVOC" means EnerVest Operating, L.L.C. a Texas limited liability company.
"EV Investors" means EV Investors, L.P., a Delaware limited partnership.
"Expansion Capital Expenditures" means cash expenditures for Acquisitions
or Capital Improvements, and shall not include Maintenance Capital Expenditures.
"Final Subordinated Units" has the meaning assigned to such term in
Section 6.1(d)(x).
"First Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(E).
"First Target Distribution" means $0.40 per Unit per Quarter commencing
the Quarter ending December 31, 2006, subject to adjustment in accordance with
Section 5.11, Section 6.6 and Section 6.9.
"Fully Diluted Basis" means, when calculating the number of Outstanding
Units for any period, a basis that includes, in addition to the Outstanding
Units, all Partnership Securities and options, rights, warrants and appreciation
rights relating to an equity interest in the Partnership (a) that are
convertible into or exercisable or exchangeable for Units that are senior to or
pari passu with the Subordinated Units, (b) whose conversion, exercise or
exchange price is less than the Current Market Price on the date of such
calculation, (c) that may be converted into or exercised or exchanged for such
Units prior to or during the Quarter immediately following the end of the period
for which the calculation is being made without the satisfaction of any
contingency beyond the control of the holder other than the payment of
consideration and the compliance with administrative mechanics applicable to
such conversion, exercise or exchange and (d) that were not converted into or
exercised or exchanged for such Units during the period for which the
calculation is being made;
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provided, however, that for purposes of determining the number of Outstanding
Units on a Fully Diluted Basis when calculating whether the Subordination Period
has ended or Subordinated Units are entitled to convert into Common Units
pursuant to Section 5.7, such Partnership Securities, options, rights, warrants
and appreciation rights shall be deemed to have been Outstanding Units only for
the four Quarters that comprise the last four Quarters of the measurement
period; provided, further, that if consideration will be paid to any Group
Member in connection with such conversion, exercise or exchange, the number of
Units to be included in such calculation shall be that number equal to the
difference between (i) the number of Units issuable upon such conversion,
exercise or exchange and (ii) the number of Units that such consideration would
purchase at the Current Market Price.
"General Partner" means EV Energy GP, L.P., a Delaware limited
partnership, and its successors and permitted assigns that are admitted to the
Partnership as general partner of the Partnership, in its capacity as general
partner of the Partnership (except as the context otherwise requires).
"General Partner Interest" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner without
reference to any Limited Partner Interest held by it), and includes any and all
benefits to which the General Partner is entitled as provided in this Agreement,
together with all obligations of the General Partner to comply with the terms
and provisions of this Agreement.
"Group" means a Person that with or through any of its Affiliates or
Associates has any contract, arrangement, understanding or relationship for the
purpose of acquiring, holding, voting (except voting pursuant to a revocable
proxy or consent given to such Person in response to a proxy or consent
solicitation made to 10 or more Persons), exercising investment power or
disposing of any Partnership Interests with any other Person that beneficially
owns, or whose Affiliates or Associates beneficially own, directly or
indirectly, Partnership Interests.
"Group Member" means a member of the Partnership Group.
"Group Member Agreement" means the partnership agreement of any Group
Member, other than the Partnership, that is a limited or general partnership,
the limited liability company agreement of any Group Member that is a limited
liability company, the certificate of incorporation and bylaws or similar
organizational documents of any Group Member that is a corporation, the joint
venture agreement or similar governing document of any Group Member that is a
joint venture and the governing or organizational or similar documents of any
other Group Member that is a Person other than a limited or general partnership,
limited liability company, corporation or joint venture, as such may be amended,
supplemented or restated from time to time.
"Hedge Contract" means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement, whether
exchange traded, "over-the-counter" or otherwise, involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of a member of the
Partnership Group shall be a Hedge Contract. If a Hedge Contract provides for
settlement payments less frequently than quarterly, in calculating Operating
Surplus and Operating Expenses, the General Partner may allocate the settlement
payments over Quarterly periods in a manner approved by the Conflicts Committee.
"Hedge Payment" means any payment made or received by a member of the
Partnership Group in connection with or pursuant to a Hedge Contract, including
periodic settlement payments, and payments made or received in connection with
the entering into, termination or modification of a Hedge Contract.
"Holder" as used in Section 7.12, has the meaning assigned to such term in
Section 7.12(a).
"Incentive Distribution Right" means a non-voting Limited Partner Interest
issued to the General Partner in connection with the transfer of all of its
interests in the general partner of the Interim Partnership to the Partnership,
which Limited Partner Interest will confer upon the holder thereof only the
rights and obligations
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specifically provided in this Agreement with respect to Incentive Distribution
Rights (and no other rights otherwise available to or other obligations of a
holder of a Partnership Interest). Notwithstanding anything in this Agreement to
the contrary, the holder of an Incentive Distribution Right shall not be
entitled to vote such Incentive Distribution Right on any Partnership matter
except as may otherwise be required by law.
"Incentive Distributions" means any amount of cash distributed to the
holders of the Incentive Distribution Rights pursuant to Section 6.4(a)(v)(B),
Section 6.4(a)(vi)(B), Section 6.4(b)(iii)(B), and Section 6.4(b)(iv)(B).
"Indemnified Persons" has the meaning assigned to such term in Section
7.12(d).
"Indemnitee" means (a) the General Partner, (b) any Departing General
Partner, (c) any Person who is or was an Affiliate of the General Partner or any
Departing General Partner, (d) the EnCap Partnerships and any Person who is or
was an Affiliate of the EnCap Partnerships (e) any Person who is or was a
member, partner, director, officer, fiduciary or trustee of any Group Member,
the General Partner or any Departing General Partner or any Affiliate of any
Group Member, the General Partner or any Departing General Partner, (f) any
Person who is or was serving at the request of the General Partner or any
Departing General Partner or any Affiliate of the General Partner or any
Departing General Partner as an officer, director, member, partner, fiduciary or
trustee of another Person; provided that a Person shall not be an Indemnitee by
reason of providing, on a fee-for-services basis, trustee, fiduciary or
custodial services, and (g) any Person the General Partner designates as an
"Indemnitee" for purposes of this Agreement.
"Initial Common Units" means the Common Units sold in the Initial
Offering.
"Initial Limited Partners" means the General Partner, EVOC, EnerVest,
EVCG, EV Investors and the EnCap Partnerships (with respect to the Common Units,
Subordinated Units and Incentive Distribution Rights received by them pursuant
to Section 5.2) and the Underwriters upon the issuance by the Partnership of
Common Units as described in Section 5.3 in connection with the Initial
Offering.
"Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
"Initial Unit Price" means (a) with respect to the Common Units, the
initial public offering price per Common Unit at which the Underwriters offered
the Common Units to the public for sale as set forth on the cover page of the
prospectus included as part of the Registration Statement and first issued at or
after the time the Registration Statement first became effective or (b) with
respect to any other class or series of Units, the price per Unit at which such
class or series of Units is initially sold by the Partnership, as determined by
the General Partner, in each case adjusted as the General Partner determines to
be appropriate to give effect to any distribution, subdivision or combination of
Units.
"Interim Capital Transactions" means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness (other than Working Capital Borrowings and other than for items
purchased on open account in the ordinary course of business) by any Group
Member and sales of debt securities of any Group Member; (b) sales of equity
interests of any Group Member (including the Common Units sold to the
Underwriters pursuant to the exercise of the Over-Allotment Option); (c) sales
or other voluntary or involuntary dispositions of any assets of any Group Member
other than (i) sales or other dispositions of production, inventory, accounts
receivable and other assets in the ordinary course of business, and (ii) sales
or other dispositions of assets as part of normal retirements or replacements;
(d) the termination of commodity and interest rate swap agreements; (e) capital
contributions; (f) corporate reorganizations or restructurings; or (g) sales in
connection with plugging and abandoning and other reclamation activities for a
well in which a Group Member owns an interest.
"Issue Price" means the price at which a Unit is purchased from the
Partnership, net of any sales commission or underwriting discount charged to the
Partnership.
"Limited Partner" means, unless the context otherwise requires, the
Organizational Limited Partner prior to its withdrawal from the Partnership,
each Initial Limited Partner, each additional Person that becomes a Limited
Partner pursuant to the terms of this Agreement and any Departing General
Partner upon the change
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of its status from General Partner to Limited Partner pursuant to Section 11.3,
in each case, in such Person's capacity as limited partner of the Partnership;
provided, however, that when the term "Limited Partner" is used herein in the
context of any vote or other approval, including Articles XIII and XIV, such
term shall not, solely for such purpose, include any holder of an Incentive
Distribution Right (solely with respect to its Incentive Distribution Rights and
not with respect to any other Limited Partner Interest held by such Person)
except as may otherwise be required by law.
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by Common Units,
Class B Units, Subordinated Units, Incentive Distribution Rights or other
Partnership Securities or a combination thereof or interest therein, and
includes any and all benefits to which such Limited Partner is entitled as
provided in this Agreement, together with all obligations of such Limited
Partner to comply with the terms and provisions of this Agreement; provided,
however, that when the term "Limited Partner Interest" is used herein in the
context of any vote or other approval, including Article XIII and Article XIV,
such term shall not, solely for such purpose, include any Incentive Distribution
Right except as may otherwise be required by law.
"Liquidation Date" means (a) in the case of an event giving rise to the
dissolution of the Partnership of the type described in clauses (a) and (b) of
the first sentence of Section 12.2, the date on which the applicable time period
during which the holders of Outstanding Units have the right to elect to
continue the business of the Partnership has expired without such an election
being made, and (b) in the case of any other event giving rise to the
dissolution of the Partnership, the date on which such event occurs.
"Liquidator" means one or more Persons selected by the General Partner to
perform the functions described in Section 12.4 as liquidating trustee of the
Partnership within the meaning of the Delaware Act.
"Maintenance Capital Expenditures" means cash expenditures (including
expenditures for the addition or improvement to the capital assets owned by any
Group Member or for the acquisition of existing, or the construction of new,
capital assets) if such expenditures are made to maintain production levels of
the oil and gas properties of the Partnership Group over the long term or the
operating capacity of the other assets of the Partnership Group over the long
term.
"Merger Agreement" has the meaning assigned to such term in Section 14.1.
"Minimum Quarterly Distribution" means $0.40 per Unit per Quarter
commencing for the Quarter ending December 31, 2006, subject to adjustment in
accordance with Section 6.6 and Section 6.9.
"National Securities Exchange" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act, and any successor
to such statute, or the Nasdaq Global Market, Nasdaq Global Select Market, or
any successor thereto.
"Net Agreed Value" means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed, (b) in the case of any property distributed to a Partner by the
Partnership, the Partnership's Carrying Value of such property (as adjusted
pursuant to Section 5.5(d)(ii)) at the time such property is distributed,
reduced by any indebtedness either assumed by such Partner or Assignee upon such
distribution or to which such property is subject at the time of distribution,
in either case, as determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of loss and deduction (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Income shall be determined in accordance with Section 5.5(b) and shall
include Simulated Gains, Simulated Losses and Simulated Depletion, but shall not
include any items specially allocated under Section 6.1(d); provided, that the
determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this Agreement.
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"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Loss shall be determined in accordance with Section 5.5(b) and shall
include Simulated Gains, Simulated Losses and Simulated Depletion, but shall not
include any items specially allocated under Section 6.1(d); provided, that the
determination of the items that have been specially allocated under Section
6.1(d) shall be made as if Section 6.1(d)(xii) were not in this Agreement.
"Net Positive Adjustments" means, with respect to any Partner, the excess,
if any, of the total positive adjustments over the total negative adjustments
made to the Capital Account of such Partner pursuant to Book-Up Events and
Book-Down Events.
"Net Termination Gain" means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Gain shall be determined in accordance with Section 5.5(b) and shall
include Simulated Gains, Simulated Losses and Simulated Depletion, but shall not
include any items of income, gain or loss specially allocated under Section
6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Loss shall be determined in accordance with Section 5.5(b) and shall
include Simulated Gains, Simulated Losses and Simulated Depletion, but shall not
include any items of income, gain or loss specially allocated under Section
6.1(d).
"Non-citizen Assignee" means a Person whom the General Partner has
determined does not constitute an Eligible Citizen and as to whose Partnership
Interest the General Partner has become the Substituted Limited Partner,
pursuant to Section 4.9.
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Section 6.2(d)(i)(A), Section
6.2(d)(ii)(A), and Section 6.2(d)(iii) if such properties were disposed of in a
taxable transaction in full satisfaction of such liabilities and for no other
consideration.
"Nonrecourse Deductions" means any and all items of loss, deduction,
expenditure (including any expenditure described in Section 705(a)(2)(B) of the
Code), Simulated Depletion or Simulated Loss that, in accordance with the
principles of Treasury Regulation Section 1.704-2(b), are attributable to a
Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
"Notice of Election to Purchase" has the meaning assigned to such term in
Section 15.1(b).
"Omnibus Agreement" means that certain Omnibus Agreement, dated as of the
Closing Date, among the General Partner, the Partnership, the Operating
Partnership, EVOC, EnerVest, EV Investors, the EnCap Partnerships and certain
other parties thereto, as such may be amended, supplemented or restated from
time to time.
"Operating Agreement" means the Joint Operating Agreement between the
Partnership, the Operating Partnership, EVOC and current and future subsidiaries
of the Operating Partnership pursuant to which EVOC will act as operator of
▇▇▇▇▇ owned by members of the Partnership Group, as amended from time to time.
"Operating Expenditures" means all Partnership Group cash expenditures,
including, but not limited to, taxes, reimbursements of the General Partner, in
accordance with this Agreement, interest payments,
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repayment of Working Capital Borrowings, and non-Pro Rata repurchases of Units
(other than those made with the proceeds of an Interim Capital Transaction), but
excluding, subject to the following:
(a) payments (including prepayments and prepayment penalties) of
principal of and premium on indebtedness other than Working Capital
Borrowings shall not constitute Operating Expenditures;
(b) Operating Expenditures shall not include Expansion Capital
Expenditures or actual Maintenance Capital Expenditures, but shall include
Estimated Average Maintenance Capital Expenditures;
(c) Operating Expenditures shall not include (i) payment of
transaction expenses (including taxes) relating to Interim Capital
Transactions or (ii) distributions to Partners;
(d) Operating Expenditures shall not include interest on borrowings
used to construct capital assets from the period commencing when the
borrowings are made until the construction of the capital assets is
completed or abandoned; and
(e) Operating Expenditures in any Quarter shall include all Hedge
Payments made by a member of the Partnership Group during such Quarter,
provided, however, that the General Partner may treat all or any portion
of any Hedge Payment as a Maintenance Capital Expenditure or Expansion
Capital Expenditure, or may allocate a Hedge Payment among one or more
Quarters, in either case with the approval of the Conflicts Committee.
(f) Cash expenditures made solely for investment purposes pending
use of the amounts invested shall not be deemed Operating Expenditures.
"Operating Partnership" means EV Properties, L.P., a Delaware limited
partnership, the limited partner interest of which was acquired by the
Partnership and any successors thereto.
"Operating Surplus" means, with respect to any period ending prior to the
Liquidation Date, on a cumulative basis and without duplication,
(a) the sum of (i) an amount equal to two times the amount needed
for any one Quarter for the Partnership to pay the Minimum Quarterly
Distribution on all Units and the related distribution on the General
Partner Interest, (ii) all cash receipts of the Partnership Group for the
period beginning on the Closing Date and ending on the last day of such
period, but excluding cash receipts from Interim Capital Transactions
(except to the extent specified in Section 6.5), (iii) any decrease made
during the period in cash reserves for Operating Expenditures, and (iv)
all cash receipts of the Partnership Group after the end of such period
but on or before the date of determination of Operating Surplus with
respect to such period resulting from Working Capital Borrowings, less
(b) the sum of (i) Operating Expenditures for the period beginning
on the Closing Date and ending on the last day of such period (other than
Operating Expenditures funded with cash reserves established by the
General Partner pursuant to clause (iii) of this Paragraph (b)) and (ii)
the amount of cash reserves established by the General Partner to provide
funds for future Operating Expenditures; provided, however, that
disbursements made (including contributions to a Group Member or
disbursements on behalf of a Group Member) or cash reserves established,
increased or reduced after the end of such period but on or before the
date of determination of Available Cash with respect to such period shall
be deemed to have been made, established, increased or reduced, for
purposes of determining Operating Surplus, within such period if the
General Partner so determines.
Notwithstanding the foregoing, (i) the General Partner may treat all or
any portion of any Hedge Payment received by a member of the Partnership Group
as an Interim Capital Transaction or may allocate such payment received over one
or more Quarters, in either case with the approval of the Conflicts Committee
and (ii) "Operating Surplus" with respect to the Quarter in which the
Liquidation Date occurs and any subsequent Quarter shall equal zero.
"Opinion of Counsel" means a written opinion of counsel (who may be
regular counsel to the Partnership or the General Partner or any of its
Affiliates) acceptable to the General Partner.
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"Option Closing Date" means the date or dates on which any Common Units
are sold by the Partnership to the Underwriters upon exercise of the
Over-Allotment Option.
"Organizational Limited Partner" means EnerVest in its capacity as the
organizational limited partner of the Partnership pursuant to this Agreement.
"Outstanding" means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
outstanding on the Partnership's books and records as of the date of
determination; provided, however, that if at any time any Person or Group (other
than the General Partner or its Affiliates or the EnCap Partnerships)
beneficially owns 20% or more of the Outstanding Partnership Securities of any
class then Outstanding, all Partnership Securities owned by such Person or Group
shall not be voted on any matter and shall not be considered to be Outstanding
when sending notices of a meeting of Limited Partners to vote on any matter
(unless otherwise required by law), calculating required votes, determining the
presence of a quorum or for other similar purposes under this Agreement, except
that Units so owned shall be considered to be Outstanding for purposes of
Section 11.1(b)(iv) (such Units shall not, however, be treated as a separate
class of Partnership Securities for purposes of this Agreement); provided,
further, that the foregoing limitation shall not apply to (i) any Person or
Group who acquired 20% or more of the Outstanding Partnership Securities of any
class then Outstanding directly from the General Partner or its Affiliates, (ii)
any Person or Group who acquired 20% or more of the Outstanding Partnership
Securities of any class then Outstanding directly or indirectly from a Person or
Group described in clause (i) provided that the General Partner shall have
notified such Person or Group in writing that such limitation shall not apply,
or (iii) any Person or Group who acquired 20% or more of any Partnership
Securities issued by the Partnership with the prior approval of the Board of
Directors.
"Over-Allotment Option" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction, expenditure (including any expenditure described in Section
705(a)(2)(B) of the Code), Simulated Depletion or Simulated Loss that, in
accordance with the principles of Treasury Regulation Section 1.704-2(i), are
attributable to a Partner Nonrecourse Debt.
"Partners" means the General Partner and the Limited Partners.
"Partnership" means EV Energy Partners, L.P., a Delaware limited
partnership.
"Partnership Group" means the Partnership and its Subsidiaries treated as
a single consolidated entity.
"Partnership Interest" means an interest in the Partnership, which shall
include the General Partner Interest and Limited Partner Interests.
"Partnership Minimum Gain" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"Partnership Security" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation rights
relating to an equity interest in the Partnership), including Common Units,
Class B Units, Subordinated Units, General Partner Interest and Incentive
Distribution Rights.
"Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partner or any Affiliate of the General Partner
who holds Units.
"Percentage Interest" means as of any date of determination (a) as to the
General Partner with respect to the General Partner Interest, the aggregate
Capital Contributions made by the General Partner with respect to the General
Partner divided by the aggregate Capital Contributions made by all the Partners,
(b) as to any
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Unitholder with respect to Units, the product obtained by multiplying (i) 100%
less the percentage applicable to clause (a) above and (c) below by (ii) the
quotient obtained by dividing the number of Units held by such Unitholder by the
total number of Outstanding Units and (c) as to the holders of other Partnership
Securities issued by the Partnership in accordance with Section 5.6, the
percentage established as a part of such issuance. The Percentage Interest with
respect to an Incentive Distribution Right shall at all times be zero.
"Person" means an individual or a corporation, firm, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other entity.
"Pro Rata" means (a) when used with respect to Units or any class thereof,
apportioned equally among all designated Units in accordance with their relative
Percentage Interests, (b) when used with respect to Partners and Assignees or
Record Holders, apportioned among all Partners and Assignees or Record Holders
in accordance with their relative Percentage Interests and (c) when used with
respect to holders of Incentive Distribution Rights, apportioned equally among
all holders of Incentive Distribution Rights in accordance with the relative
number or percentage of Incentive Distribution Rights held by each such holder.
"Properties Partnership" means EV Acquisition Partners, L.P., a Delaware
limited partnership.
"Purchase Date" means the date determined by the General Partner as the
date for purchase of all Outstanding Limited Partner Interests of a certain
class (other than Limited Partner Interests owned by the General Partner and its
Affiliates) pursuant to Article XV.
"Quarter" means, unless the context requires otherwise, a fiscal quarter
of the Partnership, or, with respect to the first fiscal quarter of the
Partnership after the Closing Date, the portion of such fiscal quarter after the
Closing Date.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Partnership, which
gain is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Record Date" means the date established by the General Partner or
otherwise in accordance with this Agreement for determining (a) the identity of
the Record Holders entitled to notice of, or to vote at, any meeting of Limited
Partners or entitled to vote by ballot or give approval of Partnership action in
writing without a meeting or entitled to exercise rights in respect of any
lawful action of Limited Partners or (b) the identity of Record Holders entitled
to receive any report or distribution or to participate in any offer.
"Record Holder" means the Person in whose name a Common Unit is registered
on the books of the Transfer Agent as of the opening of business on a particular
Business Day, or with respect to other Partnership Interests, the Person in
whose name any such other Partnership Interest is registered on the books that
the General Partner has caused to be kept as of the opening of business on such
Business Day.
"Redeemable Interests" means any Partnership Interests for which a
redemption notice has been given, and has not been withdrawn, pursuant to
Section 4.10.
"Registration Statement" means the Registration Statement on Form S-1 as
it has been or as it may be amended or supplemented from time to time, filed by
the Partnership with the Commission under the Securities Act to register the
offering and sale of the Common Units in the Initial Offering.
"Remaining Net Positive Adjustments" means as of the end of any taxable
period, (i) with respect to the Unitholders holding Common Units, Class B Units
or Subordinated Units, the excess of (a) the Net Positive Adjustments of the
Unitholders holding Common Units, Class B Units or Subordinated Units as of the
end of such period over (b) the sum of those Partners' Share of Additional Book
Basis Derivative Items for each prior taxable period, (ii) with respect to the
General Partner (as holder of the General Partner Interest), the excess of (a)
the Net Positive Adjustments of the General Partner as of the end of such period
over (b) the sum of the General Partner's Share of Additional Book Basis
Derivative Items with respect to the General Partner Interest for each prior
taxable period, and (iii) with respect to the holders of Incentive Distribution
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Rights, the excess of (a) the Net Positive Adjustments of the holders of
Incentive Distribution Rights as of the end of such period over (b) the sum of
the Share of Additional Book Basis Derivative Items of the holders of the
Incentive Distribution Rights for each prior taxable period.
"Required Allocations" means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or Section
6.1(c)(ii) and (b) any allocation of an item of income, gain, loss, deduction,
Simulated Depletion or Simulated Loss pursuant to Section 6.1(d)(i), Section
6.1(d)(ii), Section 6.1(d)(iv), Section 6.1(d)(v), Section 6.1(d)(vii) or
Section 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss or Simulated Gain
or Simulated Loss is not allocated pursuant to Section 6.2(d)(i)(A) or Section
6.2(d)(ii)(A), respectively, to eliminate Book-Tax Disparities.
"Retained Converted Subordinated Unit" has the meaning assigned to such
term in Section 5.5(c)(ii).
"Second Liquidation Target Amount" has the meaning assigned to such term
in Section 6.1(c)(i)(F).
"Second Target Distribution" means $0.46 per Unit per Quarter, subject to
adjustment in accordance with Section 5.11, Section 6.6 and Section 6.9.
"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such statute.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time and any successor to such
statute.
"Share of Additional Book Basis Derivative Items" means in connection with
any allocation of Additional Book Basis Derivative Items for any taxable period,
(i) with respect to the Unitholders holding Common Units, Class B Units or
Subordinated Units, the amount that bears the same ratio to such Additional Book
Basis Derivative Items as the Unitholders' Remaining Net Positive Adjustments as
of the end of such period bears to the Aggregate Remaining Net Positive
Adjustments as of that time, (ii) with respect to the General Partner (as holder
of the General Partner Interest), the amount that bears the same ratio to such
Additional Book Basis Derivative Items as the General Partner's Remaining Net
Positive Adjustments as of the end of such period bears to the Aggregate
Remaining Net Positive Adjustment as of that time, and (iii) with respect to the
Partners holding Incentive Distribution Rights, the amount that bears the same
ratio to such Additional Book Basis Derivative Items as the Remaining Net
Positive Adjustments of the Partners holding the Incentive Distribution Rights
as of the end of such period bears to the Aggregate Remaining Net Positive
Adjustments as of that time.
"Simulated Basis" means the Carrying Value of any oil and gas property (as
defined in Section 614 of the Code).
"Simulated Depletion" means, with respect to an oil and gas property (as
defined in Section 614 of the Code), a depletion allowance computed in
accordance with federal income tax principles (as if the Simulated Basis of the
property was its adjusted tax basis) and in the manner specified in Treasury
Regulation Section 1.704-1(b)(2)(iv)(k)(2). For purposes of computing Simulated
Depletion with respect to any property, the Simulated Basis of such property
shall be deemed to be the Carrying Value of such property, and in no event shall
such allowance for Simulated Depletion, in the aggregate, exceed such Simulated
Basis.
"Simulated Gain" means the excess of the amount realized from the sale or
other disposition of an oil or gas property over the Carrying Value of such
property.
"Simulated Loss" means the excess of the Carrying Value of an oil or gas
property over the amount realized from the sale or other disposition of such
property.
"Special Approval" means approval by a majority of the members of the
Conflicts Committee.
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"Subordinated Unit" means a Partnership Security representing a fractional
part of the Partnership Interests of all Limited Partners and Assignees and
having the rights and obligations specified with respect to Subordinated Units
in this Agreement. The term "Subordinated Unit" does not include a Common Unit
or Class B Unit. A Subordinated Unit that is convertible into a Common Unit
shall not constitute a Common Unit until such conversion occurs.
"Subordination Period" means the period commencing on the Closing Date and
ending on the first to occur of the following dates:
(a) the first day of any Quarter beginning after September 30, 2011
in respect of which (i) (A) distributions of Available Cash from Operating
Surplus on each of the Outstanding Common Units and Subordinated Units and
any other Outstanding Units that are senior or equal in right of
distribution to the Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of (x) the Minimum Quarterly
Distribution on all Outstanding Common Units and Subordinated Units and
any other Outstanding Units that are senior or equal in right of
distribution to the Subordinated Units plus (y) the General Partner
Interest during such periods and (B) the Adjusted Operating Surplus for
each of the three consecutive, non-overlapping four-Quarter periods
immediately preceding such date equaled or exceeded the sum of (x) the
Minimum Quarterly Distribution on all of the Common Units, Subordinated
Units and any other Units that are senior or equal in right of
distribution to the Subordinated Units that were Outstanding during such
periods on a Fully Diluted Basis, plus (y) the related distribution on the
General Partner Interest, with respect to each such period and (ii) there
are no Cumulative Common Unit Arrearages;
(b) the first date on which there are no longer outstanding any
Subordinated Units due to the conversion of Subordinated Units into Common
Units pursuant to Section 5.7 or otherwise; and
(c) the date on which the General Partner is removed as general
partner of the Partnership upon the requisite vote by holders of
Outstanding Units under circumstances where Cause does not exist and Units
held by the General Partner and its Affiliates are not voted in favor of
such removal.
For purposes of determining whether the test in subclause (a)(i)(B) above
has been satisfied, Adjusted Operating Surplus will be adjusted upwards or
downwards if the Conflicts Committee determines in good faith that the amount of
Estimated Average Maintenance Capital Expenditures used in the determination of
Adjusted Operating Surplus in subclause (a)(i)(B) was materially incorrect,
based on circumstances prevailing at the time of original determination of
Estimated Average Maintenance Capital Expenditures, for any one or more of the
preceding four quarter periods.
