EXHIBIT 3.6
LIMITED PARTNERSHIP AGREEMENT
OF
HANOVER COMPRESSION LIMITED PARTNERSHIP
This Limited Partnership Agreement of Hanover Compression L.P. is made and
entered into to be effective as of the 8th day of December, 2000, by and among
Hanover LLC 3, LLC, a Delaware limited liability company, as general partner,
and Hanover Compression Limited Holdings, LLC, a Delaware limited liability
company, as limited partner. All capitalized terms used herein shall have the
meaning set forth in Section 1.08 hereof and Exhibit A hereto unless the context
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clearly indicates otherwise.
WITNESSETH:
For and in consideration of the mutual covenants set forth herein and for
other good and valuable consideration, the adequacy, receipt and sufficiency of
which are hereby acknowledged, the Partners hereby agree as follows:
ARTICLE I.
ORGANIZATION AND PURPOSE
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Section 1.01 Formation of Limited Partnership. The Partners hereby agree
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to form a limited partnership pursuant to the Act.
Section 1.02 Name. The name of the Partnership shall be Hanover
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Compression Limited Partnership or such other name as shall be selected by the
General Partner. All business and affairs of the Partnership shall be conducted
solely under, and all Partnership Assets shall be held solely in, such name
unless otherwise determined by the General Partner.
Section 1.03 Effective Date and Term. The Partnership shall be in effect
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for a term beginning on the Effective Date and shall continue under this
Agreement (as amended from time to time) until dissolved upon the occurrence of
an event that causes the dissolution of the Partnership in accordance with the
provisions of this Agreement, and thereafter to the extent provided by
applicable law, until wound up and terminated as provided herein.
Section 1.04 Business and Purpose. The business and purpose of the
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Partnership is to engage in any and all business activities that may be lawfully
conducted under the Act.
Section 1.05 Documents. The Partners hereby ratify and approve the actions
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of the General Partner in executing the Certificate in accordance with the Act
and causing the same to be filed in the office of the Secretary of State of the
State of Delaware on December __, 2000.
Section 1.06 Principal Place of Business. The principal place of business
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of the Partnership shall be 12001 North Houston Rosslyn, Houston, Texas, 77806
or at such other place or places as the General Partner may designate from time
to time. The General Partner shall be
responsible for maintaining at the Partnership's principal place of business
those records required by the Act to be maintained there.
Section 1.07 Registered Agent and Office. The registered agent for service
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of process on the Partnership in the State of Delaware or any other jurisdiction
shall be The Corporation Trust Company or such other Person or Persons as the
General Partner may designate from time to time. The registered office of the
Partnership in the State of Delaware shall be at 1209 Orange Street, Wilmington,
Delaware 19801 or such other place as the General Partner may designate from
time to time.
Section 1.08 Certain Definitions. As used in this Agreement, the following
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terms shall have the meanings specified as follows:
"Act" shall mean the Delaware Revised Uniform Limited Partnership Act, Del.
Code Ann., (S)(S)17-101, et seq., or, from and after the date any successor
statute becomes, by its terms, applicable to the Partnership, such successor
statute, in each case as amended at such time by amendments that are, at that
time, applicable to the Partnership. All references to sections of the Act
include any corresponding provision or provisions of any such successor statute.
"Affiliate" shall mean, with respect to any specified Person, (i) any
Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the specified Person
or (ii) any Person that is an officer or director of, partner in, or trustee of,
or serves in a similar capacity with respect to, the specified Person or of
which the specified Person is an officer, director, partner or trustee, or with
respect to which the specified Person serves in a similar capacity. As used in
this definition of "Affiliate", the terms "controls", "controlled by" and "under
common control with" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Limited Partnership Agreement, as from time to
time amended, supplemented or restated.
"Capital Contributions" shall mean, with respect to any Partner, such
Partner's total contributions to the capital of the Partnership pursuant to this
Agreement.
"Certificate" shall mean the Partnership's Certificate of Limited
Partnership, as such Certificate may from time to time be amended or restated.
"Corporation Election" shall have the meaning set forth in Section 4.01
hereof.
"Covered Person" shall have the meaning set forth in Article VII hereof.
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"Effective Date" shall mean the date set forth in the opening paragraph of
this Agreement.
"Entity" shall mean any corporation, general partnership, limited
partnership, limited liability company, joint venture, trust, business trust,
cooperative, association or other entity.
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"General Partner" shall mean Hanover LLC 3, LLC and/or any other Person
admitted to the Partnership as a General Partner pursuant to the terms hereof.
"Limited Partner" shall mean Hanover Compression Limited Holdings, LLC
and/or any other Person admitted to the Partnership as a Limited Partner
pursuant to the terms hereof.
"Partner" and "Partners" shall mean, as the context requires, each or all
of the General Partner and the Limited Partners.
"Partnership" shall mean Hanover Compression Limited Partnership, a
Delaware limited partnership, and its successors.
"Partnership Assets" shall mean all assets, whether tangible or intangible
and whether real, personal or mixed, at any time owned by the Partnership.
