<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _________)*
Republic Group Incorporated
---------------------------
(Name of Issuer)
Common Stock $1.00 par value
----------------------------
(Title of Class of Securities)
760 473 108
-----------
(CUSIP Number)
Janey S. Rife, P.O. Box 1307, Hutchison, Kansas 67504-1307, (316) 727-2711
--------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
July 9, 1996
------------
(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 [X]. (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> 2
SCHEDULE 13D
CUSIP NO. 760 473 108 PAGE 2 OF 48 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
A.M. RHYNE & CO. LIMITED
(Phil Simpson, Managing General Partner)
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
TEXAS
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
1,953,140 (MR. PHIL SIMPSON, AS MANAGING
NUMBER OF GENERAL PARTNER OF THE REPORTING PERSON,
HAS SOLE VOTING POWER OVER THE SHARES)
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY --
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
1,953,140 (MR. PHIL SIMPSON, AS MANAGING
REPORTING GENERAL PARTNER OF THE REPORTING PERSON,
HAS SOLE DISPOSITIVE POWER OVER THE SHARES)
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
--
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,953,140
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.37%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDED BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND SIGNATURE ATTESTATION.
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 760 473 108 PAGE 3 OF 48 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PHIL SIMPSON
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
2,035,185
SHARES -------------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY --
------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
1,953,140
PERSON ------------------------------------------------
10 SHARED DISPOSITIVE POWER
WITH
--
- -------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,042,685
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.25%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- --------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDED BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND SIGNATURE ATTESTATION.
<PAGE> 4
PAGE 4 OF 48 PAGES
ITEM 1. SECURITY AND ISSUER.
The securities to which this schedule 13D relates are the shares of
common stock, $1.00 par value per share (the "Common Stock"), of Republic Group
Incorporated, a Delaware corporation (the "Issuer"), whose principal executive
offices are located at P.O.Box 1307, Hutchison, Kansas 67504-1307.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by A. M. Rhyne & Co. Limited, a Texas
limited partnership (the "Partnership") and Mr. Phil Simpson. Mr. Phil Simpson
is the Managing General Partner of the Partnership and Mrs. Lorraine Hammerich
Simpson, the spouse of Mr. Phil Simpson ("Mrs. Simpson"), and Mr. David P.
Simpson, the adult son of Mr. Phil Simpson and Mrs. Simpson, are General
Partners of the Partnership. Pursuant to the Partnership Agreement (as
hereinafter defined), Mr. Phil Simpson has sole and exclusive voting and
dispositive power with respect to the shares owned by the Partnership. The
Partnership and Mr. Phil Simpson, are collectively referred to hereinafter as
the "Reporting Persons."
The Partnership's principal purposes are to own, operate and maintain
the partnership assets for investment and/or capital appreciation and to
provide a means for the partners to preserve the partnership assets for various
purposes, including estate planning.
Mr. Phil Simpson's principal occupation is the Chairman of the Board,
President and Chief Executive Officer of the Issuer. Mr. Simpson is a citizen
of the United States of America.
Mrs. Simpson's principal occupation is a housewife. Mrs. Simpson is a
citizen of the United States of America.
Mr. David P. Simpson's principal occupation is the General Partner of
Avinger Timber Co. Limited (timberland and related investments), President of
Simpson Publishing Company (religious publications), and the Mayor of the City
of Avinger, Texas. Mr. David P. Simpson is a citizen of the United States of
America.
The business address of each of the Partnership, Mr. Phil Simpson and
Mrs. Simpson is P.O. Box 750, Dallas, Texas 75221. The business address of
each of Mr. David P. Simpson, Avinger Timber Co. Limited and Simpson Publishing
Company is P.O. Box 100, Avinger, Texas 75630-0100.
None of the Reporting Persons, Mrs. Simpson or Mr. David P. Simpson
have been (i) convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) during the last five years; or (ii) a party, during
the last five years, to a civil proceeding of a judicial or administrative body
of competent jurisdiction which resulted in any of their being 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.
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PAGE 5 OF 48 PAGES
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The 1,953,140 shares of Common Stock beneficially owned by the
Partnership were acquired by the Partnership through transfers effected on July
9, 1996 by the Simpson Family Trust (1,944,740 shares) and Mrs. Simpson (8,400
shares). Mr. Phil Simpson beneficially owns the 1,953,140 shares of Common
Stock by virtue of being the Managing General Partner of the Partnership. In
addition, Mr. Phil Simpson beneficially owns 89,545 shares of Common Stock,
including 7,500 shares which he has the right to acquire within sixty (60) days
under the Issuer's stock option plan and 82,045 shares allocated to him under
the Issuer's Employee Stock Ownership Plan ("ESOP").
ITEM 4. PURPOSE OF TRANSACTION.
The transfers made by the Simpson Family Trust and Mrs. Simpson as
reported in Item 3 above were primarily for estate planning and investment
purposes. The Reporting Persons intend to hold the shares reported herein for
investment purposes. The Reporting Persons may, however, from time to time, in
the ordinary course of their business invest on behalf of themselves or their
partners, respectively, in additional shares of Common Stock, or may engage,
depending upon market conditions and other relevant factors in a sale or other
disposition of all or a portion of the shares of Common Stock being reported
herein. Except as otherwise stated below, the Reporting Persons have no
present plans or proposals which relate to or would result in any extraordinary
corporate transaction involving the Issuer or any of its subsidiaries, a sale
or transfer of a material amount of assets of the Issuer, a change in the
present Board of Directors or management of the Issuer, a material change in
the present capitalization or dividend policy of the Issuer, any other material
change in the Issuer's business corporate structure, changes in the Issuer's
Charter or Bylaws or with respect to the delisting or deregistration of any of
the Issuer's securities. Mr. Phil Simpson, on behalf of himself and the
Partnership, intends to vote the shares reported herein in favor of the
proposals presented in the Proxy Statement dated August 27, 1996 filed with the
Securities and Exchange Commission in preliminary form (the "Proxy Statement"),
which proposals include:
(i) the addition of a "fair price" provision to the Issuer's
Certificate of Incorporation requiring that certain business
combinations with interested 15% stockholder of the Issuer (or
certain related parties) be approved by the vote of the
holders of not less than 66-2/3% of the total voting power of
all outstanding shares of voting stock (excluding shares held
by such interested stockholders and certain related parties),
unless the business combination is approved by a majority of
the continuing directors or certain procedural and fair price
requirements are satisfied;
(ii) the amendment of the Issuer's Certificate of Incorporation to
add a requirement that action by stockholders only be taken at
an annual or special meeting and not by written consent;
(iii) the amendment of the Issuer's Certificate of Incorporation to
add a requirement that adoption, amendment, alteration or
repeal of the Amended and Restated Bylaws of the Company by
the stockholders requires the vote of the holders of not less
than 66-2/3% of the total voting power of all
<PAGE> 6
PAGE 6 OF 48 PAGES
outstanding shares of voting stock, and, if such action has
been proposed by an interested 15% stockholder (or certain
related parties), the additional vote of the holders of not
less than 66-2/3% of the total voting power of all outstanding
shares of voting stock not beneficially owned by such
interested stockholder or such related parties;
(iv) the amendment of the Issuer's Certificate of Incorporation to
add a requirement that amendment, alteration or repeal of the
foregoing amendments to the Certificate of Incorporation that
are approved, as well as the amendment to be added by this
proposal, requires the vote of the holders of not less than
66-2/3% of the total voting power of all outstanding shares of
voting stock, and, if such action has been proposed by an
interested 15% stockholder (or certain related parties), the
additional vote of the holders of not less than 66-2/3% of the
total voting power of all outstanding shares of voting stock
not beneficially owned by such interested stockholder or such
related parties;
(v) the amendment of the Issuer's Certificate of Incorporation to
increase the total number of shares of Common Stock that the
Company shall have the authority to issue from 25,000,000 to
35,000,000; and
(vi) certain amendments to the Issuer's 1989 Long-Term Incentive
Plan and Non- Employee Director Stock Option Plan.
According to the Proxy Statement, the above proposals are not in response to
any effort, of which the Issuer is aware, to accumulate the Issuer's Common
Stock or to obtain control of the Issuer.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The Reporting Persons beneficially own, in the aggregate, 2,042,685
shares of Common Stock. Of such aggregate amounts, the Partnership owns
1,953,140 shares which represents approximately 18.37% of the outstanding
shares of the Issuer (based upon information contained in the Issuer's Form
10-Q for the period ending March 31, 1996, which reported 10,603,604 shares of
Common Stock). As provided for under the Agreement of Limited Partnership,
executed to be effective as of January 1, 1996, and amended as of September __
, 1996 (the "Partnership Agreement") (Exhibit B), Mr. Phil Simpson, Mrs.
Simpson and Mr. David P. Simpson have designated, by unanimous consent, Mr.
Phil Simpson as the Managing General Partner, effective as of January 6, 1996
(a copy of the Unanimous Consent of General Partners is attached at Exhibit C).
As a result of such designation, Mr. Phil Simpson has sole and exclusive power
to vote or dispose of all the 1,953,140 shares on behalf of the Partnership.
In addition, as reported in Item 3 above, Mr. Phil Simpson
beneficially owns 89,545 shares of Common Stock. Of such amounts, Mr. Phil
Simpson has sole voting power with respect to the 82,045 shares allocated to
him under the Issuer's ESOP which represents approximately 0.77% of the
outstanding shares of the Issuer. The Trustee of the Issuer's ESOP has sole
dispositive power over such shares. Mr. Phil Simpson has neither voting nor
dispositive power with respect to the 7,500 shares which he has the right to
acquire within sixty (60) days under the Issuer's
<PAGE> 7
PAGE 7 OF 48 PAGES
stock option plan, which shares represents approximately 0.071% of the
outstanding shares of the Issuer.
Mrs. Simpson owns no shares of Common Stock over which she has sole or
shared voting or dispositive power. Mr. David P. Simpson beneficially owns
132,239 shares of Common Stock which represents approximately 1.25% of the
outstanding shares of the Issuer. Of such amounts, Mr. David P. Simpson has
sole voting and dispositive power over 131,347 shares and shared voting and
dispositive power over 892 shares owned by his spouse.
The Reporting Persons, Mrs. Simpson and Mr. David P. Simpson have not
engaged in any transactions in the Issuer's Common Stock within the past sixty
(60) days. No person other than the Reporting Persons has the right to receive
or the power to direct the receipt of dividends from, or the proceeds from the
sale of the shares of Common Stock being reported herein.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Except as provided for under the Partnership Agreement pursuant to
which Mrs. Simpson and Mr. David P. Simpson delegated the sole voting and
dispositive power over the shares beneficially owned by the Partnership to Mr.
Phil Simpson, the Managing General Partner, the Reporting Persons, Mrs. Simpson
and Mr. David P. Simpson have not entered into any contracts, arrangements,
understandings or relationships (legal or otherwise) with any person with
respect to any securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBIT.
Exhibit A - Joint Filing Agreement Pursuant to Rule 13d-1(f)(1)(iii).
Exhibit B - Agreement of Limited Partnership, executed to be effective
as of January 1, 1996, and amended as of September 19,
1996.
Exhibit C - Unanimous Consent of General Partners of A.M. Rhyne & Co.
Limited dated August 8, 1996.
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PAGE 8 OF 48 PAGES
SIGNATURE
After reasonable inquiry to the best of my knowledge and behalf, I certify
that the information set forth in this statement is true, complete and correct.
A.M. Rhyne & Co. Limited
By: /s/ PHIL SIMPSON
-------------------------------
Phil Simpson
Managing General Partner
/s/ PHIL SIMPSON
-----------------------------------
Phil Simpson
Dated: September 13, 1996
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PAGE 9 OF 48 PAGES
EXHIBIT A
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f)(1) of Regulation 13D-G of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended,
the undersigned hereby agree to the joint filing on behalf of each of them of
this statement and any subsequent amendment thereto.