"Subsidiary" means, with respect to any Person, (a) a corporation of which
more than 50% of the voting power of shares entitled (without regard to the
occurrence of any contingency) to vote in the election of directors or other
governing body of such corporation is owned, directly or indirectly, at the date
of determination, by such Person, by one or more Subsidiaries of such Person or
a combination thereof, (b) a partnership (whether general or limited) in which
such Person or a Subsidiary of such Person is, at the date of determination, a
general or limited partner of such partnership, but only if more than 50% of the
partnership interests of such partnership (considering all of the partnership
interests of the partnership as a single class) is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person, or a combination thereof, or (c) any other Person
(other than a corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or indirectly,
at the date of determination, has (i) at least a majority ownership interest or
(ii) the power to elect or direct the election of a majority of the directors or
other governing body of such Person.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"Target Distribution" means, collectively, the First Target Distribution
and Second Target Distribution.
"Trading Day" has the meaning assigned to such term in Section 15.1(a).
"transfer" has the meaning assigned to such term in Section 4.4(a).
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"Transfer Agent" means such bank, trust company or other Person (including
the General Partner or one of its Affiliates) as shall be appointed from time to
time by the General Partner to act as registrar and transfer agent for the
Common Units; provided, that if no Transfer Agent is specifically designated for
any other Partnership Securities, the General Partner shall act in such
capacity.
"Underwriter" means each Person named as an underwriter in Schedule I to
the Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means that certain Underwriting Agreement dated
as of , 2006, among the Underwriters, the Partnership, the General Partner, the
Operating Partnership and other parties thereto, providing for the purchase of
Common Units by the Underwriters.
"Unit" means a Partnership Security that is designated as a "Unit" and
shall include Common Units, Class B Units and Subordinated Units, each a
separate class, but shall not include (i) the General Partner Interest or (ii)
Incentive Distribution Rights.
"Unit Majority" means (i) during the Subordination Period, at least a
majority of the Outstanding Common Units (excluding Common Units owned by the
General Partner and its Affiliates), voting as a class and at least a majority
of the Outstanding Subordinated Units, voting as a class, and (ii) after the end
of the Subordination Period, at least a majority of the Outstanding Common Units
and Class B Units, if any, voting as a single class.
"Unitholders" means the holders of Units.
"Unpaid MQD" has the meaning assigned to such term in Section
6.1(c)(i)(B).
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the fair market
value of such property as of such date (as determined under Section 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).
"Unrecovered Initial Unit Price" means at any time, with respect to a
Unit, the Initial Unit Price less the sum of all distributions constituting
Capital Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the General Partner
determines to be appropriate to give effect to any distribution, subdivision or
combination of such Units.
"U.S. GAAP" means United States generally accepted accounting principles
consistently applied.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 11.1(b).
"Working Capital Borrowings" means borrowings used solely for working
capital purposes or to pay distributions to Partners made pursuant to a credit
facility or other arrangement requiring all such borrowings thereunder to be
reduced to a relatively small amount each year (or for the year in which the
Initial Offering is consummated, the 12-month period beginning on the Closing
Date) for an economically meaningful period of time.
SECTION 1.2 Construction. Unless the context requires otherwise: (a) any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa; (b) references to Articles and Sections
refer to Articles and Sections of this Agreement; (c) the terms "include",
"includes", "including" or words of like import shall be deemed to be followed
by the words "without limitation"; and (d) the terms "hereof", "herein" or
"hereunder" refer to this Agreement as a whole and not to any particular
provision of this Agreement. The
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table of contents and headings contained in this Agreement are for reference
purposes only, and shall not affect in any way the meaning or interpretation of
this Agreement.
ARTICLE II.
Organization
SECTION 2.1 Formation. The General Partner and the Organizational Limited
Partner have previously formed the Partnership as a limited partnership pursuant
to the provisions of the Delaware Act and hereby amend and restate the original
Agreement of Limited Partnership of EV Energy Partners, L.P. in its entirety.
This amendment and restatement shall become effective on the date of this
Agreement. Except as expressly provided to the contrary in this Agreement, the
rights, duties (including fiduciary duties), liabilities and obligations of the
Partners and the administration, dissolution and termination of the Partnership
shall be governed by the Delaware Act. All Partnership Interests shall
constitute personal property of the owner thereof for all purposes.
SECTION 2.2 Name. The name of the Partnership shall be "EV Energy
Partners, L.P." The Partnership's business may be conducted under any other name
or names as determined by the General Partner, including the name of the General
Partner. The words "Limited Partnership," "L.P.," "Ltd." or similar words or
letters shall be included in the Partnership's name where necessary for the
purpose of complying with the laws of any jurisdiction that so requires. The
General Partner may change the name of the Partnership at any time and from time
to time and shall notify the Limited Partners of such change in the next regular
communication to the Limited Partners.
SECTION 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices. Unless and until changed by the General Partner, the registered office
of the Partnership in the State of Delaware shall be located at ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the registered agent for service of
process on the Partnership in the State of Delaware at such registered office
shall be The Corporation Trust Company. The principal office of the Partnership
shall be located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or
such other place as the General Partner may from time to time designate by
notice to the Limited Partners. The Partnership may maintain offices at such
other place or places within or outside the State of Delaware as the General
Partner shall determine necessary or appropriate. The address of the General
Partner shall be ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or
such other place as the General Partner may from time to time designate by
notice to the Limited Partners.
SECTION 2.4 Purpose and Business. The purpose and nature of the business
to be conducted by the Partnership shall be to (a) engage directly in, or enter
into or form, hold and dispose of any corporation, partnership, joint venture,
limited liability company or other arrangement to engage indirectly in, any
business activity that is approved by the General Partner and that lawfully may
be conducted by a limited partnership organized pursuant to the Delaware Act
and, in connection therewith, to exercise all of the rights and powers conferred
upon the Partnership pursuant to the agreements relating to such business
activity, and (b) do anything necessary or appropriate to the foregoing,
including the making of capital contributions or loans to a Group Member;
provided, however, that the General Partner shall not cause the Partnership to
engage, directly or indirectly, in any business activity that the General
Partner determines would cause the Partnership to be treated as an association
taxable as a corporation or otherwise taxable as an entity for federal income
tax purposes. To the fullest extent permitted by law, the General Partner shall
have no duty or obligation to propose or approve, and may decline to propose or
approve, the conduct by the Partnership of any business free of any fiduciary
duty or obligation whatsoever to the Partnership or any Limited Partner and, in
declining to so propose or approve, shall not be required to act in good faith
or pursuant to any other standard imposed by this Agreement, any Group Member
Agreement, any other agreement contemplated hereby or under the Delaware Act or
any other law, rule or regulation or at equity.
SECTION 2.5 Powers. The Partnership shall be empowered to do any and all
acts and things necessary or appropriate for the furtherance and accomplishment
of the purposes and business described in Section 2.4 and for the protection and
benefit of the Partnership.
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SECTION 2.6 Power of Attorney.
(a) Each Limited Partner hereby constitutes and appoints the General
Partner and, if a Liquidator shall have been selected pursuant to Section 12.3,
the Liquidator (and any successor to the Liquidator by merger, transfer,
assignment, election or otherwise) and each of their authorized officers and
attorneys-in-fact, as the case may be, with full power of substitution, as his
true and lawful agent and attorney-in-fact, with full power and authority in his
name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements hereof or thereof) that the
General Partner or the Liquidator determines to be necessary or
appropriate to form, qualify or continue the existence or qualification of
the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) in the State of Delaware and in
all other jurisdictions in which the Partnership may conduct business or
own property; (B) all certificates, documents and other instruments that
the General Partner or the Liquidator determines to be necessary or
appropriate to reflect, in accordance with its terms, any amendment,
change, modification or restatement of this Agreement; (C) all
certificates, documents and other instruments (including conveyances and a
certificate of cancellation) that the General Partner or the Liquidator
determines to be necessary or appropriate to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this Agreement;
(D) all certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant to,
or other events described in, Article IV, Article X, Article XI or Article
XII; (E) all certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of any class or
series of Partnership Securities issued pursuant to Section 5.6; and (F)
all certificates, documents and other instruments (including agreements
and a certificate of merger) relating to a merger, consolidation or
conversion of the Partnership pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments that the General Partner or the Liquidator determines to be
necessary or appropriate to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other action that is made or given
by the Partners hereunder or is consistent with the terms of this
Agreement or effectuate the terms or intent of this Agreement; provided,
that when required by Section 13.3 or any other provision of this
Agreement that establishes a percentage of the Limited Partners or of the
Limited Partners of any class or series required to take any action, the
General Partner and the Liquidator may exercise the power of attorney made
in this Section 2.6(a)(ii) only after the necessary vote, consent or
approval of the Limited Partners or of the Limited Partners of such class
or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing the
General Partner to amend this Agreement except in accordance with Article XIII
or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and, to the maximum
extent permitted by law, not be affected by the subsequent death, incompetency,
disability, incapacity, dissolution, bankruptcy or termination of any Limited
Partner and the transfer of all or any portion of such Limited Partner's
Partnership Interest and shall extend to such Limited Partner's heirs,
successors, assigns and personal representatives. Each such Limited Partner
hereby agrees to be bound by any representation made by the General Partner or
the Liquidator acting in good faith pursuant to such power of attorney; and each
such Limited Partner, to the maximum extent permitted by law, hereby waives any
and all defenses that may be available to contest, negate or disaffirm the
action of the General Partner or the Liquidator taken in good faith under such
power of attorney. Each Limited Partner shall execute and deliver to the General
Partner or the Liquidator, within 15 days after receipt of the request therefor,
such further designation, powers of attorney and other instruments as the
General Partner or the Liquidator may request in order to effectuate this
Agreement and the purposes of the Partnership.
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SECTION 2.7 Term. The term of the Partnership commenced upon the filing of
the Certificate of Limited Partnership in accordance with the Delaware Act and
shall continue in existence until the dissolution of the Partnership in
accordance with the provisions of Article XII. The existence of the Partnership
as a separate legal entity shall continue until the cancellation of the
Certificate of Limited Partnership as provided in the Delaware Act.
SECTION 2.8 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner, one or more of its
Affiliates or one or more nominees, as the General Partner may determine. The
General Partner hereby declares and warrants that any Partnership assets for
which record title is held in the name of the General Partner or one or more of
its Affiliates or one or more nominees shall be held by the General Partner or
such Affiliate or nominee for the use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use reasonable efforts to cause record title to such
assets (other than those assets in respect of which the General Partner
determines that the expense and difficulty of conveyancing makes transfer of
record title to the Partnership impracticable) to be vested in the Partnership
as soon as reasonably practicable; provided, further, that, prior to the
withdrawal or removal of the General Partner or as soon thereafter as
practicable, the General Partner shall use reasonable efforts to effect the
transfer of record title to the Partnership and, prior to any such transfer,
will provide for the use of such assets in a manner satisfactory to the General
Partner. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which record
title to such Partnership assets is held.
ARTICLE III.
Rights of Limited Partners
SECTION 3.1 Limitation of Liability. The Limited Partners shall have no
liability under this Agreement except as expressly provided in this Agreement or
the Delaware Act.
SECTION 3.2 Management of Business. No Limited Partner, in its capacity as
such, shall participate in the operation, management or control (within the
meaning of the Delaware Act) of the Partnership's business, transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership. Any action taken by any Affiliate of the General
Partner or any officer, director, employee, manager, member, general partner,
agent or trustee of the General Partner or any of its Affiliates, or any
officer, director, employee, manager, member, general partner, agent or trustee
of a Group Member, in its capacity as such, shall not be deemed to be
participation in the control of the business of the Partnership by a limited
partner of the Partnership (within the meaning of Section 17-303(a) of the
Delaware Act) and shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners under this Agreement.
SECTION 3.3 Outside Activities of the Limited Partners. Subject to the
provisions of Section 7.5, which shall continue to be applicable to the Persons
referred to therein, regardless of whether such Persons shall also be Limited
Partners, any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities in direct competition
with the Partnership Group. Neither the Partnership nor any of the other
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner.
SECTION 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each Limited Partner
shall have the right, for a purpose reasonably related to such Limited
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Partner's interest as a Limited Partner in the Partnership, upon reasonable
written demand stating the purpose of such demand, and at such Limited Partner's
own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after its becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(iv) to obtain a copy of this Agreement and the Certificate of
Limited Partnership and all amendments thereto, together with copies of
the executed copies of all powers of attorney pursuant to which this
Agreement, the Certificate of Limited Partnership and all amendments
thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any other
Capital Contribution by each Partner and that each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) The General Partner may keep confidential from the Limited Partners,
for such period of time as the General Partner deems reasonable, (i) any
information that the General Partner reasonably believes to be in the nature of
trade secrets or (ii) other information the disclosure of which the General
Partner in good faith believes (A) is not in the best interests of the
Partnership Group, (B) could damage the Partnership Group or its business or (C)
that any Group Member is required by law or by agreement with any third party to
keep confidential (other than agreements with Affiliates of the Partnership the
primary purpose of which is to circumvent the obligations set forth in this
Section 3.4).
ARTICLE IV.
Certificates; Record Holders;
Transfer of Partnership Interests;
Redemption of Partnership Interests
SECTION 4.1 Certificates. Upon the Partnership's issuance of Common Units,
Subordinated Units or Class B Units to any Person, the Partnership shall issue,
upon the request of such Person, one or more Certificates in the name of such
Person evidencing the number of such Units being so issued. In addition, (a)
upon the General Partner's request, the Partnership shall issue to it one or
more Certificates in the name of the General Partner evidencing its General
Partner Interest and (b) upon the request of any Person owning Incentive
Distribution Rights or any other Partnership Securities other than Common Units,
Subordinated Units or Class B Units, the Partnership shall issue to such Person
one or more certificates evidencing such Incentive Distribution Rights or other
Partnership Securities other than Common Units, Subordinated Units or Class B
Units. Certificates shall be executed on behalf of the Partnership by the
Chairman of the Board, President or any Executive Vice President, Senior Vice
President or Vice President and the Secretary or any Assistant Secretary of the
General Partner. No Common Unit Certificate shall be valid for any purpose until
it has been countersigned by the Transfer Agent; provided, however, that if the
General Partner elects to issue Common Units in global form, the Common Unit
Certificates shall be valid upon receipt of a certificate from the Transfer
Agent certifying that the Common Units have been duly registered in accordance
with the directions of the Partnership. Subject to the requirements of Section
6.7(c) and Section 6.7(e), the Partners holding Certificates evidencing
Subordinated Units may exchange such Certificates for Certificates evidencing
Common Units on or after the date on which such Subordinated Units are converted
into Common Units pursuant to the terms of Section 5.7. Subject to the
requirements of Section 6.7(e), the Partners holding
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Certificates evidencing Class B Units may exchange such Certificates for
Certificates evidencing Common Units on or after the period set forth in Section
5.11(f) pursuant to the terms of Section 5.11.
SECTION 4.2 Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer Agent (for
Common Units) or the General Partner (for Partnership Securities other than
Common Units), the appropriate officers of the General Partner on behalf of the
Partnership shall execute, and the Transfer Agent (for Common Units) or the
General Partner (for Partnership Securities other than Common Units) shall
countersign and deliver in exchange therefor, a new Certificate evidencing the
same number and type of Partnership Securities as the Certificate so
surrendered.
(b) The appropriate officers of the General Partner on behalf of the
Partnership shall execute and deliver, and the Transfer Agent (for Common Units)
shall countersign, a new Certificate in place of any Certificate previously
issued if the Record Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to
the General Partner, that a previously issued Certificate has been lost,
destroyed or stolen;
(ii) requests the issuance of a new Certificate before the General
Partner has notice that the Certificate has been acquired by a purchaser
for value in good faith and without notice of an adverse claim;
(iii) if requested by the General Partner, delivers to the General
Partner a bond, in form and substance satisfactory to the General Partner,
with surety or sureties and with fixed or open penalty as the General
Partner may direct to indemnify the Partnership, the Partners, the General
Partner and the Transfer Agent against any claim that may be made on
account of the alleged loss, destruction or theft of the Certificate; and
(iv) satisfies any other reasonable requirements imposed by the
General Partner.
If a Limited Partner fails to notify the General Partner within a
reasonable period of time after he has notice of the loss, destruction or theft
of a Certificate, and a transfer of the Limited Partner Interests represented by
the Certificate is registered before the Partnership, the General Partner or the
Transfer Agent receives such notification, the Limited Partner shall be
precluded from making any claim against the Partnership, the General Partner or
the Transfer Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under this
Section 4.2, the General Partner may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Transfer
Agent) reasonably connected therewith.
SECTION 4.3 Record Holders. The Partnership shall be entitled to recognize
the Record Holder as the Partner with respect to any Partnership Interest and,
accordingly, shall not be bound to recognize any equitable or other claim to, or
interest in, such Partnership Interest on the part of any other Person,
regardless of whether the Partnership shall have actual or other notice thereof,
except as otherwise provided by law or any applicable rule, regulation,
guideline or requirement of any National Securities Exchange on which such
Partnership Interests are listed or admitted to trading. Without limiting the
foregoing, when a Person (such as a broker, dealer, bank, trust company or
clearing corporation or an agent of any of the foregoing) is acting as nominee,
agent or in some other representative capacity for another Person in acquiring
and/or holding Partnership Interests, as between the Partnership on the one
hand, and such other Persons on the other, such representative Person shall be
the Record Holder of such Partnership Interest.
SECTION 4.4 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction (i) by which the
General Partner assigns its General Partner Interest to another Person or by
which a holder of Incentive Distribution Rights assigns its Incentive
Distribution Rights to another Person, and includes a sale, assignment, gift,
pledge, encumbrance, hypothecation, mortgage, exchange
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or any other disposition by law or otherwise or (ii) by which the holder of a
Limited Partner Interest (other than an Incentive Distribution Right) assigns
such Limited Partner Interest to another Person who is or becomes a Limited
Partner, and includes a sale, assignment, gift, exchange or any other
disposition by law or otherwise, including any transfer upon foreclosure of any
pledge, encumbrance, hypothecation or mortgage.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent a
disposition by any stockholder, member, partner or other owner of the General
Partner of any or all of the shares of stock, membership interests, partnership
interests or other ownership interests in the General Partner.
SECTION 4.5 Registration and Transfer of Limited Partner Interests.
(a) The General Partner shall keep or cause to be kept on behalf of the
Partnership a register in which, subject to such reasonable regulations as it
may prescribe and subject to the provisions of Section 4.5(b), the Partnership
will provide for the registration and transfer of Limited Partner Interests. The
Transfer Agent is hereby appointed registrar and transfer agent for the purpose
of registering Common Units and transfers of such Common Units as herein
provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers are effected in the
manner described in this Section 4.5. Upon surrender of a Certificate for
registration of transfer of any Limited Partner Interests evidenced by a
Certificate, and subject to the provisions of Section 4.5(b), the appropriate
officers of the General Partner on behalf of the Partnership shall execute and
deliver, and in the case of Common Units, the Transfer Agent shall countersign
and deliver, in the name of the holder or the designated transferee or
transferees, as required pursuant to the holder's instructions, one or more new
Certificates evidencing the same aggregate number and type of Limited Partner
Interests as was evidenced by the Certificate so surrendered.
(b) Except as otherwise provided in Section 4.9, the General Partner shall
not recognize any transfer of Limited Partner Interests until the Certificates
evidencing such Limited Partner Interests are surrendered for registration of
transfer. No charge shall be imposed by the General Partner for such transfer;
provided, that as a condition to the issuance of any new Certificate under this
Section 4.5, the General Partner may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed with respect
thereto.
(c) Subject to (i) the foregoing provisions of this Section 4.5, (ii)
Section 4.3, (iii) Section 4.8, (iv) with respect to any class or series of
Limited Partner Interests, the provisions of any statement of designations or an
amendment to this Agreement establishing such class or series, (v) any
contractual provisions binding on any Limited Partner and (vi) provisions of
applicable law including the Securities Act, Limited Partner Interests (other
than the Incentive Distribution Rights) shall be freely transferable.
(d) The General Partner and its Affiliates and the EnCap Partnerships
shall have the right at any time to transfer their Subordinated Units, Class B
Units and Common Units (whether issued upon conversion of the Subordinated Units
or otherwise) to one or more Persons.
SECTION 4.6 Transfer of the General Partner's General Partner Interest.
(a) Subject to Section 4.6(c), prior to December 31, 2016, the General
Partner shall not transfer all or any part of its General Partner Interest to a
Person unless such transfer (i) has been approved by the prior written consent
or vote of the holders of at least a majority of the Outstanding Common Units
(excluding Common Units held by the General Partner and its Affiliates) or (ii)
is of all, but not less than all, of its General Partner Interest to (A) an
Affiliate of the General Partner (other than an individual) or (B) another
Person (other than an individual) in connection with the merger or consolidation
of the General Partner with or into such other Person or the transfer by the
General Partner of all or substantially all of its assets to such other Person.
(b) Subject to Section 4.6(c), on or after December 31, 2016, the General
Partner may transfer all or any of its General Partner Interest without
Unitholder approval.
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(c) Notwithstanding anything herein to the contrary, no transfer by the
General Partner of all or any part of its General Partner Interest to another
Person shall be permitted unless (i) the transferee agrees to assume the rights
and duties of the General Partner under this Agreement and to be bound by the
provisions of this Agreement, (ii) the Partnership receives an Opinion of
Counsel that such transfer would not result in the loss of limited liability of
any Limited Partner under the Delaware Act or cause the Partnership to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed) and (iii) such transferee also agrees to purchase all (or the
appropriate portion thereof, if applicable) of the partnership or membership
interest of the General Partner as the general partner or managing member, if
any, of each other Group Member. In the case of a transfer pursuant to and in
compliance with this Section 4.6, the transferee or successor (as the case may
be) shall, subject to compliance with the terms of Section 10.3, be admitted to
the Partnership as the General Partner immediately prior to the transfer of the
General Partner Interest, and the business of the Partnership shall continue
without dissolution.
SECTION 4.7 Transfer of Incentive Distribution Rights. Prior to December
31, 2016, a holder of Incentive Distribution Rights may transfer any or all of
the Incentive Distribution Rights held by such holder without any consent of the
Unitholders to (a) an Affiliate of such holder (other than an individual) or (b)
another Person (other than an individual) in connection with (i) the merger or
consolidation of such holder of Incentive Distribution Rights with or into such
other Person, (ii) the transfer by such holder of all or substantially all of
its assets to such other Person or (iii) the sale of all the ownership interests
in such holder. Any other transfer of the Incentive Distribution Rights prior to
December 31, 2016 shall require the prior approval of holders of at least a
majority of the Outstanding Common Units (excluding Common Units held by the
General Partner and its Affiliates). On or after December 31, 2016, the General
Partner or any other holder of Incentive Distribution Rights may transfer any or
all of its Incentive Distribution Rights without Unitholder approval.
Notwithstanding anything herein to the contrary, (i) the transfer of Class B
Units issued pursuant to Section 5.11, or the transfer of Common Units issued
upon conversion of the Class B Units, shall not be treated as a transfer of all
or any part of the Incentive Distribution Rights and (ii) no transfer of
Incentive Distribution Rights to another Person shall be permitted unless the
transferee agrees to be bound by the provisions of this Agreement.
SECTION 4.8 Restrictions on Transfers.
(a) Except as provided in Section 4.8(d), but notwithstanding the other
provisions of this Article IV, no transfer of any Partnership Interests shall be
made if such transfer would (i) violate the then applicable federal or state
securities laws or rules and regulations of the Commission, any state securities
commission or any other governmental authority with jurisdiction over such
transfer, (ii) terminate the existence or qualification of the Partnership under
the laws of the jurisdiction of its formation, or (iii) cause the Partnership to
be treated as an association taxable as a corporation or otherwise to be taxed
as an entity for federal income tax purposes (to the extent not already so
treated or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if it receives an Opinion of Counsel that such
restrictions are necessary to avoid a significant risk of the Partnership
becoming taxable as a corporation or otherwise becoming taxable as an entity for
federal income tax purposes. The General Partner may impose such restrictions by
amending this Agreement; provided, however, that any amendment that would result
in the delisting or suspension of trading of any class of Limited Partner
Interests on the principal National Securities Exchange on which such class of
Limited Partner Interests is then listed or admitted to trading must be
approved, prior to such amendment being effected, by the holders of at least a
majority of the Outstanding Limited Partner Interests of such class.
(c) The transfer of a Subordinated Unit that has converted into a Common
Unit shall be subject to the restrictions imposed by Section 6.7(c).
(d) The transfer of a Class B Unit that has converted into a Common Unit
shall be subject to the restrictions imposed by Section 6.7(e).
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(e) Nothing contained in this Article IV, or elsewhere in this Agreement,
shall preclude the settlement of any transactions involving Partnership
Interests entered into through the facilities of any National Securities
Exchange on which such Partnership Interests are listed or admitted to trading.
(f) Each certificate evidencing Partnership Interests shall bear a
conspicuous legend in substantially the following form:
THE HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF EV ENERGY
PARTNERS, L.P. THAT THIS SECURITY MAY NOT BE SOLD, OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED IF SUCH TRANSFER WOULD (A) VIOLATE THE
THEN APPLICABLE FEDERAL OR STATE SECURITIES LAWS OR RULES AND REGULATIONS
OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION
OR ANY OTHER GOVERNMENTAL AUTHORITY WITH JURISDICTION OVER SUCH TRANSFER,
(B) TERMINATE THE EXISTENCE OR QUALIFICATION OF EV ENERGY PARTNERS, L.P.
UNDER THE LAWS OF THE STATE OF DELAWARE, OR (C) CAUSE EV ENERGY PARTNERS,
L.P. TO BE TREATED AS AN ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE
TO BE TAXED AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES (TO THE EXTENT
NOT ALREADY SO TREATED OR TAXED). EV ENERGY GP, L.P., THE GENERAL PARTNER
OF EV ENERGY PARTNERS, L.P., MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE
TRANSFER OF THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH
RESTRICTIONS ARE NECESSARY TO AVOID A SIGNIFICANT RISK OF EV ENERGY
PARTNERS, L.P. BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING
TAXABLE AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES. THE RESTRICTIONS SET
FORTH ABOVE SHALL NOT PRECLUDE THE SETTLEMENT OF ANY TRANSACTIONS
INVOLVING THIS SECURITY ENTERED INTO THROUGH THE FACILITIES OF ANY
NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS LISTED OR ADMITTED
TO TRADING.
SECTION 4.9 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state or
local law or regulation that the General Partner determines would create a
substantial risk of cancellation or forfeiture of any property in which the
Group Member has an interest based on the nationality, citizenship or other
related status of a Limited Partner, the General Partner may request any Limited
Partner to furnish to the General Partner, within 30 days after receipt of such
request, an executed Citizenship Certification or such other information
concerning his nationality, citizenship or other related status (or, if the
Limited Partner is a nominee holding for the account of another Person, the
nationality, citizenship or other related status of such Person) as the General
Partner may request. If a Limited Partner fails to furnish to the General
Partner within the aforementioned 30-day period such Citizenship Certification
or other requested information or if upon receipt of such Citizenship
Certification or other requested information the General Partner determines that
a Limited Partner is not an Eligible Citizen, the Limited Partner Interests
owned by such Limited Partner shall be subject to redemption in accordance with
the provisions of Section 4.10. In addition, the General Partner may require
that the status of any such Limited Partner be changed to that of a Non-citizen
Assignee and, thereupon, the General Partner shall be substituted for such
Non-citizen Assignee as the Limited Partner in respect of the Non-citizen
Assignee's Limited Partner Interests and shall have all voting and consent
rights attributable to the Non-citizen Assignee's Limited Partner Interests.
(b) The General Partner shall, in exercising voting rights in respect of
Limited Partner Interests held by it on behalf of Non-citizen Assignees,
distribute the votes in the same ratios as the votes of Partners (including the
General Partner) in respect of Limited Partner Interests other than those of
Non-citizen Assignees are cast, either for, against or abstaining as to the
matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have
no right to receive a distribution in kind pursuant to Section 12.4 but shall be
entitled to the cash equivalent thereof, and the Partnership shall provide cash
in exchange for an assignment of the Non-citizen Assignee's share of any
distribution in kind. Such payment and assignment shall be treated for
Partnership purposes as a purchase by
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the Partnership from the Non-citizen Assignee of his Limited Partner Interest
(representing his right to receive his share of such distribution in kind).
