EXHIBIT 3.2
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PLAINS MARKETING, L.P.
Plains Marketing, L.P.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.1 Definitions................................................................................ 1
Section 1.2 Construction............................................................................... 12
ARTICLE II
ORGANIZATION
Section 2.1 Formation.................................................................................. 13
Section 2.2 Name....................................................................................... 13
Section 2.3 Registered Office; Registered Agent; Principal Office; Other Offices....................... 13
Section 2.4 Purpose and Business....................................................................... 13
Section 2.5 Powers..................................................................................... 14
Section 2.6 Power of Attorney.......................................................................... 14
Section 2.7 Term....................................................................................... 16
Section 2.8 Title to Partnership Assets................................................................ 16
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability.................................................................... 17
Section 3.2 Management of Business..................................................................... 17
Section 3.3 Outside Activities of the Limited Partners................................................. 17
Section 3.4 Rights of Limited Partners................................................................. 17
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
Section 4.1 Transfer Generally......................................................................... 18
Section 4.2 Transfer of General Partner's Partnership Interest......................................... 19
Section 4.3 Transfer of a Limited Partner's Partnership Interest....................................... 19
Section 4.4 Restrictions on Transfers.................................................................. 19
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ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Initial Contributions...................................................................... 20
Section 5.2 Contributions Pursuant to the Contribution and Conveyance Agreement........................ 20
Section 5.3 Additional Capital Contributions........................................................... 21
Section 5.4 Interest and Withdrawal.................................................................... 21
Section 5.5 Capital Accounts........................................................................... 21
Section 5.6 Loans from Partners........................................................................ 24
Section 5.7 Limited Preemptive Rights.................................................................. 24
Section 5.8 Fully Paid and Non-Assessable Nature of Partnership Interests.............................. 25
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes................................................... 25
Section 6.2 Allocations for Tax Purposes............................................................... 29
Section 6.3 Distributions.............................................................................. 31
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management................................................................................. 32
Section 7.2 Certificate of Limited Partnership......................................................... 34
Section 7.3 Restrictions on General Partner's Authority................................................ 34
Section 7.4 Reimbursement of the General Partner....................................................... 35
Section 7.5 Outside Activities......................................................................... 36
Section 7.6 Partnership; Loans from the General Partner; Loans or Contributions from the Partnership;
Contracts with Affiliates; Certain Restrictions on the General Partner..................... 37
Section 7.7 Indemnification............................................................................ 39
Section 7.8 Liability of Indemnitees................................................................... 41
Section 7.9 Resolution of Conflicts of Interest........................................................ 42
Section 7.10 Other Matters Concerning the General Partner............................................... 43
Section 7.11 Reliance by Third Parties.................................................................. 44
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting..................................................................... 45
Section 8.2 Fiscal Year................................................................................ 45
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ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information................................................................ 45
Section 9.2 Tax Elections.............................................................................. 45
Section 9.3 Tax Controversies.......................................................................... 46
Section 9.4 Withholding................................................................................ 46
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Partners...................................................................... 46
Section 10.2 Admission of Substituted Limited Partner................................................... 46
Section 10.3 Admission of Additional Limited Partners................................................... 47
Section 10.4 Admission of Successor or Transferee General Partner....................................... 47
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership.............................. 48
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner.......................................................... 48
Section 11.2 Removal of the General Partner............................................................. 50
Section 11.3 Interest of Departing Partner.............................................................. 50
Section 11.4 Withdrawal of a Limited Partner............................................................ 51
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution................................................................................ 51
Section 12.2 Continuation of the Business of the Partnership After Dissolution.......................... 51
Section 12.3 Liquidator................................................................................. 52
Section 12.4 Liquidation................................................................................ 53
Section 12.5 Cancellation of Certificate of Limited Partnership......................................... 54
Section 12.6 Return of Contributions.................................................................... 54
Section 12.7 Waiver of Partition........................................................................ 54
Section 12.8 Capital Account Restoration................................................................ 54
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ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
Section 13.1 Amendment to be Adopted Solely by the General Partner...................................... 55
Section 13.2 Amendment Procedures....................................................................... 56
ARTICLE XIV
MERGER
Section 14.1 Authority.................................................................................. 57
Section 14.2 Procedure for Merger or Consolidation...................................................... 57
Section 14.3 Approval by Limited Partners of Merger or Consolidation.................................... 58
Section 14.4 Certificate of Merger...................................................................... 59
Section 14.5 Effect of Merger........................................................................... 59
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notices...................................................................... 60
Section 15.2 Further Action............................................................................. 60
Section 15.3 Binding Effect............................................................................. 60
Section 15.4 Integration................................................................................ 60
Section 15.5 Creditors.................................................................................. 60
Section 15.6 Waiver..................................................................................... 60
Section 15.7 Counterparts............................................................................... 61
Section 15.8 Applicable Law............................................................................. 61
Section 15.9 Invalidity of Provisions................................................................... 61
Section 15.10 Consent of Partners........................................................................ 61
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PLAINS MARKETING, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of PLAINS
MARKETING, L.P., dated as of November 23, 1998 is entered into by and between
Plains All American Inc., a Delaware corporation, as the General Partner, and
Plains All American Pipeline, L.P., a Delaware limited partnership, as the
Limited Partner, together with any other Persons who hereafter become Partners
in the Partnership or parties hereto as provided herein.
R E C I T A L S:
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WHEREAS, Plains All American Inc. and Plains All American Pipeline, L.P.
formed the Partnership pursuant to the Agreement of Limited Partnership of
Plains Marketing, L.P. dated as of November 10, 1998 (the "Prior Agreement") and
a Certificate of Limited Partnership filed with the Secretary of State of the
State of Delaware on such date; and
WHEREAS, the Partners of the Partnership now desire to amend the Prior
Agreement to reflect additional contributions by the Partners and certain other
matters.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements contained herein, the parties hereto hereby amend the Prior Agreement
and, as so amended, restate it in its entirety as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
Capitalized terms used herein but not otherwise defined shall have the meaning
assigned to such term in the MLP Agreement.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 10.4 and who is shown
as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each fiscal year of the Partnership, (a)
increased by any amounts that such Partner is obligated to restore under
the standards set by Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or
is deemed obligated to restore under Treasury Regulation Sections 1.704-
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2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the amount of all losses
and deductions that, as of the end of such fiscal year, are reasonably
expected to be allocated to such Partner in subsequent years under Sections
704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-
1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end
of such fiscal year, are reasonably expected to be made to such Partner in
subsequent years in accordance with the terms of this Agreement or
otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to)
the year in which such distributions are reasonably expected to be made
(other than increases as a result of a minimum gain chargeback pursuant to
Section 6.1(d)(i) or 6.1(d)(ii)). The foregoing definition of Adjusted
Capital Account is intended to comply with the provisions of Treasury
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith. The "Adjusted Capital Account" of a Partner in
respect of a General Partner Interest or any other specified interest in
the Partnership shall be the amount which such Adjusted Capital Account
would be if such General Partner Interest or other interest in the
Partnership were the only interest in the Partnership held by a Partner
from and after the date on which such general partner interest or other
interest was first issued.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted
Property is deemed contributed to a new partnership in exchange for an
interest in the new partnership, followed by a deemed liquidation of the
Partnership for federal income tax purposes upon a termination of the
Partnership pursuant to Treasury Regulation Section 1.708-(b)(1)(iv), such
property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is subsequently adjusted pursuant to
Section 5.5(d)(i) or 5.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, the Person in question. As
used herein, the term "control" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
"Agreed Allocation" means any allocation, other than a Required
Allocation, of an item of income, gain, loss or deduction pursuant to the
provisions of Section 6.1, including, without limitation, a Curative
Allocation (if appropriate to the context in which the term "Agreed
Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value
of such property or other consideration at the time of contribution as
determined by the General Partner using such reasonable method of valuation
as it may adopt. The General Partner shall, in its discretion, use such
method as it deems reasonable and appropriate to allocate the aggregate
Agreed Value of Contributed Properties contributed to the Partnership in a
single
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or integrated transaction among each separate property on a basis
proportional to the fair market value of each Contributed Property.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership of Plains Marketing, L.P., as it may be amended, supplemented
or restated from time to time.
"All American" means All American Pipeline, L.P., a Delaware limited
partnership.
"All American Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of All American Pipeline, L.P., as it may
be amended, supplemented or restated from time to time.
"Assets" means the assets being conveyed to the Partnership on the
Closing Date pursuant to Section 5.2 and the Contribution and Conveyance
Agreement.
"Assignee" means a Person to whom one or more Partnership Interests
have been transferred in a manner permitted under this Agreement, but who
has not been admitted as a Substituted Limited Partner.
"Associate" means, when used to indicate a relationship with any
Person, (a) any corporation or organization of which such Person is a
director, officer or partner or is, directly or indirectly, the owner of
20% or more of any class of voting stock or other voting interest; (b) any
trust or other estate in which such Person has at least a 20% beneficial
interest or as to which such Person serves as trustee or in a similar
fiduciary capacity; and (c) any relative or spouse of such Person, or any
relative of such spouse, who has the same principal residence as such
Person.
"Assumed Liabilities" means the liabilities that the Partnership is
either assuming or taking subject to in connection with the conveyance of
the Assets pursuant to Section 5.2 and the Contribution and Conveyance
Agreement.
"Available Cash" means, with respect to any Quarter ending prior to
the Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the
Partnership Group on hand at the end of such Quarter, and (ii) all
additional cash and cash equivalents of the Partnership Group on hand on
the date of determination of Available Cash with respect to such Quarter
resulting from Working Capital Borrowings made subsequent to the end of
such Quarter, less
(b) the amount of any cash reserves that is necessary or
appropriate in the reasonable discretion of the General Partner to (i)
provide for the proper conduct of the
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business of the Partnership Group (including reserves for future capital
expenditures and for anticipated future credit needs of the Partnership
Group) subsequent to such Quarter, (ii) comply with applicable law or any
loan agreement, security agreement, mortgage, debt instrument or other
agreement or obligation to which any Group Member is a party or by which it
is bound or its assets are subject or (iii) provide funds for distributions
under Section 6.4 or 6.5 of the MLP Agreement in respect of any one or more
of the next four Quarters; provided, however, that the General Partner may
not establish cash reserves pursuant to (iii) above if the effect of such
reserves would be that the MLP is unable to distribute the Minimum
Quarterly Distribution on all Common Units, plus any Cumulative Common Unit
Arrearage on all Common Units, with respect to such Quarter; and provided
further that disbursements made by a Group Member or cash reserves
established, increased or reduced after the end of such Quarter but on or
before the date of determination of Available Cash with respect to such
Quarter shall be deemed to have been made, established, increased or
reduced, for purposes of determining Available Cash, within such Quarter if
the General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to
the Quarter in which the Liquidation Date occurs and any subsequent Quarter
shall equal zero.
"Book-Tax Disparity" means with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax
purposes as of such date. A Partner's share of the Partnership's Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will
be reflected by the difference between such Partner's Capital Account
balance as maintained pursuant to Section 5.5 and the hypothetical balance
of such Partner's Capital Account computed as if it had been maintained
strictly in accordance with federal income tax accounting principles.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or Texas shall not be regarded as a
Business Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Interest or any other specified interest in the Partnership
shall be the amount which such Capital Account would be if such General
Partner Interest or other specified interest in the Partnership were the
only interest in the Partnership held by a Partner from and after the date
on which such General Partner Interest or other specified interest in the
Partnership was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net
Agreed Value of Contributed Property that a Partner contributes to the
Partnership pursuant to this Agreement or the Contribution and Conveyance
Agreement.
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"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all
depreciation, amortization and cost recovery deductions charged to the
Partners' and Assignees' Capital Accounts in respect of such Contributed
Property, and (b) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of
the time of determination. The Carrying Value of any property shall be
adjusted from time to time in accordance with Sections 5.5(d)(i) and
5.5(d)(ii) and to reflect changes, additions or other adjustments to the
Carrying Value for dispositions and acquisitions of Partnership properties,
as deemed appropriate by the General Partner.
"CT&T" means Celeron Trading & Transportation Company, a Delaware
corporation.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership of the Partnership filed with the Secretary of State of the
State of Delaware as referenced in Section 2.1, as such Certificate of
Limited Partnership may be amended, supplemented or restated from time to
time.
"Closing Date" means the first date on which Common Units are sold by
the MLP to the Underwriters pursuant to the provisions of the Underwriting
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. Any reference herein to a specific section or
sections of the Code shall be deemed to include a reference to any
corresponding provision of successor law.
"Commission" means the United States Securities and Exchange
Commission.
"Common Unit" has the meaning assigned to such term in the MLP
Agreement.
"Contributed Property" means each property or other asset, in such
form as may be permitted by the Delaware Act, but excluding cash,
contributed to the Partnership (or deemed contributed to a new partnership
on termination of the Partnership pursuant to Section 708 of the Code. Once
the Carrying Value of a Contributed Property is adjusted pursuant to
Section 5.5(d), such property shall no longer constitute a Contributed
Property, but shall be deemed an Adjusted Property.
"Contribution and Conveyance Agreement" means that certain
Contribution, Conveyance and Assumption Agreement, dated as of the Closing
Date, among the General Partner, the Plains Midstream Subsidiaries, the
MLP, the Partnership and certain other parties, together with the
additional conveyance documents and instruments contemplated or referenced
thereunder.
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"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(ix).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, 6 Del. C. (S)17-101, et seq., as amended, supplemented or restated
from time to time, and any successor to such statute.
"Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.