A.M. Rhyne & Co. Limited
By: /s/ PHIL SIMPSON
-------------------------------
Phil Simpson
Managing General Partner
/s/ PHIL SIMPSON
-----------------------------------
Phil Simpson
Dated: September 13, 1996
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PAGE 10 OF 48 PAGES
EXHIBIT B
================================================================================
AGREEMENT OF LIMITED PARTNERSHIP
OF
A.M. RHYNE & CO. LIMITED
(A TEXAS LIMITED PARTNERSHIP)
================================================================================
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PAGE 11 OF 48 PAGES
TABLE OF CONTENTS
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ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 "Act" . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 "Adjusted Capital Account" . . . . . . . . . . . . . . 1
1.3 "Adjusted Capital Account Deficit" . . . . . . . . . . 1
1.4 "Affiliate" . . . . . . . . . . . . . . . . . . . . . 1
1.5 "Agreement" . . . . . . . . . . . . . . . . . . . . . 2
1.6 "Appraisal" . . . . . . . . . . . . . . . . . . . . . 2
1.7 "Assignee" . . . . . . . . . . . . . . . . . . . . . . 2
1.8 "Assignor" . . . . . . . . . . . . . . . . . . . . . . 2
1.9 "Available Cash" . . . . . . . . . . . . . . . . . . . 2
1.10 "Bankruptcy" . . . . . . . . . . . . . . . . . . . . . 2
1.11 "Book Value" . . . . . . . . . . . . . . . . . . . . . 2
1.12 "Capital Account" . . . . . . . . . . . . . . . . . . 3
1.13 "Capital Contribution" . . . . . . . . . . . . . . . . 3
1.14 "Capital Transaction" . . . . . . . . . . . . . . . . 3
1.15 "Code" . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 "Fiscal Year" . . . . . . . . . . . . . . . . . . . . 4
1.18 "General Partner" . . . . . . . . . . . . . . . . . . 4
1.19 "Gross Income" . . . . . . . . . . . . . . . . . . . . 4
1.20 "Limited Partner" . . . . . . . . . . . . . . . . . . 4
1.21 "Net Proceeds of a Capital Transaction" . . . . . . . 4
1.22 "Net Profit and Net Loss" . . . . . . . . . . . . . . 4
1.23 "Net Profit and Net Loss from Capital Transactions" . 5
1.24 "Net Profit and Net Loss from Operations" . . . . . . 5
1.25 "Nonrecourse Deductions" . . . . . . . . . . . . . . . 5
1.26 "Nonrecourse Liability" . . . . . . . . . . . . . . . 6
1.27 "Operations" . . . . . . . . . . . . . . . . . . . . . 6
1.28 "Optional Loans" . . . . . . . . . . . . . . . . . . . 6
1.29 "Partner Nonrecourse Debt" . . . . . . . . . . . . . . 6
1.30 "Partner Nonrecourse Debt Minimum Gain" . . . . . . . 6
1.31 "Partners" . . . . . . . . . . . . . . . . . . . . . . 6
1.32 "Partnership" . . . . . . . . . . . . . . . . . . . . 6
1.33 "Partnership Assets" . . . . . . . . . . . . . . . . . 6
1.34 "Partnership Interest" . . . . . . . . . . . . . . . . 6
1.35 "Partnership Minimum Gain" . . . . . . . . . . . . . . 6
1.36 "Partnership Percentage or Percentages" . . . . . . . 6
1.37 "Permitted Transferee" . . . . . . . . . . . . . . . . 6
1.38 "Person" . . . . . . . . . . . . . . . . . . . . . . . 7
1.39 "Regulations" . . . . . . . . . . . . . . . . . . . . 7
1.40 "Reserves" . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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ARTICLE 2 - FORMATION AND TERM OF THE PARTNERSHIP . . . . . . . . . . . . 7
2.1 Name of the Partnership . . . . . . . . . . . . . . . 7
2.2 Registered Agent and Registered Office . . . . . . . . 7
2.3 Time of Formation . . . . . . . . . . . . . . . . . . 7
2.4 Filing of Certificate . . . . . . . . . . . . . . . . 7
2.5 Term of the Partnership . . . . . . . . . . . . . . . 8
2.6 Indemnity Against Preexisting Liabilities . . . . . . 8
2.7 Independent Activities . . . . . . . . . . . . . . . . 8
ARTICLE 3 - PURPOSE AND INTENT . . . . . . . . . . . . . . . . . . . . . 8
3.1 Purpose and Intent . . . . . . . . . . . . . . . . . . 8
3.2 Other Jurisdictions . . . . . . . . . . . . . . . . . 9
ARTICLE 4 - CAPITALIZATION, CONTRIBUTIONS, AND LOANS BY PARTNERS . . . . 9
4.1 Capital Accounts . . . . . . . . . . . . . . . . . . . 9
4.2 Initial Contributions . . . . . . . . . . . . . . . . 10
4.3 Duty to Contribute . . . . . . . . . . . . . . . . . . 10
4.4 Withdrawal of Capital . . . . . . . . . . . . . . . . 10
4.5 Additional Contributions . . . . . . . . . . . . . . . 10
4.6 Adjustment of Partnership Interests . . . . . . . . . 10
4.7 Partnership Interests Maintained Separately . . . . . 10
4.8 Loans by Partners . . . . . . . . . . . . . . . . . . 10
4.9 Liability of Partners . . . . . . . . . . . . . . . . 11
ARTICLE 5 - COMPENSATION OF THE GENERAL PARTNER AND AFFILIATES . . . . . 11
5.1 Compensation . . . . . . . . . . . . . . . . . . . . . 11
5.2 Interest on Optional Loans . . . . . . . . . . . . . . 11
ARTICLE 6 - MANAGEMENT AND OBLIGATIONS OF THE GENERAL
PARTNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 General Responsibility and Limitation on the
General Partner . . . . . . . . . . . . . . . . . . . 11
6.2 Rights, Powers, and Duties of the General Partner . . 11
6.3 Waiver of Self-Dealing . . . . . . . . . . . . . . . . 13
6.4 Limitations on All Partners . . . . . . . . . . . . . 13
ARTICLE 7 - TRANSFER AND ENCUMBRANCE . . . . . . . . . . . . . . . . . . 14
7.1 Restrictions on Transfer . . . . . . . . . . . . . . . 14
7.2 Partnership Property . . . . . . . . . . . . . . . . . 15
7.3 Acquisition of an Interest Conveyed Without
Authority . . . . . . . . . . . . . . . . . . . . . . 15
7.4 Prohibition Against Admission of Additional
Partners . . . . . . . . . . . . . . . . . . . . . . . 16
7.5 Prohibition Against Withdrawal of Limited Partner . . 17
</TABLE>
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ARTICLE 8 - ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1 Fiscal Year . . . . . . . . . . . . . . . . . . . . . 17
8.2 Books . . . . . . . . . . . . . . . . . . . . . . . . 17
8.3 Banking . . . . . . . . . . . . . . . . . . . . . . . 17
8.4 No Commingling of Accounts . . . . . . . . . . . . . . 17
8.5 Access to Books . . . . . . . . . . . . . . . . . . . 17
8.6 Tax Returns . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 9 - DISTRIBUTIONS AND ALLOCATIONS . . . . . . . . . . . . . . . . 17
9.1 Distribution of Available Cash . . . . . . . . . . . . 17
9.2 Distribution of Net Proceeds of a Capital
Transaction . . . . . . . . . . . . . . . . . . . . . 17
9.3 Distribution of Cash From the Sale of All of the
Partnership Assets . . . . . . . . . . . . . . . . . . 18
9.4 Distributions Not Withdrawn . . . . . . . . . . . . . 18
9.5 Transferor-Transferee Shares . . . . . . . . . . . . . 18
9.6 Negative Capital Accounts . . . . . . . . . . . . . . 18
9.7 Liquidation . . . . . . . . . . . . . . . . . . . . . 18
9.8 Allocations of Net Profit and Net Loss. . . . . . . . 19
9.9 Partnership Minimum Gain Chargeback . . . . . . . . . 20
9.10 Minimum Gain Chargeback for Partner Nonrecourse
Debt . . . . . . . . . . . . . . . . . . . . . . . . . 20
9.11 Qualified Income Offset . . . . . . . . . . . . . . . 20
9.12 Limit on Loss Allocations . . . . . . . . . . . . . . 20
9.13 Net Loss from Partner Nonrecourse Debt . . . . . . . . 21
9.14 Nonrecourse Deductions . . . . . . . . . . . . . . . . 21
9.15 Code Section 754 Adjustments . . . . . . . . . . . . . 21
9.16 Reversal of Mandatory Allocations . . . . . . . . . . 21
9.17 Compliance with Code . . . . . . . . . . . . . . . . . 21
9.18 Tax Allocations -- Code Section 704(c) . . . . . . . . 21
9.19 Allocation on Transfer . . . . . . . . . . . . . . . . 22
9.20 Minimum Interest of General Partner . . . . . . . . . 22
ARTICLE 10 - DISSOLUTION, WINDING UP, AND TERMINATION OF THE
PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10.1 Dissolution . . . . . . . . . . . . . . . . . . . . . 22
10.2 Death, Bankruptcy, or Mental Incompetence of
Partner . . . . . . . . . . . . . . . . . . . . . . . 22
10.3 Continuation . . . . . . . . . . . . . . . . . . . . . 23
10.4 Prohibition Against Withdrawal of General Partner . . 23
10.5 Successor General Partner . . . . . . . . . . . . . . 24
10.6 Winding Up . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 11 - LIABILITY AND INDEMNIFICATION OF THE GENERAL
PARTNER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.1 Exoneration . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C>
11.2 Indemnification . . . . . . . . . . . . . . . . . . . 24
11.3 Indemnification of Limited Partner . . . . . . . . . . 25
11.4 No Personal Liability . . . . . . . . . . . . . . . . 25
ARTICLE 12 - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . 26
12.1 Amendment . . . . . . . . . . . . . . . . . . . . . . 26
12.2 Notices and Consents . . . . . . . . . . . . . . . . . 26
12.3 Texas Law to Apply . . . . . . . . . . . . . . . . . . 26
12.4 Other Instruments . . . . . . . . . . . . . . . . . . 26
12.5 Headings . . . . . . . . . . . . . . . . . . . . . . . 26
12.6 Binding . . . . . . . . . . . . . . . . . . . . . . . 26
12.7 Number and Gender . . . . . . . . . . . . . . . . . . 26
12.8 Partial Invalidity . . . . . . . . . . . . . . . . . . 27
12.9 Registration of Interests . . . . . . . . . . . . . . 27
12.10 Entire Agreement . . . . . . . . . . . . . . . . . . . 27
12.11 Meetings and Means of Voting . . . . . . . . . . . . . 27
12.12 Right to Rely Upon the Authority of the General
Partner . . . . . . . . . . . . . . . . . . . . . . . 27
12.13 Litigation . . . . . . . . . . . . . . . . . . . . . . 28
12.14 Partition . . . . . . . . . . . . . . . . . . . . . . 28
12.15 General Partner with Interest as Limited Partner . . . 28
12.16 Counterpart Execution . . . . . . . . . . . . . . . . 28
</TABLE>
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<PAGE> 15
PAGE 15 OF 48 PAGES
AGREEMENT OF LIMITED PARTNERSHIP
OF
A.M. RHYNE & CO. LIMITED
This Agreement of Limited Partnership is made and entered into effective
as of the 1st day of January, 1996, by and among PHIL SIMPSON, LORRAINE
HAMMERICH SIMPSON, and DAVID P. SIMPSON, as General Partners, and PHIL SIMPSON
and LORRAINE HAMMERICH SIMPSON, as Limited Partners, for the purposes and upon
the terms and conditions as set forth herein.
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Act" shall mean the Texas Revised Limited Partnership Act, Article
6132a-1, Revised Civil Statutes of Texas, as amended from time to time.