(d) At any time after he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the General
Partner, request that with respect to any Limited Partner Interests of such
Non-citizen Assignee not redeemed pursuant to Section 4.10, such Non-citizen
Assignee be admitted as a Limited Partner, and upon approval of the General
Partner, such Non-citizen Assignee shall be admitted as a Limited Partner and
shall no longer constitute a Non-citizen Assignee and the General Partner shall
cease to be deemed to be the Limited Partner in respect of the Non-citizen
Assignee's Limited Partner Interests.
SECTION 4.10 Redemption of Partnership Interests of Non-citizen Assignees.
(a) If at any time a Limited Partner fails to furnish a Citizenship
Certification or other information requested within the 30-day period specified
in Section 4.9(a), or if upon receipt of such Citizenship Certification or other
information the General Partner determines, with the advice of counsel, that a
Limited Partner is not an Eligible Citizen, the Partnership may, unless the
Limited Partner establishes to the satisfaction of the General Partner that such
Limited Partner is an Eligible Citizen or has transferred his Partnership
Interests to a Person who is an Eligible Citizen and who furnishes a Citizenship
Certification to the General Partner prior to the date fixed for redemption as
provided below, redeem the Limited Partner Interest of such Limited Partner as
follows:
(i) The General Partner shall, not later than the 30th day before
the date fixed for redemption, give notice of redemption to the Limited
Partner, at his last address designated on the records of the Partnership
or the Transfer Agent, by registered or certified mail, postage prepaid.
The notice shall be deemed to have been given when so mailed. The notice
shall specify the Redeemable Interests, the date fixed for redemption, the
place of payment, that payment of the redemption price will be made upon
surrender of the Certificate evidencing the Redeemable Interests and that
on and after the date fixed for redemption no further allocations or
distributions to which the Limited Partner would otherwise be entitled in
respect of the Redeemable Interests will accrue or be made.
(ii) The aggregate redemption price for Redeemable Interests shall
be an amount equal to the Current Market Price (the date of determination
of which shall be the date fixed for redemption) of Limited Partner
Interests of the class to be so redeemed multiplied by the number of
Limited Partner Interests of each such class included among the Redeemable
Interests. The redemption price shall be paid, as determined by the
General Partner, in cash or by delivery of a promissory note of the
Partnership in the principal amount of the redemption price, bearing
interest at the rate of 5% annually and payable in three equal annual
installments of principal together with accrued interest, commencing one
year after the redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner, at the
place specified in the notice of redemption, of the Certificate evidencing
the Redeemable Interests, duly endorsed in blank or accompanied by an
assignment duly executed in blank, the Limited Partner or his duly
authorized representative shall be entitled to receive the payment
therefor.
(iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Limited Partner Interests.
(b) The provisions of this Section 4.10 shall also be applicable to
Limited Partner Interests held by a Limited Partner as nominee of a Person
determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.10 shall prevent the recipient of a notice
of redemption from transferring his Limited Partner Interest before the
redemption date if such transfer is otherwise permitted under this Agreement.
Upon receipt of notice of such a transfer, the General Partner shall withdraw
the notice of redemption, provided the transferee of such Limited Partner
Interest certifies to the satisfaction of the General Partner that he is an
Eligible Citizen. If the transferee fails to make such certification, such
redemption shall be effected from the transferee on the original redemption
date.
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ARTICLE V.
Capital Contributions and
Issuance of Partnership Interests
SECTION 5.1 Organizational Contributions. In connection with the formation
of the Partnership under the Delaware Act, the General Partner made an initial
Capital Contribution to the Partnership in the amount of $10.00, for a 1%
General Partner Interest in the Partnership and has been admitted as the General
Partner of the Partnership, and the Organizational Limited Partner made an
initial Capital Contribution to the Partnership in the amount of $990.00 for a
99% Limited Partner Interest in the Partnership and has been admitted as a
Limited Partner of the Partnership. As of the Closing Date, the interest of the
Organizational Limited Partner shall be redeemed and the initial Capital
Contribution of the Organizational Limited Partner shall thereupon be refunded.
Ninety-nine percent of any interest or other profit that may have resulted from
the investment or other use of such initial Capital Contributions shall be
allocated and distributed to the Organizational Limited Partner, and the balance
thereof shall be allocated and distributed to the General Partner.
SECTION 5.2 Contributions by the General Partner and its Affiliates and
the EnCap Partnerships.
(a) On the Closing Date (i) the General Partner shall contribute to the
Partnership, as a Capital Contribution, $144,500 in cash, all of the limited
liability company membership interests in the general partner of the Properties
Partnership and a limited partnership interest in the Properties Partnership, in
exchange for (A) a 2% General Partner Interest, subject to all of the rights,
privileges and duties of the General Partner under this Agreement and (B) the
Incentive Distribution Rights, (ii) EVOC, EnerVest, EV Investors and the EnCap
Partnerships shall contribute to the Partnership, as a Capital Contribution, a
limited partner interest in the Properties Partnership, in exchange for an
aggregate of 251,745 Common Units, 1,401,200 Subordinated Units and the right to
receive a cash payment of $25.52 million and (iii) CGas shall contribute to the
Partnership, as a Capital Contribution, all of the limited partner interests in
EVCG, in exchange for 343,256 Common Units, 1,698,800 Subordinated Units and the
right to receive a cash payment of $34.81 million (a portion of which shall
reimburse CGas for certain capital expenditures made by CGas).
(b) Upon the issuance of any additional Limited Partner Interests by the
Partnership (other than the Common Units issued in the Initial Offering, the
Common Units issued pursuant to the Over-Allotment Option, the Common Units and
Subordinated Units issued pursuant to Section 5.2(a), any Class B Units issued
pursuant to Section 5.11 and any Common Units issued upon conversion of
Subordinated Units or Class B Units), the General Partner may make additional
Capital Contributions in an amount equal to the product obtained by multiplying
(i) the quotient determined by dividing (A) the General Partner's Percentage
Interest by (B) 100 less the General Partner's Percentage Interest times (ii)
the amount contributed to the Partnership by the Limited Partners in exchange
for such additional Limited Partner Interests. Except as set forth in Article
XII, the General Partner shall not be obligated to make any additional Capital
Contributions to the Partnership.
SECTION 5.3 Contributions by Initial Limited Partners.
(a) On the Closing Date and pursuant to the Underwriting Agreement, each
Underwriter shall contribute to the Partnership cash in an amount equal to the
Issue Price per Initial Common Unit, multiplied by the number of Common Units
specified in the Underwriting Agreement to be purchased by such Underwriter at
the Closing Date. In exchange for such Capital Contributions by the
Underwriters, the Partnership shall issue Common Units to each Underwriter on
whose behalf such Capital Contribution is made in an amount equal to the
quotient obtained by dividing (i) the cash contribution to the Partnership by or
on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.
(b) Upon the exercise of the Over-Allotment Option, each Underwriter shall
contribute to the Partnership cash in an amount equal to the Issue Price per
Initial Common Unit, multiplied by the number of Common Units to be purchased by
such Underwriter at the Option Closing Date. In exchange for such Capital
Contributions by the Underwriters, the Partnership shall issue Common Units to
each Underwriter on whose behalf such Capital Contribution is made in an amount
equal to the quotient obtained by dividing (i) the cash
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contributions to the Partnership by or on behalf of such Underwriter by (ii) the
Issue Price per Initial Common Unit.
(c) No Limited Partner Interests will be issued or issuable as of or at
the Closing Date other than (i) the Common Units issuable pursuant to
subparagraph (a) hereof in aggregate number equal to 3,900,000, (ii) the "Option
Units" as such term is used in the Underwriting Agreement in an aggregate number
up to 585,000 issuable upon exercise of the Over-Allotment Option pursuant to
subparagraph (b) hereof, (iii) the 3,100,000 Subordinated Units issuable to
pursuant to Section 5.2 hereof, (iv) the 595,000 Common Units issuable pursuant
to Section 5.2, and (v) the Incentive Distribution Rights.
SECTION 5.4 Interest and Withdrawal. No interest shall be paid by the
Partnership on Capital Contributions. No Partner or Assignee shall be entitled
to the withdrawal or return of its Capital Contribution, except to the extent,
if any, that distributions made pursuant to this Agreement or upon termination
of the Partnership may be considered as such by law and then only to the extent
provided for in this Agreement. Except to the extent expressly provided in this
Agreement, no Partner shall have priority over any other Partner or Assignee
either as to the return of Capital Contributions or as to profits, losses or
distributions. Any such return shall be a compromise to which all Partners agree
within the meaning of Section 17-502(b) of the Delaware Act.
SECTION 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial owner
of Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner) owning a Partnership Interest a separate Capital Account with respect
to such Partnership Interest in accordance with the rules of Treasury Regulation
Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the
amount of all Capital Contributions made to the Partnership with respect to such
Partnership Interest and (ii) all items of Partnership income and gain
(including Simulated Gain and income and gain exempt from tax) computed in
accordance with Section 5.5(b) and allocated with respect to such Partnership
Interest pursuant to Section 6.1, and decreased by (x) the amount of cash or Net
Agreed Value of all actual and deemed distributions of cash or property made
with respect to such Partnership Interest and (y) all items of Partnership
deduction and loss (including Simulated Depletion and Simulated Loss) computed
in accordance with Section 5.5(b) and allocated with respect to such Partnership
Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income, gain,
loss, deduction, Simulated Depletion, Simulated Gain or Simulated Loss which is
to be allocated pursuant to Article VI and is to be reflected in the Partners'
Capital Accounts, the determination, recognition and classification of any such
item shall be the same as its determination, recognition and classification for
federal income tax purposes (including any method of depreciation, cost recovery
or amortization used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall
be treated as owning directly its proportionate share (as determined by
the General Partner based upon the provisions of the applicable Group
Member Agreement or governing, organizational or similar documents) of all
property owned by any other Group Member that is classified as a
partnership for federal income tax purposes and (y) any other partnership,
limited liability company, unincorporated business or other entity
classified as a partnership for federal income tax purposes of which a
Group Member is, directly or indirectly, a partner.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can be
neither deducted nor amortized under Section 709 of the Code, if any,
shall, for purposes of Capital Account maintenance, be treated as an item
of deduction at the time such fees and other expenses are incurred and
shall be allocated among the Partners pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss,
deduction, Simulated Depletion, Simulated Gain or Simulated Loss shall be
made without regard to any election under Section 754 of the Code which
may be made by the Partnership and, as to those items described in Section
705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that
such items are not includable in gross income or are neither
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currently deductible nor capitalized for federal income tax purposes. To
the extent an adjustment to the adjusted tax basis of any Partnership
asset pursuant to Section 734(b) or 743(b) of the Code is required,
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken
into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.
(iv) Any income, gain, loss, Simulated Gain or Simulated Loss
attributable to the taxable disposition of any Partnership property shall
be determined as if the adjusted basis of such property as of such date of
disposition were equal in amount to the Partnership's Carrying Value with
respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the
Code, any deductions for depreciation, cost recovery, amortization or
Simulated Depletion attributable to any Contributed Property shall be
determined as if the adjusted basis of such property on the date it was
acquired by the Partnership were equal to the Agreed Value of such
property. Upon an adjustment pursuant to Section 5.5(d) to the Carrying
Value of any Partnership property subject to depreciation, cost recovery,
amortization or Simulated Depletion, any further deductions for such
depreciation, cost recovery, amortization or Simulated Depletion
attributable to such property shall be determined (A) as if the adjusted
basis of such property were equal to the Carrying Value of such property
immediately following such adjustment and (B) using a rate of
depreciation, cost recovery, amortization or Simulated Depletion derived
from the same method and useful life (or, if applicable, the remaining
useful life) as is applied for federal income tax purposes; provided,
however, that, if the asset has a zero adjusted basis for federal income
tax purposes, depreciation, cost recovery, amortization or Simulated
Depletion deductions shall be determined using any method that the General
Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is
placed in service and shall be allocated among the Partners pursuant to
Section 6.1. Any restoration of such basis pursuant to Section 48(q)(2) of
the Code shall, to the extent possible, be allocated in the same manner to
the Partners to whom such deemed deduction was allocated.
(c) (i) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Partnership
Interest so transferred.
(ii) Subject to Section 6.7(c), immediately prior to the transfer of
a Subordinated Unit or of a Subordinated Unit that has converted into a
Common Unit pursuant to Section 5.7 by a holder thereof (other than a
transfer to an Affiliate unless the General Partner elects to have this
Section 5.5(c)(ii) apply), the Capital Account maintained for such Person
with respect to its Subordinated Units or converted Subordinated Units
will (A) first, be allocated to the Subordinated Units or converted
Subordinated Units to be transferred in an amount equal to the product of
(x) the number of such Subordinated Units or converted Subordinated Units
to be transferred and (y) the Per Unit Capital Amount for a Common Unit,
and (B) second, any remaining balance in such Capital Account will be
retained by the transferor, regardless of whether it has retained any
Subordinated Units or converted Subordinated Units ("RETAINED CONVERTED
SUBORDINATED UNITS"). Following any such allocation, the transferor's
Capital Account, if any, maintained with respect to the retained
Subordinated Units or Retained Converted Subordinated Units, if any, will
have a balance equal to the amount allocated under clause (B) hereinabove,
and the transferee's Capital Account established with respect to the
transferred Subordinated Units or converted Subordinated Units will have a
balance equal to the amount allocated under clause (A) hereinabove.
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for
cash or Contributed Property, the issuance of Partnership Interests as
consideration for the provision of services or the conversion of the Incentive
Distribution Rights or the General Partner's Combined Interest, as the case may
be, to Class B Units or Common Units pursuant to Sections 5.11(a) or
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11.3(b), the Capital Account of all Partners and the Carrying Value of each
Partnership property immediately prior to such issuance shall be adjusted upward
or downward to reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as if such Unrealized Gain or Unrealized Loss had
been recognized on an actual sale of each such property immediately prior to
such issuance for an amount equal to its fair market value, and had been
allocated to the Partners at such time pursuant to Section 6.1(c) in the same
manner as any item of gain, loss, Simulated Gain or Simulated Loss actually
recognized during such period would have been allocated. In determining such
Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market
value of all Partnership assets (including cash or cash equivalents) immediately
prior to the issuance of additional Partnership Interests shall be determined by
the General Partner using such method of valuation as it may adopt; provided,
however, that the General Partner, in arriving at such valuation, will rely
largely upon a methodology for determining the Partnerhip's equity value that
takes into account in a consistent manner both the Current Market Price of the
Common Units and the formula provided in Section 5.11(a) (as if an IDR Reset
Election had been made at such time). The General Partner shall allocate such
aggregate value among the assets of the Partnership (in such manner as it
determines) to arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed
distribution to a Partner of any Partnership property (other than a
distribution of cash that is not in redemption or retirement of a
Partnership Interest), the Capital Accounts of all Partners and the
Carrying Value of each Partnership property shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as if such Unrealized Gain or Unrealized Loss
had been recognized on an actual sale of each such property immediately
prior to such distribution for an amount equal to its fair market value,
and had been allocated to the Partners, at such time, pursuant to Section
6.1(c) in the same manner as any item of gain, loss, Simulated Gain or
Simulated Loss actually recognized during such period would have been
allocated. In determining such Unrealized Gain or Unrealized Loss the
aggregate cash amount and fair market value of all Partnership assets
(including cash or cash equivalents) immediately prior to a distribution
shall (A) in the case of an actual distribution that is not made pursuant
to Section 12.4 or in the case of a deemed distribution, be determined and
allocated in the same manner as that provided in Section 5.5(d)(i) or (B)
in the case of a liquidating distribution pursuant to Section 12.4, be
determined and allocated by the Liquidator using such method of valuation
as it may adopt.
SECTION 5.6 Issuances of Additional Partnership Securities.
(a) The Partnership may issue additional Partnership Securities and
options, rights, warrants and appreciation rights relating to the Partnership
Securities for any Partnership purpose at any time and from time to time to such
Persons for such consideration and on such terms and conditions as the General
Partner shall determine, all without the approval of any Limited Partners.
(b) Each additional Partnership Security authorized to be issued by the
Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or
one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series of
Partnership Securities), as shall be fixed by the General Partner, including (i)
the right to share in Partnership profits and losses or items thereof; (ii) the
right to share in Partnership distributions; (iii) the rights upon dissolution
and liquidation of the Partnership; (iv) whether, and the terms and conditions
upon which, the Partnership may redeem the Partnership Security; (v) whether
such Partnership Security is issued with the privilege of conversion or exchange
and, if so, the terms and conditions of such conversion or exchange; (vi) the
terms and conditions upon which each Partnership Security will be issued,
evidenced by certificates and assigned or transferred; (vii) the method for
determining the Percentage Interest as to such Partnership Security; and (viii)
the right, if any, of each such Partnership Security to vote on Partnership
matters, including matters relating to the relative rights, preferences and
privileges of such Partnership Security.
(c) The General Partner shall take all actions that it determines to be
necessary or appropriate in connection with (i) each issuance of Partnership
Securities and options, rights, warrants and appreciation rights relating to
Partnership Securities pursuant to this Section 5.6, (ii) the conversion of the
General Partner Interest or any Incentive Distribution Rights into Units
pursuant to the terms of this Agreement, (iii) the
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issuance of Class B Units pursuant to Section 5.11 and the conversion of Class B
Units into Common Units pursuant to the terms of this Agreement, (iv) the
issuance of Common Units upon the conversion of Subordinated Units pursuant to
Section 5.7, (v) reflecting admission of such additional Limited Partners in the
books and records of the Partnership as the Record Holder of such Limited
Partner Interest and (vi) all additional issuances of Partnership Securities.
The General Partner shall determine the relative rights, powers and duties of
the holders of the Units or other Partnership Securities being so issued. The
General Partner shall do all things necessary to comply with the Delaware Act
and is authorized and directed to do all things that it determines to be
necessary or appropriate in connection with any future issuance of Partnership
Securities or in connection with the conversion of the General Partner Interest
or any Incentive Distribution Rights into Units pursuant to the terms of this
Agreement, including compliance with any statute, rule, regulation or guideline
of any federal, state or other governmental agency or any National Securities
Exchange on which the Units or other Partnership Securities are listed or
admitted to trading.
(d) No fractional Units shall be issued by the Partnership.
SECTION 5.7 Conversion of Subordinated Units.
(a) A total of 25% of the Outstanding Subordinated Units will convert
automatically into Common Units on a one-for-one basis on the second Business
Day following the distribution of Available Cash to Partners pursuant to Section
6.3(a) in respect of any Quarter ending on or after September 30, 2009, in
respect of which:
(i) distributions of Available Cash from Operating Surplus under
Section 6.4(a) on each of the Outstanding Common Units and Subordinated
Units and any other Outstanding Units that are senior or equal in right of
distribution to the Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of (x) the Minimum Quarterly
Distribution on all of the Outstanding Common Units and Subordinated Units
and any other Outstanding Units that are senior or equal in right of
distribution to the Subordinated Units plus (y) the General Partner
Interest during such periods;
(ii) the Adjusted Operating Surplus for each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of (x) the Minimum Quarterly
Distribution on all of the Common Units, Subordinated Units and any other
Units that are senior or equal in right of distribution to the
Subordinated Units that were Outstanding during such periods on a Fully
Diluted Basis plus (y) the related distribution on the General Partner
Interest, with respect to such periods; and
(iii) there are no Cumulative Common Unit Arrearages.
(b) An additional 25% of the Subordinated Units Outstanding on the date
Subordinated Units were converted under Section 5.7(a) (adjusted for any splits
or combinations as provided in Section 5.9) will convert into Common Units on a
one-for-one basis on the second Business Day following the distribution of
Available Cash to Partners pursuant to Section 6.3(a) in respect of any Quarter
ending on or after September 30, 2010, in respect of which:
(i) distributions of Available Cash from Operating Surplus under
Section 6.4(a) on each of the Outstanding Common Units and Subordinated
Units and any other Outstanding Units that are senior or equal in right of
distribution to the Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of (x) the Minimum Quarterly
Distribution on all of the Outstanding Common Units and Subordinated Units
and any other Outstanding Units that are senior or equal in right of
distribution to the Subordinated Units plus (y) the General Partner
Interest during such periods;
(ii) the Adjusted Operating Surplus for each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of (x) the Minimum Quarterly
Distribution on all of the Common Units, Subordinated Units and any other
Units that are senior or equal in right of distribution to the
Subordinated Units that were Outstanding during such periods on a Fully
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Diluted Basis plus (y) the related distribution on the General Partner Interest,
with respect to such periods; and
(iii) there are no Cumulative Common Unit Arrearages; provided,
however, that the conversion of Subordinated Units pursuant to this
Section 5.7(b) may not occur until at least one year following the end of
the last four-Quarter period in respect of which conversion of
Subordinated Units pursuant to Section 5.7(a) occurred.
(c) All of the Outstanding Subordinated Units will convert into Common
Units on a one-for-one basis on the second Business Day following the
distribution of Available Cash to Partners pursuant to Section 6.3(a) in respect
of any Quarter ending on or after September 30, 2009, in respect of which:
(i) distributions of Available Cash from Operating Surplus under
Section 6.4(a) on each of the Outstanding Common Units and Subordinated
Units and any other Outstanding Units that are senior or equal in right of
distribution to the Subordinated Units with respect to each of the two
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded 125% of the sum of (x) the Minimum Quarterly
Distribution on all of the Outstanding Common Units and Subordinated Units
and any other Outstanding Units that are senior or equal in right of
distribution to the Subordinated Units plus (y) the General Partner
Interest during such periods;
(ii) the Adjusted Operating Surplus for each of the two consecutive,
non-overlapping four-Quarter periods immediately preceding such date
equaled or exceeded 125% of the sum of (x) the Minimum Quarterly
Distribution on all of the Common Units, Subordinated Units and any other
Units that are senior or equal in right of distribution to the
Subordinated Units that were Outstanding during such periods on a Fully
Diluted Basis plus (y) the related distribution on the General Partner
Interest, with respect to such periods; and
(iii) there are no Cumulative Common Unit Arrearages.
(d) In the event that less than all of the Outstanding Subordinated Units
shall convert into Common Units pursuant to Section 5.7(a), Section 5.7(b) or
Section 5.7(c) at a time when there shall be more than one holder of
Subordinated Units, then, unless all of the holders of Subordinated Units shall
agree to a different allocation, the Subordinated Units that are to be converted
into Common Units shall be allocated among the holders of Subordinated Units pro
rata based on the number of Subordinated Units held by each such holder.
(e) Any Subordinated Units that are not converted into Common Units
pursuant to Section 5.7(a), Section 5.7(b) or Section 5.7(c) shall convert into
Common Units on a one-for-one basis on the second Business Day following the
distribution of Available Cash to Partners pursuant to Section 6.3(a) in respect
of the final Quarter of the Subordination Period.
(f) Notwithstanding any other provision of this Agreement, all the then
Outstanding Subordinated Units will automatically convert into Common Units on a
one-for-one basis as set forth in, and pursuant to the terms of, Section 11.4.
(g) A Subordinated Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b) and Section 6.7(c).
(h) For purposes of determining whether the test in Section 5.7(a), (b) or
(c) above has been satisfied, Adjusted Operating Surplus will be adjusted
upwards or downwards if the Conflicts Committee determines in good faith that
the amount of Estimated Average Maintenance Capital Expenditures used in the
determination of Adjusted Operating Surplus was materially incorrect, based on
circumstances prevailing at the time of the original determination of Estimated
Average Maintenance Capital Expenditures, for any one or more of the preceding
four quarter periods referenced in Section 5.7(a), (b) or (c).
SECTION 5.8 Limited Preemptive Right. Except as provided in this Section
5.8 and Section 5.2, no Person shall have any preemptive, preferential or other
similar right with respect to the issuance of any Partnership Security, whether
unissued, held in the treasury or hereafter created. The General Partner shall
have the right, which it may from time to time assign in whole or in part to any
of its Affiliates, to purchase
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Partnership Securities from the Partnership whenever, and on the same terms
that, the Partnership issues Partnership Securities to Persons other than the
General Partner and its Affiliates, to the extent necessary to maintain the
Percentage Interests of the General Partner and its Affiliates equal to that
which existed immediately prior to the issuance of such Partnership Securities.
SECTION 5.9 Splits and Combinations.
(a) Subject to Section 5.9(d), Section 6.6 and Section 6.9 (dealing with
adjustments of distribution levels), the Partnership may make a Pro Rata
distribution of Partnership Securities to all Record Holders or may effect a
subdivision or combination of Partnership Securities so long as, after any such
event, each Partner shall have the same Percentage Interest in the Partnership
as before such event, and any amounts calculated on a per Unit basis (including
any Common Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a
number of Units (including the number of Subordinated Units that may convert
prior to the end of the Subordination Period) are proportionately adjusted.
(b) Whenever such a distribution, subdivision or combination of
Partnership Securities is declared, the General Partner shall select a Record
Date as of which the distribution, subdivision or combination shall be effective
and shall send notice thereof at least 20 days prior to such Record Date to each
Record Holder as of a date not less than 10 days prior to the date of such
notice. The General Partner also may cause a firm of independent public
accountants selected by it to calculate the number of Partnership Securities to
be held by each Record Holder after giving effect to such distribution,
subdivision or combination. The General Partner shall be entitled to rely on any
certificate provided by such firm as conclusive evidence of the accuracy of such
calculation.
(c) Promptly following any such distribution, subdivision or combination,
the Partnership may issue Certificates to the Record Holders of Partnership
Securities as of the applicable Record Date representing the new number of
Partnership Securities held by such Record Holders, or the General Partner may
adopt such other procedures that it determines to be necessary or appropriate to
reflect such changes. If any such combination results in a smaller total number
of Partnership Securities Outstanding, the Partnership shall require, as a
condition to the delivery to a Record Holder of such new Certificate, the
surrender of any Certificate held by such Record Holder immediately prior to
such Record Date.
(d) The Partnership shall not issue fractional Units upon any
distribution, subdivision or combination of Units. If a distribution,
subdivision or combination of Units would result in the issuance of fractional
Units but for the provisions of this Section 5.9(d), each fractional Unit shall
be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to the
next higher Unit).
SECTION 5.10 Fully Paid and Non-Assessable Nature of Limited Partner
Interests. All Limited Partner Interests issued pursuant to, and in accordance
with the requirements of, this Article V shall be fully paid and non-assessable
Limited Partner Interests in the Partnership, except as such non-assessability
may be affected by Section 17-607 of the Delaware Act.
SECTION 5.11 Issuance of Class B Units in Connection with Reset of
Incentive Distribution Rights.
(a) Subject to the provisions of this Section 5.11, the holder of the
Incentive Distribution Rights (or, if there is more than one holder of the
Incentive Distribution Rights, the holders of a majority in interest of the
Incentive Distribution Rights) shall have the right, at any time when there are
no Subordinated Units outstanding and the Partnership has made a distribution
pursuant to Section 6.4(b)(iv) for each of the four most recently completed
Quarters and the amount of each such distribution did not exceed Adjusted
Operating Surplus for such Quarter, to make an election (the "IDR RESET
ELECTION") to cause the Minimum Quarterly Distribution and the Target
Distributions to be reset in accordance with the provisions of Section 5.11(e)
and, in connection therewith, the holder or holders of the Incentive
Distribution Rights will become entitled to receive their respective
proportionate share of a number of Class B Units derived by dividing (i) the
average amount of cash distributions made by the Partnership for the two full
Quarters immediately preceding the giving of the Reset Notice (as defined in
Section 5.11(b)) in respect of the Incentive Distribution Rights by (ii) the
average of the cash distributions made by the Partnership in respect of each
Common Unit for each of the two full Quarters immediately preceding the giving
of the Reset Notice (the number of Class B Units
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determined by such quotient is referred to herein as the "AGGREGATE QUANTITY of
CLASS B UNITS"). The making of the IDR Reset Election in the manner specified in
Section 5.11(b) shall cause the Minimum Quarterly Distribution and the Target
Distributions to be reset in accordance with the provisions of Section 5.11(e)
and, in connection therewith, the holder or holders of the Incentive
Distribution Rights will become entitled to receive Class B Units on the basis
specified above, without any further approval required by the General Partner or
the Unitholders, at the time specified in Section 5.11(c) unless the IDR Reset
Election is rescinded pursuant to Section 5.11(d).
(b) To exercise the right specified in Section 5.11(a), the holder of the
Incentive Distribution Rights (or, if there is more than one holder of the
Incentive Distribution Rights, the holders of a majority in interest of the
Incentive Distribution Rights) shall deliver a written notice (the "RESET
NOTICE") to the Partnership. Within 10 Business Days after the receipt by the
Partnership of such Reset Notice, as the case may be, the Partnership shall
deliver a written notice to the holder or holders of the Incentive Distribution
Rights of the Partnership's determination of the aggregate number of Class B
Units which each holder of Incentive Distribution Rights will be entitled to
receive.
