Energy 11, L.P. (the “Partnership”) was formed as a
First Amended and Restated
Agreement of Limited Partnership
Energy 11, L.P.
_____________, 2014
TABLE OF CONTENTS
| | Page |
ARTICLE I. Definitions | 1 |
Section 1.1 | Definitions. | 1 |
Section 1.2 | Construction. | 11 |
| | |
ARTICLE II. Organization | 12 |
Section 2.1 | Formation. | 12 |
Section 2.2 | Name. | 12 |
Section 2.3 | Registered Office; Registered Agent; Principal Office; Other Offices. | 12 |
Section 2.4 | Purpose and Business. | 13 |
Section 2.5 | Powers. | 13 |
Section 2.6 | Power of Attorney. | 13 |
Section 2.7 | Term. | 14 |
Section 2.8 | Title to Partnership Assets. | 15 |
| | |
ARTICLE III. Rights of Limited Partners | 15 |
Section 3.1 | Limitation of Liability. | 15 |
Section 3.2 | Management of Business. | 15 |
Section 3.3 | Outside Activities of the Limited Partners. | 16 |
Section 3.4 | Rights of Limited Partners. | 16 |
| | |
ARTICLE IV. Certificates; Record Holders; Transfer of Partnership Interests; Redemption of Partnership Interests | 17 |
Section 4.1 | Certificates. | 17 |
Section 4.2 | Mutilated, Destroyed, Lost or Stolen Certificates. | 18 |
Section 4.3 | Record Holders. | 19 |
Section 4.4 | Transfer Generally. | 19 |
Section 4.5 | Registration and Transfer of Limited Partner Interests. | 19 |
Section 4.6 | Transfer of the General Partner’s General Partner Interest; Transfer of Ownership of the General Partner. | 20 |
Section 4.7 | Transfer of Incentive Distribution Rights or Class B Units. | 21 |
Section 4.8 | Restrictions on Transfers. | 21 |
Section 4.9 | Citizenship Certificates; Non-citizen Assignees. | 22 |
Section 4.10 | Redemption of Partnership Interests of Non-citizen Assignees. | 23 |
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ARTICLE V. Capital Contributions and Issuance of Partnership Interests | 25 |
Section 5.1 | Organizational Contributions. | 25 |
Section 5.2 | Offering of Units. | 25 |
Section 5.3 | Subscriptions by Participants. | 25 |
Section 5.4 | Effect of Subscription | 26 |
Section 5.5 | Maximum and Minimum Number of Units. | 26 |
Section 5.6 | Acceptance of Subscriptions. | 26 |
Section 5.7 | Capital Contributions of the General Partner; Payment of Subscriptions. | 27 |
Section 5.8 | Incentive Rights. | 27 |
Section 5.9 | Class B Units | 27 |
Section 5.10 | Profits Interests. | 29 |
Section 5.11 | Interest and Withdrawal. | 29 |
Section 5.12 | Fully Paid and Non-Assessable Nature of Limited Partner Interests. | 30 |
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ARTICLE VI. Distributions; Allocations and Capital Accounts | 30 |
Section 6.1 | Distributions; Distributions to Record Holders. | 30 |
Section 6.2 | Distributions of Available Cash ;Cash; Payment of Dealer Manager Contingent, Incentive Fee | 30 |
Section 6.3 | Restrictions on Distributions. | 31 |
Section 6.4 | Capital Accounts. | 31 |
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ARTICLE VII. Management and Operation of Business | 31 |
Section 7.1 | Management. | 31 |
Section 7.2 | Certificate of Limited Partnership. | 34 |
Section 7.3 | Restrictions on the General Partner’s Authority.Authority ; Agreement by Owners of the General Partner . | 34 |
Section 7.4 | Reimbursement of the General Partner. | 35 |
Section 7.5 | Outside Activities. | 35 |
Section 7.6 | Loans from the General Partner; Loans or Contributions from the Partnership or Group Members. | 37 |
Section 7.7 | Indemnification. | 37 |
Section 7.8 | Liability of Indemnitees. | 39 |
Section 7.9 | Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties. | 40 |
Section 7.10 | Other Matters Concerning the General Partner. | 41 |
Section 7.11 | Purchase or Sale of Units; Incentive Distribution Rights and Class B Units. | 42 |
Section 7.12 | Reliance by Third Parties. | 42 |
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ARTICLE VIII. Books, Records, Accounting and Reports | 43 |
Section 8.1 | Records and Accounting. | 43 |
Section 8.2 | Fiscal Year. | 43 |
Section 8.3 | Reports. | 43 |
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ARTICLE IX. Tax Matters | 44 |
Section 9.1 | Tax Returns and Information. | 44 |
Section 9.2 | Tax Elections. | 44 |
Section 9.3 | Tax Controversies. | 44 |
Section 9.4 | Withholding. | 44 |
| | |
ARTICLE X. Admission of Partners | 45 |
Section 10.1 | Admission of Limited Partners. | 45 |
Section 10.2 | Admission of Successor General Partner. | 46 |
Section 10.3 | Amendment of Agreement and Certificate of Limited Partnership. | 46 |
ARTICLE XI. Withdrawal or Removal of Partners | 46 |
Section 11.1 | Withdrawal of the General Partner. | 46 |
Section 11.2 | Removal of the General Partner. | 48 |
Section 11.3 | Interest of Departing General Partner and Successor General Partner. | 48 |
Section 11.4 | Withdrawal of Limited Partners. | 48 |
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ARTICLE XII. Dissolution and Liquidation | 48 |
Section 12.1 | Dissolution. | 48 |
Section 12.2 | Continuation of the Business of the Partnership After Dissolution. | 49 |
Section 12.3 | Liquidator. | 50 |
Section 12.4 | Liquidation. | 50 |
Section 12.5 | Cancellation of Certificate of Limited Partnership. | 51 |
Section 12.6 | Return of Contributions. | 51 |
Section 12.7 | Waiver of Partition. | 51 |
Section 12.8 | Capital Account Restoration. | 51 |
| | |
ARTICLE XIII. Amendment of Partnership Agreement; Meetings; Record Date | 51 |
Section 13.1 | Amendments to be Adopted Solely by the General Partner. | 51 |
Section 13.2 | Amendment Procedures. | 53 |
Section 13.3 | Amendment Requirements. | 53 |
Section 13.4 | Special Meetings. | 54 |
Section 13.5 | Notice of a Meeting. | 55 |
Section 13.6 | Record Date. | 55 |
Section 13.7 | Postponement and Adjournment. | 55 |
Section 13.8 | Waiver of Notice; Approval of Meeting; Approval of Minutes. | 55 |
Section 13.9 | Quorum and Voting. | 56 |
Section 13.10 | Conduct of a Meeting. | 56 |
Section 13.11 | Action Without a Meeting. | 57 |
Section 13.12 | Right to Vote and Related Matters. | 57 |
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ARTICLE XIV. Merger, Consolidation or Conversion | 58 |
Section 14.1 | Authority. | 58 |
Section 14.2 | Procedure for Merger, Consolidation or Conversion. | 58 |
Section 14.3 | Approval by Limited Partners. | 60 |
Section 14.4 | Certificate of Merger or Certificate of Conversion. | 61 |
Section 14.5 | Effect of Merger, Consolidation or Conversion. | 61 |
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ARTICLE XV. General Provisions | 63 |
Section 15.1 | Addresses and Notices. | 63 |
Section 15.2 | Further Action. | 63 |
Section 15.3 | Binding Effect. | 63 |
Section 15.4 | Integration. | 63 |
Section 15.5 | Creditors. | 64 |
Section 15.6 | Waiver. | 64 |
Section 15.7 | Third-Party Beneficiaries. | 64 |
Section 15.8 | Counterparts. | 64 |
Section 15.9 | Applicable Law; Forum, Venue and Jurisdiction; Waiver of Jury Trial. | 64 |
Section 15.10 | Invalidity of Provisions. | 65 |
Section 15.11 | Consent of Partners. | 65 |
Section 15.12 | Facsimile Signatures. | 65 |
First Amended and Restated
Agreement of Limited Partnership
of
Energy 11, L.P.
This First Amended and Restated Agreement of Limited Partnership of Energy 11, L.P., dated as of ___________, 2014, is entered into by and between Energy 11 GP, LLC, a Delaware limited liability company, as the General Partner, DMOG, LLC, as the Organizational Limited Partner, together with any other Persons who become Partners in the Partnership or parties hereto as provided herein. In consideration of the covenants, conditions and agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I.
Definitions
Section 1.1 Definitions.
The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.
“Affiliate” means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with, the Person in question. As used herein, the term “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
“Agreement” means this First Amended and Restated Agreement of Limited Partnership of Energy 11, L.P., as it may be amended, supplemented or restated from time to time.
“Associate” means, when used to indicate a relationship with any Person, (a) any corporation or organization of which such Person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock or other voting interest; (b) any trust or other estate in which such Person has at least a 20% beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person.
“Approved Credit Facility” has the meaning set forth in the Management Agreement.
“Available Cash” means the cash of the Partnership and its Subsidiaries available for distribution to the Partners and to pay the Contingent, Incentive Fee determined on a consolidated basis as of the end of each Calendar Month prior to the dissolution of the Partnership and its Subsidiaries, consisting of the cash on hand as of the end of such Month (representing the proceeds from the sale of crude oil, natural gas and other hydrocarbons from the properties of the Partnership and its Subsidiaries, net proceeds from sales of the properties of the Partnership and its Subsidiaries, net proceeds from the hedging activities of the Partnership and its subsidiaries, other receipts from the operations of the Partnership and its Subsidiaries and, if the General Partner so determines, in its sole and absolute discretion, Capital Contributions of the Partners and the proceeds of borrowings by the Partnership or its Subsidiaries), less cash determined by the General Partner, in its sole and absolute discretion, to be used for past and future: operating expenses, capital expenditures and other amounts for acquisitions, exploration and development of oil and gas properties and other assets, debt service, management fees, general and administrative expenses and other obligations of the Partnership and its Subsidiaries, and reserves for future capital (including future acquisitions and exploration and development operations) and operating requirements of the Partnership and its Subsidiaries that the General Partner determines to be necessary or appropriate. Available Cash for each Month will be determined by the General Partner in its sole and absolute discretion following the end of each Month after the Initial Closing and continuing until the dissolution of the Partnership and its Subsidiaries, and such determination shall be final and binding on the Partners.
“Bankruptcy” means, with respect to any Person, the occurrence of any of the following events, conditions or circumstances: (i) such Person shall file a voluntary petition in bankruptcy or shall be adjudicated as bankrupt or insolvent, or shall file any petition or answer or consent seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under the United States Bankruptcy Reform Act of 1978 (the “Bankruptcy Code”) or any present or future applicable federal, state or other statute or Law relating to bankruptcy, insolvency, reorganization or other relief for debtors, or shall seek or consent to, or acquiesce in, the appointment of any trustee, receiver, conservator or liquidator of such Person or of all or any substantial part of its properties (the term “acquiesce,” as used in this definition, includes the failure to file a petition or motion to vacate or discharge any order, judgment or decree within 20 days, after entry of such order, judgment or decree); (ii) an involuntary case or other proceeding shall be commenced against such Person seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief with respect to such Person or its debts under the Bankruptcy Code or any present or future applicable federal, state or other statute or Law relating to bankruptcy, insolvency, reorganization or other relief for debtors, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed or unstayed for a period of 90 consecutive days, (iii) a court of competent jurisdiction shall enter an order, judgment or decree approving a petition filed against such Person seeking a reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the Bankruptcy Code, or any other present or future applicable federal, state or other statute or law relating to bankruptcy, insolvency, reorganization or other relief for debtors, and such Person shall acquiesce in the entry of such order, judgment or decree or such order, judgment or decree shall remain unvacated and unstayed for an aggregate of 90 days (whether or not consecutive) from the date of entry thereof, or any trustee, receiver, conservator or liquidator of such Person or of all or any substantial part of its property shall be appointed without the consent or acquiescence of such Person and such appointment shall remain unvacated and unstayed for an aggregate of 90 days (whether or not consecutive); (iv) such Person shall admit in writing its inability to pay its debts as they mature or shall generally not be paying its debts as they become due; or (v) such Person shall make a general assignment for the benefit of creditors or take any other similar action for the protection or benefit of creditors.
“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act. The terms “Beneficially Owns” and “Beneficially Owned” have correlative meanings.
“Board of Directors” means, with respect to the General Partner, the following, as applicable: (i) if the General Partner is a member managed limited liability company, the board of directors or similar governing body of the managing member of the General Partner; (ii) if the General Partner is a limited liability company (other than a member managed limited liability company) or a corporation, the board of directors or similar governing body of the General Partner; or (iii) if the General partner is a limited partnership, the board of directors or similar governing body of the general partner of the General Partner.
“Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of Texas shall not be regarded as a Business Day.
“Capital Account” has the meaning assigned to such term in Exhibit B.
“Capital Contribution” means any cash, cash equivalents or the Net Agreed Value of Contributed Property that a Partner contributes to the Partnership or that is contributed or deemed contributed to the Partnership on behalf of a Partner.
“Cause” means a court of competent jurisdiction has entered a final, non-appealable judgment finding the General Partner liable for actual fraud or willful misconduct in its capacity as a general partner of the Partnership.
“Certificate” means (a) a certificate (i) substantially in the form of Exhibit A to this Agreement, or (ii) in such other form as may be adopted by the General Partner, issued by the Partnership evidencing ownership of one or more Units or (b) a certificate, in such form as may be adopted by the General Partner, issued by the Partnership evidencing ownership of the Incentive Distribution Rights or Class B Units.
“Certificate of Limited Partnership” means the Certificate of Limited Partnership of the Partnership filed with the Secretary of State of the State of Delaware as referenced in Section 7.2, as such Certificate of Limited Partnership may be amended, supplemented or restated from time to time.
“Change of Control” means the consummation of any transaction (including without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act), excluding the Qualifying Owners, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the outstanding membership interests of the General Partner; provided, however, that the Persons who, from time to time, own Equity Interests in the Qualifying Owners will not be deemed Beneficial Owners of the membership interests of the General Partner by reason of the ownership of such Equity Interests and provided further that if an entity ceases to be a Beneficial Owner it shall not be deemed to be a Change of Control if the Beneficial Owners of such entity continue to the Beneficial Owners of a majority of the membership interests in the General Partner previously owned by such entity.
“Citizenship Certification” means a properly completed certificate in such form as may be specified by the General Partner by which a Limited Partner certifies that he (and if he is a nominee holding for the account of another Person, that to the best of his knowledge such other Person) is an Eligible Citizen.
“Class B Distribution Percent” means, as of any date, 35% multiplied by a fraction, the numerator of which is the number of Class B Units Outstanding on such date and the denominator of which is 100,000.
“Class B Holder” means E11 Incentive Holdings, LLC, in its capacity as the holder of the Class B Units.
“Class B Units” means the non-voting Limited Partner Interests issued to the Class B Holder, which Limited Partner Interests will confer upon the holder thereof only the rights and obligations specifically provided for in this Agreement with respect to the Class B Units.
“Code” means the Internal Revenue Code of 1986, as amended.
“Combined Interest” has the meaning assigned to such term in Section 11.3(a).
“Commission” means the United States Securities and Exchange Commission.
“Contingent, Incentive Fee” has the meaning set forth in the Dealer Manager Agreement.
“Cumulative Preferential Distribution” means for each Unit as of any date an amount equal to the aggregate excess, if any, of the amount that would have been distributed with respect to such Unit as of the most recent Monthly Distribution Date if the full Preferred Distribution had been distributed with respect to such Unit since the date of issuance of such Unit, over the amount actually distributed with respect to such Unit pursuant to Section 6.2(a) (or treated as made thereunder pursuant to Section 12.4(c)) as of the most recent Monthly Distribution Date since the date of issuance of such Unit.
“Current Market Price” of any class of Limited Partner Interests means the fair value of any Limited Partner Interest as determined by the General Partner in good faith.
“Dealer Manager” means David Lerner Associates, Inc., an unaffiliated broker dealer, or any other unaffiliated broker dealer who enters into a Dealer Manager Agreement with the Partnership and offers and sells Units.
“Dealer Manager Agreement” means the agreement with David Lerner Associates, Inc., filed as an Exhibit to the Registration Statement, and any agreements thereunder with a soliciting dealer to offer and sell Units.
“Dealer Manager Contingent, Incentive Fee” means the Contingent, Incentive Fee payable to the Dealer Manager under the Dealer Manager Agreement.
“Delaware Act” means the Delaware Revised Uniform Limited Partnership Act, 6 Del C. Section 17-101, et seq., as amended, supplemented or restated from time to time, and any successor to such statute.
“Departing General Partner” means a former General Partner from and after the effective date of any withdrawal or removal of such former General Partner pursuant to Section 11.1 or Section 11.2.
“Depository” means, with respect to any Units issued in global form, The Depository Trust Company and its successors and permitted assigns.
“Eligible Citizen” means a Person qualified to own interests in real property in jurisdictions in which any Group Member does business or proposes to do business from time to time, and whose status as a Limited Partner the General Partner determines does not or would not subject such Group Member to a significant risk of cancellation or forfeiture under any federal, state or local law or regulation, including any governmental permit, endorsement or other authorization, of any of its properties or any interest therein.
“Event of Withdrawal” has the meaning assigned to such term in Section 11.1(a).
“Full Investment Date” means the date on which the Partnership or Operating Subsidiary has invested, committed for investment or otherwise spent 90% or more of the aggregate Capital Contributions made to the Partnership after deduction of Sales Commissions, Marketing Fee and Offering and Organization Expenses.
“General and Administrative Expenses” means all costs and expenses incurred by the General Partner and its Affiliates in connection with the management and operation of the Partnership’s business, including the direct and indirect costs and expenses of compensation, rental, office supplies, travel and entertainment, printing, legal, accounting, advertising, marketing and overhead. However, General and Administrative Expenses shall not include any direct or indirect compensation costs or expenses paid to any of the beneficial owners of the General Partner, other than reimbursement of third party costs.
“General Partner” means Energy 11 GP, LLC, a Delaware limited liability company, and its successors and permitted assigns that are admitted to the Partnership as general partner of the Partnership, in its capacity as general partner of the Partnership (except as the context otherwise requires).
“General Partner Interest” means the ownership interest of the General Partner in the Partnership (in its capacity as a general partner without reference to any Limited Partner Interests held by it), and includes any and all benefits to which the General Partner is entitled as provided in this Agreement, together with all obligations of the General Partner to comply with the terms and provisions of this Agreement.
“Group Member” means a member of the Partnership Group.
“Group Member Agreement” means the partnership agreement of any Group Member, other than the Partnership, that is a limited or general partnership, the limited liability company agreement of any Group Member that is a limited liability company, the certificate of incorporation and bylaws or similar organizational documents of any Group Member that is a corporation, the joint venture agreement or similar governing document of any Group Member that is a joint venture and the governing or organizational or similar documents of any other Group Member that is a Person other than a limited or general partnership, limited liability company, corporation or joint venture, as such may be amended, supplemented or restated from time to time.
“Hedge Contract” means any exchange, swap, forward, cap, floor, collar, option or other similar agreement or arrangement entered into for the purpose of reducing the exposure of a Group Member to fluctuations in interest rates, the price of hydrocarbons, basis differentials or currency exchange rates in their operations or financing activities and not for speculative purposes.
“Incentive Distribution Rights” means a non-voting Limited Partner Interest issued to the General Partner in connection with the execution of this Agreement, which Limited Partnership Interest will confer upon the holder thereof only the rights and obligations specifically provided for in this Agreement with respect to Incentive Distribution Rights; provided that, so long as the General Partner owns the Incentive Distribution Rights 1% of such Incentive Distribution Rights shall be deemed a General Partner Interest for all purposes of this Agreement.
“Indemnitee” means (a) the General Partner, (b) any Departing General Partner, (c) any Person who is or was an Affiliate of the General Partner or any Departing General Partner, (d) any Person who is or was a member, manager, managing member, partner, director, officer, fiduciary or trustee of any Group Member, the General Partner or any Departing General Partner or any Affiliate of any Group Member, the General Partner or any Departing General Partner, (e) any Person who is or was serving at the request of the General Partner or any Departing General Partner or any Affiliate of the General Partner or any Departing General Partner as a manager, officer, director, member, partner, fiduciary or trustee of another Person; provided that a Person shall not be an Indemnitee by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services, and (f) any Person the General Partner designates as an “Indemnitee” for purposes of this Agreement.
“Initial Closing Date” means the date, which shall not be after the Offering Termination Date, after the minimum amount of subscription proceeds required by Section 5.5(b) has been received when subscription proceeds are first withdrawn by the Partnership from the escrow account and deposited into a Partnership account.
“Interim Closing Date” means those date(s) after the Initial Closing Date, but before the Offering Termination Date, that the General Partner, in its sole discretion, accepts additional subscriptions to purchase Units, and issues Units to the persons who have executed Subscription Agreements in consideration for payment to the Partnership of the subscription price for such Units.
“Key Employees” has the meaning assigned to such term in the Management Agreement.
“Limited Partner” means, unless the context otherwise requires, the Organizational Limited Partner prior to its withdrawal from the Partnership, each additional Person that becomes a Limited Partner pursuant to the terms of this Agreement, in each case, in such Person’s capacity as a limited partner of the Partnership; provided, however, that when the term “Limited Partner” is used herein in the context of any vote or other approval, including Articles XIII and XIV, such term shall not, solely for such purpose, include any holder of an Incentive Distribution Right or Class B Units (solely with respect to its Incentive Distribution Rights, or Class B Units and not with respect to any other Limited Partner Interest held by such Person) except as may otherwise be required by law.
“Limited Partner Interest” means the equity ownership interest of a Limited Partner or Assignee in the Partnership which may be evidenced by Units, Incentive Distribution Rights, Class B Units, or a combination thereof or interest therein, and includes any and all benefits to which such Limited Partner is entitled as provided in this Agreement, together with all obligations of such Limited Partner to comply with the terms and provisions of this Agreement; provided, however, that when the term “Limited Partner Interest” is used herein in the context of any vote or other approval, including Article XIII and Article XIV, such term shall not, solely for such purpose, include any Incentive Distribution Right or Class B Units except as may otherwise be required by applicable law.
“Liquidity Event” means any of the following transactions: a sale of all or substantially all of the Partnership’s consolidated assets and distribution of the net proceeds of such sale (after payment of, or reservation for, liabilities of the Partnership and its Subsidiaries), a merger or consolidation of the Partnership with another entity or a listing of the Common Units on a National Securities Exchange or any other transaction approved by the General Partners as a Liquidity Event in which the Limited Partners receive cash, property or marketable securities in exchange for, or as a distribution (other than normal monthly distributions from Available Cash) with respect to their Common Units.