1.2 "Adjusted Capital Account" shall mean, with respect to a Partner,
that Partner's Capital Account after (i) crediting to his Capital Account any
amount that the Partner is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5);
(ii) crediting to his Capital Account any amount that the Partner is
unconditionally obligated to contribute to the Partnership under applicable
law; (iii) crediting to his Capital Account the Partner's share (as determined
under Code Section 752) of any recourse indebtedness of the Partnership to the
extent that such indebtedness could not be repaid out of the Partnership's
assets if all of the Partnership's assets were sold at their respective Book
Values as of the end of the Fiscal Year or other period and the proceeds from
the sales were used to pay the Partnership's liabilities; and (iv) debiting to
the Capital Account the items described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6). This definition of Adjusted Capital
Account is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and 1.704-2, and will be interpreted consistently with
those provisions. For purposes of clause (iii) above, the amounts computed
pursuant to clause (i) above for each Partner shall be considered to be
proceeds from the sale of the assets of the Partnership to the extent such
amounts would be available to satisfy (directly or indirectly) the indebtedness
specified in clause (iii).
1.3 "Adjusted Capital Account Deficit" shall mean, with respect to any
Partner, the deficit balance, if any, in that Partner's Adjusted Capital
Account as of the end of the relevant taxable year.
1.4 "Affiliate", with respect to any Person, shall mean (i) any other
Person directly or indirectly controlling, controlled by, or under common
control with, such Person (including spouses or lineal descendants), (ii) any
other Person owning or controlling ten percent or more of the outstanding
voting interests of such Person, (iii) an officer, director, or partner of such
Person, and
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(iv) any company, corporation, or organization for which such Person acts as an
officer, director, or partner.
1.5 "Agreement" shall mean this Agreement of Limited Partnership of
A.M. RHYNE & CO. LIMITED.
1.6 "Appraisal" shall mean, unless the context indicates otherwise, a
written valuation report by an appraiser, selected by the General Partner and
qualified to perform business appraisals of partnerships and ownership
interests in partnerships, that describes and values the fair market value of
an ownership interest in the Partnership.
1.7 "Assignee" shall mean a Person to whom a Partnership Interest has
been Transferred in a manner permitted under Sections 7.1 and 10.2 of this
Agreement, but who has not become a substituted Limited Partner or a successor
General Partner as provided thereunder.
1.8 "Assignor" shall mean a General Partner or Limited Partner from
whom an Assignee acquires a Partnership Interest as permitted under Sections
7.1 or 10.2 of this Agreement.
1.9 "Available Cash" shall mean all cash funds from operations of the
Partnership on hand or on deposit from time to time after (i) payment of all
operating expenses payable as of the date in question, (ii) provision for
payment of all outstanding and unpaid Partnership obligations due and payable
as of the date in question or within sixty (60) days thereafter, and (iii) the
establishment of such reasonable Reserves as the General Partner, in its sole
discretion, deems appropriate for the operating needs of the Partnership.
"Available Cash" shall not include or reflect any proceeds received or expenses
incurred in connection with a Capital Transaction.
1.10 "Bankruptcy" shall mean with respect to any Partner the happening
of any event described in Subsections (4) and (5) of Section 4.02(a) of the
Act.
1.11 "Book Value" shall mean with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
1.11.1 the initial Book Value of any asset contributed (or deemed
contributed under Regulations Section 1.708-1(b)(1)(iv)) by a Partner to
the Partnership shall be the asset's gross fair market value at the time
of the contribution;
1.11.2 the Book Value of all Partnership assets shall be adjusted
to equal their respective gross fair market values, as determined by the
General Partner in its reasonable judgment:
1.11.2.1 if the General Partner reasonably determines an
adjustment is necessary or appropriate to reflect the relative
economic interests of the Partners in the Partnership as of (1) the
acquisition of an additional interest in the Partnership by any new
or existing Partner in exchange for more than a de minimis
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capital contribution, or (2) the distribution by the Partnership to
a Partner of more than a de minimis amount of Partnership property
as consideration for an interest in the Partnership; and
1.11.2.2 as of the liquidation of the Partnership within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
1.11.3 the Book Value of any Partnership asset distributed to any
Partner will be the gross fair market value of the asset on the date of
distribution; and
1.11.4 the Book Values of Partnership assets will be increased or
decreased to reflect any adjustment to the adjusted basis of the assets
under Code Sections 734(b) or 743(b), but only to the extent that the
adjustment is taken into account in determining Capital Accounts under
Regulations Section 1.704-1(b)(2)(iv)(m), provided that Book Values will
not be adjusted hereunder to the extent that the General Partner
determines that an adjustment under Section 1.11.2 is necessary or
appropriate in connection with a transaction that would otherwise result
in an adjustment under this Section 1.11.4.
After the Book Value of any asset has been adjusted under Section 1.11.1,
1.11.2 or Section 1.11.4 above, Book Value will be adjusted by the
Depreciation taken into account with respect to the asset for purposes of
computing Net Profit and Net Loss.
1.12 "Capital Account" shall have the meaning set forth in Section 4.1
of this Agreement.
1.13 "Capital Contribution" shall mean, with respect to any Partner, the
amount of money and the fair market value of any other property (net of
liabilities secured by such property that the Partnership is considered to
assume or take subject to under Code Section 752) contributed to the
Partnership with respect to the interest in the Partnership held by that
Partner.
1.14 "Capital Transaction" shall mean the sale, exchange or other
disposition of all or any portion of the property of the Partnership other than
in the ordinary course of business of the Partnership. Capital Transactions
include the financing or refinancing of Partnership property which creates
excess funds not needed for Operations and which funds, in the opinion of the
General Partner, are available for distribution to the Partners.
1.15 "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.16 "Depreciation" shall mean for each taxable year or other period,
an amount equal to the depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for the year or other period,
except that if the Book Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of the year or other period,
Depreciation will be an amount which bears the same ratio to the beginning Book
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for the year or other period bears to
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PAGE 18 OF 48 PAGES
the beginning adjusted tax basis, provided that if the federal income tax
depreciation, amortization, or other cost recovery deduction for the year or
other period is zero, Depreciation will be determined with reference to the
beginning Book Value using any reasonable method selected by the General
Partner.
1.17 "Fiscal Year" shall mean the period commencing on January 1 of each
year and ending on December 31 of such year.
1.18 "General Partner" at any particular time shall mean any Person who
(i) is referred to as such in the first paragraph of this Agreement or has
become a General Partner pursuant to the terms of this Agreement, and (ii) at
such time has not ceased to be a General Partner pursuant to the terms of this
Agreement. "The General Partner" means all such Persons. The Persons who at
any particular time are serving as General Partner must act together to bind
the Partnership as provided in Section 6.2 hereof. The name and address of
each initial General Partner, each General Partner's initial capital
contribution, and each General Partner's initial Partnership Interest are
listed on Exhibit "A" attached hereto and incorporated by reference herein.
1.19 "Gross Income" shall mean for each Fiscal Year or other period, an
amount equal to the Partnership's gross income as determined for federal income
tax purposes for such Fiscal Year or period but computed with the adjustments
specified in Section 1.22.1 and 1.22.3.
1.20 "Limited Partner" at any particular time shall mean any Person (i)
who is referred to as such in the first paragraph of this Agreement or who has
been admitted as a substituted Limited Partner pursuant to the terms of this
Agreement, and (ii) who is the owner of a Partnership Interest. "Limited
Partners" means all such Persons. All references in this Agreement to a
majority in interest or a specified percentage of the Limited Partners shall
mean Limited Partners holding more than 50 percent or such specified
percentage, respectively, of the Partnership Interests then held by Limited
Partners. The name and address of each initial Limited Partner, each Limited
Partner's initial capital contribution, and each Limited Partner's initial
Partnership Interest are listed on Exhibit "A."
1.21 "Net Proceeds of a Capital Transaction" shall mean the net proceeds
received by the Partnership in connection with a Capital Transaction after
payment of all costs and expenses incurred by the Partnership in connection
with such Capital Transaction, including, without limitation, brokers'
commissions, loan fees, other closing costs, the cost of any alteration,
improvement, restoration or repair of Partnership Assets necessitated by or
incurred in connection with such Capital Transaction, any Reserves that the
General Partner believes in good faith should be established and the payment of
any loans owed by the Partnership to any of the Partners, plus any other loans
that should be appropriately paid, as determined by the General Partner in its
reasonable discretion.
1.22 "Net Profit and Net Loss" shall mean for each Fiscal Year or other
period, an amount equal to the Partnership's taxable income or loss for such
Fiscal Year or period, determined in accordance with Code Section 703(a) (for
this purpose, all items of income, gain, loss
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PAGE 19 OF 48 PAGES
or deduction required to be stated separately pursuant to Code Section
703(a)(1) shall be included in taxable income or loss) with the following
adjustments:
1.22.1 any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Net Profit
or Net Loss shall be added to such taxable income or loss;
1.22.2 any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
under Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken
into account in computing Net Profit or Net Loss shall be subtracted from
such taxable income or loss;
1.22.3 gain or loss resulting from any disposition of Partnership
Assets with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Book Value of
such property notwithstanding that the Book Value of such asset differs
from its adjusted tax basis;
1.22.4 gain or loss resulting from any adjustment pursuant to
Section 1.11.2 shall be taken into account as gain or loss from
disposition of the asset for purposes of computing Net Profit or Net Loss
hereunder;
1.22.5 in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing taxable income or
loss, there shall be taken into account Depreciation for such Fiscal Year
or other period as determined under regulation section
1.704-1(b)(2)(iv)(g)(3);
1.22.6 the amount of any Gross Income specially allocated to the
Partners pursuant to Sections 9.9 through 9.11 and 9.16 shall not be
included as income or revenue; and
1.22.7 any amount allocated pursuant to Sections 9.13 through 9.16
shall not be included as a gain, loss or deduction.
1.23 "Net Profit and Net Loss from Capital Transactions" shall mean Net
Profit and Net Loss including only those items of income, gain, loss and
deduction relating to Capital Transactions.
1.24 "Net Profit and Net Loss from Operations" shall mean Net Profit and
Net Loss excluding those items of income, gain, loss and deduction related
solely to Capital Transactions.
1.25 "Nonrecourse Deductions" shall mean losses, deductions or Code
Section 705(a)(2)(B) expenditures attributable to Nonrecourse Liabilities of
the Partnership. The amount of Nonrecourse Deductions for any Fiscal Year or
other period shall be determined in accordance with the provisions of
Regulations Section 1.704-2(c).
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1.26 "Nonrecourse Liability" shall mean a nonrecourse liability as
defined in Regulations Section 1.752-1(a)(2).
1.27 "Operations" shall mean all operations and activities of the
Partnership other than those related to or consisting of a Capital Transaction.
1.28 "Optional Loans" shall mean loans to the Partnership from either a
General Partner or a Limited Partner, or their respective Affiliates, pursuant
to Section 4.8 hereof.
1.29 "Partner Nonrecourse Debt" shall mean any Nonrecourse Liability of
the Partnership for which any Partner or related person bears the economic risk
of loss under Regulations Section 1.752-2.
1.30 "Partner Nonrecourse Debt Minimum Gain" shall mean the minimum gain
attributable to Partner Nonrecourse Debt as determined under Regulations
Section 1.704-2(i)(3).
1.31 "Partners" shall mean the Limited Partners and the General Partner.
1.32 "Partnership" shall mean A.M. RHYNE & CO. LIMITED, a Texas limited
partnership.
1.33 "Partnership Assets" shall mean, so long as owned by the
Partnership, the property described in the attached Exhibit "A", any and all
property of whatever character subsequently transferred to or acquired by the
Partnership, any income or property arising or accruing by reason of the
existence of such property, and any accretion, mutation, or appreciation in
such property.
1.34 "Partnership Interest" shall mean each Partner's respective
interest in the Partnership, including the right to receive distributions of
Partnership Assets and the right to receive allocations of income, gain, loss,
deduction, or credit of the Partnership. Each initial Partner's Partnership
Interest is set forth on Exhibit "A".
1.35 "Partnership Minimum Gain" shall mean the amount computed under
Regulations Section 1.704-2(d)(1) with respect to the Partnership's Nonrecourse
Liabilities.
