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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
EL CHICO RESTAURANTS, INC.
- -------------------------------------------------------------------------------
(NAME OF ISSUER)
COMMON STOCK, $0.10 PAR VALUE PER SHARE
- -------------------------------------------------------------------------------
(TITLE OF CLASS OF SECURITIES)
282879-10-5
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CUSIP NUMBER
G. HOUSTON HALL
GHS MANAGEMENT, INC.
8235 DOUGLAS AVENUE, SUITE 420
DALLAS, TEXAS 75225
(214)696-2700
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
JUNE 5, 1997
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(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 THIS STATEMENT [ X ].
PAGE 1 OF 43 PAGES
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CUSIP NO. 282879-10-5 13D PAGE 2 OF 43 PAGES
(1) Name of Reporting Person GHS Management, Inc.
S.S. or I.R.S. Identification 75-2345463
No. of Above Person
(2) Check the Appropriate Box if a (a)
Member of a Group (see instructions) (b) X
(3) SEC Use Only
(4) Source of Funds (see instructions) WC
(5) Check if Disclosure of Legal
Proceedings is Required Pursuant
to Items 2(d) or 2(e)
(6) Citizenship or Place of Organization Texas
Number of Shares (7) Sole Voting Power 165,100(1)
Beneficially owned
by Each Reporting
Person with
(8) Shared Voting Power -0-
(9) Sole Dispositive Power 165,100(1)
(10) Shared Dispositive Power -0-
(11) Aggregate Amount Beneficially 165,100
Owned by Each Reporting Person
(12) Check if the Aggregate Amount in
Row (11) Excludes Certain Shares
(See instructions)
(13) Percent of Class Represented by 4.5%
Amount in Row (11)
(14) Type of Reporting Person (See CO
Instructions)
- --------------------------------
(1) GHS Management, Inc. has sole voting and dispositive power with respect to
the shares of Common Stock held by Falcon Fund, Ltd. and GHS Partners LDC.
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CUSIP NO. 282879-10-5 13D PAGE 3 OF 43 PAGES
(1) Name of Reporting Person G. Houston Hall
S.S. or I.R.S. Identification ###-##-####
No. of Above Person
(2) Check the Appropriate Box (a)
if a Member of a Group (See (b) X
instructions)
(3) SEC Use Only
(4) Source of Funds (See WC
instructions)
(5) Check if Disclosure of Legal
Proceedings is Required Pursuant
to Items 2(d) or 2(e)
(6) Citizenship or Place of USA
Organization
Number of Shares (7) Sole Voting Power -0-
Beneficially Owned
by Each Reporting
Person with
(8) Shared Voting Power 165,100(1)
(9) Sole Dispositive Power -0-
(10) Shared Dispositive Power 165,100(1)
(11) Aggregate Amount Beneficially 165,100(2)
owned by Each Reporting Person
(12) Check if the Aggregate Amount in
Row (11) Excludes Certain Shares
(See instructions)
(13) Percent of Class Represented by 4.5%
Amount in Row (11)
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CUSIP NO. 282879-10-5 13D PAGE 4 OF 43 PAGES
(14) Type of Reporting Person (See IN
instructions)
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(1) Mr. Hall shares voting and dispositive power with respect to the aggregate
165,100 shares of Common Stock held by Falcon Fund, Ltd. and GHS Partners LDC
which are managed by GHS Management, Inc.
(2) Includes the aggregate of 165,100 shares of Common Stock held by Falcon
Fund, Ltd. and GHS Partners LDC which are managed by GHS Management, Inc.
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CUSIP NO. 282879-10-5 13D PAGE 5 OF 43 PAGES
(1) Name of Reporting Person James C. Smith
S.S. or I.R.S. Identification ###-##-####
No. of Above Person
(2) Check the Appropriate Box if (a)
a Member of a Group (See (b) X
instructions)
(3) SEC Use Only
(4) Source of Funds (See PF, WC
instructions)
(5) Check if Disclosure of Legal
Proceedings is Required Pursuant
to Items 2(d) or 2(e)
(6) Citizenship or Place of USA
Organization
Number of Shares (7) Sole Voting Power 37,000
Beneficially Owned
by Each Reporting
Person with
(8) Shared Voting Power 165,100(1)
(9) Sole Dispositive Power 37,000
(10) Shared Dispositive Power 165,100(1)
(11) Aggregate Amount Beneficially 202,100(2)
Owned by Each Reporting Person
(12) Check if the Aggregate Amount in
Row (11) Excludes Certain Shares
(See instructions)
(13) Percent of Class Represented by 5.5%
Amount in Row (11)
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CUSIP NO. 282879-10-5 13D PAGE 6 OF 43 PAGES
(14) Type of Reporting Person (See IN
instructions)
- -----------------------------------
(1) Mr. Smith shares voting and dispositive power with respect to the aggregate
of 165,100 shares of Common Stock held by Falcon Fund, Ltd. and GHS Partners
LDC which are managed by GHS Management, Inc.
(2) Includes the aggregate of 165,100 shares of Common Stock held by Falcon
Fund, Ltd. and GHS Partners LDC which are managed by GHS Management, Inc.
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CUSIP NO. 282879-10-5 13D PAGE 7 OF 43 PAGES
Item 1. Security and Issuer.
The statement on Schedule 13D relating to the shares of common stock,
(the "Common Stock"), of El Chico Restaurants, Inc. (the "Issuer" or the
"Company"), whose principal executive offices are located at 12200 Stemmons,
Suite 100, Dallas, TX 75234.
Item 2. Identity and Background.
(a), (b) and (c). This Statement is filed by GHS Management, Inc., a
Texas corporation ("GHS"), G. Houston Hall and James C. Smith. The present
principal occupation or employment of Messrs. Hall and Smith is the management
of their personal investments and those managed by GHS. Mr. Hall and Mr. Smith
also serve as the general partners of Falcon Fund, Ltd., a Texas limited
partnership ("Falcon"). The principal business of GHS is investment and trading
of capital stocks, warrants, bonds, notes, debentures and other securities for
funds it manages for others.
GHS has sole investment authority with respect to shares of Common Stock
held by Falcon and GHS Partners LDC ("GHS Partners"). G. Houston Hall and James
C. Smith share investment authority over the funds managed by GHS. Mr. Hall has
sole investment authority for shares held in his name. Mr. Smith has sole
investment authority for shares held in his name. The principal place of
business for Messrs. Hall and Smith and GHS Management, Inc. is 8235 Douglas
Avenue, Suite 420, Dallas, Texas 75225.
(d) None of GHS, Mr. Hall or Mr. Smith, during the last five years,
has been convicted in criminal proceedings (excluding traffic violations or
similar misdemeanors).
(e) None of GHS, Mr. Hall or Mr. Smith, during the last five years,
has been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding 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.
(f) Messrs. Hall and Smith are citizens of the United States of
America.
Item 3. Source and Amount of Funds or Other Consideration.
The aggregate of 202,100 shares of Common Stock beneficially owned by
GHS, Mr. Hall and Mr. Smith were purchased in transactions effected in the
over-the-counter markets for an aggregate purchase price of $1,631,967.00
(including brokerage commissions), all of which was derived from working
capital (in the case of GHS) and personal funds (in the case of Mr. Smith).