(c) The holder or holders of the Incentive Distribution Rights will be
entitled to receive the Aggregate Quantity of Class B Units on the fifteenth
Business Day after receipt by the Partnership of the Reset Notice, and the
Partnership shall issue Certificates for the Class B Units to the holder or
holders of the Incentive Distribution Rights; provided, however, that the
issuance of Class B Units to the holder or holders of the Incentive Distribution
Rights shall not occur prior to the approval of the listing or admission for
trading of the Common Units into which the Class B Units are convertible
pursuant to Section 5.11(f) by the principal National Securities Exchange upon
which the Common Units are then listed or admitted for trading if any such
approval is required pursuant to the rules and regulations of such National
Securities Exchange.
(d) In the event that the principal National Securities Exchange upon
which the Common Units are then traded have not approved the listing or
admission for trading of the Common Units into which the Class B Units are
convertible pursuant to Section 5.11(f) on or before the 30th calendar day
following the Partnership's receipt of the Reset Notice and such approval is
required by the rules and regulations of such National Securities Exchange, then
the holder of the Incentive Distribution Rights (or, if there is more than one
holder of the Incentive Distribution Rights, the holders of a majority in
interest of the Incentive Distribution Rights) shall have the right to either
rescind the IDR Reset Election or elect to receive other Partnership Securities
having such terms as the General Partner may approve, with the approval of the
Conflicts Committee, that will provide (i) the same economic value, in the
aggregate, as the Aggregate Quantity of Class B Units would have had at the time
of the Partnership's receipt of the Reset Notice, as determined by the General
Partner, and (ii) for the subsequent conversion of such Partnership Securities
into Common Units within not more than 12 months following the Partnership's
receipt of the Reset Notice upon the satisfaction of one or more conditions that
are reasonably acceptable to the holder of the Incentive Distribution Rights
(or, if there is more than one holder of the Incentive Distribution Rights, the
holders of a majority in interest of the Incentive Distribution Rights).
(e) The Minimum Quarterly Distribution, First Target Distribution and
Second Target Distribution shall be adjusted at the time of the issuance of
Common Units or other Partnership Securities pursuant to this Section 5.11 such
that (i) the Minimum Quarterly Distribution shall be reset to equal to the
average cash distribution amount per Common Unit for the two Quarters
immediately prior to the Partnership's receipt of the Reset Notice (the "RESET
MQD"), (ii) the First Target Distribution shall be reset to equal 115% of the
Reset MQD, and (iii) the Second Target Distribution shall be reset to equal to
125% of the Reset MQD.
(f) Any holder of Class B Units shall have the right to elect, by giving
written notice to the General Partner, to convert all or a portion of the Class
B Units held by such holder, at any time following the first anniversary of the
issuance of such Class B Units, into Common Units on a one-for-one basis, such
conversion to be effective on the second Business Day following the General
Partner's receipt of such written notice. The Class B Common Units will have
voting rights that are identical to the voting rights of the Common Units and
will vote with the Common Units as a single class, so that each Class B Common
Unit will be entitled to one vote on each matter with respect to which each
Common Unit is entitled to vote. Each reference in the
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Partnership Agreement to a vote of holders of Common Units shall be deemed to be
a reference to the holders of Common Units and Class B Common Units.
ARTICLE VI.
Allocations and Distributions
SECTION 6.1 Allocations for Capital Account Purposes. For purposes of
maintaining the Capital Accounts and in determining the rights of the Partners
among themselves, the Partnership's items of income, gain, loss, deduction,
Simulated Depletion, Simulated Gain and Simulated Loss (computed in accordance
with Section 5.5(b)) shall be allocated among the Partners in each taxable year
(or portion thereof) as provided herein.
(a) Net Income. After giving effect to the special allocations set forth
in Section 6.1(d), Net Income for each taxable year and all items of income,
gain, loss, deduction, Simulated Depletion, Simulated Gain and Simulated Loss
taken into account in computing Net Income for such taxable year shall be
allocated as follows:
(i) First, 100% to the General Partner, until the aggregate Net
Income allocated to the General Partner pursuant to this Section 6.1(a)(i)
for the current taxable year and all previous taxable years is equal to
the aggregate Net Losses allocated to the General Partner pursuant to
Section 6.1(b)(iii) for all previous taxable years;
(ii) Second, 100% to the General Partner and the Unitholders, in
accordance with their respective Percentage Interests, until the aggregate
Net Income allocated to such Partners pursuant to this Section 6.1(a)(ii)
for the current taxable year and all previous taxable years is equal to
the aggregate Net Losses allocated to such Partners pursuant to Section
6.1(b)(ii) for all previous taxable years; and
(iii) Thereafter, the balance, if any, 100% to the General Partner
and to the Unitholders, in accordance with their respective Percentage
Interests.
(b) Net Losses. After giving effect to the special allocations set forth
in Section 6.1(d), Net Losses for each taxable period and all items of income,
gain, loss, deduction, Simulated Depletion, Simulated Gain and Simulated Loss
taken into account in computing Net Losses for such taxable period shall be
allocated as follows:
(i) First, 100% to the General Partner and the Unitholders, in
accordance with their respective Percentage Interests, until the aggregate
Net Losses allocated to such Partners pursuant to this Section 6.1(b)(i)
for the current taxable year and all previous taxable years is equal to
the aggregate Net Income allocated to such Partners pursuant to Section
6.1(a)(iii) for all previous taxable years, provided that the Net Losses
shall not be allocated pursuant to this Section 6.1(b)(i) to the extent
that such allocation would cause any Unitholder to have a deficit balance
in its Adjusted Capital Account at the end of such taxable year (or
increase any existing deficit balance in its Adjusted Capital Account);
(ii) Second, 100% to the General Partner and the Unitholders, in
accordance with their respective Percentage Interests; provided, that Net
Losses shall not be allocated pursuant to this Section 6.1(b)(ii) to the
extent that such allocation would cause any Unitholder to have a deficit
balance in its Adjusted Capital Account at the end of such taxable year
(or increase any existing deficit balance in its Adjusted Capital
Account); and
(iii) Thereafter, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the special
allocations set forth in Section 6.1(d), all items of income, gain, loss,
deduction, Simulated Depletion, Simulated Gain and Simulated Loss taken into
account in computing Net Termination Gain or Net Termination Loss for such
taxable period shall be allocated in the same manner as such Net Termination
Gain or Net Termination Loss is allocated hereunder. All allocations under this
Section 6.1(c) shall be made after Capital Account balances have been adjusted
by all other allocations provided under this Section 6.1 and after all
distributions of Available Cash
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provided under Section 6.4 and Section 6.5 have been made; provided, however,
that solely for purposes of this Section 6.1(c), Capital Accounts shall not be
adjusted for distributions made pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
among the Partners in the following manner (and the Capital Accounts of
the Partners shall be increased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its
Capital Account, in the proportion that such deficit balance bears
to the total deficit balances in the Capital Accounts of all
Partners, until each such Partner has been allocated Net Termination
Gain equal to any such deficit balance in its Capital Account;
(B) Second, (x) to the General Partner in accordance with its
Percentage Interest and (y) to all Unitholders holding Common Units,
Pro Rata, a percentage equal to 100% less the percentage applicable
to subclause (x) of this clause (B), until the Capital Account in
respect of each Common Unit then Outstanding is equal to the sum of
(1) its Unrecovered Initial Unit Price, (2) the Minimum Quarterly
Distribution for the Quarter during which the Liquidation Date
occurs, reduced by any distribution pursuant to Section 6.4(a)(i) or
Section 6.4(b)(i) with respect to such Common Unit for such Quarter
(the amount determined pursuant to this clause (2) is hereinafter
defined as the "UNPAID MQD") and (3) any then existing Cumulative
Common Unit Arrearage;
(C) Third, if such Net Termination Gain is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Class B Unit, (x) to the General Partner in accordance
with its Percentage Interest and (y) to all Unitholders holding
Class B Units, Pro Rata, a percentage equal to 100% less the
percentage applicable to subclause (x) of this clause (C), until the
Capital Account in respect of each Class B Unit then Outstanding
equals the sum of (1) its Unrecovered Initial Unit Price, and (2)
the Minimum Quarterly Distribution for the Quarter during which the
Liquidation Date occurs, reduced by any distribution pursuant to
Section 6.4(b)(i) with respect to such Class B Unit for such
Quarter;
(D) Fourth, if such Net Termination Gain is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit, (x) to the General Partner in
accordance with its Percentage Interest and (y) to all Unitholders
holding Subordinated Units, Pro Rata, a percentage equal to 100%
less the percentage applicable to subclause (x) of this clause (D),
until the Capital Account in respect of each Subordinated Unit then
Outstanding equals the sum of (1) its Unrecovered Initial Unit
Price, determined for the taxable year (or portion thereof) to which
this allocation of gain relates, and (2) the Minimum Quarterly
Distribution for the Quarter during which the Liquidation Date
occurs, reduced by any distribution pursuant to Section 6.4(a)(iii)
with respect to such Subordinated Unit for such Quarter;
(E) Fifth, 100% to the General Partner and all Unitholders in
accordance with their respective Percentage Interests, until the
Capital Account in respect of each Common Unit then Outstanding is
equal to the sum of (1) its Unrecovered Initial Unit Price, (2) the
Unpaid MQD, (3) any then existing Cumulative Common Unit Arrearage,
and (4) the excess of (aa) the First Target Distribution less the
Minimum Quarterly Distribution for each Quarter of the Partnership's
existence over (bb) the cumulative per Unit amount of any
distributions of Available Cash that is deemed to be Operating
Surplus made pursuant to Section 6.4(a)(iv) and Section 6.4(b)(ii)
(the sum of (1), (2), (3) and (4) is hereinafter defined as the
"FIRST LIQUIDATION TARGET AMOUNT");
(F) Sixth, (x) to the General Partner in accordance with its
Percentage Interest, (y) 13% to the holders of the Incentive
Distribution Rights, Pro Rata, and (z) to all Unitholders, Pro Rata,
a percentage equal to 100% less the sum of the percentages
applicable to subclause (x) and (y) of this clause (F), until the
Capital Account in respect of each Common Unit then Outstanding is
equal to the sum of (1) the First Liquidation Target Amount, and (2)
the excess of (aa) the Second Target Distribution less the First
Target Distribution for each Quarter of the Partnership's existence
over
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(bb) the cumulative per Unit amount of any distributions of
Available Cash that is deemed to be Operating Surplus made pursuant
to Section 6.4(a)(v) and Section 6.4(b)(iii) (the sum of (1) and (2)
is hereinafter defined as the "SECOND LIQUIDATION TARGET AMOUNT");
and
(G) Thereafter, (x) to the General Partner in accordance with
its Percentage Interest, (y) 23% to the holders of the Incentive
Distribution Rights, Pro Rata, and (z) to all Unitholders, Pro Rata,
a percentage equal to 100% less the sum of the percentages
applicable to subclause (x) and (y) of this clause (G).
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated
among the Partners in the following manner:
(A) First, if such Net Termination Loss is recognized (or is
deemed to be recognized) prior to the conversion of the last
Outstanding Subordinated Unit, (x) to the General Partner in
accordance with its Percentage Interest and (y) to all Unitholders
holding Subordinated Units, Pro Rata, a percentage equal to 100%
less the percentage applicable to subclause (x) of this clause (A),
until the Capital Account in respect of each Subordinated Unit then
Outstanding has been reduced to zero;
(B) Second, (x) to the General Partner in accordance with its
Percentage Interest and (y) to the Class B Unitholders, Pro Rata, a
percentage equal to 100% less the percentage applicable to subclause
(x) of this clause (B) until the Capital Account in respect of each
Class B Unit then Outstanding has been reduced to zero;
(C) Third, (x) to the General Partner in accordance with its
Percentage Interest and (y) to all Unitholders, Pro Rata, a
percentage equal to 100% less the percentage applicable to subclause
(x) of this clause (B) until the Capital Account in respect of each
Unit then Outstanding has been reduced to zero; and
(D) Thereafter, the balance, if any, 100% to the General
Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income, gain and Simulated Gain for such
period (and, if necessary, subsequent periods) in the manner and amounts
provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income, gain and Simulated Gain required
hereunder shall be effected, prior to the application of any other
allocations pursuant to this Section 6.1(d) with respect to such taxable
period (other than an allocation pursuant to Section 6.1(d)(vi) and
Section 6.1(d)(vii)). This Section 6.1(d)(i) is intended to comply with
the Partnership Minimum Gain chargeback requirement in Treasury Regulation
Section 1.704-2(f) and shall be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income, gain and
Simulated Gain for such period (and, if necessary, subsequent periods) in
the manner and amounts provided in Treasury Regulation Sections
1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provisions. For
purposes of this Section 6.1(d), each Partner's Adjusted Capital Account
balance shall be determined, and the allocation of income, gain and
Simulated Gain required hereunder shall be effected, prior to the
application of any other allocations pursuant to this Section 6.1(d),
other than Section 6.1(d)(i) and other than an allocation pursuant to
Section 6.1(d)(vi) and Section 6.1(d)(vii), with respect to such taxable
period. This
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Section 6.1(d)(ii) is intended to comply with the chargeback of items of
income and gain requirement in Treasury Regulation Section 1.704-2(i)(4)
and shall be interpreted consistently therewith.
(iii) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value of any
property distributed (except cash or property distributed pursuant
to Section 12.4) to any Unitholder with respect to its Units for a
taxable year is greater (on a per Unit basis) than the amount of
cash or the Net Agreed Value of property distributed to the other
Unitholders with respect to their Units (on a per Unit basis), then
(1) there shall be allocated income, gain and Simulated Gain to each
Unitholder receiving such greater cash or property distribution
until the aggregate amount of such items allocated pursuant to this
Section 6.1(d)(iii)(A) for the current taxable year and all previous
taxable years is equal to the product of (aa) the amount by which
the distribution (on a per Unit basis) to such Unitholder exceeds
the distribution (on a per Unit basis) to the Unitholders receiving
the smallest distribution and (bb) the number of Units owned by the
Unitholder receiving the greater distribution; and (2) the General
Partner shall be allocated income, gain and Simulated Gain in an
aggregate amount equal to the product obtained by multiplying (aa)
the quotient determined by dividing (x) the General Partner's
Percentage Interest at the time in which the greater cash or
property distribution occurs by (y) the sum of 100 less the General
Partner's Percentage Interest at the time in which the greater cash
or property distribution occurs times (bb) the sum of the amounts
allocated in clause (1).
(B) After the application of Section 6.1(d)(iii)(A), all or
any portion of the remaining items of Partnership income, gain and
Simulated Gain for the taxable period, if any, shall be allocated
(1) to the holders of Incentive Distribution Rights, Pro Rata, until
the aggregate amount of such items allocated to the holders of
Incentive Distribution Rights pursuant to this Section
6.1(d)(iii)(B) for the current taxable year and all previous taxable
years is equal to the cumulative amount of all Incentive
Distributions made to the holders of Incentive Distribution Rights
from the Closing Date to a date 45 days after the end of the current
taxable year; and (2) to the General Partner an amount equal to the
product of (aa) an amount equal to the quotient determined by
dividing (x) the General Partner's Percentage Interest by (y) the
sum of 100 less the General Partner's Percentage Interest times (bb)
the sum of the amounts allocated in clause (1).
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership
income, gain and Simulated Gain shall be specially allocated to such
Partner in an amount and manner sufficient to eliminate, to the extent
required by the Treasury Regulations promulgated under Section 704(b) of
the Code, the deficit balance, if any, in its Adjusted Capital Account
created by such adjustments, allocations or distributions as quickly as
possible unless such deficit balance is otherwise eliminated pursuant to
Section 6.1(d)(i) or Section 6.1(d)(ii).
(v) Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable
period in excess of the sum of (A) the amount such Partner is required to
restore pursuant to the provisions of this Agreement and (B) the amount
such Partner is deemed obligated to restore pursuant to Treasury
Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership income, gain and Simulated Gain
in the amount of such excess as quickly as possible; provided, that an
allocation pursuant to this Section 6.1(d)(v) shall be made only if and to
the extent that such Partner would have a deficit balance in its Capital
Account as adjusted after all other allocations provided for in this
Section 6.1 have been tentatively made as if this Section 6.1(d)(v) were
not in this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines that
the Partnership's Nonrecourse Deductions should be allocated in a
different ratio to satisfy the safe harbor requirements of the Treasury
Regulations promulgated under Section 704(b) of the Code, the
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General Partner is authorized, upon notice to the other Partners, to
revise the prescribed ratio to the numerically closest ratio that does
satisfy such requirements.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions
for any taxable period shall be allocated 100% to the Partner that bears
the Economic Risk of Loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner
bears the Economic Risk of Loss with respect to a Partner Nonrecourse
Debt, such Partner Nonrecourse Deductions attributable thereto shall be
allocated between or among such Partners in accordance with the ratios in
which they share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation
Section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of
the Partnership in excess of the sum of (A) the amount of Partnership
Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall
be allocated among the Partners in accordance with their respective
Percentage Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Section 734(b)
or 743(b) of the Code is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain or Simulated Gain (if the adjustment increases
the basis of the asset), loss or Simulated Loss (if the adjustment
decreases such basis), and such item of gain, loss, Simulated Gain or
Simulated Loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required to
be adjusted pursuant to such Section of the Treasury Regulations.
(x) Economic Uniformity.
(A) At the election of the General Partner with respect to any
taxable period ending upon, or after, the termination of the
Subordination Period, all or a portion of the remaining items of
Partnership income, gain or Simulated Gain for such taxable period,
after taking into account allocations pursuant to Section
6.1(d)(iii), shall be allocated 100% to each Partner holding
Subordinated Units that are Outstanding as of the termination of the
Subordination Period ("FINAL SUBORDINATED UNITS") in the proportion
of the number of Final Subordinated Units held by such Partner to
the total number of Final Subordinated Units then Outstanding, until
each such Partner has been allocated an amount of income, gain or
Simulated Gain that increases the Capital Account maintained with
respect to such Final Subordinated Units to an amount equal to the
product of (A) the number of Final Subordinated Units held by such
Partner and (B) the Per Unit Capital Amount for a Common Unit. The
purpose of this allocation is to establish uniformity between the
Capital Accounts underlying Final Subordinated Units and the Capital
Accounts underlying Common Units held by Persons other than the
General Partner and its Affiliates immediately prior to the
conversion of such Final Subordinated Units into Common Units. This
allocation method for establishing such economic uniformity will be
available to the General Partner only if the method for allocating
the Capital Account maintained with respect to the Subordinated
Units between the transferred and retained Subordinated Units
pursuant to Section 5.5(c)(ii) does not otherwise provide such
economic uniformity to the Final Subordinated Units.
(B) At the election of the General Partner with respect to any
taxable period ending upon, or after, the conversion of the Class B
Units pursuant to Section 5.11(f), all or a portion of the remaining
items of Partnership income, gain or Simulated Gain for such taxable
period, after taking into account allocations pursuant to Section
6.1(d)(iii) and Section 6.1(d)(x)(A), shall be allocated 100% to the
holder or holders of the Common Units resulting from the conversion
pursuant to Section 5.11(f) ("CONVERTED COMMON UNITS") in the
proportion of the number of the Converted Common Units held by such
holder or holders to the total number of Converted Common Units then
Outstanding, until each such holder has been allocated an amount of
income, gain or Simulated Gain that increases the Capital Account
maintained with respect to such Converted Common Units to an amount
equal to the product of (A) the number of Converted Common Units
held by such holder
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and (B) the Per Unit Capital Amount for a Common Unit. The purpose
of this allocation is to establish uniformity between the Capital
Accounts underlying Converted Common Units and the Capital Accounts
underlying Common Units held by Persons other than the General
Partner and its Affiliates immediately prior to the receipt of
Common Units pursuant to Section 5.11(f).
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1,
other than the Required Allocations, the Required Allocations shall
be taken into account in making the Agreed Allocations so that, to
the extent possible, the net amount of items of income, gain, loss,
deduction, Simulated Depletion, Simulated Gain and Simulated Loss
allocated to each Partner pursuant to the Required Allocations and
the Agreed Allocations, together, shall be equal to the net amount
of such items that would have been allocated to each such Partner
under the Agreed Allocations had the Required Allocations and the
related Curative Allocation not otherwise been provided in this
Section 6.1. Notwithstanding the preceding sentence, Required
Allocations relating to (1) Nonrecourse Deductions shall not be
taken into account except to the extent that there has been a
decrease in Partnership Minimum Gain and (2) Partner Nonrecourse
Deductions shall not be taken into account except to the extent that
there has been a decrease in Partner Nonrecourse Debt Minimum Gain.
Allocations pursuant to this Section 6.1(d)(xi)(A) shall only be
made with respect to Required Allocations to the extent the General
Partner determines that such allocations will otherwise be
inconsistent with the economic agreement among the Partners.
Further, allocations pursuant to this Section 6.1(d)(xi)(A) shall be
deferred with respect to allocations pursuant to clauses (1) and (2)
hereof to the extent the General Partner determines that such
allocations are likely to be offset by subsequent Required
Allocations.
(B) The General Partner shall, with respect to each taxable
period, (1) apply the provisions of Section 6.1(d)(xi)(A) in
whatever order is most likely to minimize the economic distortions
that might otherwise result from the Required Allocations, and (2)
divide all allocations pursuant to Section 6.1(d)(xi)(A) among the
Partners in a manner that is likely to minimize such economic
distortions.
(xii) Corrective Allocations. In the event of any allocation of
Additional Book Basis Derivative Items or any Book-Down Event or any
recognition of a Net Termination Loss, the following rules shall apply:
(A) In the case of any allocation of Additional Book Basis
Derivative Items (other than an allocation of Unrealized Gain or
Unrealized Loss under Section 5.5(d)), the General Partner shall
allocate additional items of income, gain and Simulated Gain away
from the holders of Incentive Distribution Rights to the Unitholders
and the General Partner, or additional items of deduction, loss,
Simulated Depletion or Simulated Loss away from the Unitholders and
the General Partner to the holders of Incentive Distribution Rights,
to the extent that the Additional Book Basis Derivative Items
allocated to the Unitholders or the General Partner exceed their
Share of Additional Book Basis Derivative Items. For this purpose,
the Unitholders and the General Partner shall be treated as being
allocated Additional Book Basis Derivative Items to the extent that
such Additional Book Basis Derivative Items have reduced the amount
of income that would otherwise have been allocated to the
Unitholders or the General Partner under the Partnership Agreement
(e.g., Additional Book Basis Derivative Items taken into account in
computing cost of goods sold would reduce the amount of book income
otherwise available for allocation among the Partners). Any
allocation made pursuant to this Section 6.1(d)(xii)(A) shall be
made after all of the other Agreed Allocations have been made as if
this Section 6.1(d)(xii) were not in this Agreement and, to the
extent necessary, shall require the reallocation of items that have
been allocated pursuant to such other Agreed Allocations.
(B) In the case of any negative adjustments to the Capital
Accounts of the Partners resulting from a Book-Down Event or from
the recognition of a Net Termination Loss, such negative adjustment
(1) shall first be allocated, to the extent of the Aggregate
Remaining Net Positive Adjustments, in such a manner, as determined
by the General Partner, that to the extent possible the
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aggregate Capital Accounts of the Partners will equal the amount
that would have been the Capital Account balance of the Partners if
no prior Book-Up Events had occurred, and (2) any negative
adjustment in excess of the Aggregate Remaining Net Positive
Adjustments shall be allocated pursuant to Section 6.1(c).
(C) In making the allocations required under this Section
6.1(d)(xii), the General Partner may apply whatever conventions or
other methodology it determines will satisfy the purpose of this
Section 6.1(d)(xii).
SECTION 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction shall be allocated among the
Partners in the same manner as its correlative item of "book" income, gain, loss
or deduction is allocated pursuant to Section 6.1.
(b) The deduction for depletion with respect to each separate oil and gas
property (as defined in Section 614 of the Code) shall be computed for federal
income tax purposes separately by the Partners rather than by the Partnership in
accordance with Section 613A(c)(7)(D) of the Code. Except as provided in Section
6.2(c)(iii), for purposes of such computation (before taking into account any
adjustments resulting from an election made by the Partnership under Section 754
of the Code), the adjusted tax basis of each oil and gas property (as defined in
Section 614 of the Code) shall be allocated among the Partners in accordance
with their respective Percentage Interests. Each Partner shall separately keep
records of his share of the adjusted tax basis in each oil and gas property,
allocated as provided above, adjust such share of the adjusted tax basis for any
cost or percentage depletion allowable with respect to such property, and use
such adjusted tax basis in the computation of its cost depletion or in the
computation of his gain or loss on the disposition of such property by the
Partnership.
(c) Except as provided in Section 6.2(c)(iii), for the purposes of the
separate computation of gain or loss by each Partner on the sale or disposition
of each separate oil and gas property (as defined in Section 614 of the Code),
the Partnership's allocable share of the "amount realized" (as such term is
defined in Section 1001(b) of the Code) from such sale or disposition shall be
allocated for federal income tax purposes among the Partners as follows:
(i) first, to the extent such amount realized constitutes a recovery
of the Simulated Basis of the property, to the Partners in the same
proportion as the depletable basis of such property was allocated to the
Partners pursuant to Section 6.2(b) (without regard to any special
allocation of basis under Section 6.2(c)(iii);
(ii) second, the remainder of such amount realized, if any, to the
Partners so that, to the maximum extent possible, the amount realized
allocated to each Partner under this Section 6.2(c)(ii) will equal such
Partner's share of the Simulated Gain recognized by the Partnership from
such sale or disposition.
(iii) The Partners recognize that with respect to Contributed
Property and Adjusted Property there will be a difference between the
Carrying Value of such property at the time of contribution or
revaluation, as the case may be, and the adjusted tax basis of such
property at that time. All items of tax depreciation, cost recovery,
amortization, adjusted tax basis of depletable properties, amount realized
and gain or loss with respect to such Contributed Property and Adjusted
Property shall be allocated among the Partners to take into account the
disparities between the Carrying Values and the adjusted tax basis with
respect to such properties in accordance with the principles of Treasury
Regulation Section 1.704-3(d).
(iv) Any elections or other decisions relating to such allocations
shall be made by the Board of Directors in any manner that reasonably
reflects the purpose and intention of the Agreement.
(d) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, other than oil and gas properties
pursuant to Section 6.2(c), items of income, gain, loss, depreciation,
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amortization and cost recovery deductions shall be allocated for federal income
tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted basis
at the time of contribution; and (B) any item of Residual Gain or Residual
Loss attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.5(d)(i) or Section 5.5(d)(ii),
and (2) second, in the event such property was originally a Contributed
Property, be allocated among the Partners in a manner consistent with
Section 6.2(d)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(e) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the General Partner shall (i) adopt such conventions as it
deems appropriate in determining the amount of depreciation, amortization and
cost recovery deductions; (ii) make special allocations for federal income tax
purposes of income (including gross income) or deductions; and (iii) amend the
provisions of this Agreement as appropriate (x) to reflect the proposal or
promulgation of Treasury Regulations under Section 704(b) or Section 704(c) of
the Code or (y) otherwise to preserve or achieve uniformity of the Limited
Partner Interests (or any class or classes thereof). The General Partner may
adopt such conventions, make such allocations and make such amendments to this
Agreement as provided in this Section 6.2(e) only if such conventions,
allocations or amendments would not have a material adverse effect on the
Partners, the holders of any class or classes of Limited Partner Interests
issued and Outstanding or the Partnership, and if such allocations are
consistent with the principles of Section 704 of the Code.
(f) The General Partner may use any depreciation and amortization
conventions to preserve the uniformity of the intrinsic tax characteristics of
any Limited Partner Interests, so long as such conventions would not have a
material adverse effect on the Limited Partners or the Record Holders of any
class or classes of Limited Partner Interests.
(g) In accordance with Treasury Regulation Section 1.1245-1(e), any gain
allocated to the Partners upon the sale or other taxable disposition of any
Partnership asset shall, to the extent possible, after taking into account other
required allocations of gain pursuant to this Section 6.2, be characterized as
Recapture Income in the same proportions and to the same extent as such Partners
(or their predecessors in interest) have been allocated any deductions directly
or indirectly giving rise to the treatment of such gains as Recapture Income.
(h) All items of income, gain, loss, deduction and credit recognized by
the Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code that may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted (in the
manner determined by the General Partner) to take into account those adjustments
permitted or required by Sections 734 and 743 of the Code.
