EXHIBIT 10.1
LIMITED LIABILITY
LIMITED PARTNERSHIP AGREEMENT
OF
▇▇▇▇▇▇ DOME GATHERING, LLLP
A Colorado Limited Liability Limited Partnership
THIS LIMITED LIABILITY LIMITED PARTNERSHIP AGREEMENT is executed on the
date or dates indicated below, by and between Natural Resource Group Gathering,
LLC, a Colorado limited liability company (hereinafter the "General Partner" or
"NRGG"), as General Partner, and the undersigned entities and individuals, as
Limited Partners.
RECITALS
A. The Partners have determined to enter into a limited liability limited
partnership under the laws of the State of Colorado for the purpose of
constructing and operating a natural gas pipeline ("Pipeline") on the
Wyoming/Colorado border, and for the purpose of acquiring, maintaining,
developing, constructing, managing, operating, selling, exchanging, holding for
future appreciation, disposing of, leasing and otherwise investing in such
property or any interest therein or components thereof and in carrying on any
lawful business related thereto.
B. The Partners have determined to join together in the undertaking
contemplated in Recital A under the terms and conditions, and subject to the
provisions, set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, the Partners hereby make and declare this Limited Liability
Limited Partnership Agreement to reflect and effectuate the foregoing, and to
cause the affairs of the Limited Partnership and the terms and provisions of
this Agreement, as follows:
1. Creation and Objects of Limited Liability Limited Partnership. The
Partners hereby form the Limited Partnership under and pursuant to the Act, to
engage in (a) the construction and operation of a natural gas gathering system
on the Wyoming/Colorado border all with a view to the production of a profit;
(b) the carrying on of all lawful business for a profit; and (c) the carrying on
of any and all activities relating to the foregoing purposes. A duly executed
and acknowledged Certificate of Limited Partnership and Registration of Limited
Liability Limited Partnership setting forth the information required under the
Act and the information required by C.R.S. ss. 7-64-1002 was filed in the office
of the Secretary of State of the State of Colorado on September 1, 2004. Neither
the Partnership nor the General Partner shall be required to deliver copies of
the filed Certificate and Registration or any amendment thereto to any Limited
Partner.
2. Name, Principal Place of Business, Registered Office and Registered
Agent. The name of this Limited Partnership shall be ▇▇▇▇▇▇ DOME GATHERING,
LLLP, a Colorado limited liability limited partnership, and the principal place
of business of the Partnership shall be located at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The registered office of the
Partnership shall be located at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇ and Natural Resource Group Gathering, LLC shall act as agent for service
of process on the Partnership. The registered office may be changed by the
General Partner upon notice to the other Partners, provided such change is
reflected in a duly executed, acknowledged and filed Amended Certificate.
3. Term of Partnership. The Partnership shall commence on the date of
filing the Certificate of Limited Partnership and Registration of Limited
Liability Limited Partnership. The business of the Partnership shall continue
uninterrupted from such date until terminated under the terms and provisions of
Article 15.
4. Maintenance of Books, Records, Reports and Accounts, Tax Returns; Bank
Account.
4.1 Books of Account. At all times the General Partner shall maintain or
cause to be maintained true and proper books, records, reports, and accounts in
accordance with the Partnership's accounting methods consistently applied, in
which shall be entered fully and accurately all transactions of the Partnership.
The Partnership shall maintain its records on the accrual method of accounting
in accordance with GAAP.
4.2 Location of Books. The General Partner shall keep at the registered
office the books and records of the Partnership, including (a) a current list of
the full name and last known mailing address of each Partner set forth in
alphabetical order; (b) a copy of the Certificate of Limited Partnership and
Registration of Limited Liability Limited Partnership and all amendments
thereto, together with executed copies of any powers of attorney pursuant to
which any Certificate and Registration or amendment has been executed; (c)
copies of the Partnership's federal, state, and local income tax returns and
reports, if any, for the three (3) most recent Partnership Accounting Years; (d)
copies of the Agreement and any amendments thereto; (e) the accounting books and
records, and copies of the financial statements of the Partnership, for the
three (3) most recent Partnership Accounting Years; and (f) all documents and
records pertaining to the Partnership and other aspects of the Partnership
business.
4.3 Inspection of Records. All books, records, reports, and accounts shall
be open to inspection by any Partner or their duly authorized representative
upon at least five days written notice, and upon a showing that the request is
made in good faith and for a purpose which is reasonably related to the
Partner's Partnership Interest, as provided in the Act, at any reasonable time
during business hours; and said Partner or representative shall have the further
right to make copies or excerpts therefrom, so long as such inspection or
duplication does not materially interfere with the duties of any Partnership
employee or agent and the cost thereof is borne by such Partner. Further, each
Limited Partner shall have the right to obtain from the General Partner from
time to time upon reasonable demand:
(a) Business and Financial Information. True and full information
regarding the state of the business and financial condition of the
Partnership and any other information regarding the affairs of the
Partnership; and
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(b) Income Tax Returns. Promptly after becoming available, a copy of
the Partnership's federal, state and local income tax returns for each
year. Further, each Limited Partner has the right to have a formal
accounting of partnership affairs whenever circumstances render it just and
reasonable.
4.4 Reports.
(a) Preparation of Reports. The Partnership's accounting books shall
be closed quarterly and annually, and financial statements shall be
prepared by the Partnership. The financial statements shall include a
balance sheet, a statement of Partnership profit and loss, a statement of
each Partner's Capital Account and such other supporting, statements as the
General Partner may deem appropriate. The financial statements shall be
prepared in accordance with GAAP and the Partnership's accounting methods
consistently applied and shall be certified by the General Partner. Neither
the Partnership nor the General Partner shall be obligated to cause any
financial statements of the Partnership to be audited by any party.
However, any Partner may request that the financial statements for a
particular year be audited and, if approved by a majority of the Percentage
Interests owned by Class A Limited Partners, the costs of such audit shall
be borne by the requesting Partner, unless the General Partner agrees that
such costs shall be a Partnership expense.
(2) Reports to Partners or Transferees. No later than March 31 of
every year, the General Partner shall mail to each Person who was a Partner
or a Transferee at any time during the prior Partnership Accounting Year
(i) all tax information relating to the Partnership which is necessary for
the preparation of such Person's federal, state and local income tax
returns and (ii) any other information regarding the Partnership and its
operations during the prior Partnership Accounting Year which, in the
General Partner's determination, is material or significant to such Person.
4.5 Tax Returns. The General Partner shall cause to be prepared, signed and
filed all federal, state and local tax returns required to be filed by the
Partnership.
4.6 Custody of Partnership Funds; Bank Accounts.
(a) Safekeeping. The General Partner shall have responsibility for the
safekeeping and use of all funds and assets of the Partnership. The funds
of the Partnership shall be used exclusively with respect to the
Partnership. The funds of the Partnership shall not be commingled with the
funds of any other Person, and the General Partner shall not employ, or
permit any other Person to employ, such funds in any manner except for the
benefit of the Partnership.
(b) Deposits. All funds of the Partnership not otherwise invested
shall be deposited in one or more funds, certificates of deposit, accounts
or other media of investment in the name of the Partnership as the General
Partner shall determine in his, her or its sole discretion, and withdrawals
shall be made only in the regular course of the Partnership business on
such signature or signatures as the General Partner may, from time to time,
determine, in his or her sole discretion.
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5. Partnership Capital.
5.1 Initial Capital Contribution. Simultaneously with the execution of this
Agreement, the Partners shall make Initial Capital Contributions in exchange for
their Percentage Interests, as follows:
(a) Initial Capital Contributions of General Partner. The General
Partner shall make an Initial Capital Contribution of cash and property as
follows:
(i) an assignment of all of its right, title and interest in and
to all right of way agreements required to provide a contiguous right
of way to construct the proposed Pipeline in accordance with the
proposed Pipeline map attached hereto as Exhibit A;
(ii) an assignment of all of its right, title and interest in and
to the initial design and transportation agreements entered into with
third parties to construct and operate the Pipeline, all of which are
described on Exhibit B attached hereto (the "Pipeline Agreements");
and
(iii) an assignment of all of its right, title and interest in
and to all permits, consents and other approvals related to the
Pipeline. In exchange for such contribution of cash and property, the
General Partner shall receive a credit to its Capital Account in an
amount calculated as follows:
Aggregate Limited Partner Commitments
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Such contribution to capital represents the agreed fair value of such
Initial Capital Contribution of cash and property by the General Partner in its
capacity as the General Partner.
(b) Initial Capital Contributions of Limited Partners. The Limited
Partners shall make Initial Capital Contributions as follows: Class A
Limited Partners will be required to contribute at least $50,000 for each
Class A Limited Partnership Interest and Class B Limited Partners will be
required to contribute at least $5,000 for each Class B Limited Partnership
Interest (each a "Commitment" or collectively the "Commitments").
Contributions by the Limited Partners will be solicited pursuant to a
private placement memorandum with related subscription documents (the
"Subscription Agreement") prepared by the General Partner. Upon executing
the Subscription Agreement, each Limited Partner shall be required to pay
100% of its Limited Partner Commitment as an Initial Capital Contribution
or if the Limited Partner is owed money by the Partnership, the Limited
Partner may elect to convert the debt owed to him, her or it in increments
of $50,000 into Class A Partnership Interests instead of paying cash Upon
executing the Subscription Agreement, the subscribing Limited Partner will
also be required to sign this Agreement (or a counterpart signature page
hereto) and pay the required funds to the Partnership in immediately
available funds by certified check or wire transfer to an interest-bearing
escrow account at Colorado Business Bank designated by the Partnership. If
the Limited Partner is converting debt in exchange for his, her or its
Class A Partnership Interests, the Limited Partner shall acknowledge in
writing that he, she or it is converting the debt into Class A Partnership
Interests. Partnership Interests that are issued as a result of debt
conversion shall be
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included in the calculation of the Minimum for purposes of determining if
the Minimum investment has been reached and the funds in escrow can be
released to the Partnership. If sufficient funds or notices of debt
conversions are not obtained by the Commitment Date with which to purchase
the Pipeline and complete construction thereof, all funds (plus applicable
interest) shall be returned to the Limited Partners and the notices of debt
conversion shall be returned to the Limited Partners who issued them.
Each Limited Partner shall receive a credit to his, her, or its Capital
Account equal to the amount of cash contributed.
5.2 Additional Capital Contributions.
(a) In General. No Partner shall be obligated or required to make any
Additional Capital Contributions to the Partnership except as expressly provided
for herein. A Partner may make voluntary Additional Capital Contributions to the
Partnership at any time, with the consent of the General Partner.
(b) Event of Default. The failure by any Partner, to make, when due or
within five (5) business days thereafter, any portion of the Additional Capital
Contribution required to be contributed by such Partner pursuant to this
Agreement, or any other payment required to be made by it to the Partnership,
shall constitute an Event of Default by such Partner. Upon the occurrence of an
Event of Default, such Partner may be deemed a Defaulting Partner and the
following provisions of Section 11 shall apply.
