Exhibit 3.1
THIRD AMENDED AND RESTATED
AGREEMENT
OF
LIMITED PARTNERSHIP
OF
FERRELLGAS, L.P.
April 7, 2004
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
FERRELLGAS, L.P.
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
FERRELLGAS, L.P. dated as of April 7, 2004, is entered into by and between the
General Partner and the Limited Partner (as such terms are hereinafter defined).
WHEREAS, the Partnership (as such term is hereinafter defined) had
previously been governed by the First Amended and Restated Agreement of Limited
Partnership of Ferrellgas, L.P. dated as of April 23, 1996; and
WHEREAS, the Partnership is presently governed by the Second Amended and
Restated Agreement of Limited Partnership of Ferrellgas, L.P. dated as of
October 14, 1998 (the "Second Partnership Agreement"), as amended by that First
Amendment to the Second Amended and Restated Agreement of Limited Partnership of
Ferrellgas, L.P. dated as of June 5, 2000 (the "First Amendment" and together
with the Second Partnership Agreement, the "Current Partnership Agreement");
NOW, THEREFORE, the Current Partnership Agreement is hereby amended to
reflect particular amendments made pursuant to Section 14.1 of the Current
Partnership Agreement that provides that the General Partner may amend the
Current Partnership Agreement without the consent of the Acquisition General
Partner or the Limited Partner to reflect a change that:
(a) in the sole discretion of the General Partner, does not adversely
affect the Acquisition General Partner or the Limited Partner in any material
respect; or
(b) is required to effect the intent of the provisions of the Current
Partnership Agreement or are otherwise contemplated by the Current Partnership
Agreement,
which amendments are intended to incorporate herein the First Amendment and to
correct a typographical error contained therein, and, as so amended, is restated
in its entirety as follows:
ARTICLE II
ORGANIZATIONAL MATTERS
SECTION 2.1 Formation.
The General Partner and the Initial Limited Partner have previously formed
the Partnership as a limited partnership pursuant to the provisions of the
Delaware Act. Except as expressly provided to the contrary in this Agreement,
the rights and obligations of the Partners and the administration, dissolution
and termination of the Partnership shall be governed by the Delaware Act. All
Partnership Interests shall constitute personal property of the owner thereof
for all purposes.
SECTION 2.2 Name.
The name of the Partnership shall be, and the business of the Partnership
shall be conducted under the name of "Ferrellgas, L.P." The Partnership's
business may be conducted under any other name or names deemed necessary or
appropriate by the General Partner, including, without limitation, the name of
the General Partner or any Affiliate thereof. The words "Limited Partnership,"
"L.P.," "Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner in its sole discretion
may change the name of the Partnership at any time and from time to time and
shall notify the Limited Partner of such change in the next regular
communication to the Limited Partner.
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SECTION 2.3 Registered Office; Principal Office.
Unless and until changed by the General Partner, the registered office of
the Partnership in the State of Delaware shall be located at The Corporation
Trust Center, 1209 Orange Street, New Castle County, Wilmington, Delaware 19801,
and the registered agent for service of process on the Partnership in the State
of Delaware at such registered office shall be The Corporation Trust Company.
The principal office of the Partnership and the address of the General Partner
shall be One Liberty Plaza, Liberty, Missouri 64068, or such other place as the
General Partner may from time to time designate by notice to the Limited
Partner. 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.
SECTION 2.4 Power of Attorney.
(a) Each of the Acquisition General Partner and the Limited Partner hereby
constitutes and appoints each of the General Partner and, if a Liquidator shall
have been selected pursuant to Section 13.3, the Liquidator severally (and any
successor to either thereof by merger, transfer, assignment, election or
otherwise) and each of their authorized officers and attorneys-in-fact, with
full power of substitution, as its true, and lawful agent and attorney-in-fact,
with full power and authority in its 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, without limitation, this Agreement and the
Certificate of Limited Partnership and all amendments or restatements
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, without limitation, 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 X, XI, XII or XIII or the Capital Contribution of any
Partner; (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; and (F) all certificates, documents and
other instruments (including, without limitation, agreements and a
certificate of merger) relating to a merger or consolidation of the
Partnership pursuant to Article XV; and
(ii) execute, swear to, acknowledge, deliver, file and record all
ballots, consents, approvals, waivers, certificates, documents and other
instruments necessary or appropriate, in the sole 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 sole discretion of the General Partner
or the Liquidator, to effectuate the terms or intent of this Agreement;
provided, that when the consent or approval of the Limited Partner is
required by any provision of this Agreement, the General Partner or the
Liquidator may exercise the power of attorney made in this Section
1.4(a)(ii) only after the necessary consent or approval of the Limited
Partner is obtained. Nothing contained in this Section 1.4(a) shall be
construed as authorizing the General Partner to amend this Agreement except
in accordance with Article XIV or as may be otherwise expressly provided
for in this Agreement.
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(b) The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, and it shall survive and not be affected
by the subsequent death, incompetency, disability, incapacity, dissolution,
bankruptcy or termination of the Acquisition General Partner or the Limited
Partner and the transfer of all or any portion of the Acquisition General
Partner's or the Limited Partner's Partnership Interest and shall extend to the
Acquisition General Partner's and the Limited Partner's heirs, successors,
assigns and personal representatives. Each of the Acquisition General Partner
and the Limited Partner hereby agrees to be bound by any representation made by
the General Partner or the Liquidator acting in good faith pursuant to such
power of attorney; and each of the Acquisition General Partner and the Limited
Partner 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 of the Acquisition General Partner
and the Limited Partner shall execute and deliver to the General Partner or the
Liquidator, within 15 days after receipt of the General Partner's or the
Liquidator's 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 2.5 Term.
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 July 31, 2084, or until the earlier
termination of the Partnership in accordance with the provisions of Article
XIII.
SECTION 2.6 Possible Restrictions on Transfer.
Notwithstanding anything to the contrary contained in this Agreement, in
the event of (a) the enactment (or imminent enactment) of any legislation, (b)
the publication of any temporary or final regulation by the Treasury Department,
(c) any ruling by the Internal Revenue Service or (d) any judicial decision,
that, in any such case, in the Opinion of Counsel, would result in the taxation
of the Partnership as an association taxable as a corporation or would otherwise
result in the Partnership being taxed as an entity for federal income tax
purposes, then, the General Partner may impose such restrictions on the transfer
of Partnership Interests as may be required, in the Opinion of Counsel, to
prevent the Partnership from being taxed as an association taxable as a
corporation or otherwise as an entity for federal income tax purposes,
including, without limitation, making any amendments to this Agreement as the
General Partner in its sole discretion may determine to be necessary or
appropriate to impose such restrictions.
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ARTICLE III
DEFINITIONS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Acquisition Closing Date" means October 14, 1998.
"Acquisition Contribution Agreement" means a contribution agreement among
the Acquisition General Partner, the Partnership and Ferrellgas pursuant to
which the Acquisition General Partner contributes the assets and properties of a
retail propane business to the Partnership and the Partnership assumes certain
indebtedness and liabilities of the Acquisition General Partner related to such
business or the acquisition thereof.
"Acquisition General Partner" means FAC.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 11.6 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 1.704-2(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 5.1(d)(i)
or 5.1(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.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 4.5(d)(i) or 4.5(d)(ii). Once an Adjusted Property
is deemed distributed by, and recontributed to, the Partnership for federal
income tax purposes upon a termination thereof pursuant to Section 708 of the
Code, such property shall thereafter constitute a Contributed Property until the
Carrying Value of such property is subsequently adjusted pursuant to Section
4.5(d)(i) or 4.5(d)(ii).
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by or is under common control
with, the Person in question. As used herein, the term "control" means the
possession, directly or indirectly, 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 5.1, including, without limitation, a Curative Allocation (if
appropriate to the context in which the term "Agreed Allocation" is used).
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"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; provided, however, that the Agreed Value of any property deemed
contributed by the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Section 4.5(c)(i). Subject to Section 4.5(c)(i),
the General Partner shall, in its sole 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 or integrated transaction
among each separate property on a basis proportional to the fair market value of
each Contributed Property.
"Agreement" means this Third Amended and Restated Agreement of Limited
Partnership of Ferrellgas, L.P., as it may be amended, supplemented or restated
from time to time.
"Audit Committee" means a committee of the Board of Directors of the
General Partner composed entirely of two or more directors who are neither
officers nor employees of the General Partner or any of its Affiliates.
"Available Cash" means with respect to any period and without duplication:
(a) the sum of:
(i) all cash receipts of the Partnership during such period from all
sources (including, without limitation, distributions of cash received by
the Partnership from an OLP Subsidiary) plus, in the case of the Quarter
ending October 31, 1994, the cash balance of the Partnership as of the
close of business on the Closing Date; and
(ii) any reduction with respect to such period in a cash reserve
previously established pursuant to clause (b)(ii) below (either by reversal
or utilization) from the level of such reserve at the end of the prior
period;
(b) less the sum of:
(i) all cash disbursements of the Partnership during such period,
including, without limitation, disbursements for operating expenses, taxes,
if any, debt service (including, without limitation, the payment of
principal, premium and interest), redemption of Partnership Interests,
capital expenditures, contributions, if any, to an OLP Subsidiary and cash
distributions to Partners (but only to the extent that such cash
distributions to Partners exceed Available Cash for the immediately
preceding Quarter); and
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(ii) any cash reserves established with respect to such period, and
any increase with respect to such period in a cash reserve previously
established pursuant to this clause (b)(ii) from the level of such reserve
at the end of the prior period, in such amounts as the General Partner
determines in its reasonable discretion to be necessary or appropriate (A)
to provide for the proper conduct of the business of the Partnership
(including, without limitation, reserves for future capital expenditures or
capital contributions to an OLP Subsidiary) or (B) to provide funds for
distributions to the Partners in respect of any one or more of the next
four Quarters or (C) because the distribution of such amounts 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;
provided, however, that for purposes of determining Available Cash for the
Quarter ending October 31, 1994, such Quarter shall be deemed to commence
on the Closing Date. Notwithstanding the foregoing (x) disbursements
(including, without limitation, contributions to an OLP Subsidiary or
disbursements on behalf of an OLP Subsidiary) made or reserves established,
increased or reduced after the end of any Quarter but on or before the date
on which the Partnership makes its distribution of Available Cash in
respect of such Quarter pursuant to Section 5.3(a) shall be deemed to have
been made, established, increased or reduced, for purposes of determining
Available Cash, with respect to such Quarter if the General Partner so
determines and (y) "Available Cash" with respect to any period shall not
include any cash receipts or reductions in reserves or take into account
any disbursements made or reserves established after the Liquidation Date.