"Economic Risk of Loss" has the meaning set forth in Treasury
Regulation Section 1.752-2(a).
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Gathering LLC" means Gathering LLC, a Delaware limited liability
company.
"General Partner" means Plains All American Inc. and its successors
and permitted assigns as general partner of the Partnership.
"General Partner Interest" means the ownership interest of the General
Partner in the Partnership (in its capacity as a general partner) and
includes any and all benefits to which the General Partner is entitled as
provided in this Agreement, together with all obligations of the General
Partner to comply with the terms and provisions of this Agreement.
"Group" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting (except voting pursuant to a revocable proxy
or consent given to such Person in response to a proxy or consent
solicitation made to 10 or more Persons) or disposing of any MLP Securities
with any other Person that beneficially owns, or whose Affiliates or
Associates beneficially own, directly or indirectly, MLP Securities.
"Group Member" means a member of the Partnership Group.
"Indemnitee" means (a) the General Partner, (b) any Departing Partner,
(c) any Person who is or was an Affiliate of the General Partner or any
Departing Partner, (d) any Person who is or was a member, partner, officer,
director, employee, agent or trustee of any Group Member, the General
Partner or any Departing Partner or any Affiliate of any Group Member, the
General Partner or any Departing Partner, and (e) any Person who is or was
serving at the request of the General Partner or any Departing Partner or
any Affiliate of the General Partner or any Departing Partner as an
officer, director, employee, member, partner,
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agent, fiduciary or trustee of another Person; provided, that a Person
shall not be an Indemnitee by reason of providing, on a fee-for-services
basis, trustee, fiduciary or custodial services.
"Initial Offering" means the initial offering and sale of Common Units
to the public, as described in the Registration Statement.
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership and includes any and all benefits to
which such Limited Partner or Assignee is entitled as provided in this
Agreement, together with all obligations of such Limited Partner or
Assignee to comply with the terms and provisions of this Agreement.
"Liquidation Date" means (a) in the case of an event giving rise to
the dissolution of the Partnership of the type described in clauses (a) and
(b) of the first sentence of Section 12.2, the date on which the applicable
time period during which the Partners have the right to elect to
reconstitute the Partnership and continue its business has expired without
such an election being made, and (b) in the case of any other event giving
rise to the dissolution of the Partnership, the date on which such event
occurs.
"Liquidator" means one or more Persons selected by the General Partner
to perform the functions described in Section 12.3 as liquidating trustee
of the Partnership within the meaning of the Delaware Act.
"Limited Partner" means any Person that is admitted to the Partnership
as a limited partner pursuant to the terms and conditions of this
Agreement; but the term Limited Partner shall not include any Person from
and after the time such Person withdraws as a Limited Partner from the
Partnership.
"Merger Agreement" has the meaning assigned to such term in Section
14.1.
"Minimum Quarterly Distribution" has the meaning assigned to such term
in the MLP Agreement.
"MLP" means Plains All American Pipeline, L.P.
"MLP Agreement" means the Amended and Restated Agreement of Limited
Partnership of Plains All American Pipeline, L.P., as it may be amended,
supplemented or restated from time to time.
"MLP Security" has the meaning assigned to the term "Partnership
Security" in the MLP Agreement.
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"Net Agreed Value" means, (a) in the case of any Contributed Property,
the Agreed Value of such property reduced by any liabilities either assumed
by the Partnership upon such contribution or to which such property is
subject when contributed, and (b) in the case of any property distributed
to a Partner or Assignee by the Partnership, the Partnership's Carrying
Value of such property (as adjusted pursuant to Section 5.5(d)(ii)) at the
time such property is distributed, reduced by any indebtedness either
assumed by such Partner or Assignee upon such distribution or to which such
property is subject at the time of distribution, in either case, as
determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss)
for such taxable year over the Partnership's items of loss and deduction
(other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Income shall be determined in accordance
with Section 5.5(b) and shall not include any items specially allocated
under Section 6.1(d).
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken
into account in the computation of Net Termination Gain or Net Termination
Loss) for such taxable year over the Partnership's items of income and gain
(other than those items taken into account in the computation of Net
Termination Gain or Net Termination Loss) for such taxable year. The items
included in the calculation of Net Loss shall be determined in accordance
with Section 5.5(b) and shall not include any items specially allocated
under Section 6.1(d).
"Net Termination Gain" means, for any taxable year, the sum, if
positive, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the
determination of Net Termination Gain shall be determined in accordance
with Section 5.5(b) and shall not include any items of income, gain or loss
specially allocated under Section 6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if
negative, of all items of income, gain, loss or deduction recognized by the
Partnership after the Liquidation Date. The items included in the
determination of Net Termination Loss shall be determined in accordance
with Section 5.5(b) and shall not include any items of income, gain or loss
specially allocated under Section 6.1(d).
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would
be allocated to the Partners pursuant to Sections 6.2(b)(i)(A),
6.2(b)(ii)(A) and 6.2(b)(iii) if such properties were disposed of in a
taxable transaction in full satisfaction of such liabilities and for no
other consideration.
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"Nonrecourse Deductions" means any and all items of loss, deduction or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in
accordance with the principles of Treasury Regulation Section 1.704-2(b),
are attributable to a Nonrecourse Liability.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulation Section 1.752-1(a)(2).
"OLP Subsidiary" means a Subsidiary of the OLP.
"Omnibus Agreement" means that Omnibus Agreement, dated as of the
Closing Date, among Plains Resources, Inc., the General Partner, the MLP,
the Partnership and All American, L.P.
"Opinion of Counsel" means a written opinion of counsel (which may be
regular counsel to the Partnership or the General Partner or any of its
Affiliates) acceptable to the General Partner in its reasonable discretion.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss,
deduction or expenditure (including, without limitation, any expenditure
described in Section 705(a)(2)(B) of the Code) that, in accordance with the
principles of Treasury Regulation Section 1.704-2(i), are attributable to a
Partner Nonrecourse Debt.
"Partnership" means Plains Marketing, L.P., a Delaware limited
partnership, and any successors thereto.
"Partnership Group" means the Partnership and all OLP Subsidiaries,
treated as a single consolidated entity.
"Partnership Interest" means an ownership interest of a Partner in the
Partnership, which shall include the General Partner Interest and the
Limited Partner Interest(s).
"Partnership Minimum Gain" means that amount determined in accordance
with the principles of Treasury Regulation Section 1.704-2(d).
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"Percentage Interest" means the percentage interest in the Partnership
held by each Partner upon completion of the transactions in Section 5.4 and
shall mean, (a) as to the General Partner, an aggregate 1.0101% and (b) as
to the MLP, 98.9899%.
"Person" means an individual or a corporation, limited liability
company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other
entity.
"Prior Agreement" is defined in the Recitals.
"Pro Rata" means, when modifying Partners and Assignees, apportioned
among all Partners and Assignees in accordance with their relative
Percentage Interests.
"Quarter" means, unless the context requires otherwise, a fiscal
quarter of the Partnership.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or
Section 743 of the Code) upon the disposition of any property or asset of
the Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to
such property or asset.
"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-64107) as it has been or as it may be amended or
supplemented from time to time, filed by the MLP with the Commission under
the Securities Act to register the offering and sale of the Common Units in
the Initial Offering.
"Required Allocations" means (a) any limitation imposed on any
allocation of Net Losses or Net Termination Losses under Section 6.1(b) or
6.1(c)(ii) and (b) any allocation of an item of income, gain, loss or
deduction pursuant to Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv),
6.1(d)(vii) or 6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of a
Contributed Property or Adjusted Property, to the extent such item of gain
or loss is not allocated pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A),
respectively, to eliminate Book-Tax Disparities.
"Restricted Business" has the meaning assigned to such term in the
Omnibus Agreement.
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"Securities Act" means the Securities Act of 1933, as amended,
supplemented or restated from time to time and any successor to such
statute.
"Special Approval" has the meaning assigned to such term in the MLP
Agreement.
"Subsidiary" means, with respect to any Person, (a) a corporation of
which more than 50% of the voting power of shares entitled (without regard
to the occurrence of any contingency) to vote in the election of directors
or other governing body of such corporation is owned, directly or
indirectly, at the date of determination, by such Person, by one or more
Subsidiaries of such Person or a combination thereof, (b) a partnership
(whether general or limited) in which such Person or a Subsidiary of such
Person is, at the date of determination, a general or limited partner of
such partnership, but only if more than 50% of the partnership interests of
such partnership (considering all of the partnership interests of the
partnership as a single class) is owned, directly or indirectly, at the
date of determination, by such Person, by one or more Subsidiaries of such
Person, or a combination thereof, or (c) any other Person (other than a
corporation or a partnership) in which such Person, one or more
Subsidiaries of such Person, or a combination thereof, directly or
indirectly, at the date of determination, has (i) at least a majority
ownership interest or (ii) the power to elect or direct the election of a
majority of the directors or other governing body of such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 10.2 in place of and
with all the rights of a Limited Partner and who is shown as a Limited
Partner on the books and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"Transfer" has the meaning assigned to such term in Section 4.4(a).
"Underwriter" means each Person named as an underwriter in Schedule I
to the Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement dated
November 17, 1998 among the Underwriters, the MLP and certain other
parties, providing for the purchase of Common Units by such Underwriters.
"Unit" has the meaning assigned to such term in the MLP Agreement.
"Unit Majority" has the meaning assigned to such term in the MLP
Agreement.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the fair
market value of such property as of
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such date (as determined under Section 5.5(d)) over (b) the Carrying Value
of such property as of such date (prior to any adjustment to be made
pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (a) the
Carrying Value of such property as of such date (prior to any adjustment to
be made pursuant to Section 5.5(d) as of such date) over (b) the fair
market value of such property as of such date (as determined under Section
5.5(d)).
"U.S. GAAP" means United States Generally Accepted Accounting
Principles consistently applied.
"Working Capital Borrowings" means borrowings exclusively for working
capital purposes made pursuant to a credit facility or other arrangement
requiring all such borrowings thereunder to be reduced to a relatively
small amount each year for an economically meaningful period of time.
Section 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa; (b) references to Articles and Sections refer to Articles and
Sections of this Agreement; and (c) the term "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.
ARTICLE II
ORGANIZATION
Section 2.1 Formation.
The Partnership was previously formed as a limited partnership pursuant to
the provisions of the Delaware Act. The Partners hereby amend and restate the
Prior Agreement in its entirety. This amendment and restatement shall become
effective on the date of this Agreement. Except as expressly provided to the
contrary in this Agreement, the rights, duties (including fiduciary duties),
liabilities and obligations of the Partners and the administration, dissolution
and termination of the Partnership shall be governed by the Delaware Act. All
Partnership Interests shall constitute personal property of the owner thereof
for all purposes and a Partner has no interest in specific Partnership property.
Section 2.2 Name.
The name of the Partnership shall be "Plains Marketing, L.P." The
Partnership's business may be conducted under any other name or names deemed
necessary or appropriate by the General
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Partner in its sole discretion, including the name of the General Partner. The
words "Limited Partnership," "L.P." or "Ltd." or similar words or letters shall
be included in the Partnership's name where necessary for the purpose of
complying with the laws of any jurisdiction that so requires. The General
Partner in its discretion may change the name of the Partnership at any time and
from time to time and shall notify the other Partner(s) of such change in the
next regular communication to the Partners.
Section 2.3 Registered Office; Registered Agent; Principal Office; Other
Offices.
Unless and until changed by the General Partner, the registered office of
the Partnership in the State of Delaware shall be located at 1013 Center Road,
Wilmington, Delaware 19805-1297, and the registered agent for service of process
on the Partnership in the State of Delaware at such registered office shall be
Corporation Service Company. The principal office of the Partnership shall be
located at 500 Dallas, Suite 700, Houston, Texas 77002 or such other place as
the General Partner may from time to time designate by notice to the Limited
Partners. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems necessary
or appropriate. The address of the General Partner shall be 500 Dallas, Suite
700, Houston, Texas 77002 or such other place as the General Partner may from
time to time designate by notice to the Limited Partners.
Section 2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership
shall be to (a) acquire, manage, operate and sell the Assets and any similar
assets or properties now or hereafter acquired by the Partnership, (b) to serve
as a limited partner of All American and, in connection therewith, to exercise
all the rights and powers conferred upon the Partnership as a partner of All
American pursuant to the All American Partnership Agreement, (c) engage directly
in, or enter into or form any corporation, partnership, joint venture, limited
liability company or other arrangement to engage indirectly in, any business
activity that the Partnership is permitted to engage in, or any type of business
or activity engaged in by the General Partner prior to the Closing Date and, in
connection therewith, to exercise all of the rights and powers conferred upon
the Partnership pursuant to the agreements relating to such business activity,
(d) engage directly in, or enter into or form any corporation, partnership,
joint venture, limited liability company or other arrangement to engage
indirectly in, any business activity that is approved by the General Partner and
which lawfully may be conducted by a limited partnership organized pursuant to
the Delaware Act and, in connection therewith, to exercise all of the rights and
powers conferred upon the Partnership pursuant to the agreements relating to
such business activity; provided, however, that the General Partner reasonably
determines, as of the date of the acquisition or commencement of such activity,
that such activity (i) generates "qualifying income" (as such term is defined
pursuant to Section 7704 of the Code) or (ii) enhances the operations of an
activity of the Partnership that generates qualifying income, and (e) do
anything necessary or appropriate to the foregoing, including the making of
capital contributions or loans to a Group Member, the MLP or any Subsidiary of
the MLP. The General
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Partner has no obligation or duty to the Partnership, the Limited Partners, or
the Assignees to propose or approve, and in its discretion may decline to
propose or approve, the conduct by the Partnership of any business.