"Percentage Interest" shall mean for each Partner the percentage interest
in the Partnership set forth opposite its name on the attached Schedule A which
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is made a part of this Agreement for all purposes.
"Person" shall mean any natural person or Entity.
"Substituted Partner" shall mean any Person admitted to the Partnership in
connection with the Transfer of an interest pursuant to Section 5.02 hereof.
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"Terminating Partner" shall have the meaning set forth in Section 6.05
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hereof.
"Transfer" shall have the meaning set forth in Section 5.01 hereof.
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"Withdrawing Partner" shall have the meaning set forth in Section 6.03
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hereof.
ARTICLE II.
OPERATIONS
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Section 2.01 Management of Partnership.
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(a) The General Partner shall have exclusive control over the business
of the Partnership and shall have all rights, powers and authority generally
conferred by law or necessary, advisable or consistent in connection therewith.
The General Partner may, in its discretion, appoint officers of the Partnership
(such as President, Vice President, Treasurer, Secretary and Assistant
Secretary) to act as agents of the Partnership. If the General Partner so
resolves in writing, any such officer may bind the Partnership by executing and
delivering contracts, agreements or instruments in the name and on behalf of the
Partnership. The Limited Partner shall have no right to participate in or vote
upon any Partnership matters except as specifically provided by this Agreement
or required by any mandatory provision of the Act.
(b) Without limiting the foregoing, the General Partner shall have
full power on behalf and in the name of the Partnership to carry out any and all
of the objects and purposes of the Partnership and to perform all acts and to
execute and deliver all agreements, instruments
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and other documents which it, in its sole discretion, may deem necessary or
desirable, including without limitation, the power to:
(i) enter into, deliver, perform, construe and take any action
under, any contract, agreement or other instrument as the General Partner
shall determine to be necessary or desirable to further the purpose of the
Partnership;
(ii) open, maintain and close bank accounts, make deposits
thereunder and investment decisions with respect thereto and draw checks or
other orders for the payment of moneys;
(iii) collect all sums due the Partnership, including the assertion
by all advisable means of the Partnership's right to payment;
(iv) to the extent that funds of the Partnership are available
therefor, pay as they become due all debts, obligations and operating
expenses of the Partnership including, without limitation, the salaries,
bonuses, benefits and expenses of the employees and agents of the
Partnership and equipment and office acquisitions and operating costs;
(v) employ and dismiss from employment, and pay the fees and
expenses of, any and all employees, attorneys, accountants, consultants,
advisors or other agents, on such terms and for such compensation as the
General Partner may determine, whether or not such person may also be
otherwise employed by any affiliate of the General Partner;
(vi) obtain insurance for the Partnership;
(vii) admit additional partners;
(viii) determine distributions of Partnership cash and other property
as provided in Article IV;
(ix) bring and defend actions, investigations and proceedings at law
or equity or arbitrations or other forms of alternative dispute resolution
before any governmental, administrative or other regulatory agency, body or
commission or arbitrator, mediator or other forum for dispute resolution;
(x) make all elections, investigations, evaluations and decisions,
binding the Partnership thereby, that may in the sole judgment of the
General Partner be necessary or desirable for the acquisition, management
or disposition of assets by the Partnership, including without limitation
the exercise of rights to elect to adjust the tax basis of Partnership
assets;
(xi) incur expenses and other obligations on behalf of the
Partnership and, to the extent that funds of the Partnership are available
for such purpose, pay all such expenses and obligations;
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(xii) cause the Partnership to incur or guarantee indebtedness for
borrowed money;
(xiii) possess and exercise all rights and powers of general partners
under the Act, in furtherance of the purposes of the Partnership;
(xiv) consult with and seek the advice of one or more of the Limited
Partners as contemplated by Section 17-303 of the Act;
(xv) borrow money, execute instruments evidencing indebtedness and
secure indebtedness by mortgage, deed of trust, pledge, security interest
or other lien in furtherance of Partnership purposes; to pay and discharge
all indebtedness owing with respect to and secured by the Partnership's
assets, or any part thereof, and to cause the Partnership to make such
other payments and perform such other acts as the General Partner may deem
necessary to preserve the interest of the Partnership therein;
(xvi) sell, assign, transfer, convey or otherwise dispose of
Partnership property; to merge one or more entities with and into the
Partnership; to file any documents relating thereto with any public
official or third party;
(xvii) prepare and file all requisite tax returns required by
federal, state and local authorities having jurisdiction over the
Partnership, and o cause the Partnership to pay and discharge all taxes and
assessments levied and assessed against the Partnership's assets or any
part thereof;
(xviii) keep all books of accounts and other records required by the
Partnership, and to keep vouchers, statements, receipted bills and invoices
and other records, covering collections, disbursements, and other data in
connection with the Partnership; and
(xix) do any act which is necessary to carrying out any of the
purposes of the Partnership, including without limitation the foregoing.
