AGREEMENT OF LIMITED PARTNERSHIP

Exhibit 10.2

 

AGREEMENT OF LIMITED PARTNERSHIP

 

OF

 

EPE Unit L.P.

 

Dated as of

 

August 23, 2005

TABLE OF CONTENTS

 

 

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AGREEMENT OF LIMITED PARTNERSHIP

OF

EPE UNIT L.P.

 

This Agreement of Limited Partnership (this “Agreement” ) of EPE Unit L.P., a Delaware limited partnership (the “Partnership” ), is made and entered into as of August 23, 2005 by and among the Partners (as defined below).

 

RECITALS

 

FOR AND IN CONSIDERATION OF the mutual covenants, rights, and obligations set forth herein, the benefits to be derived therefrom, and other good and valuable consideration, the receipt and sufficiency of which each Partner acknowledges and confesses, the Partners agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.01 Certain Definitions . As used in this Agreement, the following terms have the following respective meanings:

 

“Act” means the Delaware Revised Uniform Limited Partnership Act and any successor statute, as amended from time to time.

 

“ Adjusted Capital Account ” means, with respect to any Partner, the balance in such Partner’s Capital Account after giving effect to the following adjustments:

 

(a) Credit to such Capital Account any amounts that such Partner is obligated or deemed obligated to contribute pursuant to the penultimate sentences of Sections 1.704 2(g)(1) and 1.704 2(i)(5) of the Regulations; and

 

(b) Debit to such Capital Account the items described in Sections 1.704 1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704 1(b)(2)(ii)(d)(6) of the Regulations.

 

The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.

 

“Adjustment Date” means the (i) the fifth Business Day following the payment date with respect to each distribution made by EPE with respect to EPE units, and (ii) the fifth Business Day following the receipt of any proceeds by the Partnership from the disposition of EPE units.

 

“ Affiliate ” means with respect to any Person any other Person that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under

 

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common control with, the Person specified. For the purpose of this definition, “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement” has the meaning given it in the introductory paragraph hereof.

 

“Applicable Percentage” means with respect to a disposition of less than all the EPE Units owned by the Partnership, the quotient (expressed as a percentage) of the number of EPE Units held by the Partnership immediately after such disposition divided by the number of EPE Units held by the Partnership immediately before such disposition.

 

“Bankrupt Partner” means any Partner (whether a General Partner or a Limited Partner) with respect to which an event of the type described in section 17-402(a)(4) or (5) of the Act (or any equivalent successor provision) shall have occurred, subject to the lapsing of any period of time therein specified.

 

“Business Day” means any day other than a Saturday, Sunday, or day on which commercial banks in the State of Texas are authorized or required to be closed for business.

 

“Capital Account” means the account maintained for each Partner pursuant to Section 4.04.

 

“Capital Contribution” means any contribution by a Partner to the capital of the Partnership.

 

“Certificate” means the Certificate of Limited Partnership of the Partnership referred to in Section 2.05, as it may be amended or restated from time to time.

 

“Change of Control” means Duncan shall (i) cease to own, directly or indirectly, at least a majority of the equity interests in the General Partner or the general partner of EPE, or (ii) shall cease to have the ability to elect, directly or indirectly, at least a majority of the directors of the general partner of EPD.

 

“Class A Capital Base” means $51,000,000, adjusted on each Adjustment Date as follows:

 

(i) increased by the Class A Preference Return that has accrued since the previous Adjustment Date (or in the case of the first Adjustment Date, since the Closing Date); and

 

(ii) decreased by all distributions made to the Class A Limited Partner since the previous Adjustment Date (or in the case of the first Adjustment Date, since the Closing Date); and

 

“Class A Limited Partner” means Duncan Family Interests, Inc., a Delaware corporation, and its successors and assigns.

 

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“Class A Preference Return” means the sum of the amounts determined for each day, equal to the Class A Preference Return Rate multiplied by the Class A Capital Base.

 

“Class A Preference Return Amount” means the aggregate Class A Preference Return minus all prior distributions to the Class A Limited Partner pursuant to Sections 5.03(a) and 5.04(a).

 

“Class A Preference Return Rate” means 6 ¼% per annum divided by 365 or 366 days, as the case may be during such calendar year.

 

“Class B Limited Partner” means any Person executing (by power of attorney or otherwise) this Agreement as of the date hereof as a Class B Limited Partner or hereafter admitted to the Partnership as a Class B Limited Partner as herein provided, but shall not include any Person who has ceased to be a Class B Limited Partner in the Partnership.