Section 2.5 Powers.
The Partnership shall be empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described in Section
2.4 and for the protection and benefit of the Partnership.
Section 2.6 Power of Attorney.
(a) Each Partner and each Assignee hereby constitutes and appoints
the General Partner and, if a Liquidator shall have been selected pursuant to
Section 12.3, the Liquidator (and any successor to the Liquidator by merger,
transfer, assignment, election or otherwise) and each of their authorized
officers and attorneys-in-fact, as the case may be, with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in his name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (A) all certificates, documents and other
instruments (including this Agreement and the Certificate of Limited
Partnership and all amendments or restatements hereof or thereof) that the
General Partner or the Liquidator deems necessary or appropriate to form,
qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have
limited liability) in the State of Delaware and in all other jurisdictions
in which the Partnership may conduct business or own property; (B) all
certificates, documents and other instruments that the General Partner or
the Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of this
Agreement; (C) all certificates, documents and other instruments (including
conveyances and a certificate of cancellation) that the General Partner or
the Liquidator deems necessary or appropriate to reflect the dissolution
and liquidation of the Partnership pursuant to the terms of this Agreement;
(D) all certificates, documents and other instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant to,
or other events described in, Article IV, X, XI or XII; (E) all
certificates, documents and other instruments relating to the determination
of the rights, preferences and privileges of any class or series of
Partnership Interests issued pursuant hereto; and (F) all certificates,
documents and other instruments (including agreements and a certificate of
merger) relating to a merger or consolidation of the Partnership pursuant
to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate,
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in the discretion of the General Partner or the Liquidator, to make,
evidence, give, confirm or ratify any vote, consent, approval, agreement or
other action that is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or is necessary or appropriate,
in the discretion of the General Partner or the Liquidator, to effectuate
the terms or intent of this Agreement; provided, that when required by any
provision of this Agreement that establishes a percentage of the Limited
Partners or of the Limited Partners of any class or series required to take
any action, the General Partner and the Liquidator may exercise the power
of attorney made in this Section 2.6(a)(ii) only after the necessary vote,
consent or approval of the Limited Partners or of the Limited Partners of
such class or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing
the General Partner to amend this Agreement except in accordance with Article
XIII or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, and it shall survive and, to
the maximum extent permitted by law, not be affected by the subsequent death,
incompetency, disability, incapacity, dissolution, bankruptcy or termination of
any Limited Partner or Assignee and the transfer of all or any portion of such
Limited Partner's or Assignee's Partnership Interest and shall extend to such
Limited Partner's or Assignee's successors and assigns. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or the Liquidator acting in good faith pursuant to such power of
attorney; and each such Limited Partner or Assignee, to the maximum extent
permitted by law, hereby waives any and all defenses that may be available to
contest, negate or disaffirm the action of the General Partner or the Liquidator
taken in good faith under such power of attorney. Each Limited Partner or
Assignee shall execute and deliver to the General Partner or the Liquidator,
within 15 days after receipt of the request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator deems necessary to effectuate this Agreement and the purposes of the
Partnership.
Section 2.7 Term.
The term of the Partnership commenced upon the filing of the Certificate of
Limited Partnership in accordance with the Delaware Act and shall continue in
existence until the close of Partnership business on December 31, 2088 or until
the earlier dissolution of the Partnership in accordance with the provisions of
Article XII. The existence of the Partnership as a separate legal entity shall
continue until the cancellation of the Certificate of Limited Partnership as
provided in the Delaware Act.
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Section 2.8 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner or Assignee, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner, one or more of its Affiliates or one or more nominees, as
the General Partner may determine. The General Partner hereby declares and
warrants that any Partnership assets for which record title is held in the name
of the General Partner or one or more of its Affiliates or one or more nominees
shall be held by the General Partner or such Affiliate or nominee for the use
and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use reasonable
efforts to cause record title to such assets (other than those assets in respect
of which the General Partner determines that the expense and difficulty of
conveyancing makes transfer of record title to the Partnership impracticable) to
be vested in the Partnership as soon as reasonably practicable; provided,
further, that, prior to the withdrawal or removal of the General Partner or as
soon thereafter as practicable, the General Partner shall use reasonable efforts
to effect the transfer of record title to the Partnership and, prior to any such
transfer, will provide for the use of such assets in a manner satisfactory to
the General Partner. All Partnership assets shall be recorded as the property of
the Partnership in its books and records, irrespective of the name in which
record title to such Partnership assets is held.
ARTICLE III
RIGHTS OF LIMITED PARTNERS
Section 3.1 Limitation of Liability.
The Limited Partners and the Assignees shall have no liability under this
Agreement except as expressly provided in this Agreement or in the Delaware Act.
Section 3.2 Management of Business.
No Limited Partner or Assignee, in its capacity as such, shall participate
in the operation, management or control (within the meaning of the Delaware Act)
of the Partnership's business, transact any business in the Partnership's name
or have the power to sign documents for or otherwise bind the Partnership. Any
action taken by any Affiliate of the General Partner or any officer, director,
employee, member, general partner, agent or trustee of the General Partner or
any of its Affiliates, or any officer, director, employee, member, general
partner, agent or trustee of a Group Member, in its capacity as such, shall not
be deemed to be participation in the control of the business of the Partnership
by a limited partner of the Partnership (within the meaning of Section 17-303(a)
of the Delaware Act) and shall not affect, impair or eliminate the limitations
on the liability of the Limited Partners or Assignees under this Agreement.
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Section 3.3 Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5 and the Omnibus Agreement, which
shall continue to be applicable to the Persons referred to therein, regardless
of whether such Persons shall also be Limited Partners or Assignees, any Limited
Partner or Assignee shall be entitled to and may have business interests and
engage in business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with the
Partnership Group. Neither the Partnership nor any of the other Partners or
Assignees shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee.
Section 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by
applicable law, and except as limited by Section 3.4(b), each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon reasonable written demand
and at such Limited Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the Partnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash
and a description and statement of the Net Agreed Value of any other
Capital Contribution by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) The General Partner may keep confidential from the Limited
Partners and Assignees, for such period of time as the General Partner deems
reasonable, (i) any information that the General Partner reasonably believes to
be in the nature of trade secrets or (ii) other information
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the disclosure of which the General Partner in good faith believes (A) is not in
the best interests of the MLP or the Partnership Group, (B) could damage the MLP
or the Partnership Group or (C) that any Group Member is required by law or by
agreement with any third party to keep confidential (other than agreements with
Affiliates of the Partnership the primary purpose of which is to circumvent the
obligations set forth in this Section 3.4).
ARTICLE IV
TRANSFERS OF PARTNERSHIP INTERESTS
Section 4.1 Transfer Generally.
(a) The term "transfer," when used in this Agreement with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner assigns its General Partner Interest to another Person who
becomes the General Partner (or an Assignee) or by which the holder of a Limited
Partner Interest assigns such Limited Partner Interest to another Person who
becomes a Limited Partner (or an Assignee), and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise.
(b) No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article IV.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article IV shall be null and void.
(c) Nothing contained in this Agreement shall be construed to prevent
a disposition by any shareholder of the General Partner of any or all of the
issued and outstanding capital stock of the General Partner.
Section 4.2 Transfer of General Partner's Partnership Interest.
If the General Partner transfers its interest as the general partner
of the MLP to any Person in accordance with the provisions of the MLP Agreement,
the General Partner shall contemporaneously therewith transfer all, but not less
than all, of its General Partner Interest herein to such Person, and the Limited
Partners and Assignees, if any, hereby expressly consent to such transfer.
Except as set forth in the immediately preceding sentence and in Section 5.2, a
General Partner may not transfer all or any part of its Partnership Interest as
the General Partner.
Section 4.3 Transfer of a Limited Partner's Partnership Interest.
A Limited Partner may transfer all, but not less than all, of its
Partnership Interest as a Limited Partner in connection with the merger,
consolidation or other combination of such Limited Partner with or into any
other Person or the transfer by such Limited Partner of all or substantially all
of its assets to another Person, and following any such transfer such Person may
become a Substituted Limited Partner pursuant to Article X. Except as set forth
in the immediately preceding
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sentence and in Section 5.2, or in connection with any pledge of (or any related
foreclosure on) a Partnership Interest as a Limited Partner solely for the
purpose of securing, directly or indirectly, indebtedness of the Partnership or
the MLP, and except for the transfers contemplated by Sections 5.2 and 10.1, a
Limited Partner may not transfer all or any part of its Partnership Interest or
withdraw from the Partnership.
Section 4.4 Restrictions on Transfers.
(a) Notwithstanding the other provisions of this Article IV, no
transfer of any Partnership Interest shall be made if such transfer would (i)
violate the then applicable federal or state securities laws or rules and
regulations of the Commission, any state securities commission or any other
governmental authority with jurisdiction over such transfer, (ii) terminate the
existence or qualification of the Partnership or the MLP under the laws of the
jurisdiction of its formation or (iii) cause the Partnership or the MLP to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes (to the extent not already so treated
or taxed).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership or the
MLP becoming taxable as a corporation or otherwise to be taxed as an entity for
federal income tax purposes. The restrictions may be imposed by making such
amendments to this Agreement as the General Partner may determine to be
necessary or appropriate to impose such restrictions.
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
Section 5.1 Initial Contributions.
In connection with the formation of the Partnership under the Delaware Act,
the General Partner made an initial Capital Contribution to the Partnership in
the amount of $500.00 in exchange for an interest in the Partnership and was
admitted as General Partner and as a Limited Partner, and the MLP made an
initial Capital Contribution to the Partnership in the amount of $500.00 in
exchange for an interest in the Partnership and was admitted as a Limited
Partner.
Section 5.2 Contributions Pursuant to the Contribution and Conveyance
Agreement.
(a) Pursuant to the Contribution and Conveyance Agreement, the
General Partner has contributed to the Partnership, as a Capital Contribution,
all of its interest in Gathering LLC and certain assets acquired by it from CT&T
in exchange for a continuation of its General Partner Interest and a Limited
Partner Interest. Immediately following such contribution, the General Partner
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transferred all of its Partnership Interests except a 1.0101% General Partner
Interest to the MLP in exchange for certain interests therein as more
particularly described in the Registration Statement.
(b) Pursuant to the Contribution and Conveyance Agreement, the MLP
has contributed to the Partnership, as a Capital Contribution (i) cash in the
amount of $96,700,000, (ii) all of the syndication costs incurred by the
Partnership in connection with the Initial Offering and (iii) all of its limited
partner interest in All American, in exchange for its Limited Partner Interest.
(c) Pursuant to the Contribution and Conveyance Agreement, the
Partnership has assumed certain indebtedness relating to the Assets as described
in the Contribution and Conveyance Agreement.
(d) Notwithstanding anything else herein contained, if the aggregate
excess net working capital reflected on the balance sheets of the Partnership
and All American that are prepared in accordance with Section 7.3 of the
Contribution and Conveyance Agreement is in excess of $8,000,000 then the
Partnership shall distribute to the General Partner an amount of cash equal to
the difference between (i) such excess and (ii) the amount of any similar
distribution made to the General Partner by All American. In the event that
such aggregate excess net working capital is less than $8,000,000, the General
Partner shall contribute to the Partnership, as a Capital Contribution, cash in
an amount equal to the amount that, when added to the amount of the similar
contribution made to All American by the General Partner, would cause the
aggregate excess net working capital of the Partnership and All American to be
equal to $8,000,000.
(e) Following the foregoing transactions, the General Partner holds
a 1.0101% Partnership Interest as General Partner and the MLP holds a 98.9899%
Partnership Interest as a Limited Partner.
Section 5.3 Additional Capital Contributions.
With the consent of the General Partner, any Limited Partner may, but shall
not be obligated to, make additional Capital Contributions to the Partnership.
Contemporaneously with the making of any Capital Contributions by a Limited
Partner, in addition to those provided in Sections 5.1 and 5.2, the General
Partner shall be obligated to make an additional Capital Contribution to the
Partnership in an amount equal to 1.0101 divided by 98.9899 times the amount of
the additional Capital Contribution then made by such Limited Partner. Except
as set forth in the immediately preceding sentence and in Article XII, the
General Partner shall not be obligated to make any additional Capital
Contributions to the Partnership.
Section 5.4 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No
Partner or Assignee shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent, if any,
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that distributions made pursuant to this Agreement or upon termination of the
Partnership may be considered as such by law and then only to the extent
provided for in this Agreement. Except to the extent expressly provided in this
Agreement, no Partner or Assignee shall have priority over any other Partner or
Assignee either as to the return of Capital Contributions or as to profits,
losses or distributions. Any such return shall be a compromise to which all
Partners and Assignees agree within the meaning of Section 17-502(b) of the
Delaware Act.
Section 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial
owner of Partnership Interests held by a nominee in any case in which the
nominee has furnished the identity of such owner to the Partnership in
accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion) owning a Partnership Interest a
separate Capital Account with respect to such Partnership Interest in accordance
with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital
Account shall be increased by (i) the amount of all Capital Contributions made
to the Partnership with respect to such Partnership Interest pursuant to this
Agreement and (ii) all items of Partnership income and gain (including, without
limitation, income and gain exempt from tax) computed in accordance with Section
5.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 6.1, and decreased by (x) the amount of cash or Net Agreed Value of all
actual and deemed distributions of cash or property made with respect to such
Partnership Interest pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 5.5(b) and allocated with
respect to such Partnership Interest pursuant to Section 6.1.
