AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
HEALTHCARE PARTNERS, L.P.
AMENDED AND RESTATED AGREEMENT
OF
LIMITED PARTNERSHIP
OF
Healthcare Partners, L.P.
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of
Healthcare Partners, L.P. (the "Partnership"), dated as of March 18, 1994, among
CFHF Partners, L.P., a Delaware limited partnership ("CFH"), Towers Financial
Corporation, a Delaware corporation, or the successor in interest thereof
("Towers"), on behalf of itself and its subsidiaries as their respective
interests may appear (each, a "Towers Entity") as general partners, and Towers
Limited Partner Subsidiary Corp., as limited partner.
WHEREAS, CFH, as general partner, and ▇▇▇▇ ▇. ▇▇▇▇ as limited
partner, entered into an Agreement of Limited Partnership dated as of March 10,
1994 (the "Original Agreement"); and
WHEREAS, the Certificate of Limited Partnership of the
Partnership was filed with the Office of the Secretary of State of Delaware on
March 8, 1994; and
WHEREAS, Towers desires to be admitted to the Partnership as a
general partner; and
WHEREAS, Towers Limited Partner Subsidiary Corp. desires to be
admitted to the Partnership as a limited partner; and
WHEREAS, ▇▇▇▇ ▇. ▇▇▇▇ will withdraw as a limited partner from
the Partnership; and
WHEREAS, the parties hereto desire to amend and restate the
Original Agreement.
NOW, THEREFORE, in consideration of the covenants and
agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE I
CONTINUATION OF THE PARTNERSHIP
Section 1.1. Continuation of the Partnership. The Partnership
was formed as a limited partnership under the Delaware Act (as defined below) by
the filing of the Certificate of Limited Partnership of the Partnership with the
Office of the Secretary of State of Delaware on March 8, 1994. The parties
hereto agree to continue the Partnership.
Section 1.2. Name and Principal Office; Registered Agent and
Registered Office. (a) The name of the Partnership is "Healthcare Partners,
L.P.", as such name may be modified from time to time by the General Partners
following written notice to the Limited Partners. The principal office of the
Partnership shall be located as ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, but the Management Committee may change the location of the
Partnership's principal office within or outside the State of Delaware and may
establish such additional offices of the Partnership within or outside the State
of Delaware as it may from time to time determine.
(b) The name of the registered agent for service of process on
the Partnership in the State of Delaware is The ▇▇▇▇▇▇▇▇-▇▇▇▇ Corporation
System, Inc. The address of the registered agent and the address of the
registered office of the Partnership in the State of Delaware is ▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Section 1.3. Business of the Partnership. Subject to the
limitations on the activities of the Partnership otherwise specified in this
Agreement, the Partnership is organized for the following objectives and
purposes:
(a) to carry on certain of the businesses previously conducted
by Towers or its subsidiaries, including financing of providers of medical or
other healthcare services by way of loans, accounts receivable purchases or
prefunding of revenues and to provide billing and accounts receivable management
services to providers of medical or other healthcare services (the "Healthcare
Finance Business"); and
(b) to enter into, make and perform all contracts and other
undertakings, and engage in all activities and transactions as the Management
Committee may reasonably deem necessary or advisable to the carrying out of the
foregoing objectives and purposes.
Section 1.4. Term. The term of the Partnership commenced on
March 8, 1994 and shall continue until December 31, 2019, unless the Partnership
is earlier dissolved and terminated in accordance with the provisions of this
Agreement.
ARTICLE II
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings set forth below:
"Accountants" means such firm of independent public
accountants as shall be engaged from time to time by the Partnership.
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"Additional Limited Partners" has the meaning set forth in
Section 9.7.
"Affiliate" means, with respect to a specified Person, (i) any
Person directly or indirectly owning, controlling or holding the power to vote
25% or more of the outstanding voting securities or other ownership interests of
the specified Person, (ii) any Person 25% of more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (iii) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, (iv) a partnership in which the specified Person is a
general partner, (v) any officer or director of the specified Person, and (vi)
if the specified Person is an officer, director, general partner or employee,
any other entity for which the specified Person acts in any such capacity.
"Agreement" means this Amended and Restated Agreement of
Limited Partnership, as amended, modified or supplemented from time to time.
"Applicable Sharing Percentage" means, at any date of
determination,
(a) as to CFH:
(i) until the amount of Cumulative Net Income that has
been earned by the Partnership equals $60 million, 27%;
(ii) thereafter until the amount of Cumulative Net
Income that has been earned by the Partnership equals $100 million,
30%;
(iii) thereafter until the amount of Cumulative Net
Income that has been earned by the Partnership equals $180 million,
46%; and
(iv) thereafter, 65%.
(b) as to each of the other Partners, such Partner's Capital
Account Share of:
(i) until the amount of Cumulative Net Income that has
been earned by the Partnership equals $60 million, 73%;
(ii) thereafter until the amount of Cumulative Net
Income that has been earned by the Partnership equals $100 million,
70%;
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(iii) thereafter until the amount of Cumulative Net
Income that has been earned by the Partnership equals $180 million,
54%; and
(iv) thereafter, 35%.
Notwithstanding the foregoing in clauses (a) and (b) above of
this definition of "Applicable Sharing Percentage," if cumulative distributions
made to all Partners other than CFH (from any source whatsoever other than a
distribution of Unrecovered Capital or a Quarterly Yield Amount) for all periods
ended on or prior to December 31, 1997 are less than $64.5 million, then the
percentage in (a)(iv) above shall be 60% (instead of 65%) and the percentage in
(b)(iv) above shall be 40% (instead of 35%) (regardless of any subsequent events
or circumstances).
Whenever it is necessary to allocate an amount of Net Income
or Net Loss at a time when Cumulative Net Income determined without regard to
such amount is below or above a particular threshold set forth in this
definition of "Applicable Sharing Percentage" and Cumulative Net Income
determined with regard to such amount would exceed or fall below such threshold,
as the case may be, then the Applicable Sharing Percentage applicable to such
allocation shall be determined as if such allocation were of two separate
amounts of Net Income or Net Loss, the first in an amount that causes Cumulative
Net Income to equal such threshold and the second in the remaining amount of
such Net Income or Net Loss.
"Bankruptcy" of a Partner shall mean (i) the filing by such
Partner of a voluntary petition seeking liquidation, reorganization, arrangement
or readjustment, in any form, of its debts under Title 11 of the United States
Code or any other federal or state insolvency law, or such Partner filing an
answer consenting to or acquiescing in any such petition, (ii) the making by
such Partner of any assignment for the benefit of its creditors, (iii) the entry
of an order for relief against a Partner as a debtor under Title 11 of the
United States Code or any other federal or state insolvency law, or (iv) the
expiration of 60 days after the filing of an involuntary petition under Title 11
of the United States Code, an application for the appointment of a receiver for
the assets of such Partner or an involuntary petition seeking liquidation,
reorganization, arrangement or readjustment of its debts under any other federal
or state insolvency law, provided that the same shall not have been vacated, set
aside or stayed within such 60-day period.
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"Business Day" means any day other than Saturday, Sunday or
other day on which commercial banks located in New York City are authorized to
be closed.
"Capital Account" means, with respect to any Partner, the
capital account of such Partner maintained and adjusted as provided in Article
IV.
"Capital Account Share" means, with respect to any Partner
other than CFH at any date, a fraction, the numerator of which is the Capital
Account balance of such Partner at such date and the denominator of which is the
sum of the Capital Account balances at such date of all Partners other than CFH;
provided, however, that if at any time the Capital Account balance of all
Partners other than CFH shall be zero or negative, the "Capital Account Share"
of such Partners shall be determined by reference to such Partners' Capital
Account balances immediately preceding the allocation or distribution which
reduced said balance to or below zero.
"Capital Contribution" means any cash or other property which
a Partner contributes to the Partnership pursuant to Article III (net of
liabilities assumed by the Partnership).
"Capital Liquidation Amount" has the meaning set forth in
Section 11.3.
"Certificate" means the Certificate of Limited Partnership of
the Partnership, as amended, modified or supplemented from time to time.
"CFH" has the meaning set forth in the preamble of this
Agreement.
"CFH Principal Owner" means ▇▇▇▇ ▇. ▇▇▇▇.
"CFH Required Capital Amount" means, at any date, an amount
equal to 1.86 times the sum of (i) the greater of (a) the aggregate amount of
the Unrecovered Capital of all Partners other than CFH at such date or (b) the
aggregate balance of the Capital Accounts of all Partners other than CFH at such
date, plus (ii) if any, the aggregate Unpaid Quarterly Yield Amount of all
Partners other than CFH at such date.
"Closing Date" means the date of the closing of the
transactions contemplated by the Contribution Agreement as set forth therein.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, any successor thereto and applicable regulations thereunder.
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"Competing Business" has the meaning set forth in Section 7.2.
"Contribution Agreement" means the Agreement, dated as of
March 18, 1994, by and among Towers, CFH, Towers Collection Service,
Incorporated, and the Partnership relating to the contribution of assets to the
Partnership and other transactions, and includes any other agreements or
instruments executed by any such parties pursuant thereto.
"Cumulative Net Income" means, as of any date, the excess of
(a) the aggregate amount of Net Income allocated to the Partners pursuant to
Section 4.4(a), Soft Asset Net Income allocated to the Partners pursuant to
Section 4.6(b) and items of income and gain allocated pursuant to Section
4.6(a), in each case for each Fiscal Year (or portion thereof) ending on or
before such date, over (b) the aggregate amount of Net Loss allocated to the
Partners pursuant to Section 4.4(b) for each Fiscal Year (or portion thereof)
ending on or before such date.
"Delaware Act" means the Delaware Revised Uniform Limited
Partnership Act, as it may be amended from time to time, and any successor to
such Act.
"Dissolution Date" means December 31, 2019.
"Distribution Value" means the Value of any Partnership Asset
distributed by the Partnership (net of the Value of all Partnership Liabilities
that the Partner to whom such asset is distributed is treated as assuming or
taking subject to in connection with such distribution pursuant to the
provisions of Section 752 of the Code).
"Event of Withdrawal" has the meaning specified in Section
11.2(a)(ii).
"Family Members" means with respect to any natural person,
such person's spouse, such person's parents and lineal descendants of such
parents.
"Family Trusts" means with respect to any natural person, a
trust benefiting solely such Person and the Family Members of such natural
person.
"First Reserve Amount" has the meaning set forth in Section
5.3(b)(i).
"Fiscal Quarter" means each of the three month periods ending
March 31, June 30, September 30 and December 31 in each Fiscal Year.
"Fiscal Year" means the fiscal year of the Partnership
established pursuant to Section 10.3.
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"General Partner" means any general partner in the
Partnership.