“Liquidation Date” means (a) in the case of an event giving rise to the dissolution of the Partnership of the type described in clauses (a) and (b) of the first sentence of Section 12.2, the date on which the applicable time period during which the holders of Outstanding Units have the right to elect to continue the business of the Partnership has expired without such an election being made, and (b) in the case of any other event giving rise to the dissolution of the Partnership, the date on which such event occurs.
“Liquidator” means one or more Persons selected by the General Partner to perform the functions described in Section 12.4 as liquidating trustee of the Partnership within the meaning of the Delaware Act.
“Management Agreement” means the Management Services Agreement dated [ ], 2014, between the Partnership, the Operating Subsidiary and the Manager, as such agreement may be amended from time to time.
“Manager” means E11 Management, LLC, in its capacity as Manager under the Management Agreement.
“Manager Change of Control” has the meaning set forth in the Management Agreement.
“Marketing Fee” means a fee of 1% of the purchase price of Units payable to the Dealer Manager pursuant to the Dealer Manager Agreement with respect to the sale of Units, other than Units purchased by the General Partner, its officers, directors, employees and Affiliates, and its Affiliates’ respective officers, directors and employees.
“Merger Agreement” has the meaning assigned to such term in Section 14.1.
“Month” means any calendar month.
“Monthly Distribution Date” has the meaning provided in Section 6.1.
“National Securities Exchange” means an exchange registered with the Commission under Section 6(a) of the Securities Exchange Act, and any successor to such statute, or the Nasdaq Global Market, Nasdaq Global Select Market, or any successor thereto.
“Net Agreed Value” has the meaning assigned to such term in Exhibit B.
“Non-citizen Assignee” means a Person whom the General Partner has determined does not constitute an Eligible Citizen and as to whose Partnership Interest the General Partner has become the Substituted Limited Partner, pursuant to Section 4.9.
“Offering and Organization Expenses” has the meaning set forth in the Management Agreement.
“Offering Termination Date” means (i) the date after the minimum amount of subscription proceeds has been received on which the General Partner determines, in its sole discretion, that the Partnership’s subscription period is closed and the acceptance of subscriptions ceases, which may be any date up to and including September , 2016 unless this offering is extended by the General Partner until no later than December , 2016 pursuant to a supplement to the Prospectus.Prospectus or (ii) September , 2016 if the minimum amount of subscription proceeds has not been received by that date .
Notwithstanding the above, the Offering Termination Date may not extend beyond the time that subscriptions for the maximum number of Interests set forth in Section 5.5(a) have been received and accepted by the General Partner.
“Operating Subsidiary” means Energy 11 Operating Company, LLC, a Delaware limited liability company of which the Partnership is the sole member, and any successors thereto.
“Opinion of Counsel” means a written opinion of counsel (who may be regular counsel to the Partnership or the General Partner or any of its Affiliates) acceptable to the General Partner or to such other Person selecting such counsel or obtaining such opinion.
“Organizational Limited Partner” means DMOG, LLC in its capacity as the organizational limited partner of the Partnership pursuant to this Agreement.
“Outstanding” means, with respect to any class of Limited Partner Interest, all Limited Partner Interests of such class that are issued by the Partnership and reflected as outstanding on the Partnership’s books and records as of the date of determination.
“Partners” means the General Partner and the Limited Partners.
“Partnership” means Energy 11, L.P., a Delaware limited partnership.
“Partnership Group” means the Partnership and its Subsidiaries treated as a single consolidated entity.
“Partnership Interest” means any equity interest, including any class or series of equity interest, in the Partnership, which shall include the General Partner Interest and Limited Partner Interests.
“Partnership Register” means a register maintained on behalf of the Partnership by the General Partner, or, if the General Partner so determines, by the Transfer Agent as part of the Transfer Agent’s books and transfer records, with respect to each class of Partnership Interests in which all Record Holders and transfers of such class of Partnership Interests are registered or otherwise recorded
“Percentage Interest” means, as of any date of determination as to any Unitholder with respect to Units, the quotient of the number of Units held by such Unitholder divided by the total number of Outstanding Units. The Percentage Interest with respect to the Incentive Distribution Rights, and Class B Units shall at all times be zero.
“Person” means an individual or a corporation, firm, limited liability company, partnership, joint venture, trust, unincorporated organization, group, association, government agency or political subdivision thereof or other entity.
“Plan of Conversion” is defined in Section 14.1.
“Preferred Distribution” means for each Month and for each Unit, an amount equal to one-twelfth of 7% of the Remaining Invested Capital of such Unit for such Month, calculated based on a year composed of twelve 30-day months; provided, however, that (a) for the Month in which a Unit is first issued, the Preferred Distribution will be reduced by multiplying the Preferred Distribution for such Month by the ratio (which shall not be greater than 1) of the number of days during the Month during which the Unit was Outstanding divided by 30, (b) for the Month in which the liquidation occurs, the Preferred Distribution will be reduced by multiplying the Preferred Distribution by the ratio (which shall not be greater than 1) of the number of days during the Month prior to the date of the liquidation divided by 30 and (c) Units issued on the last day of any Month shall not be entitled to a Preferred Distribution for the Month in which the Unit is issued.
“Pro Rata” means (a) when used with respect to Units, apportioned equally among all designated Units in accordance with their relative Percentage Interests, (b) when used with respect to Partners and Assignees or Record Holders, apportioned among all Partners and Assignees or Record Holders in accordance with their relative Percentage Interests, (c) when used with respect to holders of Incentive Distribution Rights or Class B Units, apportioned equally among all holders of Incentive Distribution Rights or Class B Units in accordance with the relative number or percentage of Incentive Distribution Rights or Class B Units held by each such holder, and (d) when used with respect to the amount of Cumulative Preferred Distribution, apportioned among Owners of Units based on the amount of Cumulative Preferred Distribution attributable to Units owned.
“Prospectus” means the prospectus and any supplement filed as part of the Registration Statement.
“Qualifying Owners” means the beneficial owners of the General Partner on the date of this Agreement and the conservators, guardians, executors, administrators, testamentary trustees, legatees or beneficiaries of such a beneficial owner and a partnership, limited liability company, corporation, trust, private foundation or custodianship, the beneficiaries of which include the current beneficial owners of the General Partner, his or her spouse (or ex-spouse) or his or her lineal descendants (including adopted) or, if at any time after any such transfer there shall be no then living spouse or lineal descendants, then to the estate of a deceased beneficiary.
“Record Date” means the date established by the General Partner or otherwise in accordance with this Agreement for determining (a) the identity of the Record Holders entitled to notice of, or to vote at, any meeting of Limited Partners or entitled to vote by ballot or give approval of Partnership action in writing without a meeting or entitled to exercise rights in respect of any lawful action of Limited Partners or (b) the identity of Record Holders entitled to receive any report or distribution.
“Record Holder” means (a) with respect to the Units, the Person in whose name a Unit is registered on the books of the Transfer Agent as of the opening of business on a particular Business Day, or (b) with respect to other Partnership Interests, the Person in whose name any such other Partnership Interest is registered on the books that the General Partner has caused to be kept as of the opening of business on a particular Business Day.
“Redeemable Interests” means any Partnership Interests for which a redemption notice has been given, and has not been withdrawn, pursuant to Section 4.10.
“Registration Statement” means the Registration Statement on Form S-1 (SEC Registration No. 33- 197476 )33-197476) as it has been or as it may be amended or supplemented from time to time, filed by the Partnership with the Commission under the Securities Act to register the offering and sale of the Units.
“Remaining Invested Capital” means for each Unit $20.00 minus the amount previously distributed with respect to such Unit pursuant to Section 6.2(c) (or treated as made thereunder pursuant to Section 12.4(c)).
“Sales Commission” means a commission of 5% of the purchase price of Units payable to the Dealer Manager pursuant to the Dealer Manager Agreement with respect to the sale of Units, other than Units purchased by the General Partner, its officers, directors, employees and Affiliates, and its Affiliates’ respective officers, directors and employees.
“Securities Act” means the Securities Act of 1933, as amended, supplemented or restated from time to time, and any successor to such statute.
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended, supplemented or restated from time to time, and any successor to such statute.
“Subscription Agreement” means the agreement pursuant to which a prospective Limited Partner subscribes to purchase Units, including all riders and exhibits thereto, a form of which is filed as an Exhibit to the Prospectus.
“Subsidiary” means, with respect to any Person, (a) a corporation of which more than 50% of the voting power of shares entitled (without regard to the occurrence of any contingency) to vote in the election of directors or other governing body of such corporation is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person or a combination thereof, (b) a partnership (whether general or limited) in which such Person or a Subsidiary of such Person is, at the date of determination, a general or limited partner of such partnership, but only if more than 50% of the partnership interests of such partnership (considering all of the partnership interests of the partnership as a single class) is owned, directly or indirectly, at the date of determination, by such Person, by one or more Subsidiaries of such Person, or a combination thereof, or (c) any other Person (other than a corporation or a partnership) in which such Person, one or more Subsidiaries of such Person, or a combination thereof, directly or indirectly, at the date of determination, has (i) at least a majority ownership interest or (ii) the power to elect or direct the election of a majority of the directors or other governing body of such Person.
“Surviving Business Entity” has the meaning assigned to such term in Section 14.2(b).
“Transfer” has the meaning assigned to such term in Section 4.4(a).
“Transfer Agent” means such bank, trust company or other Person (including the General Partner or one of its Affiliates) as shall be appointed from time to time by the General Partner to act as registrar and transfer agent for the Units; provided, that unless a transfer agent is appointed by the General Partner, the General Partner shall act in such capacity with respect to the Incentive Distribution Rights and Class B Units.
“Unit” means a Limited Partner Interest representing a fractional part of the Partnership Interests of all Limited Partners and Assignees, and having the rights and obligations specified with respect to Units in this Agreement. Units shall not include the Class B Units.
“Unit Majority” means at least a majority of the Outstanding Units.
“Unitholders” means the holders of Units.
“U.S. GAAP” means United States generally accepted accounting principles, as in effect from time to time, consistently applied.
“Withdrawal Opinion of Counsel” has the meaning assigned to such term in Section 11.1(b).
Section 1.2 Construction.
Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) the terms “include”, “includes”, “including” or words of like import shall be deemed to be followed by the words “without limitation”; and (d) the terms “hereof”, “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement. The table of contents and headings contained in this Agreement are for reference purposes only, and shall not affect in any way the meaning or interpretation of this Agreement. The General Partner has the power to construe and interpret this Agreement and to act upon any such construction or interpretation. To the fullest extent permitted by applicable law, any construction or interpretation of this Agreement by the General Partner and any action taken pursuant thereto and any determination made by the General Partner in good faith shall, in each case, be conclusive and binding on all Record Holders, each other Person who acquires an interest in a Partnership Interest and all other Persons for all purposes.
ARTICLE II.
Organization
Section 2.1 Formation.
The General Partner and the Organizational Limited Partner have previously formed the Partnership as a limited partnership pursuant to the provisions of the Delaware Act and hereby amend and restate the original Agreement of Limited Partnership of Energy 11, L.P. in its entirety. This amendment and restatement shall become effective on the date of this Agreement. Except as expressly provided to the contrary in this Agreement, the rights, duties (including fiduciary duties), liabilities and obligations of the Partners and the administration, dissolution and termination of the Partnership shall be governed by the Delaware Act. All Partnership Interests shall constitute personal property of the owner thereof for all purposes.
Section 2.2 Name.
The name of the Partnership shall be “Energy 11, L.P.” Subject to applicable law, the Partnership’s business may be conducted under any other name or names as determined by the General Partner, including the name of the General Partner. The words “Limited Partnership,” “L.P.,” “Ltd.” or similar words or letters shall be included in the Partnership’s name where necessary for the purpose of complying with the laws of any jurisdiction that so requires. The General Partner may change the name of the Partnership at any time and from time to time and shall notify the Limited Partners of such change in the next regular communication to the Limited Partners.
Section 2.3 Registered Office; Registered Agent; Principal Office; Other Offices.
Unless and until changed by the General Partner, the registered office of the Partnership in the State of Delaware shall be located at 1209 Orange Street, Wilmington, Delaware 19801, and the registered agent for service of process on the Partnership in the State of Delaware at such registered office shall be The Corporation Trust Company. The principal office of the Partnership shall be located at 120 W. 3rd Street, Fort Worth, Texas 76102, or such other place as the General Partner may from time to time designate by notice to the Limited Partners. The Partnership may maintain offices at such other place or places within or outside the State of Delaware as the General Partner shall determine necessary or appropriate. The address of the General Partner shall be 120 W. 3rd Street, Fort Worth, Texas 76102, or such other place as the General Partner may from time to time designate by notice to the Limited Partners.
Section 2.4 Purpose and Business.
The purpose and nature of the business to be conducted by the Partnership shall be to (a) engage directly in, or enter into or form, hold and dispose of any corporation, partnership, joint venture, limited liability company or other arrangement to engage indirectly in, any business activity that is approved by the General Partner and that lawfully may be conducted by a limited partnership organized pursuant to the Delaware Act and, in connection therewith, to exercise all of the rights and powers conferred upon the Partnership pursuant to the agreements relating to such business activity, and (b) do anything necessary or appropriate to the foregoing, including the making of capital contributions or loans to a Group Member; provided, however, that the General Partner shall not cause the Partnership to engage, directly or indirectly, in any business activity that the General Partner determines would cause the Partnership to be treated as an association taxable as a corporation or otherwise taxable as an entity for federal income tax purposes. To the fullest extent permitted by law, the General Partner shall have no duty or obligation to propose or approve, and may decline to propose or approve, the conduct by the Partnership of any business free of any fiduciary duty or obligation whatsoever to the Partnership or any Limited Partner and, in declining to so propose or approve, shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity and the General Partner in determining whether to propose or approve the conduct by the Partnership of any business shall be permitted to do so in its sole and absolute discretion.
Section 2.5 Powers.
The Partnership shall be empowered to do any and all acts and things necessary or appropriate for the furtherance and accomplishment of the purposes and business described in Section 2.4 and for the protection and benefit of the Partnership.
Section 2.6 Power of Attorney.
(a) Each Limited Partner hereby constitutes and appoints the General Partner and, if a Liquidator shall have been selected pursuant to Section 12.3, the Liquidator (and any successor to the Liquidator by merger, transfer, assignment, election or otherwise) and each of their authorized officers and attorneys-in-fact, as the case may be, with full power of substitution, as his true and lawful agent and attorney-in-fact, with full power and authority in his name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) all certificates, documents and other instruments (including this Agreement and the Certificate of Limited Partnership and all amendments or restatements hereof or thereof) that the General Partner or the Liquidator determines to be necessary or appropriate to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (B) all certificates, documents and other instruments that the General Partner or the Liquidator determines to be necessary or appropriate to reflect, in accordance with its terms, any amendment, change, modification or restatement of this Agreement; (C) all certificates, documents and other instruments (including conveyances and a certificate of cancellation) that the General Partner or the Liquidator determines to be necessary or appropriate to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement; (D) all certificates, documents and other instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to, or other events described in, Article IV, Article X, Article XI or Article XII; and (E) all certificates, documents and other instruments (including agreements and a certificate of merger) relating to a merger, consolidation or conversion of the Partnership pursuant to Article XIV; and
(ii) execute, swear to, acknowledge, deliver, file and record all ballots, consents, approvals, waivers, certificates, documents and other instruments that the General Partner or the Liquidator determines to be necessary or appropriate to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Partners hereunder or is consistent with the terms of this Agreement or effectuate the terms or intent of this Agreement; provided, that when required by Section 13.3 or any other provision of this Agreement that establishes a percentage of the Limited Partners or of the Limited Partners of any class or series required to take any action, the General Partner and the Liquidator may exercise the power of attorney made in this Section 2.6(a)(ii) only after the necessary vote, consent or approval of the Limited Partners or of the Limited Partners of such class or series, as applicable.
Nothing contained in this Section 2.6(a) shall be construed as authorizing the General Partner to amend this Agreement except in accordance with Article XIII or as may be otherwise expressly provided for in this Agreement.
(b) The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and, to the maximum extent permitted by law, not be affected by the subsequent death, incompetency, disability, incapacity, dissolution, bankruptcy or termination of any Limited Partner and the transfer of all or any portion of such Limited Partner’s Partnership Interest and shall extend to such Limited Partner’s heirs, successors, assigns and personal representatives. Each such Limited Partner hereby agrees to be bound by any representation made by the General Partner or the Liquidator acting in good faith pursuant to such power of attorney; and each such Limited Partner, to the maximum extent permitted by law, hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the General Partner or the Liquidator taken in good faith under such power of attorney. Each Limited Partner shall execute and deliver to the General Partner or the Liquidator, within 15 days after receipt of the request therefor, such further designation, powers of attorney and other instruments as the General Partner or the Liquidator may request in order to effectuate this Agreement and the purposes of the Partnership.
Section 2.7 Term.
The term of the Partnership commenced upon the filing of the Certificate of Limited Partnership in accordance with the Delaware Act and shall continue in existence until the dissolution of the Partnership in accordance with the provisions of Article XII. The existence of the Partnership as a separate legal entity shall continue until the cancellation of the Certificate of Limited Partnership as provided in the Delaware Act.
Section 2.8 Title to Partnership Assets.
Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof. Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner, one or more of its Affiliates or one or more nominees, as the General Partner may determine. The General Partner hereby declares and warrants that any Partnership assets for which record title is held in the name of the General Partner or one or more of its Affiliates or one or more nominees shall be held by the General Partner or such Affiliate or nominee for the use and benefit of the Partnership in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use reasonable efforts to cause record title to such assets (other than those assets in respect of which the General Partner determines that the expense and difficulty of conveyancing makes transfer of record title to the Partnership impracticable) to be vested in the Partnership as soon as reasonably practicable; provided, further, that, prior to the withdrawal or removal of the General Partner or as soon thereafter as practicable, the General Partner shall use reasonable efforts to effect the transfer of record title to the Partnership and, prior to any such transfer, will provide for the use of such assets in a manner satisfactory to the General Partner. All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which record title to such Partnership assets is held.
ARTICLE III.
Rights of Limited Partners
Section 3.1 Limitation of Liability.
The Limited Partners shall have no liability under this Agreement except as expressly provided in this Agreement or the Delaware Act.
Section 3.2 Management of Business.
No Limited Partner, in its capacity as such, shall participate in the operation, management or control (within the meaning of the Delaware Act) of the Partnership’s business, transact any business in the Partnership’s name or have the power to sign documents for or otherwise bind the Partnership. No action taken by any Affiliate of the General Partner or any officer, director, employee, manager, member, general partner, agent or trustee of the General Partner or any of its Affiliates, or any officer, director, employee, manager, member, general partner, agent or trustee of a Group Member, in its capacity as such, shall be deemed to be participation in the control of the business of the Partnership by a limited partner of the Partnership (within the meaning of Section 17-303(a) of the Delaware Act) and shall not affect, impair or eliminate the limitations on the liability of the Limited Partners under this Agreement.
Section 3.3 Outside Activities of the Limited Partners.
Subject to the provisions of Section 7.5, which shall continue to be applicable to the Persons referred to therein, regardless of whether such Persons shall also be Limited Partners, any Limited Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities in direct competition with the Partnership Group. Neither the Partnership nor any of the other Partners shall have any rights by virtue of this Agreement in any business ventures of any Limited Partner.
Section 3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement, and except as limited by Section 3.4(b), each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner’s interest as a Limited Partner in the Partnership, upon reasonable written demand stating the purpose of such demand, and at such Limited Partner’s own expense:
(i) to obtain from the General Partner either (A) the Partnership’s most recent filings with the Commission on Form 10-K and any subsequent filings on Form 10-Q and 8-K or (B) if the Partnership is no longer subject to the reporting requirements of the Securities Exchange Act, the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act (provided that the foregoing materials shall be deemed to be available to a Limited Partner in satisfaction of the requirements of this Section 3.4(a)(i) if posted on or accessible through the Partnership’s or the Commission’s website);
(ii) to obtain true and full information regarding the assets, the status of the business and financial condition of the Partnership;
(iii) to obtain a current list of the name and last known business, residence or mailing address of each Partner;
(iv) to obtain a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto, together with copies of the executed copies of all powers of attorney pursuant to which this Agreement, the Certificate of Limited Partnership and all amendments thereto have been executed;
(v) to obtain true and full information regarding the amount of cash and a description and statement of the Net Agreed Value of any other Capital Contribution by each Partner and that each Partner has agreed to contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the Partnership as is just and reasonable.
(b) To the fullest extent permitted by applicable law, the rights to information granted the Limited Partners pursuant to Section 3.4(a) replace in their entirety any rights to information provided for in Section 17-305(a) of the Delaware Act and each of the Partners and each other Person who acquires an interest in the Partnership hereby agrees to the fullest extent permitted by applicable law that they do not have any rights as Partners or interest holders to receive any information either pursuant to Sections 17-305(a) of the Delaware Act or otherwise except for the information identified in Section 3.4(a).
(c) The General Partner may keep confidential from the Limited Partners, for such period of time as the General Partner deems reasonable, (i) any information that the General Partner reasonably believes to be in the nature of trade secrets or (ii) other information the disclosure of which the General Partner in good faith believes (A) is not in the best interests of the Partnership Group, (B) could damage the Partnership Group or its business or (C) that any Group Member is required by law or by agreement with any third party to keep confidential (other than agreements with Affiliates of the Partnership the primary purpose of which is to circumvent the obligations set forth in this Section 3.4).
(d) Notwithstanding any other provision of this Agreement or Section 17-305 of the Delaware Act, each of the Record Holders, each other Person who acquires an interest in a Partnership Interest and each other Person bound by this Agreement hereby agrees to the fullest extent permitted by law that they do not have rights to receive information from the Partnership or any Indemnitee for the purpose of determining whether to pursue litigation or assist in pending litigation against the Partnership or any Indemnitee relating to the affairs of the Partnership except pursuant to the applicable rules of discovery relating to litigation commenced by such Person.
ARTICLE IV.
Certificates; Record Holders;
Transfer of Partnership Interests;
Redemption of Partnership Interests
Section 4.1 Certificates.
