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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ________)*
Enterprise Product Partners L.P.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Units
- --------------------------------------------------------------------------------
(Title of Class of Securities)
293792107
------------------------------------------------------
(CUSIP Number)
Curtis R. Frasier
Executive Vice President
and Chief Operating Officer
Tejas Energy, LLC
1301 McKinney Street, Suite 700
Houston, TX 77010
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
September 17, 1999
------------------------------------------------------
(Date of Event which Requires Filing of this
Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box /_/.
Check the following box if a fee is being paid with the statement /_/. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 19 pages
<PAGE>
SCHEDULE 13D
- --------------------------- ---------------------------------
CUSIP No. Page 2 of 19 pages
- --------------------------- ---------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Tejas Energy, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /_/
(b) /_/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00 1
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) /_/
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 14,500,000
REPORTING ------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
-----------------------------------------------
10 SHARED DISPOSITIVE POWER
14,500,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,500,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
OO 2
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
________________________
1 The source of funds is the contribution of Tejas Energy,
LLC's interest in Tejas Natural Gas Liquids, LLC.
2 Delaware Limited Liability Company
<PAGE>
SCHEDULE 13D
- ----------------- --------------------------------
CUSIP No. Page 3 of 19 pages
- ----------------- --------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Shell Oil Company
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /_/
(b) /_/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) /_/
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 14,500,000
REPORTING ------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
------------------------------------------------
10 SHARED DISPOSITIVE POWER
14,500,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,500,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
- ----------------- --------------------------------
CUSIP No. Page 4 of 19 pages
- ----------------- --------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Shell Western E&P Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /_/
b) /_/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) /_/
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 14,500,000
REPORTING ------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
------------------------------------------------
10 SHARED DISPOSITIVE POWER
14,500,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,500,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
- --------------- --------------------------------
CUSIP No. Page 5 of 19 pages
- --------------- --------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Shell Gas Pipeline Corp. #2
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /_/
(b) /_/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) /_/
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 14,500,000
REPORTING ------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
-----------------------------------------------
10 SHARED DISPOSITIVE POWER
14,500,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,500,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
- ------------------ ---------------------------------
CUSIP No. Page 6 of 19 pages
- ------------------ ---------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Shell Gas Gathering Corp. #2
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /_/
(b) /_/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) /_/
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 14,500,000
REPORTING ------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
------------------------------------------------
10 SHARED DISPOSITIVE POWER
14,500,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,500,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
- ---------------- --------------------------------
CUSIP No. Page 7 of 19 pages
- ---------------- --------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Shell Seahorse Company
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) /_/
b) /_/
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) /_/
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY ------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 14,500,000
REPORTING ------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
------------------------------------------------
10 SHARED DISPOSITIVE POWER
14,500,000
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,500,000
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
/_/
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
17.6%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 8 of 19 pages
ORIGINAL REPORT ON SCHEDULE 13D
Item 1. Security and Issuer
This statement relates to the common units of Enterprise Products
Partners L.P., a Delaware limited partnership (the "Issuer"). The principal
executive office of the Issuer is located at 2727 North Loop West, Suite 700,
Houston, Texas 77008.
Item 2. Identity and Background
(a) This statement is filed by (i) Tejas Energy, LLC ("Tejas Energy") as
the direct beneficial owner of Class A Special Units (the "Units") which are
convertible into common units (as described below) and (ii) by virtue of their
respective direct holdings of securities of Tejas Energy (as described below on
this statement) by Shell Oil Company ("Shell Oil"), Shell Western E&P Inc.
("SWEPI"), Shell Gas Pipeline Corp. #2 ("Shell Pipeline"), Shell Gas Gathering
Corp. #2 ("Shell Gathering") and Shell Seahorse Company ("Shell Seahorse")
(collectively, the "Reporting Entities"). Shell Oil is wholly-owned by Shell
Petroleum Inc., a Delaware corporation, whose shares are directly or indirectly
owned 60% by Royal Dutch Petroleum Company, The Hague, The Netherlands, and 40%
by The "Shell" Transport and Trading Company, p.l.c., London, England. Royal
Dutch Petroleum Company and The "Shell" Transport and Trading Company, p.l.c.,
are holding companies which together directly or indirectly own securities of
companies of the Royal Dutch/Shell Group of Companies, the members of which are
severally engaged throughout the greater part of the world in oil, natural gas,
chemicals, coal and other businesses. By signing this statement, each Reporting
Entity agrees that this statement is filed on its behalf.
Tejas Energy is the beneficial holder of approximately 17.9% of the
outstanding common units of the Issuer. Shell Oil, SWEPI, Shell Pipeline, Shell
Gathering and Shell Seahorse are the holders of approximately 4.87%, 28.79%,
18.59%, 4.81% and 3.80%, respectively, of the membership interests of Tejas
Energy. Each of SWEPI, Shell Pipeline, Shell Gathering and Shell Seahorse is an
indirect, wholly-owned subsidiary of Shell Oil. Together, Shell Oil, SWEPI,
Shell Pipeline, Shell Gathering and Shell Seahorse may be deemed to control
Tejas Energy.
Certain information concerning the executive officers and directors of
the Reporting Entities is set forth on Appendix A attached hereto and
incorporated by reference. The filing of this statement on Schedule 13D shall
not be construed as an admission that any Reporting Entity or any person listed
on Appendix A hereto is, for the purposes of Section 13(d) or 13(g) of the
Securities Exchange Act of 1934, the beneficial owner of any securities covered
by this statement.
(b) The principal executive offices of Tejas Energy, Shell Pipeline,
Shell Gathering and Shell Seahorse are located at 1301 McKinney Street, Houston,
Texas 77010. The principal executive offices of Shell Oil are located at One
Shell Plaza, Houston, Texas 77002. The principal executive offices of SWEPI are
located at 200 North Dairy Ashford, Houston, Texas 77079. The business addresses
of the remaining directors and executive officers of the Reporting Entities are
set forth on Appendix A to this statement and incorporated herein by reference.
(c) Shell Oil and its subsidiaries are engaged, principally in the United
States in the exploration for, and development, production, purchase,
transportation and marketing of, crude oil and natural gas, and the purchase,
manufacture, transportation and marketing of oil and chemical products. In
addition, Shell Oil and its subsidiaries are engaged in the exploration for, and
production of, crude oil and natural gas outside the United States. Also Shell
Oil and its subsidiaries are engaged in the development, production and
marketing of sulfur and carbon dioxide. Tejas Energy is an indirect subsidiary
of Shell Oil and is engaged primarily in the sale, transportation, processing,
storage and marketing of natural gas. SWEPI is engaged primarily in the business
of the exploration for and development and production of oil, gas and other
minerals. Each of Shell Pipeline, Shell Gathering and Shell Seahorse is engaged
in the business of holding equity and other securities or interests in limited
liability companies, corporations, partnerships and associations.
(d) Neither any of the Reporting Entities nor, to the best knowledge of
such persons, any person named in Appendix A to this statement, has been the
subject of a conviction in a criminal proceeding during the last five years
(excluding traffic violations or similar misdemeanors).
(e) During the past five years, neither any of the Reporting Entities
nor, to the best knowledge of such persons, any person named in Appendix A to
this statement, was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
<PAGE>
Page 9 of 19 pages
(f) Tejas Energy is a Delaware limited liability company. Each of Shell
Oil, SWEPI, Shell Pipeline, Shell Gathering and Shell Seahorse is a Delaware
corporation. All persons named in Appendix A to this statement are citizens of
the United States, except as otherwise indicated on such Appendix.
Item 3. Source and Amount of Funds or Other Consideration
Under the terms of a Contribution Agreement (the "Contribution
Agreement") executed September 17, 1999, between Tejas Energy, the Issuer, and
the other parties thereto, a copy of which is attached as Exhibit B hereto,
Tejas Energy obtained from the Issuer 14,500,000 Units. Tejas Energy acquired
the Units through the contribution of Tejas Natural Gas Liquids, LLC by Tejas
Midstream Enterprises, LLC, a wholly-owned subsidiary of Tejas Energy.
Item 4. Purpose of Transaction
The transactions described in Item 3 above occurred as a result of
negotiations with the Issuer. The Units were acquired for investment purposes.
Under the terms of the Second Amended and Restated Agreement of Limited
Partnership of the Enterprise Products Partners L.P. (the "Partnership
Agreement"), a copy of which is attached as Exhibit D hereto, Tejas Energy has
the opportunity to earn an additional 6.0 million contingency Units over the
next two years. Tejas Energy intends to review its investment in the Issuer on
an ongoing basis and, depending upon the price of, and other market conditions
relating to, the Units, subsequent developments affecting the Issuer, the
Issuer's business and prospects, other investment and business opportunities
available to Tejas Energy, general stock market and economic conditions, tax
considerations and other factors deemed relevant, may decide to increase or
decrease the size of its investment in the Issuer.
Other than as described in Item 3 and Item 6 hereof, none of the
Reporting Entities (nor, to their knowledge, any person listed on Appendix A
hereto) has any plan or proposal that would result in any of the consequences
listed in paragraphs (a) - (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) There were 45,552,915 common units and 21,409,870 subordinated units
outstanding as of September 17, 1999. The Reporting Entities are deemed to be
the beneficial owners of 14,500,000 Units, which are convertible into common
units under the terms of the Partnership Agreement during the period between
August 1, 2000 and August 1, 2002. The Units do not accrue distributions and are
not entitled to cash distributions until their conversion into common units. The
Units represent a 17.6% equity interest in the Issuer.
(b) As described in Item 2(a), each of the Reporting Entities may be
deemed to share voting power and investment power with respect to the Units.
(c) Except for the issuance of the 14,500,000 Units, none of the
Reporting Entities, nor, to the best of their knowledge, any person listed on
Appendix A hereto, has effected any transactions in the Units during the past 60
days.
(d) None of the Reporting Entities, nor, to the best of their knowledge,
any person listed in Appendix A beneficially owns any Units of the Issuer except
as set forth above. Except as disclosed above to the best of the knowledge of
each Reporting Entity, no persons other than the Reporting Entities have the
right to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the Units beneficially owned by the Reporting
Entities.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
respect to Securities of the Issuer
Prior to conversion of the Units as provided for in the Partnership
Agreement, Tejas Energy may not vote as a Unitholder. However, the Unitholder
Rights Agreement, which is attached hereto as Exhibit C, provides Tejas Energy
with active, voting and participating representation on all boards or governance
bodies performing a policy-making function for the Issuer and certain of its
affiliates. In addition, depending on Tejas Energy's equity interest in the
Issuer, Tejas Energy is entitled to designate (i) up to one-third of the members
of the board of directors of Enterprise GP, the general partner of the Issuer
and (ii) up to two members of the five-member executive committee of Enterprise
GP. The Unitholder Rights Agreement also provides that under certain
circumstances, Tejas Energy has the right to purchase its pro rata share of
certain securities of the Issuer if (i) the Issuer desires to dispose of such
securities or (ii) upon a change in control of the Issuer.
<PAGE>
Page 10 of 19 pages
The Registration Rights Agreement, filed as Exhibit E hereto (the
"Registration Rights Agreement"), provides Tejas Energy and certain of its
transferees, subject to various restrictions, three demand and unlimited
piggyback registration rights relating to the underlying common units of the
Issuer received upon conversion of the Units.
Item 7. Material to be filed as Exhibits
Exhibit "A" - Agreement re Joint Filing of Schedule 13D
Exhibit "B" - Contribution Agreement
Exhibit "C" - Unitholder Rights Agreement
Exhibit "D" - Enterprise Partners Amended Partnership Agreement
Exhibit "E" - Registration Rights Agreement
<PAGE>
Page 11 of 24 pages
SIGNATURE
After reasonable inquiry and to the best of our knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Date: September 27, 1999
TEJAS ENERGY, LLC
By: /s/ Curtis R. Frasier
-----------------------------------
Name: Curtis R. Frasier
Title: Executive Vice President and
Chief Operating Officer
SHELL OIL COMPANY
By: /s/ Steven L. Miller
------------------------------------
Name: Steven L. Miller
Title: Chairman, President and
Chief Executive Officer
SHELL WESTERN E&P INC.
By: /s/ P.D. Ching
-------------------------------------
Name: P.D. Ching
Title: Vice President
SHELL GAS PIPELINE CORP.#2
By: /s/ Dougas V. Krenz
-------------------------------------
Name: Dougas V. Krenz
Title: President and Chief Operating
Officer
SHELL GAS GATHERING CORP.#2
By: /s/ Dougas V. Krenz
------------------------------------
Name: Dougas V. Krenz
Title: President and Chief Operating
Officer
SHELL SEAHORSE COMPANY
By: /s/ Dougas V. Krenz
------------------------------------
Name: Dougas V. Krenz
Title: President and Chief Operating
Officer
<PAGE>
Page 12 of 19 pages
APPENDIX A
DIRECTORS AND EXECUTIVE OFFICERS OF TEJAS ENERGY, LLC
The following table sets forth the name, business address and present
principal occupation or employment of each director and executive officer of
Tejas Energy, LLC. Unless otherwise indicated below, each such person is a
citizen of the United States of America.
<TABLE>
<CAPTION>
Name Citizenship Present Principal Occupation or Business Address
Employment
<S> <C> <C> <C>
Walter van de Vijver Netherlands Director and Chairman of the Board 1301 McKinney
Houston, TX 77010
Charles R. Crisp Director, Chief Executive Officer 1301 McKinney
and President Houston, Texas 77010
Curtis R. Frasier Executive Vice President and Chief 1301 McKinney
Operating Officer Houston, Texas 77010
James W. Whalen Executive Vice President and Chief 1301 McKinney
Commercial Officer Houston, TX 77010
Mark D. Hendrix Senior Vice President and Chief 1301 McKinney
Information Officer Houston, TX 77010
Susan K. Hodge Senior Vice President, Chief 1301 McKinney
Financial Officer and Treasurer Houston, TX 77010
P. Anthony Lannie Senior Vice President, General 1301 McKinney
Counsel and Secretary Houston, TX 77010
James E. Street Senior Vice President-Human 1301 McKinney
Resources and Administration Houston, TX 77010
Nick A. Bednorz Vice President and Controller 1301 McKinney
Houston, TX 77010
Dale A. Erickson Vice President-Tax 1301 McKinney
Houston, Texas 77010
Lee B.D. Strebel Vice President 1301 McKinney
Houston, TX 77010
</TABLE>
<PAGE>
Page 13 of 19 pages
DIRECTORS AND EXECUTIVE OFFICERS OF SHELL OIL COMPANY
The following table sets forth the name, business address and present
principal occupation or employment of each director and executive officer of
Shell Oil Company. Unless otherwise indicated below, each such person is a
citizen of the United States of America.
<TABLE>
<CAPTION>
Name Citizenship Present Principal Occupation or Employment Business Address
<S> <C> <C>
S.L. Miller Director/Chairman, President and Chief 910 Louisiana
Executive Officer One Shell Plaza
Houston, Texas 77002
Joseph E. Antonini Director; Retired Chairman, President 1800 W. Maple Road
and CEO, Kmart Corporation Troy, MI 48084
Rand V. Araskog Director; Retired Chairman and CEO, 275 Toney Penna Drive, Suite 7
ITT Corporation Jupiter, FL 33458
Robert F. Daniell Director; Retired Chairman, United United Technologies Building
Technologies Corporation 755 Main Street
One Financial Plaza
Hartford, CT 06101
Vilma S. Martinez Director; Partner, Munger, Tolles & Olson 355 S. Grand Avenue
35th Floor
Los Angeles, CA 90071-1560
M. Moody-Stuart British Director; Chairman and a Managing 2 York Road
Director, The "Shell" Tranport and Shell Centre
Trading Company p.l.c. London SE1 7NA
England
Harold A. Poling Director; Retired Chairman and CEO, Ford Motor Company
Ford Motor Company Fairlane Plaza North
290 Town Center Drive, Ste. 322
Dearborn MI 48126
Gordon R. Sullivan Director; President, Association of 2425 Wilson Blvd.
the U.S. Army Arlington, VA 22201
John F. Woodhouse Director; Senior Chairman, Sysco 1390 Enclave Parkway
Corporation Houston, TX 77077-2099
</TABLE>
<PAGE>
Page 14 of 19 pages
<TABLE>
<CAPTION>
Name Citizenship Present Principal Occupation or Business Address
Employment
<S> <C> <C> <C>
S. Borches Vice President (Corporate Affairs) One Shell Plaza
P.O. Box 2463
Houston, TX 77252-2463
N.J. Caruso General Manager--Finance, Chief One Shell Plaza
Financial Officer and Controller P.O. Box 2463
Houston, TX 77252-2463
S. A. Lackey Vice President and General Counsel One Shell Plaza
P.O. Box 2463
Houston, TX 77252-2463
B. W. Levan Vice President (Human Resources) One Shell Plaza
P.O. Box 2463
Houston, TX 77252-2463
S. C. Stryker Vice President and General Tax One Shell Plaza
Counsel P.O. Box 2463
Houston, TX 77252-2463
S. E. Ward Vice President (Government One Shell Plaza
Affairs) P.O. Box 2463
Houston, TX 77252-2463
R. W. Leftwich Treasurer One Shell Plaza
P.O. Box 2463
Houston, TX 77252-2463
G. Hullinger Deputy Controller One Shell Plaza
P.O. Box 2463
Houston, TX 77252-2463
</TABLE>
<PAGE>
Page 15 of 19 pages
DIRECTORS AND EXECUTIVE OFFICERS OF SHELL WESTERN E&P INC.
The following table sets forth the name, business address and present
principal occupation or employment of each director and executive officer of
Shell Western E&P Inc. Unless otherwise indicated below, each such person is a
citizen of the United States of America.
<TABLE>
<CAPTION>
Name Citizenship Present Principal Occupation Business Address
or Employment
<S> <C> <C> <C>
Walter van de Vijver Netherlands Director, Chairman and One Shell Plaza
President; President and Chief P.O. Box 2463
Executive Officer (Shell Exploration Houston, TX 77252-2463
& Production Company)
L. L. Osborn Director; Manager, Human Resources One Shell Plaza
(Shell E&P Company) P.O. Box 2463
Houston, TX 77252-2463
P. D. Ching Director and Vice President; 2400 North Dairy Ashford
President and GM (Shell Houston, TX 77079
Continental Companies--E&P)
J. R. Eagan Director,
Vice President--Finance One Shell Plaza
(Shell E&P Co.) P.O. Box 2463
Houston, TX 77252-2463
T. J. De Georgio Vice President-- Tax; One Shell Plaza
Managing Partner--Tax P.O. Box 2463
(Shell Oil Company) Houston, TX 77252-2463
D. A. Erickson Vice President-- Tax; One Shell Plaza
General Tax Counsel P.O. Box 2463
(Shell Oil Company) Houston, TX 77252-2463
L. F. Priess Treasurer; 2400 North Dairy Ashford
Manager--Planning & Finance Houston, TX 77079
(Shell Continental Companies--E&P)
</TABLE>
<PAGE>
Page 16 of 19 pages
DIRECTORS AND EXECUTIVE OFFICERS OF SHELL GAS PIPELINE CORP. #2
The following table sets forth the name, business address and present
principal occupation or employment of each director and executive officer of
Shell Gas Pipeline Corp. #2. Unless otherwise indicated below, each such person
is a citizen of the United States of America.
<TABLE>
<CAPTION>
Name Citizenship Present Principal Occupation or Business Address
Employment
<S> <C> <C> <C>
Walter van de Vijver Netherlands Director, Chairman and President; One Shell Plaza
President and Chief Executive Officer P.O. Box 2463
(Shell Exploration & Production Company) Houston, TX 772525-2463
C. R. Frasier Director and Chief Executive Officer; Chevron Towers
Chief Operator 1301 McKinney, Suite 641
Administrator & Legal Officer (Coral) Houston, TX 77010
R. A. Pattarozzi Director; One Shell Square
General Manager, Deepwater 701 Poydras Street
(Shell Exploration & Production Company) New Orleans, LA 70139
D. V. Krenz President and Chief Operating Officer; Four Houston Center
President and Chief Operating Officer 1301 Walker Street
(Tejas Offshore Pipeline) Houston, TX 77010
B. P. Backor Vice President -- Transportation Four Houston Center
Services; Vice President -- Transportation 1301 Walker Street
Services (Tejas Offshore Pipeline) Houston, TX 77010
J. L. Giles Vice President -- Regulatory Affairs; Four Houston Center
Vice President -- Regulatory Affairs 1301 Walker Street
(Tejas Offshore Pipeline) Houston, TX 77010
</TABLE>
<PAGE>
Page 17 of 19 pages
DIRECTORS AND EXECUTIVE OFFICERS OF SHELL GAS GATHERING CORP. #2
The following table sets forth the name, business address and present
principal occupation or employment of each director and executive officer of
Shell Gas Gathering Corp. #2. Unless otherwise indicated below, each such person
is a citizen of the United States of America.
<TABLE>
<CAPTION>
Name Citizenship Present Principal Occupation or Business Address
Employment
<S> <C> <C> <C>
Walter van de Vijver Netherlands Director, Chairman and President; One Shell Plaza
President and Chief Executive P.O. Box 2463
Officer (Shell Exploration Houston, TX 77252-2463
& Production Company)
C. R. Frasier Director and Chief Executive Chevron Towers
Officer; Chief Operator 1301 McKinney, Suite 641
Administrative & Legal Officer (Coral) Houston, TX 77010
R. A. Pattarozzi Director; One Shell Square
General Manager, Deepwater 701 Poydras Street
(Shell Exploration & Production New Orleans, LA 70139
Company)
D. V. Krenz President and Chief Operating Four Houston Center
Officer; President and Chief 1301 Walker Street
Operating Officer (Tejas Houston, TX 77010
Offshore Pipeline)
B. P. Backor Vice President -- Four Houston Center
Transportation Services; 1301 Walker Street
Vice President -- Houston, TX 77010
Transportation Services
(Tejas Offshore Pipeline)
J. L. Giles Vice President -- Regulatory Four Houston Center
Affairs; Vice President -- 1301 Walker Street
Regulatory Affairs (Tejas Houston, TX 77010
Offshore Pipeline)
</TABLE>
<PAGE>
Page 18 of 19 pages
DIRECTORS AND EXECUTIVE OFFICERS OF SHELL SEAHORSE COMPANY
The following table sets forth the name, business address and present
principal occupation or employment of each director and executive officer of
Shell Seahorse Company. Unless otherwise indicated below, each such person is a
citizen of the United States of America.
<TABLE>
<CAPTION>
Name Citizenship Present Principal Occupation Business Address
or Employment
<S> <C> <C> <C>
Walter van de Vijver Netherlands Director, Chairman and President; One Shell Plaza
President and Chief Executive P.O. Box 2463
Officer (Shell Exploration & Houston, TX 77252-2463
Production Company)
C. R. Frasier Director and Chief Executive Chevron Towers
Officer; Chief Operator, 1301 McKinney, Suite 641
Administrator & Legal Officer (Coral) Houston, TX 77010
R. A. Pattarozzi Director; One Shell Square
General Manager, Deepwater 701 Poydras Street
(Shell Exploration & Production Houston, TX 77010
Company)
D. V. Krenz President and Chief Operating Four Houston Center
Officer; President and Chief 1301 Walker Street
Operating Officer (Tejas Houston, TX 77010
Offshore Pipeline)
B. P. Backor Vice President -- Four Houston Center
Transportation Services; 1301 Walker Street
Vice President -- Houston, TX 77010
Transportation Services
(Tejas Offshore Pipeline)
J. L. Giles Vice President -- Regulatory Four Houston Center
Affairs; Vice President -- 1301 Walker Street
Regulatory Affairs (Tejas Houston, TX 77010
Offshore Pipeline)
</TABLE>
<PAGE>
Page 19 of 19 pages
Index to Exhibits
Sequentially
Item Description Numbered Page
---- ----------- -------------
Exhibit A Agreement of Joint Filing 21
Exhibit B Contribution Agreement 22
Exhibit C Unitholder Rights Agreement 78
Exhibit D Enterprise Partners Amended 106
Partnership Agreement
Exhibit D Registration Rights Agreement 184
<PAGE>
EXHIBIT A
Agreement re Joint Filing of Schedule 13D
By his or its signature below, each of the undersigned hereby agrees that
the Report on Schedule 13D to which this agreement is an Exhibit is filed on his
or its behalf and that any amendment to the Report will likewise be filed on his
or its behalf if executed by such Reporting Entity.
Date: September 27, 1999
TEJAS ENERGY, LLC
By: /s/ Curtis R. Frasier
-----------------------------------
Name: Curtis R. Frasier
Title: Executive Vice President and
Chief Operating Officer
SHELL OIL COMPANY
By: /s/ Steven L. Miller
------------------------------------
Name: Steven L. Miller
Title: Chairman, President and
Chief Executive Officer
SHELL WESTERN E&P INC.
By: /s/ P.D. Ching
-------------------------------------
Name: P.D. Ching
Title: Vice President
SHELL GAS PIPELINE CORP.#2
By: /s/ Dougas V. Krenz
-------------------------------------
Name: Dougas V. Krenz
Title: President and Chief Operating
Officer
SHELL GAS GATHERING CORP.#2
By: /s/ Dougas V. Krenz
------------------------------------
Name: Dougas V. Krenz
Title: President and Chief Operating
Officer
SHELL SEAHORSE COMPANY
By: /s/ Dougas V. Krenz
------------------------------------
Name: Dougas V. Krenz
Title: President and Chief Operating
Officer
<PAGE>
EXHIBIT B
CONTRIBUTION AGREEMENT
by and among
TEJAS ENERGY, LLC,
TEJAS MIDSTREAM ENTERPRISES, LLC,
ENTERPRISE PRODUCTS PARTNERS L.P.,
ENTERPRISE PRODUCTS OPERATING L.P.,
ENTERPRISE PRODUCTS COMPANY,
ENTERPRISE PRODUCTS GP, LLC
AND
EPC PARTNERS II, INC.
Dated September 17, 1999
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<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE I
DEFINITIONS AND TERMS....................................................................................2
Section 1.01 Specific Definitions...................................................................2
Section 1.02 General Definitions...................................................................10
Section 1.03 Construction and Interpretation.......................................................10
ARTICLE II
CONTRIBUTION AND RELATED ITEMS..........................................................................11
Section 2.01 The Closing...........................................................................11
Section 2.02 The Transactions......................................................................11
Section 2.03 Special Units.........................................................................11
Section 2.04 Other Closing Matters.................................................................11
Section 2.05 Additional Special Units Following Closing............................................12
Section 2.06 Prorations of Property Taxes..........................................................12
Section 2.07 Adjustment for Interim Operations.....................................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TEJAS AND TEJAS ENERGY AS
TO TEJAS AND TEJAS ENERGY...............................................................................14
Section 3.01 Organization..........................................................................14
Section 3.02 Ownership of Company Interest.........................................................14
Section 3.03 Validity and Enforceability...........................................................14
Section 3.04 Approvals and Consents................................................................15
Section 3.05 No Violation..........................................................................15
Section 3.06 Litigation............................................................................15
Section 3.07 Investment Intent.....................................................................15
Section 3.08 No Brokers............................................................................16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TEJAS AND TEJAS ENERGY AS
TO THE COMPANY AND ITS SUBSIDIARIES.....................................................................17
Section 4.01 Organization..........................................................................17
Section 4.02 Capitalization........................................................................17
Section 4.03 No Violation..........................................................................18
Section 4.04 Permits...............................................................................18
Section 4.05 Compliance With Applicable Law........................................................19
Section 4.06 Litigation............................................................................19
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Section 4.07 Taxes.................................................................................19
Section 4.08 Financial Statements..................................................................20
Section 4.09 Absence of Certain Changes............................................................20
Section 4.10 Bank Accounts.........................................................................21
Section 4.11 Conduct of Business From the Effective Date to the Closing Date.......................21
Section 4.12 Material Contracts or Indebtedness....................................................22
Section 4.13 Assets................................................................................24
Section 4.14 Employees, Employee Benefits..........................................................24
Section 4.15 Sufficiency of Assets Held by the Company and its Subsidiaries........................24
Section 4.16 Intellectual Property.................................................................24
Section 4.17 Non-Business Related Assets...........................................................25
</TABLE>
<TABLE>
<CAPTION>
ARTICLE V
<S> <C> <C>
REPRESENTATIONS AND WARRANTIES OF THE ENTERPRISE PARTIES................................................25
Section 5.01 Organization..........................................................................25
Section 5.02 Authorization of Agreement............................................................26
Section 5.03 No Violations.........................................................................27
Section 5.04 Approvals.............................................................................27
Section 5.05 Litigation; Impairment................................................................27
Section 5.06 Compliance With Applicable Law........................................................28
Section 5.07 Permits...............................................................................28
Section 5.08 Taxes.................................................................................28
Section 5.09 SEC Reports...........................................................................29
Section 5.10 Ownership; Issuance of Special Units..................................................29
Section 5.11 Financing.............................................................................30
Section 5.12 No Brokers............................................................................30
Section 5.13 Investment Intent.....................................................................31
ARTICLE VI
COVENANTS...............................................................................................31
Section 6.01 Access to Information Following the Closing...........................................31
Section 6.02 Intentionally Deleted.................................................................32
Section 6.03 Public Announcements..................................................................32
Section 6.04 Removal of Tradenames.................................................................32
Section 6.05 Further Assurances....................................................................32
Section 6.06 Books and Records.....................................................................33
Section 6.07 Intercompany Indebtedness.............................................................33
Section 6.08 Excluded Assets.......................................................................33
Section 6.09 Acts of Amendment.....................................................................34
Section 6.10 Collections...........................................................................34
Section 6.11 Preferential Rights...................................................................34
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Section 6.12 Preparation of Historical Financials..................................................34
Section 6.13 Unitholder Approval...................................................................34
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VII
<S> <C> <C>
EMPLOYEE MATTERS........................................................................................35
Section 7.01 Employees.............................................................................35
Section 7.02 Solicitation of Employees.............................................................35
Section 7.03 Employee Benefit Plans................................................................36
Section 7.04 Vacation..............................................................................36
Section 7.05 Access to Information and Personnel...................................................37
Section 7.06 Tejas and Affiliates Benefit Plans....................................................37
Section 7.07 Third-Party Beneficiaries.............................................................37
ARTICLE VIII
INDEMNIFICATION; SURVIVAL...............................................................................37
Section 8.01 Indemnification by the Enterprise Parties, EPC II and
Enterprise Products...................................................................37
Section 8.02 Indemnification by Tejas and Tejas Energy.............................................38
Section 8.03 Indemnification Procedure.............................................................39
Section 8.04 Survival..............................................................................40
Section 8.05 Limitation on Claims..................................................................41
Section 8.06 Tejas Environmental Indemnity.........................................................42
Section 8.07 Enterprise Contingent Environmental Payment...........................................43
Section 8.08 Louisiana Fuel Tax Audit..............................................................44
ARTICLE IX
GENERAL PROVISIONS......................................................................................44
Section 9.01 Expenses and Taxes; Tax Returns.......................................................44
Section 9.02 Amendment.............................................................................45
Section 9.03 Waiver................................................................................45
Section 9.04 Notices...............................................................................45
Section 9.05 Headings; Disclosure Memorandum.......................................................47
Section 9.06 Applicable Law........................................................................47
Section 9.07 No Third Party Rights.................................................................47
Section 9.08 Counterparts..........................................................................47
Section 9.09 Severability..........................................................................47
Section 9.10 Entire Agreement......................................................................47
Section 9.11 Arbitration; Waiver...................................................................47
Section 9.12 Fair Construction.....................................................................48
Section 9.13 Disclaimer of Other Representations and Warranties....................................48
</TABLE>
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<PAGE>
EXHIBITS
Exhibit 1.01(a) EPC II Assignment of GP Interest
Exhibit 1.01(b) Tejas Assignment of Company Interest
Exhibit 9.11 Arbitration Procedures
-iv-
<PAGE>
SCHEDULES
Schedule 1.01(a) Assets of the Business
Schedule 1.01(b) Excluded Assets
Schedule 1.01(c) Permitted Liens
Schedule 1.01(d) Retained Liabilities
Schedule 2.02(c) Other Consideration
Schedule 2.04(d) Ancillary Agreements
Schedule 2.07 Interim Operations
Schedule 3.04 Tejas Required Consents
Schedule 3.06 Litigation Against Tejas or Tejas Energy
Schedule 4.02(b) Subsidiaries and Joint Ventures
Schedule 4.03 No Violation
Schedule 4.04 Permits
Schedule 4.05 Compliance with Applicable Law
Schedule 4.06(a) Pending Litigation Against the Company or its Subsidiaries
Schedule 4.06(b) Material Litigation
Schedule 4.07 Taxes
Schedule 4.08 Financial Statements
Schedule 4.09 Absence of Certain Changes
Schedule 4.10 Bank Accounts
Schedule 4.12(a) Material Contracts
Schedule 4.12(c) Defaults or Breaches
Schedule 4.13(a) Real Property
Schedule 4.13(b) Facilities
Schedule 4.13(c) Encumbered Assets
Schedule 4.15 Sufficiency of Assets
Schedule 4.16 Material Intellectual Property Rights
Schedule 5.04 Enterprise Required Consents
Schedule 5.10(e) Ownership of Units
Schedule 5.10(f) Enterprise Options/Obligations to Issue Units
Schedule 6.09 Act of Amendment
Schedule 7.01 Business Employees
-v-
<PAGE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT dated September 17, 1999, is by
and among TEJAS ENERGY, LLC, a Delaware limited liability company ("Tejas
Energy"), TEJAS MIDSTREAM ENTERPRISES, LLC, a Delaware limited liability company
("Tejas"), ENTERPRISE PRODUCTS PARTNERS L.P., a Delaware limited partnership
("Enterprise Partners"), ENTERPRISE PRODUCTS OPERATING L.P., a Delaware limited
partnership ("Enterprise Operating"), ENTERPRISE PRODUCTS GP, LLC, a Delaware
limited liability company ("Enterprise GP" and, together with Enterprise
Partners and Enterprise Operating, the "Enterprise Parties"), EPC PARTNERS II,
INC., a Delaware corporation ("EPC II") and ENTERPRISE PRODUCTS COMPANY, a Texas
corporation ("Enterprise Products") for the limited purposes of its obligations
in Articles V, VII and VIII hereof.
RECITALS:
WHEREAS, Tejas Energy is the sole member of Tejas;
WHEREAS, Tejas is the owner of all of the issued and
outstanding limited liability company membership interests of Tejas Natural Gas
Liquids, LLC, a Delaware limited liability company (the "Company"), which along
with its Subsidiaries (as defined herein) operates the Business (as defined
herein);
WHEREAS, Tejas desires to contribute its interest in the
Company to Enterprise Partners (or Enterprise Operating as the designee of
Enterprise Partners) in exchange for Enterprise Partners issuing to Tejas (or
Tejas Energy as the designee of Tejas) certain special partnership units and
Enterprise Operating paying to Tejas the Other Consideration (as defined herein)
on the terms and conditions as hereinafter provided;
WHEREAS, the parties acknowledge and agree that the
transactions contemplated herein involve a transfer by Tejas of its interest in
the Company to Enterprise Partners and a subsequent contribution of such
interest by Enterprise Partners to Enterprise Operating;
WHEREAS, Tejas Energy (as the designee of Tejas) desires to
acquire from EPC II and EPC II desires to sell to Tejas Energy a 30% membership
interest in Enterprise GP, which is the general partner of Enterprise Partners
and Enterprise Operating, for a cash payment to EPC II on the terms and
conditions hereinafter provided; and
WHEREAS, the parties hereto desire to enter into this
Agreement to set forth the terms, conditions and procedures of the
above-described transactions.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements contained herein and for other good and
valuable consideration (the
<PAGE>
receipt and sufficiency of which are hereby confirmed and acknowledged), the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.01 Specific Definitions. As used in this Agreement,
the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any Person
directly or indirectly controlling, controlled by or under common control with,
such Person. For the purposes of this definition, "control" (including, with
correlative meaning, the terms "controlling," "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of management and policies of such Person, by
contract or otherwise.
"Agreement" means this Contribution Agreement, as the same may
be amended or supplemented from time to time.
"Ancillary Agreements" shall have the meaning specified in
Section 2.04(d).
"Business" means all of the midstream natural gas processing
and NGL business generated by the NGL assets, properties and commercial
arrangements listed on Schedule 1.01(a) and the NGL assets, properties and
commercial arrangements transferred or intended to be transferred pursuant to
the acts of amendment and conveyances referenced in Section 6.09 (which includes
all of the midstream natural gas processing and NGL business conducted by the
Company and its Subsidiaries) which involves the processing of raw natural gas
and the fractionation of NGLs in the States of Louisiana and Mississippi at the
Facilities listed on Schedule 1.01(a) and all related transporting, storing,
exchanging and marketing of NGLs. The parties intend that the Business includes
all business generated by the assets, properties and commercial arrangements
(other than the distribution or marketing of pipeline-quality natural gas)
related to such gas processing and NGL operations to the extent located
downstream of the inlet flange of each gas processing plant referenced on
Schedule 1.01(a) including: (i) the fractionation facilities listed on Schedule
1.01(a), (ii) pipelines, underground storage, shipping and receiving facilities
and transportation assets listed on Schedule 1.01(a) and related rights of way
and other real property interests used in such gas processing and fractionation
operations, (iii) processing, exchange, storage, marketing, sales and
transportation agreements related to the business conducted at such Facilities,
(iv) rail tank cars used to transport NGLs as listed on Schedule 1.01(a), (v)
equity interests in Venice Energy Services Company, L.L.C., Dixie Pipeline
Company, Entell NGL Services, L.L.C., Tri-States NGL Pipeline, L.L.C., K/D/S
Promix L.L.C., Belle Rose NGL Pipeline, L.L.C. and Progas, LLC as listed on
Schedule 1.01(a) and (vi) all assets used in the Business, wherever located,
including, without limitation, contracts, intangibles, books and records,
financial and accounting systems and records, management information systems,
files, computer hardware and software (including the Solarc
-2-
<PAGE>
RightAngle license and the risk control model relating to the Business), office
equipment and other assets currently used in the Business, and the assets listed
for purposes of illustration but not limitation on Schedule 1.01(a) hereto;
provided, however, that the term Business shall not include any of the assets
listed on Schedule 1.01(b) hereto (the "Excluded Assets").
"Benefit Plan Date" has the meaning specified in Section 7.03.
"Business Day" means any day other than a Saturday, a Sunday
or a legal holiday on which banks in Houston, Texas and New York, New York are
authorized or obligated by Law to close.
"Business Employees" has the meaning specified in Section
7.01.
"Claim Notice" has the meaning specified in Section 8.03(a).
"Closing" means the closing of the transactions provided for
in this Agreement.
"Closing Date" means the date on which the Closing occurs.
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Common Units" means the common units representing limited
partner interests in Enterprise Partners having the rights specified in the
Enterprise Partners Amended Partnership Agreement.
"Company" has the meaning specified in the recitals.
"Company Interest" means 100% of the outstanding membership
and other equity interests in the Company.
"Company Required Consents" has the meaning specified in
Section 4.03.
"Confidentiality Agreement" means the Confidentiality
Agreement dated January 19, 1999, between the Company and Enterprise Operating,
as adopted by Tejas and Enterprise Partners.
"Consent" means any consent, waiver, approval, authorization,
exemption, registration or declaration.
"Contingent Environmental Payments" has the meaning specified
in Section 8.07(a).
"Conversion Dates" has the meaning specified in Section 2.03.
-3-
<PAGE>
"Court" shall mean any federal, state, or local court,
arbitration tribunal or other judicial authority.
"Damages" means all claims, liabilities, damages, penalties,
Judgments, assessments, losses, costs and expenses, including reasonable
attorneys' fees.
"Direct Claim" has the meaning specified in Section 8.03(a).
"Effective Date" means 12:01 a.m. on August 1, 1999.
"Employment Commencement Date" has the meaning specified in
Section 7.01.
"Enterprise Environmental Payments" has the meaning specified
in Section 8.07(a).
"Enterprise GP" has the meaning specified in the introductory
paragraph of this Agreement.
"Enterprise Indemnified Parties" has the meaning specified in
Section 8.02.
"Enterprise Operating" has the meaning specified in the
introductory paragraph of this Agreement.
"Enterprise Operating Partnership Agreement" means the Amended
and Restated Agreement of Limited Partnership of Enterprise Operating dated July
31, 1998, as amended, restated, supplemented or otherwise as defined.
"Enterprise Parties" has the meaning specified in the
introductory paragraph of this Agreement.
"Enterprise Partners" has the meaning specified in the
introductory paragraph of this Agreement.
"Enterprise Partners Partnership Agreement" means the Amended
and Restated Agreement of Limited Partnership of Enterprise Partners dated July
31, 1998, as amended, restated, supplemented or otherwise updated.
"Enterprise Partners Amended Partnership Agreement" means the
Second Amended and Restated Agreement of Limited Partnership of Enterprise
Partners.
"Enterprise Products" has the meaning specified in the
introductory paragraph of this Agreement.
-4-
<PAGE>
"Enterprise Representations and Warranties" has the meaning
specified in Section 8.01.
"Enterprise Required Consents" means the requirements of the
HSR Act and the Consents listed in Schedule 5.04.
"Enterprise Third-Party Environmental Claims" has the meaning
specified in Section 8.07(a).
"Environmental Law" means any Law that relates to (i) the
prevention, abatement, remediation or elimination of pollution, (ii) the
protection of the environment, (iii) the protection of individuals or property
from actual or potential exposure (or the effects of exposure) to an actual or
potential spill, release or threatened release of a Hazardous Substance, or
petroleum or produced brine, or (iv) the operation, manufacture, processing,
production, gathering, transportation, importation, use, treatment, storage or
disposal, arrangement for transportation or arrangement for disposition of a
Hazardous Substance, or petroleum or produced brine. The term "Environmental
Law" includes the Clean Air Act, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, the Federal Water Pollution Control
Act, the Occupational Safety and Health Act of 1970, the Resource Conservation
and Recovery Act of 1976, the Safe Drinking Water Act, the Toxic Substances
Control Act, the Hazardous & Solid Waste Amendments Act of 1984, the Superfund
Amendments and Reauthorization Act of 1986, the Hazardous Materials
Transportation Act, the Oil Pollution Act of 1990, any state Laws implementing
the foregoing federal Laws and any Laws pertaining to the handling of oil and
gas exploration and production wastes or the use, maintenance, and closure of
pits and impoundments, and all other environmental conservation or protection
Laws.
"EPC II" has the meaning specified in the introductory
paragraph of this Agreement.
"EPC II Assignment" means the Assignment Agreement in the form
of Exhibit 1.01(a) hereto pursuant to which EPC II will assign the GP Interest
to Tejas Energy.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, and as the same shall
be in effect from time to time.
"Facilities" means the gas processing plants, fractionation
plants, pipeline assets and storage facilities specified on Schedule 1.01(a)
hereto.
"Governmental Authority" shall mean any federal, state or
local governmental agency or authority.
"Governmental Authorization" shall mean any required consent
or approval by a Governmental Authority.
-5-
<PAGE>
"GP Interest" means a membership interest in Enterprise GP
representing a 30% ownership interest in Enterprise GP.
"Hazardous Substance" means any substance, chemical,
pollutant, waste or other material (i) that consists, wholly or in part, of a
substance that is regulated as toxic or hazardous to human health or the
environment under any Environmental Law, or (ii) that exists in a condition or
under circumstances that constitute a violation of an Environmental Law. The
term "Hazardous Substance" includes any petroleum products, oils or derivatives
thereof; asbestos or asbestos- containing materials; polychlorinated biphenols;
as well as any "hazardous substance" as that term is defined in the
Comprehensive Environmental, Response, Compensation and Liability Act of 1980,
any "hazardous material" as that term is defined in the Hazardous Materials
Transportation Act, any "hazardous chemical substance" or "pollutant" as those
terms are defined in the Federal Water Pollution Control Act, and any "solid
waste" or "hazardous waste" as those terms are defined in the Resource
Conservation and Recovery Act of 1976 and any toxic substance as that term is
defined under the Toxic Substances Control Act.
"HSR Act" means the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder.
"Indebtedness for Borrowed Money" means all obligations for
borrowed money, including (a) any capital lease obligation, (b) any obligation
(whether fixed or contingent) to reimburse any bank or other Person in respect
of amounts paid or payable under a standby letter of credit (other than
obligations under standby letters of credit securing performance under Material
Contracts), or (c) any guarantee with respect to indebtedness for borrowed money
(of the kind otherwise described in this definition) of another Person.
"Indemnified Party" has the meaning specified in Section 8.03.
"Indemnifying Party" has the meaning specified in Section
8.03.
"Intellectual Property Right" means all registered trade
marks, trade names, patents and copyrights, unregistered trade marks, trade
names and copyrights and all patent applications, all technology, trade secrets,
designs, drawings, computer programs, processes and know how, both domestic and
foreign, used in connection with the Business.
"IRS" means the United States Internal Revenue Service.
"Joint Venture" means any corporation, partnership, limited
liability company, association, trust, joint venture or other entity or
organization (other than Subsidiaries) in which the Company or any of its
Subsidiaries has an interest.
"Judgments" means any judgments, injunctions, orders, decrees,
writs, rulings or awards of any Court or any Governmental Authority of competent
jurisdiction.
-6-
<PAGE>
"Knowledge" or "knowledge" means, with respect to any party
hereto, the actual knowledge of the executive officers of such party; provided
that none of the executive officers shall be deemed to have performed, or be
obligated to perform, any independent investigation or inquiry with respect to
the matter to which such Knowledge relates other than, in each case, making
reasonable inquiry with the head of the department who is principally
responsible for the subject matter of any representation or warranty given to
the knowledge of such party.
"Laws" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, order or decree.
"Lien" means mortgages, deeds of trust, liens, pledges,
security interests, leases, conditional sale contracts, claims, rights of first
refusal, options, charges, liabilities, obligations, agreements, privileges,
liberties, easements, rights-of-way, limitations, reservations, restrictions and
other encumbrances of any kind.
"Material Adverse Effect" means a material adverse effect on
the business, assets, liabilities, or condition (financial or otherwise) of the
subject party and its Subsidiaries, taken as a whole.
"Material Contract" has the meaning set forth in Section 4.12.
"NGLs" means natural gas liquids.
"Other Consideration" has the meaning prescribed in Section
2.02(c).
"Permits" means all permits, authorizations, approvals,
registrations, licenses, certificates or variances granted by or obtained from
any Governmental Authority.
"Permitted Liens" means (i) Liens for or in respect of Taxes,
impositions, assessments, fees, rents and other governmental charges levied or
assessed or imposed which are not yet delinquent or are being contested in good
faith by appropriate proceedings and, if being contested, for which the
appropriate party has set forth reserves on its books, records and financial
statements in accordance with generally accepted accounting principles applied
in a manner consistent with past practice, (ii) the rights of lessors and
lessees under leases executed in the ordinary course of business, (iii) the
rights of licensors and licensees under licenses executed in the ordinary course
of business, and (iv) Liens, and rights to Liens, of mechanics, warehousemen,
carriers, repairmen and others arising by operation of law and incurred in the
ordinary course of business, securing obligations not yet delinquent or being
contested in good faith by appropriate proceedings, (v) any Liens which are
publicly recorded, (vi) other Liens entered into in the ordinary course of
business that do not secure the payment of indebtedness for borrowed money and
that do not materially and adversely affect the ability of Enterprise Operating,
directly or indirectly, to use the encumbered assets and properties in the
conduct of the Business and (vii) Liens set forth on Schedule 1.01(c) of the
Tejas Disclosure Memorandum.
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"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Proceeding" means any action, suit, demand, claim or legal,
administrative, arbitration or other alternative dispute resolution proceeding,
hearing or investigation.
"Retained Liabilities" means the liabilities identified as
"Retained Liabilities" on Schedule 1.01(d) of the Tejas Disclosure Memorandum.
"Securities Act" means the Securities Act of 1933, as amended
or any successor or federal statute, and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder, and as the same shall
be in effect from time to time.
"Shell Affiliate" means any Affiliate of Shell Oil Company.
"Shell Processing Agreement" means that certain Fourth
Amendment to Conveyance of Gas Processing Rights among the Company, Shell Oil
Company, Shell Exploration & Production Company, Shell Offshore Inc., Shell
Deepwater Development Inc., Shell Deepwater Production Inc., Shell Consolidated
Energy Resources Inc., Shell Land & Energy Company and Shell Frontier Oil & Gas
Inc., and any other parties thereto, dated as of August 1, 1999.
"Special Units" means each series of the Class A Special Units
of limited partnership interest in Enterprise Partners as described in Sections
2.03 and 2.05 and in the Enterprise Partners Amended Partnership Agreement.
"Subordinated Units" means the subordinated units representing
partnership interests in Enterprise Partners created under the Enterprise
Partners Amended Partnership Agreement.
"Subsidiary" or "Subsidiaries" of any Person means any
corporation, partnership, limited liability company, association, trust, joint
venture or other entity or organization of which such Person, either alone or
through or together with any other Subsidiary, owns, directly or indirectly,
more than 50% of the issued and outstanding stock or other equity or ownership
interests, the holder of which is generally entitled to vote for the election of
the board of directors or other governing body of such corporation, partnership,
limited liability company, association, trust, joint venture or other entity or
organization.
"Taxes" means all taxes, however denominated, including any
interest or penalties that may become payable in respect thereof, imposed by any
Governmental Authority, which taxes shall include all net income, alternative or
add-on minimum tax, gross income, gross receipts, sales, use, goods and
services, ad valorem or property, earnings, franchise, profits, license,
withholding (including all obligations to withhold or collect for Taxes imposed
on others), payroll, employment, excise, severance, stamp, occupation, premium,
property, excess profit or windfall profit tax, custom
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duty, value added or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest and any penalty,
addition to tax or additional amount (whether payable directly, by withholding
or otherwise).
"Tax Returns" means any report, return, declaration or other
filing required to be supplied to any taxing authority or jurisdiction with
respect to Taxes including any amendments thereto.
"Tax Statute of Limitations Date" shall mean the close of
business on the 30th day after the expiration of the applicable statute of
limitations with respect to Taxes, including any tollings or extensions thereof.
"Tejas" has the meaning specified in the introductory
paragraph of this Agreement.
"Tejas Assignment" means the Assignment Agreement in the form
of Exhibit 1.01(b) hereto pursuant to which Tejas will assign the Company
Interest to Enterprise Operating (as Enterprise Partners' designee).
"Tejas Co-ownership" means a co-ownership arrangement wherein
the Company or its Subsidiary is a co-owner of assets and the co-owners have
elected (or are deemed to have elected under Treasury Regulation ss. 1.761-2(b))
under Section 761(a) of the Code to be excluded from the provisions of
subchapter K of chapter 1 of the Code.
"Tejas Disclosure Memorandum" means the disclosure memorandum
delivered by Tejas to the Enterprise Parties prior to execution of this
Agreement containing the disclosures contemplated by this Agreement.
"Tejas Energy" has the meaning specified in the introductory
paragraph to this Agreement.
"Tejas Indemnified Parties" has the meaning specified in
Section 8.01.
"Tejas Joint Venture" means a limited liability company,
association, trust, partnership, joint venture or other entity or organization
in which the Company or any of its Subsidiaries owns, either alone or through or
together with any Subsidiary, directly or indirectly, less than 100% of the
issued and outstanding stock or other equity or ownership interests.
"Tejas LLC" means a limited liability company wherein the
Company or its Subsidiary owns 100% of the equity interests.
"Tejas Representations and Warranties" has the meaning
specified in Section 8.02.
"Tejas Required Consents" has the meaning specified in Section
3.04.
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"Tejas Third-Party Environmental Claims" has the meaning
specified in Section 8.06(a).
"Third Party Claim" has the meaning specified in Section
8.03(a).
"Transactions" means the transactions contemplated by the
Transaction Agreements.
"Transaction Agreements" means this Agreement, and the other
agreements referred to in Sections 2.04(a), (b), (c), (e) and (g).
"Transferred Employees" has the meaning specified in Section
7.01.
"United States" means the United States of America, its
territories and possessions, any state of the United States, and the District of
Columbia.
"Unitholder Rights Agreement" has the meaning specified in
Section 2.04(b).
"Units" means, collectively or individually or in any
combination, as the context may require, the Special Units and any Common Units
into which the Special Units are converted in accordance with the Enterprise
Partners Amended Partnership Agreement.
Section 1.02 General Definitions. Capitalized terms used in
this Agreement and not defined in Section 1.01 shall have the meanings ascribed
to them elsewhere in this Agreement.
