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Exhibit 3.1
SECOND AMENDED AND RESTATED AGREEMENT OF GENERAL PARTNERSHIP OF UNIVERSAL CITY FLORIDA HOLDING CO. I
TABLE OF CONTENTS
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GLOSSARY OF DEFINED TERMS
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SECOND AMENDED AND RESTATED AGREEMENT
THIS AGREEMENT (the “Agreement”) is made and entered into as of July 27, 2000, by and between BLACKSTONE UTP CAPITAL PARTNERS L.P., a Delaware limited partnership (“Blackstone UTP”), BLACKSTONE UTP CAPITAL PARTNERS A L.P., a Delaware limited partnership (“Blackstone UTP A”), BLACKSTONE UTP OFFSHORE CAPITAL PARTNERS L.P., a Cayman Islands exempted limited partnership (“Blackstone Offshore”), and BLACKSTONE FAMILY MEDIA PARTNERSHIP III L.P., a Delaware limited partnership (“Blackstone FMP” and, together with Blackstone Offshore, Blackstone UTP A, and Blackstone UTP, collectively, the “Blackstone Partners” and individually, a “Blackstone Partner”) and UNIVERSAL CITY PROPERTY MANAGEMENT COMPANY, a Delaware corporation, hereinafter referred to as “UniCo,” a wholly owned subsidiary of Universal Studios, Inc. (“Universal Parent”).
W I T N E S S E T H
WHEREAS, Universal Parent is a diversified international company engaged in the production and distribution of theatrical motion pictures and television product, nontheatrical film activities, merchandising and publishing of film properties, other business activities, and operation of the Universal Studios Tour in Los Angeles, California (the “Original Tour”); and
WHEREAS, the Blackstone Partners have been organized for the purpose of acquiring the partnership interests of Rank Orlando II, Inc. (“Rank”) in Universal City Holding Co. II (“HII”) and of Rank Orlando, Inc. (“Rank I”) in Universal City Florida Holding Co. I (the “Partnership”); and
WHEREAS, the Blackstone Partners are affiliates of Blackstone Capital Partners III Merchant Banking Fund, L.P. and its affiliates (“Blackstone Parent”); and
WHEREAS, on May 19, 2000, Rank America, Inc. (“Rank America”), Rank, Rank I and Blackstone USE Acquisition Company, L.L.C. (“Blackstone USE”), entered into a Purchase Agreement (the “Purchase Agreement”) providing for the purchase on the closing date thereunder by Blackstone USE of Rank’s 50% partnership interest in this Partnership and Rank I’s 50% interest in HII;
WHEREAS, pursuant to an Assignment and Assumption Agreement, dated as of the date hereof, Blackstone USE assigned its rights to the Blackstone Partners under the Purchase Agreement;
WHEREAS, the execution and deliver of this Amended and Restated Agreement of General Partnership by the parties hereto is a condition to the obligations of the parties under the Purchase Agreement; and
WHEREAS, Rank and Rank I are indirect wholly owned subsidiaries of Rank Leisure Holdings Plc (“Rank Parent”); and
WHEREAS, affiliates of Rank Parent and Universal Parent have owned a project (“Project 1”) consisting of a motion picture and television themed tourist attraction (“Gate 1”), sound stages and a motion picture and television studio (the “Studio”) and related activities; and
WHEREAS, affiliates of Rank Parent and Universal Parent have owned a project (“Project 2”) consisting of a gated themed tourist attraction (“Gate 2”), a retail commercial development known as CityWalk, and additional land which may be developed for hotels, restaurants, offices, commercial facilities and recreational facilities; and
WHEREAS, the land comprising Project 1 and Project 2 is hereinafter referred to as the “Master Site” and consists of approximately 821.02 acres located in the Orlando, Florida area and known as “Universal City, Florida” and the Master Site (including any improvements now or hereafter located on any portion thereof) is sometimes referred to as the “Combined Project”; and
WHEREAS, land within the Master Site is being developed as the Portofino Hotel by a partnership in which affiliates of Rank and UniCo have an indirect interest; and
WHEREAS, Project 1 was developed and operated by a general partnership organized under the laws of the State of Florida known as Universal City Florida Partners (“UCFP”); and
WHEREAS, Project 2 was developed and operated by a general partnership organized under the laws of the State of Florida known as Universal City Development Partners (“UCDP”); and
WHEREAS, on January 6, 2000, (i) UCDP converted into Universal City Development Partners, LP, a limited partnership organized under the laws of the State of Delaware (“New LP”) and (ii) a successor partnership to UCFP merged into the New LP (the “Merger”); and
WHEREAS, from and after the Merger, the Combined Project has been operated through the New LP; and
WHEREAS, this Partnership and HII and New LP are hereinafter referred to as the “Related Partnerships”; and
WHEREAS, contemporaneously with the Effective Date the constituents of the Related Partnerships and Universal Parent are entering into an Amended and Restated Partners’ Agreement (the “Partners’ Agreement”).
