EXHIBIT 3.41
AGREEMENT OF LIMITED PARTNERSHIP
OF
GENERAL NUTRITION DISTRIBUTION, L.P.
Dated: January 27, 1998
Federal E.I.N.: 23-2946511
TABLE OF CONTENTS
Page
ARTICLE I - GENERAL DEFINITIONS ............................................................... 1
Section 1.1. Definitions ................................................................. 1
ARTICLE II - NAME; FORMATION; ORGANIZATIONAL CERTIFICATES; ADMISSION OF
PARTNERS ................................................................................. 5
Section 2.1. Name ........................................................................ 5
Section 2.2. Formation of Limited Partnership ............................................ 5
Section 2.3. Statutory Compliance ............................................. .......... 5
Section 2.4. Admission of Partners ............. ......................................... 5
ARTICLE III - PURPOSES ........................................................................ 6
Section 3.1. Purposes .................................................................... 6
ARTICLE IV - TERM ............................................................................. 6
Section 4.1. Term ........................................................................ 6
ARTICLE V - PRINCIPAL OFFICE; REGISTERED OFFICE ............................................... 6
Section 5.1. Principal Office ............................................................ 6
ARTICLE VI - MANAGEMENT ....................................................................... 6
Section 6.1. General Partner ............................................................. 6
Section 6.2. Powers of the General Partner ............................................... 7
Section 6.3. Tax Controversies ........................................................... 7
Section 6.4. Limitations on Authority .................................................... 7
Section 6.5. Major Management Decisions .................................................. 8
Section 6.6. Reserve...................................................................... 8
Section 6.7. General Partner Fees......................................................... 8
Section 6.8. Interest of General Partner in Certain Transactions.......................... 9
Section 6.9. Reliance Upon Experts ....................................................... 9
Section 6.10. Other Permissible Activities ............................................... 9
ARTICLE VII - CAPITAL ......................................................................... 9
Section 7.1. Initial Capital Contributions................................................ 9
Section 7.2. Withdrawals from Capital Accounts ........................................... 9
Section 7.3. Capital Accounts............................................................. 9
Section 7.4. Determination of and Adjustments to Book Value and Capital Accounts.......... 10
Section 7.5. Additional Capital Contributions............................................. 12
Section 7.6. Liability for Continuing Obligations ........................................ 12
ARTICLE VIII - PROFITS, LOSSES AND DISTRIBUTIONS............................................... 12
Section 8.1. Positive Cash Flow........................................................... 12
Section 8.2. Distribution of Positive Cash Flow........................................... 13
Section 8.3. Determination of Net Book Profit and Net Book Losses ........................ 13
Section 8.4. Allocation of Net Book Profits and Net Book Losses .......................... 14
Section 8.5. Allocations to Comply With Applicable Treasury Regulations................... 14
Section 8.6. Federal Income Tax Allocations .............................................. 16
Section 8.7. Allocation of Taxable Income and Loss and Tax Credits on the Transfer
of a Partnership Interest ................................................. 17
Section 8.8. Special Tax Audit Allocations ............................................... 17
Section 8.9. Interest .................................................................... 17
Section 8.10. Credits .................................................................... 17
Section 8.11. Distributions in Kind ...................................................... 17
ARTICLE IX - BOOKS OF ACCOUNT, RECORDS AND REPORTS ............................................ 18
Section 9.1. Books and Records ........................................................... 18
Section 9.2. Tax Information ............................................................. 18
Section 9.3. Accounting Principles ....................................................... 18
Section 9.4. Banks ............... ....................................................... 18
ARTICLE X - FISCAL YEAR ....................................................................... 19
Section 10.1. Fiscal Year ................................................................ 19
ARTICLE XI - LIABILITY OF GENERAL PARTNER; EXCULPATION ........................................ 19
Section 11.1. Liability of General Partner ............................................... 19
Section 11.2. Exculpation ................................................................ 19
ARTICLE XII - RIGHTS AND LIMITATIONS OF
LIMITED PARTNERS; MEETINGS; AMENDMENTS ................................................... 19
Section 12.1. Limited Assessment.......................................................... 19
Section 12.2. No Right to Manage ......................................................... 19
Section 12.3. Priority ................................................................... 20
Section 12.4. Death, Disability, Etc., of a Limited Partner .............................. 20
Section 12.5. Meetings ................................................................... 20
Section 12.6. Voting Rights of Limited Partners .......................................... 21
Section 12.7. Proposal and Adoption of Amendments Generally .............................. 22
Section 12.8. Limitations on Amendments .................................................. 23
Section 12.9. Amendments on Admission or Withdrawal of Partners........................... 23
Section 12.10. Registration............................................................... 24
Section 12.11. Continuation of Limited Partner Status..................................... 24
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ARTICLE XIII - TRANSFERS BY LIMITED PARTNERS;
REPURCHASE OF INTERESTS......................................................... 24
Section 13.1. Transfers .................................................................. 24
Section 13.2. Compliance with Securities Laws............................................. 25
Section 13.3. Steps Required to Transfer ................................................. 25
Section 13.4. Admission of Substitute Limited Partner..................................... 25
Section 13.5. Status of Transferee........................................................ 26
Section 13.6. Expenses ................................................................... 26
Section 13.7. Death, Bankruptcy, Incompetence, Etc., of a Limited Partner................. 26
Section 13.8. Transferee(s)............................................................... 26
Section 13.9. Tax Elections............................................................... 26
Section 13.10. Admission of Additional Limited Partners................................... 26
Section 13.11. Amendment of Certificate................................................... 27
ARTICLE XIV - CHANGES TO THE GENERAL PARTNER .................................................. 27
Section 14.1. Removal of the General Partner.............................................. 27
Section 14.2. Withdrawal of the General Partner........................................... 28
Section 14.3. Right of the General Partner Upon Removal................................... 28
Section 14.4. Transfer of Interest........................................................ 28
Section 14.5. Continuing Liability ....................................................... 28
Section 14.6. Successor General Partner................................................... 29
Section 14.7. Involuntary Assignment by a General Partner................................. 29
ARTICLE XV - DISSOLUTION OF THE PARTNERSHIP.................................................... 29
Section 15.1. Events of Dissolution....................................................... 29
Section 15.2. Election to Continue the Partnership........................................ 30
ARTICLE XVI - ADDITIONAL PROVISIONS CONCERNING
DISSOLUTION OF THE PARTNERSHIP................................................... 30
Section 16.1. Winding Up Affairs; Liquidation............................................. 30
Section 16.2. Time for Liquidation........................................................ 30
Section 16.3. Required Reports ........................................................... 31
Section 16.4. Termination................................................................. 31
Section 16.5. Distribution of Proceeds From the Liquidation of the Partnership............ 31
Section 16.6. Capital Account Adjustments................................................. 31
Section 16.7. Compliance With Treasury Regulations........................................ 32
Section 16.8. No Recourse................................................................. 32
Section 16.9. Reserves.................................................................... 32
ARTICLE XVII - NOTICES......................................................................... 33
Section 17.1. Notices .................................................................... 33
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ARTICLE XVIII - REPRESENTATIONS AND WARRANTIES................................................. 33
Section 18.1. The General Partner......................................................... 33
Section 18.2. Limited Partners............................................................ 33
ARTICLE XIX - INDEMNIFICATION.................................................................. 34
Section 19.1. Indemnification ............................................................ 34
Section 19.2. Conditions.................................................................. 34
Section 19.3. Successful Defense ......................................................... 35
Section 19.4. Exclusions.................................................................. 35
Section 19.5. Expenses ................................................................... 35
ARTICLE XX - MISCELLANEOUS..................................................................... 35
Section 20.1. Certificates, Etc........................................................... 35
Section 20.2. Power of Attorney .......................................................... 35
Section 20.3. Partners' Relationship Inter Se ........................................... 36
Section 20.4. Partition Waived ........................................................... 36
Section 20.5. Entire Agreement ........................................................... 36
Section 20.6. Governing Law .............................................................. 36
Section 20.7. Binding Effect ............................................................. 36
Section 20.8. Gender and Number .......................................................... 36
Section 20.9. Captions ........................ .......................................... 36
Section 20.10. Severance ................................................................. 36
Section 20.11. Execution of Instruments; Reliance by Third Parties ....................... 37
Section 20.12. Counterparts .............................................................. 37
iv
AGREEMENT OF LIMITED PARTNERSHIP
OF
GENERAL NUTRITION DISTRIBUTION. L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP (hereinafter referred to
as the "Agreement") is made and entered into as of the 27th day of January,
1998, by and between General Nutrition, Incorporated, a Pennsylvania corporation
with a mailing address at 14th Floor, 300 Sixth Avenue, Pittsburgh, Pennsylvania
15222, (hereinafter referred to as the "General Partner") and the entity whose
name is set forth in Exhibit A to this Agreement (together with such other
persons or entities that may be added to Exhibit A and become parties hereto) as
the limited partners (hereinafter such persons are referred to individually as a
"Limited Partner" and collectively as the "Limited Partners").
WITNESSETH:
WHEREAS, the parties to this Agreement desire to organize a
limited partnership and to set forth in writing the agreement pursuant to which
the Partnership will conduct its business.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth, the parties hereto, intending to be
legally bound hereby, agree as follows:
ARTICLE I - GENERAL DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Act" shall mean the Federal Securities Act of 1933, as
amended.
"Affiliate" shall, with respect to the General Partner, mean
any person currently or indirectly controlling or controlled by or under common
control with the General Partner.
"Agreement" shall mean this Agreement of Limited Partnership
of the Partnership.
"Book Value" shall mean, with respect to any Partnership
asset, the asset's book value as carried on the books and records of the
Partnership, determined in compliance with the provisions of the Code and
applicable Treasury Regulations, including Treasury Regulation Section 1.704-1
(b)(2)(iv), and more particularly described in Section 7.4 of this Agreement.
"Capital Account" shall mean the capital account established
for each Partner and maintained pursuant to the terms of this Agreement in
accordance with the provisions of applicable Treasury Regulations, including
Treasury Regulation Section 1.704-1(b)(2)(iv).
"Capital Contribution" shall mean, with respect to any
Partner, the contribution made by or on behalf of such Partner in accordance
with Article VII hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto.
"Depreciation" shall mean, for each fiscal year or other
period, the depreciation, amortization or other cost recovery expense determined
pursuant to Section 8.3(a) of this Agreement.
"Gross Fair Market Value" shall mean the agreed fair market
value of an asset determined without taking into account any liabilities which
are secured by such asset or which are otherwise associated with such asset.
"Initial Capital Contribution" shall mean the initial capital
contributed or deemed contributed to the Partnership by the Partners as listed
on Exhibit B to this Agreement.
"Interest" shall mean a Partner's respective ownership
interest in and to the Partnership.
"Limited Partner" shall mean each person or entity listed on
Exhibit A hereto, and who is a limited partner as defined by the Partnership
Act.
"Minimum Gain" shall mean the aggregate amount of gain (of
whatever character) computed with respect to each property of the Partnership
that secures a Third Party Nonrecourse Liability of the Partnership, that would
be recognized by the Partnership if, in a taxable transaction, the Partnership
were to dispose of such property in full satisfaction of such Third Party
Nonrecourse Liability. The amount of Minimum Gain and the amount of any
Partner's share of Minimum Gain shall be determined in accordance with the
provisions of applicable Treasury Regulations, including Treasury Regulation
Section 1.704-2.
"Net Book Losses and Net Book Profits" shall have the meanings
ascribed to such terms in Section 8.3 of this Agreement.