Section 1.03 Construction and Interpretation. The following
rules of construction and interpretation shall apply to this Agreement, unless
elsewhere specifically indicated to the contrary:
(a) all terms defined herein in the singular shall include the
plural, as the context requires, and vice-versa;
(b) pronouns stated in the neuter gender shall include the
masculine, the feminine and the neuter genders;
(c) the term "or" is not exclusive and shall be deemed to mean
"and/or;"
(d) the term "including" (or any form thereof) shall not be
limiting or exclusive and shall be deemed to mean "including, without
limitation;" and
(e) unless otherwise indicated, any reference made in this
Agreement to a Section is a reference to a section of this Agreement, any
reference to an exhibit is a reference to an exhibit to this Agreement.
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ARTICLE II
CONTRIBUTION AND RELATED ITEMS
Section 2.01 The Closing. Subject to the terms and conditions
of this Agreement, the consummation of the transactions contemplated by this
Agreement as set forth in Section 2.02 (the "Closing") will take place
simultaneously with the execution hereof or on such other date as may be agreed
upon by the parties hereto at 4:00 p.m. local time at the offices of Andrews &
Kurth L.L.P. at 600 Travis, Houston, Texas.
Section 2.02 The Transactions. Subject to the terms and
conditions of this Agreement, at the Closing:
(a) Tejas will contribute and assign the Company Interest to
Enterprise Operating (as Enterprise Partner's designee) by executing
and delivering the Tejas Assignment to Enterprise Operating;
(b) Enterprise Partners will issue and deliver to
Tejas Energy (as Tejas' designee) 14,500,000 Special Units;
(c) Enterprise Operating (as Enterprise Partners' designee)
will pay to Tejas $166,000,000 in cash as reflected on Schedule 2.02(c)
attached hereto (the "Other Consideration");
(d) EPC II will convey the GP Interest to Tejas Energy (as
Tejas' designee) by executing and delivering the EPC II Assignment to
Tejas Energy; and
(e) Tejas Energy shall pay $4,000,000 in cash to EPC II in
consideration for the GP Interest.
Section 2.03 Special Units. The Special Units shall be
represented by certificates in the form contemplated by the Enterprise Partners
Amended Partnership Agreement and will have the rights and features set forth
therein. The Special Units will be automatically converted on a one-for-one
basis into Common Units of Enterprise Partners effective as of the Class A
Special Units Conversion Dates set forth in the Enterprise Partners Amended
Partnership Agreement (the "Conversion Dates").
Section 2.04 Other Closing Matters. Subject to the terms
and conditions of this Agreement, simultaneously with the execution hereof
unless waived by the parties:
(a) Enterprise Partners and Tejas will enter into the
Registration Rights Agreement in the form agreed upon by the parties;
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(b) Tejas, the Enterprise Parties, Enterprise Products and EPC
II will enter into the Unitholder Rights Agreement in the form agreed
upon by the parties;
(c) Tejas and Enterprise Operating will enter into the Interim
Services Agreement in the form agreed upon by the parties;
(d) Each of the agreements set forth on Schedule 2.04(d)
hereto (the "Ancillary Agreements") shall be or have been executed by
the appropriate parties thereto;
(e) Enterprise GP shall enter into the Enterprise Partners
Amended Partnership Agreement in the form agreed upon by the parties;
(f) Tejas shall receive the opinion of counsel to the
Enterprise Parties in the form agreed upon by the parties and the
Enterprise Parties shall receive the opinion of counsel to Tejas in the
form agreed upon by the parties; and
(g) Tejas, Dan Duncan LLC, EPC II and Tejas shall enter into
the Amended and Restated Limited Liability Company Agreement of
Enterprise GP in the form agreed upon by the parties.
Section 2.05 Additional Special Units Following Closing.
Enterprise Partners will issue to Tejas up to an additional 6,000,000 Special
Units, at the times and in accordance with and subject to the performance tests
and procedures set forth in the Enterprise Partners Amended Partnership
Agreement.
Section 2.06 Prorations of Property Taxes.
(a) The 1999 general property tax assessed against or
pertaining to the assets included in the Business for the taxable
period that includes the Closing Date shall be prorated between Tejas
and the Company and its Subsidiaries as of the Closing Date. Tejas'
1999 general property tax responsibility will be for the period January
1, 1999 up to and including the Closing Date (the "Tejas Property
Tax"). The Tejas Property Tax shall be an amount equal to the product
of (i) the amount of such general property Tax for the entire taxable
period that includes the Closing Date (or the amount of such general
property Tax for the immediately preceding taxable period in the case
of those assets and properties, if any, for which such general property
Tax for the current period cannot be determined), times (ii) a
fraction, the numerator of which is the number of days from January 1,
1999 to the Closing Date and the denominator of which is the total
number of days in the entire taxable period.
(b) Tejas shall pay the 1999 general property tax statement in
full and shall invoice Enterprise Partners and its Subsidiaries for the
period from the Closing Date to December 31, 1999. Enterprise Partners
agrees to make or cause to be made such payment
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(reimbursement) for the amount of the general property tax so prorated
and invoiced. Enterprise Partners shall provide the name and address to
which such invoice shall be sent.
Section 2.07 Adjustment for Interim Operations.
(a) The parties acknowledge and agree that the operations of
the Company and its Subsidiaries from and after the Effective Date
shall be for the account of Enterprise Partners; provided, Tejas and
Tejas Energy will be responsible for administering and shall
administer, the financial accounts of the Company and its Subsidiaries
from the Effective Date through September 30, 1999 (the "Interim
Period"), including processing cash collections and making required
expenditures.
(b) As promptly as practicable, but no later than November 15,
1999, Enterprise Partners (with the assistance of Tejas and Tejas
Energy to the extent requested by Enterprise Partners) will cause to be
prepared and delivered to Tejas a certificate setting forth Enterprise
Partners' calculation of the Interim Period Adjustment as determined in
accordance with the procedures set forth in Schedule 2.07 hereto (the
"Interim Period Adjustment").
(c) If Tejas or Tejas Energy disagrees with Enterprise
Partners' calculation of the Interim Period Adjustment, Tejas may,
within 20 days after delivery of such calculation, deliver a notice to
Enterprise Partners disagreeing with Enterprise Partners' calculation
of the Interim Period Adjustment and setting forth Tejas' calculation
of the Interim Period Adjustment.
(d) If a notice of disagreement shall be duly delivered
pursuant to paragraph (c), Enterprise Partners, Tejas and Tejas Energy
shall, during the 30 days following such delivery, use their reasonable
efforts to reach agreement on the amounts in order to determine the
final Interim Period Adjustment. If, during such period, Enterprise
Partners, Tejas and Tejas Energy are unable to reach such agreement,
they shall promptly thereafter retain independent accountants (a "big
5" accounting firm other than Deloitte & Touche LLP and
PricewaterhouseCoopers LLP) to promptly review this Agreement and the
disputed amounts for the purpose of calculating the final Interim
Period Adjustment. The independent accountants shall deliver to
Enterprise Partners, Tejas and Tejas Energy, as promptly as
practicable, a report setting forth each such calculation. Such report
shall be final and binding upon Enterprise Partners, Tejas and Tejas
Energy. The cost of such review and report shall be borne equally by
Enterprise Partners and Tejas.
(e) If the final Interim Period Adjustment is a positive
number, then such amount will be paid by Tejas or Tejas Energy to
Enterprise Partners within ten days following calculation of the final
Interim Period Adjustment and if the final Interim Period Adjustment is
a negative number, then such amount will be paid by Enterprise Partners
to Tejas or Tejas Energy within ten days following calculation of the
final Interim Period Adjustment.
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ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF TEJAS AND TEJAS
ENERGY AS TO TEJAS AND TEJAS
ENERGY
Tejas and Tejas Energy, jointly and severally, represent and
warrant to the Enterprise Parties that the following statements were true and
correct as of the Effective Date and are true and correct as of the Closing
Date:
Section 3.01 Organization. Tejas is a limited liability
company duly organized, validly existing and in good standing under the Laws of
the State of Delaware, with all requisite power and authority to own the Company
and its Subsidiaries (each of which is listed in Schedule 4.02(b) of the Tejas
Disclosure Memorandum) and to carry on its business as it is now conducted.
Tejas is a wholly-owned subsidiary of Tejas Energy. Tejas Energy is a limited
liability company duly organized, validly existing and in good standing under
the Laws of the State of Delaware, with all requisite power and authority to
carry on its business as it is now conducted. Tejas Energy is an indirect
majority-owned subsidiary of Shell Oil Company.
Section 3.02 Ownership of Company Interest. Tejas is the
owner, beneficially and of record, of all the Company Interest free and clear of
any Lien. At the Closing, Tejas will assign and contribute all the Company
Interest to Enterprise Operating (as Enterprise Partners' designee) free and
clear of any Lien as a result of which Enterprise Operating (as Enterprise
Partners' designee) will own 100% of the outstanding equity interests in the
Company.
Section 3.03 Validity and Enforceability. Each of Tejas Energy
and Tejas has the requisite power and authority to execute and deliver the
Transaction Agreements to which it is a party and to perform its obligations
under such Transaction Agreements. The execution and delivery of the Transaction
Agreements to which Tejas or Tejas Energy is a party and the consummation of the
Transactions have been duly authorized by Tejas and Tejas Energy, respectively,
and no additional authorization on the part of Tejas or Tejas Energy or any
Affiliate thereof is necessary in order to authorize the Transaction Agreements
or consummate the Transactions contemplated thereby. The Transaction Agreements
to which Tejas or Tejas Energy is a party have been or at Closing will be duly
executed and delivered by Tejas and Tejas Energy, respectively, and constitute
legal, valid and binding obligations of Tejas and Tejas Energy, respectively,
enforceable against Tejas and Tejas Energy in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting the rights and remedies of creditors, or by general principles of
equity
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(regardless of whether such enforceability is considered in a proceeding in
equity or at law), including the availability of specific performance.
Section 3.04 Approvals and Consents. (a) Except for the
requirements of (i) the requirements and Consents listed in Schedule 3.04 of the
Tejas Disclosure Memorandum (the "Tejas Required Consents"), and (ii) those
Laws, noncompliance with which could not reasonably be expected to have an
adverse effect on the ability of Tejas or Tejas Energy to perform their
respective obligations under the Transaction Agreements, no filing or notice or
registration with, no waiting period imposed by and no Permit or Judgment of,
any Governmental Authority is required under any Law applicable to Tejas or
Tejas Energy and no notice to or Consent of any Person is required to permit
Tejas or Tejas Energy to execute, deliver or perform their obligations under the
Transaction Agreements to be executed and delivered by either of them at the
Closing.
(b) Tejas represents that all filings required under the HSR
Act to be made by Tejas or its Affiliates in order for Tejas to consummate the
Transactions have been made and the applicable waiting period thereunder has
expired.
Section 3.05 No Violation. Assuming receipt of all Tejas
Required Consents, neither the execution and delivery by Tejas Energy and Tejas
of the Transaction Agreements nor the performance by Tejas Energy or Tejas of
their respective obligations thereunder will violate or breach the terms of or
cause a default under (i) any Law or Judgment applicable to Tejas or Tejas
Energy, (ii) the certificate of formation, the limited liability company
agreement or other organizational documents of Tejas or Tejas Energy, or (iii)
any contract or agreement to which Tejas or Tejas Energy or any of their
respective Affiliates (other than the Company and its Subsidiaries) is a party
or by which it or any of its properties or assets is bound, except in any such
case for any matters described in this Section 3.05 that would not reasonably be
expected to have an adverse effect upon the ability of Tejas or Tejas Energy to
perform their respective obligations under the Transaction Agreements.
Section 3.06 Litigation. Except as set forth on Schedule 3.06
of the Tejas Disclosure Memorandum, there are no Proceedings pending, or, to the
Knowledge of Tejas or Tejas Energy, threatened, against Tejas or Tejas Energy,
at law or in equity, in any Court or before or by any Governmental Authority
that (i) questions the validity of any Transaction Agreement or seeks to
restrain, prohibit, invalidate, set aside, prevent or make unlawful any
Transaction Agreement or any of the Transactions, or (ii) if adversely
determined (x) would prevent or impair the ability of Tejas or Tejas Energy to
perform any of their obligations under the Transaction Agreements or (y) would
have a Material Adverse Effect on the Company.
Section 3.07 Investment Intent.
(a) Each of Tejas and Tejas Energy is capable of evaluating
the merits and risks of its investment in the Units and the GP
Interest. Tejas Energy is taking the Units and the GP Interest for its
own account and not with any current view to or intent to sell in
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connection with any distribution of such securities as such terms are
defined under the Securities Act. Each of Tejas and Tejas Energy has
reviewed Enterprise Partners' Annual Report on Form 10-K for the year
ended December 31, 1998 and Quarterly Report on Form 10-Q for the
quarters ended March 31, 1999 and June 30, 1999 (the "Enterprise
Partners SEC Reports"). Each of Tejas and Tejas Energy has had an
opportunity to discuss Enterprise Partners' and Enterprise GP's
business and financial condition, properties, operations and prospects
with Enterprise Partners' and Enterprise GP's management and to ask
questions of officers of Enterprise Partners and Enterprise GP.
(b) Tejas and Tejas Energy understand that (i) the Units and
the GP Interest will be "restricted securities" under the applicable
federal securities laws, (ii) the Securities Act and the rules of the
SEC provide in substance that such unitholder may dispose of the Units
and the GP Interest only pursuant to an effective registration
statement under the Securities Act or in a transaction exempt from the
registration requirements of the Securities Act, and (iii) except as
set forth in the Registration Rights Agreement, Enterprise Partners has
no obligation or intention to register the sale of the Units or the GP
Interest pursuant to the Securities Act, and that, accordingly, Tejas
Energy and Tejas may be required to bear the economic risk of the
investment in Units and the GP Interest for a substantial period of
time.
(c) Tejas and Tejas Energy agree that certificates
representing the Units shall be subject to appropriate stop-transfer
instructions to be given by Enterprise Partners to its transfer agents
and shall have endorsed thereon a legend substantially as follows:
The securities represented by this certificate have
not been registered under the Securities Act of 1933, as
amended (the "Act"), or under any applicable state law, and
may not be transferred without registration under the Act or
such applicable state law unless an exemption from such
registration is available thereunder.
Enterprise Partners agrees to remove such legend at such time as the
Units are freely tradeable under Rule 144 or otherwise.
Section 3.08 No Brokers. None of Tejas Energy, Tejas, the
Company nor any of their respective Subsidiaries or Affiliates has, directly or
indirectly, entered into any agreement with any Person that would obligate the
Company, any of its Subsidiaries or any of the Enterprise Parties to pay any
commission, brokerage fee or "finder's fee" in connection with the Transactions.
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ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF TEJAS AND TEJAS
ENERGY AS TO THE COMPANY AND
ITS SUBSIDIARIES
Tejas and Tejas Energy, jointly and severally, represent and
warrant to the Enterprise Parties as to the Company and its Subsidiaries that
the following statements were true and correct at the Effective Date and are
true and correct as of the Closing Date:
Section 4.01 Organization. Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all requisite power and
authority to carry on its business as it is now being conducted and to own,
lease and operate its properties where now conducted, owned, leased or operated.
Each of the Company and its Subsidiaries is duly licensed or qualified to do
business and is in good standing in each jurisdiction where such license or
qualification is required to carry on its business as now conducted, except
where the failure to be so qualified or licensed or in good standing, as the
case may be, could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
Section 4.02 Capitalization.
(a) All of the issued and outstanding Company Interest has
been duly authorized and is validly issued. There are no outstanding or
authorized (i) options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments,
other than this Agreement, that could require the Company or Tejas to
issue, sell, or otherwise cause to become outstanding any member
interests in the Company or (ii) securities or rights convertible into
or exchangeable or exercisable for, membership interests of the Company
or any contracts, commitments, understandings or arrangements by which
the Company or Tejas is or may be bound to issue, redeem, purchase or
sell membership interests in the Company or securities convertible into
or exchangeable for any such membership interests in the Company.
(b) Schedule 4.02(b) of the Tejas Disclosure Memorandum sets
forth a complete list of (i) all of the Subsidiaries of the Company,
the jurisdiction of incorporation or formation of each such Subsidiary
and the number of issued and outstanding membership interests of each
such Subsidiary and the record holders thereof, (ii) all Joint
Ventures, including a description of the type of such entity, the
ownership interest of the Company its Subsidiaries therein and, to the
Knowledge of Tejas, the names and ownership interests of the other
holders thereof and (iii) the ownership interest of the Company and
each Company Subsidiary in any co-ownership arrangement wherein the
Company or its Subsidiary is a co-owner of assets. Except as set forth
on Schedule 4.02(b) of the Tejas Disclosure
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Memorandum all of the outstanding membership interests of the Company's
Subsidiaries are owned beneficially and of record by the Company or the
Company's Subsidiaries, free and clear of all Liens. There are no
outstanding or authorized (i) options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments other than as contemplated by this Agreement,
that would require the Company or any of its Subsidiaries or Tejas to
issue, sell or otherwise cause to become outstanding any membership
interests of the Company or any of its Subsidiaries or (ii) securities
or rights convertible into or exchangeable or exercisable for, any such
membership interests or any contracts, commitments, understandings or
arrangements by which the Company or Tejas is or may be bound to issue,
redeem, purchase or sell such membership interests or securities
convertible into or exchangeable for any such membership interests.
Except as set forth on Schedule 4.02(b) of the Tejas Disclosure
Memorandum, all of the Company's or any of its Subsidiary's interests
in the Joint Ventures are owned beneficially and of record by the
Company or the Company's Subsidiaries, free and clear of all Liens and
neither Tejas, the Company nor any Subsidiary has entered into any
contracts or agreements by which the Company or any of its Subsidiaries
is or may be bound to sell or otherwise transfer, directly or
indirectly, such interests provided this representation is not intended
to cover preferential rights and other similar rights of refusal or
purchase rights contained in any of the Material Contracts listed on
Schedule 4.12(a).
Section 4.03 No Violation. Assuming receipt of all Company
required consents ("Company Required Consents") indicated as required in
Schedule 4.03 of the Tejas Disclosure Memorandum, neither the execution and
delivery by Tejas and Tejas Energy of the Transaction Agreements nor the
performance by Tejas or Tejas Energy of their obligations hereunder or
thereunder will (a) (i) violate or breach the terms of or cause a default under
any Law or any Judgment applicable to the Company or any of its Subsidiaries,
(ii) conflict with or violate any provisions of the certificate of organization,
the limited liability company agreement or other organizational documents of the
Company or any of its Subsidiaries or (iii) conflict with, or result in the
breach of, or constitute a default under, or result in the termination,
cancellation or acceleration (whether after the giving of notice or the lapse of
time or both) of any right or obligation under, any note, bond, mortgage,
indenture, license, lease, agreement, contract, arrangement or commitment to
which the Company or any of its Subsidiaries is a party or by which they or any
of their properties or assets are bound, or (b) result in the creation or
imposition of any Lien on any of the properties or assets of the Company or any
of its Subsidiaries, except in any such case for any matters described in this
Section 4.03 that individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect on the Company.
Section 4.04 Permits. Except as set forth on Schedule 4.04 of
the Tejas Disclosure Memorandum, the Company and each of its Subsidiaries have
all Permits required to conduct their respective businesses as currently
conducted and the Company and each of the Subsidiaries have been operating their
respective businesses pursuant to and in compliance with the terms of all such
Permits, except for such failures to comply which have not resulted in,
individually or in the aggregate, a Material Adverse Effect on the Company.
Except as set forth on Schedule 4.04 of the
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Tejas Disclosure Memorandum, such Permits held by the Company and its
Subsidiaries are valid and in full force and effect and none of such Permits
will, assuming the Company Required Consents have been obtained, be cancelled,
forfeited, revoked, suspended or terminated as a result of the transactions
contemplated by this Agreement, except, in each case, such Permits the
cancellation, forfeiture, revocation, suspension or termination of which would
not have a Material Adverse Effect on the Company.
Section 4.05 Compliance With Applicable Law. Except as set
forth on Schedule 4.05 of the Tejas Disclosure Memorandum, each of the Company
and its Subsidiaries is presently complying with and in the past has complied
with all applicable Laws and Judgments, except for such failures to comply
which, individually or in the aggregate, would not reasonably be expected to
result in a Material Adverse Effect on the Company.
Section 4.06 Litigation.
(a) Except as set forth on Schedule 4.06(a) of the Tejas
Disclosure Memorandum, there are no Proceedings pending or, to the
Knowledge of Tejas or Tejas Energy, threatened, against the Company or
any of its Subsidiaries or to which the Company or any of the
Subsidiaries is or will be a party.
(b) Except as set forth on Schedule 4.06(b) of the Tejas
Disclosure Memorandum, none of the Proceedings referred to in Section
4.06(a) above would reasonably be expected to result in a Material
Adverse Effect on the Company or materially impair Tejas' or Tejas
Energy's ability to effect the Closing.
Section 4.07 Taxes.
(a) The Company, its Subsidiaries, the Tejas Joint Ventures
and the Tejas Co- ownerships have not, on or prior to the Closing Date,
filed an election under Treasury Regulation ss.301.7701-3 to be
classified as a corporation for federal income Tax purposes. During the
entirety of the period from the date of its formation through the
Closing Date, each of the Company and the Tejas LLCs has been a
business entity that has had and will have a single owner at any given
point in time and is and will be disregarded as an entity separate from
its owner for federal income Tax purposes under Treasury Regulation
Sections 301.7701-2 and -3 and any comparable provision of applicable
state or local Tax law that permits such treatment. Each of the Tejas
Joint Ventures (other than the Dixie Pipeline Company) is treated and
classified as a partnership for federal income Tax purposes under
Treasury Regulation ss.301.7701-2 and -3. Each of the Tejas
Co-ownerships is classified and treated as a co-ownership rather than a
partnership or association taxable as a corporation for federal income
Tax purposes under Treasury Regulation ss.301.7701-2 and -3.
(b) Except as set forth on Schedule 4.07 of the Tejas
Disclosure Memorandum, all Tax Returns of the Company, its
Subsidiaries, the Tejas Joint Ventures and the Tejas Co-
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ownerships that are required to be filed (taking into account any
extensions of time within which to file) before the Closing Date, have
been filed, the information provided in such Tax Returns is complete
and accurate in all material respects, and all Taxes owed by the
Company, its Subsidiaries, the Tejas Joint Ventures and the Tejas
Co-ownerships have been timely paid in full.
(c) There are no Liens for Taxes upon the assets of any of the
Company and its Subsidiaries or the Tejas Co-Ownerships, or, to the
Knowledge of Tejas or Tejas Energy, upon the assets of any of the Tejas
Joint Ventures (excluding the Company's Subsidiaries), other than with
respect to ad valorem Taxes which are not yet delinquent or Permitted
Liens. Each of the Company and its Subsidiaries, and, to the Knowledge
of Tejas or Tejas Energy, each of the Tejas Joint Ventures (excluding
the Company's Subsidiaries) has fully complied with all applicable
federal, state and local employment Tax, withholding and contribution
obligations with respect to its employees, and all other Tax
withholding obligations required by law.
(d) Each of the Company and its Subsidiaries and, to the
Knowledge of Tejas or Tejas Energy, the Joint Ventures (excluding the
Company's Subsidiaries) (or the operators of the Joint Ventures and/or
Tejas), to the extent required by Section 4081 et seq. of the Code, has
obtained a currently effective IRS Form 637 registration number.
Section 4.08 Financial Statements. Copies of the financial
statements of the Company and its Subsidiaries consisting of a statement of
assets acquired and liabilities assumed of the Company and its Subsidiaries as
of December 31, 1998, and the related statement of revenues and direct operating
expenses for the year ended December 31, 1998 (including the notes thereto),
which financial statements have been audited, and are accompanied by the audit
opinion of Deloitte & Touche LLP (the "Financial Statements") have been provided
to Enterprise Partners. Except for the Retained Liabilities, such Financial
Statements present fairly, in all material respects, the assets acquired and
liabilities assumed as of December 31, 1998 and the revenues and direct
operating expenses for the year ended December 31, 1998 of the Company and its
Subsidiaries pursuant to this Agreement in conformity with generally accepted
accounting principles consistently applied.
Section 4.09 Absence of Certain Changes. Since December 31,
1998, except as set forth in Schedule 4.09 of the Tejas Disclosure Memorandum,
the Company and its Subsidiaries have conducted their respective businesses in
the ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts (other than economic conditions or facts or
circumstances applicable to the natural gas liquids industry in
general) which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect on the
Company;
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(b) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the Company and its Subsidiaries
which, individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect on the Company;
(c) any material transaction or commitment made, or, any
Material Contract entered into, by the Company or any of its
Subsidiaries (including the acquisition or disposition of any assets)
or any relinquishment by the Company or any of its Subsidiaries of any
Material Contract, other than transactions and commitments in the
ordinary course of business consistent with past practices and those
contemplated by the Transaction Agreements;
(d) except as contemplated by this Agreement and except for
any such change after the date of this Agreement required by reason of
a concurrent change in generally accepted accounting principles, any
change in any method of accounting or accounting practice with respect
to the Company and its Subsidiaries; and
(e) any amendment of the terms of or breach of the provisions
of (or any event which, with notice or passage of time or both would
constitute a breach by the Company or the Subsidiaries of) the Shell
Processing Agreement which could result in the termination of such
agreement by any Shell Affiliate party thereto.
Section 4.10 Bank Accounts. Schedule 4.10 of the Tejas
Disclosure Memorandum includes the names and locations of all banks in which the
Company or any of its Subsidiaries has an account or safe deposit box related to
the Business and the names of all persons authorized to draw thereon or to have
access thereto.
Section 4.11 Conduct of Business From the Effective Date to
the Closing Date. From the Effective Date to the Closing Date and, except as
otherwise contemplated by this Agreement, Tejas and Tejas Energy:
(a) have caused the Company and its Subsidiaries to conduct
the business and operations of the Company and its Subsidiaries in the
ordinary course;
(b) have not permitted the Company or its Subsidiaries to
dispose of any assets of the Business except for Excluded Assets and
inventory sold in the ordinary course of business;
(c) have not permitted the Company or its Subsidiaries to make
any loans, advances, distributions or dividends to Tejas or its
Affiliates (other than the Company or its Subsidiaries);
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(d) have not permitted the Company or its Subsidiaries to use
their respective cash or properties to pay any Retained Liabilities
other than as adjusted for in Section 2.07;
(e) have not permitted the Company or its Subsidiaries to
incur, create or assume any Lien on any individual asset of the Company
or its Subsidiaries other than Permitted Liens; and
(f) have not permitted the Company or its Subsidiaries to
incur any Indebtedness for Borrowed Money except for amounts borrowed
from Tejas or its Affiliates which will be extinguished pursuant to
Section 6.07 below.
Section 4.12 Material Contracts or Indebtedness.
(a) Schedule 4.12(a) of the Tejas Disclosure Memorandum
includes a list of the following agreements, arrangements or
understandings to which the Company or any Subsidiary or any Joint
Venture of which the Company or a Company Subsidiary is the operator is
a party (or with respect to subsection (xii) below to which any such
party or Tejas or Tejas Energy or any other Shell Affiliate is a party)
(each, a "Material Contract"):
(i) any site lease with respect to a Facility;
(ii) any lease (whether of real or personal
property) providing for annual rental payments or receipts of
$1,500,000 or more;
(iii) any operating agreements under which the
Company or any Company Subsidiary is the operator;
(iv) any construction agreements providing for
annual payments by the Company or any Subsidiary of
$1,500,000 or more;
(v) any pipeline tariff agreements;
(vi) any storage agreements providing for annual
payments or receipts by the Company or any Subsidiary of
$1,500,000 or more, other than agreements which have a term of
30 days or less or can be terminated with 30 days or less
notice without penalty;
(vii) partnership agreements, limited liability
agreements and joint venture agreements and construction and
operation agreements;
(viii) any gas processing agreements, fractionation
agreements, NGL supply and sale agreements, marketing
agreements, straddle agreements, balancing agreements,
interconnection agreements or utility contracts in each case
providing
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for annual payments or receipts in excess of $1,500,000 other
than agreements which have a term of 30 days or less or can be
terminated with 30 days or less notice without penalty;
(ix) any agreement (other than the Transaction
Agreements) relating to the acquisition or disposition of a
Subsidiary or any material asset outside the ordinary course
of business (whether by merger, sale of stock, sale of assets
or otherwise), other than as set forth on Schedule 4.12(a)(ix)
of the Tejas Disclosure Memorandum;
(x) any agreement or series of related agreements
relating to Indebtedness for Borrowed Money or any guarantee
thereof in excess of $1,500,000;
(xi) any agreement or arrangement with Tejas
Energy or Tejas or an Affiliate of Shell Oil Company on
the one hand and the Company or any of its Subsidiaries on
the other hand; and
(xii) any agreement which restricts the Company or
its Subsidiaries or Enterprise Partners or any of its
Affiliates from engaging in any line of business which the
Company or any of the Subsidiaries is conducting immediately
prior to the Closing Date.
(b) True and complete copies of each such Material Contract
have been made available to Enterprise Partners.
(c) Except as disclosed in Schedule 4.12(c) of the Tejas
Disclosure Memorandum, each Material Contract is a legal, valid and
binding obligation of each of the Company and/or any Subsidiary that is
a party thereto and, to the Knowledge of Tejas or Tejas Energy, each
other party to such Material Contract, enforceable against the Company
and/or such Subsidiary and, to the Knowledge of Tejas or Tejas Energy,
each such other party in accordance with its terms (except as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally
and general equitable principles (regardless of whether such
enforceability is considered in a proceeding at law or in equity)), and
neither the Company nor any Subsidiary nor, to the Knowledge of Tejas
Energy or Tejas, any other party to such Material Contract is in
material default or has failed to perform any material obligation under
such Material Contract, and there does not exist any event, condition
or omission which would constitute a material breach or material
default (whether by lapse of time or notice or both), except for any
such defaults, failures or breaches as, individually or in the
aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect.
(d) Neither the Company nor any Subsidiary is in breach of or
has failed to perform or has taken any action or failed to perform any
action that, with notice or passage of time or both, would be a breach,
under any Material Contract referred to in clause (a)(xi)
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above where such breach could result in the Shell Oil Company Affiliate
terminating or having the right to terminate or cancel such agreement
or which would otherwise have a Material Adverse Effect on the Company.
Section 4.13 Assets.
(a) Schedule 4.13(a) of the Tejas Disclosure Memorandum
correctly describes all real property (the "Real Property") which the
Company or any of its Subsidiaries owns, leases or subleases, any title
insurance policies and surveys with respect to such Real Property,
specifying in the case of leases or subleases, the name of the lessor
or sublessor, the lease term and the basic annual rent.
(b) Schedule 4.13(b) of the Tejas Disclosure Memorandum sets
forth, with respect to each Facility, the name and location of such
Facility, whether such Facility is a gas processing, fractionation,
storage or pipeline facility, the capacity of such Facility, the
ownership interest of the Company and its Subsidiaries in each such
Facility and the name of the operator of each Facility.
(c) Subject to execution and filing of the acts of amendment
and conveyances (as described in Section 6.09), the Company or a
Subsidiary thereof has good and indefeasible title to, or in the case
of leased Real Property or personal property, valid leasehold interests
in, all material assets (whether real, personal, tangible or
intangible) reflected in the Audited Financial Statements or acquired
after December 31, 1998, including the interests in the Facilities
described in Schedule 1.01(a) of the Tejas Disclosure Memorandum.
Except as set forth on Schedule 4.13(c) of the Tejas Disclosure
Memorandum, no material asset of the Company or any of its Subsidiaries
is subject to any Lien, except for Permitted Liens.
Section 4.14 Employees, Employee Benefits. None of the Company
nor any Subsidiary thereof has any employees or maintains or is liable under any
employee compensation, benefit, pension or welfare plan or arrangement.
Section 4.15 Sufficiency of Assets Held by the Company and its
Subsidiaries. Except as provided in Schedule 4.15 of the Tejas Disclosure
Memorandum, the assets to be held by the Company and its Subsidiaries as of the
Closing will constitute all of the properties or assets necessary to conduct the
Business as conducted at the Effective Date.
Section 4.16 Intellectual Property.
(a) Schedule 4.16 of the Tejas Disclosure Memorandum contains
a list of all Intellectual Property Rights owned or licensed by Tejas
Energy, or Tejas or the Company or any of its Subsidiaries that
Enterprise Partners has identified that it desires to use following the
Closing ("Material Intellectual Property Rights").
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(b) Schedule 4.16 of the Tejas Disclosure Memorandum sets
forth a list of all material licenses, sublicenses and other agreements
involving Material Intellectual Property Rights as to which the Company
or any of its Subsidiaries is a party.
(c) (i) Except as set forth in Schedule 4.16 of the Tejas
Disclosure Memorandum, since February 2, 1998, none of the Company and
its Subsidiaries has been a defendant in any action, suit,
investigation or proceeding relating to, or otherwise has been notified
of, any alleged claim of infringement of any Material Intellectual
Property Right, and none of Tejas or the Company or any of its
Subsidiaries has any Knowledge of any other such infringement by the
Company or any of its Subsidiaries, and (ii) none of the Company and
its Subsidiaries has any outstanding claim or suit for, and has no
Knowledge of, any continuing infringement by any other Person of any
Material Intellectual Property Rights. No Material Intellectual
Property Right is subject to any outstanding judgment, injunction,
order, decree or agreement restricting the use of such Material
Intellectual Property Right by the Company or any of its Subsidiaries
or restricting the licensing of such Material Intellectual Property
Right by the Company or any of its Subsidiaries to any Person. None of
the Company and its Subsidiaries has entered into any agreement to
indemnify any other Person against any charge of infringement of any
Material Intellectual Property Right.
Section 4.17 Non-Business Related Assets. Since its formation
in 1998 and other than the Excluded Assets, neither the Company nor any of its
Subsidiaries has owned any assets which were not involved in, used in or
otherwise related to the conduct of the Business.
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF THE ENTERPRISE
PARTIES
The Enterprise Parties, jointly and severally, and EPC II,
severally and only as to representations and warranties applicable to EPC II in
Sections 5.01(b), 5.02(b), 5.03, 5.04(a), and 5.05, and to the representations
and warranties in 5.01(c) and 5.10(a), (b), (c), (e) and (h) and Enterprise
Products severally and only as to the representations applicable to Enterprise
Products in Sections 5.02(a), 5.03, 5.04(a) and 5.05, represent and warrant to
Tejas and Tejas Energy that the following statements were true and correct as of
the Effective Date and are true and correct as of the Closing Date:
Section 5.01 Organization.
(a) Each of Enterprise Partners and Enterprise Operating is a
limited partnership duly organized, validly existing and in good
standing under the Laws of the State of Delaware with all requisite
power and authority to own, lease and operate its properties and to
carry on its business as currently conducted.
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(b) EPC II is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware with all
requisite power and to own, lease and operate its properties and to
carry on its business as currently conducted.
(c) Enterprise GP is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Delaware with all requisite power and authority to own, lease
and operate its properties and to carry on its business as currently
conducted.
Section 5.02 Authorization of Agreement.
(a) Each of the Enterprise Parties and Enterprise Products has
all requisite power and authority to enter into the Transaction
Agreements to which it is a party, to perform its obligations
thereunder and to consummate the Transactions to which it is a party.
The execution and delivery by each of the Enterprise Parties and
Enterprise Products of such Transaction Agreements, and the performance
of their obligations thereunder, have been duly and validly authorized
by all requisite action on the part of the Enterprise Parties and
Enterprise Products. The Transaction Agreements to which the Enterprise
Parties or Enterprise Products are a party have been executed and
delivered by such Enterprise Parties and Enterprise Products,
constitute legal, valid and binding obligations of such Enterprise
Parties and Enterprise Products, and are enforceable against them in
accordance with their terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws of
general application relating to or affecting the rights and remedies of
creditors, or by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law),
including the availability of specific performance.
(b) EPC II has all requisite corporate power and authority to
enter into the Transaction Agreements to which it is a party, to
perform its obligations thereunder and to consummate the Transactions.
The execution and delivery by EPC II of the Transaction Agreements to
which it is a party, and the performance of its obligations thereunder,
have been duly and validly authorized by all requisite action on the
part of EPC II. Each Transaction Agreement to which EPC II is a party
has been duly executed and delivered by EPC II, constitutes a legal,
valid and binding obligation of EPC II, and is enforceable against EPC
II in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws of
general application relating to or affecting the rights and remedies of
creditors, or by general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law),
including the availability of specific performance.
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Section 5.03 No Violations. The execution, delivery and
performance by the Enterprise Parties, EPC II and Enterprise Products of the
Transaction Agreements, and the consummation of the Transactions do not and will
not (i) conflict with or violate any provision of the organizational documents
of the Enterprise Parties, EPC II or Enterprise Products, (ii) subject to
obtaining the Enterprise Required Consents, conflict with, or result in the
breach of, or constitute a default under, or result in the termination,
cancellation or acceleration (whether after the giving of notice or the lapse of
time or both) of any right or obligation of the Enterprise Parties, EPC II or
Enterprise Products, under any note, bond, mortgage, indenture, Permit, license,
lease, agreement, contract, arrangement or commitment to which any of the
Enterprise Parties, EPC II or Enterprise Products is a party or by which the
Enterprise Parties, EPC II or Enterprise Products or any of their assets or
properties are bound or affected, or (iii) subject to obtaining the Enterprise
Required Consents, violate or result in a breach of or constitute a default
under any Law or Judgment applicable to the Enterprise Parties, EPC II or
Enterprise Products, or by which the Enterprise Parties, EPC II or Enterprise
Products, or any of their respective assets are bound or affected, except, in
the cases of clauses (ii) and (iii), for any conflict, breach, default,
termination, cancellation, acceleration, loss or violation which, individually
or in the aggregate, would not materially impair the Enterprise Parties', EPC
II's or Enterprise Products' ability to effect the Closing or have a Material
Adverse Effect on Enterprise Partners, Enterprise Operating and their respective
Subsidiaries or on Enterprise GP.
Section 5.04 Approvals. (a) Except for the requirements of the
Consents listed in Schedule 5.04 ("Enterprise Required Consents"), no Consent is
required to be obtained by the Enterprise Parties, EPC II or Enterprise
Products, or any of their respective Affiliates from, and no notice or filing is
required to be given by the Enterprise Parties, EPC II or Enterprise Products or
any of their respective Affiliates to or made by the Enterprise Parties, EPC II
or Enterprise Products or any of their respective Affiliates with, any
Governmental Authority or other Person in connection with the execution,
delivery and performance by the Enterprise Parties, EPC II or Enterprise
Products of the Transaction Agreements, other than in all cases where the
failure to obtain such Consent or approval or to give or make such notice or
filing would not, individually or in the aggregate, impair the Enterprise
Parties', EPC II's or Enterprise Products' ability to effect the Closing or have
a Material Adverse Effect on Enterprise Partners, Enterprise Operating and their
respective Subsidiaries or on Enterprise GP.
(b) The Enterprise Parties represent that all filings required
under the HSR Act to be made by the Enterprise Parties or their Affiliates in
order for the Enterprise Parties to consummate the Transactions have been made
and early termination of the applicable waiting period thereunder has expired.
Section 5.05 Litigation; Impairment. There are no actions,
suits, claims or proceedings pending (whether at law or in equity) or, to the
Knowledge of the Enterprise Parties, EPC II and Enterprise Products, threatened
against or involving Enterprise Partners, Enterprise Operating, or their
respective Subsidiaries or Enterprise GP in any Court or before or by any
Governmental Authority which (i) questions the validity of any Transaction
Agreement or seeks to
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restrain, prohibit, invalidate, set aside, prevent or make unlawful any
Transaction Agreement or any of the Transactions, or (ii) if adversely
determined (x) would prevent or impair the ability of Enterprise Partners or
Enterprise Operating to purchase the Company Interest, the ability of EPC II to
sell the GP Interest to Tejas or the ability of the Enterprise Parties or
Enterprise Products to perform any of their obligations under the Transaction
Agreements or (y) would have a Material Adverse Effect on Enterprise Partners,
Enterprise Operating and their respective Subsidiaries or on Enterprise GP.
Section 5.06 Compliance With Applicable Law. Each of
Enterprise Partners, Enterprise Operating and its Subsidiaries and Enterprise GP
is presently complying with all applicable Laws and Judgments, except for such
failures to comply which, individually or in the aggregate, would not reasonably
be expected to result in a Material Adverse Effect on Enterprise Partners,
Enterprise Operating or its Subsidiaries or Enterprise GP.
Section 5.07 Permits. Each of the Enterprise Partners,
Enterprise Operating and each of their respective Subsidiaries and Enterprise GP
have all Permits required to conduct their respective business as currently
conducted and such entities have been operating their respective businesses
pursuant to and in compliance with the terms of all such Permits, except for
such failures to comply which have not resulted in, individually or in the
aggregate, a Material Adverse Effect on the Enterprise Parties, Enterprise
Operating and their respective Subsidiaries or on Enterprise GP. Such Permits
held by the Enterprise Partners, Enterprise Operating and their respective
Subsidiaries and Enterprise GP are valid and in full force and effect and none
of the Permits will, assuming the Enterprise Required Consents have been
obtained, be terminated or become terminable as a result of the transactions
contemplated by this Agreement, except, in each case, such Permits the
termination or impairment of which would not have a Material Adverse Effect on
Enterprise Partners, Enterprise Operating and their respective Subsidiaries or
Enterprise GP.
Section 5.08 Taxes.
(a) All Tax Returns of Enterprise Partners, Enterprise
Operating, Enterprise GP and their respective Subsidiaries that are
required to be filed (taking into account any extensions of time within
which to file) before the Closing Date, have been or will be filed, the
information provided in such Tax Returns is complete and accurate in
all material respects, and all Taxes shown to be due and payable by
Enterprise Partners, Enterprise Operating, Enterprise GP and their
respective Subsidiaries on such Tax Returns have been or will be paid
in full.
(b) Enterprise Partners and Enterprise Operating have not, and
will not on or prior to the Closing Date, file an election under
Treasury Reg. ss.301.7701-3 to be classified as a corporation for
federal income tax purposes. During the entirety of the period from the
date of the formation through the Closing, each of the Enterprise
Partners and Enterprise Operating has been and will be treated and
classified as a partnership for federal income tax purposes under
Treasury Reg. ss.301.7701-2 and -3 and ninety percent (90%) or more of
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Enterprise Partners' gross income is income derived from the
exploration, development, mining or production, processing, refining,
transportation or marketing of any mineral or natural resource or other
items of "qualifying income" within the meaning of Section 7704 of the
Code.
Section 5.09 SEC Reports. Since August 1, 1998 (a) Enterprise
Partners has timely made all filings required to be made by the Securities Act
and the Exchange Act, (b) all filings by Enterprise Partners with the SEC, at
the time filed (in the case of documents filed pursuant to the Exchange Act) or
when declared effective by the SEC (in the case of registration statements filed
under the Securities Act) complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC thereunder, (c) no such filing, at the time described
above, contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading, and (d) all financial statements contained or incorporated by
reference therein complied as to form when filed in all material respects with
the rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto), and fairly present in all material respects the financial condition
and results of operations of Enterprise Partners at and as of the respective
dates thereof and the consolidated results of its operations and changes in cash
flows for the periods indicated (subject in the case of unaudited statements, to
normal year-end audit adjustments).
Section 5.10 Ownership; Issuance of Special Units.
(a) Enterprise GP is the sole general partner of Enterprise
Partners, with a 1% general partner interest in Enterprise Partners.
(b) Enterprise GP is the sole general partner of Enterprise
Operating, with a 1.0101% general partner interest in Enterprise
Operating.
(c) All of the general partner interests in Enterprise
Partners and Enterprise Operating have been duly authorized and have
been validly issued to Enterprise GP in accordance with the Enterprise
Partners Partnership Agreement and Enterprise Operating Partnership
Agreement, and are owned by Enterprise GP free and clear of all Liens.
(d) Enterprise Partners is the sole limited partner of
Enterprise Operating with a 98.9899% limited partner interest in
Enterprise Operating; such limited partner interest has been duly
authorized and validly issued in accordance with the Enterprise
Operating Partnership Agreement, is fully paid (to the extent required
by the Enterprise Operating Partnership Agreement) and nonassessable
(as such nonassessability may be affected by matters described in the
Enterprise Partners' Prospectus dated July 27, 1998 under the
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caption "The Partnership Agreement--Limited Liability") and is owned by
Enterprise Partners free and clear of all Liens.
(e) Except as set forth on Schedule 5.10(e), all of the
membership interests in Enterprise GP have been duly authorized and
validly issued and are fully paid and nonassessable, and are owned 95%
by EPC II and 5% by Dan Duncan LLC free and clear of Liens.
(f) The only outstanding limited partner interests of
Enterprise Partners (other than the Special Units) are 45,552,915
Common Units and 21,409,870 Subordinated Units, which have been duly
authorized by the Enterprise Partners Partnership Agreement and are
validly issued and fully paid (to the extent required under the
Enterprise Partners Partnership Agreement) and nonassessable (except as
such nonassessability may be affected by matters described in the
Enterprise Partners' Prospectus dated July 27, 1998 under the caption
"The Partnership Agreement--Limited Liability"). Except as set forth on
Schedule 5.10(f), there are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights or other contracts, commitments or obligations that
could require Enterprise Partners to issue any additional units or
equity other than as set forth in this Agreement. Enterprise Partners
has not granted any registration rights with respect to partnership
units or other equity to any third parties.
(g) When issued and delivered to Tejas at the Closing, the
Special Units shall have been duly authorized and validly issued to
Tejas in accordance with the Enterprise Partners Amended Partnership
Agreement and fully paid and nonassessable (except as such
nonassessability may be affected by matters described in the Enterprise
Partners' Prospectus dated July 27, 1998 under the caption "The
Partnership Agreement--Limited Liability.") Upon its receipt of the
Special Units at Closing, Tejas will receive good and indefeasible
title to the Special Units free and clear of Liens.
(h) EPC II owns Common Units representing 73.657% of the
issued and outstanding Common Units.
Section 5.11 Financing. Enterprise Partners has, or has
arranged for, the funds necessary to pay the Other Consideration to Tejas.
Section 5.12 No Brokers. None of the Enterprise Parties has
employed any investment banker, broker, or finder in connection with the
transactions contemplated by this Agreement, nor has any of them taken any
action which would give rise to a valid claim against Tejas or Tejas Energy for
a brokerage commission, finder's fee, or other like payment.
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Section 5.13 Investment Intent.
(a) The Enterprise Parties are capable of evaluating the
merits and risks of their investment in the Company Interest. The
Enterprise Parties are taking the Company Interest for their own
account and not with a current view to or intent to sell in connection
with any distribution of such securities as such terms are defined
under the Securities Act. The Enterprise Parties have had an
opportunity to discuss the Company's and its Subsidiaries' and its
Joint Ventures' and co-ownerships' business and financial condition,
properties, operations and prospects with the Company's and its
Subsidiaries' management and to ask questions of officers of the
Company and its Subsidiaries.
(b) The Enterprise Parties understand that (i) the Company
Interests will be "restricted securities" under the applicable federal
securities laws, and (ii) that the Securities Act and the rules of the
SEC provide in substance that such equity holder may dispose of the
Company Interests only pursuant to an effective registration statement
under the Securities Act or in a transaction exempt from the
registration requirements of the Securities Act, and that, accordingly,
the Enterprise Parties may be required to bear the economic risk of the
investment in the Company Interests for a substantial period of time.
ARTICLE VI
COVENANTS
Section 6.01 Access to Information Following the Closing.
(a) To the extent reasonably necessary or desirable in
connection with Tejas' ownership of the Company Interest (including tax
related matters), after the consummation of the Transactions, Tejas
will have reasonable access at all reasonable times and in a manner so
as not to interfere with the normal business operations of the Company
and its Subsidiaries, to all premises, properties, personnel, books,
records, work papers, contracts and documents of or pertaining to each
of the Company and its Subsidiaries to the extent relating to the
Business or assets of the Business as existing at the Closing.
Enterprise Partners shall preserve all such information, records and
documents for a period of seven (7) years following the Closing.
(b) Each of the parties hereto will preserve and retain all
schedules, work papers and other documents relating to any Tax Returns
of or with respect to the Company or any of its Subsidiaries or to any
claims, audits or other proceedings affecting the Company or any of its
Subsidiaries until the expiration of the statute of limitations
(including extensions) applicable to the taxable period to which such
documents relate or until the final determination of any controversy
with respect to such taxable period and until the final determination
of any payments that may be required with respect to such taxable
period under this Agreement.
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Section 6.02 Intentionally Deleted.
Section 6.03 Public Announcements. The Enterprise Parties and
Tejas and Tejas Energy will consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the transactions contemplated by this Agreement and, except as may be
required by applicable Law or any securities exchange on which the securities of
the parties or their Affiliates are listed (following notice and consultation),
neither the Enterprise Parties nor Tejas or Tejas Energy shall issue any such
press release or make any such public statement without the prior approval of
the other party to this Agreement, such approval not to be unreasonably withheld
or delayed.
Section 6.04 Removal of Tradenames. As soon as reasonably
practicable after the Closing (and in any event, within 180 days after the
actual date of the Closing (or such later date as may be reasonably requested by
Enterprise Operating and consented to by Tejas, such consent not to be
unreasonably withheld), the Enterprise Parties will remove the "Tejas," "Coral"
and "Shell" names (and all derivatives thereof), trademarks and symbols from the
properties and assets of the Company and its Subsidiaries (including changing
all signage relating thereto) and provide the requisite notices to, the
appropriate federal, state or local agencies to place the title or other
evidences of ownership, including operation of the properties and assets, in a
name other than any name of Tejas or any of its Affiliates or any variations
thereof. In addition, within 15 days of the actual date of Closing (and 90 days
of the actual date of Closing with respect to Tejas NGL Pipelines, LLC),
Enterprise Operating will change all of the legal names of the Company and its
Subsidiaries to delete from the name thereof the word "Tejas".
Section 6.05 Further Assurances.
(a) The parties hereto agree to cooperate fully with each
other and from time to time after the Closing, upon request and without
further consideration, to (i) execute, deliver, acknowledge and file
(where necessary) all such further instruments, agreements and
documents, as may be reasonably required to more effectively evidence
the transfer of the assets comprising the Business to the Company and
its Subsidiaries or to consummate the Transactions and carry out the
intent and purposes of this Agreement and (ii) take such actions as may
be reasonably required to cause Enterprise Operating (or its designee)
to have actual control and possession of the assets comprising the
Business. Without in any manner limiting the generality of the
foregoing, if record and beneficial title to any of the assets
comprising the Business is not held by the Company or its Subsidiaries
but rather is held by an Affiliate of Tejas as of the Closing, Tejas
Energy and Tejas agree to execute and to cause their Affiliates to
execute such agreements as shall be reasonably required to cause such
title to effectively be transferred and conveyed from Tejas, Tejas
Energy or their Affiliates to the Company or its Subsidiaries.
(b) As to pre-closing Consents or governmental filings
required to transfer the Business to the Company or its Subsidiaries which are
not obtained prior to Closing, Tejas
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will (i) designate an in-house lawyer or business person (at Tejas'
cost) to assist Enterprise Partners in obtaining such Consents for a
period of twelve months following the Closing, (ii) subject to the
limitation contained in subsection (c) below, will be obligated to
provide Enterprise Partners funds to obtain such Consents and (iii)
will, to the extent possible (without any cost to Tejas or its
Affiliates, which shall not include the loss of such economic benefit)
provide to the Company and its Subsidiaries the economic benefit of
such items if the necessary Consent is not obtained within the
above-referenced twelve month period. Except as provided in this
Section 6.05, neither Tejas nor Tejas Energy will have any liability
for obtaining Consents after the Closing.
(c) Tejas' payments to unaffiliated third parties pursuant to
paragraphs (a) and (b) of this Section 6.05 shall not exceed $500,000
in the aggregate; provided, however, that if Tejas or its Affiliates
shall incur a cost that exceeds such amount, in connection with
undertaking an action requested by Enterprise Partners or one of its
Affiliates, then Enterprise Partners and Enterprise Operating shall
reimburse such amount to Tejas or its Affiliates as the case may be.