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NOW, THEREFORE, it is agreed by and between the parties hereto as follows.
1. Formation and Name of Partnership .
Each of the Blackstone Partners and UniCo (collectively, the “Partners” and individually a “Partner”) hereby continue a general partnership, with each as a partner, under the laws of the State of Florida, which general partnership is known as “Universal City Florida Holding Co. I” (hereinafter referred to as the “Partnership”) under and pursuant to the terms of this Agreement. The Partnership is organized and governed by, the Revised Uniform Partnership Act in effect in the State of Florida on the Effective Date.
2. Purpose .
The purposes of this Partnership shall be to serve as sole limited partner of New LP.
If any of the Partners becomes aware of an opportunity to acquire real property which is located within a radius of 3 miles from any spot on the perimeter of the Master Site, that Partner shall promptly advise the other Partners so that if the Partners believe that the acquisition of such real property will benefit the Partnership, the Partnership (or a Related Partnership) rather than any individual Partner will have the opportunity to acquire such real property. If one Partner or its affiliates in the capacity as a partner of the Partnership or as a partner of a Related Partnership opposes the Partnership’s or a Related Partnership’s acquisition of such property and the other Partner or its affiliates in both of such capacities favors such acquisition, the Partner (or its affiliates) opposing such acquisition and its affiliates will be prohibited from acquiring or entering into an agreement to acquire such property for 2 years from the date the Partnership determined not to acquire such property, and the other Partner and its affiliates shall be free to acquire such property at any time. If any Partner and its affiliates in the capacities described in the prior sentence oppose the Partnership’s acquisition of such property, the Partners and their affiliates shall be free to acquire such property at any time. If during the aforementioned 2-year period, the Partner or its affiliates who opposed the Partnership’s acquisition of the property change positions and propose that the Partnership or a Related Partnership acquire the property, the above provisions of this grammatical paragraph will thereafter apply as if the previous advise and rejection had not occurred.
3. Principal Place of Business . The principal place of business of the Partnership shall be Orlando, Florida, or at such other places as the Partners shall designate.
4. Term . The term of the Partnership began in 1995. This Agreement becomes effective on July 27, 2000 (the “Effective Date”). The Partnership thereafter shall be indefinite in duration, subject to the provisions for termination hereinafter set forth. No Partner shall dissociate from the Partnership, terminate the
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Partnership, or seek a dissolution of the Partnership except under circumstances expressly authorized elsewhere in this Agreement. The existence of the Partnership as a separate legal entity shall continue until its termination in accordance with the provisions of this Agreement.
5. Representations . Each of the Blackstone Partners and UniCo makes the following representations: it is duly organized and existing in good standing under the laws of the state of its organization with full power and authority to enter into this Agreement; this Agreement constitutes the legal, valid and binding obligation of such Partner enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights or creditors generally and subject to the general powers of a court of equity; the execution and performance of this Agreement by such Partner does not and will not violate any provision of, or constitute a default under, or breach of any agreement or other instrument, order, arbitration award, judgment or decree to which such Partner is a party or by which any of its assets is bound. The Partnership makes the following representation: as of the Effective Date, the capital account of UniCo in the Partnership is equal to the aggregate capital accounts of the Blackstone Partners in the Partnership.
6 . Intentionally omitted .