Record Holders of Partnership Interests shall be recorded in the Partnership Register and ownership of such interests shall be evidenced by a physical certificate or book entry notation in the Partnership Register. Upon the Partnership’s issuance of a Unit to any Person, the Partnership shall issue, upon the request of such Person, one or more Certificates in the name of such Person evidencing the number of such Units being so issued. In addition, (a) upon the General Partner’s request, the Partnership shall issue to it one or more Certificates in the name of the General Partner evidencing its General Partner Interest and (b) upon the request of any Person owning Incentive Distribution Rights or Class B Units, the Partnership shall issue to such Person one or more certificates evidencing such Incentive Distribution Rights or Class B Units. Certificates shall be executed on behalf of the Partnership by any manager, the Chairman of the Board, President or any Executive Vice President, Senior Vice President or Vice President and the Secretary or any Assistant Secretary of the General Partner. No Unit Certificate shall be valid for any purpose until it has been countersigned by the Transfer Agent; provided, however, that if the General Partner elects to issue Units in global form, the Unit Certificates shall be valid upon receipt of a certificate from the Transfer Agent certifying that the Units have been duly registered in accordance with the directions of the Partnership. With respect to any Partnership Interests that are represented by physical certificates (including Unit Certificates), the General Partner may determine that such Partnership Interests will no longer be represented by physical certificates and may, upon written notice to the holders of such Partnership Interests and subject to applicable law, take whatever actions it deems necessary or appropriate to cause such Partnership Interests to be registered in book entry or global form and may cause such physical certificates to be cancelled or deemed cancelled.
Section 4.2 Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer Agent (for Units) or the General Partner (for Incentive Distribution Rights or Class B Units), the appropriate officers of the General Partner on behalf of the Partnership shall execute, and the Transfer Agent (for Units) or the General Partner (for Incentive Distribution Rights or Class B Units) shall countersign and deliver in exchange therefor, a new Certificate evidencing the same number and type of securities as the Certificate so surrendered.
(b) Any Manager or the appropriate officers of the General Partner on behalf of the Partnership shall execute and deliver, and the Transfer Agent (for Units) shall countersign, a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate:
(i) makes proof by affidavit, in form and substance satisfactory to the General Partner, that a previously issued Certificate has been lost, destroyed or stolen;
(ii) requests the issuance of a new Certificate before the General Partner has notice that the Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim;
(iii) if requested by the General Partner, delivers to the General Partner a bond, in form and substance satisfactory to the General Partner, with surety or sureties and with fixed or open penalty as the General Partner may direct to indemnify the Partnership, the Partners, the General Partner and the Transfer Agent against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate; and
(iv) satisfies any other reasonable requirements imposed by the General Partner.
If a Limited Partner fails to notify the General Partner within a reasonable period of time after he has notice of the loss, destruction or theft of a Certificate, and a transfer of the Limited Partner Interests represented by the Certificate is registered before the Partnership, the General Partner or the Transfer Agent receives such notification, the Limited Partner shall be precluded from making any claim against the Partnership, the General Partner or the Transfer Agent for such transfer or for a new Certificate.
(c) As a condition to the issuance of any new Certificate under this Section 4.2, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Transfer Agent) reasonably connected therewith.
Section 4.3 Record Holders.
The names and addresses of Record Holders of Partnership Interests as they appear in the Partnership Register shall be the official list of Record Holders of the Partnership Interests for all purposes. The Partnership and the General Partner shall be entitled to recognize the Record Holder as the Partner with respect to any Partnership Interest and, accordingly, shall not be bound to recognize any equitable or other claim to, or interest in, such Partnership Interest on the part of any other Person, regardless of whether the Partnership shall have actual or other notice thereof, except as otherwise provided by law. Without limiting the foregoing, when a Person (such as a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing) is acting as nominee, agent or in some other representative capacity for another Person in acquiring and/or holding Partnership Interests, as between the Partnership on the one hand, and such other Persons on the other, such representative Person shall be the Record Holder of such Partnership Interest.
Section 4.4 Transfer Generally.
(a) The term “transfer,” when used in this Agreement with respect to a Partnership Interest, shall be deemed to refer to a transaction (i) by which the General Partner assigns its General Partner Interest to another Person or by which a holder of Incentive Distribution Rights or Class B Units assigns its Incentive Distribution Rights or Class B Units to another Person, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other disposition by law or otherwise or (ii) by which the holder of a Limited Partner Interest (other than Incentive Distribution Rights or Class B Units assigns such Limited Partner Interest to another Person who is or becomes a Limited Partner, and includes a sale, assignment, gift, exchange or any other disposition by law or otherwise, including any transfer upon foreclosure of any pledge, encumbrance, hypothecation or mortgage.
(b) No Partnership Interest shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article IV. Any transfer or purported transfer of a Partnership Interest not made in accordance with this Article IV shall be null and void, and the Partnership shall have no obligation to effect any such transfer or purported transfer.
(c) Nothing contained in this Agreement shall be construed to prevent a disposition by any stockholder, member, partner or other owner of the General Partner or any Limited Partner of any or all of the shares of stock, membership interests, partnership interests or other ownership interests in the General Partner or such Limited Partner, and the term “Transfer” shall not include any such disposition.
Section 4.5 Registration and Transfer of Limited Partner Interests.
(a) The General Partner shall keep, or cause to be kept on behalf of the Partnership, the Partnership Register in which, subject to such reasonable regulations as it may prescribe and subject to the provisions of Section 4.5(b), the Partnership will provide for the registration and transfer of Limited Partner Interests. The Transfer Agent is hereby appointed registrar and transfer agent for the purpose of registering Units and transfers of such Units as herein provided. The Partnership shall not recognize transfers of Certificates evidencing Limited Partner Interests unless such transfers are effected in the manner described in this Section 4.5. Upon surrender of a Certificate for registration of transfer of any Limited Partner Interests evidenced by a Certificate, and subject to the provisions of Section 4.5(b), a manager or the appropriate officers of the General Partner on behalf of the Partnership shall execute and deliver, and in the case of Units, the Transfer Agent shall countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder’s instructions, one or more new Certificates evidencing the same aggregate number and type of Limited Partner Interests as was evidenced by the Certificate so surrendered.
(b) Upon the receipt of proper transfer instructions from the Record Holder of uncertificated Partnership Interests, such transfer shall be recorded in the Partnership Register.
(c) Except as otherwise provided in Section 4.9, the General Partner shall not recognize any transfer of Limited Partner Interests until the Certificates evidencing such Limited Partner Interests are surrendered for registration of transfer. No charge shall be imposed by the General Partner for such transfer; provided, that as a condition to the issuance of any new Certificate under this Section 4.5, the General Partner may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed with respect thereto. Upon surrender of a Certificate for registration of transfer of any Limited Partner Interests evidenced by a Certificate, and subject to the provisions of this Section 4.5(b), the appropriate officers of the General Partner on behalf of the Partnership shall execute and deliver, and in the case of Certificates evidencing Limited Partner Interests for which a Transfer Agent has been appointed, the Transfer Agent shall countersign and deliver, in the name of the holder or the designated transferee or transferees, as required pursuant to the holder’s instructions, one or more new Certificates evidencing the same aggregate number and type of Limited Partner Interests as was evidenced by the Certificate so surrendered. Upon the proper surrender of a Certificate, such transfer shall be recorded in the Partnership Register.
(d)Subject to (i) the foregoing provisions of this Section 4.5, (ii) Section 4.3, (iii) Section 4.4. (iv) Section 4.8, (v) any contractual provisions binding on any Limited Partner and (vi) provisions of applicable law including the Securities Act, Limited Partner Interests (other than the Incentive Distribution Rights or Class B Units) shall be freely transferable.
Section 4.6 Transfer of the General Partner’s General Partner Interest; Transfer of Ownership of the General Partner.
(a) Subject to Section 4.6(b) below, the General Partner shall not transfer all or any part of its General Partner Interest to a Person unless such transfer (i) has been approved by the prior written consent or vote of the holders of at least a majority of the Outstanding Units (excluding Units owned by the General Partner and its Affiliates) or (ii) is of all, but not less than all, of its General Partner Interest to (A) an Affiliate of the General Partner (other than an individual) or (B) another Person (other than an individual) in connection with the merger or consolidation of the General Partner with or into such other Person or the transfer by the General Partner of all or substantially all of its assets to such other Person.
(b) Notwithstanding anything herein to the contrary, no transfer by the General Partner of all or any part of its General Partner Interest to another Person shall be permitted unless (i) the transferee agrees to assume the rights and duties of the General Partner under this Agreement and to be bound by the provisions of this Agreement and (ii) the Partnership receives an Opinion of Counsel that such transfer would not result in the loss of limited liability of any Limited Partner under the Delaware Act or cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not already so treated or taxed). In the case of a transfer pursuant to and in compliance with this Section 4.6, the transferee or successor (as the case may be) shall, subject to compliance with the terms of Section 10.3, be admitted to the Partnership as the General Partner immediately prior to the transfer of the General Partner Interest, and the business of the Partnership shall continue without dissolution.
(c) The General Partner shall not permit to occur a General Partner Change of Control unless prior to such General Partner Change of Control the General Partner receives the approval by consent or vote of the holders of a majority of the Outstanding Units, other than Units owned by the General Partner and its Affiliates.
Section 4.7 Transfer of Incentive Distribution Rights or Class B Units.
A holder of Incentive Distribution Rights or Class B Units may transfer any or all of the Incentive Distribution Rights or Class B Units held by such holder without any consent of the Unitholders to (a) an Affiliate of such holder or (b) another Person (other than an individual) in connection with (i) the merger or consolidation of such holder of Incentive Distribution Rights or Class B Units with or into such other Person, (ii) the transfer by such holder of all or substantially all of its assets to such other Person or (iii) the sale of all the ownership interests in such holder. Any other transfer of the Incentive Distribution Rights or Class B Units prior to the third anniversary of the Offering Termination Date shall require the prior consent or vote of holders of at least a majority of the Outstanding Units other than Units held by the proposed transferee and its Affiliates. Thereafter, a holder of Incentive Distribution Rights or Class B Units may transfer any or all of the Incentive Distribution Rights or Class B Units held by such owner without consent or vote of the holders of Units. No transfer of Incentive Distribution Rights or Class B Units to another Person shall be permitted unless the transferee agrees to be bound by the provisions of this Agreement.
Section 4.8 Restrictions on Transfers.
(a) Notwithstanding the other provisions of this Article IV, no transfer of any Partnership Interest shall be made if such transfer would (i) violate the then applicable federal or state securities laws or rules and regulations of the Commission, any state securities commission or any other governmental authority with jurisdiction over such transfer, (ii) terminate the existence or qualification of the Partnership under the laws of the jurisdiction of its formation, or (iii) cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not already so treated or taxed). The Partnership may issue stop transfer instructions to any Transfer Agent in order to implement any restriction on transfer contemplated by this Agreement.
(b) The General Partner may impose restrictions on the transfer of Partnership Interests if it receives an Opinion of Counsel that such restrictions are necessary to (i) avoid a significant risk of the Partnership becoming taxable as a corporation or otherwise becoming taxable as an entity for federal income tax purposes or (ii) preserve the uniformity of the Units. The General Partner may impose such restrictions by amending this Agreement.
(c) Each certificate evidencing Partnership Interests shall bear a conspicuous legend in substantially the following form:
THE HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF ENERGY 11, L.P. THAT THIS SECURITY MAY NOT BE SOLD, OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED IF SUCH TRANSFER WOULD (A) VIOLATE THE THEN APPLICABLE FEDERAL OR STATE SECURITIES LAWS OR RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL AUTHORITY WITH JURISDICTION OVER SUCH TRANSFER, (B) TERMINATE THE EXISTENCE OR QUALIFICATION OF ENERGY 11, L.P. UNDER THE LAWS OF THE STATE OF DELAWARE, OR (C) CAUSE ENERGY 11, L.P. TO BE TREATED AS AN ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED). ENERGY 11 GP, LLC, THE GENERAL PARTNER OF ENERGY 11, L.P., MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE TRANSFER OF THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH RESTRICTIONS ARE NECESSARY TO AVOID A SIGNIFICANT RISK OF ENERGY 11, L.P. BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES. AFTER THE DATE THE UNITS EVIDENCED BY THIS CERTIFICATE ARE LISTED ON A NATIONAL SECURITIES EXCHANGE, THE RESTRICTIONS SET FORTH ABOVE SHALL NOT PRECLUDE THE SETTLEMENT OF ANY TRANSACTIONS INVOLVING THIS SECURITY ENTERED INTO THROUGH THE FACILITIES OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS LISTED OR ADMITTED TO TRADING.
Section 4.9 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state or local law or regulation that the General Partner determines would create a substantial risk of cancellation or forfeiture of any property in which the Group Member has an interest based on the nationality, citizenship or other related status of a Limited Partner, the General Partner may request any Limited Partner to furnish to the General Partner, within 30 days after receipt of such request, an executed Citizenship Certification or such other information concerning his nationality, citizenship or other related status (or, if the Limited Partner is a nominee holding for the account of another Person, the nationality, citizenship or other related status of such Person) as the General Partner may request. If a Limited Partner fails to furnish to the General Partner within the aforementioned 30-day period such Citizenship Certification or other requested information or if upon receipt of such Citizenship Certification or other requested information the General Partner determines, with the advice of counsel, that a Limited Partner is not an Eligible Citizen, the Limited Partner Interests owned by such Limited Partner shall be subject to redemption in accordance with the provisions of Section 4.10. In addition, the General Partner may require that the status of any such Limited Partner be changed to that of a Non-citizen Assignee and, thereupon, the General Partner shall be substituted for such Non-citizen Assignee as the Limited Partner in respect of the Non-citizen Assignee’s Limited Partner Interests and shall have all voting and consent rights attributable to the Non-citizen Assignee’s Limited Partner Interests.
(b) The General Partner shall, in exercising voting rights in respect of Limited Partner Interests held by it on behalf of Non-citizen Assignees, distribute the votes in the same ratios as the votes of Partners (including the General Partner) in respect of Limited Partner Interests other than those of Non-citizen Assignees are cast, either for, against or abstaining as to the matter.
(c) Upon dissolution of the Partnership, a Non-citizen Assignee shall have no right to receive a distribution in kind pursuant to Section 12.4 but shall be entitled to the cash equivalent thereof, and the Partnership shall provide cash in exchange for an assignment of the Non-citizen Assignee’s share of any distribution in kind. Such payment and assignment shall be treated for Partnership purposes as a purchase by the Partnership from the Non-citizen Assignee of his Limited Partner Interest (representing his right to receive his share of such distribution in kind).
(d) At any time after a Non-Citizen Assignee can and does certify that he has become an Eligible Citizen, such Non-citizen Assignee may, upon application to the General Partner, request that with respect to any Limited Partner Interests of such Non-citizen Assignee not redeemed pursuant to Section 4.10, such Non-citizen Assignee be admitted as a Limited Partner, and upon approval of the General Partner, such Non-citizen Assignee shall be admitted as a Limited Partner and shall no longer constitute a Non-citizen Assignee and the General Partner shall cease to be deemed to be the Limited Partner in respect of the Non-citizen Assignee’s Limited Partner Interests.
Section 4.10 Redemption of Partnership Interests of Non-citizen Assignees.
(a) If at any time a Limited Partner fails to furnish a Citizenship Certification or other information requested within the 30-day period specified in Section 4.9(a), or if upon receipt of such Citizenship Certification or other information the General Partner determines, with the advice of counsel, that a Limited Partner is not an Eligible Citizen, the Partnership may, unless the Limited Partner establishes to the satisfaction of the General Partner that such Limited Partner is an Eligible Citizen or has transferred his Partnership Interests to a Person who is an Eligible Citizen and who furnishes a Citizenship Certification to the General Partner prior to the date fixed for redemption as provided below, redeem the Limited Partner Interest of such Limited Partner as follows:
(i) The General Partner shall, not later than the 30th day before the date fixed for redemption, give notice of redemption to the Limited Partner, at his last address designated on the records of the Partnership or the Transfer Agent, by registered or certified mail, postage prepaid. The notice shall be deemed to have been given when so mailed. The notice shall specify the Redeemable Interests, the date fixed for redemption, the place of payment, that payment of the redemption price will be made upon surrender of the Certificate evidencing the Redeemable Interests and that on and after the date fixed for redemption no further allocations or distributions to which the Limited Partner would otherwise be entitled in respect of the Redeemable Interests will accrue or be made.
(ii) The aggregate redemption price for Redeemable Interests shall be an amount equal to the Current Market Price (the date of determination of which shall be the date fixed for redemption) of Limited Partner Interests of the class to be so redeemed multiplied by the number of Limited Partner Interests of each such class included among the Redeemable Interests. The redemption price shall be paid, as determined by the General Partner, in cash or by delivery of a promissory note of the Partnership in the principal amount of the redemption price, bearing interest at the rate of 5% annually and payable in three equal annual installments of principal together with accrued interest, commencing one year after the redemption date.
(iii) Upon surrender by or on behalf of the Limited Partner, at the place specified in the notice of redemption, of the Certificate evidencing the Redeemable Interests, duly endorsed in blank or accompanied by an assignment duly executed in blank, the Limited Partner or his duly authorized representative shall be entitled to receive the payment therefor.
(iv) After the redemption date, Redeemable Interests shall no longer constitute issued and Outstanding Limited Partner Interests.
(b) The provisions of this Section 4.10 shall also be applicable to Limited Partner Interests held by a Limited Partner as nominee of a Person determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.10 shall prevent the recipient of a notice of redemption from transferring his Limited Partner Interest before the redemption date if such transfer is otherwise permitted under this Agreement. Upon receipt of notice of such a transfer, the General Partner shall withdraw the notice of redemption, provided the transferee of such Limited Partner Interest certifies to the satisfaction of the General Partner that he is an Eligible Citizen. If the transferee fails to make such certification, such redemption shall be effected from the transferee on the original redemption date.
ARTICLE V.
Capital Contributions and
Issuance of Partnership Interests
Section 5.1 Organizational Contributions.
In connection with the formation of the Partnership under the Delaware Act, the General Partner made an initial Capital Contribution to the Partnership in the amount of $10.00, for a 1% General Partner Interest in the Partnership and has been admitted as the General Partner of the Partnership, and the Organizational Limited Partner made an initial Capital Contribution to the Partnership in the amount of $990.00 for a 99% Limited Partner Interest in the Partnership and has been admitted as a Limited Partner of the Partnership. As of the Initial Closing Date, the interest of the Organizational Limited Partner shall be redeemed and the initial Capital Contribution of the Organizational Limited Partner shall thereupon be refunded. Ninety-nine percent of any interest or other profit that may have resulted from the investment or other use of such initial Capital Contributions shall be allocated and distributed to the Organizational Limited Partner, and the balance thereof shall be allocated and distributed to the General Partner.
Section 5.2 Offering of Units.
(a) The Partnership is authorized to admit to the Partnership on the Initial Closing Date, any Interim Closing Date(s), and the Offering Termination Date, additional Limited Partners whose Subscription Agreements for Units are accepted by the General Partner if, after the admission of the additional Limited Partners, the total number of Units sold does not exceed the maximum number of Units set forth in Section 5.5(a).
(b) No action or consent by the Limited Partners shall be required for the admission of additional Limited Partners pursuant to this Section 5.2.
(c) All subscribers’ funds shall be held in an interest bearing account or accounts by an independent escrow agent and shall not be released to the Partnership until the receipt and acceptance of the minimum amount of subscription proceeds set forth in Section 5.5(b). Thereafter, subscriptions may be paid directly to a Partnership account.
Section 5.3 Subscriptions by Participants.
The subscription price of a Unit shall be $19.00 for Units acquired prior to the Initial Closing Date and $20.00 per Unit thereafter. The aggregate subscription price shall be designated on each prospective Limited Partner’s Subscription Agreement and payable as set forth in Section 5.7(b). The minimum subscription per prospective Limited Partner shall be for a minimum of $5,000. Subscriptions for fractional Units shall not be accepted. For the avoidance of doubt, immediately after the Initial Closing Date the Remaining Invested amount of the Units issued for $19.00 per Unit shall be $20.00 per Unit.
Section 5.4 Effect of Subscription
(a) Execution of a Subscription Agreement shall serve as an agreement by the prospective Limited Partner to be bound by each and every term of this Agreement, if such Subscription Agreement is accepted by the General Partner.
(b) In addition to the General Partner’s required Capital Contributions under Section 5.7(a), the General Partner may subscribe for Units, which amount of Units shall not be applied towards the minimum number of Units required to be sold under Section 5.5(b), to the extent of such additional subscriptions, the General Partner shall be deemed to be a Limited Partner in the Partnership for all purposes under this Agreement.
Section 5.5 Maximum and Minimum Number of Units.
(a) The maximum number of Units may not exceed 100,263,158 Units, which is $2,000,000,002 of cash subscription proceeds.
(b) The minimum number of Units shall equal at least 5,263,158 Units, but in any event not less than the number of Interests that provides the Partnership with cash subscription proceeds of $100,000,002.
(c) If subscriptions for the minimum number of Units have not been received and accepted at the Offering Termination Date, then all monies deposited by subscribers shall be promptly returned to them. They shall receive interest earned on their subscription proceeds from the date the monies were deposited in escrow through the date of refund, without deduction for any fees.
(d) The Partnership may withdraw subscription proceeds from escrow and begin its activities, in the General Partner’s sole discretion, upon receipt and acceptance of the minimum subscription proceeds stipulated in Section 5.5(b).
Section 5.6 Acceptance of Subscriptions.
(a) Acceptance of subscriptions is discretionary with the General Partner. The General Partner may reject any subscription for any reason it deems appropriate.
(b) Subscriptions shall be accepted or rejected by the General Partner within 30 days after their receipt by the General Partner. If a subscription is rejected, then all of the subscriber’s funds shall be returned to the subscriber promptly, with interest earned and without deduction for any fees.
(c) The Limited Partners shall be admitted to the Partnership as follows:
(i) Once subscriptions for the minimum number of Units have been received and accepted by the General Partner, the General Partner shall set the Initial Closing Date, which shall be no later than 30 days after the receipt and acceptance of minimum subscription proceeds equal to the minimum subscription; or
(ii) if a prospective Limited Partner’s subscription proceeds are received by the Partnership after the Initial Closing Date, the General Partner shall set an Interim Closing Date on the last day of the calendar month in which the General Partner accepted the prospective Limited Partner’s Subscription Agreement.
Section 5.7 Capital Contributions of the General Partner; Payment of Subscriptions.
(a) The General Partner shall not be required to make any additional Capital Contributions to the Partnership. At the Initial Closing, the General Partner shall be issued the Incentive Distribution Rights.