"Healthcare Finance Business" has the meaning specified in
Section 1.3(a).
"Income Taxes" has the meaning set forth in Section 6.11.
"Indemnified Party" has the meaning specified in Sections 6.11
and 8.3.
"Interest", when used in reference to an interest in the
Partnership, means the entire ownership interest of a Partner in the Partnership
at any particular time, including, without limitation, its interest in the
capital, income, losses and distributions of the Partnership.
"Limited Partner" means each Person admitted to the
Partnership as a limited partner pursuant to the terms of this Agreement.
"Liquidator" has the meaning set forth in Section 11.2(b).
"Management Committee" means the committee specified in
Section 6.1.
"Net Income" and "Net Loss" mean the net income or net loss,
respectively, for any Fiscal Year or portion thereof determined in accordance
with generally accepted accounting principles consistently applied, computed
with the following adjustments:
(a) items of income, gain, loss and deduction allocated
pursuant to Section 4.6(a) and items of income, gain, loss and deduction
comprising the Soft Asset Net Income shall not be taken into account in
computing Net Income and Net Loss; and
(b) to the extent not already taken into account, Quarterly
Yield Amounts paid by the Partnership pursuant to Sections 5.3(c) and 5.4(b)
shall be treated as deductible expenses.
"Net Income" and "Net Loss" of the Partnership shall be
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Original Agreement" has the meaning set forth in the preamble
of this Agreement.
"Partner" means a General Partner or a Limited Partner.
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"Partnership" means the limited partnership continued pursuant
to this Agreement.
"Partnership Asset" means any property or asset of the
Partnership, and "Partnership Assets" means the aggregate of all of the property
and assets of the Partnership.
"Partnership Books and Records" has the meaning set forth in
Section 10.2.
"Partnership Liability" means any debt, liability or
obligation of the Partnership (whether fixed, accrued, unmatured or contingent),
and "Partnership Liabilities" means the aggregate of all such debts, liabilities
and obligations of the Partnership.
"Person" means any individual, partnership, association,
corporation, trust or other entity.
"Presumed Tax Liability" for CFH for any Fiscal Year, means an
amount equal to the product of (a) the cumulative net taxable income of the
Partnership allocated to CFH as of the end of such Fiscal Year as certified to
the Partnership by the independent public accountants of the Partnership and (b)
45%.
"Quarterly Capital Distribution Amount" means, (a) with
respect to any Partner other than CFH, at any date, an amount equal to the sum
of (i) the product of (x) the sum of (I) $1,750,000 (representing one-twentieth
of the aggregate initial Values of all the Capital Contributions made on the
Closing Date by the Partners other than CFH) and (II) an amount equal to the
product of (A) a fraction, the numerator of which is one and the denominator of
which is the excess of 20 over the number of quarters of a Fiscal Year for which
payment of a Quarterly Capital Distribution Amount has become due to such
Partner and (B) the amount of all Capital Contributions made by all Partners
other than CFH subsequent to the initial Capital Contributions of such Partners
on the Closing Date, and (y) such Partner's Capital Account Share at such date
and (ii) the Unpaid Quarterly Capital Distribution Amount of such Partner at
such date, and (b) with respect to CFH, at any date, an amount equal to the sum
of (i) $272,500 (representing one-twentieth of the initial Value of the Capital
Contribution made on the Closing Date by CFH), (ii) an amount equal to the
product of (A) a fraction, the numerator of which is one and the denominator of
which is the excess of 20 over the number of quarters of a Fiscal Year for which
payment of a Quarterly Capital Distribution Amount has become due to CFH and (B)
the amount of all Capital Contributions made by CFH subsequent to the initial
Capital Contributions of CFH on the Closing Date, and (iii) the Unpaid Quarterly
Capital Distribution Amount of CFH at such date.
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"Quarterly Yield Amount" means, with respect to any Partner
for any Fiscal Quarter, the sum of (i) the product of (a) 0.015 and (b) the
Unrecovered Capital of such Partner as of the beginning of such Fiscal Quarter
and (ii) the product of (x) 1.015 and (y) the Unpaid Quarterly Yield Amount of
such Partner as of the beginning of such Fiscal Quarter.
"Regulation" means a Treasury Regulation promulgated under the
Code.
"Restrictive Period" has the meaning set forth in Section 7.2.
"Second Reserve Amount" has the meaning set forth in Section
5.3(b)(ii).
"Soft Asset Net Income" means, for any Fiscal Year, the net
income for such Fiscal Year with respect to the Soft Assets, determined in
accordance with generally accepted accounting principles consistently applied.
"Soft Assets" means the assets contributed by Towers to the
Partnership on the Closing Date other than cash.
"Substituted Limited Partner" means any Person admitted to the
Partnership as a substituted Limited Partner pursuant to the provisions of
Article IX.
"Tax Distribution" has the meaning set forth in Section 5.2.
"Tax Matters Partner" has the meaning set forth in Section
6.10.
"Territory" has the meaning set forth in Section 7.2.
"Third Reserve Amount" has the meaning set forth in Section
5.3(b)(iii).
"Towers" has the meaning set forth in the preamble of this
Agreement.
"Towers Collection" has the meaning set forth in the preamble
of this Agreement.
"Towers Entity" has the meaning set forth in the preamble of
this Agreement.
"Transfer" has the meaning set forth in Section 9.1.
"Two-Thirds-in-Interest" of certain Partners or all the
Partners as the case may be at any time means Partners whose aggregate Capital
Account balances are equal to or exceed 66 2/3%
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of the aggregate Capital Account balances of all such Partners at such time.
"Undistributed Income" means, with respect to any Partner, at
any date, the excess, if any, at such date, of the positive balance in such
Partner's Capital Account over the amount of such Partner's Unrecovered Capital.
"Unpaid Quarterly Capital Distribution Amount" means, with
respect to any Partner, at any date, an amount equal to all or any portion of
any Quarterly Capital Distribution Amount not distributed by the Partnership to
such Partner as and when required to be distributed pursuant to Sections 5.3(d)
and 5.4(c).
"Unpaid Quarterly Yield Amount" means, with respect to any
Partner, for any Fiscal Quarter, an amount equal to all or any portion of any
Quarterly Yield Amount not paid by the Partnership to such Partner as and when
required to be paid pursuant to Sections 5.3(c) and 5.4(b).
"Unrecovered Capital" means, (A) with respect to any Partner
other than CFH, at any date, the product of (i) the positive excess, if any, as
of such date of (a) the sum of (I) $35,000,001 (being the initial Value of all
Capital Contributions made to the Partnership by all Partners other than CFH
pursuant to Section 3.1(a)), and (II) the initial Value of any Capital
Contributions made to the Partnership by the Partners other than CFH pursuant to
Section 3.5 over (b) the aggregate amount, if any, of all distributions
previously made to all Partners other than CFH pursuant to Sections 5.3(d),
5.3(e) and 11.3(e), and (ii) such Partner's Capital Account Share at such date,
and (B) with respect to CFH, at any date, the positive excess, if any, as of
such date of (a) the sum of (I) $5,450,000 (being the initial Value of the
Capital Contributions made to the Partnership by CFH pursuant to Section 3.1(b))
and (II) the initial Value of any Capital Contributions made to the Partnership
by CFH pursuant to Section 3.5 over (b) the aggregate amount, if any, of all
distributions previously made to CFH pursuant to Sections 5.4(a), 5.4(c) and
11.3(f).
"Value" of any Partnership Asset or Partnership Liability, as
the case may be, as of any date, means the fair market value of such Partnership
Asset or Partnership Liability, as the case may be, as of such date.
ARTICLE III
CAPITAL CONTRIBUTIONS
Section 3.1. Initial Capital Contributions. (a) On the Closing
Date, Towers shall contribute (i) an aggregate of $20,000,000 in cash and (ii)
such of its assets as provided in
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the Contribution Agreement. On the Closing Date, Towers Limited Partner
Subsidiary Corp. shall contribute $1 in cash.
(b) On the Closing Date, CFH shall contribute (or shall cause
its Affiliates to contribute on behalf of CFH) to the Partnership (i) $5,000,000
in cash, and (ii) such of its (or its Affiliates') assets as provided in the
Contribution Agreement.
Section 3.2. Towers Assets. (a) Solely for purposes of this
Agreement, the Partners acknowledge and agree that the aggregate Value of the
assets initially contributed to the Partnership by Towers pursuant to Section
3.1(a)(ii) and the Contribution Agreement (but not the cash contributed pursuant
to Section 3.1(a)(i)), is equal to $15,000,000.
(b) The allocation of Value to each Partnership Asset referred
to in Section 3.2(a) shall be jointly determined by the Partners as soon as
reasonably practicable after the Closing Date. If the Partners cannot agree on
the allocation of Value to any asset or assets, then the determination shall be
made by a nationally recognized accounting firm mutually acceptable to the
Partners.
Section 3.3. CFH Assets. Solely for purposes of this
Agreement, the Partners acknowledge and agree that the aggregate Value of the
assets initially contributed to the Partnership by CFH pursuant to Section
3.1(b)(ii) of this Agreement and the Contribution Agreement (but not the cash
contributed pursuant to Section 3.1(b)(i)), is equal to $450,000.
Section 3.4. No Withdrawal of Interest. No Partner shall be
entitled to withdraw any part of such Partner's Capital Contribution or any
Capital Account, or to receive any distribution from the Partnership, except as
otherwise provided in this Agreement.
Section 3.5. Other Contributions. (a) In addition to required
capital contributions pursuant to Section 3.1, with the approval of the
Management Committee, any Partner may make voluntary contributions of capital
from time to time in cash.
(b) Except as otherwise provided in this Agreement and the
Delaware Act, no Partner shall be obligated to make any contribution of capital
or have any liability for the debts and obligations of the Partnership.
(c) Whenever a Partner (other than CFH) makes a capital
contribution pursuant to this Section 3.5 or upon the issuance by the
Partnership of a Limited Partner Interest, CFH shall make an additional capital
contribution to the Partnership in an amount equal to 1.01% of such Partner's
capital contribution or such lesser amount, if any, necessary to maintain a
balance in CFH's Capital Account (determined in accordance with
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Article IV) equal to the lesser of (i) 1% of the total positive Capital Account
balances of the Partners, and (ii) $500,000.
Section 3.6. Advances to Partnership. Except for the Capital
Contributions provided for in this Article III, if any Partner shall advance
funds to the Partnership, whether pursuant to Section 6.7 or otherwise, the
amount of such advance shall not result in an increase in such Partner's Capital
Account or entitle such Partner to an increase in such Partner's share of the
income or distributions of the Partnership or subject such Partner to any
greater portion of any losses which the Partnership may sustain.