7. Loan Arrangements . New LP, as debtor, is subject to certain obligations and restrictions under the Amended and Restated Credit Agreement, dated as of November 5, 2000 by and between New LP, the lending institutions identified therein and Morgan Guaranty Trust Company of New York, as agent, as amended by Amendment No. 1 thereto dated as of July 27, 2000 (the “Credit Agreement”). If New LP enters into loan arrangements which are different than the Credit Agreement, the Partners agree to act reasonably to modify those provisions of this Agreement which were drafted to reflect the Credit Agreement so as to reflect the other loan.
8 . Intentionally omitted .
9. Contracts With Interested Entities . Except as elsewhere provided in or permitted by this Agreement, the Partnership shall not enter into contracts with a Partner or an affiliate of a Partner without the approval of the Representatives referred to in Section 11 below.
10. Joint Approval Matters . Except as otherwise provided in this Agreement, the following matters shall require the written approval of the Blackstone Partners, on the one hand and UniCo on the other hand:
(a) Dissolution, sale, pledge or encumbrance of significant assets;
(b) Issuance of securities of, or interests in, the Partnership;
(c) Changes in the primary business of the Partnership;
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(d) Any act which would make it impossible to carry on the ordinary business of the Partnership;
(e) Assignment of Partnership property in trust for creditors or on the assignee’s promise to pay the debts of the Partnership, unless in connection with an abandonment of the business which has been authorized by all Partners; and
(f) Admission of any additional partners to the Partnership; and
(g) Approving any matters requiring approval under Section 10 of the partnership agreement of New LP.
This Section 10 shall prevail over Section 11.
11. Management of the Partnership . The Partnership shall be governed and managed by 6 representatives (hereinafter referred to as “Representative” or “Representatives”) of the Partners, of whom three shall be designated from time to time by the Blackstone Partners (by notice to UniCo) (the “Blackstone Representatives”) and of whom three shall be designated from time to time by UniCo (by notice to the Blackstone Partners)(the “Universal Representatives”); one of the Blackstone Representatives shall be a senior executive of Blackstone Parent and one of the Universal Representatives shall be a senior executive of UniCo. One of the Blackstone Representatives shall be designated by Blackstone UTP A, one shall be designated by Blackstone UTP, and the remaining Blackstone Representative shall be designated by the Blackstone Partners. The first Blackstone Representatives are Howard Lipson, David Blitzer and Joe Baratta. The first Universal Representatives are Glenn J. Gumpel, William A. Sutman, and Thomas L. Williams. The vote of any Blackstone Holding II Representative or Representatives shall be deemed the vote (and approval or disapproval as the case may be) of the Blackstone Holding II Representatives and the Blackstone Holding II Representatives be shall be bound by such vote notwithstanding that one or more of the Blackstone Holding II Representatives may not have been present, consulted, advised, or otherwise involved. The vote of any Blackstone Representative or Representatives shall be deemed the vote (and approval or disapproval as the case may be) of the Blackstone Partners and the Blackstone Partners be shall be bound by such vote notwithstanding that one or more of the Blackstone Representatives may not have been present, consulted, advised, or otherwise involved. The vote of any Universal Representative or Representatives shall be deemed the vote (and approval or disapproval as the case may be) of UniCo and UniCo be shall be bound by such vote notwithstanding that one or more of the Universal Representatives may not have been present, consulted, advised, or otherwise involved. All actions of the Representatives (except as otherwise expressly provided in this Agreement) shall be taken either (i) by a unanimous vote of the Representatives at a meeting which is attended by at least one Representative of each Partner; or (ii) by the unanimous written vote or written consent of the Representatives, which may be evidenced by the signature of (x) any one Universal Representative and (y) any one Blackstone Representative; or (iii) by the notice/proposal procedure specified below in this Section 11. Any Blackstone Representative or any
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Universal Representative may, by notice given to the other Partner(s) and to each of the other Partner(s)’ Representatives, propose that particular action be taken by the Representatives. Such proposal notice shall state in substance that it is a proposal to the Representatives for action to be taken by them and shall also constitute the vote (consent) of the Representatives making the proposal in favor of that proposal. If within 15 business days after the giving of the proposal notice, no Representative of the Partner(s) to whom the proposal notice was given has given a notice disapproving the proposal to the Representatives of the Partner(s) who gave the proposal notice, the Representatives of the Partner(s) to whom the proposal notice was sent will be conclusively deemed to have voted for and consented to the proposal (even if there were no incumbent Representatives of such Partner(s)) and accordingly the proposal shall be conclusively deemed to have been unanimously approved by the Representatives. Without derogating from the generality of Section 37 below, the method and procedures for giving notices including the address to which notices are to be sent and the computation of time are governed by said Section 37.