(c) Excess Contribution Needs. If the General Partner determines that the
Partnership needs additional funds in excess of its currently available funds,
the General Partner shall notify all Partners and identify the amounts requested
and the reasons for such request. The General Partners shall establish the
timing and procedure for such Additional Capital Contributions, provided,
however, the date on which such contributions are required shall not be earlier
than 15 days after receipt of the notice sent by the General Partner requesting
such contribution. If all Partners are willing to contribute their pro rata
share of such requested Additional Capital Contribution, no adjustments shall be
made to the Percentage Interests of the Partners. If not all Partners are
willing to contribute their pro rata share of such requested Additional Capital
Contributions, the General Partner shall be free to obtain such funds from all
Partners by a contribution of capital contributions and/or loans. If the General
Partner obtains the requested Additional Capital Contributions from some, but
not all of the Partners, the General Partner may accept such contributions and
the Percentage Interests of the Partners shall be adjusted in accordance with
Section 11.2(d) hereof, with the Partners not making such Additional Capital
Contributions being treated as Defaulting Partners solely for the purpose of the
dilution formula set forth in Section 11.2(d). To the extent the General Partner
is unable to entirely fund the needs of the Partnership with such Additional
voluntary capital contributions, the General Partner may cause the Partnership
to borrow such funds from any person, including any Partner or Partners, upon
such terms and conditions as may be agreed to at the time. No such loan to the
Partnership from a Partner shall be deemed to constitute a Capital Contribution
to the Partnership and shall not increase the Capital Account of the Partner
making the loan.
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5.3 Business by Partners with the Partnership. With the consent of the
General Partner, any Partner or Transferee may loan money to, act as surety for,
or transact other business with the Partnership and, subject to other applicable
law, shall have the same rights and obligations with respect thereto as a person
who is not a Partner or Transferee, but no such transaction shall be deemed to
constitute a Capital Contribution to the Partnership and shall not increase the
Capital Account of any person engaging in any such transaction. If any Partner
or Affiliate of a Partner desires to provide services or materials to the
Partnership regarding the Pipeline, such Partner shall be authorized to provide
such services and/or materials provided: (i) he, she or it discloses such
relationship to the Partnership in advance and obtains the approval of the
General Partner; and (ii) he, she or it charges market rates for such services
and materials.
5.4 No Interest on Capital Accounts. No Partner shall be entitled to
receive interest on his or her Capital Account, and none shall be paid.
5.5 Assumption of Ongoing Obligations. The Partnership agrees to assume all
obligations incurred by the General Partner with respect to the Pipeline and the
ongoing purpose of the Partnership to the extent such obligations have not
otherwise been reimbursed as Out of Pocket Costs.
6. Distributions.
6.1 Distributions of Net Cash Flow, Net Financing Cash, Net Sales Cash, or
Net Insurance or Condemnation Cash.
(a) Allocation of Distributions. Net Cash Flow, Net Financing Cash, Net
Sales Cash, or Net Insurance or Condemnation Cash of the Partnership shall be
distributed among all of the Partners and Transferees as follows:
(i) First, to the General Partner in the amount of the Out of Pocket
Costs to reimburse the General Partner for such costs;
(ii) Second, 90% shall be distributed to the Limited Partners (pro
rata in accordance with their respective Percentage Interests) and 10%
shall be distributed to the General Partner until such time as the
Unreturned Capital of all of the Limited Partners is reduced to zero; and
(iii) Thereafter, 75% to the Limited Partners (pro rata in accordance
with their respective Percentage Interests) and 25% to the General Partner.
6.2 General Rule.
(a) Time of Distribution. Net Cash Flow, Net Financing Cash, Net Sales
Cash, or Net Insurance or Condemnation Cash shall be distributed at such time or
times as the General Partner shall determine in its sole discretion.
(b) Accumulations of Income. In the sole and absolute discretion of the
General Partner, Net Cash Flow, Net Financing Cash, Net Sales Cash, and/or Net
Insurance
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or Condemnation Cash for a Partnership Accounting Year may be accumulated, in
whole or in part, rather than being distributed among all of the Partners and
Transferees.
(c) Adjustments. All distributions of Net Cash Flow, Net Financing Cash,
Net Sales Cash or Net Insurance or Condemnation Cash for a Partnership
Accounting Year shall be subject to adjustment to conform to the financial
statements for the Partnership Accounting Year. If any additional amount is
distributed by reason of such financial statements, the additional amount shall
be deemed a distribution for that Partnership Accounting Year, and if the
financial statements show that any excess amount was distributed for a
Partnership Accounting Year, subsequent distributions shall be reduced to take
into account such excess amount.
6.3 Distributions in Liquidation. All distributions of Liquidation Proceeds
to Partners and Transferees shall be made after the allocation among the
Partners and Transferees pursuant to Article 7 of Partnership profits or losses
for the Partnership Accounting Year in which the liquidation occurs (including
any gain or loss deemed to have been realized as the result of a distribution in
kind, pursuant to Section 6.4), and shall be made in accordance with the
positive balances remaining in the Partners' and Transferees' Capital Accounts.
6.4 Distributions in Kind.
(a) Right to Make Distributions in Kind. No Partner or Transferee shall
have any right to demand or receive any distributions from the Partnership in
any form other than cash, but the General Partner (or the Liquidating Partner,
in the case of distributions in liquidation) may, in his, her, or its
discretion, make distributions in kind and may compel any Partner or Transferee
to accept a distribution in kind, including the distribution of a percentage of
an asset, which percentage is different than the Partner's or Transferee's
Percentage Interest.
(b) Deemed Sale Adjustment. Any asset distributed in kind to a Partner or
Transferee shall be valued and treated as though the asset had been sold for its
fair market value on the date of the distribution. Any gain or loss that would
have been recognized by the Partnership had the asset been so sold shall be
allocated among the Partners and Transferees as provided in Article 7, and the
distribution shall be treated as though the Partnership had distributed cash
equal to the fair market value of the asset to the Partner or Transferee
receiving the distribution in kind.
7. Allocation of Profits and Losses.
7.1 Allocation of Profits or Losses from Operations and Credits. Subject to
the provisions of this Article, all Partnership Net Profits from Operations, all
Partnership Net Losses from Operations, and all Partnership Credits shall be
allocated among the Partners and Transferees and shall be credited or debited to
the Partners' and Transferees' Capital Accounts (except that items of
Partnership Credit shall not be credited or debited to Capital Accounts), as
follows:
(a) Allocation of Net Profits from Operations and Credits. All Partnership
Net Profits from Operations, and all Partnership Credits, if any, shall be
allocated among all of the Partners and Transferees as follows: (i) until such
time as all Unreturned
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Capital of all the Limited Partners is reduced to zero, 90% to the Limited
Partners (pro rata in accordance with their respective Percentage Interests) and
10% to the General Partner; and (ii) thereafter, 75% to the Limited Partners
(pro rata in accordance with their respective Percentage Interests) and 25% to
the General Partner.
(b) Allocation of Net Losses from Operations. All Partnership Net Losses
from Operations, if any, shall be allocated among all of the Partners and
Transferees as follows: (i) until such time as all Unreturned Capital of all the
Limited Partners is reduced to zero, 90% to the Limited Partners (pro rata in
accordance with their respective Percentage Interests) and 10% to the General
Partner; and (ii) thereafter, 75% to the Limited Partners (pro rata in
accordance with their respective Percentage Interests) and 25% to the General
Partner.
7.2 Allocation of Gains and Losses Not in the Ordinary Course of
Operations. Subject to the provisions of this Article, all Partnership Gains Not
in the Ordinary Course of Operations and all Partnership Losses Not in the
Ordinary Course of Operations shall be allocated among the Partners and
Transferees and shall be credited or debited to the Partners' and Transferees'
Capital Accounts, as follows:
(a) Allocation of Gains Not in the Ordinary Course of Operations. All
Partnership Gains Not in the Ordinary Course of Operations shall be allocated as
follows:
(i) First, to those Partners with a negative Capital Account balance,
pro rata in accordance with such negative Capital Account balances, until
such negative balance reaches zero;
(ii) Second, to all Partners (pro rata in accordance with their
respective Percentage Interests) in an amount required to cause the balance
in their respective Capital Accounts (in addition to amounts credited under
(i) above) to equal the amount of their respective Unreturned Capital;
(iii) Third, 100% to the General Partner until such time as there has
been allocated to the General Partner an amount equal to 15% of the
aggregate gain allocated to all Partners under Section 7.1(a)(i) hereof;
and
(iv) Thereafter, among the Partners and Transferees in accordance with
their Percentage Interests.
(b) Allocation of Losses Not in the Ordinary Course of Operations. All
Partnership Losses Not in the Ordinary Course of Operations shall be allocated
among all of the Partners and Transferees as follows:
(i) First, to the Partners (pro rata in accordance with their
respective positive Capital Account balances, until the aggregate Capital
Accounts of each of the Partners is equal to zero; and
(ii) Thereafter, any remaining Losses, will be allocated to the
Partners in proportion to their Percentages.
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7.3 Section 704(c) Allocation. Notwithstanding any other provision of this
Article, any income, gain, loss, or deduction with respect to any property
contributed to the Partnership by a Partner shall be allocated among the
Partners and Transferees so as to take into account the variation between the
adjusted basis of the property to the Partnership and the fair market value of
the property at the time of the contribution, for which the Partner is credited
in determining his or her Capital Account. Such allocation shall be computed by
the Partnership's Accountants in accordance with Section 704(c) of the Code and
the Regulations promulgated thereunder. Said allocation shall apply to any
property contributed to the Partnership by any Partner. No increase or decrease
to the Capital Account of the Partner contributing such property shall result
from such allocation, to the extent the increase or decrease is credited at the
time of the contribution.
7.4 Transfer of Partnership Interests. Subject to Section 706 of the Code,
if a Partnership Interest is transferred during a Partnership accounting year,
that part of the Partnership's net profits and losses (including, for income tax
purposes, all items of income, gain, loss and deduction) and items of
Partnership credit, allocated pursuant to this Article 7 with respect to the
interest so transferred shall be allocated between the Transferor and the person
who acquires such interest in proportion to the number of days in such year
during which each owned such interest, as disclosed by the Partnership's
records. Subject to Section 706 of the Code, the allocation required by this
Section shall be made without regard to the results of Partnership operations
during particular periods of such Partnership accounting year or to the
Partnership distributions made to the Transferor or the Person who acquired such
interest. Notwithstanding the foregoing, but subject to Section 706 of the Code,
items of Partnership gain or loss earned or incurred on the sale, exchange or
other disposition of any Partnership asset other than in the ordinary course of
the Partnership's business, and items of Partnership credit, shall be allocated
to the Partner owning the Partnership interest at the time of the closing of
said sale, exchange or other disposition of such Partnership asset other than in
the ordinary course of the Partnership's business, or at the time the property
with respect to which a credit is allowed is placed in service.
7.3 Qualified Income Offset. No Partner shall be allocated losses or
specially allocated items of loss or deduction if the allocation would cause the
Partner to have a Capital Account, deficit at the end of a taxable year. If a
Partner receives (1) an allocation of loss, (2) a special allocation pursuant to
Article 7 of an item of loss or deduction or (3) any distribution, which
unexpectedly causes the Partner to have a Capital Account deficit at the end of
any taxable year, then all items of income and gain of the Partnership
(consisting of a pro rata portion of each item of Partnership income, including
gross income and gain) for that taxable year shall be allocated to that Partner,
before any other allocation is made of Partnership items for that taxable year,
in the amount and in proportions required to eliminate the excess as quickly as
possible. This Section 7.5 is intended to comply with, and shall be interpreted
consistently with, the "qualified income offset" provisions of the Regulations
promulgated under Code Section 704(b).