Section 2.02 Power of Attorney. By the execution of this Agreement, the
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Limited Partner does irrevocably constitute and appoint the General Partner as
its true and lawful attorney-in-fact and agent with full power and authority to
act in its name, place and stead in the execution, acknowledgement, delivering,
filing and recording of all certificates and documents that the General Partner
deems necessary or reasonably appropriate for the following specific purposes:
(i) to qualify or continue the Partnership as a limited
partnership in Delaware and to qualify the Partnership to do business in
the states in which the Partnership is required to qualify;
(ii) to reflect a change in the identity of any Partner, the
addition of any Partner pursuant to the provisions of Article V or an
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amendment of this Agreement made pursuant to the provisions of Section
8.03; and
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(iii) to reflect the dissolution and termination of the
Partnership after same has been dissolved and terminated in accordance
herewith.
The power of attorney granted herein shall be deemed to be coupled with an
interest, shall be irrevocable and shall, to the extent permitted by law,
survive the termination of the Limited Partner, and shall be binding on any
assignee or vendee of the Limited Partner's Percentage Interest hereunder, or
any portion thereof, including any of the distributive rights relating thereto.
Section 2.03 Partnership Expenses. Except as otherwise provided in this
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Agreement, the Partnership shall be responsible for paying all costs and
expenses related to the business of the Partnership. In the event any such costs
and expenses are or have been paid by any Partner, then, except as expressly
provided herein to the contrary, such Partner shall be entitled to be reimbursed
for such payment. The payments and reimbursements provided in this Section 2.02
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shall be made regardless of whether any distributions are made to the Partners
under Article IV hereof.
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ARTICLE III.
FINANCING
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Section 3.01 Capital Contributions; Etc.
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(a) On the Effective Date, each of Hanover LLC 3, LLC and
Hanover Compression Limited Holdings, LLC agrees to contribute to the capital of
the Partnership the property set forth opposite its name on the attached
Schedule A, which is made a part of this Agreement for all purposes, as its
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initial Capital Contribution.
(b) The Partners shall not be obligated to make any additional
Capital Contributions or loan money to the Partnership.
Section 3.02 Limited Liability of Partners. The Limited Partner shall not
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be liable for the losses, debts, liabilities, contracts or other obligations of
the Partnership except as otherwise required by the law.
Section 3.03 Treatment of Capital Contributions. Except as may otherwise
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be provided in this Agreement, no Partner shall be entitled to interest on its
Capital Contributions nor shall any Partner be entitled to demand the return of
all or any part of such Capital Contributions.
Section 3.04 No Third Party Beneficiaries. Nothing in this Agreement, and,
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without limiting the generality of the foregoing, in this Article III, expressed
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or implied, is intended or shall be construed to give to any creditor of the
Partnership or to any creditor of any Partner or any other Person whatsoever,
other than the Partners and the Partnership, any legal or equitable right,
remedy or claim against, under or in respect of the Partnership, the Partners or
this Agreement or any covenant, condition or provisions herein contained, and
such provisions are and shall be held to be for the sole and exclusive benefit
of the Partners and the Partnership.
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ARTICLE IV.
ALLOCATION, DISTRIBUTIONS AND ACCOUNTING MATTERS
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Section 4.01 Certain Tax and Accounting Matters. The Partnership shall
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file an Internal Revenue Service Form 8832 (Entity Classification Election) and
elect to be classified as a corporation for federal tax purposes under Treasury
Regulation Section 301.7701-3 (the "Corporation Election"). For those
jurisdictions that do not give effect to the Corporation Election, the
Partnership shall establish and maintain Partner capital accounts, allocate
Profits and Losses, and address tax and accounting matters in accordance with
the provisions of Exhibit A, hereunto annexed and made a part hereof, which
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provisions are incorporated herein and shall constitute part of this Agreement.
Section 4.02 Distributions to Partners. From time to time, the General
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Partner shall distribute funds in such amounts as it may determine, in its sole
discretion. All funds shall be distributed to the Partners in accordance with
their respective Percentage Interests at the time of the distribution. In
determining the amount of funds to distribute pursuant to this Section 4.02, the
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General Partner may consider such factors as the need to allocate funds to any
reserves for Partnership contingencies or any other Partnership purposes that
the General Partner deems necessary or appropriate.
ARTICLE V.
TRANSFERS
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Section 5.01 Transfers. Any Limited Partner or the General Partner may not
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sell, transfer, assign, mortgage, hypothecate or otherwise permit or suffer any
encumbrance of ("Transfer") all or any part of its interest in the profits,
losses or distributions of the Partnership without the prior unanimous written
consent of the other Partners. All reasonable costs and expenses incurred by the
Partnership in connection with any Transfer, and the admission of a Person as a
Substituted Partner, shall be paid by the transferee.
Section 5.02 Restrictions on Transfer. In the event of any Transfer or
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Transfers permitted by this Article V, the interest so Transferred shall remain
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subject to all terms and provisions of this Agreement; and the assignee or
transferee shall be deemed, by accepting the interest so Transferred, to have
assumed all the obligations hereunder relating to the interest so Transferred.