"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
4.5 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 or the
states of New York or Missouri shall not be regarded as a Business Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 4.5.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership
pursuant to Section 4.1, 4.2, 4.3, 4.5(c) or 13.8.
"Capital Interests" means, with respect to any corporation, any and all
shares, participations, rights or other equivalent interests in the capital of
the corporation, and with respect to any partnership, any and all partnership
interests (whether general or limited) and any other interests or participations
that confer on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, such partnership.
"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' 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
4.5(d)(i) and 4.5(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.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership filed with the Secretary of State of the State of Delaware as
referenced in Section 6.2, as such Certificate of Limited Partnership may be
amended, supplemented or restated from time to time.
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"Closing Date" means the first date on which Common Units are sold by the
MLP to the Underwriters pursuant to the provisions of the MLP Underwriting
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"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 the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code). Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 4.5(d), such
property shall no longer constitute a Contributed Property, but shall be deemed
an Adjusted Property.
"Contribution Agreement" has the meaning assigned to such term in the MLP
Agreement.
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 5.1(d)(ix).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. ss.ss. 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 12.1 or Section 12.2.
"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
12.1(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
supplemented or restated from time to time, and any successor to such statute.
"FAC" means Ferrellgas Acquisition Company, LLC, a Delaware limited
liability company whose sole member is Ferrellgas.
"Ferrell" means Ferrell Companies, Inc., a Kansas corporation.
"Ferrellgas" means Ferrellgas, Inc., a Delaware corporation and a wholly
owned subsidiary of Ferrell.
"General Partner" means Ferrellgas, and its successors as general partner
of the Partnership.
"IDR" has the meaning assigned to such term in the MLP Agreement.
"Indemnitee" means the General Partner, any Departing Partner, any Person
who is or was an Affiliate of the General Partner or any Departing Partner, any
Person who is or was an officer, director, employee, partner, agent or trustee
of the General Partner or any Departing Partner or any such Affiliate, or any
Person who is or was serving at the request of the General Partner or any
Departing Partner or any such Affiliate as a director, officer, employee,
partner, agent or trustee of another Person.
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"Initial Limited Partner" means the MLP.
"Limited Partner" means the Initial Limited Partner, Ferrellgas pursuant to
Section 4.2, each Substituted Limited Partner, if any, each Additional Limited
Partner and any Departing Partner upon the change of its status from General
Partner to Limited Partner pursuant to Section 12.3, but excluding any such
Person from and after the time it withdraws from the Partnership.
"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 13.2, 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 the General Partner or other Person approved pursuant to
Section 13.3 who performs the functions described therein.
"Merger Agreement" has the meaning assigned to such term in Section 15.1.
"MLP" means Ferrellgas Partners, L.P., a Delaware limited partnership.
"MLP Agreement" means the Fourth Amended and Restated Agreement of Limited
Partnership of Ferrellgas Partners, L.P. dated February 18, 2003, as it may be
amended, supplemented or restated from time to time.
"MLP Offering" means the initial offering of Common Units to the public, as
described in the MLP Registration Statement.
"MLP Registration Statement" means the Registration Statement on Form S-1
(Registration No. 33-53383), as it has been or as it may be amended or
supplemented from time to time, filed by the MLP with the Securities and
Exchange Commission under the Securities Act to register the offering and sale
of the Common Units in the MLP Offering.
"MLP Subsidiary" means a Subsidiary of the MLP.
"MLP Underwriting Agreement" means the underwriting agreement dated June
27, 1994, among the MLP, the General Partner, Ferrell and the Underwriters named
in Schedule I thereto providing for the purchase of Common Units by such
Underwriters.
"National Securities Exchange" means an exchange registered with the
Securities and Exchange Commission under Section 6(a) of the Exchange Act.
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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 by the
Partnership, the Partnership's Carrying Value of such property (as adjusted
pursuant to Section 4.5(d)(ii)) at the time such property is distributed,
reduced by any indebtedness either assumed by such Partner 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 period, the excess, if any, of the
Partnership's items of income and gain (other than those items attributable to
dispositions constituting Termination Capital Transactions) for such taxable
period over the Partnership's items of loss and deduction (other than those
items attributable to dispositions constituting Termination Capital
Transactions) for such taxable period. The items included in the calculation of
Net Income shall be determined in accordance with Section 4.5(b) and shall not
include any items specially allocated under Section 5.1(d). Once an item of
income, gain, loss or deduction that has been included in the initial
computation of Net Income is subjected to a Required Allocation or a Curative
Allocation, Net Income or Net Loss, whichever the case may be, shall be
recomputed without regard to such item.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction (other than those items attributable
to dispositions constituting Termination Capital Transactions) for such taxable
period over the Partnership's items of income and gain (other than those items
attributable to dispositions constituting Termination Capital Transactions) for
such taxable period. The items included in the calculation of Net Loss shall be
determined in accordance with Section 4.5(b) and shall not include any items
specially allocated under Section 5.1(d). Once an item of income, gain, loss or
deduction that has been included in the initial computation of Net Loss is
subjected to a Required Allocation or a Curative Allocation, Net Income, or Net
Loss, whichever the case may be, shall be recomputed without regard to such
item.
"Net Termination Gain" means, for any taxable period, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
(including, without limitation, such amounts recognized through an OLP
Subsidiary, if applicable) from Termination Capital Transactions occurring in
such taxable period. The items included in the determination of Net Termination
Gain shall be determined in accordance with Section 4.5(b) and shall not include
any items of income, gain or loss specially allocated under Section 5.1(d). Once
an item of income, gain or loss that has been included in the initial
computation of Net Termination Gain is subjected to a Required Allocation or a
Curative Allocation, Net Termination Gain or Net Termination Loss, whichever the
case may be, shall be recomputed without regard to such item.
"Net Termination Loss" means, for any taxable period, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Partnership
(including, without limitation, such amounts recognized through an OLP
Subsidiary, if applicable) from Termination Capital Transactions occurring in
such taxable period. The items included in the determination of Net Termination
Loss shall be determined in accordance with Section 4.5(b) and shall not include
any items of income, gain or loss specially allocated under Section 5.1(d). Once
an item of gain or loss that has been included in the initial computation of Net
Termination Loss is subjected to a Required Allocation or a Curative Allocation,
Net Termination Gain or Net Termination Loss, whichever the case may be, shall
be recomputed without regard to such item.
"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 5.2(b)(i)(A), 5.2(b)(ii)(A) or
5.2(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 Offering" means the initial offering of Senior Notes to the public, as
described in the OLP Registration Statement.
"OLP Registration Statement" means the Registration Statement on Form S-1
(Registration No. 33-53379), as it has been or as it may be amended or
supplemented from time to time, filed by the Partnership and Ferrellgas Finance
Corp. with the Securities and Exchange Commission under the Securities Act to
register the offering and sale of the Senior Notes in the OLP Offering.
"OLP Subsidiary" means a Subsidiary of the Partnership.
"OLP Underwriting Agreement" means the underwriting agreement dated June
27,1994, among the Partnership, Ferrellgas Finance Corp., the General Partner
and the Underwriters named in Schedule A thereto providing for the purchase of
Senior Notes by such Underwriters.
"Opinion of Counsel" means a written opinion of counsel (who may be regular
counsel to the General Partner, any Affiliate of the General Partner, or the
Partnership) acceptable to the General Partner.
"Partners" means the General Partner, the Acquisition General Partner and
the Limited Partner.
"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 Ferrellgas, L.P., a Delaware limited partnership,
established by the Certificate of Limited Partnership, and any successor
thereto.
"Partnership Interest" means the interest of a Partner in the Partnership.
"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 as of the date of such determination as to any
Partner, the percentage determined by dividing the amount of that Partner's
cumulative Capital Contributions to the Partnership by the cumulative Capital
Contributions of all Partners to the Partnership. As of April 7, 2004, the
Percentage Interest of the General Partner, in its capacity as such, is 1.0101%,
and the Percentage Interest of the Limited Partner, is 98.9899%.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Quarter" means, unless the context requires otherwise, a three-month
period of time ending on October 31, January 31, April 30, or July 31; provided,
however, that the General Partner in its sole discretion may amend such period
as it deems necessary or appropriate in connection with a change in the fiscal
year of the Partnership.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Sections 734 or 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 Statements" means the MLP Registration Statement and the OLP
Registration Statement.
"Required Allocations" means any allocation (or limitation imposed on any
allocation) of an item of income, gain, deduction or loss pursuant to (a)
Section 5.1(b)(i) or (b) Sections 5.1(d)(i)-(vi) and (viii), such allocations
(or limitations thereon) being directly or indirectly required by the Treasury
regulations promulgated under Section 704(b) of the Code.
"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 Sections 5.2(b)(i)(A) or 5.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
"Restricted Activities" means the retail sale of propane to end users
within the continental United States in the manner engaged in by Ferrellgas
immediately prior to the Closing Date.
"Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.
"Senior Notes" means, collectively, the $200 million in aggregate principal
amount of 10.0% Fixed Rate Senior Notes due 2001 and $50 million in aggregate
principal amount of Floating Rate Senior Notes due 2001 to be issued by the
Partnership and Ferrellgas Finance Corp. and offered and sold in the OLP
Offering.
"Special Approval" means approval by the Audit Committee.
