<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
FLAGSTAR COMPANIES, INC.
------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $0.50 PER SHARE
---------------------------------------
(Title of Class of Securities)
873098 10 7
-----------
(CUSIP Number)
Paul Raether with a copy to:
TW Associates, L.P., KKR Associates, Randall C. Bassett, Esq.
KKR Partners II, L.P., Latham & Watkins
C D Associates, L.P. and 633 West Fifth Street, Suite 4000
C D GP, LLC Los Angeles, California 90071
c/o Kohlberg, Kravis Roberts & Co. (213) 485-1234
9 West 57th Street
New York, New York 10019
(212) 750-8300
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
March 10, 1997
---------------------------------------
(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 [_].
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>
This Amendment No. 2 to Schedule 13D ("Amendment No. 2") amends the
Schedule 13D dated November 16, 1992, and all amendments thereto, filed by TW
Associates, L.P., KKR Partners II, L.P., KKR Associates, C D GP, LLC and C D
Associates, L.P. (the "Schedule 13D"), relating to the Common Stock, par value
$.50 per share (the "Common Stock"), of Flagstar Companies, Inc., a Delaware
corporation and formerly known as TW Holdings, Inc. (the "Company").
ITEM 2. IDENTITY AND BACKGROUND.
Item 2 to Schedule 13D is hereby amended and restated in full to read
in its entirety as follows:
(a) - (c) This statement is being filed jointly by (i) TW Associates,
L.P., a Delaware limited partnership ("Associates"), (ii) KKR Partners II, L.P.,
a Delaware limited partnership ("KKR Partners II"), (iii) KKR Associates, a New
York limited partnership ("KKR Associates"), (iv) C D Associates, L.P., a
Delaware limited partnership ("CD Associates") and (v) C D GP, LLC, a Delaware
limited liability company ("CDGP"). KKR Associates is the sole general partner
of Associates and KKR Partners II. CDGP is the sole general partner of CD
Associates. Associates, KKR Partners II, KKR Associates, CD Associates and CDGP
are hereinafter collectively referred to as the "Reporting Persons." The
agreement among the Reporting Persons relating to the joint filing of this
Amendment No. 2 is attached as Exhibit 1 hereto.
Messrs. Henry R. Kravis, George R. Roberts, Robert I. MacDonnell,
Paul E. Raether, Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz,
Edward A. Gilhuly, Perry Golkin, Clifton S. Robbins and Scott M. Stuart are the
general partners of KKR Associates. Messrs. Kravis and Roberts are the managing
members of CDGP. The other members of CDGP are Messrs. MacDonnell, Raether,
Michelson, Greene, Tokarz, Gilhuly, Golkin, Robbins and Stuart. The principal
occupation or employment of each of Messrs. Kravis and Roberts is as a managing
member of KKR & Co. L.L.C. ("KKR & Co."), which is the general partner of
Kohlberg Kravis Roberts & Co., L.P. ("KKR"), a private investment firm. The
addresses of KKR & Co. and KKR are 9 West 57th Street, New York, New York 10019
and 2800 Sand Hill Road, Suite 200, Menlo Park, California 94025. The principal
occupation or employment of each of Messrs. MacDonnell, Raether, Michelson,
Greene, Tokarz, Golkin, Robbins, Stuart and Gilhuly is as a member of KKR & Co.
The address of the principal business and principal office of
each of the Reporting Persons is 9 West 57th Street, Suite 4200, New York, New
York 10019 and 2800 Sand Hill Road, Suite 200, Menlo Park, California 94025. The
business address of Messrs. Kravis, Raether, Tokarz, Golkin, Robbins and Stuart
is 9 West 57th Street, Suite 4200, New York, New York, 10019; the business
address of Messrs. Roberts, MacDonnell, Michelson, Greene and Gilhuly is 2800
Sand Hill Road, Suite 200, Menlo Park, California 94025.
The principal businesses of Associates, KKR Partners II and KKR
Associates is investing, directly or indirectly through partnerships or other
entities, in the Company and other issuers. The principal businesses of CD
Associates and CDGP is investing in securities of the Company and, potentially,
other issuers.
(d) None of the Reporting Persons, nor, to the best of their
knowledge, any of the other persons named in this Item 2 has, during the last
five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) None of the Reporting Persons, nor, to the best of their
knowledge, any of the other persons named in paragraphs (a) - (c) above has,
during the last five years, been a party to a
1
<PAGE>
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
(f) Each of Messrs. Kravis, Roberts, MacDonnell, Raether, Michelson,
Greene, Tokarz, Gilhuly, Golkin, Robbins and Stuart is a United States citizen.
ITEM 5. INTEREST IN SECURITIES OF THE COMPANY.