12 . Intentionally omitted .
13 . Intentionally omitted .
14 . Staffing . It is not expected that the Partnership will directly employ any personnel and any such employment shall require the approval of the Representatives.
15 . Intentionally omitted .
16 . Calls for Capital Contributions . The Representatives (or the Representative[s] of one Partner) may, from time to time, make a call (“Call”) upon the Partners to make additional contributions in cash (“Call Payments”) to the Partnership. “Unilateral Call” refers to a Call made by the Representative(s] of only one Partner. “Calling Partner” means the Partner whose Representative[s] made the Unilateral Call and the “Non-calling Partner” means the other Partner. The terms “Call” and “Call Payments” unless otherwise qualified, refers to both Calls made by the Representatives of both Partners or to Unilateral Calls and to the contributions made pursuant thereto.
(a) All Calls shall be made upon the Partners in the proportion which the capital accounts of each Partner bears to the total of the capital accounts of all Partners (which means that, absent a conversion of a loan into capital pursuant to Subsection 16(f), the Calls will be made equally upon the Partners). The Call Payments shall constitute capital contributions to the Partnership. Any direct payment by a Partner or an affiliate required to be paid under any guarantee of the Partnership’s obligations or the obligations of New LP pursuant to the Credit Agreement or under any other guarantee of the Partnership obligations approved by both Partners, shall at the election of the paying Partner be treated as if the payment were made directly to the Partnership and constituted a loan to the Partnership at two percent over Prime (as defined in Subsection 16(i)), which loan shall be the basis of a valid Call by either Partner, and the provisions
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of this Section 16 shall be applicable. The foregoing shall not deprive any Partner or its affiliates of any subrogation rights.
(b) Call Payments shall be made within 15 business days after the date upon which the Call was deemed valid as provided in Subsection (c) below.
(c) Any Call made by the Representatives will be conclusively deemed as valid when made. If a Unilateral Call is made, the Unilateral Call will only be valid if it is made to provide funds required to enable the Partnership to provide working capital or funds to New LP so that New LP can enter into or discharge New LP’s obligations, all of the foregoing to be in accordance with the Calling Partner’s good faith estimates of Cash Flow (as defined in Subsection 16(j) below). If the Non-calling Partner believes a Unilateral Call is not consistent with the above provisions, then within 10 business days after receiving the Call, the Non-calling Partner may initiate arbitration proceedings pursuant to Section 29 below, which arbitration proceedings shall be on an expedited basis. If the Non-calling Partner does not initiate the arbitration proceedings within the aforementioned 10 business day period, the Unilateral Call shall be conclusively deemed as valid on the expiration of said period. If the Non-calling Partner does initiate arbitration proceedings, then pending the determination of the arbitration tribunal, if the Non-calling Partner declines to advance the funds specified in the Unilateral Call (which it may advance during the pendency of such proceeding on a reservation-of-rights basis), the Calling Partner may take such steps as it requires to reduce, temporarily or otherwise, the amount needed and/or the Calling Partner may loan the amount specified in the Call (including the amount which would otherwise be payable by it under such Call) to the Partnership on the terms specified in Subsection (i) below. If and to the extent the disputed Unilateral Call is determined by the arbitration tribunal to have been proper, the Unilateral Call shall conclusively be deemed valid on the date the arbitration tribunal notifies the Partners of its determination. In those instances in which the Calling Partner has made a loan to the Partnership pursuant to the above provisions of this Subsection (c), or is deemed to have made a loan as provided in Subsection 16(a), the amount of the Call Payment required of the Non-calling Partner shall conclusively be deemed to include all of the interest paid and/or accrued on the sum loaned by the Calling Partner to the Partnership with respect to the amount of the Call Payment required of the Non-calling Partner.