"Subsidiary" means, with respect to any Person, (i) a corporation of which
more than 50% of the voting power of shares of Capital Interests 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, by such Person, by one or more Subsidiaries of such Person, or a
combination thereof, (ii) 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
Capital Interests of such partnership (considering all of the Capital Interests
of the partnership as a single class) is owned or controlled, directly or
indirectly, by such Person, by one or more Subsidiaries of such Person, or a
combination thereof, or (iii) any other Person (other than a corporation or a
partnership) in which such Person, directly or indirectly, at the date of
determination, has (x) at least a majority ownership interest or (y) the power
to elect or direct the election of a majority of the directors or other
governing body of such Person.
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"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.3 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 15.2(b).
"Termination Capital Transactions" means any sale, transfer or other
disposition of property of the Partnership occurring upon or incident to the
liquidation and winding up of the Partnership pursuant to Article XIII.
"Underwriting Agreements" means the MLP Underwriting Agreement and the OLP
Underwriting Agreement.
"Unit" has the meaning assigned to such term in this 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 such date (as determined under Section 4.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 4.5(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 4.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 4.5(d)).
"Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 12.1(b).
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ARTICLE IV
PURPOSE
SECTION 4.1 Purpose and Business.
The purpose and nature of this business to be conducted by the Partnership
shall be (a) to acquire, manage, and operate the assets described in the
Contribution Agreement as being transferred to the Partnership and any similar
assets or properties and to engage directly in, or to enter into or form any
corporation, limited liability company, partnership, joint venture or other
arrangement to engage indirectly in, any type of business or activity engaged in
by Ferrellgas immediately 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 assets, (b) to engage
directly in, or enter into or form any corporation, limited liability company,
partnership, joint venture or other arrangement to engage indirectly in, any
business activity that is approved by the General Partner and which may lawfully
be conducted by a limited partnership organized pursuant to the Delaware Act
and, in connection therewith, to exercise all of the rights and powers conferred
upon the Partnership pursuant to the agreements relating to such business
activity, and (c) to do anything necessary or appropriate to the foregoing,
including, without limitation, the making of capital contributions to any OLP
Subsidiary or loans to the MLP, an MLP Subsidiary or an OLP Subsidiary
(including, without limitation, those contributions or loans that may be
required in connection with its involvement in the activities referred to in
clause (b) of this sentence). The General Partner has no obligation or duty to
the Partnership or the Limited Partner to propose or approve, and in its sole
discretion may decline to propose or approve, the conduct by the Partnership of
any business.
SECTION 4.2 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
3.1 and for the protection and benefit of the Partnership.
ARTICLE V
CAPITAL CONTRIBUTIONS
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 $10.10 for an interest in the Partnership and was admitted as the
general partner of the Partnership, and the Initial Limited Partner made an
initial Capital Contribution to the Partnership in the amount of $989.90 for an
interest in the Partnership and was admitted as a limited partner of the
Partnership.
SECTION 5.2 Contributions by Ferrellgas, the MLP and the Acquisition General
Partner.
(a) On the Closing Date, Ferrellgas, as a Capital Contribution,
contributed, transferred, conveyed, assigned and delivered to the Partnership
the property and other rights described in the Contribution Agreement as being
so contributed, transferred, conveyed, assigned and delivered in exchange for
(i) the continuation of its general partner interest in the Partnership
consisting of a Partnership Interest representing a 1.0101% Percentage Interest,
(ii) a limited partner interest in the Partnership, which was contributed,
transferred, conveyed, assigned and delivered by the General Partner to the MLP
as set forth in the Contribution Agreement, and which, together with the
Partnership Interest previously held by the MLP, represents a 98.9899%
Percentage Interest in the Partnership, and (iii) the Partnership's assumption
of, or taking of assets subject to, certain indebtedness and other liabilities,
including, without limitation, the Partnership's assumption of the payment
obligations of certain indebtedness of Ferrellgas, all as provided for in the
Contribution Agreement.
(b) On the Closing Date, the MLP contributed in respect of its Partnership
Interest approximately $255 million out of the net proceeds to the MLP from the
issuance of the Common Units pursuant to the MLP Offering.
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(c) On the Acquisition Closing Date, FAC, as a Capital Contribution,
contributed, transferred, conveyed, assigned and delivered to the Partnership
the property and other rights described in an Acquisition Contribution Agreement
dated the Acquisition Closing Date as being so contributed, transferred,
conveyed, assigned and delivered in exchange for (i) the general partner
interest in the Partnership of the Acquisition General Partner consisting of a
Partnership Interest in the amount of $735, and (ii) the Partnership's
assumption of, or taking of assets subject to, certain indebtedness and other
liabilities, including, without limitation, the Partnership's assumption of the
payment obligations of certain indebtedness of FAC, all as provided for in such
Acquisition Contribution Agreement. Immediately thereafter, FAC assigned the
Partnership Interest of the Acquisition General Partner to Ferrellgas, the
general partner interest in the Partnership of Ferrellgas continued thereafter
as a Partnership Interest representing a 1.0101 Percentage Interest, and FAC
withdrew from the Partnership.
SECTION 5.3 Additional Capital Contributions.
With the consent of the General Partner, the Limited Partner may, but shall
not be obligated to, make additional Capital Contributions to the Partnership.
Contemporaneously with the making of any such additional Capital Contributions
by the Limited Partner, the General Partner may make an additional Capital
Contribution to the Partnership in an amount equal to 1.0204% of the additional
Capital Contribution then made by the Limited Partner. The General Partner may,
at any time and from time to time, make a Capital Contribution to the
Partnership so that the General Partner will have a Capital Account equal to no
more than 1.0101% of the sum of the Capital Accounts of all Partners. Except as
set forth in Section 13.8, the General Partner shall not be obligated to make
any additional Capital Contributions to the Partnership.
SECTION 5.4 No Preemptive Rights.
Except as provided in Section 4.3, no Person shall have any preemptive,
preferential or other similar right 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 5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner owning a Partnership
Interest a separate Capital Account with respect to such Partnership Interest in
accordance with the rules of Treasury Regulation Section 1.704-1 (b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions made to the Partnership with respect to such Partnership Interest
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 4.5(b) and allocated with respect to such Partnership
Interest pursuant to Section 5.1, and decreased by (x) the amount of cash or the
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
4.5(b) and allocated with respect to such Partnership Interest pursuant to
Section 5.1.
(b) For purposes of computing the amount of any item of income, gain, loss
or deduction 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:
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(i) Solely for purposes of this Section 4.5, 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 5.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1 (b)(2)(iv)(m), the computation of all items of income, gain, loss
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.
(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
4.5(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 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
5.1. 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; provided, however, that, if the transfer causes a
termination of the Partnership under Section 708(b)(1)(B) of the Code, the
Partnership's properties shall be deemed to have been distributed in liquidation
of the Partnership to the Partners (including any transferee of a Partnership
Interest that is a party to the transfer causing such termination) pursuant to
Sections 13.3 and 13.4 and recontributed by such Partners in reconstitution of
the Partnership. Any such deemed distribution shall be treated as an actual
distribution for purposes of this Section 4.5. In such event, the Carrying
Values of the Partnership properties shall be adjusted immediately prior to such
deemed distribution pursuant to Section 4.5(d)(ii) and such Carrying Values
shall then constitute the Agreed Values of such properties upon such deemed
contribution to the reconstituted Partnership. The Capital Accounts of such
reconstituted Partnership shall be maintained in accordance with the principles
of this Section 4.5.
(d) (i) Consistent with the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for
cash or Contributed Property, the Capital Account of all Partners and the
Carrying Value of each Partnership property immediately prior to such issuance
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as if such Unrealized
Gain or Unrealized Loss had been recognized on an actual sale of each such
property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Sections 5.1(a) and 5.1(b). 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 sole 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 such 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 5.1. Any
Unrealized Gain or Unrealized Loss attributable to such property shall be
allocated in the same manner as Net Termination Gain or Net Termination
Loss pursuant to Section 5.1(c); provided, however, that, in making any
such allocation, Net Termination Gain or Net Termination Loss actually
realized shall be allocated first. 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 a
deemed 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 4.5(d)(i) or (B)
in the case of a liquidating distribution pursuant to Section 14.3 or 14.4,
be determined and allocated by the Liquidator using such reasonable method
of valuation as it may adopt.
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SECTION 5.6 Interest.
No interest shall be paid by the Partnership on Capital Contributions or on
balances in Partners' Capital Accounts.
SECTION 5.7 No Withdrawal.
No Partner shall be entitled to withdraw any part of its Capital
Contributions or its Capital Account or to receive any distribution from the
Partnership, except as provided in Articles V, VII, XII and XIII.
SECTION 5.8 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.
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 4.5(b)) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided hereinbelow.
(a) Net Income. After giving effect to the special allocations set forth in
Section 5.1(d), Net Income for each taxable period and all items of income,
gain, loss and deduction taken into account in computing Net Income for such
taxable period shall be allocated as follows:
(i) First, 100% to the General Partner until the aggregate Net Income
allocated to the General Partner pursuant to this Section 5.1 (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
5.1 (b)(ii) for all previous taxable years; and
(ii) Second, the balance, if any, 100% to the General Partner and the
Limited Partner in accordance with their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set forth in
Section 5.1(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 as follows:
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(i) First, 100% to the General Partner and the Limited Partner in
accordance with their respective Percentage Interests; provided, that Net
Losses shall not be allocated pursuant to this Section 5.1(b)(i) to the
extent that such allocation would cause any 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 its Adjusted Capital
Account); and
(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 5.1(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 5.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
5.1(c) after all distributions of Available Cash provided under Section 5.3 have
been made with respect to the taxable period ending on the date of the
Partnership's liquidation pursuant to Section 13.3.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 4.5(d)) from Termination Capital Transactions, such Net
Termination Gain shall be allocated between the General Partner and the
Limited Partner in the following manner (and the Adjusted 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
Adjusted Capital Account, in the proportion that such deficit balance
bears to the total deficit balances in the Adjusted Capital Accounts
of all Partners, until each such Partner has been allocated Net
Termination Gain equal to any such deficit balance in its Adjusted
Capital Account; and
(B) Second, 100% to the General Partner and the Limited Partner
in accordance with their respective Percentage Interests.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 4.5(d)) from Termination Capital Transactions, such Net
Termination Loss shall be allocated to the Partners in the following
manner:
(A) First, 100% to the General Partner and the Limited Partner in
proportion to, and to the extent of, the positive balances in their
respective Adjusted Capital Accounts; and
(B) Second, the balance, if any, 100% to the General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 5.1, the following special allocations shall be made for such taxable
period:
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(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 5.1, 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
5.1(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 5.1(d) with respect to such taxable period (other than an
allocation pursuant to Sections 5.1 (d)(v) and (vi)). This Section
5.1(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 5.1 (other than
Section 5.1(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 5.1(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 5.1(d), other than Section 5.1(d)(i) and other than an
allocation pursuant to Sections 5.1(d)(v) and (vi), with respect to such
taxable period. This Section 5.1(d)(ii) is intended to comply with the
chargeback of items of income and gain requirement in Treasury Regulation
Section 1.7041-2(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 specifically 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 5.1(d)(i)
or (ii).