The cost of the in-house lawyer or business person referenced in
subsection (b)(i) above and loss of economic benefit pursuant to
subsection (b)(iii) shall not be included in or charged against the
$500,000 ceiling. Tejas, subject to and as part of the above-referenced
$500,000 ceiling, agrees to reimburse Enterprise Partners for local
counsel fees incurred in connection with remedial actions pursuant to
subsections (a) and (b) above.
Section 6.06 Books and Records. Within a reasonable period of
time after Closing, Tejas Energy and Tejas will, and will cause their respective
Affiliates to deliver to Enterprise Operating (or its designee) all books,
accounting records, contracts, leases, property files and other files and
records relating to the Business.
Section 6.07 Intercompany Indebtedness. On or prior to the
Closing, Tejas Energy and Tejas shall (i) pay or cause their Affiliates to pay
to the Company and its Subsidiaries all long-term debt (including current
maturities) and other Indebtedness for Borrowed Money owed by Tejas, Tejas
Energy or any Affiliate of Tejas or Tejas Energy (other than the Company and its
Subsidiaries and Joint Ventures) as of such date to the Company and its
Subsidiaries and (ii) pay to the Company a capital contribution and cause such
capital contribution to be applied to pay or satisfy all long-term debt
(including current maturities) and other Indebtedness for Borrowed Money owed by
the Company and its Subsidiaries to Tejas, Tejas Energy or their respective
Affiliates (other than the Company and its Subsidiaries and Joint Ventures) as
of such date. Tejas and Tejas Energy further agree to pay all Retained
Liabilities when, as and if they become due and payable.
Section 6.08 Excluded Assets. On or prior to the Closing,
Tejas and Tejas Energy will cause the Excluded Assets to be transferred and
conveyed out of the Company and its Subsidiaries pursuant to documentation
reasonably acceptable to Enterprise Partners.
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Section 6.09 Acts of Amendment. Tejas Energy and Tejas shall
cause their Affiliates which conveyed, assigned and contributed assets and
properties to the Company and its Subsidiaries as reflected in Section 6.09 of
the Tejas Disclosure Memorandum to enter into with the Company and its
Subsidiaries, and shall cause the Company and its Subsidiaries to execute an act
of amendment to the applicable conveyance and assignments or acts of sale or
conveyances as reflected on Schedule 6.09, effective as of the date of the
original conveyance, assignment and/or contribution.
Section 6.10 Collections.
(a) After Closing, Tejas and Tejas Energy agree to cause to be
paid to the Company any amounts received in respect of accounts
receivable related to the Business after the Effective Date promptly
upon receipt thereof.
(b) After Closing, the Enterprise Parties agree to, and to
cause the Company and its Subsidiaries to, pay to Tejas or Tejas Energy
any amounts received in respect of the Excluded Assets after the
Effective Date promptly upon receipt thereof.
Section 6.11 Preferential Rights. The parties hereto
acknowledge and agree that if following the Closing and as a consequence of the
transactions contemplated by this Agreement, the Company or any of its
Subsidiaries or Tejas or any of its Affiliates is required to transfer title to
any of the assets included in the Business to satisfy a preferential right, then
the Company or its Subsidiary (as the case may be) shall be entitled to receive
and retain such proceeds paid by the Person exercising the preferential right.
Section 6.12 Preparation of Historical Financials. Tejas and
Tejas Energy agree (at no out-of-pocket cost to Tejas or Tejas Energy) to
cooperate with Enterprise Partners and to provide Enterprise Partners with
reasonable access (at all reasonable times and in a manner so as not to
interfere with the normal business operations of Tejas and Tejas Energy) to
books, records and personnel reasonably required for Enterprise Partners to
prepare statements of direct operating revenues and expenses of the Company and
its Subsidiaries for fiscal years 1996 and 1997 as may be required for
Enterprise Partners' SEC filings in connection with the transactions
contemplated by this Agreement.
Section 6.13 Unitholder Approval.
(a) Enterprise GP and EPC II agree to and shall call and
schedule a meeting of the Unitholders of Enterprise Partners and submit
to the Unitholders of Enterprise Partners for their approval a proposal
to approve the issuance of the Common Units to be issued upon
conversion of the Special Units as soon as practicable following the
Closing Date and in any event prior to May 1, 2000.
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(b) EPC II represents that it (alone and without any other
equity holder in Enterprise Partners) has the requisite ownership in
Enterprise Partners to approve the issuance of the Common Units upon
conversion of the Special Units. EPC II covenants and agrees that it
will not dispose of any of its equity interests in Enterprise Partners
prior to such meeting of the Unitholders and will vote its equity
interests in favor of the issuance of the Common Units required to be
issued upon conversion of the Special Units.
(c) The Enterprise Partners will, as soon as practicable,
following the Unitholders' meeting referenced in (a) above and in any
event within 20 days following such Unitholders' meeting, use its best
efforts to cause the Common Units which are to be issued upon
conversion of the Special Units to be listed on the New York Stock
Exchange.
ARTICLE VII
EMPLOYEE MATTERS
Section 7.01 Employees. Tejas has furnished Enterprise
Products with a list of the employees of Tejas or its Affiliates who are
assigned to the Business (the "Business Employees"), which list is attached
hereto as Schedule 7.01. Enterprise Products shall have the sole and absolute
discretion in determining which, if any, of the Business Employees it will offer
employment and the terms, conditions and benefits relating to such offers of
employment, provided that the same shall be substantially comparable with the
terms, conditions and benefits Enterprise Products provides to similarly
situated employees of Enterprise Products. Employment under such offers shall
commence on the later of October 1, 1999, or the date such Business Employee, if
not actively at work on October 1, 1999 for any reason, excluding vacation, sick
leave or regularly scheduled days off, returns to full-time active employment
with Enterprise Products (the "Employment Commencement Date"), provided such
Business Employee returns within 180 days of the Closing Date. The Business
Employees who accept and actually commence employment with Enterprise Products
are hereinafter collectively referred to as "Transferred Employees."
Section 7.02 Solicitation of Employees.
(a) Without the prior written consent of Enterprise Products,
Tejas shall cause its Affiliates to refrain for a period of one year
from the Closing Date, from soliciting directly or indirectly, the
employment of or otherwise seeking to engage the services of any
Transferred Employee. Tejas shall be responsible for all obligations
and liabilities, if any, under the Worker Adjustment and Retraining
Notification Act and any comparable state laws with respect to the
current and former Business Employees who do not become Transferred
Employees.
(b) Without the prior written consent of Tejas, the Enterprise
Parties, Enterprise Products and their respective Affiliates shall
refrain for a period of one year from the Closing Date, from soliciting
directly or indirectly, the employment of or otherwise seeking to
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engage the services of any employee of Tejas or any of its respective
Affiliates, other than the Transferred Employee.
(c) Notwithstanding paragraphs (a) and (b) of this Section
7.02, nothing herein shall prevent a party hereto (the "Hiring Party")
from hiring any employee of another party hereto if such person
responds to a general advertisement of employment which is not directed
to such individual specifically or was otherwise not directly or
indirectly solicited by the Hiring Party.
Section 7.03 Employee Benefit Plans. Effective as of their
Employment Commencement Dates, Enterprise Products shall provide to the
Transferred Employees its employee benefit plans and programs ("Enterprise
Products' Benefit Plans") on substantially the same basis such plans and
programs are provided to similarly situated employees of Enterprise Products,
except that coverage under Enterprise Products' group health, life and
disability plans shall commence as of the Benefit Plan Date (as defined below).
With respect to the Enterprise Products' Benefit Plans, Enterprise Products
shall grant the Transferred Employees credit for their service with Tejas
Affiliates as of their Employment Commencement Date for all purposes (other than
the accrual of benefits under a defined benefit pension plan) for which such
service was recognized by Tejas Affiliates under a similar plan or program. With
respect to Enterprise Products' Benefit Plans that provide group health, life
and disability benefits: (i) Enterprise Products shall make Transferred
Employees eligible to participate on their Employment Commencement Date (the
"Benefit Plan Date"), (ii) Enterprise Products shall cause such plans to waive
any exclusions or limitations with respect to pre-existing conditions, waiting
periods and actively-at-work exclusions, except to the same extent the
Transferred Employee is subject to a pre-existing condition or actively-at-work
exclusion on the Closing Date under any health plan of Tejas Affiliates, and
(iii) Enterprise Products shall provide that any health expenses incurred by a
Transferred Employee or his or her covered dependents during 1999 on or before
the Benefit Plan Date shall be taken into account under such plan for purposes
of satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions. Enterprise Products' group health plan shall be responsible for all
benefit claims by Transferred Employees and their dependents for covered
services rendered on and after the date their participation in Enterprise
Products' group health plan commences, and the respective group health plans of
Tejas Affiliates shall be responsible for all benefit claims by Transferred
Employees and their dependents for covered services rendered before their
participation in Enterprise Products' group health plan commences.
Section 7.04 Vacation. The Transferred Employees shall receive
credit under Enterprise Products' vacation schedule such that the vacation time
they earn with Enterprise Products is not less than that which they are eligible
to earn under the vacation schedules of Tejas Affiliates as of the Closing Date.
Transferred Employees shall be entitled to vacation time with Enterprise
Products for the remainder of 1999 based only on their actual service with
Enterprise Products, and Enterprise Products' vacation schedule shall be
prorated for the remainder of 1999 for this purpose. Tejas shall cause its
Affiliates to pay each Transferred Employee his or her accrued but unused paid
personal leave as soon as reasonably practicable following the Closing Date.
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Section 7.05 Access to Information and Personnel. (a) After
the Closing Date, Tejas shall cause its Affiliates to make reasonably available
to Enterprise Products such financial, personnel and related information as may
be reasonably requested by Enterprise Products with respect to any Transferred
Employee, including, but not limited to, compensation and employment histories;
except that neither Tejas nor its Affiliates will provide any historical
performance related data with respect to any Transferred Employee.
(b) After the Closing Date, Enterprise shall make available to
Tejas any Transferred Employees with respect to continuing litigation, audits
and other reasonable business requests at no cost to Tejas.
Section 7.06 Tejas and Affiliates Benefit Plans. (a)
Enterprise Products is not assuming any employee benefit plan or program or any
liability of Tejas and its Affiliates thereunder or any other liability of Tejas
or any Affiliate with respect to any Business Employee or other current or
former employee of Tejas or any Affiliate, including, without limitation, any
liability under COBRA.
(b) Tejas and its Subsidiaries shall cause each Transferred
Employee to be fully vested as of the Closing Date in each plan of Tejas and its
Subsidiaries that is a qualified plan under Section 401(a) of the Code.
(c) Each Transferred Employee who would be eligible to
immediately retire from Tejas and its Subsidiaries on the Closing Date and
receive retiree health benefits under a health plan of Tejas and its
Subsidiaries shall be eligible notwithstanding his active employment with
Enterprise Products and its Affiliates to immediately begin receiving retiree
health or pension benefits under the retiree health plan of Tejas and its
Subsidiaries subject to the then terms of such plan.
Section 7.07 Third-Party Beneficiaries. No provision of this
Article VII shall create any third-party beneficiary rights in any Transferred
Employee (including any beneficiary or dependent thereof), including, without
limitation, any right to employment or employment in any particular position
with Enterprise Products for any specified period of time after the Closing
Date.
ARTICLE VIII
INDEMNIFICATION; SURVIVAL
Section 8.01 Indemnification by the Enterprise Parties, EPC II
and Enterprise Products. Subject to the limitations set forth in this Article
VIII,
(i) the Enterprise Parties, jointly and severally, hereby
agree to indemnify and hold harmless Tejas, Tejas Energy and any of
their respective Affiliates and their respective officers, directors,
partners, members and shareholders (collectively the "Tejas Indemnified
Parties") from and against any and all Damages incurred by Tejas
Indemnified Parties in
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connection with (a) any breach of any representation or any warranty
made by the Enterprise Parties under Sections 5.01 (Organization), 5.02
(Authorization of Agreement), 5.03 (No Violations), 5.04 (Approvals),
5.08 (Taxes), 5.09 (SEC Reports), 5.10 (Ownership; Issuance of Special
Units), 5.12 (No Brokers) and 5.13 (Investment Intent) (collectively,
the "Enterprise Representations and Warranties"); or (b) any failure by
any of the Enterprise Parties to perform any covenant or other
agreement hereunder;
(ii) EPC II hereby agrees to indemnify and hold harmless the
Tejas Indemnified Parties from and against any and all Damages incurred
by the Tejas Indemnified Parties in connection with (a) any breach of
any of the Enterprise Representations and Warranties to the extent and
only to the extent that such representations and warranties are made by
EPC II under Article V hereof, or (b) any failure by EPC II to perform
any covenant or other agreement made by it hereunder; and
(iii) Enterprise Products hereby agrees to indemnify and hold
harmless the Tejas Indemnified Parties from and against any and all
Damages incurred by the Tejas Indemnified Parties in connection with
(a) any breach of any of the Enterprise Representations and Warranties
to the extent and only to the extent that such representations and
warranties are made by Enterprise Products under Article V hereof, or
(b) any failure by Enterprise Products to perform any covenant or other
agreement made by it hereunder;
IN EACH CASE REGARDLESS OF WHETHER SUCH DAMAGES ARE CAUSED IN WHOLE OR IN PART
BY THE STRICT LIABILITY OR NEGLIGENT ACT OR OMISSION OF THE INDEMNIFIED PARTY.
Section 8.02 Indemnification by Tejas and Tejas Energy.
Subject to the limitations set forth in this Article VIII, Tejas and Tejas
Energy agree, jointly and severally, to indemnify and hold harmless the
Enterprise Parties and their respective officers, directors, partners, members
and shareholders (collectively, the "Enterprise Indemnified Parties") from and
against any and all Damages arising in connection with or out of (a) any breach
by Tejas and Tejas Energy of any of their representations and warranties
contained in Sections 3.01 (Organization); 3.02 (Ownership of Company Interest),
3.03 (Validity and Enforceability), 3.04 (Approvals and Consents), 3.05 (No
Violation), 3.07 (Investment Intent), 3.08 (No Brokers), 4.01 (Organization),
4.02 (Capitalization), 4.06(a) (Litigation), 4.07 (Taxes), 4.11 (Conduct of
Business From the Effective Date to the Closing Date), and 4.12(a), (b) and (d)
(Material Contracts or Indebtedness) and 4.17 (Non-Business Related Assets)
(collectively, the "Tejas Representations and Warranties"), (b) any failure by
Tejas or Tejas Energy to perform any covenant or other agreement hereunder, (c)
the Excluded Assets, (d) the Retained Liabilities, or (e) any claims which may
hereafter be made against the Company or its Subsidiaries pursuant to the
Contribution Agreement dated as of January 12, 1998 among Shell Oil Company,
Tejas Holdings, LLC, Sierra Capital Acquisition Corp., and Tejas Gas
Corporation, IN EACH CASE REGARDLESS OF WHETHER SUCH DAMAGES ARE CAUSED IN WHOLE
OR IN PART BY THE STRICT LIABILITY OR NEGLIGENT ACT OR OMISSION OF THE
INDEMNIFIED PARTY.
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Section 8.03 Indemnification Procedure. The party or parties
making a claim for indemnification under this Article VIII shall be, for the
purposes of this Agreement, referred to as the "Indemnified Party" and the party
or parties against whom such claims are asserted under this Article VIII shall
be, for the purposes of this Agreement, referred to as the "Indemnifying Party."
All claims by any Indemnified Party under this Article VIII shall be asserted
and resolved as follows:
(a) In the event that (i) any claim, demand or Proceeding is
asserted or instituted by any Person other than the parties to this
Agreement or their Affiliates which could give rise to Damages for
which an Indemnifying Party could be liable to an Indemnified Party
under this Agreement (such claim, demand or Proceeding, a "Third Party
Claim") or (ii) any Indemnified Party under this Agreement shall have a
claim to be indemnified by any Indemnifying Party under this Agreement
which does not involve a Third Party Claim (such claim, a "Direct
Claim"), the Indemnified Party shall, with reasonable promptness, send
to the Indemnifying Party a written notice specifying the nature of
such claim, demand or Proceeding and the amount or estimated amount
thereof (which amount or estimated amount shall not be conclusive of
the final amount, if any, of such claim, demand or Proceeding) (a
"Claim Notice"), provided that a delay in notifying the Indemnifying
Party shall not relieve the Indemnifying Party of its obligations under
this Agreement except to the extent that (and only to the extent that)
such failure shall have caused the Damages for which Indemnifying Party
is obligated to be greater than such Damages would have been had the
Indemnified Party given the Indemnifying Party proper notice.
(b) In the event of a Third Party Claim, the Indemnifying
Party shall be entitled to appoint counsel of the Indemnifying Party's
choice at the expense of the Indemnifying Party to represent the
Indemnified Party in connection with such claim, demand or Proceeding
(in which case the Indemnifying Party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained
by any Indemnified Party except as set forth below); provided that such
counsel is reasonably acceptable to the Indemnified Party.
Notwithstanding an Indemnifying Party's election to appoint counsel to
represent an Indemnified Party in connection with a Third Party Claim,
an Indemnified Party shall have the right to employ separate counsel,
and the Indemnifying Party shall bear the reasonable fees, costs and
expenses of such separate counsel if (i) the use of counsel selected by
the Indemnifying Party to represent the Indemnified Party would present
such counsel with a conflict of interest or (ii) the Indemnifying Party
shall not have employed counsel to represent the Indemnified Party
within a reasonable time after notice of the institution of such Third
Party Claim. If requested by the Indemnifying Party, the Indemnified
Party agrees to cooperate with the Indemnifying Party and its counsel
in contesting any claim, demand or Proceeding which the Indemnifying
Party defends, or, if appropriate and related to the claim, demand or
Proceeding in question, in making any counterclaim against the Person
asserting the Third Party Claim, or any cross-complaint against any
Person. No Third Party Claim may be settled or compromised (i) by the
Indemnified Party without the prior written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld or delayed or
(ii) by the Indemnifying Party without the prior written consent of the
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Indemnified Party, which consent shall not be unreasonably withheld or
delayed. In the event any Indemnified Party settles or compromises or
consents to the entry of any Judgment with respect to any Third Party
Claim without the prior written consent of the Indemnifying Party, each
Indemnified Party shall be deemed to have waived all rights against the
Indemnifying Party for indemnification under this Article VIII.
(c) In the event of a Direct Claim, the Indemnifying Party
shall notify the Indemnified Party within 30 Business Days of receipt
of a Claim Notice whether or not the Indemnifying Party disputes such
claim.
(d) From and after the delivery of a Claim Notice under this
Agreement relating to a Third Party Claim, at the reasonable request of
the Indemnifying Party, each Indemnified Party shall grant the
Indemnifying Party and its representatives all reasonable access to the
books, records and properties of such Indemnified Party to the extent
reasonably related to the matters to which the Claim Notice relates.
All such access shall be granted during normal business hours and shall
be granted under conditions which will not unreasonably interfere with
the business and operations of such Indemnified Party. The Indemnifying
Party will not, and shall require that its representatives do not, use
(except in connection with such Claim Notice) or disclose to any third
Person other than the Indemnifying Party's representatives (except as
may be required by applicable Law) any information obtained pursuant to
this Section 8.03(d) which is designated as confidential by an
Indemnified Party.
Section 8.04 Survival. The representations and warranties of
the parties contained in this Agreement shall terminate at and not survive the
Closing; provided that the Tejas Representations and Warranties and the
Enterprise Representations and Warranties shall each survive the Closing for the
periods set forth below:
(a) the representations and warranties of Tejas and Tejas
Energy in Sections 3.04, 3.05, 3.07, 4.02, 4.06(a) and 4.12(a), (b) and
(d) and 4.17 and the representations and warranties of the Enterprise
Parties, EPC II, and Enterprise Products in Sections 5.03, 5.04, 5.09
and 5.13 shall survive the Closing until the second anniversary of the
Closing Date;
(b) the representations and warranties of Tejas and Tejas
Energy in Section 4.07 and of the Enterprise Parties in Section 5.08
shall survive the Closing until the expiration of the applicable Tax
Statute of Limitations Date; and
(c) the representations and warranties of Tejas and Tejas
Energy in Sections 3.01, 3.02, 3.03, 3.08, 4.01, and 4.11 and the
representations and warranties of the Enterprise Parties, EPC II and
Enterprise Products in Sections 5.01, 5.02, 5.10 and 5.12 shall survive
the Closing for the applicable statute of limitations.
Following the Closing, no party shall have the right to make any claim for
indemnification for any representations or warranties under this Agreement which
do not expressly survive the Closing or
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after the expiration of the applicable survival period thereof; provided that,
with respect to any representation or warranty that survives the Closing in
respect of which indemnity may be sought under this Agreement, such
representation or warranty shall survive the time at which it would otherwise
terminate pursuant to the preceding sentence, only if a bona fide, written
notice of the inaccuracy of such representation or warranty giving rise to such
right of indemnity (including the specific nature of such inaccuracy) shall have
been given to the party against whom such indemnity may be sought prior to such
time. The covenants and agreements of the parties (including, without
limitation, the covenants and agreements of the parties set forth in this
Article VIII) contained in this Agreement or in any other Transaction Agreement
shall survive the Closing indefinitely.
Section 8.05 Limitation on Claims.
(a) Each party hereto acknowledges and agrees that (except as
set forth in subsection (d) below), the provisions of this Article VIII
shall be the exclusive remedy of such party with respect to any matter
arising under this Agreement; provided, however, that (i) the foregoing
shall not limit the right of any such party to seek any equitable
remedy (including specific performance) available to enforce the rights
of such party under this Agreement or any other Transaction Agreement
in accordance with the terms of this Agreement and (ii) nothing herein
is intended to restrict the rights of Tejas (or its Affiliates) as a
unitholder under the Enterprise Partners Amended Partnership Agreement,
applicable securities laws or otherwise arising independently of this
Agreement.
(b) The liability of Tejas or Tejas Energy for Damages for
breaches of any Tejas Representations and Warranties pursuant to
Section 8.02(a), other than with respect to breaches of Sections 3.02,
3.08 and 4.07 shall be limited as follows:
(i) Tejas and Tejas Energy shall not be liable for or
have responsibility for any such Damages until the aggregate
of such Damages incurred by the Enterprise Indemnified Parties
with respect to such claims exceeds $8,000,000 in the
aggregate and then only to the extent of the excess over such
amount; and
(ii) The obligations and total liability of Tejas and
Tejas Energy for such Damages shall not exceed $60,000,000 in
the aggregate.
(c) The liability of any of the Enterprise Parties, EPC II or
Enterprise Products for Damages for breaches of any Enterprise
Representations and Warranties pursuant to Sections 8.01(i)(a),
(ii)(a), and (iii)(a), other than with respect to Sections 5.08,
5.10(f) and (g) and 5.12 shall be limited as follows:
(i) None of the Enterprise Parties, EPC II or
Enterprise Products shall be liable for or have responsibility
for any such Damages until the aggregate of such Damages
incurred by the Tejas Indemnified Parties with respect to such
claims
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exceeds $8,000,000 in the aggregate, and then only to the
extent of the excess over such amount; and
(ii) The obligations and total liability of the
Enterprise Parties, EPC II and Enterprise Products for such
Damages shall not exceed $60,000,000 in the aggregate.
(d) Nothing in this Section 8.05 shall prevent any party from
making a claim against the other party for actual and intentional fraud
(as opposed to a fraud claim based on constructive knowledge, or
negligent misrepresentation or similar theory).
Section 8.06 Tejas Environmental Indemnity.
(a) Subject to the limitations set forth in Section 8.06(b)
below, Tejas and Tejas Energy agree, jointly and severally, to
indemnify and hold harmless each of the Enterprise Indemnified Parties
from and against all Damages to the extent resulting from or arising
out of Tejas Third-Party Environmental Claims made against the Company
(or its successors or assigns) or any of its Subsidiaries or any of the
Enterprise Indemnified Parties following the Closing Date. For purposes
hereof, "Tejas Third-Party Environmental Claims" shall mean (x) a bona
fide claim by a third party (other than a Governmental Authority acting
in its regulatory capacity) alleging property damage resulting from
exposure to Hazardous Substances prior to the Closing Date from
properties owned by the Company or its Subsidiaries on or prior to the
Closing Date and (y) a written directive from a Governmental Authority
requiring remediation of properties owned by the Company or its
Subsidiaries on or prior to the Closing Date pursuant to Environmental
Laws in effect at the Closing Date.
(b) The liability of Tejas or Tejas Energy for Damages under
this Section 8.06 shall be limited as follows:
(i) Tejas and Tejas Energy shall not be liable or
have responsibility for any Damages under this Section 8.06
until the aggregate Damages incurred by the Company and its
Subsidiaries with respect to all Tejas Third-Party
Environmental Claims exceed $5,000,000 in the aggregate and
then only to the extent of the excess over $5,000,000.
Individual Tejas Third-Party Environmental Claims shall not be
included in the $5,000,000 deductible until the Company or its
Subsidiaries incurs Damages in excess of $500,000 with respect
to such Tejas Third-Party Environmental Claim and then only to
the extent of the excess over the $500,000 deductible.
(ii) The obligations and total liability for Damages
of Tejas and Tejas Energy under this Section 8.06 shall not
exceed $100,000,000 in the aggregate.
(iii) The obligations and liability of Tejas and
Tejas Energy under this Section 8.06 shall cease in their
entirety five (5) years after the Closing Date except
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with respect to bona fide claims for indemnification made in
writing prior to such date which remain unresolved as of such
date.
(c) The Enterprise Indemnified Parties acknowledge and agree
that the liability of Tejas, Tejas Energy or any of their Affiliates
(other than the Company and the Subsidiaries) for Damages resulting out
of or relating to environmental claims, matters or liabilities
(including violations of Environmental Law and required remediation of
properties due to the presence of Hazardous Substances in the soil,
groundwater or surface water) shall be governed exclusively by the
indemnification provisions contained in this Section 8.06.
(d) With regard to all Tejas Third Party-Environmental Claims,
the Enterprise Indemnified Parties shall give written notice
identifying such claim to Tejas and Tejas Energy so that Tejas or Tejas
Energy may participate, at its expense, in any discussions or
negotiations with any applicable Governmental Authority concerning the
remediation plan or project.
Section 8.07 Enterprise Contingent Environmental Payment.
(a) If, following the Closing Date, any of Enterprise
Partners, Enterprise Operating or any of their respective Subsidiaries
or Enterprise GP incurs any Damages with respect to Enterprise
Third-Party Environmental Claims (the "Enterprise Environmental
Payments") then the Enterprise Parties shall within 20 days following
such Enterprise Environmental Payment make a payment to Tejas (or its
successors or designees) equal to 25% of such Enterprise Environmental
Payment (the "Contingent Environmental Payments"). For purposes hereof,
"Enterprise Third-Party Environmental Claims" shall mean (x) a bona
fide claim by a third party (other than a Governmental Authority)
alleging personal injury or property damage resulting from exposure to
Hazardous Substances prior to the Closing and (y) a written directive
from a Governmental Authority requiring remediation of properties, now,
previously or hereafter, owned by the Enterprise Parties or any of
their Subsidiaries; provided, however, that the term Enterprise
Third-Party Environmental Claim shall not include any matters relating
to the properties or assets included in the Business as contemplated by
this Agreement.
(b) The obligation of the Enterprise Parties to make the
Contingent Environmental Payments will be subject to the following
limitations:
(i) The Enterprise Parties shall not be required to
make any Contingent Environmental Payments under this Section
8.07 until the aggregate Damages incurred by the Enterprise
Parties with respect to all Enterprise Third-Party
Environmental Claims exceeds $5,000,000 in the aggregate.
Individual Enterprise Third-Party Environmental claims shall
not be included in the $5,000,000 threshold unless and until
the Enterprise Parties incur Damages in excess of $500,000
with respect to such Enterprise Third-Party Environmental
Claim.
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(ii) The obligations and total liability for
Contingent Environmental Payments under this Section 8.07
shall not exceed $100,000,000 in the aggregate .
(iii) The obligation and liability of the Enterprise
Parties under this Section 8.07 shall cease in their entirety
five (5) years after the Closing Date, except with respect to
bona fide claims for indemnification made prior to such date
which remain unresolved as of such date.
Section 8.08 Louisiana Fuel Tax Audit. (a) Tejas and Tejas
Energy, agree, jointly and severally, to indemnify and hold harmless each of the
Enterprise Indemnified Parties from and against any Taxes which may be assessed
against the Company, any of its Subsidiaries or the assets of the Business as a
result of any audit by the State of Louisiana of fuel gas consumed in plant
operations for any period prior to the Effective Date.
(b) The Enterprise Parties, agree, jointly and severally, to
indemnify and hold harmless each of the Tejas Indemnified Parties from and
against any Taxes which may be assessed against the Company, any of its
Subsidiaries or the assets of the Business as a result of any audit by the State
of Louisiana of fuel gas consumed in plant operations for any period after the
Effective Date.
ARTICLE IX
GENERAL PROVISIONS
Section 9.01 Expenses and Taxes; Tax Returns.
(a) Each party to this Agreement shall pay all fees and
expenses incurred by it in connection with this Agreement and the
transactions contemplated by this Agreement. The parties to this
Agreement agree that all applicable excise, sales, transfer,
documentary, filing, recordation and other similar Taxes, levies, fees
and charges, if any, that may be imposed upon, or payable or
collectible or incurred in connection with, this Agreement and the
transactions contemplated by this Agreement shall be borne by the party
on which such Taxes, levies, fees or charges are imposed by operation
of law. Each party to this Agreement agrees to file all necessary
documentation (including all Tax Returns) with respect to such Taxes in
a timely manner.
(b) Tejas shall timely file (taking into account any
extensions received from the relevant Tax authorities) all Tax Returns
accurately reflecting the operations of the Company and its
Subsidiaries for periods ending prior to the Closing Date and shall pay
all Taxes with respect thereto.
(c) Enterprise Partners shall timely file (taking into account
any extensions received from the relevant Tax authorities) all Tax
Returns accurately reflecting the
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operations of the Company and its Subsidiaries for periods ending on or
after the Closing Date and shall pay all Taxes with respect thereto.
For purposes of this Section 9.01(c), in the case of any Taxes based
upon or related to income or receipts, including franchise Taxes, that
are payable for a Tax period that includes (but does not end on) the
Closing Date, Tejas shall pay to Enterprise Partners, the portion of
such Tax which relates to the portion of such Tax period ending prior
to the Closing Date. This amount due from Tejas shall be deemed equal
to the amount which would be payable if the relevant Tax period ended
on the Closing Date.
(d) Enterprise Partners agrees to and shall reimburse Tejas
for any Taxes relating to the Business which may be paid by Tejas with
respect to the Interim Period, within ten (10) days following notice
from Tejas.
Section 9.02 Amendment. This Agreement may not be amended
except by an instrument in writing signed by the Enterprise Parties, Enterprise
Products, EPC II, Tejas and Tejas Energy.
Section 9.03 Waiver. Either the Enterprise Parties or the
Tejas or Tejas Energy may (a) extend the time for the performance of any of the
obligations or other acts of the other, (b) waive any inaccuracies in the
representations and warranties of the other contained in this Agreement or in
any document delivered by the other pursuant to this Agreement or (c) waive
compliance with any of the agreements, or satisfaction of any of the conditions,
contained in this Agreement by the other. Any agreement on the part of a party
to this Agreement to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party against whom enforcement
is sought.
Section 9.04 Notices. Any notices or other communications
required or permitted under, or otherwise in connection with, this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or upon confirmation of receipt when transmitted by facsimile
transmission or on receipt after dispatch by registered or certified mail,
postage prepaid, addressed, as follows:
If to Tejas or Tejas Energy:
Tejas Midstream Enterprises, LLC
1301 McKinney Street, Suite 700
Houston, Texas 77010
Attn: Chief Operating Officer
Phone: (713) 230-3000
Fax: (713) 230-2900
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Tejas Energy, LLC
1301 McKinney Street, Suite 700
Houston, Texas 77010
Attn: Chief Operating Officer
Phone: (713) 230-3000
Fax: (713) 230-1800
With a copy to:
Tejas Energy, LLC
1301 McKinney Street, Suite 700
Houston, TX 77010
Attn: General Counsel
Phone: (713) 230-3000
Fax: (713) 230-2900
If to an Enterprise Party:
Enterprise Products Company
P. O. Box 4324 (77210-4324)
2727 North Loop West, Suite 700
Houston, Texas 77008
Attention: President
Telephone: 713-880-6500
Facsimile: 713-880-6570
With a copy to:
Enterprise Products Company
P. O. Box 4324 (77210-4324)
2727 North Loop West, Suite 700
Houston, Texas 77008
Attention: Chief Legal Officer
Telephone: 713-880-6500
Facsimile: 713-880-6570
or such other address as the person to whom notice is to be given has furnished
in writing to the other parties. A notice of change in address shall not be
deemed to have been given until received by the addressee.
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Section 9.05 Headings; Disclosure Memorandum. The descriptive
headings of the Articles and Sections of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement. The Tejas
Disclosure Memorandum constitutes an integral part of this Agreement and
modifies the respective representations, warranties, covenants or agreements of
the Tejas and Tejas Energy contained herein to the extent that such
representations, warranties, covenants or agreements expressly refer
specifically to the applicable section of the Tejas Disclosure Memorandum. Each
item of disclosure set forth in the Tejas Disclosure Memorandum specifically
refers to the article and section of the Agreement to which such disclosure
responds, and shall not be deemed to be disclosed with respect to any other
article or section of the Agreement.
Section 9.06 Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Texas regardless of
principles of conflicts of laws.
Section 9.07 No Third Party Rights. Except as specifically
provided in Article VIII, this Agreement is intended to be solely for the
benefit of the parties to this Agreement and is not intended to confer any
benefits upon, or create any rights in favor of, any Person other than the
parties to this Agreement.
Section 9.08 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute a single instrument.
Section 9.09 Severability. If any provision of this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality or
enforceability of the other provisions of this Agreement shall not be affected
thereby, and there shall be deemed substituted for the provision at issue a
valid, legal and enforceable provision as similar as possible to the provision
at issue.
Section 9.10 Entire Agreement. This Agreement (including the
documents and instruments referred to in this Agreement) sets forth the entire
understanding and agreement among the parties as to the matters covered in this
Agreement and supersedes and replaces any prior understanding, agreement,
including the Confidentiality Agreement, the Term Sheet dated April 19, 1999
between Enterprise Partners and Tejas Energy or any other statement of intent,
in each case, written or oral, of any and every nature with respect to such
understanding, agreement or statement.
Section 9.11 Arbitration; Waiver.
(a) Any controversy or claim, whether based on contract, tort,
statute or other legal or equitable theory arising out of or related to
this Agreement (including any amendments or extensions), or the breach
of termination hereof or any right to indemnity hereunder shall be
settled by arbitration in accordance with the arbitration terms set
forth in Exhibit 9.11 hereto.
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(b) Without any way limiting Section 9.11(a), each of the
parties hereto hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to this Agreement or the
actions of any of them in the negotiation, administration, performance
and enforcement thereof.
Section 9.12 Fair Construction. This Agreement shall be deemed
to be the joint work product of the Enterprise Parties, Enterprise Products, EPC
II, Tejas and Tejas Energy without regard to the identity of the draftsperson,
and any rule of construction that a document shall be interpreted or construed
against the drafting party shall not be applicable.
Section 9.13 Disclaimer of Other Representations and
Warranties.
(a) EXCEPT AS EXPRESSLY SET FORTH IN ARTICLES III, IV AND V,
NO PARTY MAKES ANY ORAL OR WRITTEN REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO ANY OF THEIR OR THEIR
SUBSIDIARIES' OR JOINT VENTURE'S RESPECTIVE ASSETS, LIABILITIES OR
OPERATIONS (INCLUDING THE ASSETS, LIABILITIES OR OPERATIONS OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES), INCLUDING, WITHOUT LIMITATION,
WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE
OR ANY REPRESENTATION OR WARRANTIES WITH RESPECT TO THE DESIGN,
QUALITY, DURABILITY, VALUE, OR CONDITION OR SUITABILITY OF SUCH ASSETS
AND ANY SUCH REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY
DISCLAIMED.
(b) EACH OF THE PARTIES ACKNOWLEDGES THAT, PRIOR TO ITS
EXECUTION OF THIS AGREEMENT, IT HAS CONDUCTED SUCH EXAMINATION OF THE
OTHER PARTY'S TITLE TO THEIR RESPECTIVE PROPERTIES AND ASSETS AS ITS
HAS DEEMED NECESSARY OR ADVISABLE IN ORDER TO SATISFY ITSELF AS TO THE
CONDITION OF TITLE TO SUCH PROPERTIES AND ASSETS, EXCEPT FOR THE
LIMITED WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT.
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Each of the parties to this Agreement has caused this
Agreement to be executed on its behalf by its duly authorized officer, all as of
the day and year first above written.
TEJAS ENERGY, LLC
By: /s/ Curtis R. Frasier
______________________________________
Name: Curtis R. Frasier
Title: Executive Vice President and Chief Operating
Officer
TEJAS MIDSTREAM ENTERPRISES, LLC
By: /s/ Curtis R. Frasier
_____________________________________
Name: Curtis R. Frasier
Title: President and Chief Operating Officer
ENTERPRISE PRODUCTS PARTNERS L.P.
By Enterprise Products GP, LLC, General Partner
By: /s/ O. S. Andras
____________________________________
Name: O. S. Andras
Title: President and Chief Executive Officer
ENTERPRISE PRODUCTS OPERATING L.P.
By Enterprise Products GP, LLC, General Partner
By: /s/ O. S. Andras
____________________________________
Name: O. S. Andras
Title: President and Chief Executive Officer
ENTERPRISE PRODUCTS GP, LLC
By: /s/ O. S. Andras
___________________________________
Name: O. S. Andras
Title: President and Chief Executive Officer
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ENTERPRISE PRODUCTS COMPANY
(for limited purposes of Articles V, VII and VIII
hereof)
By: /s/ O. S. Andras
____________________________________
Name: O. S. Andras
Title: President and Chief Executive Officer
EPC PARTNERS II, INC.
By: /s/ Francis B. Jacobs II
_____________________________________
Name: Francis B. Jacobs II
Title: President
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EXHIBIT C
UNITHOLDER RIGHTS AGREEMENT
among
TEJAS ENERGY, LLC,
TEJAS MIDSTREAM ENTERPRISES, LLC,
ENTERPRISE PRODUCTS PARTNERS L.P.,
ENTERPRISE PRODUCTS OPERATING L.P.
ENTERPRISE PRODUCTS COMPANY,
ENTERPRISE PRODUCTS GP, LLC
AND
EPC PARTNERS II, INC.
September 17, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C> <C>
Page
ARTICLE I
DEFINED TERMS
Section 1.1 Contribution Agreement Definitions............................................1
Section 1.2 Other Definitions.............................................................1
Section 1.3 Construction..................................................................3
ARTICLE II
BOARD AND COMMITTEE
REPRESENTATION; EXECUTIVE
COMMITTEE
Section 2.1 Board and Committee Representation............................................3
Section 2.2 Executive Committee...........................................................4
Section 2.3 Voting........................................................................8
Section 2.4 Transfer of Approval Rights...................................................8
ARTICLE III
PURCHASE OPTIONS
Section 3.1 Designated Purchase Price.....................................................9
Section 3.2 GP Interest Purchase Option...................................................9
Section 3.3 Enterprise Partners' Right of First Refusal Upon Sale by Tejas Energy........10
Section 3.4 Right of Purchase in Favor of Enterprise Partners Upon Public
Offering.....................................................................12
Section 3.5 Tejas Energy's Preemptive Rights Upon a Private Sale of Interests by
Enterprise Partners..........................................................12
Section 3.6 Enterprise Change of Control.................................................14
ARTICLE IV
MAKE WHOLE
Section 4.1 Make Whole...................................................................15
</TABLE>
ARTICLE V
TERM OF THIS AGREEMENT
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<TABLE>
<S> <C> <C> <C> <C>
ARTICLE VI
FIDUCIARY DUTIES WAIVER; BUSINESS
OPPORTUNITIES
Section 6.1 Conduct of Affairs...........................................................17
Section 6.2 No Duty to Refrain from Activities...........................................17
Section 6.3 No Duty to Communicate Opportunities.........................................17
Section 6.4 Good Faith Actions...........................................................18
ARTICLE VII
GOVERNING PRINCIPLES AND POLICIES
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Injunctions..................................................................18
Section 8.2 Severability.................................................................18
Section 8.3 Amendments...................................................................19
Section 8.4 Descriptive Headings.........................................................19
Section 8.5 Counterparts.................................................................19
Section 8.6 Notices......................................................................19
Section 8.7 Law Applicable...............................................................20
Section 8.8 Arbitration..................................................................20
Section 8.9 Successors and Assigns.......................................................20
Section 8.10 Limitation on Liability......................................................20
</TABLE>
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<PAGE>
Exhibit A Form of Assignment
Exhibit B Form of Assignment
Exhibit C Form of Assignment
Exhibit D Code of Conduct
Exhibit E Arbitration Provisions
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UNITHOLDER RIGHTS AGREEMENT
THIS UNITHOLDER RIGHTS AGREEMENT dated as of September 17, 1999 (this
"Agreement") is entered into among TEJAS ENERGY, LLC, a Delaware limited
liability company ("Tejas Energy"), TEJAS MIDSTREAM ENTERPRISES, LLC, a Delaware
limited liability company ("Tejas") ENTERPRISE PRODUCTS PARTNERS L.P., a
Delaware limited partnership ("Enterprise Partners"), ENTERPRISE PRODUCTS
OPERATING L.P., a Delaware limited partnership ("Enterprise Operating"),
ENTERPRISE PRODUCTS COMPANY, a Delaware corporation ("EPCO"), ENTERPRISE
PRODUCTS GP, LLC, a Delaware limited liability company (together with any
successor general partner of Enterprise Partners or Enterprise Operating
("Enterprise GP")), and EPC PARTNERS II, INC., a Delaware corporation ("EPC
II").
W I T N E S S E T H:
WHEREAS, Enterprise Partners, Enterprise Operating, EPC II, Enterprise
GP, EPCO, Tejas and Tejas Energy are simultaneously herewith entering into a
Contribution Agreement, dated September 17, 1999 (the "Contribution Agreement"),
pursuant to which, subject to the terms and conditions set forth in the
Contribution Agreement, Tejas will contribute all of the member interests (the
"Company Interests") in Tejas Natural Gas Liquids, LLC, a Delaware limited
liability company (the "Company"), to Enterprise Operating (as the designee of
Enterprise Partners) in exchange for Enterprise Partners' issuing to Tejas
Energy (as the designee of Tejas) certain special partnership units and making a
cash payment to Tejas, and Tejas Energy will purchase from EPC II a 30% member
interest in Enterprise GP, the general partner of Enterprise Partners; and
WHEREAS, as consideration for the Company Interests, Enterprise
Partners will issue to Tejas Energy (as the designee of Tejas) up to 20,500,000
units of a special class of partnership interest in Enterprise Partners
("Special Units") in the manner specified in the Partnership Agreement; and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the closing of the transactions contemplated by the Contribution
Agreement;
NOW, THEREFORE, in consideration of the aforesaid and of the mutual
representations, warranties and covenants contained herein and in the
Contribution Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE I
DEFINED TERMS
Section 1.1 Contribution Agreement Definitions. All capitalized terms
used, but not defined herein, shall have the meanings expressed in the
Contribution Agreement.
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Section 1.2 Other Definitions. Certain terms are defined in the body of
this Agreement. In addition, as used in this Agreement, the following terms have
the following meanings:
"Adjusted" means adjusted for splits, reverse splits, and similar
recapitalizations applicable to all holders of Common Units.
"Article IV Units" means the Common Units, if any, issued by Enterprise
Partners to Tejas Energy pursuant to Article IV.
"Closing Price" shall mean the average closing sale price, regular way,
on such day, or in case no such sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in each case on the New York
Stock Exchange Consolidated Tape (or any successor composite tape reporting
transactions on national securities exchanges) or, if the subject securities are
not listed or admitted to trading on such exchange, on the principal national
securities exchange on which the subject securities are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices, regular way, of the
subject securities on the over-the-counter market for the five trading days
preceding the day in question as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or a similarly
generally accepted reporting service.
"Conversion Date" means the date on which the applicable series of
Special Units is converted into Common Units pursuant to the terms and
conditions of the Partnership Agreement.
"Dispose" means to transfer, sell, assign or otherwise dispose of the
asset in question. "Disposition", "Disposed" and "Disposing" shall have
correlative meanings.
"Enterprise Securities" means Common Units, Special Units, Subordinated
Units or other Partnership Securities or securities or instruments convertible
into or exchangeable for Common Units, Special Units, Subordinated Units or
other Partnership Securities of Enterprise Partners.
"GP LLC Agreement" means the First Amended and Restated Limited
Liability Company Agreement of Enterprise Products GP, LLC dated September 17,
1999.
"Initial Conversion Date" means the first day following the Record Date
(as defined in the Partnership Agreement) for distribution in respect of the
Quarter (as defined in the Partnership Agreement) ended June 30, 2000 in
accordance with the terms and conditions of the Partnership Agreement.
"Partnership Agreement" means the Second Amended and Restated Agreement
of Limited Partnership of Enterprise Partners, dated September 17, 1999.
"Partnership Security" has the meaning specified in the Partnership
Agreement.
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"Permitted Affiliate" means either (i) any Person in which Shell Oil
Company ("Shell") owns, directly or indirectly, more than 50% of such Person's
equity interests and that is controlled by Shell or (ii) any Person that is
controlled by, controls, or is under common control with the Person which
controls or owns the exploration and production properties, from time to time,
subject to the Shell Processing Agreement. For the purposes of this definition
"controlled" means that such controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of management and
policies of such controlled Person, by contract or otherwise.
"Public Offering" means a public offering of Common Units as defined in
Section 4(2) of the Securities Act of 1933 and the rules, regulations and
judicial interpretations thereof.
"Tejas Change of Control" means an event or related series of events
the result of which is that a Person that holds any of the Tejas Units ceases to
be a Permitted Affiliate; provided, no Tejas Change of Control shall be deemed
to have occurred if such event is remedied by reconveyance to a Permitted
Affiliate within forty-five days following Tejas or Tejas Energy having actual
knowledge that such event or events have caused a Tejas Change of Control.
"Tejas Units" means the Special Units and the Common Units issued upon
conversion of the Special Units.
"Total Enterprise Value" means the aggregate value of all Partnership
Securities of Enterprise Partners at the time in question, determined by
multiplying the number of outstanding Partnership Securities by the applicable
Designated Purchase Price for such Partnership Securities.
"Unitholder" has the meaning specified in the Partnership Agreement.
Section 1.3 Construction. The rules of construction and interpretation
set forth in Section 1.03 of the Contribution Agreement shall apply, mutatis
mutandis, to this Agreement. If a different part of speech of a defined term is
used (such as the noun form of a defined verb), it shall have a corresponding
meaning.
ARTICLE II
BOARD AND COMMITTEE
REPRESENTATION; EXECUTIVE
COMMITTEE
Section 2.1 Board and Committee Representation. During the term of this
Agreement, Tejas Energy shall be entitled to active, voting and participating
representation on all boards, management committees, executive committees and
other groups or governance bodies performing a policy-making or decision-making
function for or on behalf of Enterprise Partners, Enterprise Operating or
Enterprise GP (and on such boards or other governance bodies of their respective
Subsidiaries as Tejas Energy may request to the relevant Subsidiary in writing),
other than the Audit
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and Conflicts Committee of Enterprise GP (collectively the "Committees"),
pursuant to the following provisions:
(a) With respect to the board of directors and any successor
governing body of Enterprise GP (the "GP Board"), Tejas Energy shall be
entitled, from time to time during the term of this Agreement, to designate
certain members of the GP Board (with Tejas Energy's initial designation to
become effective on the Closing Date), as follows:
(i) Tejas Energy shall be entitled to designate one-third of
the GP Board's members for so long as and provided Tejas Energy and/or
its Affiliates maintain more than a 20% equity interest in Enterprise
GP;
(ii) Tejas Energy shall be entitled to designate two-ninths of
the GP Board's members for so long as and provided Tejas Energy and/or
its Affiliates maintain less than or equal to a 20% but more than a 10%
equity interest in Enterprise GP; and
(iii) Tejas Energy shall be entitled to designate one-ninth of
the GP Board's members (but in any event at least one Board member)
provided Tejas Energy and its Affiliates collectively own at least 5
million of the Tejas Units and/or Article IV Units.
In the event the calculation of Tejas Energy's percentage representation on the
GP Board results in a fraction (as opposed to a whole number), such fractional
number shall be rounded to the nearest whole number which shall not be less than
one.
(b) With respect to all Committees (other than the Executive
Committee of Enterprise GP referenced in Section 2.2), Tejas Energy shall be
entitled, from time to time during the term of this Agreement, to designate at
least one member or representative to serve on each such Committee; provided
Tejas Energy and/or its Affiliates own at least 5 million of the Tejas Units
and/or the Article IV Units.
(c) Subject to the terms and conditions of this Agreement, if
any Person designated as a director, committee member or representative by Tejas
Energy dies, resigns, or becomes disabled or incapacitated, Tejas Energy shall
be entitled to designate a replacement, and each director, committee member or
representative designated by Tejas Energy shall serve in such capacity until
removed or replaced by Tejas Energy. Upon the termination of Tejas Energy's
designation rights set forth in this Article II, the directors, committee
members and representatives appointed by Tejas Energy pursuant to such rights
may be removed by the Committees on which they serve and Tejas Energy shall have
no right to replace such removed directors, committee members and
representatives.
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Section 2.2 Executive Committee.
(a) At the Closing, Enterprise GP shall establish a
five-member executive committee(the "GP Executive Committee"). Tejas Energy will
be entitled to designate two members to serve on the GP Executive Committee as
long as the collective equity interest of Tejas Energy and its Affiliates in
Enterprise GP is equal to or greater than 10%. If the collective equity interest
of Tejas Energy and its Affiliates in Enterprise GP is less than 10% but Tejas
Energy and its Affiliates collectively own at least 5 million of the Tejas Units
and/or the Article IV Units, then Tejas Energy shall thereafter be entitled to
designate only one member of the GP Executive Committee. If the collective
equity interest of Tejas Energy and its Affiliates in Enterprise GP is less than
10% and Tejas Energy and its Affiliates collectively own less than 5 million of
the Tejas Units and/or the Article IV Units, then Tejas Energy shall not be
entitled to designate any member of the GP Executive Committee.
(b) All matters relating to the items listed below must be
submitted to and are subject to the approval of the GP Executive Committee. The
GP Executive Committee will decide matters by majority vote, provided that,
until such time as all of the Special Units (other than any Special Units not
issued as a result of a failure to meet the performance tests referenced in
Section 5.3(d) of the Partnership Agreement) have been converted to Common Units
and such Common Units have a Closing Price in excess of $24 per Common Unit
(appropriately Adjusted) for each trading day during a period of 120 consecutive
calendar days (with any trading days during which Tejas Energy is prevented from
trading its Common Units, as a result of (i) black-out periods under Section
2(b)(ii) of the Registration Rights Agreement referenced in the Contribution
Agreement (the "Registration Rights Agreement") or (ii) in the event Tejas
Energy desires to sell such Common Units in a manner not requiring registration
under the Securities Act and Tejas Energy advises Enterprise Partners of such
intention in writing, Tejas Energy having been advised by Enterprise Partners in
writing that there is material non-public information relating to Enterprise
Partners that would prevent such a sale, not counting toward such 120-day
total), the GP Executive Committee must receive the vote of at least one of the
Tejas Energy representatives on the GP Executive Committee in order to approve
and take any of the following actions by Enterprise Partners, Enterprise
Operating, Enterprise GP or any of their respective Subsidiaries:
(i) dividends by Enterprise GP or distributions by Enterprise
Partners (other than distributions by Enterprise Partners to its
Unitholders of Available Cash from Operating Surplus pursuant to the
Cash Distribution Policy described on pages 42-49 of the Enterprise
Partners' Prospectus, dated July 27, 1998, and dividends by Enterprise
GP to its members of its share of Enterprise Partners' distributions);
(ii) a Disposition, in any one transaction or series of
related transactions, of the properties or assets of Enterprise
Partners, Enterprise Operating or any of their respective Subsidiaries
for consideration of $150,000,000 or more (excluding the sale of
product or inventory in the ordinary course of business).