In those instances in which the Calling Partner has made a loan to the Partnership pursuant to the above provisions of this Subsection (c) and it is subsequently determined that the Call was not valid, to the extent that the loan was both made in good faith and benefitted the Partnership, the said loan shall bear interest at Prime (as defined in Subsection 16(i)), which interest shall not be compounded, and the said loan shall not be repayable except out of Cash Flow (as defined in Subsection 16(j) below), after all monies otherwise properly loaned by the Partners to the Partnership, together with accrued interest thereon, have been repaid in full and after each of the Partners has received by way of any distributions of any kind from the Partnership (other than reimbursement of expenses and repayment of loans), an amount equal to half of the capital contributed by each of them up to the date in question; any such loan or portion
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thereof not made in good faith or without benefit to the Partnership shall be forfeited and extinguished without repayment thereof.
(d) If either Partner does not comply with a Call within 15 business days after the date upon which a Call was deemed valid as provided in Subsection (c) above, the other Partner may take such steps as it requires to reduce temporarily or otherwise the amount needed and/or may loan the amount specified in the Call (including the amount which would otherwise be payable by it) to the Partnership and all the terms and provisions of Subsections (c) above and (i) below which were applicable to the loan made by the Calling Partner shall be applicable mutatis mutandis to the loan made pursuant to this Subsection (d).
(e) Intentionally omitted .
(f) No Partner shall be personally liable for not complying with a Call nor shall such Partner be in default under this Agreement for not complying with a Call. However, the other Partner may take the steps specified in Subsections (c) and (d) above and (i) below with respect to loaning funds to the Partnership pursuant to such Call, and the provisions of Subsections (c) and (d) above and Subsection (i) below shall be fully applicable. Furthermore, at any time after making such a loan and after the Call is validated, the Partner which does make the loan may give the nonpaying Partner written notice that the loaning Partner will convert all or a portion of the loan (and, to the extent designated, the accrued unpaid interest thereon) to capital of the Partnership. If, within 15 business days after giving of such notice, the non-paying Partner does not pay to the Partnership the amount of the Call required of it and the interest which has been paid or accrued pursuant to the above provisions of Subsections (c) and (d) above and (i) below, the loan or portion thereof specified in the above election including interest as aforesaid shall automatically be converted into capital of the Partnership (which means that thereafter the capital accounts of the parties may not be the same).
(g) Intentionally omitted .
(h) Reference is made to the circumstance in which (i) a Partner (referred to herein as “Partner A”) initially did not make a Call Payment required of it, (ii) the other Partner (i.e., the loaning Partner) thereafter made a loan to the Partnership with respect to the Call Payment required of both Partners pursuant to Subsections (c), (d), or (f) above, (iii) the loaning Partner does not convert the loan to capital, and (iv) Partner A makes the Call Payment (which Partner A shall have the right to do anytime prior to the loaning Partner’s conversion of the loan with respect to such Call Payment to capital) in the manner specified in the aforementioned Subsections. In such circumstances, at the same time as Partner A makes the Call Payment, the loaning Partner shall also make the Call Payment required of it which shall also include interest paid or accrued on the sum loaned by it to the Partnership with respect to the amount of the Call Payment required of the loaning Partner; also at the same time, the Partnership shall repay to the loaning Partner, to the extent not previously repaid, the entire sum loaned by it to the Partnership and any unpaid accrued interest on the entire loan. The interest paid by Partner A and the loaning Partner with respect to such Call Payment shall
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not be credited to capital. Contributions by the loaning Partner to the Partnership, and the payments by the Partnership to the loaning Partner pursuant to the preceding sentence, may at the loaning Partner’s election, to the extent equal, be offset against each other.
(i) Any loan made to the Partnership pursuant to the above provisions of this Section 16 may, at the election of the Partner entitled to make the loan, be made by any person or entity designated by such Partner including without limitation an affiliate thereof and shall bear interest at two hundred basis points over the Prime, (“Prime” being defined as the prime or reference rate charged from time to time by Morgan Guaranty Trust Company of New York, or such substitute bank as the parties may agree upon, each acting reasonably) with interest compounded monthly unless otherwise specifically provided. The loan shall be unsecured and shall be repayable out of the first available Cash Flow (as defined in Subsection 16(j) below) ahead of other payments due to either Partner and ahead of the Special Fee payable under Section 20 of the New LP partnership agreement, with payments first credited against accrued interest; no such loan shall have priority as far as repayment over any other such loan, and such loans shall be repayable pari passu (with the determination of the ratios applicable to each such loan to take into account in each case the amount of accrued and unpaid interest thereon). This Subsection shall not apply to the last grammatical paragraph of Subsection 16(c).