"Net Fair Market Value" shall mean, in connection with the
contribution of an asset to the Partnership by a Partner and/or in connection
with the distribution of an asset by the Partnership to a Partner, the Gross
Fair Market Value of such asset reduced by any liabilities (a) assumed by such
Partner or the Partnership or (b) subject to which such Partner or the
Partnership takes such asset.
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"Nonrecourse Deduction" shall mean an allocation of loss
and/or expense (or item thereof) attributable to Third Party Nonrecourse
Liabilities, determined in accordance with the provisions of applicable Treasury
Regulations, including Treasury Regulation Section 1.704-2.
"Participating Percentage" shall mean, with respect to a
Partner, the percentage set forth next to such Partner's name on Exhibit B to
this Agreement.
"Partner Nonrecourse Deduction" shall mean an allocation of
loss and/or expense (or item thereof) attributable to Partner Nonrecourse
Liabilities, determined in accordance with the provisions of applicable Treasury
Regulations, including Treasury Regulation Section 1.704-2.
"Partner Nonrecourse Liabilities" shall mean liabilities of
the Partnership which are nonrecourse debt (as defined in applicable Treasury
Regulations, including Treasury Regulation Section 1.704-2) but with respect to
which one or more Partners (or the affiliate of any Partner) bears the economic
risk of loss (as defined in applicable Treasury Regulations promulgated under
Code Section 752).
"Partner Nonrecourse Liability Minimum Gain" shall mean the
aggregate amount of gain (of whatever character), computed with respect to each
property of the Partnership which secures a Partner Nonrecourse Liability of the
Partnership, that would be recognized by the Partnership if, in a taxable
transaction, the Partnership were to dispose of such property in full
satisfaction of such Partner Nonrecourse Liability. The amount of Partner
Recourse Liability Minimum Gain and the amount of any Partner's share of Partner
Nonrecourse Liability Minimum Gain shall be determined in accordance with the
provisions of applicable Treasury Regulations, including Treasury Regulation
Section 1.704-2.
"Partners" shall mean the General Partners and Limited
Partners of the Partnership.
"Partnership" shall mean the limited partnership created under
this Agreement.
"Partnership Act" shall mean the Pennsylvania Revised Uniform
Limited Partnership Act (Act of December 21, 1988, P.L. 1444, No. 177; 15 Pa.
C.S.A. Section 8501 et seq.
"Partnership Interest" or "Interest" means each Partner's
percentage ownership in the Partnership as set forth in Exhibit B hereto.
"Partnership Interest Valuation" shall mean, with respect to
the interest in the Partnership of any Partner, the value determined in good
faith by the accountant to the Partnership or value determined by the appraisal
of an independent, third party appraiser.
"Person" shall mean an individual, corporation, partnership,
trust, joint venture, proprietorship, estate or other incorporated or
unincorporated enterprise, entity or organization of any kind whatsoever.
3
"Positive Cash Flow" shall have the meaning ascribed to it in
Section 8.1 of this Agreement.
"Reserve" shall mean the reserve account established by the
Partnership to provide for anticipated capital improvements and other deferred
maintenance, as provided for in Section 6.6 of this Agreement.
"Substitute Limited Partner" shall mean any Person admitted as
a Limited Partner of the Partnership in substitution of another Limited Partner
in accordance with the provisions of this Agreement.
"Tax Matters Partner" shall mean the Partner designated in
this Agreement as the "tax matters partner" as defined in Code Sections
6221,6231 (a)(7) and 6233.
"Third Party Nonrecourse Liabilities" shall mean liabilities
of the Partnership which are nonrecourse debt (as defined in applicable Treasury
Regulations, including Treasury Regulation Section 1.704-2) and which are not
Partner Nonrecourse Liabilities.
"Total Minimum Gain" shall mean the aggregate of the Minimum
Gain and the Partner Nonrecourse Liability Minimum Gain.
"Treasury Regulations" shall mean any applicable regulations
promulgated under the Code.
"Units" shall mean the limited partnership interests in the
Partnership, with each Limited Partner being treated as the holder of one (1)
Unit for each One Thousand Dollars ($ 1,000.00) contributed (or deemed
contributed) by such Limited Partner to the Partnership. The number of Units of
each Limited Partner shall be set forth next to such-Limited Partner's name on
Exhibit B to this Agreement.
"Vote" refers to the right of the Partners, subject to all
limitations set forth in this Agreement, to decide any matter that may be
submitted for decision by the Partners in accordance with the express written
terms of this Agreement or under the provisions of the Partnership. Each Partner
shall be entitled to cast one vote for every Unit interest held of record by it
on the date when notice is given of the matter to be voted on or consented to by
the Partners. A "Simple Majority Vote" of the Partners means a vote of over
Fifty Percent (50%) of the Units which are entitled to be voted, a "Required
Vote" means a vote of at least Sixty-Seven Percent (67%) of the Units which are
entitled to be voted, and a "Unanimous Vote" means a vote of One Hundred Percent
(100%) of the Partners eligible to vote. Except as otherwise expressly provided
in this Agreement, a Simple Majority Vote shall be sufficient to pass and
approve any matter submitted to a Vote of the Partners. Whenever a Vote of the
Partners is required or permitted, a written consent to the action to be taken
signed by the Partners holding the required percentage may be used in lieu of
holding a formal meeting at which a Vote is taken.
4
ARTICLE II - NAME; FORMATION;
ORGANIZATIONAL CERTIFICATES; ADMISSION OF PARTNERS
Section 2.1. Name. The name of the Partnership shall be
General Nutrition Distribution, L.P. The business of the Partnership shall be
conducted under this name and such other registered fictitious names as the
General Partner, in its sole discretion, shall determine to be appropriate.
Section 2.2. Formation of Limited Partnership. The Partnership
shall commence existence by filing a Certificate of Limited Partnership with the
Secretary of State of the Commonwealth of Pennsylvania. With this Agreement, the
Partners hereby agree to confirm their agreement and form a limited partnership
pursuant to the provisions of the Partnership Act for the limited purposes and
upon the terms and conditions set forth herein.
Section 2.3. Statutory Compliance.
(a) The Partnership shall exist under and be governed by
the applicable laws of the Commonwealth of Pennsylvania. The Partners shall make
all filings and disclosures required by, and shall otherwise comply with, all
such laws. Except as otherwise provided in this Agreement or required by law,
the rights, duties, status and liabilities of the Partners and the formation,
administration, dissolution and continuation or termination of the Partnership
shall be as provided in the Partnership Act.
(b) Upon the request of the General Partner, the Limited
Partners shall execute, acknowledge, swear to and deliver all certificates and
other instruments and perform such additional acts consistent with the terms of
this Agreement as may be necessary to enable the General Partner to form,
qualify, register, continue, conduct the business of and terminate the
Partnership as a limited partnership under the laws of the Commonwealth of
Pennsylvania and in accordance with the provisions of this Agreement.
Section 2.4. Admission of Partners. A Person shall be deemed
to have been admitted as a Partner:
(a) on the date this Agreement and a Certificate of
Limited Partnership are fully executed by the Partners, and the Certificate of
Limited Partnership is filed with the Pennsylvania Department of State; or
(b) if applicable, with respect to any additional Limited
Partners or Substitute Limited Partners, on the date such Person complies with
the requirements for admission to the Partnership set forth herein.
5
ARTICLE III - PURPOSES
Section 3.1. Purposes. The purpose to which the Partnership is
organized are:
(a) To purchase, acquire, own, hold, develop, manage,
improve, maintain, repair, lease, rent, mortgage, encumber, sell, resell, and
dispose of securities, real property, personal property, chooses in action
and/or such other assets as the General Partner shall in its sole discretion,
determine from time to time to be appropriate;
(b) To invest, reinvest and hold for investment or other
purposes beneficial to the Partners the assets of the Partnership, and to carry
on one or more enterprises, ventures, or other activities as the General Partner
may from time to time determine in its sole discretion;
(c) To carry out any and all activities not prohibited
under the Act or the Partnership Act; and
(d) To perform any acts the General Partner in its sole
discretion determines to be necessary, desirable or convenient to accomplish the
foregoing purposes and all things incident thereto, except to the extent
specifically provided herein.
ARTICLE IV-TERM
Section 4.1. Term. The term of the Partnership shall be from
the date of the filing of the Certificate referenced in Section 2.2 hereof, to
February 1,2029, unless sooner terminated as hereinafter provided in this
Agreement.
ARTICLE V - PRINCIPAL OFFICE; REGISTERED OFFICE
Section 5.1. Principal Office. The principal office of the
Partnership shall be at 14th Floor, 300 Sixth Avenue, Pittsburgh, Pennsylvania
15222. The General Partner may change or relocate the principal office of the
Partnership and establish other or additional places of business of the
Partnership by giving written notice thereof to the Limited Partners.
ARTICLE VI - MANAGEMENT
Section 6.1. General Partner. The General Partner shall have
the sole, exclusive and absolute right, authority and obligation to act for, on
behalf of, and manage the Partnership for the purposes of the Partnership as set
forth in this Agreement and, except as otherwise expressly provided in this
Agreement, the decision-making and plenary authority to implement the purposes
of the Partnership shall reside with the General Partner.
6
Section 6.2. Powers of the General Partner.
(a) The General Partner is hereby authorized and
empowered to carry out and implement the purposes of the Partnership and, in
accordance therewith, the General Partner shall, except as otherwise expressly
provided in this Agreement, have all the rights and powers of a partner in a
general partnership.
(b) The Limited Partners specifically approve and consent
to the exercise by the General Partner of the powers described in Paragraph (a)
of this Section 6.2.
Section 6.3. Tax Controversies. The General Partner shall be
the Tax Matters Partner and shall act as the agent of the Partnership to resolve
any question or controversy with the Internal Revenue Service or other taxing
authority involving the Partnership and may, on behalf of the Partnership, incur
any expenses such Partner shall deem necessary or advisable in the interest of
the Partners in connection with any such question or controversy, including
professional fees and the cost of any protest, litigation and/or appeal. Limited
Partners shall be bound by the terms of any settlement entered into by General
Partner on behalf of the Partnership or all Partners.
Section 6.4. Limitations on Authority. The General Partner
shall not take any action which:
(a) would cause any Limited Partner to be liable for any
amounts in excess of the amounts which such Limited Partner is expressly
obligated to contribute to the capital of the Partnership pursuant to this
Agreement;
(b) would require a Major Management Decision as
described in Section 6.5 of this Agreement without the consent of the Limited
Partners as provided in Section 12.6(b) hereof;
(c) would make it impossible to carry on the ordinary
business of the Partnership;
(d) would directly result in a judgment being entered,
including by confession, against the Partnership;
(e) retain the income in the Partnership in an amount
greater than that determined by the General Partner to be necessary for the
reasonable needs of the Partnership;
(f) would result in the General Partner's obtaining
possession of Partnership property or receiving an assignment of the
Partnership's rights in specific Partnership property, other than for a
Partnership purpose; or
(g) would result in the admission or substitution of a
person as a General Partner of the Partnership, except with the required vote of
the Limited Partners.
7
Section 6.5. Major Management Decisions. A "Major Management
Decision" shall be required for the Partnership to engage in any of the
following actions:
(a) Directly or indirectly acquire or convey, in a single
transaction, real property, including any interests therein, and tangible and
intangible personal property and interests therein on behalf of the Partnership
with a purchase price in excess of Two Million Dollars ($2,000,000.00) (as
adjusted annually for changes in the Consumer Price Index ("CPl"));
(b) Refinance all or substantially all of the
indebtedness of the Partnership (whether in the same or a greater or lesser
amount or with the same or a different lender);
(c) Approve the merger or consolidation of the
Partnership with or into any entity;
(d) Sell, transfer or otherwise dispose of all or
substantially all of the assets of the Partnership, or dissolve, liquidate or
terminate the Partnership;
(e) Issue, grant, sell or authorize the issuance, grant
or sale of any equity or debt security or security convertible into any equity
or debt security or any options or rights relating thereto of the Partnership;
(f) Incur, become a guarantor or surety for, or make any
single expenditure in an amount exceeding Two Million Dollars ($2,000,000.00) on
behalf of the Partnership (as adjusted annually for changes in the CPI);
(g) Make an assignment on behalf of the Partnership for
the benefit of creditors or file a voluntary petition in bankruptcy on behalf of
the Partnership.