Paragraph (b) of Item 5 of Schedule 13D is hereby amended and restated
in full to read as follows:
Associates and KKR Partners II, acting through their sole general partner,
KKR Associates, have the sole power to vote or direct the vote, and to dispose
or to direct the disposition of, Associates' Stock and Partners's Stock,
respectively. As a result, KKR Associates may be deemed to beneficially own any
shares of Common Stock that Associates and KKR Partners II may beneficially own
or be deemed to beneficially own. CD Associates, acting through its sole
general partner, CDGP, has the sole power to vote or direct the vote, and to
dispose or to direct the disposition of, the CD Stock. As a result, CDGP may be
deemed to beneficially own any shares of Common Stock that CD Associates may
beneficially own or be deemed to beneficially own. Each of Messrs. Kravis and
Roberts, as general partners and members of the Executive Committee of KKR
Associates and managing members of CDGP, and each of Messrs. MacDonnell,
Raether, Michelson, Greene, Tokarz, Gilhuly, Golkin, Robbins and Stuart, as
general partners of KKR Associates and the other members of CDGP, may be deemed
to beneficially own the shares of Common Stock and (with respect to KKR
Associates) Warrants of the Company that KKR Associates and CDGP, respectively,
may be deemed to beneficially own. Associates disclaims beneficial ownership of
the Common Stock owned by CD Associates. Neither the filing of this Amendment
No. 2 to the Reporting Persons' Schedule 13D nor any of its contents shall be
deemed to constitute an admission that any Reporting Person or any other person
named in Item 2 above is the beneficial owner of Common Stock referred to in
this paragraph for purposes of Section 13(d) of the Exchange Act or for any
other purpose, and such beneficial ownership is expressly disclaimed.
On March 10, 1997, Associates was admitted as the sole limited partner of
CD Associates. Item 6 hereto describes certain provisions of the Amended and
Restated Limited Partnership Agreement of CD Associates (the "Amended
Partnership Agreement") and is incorporated by reference herein. Associates
disclaims that it is the beneficial owner of the Common Stock owned by CD
Associates for purposes of Section 13(d) of the Exchange Act or for any other
purpose.
The Reporting Persons may be deemed to be a group in relation to their
respective investments in the Company. The Reporting Persons do not affirm the
existence of a group.
Paragraph (c) of Item 5 of Schedule 13D is hereby amended to include
the following:
Except as stated in paragraph (b) above, there have not been any
transactions in the shares of Common Stock effected by or for the account of the
Reporting Persons during the 60 days prior to the date of this Amendment No. 2.
Paragraph (d) of Item 5 of Schedule 13D is hereby amended to read in
its entirety as follows:
Except as stated in this Item 5, to the best knowledge of the Reporting
Persons, no other person 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 and Warrants owned by Associates, KKR Partners II and CD Associates,
respectively.
2
<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE COMPANY.
Item 6 of Schedule 13D is hereby amended to include the following:
Amended and Restated Limited Partnership Agreement of CD Associates
-------------------------------------------------------------------
The Amended Partnership Agreement provides, among other things,
that dividends and interest received with respect to, and proceeds
from the sale or other disposition of, the Common Stock held by CD
Associates would be distributed first to CDGP, as sole general partner
of CD Associates, up to the amount of its cost basis, and thereafter,
any and all such dividends, distributions and proceeds would be
distributed to Associates as the sole limited partner of CD
Associates. A copy of the Amended Partnership Agreement is filed as
Exhibit 2 hereto and is incorporated by reference herein.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
1. Joint Filing Agreement dated as of March 10, 1997.
2. Amended and Restated Limited Partnership Agreement of CD
Associates, L.P., dated as of March 10, 1997.
3
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
TW ASSOCIATES, L.P.
By: KKR Associates
General Partner
By: /s/ Paul E. Raether
-------------------
Name: Paul E. Raether
Title: General Partner
KKR PARTNERS II, L.P.
By: KKR Associates
General Partner
By: /s/ Paul E. Raether
-------------------
Name: Paul E. Raether
Title: General Partner
KKR ASSOCIATES
By: /s/ Paul E. Raether
-------------------
Name: Paul E. Raether
Title: General Partner
C D ASSOCIATES, L.P.
By: C D GP, LLC
General Partner
By: /s/ Paul E. Raether
-------------------
Name: Paul E. Raether
Title: Member
C D GP, LLC
By: /s/ Paul E. Raether
-------------------
Name: Paul E. Raether
Title: Member
Dated: March 10, 1997
4
<PAGE>
EXHIBIT LIST
1. Joint Filing Agreement dated as of March 10, 1997.
2. Amended and Restated Limited Partnership Agreement of CD Associates,
L.P., dated as of March 10, 1997.
5
<PAGE>
Exhibit 1
---------
JOINT FILING AGREEMENT
PURSUANT TO RULE 13d-1(f)(1)
----------------------------
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this statement on Schedule 13D shall be filed on behalf
of each of the undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall be
responsible for the timely filing of such amendments, and for the completeness
and accuracy of the information concerning him or it contained therein, but
shall not be responsible for the completeness and accuracy of the information
concerning the other, except to the extent that it knows or has reason to
believe that such information is inaccurate.