8. Limited Liability of Partners. Notwithstanding the provisions hereof for
the allocation of the Partnership's losses and for the distribution of cash to
the Partners by the Partnership, except as set forth under the Act, the Partners
shall not be required to make any contributions to the capital of the
Partnership for the payment of any such losses or for any other purposes nor
shall any Partner be responsible or obligated to any third parties for any debts
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or liabilities of the Partnership in excess of the sum of his unrecovered
contributions to the capital of the Partnership and his share of any
undistributed profits of the Partnership.
9. Administrative Provisions.
9.1 Management by General Partner. The business of the Partnership shall be
conducted under the exclusive management of the General Partner. The Managers of
the General Partner are ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, each of whom shall be
fully authorized to act on behalf of the General Partner. The Limited Partners
shall have no power to engage in the management of the affairs of the
Partnership.
9.2 Compensation for Services.
(a) Project Management Fee. The Partnership shall pay to the General
Partner a one-time project management fee of $200,000 equal to
approximately 7% of the total cost of the Pipeline for work the General
Partner has and will provide in managing the construction of the Pipeline.
If the Partnership does not receive $3,175,000 in cash or the conversion of
debt from its initial private offering, the $200,000 Project Management Fee
will be accrued by the Partnership and paid to the General Partner from the
Partnership's cash flow prior to the first distributions made by the
Partnership.
(b) Operating Management Fee. Beginning with the month in which
through-put of gas is commenced through the Pipeline on an operational
basis, the Partnership shall pay to the General Partner in the first year
that the Pipeline is operational an operating fee equal to 1% of the
invested capital. Invested capital means the total investment in ▇▇▇▇▇▇
Dome Gathering LLLP, not including the General Partner's capital
contribution. After the first year, the General Partner shall be paid a
monthly operating management fee equal to 2% of Gross Receipts per month
(or pro rata portion thereof for a partial month) which fee shall continue
for so long as the Pipeline is operational.
(c) Pipeline Expansion Fee. If the Pipeline reaches its capacity and
the General Partner decides to expand Partnership operations by
constructing a pipeline parallel to the Pipeline, the General Partner shall
be paid an additional project management fee equal to 7% of the cost of
developing and constructing the parallel pipeline.
(d) Reimbursement of Expenses. In addition, the General Partner shall
be reimbursed for all reasonable out-of-pocket costs incurred by the
General Partner in managing the Partnership. The General Partner shall not
be reimbursed for its overhead costs.
9.3 Matters Requiring Consent of Class A Limited Partners. The following
matters shall not be within the sole authority of the General Partner and shall
(except where otherwise indicated) require the consent of a majority of the
Percentage Interests of the Class A Limited Partners:
(a) Change in Method of Accounting. Any change in the method of
accounting employed by the Partnership;
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(b) Transfer of Assets. Except for a Permitted Sale (as hereinafter
defined with respect to which the General Partner shall be unilaterally
entitled to undertake and complete without the consent of any other
Partner), the sale, exchange, transfer or other disposition of any asset of
the Partnership. For this purpose, a Permitted Sale shall be defined as
either: (i) the sale, transfer and disposition of Partnership personal
property that has become obsolete or is otherwise in need of replacement in
the ordinary course of business; or (ii) the sale of substantially all of
the assets of the Partnership if such sale would generate a cash on cash
annualized rate of return on investment for the Limited Partners of not
less than 20%.
(c) Debts of Partnership. The assignment, transfer or pledge of any
debts due the Partnership, or the release of any debts due, except on
payment in full;
(d) Compromise of Claims. The compromise of any claim due the
Partnership or the submission to arbitration of any dispute or controversy
involving the Partnership in excess of $25,000;
(e) Removal of General Partner. The Limited Partners shall have the
power to remove the General Partner as General Partner, but only for cause.
Cause shall exist if the General Partner has been guilty of (i) gross
negligence or willful misconduct in managing the affairs of the Partnership
or dealing with the Partnership or (ii) a material breach of its duty of
loyalty to the Partnership or the Partners, in each case which has a
material adverse effect upon the Partnership or the Limited Partners. No
mistake in judgment that would be protected by a business judgment rule if
made by a director of a Colorado corporation shall be cause for removal of
the General Partner under any of the standards described above. Any removal
of the General Partner shall become effective upon receipt by the General
Partner of notice from the Limited Partners of such vote, subject to the
right of the General Partner to contest the existence of cause. Any
proceeding initiated by the General Partner to contest the existence of
cause for his removal shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. Upon such
removal, the Limited Partners, or the successor general partner selected by
the Limited Partners shall purchase the removed General Partner's
Partnership Interest in the manner provided in Section 14.2(e) of this
Agreement; and
(f) General Partner Compensation. Any increase in compensation payable
to the General Partner under Section 9.2 hereof.
9.4 Partners' Other Activities and Conflicts of Interest. The parties
understand that the General Partner and Limited Partners may have other business
activities which take the major portion of their time devoted to business
matters. Accordingly, the General Partner is required to expend on behalf of the
Partnership only such efforts as it shall, in its discretion, determine to be
appropriate for the proper conduct of Partnership affairs. Further, it is
acknowledged that any General Partner or Limited Partner, or any Affiliate
thereof, may engage in or possess an interest in any other business ventures of
every nature and description, independently or with others, including but not
limited to the ownership, financing, leasing, operation, management,
syndication, brokerage, or development of real properties, personal property or
equipment, some of which may compete with the business of the Partnership, and
neither the Partnership nor any of its Partners shall have any right in or to
any such independent ventures or to the income or profits derived therefrom. For
the purpose of avoidance of costly
11
and prolonged litigation, which may result in undue damage to all Partners, any
claims based on any such activities or conflicts of interest presented to any
Partner thereby are hereby expressly waived by the Partners.
9.5 Powers of General Partner. Subject to the rights and powers vested in
the other Partners by law and to such limitations and restrictions as are herein
set forth, the General Partner shall have the power for and on behalf of the
Partnership:
(a) Deal with Partnership Property. To deal in real and personal property
of the Partnership, including but not limited to the right to sell, lease,
exchange, or convey any part of such property (either alone or with other
Persons); to create and/or contribute property of the Partnership to any other
entity or business organization, including but not limited to, corporations,
joint ventures, limited liability companies, and other partnerships (either
general or limited), and to receive and hold interests in such other entities or
organizations, and to have and exercise all of the rights and obligations of an
owner of such interests; to pay from the Partnership funds any and all expenses
and fees; to obtain financing or refinancing of any property of the Partnership
by deeds of trust, or other security instruments encumbering property of the
Partnership, and to pay, prepay or repay the same in whole or in part; to
increase, modify, refinance, consolidate, or extend any deed of trust, or other
security instruments encumbering the property of the Partnership; to obtain and
maintain insurance coverage concerning the property of the Partnership; and to
employ as may be necessary or convenient brokers, managing agents, accountants,
legal counsel, and other personnel. Employment of such persons shall be on such
terms and for such compensation as the General Partner shall determine and the
costs and expenses thereof shall be paid for as a Partnership expense.
(b) Borrow Funds on Behalf of the Partnership. The General Partner is
authorized and empowered at any time and from time to time in the name and on
behalf of the Partnership to borrow money on behalf of the Partnership without
the approval of the Limited Partners, provided, however, that the General
Partner may not, without the consent of the Class A Limited Partners, borrow
money for the purpose of making distributions to the Limited Partners, and
further may mortgage, pledge, assign, hypothecate, or grant a security interest
in any or all of the assets or properties of the Partnership now owned or
hereafter acquired to secure a loan or any extensions and renewals thereof, and
that in connection therewith, the General Partner is authorized and empowered at
any time and from time to time in the name of and on behalf of the Partnership
to execute, acknowledge, seal, and deliver to the lender any instruments and
agreements including, without limitation, promissory notes, loan agreements,
guaranty agreements, and other obligations, instruments, mortgages, deeds of
trust, pledges, assignments, and security agreements, containing such terms,
conditions, covenants, and agreements of the Partnership as may be agreed upon
by the lender and the General Partner, the execution, sealing, acknowledgment,
and delivery of any such promissory notes, loan agreements, guaranty agreements,
and other obligations, instruments, mortgages, deeds of trust, pledges,
assignments, and security agreements by the General Partner to be conclusive
evidence of such agreement.
(c) Self-Dealing. To deal with or through any Partner, General or Limited,
or any Affiliate thereof, and the fact that a Partner is employed by the
Partnership or is an Affiliate of any Person employed by the Partnership to
render or perform a service, or from which the Partnership may purchase any
property, shall not prohibit the General Partner from
12
employing such Partner or Affiliate, or from otherwise dealing with him, her or
it, and neither the Partnership nor any of the Partners herein shall have any
right in and to the income or profits derived therefrom as a consequence of the
Partnership relationship herein created.
(d) Other Powers. To exercise all of the powers and rights of a general
partner in a limited partnership formed under the Act.
9.6 Execution and Filing of Instruments. The Partners hereby irrevocably
constitute and appoint the General Partner, with power of substitution, and any
successor General Partner, their true and lawful attorney and agent with full
power and authority in their name, place, and ▇▇▇▇▇ to make, execute,
acknowledge, deliver, file, and record in any appropriate public office the
following:
(a) Certificate of Limited Partnership and Registration of Limited
Liability Limited Partnership. A Certificate of Limited Partnership and
Registration of Limited Liability Limited Partnership pursuant to the laws
of the State of Colorado, a Trade Name Affidavit, where appropriate, and
such other certificates or instruments as may be required to be filed by
the Partnership under the laws of any jurisdiction or under this Agreement
(including, but not limited to, any documents required under Section 11
hereof); and
(b) Amendments. Any and all amendments of the instruments described in
the preceding paragraph, provided that they are consistent with the terms
of this Agreement and have been authorized by the Partners.
The foregoing power of attorney shall survive the delivery of any
assignment by any Partner or Transferee of the whole or any portion of its
Partnership Interest and any Transferee or Substituted Partner hereby
constitutes and appoints the General Partner or any successor General Partner,
as his, her or its true and lawful attorney in the same manner and for the same
purposes as the Transferor or Partner. This power of attorney is a special power
of attorney coupled with an interest and is irrevocable.
9.7 Indemnification of General Partner.
(a) Indemnification. The General Partner shall be fully indemnified,
defended and held harmless, absolutely, irrevocably and forever, by the
Partnership from and against any and all claims, demands, liabilities,
costs, damages and causes of action, of any nature whatsoever, except to
the extent any such action relates to distributions to Partners and
Transferees, arising out of or incidental to the General Partner's
management of the Partnership affairs, except where the claim at issue is
based upon the fraud, gross negligence or willful misconduct of such
General Partner, or the breach by such General Partner of any provision of
this Agreement, the result of which is adverse to the Partnership or to any
Partner. Further, except to the extent any such action relates to
distributions to Partners and Transferees, no Partner or the Partnership
shall be entitled to recover from a General Partner any damages relating to
any action taken or not taken by the General Partner under the authority
granted to the General Partner hereunder, unless such action or inaction
was grossly negligent or fraudulent.
(b) Scope of Indemnification. The indemnification authorized by this
Section shall include, but not be limited to, payment of (i) reasonable
attorneys' fees or other
13
expenses incurred in connection with settlement or in any finally
adjudicated legal proceeding; and (ii) the removal of any liens affecting
any property of the indemnitee.