Any transferee or assignee of the interest of a Partner shall automatically be
admitted as a Substituted Partner. Any assignee of a General Partner interest in
the Partnership admitted to the Partnership as a Substituted Partner shall
succeed to and assume the management and voting rights of the Transferring
General Partner. Except as provided herein, upon admission, a Substituted
Partner shall be subject to all provisions of the Agreement in the place and
stead of its assignor as if the Substituted Partner were originally a party to
this Agreement. Upon admission of a transferee of the entire interest of a
Partner as a Substituted Partner, the transferor shall be automatically
withdrawn as a Partner from the Partnership, and shall be relieved of any
corresponding obligations as a Partner hereunder, including, without limitation,
any obligations of the Partnership or any other Partner.
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ARTICLE VI.
WITHDRAWAL, DISSOLUTION, AND TERMINATION
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Section 6.01 Withdrawal. Except in connection with the Transfer of an
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interest in the Partnership, no Partner shall at any time retire or withdraw
from the Partnership without obtaining the prior unanimous written consent of
the remaining Partners. The withdrawal of any Limited Partner shall not dissolve
the Partnership; and the Partnership shall continue notwithstanding such
withdrawal.
Section 6.02 Dissolution/Winding-Up. The Partnership shall be dissolved
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and wound up upon the occurrence of any of the following:
(a) the resignation of a General Partner other than in connection
with the Transfer of an interest in the Partnership, unless:
(i) the remaining General Partner, if any, elects in writing
within thirty (30) days after such withdrawal to reconstitute the
Partnership, to continue as the General Partner and to continue the
Partnership and its business, or
(ii) if there is no remaining General Partner within ninety
(90) days after such withdrawal, all of the Limited Partners agree to
appoint in writing a successor General Partner, as of the date of the
withdrawal of the General Partner, and agree to reconstitute the
Partnership and to continue the business of the Partnership, and such
successor General Partner agrees in writing to accept such appointment;
(b) the sale, exchange or other disposition of all or
substantially all of the Partnership Assets; or
(c) the unanimous written election of the Partners.
Section 6.03 Continuation and Reconstitution of Partnership. If the
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Partnership is continued as provided in Sections 6.01, 6.02(a)(i) or (ii) then,
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as of the date of withdrawal, the Partner with respect to which an event of
withdrawal under Sections 6.01 or 6.02 has occurred (or its successor in
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interest) (the "Withdrawing Partner") shall have none of the powers of a Partner
under the Agreement or applicable law and shall have only the rights and powers
of an assignee of the interest of such Partner hereunder to share in any
Partnership profits, losses and distributions in accordance with its interest in
the Partnership and shall have no other rights, powers or liabilities of a
Partner hereunder; provided, however, that any Withdrawing Partner shall remain
subject to all of its obligations, liabilities, restrictions and remedies with
respect to Capital Contributions, and shall remain subject to all restrictions
provided for with respect to a Partner's interest hereunder unless specifically
otherwise agreed by all the remaining Partners.
Section 6.04 Bankruptcy, etc. of a Limited Partner. The withdrawal,
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termination (in the case of a Limited Partner that is a partnership),
dissolution (in the case of a Limited Partner that is a corporation), retirement
or adjudication as a bankrupt of a Limited Partner shall not dissolve nor
wind-up the Partnership, but the rights of such Limited Partner to share in the
profits and losses of the Partnership and to receive distributions of
Partnership funds shall, upon the happening of such an event, pass to the
Limited Partner's legal representative, or successor in
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interest, as the case may be, subject to the Agreement, and the Partnership
shall continue as a limited partnership but in no event shall such Limited
Partner's legal representative, or successors in interest, become a Substituted
Partner except with the consent of all of the Partners.
Section 6.05 Termination of Partnership.
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(a) Upon the winding-up and dissolution of the Partnership unless
continued pursuant to Sections 6.01 or 6.02, the Partnership shall be terminated
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as rapidly as business circumstances will reasonably permit. At the direction of
the General Partner, or a Person approved by the Limited Partner(s) if the
winding-up and dissolution of the Partnership is pursuant to Section 6.02(a)(ii)
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hereof (the General Partner or the other Person, as the case may be, being
herein called the "Terminating Partner"), a full accounting of the assets and
liabilities of the Partnership shall be taken and a statement of the Partnership
Assets shall be furnished to all Partners as soon as is reasonably practicable.
(b) After the payment of all expenses of liquidation and of all
debts and liabilities of the Partnership in such order or priority as provided
by law (including any debts or liabilities to Partners, who shall be treated as
secured or unsecured creditors, as may be the case, to the extent permitted by
law, for sums loaned to the Partnership, if any, as distinguished from Capital
Contributions) and after all resulting items of Partnership Profits and Losses
have been allocated to the Partners in accordance with the terms of Exhibit A,
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all remaining Partnership Assets shall then be distributed among the Partners in
accordance with the provisions of Section 4.02 hereof. All liquidating
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distributions shall be made in assets of the Partnership and/or in cash as the
Terminating Partner shall determine in its sole and absolute discretion.