(b) For purposes of computing the amount of any item of income,
gain, loss or deduction which is to be allocated pursuant to Article VI and is
to be reflected in the Partners' Capital Accounts, the determination,
recognition and classification of any such item shall be the same as its
determination, recognition and classification for federal income tax purposes
(including, without limitation, any method of depreciation, cost recovery or
amortization used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall
be treated as owning directly its proportionate share (as determined by the
General Partner) of all property owned by any OLP Subsidiary that is
classified as a partnership for federal income tax purposes.
(ii) All fees and other expenses incurred by the Partnership to
promote the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code, if any, shall, for
purposes of Capital Account maintenance, be treated as an item of deduction
at the time such fees and other expenses are incurred and shall be
allocated among the Partners pursuant to Section 6.1.
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(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of
the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes. To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or 743(b) of the Code is
required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such
adjustment in the Capital Accounts shall be treated as an item of gain or
loss.
(iv) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the
Code, any deductions for depreciation, cost recovery or amortization
attributable to any Contributed Property shall be determined as if the
adjusted basis of such property on the date it was acquired by the
Partnership were equal to the Agreed Value of such property. Upon an
adjustment pursuant to Section 5.5(d) to the Carrying Value of any
Partnership property subject to depreciation, cost recovery or
amortization, any further deductions for such depreciation, cost recovery
or amortization attributable to such property shall be determined (A) as if
the adjusted basis of such property were equal to the Carrying Value of
such property immediately following such adjustment and (B) using a rate of
depreciation, cost recovery or amortization derived from the same method
and useful life (or, if applicable, the remaining useful life) as is
applied for federal income tax purposes; provided, however, that, if the
asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization derived from the same method
and useful life (or, if applicable, the remaining useful life) as is
applied for federal income tax purposes; provided, however, that, if the
asset has a zero adjusted basis for federal income tax purposes,
depreciation, cost recovery or amortization deductions shall be determined
using any reasonable method that the General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed
in service and shall be allocated among the Partners pursuant to Section
6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
shall, to the extent possible, be allocated in the same manner to the
Partners to whom such deemed deduction was allocated.
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(c) A transferee of a Partnership Interest shall succeed to a pro
rata portion of the Capital Account of the transferor relating to the
Partnership Interest so transferred.
(d) (i) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for cash
or Contributed Property or the conversion of the General Partner's
Partnership Interest to Common Units pursuant to Section 11.3(a), the
Capital Accounts of all Partners and the Carrying Value of each Partnership
property immediately prior to such issuance shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss attributable to
such Partnership property, as if such Unrealized Gain or Unrealized Loss
had been recognized on an actual sale of each such property immediately
prior to such issuance and had been allocated to the Partners at such time
pursuant to Section 6.1 in the same manner as any item of gain or loss
actually recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss, the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Partnership Interests shall be determined by the General Partner
using such reasonable method of valuation as it may adopt; provided,
however, that the General Partner, in arriving at such valuation, must take
fully into account the fair market value of the Partnership Interests of
all Partners at such time. The General Partner shall allocate such
aggregate value among the assets of the Partnership (in such manner as it
determines in its discretion to be reasonable) to arrive at a fair market
value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-
1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a
Partner of any Partnership property (other than a distribution of cash that
is not in redemption or retirement of a Partnership Interest), the Capital
Accounts of all Partners and the Carrying Value of all Partnership property
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized in a sale of such
property immediately prior to such distribution for an amount equal to its
fair market value, and had been allocated to the Partners, at such time,
pursuant to Section 6.1 in the same manner as any item of gain or loss
actually recognized during such period would have been allocated. In
determining such Unrealized Gain or Unrealized Loss the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to a distribution
shall (A) in the case of an actual distribution which is not made pursuant
to Section 12.4 or in the case of a deemed contribution and/or distribution
occurring as a result of a termination of the Partnership pursuant to
Section 708 of the Code, be determined and allocated in the same manner as
that provided in Section 5.5(d)(i) or (B) in the case of a liquidating
distribution pursuant to Section 12.4, be determined and allocated by the
Liquidator using such reasonable method of valuation as it may adopt.
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Section 5.6 Loans from Partners.
Loans by a Partner to the Partnership shall not constitute Capital
Contributions. If any Partner shall advance funds to the Partnership in excess
of the amounts required hereunder to be contributed by it to the capital of the
Partnership, the making of such excess advances shall not result in any increase
in the amount of the Capital Account of such Partner. The amount of any such
excess advances shall be a debt obligation of the Partnership to such Partner
and shall be payable or collectible only out of the Partnership assets in
accordance with the terms and conditions upon which such advances are made.
Section 5.7 Limited Preemptive Rights.
Except as provided in Section 5.3, no Person shall have preemptive,
preferential or other similar rights with respect to (a) additional Capital
Contributions; (b) issuance or sale of any class or series of Partnership
Interests, whether unissued, held in the treasury or hereafter created; (c)
issuance of any obligations, evidences of indebtedness or other securities of
the Partnership convertible into or exchangeable for, or carrying or accompanied
by any rights to receive, purchase or subscribe to, any such Partnership
Interests; (d) issuance of any right of subscription to or right to receive, or
any warrant or option for the purchase of, any such Partnership Interests; or
(e) issuance or sale of any other securities that may be issued or sold by the
Partnership.
Section 5.8 Fully Paid and Non-Assessable Nature of Partnership Interests.
All Partnership Interests issued to Limited Partners pursuant to, and in
accordance with the requirements of, this Article V shall be fully paid and non-
assessable Partnership Interests, except as such non-assessability may be
affected by Section 17-607 of the Delaware Act.
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
Section 6.1 Allocations for Capital Account Purposes.
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Section 5.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
(a) Net Income. After giving effect to the special allocations set
forth in Section 6.1(d), Net Income for each taxable year and all items of
income, gain, loss and deduction taken into account in computing Net Income for
such taxable year shall be allocated among the Partners as follows:
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(i) First, 100% to the General Partner, until the aggregate
Net Income allocated to the General Partner pursuant to this Section
6.1(a)(i) for the current taxable year and all previous taxable years is
equal to the aggregate Net Losses allocated to the General Partner pursuant
to Section 6.1(b)(ii) for all previous taxable years;
(ii) Second, 1.0101% to the General Partner and 98.9899% to the
Limited Partners in accordance with their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set
forth in Section 6.1(d), Net Losses for each taxable period and all items of
income, gain, loss and deduction taken into account in computing Net Losses for
such taxable period shall be allocated among the Partners as follows:
(i) First, 1.0101% to the General Partner and 98.9899% to the
Limited Partners, in accordance with their respective Percentage Interests;
provided, however, that Net Losses shall not be allocated to a Limited
Partner pursuant to this Section 6.1(b)(i) to the extent that such
allocation would cause a Limited Partner to have a deficit balance in its
Adjusted Capital Account at the end of such taxable year (or increase any
existing deficit balance in such Limited Partners's original signed
Agreement has this Adjusted Capital Account);
(ii) Second, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the
special allocations set forth in Section 6.1(d), all items of income, gain, loss
and deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder.
All allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Section 6.4
have been made with respect to the taxable period ending on or before the
Liquidation Date; provided, however, that solely for purposes of this Section
6.1(c), Capital Accounts shall not be adjusted for distributions made pursuant
to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed
recognized pursuant to Section 5.5(d)), such Net Termination Gain shall be
allocated among the Partners in the following manner (and the Capital
Accounts of the Partners shall be increased by the amount so allocated in
each of the following subclauses, in the order listed, before an allocation
is made pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its
Capital Account, in the proportion that such deficit balance bears to
the total deficit balances in the Capital Accounts of all Partners,
until each such Partner has been allocated Net Termination Gain equal
to any such deficit balance in its Capital Account; and
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(B) Second, 1.0101% to the General Partner and 98.9899% to the
Limited Partners, in accordance with their respective Percentage
Interests.
(ii) If a Net Termination Loss is recognized (or deemed
recognized pursuant to Section 5.5(d)), such Net Termination Loss shall be
allocated among the Partners in the following manner:
(A) First, to the General Partner and the Limited Partners in
proportion to, and to the extent of, the positive balances in their
respective Capital Accounts; and
(B) Second, the balance, if any, 100% to the General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any
other provision of this Section 6.1, if there is a net decrease in
Partnership Minimum Gain during any Partnership taxable period, each
Partner shall be allocated items of Partnership income and gain for such
period (and, if necessary, subsequent periods) in the manner and amounts
provided in Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d) with respect to such taxable period (other than an
allocation pursuant to Sections 6.1(d)(v) and 6.1(d)(vi)). This Section
6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and 1.704-
2(j)(2)(ii), or any successor provisions. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d), other than Section 6.1(d)(i) and other than an
allocation pursuant to Sections 6.1(d)(v) and 6.1(d)(vi), with respect to
such taxable period. This Section 6.1(d)(ii) is intended to comply with the
chargeback of items of income and gain
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requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions
described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Partnership income
and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i)
or (ii).
(iv) Gross Income Allocations. In the event any Partner has a
deficit balance in its Capital Account at the end of any Partnership
taxable period in excess of the sum of (A) the amount such Partner is
required to restore pursuant to the provisions of this Agreement and (B)
the amount such Partner is deemed obligated to restore pursuant to Treasury
Regulation Sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be
specially allocated items of Partnership gross income and gain in the
amount of such excess as quickly as possible; provided, that an allocation
pursuant to this Section 6.1(d)(iv) shall be made only if and to the extent
that such Partner would have a deficit balance in its Capital Account as
adjusted after all other allocations provided for in this Section 6.1 have
been tentatively made as if this Section 6.1(d)(iv) were not in this
Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions for any
taxable period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its
good faith discretion that the Partnership's Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements of
the Treasury Regulations promulgated under Section 704(b) of the Code, the
General Partner is authorized, upon notice to the other Partners, to revise
the prescribed ratio to the numerically closest ratio that does satisfy
such requirements.
(vi) Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions for any taxable period shall be allocated 100% to the Partner
that bears the Economic Risk of Loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Treasury Regulation Section 1.704-2(i). If
more than one Partner bears the Economic Risk of Loss with respect to a
Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable
thereto shall be allocated between or among such Partners in accordance
with the ratios in which they share such Economic Risk of Loss.
(vii) Nonrecourse Liabilities. For purposes of Treasury
Regulation Section 1.752-3(a)(3), the Partners agree that Nonrecourse
Liabilities of the Partnership in excess of the sum of (A) the amount of
Partnership Minimum Gain and (B) the total amount of Nonrecourse
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Built-in Gain shall be allocated among the Partners in accordance with
their respective Percentage Interests.
(viii) Code Section 754 Adjustments. To the extent an adjustment
to the adjusted tax basis of any Partnership asset pursuant to Section
734(b) or 743(c) of the Code is required, pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining
Capital Accounts, the amount of such adjustment to the Capital Accounts
shall be treated as an item of gain (if the adjustment increases the basis
of the asset) or loss (if the adjustment decreases such basis), and such
item of gain or loss shall be specially allocated to the Partners in a
manner consistent with the manner in which their Capital Accounts are
required to be adjusted pursuant to such Section of the Treasury
Regulations.
(ix) Curative Allocation.
(A) Notwithstanding any other provision of this Section
6.1, other than the Required Allocations, the Required
Allocations shall be taken into account in making the Agreed
Allocations so that, to the extent possible, the net amount of
items of income, gain, loss and deduction allocated to each
Partner pursuant to the Required Allocations and the Agreed
Allocations, together, shall be equal to the net amount of such
items that would have been allocated to each such Partner under
the Agreed Allocations had the Required Allocations and the
related Curative Allocation not otherwise been provided in this
Section 6.1. Notwithstanding the preceding sentence, Required
Allocations relating to (1) Nonrecourse Deductions shall not be
taken into account except to the extent that there has been a
decrease in Partnership Minimum Gain and (2) Partner Nonrecourse
Deductions shall not be taken into account except to the extent
that there has been a decrease in Partner Nonrecourse Debt
Minimum Gain. Allocations pursuant to this Section 6.1(d)(ix)(A)
shall only be made with respect to Required Allocations to the
extent the General Partner reasonably determines that such
allocations will otherwise be inconsistent with the economic
agreement among the Partners. Further, allocations pursuant to
this Section 6.1(d)(ix)(A) shall be deferred with respect to
allocations pursuant to clauses (1) and (2) hereof to the extent
the General Partner reasonably determines that such allocations
are likely to be offset by subsequent Required Allocations.
(B) The General Partner shall have reasonable discretion,
with respect to each taxable period, to (1) apply the provisions
of Section 6.1(d)(ix)(A) in whatever order is most likely to
minimize the economic distortions that might otherwise result
from the Required Allocations, and (2) divide all allocations
pursuant to Section 6.1(d)(ix)(A) among the Partners in a manner
that is likely to minimize such economic distortions.
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Section 6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to
a Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners in the manner
provided under Section 704(c) of the Code that takes into account the
variation between the Agreed Value of such property and its adjusted basis
at the time of contribution; and (B) any item of Residual Gain or Residual
Loss attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2)
second, in the event such property was originally a Contributed Property,
be allocated among the Partners in a manner consistent with Section
6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Units or other limited partner interests of
the MLP (or any class or classes thereof), the General Partner shall have sole
discretion to (i) adopt such conventions as it deems appropriate in determining
the amount of depreciation, amortization and cost recovery deductions; (ii) make
special allocations for federal income tax purposes of income (including,
without limitation, gross income) or deductions; and (iii) amend the provisions
of this Agreement as appropriate (x) to reflect the proposal or promulgation of
Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y)
otherwise to preserve or achieve uniformity of the Units or other limited
partner interests of the MLP (or any class or classes thereof). The General
Partner may adopt such conventions, make such allocations and make such
amendments to this Agreement as provided in this Section 6.2(c) only if such
conventions, allocations or amendments would not have a material adverse effect
on the Partners, the holders of any class or classes of Units or other limited
partner interests of the MLP
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issued and outstanding or the Partnership and if such allocations are consistent
with the principles of Section 704 of the Code.