(j) “Cash Flow” is defined for purposes of this Agreement as operating profit generated by the Partnership from all sources, plus, to the extent already deducted in computing operating profit, depreciation, similar items, and all other non-cash items, less, to the extent not already deducted in computing operating profit, capital expenditures, debt service, any cash reserves withheld during the particular period, and cash required for operations, all as determined in good faith by the Manager of New LP and in accordance with generally accepted accounting principles.
(k) Intentionally omitted .
17 . Shift of Control .
(a) If (i) the aggregate capital account (as described in Section 18) of the Blackstone Partners at any time is less than one half the capital account of UniCo, the Blackstone Partners shall be deemed to be the “minority partner” and UniCo shall be deemed to be the “majority partner” for purposes of this Section 17 or (ii) the capital account (as described in Section 18) of Unico at any time is less than one half the aggregate capital account of the Blackstone Partners, Unico shall be deemed to be the “minority partner” and the Blackstone Partners shall be deemed to be the “majority partner” for purposes of this Section 17 and in any such event, then notwithstanding the provisions of Section 11, the minority partner shall be bound by all determinations made by the majority partner’s Representative (or by the majority partner directly), as if such determinations were made by the unanimous vote or written consent of the Representatives, the minority partner will have no right to make a Unilateral Call, and the majority partner shall have complete unrestricted authority with respect to all Partnership matters, except that the minority partner’s written approval shall continue to be required
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for those decisions referred to in Section 10 (except to the extent such approval is not required because of the operation of other provisions of this Agreement). If by reason of subsequent capital contributions made pursuant to Section 16, the minority partner’s capital account ratio is increased so that it exceeds or equals one-half of the capital account of the majority partner, then as long as such condition exists, the above provisions of this Section 17 shall not be applicable.
(b) If any Blackstone Partner or its affiliate[s] and UniCo or its affiliate(s] are partners of a Related Partnership and a shift of control occurs under Section 17 of the partnership agreement of such Related Partnership, so that any such partner is deemed a minority partner under said Section 17 (a “Related minority partner”), the Partner in the Partnership who is the same entity as such Related minority partner, or an affiliate of such Related minority partner, shall automatically be deemed a minority partner under this Section 17, for as long as it or its affiliate remains a Related minority partner under the partnership agreement of such Related Partnership, and the other partner shall automatically be deemed the majority partner for the same period.
18 . Capital Accounts .
(a) An individual capital account shall be established and maintained for each Partner. To each Partner’s capital account there shall be credited, without duplication, (1) the amount of money contributed to capital by such Partner to the Partnership pursuant to the terms of this Agreement, including as a result of conversion of a loan to capital pursuant to Section 16 (money contributed by a Partner to the Partnership includes the amount of any Partnership liabilities that are assumed by such Partner (i.e., individually and not by virtue of such liability being a liability of the Partnership and such Partner being a general partner of the Partnership or solely by virtue of a guaranty), other than liabilities secured by property distributed by the Partnership to such Partner where such liability was taken into account in clause (x) below, but does not include increases in such Partner’s proportionate share of Partnership liabilities, (2) the fair market value of property contributed to capital by such Partner to the Partnership pursuant to the terms of this Agreement (net of any liabilities secured by such property that the Partnership assumes or takes subject to), and (3) allocations to such Partner of Net Income (as defined herein) pursuant to the terms of this Agreement. To each Partner’s capital account, there shall be debited (x) the amount of money distributed to such Partner by the Partnership pursuant to the terms of this Agreement in respect of such Partner’s equity interest in the Partnership (money distributed to a Partner by the Partnership includes the amount of such Partner’s individual liabilities that are assumed (but not solely by virtue of a guaranty) by the Partnership, other than liabilities secured by property contributed to the Partnership by such Partner where such liability was taken into account in clause (2) above, but does not include decreases in such Partner’s proportionate share of Partnership liabilities), (y) the fair market value of property distributed to such Partner by the Partnership pursuant to the terms of this Agreement (net only of any liabilities secured by such property that the Partner assumes or takes subject to), and (z) allocations of Net Loss (as defined herein) pursuant to the terms of this Agreement.