(iv) Gross Income Allocations. In the event any Partner has a deficit
balance in its Adjusted Capital Account at the end of any Partnership
taxable period 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
5.1(d)(iv) shall be made only if and to the extent that such Partner would
have a deficit balance in its Adjusted Capital Account after all other
allocations provided in this Section 5.1 have been tentatively made as if
this Section 5.1(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 Limited Partner, 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.
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(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 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(b) of the Code is required, pursuant to Treasury Regulation Section
1.704-1 (b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (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 5.1,
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 5.1. 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 5.1(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 5.1(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
5.1(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
5.1(d)(ix)(A) among the Partners in a manner that is likely to
minimize such economic distortions.
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(e) Allocations to Acquisition General Partner. Notwithstanding any other
provision of this Section 5.1, no items of income, gain, loss or deduction shall
be allocated to the Acquisition General Partner.
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 5.1.
(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) except as otherwise provided in Section 5.2(b)i(iii),
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
5.1.
(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 4.5(d)(i) or (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
5.2(b)(i)(A); and (B) except as otherwise provided in Section 5.2(b)(iii),
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
5.1.
(iii) The General Partner shall apply the principles of Temporary
Regulation Section 1.704-3T to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of Units 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 Units 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 5.2(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 of the MLP issued
and outstanding or the Partnership, and if such allocations are consistent with
the principles of Section 704 of the Code.
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(d) The General Partner in its sole 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 the inconsistency of such
approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-1(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 Units 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 class or classes of Units of the MLP that would not have
a material adverse effect on the Limited Partner or the holders of any class or
classes of Units 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 5.2, 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.
SECTION 6.3 Requirement of Distributions.
(a) Within 45 days following the end of (i) the period beginning on the
Closing Date and ending on October 31, 1994 and (ii) each Quarter commencing
with the Quarter beginning on November 1, 1994, an amount equal to 100% of
Available Cash with respect to such period or Quarter shall be distributed in
accordance with this Article V 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.
(b) Notwithstanding the foregoing, in the event of the dissolution and
liquidation of the Partnership, all proceeds of such liquidation shall be
applied and distributed in accordance with, and subject to the terms and
conditions of, Sections 13.3 and 13.4.
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ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
SECTION 7.1 Management.
(a) The General Partner shall conduct, direct and manage all activities of
the Partnership. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership shall be
exclusively vested in the General Partner, and neither the Acquisition General
Partner nor the Limited Partner shall have any right of control or 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 6.3, 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 3.2 and to
effectuate the purposes set forth in Section 3.1, including, without limitation,
(i) the making of any expenditures, the lending or borrowing of money, the
assumption or guarantee of, or other contracting for, indebtedness and other
liabilities, the issuance of evidences of indebtedness 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 6.3); (iv) the use of the assets of the
Partnership (including, without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement, including, without limitation, the
financing of the conduct of the operations of the Partnership, the lending of
funds to other Persons (including, without limitation, an OLP Subsidiary), the
repayment of obligations of the Partnership and the making of capital
contributions to an OLP Subsidiary; (v) the negotiation, execution and
performance of any contracts, conveyances or other instruments (including,
without limitation, 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 and agents (including, without
limitation, 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 and the Partners (including, without
limitation, the assets of the Partnership) 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, limited liability companies or other
relationships; (x) the control of any matters affecting the rights and
obligations of the Partnership, including, without limitation, 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.
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(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 hereby (i) approves, ratifies and confirms the execution, delivery
and performance by the parties thereto of the MLP Agreement, the Underwriting
Agreements, the Contribution Agreement, the agreements and other documents filed
as exhibits to the Registration Statements, and the other agreements described
in or filed as a part of the Registration Statements, and the engaging by any
Affiliate of the General Partner in business and activities (other than
Restricted Activities) that are in direct competition with the business and
activities of the MLP, the Partnership, any OLP Subsidiary and any MLP
Subsidiary; (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 the Registration Statements on
behalf of the Partnership without any further act, approval or vote of the
Partners; and (iii) agrees that the execution, delivery or performance by the
General Partner, the MLP, the Partnership or any Affiliate of any of them of
this Agreement or any agreement authorized or permitted under this Agreement, or
the engaging by any Affiliate of the General Partner in any business and
activities (other than Restricted Activities) that are in direct competition
with the business and activities of the MLP, the Partnership, any OLP Subsidiary
and any MLP Subsidiary, 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. The term "Affiliate" when used
in this Section 6.1(b) with respect to the General Partner shall not include the
Partnership, the MLP, any OLP Subsidiary or any MLP Subsidiary.
(c) Notwithstanding any provision of the Delaware Act or other applicable
law, the Acquisition General Partner shall not 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 other otherwise bind the Partnership.
SECTION 7.2 Certificate of Limited Partnership.
The General Partner has caused the Certificate of Limited Partnership of
Ferrellgas, L.P. 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 Partner has 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 in which the
Limited Partner has limited liability) under the laws of the State of Delaware
or of any other state in which the Partnership may elect to do business or own
property. Subject to the terms of Section 7.4(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 the Limited Partner.
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 Partner or by other written instrument executed and delivered
by the Limited Partner subsequent to the date of this Agreement, take any action
in contravention of this Agreement, including, without limitation, (i) any act
that would make it impossible to carry on the ordinary business of the
Partnership, except as otherwise provided in this Agreement; (ii) possess
Partnership property, or assign any rights in specific Partnership property, for
other than a Partnership purpose; (iii) admit a Person as a Partner, except as
otherwise provided in this Agreement; (iv) amend this Agreement in any manner,
except as otherwise provided in this Agreement; or (v) transfer its interest as
general partner of the Partnership, except as otherwise provided in this
Agreement.
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(b) Except as provided in Articles XIII and XV, 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
without the approval of the Limited Partner; 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 Partnership's assets and shall not apply to any forced sale of any or all of
the Partnership's assets pursuant to the foreclosure of, or other realization
upon, any such encumbrance.
(c) Unless approved by the Limited Partner, the General Partner shall not
take any action or refuse to take any reasonable action the effect of which, if
taken or not taken, as the case may be, would be to cause the Partnership to be
treated as an association taxable as a corporation or otherwise to be taxed as
an entity for federal income tax purposes; provided that this Section 6.3(c)
shall not be construed to apply to amendments to this Agreement (which are
governed by Article XIV) or mergers or consolidations of the Partnership with
any Person (which are governed by Article XV).
(d) At all times while serving as the general partner of the Partnership,
the General Partner shall not (except as provided below) make any dividend or
distribution on, or repurchase any shares of, its stock or take any other action
within its control unless it shall first receive an Opinion of Counsel that the
effect of such dividend, distribution, repurchase or other action would not
reduce its net worth below an amount such that the Partnership will be treated
as an association taxable as a corporation for federal income tax purposes;
provided, however, to the extent the General Partner receives distributions of
cash from the Partnership or any other partnership of which the Partnership is,
directly or indirectly, a partner, the General Partner shall not use such cash
to make any dividend or distribution on, or repurchase any shares of, its stock
or take any other action within its control if the effect of such dividend,
distribution, repurchase or other action would be to reduce its net worth below
an amount necessary to receive an Opinion of Counsel that the Partnership will
be treated as a partnership for federal income tax purposes.
SECTION 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 6.4 and elsewhere in this Agreement,
the General Partner shall not be compensated for its services as general partner
of the Partnership.
(b) The General Partner shall be reimbursed on a monthly basis, or such
other 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, without limitation, salary, bonus, incentive
compensation and other amounts paid to any Person to perform services for the
Partnership or for the General Partner in the discharge of its duties 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, without
limitation, expenses allocated to the General Partner by its Affiliates). The
General Partner shall determine the fees and 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 6.4 shall be in
addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 6.7.
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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 MLP, any OLP Subsidiary and
any MLP Subsidiary and to undertake activities that are ancillary or related
thereto (including being a limited partner in the MLP), (ii) shall not enter
into or conduct any business or incur any debts or liabilities except in
connection with or incidental to (A) its performance of the activities required
or authorized by this Agreement or the MLP Agreement or described in or
contemplated by the Registration Statements and (B) the acquisition, ownership
or disposition of partnership interests in the Partnership, the MLP, any OLP
Subsidiary and any MLP Subsidiary, except that, notwithstanding the foregoing,
employees of the General Partner may perform services for Ferrell and its
Affiliates and (iii) shall not and shall cause its Affiliates not to engage in
any Restricted Activities.