 

“Class B Percentage Interest” means with respect to each Class B Limited Partner the quotient (expressed as a percentage) of (i) such Class B Limited Partner’s Sharing Points, divided by (ii) the Sharing Points of all Class B Limited Partners. For purposes of calculating the Class B Percentage Interest, Sharing Points attributable to interests in the Partnership that are forfeited pursuant to Section 3.07 shall be ignored.

 

“Closing Date” means the date on which EPE Units are sold to certain underwriters in connection with EPE’s initial public offering.

 

“Code” means the Internal Revenue Code of 1986, and any successor statute, as amended from time to time.

 

“Default Interest Rate” means a varying per annum rate equal at any given time to the lesser of (a) four percentage points in excess of the General Interest Rate and (b) the maximum rate permitted by applicable law.

 

“Disability” means the event whereby a Limited Partner becomes entitled to receive long-term disability benefits under the long-term disability plan of the General Partner or any of its Affiliates.

 

“Dispose,” “Disposing,” or “Disposition” means a sale, assignment, transfer, exchange, mortgage, pledge, grant of a security interest, or other disposition or encumbrance, or the acts thereof, other than by divorce, legal separation or other dissolution of a Partner’s marriage.

 

“Duncan” means, collectively, individually or in any combination, Dan L. Duncan, his wife, descendants, heirs and/or legatees and/or distributees of Dan L. Duncan’s estate, and/or trusts established for the benefit of his wife, descendants, such legatees and/or distributees and/or their respective descendants, heirs, legatees and distributees.

 

“EPD” means Enterprise Products Partners L.P., a Delaware limited partnership.

 

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“EPE” means Enterprise GP Holdings L.P., a Delaware limited partnership.

 

“ EPE Units ” means partnership units representing limited partner interests in EPE.

 

“General Interest Rate” means a varying per annum rate equal at any given time to the lesser of (a) the interest rate publicly quoted by J.P. Morgan Chase from time to time as its prime commercial or similar reference interest rate, and (b) the maximum rate permitted by applicable law.

 

“General Partner” means EPCO, Inc., a Texas corporation, or any Person hereafter admitted to the Partnership as a general partner as herein provided, but shall not include any Person who has ceased to be a general partner in the Partnership.

 

“Limited Partner” means the Class A Limited Partner or any Class B Limited Partner.

 

“Net Income” and “Net Loss” mean, respectively, subject to Section 4.04, an amount equal to the Partnership’s taxable income or loss determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, 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:

 

(a) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income and Net Loss shall be added to such taxable income or loss;

 

(b) Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Section 1.704 1(b)(2)(iv)(i) of the Regulations, and not otherwise taken into account in computing Net Income or Net Loss pursuant to this definition of Net Income and Net Loss, shall be subtracted from such taxable income or loss;

 

(c) In the event the value of any Partnership property is adjusted pursuant to Section 4.04 (i) such adjustment shall be taken into account as gain or loss from the disposition of such Partnership property for purposes of computing Net Income or Net Loss, (ii) if such property is subject to depreciation, cost recovery, depletion or amortization, any further deductions for such depreciation, cost recovery, depletion or amortization attributable to such property shall be determined taking into account such adjustment, and (ii) in determining the amount of any income, gain or loss attributable to the taxable disposition of such property such adjustment (and the related adjustments for depreciation, cost recovery, depletion or amortization) shall be taken into account;

 

(d) To the extent an adjustment to the adjusted tax basis of any Partnership Property pursuant to Code Section 734(b) is required, pursuant to Section 1.704 1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in determining Capital Accounts as a result of a Distribution other than in liquidation of a Partner’s interest in the Partnership, the amount of such adjustment shall be treated as an item of gain (if the

 

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adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) from the disposition of such Partnership Property and shall be taken into account for purposes of computing Net Income or Net Loss; and

 

(e) Any items that are allocated pursuant to Section 5.01(b) shall not be taken into account in computing Net Income or Net Loss.

 

“Partner” means the General Partner, the Class A Limited Partner or any Class B Limited Partner.

 

“Partnership” has the meaning given it in the introductory paragraph.

 

“Person” has the meaning given it in the Act.

 

“ Qualifying Termination ” means the termination of a Class B Limited Partner’s employment with the General Partner and its Affiliates due to (i) death, (ii) receiving long-term disability benefits under the long-term disability plan of the General Partner or any of its Affiliates or (iii) retirement with the approval of the General Partner on or after reaching age 60.

 

“Regulations” means the regulations promulgated under Section 704 of the Code.