(c) Indemnification Cumulative. The indemnification rights contained
in this Section shall be cumulative of, and in addition to, any and all
rights, remedies and recourse to which the General Partners shall be
entitled, whether pursuant to the provisions of this Agreement, at law or
in equity.
(d) Limitation. Indemnification shall be made solely and entirely from
assets of the Partnership (excluding, for these purposes, all assets of a
Partner other than those of, and attributable to, such Partner's
Partnership Interest), and no Limited Partner or other General Partner
shall be personally liable to the indemnitee under this Section.
9.8 Tax Matters Partner.
(a) Designation. The General Partner is hereby designated the Tax
Matters Partner.
(b) Limitations on Extending Statute of Limitations. Without the
consent of the General Partner, the Tax Matters Partner shall have no right
to extend the statute of limitations for assessing or computing any tax
liability against the Partnership or the amount of any Partnership tax
item.
(c) Filing Petitions in Tax Court. If the Tax Matters Partner elects
to file a petition for readjustment of any Partnership tax item (in
accordance with Section 6226(a) of the Code), such petition shall, unless
the General Partner and the other General Partners agree otherwise, be
filed in the United States Tax Court.
(d) Communications. The Tax Matters Partner shall, within five days of
receipt thereof, forward to each Partner a photocopy of any correspondence
relating to the Partnership received from the Internal Revenue Service. The
Tax Matters Partner shall, within five days thereof, advise each Partner in
writing of the substance of any conversation held with any representative
of the Internal Revenue Service.
(e) Accountants and Lawyers. Any reasonable costs incurred by the Tax
Matters Partner for retaining accountants and/or lawyers on behalf of the
Partnership in connection with any Internal Revenue Service audit of the
Partnership shall be expenses of the Partnership.
9.9 Partnership Meetings; Manner of Acting.
The General Partner shall hold meetings at locations selected by the
General Partner at least once each calendar year to discuss the business affairs
and financial position of the Partnership. At least fifteen (15) days prior to
any such meeting, the General Partner may provide the others with an agenda
setting forth the items which such General Partner wishes to discuss at such
meeting. After each such meeting, the General Partner shall prepare written
minutes containing the substance of the discussions held at such meeting which
minutes shall within thirty days of the date of any such meeting be distributed
to the other General Partners,
14
the Limited Partners and the Partnership's Accountants. The General Partner may
call and hold additional meetings of the General Partners to discuss any matters
relating to the Partnership at locations selected by the General Partner upon
fifteen (15) days prior written notice to the General Partners. After each such
meeting, the General Partner shall prepare written minutes containing the
substance of the discussions held at such meeting which minutes shall within
thirty days of the date of any such meeting be distributed to the other General
Partners, the Limited Partners and the Partnership's Accountants.
9.10 Successor General Partner.
(a) Termination of General Partner. NRGG shall cease to be the General
Partner upon the happening of any of the following events:
(i) The retirement, withdrawal (including a withdrawal described
in Section 12.2 hereof), adjudication of incompetency, or death of
both ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇, or ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇
are no longer active Managers of the General Partner;
(ii) The Transfer by NRGG of all of its General Partnership
Interest to a Transferee or a Substituted Partner in accordance with
the terms of this Agreement; or
(iii) The occurrence of fraud by the General Partner or its
representatives or the General Partner files for or is the subject of
a bankruptcy filing.
(b) Successor General Partner. If NRGG ceases to be the General
Partner of this Partnership, then a new General Partner shall be elected by
at least a majority of the Percentage Interests of the Class A Limited
Partners.
9.11 Rights and Obligations of Limited Partners.
(a) No Management by Limited Partners. The Limited Partners shall not,
under any circumstances, take part or interfere in any manner with the
management of the Partnership and shall have no right or authority to act
in such management capacity for or on behalf of the Partnership.
(b) Limited Liability. The Limited Partners, as such, shall not be
personally liable for any of the debts of the Partnership or any of the
losses of the Partnership beyond the amounts contributed or required to be
contributed pursuant to this Agreement, and their share of undistributed
profits of the Partnership, or as otherwise provided by law.
(c) Transactions with Partnership. The Limited Partners may, with the
consent of the General Partner, lend money to, act as surety for, and
transact other business with the Partnership; but the Limited Partners
shall not in respect to any claim, receive or hold as collateral any
Partnership property or receive from the General Partner or the Partnership
any payment, conveyance, or release from liability if, at the time of any
such payment, conveyance, or release, the assets of the partnership are not
sufficient to discharge Partnership liabilities (such liabilities including
loans from Partners) to persons not claiming as Partners.
15
9.12 Action by the General Partner. Whenever any action is to be taken or
not taken, or any decision is to be made, by the General Partner, such action
shall be taken or not taken, or such decision shall be made, upon a majority
vote of the Percentage Interests held by the General Partner who are not then
Defaulting Partners, if more than one. Any General Partner may register its
dissent or abstention with respect to such action or decision by depositing a
written statement of such dissent or abstention with the records of the
Partnership, but the dissenting or abstaining General Partner shall be obligated
to act with the other General Partners to effectuate and carry out any action to
be taken or any decision reached by a majority vote of the Percentage Interests
held by the General Partners who are not then Defaulting Partners.
10. Representations and Warranties of Limited Partners.
(a) Representations and Warranties. Each Limited Partner hereby
represents, warrants and covenants to the Partnership and the General
Partner that:
(i) Limited Partner is acquiring its Partnership Interest solely
for its own account as principal and not with a view to resale or
distribution; and it, if an entity, was not formed for the purpose of
acquiring its Partnership Interest.
(ii) Limited Partner recognizes that investments of any kind
involve certain risks, and Limited Partner has taken full cognizance
of and understands such risks.
(iii) Limited Partner has been provided with all information and
documents relating to the General Partner, the Partnership, and its
proposed business and operations and the Partnership Interests
necessary for it to make an informed investment decision, Limited
Partner has been afforded an opportunity to request any and all
relevant information concerning such matters, and has been provided
with all information it has requested and with copies of all documents
it has requested; and it has read, thoroughly reviewed and understands
all such documents and information.
(iv) in connection with Limited Partner's acquisition of a
Partnership Interest, Limited Partner:
(A) has been fully informed as to the circumstances under
which it is required to take and hold its Partnership Interest
pursuant to the requirements of the Securities Act of 1933, as
amended (the "1933 Act") and the applicable state securities or
"Blue Sky" law or laws;
(B) has been informed by the General Partner that his, her,
or its Partnership Interest is not registered under the 1933 Act
and may not be Transferred, assigned or otherwise disposed of
unless its Partnership Interest is subsequently registered under
the 1933 Act or an exemption from such registration is available;
(C) understands that (I) the Partnership and the General
Partner are under no obligation to register his, her, or its
Partnership Interest under the 1933 Act or to comply with any
applicable exemption under the 1933 Act and the applicable state
securities or "Blue Sky" law or laws with respect to its
Partnership Interest and (II) the Partnership will not be
required to supply Limited Partner with any information necessary
to enable it to make a casual
16
sale of its Partnership Interest under Rule 144 of the 1933 Act
(assuming such Rule is applicable and is otherwise available to
it with respect to its Partnership Interest); and
(D) stop transfer instructions will be noted on the
Partnership Interest records of the Partnership and any
certificate or other document evidencing ownership of the
Partnership Interest will bear a legend restricting the transfer
thereof.
(v) understands that this Agreement contains restrictions on the
transfer, assignment and disposition of its Partnership Interest, and
that, in addition to such restrictions, the Partner covenants and
agrees that its Partnership Interest shall not be sold, assigned,
transferred or otherwise disposed of unless:
(A) such sale, assignment, transfer or disposition is exempt
from registration under the 1933 Act and the applicable state
securities or "Blue Sky" law or laws and, if the General Partner
so request, an opinion, satisfactory to them, to such effect has
been rendered by counsel satisfactory to the General Partner, or
(B) a registration statement covering its Partnership
Interest is effective under the 1933 Act.
(vi) in connection with the sale or transfer of interests within
any Limited Partner, no Person has been admitted to such partnership,
limited liability Partnership, trust, corporation or other entity
whose participation or investment therein, or whose indirect
participation or investment in the Partnership, constitutes, or would
constitute, a violation on the part of the General Partner or the
Partnership of the 1933 Act or any applicable "Blue Sky" law or laws;
nor does the manner in which any such sale or transfer of interests
within any Limited Partner has been conducted constitute a violation
on the part of the General Partner or the Partnership of the 1933 Act
or any applicable "Blue Sky" law or laws.
(vii) He, she, or it has such knowledge and experience in
financial and business matters so as to be capable of evaluating the
merits and risks of the acquisition of a Partnership Interest. In
addition, he or she can afford the loss of his or her entire
investment in the Partnership.
(viii) all transactions contemplated by this Agreement to be
performed by each Limited Partner, if an entity, have been duly
authorized by all necessary action of its partners, managers,
trustees, general partner or other governing body and by the owners of
all of the equity interests in such Limited Partner; the consummation
of this Agreement will not result in a breach or violation of, or
default under, the partnership agreement, articles of organization,
operating agreement, trust agreement, articles of incorporation,
bylaws, or other governing document of the Limited Partner or any
agreement by which it is bound or any statute, regulation, order or
other law to which it is subject; and this Agreement is a binding and
enforceable agreement on the part of the Limited Partner.
(ix) the address of each Limited Partner specified herein is, if
an individual, his or her principal place of residence or, if an
entity, its principal place of business.
17
(b) Indemnification. Each Limited Partner shall and does hereby agree
to indemnify and save harmless the Partnership, the General Partner and
each other Limited Partner from any damages, claims, expenses, losses or
actions resulting from a breach by such Limited Partner of any of the
warranties and representations contained in this Article or the untruth of
any of the warranties and representations contained in this Article.
11. Default and Remedies.
11.1 Events of Default. Any of the following occurrences shall constitute
an "Event of Default":
(a) Monetary Default. The failure of a Partner to make any of the
Capital Contributions to the Partnership required to be made by that
Partner under this Agreement and the continuance of such failure for a
period of ten days after the giving to such Partner by the General Partner
of a written demand for such Partner's Capital Contribution.
(b) Failure to Comply with Other Provisions. The failure by a Partner
to comply with any of the provisions of this Agreement and the continuance
of such failure for a period of ten (10) days after written notice thereof
is given to such Partner by the General Partner specifying the nature
thereof, or, if such default cannot by its nature be cured or remedied
within such ten (10) day period, the failure of the Defaulting Partner to
take such action as may be necessary to begin to cure or remedy such
default within such ten (10) day period and thereafter to diligently pursue
to completion the cure or remedy of such default.
(c) Action Resulting in Dissolution. Any action by a Partner in
contravention of the provisions of this Agreement, which results in
dissolution of the Partnership under applicable law.
11.2 Remedies for Default. If any Partner defaults under the provisions of
Section 11.1, the General Partner and the Partnership shall have the following
rights:
(a) Legal Action. The General Partner or the Partnership may bring an
action against the Defaulting Partner, for damages, specific performance,
injunctive relief and/or any other remedy available at law or in equity.
Each Partner, by executing this Agreement, hereby consents to any such
action being brought in the Colorado District Court in and for the County
of Arapahoe, or any other court of competent jurisdiction, at the option of
the General Partner.