(i) Each item of Partnership income, gain, loss and deduction, for
federal income tax purposes, shall be determined on an annual basis and
prorated on a monthly basis and shall be allocated to the Partners as of
the opening of the New York Stock Exchange on the first Business Day of
each month; provided, however, such items for the period beginning on the
Closing Date and ending on the last day of the month in which the Option
Closing Date or the expiration of the Over-Allotment Option occurs shall
be allocated to the Partners
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as of the opening of the New York Stock Exchange on the first Business Day of
the next succeeding month; and provided, further, that gain or loss on a sale or
other disposition of any assets of the Partnership or any other extraordinary
item of income or loss realized and recognized other than in the ordinary course
of business, as determined by the General Partner, shall be allocated to the
Partners as of the opening of the New York Stock Exchange on the first Business
Day of the month in which such gain or loss is recognized for federal income tax
purposes. The General Partner may revise, alter or otherwise modify such methods
of allocation to the extent permitted or required by Section 706 of the Code and
the regulations or rulings promulgated thereunder.
(j) Allocations that would otherwise be made to a Limited Partner under
the provisions of this Article VI shall instead be made to the beneficial owner
of Limited Partner Interests held by a nominee in any case in which the nominee
has furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method determined by the General
Partner.
SECTION 6.3 Requirement and Characterization of Distributions;
Distributions to Record Holders.
(a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on December 31, 2006, an amount equal to 100% of Available Cash
with respect to such Quarter shall, subject to Section 17-607 of the Delaware
Act, be distributed in accordance with this Article VI by the Partnership to the
Partners as of the Record Date selected by the General Partner. All amounts of
Available Cash distributed by the Partnership on any date from any source shall
be deemed to be Operating Surplus until the sum of all amounts of Available Cash
theretofore distributed by the Partnership to the Partners pursuant to Section
6.4 equals the Operating Surplus from the Closing Date through the close of the
immediately preceding Quarter. Any remaining amounts of Available Cash
distributed by the Partnership on such date shall, except as otherwise provided
in Section 6.5, be deemed to be "Capital Surplus." All distributions required to
be made under this Agreement shall be made subject to Section 17-607 of the
Delaware Act.
(b) Notwithstanding Section 6.3(a), in the event of the dissolution and
liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs shall be applied and distributed
solely in accordance with, and subject to the terms and conditions of, Section
12.4.
(c) The General Partner may treat taxes paid by the Partnership on behalf
of, or amounts withheld with respect to, all or less than all of the Partners,
as a distribution of Available Cash to such Partners.
(d) Each distribution in respect of a Partnership Interest shall be paid
by the Partnership, directly or through the Transfer Agent or through any other
Person or agent, only to the Record Holder of such Partnership Interest as of
the Record Date set for such distribution. Such payment shall constitute full
payment and satisfaction of the Partnership's liability in respect of such
payment, regardless of any claim of any Person who may have an interest in such
payment by reason of an assignment or otherwise.
SECTION 6.4 Distributions of Available Cash from Operating Surplus.
(a) During Subordination Period. Available Cash with respect to any
Quarter within the Subordination Period that is deemed to be Operating Surplus
pursuant to the provisions of Section 6.3 or Section 6.5 shall, subject to
Section 17-607 of the Delaware Act, be distributed as follows, except as
otherwise contemplated by Section 5.6 in respect of other Partnership Securities
issued pursuant thereto:
(i) First, to the General Partner and the Unitholders holding Common
Units, in accordance with their respective Percentage Interests, until
there has been distributed in respect of each Common Unit then Outstanding
an amount equal to the Minimum Quarterly Distribution for such Quarter;
(ii) Second, to the General Partner and the Unitholders holding
Common Units, in accordance with their respective Percentage Interests,
until there has been distributed in respect of each Common Unit then
Outstanding an amount equal to the Cumulative Common Unit Arrearage
existing with respect to such Quarter;
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(iii) Third, to the General Partner and the Unitholders holding
Subordinated Units, in accordance with their respective Percentage
Interests, until there has been distributed in respect of each
Subordinated Unit then Outstanding an amount equal to the Minimum
Quarterly Distribution for such Quarter;
(iv) Fourth, to the General Partner and all Unitholders, in
accordance with their respective Percentage Interests, until there has
been distributed in respect of each Unit then Outstanding an amount equal
to the excess of the First Target Distribution over the Minimum Quarterly
Distribution for such Quarter;
(v) Fifth, (A) to the General Partner in accordance with its
Percentage Interest; (B) 13% to the holders of the Incentive Distribution
Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a percentage equal
to 100% less the sum of the percentages applicable to subclauses (A) and
(B) of this clause (v) until there has been distributed in respect of each
Unit then Outstanding an amount equal to the excess of the Second Target
Distribution over the First Target Distribution for such Quarter; and
(vi) Thereafter, (A) to the General Partner in accordance with its
Percentage Interest, (B) 23% to the holders of the Incentive Distribution
Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a percentage equal
to 100% less the sum of the percentages applicable to subclauses (A) and
(B) of this subclause (vi); provided, however, if the Minimum Quarterly
Distribution, the First Target Distribution, and the Second Target
Distribution have been reduced to zero pursuant to the second sentence of
Section 6.6(a), the distribution of Available Cash that is deemed to be
Operating Surplus with respect to any Quarter will be made solely in
accordance with Section 6.4(a)(vi).
(b) After Subordination Period. Available Cash with respect to any Quarter
after the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or Section 6.5, subject to Section 17-607 of
the Delaware Act, shall be distributed as follows, except as otherwise required
by Section 5.6(b) in respect of additional Partnership Securities issued
pursuant thereto:
(i) First, 100% to the General Partner and the Unitholders in
accordance with their respective Percentage Interests, until there has
been distributed in respect of each Unit then Outstanding an amount equal
to the Minimum Quarterly Distribution for such Quarter;
(ii) Second, 100% to the General Partner and the Unitholders in
accordance with their respective Percentage Interests, until there has
been distributed in respect of each Unit then Outstanding an amount equal
to the excess of the First Target Distribution over the Minimum Quarterly
Distribution for such Quarter;
(iii) Third, (A) to the General Partner in accordance with its
Percentage Interest; (B) 13% to the holders of the Incentive Distribution
Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a percentage equal
to 100% less the sum of the percentages applicable to subclauses (A) and
(B) of this clause (iii), until there has been distributed in respect of
each Unit then Outstanding an amount equal to the excess of the Second
Target Distribution over the First Target Distribution for such Quarter;
and
(iv) Thereafter, (A) to the General Partner in accordance with its
Percentage Interest; (B) 23% to the holders of the Incentive Distribution
Rights, Pro Rata; and (C) to all Unitholders, Pro Rata, a percentage equal
to 100% less the sum of the percentages applicable to subclause (A) and
(B) of this clause (iv); provided, however, if the Minimum Quarterly
Distribution, the First Target Distribution, and the Second Target
Distribution have been reduced to zero pursuant to the second sentence of
Section 6.6(a), the distribution of Available Cash that is deemed to be
Operating Surplus with respect to any Quarter will be made solely in
accordance with Section 6.4(a)(iv).
SECTION 6.5 Distributions of Available Cash from Capital Surplus.
Available Cash that is deemed to be Capital Surplus pursuant to the
provisions of Section 6.3(a) shall, subject to Section 17-607 of the Delaware
Act, be distributed, unless the provisions of Section 6.3 require otherwise,
100% to the General Partner and the Unitholders in accordance with their
respective Percentage Interests, until a hypothetical holder of a Common Unit
acquired on the Closing Date has received with respect to such Common Unit,
during the period since the Closing Date through such date, distributions of
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Available Cash that are deemed to be Capital Surplus in an aggregate amount
equal to the Initial Unit Price. Available Cash that is deemed to be Capital
Surplus shall then be distributed to the General Partner and all Unitholders
holding Common Units, in accordance with their respective Percentage Interests,
until there has been distributed in respect of each Common Unit then Outstanding
an amount equal to the Cumulative Common Unit Arrearage. Thereafter, all
Available Cash shall be distributed as if it were Operating Surplus and shall be
distributed in accordance with Section 6.4.
SECTION 6.6 Adjustment of Minimum Quarterly Distribution and Target
Distribution Levels.
(a) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution, Common Unit Arrearages and Cumulative Common Unit
Arrearages shall be proportionately adjusted in the event of any distribution,
combination or subdivision (whether effected by a distribution payable in Units
or otherwise) of Units or other Partnership Securities in accordance with
Section 5.9. In the event of a distribution of Available Cash that is deemed to
be from Capital Surplus, the then applicable Minimum Quarterly Distribution,
First Target Distribution, and Second Target Distribution, shall be adjusted
proportionately downward to equal the product obtained by multiplying the
otherwise applicable Minimum Quarterly Distribution, First Target Distribution,
and Second Target Distribution, as the case may be, by a fraction of which the
numerator is the Unrecovered Initial Unit Price of the Common Units immediately
after giving effect to such distribution and of which the denominator is the
Unrecovered Initial Unit Price of the Common Units immediately prior to giving
effect to such distribution.
(b) The Minimum Quarterly Distribution, First Target Distribution, and
Second Target Distribution shall also be subject to adjustment pursuant to
Section 5.11 and Section 6.9.
SECTION 6.7 Special Provisions Relating to the Holders of Subordinated
Units and Class B Units.
(a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Subordinated Unit, although a separate class, shall have all of the rights and
obligations of a Unitholder holding Common Units hereunder; provided, however,
that immediately upon the conversion of Subordinated Units into Common Units
pursuant to Section 5.7, the Unitholder holding a Subordinated Unit shall
possess all of the rights and obligations of a Unitholder holding Common Units
hereunder, including the right to vote as a Common Unitholder and the right to
participate in allocations of income, gain, loss and deduction and distributions
made with respect to Common Units; provided, however, that such converted
Subordinated Units shall remain subject to the provisions of Section 5.5(c)(ii),
Section 6.1(d)(x)(A), Section 6.7(b) and Section 6.7(c).
(b) A Unitholder shall not be permitted to transfer a Subordinated Unit or
a Subordinated Unit that has converted into a Common Unit pursuant to Section
5.7 (other than a transfer to an Affiliate) if the remaining balance in the
transferring Unitholder's Capital Account with respect to the retained
Subordinated Units or Retained Converted Subordinated Units would be negative
after giving effect to the allocation under Section 5.5(c)(ii)(B).
(c) The Unitholder holding a Common Unit that has resulted from the
conversion of a Subordinated Unit pursuant to Section 5.7 shall not be issued a
Common Unit Certificate pursuant to Section 4.1, and shall not be permitted to
transfer such Common Units to a Person that is not an Affiliate of the holder
until such time as the General Partner determines, based on advice of counsel,
that each such Common Unit should have, as a substantive matter, like intrinsic
economic and federal income tax characteristics, in all material respects, to
the intrinsic economic and federal income tax characteristics of an Initial
Common Unit. In connection with the condition imposed by this Section 6.7(c),
the General Partner may take whatever steps are required to provide economic
uniformity to such Common Units in preparation for a transfer of such Common
Units, including the application of Section 5.5(c)(ii), Section 6.1(d)(x) and
Section 6.7(b); provided, however, that no such steps may be taken that would
have a material adverse effect on the Unitholders holding Common Units
represented by Common Unit Certificates.
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(d) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holders
of Class B Units shall have all the rights and obligations of a Unitholder
holding Common Units; provided, however, that immediately upon the conversion of
Class B Units into Common Units pursuant to Section 5.11, the Unitholders
holding a Class B Unit shall possess all the rights and obligations of a
Unitholder holding Common Units hereunder, including the right to vote as a
Common Unitholder and the right to participate in allocations of income, gain,
loss and deduction and distributions made with respect to Common Units;
provided, however, that such converted Class B Units shall remain subject to the
provisions of Section 6.1(d)(x)(B) and Section 6.7(e).
(e) The holder or holders of Common Units resulting from the conversion
pursuant to Section 5.11(f) of any Class B Units pursuant to Section 5.11 shall
not be issued a Common Unit Certificate pursuant to Section 4.1, and shall not
be permitted to transfer such Common Units until such time as the General
Partner determines, based on advice of counsel, that each such Common Unit
should have, as a substantive matter, like intrinsic economic and federal income
tax characteristics, in all material respects, to the intrinsic economic and
federal income tax characteristics of an Initial Common Unit. In connection with
the condition imposed by this Section 6.7(d), the General Partner may take
whatever steps are required to provide economic uniformity to such Common Units,
including the application of Section 6.1(d)(x)(B); provided, however, that no
such steps may be taken that would have a material adverse effect on the
Unitholders holding Common Units represented by Common Unit Certificates.
SECTION 6.8 Special Provisions Relating to the Holders of Incentive
Distribution Rights. Notwithstanding anything to the contrary set forth in this
Agreement, the holders of the Incentive Distribution Rights (a) shall (i)
possess the rights and obligations provided in this Agreement with respect to a
Limited Partner pursuant to Article III and Article VII and (ii) have a Capital
Account as a Partner pursuant to Section 5.5 and all other provisions related
thereto and (b) shall not (i) be entitled to vote on any matters requiring the
approval or vote of the holders of Outstanding Units, except as provided by law,
(ii) be entitled to any distributions other than as provided in Section
6.4(a)(v), Section 6.4(a)(vi), Section 6.4(b)(iii), Section 6.4(b)(iv), and
Section 12.4 or (iii) be allocated items of income, gain, loss or deduction
other than as specified in this Article VI.
SECTION 6.9 Entity-Level Taxation. If legislation is enacted or the
interpretation of existing language is modified by a governmental taxing
authority so that a Group Member is treated as an association taxable as a
corporation or is otherwise subject to an entity-level tax for federal, state or
local income tax purposes, then the General Partner shall estimate for each
Quarter the Partnership Group's aggregate liability (the "ESTIMATED INCREMENTAL
QUARTERLY TAX AMOUNT") for all such income taxes that are payable by reason of
any such new legislation or interpretation; provided that any difference between
such estimate and the actual tax liability for such Quarter that is owed by
reason of any such new legislation or interpretation shall be taken into account
in determining the Estimated Incremental Quarterly Tax Amount with respect to
each Quarter in which any such difference can be determined. For each such
Quarter, the Minimum Quarterly Distribution, First Target Distribution, and
Second Target Distribution, shall be the product obtained by multiplying (a) the
amounts therefor that are set out herein prior to the application of this
Section 6.9 times (b) the quotient obtained by dividing (i) Available Cash with
respect to such Quarter by (ii) the sum of Available Cash with respect to such
Quarter and the Estimated Incremental Quarterly Tax Amount for such Quarter, as
determined by the General Partner. For purposes of the foregoing, Available Cash
with respect to a Quarter will be deemed reduced by the Estimated Incremental
Quarterly Tax Amount for that Quarter.
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ARTICLE VII.
Management and Operation of Business
SECTION 7.1 Management.
(a) The General Partner shall conduct, direct and manage all activities of
the Partnership. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership shall be
exclusively vested in the General Partner, and no Limited Partner shall have any
management power over the business and affairs of the Partnership. In addition
to the powers now or hereafter granted a general partner of a limited
partnership under applicable law or that are granted to the General Partner
under any other provision of this Agreement, the General Partner, subject to
Section 7.3, shall have full power and authority to do all things and on such
terms as it determines to be necessary or appropriate to conduct the business of
the Partnership, to exercise all powers set forth in Section 2.5 and to
effectuate the purposes set forth in Section 2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of
money, the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of evidences of
indebtedness, including indebtedness that is convertible into Partnership
Securities, and the incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering
of periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership
or the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3 and Article
XIV);
(iv) the use of the assets of the Partnership (including cash on
hand) for any purpose consistent with the terms of this Agreement,
including the financing of the conduct of the operations of the
Partnership Group; subject to Section 7.6(a), the lending of funds to
other Persons (including other Group Members); the repayment or guarantee
of obligations of any Group Member; and the making of capital
contributions to any Group Member;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including instruments that limit the
liability of the Partnership under contractual arrangements to all or
particular assets of the Partnership, with the other party to the contract
to have no recourse against the General Partner or its assets other than
its interest in the Partnership, even if same results in the terms of the
transaction being less favorable to the Partnership than would otherwise
be the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring;
(viii) the maintenance of insurance for the benefit of the
Partnership Group, the Partners and Indemnitees;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited
or general partnerships, joint ventures, corporations, limited liability
companies or other relationships (including the acquisition of interests
in, and the contributions of property to, any Group Member from time to
time) subject to the restrictions set forth in Section 2.4;
(x) the control of any matters affecting the rights and obligations
of the Partnership, including the bringing and defending of actions at law
or in equity and otherwise engaging in the conduct of litigation,
arbitration or mediation and the incurring of legal expense and the
settlement of claims and litigation;
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(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xii) the entering into of listing agreements with any National
Securities Exchange and the delisting of some or all of the Limited
Partner Interests from, or requesting that trading be suspended on, any
such exchange (subject to any prior approval that may be required under
Section 4.8);
(xiii) the purchase, sale or other acquisition or disposition of
Partnership Securities, or the issuance of options, rights, warrants and
appreciation rights relating to Partnership Securities;
(xiv) the undertaking of any action in connection with the
Partnership's participation in any Group Member; and
(xv) the entering into of agreements with any of its Affiliates to
render services to a Group Member or to itself in the discharge of its
duties as General Partner of the Partnership.
(b) Notwithstanding any other provision of this Agreement, any Group
Member Agreement, the Delaware Act or any applicable law, rule or regulation,
each of the Partners and the Assignees and each other Person who may acquire an
interest in Partnership Securities hereby (i) approves, ratifies and confirms
the execution, delivery and performance by the parties thereto of this Agreement
and the Group Member Agreement of each other Group Member, the Underwriting
Agreement, the Omnibus Agreement, the Operating Agreement, any Group Member
Agreement and the other agreements described in or filed as exhibits to the
Registration Statement that are related to the transactions contemplated by the
Registration Statement; (ii) agrees that the General Partner (on its own or
through any officer of the Partnership) is authorized to execute, deliver and
perform the agreements referred to in clause (i) of this sentence and the other
agreements, acts, transactions and matters described in or contemplated by the
Registration Statement on behalf of the Partnership without any further act,
approval or vote of the Partners or the Assignees or the other Persons who may
acquire an interest in Partnership Securities; and (iii) agrees that the
execution, delivery or performance by the General Partner, any Group Member or
any Affiliate of any of them of this Agreement or any agreement authorized or
permitted under this Agreement (including the exercise by the General Partner or
any Affiliate of the General Partner of the rights accorded pursuant to Article
XV) shall not constitute a breach by the General Partner of any duty that the
General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement (or any other agreements) or of any duty stated or
implied by law or equity.
SECTION 7.2 Certificate of Limited Partnership. The General Partner has
caused the Certificate of Limited Partnership to be filed with the Secretary of
State of the State of Delaware as required by the Delaware Act. The General
Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents that the General Partner determines to be necessary or
appropriate for the formation, continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware or any other state in which the Partnership
may elect to do business or own property. To the extent the General Partner
determines such action to be necessary or appropriate, the General Partner shall
file amendments to and restatements of the Certificate of Limited Partnership
and do all things to maintain the Partnership as a limited partnership (or a
partnership or other entity in which the limited partners have limited
liability) under the laws of the State of Delaware or of any other state in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 3.4(a), the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate of Limited
Partnership, any qualification document or any amendment thereto to any Limited
Partner.
SECTION 7.3 Restrictions on the General Partner's Authority. Except as
provided in Article XII and Article XIV, the General Partner may not sell,
exchange or otherwise dispose of all or substantially all of the assets of the
Partnership Group, taken as a whole, in a single transaction or a series of
related transactions (including by way of merger, consolidation, other
combination or sale of ownership interests of the Partnership's Subsidiaries)
without the approval of holders of a Unit Majority; provided, however, that this
provision shall not preclude or limit the General Partner's ability to mortgage,
pledge, hypothecate or grant a security interest in all or substantially all of
the assets of the Partnership Group and shall not apply to any
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forced sale of any or all of the assets of the Partnership Group pursuant to the
foreclosure of, or other realization upon, any such encumbrance. Without the
approval of holders of a Unit Majority, the General Partner shall not, on behalf
of the Partnership, except as permitted under Section 4.6, Section 11.1 and
Section 11.2, elect or cause the Partnership to elect a successor general
partner of the Partnership.
SECTION 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement, the General Partner shall not be compensated for its services as a
general partner or managing member of any Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or such
other basis as the General Partner may determine, for (i) all direct and
indirect expenses it incurs or payments it makes on behalf of the Partnership
Group (including salary, bonus, incentive compensation and other amounts paid to
any Person, including Affiliates of the General Partner to perform services for
the Partnership Group or for the General Partner in the discharge of its duties
to the Partnership Group which amounts shall also include reimbursement for any
Partnership Securities purchased to satisfy obligations of the Partnership under
any equity compensation plans), and (ii) all other expenses allocable to the
Partnership Group or otherwise incurred by the General Partner in connection
with operating the Partnership Group's business (including expenses allocated to
the General Partner by its Affiliates). The General Partner shall determine the
expenses that are allocable to the Partnership Group. Reimbursements pursuant to
this Section 7.4 shall be in addition to any reimbursement to the General
Partner as a result of indemnification pursuant to Section 7.7.
(c) The General Partner and its Affiliates may charge any member of the
Partnership Group a management fee to the extent necessary to allow the
Partnership Group to reduce the amount of any state franchise or income tax or
any tax based upon the revenues or gross margin of any member of the Partnership
Group if the tax benefit produced by the payment of such management fee or fees
exceeds the amount of such fee or fees.
(d) The General Partner, without the approval of the Limited Partners (who
shall have no right to vote in respect thereof), may propose and adopt on behalf
of the Partnership employee benefit plans, employee programs and employee
practices (including plans, programs and practices involving the issuance of
Partnership Securities or options to purchase or rights, warrants or
appreciation rights relating to Partnership Securities), or cause the
Partnership to issue Partnership Securities in connection with, or pursuant to,
any employee benefit plan, employee program or employee practice maintained or
sponsored by the General Partner, Group Member or any Affiliates in each case
for the benefit of employees of the General Partner, any Group Member or any
Affiliate, in respect of services performed, directly or indirectly, for the
benefit of the Partnership Group. The Partnership agrees to issue and sell to
the General Partner or any of its Affiliates any Partnership Securities that the
General Partner or such Affiliates are obligated to provide to any employees
pursuant to any such employee benefit plans, employee programs or employee
practices. Expenses incurred by the General Partner in connection with any such
plans, programs and practices (including the net cost to the General Partner or
such Affiliates of Partnership Securities purchased by the General Partner or
such Affiliates from the Partnership to fulfill options or awards under such
plans, programs and practices) shall be reimbursed in accordance with Section
7.4(b). Any and all obligations of the General Partner under any employee
benefit plans, employee programs or employee practices adopted by the General
Partner as permitted by this Section 7.4(c) shall constitute obligations of the
General Partner hereunder and shall be assumed by any successor General Partner
approved pursuant to Section 11.1 or Section 11.2 or the transferee of or
successor to all of the General Partner's General Partner Interest pursuant to
Section 4.6.
SECTION 7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so long as it is the
General Partner of the Partnership (i) agrees that its sole business will be to
act as a general partner or managing member, as the case may be, of the
Partnership and any other partnership or limited liability company of which the
Partnership is, directly or indirectly, a partner or member and to undertake
activities that are ancillary or related thereto (including being a limited
partner in the Partnership) and (ii) shall not engage in any business or
activity or incur any debts or liabilities except in connection with or
incidental to (A) its performance as general partner or managing
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member, if any, of one or more Group Members or as described in or contemplated
by the Registration Statement or (B) the acquiring, owning or disposing of debt
or equity securities in any Group Member.
(b) Each Indemnitee (other than the General Partner) shall have the right
to engage in businesses of every type and description and other activities for
profit and to engage in and possess an interest in other business ventures of
any and every type or description, whether in businesses engaged in or
anticipated to be engaged in by any Group Member, independently or with others,
including business interests and activities in direct competition with the
business and activities of any Group Member, and none of the same shall
constitute a breach of this Agreement or any duty expressed or implied by law to
any Group Member or any Partner or Assignee. None of any Group Member, any
Limited Partner or any other Person shall have any rights by virtue of this
Agreement, any Group Member Agreement, or the partnership relationship
established hereby in any business ventures of any Indemnitee.
(c) Notwithstanding anything to the contrary in this Agreement, (i) the
engaging in competitive activities by any Indemnitees (other than the General
Partner) is hereby approved by the Partnership and all Partners, (ii) it shall
be deemed not to be a breach of any fiduciary duty or any other obligation of
any type whatsoever of any Indemnitee for the Indemnitees (other than the
General Partner) to engage in such business interests and activities in
preference to or to the exclusion of the Partnership and (iii) the Indemnitees
shall have no obligation hereunder or as a result of any duty expressed or
implied by law to present business opportunities to the Partnership.
Notwithstanding anything to the contrary in this Agreement, the doctrine of
corporate opportunity, or any analogous doctrine, shall not apply to any
Indemnitee (including the General Partner). No Indemnitee (including the General
Partner) who acquires knowledge of a potential transaction, agreement,
arrangement or other matter that may be an opportunity for the Partnership,
shall have any duty to communicate or offer such opportunity to the Partnership,
and such Indemnitee (including the General Partner) shall not be liable to the
Partnership, to any Limited Partner or any other Person for breach of any
fiduciary or other duty by reason of the fact that such Indemnitee (including
the General Partner) pursues or acquires for itself, directs such opportunity to
another Person or does not communicate such opportunity or information to the
Partnership.
(d) The General Partner and each of its Affiliates may acquire Units or
other Partnership Securities in addition to those acquired on the Closing Date
and, except as otherwise provided in this Agreement, shall be entitled to
exercise, at their option, all rights relating to all Units or other Partnership
Securities acquired by them. The term "Affiliates" when used in this Section
7.5(d) with respect to the General Partner shall not include any Group Member.
(e) The Partners (and the General Partner on behalf of the Partnership)
hereby:
(1) agree that (A) the terms of this section, to the extent that
they modify or limit a duty, if any, that a Partner may have to the
Partnership or another Partner, are reasonable in form, scope and content;
and (B) the terms of this section shall control to the fullest extent
possible if it is in conflict with a duty, if any, that a Partner may have
to the Partnership or another Partner, the Act or any other applicable
law, rule or regulation; and
(2) waive a duty, if any, that a Partner may have to the Partnership
or another Partner, under the Act or any other applicable law, rule or
regulation to the extent necessary to give effect to the terms of this
section;
it being expressly acknowledged and affirmed by the Partners (and the General
Partner on behalf of the Partnership) that the execution and delivery of this
Agreement by the Partners are of material benefit to the Partnership and the
Partners and that the Partners would not be willing to execute and deliver this
Agreement without the benefit of this section.
SECTION 7.6 Loans from the General Partner; Loans or Contributions from
the Partnership or Group Members.
(a) The General Partner or any of its Affiliates may lend to any Group
Member, and any Group Member may borrow from the General Partner or any of its
Affiliates, funds needed or desired by the Group Member
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for such periods of time and in such amounts as the General Partner may
determine; provided, however, that in any such case the lending party may not
charge the borrowing party interest at a rate greater than the rate that would
be charged the borrowing party or impose terms less favorable to the borrowing
party than would be charged or imposed on the borrowing party by unrelated
lenders on comparable loans made on an arm's-length basis (without reference to
the lending party's financial abilities or guarantees), all as determined by the
General Partner. The borrowing party shall reimburse the lending party for any
costs (other than any additional interest costs) incurred by the lending party
in connection with the borrowing of such funds. For purposes of this Section
7.6(a) and Section 7.6(b), the term "Group Member" shall include any Affiliate
of a Group Member that is controlled by the Group Member.
(b) The Partnership may lend or contribute to any Group Member, and any
Group Member may borrow from the Partnership, funds on terms and conditions
determined by the General Partner. No Group Member may lend funds to the General
Partner or any of its Affiliates (other than another Group Member).
(c) No borrowing by any Group Member or the approval thereof by the
General Partner shall be deemed to constitute a breach of any duty, expressed or
implied, of the General Partner or its Affiliates to the Partnership or the
Limited Partners by reason of the fact that the purpose or effect of such
borrowing is directly or indirectly to (i) enable distributions to the General
Partner or its Affiliates (including in their capacities as Limited Partners) to
exceed the General Partner's Percentage Interest of the total amount distributed
to all partners or (ii) hasten the expiration of the Subordination Period or the
conversion of any Subordinated Units into Common Units.