Section 6.06 General Partners Not Personally Liable for Return of Capital
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Contributions. No General Partner nor any Affiliate of any General Partner shall
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be personally liable for the return of the Capital Contributions of any Partner,
and such return shall be made solely from available Partnership Assets, if any,
and each Limited Partner hereby waives any and all claims it may have against
any General Partner or any such Affiliate in this regard.
Section 6.07 Provisions Cumulative. All provisions of this Agreement
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relating to the dissolution, liquidation and termination of the Partnership
shall be cumulative to the extent not inconsistent with other provisions herein;
that is, the exercise or use of one of the provisions hereof shall not preclude
the exercise or use of any other provision of this Agreement to the extent not
inconsistent therewith.
ARTICLE VII.
INDEMNIFICATION
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The Partnership shall indemnify and hold harmless each General Partner and
Limited Partner and its equity holders, members, directors, officers, employees,
agents and Affiliates (each, a "Covered Person") from and against any and all
claims or liabilities of any nature whatsoever, including legal fees and other
expenses reasonably incurred, arising out of or in connection with the
activities of the Partnership or any action taken or omitted by any such Covered
Person by or on behalf of the Partnership pursuant to authority granted by this
Agreement except (i) for those incurred as a result of, arising from, or
relating to, the gross
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negligence, willful misconduct or bad faith of such Covered Person, or a knowing
and material violation by such Covered Person of the provisions of this
Agreement, (ii) as to which indemnification is barred under the federal
securities law, the Act or other applicable law, or (iii) as to its share as
Partner in any losses or expenses of the Partnership, including any
indemnification provided pursuant to this Article VII. In the event that any
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Covered Person becomes involved in any capacity in any suit, action, proceeding
or investigation with respect to which such Covered Person may be entitled to
indemnification under this Article VII, the Partnership will periodically
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reimburse such Covered Person for its reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith; provided, however, that such Covered Person shall provide an
undertaking to promptly repay to the Partnership the amount of any such expenses
paid to it if it shall ultimately be determined that such Covered Person is not
entitled to be indemnified by the Partnership as herein provided in connection
with such suit, action, proceeding or investigation.
The satisfaction of any indemnification and any saving harmless pursuant to
this Article VII shall be solely from Partnership Assets and no Partner shall be
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required to contribute additional capital or otherwise pay any amounts in
respect of any indemnification obligations hereunder.
No amendment, alteration or repeal of this Article VII or any provision
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hereof will be effective as to any Covered Person for acts, events and
circumstances that occurred, in whole or in part, before that amendment,
alteration or repeal. The provisions of this Article VII will continue as to any
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Covered Person whose company status has ceased for any reason and will inure to
the benefit of its heirs, executors, administrators, successors and assigns.
Neither the provisions of this Article VII nor those of any agreement to which
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the Partnership is a party will preclude the indemnification of any person,
entity or organization which this Article VII does not specify as having the
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right to receive indemnification or is not a party to any such agreement, but
which the Partnership has the power or obligation to indemnify under the
provisions of the Act.
ARTICLE VIII.
MISCELLANEOUS
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Section 8.01 Other Competing Business. Except as may be provided in any
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other agreement to which the parties hereto may be a party but notwithstanding
anything else to the contrary contained in or inferable from this Agreement, the
Act or any other statute or principle of law, neither the Partners nor any of
their respective Affiliates shall be prohibited or restricted in any way from
investing in or conducting, either directly or indirectly, businesses of any
nature whatsoever, including the ownership and operation of businesses or
properties similar to, competitive with or in the same geographical area as
those held by the Partnership. Any investment in or conduct of any such
businesses by a Partner or any of their respective Affiliates shall not give
rise to any claim for an accounting by the other Partners or the Partnership or
any right to claim any interest therein or the profits therefrom or damages in
respect thereof.
Section 8.02 Notice.
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(a) All notices, demands or requests provided for or permitted to be
given pursuant to this Agreement must be in writing and sent to a Partner at the
address listed under such Partner's name on the signature page of this Agreement
or via telecopier or other similar device to the telephone number listed
opposite such Partner's name on the signature page, as both shall be changed by
notice in accordance with this Section.
(b) All notices, demands and requests to be sent to a Partner pursuant
to this Agreement shall be deemed to have been properly given or served if: (i)
personally delivered, (ii) deposited for next day delivery by Federal Express,
or other similar overnight courier services, addressed to such Partner, (iii)
deposited in the United States mail, addressed to such Partner, prepaid and
registered or certified with return receipt requested or (iv) transmitted via
telecopier or other similar device to the attention of such Partner. Any notice
sent in compliance with the above provisions shall be deemed given on the date
received, except that notices sent by registered or certified mail, return
receipt requested, shall be deemed given on the third business day next
succeeding the day on which it was sent, or, if sooner, on the actual date
received.
Section 8.03 Amendments. Except as provided herein, amendments and
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supplements may be made to or restatements made of this Agreement only with the
prior unanimous consent of the Partners.