 

“Required Interest” means one or more Class B Limited Partners having among them more than 50% of the Class B Percentage Interests of all Limited Partners in their capacities as such.

 

“ Sharing Points ” means, with respect to each Class B Limited Partner, the number of Sharing Points granted by the General Partner to such Class B Limited Partner (which number is set forth on the Power of Attorney executed by the Class B Limited Partner and delivered to the General Partner), as the same may be amended from time to time pursuant to the terms of this Agreement.

 

“ Vesting Date ” means the earliest of (i) the fifth anniversary of the date of this Agreement, (ii) a Change of Control or (iii) dissolution of the Partnership.

 

1.02 Other Definitions . Other terms defined herein have the meanings so given them.

 

ARTICLE II

 

ORGANIZATIONAL MATTERS

 

2.01 Formation . The Persons executing this Agreement hereby form a limited partnership for the purposes hereinafter set forth under and pursuant to the Act.

 

2.02 Name . The name of the Partnership is “EPE Unit L.P.” and all Partnership business shall be conducted in such name or such other name or names that comply with applicable law as the General Partner may designate from time to time.

 

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2.03 Registered Office; Registered Agent; Other Offices . The registered office of the Partnership in the State of Delaware shall be at such place as the General Partner may designate from time to time. The registered agent for service of process on the Partnership in the State of Delaware or any other jurisdiction shall be such Person or Persons as the General Partner may designate from time to time. The Partnership may have such other offices as the General Partner may designate from time to time.

 

2.04 Purposes . The purposes of the Partnership are to acquire, own, sell, exchange or otherwise dispose of EPE Units, and to enter into, make and perform all contracts and other undertakings and to engage in any other business, activity or transaction that now or hereafter may be necessary, incidental, proper, advisable, or convenient, as determined by the General Partner, to accomplish the foregoing purposes.

 

2.05 Certificate; Foreign Qualification . The General Partner has executed and caused to be filed on August 16, 2005 with the Secretary of State of the State of Delaware a Certificate of Limited Partnership containing information required by the Act and such other information as the General Partner deemed appropriate. Prior to conducting business in any jurisdiction other than Delaware, the General Partner shall cause the Partnership to comply, to the extent such matters are reasonably within the control of the General Partner, with all requirements necessary to qualify the Partnership as a foreign limited partnership (or a partnership in which the Limited Partners have limited liability) in such jurisdiction. Upon the request of the General Partner, each Partner shall execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate as determined by the General Partner to qualify, continue, and terminate the Partnership as a limited partnership under the laws of the State of Delaware and to qualify, continue, and terminate the Partnership as a foreign limited partnership (or a partnership in which the Limited Partners have limited liability) in all other jurisdictions in which the Partnership may conduct business, and to this end the General Partner may use the power of attorney described in Section 6.04.

 

2.06 Term . The term of this Partnership shall continue in existence until the close of Partnership business on the earliest to occur of (i) the fiftieth anniversary of the date of this Agreement, and (ii) such earlier time as this Agreement may specify.

 

2.07 Merger or Consolidation . The Partnership may merge or consolidate with or into another business entity, or enter into an agreement to do so, with the consent of the General Partner and a Required Interest.

 

ARTICLE III

 

PARTNERS; DISPOSITIONS OF INTERESTS

 

3.01 Partners . The General Partner, the Class A Limited Partner and the Class B Limited Partners of the Partnership are the Persons executing (by power of attorney or otherwise) this Agreement as of the date hereof as the General Partner, the Class A Limited Partner and the Class B Limited Partners, respectively, each of which is admitted to the Partnership as the General Partner, the Class A Limited Partner or a Class B Limited Partner, as the case may be, effective as of the date hereof.

 

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3.02 Representations and Warranties . Each Partner hereby represents and warrants to the Partnership and each other Partner that (a) if such Partner is a corporation, it is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation and is duly qualified and in good standing as a foreign corporation in the jurisdiction of its principal place of business (if not incorporated therein), (b) if such Partner is a trust, estate or other entity, it is duly formed, validly existing, and (if applicable) in good standing under the laws of the jurisdiction of its formation, and if required by law is duly qualified to do business and (if applicable) in good standing in the jurisdiction of its principal place of business (if not formed therein), (c) such Partner has full corporate, trust, or other applicable right, power and authority to enter into this Agreement and to perform its obligations hereunder and all necessary actions by the board of directors, trustees, beneficiaries, or other Persons necessary for the due authorization, execution, delivery, and performance of this Agreement by such Partner have been duly taken, and such authorization, execution, delivery, and performance do not conflict with any other agreement or arrangement to which such Partner is a party or by which it is bound, and (d) such Partner is acquiring its interest in the Partnership for investment purposes and not with a view to distribution thereof.