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(iii) a Disposition, in any one transaction or series of
related transactions, of any of the properties or assets which were
owned by the Company or any of its Subsidiaries, directly or
indirectly, on the Closing Date for consideration in excess of
$15,000,000 or the Disposition of any properties or assets which were
owned by the Company or any of its Subsidiaries on the Closing Date
that, in Tejas Energy's good faith belief, could affect Shell's or any
of its Affiliates' Gulf of Mexico production or jeopardize in a
material way any of their respective abilities to deliver pipeline
quality equity gas from the Gulf of Mexico to their respective markets;
(iv) the acquisition, in any one transaction or series of
related transactions, by Enterprise Partners or its Subsidiaries in any
fiscal year of assets, properties or equity (including joint ventures
with and investments in other Persons) with acquisition consideration
exceeding $150,000,000;
(v) the merger, liquidation, dissolution, or consolidation of
Enterprise Partners, Enterprise Operating or Enterprise GP or any of
their respective Subsidiaries, except (A) a merger or consolidation in
which any of Enterprise Partners, Enterprise Operating, Enterprise GP
or any of their respective Subsidiaries is (in the case of a merger)
the survivor and the percentage equity ownership of Tejas Energy in
Enterprise Partners, Enterprise Operating (indirectly) or Enterprise GP
is not reduced by reason of such merger or consolidation or (B) a
merger or consolidation in connection with an acquisition described in
and permitted by Section 2.2(iv) or Section 3.5(f)(iii) so long as the
percentage reduction in the equity ownership of Tejas Energy in
Enterprise Partners, Enterprise Operating (indirectly) or Enterprise GP
by reason of such merger or consolidation is not greater than the
percentage reduction in the equity ownership in Enterprise Partners,
Enterprise Operating (indirectly) or Enterprise GP of other pre-merger
or pre-consolidation owners by reason of such merger or consolidation,
and provided that Enterprise Partners, Enterprise Operating, Enterprise
GP or any of their respective Subsidiaries is (in the case of a merger)
the survivor;
(vi) the filing of a petition in bankruptcy or seeking any
reorganization, liquidation or similar relief on behalf of Enterprise
GP, Enterprise Partners, Enterprise Operating or any of their
respective Subsidiaries, or consenting to the filing of a petition in
bankruptcy against Enterprise GP, Enterprise Partners, Enterprise
Operating or any of their respective Subsidiaries or consenting to the
appointment of a receiver, custodian, liquidator or trustee for
Enterprise GP, Enterprise Partners, Enterprise Operating or any of
their respective Subsidiaries for all or any substantial portion of its
property;
(vii) the issuance of partnership units, membership interests,
capital stock or other equity interests of Enterprise GP, Enterprise
Partners, Enterprise Operating or any of their respective Subsidiaries
or any securities or instruments convertible into or exchangeable for
such partnership units, membership interests, capital stock or equity
interests, except (A) the issuance to Enterprise GP, Enterprise
Partners, Enterprise Operating or any of their respective Subsidiaries
of such partnership units, membership interests, capital stock or other
equity interests in connection with the creation of wholly-owned
Subsidiaries of Enterprise
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GP, Enterprise Partners, Enterprise Operating or any of their
respective Subsidiaries, (B) the issuance of Common Units or Enterprise
Securities convertible into Common Units in a Public Offering, (C) the
issuance of Common Units or Enterprise Securities convertible into
Common Units to purchase assets or businesses from third parties in
bona fide, arm's length transactions, (D) the issuance of Common Units
or Enterprise Securities convertible into Common Units to employees of
EPCO, Enterprise GP, Enterprise Partners or any of their respective
Subsidiaries under employee incentive compensation programs existing or
approved at or prior to the Closing Date or (E) the issuance of
Enterprise Securities upon conversion of other Enterprise Securities
existing as of the date hereof or issued in accordance with the terms
of this item (vii); provided however, that the issuance of Enterprise
Securities with voting, distribution or liquidation preferences having
a priority over Common Units requires the approval of the GP Executive
Committee and the vote of at least one of the Tejas Energy
representatives on the GP Executive Committee.
(viii) the creation, incurrence, assumption, issuance,
guarantee or any other manner of becoming liable for or with respect
to, contingently or otherwise, any Indebtedness that would result in
both (A) a ratio of total Indebtedness to total capitalization
(long-term Indebtedness plus partners' capital) for Enterprise Partners
of greater than 60% and (B) a ratio of total Indebtedness to Total
Enterprise Value for Enterprise Partners of greater than 40%. For
purposes hereof, "Indebtedness" means (I) all indebtedness for borrowed
money or for the deferred purchase price of property or services (other
than accounts or trade payables incurred in the ordinary course of
business, which will not be considered Indebtedness), (II) other
obligations evidenced by bonds, notes, debentures or other similar
instruments, (III) indebtedness created or arising under any
conditional sale or other title retention agreement, (IV) capitalized
lease obligations, (V) obligations under interest rate agreements and
currency agreements, and (VI) guarantees of any of the foregoing;
(ix) the repurchase by Enterprise Partners or any of its
Subsidiaries of Enterprise Securities or Indebtedness of Enterprise
Partners or any of its Subsidiaries or Affiliates, except from Tejas
Energy (or its successors) pursuant to the terms of this Agreement,
except for public market purchases to reduce the liability of
Enterprise Partners or Enterprise GP or their respective Subsidiaries
under employee incentive compensation programs described in Section
2.2(b)(vii)(D) and except for refinancings made in accordance with the
provisions of clause (viii) above;
(x) Enterprise Partners or any of its Subsidiaries or
Enterprise GP or any of its Subsidiaries entering into any new
transaction or amending in any way any existing transactions with, or
for the benefit of any Affiliate of Enterprise Partners (other than any
Subsidiary of Enterprise Partners or Enterprise GP or any of its
Subsidiaries), directly or indirectly, except as otherwise agreed to in
the Contribution Agreement;
(xi) the implementation of any material change in
accounting policies (other than mandatory changes required by the
auditors); change in auditors; or change in significant tax
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positions that adversely affects the Unitholders as a group (other than
mandatory changes required by law);
(xii) the implementation of any material change in the
partnership agreement, regulations or other organizational or
governance documents of Enterprise Partners, Enterprise Operating or
Enterprise GP (other than as may be required by a change in law or as
may be required by the transactions contemplated by the Contribution
Agreement);
(xiii) the adoption of any takeover defense (such as the
creation of certain kinds of preferred units or unitholder rights
plans) that would, at any time at which Enterprise GP and its
Affiliates beneficially own less than 50% of the outstanding
Partnership Securities, render it materially more difficult to effect
an acquisition of Enterprise Partners by merger, tender offer or other
change of control transaction;
(xiv) the change in a material way in the scope of business of
Enterprise Partners, Enterprise Operating or any of their respective
Subsidiaries as conducted immediately after the Closing Date;
(xv) the change in or reassignment of executive personnel or
key operating personnel involved in conducting or managing the business
of Enterprise Partners and its Subsidiaries as of the Closing Date,
excluding any change initiated by such personnel in such person's
individual capacity, any change for cause based on the conduct of such
personnel and any change resulting from the transactions contemplated
by the Contribution Agreement;
(xvi) the change to compensation of executives, directors or
employees involved in conducting or managing the business of Enterprise
Partners and its Subsidiaries as of the date hereof, which is outside
the scope of or not consistent with the policies and practices in
effect at December 31, 1998;
(xvii) the submission by Enterprise GP of any matter to a
Unitholder vote pursuant to the terms and conditions of the Partnership
Agreement; or
(xviii) the amendment, replacement or other alteration of the
Code of Conduct.
Section 2.3 Voting.
(a) Enterprise GP agrees that for so long as any of the Tejas
Units are unable to vote as a result of the restrictions contained in the
definition of "Outstanding" under the Partnership Agreement (the "Voting
Restrictions"), (i) Enterprise GP will not submit any matter to a Unitholder
vote (including providing for any execution of a consent in lieu of a meeting)
pursuant to the terms and conditions of the Partnership Agreement without the
prior written approval of Tejas Energy and (ii) Enterprise GP will not vote in
favor of any matter submitted for a Unitholder vote or proposed for Unitholder
approval pursuant to a meeting or consent without the prior written consent of
Tejas Energy.
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(b) EPC II agrees, for itself and its Affiliates, that for so
long as any of the Tejas Units are unable to vote as a result of the Voting
Restrictions, (i) neither EPC II nor its Affiliates will propose or vote to
allow any matters to be submitted to a vote of the Unitholders (including
entering into a consent in lieu of a meeting) pursuant to the terms and
conditions of the Partnership Agreement without the prior written consent of
Tejas Energy, (ii) EPC II will not vote in favor of any matter submitted for a
Unitholder vote or proposed for Unitholder approval pursuant to a meeting or
consent without the prior written consent of Tejas Energy and (iii) EPC II will
vote in favor of any matter submitted for a Unitholder vote or proposed for
Unitholder approval pursuant to a meeting or consent if requested in writing by
Tejas Energy to vote in favor of such matter provided such vote does not
adversely impact EPC II.
(c) Enterprise Partners and Enterprise GP acknowledge that at
such time as Tejas Energy and/or its Affiliates own less than 20% of the Common
Units, such Common Units owned by Tejas Energy and or its Affiliates shall not
be subject to the voting restrictions set forth in the definition of
"Outstanding" in the Partnership Agreement.
Section 2.4 Transfer of Approval Rights. In the event of a Disposition
by Tejas Energy to a Permitted Affiliate of all of its interest in Enterprise GP
and/or any or all of its interest in Enterprise Partners in accordance with the
terms and conditions of this Agreement and the GP LLC Agreement, Tejas Energy
may transfer to such Permitted Affiliate all of the rights of Tejas Energy under
this Article II; provided that such Permitted Affiliate shall be bound by the
terms and conditions of this Agreement and shall execute an assignment
reasonably acceptable to Enterprise Partners agreeing, among other things, to be
bound by the terms and conditions of this Agreement.
ARTICLE III
PURCHASE OPTIONS
Section 3.1 Designated Purchase Price. For purposes of this Agreement,
(i) the term "Designated Purchase Price" shall mean the Closing Price for the
subject securities as of the Business Day immediately preceding the exercise of
the applicable option under this Agreement or, with respect to a calculation of
Total Enterprise Value, the Business Day immediately preceding such calculation
(in either case, the "Determination Date"), or if there is no applicable Closing
Price, shall mean the Fair Market Value of the subject securities on such date,
and (ii) "Fair Market Value" shall mean the fair market value of the securities
as determined by mutual agreement of the selling party and the purchasing party;
provided that, if within five Business Days following the Determination Date,
the selling party and the purchasing party cannot agree upon fair market value,
then the selling party and the purchasing party shall agree upon a mutually
acceptable financial expert who shall determine fair market value. In the event
that, within ten Business Days following the Determination Date, the selling
party and the purchasing party cannot agree upon a mutually acceptable financial
expert, then each of the selling party and the purchasing party will select a
financial expert and the two financial experts as selected shall select a third
financial expert who shall determine Fair Market Value. If either the selling
party or the purchasing party fails to
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designate its financial expert within five Business Days following written
notice of the other party's designation, the financial expert designated by the
other party will determine Fair Market Value. The cost of the financial expert
shall be borne equally by the selling party and the purchasing party.
Section 3.2 GP Interest Purchase Option. In the event that Tejas Energy
shall hereafter make any Disposition of any of the Tejas Units to any Person
(other than a Permitted Affiliate), Tejas Energy will promptly provide written
notice to EPC II of such Disposition. For purposes of this Section 3.2, either
(i) the closing of a transaction (or series of related transactions) which
result in a Tejas Change of Control or (ii) entering into an agreement the
consummation of which would result in a Tejas Change of Control shall be deemed
to be a Disposition of all of the Tejas Units. Tejas Energy shall provide EPC II
with written notice of a closing described in clause (i) of the preceding
sentence at least ten Business Days prior to such closing. EPC II (or its
designee) will have the right and option, upon such Disposition, to purchase
from Tejas Energy a portion of Tejas Energy's member interest in Enterprise GP
(the "GP Interest") equal to such member interest (representing a percentage
equity ownership in Enterprise GP) multiplied by a fraction equal to the number
of Tejas Units Disposed of by Tejas Energy over the number of Tejas Units held
by Tejas Energy immediately prior to such Disposition; provided however, that in
the case of a Disposition of the type described in clause (ii) of the second
sentence of this Section 3.2, such right shall be contingent upon the closing of
the transaction (or series of related transactions) which effect a Tejas Change
of Control. The purchase option afforded EPC II (or its designee) in this
Section 3.2 may be exercised by EPC II (or its designee) by providing written
notice to Tejas Energy of its election to purchase all of the GP Interest
subject to the purchase option within 30 days following receipt from Tejas
Energy of its notice of Disposition. The purchase price payable following the
exercise of such purchase option will be an amount equal to the members' capital
of Enterprise GP attributable to the purchased interest as then reflected on the
books and records of Enterprise GP. The purchase and sale contemplated by the
exercise by EPC II (or its designee) of its purchase option created by this
Section 3.2 shall be completed at a closing that shall occur within ten Business
Days after the written notice by EPC II (or its designee) electing to exercise
such option, by (i) the transfer and assignment by Tejas Energy to EPC II (or
its designee) of the GP Interest purchased and (ii) payment of the purchase
price described in the preceding sentence by EPC II (or its designee) to Tejas
Energy by wire transfer of immediately available funds to an account designated
by Tejas Energy at least five Business Days prior to such transfer and
assignment. The assignment referred to in the preceding sentence shall be
substantially in the form attached hereto as Exhibit A.
Section 3.3 Enterprise Partners' Right of First Refusal Upon Sale
by Tejas Energy.
(a) In the event that Tejas Energy shall hereafter desire to
make any Disposition of Tejas Units, in whole or part, or any interest therein,
that is not permitted in Section 3.3(f), Enterprise Partners or its designee
shall have the right and option to purchase all of the Tejas Units that Tejas
Energy desires to Dispose of, exercisable in the manner and on the terms
hereinafter set forth; provided however, that there shall be no obligation of
Tejas Energy to Dispose of such Tejas Units to Enterprise Partners or its
designee unless all of the Tejas Units that are subject to the option to
purchase described in this Section 3.3 are purchased. For the purposes of this
Section 3.3, either (i) the closing of a transaction (or series of related
transactions) which result in a Tejas Change of
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Control or (ii) entering into an agreement the consummation of which would
result in a Tejas Change of Control shall be deemed to be a Disposition by Tejas
Energy of all of the Tejas Units. Tejas Energy shall provide Enterprise Partners
with written notice of a closing described in clause (i) of the preceding
sentence at least ten Business Days prior to such closing. The total purchase
price for the Tejas Units purchased pursuant to the exercise of any option
granted by this Section 3.3 shall be equal to the number of Tejas Units so
purchased times the Section 3.3 Price Per Unit.
(b) Prior to the Disposition of any Tejas Units, Tejas Energy
shall give written notice ("Tejas' Notice of Disposition") setting forth:
(i) the number of Tejas Units that Tejas Energy desires
to Dispose of;
(ii) the bona fide cash price (or estimated value of noncash
consideration, which estimate shall not be binding upon Enterprise
Partners or its designee) offered in connection with such Disposition
of such Tejas Units; and
(iii) the terms upon which such Disposition is to be made and
the name of the Person or Persons to whom such Disposition is to be
made.
(c) Upon receipt by Enterprise Partners of any such Tejas'
Notice of Disposition, Enterprise Partners (or its designee) may exercise its
purchase right as to all (but not less than all) of the Tejas Units being
Disposed of for a period of 30 days commencing with the date Tejas' Notice of
Disposition was received by Enterprise Partners; provided however, that in the
case of a Disposition of the type described in clause (ii) of the second
sentence of Section 3.3(a), such rights shall be contingent upon the closing of
the transaction (or series of related transactions) which effect a Tejas Change
of Control. Such right to purchase may be exercised by Enterprise Partners (or
its designee) by giving notice to Tejas Energy that Enterprise Partners (or its
designee) has elected to acquire the Tejas Units. The purchase and sale
contemplated by the exercise by Enterprise Partners (or its designee) of such
purchase right shall be completed at a closing that shall occur within 30 days
after the written notice by Enterprise Partners (or its designee) electing to
exercise such purchase right (or, if later and if Section 3.3(d)(ii) applies,
within 15 Business Days after the determination of the Designated Purchase Price
in accordance with Section 3.1), by (i) the transfer and assignment by Tejas
Energy to Enterprise Partners (or its designee) of certificates, duly endorsed
for transfer, evidencing the Tejas Units purchased and (ii) payment of the
purchase price described in Section 3.3(a) by Enterprise Partners (or its
designee) to Tejas Energy by wire transfer of immediately available funds to an
account designated by Tejas Energy at least five Business Days prior to such
transfer and assignment. Notwithstanding any other provision of this Section
3.3, if Section 3.3(d)(ii) applies and the Designated Purchase Price as
determined pursuant to Section 3.1(ii) exceeds the estimated value of noncash
consideration specified by Tejas Energy in Tejas' Notice of Disposition by more
than 10%, then at any time within five Business Days after such determination
Enterprise Partners (or its designee) shall have the right to notify Tejas
Energy that it is electing to cancel its exercise of such purchase right, and in
the case of any such cancellation, the 90-day period referred to in Section
3.3(e) shall commence with the date of such cancellation. The assignment
referred to in the preceding sentence shall be substantially in the form
attached hereto as Exhibit B.
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Any Disposition by Tejas Energy pursuant to this Section 3.3 with respect to
which Enterprise does not or is not permitted to exercise its purchase option
created by this Section 3.3 shall be pursuant to an assignment substantially in
the form attached hereto as Exhibit C executed by the Person to which such
Disposition is made.
(d) The "Section 3.3 Price Per Unit" shall be:
(i) the bona fide cash price per unit payable, if any,
specified in Tejas' Notice of Disposition, provided that the price per
unit is payable solely in cash or cash equivalent; or
(ii) if, and to the extent the price per unit is payable
otherwise than as specified in Section 3.3(d)(i), then the price per
unit shall be the Designated Purchase Price.
(e) Any proposed Disposition of any Tejas Units with respect
to which a Tejas' Notice of Disposition shall have been given and as to which
the rights to acquire such Tejas Units shall not have been exercised in full as
herein provided may be completed at any time within, but not after, 90 days
after the expiration of the 30-day period during which Enterprise Partners (or
its designee) may exercise the right to acquire such Tejas Units. If a
Disposition is not completed within said 90-day period, Tejas' Notice of
Disposition theretofore given shall in all respects be a nullity and shall be
treated as though it never had been given. If such Disposition is not carried
out on the same material terms set forth in Tejas' Notice of Disposition in
respect thereto, such Disposition shall be of no force, effect or validity for
any purpose whatsoever.
(f) The purchase option in favor of Enterprise Partners (or
its designee) provided in this Section 3.3 shall not be applicable to any
Disposition by Tejas Energy of the Tejas Units (i) to a Permitted Affiliate or
(ii) pursuant to a Public Offering.
Section 3.4 Right of Purchase in Favor of Enterprise Partners Upon
Public Offering.
(a) In the event that Tejas Energy proposes to Dispose of any
of the Tejas Units through a Public Offering, Tejas Energy shall first provide
written notice of such proposed Disposition (the "Public Sale Notice") to
Enterprise Partners, including in such notice a statement of the proposed public
offering price (the "Proposed Public Offering Price"). Enterprise Partners (or
its designee) shall have the right and option to purchase all of the Tejas Units
that Tejas Energy desires to Dispose of pursuant to such Public Offering,
exercisable in the manner and on the terms hereinafter set forth.
(b) Upon receipt by Enterprise Partners of any such Public
Sale Notice, Enterprise Partners (or its designee) may exercise its purchase
right as to all (but not less than all) of the Tejas Units subject to the Public
Sale Notice for a period of 20 days commencing with the date the Public Sale
Notice was received by Enterprise Partners. Such right to purchase may be
exercised by Enterprise Partners (or its designee) giving notice to Tejas Energy
that Enterprise Partners (or its designee) has elected to acquire the Tejas
Units subject to the Public Sale Notice at the Proposed Public Offering Price.
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(c) The purchase and sale contemplated by the exercise by
Enterprise Partners (or its designee) of such purchase right shall be completed
at a closing that shall occur within 20 days after the written notice by
Enterprise Partners (or its designee) electing to exercise such purchase right,
by (i) the transfer and assignment by Tejas Energy to Enterprise Partners (or
its designee) of certificates, duly endorsed for transfer, evidencing the Tejas
Units purchased and (ii) payment of the Proposed Public Offering Price by
Enterprise Partners (or its designee) to Tejas Energy by wire transfer of
immediately available funds to an account designated by Tejas Energy at least
five Business Days prior to such transfer and assignment. The assignment
referred to in the preceding sentence shall be substantially in the form
attached hereto as Exhibit B.
(d) In the event that Enterprise Partners does not exercise
its purchase right triggered by a Public Sale Notice, then Tejas Energy may
proceed to sell such Tejas Units pursuant to Public Offering provided that such
Public Offering is completed within 120 days following the end of the 20-day
period during which Enterprise Partners could exercise its purchase right
hereunder, and the price at which Tejas Energy sells the Tejas Units in the
Public Offering shall not be less than 90% of the Proposed Public Offering
Price.
Section 3.5 Tejas Energy's Preemptive Rights Upon a Private Sale of
Interests by Enterprise Partners.
(a) In the event that Enterprise Partners desires to issue or
Dispose of Enterprise Securities other than in a transaction referred to in
Section 3.5(f), Tejas Energy (or a Permitted Affiliate designated by Tejas
Energy) shall have the right and option to purchase its pro rata share (based on
the aggregate ownership of Tejas Units and Article IV Units of Tejas Energy or
its Permitted Affiliates) of all of the Enterprise Securities that Enterprise
Partners desires to issue or Dispose of, exercisable in the manner and on the
terms hereinafter set forth (such pro rata share being calculated by multiplying
the number of such Enterprise Securities being issued or Disposed of by a
fraction equal to the result of dividing (i) the aggregate number of Tejas Units
and Article IV Units then owned by Tejas Energy or its Affiliates by (ii) the
total number of Enterprise Securities outstanding on a fully diluted basis
without taking into account the newly issued Enterprise Securities, if any);
provided, however, that there shall be no obligation of Enterprise Partners to
issue or Dispose of such Enterprise Securities to Tejas Energy (or a Permitted
Affiliate designated by Tejas Energy) unless all of the Enterprise Securities
that are subject to the option to purchase described in this Section 3.5 are
(subject to the provisions of subsection (c) below) purchased at the same time
and subject to the same terms as the other Enterprise Securities being issued or
Disposed of. The total purchase price for any Enterprise Securities purchased
pursuant to the exercise of any option granted by this Section 3.5 shall be
equal to the number of Enterprise Securities so purchased times the Section 3.5
Price Per Unit.
(b) Prior to the issuance or Disposition of any Enterprise
Securities, Enterprise Partners shall give written notice "Enterprise Partners'
Notice of Disposition" to Tejas Energy setting forth:
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(i) a description of the Enterprise Securities being offered
including detail as to the terms and rights applicable thereto;
(ii) the number of Enterprise Securities that Enterprise
Partners desires to issue or Dispose of;
(iii) the bona fide cash price, if any (or the estimated value
of noncash consideration, which estimate shall not be binding upon
Tejas Energy), to be received or estimated to be received in connection
with such issuance or Disposition of such Enterprise Securities; and
(iv) the terms upon which such issuance or Disposition is to
be made and the name of the Person or Persons to whom such Disposition
is to be made.
(c) Upon receipt by Tejas Energy of any such Enterprise
Partners' Notice of Disposition, Tejas Energy (or a Permitted Affiliate
designated by Tejas Energy) may exercise its purchase right as to the Enterprise
Securities that it is entitled to purchase pursuant to Section 3.5(a) for a
period of 30 days commencing with the date Enterprise Partners' Notice of
Disposition was received by Tejas Energy. Such right to purchase may be
exercised by Tejas Energy (or a Permitted Affiliate designated by Tejas Energy)
by giving notice to Enterprise Partners that Tejas Energy has elected to acquire
such Enterprise Securities. The purchase and sale contemplated by the exercise
by Tejas Energy (or a Permitted Affiliate designated by Tejas Energy) of such
purchase right shall be completed at a closing that shall occur within twenty
days after the written notice by Tejas Energy electing to exercise the Section
3.5 purchase right or, if later, simultaneously with the closing of the offering
that triggered the Section 3.5 purchase right (or, if later and if Section
3.5(d)(ii) applies, within 15 Business Days after the determination of the
Designated Purchase Price in accordance with Section 3.1), by (i) the transfer
and assignment by Enterprise Partners to Tejas Energy of certificates evidencing
the Enterprise Securities purchased and (ii) payment of the purchase price
described in Section 3.5(a) by Tejas Energy to Enterprise Partners by wire
transfer of immediately available funds to an account designated by Enterprise
Partners at least five Business Days prior to such transfer and assignment.
Notwithstanding any other provision of this Section 3.5, if Section 3.5(d)(ii)
applies and the Designated Purchase Price as determined pursuant to Section
3.1(ii) exceeds the estimated value of noncash consideration specified by
Enterprise Partners in Enterprise Partners' Notice of Disposition by more than
10%, then at any time within five Business Days after such determination Tejas
Energy shall have the right to notify Enterprise Partners that it is electing to
cancel its exercise of such purchase right, and in the case of any such
cancellation, the 90-day period referred to in Section 3.5(e) shall commence
with the date of such cancellation.
(d) The "Section 3.5 Price Per Unit" shall be:
(i) the bona fide cash price specified in Enterprise Partners'
Notice of Disposition, provided that the price per unit is payable
solely in cash or cash equivalent; or
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(ii) if, and to the extent the price per unit is payable
otherwise than as specified in Section 3.5(d)(i), then the price per
unit shall be the Designated Purchase Price.
(e) Any proposed Disposition of any Enterprise Securities with
respect to which an Enterprise Partners' Notice of Disposition shall have been
given and as to which the right to acquire such Enterprise Securities shall not
have been exercised in full as herein provided may be completed at any time
within, but not after, 90 days after the expiration of the 30-day period during
which Tejas Energy may exercise the right to acquire such Enterprise Securities.
If a Disposition is not completed within said 90-day period, Enterprise
Partners' Notice of Disposition theretofore given shall in all respects be a
nullity and shall be treated as though it never had been given. If such
Disposition is not carried out on the same material terms set forth in
Enterprise Partners' Notice of Disposition in respect thereto such Disposition
shall be of no force, effect or validity for any purpose whatsoever.
(f) The rights granted in this Section 3.5 shall not be
applicable to (i) the sale of Common Units effected pursuant to a Public
Offering, (ii) the issuance of Common Units or Enterprise Securities convertible
into Common Units to employees of EPCO, Enterprise Partners, Enterprise GP or
any of their respective Subsidiaries under employee incentive compensation
programs approved or existing at or prior to the Closing Date, (iii) Common
Units or Enterprise Securities convertible into Common Units issued to purchase
assets or businesses from third Persons in bona fide, arm's length transactions
and (iv) the issuance of Enterprise Securities upon conversion of other
Enterprise Securities existing on the date hereof or issued in accordance with
the terms of Section 2.2(b)(vii).
Section 3.6 Enterprise Change of Control.
(a) In the event of an Enterprise Change of Control (as
defined in Section 3.6(d)), Enterprise Partners will provide written notice to
Tejas Energy of such an Enterprise Change of Control.
(b) In the event of an Enterprise Change of Control, Tejas
Energy (or a Permitted Affiliate designated by Tejas Energy) shall have the
right and option to purchase all of the Common Units and Subordinated Units and
other Partnership Securities in Enterprise Partners owned by EPCO, EPC II and
their respective Affiliates and, to the extent practicable, all Partnership
Securities owned by the new control group. The total purchase price for any such
securities purchased pursuant to the exercise of any option created by this
Section 3.6 shall be equal to the number of units so purchased times the
Designated Purchase Price.
(c) Upon receipt by Tejas Energy of written notice from
Enterprise Partners of an Enterprise Change of Control or (if later) the date
upon which Tejas Energy becomes aware of the Enterprise Change of Control, Tejas
Energy (or a Permitted Affiliate designated by Tejas Energy) may exercise its
purchase right to acquire all (but not less than all) of the units by providing
written notice to Enterprise Partners at any time within 30 days thereafter. The
purchase and sale contemplated by the exercise by Tejas Energy of such purchase
right shall be completed at a closing
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<PAGE>
that shall occur before the later of (i) 30 days after the written notice by
Tejas Energy electing to exercise such purchase right and (ii) 15 Business Days
after the determination of the Designated Purchase Price in accordance with
Section 3.1, by (A) the transfer and assignment by the sellers to Tejas Energy
of certificates, duly endorsed for transfer, evidencing the Partnership
Securities purchased and (ii) payment of the purchase price described in Section
3.6(b) by Tejas Energy to the sellers by wire transfer of immediately available
funds to the accounts designated by the sellers at least five Business Days
prior to such transfer and assignment, provided that, notwithstanding any other
provision of this Agreement, if the Designated Purchase Price is determined
pursuant to Section 3.1(ii), then at any time within 5 Business Days after such
determination Tejas Energy shall have the right to notify Enterprise Partners
that it is electing to cancel its exercise of such purchase right.
(d) For purposes of this Section 3.6, the term "Enterprise
Change of Control" shall mean an event or series of related events that result
in (or entering into a definitive agreement the consummation of which would
result in (provided that, in the case of such an agreement, Tejas Energy's
rights under this Section 3.6 shall be contingent upon the occurrence of the
following)) Enterprise Partners or EPC II (only if EPC II is a member of
Enterprise GP) being controlled, directly or indirectly, by someone other than
Dan Duncan, his wife and/or his heirs, devisees and/or legatees (and/or trusts
for any of their respective benefit).
(e) If Tejas Energy exercises its purchase option and right
under this Section 3.6, then EPCO shall, upon reasonable request of Tejas
Energy, transfer any of its employees primarily involved in the business of
Enterprise Partners and its Subsidiaries to Enterprise GP, Enterprise Partners
or any designated Subsidiary; provided that, EPCO does not guarantee that any
such employee will accept such transfer. EPCO shall bear the reasonable costs
necessary for such transfer.
ARTICLE IV
MAKE WHOLE
Section 4.1 Make Whole. If (i) Tejas Energy sells to non-Affiliates in
a bona fide arm's-length transaction any of the Common Units received upon
conversion of the Special Units, (ii) such sale either (A) is a block sale (as
"block" is defined under Rule 10b-18 of the Securities Exchange Act of 1934, as
amended), (B) together with sales by Tejas Energy of other Common Units received
upon conversion of the Special Units during the three months preceding such
sale, either (x) includes a number of Common Units not exceeding the average
weekly trading volume requirement set forth in Rule 144(e)(1)(ii) of the
Securities Act or (y) includes a number of Common Units not exceeding [205,000],
or (C) is part of a firmly underwritten offering of Common Units for cash (the
restrictions set forth in (A), (B) and (C) are referred to herein as the "Manner
of Sale Restrictions"), (iii) the sales price per Common Unit of such sale (the
"Sales Price") is less than $18 (appropriately Adjusted) and (iv) such sale
occurs within one year following the Conversion Date for such Common Units (as
such period may be extended pursuant to the provisions of this Section 4.1),
then Enterprise Partners
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will at its option either issue additional registered Common Units to Tejas
Energy, make a cash payment to Tejas Energy or effect a combination of Common
Units and cash payment as follows:
(a) Enterprise Partners may issue to Tejas Energy additional
Common Units having an aggregate value (based on the Closing Price for Common
Units on the Business Day immediately preceding the date of issuance) in an
amount equal to (i) the number of Common Units so sold by Tejas Energy
multiplied by (ii) (A) $18 (as appropriately Adjusted) minus (B) the Sales
Price;
(b) Enterprise Partners may pay to Tejas Energy an amount of
cash in immediately available funds equal to (i) the number of Common Units so
sold by Tejas Energy multiplied by (ii) (A) $18 (appropriately Adjusted) minus
(B) the Sales Price; or
(c) Any combination of the foregoing.
Notwithstanding the requirements of clause (iv) of the foregoing, (i) if Tejas
Energy requests in writing that Enterprise Partners waive the Manner of Sale
Restrictions in connection with a proposed sale by Tejas Energy of Common Units
received upon conversion of Special Units and Enterprise Partners declines to
waive the Manner of Sale Restrictions, then the one-year period following the
applicable Conversion Date for such Common Units will be tolled for such period
during which Enterprise Partners declines to waive the Manner of Sale
Restrictions, (ii) in the event Tejas Energy requests a demand registration
under the Registration Rights Agreement and is prevented from registering or
trading Common Units as a result of black-out periods under Section 2(b)(ii) of
the Registration Rights Agreement, then the one-year period following the
applicable Conversion Date for such Common Units will be tolled for such
black-out period, (iii) in the event Tejas Energy desires to sell Common Units
in a manner not requiring registration under the Securities Act and Tejas Energy
advises Enterprise Partners of such intention in writing and Enterprise Partners
advises Tejas Energy in writing that there is material non-public information
relating to Enterprise Partners that would prevent such a sale, then the
one-year period following the applicable Conversion Date for such Common Units
will be tolled for the days covered by such advice and (iv) in the event Tejas
Energy desires to sell Common Units but is restricted from selling such Common
Units as a result of any lock-up agreement binding on Tejas Energy pursuant to
Section 4(a) of the Registration Rights Agreement, then the one-year period
following the applicable Conversion Date for such Common Units will be tolled
for such lock-up period.
In the event Enterprise Partners is unable or fails to fulfill its obligations
under this Article IV, EPCO agrees, if requested in writing by Tejas Energy to
do so, to fulfill the obligations of Enterprise Partners under this Article IV
on behalf of Enterprise Partners.
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ARTICLE V
TERM OF THIS AGREEMENT
This Agreement will continue in full force and effect until the date
that Tejas Energy shall Dispose of all right, title and interest in the Tejas
Units and the Article IV Units to a Person other than a Permitted Affiliate,
provided that in the event that Tejas Energy and the Permitted Affiliates cease
to own at least 5 million of the Tejas Units and/or the Article IV Units, the
rights of Tejas Energy and the Permitted Affiliates under Article II, Section
3.5 and Section 3.6 shall terminate.
ARTICLE VI
FIDUCIARY DUTIES WAIVER; BUSINESS
OPPORTUNITIES
Section 6.1 Conduct of Affairs. In anticipation that Tejas Energy and
its Affiliates may engage in the same or similar activities or lines of business
and have an interest in the same areas of business opportunities as Enterprise
Partners and Enterprise GP and their respective Subsidiaries, and in recognition
of the difficulties attendant to any Tejas Energy Committee member ("Management
Designee") who desires and endeavors fully to satisfy such Management Designee's
fiduciary duties, in determining the full scope of such duties in any particular
situation, the provisions of this Article VI are set forth to guide the conduct
of certain affairs of Enterprise Partners and Enterprise GP and their respective
Subsidiaries as they may involve the Management Designees, and to define the
powers, rights and duties of the Management Designees in connection therewith.
Section 6.2 No Duty to Refrain from Activities. Neither Tejas Energy or
its Affiliates nor any Management Designee shall have a duty to refrain from
engaging directly or indirectly in the same or similar business activities or
lines of business as Enterprise Partners or its Subsidiaries, and to the fullest
extent permitted by applicable law, neither Tejas Energy or its Affiliates nor
the Management Designees shall be liable to Enterprise Partners and Enterprise
GP or their respective Subsidiaries for breach of any fiduciary duty by reason
of any such activities.
Section 6.3 No Duty to Communicate Opportunities. To the fullest extent
permitted by law, if a Management Designee who is also a director, officer or
employee of Tejas Energy or any of its Affiliates acquires knowledge of a
potential transaction or matter that may be a business opportunity for
Enterprise Partners and Enterprise GP or their respective Subsidiaries (whether
such potential transaction or matter is proposed by a third Person or is
conceived of by such Management Designee), such Management Designee shall be
entitled to offer such business opportunity to any Person as such Management
Designee deems appropriate under the circumstances in his sole discretion, and
neither Tejas Energy or any of its Affiliates nor such Management Designee shall
be liable to Enterprise Partners and Enterprise GP or any of their respective
Subsidiaries for breach of any fiduciary duty or duty of loyalty or failure to
act in (or not opposed to) the best interests of Enterprise Partners and
Enterprise GP or any of their respective Subsidiaries or the derivation of any
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improper personal benefit by reason of the fact that (a) such Management
Designee offered such business opportunity to any Person (rather than Enterprise
Partners and Enterprise GP or any of their respective Subsidiaries) or did not
communicate information regarding such business opportunity to Enterprise
Partners and Enterprise GP or any of their respective Subsidiaries or (b) Tejas
Energy or any of its Affiliates pursued or acquired such business opportunity
for itself or directed such business opportunity to another Person or did not
communicate information regarding such business opportunity to Enterprise
Partners and Enterprise GP or any of their respective Subsidiaries.
Section 6.4 Good Faith Actions. To the fullest extent permitted by law,
neither Tejas Energy nor any of its Affiliates nor any Management Designee shall
be liable to Enterprise Partners and Enterprise GP or any of their respective
Subsidiaries for breach of any fiduciary duty or duty of loyalty or failure to
act in (or not opposed to) the best interests of Enterprise Partners and
Enterprise GP or any of their respective Subsidiaries or the designation of any
improper personal benefit by reason of the fact that Tejas Energy or any of its
Affiliates or Management Designee in good faith takes any action or exercises
any rights or gives or withholds any consent in connection with any agreement or
contract between Tejas Energy or any of its Affiliates or any Management
Designee on the one hand and Enterprise Partners and Enterprise GP or any of
their respective Subsidiaries on the other hand.
ARTICLE VII
GOVERNING PRINCIPLES AND POLICIES
Enterprise Partners and Enterprise GP hereby adopt and agree that the
Code of Conduct set forth on Exhibit D (the "Code of Conduct") hereto shall,
during the term of this Agreement, be the governing principles and policies for
the conduct of business and operations of Enterprise Partners, Enterprise GP and
their respective Subsidiaries with respect to the financial policies, audit
rights, budgets, internal controls and other matters set forth in Exhibit D. The
Code of Conduct may be amended, replaced or otherwise altered as provided in
Section 2.2(b)(xviii).
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Injunctions. Each party acknowledges and agrees that the
other parties could be irreparably damaged in the event any of the provisions of
this Agreement were not performed by the party required to perform the same in
accordance with their specific terms or were otherwise breached. Each party
accordingly agrees that the other parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and
specifically enforce the terms and provisions thereof in any court of the United
States or any state thereof having jurisdiction, in addition to any remedy to
which a party may be entitled at law or equity.
-19-
<PAGE>
Section 8.2 Severability. If any term, provision, covenant or
restriction of this Agreement is held to be invalid, void, or unenforceable, the
remainder of the terms, provisions, covenants and restrictions shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such which may be hereafter declared
invalid, void or enforceable.
Section 8.3 Amendments. This Agreement may be amended only by an
agreement of the affected parties in writing.
Section 8.4 Descriptive Headings. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
Section 8.5 Counterparts. For the convenience of the parties, number of
counterparts of this Agreement may be executed by one or more parties hereto and
each such executed counterpart shall be and shall be deemed to be, an original
instrument.
Section 8.6 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and
delivered personally, by facsimile transmission (except for legal process) or
sent by registered mail, postage prepaid, if to:
If to Tejas Energy:
Tejas Energy, LLC
1301 McKinney Street, Suite 700
Houston, Texas 77010
Attention: General Counsel
Phone: (713) 230-3000
Fax No.: (713) 230-2900
-20-
<PAGE>
With a copy to:
Tejas Midstream Enterprises, LLC
1301 McKinney Street, Suite 700
Houston, Texas 77010
Attention: Chief Operating Officer
Phone: (713) 230-3000
Fax No.: (713) 230-1800
If to Enterprise Partners, EPCO, Enterprise GP and/or EPC II:
Enterprise Products GP, LLC
P.O. Box 4324 (77210-4324)
2727 North Loop West, Suite 700
Houston, Texas 77008
Attention: President
Phone: (713) 880-6500
Fax No. (713) 880-6570
With a copy to:
Enterprise Products GP, LLC
P.O. Box 4324 (77210-4324)
2727 North Loop West, Suite 700
Houston, Texas 77008
Attention: Chief Legal Officer
Phone: (713) 880-6500
Fax No. (713) 880-6570
or to such other address and facsimile transmission numbers as any part hereto
may, from time to time, designate in a written notice given in a like manner.
Notice shall be deemed given upon receipt.
Section 8.7 Law Applicable. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Texas
(without regard to the principles of conflicts of law thereof).
Section 8.8 Arbitration. Subject to Section 8.1, any controversy or
claim, whether based on contract, tort, statute or other legal or equitable
theory (including, but not limited to, any claim of fraud, misrepresentation or
fraudulent inducement or any question of validity or effect of this Agreement,
including this Section 8.8) arising out of or related to this Agreement
(including any amendments or extensions), or the breach of termination hereof or
any right to indemnity hereunder shall be settled by arbitration in accordance
with the arbitration terms set forth in Exhibit E hereto.
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Section 8.9 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of the parties hereto.
Section 8.10 Limitation on Liability. Notwithstanding any other
provision of this Agreement, neither a party nor any of its Affiliates, nor
their respective directors, officers, employees, agents and representatives,
shall be liable, whether in contract, tort, warranty, negligence, strict
liability, arbitration or otherwise, for any special, punitive, exemplary,
incidental, or consequential damages arising out of or in connection with this
Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers, each of whom is duly and validly
authorized and empowered, all as of the day and year first above written.
TEJAS MIDSTREAM ENTERPRISES, LLC
By: /s/ Curtis R. Frasier
------------------------------------
Curtis R. Frasier
President and Chief Operating Officer
TEJAS ENERGY, LLC
By /s/ Curtis R. Frasier
-----------------------------------
Curtis R. Frasier
Executive Vice President and
Chief Operating Officer
ENTERPRISE PRODUCTS GP, LLC
By: /s/ O. S. Andras
-----------------------------------
O. S. Andras
President and Chief Executive Officer
ENTERPRISE PRODUCTS PARTNERS L.P.
By: Enterprise Products GP, LLC, its general partner
By: /s/ O. S. Andras
-----------------------------------
O. S. Andras
President and Chief Executive Officer
ENTERPRISE PRODUCTS OPERATING L.P.
By: Enterprise Products GP, LLC, its general partner
By: /s/ O. S. Andras
-------------------------------------
O. S. Andras
President and Chief Executive Officer
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ENTERPRISE PRODUCTS COMPANY
By: /s/ O. S. Andras
--------------------------------------
Name: O. S. Andras
--------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
EPC PARTNERS II, INC.
By: /s/ Fancis B. Jacobs II
----------------------------
Name: Francis B. Jacobs II
----------------------------
Title: President
----------------------------
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<PAGE>
EXHIBIT D
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ENTERPRISE PRODUCTS PARTNERS L.P.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<TABLE>
<S> <C> <C>
1.1 Definitions...................................................................................................1
1.2 Construction..................................................................................................1
</TABLE>
ARTICLE II
ORGANIZATION
<TABLE>
<S> <C> <C>
2.1 Formation.....................................................................................................1
2.2 Name..........................................................................................................1
2.3 Registered Office; Registered Agent; Principal Office; Other Offices..........................................1
2.4 Purpose and Business..........................................................................................2
2.5 Powers........................................................................................................2
2.6 Power of Attorney.............................................................................................2
2.7 Term..........................................................................................................3
2.8 Title to Partnership Assets...................................................................................3
</TABLE>
ARTICLE III
RIGHTS OF LIMITED PARTNERS
<TABLE>
<S> <C> <C>
3.1 Limitation of Liability.......................................................................................4
3.2 Management of Business........................................................................................4
3.3 Outside Activities of the Limited Partners....................................................................4
3.4 Rights of Limited Partners....................................................................................4
</TABLE>
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
<TABLE>
<S> <C> <C>
4.1 Certificates..................................................................................................5
4.2 Mutilated, Destroyed, Lost or Stolen Certificates.............................................................5
4.3 Record Holders................................................................................................6
4.4 Transfer Generally............................................................................................6
4.5 Registration and Transfer of Limited Partner Interests........................................................6
4.6 Transfer of General Partner Interest..........................................................................7
4.7 Restrictions on Transfers.....................................................................................7
4.8 Citizenship Certificates; Non-citizen Assignees...............................................................8
4.9 Redemption of Partnership Interests of Non-citizen Assignees..................................................9
</TABLE>
ARTICLE V
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS
i
<PAGE>
<TABLE>
<S> <C> <C>
5.1 Prior Contributions...........................................................................................9
5.2 Continuation of General Partner and Limited Partner Interests; Initial Offering; Issuance of Class A Special
Units; Contributions by the General Partner......................................................................10
5.3 Contributions by the Underwriters............................................................................10
5.4 Interest and Withdrawal......................................................................................11
5.5 Capital Accounts.............................................................................................11
5.6 Issuances of Additional Partnership Securities...............................................................13
5.7 Limitations on Issuance of Additional Partnership Securities.................................................14
5.8 Conversion of Subordinated Units.............................................................................14
5.9 Limited Preemptive Right.....................................................................................16
5.10 Splits and Combinations.....................................................................................16
5.11 Fully Paid and Non-Assessable Nature of Limited Partner Interests...........................................16
5.12 Creation and Conversion of Class A Special Units............................................................17
</TABLE>
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
<TABLE>
<S> <C> <C>
6.1 Allocations for Capital Account Purposes.....................................................................17
6.2 Allocations for Tax Purposes.................................................................................23
6.3 Requirement and Characterization of Distributions; Distributions to Record Holders...........................24
6.4 Distributions of Available Cash from Operating Surplus.......................................................25
6.5 Distributions of Available Cash from Capital Surplus.........................................................26
6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution Levels..................................26
6.7 Special Provisions Relating to the Holders of Subordinated Units and Class A Special Units...................27
6.8 Entity-Level Taxation........................................................................................27
</TABLE>
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
<TABLE>
<S> <C> <C>
7.1 Management...................................................................................................28
7.2 Certificate of Limited Partnership...........................................................................29
7.3 Restrictions on General Partner's Authority..................................................................29
7.4 Reimbursement of the General Partner.........................................................................30
7.5 Outside Activities...........................................................................................31
7.6 Loans from the General Partner; Loans or Contributions from the Partnership; Contracts with Affiliates; Certain
Restrictions on the General Partner..............................................................................31
7.7 Indemnification..............................................................................................32
7.8 Liability of Indemnitees.....................................................................................34
7.9 Resolution of Conflicts of Interest..........................................................................34
7.10 Other Matters Concerning the General Partner................................................................35
7.11 Purchase or Sale of Partnership Securities..................................................................36
7.12 Registration Rights of the General Partner and its Affiliates...............................................36
7.13 Reliance by Third Parties...................................................................................37
</TABLE>
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
<TABLE>
<S> <C> <C>
8.1 Records and Accounting.......................................................................................38
8.2 Fiscal Year..................................................................................................38
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
8.3 Reports......................................................................................................38
</TABLE>
ARTICLE IX
TAX MATTERS
<TABLE>
<S> <C> <C>
9.1 Tax Returns and Information..................................................................................39
9.2 Tax Elections................................................................................................39
9.3 Tax Controversies............................................................................................39
9.4 Withholding..................................................................................................39
</TABLE>
ARTICLE X
ADMISSION OF PARTNERS
<TABLE>
<S> <C> <C>
10.1 Admission of Initial Limited Partners.......................................................................39
10.2 Admission of Substituted Limited Partner....................................................................40
10.3 Admission of Successor General Partner......................................................................40
10.4 Admission of Additional Limited Partners....................................................................40
10.5 Amendment of Agreement and Certificate of Limited Partnership...............................................41
</TABLE>
ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
<TABLE>
<S> <C> <C>
11.1 Withdrawal of the General Partner...........................................................................41
11.2 Removal of the General Partner..............................................................................42
11.3 Interest of Departing Partner and Successor General Partner.................................................42
11.4 Termination of Subordination Period, Conversion of Subordinated Units and Extinguishment of Cumulative
Common Unit Arrearages...........................................................................................43
11.5 Withdrawal of Limited Partners..............................................................................43
</TABLE>
ARTICLE XII
DISSOLUTION AND LIQUIDATION
<TABLE>
<S> <C> <C>
12.1 Dissolution.................................................................................................44
12.2 Continuation of the Business of the Partnership After Dissolution...........................................44
12.3 Liquidator..................................................................................................45
12.4 Liquidation.................................................................................................45
12.5 Cancellation of Certificate of Limited Partnership..........................................................45
12.6 Return of Contributions.....................................................................................46
12.7 Waiver of Partition.........................................................................................46
12.8 Capital Account Restoration.................................................................................46
</TABLE>
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
<TABLE>
<S> <C> <C>
13.1 Amendment to be Adopted Solely by the General Partner.......................................................46
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
13.2 Amendment Procedures........................................................................................47
13.3 Amendment Requirements......................................................................................47
13.4 Special Meetings............................................................................................48
13.5 Notice of a Meeting.........................................................................................48
13.6 Record Date.................................................................................................48
13.7 Adjournment.................................................................................................48
13.8 Waiver of Notice............................................................................................48
13.9 Quorum......................................................................................................49
13.10 Conduct of a Meeting.......................................................................................49
13.11 Action Without a Meeting...................................................................................49
13.12 Voting and Other Rights....................................................................................50
</TABLE>
ARTICLE XIV
MERGER
<TABLE>
<S> <C> <C>
14.1 Authority...................................................................................................50
14.2 Procedure for Merger or Consolidation.......................................................................50
14.3 Approval by Limited Partners of Merger or Consolidation.....................................................51
14.4 Certificate of Merger.......................................................................................52
14.5 Effect of Merger............................................................................................52
</TABLE>
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
<TABLE>
<S> <C> <C>
15.1 Right to Acquire Limited Partner Interests..................................................................52
</TABLE>
ARTICLE XVI
GENERAL PROVISIONS
<TABLE>
<S> <C> <C>
16.1 Addresses and Notices.......................................................................................53
16.2 Further Action..............................................................................................54
16.3 Binding Effect..............................................................................................54
16.4 Integration.................................................................................................54
16.5 Creditors...................................................................................................54
16.6 Waiver......................................................................................................54
16.7 Counterparts................................................................................................54
16.8 Applicable Law..............................................................................................54
16.9 Invalidity of Provisions....................................................................................54
16.10 Consent of Partners........................................................................................54
</TABLE>
iv
<PAGE>
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF ENTERPRISE PRODUCTS PARTNERS L.P.
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
ENTERPRISE PRODUCTS PARTNERS L.P. dated as of September 17, 1999, is entered
into by and among Enterprise Products GP, LLC, a Delaware limited liability
company, as the General Partner, and the Limited Partners as provided herein. In
consideration of the covenants, conditions and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The definitions listed on Attachment I shall be for all
purposes, unless otherwise clearly indicated to the contrary, applied to the
terms used in this Agreement.
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; and (c) "include" or "includes" means
includes, without limitation, and "including" means including, without
limitation.
ARTICLE II
ORGANIZATION
2.1 Formation. The Partnership has been previously formed as a limited
partnership pursuant to the provisions of the Delaware Act. The General Partner
and the Limited Partners hereby amend and restate in its entirety the Agreement
of Limited Partnership of Enterprise Products Partners L.P., dated April 9,
1998, as amended by that certain First Amendment to Agreement of Limited
Partnership of Enterprise Products Partners L.P., dated as of June 1, 1998, as
amended by that certain Amended and Restated Agreement of Limited Partnership of
Enterprise Products Partners L.P., dated as of July 31, 1998. Subject to the
provisions of this Agreement, the General Partner and the Limited Partners
hereby continue the Partnership as a limited partnership pursuant to the
provisions of the Delaware Act. 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 and a Partner has no interest in specific Partnership property.
2.2 Name. The name of the Partnership shall be "Enterprise Products
Partners L.P." The Partnership's business may be conducted under any other name
or names deemed necessary or appropriate by the General Partner in its sole
discretion, 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 in its discretion
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.
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, New
Castle County, Wilmington, Delaware 19801, and the registered agent for service
of process on the Partnership in the State of Delaware at such registered office
shall be The Corporation Trust Company. The principal office of the
1
<PAGE>
Partnership shall be located at P.O. Box 4324, Houston, Texas 77210-4324 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 deems
necessary or appropriate. The address of the General Partner shall be P.O. Box
4324, Houston, Texas 77210-4324 or such other place as the General Partner may
from time to time designate by notice to the Limited Partners.
