EXHIBIT 3.173
PARTNERSHIP AGREEMENT AMONG
BLACK BEAUTY EQUIPMENT COMPANY
FRANKS ENERGY, LLC
FOR
SUGAR CAMP PROPERTIES
PARTNERSHIP AGREEMENT
THIS PARTNERSHIP AGREEMENT (this "Agreement") is effective as of the
20th day of December, 2000 by and among (i) BLACK BEAUTY EQUIPMENT COMPANY, an
Indiana general partnership ("BBEC"), and (ii) FRANKS ENERGY, LLC, an Illinois
limited liability company ("Franks") (BBEC and Franks are hereinafter
collectively referred to as the "Partners" and each individually as a
"Partner"). For purposes of this Agreement, the term "Partner" shall include any
party then acting in such capacity in accordance with the terms of this
Agreement.
R E C I T A L S:
A. BBEC and Franks desire to form a general partnership under the
Indiana Uniform Partnership Act ("IUPA") known as "Sugar Camp Properties" (the
"Partnership") for the limited purposes set out herein.
B. BBEC and Franks desire to set out in this Agreement the ownership
percentages of BBEC and Franks and the respective rights, duties and liabilities
of the Partners with respect to the Partnership.
NOW, THEREFORE, in consideration of the Recitals and the mutual
covenants and undertakings set forth herein, BBEC and Franks agree as follows:
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ARTICLE 1
FORMATION AND ADMISSION
1.l FORMATION. The Partners do hereby form a general partnership
pursuant to the IUPA, known as Sugar Camp Properties, for the purposes and term
set out in this Agreement.
1.2 PRINCIPAL OFFICE. The principal office of the Partnership
shall initially be at 414 S. Fares Ave., Evansville, Indiana. The principal
office may hereafter from time to time be moved to such other place as may be
designated by the Partnership Committee (which committee is described in Section
9.1 hereof). The books and records of the Partnership shall be maintained at the
Partnership's principal place of business.
1.3 TERM. The term of the Partnership shall continue until
December 31,2100, unless sooner terminated as herein provided or pursuant to
law.
1.4 PROPERTY OWNERSHIP. All assets and property owned by the
Partnership, whether real or personal, tangible or intangible, shall be held in
the name of the Partnership unless otherwise determined by the Partnership
Committee.
ARTICLE 2
PURPOSE
The Partnership is formed to (i) acquire certain mineral and surface
properties owned and/or leased by Dupech, Inc. and others located in Gallatin
and Saline Counties in Illinois, (ii) lease, sublease, rent, sell, or otherwise
dispose or make use of in any manner whatsoever any mineral or surface property
acquired by the Partnership and (iii) take any actions related to any of the
foregoing, including, without limitation, obtaining financing necessary to
accomplish the foregoing, which financing may include the granting of liens
and/or security interests in any or all
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assets of the Partnership. The purposes of the Partnership shall not be
extended, by implication or otherwise, beyond the purposes set forth in this
Article 2 without the approval of the Partnership Committee.
ARTICLE 3
CAPITAL CONTRIBUTIONS
3.1 CAPITAL CONTRIBUTIONS.
(a) The Partners shall make initial cash capital
contributions to the Partnership as follows:
Franks $250.00
BBEC $750.00
(b) Upon completion of the contributions described in
Section 3.1 (a) hereof, Franks shall own a 25% interest in the Partnership and
BBEC shall own a 75% interest in the Partnership (the interests of Franks and
BBEC in the Partnership shall be referred to herein as their "Percentage
Interests") and the terms of this Agreement shall be construed consistent with
the stated Percentage Interests of the Partners.
3.2 DEBT; ADDITIONAL CAPITAL CONTRIBUTIONS.
(a) It is contemplated by the Partners that the
Partnership shall borrow from whatever source funds sufficient to support the
purposes set out in Article 2. As among the Partners, each Partner shall be
responsible for its Percentage Interest of all Partnership indebtedness unless
and to the extent the Partners otherwise agree in writing. No Partner shall be
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obligated by this Agreement to obtain financing on behalf of the Partnership,
should the Partnership be unable on its own to obtain such financing.
(b) No Partner shall be required to make additional
capital contributions to the Partnership. If any additional capital
contributions to the Partnership are approved by the Partnership Committee, such
contributions shall be in cash unless otherwise approved by the Partnership
Committee.
3.3 INTEREST ON CAPITAL CONTRIBUTIONS. No Partner shall be
entitled to interest on any capital contributions made to the Partnership.
3.4 WITHDRAWAL OF CAPITAL. No Partner shall be entitled to
withdraw any part of its capital contributions to the Partnership, or receive
any distributions from the Partnership, except as provided in this Agreement. No
Partner shall be entitled to demand or receive any property from the Partnership
other than cash, except as otherwise expressly provided for herein.
3.5 CAPITAL ACCOUNTS. There shall be established on the books of
the Partnership a capital account ("Capital Account") for each Partner. It is
the intention of the Partners that such Capital Account be maintained in
accordance with the provisions of Treas. Reg. Section 1.704-l(b)(2)(iv), and
this Agreement shall be so construed. Accordingly, such Capital Account shall
initially be credited with the initial capital contribution of the Partner, and
shall thereafter be increased by (i) any cash or the fair market value of any
property contributed by such Partner (net of any liabilities assumed by the
Partnership or to which the contributed property is subject), and (ii) the
amount of all net income (whether or not exempt from tax) allocated to such
Partner hereunder, and decreased by (i) the amount of all net losses allocated
to such Partner hereunder (including expenditures described in section
705(a)(2)(B) of the Internal Revenue Code of 1986, as amended ("Code"), or
treated as such an expenditure by reason of Treas. Reg. Section 1.704-
l(b)(2)(iv)(i)), and (ii) the amount of cash, and the fair market value of
property (net of any liabilities assumed by such Partner or to which the
distributed property is subject) distributed to
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such Partner. If a Partner transfers all or any portion of such Partner's
interest in the Partnership in accordance with the terms of this Agreement, the
Capital Account of the transferor shall become the Capital Account of the
transferee to the extent of the Partnership interest transferred.
ARTICLE 4
ACCOUNTING
4.1 BOOKS AND RECORDS. The Partnership Committee shall cause the
Partnership to maintain full and accurate books and records at the Partnership's
principal place of business, showing all receipts and expenditures, assets and
liabilities, net income or loss, and all other records necessary for recording
the partnership's business and affairs, including those sufficient to record the
allocations and distributions to the Partners provided for in this Agreement.
Such books and records shall be maintained in accordance with generally accepted
accounting principles; provided that, adequate records concerning tax
allocations shall be simultaneously maintained by the Partnership. Such books
and records shall be open to the inspection and examination of each Partner by
its duly authorized representatives at all reasonable times.
4.2 FISCAL YEAR. The fiscal year of the Partnership shall end on
April 30 ("Fiscal Year").
4.3 REPORTS.
(a) Within 90 days after the close of each Fiscal Year of
the Partnership, the Partnership shall furnish to each Partner a report of the
business and operations of the Partnership during such Fiscal Year. Unless
otherwise agreed to by the Partnership Committee, such report shall contain
financial statements prepared by the Partnership which are audited by the
certified public accountants employed by the Partnership. Any financial
statement submitted pursuant to this Section 4.3(a) shall be deemed correct,
binding and conclusive upon the Partners unless
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objection thereto is made by a Partner within 45 days after the statement is
received by such Partner.
(b) Within 10 business days after the close of each
calendar month, the Partnership shall furnish to each Partner a report of the
business and operations of the Partnership for such calendar month. Unless
otherwise agreed to by the Partnership Committee, such report shall contain
unaudited financial statements prepared by the Partnership, be in such form as
the Partnership Committee may require and shall include a balance sheet as of
the end of such calendar month, a statement of the net income or net loss of the
Partnership for such calendar month and such other information as in the
judgment of the Partnership Committee shall be reasonably necessary for the
Partners to be advised of the results of the Partnership's operations and its
financial condition.