ARTICLE IV
CAPITAL ACCOUNTS; ALLOCATION OF
NET INCOME AND NET LOSS
Section 4.1. Capital Accounts. There shall be established and
maintained for each Partner, on the books and records of the Partnership, a
"Capital Account". The initial capital account balance of each Partner shall be
an amount equal to the aggregate net Value of the assets contributed by such
Partner to the Partnership.
Section 4.2. Capital Account Adjustments. Each Partner's
Capital Account shall be maintained and adjusted as follows: There shall be
credited to each Partner's Capital Account (i) the amount of any cash
contributed by such Partner to the capital of the Partnership, (ii) the Value of
any Property contributed by such Partner to the capital of the Partnership (net
of any liability secured by such property that the Partnership is considered to
assume or take subject to under Section 752 of the Code), and (iii) the amount
of any Net Income allocated to such Partner pursuant to Section 4.4(a), the
amount of any Soft Asset Net Income allocated to such Partner pursuant to
Section 4.6(b) and the amount of any items of income or gain allocated to such
Partner pursuant to Section 4.6(a); and there shall be charged against each
Partner's Capital Account (A) the amount of all cash distributions made to such
Partner by the Partnership (other than Quarterly Yield Amounts), (B) the
Distribution Value of any property distributed to such Partner by the
Partnership, and (C) the amount of any Net Loss Allocated to such Partner
pursuant to Section 4.4(b) and the amount of any items of loss, deduction or
credit allocated to such Partner pursuant to Section 4.6(a). Whenever property
of the Partnership is to be distributed in kind to a Partner, the Capital
Accounts of the Partners shall be adjusted immediately prior to such
distribution to reflect the manner in which the unrealized income, gain, loss
and deduction inherent in such property would be allocated among the Partners if
there were a taxable disposition of the property for its then current fair
market
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value (as determined in the reasonable judgment of the Management Committee)
immediately prior to such distribution.
Section 4.3. Ordering Rule. Whenever it is necessary to
determine the Capital Account of any Partner, the Capital Account of such
Partner shall be determined after giving effect to all allocations pursuant to
this Article IV and all contributions and distributions made prior to the time
as of which such determination is to be made.
Section 4.4. Allocation of Net Income and Net Loss. Except as
provided in Section 4.6, the Partnership's Net Income or Net Loss, as the case
may be, and each item of income, gain, loss and deduction entering into the
computation thereof for each Fiscal Year (or portion thereof) shall be allocated
among the Partners as follows:
(a) Net Income for each Fiscal Year (or portion thereof) shall
be allocated in the following amounts and order of priority:
(i) first, to CFH, an amount equal to its negative Capital
Account balance, if any;
(ii) second, to the Partners to the extent of and in
proportion to the excess, if any, of the cumulative amount of Net Loss
previously allocated to such Partners pursuant to Section 4.4(b)(ii)
over the cumulative amount of Net Income previously allocated to such
Partners pursuant to this Section 4.4(a)(ii); and
(iii) thereafter, to the Partners in proportion to their
respective Applicable Sharing Percentages.
(b) Net Loss for each Fiscal Year (or portion thereof) shall
be allocated in the following amounts and order of priority:
(i) first, to each of the Partners to the extent of and in
proportion to the excess, if any, of the positive Capital Account
balance of such Partner over the Unrecovered Capital of such Partner;
(ii) second, to the Partners in proportion to their respective
positive Capital Account balances, an amount equal to the sum of the
positive Capital Account balances of all Partners; and
(iii) thereafter, to CFH.
Section 4.5. Affiliates Transactions. The Partnership shall
not directly or indirectly pay (or agree to pay) to CFH, its partners or their
respective Affiliates any amount including but not limited to amounts for
management fees, salaries or other
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compensation or fees for the performance of services or payments for the
purchase or lease of property of more than (i) $800,000 in the cumulative period
through the end of the first four Fiscal Quarters including and following the
date of this Agreement, and $960,000 for each subsequent period of four
consecutive Fiscal Quarters or (ii) the Fair Market Value of the consideration
received for such payment, whichever is less; provided, however, that in no
event shall any such payment be made if the recipient thereof (other than ▇▇▇▇
▇. ▇▇▇▇) is not engaged, independently of the Partnership and as an ordinary and
ongoing business, in the business of rendering the consideration for such
payment to a substantial extent to other Persons. For purposes of this Section,
"Fair Market Value" shall mean the consideration which is at least as favorable
to the Partnership as that which it could obtain in a transaction with a
non-Affiliate on an arm's length basis.
Section 4.6. Provisions Having General Applicability. (a)
Notwithstanding anything else contained in this Article IV, if any Partner other
than CFH has a deficit balance in its Capital Account for any Fiscal Year as a
result of any adjustment of the type described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4) through (6), then items of Partnership income and gain
will be allocated to such Partner in an amount and manner sufficient to
eliminate such deficit as quickly as possible. Any allocation of items of income
and gain pursuant to this Section 4.6(a) shall be taken into account in
computing subsequent allocations pursuant to this Article IV so that the
cumulative net amount of all items allocated to such Partner shall, to the
extent possible, be equal to the amount that would have been allocated to such
Partner if there had never been any allocation pursuant to this Section 4.6(a).
(b) For each Fiscal Year, the amount of any Soft Asset Net
Income for such Fiscal Year shall be allocated 90% to the Partners other than
CFH, in accordance with their Capital Account Shares, and 10% to CFH.
(c) All matters concerning the determination of Net Income or
Net Loss, the allocations required by Sections 4.4, 4.6 and 4.7 and any
accounting procedures, policies or determinations not expressly provided for by
the terms of this Agreement, shall be determined in good faith, on a consistent
basis, and Towers or a Person or Persons designated by Towers shall have the
opportunity to review and object to any determination made by the Management
Committee. In the case of any such dispute that is not resolved to the
satisfaction of all the parties within 60 days from the date that an objection
is made, any party to the dispute may submit the dispute to binding arbitration
in accordance with the procedures of the American Arbitration Association
governing the arbitration of disputes regarding accounting matters.
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(d) The Quarterly Yield Amount of any Partner shall be treated
by the Partnership and by such Partner for all purposes of this Agreement and
for federal income tax purposes as a "guaranteed payment" within the meaning of
Section 707(c) of the Code.
Section 4.7. Allocation For Income Tax Purposes. For tax
purposes, income, gain, losses, deductions and credits of the Partnership shall
be allocated in accordance with the principles of Section 704(b) of the Code and
the Treasury Regulations thereunder so as to reflect as closely as possible,
both currently and on a cumulative basis, the economic benefits and burdens to
the respective Partners of the allocations provided for in Sections 4.4 and 4.6
and the distributions made pursuant to Article V and Section 11.3; provided,
however, that in accordance with Section 704(c) of the Code, taxable income,
gain, loss, deduction and credit with respect to any Partnership Asset
contributed to the Partnership shall be allocated among the Partners so as to
take account of the variation between the adjusted tax basis of such Partnership
Asset and its Value under such method, consistent with any Treasury Regulations
promulgated under Section 704(c) of the Code, as shall be selected by the Towers
designees to the Management Committee. The Partners intend that these
allocations of taxable income or loss will have substantial economic effect, and
will reflect the Partners' economic interests in the Partnership, in accordance
with the principles of Section 704(b) of the Code and the Treasury Regulations
thereunder. The Partners understand that, by reason of timing differences, the
Partners may not realize items of taxable income or loss with the same taxable
year as the Partnership allocates items of Net Income or Net Loss, and agree to
use their best efforts to cause the allocations of items of taxable income or
loss, as required by this Section 4.7, to produce, as closely as possible, the
same results to the Partners as would occur if the requirements of Treas. Reg.
Sections 1.704-1(b)(2)(ii)(b)(1), (2) and (3) and 1.704-1(b)(2)(ii)(d) were
satisfied. To accomplish the above purposes, the Partners undertake as promptly
as practicable to consider and if possible approve a protocol or procedure, to
be consistently applied, for the administrative implementation of this Section
4.7.
ARTICLE V
DISTRIBUTIONS; PAYMENTS; WITHDRAWALS
Section 5.1. Distributions Generally. (a) Except for any
distributions expressly required or permitted to be made pursuant to this
Article V, and subject to the provisions of Section 5.1(b), no distributions of
cash or other property of the Partnership shall be made to any Partner except
with the prior written consent of all the General Partners and the prior consent
of at least five members of the Management Committee.
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(b) Notwithstanding anything herein to the contrary, no
distribution or payment pursuant to this Agreement shall be made if such
distribution or payment would violate the Delaware Act.
(c) All distributions and payments required to be made to the
Partners pursuant to Section 5.3 or 5.4 with respect to any Fiscal Quarter shall
be made, in accordance with the provisions of such Sections, on the same date.
Section 5.2. Tax Distributions to CFH. CFH shall have the
right to receive, with respect to each Fiscal Year beginning with the Fiscal
Year beginning January 1, 1994, a cash distribution (a "Tax Distribution") in an
amount equal to the excess of (i) CFH's Presumed Tax Liability as of the end of
such Fiscal Year over (ii) the sum of (A) all amounts distributed to CFH by the
Partnership during such Fiscal Year and all prior Fiscal Years and (B) all
amounts (other than amounts referred to in Section 5.2(ii)(A) above) distributed
to CFH effective as of the last day of such Fiscal Year pursuant to Section
5.4(a). The Partnership shall distribute, not earlier than 45 days nor later
than 90 days following the end of each Fiscal Year, to CFH an amount of cash
equal to CFH's Tax Distribution with respect to such Fiscal Year unless CFH
shall have notified the Partnership not later than 90 days following the end of
such Fiscal Year that it does not wish to receive such distribution.
Section 5.3. Distributions and Payments to Partners Other
Than CFH.
(a) Required Income Distributions. Except as otherwise
provided in Section 5.3(b) or 5.5, as soon as practicable (but not later than 45
days) after the end of each Fiscal Quarter, the Partnership shall distribute to
each Partner other than CFH cash in the amount of such Partner's Undistributed
Income as of the end of such Fiscal Quarter.