 

3.03 Restrictions on the Disposition of an Interest . (a) No Class B Limited Partner may Dispose of all or part of its interest in the Partnership without the prior written consent (which may be given or withheld in its sole discretion) of the General Partner, and then only after Sections 3.03(c), (d) and (e) have been complied with, except that a Class B Limited Partner may Dispose of all of its interest upon the death of such Class B Limited Partner or upon becoming a Bankrupt Partner, but in each case only after compliance with Sections 3.03(c), (d) and (e). Neither the General Partner nor the Class A Limited Partner may Dispose of all or a part of its interest in the Partnership to a Person who is not an Affiliate of Duncan without the prior written consent of a Required Interest, and then only after Sections 3.03(c), (d) and (e) have been complied with.

 

(b) Subject to the provisions of Sections 3.03(c), (d) and (e), a permitted transferee of all or a part of a Partner’s interest in the Partnership shall be admitted to the Partnership as a General Partner or a Limited Partner (as applicable) with, in the case of a Class B Limited Partner, such Sharing Points (no greater than the Sharing Points of the Class B Limited Partner effecting such Disposition immediately prior thereto) as the Partner effecting such Disposition and such permitted transferee may agree.

 

(c) The Partnership shall not recognize for any purpose any purported Disposition of an interest in the Partnership or distributions therefrom unless and until the provisions of this Section 3.03 shall have been satisfied and there shall have been delivered to the General Partner a document (i) executed by both the Partner effecting such Disposition and the Person to which such interest or interest in distributions are to be Disposed, (ii) including the written acceptance by any Person to be admitted to the Partnership of all the terms and provisions of this Agreement, such Person’s notice address, and an agreement by such Person to perform and discharge timely all of the obligations and liabilities in respect of the interest being obtained, (iii) setting forth, in the case of a Class B Limited Partner, the Sharing Points of the Class B Limited Partner effecting such Disposition and the Person to which such interest is Disposed after such Disposition (which together shall total the Sharing Points of the Class B Limited Partner effecting such Disposition prior thereto), (iv) containing a representation and

 

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warranty that such Disposition complied with all applicable laws and regulations (including securities laws) and a representation and warranty by such Person that the representations and warranties in Section 3.02 are true and correct with respect to such Person. Each such Disposition and, if applicable, admission shall be effective as of the first day of the calendar month immediately succeeding the month in which the General Partner shall receive such notification of Disposition and the other requirements of this Section 3.03 shall have been met unless the General Partner and the Partner affecting such Disposition agree to a different effective date; provided, however, that if there shall be only one General Partner and such Disposition or admission and, as a result of such Disposition such General Partner would cease to be a General Partner, such permitted transferee shall be deemed admitted as a General Partner immediately prior to such cessation.

 

(d) Notwithstanding any provision of this Agreement to the contrary, the right of any Partner to Dispose of an interest in the Partnership or distributions therefrom or of any Person to be admitted to the Partnership in connection therewith shall not exist or be exercised (i) unless and until the Partnership shall have received a favorable opinion of the Partnership’s legal counsel or of other legal counsel acceptable to the General Partner to the effect that such Disposition or admission is not required to be registered under the Securities Act of 1933 or any other applicable securities laws, and such Disposition or admission would not cause the Partnership to become an “investment company” required to register under the Investment Company Act of 1940, and (ii) unless such Disposition or admission would not result in the Partnership’s being treated as an association taxable as a corporation for federal income tax purposes or as a publicly traded partnership as defined in section 7704 of the Code. The General Partner, however, may waive the requirements of Section 3.03(d)(i).

 

(e) All costs (including, without limitation, the legal fees incurred in connection with the obtaining of the legal opinions referred to in Section 3.03(d)) incurred by the Partnership in connection with any Disposition or admission of a Person to the Partnership pursuant to this Section 3.03 shall be borne and paid by the Partner effecting such Disposition within 10 days after the receipt by such Person of the Partnership’s invoice for the amount due.