Section 6.6. Reserve. Though it is anticipated that the
majority of the Net Profits will be distributed to Partners, the General Partner
may maintain a reserve fund for anticipated future capital or extraordinary
expenditures of the Partnership or for the deferred maintenance costs of the
property of the Partnership.
Section 6.7. General Partner Fees. The General Partner shall
be entitled to receive, in consideration for services to be performed for the
Partnership pursuant to the terms of this Agreement, including without
limitation, the General Partner's management of the Partnership and the
Partnership assets and property and the preparation of reports, a fair and
reasonable management fee, as determined by the General Partner, in a manner
consistent with its duties to the Partnership, which management fee shall be
based upon the General Partner's administration of the Partnership, the relative
financial benefit accruing to the Partnership as the result of the General
Partner's management, and such other fees as shall be reasonable under all of
the facts and circumstances. Such fees shall be paid as, if and when such funds
shall become available to the Partnership.
8
Section 6.8. Interest of General Partner in Certain
Transactions. The General Partner shall not be deemed to have received on behalf
of the Partnership commissions, fees or other compensation paid to any
Affiliate, or any entity in which the General Partner owns a beneficial
interest.
Section 6.9. Reliance Upon Experts. The General Partner may
act and shall be protected in acting in good faith on the opinion or advice of,
or information obtained from any counsel, accountant, engineer, appraiser or
other expert or advisor, whether retained or employed by the Partnership, the
General Partner, or otherwise, in relation to any matter connected with the
administration or operation of the business and affairs of the Partnership.
Section 6.10. Other Permissible Activities. No Partner is
prevented hereby from engaging in other activities for profit, whether as an
investment, an active business or otherwise. The Partners and their Affiliates
are hereby authorized, during the life of the Partnership, to acquire real and
personal properties in their individual capacity and not offer same to the
Partnership.
ARTICLE VII - CAPITAL
Section 7.1. Initial Capital Contributions. This Agreement
contemplates that the General Partner and the Limited Partners will make, or be
deemed to make, cash or other property contributions to the Partnership in
exchange for their respective Interests in the Partnership. The Partners shall
contribute, or be deemed to contribute, to the capital of the Partnership, as
their Initial Capital Contributions, the sums and property set forth on Exhibit
B to this Agreement. Pursuant to applicable Treasury Regulations, including
Treasury Regulation Section 1.704-1(b)(2)(iv)(d), the Book Value of any property
contributed to the Partnership by the Partners as all or a portion of their
Initial Capital Contributions shall reflect the agreed fair market value of such
property on the date of its contribution to the Partnership. Each Partner's
contribution to the Partnership shall be reflected in such Partner's respective
Capital Account in the amount set forth next to such Partner's name on Exhibit B
to this Agreement and each Limited Partner subscribes and agrees to contribute
to the capital of the Partnership such amounts.
Section 7.2. Withdrawals from Capital Accounts. No Partner
shall be entitled to receive interest on or to withdraw any amount from such
Partner's Capital Account other than as expressly provided for in this
Agreement.
Section 7.3. Capital Accounts. A Capital Account shall be
established and maintained for each Partner in compliance with the provisions of
applicable Treasury Regulations, including Treasury Regulation Section
1.704-1(b)(2)(iv). In general, such Capital Accounts shall be maintained as
follows:
(a) Each Partner's Capital Account shall be (i) credited
with the amount of cash or other property contributed by, or deemed to be
contributed by, such Partner to the
9
Partnership, including, without limitation, as a result of a Funding Shortfall,
(ii) credited or debited, as the case may be, with such Partner's allocation of
income, gain, loss and expense made to such Partner pursuant to the terms of
this Agreement and (iii) debited with the amount of cash and the Net Fair Market
Value of property distributed to such Partner pursuant to the terms of this
Agreement.
(b) If any Partner's Interest in the Partnership is sold,
exchanged or liquidated, the following special rules shall apply when
determining the Capital Account balances of any new or remaining Partners:
(i) If such sale or exchange (together with such
other sales or exchanges of interests in the Partnership as shall occur during
any relevant time period) causes a termination of the Partnership within the
meaning of Code Section 708(b)(1)(B), the Capital Accounts of the Partnership
shall be redetermined in accordance with applicable Treasury Regulations,
including Treasury Regulation Section 1.708-1(b)(1)(iv);
(ii) If such sale or exchange does not cause a
termination of the Partnership within the meaning of Code Section 708(b)(l)(B)
and if the Partnership has in effect at the time of such sale or exchange an
election in accordance with the provisions of Code Section 754, and the Treasury
Regulations promulgated thereunder, the Capital Account of the selling or
exchanging Partner shall be carried over to the transferee Partner and there
shall not be made to the Capital Account of the Partner who receives the special
tax basis adjustment under Code Section 743 a corresponding adjustment, except
to the extent such a special tax basis adjustment would be reflected in a
Partner's Capital Account pursuant to applicable Treasury Regulations, including
Treasury Regulation Section 1.704-1(b)(2)(iv)(m);
(iii) If such a sale or exchange is not described in
Subparagraph (i) or (ii) of this Paragraph (b), the Capital Account of the
selling or exchanging Partner shall be carried over to the transferee Partner;
and
(iv) If a Partner's Interest in the Partnership is
redeemed by the Partnership through a distribution in complete liquidation of
the Interest, except as provided in Paragraph (a) of this Section 7.3, the
Capital Accounts of the remaining Partners shall be adjusted only to the extent
required by applicable Treasury Regulations, including Treasury Regulation
Section 1.704-1(b)(2)(iv)(m).
Section 7.4. Determination of and Adjustments to Book Value
and Capital Accounts. When determining the Book Value of the assets of the
Partnership and the appropriate balances in each Partner's Capital Account
resulting from any adjustments to such Book Value, in accordance with the
provisions of applicable Treasury Regulations, including Treasury Regulation
Section 1.704-1(b)(2)(iv), the following accounting rules shall apply.
(a) The initial Book Value of any asset contributed by a
Partner to the Partnership shall be its Gross Fair Market Value on the date of
contribution.
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(b) The Book Value of all Partnership assets shall be
adjusted to equal their respective Gross Fair Market values, as of the following
times:
(i) the acquisition of an Interest (including an
additional interest) in the Partnership by any new or existing Partner in
exchange for more than a de minimis capital contribution to the Partnership, if
the General Partner determines that such adjustment is necessary or appropriate
to reflect the relative economic interests of the Partners with respect to the
Partnership;
(ii) the distribution by the Partnership to a Partner
of more than a de minimis amount of money or other Partnership property, if the
General Partner determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners with respect to the
Partnership;
(iii) the liquidation of the Partnership within the
meaning of applicable Treasury Regulations, including Treasury Regulation
Section 1.704-1(b)(2)(ii)(g); and
(iv) the occurrence of any other event (including,
without limitation, a refinancing of any property of the Partnership) if the
General Partner determines that such adjustment is necessary or appropriate, if
not prevented by applicable Treasury Regulations, to reflect the economic
interests of the Partners with respect to the Partnership.
(c) The Book Value of any Partnership asset distributed
to any Partner shall be adjusted to equal its Gross Fair Market Value on the
date of such distribution.
(d) The Book Value of Partnership assets shall not be
increased or decreased to reflect any adjustments to the adjusted tax basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), except to
the extent that such adjustments are taken into account in determining and
maintaining capital accounts pursuant to applicable Treasury Regulations,
including Treasury Regulation Section 1.704-1(b)(2)(iv)(m); provided, however,
that the Book Value shall not be adjusted pursuant to this provision to the
extent that such adjustment was previously reflected in the Book Value of the
Partnership's assets.
(e) If the Book Value of an asset has been determined or
adjusted pursuant to the foregoing provisions of this Section 7.4, such Book
Value shall thereafter be reduced by the Depreciation taken into account with
respect to such asset for purposes of computing the Net Book Profits and the Net
Book Losses of the Partnership pursuant to the provisions of this Agreement.
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Section 7.5. Additional Capital Contributions.
(a) With the prior written consent of the General
Partner, a Limited Partner may, though is not required to do so, make, or be
deemed to make, additional capital contributions to the Partnership from time to
time.
(b) Subject to the limitations of Section 6.4 and Section
6.5 of this Agreement, to the extent that the General Partner determines that
additional funds are needed by the Partnership for its operations, the General
Partner may, at its election, cause the Partnership to borrow such funds at
commercially reasonable rates from unrelated third persons.
(c) If the Partnership is not able to obtain loans from
third party lenders, the General Partner shall give notice to the Limited
Partners of the amount needed by the Partnership (the "Funding Shortfall") and
the purpose for which the Partnership requires such additional funds.
(d) In order to reduce or eliminate the Funding
Shortfall, the General Partner and/or any Limited Partner may loan funds to the
Partnership at a mutually agreed upon rate of interest not to exceed the highest
non-usurious lawful rate of interest permitted by applicable law and upon other
terms and conditions as may be agreed upon at that time, including with respect
to collateral for such loan. As to any funds so loaned, the General Partners or
Limited Partner(s) shall be deemed general creditors of the Partnership and
shall be entitled to be paid principal and interest thereon without regard to
the income or profits of the Partnership.
(e) Additional Capital Contributions. If the Partnership
is unable to obtain loans from third party creditors or loans from Partners
sufficient to satisfy the Funding Shortfall, the General Partner shall request
the Partners to make additional contributions to the Partnership in the amount
necessary to satisfy the Funding Shortfall. All Partners shall have the right
(but not the obligation) to contribute a portion of the Funding Shortfall by
contributing additional assets. Such contributing Partner's Capital Account
shall be increased by the amount of the contributing Partner's contribution, as
provided herein.
Section.7.6. Liability for Continuing Obligations. Upon the
bankruptcy, insolvency, death, disability or other change in the circumstances
of a Partner prior to the completion of such Partner's obligations to the
Partnership, including without limitation, its obligation to make certain
payments to the Partnership, in the form of an Initial Capital Contribution or
otherwise, such Partner's estate, legal representative or successor shall
succeed to such Partner's rights and responsibilities as provided herein.
ARTICLE VIII - PROFITS, LOSSES AND DISTRIBUTIONS
Section 8.l. Positive Cash Flow. The term "Positive Cash Flow"
as used in this Agreement shall mean the gross cash receipts generated from the
operation of the business of the Partnership from all sources (including,
without limitation, all revenue and income obtained from
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the operation of the Partnership, the sale of the assets or property of the
Partnership, as well as the proceeds from all refinancing of mortgages or
replacements of existing mortgages encumbering the property of the Partnership)
after (i) the payment or accrual for payment of all current operating
expenditures in connection therewith, including, without limitation, interest
and principal payments due on loans and other charges due pursuant to any
mortgages encumbering the property of the Partnership and after (ii) making
provisions for the reasonable working capital requirements of the Partnership,
the Reserve and investments and reinvestments appropriate to enable the
Partnership to carry out its purposes but disregarding, in determining Positive
Cash Flow, depreciation, amortization, other noncash items and amounts to be
distributed to the Partners pursuant to the terms of this Agreement.
Section 8.2. Distribution of Positive Cash Flow.