(b) Except as described or provided for in the MLP Agreement, the
Registration Statements or Section 6.5(a), no Indemnitee shall be expressly or
implicitly restricted or proscribed pursuant to the MLP Agreement or this
Agreement or the partnership relationship established hereby or thereby from
engaging in other activities for profit, whether in the businesses engaged in by
the Partnership, an OLP Subsidiary, the MLP or an MLP Subsidiary or anticipated
to be engaged in by the Partnership, an OLP Subsidiary, the MLP, an MLP
Subsidiary or otherwise, including, without limitation, in the case of any
Affiliates of the General Partner those businesses and activities (other than
Restricted Activities) in direct competition with the business and activities of
the Partnership, the MLP, an OLP Subsidiary or an MLP Subsidiary or otherwise
described in or contemplated by the Registration Statements. Without limitation
of and subject to the foregoing each Indemnitee (other than the General Partner)
shall have the right to engage in businesses of every type and description and
to engage in and possess an interest in other business ventures of any and every
type or description, independently or with others, including, without
limitation, in the case of any Affiliates of the General Partner, business
interests and activities (other than Restricted Activities) in direct
competition with the business and activities of the Partnership, the MLP, an OLP
Subsidiary or an MLP Subsidiary, and none of the same shall constitute a breach
of this Agreement or any duty to the Partnership, the MLP or any Partners.
Neither the Partnership, the MLP, any Limited Partner nor any other Person shall
have any rights by virtue of this Agreement or the MLP Agreement or the
partnership relationship established hereby or thereby in any business ventures
of any Indemnitee (subject, in the case of the General Partner, to compliance
with Section 6.5(c)) and such Indemnitees shall have no obligation to offer any
interest in any such business ventures to the Partnership, the MLP, any Limited
Partner or any other Person.
(c) Subject to the terms of Sections 6.5(a) and (b) but otherwise
notwithstanding anything to the contrary in this Agreement, (i) the competitive
activities of any Indemnitees (other than the General Partner) are hereby
approved by the Partnership and all Partners and (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 General Partner to permit an
Affiliate of the General Partner to engage, or for any such Affiliate to engage,
in business interests or activities (other than Restricted Activities) in
preference to or to the exclusion of the Partnership.
(d) The term "Affiliates" when used in this Section 6.5 with respect to the
General Partner shall not include the Partnership, the MLP, an OLP Subsidiary or
an MLP Subsidiary.
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SECTION 7.6 Loans to and from the General Partner; Contracts with Affiliates.
(a) (i) The General Partner, the Limited Partner, an OLP Subsidiary or any
of their Affiliates may lend to the Partnership, and the Partnership may borrow,
funds needed or desired by the Partnership for such periods of time as the
General Partner may determine and (ii) the General Partner, the Limited Partner,
an OLP Subsidiary or any Affiliate thereof may borrow from the Partnership, and
the Partnership may lend to such Persons, excess funds of the Partnership for
such periods of time and in such amounts as the General Partner may determine;
provided, however, that in either 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 (without reference to the lending party's financial
abilities or guarantees) by unrelated lenders on comparable loans. 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 6.6(a) and Section 6.6(b), the term
"Partnership" shall include any Affiliate of the Partnership that is controlled
by the Partnership.
(ii) The General Partner may itself, or may enter into an agreement
with any of its Affiliates to, render services to the Partnership or to the
General Partner in the discharge of its duties as general partner of the
Partnership. Any service rendered to the Partnership 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
6.6(b) 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 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), is equitable to the Partnership. The
provisions of Section 6.4 shall apply to the rendering of services
described in this Section 6.6(b).
(b) The Partnership 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.
(c) 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 6.6(d) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 4.2, the Contribution Agreement and
any other transactions described in or contemplated by the Registration
Statements, (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.
(d) The General Partner and its Affiliates will have no obligation to
permit the Partnership, an OLP Subsidiary or the MLP 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.
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(e) Without limitation of Sections 6.6(a) through 6.6(e), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statements 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, the General Partner, any Departing
Partner, any Person who is or was an officer or director of the Partnership, the
General Partner, or any Departing Partner and all other 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,
without limitation, legal fees and expenses), judgments, fines, penalties,
interest, settlements and 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 (i) the General
Partner, a Departing Partner or any of their Affiliates, (ii) an officer,
director, employee, partner, agent or trustee of the Partnership, the General
Partner, any Departing Partner or any of their Affiliates or (iii) a Person
serving at the request of the Partnership in another entity in a similar
capacity, provided, that in each case the Indemnitee acted in good faith and in
a manner which such Indemnitee reasonably believed to be in, or not opposed to,
the best interests of the Partnership and, with respect to any criminal
proceeding, had no reasonable cause to believe its conduct was unlawful;
provided, further, no indemnification pursuant to this Section 6.7 shall be
available to the General Partner with respect to its obligations incurred
pursuant to the Contribution Agreement (other than obligations incurred by the
General Partner on behalf of the Partnership or the MLP). 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 6.7 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, without
limitation, legal fees and expenses) incurred by an Indemnitee who is
indemnified pursuant to Section 6.7(a) in defending any claim, demand, action,
suit or proceeding shall, from time to time, be advanced by the Partnership
prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Partnership of an undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined that the Indemnitee is
not entitled to be indemnified as authorized in this Section 6.7.
(c) The indemnification provided by this Section 6.7 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 (i) the General Partner, a Departing
Partner or an Affiliate thereof, (ii) an officer, director, employee, partner,
agent or trustee of the Partnership, the General Partner, any Departing Partner
or an Affiliate thereof or (iii) a Person serving at the request of the
Partnership in another entity in a similar capacity, and as to actions in any
other capacity (including, without limitation, any capacity under the
Underwriting Agreements), and shall continue as to an Indemnitee who has ceased
to serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns and administrators of the Indemnitee.
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(d) The Partnership may purchase and maintain (or reimburse the General
Partner or its Affiliates for the cost of) insurance, on behalf of the General
Partner 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, 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 6.7, 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 6.7(a); and action taken or omitted by it with
respect to an 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 Partner 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 6.7 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 6.7 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 6.7 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 obligation of the Partnership to indemnify any such Indemnitee under and in
accordance with the provisions of this Section 6.7 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 Partner, or any other Persons who have acquired interests in the
Partnership, 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 6.1 (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.
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(c) Any amendment, modification or repeal of this Section 6.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the liability to the Partnership and the Limited Partner of the
General Partner, its directors, officers and employees and any other Indemnitees
under this Section 6.8 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 or the Limited Partner, on the other hand, any resolution
or course of action in respect of such conflict of interest shall be permitted
and deemed approved by the Limited Partner, and shall not constitute a breach of
this Agreement, of the MLP Agreement or 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 a resolution of such conflict or course of action. 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, (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 Audit 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 or engineering practices or principles; and (D) such additional
factors as the General Partner (including such Audit 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 such Audit
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, the MLP Agreement or any
other agreement contemplated herein or a breach of any standard of care or duty
imposed herein or therein or under the Delaware Act or any other law, rule or
regulation.
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(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 under a grant of similar authority or
latitude, 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, an OLP Subsidiary, the Limited Partner or any limited
partner in the MLP, (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 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 Partner. The General
Partner shall have no duty, express or implied, to sell or otherwise dispose of
any asset of the Partnership or of an OLP Subsidiary, other than in the ordinary
course of business. No borrowing by the Partnership 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 Partner by reason of the fact
that the purpose or effect of such borrowing is directly or indirectly to (A)
enable the holders of IDRs to receive distributions under the MLP Agreement or
increase the amount of any such distributions, (B) hasten the termination of the
"Subordination Period" under the MLP Agreement or (C) reduce the "Cumulative
Common Unit Arrearage" under the MLP Agreement in order to hasten the conversion
of the "Subordinated Units" in the MLP 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.
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, without limitation, an Opinion of Counsel) of such
Persons as to matters that such 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 and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform each and every act and duty that
is permitted or required to be done by the General Partner hereunder.
(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 as required to permit the General Partner to act under this Agreement
or any 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
not reasonably believed by the General Partner to be in, or not inconsistent
with, the best interests of the Partnership.
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SECTION 7.11 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner, one or more of its Affiliates or one or more nominees, as the
General Partner may determine. The General Partner hereby declares and warrants
that any Partnership assets for which record title is held in the name of the
General Partner or one or more of its Affiliates or one or more nominees shall
be held by the General Partner or such Affiliate or nominee for the use and
benefit of the Partnership in accordance with the provisions of this Agreement;
provided, however, that the General Partner shall use its 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 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
Partnership. 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.
SECTION 7.12 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 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 contracts on
behalf of the Partnership, and such Person shall be entitled to deal with the
General Partner as if it were the Partnership's sole party in interest, both
legally and beneficially. The 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 in connection with any such
dealing. In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or 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
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER
SECTION 8.1 Limitation of Liability.
The Limited Partner shall have no liability under this Agreement except as
expressly provided in this Agreement or the Delaware Act.
SECTION 8.2 Management of Business.
The Limited Partner, in its capacity as such, shall not 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. The
transaction of any such business by the Partnership, the General Partner, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the General Partner or any of its Affiliates, in its capacity as such, shall not
affect, impair or eliminate the limitations on the liability of the Limited
Partner under this Agreement.
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SECTION 8.3 Return of Capital.
The Limited Partner shall not be entitled to the withdrawal or return of
its Capital Contribution, except to the extent, if any, that distributions made
pursuant to this Agreement or upon termination of the Partnership may be
considered as such by law and then only to the extent provided for in this
Agreement.
SECTION 8.4 Rights of the Limited Partner Relating to the Partnership.
(a) In addition to other rights provided by this Agreement or by applicable
law, and except as limited by Section 7.4(b), the Limited Partner shall have the
right, for a purpose reasonably related to the Limited Partner's interest as a
limited partner in the Partnership, upon reasonable demand and at the 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 tax returns for each year;
(iii) to have furnished to it, upon notification to the General
Partner, a current list of the name and last known business, residence or
mailing address of each Partner;
(iv) to have furnished to it, upon notification to the General
Partner, 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 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) Notwithstanding any other provision of this Agreement, the General
Partner may keep confidential from the Limited Partner for such period of time
as the General Partner deems reasonable, any information that the General
Partner reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the General Partner in good faith believes
is not in the best interests of the Partnership or could damage the Partnership
or that the Partnership is required by law or by agreements with third parties
to keep confidential (other than agreements with Affiliates of the General
Partner the primary purpose of which is to circumvent the obligations set forth
in this Section 7.4).