Dated: March 10, 1997
TW ASSOCIATES, L.P.
By: KKR Associates
General Partner
By: /s/ Paul E. Raether
-------------------
Name: Paul E. Raether
Title: General Partner
KKR PARTNERS II, L.P.
By: KKR Associates
General Partner
By: /s/ Paul E. Raether
-------------------
Name: Paul E. Raether
Title: General Partner
KKR ASSOCIATES
By: /s/ Paul E. Raether
-------------------
Name: Paul E. Raether
Title: General Partner
6
<PAGE>
C D ASSOCIATES, L.P.
By: C D GP, LLC
General Partner
By: /s/ Paul E. Raether
-------------------
Name: Paul E. Raether
Title: Member
C D GP, LLC
By: /s/ Paul E. Raether
-------------------
Name: Paul E. Raether
Title: Member
7
<PAGE>
Exhibit 2
---------
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
C D ASSOCIATES, L.P.
8
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
I. DEFINITIONS..................................................... 1
1.1 "Acquisition Expenses".................................... 1
1.2 "Act"..................................................... 1
1.3 "Agreement"............................................... 1
1.4 "Basis"................................................... 1
1.5 "Certificate"............................................. 1
1.6 "Code".................................................... 1
1.7 "General Partner"......................................... 1
1.8 "Investment Account"...................................... 1
1.9 "Investment Contribution"................................. 1
1.10 "Limited Partners"........................................ 2
1.11 "Operating Capital Account"............................... 2
1.12 "Partners"................................................ 2
1.13 "Partnership"............................................. 2
1.14 "Profits and Losses"...................................... 2
1.15 "Qualified Equity Investment"............................. 2
1.16 "Realized Investment Gain"................................ 2
1.17 "Realized Investment Loss"................................ 2
1.18 "Transferred Interest".................................... 2
II. GENERAL......................................................... 2
2.1 Formation................................................. 2
2.2 Name...................................................... 2
2.3 Purpose................................................... 3
2.4 Partners.................................................. 3
2.5 Office of the Partnership................................. 3
2.6 Designated Agent for Service of Process................... 3
2.7 Representations and Warranties of Partners................ 4
2.8 Withdrawing Limited Partner............................... 4
III. TERM............................................................ 4
IV. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS......................... 4
4.1 Capital Contributions..................................... 4
4.2 Investment Accounts; Operating Capital Account............ 4
4.3 Adjustments to Investment Accounts........................ 4
4.4 Adjustments to Operating Capital Account.................. 5
4.5 No Right of Withdrawal.................................... 5
V. DISTRIBUTIONS................................................... 5
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
5.1 Distribution of the Qualified Equity Investment........... 5
5.2 Distribution of Proceeds Resulting from Dispositions
of the Qualified Equity Investment........................ 6
5.3 Distribution of Dividends or Interest from the
Qualified Equity Investment............................... 6
VI. MANAGEMENT...................................................... 6
6.1 General................................................... 6
6.2 Role of Limited Partners.................................. 6
6.3 Liability of General Partner.............................. 6
6.4 Right of General Partner to Employ Persons................ 7
6.5 Partnership Expenses...................................... 7
VII. TRANSFER OF PARTNERSHIP INTERESTS; SUBSTITUTE AND
ADDITIONAL LIMITED PARTNERS..................................... 7
7.1 General................................................... 7
7.2 Effect of Retirement, Withdrawal, Bankruptcy,
Dissolution, Death or Incompetency of Limited Partner..... 7
7.3 Substitute Limited Partners............................... 8
7.4 Additional Partners....................................... 8
VIII. BOOKS OF ACCOUNT................................................ 8
8.1 General................................................... 8
8.2 Fiscal Year............................................... 8
8.3 Income Tax Elections...................................... 8
IX. DISSOLUTION AND TERMINATION OF THE PARTNERSHIP.................. 8
9.1 General................................................... 8
9.2 Distribution of Partnership Assets Upon Termination....... 9
X. POWER OF ATTORNEY............................................... 9
10.1 General.................................................. 9
10.2 Survival of Power of Attorney............................ 10
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
XI. MISCELLANEOUS.................................................... 10
11.1 Governing Law............................................. 10
11.2 Binding Effect............................................ 10
11.3 Amendment................................................. 10
11.4 Counterparts.............................................. 10
11.5 Entire Agreement.......................................... 10
11.6 Severability.............................................. 10
11.7 Headings; Use of Pronouns................................. 11
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
C D ASSOCIATES, L.P.
This AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (this
"Agreement") of C D ASSOCIATES, L.P. (the "Partnership") is made as of March 10,
- ---------- -----------
1997, among C D GP, LLC, a Delaware limited liability company, as general
partner, Perry Golkin, as a withdrawing limited partner, and TW Associates,
L.P., a Delaware limited partnership, as a limited partner.
The Partnership was formed by C D GP, LLC and Perry Golkin on December
23, 1996. On December 31, 1996, the Partnership made the Qualified Equity
Investment (as defined below). This amendment to and restatement of the Limited
Partnership Agreement of the Partnership dated as of December 23, 1996 is being
entered into for the purpose of admitting a new limited partner to the
Partnership, permitting Perry Golkin to withdraw as the limited partner of the
Partnership, setting forth the terms and conditions under which the parties to
the Agreement will operate and otherwise continuing the business of the
Partnership.
I. DEFINITIONS
-----------
1.1 "Acquisition Expenses" has the meaning given in Section 4.2.
-------------------- -----------
1.2 "Act" means the Delaware Revised Uniform Limited Partnership Act
---
(6 Del. C. (S) 17-101 et. seq.), as amended from time to time.
--- -
1.3 "Agreement" has the meaning given in the preamble.
---------
1.4 "Basis" means, with respect to any portion of the Qualified
-----
Equity Investment, the basis thereof as determined in accordance with the Code,
which shall include Acquisition Expenses allocable thereto.
1.5 "Certificate" has the meaning given in Section 2.1.
----------- -----------
1.6 "Code" means the Internal Revenue Code of 1986, as amended.
----
1.7 "General Partner" means C D GP, LLC, a Delaware limited liability
---------------
company, and any additional General Partner admitted pursuant to Section 7.4.
-----------
1.8 "Investment Account" has the meaning given in Section 4.2.
------------------ -----------
1.9 "Investment Contribution" has the meaning given in Section 4.1.
----------------------- -----------
1.10 "Limited Partners" means TW Associates, L.P., a Delaware limited
----------------
partnership, and any additional or substitute Limited Partner admitted pursuant
to Section 7.3 or Section 7.4.
----------- -----------
1
<PAGE>
1.11 "Operating Capital Account" has the meaning given in Section
------------------------- -------
4.2.
1.12 "Partners" means the General Partner and the Limited Partners.
--------
1.13 "Partnership" has the meaning given in the preamble.
-----------
1.14 "Profits and Losses" means the profits and losses of the
------------------
Partnership with respect to the Qualified Equity Investment, determined in
accordance with the method of accounting used by the Partnership for federal
income tax purposes, other than Realized Investment Gain, Realized Investment
Loss and losses allocated pursuant to Section 4.4.
-----------
1.15 "Qualified Equity Investment" means the investment by the
---------------------------
Partnership in the common stock of Flagstar Companies, Inc., and any securities
received by the Partnership in exchange therefor.
1.16 "Realized Investment Gain" means the excess, if any, of the
------------------------
proceeds from the sale or exchange of all or any portion of the Qualified Equity
Investment over the Basis thereof.
1.17 "Realized Investment Loss" means the deficiency, if any, of the
------------------------
proceeds from the sale or exchange of all or any portion of the Qualified Equity
Investment as compared to the Basis thereof.
1.18 "Transferred Interest" has the meaning given in Section 7.1.
-------------------- -----------
II. GENERAL
-------
2.1 Formation. The Partnership was formed, and is hereby continued
---------
by the Partners, under the Act for the purposes and upon the terms and
conditions set forth herein. The rights and liabilities of the Partners shall
be as provided in the Act, except as otherwise expressly provided in this
Agreement. If there is any inconsistency between any terms and conditions
contained in this Agreement and any nonmandatory provisions of the Act, the
terms and conditions contained in this Agreement shall govern. A certificate of
limited partnership (the "Certificate") was filed on behalf of the Partnership
-----------
in the office of the Secretary of State of the State of Delaware on December 23,
1996. The General Partner may execute and file any duly authorized amendments
to the Certificate from time to time in a form prescribed by the Act.
2.2 Name. The name of the Partnership is C D Associates, L.P.
----
However, the Partnership may do business under such other names as the General
Partner deems necessary or desirable.
2.3 Purpose. The Partnership is organized for the object and purpose
-------
of making the Qualified Equity Investment, managing and disposing of such
investment, sharing the profits and losses therefrom, and engaging in such
activities incidental or ancillary thereto as the General Partner deems
necessary or advisable. In order to carry out its purpose the Partnership is
authorized to:
2
<PAGE>
(a) acquire, own, sell, transfer, convey, assign, exchange or
otherwise dispose of its interest in the Qualified Equity Investment or any
other investment made by the Partnership;
(b) act as a partner of any partnership organized to make equity
investments;
(c) borrow money, issue evidences of indebtedness and purchase,
renew and dispose of letters of credit;
(d) lend money;
(e) make interim investments in government obligations,
certificates of deposit and bankers' acceptances;
(f) enter into, execute and carry out contracts and agreements
and any and all other documents and agreements;
(g) bring and defend actions at law or equity;
(h) purchase, cancel or otherwise retire or dispose of the
interest of any Partner in the Partnership pursuant to the provisions of this
Agreement; and
(i) do any and all other acts and things necessary or proper in
furtherance of Partnership business.