(a) Positive Cash Flow of the Partnership, to the extent
available, shall be distributed in the complete discretion of the General
Partner among the Partners in proportion to each Partner's respective
Participating Percentage.
(b) Notwithstanding anything set forth in this Section
8.2 to the contrary, the General Partner shall have the right to apply any
Positive Cash Flow to be distributed to a Partner against any amounts due from,
or required to be contributed by, such Partner to the Partnership. Such
application of any Positive Cash Flow shall be deemed to be a distribution to
such Partner, followed by a payment or contribution to the Partnership, as the
case may be.
(c) Notwithstanding anything set forth in this Section
8.2 to the contrary, any Positive Cash Flow which arises during the liquidation
of the Partnership shall be distributed in accordance with the provisions of
this Agreement dealing with the distribution of proceeds from the liquidation of
the Partnership.
Section 8.3. Determination of Net Book Profit and Net Book
Losses. For purposes of computing the amount of any items of income, gain, loss
or expense to be reflected in the Partner's Capital Accounts (hereinafter the
net of such items being referred to as the "Net Book Profits" or the "Net Book
Losses" of the Partnership), the determination, recognition and classification
of such items shall be the same as their determination, recognition and
classification for federal income tax purposes, with the following
modifications.
(a) Any item of expense attributable to depreciation,
amortization or other cost recovery with respect to any asset of the Partnership
(hereinafter referred to as "Depreciation") shall be in an amount which bears
the same ratio to the Book Value of such asset at the beginning of the
applicable period as the federal income tax deduction for depreciation,
amortization or other cost recovery with respect to such asset for such
applicable period bears to the adjusted tax basis of such asset at the beginning
of such period; provided, however, that if the federal income tax deduction
attributable to depreciation, amortization or other cost recovery for such
applicable period with respect to any asset is zero, the Depreciation with
respect to such asset for such applicable period shall be determined with
reference to the Book Value of such
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asset as of the beginning of such applicable period using any reasonable method
selected by the General Partner.
(b) Any item of income, gain, loss or expense
attributable to the taxable disposition of any property with an adjusted tax
basis which is different from the Book Value of such property shall be
determined as if the adjusted tax basis of such property as of the date of such
dispositive were equal in amount to the Book Value of such property.
(c) All expenditures of the Partnership not deductible in
computing its taxable income and not properly chargeable to a Capital Account
and any otherwise nondeductible organization and syndication expenses of the
Partnership (as described in Code Section 709) shall be treated as Partnership
expenses.
(d) Revenue of the Partnership which is exempt from
federal income tax shall be included in the Net Book Profits or the Net Book
Losses of the Partnership without regard to the fact that such revenue is not
includable in gross income for federal income tax purposes.
(e) Payments made to any Partner which are treated for
federal income tax purposes as guaranteed payments pursuant to Code Section
707(c) shall be treated as Partnership expenses; provided, however, that such
payments shall be treated as capital expenditures of the Partnership to the
extent that such payments are required to be capitalized under the Code and any
applicable Treasury Regulations thereunder.
(f) In the event the Book Value of any Partnership asset
is adjusted pursuant to the terms of this Agreement, the amount of such
adjustment shall be treated as a gain or loss (as appropriate) from a sale of
such asset.
Section 8.4. Allocation of Net Book Profits and Net Book
Losses. For purposes of maintaining the Capital Accounts of the Partners and
determining the rights of the Partners among themselves with respect to the
assets of the Partnership, the Net Book Profits or Net Book Losses of the
Partnership for each applicable period shall be allocated among the Partners in
Proportion to each Partner's respective Participating Percentage. Each item of
such income, gain, loss or expense giving rise to such Net Book Profits or Net
Book Losses of the Partnership for such period shall be allocated among the
Partners in the same proportion that such Net Book Profits or Net Book Losses of
the Partnership for such period are allocated among the Partners.
Section 8.5. Allocations to Comply With Applicable Treasury
Regulations. In order to comply with the provisions of applicable Treasury
Regulations, including Treasury Regulation Sections 1.704-1(b) and 1.704-2, the
following special allocations of income, gain, loss and expense shall be made
notwithstanding any other provision of this Agreement.
(a) Deficit Capital Account Allocations. Subject to the
remaining provisions of this Section 8.5, in accordance with applicable Treasury
Regulations, including Treasury Regulation Section 1.704-1(b)(2)(ii), no
allocation of expenses or losses shall be made pursuant to the terms of this
Agreement to the extent such allocation would cause or increase a net deficit
14
balance in a Partner's Capital Account as of the end of the period to which such
allocation relates in excess of any dollar amount of such net deficit balance
that such Partner is obligated to restore under this Agreement. Such expenses
and losses shall instead be allocated among the other Partners not subject to
this limitation in accordance with their relative Participating Percentages. For
purposes of this Paragraph (a), the following rules shall apply:
(i) each Partner's net deficit balance in such
Partner's respective Capital Account shall be determined by adding to such
Capital Account balance the amount of such Partner's share (as determined
pursuant to Treasury Regulation Section 1.704-2) of the Total Minimum Gain of
the partnership as of the end of the period with respect to which such
determination is being made; and
(ii) in determining whether an allocation of a loss
or expense would cause or increase a net deficit balance in a Partner's
respective Capital Account as of the end of the period to which such allocation
relates, the initial balance in such Partner's respective Capital Account shall
be treated as if it reflected an amount equal to the excess of any distributions
that, as of the end of such period, reasonably are expected to be made to such
Partner in any future period over the Net Book Profits reasonably expected to be
allocated to such Partner during (or prior to) the period in which such
distributions are expected to be made.
(b) Qualified Income Offset Provision. If a Partner
unexpectedly receives an adjustment, allocation or distribution as described in
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), pursuant to
this Agreement which causes or increases a net deficit balance in such Partner's
Capital Account as of the end of the period to which such adjustment, allocation
or distribution relates in excess of any dollar amount of such net deficit
balance that such Partner is obligated to restore pursuant to this Agreement,
such Partner will be allocated items of gross income and gain in an amount and
manner sufficient to eliminate such net deficit balance as quickly as possible.
The rules set forth in Subparagraph (i) and (ii) of Paragraph (a) of this
Section 8.5 shall apply for purposes of determining whether any adjustment,
allocation or distribution would cause or increase a net deficit balance in any
Partner's Capital Account.
(c) Special Allocations of Nonrecourse Deductions.
Notwithstanding any other provision in this Agreement, in compliance with
applicable Treasury Regulations, including Treasury Regulation Section 1.704-2,
allocations of Nonrecourse Deductions shall be made among the Partners in
accordance with the Participating Percentages of the Partners.
(d) Minimum Gain Chargeback Provision. If there is a net
decrease in the Minimum Gain of the Partnership (as determined pursuant to
applicable Treasury Regulations, including Treasury Regulation Section 1.704-2)
during any period, then each Partner shall be allocated items of gross income
and gain in accordance with the provisions of applicable Treasury Regulations,
including Treasury Regulation Section 1.704-2.
(e) Special Allocations of Partner Nonrecourse
Deductions. Notwithstanding any other provision in this Agreement, in compliance
with applicable Treasury Regulations, including Treasury Regulation Section
1.704-2, allocations of Partner Nonrecourse Deductions
15
shall be made among the Partners in accordance with the ratios in which the
Partners (or the affiliates of any Partners) share the economic risk of loss
with respect to the Partner Nonrecourse Liabilities to which such Partner
Nonrecourse Deductions are attributable.
(f) Partner Nonrecourse Liability Minimum Gain Chargeback
Provision. If there is a net decrease in the Partner Nonrecourse Liability
Minimum Gain (as determined pursuant to applicable Treasury Regulations,
including Treasury Regulation Section 1.704-2) during any period, then each
Partner shall be allocated items of income and gain in accordance with the
provisions of applicable Treasury Regulations, including Treasury Regulation
Section 1.704-2.
(g) Subsequent Allocations. Any special allocations of
items of income, gain, loss or expense made pursuant to this Section shall be
taken into account in computing subsequent allocations of income, gain, loss and
expense pursuant to this Agreement, so that the net amount of any item of
income, gain, loss and expense allocated to each Partner pursuant to this
Agreement shall, to the extent possible, be equal to the amount of such items of
income, gain, loss and expense that would have been allocated to such Partner
pursuant to this Agreement if the special allocations of income, gain, loss or
expense required by this Section 8.5 had not been made.
(h) Interpretation of these Provisions. The provisions of
this Section are intended to comply with the provisions of applicable Treasury
Regulations, including Treasury Regulation Sections 1.704-1(b)(2) and 1.704-2,
and shall be interpreted consistently therewith.
Section 8.6. Federal Income Tax Allocations. The allocations
of income, gain, loss and expense made pursuant to the previous Sections are
allocations of book income which are made for accounting purposes to determine
the respective balances in the Capital Accounts of the Partners and to establish
the rights of the Partners among themselves with respect to the assets of the
Partnership. These allocations may be different from the allocations among the
Partners of the income, gain, loss, deduction, tax preference and tax credits of
the Partnership for federal income tax purposes. Allocations of income, gain,
loss, deduction, tax preference and tax credits of the Partnership for federal
income tax purposes for each taxable year shall be made among the Partners in
accordance with the following provisions.
(a) General Rules Regarding Allocations of Income, Loss,
Etc. In general, for federal income tax purposes, all items of income, gain,
loss, deduction and tax preference of the Partnership for each taxable year
shall be allocated among the Partners in the same manner as the items of income,
gain, loss and expense which gave rise to such items of income, gain, loss,
deduction and tax preference for federal income tax purposes are allocated among
the Partners pursuant to the terms of this Agreement.
(b) Special Rules Where Tax Basis Differs From Book
Value. If the Partnership's adjusted tax basis for federal income tax purposes
of any of its property differs from the Book Value of such property at the
beginning of any taxable year, in determining each Partner's distributive share
of the taxable income or loss (or items thereof) of the Partnership,
16
each item of income, gain, loss or deduction with respect to such property shall
be allocated among the Partners in such a manner as will take into account (as
required by Code Section 704(c) and any applicable Treasury Regulations,
including Treasury Regulation Section 1.704-1(b)(4)(i)) the difference between
the adjusted tax basis for federal income tax purposes of such property and its
Book Value, all as of the beginning of such taxable year.
Section 8.7. Allocation of Taxable Income and Loss and Tax
Credits on the Transfer of a Partnership Interest. The items of income, gain,
loss, expense, deduction, tax preference and/or tax credit allocable under the
terms of this Agreement to any interest in the Partnership which may have been
transferred during any period shall be allocated among the Persons who were the
holders of such interest during such period in a manner which takes into account
the varying interests of the Partners in the Partnership during such period, all
in accordance with any Treasury Regulations promulgated under Code Section
706(d); provided, however, that the allocation of gain or loss on the
disposition of any property in which the Partnership has a direct or indirect
interest shall, to the extent not prohibited under such Regulations, be
allocated among the Partners who are Partners in the Partnership on the date the
event giving rise to such gain or loss occurs in accordance with the provisions
of this Agreement otherwise dealing with federal income tax allocations.
Section 8.8. Special Tax Audit Allocations. Notwithstanding
anything contained in this Agreement to the contrary, in the event that the
taxable income (or any item thereof) of the Partnership for federal income tax
Purposes is adjusted as the result of an audit by the Internal Revenue Service,
the Partners' Capital Accounts shall be adjusted in a manner which reflects such
adjustments as though corresponding book adjustments had been originally
reflected in the Net Book Profits or Net Book Losses of the Partnership
determined pursuant to the terms of this Agreement.