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(b) Immediately prior to the distribution of any property (other than cash) to a Partner, the capital account of each Partner shall be increased or decreased (to the extent that such capital account is not otherwise so increased or decreased under paragraph (c)(ii) of this Section), as the case may be, to reflect the manner in which the unrealized income, gain, loss and deduction inherent in such property (that has not previously been reflected in the capital accounts of the Partners) would be allocated among the Partners if there were a taxable disposition of such property for its fair value.
(c) Immediately prior to
(i) a contribution of money or other property (other than a de minimis amount) to the Partnership by a new or existing Partner as consideration for an interest in the Partnership, unless all existing partners of the Partnership (and no new Partners) make such a contribution pro rata in proportion to their capital accounts in the Partnership, or
(ii) a distribution of money or other property (other than a de minimis amount) by the Partnership to a withdrawing or continuing Partner as consideration for an interest in the Partnership, unless all Partners receive simultaneous distributions of money, or undivided interests in the distributed property, in proportion to their capital accounts in the Partnership,
the capital account of each Partner shall be increased or decreased, as the case may be, to reflect the manner in which the unrealized income, gain, loss and deduction inherent in all of the Partnership’s property (that has not previously been reflected in the capital accounts of the Partners) would be allocated among the Partners if there were a taxable disposition of all such property for its fair value.
(d) In the event 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 such capital account relates to the transferred interest.
(e) The tax matters partner shall have full discretion to make adjustments to the foregoing provisions to comply with Treasury Regulation Section 1.704-1(b), provided that any such adjustment must be approved by the Representatives in the event such adjustment results in a materially adverse tax or economic consequence to the other Partners.
19 . Allocations of Profits and Losses; Distributions .
(a) Net Income or Net Loss (as defined below) realized during a Fiscal Period (as defined below) of the Partnership shall be allocated among the Partners at the end of each Fiscal Period proportionately, based upon the average ratio of the respective capital accounts of the Partners throughout such Fiscal Period. For each Fiscal Period, “Net Income” or Net Loss” shall mean an amount equal to the Partnership’s taxable income or loss for such year or other period, determined in accordance with
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Section 703 of the Internal Revenue Code of 1986, as amended (the “Code”), with the following adjustments:
(i) any income of the Partnership that is exempt from United States federal income taxation and is not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition shall be added to such taxable income or loss;
(ii) upon an adjustment, pursuant to the definition of Carrying Value (as defined below), to the Carrying Value of any Partnership property subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or other amortization attributable to such property shall for purposes of capital account maintenance equal an amount that bears the same ratio to the Carrying Value at the beginning of such year or other period as the United States federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to the property’s adjusted tax basis at the beginning of such year or other period; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of the year is zero, depreciation, cost recovery or amortization shall be determined with reference to such beginning Carrying Value using any reasonable method;
(iii) Upon an adjustment to the Carrying Value (as defined below) of any Partnership property, gain or loss from the sale or other disposition of such property shall be determined based on the Carrying Value of that property;
(iv) any liabilities, which liabilities do not constitute liabilities for tax purposes that have been taken into account for purposes of Capital Account maintenance under Section 18 of this Agreement, shall be included in the calculation of Net Loss under this Section; and
(v) any expenditures of the Partnership not deductible in computing taxable income or loss, not properly capitalizable and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition, shall, for purposes of capital account maintenance, be treated as items of deduction, subtracted from such taxable income or loss.
With respect to any asset, the asset’s “Carrying Value” shall mean the asset’s adjusted basis for United States federal income tax purposes, except that the Carrying Values of all Partnership assets shall be adjusted to equal their respective fair values on the occurrence of any event described in Section 18(c)(i) or (ii).
“Fiscal Period” shall mean (unless otherwise required by applicable Treasury Regulations) the period beginning on the day immediately following the last day of the immediately preceding Fiscal Period and ending on the sooner to occur of the following:
(A) the last day of the fiscal year of the Partnership; or
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(B) the day immediately preceding any event described in Section 18(c)(i), (ii) or (iii).
The initial Fiscal Period shall begin on the date the term of the Partnership begins.
All the tax credits and any tax credit re |
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