2.4 Purpose and Business. The purpose and nature of the business to be
conducted by the Partnership shall be:
(a) to serve as a limited partner in the Operating Partnership and any
of its Subsidiary partnerships and, in connection therewith, to exercise
all of the rights and powers conferred upon the Partnership as a limited
partner in such partnerships pursuant to the partnership agreements for
such entities or otherwise;
(b) to engage directly in, or enter into or form any corporation,
partnership, joint venture, limited liability company or other arrangement
to engage indirectly in, any business activity that the Operating
Partnership is permitted to engage in by the Operating Partnership
Agreement 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;
(c) to engage directly in, or enter into or form 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 which 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;
provided, however, that the General Partner determines in good faith, prior
to the conduct of such activity, that the conduct by the Partnership of
such activity is not likely to result in the Partnership being treated as
an association taxable as a corporation for federal income tax purposes;
and
(d) to do anything necessary or appropriate to the foregoing, including
the making of capital contributions or loans to any Group Member.
The General Partner has no obligation or duty to the Partnership, the Limited
Partners or any Assignee to propose or approve, and in its sole discretion may
decline to propose or approve, the conduct by the Partnership of any business.
2.5 Powers. The Partnership shall be empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described in
Section 2.4 and for the protection and benefit of the Partnership.
2.6 Power of Attorney.
(a) Each Limited Partner and each Assignee hereby constitutes and appoints
the General Partner and, if a Liquidator (other than the General Partner) shall
have been selected pursuant to Section 12.3, the Liquidator, severally (and any
successor to either thereof by merger, transfer, assignment, election or
otherwise) and each of their authorized officers and attorneys-in-fact, 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 deems necessary or appropriate to form,
qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have
limited liability) in the State of Delaware and in all other jurisdictions
in which the Partnership may conduct business or own property; (B) all
certificates, documents and other instruments that the General Partner or
the Liquidator deems necessary or appropriate to reflect, in accordance
with its terms, any amendment, change, modification or restatement of this
Agreement; (C) all certificates,
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documents and other instruments (including conveyances and a certificate of
cancellation) that the General Partner or the Liquidator deems necessary or
appropriate to reflect the dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement; (D) all certificates, documents
and other instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events described in,
Article IV, X, XI or XII; (E) all certificates, documents and other
instruments relating to the determination of the rights, preferences and
privileges of any class or series of Partnership Securities issued pursuant
to Section 5.6; and (F) all certificates, documents and other instruments
(including agreements and a certificate of merger) relating to a merger or
consolidation 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 necessary or appropriate, in the discretion of the General
Partner or the Liquidator, to make, evidence, give, confirm or ratify any
vote, consent, approval, agreement or other action that is made or given by
the Partners hereunder or is consistent with the terms of this Agreement or
is necessary or appropriate, in the discretion of the General Partner or
the Liquidator, to 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 or Assignee and the transfer of all or any portion of such Limited
Partner's or Assignee's Partnership Interest and shall extend to such Limited
Partner's or Assignee's heirs, successors, assigns and personal representatives.
Each such Limited Partner or Assignee 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 or
Assignee, 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 or Assignee 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 deems necessary to effectuate this
Agreement and the purposes of the Partnership.
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 close of Partnership business on December 31,
2088 or until the earlier termination 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.
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 or Assignee, 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
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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
3.1 Limitation of Liability. The Limited Partners and the Assignees shall
have no liability under this Agreement except as expressly provided in this
Agreement or the Delaware Act.
3.2 Management of Business. No Limited Partner or Assignee, in its capacity
as such, shall participate in the operation, management or control (within the
meaning of Section 17-303(a) 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. Any action taken by any
Affiliate of the General Partner or any officer, director, employee, member,
general partner, agent or trustee of the General Partner or any of its
Affiliates, or any officer, director, employee, member, general partner, agent
or trustee of a Group Member, in its capacity as such, shall not 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 or Assignees under this Agreement.
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 or
Assignees, any Limited Partner or Assignee 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 or Assignees shall have any rights by virtue of this
Agreement in any business ventures of any Limited Partner or Assignee.
3.4 Rights of Limited Partners.
(a) In addition to other rights provided by this Agreement or by applicable
law, 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 and at
such Limited Partner's own expense:
(i) to obtain true and full information regarding the status of the
business and financial condition of the artnership;
(ii) promptly after becoming available, to obtain a copy of the
Partnership's federal, state and local income tax returns for each year;
(iii) to have furnished to him a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to have furnished to him a copy of this Agreement and the
Certificate of Limited Partnership and all amendments thereto, together
with a copy of the executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed;
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(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 which each Partner has agreed to
contribute in the future, and the date on which each became a Partner; and
(vi) to obtain such other information regarding the affairs of the
Partnership as is just and reasonable.
(b) Notwithstanding any other provision of this Agreement, the General
Partner may keep confidential from the Limited Partners and Assignees, 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 (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).
ARTICLE IV
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS;
REDEMPTION OF PARTNERSHIP INTERESTS
4.1 Certificates. Upon the Partnership's issuance of Common Units,
Subordinated Units or Class A Special Units to any Person, the Partnership shall
issue 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 interests in the Partnership and (b) upon
the request of any Person owning any Partnership Securities, the Partnership
shall issue to such Person one or more certificates evidencing such Partnership
Securities. Certificates shall be executed on behalf of the Partnership by the
Chairman of the Board, President or any Executive Vice President or Vice
President and the Secretary or any Assistant Secretary of the General Partner.
No Common Unit Certificate shall be valid for any purpose until it has been
countersigned by the Transfer Agent. Subject to the requirements of Section
6.7(b), the Partners holding Certificates evidencing Subordinated Units may
exchange such Certificates for Certificates evidencing Common Units on or after
the date on which such Subordinated Units are converted into Common Units
pursuant to the terms of Section 5.8. Subject to the requirements of Section
6.7(b), the Partners holding Certificates evidencing Class A Special Units may
exchange such Certificates for Certificates evidencing Common Units on or after
the date on which such Class A Special Units are converted into Common Units
pursuant to the terms of Section 5.12.
4.2 Mutilated, Destroyed, Lost or Stolen Certificates.
(a) If any mutilated Certificate is surrendered to the Transfer Agent, the
appropriate officers of the General Partner on behalf of the Partnership shall
execute, and the Transfer Agent shall countersign and deliver in exchange
therefor, a new Certificate evidencing the same number and type of Partnership
Securities as the Certificate so surrendered.
(b) The appropriate officers of the General Partner on behalf of the
Partnership shall execute and deliver, and the Transfer Agent 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
Partnership, that a previously issued Certificate has been lost, destroyed
or stolen;
(ii) requests the issuance of a new Certificate before the Partnership
has notice that the Certificate has been acquired by a purchaser for value
in good faith and without notice of an adverse claim;
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(iii) if requested by the Partnership, delivers to the Partnership a
bond, in form and substance satisfactory to the Partnership, with surety or
sureties and with fixed or open penalty as the Partnership may reasonably
direct, in its sole discretion, 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
Partnership.
If a Limited Partner or Assignee fails to notify the Partnership within a
reasonable 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 or Assignee 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 Partnership 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.
4.3 Record Holders. The Partnership shall be entitled to recognize the
Record Holder as the Partner or Assignee 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 or any applicable rule, regulation,
guideline or requirement of any National Securities Exchange on which such
Partnership Interests are listed for trading. 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 (a) shall be the
Partner or Assignee (as the case may be) of record and beneficially, (b) must
execute and deliver a Transfer Application and (c) shall be bound by this
Agreement and shall have the rights and obligations of a Partner or Assignee (as
the case may be) hereunder and as, and to the extent, provided for herein.
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 by which the
General Partner assigns its Partnership Interest as a general partner in the
Partnership to another Person who becomes the General Partner, or by which the
holder of a Limited Partner Interest assigns such Limited Partner Interest to
another Person who is or becomes a Limited Partner or an Assignee, and includes
a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange
or any other disposition by law or otherwise.
(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.
(c) Nothing contained in this Agreement shall be construed to prevent a
disposition by any member of the General Partner of any or all of the issued and
outstanding member interests of the General Partner.
4.5 Registration and Transfer of Limited Partner Interests.
(a) The Partnership shall keep or cause to be kept on behalf of the
Partnership a 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 Common Units and transfers of such Common Units as herein
provided. The Partnership shall not recognize transfers of Certificates
evidencing Limited Partner Interests unless such transfers
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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), the
appropriate officers of the General Partner on behalf of the Partnership shall
execute and deliver, and in the case of Common 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) Except as otherwise provided in Section 4.9, the Partnership shall not
recognize any transfer of Limited Partner Interests until the Certificates
evidencing such Limited Partner Interests are surrendered for registration of
transfer and such Certificates are accompanied by a Transfer Application duly
executed by the transferee (or the transferee's attorney-in-fact duly authorized
in writing). No charge shall be imposed by the Partnership for such transfer;
provided, that as a condition to the issuance of any new Certificate under this
Section 4.5, the Partnership may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed with respect
thereto.
(c) Limited Partner Interests may be transferred only in the manner
described in this Section 4.5. The transfer of any Limited Partner Interests and
the admission of any new Limited Partner shall not constitute an amendment to
this Agreement.
(d) Until admitted as a Substituted Limited Partner pursuant to Section
10.2, the Record Holder of a Limited Partner Interest shall be an Assignee in
respect of such Limited Partner Interest. Limited Partners may include
custodians, nominees or any other individual or entity in its own or any
representative capacity.
(e) A transferee of a Limited Partner Interest who has completed and
delivered a Transfer Application shall be deemed to have (i) requested admission
as a Substituted Limited Partner, (ii) agreed to comply with and be bound by and
to have executed this Agreement, (iii) represented and warranted that such
transferee has the right, power and authority and, if an individual, the
capacity to enter into this Agreement, (iv) granted the powers of attorney set
forth in this Agreement and (v) given the consents and approvals and made the
waivers contained in this Agreement.
(f) The General Partner and its Affiliates shall have the right at any time
to transfer its Subordinated Units, and Common Units (whether issued upon
conversion of the Subordinated Units or otherwise) to one or more Persons.
4.6 Transfer of General Partner Interest.
(a) Subject to Section 4.6(c) below, prior to June 30, 2008, 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 Common Units
(excluding any Common Units held 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 or (B) another Person in connection with the
merger or consolidation of the General Partner with or into another Person or
the transfer by the General Partner of all or substantially all of its assets to
another Person.
(b) Subject to Section 4.6(c) below, on or after June 30, 2008, the General
Partner may transfer all or any of its General Partner Interest without
Unitholder approval.
(c) 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 the Operating
Partnership Agreement and to be bound by the provisions of this Agreement and
the Operating Partnership Agreement, (ii) the Partnership receives an Opinion of
Counsel that such transfer would not result in the loss of limited liability of
any Limited Partner or of any member of the Operating Partnership or cause the
Partnership or the Operating 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) and (iii) such
transferee also agrees to purchase all (or the appropriate portion thereof, if
applicable) of the
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partnership interest of the General Partner as the general partner of each other
Group Member. 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 a
General Partner immediately prior to the transfer of the General Partner
Interest, and the business of the Partnership shall continue without
dissolution.
4.7 Restrictions on Transfers.
(a) Except as provided in Section 4.7(d) below, but notwithstanding the
other provisions of this Article IV, no transfer of any Partnership Interests
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
or the Operating Partnership under the laws of the jurisdiction of its
formation, or (iii) cause the Partnership or the Operating 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).
(b) The General Partner may impose restrictions on the transfer of
Partnership Interests if a subsequent Opinion of Counsel determines that such
restrictions are necessary to avoid a significant risk of the Partnership or the
Operating Partnership becoming taxable as a corporation or otherwise to be taxed
as an entity for federal income tax purposes. The restrictions may be imposed by
making such amendments to this Agreement as the General Partner may determine to
be necessary or appropriate to impose such restrictions; provided, however, that
any amendment that the General Partner believes, in the exercise of its
reasonable discretion, could result in the delisting or suspension of trading of
any class of Limited Partner Interests on the principal National Securities
Exchange on which such class of Limited Partner Interests is then traded must be
approved, prior to such amendment being effected, by the holders of at least a
majority of the Outstanding Limited Partner Interests of such class.
(c) The transfer of a Subordinated Unit that has converted into a Common
Unit shall be subject to the restrictions imposed by Section 6.7(b), and the
transfer of a Class A Special Unit that has been converted into a Common Unit
shall be subject to the restrictions imposed by Section 6.7(b).
(d) Nothing contained in this Article IV, or elsewhere in this Agreement,
shall preclude the settlement of any transactions involving Partnership
Interests entered into through the facilities of any National Securities
Exchange on which such Partnership Interests are listed for trading.
4.8 Citizenship Certificates; Non-citizen Assignees.
(a) If any Group Member is or becomes subject to any federal, state or
local law or regulation that, in the reasonable determination of the General
Partner, creates 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 or Assignee, the
General Partner may request any Limited Partner or Assignee 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 or Assignee 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 or Assignee 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 or Assignee is not an Eligible Citizen, the
Partnership Interests owned by such Limited Partner or Assignee shall be subject
to redemption in accordance with the provisions of Section 4.9. In addition, the
General Partner may require that the status of any such Limited Partner or
Assignee 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 his Limited Partner Interests.
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(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
without limitation 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 the
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 he can and does certify that he has become an
Eligible Citizen, a Non-citizen Assignee may, upon application to the General
Partner, request admission as a Substituted Limited Partner with respect to any
Limited Partner Interests of such Non-citizen Assignee not redeemed pursuant to
Section 4.9, and upon his admission pursuant to Section 10.2, the General
Partner shall cease to be deemed to be the Limited Partner in respect of the
Non-citizen Assignee's Limited Partner Interests.
4.9 Redemption of Partnership Interests of Non-citizen Assignees.
(a) If at any time a Limited Partner or Assignee fails to furnish a
Citizenship Certification or other information requested within the 30-day
period specified in Section 4.8(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 or Assignee is not an Eligible
Citizen, the Partnership may, unless the Limited Partner or Assignee establishes
to the satisfaction of the General Partner that such Limited Partner or Assignee
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 Partnership Interest of such Limited Partner or Assignee 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
or Assignee, 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 or Assignee 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 Partnership Interests of
the class to be so redeemed multiplied by the number of Partnership
Interests of each such class included among the Redeemable Interests. The
redemption price shall be paid, in the discretion of 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
10% 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 or
Assignee, 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
Assignee or his duly authorized representative shall be entitled to receive
the payment therefor.
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(iv) After the redemption date, Redeemable Interests shall no longer
constitute issued and Outstanding Partnership Interests.
(b) The provisions of this Section 4.9 shall also be applicable to
Partnership Interests held by a Limited Partner or Assignee as nominee of a
Person determined to be other than an Eligible Citizen.
(c) Nothing in this Section 4.9 shall prevent the recipient of a notice of
redemption from transferring his Partnership 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 Partnership Interest certifies to
the satisfaction of the General Partner in a Citizenship Certification delivered
in connection with the Transfer Application 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
5.1 Prior Contributions. Prior to the date hereof, the General Partner made
certain Capital Contributions to the Partnership in exchange for an interest in
the Partnership and has been admitted as the General Partner of the Partnership,
and EPC Partners II made certain Capital Contributions to the Partnership in
exchange for an interest in the Partnership and has been admitted as a Limited
Partner of the Partnership.
5.2 Continuation of General Partner and Limited Partner Interests; Initial
Offering; Issuance of Class A Special Units; Contributions by the General
Partner.
(a) The Partnership Interest of the General Partner in the Partnership
shall be continued, subject to all of the rights, privileges and duties of the
General Partner under this Agreement.
(b) On the Closing Date, the Partnership Interest of EPC Partners II in the
Partnership was converted into 33,552,915 Common Units and 21,409,870
Subordinated Units, and such Partnership Interest shall be continued.
(c) All other Partnership Interests that were issued prior to the date
hereof and are currently Outstanding shall be continued.
(d) Upon the issuance of the Class A Special Units (other than the Series
2002B Class A Special Units) and upon the issuance of any additional Limited
Partner Interests by the Partnership, the General Partner shall be required to
make additional Capital Contributions equal to 1/99th of any amount contributed
to the Partnership in exchange for such additional Limited Partner Interests.
Except as set forth in the immediately preceding sentence and Article XII, the
General Partner shall not be obligated to make any additional Capital
Contributions to the Partnership.
5.3 Contributions by the Underwriters.
(a) On the Closing Date and pursuant to the Underwriting Agreement, each
Underwriter was required to contribute to the Partnership cash in an amount
equal to the Issue Price per Initial Common Unit, multiplied by the number of
Common Units specified in the Underwriting Agreement to be purchased by such
Underwriter at the Closing Date. In exchange for such Capital Contributions by
the Underwriters, the Partnership issued Common Units to each Underwriter on
whose behalf such Capital Contribution was made in an amount equal to the
quotient obtained by dividing (i) the cash contribution to the Partnership by or
on behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.
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(b) Upon the exercise of the Over-Allotment Option, each Underwriter was
required to contribute to the Partnership cash in an amount equal to the Issue
Price per Initial Common Unit, multiplied by the number of Common Units
specified in the Underwriting Agreement to be purchased by such Underwriter at
the Option Closing Date. In exchange for such Capital Contributions by the
Underwriters, the Partnership issued Common Units to each Underwriter on whose
behalf such Capital Contribution was made in an amount equal to the quotient
obtained by dividing (i) the cash contributions to the Partnership by or on
behalf of such Underwriter by (ii) the Issue Price per Initial Common Unit.
(c) No Limited Partner Partnership Interests were issued or issuable as of
or at the Closing Date other than (i) the Common Units issuable pursuant to
subparagraph (a) hereof in aggregate number equal to 12,000,000, (ii) the
"Option Units" as such term is used in the Underwriting Agreement in aggregate
number up to 1,800,000 issuable upon exercise of the Over-Allotment Option
pursuant to subparagraph (b) hereof, and (iii) the 33,552,915 Common Units and
21,409,870 Subordinated Units issuable to EPC Partners II pursuant to Section
5.2(b).
(d) On the date hereof, Tejas shall be issued 14,500,000 Class A Special
Units and be admitted as a Limited Partner of the Partnership in exchange for
certain Capital Contributions described in the Tejas Contribution Agreement. If,
but only if, the Year 2000 Performance Test is fully satisfied and met, Tejas
will be issued an additional 3,000,000 Class A Special Units in accordance with
the Year 2000 Performance Test and, if, but only if, the Year 2001 Performance
Test is fully satisfied and met, Tejas will be issued an additional 3,000,000
Class A Special Units in accordance with the Year 2001 Performance Test;
provided, however, that if the Year 2000 Performance Test and/or the Year 2001
Performance Test is not met, the Class A Special Units that would have been but
were not issued pursuant to such tests will be issued to Tejas in accordance
with the Combined Performance Test if, but only if, the Combined Performance
Test is met. In no event shall the aggregate number of Class A Special Units
issued upon satisfaction of the Performance Tests (collectively, the "Series
2002B Class A Special Units") exceed 6,000,000. Upon the issuance of any Series
2002 B Class A Special Units pursuant to this Section 5.3(d), the Net Agreed
Value of Tejas' initial Capital Contribution shall be increased by an amount
equal to the fair market value of such Series 2002B Class A Special Units
discounted at a 5.42% rate to the date hereof.
5.4 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 or Assignee 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 and Assignees agree within the meaning of 17-502(b) of the Delaware
Act.
5.5 Capital Accounts.
(a) The Partnership shall maintain for each Partner (or a beneficial owner
of Partnership Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner in its sole discretion) owning a Partnership Interest a separate Capital
Account with respect to such Partnership Interest in accordance with the rules
of Treasury Regulation Section 1.704-1(b)(2)(iv). Such Capital Account shall be
increased by (i) the amount of all Capital Contributions made to the Partnership
with respect to such Partnership Interest pursuant to this Agreement and (ii)
all items of Partnership income and gain (including, without limitation, income
and gain exempt from tax) computed in accordance with Section 5.5(b) and
allocated with respect to such Partnership Interest pursuant to Section 6.1, and
decreased by (A) the amount of cash or Net Agreed Value of all actual and deemed
distributions of cash or property made with respect to such Partnership Interest
pursuant to this Agreement and (B) all items of Partnership deduction and loss
computed in accordance with Section 5.5(b) and allocated with respect to such
Partnership Interest pursuant to Section 6.1.
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(b) For purposes of computing the amount of any item of income, gain, loss
or deduction which is to be allocated pursuant to Article VI 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 (including,
without limitation, any method of depreciation, cost recovery or amortization
used for that purpose), provided, that:
(i) Solely for purposes of this Section 5.5, the Partnership shall be
treated as owning directly its proportionate share (as determined by the
General Partner based upon the provisions of the Operating Partnership
Agreement) of all property owned by the Operating Partnership.
(ii) All fees and other expenses incurred by the Partnership to promote
the sale of (or to sell) a Partnership Interest that can neither be
deducted nor amortized under Section 709 of the Code, if any, shall, for
purposes of Capital Account maintenance, be treated as an item of deduction
at the time such fees and other expenses are incurred and shall be
allocated among the Partners pursuant to Section 6.1.
(iii) Except as otherwise provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under Section
754 of the Code which may be made by the Partnership and, as to those items
described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without
regard to the fact that such items are not includable in gross income or
are neither currently deductible nor capitalized for federal income tax
purposes. 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.
(iv) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(v) In accordance with the requirements of Section 704(b) of the Code,
any deductions for depreciation, cost recovery or amortization attributable
to any Contributed Property shall be determined as if the adjusted basis of
such property on the date it was acquired by the Partnership were equal to
the Agreed Value of such property. Upon an adjustment pursuant to Section
5.5(d) to the Carrying Value of any Partnership property subject to
depreciation, cost recovery or amortization, any further deductions for
such depreciation, cost recovery or amortization attributable to such
property shall be determined (A) as if the adjusted basis of such property
were equal to the Carrying Value of such property immediately following
such adjustment and (B) using a rate of depreciation, cost recovery or
amortization derived from the same method and useful life (or, if
applicable, the remaining useful life) as is applied for federal income tax
purposes; provided, however, that, if the asset has a zero adjusted basis
for federal income tax purposes, depreciation, cost recovery or
amortization deductions shall be determined using any reasonable method
that the General Partner may adopt.
(vi) If the Partnership's adjusted basis in a depreciable or cost
recovery property is reduced for federal income tax purposes pursuant to
Section 48(q)(1) or 48(q)(3) of the Code, the amount of such reduction
shall, solely for purposes hereof, be deemed to be an additional
depreciation or cost recovery deduction in the year such property is placed
in service and shall be allocated among the Partners pursuant to Section
6.1. Any restoration of such basis pursuant to Section 48(q)(2) of the Code
shall, to the extent possible, be allocated in the same manner to the
Partners to whom such deemed deduction was allocated.
(c) (i) A transferee of a Partnership Interest shall succeed to a pro rata
portion of the Capital Account of the transferor relating to the Partnership
Interest so transferred.
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(ii) Immediately prior to the transfer of (A) a Subordinated Unit or of a
Subordinated Unit that has converted into a Common Unit pursuant to Section 5.8
by a holder thereof (other than a transfer to an Affiliate unless the General
Partner elects to have this subparagraph 5.5(c)(ii) apply) or (B) a Class A
Special Unit that has converted into a Common Unit pursuant to Section 5.12, the
Capital Account maintained for such Person with respect to its Subordinated
Units, converted Subordinated Units or converted Class A Special Units will (x)
first, be allocated to the Subordinated Units, converted Subordinated Units or
converted Class A Special Units to be transferred in an amount equal to the
product of (1) the number of such Subordinated Units, converted Subordinated
Units or converted Class A Special Units to be transferred and (2) the Per Unit
Capital Amount for a Common Unit, and (y) second, any remaining balance in such
Capital Account will be retained by the transferor, regardless of whether it has
retained any Subordinated Units, converted Subordinated Units or converted Class
A Special Units. Following any such allocation, the transferor's Capital
Account, if any, maintained with respect to the retained Subordinated Units,
converted Subordinated Units or converted Class A Special Units, if any, will
have a balance equal to the amount allocated under clause (y) hereinabove, and
the transferee's Capital Account established with respect to the transferred
Subordinated Units, converted Subordinated Units or converted Class A Special
Units will have a balance equal to the amount allocated under clause (x)
hereinabove. If the transferor has not retained any Subordinated Units,
converted Subordinated Units or converted Class A Special Units, any remaining
balance in such Capital Account will be retained by transferor, such Capital
Account interest having rights to receive distributions pursuant to Section
12.4(c) and being allocated Net Termination Losses pursuant to Section
6.1(c)(ii)(C).
(d) (i) In accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on an issuance of additional Partnership Interests for
cash or Contributed Property or the conversion of the General Partner's Combined
Interest to Common Units pursuant to Section 11.3(c), the Capital Account of all
Partners and the Carrying Value of each Partnership property immediately prior
to such issuance shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property immediately prior to such issuance and had been allocated to the
Partners at such time pursuant to Section 6.1 in the same manner as any item of
gain or loss actually recognized during such period would have been allocated.
In determining such Unrealized Gain or Unrealized Loss, the aggregate cash
amount and fair market value of all Partnership assets (including, without
limitation, cash or cash equivalents) immediately prior to the issuance of
additional Partnership Interests shall be determined by the General Partner
using such reasonable method of valuation as it may adopt; provided, however,
that the General Partner, in arriving at such valuation, must take fully into
account the fair market value of the Partnership Interests of all Partners at
such time. The General Partner shall allocate such aggregate value among the
assets of the Partnership (in such manner as it determines in its discretion to
be reasonable) to arrive at a fair market value for individual properties.
(ii) In accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
immediately prior to any actual or deemed distribution to a Partner of any
Partnership property (other than a distribution of cash that is not in
redemption or retirement of a Partnership Interest), the Capital Accounts of all
Partners and the Carrying Value of all Partnership property shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as if such Unrealized Gain or
Unrealized Loss had been recognized in a sale of such property immediately prior
to such distribution for an amount equal to its fair market value, and had been
allocated to the Partners, at such time, pursuant to Section 6.1 in the same
manner as any item of gain or loss actually recognized during such period would
have been allocated. In determining such Unrealized Gain or Unrealized Loss the
aggregate cash amount and fair market value of all Partnership assets
(including, without limitation, cash or cash equivalents) immediately prior to a
distribution shall (A) in the case of an actual distribution which is not made
pursuant to Section 12.4 or in the case of a deemed contribution and/or
distribution occurring as a result of a termination of the Partnership pursuant
to Section 708 of the Code, be determined and allocated in the same manner as
that provided in Section 5.5(d)(i) or (B) in the case of a liquidating
distribution pursuant to Section 12.4, be determined and allocated by the
Liquidator using such reasonable method of valuation as it may adopt.
5.6 Issuances of Additional Partnership Securities.
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(a) Subject to Section 5.7, the Partnership may issue additional
Partnership Securities and options, rights, warrants and appreciation rights
relating to the Partnership Securities for any Partnership purpose at any time
and from time to time to such Persons for such consideration and on such terms
and conditions as shall be established by the General Partner in its sole
discretion, all without the approval of any Limited Partners.
(b) Each additional Partnership Security authorized to be issued by the
Partnership pursuant to Section 5.6(a) may be issued in one or more classes, or
one or more series of any such classes, with such designations, preferences,
rights, powers and duties (which may be senior to existing classes and series of
Partnership Securities), as shall be fixed by the General Partner in the
exercise of its sole discretion, including (i) the right to share Partnership
profits and losses or items thereof; (ii) the right to share in Partnership
distributions; (iii) the rights upon dissolution and liquidation of the
Partnership; (iv) whether, and the terms and conditions upon which, the
Partnership may redeem the Partnership Security; (v) whether such Partnership
Security is issued with the privilege of conversion or exchange and, if so, the
terms and conditions of such conversion or exchange; (vi) the terms and
conditions upon which each Partnership Security will be issued, evidenced by
certificates and assigned or transferred; and (vii) the right, if any, of each
such Partnership Security to vote on Partnership matters, including matters
relating to the relative rights, preferences and privileges of such Partnership
Security.
(c) The General Partner is hereby authorized and directed to take all
actions that it deems necessary or appropriate in connection with (i) each
issuance of Partnership Securities and options, rights, warrants and
appreciation rights relating to Partnership Securities pursuant to this Section
5.6, (ii) the conversion of the General Partner Interest into Units pursuant to
the terms of this Agreement, (iii) the admission of Additional Limited Partners
and (iv) all additional issuances of Partnership Securities. The General Partner
is further authorized and directed to specify the relative rights, powers and
duties of the holders of the Units or other Partnership Securities being so
issued. The General Partner shall do all things necessary to comply with the
Delaware Act and is authorized and directed to do all things it deems to be
necessary or advisable in connection with any future issuance of Partnership
Securities or in connection with the conversion of the General Partner Interest
into Units pursuant to the terms of this Agreement, including compliance with
any statute, rule, regulation or guideline of any federal, state or other
governmental agency or any National Securities Exchange on which the Units or
other Partnership Securities are listed for trading.
5.7 Limitations on Issuance of Additional Partnership Securities. The
issuance of Partnership Securities pursuant to Section 5.6 shall be subject to
the following restrictions and limitations:
(a) During the Subordination Period, the Partnership shall not issue
(and shall not issue any options, rights, warrants or appreciation rights
relating to) an aggregate of more than 22,775,000 additional Parity Units
without the prior approval of the holders of a Unit Majority. The Class A
Special Units issued hereunder shall be deemed to be Parity Units. In
applying this limitation, there shall be excluded Common Units and other
Parity Units issued (i) in connection with the exercise of the
Over-Allotment Option, (ii) in accordance with Sections 5.7(b) and 5.7(c),
(iii) upon conversion of Subordinated Units pursuant to Section 5.8, (iv)
upon conversion of Class A Special Units pursuant to Section 5.12, (v) upon
conversion of the General Partner Interest pursuant to Section 11.3(c),
(vi) pursuant to the employee benefit plans of the General Partner, EPC,
the Partnership or any other Group Member and (vii) in the event of a
combination or subdivision of Common Units.
(b) The Partnership may also issue an unlimited number of Parity Units,
prior to the end of the Subordination Period and without the approval of
the Unitholders if such issuance occurs (i) in connection with an
Acquisition or a Capital Improvement or (ii) within 365 days of an
Acquisition or a Capital Improvement where the net proceeds from such
issuance are used to repay debt incurred in connection with such
Acquisition or Capital Improvement, in each case where such Acquisition or
Capital Improvement involves assets that, if acquired by the Partnership as
of the date that is one year prior to the first day of the Quarter in which
such Acquisition is to be consummated or such Capital Improvement is to be
completed, would have resulted, on a pro forma basis, in an increase in:
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(A) the amount of Adjusted Operating Surplus generated by the
Partnership on a per-Unit basis (for all outstanding Units) with
respect to each of the four most recently completed Quarters (on a pro
forma basis), as compared to
(B) the actual amount of Adjusted Operating Surplus generated by
the Partnership on a per-Unit basis (for all outstanding Units)
(excluding Adjusted Operating Surplus attributable to the Acquisition
or Capital Improvement) with respect to each of such four most recently
completed Quarters.
If the issuance of Units with respect to an Acquisition or Capital
Improvement occurs within the first four full Quarters after the Closing Date,
then Adjusted Operating Surplus as used in clauses (A) (subject to the
succeeding sentence) and (B) above will be calculated (i) for each Quarter, if
any, that commenced after the closing of this offering for which actual results
of operations are available, based on the actual Adjusted Operating Surplus of
the Partnership generated with respect to such Quarter and (ii) for each other
Quarter, on a pro forma basis not inconsistent with the procedures, as
applicable, set forth in Appendix D to the Registration Statement. Furthermore,
the amount in clause (A) shall be determined on a pro forma basis assuming that
(1) all of the Parity Units to be issued in connection with (or as a part of but
within 365 days of) such Acquisition or Capital Improvement had been issued and
outstanding, (2) all indebtedness for borrowed money to be incurred or assumed
in connection with such Acquisition or Capital Improvement (other than any such
indebtedness that is to be repaid with the proceeds of such issuance) had been
incurred or assumed, in each case as of the commencement of such four-Quarter
period, (3) the personnel expenses that would have been incurred by the
Partnership in the operation of the acquired assets are the personnel expenses
for employees to be retained by the Partnership in the operation of the acquired
assets, and (4) the non-personnel costs and expenses are computed on the same
basis as those incurred by the Partnership in the operation of the Partnership's
business at similarly situated Partnership facilities.
(c) During the Subordination Period, the Partnership shall not issue (and
shall not issue any options, rights, warrants or appreciation rights relating
to) additional Partnership Securities having rights to distributions or in
liquidation ranking prior or senior to the Common Units, without the prior
approval of the holders of a Unit Majority.
(d) No fractional Units shall be issued by the Partnership.
5.8 Conversion of Subordinated Units.
(a) A total of 5,352,468 of the Outstanding Subordinated Units will convert
into Common Units on a one-for-one basis on the first day after the Record Date
for distribution in respect of any Quarter ending on or after June 30, 2001, in
respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units and Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Outstanding Common Units and Subordinated Units during such
periods;
(ii) the Adjusted Operating Surplus generated during each of the three
consecutive, non-overlapping four- Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Common Units and Subordinated Units that were Outstanding
during such periods on a fully diluted basis (i.e., taking into account for
purposes of such determination all Outstanding Common Units, all
Outstanding Subordinated Units, all Common Units and Subordinated Units
issuable upon exercise of employee options that have, as of the date of
determination, already vested or are scheduled to vest prior to the end of
the Quarter immediately following the Quarter with respect to which such
determination is made, and all Common Units and Subordinated Units that
have as of the date of determination, been earned by but not yet issued to
management of the Partnership in respect of incentive compensation), plus
the related distribution on the General Partner Interest and on the general
partner interest in the Operating Partnership; and
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(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero.
(b) An additional 5,352,468 of the Outstanding Subordinated Units will
convert into Common Units on a one-for-one basis on the first day after the
Record Date for distribution in respect of any Quarter ending on or after June
30, 2002, in respect of which:
(i) distributions under Section 6.4 in respect of all Outstanding
Common Units and Subordinated Units with respect to each of the three
consecutive, non-overlapping four-Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Outstanding Common Units and Subordinated Units during such
periods;
(ii) the Adjusted Operating Surplus generated during each of the three
consecutive, non-overlapping four- Quarter periods immediately preceding
such date equaled or exceeded the sum of the Minimum Quarterly Distribution
on all of the Common Units and Subordinated Units that were outstanding
during such periods on a fully diluted basis (i.e., taking into account for
purposes of such determination all Outstanding Common Units, all
Outstanding Subordinated Units, all Common Units and Subordinated Units
issuable upon exercise of employee options that have, as of the date of
determination, already vested or are scheduled to vest prior to the end of
the Quarter immediately following the Quarter with respect to which such
determination is made, and all Common Units and Subordinated Units that
have as of the date of determination, been earned by but not yet issued to
management of the Partnership in respect of incentive compensation), plus
the related distribution on the General Partner Interest and on the general
partner interest in the Operating Partnership; and
(iii) the Cumulative Common Unit Arrearage on all of the Common Units
is zero;
provided, however, that the conversion of Subordinated Units pursuant to this
Section 5.8(b) may not occur until at least one year following the conversion of
Subordinated Units pursuant to Section 5.8(a).
(c) In the event that less than all of the Outstanding Subordinated Units
shall convert into Common Units pursuant to Section 5.8(a) or 5.8(b) at a time
when there shall be more than one holder of Subordinated Units, then, unless all
of the holders of Subordinated Units shall agree to a different allocation, the
Subordinated Units that are to be converted into Common Units shall be allocated
among the holders of Subordinated Units pro rata based on the number of
Subordinated Units held by each such holder.
(d) Any Subordinated Units that are not converted into Common Units
pursuant to Sections 5.8(a) and (b) shall convert into Common Units on a
one-for-one basis on the first day following the Record Date for distributions
in respect of the final Quarter of the Subordination Period.
(e) Notwithstanding any other provision of this Agreement, all the then
Outstanding Subordinated Units will automatically convert into Common Units on a
one-for-one basis as set forth in, and pursuant to the terms of, Section 11.4.
(f) A Subordinated Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b).
5.9 Limited Preemptive Right. Except as provided in this Section 5.9, no
Person shall have any preemptive, preferential or other similar right with
respect to the issuance of any Partnership Security, whether unissued, held in
the treasury or hereafter created. The General Partner shall have the right,
which it may from time to time assign in whole or in part to any of its
Affiliates, to purchase Partnership Securities from the Partnership whenever,
and on the same terms that, the Partnership issues Partnership Securities to
Persons other than the General Partner and its Affiliates, to the extent
necessary to maintain the Percentage Interests of the General Partner and its
Affiliates equal to that which existed immediately prior to the issuance of such
Partnership Securities.
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5.10 Splits and Combinations.
(a) Subject to Sections 5.10(d), 6.6 and 6.8 (dealing with adjustments of
distribution levels), the Partnership may make a Pro Rata distribution of
Partnership Securities to all Record Holders or may effect a subdivision or
combination of Partnership Securities so long as, after any such event, each
Partner shall have the same Percentage Interest in the Partnership as before
such event, and any amounts calculated on a per Unit basis (including any Common
Unit Arrearage or Cumulative Common Unit Arrearage) or stated as a number of
Units (including the number of Subordinated Units that may convert prior to the
end of the Subordination Period, and the number of additional Parity Units that
may be issued pursuant to Section 5.7 without a Unitholder vote, and the number
of Common Units into which Class A Special Units are to be converted pursuant to
Section 5.12) are proportionately adjusted retroactive to the beginning of the
Partnership.
(b) Whenever such a distribution, subdivision or combination of Partnership
Securities is declared, the General Partner shall select a Record Date as of
which the distribution, subdivision or combination shall be effective and shall
send notice thereof at least 20 days prior to such Record Date to each Record
Holder as of a date not less than 10 days prior to the date of such notice. The
General Partner also may cause a firm of independent public accountants selected
by it to calculate the number of Partnership Securities to be held by each
Record Holder after giving effect to such distribution, subdivision or
combination. The General Partner shall be entitled to rely on any certificate
provided by such firm as conclusive evidence of the accuracy of such
calculation.
(c) Promptly following any such distribution, subdivision or combination,
the Partnership may issue Certificates to the Record Holders of Partnership
Securities as of the applicable Record Date representing the new number of
Partnership Securities held by such Record Holders, or the General Partner may
adopt such other procedures as it may deem appropriate to reflect such changes.
If any such combination results in a smaller total number of Partnership
Securities Outstanding, the Partnership shall require, as a condition to the
delivery to a Record Holder of such new Certificate, the surrender of any
Certificate held by such Record Holder immediately prior to such Record Date.
(d) The Partnership shall not issue fractional Units upon any distribution,
subdivision or combination of Units. If a distribution, subdivision or
combination of Units would result in the issuance of fractional Units but for
the provisions of Section 5.7(d) and this Section 5.10(d), each fractional Unit
shall be rounded to the nearest whole Unit (and a 0.5 Unit shall be rounded to
the next higher Unit).
5.11 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.
5.12 Creation and Conversion of Class A Special Units. Pursuant to Section
5.6, the General Partner hereby designates and creates a special class of Units
designated "Class A Special Units" and fixes the designations, preferences and
relative, participating, optional or other special rights, powers and duties of
the holders of the Class A Special Units as follows:
(a) The Class A Special Units shall be divided into four series as set
forth below, and each series of Class A Special Units shall be evidenced by a
distinct Certificate issued in accordance with Section 4.1. The number of Class
A Special Units comprising each series of Class A Special Units shall
automatically convert into Common Units on a one-for-one basis on the date set
forth opposite such number below (the "Class A Special Units Conversation
Dates"):
(i) 1,000,000 Series 2000 Class A Special Units - the first day
following the Record Date for distribution in respect of the Quarter ended
June 30, 2000;
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(ii) 5,000,000 Series 2001 Class A Special Units - the first day
following the Record Date for distribution in respect of the Quarter ended
June 30, 2001;
(iii) 8,500,000 Series 2002 Class A Special Units plus the first
1,000,000 Series 2002B Class A Special Units, if any, issued pursuant to
the second sentence of Section 5.3(d) upon satisfaction of the Performance
Tests -- the first day following the Record Date for distribution in
respect of the Quarter ended June 30, 2002; and
(iv) other than the Series 2002B Class A Special Units converted
pursuant to Section 5.12(a)(iii), the number of Series 2002B Class A
Special Units, if any, issued pursuant to the second sentence of Section
5.3(d) upon satisfaction of the Performance Tests - the first day following
the Record Date for distribution in respect of the Quarter ended June 30,
2003
; provided, however, that notwithstanding the foregoing the Class A Special
Units will not convert or be convertible into Common Units until after such
time as the issuance of such Common Units has been approved by holders of a
majority of the Units (not including for this purpose the Class A Special
Units) present and entitled to vote at a meeting of Unitholders called to
consider and vote upon such issuance.
(b) Except as otherwise provided in this Section 5.12(b), upon conversion
pursuant to Section 5.12(a), Class A Special Units to be converted shall cease
to remain outstanding and shall have no rights or obligations under this
Agreement. Upon a request from the General Partner, Partners holding Class A
Special Units converted pursuant to Section 5.12(a) shall surrender the
Certificates evidencing such Class A Special Units in exchange for Certificates
issued in accordance with Section 4.1.
(c) Except for distributions pursuant to Section 12.4(c) and except as
otherwise expressly provided in this Agreement by reference to the Class A
Special Units, the Class A Special Units shall have no voting rights, rights to
distributions, rights to allocation, rights upon dissolution and liquidation or
other rights with respect to the Partnership.
(d) A Class A Special Unit that has converted into a Common Unit shall be
subject to the provisions of Section 6.7(b).
ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS
6.1 Allocations for Capital Account Purposes. For purposes of maintaining
the Capital Accounts and in determining the rights of the Partners among
themselves, the Partnership's items of income, gain, loss and deduction
(computed in accordance with Section 5.5(b)) shall be allocated among the
Partners in each taxable year (or portion thereof) as provided herein below.
(a) Net Income. After giving effect to the special allocations set forth in
Section 6.1(d), Net Income for each taxable year and all items of income, gain,
loss and deduction taken into account in computing Net Income for such taxable
year shall be allocated as follows:
(i) First, 100% to the General Partner in an amount equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(iii) for all previous taxable years until the aggregate Net Income
allocated to the General Partner pursuant to this Section 6.1(a)(i) for the
current taxable year and all previous taxable years is equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(iii) for all previous taxable years;
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(ii) Second, 1% to the General Partner in an amount equal to the
aggregate Net Losses allocated to the General Partner pursuant to Section
6.1(b)(ii) for all previous taxable years and 99% to Unitholders holding
Common Units and Subordinated Units in accordance with their respective
Percentage Interests, until the aggregate Net Income allocated to such
Partners pursuant to this Section 6.1(a)(ii) for the current taxable year
and all previous taxable years is equal to the aggregate Net Losses
allocated to such Partners pursuant to Section 6.1(b)(ii) for all previous
taxable years; and
(iii) Third, the balance, if any, 100% to the General Partner and
Unitholders holding Common Units and Subordinated Units in accordance with
their respective Percentage Interests.
(b) Net Losses. After giving effect to the special allocations set forth in
Section 6.1(d), Net Losses for each taxable period and all items of income,
gain, loss and deduction taken into account in computing Net Losses for such
taxable period shall be allocated as follows:
(i) First, 1% to the General Partner and 99% to Unitholders holding
Common Units and Subordinated Units in accordance with their respective
Percentage Interests, until the aggregate Net Losses allocated pursuant to
this Section 6.1(b)(i) for the current taxable year and all previous
taxable years is equal to the aggregate Net Income allocated to such
Partners pursuant to Section 6.1(a)(iii) for all previous taxable years;
provided that the Net Losses shall not be allocated pursuant to this
Section 6.1(b)(i) to the extent that such allocation would cause any
Unitholder to have a deficit balance in its Adjusted Capital Account at the
end of such taxable year (or increase any existing deficit balance in its
Adjusted Capital Account);
(ii) Second, 1% to the General Partner and 99% to the Unitholders
holding Common Units and Subordinated Units in accordance with their
respective Percentage Interests; provided, that Net Losses shall not be
allocated pursuant to this Section 6.1(b)(ii) to the extent that such
allocation would cause any Unitholder to have a deficit balance in its
Adjusted Capital Account at the end of such taxable year (or increase any
existing deficit balance in its Adjusted Capital Account);
(iii) Third, the balance, if any, 100% to the General Partner.
(c) Net Termination Gains and Losses. After giving effect to the special
allocations set forth in Section 6.1(d), all items of income, gain, loss and
deduction taken into account in computing Net Termination Gain or Net
Termination Loss for such taxable period shall be allocated in the same manner
as such Net Termination Gain or Net Termination Loss is allocated hereunder. All
allocations under this Section 6.1(c) shall be made after Capital Account
balances have been adjusted by all other allocations provided under this Section
6.1 and after all distributions of Available Cash provided under Sections 6.4
and 6.5 have been made; provided, however, that solely for purposes of this
Section 6.1(c), Capital Accounts shall not be adjusted for distributions made
pursuant to Section 12.4.
(i) If a Net Termination Gain is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Gain shall be allocated
among the Partners in the following manner (and the Capital Accounts of the
Partners shall be increased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
(A) First, to each Partner having a deficit balance in its Capital
Account, in the proportion that such deficit balance bears to the total
deficit balances in the Capital Accounts of all Partners, until each
such Partner has been allocated Net Termination Gain equal to any such
deficit balance in its Capital Account;
(B) Second, if prior to the conversion of the last Outstanding
Class A Special Unit, the Per Unit Capital Amount with respect to a
Class A Special Unit is higher or lower than the Per Unit Capital
Amount with respect to each Common Unit, 99% to the Unitholders holding
Common Units and Class A Special Units in
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the manner and amount necessary to equalize, to the maximum extent
possible, the Per Unit Capital Amount with respect to each Common Unit
and each Class A Special Unit, and 1% to the General Partner;
(C) Third, 99% to all Unitholders holding Common Units, in
proportion to their relative Percentage Interests, and 1% to the
General Partner until the Capital Account in respect of each Common
Unit then Outstanding is equal to the sum of (1) its Unrecovered
Capital plus (2) the Minimum Quarterly Distribution for the Quarter
during which the Liquidation Date occurs, reduced by any distribution
pursuant to Section 6.4(a)(i) or (b)(i) with respect to such Common
Unit for such Quarter (the amount determined pursuant to this clause
(2) is hereinafter defined as the "Unpaid MQD"), plus (3) any then
existing Cumulative Common Unit Arrearage;
(D) Fourth, if such Net Termination Gain is recognized (or is
deemed to be recognized) prior to the expiration of the Subordination
Period, 99% to all Unitholders holding Subordinated Units, in
proportion to their relative Percentage Interests, and 1% to the
General Partner until the Capital Account in respect of each
Subordinated Unit then Outstanding equals the sum of (1) its
Unrecovered Capital, determined for the taxable year (or portion
thereof) to which this allocation of gain relates, plus (2) the Minimum
Quarterly Distribution for the Quarter during which the Liquidation
Date occurs, reduced by any distribution pursuant to Section
6.4(a)(iii) with respect to such Subordinated Unit for such Quarter;
(E) Fifth, 99% to all Unitholders, in accordance with their
relative Percentage Interests, and 1% to the General Partner until the
Capital Account in respect of each Common Unit then Outstanding is
equal to the sum of (1) its Unrecovered Capital, plus (2) the Unpaid
MQD, plus (3) any then existing Cumulative Common Unit Arrearage, plus
(4) the excess of (aa) the First Target Distribution less the Minimum
Quarterly Distribution for each Quarter of the Partnership's existence
over (bb) the cumulative per Unit amount of any distributions of
Operating Surplus that was distributed pursuant to Sections 6.4(a)(iv)
and 6.4(b)(ii) (the sum of (1) plus (2) plus (3) plus (4) is
hereinafter defined as the "First Liquidation Target Amount");
(F) Sixth, 85.8673% to all Unitholders, in accordance with their
relative Percentage Interests, and 14.1327% to the General Partner
until the Capital Account in respect of each Common Unit then
Outstanding is equal to the sum of (1) the First Liquidation Target
Amount, plus (2) the excess of (aa) the Second Target Distribution less
the First Target Distribution for each Quarter of the Partnership's
existence over (bb) the cumulative per Unit amount of any distributions
of Operating Surplus that was distributed pursuant to Sections
6.4(a)(v) and 6.4(b)(iii) (the sum of (1) plus (2) is hereinafter
defined as the "Second Liquidation Target Amount");
(G) Seventh, 75.7653% to all Unitholders, in accordance with their
relative Percentage Interests, and 24.2347% to the General Partner
until the Capital Account in respect of each Common Unit then
Outstanding is equal to the sum of (1) the Second Liquidation Target
Amount, plus (2) the excess of (aa) the Third Target Distribution less
the Second Target Distribution for each Quarter of the Partnership's
existence over (bb) the cumulative per Unit amount of any distributions
of Operating Surplus that was distributed pursuant to Sections
6.4(a)(vi) and 6.4(b)(iv); and
(H) Finally, any remaining amount 50.5102% to all Unitholders, in
accordance with their relative Percentage Interests, and 49.4898% to
the General Partner.
(ii) If a Net Termination Loss is recognized (or deemed recognized
pursuant to Section 5.5(d)), such Net Termination Loss shall be allocated
among the Partners in the following manner (and the Capital Accounts of the
Partners shall be decreased by the amount so allocated in each of the
following subclauses, in the order listed, before an allocation is made
pursuant to the next succeeding subclause):
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(A) First, prior to the conversion of the last Outstanding
Subordinated Unit, 99% to the Unitholders holding Subordinated Units,
in proportion to their relative Percentage Interests, and 1% to the
General Partner until the Capital Account in respect of each
Subordinated Unit then Outstanding has been reduced to zero;
(B) Second, if, prior to the conversion of the last Outstanding
Class A Special Unit, the Per Unit Capital Amount with respect to a
Class A Special Unit is higher or lower than the Per Unit Capital
Amount with respect to each Common Unit, 99% to the Unitholders holding
Common Units and Class A Special Units in the manner and amount
necessary to equalize, to the maximum extent possible, the Per Unit
Capital Amount with respect to each Common Unit and each Class A
Special Unit, and 1% to the General Partner;
(C) Third, 99% to all Unitholders holding Common Units and Class A
Special Units and to holders of Capital Account interests described in
the last sentence of Section 5.5(c)(ii), in proportion to their
relative Capital Account balances and 1% to the General Partner until
the Capital Account in respect of each Common Unit and Class A Special
Unit then Outstanding has been reduced to zero; and
(D) Fourth, the balance, if any, 100% to the General Partner.
(d) Special Allocations. Notwithstanding any other provision of this
Section 6.1, the following special allocations shall be made for such taxable
period:
(i) Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 6.1, if there is a net decrease in Partnership
Minimum Gain during any Partnership taxable period, each Partner shall be
allocated items of Partnership income and gain for such period (and, if
necessary, subsequent periods) in the manner and amounts provided in
Treasury Regulation Sections 1.704-2(f)(6), 1.704-2(g)(2) and
1.704-2(j)(2)(i), or any successor provision. For purposes of this Section
6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d) with respect to such taxable period (other than an
allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii)). This Section
6.1(d)(i) is intended to comply with the Partnership Minimum Gain
chargeback requirement in Treasury Regulation Section 1.704-2(f) and shall
be interpreted consistently therewith.
(ii) Chargeback of Partner Nonrecourse Debt Minimum Gain.
Notwithstanding the other provisions of this Section 6.1 (other than
Section 6.1(d)(i)), except as provided in Treasury Regulation Section
1.704-2(i)(4), if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain during any Partnership taxable period, any Partner with a
share of Partner Nonrecourse Debt Minimum Gain at the beginning of such
taxable period shall be allocated items of Partnership income and gain for
such period (and, if necessary, subsequent periods) in the manner and
amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and
1.704-2(j)(2)(ii), or any successor provisions. For purposes of this
Section 6.1(d), each Partner's Adjusted Capital Account balance shall be
determined, and the allocation of income or gain required hereunder shall
be effected, prior to the application of any other allocations pursuant to
this Section 6.1(d), other than Section 6.1(d)(i) and other than an
allocation pursuant to Sections 6.1(d)(vi) and 6.1(d)(vii), with respect to
such taxable period. This Section 6.1(d)(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) Priority Allocations.