2.4 Partners. From and after the date hereof, the Partnership shall
--------
consist of the General Partner and the undersigned Limited Partner, together
with such other Partners as may be subsequently admitted pursuant to this
Agreement. No real or personal property of the Partnership shall be deemed to
be owned by any Partner individually, but shall be owned by, and title shall be
vested solely in, the Partnership.
2.5 Office of the Partnership. The Partnership shall maintain an
-------------------------
office and principal place of business at 9 West 57th Street, New York, New York
10019, or at such other place or places as the General Partner may from time to
time decide.
2.6 Designated Agent for Service of Process. The Partnership shall
---------------------------------------
continuously maintain a registered office and a designated and duly qualified
agent for service of process on the Partnership in the State of Delaware.
2.7 Representations and Warranties of Partners. By execution and
------------------------------------------
delivery of this Agreement, each of the Partners: (i) represents and warrants
that its interest in the Partnership is intended to be and is being acquired
solely for its own account for investment and not with a view to or for sale in
connection with any distribution of all or any part thereof; (ii) acknowledges
that it is aware that interests in the Partnership have not been registered
under the Securities Act of 1933, that interests in the Partnership cannot be
sold or otherwise disposed of unless they are registered thereunder or unless an
exemption from such
3
<PAGE>
registration is available and that the Partnership has no intention of so
registering interests in the Partnership thereunder, and that accordingly it is
able and is prepared to bear the economic risk of making its Investment
Contributions contemplated hereby and to suffer a complete loss of such
Investment Contributions; and (iii) represents that it is authorized and has all
requisite power and authority to become a Partner, that this Agreement has been
duly and validly executed by such Partner and that this Agreement constitutes a
valid and binding obligation of such Partner.
2.8 Withdrawing Limited Partner. The execution of this Agreement by
---------------------------
Perry Golkin, in his capacity as a withdrawing limited partner, constitutes his
withdrawal as a limited partner of the Partnership. Because of such withdrawal,
Perry Golkin has no further right, interest or obligation of any kind whatsoever
as a limited partner of the Partnership. Any capital contribution of Perry
Golkin shall be returned to him on the date of this Agreement.
III. TERM
----
The existence of the Partnership commenced upon the filing of the
Certificate and shall terminate on December 31, 2025, unless terminated earlier
pursuant to Article IX.
----------
IV. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
---------------------------------------
4.1 Capital Contributions. The General Partner shall contribute to
---------------------
the Partnership the amount necessary to enable the Partnership to make the
Qualified Equity Investment and pay Acquisition Expenses (as defined in Section
-------
4.2). Such amount is called the "Investment Contribution."
- --- -----------------------
4.2 Investment Accounts; Operating Capital Account. There shall be
----------------------------------------------
established for each Partner on the books of the Partnership a capital account
(an "Investment Account") relating to the Qualified Equity Investment. The
------------------
Investment Contribution shall be credited to the Investment Account of the
General Partner. In addition, the General Partner shall have established for it
a capital account (the "Operating Capital Account") to which shall be credited
-------------------------
its capital contributions pursuant to Section 6.5, other than capital
-----------
contributions relating to expenses incurred in connection with the acquisition
of the Qualified Equity Investment and any other expenses properly added to
Basis (the "Acquisition Expenses").
--------------------
4.3 Adjustments to Investment Accounts. The Investment Accounts of
----------------------------------
Partners shall, for federal income tax purposes, be adjusted as follows:
(a) any amounts distributed to the Partners pursuant to Section
-------
5.2 and Section 5.3 shall be debited against the Investment Accounts of the
- --- -----------
Partners;
(b) any Profits of the Partnership shall be credited to the
Investment Account of the General Partner in an amount equal to the excess of
the amount of any Realized Investment Losses previously charged thereto pursuant
to Section 4.3(d) over the amount of any Realized Investment Gains credited
--------------
thereto pursuant to Section
-------
4
<PAGE>
4.3(c), and thereafter to the Investment Accounts of the Limited Partners; and
- ------
any Losses of the Partnership shall be debited against the Investment Account of
the General Partner;
(c) any Realized Investment Gains shall be credited to the
Investment Account of the General Partner in an amount equal to the excess of
the amount of any Realized Investment Losses previously charged thereto pursuant
to Section 4.3(d) over the amount of any Realized Investment Gains previously
--------------
credited thereto pursuant to this Section 4.3(c), and thereafter to the
--------------
Investment Accounts of the Limited Partners;
(d) any Realized Investment Loss shall be debited against the
Investment Account of the General Partner; and
(e) the Basis of any portion of the Qualified Equity Investment
distributed to the General Partner pursuant to Section 5.1 shall be debited
-----------
against the Investment Account of the General Partner.