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CUSIP NO. 282879-10-5 13D PAGE 8 OF 43 PAGES
Item 4. Purpose of Transaction.
GHS, Mr. Hall and Mr. Smith have acquired the Common Stock solely for
investment purposes. Depending on their evaluation of the Company, other
investment opportunities, market conditions, and such other factors as each may
deem material, GHS, Mr. Hall and/or Mr. Smith may seek to acquire additional
shares of Common Stock in the open market, in private transactions, or
otherwise, or may dispose of all or a portion of the shares of Common Stock.
On June 11, 1997, GHS sent the following letter to the Company's Board of
Directors:
June 11, 1997
The Board of Directors
El Chico Restaurants, Inc.
12200 Stemmons Freeway, Suite 100
Dallas, Texas 75234
Dear Sirs:
We have been significant long-term shareholders of El Chico Restaurants,
Inc. and have closely followed the company and its public disclosures. In this
regard, we have particularly noted your disclosures regarding the "extremely
competitive market environment" and continuing declines in sales per El Chico
restaurant. Also, we are aware of management's "brand transformation strategy",
significant defensive moves to remodel older facilities, and the high capital
requirements related thereto.
During our ownership period, you have convinced us of the difficulty of
operating a capital constrained restaurant chain with a mature/dated brand name
in an intensely competitive environment. Given El Chico's historic performance
and your frank disclosures regarding its prospects, we believe there has been a
substantial decline in investor interest in the Company's shares as evidenced
by infrequent trades in El Chico's stock. With the stock recently quoted at a
five-year low of $6 per share, shareholder value has been greatly diminished.
It has recently come to our attention that the Company received a written
proposal contemplating the acquisition of the Company at a substantial premium
to the market price. We have also learned that this proposal was rejected by
the Board of Directors without any disclosure to shareholders. Such actions are
very concerning in light of the above-referenced management disclosures
regarding the prospects of the Company and insiders' relatively small stock
ownership position in the Company.
We believe that your fiduciary obligation to maximize shareholder value
mandates your full and fair consideration of qualified private expressions of
interest or bids for the Company and disclosure thereof to the shareholders. In
this regard, as a substantial shareholder, we expect that you will fulfill your
fiduciary obligations to review all qualified proposals, disclose
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CUSIP NO. 282879-10-5 13D PAGE 9 OF 43 PAGES
them in the appropriate manner to the shareholders of the Company, and afford
the El Chico shareholders an opportunity to respond to such proposals in the
appropriate manner.
Very truly yours,
GHS Management, Inc.
By: /s/ James C. Smith
-------------------------
Except as set forth above, none of GHS, Mr. Hall or Mr. Smith has any
plans or proposals of the type referred to in clauses (a) through (j) of Item 4
on Schedule 13D.
Item 5. Interest in Securities of the Issuer.
(a) As of June 5, 1997, (i) GHS beneficially owned 165,100 shares of
Common Stock of the Company, representing approximately 4.5% of the outstanding
Common Stock of the Company, (ii) Mr. Hall beneficially owned 165,100 shares of
Common Stock (including the 165,100 owned by GHS), representing approximately
4.5% of the outstanding Common Stock of the Company, and (iii) Mr. Smith
beneficially owned 202,100 shares of Common Stock (including the 165,100 shares
owned by GHS), representing approximately 5.5% of the outstanding Common Stock
of the Company.
According to the Issuer's Report on Form 10-Q for the quarter ended March
31, 1997, a total of 3,706,335 shares of Common Stock were issued and
outstanding on April 30, 1997.
(b) Mr. Smith has the sole power to vote and dispose of the Common
Stock beneficially owned by him, Mr. Hall has the sole power to vote and
dispose of the Common Stock beneficially owned by him and Mr. Hall and Mr.
Smith share the power to vote and dispose of the Common Stock beneficially
owned by GHS through its management of Falcon and GHS Partners.
(c) During the 60 days prior to and including the date of the event
which requires the filing of this Statement, GHS and Messrs. Hall and Smith
effected no transactions in the Common Stock of the Issuer; however, the
Company repurchased shares of Common Stock of the Company and as a result of
such purchases the percentage of shares owned by GHS, Mr. Hall and Mr. Smith
increased to 5.5% according to the Issuer's 10-Q for the period ended March 31,
1996.
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CUSIP NO. 282879-10-5 13D PAGE 10 OF 43 PAGES
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
None of GHS, Mr. Hall or Mr. Smith have any contracts, arrangements,
understandings or relationships (legal or otherwise) between themselves and any
person with respect to any securities of the Issuer other than the First
Amended and Restate Limited Partnership Agreement of Falcon Fund, Ltd., dated
as of June 30, 1991, pursuant to the terms of which Mr. Hall and Mr. Smith, as
General Partners, share the power to manage the affairs of Falcon, including
the right to vote the shares of the Issuer and to dispose of such shares.
Item 7. Materials to be Filed as Exhibits.
The following are filed as exhibits to this Statement on Schedule 13D.
Exhibit A Form of First Amended and Restated Limited Partnership
Agreement of Falcon dated as of June 30, 1991.
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CUSIP NO. 282879-10-5 13D PAGE 11 OF 43 PAGES
Signatures
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
Dated: June 11, 1997
--------------------------
GHS Management, Inc.
By: /s/ JAMES F. GALLIVAN, JR.
-----------------------------
It's: President
/s/ G. HOUSTON HALL
--------------------------------
G. Houston Hall
/s/ JAMES C. SMITH
--------------------------------
James C. Smith
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CUSIP NO. 282879-10-5 13D PAGE 12 OF 43 PAGES
EXHIBIT INDEX
<TABLE>
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Page
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99.A Form of First Amendment and Restated 13
Limited Partnership Agreement for
Falcon Fund dated as of June 30, 1991
</TABLE>
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EXHIBIT A
FALCON FUND, LTD.
FIRST AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
(A Texas Limited Partnership)
THE LIMITED PARTNERSHIP INTERESTS ISSUED UNDER THIS AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACT AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF ABSENT SUCH REGISTRATION
UNLESS, IN THE OPINION OF COUNSEL TO THE GENERAL PARTNER, SUCH REGISTRATION IS
NOT REQUIRED.
THE LIMITED PARTNERSHIP INTERESTS ARE FURTHER RESTRICTED AS TO TRANSFERABILITY
BY THE TERMS OF THIS AGREEMENT.