(d) The General Partner in its discretion may determine to depreciate
or amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-l(a)(6) or the legislative history of Section 197 of
the Code. If the General Partner determines that such reporting position cannot
reasonably be taken, the General Partner may adopt depreciation and amortization
conventions under which all purchasers acquiring limited partner interests of
the MLP in the same month would receive depreciation and amortization
deductions, based upon the same applicable rate as if they had purchased a
direct interest in the Partnership's property. If the General Partner chooses
not to utilize such aggregate method, the General Partner may use any other
reasonable depreciation and amortization conventions to preserve the uniformity
of the intrinsic tax characteristics of any limited partner interests of the MLP
that would not have a material adverse effect on the Partners or the holders of
any class or classes of limited partner interests of the MLP.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized
by the Partnership for federal income tax purposes and allocated to the Partners
in accordance with the provisions hereof shall be determined without regard to
any election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) The General Partner may adopt such methods of allocation of
income, gain, loss or deduction between a transferor and a transferee of a
Partnership Interest as it determines necessary, to the extent permitted or
required by Section 706 of the Code and the regulations or rulings promulgated
thereunder.
(h) Allocations that would otherwise be made to a Partner under the
provisions of this Article VI shall instead be made to the beneficial owner of
Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership
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in accordance with Section 6031(c) of the Code or any other method acceptable to
the General Partner in its sole discretion.
Section 6.3 Distributions.
(a) Within 45 days following the end of each Quarter commencing with
the Quarter ending on December 31, 1998, an amount equal to 100% of Available
Cash with respect to such Quarter shall, subject to Section 17-607 of the
Delaware Act, be distributed in accordance with this Article VI by the
Partnership to the Partners in accordance with their respective Percentage
Interests. The immediately preceding sentence shall not require any distribution
of cash if and to the extent such distribution would be prohibited by applicable
law or by any loan agreement, security agreement, mortgage, debt instrument or
other agreement or obligation to which the Partnership is a party or by which it
is bound or its assets are subject. All distributions required to be made under
this Agreement shall be made subject to Section 17-607 of the Delaware Act.
(b) In the event of the dissolution and liquidation of the
Partnership, all receipts received during or after the Quarter in which the
Liquidation Date occurs, other than from borrowings described in (a)(ii) of the
definition of Available Cash, shall be applied and distributed solely in
accordance with, and subject to the terms and conditions of, Section 12.4.
(c) The General Partner shall have the discretion to treat taxes paid
by the Partnership on behalf of, or amounts withheld with respect to, all or
less than all of the Partners, as a distribution of Available Cash to such
Partners.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
Section 7.1 Management.
(a) The General Partner shall conduct, direct and manage all
activities of the Partnership. Except as otherwise expressly provided in this
Agreement, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner, and no Limited
Partner or Assignee shall have any management power over the business and
affairs of the Partnership. In addition to the powers now or hereafter granted a
general partner of a limited partnership under applicable law or which are
granted to the General Partner under any other provision of this Agreement, the
General Partner, subject to Section 7.3, shall have full power and authority to
do all things and on such terms as it, in its sole discretion, may deem
necessary or appropriate to conduct the business of the Partnership, to exercise
all powers set forth in Section 2.5 and to effectuate the purposes set forth in
Section 2.4, including the following:
(i) the making of any expenditures, the lending or borrowing of
money, the assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the
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issuance of evidences of indebtedness, including indebtedness that is
convertible into a Partnership Interest, and the incurring of any other
obligations;
(ii) the making of tax, regulatory and other filings, or rendering
of periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership or
the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3);
(iv) the use of the assets of the Partnership (including cash on
hand) for any purpose consistent with the terms of this Agreement,
including the financing of the conduct of the operations of the Partnership
Group, subject to Section 7.6, the lending of funds to other Persons
(including the MLP and any member of the Partnership Group), the repayment
of obligations of the MLP or any member of the Partnership Group and the
making of capital contributions to any member of the Partnership Group;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments (including instruments that limit the
liability of the Partnership under contractual arrangements to all or
particular assets of the Partnership, with the other party to the contract
to have no recourse against the General Partner or its assets other than
its interest in the Partnership, even if same results in the terms of the
transaction being less favorable to the Partnership than would otherwise be
the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring;
(viii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited or
general partnerships, joint ventures, corporations or other relationships
subject to the restrictions set forth in Section 2.4;
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(x) the control of any matters affecting the rights and obligations
of the Partnership, including the bringing and defending of actions at law
or in equity and otherwise engaging in the conduct of litigation and the
incurring of legal expense and the settlement of claims and litigation; and
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law.
(b) Notwithstanding any other provision of this Agreement, the MLP
Agreement, the Delaware Act or any applicable law, rule or regulation, each of
the Partners and Assignees and each other Person who may acquire an interest in
the Partnership hereby (i) approves, ratifies and confirms the execution,
delivery and performance by the parties thereto of the Partnership Agreement,
the MLP Agreement, the Underwriting Agreement, the Omnibus Agreement, the
Contribution and Conveyance Agreement and the other agreements and documents
described in or filed as exhibits to the Registration Statement that are related
to the transactions contemplated by the Registration Statement; (ii) agrees that
the General Partner (on its own or through any officer of the Partnership) is
authorized to execute, deliver and perform the agreements referred to in clause
(i) of this sentence and the other agreements, acts, transactions and matters
described in or contemplated by the Registration Statement on behalf of the
Partnership without any further act, approval or vote of the Partners or the
Assignees or the other Persons who may acquire an interest in the Partnership;
and (iii) agrees that the execution, delivery or performance by the General
Partner, the MLP, any Group Member or any Affiliate of any of them, of this
Agreement or any agreement authorized or permitted under this Agreement
(including the exercise by the General Partner or any Affiliate of the General
Partner of the rights accorded pursuant to Article XV), shall not constitute a
breach by the General Partner of any duty that the General Partner may owe the
Partnership or the Limited Partners or any other Persons under this Agreement
(or any other agreements) or of any duty stated or implied by law or equity.
Section 7.2 Certificate of Limited Partnership.
The General Partner has caused the Certificate of Limited Partnership to be
filed with the Secretary of State of the State of Delaware as required by the
Delaware Act and shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be determined by the General Partner in
its sole discretion to be reasonable and necessary or appropriate for the
formation, continuation, qualification and operation of a limited partnership
(or a partnership in which the limited partners have limited liability) in the
State of Delaware or any other state in which the Partnership may elect to do
business or own property. To the extent that such action is determined by the
General Partner in its sole discretion to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and restatements of
the Certificate of Limited Partnership and do all things to maintain the
Partnership as a limited partnership (or a partnership or other entity in which
the limited partners have limited liability) under the laws of the State of
Delaware or of any other state in which the Partnership may elect to do business
or own property. Subject to the terms
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of Section 3.4(a), the General Partner shall not be required, before or after
filing, to deliver or mail a copy of the Certificate of Limited Partnership, any
qualification document or any amendment thereto to any Limited Partner or
Assignee.
Section 7.3 Restrictions on General Partner's Authority.
(a) The General Partner may not, without written approval of the
specific act by the Limited Partners or by other written instrument executed and
delivered by the Limited Partners subsequent to the date of this Agreement, take
any action in contravention of this Agreement, including, except as otherwise
provided in this Agreement, (i) committing any act that would make it impossible
to carry on the ordinary business of the Partnership; (ii) possessing
Partnership property, or assigning any rights in specific Partnership property,
for other than a Partnership purpose; (iii) admitting a Person as a Partner;
(iv) amending this Agreement in any manner or (v) transferring its General
Partner Interest.
(b) Except as provided in Articles XII and XIV, the General Partner
may not sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
(including by way of merger, consolidation or other combination) or approve on
behalf of the Partnership the sale, exchange or other disposition of all or
substantially all of the assets of the Partnership, without the approval of the
Limited Partners; provided however that this provision shall not preclude or
limit the General Partner's ability to mortgage, pledge, hypothecate or grant a
security interest in all or substantially all of the assets of the Partnership
and shall not apply to any forced sale of any or all of the assets of the
Partnership pursuant to the foreclosure of, or other realization upon, any such
encumbrance. Without the approval of at least a Unit Majority, the General
Partner shall not, on behalf of the MLP, (i) consent to any amendment to this
Agreement or, except as expressly permitted by Section 7.9(d) of the MLP
Agreement, take any action permitted to be taken by a Partner, in either case,
that would have a material adverse effect on the MLP as a Partner or (ii) except
as permitted under Sections 4.6, 11.1 and 11.2 of the MLP Agreement, elect or
cause the MLP to elect a successor general partner of the Partnership.
Section 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this
Agreement or in the MLP Agreement, the General Partner shall not be compensated
for its services as General Partner, general partner of the MLP or as general
partner of any Group Member.
(b) The General Partner shall be reimbursed on a monthly basis, or
such other reasonable basis as the General Partner may determine in its sole
discretion, for (i) all direct and indirect expenses it incurs or payments it
makes on behalf of the Partnership (including salary, bonus, incentive
compensation and other amounts paid to any Person including Affiliates of the
General Partner to perform services for the Partnership or for the General
Partner in the discharge of its duties
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to the Partnership), and (ii) all other necessary or appropriate expenses
allocable to the Partnership or otherwise reasonably incurred by the General
Partner in connection with operating the Partnership's business (including
expenses allocated to the General Partner by its Affiliates). The General
Partner shall determine the expenses that are allocable to the Partnership in
any reasonable manner determined by the General Partner in its sole discretion.
Reimbursements pursuant to this Section 7.4 shall be in addition to any
reimbursement to the General Partner as a result of indemnification pursuant to
Section 7.7.
(c) Subject to Section 5.7, the General Partner, in its sole
discretion and without the approval of the Limited Partners (who shall have no
right to vote in respect thereof), may propose and adopt on behalf of the
Partnership employee benefit plans, employee programs and employee practices, or
cause the Partnership to issue Partnership Interests, in connection with,
pursuant to any employee benefit plan, employee program or employee practice
maintained or sponsored by the General Partner or any of its Affiliates, in each
case for the benefit of employees of the General Partner any Group Member or any
Affiliate, or any of them, in respect of services performed, directly or
indirectly, for the benefit of the Partnership Group. Expenses incurred by the
General Partner in connection with any such plans, programs and practices shall
be reimbursed in accordance with Section 7.4(b). Any and all obligations of the
General Partner under any employee benefit plans, employee programs or employee
practices adopted by the General Partner as permitted by this Section 7.4(c)
shall constitute obligations of the General Partner hereunder and shall be
assumed by any successor General Partner approved pursuant to Section 11.1 or
11.2 or the transferee of or successor to all of the General Partner's General
Partner Interest pursuant to Section 4.2.
Section 7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so long as it is
the General Partner of the Partnership (i) agrees that its sole business will be
to act as the General Partner of the Partnership, the general partner of the
MLP, and a general partner of any other partnership of which the Partnership or
the MLP is, directly or indirectly, a partner and to undertake activities that
are ancillary or related thereto (including being a limited partner in the MLP),
(ii) shall not engage in any business or activity or incur any debts or
liabilities except in connection with or incidental to (A) its performance as
general partner of the Partnership, the MLP or one or more Group Members or as
described in or contemplated by the Registration Statement or (B) the acquiring,
owning or disposing of debt or equity securities in any Group Member and (iii)
except to the extent permitted in the Omnibus Agreement, shall not, and shall
cause its Affiliates not to, engage in any Restricted Business.
(b) The Omnibus Agreement, to which the Partnership is a party, sets
forth certain restrictions on the ability of Plains Resources Inc. to engage in
Restricted Businesses.
(c) Except as specifically restricted by Section 7.5(a) and the
Omnibus Agreement, each Indemnitee (other than the General Partner) shall have
the right to engage in businesses of every type and description and other
activities for profit and to engage in and possess an interest in other
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business ventures of any and every type or description, whether in businesses
engaged in or anticipated to be engaged in by the MLP or any Group Member,
independently or with others, including business interests and activities in
direct competition with the business and activities of the MLP or any Group
Member, and none of the same shall constitute a breach of this Agreement or any
duty express or implied by law to the MLP or any Group Member or any Partner or
Assignee. Neither the MLP nor any Group Member, any Limited Partner, nor any
other Person shall have any rights by virtue of this Agreement, the MLP
Agreement or the partnership relationship established hereby or thereby in any
business ventures of any Indemnitee.
(d) Subject to the terms of Section 7.5(a), Section 7.5(b), Section
7.5(c) and the Omnibus Agreement, but otherwise notwithstanding anything to the
contrary in this Agreement, (i) the engaging in competitive activities by any
Indemnitees (other than the General Partner) in accordance with the provisions
of this Section 7.5 is hereby approved by the Partnership and all Partners, (ii)
it shall be deemed not to be a breach of the General Partner's fiduciary duty or
any other obligation of any type whatsoever of the General Partner for the
Indemnitees (other than the General Partner) to engage in such business
interests and activities in preference to or to the exclusion of the Partnership
and (iii) except as set forth in the Omnibus Agreement, the General Partner and
the Indemnities shall have no obligation to present business opportunities to
the Partnership.