4.4 Adjustments to Operating Capital Account. All expenses or losses
----------------------------------------
incurred by the Partnership pursuant to Section 6.5, other than Acquisition
-----------
Expenses, shall be debited to the Operating Capital Account for federal income
tax purposes.
4.5 No Right of Withdrawal. No Partner shall have the right to
----------------------
withdraw any portion of such Partner's Investment Contribution or Investment
Account, except as provided herein.
V. DISTRIBUTIONS
-------------
5.1 Distribution of the Qualified Equity Investment. If the General
-----------------------------------------------
Partner deems it advisable, either because the Qualified Equity Investment has
attained a suitable degree of appreciation and marketability, or for any other
reason, it may in its discretion distribute to Partners all or any portion of
the Qualified Equity Investment. The decision of the General Partner to
distribute, retain or sell all or any portion of the Qualified Equity Investment
shall be binding and conclusive on all Partners. Any such distribution shall be
made in the following order of priority: first, the portion of the securities
to be distributed having a value up to the original cost basis of the
Partnership plus Acquisition Expenses allocable to all such securities (to the
extent not previously distributed to the General Partner hereunder) shall be
distributed to the General Partner; and second, the remainder of such securities
shall be distributed to the Limited Partners. Notwithstanding the foregoing,
the General Partner may withhold making a distribution to a Partner until the
Partner has provided the General Partner with all necessary information and
assurances (including an opinion of counsel satisfactory to the General Partner)
requested by the General Partner to determine that such distribution will be in
compliance with all applicable laws.
5.2 Distribution of Proceeds Resulting from Dispositions of the
-----------------------------------------------------------
Qualified Equity Investment. As soon as practicable after the receipt of any
- ---------------------------
proceeds from the sale, exchange or other disposition of all or any portion of
the Qualified Equity Investment, the proceeds, net of any expenses, shall be
distributed to the Partners in the following order of priority: first, an
amount up to the original cost basis of the Partnership plus Acquisition
5
<PAGE>
Expenses allocable to such investment (to the extent not previously distributed
to the General Partner hereunder) shall be distributed to the General Partner;
and second, the remaining amount shall be distributed to the Limited Partners.
5.3 Distribution of Dividends or Interest from the Qualified Equity
---------------------------------------------------------------
Investment. As soon as practicable after receipt thereof, any dividends or
- ----------
interest received by the Partnership with respect to any Qualified Equity
Investment shall be distributed to the Partners in the following order of
priority: first, an amount up to the original cost basis of the Partnership
plus Acquisition Expenses allocable to such investment (to the extent not
previously distributed to the General Partner hereunder) shall be distributed to
the General Partner; and second, the remaining amount shall be distributed to
the Limited Partners.
VI. MANAGEMENT
----------
6.1 General. The General Partner may act for and bind the
-------
Partnership. The General Partner shall have the authority, inter alia, to make
distributions and sell assets of the Partnership, and shall have the exclusive
right to manage the business and affairs of the Partnership, and shall delegate
such management duties and responsibilities to such other person or persons
designated by it as it may determine (including, without limitation, affiliates
of the General Partner).
6.2 Role of Limited Partners. No Limited Partner shall have any
------------------------
right to participate in the management of the business of the Partnership or act
for or bind the Partnership.
6.3 Liability of General Partner. The General Partner shall not be
----------------------------
liable to the Partnership or any other Partner for any action taken or omitted
to be taken in good faith and with the belief that such action or omission was
in the best interest of the Partnership, so long as such action or omission was
not in violation of the provisions hereof and did not constitute fraud or gross
negligence by the General Partner. The General Partner shall not be liable to
the Partnership or any other Partner for any action taken or omitted to be taken
by any other Partner, nor shall the General Partner (in the absence of fraud or
gross negligence by the General Partner) be liable to the Partnership or any
other Partner for any action or any omission of any employee or agent of the
Partnership. The Partnership shall, to the full extent permitted by applicable
law, indemnify and hold harmless the General Partner against liabilities
incurred by it in connection with any action, suit or proceeding to which it may
be made a party or otherwise involved or with which it shall be threatened by
reason of its being a General Partner of the Partnership or while acting as
General Partner on behalf of the Partnership or in its interest; provided that
the foregoing indemnification shall not include or apply to any liability
arising by reason of any act or omission of the General Partner which has been
finally determined by a court of competent jurisdiction to have been grossly
negligent or fraudulent.
6.4 Right of General Partner to Employ Persons. The General Partner
------------------------------------------
may employ, on behalf of the Partnership, such persons, firms or corporations
(including accountants and attorneys) as it deems advisable for the conduct of
the business of the Partnership, on such terms and for such compensation as the
General Partner may determine.