(b) Monetary Default. In the case of a Monetary Default by any
Partner, the remaining Partners may, at their option, and on ten (10) days'
written notice to the Defaulting Partner, advance to the Partnership the
amount of the Monetary Default (pro rata in proportion to the Partnership
Interests of the Non-defaulting Partners, or in such other proportions as
the Non-defaulting Partners may agree), in which event the Advancing
Partners shall be entitled to, at their option, treat the amounts advanced
pursuant to this Section (i) as a loan from the Advancing Partners bearing
interest at a rate per annum equal to three (3.0) percentage points above
the prime rate of interest charged by ▇▇▇▇▇ Fargo Bank, N.A., of Denver,
Colorado to its most creditworthy customers secured by the Defaulting
Partner's interest in the Partnership or (ii) as a reduction in the
Defaulting Partner's interest in the Partnership. If
18
the Advancing Partners elect to treat such amounts contributed as a loan,
such loan shall be due and payable to the Advancing Partners without
further notice or demand one hundred eighty (180) days after the date
additional amounts are advanced. Until they are fully repaid, the Advancing
Partners shall be entitled to all Distributions to which the Defaulting
Partner would have been entitled. If the Advancing Partners elect to treat
such amounts contributed as a reduction in the Defaulting Partner's
interest in the Partnership, the Percentage Interests of the Partners shall
then be readjusted in accordance with the dilution procedure described in
Section 11.2(d) thereof.
(c) Loss of Voting Rights. Any Class A Limited Partner or General
Partner who is in default hereunder shall have no right to vote on any
matter until such Event of Default is cured. In such event, votes shall be
taken as if the vote of the Partner in default does not exist.
(d) Dilution. In the event the Percentage Interests of a Defaulting
Partner are subject to dilution and adjustment under this Agreement, the
recalculated Percentage Interest of the Defaulting Partner shall be
calculated in accordance with the following formula:
Revised = The amount of A + B + C + D attributable to just the Defaulting
Partner Percentage Interest A + B + C + D
A = Total Initial and Additional Capital Contribution of all
Partners to date.
B = Retained earnings of the Partnership dated in accordance
with GAAP as of the same date that the numerator is
determined.
C = Current tax depreciation cleared by the Partnership to date.
D = The total Additional Capital Contribution with respect to
which the Defaulting Partner failed to contribute his or its
share.
The reduction in the Percentage Interest of the Defaulting Partner shall be
allocated to the non-defaulting Partners in the ratio that they each contributed
to curing such default. The purpose of the foregoing formula is to deny the
Defaulting Partner any increase in its Percentage Interest attributable to
appreciation in the assets of the Partnership.
The example attached hereto as Exhibit C is intended to reflect application
of the above formula:
(f) Remedies Cumulative. The rights and remedies granted to the
Partnership and the General Partner by this Section shall be in addition
to, and not in limitation of, any other rights or remedies available to the
Partnership or the General Partner, at law or in equity, under the terms of
this Agreement, or otherwise. Further, the failure to exercise any right or
remedy, or the exercise of any particular right or remedy, on one occasion,
shall not prevent the exercise of the same or any other right or remedy on
any other occasion.
19
12. Withdrawal of Partners; Waiver of Partition.
12.1 Withdrawal by Limited Partner. No Limited Partner may withdraw from
the Partnership.
12.2 Events of Withdrawal of General Partner. A Person shall cease to be a
General Partner of the Partnership upon the happening of any of the following
events:
(a) Withdrawal. The General Partner withdraws from the Partnership by
giving written notice to the other Partners. Any such withdrawal shall not
subject the General Partner to damages for breach of the Partnership
Agreement;
(b) Assignment. The General Partner ceases to be a Partner of the
Partnership by virtue of the assignment or transfer of such Partner's
interest in the Partnership;
(c) Bankruptcy. Unless all Partners give their consent in writing at
the time, the General Partner:
(i) makes an assignment for the benefit of creditors;
(ii) files a voluntary petition in bankruptcy;
(iii) is adjudicated a bankrupt or insolvent;
(iv) files a petition or answer seeking for himself or herself
any reorganization agreement, composition, readjustment, liquidation,
dissolution, or similar relief under any statute, law or regulation;
(v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against him or
her in any proceeding of this nature; or
(vi) seeks, consents to, or acquiesces in the appointment of a
trustee, receiver or liquidator of the General Partner or of all or
any substantial part of his or her properties;
(d) Reorganization. Unless all Partners give their consent in writing
at the time, if 120 days after the commencement of any proceeding against
the General Partner seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute,
law or regulation the proceeding has not been dismissed; or if within 90
days after the appointment without his or her consent or acquiescence of a
trustee, receiver or liquidator of the General Partner or of all or any
substantial part of his or her properties the appointment is not vacated or
stayed, or if within 90 days after the expiration of any such stay the
appointment is not vacated;
(e) Death or Incompetency. In the case of a General Partner who is a
natural person:
20
(i) his or her death; or
(ii) the entry by court of competent jurisdiction adjudicating
him or her incompetent to manage his or her person or his or her
estate;
(f) Termination of Trust. In the case of a General Partner who is
acting as a General Partner by virtue of being a trustee of a trust, the
termination of the trust (but not merely the substitution of a new
trustee);
(g) Dissolution of Partnership. In the case of a General Partner that
is a separate partnership, the dissolution and commencement of winding up
of the separate partnership;
(h) Dissolution of Limited Liability Partnership. In the case of a
General Partner that is a limited liability Partnership, upon the filing of
a statement of intent to dissolve.
(i) Dissolution of Corporation. In the case of a General Partner that
is a corporation, the filing of a Certificate of Dissolution, or its
equivalent, for the corporation or the revocation of its charter or its
Certificate of Incorporation; or
(j) Distribution of Estate. In the case of a General Partner that is
an estate, the distribution by the fiduciary of the estate's entire
interest in the Partnership.
12.3 Waiver of Partition and Withdrawal. The Partners acknowledge that care
has been taken in this Agreement to provide for the fair and just payment on
liquidation of the interest of all Partners, and that partition of the
Partnership property prior to any of the occurrences contemplated herein would
cause irreparable damage to the Partnership's business. Accordingly, each
Partner hereby waives and renounces his or her right to seek appointment by any
court of a liquidator for the Partnership, or to seek the partition of the
Partnership or any Partnership property for any reason. Further, except as
specifically provided in this Agreement, it is agreed that no Partner shall have
the right to withdraw any part of his or her Capital Contribution prior to the
termination of this Partnership, and then only as contemplated herein and to the
extent of Partnership assets.
13. Partner Acting as Both General Partner and Limited Partner. A General
Partner may make contributions to the Partnership and share in the profits and
losses of, and in distributions from, the Partnership as a General Partner. A
General Partner may also make contributions to and share in profits, losses and
distributions as a Limited Partner of the Partnership. A person who is both a
General Partner and a Limited Partner has the rights and powers, and is subject
to the restrictions and liabilities, of a General Partner and also has the
powers, and is subject to the restrictions, of a Limited Partner to the extent
of his or her participation in the Partnership as a Limited Partner.
14. Transfer of Partnership Interests.
14.1 Transfer of General Partnership Interests. Except as provided in this
Article, the Partnership Interest of a General Partner in the Partnership may
not be Transferred in
21
whole or in part without the consent of all the General Partners (including the
vote of the General Partner making the Transfer) and approval of the Class A
Limited Partner required under Section 9.3(e) hereof. Notwithstanding anything
contained in this Section 14.1 hereof, the General Partner shall be permitted to
transfer all or any part of its General Partner Partnership Interest to an
Affiliate of the General Partner provided both the transferor and transferee
remain obligated to perform all obligations of the General Partner under this
Agreement. A Transferee of a General Partnership Interest shall become a
Substituted General Partner only upon the written consent pursuant to Section
9.3(g) hereof.
14.2 Transfer of Limited Partnership Interests.
(a) No Dissolution on Termination of Limited Partners. The death,
dissolution, disability, withdrawal or bankruptcy of a Limited Partner or
the death or disability of any Person who shall succeed to any portion of
the interest of a Limited Partner as hereinafter described shall not cause
a dissolution or termination of this Partnership. The personal
representatives, successors, conservators, or trustees, as the case may be
(hereinafter "successors in interest"), of a Limited Partner shall succeed
to his or her interest herein, and the Transfer of such interest to such
Persons shall be effective on the books of the Partnership subject however,
to the performance of such acts and the agreement of such successor in
interest to such covenants or undertakings as counsel for the Partnership
shall determine to be necessary to avoid violation of any federal or state
securities laws in connection with such succession or subsequent Transfers,
and their agreement to all of the terms and provisions of this Agreement.
Notwithstanding the Transfers herein contemplated, such successors in
interest shall be Transferees only with respect to the Partnership Interest
of a Limited Partner; provided, however, that the General Partners may, in
their discretion, acting in the interest of the Partnership, cause such
successors in interest to be Substituted Limited Partners upon the
appropriate execution and filing of an amendment to the Certificate.
(b) Restrictions on Transfers by Gift by Limited Partners. No Limited
Partner nor any successor to any portion of the Partnership Interest of any
Limited Partner shall Transfer by gift the Limited Partnership Interest
held, or any portion thereof, unless the provisions of this Section 14.2
(and in particular Section 14.2(d) hereof) are complied with in respect to
such Transfer by gift.
(c) Sales of Partnership Interests to a Third Party. Any Limited
Partner desiring to sell their interest in the Partnership and whom has
received a bona fide written offer from a third party desiring to purchase
such interest of the Transferor, must first offer ("Transfer Notice"), in
writing, to sell such interest to the Partnership for a period of ten (10)
days, at a price determined pursuant to Subsection (f) below and upon the
terms stated in Subsection (g) below. The Partnership may, within such ten
(10) day period, accept such offer as to all or part of the interest so
offered. If, at the end of such period, the option to purchase the interest
so offered has not been exercised, in part or in whole, by the Partnership,
then the other Partners shall have the right to exercise said option for an
additional twenty (20) days in such proportions as they agree upon among
themselves, or in the absence of any such agreement then in accordance with
their then respective Percentage Interests (excluding the Percentage
Interests of the Transferor). If the foregoing option is not exercised as
to any portion of the interest, the Transferor may sell any remaining
interest in the Partnership at the price, on the terms and to the
22
assignee stated in the notice or if there is no third-party offer, to the
assignee set forth in the written offer at any time within ten (10) days
after the foregoing option expires, but not thereafter unless and until
such Transferor gives a new notice to the Partnership and the
non-Transferor Partners and they again fail to exercise their option under
the foregoing provisions. All offers to sell an interest in the Partnership
in accordance with this Section shall be in writing, shall state the
proposed purchase price and terms, if any, and shall identify the
prospective assignee by name and address. The admission of a Transferee as
a Partner shall be conditioned upon the written acceptance and adoption by
such Transferee of all terms and conditions of this Agreement.