(e) The General Partner and any of its Affiliates may acquire Units
or other MLP Securities in addition to those acquired on the Closing Date and,
except as otherwise provided in this Agreement, shall be entitled to exercise
all rights relating to such Units or MLP Securities.
(f) The term "Affiliates" when used in Section 7.5(a) and Section
7.5(e) with respect to the General Partner shall not include any Group Member or
any Subsidiary of the MLP or any Group Member.
(g) Anything in this Agreement to the contrary notwithstanding, to
the extent that provisions of Sections 7.7, 7.8, 7.9, 7.10 or other Sections of
this Agreement purport or are interpreted to have the effect of restricting the
fiduciary duties that might otherwise, as a result of Delaware or other
applicable law, be owed by the General Partner to the Partnership and its
Limited Partners, or to constitute a waiver or consent by the Limited Partners
to any such restriction, such provisions shall be inapplicable and have no
effect in determining whether the General Partner has complied with its
fiduciary duties in connection with determinations made by it under this Section
7.5.
Section 7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the General
Partner.
(a) The General Partner or its Affiliates may lend to the MLP or any
Group Member, and the MLP or any Group Member may borrow from the General
Partner or any of its Affiliates, funds needed or desired by the MLP or the
Group Member for such periods of time and
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in such amounts as the General Partner may determine; provided, however, that in
any such case the lending party may not charge the borrowing party interest at a
rate greater than the rate that would be charged the borrowing party or impose
terms less favorable to the borrowing party than would be charged or imposed on
the borrowing party by unrelated lenders on comparable loans made on an arm's-
length basis (without reference to the lending party's financial abilities or
guarantees). The borrowing party shall reimburse the lending party for any costs
(other than any additional interest costs) incurred by the lending party in
connection with the borrowing of such funds. For purposes of this Section 7.6(a)
and Section 7.6(b), the term "Group Member" shall include any Affiliate of a
Group Member that is controlled by the Group Member. No Group Member may lend
funds to the General Partner or any of its Affiliates (other than the MLP, a
Subsidiary of the MLP or a Subsidiary of another Group Member).
(b) The Partnership may lend or contribute to any Group Member, and
any Group Member may borrow from the Partnership, funds on terms and conditions
established in the sole discretion of the General Partner; provided, however,
that the Partnership may not charge the Group Member interest at a rate less
than the rate that would be charged to the Group Member (without reference to
the General Partner's financial abilities or guarantees) by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member or any other Person.
(c) The General Partner may itself, or may enter into an agreement
with any of its Affiliates to, render services to a Group Member or to the
General Partner in the discharge of its duties as general partner of the
Partnership. Any services rendered to a Group Member by the General Partner or
any of its Affiliates shall be on terms that are fair and reasonable to the
Partnership; provided, however, that the requirements of this Section 7.6(c)
shall be deemed satisfied as to (i) any transaction approved by Special
Approval, (ii) any transaction, the terms of which are no less favorable to the
Partnership Group than those generally being provided to or available from
unrelated third parties or (iii) any transaction that, taking into account the
totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this Section
7.6(c).
(d) The Partnership Group may transfer assets to joint ventures,
other partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the General Partner nor any of its Affiliates shall
sell, transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.2 and 5.3, the Contribution and
Conveyance Agreement and any other
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transactions described in or contemplated by the Registration Statement, (ii)
any transaction approved by Special Approval, (iii) any transaction, the terms
of which are no less favorable to the Partnership than those generally being
provided to or available from unrelated third parties, or (iv) any transaction
that, taking into account the totality of the relationships between the parties
involved (including other transactions that may be particularly favorable or
advantageous to the Partnership), is equitable to the Partnership.
(f) The General Partner and its Affiliates will have no obligation
to permit any Group Member to use any facilities or assets of the General
Partner and its Affiliates, except as may be provided in contracts entered into
from time to time specifically dealing with such use, nor shall there be any
obligation on the part of the General Partner or its Affiliates to enter into
such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
Section 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the
limitations expressly provided in this Agreement, all Indemnitees shall be
indemnified and held harmless by the Partnership from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
legal fees and expenses), judgments, fines, penalties, interest, settlements or
other amounts arising from any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, in which
any Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as an Indemnitee; provided, that in each case
the Indemnitee acted in good faith and in a manner that such Indemnitee
reasonably believed to be in, or (in the case of a Person other than the General
Partner) not opposed to, the best interests of the Partnership and, with respect
to any criminal proceeding, had no reasonable cause to believe its conduct was
unlawful; provided, further, no indemnification pursuant to this Section 7.7
shall be available to the General Partner with respect to its obligations
incurred pursuant to the Underwriting Agreement or the Contribution and
Conveyance Agreement (other than obligations incurred by the General Partner on
behalf of the MLP or the Partnership). The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that the
Indemnitee acted in a manner contrary to that specified above. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership, it being agreed that the General Partner shall not be
personally liable for such indemnification and shall have no obligation to
contribute or loan any monies or property to the Partnership to enable it to
effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal
fees and expenses) incurred by an Indemnitee who is indemnified pursuant to
Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Partnership
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prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Partnership of any undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined that the Indemnitee is
not entitled to be indemnified as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, both as to actions in the Indemnitee's capacity as an Indemnitee and
as to actions in any other capacity (including any capacity under the
Underwriting Agreement), and shall continue as to an Indemnitee who has ceased
to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the
General Partner or its Affiliates for the cost of) insurance, on behalf of the
General Partner, its Affiliates and such other Persons as the General Partner
shall determine, against any liability that may be asserted against or expense
that may be incurred by such Person in connection with the Partnership's
activities or such Person's activities on behalf of the Partnership, regardless
of whether the Partnership would have the power to indemnify such Person against
such liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by it of its duties to the Partnership also
imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute "fines" within the meaning of Section 7.7(a); and action taken
or omitted by it with respect to any employee benefit plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is in, or not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any
provision hereof shall in any manner terminate, reduce or impair the right of
any past, present or future Indemnitee to be indemnified by the Partnership, nor
the obligations of the Partnership to indemnify
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any such Indemnitee under and in accordance with the provisions of this Section
7.7 as in effect immediately prior to such amendment, modification or repeal
with respect to claims arising from or relating to matters occurring, in whole
or in part, prior to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.
Section 7.8 Liability of Indemnitees.
(a) Notwithstanding anything to the contrary set forth in this
Agreement, no Indemnitee shall be liable for monetary damages to the
Partnership, the Limited Partners, the Assignees or any other Persons who have
acquired interests in the Units or other Partnership Securities of the MLP, for
losses sustained or liabilities incurred as a result of any act or omission if
such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as General Partner set
forth in Section 7.1(a), the General Partner may exercise any of the powers
granted to it by this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents, and the General Partner
shall not be responsible for any misconduct or negligence on the part of any
such agent appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Partnership
or to the Limited Partners, the General Partner and any other Indemnitee acting
in connection with the Partnership's business or affairs shall not be liable to
the Partnership or to any Partner for its good faith reliance on the provisions
of this Agreement. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.
(d) Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership, the Limited Partners, the
General Partner, and the Partnership's and General Partner's directors, officers
and employees under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or the MLP
Agreement, whenever a potential conflict of interest exists or arises between
the General Partner or any of its Affiliates, on the one hand, and the
Partnership, the MLP, any Partner or any Assignee, on the other, any resolution
or course of action by the General Partner or its Affiliates in respect of such
conflict of interest shall be permitted and deemed approved by all Partners, and
shall not constitute
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a breach of this Agreement of the MLP Agreement, of any agreement contemplated
herein or therein, or of any duty stated or implied by law or equity, if the
resolution or course of action is, or by operation of this Agreement is deemed
to be, fair and reasonable to the Partnership. The General Partner shall be
authorized but not required in connection with its resolution of such conflict
of interest to seek Special Approval of such resolution. Any conflict of
interest and any resolution of such conflict of interest shall be conclusively
deemed fair and reasonable to the Partnership if such conflict of interest or
resolution is (i) approved by Special Approval (as long as the material facts
known to the General Partner or any of its Affiliates regarding any proposed
transaction were disclosed to the Conflicts Committee at the time it gave its
approval), (ii) on terms no less favorable to the Partnership than those
generally being provided to or available from unrelated third parties or (iii)
fair to the Partnership, taking into account the totality of the relationships
between the parties involved (including other transactions that may be
particularly favorable or advantageous to the Partnership). The General Partner
may also adopt a resolution or course of action that has not received Special
Approval. The General Partner (including the Conflicts Committee in connection
with Special Approval) shall be authorized in connection with its determination
of what is "fair and reasonable" to the Partnership and in connection with its
resolution of any conflict of interest to consider (A) the relative interests of
any party to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interest; (B) any customary or accepted industry
practices and any customary or historical dealings with a particular Person; (C)
any applicable generally accepted accounting practices or principles; and (D)
such additional factors as the General Partner (including the Conflicts
Committee) determines in its sole discretion to be relevant, reasonable or
appropriate under the circumstances. Nothing contained in this Agreement,
however, is intended to nor shall it be construed to require the General Partner
(including the Conflicts Committee) to consider the interests of any Person
other than the Partnership. In the absence of bad faith by the General Partner,
the resolution, action or terms so made, taken or provided by the General
Partner with respect to such matter shall not constitute a breach of this
Agreement or any other agreement contemplated herein or a breach of any standard
of care or duty imposed herein or therein or, to the extent permitted by law,
under the Delaware Act or any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated
hereby provides that the General Partner or any of its Affiliates is permitted
or required to make a decision (i) in its "sole discretion" or "discretion,"
that it deems "necessary or appropriate" or "necessary or advisable" or under a
grant of similar authority or latitude, except as otherwise provided herein, the
General Partner or such Affiliate shall be entitled to consider only such
interests and factors as it desires and shall have no duty or obligation to give
any consideration to any interest of, or factors affecting, the Partnership, the
MLP, any Limited Partner or any Assignee, (ii) it may make such decision in its
sole discretion (regardless of whether there is a reference to "sole discretion"
or "discretion") unless another express standard is provided for, or (iii) in
"good faith" or under another express standard, the General Partner or such
Affiliate shall act under such express standard and shall not be subject to any
other or different standards imposed by this Agreement, the MLP Agreement, any
other agreement contemplated hereby or under the Delaware Act or any other law,
rule or regulation. In addition, any actions taken by the General Partner or
such Affiliate consistent with the
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standards of "reasonable discretion" set forth in the definition of Available
Cash shall not constitute a breach of any duty of the General Partner to the
Partnership or the Limited Partners. The General Partner shall have no duty,
express or implied, to sell or otherwise dispose of any asset of the Partnership
Group other than in the ordinary course of business. No borrowing by any Group
Member or the approval thereof by the General Partner shall be deemed to
constitute a breach of any duty of the General Partner to the Partnership or the
Limited Partners by reason of the fact that the purpose or effect of such
borrowing is directly or indirectly to (A) enable distributions to the General
Partner or its Affiliates to exceed 1.0101% of the total amount distributed to
all Partners or (B) hasten the expiration of the Subordination Period or the
conversion of any Subordinated Units into Common Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) The Limited Partner hereby authorizes the General Partner, on
behalf of the Partnership as a partner or member of a Group Member, to approve
of actions by the general partner of such Group Member similar to those actions
permitted to be taken by the General Partner pursuant to this Section 7.9.
Section 7.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers selected by it, and any act taken or omitted to be taken in reliance
upon the opinion (including an Opinion of Counsel) of such Persons as to matters
that the General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to have been
done or omitted in good faith and in accordance with such opinion.
(c) The General Partner shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers, a duly appointed attorney or attorneys-in-fact or the duly authorized
officers of the Partnership.
(d) Any standard of care and duty imposed by this Agreement or under
the Delaware Act or any applicable law, rule or regulation shall be modified,
waived or limited, to the extent permitted by law, as required to permit the
General Partner to act under this Agreement or any
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other agreement contemplated by this Agreement and to make any decision pursuant
to the authority prescribed in this Agreement, so long as such action is
reasonably believed by the General Partner to be in, or not inconsistent with,
the best interests of the Partnership.
Section 7.11 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner and any officer of the General Partner authorized by the General Partner
to act on behalf of and in the name of the Partnership has full power and
authority to encumber, sell or otherwise use in any manner any and all assets of
the Partnership and to enter into any authorized contracts on behalf of the
Partnership, and such Person shall be entitled to deal with the General Partner
or any such officer as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such Person to contest,
negate or disaffirm any action of the General Partner or any such officer in
connection with any such dealing. In no event shall any Person dealing with the
General Partner or any such officer or its representatives be obligated to
ascertain that the terms of the Agreement have been complied with or to inquire
into the necessity or expedience of any act or action of the General Partner or
any such officer or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Partnership by the General Partner or
its representatives shall be conclusive evidence in favor of any and every
Person relying thereon or claiming thereunder that (a) at the time of the
execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (b) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership and (c) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 8.1 Records and Accounting.
The General Partner shall keep or cause to be kept at the principal office
of the Partnership appropriate books and records with respect to the
Partnership's business, including all books and records necessary to provide to
the Limited Partners any information required to be provided pursuant to Section
3.4(a). Any books and records maintained by or on behalf of the Partnership in
the regular course of its business, including books of account and records of
Partnership proceedings, may be kept on, or be in the form of, computer disks,
hard drives, punch cards, magnetic tape, photographs, micrographics or any other
information storage device; provided, that the books and records so maintained
are convertible into clearly legible written form within a reasonable period of
time. The books of the Partnership shall be maintained, for financial reporting
purposes, on an accrual basis in accordance with U.S. GAAP.