Section 8.04 Force Majeure. If, as a result of force majeure (including
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and without limitation any and all events and circumstances not within or
subject to a party's reasonable control), the General Partner is unable to carry
out, wholly or in part, its duties and obligations under this Agreement, then
the duties and obligations of the General Partner, so far as the General
Partner's ability to comply with them is affected by the force majeure, shall be
suspended during the continuance of the force majeure. The General Partner shall
use all reasonable diligence to remove the force majeure as quickly as
reasonably possible. The requirement that any force majeure shall be remedied
with all reasonable diligence shall not require the settlement of strikes,
lockouts or other labor difficulty suffered, but resolution of all such
difficulties shall be entirely within the discretion of the party concerned.
Section 8.05 GOVERNING LAW. THE RIGHTS AND OBLIGATIONS OF THE PARTNERS
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HEREUNDER SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES
THEREOF.
Section 8.06 Entire Agreement. Except as provided herein, this Agreement,
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including all exhibits and schedules to this Agreement, contains the entire
agreement among the parties relative to the matters contained in this Agreement.
Section 8.07 Waiver. No consent or waiver, express or implied, by any
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Partner to or for any breach or default by any other Partner in the performance
by such other Partner of its or its obligations under this Agreement shall be
deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such other Partner of the same or any other
obligations of such other Partner under this Agreement. Failure on the part of
any Partner to complain of any act or failure to act of any of the other
Partners or to declare any of the Partners
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in default, regardless of how long such failure continues, shall not constitute
a waiver by such Partner of its rights hereunder.
Section 8.08 Severability. If any provision of this Agreement or the
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application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby, and the intent of this Agreement shall be enforced to the greatest
extent permitted by law.
Section 8.09 Binding Agreement. Subject to the restrictions on transfers
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and encumbrances set forth in this Agreement, this Agreement shall inure to the
benefit of, and be binding upon, the undersigned Partners and their respective
legal representatives, successors and assigns. Whenever, in this Agreement, a
reference to any party or Partner is made, such reference shall be deemed to
include a reference to the legal representatives, successors and assigns of such
party or Partner.
Section 8.10 Waiver of Partition. Except as may be otherwise required by
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law in connection with the winding-up, liquidation and dissolution of the
Partnership, each Partner hereby irrevocably waives any and all rights that it
may have to maintain an action for partition of any of the Partnership Assets.
Section 8.11 Counterparts. This Agreement may be executed in multiple
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counterparts, each of which shall be deemed an original for all purposes and all
of which when taken together shall constitute a single counterpart instrument.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, each of the undersigned has executed and delivered this
Agreement to be effective as of the Effective Date.
GENERAL PARTNER
Hanover LLC 3, LLC, a Delaware limited liability company
By: _______________________________________
William S. Goldberg
President
LIMITED PARTNER
Hanover Compression Limited Holdings, LLC, a Delaware
limited liability company
By: _______________________________________
William C. Bryant
Vice President
S-1
SCHEDULE A
TO THE
LIMITED PARTNERSHIP AGREEMENT
OF
HANOVER COMPRESSION LIMITED PARTNERSHIP
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General Partner Percentage Interest Initial Capital
Contributions
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Hanover LLC 3, LLC 1.0% $ 10
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Limited Partner
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Hanover Compression Limited Holdings 99.0% $990
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EXHIBIT A
TO THE
LIMITED PARTNERSHIP AGREEMENT
OF
HANOVER COMPRESSION, LIMITED PARTNERSHIP
CAPITAL ACCOUNTS; ALLOCATIONS OF PROFITS AND LOSSES;
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TAX AND ACCOUNTING MATTERS; CERTAIN OTHER PROVISIONS
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ARTICLE I
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CAPITAL ACCOUNTS
Section 1.1 Definitions. When used in this Exhibit A, the following terms
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will have the meanings respectively indicated.
"Adjusted Capital Account" means the Book Capital Account of a Partner
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reduced by any adjustments, allocations or distributions described in paragraphs
(b)(2)(ii)(d)(4), (5) or (6) of Section 1.704-1 of the Regulations and increased
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by any amounts such Partner is obligated to restore to the Partnership or is
deemed obligated to restore pursuant to the penultimate sentences of Section
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1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations.
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"Book Basis" means with respect to any asset, the asset's adjusted basis
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for federal income tax purposes provided, however, (i) if property is
contributed to the Partnership, the initial Book Basis of such property shall
equal its fair market value on the date of contribution; and (ii) if the Book
Capital Accounts of the Partnership are adjusted pursuant to Regulations Section
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1.704-1(b) to reflect the fair market value of any Partnership asset, the Book
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Basis of such asset shall be adjusted to equal its respective fair market value
as of the time of such adjustment in accordance with such Regulation. The Book
Basis of all assets shall be adjusted thereafter by Book Depreciation as
provided in Regulations Section 1.704-1(b)(2)(iv)(g) and any other adjustment to
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the basis of assets other than Book Depreciation.