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ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
SECTION 9.1 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, without limitation, all books and records
necessary to provide to the Limited Partner any information, lists and copies of
documents required to be provided pursuant to Section 7.4(a). Any books and
records maintained by or on behalf of the Partnership in the regular course of
its business, including, without limitation, 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 generally accepted accounting
principles.
SECTION 9.2 Fiscal Year.
The fiscal year of the Partnership shall be August 1 to July 31.
ARTICLE X
TAX MATTERS
SECTION 10.1 Preparation of Tax Returns.
The General Partner shall arrange for the preparation and timely filing of
all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use all reasonable efforts to furnish, within 90 days of the close of each
calendar year, the tax information reasonably required by the Partners for
federal and state income tax reporting purposes. 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. The taxable
year of the Partnership shall be August 1 to July 31.
SECTION 10.2 Tax Elections.
Except as otherwise provided herein, the General Partner shall, in its sole
discretion, determine whether to make any available election pursuant to the
Code; provided, however, that the General Partner shall make the election under
Section 754 of the Code in accordance with applicable regulations thereunder.
The General Partner shall have the right to seek to revoke any such election
(including, without limitation, the election under Section 754 of the Code) upon
the General Partner's determination in its sole discretion that such revocation
is in the best interests of the Limited Partner.
SECTION 10.3 Tax Controversies.
Subject to the provisions hereof, the General Partner is designated the Tax
Matters Partner (as defined in Section 6231 of 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, without limitation, resulting administrative and
judicial proceedings, and to expend Partnership funds for professional services
and costs associated therewith. The Limited 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 10.4 Organizational Expenses.
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a 60-month period as provided in Section
709 of the Code.
SECTION 10.5 Withholding.
Notwithstanding any other provision of this Agreement, the General Partner
is authorized to take any action that it determines in its sole 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 to withhold and pay
over to any taxing authority any amount resulting from the allocation or
distribution of income to any Partner (including, without limitation, by reason
of Section 1446 of the Code), the amount withheld shall be treated as a
distribution of cash pursuant to Section 5.3 in the amount of such withholding
from such Partner.
SECTION 10.6 Opinions of Counsel.
Notwithstanding any other provision of this Agreement, if the Partnership
is treated as an association taxable as a corporation at any time or is
otherwise taxable for federal income tax purposes as an entity at any time and,
pursuant to the provisions of this Agreement, an Opinion of Counsel would
otherwise be required to the effect that an action will not cause the
Partnership to become so treated as an association taxable as a corporation or
otherwise taxable as an entity for federal income tax purposes, such requirement
for an Opinion of Counsel shall be deemed automatically waived.
ARTICLE XI
TRANSFER OF INTERESTS
SECTION 11.1 Transfer.
(a) The term "transfer," when used in this Article X with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which a
Partner disposes of its Partnership Interest to another Person and includes a
sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange
or any other disposition by law or otherwise, provided, however, that the term
"Transfer" shall not include the pledge, encumbrance or hypothecation by a
Limited Partner of its Partnership Interest.
(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 X.
Any Transfer or purported transfer of a Partnership Interest not made in
accordance with this Article X shall be null and void.
(c) Nothing contained in this Article X shall be construed to prevent a
disposition by the parent entity of the General Partner of any or all of the
issued and outstanding capital stock of the General Partner.
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SECTION 11.2 Transfer of the General Partner's Partnership Interest.
If the general partner of the MLP transfers its partnership interest as the
general partner therein to any Person in accordance with the provisions of the
MLP Agreement, the General Partner shall contemporaneously therewith transfer
its Partnership Interest as the general partner of the Partnership to such
Person, and the Limited Partner hereby expressly consents to such transfer. A
Limited Partner may not transfer all or any part of its Partnership Interest or
withdraw from the Partnership except for (i) a transfer described in the
immediately preceding sentence, (ii) the transfer by Ferrellgas of its
Partnership Interest as a Limited Partner in the Partnership to the MLP as
provided in the Contribution Agreement and contemplated by Sections 4.2 and
11.2, (iii) the forced sale or other transfer of a Limited Partner's Partnership
Interest pursuant to the foreclosure of, or other realization upon, any lien
resulting from the pledge, encumbrance or hypothecation of such Partnership
Interest, or (iv) any transfer of a Limited Partner's Partnership Interest by a
Person acquiring such Partnership Interest as a result of a sale or other
transfer described in the immediately preceding clause (iii), or any transfer by
a transferee of any such Person.
SECTION 11.3 Transfer of the Limited Partner's Partnership Interest.
If the Limited Partner merges, consolidates or otherwise combines into any
other Person or transfers all or substantially all of its assets to another
Person, such Person may become a Substituted Limited Partner pursuant to Article
XI. Except as set forth in the immediately preceding sentence and except for the
transfer by Ferrellgas of its Partnership Interest as a limited partner in the
Partnership to the MLP as provided in the Contribution Agreement and
contemplated by Sections 4.2 and 11.2, a Limited Partner may not transfer all or
any part of its Partnership Interest or withdraw from the Partnership.
SECTION 11.4 Transfer of the Acquisition General Partner's Partnership
Interest.
Except for the transfer by FAC of its Partnership Interest in the
Partnership as the Acquisition General Partner to Ferrellgas, FAC may not
transfer all or any part of its Partnership Interest.
ARTICLE XII
ADMISSION OF PARTNERS
SECTION 12.1 Admission of Initial Partners.
Upon the formation of the Partnership pursuant to the filing of the
Certificate of Limited Partnership, Ferrellgas was admitted to the Partnership
as the sole general partner and the MLP was admitted to the Partnership as the
sole limited partner.
SECTION 12.2 Admission of Ferrellgas as a Limited Partner.
Upon the making by Ferrellgas of the Capital Contributions described in
Section 4.2, Ferrellgas was admitted to the Partnership as a limited partner.
Upon the transfer by Ferrellgas of its Partnership Interest as a limited partner
to the MLP as provided in the Contribution Agreement, Ferrellgas ceased to be a
limited partner of the Partnership.
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SECTION 12.3 Admission of Substituted Limited Partners.
Any person that is the successor in interest to a Limited Partner as
described in Section 10.3 shall be admitted to the Partnership as a limited
partner upon (a) furnishing to the General Partner (i) acceptance in form
satisfactory to the General Partner of all of the terms and conditions of this
Agreement and (ii) such other documents or instruments as may be required to
effect its admission as a limited partner in the Partnership and (b) obtaining
the consent of the General Partner, which consent may be withheld or granted in
the sole discretion of the General Partner; provided, however, that this clause
(b) shall not be applicable in the case of the admission as a Limited Partner of
a Person acquiring a Limited Partner's Partnership Interest as a result of a
transfer described in clauses (iii) or (iv) of the second sentence of Section
10.3. Such Person shall be admitted to the Partnership as a limited partner
immediately prior to the transfer of the Partnership Interest, and the business
of the Partnership shall continue without dissolution.
SECTION 12.4 Admission of Successor General Partner.
A successor General Partner approved pursuant to Section 12.1 or 12.2 or
the transferee of or successor to all of the General Partner's Partnership
Interest as the general partner in the Partnership pursuant to Section 10.2 who
is proposed to be admitted as a successor General Partner shall, subject to
compliance with the terms of Section 12.3, if applicable, be admitted to the
Partnership as the successor General Partner, effective immediately prior to the
withdrawal or removal of the General Partner pursuant to Section 12.1 or 12.2 or
the transfer of the General Partner's Partnership Interest as the general
partner of the Partnership pursuant to Section 10.2. Any such successor shall,
subject to the terms hereof, carry on the business of the Partnership without
dissolution. In each case, the admission of such successor General Partner to
the Partnership shall, subject to the terms hereof, be subject to the successor
General Partner executing and delivering to the Partnership an acceptance of all
of the terms and conditions of this Agreement and such other documents or
instruments as may be required to effect such admission.
SECTION 12.5 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 practical an amendment of this Agreement and,
if required by law, to prepare and file an amendment to the Certificate of
Limited Partnership and may for this purpose, among others, exercise the power
of attorney granted pursuant to Section 1.4.
SECTION 12.6 Admission of Additional Limited Partners.
(a) A Person (other than the General Partner, the Initial Limited Partner
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, without
limitation, the granting of the power of attorney granted in Section 1.4, 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 11.6, 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 sole 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.
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SECTION 12.7 Admission of FAC as the Acquisition General Partner.
Upon the making by FAC of the Capital Contribution described in Section
4.2(c), FAC was admitted to the Partnership as the Acquisition General Partner.
ARTICLE XIII
WITHDRAWAL OR REMOVAL OF PARTNERS
SECTION 13.1 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 Limited Partner;
(ii) the General Partner transfers all of its rights as General
Partner pursuant to Section 10.2;
(iii) the General Partner is removed pursuant to Section 12.2;
(iv) the general partner of the MLP withdraws from the MLP;
(v) the General Partner (A) makes a general assignment for the benefit
of creditors; (B) files a voluntary bankruptcy petition; (C) files a
petition or answer seeking for itself a reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief 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 12.1(a)(v); or (E) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of the General Partner or
of all or any substantial part of its properties;
(vi) a final and non-appealable judgment is entered by a court with
appropriate jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a
court with appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now or
hereafter in effect; or
(vii) 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.