 

(f) In the event of a Disposition of an interest in the Partnership pursuant to the death of a Limited Partner that would, in the opinion of the Partnership’s legal counsel, result in the Partnership becoming an “investment company” required to register under the Investment Company Act of 1940, the General Partner shall have the right to purchase such interest from the estate (or beneficiaries) of such deceased Partner for a price equal to the amount that the deceased Partner’s estate (or beneficiaries) would receive if all of the EPE Units held by the Partnership were sold at a price equal to the closing sale price per EPE Unit as reported by the New York Stock Exchange (or such other applicable trading market) on the day prior to the exercise of such right by the General Partner and the proceeds from such sale were distributed to the Partners in accordance with the provisions of Section 5.04. The determination by the General Partner of the foregoing purchase price of such deceased Partner’s interest in the Partnership shall be conclusive and binding on the deceased Partner’s estate and beneficiaries.

 

(g) Any attempted Disposition by a Person of an interest or right, or any part thereof, in or in respect of the Partnership other than in accordance with this Section 3.03 shall be, and is hereby declared, null and void ab initio.

 

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3.04 Additional Partners . Subject to the provisions of Section 12.05 and 3.03, additional Persons may be admitted to the Partnership as General Partners or Limited Partners, only to the extent that, and on such terms and conditions as, the General Partner shall consent at the time of such admission or issuance. Such admission or issuance shall, in the case of a Class B Limited Partner, specify the Sharing Points applicable thereto. Any such admission must comply with the provisions of Section 3.03(d) and shall not be effective until such new Partner shall have executed and delivered to the General Partner a document including such new Partner’s notice address, acceptance of all the terms and provisions of this Agreement, an agreement to perform and discharge timely all of its obligations and liabilities hereunder, and a representation and warranty that the representations and warranties in Section 3.02 are true and correct with respect to such new Partner.

 

3.05 Interests in a Partner . No Partner that is not a natural person shall cause or permit an interest, direct or indirect, in itself to be Disposed of such that, on account of such Disposition, the Partnership would become an association taxable as a corporation for federal income tax purposes.

 

3.06 Spouses of Partners . A spouse of a Partner does not become a Partner as a result of such marital relationship or by reason of a divorce, legal separation or other dissolution of marriage. If, in the event of a divorce, legal separation or other dissolution of marriage of a Partner, a former spouse of a Partner is awarded ownership of, or an interest in, all or part of a Partner’s interest in the Partnership (the “ Awarded Interest ”), the Awarded Interest shall automatically and immediately be forfeited and cancelled without payment on such date.

 

3.07 Vesting of Limited Partners . One hundred percent (100%) of each Class B Limited Partner’s interest in the Partnership shall vest on the Vesting Date, but only if (i) on such date the Class B Limited Partner continues to be an active, full-time employee of the General Partner or any of its Affiliates or (ii) prior to the Vesting Date a Qualifying Termination has occurred with respect to the Class B Limited Partner. At such time as any Class B Limited Partner ceases, for any reason other than a Qualifying Termination, to be an active, full-time employee of the General Partner or any of its Affiliates prior to the Vesting Date, his unvested interest in the Partnership shall be forfeited. If a Class B Limited Partner ceases to be an active, full-time employee prior to the Vesting Date, as determined by the General Partner in its sole discretion, without regard as to how his status is treated by the General Partner or any of its Affiliates for any of its other compensation or benefit plans or programs, the Class B Limited Partner will be deemed to have terminated employment with the General Partner and its Affiliates and forfeited his unvested interest in the Partnership for purposes of this Agreement. The Capital Account attributable to any Class B Limited Partner’s interest in the Partnership that is forfeited pursuant to Section 3.06, this Section 3.07 or otherwise hereunder shall be allocated to the remaining Class B Limited Partners in accordance with their respective Class B Percentage Interests.

 

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ARTICLE IV

 

CAPITAL CONTRIBUTIONS

 

4.01 Initial and Additional Capital Contributions . The General Partner has contributed $510 to the Partnership. The Class A Limited Partner hereby agrees to contribute $51,000,000 to the Partnership on the Closing Date. On the date hereof, the Partnership has executed a Unit Purchase Agreement among the Partnership, EPE and EPE’s general partner, pursuant to which the Partnership has agreed to purchase $51,000,000 worth of EPE Units directly from EPE on the Closing Date at the initial public offering price of $28.00 per EPE Unit (an aggregate of 1,821,428 EPE Units). The Partnership will use the $51,000,000 to be contributed by the Class A Limited Partner to purchase such EPE Units on the Closing Date. Subject to the provisions of applicable law or except as otherwise provided for herein, no Partner shall be liable for or obligated to make an additional Capital Contribution to the Partnership, whether for the purpose of enabling the Partnership to meet its obligations under Section 6.03 or for any other purpose. The initial Capital Account of the General Partner is $510 and the Capital Account of the Class A Limited Partner as of the Closing Date is $51,000,000. The initial Capital Account of each Class B Limited Partner is zero.