(A) If the amount of cash or the Net Agreed Value of any property
distributed (except cash or property distributed pursuant to Section
12.4) to any Unitholder with respect to its Units for a taxable year is
greater (on a per Unit basis) than the amount of cash or the Net Agreed
Value of property distributed to the other Unitholders with respect to
their Units (on a per Unit basis), then (1) each Unitholder receiving
such greater cash or property distribution shall be allocated gross
income in an amount equal to the product of (aa) the
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amount by which the distribution (on a per Unit basis) to such
Unitholder exceeds the distribution (on a per Unit basis) to the
Unitholders receiving the smallest distribution and (bb) the number of
Units owned by the Unitholder receiving the greater distribution; and
(2) the General Partner shall be allocated gross income in an aggregate
amount equal to 1/99 of the sum of the amounts allocated in clause (1)
above.
(B) After the application of Section 6.1(d)(iii)(A), all or any
portion of the remaining items of Partnership gross income or gain for
the taxable period, if any, shall be allocated 100% to the General
Partner, until the aggregate amount of such items allocated to the
General Partner pursuant to this paragraph 6.1(d)(iii)(B) for the
current taxable year and all previous taxable years is equal to the
cumulative amount of all Incentive Distributions made to the General
Partner from the Closing Date to a date 45 days after the end of the
current taxable year.
(iv) Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704- 1(b)(2)(ii)(d)(6), items of Partnership
income and gain shall be specially allocated to such Partner in an amount
and manner sufficient to eliminate, to the extent required by the Treasury
Regulations promulgated under Section 704(b) of the Code, the deficit
balance, if any, in its Adjusted Capital Account created by such
adjustments, allocations or distributions as quickly as possible unless
such deficit balance is otherwise eliminated pursuant to Section 6.1(d)(i)
or (ii).
(v) Gross Income Allocations. In the event any Partner has a deficit
balance in its Capital Account at the end of any Partnership taxable period
in excess of the sum of (A) the amount such Partner is required to restore
pursuant to the provisions 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, that an allocation pursuant to
this Section 6.1(d)(v) shall be made only if and to the extent that such
Partner would have a deficit balance in its Capital Account as adjusted
after all other allocations provided for in this Section 6.1 have been
tentatively made as if this Section 6.1(d)(v) were not in this Agreement.
(vi) Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its
good faith discretion that the Partnership's Nonrecourse Deductions must be
allocated in a different ratio to satisfy the safe harbor requirements of
the Treasury Regulations promulgated under Section 704(b) of the Code, the
General Partner is authorized, upon notice to the other Partners, to revise
the prescribed ratio to the numerically closest ratio that does satisfy
such requirements.
(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 the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance
with Treasury Regulation Section 1.704-2(i). If more than one Partner bears
the Economic Risk of Loss with respect to a Partner Nonrecourse Debt, such
Partner Nonrecourse Deductions attributable thereto shall be allocated
between or among such Partners in accordance with the ratios in which they
share such Economic Risk of Loss.
(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
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Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis), and such item of gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Treasury Regulations.
(x) Economic Uniformity. (A) With respect to any taxable period ending
upon, or after, a Class A Special Unit Conversion Date, all or a portion of
the remaining items of Partnership gross income or gain for such taxable
period, after taking into account allocations pursuant to Section
6.1(d)(iii), shall be allocated 100% to the Partner holding Class A Special
Units that have been converted to Common Units pursuant to Section 5.12,
until such Partner has been allocated an amount of gross income or gain
that increases the Capital Account maintained with respect to such
converted Class A Special Units to an amount equal to the product of (1)
the number of converted Class A Special Units held by such Partner and (2)
the Per Unit Capital Amount for a Common Unit. The purpose of this
allocation is to establish uniformity between the Capital Accounts
underlying converted Class A Special Units and the Capital Accounts
underlying Common Units held by Persons other than the General Partner and
its Affiliates immediately prior to the conversion of such Class A Special
Units into Common Units. This allocation method for establishing such
economic uniformity will only be available if the method for allocating the
Capital Account maintained with respect to the Class A Special Units
between the transferred and retained Class A Special Units pursuant to
Section 5.5(c)(ii) does not otherwise provide such economic uniformity to
the converted Class A Special Units; (B) at the election of the General
Partner with respect to any taxable period ending upon, or after, the
termination of the Subordination Period, all or a portion of the remaining
items of Partnership gross income or gain for such taxable period, after
taking into account allocations pursuant to Sections 6.1(d)(iii) and
6.1(d)(x)(A), shall be allocated 100% to each Partner holding Subordinated
Units that are Outstanding as of the termination of the Subordination
Period ("Final Subordinated Units") in the proportion of the number of
Final Subordinated Units held by such Partner to the total number of Final
Subordinated Units then Outstanding, until each such Partner has been
allocated an amount of gross income or gain which increases the Capital
Account maintained with respect to such Final Subordinated Units to an
amount equal to the product of (1) the number of Final Subordinated Units
held by such Partner and (2) the Per Unit Capital Amount for a Common Unit.
The purpose of this allocation is to establish uniformity between the
Capital Accounts underlying Final Subordinated Units and the Capital
Accounts underlying Common Units held by Persons other than the General
Partner and its Affiliates immediately prior to the conversion of such
Final Subordinated Units into Common Units. This allocation method for
establishing such economic uniformity will only be available to the General
Partner if the method for allocating the Capital Account maintained with
respect to the Subordinated Units between the transferred and retained
Subordinated Units pursuant to Section 5.5(c)(ii) does not otherwise
provide such economic uniformity to the Final Subordinated Units.
(xi) Curative Allocation.
(A) Notwithstanding any other provision of this Section 6.1, other
than the Required Allocations, the Required Allocations shall be taken
into account in making the Agreed Allocations so that, to the extent
possible, the net amount of items of income, gain, loss and deduction
allocated to each Partner pursuant to the Required Allocations and the
Agreed Allocations, together, shall be equal to the net amount of such
items that would have been allocated to each such Partner under the
Agreed Allocations had the Required Allocations and the related
Curative Allocation not otherwise been provided in this Section 6.1.
Notwithstanding the preceding sentence, Required Allocations relating
to (1) Nonrecourse Deductions shall not be taken into account except to
the extent that there has been a decrease in Partnership Minimum Gain
and (2) Partner Nonrecourse Deductions shall not be taken into account
except to the extent that there has been a decrease in Partner
Nonrecourse Debt Minimum Gain. Allocations pursuant to this Section
6.1(d)(xi)(A) shall only be made with respect to Required Allocations
to the extent the General Partner reasonably determines that such
allocations will otherwise be inconsistent with the economic agreement
among the Partners. Further, allocations pursuant to this Section
6.1(d)(xi)(A) shall be deferred with respect to allocations pursuant to
clauses (1) and (2) hereof to the extent the General Partner reasonably
determines that such allocations are likely to be offset by subsequent
Required Allocations.
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(B) The General Partner shall have reasonable discretion, with
respect to each taxable period, to (1) apply the provisions of Section
6.1(d)(xi)(A) in whatever order is most likely to minimize the economic
distortions that might otherwise result from the Required Allocations,
and (2) divide all allocations pursuant to Section 6.1(d)(xi)(A) among
the Partners in a manner that is likely to minimize such economic
distortions.
6.2 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income tax purposes,
each item of income, gain, loss and deduction shall be allocated among the
Partners in the same manner as its correlative item of "book" income, gain, loss
or deduction is allocated pursuant to Section 6.1.
(b) In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss,
depreciation, amortization and cost recovery deductions shall be allocated for
federal income tax purposes among the Partners as follows:
(i) (A) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners in the manner provided under
Section 704(c) of the Code that takes into account the variation between
the Agreed Value of such property and its adjusted basis at the time of
contribution; and (B) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of "book" gain or loss
is allocated pursuant to Section 6.1.
(ii) (A) In the case of an Adjusted Property, such items shall (1)
first, be allocated among the Partners in a manner consistent with the
principles of Section 704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to such property and the
allocations thereof pursuant to Section 5.5(d)(i) or 5.5(d)(ii), and (2)
second, in the event such property was originally a Contributed Property,
be allocated among the Partners in a manner consistent with Section
6.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be allocated among the Partners
in the same manner as its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1.
(iii) The General Partner shall apply the principles of Treasury
Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.
(c) For the proper administration of the Partnership and for the
preservation of uniformity of the Limited Partner Interests (or any class or
classes thereof), the General Partner shall have sole discretion to (i) adopt
such conventions as it deems appropriate in determining the amount of
depreciation, amortization and cost recovery deductions; (ii) make special
allocations for federal income tax purposes of income (including, without
limitation, gross income) or deductions; and (iii) amend the provisions of this
Agreement as appropriate (A) to reflect the proposal or promulgation of Treasury
Regulations under Section 704(b) or Section 704(c) of the Code or (B) otherwise
to preserve or achieve uniformity of the Limited Partner Interests (or any class
or classes thereof). The General Partner may adopt such conventions, make such
allocations and make such amendments to this Agreement as provided in this
Section 6.2(c) only if such conventions, allocations or amendments would not
have a material adverse effect on the Partners, the holders of any class or
classes of Limited Partner Interests issued and Outstanding or the Partnership,
and if such allocations are consistent with the principles of Section 704 of the
Code.
(d) The General Partner in its discretion may determine to depreciate or
amortize the portion of an adjustment under Section 743(b) of the Code
attributable to unrealized appreciation in any Adjusted Property (to the extent
of the unamortized Book-Tax Disparity) using a predetermined rate derived from
the depreciation or amortization method and useful life applied to the
Partnership's common basis of such property, despite any inconsistency of such
approach with Proposed Treasury Regulation Section 1.168-2(n), Treasury
Regulation Section 1.167(c)-l(a)(6) or Proposed Treasury Regulation Section
1.197-2(g)(3). If the General Partner determines that such reporting position
cannot reasonably be taken, the General Partner may adopt depreciation and
amortization conventions under which all purchasers acquiring
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Limited Partner Interests in the same month would receive depreciation and
amortization deductions, based upon the same applicable rate as if they had
purchased a direct interest in the Partnership's property. If the General
Partner chooses not to utilize such aggregate method, the General Partner may
use any other reasonable depreciation and amortization conventions to preserve
the uniformity of the intrinsic tax characteristics of any Limited Partner
Interests that would not have material adverse effect on the Limited Partners or
the Record Holders of any class or classes of Limited Partner Interests.
(e) Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to this Section 6.2, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners (or their predecessors in interest) have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
(f) All items of income, gain, loss, deduction and credit recognized by the
Partnership for federal income tax purposes and allocated to the Partners in
accordance with the provisions hereof shall be determined without regard to any
election under Section 754 of the Code which may be made by the Partnership;
provided, however, that such allocations, once made, shall be adjusted as
necessary or appropriate to take into account those adjustments permitted or
required by Sections 734 and 743 of the Code.
(g) Each item of Partnership income, gain, loss and deduction attributable
to a transferred Partnership Interest, shall for federal income tax purposes, be
determined on an annual basis and prorated on a monthly basis and shall be
allocated to the Partners as of the opening of the principal National Securities
Exchange on which the Common Units are then traded on the first Business Day of
each month; provided, however, that such items for the period beginning on the
Closing Date and ending on the last day of the month in which the Option Closing
Date or the expiration of the Over- allotment Option occurs shall be allocated
to the Partners as of the opening of the Nasdaq National Market on the first
Business Day of the next succeeding month; and provided, further, that gain or
loss on a sale or other disposition of any assets of the Partnership other than
in the ordinary course of business shall be allocated to the Partners as of the
opening of the Nasdaq National Market (or such other National Securities
Exchange on which the Common Units are then primarily traded) on the first
Business Day of the month in which such gain or loss is recognized for federal
income tax purposes. The General Partner may revise, alter or otherwise modify
such methods of allocation as it determines necessary, to the extent permitted
or required by Section 706 of the Code and the regulations or rulings
promulgated thereunder.
(h) Allocations that would otherwise be made to a Limited Partner under the
provisions of this Article VI shall instead be made to the beneficial owner of
Limited Partner Interests held by a nominee in any case in which the nominee has
furnished the identity of such owner to the Partnership in accordance with
Section 6031(c) of the Code or any other method acceptable to the General
Partner in its sole discretion.
6.3 Requirement and Characterization of Distributions; Distributions to
Record Holders.
(a) Within 45 days following the end of each Quarter commencing with the
Quarter ending on September 30, 1998, an amount equal to 100% of Available Cash
with respect to such Quarter shall, subject to Section 17-607 of the Delaware
Act, be distributed in accordance with this Article VI by the Partnership to the
Partners as of the Record Date selected by the General Partner in its reasonable
discretion. All amounts of Available Cash distributed by the Partnership on any
date from any source shall be deemed to be Operating Surplus until the sum of
all amounts of Available Cash theretofore distributed by the Partnership to the
Partners pursuant to Section 6.4 equals the Operating Surplus from the Closing
Date through the close of the immediately preceding Quarter. Any remaining
amounts of Available Cash distributed by the Partnership on such date shall,
except as otherwise provided in Section 6.5, be deemed to be "Capital Surplus."
All distributions required to be made under this Agreement shall be made subject
to Section 17-607 of the Delaware Act.
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(b) Notwithstanding Section 6.3(a), in the event of the dissolution and
liquidation of the Partnership, all receipts received during or after the
Quarter in which the Liquidation Date occurs, other than from borrowings
described in (a)(ii)(A) of the definition of Available Cash, shall be applied
and distributed solely in accordance with, and subject to the terms and
conditions of, Section 12.4.
(c) The General Partner shall have the discretion to 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.
6.4 Distributions of Available Cash from Operating Surplus.
(a) During Subordination Period. Available Cash with respect to any Quarter
within the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or 6.5 shall, subject to Section 17- 607 of the
Delaware Act, be distributed as follows, except as otherwise required by Section
5.6(b) in respect of additional Partnership Securities issued pursuant thereto:
(i) First, 99% to the Unitholders holding Common Units, Pro Rata, and
1% to the General Partner until there has been distributed in respect of
each Common Unit then Outstanding an amount equal to the Minimum Quarterly
Distribution for such Quarter;
(ii) Second, 99% to the Unitholders holding Common Units, Pro Rata, and
1% to the General Partner until there has been distributed in respect of
each Common Unit then Outstanding an amount equal to the Cumulative Common
Unit Arrearage existing with respect to such Quarter;
(iii) Third, 99% to the Unitholders holding Subordinated Units, Pro
Rata, and 1% to the General Partner until there has been distributed in
respect of each Subordinated Unit then Outstanding an amount equal to the
Minimum Quarterly Distribution for such Quarter;
(iv) Fourth, 99% to all Unitholders holding Common Units and all
Unitholders holding Subordinated Units, Pro Rata, and 1% to the General
Partner until there has been distributed in respect of each such Unit then
Outstanding an amount equal to the excess of the First Target Distribution
over the Minimum Quarterly Distribution for such Quarter;
(v) Fifth, 85.8673% to all Unitholders holding Common Units and all
Unitholders holding Subordinated Units, Pro Rata, and 14.1327% to the
General Partner until there has been distributed in respect of each such
Unit then Outstanding an amount equal to the excess of the Second Target
Distribution over the First Target Distribution for such Quarter;
(vi) Sixth, 75.7653% to all Unitholders holding Common Units and all
Unitholders holding Subordinated Units, Pro Rata, and 24.2347% to the
General Partner until there has been distributed in respect of each such
Unit then Outstanding an amount equal to the excess of the Third Target
Distribution over the Second Target Distribution for such Quarter; and
(vii) Thereafter, 50.5102% to all Unitholders holding Common Units and
all Unitholders holding Subordinated Units, Pro Rata, and 49.4898% to the
General Partner;
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provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section
6.4(a)(vii).
(b) After Subordination Period. Available Cash with respect to any Quarter
after the Subordination Period that is deemed to be Operating Surplus pursuant
to the provisions of Section 6.3 or 6.5, subject to Section 17-607 of the
Delaware Act, shall be distributed as follows, except as otherwise required by
Section 5.6(b) in respect of additional Partnership Securities issued pursuant
thereto:
(i) First, 99% to all Unitholders holding Common Units and all
Unitholders holding Subordinated Units, Pro Rata, and 1% to the General
Partner until there has been distributed in respect of each such Unit then
Outstanding an amount equal to the Minimum Quarterly Distribution for such
Quarter;
(ii) Second, 99% to all Unitholders holding Common Units and all
Unitholders holding Subordinated Units, Pro Rata, and 1% to the General
Partner until there has been distributed in respect of each such Unit then
Outstanding an amount equal to the excess of the First Target Distribution
over the Minimum Quarterly Distribution for such Quarter;
(iii) Third, 85.8673% to all Unitholders holding Common Units and all
Unitholders holding Subordinated Units, Pro Rata, and 14.1327% to the
General Partner until there has been distributed in respect of each such
Unit then Outstanding an amount equal to the excess of the Second Target
Distribution over the First Target Distribution for such Quarter;
(iv) Fourth, 75.7653% to all Unitholders holding Common Units and all
Unitholders holding Subordinated Units, Pro Rata, and 24.2347% to the
General Partner until there has been distributed in respect of each such
Unit then Outstanding an amount equal to the excess of the Third Target
Distribution over the Second Target Distribution for such Quarter; and
(v) Thereafter, 50.5102% to all Unitholders holding Common Units and
all Unitholders holding Subordinated Units, Pro Rata, and 49.4898% to the
General Partner;
provided, however, if the Minimum Quarterly Distribution, the First Target
Distribution, the Second Target Distribution and the Third Target Distribution
have been reduced to zero pursuant to the second sentence of Section 6.6(a), the
distribution of Available Cash that is deemed to be Operating Surplus with
respect to any Quarter will be made solely in accordance with Section 6.4(b)(v).
6.5 Distributions of Available Cash from Capital Surplus. Available Cash
that is deemed to be Capital Surplus pursuant to the provisions of Section
6.3(a) shall, subject to Section 17-607 of the Delaware Act, be distributed,
unless the provisions of Section 6.3 require otherwise, 99% to all Unitholders
holding Common Units and all Unitholders holding Subordinated Units, Pro Rata,
and 1% to the General Partner until a hypothetical holder of a Common Unit
acquired on the Closing Date has received with respect to such Common Unit,
during the period since the Closing Date through such date, distributions of
Available Cash that are deemed to be Capital Surplus in an aggregate amount
equal to the Initial Unit Price. Available Cash that is deemed to be Capital
Surplus shall then be distributed 99% to all Unitholders holding Common Units,
Pro Rata, and 1% to the General Partner until there has been distributed in
respect of each Common Unit then Outstanding an amount equal to the Cumulative
Common Unit Arrearage. Thereafter, all Available Cash shall be distributed as if
it were Operating Surplus and shall be distributed in accordance with Section
6.4.
6.6 Adjustment of Minimum Quarterly Distribution and Target Distribution
Levels.
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(a) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution, Third Target Distribution, Common Unit Arrearages and
Cumulative Common Unit Arrearages shall be proportionately adjusted in the event
of any distribution, combination or subdivision (whether effected by a
distribution payable in Units or otherwise) of Units or other Partnership
Securities in accordance with Section 5.10. In the event of a distribution of
Available Cash that is deemed to be from Capital Surplus, the then applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution shall be adjusted proportionately
downward to equal the product obtained by multiplying the otherwise applicable
Minimum Quarterly Distribution, First Target Distribution, Second Target
Distribution and Third Target Distribution, as the case may be, by a fraction of
which the numerator is the Unrecovered Capital of the Common Units immediately
after giving effect to such distribution and of which the denominator is the
Unrecovered Capital of the Common Units immediately prior to giving effect to
such distribution.
(b) The Minimum Quarterly Distribution, First Target Distribution, Second
Target Distribution and Third Target Distribution shall also be subject to
adjustment pursuant to Section 6.8.
6.7 Special Provisions Relating to the Holders of Subordinated Units and
Class A Special Units.
(a) Except with respect to the right to vote on or approve matters
requiring the vote or approval of a percentage of the holders of Outstanding
Common Units and the right to participate in allocations of income, gain, loss
and deduction and distributions made with respect to Common Units, the holder of
a Subordinated Unit shall have all of the rights and obligations of a Unitholder
holding Common Units hereunder; provided, however, that immediately upon the
conversion of Subordinated Units into Common Units pursuant to Section 5.8, the
Unitholder holding a Subordinated Unit so converted shall possess all of the
rights and obligations of a Unitholder holding Common Units hereunder, including
the right to vote as a Common Unitholder and the right to participate in
allocations of income, gain, loss and deduction and distributions made with
respect to Common Units; provided, however, that such converted Subordinated
Units shall remain subject to the provisions of Sections 5.5(c)(ii), 6.1(d)(x)
and 6.7(b).
(b) The Unitholder holding a Subordinated Unit or a Class A Special Unit
which has converted into a Common Unit pursuant to Section 5.8 or Section 5.12,
respectively, shall not be issued a Common Unit Certificate pursuant to Section
4.1, and shall not be permitted to transfer its converted Subordinated Units or
Class A Special Units to a Person which is not an Affiliate of the holder until
such time as the General Partner determines, based on advice of counsel, that a
converted Subordinated Unit or Class A Special Unit should have, as a
substantive matter, like intrinsic economic and federal income tax
characteristics, in all material respects, to the intrinsic economic and federal
income tax characteristics of an Initial Common Unit. In connection with the
condition imposed by this Section 6.7(b), the General Partner may take whatever
reasonable steps are required to provide economic uniformity to the converted
Subordinated Units or Class A Special Units in preparation for a transfer of
such converted Subordinated Units or Class A Special Units, including the
application of Sections 5.5(c)(ii) and 6.1(d)(x); provided, however, that no
such steps may be taken that would have a material adverse effect on the
Unitholders holding Common Units represented by Common Unit Certificates.
(c) Immediately upon the conversion of Class A Special Units into Common
Units pursuant to Section 5.12, the Unitholder holding a Class A Special Unit so
converted shall possess all of the rights and obligations of a Unitholder
holding Common Units hereunder, including the right to vote as a Common
Unitholder and the right to participate in allocations of income, gain, loss and
deduction and distributions made with respect to Common Units; provided,
however, that such converted Class A Special Units shall remain subject to the
provisions of Sections 5.5(c)(ii), 6.1(d)(x)(A) and 6.7(b).
6.8 Entity-Level Taxation. If legislation is enacted or the interpretation
of existing language is modified by the relevant governmental authority which
causes the Partnership or the Operating Partnership to be treated as an
association taxable as a corporation or otherwise subjects the Partnership or
the Operating Partnership to entity-level taxation for federal income tax
purposes, the then applicable Minimum Quarterly Distribution, First Target
Distribution, Second
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Target Distribution and Third Target Distribution shall be adjusted to equal the
product obtained by multiplying (a) the amount thereof by (b) one minus the sum
of (i) the highest marginal federal corporate (or other entity, as applicable)
income tax rate of the Partnership or the Operating Partnership for the taxable
year of the Partnership or the Operating Partnership in which such Quarter
occurs (expressed as a percentage) plus (ii) the effective overall state and
local income tax rate (expressed as a percentage) applicable to the Partnership
or the Operating Partnership for the calendar year next preceding the calendar
year in which such Quarter occurs (after taking into account the benefit of any
deduction allowable for federal income tax purposes with respect to the payment
of state and local income taxes), but only to the extent of the increase in such
rates resulting from such legislation or interpretation. Such effective overall
state and local income tax rate shall be determined for the taxable year next
preceding the first taxable year during which the Partnership or the Operating
Partnership is taxable for federal income tax purposes as an association taxable
as a corporation or is otherwise subject to entity-level taxation by determining
such rate as if the Partnership or the Operating Partnership had been subject to
such state and local taxes during such preceding taxable year.
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
7.1 Management.
(a) The General Partner shall conduct, direct and manage all activities of
the Partnership. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership shall be
exclusively vested in the General Partner, and no Limited Partner or Assignee
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 which 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, in its sole discretion, may deem 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) 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, including
indebtedness that is convertible into Partnership Securities, and the
incurring of any other obligations;
(ii) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(iii) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any or all of the assets of the Partnership or
the merger or other combination of the Partnership with or into another
Person (the matters described in this clause (iii) being subject, however,
to any prior approval that may be required by Section 7.3);
(iv) 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
the Operating Partnership); the repayment of obligations of the Partnership
Group; and the making of capital contributions to any member of the
Partnership Group;
(v) 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
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other than its interest in the Partnership, even if same results in the
terms of the transaction being less favorable to the Partnership than would
otherwise be the case);
(vi) the distribution of Partnership cash;
(vii) the selection and dismissal of employees (including employees
having titles such as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants, consultants and
contractors and the determination of their compensation and other terms of
employment or hiring;
(viii) the maintenance of such insurance for the benefit of the
Partnership Group and the Partners as it deems necessary or appropriate;
(ix) the formation of, or acquisition of an interest in, and the
contribution of property and the making of loans to, any further limited or
general partnerships, joint ventures, corporations or other relationships
(including the acquisition of interests in, and the contributions of
property to, the Operating Partnership from time to time) subject to the
restrictions set forth in Section 2.4;
(x) 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 and the
incurring of legal expense and the settlement of claims and litigation;
(xi) the indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(xii) 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 any prior approval that may be required under Section
4.8);
(xiii) unless restricted or prohibited by Section 5.7, the purchase,
sale or other acquisition or disposition of Partnership Securities, or the
issuance of additional options, rights, warrants and appreciation rights
relating to Partnership Securities; and
(xiv) the undertaking of any action in connection with the
Partnership's participation in the Operating Partnership as a partner or
any other Group Member as a partner or equity owner, as applicable.
(b) Notwithstanding any other provision of this Agreement, the Operating
Partnership Agreement, the Delaware Act or any applicable law, rule or
regulation, each of the Partners and Assignees and each other Person who may
acquire an interest in Partnership Securities hereby (i) approves, ratifies and
confirms the execution, delivery and performance by the parties thereto of the
Operating Partnership Agreement, the Underwriting Agreement, the EPCO Agreement,
and the other agreements described in or filed as a part of 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 Partnership Securities; 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 (including the exercise by the General Partner or
any Affiliate of the General Partner of the rights accorded pursuant to Article
XV), 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 the Assignees
or any other Persons under this Agreement (or any other agreements) or of any
duty stated or implied by law or equity.
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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 and shall use all
reasonable efforts to cause to be filed such other certificates or documents as
may be determined by the General Partner in its sole discretion to be reasonable
and necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
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
that such action is determined by the General Partner in its sole discretion to
be reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate of Limited Partnership and do
all things to maintain the Partnership as a limited partnership (or a
partnership 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.
7.3 Restrictions on General Partner's Authority.
(a) The General Partner may not, without written approval of the specific
act by holders of all of the Outstanding Limited Partner Interests (other than
the Class A Special Units) or by other written instrument executed and delivered
by holders of all of the Outstanding Limited Partner Interests (other than the
Class A Special Units) subsequent to the date of this Agreement, take any action
in contravention of this Agreement, including, except as otherwise provided in
this Agreement, (i) committing any act that would make it impossible to carry on
the ordinary business of the Partnership; (ii) possessing Partnership property,
or assigning any rights in specific Partnership property, for other than a
Partnership purpose; (iii) admitting a Person as a Partner; (iv) amending this
Agreement in any manner; or (v) transferring its interest as general partner of
the Partnership.
(b) Except as provided in Articles XII and XIV, the General Partner may not
sell, exchange or otherwise dispose of all or substantially all of the
Partnership's assets in a single transaction or a series of related transactions
or approve on behalf of the Partnership the sale, exchange or other disposition
of all or substantially all of the assets of the Partnership or the Operating
Partnership, 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 or the Operating Partnership
and shall not apply to any forced sale of any or all of the assets of the
Partnership or the Operating Partnership 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,
(i) consent to any amendment to the Operating Partnership Agreement or, except
as expressly permitted by Section 7.9(d), take any action permitted to be taken
by a partner of the Operating Partnership, in either case, that would have a
material adverse effect on the Partnership as a partner of the Operating
Partnership or (ii) except as permitted under Sections 4.6, 11.1 and 11.2, elect
or cause the Partnership to elect a successor general partner of the Partnership
or the Operating Partnership.
7.4 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.4 and elsewhere in this Agreement
or in the Operating Partnership Agreement, the General Partner shall not be
compensated for its services as general partner of the Partnership or any Group
Member.
(b) Subject to any applicable limitations contained in the EPCO Agreement,
the General Partner shall be reimbursed on a monthly basis, or such other
reasonable basis as the General Partner may determine in its sole discretion,
for (i) all direct and indirect expenses it incurs or payments it makes on
behalf of the Partnership (including amounts paid by the General Partner to EPC
under the EPCO Agreement and including salary, bonus, incentive compensation and
other amounts paid to any Person, including Affiliates of the General Partner,
to perform services for the Partnership or for the General Partner in the
discharge of its duties to the Partnership), and (ii) all other necessary or
appropriate expenses
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allocable to the Partnership or otherwise reasonably incurred by the General
Partner in connection with operating the Partnership's business (including
expenses allocated to the General Partner by its Affiliates). The General
Partner shall determine the expenses that are allocable to the Partnership in
any reasonable manner determined by the General Partner in its sole discretion.
Reimbursements pursuant to this Section 7.4 shall be in addition to any
reimbursement to the General Partner as a result of indemnification pursuant to
Section 7.7.
(c) Subject to Section 5.7, the General Partner, in its sole discretion and
without the approval of the Limited Partners (who shall have no right to vote in
respect thereof), may propose and adopt on behalf of the Partnership employee
benefit and incentive plans, employee programs and employee practices (including
plans, programs and practices involving the issuance of Partnership Securities
or options to purchase Partnership Securities), or cause the Partnership to
issue Partnership Securities in connection with, or pursuant to, any employee
benefit plan, employee program or employee practice maintained or sponsored by
the General Partner or any of its Affiliates, in each case for the benefit of
employees of the General Partner, any Group Member or any Affiliate, or any of
them, in respect of services performed, directly or indirectly, for the benefit
of the Partnership Group. The Partnership agrees to issue and sell to the
General Partner or any of its Affiliates any Partnership Securities that the
General Partner or such Affiliate is obligated to provide to any employees
pursuant to any such employee benefit plans, employee programs or employee
practices. Expenses incurred by the General Partner in connection with any such
plans, programs and practices (including the net cost to the General Partner or
such Affiliate of Partnership Securities purchased by the General Partner or
such Affiliate from the Partnership to fulfill options or awards under such
plans, programs and practices) shall be reimbursed in accordance with Section
7.4(b). Any and all obligations of the General Partner under any employee
benefit or incentive plans, employee programs or employee practices adopted by
the General Partner as permitted by this Section 7.4(c) shall constitute
obligations of the General Partner hereunder and shall be assumed by any
successor General Partner approved pursuant to Section 11.1 or 11.2 or the
transferee of or successor to all of the General Partner's Partnership Interest
as the General Partner in the Partnership pursuant to Section 4.6.
7.5 Outside Activities.
(a) After the Closing Date, the General Partner, for so long as it is the
general partner of the Partnership (i) agrees that its sole business will be to
act as the general partner or managing member of the Partnership, the Operating
Partnership, and any other partnership or limited liability company of which the
Partnership or the Operating Partnership is, directly or indirectly, a partner
or managing member and to undertake activities that are ancillary or related
thereto (including being a limited partner in the partnership), (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 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 and (iii) except to the extent
permitted by the EPCO Agreement, shall not, and shall cause its Affiliates not
to, engage in any Restricted Activity.
(b) EPC has entered into the EPCO Agreement with the Partnership and the
Operating Partnership, which agreement sets forth certain restrictions on the
ability of EPC and its Affiliates to engage in Restricted Activities.
(c) Except as specifically restricted by Section 7.5(a) and the EPCO
Agreement, 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 express or implied by law to
any Group Member or any Partner or Assignee. Neither any Group Member, any
Limited Partner nor any other Person shall have any rights by virtue of this
Agreement, the Operating Partnership Agreement or the partnership relationship
established hereby or thereby in any business ventures of any Indemnitee.
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(d) Subject to the terms of the EPCO Agreement and Section 7.5(a), 7.5(b),
and 7.5(c) and the EPCO Agreement, but otherwise notwithstanding anything to the
contrary in this Agreement, (i) the engaging in competitive activities by any
Indemnitees (other than the General Partner) in accordance with the provisions
of this Section 7.5 is hereby approved by the Partnership and all Partners, (ii)
it shall be deemed not to be a breach of the General Partner's fiduciary duty or
any other obligation of any type whatsoever of the General Partner for the
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 General Partner and the Indemnitees shall have no obligation to
present business opportunities to the Partnership.
(e) The General Partner and any of its Affiliates may acquire Partnership
Securities in addition to those acquired on the Closing Date and, except as
otherwise provided in this Agreement, shall be entitled to exercise all rights
of the General Partner or Limited Partner, as applicable, relating to such
Partnership Securities.
(f) The term "Affiliates" when used in Sections 7.5(a) and 7.5(b) with
respect to the General Partner shall not include any Group Member or any
Subsidiary of the Group Member.
7.6 Loans from the General Partner; Loans or Contributions from the
Partnership; Contracts with Affiliates; Certain Restrictions on the General
Partner.
(a) The General Partner or 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). 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. No Group Member may
lend funds to the General Partner or any of its Affiliates (other than another
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
established in the sole discretion of the General Partner; provided, however,
that the Partnership may not charge the Group Member interest at a rate less
than the rate that would be charged to the Group Member (without reference to
the General Partner's financial abilities or guarantees) by unrelated lenders on
comparable loans. The foregoing authority shall be exercised by the General
Partner in its sole discretion and shall not create any right or benefit in
favor of any Group Member or any other Person.
(c) The General Partner may itself, or may enter into an agreement, in
addition to the EPCO Agreement, with any of its Affiliates to, render services
to a Group Member or to the General Partner in the discharge of its duties as
general partner of the Partnership. Any services rendered to a Group Member by
the General Partner or any of its Affiliates shall be on terms that are fair and
reasonable to the Partnership; provided, however, that the requirements of this
Section 7.6(c) shall be deemed satisfied as to (i) any transaction approved by
Special Approval, (ii) any transaction, the terms of which are no less favorable
to the Partnership Group than those generally being provided to or available
from unrelated third parties or (iii) any transaction that, taking into account
the totality of the relationships between the parties involved (including other
transactions that may be particularly favorable or advantageous to the
Partnership Group), is equitable to the Partnership Group. The provisions of
Section 7.4 shall apply to the rendering of services described in this Section
7.6(c).
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(d) The Partnership Group may transfer assets to joint ventures, other
partnerships, corporations, limited liability companies or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions as are consistent with this Agreement and applicable
law.
(e) Neither the General Partner nor any of its Affiliates shall sell,
transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions that are
fair and reasonable to the Partnership; provided, however, that the requirements
of this Section 7.6(e) shall be deemed to be satisfied as to (i) the
transactions effected pursuant to Sections 5.2 and 5.3 and any other
transactions described in or contemplated by the Registration Statement, (ii)
any transaction approved by Special Approval, (iii) any transaction, the terms
of which are no less favorable to the Partnership than those generally being
provided to or available from unrelated third parties, or (iv) any transaction
that, taking into account the totality of the relationships between the parties
involved (including other transactions that may be particularly favorable or
advantageous to the Partnership), is equitable to the Partnership. With respect
to any contribution of assets to the Partnership in exchange for Partnership
Securities, the Audit and Conflicts Committee, in determining whether the
appropriate number of Partnership Securities are being issued, may take into
account, among other things, the fair market value of the assets, the liquidated
and contingent liabilities assumed, the tax basis in the assets, the extent to
which tax-only allocations to the transferor will protect the existing partners
of the Partnership against a low tax basis, and such other factors as the Audit
and Conflicts Committee deems relevant under the circumstances.
(f) The General Partner and its Affiliates will have no obligation to
permit any Group Member to use any facilities or assets of the General Partner
and its Affiliates, except as may be provided in contracts entered into from
time to time specifically dealing with such use, nor shall there be any
obligation on the part of the General Partner or its Affiliates to enter into
such contracts.
(g) Without limitation of Sections 7.6(a) through 7.6(f), and
notwithstanding anything to the contrary in this Agreement, the existence of the
conflicts of interest described in the Registration Statement are hereby
approved by all Partners.
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 a Person of the type described in clauses (a)--(d) of the
definition of the term "Indemnitee"; provided, that in each case the Indemnitee
acted in good faith and in a manner that such Indemnitee reasonably believed to
be in, or (in the case of a Person other than the General Partner) not opposed
to, the best interests of the Partnership and, with respect to any criminal
proceeding, had no reasonable cause to believe its conduct was unlawful;
provided, further, no indemnification pursuant to this Section 7.7 shall be
available to the General Partner with respect to its obligations incurred
pursuant to the Underwriting Agreement (other than obligations incurred by the
General Partner on behalf of the Partnership or the Operating Partnership). The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that the Indemnitee acted in a manner contrary to that
specified above. Any indemnification pursuant to this Section 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 the final disposition of
such claim, demand, action, suit or
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proceeding 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
entitled to vote on such matter, as a matter of law or otherwise, both as to
actions in the Indemnitee's capacity as a Person of the type described in
clauses (a)--(d) of the definition of the term "Indemnitee", and as to actions
in any other capacity (including any capacity under the Underwriting 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 interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is in, or
not opposed to, the best interests of the Partnership.
(f) In no event may an Indemnitee subject the Limited 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.
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, the Assignees or any other Persons who have acquired interests
in the Partnership Securities, for losses sustained or liabilities incurred as a
result of any act or omission if such Indemnitee acted in good faith.
(b) Subject to its obligations and duties as General Partner set forth in
Section 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
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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. The provisions of this Agreement, to the extent that they
restrict or otherwise modify the duties and liabilities of an Indemnitee
otherwise existing at law or in equity, are agreed by the Partners to replace
such other duties and liabilities of such Indemnitee.
(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 to the Partnership, the Limited Partners, the
General Partner, and the Partnership's and General Partner's directors, officers
and employees 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.
7.9 Resolution of Conflicts of Interest.
(a) Unless otherwise expressly provided in this Agreement or the Operating
Partnership Agreement, whenever a potential conflict of interest exists or
arises between the General Partner or any of its Affiliates, on the one hand,
and the Partnership, the Operating Partnership, any Partner or any Assignee, on
the other, any resolution or course of action by the General Partner or its
Affiliates 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 the Operating Partnership 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 is, or by operation of this Agreement is deemed to be, fair and
reasonable to the Partnership. The General Partner shall be authorized but not
required in connection with its resolution of such conflict of interest to seek
Special Approval of such resolution. Any conflict of interest and any resolution
of such conflict of interest shall be conclusively deemed fair and reasonable to
the Partnership if such conflict of interest or resolution is (i) approved by
Special Approval (as long as the material facts within the actual knowledge of
the officers and directors of the General Partner and EPC regarding the proposed
transaction were disclosed to the Audit and Conflicts Committee at the time it
gave its approval), (ii) on terms no less favorable to the Partnership than
those generally being provided to or available from unrelated third parties or
(iii) fair to the Partnership, taking into account the totality of the
relationships between the parties involved (including other transactions that
may be particularly favorable or advantageous to the Partnership). The General
Partner may also adopt a resolution or course of action that has not received
Special Approval. The General Partner (including the Audit and Conflicts
Committee in connection with Special Approval) shall be authorized in connection
with its determination of what is "fair and reasonable" to the Partnership and
in connection with its resolution of any conflict of interest to consider (A)
the relative interests of any party to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interest; (B) any
customary or accepted industry practices and any customary or historical
dealings with a particular Person; (C) any applicable generally accepted
accounting practices or principles; and (D) such additional factors as the
General Partner (including the Audit and Conflicts Committee) determines in its
sole discretion to be relevant, reasonable or appropriate under the
circumstances. Nothing contained in this Agreement, however, is intended to nor
shall it be construed to require the General Partner (including the Audit and
Conflicts Committee) to consider the interests of any Person other than the
Partnership. In the absence of bad faith by the General Partner, the resolution,
action or terms so made, taken or provided by the General Partner with respect
to such matter shall not constitute a breach of this Agreement or any other
agreement contemplated herein or a breach of any standard of care or duty
imposed herein or therein or, to the extent permitted by law, under the Delaware
Act or any other law, rule or regulation.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that the General Partner or any of its Affiliates is permitted or
required to make a decision (i) in its "sole discretion" or "discretion," that
it deems
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"necessary or appropriate" or "necessary or advisable" or under a grant of
similar authority or latitude, except as otherwise provided herein, the General
Partner or such Affiliate shall be entitled to consider only such interests and
factors as it desires and shall have no duty or obligation to give any
consideration to any interest of, or factors affecting, the Partnership, the
Operating Partnership, any Limited Partner or any Assignee, (ii) it may make
such decision in its sole discretion (regardless of whether there is a reference
to "sole discretion" or "discretion") unless another express standard is
provided for, or (iii) in "good faith" or under another express standard, the
General Partner or such Affiliate shall act under such express standard and
shall not be subject to any other or different standards imposed by this
Agreement, the Operating Partnership Agreement, any other agreement contemplated
hereby or under the Delaware Act or any other law, rule or regulation. In
addition, any actions taken by the General Partner or such Affiliate consistent
with the standards of "reasonable discretion" set forth in the definitions of
Available Cash or Operating Surplus shall not constitute a breach of any duty of
the General Partner to the Partnership or the Limited Partners. The General
Partner shall have no duty, express or implied, to sell or otherwise dispose of
any asset of the Partnership Group other than in the ordinary course of
business. No borrowing by any Group Member or the approval thereof by the
General Partner shall be deemed to constitute a breach of any duty of the
General Partner to the Partnership or the Limited Partners by reason of the fact
that the purpose or effect of such borrowing is directly or indirectly to (A)
enable distributions to the General Partner or its Affiliates (including in
their capacities as Limited Partners) to exceed 1% of the total amount
distributed to all partners or (B) hasten the expiration of the Subordination
Period or the conversion of any Subordinated Units into Common Units.
(c) Whenever a particular transaction, arrangement or resolution of a
conflict of interest is required under this Agreement to be "fair and
reasonable" to any Person, the fair and reasonable nature of such transaction,
arrangement or resolution shall be considered in the context of all similar or
related transactions.
(d) 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.
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) 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.
(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. Each such attorney shall, to the extent provided by
the General Partner in the power of attorney, have full power and authority to
do and perform each and every act and duty that is permitted or required to be
done by the General Partner hereunder.
(d) Any standard of care and duty imposed by this Agreement or under the
Delaware Act or any applicable law, rule or regulation shall be modified, waived
or limited, to the extent permitted by law, as required to permit the General
Partner to act under this Agreement or any other agreement contemplated by this
Agreement and to make any decision pursuant to the authority prescribed in this
Agreement, so long as such action is reasonably believed by the General Partner
to be in, or not inconsistent with, the best interests of the Partnership.
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7.11 Purchase or Sale of Partnership Securities. The General Partner may
cause the Partnership to purchase or otherwise acquire Partnership Securities;
provided that, except as permitted pursuant to Section 4.10, the General Partner
may not cause any Group Member to purchase Subordinated Units during the
Subordination Period. As long as Partnership Securities are held by any Group
Member, such Partnership Securities 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 Partnership Securities for its own account, subject to
the provisions of Articles IV and X.
7.12 Registration Rights of the General Partner and its Affiliates.
(a) If (i) the General Partner or any Affiliate of the General Partner
(including for purposes of this Section 7.12, any Person that is an Affiliate of
the General Partner at the date hereof notwithstanding that it may later cease
to be an Affiliate of the General Partner) holds Partnership Securities that it
desires to sell and (ii) Rule 144 of the Securities Act (or any successor rule
or regulation to Rule 144) or another exemption from registration is not
available to enable such holder of Partnership Securities (the "Holder") to
dispose of the number of Partnership Securities it desires to sell at the time
it desires to do so without registration under the Securities Act, then upon the
request of the General Partner or any of its Affiliates, the Partnership shall
file with the Commission as promptly as practicable after receiving such
request, and use all reasonable efforts to cause to become effective and remain
effective for a period of not less than six months following its effective date
or such shorter period as shall terminate when all Partnership Securities
covered by such registration statement have been sold, a registration statement
under the Securities Act registering the offering and sale of the number of
Partnership Securities specified by the Holder; provided, however, that the
Partnership shall not be required to effect more than three registrations
pursuant to this Section 7.12(a); and provided further, however, that if at the
time a request pursuant to this Section 7.12 is submitted to the Partnership,
EPC or its Affiliates requesting registration is an Affiliate of the General
Partner and the Audit and Conflicts Committee determines in its good faith
judgment that a postponement of the requested registration for up to six months
would be in the best interests of the Partnership and its Partners due to a
pending transaction, investigation or other event, the filing of such
registration statement or the effectiveness thereof may be deferred for up to
six months, but not thereafter. In connection with any registration pursuant to
the immediately preceding sentence, the Partnership shall promptly prepare and
file (x) such documents as may be necessary to register or qualify the
securities subject to such registration under the securities laws of such states
as the Holder shall reasonably request; provided, however, that no such
qualification shall be required in any jurisdiction where, as a result thereof,
the Partnership would become subject to general service of process or to
taxation or qualification to do business as a foreign corporation or partnership
doing business in such jurisdiction solely as a result of such registration, and
(y) such documents as may be necessary to apply for listing or to list the
Partnership Securities subject to such registration on such National Securities
Exchange as the Holder shall reasonably request, and do any and all other acts
and things that may reasonably be necessary or advisable to enable the Holder to
consummate a public sale of such Partnership Securities in such states. Except
as set forth in Section 7.12(c), all costs and expenses of any such registration
and offering (other than the underwriting discounts and commissions) shall be
paid by the Partnership, without reimbursement by the Holder.
(b) If the Partnership shall at any time propose to file a registration
statement under the Securities Act for an offering of equity securities of the
Partnership for cash (other than an offering relating solely to an employee
benefit plan), the Partnership shall use all reasonable efforts to include such
number or amount of securities held by the Holder in such registration statement
as the Holder shall request. If the proposed offering pursuant to this Section
7.12(b) shall be an underwritten offering, then, in the event that the managing
underwriter or managing underwriters of such offering advise the Partnership and
the Holder in writing that in their opinion the inclusion of all or some of the
Holder's Partnership Securities would adversely and materially affect the
success of the offering, the Partnership shall include in such offering only
that number or amount, if any, of securities held by the Holder which, in the
opinion of the managing underwriter or managing underwriters, will not so
adversely and materially affect the offering. Except as set forth in Section
7.12(c), all costs and expenses of any such registration and offering (other
than the underwriting discounts and commissions) shall be paid by the
Partnership, without reimbursement by the Holder.
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(c) If underwriters are engaged in connection with any registration
referred to in this Section 7.12, the Partnership shall provide indemnification,
representations, covenants, opinions and other assurance to the underwriters in
form and substance reasonably satisfactory to such underwriters. Further, in
addition to and not in limitation of the Partnership's obligation under Section
7.7, the Partnership shall, to the fullest extent permitted by law, indemnify
and hold harmless the Holder, its officers, directors and each Person who
controls the Holder (within the meaning of the Securities Act) and any agent
thereof (collectively, "Indemnified Persons") against any losses, claims,
demands, actions, causes of action, assessments, damages, liabilities (joint or
several), costs and expenses (including interest, penalties and reasonable
attorneys' fees and disbursements), resulting to, imposed upon, or incurred by
the Indemnified Persons, directly or indirectly, under the Securities Act or
otherwise (hereinafter referred to in this Section 7.12(c) as a "claim" and in
the plural as "claims") based upon, arising out of or resulting from any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which any Partnership Securities were registered
under the Securities Act or any state securities or Blue Sky laws, in any
preliminary prospectus (if used prior to the effective date of such registration
statement), or in any summary or final prospectus or in any amendment or
supplement thereto (if used during the period the Partnership is required to
keep the registration statement current), or arising out of, based upon or
resulting from the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements made therein
not misleading; provided, however, that the Partnership shall not be liable to
any Indemnified Person to the extent that any such claim arises out of, is based
upon or results from an untrue statement or alleged untrue statement or omission
or alleged omission made in such registration statement, such preliminary,
summary or final prospectus or such amendment or supplement, in reliance upon
and in conformity with written information furnished to the Partnership by or on
behalf of such Indemnified Person specifically for use in the preparation
thereof.
(d) The provisions of Section 7.12(a) and 7.12(b) shall continue to be
applicable with respect to the General Partner (and any of the General Partner's
Affiliates) after it ceases to be a Partner of the Partnership, during a period
of two years subsequent to the effective date of such cessation and for so long
thereafter as is required for the Holder to sell all of the Partnership
Securities with respect to which it has requested during such two-year period
inclusion in a registration statement otherwise filed or that a registration
statement be filed; provided, however, that the Partnership shall not be
required to file successive registration statements covering the same
Partnership Securities for which registration was demanded during such two-year
period. The provisions of Section 7.12(c) shall continue in effect thereafter.
(e) Any request to register Partnership Securities pursuant to this Section
7.12 shall (i) specify the Partnership Securities intended to be offered and
sold by the Person making the request, (ii) express such Person's present intent
to offer such shares for distribution, (iii) describe the nature or method of
the proposed offer and sale of Partnership Securities, and (iv) contain the
undertaking of such Person to provide all such information and materials and
take all action as may be required in order to permit the Partnership to comply
with all applicable requirements in connection with the registration of such
Partnership Securities.
7.13 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 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 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 officer in
connection with any such dealing. In no event shall any Person dealing with the
General Partner or any such officer or its representatives be obligated to
ascertain that the terms of the 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 officer or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Partnership by the
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General Partner or any such officer or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) 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 (iii)
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
8.1 Records and Accounting. The General Partner shall keep or cause to be
kept at the principal office of the Partnership appropriate books and records
with respect to the Partnership's business, including 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 and Assignees of Units or other Partnership
Securities, 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.
8.2 Fiscal Year. The fiscal year of the Partnership shall be a fiscal year
ending December 31.
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 cause to
be mailed or furnished to each Record Holder of a Unit as of a date selected by
the General Partner in its discretion, 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 cause to be mailed or furnished to each Record Holder of a Unit,
as of a date selected by the General Partner in its discretion, 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 for trading, or as
the General Partner determines to be necessary or appropriate.
ARTICLE IX
TAX MATTERS
9.1 Tax Returns and Information. The Partnership shall timely 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 a taxable 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 within 90 days of the close of the calendar year in
which the Partnership's taxable year ends. 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.
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9.2 Tax Elections.
(a) The Partnership shall make the election under Section 754 of the Code
in accordance with applicable regulations thereunder, subject to the reservation
of the right to seek to revoke any such election upon the General Partner's
determination that such revocation is in the best interests of the Limited
Partners. Notwithstanding any other provision herein contained, for the purposes
of computing the adjustments under Section 743(b) of the Code, the General
Partner shall be authorized (but not required) to adopt a convention whereby the
price paid by a transferee of a Limited Partner Interest that is traded on any
National Securities Exchange will be deemed to be the lowest quoted closing
price of such Limited Partner Interests on any National Securities Exchange on
which such Limited Partner Interests are traded during the calendar month in
which such transfer is deemed to occur pursuant to Section 6.2(g) without regard
to the actual price paid by such transferee.
(b) The Partnership shall elect to deduct expenses incurred in organizing
the Partnership ratably over a sixty-month period as provided in Section 709 of
the Code.
(c) Except as otherwise provided herein, the General Partner shall
determine whether the Partnership should make any other elections permitted by
the Code.
9.3 Tax Controversies. Subject to the provisions hereof, the General
Partner is designated as the Tax Matters Partner (as defined in 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.
9.4 Withholding. Notwithstanding any other provision of this Agreement, the
General Partner is authorized to take any action that it determines in its
discretion to be necessary or appropriate to cause the Partnership and the
Operating Partnership to comply with any withholding requirements established
under the Code or any other federal, state or local law including, without
limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the
extent that the Partnership is required 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, without limitation, by reason of
Section 1446 of the Code), the amount withheld may at the discretion of the
General Partner be treated by the Partnership as a distribution of cash pursuant
to Section 6.3 in the amount of such withholding from such Partner.