1.36 "Partnership Percentage or Percentages" shall mean the percentages
of the Partners as specified on Exhibit "A" of this Agreement, as they may be
adjusted or amended from time to time.
1.37 "Permitted Transferee" shall mean (i) a spouse of a Partner, other
than a spouse who is legally separated under a decree of separate maintenance
or who is a party to a pending divorce proceeding; (ii) a descendant of a
Partner, including descendants adopted before attaining age 18; (iii) any
parent, sibling or descendant of a sibling of a Partner; (iv) a trust for the
benefit of any or all Persons described above, (v) any organization described
in Sections 170(b)(1)(A),
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170(c), 2055(a) and 2522(a) of the Code; and (vi) a charitable remainder trust
created under Section 664 of the Code.
1.38 "Person" shall mean any individual, partnership, corporation,
trust, or other entity or organization.
1.39 "Regulations" shall mean the Income Tax Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
1.40 "Reserves" shall mean such reserves, if any, as the General Partner
deems necessary for the payment of anticipated expenses or obligations
(including obligations, if any, to make loans) of the Partnership, for working
capital requirements, and/or for the reasonable needs or anticipated needs of
the partnership's business and its winding up and liquidation.
1.41 "Transfer" shall mean, as a noun, any voluntary or involuntary
transfer, sale, assignment, gift, exchange, conveyance, or other disposition,
with or without consideration, and as a verb, voluntarily or involuntarily, to
transfer, sell, assign, give, exchange, convey, or otherwise dispose of, with
or without consideration.
ARTICLE 2
FORMATION AND TERM OF THE PARTNERSHIP
2.1 Name of the Partnership. The name of the Partnership shall be A.M.
RHYNE & CO. LIMITED, and the business of the Partnership shall be conducted
under this name. The General Partner may, in its discretion, change the name
of the Partnership; provided, however, that in the event of any such name
change, each Limited Partner shall be notified in writing within 30 days prior
thereto. In addition, the General Partner may adopt such other trade or
fictitious names as it deems appropriate and cause the filing in the
appropriate county of any assumed name certificates relating thereto.
2.2 Registered Agent and Registered Office. The name and address of
the registered agent of the Partnership in the State of Texas upon whom process
may be served is PHIL SIMPSON, 1320 Greenway Drive, Suite 920, Irving, Texas
75038-2548. The address of the registered office of the Partnership in the
State of Texas is 1320 Greenway Drive, Suite 920, Irving, Texas 75038-2548.
2.3 Time of Formation. The Partnership shall commence on the date of
the filing of a certificate of limited partnership with the Secretary of State
of the State of Texas pursuant to the Act for the purposes and upon the terms
and conditions set forth herein.
2.4 Filing of Certificate. The General Partner shall promptly cause to
be filed a certificate qualifying as such under the Act at the expense of the
Partnership and any affidavits
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required to be filed with the Secretary of State of the State of Texas and
shall do all other things requisite to the formation of the Partnership as a
limited partnership pursuant to the Act. The General Partner shall prepare and
cause to be filed, at the expense of the Partnership, such amendments to the
certificate of limited partnership as may be required consistent with this
Agreement.
2.5 Term of the Partnership. The Partnership shall continue until
terminated as provided in Article 10 hereof or as otherwise provided by law.
2.6 Indemnity Against Preexisting Liabilities. There shall exist no
liability in regard to this Agreement on the part of the Partners for any
claim, debt, or obligation which may occur prior to the time of formation of
the Partnership, and each Partner hereby agrees, with respect to any such
claim, debt, or obligation so incurred by such Partner, to indemnify and hold
harmless the Partnership and other Partners from and against the same.
2.7 Independent Activities. The General Partner and each Limited
Partner may, notwithstanding the existence of this Agreement, engage in
whatever activities they desire, whether the same be competitive with the
Partnership or otherwise, without having or incurring any obligation to offer
any interest in such activities to the Partnership or any party hereto.
Neither this Agreement nor any activity undertaken pursuant hereto will prevent
any Partner from engaging in such activities, or require any Partner to permit
the Partnership or the other Partners to participate in any such activities,
and each Partner hereby waives, relinquishes, and renounces any such right,
claim, or participation.
ARTICLE 3
PURPOSE AND INTENT
3.1 Purpose and Intent. The purposes and intent of the Partnership are
to own, operate, and maintain the Partnership Assets, to hold the Partnership
Assets for investment and/or to sell the Partnership Assets for capital
appreciation, and to provide a means for the Partners to preserve the
Partnership Assets from the claims of others, which purposes shall include the
following:
3.1.1 To acquire and accept conveyance of the Partnership Assets
and any additional assets conveyed to the Partnership at any time and
from time to time;
3.1.2 To own, operate, maintain, construct improvements, rent,
lease, or sell the Partnership Assets, whether as a part or as a whole;
3.1.3 To incur debt for the acquisition of the Partnership Assets
and for other Partnership purposes;
3.1.4 To produce income from the Partnership Assets;
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3.1.5 To hold the Partnership Assets for capital appreciation and
investment;
3.1.6 To continue the ownership of the Partnership Assets without
fractionalizing, and to restrict the rights of others to acquire
interests in the Partnership Assets;
3.1.7 To provide flexibility in business planning not available
through trusts, corporations or other business entities;
3.1.8 To facilitate the administration of the Partnership Assets
and to reduce the cost and business interruptions associated with the
disability, bankruptcy or death of a Partner;
3.1.9 To make loans to Persons in furtherance of the Partnership
purpose;
3.1.10 To invest, reinvest, encumber, pledge, mortgage, finance,
and refinance any and all Partnership Assets; and/or
3.1.11 To engage in any other lawful business under the Act and
within the contemplation of this Agreement as long as the same shall be
for the benefit of the Partnership.
3.2 Other Jurisdictions. The Partnership is authorized to engage in
all business permitted by the Act. If the Partnership qualifies to do business
in a foreign jurisdiction, then it may transact all business permitted in that
jurisdiction. There is no jurisdictional restriction upon Partnership Assets
or the activities of the Partnership.
ARTICLE 4
CAPITALIZATION, CONTRIBUTIONS, AND LOANS BY PARTNERS
4.1 Capital Accounts. A separate capital account ("Capital Account")
shall be maintained for each Partner. There shall be credited to each
Partner's Capital Account the amount of any cash actually contributed by such
Partner to the capital of the Partnership (or deemed contributed pursuant to
Regulations Section 1.704-1(b)(2)(iv)(c)), the Book Value of any property
contributed by such Partner to the capital of the Partnership (net of any
liabilities secured by such property that the Partnership is considered to
assume or to take subject to under Code Section 752), such Partner's share of
the Net Profit (and all items in the nature of income or gain that are
specially allocated to the Partner under Article 9 hereof) of the Partnership
and the amount of any Partnership liabilities that are assumed by the Partner
or secured by any Partnership property distributed to the Partner. There shall
be charged against each Partner's Capital Account the amount of all cash
distributed to such Partner by the Partnership (or deemed distributed pursuant
to Regulations Section 1.704- 1(b)(2)(iv)(c)), the Book Value of any property
distributed to such Partner by the Partnership (net of any liabilities secured
by such property that the Partner is considered to assume or take subject to
under Code Section 752), such Partner's share of the Net
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Loss (and all items in the nature of deduction or loss that are specially
allocated to the Partner under Article 9 hereof) of the Partnership and the
amount of any liabilities of the Partner assumed by the Partnership or which
are secured by any property contributed by the Partner to the Partnership. In
the event that any interest in the Partnership is Transferred in accordance
with the terms of this Agreement, the transferee shall succeed to the Capital
Account of the transferor to the extent that it relates to the Transferred
interest. This definition of "Capital Account" and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Regulations Section 1.704-1(b) and shall be interpreted and applied
in a manner consistent with such regulation. The General Partner may modify
the manner in which the Capital Accounts are maintained under this definition
in order to comply with these provisions, as well as upon the occurrence of
events that might otherwise cause this Agreement not to comply with the
Regulations.
4.2 Initial Contributions. The assets listed on Exhibit "A" attached
hereto and incorporated herein by reference constitute the initial
contributions to the capital of the Partnership.
4.3 Duty to Contribute. Each Partner shall be personally liable to the
Partnership to contribute to the capital of the Partnership the full amount of
its initial contribution set forth in Section 4.2 hereof.
4.4 Withdrawal of Capital. Except as otherwise set forth herein, no
Partner shall be permitted to withdraw its capital from the Partnership.
4.5 Additional Contributions. No Partner shall be obligated to make
any additional contributions to the capital of the Partnership except as agreed
upon in writing by all Partners. The Partners may make additional Capital
Contributions to the Partnership on a pro rata or non-pro rata basis. Optional
Capital Contributions by a Limited Partner will be subject to the consent of
the General Partner. Optional Capital Contributions by a General Partner will
be subject to the consent of a majority of the Limited Partners. The required
consent need not be in writing, and any optional Capital Contributions will be
presumed to have been made with the required consent unless there is clear and
convincing evidence to the contrary. The General Partner is required to
maintain a Partnership Interest of at least one percent at all times.
4.6 Adjustment of Partnership Interests. Any adjustment to the
Partnership Interests of the Partners and the timing of any such adjustment
caused by optional Capital Contributions shall be made in the manner determined
by the General Partner in its sole discretion.
4.7 Partnership Interests Maintained Separately. The General Partner's
general Partnership Interest will be maintained separately from any limited
Partnership Interest which he may have.
4.8 Loans by Partners. Subject to the requirements of Section 5.2, any
Partner or its Affiliates may make financing available to the Partnership as
Optional Loans but shall have no obligation to do so. Any such party loaning
money to the Partnership shall have the same rights
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regarding the loan as would any unaffiliated Person making the loan to the
Partnership, except as may be otherwise expressly set forth herein.
4.9 Liability of Partners. The liability of the General Partner shall
be as provided under the Act. The liability of each Limited Partner with
regard to the Partnership in all respects is restricted and limited to the
amount of the actual capital contributions that such Limited Partner makes or
expressly agrees in writing to make to the Partnership. Except as otherwise
expressly provided herein, no Limited Partner shall be assessed or required to
make additional capital contributions to the Partnership above that which the
Limited Partner has expressly agreed in writing to make to the Partnership.
ARTICLE 5
COMPENSATION OF THE GENERAL PARTNER AND AFFILIATES
5.1 Compensation. The General Partner may pay reasonable compensation
for any services performed or rendered to the Partnership by any Person,
including the General Partner or an Affiliate of the General Partner. The
General Partner will be entitled to a reasonable annual compensation to be
measured by the time required in the administration of the Partnership, the
value of Partnership Assets, and the responsibilities assumed in the discharge
of the duties of General Partner. A majority of the Limited Partners may
adjust a General Partner's compensation based upon the General Partner's
performance and dedication of time to the business of the Partnership.
5.2 Interest on Optional Loans. Optional Loans made pursuant to
Section 4.8 hereof shall provide for interest not in excess of the base
commercial rate of interest as announced or published by Comerica Bank - Texas,
Dallas, Texas, or its successor, from time to time during the term of the loan,
plus one percent per annum.
ARTICLE 6
MANAGEMENT AND OBLIGATIONS OF THE GENERAL PARTNER
6.1 General Responsibility and Limitation on the General Partner.
Management of the day-to-day affairs of the Partnership shall be vested in the
General Partner. The Limited Partners shall not have either the obligation or
the right to take part directly in the active day-to-day management of the
business, and the Limited Partners are not authorized to do or perform any act,
thing, or deed in the name of, for, or on behalf of, the Partnership.
6.2 Rights, Powers, and Duties of the General Partner. Except as
expressly limited herein, the General Partner shall have authority to do any
and all things necessary to carry out the purposes of this Partnership,
including, but not limited to: (i) the execution of such documents as the
General Partner may deem advisable for Partnership purposes and (ii) the
performance of or causing to be performed the Partnership's obligations, under
any agreement to which the
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Partnership is a party. Notwithstanding the foregoing, the General Partner
shall not perform any act which shall be in contravention of the Act or this
Agreement, including, but not limited to, using, directly or indirectly, any
Partnership Assets for any purpose other than carrying on the business and
purpose of this Partnership as set forth in Section 3.1 hereof, for the full
and exclusive benefit of all its Partners.