(b) A prospective Limited Partner shall pay the subscription amount designated on his Subscription Agreement entirely in cash at the time of subscribing. A prospective Limited Partner shall receive interest on the amount he pays from the time his subscription proceeds are deposited in the escrow account until his subscription proceeds are paid to the Partnership. All interest distributions shall be in the ratio that the number of Units acquired by each Limited Partner multiplied by the number of days the Limited Partner’s subscription proceeds were held in the escrow account bears to the sum of that calculation for all Limited Partner’s whose subscription proceeds were paid to the General Partner at the same time.
Section 5.8 Incentive Rights.
On the date of this Agreement, the Partnership shall issue the Incentive Distribution Rights to the General Partner.
Section 5.9 Class B Units
(a) At the Initial Closing and in consideration for services rendered or to be rendered to or for the benefit of the Partnership, the Partnership shall issue 100,000 Class B Units to the Class B Holder. Except as provided in Section 5.9(f), the Partnership shall not issue any additional Class B Units without the consent of the holders of a majority of the Outstanding Class B Units.
(b) (i) If (A) the Management Agreement is terminated by the Operating Subsidiary pursuant to Section 10.2(b)(v) or Section 10.2(b)(vii) of the Management Agreement, then concurrently with such termination all of the Class B Units Outstanding shall be forfeited, cancelled and cease to be Outstanding.
(ii) If (A) the Management Agreement is terminated by the Operating Subsidiary before the Full Investment Date, and (B) such termination by the Operating Subsidiary was made (I) at any time within 30 days after a Manager Change in Control, (II) in accordance with Section 8.2(b) of the Management Agreement because the Key Employees cease to be employed on a full time basis by the Manager or (III) during the Bankruptcy of the Manager, then concurrently with such termination a portion of the Class B Units Outstanding shall be forfeited, cancelled and cease to be Outstanding equal to the sum of (X) 37.5% of the Class B Units Outstanding plus (Y) a portion of the Class B Units Outstanding equal to the product of the Class B Units Outstanding immediately before such forfeiture multiplied by a fraction of which the numerator is (AA) the aggregate Capital Contributions made to the Partnership by the holders of Units that have not been invested, committed for investment or otherwise spent by the Partnership as of the date of such termination, and (BB) the denominator of which is the aggregate Capital Contributions made by holders of Units to the Partnership as of the date of such termination.
(iii) If the Management Agreement is terminated by the Operating Subsidiary pursuant to Section 10.2(b)(vi) of the Management Agreement, then concurrently with such termination, a number of Class B Units shall be cancelled, forfeited and shall cease to be Outstanding equal to the number Class B Units Outstanding multiplied by a fraction the numerator of which shall be the amount of Unallocated Funds on the date of termination and the denominator of which shall be the total net Capital Contributions made to the Partnership (after deduction of Sales Commissions, Marketing Fees and Offering and Organization Expenses), plus the amount of borrowings outstanding under an Approved Credit Facility plus the amount that is available to be borrowed under an Approved Credit Facility, in each case as of the date of termination.
(iv) If (A) the Management Agreement is terminated by the Operating Subsidiary on or after the Full Investment Date, and (B) such termination by the Operating Subsidiary was made (I) at any time within 30 days after a Manager Change in Control, (II) in accordance with Section 8.2(b) of the Management Agreement because the Key Employees cease to be employed on a full time basis by the Manager or (III) during the Bankruptcy of the Manager, then concurrently with such termination 37.5% of the Class B Units Outstanding shall be forfeited, cancelled and cease to be Outstanding.
(c) Except as provided in this Section, the termination of the Management Agreement shall not forfeit, cancel or otherwise affect the Class B Units. If Class B Units are forfeited, cancelled and cease to be Outstanding pursuant to this Section 5.09, and there is more than one Record Holder of Class B Units, Class B Units will be forfeited, cancelled and cease to be Outstanding on a pro rata basis among the Record Holders, pro rata based on the number of Class B Units owned on the date of termination of the Management Agreement.
(d) The forfeiture and cancellation of the Class B Units will not require the holder of such Class B Units or any former holder to repay any distribution previously made.
(e) The Class B Units issued and Outstanding as of the date of a Liquidity Event (including any equity interests into which such Class B Units may be converted or exchanged) will cease to be subject to forfeiture and cancellation pursuant to Section 5.9(b) above from and after the date of a Liquidity Event.
(f) The General Partner may cause the Partnership to issue a number of Class B Units equal to the number of Class B Units forfeited under this Section to a Person who performs services to the Partnership or other Group Member for such consideration as the General Partner determines, without the consent of any Limited Partner.
Section 5.10 Profits Interests.
The Incentive Distribution Rights and Class B Units are intended to constitute “profits interests” within the meaning of Revenue Procedures 93-27 and 2001-43, and the Partnership and the Dealer Manager, General Partner, and Class B Holder shall file all federal income tax returns consistent with such characterization. By executing this Agreement, each Partner authorizes and directs the Partnership to elect to have the “safe harbor” described in the proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43 (the “IRS Notice”), including any similar safe harbor in any finalized revenue procedure, revenue ruling or United States Treasury Regulation, apply to any Incentive Distribution Right, Class B Units or other interests issued by the Partnership for services rendered to or on behalf of the Partnership. For purposes of making such safe harbor election, the Partner designated as the “tax matters partner” pursuant to this Agreement is hereby designated as the “partner who has responsibility for federal income tax reporting” by the Partnership and, accordingly, execution of such safe harbor election by the “tax matters member” constitutes execution of a “safe harbor election” in accordance with the IRS Notice or any similar provision of any final pronouncement. The Partnership and each Partner hereby agree to comply with all requirements of any such safe harbor, including any requirement that a Partner prepare and file all federal income tax returns reporting the income tax effects of each interest issued by the Partnership in connection with services in a manner consistent with the requirements of the IRS Notice or other final pronouncement.
Section 5.11 Interest and Withdrawal.
No interest shall be paid by the Partnership on Capital Contributions. No Partner or Assignee shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent, if any, that distributions made pursuant to this Agreement or upon termination of the Partnership may be considered as such by law and then only to the extent provided for in this Agreement. Except to the extent expressly provided in this Agreement, no Partner shall have priority over any other Partner or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions. Any such return shall be a compromise to which all Partners agree within the meaning of Section 17-502(b) of the Delaware Act.
Section 5.12 Fully Paid and Non-Assessable Nature of Limited Partner Interests.
All Limited Partner Interests issued pursuant to, and in accordance with the requirements of, this Article V shall be fully paid and non-assessable Limited Partner Interests in the Partnership, except as such non-assessability may be affected by Section 17-607 of the Delaware Act.
ARTICLE VI.
Distributions; Allocations and Capital Accounts
Section 6.1 Distributions; Distributions to Record Holders.
(a) Available Cash shall be determined by the General Partner, taking into account the Partnership’s current and anticipated future operating and capital needs. Each such determination shall be made by the General Partner following the end of each Month after the Initial Closing. The General Partner shall distribute to the Partners such cash, if any, as the General Partner determines in its sole and absolute discretion constitutes Available Cash, which distribution, if any, shall be made in accordance with Section 6.2 within 30 days following the end of the Month in respect of which such determination of Available Cash is made by the General Partner (the date such distribution is made is referred to as the “Monthly Distribution Date”). In addition, a portion of Available Cash will be used to pay the Dealer Manager Contingent, Incentive Fee.
(b) Notwithstanding Section 6.1(a), in the event of the dissolution and liquidation of the Partnership, all receipts received during or after the Month in which the Liquidation Date occurs shall be applied and distributed solely in accordance with, and subject to the terms and conditions of, Section 12.4.
(c) The General Partner may treat taxes paid by the Partnership on behalf of, or amounts withheld with respect to, all or less than all of the Partners, as a distribution of Available Cash to such Partners.
(d) Each distribution in respect of a Partnership Interest shall be paid by the Partnership, directly or through the Transfer Agent or through any other Person or agent, only to the Record Holder of such Partnership Interest as of the Record Date set for such distribution. Such payment shall constitute full payment and satisfaction of the Partnership’s liability in respect of such payment, regardless of any claim of any Person who may have an interest in such payment by reason of an assignment or otherwise.
Section 6.2 Distributions of Available Cash ;Cash; Payment of Dealer Manager Contingent, Incentive Fee .Fee.
Available Cash for any Month determined pursuant to Section 6.1 shall be distributed, allocated and paid to the Partners and paid to the Dealer Manager as follows:
(a) First, to the Record Holders of Outstanding Units, Pro Rata based upon their Percentage Interest, until there has been distributed to each Unitholder in respect of the Units then Outstanding and owned by such Unitholder an amount equal to the Preferred Distribution for such Month in respect of such Unit;
(b) Second, to the Record Holders of Outstanding Units, Pro Rata based on the amount of the Cumulative Preferential Distribution for each of the Units owned by such Unitholder, until there has been distributed in respect of each Unit then Outstanding an amount equal to the Cumulative Preferential Distribution for such Unit;
(c) Third, to the Record Holder of Outstanding Units, in accordance with their respective Percentage Interests until there has been distributed in respect of each Unit then Outstanding an amount equal to the Remaining Invested Capital with respect to such Unit;
(d) Fourth, (i) to Record Holders of the Incentive Distribution Rights, 35 %,35%, (ii) to the Record Holders of the Outstanding Class B Units, Pro Rata based on the number of Class B Units owned, 35 %35% multiplied by a fraction the numerator of which is the number of Class B Units outstanding and the denominator of which is 100,000, (iii) to the Dealer Manager, as the Dealer Manager Contingent Incentive Fee paid under the Dealer Manager Agreement, 30%, and (iv) the remaining amount, if any, to the Record Holders of Outstanding Units, Pro Rata based on their Percentage Interest until such time as the Dealer Manager receives the full amount of the Dealer Manager Contingent, Incentive Fee under the Dealer Manager Agreement; and
(e) Thereafter, (i) to the Record Holders of the Incentive Distribution Rights, 35%, (ii) to the Record Holders of the Outstanding Class B Units, Pro Rata based on the number of Class B Units owned, the Class B Unit Distribution Percent, and (iii) to the Record Holders of Outstanding Units, Pro Rata based on their Percentage Interest, 65% minus the Class B Distribution Percent.
Section 6.3 Restrictions on Distributions.
Prior to the Offering Termination Date, the General Partner shall not make any distributions of Available Cash to the Partners, on any Monthly Distribution Date in excess of the aggregate Preferred Distribution and Cumulative Preferential Distribution as of the end of the most recently completed Month. All distributions required to be made under this Agreement shall be made subject to Sections 17-607 and 17-804 of the Delaware Act and other applicable law, notwithstanding any other provision of this Agreement.
Section 6.4 Capital Accounts.
Capital Accounts shall be maintained and all items of income, gain, deduction, loss or credit shall be allocated among the Partners as provided in Exhibit B.
ARTICLE VII.
Management and Operation of Business
Section 7.1 Management.
(a) The Operating Subsidiary and the Manager shall enter into the Management Agreement which shall become effective on the Initial Closing Date. The General Partner shall conduct, direct and manage all activities of the Partnership, including making all decisions for the Partnership under the Management Agreement. Except as otherwise expressly provided in this Agreement, all management powers over the business and affairs of the Partnership shall be exclusively vested in the General Partner, and no Limited Partner shall have any management power over the business and affairs of the Partnership. In addition to the powers now or hereafter granted a general partner of a limited partnership under applicable law or that are granted to the General Partner under any other provision of this Agreement, the General Partner, subject to Section 7.3, shall have full power and authority to do all things and on such terms as it determines to be necessary or appropriate to conduct the business of the Partnership, to exercise all powers set forth in Section 2.5 and to effectuate the purposes set forth in Section 2.4, including the following:
(i) cause the Partnership to enter into and perform pursuant to the Management Agreement with the Manager, including causing the Partnership to approve or reject any acquisitions, operations or other activities or transactions recommended by the Manager as contemplated by the Management Agreement, supervising the activities of the Manager under the Management Agreement, and to otherwise cause the Partnership and Operating Subsidiary to enforce its rights under, and perform its obligations pursuant to, the Management Agreement;
(ii) cause the Partnership to enter into the Dealer Manager Agreement with the Dealer Manager and to perform its obligations thereunder;
(iii) cause the Partnership and Operating Subsidiary to acquire interests in oil and gas properties having the attributes described in the Registration Statement, provided that the General Partner may cause the Partnership to acquire interests in properties that do not have such attributes if the General Partner determines, in good faith, that the acquisition of such properties is in the best interest of the Partnership;
(iv) the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of, or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness and the incurring of any other obligations;
(v) the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over the business or assets of the Partnership;
(vi) the acquisition, disposition, mortgage, pledge, encumbrance, hypothecation or exchange of any or all of the assets of the Partnership or the merger or other combination of the Partnership with or into another Person (the matters described in this clause (iv) being subject, however, to any prior approval that may be required by Section 7.3 and Article XIV);
(vii) the use of the assets of the Partnership (including cash on hand) for any purpose consistent with the terms of this Agreement, including the financing of the conduct of the operations of the Partnership Group; subject to Section 7.6(a), the lending of funds to other Persons (including other Group Members); the repayment or guarantee of obligations of any Group Member; and the making of capital contributions to any Group Member;
(viii) the negotiation, execution and performance of any contracts, conveyances or other instruments (including instruments that limit the liability of the Partnership under contractual arrangements to all or particular assets of the Partnership, with the other party to the contract to have no recourse against the General Partner or its assets other than its interest in the Partnership, even if same results in the terms of the transaction being less favorable to the Partnership than would otherwise be the case);
(ix) the distribution of Partnership cash and the payment of the Contingent, Incentive Fee pursuant to the Dealer Manager Agreement ;Agreement;
(x) the selection and dismissal of employees and officers and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring;
(xi) the maintenance of insurance for the benefit of the Partnership Group, the Partners and Indemnitees;
(xii) the formation of, or acquisition of an interest in, and the contribution of property and the making of loans to, any further limited or general partnerships, joint ventures, corporations, limited liability companies or other relationships (including the acquisition of interests in, and the contributions of property to, any Group Member from time to time) subject to the restrictions set forth in Section 2.4;
(xiii) the control of any matters affecting the rights and obligations of the Partnership, including the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation, arbitration or mediation and the incurring of legal expense and the settlement of claims and litigation;
(xiv) the indemnification of any Person against liabilities and contingencies to the extent permitted by law;
(xv) if the General Partner determines that the Units may be eligible for listing on a National Securities Exchange, and that such listing would be in the best interests of other holders of Units, the entering into of listing agreements with any National Securities Exchange and the delisting of some or all of the Limited Partner Interests from, or requesting that trading be suspended on, any such exchange (subject to Section 7.3(c) and any prior approval that may be required under Section 4.8);
(xvi)the purchase, sale or other acquisition of Units, Incentive Distribution Rights or Class B Units;
(xvii) the undertaking of any action in connection with the Partnership’s participation in any Group Member; and
(xviii) the entering into of agreements with any of its Affiliates to render services to a Group Member or to itself in the discharge of its duties as General Partner of the Partnership.
(b)Notwithstanding any other provision of this Agreement, any Group Member Agreement, the Delaware Act or any applicable law, rule or regulation, each of the Partners and the Assignees and each other Person who may acquire an interest in the Units, Incentive Distribution Rights or Class B Units hereby (i) approves, ratifies and confirms the execution, delivery and performance by the parties thereto of this Agreement, the Management Agreement, the Dealer Manager Agreement and the Group Member Agreement of each other Group Member, and the other agreements described in or filed as exhibits to the Registration Statement that are related to the transactions contemplated by the Registration Statement; (ii) agrees that the General Partner (on its own or through any officer of the Partnership) is authorized to execute, deliver and perform the agreements referred to in clause (i) of this sentence and the other agreements, acts, transactions and matters described in or contemplated by the Registration Statement on behalf of the Partnership without any further act, approval or vote of the Partners or the Assignees or the other Persons who may acquire an interest in the Units, Incentive Distribution Rights or Class B Units; and (iii) agrees that the execution, delivery or performance by the General Partner, any Group Member or any Affiliate of any of them of this Agreement or any agreement authorized or permitted under this Agreement shall not constitute a breach by the General Partner of any duty that the General Partner may owe the Partnership or the Limited Partners or any other Persons under this Agreement (or any other agreements) or of any duty stated or implied by law or equity.
(c) The General Partner shall conduct the Partnership’s business so that an amount equal to at least 65% of the gross proceeds from the sale of Common Units are invested in the acquisition, development, exploration, exploitation of oil and gas properties and related capital assets.
Section 7.2 Certificate of Limited Partnership.
The General Partner has caused the Certificate of Limited Partnership to be filed with the Secretary of State of the State of Delaware as required by the Delaware Act. The General Partner shall use all reasonable efforts to cause to be filed such other certificates or documents that the General Partner determines to be necessary or appropriate for the formation, continuation, qualification and operation of a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware or any other state in which the Partnership may elect to do business or own property. To the extent the General Partner determines such action to be necessary or appropriate, the General Partner shall file amendments to and restatements of the Certificate of Limited Partnership and do all things to maintain the Partnership as a limited partnership (or a partnership or other entity in which the limited partners have limited liability) under the laws of the State of Delaware or of any other state in which the Partnership may elect to do business or own property. Subject to the terms of Section 3.4(a), the General Partner shall not be required, before or after filing, to deliver or mail a copy of the Certificate of Limited Partnership, any qualification document or any amendment thereto to any Limited Partner.
Section 7.3 Restrictions on the General Partner’s Authority.Authority ; Agreement by Owners of the General Partner .
(a) Except as provided in Article XII and Article XIV, the General Partner may not sell, exchange or otherwise dispose of all or substantially all of the assets of the Partnership Group, taken as a whole, in a single transaction or a series of related transactions (including by way of merger, consolidation, other combination or sale of ownership interests of the Partnership’s Subsidiaries) without the approval of holders of a Unit Majority; provided, however, that this provision shall not preclude or limit the General Partner’s ability to mortgage, pledge, hypothecate or grant a security interest in all or substantially all of the assets of the Partnership Group and shall not apply to any forced sale of any or all of the assets of the Partnership Group pursuant to the foreclosure of, or other realization upon, any such encumbrance. Without the approval of holders of a Unit Majority, the General Partner shall not, on behalf of the Partnership, except as permitted under Section 4.6, Section 11.1 and Section 11.2, elect or cause the Partnership to elect a successor general partner of the Partnership.
(b) The General Partner will not cause the Partnership to acquire an interest in an oil and gas property located offshore or located outside of the United States without the approval of a Unit Majority.
(c) The General Partner may not cause the Units to be listed on a National Securities Exchange without the approval of a Unit Majority.
(d) Each beneficial owner of the General Partner who has executed a counterpart of this Agreement agrees that until the Full Investment Date, the beneficial owner will not form or manage a partnership or other entity formed for the purpose of acquiring oil and gas properties, other than partnerships or other entities formed for personal or family investments of less than $ 50 million in the aggregate for each such person.
Section 7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this Agreement, the General Partner shall not be compensated for its services as a general partner or managing member of any Group Member.
(b) The General Partner shall be reimbursed from time to time for all of the Offering and Organization Expenses incurred by the General Partner.
(c) The General Partner shall be reimbursed for all of its and its Affiliates’ General and Administrative Expenses incurred in connection with the Partnership’s business. If the General Partner or any of its Affiliates engages in any business activities other than acting as the General Partner of the Partnership, the General Partner shall allocate its and its Affiliates’ General and Administrative Expenses to the Partnership and such other activities in any manner deemed reasonable by the General Partner.
(d)The General Partner shall be reimbursed on a Monthly basis for all of the allocable portion of third-party expenses it incurs or payments it makes on behalf of the Partnership Group. The General Partner shall determine the expenses that are allocable to the Partnership Group. All reimbursements under this Section 7.4(b) shall be supported by appropriate invoices or other documentation. Reimbursements pursuant to this Section 7.4 shall be in addition to any reimbursement to the General Partner as a result of indemnification pursuant to Section 7.7.
Section 7.5 Outside Activities.
(a) After the Initial Closing Date, the General Partner, for so long as it is the General Partner of the Partnership (i) agrees that its sole business will be to act as a general partner or managing member, as the case may be, of the Partnership and any other partnership or limited liability company of which the Partnership is, directly or indirectly, a partner or member and to undertake activities that are ancillary or related thereto (including being a limited partner in the Partnership) and (ii) shall not engage in any business or activity or incur any debts or liabilities except in connection with or incidental to (A) its performance as general partner or managing member, if any, of one or more Group Members or as described in or contemplated by the Registration Statement or (B) the acquiring, owning or disposing of debt or equity securities in any Group Member.
(b) Each Indemnitee (other than the General Partner) shall have the right to engage in businesses of every type and description and other activities for profit and to engage in and possess an interest in other business ventures of any and every type or description, whether in businesses engaged in or anticipated to be engaged in by any Group Member, independently or with others, including business interests and activities in direct competition with the business and activities of any Group Member, and none of the same shall constitute a breach of this Agreement or any duty expressed or implied by law to any Group Member or any Partner or Assignee. None of any Group Member, any Limited Partner or any other Person shall have any rights by virtue of this Agreement, any Group Member Agreement, or the partnership relationship established hereby in any business ventures of any Indemnitee.
(c) Notwithstanding anything to the contrary in this Agreement, (i) the engaging in competitive activities by any Indemnitees (other than the General Partner) is hereby approved by the Partnership and all Partners, (ii) it shall be deemed not to be a breach of any fiduciary duty or any other obligation of any type whatsoever of any Indemnitee for the Indemnitees (other than the General Partner) to engage in such business interests and activities in preference to or to the exclusion of the Partnership and (iii) the Indemnitees shall have no obligation hereunder or as a result of any duty expressed or implied by law to present business opportunities to the Partnership. Notwithstanding anything to the contrary in this Agreement, the doctrine of corporate opportunity, or any analogous doctrine, shall not apply to any Indemnitee (including the General Partner). No Indemnitee (including the General Partner) who acquires knowledge of a potential transaction, agreement, arrangement or other matter that may be an opportunity for the Partnership, shall have any duty to communicate or offer such opportunity to the Partnership, and such Indemnitee (including the General Partner) shall not be liable to the Partnership, to any Limited Partner or any other Person for breach of any fiduciary or other duty by reason of the fact that such Indemnitee (including the General Partner) pursues or acquires for itself, directs such opportunity to another Person or does not communicate such opportunity or information to the Partnership.