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TABLE OF CONTENTS
<TABLE>
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1. DEFINITIONS.............................................................1
1.1 Administrative Fee.............................................1
1.2 Affiliate......................................................1
1.3 Capital Account................................................1
1.4 Capital Contributions..........................................1
1.5 Code...........................................................1
1.6 Cumulative Reimbursable Net Loss...............................1
1.7 General Partner................................................2
1.8 Incentive Fee..................................................2
1.9 Interim Period.................................................2
1.10 Limited Partners...............................................3
1.11 Liquidating Share..............................................3
1.12 Net Profits....................................................3
1.13 Net Losses.....................................................3
1.14 Ordinary Income or Loss........................................3
1.15 Partnership Percentage.........................................3
1.16 Realized Capital Gains or Losses...............................4
1.17 Schedule.......................................................4
1.18 Securities.....................................................4
1.19 Unrealized Capital Gains or Losses.............................4
2. GENERAL PROVISIONS......................................................4
2.1 Partnership Name...............................................4
2.2 Fiscal Year....................................................4
2.3 Registered Office/Agent........................................4
2.4 Purposes of Partnership and Powers of the General Partner......5
2.5 Investments in Certain Entities................................6
3. MANAGEMENT OF PARTNERSHIP...............................................6
3.1 Management Generally...........................................6
3.2 Reliance by Third Parties......................................7
3.3 Activity of General Partner....................................7
3.4 Administrative Fee.............................................8
4. ALLOCATION OF NET PROFITS AND NET LOSSES................................8
4.1 Allocation of Net Profits and Net Losses.......................8
4.2 Allocation for Federal Income Tax Purposes.....................9
4.3 Special Allocations...........................................10
4.4 Minimum Gain Chargeback.......................................10
</TABLE>
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<TABLE>
<S> <C>
5. CAPITAL ACCOUNTS OF PARTNERS...........................................10
5.1 Capital Contributions.........................................10
5.2 Capital Accounts..............................................11
5.3 Additional Capital Contributions..............................11
5.4 Adjustments to Capital Accounts...............................11
5.5 Value of Securities...........................................12
5.6 Determination by General Partner of Certain Matters...........12
6. ADMISSION OF NEW PARTNERS..............................................12
6.1 Limited Partners..............................................12
6.2 General Partners..............................................13
7. WITHDRAWAL OF CAPITAL..................................................13
7.1 Withdrawals in General........................................13
7.2 Partial Withdrawals...........................................13
7.3 Limitations on Withdrawal.....................................14
8. WITHDRAWAL, DEATH OR INSANITY OF PARTNERS..............................14
8.1 Withdrawal, Death, etc., of General Partner...................14
8.2 Withdrawal, Death, etc., of Limited Partner...................15
8.3 Payment of Liquidating Share..................................16
8.4 Required Withdrawals..........................................16
8.5 Limitations on Withdrawal of Liquidating Share................17
9. DURATION AND TERMINATION OF PARTNERSHIP................................18
9.1 Duration......................................................18
9.2 Termination...................................................18
9.3 Method of Distributions.......................................18
10. REPORTS TO PARTNERS....................................................19
10.1 Independent Auditors..........................................19
10.2 Reports to Current Partners...................................19
10.3 Reports to Current and Former Partners........................19
10.4 Interim Reports...............................................19
</TABLE>
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<TABLE>
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11. MISCELLANEOUS...........................................................19
11.1 Amendments to Partnership Agreement............................19
11.2 Liability of Partners..........................................20
11.3 Assignability of Interest......................................21
11.4 Exculpation and Indemnification of the General Partner.........22
11.5 General........................................................23
11.6 Power of Attorney..............................................24
11.7 Notices........................................................24
11.8 Joint and Several Liability....................................24
11.9 Use of Name....................................................24
11.10 Good Will......................................................25
11.11 Headings.......................................................25
11.12 Prior Agreement................................................25
</TABLE>
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FALCON FUND, LTD.
FIRST AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
Pursuant to an Agreement of Limited Partnership dated August 31, 1990 (the
"Prior Agreement"), a limited partnership (the "Partnership") was formed
pursuant to the Texas Revised Limited Partnership Act. The undersigned (the
"Partners") desire to amend and restate the Prior Agreement and the Partnership
shall be governed by and operated pursuant to the terms and provisions of this
First Amended and Restated Limited Partnership Agreement (the "Agreement").
SECTION 1
DEFINITIONS
Unless the context requires otherwise, the following terms have the
meanings specified in this Section:
SECTION 1.1 Administrative Fee: The fee defined in Section 3.4.
SECTION 1.2 Affiliate: With respect to any person, a person or entity
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with such person.
SECTION 1.3 Capital Account: The book capital account established for each
Partner.
SECTION 1.4 Capital Contributions: Cash contributed by Partners to the
capital of the Partnership.
SECTION 1.5 Code: The Internal Revenue Code of 1986, as amended.
SECTION 1.6 Cumulative Reimbursable Net Loss: With respect to each Limited
Partner (other than a Limited Partner who is also a General Partner, an officer
or director of GHS Management, Inc. or any such person's spouse, children or
any trust or retirement account established for the benefit of such person
and/or his or her spouse or
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children), the excess, if any, of (i) the cumulative amount of Net Losses of
the Partnership allocated to such Limited Partner for all Interim Periods since
the later of (a) the date on which such Limited Partner became a Limited
Partner and (b) the last Interim Period with respect to which an Incentive Fee
has been paid to the General Partner, over (ii) the cumulative amount of Net
Profits of the Partnership allocated to such Limited Partner for all Interim
Periods since the later of (a) the date on which such Limited Partner became a
Limited Partner and (b) the last Interim Period with respect to which an
Incentive Fee has been paid to the General Partner; provided, however, that in
the event that a Limited Partner has made a withdrawal since the last Interim
Period for which an Incentive Fee has been paid, the amount of any Cumulative
Reimbursable Net Loss shall be reduced by an amount with respect to each such
withdrawal by such Limited Partner equal to the product of (A) the amount
withdrawn divided by the Limited Partner's Capital Account immediately prior to
the withdrawal, and (B) the Cumulative Reimbursable Net Loss immediately prior
to such withdrawal. To illustrate the preceding proviso, assume a Partner's
Cumulative Reimbursable Net Loss is $20,000 at the end of an Interim Period at
which time his Capital Account is valued at $80,000. On the first day of the
next Interim Period the Partner withdraws $40,000. Such Partner's Cumulative
Reimbursable Net Loss would be reduced by $10,000 at the date of withdrawal
calculated as follows: $40,000/$80,000 x $20,000.
SECTION 1.7 General Partner: The Partner or Partners who are designated in
Part 1 of the Schedule as the General Partner.
SECTION 1.8 Incentive Fee: The fee payable to the General Partner as
defined in Section 4.1(c).
SECTION 1.9 Interim Period: A period subsequent to the formation of the
Partnership commencing on the first day of a calendar quarter, the day on which
a new Partner is admitted to the Partnership or the day on which the General
Partner effects the
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withdrawal of a Limited Partner pursuant to Section 8.4. An Interim Period
shall end on the day immediately preceding the beginning of a new Interim
Period.
SECTION 1.10 Limited Partners: Those Partners who are designated in Part
II of the Schedule as Limited Partners.
SECTION 1.11 Liquidating Share: The amount payable to a Partner upon
death, insanity or withdrawal from the Partnership as described in Section 8.3.
SECTION 1.12 Net Profits: The net profit of the Partnership for each
Interim Period, consisting of Ordinary Income or Loss, Unrealized Capital Gains
or Losses with respect to Securities and the Realized Capital Gains or Losses
with respect to the disposition of Securities.
SECTION 1.13 Net Losses: The net loss of the Partnership for each Interim
Period, consisting of Ordinary Income or Loss, Unrealized Capital Gains or
Losses with respect to Securities and the Realized Capital Gains or Losses with
respect to the disposition of Securities.