(b) Initial Periods. Notwithstanding the foregoing in clause
(a) of this Section 5.3:
(i) the first distribution to each Partner pursuant to Section
5.3(a) shall be with respect to the cumulative period ending at the end
of the Fiscal Quarter ending June 30, 1994 in an amount equal to
one-half of the Undistributed Income of such Partner as of the end of
such Fiscal Quarter (and the other half shall be referred to as the
"First Reserve Amount");
(ii) the second distribution to each Partner pursuant to
Section 5.3(a) shall be with respect to the Fiscal Quarter ending
September 30, 1994 in an amount equal to one-half of the excess of (A)
the Undistributed Income of such Partner as of September 30, 1994 over
(B) the First Reserve
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Amount of such Partner (and the other half shall be referred to as the
"Second Reserve Amount");
(iii) the third distribution to each Partner to Section 5.3(a)
shall be with respect to the Fiscal Quarter ending December 31, 1994 in
an amount equal to one-half of the excess of (A) the Undistributed
Income of such Partner as of December 31, 1994, over (B) the sum of the
First Reserve Amount of such Partner and the Second Reserve Amount of
such Partner (and the other half shall be referred to as the "Third
Reserve Amount"); and
(iv) (without limiting in any way any subsequent
distributions) the balance of the amount due to each Partner under
Section 5.3(a) and this Section 5.3(b) as of the end of the Fiscal
Quarter ending December 31, 1994 (i.e., the sum of the First Reserve
Amount of such Partner, the Second Reserve Amount of such Partner, and
the Third Reserve Amount of such Partner) shall be distributed in cash
to such Partner in three equal installments at such time as
distributions are made (or would be required to be made) with respect
to the Fiscal Quarters ending on March 31, 1995, June 30, 1995 and
September 30, 1995 (or, if any such distribution is not required to be
made, on the forty-fifth day following such Fiscal Quarter as to which
such distribution is not required to be made.
(c) Required Yield Payments. Beginning with the Fiscal Quarter
that begins on January 1, 1999, as soon as practicable (but not later than 45
days) after the end of each Fiscal Quarter, the Partnership shall pay to each
Partner other than CFH the Quarterly Yield Amount of such Partner for such
Fiscal Quarter. Any Quarterly Yield Amount of a Partner not so paid shall be the
Unpaid Quarterly Yield Amount of such Partner (as provided in the definition of
the term "Unpaid Quarterly Yield Amount") and shall be paid to such Partner in
accordance with the terms of this Agreement.
(d) Required Capital Distributions. Beginning with the first
full Fiscal Quarter that begins after the date when Cumulative Net Income as
equaled $180,000,000 (and regardless of any subsequent decreases, if any, in
Cumulative Net Income) (but in any event not later than the Fiscal Quarter
beginning January 1, 2004), and continuing until the aggregate Unrecovered
Capital for all Partners other than CFH equals zero, as soon as practicable (but
in any event not later than 45 days) after the end of each Fiscal Quarter, the
Partnership shall distribute to each Partner other than CFH the Quarterly
Capital Distribution Amount of such Partner for such Fiscal Quarter.
(e) Optional Capital Distributions. Effective as of the end of
any Fiscal Quarter, within 45 days after the end of such Fiscal Quarter, CFH may
cause the Partnership to distribute
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to all Partners other than CFH, in proportion to their Capital Account Shares,
all or any part of the aggregate Unrecovered Capital of all Partners other than
CFH as of such date (without limiting in any way any required distributions
pursuant to Section 5.3(d) or otherwise).
Section 5.4. Distributions and Payments to CFH.
(a) General. Except as provided in Section 5.5, upon proper
notice by CFH as described in the following sentence, CFH shall be entitled to
receive a distribution from the Partnership, as soon as practicable (but not
later than 45 days) after (and effective as of) the end of each Fiscal Year, in
an amount equal to all or any part of the positive balance, if any, of the
Capital Account of CFH as of such date, and the Partnership shall make such
distribution on the date specified in the notice; provided, however, that,
except for Tax Distributions pursuant to Section 5.2, CFH shall have no right to
receive any distribution to the extent that giving effect to such distribution
for Capital Account adjustment purposes, the balance of the Capital Account of
CFH would be less than the CFH Required Capital Amount. If CFH desires to
receive any distribution described in this Section 5.4, CFH shall provide
written notice to the other General Partners, if any, the members of the
Management Committee and the Partnership, which notice shall state the amount to
be distributed (consistent with the provisions of this Section 5.4) and the date
the distribution is to be made, which date shall be no earlier than 45 days
after the date of the notice.
(b) Required Yield Payments. Beginning with the Fiscal Quarter
that begins on January 1, 1999, as soon as practicable (but not later than 45
days) after the end of each Fiscal Quarter, the Partnership shall pay to CFH the
Quarterly Yield Amount of CFH for such Fiscal Quarter. Any Quarterly Yield
Amount of CFH not so paid shall be the Unpaid Quarterly Yield Amount of CFH (as
provided in the definition of the term "Unpaid Quarterly Yield Amount") and
shall be paid to CFH in accordance with the terms of this Agreement.
(c) Required Capital Distributions. Beginning with the first
full Fiscal Quarter that begins after the date when Cumulative Net Income has
equaled $180,000,000 (and regardless of any subsequent decreases, if any, in
Cumulative Net Income) but in any event not later than the Fiscal Quarter
beginning January 1, 2004), and continuing until the aggregate Unrecovered
Capital for CFH equals zero, as soon as practicable (but in any event not later
than 45 days) after the end of each Fiscal Quarter, the Partnership shall
distribute to CFH the quarterly Capital Distribution Amount of CFH for such
Fiscal Quarter.
Section 5.5. Distributions Pursuant to a Liquidation.
Distributions pursuant to a liquidation of the Partnership shall be made in
accordance with the provisions of Section 11.3.
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ARTICLE VI
POWERS, RIGHTS AND DUTIES OF THE
GENERAL PARTNERS' MANAGEMENT COMMITTEE
Section 6.1. Authority. (a) Subject to the limitations
provided in this Agreement, the business and affairs of the Partnership shall be
exclusively controlled by a management committee (the "Management Committee")
consisting of six members, four of whom shall be designated by CFH and two of
whom shall be such Person or Persons as the official unsecured creditors'
committee in the Towers Bankruptcy Case (the "Creditors' Committee"), so long as
such committee is in existence, may designate, or as otherwise provided by order
of the Bankruptcy Court (as defined in the Contribution Agreement). For so long
as the Trustee shall continue to serve as the chapter 11 trustee of Towers, such
Trustee shall be an ex officio member of the Management Committee entitled to
notice of and to attend all meetings of the Management Committee, but shall have
no vote as a member of the Management Committee. Any action taken by the
Management Committee shall constitute the act of and serve to bind the
Partnership. In dealing with the Management Committee acting on behalf of the
Partnership no Person shall be required to inquire into the authority of the
Management Committee to bind the Partnership. Persons dealing with the
Partnership are entitled to rely conclusively on the power and authority of the
Management Committee as set forth in this Agreement.
(b) The Management Committee shall meet quarterly on the
second Wednesday of the fist month of each calendar quarter and at any other
time upon the request of any Management Committee member (but in no event more
than two additional times per Fiscal Year at the request of a Towers designee to
the Management Committee), provided not less than ten days' advance written
notice is given for any such meeting unless such notice is waived by the
unanimous consent of the members of the Management Committee. Such notice shall
include an agenda for the meeting and the text of any proposed resolutions for
adoption. Such meetings may be held by any means permissible under the laws of
the State of Delaware. Members of the Management Committee holding at least
three votes and present (or substitute members with written proxy) at any
meeting shall constitute a quorum for purposes of transacting business at a
meeting of the Management Committee. The vote of the members present at a
meeting (or by proxy) and holding a majority of the votes shall, except as
provided in Section 6.3, be the act of the Management Committee. Members of the
Management Committee who are not employees or Affiliates (other than solely by
virtue of serving on the Management Committee) of the Partnership will be
compensated at the rate of $500 per meeting attended and reimbursed for actual
out-of-pocket expenses associated with attending meetings of the Management
Committee, and will be
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indemnified by the Partnership to the fullest extent permitted by Delaware law.
The two Towers designees to the Management Committee shall be reimbursed by the
Partnership for premiums paid for director and officer liability insurance in
connection with his or her role as a member of the Management Committee in an
aggregate amount for both Towers designees not to exceed $50,000 annually.
(c) The decisions of the Management Committee shall be
implemented by one or more of the General Partners or such other Persons as the
Management Committee may designate from time to time.
Section 6.2. Powers and Duties of the Management Committee.
Except as otherwise specifically provided herein, the Management Committee shall
have the rights and powers of a general partner under the Delaware Act, and
shall have all authority, rights and powers in the management of the Partnership
business to do any and all other acts and things necessary, proper, convenient
or advisable to effectuate the purposes of this Agreement, including by way of
illustration but not by way of limitation, the following:
(a) to acquire, hold, sell, transfer, exchange, pledge,
dispose of and otherwise deal with all or any part of the Partnership Assets and
Partnership Liabilities, and incident thereto, to liquidate Partnership Assets
at any time during the term of the Partnership and to reinvest the proceeds
thereof;
(b) enter into, amend, renew, extend or otherwise modify any
financing or refinancing arrangements relating to the business of the
Partnership, and, incident thereto, to pledge or otherwise encumber all or any
part of the Partnership Assets as margin or other collateral for such financing
and refinancing arrangements;
(c) to do such other acts as the Management Committee may deem
necessary or advisable, or as may be incidental to or necessary for the conduct
of the business of the Partnership;
(d) to consult with legal counsel, independent public
accountants and other experts selected by the Management Committee on behalf of
the Partnership;
(e) to exercise all rights, powers, privileges and other
incidents of ownership or possession with respect to any Partnership Assets,
including, without limitation, the voting of securities, the approval of a
restructuring of an investment or loan held by the Partnership, participation in
arrangements with creditors, the institution and settlement or compromise of
suits and administrative proceedings and other similar matters;
(f) to open, maintain and close bank accounts and draw checks
or other orders for the payment of money;
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(g) to employ and dismiss accountants, consultants, attorneys,
and such other agents and employees for the Partnership as it may deem necessary
or advisable, and authorize any such agent or employee to act for and on behalf
of the Partnership;
(h) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or against the
Partnership;
(i) to deposit, withdraw, invest, pay, retain and distribute
the Partnership's funds in a manner consistent with the provisions of this
Agreement;
(j) to take all action which may be necessary or appropriate
for the continuation of the Partnership's valid existence as a limited
partnership under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Limited Partners or to enable the Partnership to conduct the
business in which it is engaged; and
(k) to execute and deliver any and all agreements, instruments
or other documents as are necessary or desirable to carry out the intentions and
purposes of the above duties and powers.