(c) Each Fiscal Year the Partnership Committee shall
establish the date by which the Chief Executive Officer shall submit to the
Partnership Committee an annual budget and a business plan for the next
succeeding Fiscal Year of the Partnership as well as longer term business plans
for the Partnership which are requested by the Partners. The date for submission
established by the Partnership Committee shall accommodate the budgeting process
of all Partners; provided that, the Partnership shall have at least 60 days
advance notice from the Partners of the date for submission of the budget and
business plans. All budgets and business plans required to be submitted by the
Chief Executive Officer to the Partnership Committee pursuant to this Section
4.3(c)shall be approved, or modified and then approved, by the Partnership
Committee, and the Chief Executive Officer shall thereafter conduct the business
of the Partnership in accordance with the annual budget business plan and
delegation of authority approved by the Partnership Committee, unless otherwise
directed by the Partnership Committee. Any Partner may designate in the budget
capital projects which must be specifically approved by the Partnership
Committee prior to the commencement of expenditures for such project.
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4.4 TAX RETURNS. The Partnership Committee shall cause all
required federal, state and local partnership income, franchise, property and
other tax returns, including information returns, to be filed with the
appropriate office of the relevant taxing jurisdiction or agency. In order to
accommodate the following provision regarding review of drafts of the Federal
and state income tax returns of the Partnership, the Partnership shall seek each
year a three month extension of the date on which such returns must be filed.
With respect to the Federal and state income tax returns of the Partnership, the
Partnership shall submit to each Partner, or, with the consent of each Partner,
make available for review, drafts of the proposed returns, including the related
work papers, books, records and any other documents used in the preparation of
such returns, as soon as possible, but by no later than August 30 of each year,
to permit review and approval of such returns by each Partner prior to filing.
All expenses incurred in connection with such tax returns and information
returns, as well as for the reports referred to in Section 4.3 hereof, shall be
expenses of the Partnership.
4.5 PARTNER'S REQUEST FOR ADDITIONAL INFORMATION. The Chief
Executive Officer shall also furnish to any Partner such other reports of the
Partnership's operations and conditions as may reasonably be requested by any of
the Partners.
4.6 TAX MATTERS PARTNER. Franks shall be the Tax Matters Partner
for the Partnership as defined in Section 623l(a) of the Code. The Tax Matters
Partner shall not take any action in such capacity without first notifying, and
receiving the concurrence of, the other Partners.
ARTICLE 5
BANK ACCOUNTS AND EXCESS FUNDS
5.1 BANK ACCOUNTS. All funds of the Partnership shall be deposited
in its name into such checking or savings accounts, time certificates or
short-term money market funds as shall be
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designated by the Partnership Committee. Withdrawals therefrom shall be made
upon such signature or signatures (or other authorization form) as determined by
the partnership Committee.
5.2 INVESTMENT OF EXCESS FUNDS. The Partnership may invest excess
funds not required in the Partnership's business, and not required to be
distributed pursuant to the terms of this Agreement, in short-term United States
Government obligations maturing within 1 year or in other securities approved by
the Partnership Committee.
ARTICLE 6
ALLOCATION OF NET INCOME AND LOSS
6.1 NET INCOME AND NET LOSS.
(a) The net income and net loss of the Partnership for
each Fiscal Year shall be allocated to the Partners in accordance with their
respective Percentage Interests.
(b) For Federal, state and local income tax purposes
only, depreciation (cost recovery) and cost depletion deductions to which the
Partnership is entitled with respect to the assets of the Partnership and gains
and losses from sales or other dispositions of assets of the Partnership shall
be determined based upon the provisions of section 704(c) of the Code with
respect to that portion of assets which was contributed by a Partner. All such
allocations shall be made in accordance with the "traditional method" (within
the meaning of Treas. Reg. Section 1.704-3(b)).
(c) For Federal, state and local income tax purposes
only, percentage depletion shall be allocated pursuant to Section 6.1 (a)
hereof.
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6.2 ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. For purposes of
section 752 of the Code and the regulations thereunder, the excess nonrecourse
liabilities of the Partnership, within the meaning of Treas. Reg Section
1.752-3(a)(3), if any, shall be allocated to each Partner in accordance with its
respective Percentage Interest.
6.3 ALLOCATIONS IN EVENT OF TRANSFER. In the event of the transfer
of a Partner's interest (in accordance with and subject to the provisions of
this Agreement) in the Partnership at any time other than at the end of a Fiscal
Year, or the admission of a new Partner at any time other than the end of a
Fiscal Year, the periods before and after such transfer or admission shall be
treated as separate fiscal years, and the Partnership's net income, net loss and
credits for each of such deemed separate fiscal years shall be allocated in
accordance with the Partners' respective percentage interests in the Partnership
for each of such deemed separate fiscal years.
ARTICLE 7
DISTRIBUTIVE SHARES AND FEDERAL INCOME TAX ELECTION
7.1 DISTRIBUTIVE SHARES. For purposes of Subchapter K of the Code,
the distributive shares of the Partners of each item of Partnership taxable
income, gains, losses, deductions or credits for any Fiscal Year shall be in the
same proportions as their respective shares of the net income or loss of the
Partnership allocated to them pursuant to Section 6.1 hereof. Notwithstanding
the foregoing, to the extent not inconsistent with the allocation of gain
provided for in Sections 6.1(a) and 6. l(b) hereof, gain recognized by the
Partnership which represents ordinary income by reason of recapture of
depreciation, cost recovery or depletion deductions for Federal income tax
purposes shall be allocated to the Partner to whom such depreciation, cost
recovery or depletion deduction to which such recapture relates was allocated.
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7.2 ELECTIONS. Any and all elections required or permitted to be
made by the Partnership under the Code, including the election provided for in
section 754 of the Code, shall be made in accordance with the decisions of the
Partnership Committee.
7.3 PARTNERSHIP TREATMENT. The Partnership shall be treated as a
partnership for purposes of Federal, state and local income tax and other taxes,
and the Partners shall not take any position or make any election, in a tax
return or otherwise, inconsistent with such treatment.
ARTICLE 8
DISTRIBUTIONS
8.1 NET CASH FLOW. For purposes of this Agreement, the term "Net
Cash Flow" for any period shall mean the excess, if any, of (a) the sum of (i)
the gross receipts (excluding loan proceeds) of the Partnership for such period
plus (ii) any funds released by the Partnership Committee from previously
established reserves referred to in (b)(v) of this Section 8.1 over (b) the sum
of (i) all cash operating expenses paid by the Partnership for such period,
including, but not by way of limitation, salaries, taxes, interest, insurance
premiums, royalties, rentals, utilities and fees, (ii) all cash capital
expenditures paid for such period for maintenance or replacement of existing
Partnership operations, (iii) all amounts paid by the Partnership in such period
on account of amortization of the principal of any debts or liabilities of the
Partnership and (iv) reasonable reserves to maintain Partnership finances in
compliance with financing covenants, as shall be determined from time to time by
the Partnership Committee. Notwithstanding the foregoing, to the extent that any
of the payments described in (b)(i), (ii) or (iii) above are paid from capital
contributions, from loan proceeds or from previously established reserves, such
payments shall not be taken into account in determining Net Cash Flow for such
period.
8.2 DISTRIBUTION OF NET CASH FLOW. The Net Cash Flow for all
Fiscal Years shall be distributed at such time or times as shall be determined
by the Partnership Committee; provided that, unless otherwise agreed to by all
Partners, the Net Cash Flow for each Fiscal Year to the
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extent not previously distributed, shall be distributed within 90 days following
the close of each Fiscal Year. It is the intention of the Partners that the Net
Cash Flow be distributed quarterly if the Partnership Committee deems such
quarterly distribution prudent. All such distributions of Net Cash Flow shall be
distributed to the Partners in accordance with their respective Percentage
Interests.