"Book Capital Account" has the meaning set forth in Section 1.2 of this
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Exhibit A.
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"Book Depreciation" means for each taxable year or other period, an amount
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equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset of the Partnership for the year or other
period, except that if the Book Basis of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of the year or other
period, Book Depreciation with respect to that asset shall be an amount which
bears the same ratio to the beginning Book Basis as the federal income tax
depreciation, amortization or other cost recovery deduction with respect to that
asset for the year or other period bears to the beginning adjusted tax basis,
provided that if the federal income tax depreciation, amortization, or other
cost recovery deduction with respect to that asset for the year or other period
is zero, Book Depreciation will be determined with reference to the beginning
Book Basis using any reasonable method selected by the General Partner.
"Code" means the Internal Revenue Code of 1986, as amended from time to
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time.
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"Nonrecourse Deductions" has the meaning set forth in Section 1.704-2(b)(1)
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of the Regulations.
"Nonrecourse Liability" has the meaning set forth in Section
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1.752-1(a)(2) of the Regulations.
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"Partner Nonrecourse Debt" has the meaning set forth in Section
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1.704-2(b)(4) of the Regulations.
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"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
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Section 1.704-2(i)(2) of the Regulations.
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"Partner Nonrecourse Deductions" has the meaning set forth in Sections
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1.704-2(i) and 1.704-2(i)(2) of the Regulations.
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"Partnership Minimum Gain" has the meaning set forth in Sections
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1.704-2(b)(2) and 1.704-2(d) of the Regulations.
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"Profits" or "Losses" means the Partnership's taxable income or loss,
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respectively, as calculated in accordance with Section 703(a) of the Code (for
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this purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in such
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taxable income or loss), with the following adjustments:
(i) any income and gain that is exempt from tax and all
expenditures described in Section 705(a)(2)(B) of the Code (or treated as
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expenditures so described pursuant to Section 1.704-1(b)(2)(iv)(i) of the
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Regulations), and not otherwise taken into account in computing Profits or
Losses shall be reflected in such Profits or Losses;
(ii) Book Depreciation, and not the depreciation, depletion
amortization deduction or allowance that shall be allowable for federal
income tax purposes to the Partnership with respect to a Partnership Asset,
shall be taken into account;
(iii) The Book Basis of Partnership assets and not the adjusted
tax basis, shall be used in calculating such Profits or Losses;
(iv) Any increase or decrease to Book Capital Accounts as a
result of any adjustment pursuant to Regulations Section
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1.704-1(b)(2)(iv)(g) shall constitute an item of Profit or Loss as
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appropriate; and
(v) Any amounts allocated under Sections 2.2 and 2.3 of this
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Exhibit A shall not be taken into account in computing Profits or Losses.
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"Regulations" means the temporary, final and proposed Income Tax
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Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding Regulations).
Section 1.2 Book Capital Accounts. A capital account (the "Book Capital
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Account") for each Partner shall be maintained at all times during the term of
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the Partnership in accordance
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with this Section 1.2 and the capital accounting rules set forth in Section
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1.704-1(b)(2)(iv) and in Section 1.704-2 of the Regulations. In the event that
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at any time during the term of the Partnership it shall be determined that the
Book Capital Accounts shall not have been maintained as required by this Section
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1.2, then said accounts shall be retroactively adjusted so that the same shall
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conform to this Section 1.2.
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(a) Initial Book Capital Accounts. The Book Capital Accounts of the
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Partners as of the date hereof (and after the contributions described in Section
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3.01 of the Agreement have been made) shall be as more fully reflected on the
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Partnership's books and records.
(b) Optional Revaluations of Partnership Property. The Partnership will
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make the election to revalue Partnership Assets permitted under Section
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1.704-1(b)(2)(iv)(f) of the Regulations unless otherwise determined by the
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General Partner.
(c) Book Adjustments on Distributions. With respect to all distributions of
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Partnership Assets to Partners, the Partnership shall comply with the provisions
contained in Section 1.704-1(b)(2)(iv)(e) of the Regulations (relating to
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adjustments to the Partners' Book Capital Accounts in connection with such
distributions) and all allocations and adjustments made in connection therewith
shall be in accordance with Article II of this Exhibit A.
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ARTICLE II
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ALLOCATION OF CERTAIN PROFITS AND LOSSES
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FOR BOOK AND TAX PURPOSES
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Section 2.1 Profits and Losses.
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(a) Allocation. The Profits or Losses of the Partnership shall be allocated
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to the Partners in accordance with their respective Percentage Interests.
(b) Limitation. To the extent Losses which otherwise would have been
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allocated to a Limited Partner pursuant to Section 2.1(a) would cause such
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Limited Partner to have a deficit in its Adjusted Capital Account at the end of
any fiscal year, such Losses shall not be allocated to the such Limited Partner
but instead shall be allocated to the General Partner. This Section 2.1(b) is
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intended to ensure that allocations of Losses have economic effect pursuant to
Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
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consistently therewith.