(d)The General Partner and each of its Affiliates may acquire Units, Incentive Distribution Rights or Class B Units in addition to those acquired on the Initial Closing Date and, except as otherwise provided in this Agreement, shall be entitled to exercise, at their option, all rights relating to all Units, Incentive Distribution Rights or Class B Units acquired by them. The term “Affiliates” when used in this Section 7.5(d) with respect to the General Partner shall not include any Group Member.
(e) The Partners (and the General Partner on behalf of the Partnership) hereby:
(i) agree that (A) the terms of this section, to the extent that they modify or limit a duty, if any, that a Partner may have to the Partnership or another Partner, are reasonable in form, scope and content; and (B) the terms of this section shall control to the fullest extent possible if it is in conflict with a duty, if any, that a Partner may have to the Partnership or another Partner, the Act or any other applicable law, rule or regulation; and
(ii) waive a duty, if any, that a Partner may have to the Partnership or another Partner, under the Act or any other applicable law, rule or regulation to the extent necessary to give effect to the terms of this section;
it being expressly acknowledged and affirmed by the Partners (and the General Partner on behalf of the Partnership) that the execution and delivery of this Agreement by the Partners are of material benefit to the Partnership and the Partners and that the Partners would not be willing to execute and deliver this Agreement without the benefit of this section.
Section 7.6 Loans from the General Partner; Loans or Contributions from the Partnership or Group Members.
(a) The General Partner or any of its Affiliates may lend to any Group Member, and any Group Member may borrow from the General Partner or any of its Affiliates, funds needed or desired by the Group Member for such periods of time and in such amounts as the General Partner may determine; provided, however, that in any such case the lending party may not charge the borrowing party interest at a rate greater than the rate that would be charged the borrowing party or impose terms less favorable to the borrowing party than would be charged or imposed on the borrowing party by unrelated lenders on comparable loans made on an arm’s-length basis (without reference to the lending party’s financial abilities or guarantees), all as determined by the General Partner. The borrowing party shall reimburse the lending party for any costs (other than any additional interest costs) incurred by the lending party in connection with the borrowing of such funds. For purposes of this Section 7.6(a) and Section 7.6(b), the term “Group Member” shall include any Affiliate of a Group Member that is controlled by the Group Member.
(b) The Partnership may lend or contribute to any Group Member, and any Group Member may borrow from the Partnership, funds on terms and conditions determined by the General Partner. No Group Member may lend funds to the General Partner or any of its Affiliates (other than another Group Member).
(c) No borrowing by any Group Member or the approval thereof by the General Partner shall be deemed to constitute a breach of any duty, expressed or implied, of the General Partner or its Affiliates to the Partnership or the Limited Partners by reason of the fact that the purpose or effect of such borrowing is directly or indirectly to enable distributions to the General Partner or its Affiliates (including in their capacities as Limited Partners) to exceed the amount that would have been distributed to the General Partner of such Affiliate without such borrowing.
Section 7.7 Indemnification.
(a) To the fullest extent permitted by law but subject to the limitations expressly provided in this Agreement, all Indemnitees shall be indemnified and held harmless by the Partnership from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, by reason of its status as an Indemnitee; provided, that the Indemnitee shall not be indemnified and held harmless if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter for which the Indemnitee is seeking indemnification pursuant to this Section 7.7, the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was unlawful. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Partnership, it being agreed that the General Partner shall not be personally liable for such indemnification and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate such indemnification.
(b) To the fullest extent permitted by law, expenses (including legal fees and expenses) incurred by an Indemnitee who is indemnified pursuant to Section 7.7(a) in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Partnership prior to a determination that the Indemnitee is not entitled to be indemnified upon receipt by the Partnership of any undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as authorized in this Section 7.7.
(c) The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee may be entitled under any agreement, pursuant to any vote of the holders of Outstanding Limited Partner Interests, as a matter of law or otherwise, both as to actions in the Indemnitee’s capacity as an Indemnitee and as to actions in any other capacity (including any capacity under the Dealer Manager Agreement), and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee.
(d) The Partnership may purchase and maintain (or reimburse the General Partner or its Affiliates for the cost of) insurance, on behalf of the General Partner, its Affiliates and such other Persons as the General Partner shall determine, against any liability that may be asserted against, or expense that may be incurred by, such Person in connection with the Partnership’s activities or such Person’s activities on behalf of the Partnership, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.
(e) For purposes of this Section 7.7, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute “fines” within the meaning of Section 7.7(a); and action taken or omitted by it with respect to any employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the best interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose that is in the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.
(g) An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.
(h) The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.
(i) No amendment, modification or repeal of this Section 7.7 or any provision hereof shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitee to be indemnified by the Partnership, nor the obligations of the Partnership to indemnify any such Indemnitee under and in accordance with the provisions of this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.8 Liability of Indemnitees.
(a)Notwithstanding anything to the contrary set forth in this Agreement, no Indemnitee shall be liable for monetary damages to the Partnership, the Limited Partners, or any other Persons who have acquired interests in the Units, Incentive Distribution Rights or Class B Units, for losses sustained or liabilities incurred as a result of any act or omission of an Indemnitee unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter in question, the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the Indemnitee’s conduct was criminal.
(b) Subject to its obligations and duties as General Partner set forth in Section 7.1(a), the General Partner may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and the General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by the General Partner in good faith.
(c) To the extent that, at law or in equity, an Indemnitee has duties (including fiduciary duties) and liabilities relating thereto to the Partnership or to the Partners, the General Partner and any other Indemnitee acting in connection with the Partnership’s business or affairs shall not be liable to the Partnership or to any Partner for its good faith reliance on the provisions of this Agreement.
(d) Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the Indemnitees under this Section 7.8 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Resolution of Conflicts of Interest; Standards of Conduct and Modification of Duties.
(a) Unless otherwise expressly provided in this Agreement or any Group Member Agreement, whenever a potential conflict of interest exists or arises between the General Partner or any of its Affiliates or an Indemnitee, on the one hand, and the Partnership, any Group Member or any Partner, on the other, any resolution or course of action by the General Partner or its Affiliates or an Indemnitee in respect of such conflict of interest shall be permitted and deemed approved by all Partners, and shall not constitute a breach of this Agreement, of any Group Member Agreement, of any agreement contemplated herein or therein, or of any duty stated or implied by law or equity, if the resolution or course of action in respect of such conflict of interest is (i) approved by the vote of a majority of the Units (excluding Units owned by the General Partner and its Affiliates), (ii) on terms no less favorable to the Partnership than those generally being provided to or available from unrelated third parties or (iii) fair and reasonable to the Partnership, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to the Partnership). If the Board of Directors determines that the resolution or course of action taken with respect to a conflict of interest satisfies either of the standards set forth in clauses (ii) or (iii) above, then it shall be presumed that, in making its decision, the Board of Directors acted in good faith, and in any proceeding brought by any Limited Partner or by or on behalf of such Limited Partner or any other Limited Partner or the Partnership challenging such approval, the Person bringing or prosecuting such proceeding shall have the burden of overcoming such presumption that the Board of Directors acted in good faith. Notwithstanding anything to the contrary in this Agreement or any duty otherwise existing at law or equity, the existence of the conflicts of interest described in the Registration Statement are hereby approved by all Partners and shall not constitute a breach of this Agreement.
(b) Whenever the General Partner makes a determination or takes or declines to take any other action, or any of its Affiliates causes it to do so, in its capacity as the general partner of the Partnership as opposed to in its individual capacity, whether under this Agreement, any Group Member Agreement or any other agreement contemplated hereby or otherwise, then, unless another express standard is provided for in this Agreement, the General Partner, or such Affiliates causing it to do so, shall make such determination or take or decline to take such other action in good faith and shall not be subject to any other or different duties (including fiduciary duty) or standards imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity, subject to the implied covenant of good faith and fair dealing imposed under Delaware law. In order for a determination or other action to be in “good faith” for purposes of this Agreement, the Person or Persons making such determination or taking or declining to take such other action must believe that the determination or other action is in the best interests of the Partnership.
(c) Whenever the General Partner makes a determination or takes or declines to take any other action, or any of its Affiliates causes it to do so, in its individual capacity as opposed to in its capacity as the general partner of the Partnership, whether under this Agreement, any Group Member Agreement or any other agreement contemplated hereby or otherwise, then the General Partner, or such Affiliates causing it to do so, are entitled to make such determination or to take or decline to take such other action free of any fiduciary duty or obligation whatsoever to the Partnership, any Limited Partner, and the General Partner, or such Affiliates causing it to do so, shall not be required to act in good faith or pursuant to any other duty or standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity, subject to the implied covenant of good faith and fair dealing imposed under Delaware law. By way of illustration and not of limitation, whenever the phrase, “at the option of the General Partner,” or some variation of that phrase, is used in this Agreement, it indicates that the General Partner is acting in its individual capacity. For the avoidance of doubt, whenever the General Partner votes or transfers its Partnership Interests, or refrains from voting or transferring its Partnership Interests, it shall be acting in its individual capacity. The General Partner’s organizational documents may provide that determinations to take or decline to take any action in its individual, rather than representative, capacity may or shall be determined by its members, if the General Partner is a limited liability company, stockholders, if the General Partner is a corporation, or the members or stockholders of the General Partner���sPartner’s general partner, if the General Partner is a limited partnership.
(d) The General Partner’s organizational documents may provide that determinations to take or decline to take any action in its individual, rather than representative, capacity may or shall be determined by its member(s), if the General Partner is a limited liability company, stockholder(s), if the General Partner is a corporation, or the member(s) or stockholder(s) of the General Partner’s general partner, if the General Partner is a partnership.
(e) Notwithstanding anything to the contrary in this Agreement, the General Partner and its Affiliates shall have no duty or obligation, express or implied, to (i) sell or otherwise dispose of any asset of the Partnership Group other than in the ordinary course of business or (ii) permit any Group Member to use any facilities or assets of the General Partner and its Affiliates or any Indemnitee, except as may be provided in contracts entered into from time to time specifically dealing with such use. Any determination by the General Partner or any of its Affiliates or any Indemnitee to enter into such contracts shall be at its option.
(f) Except as expressly set forth in this Agreement, neither the General Partner nor any other Indemnitee shall have any duties or liabilities, including fiduciary duties, to the Partnership or any Limited Partner and the provisions of this Agreement, to the extent that they restrict, eliminate or otherwise modify the duties and liabilities, including fiduciary duties, of the General Partner or any other Indemnitee otherwise existing at law or in equity, are agreed by the Partners to replace such other duties and liabilities of the General Partner or such other Indemnitee.
(g) The Unitholders hereby authorize the General Partner, on behalf of the Partnership as a partner or member of a Group Member, to approve of actions by the general partner or managing member of such Group Member similar to those actions permitted to be taken by the General Partner pursuant to this Section 7.9.
Section 7.10 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.
(b) The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion (including an Opinion of Counsel or fairness opinion of an investment banker) of such Persons as to matters that the General Partner reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. Without limiting the forgoing, if the General Partner receives a fairness opinion from an investment banker regarding the fairness, from a financial point of view, of a transaction or the consideration paid or payable in a transaction, including a purchase or sale of property or in connection with the listing of the Units on an National Securities Exchange, and the General Partner relies on such opinion in taking or omitting to take an action, such action shall be conclusively presumed to have been taken or not taken in good faith.
(c) The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers, a duly appointed attorney or attorneys-in-fact or the duly authorized officers of the Partnership.
Section 7.11Purchase or Sale of Units, Incentive Distribution Rights or Class B Units.
The General Partner may cause the Partnership to purchase or otherwise acquire Units, Incentive Distribution Rights or Class B Units. Such Units, Incentive Distribution Rights, or Class B Units shall be held by the Partnership as treasury securities unless they are expressly cancelled by action of an appropriate officer of the General Partner. As long as Units, Incentive Distribution Rights or Class B Units are held by any Group Member, such Partnership Interests shall not be considered Outstanding for any purpose, except as otherwise provided herein. The General Partner or any Affiliate of the General Partner may also purchase or otherwise acquire and sell or otherwise dispose of Units, Incentive Distribution Rights or Class B Units for its own account, subject to the provisions of Articles IV and X.
Section 7.12 Reliance by Third Parties.
Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner and manager or any officer of the General Partner authorized by the General Partner to act on behalf of and in the name of the Partnership has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any authorized contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner or any such manager or officer as if it were the Partnership’s sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the General Partner or any such manager or officer in connection with any such dealing. In no event shall any Person dealing with the General Partner or any such manager or officer or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or any such manager or officer or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (a) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (b) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (c) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership.
ARTICLE VIII.
Books, Records, Accounting and Reports
Section 8.1 Records and Accounting.
The General Partner shall keep, or cause to be kept by the Manager under the Management Agreement, at the principal office of the Partnership or Manager appropriate books and records with respect to the Partnership’s business, including all books and records necessary to provide to the Limited Partners any information required to be provided pursuant to Section 3.4(a). Any books and records maintained by or on behalf of the Partnership in the regular course of its business, including the record of the Record Holders of Units, books of account and records of Partnership proceedings, may be kept on, or be in the form of, computer disks, hard drives, punch cards, magnetic tape, photographs, micrographics or any other information storage device; provided, that the books and records so maintained are convertible into clearly legible written form within a reasonable period of time. The books of the Partnership shall be maintained, for financial reporting purposes, on an accrual basis in accordance with U.S. GAAP.
Section 8.2 Fiscal Year.
The fiscal year of the Partnership shall be a fiscal year ending December 31.
Section 8.3 Reports.
(a) As soon as practicable, but in no event later than 120 days after the close of each fiscal year of the Partnership, the General Partner shall use its best efforts to cause to be mailed or made available, by any reasonable means (including posting on or accessible through the Partnership’s website) to each Record Holder of a Unit as of a date selected by the General Partner, an annual report containing financial statements of the Partnership for such fiscal year of the Partnership, presented in accordance with U.S. GAAP, including a balance sheet and statements of operations, Partnership equity and cash flows, such statements to be audited by a firm of independent public accountants selected by the General Partner.
(b) As soon as practicable, but in no event later than 90 days after the close of each quarter except the last quarter of each fiscal year, the General Partner shall use its best efforts to cause to be mailed or made available, by any reasonable means (including posting on or accessible through the Partnership’s website) to each Record Holder of a Unit, as of a date selected by the General Partner, a report containing unaudited financial statements of the Partnership and such other information as may be required by applicable law, regulation or rule of any National Securities Exchange on which the Units are listed or admitted to trading, or as the General Partner determines to be necessary or appropriate.
ARTICLE IX.
Tax Matters
Section 9.1 Tax Returns and Information.
The Partnership shall timely (taking into account applicable extensions) file all returns of the Partnership that are required for federal, state and local income tax purposes on the basis of the accrual method and the taxable year or years that it is required by law to adopt, from time to time, as determined by the General Partner. In the event the Partnership is required to use a taxable year other than a year ending on December 31, the General Partner shall use reasonable efforts to change the taxable year of the Partnership to a year ending on December 31. The tax information reasonably required by Record Holders for federal and state income tax reporting purposes with respect to a taxable year shall be furnished to them as soon as available. The classification, realization and recognition of income, gain, losses and deductions and other items shall be on the accrual method of accounting for federal income tax purposes.
Section 9.2 Tax Elections.
Except as otherwise provided herein, the General Partner shall determine whether the Partnership should make any elections permitted by the Code.
Section 9.3 Tax Controversies.
Subject to the provisions hereof, the General Partner is designated as the “tax matters partner” (as defined in Section 6231(a)(7) of the Code) and is authorized and required to represent the Partnership (at the Partnership’s expense) in connection with all examinations of the Partnership’s affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Partnership funds for professional services and costs associated therewith. Each Partner agrees to cooperate with the General Partner and to do or refrain from doing any or all things reasonably required by the General Partner to conduct such proceedings.
Section 9.4 Withholding.
Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that may be required to cause the Partnership and other Group Members to comply with any withholding requirements established under the Code or any other federal, state or local law including pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Partnership is required or elects to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner or Assignee (including by reason of Section 1446 of the Code), the General Partner may treat the amount withheld as a distribution of cash pursuant to Section 6.2 and B1.2 of Exhibit B in the amount of such withholding from such Partner.
ARTICLE X.
Admission of Partners
Section 10.1 Admission of Limited Partners.
(a) By acceptance of the transfer of any Limited Partner Interests in accordance with Article IV or the acceptance of any Limited Partner Interests issued pursuant to Article V or pursuant to a merger consolidation pursuant to Article XIV, and except as provided in Section 4.9, each transferee of, or other such Person acquiring, a Limited Partner Interest (including any nominee holder or an agent or representative acquiring such Limited Partner Interests for the account of another Person) (i) shall be admitted to the Partnership as a Limited Partner with respect to the Limited Partner Interests so transferred or issued to such Person when any such transfer, issuance or admission is reflected in the books and records of the Partnership and such Limited Partner becomes the Record Holder of the Limited Partner Interests so transferred, (ii) shall become bound by the terms of this Agreement, (iii) represents that the transferee has the capacity, power and authority to enter into this Agreement, (iv) grants the powers of attorney set forth in this Agreement and (v) makes the consents and waivers contained in this Agreement, all with or without execution of this Agreement by such Person. The transfer of any Limited Partner Interests and the admission of any new Limited Partner shall not constitute an amendment to this Agreement. A Person may become a Limited Partner or Record Holder of a Limited Partner Interest without the consent or approval of any of the Partners. A Person may not become a Limited Partner without acquiring a Limited Partner Interest and until such Person is reflected in the books and records of the Partnership as the Record Holder of such Limited Partner Interest. The rights and obligations of a Person who is a Non-citizen Assignee shall be determined in accordance with Section 4.9.
(b) The name and mailing address of each Limited Partner shall be listed on the books and records of the Partnership maintained for such purpose by the Partnership or the Transfer Agent. The General Partner shall update the books and records of the Partnership from time to time as necessary to reflect accurately the information therein (or shall cause the Transfer Agent to do so, as applicable). A Limited Partner Interest may be represented by a Certificate, as provided in Section 4.1.
(c) With respect to any Limited Partner that holds Units representing Limited Partner Interests for another Person’s account (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose name such Units are registered, such Limited Partner shall, in exercising the rights of a Limited Partner in respect of such Units on any matter, and unless the arrangement between such Persons provides otherwise, take all action as a Limited Partner by virtue of being the Record Holder of such Units at the direction of the Person who is the beneficial owner, and the Partnership shall be entitled to assume such Limited Partner is so acting without further inquiry.
(d) Any transfer of a Limited Partner Interest shall not entitle the transferee to share in the profits and losses, to receive distributions, to receive allocations of income, gain, loss, deduction or credit or any similar item or to any other rights to which the transferor was entitled until the transferee becomes a Limited Partner pursuant to Section 10.1(a).
Section 10.2 Admission of Successor General Partner.
A successor General Partner approved pursuant to Section 11.1 or Section 11.2 or the transferee of or successor to all of the General Partner Interest pursuant to Section 4.6 who is proposed to be admitted as a successor General Partner shall be admitted to the Partnership as the General Partner, effective immediately prior to the withdrawal or removal of the predecessor or transferring General Partner, pursuant to Section 11.1 or Section 11.2 or the transfer of the General Partner Interest pursuant to Section 4.6, provided, however, that no such successor shall be admitted to the Partnership until compliance with the terms of Section 4.6 has occurred and such successor has executed and delivered such other documents or instruments as may be required to effect such admission. Any such successor shall, subject to the terms hereof, carry on the business of the members of the Partnership Group without dissolution.
Section 10.3 Amendment of Agreement and Certificate of Limited Partnership.
To effect the admission to the Partnership of any Partner, the General Partner shall take all steps necessary or appropriate under the Delaware Act to amend the records of the Partnership to reflect such admission and, if necessary, to prepare as soon as practicable an amendment to this Agreement and, if required by law, the General Partner shall prepare and file an amendment to the Certificate of Limited Partnership, and the General Partner may for this purpose, among others, exercise the power of attorney granted pursuant to Section 2.6.
ARTICLE XI.
Withdrawal or Removal of Partners
Section 11.1 Withdrawal of the General Partner.
(a) The General Partner shall be deemed to have withdrawn from the Partnership upon the occurrence of any one of the following events (each such event herein referred to as an “Event of Withdrawal”);
(i) The General Partner voluntarily withdraws from the Partnership as provided in Section 11.1(b)(i);
(ii) The General Partner transfers all of its rights as General Partner pursuant to Section 4.6;
(iii) The General Partner (A) makes a general assignment for the benefit of creditors; (B) files a voluntary bankruptcy petition for relief under Chapter 7 of the United States Bankruptcy Code; (C) files a petition or answer seeking for itself a liquidation, dissolution or similar relief (but not a reorganization) under any law; (D) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the General Partner in a proceeding of the type described in clauses (A)-(C) of this Section 11.1(a)(iii); or (E) seeks, consents to or acquiesces in the appointment of a trustee (but not a debtor-in-possession), receiver or liquidator of the General Partner or of all or any substantial part of its properties;
(iv) A final and non-appealable order of relief under Chapter 7 of the United States Bankruptcy Code is entered by a court with appropriate jurisdiction pursuant to a voluntary or involuntary petition by or against the General Partner; or
(v) (A) If the General Partner is a corporation, a certificate of dissolution or its equivalent is filed for the General Partner, or 90 days expire after the date of notice to the General Partner of revocation of its charter without a reinstatement of its charter, under the laws of its state of incorporation; (B) if the General Partner is a partnership or a limited liability company, the dissolution and commencement of winding up of the General Partner; (C) in the event the General Partner is acting in such capacity by virtue of being a trustee of a trust, the termination of the trust; (D) if the General Partner is a natural person, his death or adjudication of incompetency; and (E) otherwise, in the event of the termination of the General Partner.
If an Event of Withdrawal specified in Section 11.1(a)(iii), Section 11.1(a)(iv), or Section 11.1(a)(v)(A), Section 11.1(a)(v)(B), Section 11.1(a)(v)(C) or Section 11.1(a)(v)(E) occurs, the withdrawing General Partner shall give notice to the Limited Partners within 30 days after such occurrence. The Partners hereby agree that only the Events of Withdrawal described in this Section 11.1 shall result in the withdrawal of the General Partner from the Partnership.