Section 6.3. Limitations on the Powers of the Management
Committee. (a) Notwithstanding any other provision of this Agreement to the
contrary, the approval of at least five members of the Management Committee or,
with respect to clauses (i), (ii) and (iv) below, either (x) the unanimous
approval of all members of the Management Committee or, (y) the affirmative vote
of Persons owning a majority of the Partnership Interests (other than CFH or its
Affiliates), shall be necessary to:
(i) sell, exchange, lease or otherwise dispose of (x) all or
substantially all of the assets of the Partnership in a single
transaction or a series of related transactions within a one year
period, or (y) any material portion of the assets of the Partnership in
a transaction that is not in the ordinary course of the Partnership's
business where the consideration includes an equity interest in or
other security of the transferee; provided, however, that this
provision shall not preclude or limited the authority of the Management
Committee to mortgage, pledge, hypothecate or grant a security interest
in all or substantially all of the Partnership's assets,
(ii) merge or consolidate the Partnership with or into any
other Person,
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(iii) make any investment or expenditure by the Partnership in
excess of $100,000 for the purpose of entering into any new and
unrelated line of business,
(iv) admit an additional General Partner,
(v) admit a Limited Partner pursuant to Section 9.7,
(vi) voluntarily cause the Bankruptcy of the Partnership,
(vii) take any action to dissolve the Partnership,
(viii) except as permitted by Section 4.5, approve or cause
the Partnership to enter into any transaction with any Partner or its
Affiliate,
(ix) except as otherwise expressly provided in this Agreement,
to make elections under the Code and other relevant tax laws as to the
treatment of items of Partnership income, gain, loss and deduction, and
(to the extent not expressly provided in this Agreement) selection of
the method of accounting and bookkeeping procedures to be used by the
Partnership and selection of accountants other than Ernst & Young,
(x) to establish such reserves from Partnership funds as the
Management Committee, in its discretion, may deem necessary or
advisable for Partnership operations and for the payment of Partnership
obligations, or
(xi) approve or cause the Partnership to enter into any
transaction with ▇. ▇▇▇▇▇▇▇, ▇. ▇▇▇▇▇▇, Colony Capital, Inc. or any of
their respective Affiliates.
(b) Notwithstanding any other provision of this Agreement to
the contrary, the Management Committee shall not have authority, and authority
shall be vested solely in the Towers designees to the Management Committee, to:
(i) reconstitute the Partnership as a Delaware corporation, by
means of a contribution of assets, merger or otherwise, with the
Partners' having distribution, governance and other rights and CFH
having contractual responsibilities all as nearly the same as is
provided in this Agreement to the extent practicable, as reasonably
specified by Towers as the General Partner (or by the Towers designee)
with the intent being to replicate the economic benefits and
obligations and governance mechanisms provided in this Agreement in a
corporate form (except that Partners/shareholders shall not be required
to remain generally liable for the Partnership's/corporation's debts
and liabilities); it is expected that rights to distribution to all
Partners other than CFH pursuant to Section 5.3(a)
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and (b) until the amount of Cumulative Net Income that has been earned
by the Partnership equals $180 million would be represented by a
preferred or preference stock with priority upon liquidation,
winding-up, dissolution and redemptions, dividends or other
distributions over other classes of capital stock (any such preferred
or preference stock shall not be redeemed or acquired by the
Partnership or any of its Affiliates at less than par plus, if any,
accumulated dividends); CFH agrees to cooperate in good faith and to
enter into all contractual and other arrangements necessary or
appropriate to implement this clause (i); and
(ii) cause the limited partnership interests of the
Partnership or the shares of capital stock (of whatever class) of the
corporation referred to in clause (i) above to be registered under
applicable federal and state securities laws and to enter into all
related arrangements including indemnity and similar agreements.
(iii) waive, modify or enforce rights or claims against CFH,
▇▇▇▇ ▇▇▇▇ or their respective Affiliates arising hereunder, under the
Contribution Agreement or under any other agreement, instrument or
document executed in connection herewith or thereunder.
The holders of a majority of the interests in the Partnership of all
Partners other than CFH shall have the right to direct Towers as a
General Partner (or the Towers designees referred to above) to take or
refrain from any action contemplated by this Section 6.3(b).
Section 6.4. Intentionally deleted.
Section 6.5. Certificate of Limited Partnership. CFH shall
cause to be filed with the Secretary of State of Delaware such certificates or
documents as may be necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership in the State of Delaware or
any other state in which the Management Committee elects to cause the
Partnership to conduct business. To the extent necessary or appropriate, CFH
shall cause the Partnership to file amendments to the Certificate of Limited
Partnership and do all the things to maintain the Partnership as a limited
partnership under the laws of the State of Delaware or any other state in which
the Partnership conducts business. Subject to applicable law, CFH may cause the
Partnership to omit from the Certificate of Limited Partnership of the
Partnership filed with the Secretary of State of Delaware and from any other
certificates or documents filed in any other state in order to qualify the
Partnership to do business therein, and from all amendments thereto, any
information, including, without limitation, the names and addresses of the
Limited Partners and information related to the Capital Contributions and shares
or profits and compensation of the Limited Partners, or
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state such information in the aggregate rather than with respect to each Limited
Partner.
Section 6.6. Compensation and Reimbursement of the General
Partners. Except for the General Partners' interests in distributions, capital,
profits, income, gain, loss, deduction and credit of the Partnership as provided
in this Agreement, none of the General Partners nor (except for compensation, if
any, to the extent permitted by Sections 4.5 and 6.3 any Affiliates of the
General Partners shall receive compensation from the Partnership. Each of the
General Partners shall be reimbursed (except as contemplated by the Contribution
Agreement) and subject to compliance with Section 4.5, for all direct expenses
it incurs or makes on behalf of the Partnership (including amounts paid to any
person to perform services solely for the Partnership).
Section 6.7. Loans to and by Partners. The General Partners
may lend to the Partnership funds needed by the Partnership for such periods of
time as the Management Committee may determine; provided, however, that: (i) all
General Partners are offered the opportunity to lend to the Partnership the
portion of such funds as is equal to such General Partners' Applicable Sharing
Percentage as a percentage of the aggregate Applicable Sharing Percentages of
all General Partners at the time of the intended loan, and (ii) the General
Partners may not charge the Partnership interest at a rate greater than the rate
(including points or other financing charges or fees) that would be charged the
Partnership (without reference to any Partner's financial abilities or
guaranties) by unrelated lenders on comparable loans. The Partners and their
respective Affiliates shall not borrow from the Partnership.
Section 6.8. Partnership Funds; Title to Partnership Assets.
Partnership funds shall be held in the name of the Partnership and shall not be
commingled with those of any other Person. Partnership funds shall be used only
for the business of the Partnership. All funds of the Partnership shall be
deposited in the name of the Partnership in such bank account or accounts as may
be designated by the Management Committee. All withdrawals from or charges
against such accounts shall be made in the regular course of the Partnership's
business upon such signature or signatures as the Management Committee may
designate. Title to Partnership assets, whether real or personal, tangible or
intangible, shall be deemed to be owned by the Partnership as an entity, and no
Partners, individually or collectively, shall have any ownership interest in
such Partnership assets.
Section 6.9. Partnership Status. CFH shall cause the
Partnership to use all reasonable efforts to establish and maintain the
classification of the Partnership as a partnership for federal income tax
purposes and not as an association taxable as a corporation.
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Section 6.10. Tax Matters Partner. For purposes of Code
section 6231(a)(7), the "Tax Matters Partner" shall be CFH as long as it remains
a general partner of the Partnership. The Tax Matters Partner shall keep Towers
fully informed of any, and allow Towers to participate in any Partnership level,
inquiry, examination or proceeding, including, without limitation, promptly
notifying Towers of the beginning and completion of an administrative proceeding
at the Partnership level promptly upon such notice being received by the Tax
Matters Partner.
Section 6.11. Indemnification of General Partners. The
Partnership shall indemnify and hold harmless the General Partners, their
stockholders, creditors, the officers, directors, trustees, agents and employees
of the General Partners and the Affiliates of the General Partners, and their
respective officers, directors, trustees, agents and employees (herein the
"Indemnified Party"), from and against any loss, expense, damage or injury
(other than Income Taxes (as hereinafter defined)) suffered or sustained by them
by reason of any acts, omissions or alleged acts or omissions arising out of or
in connection with the Partnership or this Agreement without regard to the date
or dates on which such acts or omissions occurred or are alleged to have
occurred, including but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim and
including any payments made by a General Partner to any Affiliate, any officer
or director of the General Partner, or any of their respective officers, agents
or employees pursuant to an indemnification agreement no broader than this
Section 6.11, if the acts, omissions or alleged acts or omissions upon which
such actual or threatened action, proceeding or claims are based were for a
purpose (a) within the scope of the authority conferred on the General Partner
by this Agreement or by law and (b) in or not opposed to the best interests of
the Partnership and were not performed or omitted fraudulently or in bad faith
or did not constitute gross negligence or willful misconduct by such Indemnified
Party, provided, however, that this Section 6.11 shall not be applicable to any
action, claim or proceeding by, or dispute with, any Limited Partner or its
Affiliates or among the General Partners (or their respective Affiliates). Any
indemnification pursuant to this Section 6.11 shall only be from the assets of
the Partnership. The term "Income Taxes" means any federal, state, local or
foreign tax (including any interest, penalties or additions thereto) (i) based
upon, measured by, or calculated with respect to, net income or profits or (ii)
based upon, measured by, or calculated with respect to multiple bases
(including, but not limited to, corporate franchise or occupation taxes) if one
or more of the bases on which such tax may be based, measured by, or calculated
with respect to is described in (i) above.
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Section 6.12. Subsidiaries of the Partnership. The Partnership
shall not establish or own any subsidiaries (other than subsidiaries to conduct
the Healthcare Finance Business in which the Partnership has a controlling
interest, and if acquired, Towers International Reinsurance Corp. ("TIRC") or an
insurance company reinsuring and/or continuing the business of TIRC in which the
Partnership has a controlling interest). All references to the activities,
operations and conduct of the Partnership (and limitations and restrictions
thereof) in this Agreement shall refer to the Partnership and its subsidiaries
taken as a whole.
Section 6.13. 754 Election. The Partnership shall not be
required to make an election under Section 754 of the Code.
ARTICLE VII
RESPONSIBILITIES OF CFH
Section 7.1. Responsibilities of CFH. (a) CFH shall devote
such management time, effort and expertise as are necessary to achieve the
business objectives of the Partnership.
(b) CFH shall conduct the operations of the Partnership
efficiently and in accordance with the general business practices of the
industry and all applicable laws and regulations.