8.3 PROPERTY DISTRIBUTIONS. If any property of the Partnership,
other than cash, is distributed by the Partnership to a Partner (in connection
with the liquidation of the Partnership or otherwise), then the fair market
value of such property shall be used for purposes of determining the amount of
such distribution. The fair market value of the property distributed shall be
agreed to by the Partners; provided that, if the Partners cannot so agree, the
issue shall be submitted to arbitration as provided in Article 15 hereof.
ARTICLE 9
PARTNERSHIP MANAGEMENT
9.1 PARTNERSHIP COMMITTEE.
(a) The Partnership shall be managed by a committee (the
"Partnership Committee") comprised of representatives of the Partners. The
Partnership Committee shall have authority over all Partnership actions,
including, but not limited to, the "Major Decisions" set forth on Exhibit "9.1"
to this Agreement.
(b) The regular members of the Partnership Committee
shall consist of one representative (herein "Representatives") of each Partner.
Each Partner shall designate in writing to the other Partners such Partner's
Representative, and each Partner agrees to fill any vacancies within 15 days.
Representatives may also be employees of the Partnership. By written notice,
each Partner may designate up to three alternate Representatives to act in the
absence of its regular Representative. The Representative shall serve for
indefinite terms at the pleasure of the
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appointing Partner and may be removed by such Partner at any time and for any
reason. The Representative appointed by each Partner shall cast only one vote
with respect to all such actions or decisions. Any action taken by the
Partnership (through its officers or employees, including the Chief Executive
Officer) in compliance with the direction or decision of the Partnership
Committee shall be binding upon the Partnership and each Partner.
(c) All Partnership Committee actions shall require the
approval of all Partners acting through their appointed Representatives. An
action of the Partnership Committee shall be by a resolution adopted at a
Partnership Committee meeting or, without a meeting, by a written consent signed
by at least one Representative of each Partner. The Secretary of the Partnership
Committee and any Assistant Secretary may execute certificates setting forth
actions taken by the Partnership Committee or which reflect delegation of
authority by the Partnership Committee to employees of the Partnership.
(d) Meetings of the Partnership Committee shall be held
at least quarterly Meetings of the Partnership Committee shall also be held upon
call by any member of the Partnership Committee. Unless waived by at least one
Representative of each Partner, the calling of a meeting of the Partnership
Committee shall require a minimum of three (3) days' notice. At least one
Representative of each Partner must be present to constitute a quorum and
convene a meeting of the Partnership Committee. Each Partner may invite to the
meetings of the Partnership Committee such attorneys and advisors as such
Partner deems appropriate. Meetings of the Partnership Committee may, if at the
Representative of each Partner consents, be held by telephone conferences in
which each participating Representative can hear all other participating
Representatives, or in such other manner as shall be agreed to by the
Representatives. Unless otherwise agreed by the Representative of each Partner,
all meetings shall be held at the principal office of the Partnership.
(e) The Partnership Committee is authorized to adopt
rules concerning the conduct of the affairs of the Partnership Committee and the
Partnership.
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(f) The chair of the Partnership Committee shall be the
Representative appointed by Franks. The Partnership Committee shall appoint a
Secretary and one or more Assistant Secretaries to keep complete minutes of the
proceedings and decisions of the Partnership Committee and take such other
actions as may be authorized under this Agreement or by the Partnership
Committee.
(g) No Partner shall have any right, power or obligation
to exercise any control over the hiring of miners or over the work force of the
Partnership, including, but not limited to, any employment benefits or other
terms and conditions of employment for the employees of the Partnership, and all
such matters are delegated to the management employees of the Partnership.
Franks and BBEC shall take no part in, and shall have no right, power or
obligation with respect to, any matter relating to the hiring of employees of
the Partnership.
9.2 CHIEF EXECUTIVE OFFICER.
(a) The Partnership Committee shall select an individual
to be the Chief Executive Officer for the Partnership (the "Chief Executive
Officer"). The initial Chief Executive Officer shall be Thomas Franks. Upon the
Chief Executive Officer's ceasing to so act for any reason, a replacement Chief
Executive Officer shall be elected by the Partnership Committee.
(b) Within the scope of authority delegated by the
Partnership Committee to the Chief Executive Officer, day to day control and
management of the business of the Partnership shall be vested in the Chief
Executive Officer, provided that, the Chief Executive Officer shall be subject
to control and direction at all times by the Partnership Committee. The Chief
Executive Officer may not take any action on behalf of the Partnership if
authority for such action is not delegated (either specifically or generally) to
the Chief Executive Officer by the Partnership Committee.
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(c) The Chief Executive Officer may be removed upon the
decision of the Partnership Committee to remove the Chief Executive Officer,
subject to any employment contract between the Partnership and the Chief
Executive Officer. Further, unless otherwise agreed to by the Partnership
Committee, the term of office of the Chief Executive Officer shall be at the
pleasure of the Partnership Committee. Any extension or renewal of the term of
office of any Chief Executive Officer shall require the approval of the
Partnership Committee. The decision of the Partnership Committee not to renew or
not to extend the term of any Chief Executive Officer shall not alter the
Partnership's obligations under any employment contract approved by the
Partnership Committee. The Chief Executive Officer may delegate responsibility
and grant authority to other employees of the Partnership, subject to the
limitations on the authority of the Chief Executive Officer set out herein and
actions or directives from the Partnership Committee.
9.3 SERVICE AGREEMENTS; COMPENSATION. To the extent and for the
period that it is not practicable or economic to include in the staff of the
Partnership personnel capable of providing certain management and staff services
required by the Partnership, the Partnership, through the Partnership Committee,
may enter into appropriate service agreements with BBEC and/or Franks for such
services. The Partnership Committee shall establish policies as to the use of
BBEC's and Franks' services. Further, the Partnership, through the Partnership
Committee, may contract with any Partner for the temporary assignment of one or
more employees of any Partner to the Partnership. Such loaned employees shall
work for the Partnership for the period of the temporary assignment by the
Partner, but shall remain employees of the assigning Partner and shall be paid
by the assigning Partner, although the Partnership shall reimburse to the
assigning Partner the cost of such employee. Except with regard to service
agreements and loaned employees described above, no Partner shall be entitled to
compensation for services rendered to the Partnership. Representatives on the
Partnership Committee shall receive no compensation for acting as
Representatives on the Partnership Committee. The Partnership may, on terms
approved by the Partnership Committee, enter into employment agreements with the
Chief Executive Officer and other senior management of the Partnership.
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9.4 RELATED PARTY TRANSACTIONS. The fact that one of the Partners
is directly or indirectly interested in, or connected with, any person, firm or
corporation employed by the Partnership to render or perform a service, or to or
from whom the Partnership may purchase, sell or lease property, shall not
prohibit the Chief Executive Officer from causing the Partnership to employ such
person, firm or corporation, or from otherwise dealing with him or it, provided
(i) it is on terms no less advantageous to the Partnership than are available
from an unrelated third party and (ii) the Chief Executive Officer has received
approval of each such transaction in advance from the Partnership Committee if
the proposed transaction is material and is other than in the ordinary course of
business.
9.5 ACTS BY PARTNERS. No Partner shall take, or commit the
Partnership to take, any action, either in its own name in respect of the
Partnership or in the name of the Partnership, unless the Partnership Committee
has approved the same.
ARTICLE 10
DISSOLUTION AND LIQUIDATION
10.1 CONTINUANCE. The Partnership shall continue until its
expiration as provided in Section 1.4 hereof, or until it is earlier dissolved
by law or by the mutual consent of the Partners in writing or in accordance with
the provisions of this Article 10.