SECTION 1.14 Ordinary Income or Loss: The net income or loss of the
Partnership for each Interim Period from whatever source derived (including
those items required to be separately stated under Section 702 (a)(1) through
(7) of the Code, excluding, however, gain or loss arising from the purchase or
sale of a Security.
SECTION 1.15 Partnership Percentage: Each Partner's Partnership Percentage
shall be determined as of the initial closing of Limited Partners into the
Partnership, and thereafter, as of the first day of an Interim Period, by
dividing the Capital Account balance of such Partner by the aggregate Capital
Account balances of all Partners. The sum of the Partnership Percentages shall
equal 100 percent (100%). The Partnership Percentages shall be set forth in a
schedule which shall be filed with the records of the Partnership within 90
days of the beginning of each Interim Period. All Partnership Percentages shall
be rounded to three decimal places.
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SECTION 1.16 Realized Capital Gains or Losses: With respect to each
Security disposed of by the Partnership for any Interim Period, the difference
between (i) the amount realized from such disposition and (ii) the value of the
Security as of the last day of the preceding Interim Period, or the adjusted
basis of such Security in the case of Securities acquired during the Interim
Period.
SECTION 1.17 Schedule: Schedule entitled "Schedule of Capital
Contributions" attached hereto.
SECTION 1.18 Securities: Securities of every kind and nature, including,
without limitation, stocks, notes, bonds, debentures, commodities, options,
trust receipts, evidences of indebtedness, stock index futures, foreign
currencies, or warrants or rights to subscribe to or purchase or to sell any of
the foregoing or, in general, any interest or instrument commonly known as a
"security."
SECTION 1.19 Unrealized Capital Gains or Losses: With respect to each
Security held by the Partnership on the last day of an Interim Period, the
difference between (i) the value of the Security on such date and (ii) the
value of the Security as of the last day of the preceding Interim Period, or
the adjusted basis of such Security in the case of Securities acquired during
the Interim Period.
SECTION 2
GENERAL PROVISIONS
SECTION 2.1 Partnership Name: The Partnership shall do business under the
name of FALCON FUND, LTD.
SECTION 2.2 Fiscal Year: The fiscal year of the Partnership (herein called
the "fiscal year") shall end on December 31.
SECTION 2.3 Registered Office/Agent: The street address of the registered
office of the Partnership is 8235 Douglas Avenue, Suite 420, Dallas, Texas
75225, and the name of its registered agent at such address is GHS Management,
Inc.
4
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SECTION 2.4 Purposes of Partnership and Powers of the General Partner: The
purpose of the Partnership is to purchase and otherwise acquire, invest in,
hold for investment, sell or otherwise dispose of, trade in (on margin or
otherwise), sell short, mortgage, pledge or otherwise deal in Securities and to
exercise all rights, powers, privileges and other incidents of ownership or
possession with respect to Securities held or owned by the Partnership.
The General Partner shall have the power by itself on behalf and in the
name of the Partnership to carry out any and all of the objects and purposes of
the Partnership set forth above, and to perform all acts and enter into and
perform all contracts and other undertakings which it may deem necessary and
advisable or incidental thereto, including without limitation, the power to:
(a) purchase, hold, sell or otherwise deal in Securities;
(b) sell Securities short and cover such sales;
(c) purchase, hold, sell or otherwise deal in put and call options and
any combination thereof;
(d) conduct accounts with brokers, including margin accounts and
accounts holding Securities in street name;
(e) open, maintain, and close bank accounts, including custodial
accounts, and draw checks or other orders for the payment of monies;
(f) from time to time without limit as to amount, borrow or raise
funds and secure the payment of obligations of the Partnership by mortgage
upon, or pledge or hypothecation of, all or any part of the property of
the Partnership;
(g) purchase such policies of insurance as it deems reasonable,
insuring the General Partner and the Partnership against liabilities that
may arise out of its management of the Partnership;
5
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(h) do any and all acts on behalf of the Partnership, and exercise all
rights of the Partnership, with respect to its interest in any person,
firm, corporation or other entity, including, without limitation the
voting of Securities, the negotiation and payment of commissions,
participation in arrangements with creditors, the institution of suits and
administrative proceedings and other like or similar matters;
(i) act and incur expenses for and on behalf of the Partnership in all
matters incidental to the foregoing including, without limitation, the
employment of consultants, accountants and attorneys; and
(j) to make any tax elections allowable under the Code on behalf of
the Partnership.
SECTION 2.5 Investments in Certain Entities: Each Partner agrees to notify
the General Partner of such Partner's being or becoming a director, officer or
ten percent shareholder of any publicly held business or economic entity and,
upon written request of any such Partner, the Partnership will not invest or
trade in, purchase or sell, sell short or cover, or sell "against the box" any
Securities issued by any such publicly held business or economic entity of
which the Partner is a director, officer or ten percent shareholder.
SECTION 3
MANAGEMENT OF PARTNERSHIP
SECTION 3.1 Management Generally: The management of the Partnership
shall be vested exclusively in the General Partner. The Limited Partners shall
have no part in the management of the Partnership, and shall have no authority
or right to act on behalf of the Partnership in connection with any matter
except as may be provided for in Section 8.1 hereof.
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Without limiting the generality of the foregoing, in the course of
selecting brokers, dealers and other intermediaries for the execution,
clearance and settlement of transactions for the Partnership, the General
Partner may agree to such commissions, fees and other charges on behalf of the
Partnership as he shall deem reasonable in the circumstances taking into
account all such factors as he deems relevant (including the quality of
research and other services made available to him even if such services are not
for the exclusive benefit of the Partnership and the cost of such services does
not represent the lowest cost available) and shall be under no obligation to
combine or arrange orders so as to obtain reduced charges.
SECTION 3.2 Reliance by Third Parties: Persons dealing with the
Partnership are entitled to rely conclusively upon the certificate of a General
Partner to the effect that he is a General Partner and upon the power and
authority of the General Partner as herein set forth.
SECTION 3.3 Activity of General Partner: Each General Partner hereby
agrees to use his best efforts in connection with the purposes and objects of
the Partnership and shall diligently and faithfully devote to such purposes and
objects his time and activity during normal business days and hours as each
General Partner in his discretion shall deem necessary for the management of
the affairs of the Partnership; provided, however, that nothing contained in
this Section 3.3 shall preclude a General Partner from acting, consistent,
however, with the foregoing, as a director, officer or employee of any
corporation, a trustee of any trust, or an executor or administrative official
of any other business entity; or from participating in profits derived from the
investments of any such corporation, trust, estate, partnership or other
business entity or person; or from engaging in any other business or having
other business interests. The General Partner and its Affiliates shall not
participate in brokerage fees earned by persons through which the Partnership
transacts securities trades.