6.2.1 The General Partner may, on behalf of the Partnership,
employ, engage, or retain any Person to act in any capacity the General
Partner deems appropriate and may pay from the Partnership Assets to any
such Person a reasonable compensation; provided, however, that the
General Partner shall continue to be primarily responsible for the
fulfillment of all of its obligations pursuant to this Agreement. Any
Affiliates of the General Partner performing any duties for or on behalf
of the Partnership shall permit each Limited Partner or its authorized
representatives to examine the books and records of such Affiliate, as
they relate to such transactions, at such Affiliate's place of business
during normal business hours.
6.2.2 Except as may otherwise be provided herein or under the Act,
the General Partner shall possess the same rights and powers as a general
partner in a partnership without limited partners (a general partnership)
formed under the laws of the State of Texas. The General Partner shall
have the authority to make any tax elections available to the
Partnership, including the election under Code Section 754.
6.2.3 If more than one Person serves as General Partner, all
Persons who serve as General Partner (if there are two Persons serving as
General Partner), or a majority of the Persons who serve as General
Partner (if there are more than two Persons so serving), must act on
behalf of, and make all decisions of, the Partnership, and only the
action and decision of such Persons together shall bind the Partnership;
provided, however, ministerial acts such as signing and executing deeds,
documents and agreements of all kinds, drawing on Partnership bank
accounts, endorsing checks, signing stock powers and similar acts and
matters, may be delegated in writing to any Person serving as one of the
General Partners, and third parties dealing with the Partnership shall
rely on the act of any single Person serving as a General Partner as the
act of all General Partners and of the Partnership.
6.2.4 Notwithstanding the foregoing paragraph, all Persons who are
General Partners may, by unanimous consent, designate a managing partner
("Manager"). A designated Manager shall serve until the designation is
revoked or the Manager ceases to serve for any other reason. If a
Manager is designated, the Manager is authorized and directed to manage
and control the assets and business of the Partnership. The Manager may
exercise all of the powers which could be exercised by majority consent
of the General Partners. If a Manager is designated, any reference to
"General Partner" in this Agreement shall also include "Manager," if
applicable.
6.2.5 The General Partner shall have the authority to invest
Partnership Assets in any manner and investment vehicle deemed
appropriate by the General Partner, including,
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but not limited to: the purchase of, sale of, and dealing in stocks,
bonds, notes, and evidences of indebtedness of any Person, and bonds and
any other obligations of any government, state, municipality, school
district, or any political subdivision thereof, domestic or foreign, and
bills of exchange and commercial paper, and any and all other securities
of any kind, nature, or description whatsoever (including partnership
interests); the purchase of, sale of, development, subdivision, and
improvement of, leasing of, and dealing in real properties; and the
purchase of, sale of, exploration and development of, and drilling on oil
and gas properties, including the execution of oil, gas, and other
mineral leases on such properties which are Partnership Assets.
6.2.6 If the Persons who serve as General Partner are in
disagreement and deadlock as to a matter requiring a decision to be made
on behalf of the Partnership by the General Partner and a decision of
both such Persons (if there are two such Persons) or the majority of such
Persons (if there are more than two such Persons) cannot be reached, any
Person who serves as General Partner may submit the matter to a third
party for consideration and decision. All Persons who serve as General
Partner must agree on the identity of the third party to decide the
matter and must agree to be bound by the decision of that third party.
6.3 Waiver of Self-Dealing. The General Partner shall have the
authority to enter into any transaction on behalf of the Partnership despite
the fact that another party to the transaction may be (i) a trust of which a
Partner is a trustee or beneficiary; (ii) an estate of which a Partner is an
executor, administrator or beneficiary; (iii) a business controlled by one or
more Partners or a business of which any Partner is also a director, officer or
employee; (iv) any Affiliate; (v) any Partner, acting individually; or (vi) any
relative of a Partner; provided the terms of the transaction are no less
favorable than those the Partnership could obtain from unrelated third parties.
6.4 Limitations on All Partners. Neither the General Partner nor any
Limited Partner shall do anything in contravention of the Act or do any of the
following acts:
6.4.1 Use the name of the Partnership (or any substantially
similar name) or any trademark or trade name adopted by the Partnership,
except in connection with the Partnership's business;
6.4.2 Disclose to any non-Partner any of the Partnership business
practices, trade secrets, or any other information not generally known to
the business community, except in conjunction with the Partnership's
business;
6.4.3 Do any other act or deed with the intention of harming the
operations of the Partnership;
6.4.4 Do any act contrary to this Agreement;
6.4.5 Do any act which would make it impossible to carry on the
intended or ordinary purposes of the Partnership;
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6.4.6 Confess a judgment against the Partnership;
6.4.7 Wrongfully abandon, transfer or dispose of Partnership
Assets; or
6.4.8 Admit another Person as a Partner of the Partnership, except
as provided herein.
ARTICLE 7
TRANSFER AND ENCUMBRANCE
7.1 Restrictions on Transfer. The Partnership has been formed by those
who know and trust one another, who have surrendered certain management rights
(in exchange for limited liability in the case of a Limited Partner) or who
have assumed management responsibility and risk (in the case of a General
Partner) based upon their relationship and trust. An unauthorized Transfer of
a Partner's Partnership Interest could create a substantial hardship to the
Partnership, jeopardize its capital base and adversely affect its tax
structure. Therefore, any purported Transfer, encumbrance, mortgage, pledge,
or hypothecation in violation of the provisions of this Article shall be null
and void, and the purported transferee shall have no rights of any kind in the
Partnership. The non- transferring Partners, or any of them, in addition to
any other remedies available under this Agreement and at law, in equity and
otherwise, may seek to enjoin such Transfer, encumbrance, mortgage, pledge, or
hypothecation, and the transferring Partner agrees to submit to the
jurisdiction of any court of competent jurisdiction and to be bound by an order
of such court enjoining such purported Transfer, encumbrance, mortgage, pledge,
or hypothecation.
7.1.1 A General Partner may Transfer, encumber, mortgage, pledge,
or hypothecate his Partnership Interest (or any part thereof or interest
therein) only with the prior written consent of all of the Limited
Partners, and, except as provided in Section 7.1.2, a Limited Partner may
Transfer, encumber, mortgage, pledge, or hypothecate his Partnership
Interest (or any part thereof or interest therein) only with the prior
written consent of the General Partner and all of the Limited Partners.
7.1.2 A Limited Partner who is an individual or a trust with an
individual beneficiary with a limited or unlimited right to make a
disposition of all or any part of his interest in the trust during his
lifetime may Transfer his Partnership Interest (or any part thereof or
interest therein) to any Permitted Transferee without the prior written
consent of any Partner (hereinafter, any such Transfer is referred to as
a "Permitted Transfer"). The Transfer may be accomplished pursuant to
(i) the last will of a Partner duly admitted to probate, (ii) the
exercise of a limited or unlimited power of appointment or beneficiary
designation of any trust, or (iii) a written and acknowledged assignment
and designation of beneficiary delivered by the Partner to the General
Partner prior to the death of the Partner, effective as of his death or
the death of the trust beneficiary.
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7.1.3 If a Partnership Interest (or any part thereof or interest
therein) is Transferred as provided in Section 7.1.1 or 7.1.2, the
Assignor shall not be relieved of his obligations hereunder without the
written consent of all Partners, and the Person acquiring the Partnership
Interest (or any part thereof or interest therein) shall have only the
rights of an Assignee of such Partnership Interest (or part thereof or
interest therein) and shall not be admitted as a Partner except upon the
written consent of the General Partner and all of the Limited Partners
and the written agreement by such Person to be bound by the provisions of
this Agreement.
7.1.4 If a Partnership Interest (or any part thereof or interest
therein) is Transferred to a Permitted Transferee pursuant to Sections
7.1 or 10.2 of this Agreement, the Assignor shall not be relieved of his
obligations hereunder without the written consent of all Partners, but
the Person acquiring the Partnership Interest (or any part thereof or
interest therein) shall be admitted as a Partner upon the written
agreement by such Person to be bound by the provisions of this Agreement.
In the event of any Transfer as provided in Sections 7.1 and 10.2 of this
Agreement other than a Permitted Transfer, the Assignee shall be entitled to
receive the allocations and distributions to which the Assignor would have been
entitled and shall be required to make the capital contributions, if any, which
the Assignor would have been required to make hereunder, but shall become a
Partner only after the further written consents and agreement required above
have been executed and delivered.
An Assignee of a Partnership Interest, or a part thereof or interest
therein, shall also be subject to all of the aforesaid restrictions against
Transfer.
7.2 Partnership Property. All real, personal or mixed property,
including all improvements thereto or placed or located thereon, acquired by
the Partnership shall be owned by the Partnership, such ownership being subject
to the other terms and provisions of this Agreement. In accordance with the
provisions of Section 12.14 hereof, each Partner hereby expressly waives the
right, if any, to require partition of any Partnership property or any part
thereof. The rights of a judgment creditor of a Partner in Partnership Assets
or property and/or in such Partner's Partnership Interest shall be limited
exclusively to those rights provided in Section 7.03(a) of the Act.
7.3 Acquisition of an Interest Conveyed Without Authority. If any
Person acquires a Partnership Interest or becomes an Assignee as a result of a
court order which the Partnership is required by law to recognize, or if a
Partner's interest in the Partnership is subjected to a lawful "charging
order", or if a Partner makes an unauthorized transfer or assignment of a
Partnership Interest which the Partnership is required by law (and by order of
a court) to recognize, the Partnership will have the unilateral option to
acquire all or any part of the interest of the transferee or Assignee upon the
following terms and conditions:
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7.3.1 The Partnership will have the option to acquire the interest
by giving written notice to the transferee or Assignee of its intent to
purchase within ninety (90) days from the later of (i) the date it is
finally determined that the Partnership is required to recognize the
transfer or assignment, and (ii) the date the Partnership or General
Partner receives actual notice of such determination.
7.3.2 The valuation date for the determination of the purchase
price of the interest will be the first day of the month following the
month in which notice is delivered. Unless the Partnership and the
transferee or Assignee agree otherwise, the purchase price for the
interest to be acquired shall be its fair market value as determined by
an Appraisal.
7.3.3 Closing of the sale will occur at the principal office of
the Partnership on the first Tuesday of the month following the month in
which the Appraisal is rendered.
7.3.4 In order to reduce the burden upon the resources of the
Partnership, the Partnership will have the option, to be exercised in
writing delivered at closing, to pay its purchase money obligation in 15
equal annual installments (or the remaining term of the Partnership if
less than 15 years), plus interest at the base commercial interest rate
as announced or published by Comerica Bank - Texas, Dallas, Texas, or its
successor, plus one percent per annum, adjusted annually on the date of
each payment. The first installment of principal, plus interest, will be
due and payable on the first day of the calendar year following closing,
and subsequent annual installments, with accrued interest, will be due
and payable on the first day of each succeeding calendar year until the
entire amount of the obligation is paid. The Partnership will have the
right to prepay all or any part of the purchase money obligation at any
time without penalty.
7.3.5 With the consent of all of the Partners other than the
Partner whose interest is to be acquired, the General Partner may assign
the Partnership's option to purchase to one or more of the remaining
Partners and, when done, any rights or obligations imposed upon the
Partnership will instead become, by substitution, the rights and
obligations of the Partners who are assignees.
7.3.6 Neither the transferee or Assignee of an unauthorized
transfer or assignment, or the Partner causing the transfer or
assignment, will have the right to vote on Partnership matters during the
prescribed option period or, if the option is timely exercised, until the
sale is closed.