10.2 EVENTS CAUSING DISSOLUTION. The Partnership shall, as provided
below, dissolve upon, but not before, the first to occur of the following:
(a) Proceedings are commenced by or against any of the
Partners for any relief under any bankruptcy or insolvency law, or any law
relating to the relief of debtors, readjustment of indebtedness, reorganization,
arrangement or extension and such proceedings
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have not been dismissed, nullified or otherwise rendered ineffective within 60
days after such proceedings have commenced; or
(b) A decree or order of a court having jurisdiction in
the premises for the appointment of a receiver, liquidator, trustee or assignee
in bankruptcy or insolvency of any of the Partners, or of a substantial part of
its property, or for the winding-up or liquidation of its affairs, has been
entered, and such decree or order has remained in force undischarged for a
period of 60 days; or
(c) Any Partner shall make a general assignment for the
benefit of creditors; or
(d) The sale, condemnation, taking by eminent domain or
other disposition of all or substantially all of the assets of the Partnership
and the sale and/or collection of any evidence of indebtedness received in
connection therewith; or
(e) The conclusion of the term of the Partnership under
Section 1.4 hereof; or
(f) The withdrawal by a Partner from the Partnership
without the written consent of the other Partners; or
(g) The breach by a Partner of any of the covenants
contained herein, and, if such breach is remediable, such Partner fails to
remedy the breach within 45 days after written notice from either of the other
Partners to remedy such breach or, in the case of a dispute as to the existence
or occurrence of such breach, within 45 days after a final determination
(through arbitration or allowed judicial proceedings) that there has been a
breach; or
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(h) The transfer (directly, indirectly or by operation
of law) of greater than a 50% equity interest in a Partner, except as
specifically allowed under Section 11.2 hereof.
10.3 ELECTION FOLLOWING EVENT CAUSING DISSOLUTION. Unless required
by applicable law, the occurrence of any event under Section 10.2 hereof, other
than under Sections 10.2(d) and 10.2(e) hereof, shall not require the winding up
of the Partnership if the Partners not initiating or causing the event to occur
(the "Electing Partners") make the election provided for in Section 10.4 hereof.
Such election to pursue an alternative to winding up of the Partnership must be
made by the Electing Partners within 60 days of the Electing Partners' becoming
actually aware of the occurrence of the event causing dissolution. If (i) such
election is not made by written notice to the other Partner within the time
required, (ii) the event under Section 10.2(d) hereof occurs, or (iii) the event
under Section 10.2(e) hereof occurs, then the provisions of Section 10.5 hereof
regarding liquidation and winding up of the affairs of the Partnership shall
govern.
10.4 ALTERNATIVE TO LIQUIDATION. To avoid the winding up of the
Partnership as provided in Section 10.3 hereof, the Electing Partners, if
allowed by applicable law, may elect (for events other than events under Section
10.2(d) or 10.2(e) hereof) to have the Partnership continue as if such event had
not occurred; provided that, any waiver shall not be deemed to require such a
waiver in regard to any future or other event. In addition, any Partner may at
any time invoke the Buy-Sell provisions of Article 16 of this Agreement.
10.5 LIQUIDATION AND WINDING UP UPON DISSOLUTION. If the
Partnership is dissolved and if the Electing Partners do not make the election
provided for in Section 10.4 hereof, the Partnership shall be wound up and
liquidated in accordance with the requirements of law and the following
provisions:
(a) The right to wind up the Partnership's affairs and to
supervise its liquidation shall be exercised jointly by all Partners (the
"Liquidators").
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(b) Upon dissolution, the Liquidators shall ensure that
an account is taken as soon as practicable of all property, assets and
liabilities of the Partnership.
(c) Each Partner shall pay to the Partnership all amounts
owed by it to the Partnership, together with such Partner's share of
contributions required by law and this Agreement to be made by the Partners for
the payment of liabilities.
(d) The assets and property of the Partnership or the
proceeds of any sale thereof, together with contributions received pursuant to
Section 10.5(c) hereof, shall be applied by the Liquidators in accordance with
Section 10.6 hereof.
10.6 DISTRIBUTIONS UPON DISSOLUTION. Upon the dissolution of the
Partnership, the properties of the Partnership to be sold shall be liquidated in
an orderly fashion, and the proceeds thereof and any other property remaining
shall be distributed in kind as soon as practical, as follows:
First: To the payment and discharge of all of the
Partnership's debts and liabilities (other than to
the Partners), to the necessary expenses of
liquidation, to a cash reserve for the completion of
the reclamation obligations of the Partnership and to
the establishment of a cash reserve which the
Partnership Committee determines to create for
unmatured and/or contingent liabilities and
obligations of the Partnership.
Second: To the payment and discharge of all of the
Partnership's debts and liabilities to Partners,
pro-rata in accordance with their respective unpaid
principal balances.
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Third: To the Partners, pro rata in accordance with their
respective Capital Accounts on the date of
distribution (after adjustment for all items of
income and expense through that date).
If, upon the liquidation of the Partnership, or upon the liquidation of the
partnership interest of a Partner (in each case determined as provided in Treas.
Reg. Section 1.704-1(b)(2)(ii)(g)), after crediting all income upon sale of the
Partnership's assets which have been sold, and after making all allocations
provided for herein, a Partner (the Partner whose partnership interest has been
liquidated, if applicable) has a negative Capital Account, such Partner shall be
obligated to contribute to the Partnership at or before the later to occur of
(i) the close of the Partnership's taxable year, or (ii) 90 days following such
liquidation, an amount equal to such negative Capital Account for distribution
in accordance with the terms of this Agreement.
ARTICLE 11
ASSIGNMENT AND TRANSFERS TO AFFILIATES
11.1 ASSIGNMENT OF PARTNER'S INTEREST. Except as provided in this
Agreement, a Partner may not withdraw, nor sell, assign, transfer, pledge, grant
a security interest in, encumber or otherwise dispose of, all or any part of its
interest in the Partnership. Any Partner may grant a security interest in its
right to receive distributions from the Partnership in connection with a
financing by such Partner. Any attempted withdrawal or transfer not permitted by
the terms of this Agreement shall be null and void ab initio and is of no force
and effect.
11.2 TRANSFER TO AFFILIATES. With the prior written consent of the
other Partners, a Partner ("Transferring Partner") may sell, assign, transfer or
dispose of all, or a portion, of its interest in the Partnership to any of its
Affiliates as defined below; provided that, the other Partners
("Non-Transferring Partners") shall not unreasonably withhold consent thereto if
the Transferring Partner: (i) enters into a guarantee of the liabilities and
obligations of its Affiliate (and in the case of Thoroughbred Peabody Holding
Company, Inc. enters into a guaranty of such
19
Affiliates obligations as a Partner); (ii) indemnifies and holds harmless the
Non-Transferring Partners, in form and substance satisfactory to the
Non-Transferring Partners, against all costs and obligations of any nature
whatsoever, including, without limitation, obligations under the Code and the
Employee Retirement Income Security Act of 1974, as amended from time to time,
such that the Non-Transferring Partners shall be in the same position as it
would have been in if no such transfer had occurred, and (iii) satisfies the
Non-Transferring Partners that such transfer will not result in a termination of
the Partnership for Federal income tax purposes under Section 708(b) of the
Code. Any Affiliate to which such right, title and interest shall be sold,
assigned, transferred or disposed of shall execute a copy of this Agreement and
such other documents as are necessary to assume all the duties, liabilities and
obligations of the Transferring Partner concerning the Partnership. Thereupon,
the Affiliate shall be a Partner in succession to the Transferring Partner, and
the Transferring Partner shall cease to have any right, title or interest in, or
duties, liabilities or obligations in respect of, the Partnership to the extent
of any such transfer, except as provided above in this Section 11.2 or which may
arise by operation of law. For purposes of this Agreement, the term "Affiliate"
shall mean any individual, corporation, partnership or other entity which,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, another individual, corporation,
partnership or other entity. For purposes of this Agreement the interest of any
Affiliate assignee(s) of a Partner shall be aggregated with such Partner and the
original named Partner and all Affiliate assignees of such Partner shall be
treated as a single Partner.