(b) Withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall not constitute a breach of this Agreement under the following circumstances: (i) the General Partner voluntarily withdraws by giving at least 90 days’ advance notice of its intention to withdraw to the Limited Partners; provided, that prior to the effective date of such withdrawal, the withdrawal is approved by Unitholders holding at least a majority of the Outstanding Units (excluding Units held by the General Partner and its Affiliates) and the General Partner delivers to the Partnership an Opinion of Counsel (“Withdrawal Opinion of Counsel”) that such withdrawal (following the selection of the successor General Partner) would not result in the loss of the limited liability of any Limited Partner or any Group Member or cause any Group Member to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not already so treated or taxed); or (ii) at any time that the General Partner ceases to be the General Partner pursuant to Section 11.1(a)(ii). The withdrawal of the General Partner from the Partnership upon the occurrence of an Event of Withdrawal shall also constitute the withdrawal of the General Partner as general partner or managing member, if any, to the extent applicable, of the other Group Members. If the General Partner gives a notice of withdrawal pursuant to Section 11.1(a)(i), the holders of a Unit Majority, may, prior to the effective date of such withdrawal, elect a successor General Partner. The Person so elected as successor General Partner shall automatically become the successor general partner or managing member, to the extent applicable, of the other Group Members of which the General Partner is a general partner or a managing member. If, prior to the effective date of the General Partner’s withdrawal, a successor is not selected by the Unitholders as provided herein or the Partnership does not receive a Withdrawal Opinion of Counsel, the Partnership shall be dissolved in accordance with Section 12.1. Any successor General Partner elected in accordance with the terms of this Section 11.1 shall be subject to the provisions of Section 10.3.
Section 11.2 Removal of the General Partner.
The General Partner may not be removed as General Partner of the Partnership.
Section 11.3 Interest of Departing General Partner and Successor General Partner.
(a) In the event of withdrawal of the General Partner, if the successor General Partner is elected in accordance with the terms of Section 11.1, the Departing General Partner shall have the option, exercisable prior to the effective date of the departure of such Departing General Partner, to require its successor to purchase its General Partner Interest and its general partner interest (or equivalent interest), if any, in the other Group Members (collectively, the “Combined Interest”) in exchange for $100.00 in cash.
(b) If a successor General Partner is elected in accordance with the terms of Section 11.1 (or if the business of the Partnership is continued pursuant to Section 12.2 and the successor General Partner is not the former General Partner), the successor General Partner shall, at the effective date of its admission to the Partnership, contribute to the Partnership cash in the amount of $100.00.
Section 11.4 Withdrawal of Limited Partners.
No Limited Partner shall have any right to withdraw from the Partnership; provided, however, that when a transferee of a Limited Partner’s Limited Partner Interest becomes a Record Holder of the Limited Partner Interest so transferred, such transferring Limited Partner shall cease to be a Limited Partner with respect to the Limited Partner Interest so transferred.
ARTICLE XII.
Dissolution and Liquidation
Section 12.1 Dissolution.
The Partnership shall not be dissolved by the admission of additional Limited Partners or by the admission of a successor General Partner in accordance with the terms of this Agreement. Upon the removal or withdrawal of the General Partner, if a successor General Partner is elected pursuant to Section 11.1, the Partnership shall not be dissolved and such successor General Partner shall continue the business of the Partnership. The Partnership shall dissolve, and (subject to Section 12.2) its affairs shall be wound up, upon:
(a) an Event of Withdrawal of the General Partner as provided in Section 11.1(a) (other than Section 11.1(a)(ii)), unless a successor is elected and an Opinion of Counsel is received as provided in Section 11.1(b) and such successor is admitted to the Partnership pursuant to Section 10.3;
(b) an election to dissolve the Partnership by the General Partner that is approved by the holders of a Unit Majority;
(c) the entry of a decree of judicial dissolution of the Partnership pursuant to the provisions of the Delaware Act;
(d) at any time after the Full Investment Date, the election of the General Partner to cause the Partnership to dissolve if, at the time such election is made, the present value, discounted at 10%, of the estimate net after-tax cash flow attributable to the Partnership’s consolidated oil and gas proved reserves as reflected in the most recent annual audited financial statements (or if not included in such financial statements, as determined by the General Partner) is less than 20% of the aggregate Capital Contributions received by the Partnership (after the deduction of Sales Commissions, Marketing Fees and Offering and Organization Expenses); or
(e) at any time there are no Limited Partners, unless the Partnership is continued without dissolution in accordance with the Delaware Act.
Section 12.2 Continuation of the Business of the Partnership After Dissolution.
Upon (a) dissolution of the Partnership following an Event of Withdrawal caused by the withdrawal of the General Partner as provided in Section 11.1(a)(i) and the failure of the Partners to select a successor to such Departing General Partner pursuant to Section 11.1, then within 90 days thereafter, or (b) dissolution of the Partnership upon an event constituting an Event of Withdrawal as defined in Section 11.1(a)(iii), Section 11.1(a)(iv) or Section 11.1(a)(v), then, to the maximum extent permitted by applicable law, within 180 days thereafter, the holders of a Unit Majority may elect to continue the business of the Partnership on the same terms and conditions set forth in this Agreement by appointing as a successor General Partner a Person approved by the holders of a Unit Majority. Unless such an election is made within the applicable time period as set forth above, the Partnership shall conduct only activities necessary to wind up its affairs. If such an election is so made, then:
(i) the Partnership shall continue without dissolution unless earlier dissolved in accordance with this Article XII;
(ii) if the successor General Partner is not the former General Partner, then the interest of the former General Partner shall be treated in the manner provided in Section 11.3; and
(iii) the successor General Partner shall be admitted to the Partnership as General Partner, effective as of the Event of Withdrawal, by agreeing in writing to be bound by this Agreement;
provided, that the right of the holders of a Unit Majority to approve a successor General Partner and to continue the business of the Partnership shall not exist and may not be exercised unless the Partnership has received an Opinion of Counsel that (x) the exercise of the right would not result in the loss of limited liability of any Limited Partner and (y) neither the Partnership nor any Group Member would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of such right to continue (to the extent not already so treated or taxed).
Section 12.3 Liquidator.
Upon dissolution of the Partnership, unless the business of the Partnership is continued pursuant to Section 12.2, the General Partner shall act as, or shall select one or more Persons to act as, Liquidator. The Liquidator (if other than the General Partner) shall be entitled to receive such compensation for its services as may be approved by holders of at least a majority of the Outstanding Units. The Liquidator (if other than the General Partner) shall agree not to resign at any time without 15 days’ prior notice and may be removed at any time, with or without cause, by notice of removal approved by holders of at least a majority of the Outstanding Units. Upon dissolution, removal or resignation of the Liquidator, a successor and substitute Liquidator (who shall have and succeed to all rights, powers and duties of the original Liquidator) shall within 30 days thereafter be approved by holders of at least a majority of the Outstanding Units. The right to approve a successor or substitute Liquidator in the manner provided herein shall be deemed to refer also to any such successor or substitute Liquidator approved in the manner herein provided. Except as expressly provided in this Article XII, the Liquidator approved in the manner provided herein shall have and may exercise, without further authorization or consent of any of the parties hereto, all of the powers conferred upon the General Partner under the terms of this Agreement (but subject to all of the applicable limitations, contractual and otherwise, upon the exercise of such powers, other than the limitation on sale set forth in Section 7.3) necessary or appropriate to carry out the duties and functions of the Liquidator hereunder for and during the period of time required to complete the winding up and liquidation of the Partnership as provided for herein.
Section 12.4 Liquidation.
The Liquidator shall proceed to dispose of the assets of the Partnership, discharge its liabilities, and otherwise wind up its affairs in such manner and over such period as determined by the Liquidator, subject to Section 17-804 of the Delaware Act and the following:
(a) The assets may be disposed of by public or private sale or by distribution in kind to one or more Partners on such terms as the Liquidator and such Partner or Partners may agree. If any property is distributed in kind, the Partner receiving the property shall be deemed for purposes of Section 12.4(c) to have received cash equal to its fair market value; and contemporaneously therewith, appropriate cash distributions must be made to the other Partners. The Liquidator may defer liquidation or distribution of the Partnership’s assets for a reasonable time if it determines that an immediate sale or distribution of all or some of the Partnership’s assets would be impractical or would cause undue loss to the Partners. The Liquidator may distribute the Partnership’s assets, in whole or in part, in kind if it determines that a sale would be impractical or would cause undue loss to the Partners.
(b) Liabilities of the Partnership include amounts owed to the Liquidator as compensation for serving in such capacity (subject to the terms of Section 12.3) and amounts to Partners otherwise than in respect of their distribution rights under Article VI. With respect to any liability that is contingent, conditional or unmatured or is otherwise not yet due and payable, the Liquidator shall either settle such claim for such amount as it thinks appropriate or establish a reserve of cash or other assets to provide for its payment. When paid, any unused portion of the reserve shall be distributed as additional liquidation proceeds.
(c) All property and all cash in excess of that required to discharge liabilities as provided in Section 12.4(b) shall be distributed to the Partners in accordance with Section 6.2.
Section 12.5 Cancellation of Certificate of Limited Partnership.
Upon the completion of the distribution of Partnership cash and property as provided in Section 12.4 in connection with the liquidation of the Partnership, the Certificate of Limited Partnership and all qualifications of the Partnership as a foreign limited partnership in jurisdictions other than the State of Delaware shall be canceled and such other actions as may be necessary to terminate the Partnership shall be taken.
Section 12.6 Return of Contributions.
The General Partner shall not be personally liable for, and shall have no obligation to contribute or loan any monies or property to the Partnership to enable it to effectuate, the return of the Capital Contributions of the Limited Partners or Unitholders, or any portion thereof, it being expressly understood that any such return shall be made solely from Partnership assets.
Section 12.7 Waiver of Partition.
To the maximum extent permitted by law, each Partner hereby waives any right to partition of the Partnership property.
Section 12.8 Capital Account Restoration.
No Limited Partner shall have any obligation to restore any negative balance in its Capital Account upon liquidation of the Partnership. The General Partner shall be obligated to restore any negative balance in its Capital Account upon liquidation of its interest in the Partnership by the end of the taxable year of the Partnership during which such liquidation occurs, or, if later, within 90 days after the date of such liquidation.
ARTICLE XIII.
Amendment of Partnership Agreement;
Meetings; Record Date
Section 13.1 Amendments to be Adopted Solely by the General Partner.
Each Partner agrees that the General Partner, without the approval of any Partner, may amend any provision of this Agreement and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the principal place of business of the Partnership, the registered agent of the Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in accordance with this Agreement;
(c) a change that the General Partner determines to be necessary or appropriate to qualify or continue the qualification of the Partnership as a limited partnership or a partnership in which the Limited Partners have limited liability under the laws of any state or to ensure that the Group Members will not be treated as associations taxable as corporations or otherwise taxed as entities for federal income tax purposes;
(d) a change that the General Partner determines, (i) does not adversely affect the Limited Partners (including any particular class of Partnership Interests as compared to other classes of Partnership Interests) in any material respect, (ii) to be necessary or appropriate to (A) satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute (including the Delaware Act) or (B) facilitate the trading of the Units (including the division of any class or classes of Outstanding Units into different classes to facilitate uniformity of tax consequences within such classes of Units) or comply with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are or will be listed or admitted to trading or (iii) is required to effect the intent expressed in the Registration Statement or the intent of the provisions of this Agreement or is otherwise contemplated by this Agreement;
(e) a change in the fiscal year or taxable year of the Partnership and any other changes that the General Partner determines to be necessary or appropriate as a result of a change in the fiscal year or taxable year of the Partnership including, if the General Partner shall so determine, a change in the definition of “Month” and the dates on which distributions are to be made by the Partnership;
(f) an amendment that is necessary, in the Opinion of Counsel, to prevent the Partnership, or the General Partner or its directors, officers, trustees or agents from in any manner being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, as amended, regardless of whether such are substantially similar to plan asset regulations currently applied or proposed by the United States Department of Labor;
(g) any amendment expressly permitted in this Agreement to be made by the General Partner acting alone;
(h) an amendment effected, necessitated or contemplated by a Merger Agreement approved in accordance with Section 14.3;
(i) an amendment that the General Partner determines to be necessary or appropriate to reflect and account for the formation by the Partnership of, or investment by the Partnership in, any corporation, partnership, joint venture, limited liability company or other entity, in connection with the conduct by the Partnership of activities permitted by the terms of Section 2.4;
(j) any merger, conveyance or conversion pursuant to Section 14.3(d); or
(k) any other amendments substantially similar to the foregoing.
Section 13.2 Amendment Procedures.
Except as provided in Section 13.1 and Section 13.3, all amendments to this Agreement shall be made in accordance with the following requirements. Amendments to this Agreement may be proposed only by the General Partner; provided, however, that the General Partner shall have no duty or obligation to propose any amendment to this Agreement and may decline to do so free of any fiduciary duty or obligation whatsoever to the Partnership or any Limited Partner and, in declining to propose an amendment, to the fullest extent permitted by law shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any Group Member Agreement, any other agreement contemplated hereby or under the Delaware Act or any other law, rule or regulation or at equity. A proposed amendment shall be effective upon its approval by the General Partner and the holders of a Unit Majority, unless a greater or different percentage is required under this Agreement or by Delaware law. Each proposed amendment that requires the approval of the holders of a specified percentage of Outstanding Units shall be set forth in a writing that contains the text of the proposed amendment. If such an amendment is proposed, the General Partner shall seek the written approval of the requisite percentage of Outstanding Units or call a meeting of the Unitholders to consider and vote on such proposed amendment. The General Partner shall notify all Record Holders upon final adoption of any such proposed amendments.
Section 13.3 Amendment Requirements.
(a) Notwithstanding the provisions of Section 13.1 and Section 13.2, no provision of this Agreement that establishes a percentage of Outstanding Units (including Units deemed owned by the General Partner) required to take any action shall be amended, altered, changed, repealed or rescinded in any respect that would have the effect of (i) in the case of any provision of this Agreement other than Section 13.4, reducing such percentage or (ii) in the case of Section 13.4, increasing such percentages, unless such amendment is approved by the written consent or the affirmative vote of holders of Outstanding Units whose aggregate Outstanding Units constitute in the case of a reduction as described in sub-clause (a)(i) hereof, not less than the voting requirement sought to be reduced, or in the case of an increase in the percentage in Section 13.4, not less than a majority of the Outstanding Units.
(b) Notwithstanding the provisions of Section 13.1 and Section 13.2, no amendment to this Agreement may (i) enlarge the obligations of any Limited Partner without its consent, or (ii) enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable to, the General Partner or any of its Affiliates without its consent, which consent may be given or withheld at its option.
(c) Without limitation of the General Partner’s authority to adopt amendments to this Agreement without the approval of any Partners or Assignees as contemplated in Section 13.1, (i) any amendment that affects only the Class B Units or the duties, responsibilities, rights and preferences of the holders of the Class B Units maybe proposed only by the General Partner as contemplated by Section 13.2, and shall be effective upon its approval by the General Partner and the holders of a majority of the Outstanding Class B Units and shall not require the approval of the holders of Units, (ii) any amendment that affects only the Incentive Distribution Rights or the duties, responsibilities, rights and preferences of the holders of the Incentive Distribution Rights maybe proposed only by the General Partner as contemplated by Section 13.2, and shall be effective upon its approval by the General Partner and the holders of the Incentive Distribution Rights and shall not require the approval of the holders of Units and (iii) any amendment that would have a material adverse effect on the rights or preferences of the Incentive Distribution Rights or Class B Units must be approved by the holders of the Outstanding Incentive Distribution Rights or the holders of not less than a majority of Class B Units, as applicable; provided that for an amendment made in connection with a Liquidity Event, the owners of such Incentive Distribution Rights or Class B Units may not unreasonably withhold such approval.Any amendment of this Section 13.3(c) shall require the approval of the General Partner and the holders of a majority of the Outstanding Incentive Distribution Rights and Class B Units.
(d) Notwithstanding any other provision of this Agreement, except for amendments pursuant to Section 13.1 and except as otherwise provided by Section 14.3(b), no amendments shall become effective without the approval of the holders of at least 90% of the Outstanding Units voting as a single class unless the Partnership obtains an Opinion of Counsel to the effect that such amendment will not affect the limited liability of any Limited Partner under applicable partnership law of the state under whose laws the Partnership is organized.
Section 13.4 Special Meetings.
All acts of Limited Partners to be taken pursuant to this Agreement shall be taken in the manner provided in this Article XIII. Special meetings of the Limited Partners may be called by the General Partner or by Limited Partners owning 20% or more of the Outstanding Units. Limited Partners shall call a special meeting by delivering to the General Partner one or more requests in writing stating that the signing Limited Partners wish to call a special meeting and indicating the general or specific purposes for which the special meeting is to be called. Within 60 days after receipt of such a call from Limited Partners or within such greater time as may be reasonably necessary for the Partnership to comply with any statutes, rules, regulations, listing agreements or similar requirements governing the holding of a meeting or the solicitation of proxies for use at such a meeting, the General Partner shall send a notice of the meeting to the Limited Partners either directly or indirectly through the Transfer Agent. A meeting shall be held at a time and place determined by the General Partner on a date not less than 10 days nor more than 60 days after the mailing of notice of the meeting. Limited Partners shall not vote on matters that would cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners’ limited liability under the Delaware Act or the law of any other state in which the Partnership is qualified to do business, and if any such vote were to take place, to the fullest extent permitted by law, it shall be deemed null and void to the extent necessary so as not to jeopardize the Limited Partners’ limited liability under the Delaware Act or the law of any other state in which the Partnership is qualified to do business.
Section 13.5 Notice of a Meeting.
Notice of a meeting called pursuant to Section 13.4 shall be given to the Record Holders of the class or classes of Units for which a meeting is proposed in writing by mail or other means of written in accordance with Section 15.1. The notice shall be deemed to have been given at the time when deposited in the mail or sent by other means of written communication.
Section 13.6 Record Date.
For purposes of determining the Limited Partners entitled to notice of or to vote at a meeting of the Limited Partners or to give approvals without a meeting as provided in Section 13.11 the General Partner may set a Record Date, which shall not be less than 10 nor more than 60 days before (a) the date of the meeting (unless such requirement conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed or admitted to trading, in which case the rule, regulation, guideline or requirement of such National Securities Exchange shall govern) or (b) in the event that approvals are sought without a meeting, the date by which Limited Partners are requested in writing by the General Partner to give such approvals. If the General Partner does not set a Record Date, then (a) the Record Date for determining the Limited Partners entitled to notice of or to vote at a meeting of the Limited Partners shall be the close of business on the day next preceding the day on which notice is given, and (b) the Record Date for determining the Limited Partners entitled to give approvals without a meeting shall be the date the first written approval is deposited with the Partnership in care of the General Partner in accordance with Section 13.11.
Section 13.7 Postponement and Adjournment.
Prior to the date upon which any meeting of Limited Partners is to be held, the General Partner may postpone such meeting one or more times for any reason by giving notice to each Limited Partner entitled to vote at the meeting so postponed of the place, date and hour at which such meeting would be held. Such notice shall be given not fewer than two days before the date of such meeting and otherwise in accordance with this Article XIII. When a meeting is postponed, a new Record Date need not be fixed unless such postponement shall be for more than 45 days. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting and a new Record Date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than 45 days. At the adjourned meeting, the Partnership may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if a new Record Date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given in accordance with this Article XIII.
Section 13.8 Waiver of Notice; Approval of Meeting; Approval of Minutes.
The transactions of any meeting of Limited Partners, however called and noticed, and whenever held, shall be as valid as if it had occurred at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy. Attendance of a Limited Partner at a meeting shall constitute a waiver of notice of the meeting, except when the Limited Partner attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened; and except that attendance at a meeting is not a waiver of any right to disapprove the consideration of matters required to be included in the notice of the meeting, but not so included, if the disapproval is expressly made at the meeting.
Section 13.9 Quorum and Voting.
The holders of a majority of the Outstanding Units (including Outstanding Units deemed owned by the General Partner), present in person or represented by proxy, shall constitute a quorum at a meeting of Unitholders unless any such action by the Limited Partners requires approval by holders of a greater percentage of such Units, in which case the quorum shall be such greater percentage. At any meeting of the Unitholders duly called and held in accordance with this Agreement at which a quorum is present, the act of Limited Partners holding Outstanding Units that in the aggregate represent a majority of the Outstanding Units entitled to vote and be present in person or by proxy at such meeting shall be deemed to constitute the act of all Limited Partners, unless a greater or different percentage is required with respect to such action under the provisions of this Agreement, in which case the act of the Limited Partners holding Outstanding Units that in the aggregate represent at least such greater or different percentage shall be required. The Limited Partners present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Limited Partners to leave less than a quorum, if any action taken (other than adjournment) is approved by the required percentage of Outstanding Units specified in this Agreement (including Outstanding Units deemed owned by the General Partner). In the absence of a quorum any meeting of Limited Partners may be adjourned from time to time by the affirmative vote of holders of at least a majority of the Outstanding Units entitled to vote at such meeting (including Outstanding Units deemed owned by the General Partner) represented either in person or by proxy, but no other business may be transacted, except as provided in Section 13.7.
Section 13.10 Conduct of a Meeting.
The General Partner shall have full power and authority concerning the manner of conducting any meeting of the Limited Partners or solicitation of approvals in writing, including the determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the requirements of Section 13.4, the conduct of voting, the validity and effect of any proxies and the determination of any controversies, votes or challenges arising in connection with or during the meeting or voting. The General Partner shall designate a Person to serve as chairman of any meeting and shall further designate a Person to take the minutes of any meeting. All minutes shall be kept with the records of the Partnership maintained by the General Partner. The General Partner may make such other regulations consistent with applicable law and this Agreement as it may deem advisable concerning the conduct of any meeting of the Limited Partners or solicitation of approvals in writing, including regulations in regard to the appointment of proxies, the appointment and duties of inspectors of votes and approvals, the submission and examination of proxies and other evidence of the right to vote, and the revocation of approvals in writing.
Section 13.11 Action Without a Meeting.