 

4.02 Return of Contributions . No Partner shall be entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or any Capital Contribution made by it. No unrepaid Capital Contribution shall be deemed or considered to be a liability of the Partnership or of any Partner. No Partner shall be required to contribute, advance or lend any cash or property to the Partnership to enable the Partnership to return any Partner’s Capital Contributions to the Partnership. To the extent, however, any Partner (by mistake, overpayment or otherwise) advances funds to the Partnership in excess of the Capital Contributions called for under Section 4.01, such excess amounts shall not be Capital Contributions and (other than advances made by the General Partner pursuant to Section 4.03 below) shall be promptly returned by the Partnership to the Partner so advancing such funds.

 

4.03 Advances by General Partner . At any time that the Partnership shall not have sufficient cash to pay its obligations, the General Partner may, but shall not be obligated to, advance such funds for or on behalf of the Partnership. Each such advance shall constitute a loan from the General Partner to the Partnership and shall bear interest from the date of the advance until the date of repayment at the General Interest Rate. Any advances made by the General Partner pursuant to this Section 4.03 shall not be considered to be Capital Contributions. All advances shall be repaid out of the next available funds of the Partnership, including Capital Contributions received.

 

4.04 Capital Accounts . A Capital Account shall be established and maintained for each Partner. Each Partner’s Capital Account (a) shall be increased by (i) the amount of money contributed by that Partner to the Partnership, (ii) the fair market value of property, if any, contributed by that Partner to the Partnership (net of liabilities secured by such contributed property that the Partnership is considered to assume or take subject to under section 752 of the Code), and (iii) allocations to that Partner of Partnership income and gain (or items thereof), including income and gain exempt from tax and income and gain described in Regulation § 1.704-1(b)(2)(iv)(g), but excluding income and gain described in Regulation § 1.704-1(b)(4)(i),

 

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and (b) shall be decreased by (i) the amount of money distributed to that Partner by the Partnership, (ii) the fair market value of property distributed to that Partner by the Partnership (net of liabilities secured by such distributed property that such Partner is considered to assume or take subject to under section 752 of the Code), (iii) allocations to that Partner of expenditures of the Partnership described in section 705(a)(2)(B) of the Code, and (iv) allocations of Partnership loss and deduction (or items thereof), including loss and deduction described in Regulation § 1.704-1(b)(2)(iv)(g), but excluding items described in clause (b)(iii) above and loss or deduction described in Regulation § 1.704-1(b)(4)(i). The Partners’ Capital Accounts also shall be maintained and adjusted as permitted by the provisions of Regulation § 1.704-1(b)(2)(iv)(f) and as required by the other provisions of Regulation §§ 1.704-1(b)(2)(iv) and 1.704-1(b)(4), including adjustments to reflect the allocations to the Partners of depreciation, amortization, and gain or loss as computed for book purposes rather than the allocation of the corresponding items as computed for tax purposes, as required by Regulation § 1.704-1(b)(2)(iv)(g). A Partner that has more than one interest in the Partnership shall have a single Capital Account that reflects all such interests, regardless of the class of interests owned by such Partner and regardless of the time or manner in which such interests were acquired; provided that Partners that are Affiliates but nevertheless separate legal entities shall have separate Capital Accounts. Upon the transfer of all or part of an interest in the Partnership, the Capital Account of the transferor that is attributable to the transferred interest in the Partnership shall carry over to the transferee Partner in accordance with the provisions of Regulation § 1.704-1(b)(2)(iv)(l).

 

ARTICLE V

 

ALLOCATIONS AND DISTRIBUTIONS

 

5.01 Allocations .

 

(a) Net Income and Net Loss . For purposes of maintaining the Capital Accounts, Net Income or Net Loss (and all items included in the computation thereof) shall be allocated among the Partners as follows:

 

(i)

Net Income :

 

(A) First, to the Class A Limited Partner until the Class A Limited Partner’s Adjusted Capital Account equals the Class A Capital Base; and

 

(B) Thereafter, to the Class B Limited Partners in accordance with the Class B Percentage Interests.

 

(ii)

Net Loss :

 

(A) First, to the Class B Limited Partners in accordance with the Class B Percentage Interests until the Adjusted Capital Accounts of the Limited Partners are reduced to zero; and

 

(B) Thereaf