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Section 8.2 Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending
December 31.
ARTICLE IX
TAX MATTERS
Section 9.1 Tax Returns and Information.
The Partnership shall timely file all returns of the Partnership that are
required for federal, state and local income tax purposes on the basis of the
accrual method and a taxable year ending on December 31. The tax information
reasonably required by the Partners for federal and state income tax reporting
purposes with respect to a taxable year shall be furnished to them within 90
days of the close of the calendar year in which the Partnership's taxable year
ends. The classification, realization and recognition of income, gain, losses
and deductions and other items shall be on the accrual method of accounting for
federal income tax purposes.
Section 9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the
Code in accordance with applicable regulations thereunder, subject to the
reservation of the right to seek to revoke any such election upon the General
Partner's determination that such revocation is in the best interests of the
Limited Partners.
(b) The Partnership shall elect to deduct expenses incurred in
organizing the Partnership ratably over a sixty-month period as provided in
Section 709 of the Code.
(c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
Section 9.3 Tax Controversies.
Subject to the provisions hereof, the General Partner is designated as the
Tax Matters Partner (as defined in the Code) and is authorized and required to
represent the Partnership (at the Partnership's expense) in connection with all
examinations of the Partnership's affairs by tax authorities, including
resulting administrative and judicial proceedings, and to expend Partnership
funds for professional services and costs associated therewith. Each Partner
agrees to cooperate with the General Partner and to do or refrain from doing any
or all things reasonably required by the General Partner to conduct such
proceedings.
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Section 9.4 Withholding.
Notwithstanding any other provision of this Agreement, the General Partner
is authorized to take any action that it determines in its discretion to be
necessary or appropriate to cause the Partnership to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code. To the extent that the Partnership is required or elects to withhold
and pay over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner or Assignee (including, without
limitation, by reason of Section 1446 of the Code), the amount withheld may at
the discretion of the General Partner be treated by the Partnership as a
distribution of cash pursuant to Section 6.3 in the amount of such withholding
from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
Section 10.1 Admission of Partners.
Upon the consummation of the transfers and conveyances described in Section
5.2, the General Partner shall be the sole general partner of the Partnership
and the MLP shall be the sole limited partner of the Partnership.
Section 10.2 Admission of Substituted Limited Partner.
By transfer of a Limited Partner Interest in accordance with Article IV,
the transferor shall be deemed to have given the transferee the right to seek
admission as a Substituted Limited Partner subject to the conditions of, and in
the manner permitted under, this Agreement. A transferor of a Limited Partner
Interest shall, however, only have the authority to convey to a purchaser or
other transferee (a) the right to negotiate such Limited Partner Interest to a
purchaser or other transferee and (b) the right to request admission as a
Substituted Limited Partner to such purchaser or other transferee in respect of
the transferred Limited Partner Interests. Each transferee of a Limited Partner
Interest shall be an Assignee and be deemed to have applied to become a
Substituted Limited Partner with respect to the Limited Partner Interests so
transferred to such Person. Such Assignee shall become a Substituted Limited
Partner (x) at such time as the General Partner consents thereto, which consent
may be given or withheld in the General Partner's discretion, and (y) when any
such admission is shown on the books and records of the Partnership. If such
consent is withheld, such transferee shall remain an Assignee. An Assignee shall
have an interest in the Partnership equivalent to that of a Limited Partner with
respect to allocations and distributions, including liquidating distributions,
of the Partnership. With respect to voting rights attributable to Limited
Partner Interests that are held by Assignees, the General Partner shall be
deemed to be the Limited Partner with respect thereto and shall, in exercising
the voting rights in respect of such Limited Partner Interests on any matter,
vote such Limited Partner Interests at the written direction of the Assignee. If
no such written
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direction is received, such Partnership Interests will not be voted. An Assignee
shall have no other rights of a Limited Partner.
Section 10.3 Admission of Additional Limited Partners.
(a) A Person (other than the General Partner, the MLP or a
Substituted Limited Partner) who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including the power of attorney granted
in Section 2.6, and (ii) such other documents or instruments as may be required
in the discretion of the General Partner to effect such Person's admission as an
Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.3, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's discretion. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person is
recorded as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
Section 10.4 Admission of Successor or Transferee General Partner.
A successor General Partner approved pursuant to Section 11.1 or 11.2 or
the transferee of or successor to all of the General Partner's Partnership
Interest pursuant to Section 4.2 who is proposed to be admitted as a successor
General Partner shall, subject to compliance with the terms of Section 11.3, if
applicable, be admitted to the Partnership as the General Partner, effective
immediately prior to the withdrawal or removal of the predecessor or
transferring General Partner pursuant to Section 11.1 or 11.2 or the transfer of
the General Partner Interest pursuant to Section 4.2, provided, however, that no
such successor shall be admitted to the Partnership until compliance with the
terms of Section 4.2 has occurred and such successor has executed and delivered
such other documents or instruments as may be required to effect such admission.
Any such successor shall, subject to the terms hereof, carry on the business of
the members of the Partnership Group without dissolution.
Section 10.5 Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Delaware Act to
amend the records of the Partnership to reflect such admission and, if
necessary, to prepare as soon as practicable an amendment to this Agreement and,
if required by law, the General Partner shall prepare and file an amendment to
the Certificate of Limited Partnership, and the General Partner may for this
purpose, among others, exercise the power of attorney granted pursuant to
Section 2.6.
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ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
Section 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the
Partnership upon the occurrence of any one of the following events (each such
event herein referred to as an "Event of Withdrawal");
(i) The General Partner voluntarily withdraws from the Partnership
by giving written notice to the other Partners;
(ii) The General Partner transfers all of its rights as General
Partner pursuant to Section 4.2;
(iii) The General Partner is removed pursuant to Section 11.2;
(iv) The General Partner withdraws from, or is removed as the General
Partner of, the MLP;
(v) The General Partner (A) makes a general assignment for the
benefit of creditors; (B) files a voluntary bankruptcy petition for relief
under Chapter 7 of the United States Bankruptcy Code; (C) files a petition
or answer seeking for itself a liquidation, dissolution or similar relief
(but not a reorganization) under any law; (D) files an answer or other
pleading admitting or failing to contest the material allegations of a
petition filed against the General Partner in a proceeding of the type
described in clauses (A)-(C) of this Section 11.1(a)(v); or (E) seeks,
consents to or acquiesces in the appointment of a trustee (but not a debtor
in possession), receiver or liquidator of the General Partner or of all or
any substantial part of its properties;
(vi) A final and non-appealable order of relief under Chapter 7 of
the United States Bankruptcy Code is entered by a court with appropriate
jurisdiction pursuant to a voluntary or involuntary petition by or against
the General Partner; or
(vii) (A) in the event the General Partner is a corporation, a
certificate of dissolution or its equivalent is filed for the General
Partner, or 90 days expire after the date of notice to the General Partner
of revocation of its charter without a reinstatement of its charter, under
the laws of its state of incorporation; (B) in the event the General
Partner is a partnership or limited liability company, the dissolution and
commencement of winding up of the General Partner; (C) in the event the
General Partner is acting in such capacity by virtue of being a trustee of
a trust, the termination of the trust; (D) in the event the General Partner
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is a natural person, his death or adjudication of incompetency; and (E)
otherwise in the event of the termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iv)(with respect to
withdrawal), (v), (vi) or (vii)(A), (B), (C) or (E) occurs, the withdrawing
General Partner shall give notice to the Limited Partners within 30 days after
such occurrence. The Partners hereby agree that only the Events of Withdrawal
described in this Section 11.1 shall result in the withdrawal of the General
Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances: (i) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on December 31, 2008, the General Partner voluntarily withdraws by giving
at least 90 days' advance notice of its intention to withdraw to the Limited
Partners; provided that prior to the effective date of such withdrawal, the
withdrawal is approved by the Limited Partners and the General Partner delivers
to the Partnership an Opinion of Counsel ("Withdrawal Opinion of Counsel") that
such withdrawal (following the selection of the successor General Partner) would
not result in the loss of the limited liability of any Limited Partner or of the
limited partners of the MLP or cause the Partnership or the MLP to be treated as
an association taxable as a corporation or otherwise to be taxed as an entity
for federal income tax purposes (to the extent not previously treated as such);
(ii) at any time after 12:00 midnight, Eastern Standard Time, on December 31,
2008, the General Partner voluntarily withdraws by giving at least 90 days'
advance notice to the Limited Partners, such withdrawal to take effect on the
date specified in such notice; (iii) at any time that the General Partner ceases
to be the General Partner pursuant to Section 11.1(a)(ii), (iii) or (iv). If
the General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i)
hereof or Section 11.1(a)(i) of the MLP Agreement, the Limited Partners may,
prior to the effective date of such withdrawal, elect a successor General
Partner; provided, however, that such successor shall be the same person, if
any, that is elected by the limited partners of the MLP pursuant to Section 11.1
of the MLP Agreement as the successor to the general partner of the MLP. If,
prior to the effective date of the General Partner's withdrawal, a successor is
not selected by the Limited Partners as provided herein or the Partnership does
not receive a Withdrawal Opinion of Counsel, the Partnership shall be dissolved
in accordance with Section 12.1. Any successor General Partner elected in
accordance with the terms of this Section 11.1 shall be subject to the
provisions of Section 10.3.
Section 11.2 Removal of the General Partner.
The General Partner shall be removed if the General Partner is removed as
the general partner of the MLP pursuant to Section 11.2 of the MLP Agreement.
Such removal shall be effective concurrently with the effectiveness of the
removal of the General Partner as the general partner of the MLP pursuant to the
terms of the MLP Agreement. If a successor general partner for the MLP is
elected in connection with the removal of the General Partner, such successor
general partner for
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the MLP shall, upon admission pursuant to Article X, automatically become the
successor General Partner of the Partnership. The admission of any such
successor General Partner to the Partnership shall be subject to the provisions
of Section 10.3.
Section 11.3 Interest of Departing Partner.
(a) The Partnership Interest of the Departing Partner departing as a
result of withdrawal or removal pursuant to Section 11.1 or 11.2 shall (unless
it is otherwise required to be converted into Common Units pursuant to Section
11.3(b) of the MLP Agreement) be purchased by the successor to the Departing
Partner for cash in the manner specified in the MLP Agreement. Such purchase
(or conversion into Common Units, as applicable) shall be a condition to the
admission to the Partnership of the successor as the General Partner. Any
successor General Partner shall indemnify the Departing Partner as to all debts
and liabilities of the Partnership arising on or after the effective date of the
withdrawal or removal of the Departing Partner.
(b) The Departing Partner shall be entitled to receive all
reimbursements due such Departing Partner pursuant to Section 7.4, including any
employee-related liabilities (including severance liabilities), incurred in
connection with the termination of any employees employed by such Departing
Partner for the benefit of the Partnership.
Section 11.4 Withdrawal of a Limited Partner.
Without the prior written consent of the General Partner, which may be
granted or withheld in its sole discretion, and except as provided in Section
10.1, no Limited Partner shall have the right to withdraw from the Partnership.
ARTICLE XII
DISSOLUTION AND LIQUIDATION
Section 12.1 Dissolution.
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the removal or withdrawal of the General Partner, if a successor General Partner
is elected pursuant to Section 11.1 or 11.2, the Partnership shall not be
dissolved and such successor General Partner shall continue the business of the
Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its
affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section 2.7;
(b) an Event of Withdrawal of the General Partner as provided in
Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected
and an Opinion of
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Counsel is received as provided in Section 11.1(b) or 11.2 and such successor is
admitted to the Partnership pursuant to Section 10.3;
(c) an election to dissolve the Partnership by the General Partner
that is approved by all of the Limited Partners;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act;
(e) the sale of all or substantially all of the assets and properties
of the Partnership Group; or
(f) the dissolution of the MLP.
Section 12.2 Continuation of the Business of the Partnership After
Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal
caused by the withdrawal or removal of the General Partner as provided in
Section 11.1(a)(i) or (iii) and the failure of the Partners to select a
successor to such Departing Partner pursuant to Section 11.1 or 11.2, then
within 90 days thereafter, or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 11.1(a)(iv), (v) or
(vi) of the MLP Agreement, then, to the maximum extent permitted by law, within
180 days thereafter, all of the Limited Partners may elect to reconstitute the
Partnership and continue its business on the same terms and conditions set forth
in this Agreement by forming a new limited partnership on terms identical to
those set forth in this Agreement and having as a general partner a Person
approved by a majority in interest of the Limited Partners. In addition, upon
dissolution of the Partnership pursuant to Section 12.1(f), if the MLP is
reconstituted pursuant to Section 12.2 of the MLP Agreement, the reconstituted
MLP may, within 180 days after such event of dissolution, acting alone,
regardless of whether there are any other Limited Partners, elect to
reconstitute the Partnership in accordance with the immediately preceding
sentence. Upon any such election by the Limited Partners or the MLP, as the
case may be, all Partners shall be bound thereby and shall be deemed to have
approved same. Unless such an election is made within the applicable time
period as set forth above, the Partnership shall conduct only activities
necessary to wind up its affairs. If such an election is so made, then:
(a) the reconstituted Partnership shall continue until the end of the
term set forth in Section 2.7 unless earlier dissolved in accordance with this
Article XII;
(b) if the successor General Partner is not the former General
Partner, then the interest of the former General Partner shall be purchased by
the successor General Partner or converted into Common Units as provided in the
MLP Agreement; and
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(c) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as necessary, to
file, a new partnership agreement and certificate of limited partnership, and
the successor General Partner may for this purpose exercise the power of
attorney granted the General Partner pursuant to Section 2.6; provided, that the
right to approve a successor General Partner and to reconstitute and to continue
the business of the Partnership shall not exist and may not be exercised unless
the Partnership has received an Opinion of Counsel that (x) the exercise of the
right would not result in the loss of limited liability of the Limited Partners
or any limited partner of the MLP and (y) neither the Partnership, the
reconstituted limited partnership, the MLP nor any Group Member would be treated
as an association taxable as a corporation or otherwise be taxable as an entity
for federal income tax purposes upon the exercise of such right to continue.