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If an Event of Withdrawal specified in Section 12.1(a)(v), (vi) or (vii)
occurs, the withdrawing General Partner shall give notice to the Limited Partner
within 30 days after such occurrence. The Partners hereby agree that only the
Events of Withdrawal described in this Section 12.1 shall result in the
withdrawal of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the
occurrence of an Event of Withdrawal shall not constitute a breach of this
Agreement under the following circumstances:
(i) at any time during the period beginning on the Closing Date and
ending at 12:00 Midnight, Central Standard Time, on July 31, 2004 the
General Partner voluntarily withdraws by giving at least 90 days' advance
notice of its intention to withdraw to the Limited Partner, provided, that
prior to the effective date of such withdrawal the Limited Partner approves
such withdrawal 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 the Limited Partner or cause the
Partnership to be treated as an association taxable as a corporation or
otherwise to be taxed as an entity for federal income tax purposes;
(ii) at any time on or after 12:00 Midnight, Central Standard Time, on
July 31, 2004, the General Partner voluntarily withdraws by giving at least
90 days' advance notice to the Limited Partner, such withdrawal to take
effect on the date specified in such notice; or
(iii) at any time that the General Partner ceases to be the General
Partner pursuant to Section 12.1(a)(ii), (iii) or (iv). If the General
Partner gives a notice of withdrawal pursuant to Section 12.1(a)(i) or
Section 13.1(a)(i) of the MLP Agreement, the Limited Partner may, prior to
the effective date of such withdrawal, elect a successor General Partner,
provided, that such successor shall be the same Person, if any, that is
elected by the limited partners of the MLP pursuant to Section 13.1 of the
MLP Agreement as the successor to the General Partner in its capacity as
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 Partner as
provided herein or the Partnership does not receive a Withdrawal Opinion of
Counsel, the Partnership shall be dissolved in accordance with Section
13.1. Any successor General Partner elected in accordance with the terms of
this Section 12.1 shall be subject to the provisions of Section 11.4.
SECTION 13.2 Removal of the General Partner.
The General Partner shall be removed if such General Partner is removed as
a general partner of the MLP pursuant to Section 13.2 of the MLP Agreement. Such
removal shall be effective concurrently with the effectiveness of the removal of
such General Partner as the general partner of the MLP pursuant to the terms of
the MLP Agreement. If a successor to the General Partner in its capacity as
general partner of the MLP is elected in connection with the removal of such
General Partner as general partner of the MLP, as provided in the MLP Agreement,
then the Limited Partner shall elect such successor as the successor General
Partner of the Partnership and such successor shall, upon admission pursuant to
Article XI, automatically become a 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 11.4.
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SECTION 13.3 Interest of Departing Partner and Successor General Partner.
The Partnership Interest of a Departing Partner departing as a result of
withdrawal or removal pursuant to Section 12.1 or 12.2 shall (unless it is
otherwise required to be converted into Common Units pursuant to Section 13.3(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 General Partner as to all debts and
liabilities of the Partnership arising on or after the effective date of the
removal of the Departing Partner.
SECTION 13.4 Reimbursement of Departing Partner.
The Departing Partner shall be entitled to receive all reimbursements due
such Departing Partner pursuant to Section 6.4, including, without limitation,
any employee-related liabilities (including, without limitation, severance
liabilities), incurred in connection with the termination of any employees
employed by such departing Partner for the benefit of the Partnership.
SECTION 13.5 Withdrawal of the Limited Partner.
A Limited Partner shall not have the right to withdraw from the Partnership
without the prior consent of the General Partner, which may be granted or
withheld in its sole discretion, provided, however, that immediately following a
transfer of a Limited Partner's Partnership Interest permitted under Section
11.3, the transferring Limited Partner shall cease to be a Limited Partner with
respect to the Partnership Interest so transferred.
SECTION 13.6 Withdrawal of the Acquisition General Partner.
The Acquisition General Partner shall withdraw from the Partnership
immediately following the assignment of its general partner interest in the
Partnership to Ferrellgas as provided in Section 4.2(c).
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
SECTION 14.1 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 or the withdrawal of the Acquisition General Partner
in accordance with the terms of this Agreement. Upon the removal or withdrawal
of the General Partner any successor General Partner shall continue the business
of the Partnership. The Partnership shall dissolve and, subject to Section 13.2,
its affairs should be wound up, upon:
(a) the expiration of its term as provided in Section 1.5;
(b) an Event of Withdrawal of the General Partner as provided in Section
12.1(a) (other than Section 12.1(a)(ii)), unless a successor is elected and an
Opinion of Counsel is received as provided in Section 12.1(b) or 12.2 and such
successor is admitted to the Partnership pursuant to Section 11.4;
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(c) an election to dissolve the Partnership by the General Partner that is
approved by the Limited Partner;
(d) 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; or
(f) the dissolution of the MLP.
SECTION 14.2 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 12.1(a)(i) or (iii) and following a failure of the Limited Partner to
appoint a successor General Partner as provided in Section 12.1 or 12.2, then
within 90 days thereafter or (b) dissolution of the Partnership upon an event
constituting an Event of Withdrawal as defined in Section 12.1(a)(v), (vi) or
(vii), then within 180 days thereafter, the Limited Partner 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 the Limited Partner. In addition, upon dissolution
of the Partnership pursuant to Section 13.1(f), if the MLP is reconstituted
pursuant to Section 14.2 of the MLP Agreement, the reconstituted MLP may, within
180 days after such event of dissolution, as the Limited Partner, elect to
reconstitute the Partnership in accordance with the immediately preceding
sentence. Upon any such election by the Limited Partner, 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:
(i) the reconstituted Partnership shall continue until the end of the
term set forth in Section 1.5 unless earlier dissolved in accordance with
this Article XIII;
(ii) 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 of the MLP
as provided in the MLP Agreement; and
(iii) 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 powers
of attorney granted the General Partner pursuant to Section 1.4; 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 Partner and (y) neither the Partnership nor the
reconstituted limited partnership 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.
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SECTION 14.3 Liquidation.
Upon dissolution of the Partnership, unless the Partnership is continued
under an election to reconstitute and continue the Partnership pursuant to
Section 13.2, the General Partner, or in the event the General Partner has been
dissolved or removed, become bankrupt as set forth in Section 12.1 or withdrawn
from the Partnership, a liquidator or liquidating committee approved by the
Limited Partner, shall be the Liquidator. The Liquidator (if other than the
General Partner) shall be entitled to receive such compensation for its services
as may be approved by the Limited Partner. The Liquidator shall agree not to
resign at any time without 15 days' prior notice and (if other than the General
Partner) may be removed at any time, with or without cause, by notice of removal
approved by the Limited Partner. 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 the Limited Partner. 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 XIII, 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 6.3(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. The Liquidator shall
liquidate the assets of the Partnership, and apply and distribute the proceeds
of such liquidation in the following order of priority, unless otherwise
required by mandatory provisions of applicable law:
(a) the payment to creditors of the Partnership, including, without
limitation, Partners who are creditors, in the order of priority provided by
law; and the creation of a reserve of cash or other assets of the Partnership
for contingent liabilities in an amount, if any, determined by the Liquidator to
be appropriate for such purposes; and
(b) to all Partners in accordance with 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 this clause) for the
taxable year of the Partnership during which the liquidation of the Partnership
occurs (with the date of such 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 14.4 Distributions in Kind.
(a) Notwithstanding the provisions of Section 13.3, which require the
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or all of the
Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its absolute discretion, defer for a reasonable
time the liquidation of any assets except those necessary to satisfy liabilities
of the Partnership (including, without limitation, those to Partners as
creditors) and/or distribute to the Partners or to specific classes of Partners,
in lieu of cash, as tenants in common and in accordance with the provisions of
Section 13.3, undivided interests in such Partnership assets as the Liquidator
deems not suitable for liquidation. Any such distributions in kind shall be made
only if, in the good faith judgment of the Liquidator, such distributions in
kind are in the best interest of the Limited Partner, and shall be subject to
such conditions relating to the disposition and management of such properties as
the Liquidator deems reasonable and equitable and to any agreements governing
the operation of such properties at such time. The Liquidator shall determine
the fair market value of any property distributed in kind using such reasonable
method of valuation as it may adopt.
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(b) In accordance with Section 704(c)(1)(B) of the Code, in the case of any
deemed distribution occurring as a result of a termination of the Partnership
pursuant to Section 708(b)(1)(B) of the Code, to the maximum extent possible
consistent with the priorities of Section 13.3, the General Partner shall have
sole discretion to treat the deemed distribution of Partnership assets to
Partners as occurring in a manner that will not cause a shift of the Book Tax
Disparity attributable to a Partnership asset existing immediately prior to the
deemed distribution to another asset upon the deemed contribution of assets to
the reconstituted Partnership, including, without limitation, deeming the
distribution of any Partnership assets to be made either to the Partner who
contributed such assets or to the transferee of such Partner.
SECTION 14.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as
provided in Sections 13.3 and 13.4 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 cancelled
and such other action as may be necessary to terminate the Partnership shall be
taken.
SECTION 14.6 Reasonable Time for Winding Up.
A reasonable time shall be allowed for the orderly winding up of business
and affairs of the Partnership and the liquidation of its assets pursuant to
Section 13.3 in order to minimize any losses otherwise attendant upon such
winding up, and the provisions of this Agreement shall remain in effect between
the Partners during the period of liquidation.
SECTION 14.7 Return of Capital.
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
Partner, or any portion thereof, it being expressly understood that any such
return shall be made solely from Partnership assets.
SECTION 14.8 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.
SECTION 14.9 Waiver of Partition.
Each Partner hereby waives any right to partition of the Partnership
property.
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ARTICLE XV
AMENDMENT OF PARTNERSHIP AGREEMENT
SECTION 15.1 Amendment to be Adopted Solely by General Partner.
The Acquisition General Partner and the Limited Partner agree that the
General Partner (pursuant to its powers of attorney from the Acquisition General
Partner and the Limited Partner), without the approval of the Acquisition
General Partner or the Limited Partner, may amend any provision of this
Agreement, and execute, swear to, acknowledge, deliver, file and record whatever
documents may be required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the principal
place of business of the Partnership, the registered agent of the Partnership or
the registered office of the, Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
necessary or appropriate to qualify or continue the qualification of the
Partnership as a limited partnership or a partnership in which the limited
partners have limited liability under the laws of any state or that is necessary
or advisable in the opinion of the General Partner to ensure that the
Partnership will not be treated as an association taxable as a corporation or
otherwise taxed as an entity for federal income tax purposes;
(d) a change (i) that, in the sole discretion of the General Partner, does
not adversely affect the Acquisition General Partner or the Limited Partner in
any material respect, (ii) that is necessary or desirable to 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, without limitation, the
Delaware Act), compliance with any of which the General Partner determines in
its sole discretion to be in the best interests of the Partnership and the
Limited Partner, (iii) that is required to effect the intent of the provisions
of this Agreement or is otherwise contemplated by this Agreement or (iv) that 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 and taxable year of the Partnership and any
changes that, in the sole discretion of the General Partner, are necessary or
appropriate as a result of a change in the fiscal year and taxable year of the
Partnership including, without limitation, 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 or officers 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, whether or not 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;
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(h) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 15.3;
(i) an amendment that, in the sole discretion of the General Partner, is
necessary or desirable 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 3.1; or
(j) any other amendments substantially similar to the foregoing.