Section 7.2. Non-Competition. (a) CFH and its Affiliates which
are controlled by or under common control with CFH shall not, without the prior
written consent of Towers and five members of the Management Committee, directly
or indirectly, anywhere within the world (the "Territory") during the period
commencing on the Closing Date and expiring on the second (2nd) anniversary of
the termination of the Partnership (the "Restrictive Period"), (i) voluntarily
form, acquire (except for the ownership of less than five (5%) percent of the
issued and outstanding capital stock of a publicly traded company), finance,
assist, support, provide premises, facilities, goods or services directly or
indirectly to, an enterprise which is substantially similar to, as to types of
customers and products, or otherwise competitive with the Healthcare Finance
Business of the Partnership (a "Competing Business"); provided, however, that
the foregoing shall not prohibit CFH or its Affiliates from engaging in
transactions with parties which conduct a Competing Business, as long as such
transactions are not directly or indirectly connected with such other parties'
Competing Business, (ii) interfere with or attempt to interfere with or induce
or attempt to induce any employee to leave the employ of the Partnership, or
violate the terms of such employee's contract of employment or other engagement;
or (iii) for the purpose of conducting or engaging in a Competing Business, call
upon, solicit, advise or otherwise do, or attempt to do, business with any
clients,
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suppliers, customers or accounts of the Partnership or take away or interfere or
attempt to interfere with any custom, trade, business or patronage of the
Partnership; provided, however, in the event that CFH acquires a business during
the Restrictive Period of which a Competing Business constitutes less than ten
(10%) percent of the assets or revenues of the acquired business and divests
itself of the Competing Business within one (1) year of acquisition, such action
shall not constitute a breach of this covenant not to compete.
(b) The parties hereto acknowledge and agree that any breach
by CFH or its Affiliates of the restrictive covenant contained in Section 7.2(a)
would cause irreparable injury to the Partnership and the other Partners and
that the remedy at law for any such breach would be inadequate. CFH therefore
agrees and consents for itself and its Affiliates that, in addition to any other
available remedy, temporary and permanent injunctive relief may be granted in
any proceeding which may be brought to enforce such restrictive covenant without
necessity of proof that any other remedy at law is inadequate and CFH and its
Affiliates hereby covenant and agree not to interpose in any such proceeding any
claim or defense that there is an adequate remedy at law.
(c) Each of CFH and the other Partners intend that the
covenant of Section 7.2(a) shall be deemed to be a series of separate covenants,
one for each county or province of each and every state, territory or
jurisdiction of each country included within the Territory and one for each
month of the Restrictive Period. If, in any judicial proceeding, a court shall
refuse to enforce any of such covenants by relief in equity, then such
unenforceable covenants shall be deemed eliminated from the provisions hereof
for the purpose of such proceeding to the extent necessary to permit the
remaining separate covenants to be enforced in such proceeding. If, in any
judicial proceeding, a court shall refuse to enforce any one or more of such
separate covenants because the total time thereof is deemed to be excessive or
unreasonable, then it is the intent of the parties hereto that such covenants,
which would otherwise be unenforceable due to such excessive or unreasonable
period of time, be in force for such lesser period of time as shall be deemed
reasonable and not excessive by such court.
Section 7.3. Systems Development and CFH's Ongoing Credit
Support. CFH agrees to use its best efforts to, as quickly as practicable, cause
the Partnership to complete the development of state-of-the-art systems for the
acquisition, evaluation, tracking and disposition of medical receivables. At or
near the substantial completion of such systems, the Partnership will seek new
customers for the Healthcare Finance Business. Upon approval by the Management
Committee of the extension of credit to customers of the Partnership, CFH shall
(or shall cause its Affiliates to) provide, as needed, first loss protection (in
the form of guarantees, letters of credit, cash collateral or otherwise) to
lenders who are not Affiliates of CFH
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or its Principal Owners in an amount up to $20,000,000, all in amount, form and
substance satisfactory to such lenders to induce them initially to lend
approximately $150 million aggregate principal amount of funds to the
Partnership.
Section 7.4. Minimum CFH Net Worth. CFH covenants and agrees
to maintain, at and following the Closing Date, an aggregate net worth
(exclusive of its Partnership Interest in the Partnership) adequate to maintain
the Partnership's tax status as a partnership under the standards of existing
law but which shall in no event be less than $1,000,000 which may be in the form
of a demand promissory note.
Section 7.5. No CFH Partners Limited Partnership Interest. CFH
shall cause (by written agreements, copies of which will be made available to
Towers) each of its partners (and the Persons holding ownership interests in
such partners) never to own a beneficial interest in any Limited Partner
Interest (other than through their respective direct or indirect partnership
interests in CFH) (it being acknowledged that this Section 7.5 does not prohibit
CFH itself from owning Limited Partner Interests).
Section 7.6. Separate Legal Identity of Towers International
Reinsurance Corp. CFH shall take, and shall cause the Partnership to take, all
reasonable steps to maintain the separate legal identity of TIRC, to make it
apparent to third parties that TIRC is a corporation with properties and
liabilities distinct from those of the Partnership and maintain compliance with
Barbados law regarding the ownership, existence or operation of TIRC. Without
limiting the generality of the foregoing, the Partnership shall use its best
efforts to assure that TIRC: (a) compensates all consultants and agents
directly, from TIRC's bank accounts, for services provided to TIRC by such
consultants and agents and, to the extent any employee, consultant or agent of
TIRC is also an employee, consultant or agent of the Partnership, allocates the
compensation of such employee, consultant or agent between TIRC and the
Partnership on a basis which reflects the separate services rendered to each of
TIRC and the Partnership; (b) allocates all overhead and operating expenses for
items shared between TIRC and the Partnership on the basis of actual use to the
extent practicable and, to the extent such allocation is not practicable, on a
basis reasonably related to actual use; (c) maintains the books and records of
TIRC complete and separate from those of the Partnership; (d) does not maintain
bank accounts or other depository accounts to which the Partnership is an
account party, into which the Partnership makes deposits or from which the
Partnership has the power to make withdrawals; (e) does not permit the
Partnership to pay any of the operating expenses of TIRC; (f) refrains from
filing or otherwise initiating or supporting the filing of a motion in any
bankruptcy or insolvency proceeding to substantively consolidate TIRC with the
Partnership; and (g) conducts all of its business solely in its
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own name. No funds or assets may be transferred, loaned or advanced from the
Partnership to TIRC except with the approval of five members of the Management
Committee.
ARTICLE VIII
LIABILITY AND RIGHTS OF LIMITED PARTNERS
Section 8.1. Limitation of Liability. Except to the extent
required by the Delaware Act, the Limited Partners shall not have any personal
liability to the Partnership, to any Partner, nor to the creditors of the
Partnership.
Section 8.2. Management of Business. The Limited Partners
shall not take part in the operation, management or control of the Partnership's
business, transact any business in the Partnership's name nor have the power to
sign documents for or otherwise bind the Partnership.
Section 8.3. Indemnification of Limited Partners. The
Partnership shall indemnify and hold harmless any Limited Partner, its
stockholders, the officers, directors, agents and employees of any Limited
Partner and the Affiliates of any Limited Partner, and their respective
officers, directors, trustees, agents and employees (herein the "Indemnified
Party"), from and against any loss, expense, damage or injury other than Income
Taxes suffered or sustained by them by reason of any acts, omissions or alleged
acts or omissions arising out of or in connection with the Partnership or this
Agreement without regard to the date or dates on which such acts or omissions
occurred or are alleged to have occurred, including but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim and including any payment made by any Limited
Partner to any Affiliate, any officer or director of any Limited Partner, or any
of their respective officers, agents or employees pursuant to an indemnification
agreement no broader than this Section 8.3, if the acts, omissions or alleged
acts or omissions upon which such actual or threatened action, proceeding or
claims are based were not performed or omitted fraudulently or in bad faith or
did not constitute gross negligence or willful misconduct by such Indemnified
Party; provided, however, that this Section 8.3 shall not be applicable to any
action, claim or proceeding by, or dispute with, the other Limited Partners or
their respective Affiliates. Any indemnification pursuant to this Section 8.3
shall only be from the assets of the Partnership.
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ARTICLE IX
TRANSFERABILITY OF A PARTNER'S INTEREST; SUBSTITUTED
LIMITED PARTNERS; ADDITIONAL PARTNERS
Section 9.1. Transferability of a Partner's Interest. Except
as otherwise provided in this Article IX, a Partner may not sell, exchange,
transfer, assign, pledge, create a security interest in, hypothecate or
otherwise dispose of (each, a "Transfer") all or any portion of its Interest in
the Partnership to any Person (except a testamentary or legal heir of such
Partner). Any Transfer or purported Transfer of an Interest in the Partnership
not made in accordance with this Agreement shall be null and void and of no
force or effect whatsoever.
Section 9.2. Transfer of CFH Interests. CFH may not Transfer
all or any portion of its Interest in the Partnership. None of the CFH Principal
Owners may, directly or indirectly (by merger, consolidation or otherwise),
Transfer all or any portion of his interest in CFH to any Person (except to his
testamentary or legal heirs) unless after giving effect to such Transfer, the
CFH Principal Owners and/or Family Members or Family Trusts for such Persons
will own collectively, directly or indirectly, all of the outstanding voting
securities and other ownership interests of such Person.
Section 9.3. Transfer of Towers Entities Interests.
Notwithstanding any other provision in this Article IX, Towers, Towers
Collection and other Tower Entities may Transfer all or any part of their
respective Partnership Interests (and may cause their subsidiaries to Transfer
their Partnership Interests) to creditors or other Person or Persons in
connection with a plan or reorganization or a liquidation confirmed by or
approved by the Bankruptcy Court and such transferees shall be admitted to the
Partnership as substituted Partners. In addition, notwithstanding any other
provision of this Article IX, Towers (or a Person or Persons designated by
Towers) may establish procedures on behalf of the Partnership, which procedures
shall satisfy the conditions set forth in this Section 9.3, under which Partners
other than CFH may Transfer all or part of their Partnership Interests. The
conditions under which Towers or its designee may establish such procedures are
as follows:
(A) In no event shall any such procedures be adopted if
Transfers made in accordance with such procedures could in the reasonable
judgment of the Management Committee result in (I) the Partnership being treated
as a "publicly traded partnership" within the meaning of Section 7704 of the
Code or (II) the Partnership otherwise being treated as an association taxable
as a corporation for federal income tax purposes.
(B) In no event shall any transferee of a Partnership interest
under such procedures be admitted to the Partnership as a Substituted Limited
Partner without the written consent of CFH, which consent may be given or
refused in CFH's sole and absolute discretion.
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(C) In no event shall such procedures allow any Transfers that
(I) would violate the then applicable federal or state securities laws or rules
and regulations of the Securities and Exchange Commission, state securities
commissions or any other governmental authorities with jurisdiction over such
Transfers or (II) would affect Partnership's existence or qualification as a
limited partnership under any applicable state law.
In connection with establishment of the foregoing procedures,
Towers (or its designee(s)) (in consultation with CFH) may establish mechanisms
for certification of, notices to, and voting of, limited partner Interests. The
other Partners shall agree with and cause such mechanisms to be reflected in an
amendment of this Agreement (so long as such mechanisms do not adversely affect
the entitlements to percentages of allocations or distributions of such other
Partners or are customary for partnerships that have numerous limited partners).