(d) Death, Disability, Divorce or Bankruptcy of a Limited Partner. If
a Limited Partner dies or becomes incapacitated, bankrupt or insolvent, or
if a Limited Partner shall become legally separated or divorced and, as a
result, all or part of such Partner's Partnership Interest is transferred
to the personal representative of the deceased Partner, the legal successor
in interest of the incapacitated, bankrupt or insolvent Partner, or the
spouse or former spouse of the separated or divorced Partner shall offer to
sell such interest of the deceased, incapacitated, bankrupt, insolvent,
separated or divorced Partner to the Partnership for a period of sixty (60)
days, at the price determined pursuant to Subsection (f) below and upon
terms contained in Subsection (g). If, at the end of such sixty (60) day
period, the Partnership has not accepted the offer with respect to any
portion of the interest so offered, such personal representative of the
deceased Partner, legal successor in interest of the incapacitated,
bankrupt or insolvent Partner, or spouse or former spouse of the separated
or divorced Partner shall offer to sell the interest of the deceased,
incapacitated, bankrupt, insolvent, separated or divorced Partner pro rata
to all of the other Partners for an additional period of sixty (60) days,
at the same price and upon the same terms. Such other Partners may, within
such additional sixty (60) day period, accept such offer as to all or any
part of the interest so offered. If any Partner rejects part or all of such
pro rata offer, the interest so rejected shall be offered pro rata to such
other Partners for an additional period of ten (10) days. If, at the end of
such period, the option to purchase any of the interest so offered has not
been exercised, then the Assignee shall have the right to become a
Transferee in the place of the deceased, incapacitated, bankrupt,
insolvent, separated or divorced Partner and to the extent of such
Partner's remaining interest in the Partnership. The admission of a
Transferee as a Partner shall be conditioned upon the written acceptance
and adoption by such Transferee of all terms and conditions of this
Agreement and upon obtaining the vote required under this Agreement to
approve such admission.
(e) Determination of Purchase Price. Except as otherwise provided in
this Section, the purchase price of a Partner's interest in the Partnership
shall be the lesser of the lowest offer to purchase the Partner's interest
that has been made by a non-Partner or the fair market value of the
Partner's interest as of the close of business on the date of the transfer.
In the case of a purchase made pursuant to Subsection (e) above, the
purchase price shall be the fair market value of the Partner's interest as
of the close of business on the date of the transfer. Fair market value
shall be determined by an independent valuation expert agreed to by the
Transferor, the personal representative of the deceased Partner, legal
successor in interest of the incapacitated, bankrupt or insolvent Partner,
or spouse or former spouse of the separated or divorced Partner and the
General Partner and shall reflect all appropriate discounts and premiums
based on valuation principles generally applicable to such an interest. If
such parties are unable to agree upon the selection of one valuation expert
within thirty (30) days, then the
23
General Partner shall select one valuation expert and the Transferor, the
personal representative of the deceased Partner, legal successor in
interest of the incapacitated, bankrupt or insolvent Partner, or spouse or
former spouse of the separated or divorced Partner shall select one
valuation expert and each valuation expert shall make a determination as to
fair market value, within an additional thirty (30) days. If the two
valuation experts do not agree on fair market value and if there is a ten
(10) percent or less difference between their determinations, then their
determinations shall be averaged to determine fair market value. If there
is more than ten percent difference between the fair market value
determinations of the two valuation experts, then those two valuation
experts shall within a thirty (30) day period appoint a third valuation
expert who shall make a determination of fair market value, within an
additional thirty (30) day period. The average of the three valuations
shall be the fair market value. The fees of the valuation expert selected
by the Transferor, the personal representative of the deceased Partner,
legal successor in interest of the incapacitated, bankrupt or insolvent
Partner, or spouse or former spouse of the separated or divorced Partner
shall be paid by such person. The fees of the valuation expert selected by
the General Partner shall be paid by the Partnership. The fees of a third
valuation expert selected by the other two valuation experts shall be paid
one-half by the Transferor, the personal representative of the deceased
Partner, legal successor in interest of the incapacitated, bankrupt or
insolvent Partner, or spouse or former spouse of the separated or divorced
Partner and one-half by the Partnership. If the Transferor, the personal
representative of the deceased Partner, legal successor in interest of the
incapacitated, bankrupt or insolvent Partner, or spouse or former spouse of
the separated or divorced Partner and the General Partner are unable to
agree on one valuation expert and either party fails to select a valuation
expert within the required thirty day period, then the party that fails to
select a valuation expert within the specified time limits shall have
waived such party's right to select a valuation expert. In that event, the
fair market value determination made by the valuation expert selected by
the non-waiving party shall control. The Transferor or the deceased,
incapacitated, bankrupt, insolvent, separated or divorced Partner shall
also be allocated his or her share of income or loss pursuant to Section 7.
(f) Payment of Purchase Price. The Purchase price for an interest in
the Partnership, shall be paid as follows:
(i) Five (5%) percent, or more at the option of the purchaser, of
the purchase price shall be payable in cash or certified funds at the
end of the applicable option period; and
(ii) The balance of the purchase price shall be payable in ten
(10) equal quarter annual installments, or such shorter period as
determined by the purchaser, the first of which shall be due three (3)
months after the end of the applicable option period. This obligation
shall be evidenced by a promissory note providing for:
(A) interest on the unpaid balance at the rate that the
▇▇▇▇▇ Fargo Bank, N.A. of Denver, Colorado, or its corporate
successor, charges to its prime commercial customers borrowing
funds on a secured basis on the date the note is executed, but
not less than the minimum rate required by Section 1274(d) of the
Code as amended, and the regulations thereunder; and
24
(B) the right of prepayment in whole or in part, without
penalty, any partial prepayment to be applied against the next
installment due.
(g) Security. Any promissory note under this Article may be secured by
the purchaser's Partnership Interest (including the Partnership Interest
just acquired) or such other assets as the parties may agree pursuant to
security instruments appropriate to create and perfect such a security
interest.
14.3 Limitations. Notwithstanding any other provision of this Agreement, as
to any Transfer under this Section, the General Partner shall impose such
conditions of Transfer, the performance of such acts, and the rendering of such
covenants or undertakings by the transferor and the transferee of such interest,
as counsel for the Partnership may reasonably determine to be necessary to avoid
the violation of any federal and state securities laws with respect to any such
transfer, to evidence the transferee's agreement to be bound by all terms and
provisions hereof, and to evidence the intent of the transferee to purchase such
interest with a view to investment, and not with a view to further distribution
thereof. The General Partners may, in their absolute discretion, withhold for
any reason their consent to a Transferee to become a Substituted Partner, or may
determine to allow such Transferee to become a Substituted Partner, in which
event an amendment of the Certificate shall be filed to reflect the same. Absent
such action by the General Partner, the Transferee shall be accorded the rights
and privileges of a Transferee only with respect to the interest so Transferred.
Anything herein to the contrary notwithstanding, the General Partner may divide
and/or delay any purchase transaction herein contemplated in such manner as they
shall reasonably determine to be necessary to avoid a termination of the
Partnership for income tax purposes.
14.4 Encumbrance of Partnership Interest. No General Partner or Limited
Partner or Transferee shall pledge, hypothecate or otherwise encumber all or any
part of his or her Partnership Interest without the prior written consent of the
General Partner; and any act in violation of this restriction shall be null and
void as against the Partnership and the other Partners.
14.5 Admission of Additional Limited Partners. Nothing herein shall
restrict or inhibit the General Partner, in its sole discretion, from admitting
Additional Limited Partners upon proper filing of an amendment to the
Certificate. Subject to the foregoing, the General Partner may admit Additional
Limited Partners upon the making of Capital Contributions by such Additional
Limited Partners and the Percentage Interests of the Partners shall be adjusted
proportionately; provided the vote required by Section 9.3 is obtained.
15. Termination of the Partnership.
15.1 Events of Termination. The Partnership shall be dissolved, terminated,
and liquidated upon the earliest to occur of the following:
(a) Event of Withdrawal of General Partner. An event of withdrawal of
a General Partner, as defined in Section 12.2, unless at the time there is
at least one other General Partner and such remaining General Partner
elects, within sixty (60) days after said event of withdrawal to continue
the business of the Partnership, or if there is no remaining
25
General Partner, the Partnership is not dissolved and is not required to be
wound up by reason of any event of withdrawal if, within ninety (90) days
after the withdrawal, a majority of the Class A Partners agrees in writing
to continue the business of the Limited Partnership and to the appointment
of one or more additional General Partners if necessary or desired. Said
agreement to continue and the appointment of one or more additional General
Partners shall be by a majority vote of the Class A Partners.
(b) Specified Date. December 31, 2060.
(c) Written Consent. Written Consent of all Partners excluding the
Class B Partners.
(d) Decree. Entry of a Decree of Judicial Dissolution under Sec.
7-62-802 of the Act.
15.2 Winding Up. In the event of the termination of the Partnership, the
Partnership shall immediately commence to wind up its affairs. Upon the
termination of the Partnership, a Liquidating Partner shall be appointed as
follows: if the General Partner, or his or her designated successor, is then a
General Partner, he or she shall be the Liquidating Partner; and if the General
Partner, or his or her designated successor, is not then a General Partner, the
remaining Partners shall unanimously select a Liquidating Partner. The
Liquidating Partner shall execute, acknowledge and cause to be filed a
cancellation to the Certificate indicating the termination of the Partnership
upon the dissolution and commencement of winding up of the Partnership. The
Partners shall continue to share in profits and losses during liquidation in the
same proportions as before termination. The proceeds from liquidation of the
Partnership assets shall be applied in the following order of priority:
(a) Debts to Third Parties. To payment of the debts and liabilities of
the Partnership (other than those to Partners) in the order of priority
provided by law (including the right of any lender to participate to any
extent therein); provided, however, that the Liquidating Partner shall
first pay, to the extent permitted by law, liabilities with respect to
which any Partner is or may be personally liable; and provided further,
however, that the Partnership shall not be required to repay any
indebtedness which has a remaining term in excess of one year and which the
Partners are willing to take their distributions subject to, or which the
Partners may, and agree to, assume.
(b) Expenses of Liquidation. To payment of the expenses of liquidation
of the Partnership in the order of priority provided by law; provided,
however, that the Liquidating Partner shall first pay, to the extent
permitted by law, expenses with respect to which any Partner is or may be
personally liable.
(c) Reserves. To the setting up of such reserves as the Liquidating
Partner may deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership arising out of or in
connection with the Partnership business; provided, however, that any such
reserves will be held by the Liquidating Partner for the purposes of
disbursing such reserves in payment of any of such contingencies and, at
the
26
expiration of such period as the Liquidating Partner shall deem advisable,
to distribute the balance thereafter remaining in the manner provided
below.
(d) Debts to Partners. To the payment of debts and liabilities of the
Partnership to Partners, to the extent of any debt or liability of the
Partnership to a Partner other than in its capacity as a Partner.
(e) Distributions of Partners' Capital Accounts. To payment to each
Partner of his, her or its respective positive Capital Account balance.
The Liquidating Partner shall determine whether to sell any assets of the
Partnership in connection with such termination, or to distribute any portion
thereof in kind. Any property distributed in kind in the liquidation shall be
treated as provided in Section 6.4.
15.3 Final Accounting. Each of the Partners shall be furnished with a
statement prepared by the Liquidating Partner setting forth the assets and
liabilities of the Partnership on the date of complete liquidation. Upon
compliance with the foregoing manner of distribution, all Partners shall be
relieved of the burdens and benefits of their association hereunder.
15.4 Responsibility for Contributions. The General Partner shall not be
personally liable for the return of all or any part of the capital contributions
of the Partners to the Partnership.