7.4 Prohibition Against Admission of Additional Partners. No
additional (as opposed to successor or substitute) General or Limited Partner
shall be admitted to the Partnership except upon the written consent of all of
the Partners and the written agreement by the proposed incoming partner to be
bound by the provisions of this Agreement. In no event shall anyone become a
Partner except upon compliance with the Act and all other applicable state and
federal laws (the satisfaction of which may be met by the provision, by the
proposed incoming Partner, of a favorable opinion of counsel acceptable to the
Partnership).
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7.5 Prohibition Against Withdrawal of Limited Partner. A Limited
Partner may not withdraw from the Partnership.
ARTICLE 8
ACCOUNTING
8.1 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
8.2 Books. The books of account of the Partnership shall be kept and
maintained at all times in the principal place of business of the Partnership
and shall be separate and distinct from all other books and records of any
other entity. The books of account shall be maintained on a basis which will
be in compliance with applicable federal income tax law.
8.3 Banking. The Partnership shall maintain accounts at such banks or
other financial institutions as the General Partner shall determine is
necessary for the operation of the Partnership. Checks shall be drawn on such
accounts for Partnership purposes and shall be signed by the General Partner or
his designees.
8.4 No Commingling of Accounts. In no event shall any account
described herein be commingled with the funds of any other account.
8.5 Access to Books. Each Partner shall have the right at all
reasonable times during usual business hours to audit, examine, and make copies
of or extracts from the books of account of the Partnership. Any Partner may
exercise such right through any agent or employee so designated by it, and such
expense shall be an expense of the Partner exercising such right.
8.6 Tax Returns. All tax returns are to be timely prepared (including
extensions) and filed by the General Partner or his designee. Any expense
incurred in the preparation, review, and filing of the tax returns shall be the
expense of the Partnership. Copies of all such returns shall be timely
furnished to all Partners, but in any event within 30 days following their
filing. The General Partner hereby is designated the Tax Matters Partner for
federal income tax purposes.
ARTICLE 9
DISTRIBUTIONS AND ALLOCATIONS
9.1 Distribution of Available Cash. At such times as may be determined
by the General Partner, the Available Cash, or any portion thereof, of the
Partnership may be distributed to the Partners pro rata in accordance with
their respective Partnership Percentages.
9.2 Distribution of Net Proceeds of a Capital Transaction. Except upon
the liquidation of the Partnership as provided in Section 9.3 hereof, as soon
as possible following receipt of the Net Proceeds of a Capital Transaction the
General Partner may, but shall not be required to, distribute
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to the Partners the Net Proceeds of such Capital Transaction. If the General
Partner makes a distribution of the Net Proceeds of a Capital Transaction, such
distribution shall be made to the Partners in accordance with their respective
Partnership Percentages.
9.3 Distribution of Cash From the Sale of All of the Partnership
Assets. Upon the sale, exchange, and/or other disposition of all or
substantially all of the Partnership Assets and liquidation of the Partnership
(if approved by the General Partner and all of the Limited Partners), and after
satisfaction of the Partnership debts and obligations (other than Optional
Loans) and the expenses of winding up and liquidating the Partnership, the
remaining proceeds from the sale, exchange, or other disposition of the
Partnership Assets shall be distributed (in cash or in kind, or both, at the
sole discretion of the General Partner), to the Partners as follows:
9.3.1 First, to the payment of any outstanding Optional Loans,
plus any accrued unpaid interest thereon, with payment ratably based upon
the amount of such loans in proportion to the total of all such loans;
and
9.3.2 Thereafter, to the Partners in accordance with their
positive Capital Account balances, as determined after giving effect to
all distributions and all allocations under Section 9.8 of this Agreement
for all prior periods, including the period during which such liquidation
occurs, in accordance with Treasury Regulations Section
1.704-1(b)(2)(ii)(b)(2), to the extent of such balances.
9.4 Distributions Not Withdrawn. If any Partner does not withdraw the
whole or part of his share of any cash distribution made pursuant to Section
9.1, the Partner shall not be entitled to receive any interest without the
unanimous consent of all Partners. Such non- withdrawn amount shall be deemed
an optional Capital Contribution under Section 4.5, if otherwise permitted at
that time.
9.5 Transferor-Transferee Shares. Unless agreed in writing by a
transferor and transferee, any distribution allocable to a transferred
Partnership Interest which has been transferred during a year shall be
distributed to the holder of such Partnership Interest who was the owner on the
date of such distribution, without regard to the results of Partnership
operations during the year.
9.6 Negative Capital Accounts. No Partner shall have the obligation to
restore any negative Capital Account to the Partnership or to any other
Partner.
9.7 Liquidation. The Partnership shall not be liquidated, nor shall
Partnership assets be distributed in a liquidation or partial liquidation
without the written consent of the General Partner and all of the Limited
Partners.
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9.8 Allocations of Net Profit and Net Loss.
9.8.1 Net Profit From Operations.
9.8.1.1 If any Net Loss from Operations has been allocated
to the Partners pursuant to Section 9.8.2, then Net Profit from
Operations shall first be allocated to the Partners, in the same
proportions as such Net Loss from Operations was allocated, until
each Partner's Capital Account balance equals what it would have
been had there been no such allocation of Net Loss from Operations.
9.8.1.2 After any allocation required pursuant to Section
9.8.1.1, Net Profit from Operations shall be allocated among the
Partners in accordance with their Partnership Percentages.
9.8.2 Net Loss From Operations.
9.8.2.1 If any Net Profit from Operations has been allocated
to the Partners pursuant to Section 9.8.1, then Net Loss from
Operations shall first be allocated to the Partners, in the same
proportions as such Net Profit from Operations was allocated, until
each Partner's Capital Account balance equals what it would have
been had there been no such allocation of Net Profit from
Operations.
9.8.2.2 After any allocation required pursuant to Section
9.8.2.1, Net Loss from Operations shall be allocated among the
Partners in accordance with their Partnership Percentages.
9.8.3 Net Profit From Capital Transactions.
9.8.3.1 Net Profit from Capital Transactions shall be
allocated as follows:
9.8.3.1.1 First, Net Profit from Capital Transactions
shall be allocated among the Partners until the Capital
Account balances of the Partners stand in the same ratios as
their Partnership Percentages.
9.8.3.1.2 Second, Net Profit from Capital Transactions
shall be allocated among the Partners in accordance with
their Partnership Percentages.
9.8.4 Net Loss From Capital Transactions.
9.8.4.1 Net Loss from Capital Transactions shall be
allocated as follows:
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9.8.4.1.1 First, Net Loss from Capital Transactions
shall be allocated among the Partners until the Capital
Account balances of the Partners stand in the same ratios as
their Partnership Percentages.
9.8.4.1.2 Second, Net Loss from Capital Transactions
shall be allocated among the Partners in accordance with
their Partnership Percentages until their Capital Account
balances equal zero.
9.8.4.1.3 Third, Net Loss from Capital Transactions
shall be allocated to the General Partner.
9.9 Partnership Minimum Gain Chargeback. Notwithstanding any other
provision of this Agreement to the contrary, if in any Fiscal Year or other
period there is a net decrease in the amount of the Partnership Minimum Gain,
then each Partner shall first be allocated items of Gross Income for such year
(and, if necessary, subsequent years) in an amount equal to such Partner's
share of the net decrease in such Minimum Gain during such year (as determined
under Regulations Section 1.704-2(g)(2)); provided, however, if there is
insufficient Gross Income in a year to make the allocation specified above for
all Partners for such year, the Gross Income shall be allocated among the
Partners in proportion to the respective amounts they would have been allocated
had there been an unlimited amount of Gross Income for such year.
9.10 Minimum Gain Chargeback for Partner Nonrecourse Debt.
Notwithstanding any other provision of this Agreement to the contrary other
than Section 9.9, if in any year there is a net decrease in the amount of the
Partner Nonrecourse Debt Minimum Gain, then each Partner shall first be
allocated items of Gross Income for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net decrease in such
Minimum Gain during such year (as determined under Regulations Section
1.704-2(i)(4)); provided, however, if there is insufficient Gross Income in a
year to make the allocation specified above for all Partners for such year, the
Gross Income shall be allocated among the Partners in proportion to the
respective amounts they would have been allocated had there been an unlimited
amount of Gross Income for such year.
9.11 Qualified Income Offset. Notwithstanding any other provision of
this Agreement to the contrary (except Sections 9.9 and 9.10 which shall be
applied first), if in any Fiscal Year or other period a Partner unexpectedly
receives an adjustment, allocation or distribution described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), such Partner will be specially
allocated items of Gross Income in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of such Partner as quickly as possible.
9.12 Limit on Loss Allocations. Notwithstanding the provisions of
Section 9.8.2, 9.8.4, or any other provision of this Agreement to the contrary,
Net Loss (or items thereof) shall not be allocated to a Limited Partner if such
allocation would cause or increase such Partner's Adjusted Capital Account
Deficit and shall be reallocated to the other Partners, subject to the
limitations of
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this Section 9.12. In the event that no Limited Partner could be allocated Net
Loss as a result of the foregoing limitation, then all remaining Net Loss shall
be allocated to the General Partner.
9.13 Net Loss from Partner Nonrecourse Debt. Any Net Loss or deductions
attributable to Partner Nonrecourse Debt shall be allocated to the Partner who
bears the economic risk of loss with respect to such debt.
9.14 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
or other period shall be allocated among the Partners in accordance with their
Partnership Percentages.
9.15 Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset under Code Sections 734(b) or
743(b) is required to be taken into account in determining Capital Accounts
under Regulations Section 1.704-1(b)(2)(iv)(m), the amount of the adjustment to
the Capital Accounts will be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases the
basis), and the gain or loss will be specially allocated to the Partners in a
manner consistent with the manner in which their Capital Accounts are required
to be adjusted under Regulations Section 1.704-1(b)(2)(iv)(m).
9.16 Reversal of Mandatory Allocations. In the event that any Gross
Income or Net Loss is allocated pursuant to Section 9.9 through 9.12,
subsequent Gross Income, Net Profit or Net Loss (or items thereof) will first
be allocated (subject to Sections 9.9 through 9.12) to the Partners in a manner
which will result in each Partner having a Capital Account balance equal to
that which would have resulted had the original allocation of Gross Income or
Net Loss (or items thereof) pursuant to Sections 9.9 through 9.12 not occurred.
9.17 Compliance with Code. The foregoing provisions of this Agreement
relating to the allocation of Net Profit and Net Loss are intended to comply
with Regulations under Section 704(b) of the Code and shall be interpreted and
applied in a manner consistent with such Regulations.
9.18 Tax Allocations -- Code Section 704(c). In accordance with Code
Section 704(c) and the related Regulations, income, gain, loss and deduction
with respect to any property contributed to the capital of the Partnership,
solely for tax purposes, will be allocated among the Partners so as to take
account of any variation between the adjusted basis to the Partnership of the
property for federal income tax purposes and the initial Book Value of the
property. If the Book Value of any Partnership asset is adjusted under Section
1.11, subsequent allocations of income, gain, loss and deduction with respect
to that asset will take account of any variation between the adjusted basis of
the asset for federal income tax purposes and its Book Value in the same manner
as under Code Section 704(c) and the related Regulations. Any elections or
other decisions relating to allocations under this Section 9.18 will be made in
any manner that the General Partner determines reasonably reflects the purpose
and intention of this Agreement. Allocations under this Section 9.18 are
solely for purposes of federal, state and local taxes and will not affect, or
in any way be taken into account in computing, any Partner's Capital Account or
share of Net Profit, Net Loss or other items or distributions under any
provision of this Agreement.
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9.19 Allocation on Transfer. If any interest in the Partnership is
Transferred, or is increased or decreased by reason of the admission of a new
Partner or otherwise, during any Fiscal Year, the Partnership shall make an
interim closing of its books as of such date of Transfer or admission and shall
allocate Net Income or Net Loss or items thereof based on such interim closing.
All Transfers of interests or admissions or exclusions of Partners occurring at
any time during a month shall be deemed effective as of the opening of business
on the first day of the subsequent month.