Section 8.9. Interest. If, pursuant to applicable law, a
portion of the amounts paid on any Partner notes issued with respect to capital
contributions to the Partnership shall be deemed to constitute interest rather
than principal for federal income tax purposes, the interest income attributable
thereto shall be allocated to the Partners who shall have made such deemed
interest payments on such Partner notes and the amount of such interest income
shall be taken into account in determining the amount of capital contributions
made by such Partner to the Partnership.
Section 8.10. Credits. All investment tax credits, targeted
job credits and other tax credits available to the Partnership shall, subject to
applicable Treasury Regulations and provisions of the Code be allocated among
the Partners in proportion to each Partner's respective Participating
Percentage.
Section 8.11. Distributions in Kind. Assets of the Partnership
may be distributed in kind in the sole and absolute discretion of the General
Partner. If any assets of the Partnership are distributed in kind, the
Partnership shall make such distributions in kind pursuant to Section 1.704-1
(b)(2)(iv)(e)(1) of the Treasury Regulations in accordance with the following:
17
(a) The Gross Fair Market Value of such assets shall be
determined, taking into account the nature of the assets;
(b) Immediately prior to any distribution of any assets
by the Partnership, the Capital Accounts of all Partners shall be adjusted to
reflect the manner in which the unrealized income, gain, loss and deduction
inherent in such assets (that have not been reflected in the Capital Accounts
previously) would be allocated among the Partners if there were a taxable
disposition of such assets for their Gross Fair Market Value on the date of
distribution; and
(c) In a distribution in kind other than in liquidation
of the Partnership pursuant hereto, such assets shall be distributed to the
Partners either (i) as tenants-in-common in the same proportions as such
Partner's Participating Percentages; or (ii) on an asset-by-asset determination,
as determined by the General Partner in its sole and absolute discretion.
ARTICLE IX - BOOKS OF ACCOUNT, RECORDS AND REPORTS
Section 9.1. Books and Records. Proper and complete records
and books of account shall be kept by the Partnership. The Partnership books and
records shall be kept on the accrual method of accounting or on such other
acceptable method as the General Partner shall determine. The books and records
shall at all times be maintained at the principal office of the Partnership and
shall be open to the reasonable inspection and examination of the Partners or
their duly authorized representatives during normal business hours.
Section 9.2. Tax Information. As soon as available after the
end of each fiscal year of the Partnership, but in no event later than
seventy-five (75) days thereafter, the General Partner shall send or cause to be
sent to each Partner such tax information as shall be necessary for the
preparation by such Partner of his, her or its federal and state income tax
returns. The Partners may review and/or request a copy of the Annual Partnership
Tax Return (IRS Form 1065). The Partners acknowledge that because of the nature
of the Partnership, it may be difficult or impossible to accurately set forth on
Schedule K-1, and other tax forms which the Partnership may file and/or provide
to the Partners, the actual interests of the Partners in the Partnership's
income, losses and capital. The Partners agree among themselves that no
information on any such form will be evidence of the actual interest in the
Partnership of any Partner. In addition to the foregoing, the General Partner
shall provide such financial information to each Partner as required by
applicable law.
Section 9.3. Accounting Principles. Except as otherwise
provided in this Agreement, all books and records of the Partnership shall be
kept, and all financial statements furnished to the Partners hereunder shall be
prepared, in accordance with generally accepted accounting Principles
consistently applied.
Section 9.4. Banks. All funds of the Partnership shall be
deposited in a bank account or accounts in the name of the Partnership or such
other name as may be determined by the General Partner. Withdrawals from such
account or accounts shall be made by checks or
18
other withdrawal orders signed by a duly authorized officer or representative of
the General Partner.
ARTICLE X - FISCAL YEAR
Section 10.1. Fiscal Year. The fiscal year of the Partnership
shall be the 52/53 week year ending on the first Saturday which is nearest to
the last day of January.
ARTICLE XI - LIABILITY OF GENERAL PARTNER; EXCULPATION
Section 11.1. Liability of General Partner. To the extent that
assets of the Partnership are insufficient to satisfy any and all of the
Partnership's liabilities, the General Partner shall bear such liability.
Section 11.2. Exculpation. The General Partner shall not be
liable to the Partnership or any other Partner for losses or liability arising
from the conduct of the affairs of the Partnership or from the conduct of an
employee or agent of the General Partner or the Partnership, so long as such
losses or liability do not arise from the gross negligence, willful misconduct
or fraud of the General Partner.
ARTICLE XII - RIGHTS AND LIMITATIONS
OF LIMITED PARTNERS; MEETINGS; AMENDMENTS
Section 12.1. Limited Assessment. Except as provided in this
Agreement or under applicable law, no Limited Partner shall be subject to
assessment nor shall any Limited Partner be personally liable for, or bound by,
any expenses, liabilities or obligations of the Partnership beyond such Limited
Partner's Capital Contribution.
Section 12.2. No Right to Manage. Except as specifically
provided in this Agreement, no Limited Partner shall take part in, or interfere
in any manner with, the management, control, conduct or operation of the
Partnership, nor have any right, power or authority to act for or bind the
Partnership. Any action of a Limited Partner that is inconsistent with the sole,
exclusive and absolute right of the General Partner shall:
(a) Constitute a breach of this Agreement on the part of
the Limited Partner so acting, and
(b) The General Partner shall provide such Limited
Partner with notice of the breach. Such Limited Partner shall have five (5) days
after he receives such notice of the breach to cure the breach (if such breach
can be cured). If the breach is not cured within such five (5) day period, such
Limited Partner shall be liable for any and all damages that may occur to the
19
Partnership, all of the other Partners and any creditor of the Partnership who
relies to its detriment on the actions of such Limited Partner.
Section 12.3. Priority. No Partner shall have priority over
any other Partner either as to the return of capital contributions or any other
distributions from the Partnership, unless otherwise specifically provided
herein.
Section 12.4. Death, Disability, Etc., of a Limited Partner.
The Partnership shall not be dissolved by (i) the death, disability, insanity,
adjudication of incompetency, bankruptcy, insolvency or withdrawal of any
Limited Partner, (ii) the assignment by any Limited Partner of its interest in
the Partnership, or (iii) the admission of a Substitute Limited Partner.
Section 12.5. Meetings.
(a) Place of Meetings. Meetings of Partners may be held
in such place within or without the Commonwealth of Pennsylvania as may be
specified in the notice of such meeting or by means of any telecommunications
system.
(b) Call of Meetings. A meeting of the Partners for any
matters on which the Limited Partners are entitled to vote or consent may be
called by the written notice of the General Partner or by the written notice of
the Limited Partners holding at least Forty Percent (40%) of the then
outstanding Units.
(i) Written notification of such meeting shall be
issued by the General Partner no later than ten (10) days before the date of
such meeting. Such meetings shall be held on a date not less than fifteen (15)
days nor more than sixty (60) days after the receipt by the General Partner of a
written request for such a meeting signed by holders of Forty Percent (40%) or
more of the then outstanding Units. In addition, the General Partner may submit
any matter upon which the Limited Partners are entitled to vote to the Limited
Partners for a vote by written consent without a meeting (including, without
limitation, for the purpose of proposing an amendment to this Agreement).
(ii) Notification of any meeting to be held pursuant
to this Section 12.5 shall be given to each Limited Partner at such Limited
Partner's record address or at such other address which such Limited Partner may
have furnished to the General Partner in writing. Such notification shall state
the place, date and hour of the meeting and shall indicate that the notification
is being issued at or by the direction of the Partner or Partners calling the
meeting. The notification shall state the purpose or purposes of the meeting and
the matters proposed to be acted upon. If a meeting is adjourned to another time
or place, the General Partner shall give notification of the adjourned meeting.
The presence in person, by proxy or via telecommunications system of the holders
of a majority of the then outstanding Units shall constitute a quorum at all
meetings of the Limited Partners; provided, however, that if there be no such
quorum, holders of a majority of the Units present or represented by Proxy may
adjourn the meeting from time to time, until a quorum shall have been obtained.
No notification of the time, place or purpose of any meeting of Limited Partners
need be given to any Limited Partner
20
who attends in person or is represented by proxy or to any Limited Partner
entitled to such notification who in writing, executed and filed with the
records of the meeting either before or after the time thereof, waives such
notification, except for a Limited Partner attending a meeting for the express
purpose of objecting at the beginning of the meeting to the transaction of any
business on the grounds that the meeting is not lawfully called or convened.
(iii) Every proxy must be signed by the Limited
Partner or such Limited Partner's attorney-in-fact. No proxy shall be valid
after the expiration of twelve (12) months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the Limited Partner executing it. In connection with any vote, the General
Partner shall be empowered to establish reasonable rules pertaining to the
validity and use of proxies by the Limited Partners.
(iv) For the purpose of determining the Limited
Partners entitled to vote at any meeting of the Limited Partners or any
adjournment thereof, or to vote by written consent without a meeting, the
General Partner or the Limited Partners requesting such meeting or vote may fix,
in advance, a date as the record date of any such determination of Limited
Partners. Such date shall not be more than fifty (50) days nor less than ten
(10) days prior to any such meeting or submission of a matter to the Limited
Partners for a vote by written consent. Only the votes of Limited Partners of
record on the notification date or such other record date as may be set pursuant
to the provisions of this Agreement, whether at a meeting or otherwise, shall be
counted.
(v) At each meeting of Limited Partners, the Limited
Partners present or represented by proxy shall adopt such rules for the conduct
of such meeting as they shall deem appropriate.
Section 12.6. Voting Rights of Limited Partners.
(a) A Limited Partner shall be entitled to cast one vote
for each Unit which such Limited Partner owns unless otherwise set forth herein.
(b) The following actions shall require at least the
Simple Majority Vote of the Limited Partners:
(i) Amendment of this Agreement, subject to the
provisions of Section 12.8 hereof;
(ii) Continuation of the Partnership upon the
occurrence of one of the events set forth in Section 15.1 hereof;
(iii) Indemnification of a Partner;
(iv) Admission of additional Limited Partners;
21
(v) Subject to the provisions herein to the contrary,
any other matters on which the Partners are entitled to vote.
(c) The following actions shall require at least the
Required Vote of the Limited Partners:
(i) The Major Management Decisions set forth in
Section 6.5(a), (b), (f) and(g);
(ii) Removal of the General Partner in accordance
with Section 14.1 hereof; and
(iii) Transfer of a General Partner's Interest.
(d) The Unanimous Vote of the Limited Partners shall be
required for the Major Management Decisions set forth in Section 6.5(c), (d) and
(e).
Section 12.7. Proposal and Adoption of Amendments Generally.
(a) Amendments to this Agreement may be proposed in the
following manner:
(i) by the General Partner, who shall give to the
Limited Partners the text of such proposed amendment, a statement of the purpose
of such amendment and an opinion of counsel obtained by the General Partner to
the effect that such amendment is permitted by the Partnership Act, will not
impair the purposes of the Partnership or the limited liability of any Limited
Partner and will not adversely affect the classification of or cause a
termination of the Partnership as a partnership for federal income tax purposes;
and
(ii) by a Limited Partner or Partners holding more
than Twenty-Five Percent (25%) of the then outstanding Units, who shall submit
to the General Partner the text of such proposed amendment, together with a
statement of the purpose of such amendment and an opinion from counsel obtained
by such Limited Partner or Partners, satisfactory in form and substance to the
counsel of the Partnership, to the effect that such amendment is permitted by
the Partnership Act, will not impair the purposes of the Partnership or the
limited liability of the Limited Partners and will not adversely affect the
classification or cause the termination of the Partnership as a partnership for
federal income tax purposes. The General Partner shall, within twenty (20) days
after receipt of any proposal under this Subparagraph (ii), give to all Limited
Partners the text of such proposed amendment, such statement of purpose and such
opinion of counsel, together with the views, if any, of the General Partner with
respect to such proposed amendment.