Section 9.4. Transfer of Interests of General Partners Other
Than CFH. In the event of a transfer of all or any part of the Partnership
Interest of a General Partner other than CFH, such Partnership Interest shall
immediately and automatically (and without further action by the transferring
Partner or the transferee) be converted from a Partnership Interest as a general
partner to a Partnership Interest as a Limited Partner (unless the transferring
General Partner expressly notifies the Partnership to the contrary). However
(except as provided in the first sentence of Section 9.3), such transferee shall
not be admitted in the Partnership as a Substituted Limited Partner without the
written consent of CFH, which consent may be given or refused in CFH's sole and
absolute discretion.
Section 9.5. Substituted Limited Partners. (a) The transferee
of a Partner's Interest in the Partnership may be admitted in the Partnership as
a Substituted Limited Partner upon the written consent of CFH, which consent may
be given or refused in CFH's sole and absolute discretion.
(b) Upon the Transfer of its entire Interest in the
Partnership and the admission of such Partner's transferee pursuant to Section
9.5(a), a Partner shall be deemed to have withdrawn from the Partnership.
Section 9.6. Consequences of Transfers Generally. (a) In the
event of any Transfer or Transfers permitted under this Article IX, the
transferor and the Interest in the Partnership that is the subject of such
Transfer shall remain subject to all terms and provisions of this Agreement and
the transferee shall (except as provided in Section 9.5) hold such Interest in
the Partnership subject to all unperformed obligations of the transferor and
shall agree in writing to the foregoing if requested by any of the General
Partners. Any successor or transferee hereunder shall be subject to and bound by
all the
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provisions of this Agreement as if originally a party to this Agreement.
(b) Unless a transferee of a Partner's Interest becomes a
Substituted Limited Partner, such transferee shall have no right to obtain or
require any information or account of Partnership transactions, or to inspect
the Partnership's books, or to consent or vote on Partnership matters. Such a
Transfer shall, subject to the last sentence of Section 9.1, merely entitle the
transferee to receive the share of distributions, income and losses to which the
transferring Partner otherwise would be entitled. Each Partner agrees that such
Partner will, upon request of the Management Committee, execute such
certificates or other documents and perform such acts as the Management
Committee deems appropriate after a Transfer of that Limited Partner's Interest
in the Partnership (whether or not the transferee becomes a Substituted Limited
Partner) to preserve the limited liability of the Limited Partner under the laws
of the jurisdictions in which the Partnership is doing business.
(c) The Transfer of a Partner's interest in the Partnership
and the admission of a Substituted Limited Partner shall not be cause for
dissolution of the Partnership.
(d) References in this Agreement to allocations or
distributions to a Partner shall include allocations or distributions to any
predecessor in interest of such Partner. Any transferee of a Partner admitted as
a Partner pursuant to this Agreement and any assignee of a Partner pursuant to
an assignment permitted under this Agreement shall succeed to the Capital
Account so transferred or assigned to such Person.
Section 9.7. Admission of Additional Limited Partners. (a) The
Management Committee acting in accordance with Section 6.3(a)(v) may admit one
or more Persons as additional Limited Partners ("Additional Limited Partners")
for such Capital Contributions in cash as the Management Committee, in its sole
discretion, may determine; provided, however, that no Person may be admitted as
an Additional Limited Partner if such admission would jeopardize the status of
the Partnership as a partnership for Federal income tax purposes or violate or
cause the Partnership to violate any applicable Federal or state law, rule or
regulation.
(b) Each Additional Limited Partner shall automatically be
bound by all of the terms and conditions of this Agreement applicable to a
Limited Partner. Each Additional Limited Partner shall execute such
documentation as requested by the Management Committee pursuant to which such
Additional Limited Partner agrees to be bound by the terms and provisions of
this Agreement.
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(c) Each Additional Limited Partner shall, at the discretion
of the Management Committee, be subject to a charge in such amount as the
Management Committee shall determine to reimburse the Partnership for the
expenses incurred by or on behalf of the Partnership in connection with such
admission.
ARTICLE X
BOOKS, RECORDS, ACCOUNTING AND
REPORTS; OTHER AGREEMENTS
Section 10.1. Books and Records. (a) The Partnership shall
keep or cause to be kept complete and accurate books and records with respect to
the Partnership's business, which books and records shall at all times be kept
at the principal office of the Partnership or at such other place as the
Management Committee shall reasonably designate. The books of the Partnership
shall be maintained, for financial reporting purposes, on the accrual basis in
accordance with generally accepted accounting principles consistently applied.
(b) The books of account and records of the Partnerships shall
be audited as of the end of each Fiscal Year by the Accountants.
Section 10.2. Access to Books. (a) The books and records of
the Partnership shall be available to each Partner or its representatives or a
Partner's designees for inspection, copying and audit (at the Partnership's
expense) during normal business hours and, upon request made by Towers at least
one Business Day in advance, at any other time at the principal office of the
Partnership. The Partnership shall cause the auditors of the Partnership to
cooperate in such inspection and audit, and to provide any of their work papers
requested in connection therewith, all at the cost and expense of the
Partnership.
(b) For a period of seven years from the Closing Date (or such
longer period as may be required of the Partnership by any governmental agency
or requested by Towers or any Person or Persons designated by Towers in
connection with disputes, investigations or litigation):
(i) the Partnership shall not dispose of or destroy any of the
books, records, files and data of the Partnership relating to periods
prior to the Closing (or otherwise obtained from any Towers Entity or
relating in any way to TIRC) ("Partnership Books and Records") without
first offering to turn over possession thereof to Towers by written
notice to Towers at least 30 days prior to the proposed date of such
disposition or destruction;
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(ii) the Partnership shall allow Towers and its agents or
designees access to all the Partnership Books and Records during normal
working hours and, upon request made at least one Business Day in
advance at any other time at the Partnership's principal place of
business or at any location where any Partnership Books and Records are
stored, and Towers shall have the right, at the Partnership's expense,
to make copies of any of the Partnership Books and Records; and
(iii) the Partnership shall make available to Towers upon
written request (i) copies of any Partnership Books and Records, (ii)
Partnership personnel to assist Towers in locating and obtaining any
Partnership Books and Records and (iii) any of Partnership personnel
whose assistance or participation is reasonably required by Towers or
any of their Affiliates in anticipation of, or preparation for,
existing or future litigation, tax returns or other matters in which
Towers or any of its Affiliates are involved.
Section 10.3. Fiscal Year. The fiscal year of the Partnership
shall either be the calendar year or the twelve month period ending June 30th,
as Tower designates to the Partnership prior to Closing or within 30 days
thereafter; provided, however, that the last Fiscal Year of the Partnership
shall end on the date on which the Partnership is terminated.
Section 10.4. Reports. (a) As soon as practicable (but in any
event within 120 days) after the close of each Fiscal Year, the Partnership
shall cause to be mailed to each Partner financial statements of the Partnership
for the Fiscal Year then ended, including a balance sheet and statements of
operations, Partners' equity and changes in financial position, reconciliation
of Capital Accounts for all Partners and schedules of distributions and
allocations of Net Income and Net Loss for all Partners, all of which shall be
prepared in accordance with generally accepted accounting principles (except as
required by this Agreement) and shall be audited by the Partnership's
Accountants. The Partnership's Accountants shall be selected by the Management
Committee (with the concurrence of the designees of all General Partners which
shall not be unreasonably withheld) from among the nationally recognized
accounting firms.
(b) As soon as practicable (but in no event later than 60
days) after the close of each Fiscal Quarter, except the last Fiscal Quarter of
each Fiscal Year, the Partnership shall cause to be mailed to each Partner
unaudited financial statements of the Partnership for the fiscal quarter then
ended, including a balance sheet and statements of operations, Partners' equity
and changes in financial position, reconciliation of Capital Accounts for all
Partners and schedules of distributions and allocations of Net Income and Net
Loss for all Partners, all of which shall
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be prepared in accordance with generally accepted accounting principles (except
as required by this Agreement).
(c) The Partnership shall mail to each Partner copies of any
monthly Partnership financial statements or operating reports furnished to the
Partnership's principal lenders. Such reports shall be mailed to the Partners at
the same time they are forwarded or delivered to the Partnership's principal
lenders.
SECTION 10.5. Preparation of Tax Returns. The Partnership
shall arrange for the preparation and timely filing of all returns relating to
Partnership income, gains, losses, deductions and credits, as necessary for
federal, state and local income tax purposes. CFH shall cause the Partnership to
furnish to each of the Partners within 60 days of the close of the taxable year
the tax information required for federal, state and local income tax reporting
purposes. If so requested by Towers or a Person or Persons designated by Towers
in a notice provided to the Partnership in any Fiscal Year, the Partnership
shall duly make a timely election under Section 754 of the Code.
ARTICLE XI
WITHDRAWAL OF PARTNERSHIP;
TERMINATION OF PARTNERSHIP;
LIQUIDATION AND DISTRIBUTION OF ASSETS
Section 11.1. Withdrawal of Partner. Except as otherwise
specifically permitted in this Agreement, no Partner shall at any time retire or
withdraw from the Partnership. Any Partner retiring or withdrawing in
contravention of this Section 11.1 shall indemnify, defend and hold harmless the
Partnership and all other Partners from and against any losses, expenses,
judgment, fines, settlements or damages suffered or incurred by the Partnership
or any other Partner arising out of or resulting from such retirement or
withdrawal.
Section 11.2. Dissolution of Partnership. (a) The Partnership
shall be dissolved, wound up and terminated as provided herein upon the first to
occur of the following:
(i) the Dissolution Date;
(ii) the removal, withdrawal, resignation or Bankruptcy of any
General Partner or the dissolution or termination of any General
Partner's existence as an entity (an "Event of Withdrawal"); provided,
however, that with respect to any of the Towers Entities, the
occurrence of any of the events listed in this Section 11.2(a)(ii) will
only constitute an Event of Withdrawal if such event occurs subsequent
to the substantial consummation of a plan of reorganization or a
liquidation of such Towers Entity;
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(iii) upon election and notice by Towers (or such Person or
Persons as are designated by Towers) to the Partnership, the occurrence
of a Transfer in violation of Section 9.2 of this Agreement;
(iv) upon election and notice by Towers (or such Person or
Persons as are designated by Towers) to the Partnership, the occurrence
of any event which constitutes a material breach of this Agreement by
CFH which continues uncured for 30 days; or
(v) the occurrence of any other event that would make it
unlawful for the business of the Partnership to be continued;
or as otherwise required under the Delaware Act; provided, however, that upon
the occurrence of an Event of Withdrawal or an event described in clause (iii)
or (iv) above, the remaining Partners may, by written consent of
Two-Thirds-in-Interest of the remaining Partners (or such higher percentage as
may be required by the Delaware Act), elect a successor general partner (if
necessary) and continue the business of the Partnership without application of
the liquidation provisions of this Article XI, such action to be taken within 90
days after such Event of Withdrawal or an event described in clause (iii) or
(iv) above. In the event of the continuation of the Partnership as herein
provided, any successor general partner shall exercise the rights and powers and
assume the obligations hereunder of a General Partner (excluding, however,
obligations of a General Partner to another Partner occasioned by that General
Partner's removal or wrongful resignation or withdrawal as General Partner), and
shall have such interest in the Net Income, Net Loss and distributions of the
Partnership as shall be agreed upon by the successor general partner(s) (if any)
and Two-Thirds-in-Interest of the remaining Partners upon execution of a written
acceptance of this Agreement. Except as provided herein or otherwise required by
Delaware law, the Limited Partners shall have no power to dissolve the
Partnership without the consent of the Management Committee.