9.20 Minimum Interest of General Partner. Notwithstanding any
indication to the contrary, the General Partner's interest in each item of
Partnership income, gain, loss, deduction and credit shall be not less than 1%,
except as otherwise required pursuant to Section 704(b) or Section 704(c) of
the Code.
ARTICLE 10
DISSOLUTION, WINDING UP, AND TERMINATION OF THE PARTNERSHIP
10.1 Dissolution. The Partnership shall be dissolved upon the first to
occur of the following:
10.1.1 December 31, 2046;
10.1.2 The agreement of all Partners;
10.1.3 The Bankruptcy, death, or dissolution of a General Partner;
or
10.1.4 Except as provided in Section 10.2 hereof, any other event
of dissolution as defined in Section 8.01 of the Act.
10.2 Death, Bankruptcy, or Mental Incompetence of Partner.
10.2.1 The death, Bankruptcy, or mental incompetence of any
Limited Partner (a "Former Limited Partner") shall not have the effect of
terminating or dissolving the Partnership.
10.2.2 Upon the death, Bankruptcy or dissolution of a General
Partner (a "Former General Partner"), the general Partnership Interest of
the Former General Partner shall be automatically converted from a
general Partnership Interest into a limited Partnership Interest.
10.2.3 A Limited Partner who is a General Partner whose death,
bankruptcy or dissolution converted his general Partnership Interest to a
limited Partnership Interest may Transfer his limited Partnership
Interest (or any part thereof or interest therein) to any
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Permitted Transferee without the prior written consent of any Partner.
Such Transfer may be accomplished in any manner as provided in Section
7.1.2.
10.2.4 The estate or successor of a Former General Partner or a
Former Limited Partner (a "Former Partner") shall succeed to the limited
Partnership Interest of the Former Partner, but the estate or successor
(other than a Permitted Transferee) shall have only the rights of an
Assignee of the Partnership Interest and shall not be admitted as a
Limited Partner except upon the written consent of the General Partner
and all of the Limited Partners and the written agreement by the personal
representative of the estate or by the successor to be bound by the
provisions of this Agreement.
10.2.5 If a Partnership Interest (or any part thereof or interest
therein) of a Former Partner is Transferred to a Permitted Transferee,
the Assignor shall not be relieved of his obligations hereunder without
the written consent of all Partners, but the Person acquiring the
Partnership Interest (or any part thereof or interest therein) shall be
admitted as a Partner upon the written agreement by such Person to be
bound by the provisions of this Agreement.
10.2.6 An Assignee of a Partnership Interest, or a part thereof or
interest therein, shall also be subject to all of the aforesaid
restrictions against Transfer.
10.2.7 For purposes of this Section 10.2, mental incompetence of a
Partner shall be treated as if the Partner had died. For this purpose, a
Partner shall be deemed mentally incompetent upon certification in a form
sufficient for the recording of a deed in the State of Texas by two
medical doctors (neither of whom is a Partner) affirming that each has
examined the Partner and that each has concluded, based on such
examination, that the Partner is unable to discharge his duties under
this Partnership Agreement because of accident, physical or mental
illness or deterioration, or other cause.
10.3 Continuation. If at least one General Partner remains after an
event of dissolution described in Sections 10.1.3 or 10.1.4, it is agreed that
the Partnership shall be automatically reconstituted without being wound up and
the business of the Partnership shall be carried on by the successor General
Partner(s). If no General Partner remains after an event of dissolution
described in Sections 10.1.3 or 10.1.4, it is agreed that, within ninety (90)
days after the occurrence of such an event of dissolution, all remaining
Partners shall elect a new General Partner in accordance with Section 10.5 and
shall reconstitute and continue the business of the Partnership.
10.4 Prohibition Against Withdrawal of General Partner. Under the terms
of this Agreement, a Person who is a General Partner shall not be permitted to
withdraw from the Partnership. Notwithstanding this provision, if a Person who
is a General Partner withdraws from the Partnership pursuant to Section 6.02 of
the Act, he shall be liable to the Partnership and to the other Partners for
any damages arising from such withdrawal, and his Partnership Interest shall be
converted from a General Partnership Interest into a Limited Partnership
Interest.
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<PAGE> 38
PAGE 38 OF 48 PAGES
10.5 Successor General Partner. Prior to the withdrawal of all multiple
General Partners or the withdrawal of a sole General Partner, successor General
Partners ("Designated Successor General Partners") or additional General
Partners may be appointed by a unanimous vote of the Partners. If a General
Partner, serving alone, withdraws or ceases to serve for any reason and there
are no Designated Successor General Partners remaining, then, without amendment
to this Agreement, all the remaining Partners may continue the business of the
Partnership and appoint one or more of the Limited Partners to serve as the new
General Partners effective as of the date of withdrawal of the withdrawing
General Partner and designate all or a portion of that Limited Partner's
Partnership Interest that shall be converted from a limited Partnership
Interest into a General Partnership Interest.
10.6 Winding Up. Upon dissolution, the Partnership business shall be
wound up and liquidated as soon as reasonably practicable by the General
Partner unless the Partnership is reconstituted pursuant to the provisions of
Section 10.3. In this regard, the winding-up Person may dispose of and convey
the Partnership Assets for cash or on noncash terms, or both, in his sole and
absolute discretion, and such Person may distribute to the Partners any
remaining Partnership Assets (in cash or in kind, or both, in his sole and
absolute discretion). Upon the winding up of the Partnership, the remaining
Partnership Assets shall be paid or transferred, subject to this Section 10.6,
to those creditors and Partners, in those amounts, and in the order of priority
as set forth in Section 9.3 above. After such winding up process is completed,
the Partnership will terminate.
ARTICLE 11
LIABILITY AND INDEMNIFICATION OF THE GENERAL PARTNER
11.1 Exoneration. Except in cases of fraud, gross negligence, or
willful misconduct, the doing of any act or the failure to do any act by the
General Partner, the effect of which may cause or result in loss or damage to
the Partnership, if done or omitted in good faith to promote the best interests
of the Partnership, will not subject such General Partner to any liability to
any Limited Partner, Permitted Transferee, Assignee, or the Partnership.
11.2 Indemnification. The General Partner, its Affiliates and their
respective employees, agents, independent contractors, and attorneys shall have
no liability to the Partnership or any Limited Partner, Permitted Transferee,
or Assignee for any loss suffered by the Partnership which arises out of any
action or inaction of the General Partner or its Affiliates, if the General
Partner or its Affiliates (i) acted in good faith; (ii) reasonably believed (a)
in the case of the conduct of the General Partner acting in its official
capacity as the general partner of the Partnership, that the General Partner's
conduct was in the best interest of the Partnership and (b) in all other cases,
that the General Partner's conduct was at least not opposed to the best
interest of the Partnership; and (iii) in the case of a criminal proceeding,
had no reasonable cause to believe that the General Partner's conduct was
unlawful.
-24-
<PAGE> 39
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11.2.1 To the fullest extent permitted by law, the Partnership or
its receiver or trustee shall indemnify, save harmless, and pay all
judgments and claims against the General Partner, its Affiliates, and
their respective employees, agents, independent contractors, and
attorneys from and against any losses, judgments, liabilities, expenses,
and amounts paid in settlement of any claims sustained by them in
connection with the activities of the Partnership or in dealing with
third parties on behalf of the Partnership, including costs and
attorneys' fees (which attorneys' fees may be paid as incurred if such
action relates to the performance of duties or services by the General
Partner or its Affiliates to the Partnership and is initiated by a third
party who is not a Limited Partner; provided, however, that the General
Partner or its Affiliates provide an undertaking to repay any funds
advanced for payment of costs or attorneys' fees if a court of competent
jurisdiction determines that such indemnification is inappropriate).
Notwithstanding the foregoing, the Affiliates and the employees, agents,
independent contractors, and attorneys of the General Partner may only be
indemnified or exculpated from liability when acting within the scope of
the General Partner's authority.
11.2.2 The Partnership shall not pay for any insurance covering
liability of the General Partner or its Affiliates for actions or
omissions for which indemnification is not permitted hereunder; provided,
however, that nothing contained herein shall preclude the Partnership
from purchasing and paying for any fidelity bond or for such types of
insurance, including extended coverage liability and casualty and
worker's compensation, as would be customary for any Person owning
comparable property and engaged in a similar business. In addition, the
General Partner, any Affiliate of the General Partner, and their
respective employees, agents, independent contractors, and attorneys may
be named as additional insured parties on policies obtained for the
benefit of the Partnership to the extent that there is no additional cost
to the Partnership; provided, however, the Partnership shall not pay for
any insurance covering liability of the General Partner or any other
Person for any act or omission for which indemnification is not permitted
by this Agreement.
11.3 Indemnification of Limited Partner. To the fullest extent
permitted by law, the Partnership will indemnify, to the extent of Partnership
assets, each Limited Partner against any claim of liability asserted against a
Limited Partner solely because he is a Limited Partner of the Partnership.
11.4 No Personal Liability. Except as may be required under this
Agreement, the General Partner will not be personally liable for the return of
the Capital Contribution, if any, of any Limited Partner, or any portion
thereof, it being expressly understood that any such return will be made solely
from Partnership Assets.
-25-
<PAGE> 40
PAGE 40 OF 48 PAGES
ARTICLE 12
MISCELLANEOUS PROVISIONS
12.1 Amendment. This Agreement may be amended or modified by the
Partners from time to time, but only by a written instrument executed by all
Partners.
12.2 Notices and Consents. All notices and consents provided for in
this Agreement or the Act shall be in writing and shall be delivered personally
to the Person to whom the same is directed, or sent by regular, registered, or
certified mail, addressed as follows: if to the Partnership, to the Partnership
at the address of its registered office as set forth in Section 2.2 hereof, or
to such other address as the Partnership may from time to time specify by
notice to the Partners; if to any initial Partner, to such Partner at the
address set forth in Exhibit "A" or to such other address as such Partner may
from time to time specify by notice to the Partners; if to any substituted or
successor Partner, to such Partner at the address specified by such Partner by
notice to the Partners after admission as a Partner, or to such other address
as such substituted or successor Partner may from time to time specify by
notice to the Partners; if to an Assignee, to such Assignee at the address
specified by such Assignee by notice to the Partners after becoming an
Assignee, or to such other address as such Assignee may from time to time
specify by notice to the Partners. Any such notice shall be deemed to be
delivered, given, and received for all purposes as of the date so delivered, if
delivered personally, or if sent by regular, registered, or certified mail,
postage and charges prepaid, three days after the date on which the same was
deposited in a regularly maintained receptacle for the deposit of United States
mail.
12.3 Texas Law to Apply. This Agreement shall be construed under and in
accordance with the Act and the laws of the State of Texas, and all obligations
of the parties created hereunder are performable in Dallas County, Texas.
12.4 Other Instruments. The parties hereto covenant and agree that they
will execute such other and further instruments and documents as are or may
become necessary or convenient to effectuate and carry out the Partnership
created by this Agreement.
12.5 Headings. The headings used in this Agreement are used for
administrative purposes only and do not constitute substantive matter to be
considered in construing the terms of this Agreement.
12.6 Binding. This Agreement shall bind the Partners and their heirs
and permitted successors and assigns.
12.7 Number and Gender. The singular shall be interpreted as the
plural, and words of each gender (or the neuter gender) shall be interpreted as
the other, and vice versa, as necessary to interpret this Agreement in
accordance with its manifest intent.
-26-
<PAGE> 41
PAGE 41 OF 48 PAGES
12.8 Partial Invalidity. If any portion of this Agreement shall be held
invalid or inoperative, then, insofar as is reasonable and possible, the
remainder of this Agreement shall be considered valid and operative, and effect
shall be given to the intent manifested by the portion held invalid or
inoperative.