(b) Amendments proposed pursuant to this Section 12.7
(subject to Section 12.8 hereof) shall be adopted if consented to by the General
Partner and the Limited Partners owning a majority of the then outstanding
Units.
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(c) The General Partner shall and is hereby authorized
to, within a reasonable time after the adoption of any amendment to this
Agreement, make any official filings, recordings and publications required or
desirable to reflect such amendment, including any required filing or
recordation of an Amended Certificate of Limited Partnership of the Partnership.
Section 12.8. Limitations on Amendments. Notwithstanding any
other provision of this Agreement to the contrary, no amendment to this
Agreement may:
(a) Without the consent of any affected Partner, enlarge
the obligations of any Partner under this Agreement or convert the Interest of
any Limited Partner into the Interest of a General Partner;
(b) Allow the Limited Partners to take part in the
control of the Partnership's business or otherwise modify the limited liability
of any Limited Partner;
(c) Create any additional class of Partnership Interest;
(d) Change the interest of any Partner in the capital,
profits, losses or cash distributions of the Partnership;
(e) Amend or modify the provisions of this Agreement
dealing with voting rights and requirements, allocations of profits and losses
and distributions of Positive Cash Flow or the proceeds from the liquidation of
the Partnership, without the consent of each Partner adversely affected by such
modification;
(f) Change the term of this Agreement; or
(g) Change the voting requirements hereunder unless
approved by such percentage of Partners required to approve such matter prior to
the amendment.
Section 12.9. Amendments on Admission or Withdrawal of
Partners.
(a) Amendments solely to admit additional Limited
Partners and Substitute Limited Partners shall be adopted if the conditions
specified in this Agreement regarding the admission of such Partners shall have
been satisfactorily complied with and the amendment shall have been signed by
the General Partner and by the person to be substituted or added and, if a
Limited Partner is to be substituted, by the assigning Limited Partner or such
Limited Partner's attorney-in-fact.
(b) Amendments solely to reflect the admission and/or
designation of a successor General Partner shall be adopted if the conditions
specified in this Agreement regarding the admission and/or designation of such a
Partner shall have been satisfactorily completed and the amendments shall have
been signed by such successor General Partner.
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(c) Amendments solely for the removal or withdrawal of
the General Partner, if the business of the Partnership is continued, shall be
adopted if the conditions specified in this Agreement dealing with such removal
or withdrawal of the General Partner shall have been satisfactorily completed
and the amendment shall have been signed by the successor General Partner.
Section 12.10. Registration. Upon the admission of a person as
a Limited Partner, such person shall be registered on the records of the
Partnership as a Limited Partner, together with its address and its interest in
the Partnership. Upon the transfer of a Limited Partnership interest pursuant to
the provisions of this Agreement, the transferee of such interest in the
Partnership shall be registered on the records of the Partnership as a
Substitute Limited Partner, together with its address and interest in the
Partnership.
Section 12.11. Continuation of Limited Partner Status. No
event, including but not limited to, the admission of a Substitute Limited
Partner, the transfer of an Interest in the Partnership by a Limited Partner,
the expulsion of a Limited Partner from the Partnership, the forfeiture of an
interest in the Partnership and the retirement, death, disability or bankruptcy
of a Limited Partner shall entitle a Limited Partner to withdraw from the
Partnership. Once admitted as a Limited Partner, a person shall continue to be a
Limited Partner for all purposes of this Agreement and the Partnership Act until
the General Partner consents in writing to the admission of a Substitute Limited
Partner pursuant to the provisions of Article XIII of this Agreement.
ARTICLE XIII - TRANSFERS BY LIMITED PARTNERS;
REPURCHASE OF INTERESTS
Section 13.1. Transfers. A Limited Partner shall have the
right to assign, transfer, encumber or pledge (hereinafter such actions
collectively referred to as an "Assignment") the whole or any portion of his or
her Interest in the Partnership by written Assignment, provided that (i) the
terms of such Assignment are not in contravention of any of the provisions of
this Agreement, (ii) such Assignment is fully executed by the transferor and
transferee, (iii) such Assignment is received by the Partnership and recorded on
the books thereof and (iv) the transfer is approved by the Unanimous Vote of the
Partners. In the event of such Assignment, the following rules shall govern:
(a) The effective date of an Assignment of an Interest in
the Partnership shall be the date set forth on the written instrument of
Assignment;
(b) Notwithstanding anything herein to the contrary, the
Partnership and the General Partner shall be entitled to treat the transferor of
such Interest as the absolute owner thereof in all respects and shall incur no
liability for distributions of cash or other property made in good faith to him
until such time as the written Assignment has been received by and recorded on
the books of the Partnership and is otherwise effective in accordance with the
provisions of this Agreement;
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(c) Except as provided in Section 13.1(b) of this
Agreement, the transferee of an Assignment of Interest in the Partnership shall
be entitled to receive distributions of cash or other property from the
Partnership attributable to the Interest acquired by reason of such Assignment
from and after the effective date of the Assignment of such Interest; and
(d) The division and allocation of profits and losses
attributable to the Interest in the Partnership between transferor and
transferee during any fiscal year of the Partnership shall be in accordance with
the provisions of Section 8.7 of this Agreement.
Section 13.2. Compliance with Securities Laws. No Partnership
Interest has been registered under the Act or under any state securities law. A
Limited Partner may not transfer all or any part of its Partnership Interest
except in compliance with applicable federal and state securities laws. A
transfer, for purposes of this Agreement, shall be deemed to include, but not
limited to, any sale, transfer, assignment, pledge, creation of a security
interest or other disposition. The General Partner shall have no obligation to
register any Limited Partner's interest under the Act or the securities laws of
any state or to make any exemption therefrom available to any Limited Partner or
Substitute Limited Partner. Any certificates or other documents representing the
Units may bear a legend outlining the above restrictions on transfer. Further,
the Partnership will make notations on its records of the foregoing restrictions
on transfer. If a transfer agent is appointed, the Partnership will issue
appropriate stop-transfer instructions to its transfer agent respecting the
limitations on transfer outlined in this Article XIII.
Section 13.3. Steps Required to Transfer. No transferee of the
whole or any portion of an Interest in the Partnership shall have the right to
become a Substitute Limited Partner in place of his transferor unless all of the
following conditions are satisfied:
(a) The transferor executes and acknowledges a written
instrument of Assignment together with such other instruments as the General
Partner shall deem necessary or desirable to effect the admission of the
transferee as a Substitute Limited Partner including without limitation, those
set forth in Section 13.4 hereof;
(b) Such instrument of assignment has been delivered to,
received and approved in writing by the General Partner; and
(c) The unanimous written consent of all Partners to such
substitution has been obtained, the granting or denial of which shall be within
the sole and absolute discretion of each Partner.
Section 13.4. Admission of Substitute Limited Partner. Except
as specifically provided for in this Agreement, a transferee of a Unit shall
become a Substitute Limited Partner only after the proposed transferee receives
the Unanimous Vote of the other Limited Partners and the transferee adopts and
approves in writing all the terms and provisions of this Agreement then in
effect (including without limitation, those set forth in Section 13.10 hereof)
and assumes the obligations, if any, of the transferor to the Partnership. A
Substitute Limited Partner is liable for
25
the obligations of such Substitute Limited Partner's transferor to make
contributions as provided in and under this Agreement.
Section 13.5. Status of Transferee. A nonadmitted transferee
of an Interest in the Partnership of a Limited Partner shall be entitled to
receive only that share of distributions to which its transferor would otherwise
be entitled to with respect to the Interest transferred and shall have no right
to obtain any information on account of the Partnership's transactions, to
inspect the Partnership books or to vote with the Limited Partners on any
matter. However, the Partnership may, in the discretion of the General Partner,
furnish the transferee with pertinent tax information at the end of each fiscal
year of the Partnership.
Section 13.6. Expenses. The General Partner may charge and
receive from any selling or transferring Limited Partner an amount to defray its
costs and expenses, including attorneys' fees, in effecting the transfer and
registration on its books of such Interest in the Partnership thus sold.
Section 13.7. Death, Bankruptcy, Incompetence, Etc., of a
Limited Partner. Upon the death, dissolution, adjudication of bankruptcy,
insanity or adjudication of incapacity or incompetence of a Limited Partner,
such Partner's executors, administrators or legal representatives shall have all
of the rights of a Limited Partner, for the purpose of settling or managing such
Partner's estate, including such power as such Limited Partner possessed to
constitute a successor as a transferee of its interest in the Partnership and to
join with such transferee in making the application to substitute such
transferee as a Partner. However, such executors, administrators or legal
representatives will not have the right to become Substitute Limited Partners in
the place of their predecessor in interest unless they agree to be bound by the
provisions hereof.
Section 13.8. Transferee(s). Any transfer, bequest or gift of
an interest in the Partnership is conditioned upon the transferee or, in the
case of a trust, the trustee, being sui juris and mentally competent.
Section 13.9. Tax Elections. In the event of the transfer of
any Interest in the Partnership or the distribution of property to any Partner,
the Partnership may, at the determination of the General Partner, file an
election in accordance with the provisions of Code Section 754, and the Treasury
Regulations promulgated thereunder, to cause the basis of the Partnership's
assets to be adjusted for federal income tax purposes as provided under Code
Sections 734 and 743.
Section 13.10. Admission of Additional Limited Partners.
Additional Limited Partners may be admitted to the Partnership from time to time
with the Simple Majority Vote of the Partners of the Partnership. No Person
shall be admitted as an additional Limited Partner pursuant to this Section
until:
(a) Such Person shall have agreed to be bound by the
terms and provisions of this Agreement and shall have assumed all of the
obligations, if any, of a Limited Partner;
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(b) Such Person shall have executed this Agreement (or an
addendum hereto) and such other documents or instruments as the General Partner
may require in order to effect the admission of such Person as a Partner;
(c) Such Person shall have executed powers of attorney
containing the terms and conditions set forth in the power of attorney
provisions of this Agreement; and
(d) Such Person shall have delivered to the Partnership a
letter containing such representations and agreements as are otherwise set forth
in this Agreement and as are requested by the General Partner.
Section 13.11. Amendment of Certificate. The General Partner
shall take such steps as are necessary and/or required by the Act to effect an
amendment of the Certificate of Limited Partnership to reflect the substitution
or addition of Limited Partners. For this purpose, the General Partner shall
have the authority to sign the amendment of this Agreement and the Certificate
of Limited Partnership as attorney-in-fact for the assigning Limited Partner,
the Substitute Limited Partner and the remaining Limited Partners.
ARTICLE XIV - CHANGES TO THE GENERAL PARTNER
Section 14.1. Removal of the General Partner. Limited Partners
by obtaining a Required Vote shall have the right to remove a General Partner
only in the event such General Partner:
(a) makes a general assignment of the General Partner's
assets for the benefit of creditors;
(b) files a voluntary bankruptcy petition;
(c) becomes the subject of an order for relief or is
declared bankrupt or insolvent in any federal or state bankruptcy or insolvency
Proceedings;
(d) files a petition or answer seeking for the General
Partner a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law;
(e) filed an answer or other pleading admitting or
failing to contest the material allegations of a Petition filed against it in a
proceeding of the type described in Paragraphs (a) through (d) of this Section
14.1;
(f) seeks, consents to or acquiesces in the appointment
of a trustee, receiver or liquidator of all or any substantial part of the
General Partner's properties;
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(g) a creditor of the General Partner attaches the
General Partner's assets, such attachment not being discharged or vacated within
ninety (90) days from the effective date thereof; or
(h) pleads, is found guilty of, or admits to, fraud,
gross negligence or recklessness in connection with its responsibilities, duties
or obligations to the Partnership arising hereunder.