16. Notices and Addresses.
16.1 Manner of Notice. All notices or other communications given or made
under this Agreement shall be in writing, and shall either be personally
delivered or shall be deposited in the United States Mail, postage prepaid,
registered or certified mail, return receipt requested, and addressed to the
Partner to whom it is directed, at the address maintained by the Partnership for
such Partner, or at such other address as any such Partner may specify in a
notice to the Partnership and the other Partners.
16.2 Time of Notice. A notice given by mail in accordance with Section 16.1
shall be deemed to have been given and received on the date that is two days
after the date of mailing.
17. Definitions.
17.1 Act. The Colorado Uniform Limited Partnership Act of 1981 (C.R.S. Sec.
7-62-101 to Sec. 7-62-1201), as amended.
17.2 Additional Capital Contributions. The additional contributions made to
the capital of the Partnership pursuant to Section 5.2 of this Agreement.
17.3 Additional Partner. Any person other than the Partners at the time of
execution of this Agreement who is admitted to the Partnership as a Partner, and
who acquires his or her Partnership Interest in exchange for a Capital
Contribution and not by Transfer from another Person.
27
17.4 Advancing Partner. Any partner who makes an advance pursuant to the
terms of Section 11.2(b).
17.5 Affiliate.
(a) Any Person owning outstanding equity interests or profits
interests of any other Person;
(b) Any Person whose outstanding equity interests are owned by any
other Person;
(c) Any Person owning, owned by or under common ownership with any
other Person;
(d) Any officer or director of any other Person;
(e) If such other Person is an officer or director, any entity for
which such Person acts in any such capacity; and
(f) Any person related to another Person by blood, adoption or
marriage.
For purposes of this Agreement, "control" means the direct or indirect
ownership of at least 51% of the equity interests or profits interests of
another Person.
17.6 Agreement. This Agreement of Limited Partnership, including any
attachments or exhibits attached hereto, as amended and in effect from time to
time.
17.7 Capital Account. An account maintained by the Partnership for each
Partner according to the treasury regulations under Code Section 704. To the
extent consistent with such treasury regulations, a Partner's Capital Account
shall equal the Capital Contribution of a Partner (as of any particular date),
(a) increased by the Partner's distributive share of the Partnership's income
and gain or any item thereof (including, if such date is not the close of the
Partnership Accounting year, the distributive share of the Partnership's income
and gain, or any item thereof, for the period from the close of the last
Partnership Accounting Year to such date and including the distributive share of
items of income and/or gain of the Partnership which are excluded from gross
income under the Code), and (b) decreased by the Partner's distributive share of
the Partnership's losses and deductions or any item thereof, and distributions
by the Partnership to such Partner (including, if such date is not the close of
the Partnership Accounting Year, the distributive share of the Partnership's
losses and deductions, or any item thereof, and distributions by the
Partnership, during the period from the close of the last Partnership Accounting
Year to such date and including the distributive share of items of deduction and
loss of the Partnership for which a deduction is not allowed under the Code).
17.8 Capital Contribution. The property (at the fair market value thereof,
as determined by the Partners) less the amount of any liabilities assumed by the
Partnership or to which the property contributed is taken subject by the
Partnership, and/or the amount of cash, contributed by a Partner to the capital
of the Partnership upon the execution of this Agreement,
28
or upon the subsequent admission of a new Partner to the Partnership, as well as
any additional contributions (including the Additional Capital Contributions) as
and when made by that Partner to the capital of the Partnership after the
execution of this Agreement.
17.9 Cash. Cash or any item which is immediately convertible into cash
without substantial discount or reduction (for present value or otherwise).
17.10 Certificate. The Certificate of Limited Partnership for the
Partnership, as amended and in effect from time to time.
17.11 Class A Limited Partners. Refers to those Limited Partners who own
Class A Limited Partnership Interests. The Class A Limited Partners are
identified on the signature pages hereof.
17.12 Class B Limited Partners. Refers to those Limited Partners who own
Class B Limited Partnership Interests. The Class B Limited Partners are
comprised of property owners, which have contributed to the Partnership a right
of way for the Pipeline in exchange for a Class B Limited Partnership Interest.
17.13 Code. The Internal Revenue Code of 1986, as the same may be amended
from time to time and any other revenue law or act enacted in substitution
therefor.
17.14 Commitment Date. Means May 15, 2005 unless the deadline for investing
is extended by the General Partner to July 15, 2005.
17.15 Consent of the General Partner(s). The affirmative option or giving
of notice, consent, acceptance, approval or similar or equivalent act of the
General Partner(s). Any reference in this Agreement to a determination or
decision (or any words of similar meaning or function) of the General Partner(s)
shall similarly require all of the General Partner(s) if more than one. Whenever
the consent of the General Partner(s) is required, such consent shall not be
unreasonably withheld, conditioned or delayed.
17.16 Defaulting Partner. Any partner causing an event of default under
Section 11.1.
17.17 GAAP. Means United States generally accepted accounting principles.
17.18 Gain Not in the Ordinary Course of Operations. All items of
Partnership gain, whether ordinary gain, 1231 gain or capital gain, attributable
to the sale, exchange or other disposition of any property of the Partnership in
any transaction that is not in the ordinary course of the operation of the
Partnership.
17.19 General Partner(s). Natural Resource Group Gathering, LLC, a Colorado
limited liability company ("NRGG") and any other Person or Persons from time to
time admitted to the Partnership as Additional or Substituted General Partner(s)
in accordance with the terms and provisions of this Agreement. All references
herein to General Partner shall refer to NRGG only in its capacity as general
partner.
29
17.20 Gross Receipts. All Cash received by the Partnership during the
period in question, but excluding any receipts constituting: (a) Capital
Contributions or advances by any Partner to the Partnership; (b) repayment to
the Partnership of loans made by the Partnership; (c) Net Sales Cash; (d) Net
Financing Cash; (e) Net Insurance or Condemnation Cash; or (f) security
deposits, escrow deposits or similar deposits received from tenants, purchasers,
optionors, etc.
17.21 Initial Capital Contributions. The contributions required to be made
to the capital of the Partnership pursuant to Section 5.1 of this Agreement.
17.22 Items of Partnership Deduction and Loss Required to be Separately
Stated. Those items of Partnership deduction and loss which are required to be
taken into account separately in determining a Partner's or Transferee's
distributive share of the Partnership income, gain, loss, deductions and
credits, pursuant to 702(a) of the Code and the Regulations promulgated
thereunder.
17.23 Items of Partnership Income and Gain Required to be Separately
Stated. All items of Partnership income and gain, which are required to be taken
into account separately in determining a Partner's or Transferee's distributive
share of the Partnership income, gain, loss, deductions and credits, pursuant to
702(a) of the Code and the Regulations promulgated thereunder.
17.24 Limited Partners. The Class A and Class B Limited Partners and any
other Person or Persons from time to time admitted to the Partnership as
Additional or Substituted Limited Partner(s) in accordance with the terms of
this Agreement.
17.25 Liquidating Partner. That Partner or other Person designated upon the
dissolution and winding up of the Partnership to liquidate the Partnership
assets and the Partnership business pursuant to Article 15.
17.26 Liquidation Proceeds. All amounts distributed, whether in cash or in
kind, in liquidation of the Partnership.
17.27 Losses Not in the Ordinary Course of Operations. All items of
Partnership loss attributable to the sale, exchange or other disposition of any
property of the Partnership in any transaction not in the ordinary course of the
operation of the Property.
17.28 Net Cash Flow. For the period in question, (a) the aggregate of the
Partnership's Gross Receipts during such period and any decreases in its cash
reserves, plus (b) the Initial Capital Contributions of the Limited Partners to
the extent of, but not in excess of, the Out of Pocket Costs to be reimbursed
under Section 6.1(a)(i) hereof, less (c) the aggregate of all amounts expended
or incurred by the Partnership during such period for (i) the timely servicing
of the Partnership's obligations (including repayment of principal of loans to
the Partnership), (ii) the Partnership's share of the cost of improvements then
contemplated to its property not defrayed or reasonably expected to be defrayed
through the proceeds of debt financing, (iii) the operating expenses of the
Partnership, and (iv) increases in the Partnership's cash reserves. For purposes
of determining Net Cash Flow, aggregate ending cash reserves for the period in
question may be established from time to time by the General Partner as
determined
30
to be for the reasonable needs of the Partnership, or for the purpose of
expanding the Pipeline and/or acquiring additional Partnership property or
equipment, in the sole discretion of the General Partner. Computations of Net
Cash Flow shall be made by the General Partner in accordance with the
Partnership's accounting principles consistently applied on the cash basis and
shall be approved by the Partnership's Accountants.
17.29 Net Financing Cash. The excess of the gross proceeds received by the
Partnership from any financing or refinancing (from time to time) of the
Partnership, and for this purpose the term "refinancing" shall include the terms
modify, refund, recast, alter or extend the maturity of, and similar terms,
reduced by all reasonable out-of-pocket expenses incurred in connection
therewith, and by the application of any such proceeds toward the payment of any
existing Partnership debts, the purchase of improvements to the Property, the
establishment of cash reserves for contingencies or for the reasonable needs of
the Partnership, or for the purpose of acquiring additional Partnership property
or equipment, in the sole discretion of the General Partner. For all purposes of
this Agreement, Net Financing Cash shall include amounts received by the
Partnership from any other partnership or joint venture in which this
Partnership is a partner or joint venturer and which represented Net Financing
Cash in the hands of that other partnership or joint venture, even if not
defined as such under the terms of its partnership or joint venture agreement.
17.30 Net Insurance or Condemnation Cash. The gross proceeds received by
the Partnership from insurance settlements or other claims attributable to fire
or other casualty, or from partial condemnation, sales or grants of easements,
rights of way and the like, reduced in the case of insurance settlements or
proceeds from similar claims by any amounts of such proceeds expended by the
Partnership for the repair or replacement of damaged or destroyed property which
gave rise to the insurance settlement or similar claim, and reduced by the
application of any such proceeds to the payment of any existing Partnership
debts, the purchase of improvements to its property and equipment, the
establishment of cash reserves for contingencies or for the reasonable needs of
the Partnership, or for the purpose of acquiring additional Partnership property
and equipment, in the sole discretion of the General Partner. For all purposes
of this Agreement, Net Insurance or Condemnation Cash shall include amounts
received by the Partnership from any other partnership or joint venture in which
this Partnership is a partner or joint venturer and which represented Net
Insurance or Condemnation Cash in the hands of that other partnership or joint
venture, even if not defined as such under the terms of its partnership or joint
venture agreement.
17.31 Net Losses from Operations. For each taxable year of the Partnership,
the sum of (a) all Items of Partnership Deduction and Loss Required to be
Separately Stated, and (b) the excess, if any, of (i) Partnership losses
(including for tax purposes all items of Partnership deduction and loss other
than Items of Partnership Deduction and Loss Required to be Separately Stated)
over (ii) all Partnership profits (including for tax purposes all items of
Partnership income and gain other than Items of Partnership Income and Gain
Required to be Separately Stated).
17.32 Net Profits from Operations. For each taxable year of the
Partnership, the sum of (a) all Items of Partnership Income and Gain Required to
be Separately Stated, and (b) the excess, if any, of (i) Partnership profits
(including for tax purposes, all items of
31
Partnership income and gain other than Items of Partnership Income and Gain
Required to be Separately Stated) over (ii) all Partnership losses (including
for tax purposes all items of Partnership deduction and loss other than Items of
Partnership Deduction and Loss Required to be Separately Stated).