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SECTION 3.4 Administrative Fee: The Partnership shall pay the General
Partner a quarterly administrative fee equal to .25% of the Partners' aggregate
Capital Account balances as of the first day of such quarter (the
"Administrative Fee"). The General Partner may assign its right to receive the
Administrative Fee hereunder to an Affiliate, whereupon such Affiliate will be
obligated to provide the services described in the last sentence of this
Section 3.4 in connection with the receipt of the Administrative Fee. The
Administrative Fee is payable on or before the tenth day of each calendar
quarter. Ordinary and extraordinary legal and accounting fees, brokerage fees,
custodial fees, and interest expense shall be paid by the Partnership and shall
not be payable by the General Partner pursuant to this Section. The General
Partner may pay on behalf of the Partnership, and be reimbursed for such
payment by the Partnership, any expenses that the Partnership is required to
pay. In connection with the receipt of the Administrative Fee, the General
Partner shall provide and/or pay for, without charge, all other expenses of the
Partnership, including but not limited to the following: office rental, office
supplies, telephone, postage, travel, insurance and salaries of employees of
the General Partner and Affiliates of the General Partner, if any.
SECTION 4
ALLOCATION OF NET PROFITS AND NET LOSSES
SECTION 4.1 Allocation of Net Profits and Net Losses: Except as otherwise
provided in this Agreement, Net Profits or Net Losses for each Interim Period
shall be allocated as follows:
(a) Each Limited Partner shall be allocated a share of the Net Profits
equal to 85% of his Partnership Percentage or shall be allocated a share of Net
Losses equal to 100% of his Partnership Percentage; provided, however, that a
Limited Partner who is also a General Partner or an officer or director of GHS
Management, Inc. (and any such person's spouse, children and any trust or
retirement account established for the benefit
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of such person and/or his or her spouse or children) shall be allocated a share
of Net Profits equal to 100% of his Partnership Percentage.
(b) Each General Partner shall be allocated a share of the Net Profits or
Net Losses equal to 100% of his Partnership Percentage.
(c) The remaining Net Profits shall be allocated to the General Partner as
an incentive fee (the "Incentive Fee").
(d) Notwithstanding the foregoing to the contrary, Net Profit otherwise
allocable to the General Partner pursuant to Section 4.1(c) in an Interim
Period ending in which a Limited Partner had a Cumulative Reimbursable Net Loss
shall instead be allocated to each Limited Partner up to the amount of such
Limited Partner's Cumulative Reimbursable Net Loss in the proportion that the
Cumulative Reimbursable Net Loss of such Limited Partner bears to the aggregate
Cumulative Reimbursable Net Losses of all Limited Partners.
SECTION 4.2 Allocation for Federal Income Tax Purposes: Income or loss of
the Partnership for federal income tax purposes only shall be allocated in each
fiscal year in the following manner:
(a) Ordinary Income or Loss of the Partnership shall be allocated
among all Partners in the same proportion as they are allocated Net Profit
or Net Loss in such fiscal year pursuant to Section 4.1.
(b) Capital gains and losses from the disposition of Securities for
any fiscal year shall first be allocated to each Partner in a manner which
takes into account the difference between the adjusted tax basis of
property disposed of by the Partnership and the book value of such
property at the time such Partner acquired its interest in the
Partnership, as required pursuant to Treas. Reg. ss.1.704-1(b)(4)(i). Any
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remaining portion of such gain or loss shall be allocated in accordance
with Section 4.1.
SECTION 4.3 Special Allocations: Notwithstanding any provision of this
Agreement to the contrary, no Partner shall be allocated any item of loss or
deduction which would cause or increase a deficit balance in the Capital
Account of such Partner unless such allocation has substantial economic effect
within the meaning of Section 704(b) of the Code. Any item of loss or deduction
not allocated to a Partner due to the application of the preceding sentence
shall be allocated to those Partners entitled to receive allocations of loss or
deduction hereunder pro rata in proportion to their relative Partnership
Percentages.
SECTION 4.4 Minimum Gain Chargeback: Anything contained herein to the
contrary notwithstanding, there shall first be allocated to each Limited
Partner with a deficit capital account in excess of any obligation by the
Limited Partner to restore such deficit balance, resulting from any adjustment,
allocation or distribution described in Treasury regulations
1.704-1(b)(2)(ii)(d),(5), or (6), such Limited Partner's allocable share of all
Partnership gross income up to the amount by which such deficit capital account
balance exceeds such Limited Partner's obligation to restore such deficit
balance.
SECTION 5
CAPITAL ACCOUNTS OF PARTNERS
SECTION 5.1 Capital Contributions: Each Limited Partner has paid by way of
contribution to the Partnership cash equal to the amount set forth opposite
such Limited Partner's name in Part II of the Schedule. Additional
contributions in cash may be made by Partners only in accordance with the
provisions of Section 5.3. Each General Partner has contributed the amount set
forth in Part I of the Schedule for his interest as General Partner.
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SECTION 5.2 Capital Accounts: There shall be established for each Partner
on the books of the Partnership a Capital Account which for the Interim Period
during which such Partner was admitted shall be an amount equal to his Capital
Contribution subject to Section 5.1 hereof. Each General Partner may also own
an interest in the Partnership as a Limited Partner and in such case such
General Partner shall have two Capital Accounts, one for his General Partner's
interest and one for his individual Limited Partner's interest. The Capital
Account for each General Partner's Limited Partnership interest shall be kept
in the same manner as all other Limited Partner Capital Accounts subject to the
provisions of Section 4.1(a).
SECTION 5.3 Additional Capital Contributions: Additional contributions of
cash may be made by any Limited Partner on the first day of each calendar
quarter; provided, the Partnership may require not less than 30 days' notice
thereof specifying the amount of the additional contributions. The General
Partner shall have the right to accept or decline to accept any such additional
contribution whether or not such notice is given.
SECTION 5.4 Adjustments to Capital Accounts: Each Partner's Capital
Account shall be increased, as of the first day of an Interim Period, by:
(a) the amount of his cash contributions pursuant to Sections 5.1 and
5.3;
(b) the amount of Net Profits allocated to him from the immediately
preceding Interim Period pursuant to Section 4.1; and shall be decreased
by
(c) the amount of Net Losses allocated to him from the immediately
preceding Interim Period pursuant to Section 4.1;
(d) the amount of any withdrawals made pursuant to Sections 7.2, 8.1,
8.2 and 8.4; and
(e) such Partner's pro rata amount (based upon his Partnership
Percentage) of expenditures of the Partnership described in
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Section 705(a)(2)(B) of the Internal Revenue Code (relating to
expenditures which are neither deductible nor properly chargeable to
capital).
SECTION 5.5 Value of Securities: For purposes of determining the value of
Securities, Securities which are listed on a national securities exchange shall
be valued at their closing sales prices on the trading day immediately prior to
or on the date of determination, or if no sales occurred on such trading day,
at the mean between the "bid" and "asked" prices on such trading day.
Securities which are not listed shall be valued at their last closing "bid"
prices if held "long" by the Partnership and their last closing "asked" prices
if held "short" by the Partnership. Securities which are in the form of put or
call options shall be valued at their fair market value. All other Securities
shall be assigned such value as the General Partner may determine and such
value, as well as all other values assigned to Securities by the General
Partner pursuant to this paragraph of this Section 5.5 shall be final and
conclusive as to all of the Partners.