SECTION 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the limitations
expressly provided in this Agreement, all Indemnitees shall be indemnified and
held harmless by the Partnership from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including legal fees and
expenses), judgments, fines, penalties, interest, settlements or other amounts
arising from any and all claims, demands, actions, suits or proceedings, whether
civil, criminal, administrative or investigative, in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, by reason of
its status as an Indemnitee; provided, that the Indemnitee shall not be
indemnified and held harmless if there has been a final and non-appealable
judgment entered by a court of competent jurisdiction determining that, in
respect of the matter for which the Indemnitee is seeking indemnification
pursuant to this Section 7.7, the Indemnitee acted in bad faith or engaged in
fraud, willful misconduct or, in the case of a criminal matter, acted with
knowledge that the Indemnitee's conduct was unlawful; provided, further, no
indemnification pursuant to this Section 7.7 shall be available to the General
Partner or its Affiliates (other than a Group Member) with respect to its or
their obligations incurred pursuant to the Underwriting Agreement, the Omnibus
Agreement, or the Operating Agreement (other than obligations incurred by the
General Partner on behalf of the Partnership). Any indemnification pursuant to
this Section 7.7 shall be made only out of the assets of the Partnership, it
being agreed that the General Partner shall not be personally liable for such
indemnification and shall have no obligation to contribute or loan any monies or
property to the Partnership to enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal fees
and expenses) incurred by an Indemnitee who is indemnified pursuant to Section
7.7(a) in defending any claim, demand, action, suit or proceeding shall, from
time to time, be advanced by the Partnership prior to a determination that the
Indemnitee is not entitled to be indemnified upon receipt by the Partnership of
any undertaking by or on behalf of the Indemnitee to repay such amount if it
shall be determined that the Indemnitee is not entitled to be indemnified as
authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in addition
to any other rights to which an Indemnitee may be entitled under any agreement,
pursuant to any vote of the holders of Outstanding Limited Partner Interests, as
a matter of law or otherwise, both as to actions in the Indemnitee's capacity as
an Indemnitee and as to actions in any other capacity (including any capacity
under the Underwriting Agreement), and shall continue as to an Indemnitee who
has ceased to serve in such capacity and shall inure to the benefit of the
heirs, successors, assigns and administrators of the Indemnitee.
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(d) The Partnership may purchase and maintain (or reimburse the General
Partner or its Affiliates for the cost of) insurance, on behalf of the General
Partner, its Affiliates and such other Persons as the General Partner shall
determine, against any liability that may be asserted against, or expense that
may be incurred by, such Person in connection with the Partnership's activities
or such Person's activities on behalf of the Partnership, regardless of whether
the Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute "fines"
within the meaning of Section 7.7(a); and action taken or omitted by it with
respect to any employee benefit plan in the performance of its duties for a
purpose reasonably believed by it to be in the best interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose that is in the
best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 7.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
SECTION 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this Agreement,
no Indemnitee shall be liable for monetary damages to the Partnership, the
Limited Partners, or any other Persons who have acquired interests in the
Partnership Securities, for losses sustained or liabilities incurred as a result
of any act or omission of an Indemnitee unless there has been a final and
non-appealable judgment entered by a court of competent jurisdiction determining
that, in respect of the matter in question, the Indemnitee acted in bad faith or
engaged in fraud, willful misconduct or, in the case of a criminal matter, acted
with knowledge that the Indemnitee's conduct was criminal.
(b) Subject to its obligations and duties as General Partner set forth in
Section 7.1(a), the General Partner may exercise any of the powers granted to it
by this Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and the General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or to the Partners, the General Partner and any other Indemnitee acting in
connection with the Partnership's business or affairs shall not be liable to the
Partnership or to any Partner for its good faith reliance on the provisions of
this Agreement.
(d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability of the Indemnitees under this Section 7.8 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or relating to matters occurring, in whole or in part,
prior to such amendment, modification or repeal, regardless of when such claims
may arise or be asserted.
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SECTION 7.9 Resolution of Conflicts of Interest; Standards of Conduct and
Modification of Duties.
(a) Unless otherwise expressly provided in this Agreement or any Group
Member Agreement, whenever a potential conflict of interest exists or arises
between the General Partner or any of its Affiliates or an Indemnitee, on the
one hand, and the Partnership, any Group Member or any Partner, on the other,
any resolution or course of action by the General Partner or its Affiliates or
an Indemnitee in respect of such conflict of interest shall be permitted and
deemed approved by all Partners, and shall not constitute a breach of this
Agreement, of any Group Member Agreement, of any agreement contemplated herein
or therein, or of any duty stated or implied by law or equity, if the resolution
or course of action in respect of such conflict of interest is (i) approved by
Special Approval, (ii) approved by the vote of a majority of the Common Units
(excluding Common Units owned by the General Partner and its Affiliates), (iii)
on terms no less favorable to the Partnership than those generally being
provided to or available from unrelated third parties or (iv) fair and
reasonable to the Partnership, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership). The General
Partner shall be authorized but not required in connection with its resolution
of such conflict of interest to seek Special Approval of such resolution, and
the General Partner may also adopt a resolution or course of action that has not
received Special Approval. If Special Approval is not sought and the Board of
Directors determines that the resolution or course of action taken with respect
to a conflict of interest satisfies either of the standards set forth in clauses
(iii) or (iv) above, then it shall be presumed that, in making its decision, the
Board of Directors acted in good faith, and in any proceeding brought by any
Limited Partner or by or on behalf of such Limited Partner or any other Limited
Partner or the Partnership challenging such approval, the Person bringing or
prosecuting such proceeding shall have the burden of overcoming such
presumption. Notwithstanding anything to the contrary in this Agreement or any
duty otherwise existing at law or equity, the existence of the conflicts of
interest described in the Registration Statement are hereby approved by all
Partners and shall not constitute a breach of this Agreement.
(b) Whenever the General Partner makes a determination or takes or
declines to take any other action, or any of its Affiliates causes it to do so,
in its capacity as the general partner of the Partnership as opposed to in its
individual capacity, whether under this Agreement, any Group Member Agreement or
any other agreement contemplated hereby or otherwise, then, unless another
express standard is provided for in this Agreement, the General Partner, or such
Affiliates causing it to do so, shall make such determination or take or decline
to take such other action in good faith and shall not be subject to any other or
different standards imposed by this Agreement, any Group Member Agreement, any
other agreement contemplated hereby or under the Delaware Act or any other law,
rule or regulation or at equity. In order for a determination or other action to
be in "good faith" for purposes of this Agreement, the Person or Persons making
such determination or taking or declining to take such other action must believe
that the determination or other action is in the best interests of the
Partnership.
(c) Whenever the General Partner makes a determination or takes or
declines to take any other action, or any of its Affiliates causes it to do so,
in its individual capacity as opposed to in its capacity as the general partner
of the Partnership, whether under this Agreement, any Group Member Agreement or
any other agreement contemplated hereby or otherwise, then the General Partner,
or such Affiliates causing it to do so, are entitled to make such determination
or to take or decline to take such other action free of any fiduciary duty or
obligation whatsoever to the Partnership, any Limited Partner, and the General
Partner, or such Affiliates causing it to do so, shall not be required to act in
good faith or pursuant to any other standard imposed by this Agreement, any
Group Member Agreement, any other agreement contemplated hereby or under the
Delaware Act or any other law, rule or regulation or at equity. By way of
illustration and not of limitation, whenever the phrase, "at the option of the
General Partner," or some variation of that phrase, is used in this Agreement,
it indicates that the General Partner is acting in its individual capacity. For
the avoidance of doubt, whenever the General Partner votes or transfers its
Partnership Interests, or refrains from voting or transferring its Partnership
Interests, it shall be acting in its individual capacity. The General Partner's
organizational documents may provide that determinations to take or decline to
take any action in its individual, rather than representative, capacity may or
shall be determined by its members, if the General Partner is a limited
liability company, stockholders, if the General Partner is a corporation, or the
members or stockholders of the General Partner's general partner, if the General
Partner is a limited partnership.
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(d) Notwithstanding anything to the contrary in this Agreement, the
General Partner and its Affiliates shall have no duty or obligation, express or
implied, to (i) sell or otherwise dispose of any asset of the Partnership Group
other than in the ordinary course of business or (ii) permit any Group Member to
use any facilities or assets of the General Partner and its Affiliates or any
Indemnitee, except as may be provided in contracts entered into from time to
time specifically dealing with such use. Any determination by the General
Partner or any of its Affiliates or any Indemnitee to enter into such contracts
shall be at its option.
(e) Except as expressly set forth in this Agreement, neither the General
Partner nor any other Indemnitee shall have any duties or liabilities, including
fiduciary duties, to the Partnership or any Limited Partner and the provisions
of this Agreement, to the extent that they restrict, eliminate or otherwise
modify the duties and liabilities, including fiduciary duties, of the General
Partner or any other Indemnitee otherwise existing at law or in equity, are
agreed by the Partners to replace such other duties and liabilities of the
General Partner or such other Indemnitee.
(f) The Unitholders hereby authorize the General Partner, on behalf of the
Partnership as a partner or member of a Group Member, to approve of actions by
the general partner or managing member of such Group Member similar to those
actions permitted to be taken by the General Partner pursuant to this Section
7.9.
SECTION 7.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that the General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
officers of the Partnership.
SECTION 7.11 Purchase or Sale of Partnership Securities. The General
Partner may cause the Partnership to purchase or otherwise acquire Partnership
Securities; provided that, except as permitted pursuant to Section 4.10, the
General Partner may not cause any Group Member to purchase Subordinated Units
during the Subordination Period. Such Partnership Securities shall be held by
the Partnership as treasury securities unless they are expressly cancelled by
action of an appropriate officer of the General Partner. As long as Partnership
Securities are held by any Group Member, such Partnership Securities shall not
be considered Outstanding for any purpose, except as otherwise provided herein.
The General Partner or any Affiliate of the General Partner may also purchase or
otherwise acquire and sell or otherwise dispose of Partnership Securities for
its own account, subject to the provisions of Articles IV and X.
SECTION 7.12 Registration Rights of the General Partner and its Affiliates
and the EnCap Partnerships.
(a) If (i) the General Partner EVOC, CGas, EV Investors or the EnCap
Partnerships, or any Affiliate of, or owner of an equity interest in, such
person (including for purposes of this Section 7.12, any Person that is an
Affiliate of or owner of an equity interest in, such person at the date hereof
notwithstanding that it may later cease to be an Affiliate of the General
Partner) holds Partnership Securities that it desires to sell and (ii) Rule 144
of the Securities Act (or any successor rule or regulation to Rule 144) or
another exemption from registration is not available to enable such holder of
Partnership Securities (the "Holder") to dispose of the number of Partnership
Securities it desires to sell at the time it desires to do so without
registration under the Securities Act, then at the option and upon the request
of the Holder, the Partnership shall file with the Commission as promptly as
practicable after receiving such request, and use all commercially reasonable
efforts to cause to become effective and remain effective for a period of not
less than six months following its
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effective date or such shorter period as shall terminate when all Partnership
Securities covered by such registration statement have been sold, a registration
statement under the Securities Act registering the offering and sale of the
number of Partnership Securities specified by the Holder; provided, however,
that if the Conflicts Committee determines in good faith that the requested
registration would be materially detrimental to the Partnership and its Partners
because such registration would (x) materially interfere with a significant
acquisition, reorganization or other similar transaction involving the
Partnership, (y) require premature disclosure of material information that the
Partnership has a bona fide business purpose for preserving as confidential or
(z) render the Partnership unable to comply with requirements under applicable
securities laws, then the Partnership shall have the right to postpone such
requested registration for a period of not more than six months after receipt of
the Holder's request, such right pursuant to this Section 7.12(a) or Section
7.12(b) not to be utilized more than once in any twelve-month period. Except as
provided in the preceding sentence, the Partnership shall be deemed not to have
used all commercially reasonable efforts to keep the registration statement
effective during the applicable period if it voluntarily takes any action that
would result in Holders of Partnership Securities covered thereby not being able
to offer and sell such Partnership Securities at any time during such period,
unless such action is required by applicable law. In connection with any
registration pursuant to the first sentence of this Section 7.12(a), the
Partnership shall (i) promptly prepare and file (A) such documents as may be
necessary to register or qualify the securities subject to such registration
under the securities laws of such states as the Holder shall reasonably request;
provided, however, that no such qualification shall be required in any
jurisdiction where, as a result thereof, the Partnership would become subject to
general service of process or to taxation or qualification to do business as a
foreign corporation or partnership doing business in such jurisdiction solely as
a result of such registration, and (B) such documents as may be necessary to
apply for listing or to list the Partnership Securities subject to such
registration on such National Securities Exchange as the Holder shall reasonably
request, and (ii) do any and all other acts and things that may be necessary or
appropriate to enable the Holder to consummate a public sale of such Partnership
Securities in such states. Except as set forth in Section 7.12(d), all costs and
expenses of any such registration and offering (other than the underwriting
discounts and commissions) shall be paid by the Partnership, without
reimbursement by the Holder.
(b) If any Holder holds Partnership Securities that it desires to sell and
Rule 144 of the Securities Act (or any successor rule or regulation to Rule 144)
or another exemption from registration is not available to enable such Holder to
dispose of the number of Partnership Securities it desires to sell at the time
it desires to do so without registration under the Securities Act, then at the
option and upon the request of the Holder, the Partnership shall file with the
Commission as promptly as practicable after receiving such request, and use all
reasonable efforts to cause to become effective and remain effective for a
period of not less than six months following its effective date or such shorter
period as shall terminate when all Partnership Securities covered by such shelf
registration statement have been sold, a "shelf" registration statement covering
the Partnership Securities specified by the Holder on an appropriate form under
Rule 415 under the Securities Act, or any similar rule that may be adopted by
the Commission; provided, however, that if the Conflicts Committee determines in
good faith that any offering under, or the use of any prospectus forming a part
of, the shelf registration statement would be materially detrimental to the
Partnership and its Partners because such offering or use would (x) materially
interfere with a significant acquisition, reorganization or other similar
transaction involving the Partnership, (y) require premature disclosure of
material information that the Partnership has a bona fide business purpose for
preserving as confidential or (z) render the Partnership unable to comply with
requirements under applicable securities laws, then the Partnership shall have
the right to suspend such offering or use for a period of not more than six
months, if it is a registration statement which does not update automatically,
after receipt of the Holder's request, such right pursuant to Section 7.12(a) or
this Section 7.12(b) not to be utilized more than once in any twelve-month
period. Except as provided in the preceding sentence, the Partnership shall be
deemed not to have used all reasonable efforts to keep the shelf registration
statement effective during the applicable period if it voluntarily takes any
action that would result in Holders of Partnership Securities covered thereby
not being able to offer and sell such Partnership Securities at any time during
such period, unless such action is required by applicable law. In connection
with any shelf registration pursuant to this Section 7.12(b), the Partnership
shall (i) promptly prepare and file (A) such documents as may be necessary to
register or qualify the securities subject to such shelf registration
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under the securities laws of such states as the Holder shall reasonably request;
provided, however, that no such qualification shall be required in any
jurisdiction where, as a result thereof, the Partnership would become subject to
general service of process or to taxation or qualification to do business as a
foreign corporation or partnership doing business in such jurisdiction solely as
a result of such shelf registration, and (B) such documents as may be necessary
to apply for listing or to list the Partnership Securities subject to such shelf
registration on such National Securities Exchange as the Holder shall reasonably
request, and (ii) do any and all other acts and things that may be necessary or
appropriate to enable the Holder to consummate a public sale of such Partnership
Securities in such states. Except as set forth in Section 7.12(d), all costs and
expenses of any such shelf registration and offering (other than the
underwriting discounts and commissions) shall be paid by the Partnership,
without reimbursement by the Holder.
(c) If the Partnership shall at any time propose to file a registration
statement under the Securities Act for an offering of equity securities of the
Partnership for cash (other than an offering relating solely to an employee
benefit plan), the Partnership shall use all reasonable efforts to include such
number or amount of securities held by the Holder in such registration statement
as the Holder shall request; provided, that the Partnership is not required to
make any effort or take any action to so include the securities of the Holder
once the registration statement is declared effective by the Commission or
otherwise becomes effective, including any registration statement providing for
the offering from time to time of securities pursuant to Rule 415 of the
Securities Act. If the proposed offering pursuant to this Section 7.12(c) shall
be an underwritten offering, then, in the event that the managing underwriter or
managing underwriters of such offering advise the Partnership and the Holder in
writing that in their opinion the inclusion of all or some of the Holder's
Partnership Securities would adversely and materially affect the success of the
offering, the Partnership shall include in such offering only that number or
amount, if any, of securities held by the Holder that, in the opinion of the
managing underwriter or managing underwriters, will not so adversely and
materially affect the offering. Except as set forth in Section 7.12(d), all
costs and expenses of any such registration and offering (other than the
underwriting discounts and commissions) shall be paid by the Partnership,
without reimbursement by the Holder.
(d) If underwriters are engaged in connection with any registration
referred to in this Section 7.12, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of the Partnership's obligation under Section
7.7, the Partnership shall, to the fullest extent permitted by law, indemnify
and hold harmless the Holder, its officers, directors and each Person who
controls the Holder (within the meaning of the Securities Act) and any agent
thereof (collectively, "INDEMNIFIED PERSONS") from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnified Person may be involved, or is threatened to be involved, as a
party or otherwise, under the Securities Act or otherwise (hereinafter referred
to in this Section 7.12(d) as a "CLAIM" and in the plural as "CLAIMS") based
upon, arising out of or resulting from any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which any Partnership Securities were registered under the Securities Act or any
state securities or Blue Sky laws, in any preliminary prospectus (if used prior
to the effective date of such registration statement), or in any summary or
final prospectus or in any amendment or supplement thereto (if used during the
period the Partnership is required to keep the registration statement current),
or arising out of, based upon or resulting from the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements made therein not misleading; provided, however, that the
Partnership shall not be liable to any Indemnified Person to the extent that any
such claim arises out of, is based upon or results from an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, such preliminary, summary or final prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Partnership by or on behalf of such Indemnified
Person specifically for use in the preparation thereof.
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(e) The provisions of Section 7.12(a), Section 7.12(b) and Section 7.12(c)
shall continue to be applicable with respect to the General Partner (and any of
the General Partner's Affiliates), after it ceases to be a general partner of
the Partnership and the EnCap Partnerships, during a period of two years
subsequent to the effective date of such cessation and for so long thereafter as
is required for the Holder to sell all of the Partnership Securities with
respect to which it has requested during such two-year period inclusion in a
registration statement otherwise filed or that a registration statement be
filed; provided, however, that the Partnership shall not be required to file
successive registration statements covering the same Partnership Securities for
which registration was demanded during such two-year period. The provisions of
Section 7.12(d) shall continue in effect thereafter.
(f) The rights to cause the Partnership to register Partnership Securities
pursuant to this Section 7.12 may be assigned (but only with all related
obligations) by a Holder to a transferee or assignee of such Partnership
Securities, provided (i) the Partnership is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the Partnership Securities with respect to which such
registration rights are being assigned; and (ii) such transferee or assignee
agrees in writing to be bound by and subject to the terms set forth in this
Section 7.12.
(g) Any request to register Partnership Securities pursuant to this
Section 7.12 shall (i) specify the Partnership Securities intended to be offered
and sold by the Person making the request, (ii) express such Person's present
intent to offer such Partnership Securities for distribution, (iii) describe the
nature or method of the proposed offer and sale of Partnership Securities, and
(iv) contain the undertaking of such Person to provide all such information and
materials and take all action as may be required in order to permit the
Partnership to comply with all applicable requirements in connection with the
registration of such Partnership Securities.
SECTION 7.13 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner and any officer of the General
Partner authorized by the General Partner to act on behalf of and in the name of
the Partnership has full power and authority to encumber, sell or otherwise use
in any manner any and all assets of the Partnership and to enter into any
authorized contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner or any such officer as if it were the
Partnership's sole party in interest, both legally and beneficially. Each
Limited Partner hereby waives any and all defenses or other remedies that may be
available against such Person to contest, negate or disaffirm any action of the
General Partner or any such officer in connection with any such dealing. In no
event shall any Person dealing with the General Partner or any such officer or
its representatives be obligated to ascertain that the terms of this Agreement
have been complied with or to inquire into the necessity or expedience of any
act or action of the General Partner or any such officer or its representatives.
Each and every certificate, document or other instrument executed on behalf of
the Partnership by the General Partner or its representatives shall be
conclusive evidence in favor of any and every Person relying thereon or claiming
thereunder that (a) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (b) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Partnership and (c) such certificate, document or instrument was duly executed
and delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
ARTICLE VIII.
Books, Records, Accounting and Reports
SECTION 8.1 Records and Accounting. The General Partner shall keep or
cause to be kept at the principal office of the Partnership appropriate books
and records with respect to the Partnership's business, including all books and
records necessary to provide to the Limited Partners any information required to
be provided pursuant to Section 3.4(a). Any books and records maintained by or
on behalf of the Partnership in the regular course of its business, including
the record of the Record Holders of Units or other Partnership Securities, books
of account and records of Partnership proceedings, may be kept on, or be in the
form of,
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computer disks, hard drives, punch cards, magnetic tape, photographs,
micrographics or any other information storage device; provided, that the books
and records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial reporting purposes, on an accrual basis in accordance
with U.S. GAAP.
SECTION 8.2 Fiscal Year. The fiscal year of the Partnership shall be a
fiscal year ending December 31.
SECTION 8.3 Reports.
(a) As soon as practicable, but in no event later than 120 days after the
close of each fiscal year of the Partnership, the General Partner shall use its
best efforts to cause to be mailed or made available, by any reasonable means
(including posting on or accessible through the Partnership's website) to each
Record Holder of a Unit as of a date selected by the General Partner, an annual
report containing financial statements of the Partnership for such fiscal year
of the Partnership, presented in accordance with U.S. GAAP, including a balance
sheet and statements of operations, Partnership equity and cash flows, such
statements to be audited by a firm of independent public accountants selected by
the General Partner.
(b) As soon as practicable, but in no event later than 90 days after the
close of each Quarter except the last Quarter of each fiscal year, the General
Partner shall use its best efforts to cause to be mailed or made available, by
any reasonable means (including posting on or accessible through the
Partnership's website) to each Record Holder of a Unit, as of a date selected by
the General Partner, a report containing unaudited financial statements of the
Partnership and such other information as may be required by applicable law,
regulation or rule of any National Securities Exchange on which the Units are
listed or admitted to trading, or as the General Partner determines to be
necessary or appropriate.
ARTICLE IX.
Tax Matters
SECTION 9.1 Tax Returns and Information. The Partnership shall timely file
all returns of the Partnership that are required for federal, state and local
income tax purposes on the basis of the accrual method and the taxable year or
years that it is required by law to adopt, from time to time, as determined by
the General Partner. In the event the Partnership is required to use a taxable
year other than a year ending on December 31, the General Partner shall use
reasonable efforts to change the taxable year of the Partnership to a year
ending on December 31. The tax information reasonably required by Record Holders
for federal and state income tax reporting purposes with respect to a taxable
year shall be furnished to them within 90 days of the close of the calendar year
in which the Partnership's taxable year ends. The classification, realization
and recognition of income, gain, losses and deductions and other items shall be
on the accrual method of accounting for federal income tax purposes.
SECTION 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the General Partner's
determination that such revocation is in the best interests of the Limited
Partners. Notwithstanding any other provision herein contained, for the purposes
of computing the adjustments under Section 743(b) of the Code, the General
Partner shall be authorized (but not required) to adopt a convention whereby the
price paid by a transferee of a Limited Partner Interest will be deemed to be
the lowest quoted closing price of the Limited Partner Interests on any National
Securities Exchange on which such Limited Partner Interests are listed or
admitted to trading during the calendar month in which such transfer is deemed
to occur pursuant to Section 6.2(g) without regard to the actual price paid by
such transferee.
(b) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
SECTION 9.3 Tax Controversies. Subject to the provisions hereof, the
General Partner is designated as the Tax Matters Partner (as defined in the
Code) and is authorized and required to represent the Partnership (at
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the Partnership's expense) in connection with all examinations of the
Partnership's affairs by tax authorities, including resulting administrative and
judicial proceedings, and to expend Partnership funds for professional services
and costs associated therewith. Each Partner agrees to cooperate with the
General Partner and to do or refrain from doing any or all things reasonably
required by the General Partner to conduct such proceedings.
SECTION 9.4 Withholding. Notwithstanding any other provision of this
Agreement, the General Partner is authorized to take any action that may be
required to cause the Partnership and other Group Members to comply with any
withholding requirements established under the Code or any other federal, state
or local law including pursuant to Sections 1441, 1442, 1445 and 1446 of the
Code. To the extent that the Partnership is required or elects to withhold and
pay over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or Assignee (including by reason of
Section 1446 of the Code), the General Partner may treat the amount withheld as
a distribution of cash pursuant to Section 6.3 in the amount of such withholding
from such Partner.
ARTICLE X.
Admission of Partners
SECTION 10.1 Admission of Limited Partners.
(a) By acceptance of the transfer of any Limited Partner Interests in
accordance with Article IV or the acceptance of any Limited Partner Interests
issued pursuant to Article V or pursuant to a merger consolidation pursuant to
Article XIV, and except as provided in Section 4.9, each transferee of, or other
such Person acquiring, a Limited Partner Interest (including any nominee holder
or an agent or representative acquiring such Limited Partner Interests for the
account of another Person) (i) shall be admitted to the Partnership as a Limited
Partner with respect to the Limited Partner Interests so transferred or issued
to such Person when any such transfer, issuance or admission is reflected in the
books and records of the Partnership and such Limited Partner becomes the Record
Holder of the Limited Partner Interests so transferred, (ii) shall become bound
by the terms of this Agreement, (iii) represents that the transferee has the
capacity, power and authority to enter into this Agreement, (iv) grants the
powers of attorney set forth in this Agreement and (v) makes the consents and
waivers contained in this Agreement, all with or without execution of this
Agreement by such Person. The transfer of any Limited Partner Interests and the
admission of any new Limited Partner shall not constitute an amendment to this
Agreement. A Person may become a Limited Partner or Record Holder of a Limited
Partner Interest without the consent or approval of any of the Partners. A
Person may not become a Limited Partner without acquiring a Limited Partner
Interest and until such Person is reflected in the books and records of the
Partnership as the Record Holder of such Limited Partner Interest. The rights
and obligations of a Person who is a Non-citizen Assignee shall be determined in
accordance with Section 4.9.
(b) The name and mailing address of each Limited Partner shall be listed
on the books and records of the Partnership maintained for such purpose by the
Partnership or the Transfer Agent. The General Partner shall update the books
and records of the Partnership from time to time as necessary to reflect
accurately the information therein (or shall cause the Transfer Agent to do so,
as applicable). A Limited Partner Interest may be represented by a Certificate,
as provided in Section 4.1.
(c) Any transfer of a Limited Partner Interest shall not entitle the
transferee to share in the profits and losses, to receive distributions, to
receive allocations of income, gain, loss, deduction or credit or any similar
item or to any other rights to which the transferor was entitled until the
transferee becomes a Limited Partner pursuant to Section 10.2(a).
SECTION 10.2 Admission of Successor General Partner. A successor General
Partner approved pursuant to Section 11.1 or Section 11.2 or the transferee of
or successor to all of the General Partner Interest pursuant to Section 4.6 who
is proposed to be admitted as a successor General Partner shall be admitted to
the Partnership as the General Partner, effective immediately prior to the
withdrawal or removal of the predecessor or transferring General Partner,
pursuant to Section 11.1 or Section 11.2 or the transfer of the General Partner
Interest pursuant to Section 4.6, provided, however, that no such successor
shall be admitted to the Partnership until compliance with the terms of Section
4.6 has occurred and such successor has executed and delivered
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such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.
SECTION 10.3 Amendment of Agreement and Certificate of Limited
Partnership. To effect the admission to the Partnership of any Partner, the
General Partner shall take all steps necessary or appropriate under the Delaware
Act to amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement and,
if required by law, the General Partner shall prepare and file an amendment to
the Certificate of Limited Partnership, and the General Partner may for this
purpose, among others, exercise the power of attorney granted pursuant to
Section 2.6.
ARTICLE XI.