ARTICLE 12
RELATIONSHIP WITH PARTNERSHIP
12.1 INFORMATION. Subject to any applicable restriction of law, all
Partners shall be fully and currently informed of the activities of the
Partnership. To the extent that there are any applicable laws or regulations
which would have the effect of limiting the right of a Partner to be so
informed, the other Partners shall use all reasonable efforts to obtain waivers
thereof in favor of the Partnership and the Partner so limited and, failing the
obtaining of such waivers, the Partners shall make such arrangements as shall be
practicable to preserve to the Partnership the
20
benefits of the contracts or projects to which any secrecy agreements or laws or
regulations relate. Each Partner shall not, except as required by law and except
for disclosure to its attorneys, accountants, and Affiliates (who shall be bound
by the confidentiality provisions of this Agreement), divulge to any person any
confidential or proprietary information concerning the business of the
Partnership.
12.2 GOOD FAITH OF PARTNERS AND AFFILIATES. Each of the Partners
shall act in good faith with respect to the Partnership in any matter which
involves the interests of any of its Affiliates. Without derogating from the
obligations of a Partner and its Affiliates to the Partnership and the other
Partners, a Partner shall not subordinate the interests of the Partnership to
the separate interests of itself or its Affiliates.
ARTICLE 13
SCOPE OF PARTNERSHIP
13.1 NATURE OF OBLIGATIONS AMONG PARTNERS. Except as otherwise
provided in this Agreement, a Partner shall not act for, or assume any
obligation or responsibility on behalf of, any other Partner or the Partnership.
Each Partner hereby acknowledges, as among the Partners and the Partnership, a
personal responsibility for its respective Percentage Interest of the
liabilities and obligations of the Partnership incurred in accordance with the
terms of this Agreement, except as otherwise expressly provided in this
Agreement. In furtherance of the foregoing, if a Partner, pursuant to a final
judgment of a court of applicable jurisdiction, pays any amount on behalf or for
the account of the Partnership with respect to (i) any liability, obligation,
undertaking, damage or claim for which the Partnership shall or may, pursuant to
this Agreement or other contract or applicable law, be liable or responsible, or
(ii) making good any loss or damage sustained by, or paying any duty, cost,
claim or damage incurred by, the Partnership (such items referenced in clauses
(i) and (ii) above called "Liabilities"), then the Partnership shall reimburse
such Partner for the amount so paid by that Partner. If the Partnership fails
fully to reimburse the paying Partner,
21
each of the other Partners (a "Reimbursing Partner") shall indemnify the paying
Partner by paying to it an amount necessary to cause the Reimbursing Partner to
have incurred its Percentage Interest of the excess of (x) the aggregate
payments by the paying Partner as to such Liabilities over (y) the aggregate
reimbursement, if any, which the paying Partner has received from the
Partnership as to such payments. For purposes of this Article 13, all
Liabilities arising as a result of the insufficiency of any reserve established
in connection with the dissolution of the Partnership shall in each case be
deemed to be Liabilities of the Partnership.
13.2 INDEMNIFICATION.
(a) The Partnership shall indemnify, defend and hold
harmless each Partner and its employees, officers, directors and agents (the
"Other Indemnified Persons") from and against all loss, cost, liability and
expense which may be imposed upon or reasonably incurred by such Partner or
Other Indemnified Persons, including reasonable attorneys' fees and
disbursements and reasonable settlement payments, in connection with any claim,
action, suit or proceeding or threat thereof, made or instituted in which such
Partner of Other Indemnified Persons may be involved or be made a party by
reason of such Partner's being a Partner, or by reason of any action alleged to
have been taken or omitted by such Partner in such capacity, or by such Other
Indemnified Persons acting on behalf of such Partner or the Partnership, if such
Partner or Other Indemnified Person was acting in good faith and with reasonable
care in what it reasonably believed to be its scope of authority set forth in
this Agreement and in the best interests of the Partnership.
(b) Nothing in this Section 13.2 shall be construed to
require the Partnership to reimburse, defend indemnify or hold harmless any
Partner or Other Indemnified Persons with respect to any loss, cost, liability
or expense in any circumstance in which this Agreement requires a Partner to
reimburse, defend, indemnify or hold harmless any other Partner or the
Partnership.
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(c) Each Partner shall indemnify and hold harmless the
Partnership and each other Partner, and the Other Indemnified Persons, from and
against all loss, cost, liability and expense which may be imposed upon or
reasonably incurred by the Partnership, such other Partner, or Other Indemnified
Persons, including reasonable attorneys' fees and disbursements and reasonable
settlement payments, in connection with any claim, action, suit or proceeding or
threat thereof arising out of any breach by such indemnifying Partner of its
obligations and agreements under this Agreement.
(d) Promptly after receipt by a person or entity
indemnified under any provision of this Agreement (the "Indemnified Party") of
notice of the commencement of any action against the Indemnified Party, such
Indemnified Party shall give notice to the person or persons or entity or
entities obligated to indemnify the Indemnified Party pursuant to the provisions
of this Agreement (the "Indemnifying Party"). The Indemnifying Party shall be
entitled to participate in the defense of the action and, to the extent that it
may elect in its discretion by written notice to the Indemnified Party, to
assume control of the defense and/or settlement of such action; provided,
however, that (i) both the Indemnifying Party and the Indemnified Party must
consent and agree to any settlement of any such action, except that it the
Indemnifying Party has reached a bona fide settlement agreement with the
plaintiff(s) in any such action and the Indemnified Party does not consent to
such settlement agreement, such settlement agreement shall act as an absolute
maximum limit on the indemnification obligation of the Indemnifying Party, and
(ii) if the defendants in any such action include both the Indemnifying Party
and the Indemnified Party and if the Indemnified Party shall have reasonably
concluded that there are legal defenses available to it which are in conflict
with those available to the Indemnifying Party, then the Indemnified Party shall
have the right to select separate counsel to assert such legal defenses and
otherwise to participate in the defense of such action on its own behalf, and
the fees and disbursements of such separate counsel shall be included in the
amount which the Indemnified Party is entitled to recover under the terms and
subject to the conditions of this Agreement.
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ARTICLE 14
GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Indiana. The Partners agree that if any
litigation occurs between the Partners regarding the Partnership, such action
shall be maintained only in the United States District Court for the Southern
District of Indiana, subject to applicable jurisdictional limitations. If due to
jurisdictional limitations, such action cannot be brought in the Southern
District of Indiana, such action may be maintained in any other Federal district
court in Indiana, or in an appropriate state court in Indiana.
ARTICLE 15
ARBITRATION
Any claim or dispute between the Partners which arises out of or
relates to this Agreement shall be arbitrable; provided that no matter requiring
the approval of the Partnership Committee shall be arbitrable. Further, any
Partner may bring an action in law or in equity for an injunction against a
violation of this Agreement pending resolution of the dispute by arbitration.
All such arbitrable matters shall be governed solely by Exhibit "15" hereto. The
pendency of any arbitration proceeding shall stay any right of a Partner to take
any action in regard to the other Partners which is based upon a claim involved
in the matter being arbitrated, but such stay shall not affect the obligations
of the parties hereunder to continue with performance of this Agreement except
to the extent of the matter being arbitrated.
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ARTICLE 16
{RESERVED}
ARTICLE 17
NOTICES
17.1 ADDRESSES. All notices, consents, elections, requests,
reports, demands and other communications hereunder shall be in writing and
shall be personally delivered or mailed by registered or certified, first-class
mail, postage prepaid, or sent by attested facsimile transmission or by a
reputable overnight courier service such as Federal Express,
to BBEC:
Black Beauty Equipment Company
414 South Fares Ave.
Evansville, Indiana 47714
Attention: President
to Franks:
Franks Energy, LLC
29 W. Raymond
P.O. Box 444
Harrisburg, Illinois 62946
Attention: President
or to such other address or to such other person as a Partner shall have last
designated by notice to the other Partners.