If authorized by the General Partner, any action that may be taken at a meeting of the Limited Partners may be taken without a meeting if an approval in writing setting forth the action so taken is signed by Limited Partners owning not less than the minimum percentage of the Outstanding Units (including Units owned by the General Partner) that would be necessary to authorize or take such action at a meeting at which all the Limited Partners were present and voted (unless such provision conflicts with any rule, regulation, guideline or requirement of any National Securities Exchange on which the Units are listed or admitted to trading, in which case the rule, regulation, guideline or requirement of such National Securities Exchange shall govern). Prompt notice of the taking of action without a meeting shall be given to the Limited Partners who have not approved in writing. The General Partner may specify that any written ballot submitted to Limited Partners for the purpose of taking any action without a meeting shall be returned to the Partnership within the time period, which shall be not less than 20 days, specified by the General Partner. If a ballot returned to the Partnership does not vote all of the Units held by the Limited Partners, the Partnership shall be deemed to have failed to receive a ballot for the Units that were not voted. If approval of the taking of any action by the Limited Partners is solicited by any Person other than by or on behalf of the General Partner, the written approvals shall have no force and effect unless and until (a) they are deposited with the Partnership in care of the General Partner, (b) approvals sufficient to take the action proposed are dated as of a date not more than 90 days prior to the date sufficient approvals are deposited with the Partnership and (c) an Opinion of Counsel is delivered to the General Partner to the effect that the exercise of such right and the action proposed to be taken with respect to any particular matter (i) will not cause the Limited Partners to be deemed to be taking part in the management and control of the business and affairs of the Partnership so as to jeopardize the Limited Partners’ limited liability, and (ii) is otherwise permissible under the state statutes then governing the rights, duties and liabilities of the Partnership and the Partners.
Section 13.12 Right to Vote and Related Matters.
(a) Only those Record Holders of the Units on the Record Date set pursuant to Section 13.6 (and also subject to the limitations contained in the definition of “Outstanding”) shall be entitled to notice of, and to vote at, a meeting of Limited Partners or to act with respect to matters as to which the holders of the Outstanding Units have the right to vote or to act. All references in this Agreement to votes of, or other acts that may be taken by, the Outstanding Units shall be deemed to be references to the votes or acts of the Record Holders of such Outstanding Units.
(b) With respect to Units that are held for a Person’s account by another Person (such as a broker, dealer, bank, trust company or clearing corporation, or an agent of any of the foregoing), in whose name such Units are registered, such other Person shall, in exercising the voting rights in respect of such Units on any matter, and unless the arrangement between such Persons provides otherwise, vote such Units in favor of, and at the direction of, the Person who is the beneficial owner, and the Partnership shall be entitled to assume it is so acting without further inquiry. The provisions of this Section 13.12(b) (as well as all other provisions of this Agreement) are subject to the provisions of Section 4.3.
(c)Notwithstanding anything in this Agreement to the contrary, except as specifically provided in Sections 13.3 and 14.3 (and subject to the limitations set forth in such Sections) the owners of an Incentive Distribution Rights and Class B Units shall not be entitled to vote such Incentive Distribution Rights or Class B Units on the amendment of this Agreement or any other Partnership matter.
ARTICLE XIV.
Merger, Consolidation or Conversion
Section 14.1 Authority.
The Partnership may merge or consolidate with or into one or more corporations, limited liability companies, statutory trusts or associations, real estate investment trusts, common law trusts or unincorporated businesses, including a partnership (whether general or limited (including a limited liability partnership)) or convert into any such entity, whether such entity is formed under the laws of the State of Delaware or any other state of the United States of America, pursuant to a written plan of merger or consolidation (“Merger Agreement”) or a written plan of conversion (“Plan of Conversion”), as the case may be, in accordance with this Article XIV.
Section 14.2 Procedure for Merger, Consolidation or Conversion.
(a) Merger, consolidation or conversion of the Partnership pursuant to this Article XIV requires the prior consent of the General Partner, provided, however, that, to the fullest extent permitted by law, the General Partner shall have no duty or obligation to consent to any merger, consolidation or conversion of the Partnership and may decline to do so free of any fiduciary duty or obligation whatsoever to the Partnership, any Limited Partner and, in declining to consent to a merger, consolidation or conversion, shall not be required to act in good faith or pursuant to any other standard imposed by this Agreement, any other agreement contemplated hereby or under the Act or any other law, rule or regulation or at equity, subject to the implied covenant of good faith and fair dealing imposed under Delaware law.
(b) If the General Partner shall determine to consent to the merger or consolidation, the General Partner shall approve the Merger Agreement, which shall set forth:
(i) name and state of domicile of each of the business entities proposing to merge or consolidate;
(ii) the name and state of domicile of the business entity that is to survive the proposed merger or consolidation (the “Surviving Business Entity”);
(iii) the terms and conditions of the proposed merger or consolidation;
(iv) the manner and basis of exchanging or converting the equity securities of each constituent business entity for, or into, cash, property or interests, rights, securities or obligations of the Surviving Business Entity; and (i) if any general or limited partner interests, securities or rights of any constituent business entity are not to be exchanged or converted solely for, or into, cash, property or general or limited partner interests, rights, securities or obligations of the Surviving Business Entity, the cash, property or interests, rights, securities or obligations of any general or limited partnership, corporation, trust, limited liability company, unincorporated business or other entity (other than the Surviving Business Entity) which the holders of such general or limited partner interests, securities or rights are to receive in exchange for, or upon conversion of their interests, securities or rights, and (ii) in the case of securities represented by certificates, upon the surrender of such certificates, which cash, property or general or limited partner interests, rights, securities or obligations of the Surviving Business Entity or any general or limited partnership, corporation, trust, limited liability company, unincorporated business or other entity (other than the Surviving Business Entity), or evidences thereof, are to be delivered;
(v) a statement of any changes in the constituent documents or the adoption of new constituent documents (the articles or certificate of incorporation, articles of trust, declaration of trust, certificate or agreement of limited partnership, operating agreement or other similar charter or governing document) of the Surviving Business Entity to be effected by such merger or consolidation;
(vi) the effective time of the merger, which may be the date of the filing of the certificate of merger pursuant to Section 14.4 or a later date specified in or determinable in accordance with the Merger Agreement (provided, that if the effective time of the merger is to be later than the date of the filing of such certificate of merger, the effective time shall be fixed at a date or time certain at or prior to the time of the filing of such certificate of merger and stated therein); and
(vii) such other provisions with respect to the proposed merger or consolidation that the General Partner determines to be necessary or appropriate.
(c) If the General Partner shall determine to consent to the conversion, the General Partner shall approve the Plan of Conversion, which shall set forth:
(i) the name of the converting entity and the converted entity;
(ii) a statement that the Partnership is continuing its existence in the organizational form of the converted entity;
(iii) a statement as to the type of entity that the converted entity is to be and the state or country under the laws of which the converted entity is to be incorporated, formed or organized;
(iv) the manner and basis of exchanging or converting the equity securities of each constituent business entity for, or into, cash, property or interests, rights, securities or obligations of the converted entity;
(v) in an attachment or exhibit, the certificate of limited partnership of the Partnership; and
(vi) in an attachment or exhibit, the certificate of limited partnership, articles of incorporation, or other organizational documents of the converted entity;
(vii) the effective time of the conversion, which may be the date of the filing of the articles of conversion or a later date specified in or determinable in accordance with the Plan of Conversion (provided, that if the effective time of the conversion is to be later than the date of the filing of such articles of conversion, the effective time shall be fixed at a date or time certain at or prior to the time of the filing of such articles of conversion and stated therein); and
(viii) such other provisions with respect to the proposed conversion that the General Partner determines to be necessary or appropriate.
Section 14.3 Approval by Limited Partners.
(a) Except as provided in Section 14.3(d), the General Partner, upon its approval of the Merger Agreement or the Plan of Conversion, as the case may be, shall direct that the Merger Agreement or the Plan of Conversion, as applicable, be submitted to a vote of Limited Partners, whether at a special meeting or by written consent, in either case in accordance with the requirements of Article XIII. A copy or a summary of the Merger Agreement or the Plan of Conversion, as the case may be, shall be included in or enclosed with the notice of a special meeting or the written consent.
(b) Except as provided in Section 14.3(d), the Merger Agreement or Plan of Conversion, as the case may be, shall be approved upon receiving the affirmative vote or consent of the holders of a Unit Majority unless the Merger Agreement or Plan of Conversion, as the case may be, effects an amendment to any provision of this Agreement that, if contained in an amendment to this Agreement adopted pursuant to Article XIII, would require for its approval the vote, approval or consent of a greater percentage of the Outstanding Units or of any class of Limited Partners, in which case such greater percentage vote, approval or consent shall be required for approval of the Merger Agreement or the Plan of Conversion, as the case may be.
(c) Except as provided in Section 14.3(d) or Section 14.3(e), after such approval by vote or consent of the Limited Partners, and at any time prior to the filing of the certificate of merger or articles of conversion pursuant to Section 14.4, the merger, consolidation or conversion may be abandoned pursuant to provisions therefor, if any, set forth in the Merger Agreement or Plan of Conversion, as the case may be.
(d) Notwithstanding anything else contained in this Article XIV or in this Agreement, the General Partner is permitted, without Limited Partner approval, to convert the Partnership or any Group Member into a new limited liability entity, to merge the Partnership or any Group Member into, or convey all of the Partnership’s assets to, another limited liability entity that shall be newly formed and shall have no assets, liabilities or operations at the time of such conversion, merger or conveyance other than those it receives from the Partnership or other Group Member if (i) the General Partner has received an Opinion of Counsel that the conversion, merger or conveyance, as the case may be, would not result in the loss of the limited liability of any Limited Partner or cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not previously treated as such), (ii) the sole purpose of such conversion, merger, or conveyance is to effect a mere change in the legal form of the Partnership into another limited liability entity and (iii) the governing instruments of the new entity provide the Limited Partners and the General Partner with the same rights and obligations as are herein contained.
(e) Additionally, notwithstanding anything else contained in this Article XIV or in this Agreement, the General Partner is permitted, without Limited Partner approval, to merge or consolidate the Partnership with or into another limited liability entity if (i) the General Partner has received an Opinion of Counsel that the merger or consolidation, as the case may be, would not result in the loss of the limited liability of any Limited Partner under the laws of the jurisdiction governing the other limited liability entity (if that jurisdiction is not Delaware) as compared to its limited liability under the Delaware Act or cause the Partnership to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not previously treated as such), (ii) the merger or consolidation would not result in an amendment to this Agreement, other than any amendments that could be adopted pursuant to Section 13.1, (iii) the Partnership is the Surviving Business Entity in such merger or consolidation, (iv) each Unit outstanding immediately prior to the effective date of the merger or consolidation is to be an identical Unit of the Partnership after the effective date of the merger or consolidation, and (v) the number of Partnership Interests to be issued by the Partnership in such merger or consolidation does not exceed 20% of the Partnership Interests (other than Incentive Distribution Rights) Outstanding immediately prior to the effective date of such merger or consolidation.
(f) Pursuant to Section 17-211(g) of the Delaware Act, an agreement of merger or consolidation approved in accordance with this Article XIV may (a) effect any amendment to this Agreement or (b) effect the adoption of a new partnership agreement for the Partnership if it is the Surviving Business Entity. Any such amendment or adoption made pursuant to this Section 14.3 shall be effective at the effective time or date of the merger or consolidation.
Section 14.4 Certificate of Merger or Certificate of Conversion.
Upon the required approval by the General Partner and the Unitholders of a Merger Agreement or the Plan of Conversion, as the case may be, a certificate of merger or articles of conversion, as applicable, shall be executed and filed with the Secretary of State of the State of Delaware in conformity with the requirements of the Delaware Act.
Section 14.5 Effect of Merger, Consolidation or Conversion.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business entities that has merged or consolidated, and all property, real, personal and mixed, and all debts due to any of those business entities and all other things and causes of action belonging to each of those business entities, shall be vested in the Surviving Business Entity and after the merger or consolidation shall be the property of the Surviving Business Entity to the extent they were of each constituent business entity;
(ii) the title to any real property vested by deed or otherwise in any of those constituent business entities shall not revert and is not in any way impaired because of the merger or consolidation;
(iii) all rights of creditors and all liens on or security interests in property of any of those constituent business entities shall be preserved unimpaired; and
(iv) all debts, liabilities and duties of those constituent business entities shall attach to the Surviving Business Entity and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it.
(b) At the effective time of the articles of conversion:
(i) the Partnership shall continue to exist, without interruption, but in the organizational form of the converted entity rather than in its prior organizational form;
(ii) all rights, title, and interests to all real estate and other property owned by the Partnership shall continue to be owned by the converted entity in its new organizational form without reversion or impairment, without further act or deed, and without any transfer or assignment having occurred, but subject to any existing liens or other encumbrances thereon;
(iii) all liabilities and obligations of the Partnership shall continue to be liabilities and obligations of the converted entity in its new organizational form without impairment or diminution by reason of the conversion;
(iv) all rights of creditors or other parties with respect to or against the prior interest holders or other owners of the Partnership in their capacities as such in existence as of the effective time of the conversion will continue in existence as to those liabilities and obligations and may be pursued by such creditors and obligees as if the conversion did not occur;
(v) a proceeding pending by or against the Partnership or by or against any of Partners in their capacities as such may be continued by or against the converted entity in its new organizational form and by or against the prior partners without any need for substitution of parties; and
(vi) the Partnership Units that are to be converted into partnership interests, shares, evidences of ownership, or other securities in the converted entity as provided in the plan of conversion shall be so converted, and Partners shall be entitled only to the rights provided in the Plan of Conversion.
ARTICLE XV.
General Provisions
Section 15.1 Addresses and Notices.
Any notice, demand, request, report or proxy materials required or permitted to be given or made to a Partner under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written communication to the Partner at the address described below. Any notice, payment or report to be given or made to a Partner hereunder shall be deemed conclusively to have been given or made, and the obligation to give such notice or report or to make such payment shall be deemed conclusively to have been fully satisfied, upon sending of such notice, payment or report to the Record Holder of such Partnership Interest at his address as shown on the records of the Transfer Agent or as otherwise shown on the records of the Partnership, regardless of any claim of any Person who may have an interest in such Partnership Interest by reason of any assignment or otherwise. An affidavit or certificate of making of any notice, payment or report in accordance with the provisions of this Section 15.1 executed by the General Partner, the Transfer Agent or the mailing organization shall be prima facie evidence of the giving or making of such notice, payment or report. If any notice, payment or report addressed to a Record Holder at the address of such Record Holder appearing on the books and records of the Transfer Agent or the Partnership is returned by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver it, such notice, payment or report and any subsequent notices, payments and reports shall be deemed to have been duly given or made without further mailing (until such time as such Record Holder or another Person notifies the Transfer Agent or the Partnership of a change in his address) if they are available for the Partner at the principal office of the Partnership for a period of one year from the date of the giving or making of such notice, payment or report to the other Partners. Any notice to the Partnership shall be deemed given if received by the General Partner at the principal office of the Partnership designated pursuant to Section 2.3. The General Partner may rely and shall be protected in relying on any notice or other document from a Partner or other Person if believed by it to be genuine.
Section 15.2 Further Action.
The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.
Section 15.3 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
Section 15.4 Integration.
This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.
Section 15.5 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 15.6 Waiver.
No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.
Section 15.7 Third-Party Beneficiaries.
Each Partner agrees that any Indemnitee shall be entitled to assert rights and remedies hereunder as a third-party beneficiary hereto with respect to those provisions of this Agreement affording a right, benefit or privilege to such Indemnitee.
Section 15.8 Counterparts.
This Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto or, in the case of a Person acquiring a Limited Partner Interest, pursuant to Section 10.1(a) without execution hereto.
Section 15.9 Applicable Law; Forum, Venue and Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.
(b) Each of the Partners and each Person holding any beneficial interest in the Partnership (whether through a broker, dealer, bank, trust company or clearing corporation or an agent of any of the foregoing or otherwise):
(i) irrevocably agrees that any claims, suits, actions or proceedings (A) arising out of or relating in any way to this Agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of this Agreement or the duties, obligations or liabilities among Partners or of Partners to the Partnership, or the rights or powers of, or restrictions on, the Partners or the Partnership), (B) brought in a derivative manner on behalf of the Partnership, (C) asserting a claim of breach of a duty owed by any director, officer, or other employee of the Partnership or the General Partner, or owed by the General Partner, to the Partnership or the Partners, (D) asserting a claim arising pursuant to any provision of the Delaware Act or (E) asserting a claim governed by the internal affairs doctrine shall be exclusively brought in the Court of Chancery of the State of Delaware, in each case regardless of whether such claims, suits, actions or proceedings sound in contract, tort, fraud or otherwise, are based on common law, statutory, equitable, legal or other grounds, or are derivative or direct claims; provided, however, that any claims, suits, actions or proceedings over which the Court of Chancery of the State of Delaware does not have jurisdiction shall be brought in any other court in the State of Delaware having jurisdiction;
(ii) irrevocably submits to the exclusive jurisdiction of the courts of the State of Delaware in connection with any such claim, suit, action or proceeding;
(iii) agrees not to, and waives any right to, assert in any such claim, suit, action or proceeding that (A) it is not personally subject to the jurisdiction of the courts of the State of Delaware or of any other court to which proceedings in the courts of the State of Delaware may be appealed, (B) such claim, suit, action or proceeding is brought in an inconvenient forum, or (C) the venue of such claim, suit, action or proceeding is improper;
(iv) expressly waives any requirement for the posting of a bond by a party bringing such claim, suit, action or proceeding; and
(v) consents to process being served in any such claim, suit, action or proceeding by mailing, certified mail, return receipt requested, a copy thereof to such party at the address in effect for notices hereunder, and agrees that such services shall constitute good and sufficient service of process and notice thereof; provided, however, that nothing in this clause (v) shall affect or limit any right to serve process in any other manner permitted by law.
Section 15.10 Invalidity of Provisions.
If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.
Section 15.11 Consent of Partners.
Each Partner hereby expressly consents and agrees that, whenever in this Agreement it is specified that an action may be taken upon the affirmative vote or consent of less than all of the Partners, such action may be so taken upon the concurrence of less than all of the Partners and each Partner shall be bound by the results of such action.
Section 15.12 Facsimile Signatures.
The use of facsimile signatures affixed in the name and on behalf of the transfer agent and registrar of the Partnership on certificates representing Units is expressly permitted by this Agreement.
Remainder of Page Intentionally Left Blank.
Signature Page Follows.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
Energy 11 GP, LLC
By:
LIMITED PARTNERS:
All Limited Partners now and hereafter admitted as Limited Partners of the Partnership, pursuant to powers of attorney now and hereafter executed in favor of, and granted and delivered to the General Partner, or without execution hereof pursuant to Section 10.1(a).
Energy 11 GP, LLC
By:
EXHIBIT A
to the
First Amended and Restated
Agreement of Limited Partnership
of
Energy 11, L.P.
Certificate Evidencing Units
Representing Limited Partner Interests
in
Energy 11, L.P.
No. [ ] [ ] Units
In accordance with Section 4.1 of the First Amended and Restated Agreement of Limited Partnership of Energy 11, L.P., as amended, supplemented or restated from time to time (the “Partnership Agreement”), Energy 11, L.P., a Delaware limited partnership (the “Partnership”), hereby certifies that (the “Holder”) is the registered owner of Units representing limited partner interests in the Partnership (the “Units”) transferable on the books of the Partnership, in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. The rights, preferences and limitations of the Units are set forth in, and this Certificate and the Units represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Partnership Agreement. Copies of the Partnership Agreement are on file at, and will be furnished without charge on delivery of written request to the Partnership at, the principal office of the Partnership located at 120 W. 3rd Street, Fort Worth, Texas 76102. Capitalized terms used herein but not defined shall have the meanings given them in the Partnership Agreement.
THE HOLDER OF THIS SECURITY ACKNOWLEDGES FOR THE BENEFIT OF ENERGY 11, L.P. THAT THIS SECURITY MAY NOT BE SOLD, OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED IF SUCH TRANSFER WOULD (A) VIOLATE THE THEN APPLICABLE FEDERAL OR STATE SECURITIES LAWS OR RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER GOVERNMENTAL AUTHORITY WITH JURISDICTION OVER SUCH TRANSFER, (B) TERMINATE THE EXISTENCE OR QUALIFICATION OF ENERGY 11, L.P. UNDER THE LAWS OF THE STATE OF DELAWARE, OR (C) CAUSE ENERGY 11, L.P. TO BE TREATED AS AN ASSOCIATION TAXABLE AS A CORPORATION OR OTHERWISE TO BE TAXED AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES (TO THE EXTENT NOT ALREADY SO TREATED OR TAXED). ENERGY 11 GP, LLC, THE GENERAL PARTNER OF ENERGY 11, L.P., MAY IMPOSE ADDITIONAL RESTRICTIONS ON THE TRANSFER OF THIS SECURITY IF IT RECEIVES AN OPINION OF COUNSEL THAT SUCH RESTRICTIONS ARE NECESSARY TO AVOID A SIGNIFICANT RISK OF ENERGY 11, L.P. BECOMING TAXABLE AS A CORPORATION OR OTHERWISE BECOMING TAXABLE AS AN ENTITY FOR FEDERAL INCOME TAX PURPOSES. THE RESTRICTIONS SET FORTH ABOVE SHALL NOT PRECLUDE THE SETTLEMENT OF ANY TRANSACTIONS INVOLVING THIS SECURITY ENTERED INTO THROUGH THE FACILITIES OF ANY NATIONAL SECURITIES EXCHANGE ON WHICH THIS SECURITY IS LISTED OR ADMITTED TO TRADING.
The Holder, by accepting this Certificate, is deemed to have (i) requested admission as, and agreed to become, a Limited Partner and to have agreed to comply with and be bound by and to have executed the Partnership Agreement, (ii) represented and warranted that the Holder has all right, power and authority and, if an individual, the capacity necessary to enter into the Partnership Agreement, (iii) granted the powers of attorney provided for in the Partnership Agreement and (iv) made the waivers and given the consents and approvals contained in the Partnership Agreement.
This Certificate shall not be valid for any purpose unless it has been countersigned and registered by the Transfer Agent and Registrar.
Dated: Countersigned and Registered by: By: as Transfer Agent and Registrar | Energy 11, L.P. By: ENERGY 11 GP, LLC By: |
[Reverse of Certificate]
ABBREVIATIONS
The following abbreviations, when used in the inscription on the face of this Certificate, shall be construed as follows according to applicable laws or regulations:
TEN COM — as tenants in common TEN ENT — as tenants by the entireties JT TEN — as joint tenants with right of survivorship and not as tenants in common | UNIF GIFT/TRANSFERS MIN ACT Custodian (Cust) (Minor) under Uniform Gifts/Transfers to CD Minors Act (state) |
Additional abbreviations, though not in the above list, may also be used.
ASSIGNMENT OF UNITS
Energy 11, L.P.
FOR VALUE RECEIVED, _______________________________ hereby assigns, conveys, sells and transfers unto
(Please print or typewrite name and address of Assignee) | (Please insert Social Security or other identifying number of Assignee) |
Units representing limited partner interests evidenced by this Certificate, subject to the Partnership Agreement, and does hereby irrevocably constitute and appoint ______________________ as its attorney-in-fact with full power of substitution to transfer the same on the books of Energy 11, L.P.