Section 14.2. Withdrawal of the General Partner. The General
Partner may unilaterally withdraw or resign as the General Partner of the
Partnership at any time by giving thirty (30) days written notice of its intent
to withdraw or resign as such General Partner to all of the then current Limited
Partners. Such notice requirement may be shortened or waived by the Partners in
their sole discretion.
Section 14.3. Right of the General Partner Upon Removal.
(a) Upon the removal, withdrawal or resignation of the
General Partner pursuant to the provisions hereof or by applicable law, the
General Partner shall not have any right to participate in the management of the
affairs of the Partnership. Upon removal, withdrawal or resignation by the
General Partner, the General Partner shall retain its share of the net profits
or net losses, cash flow and capital interest which are allocated to such
General Partner to the date of the removal, withdrawal or resignation as if it
remained the General Partner of the Partnership. Neither the former General
Partner nor any Affiliate shall be entitled to receive any fees under this
Agreement following such removal, withdrawal or resignation. Upon the General
Partner's removal, withdrawal or resignation, the General Partner may (with the
approval of a Simple Majority Vote of the Limited Partners) sell all or a
portion of its Partnership Interest to the new General Partner (whether
Successor General Partner, second Successor General Partner or the like) upon
such terms and conditions as they may mutually agree.
(b) The remaining Interest of the removed or withdrawing
General Partner shall, subject to Section 14.3(a), become a Limited Partnership
Interest and be assigned to the removed, resigned or withdrawing General Partner
by the Partnership. The removed, resigned or withdrawing General Partner holding
such a Limited Partnership Interest shall automatically become a Substitute
Limited Partner.
Section 14.4. Transfer of Interest. Except as otherwise
provided in this Agreement, the General Partner may not assign, transfer,
mortgage or sell any portion of its Interest in the Partnership or enter into
any agreement as the result of which any Person shall become interested in the
Partnership, without the Required Vote of the Limited Partners.
Section 14.5. Continuing Liability. No removal, withdrawal or
resignation under this Article XIV shall relieve a General Partner of any then
existing obligation owing by that General Partner to the Partnership or any
Partner, nor shall it constitute a waiver of any claim the Partnership or any
Partner may have against the former General Partner. Upon withdrawal of the
General Partner, the General Partner shall not be deemed to be liable with
respect to any debts or
28
liabilities incurred by the Partnership subsequent to the date of withdrawal,
provided that such withdrawal shall not diminish or in any way affect any debts
or liabilities incurred by the Partnership prior to such date. In the event a
General Partner withdraws from the Partnership or sells, transfers or assigns
its entire Interest pursuant to the provisions of this Article XIV, such General
Partner shall be, and shall remain, liable for all obligations and liabilities
incurred by the General Partner and the Partnership prior to the effective date
of such occurrence and shall be free of any obligation or liability incurred on
account of the activities of the Partnership after such time.
Section 14.6. Successor General Partner. In the event of the
bankruptcy, death, incapacity, dissolution, removal, withdrawal or resignation
of the General Partner, the Limited Partners may elect by a Required Vote a
Successor General Partner. Upon approval by the Limited Partners as set forth
above, the Successor General Partner, or new General Partner shall be referred
to herein as the "General Partner."
Section 14.7. Involuntary Assignment by a General Partner. In
the event a General Partner's Interest is taken or distributed by levy,
foreclosure, charging order, execution or other similar proceeding, a Successor
General Partner may be elected by the Limited Partners pursuant to Section 14.6
hereof and in such case the Partnership shall not dissolve. The assignee of that
General Partner's Interest shall receive only that General Partner's rights to
distributions and allocations of the Partnership and shall, in no event, have
the right to interfere in the management or the administration of the
Partnership business or affairs or to act as a General Partner. Any General
Partner whose Interest has been taken or distributed under any circumstances
described above shall automatically become a Substitute Limited Partner and the
Interest of such General Partner shall become a Limited Partnership Interest.
Any entity to which an Interest under this Agreement is
transferred pursuant to the provisions of the Bankruptcy Code, 11 U.S.C.
sections 101 et seq., shall be deemed without further act to have assumed all
of the obligations arising out of this Agreement on or after the date of such
assignment. Upon demand any such assignee shall execute and deliver to each
other party to this Agreement an instrument confirming such assumption. Failure
to deliver such instrument shall entitle such assignee only to those rights
specified in Section 13.5 hereof.
ARTICLE XV. - DISSOLUTION OF THE PARTNERSHIP
Section 15.1. Events of Dissolution. Subject to Section 15.2
hereof, the occurrence of any one of the following events shall cause an
immediate dissolution of the Partnership:
(a) The expiration of the term of the Partnership;
(b) The consent of the General Partner and a Unanimous
Vote of the Limited Partners to dissolve the Partnership;
29
(c) The decision of the General Partner to dissolve the
Partnership at a time when the Partnership holds no substantial assets;
(d) An entry of judicial dissolution pursuant to the Act;
(e) The termination of the business of the Partnership;
(f) The general assignment for the benefit of
creditors; and
(g) the bankruptcy, death, incapacity, dissolution,
removal, resignation or withdrawal of the General Partner as the General Partner
of the Partnership without a successor General Partner being appointed pursuant
to the provisions of this Agreement.
Section 15.2. Election to Continue the Partnership. In the
event of the happening of any of the events described in Paragraph (g) of
Section 15.1 of this Agreement to any General Partner, within one hundred twenty
(120) days of the happening of the first of such events, the Limited Partners
may elect, upon the Required Vote of Limited Partners, to continue the
Partnership. In the event of such election, the Partnership shall not terminate
but shall continue upon the selection, by the Limited Partners holding a
majority of the then outstanding Units, of a successor General Partner, which
selection shall be done concurrently with the election to continue the
Partnership business.
ARTICLE XVI - ADDITIONAL PROVISIONS CONCERNING
DISSOLUTION OF THE PARTNERSHIP
Section 16.1. Winding Up Affairs; Liquidation. In the event of
the dissolution of the Partnership for any reason, if no election is made
pursuant to Article XV of this Agreement to continue the Partnership, the
General Partner, or if the General Partner is bankrupt and without at least one
qualified successor, a liquidating agent or committee selected by the
affirmative vote or written concurrence of Partners owning at least a Simple
Majority in value of the Interests in the Partnership owned at the time by all
Partners, shall commence to wind up the business and affairs of the Partnership
and to liquidate its assets. Allocations of income, gain, loss, expense,
deductions, tax preference items and tax credits shall continue to be made among
the Partners during the period of liquidation in accordance with the provisions
of this Agreement dealing with such allocations. The General Partner or such
liquidating agent or committee, as the case may be, shall have the full right
and unlimited discretion to determine the time, manner and terms of any sale or
sales of Partnership assets pursuant to such liquidation, having due regard
to the activity and condition of the relevant market and general financial and
economic conditions and any in-kind liquidating distributions to Partners, so
long as any nonratable distributions of property interests result in the
distributees receiving value in accordance with the provisions of this Article
XVI.
Section 16.2. Time for Liquidation. A reasonable time shall be
allowed for the orderly liquidation of the assets of the Partnership and the
discharge of its liabilities so as to
30
enable the General Partner or the liquidating agent or committee, as the case
may be, to minimize the normal losses attendant upon such a liquidation.
Section 16.3. Required Reports. If requested by Partners
owning a majority of Interests then outstanding, the General Partner or the
liquidating agent or committee, as the case may be, shall furnish each Partner
with a statement showing the net profit or net loss of the Partnership from the
date of the last annual Federal tax return submitted to the Partners Pursuant to
the terms of this Agreement, to the date of the final distribution of the
proceeds of the liquidation to the Partners and the manner in which the proceeds
of liquidation were distributed. The General Partner or liquidating agent or
committee shall comply with any and all requirements under applicable law
pertaining to the winding up of a limited partnership.
Section 16.4. Termination. The Partnership shall terminate
when all property owned by the Partnership shall have been disposed of or
distributed and the net proceeds from sales of properties, after satisfaction of
liabilities to creditors, shall have been distributed among the Partners as
aforesaid. The establishment of any reserves in accordance with the provisions
of this Article XVI shall not have the effect of extending the term of the
Partnership.
Section 16.5. Distribution of Proceeds From the Liquidation of
the Partnership. The net proceeds of liquidation and any other funds or property
of the Partnership shall be distributed and applied to the extent available in
the following order of priority:
(a) to the payment of debts and liabilities of the
Partnership, including any debts and liabilities to a Partner arising under this
Agreement;
(b) to the setting up of any reserves which the General
Partner or the liquidating agent or committee, as the case may be, shall deem
reasonably necessary for contingent or unforeseen liabilities or obligations of
the Partnership; and
(c) to the Partners with net positive balances in their
respective Capital Accounts in the proportion that the balance in the Capital
Account of each Partner with a net positive balance in such Partner's respective
Capital Account bears to the balances in the Capital Accounts of all Partners
with net positive balances in their respective Capital Accounts.
Section 16.6. Capital Account Adjustments. For purposes of
Section 16.5, the respective balance in the Capital Account of each Partner
shall be determined after allocating all income, gain, loss and expense of the
Partnership pursuant to the terms of this Agreement and after taking into
account all prior distributions to the Partners. In addition, if property is
distributed in kind to the Partners, for purposes of Section 16.5 of this
Agreement, any unsold Partnership property shall be valued by the General
Partner or the liquidating agent or committee, as the case may be, to determine
the gain or loss which would have resulted if the property were sold for its
Gross Fair Market Value, and, to the extent not previously reflected in the
Partners Capital Accounts, the respective balance of the Capital Account of each
Partner shall be adjusted to reflect such gain or loss that would have been
allocated to such Partner if such property had been sold at its then Gross Fair
Market Value.
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Section 16.7. Compliance With Treasury Regulations. In the
event the Partnership or any General Partner's interest in the Partnership is
liquidated within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(g), the following action shall be taken by the later to occur
of the last day of the Partnership's taxable year in which such liquidation
occurred or the ninetieth day following the date of such liquidation:
(a) If any General Partner has a deficit balance in its
Capital Account at the time of the liquidation of the Partnership or the
liquidation of such General Partner's interest in the Partnership (after giving
effect to all contributions, distributions and allocations for all taxable years
including the year during which such liquidation occurs), such General Partner
shall contribute to the capital of the Partnership funds in an amount equal to
the deficit balance in its Capital Account. Nothing contained in this Agreement
shall require any Limited Partner to contribute to the Partnership any amounts
with respect to a deficit balance in such Partner's respective Capital Account.
(b) If the Partnership is actually liquidated,
distributions shall be made to the Partners who have positive capital Account
balances in compliance with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2).
(c) In the discretion of the General Partner or the
liquidating agent or committee, as the case may be, distributions pursuant to
this Section 16.7 may be distributed to a trust of which the General Partner or
the liquidating agent or committee is the trustee (hereinafter referred to as
the "Trustee") established for the benefit of the Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to the Partnership and
paying any contingent or unforeseen liabilities or obligations of the
Partnership so long as an opinion of counsel is obtained to the effect that such
trust will not be taxed as an association taxable as a corporation. The assets
of any such trust shall be distributed to the Partners from time to time, in the
reasonable discretion of the Trustee, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise have been
distributed to the Partners pursuant to this Agreement and a portion or all of
such assets may be withheld by the Trustee to provide a reasonable reserve for
liabilities.
Section 16.8. No Recourse. On liquidation and dissolution of
the Partnership, the Limited Partners shall look solely to the assets of the
Partnership for the return of their investment, and if the Partnership assets
remaining after payment and discharge of debts and liabilities of the
Partnership, including any debts and liabilities owed to any one or more of the
Partners, is insufficient to satisfy the rights of the Limited Partners, the
Limited Partners shall have no recourse or further right or claim against the
Partnership or the General Partner.