Section 12.3 Liquidator.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 12.2, the General Partner shall select one or more Persons to act as
Liquidator. The Liquidator (if other than the General Partner) shall be entitled
to receive such compensation for its services as may be approved by a majority
of the Limited Partners. The Liquidator (if other than the General Partner)
shall agree not to resign at any time without 15 days' prior notice and may be
removed at any time, with or without cause, by notice of removal approved by a
majority in interest of the Limited Partners. Upon dissolution, removal or
resignation of the Liquidator, a successor and substitute Liquidator (who shall
have and succeed to all rights, powers and duties of the original Liquidator)
shall within 30 days thereafter be approved by at least a majority in interest
of the Limited Partners. The right to approve a successor or substitute
Liquidator in the manner provided herein shall be deemed to refer also to any
such successor or substitute Liquidator approved in the manner herein provided.
Except as expressly provided in this Article XII, the Liquidator approved in the
manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto, all of the powers
conferred upon the General Partner under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers, other than the limitation on sale set forth in
Section 7.3(b)) to the extent necessary or desirable in the good faith judgment
of the Liquidator to carry out the duties and functions of the Liquidator
hereunder for and during such period of time as shall be reasonably required in
the good faith judgment of the Liquidator to complete the winding up and
liquidation of the Partnership as provided for herein.
Section 12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the Partnership,
discharge its liabilities, and otherwise wind up its affairs in such manner and
over such period as the Liquidator determines to be in the best interest of the
Partners, subject to Section 17-804 of the Delaware Act and the following:
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(a) Disposition of Assets. The assets may be disposed of by public
or private sale or by distribution in kind to one or more Partners on such terms
as the Liquidator and such Partner or Partners may agree. If any property is
distributed in kind, the Partner receiving the property shall be deemed for
purposes of Section 12.4(c) to have received cash equal to its fair market
value; and contemporaneously therewith, appropriate cash distributions must be
made to the other Partners. The Liquidator may, in its absolute discretion,
defer liquidation or distribution of the Partnership's assets for a reasonable
time if it determines that an immediate sale or distribution of all or some of
the Partnership's assets would be impractical or would cause undue loss to the
Partners. The Liquidator may, in its absolute discretion, distribute the
Partnership's assets, in whole or in part, in kind if it determines that a sale
would be impractical or would cause undue loss to the Partners.
(b) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed to Partners otherwise than in respect of their distribution rights
under Article VI. With respect to any liability that is contingent, conditional
or unmatured or is otherwise not yet due and payable, the Liquidator shall
either settle such claim for such amount as it thinks appropriate or establish a
reserve of cash or other assets to provide for its payment. When paid, any
unused portion of the reserve shall be distributed as additional liquidation
proceeds.
(c) Liquidation Distributions. All property and all cash in excess
of that required to discharge liabilities as provided in Section 12.4(b) shall
be distributed to the Partners in accordance with, and to the extent of, the
positive balances in their respective Capital Accounts, as determined after
taking into account all Capital Account adjustments (other than those made by
reason of distributions pursuant to this Section 12.4(c)) for the taxable year
of the Partnership during which the liquidation of the Partnership occurs (with
such date of occurrence being determined pursuant to Treasury Regulation Section
1.704-1(b)(2)(ii)(g)), and such distribution shall be made by the end of such
taxable year (or, if later, within 90 days after said date of such occurrence).
Section 12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as
provided in Section 12.4 in connection with the liquidation of the Partnership,
the Partnership shall be terminated and the Certificate of Limited Partnership,
and all qualifications of the Partnership as a foreign limited partnership in
jurisdictions other than the State of Delaware, shall be canceled and such other
actions as may be necessary to terminate the Partnership shall be taken.
Section 12.6 Return of Contributions.
The General Partner shall not be personally liable for, and shall have no
obligation to contribute or loan any monies or property to the Partnership to
enable it to effectuate, the return of the Capital Contributions of the Limited
Partners, or any portion thereof, it being expressly understood that any such
return shall be made solely from Partnership assets.
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Section 12.7 Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any
right to partition of the Partnership property.
Section 12.8 Capital Account Restoration.
No Limited Partner shall have any obligation to restore any negative
balance in its Capital Account upon liquidation of the Partnership. The General
Partner shall be obligated to restore any negative balance in its Capital
Account upon liquidation of its interest in the Partnership by the end of the
taxable year of the Partnership during which such liquidation occurs, or, if
later, within 90 days after the date of such liquidation.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT
Section 13.1 Amendment to be Adopted Solely by the General Partner.
Each Partner agrees that the General Partner, without the approval of any
Partner or Assignee, may amend any provision of this Agreement and execute,
swear to, acknowledge, deliver, file and record whatever documents may be
required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
necessary or advisable to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the Limited
Partners have limited liability under the laws of any state or to ensure that no
Group Member will be treated as an association taxable as a corporation or
otherwise taxed as an entity for federal income tax purposes;
(d) a change that, in the discretion of the General Partner, (i) does
not adversely affect the Limited Partners in any material respect, (ii) is
necessary or advisable to (A) satisfy any requirements, conditions or guidelines
contained in any opinion, directive, order, ruling or regulation of any federal
or state agency or judicial authority or contained in any federal or state
statute (including the Delaware Act) or (B) facilitate the trading of limited
partner interests of the MLP (including the division of any class or classes of
outstanding limited partner interests of the MLP into different classes to
facilitate uniformity of tax consequences within such classes of limited partner
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interests of the MLP) or comply with any rule, regulation, guideline or
requirement of any National Securities Exchange on which such limited partner
interests are or will be listed for trading, compliance with any of which the
General Partner determines in its discretion to be in the best interests of the
MLP and the limited partners of the MLP, (iii) is required to effect the intent
expressed in the Registration Statement or the intent of the provisions of this
Agreement or is otherwise contemplated by this Agreement or (iv) is required to
conform the provisions of this Agreement with the provisions of the MLP
Agreement as the provisions of the MLP Agreement may be amended, supplemented or
restated from time to time;
(e) a change in the fiscal year or taxable year of the Partnership
and any changes that, in the discretion of the General Partner, are necessary or
advisable as a result of a change in the fiscal year or taxable year of the
Partnership including, if the General Partner shall so determine, a change in
the definition of "Quarter" and the dates on which distributions are to be made
by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to
prevent the Partnership, or the General Partner or its directors, officers,
trustees or agents from in any manner being subjected to the provisions of the
Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940,
as amended, or "plan asset" regulations adopted under the Employee Retirement
Income Security Act of 1974, as amended, regardless of whether such are
substantially similar to plan asset regulations currently applied or proposed by
the United States Department of Labor;
(g) any amendment expressly permitted in this Agreement to be made by
the General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(i) an amendment that, in the discretion of the General Partner, is
necessary or advisable to reflect, account for and deal with appropriately the
formation by the Partnership of, or investment by the Partnership in, any
corporation, partnership, joint venture, limited liability company or other
entity, in connection with the conduct by the Partnership of activities
permitted by the terms of Section 2.4;
(j) a merger or conveyance pursuant to Section 14.3(d); or
(k) any other amendments substantially similar to the foregoing.
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Section 13.2 Amendment Procedures.
Except with respect to amendments of the type described in Section 13.1,
all amendments to this Agreement shall be made in accordance with the following
requirements: Amendments to this Agreement may be proposed only by or with the
consent of the General Partner which consent may be given or withheld in its
sole discretion. A proposed amendment shall be effective upon its approval by
the Limited Partner.
ARTICLE XIV
MERGER
Section 14.1 Authority.
The Partnership may merge or consolidate with one or more corporations,
limited liability companies, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other state of the United States of America, pursuant to a
written agreement of merger or consolidation ("Merger Agreement") in accordance
with this Article XIV.
Section 14.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article XIV
requires the prior approval of the General Partner. If the General Partner shall
determine, in the exercise of its discretion, to consent to the merger or
consolidation, the General Partner shall approve the Merger Agreement, which
shall set forth:
(a) The names and jurisdictions of formation or organization of each
of the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation (the
"Surviving Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property or
general or limited partner interests, rights, securities or obligations of the
Surviving Business Entity; and (i) if any general or limited partner interests,
securities or rights of any constituent business entity are not to be exchanged
or converted solely for, or into, cash, property or general or limited partner
interests, rights, securities or
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obligations of the Surviving Business Entity, the cash, property or general or
limited partner interests, rights, securities or obligations of any limited
partnership, corporation, trust or other entity (other than the Surviving
Business Entity) which the holders of such general or limited partner interests,
securities or rights are to receive in exchange for, or upon conversion of their
general or limited partner interests, securities or rights, and (ii) in the case
of securities represented by certificates, upon the surrender of such
certificates, which cash, property or general or limited partner interests,
rights, securities or obligations of the Surviving Business Entity or any
general or limited partnership, corporation, trust or other entity (other than
the Surviving Business Entity), or evidences thereof, are to be delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or agreement
of limited partnership or other similar charter or governing document) of the
Surviving Business Entity to be effected by such merger or consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 14.4 or a later date
specified in or determinable in accordance with the Merger Agreement (provided,
that if the effective time of the merger is to be later than the date of the
filing of the certificate of merger, the effective time shall be fixed no later
than the time of the filing of the certificate of merger and stated therein);
and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General Partner.
Section 14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the General Partner, upon
its approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of the Limited Partners, whether at a special meeting or by
written consent, in either case in accordance with the requirements of Article
XIII. A copy or a summary of the Merger Agreement shall be included in or
enclosed with the notice of a special meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement shall
be approved upon receiving the affirmative vote or consent of the Limited
Partners.
(c) Except as provided in Section 14.3(d), after such approval by
vote or consent of the Limited Partners, and at any time prior to the filing of
the certificate of merger pursuant to Section 14.4, the merger or consolidation
may be abandoned pursuant to provisions therefor, if any, set forth in the
Merger Agreement.
(d) Notwithstanding anything else contained in this Article XIV or in
this Agreement, the General Partner is permitted, in its discretion, without
Limited Partner approval, to
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merge the Partnership or any Group Member into, or convey all of the
Partnership's assets to, another limited liability entity which shall be newly
formed and shall have no assets, liabilities or operations at the time of such
Merger other than those it receives from the Partnership or other Group Member
if (i) the General Partner has received an Opinion of Counsel that the merger or
conveyance, as the case may be, would not result in the loss of the limited
liability of any Limited Partner or any limited partner in the MLP or cause the
Partnership or the MLP to be treated as an association taxable as a corporation
or otherwise to be taxed as an entity for federal income tax purposes (to the
extent not previously treated as such), (ii) the sole purpose of such merger or
conveyance is to effect a mere change in the legal form of the Partnership into
another limited liability entity and (iii) the governing instruments of the new
entity provide the Limited Partners and the General Partner with the same rights
and obligations as are herein contained.
Section 14.4 Certificate of Merger.
Upon the required approval by the General Partner and the Limited Partners
of a Merger Agreement, a certificate of merger shall be executed and filed with
the Secretary of State of the State of Delaware in conformity with the
requirements of the Delaware Act.
Section 14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities, shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in
any of those constituent business entities shall not revert and is not in
any way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests
in property of any of those constituent business entities shall be
preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business
entities shall attach to the Surviving Business Entity and may be enforced
against it to the same extent as if the debts, liabilities and duties had
been incurred or contracted by it.
(b) A merger or consolidation effected pursuant to this Article
shall not be deemed to result in a transfer or assignment of assets or
liabilities from one entity to another.
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ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or
permitted to be given or made to a Partner or Assignee under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other means of written
communication to the Partner at the address described below. Any notice to the
Partnership shall be deemed given if received by the General Partner at the
principal office of the Partnership designated pursuant to Section 2.3. The
General Partner may rely and shall be protected in relying on any notice or
other document from a Partner, Assignee or other Person if believed by it to be
genuine.
Section 15.2 Further Action.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings pertaining thereto.
Section 15.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
Section 15.6 Waiver.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach of any other covenant, duty, agreement or condition.
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Section 15.7 Counterparts.
This Agreement may be executed in counterparts, all of which together shall
constitute an agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto, independently of the signature of any other party.
Section 15.8 Applicable Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Delaware, without regard to the principles of conflicts of
law.
Section 15.9 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.10 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this
Agreement it is specified that an action may be taken upon the affirmative vote
or consent of less than all of the Partners, such action may be so taken upon
the concurrence of less than all of the Partners and each Partner shall be bound
by the results of such action.
[Rest of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
PLAINS ALL AMERICAN INC.
By: /s/ Michael R. Patterson
--------------------------------------
Name: Michael R. Patterson
Its: Senior Vice President, General Counsel and
Secretary
LIMITED PARTNER:
PLAINS ALL AMERICAN PIPELINE, L.P.
By: Plains All American Inc.
Its: General Partner
By: /s/ Michael R. Patterson
--------------------------------
Name: Michael R. Patterson
Its: Senior Vice President, General
Counsel and Secretary
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