17.33 Net Sales Cash. The excess of the gross proceeds received by the
Partnership from a sale or other disposition of any asset of the Partnership,
reduced by all reasonable out-of-pocket expenses incurred in connection
therewith, and by the application of any such proceeds towards the payment of
any existing Partnership debts, the purchase of improvements to its property and
equipment, and/or the establishment of cash reserves for contingencies as
determined in the sole discretion of the General Partner. For all purposes of
this Agreement, Net Sales Cash shall include amounts received by the Partnership
from any other partnership or joint venture in which this Partnership is a
partner or joint venturer and which represented Net Sales Cash in the hands of
that other partnership or joint venture, even if not defined as such under its
partnership or joint venture agreement.
17.34 Out of Pocket Costs. Those funds expended through the Commitment Date
by the General Partner and any Affiliate thereof for or on behalf of the
Partnership with respect to the Partnership and its purpose to construct the
Pipeline. The Out of Pocket Costs are detailed and described on Exhibit D
attached hereto.
17.35 Partners. The General Partner and the Limited Partners, collectively.
17.36 Partnership. ▇▇▇▇▇▇ DOME GATHERING, LLLP, a Colorado limited
liability limited partnership.
17.37 Partnership Accounting Year. The accounting year of the Partnership,
which shall be the twelve month period coinciding with the calendar year, except
that the first Partnership Accounting Year shall be that period (even if less
than twelve months) beginning at the date of filing the Certificate and ending
on the next following December 31, and the final Partnership Accounting Year
shall be that period beginning the first day of such year and ending on the date
of termination of the Partnership. Notwithstanding the foregoing, the General
Partner, in consultation with the Partnership's Accountants, may select or
change to any other permissible accounting year.
17.38 Partnership's Accountants. The independent public accountants serving
the Partnership at any particular time.
17.39 Partnership Credit. Any income tax credit allowable to any Partner(s)
or Transferee(s) as a result of the activities or assets of the Partnership. All
references in this Agreement to any allocation of Partnership Credit shall be
deemed to be references to the base on which the credit is calculated.
17.40 Partnership Interest. As to any Partner or Transferee, his or her
rights in the Partnership, in accordance with the terms of this Agreement, as
follows:
(a) General Partnership Interest. As to any General Partner, his or
her Capital Account, Percentage Interest, rights to distributions, profits
and losses, rights to participate in the management of the Partnership, and
any other rights which such General Partner has in the Partnership.
32
(b) Class A Limited Partnership Interest. As to any Class A Limited
Partner, his, her or its Capital Account, Percentage Interest, rights to
distributions, profits and losses, and any other rights which such Class A
Limited Partner has in the Partnership;
(c) Class B Limited Partnership Interest. As to any Class B Limited
Partner, his, her or its Capital Account, Percentage Interest, rights to
distributions, profits and losses provided however, such Class B Limited
Partnership Interest shall not have any voting rights with respect to the
Partnership.
(d) Transferee Interest. As to any Transferee, his or her Capital
Account, Percentage Interest, rights to distributions, profits and losses,
and any other rights which such Transferee has in the Partnership, but not
including any rights accorded only to Persons who are Partners.
17.41 Percentage Interest. As to any Partner, the percentage shown below
opposite his, her or its name and, as to any Transferee or Substituted or
Additional Partner, the Percentage Interest acquired by him, her or it upon
becoming a Partner or Transferee, as the same may be adjusted from time to time
to reflect Transfers of Partnership Interests or the admission of Additional
Partners:
Partner Percentage Interest
------- -------------------
General Partner:
NRGG 25.00%
Limited Partners:
Class A and Class B As set forth in the applicable
Subscription Agreements
Total 100.00%
======
With respect to any matter requiring a vote of a Partner hereof, the
Percentage Interests of the General Partner and Class A Limited Partners shall
govern. Class B Limited Partner Interests are non-voting. Each 1% Percentage
Interest shall be entitled to one (1) vote and less than a 1% Percentage
Interest shall be assigned a proportionate share of one (1) vote (i.e., a 0.5%
Percentage Interest is assigned one-half of one (1) vote).
33
17.42 Person. An individual or an entity, such as, but not limited to, a
corporation, general partnership, joint venture, limited partnership, trust,
limited liability Partnership, or business association. When a Person is an
entity, the words "he", "him" and "his" and similar words shall include or refer
to "it" and "its" and similar words.
17.43 Reserves. Reserves shall mean cash reasonably reserved by the
Partnership at the direction of the General Partner or reasonably anticipated by
the General Partner to be required (after application of anticipated cash
revenues from any source) for debts and expenses, interest and scheduled
principal payments on any indebtedness, capital expenditures, replacements,
taxes or activities in the business of the Partnership; provided, however, that
in no event shall such amounts exceed 50% of funds available to establish such
reserves at any time it is necessary to establish such a reserve.
17.44 Substituted Partner. Any Person admitted to the Partnership as a
Partner and who acquires his or her Partnership Interest by Transfer from
another Person.
17.45 Tax Matters Partner. That Partner designated as the Tax Matters
Partner pursuant to Section 9.8.
17.46 Transfer and Transferred. The passage of a legal or equitable
interest in a Partnership Interest pursuant to a sale, exchange, gift,
assignment, pledge, foreclosure or other conveyance, disposition or encumbrance,
and including without limitation the passage of a legal or equitable interest in
the Partnership by judicial order, bequest, devise, intestate succession or
other operation of law.
17.47 Transferee. A Person who acquires by a Transfer all or part of any
Partnership Interest. Such Person shall have a Partnership Interest of a
Transferee only and until such Person becomes a Substituted Partner in
accordance with the terms of this Agreement.
17.48 Transferor. A Partner or Transferee who Transfers, or who proposes to
Transfer, all or any portion of his or her Partnership Interest.
17.49 Unreturned Capital. Means as to any Partner, on any date shall be
equal to the excess, if any, of: (i) the aggregate Initial Capital Contributions
and Additional Capital Contributions of such partners as of such date, over (ii)
the aggregate distributions to such Partner pursuant to Section 6.1(a)(i) and
(ii) hereof. Unreturned Capital shall not include Partnership earnings or
losses.
18. Miscellaneous.
18.1 Counterparts. This Agreement may be executed in several counterparts,
and by facsimile signature, and as so executed shall constitute one Agreement,
binding on all of the parties hereto, notwithstanding that all of the parties
are not signatory to the original or to the same counterpart.
18.2 Arbitration. All disputes (except any disputes relating to the
distributions and/or the accounting for Partnership profits, losses and
distributions) shall be submitted to arbitration in accordance with the rules of
the American Arbitration Association, and it is
34
requested that the arbitrator or board of arbitrators selected for this purpose
be, contain, or consult with a suitable firm of certified public accountants in
connection with their settlement of such a dispute. All disputes relating to
distributions and/or accounting for Partnership profits, losses and
distributions shall be decided by the Managing, General Partner and its
decisions shall be binding and conclusive on all parties hereto.
18.3 Amendments. Amendments may be made to this Agreement from time to time
by the General Partner as it shall determine necessary for purposes of
continuing to qualify the Partnership as a Limited Partnership under the laws of
the State of Colorado and as a registered limited liability limited partnership
under Colorado law. No other amendment may be made to this Partnership Agreement
which affects the rights, responsibilities, obligations, duties or restrictions
of any Partner unless the Partner so affected approves such amendment. In all
other respects, amendments to this Partnership Agreement shall be made upon the
consent of the General Partner and the affirmative vote of a majority in
interest of the Limited Partners.
18.4 Benefits and Burdens. The terms and provisions of this Agreement shall
be binding upon and shall inure to the benefit of the heirs, personal
representatives, successors and assigns of the respective Partners.
18.5 Captions. Paragraph titles or captions contained in this Agreement are
inserted only as a matter of convenience and for reference. Such titles and
captions in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any provisions hereof.
18.6 Construction. Whenever required by the context hereof, the singular
shall include the plural, and vice versa; and the masculine gender shall include
the feminine and neuter genders, and vice versa.
18.7 Severability. If any portion of this Agreement is declared by a court
of competent jurisdiction to be void or unenforceable, such portion shall be
deemed severed from the Agreement and the balance of the Agreement shall remain
in effect.
18.8 Choice of Law. The conduct of Partnership affairs and the relationship
of the Partners to the Partnership and to each other shall be governed by the
laws of the State of Colorado, and this Agreement shall be construed consistent
therewith.
18.9 Legal Representation. Each of the undersigned hereby acknowledges that
this Agreement was prepared by legal counsel representing the Partnership.
Further, each of the undersigned recognize that said legal counsel was acting
solely on behalf of the Partnership and not on behalf of the Partners,
individually or collectively. Each of the undersigned represent and warrant that
he or she has been advised by the Partnership to seek independent legal and
financial counsel with respect to his or her execution of this Agreement and
that he or she has had the opportunity to do so. Each of the undersigned agrees
that the statements, representations and warranties made in this paragraph may
be relied upon by the Partnership and by ▇▇▇▇, Fell & ▇▇▇▇▇, LLC, and ▇▇▇▇▇▇▇▇▇
& Associates, P.C. or their successors in interest.
35
IN WITNESS WHEREOF, this instrument has been executed by or on behalf
of the General and Limited Partners on the date or dates indicated below.
GENERAL PARTNER:
---------------
"NRGG"
Dated: April 15, 2005 NATURAL RESOURCE GROUP GATHERING, LLC,
a Colorado limited liability company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager
36
SIGNATURE PAGE
▇▇▇▇▇▇ DOME GATHERING, LLLP
(LIMITED PARTNERS]
The undersigned is a Class [A] [B] Limited Partner in the Partnership.
Dated: [______________], 2005 _______________________________________________
37
EXHIBIT A
PIPELINE MAP
EXHIBIT B
PIPELINE AGREEMENTS
EXHIBIT C
DILUTION CALCULATION
(Based on Assumed Facts For Example Purposes Only)
General Partner: Natural Resource Gathering Group
Initial Capital 748,500 25.00%
Class A partners:
Partner 1 270,625 9.04%
Partner 2 270,625 9.04%
Partner 3 270,625 9.04%
Partner 4 270,625 9.04%
Partner 5 270,625 9.04%
Partner 6 270,625 9.04%
Partner 7 270,625 9.04%
Partner 8 270,625 9.04%
Class B partners:
Land Owners 80,000 2.67%
--------- ------
2,993,500 100.00%
Assumptions:
Retained earnings Net Income Distributions Retained Earnings
----------------- ---------- ------------- -----------------
Year 1 75,000 (50,000) 25,000
Year 2 125,000 (100,000) 25,000
Year 3 175,000 (150,000) 25,000
Depreciation:
Year 1 80,000
Year 2 80,000
Year 3 80,000
Initial capital contribution 2,993,500
Additional capital contribution 1,000,000
Example:
Natural Resources Gathering Group does not participate in the additional
capital contribution of $1,000,000, therefore they are diluted utilizing
the following formula:
748,500 + 18,750 + 60,000
--------------------------------- = 19.2%
2993500 + 75000 + 240000+ 1000000
EXHIBIT D
OUT OF POCKET COSTS
(See attached.)