SECTION 15.2 Amendment Procedures.
Except with respect to amendments of the type described in Section 14.1,
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. Each such proposal shall contain the text of the
proposed amendment. A proposed amendment shall be effective upon its approval by
the Limited Partner.
ARTICLE XVI
MERGER
SECTION 16.1 Authority.
The Partnership may merge or consolidate with one or more corporations,
business trusts or associations, real estate investment trusts, common law
trusts or unincorporated businesses, including, without limitation, 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.
SECTION 16.2 Procedure for Merger or Consolidation.
Merger or consolidation of the Partnership pursuant to this Article
requires the prior approval of the General Partner. If the General Partner shall
determine, in the exercise of its sole 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 jurisdictions 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;
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(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 partnership interests, rights, securities or obligations of the
Surviving Business Entity; and (i) if any general or limited partnership
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
partnership interests, rights, securities or obligations of the Surviving
Business Entity, the cash, property or general or limited partnership 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 partnership 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 partnership 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 15.4 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 16.3 Approval by Limited Partner of Merger or Consolidation.
(a) The General Partner of the Partnership, upon its approval of the Merger
Agreement, shall direct that a copy or a summary of the Merger Agreement be
submitted to the Limited Partner for its approval.
(b) The Merger Agreement shall be approved upon receiving the consent of
the Limited Partner. After such approval by the Limited Partner, and at any time
prior to the filing of the certificate of merger pursuant to Section 15.4, the
merger or consolidation may be abandoned pursuant to provisions therefor, if
any, set forth in the Merger Agreement.
SECTION 16.4 Certificate of Merger.
Upon the required approval by the General Partner, the Acquisition General
Partner and the Limited Partner 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 16.5 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;
-46-
(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 interest in
property of any of those constituent business entities shall be preserved
unimpaired; and
(b) 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.
SECTION 16.6 Transfer or Assignment of Assets or Liabilities.
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 having occurred.
ARTICLE XVII
GENERAL PROVISIONS
SECTION 17.1 Addresses and Notices.
Any notice, demand, request or report required or permitted to be given or
made to a Partner under this Agreement shall be in writing, and shall be deemed
given or made when received by it at the principal office of the Partnership
referred to in Section 1.3.
SECTION 17.2 References.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
SECTION 17.3 Pronouns and Plurals.
Whenever the context may require, 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.
SECTION 17.4 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 17.5 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.
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SECTION 17.6 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 17.7 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 17.8 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 or any other covenant, duty, agreement or condition.
SECTION 17.9 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 17.10 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 17.11 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.
[remainder of page intentionally left blank - signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
FERRELLGAS, INC.
By: /s/ Kevin T. Kelly
-------------------------------------------------
Kevin T. Kelly
Senior Vice President and Chief Financial Officer
LIMITED PARTNER:
FERRELLGAS PARTNERS, L.P.
By: Ferrellgas, Inc.,
its general partner
By: /s/ Kevin T. Kelly
-------------------------------------------------
Kevin T. Kelly,
Senior Vice President and Chief Financial Officer
Third Amended and Restated Agreement of Limited Partnership of Ferrellgas, L.P.
Signature Page
Table of Contents
Page
------
ARTICLE II ORGANIZATIONAL MATTERS..........................................1
SECTION 2.1 Formation............................................1
SECTION 2.2 Name.................................................1
SECTION 2.3 Registered Office; Principal Office..................2
SECTION 2.4 Power of Attorney....................................2
SECTION 2.5 Term.................................................3
SECTION 2.6 Possible Restrictions on Transfer....................3
ARTICLE III DEFINITIONS.....................................................4
ARTICLE IV PURPOSE........................................................12
SECTION 4.1 Purpose and Business................................12
SECTION 4.2 Powers..............................................13
ARTICLE V CAPITAL CONTRIBUTIONS..........................................13
SECTION 5.1 Initial Contributions...............................13
SECTION 5.2 Contributions by Ferrellgas, the MLP and the Acquisition
General Partner.....................................13
SECTION 5.3 Additional Capital Contributions....................14
SECTION 5.4 No Preemptive Rights................................14
SECTION 5.5 Capital Accounts....................................14
SECTION 5.6 Interest............................................17
SECTION 5.7 No Withdrawal.......................................17
SECTION 5.8 Loans from Partners.................................17
ARTICLE VI ALLOCATIONS AND DISTRIBUTIONS..................................17
SECTION 6.1 Allocations for Capital Account Purposes............17
SECTION 6.2 Allocations for Tax Purposes........................21
SECTION 6.3 Requirement of Distributions........................22
ARTICLE VII MANAGEMENT AND OPERATION OF BUSINESS...........................23
SECTION 7.1 Management..........................................23
SECTION 7.2 Certificate of Limited Partnership..................24
SECTION 7.3 Restrictions on General Partner's Authority.........24
SECTION 7.4 Reimbursement of the General Partner................25
SECTION 7.5 Outside Activities..................................26
SECTION 7.6 Loans to and from the General Partner; Contracts with
Affiliates..........................................27
SECTION 7.7 Indemnification.....................................28
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Table of Contents
(continued)
SECTION 7.8 Liability of Indemnitees............................29
SECTION 7.9 Resolution of Conflicts of Interest.................30
SECTION 7.10 Other Matters Concerning the General Partner........31
SECTION 7.11 Title to Partnership Assets.........................31
SECTION 7.12 Reliance by Third Parties...........................32
ARTICLE VIII RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER..................32
SECTION 8.1 Limitation of Liability.............................32
SECTION 8.2 Management of Business..............................32
SECTION 8.3 Return of Capital...................................33
SECTION 8.4 Rights of the Limited Partner Relating to the
Partnership.........................................33
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS.........................34
SECTION 9.1 Records and Accounting..............................34
SECTION 9.2 Fiscal Year.........................................34
ARTICLE X TAX MATTERS....................................................34
SECTION 10.1 Preparation of Tax Returns..........................34
SECTION 10.2 Tax Elections.......................................34
SECTION 10.3 Tax Controversies...................................34
SECTION 10.4 Organizational Expenses.............................35
SECTION 10.5 Withholding.........................................35
SECTION 10.6 Opinions of Counsel.................................35
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Table of Contents
(continued)
ARTICLE XI TRANSFER OF INTERESTS..........................................35
SECTION 11.1 Transfer............................................35
SECTION 11.2 Transfer of the General Partner's Partnership
Interest............................................36
SECTION 11.3 Transfer of the Limited Partner's Partnership
Interest............................................36
SECTION 11.4 Transfer of the Acquisition General Partner's
Partnership Interest................................36
ARTICLE XII ADMISSION OF PARTNERS..........................................36
SECTION 12.1 Admission of Initial Partners.......................36
SECTION 12.2 Admission of Ferrellgas as a Limited Partner........36
SECTION 12.3 Admission of Substituted Limited Partners...........37
SECTION 12.4 Admission of Successor General Partner..............37
SECTION 12.5 Amendment of Agreement and Certificate of Limited
Partnership.........................................37
SECTION 12.6 Admission of Additional Limited Partners............37
SECTION 12.7 Admission of FAC as the Acquisition General
Partner.............................................38
ARTICLE XIII WITHDRAWAL OR REMOVAL OF PARTNERS..............................38
SECTION 13.1 Withdrawal of the General Partner...................38
SECTION 13.2 Removal of the General Partner......................39
SECTION 13.3 Interest of Departing Partner and Successor General
Partner.............................................40
SECTION 13.4 Reimbursement of Departing Partner..................40
SECTION 13.5 Withdrawal of the Limited Partner...................40
SECTION 13.6 Withdrawal of the Acquisition General Partner.......40
ARTICLE XIV DISSOLUTION AND LIQUIDATION....................................40
SECTION 14.1 Dissolution.........................................40
SECTION 14.2 Continuation of the Business of the Partnership after
Dissolution.........................................41
SECTION 14.3 Liquidation.........................................41
SECTION 14.4 Distributions in Kind...............................42
SECTION 14.5 Cancellation of Certificate of Limited Partnership..43
SECTION 14.6 Reasonable Time for Winding Up......................43
SECTION 14.7 Return of Capital...................................43
SECTION 14.8 Capital Account Restoration.........................43
SECTION 14.9 Waiver of Partition.................................43
ARTICLE XV AMENDMENT OF PARTNERSHIP AGREEMENT.............................44
SECTION 15.1 Amendment to be Adopted Solely by General Partner...44
SECTION 15.2 Amendment Procedures................................45
ARTICLE XVI MERGER.........................................................45
SECTION 16.1 Authority...........................................45
SECTION 16.2 Procedure for Merger or Consolidation...............45
SECTION 16.3 Approval by Limited Partner of Merger or
Consolidation.......................................46
SECTION 16.4 Certificate of Merger...............................46
SECTION 16.5 Effect of Merger....................................46
SECTION 16.6 Transfer or Assignment of Assets or Liabilities.....47
ARTICLE XVII GENERAL PROVISIONS.............................................47
SECTION 17.1 Addresses and Notices...............................47
SECTION 17.2 References..........................................47
SECTION 17.3 Pronouns and Plurals................................47
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Table of Contents
(continued)
SECTION 17.4 Further Action......................................47
SECTION 17.5 Binding Effect......................................47
SECTION 17.6 Integration.........................................48
SECTION 17.7 Creditors...........................................48
SECTION 17.8 Waiver..............................................48
SECTION 17.9 Counterparts........................................48
SECTION 17.10 Applicable Law......................................48
SECTION 17.11 Invalidity of Provisions............................48
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