ARTICLE X
ADMISSION OF PARTNERS
10.1 Admission of Initial Limited Partners. Upon the issuance by the
Partnership of Common Units and Subordinated Units to EPC Partners II, as
described in Section 5.2, EPC Partners II was admitted to the Partnership as a
Limited Partner in respect of the Units issued to it. Upon the issuance by the
Partnership of Common Units to the Underwriters as described in Section 5.3 in
connection with the Initial Offering and the execution by each Underwriter of a
Transfer Application, the General Partner admitted the Underwriters to the
Partnership as Initial Limited Partners in respect of the Common Units purchased
by them. Upon the issuance by the Partnership of Class A Special Units to Tejas
as described in Section 5.3, the General Partner shall admit Tejas to the
Partnership as an Initial Limited Partner in respect of the Class A Special
Units issued to Tejas.
10.2 Admission of Substituted Limited Partner. By transfer of a Limited
Partner Interest in accordance with Article IV, the transferor shall be deemed
to have given the transferee the right to seek admission as a Substituted
Limited Partner subject to the conditions of, and in the manner permitted under,
this Agreement. A transferor of a Certificate
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representing a Limited Partner Interest shall, however, only have the authority
to convey to a purchaser or other transferee who does not execute and deliver a
Transfer Application (a) the right to negotiate such Certificate to a purchaser
or other transferee and (b) the right to transfer the right to request admission
as a Substituted Limited Partner to such purchaser or other transferee in
respect of the transferred Limited Partner Interests. Each transferee of a
Limited Partner Interest (including any nominee holder or an agent acquiring
such Limited Partner Interest for the account of another Person) who executes
and delivers a Transfer Application shall, by virtue of such execution and
delivery, be an Assignee and be deemed to have applied to become a Substituted
Limited Partner with respect to the Limited Partner Interests so transferred to
such Person. Such Assignee shall become a Substituted Limited Partner (x) at
such time as the General Partner consents thereto, which consent may be given or
withheld in the General Partner's discretion, and (y) when any such admission is
shown on the books and records of the Partnership. If such consent is withheld,
such transferee shall be an Assignee. An Assignee shall have an interest in the
Partnership equivalent to that of a Limited Partner with respect to allocations
and distributions, including liquidating distributions, of the Partnership. With
respect to voting rights attributable to Limited Partner Interests that are held
by Assignees, the General Partner shall be deemed to be the Limited Partner with
respect thereto and shall, in exercising the voting rights in respect of such
Limited Partner Interests on any matter, vote such Limited Partner Interests at
the written direction of the Assignee who is the Record Holder of such Limited
Partner Interests. If no such written direction is received, such Limited
Partner Interests will not be voted. An Assignee shall have no other rights of a
Limited Partner.
10.3 Admission of Successor General Partner. A successor General Partner
approved pursuant to Section 11.1 or 11.2 or the transferee of or successor to
all of the General Partner's Partnership Interest as general partner in the
Partnership 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 11.2 or
the transfer of the General Partner's Partnership Interest as a general partner
in the Partnership 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.
10.4 Admission of Additional Limited Partners.
(a) A Person (other than the General Partner, an Initial Limited Partner or
a Substituted Limited Partner) who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including the power of
attorney granted in Section 2.6, and (ii) such other documents or instruments as
may be required in the discretion of the General Partner to effect such Person's
admission as an Additional Limited Partner.
(b) Notwithstanding anything to the contrary in this Section 10.4, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole discretion. The admission of any Person as an Additional Limited
Partner shall become effective on the date upon which the name of such Person is
recorded as such in the books and records of the Partnership, following the
consent of the General Partner to such admission.
10.5 Amendment of Agreement and Certificate of Limited Partnership. To
effect the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Delaware Act to amend
the records of the Partnership to reflect such admission and, if necessary, to
prepare as soon as 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.
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ARTICLE XI
WITHDRAWAL OR REMOVAL OF PARTNERS
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 by
giving written notice to the other Partners (and it shall be deemed that
the General Partner has withdrawn pursuant to this Section 11.1(a)(i) if
the General Partner voluntarily withdraws as general partner of the
Operating Partnership);
(ii) the General Partner transfers all of its rights as General Partner
pursuant to Section 4.6;
(iii) the General Partner is removed pursuant to Section 11.2;
(iv) 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)(iv); 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;
(v) 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
(vi) (A) in the event 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) in the event 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) in the event 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)(iv), (v) or (vi)(A), (B),
(C) or (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) at any time during the period
beginning on the Closing Date and ending at 12:00 midnight, Eastern Standard
Time, on December 31, 2008, 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 Common Units (excluding Common 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 of a member of the Operating
Partnership or cause the Partnership or the Operating
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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) at any time after 12:00 midnight,
Eastern Standard Time, on December 31, 2008, the General Partner voluntarily
withdraws by giving at least 90 days' advance notice to the Unitholders, such
withdrawal to take effect on the date specified in such notice; (iii) at any
time that the General Partner ceases to be the General Partner pursuant to
Section 11.1(a)(ii) or is removed pursuant to Section 11.2; or (iv)
notwithstanding clause (i) of this sentence, at any time that the General
Partner voluntarily withdraws by giving at least 90 days' advance notice of its
intention to withdraw to the Limited Partners, such withdrawal to take effect on
the date specified in the notice, if at the time such notice is given one Person
and its Affiliates (other than the General Partner and its Affiliates) own
beneficially or of record or control at least 50% of the Outstanding Units. 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, as the case may be, 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, as the case may be, of the other Group Members of
which the General Partner is a general partner or 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.
11.2 Removal of the General Partner. The General Partner may be removed if
such removal is approved by Unitholders holding at least 662/3% of the
Outstanding Units (including Units held by the General Partner and its
Affiliates but excluding Class A Special Units). Any such action by such holders
for removal of the General Partner must also provide for the election of a
successor General Partner by the Unitholders holding a Unit Majority. Such
removal shall be effective immediately following the admission of a successor
General Partner pursuant to Section 10.3. The removal of the General Partner
shall also automatically constitute the removal of the General Partner as
general partner or managing member, as the case may be, of the other Group
Members of which the General Partner is a general partner or managing member. If
a Person is elected as a successor General Partner in accordance with the terms
of this Section 11.2, such Person shall, upon admission pursuant to Section
10.3, automatically become a successor general partner or managing member, as
the case may be, of the other Group Members of which the General Partner is a
general partner or managing member. The right of the holders of Outstanding
Units to remove the General Partner shall not exist or be exercised unless the
Partnership has received an opinion opining as to the matters covered by a
Withdrawal Opinion of Counsel. Any successor General Partner elected in
accordance with the terms of this Section 11.2 shall be subject to the
provisions of Section 10.3.
11.3 Interest of Departing Partner and Successor General Partner.
(a) In the event of (i) withdrawal of the General Partner under
circumstances where such withdrawal does not violate this Agreement or (ii)
removal of the General Partner by the holders of Outstanding Units under
circumstances where Cause does not exist, if a successor General Partner is
elected in accordance with the terms of Section 11.1 or 11.2, the Departing
Partner shall have the option exercisable prior to the effective date of the
departure of such Departing Partner to require its successor to purchase its
Partnership Interest as a general partner in the Partnership and its partnership
or member interest as the general partner or managing member in the other Group
Members (collectively, the "Combined Interest") in exchange for an amount in
cash equal to the fair market value of such Combined Interest, such amount to be
determined and payable as of the effective date of its departure or, if there is
not agreement as to the fair market value of such Combined Interest, within ten
(10) days after such agreement is reached. If the General Partner is removed by
the Unitholders under circumstances where Cause exists or if the General Partner
withdraws under circumstances where such withdrawal violates this Agreement or
the Operating Partnership Agreement, and if a successor General Partner is
elected in accordance with the terms of Section 11.1 or 11.2, such successor
shall have the option, exercisable prior to the effective date of the departure
of such Departing Partner, to purchase the Combined Interest for such fair
market value of such Combined Interest. In either event, the Departing Partner
shall be entitled to
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receive all reimbursements due such Departing Partner pursuant to Section 7.4,
including any employee-related liabilities (including severance liabilities),
incurred in connection with the termination of any employees employed by the
General Partner for the benefit of the Partnership or the other Group Members.
(b) For purposes of this Section 11.3(a), the fair market value of the
Combined Interest shall be determined by agreement between the Departing Partner
and its successor or, failing agreement within 30 days after the effective date
of such Departing Partner's departure, by an independent investment banking firm
or other independent expert selected by the Departing Partner and its successor,
which, in turn, may rely on other experts, and the determination of which shall
be conclusive as to such matter. If such parties cannot agree upon one
independent investment banking firm or other independent expert within 45 days
after the effective date of such departure, then the Departing Partner shall
designate an independent investment banking firm or other independent expert,
the Departing Partner's successor shall designate an independent investment
banking firm or other independent expert, and such firms or experts shall
mutually select a third independent investment banking firm or independent
expert, which third independent investment banking firm or other independent
expert shall determine the fair market value of the Combined Interest. In making
its determination, such third independent investment banking firm or other
independent expert may consider the then current trading price of Units on any
National Securities Exchange on which Units are then listed, the value of the
Partnership's assets, the rights and obligations of the Departing Partner and
other factors it may deem relevant.
(c) If the Combined Interest is not purchased in the manner set forth in
Section 11.3(a), the Departing Partner (or its transferee) shall become a
Limited Partner and its Combined Interest shall be converted into Common Units
pursuant to a valuation made by an investment banking firm or other independent
expert selected pursuant to Section 11.3(a), without reduction in such
Partnership Interest (but subject to proportionate dilution by reason of the
admission of its successor). Any successor General Partner shall indemnify the
Departing Partner (or its transferee) as to all debts and liabilities of the
Partnership arising on or after the date on which the Departing Partner (or its
transferee) becomes a Limited Partner. For purposes of this Agreement,
conversion of the Combined Interest to Common Units will be characterized as if
the General Partner (or its transferee) contributed its Combined Interest to the
Partnership in exchange for the newly issued Common Units.
(d) If a successor General Partner is elected in accordance with the terms
of Section 11.1 or 11.2 and the option described in Section 11.3(a) is not
exercised by the party entitled to do so, the successor General Partner shall,
at the effective date of its admission to the Partnership, contribute to the
Partnership cash in the amount equal to 1/99th of the Net Agreed Value of the
Partnership's assets on such date. In such event, such successor General Partner
shall, subject to the following sentence, be entitled to 1% of all Partnership
allocations and distributions. The successor General Partner shall cause this
Agreement to be amended to reflect that, from and after the date of such
successor General Partner's admission, the successor General Partner's interest
in all Partnership distributions and allocations shall be 1%.
11.4 Termination of Subordination Period, Conversion of Subordinated Units
and Extinguishment of Cumulative Common Unit Arrearages. Notwithstanding any
provision of this Agreement, if the General Partner is removed as general
partner of the Partnership under circumstances where Cause does not exist and
Units held by the General Partner and its Affiliates are not voted in favor of
such removal, (i) the Subordination Period will end and all Outstanding
Subordinated Units will immediately and automatically convert into Common Units
on a one-for-one basis and (ii) all Cumulative Common Unit Arrearages on the
Common Units will be extinguished.
11.5 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
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DISSOLUTION AND LIQUIDATION
12.1 Dissolution. The Partnership shall not be dissolved by the admission
of Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner 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 or 11.2, 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) the expiration of its term as provided in Section 2.7;
(b) 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) or 11.2 and such successor is admitted to the Partnership pursuant
to Section 10.3;
(c) an election to dissolve the Partnership by the General Partner that
is approved by the holders of a Unit Majority;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Delaware Act; or
(e) the sale of all or substantially all of the assets and properties
of the Partnership Group.
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 or removal of the General Partner as provided in Section
11.1(a)(i) or (iii) and the failure of the Partners to select a successor to
such Departing Partner pursuant to Section 11.1 or 11.2, 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)(iv), (v) or (vi), then, to the
maximum extent permitted by law, within 180 days thereafter, the holders of a
Unit Majority may elect to reconstitute the Partnership and continue its
business on the same terms and conditions set forth in this Agreement by forming
a new limited partnership on terms identical to those set forth in this
Agreement and having as the 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 reconstituted Partnership shall continue until the end of the
term set forth in Section 2.7 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) all necessary steps shall be taken to cancel this Agreement and
the Certificate of Limited Partnership and to enter into and, as necessary,
to file a new partnership agreement and certificate of limited partnership,
and the successor general partner may for this purpose exercise the powers
of attorney granted the General Partner pursuant to Section 2.6; provided,
that the right of the holders of a Unit Majority to approve a successor
General Partner and to reconstitute and to continue the business of the
Partnership shall not exist and may not be exercised unless the Partnership
has received an Opinion of Counsel that (x) the exercise of the right would
not result in the loss of limited liability of any Limited Partner and (y)
neither the Partnership, the reconstituted limited partnership nor the
Operating Partnership would be treated as an association taxable as a
corporation or otherwise be taxable as an entity for federal income tax
purposes upon the exercise of such right to continue.
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12.3 Liquidator. Upon dissolution of the Partnership, unless the
Partnership is continued under an election to reconstitute and continue the
Partnership pursuant to Section 12.2, the General Partner 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 Common Units
and Subordinated Units voting as a single class. 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 Common
Units and Subordinated Units voting as a single class. 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 Common Units and Subordinated Units voting as a
single class. 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(b)) to the
extent necessary or desirable in the good faith judgment of the Liquidator to
carry out the duties and functions of the Liquidator hereunder for and during
such period of time as shall be reasonably required in the good faith judgment
of the Liquidator to complete the winding up and liquidation of the Partnership
as provided for herein.
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 the Liquidator determines to be in the best
interest of the Partners, subject to Section 17-804 of the Delaware Act and the
following:
(a) Disposition of Assets. 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, in
its absolute discretion, 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, in its absolute discretion, 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) Discharge of Liabilities. Liabilities of the Partnership include
amounts owed 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) Liquidation Distributions. 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, and to the extent of,
the positive balances in their respective Capital Accounts, as determined
after taking into account all Capital Account adjustments (other than those
made by reason of distributions pursuant to this Section 12.4(c)) for the
taxable year of the Partnership during which the liquidation of the
Partnership occurs (with such date of occurrence being determined pursuant
to Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), and such distribution
shall be made by the end of such taxable year (or, if later, within 90 days
after said date of such occurrence).
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
Partnership shall be terminated and the Certificate of Limited Partnership and
all qualifications of the Partnership as a foreign limited
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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.
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.
12.7 Waiver of Partition. To the maximum extent permitted by law, each
Partner hereby waives any right to partition of the Partnership property.
12.8 Capital Account Restoration. No Partner shall have any obligation to
restore any negative balance in its Capital Account upon liquidation of the
Partnership.
ARTICLE XIII
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE
13.1 Amendment to be Adopted Solely by the General Partner. Each Partner
agrees that the General Partner, without the approval of any Partner or
Assignee, may amend any provision of this Agreement and execute, swear to,
acknowledge, deliver, file and record whatever documents may be required in
connection therewith, to reflect:
(a) a change in the name of the Partnership, the location of the
principal place of business of the Partnership, the registered agent of the
Partnership or the registered office of the Partnership;
(b) admission, substitution, withdrawal or removal of Partners in
accordance with this Agreement;
(c) a change that, in the sole discretion of the General Partner, is
necessary or advisable 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 no Group Member will be treated as an association taxable as a
corporation or otherwise taxed as an entity for federal income tax
purposes;
(d) a change that, in the discretion of the General Partner, (i) does
not adversely affect the Limited Partners in any material respect, (ii) is
necessary or advisable 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 Limited Partner Interests (including the division of any
class or classes of Outstanding Limited Partner Interests into different
classes to facilitate uniformity of tax consequences within such classes of
Limited Partner Interests) or comply with any rule, regulation, guideline
or requirement of any National Securities Exchange on which the Limited
Partner Interests are or will be listed for trading, compliance with any of
which the General Partner determines in its discretion to be in the best
interests of the Partnership and the Limited Partners, (iii) is necessary
or advisable in connection with action taken by the General Partner
pursuant to Section 5.10 or (iv) 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 changes that, in the discretion of the General Partner, are necessary
or advisable 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 "Quarter" and the dates on which distributions
are to be made by the Partnership;
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(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) subject to the terms of Section 5.7, an amendment that, in the
discretion of the General Partner, is necessary or advisable in connection
with the authorization of issuance of any class or series of Partnership
Securities pursuant to Section 5.6;
(h) any amendment expressly permitted in this Agreement to be made by
the General Partner acting alone;
(i) an amendment effected, necessitated or contemplated by a Merger
Agreement approved in accordance with Section 14.3;
(j) an amendment that, in the discretion of the General Partner, is
necessary or advisable to reflect, account for and deal with appropriately
the formation by the Partnership of, or investment by the Partnership in,
any corporation, partnership, joint venture, limited liability company or
other entity other than the Operating Partnership, in connection with the
conduct by the Partnership of activities permitted by the terms of Section
2.4;
(k) a merger or conveyance pursuant to Section 14.3(d); or
(l) any other amendments substantially similar to the foregoing.
13.2 Amendment Procedures. Except as provided in Sections 13.1 and 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 or with the
consent of the General Partner which consent may be given or withheld in its
sole discretion. A proposed amendment shall be effective upon its approval by
the holders of a Unit Majority, unless a greater or different percentage is
required under this Agreement or by Delaware law. A proposed amendment that
adversely alters the powers, obligations or special rights of the Class A
Special Units set forth herein shall be effective upon its approval by the
holders of a majority of the Class A Special Units. 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.
13.3 Amendment Requirements.
(a) Notwithstanding the provisions of Sections 13.1 and 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 reducing such voting percentage unless such amendment is approved
by the written consent or the affirmative vote of holders of Outstanding Units
whose aggregate Outstanding Units constitute not less than the voting
requirement sought to be reduced.
(b) Notwithstanding the provisions of Sections 13.1 and 13.2, no amendment
to this Agreement may (i) enlarge the obligations of any Limited Partner without
its consent, unless such shall have occurred as a result of an amendment
approved pursuant to Section 13.3(c), (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 in
its sole discretion, (iii) change Section 12.1(a)
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or 12.1(c), or (iv) change the term of the Partnership or, except as set forth
in Section 12.1(c), give any Person the right to dissolve the Partnership.
(c) Except as provided in Section 14.3, and except as otherwise provided,
and without limitation of the General Partner's authority to adopt amendments to
this Agreement as contemplated in Section 13.1, any amendment that would have a
material adverse effect on the rights or preferences of any class of Partnership
Interests in relation to other classes of Partnership Interests must be approved
by the holders of not less than a majority of the Outstanding Partnership
Interests of the class affected.
(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 Common Units and Subordinated 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 law.
(e) Except as provided in Section 13.1, this Section 13.3 shall only be
amended with the approval of the holders of at least 90% of the Outstanding
Common Units and Subordinated Units voting as a single class.
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 Limited Partner
Interests of the class or classes for which a meeting is proposed. 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.
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 Limited
Partner Interests for which a meeting is proposed in writing by mail or other
means of written communication in accordance with Section 16.1. 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.
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 Limited Partner Interests are listed for trading, in which case the
rule, regulation, guideline or requirement of such 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.
13.7 Adjournment. 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
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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.
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, and if, either before or after the meeting, Limited Partners representing
such quorum who were present in person or by proxy and entitled to vote, sign a
written waiver of notice or an approval of the holding of the meeting or an
approval of the minutes thereof. All waivers and approvals shall be filed with
the Partnership records or made a part of the minutes of the meeting. Attendance
of a Limited Partner at a meeting shall constitute a waiver of notice of the
meeting, except when the Limited Partner does not approve, at the beginning of
the meeting, of 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.
13.9 Quorum. The holders of a majority of the Outstanding Limited Partner
Interests of the class or classes for which a meeting has been called (including
Limited Partner Interests deemed owned by the General Partner) represented in
person or by proxy shall constitute a quorum at a meeting of Limited Partners of
such class or classes unless any such action by the Limited Partners requires
approval by holders of a greater percentage of such Limited Partner Interests,
in which case the quorum shall be such greater percentage. At any meeting of the
Limited Partners duly called and held in accordance with this Agreement at which
a quorum is present, the act of Limited Partners holding Outstanding Limited
Partner Interests that in the aggregate represent a majority of the Outstanding
Limited Partner Interests 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 Limited Partner Interests 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 Limited Partner Interests specified in this Agreement (including
Limited Partner Interests 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
Limited Partner Interests entitled to vote at such meeting (including Limited
Partner Interests 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.
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.
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 Limited Partner Interests (including Limited Partner Interests
deemed owned by the General Partner) that would be necessary to authorize or
take
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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 Limited Partner
Interests are listed for trading, in which case the rule, regulation, guideline
or requirement of such 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 Limited Partner Interests held by
the Limited Partners the Partnership shall be deemed to have failed to receive a
ballot for the Limited Partner Interests 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.
13.12 Voting and Other Rights.
(a) Only those Record Holders of the Limited Partner Interests 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 Limited Partner Interests 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 Limited Partner Interests shall be
deemed to be references to the votes or acts of the Record Holders of such
Outstanding Limited Partner Interests.
(b) With respect to Limited Partner Interests 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
Limited Partner Interests are registered, such other Person shall, in exercising
the voting rights in respect of such Limited Partner Interests on any matter,
and unless the arrangement between such Persons provides otherwise, vote such
Limited Partner Interests 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.
ARTICLE XIV
MERGER
14.1 Authority. The Partnership may merge or consolidate with one or more
corporations, limited liability companies, business trusts or associations, real
estate investment trusts, common law trusts or unincorporated businesses,
including a general partnership or limited partnership, formed under the laws of
the State of Delaware or any other state of the United States of America,
pursuant to a written agreement of merger or consolidation ("Merger Agreement")
in accordance with this Article XIV.
14.2 Procedure for Merger or Consolidation. Merger or consolidation of the
Partnership pursuant to this Article XIV requires the prior approval of the
General Partner. If the General Partner shall determine, in the exercise of its
discretion, to consent to the merger or consolidation, the General Partner shall
approve the Merger Agreement, which shall set forth:
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(a) The names and jurisdictions of formation or organization of each of
the business entities proposing to merge or consolidate;
(b) The name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation
(the "Surviving Business Entity");
(c) The terms and conditions of the proposed merger or consolidation;
(d) The manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash, property
or general or limited partner 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 general or limited partner
interests, rights, securities or obligations of any limited partnership,
corporation, trust or other entity (other than the Surviving Business
Entity) which the holders of such general or limited partner interests,
securities or rights are to receive in exchange for, or upon conversion of
their general or limited partner interests, securities or rights, and (ii)
in the case of securities represented by certificates, upon the surrender
of such certificates, which cash, property or general or limited partner
interests, rights, securities or obligations of the Surviving Business
Entity or any general or limited partnership, corporation, trust or other
entity (other than the Surviving Business Entity), or evidences thereof,
are to be delivered;
(e) A statement of any changes in the constituent documents or the
adoption of new constituent documents (the articles or certificate of
incorporation, articles of trust, declaration of trust, certificate or
agreement of limited partnership or other similar charter or governing
document) of the Surviving Business Entity to be effected by such merger or
consolidation;
(f) The effective time of the merger, which may be the date of the
filing of the certificate of merger pursuant to Section 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 the certificate of merger, the effective time shall
be fixed no later than the time of the filing of the certificate of merger
and stated therein); and
(g) Such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the General
Partner.
14.3 Approval by Limited Partners of Merger or Consolidation.
(a) Except as provided in Section 14.3(d), the General Partner, upon its
approval of the Merger Agreement, shall direct that the Merger Agreement be
submitted to a vote of Limited Partners (other than Limited Partners holding
Class A Special Units, in their capacity as such), 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 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 shall be
approved upon receiving the affirmative vote or consent of the holders of a Unit
Majority unless the Merger Agreement contains any provision that, if contained
in an amendment to this Agreement, the provisions of this Agreement or the
Delaware Act would require for its approval the vote or consent of a greater
percentage of the Outstanding Limited Partner Interests or of any class of
Limited Partners, in which case such greater percentage vote or consent shall be
required for approval of the Merger Agreement.
(c) Except as provided in Section 14.3(d), after such approval by vote or
consent of the Limited Partners, and at any time prior to the filing of the
certificate of merger pursuant to Section 14.4, the merger or consolidation may
be abandoned pursuant to provisions therefor, if any, set forth in the Merger
Agreement.
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(d) Notwithstanding anything else contained in this Article XIV or in this
Agreement, the General Partner is permitted, in its discretion and without
Limited Partner approval, to (i) convert the Partnership or any Group Member to
another type of limited liability entity as provided by Section 17-219 of the
Delaware Act or (ii) merge the Partnership or any Group Member into, or convey
all of the Partnership's assets to, another limited liability entity which shall
be newly formed and shall have no assets, liabilities or operations at the time
of such merger or conveyance other than those it receives from the Partnership
or other Group Member, provided that in any such case (A) 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 any member in the Operating Partnership or cause the
Partnership or Operating 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 with rights
and obligations that are, in all material respects, the same rights and
obligations of the Limited Partners hereunder.
14.4 Certificate of Merger. Upon the required approval by the General
Partner and the Limited Partners of a Merger Agreement, a certificate of merger
shall be executed and filed with the Secretary of State of the State of Delaware
in conformity with the requirements of the Delaware Act.
14.5 Effect of Merger.
(a) At the effective time of the certificate of merger:
(i) all of the rights, privileges and powers of each of the business
entities that has merged or consolidated, and all property, real, personal
and mixed, and all debts due to any of those business entities and all
other things and causes of action belonging to each of those business
entities, shall be vested in the Surviving Business Entity and after the
merger or consolidation shall be the property of the Surviving Business
Entity to the extent they were of each constituent business entity;
(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) A merger or consolidation effected pursuant to this Article shall not
be deemed to result in a transfer or assignment of assets or liabilities from
one entity to another.
ARTICLE XV
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS
15.1 Right to Acquire Limited Partner Interests.
(a) Notwithstanding any other provision of this Agreement, if at any time
not more than 15% of the total Limited Partner Interests of any class then
Outstanding is held by Persons other than the General Partner and its
Affiliates, the General Partner shall then have the right, which right it may
assign and transfer in whole or in part to the Partnership
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or any Affiliate of the General Partner, exercisable in its sole discretion, to
purchase all, but not less than all, of such Limited Partner Interests of such
class then Outstanding held by Persons other than the General Partner and its
Affiliates, at the greater of (x) the Current Market Price as of the date three
days prior to the date that the notice described in Section 15.1(b) is mailed
and (y) the highest price paid by the General Partner or any of its Affiliates
for any such Limited Partner Interest of such class purchased during the 90-day
period preceding the date that the notice described in Section 15.1(b) is
mailed. As used in this Agreement, (i) "Current Market Price" as of any date of
any class of Limited Partner Interests listed or admitted to trading on any
National Securities Exchange means the average of the daily Closing Prices (as
hereinafter defined) per limited partner interest of such class for the 20
consecutive Trading Days (as hereinafter defined) immediately prior to such
date; (ii) "Closing Price" for any day means the last sale price on such day,
regular way, or in case no such sale takes place on such day, the average of the
closing bid and asked prices on such day, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted for trading on the principal National
Securities Exchange (other than the Nasdaq Stock Market) on which such Limited
Partner Interests of such class are listed or admitted to trading or, if such
Limited Partner Interests of such class are not listed or admitted to trading on
any National Securities Exchange (other than the Nasdaq Stock Market), the last
quoted price on such day or, if not so quoted, the average of the high bid and
low asked prices on such day in the over-the-counter market, as reported by the
Nasdaq Stock Market or such other system then in use, or, if on any such day
such Limited Partner Interests of such class are not quoted by any such
organization, the average of the closing bid and asked prices on such day as
furnished by a professional market maker making a market in such Limited Partner
Interests of such class selected by the General Partner, or if on any such day
no market maker is making a market in such Limited Partner Interests of such
class, the fair value of such Limited Partner Interests on such day as
determined reasonably and in good faith by the General Partner; and (iii)
"Trading Day" means a day on which the principal National Securities Exchange on
which such Limited Partner Interests of any class are listed or admitted to
trading is open for the transaction of business or, if Limited Partner Interests
of a class are not listed or admitted to trading on any National Securities
Exchange, a day on which banking institutions in New York City generally are
open.
(b) If the General Partner, any Affiliate of the General Partner or the
Partnership elects to exercise the right to purchase Limited Partner Interests
granted pursuant to Section 15.1(a), the General Partner shall deliver to the
Transfer Agent notice of such election to purchase (the "Notice of Election to
Purchase") and shall cause the Transfer Agent to mail a copy of such Notice of
Election to Purchase to the Record Holders of Limited Partner Interests of such
class (as of a Record Date selected by the General Partner) at least 10, but not
more than 60, days prior to the Purchase Date. Such Notice of Election to
Purchase shall also be published for a period of at least three consecutive days
in at least two daily newspapers of general circulation printed in the English
language and published in the Borough of Manhattan, New York. The Notice of
Election to Purchase shall specify the Purchase Date and the price (determined
in accordance with Section 15.1(a)) at which Limited Partner Interests will be
purchased and state that the General Partner, its Affiliate or the Partnership,
as the case may be, elects to purchase such Limited Partner Interests, upon
surrender of Certificates representing such Limited Partner Interests in
exchange for payment, at such office or offices of the Transfer Agent as the
Transfer Agent may specify, or as may be required by any National Securities
Exchange on which such Limited Partner Interests are listed or admitted to
trading. Any such Notice of Election to Purchase mailed to a Record Holder of
Limited Partner Interests at his address as reflected in the records of the
Transfer Agent shall be conclusively presumed to have been given regardless of
whether the owner receives such notice. On or prior to the Purchase Date, the
General Partner, its Affiliate or the Partnership, as the case may be, shall
deposit with the Transfer Agent cash in an amount sufficient to pay the
aggregate purchase price of all of such Limited Partner Interests to be
purchased in accordance with this Section 15.1. If the Notice of Election to
Purchase shall have been duly given as aforesaid at least 10 days prior to the
Purchase Date, and if on or prior to the Purchase Date the deposit described in
the preceding sentence has been made for the benefit of the holders of Limited
Partner Interests subject to purchase as provided herein, then from and after
the Purchase Date, notwithstanding that any Certificate shall not have been
surrendered for purchase, all rights of the holders of such Limited Partner
Interests (including any rights pursuant to Articles IV, V, VI, and XII) shall
thereupon cease, except the right to receive the purchase price (determined in
accordance with Section 15.1(a)) for Limited Partner Interests therefor, without
interest, upon surrender to the Transfer Agent of the Certificates representing
such Limited Partner Interests, and such Limited Partner Interests shall
thereupon be deemed to be
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transferred to the General Partner, its Affiliate or the Partnership, as the
case may be, on the record books of the Transfer Agent and the Partnership, and
the General Partner or any Affiliate of the General Partner, or the Partnership,
as the case may be, shall be deemed to be the owner of all such Limited Partner
Interests from and after the Purchase Date and shall have all rights as the
owner of such Limited Partner Interests (including all rights as owner of such
Limited Partner Interests pursuant to Articles IV, V, VI and XII).
(c) At any time from and after the Purchase Date, a holder of an
Outstanding Limited Partner Interest subject to purchase as provided in this
Section 15.1 may surrender his Certificate evidencing such Limited Partner
Interest to the Transfer Agent in exchange for payment of the amount described
in Section 15.1(a), therefor, without interest thereon.
ARTICLE XVI
GENERAL PROVISIONS
16.1 Addresses and Notices. Any notice, demand, request, report or proxy
materials required or permitted to be given or made to a Partner or Assignee
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 or Assignee at the address
described below. Any notice, payment or report to be given or made to a Partner
or Assignee 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 Securities 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 Securities 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 16.1 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 Post Office 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 or Assignee 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
and Assignees. 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, Assignee or other Person
if believed by it to be genuine.
16.2 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.
16.3 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.
16.4 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.
16.5 Creditors. None of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
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16.6 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.
16.7 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 Unit,
upon accepting the certificate evidencing such Unit or executing and delivering
a Transfer Application as herein described, independently of the signature of
any other party.
16.8 Applicable Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
16.9 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.
16.10 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.
1
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
ENTERPRISE PRODUCTS GP, LLC
By: /s/ O. S. Andras
____________________________________
O. S. Andras
President and Chief Executive Officer
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.
By: Enterprise Products GP, LLC
General Partner, as attorney-in-fact
for the Limited Partners pursuant to
the Powers of Attorney granted pursuant
to Section 2.6.
By: /s/ O. S. Andras
________________________________
O. S. Andras
President and Chief Executive Officer
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Attachment I
DEFINED TERMS
"Acquisition" means any transaction in which any Group Member acquires
(through an asset acquisition, merger, stock acquisition or other form of
investment) control over all or a portion of the assets, properties or business
of another Person for the purpose of increasing the operating capacity or
revenues of the Partnership Group from the operating capacity or revenues of the
Partnership Group existing immediately prior to such transaction.
"Additional Limited Partner" means a Person admitted to the Partnership as
a Limited Partner pursuant to Section 10.4 and who is shown as such on the books
and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each fiscal year of the Partnership, (a) increased by
any amounts that such Partner is obligated to restore under the standards set by
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to
restore under Treasury Regulation Sections 1.704-2(g) and 1.704-2(i)(5)) and (b)
decreased by (i) the amount of all losses and deductions that, as of the end of
such fiscal year, are reasonably expected to be allocated to such Partner in
subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury
Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions
that, as of the end of such fiscal year, are reasonably expected to be made to
such Partner in subsequent years in accordance with the terms of this Agreement
or otherwise to the extent they exceed offsetting increases to such Partner's
Capital Account that are reasonably expected to occur during (or prior to) the
year in which such distributions are reasonably expected to be made (other than
increases as a result of a minimum gain chargeback pursuant to Section 6.1(d)(i)
or 6.1(d)(ii)). The foregoing definition of Adjusted Capital Account is intended
to comply with the provisions of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The
"Adjusted Capital Account" of a Partner in respect of a General Partner
Interest, a Common Unit, a Subordinated Unit or any other specified interest in
the Partnership shall be the amount which such Adjusted Capital Account would be
if such General Partner Interest, Common Unit, Subordinated Unit, or other
interest in the Partnership were the only interest in the Partnership held by a
Partner from and after the date on which such General Partner Interest, Common
Unit, Subordinated Unit, or other interest was first issued.
"Adjusted Operating Surplus" means, with respect to any period, Operating
Surplus generated during such period (a) less (i) any net increase in working
capital borrowings during such period and (ii) any net reduction in cash
reserves for Operating Expenditures during such period not relating to an
Operating Expenditure made during such period, and (b) plus (i) any net decrease
in working capital borrowings during such period and (ii) any net increase in
cash reserves for Operating Expenditures during such period required by any debt
instrument for the repayment of principal, interest or premium. Adjusted
Operating Surplus does not include that portion of Operating Surplus included in
clause (a)(i) or (a)(iii)(A) of the definition of Operating Surplus.
"Adjusted Property" means any property the Carrying Value of which has been
adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii). Once an Adjusted Property
is deemed contributed to a new partnership in exchange for an interest in the
new partnership, followed by the deemed liquidation of the Partnership for
federal income tax purposes upon a termination of the Partnership pursuant to
Treasury Regulation Section 1.708-(b)(1)(iv), such property shall thereafter
constitute a Contributed Property until the Carrying Value of such property is
subsequently adjusted pursuant to Section 5.5(d)(i) or 5.5(d)(ii).
"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. Notwithstanding the foregoing, a Person shall only be considered an
"Affiliate" of the General Partner if such Person owns, directly or
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indirectly, 50% or more of the voting securities of the General Partner or
otherwise possesses the sole power to direct or cause the direction of the
management and policies of the General Partner.
"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 6.1, including, without limitation, a Curative Allocation (if
appropriate to the context in which the term "Agreed Allocation" is used).
"Agreed Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution as determined
by the General Partner using such reasonable method of valuation as it may
adopt. The General Partner shall, in its discretion, use such method as it deems
reasonable and appropriate to allocate the aggregate Agreed Value of Contributed
Properties contributed to the Partnership in a single or integrated transaction
among each separate property on a basis proportional to the fair market value of
each Contributed Property.
"Agreement" means this Second Amended and Restated Agreement of Limited
Partnership of Enterprise Products Partners L.P., as it may be amended,
supplemented or restated from time to time.
"Assignee" means a Non-citizen Assignee or a Person to whom one or more
Limited Partner Interests have been transferred in a manner permitted under this
Agreement and who has executed and delivered a Transfer Application as required
by this Agreement, but who has not been admitted as a Substituted Limited
Partner.
"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.
"Audit and Conflicts Committee" means a committee of the Board of Directors
of the General Partner composed entirely of two or more directors who are
neither members, officers nor employees of the General Partner nor members,
officers, directors or employees of any Affiliate of the General Partner.
"Available Cash" means, with respect to any Quarter ending prior to the
Liquidation Date,
(a) the sum of (i) all cash and cash equivalents of the Partnership
Group on hand at the end of such Quarter, and (ii) all additional cash and
cash equivalents of the Partnership Group on hand on the date of
determination of Available Cash with respect to such Quarter resulting from
(A) borrowings under the Working Capital Facility made subsequent to the
end of such Quarter or (B) Interim Capital Transactions after the end of
such Quarter designated by the General Partner as Operating Surplus in
accordance with clause (a)(iii)(A) of the definition of Operating Surplus,
less
(b) the amount of any cash reserves that is necessary or appropriate in
the reasonable discretion of the General Partner to (i) provide for the
proper conduct of the business of the Partnership Group (including reserves
for future capital expenditures and for anticipated future credit needs of
the Partnership Group) subsequent to such Quarter, (ii) comply with
applicable law or any loan agreement, security agreement, mortgage, debt
instrument or other agreement or obligation to which any Group Member is a
party or by which it is bound or its assets are subject or (iii) provide
funds for distributions under Section 6.4 or 6.5 in respect of any one or
more of the next four Quarters; provided, however, that the General Partner
may not establish cash reserves pursuant to (iii) above if the effect of
such reserves would be that the Partnership is unable to distribute the
Minimum Quarterly Distribution on all Common Units with respect to such
Quarter; and, provided further, that disbursements made by a Group Member
or cash reserves established, increased or reduced after the end of such
Quarter, but on or before the date of determination of Available Cash with
respect to such Quarter, shall be deemed to have been made, established,
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increased or reduced, for purposes of determining Available Cash, within
such Quarter if the General Partner so determines.
Notwithstanding the foregoing, "Available Cash" with respect to the Quarter
in which the Liquidation Date occurs and any subsequent Quarter shall equal
zero.
"Book-Tax Disparity" means with respect to any item of Contributed Property
or Adjusted Property, as of the date of any determination, the difference
between the Carrying Value of such Contributed Property or Adjusted Property and
the adjusted basis thereof for federal income tax purposes as of such date. A
Partner's share of the Partnership's Book- Tax Disparities in all of its
Contributed Property and Adjusted Property will be reflected by the difference
between such Partner's Capital Account balance as maintained pursuant to Section
5.5 and the hypothetical balance of such Partner's Capital Account computed as
if it had been maintained strictly in accordance with federal income tax
accounting principles.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the government of the United States of
America or the states of New York or Texas shall not be regarded as a Business
Day.
"Capital Account" means the capital account maintained for a Partner
pursuant to Section 5.5. The "Capital Account" of a Partner in respect of a
General Partner Interest, a Common Unit, a Subordinated Unit, or any other
Partnership Interest shall be the amount which such Capital Account would be if
such General Partner Interest, Common Unit, Subordinated Unit, or other
Partnership Interest were the only interest in the Partnership held by a Partner
from and after the date on which such General Partner Interest, Common Unit,
Subordinated Unit, or other Partnership Interest was first issued.
"Capital Contribution" means any cash, cash equivalents or the Net Agreed
Value of Contributed Property that a Partner contributes to the Partnership.
"Capital Improvement" means any (a) addition or improvement to the capital
assets owned by any Group Member or (b) acquisition of existing, or the
construction of new, capital assets, in each case made to increase the operating
capacity or revenues of the Partnership Group from the operating capacity or
revenues of the Partnership Group existing immediately prior to such addition,
improvement, acquisition or construction.
"Capital Surplus" has the meaning assigned to such term in Section 6.3(a).
"Carrying Value" means (a) with respect to a Contributed Property, the
Agreed Value of such property reduced (but not below zero) by all depreciation,
amortization and cost recovery deductions charged to the Partners' and
Assignees' Capital Accounts in respect of such Contributed Property, and (b)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Sections 5.5(d)(i) and 5.5(d)(ii) and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
"Cause" means a court of competent jurisdiction has entered a final,
non-appealable judgment finding the General Partner liable for actual fraud,
gross negligence or willful or wanton misconduct in its capacity as general
partner of the Partnership.
"Certificate" means a certificate, substantially in the form of Exhibit A
to this Agreement or in such other form as may be adopted by the General Partner
in its discretion, issued by the Partnership evidencing ownership of one or more
Common Units or a certificate, in such form as may be adopted by the General
Partner in its discretion, issued by the Partnership evidencing ownership of one
or more other Partnership Securities.
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"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 2.1, as such Certificate of Limited
Partnership may be amended, supplemented or restated from time to time.
"Citizenship Certification" means a properly completed certificate in such
form as may be specified by the General Partner by which an Assignee or 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.
"Claim" has the meaning assigned to such term in Section 7.12(c).
"Class A Special Units" means the special class of Units designated and
created pursuant to Section 5.12.
"Class A Special Units Conversion Dates" has the meaning assigned to such
term in Section 5.12.
"Closing Date" means July 31, 1998.
"Closing Price" has the meaning assigned to such term in Section 15.1(a).
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time and as interpreted by the applicable regulations thereunder.
Any reference herein to a specific section or sections of the Code shall be
deemed to include a reference to any corresponding provision of successor law.
"Combined Interest" has the meaning assigned to such term in Section
11.3(a).
"Combined Performance Test" shall be met if, at any time during the
Production Period, Gas Production reaches 725 billion cubic feet on a cumulative
basis during the Production Period and Tejas provides written notice to the
General Partner stating that such production level has been reached during the
Production Period and which notice shall include information supporting that
statement reasonably acceptable to the General Partner.
"Commission" means the United States Securities and Exchange Commission.
"Common Unit" means a Partnership Security representing a fractional part
of the Partnership Interests of all Limited Partners and Assignees and of the
General Partner (exclusive of its interest as a holder of a General Partner
Interest) and having the rights and obligations specified with respect to Common
Units in this Agreement. The term "Common Unit" does not refer to a Subordinated
Unit or a Class A Special Unit prior to its conversion into a Common Unit
pursuant to the terms hereof.
"Common Unit Arrearage" means, with respect to any Common Unit, whenever
issued, as to any Quarter within the Subordination Period, the excess, if any,
of (a) the Minimum Quarterly Distribution with respect to a Common Unit in
respect of such Quarter over (b) the sum of all Available Cash distributed with
respect to a Common Unit in respect of such Quarter pursuant to Section
6.4(a)(i).
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Delaware Act, but excluding cash, contributed to the
Partnership (or deemed contributed to a new partnership on termination of the
Partnership pursuant to Section 708 of the Code). Once the Carrying Value of a
Contributed Property is adjusted pursuant to Section 5.5(d), such property shall
no longer constitute a Contributed Property, but shall be deemed an Adjusted
Property.
"Cumulative Common Unit Arrearage" means, with respect to any Common Unit,
whenever issued, and as of the end of any Quarter, the excess, if any, of (a)
the sum resulting from adding together the Common Unit Arrearage as to an
Initial Common Unit for each of the Quarters within the Subordination Period
ending on or before the last day of such
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Quarter over (b) the sum of any distributions theretofore made pursuant to
Section 6.4(a)(ii) and the second sentence of Section 6.5 with respect to an
Initial Common Unit (including any distributions to be made in respect of the
last of such Quarters).
"Curative Allocation" means any allocation of an item of income, gain,
deduction, loss or credit pursuant to the provisions of Section 6.1(d)(xi).
"Current Market Price" has the meaning assigned to such term in Section
15.1(a).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership Act,
6 Del C. ss. 17-101, et seq., as amended, supplemented or restated from time to
time, and any successor to such statute.
"Departing Partner" means a former General Partner from and after the
effective date of any withdrawal or removal of such former General Partner
pursuant to Section 11.1 or 11.2.
"Economic Risk of Loss" has the meaning set forth in Treasury Regulation
Section 1.752-2(a).
"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 or Assignee
does not or would not subject such Group Member to a significant risk of
cancellation or forfeiture of any of its properties or any interest therein.
"EPC" means Enterprise Products Company, a Texas Subchapter S corporation.
"EPC Partners II" means EPC Partners II, Inc., a Delaware corporation.
"EPCO Agreement" means the EPCO Agreement dated the Closing Date among
EPCO, the Partnership, the Operating Partnership and the General Partner.
"Event of Withdrawal" has the meaning assigned to such term in Section
11.1(a).
"Existing Capital Commitment Amount" means $46.5 million, which amount
represents the aggregate estimated capital costs to be incurred by the
Partnership Group in connection with the following proposed projects:
Estimated
Proposed Project Capital Costs
-------- ------- -------------
(i) Baton Rouge Fractionator...............$ 20.0 Million
(ii)Tri-State Pipeline.....................$ 10.0 Million
(iiiWilprise Pipeline......................$ 8.0 Million
(iv)NGL Product Chiller....................$ 8.5 Million
- -----------
Total..............................$ 46.5 Million
each of which is described in greater detail in the Registration Statement;
provided, however, that if for any reason (other than as a result of the
cancellation of such project) the actual capital costs incurred by the
Partnership Group in connection with any of the proposed projects
referenced above is less than the estimated capital cost for such project
as set forth above, the "Existing Capital Commitment Amount" shall be
reduced by the amount of such difference.
"Final Subordinated Units" has the meaning assigned to such term in Section
6.1(d)(x).
"First Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(E).
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"First Target Distribution" means $0.506 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
1998, it means the product of $0.506 multiplied by a fraction of which the
numerator is the number of days in the period commencing on the Closing Date and
ending on September 30, 1998, and of which the denominator is 92), subject to
adjustment in accordance with Sections 6.6 and 6.9.
"Force Majeure Event" means an event during which Gas Production is
reduced, in whole or in part, by an event reasonably beyond the control of the
party producing such Gas Production, including but not limited to any event of
force majeure under the Shell Processing Agreement (as defined in the Tejas
Contribution Agreement) or any of the Dedicated Leases under, and as defined in,
the Shell Processing Agreement (as defined in the Tejas Contribution Agreement).
"Gas Production" means natural gas produced from all Dedicated Leases (as
defined in the Shell Processing Agreement (as defined in the Tejas Contribution
Agreement)).
"General Partner" means Enterprise Products GP, LLC, a Delaware limited
liability company, and its successors and permitted assigns as general partner
of the Partnership.
"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 Interest held by it) which may be evidenced by
Partnership Securities or a combination thereof or interest therein, 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" means a Person that with or through any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting (except voting pursuant to a revocable proxy or
consent given to such Person in response to a proxy or consent solicitation made
to 10 or more Persons) or disposing of any Partnership Securities with any other
Person that beneficially owns, or whose Affiliates or Associates beneficially
own, directly or indirectly, Partnership Securities.
"Group Member" means a member of the Partnership Group.
"Holder" as used in Section 7.12, has the meaning assigned to such term in
Section 7.12(a).
"Incentive Distributions" means any amount of cash distributed to the
General Partner pursuant to Sections 6.4(a)(v), 6.4(a)(vi), 6.4(a)(vii),
6.4(b)(iii), 6.4(b)(iv) or 6.4(b)(v) that exceeds that amount equal to 1% of the
aggregate amount of cash then being distributed pursuant to such provisions.
"Indemnified Persons" has the meaning assigned to such term in Section
7.12(c).
"Indemnitee" means (a) the General Partner, any Departing Partner and any
Person who is or was an Affiliate of the General Partner or any Departing
Partner, (b) any Person who is or was a member, director, officer, employee,
agent or trustee of a Group Member, (c) any Person who is or was an officer,
member, partner, director, employee, agent or trustee of the General Partner or
any Departing Partner or any Affiliate of the General Partner or any Departing
Partner, or any Affiliate of any such Person and (d) any Person who is or was
serving at the request of the General Partner or any Departing Partner or any
such Affiliate as a director, officer, employee, member, partner, agent,
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.
"Initial Common Units" means the Common Units sold in the Initial Offering.
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"Initial Limited Partners" means EPC Partners II, the Underwriters, and
Tejas, in each case upon being admitted to the Partnership in accordance with
Section 10.1.
"Initial Offering" means the initial offering and sale of Common Units to
the public, as described in the Registration Statement.
"Initial Unit Price" means (a) with respect to the Common Units and the
Subordinated Units, the initial public offering price per Common Unit at which
the Underwriters offered the Common Units to the public for sale as set forth on
the cover page of the prospectus included as part of the Registration Statement
and first issued at or after the time the Registration Statement first became
effective or (b) with respect to any other class or series of Units, the price
per Unit at which such class or series of Units is initially sold by the
Partnership, as determined by the General Partner, in each case adjusted as the
General Partner determines to be appropriate to give effect to any distribution,
subdivision or combination of Units.
"Interim Capital Transactions" means the following transactions if they
occur prior to the Liquidation Date: (a) borrowings, refinancings or refundings
of indebtedness and sales of debt securities (other than borrowings under the
Working Capital Facility and other than for items purchased on open account in
the ordinary course of business) by any Group Member; (b) sales of equity
interests by any Group Member (including Common Units sold to the underwriters
pursuant to the exercise of the Over-Allotment Option); and (c) sales or other
voluntary or involuntary dispositions of any assets of any Group Member (other
than (i) sales or other dispositions of inventory, accounts receivable and other
assets in the ordinary course of business, and (ii) sales or other dispositions
of assets as part of normal retirements or replacements), in each case prior to
the Liquidation Date.
"Issue Price" means the price at which a Unit is purchased from the
Partnership, after taking into account any sales commission or underwriting
discount charged to the Partnership.
"Limited Partner" means, unless the context otherwise requires, (a) each
Initial Limited Partner, each Substituted Limited Partner, each Additional
Limited Partner and any Partner upon the change of its status from General
Partner to Limited Partner pursuant to Section 11.3 or (b) solely for purposes
of Articles V, VI, VII and IX and Sections 12.3 and 12.4, each Assignee.
"Limited Partner Interest" means the ownership interest of a Limited
Partner or Assignee in the Partnership, which may be evidenced by Common Units,
Subordinated Units, Class A Special Units, or other Partnership Securities or a
combination thereof or interest therein, and includes any and all benefits to
which such Limited Partner or Assignee is entitled as provided in this
Agreement, together with all obligations of such Limited Partner or Assignee to
comply with the terms and provisions of this Agreement.
"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
reconstitute the Partnership and continue its business has expired without such
an election being made, and (b) in the case of any other event giving rise to
the dissolution of the Partnership, the date on which such event occurs.
"Liquidator" means one or more Persons selected by the General Partner to
perform the functions described in Section 12.3 as liquidating trustee of the
Partnership within the meaning of the Delaware Act.
"Merger Agreement" has the meaning assigned to such term in Section 14.1.
"Minimum Quarterly Distribution" means $0.45 per Unit per Quarter (or with
respect to the period commencing on the Closing Date and ending on September 30,
1998, it means the product of $0.45 multiplied by a fraction of which
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the numerator is the number of days in the period commencing on the Closing Date
and ending on September 30, 1998, and of which the denominator is 92), subject
to adjustment in accordance with Sections 6.6 and 6.9.
"National Securities Exchange" means an exchange registered with the
Commission under Section 6(a) of the Securities Exchange Act of 1934, as
amended, supplemented or restated from time to time, and any successor to such
statute, or the Nasdaq Stock Market or any successor thereto.
"Net Agreed Value" means, (a) in the case of any Contributed Property, the
Agreed Value of such property reduced by any liabilities either assumed by the
Partnership upon such contribution or to which such property is subject when
contributed, and (b) in the case of any property distributed to a Partner or
Assignee by the Partnership, the Partnership's Carrying Value of such property
(as adjusted pursuant to Section 5.5(d)(ii)) at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner or
Assignee upon such distribution or to which such property is subject at the time
of distribution, in either case, as determined under Section 752 of the Code.
"Net Income" means, for any taxable year, the excess, if any, of the
Partnership's items of income and gain (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of loss and deduction (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Income shall be determined in accordance with Section 5.5(b) and shall
not include any items specially allocated under Section 6.1(d).
"Net Loss" means, for any taxable year, the excess, if any, of the
Partnership's items of loss and deduction (other than those items taken into
account in the computation of Net Termination Gain or Net Termination Loss) for
such taxable year over the Partnership's items of income and gain (other than
those items taken into account in the computation of Net Termination Gain or Net
Termination Loss) for such taxable year. The items included in the calculation
of Net Loss shall be determined in accordance with Section 5.5(b) and shall not
include any items specially allocated under Section 6.1(d).