Withdrawal or Removal of Partners
SECTION 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "EVENT OF WITHDRAWAL");
(i) The General Partner voluntarily withdraws from the Partnership
by giving written notice to the other Partners;
(ii) The General Partner transfers all of its rights as General
Partner pursuant to Section 4.6;
(iii) The General Partner is removed pursuant to Section 11.2;
(iv) The General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition for relief
under Chapter 7 of the United States Bankruptcy Code; (C) files a petition
or answer seeking for itself a liquidation, dissolution or similar relief
(but not a reorganization) under any law; (D) files an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in a proceeding of the type
described in clauses (A)-(C) of this Section 11.1(a)(iv); or (E) seeks,
consents to or acquiesces in the appointment of a trustee (but not a
debtor-in-possession), receiver or liquidator of the General Partner or of
all or any substantial part of its properties;
(v) A final and non-appealable order of relief under Chapter 7 of
the United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the General Partner; or
(vi) (A) in the event the General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the General
Partner, or 90 days expire after the date of notice to the General Partner
of revocation of its charter without a reinstatement of its charter, under
the laws of its state of incorporation; (B) in the event the General
Partner is a partnership or a limited liability company, the dissolution
and commencement of winding up of the General Partner; (C) in the event
the General Partner is acting in such capacity by virtue of being a
trustee of a trust, the termination of the trust; (D) in the event the
General Partner is a natural person, his death or adjudication of
incompetency; and (E) otherwise in the event of the termination of the
General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv), Section 11.1(a)(v),
or Section 11.1(a)(vi)(A), Section 11.1(a)(vi)(B), Section 11.1(a)(vi)(C) or
Section 11.1(a)(vi)(E) occurs, the withdrawing General Partner shall give notice
to the Limited Partners within 30 days after such occurrence. The Partners
hereby agree that only the Events of Withdrawal described in this Section 11.1
shall result in the withdrawal of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Central Standard
Time, on
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December 31, 2015, the General Partner voluntarily withdraws by giving at least
90 days' advance notice of its intention to withdraw to the Limited Partners;
provided, that prior to the effective date of such withdrawal, the withdrawal is
approved by Unitholders holding at least a majority of the Outstanding Common
Units (excluding Common Units held by the General Partner and its Affiliates)
and the General Partner delivers to the Partnership an Opinion of Counsel
("WITHDRAWAL OPINION OF COUNSEL") that such withdrawal (following the selection
of the successor General Partner) would not result in the loss of the limited
liability of any Limited Partner or any Group Member or cause any Group Member
to be treated as an association taxable as a corporation or otherwise to be
taxed as an entity for federal income tax purposes (to the extent not already so
treated or taxed); (ii) at any time after 12:00 midnight, Central Standard Time,
on December 31, 2015, the General Partner voluntarily withdraws by giving at
least 90 days' advance notice to the Unitholders, such withdrawal to take effect
on the date specified in such notice; (iii) at any time that the General Partner
ceases to be the General Partner pursuant to Section 11.1(a)(ii) or is removed
pursuant to Section 11.2; or (iv) notwithstanding clause (i) of this sentence,
at any time that the General Partner voluntarily withdraws by giving at least 90
days' advance notice of its intention to withdraw to the Limited Partners, such
withdrawal to take effect on the date specified in the notice, if at the time
such notice is given one Person and its Affiliates (other than the General
Partner and its Affiliates) own beneficially or of record or control at least
50% of the Outstanding Units. The withdrawal of the General Partner from the
Partnership upon the occurrence of an Event of Withdrawal shall also constitute
the withdrawal of the General Partner as general partner or managing member, if
any, to the extent applicable, of the other Group Members. If the General
Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the holders
of a Unit Majority, may, prior to the effective date of such withdrawal, elect a
successor General Partner. The Person so elected as successor General Partner
shall automatically become the successor general partner or managing member, to
the extent applicable, of the other Group Members of which the General Partner
is a general partner or a managing member. If, prior to the effective date of
the General Partner's withdrawal, a successor is not selected by the Unitholders
as provided herein or the Partnership does not receive a Withdrawal Opinion of
Counsel, the Partnership shall be dissolved in accordance with Section 12.1. Any
successor General Partner elected in accordance with the terms of this Section
11.1 shall be subject to the provisions of Section 10.3.
SECTION 11.2 Removal of the General Partner. The General Partner may be
removed if such removal is approved by the Unitholders holding at least 662/3%
of the Outstanding Units (including Units held by the General Partner and its
Affiliates) voting as a single class. Any such action by such holders for
removal of the General Partner must also provide for the election of a successor
General Partner by the Unitholders holding a majority of the outstanding Common
Units and Class B Units, if any, voting as a single class and a majority of the
outstanding Subordinated Units (if any Subordinated Units are then Outstanding)
voting as a class (including, in each case, Units held by the General Partner
and its Affiliates). Such removal shall be effective immediately following the
admission of a successor General Partner pursuant to Section 10.3. The removal
of the General Partner shall also automatically constitute the removal of the
General Partner as general partner or managing member, to the extent applicable,
of the other Group Members of which the General Partner is a general partner or
a managing member. If a Person is elected as a successor General Partner in
accordance with the terms of this Section 11.2, such Person shall, upon
admission pursuant to Section 10.3, automatically become a successor general
partner or managing member, to the extent applicable, of the other Group Members
of which the General Partner is a general partner or a managing member. The
right of the holders of Outstanding Units to remove the General Partner shall
not exist or be exercised unless the Partnership has received an opinion opining
as to the matters covered by a Withdrawal Opinion of Counsel. Any successor
General Partner elected in accordance with the terms of this Section 11.2 shall
be subject to the provisions of Section 10.3.
SECTION 11.3 Interest of Departing General Partner and Successor General
Partner.
(a) In the event of (i) withdrawal of the General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of the General Partner by the holders of Outstanding Units under
circumstances where Cause does not exist, if the successor General Partner is
elected in accordance with the terms of Section 11.1 or Section 11.2, the
Departing General Partner shall have the option, exercisable prior to the
effective date of the departure of such Departing General Partner, to require
its successor to purchase its
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General Partner Interest and its general partner interest (or equivalent
interest), if any, in the other Group Members and all of its Incentive
Distribution Rights (collectively, the "Combined Interest") in exchange for an
amount in cash equal to the fair market value of such Combined Interest, such
amount to be determined and payable as of the effective date of its departure.
If the General Partner is removed by the Unitholders under circumstances where
Cause exists or if the General Partner withdraws under circumstances where such
withdrawal violates this Agreement, and if a successor General Partner is
elected in accordance with the terms of Section 11.1 or Section 11.2 (or if the
business of the Partnership is continued pursuant to Section 12.2 and the
successor General Partner is not the former General Partner), such successor
shall have the option, exercisable prior to the effective date of the departure
of such Departing General Partner (or, in the event the business of the
Partnership is continued, prior to the date the business of the Partnership is
continued), to purchase the Combined Interest for such fair market value of such
Combined Interest of the Departing General Partner. In either event, the
Departing General Partner shall be entitled to receive all reimbursements due
such Departing General Partner pursuant to Section 7.4, including any
employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by the Departing
General Partner or its Affiliates (other than any Group Member) for the benefit
of the Partnership or the other Group Members.
For purposes of this Section 11.3(a), the fair market value of the
Departing General Partner's Combined Interest shall be determined by agreement
between the Departing General Partner and its successor or, failing agreement
within 30 days after the effective date of such Departing General Partner's
departure, by an independent investment banking firm or other independent expert
selected by the Departing General Partner and its successor, which, in turn, may
rely on other experts, and the determination of which shall be conclusive as to
such matter. If such parties cannot agree upon one independent investment
banking firm or other independent expert within 45 days after the effective date
of such departure, then the Departing General Partner shall designate an
independent investment banking firm or other independent expert, the Departing
General Partner's successor shall designate an independent investment banking
firm or other independent expert, and such firms or experts shall mutually
select a third independent investment banking firm or independent expert, which
third independent investment banking firm or other independent expert shall
determine the fair market value of the Combined Interest of the Departing
General Partner. In making its determination, such third independent investment
banking firm or other independent expert may consider the then current trading
price of Units on any National Securities Exchange on which Units are then
listed or admitted to trading, the value of the Partnership's assets, the rights
and obligations of the Departing General Partner and other factors it may deem
relevant.
(b) If the Combined Interest is not purchased in the manner set forth in
Section 11.3(a), the Departing General Partner (or its transferee) shall become
a Limited Partner and its Combined Interest shall be converted into Common Units
pursuant to a valuation made by an investment banking firm or other independent
expert selected pursuant to Section 11.3(a), without reduction in such
Partnership Interest (but subject to proportionate dilution by reason of the
admission of its successor). Any successor General Partner shall indemnify the
Departing General Partner (or its transferee) as to all debts and liabilities of
the Partnership arising on or after the date on which the Departing General
Partner (or its transferee) becomes a Limited Partner. For purposes of this
Agreement, conversion of the Combined Interest of the Departing General Partner
to Common Units will be characterized as if the Departing General Partner (or
its transferee) contributed its Combined Interest to the Partnership in exchange
for the newly issued Common Units.
(c) If a successor General Partner is elected in accordance with the terms
of Section 11.1 or Section 11.2 (or if the business of the Partnership is
continued pursuant to Section 12.2 and the successor General Partner is not the
former General Partner) and the option described in Section 11.3(a) is not
exercised by the party entitled to do so, the successor General Partner shall,
at the effective date of its admission to the Partnership, contribute to the
Partnership cash in the amount equal to the product of the Percentage Interest
of the Departing General Partner and the Net Agreed Value of the Partnership's
assets on such date. In such event, such successor General Partner shall,
subject to the following sentence, be entitled to its Percentage Interest of all
Partnership allocations and distributions to which the Departing General Partner
was entitled. In addition, the successor General Partner shall cause this
Agreement to be amended to reflect that, from and after the date
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of such successor General Partner's admission, the successor General Partner's
interest in all Partnership distributions and allocations shall be its
Percentage Interest.
SECTION 11.4 Termination of Subordination Period, Conversion of
Subordinated Units and Extinguishment of Cumulative Common Unit Arrearages.
Notwithstanding any provision of this Agreement, if the General Partner is
removed as general partner of the Partnership under circumstances where Cause
does not exist and Units held by the General Partner and its Affiliates are not
voted in favor of such removal, (i) the Subordination Period will end and all
Outstanding Subordinated Units will immediately and automatically convert into
Common Units on a one-for-one basis, (ii) all Cumulative Common Unit Arrearages
on the Common Units will be extinguished and (iii) the General Partner will have
the right to convert its General Partner Interest its Incentive Distribution
Rights into Common Units or to receive cash in exchange therefor in accordance
with Section 11.3.
SECTION 11.5 Withdrawal of Limited Partners. No Limited Partner shall have
any right to withdraw from the Partnership; provided, however, that when a
transferee of a Limited Partner's Limited Partner Interest becomes a Record
Holder of the Limited Partner Interest so transferred, such transferring Limited
Partner shall cease to be a Limited Partner with respect to the Limited Partner
Interest so transferred.
ARTICLE XII.
Dissolution and Liquidation
SECTION 12.1 Dissolution. The Partnership shall not be dissolved by the
admission of additional Limited Partners or by the admission of a successor
General Partner in accordance with the terms of this Agreement. Upon the removal
or withdrawal of the General Partner, if a successor General Partner is elected
pursuant to Section 11.1 or Section 11.2, the Partnership shall not be dissolved
and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) an Event of Withdrawal of the General Partner as provided in
Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is
elected and an Opinion of Counsel is received as provided in Section
11.1(b) or Section 11.2 and such successor is admitted to the Partnership
pursuant to Section 10.3;
(b) an election to dissolve the Partnership by the General Partner
that is approved by the holders of a Unit Majority;
(c) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(d) at any time there are no Limited Partners, unless the
Partnership is continued without dissolution in accordance with the
Delaware Act.
SECTION 12.2 Continuation of the Business of the Partnership After
Dissolution. Upon (a) dissolution of the Partnership following an Event of
Withdrawal caused by the withdrawal or removal of the General Partner as
provided in Section 11.1(a)(i) or Section 11.1(a)(iii) and the failure of the
Partners to select a successor to such Departing General Partner pursuant to
Section 11.1 or Section 11.2, then within 90 days thereafter, or (b) dissolution
of the Partnership upon an event constituting an Event of Withdrawal as defined
in Section 11.1(a)(iv), Section 11.1(a)(v) or Section 11.1(a)(vi), then, to the
maximum extent permitted by law, within 180 days thereafter, the holders of a
Unit Majority may elect to continue the business of the Partnership on the same
terms and conditions set forth in this Agreement by appointing as a successor
General Partner a Person approved by the holders of a Unit Majority. Unless such
an election is made within the applicable time period as set forth above, the
Partnership shall conduct only activities necessary to wind up its affairs. If
such an election is so made, then:
(i) the Partnership shall continue without dissolution unless
earlier dissolved in accordance with this Article XII;
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(ii) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be treated
in the manner provided in Section 11.3; and
(iii) the successor General Partner shall be admitted to the
Partnership as General Partner, effective as of the Event of Withdrawal,
by agreeing in writing to be bound by this Agreement; provided, that the
right of the holders of a Unit Majority to approve a successor General
Partner and to continue the business of the Partnership shall not exist
and may not be exercised unless the Partnership has received an Opinion of
Counsel that (x) the exercise of the right would not result in the loss of
limited liability of any Limited Partner and (y) neither the Partnership
nor any Group Member would be treated as an association taxable as a
corporation or otherwise be taxable as an entity for federal income tax
purposes upon the exercise of such right to continue (to the extent not
already so treated or taxed).
SECTION 12.3 Liquidator. Upon dissolution of the Partnership, unless the
business of the Partnership is continued pursuant to Section 12.2, the General
Partner shall select one or more Persons to act as Liquidator. The Liquidator
(if other than the General Partner) shall be entitled to receive such
compensation for its services as may be approved by holders of at least a
majority of the Outstanding Common Units and Subordinated Units voting as a
single class. The Liquidator (if other than the General Partner) shall agree not
to resign at any time without 15 days' prior notice and may be removed at any
time, with or without cause, by notice of removal approved by holders of at
least a majority of the Outstanding Common Units, Class B Units (if any), and
Subordinated Units voting as a single class. Upon dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall
have and succeed to all rights, powers and duties of the original Liquidator)
shall within 30 days thereafter be approved by holders of at least a majority of
the Outstanding Common Units, Class B Units (if any), and Subordinated Units
voting as a single class. The right to approve a successor or substitute
Liquidator in the manner provided herein shall be deemed to refer also to any
such successor or substitute Liquidator approved in the manner herein provided.
Except as expressly provided in this Article XII, the Liquidator approved in the
manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto, all of the powers
conferred upon the General Partner under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sale set forth in
Section 7.3) necessary or appropriate to carry out the duties and functions of
the Liquidator hereunder for and during the period of time required to complete
the winding up and liquidation of the Partnership as provided for herein.
SECTION 12.4 Liquidation. The Liquidator shall proceed to dispose of the
assets of the Partnership, discharge its liabilities, and otherwise wind up its
affairs in such manner and over such period as determined by the Liquidator,
subject to Section 17-804 of the Delaware Act and the following:
(a) The assets may be disposed of by public or private sale or by
distribution in kind to one or more Partners on such terms as the
Liquidator and such Partner or Partners may agree. If any property is
distributed in kind, the Partner receiving the property shall be deemed
for purposes of Section 12.4(c) to have received cash equal to its fair
market value; and contemporaneously therewith, appropriate cash
distributions must be made to the other Partners. The Liquidator may defer
liquidation or distribution of the Partnership's assets for a reasonable
time if it determines that an immediate sale or distribution of all or
some of the Partnership's assets would be impractical or would cause undue
loss to the Partners. The Liquidator may distribute the Partnership's
assets, in whole or in part, in kind if it determines that a sale would be
impractical or would cause undue loss to the Partners.
(b) Liabilities of the Partnership include amounts owed to the
Liquidator as compensation for serving in such capacity (subject to the
terms of Section 12.3) and amounts to Partners otherwise than in respect
of their distribution rights under Article VI. With respect to any
liability that is contingent, conditional or unmatured or is otherwise not
yet due and payable, the Liquidator shall either settle such claim for
such amount as it thinks appropriate or establish a reserve of cash or
other assets to provide for its payment. When paid, any unused portion of
the reserve shall be distributed as additional liquidation proceeds.
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(c) All property and all cash in excess of that required to
discharge liabilities as provided in Section 12.4(b) shall be distributed
to the Partners in accordance with, and to the extent of, the positive
balances in their respective Capital Accounts, as determined after taking
into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable
year of the Partnership during which the liquidation of the Partnership
occurs (with such date of occurrence being determined pursuant to Treasury
Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution shall be
made by the end of such taxable year (or, if later, within 90 days after
said date of such occurrence).
SECTION 12.5 Cancellation of Certificate of Limited Partnership. Upon the
completion of the distribution of Partnership cash and property as provided in
Section 12.4 in connection with the liquidation of the Partnership, the
Certificate of Limited Partnership and all qualifications of the Partnership as
a foreign limited partnership in jurisdictions other than the State of Delaware
shall be canceled and such other actions as may be necessary to terminate the
Partnership shall be taken.
SECTION 12.6 Return of Contributions. The General Partner shall not be
personally liable for, and shall have no obligation to contribute or loan any
monies or property to the Partnership to enable it to effectuate, the return of
the Capital Contributions of the Limited Partners or Unitholders, or any portion
thereof, it being expressly understood that any such return shall be made solely
from Partnership assets.
SECTION 12.7 Waiver of Partition. To the maximum extent permitted by law,
each Partner hereby waives any right to partition of the Partnership property.
SECTION 12.8 Capital Account Restoration. No Limited Partner shall have
any obligation to restore any negative balance in its Capital Account upon
liquidation of the Partnership. The General Partner shall be obligated to
restore any negative balance in its Capital Account upon liquidation of its
interest in the Partnership by the end of the taxable year of the Partnership
during which such liquidation occurs, or, if later, within 90 days after the
date of such liquidation.
ARTICLE XIII.
Amendment of Partnership Agreement;
Meetings; Record Date
SECTION 13.1 Amendments to be Adopted Solely by the General Partner. Each
Partner agrees that the General Partner, without the approval of any Partner,
may amend any provision of this Agreement and execute, swear to, acknowledge,
deliver, file and record whatever documents may be required in connection
therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of
the Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that the General Partner determines to be necessary or
appropriate to qualify or continue the qualification of the Partnership as
a limited partnership or a partnership in which the Limited Partners have
limited liability under the laws of any state or to ensure that the Group
Members will not be treated as associations taxable as corporations or
otherwise taxed as entities for federal income tax purposes;
(d) a change that the General Partner determines, (i) does not
adversely affect the Limited Partners (including any particular class of
Partnership Interests as compared to other classes of Partnership
Interests) in any material respect, (ii) to be necessary or appropriate to
(A) satisfy any requirements, conditions or guidelines contained in any
opinion, directive, order, ruling or regulation of any federal or state
agency or judicial authority or contained in any federal or state statute
(including the Delaware Act) or (B) facilitate the trading of the Units
(including the division of any class or classes of Outstanding Units into
different classes to facilitate uniformity of tax consequences within such
classes of
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Units) or comply with any rule, regulation, guideline or requirement of
any National Securities Exchange on which the Units are or will be listed
or admitted to trading, (iii) to be necessary or appropriate in connection
with action taken by the General Partner pursuant to Section 5.9 or (iv)
is required to effect the intent expressed in the Registration Statement
or the intent of the provisions of this Agreement or is otherwise
contemplated by this Agreement;
(e) a change in the fiscal year or taxable year of the Partnership
and any other changes that the General Partner determines to be necessary
or appropriate as a result of a change in the fiscal year or taxable year
of the Partnership including, if the General Partner shall so determine, a
change in the definition of "Quarter" and the dates on which distributions
are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or the General Partner or its directors,
officers, trustees or agents from in any manner being subjected to the
provisions of the Investment Company Act of 1940, as amended, the
Investment Advisers Act of 1940, as amended, or "plan asset" regulations
adopted under the Employee Retirement Income Security Act of 1974, as
amended, regardless of whether such are substantially similar to plan
asset regulations currently applied or proposed by the United States
Department of Labor;
(g) an amendment that the General Partner determines to be necessary
or appropriate in connection with the authorization of issuance of any
class or series of Partnership Securities pursuant to Section 5.6,
including any amendment that the General Partner determines is necessary
or appropriate in connection with (i) the adjustments of the Minimum
Quarterly Distribution, First Target Distribution and Second Target
Distribution pursuant to the provisions of Section 5.11, (ii) the
implementation of the provisions of Section 5.11 or (iii) any
modifications to the Incentive Distribution Rights made in connection with
the issuance of Partnership Securities pursuant to Section 5.6, provided
that, with respect to this clause (iii), the modifications to the
Incentive Distribution Rights and the related issuance of Partnership
Securities have received Special Approval;
(h) any amendment expressly permitted in this Agreement to be made
by the General Partner acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that the General Partner determines to be necessary
or appropriate to reflect and account for the formation by the Partnership
of, or investment by the Partnership in, any corporation, partnership,
joint venture, limited liability company or other entity, in connection
with the conduct by the Partnership of activities permitted by the terms
of Section 2.4;
(k) merger, conveyance or conversion pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
SECTION 13.2 Amendment Procedures. Except as provided in Section 13.1 and
Section 13.3, all amendments to this Agreement shall be made in accordance with
the following requirements. Amendments to this Agreement may be proposed only by
the General Partner; provided, however, that the General Partner shall have no
duty or obligation to propose any amendment to this Agreement and may decline to
do so free of any fiduciary duty or obligation whatsoever to the Partnership or
any Limited Partner and, in declining to propose an amendment, to the fullest
extent permitted by law shall not be required to act in good faith or pursuant
to any other standard imposed by this Agreement, any Group Member Agreement, any
other agreement contemplated hereby or under the Delaware Act or any other law,
rule or regulation or at equity. A proposed amendment shall be effective upon
its approval by the General Partner and the holders of a Unit Majority, unless a
greater or different percentage is required under this Agreement or by Delaware
law. Each proposed amendment that requires the approval of the holders of a
specified percentage of Outstanding Units shall be set forth in a writing that
contains the text of the proposed amendment. If such an amendment is proposed,
the General Partner shall seek the written approval of the requisite percentage
of Outstanding Units
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or call a meeting of the Unitholders to consider and vote on such proposed
amendment. The General Partner shall notify all Record Holders upon final
adoption of any such proposed amendments.
SECTION 13.3 Amendment Requirements.
(a) Notwithstanding the provisions of Section 13.1 and Section 13.2, no
provision of this Agreement that establishes a percentage of Outstanding Units
(including Units deemed owned by the General Partner) required to take any
action shall be amended, altered, changed, repealed or rescinded in any respect
that would have the effect of reducing such voting percentage unless such
amendment is approved by the written consent or the affirmative vote of holders
of Outstanding Units whose aggregate Outstanding Units constitute not less than
the voting requirement sought to be reduced.
(b) Notwithstanding the provisions of Section 13.1 and Section 13.2, no
amendment to this Agreement may (i) enlarge the obligations of any Limited
Partner without its consent, unless such shall be deemed to have occurred as a
result of an amendment approved pursuant to Section 13.3(c), or (ii) enlarge the
obligations of, restrict in any way any action by or rights of, or reduce in any
way the amounts distributable, reimbursable or otherwise payable to, the General
Partner or any of its Affiliates without its consent, which consent may be given
or withheld at its option.
(c) Except as provided in Section 14.3, and without limitation of the
General Partner's authority to adopt amendments to this Agreement without the
approval of any Partners or Assignees as contemplated in Section 13.1, any
amendment that would have a material adverse effect on the rights or preferences
of any class of Partnership Interests in relation to other classes of
Partnership Interests must be approved by the holders of not less than a
majority of the Outstanding Partnership Interests of the class affected.
(d) Notwithstanding any other provision of this Agreement, except for
amendments pursuant to Section 13.1 and except as otherwise provided by Section
14.3(b), no amendments shall become effective without the approval of the
holders of at least 90% of the Outstanding Units voting as a single class unless
the Partnership obtains an Opinion of Counsel to the effect that such amendment
will not affect the limited liability of any Limited Partner under applicable
partnership law of the state under whose laws the Partnership is organized.
(e) Except as provided in Section 13.1, this Section 13.3 shall only be
amended with the approval of the holders of at least 90% of the Outstanding
Units.
SECTION 13.4 Special Meetings. All acts of Limited Partners to be taken
pursuant to this Agreement shall be taken in the manner provided in this Article
XIII. Special meetings of the Limited Partners may be called by the General
Partner or by Limited Partners owning 20% or more of the Outstanding Units of
the class or classes for which a meeting is proposed. Limited Partners shall
call a special meeting by delivering to the General Partner one or more requests
in writing stating that the signing Limited Partners wish to call a special
meeting and indicating the general or specific purposes for which the special
meeting is to be called. Within 60 days after receipt of such a call from
Limited Partners or within such greater time as may be reasonably necessary for
the Partnership to comply with any statutes, rules, regulations, listing
agreements or similar requirements governing the holding of a meeting or the
solicitation of proxies for use at such a meeting, the General Partner shall
send a notice of the meeting to the Limited Partners either directly or
indirectly through the Transfer Agent. A meeting shall be held at a time and
place determined by the General Partner on a date not less than 10 days nor more
than 60 days after the mailing of notice of the meeting. Limited Partners shall
not vote on matters that would cause the Limited Partners to be deemed to be
taking part in the management and control of the business and affairs of the
Partnership so as to jeopardize the Limited Partners' limited liability under
the Delaware Act or the law of any other state in which the Partnership is
qualified to do business.
SECTION 13.5 Notice of a Meeting. Notice of a meeting called pursuant to
Section 13.4 shall be given to the Record Holders of the class or classes of
Units for which a meeting is proposed in writing by mail or other means of
written in accordance with Section 16.1. The notice shall be deemed to have been
given at the time when deposited in the mail or sent by other means of written
communication.
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SECTION 13.6 Record Date. For purposes of determining the Limited Partners
entitled to notice of or to vote at a meeting of the Limited Partners or to give
approvals without a meeting as provided in Section 13.11 the General Partner may
set a Record Date, which shall not be less than 10 nor more than 60 days before
(a) the date of the meeting (unless such requirement conflicts with any rule,
regulation, guideline or requirement of any National Securities Exchange on
which the Units are listed or admitted to trading, in which case the rule,
regulation, guideline or requirement of such National Securities Exchange shall
govern) or (b) in the event that approvals are sought without a meeting, the
date by which Limited Partners are requested in writing by the General Partner
to give such approvals. If the General Partner does not set a Record Date, then
(a) the Record Date for determining the Limited Partners entitled to notice of
or to vote at a meeting of the Limited Partners shall be the close of business
on the day next preceding the day on which notice is given, and (b) the Record
Date for determining the Limited Partners entitled to give approvals without a
meeting shall be the date the first written approval is deposited with the
Partnership in care of the General Partner in accordance with Section 13.11.
SECTION 13.7 Adjournment. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting and a new Record Date
need not be fixed, if the time and place thereof are announced at the meeting at
which the adjournment is taken, unless such adjournment shall be for more than
45 days. At the adjourned meeting, the Partnership may transact any business
which might have been transacted at the original meeting. If the adjournment is
for more than 45 days or if a new Record Date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given in accordance with
this Article XIII.
SECTION 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and noticed,
and whenever held, shall be as valid as if it had occurred at a meeting duly
held after regular call and notice, if a quorum is present either in person or
by proxy. Attendance of a Limited Partner at a meeting shall constitute a waiver
of notice of the meeting, except when the Limited Partner attends the meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened; and except that attendance at a meeting is not a waiver of any right
to disapprove the consideration of matters required to be included in the notice
of the meeting, but not so included, if the disapproval is expressly made at the
meeting.