17.2 EFFECTIVE DATE. All notices, consents, elections, requests,
reports and other documents authorized or required to be given pursuant to this
Agreement shall be effective as of the date received by the recipient or
addressee for purposes of calculating the time within which the other Partners
are obligated to respond. If a Partner refuses to accept delivery of any notice
25
sent in accordance with Section 17.1 hereof, such Partner shall nevertheless be
deemed to have received such notice for purposes of this Section 17.2 on the
date such refusal first occurred.
26
ARTICLE 18
MISCELLANEOUS
18.1 BINDING ON SUCCESSORS. Except as otherwise provided in this
Agreement, this Agreement shall be binding upon and inure to the benefit of the
Partners and their successors and assigns.
18.2 AMENDMENTS. This Agreement shall not be amended or modified
except by a written instrument executed by all Partners.
18.3 WAIVER AND CONSENT. No consent or waiver, express or implied,
by a Partner to or of any breach or default by the other Partners in the
performance of its obligations hereunder shall be deemed or construed to be a
consent or waiver to or of any other breach or default in the performance by
such other Partners of the same or any other obligation of such Partners
hereunder. Failure by any Partner to complain of any act or failure to act of
the other Partners or to declare any such other Partner in default, irrespective
of how long such failure continues, shall not constitute a waiver by such
Partner of its rights hereunder.
18.4 LIMITATION ON RIGHT TO PURCHASE PARTNERSHIP INTEREST.
Notwithstanding anything in this Agreement to the contrary, the right of a
Partner to purchase the Partnership Interest of the other Partners shall cease
20 years and 11 months after the death of the last survivor of the descendants
living as of the date hereof of William J. Clinton, President of the United
States of America.
18.5 WAIVER OF DISSOLUTION UNDER THE UNIFORM PARTNERSHIP ACT. Any
dissolution of the Partnership shall occur only as provided in Article 10
hereof, and each Partner hereby waives and renounces its rights under the IUPA
to seek a court decree of dissolution, to seek the appointment of a liquidator
of the Partnership, and to seek a partition of any Partnership property.
27
18.6 RELATIONSHIP OF THE PARTNERS. Nothing herein shall be
construed to authorize a Partner to act as general agent for the other Partners.
18.7 FURTHER ASSURANCES. The Partners shall execute and deliver
such further instruments and do such further acts and things as may be required
to carry out the intent and purpose of this Agreement.
18.8 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance is invalid or unenforceable
to any extent, the remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be affected thereby and
shall be enforced to the greatest extent permitted by law.
18.9 AGREEMENT IN COUNTERPARTS. This Agreement may be executed in
as many counterparts as may be deemed necessary and convenient. Each
counterpart when so executed shall be deemed an original, but all counterparts
shall constitute one and the same instrument.
18.10 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto relative to the Partnership. Exhibits 9.1 and 15 are
incorporated into this Agreement by reference.
IN WITNESS WHEREOF, the parties hereto have duly caused the execution
of this Agreement by their duly authorized officers, as of the day and year
first above written.
BLACK BEAUTY EQUIPMENT COMPANY
BY: /s/ David S. Hermann
--------------------------
TITLE: President
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FRANKS ENERGY, LLC
BY: /s/ Thomas W. Franks
--------------------------
TITLE: President
29
EXHIBIT LIST
9.1 Major Decisions
15 Arbitration
EXHIBIT "9.1"
MAJOR DECISIONS
1. Any change in, addition to, or exclusion from, the purposes of the
Partnership, or the setting up or substantial alteration or divestment
of any major business activity or activities of the Partnership.
2. The approval of, and any material change in, the annual budget and
business plan of the Partnership.
3. Any specific capital project or capital expenditure not covered by an
approved budget and business plan, or any decision requiring the
Partners to make additional capital contributions to the Partnership.
4. Any contract or other commitment which cannot be cancelled by the
Partnership without penalty and requiring, or potentially requiring,
the expenditure of more than $25,000 or having, or potentially having,
a material impact upon the business of the Partnership, except
contracts or other commitments in respect of which authority to commit
the Partnership shall have been approved in an annual budget and
business plan or is delegated to the Chief Executive Officer by general
or specific action of the Partnership Committee.
5. Any contract or arrangement between the Partnership, on the one hand,
and one Partner or an Affiliate of such Partner, on the other hand, if
such arrangement is subject to Partnership Committee approval under
Section 9.4 of the Agreement.
6. The commencement or settlement of litigation or the settlement of any
claim or environmental proceeding involving or potentially involving
$25,000 or more in value at issue plus costs.
7. The appointment of any person as Chief Executive Officer or the removal
or dismissal of any person holding that office; or the establishment of
salary and employee benefits for the Chief Executive Officer; or the
approval of any contract of employment for the Chief Executive Officer.
8. The appointment of any person to, or the removal or dismissal of any
person from, a senior managerial position with the Partnership; the
designation of which positions constitute senior managerial positions;
or the establishment of salaries and employee benefits for the holders
of such positions.
9. Any borrowing by the Partnership, other than the incurrence of trade
payables in the ordinary course of business, the imposition of any
mortgage or other encumbrance on assets of the Partnership for any
financing transaction, including any incurrence of a contingent
liability with respect thereto and any lease commitment which is either
noncancelable or only cancelable at a penalty; other than a loan by a
Partner to the Partnership or the incurrence of liabilities approved in
an annual budget and business plan. Also, any decision by the
Partnership to pre-pay any long term indebtedness of the Partnership.
10. Any sale or other disposal of one or more capital assets of the
Partnership having an aggregate value on the books of the partnership
in excess of $100,000 in any one year.
11. Any matter relating to company, corporate or partnership titles, names
or trade names, designations, descriptions, designs, emblems or
insignia used or to be used by the Partnership.
12. Adoption or amendment of pension or other employee benefit plans.
13. Approval of all significant tax returns of the Partnership before
filing.
14. The approval of any labor contract or the settlement of any significant
work stoppage.
15. Questions of Business ethics.
16. Any merger, consolidation, dissolution, winding-up or any sale of all
or a substantial portion of the assets of the Partnership, and the
decision as to whether any of the Partnership assets are to be
distributed to the Partner "in kind" in connection with any dissolution
or winding-up of the business of the Partnership.
17. Acquisition by the Partnership of any interest in any corporation,
partnership joint venture or other unincorporated association.
18. The determination whether the Partnership should join any industrial
bargaining group or trade association having similar functions.
EXHIBIT 15
ARBITRATION AGREEMENT
I. MATTERS SUBJECT TO ARBITRATION
Any claim or dispute between any of the Partners which arises out of or
relates to that Partnership Agreement among BBEC and Franks dated Dec.
20, 2000 ("Partnership Agreement"), other than certain matters excluded
under Article XV shall be arbitrable. The Partners hereby agree that,
as to all arbitrable claims or disputes, these provisions provide the
exclusive remedy(ies) and bar any court proceeding on the same
question; provided that, any Partner may pursue any judicial remedy in
any court having jurisdiction to compel arbitration or to enforce or
appeal any decision, award, remedy or sanction of the arbitration panel
("Panel") pursuant to Article VIII, X or XI hereof, Unless prohibited
by applicable law, the Panel shall decide whether a claim or dispute is
arbitrable under the Agreement.
II. CHOICE OF FORUM AND LAW
A. Choice of Forum
Unless otherwise agreed in writing by the Partners, the
arbitration and all meetings and hearings relative thereto
shall be held in Evansville, Indiana.
B. Choice of Law
All decisions, awards, orders, proceedings and procedures
pursuant to this Agreement shall be governed, as a matter of
contract, by Articles I through XVIII. Where such a proceeding
or procedure is not addressed by this Agreement, the Federal
Arbitration Act as presently in effect shall apply, as a
matter of contract. To the extent not in conflict with either
this Agreement or
the Federal Arbitration Act, the law of the State of Indiana,
including its substantive law, shall apply to such decisions,
awards, orders, proceedings and procedures.