Section 2.2 Special Allocations. The following special allocations shall be
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made in the following order:
(a) Partnership Minimum Gain Chargeback. Notwithstanding any other
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provision of this Agreement to the contrary, if there is a net decrease in
Partnership Minimum Gain during any Partnership taxable period, each Partner
shall be allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in Sections
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1.704-2(f), 1.704-2(g)(2) and 1.704-2(j)(2)(i) of the Regulations, or any
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successor provisions. Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the
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Regulations. This Section 2.2(a) is intended to comply with the Partnership
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Minimum Gain chargeback requirement in Section 1.704-2(f) of the Regulations and
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shall be interpreted consistently therewith.
(b) Partner Nonrecourse Debt Minimum Gain Chargeback. Except as provided in
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Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of
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this Exhibit A to the contrary, if there is a net decrease in Partner
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Nonrecourse Debt Minimum Gain during any Partnership taxable period, any Partner
with a share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain for such
period (and, if necessary, subsequent periods) in the manner and amounts
provided in Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii) of the Regulations, or
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any successor provisions. Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations.
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This Section 2.2(b) is intended to comply with the chargeback of items of income
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and gain requirement in Section 1.704-2(i)(4) of the Regulations and shall be
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interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Limited Partner unexpectedly
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receives any adjustments, allocations, or distributions described in Sections
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1.704- 1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, items of Partnership
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income and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Code Section 704(b), the deficit balance, if any,
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in its Adjusted Capital Account created by such adjustments, allocations, or
distributions, as quickly as possible; provided, however, that an allocation
pursuant to this Section 2.2(c) shall be made only if and to the extent that
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such Limited Partner would have a deficit balance in its Adjusted Capital
Account after all other allocations provided for in this Exhibit A have been
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tentatively made as if this Section 2.2(c) were not in the Agreement.
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(d) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period
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shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the General Partner determines in good faith discretion
that the Partnership's Nonrecourse Deductions must be allocated in a different
ratio to satisfy the safe harbor requirements of the Treasury Regulations
promulgated under Code Section 704(b), the General Partner is authorized, upon
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notice to the Partners, to revise the prescribed ratio to the numerically
closest ratio that does satisfy such requirements.
(e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any
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taxable period shall be allocated to the Partner that bears the economic risk of
loss with respect to the Partner Nonrecourse Debt to which such Partner
Nonrecourse Deductions are attributable in accordance with Section 1.704-2(i) of
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the Regulations.
Section 2.3 Certain Book/Tax Differences. In accordance with Section 704(c)
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of the Code and the applicable Regulations thereunder, income, gain, loss and
deduction with respect to any Partnership Asset contributed to the capital of
the Partnership, or with respect to any Partnership Asset which has a Book Basis
different than its adjusted tax basis, shall, solely for income tax purposes, be
allocated among the Partners so as to take into account any variation
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between the adjusted tax basis of such Partnership Asset to the Partnership and
the Book Basis of such Partnership Asset.
ARTICLE III
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TAX AND ACCOUNTING MATTERS; REPORTING.
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Section 3.1 Tax and Accounting Matters.
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(a) The Partnership will be on the accrual basis for both tax and
accounting purposes.
(b) The Partnership books and records shall be prepared in accordance with
either tax accounting principles, consistently applied, or generally accepted
accounting principles, consistently applied, as the General Partner shall
determine in its sole discretion. Such books and records shall be audited by a
firm of independent certified public accountants as determined by the General
Partner at such times as the General Partner may determine, and the expenses of
all such audits shall be borne by the Partnership; provided, however that if the
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Partnership makes an election under Section 754 of the Code, any Partner
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receiving an adjustment in tax basis in Partnership Assets by application of
Section 743 of the Code shall bear that portion of the accounting and audit
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expenses as is properly attributable to the calculation of such basis adjustment
and the maintenance of the accounts with respect thereto.
(c) All federal and state income tax returns of the Partnership shall be
prepared under the direction of the General Partner, and all tax audits and
litigation shall be conducted under the direction of the General Partner. The
General Partner is hereby designated as the "tax matters partner" for the
Partnership (as such term is defined in Section 6231(a)(7) of the Code).
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(d) The fiscal year of the Partnership shall end on the 31st day of
December in each year.
(e) The Partnership shall invest its funds in such interest bearing or
non-interest bearing accounts as the General Partner shall determine from time
to time.
Section 3.2 Reporting. Within 60 days after the close of each calendar
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year, the General Partner shall provide a copy of a set of unaudited financial
statements to each Partner which shall include, as of the end of such year:
(a) a balance sheet and a statement of net assets of the Partnership;
(b) a statement of income;
(c) a statement of cash flows;
(d) a statement of the capital accounts of each Partner; and
(e) a statement of Partnership allocations and distributions during such
year.
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ARTICLE IV
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NO DEFICIT FUNDING OBLIGATION
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Notwithstanding anything to the contrary contained in this Exhibit A or in
the Partnership Agreement, at no time shall any Partner be obligated to restore
all or any portion of any deficit balance in such Partner's Book Capital
Account.
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