12.9 Registration of Interests. The Partnership Interests acquired by
this instrument or document have been acquired for investment and have not been
registered under the Securities Act of 1933, as amended, or the securities laws
of any state. Without such registration, such securities may not be
Transferred, except upon delivery to the Partnership of an opinion of counsel
satisfactory to all Partners that registration is not required for such
Transfer or the submission to the Partners of such other evidence as may be
satisfactory to the Partners to the effect that any such Transfer shall not be
in violation of the Securities Act of 1933, as amended, or applicable state
securities laws or any rules or regulations promulgated thereunder.
12.10 Entire Agreement. Exhibit "A" attached hereto is incorporated into
this Agreement as if fully restated herein. This Agreement sets forth all
promises, agreements, conditions, understandings, warranties, and
representations among the parties hereto with respect to the Partnership, and
there are no promises, oral or written, express or implied, among them other
than as set forth herein. No variations, modifications, or changes herein or
hereof shall be binding upon any party hereto unless set forth in a document
duly executed by or on behalf of all Partners. All prior agreements among the
parties relative to the formation and operation of the Partnership are hereby
canceled.
12.11 Meetings and Means of Voting. Meetings of the Partners may be
called by the General Partner or by any Limited Partner. The call will state
the location of and the reason for the meeting. If not specified otherwise, the
meeting will be held at the principal place of business of the Partnership.
Notice of any such meeting will be delivered to all Partners in the manner
prescribed herein not less than 7 days nor more than 30 days prior to the date
of such meeting. Partners may vote in person or by written proxy at any such
meeting. Whenever the vote or consent of Partners is permitted or required
under this Agreement, such vote or consent may be given at a meeting of Partners
or may be given in writing. Any Partner may waive notice of or attendance at
any meeting of the Partners and may attend by telephone or any other electronic
communication device or may execute a signed written consent.
12.12 Right to Rely Upon the Authority of the General Partner. No Person
dealing with the General Partner will be required to determine its authority to
make any commitment or undertaking on behalf of the Partnership, nor to
determine any fact or circumstance bearing upon the existence of its authority.
In addition, no purchaser of any asset owned by the Partnership will be required
to determine the sole and exclusive authority of the General Partner to sign and
deliver on behalf of the Partnership any such instrument of transfer, or to see
to the application or distribution of revenues or proceeds paid or credited in
connection therewith, unless such purchaser had received written notice from the
Partnership affecting the same.
-27-
<PAGE> 42
PAGE 42 OF 48 PAGES
12.13 Litigation. The General Partner will prosecute and defend such
actions at law or in equity as may be necessary to enforce or protect the
interests of the Partnership. The Partnership and the General Partner will
respond to any final decree, judgment, or decision of any court, board, or
authority having jurisdiction of the matter. The General Partner will satisfy
any such judgment, decree, or decision first out of any insurance proceeds
available therefor, next out of the assets of the Partnership, and finally out
of the assets of the General Partner, to the extent legally required.
12.14 Partition. The Partners hereby agree that no Partner shall have the
right while this Agreement remains in effect to have any real property of the
Partnership partitioned, or to file a complaint, or institute any proceeding at
law or in equity to have any Partnership asset partitioned, and each Partner
hereby waives any such right. It is the intention of the Partners that during
the term of this Agreement, the rights of the Partners as among themselves shall
be governed by the terms of this Agreement.
12.15 General Partner with Interest as Limited Partner. If a General
Partner has or acquires an interest as a Limited Partner, the General Partner,
with respect to that Limited Partner's interest, will enjoy all of the rights
and be subject to all of the duties of a Limited Partner.
12.16 Counterpart Execution. This Agreement may be executed in any number
of counterparts with the same effect as if all parties hereto had signed the
same document. All counterparts will be construed together and will constitute
one agreement.
EXECUTED to be effective as of the date first above written.
GENERAL PARTNERS: /s/ PHIL SIMPSON
-----------------------------------
PHIL SIMPSON
/s/ LORRAINE HAMMERICH SIMPSON
-----------------------------------
LORRAINE HAMMERICH SIMPSON
/s/ DAVID P. SIMPSON
-----------------------------------
DAVID P. SIMPSON
LIMITED PARTNERS: /s/ PHIL SIMPSON
-----------------------------------
PHIL SIMPSON
/s/ LORRAINE HAMMERICH SIMPSON
-----------------------------------
LORRAINE HAMMERICH SIMPSON
-28-
<PAGE> 43
PAGE 43 OF 48 PAGES
EXHIBIT "A"
<TABLE>
<CAPTION>
Name and Address of Initial Capital Partnership
Partner Contribution Interest
- ------------------- --------------- -----------
<S> <C> <C>
GENERAL PARTNERS:
Phil Simpson $1,218,608 4.99 percent
1320 Greenway Drive
Suite 920
Irving, Texas 75038-2548
Lorraine Hammerich Simpson $1,218,608 4.99 percent
1320 Greenway Drive
Suite 920
Irving, Texas 75038-2548
David P. Simpson $4,884 0.02 percent
P. O. Box 100
Avinger, Texas 75630-0100
LIMITED PARTNERS:
Phil Simpson $10,989,447 45.0 percent
1320 Greenway Drive
Suite 920
Irving, Texas 75038-2548
Lorraine Hammerich Simpson $10,989,447 45.0 percent
1320 Greenway Drive
Suite 920
Irving, Texas 75038-2548
</TABLE>
Partnership Assets
Partnership Assets include cash, receivables, securities, inventories, prepaid
expenses, buildings and improvements, vehicles, and other assets valued at
$24,420,994 (net of liabilities), including 1,953,140 shares of Common Stock,
$1.00 par value, of Republic Group Incorporated.
<PAGE> 44
PAGE 44 OF 48 PAGES
FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
A.M. RHYNE & CO. LIMITED
THIS FIRST AMENDMENT TO AGREEMENT OF LIMITED PARTNERSHIP OF A.M. RHYNE &
CO. LIMITED (this "First Amendment"), dated as of September 19, 1996, is
entered into by and among PHIL SIMPSON, LORRAINE HAMMERICH SIMPSON, and DAVID
P. SIMPSON, as General Partners, and PHIL SIMPSON and LORRAINE HAMMERICH
SIMPSON, as Limited Partners, for the purposes and upon the terms and
conditions as set forth herein.
WITNESSETH
WHEREAS, on August 8, 1996, Phil Simpson was designated the Manager of
the Partnership by the unanimous consent of the General Partners; and
WHEREAS, the Partners desire to (i) amend the Agreement to clarify
certain rights, powers and duties of the Manager of the Partnership as
specifically set forth below, and (ii) amend and restate Exhibit A to the
Agreement;
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Partners hereby (i) amend the Agreement as set forth below,
and (ii) amend and restate Exhibit A to the Agreement by replacing the existing
Exhibit A with the Exhibit A attached hereto (all capitalized terms used herein
and not otherwise defined herein have the meanings assigned to them in the
Agreement):
1. Section 6.2.4 of Article 6 is amended by replacing such Section
with the following language:
Notwithstanding the foregoing paragraph, all Persons who are
General Partners may, by unanimous consent, designate a managing partner
("Manager"). A designated Manager shall serve until the designation is
revoked or the Manager ceases to serve for any other reason. If a
Manager is designated, the Manager (subject to the restriction imposed by
the next sentence) shall have the sole and exclusive authority to manage
and control the assets and business of the Partnership, including,
without limitation, the right to purchase, sell or vote securities held
by the Partnership. The Manager is authorized to exercise all of the
powers which could be exercised by majority consent of the General
Partners, but shall not take any action requiring unanimous consent of
the General Partners without first obtaining such consent. If a Manager
is designated, any reference to "General Partner" in this Agreement shall
also include "Manager," if applicable.
2. Section 6.2.5 of Article 6 is amended by adding the following
language to the end of such Section:
<PAGE> 45
PAGE 45 OF 48 PAGES
Provided, however, that for so long as a Manager has been designated, the
Manager (subject to the restriction imposed by the fourth sentence in
Section 6.2.4) shall have the sole and exclusive authority to manage and
control the assets and business of the Partnership, including, without
limitation, the right to purchase, sell or vote securities held by the
Partnership.
This First Amendment may be executed in any number of counterparts with
the same effect as if all parties hereto had signed the same document. All
counterparts will be construed together and will constitute one amendment.
IN WITNESS WHEREOF, the undersigned have executed this First Amendment to
be effective as of the date first above written.
GENERAL PARTNERS: /s/ PHIL SIMPSON
-----------------------------------
PHIL SIMPSON
/s/ LORRAINE HAMMERICH SIMPSON
-----------------------------------
LORRAINE HAMMERICH SIMPSON
/s/ DAVID P. SIMPSON
-----------------------------------
DAVID P. SIMPSON
LIMITED PARTNERS: /s/ PHIL SIMPSON
-----------------------------------
PHIL SIMPSON
/s/ LORRAINE HAMMERICH SIMPSON
-----------------------------------
LORRAINE HAMMERICH SIMPSON
<PAGE> 46
PAGE 46 OF 48 PAGES
EXHIBIT "A"
<TABLE>
<CAPTION>
Name and Address of Initial Capital Partnership
Partner Contribution Interest
- --------------- --------------- -----------
<S> <C> <C>
GENERAL PARTNERS:
Phil Simpson $1,218,608 4.99 percent
1320 Greenway Drive
Suite 920
Irving, Texas 75038-2548
Lorraine Hammerich Simpson $1,218,608 4.99 percent
1320 Greenway Drive
Suite 920
Irving, Texas 75038-2548
David P. Simpson $4,884 0.02 percent
P. O. Box 100
Avinger, Texas 75630-0100
LIMITED PARTNERS:
Phil Simpson $10,989,447 45.0 percent
1320 Greenway Drive
Suite 920
Irving, Texas 75038-2548
Lorraine Hammerich Simpson $10,989,447 45.0 percent
1320 Greenway Drive
Suite 920
Irving, Texas 75038-2548
</TABLE>
Partnership Assets
Partnership Assets include cash, receivables, securities, inventories, prepaid
expenses, buildings and improvements, vehicles, and other assets valued at
$24,420,994 (net of liabilities), including 1,953,140 shares of Common Stock,
$1.00 par value, of Republic Group Incorporated.
<PAGE> 47
PAGE 47 OF 48 PAGES
EXHBIIT C
UNANIMOUS CONSENT OF GENERAL PARTNERS
OF
A.M. RHYNE & CO. LIMITED
In accordance with the provisions of Article 6.2.4 of the Agreement of
Limited Partnership (the "Partnership Agreement") of A.M. Rhyne & Co. Limited
(the "Partnership"), the undersigned General Partners of the Partnership by
unanimous written consent do hereby designate Phil Simpson to serve as Managing
General Partner ("Managing General Partner") of the Partnership. The Managing
General Partner shall serve until the designation is revoked or the Managing
General Partner ceases to serve for any other reason. The Managing General
Partner is hereby authorized and directed to manage and control the assets and
business of the Partnership. The Managing General Partner may exercise all of
the powers which could be exercised by majority consent of the General Partners
as set forth in the Partnership Agreement.
/s/ PHIL SIMPSON
-----------------------------------
PHIL SIMPSON
/s/ LORRAINE HAMMERICH SIMPSON
-----------------------------------
LORRAINE HAMMERICH SIMPSON
/s/ DAVID P. SIMPSON
-----------------------------------
DAVID P. SIMPSON
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Phil Simpson, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and consideration therein expressed and in the capacities therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 8th day of August, 1996.
/s/ PATRICIA TAYLOR
-------------------------------------------
Notary Public in and for the State of Texas
[SEAL]
<PAGE> 48
PAGE 48 OF 48 PAGES
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Lorraine Hammerich Simpson, known to me to be the person whose name is
subscribed to the foregoing instrument, and acknowledged to me that he executed
the same for the purposes and consideration therein expressed and in the
capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 8th day of August, 1996.
/s/ PATRICIA TAYLOR
-------------------------------------------
Notary Public in and for the State of Texas
[SEAL]
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
David P. Simpson, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and consideration therein expressed and in the capacities therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 9th day of August, 1996.
/s/ MILDRED DOWNS
-------------------------------------------
Notary Public in and for the State of Texas
[SEAL]