SECTION 13.9 Quorum and Voting. The holders of a majority of the
Outstanding Units of the class or classes for which a meeting has been called
(including Outstanding Units deemed owned by the General Partner) represented in
person or by proxy shall constitute a quorum at a meeting of Limited Partners of
such class or classes unless any such action by the Limited Partners requires
approval by holders of a greater percentage of such Units, in which case the
quorum shall be such greater percentage. At any meeting of the Limited Partners
duly called and held in accordance with this Agreement at which a quorum is
present, the act of Limited Partners holding Outstanding Units that in the
aggregate represent a majority of the Outstanding Units entitled to vote and be
present in person or by proxy at such meeting shall be deemed to constitute the
act of all Limited Partners, unless a greater or different percentage is
required with respect to such action under the provisions of this Agreement, in
which case the act of the Limited Partners holding Outstanding Units that in the
aggregate represent at least such greater or different percentage shall be
required. The Limited Partners present at a duly called or held meeting at which
a quorum is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Limited Partners to leave less than a
quorum, if any action taken (other than adjournment) is approved by the required
percentage of Outstanding Units specified in this Agreement (including
Outstanding Units deemed owned by the General Partner). In the absence of a
quorum any meeting of Limited Partners may be adjourned from time to time by the
affirmative vote of holders of at least a majority of the Outstanding Units
entitled to vote at such meeting (including Outstanding Units deemed owned by
the General Partner) represented either in person or by proxy, but no other
business may be transacted, except as provided in Section 13.7.
SECTION 13.10 Conduct of a Meeting. The General Partner shall have full
power and authority concerning the manner of conducting any meeting of the
Limited Partners or solicitation of approvals in writing, including the
determination of Persons entitled to vote, the existence of a quorum, the
satisfaction of
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the requirements of Section 13.4, the conduct of voting, the validity and effect
of any proxies and the determination of any controversies, votes or challenges
arising in connection with or during the meeting or voting. The General Partner
shall designate a Person to serve as chairman of any meeting and shall further
designate a Person to take the minutes of any meeting. All minutes shall be kept
with the records of the Partnership maintained by the General Partner. The
General Partner may make such other regulations consistent with applicable law
and this Agreement as it may deem advisable concerning the conduct of any
meeting of the Limited Partners or solicitation of approvals in writing,
including regulations in regard to the appointment of proxies, the appointment
and duties of inspectors of votes and approvals, the submission and examination
of proxies and other evidence of the right to vote, and the revocation of
approvals in writing.
SECTION 13.11 Action Without a Meeting. If authorized by the General
Partner, any action that may be taken at a meeting of the Limited Partners may
be taken without a meeting if an approval in writing setting forth the action so
taken is signed by Limited Partners owning not less than the minimum percentage
of the Outstanding Units (including Units deemed owned by the General Partner)
that would be necessary to authorize or take such action at a meeting at which
all the Limited Partners were present and voted (unless such provision conflicts
with any rule, regulation, guideline or requirement of any National Securities
Exchange on which the Units are listed or admitted to trading, in which case the
rule, regulation, guideline or requirement of such National Securities Exchange
shall govern). Prompt notice of the taking of action without a meeting shall be
given to the Limited Partners who have not approved in writing. The General
Partner may specify that any written ballot submitted to Limited Partners for
the purpose of taking any action without a meeting shall be returned to the
Partnership within the time period, which shall be not less than 20 days,
specified by the General Partner. If a ballot returned to the Partnership does
not vote all of the Units held by the Limited Partners, the Partnership shall be
deemed to have failed to receive a ballot for the Units that were not voted. If
approval of the taking of any action by the Limited Partners is solicited by any
Person other than by or on behalf of the General Partner, the written approvals
shall have no force and effect unless and until (a) they are deposited with the
Partnership in care of the General Partner, (b) approvals sufficient to take the
action proposed are dated as of a date not more than 90 days prior to the date
sufficient approvals are deposited with the Partnership and (c) an Opinion of
Counsel is delivered to the General Partner to the effect that the exercise of
such right and the action proposed to be taken with respect to any particular
matter (i) will not cause the Limited Partners to be deemed to be taking part in
the management and control of the business and affairs of the Partnership so as
to jeopardize the Limited Partners' limited liability, and (ii) is otherwise
permissible under the state statutes then governing the rights, duties and
liabilities of the Partnership and the Partners.
SECTION 13.12 Right to Vote and Related Matters.
(a) Only those Record Holders of the Units on the Record Date set pursuant
to Section 13.6 (and also subject to the limitations contained in the definition
of "Outstanding") shall be entitled to notice of, and to vote at, a meeting of
Limited Partners or to act with respect to matters as to which the holders of
the Outstanding Units have the right to vote or to act. All references in this
Agreement to votes of, or other acts that may be taken by, the Outstanding Units
shall be deemed to be references to the votes or acts of the Record Holders of
such Outstanding Units.
(b) With respect to Units that are held for a Person's account by another
Person (such as a broker, dealer, bank, trust company or clearing corporation,
or an agent of any of the foregoing), in whose name such Units are registered,
such other Person shall, in exercising the voting rights in respect of such
Units on any matter, and unless the arrangement between such Persons provides
otherwise, vote such Units in favor of, and at the direction of, the Person who
is the beneficial owner, and the Partnership shall be entitled to assume it is
so acting without further inquiry. The provisions of this Section 13.12(b) (as
well as all other provisions of this Agreement) are subject to the provisions of
Section 4.3.
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ARTICLE XIV.
Merger, Consolidation or Conversion
SECTION 14.1 Authority. The Partnership may merge or consolidate with or
into one or more corporations, limited liability companies, statutory trusts or
associations, real estate investment trusts, common law trusts or unincorporated
businesses, including a partnership (whether general or limited (including a
limited liability partnership)) or convert into any such entity, whether such
entity is formed under the laws of the State of Delaware or any other state of
the United States of America, pursuant to a written plan of merger or
consolidation ("Merger Agreement") or a written plan of conversion ("Plan of
Conversion"), as the case may be, in accordance with this Article XIV.
SECTION 14.2 Procedure for Merger, Consolidation or Conversion.
(a) Merger, consolidation or conversion of the Partnership pursuant to
this Article XIV requires the prior consent of the General Partner, provided,
however, that, to the fullest extent permitted by law, the General Partner shall
have no duty or obligation to consent to any merger, consolidation or conversion
of the Partnership and may decline to do so free of any fiduciary duty or
obligation whatsoever to the Partnership, any Limited Partner and, in declining
to consent to a merger, consolidation or conversion, shall not be required to
act in good faith or pursuant to any other standard imposed by this Agreement,
any other agreement contemplated hereby or under the Act or any other law, rule
or regulation or at equity.
(b) If the General Partner shall determine to consent to the merger or
consolidation, the General partner shall approve the Merger Agreement, which
shall set forth:
(i) name and state of domicile of each of the business entities
proposing to merge or consolidate;
(ii) the name and state of domicile of the business entity that is
to survive the proposed merger or consolidation (the "SURVIVING BUSINESS
ENTITY");
(iii) the terms and conditions of the proposed merger or
consolidation;
(iv) the manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash,
property or interests, rights, securities or obligations of the Surviving
Business Entity; and (i) if any general or limited partner interests,
securities or rights of any constituent business entity are not to be
exchanged or converted solely for, or into, cash, property or general or
limited partner interests, rights, securities or obligations of the
Surviving Business Entity, the cash, property or interests, rights,
securities or obligations of any general or limited partnership,
corporation, trust, limited liability company, unincorporated business or
other entity (other than the Surviving Business Entity) which the holders
of such general or limited partner interests, securities or rights are to
receive in exchange for, or upon conversion of their interests, securities
or rights, and (ii) in the case of securities represented by certificates,
upon the surrender of such certificates, which cash, property or general
or limited partner interests, rights, securities or obligations of the
Surviving Business Entity or any general or limited partnership,
corporation, trust, limited liability company, unincorporated business or
other entity (other than the Surviving Business Entity), or evidences
thereof, are to be delivered;
(v) a statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or
agreement of limited partnership, operating agreement or other similar
charter or governing document) of the Surviving Business Entity to be
effected by such merger or consolidation;
(vi) the effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later
date specified in or determinable in accordance with the Merger Agreement
(provided, that if the effective time of the merger is to be later than
the date of the filing of such certificate of merger, the effective time
shall be fixed at a date or time certain at or prior to the time of the
filing of such certificate of merger and stated therein); and
(vii) such other provisions with respect to the proposed merger or
consolidation that the General Partner determines to be necessary or
appropriate.
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(c) If the General Partner shall determine to consent to the conversion,
the General Partner shall approve the Plan of Conversion, which shall set forth:
(i) the name of the converting entity and the converted entity;
(ii) a statement that the Partnership is continuing its existence in
the organizational form of the converted entity;
(iii) a statement as to the type of entity that the converted entity
is to be and the state or country under the laws of which the converted
entity is to be incorporated, formed or organized;
(iv) the manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash,
property or interests, rights, securities or obligations of the converted
entity;
(v) in an attachment or exhibit, the certificate of limited
partnership of the Partnership; and
(vi) in an attachment or exhibit, the certificate of limited
partnership, articles of incorporation, or other organizational documents
of the converted entity;
(vii) the effective time of the conversion, which may be the date of
the filing of the articles of conversion or a later date specified in or
determinable in accordance with the Plan of Conversion (provided, that if
the effective time of the conversion is to be later than the date of the
filing of such articles of conversion, the effective time shall be fixed
at a date or time certain at or prior to the time of the filing of such
articles of conversion and stated therein); and
(viii) such other provisions with respect to the proposed conversion
that the General Partner determines to be necessary or appropriate.
SECTION 14.3 Approval by Limited Partners.
(a) Except as provided in Section 14.3(d), the General Partner, upon its
approval of the Merger Agreement or the Plan of Conversion, as the case may be,
shall direct that the Merger Agreement or the Plan of Conversion, as applicable,
be submitted to a vote of Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement or the Plan of Conversion, as
the case may be, shall be included in or enclosed with the notice of a special
meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement or Plan of
Conversion, as the case may be, shall be approved upon receiving the affirmative
vote or consent of the holders of a Unit Majority.
(c) Except as provided in Section 14.3(d), after such approval by vote or
consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger or articles of conversion pursuant to Section 14.4, the
merger, consolidation or conversion may be abandoned pursuant to provisions
therefor, if any, set forth in the Merger Agreement or Plan of Conversion, as
the case may be.
(d) Notwithstanding anything else contained in this Article XIV or in this
Agreement, the General Partner is permitted, without Limited Partner approval,
to convert the Partnership or any Group Member into a new limited liability
entity, to merge the Partnership or any Group Member into, or convey all of the
Partnership's assets to, another limited liability entity that shall be newly
formed and shall have no assets, liabilities or operations at the time of such
conversion, merger or conveyance other than those it receives the Partnership or
other Group Member if (i) the General Partner has received an Opinion of Counsel
that the conversion, merger or conveyance, as the case may be, would not result
in the loss of the limited liability of any Limited Partner or cause the
Partnership to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes (to the
extent not previously treated as such), (ii) the sole purpose of such
conversion, merger, or conveyance is to effect a mere change in the legal form
of the Partnership into another limited liability entity and (iii) the governing
instruments of the new entity provide the Limited Partners and the General
Partner with the same rights and obligations as are herein contained.
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(e) Additionally, notwithstanding anything else contained in this Article
XIV or in this Agreement, the General Partner is permitted, without Limited
Partner approval, to merge or consolidate the Partnership with or into another
entity if (A) the General Partner has received an Opinion of Counsel that the
merger or consolidation, as the case may be, would not result in the loss of the
limited liability of any Limited Partner or cause the Partnership to be treated
as an association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not previously treated as such),
(B) the merger or consolidation would not result in an amendment to the
Partnership Agreement, other than any amendments that could be adopted pursuant
to Section 13.1, (C) the Partnership is the Surviving Business Entity in such
merger or consolidation, (D) each Unit outstanding immediately prior to the
effective date of the merger or consolidation is to be an identical Unit of the
Partnership after the effective date of the merger or consolidation, and (E) the
number of Partnership Securities to be issued by the Partnership in such merger
or consolidation do not exceed 20% of the Partnership Securities Outstanding
immediately prior to the effective date of such merger or consolidation.
(f) Pursuant to Section 17-211(g) of the Delaware Act, an agreement of
merger or consolidation approved in accordance with this Article XIV may (a)
effect any amendment to this Agreement or (b) effect the adoption of a new
partnership agreement for the Partnership if it is the Surviving Business
Entity. Any such amendment or adoption made pursuant to this Section 14.3 shall
be effective at the effective time or date of the merger or consolidation.
SECTION 14.4 Certificate of Merger. Upon the required approval by the
General Partner and the Unitholders of a Merger Agreement or the Plan of
Conversion, as the case may be, a certificate of merger or articles of
conversion, as applicable, shall be executed and filed with the Secretary of
State of the State of Delaware in conformity with the requirements of the
Delaware Act.
SECTION 14.5 Effect of Merger, Consolidation or Conversion.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities, shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in
any of those constituent business entities shall not revert and is not in
any way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests
in property of any of those constituent business entities shall be
preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) At the effective time of the articles of conversion:
(i) the Partnership shall continue to exist, without interruption,
but in the organizational form of the converted entity rather than in its
prior organizational form;
(ii) all rights, title, and interests to all real estate and other
property owned by the Partnership shall continue to be owned by the
converted entity in its new organizational form without reversion or
impairment, without further act or deed, and without any transfer or
assignment having occurred, but subject to any existing liens or other
encumbrances thereon;
(iii) all liabilities and obligations of the Partnership shall
continue to be liabilities and obligations of the converted entity in its
new organizational form without impairment or diminution by reason of the
conversion;
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(iv) all rights of creditors or other parties with respect to or
against the prior interest holders or other owners of the Partnership in
their capacities as such in existence as of the effective time of the
conversion will continue in existence as to those liabilities and
obligations and may be pursued by such creditors and obligees as if the
conversion did not occur;
(v) a proceeding pending by or against the Partnership or by or
against any of Partners in their capacities as such may be continued by or
against the converted entity in its new organizational form and by or
against the prior partners without any need for substitution of parties;
and
(vi) the Partnership Units that are to be converted into partnership
interests, shares, evidences of ownership, or other securities in the
converted entity as provided in the plan of conversion shall be so
converted, and Partners shall be entitled only to the rights provided in
the Plan of Conversion.
ARTICLE XV.
Right to Acquire Limited Partner Interests
SECTION 15.1 Right to Acquire Limited Partner Interests.
(a) Notwithstanding any other provision of this Agreement, if at any time
the General Partner and its Affiliates hold more than 80% of the total Limited
Partner Interests of any class then Outstanding, the General Partner shall then
have the right, which right it may assign and transfer in whole or in part to
the Partnership or any Affiliate of the General Partner, exercisable at its
option, to purchase all, but not less than all, of such Limited Partner
Interests of such class then Outstanding held by Persons other than the General
Partner and its Affiliates, at the greater of (x) the Current Market Price as of
the date three days prior to the date that the notice described in Section
15.1(b) is mailed and (y) the highest price paid by the General Partner or any
of its Affiliates for any such Limited Partner Interest of such class purchased
during the 90-day period preceding the date that the notice described in Section
15.1(b) is mailed. As used in this Agreement, (i) "CURRENT MARKET PRICE" AS of
any date of any class of Limited Partner Interests means the average of the
daily Closing Prices (as hereinafter defined) per Limited Partner Interest of
such class for the 20 consecutive Trading Days (as hereinafter defined)
immediately prior to such date; (ii) "CLOSING PRICE" for any day means the last
sale price on such day, regular way, or in case no such sale takes place on such
day, the average of the closing bid and asked prices on such day, regular way,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal National Securities Exchange
(other than the Nasdaq Stock Market) on which such Limited Partner Interests are
listed or admitted to trading or, if such Limited Partner Interests of such
class are not listed or admitted to trading on any National Securities Exchange
(other than the Nasdaq Stock Market), the last quoted price on such day or, if
not so quoted, the average of the high bid and low asked prices on such day in
the over-the-counter market, as reported by the Nasdaq Stock Market or such
other system then in use, or, if on any such day such Limited Partner Interests
of such class are not quoted by any such organization, the average of the
closing bid and asked prices on such day as furnished by a professional market
maker making a market in such Limited Partner Interests of such class selected
by the General Partner, or if on any such day no market maker is making a market
in such Limited Partner Interests of such class, the fair value of such Limited
Interests on such day as determined by the General Partner; and (iii) "TRADING
DAY" means a day on which the principal National Securities Exchange on which
such Limited Partner Interests of any class are listed or admitted for trading
is open for the transaction of business or, if Limited Partner Interests of a
class are not listed or admitted for trading on any National Securities
Exchange, a day on which banking institutions in New York City generally are
open.
(b) If the General Partner, any Affiliate of the General Partner or the
Partnership elects to exercise the right to purchase Limited Partner Interests
granted pursuant to Section 15.1(a), the General Partner shall deliver to the
Transfer Agent notice of such election to purchase (the "NOTICE OF ELECTION TO
PURCHASE") and shall cause the Transfer Agent to mail a copy of such Notice of
Election to Purchase to the Record Holders of Limited Partner Interests of such
class (as of a Record Date selected by the General Partner) at least 10, but not
more than 60, days prior to the Purchase Date. Such Notice of Election to
Purchase shall also be published for a period of at least three consecutive days
in at least two daily newspapers of general circulation printed in
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the English language and published in the Borough of Manhattan, New York. The
Notice of Election to Purchase shall specify the Purchase Date and the price
(determined in accordance with Section 15.1(a)) at which Limited Partner
Interests will be purchased and state that the General Partner, its Affiliate or
the Partnership, as the case may be, elects to purchase such Limited Partner
Interests, upon surrender of Certificates representing such Limited Partner
Interests in exchange for payment, at such office or offices of the Transfer
Agent as the Transfer Agent may specify, or as may be required by any National
Securities Exchange on which such Limited Partner Interests are listed. Any such
Notice of Election to Purchase mailed to a Record Holder of Limited Partner
Interests at his address as reflected in the records of the Transfer Agent shall
be conclusively presumed to have been given regardless of whether the owner
receives such notice. On or prior to the Purchase Date, the General Partner, its
Affiliate or the Partnership, as the case may be, shall deposit with the
Transfer Agent cash in an amount sufficient to pay the aggregate purchase price
of all of such Limited Partner Interests to be purchased in accordance with this
Section 15.1. If the Notice of Election to Purchase shall have been duly given
as aforesaid at least 10 days prior to the Purchase Date, and if on or prior to
the Purchase Date the deposit described in the preceding sentence has been made
for the benefit of the holders of Limited Partner Interests subject to purchase
as provided herein, then from and after the Purchase Date, notwithstanding that
any Certificate shall not have been surrendered for purchase, all rights of the
holders of such Limited Partner Interests (including any rights pursuant to
Article IV, Article V, Article VI, and Article XII) shall thereupon cease,
except the right to receive the purchase price (determined in accordance with
Section 15.1(a)) for Limited Partner Interests therefor, without interest, upon
surrender to the Transfer Agent of the Certificates representing such Limited
Partner Interests, and such Limited Partner Interests shall thereupon be deemed
to be transferred to the General Partner, its Affiliate or the Partnership, as
the case may be, on the record books of the Transfer Agent and the Partnership,
and the General Partner or any Affiliate of the General Partner, or the
Partnership, as the case may be, shall be deemed to be the owner of all such
Limited Partner Interests from and after the Purchase Date and shall have all
rights as the owner of such Limited Partner Interests (including all rights as
owner of such Limited Partner Interests pursuant to Article IV, Article V,
Article VI and Article XII).
(c) At any time from and after the Purchase Date, a holder of an
Outstanding Limited Partner Interest subject to purchase as provided in this
Section 15.1 may surrender his Certificate evidencing such Limited Partner
Interest to the Transfer Agent in exchange for payment of the amount described
in Section 15.1(a), therefor, without interest thereon.
(d) The General Partner and Partnership shall comply with all applicable
federal and state securities laws in connection with the purchase of Limited
Partner Interests pursuant to this Article XV. To the extent the notice, time
period or other provisions of this Article XV do not permit the General Partner
or the Partnership to comply with applicable federal and state securities laws,
the General Partner and the Partnership shall comply with such laws, and the
provisions of this Article XV shall be deemed to have been amended to permit
such compliance.
ARTICLE XVI.
General Provisions
SECTION 16.1 Addresses and Notices. Any notice, demand, request, report or
proxy materials required or permitted to be given or made to a Partner under
this Agreement shall be in writing and shall be deemed given or made when
delivered in person or when sent by first class United States mail or by other
means of written communication to the Partner at the address described below.
Any notice, payment or report to be given or made to a Partner hereunder shall
be deemed conclusively to have been given or made, and the obligation to give
such notice or report or to make such payment shall be deemed conclusively to
have been fully satisfied, upon sending of such notice, payment or report to the
Record Holder of such Partnership Securities at his address as shown on the
records of the Transfer Agent or as otherwise shown on the records of the
Partnership, regardless of any claim of any Person who may have an interest in
such Partnership Securities by reason of any assignment or otherwise. An
affidavit or certificate of making of any notice, payment or report in
accordance with the provisions of this Section 16.1 executed by the General
Partner, the
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Transfer Agent or the mailing organization shall be prima facie evidence of the
giving or making of such notice, payment or report. If any notice, payment or
report addressed to a Record Holder at the address of such Record Holder
appearing on the books and records of the Transfer Agent or the Partnership is
returned by the United States Postal Service marked to indicate that the United
States Postal Service is unable to deliver it, such notice, payment or report
and any subsequent notices, payments and reports shall be deemed to have been
duly given or made without further mailing (until such time as such Record
Holder or another Person notifies the Transfer Agent or the Partnership of a
change in his address) if they are available for the Partner at the principal
office of the Partnership for a period of one year from the date of the giving
or making of such notice, payment or report to the other Partners. Any notice to
the Partnership shall be deemed given if received by the General Partner at the
principal office of the Partnership designated pursuant to Section 2.3. The
General Partner may rely and shall be protected in relying on any notice or
other document from a Partner or other Person if believed by it to be genuine.
SECTION 16.2 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be necessary or appropriate to achieve the purposes of this Agreement.
SECTION 16.3 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
SECTION 16.4 Integration. This Agreement constitutes the entire agreement
among the parties hereto pertaining to the subject matter hereof and supersedes
all prior agreements and understandings pertaining thereto.
SECTION 16.5 Creditors. None of the provisions of this Agreement shall be
for the benefit of, or shall be enforceable by, any creditor of the Partnership.
SECTION 16.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach of any other covenant, duty, agreement or
condition.
SECTION 16.7 Third-Party Beneficiaries. Each Partner agrees that any
Indemnitee shall be entitled to assert rights and remedies hereunder as a
third-party beneficiary hereto with respect to those provisions of this
Agreement affording a right, benefit or privilege to such Indemnitee.
SECTION 16.8 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute an agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto or, in the case of a
Person acquiring a Limited Partner Interest, pursuant to Section 10.1(a) without
execution hereto.
SECTION 16.9 Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.
SECTION 16.10 Invalidity of Provisions. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
SECTION 16.11 Consent of Partners. Each Partner hereby expressly consents
and agrees that, whenever in this Agreement it is specified that an action may
be taken upon the affirmative vote or consent of less than all of the Partners,
such action may be so taken upon the concurrence of less than all of the
Partners and each Partner shall be bound by the results of such action.
SECTION 16.12 Facsimile Signatures. The use of facsimile signatures
affixed in the name and on behalf of the transfer agent and registrar of the
Partnership on certificates representing Common Units is expressly permitted by
this Agreement.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
EV ENERGY GP, L.P.
By: EV MANAGEMENT, L.L.C.
its General Partner
By: ________________________________
Name:
Title:
ORGANIZATIONAL LIMITED PARTNER:
ENERVEST MANAGEMENT PARTNERS,
LTD.
By: EnerVest Management GP, L.C.,
its General Partner
By: ________________________________
Name:
Title:
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as Limited Partners of the
Partnership, pursuant to powers of attorney now and hereafter executed in favor
of, and granted and delivered to the General Partner or without execution hereof
pursuant to Section 10.2(a).
EV ENERGY GP, L.P.
By: EV MANAGEMENT, L.L.C.
its general partner
By: ________________________________
Name:
Title:
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EXHIBIT A
to the
First Amended and Restated
Agreement of Limited Partnership
of
EV Energy Partners, L.P.
Certificate Evidencing Common Units
Representing Limited Partner Interests
in
EV Energy Partners, L.P.
No. [ ] [ ]Common Units
In accordance with Section 4.1 of the First Amended and Restated Agreement
of Limited Partnership of EV Energy Partners, L.P., as amended, supplemented or
restated from time to time (the "Partnership Agreement"), EV Energy Partners,
L.P., a Delaware limited partnership (the "Partnership"), hereby certifies that
(the "Holder") is the registered owner of Common Units representing limited
partner interests in the Partnership (the "Common Units") transferable on the
books of the Partnership, in person or by duly authorized attorney, upon
surrender of this Certificate properly endorsed. The rights, preferences and
limitations of the Common Units are set forth in, and this Certificate and the
Common Units represented hereby are issued and shall in all respects be subject
to the terms and provisions of, the Partnership Agreement. Copies of the
Partnership Agreement are on file at, and will be furnished without charge on
delivery of written request to the Partnership at, the principal office of the
Partnership located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
Capitalized terms used herein but not defined shall have the meanings given them
in the Partnership Agreement.
THE HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF EV ENERGY
PARTNERS, L.P. THAT THIS SECURITY MAY NOT BE SOLD, OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED IF SUCH TRANSFER WOULD (A) VIOLATE THE THEN APPLICABLE
FEDERAL OR STATE SECURITIES LAWS OR RULES AND REGULATIONS OF THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL
AUTHORITY WITH JURISDICTION OVER SUCH TRANSFER, (B) TERMINATE THE EXISTENCE OR
QUALIFICATION OF EV ENERGY PARTNERS, L.P. UNDER THE LAWS OF THE STATE OF
DELAWARE, OR (C) CAUSE EV ENERGY PARTNERS, L.P. TO BE TREATED AS AN ASSOCIATION
TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY FOR FEDERAL
INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED). MLP GP, THE
GENERAL PARTNER OF EV ENERGY PARTNERS, L.P., MAY IMPOSE ADDITIONAL RESTRICTIONS
ON THE TRANSFER OF THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH
RESTRICTIONS ARE NECESSARY TO AVOID A SIGNIFICANT RISK OF EV ENERGY PARTNERS,
L.P. BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE AS AN
ENTITY FOR FEDERAL INCOME TAX PURPOSES. THE RESTRICTIONS SET FORTH ABOVE SHALL
NOT PRECLUDE THE SETTLEMENT OF ANY TRANSACTIONS INVOLVING THIS SECURITY ENTERED
INTO THROUGH THE FACILITIES OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS
SECURITY IS LISTED OR ADMITTED TO TRADING.
The Holder, by accepting this Certificate, is deemed to have (i) requested
admission as, and agreed to become, a Limited Partner and to have agreed to
comply with and be bound by and to have executed the Partnership Agreement, (ii)
represented and warranted that the Holder has all right, power and authority
and, if an individual, the capacity necessary to enter into the Partnership
Agreement, (iii) granted the powers of attorney provided for in the Partnership
Agreement and (iv) made the waivers and given the consents and approvals
contained in the Partnership Agreement.
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This Certificate shall not be valid for any purpose unless it has been
countersigned and registered by the Transfer Agent and Registrar.
Dated: _________________ EV Energy Partners, L.P.
Countersigned and Registered by:
By: ________________________________
By: ___________________________________
as Transfer Agent and Registrar
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[Reverse of Certificate]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as follows according to applicable laws or
regulations:
TEN COM -- as tenants in common UNIF GIFT/TRANSFERS MIN ACT
___________Custodian___________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
under Uniform Gifts/Transfers to CD
JT TEN -- as joint tenants with right of Minors Act (state)
survivorship and not as tenants
in common
Additional abbreviations, though not in the above list, may also be used.
A-78
ASSIGNMENT OF COMMON UNITS
EV Energy Partners, L.P.
FOR VALUE RECEIVED, _________________________ hereby assigns, conveys,
sells and transfers unto
______________________________________ _____________________________________
(Please print or typewrite name (Please insert Social Security or
and address of Assignee) other identifying number of Assignee)
Common Units representing limited partner interests evidenced by this
Certificate, subject to the Partnership Agreement, and does hereby irrevocably
constitute and appoint _ _ as its attorney-in-fact with full power of
substitution to transfer the same on the books of EV Energy Partners, L.P.
Date: ________________________________ NOTE: This signature to any
endorsement hereon must correspond
with the name as written upon the
face of this Certificate in every
particular, without alteration,
enlargement or change.
SIGNATURES MUST BE GUARANTEED BY A
MEMBER OF THE FIRM OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALER, INC. _____________________________________
OR BY A COMMERCIAL BANK OR TRUST (Signature)
COMPANY SIGNATURE(S) GUARANTEED
_____________________________________
(Signature)
Exhibit A-1