Date: SIGNATURES MUST BE GUARANTEED BY A MEMBER OF THE FIRM OF THE NATIONAL ASSOCIATION OF SECURITIES DEALER, INC. OR BY A COMMERCIAL BANK OR TRUST COMPANY SIGNATURE(S) GUARANTEED | NOTE: This signature to any endorsement hereon must correspond with the name as written upon the face of this Certificate in every particular, without alteration, enlargement or change. (Signature) (Signature) |
EXHIBIT B
ALLOCATIONS AND TAX PROCEDURES
B1.1 Definitions. In addition to the capitalized terms used in the Agreement, as used in this Exhibit B, the following terms shall be defined as follows:
“Adjusted Capital Account” means the Capital Account, with respect to each Partner, maintained for such Partner as of the end of each taxable year of the Partnership, (a) increased by any amounts that such Partner is obligated to restore under the standards set by Treasury Regulation section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulation sections 1.704-2(g) and 1.704-2(i)(5)), and (b) decreased by (i) adjustments that, as of the end of such taxable year, are reasonably expected to be made to such Partner’s Capital Account under Treasury Regulation section 1.704-1(b)(2)(iv)(k), (ii) the amount of all losses and deductions that, as of the end of such taxable year, are reasonably expected to be allocated to such Partner in subsequent years under sections 704(e)(2) and 706(d) of the Code and Treasury Regulation section 1.751-1(b)(2)(ii), and (iii) the amount of all distributions that, as of the end of such taxable year, are reasonably expected to be made to such Partner in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Partner’s Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases as a result of a minimum gain chargeback pursuant to Section B1.3(c)(i) or Section B1.3(c)(ii)). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
“Adjusted Property” means any property the Carrying Value of which has been adjusted pursuant to Section B1.2(d).
“Agreed Allocation” means any allocation, other than a Required Allocation, of an item of income, gain, loss or deduction pursuant to the provisions of Section B1.3.
“Agreed Value” of any Contributed Property or Adjusted Property means the fair market value of such property at the time of contribution or adjustment as determined by the General Partner. The General Partner shall use such method as it determines appropriate to allocate the aggregate Agreed Value of Contributed Properties contributed to the Partnership in a single or integrated transaction among each separate property on a basis proportional to the fair market value of each Contributed Property.
“Book-Tax Disparity” means with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date.
“Carrying Value” means (a) with respect to Contributed Property or Adjusted Property, the Agreed Value of such property reduced (but not below zero) by all Depreciation and Simulated Depletion charged to the Partners’ Capital Accounts in respect of such Contributed Property or Adjusted Property, and (b) with respect to any other Partnership property, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Section B1.2(d) to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Partnership properties, as deemed appropriate by the General Partner.
“Contributed Property” means each property or other asset, but excluding cash, contributed to the Partnership. Once the Carrying Value of a Contributed Property is adjusted hereunder, such property shall no longer constitute a Contributed Property, but shall be deemed an Adjusted Property.
“Depreciation” means, for any Fiscal Year or other period, except as provided in Treasury Regulation section 1.704-3(d)(2), an amount equal to the depreciation, amortization, or other cost recovery deduction (other than depletion or Simulated Depletion) allowable with respect to an asset for such year or other period, except that, if the Carrying Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation will be an amount that bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; except that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation will be determined with reference to such beginning Carrying Value using any reasonable method selected by the General Partner.
“Economic Risk of Loss” has the meaning set forth in Treasury Regulation section 1.752-2(a).
“Nonrecourse Built-in Gain” means with respect to any Contributed Properties or Adjusted Properties that are subject to a mortgage or pledge securing a Nonrecourse Liability, the amount of any taxable gain that would be allocated to the Partners if such properties were disposed of in a taxable transaction in full satisfaction of such liabilities and for no other consideration.
“Nonrecourse Deductions” means any and all items of loss, deduction, expenditure (including any expenditure described in section 705(a)(2)(b) of the Code), Simulated Depletion or Simulated Loss, that, in accordance with the principles of Treasury Regulation section 1.704- 2(b)(1), are attributable to a Nonrecourse Liability.
“Nonrecourse Liability” has the meaning assigned to such term in Treasury Regulation section 1.704-2(b)(3).
“Partner Nonrecourse Debt” has the meaning set forth for “partner nonrecourse debt” in Treasury Regulation section 1.704-2(b)(4).
“Partner Nonrecourse Debt Minimum Gain” has the meaning set forth for the term “partner nonrecourse debt minimum gain” in Treasury Regulation section 1.704-2(i)(2).
“Partner Nonrecourse Deductions” means any and all items of loss, deduction, expenditure (including any expenditure described in section 705(a)(2)(B) of the Code), Simulated Depletion or Simulated Loss that, in accordance with the principles of Treasury Regulation section 1.704-2(i), are attributable to Partner Nonrecourse Debt.
“Partnership Minimum Gain” has the meaning given the term “partnership minimum gain” in Treasury Regulation section 1.704-2(b)(2) and the amount of which shall be determined in accordance with the principles of Treasury Regulation section 1.704-2(d).
“Percentage Interest in Partnership Capital” means, at any time of determination and as to any Partner, the percentage of the total distributions that would be made to such Partner if the assets of the Partnership were sold for their Carrying Values, all liabilities of the Partnership were paid in accordance with their terms, all items of Partnership income, gain, loss and deduction were allocated to the Partners in accordance with this Exhibit B, and the resulting net proceeds were distributed to the Partners in accordance with the terms of this Agreement. The foregoing definition of Percentage Interest in Partnership Capital is intended to result in a percentage that corresponds with that defined as “partner’s proportionate interest in partnership capital” in Treasury Regulation sections 1.613A-3(e)(2)(ii) and 1.704-1(b)(4)(v), and Percentage Interest in Partnership Capital shall be interpreted consistently therewith.
“Required Allocations” means any allocation of an item of income, gain, loss or deduction pursuant to Section B1.3(c)(i), Section B1.3(c)(ii), Section B1.3(c)(iii), Section B1.3(c)(iv), Section B1.3(c)(v), Section B1.3(c)(vi), Section B1.3(c)(vii) or Section B1.3(c)(ix).
“Simulated Basis” means, with respect to each oil and gas property, the Carrying Value of such property. For purposes of such computation, the Simulated Basis of each oil and gas property shall be allocated to each Partner in accordance with such Partner’s Percentage Interest in Partnership Capital as of the time such oil and gas property is acquired by the Partnership and shall be reallocated among the Partners in accordance with the Partners’ Percentage Interest in Partnership Capital as determined immediately following the occurrence of an event giving rise to any adjustment to the Carrying Values of the Partnership’s oil and gas properties pursuant to the terms of this Agreement.
“Simulated Depletion” means a depletion allowance computed for each oil and gas property pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(k)(2), taking into account Section B1.2(b)(ii) of this Agreement, provided, however, that such Simulated Depletion shall not exceed such oil and gas property’s Simulated Basis prior to the adjustment that is caused by such depletion allowance.
“Simulated Gain or Loss” means the simulated gain or loss computed with respect to a sale or other disposition of an oil and gas property pursuant to Treasury Regulation section 1.704-1(b)(2)(iv)(k)(2) as more specifically set forth in Section B1.2(b)(ii) of this Agreement.
“Unrealized Gain” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property as of such date (as determined under Section B1.2(d)) over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section B1.2(d) as of such date).
“Unrealized Loss” attributable to any item of Partnership property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section B1.2(d) as of such date) over (b) the fair market value of such property as of such date (as determined under Section B1.2(d)).
B1.2 Capital Accounts. The Partnership shall maintain for each Partner a separate Capital Account with respect to the Partnership Interest owned by the Partner in accordance with the rules of Treasury Regulation section 1.704-1(b)(2)(iv) and in accordance with the following provisions:
(a) Each Partner’s Capital Account shall be increased by (i) the amount of all cash and the Agreed Value of any property contributed to the Partnership by such Partner pursuant to this Agreement, (ii) all items of Partnership income and gain (including Simulated Gain and income and gain exempt from tax) computed in accordance with Section B1.2(b) and allocated with respect to such Partner pursuant to Section B1.3, and (iii) the amount of any Partnership liabilities assumed by such Partner or that are secured by any Partnership property distributed to such Partner, and decreased by (x) the amount of cash or fair market value of property actually or deemed distributed to such Partner pursuant to this Agreement, (y) all items of Partnership deduction and loss (including Simulated Loss and Simulated Depletion) computed in accordance with Section B1.2(b) and allocated to such Partner pursuant to Section B1.3 and (z) the amount of any liabilities of such Partner assumed by the Partnership or that are secured by any property contributed by such Partner to the Partnership.
(b) For purposes of computing the amount of any item of income, gain, loss or deduction which is to be allocated pursuant to this Exhibit B and is to be reflected in the Partners’ Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes, provided, however, that:
(i) All fees and other expenses incurred by the Partnership to promote the sale of (or to sell) a Partnership Interest that can neither be deducted nor amortized under section 709 of the Code, if any, shall, for purposes of Capital Account maintenance, be treated as an item of deduction at the time such fees and other expenses are incurred and shall be allocated among the Partners pursuant to Section B1.3.
(ii) Except as otherwise provided in Treasury Regulation section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss, deduction, Simulated Depletion, Simulated Gain and Simulated Loss shall be made without regard to any election under section 754 of the Code which may be made by the Partnership and, as to those items described in section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment in the Capital Accounts shall be treated as an item of gain or loss, as the case may be.
(iii) In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such items, there shall be taken into account Depreciation and Simulated Depletion.
(iv) For purposes of determining income, gain, loss, and deduction, or any other item allocable to any period, such items will be determined on a daily, monthly or other basis, as reasonably determined by the General Partner using any permissible method under Code section 706 and the related Treasury Regulation.
(c) A transferee of a Partnership Interest pursuant to a Transfer shall succeed to the pro rata portion of the Capital Account of the transferor relating to the Partnership Interest so transferred. Except as otherwise provided herein, all items of income, gain, expense, loss, deduction, and credit allocable to any Partnership Interest that may have been transferred during any calendar year shall, if permitted by law, be allocated between the transferor and the transferee based on the portion of the calendar year during which each was recognized as owning that Partnership Interest, based upon the interim closing of the books method or such other method as agreed between the transferor and the transferee; provided, however, that this allocation must be made in accordance with a method permissible under section 706 of the Code and the Treasury Regulation thereunder.
(d) In accordance with Treasury Regulation section 1.704-1(b)(2)(iv)(f), (i) on an issuance of additional Partnership Interests for cash or Contributed Property (including an Interim Closing Date), (ii) immediately prior to any actual or deemed distribution to a Partner of any Partnership property (other than a distribution of cash that is not in redemption or retirement of a Partnership Interest), (iii) upon the issuance of Partnership Interests as consideration for the provision of services or (iv) upon the occurrence of any other event provided in such Treasury Regulation, the Capital Accounts of all Partners and the Carrying Value of each Partnership property immediately prior to such issuance or adjustment shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Partnership property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance or adjustment and had been allocated to the Partners at such time pursuant to Section B1.3 in the same manner as any item of gain or loss actually recognized during such period would have been allocated, provided, however, that such adjustments shall be made only if the General Partner reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and fair market value of all Partnership assets (including cash and cash equivalents) immediately prior to the event triggering such adjustment shall be determined by the General Partner using such method of valuation as it may adopt. The General Partner shall allocate such aggregate value among the assets of the Partnership (in such manner as it determines) to arrive at a fair market value for individual properties.
B1.3 Allocations for Capital Account Purposes. For purposes of maintaining the Capital Accounts, the Partnership’s items of income, gain, loss and deduction (computed in accordance with Section B1.2(b)) shall be allocated among the Partners in each taxable year (or portion thereof) as provided herein below.
(a) General. Except as otherwise provided in this Agreement, all items of income, gain, loss and deduction (including items of gross income and income and gain exempt from tax) shall be allocated among the Partners in a manner such that, after giving effect to the special allocations set forth in Section B1.3(c), the Capital Account of each Partner, immediately after making such allocation, is, as nearly as possible, equal (proportionately) to (i) the distributions that would be made to such Partner pursuant to Section 5.2 if the Partnership were dissolved, its affairs wound up and its assets sold for cash equal to their Carrying Value, all Partnership liabilities were satisfied (limited with respect to each Nonrecourse Liability to the Carrying Value of the assets securing such liability), and the net assets of the Partnership were distributed in accordance with Section 5.2 to the Partners immediately after making such allocation, minus (ii) such Partner’s share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets. The Partners acknowledge that allocations like those described in Proposed Treasury Regulation Section 1.704-1(b)(4)(vii)(c) (“Forfeiture Allocations”) may result from the allocations of income, gain, loss and deduction provided for in this Agreement. For the avoidance of doubt, the Partnership is entitled to make Forfeiture Allocations and, once required by applicable final or temporary guidance, allocations of income, gain, loss and deduction will be made in accordance with Proposed Treasury Regulation Section 1.704-1(b)(4)(xii)(c) or any successor provision or guidance.
(b) Reserved.
(c) Special Allocations. Notwithstanding any other provision of this Section B1.3, the following special allocations shall be made for such taxable period in the following order and priority:
(i) Partnership Minimum Gain Chargeback. Notwithstanding the other provisions of this Section B1.3, 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 taxable period (and, if necessary, subsequent taxable periods) in the manner and amounts provided in Treasury Regulation sections 1.704-2(f)(6) and (g)(2) and section 1.704-2(j)(2)(i), or any successor provisions. This Section B1.3(c)(i) is intended to comply with the Partnership Minimum Gain chargeback requirement in Treasury Regulation section 1.704-2(f) and shall be interpreted consistently therewith.
(ii) Chargeback of Minimum Gain Attributable to Partner Nonrecourse Debt. Notwithstanding the other provisions of this Section B1.3 (other than Section B1.3(c)(i)), except as provided in Treasury Regulation section 1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any Partnership taxable period, any Partner with a share of Partner Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Partnership income and gain for such taxable period (and, if necessary, subsequent taxable periods) in the manner and amounts provided in Treasury Regulation sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provisions. This Section B1.3(c)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulation section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(iii) Qualified Income Offset. In the event any Partner unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulation section 1.704-1(b)(2)(ii)(d)(4) through (6), items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulation promulgated under section 704(b) of the Code, the deficit balance, if any, in each Partner’s Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible; provided, however, that, an allocation pursuant to this Section B1.3(c)(iii) shall be made only if and to the extent that such Partner would have a deficit in such Partner’s Adjusted Capital Account after all other allocations provided in this Exhibit B have been tentatively made as if this Section B1.3(c)(iii) were not a part of this Agreement. This Section B1.3(c)(iii) is intended to be a “qualified income offset” as that term is used in Treasury Regulation section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(iv) Stop Loss. No amount of loss or deduction shall be allocated pursuant to Section B1.3(a) to the extent that such allocation would cause any Partner to have a deficit balance in its Adjusted Capital Account at the end of such taxable period (or increase any existing deficit balance in its Adjusted Capital Account). All loss and deductions in excess of the limitation set forth in the preceding sentence shall be allocated among such other Partners, who have positive Adjusted Capital Account balances, in proportion to their respective Partnership Interests until each Partner’s Adjusted Capital Account balance is reduced to zero.
(v) Gross Income Allocations. In the event any Partner has a deficit balance in its Adjusted Capital Account at the end of any Partnership taxable period in excess of the sum of (A) the amount such Partner is obligated to restore pursuant to any provision of this Agreement and (B) the amount such Partner is deemed obligated to restore pursuant to Treasury Regulation sections 1.704-2(g) and 1.704-2(i)(5), such Partner shall be specially allocated items of Partnership gross income and gain in the amount of such excess as quickly as possible; provided, however, that, an allocation pursuant to this Section B1.3(c)(v) shall be made only if and to the extent that such Partner would have a deficit balance in its Adjusted Capital Account after all other allocations provided in this Section B1.3 have been tentatively made as if this Section B1.3(c)(v) and Section B1.3(c)(iii) were not in the Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable period shall be allocated to the Partners in accordance with their respective Percentage Interests.
(vii) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any taxable period shall be allocated 100% to the Partner that bears the Economic Risk of Loss with respect to such Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Treasury Regulation section 1.704-2(i). If more than one Partner bears the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such Partner Nonrecourse Deductions attributable thereto shall be allocated between or among such Partners in accordance with the ratios in which they share such Economic Risk of Loss.
(viii) Nonrecourse Liabilities. For purposes of Treasury Regulation section 1.752-3(a)(3), the Partners agree that Nonrecourse Liabilities of the Partnership in excess of the sum of (A) the amount of Partnership Minimum Gain and (B) the total amount of Nonrecourse Built-in Gain shall be allocated among the Partners in accordance with their respective Percentage Interests.
(ix) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such item of gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such section of the Treasury Regulation.
(x) Simulated Depletion and Simulated Loss. Simulated Depletion and Simulated Loss with respect to any oil and gas property shall be allocated among the Partners in proportion to their shares of the Simulated Basis in such property. Each Partner’s share of the Simulated Basis in each of the Partnership’s oil and gas properties shall be determined in accordance with such Partner’s Percentage Interest in Partnership Capital.
(xi) Simulated Gain. Simulated gain with respect to any oil and gas property shall be allocated among the Partners as provided in Section B1.3(a).
B1.4 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Partners in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Section B1.3.
(b) Notwithstanding any provisions to the contrary, allocations of depletion with respect to each oil and gas property and gain and losses therefrom shall be governed by the following:
(i) For purposes of such computations, the federal income tax basis of each oil and gas property shall be allocated to each Partner in accordance with such Partner’s Percentage Interest in Partnership Capital as of the time such oil and gas property is acquired by the Partnership, and shall be reallocated among the Partners in accordance with the Partners’ Percentage Interest in Partnership Capital as determined immediately following the occurrence of an event giving rise to an adjustment to the Carrying Values of the Partnership’s oil and gas properties pursuant to the terms of this Agreement (or at the time of any material additions to the federal income tax basis of such oil and gas property). Such allocations are intended to be applied in accordance with the “partners’ interests in partnership capital” under section 613A(c)(7)(D) of the Code and Treasury Regulation sections 1.613A-3(e)(2)(ii) and 1.704-1(b)(4)(v); provided, however, that the Partners understand and agree that the General Partner may authorize special allocations of tax basis, income, gain, deduction or loss, as computed for federal income tax purposes, in order to eliminate differences between Simulated Basis and adjusted federal income tax basis with respect to any oil and gas properties, in such manner as determined consistent with the principles of section 704(c) of the Code and Section B1.4(c) hereof.
(ii) For purposes of the separate computation of gain or loss by each Partner on the taxable sale or other disposition of an oil and gas property, the amount realized from such sale or disposition shall be allocated (i) first, to the Partners in an amount equal to the Simulated Basis in such oil and gas property and in the same proportion as their shares thereof were allocated, and (ii) second, any remaining amount realized shall be allocated consistent with the allocation of Simulated Gains; provided, however, that the Partners understand and agree that the General Partner may authorize special allocations of tax basis and amount realized, as computed for federal income tax purposes, in order to eliminate differences between Simulated Basis and adjusted federal income tax basis with respect to any oil and gas properties, in such manner as determined consistent with the principles of section 704(c) of the Code and Section B1.4(c) hereof.
(iii) Each Partner shall separately keep records of its share of the adjusted tax basis in each oil and gas property, adjust such share of the adjusted tax basis for any cost or percentage depletion allowable with respect to such property and use such adjusted tax basis in the computation of its cost depletion or in the computation of its gain or loss on the disposition of such property by the Partnership. Upon the request of the Partnership, each Partner shall advise the Partnership of its adjusted tax basis in each oil and gas property and any depletion computed with respect thereto, both as computed in accordance with the provisions of this subsection. The Partnership may rely on such information and, if it is not provided by the Partner, may make such reasonable assumptions as it shall determine with respect thereto.
(c) Notwithstanding any provisions contained herein to the contrary, solely for federal (and applicable state and local) income tax purposes, items of income, gain, depreciation, depletion, amortization, gain, loss or amount realized with respect to property for which a Book-Tax Disparity exists shall be allocated so as to take into account the variation between the Partnership’s tax basis in such property and its Carrying Value consistent with Treasury Regulation sections 1.704-1(b)(4)(i) and 1.704-3(d).
(d) For the proper administration of the Partnership, the General Partner shall (i) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost recovery deductions; (ii) make special allocations for federal income tax purposes of income (including gross income or deductions); and (iii) amend the provisions of this Agreement as appropriate to reflect the proposal or promulgation of Treasury Regulation under section 704(b) or section 704(c) of the Code. The General Partner may adopt such conventions, make such allocations and make such amendments to this Agreement as provided in this Section B1.4(d) only if such conventions, allocations or amendments are consistent with the principles of section 704 of the Code and would not have a material adverse effect on any Partner.
(e) All recapture of income tax deductions resulting from the taxable sale or other disposition of Partnership property shall, to the maximum extent possible, be allocated to the Partner to whom the deduction that gave rise to such recapture was allocated hereunder to the extent that such Partner is allocated any gain from the disposition of such property.
(f) All items of income, gain, loss, deduction and credit recognized by the Partnership for federal income tax purposes and allocated to the Partners in accordance with the provisions hereof shall be determined without regard to any election under section 754 of the Code; provided, however, that in the event such an election is made under section 754 of the Code, such allocations, once made, shall be adjusted (in any manner determined by the General Partner as necessary or appropriate to take into account those adjustments permitted or required by sections 734 and 743 of the Code.
Social Security or Tax ID Number(s):_______________________________________________
Set forth below are the expenses (other than selling commissions) expected to be incurred in connection with the issuance and distribution of the securities registered hereby. With the exception of the Securities and Exchange Commission registration fee, the FINRA filing fee, the amounts set forth below are estimates.
* The marketing fee is the only item in this list that that constitutes FINRA underwriting compensation and that is payable to a FINRA member.
The section of the prospectus entitled “The Partnership Agreement — Indemnification” discloses that we will generally indemnify our general partner and officers and directors of our general partner to the fullest extent permitted by the law against all losses, claims, damages or similar events and is incorporated herein by this reference. Subject to any terms, conditions or restrictions set forth in the Partnership Agreement, Section 17-108 of the Delaware Revised Uniform Limited Partnership Act empowers a Delaware limited partnership to indemnify and hold harmless any partner or other persons from and against all claims and demands whatsoever.
* To be filed by amendment.
** Filed herewith.
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
* To be filed by amendment.
** Filed herewith.