SECTION 5.6 Determination by General Partner of Certain Matters: All
matters concerning the valuation of Securities, the allocation of profits,
gains and losses among the Partners including their taxable status, and
accounting procedures not specifically and expressly provided for by the terms
of this Agreement, shall be determined by the General Partner on a fair and
equitable basis (subject where appropriate, to generally accepted accounting
principles, as recommended by the accountants for the Partnership) whose
determination shall be final and conclusive as to all of the Partners.
SECTION 6
ADMISSION OF NEW PARTNERS
SECTION 6.1 Limited Partners: The General Partner may admit additional
Limited Partners at any time. The Capital Account of a new Limited Partner or a
Limited Partner who makes an additional Capital Contribution shall be subject
to adjustment
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upon completion of the audit of the Partnership for the year in which such new
or additional Capital Contribution is made. Each Limited Partner admitted to
the Partnership shall execute an appropriate supplement to this Agreement
pursuant to which he agrees to be bound by the terms and provisions hereof.
SECTION 6.2 General Partners: The General Partner may admit additional
general partners of the Partnership at any time with the prior written approval
of a majority-in-interest of the Limited Partners.
SECTION 7
WITHDRAWAL OF CAPITAL
SECTION 7.1 Withdrawals in General: No Partner shall be entitled to
withdraw any amount from his Capital Account other than upon his withdrawal
from the Partnership as described in Sections 8.1 and 8.2, except as provided
in Section 7.2.
SECTION 7.2 Partial Withdrawals: Each Partner shall have the right, as of
the first day of each calendar quarter of any fiscal year, to withdraw any
amount out of his Capital Account upon 30 days' notice prior to the effective
date of withdrawal; provided, however, that (i) the Capital Account of the
requesting Partner will not by such withdrawal be reduced to less than 1% of
the aggregate Capital Accounts of all Partners, unless the General Partner, in
its sole discretion, waives the requirement that such Limited Partner maintain
a Capital Account balance equal to at least 1% of the aggregate Capital
Accounts of all Partners; (ii) a Partner who makes a withdrawal pursuant to
this Section 7.2 will not receive in excess of 85% of the balance of his
Capital Account (such amount to be paid within ten (10) days subsequent to the
date on which withdrawal shall have occurred) with the remainder of such
Capital Account, if any, to be paid to the withdrawing Partner within ten days
after completion of the Partnership's audit for such fiscal year and (iii) the
Capital Account of any Partner who
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makes a withdrawal pursuant to this Section 7.2 will be subject to adjustment
upon completion of the Partnership's audit for such fiscal year.
Any withdrawal pursuant to this Section 7.2 shall be subject to a charge
not in excess of 2% of the amount thereof as the General Partner may determine
to cover costs of selling Securities in order to effect payment of such
withdrawal, and such expense shall be specially allocated to the Capital
Account of such withdrawing Partner.
SECTION 7.3 Limitations on Withdrawal: The right of any Partner to
withdraw any amount from his Capital Account pursuant to the provisions of this
Section 7 is subject to the provision by the General Partner for all
Partnership liabilities in accordance with the Texas Revised Limited
Partnership Act and for reserves for contingencies.
SECTION 8
WITHDRAWAL, DEATH OR INSANITY OF PARTNERS
SECTION 8.1 Withdrawal, Death, etc., of General Partner: Any General
Partner shall be entitled to withdraw from the Partnership as of the first day
of any calendar quarter of any fiscal year by the delivery of written notice of
such intent to the Limited Partners on or before sixty (60) days prior to the
beginning of such calendar quarter. The withdrawal, death or insanity of all
General Partners shall dissolve the Partnership. In such event, the Partnership
shall terminate and a majority in interest of the Limited Partners may select
one or more persons to wind up the affairs of the Partnership in due course and
discharge the functions exercised by the General Partner under Section 9.2
subject to Section 11.4 hereof.
In the event of the withdrawal, death or insanity of all General
Partners, the interest of such General Partners shall continue at the risk of
the Partnership business until the affairs of the Partnership have been wound
up in due course.
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If a General Partner becomes disabled and remains so disabled for more
than 15 consecutive days, the remaining General Partner shall continue to
perform the functions of the General Partner during the period of such General
Partner's disability. If each remaining General Partner becomes disabled and
remains so disabled for more than 15 consecutive days, the Limited Partners may
by a vote of a majority in interest select one or more persons to perform the
functions of the General Partner during the period of such General Partner's
disability; but if the disability continues for 90 days from the date on which
the remaining General Partner or General Partners become disabled, the
Partnership shall in any event terminate. Prior to the selection by a majority
in interest of the Limited Partners of one or more persons to perform the
functions of the General Partner, pursuant to this paragraph, a person or
persons designated by prior appointment by the General Partner may perform such
functions.
The person designated by prior appointment by the General Partner to
function as General Partner shall be entitled to all of the powers of the
General Partner and to the benefit of Section 11.4 and shall be paid a
reasonable fee as determined by the General Partner and reimbursed for his
reasonable expenses.
For purposes of this Section 8.1, a General Partner is "disabled" if
because of disease or injury he is rendered unable to perform his duties as a
General Partner of the Partnership.
SECTION 8.2 Withdrawal, Death, etc., of Limited Partner: Each Limited
Partner shall be entitled to withdraw from the Partnership as of the first day
of any calendar quarter of any fiscal year by the delivery of written notice of
such intent to the General Partner on or before thirty (30) days prior to the
beginning of such calendar quarter. The withdrawal, death or insanity of a
Limited Partner shall not dissolve the Partnership.
In the event of death or insanity of a Limited Partner or the giving of
notice of withdrawal by a Limited Partner, the interest of such Limited Partner
shall continue at the risk of the Partnership business until the earlier of the
first permitted date of
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withdrawal occurring after such event, or termination of the Partnership. If
the Partnership is continued after the first permitted date of withdrawal, such
Limited Partner or his legal representatives shall be entitled to receive his
Liquidating Share in accordance with Section 8.3. The interest of a Limited
Partner who serves notice of withdrawal, dies or becomes insane or the interest
of the legal representatives of such Limited Partner shall not be included in
calculating a majority in interest of the Limited Partners under Section 6.2,
Section 8.1 and Section 11.1.
SECTION 8.3 Payment of Liquidating Share: The Liquidating Share of a
withdrawing, deceased or insane Partner shall be an amount equal to the Capital
Account of such Partner on the date of withdrawal as adjusted to reflect (i)
adjustment to such Partner's Capital Account pursuant to Section 5.4 and (ii) a
charge not in excess of 2% of the amount of such withdrawal as the General
Partner may determine to cover costs of selling Securities in order to effect
payment of such withdrawal. Eighty-Five Percent (85%) of the Liquidating Share
is payable on or before ten (10) days subsequent to the date on which
withdrawal shall have occurred with the remainder of such Liquidating Share, if
any, to be paid within ten days after completion of the Partnership's audit for
such fiscal year. If the prior distribution exceeds the amount of his
Liquidating Share, as determined pursuant to the audit, the withdrawing Partner
will be required to pay the excess amount to the Partnership in cash.