"Net Termination Gain" means, for any taxable year, the sum, if positive,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Gain shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).
"Net Termination Loss" means, for any taxable year, the sum, if negative,
of all items of income, gain, loss or deduction recognized by the Partnership
after the Liquidation Date. The items included in the determination of Net
Termination Loss shall be determined in accordance with Section 5.5(b) and shall
not include any items of income, gain or loss specially allocated under Section
6.1(d).
"Non-citizen Assignee" means a Person whom the General Partner has
determined in its discretion 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.
"Nonrecourse Built-in Gain" means with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or pledge
securing a Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Sections 6.2(b)(i)(A), 6.2(b)(ii)(A) and
6.2(b)(iii) 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 or
expenditures (described in Section 705(a)(2)(B) of the Code) that, in accordance
with the principles of Treasury Regulation Section 1.704-2(b), are attributable
to a Nonrecourse Liability.
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"Nonrecourse Liability" has the meaning set forth in Treasury Regulation
Section 1.752-1(a)(2).
"Notice of Election to Purchase" has the meaning assigned to such term in
Section 15.1(b) hereof.
"Operating Expenditures" means all Partnership Group expenditures,
including, but not limited to, taxes, reimbursements of the General Partner,
debt service payments, and capital expenditures, subject to the following:
(a) Payments (including prepayments) of principal of and premium on
indebtedness shall not be an Operating Expenditure if the payment is (i)
required in connection with the sale or other disposition of assets or (ii)
made in connection with the refinancing or refunding of indebtedness with
the proceeds from new indebtedness or from the sale of equity interests.
For purposes of the foregoing, at the election and in the reasonable
discretion of the General Partner, any payment of principal or premium
shall be deemed to be refunded or refinanced by any indebtedness incurred
or to be incurred by the Partnership Group within 180 days before or after
such payment to the extent of the principal amount of such indebtedness.
(b) Operating Expenditures shall not include (i) capital expenditures
made for Acquisitions or for Capital Improvements, (ii) payment of
transaction expenses relating to Interim Capital Transactions or (iii)
distributions to Partners. Where capital expenditures are made in part for
Acquisitions or for Capital Improvements and in part for other purposes,
the General Partner's good faith allocation between the amounts paid for
each shall be conclusive.
"Operating Partnership" means Enterprise Products Operating L.P., a
Delaware limited partnership, and any successors thereto.
"Operating Partnership Agreement" means the Amended and Restated Agreement
of Limited Partnership of the Operating Partnership, as it may be amended,
supplemented or restated from time to time.
"Operating Surplus," means, with respect to any period ending prior to the
Liquidation Date, on a cumulative basis and without duplication:
(a) the sum of (i) all cash and cash equivalents of the Partnership
Group on hand as of the close of business on the Closing Date (other than
the Existing Capital Commitment Amount), (ii) all cash receipts of the
Partnership Group for the period beginning on the Closing Date and ending
with the last day of such period, other than cash receipts from Interim
Capital Transactions (except to the extent specified in Section 6.5 and
except as set forth in clause (iii) immediately following), and (iii) as
determined by the General Partner, all or any portion of any cash receipts
of the Partnership Group during such period, or after the end of such
period but on or before the date of determination of Operating Surplus with
respect to such period, that constitute (A) cash receipts from Interim
Capital Transactions, provided that the total amount of cash receipts from
Interim Capital Transactions designated as "Operating Surplus" by the
General Partner pursuant to this clause (iii) since the Closing Date may
not exceed an aggregate amount equal to $60.0 million, and/or (B) cash
receipts from borrowings under the Working Capital Facility, less
(b) the sum of (i) Operating Expenditures for the period beginning on
the Closing Date and ending with the last day of such period and (ii) the
amount of cash reserves that is necessary or advisable in the reasonable
discretion of the General Partner to provide funds for future Operating
Expenditures, provided, however, that disbursements made (including
contributions to a Group Member or disbursements on behalf of a Group
Member) or cash reserves established, increased or reduced after the end of
such period but on or before the date of determination of Operating Surplus
with respect to such period shall be deemed to have been made, established,
increased or reduced, for purposes of determining Operating Surplus, within
such period if the General Partner so determines.
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Notwithstanding the foregoing, "Operating Surplus" with respect to the
Quarter in which the Liquidation Date occurs and any subsequent Quarter
shall equal zero.
"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 in its reasonable discretion.
"Option Closing Date" has the meaning assigned to such term in the
Underwriting Agreement.
"Outstanding" means, with respect to Partnership Securities, all
Partnership Securities that are issued by the Partnership and reflected as
outstanding on the Partnership's books and records as of the date of
determination; provided, however, that, with respect to Partnership Securities
other than Class A Special Units, if at any time any Person or Group (other than
the General Partner or its Affiliates) beneficially owns 20% or more of any
Outstanding Partnership Securities of any class then Outstanding, all
Partnership Securities owned by such Person or Group shall not be voted on any
matter and shall not be considered to be Outstanding when sending notices of a
meeting of Limited Partners to vote on any matter (unless otherwise required by
law), calculating required votes, determining the presence of a quorum or for
other similar purposes under this Agreement, except that Common Units so owned
shall be considered to be Outstanding for purposes of Section 11.1(b)(iv) (such
Common Units shall not, however, be treated as a separate class of Partnership
Securities for purposes of this Agreement).
"Over-Allotment Option" means the over-allotment option granted to the
Underwriters by the Partnership pursuant to the Underwriting Agreement.
"Parity Units" means Common Units and all other Units having rights to
distributions or in liquidation ranking on a parity with the Common Units.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Deductions" means any and all items of loss, deduction
or expenditure (including, without limitation, any expenditure described in
Section 705(a)(2)(B) of the Code) that, in accordance with the principles of
Treasury Regulation Section 1.704-2(i), are attributable to a Partner
Nonrecourse Debt.
"Partners" means the General Partner, the Limited Partners and the holders
of Common Units and Subordinated Units.
"Partnership" means Enterprise Products Partners L.P., a Delaware limited
partnership, and any successors thereto.
"Partnership Group" means the Partnership, the Operating Partnership and
any Subsidiary of either such entity, treated as a single consolidated entity.
"Partnership Interest" means an ownership interest in the Partnership,
which shall include General Partner Interests and Limited Partner Interests.
"Partnership Minimum Gain" means that amount determined in accordance with
the principles of Treasury Regulation Section 1.704-2(d).
"Partnership Security" means any class or series of equity interest in the
Partnership (but excluding any options, rights, warrants and appreciation rights
relating to any equity interest in the Partnership), including, without
limitation, Common Units, Subordinated Units, and Class A Special Units.
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"Per Unit Capital Amount" means, as of any date of determination, the
Capital Account, stated on a per Unit basis, underlying any Unit held by a
Person other than the General Partner or any Affiliate of the General Partner
who holds Units.
"Percentage Interest" means as of the date of such determination (a) with
respect to Sections 6.1(a) and (b), (i) as to the General Partner, 1.0%, and
(ii) as to any Unitholder or Assignee holding Common Units or Subordinated
Units, the product obtained by multiplying (A) 99% by (B) the quotient obtained
by dividing (x) the number of Common Units and Subordinated Units held by such
Unitholder or Assignee by (y) the total number of all Outstanding Common Units
and Outstanding Subordinated Units, and (b) with respect to Sections other than
Sections 6.1(a) and (b), (i) as to the General Partner, 1.0%, and (ii) as to any
Unitholder or Assignee holding Units, the quotient obtained by multiplying (A)
99% by (B) the quotient obtained by dividing (x) the number of Units held by
such Unitholder or Assignee by (y) the total number of all Outstanding Units.
"Performance Tests" means the Year 2000 Performance Test, the Year 2001
Performance Test and the Combined Performance Test.
"Person" means an individual or a corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization, association,
government agency or political subdivision thereof or other entity.
"Pro Rata" means (a) when modifying Units or any class thereof, apportioned
equally among all designated Units in accordance with their relative Percentage
Interests and (b) when modifying Partners and Assignees, apportioned among all
Partners and Assignees in accordance with their respective Percentage Interests.
"Production Period" means calendar years 2000 and 2001, as such periods may
be extended as a result of Force Majeure Events in accordance with the Year 2000
Performance Test and the Year 2001 Performance Test.
"Purchase Date" means the date determined by the General Partner as the
date for purchase of all Outstanding Units (other than Units owned by the
General Partner and its Affiliates) pursuant to Article XV.
"Quarter" means, unless the context requires otherwise, a fiscal quarter of
the Partnership.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Sections 734 or 743 of the Code)
upon the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Record Date" means the date established by the General Partner 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 or to
participate in any offer.
"Record Holder" means the Person in whose name a Common Unit is registered
on the books of the Transfer Agent as of the opening of business on a particular
Business Day, or with respect to other Partnership Securities, the Person in
whose name any such other Partnership Security is registered on the books which
the General Partner has caused to be kept as of the opening of business on such
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.
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"Registration Statement" means the Registration Statement on Form S-1
(Registration No. 333-52537) 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 Common Units
in the Initial Offering.
"Required Allocations" means (a) any limitation imposed on any allocation
of Net Losses or Net Termination Losses under Section 6.1(b) or 6.1(c)(ii) and
(b) any allocation of an item of income, gain, loss or deduction pursuant to
Section 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iv), 6.1(d)(vi), 6.1(d)(vii) or
6.1(d)(ix).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of a Contributed Property
or Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 6.2(b)(i)(A) or 6.2(b)(ii)(A), respectively, to eliminate
Book-Tax Disparities.
"Restricted Activities" means the conduct within North America of the types
of businesses and activities engaged in by EPC and its Affiliates as of May 31,
1998; provided, however, that such term shall not include any business or
activities associated with the assets, properties or businesses of EPC and its
Affiliates as of June 2, 1998 (other than the Sorrento Pipeline System). As used
in this defined term, the Partnership Group and any Subsidiary of a Group Member
shall not be considered to be "Affiliates" of EPC.
"Second Liquidation Target Amount" has the meaning assigned to such term in
Section 6.1(c)(i)(F).
"Second Target Distribution" means $0.617 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
1998, it means the product of $0.617 multiplied by a fraction of which the
numerator is equal to the number of days in the period commencing on the Closing
Date and ending on September 30, 1998, and of which the denominator is 92),
subject to adjustment in accordance with Sections 6.6 and 6.9.
"Securities Act" means the Securities Act of 1933, as amended, supplemented
or restated from time to time and any successor to such statute.
"Series 2002B Class Special Units" has the meaning assigned to such term in
Section 5.3(d).
"Special Approval" means approval by a majority of the members of the Audit
and Conflicts Committee.
"Subordinated Unit" means a Unit representing a fractional part of the
Partnership Interests of all Limited Partners and Assignees and having the
rights and obligations specified with respect to Subordinated Units in this
Agreement.
The term "Subordinated Unit" as used herein does not include a Common Unit.
"Subordination Period" means the period commencing on the Closing Date and
ending on the first to occur of the following dates:
(a) the first day of any Quarter beginning after June 30, 2003, in
respect of which (i) (A) distributions of Available Cash from Operating
Surplus on each of the Outstanding Common Units and Subordinated Units with
respect to each of the three consecutive, non-overlapping four-Quarter
periods immediately preceding such date equaled or exceeded the sum of the
Minimum Quarterly Distribution on all Outstanding Common Units and
Subordinated Units during such periods and (B) the Adjusted Operating
Surplus generated during each of the three consecutive, non-overlapping
four-Quarter periods immediately preceding such date equaled or exceeded
the sum of the Minimum Quarterly Distribution on all of the Common Units
and Subordinated Units that were outstanding during such periods on a fully
diluted basis (i.e., taking into account for purposes of such determination
all Outstanding Common Units, all Outstanding Subordinated Units, all
Common Units and Subordinated Units issuable upon exercise of employee
options that have, as of the date of determination, already vested or are
scheduled to vest prior to the end of the Quarter immediately following the
Quarter with respect to which such
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determination is made, and all Common Units and Subordinated Units that
have as of the date of determination, been earned by but not yet issued to
management of the Partnership in respect of incentive compensation), plus
the related distribution on the general partner Interest in the Partnership
and on the general partner interest in the Operating Partnership and (ii)
there are no Cumulative Common Unit Arrearages; and
(b) the date on which the General Partner is removed as general partner
of the Partnership upon the requisite vote by holders of Outstanding Units
under circumstances where Cause does not exist and Units held by the
General Partner and its Affiliates are not voted in favor of such removal.
"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.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 10.2 in place of and with all the
rights of a Limited Partner and who is shown as a Limited Partner on the books
and records of the Partnership.
"Surviving Business Entity" has the meaning assigned to such term in
Section 14.2(b).
"Tejas" means Tejas Energy, LLC, a Delaware limited liability company.
"Tejas Contribution Agreement" means the Contribution Agreement among
Tejas, Tejas Midstream Enterprises, LLC, the Partnership, the Operating
Partnership, EPC, the General Partner and EPC Partners II, dated September 17,
1999.
"Third Target Distribution" means $0.784 per Unit per Quarter (or, with
respect to the period commencing on the Closing Date and ending on September 30,
1998, it means the product of $0.784 multiplied by a fraction of which the
numerator is equal to the number of days in the period commencing on the Closing
Date and ending on September 30, 1998, and of which the denominator is 92),
subject to adjustment in accordance with Sections 6.6 and 6.9.
"Trading Day" has the meaning assigned to such term in Section 15.1(a).
"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 Partnership to act as registrar and transfer agent for the Common
Units and as may be appointed from time to time by the Partnership to act as
registrar and transfer agent for any other Partnership Securities; provided that
if no Transfer Agent is specifically designated for any such other Partnership
Securities, the General Partner shall act in such capacity.
"Transfer Application" means an application and agreement for transfer of
Limited Partner Interests in the form set forth on the back of a Certificate or
in a form substantially to the same effect in a separate instrument.
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"Underwriter" means each Person named as an underwriter in Schedule 1 to
the Underwriting Agreement who purchases Common Units pursuant thereto.
"Underwriting Agreement" means the Underwriting Agreement dated July 27,
1998, among the Underwriters, the Partnership and certain other parties,
providing for the purchase of Common Units by such Underwriters.
"Unit" means a Partnership Security that is designated as a "Unit" and
shall include Common Units, Subordinated Units, and Class A Special Units but
shall not include a General Partner Interest; provided, that each Common Unit at
any time Outstanding shall represent the same fractional part of the Partnership
Interests of all Limited Partners holding Common Units as each other Common
Unit, each Subordinated Unit at any time Outstanding shall represent the same
fractional part of the Partnership Interests of all Limited Partners holding
Subordinated Units as each other Subordinated Units, and each Class A Special
Unit at any time Outstanding shall represent the same fractional part of the
Partnership Interests of all Limited Partners holding Class A Special Units as
each other Class A Special Unit.
"Unitholders" means the holders of Common Units, Subordinated Units, and
Class A Special Units.
"Unit Majority" means, (i) during the Subordination Period, at least a
majority of the Outstanding Common Units, excluding any Common Units held by the
General Partner and its Affiliates, and (ii) following the end of the
Subordination Period, at least a majority of the Outstanding Common Units.
"Unpaid MQD" has the meaning assigned to such term in Section 6.1(c)(i)(C).
"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 5.5(d)) over
(b) the Carrying Value of such property as of such date (prior to any adjustment
to be made pursuant to Section 5.5(d) as of such date).
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (a) the Carrying Value
of such property as of such date (prior to any adjustment to be made pursuant to
Section 5.5(d) as of such date) over (b) the fair market value of such property
as of such date (as determined under Section 5.5(d)).
"Unrecovered Capital" means at any time, with respect to a Unit, the
Initial Unit Price less the sum of all distributions constituting Capital
Surplus theretofore made in respect of an Initial Common Unit and any
distributions of cash (or the Net Agreed Value of any distributions in kind) in
connection with the dissolution and liquidation of the Partnership theretofore
made in respect of an Initial Common Unit, adjusted as the General Partner
determines to be appropriate to give effect to any distribution, subdivision or
combination of such Units.
"U.S. GAAP" means United States Generally Accepted Accounting Principles
consistently applied.
"Withdrawal Opinion of Counsel" has the meaning assigned to such term in
Section 11.1(b).
"Working Capital Facility" means any working capital credit facility of the
Partnership or the Operating Partnership that requires the outstanding balance
of any working capital borrowings thereunder to be reduced to $0 for at least
fifteen consecutive calendar days each fiscal year.
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"Year 2000 Performance Test" shall be met if, at any point in time during
calendar year 2000, as such period shall be extended for a period of days equal
to the number of days during calendar year 2000 when there is a Force Majeure
Event, Gas Production meets either of the following contingencies, and Tejas
provides written notice to the General Partner stating that such contingency has
been met and which notice includes information supporting that statement
reasonably acceptable to the General Partner. The two contingencies are:
1. Gas Production being 950 million cubic feet per day for 180
days (there being no requirement for such days to be
consecutive) during calendar year 2000 as such period may be
extended due to Force Majeure Events; or
2. Gas Production being 375 billion cubic feet on a cumulative
basis during calendar year 2000 as such period may be extended
due to Force Majeure Events.
"Year 2001 Performance Test"shall be met if, at any point in time
during calendar year 2001, as such period shall be extended for a period of days
equal to the number of days during calendar year 2001 when there is a Force
Majeure Event, Gas Production meets either of the following contingencies, and
Tejas provides written notice to the General Partner stating that such
contingency has been met and which notice includes information supporting that
statement reasonably acceptable to the General Partner. The two contingencies
are:
1. Gas production being 900 million cubic feet per day for 180
days (there being no requirement for such days to be
consecutive) during calendar year 2001 as such period may be
extended due to Force Majeure Events; or
2. Gas Production being 350 billion cubic feet on a cumulative
basis during calendar year 2001 as such period may be extended
due to Force Majeure Events.
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EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement dated as of September 17, 1999 (this
"Agreement"), is made and entered into by and among Tejas Energy, LLC, a
Delaware limited liability company ("Tejas") and Enterprise Products Partners
L.P., a Delaware limited partnership ("Enterprise Partners").
W I T N E S S E T H:
WHEREAS, Tejas has received certain units of a special class of
partnership interests (the "Special Units") issued by Enterprise Partners
pursuant to that certain Contribution Agreement dated as of September 17, 1999
(the "Contribution Agreement") between Tejas, Tejas Midstream Enterprises, LLC
("Tejas Midstream"), Enterprise Partners, Enterprise Products Operating L.P.
("Enterprise Operating"), Enterprise Products GP, LLC ("Enterprise GP"),
Enterprise Products Company ("EPC"), and EPC Partners II, Inc. ("EPC Partners
II");
WHEREAS, the Special Units will be automatically convertible, on a
one-for-one basis into Common Units (the "Tejas Common Units") of Enterprise
Partners, effective as of the dates specified in the Contribution Agreement (the
"Conversion Date");
WHEREAS, in order to improve the transferability of the Tejas Common
Units, Enterprise Partners is willing to provide certain registration rights
with respect thereto; and
WHEREAS, Enterprise Partners and Tejas deem it to be in their
respective best interests to enter into this Agreement to set forth certain
rights of Tejas in connection with public offerings and sales of the Tejas
Common Units and are entering into this Agreement as a condition to and in
connection with the Contribution Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and obligations hereinafter set forth, the parties hereto hereby agree as
follows:
Section 1. Definitions. As used in this Agreement, the following terms
have the following meanings:
"Affiliate" means, with respect to any Person, (i) a director or
executive officer of such Person, and (ii) any other Person that, directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with such Person. The term "control" means the possession,
directly or indirectly, of the power to direct the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Best Efforts" as used herein means reasonable best efforts in
accordance with reasonable commercial practice.
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"Business Day" means a day that is not a Saturday, Sunday or other day
on which banks in Houston, Texas and New York, New York are authorized or
obligated to close.
"Commission" means the Securities and Exchange Commission or any other
governmental body or agency succeeding to the functions thereof.
"Common Units" means the common units representing limited partnership
interests in Enterprise Partners.
"Contribution Agreement" means the Contribution Agreement dated
September 17, 1999, by and among Tejas, Tejas Midstream, Enterprise Partners,
Enterprise Operating, Enterprise GP, EPC, and EPC Partners II, as the same may
be amended, supplemented, modified or restated.
"Equity Equivalents" means securities which are convertible,
exchangeable or exercisable for or into Common Units.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"Executive Committee" means the Executive Committee or other governing
body of Enterprise Partners.
"Person" shall be construed broadly and shall include an individual, a
partnership, a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a governmental entity or any department, agency or political subdivision
thereof.
"Public Offering" means a public offering of Common Units or Equity
Equivalents pursuant to a registration statement declared effective under the
Securities Act, except that a Public Offering shall not include an offering made
in connection with a business acquisition or otherwise on Form S-4 under the
Securities Act (or any successor form) or an employee benefit plan or otherwise
on Form S-8 under the Securities Act (or any successor form).
"Registrable Securities" shall mean (i) Tejas Common Units; (ii) any
Common Units or other securities issued as a dividend or other distribution with
respect to or in exchange for or in replacement of the Tejas Common Units; (iii)
any Common Units issued to Tejas under Section 4.1(a) of the Unitholder
Agreement; and (iv) any then outstanding securities into which the Tejas Common
Units shall have been changed by any reclassification or recapitalization of the
Tejas Common Units or otherwise, in each case to the extent and only to the
extent such securities are held by Unitholders; provided, however, that as to
any particular securities that would otherwise be Registrable Securities, such
securities shall not be Registrable Securities until the Conversion Date with
respect to such securities has occurred and provided further, that as to any
particular Registrable
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Securities, once issued, such securities shall cease to be Registrable
Securities if (A) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of by the holder in accordance with such
registration statement, (B) such securities shall have been sold pursuant to
Rule 144, (C) as to the provisions of Section 3 hereof only, at any time the
Registrable Securities owned by a Unitholder (together with all Registrable
Securities owned by its Affiliates) represent less than 200,000 Common Units
(adjusted to reflect splits, reclassifications and similar events) and the
holder of such securities may sell such securities pursuant to paragraph (k) of
Rule 144 and without any limitation as to timing, volume or manner of sale, or
(D) such securities shall have ceased to be outstanding.
"Requesting Unitholders" means, with respect to any request for
registration hereunder, the Unitholders that have requested such registration
under Section 2 or Section 3 hereof, as the case may be.
"Required Unitholders" means, as of the date of any determination
thereof, Unitholders which then hold Registrable Securities representing at
least a majority (by number of units) of the Registrable Securities, on a fully
diluted basis, then held by all Unitholders.
"Rule 144" means Rule 144 promulgated under the Securities Act or any
successor rule thereto or any complementary rule thereto (such as Rule 144A).
"Securities Act" means the Securities Act of 1933, as amended, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Tejas Common Units" has the meaning specified in the preamble to this
Agreement.
"Unitholder Agreement" means the Unitholder Rights Agreement dated
September 17, 1999 among Tejas, Tejas Midstream, Enterprise Partners, Enterprise
GP, EPC, and EPC Partners II.
"Unitholders" means, collectively, (i) Tejas and (ii) any Persons
which, in the future, may become parties to this Agreement pursuant to Section
13(e).
"Unitholders' Counsel" means one counsel chosen by the Requesting
Unitholders.
Section 2. Required Registration.
(a) Subject to Section 2(b) below, if, at any time following
the Conversion Date with respect to any Registrable Securities, Enterprise
Partners shall be requested by the Required Unitholders to effect the
registration under the Securities Act of Registrable Securities, then Enterprise
Partners shall within 15 days of receipt thereof give written notice of such
request to all other holders of Registrable Securities and, thereafter,
Enterprise Partners shall use its Best Efforts to effect the registration under
the Securities Act of the Registrable Securities which Enterprise
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Partners has been requested to register by the Required Unitholders making the
request and the other Requesting Unitholders to the extent notice of such
request is received by Enterprise Partners within 20 days of their receipt of
Enterprise Partners' notice. Any request for a registration under this Section 2
shall specify the number of Registrable Securities proposed to be sold by the
Requesting Unitholders and the intended method of disposition thereof.
(b) Anything contained in Section 2(a) notwithstanding,
Enterprise Partners shall not be obligated to effect any registration of
Registrable Securities under the Securities Act pursuant to Section 2(a) except
in accordance with the following provisions:
(i) Enterprise Partners shall not be obligated to use its Best
Efforts to file and cause to become effective, within the meaning of
clause (iii) below, more than three registration statements in the
aggregate pursuant to Section 2(a) hereof;
(ii) Enterprise Partners may, upon written notice to the
Requesting Unitholders, delay the filing or effectiveness of any
registration statement (A) during any period during which Enterprise
Partners is in the process of negotiating or preparing, and ending on a
date 90 days following the effective date of any registration statement
pertaining to a Public Offering of Common Units or Equity Equivalents
(other than on Form S-4 or Form S-8 or a comparable form), provided
that Enterprise Partners is throughout that period actively employing
in good faith its Best Efforts to cause such registration statement to
become effective, (B) until a period of at least 90 days shall have
elapsed from the effective date of any previously effected registration
pursuant to Section 2, (C) during any period during which Enterprise
Partners is engaged in any material acquisition or disposition
transaction which could be significantly disrupted by such
registration, qualification and/or compliance, or (D) during any period
during which Enterprise Partners is in possession of material
information concerning it or its business and affairs, the public
disclosure of which could have a material adverse effect on Enterprise
Partners as reasonably determined by the Executive Committee; provided,
however, that Enterprise Partners may not effect more than two periods
of delay under clauses (A), (C) or (D) above within any 12-month
period, and any such two delay periods shall in the aggregate not
exceed 120 days within any 12-month period;
(iii) At any time before the registration statement covering
Registrable Securities becomes effective, the Requesting Unitholders
which requested such registration may request Enterprise Partners to
withdraw or not to file the registration statement. In that event, if
such request of withdrawal shall not have been caused by, or made in
response to, a material adverse change in the business, properties,
condition, financial or otherwise, or operations of Enterprise Partners
occurring on or after the date of such request, one demand registration
right shall be deemed to have been effected, as provided in clause (i)
above, unless the Requesting Unitholders shall pay to Enterprise
Partners the expenses incurred by Enterprise Partners in connection
with such registration statement through the date of such request,
which payment shall be pro rata to the number of Registrable Securities
originally requested
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to be included in such registration, in which case no such demand
registration right shall be deemed to have been effected; and
(iv) Subject to clause (iii) above, no registration shall be
deemed to have been requested or effected for any purposes under this
Section 2: (A) unless a registration statement with respect thereto has
become effective; (B) if, after it has become effective, any stop
order, injunction or other order or requirement of the Commission or
any other governmental agency or court, for any reason, affecting any
of the Registrable Securities covered by such registration statement,
is issued by the Commission or other governmental agency or court and
not withdrawn within 10 Business Days; (C) if the conditions to closing
specified in the purchase agreement or underwriting agreement entered
into in connection with such registration are not satisfied by reason
of a failure by or inability of Enterprise Partners to satisfy any of
such conditions, or the occurrence of an event outside the reasonable
control of the relevant Requesting Unitholders; or (D) if the request
for withdrawal made by the Requesting Unitholders pursuant to clause
(iii) above shall have been caused by, or made in response to, the
material adverse change in the business properties, condition,
financial or otherwise, or operations of Enterprise Partners.
(c) If a registration effected pursuant to this Section 2 is for an
underwritten Public Offering, Enterprise Partners may include in such
registration the number of securities (for its own account or the account of any
securityholder) which in the opinion of such underwriters can be sold without
adversely affecting the proposed offering or the offering price, provided the
number of Registrable Securities requested by the Requesting Unitholders to be
included in such registration shall not be reduced.
Section 3. Piggyback Registration.
(a) If at any time after the Conversion Date with respect to
any Registrable Securities, Enterprise Partners proposes for any reason to
register any Common Units or Equity Equivalents (other than in connection with a
business acquisition or otherwise on Form S-4 under the Securities Act (or any
successor form) or an employee benefit plan or otherwise on Form S-8 under the
Securities Act (or any successor form)) then it shall promptly give written
notice at least 15 Business Days before the anticipated filing date to each of
the holders of Registrable Securities of its intention to so register such
Common Units or Equity Equivalents and, upon the written request, delivered to
Enterprise Partners within 10 Business Days after receipt of any such notice by
Enterprise Partners, of the Unitholders to include in such registration
Registrable Securities (which request shall specify the number of Registrable
Securities proposed to be included in such registration), Enterprise Partners
shall use its Best Efforts to cause all such Registrable Securities to be
included in such registration on the same terms and conditions as the Common
Units or Equity Equivalents otherwise being sold in such registration, subject
to the limitations set forth herein.
(b) If a registration referred to in paragraph 3(a) relates to
an underwritten Public Offering on behalf of Enterprise Partners, and the
managing underwriters advise Enterprise Partners
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in writing that the inclusion of all Registrable Securities requested to be
included in such registration would materially and adversely affect the proposed
offering or the offering price, Enterprise Partners will include in such
registration: (i) first, all securities Enterprise Partners proposes to sell,
(ii) second, all Registrable Securities which the Requesting Unitholders ask to
be included and (iii) third, such other securities (provided such securities are
of the same class as the securities being sold by Enterprise Partners) as are
requested to be included in such registration equal to the balance, if any,
allocated pro rata among the holders of such securities on the basis of the
dollar amount or number of securities requested to be included therein by each
such holder. If a registration referred to in paragraph 3(a) relates to an
underwritten secondary registration on behalf of holders of Enterprise Partners'
securities (other than holders of Registrable Securities in their capacity as
such), and the managing underwriters advise Enterprise Partners in writing that
in their opinion the securities requested to be included in such registration
exceeds the securities which can be sold in such offering without adversely
affecting the offering or the offering price, Enterprise Partners will include
in such registration, (i) first, the securities which in the opinion of such
underwriters can be sold without adversely affecting the offering or the
offering price of the securities intended to be included therein on behalf of
the other holders of Enterprise Partners' securities, allocated among the
holders of such securities in such proportions as Enterprise Partners and such
holders may agree, and (ii) to the extent of the balance, if any, the
Registrable Securities requested to be included in such registration, allocated
pro rata among the holders of such Registrable Securities on the basis of the
securities requested to be included therein by each such holder.
(c) If the registration referred to in paragraph 3(a) involves
an underwritten offering, the right of any Unitholder to include any Registrable
Securities in such registration pursuant to this Section 3 shall be conditioned
upon such Unitholders' participation in such underwriting. The Unitholders
proposing to include their Registrable Securities pursuant to this Section 3
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by Enterprise
Partners.
(d) Notwithstanding anything to the contrary in this Section 3, if a
registration referred to in paragraph 3(a) relates to an underwritten offering
of a class of securities of Enterprise Partners different from the Registrable
Securities proposed to be included in such offering and the managing
underwriters advise that in their opinion Registrable Securities of a different
class cannot be included in such offering without adversely affecting the
offering or the offering price, then the holders of the Registrable Securities
shall not be entitled to include Registrable Securities in such registration.
(e) Enterprise Partners shall have the right to terminate any proposed
registration under this Section 3 at any time without any obligation to the
Requesting Holders requesting inclusion in such registration under this Section
3.
Section 4. Holdback Agreement.
(a) If Enterprise Partners at any time shall register Common
Units or Equity Equivalents under the Securities Act (including any registration
pursuant to Section 3) for sale in an
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underwritten Public Offering, then to the extent requested by the underwriters
for such offering, the Unitholders shall not sell, make any short sale of, grant
any option for the purchase of, or otherwise dispose of, directly or indirectly,
any Registrable Securities (other than those Registrable Securities included in
such registration) without the prior written consent of Enterprise Partners, for
a period designated by the managing underwriter in writing to the Unitholders,
which period shall begin not more than seven days prior to the effectiveness of
the registration statement pursuant to which such Public Offering shall be made
(or within seven days prior to the execution of the applicable underwriting
agreement in the case of an offering pursuant to Rule 415) and shall not last
more than 90 days after the closing of such Public Offering or such shorter
holdback period to which Enterprise Partners or other unitholders of Enterprise
Partners holding at least 10% of the Common Units of Enterprise Partners (on a
fully diluted basis) are subject. The Requesting Unitholders will enter into
agreements with the underwriters to the foregoing effect.
(b) If, at any time, Enterprise Partners is requested by the
Requesting Unitholders to register Registrable Securities pursuant to Section
2(a) hereof under the Securities Act for sale in an underwritten Public
Offering, then to the extent requested by the underwriters for such offering
Enterprise Partners shall not sell, make any short sale of, grant any option
(other than under compensatory option or benefit plans of Enterprise Partners or
its Affiliates) for the purchase of, or otherwise dispose of, directly or
indirectly, any securities similar to those being registered or any Equity
Equivalents, without the prior written consent of the managing underwriter, for
a period designated by the managing underwriter in writing to Enterprise
Partners, which period shall begin not more than seven days prior to the
effectiveness of the registration statement pursuant to which such public
offering shall be made (or within seven days prior to the execution of the
applicable underwriting agreement in the case of an offering pursuant to Rule
415) and shall not last more than 90 days after the closing of the sale of units
pursuant to such registration statement or such shorter holdback period to which
the Unitholders are then subject. Enterprise Partners shall use its Best Efforts
to cause each holder of at least 10% (on a fully diluted basis) of Common Units
other than Unitholders to agree not to sell publicly, make any short sale of,
grant any option for the purchase of, or otherwise dispose publicly of, any
Common Units or Equity Equivalents (except as part of the underwritten offering
pursuant to such registration statement), without the prior written consent of
the managing underwriter, for a period designated by the managing underwriter in
writing to such holders, which period shall begin not more than seven days prior
to the effectiveness of the registration statement pursuant to which such public
offering shall be made (or within seven days prior to the execution of the
applicable underwriting agreement in the case of an offering pursuant to Rule
415) and shall not last more than 90 days after the closing of the sale of units
pursuant to such registration statement or such shorter holdback period to which
the Unitholders are then subject.
Section 5. Preparation and Filing.
(a) If and whenever Enterprise Partners is under an obligation
pursuant to the provisions of this Agreement to use its Best Efforts to effect
the registration of any Registrable Securities, Enterprise Partners shall, as
expeditiously as practicable:
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(i) use its Best Efforts to cause a registration statement
that registers such Registrable Securities to be filed within 45 days
following the request delivered pursuant to Section 2 and to become and
remain effective for a period (the "Registration Period") of 180 days
(or such extended period pursuant to clause (viii) below) or until all
of such Registrable Securities have been disposed of (if earlier);
(ii) furnish, at least five Business Days before filing a
registration statement that registers such Registrable Securities, a
prospectus relating thereto or any amendments or supplements relating
to such a registration statement or prospectus, to Unitholders'
Counsel, copies of all such documents proposed to be filed (it being
understood that such five-Business-Day period need not apply to
successive drafts of the same document proposed to be filed so long as
such successive drafts are supplied to Unitholders' Counsel in advance
of the proposed filing by a period of time that is customary and
reasonable under the circumstances);
(iii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective at all times during the Registration Period and to
comply with the provisions of the Securities Act with respect to the
sale or other disposition of such Registrable Securities;
(iv) notify in writing Unitholders' Counsel promptly of (A)
the receipt by Enterprise Partners of any notification with respect to
any comments by the Commission with respect to such registration
statement or prospectus or any amendment or supplement thereto or any
request by the Commission for the amending or supplementing thereof or
for additional information with respect thereto, (B) the receipt by
Enterprise Partners of any notification with respect to any stop order
issued or threatened to be issued by the Commission suspending the
effectiveness of such registration statement or prospectus or any
amendment or supplement thereto or the initiation or threatening of any
proceeding for that purpose and (C) the receipt by Enterprise Partners
of any notification with respect to the suspension of the qualification
of such Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purposes;
(v) use its Best Efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of
such jurisdictions as Unitholders reasonably request and to keep such
registration and qualification in effect for so long as such
registration statement remains in effect and to do any and all other
acts and things which may be reasonably necessary or advisable to
enable Unitholders to consummate the disposition in such jurisdictions
of the Registrable Securities owned by Unitholders; provided, however,
that Enterprise Partners will not be required to qualify generally to
do business or consent to general service of process or taxation in any
jurisdiction where it would not otherwise be required to do so but for
this clause (v);
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(vi) furnish, without charge, to the holders of such
Registrable Securities such number of copies of such registration
statement, prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other
documents (including exhibits thereto and documents incorporated by
reference therein) as such holders may reasonably request in order to
facilitate the public sale or other disposition of such Registrable
Securities;
(vii) use its Best Efforts to cause such Registrable
Securities to be registered with or approved by such other governmental
agencies or authorities or self-regulatory organizations as may be
necessary by virtue of the business and operations of Enterprise
Partners to enable the Unitholders holding such Registrable Securities
to consummate the disposition of such Registrable Securities;
(viii) notify in writing holders of Registrable Securities on
a timely basis at any time when a prospectus relating to such
Registrable Securities is required to be delivered under the Securities
Act during the Registration Period of the happening of any event as a
result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing and, at the request of the holders of
Registrable Securities, prepare and furnish to such holders a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
offerees and purchasers of such units, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing; provided, however, that the Registration Period shall be
deemed to be extended by the number of days constituting the period
commencing on and including the date of the giving of such notice to
such seller and ending on and including the date when Enterprise
Partners made available to such seller an amended or supplemented
prospectus;
(ix) in the case of an underwritten offering, use its Best
Efforts to obtain from its independent certified public accountants
"comfort" letters in customary form and at customary times and covering
matters of the type customarily covered by comfort letters;
(x) in the case of an underwritten offering, (A) use its Best
Efforts to obtain from its counsel an opinion or opinions in customary
form to the underwriters and the holders of Registrable Securities and
(B) to enter into a customary underwriting agreement and make
representations and warranties to the underwriters, in form, substance
and scope as are customarily made by issuers to underwriters in
comparable underwritten offerings;
(xi) provide a transfer agent and registrar (which may be
the same entity and which may be Enterprise Partners) for such
Registrable Securities;
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(xii) if required, issue to any underwriter to which the
holders of Registrable Securities may sell units in such offering
certificates evidencing such Registrable Securities;
(xiii) use its Best Efforts to list such Registrable
Securities on the New York Stock Exchange or such other securities
exchange on which the Common Units are traded;
(xiv) use all reasonable efforts to obtain the lifting at the
earliest possible time of any stop order suspending the effectiveness
of such registration statement or of any order preventing or suspending
the use of any preliminary prospectus included therein; and
(xv) use its Best Efforts to take all other steps necessary to
effect the registration of such Registrable Securities contemplated
hereby.
(b) Each holder of the Registrable Securities, upon receipt of
any notice from Enterprise Partners of any event of the kind described in
Section 5(a)(viii) hereof, shall forthwith discontinue disposition of the
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 5(a)(viii) hereof,
and, if so directed by Enterprise Partners, such holder shall deliver to
Enterprise Partners all copies, other than permanent file copies then in such
holder's possession, of the prospectus covering such Registrable Securities at
the time of receipt of such notice.
(c) In the case of an underwritten offering pursuant to
Section 2 hereof, the Requesting Unitholders shall choose the managing
underwriter, provided that the managing underwriter is reasonably acceptable to
Enterprise Partners. In the case of an underwritten offering pursuant to Section
3 hereof, Enterprise Partners shall choose the managing underwriter. In either
case, the form of underwriting agreement shall be reasonably acceptable to
Enterprise Partners.
(d) Enterprise Partners may require each seller of Registrable
Securities as to which any registration is being effected hereunder to furnish
to Enterprise Partners such information and complete such questionnaires
regarding the seller and the distribution of such securities as Enterprise
Partners may from time to time reasonably request.
Section 6. Expenses. All expenses (other than as provided in the last
sentence of this Section 6) incident to the registration of Registrable
Securities pursuant to Section 2 and 3 hereof, including, without limitation,
the fees and expenses of the underwriters, all salaries and expenses of
Enterprise Partners' officers and employees performing legal or accounting
duties, the expense of any annual audit or quarterly review, the expense of any
liability insurance, all registration and filing fees, the expense and fees for
listing securities on one or more securities exchanges, the fees and expenses of
complying with securities and blue sky laws, printing expenses, messenger and
delivery expenses, fees and expenses of Enterprise Partners' counsel and
accountants, and the reasonable fees and expenses of one counsel to the
Unitholders not to exceed $25,000 for any registration (all such expenses being
herein called "Registration Expenses"), shall be borne by Enterprise Partners;
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provided, however, that with respect to any request for registration begun
pursuant to Section 2 that is subsequently withdrawn by the Requesting
Unitholders, other than if such withdrawal is caused by, or made in response to,
a material adverse change in the business, properties, condition, financial or
otherwise, or operations of Enterprise Partners occurring on or after the date
of such request, then Enterprise Partners shall not be required to pay the
Registration Expenses of such registration and the Registration Expenses shall
be paid by the withdrawing Unitholders pro rata based on the number of
Registrable Securities to be included therein. All underwriting discounts and
selling commissions applicable to the Registrable Securities and the fees and
expenses of any counsel to the Unitholders not provided for in the above
definition of Registration Expenses shall be borne by the holders selling such
securities, in proportion to the number of securities sold by each such holder.
Section 7. Indemnification.
(a) In connection with any registration of any Registrable
Securities under the Securities Act pursuant to this Agreement, Enterprise
Partners shall indemnify and hold harmless, to the fullest extent permitted by
law, the holders of Registrable Securities, each other Person, if any, who
controls any such holder of Registrable Securities within the meaning of the
Securities Act or the Exchange Act, and each of their respective directors,
partners, officers and agents, against any and all losses, claims, damages or
liabilities, joint or several (or actions or threatened actions in respect
thereof), to which any of the foregoing Persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or threatened actions in respect thereof) arise out of
or are based upon (i) an untrue statement or allegedly untrue statement of a
material fact contained in the registration statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Securities or (ii) the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or, with
respect to any prospectus, necessary to make the statements therein in light of
the circumstances under which they were made not misleading. Enterprise Partners
shall reimburse each holder of Registrable Securities and each such controlling
Person for any expenses (including reasonable attorneys' fees, disbursements and
expenses as incurred) reasonably incurred by any of them in connection with
investigating or defending against any such loss, claim, damage, liability,
action or threatened action. Notwithstanding the foregoing provisions of this
Section 7, Enterprise Partners shall not be liable to any such indemnified
Person in any such case to the extent that any such loss, claim, damage,
liability, action or threatened action (including any reasonable legal or other
fees, disbursements and expenses incurred) arises out of or is based upon an
untrue statement or allegedly untrue statement or omission or alleged omission
made in said registration statement, preliminary prospectus, final prospectus,
amendment, supplement or document incident to registration or qualification of
any Registrable Securities in reliance upon and in conformity with written
information furnished to Enterprise Partners by or on behalf of a holder of
Registrable Securities specifically for use in the preparation thereof. The
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any untrue statement, allegedly untrue statement, omission or alleged
omission made in any preliminary
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prospectus but eliminated or remedied in the final prospectus (filed pursuant to
Rule 424 of the Securities Act), such indemnity agreement shall not inure to the
benefit of any underwriter who participates in the offering or sale of
Registrable Securities or any other Person, if any, who controls such
underwriter (within the meaning of the Securities Act or the Exchange Act) from
whom a Person asserting any loss, claim, damage, liability or expense purchased
the Registrable Securities which are the subject thereof, if a copy of such
final prospectus had been made available to such underwriter and such
controlling Person and such final prospectus was not delivered to such Person
asserting any loss, claim, damage, liability or expense with or prior to the
written confirmation of the sale of such Registrable Securities to such Person.
(b) In connection with any registration of Registrable
Securities under the Securities Act pursuant to this Agreement, each holder of
Registrable Securities shall severally and not jointly indemnify and hold
harmless, in the same manner and to the same extent as set forth in the
preceding paragraph (a) of this Section 7, Enterprise Partners, each director of
Enterprise Partners, each officer of Enterprise Partners who shall sign such
registration statement and each Person who controls any of the foregoing Persons
(within the meaning of the Securities Act), against any losses, claims, damages
or liabilities, joint or several (or actions or threatened actions in respect
thereof), to which any of the foregoing Persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or threatened actions in respect thereof) arise out of
or are based upon any statement or omission from such registration statement,
any preliminary prospectus or final prospectus contained therein or otherwise
filed with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Securities, if such
statement or omission was made in reliance upon and in conformity with written
information furnished to Enterprise Partners by such holder with respect to such
holder specifically for use in connection with the preparation of such
registration statement, preliminary prospectus, final prospectus, amendment,
supplement or document; provided, however, that the maximum amount of liability
in respect of such indemnification shall be limited, in the case of each seller
of Registrable Securities, to an amount equal to the net proceeds actually
received by such seller from the sale of Registrable Securities effected
pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 7, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action. In case any such action is brought
against an indemnified party, the indemnifying party will be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, (i) the indemnified party shall reasonably cooperate with
the indemnifying party and its counsel in the defense of such claim, and (ii)
the indemnifying party shall not be responsible for any legal or other fees,
disbursements and expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided, however, that if any indemnified
party shall have reasonably concluded that there may be one or more legal or
equitable defenses available to such indemnified
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party which are additional to or conflict with those available to the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party and such
indemnifying party shall reimburse such indemnified party and any Person
controlling such indemnified party for that portion of the fees, disbursements
and expenses of not more than one counsel retained by the indemnified party in
connection with the matters covered by the indemnity agreement provided in this
Section 7 provided that no indemnifying party shall, in connection with any such
suit, be liable under this subsection for the fees and expenses of more than one
separate firm for all indemnified parties. No indemnifying party shall be liable
for any compromise or settlement of any such action effected without its
consent, such consent not to be unreasonably withheld. No indemnifying party, in
the defense of any such claim or suit, shall, except with the consent of each
indemnified party which shall not be unreasonably withheld, consent to any
compromise or settlement which does not include as an unconditional term thereof
the giving by the claimant to such indemnified party of a release from all
liability in respect of such claim or suit.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party hereunder with respect to any loss, claim,
damage, liability, action or threatened action referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amounts paid or payable by such indemnified party as a
result of such loss, claim, damage, liability, action or threatened action in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions which resulted in such loss, claim,
damage, liability, action or threatened action as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether any statement or omission, including any untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, however, that the maximum amount of liability in respect of such
contribution shall be limited, in the case of each seller of Registrable
Securities, to an amount equal to the net proceeds actually received by such
seller from the sale of Registrable Securities effected pursuant to such
registration. The amount paid or payable by a party under this Section 7(d) as a
result of the loss, claim, damage, liability, action or threatened action
referred to above shall be deemed to include any legal or other fees,
disbursements and expenses reasonably incurred by such party in connection with
any investigation or proceeding. The parties hereto agree that it would not be
just and equitable if contributions pursuant to this Section 7(d) were to be
determined by pro rata allocation or by any method of allocation which does not
take account of the equitable considerations referred to in the first and second
sentences of this Section 7(d). No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
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(e) The provisions of this Section 7 shall be in addition to
any other liability which any indemnifying party may have to any indemnified
party and shall survive the termination of this Agreement.
Section 8. Underwriting Agreement. To the extent that the holders of
Registrable Securities participating in any underwritten registration shall
enter into an underwriting or similar agreement that contains provisions which
conflict with any provision of Section 7 hereof, as between Enterprise Partners
and such holders of Registrable Securities, the provisions contained in Section
7 hereof shall control.
Section 9. Information by Holder. The Unitholders shall furnish to
Enterprise Partners such written information regarding the Unitholders and the
distribution proposed by the Unitholders as Enterprise Partners may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
Section 10. Exchange Act Compliance. Enterprise Partners agrees to and
shall comply with all of the reporting requirements of the Exchange Act
applicable to it. Upon the request of any holder of Registrable Securities,
Enterprise Partners shall deliver to such holder a written statement as to
whether it has complied with such requirements. Enterprise Partners shall
cooperate with the Unitholders in supplying such information as may be necessary
for the Unitholders to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of Rule 144.
Section 11. No Conflict of Rights. Enterprise Partners shall not, after
the date hereof, grant any registration rights which conflict with or impair the
registration rights granted hereby.
Section 12. Termination. Except as provided in Section 7(e) hereof,
this Agreement shall terminate and be of no further force or effect when there
shall no longer be any Registrable Securities outstanding.
Section 13. Miscellaneous.
(a) Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally at by facsimile transmission or mailed (prepaid first class
certified mail, return receipt requested) to the parties at the following
addresses or facsimile numbers:
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If to Enterprise Partners, to:
Enterprise Products Company
P.O. Box 4324 (77210-4324)
2727 North Loop West, Suite 700
Houston, Texas 77008
Attention: Chief Financial Officer
Phone: (713) 880-6500
Fax No. (713) 880-6570
With a copy to:
Enterprise Products Company
P.O. Box 4324 (77210-4324)
2727 North Loop West, Suite 700
Houston, Texas 77008
Attention: Chief Legal Officer
Phone: (713) 880-6500
Fax No. (713) 880-6570
If to Tejas or its Affiliates, to:
Tejas Energy, LLC
1301 McKinney Street, Suite 700
Houston, Texas 77010
Attention: Chief Operating Officer
Phone: (713) 230-3000
Fax No. (713) 230-2900
With a copy to:
Tejas Energy, LLC
1301 McKinney Street, Suite 700
Houston, Texas 77010
Attention: General Counsel
Phone: (713) 230-3000
Fax No. (713) 230-1800
All such notices, requests and other communications will (i) if delivered
personally against written receipt to the address as provided in this Section,
be deemed given upon delivery, (ii) if delivered by facsimile transmission to
the facsimile number as provided in this Section, be deemed given upon receipt
or upon the next Business Day if received after normal business hours or a day
which is not a Business Day, and (iii) if delivered by mail in the manner
described above to the address as
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provided in this Section, be deemed given upon receipt (in each case regardless
of whether such notice is received by any other person to whom a copy of such
notice, request or other communication is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
(b) Specific Performance. The parties hereto agree that in the
event any provision of this Agreement was not performed in accordance with the
terms hereof, irreparable damage would occur, and that the parties shall
therefore be entitled to specific performance of the terms hereof, in addition
to any remedy that may be available to any of them at law or equity and, to the
extent permitted by applicable law, each party waives any objection to the
imposition of such relief.
(c) Entire Agreement. This Agreement, together with the
Contribution Agreement and the Unitholder Agreement, supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof and thereof, and contains the sole and entire agreement between
the parties hereto with respect to the subject matter hereof and thereof.
(d) Successors and Assigns. This Agreement shall bind and
inure to the benefit of Enterprise Partners and the Unitholders and, subject to
Section 13(e) below, the respective successors and assigns of Enterprise
Partners and Unitholders.
(e) Assignment. Subject to the terms set forth in the
Unitholder Agreement, each Unitholder may assign its rights hereunder to any
purchaser or transferee of Registrable Securities; provided, however, that (i)
such transfer is otherwise effected in accordance with applicable securities
laws, (ii) such purchaser or transferee shall, as a condition to the
effectiveness of such assignment, be required to execute a counterpart to this
Agreement agreeing to be treated as a Unitholder, whereupon such purchaser or
transferee shall have the benefits of and shall be subject to the restrictions
contained in this Agreement as if such purchaser or transferee was originally
included in the definition of a Unitholder and had originally been a party
hereto and (iii) Enterprise Partners is given written notice of such transfer
after such transfer, setting forth the name and address of such assignee and
identifying the Registrable Securities with respect to which such registration
rights have been assigned. Schedule I hereto shall, from time to time, be
amended to include the name, address and numbers of Registrable Securities of
each such Unitholder.
(f) Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by law or otherwise afforded, will be cumulative
and not alternative.
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(g) Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
(h) No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any other Person
except to the extent such Person is expressly given rights herein.
(i) Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
(j) Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
(k) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas applicable to a
contract executed and performed in such State without giving effect to the
conflicts of laws principles thereof.
(l) Counterparts. This Agreement may be executed in any number
of counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be executed as of the date first written above.
TEJAS ENERGY, LLC
By: /s/ Curtis R. Frasier
------------------------------
Curtis R. Frasier
Executive Vice President and
Chief Operating Officer
ENTERPRISE PRODUCTS PARTNERS L.P.
By: Enterprise Products GP, LLC,
its General Partner
By: /s/ O. S. Andras
-----------------------------
O. S. Andras
President and Chief Executive
Officer
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Schedule I
Unitholders Number of Registrable Securities Held
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