(b) In the event of the dissolution of the Partnership for any
reason, the remaining General Partner, or, if there is more than one remaining
General Partner, a liquidating agent appointed by Two-Thirds-in-Interest of the
remaining General Partners, or if there is no remaining General Partner, then a
liquidating agent appointed by Two-Thirds-in-Interest of the Limited Partners
(the remaining General Partner or such Person so designated hereinafter referred
to as the "Liquidator"), shall commence to wind up the affairs of the
Partnership and to liquidate the Partnership's Assets. The Partners shall
continue to share all income, losses and allocations during the period of
liquidation in accordance with Articles IV and V. The Liquidator shall have full
right and unlimited discretion to determine the
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time, manner, and terms of any sale or sales of Partnership Assets pursuant to
such liquidation, giving due regard to the activity and condition of the
relevant market and general financial and economic conditions.
(c) The Liquidator shall have all of the rights and powers
with respect to the assets and liabilities of the Partnership in connection with
the liquidation and termination of the Partnership that the Management Committee
would have with respect to the assets and liabilities of the Partnership during
the term of the Partnership, and the Liquidator is hereby expressly authorized
and empowered to execute any and all documents necessary or desirable to
effectuate the liquidation and termination of the Partnership and the transfer
of any assets.
(d) Notwithstanding the foregoing, a Liquidator which is not a
General Partner shall not be deemed a Partner in this Partnership and shall not
have any of the economic interests in the Partnership of a Partner; and such
Liquidator shall be compensated for its services to the Partnership at normal,
customary and competitive rates for its services to the Partnership as
reasonably determined by Two-Thirds-in-Interest of all the Partners.
Section 11.3. Distribution in Liquidation. Upon liquidation of
Partnership, distributions of Partnership Assets shall be made in the following
amounts and order of priority:
(a) first, to pay the costs and expenses of the winding up,
liquidation and the termination of the Partnership;
(b) second, to creditors of the Partnership, in the order of
priority provided by law, but not including those liabilities (other
than liabilities to any General Partner for any expenses of the
Partnership paid by such General Partner for any expenses of the
Partnership paid by such General Partner or its Affiliates to the
extent such General Partner is otherwise entitled to reimbursement
hereunder) to the Limited Partners or to the General Partners in their
capacity as Partners;
(c) third, to establish reserves reasonably adequate to meet
any and all contingent or unforeseen liabilities or obligations of the
Partnership, provided that at the expiration of such period of time as
the Liquidator may deem advisable, the balance of such reserves
remaining after the payment of such contingencies or liabilities shall
be distributed as hereinafter provided;
(d) fourth, to the Partners for loans, if any, made by them to
the Partnership;
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(e) fifth, to the Partners other than CFH in proportion to
their respective Capital Account Shares, the aggregate amount of Unpaid
Quarterly Yield Amounts and Unrecovered Capital for all such Partners;
and
(f) sixth, the aggregate amount remaining for distribution in
cash and the Distribution Value of any other assets of the Partnership
(the "Capital Liquidation Amount") shall be simultaneously distributed
to the Partners either:
(1) (i) for CFH, an amount equal to the positive
balance of CFH's Capital Account; and (ii) for each other
Partner, an amount equal to the Capital Liquidation Amount
minus the amount specified in subclause (1)(i) of this clause
(f) distributed in proportion to their respective positive
Capital Account balances; or
(2) proportionately according to the positive
balances in the respective Partner's Capital Account;
whichever of (1) or (2) yields a larger aggregate total for the Partners other
than CFH.
If the Liquidator, in its sole discretion, determines that
Partnership Assets other than cash are to be distributed, then the Liquidator
shall cause the Value of the assets not so liquidated to be determined. Such
assets shall be retained or distributed by the Liquidator as follows:
(i) The Liquidator shall retain assets having an appraised
value, net of any liability related thereto, equal to the amount by
which the net proceeds of liquidated assets are insufficient to satisfy
the requirements of subparagraphs (a), (b), and (c) of this Section
11.3.
(ii) The remaining assets shall be distributed to the Partners
in the manner specified in subparagraphs (d), (e) and (f) of this
Section 11.3.
If the Liquidator, in its sole discretion, deems it not feasible or desirable to
distribute to each Partner its allocable share of each asset, the Liquidator may
allocate and distribute specific assets to one or more Partners as the
Liquidator shall reasonably determine to be fair and equitable, taking into
consideration, inter alia, the Distribution Value of the assets and the tax
consequences of the proposed distribution upon each of the Partners (including
both distributes and others if any). Any distributions in kind shall be subject
to such conditions relating to the disposition and management thereof as the
Liquidator deems reasonable and equitable.
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Section 11.4. Final Reports. Within a reasonable time
following the completion of the liquidation of the Partnership's Assets, the
Liquidator shall supply to each of the Partners a statement audited by the
Accountants which shall set forth the assets and liabilities of the Partnership
as of the date of complete liquidation and each Partner's portion of
distributions pursuant to Section 11.3.
Section 11.5. No Rights to Non-Cash Assets. No Partner shall
have any right to demand or receive specific property other than cash upon
dissolution and termination of the Partnership.
Section 11.6. Deficit Restoration. Upon liquidation of the
Partnership CFH shall contribute to the Partnership cash in an amount sufficient
to restore any deficit in CFH's Capital Account to zero and such amount shall be
distributed by the Partnership in accordance with the provision of Section 11.3.
No other Partner shall have any liability to restore any deficit in its Capital
Account. The obligations of CFH to make Capital Contributions pursuant to
Article III and this Section 11.6 are for the exclusive benefit of the
Partnership and not of any creditor of the Partnership; no such creditor is
intended as a third-party beneficiary of this Agreement nor shall any such
creditor have any rights hereunder, including, but without limitation, the right
to enforce any capital contribution obligation of CFH.
Section 11.7. Termination. The Partnership shall terminate
when all property owned by the Partnership shall have been disposed of and the
assets shall have been distributed as provided in Section 11.3. The Liquidator
shall then execute and cause to be filed a Certificate of Cancellation of the
Partnership.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand, five days after mailed by certified mail with postage paid
and return receipt requested, or sent by facsimile transmissions to the parties
at the following addresses and facsimile numbers (or at such other address or
facsimile number for a party as such party shall designate in a notice given
pursuant to this Section).
(a) If to CFH, to:
CFHF Partners, L.P.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
(b) If to Towers, to:
Towers Financial Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, Trustee
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
and to the Persons in (e) below
(c) If to the Partnership, to:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(d) If to any Limited Partner:
Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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(e) If to the Committee to:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Co-Chairman
The Official Committee of Unsecured
Creditors of Towers Financial Corporation
LaSalle National Bank
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇▇▇▇ Royal, Co-Chairman
The Official Committee of Unsecured
Creditors of Towers Financial Corporation
City of Detroit Police and Fire
Retirement System
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 12.2. Amendments. Amendments to this Agreement which
do not adversely affect the right of any Limited Partner in any material respect
may be made by the Management Committee with the approval of all the General
Partners without the consent of any Limited Partner if those amendments are (i)
of an inconsequential nature (as reasonably determined by the Management
Committee but if Towers is not at such time a General Partner, as determined by
at least five members of the Management Committee), (ii) for the purpose of
admitting Additional Limited Partners or Substituted Limited Partners as
permitted by this Agreement, (iii) necessary to maintain the Partnership's
status as a partnership according to Section 7701(a)(2) of the Code, (iv)
necessary to preserve the validity of any and all allocations of Partnership
income, gain, loss or deduction pursuant to Section 704(b) of the Code, or (v)
contemplated by this Agreement. Amendments to this Agreement other than those
described in the foregoing sentence may be made only if embodied in an
instrument signed by all the General Partners and Two-Thirds-in-Interest of the
Limited Partners; provided, however, that, unless otherwise specifically
contemplated by this Agreement, no amendment to this Agreement shall (i) without
the consent of all Partners, change or alter this Section 12.2, or (ii) without
the consent of each of the Partners adversely affected thereby, except as
contemplated herein, increase the liability of any Limited Partner, decrease any
Limited Partner's interest in profits and distributions or increase any Limited
Partner's interest in losses. The Partnership shall send to each
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Limited Partner a copy of any amendment executed by the General Partners
pursuant to this Section 12.2.
Section 12.3. Entire Agreement. This Agreement, together with
the Contribution Agreement, constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes any prior agreement or
understanding among the parties with respect to the subject matter hereof.
Section 12.4. Governing Law. This Agreement shall be construed
in accordance with and governed by the laws of the State of Delaware, without
giving effect to the provisions, policies or principles thereof relating to
choice or conflict of laws.
Section 12.5. Binding Effect. Except as provided otherwise
herein, this Agreement shall be binding upon and shall inure to the benefit of
the parties and their respective legal representatives, successors and assigns.
Section 12.6. Counterparts. This Agreement may be executed
either directly or by an attorney-in-fact, in any number of counterparts of the
signature pages, each of which shall be considered an original.
Section 12.7. Separability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or affecting
the validity or enforceability of such provision in any other jurisdiction.
Section 12.8. Captions. The section and other captions
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
Section 12.9. Gender and Number. Whenever required by the
context hereof, the singular shall include the plural and the plural shall
include the singular. The masculine gender shall include the feminine and neuter
genders, and the neuter gender shall include the masculine and feminine genders.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the 18th day of March, 1994.
GENERAL PARTNER:
CFHF Partners, L.P.
By: CFHF, Inc., General Partner
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇
President
GENERAL PARTNER:
Towers Financial Corporation
By:/s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Trustee
LIMITED PARTNER:
Towers Limited Partner
Subsidiary Corp.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Attorney-in-Fact
Consented to:
▇▇▇▇ ▇. ▇▇▇▇
as withdrawing limited partner.
/s/ ▇▇▇▇ ▇. ▇▇▇▇
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