SECTION 8.4 Required Withdrawals: The General Partner, in its sole
discretion, may effect the withdrawal of a Limited Partner at any time during a
fiscal year by delivery of at least 10 days written notice to such Limited
Partner if: (i) the Capital Account of such Limited Partner is less than 1% of
the aggregate Capital Accounts of all Partners, (ii) the Limited Partner's
participation in the Partnership would result in additional legal, regulatory
or other compliance expenses or restrictions on the Partnership, or (iii) the
General Partner, in its sole discretion, determines it would be in
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the best interest of the Partnership and the remaining Partners to exclude such
Limited Partner from the Partnership.
(a) The General Partner, under such circumstances, shall first have
the option to acquire for its own account and at its own expense the
Partnership interest of said Limited Partner by payment to such Limited
Partner of an amount equal to the Capital Account of such Limited Partner
as of the effective date of withdrawal as adjusted to reflect that Limited
Partner's Partnership Percentage of any Net Profits or Losses and Realized
and Unrealized Capital Gains or Losses for the current Interim Period.
(b) If the General Partner chooses not to purchase for its own account
the interest of such Limited Partner, then a withdrawal of such Limited
Partner shall be effected by the General Partner on behalf of the
Partnership and at the Partnership's expense by payment to the Limited
Partner of an amount equal to the Capital Account of such Limited Partner
as of the effective date of withdrawal as adjusted to reflect that Limited
Partner's Partnership Percentage of any Net Profits or Losses and Realized
and Unrealized Capital Gains or Losses for the current Interim Period.
(c) Upon any such payment either pursuant to (a) or (b) above, such
Limited Partner shall be deemed to have withdrawn from the Partnership as
of the date of such payment and such Limited Partner shall have no further
interest in the profits or losses of the Partnership.
SECTION 8.5 Limitations on Withdrawal of Liquidating Share: The right of
any withdrawn, deceased or insane Partner or his legal representative to have
distributed the Liquidating Share of such Partner pursuant to this Section 8 is
subject to the provision by the General Partner for all Partnership liabilities
in accordance with the
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Texas Revised Limited Partnership Act and for reserves for contingencies, which
reserves shall be held in escrow. The unused portion of any reserve shall be
distributed after the General Partner has determined that the need therefore
shall have ceased.
SECTION 9
DURATION AND TERMINATION OF PARTNERSHIP
SECTION 9.1 Duration: The Partnership shall continue until August 1, 2030
unless sooner terminated pursuant to Section 8.1. In the case of dissolution of
the Partnership for any cause, whether or not specified in this Agreement, the
Partnership business may be continued by the General Partner, or the liquidator
selected by the Limited Partners in accordance with Section 8.1, until all of
the assets and liabilities of the Partnership are liquidated.
SECTION 9.2 Termination: On termination of the business of the
Partnership, the General Partner shall, out of the Partnership assets, make
distribution in the following manner and order:
(a) to payment and discharge of the claims of all creditors of the
Partnership who are not Partners;
(b) to payment and discharge pro rata of the claims of all creditors
of the Partnership who are Partners; and
(c) to the Partners in the relative proportions that their respective
Liquidating Shares bear to each other.
SECTION 9.3 Method of Distributions: Distributions made pursuant to
subparagraphs (a) and (b) of Section 9.2 shall be made solely in cash. All
other distributions and/or withdrawals made pursuant to this Agreement shall be
made in cash or Securities or both, as the General Partner may in its
discretion determine.
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SECTION 10
REPORTS TO PARTNERS
SECTION 10.1 Independent Auditors: The books of accounts and records of
the Partnership shall be kept at the discretion of the General Partner and
shall be audited as of the end of each fiscal year by the independent certified
public accountants selected by the General Partner. All determinations of
Capital Accounts and Partnership Percentages made during a fiscal year shall be
subject to adjustment upon completion of the Partnership's audit for such
fiscal year.
SECTION 10.2 Reports to Current Partners: Within 90 days of the end of
each fiscal year, the independent certified public accountants selected by the
General Partner shall prepare and mail to each Partner a report setting forth
the financial position of the Partnership as of the end of such fiscal year and
the income statement of the Partnership for such fiscal year.
SECTION 10.3 Reports to Current and Former Partners: In addition, within
90 days of the end of each fiscal year, the independent certified public
accountants selected by the General Partner shall prepare and mail to each
Partner (or his legal representatives) to the extent necessary a report setting
forth in sufficient detail such transactions effected by the Partnership during
such fiscal year as shall enable such Partner (or his legal representatives) to
prepare his respective Federal Income Tax Return in accordance with the laws,
rules and regulations then prevailing. SECTION 10.4 Interim Reports: In
addition, at least every 90 days, the General Partner will provide interim
reports with respect to the progress of the Partnership.
SECTION 11
MISCELLANEOUS
SECTION 11.1 Amendments to Partnership Agreement: The terms and provisions
of this Agreement may be modified or amended at any time and from time to time
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with the written consent of a majority in interest of the Limited Partners and
the written consent of each General Partner insofar as is consistent with the
laws governing this Agreement; provided, however, that, without the specific
consent of each Partner affected thereby, no such modification or amendment
shall (i) reduce the capital account of any Partner or his rights of
contribution or withdrawal with respect thereto; (ii) change by way of increase
the General Partner's share of Net Profits and Realized Capital Gains or Losses
or Unrealized Capital Gains or Losses; or (iii) amend this Section 11.1, and
provided, further that without the consent of the Limited Partners, the General
Partner may amend the Agreement in such a manner that does not adversely affect
any Limited Partner.
SECTION 11.2 Liability of Partners: The names of all of the Partners and
the amounts of their respective Capital Contributions are set forth in the
Schedule which is attached hereto and made a part of this Agreement.
Each General Partner shall have unlimited liability for the repayment and
discharge of all debts and obligations of the Partnership attributable to any
Interim Period during which he is or was a General Partner of the Partnership.
Limited Partners and former Limited Partners shall be liable for the
repayment and discharge of all debts and obligations of the Partnership
attributable to any Interim Period during which they are or were Limited
Partners of the Partnership only to the extent of their respective interests in
the Partnership in such Interim Periods to which any such debts and obligations
are attributable and shall not otherwise have any liability in respect of the
debts and obligations of the Partnership.
The Partners and all former Partners shall share all losses, liabilities
or expenses suffered or incurred by virtue of the operation of the preceding
paragraphs of this Section 11.2 in the proportions of their respective
Partnership Percentages for the Interim Periods to which any debts or
obligations of the Partnership are attributable up to the limit of their
respective interests in the Partnership for such Interim Periods.
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As used in this Section 11.2, the terms "interests in the Partnership" and
"interest in the Partnership" shall mean with respect to any Interim Period and
with respect to each Partner (or former Partner) the Liquidating Share that
such Partner (or former Partner) would have received (or in fact did receive)
pursuant to the terms and provisions of Section 8.3 on withdrawal from the
Partnership as of the end of such Interim Period.
Notwithstanding any other provision in this Agreement, in no event shall
any Limited Partner (or former Limited Partner) be obligated to make any
additional contribution whatsoever to the Partnership, or have any liability
for the repayment and discharge of the debts and obligations of the Partnership
(apart from his interest in the Partnership) except that a Limited Partner (or
former Limited Partner) may be required for purposes of meeting his obligations
under the Texas Revised Limited Partnership Act to make additional
contributions up to, but in no event in excess of, the aggregate amount of the
withdrawals actually received by him from the Partnership during or after the
Interim Period to which any debt or obligation is attributable.