III. ARBITRATORS
A. Number and Method of Selection
Three arbitrators shall comprise the Panel for any proceeding
or procedure under this Agreement. The Partner invoking
arbitration shall include in the notice thereof a list of the
names, business addresses, and affiliations of three neutral
arbitrators acceptable to it. Upon receipt of that notice,
each of the other Partners, in their respective answers
thereto shall include, as provided in Article VI. A, the
names, business addresses and affiliations of three neutral
arbitrators acceptable to it. Upon receipt of that answer, the
Partner invoking arbitration shall contact the other Partners,
and they shall attempt to mutually select three neutral
arbitrators. Upon request by any Partner, the Partners shall
participate in interviewing each proposed arbitrator. If the
Partners fail to agree on the selection of one or more
arbitrators within 14 days from the date the Partner invoking
the arbitration receives the other Partners' answers, then any
Partner may refer the selection of those Panel members not so
selected to a judge of the Federal District Court for the
Southern District of Indiana, Evansville Division. When the
three arbitrators are finally selected, they shall promptly
notify each Partner of their respective mailing addresses and
affiliations.
B. Minimum Qualification
The Panel shall consist of at least one arbitrator who, at the
time of his/her selection, is an attorney currently licensed
to actively practice in at least one state or is a retired
federal or state judge.
C. Selection of Chair
The Panel shall be chaired by an attorney/judge who meets the
minimum qualification in Article III.B. If more than one Panel
member is such an attorney/judge, a majority of the Panel
shall determine which attorney/judge shall chair the Panel.
D. Vacancies
If any Panel member is unable or unwilling to continue to
serve at any time prior to the issuance of the Panel's
decision and award, the remaining two Panel members shall
mutually select a replacement. Upon their failure to make that
selection within 7 days of such vacancy, any Partner may
request a judge of the Federal District Court for the Southern
District of Indiana, Evansville Division, to select that
replacement.
E. Compensation
Whoever selects an arbitrator shall determine, at the time of
selection, that arbitrator's compensation. The compensation of
the arbitrators shall be borne equally by the Partners, unless
otherwise apportioned by the Panel as provided in Article XL.
F. Oath
At the Panel's first meeting, and in any event before
proceeding with the preliminary hearing described in Article
VI.C, each arbitrator shall take the oath of office, which
shall be in the form of the "Arbitrator's Oath" set forth in
the American Arbitration Association's then "Notice of
Appointment."
G. Powers
The Panel shall have the powers stated in this Agreement, as
well as any power reasonably necessary to exercise or
implement any such stated powers. All powers of the Panel
shall be exercised by a majority of the Panel.
H. No Liability to Any Partner
The Partners hereby agree that no arbitrator shall be liable
to any Partner for any act or omission in connection with any
arbitration, proceeding or procedure conducted under, or any
decision, award or order with respect to, this Agreement.
IV. USE AND COMPENSATION OF CONSULTANTS
Whenever the Panel desires, it may use one or more consultants to
enable it to more clearly understand any technical, financial or
scientific matters related to any claim or dispute at issue; provided
that, the cost thereof shall not exceed an amount previously agreed to
in writing by the Partners. In making its decision and award, the Panel
may fully or partially use, or may disregard, any information or report
prepared or developed by any such consultant. The cost of all
consultants shall be borne equally by the Partners, unless otherwise
awarded by the Panel as provided in Article XI.
V. REPRESENTATION BY COUNSEL
Any Partner, at its sole election, may be represented by counsel of its
choice at any and all times during the arbitration.
VI. PROCEDURES
A. Commencement
Any Partner may invoke arbitration by notifying the other
Partners, within one year of the date the claim or dispute
first arose. The date such notice is mailed shall be the
effective date the arbitration is invoked for all purposes of
this Agreement. In addition to listing its three proposed
neutral arbitrators in that notice as required by Article
III.A, the notice shall state with reasonable specificity each
claim or dispute and the relief sought. Within 20 days of the
receipt of the notice, each of the receiving Partners shall
send its written answer thereto by certified mail, return
receipt requested, to the other Partners. Each answer shall
include the list of that answering Partner's three proposed
neutral arbitrators and a reasonably specific statement of its
view of each such claim or dispute, including all defenses,
offsets, counterclaims, and any relief sought which arise out
of or relate to each such claim or dispute.
B. Closed Hearings
All proceedings under this Agreement, including the
preliminary and final hearings, shall be closed to the public,
including, without limitation, the print and electronic media,
unless otherwise agreed to in writing by the Partners.
C. Preliminary Hearing
1. Setting the Hearing; Prehearing Statement
Following the selection of the third member of the
Panel and receipt of the other Partners' answers, the
Panel shall set a date, time and place for a
preliminary hearing and shall so notify the Partners
in writing. Such notice shall be submitted to each
Partner within 10 days of the date the third member
of the Panel is selected. The preliminary
hearing shall occur no sooner than 14 days and no
later than 28 days from the date such notice is
received by each Partner. Not later than 2 days prior
to the commencement of the preliminary hearing, each
Partner shall submit a copy of its proposed
prehearing report to each Panel member and to the
other Partner. Each prehearing statement shall
identify:
a. every claim or dispute to be arbitrated;
b. every legal issue involved in the arbitration;
c. every relevant fact and legal issue which can be
stipulated;
d. each witness that Partner intends to call at the
final hearing, a summary of that testimony, and
each document that Partner intends to offer into
evidence at that hearing, but such matter shall
be subject to revision as a result of any second
preliminary hearing requested by a Partner and
deemed warranted and scheduled by the Panel; and
e. all discovery that Partner intends to undertake
in accordance with Article VII.
A Partner may amend its proposed prehearing report at
the preliminary hearing. After the close of the last
preliminary hearing, any change to a proposed
prehearing report shall be within the Panel's
discretion; provided that, no such change shall be
permitted by the Panel less than 15 days prior to the
commencement of the final hearing, or at any time
without prior written notice to, and an opportunity
to object by, the Partners.
2. Panel's Duties at Preliminary Hearing
The Panel shall perform the following tasks,
seriatim, at the preliminary hearing:
a. require each Panel member, if not previously
sworn, to take the oath of office;
b. identify every claim or dispute to be arbitrated;
c. identify every stipulated fact and issue of law;
d. identify the discovery each Partner intends to
undertake and establish a date for its completion
in accordance with Article VII, which date shall
not be less than 20 days nor more than 60 days
from the date of the Panel's initial preliminary
hearing report;
e. determine the matters in Article VI.C.3 relative
to the Partners' final hearing briefs;
f. set the date, place, time and duration for the
final hearing, which shall be consistent with
Article IX.B and which date shall not be less
than 30 days nor more than 60 days from the date
discovery is required to be completed as provided
in Article VI.C.2.d;
g. establish an agenda for the final hearing; and
h. issue its initial or final preliminary hearing
report, as the case may be.
Any objection to the Panel's actions on any of these
tasks shall be raised by a Partner at the preliminary
hearing, followed by notice to the Panel and the
other Partner within 5 days after the conclusion of
that hearing, failing which such Partner shall be
conclusively deemed to have waived any objection
thereto. If, on motion by a Partner, the Panel
believes a second preliminary hearing is warranted,
the Panel may schedule such a hearing so long as that
hearing does not increase by more than 10 days what
otherwise would have been the duration of the entire
arbitration procedure under this Agreement had no
second preliminary hearing ever been held.
Within 15 days from the completion of the last
preliminary hearing, the Panel shall send a written
copy of the Panel's final preliminary hearing report
to each Partner by certified mail, return receipt
requested. This report shall contain the Panel's
decisions with respect to tasks a through h in
Article VI.C.2. The Panel may amend this report, but
no such amendment shall occur less than 15 days prior
to the commencement of the final hearing, or at the
time without prior written notice to, and a
reasonable opportunity to object by, each Partner.
3. The Partners' Final Hearing Briefs
Each Partner shall submit to the Panel and to the
other Partners its final hearing brief on or before
the date set by the Panel in its final preliminary
hearing report, which date shall be no later than 20
days prior to the commencement of the final hearing.