Section 16.9. Reserves. In winding up the affairs of the
Partnership and distributing its assets, the General Partner or the liquidating
agent or committee, as applicable, shall set up a reserve to meet any contingent
or unforeseen liabilities or obligations and deposit funds for such purpose,
together with funds held by the Partnership for distribution to Partners which
remain unclaimed after a reasonable period of time, with an escrow agent for the
purpose of disbursing such reserves and funds. At the expiration of such period
as the General Partner or
32
the liquidating agent or committee, as applicable, deems advisable, the escrow
agent shall be authorized and directed to distribute the balance remaining in
the manner provided in Section 16.5 above.
ARTICLE XVII-NOTICES
Section 17.1. Notices. All notices and demands required or
permitted under the provisions of this Agreement shall be in writing and may be
personally delivered or sent by telefax, certified or registered mail, Federal
Express or comparable courier service, postage or freight prepaid, to the
Partners at their addresses as shown on Exhibit A hereto. Any Partner may
specify a different address by notifying the General Partner in writing of such
different address. Any notice personally delivered shall be effective upon the
date of delivery. Any notice mailed or sent by air courier as provided for in
this Section 17.1 shall be deemed given and become effective on the second
business day following the date so sent.
ARTICLE XVIII - REPRESENTATIONS AND WARRANTIES
Section 18.1. The General Partner. As of the date of this
Agreement, each of the representations and warranties contained in this Section
18.1 shall be a true, accurate and full disclosure of all facts relevant to the
matters contained herein and such warranties and representations shall survive
the execution of this Agreement. The General Partner hereby represents and
warrants that:
(a) There are no disputes, claims, actions, suits or
proceedings, arbitrations or investigations, either administrative or judicial,
pending or, to the knowledge of the General Partner, threatened or contemplated,
against or affecting the General Partner or its business, operations, financial
condition or assets or its ability to consummate the transactions contemplated
in this Agreement, at law or in equity or otherwise, before or by any court or
governmental agency or body, domestic or foreign, or before an arbitrator of any
kind. The General Partner is not in default with respect to any judgment, order,
writ, injunction or decree of any court or governmental agency or body, domestic
or foreign, or of an arbitrator of any kind, and the execution and delivery of
this Agreement by the General Partner and the performance by the General Partner
of its obligations hereunder, will not constitute an event of default under any
agreement by which the General Partner or its properties are bound or result in
any encumbrance upon the properties or assets of the General Partner, and
(b) The General Partner is acquiring its Interest in the
Partnership for investment and without a view to the distribution thereof.
Section 18.2. Limited Partners. As of the date each Limited
Partner executes this Agreement, each of the representations and warranties made
with respect to such Limited Partner in this Section 18.2 shall be a true,
accurate and full disclosure of all facts relevant to the matters
33
contained herein and such warranties and representations shall survive the
execution of this Agreement. Each Limited Partner hereby represents and warrants
that:
(a) Such Limited Partner is acquiring such Limited
Partner's Interest in the Partnership for investment and without a view to the
distribution thereof;
(b) If such Limited Partner is not an individual, it is
duly organized and validly existing under appropriate state law and has the
requisite power and authority to enter into and carry out the terms and
conditions of this Agreement;
(c) All actions required to be taken by such Limited
Partner to consummate the transactions contemplated by this Agreement have been
taken by such Limited Partner and no further approval of any board, court or
other body is necessary in order to permit such Limited Partner to consummate
the transactions contemplated by the Agreement; and
(d) There are no disputes, claims, actions, suits or
proceedings, arbitrations or investigations, either administrative or judicial,
pending or, to the knowledge of the Limited Partner, threatened or contemplated,
against or affecting the Limited Partner or its business, operations, financial
condition or assets or its ability to consummate the transactions contemplated
in this Agreement, at law or in equity or otherwise, before or by any court or
governmental agency or body, domestic or foreign, or before an arbitrator of any
kind. The Limited Partner is not in default with respect to any judgment, order,
writ, injunction or decree of any court or governmental agency or body, domestic
or foreign, or of an arbitrator of any kind, and the execution and delivery of
this Agreement by the Limited Partner and the performance by the Limited Partner
of its obligations hereunder, will not constitute an event of default under any
agreement by which the Limited Partner or its properties are bound or result in
any encumbrance upon the properties or assets of the Limited Partner.
ARTICLE XIX - INDEMNIFICATION
Section 19.1. Indemnification. The Partnership (but not any
Limited Partner individually) shall indemnify any Partner (or employee of a
Partner) against any losses, judgments, claims and/or liabilities (including
reasonable expenses incurred) in connection with the defense of any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative, any appeal in such an action, suit
or proceeding, and any inquiry or investigation that could lead to such an
action, suit or proceeding (other than an action, suit or proceeding by or in
the right of a Limited Partner or the Partnership), where the Person who was, is
or is threatened to be made a named defendant or respondent in a proceeding was
named because the Person is or was a Partner of the Partnership (or employee of
the same).
Section 19.2. Conditions. The indemnification contained in
Section 19.1 is conditioned upon the Majority Vote that such Person:
34
(a) conducted himself in good faith;
(b) reasonably believed, in the case of conduct in his
official capacity as a General Partner of the Partnership, that his conduct was
in the Partnership's best interest, and in all other cases, that his conduct was
at least not opposed to the Partnership's best interest; and
(c) in the case of any criminal proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 19.3. Successful Defense. Notwithstanding Section
19.2, the Partnership shall indemnify each Partner (or employee of a Partner)
against reasonable expenses incurred in connection with a proceeding in which he
is a party because he is or was a Partner (or employee of a Partner) if he has
been wholly successful, on the merits or otherwise, in the defense of the
proceeding.
Section 19.4. Exclusions. A Partner (or employee of a Partner)
may not be indemnified under this Article XIX for obligations resulting from a
proceeding:
(a) in which the Person is found liable on the basis that
personal benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the Person's official capacity; or
(b) in which the Person is found liable to the
Partnership.
In the event that the Partnership advanced funds for a proceeding in which the
Partner (or Employee) was found liable in accordance with subsections (a) and
(b) above, the Partner (or Employee) shall repay all such amounts to the
Partnership, with interest.
Section 19.5. Expenses. Expenses as used herein means court
costs, attorneys' fees, judgments, penalties (including excise and similar
taxes), fines, settlements and other reasonable expenditures actually incurred
by the Person in connection with the proceeding.
ARTICLE XX - MISCELLANEOUS
Section 20.1. Certificates, Etc. At the expense of the
Partnership, the General Partner shall promptly have prepared and executed all
legally required applications, registrations, publications, certificates and
affidavits, and any amendments thereof, for filing with the proper governmental
authorities and arrange for the proper advertisement, publication and filing
thereof for the record.
Section 20.2. Power of Attorney. Each Partner who is a party
hereto or executes and delivers an addendum joining in his Agreement, hereby
makes, constitutes and appoints the General Partner, with full power of
substitution, the Partner's true and lawful attorney-in-fact for
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the Partner and in the Partner's name, place and stead and for the Partner's use
and benefit, to sign, execute, certify, acknowledge, file and record any
documents, financing statements or other instruments referred to herein or
required by law in Pennsylvania or any other jurisdiction, of the Partnership or
the Partners, or appropriate to fully effectuate the provisions of this
Agreement. The foregoing grant of authority shall be irrevocable and shall
constitute a power coupled with an interest; provided, however, that each
Partner may revoke this power by an instrument in writing executed and delivered
to the General Partner after the dissolution and winding-up of the Partnership
in accordance with the terms of this Agreement or after the permitted assignment
or transfer of the Partner's entire interest in the Partnership.
Section 20.3. Partners' Relationship Inter Se. Nothing in this
Agreement shall be construed to constitute any Partner the agent of any other
Partner, except as expressly provided herein. Each Partner may, without
accountability to the Partnership or to any other Partner, and without any
consent whatsoever, engage jointly and/or severally in any other business
whether or not such other business is similar to the business of the Partnership
or any of its assets.
Section 20.4. Partition Waived. The Partners agree that the
Partnership property is not and will not be suitable for Partition. Accordingly,
each of the Partners hereby irrevocably waives any and all rights that such
Partner may have to maintain any action for partition of any of the Partnership
Property.
Section 20.5. Entire Agreement. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof. It
supersedes any prior or contemporaneous agreement or understanding among the
parties and it may not be modified or amended in any manner other than as set
forth in this Agreement.
Section 20.6. Governing Law. This Agreement and the rights of
the parties hereunder shall be governed by and interpreted in accordance with
the laws of the Commonwealth of Pennsylvania, without regard to conflicts of law
provisions.
Section 20.7. Binding Effect. Except as otherwise specifically
provided in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the Parties and their legal representatives, heirs,
administrators, executors, successors and assigns.
Section 20.8. Gender and Number. Wherever from the context it
appears appropriate, each term stated in either the singular or the plural shall
include the singular and the plural and pronouns stated in either the masculine,
the feminine or the neuter gender shall include the masculine, feminine and
neuter.
Section 20.9. Captions. Captions contained in this Agreement
are inserted only as a matter of convenience and in no way define, limit or
extend the scope of any provision of this Agreement.
Section 20.10. Severance. If any provision of this Agreement
or the application of such provision to any Person or circumstance shall be held
invalid, the remainder of this
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Agreement, or the application of such provisions to Persons or circumstances
other than those to which it is held invalid, shall not be affected thereby and
this Agreement shall be construed so as to be enforceable to the maximum extent
allowed at law or in equity.
Section 20.11. Execution of Instruments; Reliance by Third
Parties. Any form of execution on behalf of the Partnership, including, without
limitation, execution of any note, mortgage, evidence of indebtedness, contract
or other instrument or writing, or any assignment or endorsement thereof
executed or entered into between the Partnership and any Person shall be
executed on behalf of the Partnership by the General Partner. Third parties
dealing with the Partnership shall be entitled to rely conclusively upon the
power and authority of the General Partner. Any Person having occasion to
transact business with the Partnership or being called upon to transfer any
property, funds or value to or from the name or account of the Partnership shall
be entitled to rely on instructions, assignments or any document or instrument
signed or purporting to be signed in accordance with this Section 20.11 by the
General Partner without inquiry as to the authority of the General Partner and
without inquiry as to the validity of any transfer to or from the name or
account of the Partnership. At the time of transfer, the Person shall be
entitled to assume that the Partnership continues in existence under the laws of
the Commonwealth of Pennsylvania and this Agreement continues in full force and
effect without amendment, so long as such Person has received no actual notice
to the contrary.
Section 20.12. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument. In addition, this Agreement may
contain more than one counterpart of the signature page and any schedule, and
this Agreement may be executed by the affixing of the signatures of each of the
Partners to one of such counterparts. All of such counterparts shall be read as
though one and they shall have the same force and effect as though all the
signers had signed a single page.
IN WITNESS WHEREOF, the undersigned have executed and
delivered this Agreement as of the date first written above.
WITNESS: GENERAL PARTNER:
GENERAL NUTRITION, INCORPORATED
[ILLEGIBLE] By: /s/ Ronald M. Marmo
------------------------------
Name: Ronald M. Marmo
Title: Assistant Secretary
[SEE ATTACHED LIMITED PARTNER SIGNATURE PAGES]
37
LIMITED PARTNER SIGNATURE PAGE
GN INVESTMENT, INC.
By: /s/ Ronald M. Marmo
------------------------------
Ronald M. Marmo
Assistant Secretary/Treasurer