As used in this Agreement, the terms "former Limited Partner" and "former
Partner" refer to such persons as hereafter from time to time cease to be
Limited Partners and Partners respectively pursuant to the terms and provisions
of this Agreement.
SECTION 11.3 Assignability of Interest: A Partner may not assign his
interest in whole or in part to any person except by last will and testament or
by operation of law, and any such attempted assignment shall be void; provided,
however, that nothing contained herein shall limit the rights of any Partner to
take the following actions:
A Limited Partner may, at his own expense and with the prior written
consent of the General Partner, assign his Partnership interest (i) to other
Limited Partners, (ii) to entities controlled by such Limited Partner, or (iii)
to a trustee for the benefit of such Limited Partner and/or such Limited
Partner's immediate family; provided, however, that
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the Limited Partner, a member of his immediate family or such other person or
entity as may be acceptable to the General Partner shall be the trustee of such
trust.
If the interest of a Limited Partner is assigned pursuant to this Section
11.3, the assignee shall become a substituted Limited Partner in his place only
with the consent of the General Partner and no other Limited Partner need
consent to such substitution in order to render it effective; provided,
however, that such assignee shall:
(a) execute and swear to such instruments as the General Partner may
deem necessary or advisable to effect the admission of such person as a
substituted Limited Partner;
(b) assume all obligations of the Limited Partner, as such, for whom
he is being substituted; and
(c) pay for all expenses incurred by the Partnership in connection
with such person's becoming a substituted Limited Partner.
All other steps shall be taken which, in the opinion of the General
Partner, are reasonably necessary to admit such person as a substituted Limited
Partner and such person shall thereupon become a substituted Limited Partner
and consistent therewith shall enjoy all of the rights and duties incident to
the interest with respect to which the substitution has occurred; provided,
however, that neither the assignment of an interest of a Limited Partner, nor
the admission of an assignee as a substituted Limited Partner, shall relieve
the assignor of any duties or obligations as such theretofore incurred except
to the extent provided in a writing signed by the parties to said assignment
and the General Partner.
SECTION 11.4 Exculpation and Indemnification of the General Partner: Each
General Partner and his or its directors, officers, employees, agents,
authorized representatives and Affiliates (the "Indemnitees") shall not be
liable, responsible or accountable in damages or otherwise to the Partnership
or any Partner for any action taken or failure to act on behalf of the
Partnership to the maximum extent permitted by
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law. A determination that the standards for exculpation have been met under
applicable law shall be made by special legal counsel selected by the General
Partner. Furthermore, the Indemnitees shall be indemnified by the Partnership
against any losses, judgments, liabilities, expenses, penalties, fines, taxes
and amounts paid in settlement of any claims sustained by him or it in
connection with the Partnership, including but not limited to any judgment,
award, settlement, reasonable attorneys' fees, and other costs or expenses
incurred in connection with the defense or settlement of any actual or
threatened action proceeding or claim, provided that the Indemnitee is entitled
to exculpation under applicable law as set forth in this Section 11.4. The
Partnership will pay or reimburse, in advance of the final disposition of any
proceeding, reasonable expenses incurred by a General Partner who was, is, or
is threatened to be made a named defendant or respondent in a proceeding after:
(i) the Partnership receives a written affirmation by the General Partner of
the General Partner's good faith belief that the General Partner has met the
standard of conduct necessary for indemnification as required under applicable
law, and a written undertaking by or on behalf of the General Partner to repay
the amount paid or reimbursed if it is ultimately determined that the General
Partner has not met those requirements and (ii) a determination by special
legal counsel selected by the General Partner that the facts then known to such
special legal counsel would not preclude indemnification under applicable law.
SECTION 11.5 General: This Agreement (i) shall be binding on the
executors, administrators, estates, heirs, and legal successors of the
Partners; (ii) shall be governed by, and construed in accordance with, the laws
of the State of Texas; and (iii) may be executed in several counterparts with
the same effect as if the parties executing the several counterparts had all
executed one counterpart as of the date and year first above written, provided,
however, that each separate counterpart shall have been
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executed by the General Partner and that the several counterparts, in the
aggregate, shall have been signed by all of the Partners.
SECTION 11.6 Power of Attorney: Each of the undersigned does hereby
constitute and appoint each General Partner as his true and lawful
representative and attorney in fact, in his name, place and stead to make,
execute, sign and file all such instruments, documents, and certificates which
may from time to time be required by the laws of the United States of America,
the State of Texas or any other state in which the Partnership shall determine
to do business, or any political subdivision or agency thereof, to effectuate,
implement and continue the valid and subsisting existence of the Partnership.
Such representatives and attorneys in fact shall not, however, have any
right, power or authority to amend or modify this Agreement when acting in such
capacities.
SECTION 11.7 Notices: Each notice relating to this Agreement shall be in
writing and delivered in person, by recognized overnight delivery service or by
registered, certified or regular mail. All notices to the Partnership shall be
addressed to its principal office and place of business. All notices addressed
to a Partner shall be addressed to such Partner at the address set forth in the
Schedule. Any Partner may designate a new address by notice to that effect
given to the Partnership. Unless otherwise specifically provided in this
Agreement, a notice shall be deemed to have been effectively given when mailed
by registered, certified or regular mail to the proper address or delivered in
person or by recognized overnight delivery service.
SECTION 11.8 Joint and Several Liability: The general partners and
co-venturers of any Partner that itself is a partnership or joint venture shall
be jointly and severally liable for all obligations of that Partner.
SECTION 11.9 Use of Name: The Partnership shall have the right to use the
name of any General Partner. The term "General Partner" and "General Partners"
shall include one or more General Partners unless the context otherwise
requires.
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SECTION 11.10 Good Will: No value shall be placed on the name or good will
of the Partnership.
SECTION 11.11 Headings: The headings of the Sections of this Agreement are
for convenience of reference only, and are not to be considered in construing
the terms and provisions of this Agreement.
SECTION 11.12 Prior Agreement: By the execution hereof, each of the
parties hereto consents and agrees to the amendment and restatement of the
Prior Agreement as set forth herein. Each party to the Prior Agreement further
agrees that, notwithstanding anything in the Prior Agreement to the contrary,
the change in the persons who are General Partners of the Partnership shall not
effect a dissolution and termination of the Partnership.
[SIGNATURE PAGE TO FOLLOW]
25
<PAGE> 30
IN WITNESS WHEREOF, the undersigned have hereto, set their hands and seals
as of June 30, 1991.
GENERAL PARTNER:
---------------------------------
G. Houston Hall
---------------------------------
James C. Smith
LIMITED PARTNER:
---------------------------------
Name:
----------------------------
26
<PAGE> 31
SCHEDULE OF CAPITAL CONTRIBUTIONS
I
- ------------------------
General Partner:
G. Houston Hall $
8235 Douglas Avenue ----------------------
Suite 420
Dallas, Texas 75225
James C. Smith $
8235 Douglas Avenue ----------------------
Suite 420
Dallas, Texas 75225
II
- ------------------------
Limited Partners:
27