6
<PAGE>
6.5 Partnership Expenses. The General Partner shall contribute all
--------------------
sums necessary to pay the expenses of the Partnership, both for routine and
recurring costs and for extraordinary items.
VII. TRANSFER OF PARTNERSHIP INTERESTS; SUBSTITUTE AND ADDITIONAL LIMITED
--------------------------------------------------------------------
PARTNERS
--------
7.1 General. No Partner may sell, transfer, assign, hypothecate,
-------
pledge or otherwise dispose of or encumber all or any part of such Partner's
interest in the Partnership (whether voluntarily, involuntarily or by operation
of law) without the prior written consent of the General Partner, which consent
may be given or withheld in the General Partner's sole and absolute discretion;
provided, however, that any Partner may transfer or assign all or any portion of
its interest in the Partnership to any member of its family (including a trust
for the benefit of such family members or a partnership of which such family
members are partners), by gift, will or intestate succession, or by a transfer
involving the receipt of value in exchange therefor. Upon any permitted
transfer, the assignee shall succeed to such portion of the transferring
Partner's Investment Account and Investment Contribution and Operating Capital
Account (if applicable) as the transferring Partner shall provide by written
notice to the Partnership (collectively, the "Transferred Interest"). No
--------------------
assignee shall have the right to become a General Partner of the Partnership,
but an assignee of the interest of a General Partner or a Limited Partner may be
admitted as a substitute Limited Partner pursuant to Section 7.3. Except as
-----------
specifically provided otherwise in this Agreement, no Limited Partner shall have
the right to withdraw from the Partnership without the General Partner's
consent, which consent may be given or withheld in the General Partner's sole
and absolute discretion.
7.2 Effect of Retirement, Withdrawal, Bankruptcy, Dissolution, Death
----------------------------------------------------------------
or Incompetency of Limited Partner. The retirement, withdrawal, bankruptcy,
- ----------------------------------
dissolution, death or adjudication of incompetency of a Limited Partner shall
not dissolve the Partnership. The trustee, executor, administrator, committee
or guardian of the Limited Partner or of the Limited Partner's estate, as the
case may be, shall have all the rights of the Limited Partner for the purpose of
settling or managing the estate and such power as the bankrupt, deceased or
incompetent Limited Partner possessed to assign all or part of the Limited
Partner's interest in the Partnership.
7.3 Substitute Limited Partners. No assignee of all or any part of
---------------------------
an interest of a Partner in the Partnership shall be admitted to the Partnership
as a substitute Limited Partner unless (a) the General Partner in its sole and
absolute discretion has consented in writing to such admission, (b) the assignee
has executed a counterpart of this Agreement (as modified or amended from time
to time) and such other instruments as the General Partner deems necessary to
confirm the undertaking of the assignee to be bound by all the terms and
provisions of this Agreement and (c) the assignee undertakes to pay all expenses
incurred by the Partnership in connection with such assignment and substitution.
7.4 Additional Partners. Any person may be admitted to the
-------------------
Partnership as an additional Partner if (a) the General Partner in its sole and
absolute discretion has consented in writing to the admission and (b) the person
has executed a counterpart of this
7
<PAGE>
Agreement (as modified or amended from time to time) and such other instruments
as the General Partner deems necessary to confirm the undertaking of the person
to be bound by all the terms and provisions of this Agreement.
VIII. BOOKS OF ACCOUNT
----------------
8.1 General. Full and accurate books of account, in which shall be
-------
entered each and every transaction of the Partnership, shall be kept by the
Partnership at an office of the Partnership (or at such other place as the
General Partner shall advise the Partners in writing). These books shall be
kept on a cash basis as employed for purposes of federal income taxation. Such
books shall, at all reasonable times, be open to inspection and copying by the
General Partner or its authorized agents, servants and employees. A report
showing the financial condition of the Partnership at the end of each fiscal
year of the Partnership and the results of its operations for the fiscal year
shall be mailed to each Partner within 120 days after the end of the fiscal
year.
8.2 Fiscal Year. Except as the General Partner may otherwise
-----------
determine, the fiscal year of the Partnership shall be the calendar year.
8.3 Income Tax Elections. The General Partner may make any income
--------------------
tax elections for the Partnership which it deems necessary or advisable,
including the election pursuant to Section 754 of the Code.
IX. DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
----------------------------------------------
9.1 General. The Partnership shall be dissolved and its affairs
-------
wound up only upon the first to occur of the following:
(a) a determination by the General Partner to dissolve the
Partnership;
(b) December 31, 2025;
(c) judicial dissolution; or
(d) the death, dissolution, withdrawal or Bankruptcy (as defined
below) of the General Partner. For purposes of this Section 9.1(d),
--------------
"Bankruptcy" means the occurrence of any of the events specified in Section 17-
----------
402(a)(4) or (5) of the Act with respect to the General Partner.