In its final preliminary hearing report, the Panel
shall determine what this brief shall address and
shall establish a page limitation therefor, but,
unless mooted by the second preliminary hearing, each
brief shall:
a. identify all witnesses, by name, address, title
and affiliation, that Partner intends to call at
the final hearing;
b. contain a summary in reasonable detail of the
nature of each such witness' testimony; and
c. include by way of attachment a photocopy of each
document that Partner intends to introduce at the
final hearing.
Any witness not so identified shall not be permitted to
testify at the final hearing, and any photocopy of a document
not so attached shall not be admitted into evidence at that
hearing. Within 7 days of its receipt of each other Partner's
final hearing brief, each Partner shall submit to the Panel
and to the other Partner an amendment to its final hearing
brief, which shall contain all objections that Partner has to
the authenticity of any of the photocopied documents attached
to the other Partners' final hearing briefs. Any such
photocopied document not so objected to shall be deemed
authenticated for purposes of the final hearing.
VII. DISCOVERY AND SUBPOENAS
If there are material facts in dispute, any Partner may pursue any
method of discovery permitted by the Federal Rules of Civil Procedure,
notwithstanding Rule 81(a)(3) thereof, provided that, in no event shall
the duration of all discovery, including all discovery requests and
responses, exceed the time established by the Panel pursuant to Article
VI.C.2.d. Discovery costs may be awarded by the Panel as provided in
Article XI. The Panel at any time may issue subpoenas for the
attendance of witnesses and the production of books, records, documents
and other evidence for any proceeding or procedure under this
Agreement. The Panel may issue a discovery order to reasonably protect
a Partner's competitive and confidential information.
VIII. INTERLOCUTORY POWERS OF PANEL
A. Decisions
The Panel may decide any matter in advance of the final
hearing, including, without limitation, any matter which may
be dispositive of the claim or dispute being arbitrated.
B. Hearings and Sanctions
Notwithstanding anything in this Agreement to the contrary, if
a Partner fails to fully and timely comply with this Agreement
or with any reasonable order of the Panel, the Panel may hold
a hearing on the default. The defaulting Partner shall be
notified by the Panel of the date, time, location and nature
of that hearing and of the sanctions the Panel may impose.
Such notice shall be sent not less than 10 days prior to the
commencement of the hearing. If the defaulting Partner fails
to appear at that hearing, the Panel may conduct an ex parte
hearing, then or later, which it deems desirable to remedy
such default. Following any such ex parte hearing, the Panel
shall notify each Partner in writing of its decision and
award. Such award shall be consistent with Articles X and XI.
IX. FINAL HEARING
A. Final Prehearing Order
Not later than 15 days prior to the commencement of the final
hearing, the Panel shall submit a copy of its final prehearing
order to each Partner. The final prehearing order shall:
1. resolve any matter not finalized in the Panel's final
preliminary hearing report, as originally issued or
amended; and
2. finalize each of the matters set forth in the
Partners' final hearing briefs, as originally
submitted or amended.
B. Procedure
The final hearing shall occur in one continuous session over a
period not to exceed 5 days, with no recess in excess of 15
hours except for Saturdays, Sundays and Holidays. The Panel
shall conduct the final hearing in accordance with its final
prehearing order. A transcript and an electronic recording
shall be made of all testimony and proceedings at the final
hearing. The Panel shall arrange for a reporter to make such a
transcript and recording. Except as provided in the last
paragraph of Article VI.C.3, the Panel shall consider all
evidence presented by a Partner which is relevant to any claim
or dispute being arbitrated and which is not unduly
repetitious of any previous evidence presented by that
Partner. No other rules of evidence shall apply. The Panel
chair shall administer the oath to each witness before the
witness testifies. The Panel may require that each Partner
submit a short opening and/or closing brief. At the close of
all evidence, the Partners shall be given a reasonable period,
but not to exceed 3 days, in which to make one final attempt
to settle all claims and disputes being arbitrated before the
Panel issues its decision and award as provided in Article X.
Only evidence offered and admitted at the final hearing shall
be considered by the Panel in reaching its decision and award.
X. THE PANEL'S DECISION AND AWARD
Not later than 14 days after the completion of the final hearing, the
Panel shall submit to each Partner a copy of its written decision and
award on each arbitrated claim and dispute.
The decision and award shall be concise, and shall include findings of
fact, conclusions of law, and a reasoned decision. It also shall
include the remedies in Article XI which are awarded, including the
time and method for payment of all awards. All members of the Panel
shall sign the decision and award. However, if a Panel member dissents
in whole or in part from the decision and award, that member shall so
indicate by appropriate notation thereon or by a separate signed,
written dissenting opinion attached thereto within that same 14-day
period. The decision and award shall be final, and judgment may be
entered thereon in any court having jurisdiction thereof. Where
required by applicable law, the decision and award shall be
acknowledged, and a copy of the oaths of each Panel member shall be
attached thereto.
XI. REMEDIES
The Panel may grant, award, modify or vacate any remedy deemed
appropriate, including, without limitation, specific performance,
damages, costs and expenses of the arbitration proceeding, and pre- and
post-decision and award interest. The Panel shall not award any
punitive damages. The actual damages, the costs and expenses of the
arbitration proceeding, and interest shall be separately identified in
the Panel's decision and award. The Panel may apportion such damages,
costs, expenses and interests between or among the Partners as it deems
equitable.
XII. COMMUNICATIONS BETWEEN THE PARTNERS AND THE PANEL
No oral communications between a Partner and any Panel member shall
occur unless the other Partner is present during that communication.
Written communication between a Partner and any Panel member is
permissible only if the other Partners and all other Panel members
timely receive a copy of such written communication.
XIII. NOTICES
All notices and correspondence from any member of the Panel to a
Partner, or from a Partner to the other Partners or to any member of
the Panel, shall be in writing and shall be sent by certified mail,
return receipt requested. If given to a Partner, such notice and
correspondence shall be sent to the addressee's mailing address stated
in Section 17.1 of the Partnership Agreement or to such address as
otherwise designated. If given to a Panel member, it shall be sent to
the mailing address provided by that member to the Partners as provided
in Article III. A. Except for the one-year deadline for invoking
arbitration in Article VI.A, and except as otherwise may be provided in
this Agreement, all notices and correspondence shall be effective and
deemed delivered when received by the addressee or any employee or
agent thereof.
XIV. COMPUTATION OF TIME LIMITS
All time limits set forth in this Agreement include Saturdays, Sundays
and Holidays, except where the last day falls on one of those days. In
that event, such time limit shall be extended to include the next
weekday immediately following that last day which is not a Saturday,
Sunday or Holiday.
XV. WAIVER
If a Partner participates in any arbitration proceeding or procedure
with actual or constructive knowledge that any provision or requirement
of this Agreement has not been complied with, and fails to timely
object thereto in writing to the Panel, that Partner shall be deemed to
have waived the right to object to such noncompliance.
XVI. APPEAL
Any appeal of the Panel's decision and award to any court having
jurisdiction thereof shall be governed exclusively by this Article XVI.
The Panel's decision and award shall be modified only
if;
a. there was an evident material miscalculation of
figures contained in the decision and award, or
an evident material mistake in the description of
any person, thing or property referred to
therein; or
b. the decision and award included a matter not
submitted to the Panel, but such modification
shall apply only to that matter; or
c. the reason for the modification is to give full
force and effect to the Panel's decision and
award.
XVI. SURVIVAL OF THE TERMS AND CONDITIONS
The terms and conditions of this Agreement shall survive the
termination or expiration of the Partnership Agreement to the extent
necessary for their complete enforcement and for the full protection of
the Partner in whose favor they run.
XVII. SEVERABILITY
If any portion of this Agreement is unenforceable for any reason, the
remainder of this Agreement shall be severed from such portion, and, as
severed, shall be binding on and enforceable against the Partners;
provided that, if Article VII is unenforceable in whole or in
substantial part, this Agreement shall automatically terminate and
shall be unenforceable against the Partners.