9.2 Distribution of Partnership Assets Upon Termination. Upon the
---------------------------------------------------
dissolution of the Partnership in accordance with this Agreement and the Act,
the General Partner shall act as liquidator of the Partnership's assets or, if
the General Partner is not still functioning, the remaining members of the
General Partner shall act as liquidators of the Partnership's assets. All
liquidating distributions shall be made in assets of the Partnership and/or in
cash, as the liquidator(s) shall determine in their sole discretion. In
connection with the sale by the Partnership and reduction to cash of any of its
assets, any Partner (or
8
<PAGE>
affiliate thereof) may bid for and purchase any such assets. The liquidator(s)
shall apply or distribute the assets of the Partnership in one or more
installments as follows:
(a) First, to the payment of the Partnership's outstanding
liabilities to creditors, in the order of priority as provided by law, or the
provision of adequate reserves therefor;
(b) Second, to the General Partner in the amount of the positive
balance in its Investment Account (which shall be adjusted to reflect the profit
or loss arising from such liquidation); and
(c) Third, the remainder to the Limited Partners.
X. POWER OF ATTORNEY
-----------------
10.1 General. Each Limited Partner irrevocably constitutes and
-------
appoints the General Partner (and each additional General Partner, if any) its
true and lawful attorney, in its name, place and stead, to make, execute,
acknowledge and/or file:
(a) the Certificate;
(b) all documents and instruments which may be deemed necessary
or desirable to effect the winding-up and termination of the Partnership
(including but not limited to a certificate of cancellation of the Certificate);
(c) any documents which may be required to effect transfers of
Partnership interests;
(d) any and all amendments to this Agreement and the Certificate
necessary to substitute or add Partners, to reflect adjustments in interests in
the Partnership or to make other required changes; and
(e) any business certificate, fictitious name certificate,
amendment thereto or other instrument or document of any kind necessary or, in
the opinion of the General Partner, advisable to accomplish the purpose of the
Partnership or required by applicable federal, state or local law;
it being expressly intended by each of the Partners that the foregoing power of
attorney is coupled with an interest.
10.2 Survival of Power of Attorney. The power of attorney set forth
-----------------------------
in Section 10.1 shall survive (a) the death, insanity or incapacity of a Partner
------------
and (b) any assignment or other transfer (voluntary or involuntary) by a Partner
of all or any part of its interest in the Partnership.
9
<PAGE>
XI. MISCELLANEOUS
-------------
11.1 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of Delaware applicable to contracts made
and to be performed therein without giving effect to any otherwise governing
principles of conflicts of law.
11.2 Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the parties hereto and their respective permitted
successors, assigns, legal representatives, heirs and distributees. Nothing in
this Agreement, express or implied, is intended or shall be construed to give
any person other than the parties to this Agreement (or their respective
permitted successors, assigns, legal representatives, heirs and distributees)
any legal or equitable right, remedy or claim under or in respect of any
agreement or provision contained herein, it being the intention of the parties
hereto that this Agreement is for the sole and exclusive benefit of such parties
(or such permitted successors, assigns, legal representatives, heirs and
distributees) and for the benefit of no other person.
11.3 Amendment. This Agreement may only be amended by a writing duly
---------
signed by the General Partner, except that any such amendment which directly and
materially adversely affects the Limited Partners shall require the consent of
the Limited Partners.
11.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart shall for all purposes be deemed an
original, and all such counterparts shall together constitute but one and the
same agreement.
11.5 Entire Agreement. This Agreement constitutes the entire
----------------
agreement among the Partners and supersedes all prior agreements and
understandings among the Partners with respect to the matters contemplated
hereby. There are no restrictions, warranties, covenants, agreements, promises
or undertakings other than those expressly set forth in this Agreement.
11.6 Severability. If at any time subsequent to the date hereof, any
------------
provision of this Agreement shall be held by any court of competent jurisdiction
to be illegal, void or unenforceable, such provision shall be of no force and
effect, but the illegality or unenforceability of such provision shall have no
effect upon and shall not impair the enforceability of any other provision of
this Agreement.
11.7 Headings; Use of Pronouns. Headings and captions are used herein
-------------------------
for convenience only and do not form a part of this Agreement. Where context
requires, the terms "it" and "its" are used to refer to both individuals and
entities.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GENERAL PARTNER: LIMITED PARTNER:
- --------------- ---------------
C D GP, LLC TW ASSOCIATES, L.P.
By: KKR Associates, L.P.,
its General Partner
By: /s/ Henry R. Kravis
________________________
Henry R. Kravis
Manager By: /s/ Paul Raether
________________________
General Partner
By: /s/ George R. Roberts
________________________
George R. Roberts
Manager
WITHDRAWING LIMITED PARTNER
/s/ Perry Golkin
__________________________________
Perry Golkin
S-1
